An apartment combination is the stuff of lore for many New Yorkers, but if you're one of the lucky few for whom that opportunity may present itself, there are many things to consider before making the offer on your neighbor's apartment. Theoretically, combining two adjacent co-op or condo apartments requires nothing more than removing a kitchen and creating a doorway-sized opening in a wall to join the two units. However, creating a new apartment that actually feels like a home in terms of flow, functionality and durability will require a much more extensive renovation. Before you take the plunge, it’s important to consider the costs associated with combinations, both to make sure your budget can foot the bill, but also to make sure the value of the apartment you plan to create will be worth more than the sum of its parts in a resale. Start with your building Confirm your building will allow a combination, and find out as much as you can about what the process will entail. Depending on your particular circumstances, it may be desirable to purchase hallway or other common space from the building. It is also important to understand the building's rules for this type of renovation, which is usually contained in the alteration plan. Your building's fees for renovation, use of elevators, protection of hallways, and potential penalties for exceeding the scheduled timeline will all factor into your budget. Costs will also vary based on what your building will require of your renovation, for example if you must update all electrical during a renovation or when the building requires you engaged a structural engineer. Understand the costs with a team of experienced professionals While the costs of a renovation can range from $200-$500 a square foot, this does not begin to address the question of what is a reasonable budget for a particular combination. Vertical combinations are more expensive than adjacent, but the condition of the respective units and the final vision you have for the combination (custom features are a major driver of cost) will make a huge difference. Apartment combinations almost always require an architect. Many architects will charge a percentage to provide full-scale service from design and drawings to construction management, but if you are on a budget, it may be possible to reach another arrangement such as hourly or a flat fee. It is most important to be upfront about your expectations on scope of work and budget when speaking to architects. Similarly, it is important to get quotes from several contractors to get a sense of what it will cost to get the work done. At a preliminary phase, it is difficult for contractors to estimate costs without drawings or a sense of the level of finishes desired for the combination. A trusted architect may be able to help you formulate a plan and anticipate other professionals you may need to hire (an expeditor to submit plans and navigate the permitting process, asbestos abatement, structural engineering certifications, or major electrical or plumbing upgrades). The importance of a thoughtful layout While there are legal requirements for light and ventilation when creating or moving kitchens, bathrooms and bedrooms, other factors are important to consider when creating your new floorplan. All too often, combination apartments have odd room sizes, weird areas of “dead” or unusable space, or just seem to flow weirdly. An experienced architect or designer will be able to offer you advice on how best to configure your new space, and create a floorplan that will maximize both functionality and value of your home. Keep in mind that not every combination may result in a desirable larger home that feels like it was meant to be a single space. Moving major systems: kitchens and bathrooms Other than in a few specific situations, New York City only permits one kitchen per apartment. A kitchen demolition can run anywhere from $5,000 to $8,000, but it’s important to consider whether your demo requires moving plumbing or waste risers. Plumbing risers are the most expensive thing to move around. Even if one apartment has a bathroom that lines up with the other apartment’s kitchen, you won’t necessarily be able to blast through the wall to create a giant kitchen or bathroom. The risers—which begin in the basement and end at the top floor—likely serve an entire line of apartments, so buildings usually forbid moving them for safety reasons, and to avoid major disruption to other building residents. If you are allowed to shift a riser line, keep in mind that it will likely add a at least $10-20K to the cost of your renovation. The devil is in the details Combining apartments that are mismatched in quality (e.g. if one is in estate condition) poses additional design challenges. However, even if you’re combining two renovated apartments, blending finish work between the two will almost always require updating trim, moldings, doors and windows. Surprisingly, this finish work may be one of your largest expenses, as it will typically involve custom millwork, framing, and built-ins. High-end custom millwork, such as full height bookcases, storage cabinets or elaborate wall panels, can run you anywhere from $200 per linear foot to $800 per linear foot. Look at the big picture While much of our focus here has been on the costs, ultimately the goal is to create value. Speak to an experienced real estate agent to get a sense of a realistic offer on the neighboring apartment and what the resulting combination may be worth. Their guidance may even shape your renovation plans including decisions on number of bedrooms/baths that would be most desirable as well as what level of finishes are likely to be appropriate at a certain price point. #BlogPosts #FAQNYLiving

