Can This Market Be Saved?

Moderated by S. Jhoanna Robledo

Is there anyone in town—owner, renter, or especially buyer or seller—who isn’t watching the New York real-estate market right now? Some fear a full-on collapse. Others are circling the weak, hoping to pick over the corpse. And still others are bullish, saying that we may already have hit bottom and there’s nowhere to go but up. New York collected seven of the best real-estate minds we know for an afternoon roundtable, to see what everyone thinks—and how you can potentially take advantage of a seriously creeped-out moment.

Let’s start with the question that’s on every mind: Is our real-estate market poised for a big fall, like everyone else’s?
J.M.: One of my least favorite expressions is that Manhattan is immune. In the early-nineties recession, New York fared worse than many other metro areas.
D.H.: I never think we’re immune. Certainly we’re going to get bruised, but not like the rest of the country.
M.C.: I tend to agree with Dottie. We have the advantage, in that the average price is much greater and therefore we tend to have better-qualified buyers.
J.M.: The price points are higher, so they weren’t conducive to flipping, or that sort of activity. Five percent of the transactions had an eighteen-month turnover, whereas when you look at Miami, it’s 40 percent.
J.V.M.: New York’s sense of exceptionalism in the fiscal crisis in the seventies prolonged that crisis, by encouraging New Yorkers to think things were going to be okay when in fact the city had fundamental problems. We’ve gone through a period of tremendous prosperity, and did not take that opportunity to do some fundamental things [like] restructuring the tax system.

Which brings us to the current moment, when people are just …
L.S.: They’re sort of frozen. You hear from people who are just waiting, waiting to see when the time is going to be right. And I think most people are waiting to get a sense of when it’s okay to exhale.
M.C.: I agree. I’ve never seen more people come to me with little need for financing—just waiting to pull the trigger when they feel the markets are stabilized.
D.H.: [Look at] inventory. It’s up from 2007—because in 2007 we didn’t have any! So we’re really at average levels. In Florida and California, we’re looking at a three-to-five-year supply.
D.C.: The best quote I’ve heard was Dottie’s. She said, we were going at 160 miles an hour; now we’re down to about 80. And people are looking at real-estate principles: price, quality of building, and location. When you’ve got a cappuccino machine in the master-bedroom walk-in-closet—this was great when you needed to out-market somebody else. That needs to adjust.

How does it all compare to the ’87 crash?
D.C.: In 1987, it was overnight. One day we were making deals and the next day we were not making any … Since last year we’ve watched the market evolve. We got to this stage in a slow and controlled manner.
D.H.: There will be better deals, and more of them after the first of the year, but I don’t think they’re going to be like on TV—buy a foreclosure at $700, no money down!
N.R.: Deals happening right now are 15 to 18 percent [off the peak]. This hasn’t really come out yet, but it will. My clients are starting to get a little excited.

Do they think we’re at bottom? Do you?
J.M.: The bottom discussion is really futile at the moment. Credit hasn’t stabilized, and what happens with the new administration? It’s premature to start predicting.
M.C.: I don’t think that we will know when we’ve reached bottom until we’re past it.
D.H.: And when you hear somebody report that, you’re already on the upswing.
N.R.: I don’t expect to do a deal in the next three or four months. It’s not that I don’t want to. But my clients know what’s going on. If I said, “Buy now, you’re going to miss it,” I’m going to insult their intelligence.
D.H.: I have to disagree. If you’re going to live there and raise a family, and you try to wait for that perfect time, you might miss something you like. [But] if you expect to become rich in a day or two, forget it.

Okay, so say you’re looking for value and stability. Where should you look?
N.R.: I like the Upper East and Upper West Sides. You can get a good product at a good price, in an area that has everything you need within five blocks.
L.S.: It’s less about what neighborhood and more sort of block-by-block at this point. It really comes down to: Some parts of the neighborhoods are nicer than others.
D.C.: Downtown Brooklyn’s undergoing a huge resurgence—full disclosure, I have a project there. If you’re going to live in Brooklyn, and you’re price-sensitive … we’re selling at half of what is being sold right over the Manhattan Bridge.
J.V.M.: With or without Atlantic Yards?
D.C.: Without. Public transportation is there; infrastructure is there.
J.V.M.: Well, I’ve always been a fan of downtown Brooklyn. I also think Noah’s right about the Upper West and the Upper East, but in price-sensitive terms, I would go Harlem. That housing stock is magnificent, and the city [has rezoned] 125th Street. What Harlem doesn’t have is the retail …
D.H.: Services—you’re right.
L.S.: I’m a downtown guy, but there are three or four people blogging rhapsodically about Inwood. One of the fascinating things about this boom has been the amount of neighborhood love that has flowered.
J.M.: The other interesting thing is that you’d think if the housing market here was just going to fall off a cliff tomorrow, the rental market would spike. In fact, although rents are relatively high, the softening activity is [happening there, too].

How about new development? There’s a whole lot of it coming online right now.
D.C.: What was selling a year ago was envisioned three years ago. We’re now in a different world. It’s back to principles: location, access to transportation, quality building. Would you need a Wii room on the first floor? I don’t think so.
L.S.: You’re taking away the Wii room now? You took my coffeemaker in the master suite …
D.C.: Exactly. This stuff drives me crazy.

It sounds like sellers just have to be realistic. Don’t overreach; wait if you can.
J.M.: You have to be priced within 2 to 3 percent of what it’s actually worth for it to sell. If you’re priced higher than that, you’re wasting your time.
N.R.: Do not fall for the trick of working with the broker who promises the highest price. People bring in four or five brokers, and brokers have learned that if they offer the best price, they get the listing.
D.H.: That’s really not what happens. I just had a meeting to tell my brokers, don’t do that. They don’t do it.
N.R.: Well, you can’t babysit them.
D.H.: Here’s what happens. The seller says, listen, I’m not going to give it to you if you think this’ll work.
N.R.: Okay, well, it’s going to be counterproductive if you fall for that. Bids are not flying in; buyers’ confidence is down. So if you had to sell now, and you have a cookie-cutter apartment, no outdoor space, no views, you’d price 10 percent below the last comp, ahead of your competition.

What do you say to people who are eager for a slowdown, because they think New York is losing uniqueness?
D.C.: The only way cities survive is to rebuild themselves. I mean, do you want New York to stand still? Nobody wants that.
J.V.M.: I agree. Rushes have forces all their own; pauses have forces all their own.
L.S.: For all that you can say about a shiny development here or there, New York remains fabulously weird. I understand when a neighborhood loses something that it loves, and I also understand why preservationists fight as hard as they do, but I don’t see the city as having to become homogenized. New York can’t be homogenized.

1. Lockhart Steele, founder of
2. Jonathan Miller, president and CEO of appraisal firm Miller Samuel
3. Don Capoccia, developer, managing partner of BFC Partners
4. Noah Rosenblatt, publisher and Halstead Property vice-president
5. Melissa Cohn, president and CEO of the Manhattan Mortgage Company
6. Julia Vitullo-Martin, senior fellow at the Manhattan Institute and director of the Center for Rethinking Development
7. Dottie Herman, president and CEO of Prudential Douglas Elliman

Can This Market Be Saved?