Photos of Brooklyn Heights fron the NY Times, ”Living In Brooklyn Heights”.

Photo of a brick row house on the market for $2.95 million in Brookyn Heights.

Article in New York Post, ”Duke 5th Ave. manse goes on block” shows $50 million row house on the market at the corner of 5th Avenue and 82nd Street in Manhattan.

Old NY Times Article: ”Brownstones; Sales Drop, Prices Rise” Published: August 30, 1987.  Interesting to reflect on the following, “The average East Side price was $1,136,183; the West Side average was $619,048. The top East Side price, $6,992,227 was achieved by 4-6 East 75th Street. On the West Side, the top price was $4.2 million, for 37 West 70th Street.”

If you are trying to sell your house in the current real estate environment, then be prepared for buyer’s abuse, especially if you are trying to sell your house without using a realtor.  I have been trying to sell my house in NYS by owner (FSBO) in combination with using a flat fee listing service.  The flat fee listing service gets my property on the local multiple listing (mls) and requires me to pay a buyers/sellers commission.  I selected to pay 2.5% to the agent that brings me a buyer, however I really have no one representing me and this can make the process a bit harrowing.

Since March 2008 three buyers have throw me the same low ball all cash offer of $450,000.  In all cases I did not respond to these offers.  I had two other offers which were higher than the three all cash offers but they came with qualifying statements attempting to let me know that the buyers are in the driver’s seat.  One buyer made me an initial offer of $470,000 (not a bad first offer) however the offer came with the statement that he was making offers on three other houses simultaneously.  I perceived this statement to mean his offer was not negotiable, so I pleasantly wished him good luck in his search for a home.  I also received an offer of $465,000 which came with similar qualifying statements and I pleasantly declined without making a counteroffer.

Eventually I received a call from a real estate agent that had shown my house to her clients the previous day.  She said her clients were interested in two houses in my area and that her clients were more interested in the other house than in my house.  She requested that I make a lower offer than my asking price of $498,000.  She indicated that she knew her clients offer but could not disclose it.  So I requested that I get back to her the following morning, but she insisted that her clients needed to make a decision before 12 noon.  So I reluctantly got off the phone to discuss it with my wife.  My wife suggested that we drop the price to $490,000 but I decided unilaterally that I would drop the price to $480,000 in an attempt to conclude the transaction and move on with our lives.  I presented the offer to the realtor and she said that she would write up the paperwork, leading me to believe that my offer was below her client’s undisclosed offer.

Five hours later I get a call from the buyer’s agent and she presents me with an all cash offer of $450,000 closing in two weeks.  I was pissed, but I politely refused and hung up the phone.  The following day she called me requesting that I further bid against myself and reduce my asking price.  I again politely declined and several days later she presented me with a new offer of $470,000 with a 20% down payment. 

Well the abuse just kept coming from these latest buyers. On several occasions we had come to a meeting of the minds on price and terms, yet they just kept changing their minds and continued to drag out the process in an attempt (what I perceive) to wear me down.  Eventually after 5 weeks I dropped the price to $483,000 on the MLS and scheduled an open house for the weekend.  These buyers became very upset over my actions and nearly threatened to pull out of the deal (by the way they still had not signed the contract and put up the deposit).  This experience reminded me of an old relationship I had with a woman.  This woman had several affairs with other men while I kept attempting to accommodate her and preserve the relationship.  Finally I decide to act in my own best interests and she accused me of having ruined the relationship.

If you are about to sell your house be prepared for the rocks.  There are a lot of buyers running around just throwing rocks in an attempt to beat you lower and lower and lower.  At the same time you have to be realistic about the market.  Don’t put your house on the market and price it too high.  The fact that I am receiving offers is an indication that I am close to selling.  You may need to give someone a good deal but you don’t want someone to steal your property from you and you certainly would like to transact without the hurling rocks.

New York Times article in the Sunday Times, ”Hoboken Weathers the Market”.

A reflection of the US dollar losing ground against other currencies.

Trump Soho hotel condominum at 246 Spring Street, New York, N.Y. 10013

Article in this Sunday’s real estate section of the NY Times ”Taking The Pulse Of The Boroughs” points out that ”Brooklyn hinges on buyers who can not afford to stay in Manhattan” and ”Brooklyn prices will remain high if Wall Street executives and foreign buyers continue to drive up Manhattan prices.”.  These same assumptions could apply to Hoboken and Downtown Jersey City. Many newly arrived residents of Downtown Jersey City have moved here from Manhattan or from foreign countries. Though some recent residents have relocated from the New Jersey suburbs and other parts of the United States, most would have preferred to move to Manhattan had it been more affordable in the first place.  The above two quotes were taken from page two, paragraph three of the above mentioned NY Times article.

If you are considering buying a home for the first time and plan to be in a home for a considerable period of time, then considering buying in the next 12 to 24 months. Why? There has been a convergence of market conditions that point to a buying opportunity. First, interest rates are at an all time low which means you can lock in that mortgage rate at historic lows. Second, the real estate market has turned into a buyer’s market with inventory levels rising. Third, the dollar is weak internationally and real estate prices over the long term are subject to the effects of inflation.

The US dollar has declined against the Eurodollar for the past five years. In the short term US housing values are more a function of local supply and demand, but over the long term other less apparent factors could eventually work their way into US housing values and costs. If you are an avid traveler of Europe, then you should have an appreciation of what I am talking about. If your dollar is worth half of what it was worth five or six years ago overseas, than what is your home really worth today. If you sell your home today for double what you paid for it ten years ago (in US dollars) and then take those dollars to Europe, how much appreciation in terms of “true value” did you obtain?