As a first time buyer in NYC, it is important to know the real price tag on your purchase and create a realistic budget that will help narrow your search to properties you can afford and ensure you are able to make a competitive offer when you find "the one." 1. Downpayment Most coops will require that buyers put down at least 20% of the purchase price as a downpayment (some may have higher requirements of 25%, 40%, or 50%). Condos have a lower threshold -- usually 10% -- but financing more than 80% will involve a surplus on the monthly mortgage payments so will amount to a costlier purchase. Especially in a tight market, buyers will be encouraged to put down at least 25% which decreases the risks of the deal falling through due to a lower-than-expected appraisal - it also difficult to be competitive in any kind of bidding war with an offer that includes less than a 20% downpayment. 2. Closing Costs Closing costs vary based on whether you are buying a coop or a condo, and whether the purchase exceeds $1 million. Your attorney or real estate agent can provide you with detailed information on closing costs for your specific purchase, however, the most basic takeaway is that closing costs for coops up to $1 million is around $8000-$8500 regardless of their cost or amount financed. Condo closing costs are significantly higher, especially if you are financing (about 2% of the financed amount is due as a mortgage tax). Purchases over $1 million in both coops and condos are subject to a 1% mansion tax. 3. Reserves Most coop boards will require buyers have some liquid funds remaining after closing, with the amount varying from 6 months to 2 years. This means that coop buyers must show that after deducting downpayment and closing costs, they have 6- to 24-months’ worth of their mortgage and maintenance remaining in their bank accounts. Condo boards have no reserve requirements though bear in mind that most lenders will require some reserves although they differ on whether those reserves can be liquid or illiquid (i.e. retirement accounts). 4. Monthly Carrying Costs In addition to your monthly mortgage, you will be paying maintenance for a coop (includes your share of real estate taxes and common charges) or separately common charges and real estate taxes for a condo. In Manhattan, $2/square foot is considered a reasonable monthly total for these fees, in Brooklyn, monthlies tend to be lower. While these costs can fluctuate based on amenities, some smaller buildings have surprisingly high monthly charges since basic costs are shared by a smaller number of residents. If these costs price you out of your desired area, I often advise my buyers to think outside the box and look at adjacent neighborhoods or areas that have the same look and feel as their ideal neighborhood. It's almost always better to opt for a larger apartment in a transitioning area rather than a smaller one in an established neighborhood. For Brooklyn buyers, this might mean Windsor Terrace or Greenwood Heights in lieu of Park Slope, Clinton Hill or Crown Heights rather than Fort Greene, or Prospect Park South or Kensington instead of Ditmas Park. In Manhattan, the East Side has a lot of value: Midtown East, Murray Hill, and the far East reaches of the Upper East Side and Lower East Side provide great entry level apartments with room to grow. But for those with their heart set on the West Side, I suggest buyers look North: the West Side is beautiful all the way up the Hudson River, from Manhattan Valley through Hudson Heights. Check out my quotes and ideas from my colleagues in this article in Brooklyn Underground to advise new buyers on which neighborhoods offer them the most opportunity, both in terms of price per square foot and return on investment in resale value after less than 10 years of ownership. #FAQ #BlogPosts

Two weeks into the new year, the 2024 real estate market shows considerable promise. The final quarter of 2023 continued the trend of low sales volume but concluded with positive momentum. Anecdotally we are already seeing an increase in new buyer consultations, a rise in showing inquiries, a notable uptick in signed contracts in BK, and the anticipation of several new listings. While the upcoming election adds some uncertainty to to come in the Fall, the backlog of activity accumulated over 18 months of low buyer and seller activity holds the promise of a robust market so long as economic conditions (stock market, inflation, mortgage) hold relatively stable or improve. Stay tuned for our January report out in a few weeks to see if the numbers track what we're seeing on the ground. If inventory and mortgage rates continue to normalize, we anticipate a surge in transactions that buyers and sellers have postponed for 12-24 months. If you've delayed buying or selling, now is the ideal time to contact us for strategic positioning in anticipation of what 2024 holds. Low inventory continued to be