Property Grunt

Monday, December 03, 2007

Preparing for the siege

Christine Haughney has written an excellent article on the current state of affairs between buyer and seller. She explains that despite record sales and evidence of buyers who are being shut out trying to look for deals, buyers are displaying a siege mentality by waiting it out.
She makes a pretty strong argument for buyers to hold their ground with some really scary ass stories.

Brokers say it is the buyers in this sector of the market who are now growing concerned about the impact of the weak national housing market and the effect that Wall Street losses might have on Manhattan apartment prices. So they’re lowering their bidding or stopping their searches altogether until they have more confidence in the market.

Manhattan has been able to weather the storm, however the question on everyone's mind is not if but when the s**t hits the fan for Manhattan. The reason why these buyers are going bargain hunting is not because their douchebags but because they want to hedge their bets and not get caught with their pants down.

Jason Loeb, 37, an equity analyst for a money management firm, has received a half-dozen e-mail messages from friends who have lost jobs because of downsizing at major banks. Those “I hope I land on my feet” notes, coupled with weak performance in industries he tracks like trucking and retail, convinced him that Manhattan real estate prices eventually have to decline.

He is not going to be the only who is going to be backing off. Right now as we speak there is a growing number of people are having second thoughts on whether to buy right now.

Some buyers have reason to be cautious. Shai Shustik, president of Manhattan Residential, a brokerage with many clients in the financial industry, said that since the end of August, his buyers had cut their budgets by 10 percent because of concerns about their bonuses. One lost his job at a hedge fund hours before he was due to sign a contract for a $1 million two-bedroom co-op on the Upper East Side.
“He was literally ready to meet the attorney that afternoon to return the checks,” Mr. Shustik said. “But he never did. He got laid off that morning.”

On the bright side, this guy is very, very lucky. Can you imagine if he was laid off hours after he signed that contract? He would be trying to flip that sucker.And with Citibank planning layoffs, that buyer won't be alone looking for another job.

In my previous entry, I presented an argument that buyers who are not in a dire to buy should wait. I hope this article provides further evidence on my perspective.

By no means do I take any satisfaction in any of this, because if Wall Street gets hit hard then we all are going to get hit hard. And I am not just talking about Manhattan but the rest of the country.

Sellers, if you want to be taken seriously, well you need to sit down with your broker and put together a new game plan. If the product is not moving, then some drastic price cutting maybe needed or sellers may decide to take it off the market till the next cycle which looks like it won’t be happening for quite awhile.

Brokers, keep the faith. This is not the time for despair. This is the time to find good buyers or have a sit down with your sellers. You have to figure out another plan of attack.