What affect will the weakening US dollar have on US housing prices? Will this put upward pressure on the US housing market over time? Consider the price of oil, gold, and other commodities including the cost of building materials for a home. If gold is $1000 an ounce and the dollar has depreciated by 50% against most major foreign currencies, then gold’s appreciation from $400 to $1000 an ounce is more a function of the depreciating dollar rather than a true increase in the price of gold.

This holds true for oil as well. If oil has risen from a price of $15 a barrel 10 years ago to a price of $105 a barrel today, then what amount of that dollar increase is a result of the depreciation of our own currency (the US dollar). Oil and gold are “international currencies” and many of the building materials we use in our homes are affected by long term changes in exchange rates. What does this mean for housing prices today and in the future and what does this mean for the cost of construction now and in the future?

Housing prices have more than doubled in most regions, but construction costs have risen as well. In many instances material costs have doubled and even tripled, so it may cost twice as much to build that house as compared to what it might have costs ten years ago. If the median and average selling price of a home continues to decline, then construction of new homes will fall dramatically. Why? Because rising construction costs and falling housing prices will squeeze builder’s gross profit margins forcing them to postpone many future projects.

The New York City real estate market is the most likely real estate market to be impacted by the falling dollar, because of its appeal to international investors. While real estate prices are failing in most local US real estate markets, New York City prices continue to rise. Why? Well demand is high and supply is low and the dollar is weak. Foreign investors are hungry for Manhattan real estate and much of the added supply of new construction is swallowed up by foreign investors.

Please note this article was written for information purposes only and should not be relied on to make material financial decisions. Speak to your lawyer, financial advisor and your tax specialist for professional advice in purchasing a home. 

The price difference between various real estate markets is what many people try to profit from. This is called a price spread. For example, Manhattan residential real estate prices are roughly $1000 a square foot while Downtown Jersey City and other equivalent outlying urban areas of Manhattan might be $550 a square foot, a price spread of $450 ($1000 less $550) a square foot.

Bond traders or people that trade stocks look for price spreads. Bond traders refer to the spread in basis points and yield to maturity. So if a corporate bond yields 8% and an equivalent term US treasury bond yields 6%, then they would say that corporate bonds trade at a spread of 200 basis points or 2% (8% - 6%) to US treasuries.

With real estate markets people reach out to more far reaching markets in the hope that those markets may mature and/or improve and that prices may rise closing the spread between that market and another. Looking at Brooklyn Heights versus Downtown Jersey City there is a significant price spread. The selling price per square foot for housing in Brooklyn Heights is higher than in Downtown Jersey City. Recently I previewed several properties in Brooklyn Heights selling for about $850 a square. Since real estate in Downtown Jersey City is selling for about $550 per square foot, then this would imply a price spread per square foot of $300 ($850 - $550) between these two markets.

Infact depending on the property and its exact location within Brooklyn Heights, prices can far exceed $850 a square foot. On February 6, 2005 an article was published in the New York Times titled “$8.5 million Brownstone Deal Raises the Bar in Brooklyn” pointing out that the prices of row houses in Brooklyn Heights had reached all time new highs.

A lot of development is transpiring in Downtown Jersey City. This development will probably keep prices down in the near term (next couple of years) as a lot of inventory comes on the market and requires market absorption. However beyond the next couple of years as Downtown Jersey City improves, spreads should narrow.

As larger developers complete their projects and advertise them, more attention should be brought to bear on Downtown Jersey City. I speculate that Donald Trump has every intention of marketing his Trump Plaza Jersey City beyond the local markets. Plus let’s not forget about the new $130 million dollar international golf course near Liberty State Park (called the Liberty National Golf Club) and the $4.8 Billion Liberty Harbor North project. These projects should translate into positive marketing exposure for Downtown Jersey City and should result in some international exposure as well. 

Foreclosures will hit outlying areas harder, such as Jersey City Heights, Bergen Lafayette and Journal Square.  An article in this Sunday’s NYTimes, ”Beaten Down, and Not Only by Nature” highlights that almost 30% of houses on the market in Far Rockaway, Queens are being sold by banks. 

We traveled to Bushwick Brooklyn in search of the ”cheaper apartment”.  Rents in Hoboken and Downtown Jersey City have risen as much as 300% since 1996 making it unaffordable for many young struggling professionals and artists.  There are a lot of lofts in Bushwick but not many rowhouses. Admittedly spending a single day in Bushwick is probably not enough time to fully appreciate this area of Brooklyn.  We had coffee at Brooklyn’s Natural near the subway station.  We were approached during the day by two individuals that were obviously under the influence of illegal substances. We stopped at an HVAC supply store where we needed to be buzzed in for security reasons.  If you want to know more about Bushwick Brooklyn try Bushwickbk.com, a blog or journal about Bushwick.  Here is an entry on Bushwickbk.com regarding crime in Bushwick.

Article on CNN Money.com points out flattening and falling rents throughout the country except in San Francisco and New York where massive demand more than offset increased supply. “These cities compete in a global market and by world standards they’re still relatively inexpensive for foreign currency-based consumers taking advantage of a weak dollar.”

Blog entry at UrbanDigs.com mentions Manhattan real estate market’s link to Wall Street and the financial sector, affodability and jobs and the potential for layoffs in the financial sector.