a stabilizing force on prices but kept transaction volume low. While the total number of closed sales was down 10.2% year-over-year, active inventory and contracts signed were up compared to last year, showing positive movement as we transition into 2024. Despite rates, low supply and increased contracts drove prices to the highest levels we've seen since 2018 both for condos and co-ops. Many are speculating that the bottom -- which was a bit anticlimactic in terms of "deals" -- is now behind us, while many would-be buyers were waiting for it to happen. New developments are moving quickly and helping to propel climbing prices, but resale inventory has continued to stagnate and is the market's current limiting factor. This comes as no surprise, as approximately 40% of would-be sellers are locked into ultra-low mortgages, and the data indicates they are still not interested in providing significant discounts. As rates decline, a resurgence in resale transactions in 2024 is possible, as buyers effectively have access to additional capital, and sellers on the sidelines with low-rate mortgages are more willing to take the plunge with a new purchase. The Brooklyn market was not immune to the effects of high mortgage rates and record-low inventory, but the year-end showed some improvement and the potential for a busier market in 2024. The total number of signed contracts increased 16% from the third quarter, the first year-over-year increase in signed contracts in almost two years. Lack of inventory continues to paralyze Brooklyn and is self-reinforcing. Would-be sellers are trapped in their low-rate mortgages, and beyond that know that once they sell there is little inventory for their subsequent purchase. Fewer new development launches in the end of 2023 only further exacerbated this problem. We'd expect that even some modest relief in inventory levels will unlock the market, driving more sellers to enter the market which would, in-turn, release pent-up inventory further. With record low available listings in prime neighborhoods, many buyers turned to resale co-ops and/or locations farther east and south pushing median and average prices down. These declines bring marketwide prices below where they were during the sizzling market of 2021, but essentially level with their five-year historical averages. Despite the decrease in these averages, Brooklyn remains an incredibly in-demand and competitive market with bidding wars on one-in-five sales. Rates are down more than 100 bps from their peak in October, and are now hovering in the low-6s. While all are anticipating rates to decline in 2024 as the Federal Reserve has made clear that they plan to lower the Fed Funds Rate by 75 bps in 2024, it’s not clear if that path will include one final rate hike before the rate cuts. Mortgage banks are cautiously optimistic of rate cuts sooner than later, and all eyes are on Jerome Powell as he announces the Fed’s outlook at their next meeting on January 31. The share of all-cash buyers in Manhattan hit an all-time high in the fourth quarter of 2023 at 67.9%, up 17.6% year-over-year and compared to figures between 40-50% historically. The surge in cash deals likely reflects the market’s anticipation that rates will be lower in the next few years and there will be an opportunity to obtain a lower-rate mortgage. (FINANCE YAHOO) Despite stocks experiencing a seventh consecutive week of gains, traders might be overly optimistic about expecting rate cuts early next year. The next step is not when to cut rates, but to decide how long to keep policy restrictive. (BUSINESS INSIDER) In the fourth quarter, there were 9.1% more sales (amounting to 37.6% jump in transaction volume) at the $20 million-plus price range compared to last year. New signed contracts, which provide a more real-time measure of market activity, also saw strong activity from deep-pocketed Manhattan buyers in the fourth quarter. (MANSION GLOBAL) If you are upgrading your New York City apartment or brownstone, then you are no doubt all too familiar with the U.S.'s supply chain crisis. Even design pros are grappling with getting materials—as in lumber, paint, and so much more—for their projects. Here is how to get around the supply chain crisis when you're updating your NYC apartment or brownstone. (BRICK UNDERGROUND)

Dear Clients, Friends, and Colleagues, I hope you had a wonderful holiday. Ahead of our in-depth 4th Quarter market report, I wanted to share some exciting updates with you and our 2023 market recap. Isabel welcomed her baby daughter Layla on November 6. Of course Layla is adorable, and both are doing great. Isabel is back in action next week, albeit in a bit more limited capacity. I'm thrilled to be able to share in this new chapter with her. My brood is doing well. We are applying to kindergarten for Teddy (4.5 y.o.), and Cece (16 m.o.) is busy exploring and learning from big bro. It's a special gift every day hearing what will come out of both of their mouths. I am gearing up for my 20th Yale Reunion, and just celebrated 10 years in real estate. While 2023 was a challenging year for real estate, characterized by high mortgage rates, low inventory, high inflation and lingering recession apprehensions, I was extremely proud of what our team accomplished. We obtained several building-record sales for our sellers and