“Value is not a word I’ve used in the last two or three years – at least, not when it comes to real estate,” says Gumley Haft Kleier president Michele Kleier. “But right now, there are apartments on the market that I can honestly say are a good deal. And that’s nice for a change.” Real-estate and mortgage brokers seem to be in agreement: Now is the time to buy an apartment. Right now. And while it’s easy to dismiss the advice of industry insiders as self-serving, their reasons are compelling:
Prices are down. “We’re seeing people who are scoring at 15 to 20 percent below what they would have paid fifteen months ago,” says Ashforth Warburg Associates president Frederick Peters. Kleier agrees: “They haven’t been prices from the mid-nineties, but they certainly are a lot lower than they were for the same apartments back in 2000.”
The bigger, the better. Most brokers say that large apartments have experienced the most dramatic price drops. “The larger apartments have come down more, but of course those were the ones that were so inflated, they had nowhere to go but down,” says Kleier. “So apartments that were maybe $12 million have come down to $9 million. If something didn’t sell for six months before September 11th, how could anyone expect it to sell at that price after September 11th?”
It’s a good time to upgrade. It’s a question of mathematics. Take someone moving from an $800,000 two-bedroom to a $1.5 million three-bedroom. Assuming there’s a 10 percent reduction in prices across the board, this person might lose $80,000 on the place he’s selling, but he’d have $150,000 knocked off the apartment he’s buying. “I call this difference in the selling and buying price ‘the leap,’ ” says Neil Binder, principal of Bellmarc Realty and author of The Ultimate Guide to Buying and Selling Coops and Condos in New York City. “Right now, the leap is smaller than it’s been in a long time.” Peters agrees: “People get hung up on absolute value, rather than relative value. If you’re buying and selling, it doesn’t matter what you get or what you pay: All that matters is the difference between the two.”
Money’s cheap. Low mortgage rates are just as important as low purchase prices, if not more so. “People say, ‘Gee, should I wait and see if purchase prices come down another 10 percent?’ But the truth is, if interest rates bump up just one percent in the meantime, well that’s your 10 percent right there,” says Neil Bader of IPI Skyscraper Mortgage.
Wait at your own risk. “The problem with waiting for the bottom is that by the time you know it was there, you’ve already missed it,” counsels Peters. And no one knows how much longer purchase prices and interest rates will stay low. “Once the economy starts to pick up again, I think rates are going to go up pretty quickly. So now’s the time to do it,” says Bader.
On the other hand. If the announcement of an official recession and reports of increasing layoffs suggest to you that the bottom could be a ways off, you’re not alone. “There are plenty of people out there who think prices will continue to erode. People are concerned that in January bonuses will be much lower, and there’ll be fewer buyers looking,” says Pam Liebman, CEO of the Corcoran Group. So does she think buyers should hold off and see? “Well,” she laughs, “I bought a house three weeks ago.”
What about rentals? It depends whom you ask, although most brokers report at least some price decreases. “We’ve seen substantial price drops – from 5 percent to as much as 20 percent,” reports Michael Moran, who heads Corcoran’s rental division. Others describe more modest declines: Benjamin James president James Ferrari estimates a 7 to 8 percent drop, while William B. May’s Lisa Rose observes, “You might knock a couple hundred dollars off the price, but not a couple thousand.”
Wait for the right one. You’re more likely to find a rental you truly love right now, thanks to a dramatic increase in supply. “From September 1st to November 1st, we’ve had 92 percent more rental listings than for the same period last year,” reports Moran. William B. May downtown broker Mary A. Vetri concurs: “I’ve never had such a rental inventory.” There are numerous reasons for the increase – cash-strapped companies cutting back on new hires, newly unemployed twentysomethings moving to cheaper apartments (or back in with their parents), jittery renters moving out of the city – but the result is a less stressful and more appealing shopping environment.
Let’s make a deal. “Landlords are more willing to negotiate in today’s market,” says Moran. “Some are accepting out-of-state guarantors. Some are even offering a month’s rent off the price.” In other words, if you’re hoping to bring your Doberman with you, knock down a wall, or take on another roommate, you may find your landlord surprisingly sympathetic.