negotiated some great deals on behalf of our buyers. With rates on the downslide and economic indicators looking up at the end of the year, there is much cause for optimism in 2024. We recently hired a full-time marketing associate and are working with a top coach to further improve our team's operations, so we can deliver a better real estate experience for you. We are bracing ourselves for a busy year! Thank you to our amazing clients, colleagues, family, and friends for your support this year. We wish you a happy, prosperous, and healthy 2024! Prices softened in 2023, but it was not the drop that would be expected looking simply at low demand and high interest rates, as low inventory acted to stabilize price. Not counting 2020 when the market was halted for several months, in 2023 total supply was the lowest since 2017 and contracts signed were at a 10-year low. So there were no massive shifts in price or discounts, just a quiet market. The biggest trend we saw was a jump in all-cash deals, at times amounting to more than two-thirds of all deals. We also saw an increased premium on renovated versus unrenovated homes, which could have been driven by the cost and time of renovations in a rising inflation environment, but also by the lack of renovated inventory on the market. As we head into 2024, there are several factors to consider that will ultimately shape the market. Interest rates are expected to drop and inflation seems to be under control. With the looming election, things can be hard to predict, but the 18-month slowdown in transactions means that there are buyers and sellers out there who are ready to make a move. Lower rates will hopefully bring back buyers, especially those in the lower-end of the market. It could also mean more supply since many would-be sellers have been on the sidelines to keep their their low-interest loans and facing lackluster options once they sold. Stay tuned for our in-depth analysis of 4th Quarter data, coming mid-month. In the last 2 months of 2023, the average weekly 30-year mortgage interest rate dropped from 7.79% to 6.61%. On jumbo loans, rates are currently around 6.25%. While there is still some uncertainty, we expect mortgage rates to continue to decline in 2024 with the Fed indicating 0.75% of cuts are still on the way. Currently, we are seeing non-conforming rates in the low 6% range (before points and relationship discounts), which is a far cry from earlier this Fall. Hear It From Our Clients! "Isil and her team helped us sell our parents' Upper East Side co-op in a market that was becoming increasingly buyer-friendly. They worked tirelessly to prepare and price an apartment that was in serious disrepair as it had not been renovated in over 50 years. They expertly marketed the property to qualified buyers and worked closely with us through a successful negotiation that turned multiple lowball offers into an at-asking sale. We would, without reservation, recommend Isil and her team to anyone looking for a real estate agent in New York." - Thor & Andy, Sellers of a Carnegie Hill Coop

Though interest rates have dropped substantially in the last few weeks, it was not enough to boost activity levels which continue to lag behind seasonal averages. After an 18 month slog, sellers are adjusting as both asking prices and closed sale prices have declined. Despite all factors pointing to a "buyer's market," buyers -- particularly on the lower end -- have not been motivated. As rates have begun to dip, it will be interesting to see if there's a December awakening. Until next time! The market in November continues to be below seasonal averages. While supply has caught up to norms, contracts signed continue to trail behind. Activity across all stages of the transaction -- from open houses to closings -- are well below last year and seasonal averages. This is especially true in the the under-$2M market. which has been most sensitive to higher rates. Anecdotally, our team has seen the same thing. All of our active buyers since May have been looking around or above $2M, whereas we usually work with a wider range of budgets including first-time buyers on the lower-end. As expected, closed sale prices continued to decline and we expect this trend to continue as deals reached this Fall will be reflected in closed sale data in the coming months. It is telling that median prices held almost steady while price per square foot declined substantially, indicating that the mix of activity has skewed to the higher end. This month Brooklyn data closely mirrored Manhattan with overall metrics firmly showing that it is a "buyer's market" on both sides of the river. However, certain neighborhoods, particularly in NW Brooklyn, continue to buck trends and show resilience and strong demand, making up an outsize share of contracts signed relative to inventory. Similar to Manhattan, median prices decreased less than price per square foot, indicating comparatively ore deals on the higher-end and in the more in-demand neighborhoods. With interest rates falling, things might bounce back quickly in Brooklyn. According to a real estate attorney who does a large share of transactions and tracks this data, about 75% of deals he is seeing now involve financing compared to less than 40% in the Summer/early Fall. Mortgage rates have steadily fallen (more than 0.5%) since the Fed did not raise rates at its November 1st meeting, the second consecutive meeting where they held rates steady following 11 straight rate hikes. Along with the October Jobs Report, which indicated that inflation might be under control, the market has reacted on the assumption that rate hikes are behind us and we can expect the Fed to even lower rates by next Summer. If you come across a pricing history that doesn’t make sense, you may be seeing the ripple effect of a closing credit, a hush-hush discount that sellers give to buyers at the closing table that can throw comps off kilter. Brokers say more buyers are asking about credits and more sellers are agreeing to them in the current market to move deals along. (BRICK UNDERGROUND) Following the plaintiff's victory in the Sitzer Burnett commission lawsuit, attorneys filed suit against REBNY targeting their policy that the brokers “shall each be paid an equal share of the commission as specified in the Exclusive Listing” which they claim has caused sellers to pay inflated broker commissions. (HOUSING WIRE). Manhattan is a focal point of global real estate interest, and its dynamic market reflects various economic, social, and geopolitical factors. Given its relative importance, there are five critical areas to influence the Manhattan real estate market in the upcoming months. (FORBES) Commercial leasing activity in November was underwhelming and and supply outpaced demand leading to an increase in available office space at the end of the month. (THE REAL DEAL)

The Fall market in Manhattan has been turning out as we expected. As interest rates have continued to climb, contract activity has continued to decline. Prices have still not followed suit, however, and inventory levels continue to drop as many sellers elect to delay listing until until Spring or Fall 2023 in hopes of riding out the high-rate environment. More specifically, contract activity was down more than 40% last month year-over-year; however, looking past 2021 and 2020 (both outlier years), contract activity is only 12% lower than in October 2019 and 20% lower than the October average for the years 2008-2021. Supply has remained relatively stable, despite this decline in contract activity, as there have been 20% fewer new listings this October compared to 2021 and 7% fewer than in October 2019. While it's impossible to say for sure, most of the NYC real estate community is anticipating a quiet end to 2022, with the current trends continuing. While overall prices have not budged much so far, price reductions continue to come in and we suspect negotiability is up, particularly in some sectors. We expect to see the results of this in sale metrics for the first quarter of 2023, when deals currently being negotiated close. Anecdotally, while our team has had fewer listings this Fall, those we had entered contract relatively early this season and at good prices. Well-priced properties that have value are still trading despite the interest rate environment and we have seen more cash buyers than expected, especially for the coop market. The NYC rental market continued to cool slightly last month, with the Manhattan median rent price down slightly from $4,700 in September to $4,585 in October. However, inventory remains extremely tight, and October's median price is still 25% higher year-over-year -- and even more dramatically elevated compared to pre-pandemic rents. A Forbes article this month indicates investor demand for NYC multi-family properties remains high, as they offer an attractive alternative to hedge against inflation and market volatility in the near future. In Brooklyn, inventory shrunk even further with both new listings and total supply down by double digit percentages year-over-year in October. This kept days on market and median price metrics even with last year, despite substantial drops in contract and sales activity. The fervor of bidding wars has cooled, though the imbalance in supply and demand -- particularly for townhouses in prime areas -- has kept prices high. We have seen several instances where sellers are making deals pre-market rather than listing with the expectation of a massive bidding war as they would have done 6 months ago. Stocks dropped after the Federal Reserve again sharply raised interest rates on November 2, and while the Fed did hint at a possible slowdown in the pace of increases indicated it still has work to do in its fight against inflation. (WSJ) Sharply higher mortgage rates caused mortgage demand to drop to the lowest level since 1997. Mortgage rates fell slightly to start this week, but are still well over 7% after starting the year at around 3%. (CNBC) Forbes Investment Sales & Capital Services Groups indicate free market apartment buildings in NYC will remain an attractive long-term inflation hedge for investors due to the long-term supply constraint for apartments in New York City (a projected deficit of 560,000 units by 2030) and rent growth. (FORBES) In the face of skyrocketing rents, some NYS lawmakers on the left who have traditionally been fierce critics of the real estate industry are shifting to embrace new housing development, even if it’s not fully affordable. (NYTIMES) There are pros and cons of owning a "Penthouse" apartment in NYC, but one big pro is resale. On average, penthouses tend to sell for about 5 to 10 percent more than non-penthouse apartments and tend to be less affected by market volatility. (BRICK UNDERGROUND)

While October was lackluster (especially on the lower end of the market which is more sensitive to financing), many are eyeing end-of-year price cuts to spur activity between Thanksgiving and Christmas. In other news, the real estate world was shaken by the federal jury verdict in the antitrust suit against the National Association of Realtors and several major brokerages. While this has the potential to reshape the industry, the sky is not falling and I'm excited to share in coming months how we will be adapting to these changes. Please don't hesitate to reach out with any questions. Until next time! While inventory levels have normalized, activity in Manhattan is still lagging. Open house attendance has been in decline since Labor Day, and though signed contract figures are up relative to last month and last year (which were both low points), figures are lacking as a percentage of inventory. Median days on market, negotiability, and listing discount are all up materially compared to last year, favoring buyers. While closed sale prices have ticked down only slightly, this reflects deals negotiated 45-120 days ago and we expect prices to further adjust to market conditions as Fall deals close and as motivated sellers drop prices to strike deals before the new year. Brooklyn continued to show strength relative to Manhattan. Contracts signed were level with last year despite even less inventory, indicating extraordinary absorption levels. Though borough-wide prices were down slightly, it is interesting that this is based on a substantially fewer number of transactions (almost a third less than the number of closed sales last October). Also, as we've said before, these metrics are not indicative of the more in-demand neighborhoods where homes continue to trade above asking price. October saw two jumps in mortgage rates -- first as an overreaction to the Oct. 6 jobs report and again in anticipation of the November 1st Fed Meeting and the November 3rd jobs report. However, the November Fed meeting and subsequent weak jobs report seemed to allay concerns of another rate hike this year, pushing rates down to 6.892% APR so far in November. A federal jury ruling that the National Association of Realtors and brokerages had conspired to artificially inflate commissions, has the potential to transform the U.S. real estate industry by changing how buyer's agents can be compensated. (NYTIMES) In September, Manhattan's median rent slightly decreased to $4,350 from $4,400, indicating more lease renewals as landlords strive to retain tenants, with rent affordability improving marginally amid a shift attributed to market normalization rather than short-term rental restrictions. (CURBED) New York's neighborhoods are not only shaped by developers and brokers but also by the people who live in them. Check out NY Times' extensive "neighborhood" map, created from over 37,000 responses, which offers a unique look at the city's neighborhoods. (NYTIMES) Mortgage rates are down over the past week, with the 30-year fixed rate mortgage at 7.77%. The average rate on a 30-year fixed rate mortgage surpassed 8% in mid-October for the first time since 2000. (MARKET WATCH)

While transaction activity in August lagged compared to 2021 and 2022 levels, the main indicator – contracts signed – was on par with historical averages. Despite record-setting interest rates, prices did not decline month-over-month and year-over-year due to unusually low inventory levels, and competition for well-priced desirable listings remains robust. We expect an influx of new listings this month, as we do every September, but to what extent this will track with historical norms – or if inventory will remain constrained – is a big unknown. If interest rates appear to stabilize or even decline, it would be a release valve for pent-up listings; however, most don't expect a significant uptick in activity until spring or fall of next year. In Brooklyn, inventory levels remained at historic lows last month, with new listings and total inventory figures down double digits once again. Closed sale prices declined slightly and days on market ticked up, although - as we've come to expect - this does not necessarily reflect the market conditions in the most in-demand areas, specifically North Brooklyn (Williamsburg & Greenpoint) and Northwest Brooklyn (BoCoCa, DUMBO, Brooklyn Heights, Fort Greene, Prospect Heights, Park Slope, etc.) where we are still seeing bidding wars and over-asking closed sale prices. In August these areas accounted for only 28% of active inventory, but 36% of all contracts signed. On the other hand, South Brooklyn inventory, primarily 1-2 family homes, made up 57% of total Brooklyn inventory but only 48% of signed contracts. Declining prices for houses – the chief property type in this area – contributed the most to Brooklyn's overall decline in prices; condo sale prices actually increased and coop prices remained unchanged borough-wide in August. Mortgage rates continued to tick up, peaking at just under 7% for jumbo loan sizes on August 22, a 21-year-high. However, the most recent Jobs Report, released on September 1, gives some cause for optimism on the rate-front because it showed that the job market is finally cooling, which is good news for rates. The US had been experiencing stronger-than-expected job growth for a very long time, and the Fed has been holding out for sustained below-trend growth to ensure inflation is on track to reset to their 2% target. The most recent report indicated that fewer jobs were added to the American economy than expected, and unemployment rose from 3.5% to 3.8% in August. This is exactly what the Fed is looking for to stop rate hikes. While there hasn’t been a significant improvement on mortgage rates yet, we may see a small one as we get closer to the Fed Meeting later this month. While we are not expecting a dramatic drop in rates this fall, we are hopeful that the Fed is done with the rate hikes, and we will begin to see a slow but steady decline over the rest of this year and into 2024. The end of AirBnB in NYC? Local Law 18, effective as of Tuesday, limits how Airbnb operates in the city - effectively banning it entirely for many guests and hosts. From now on, all short-term rental hosts in New York must register with the city, and only those who live in the place they’re renting—and are present when guests are staying—can qualify. (WIRED) Goldman Sachs now predicts a 15% chance of a recession, down from 20%. Bank of America and JPMorgan also lowered recession calls. (CNBC) After more than a decade of rock-bottom interest rates, real estate lenders and borrowers in New York City are in a precarious situation. The rapid rise of rates and declining property values in some sectors - most notably commercial office buildings - have prompted lenders to be more selective about what sectors they lend in, and to whom. (THE REAL DEAL) US homebuilder stocks have defied conventional wisdom about the effects of rising mortgage rates, rallying furiously and attracting an $814M bet from Warren Buffett’s Berkshire Hathaway. Shares in DR Horton, Lennar and NVR, which Berkshire disclosed it owned this week, have risen about a third apiece this year, far outpacing the S&P 500 stock index. Rising rates have proved a blessing for homebuilders because their rapid rise has in effect trapped many current owners in their properties, reducing the stock of existing houses for sale and driving would-be buyers to new properties. (FINANCIAL TIMES)

In July, Manhattan contract activity was essentially on par with last year and within the realm of historical averages, though on the lower range of what we are used to seeing. New contracts declined from June (~16%) and throughout the month, aligning with seasonal patterns. Inventory levels remain historically low, with new listings in July down 16.7% vs. last year. While the market is slow, prices have not budged much, due both to the strength of the high-end market and the lack of inventory/activity in general. In fact, median closed sale prices only decreased by ~2% from last year, despite deals being negotiated in a far less favorable interest rate environment (with rates up ~2%+ since then). The average days on market currently stands at 68 days -- a 10% decrease year-to-date and a 3% decrease from the previous month, but a significant 36% increase from the previous year. It is interesting to note that ~65% of all deals in the second quarter were cash, which disproportionately affects the higher end of the market (75% of deals over $5M were cash). So while interest rates have cooled the lower end of the market, overall metrics are buoyed by the higher end. Listing traffic, new inventory, contract activity, and open house attendance have all declined sharply since Memorial Day. Though traffic had been building, open house attendance changed course in June with almost half of all open houses reporting zero visitors consistently each week. Inventory had been surpassing historical averages in the earlier part of the quarter, but fell short in June, likely due to sellers holding out in the face of diminished demand. The Brooklyn market continues to be defined by two words: inventory constraint. While July contracts signed were essentially level with prior years, new listings were down compared to both 2022 and 2021, when inventory levels had already hit record lows. This has led to a net supply deficit, with listings absorbed faster than they can be replenished. It is easier to sell a property in Brooklyn now than any other July since 2019, even with rates making the cost of ownership higher. Despite such favorable conditions for sellers, many are staying put rather than listing because of the lack of options (and relative costs) of moving within the borough. As a result, the Brooklyn market has, in some ways, felt slower than Manhattan; there is simply nothing for buyers to even go out and see.Despite all this, prices in Manhattan have not declined significantly and remain neutral. There is some negotiability, but not enough to motivate buyers causing the lack of activity/transactions. As expected, days on market has increased and – 29% of homes sold in Q2 took 180+ days to enter contract. We don't expect to see many price reductions until fall, as sellers may be waiting out the slow summer in hopes of greater buyer interest and traffic in the fall. On July 5th the Fed released the minutes of its June 16th meeting, which showed that we had been very close to an 11th straight increase, and that "the moderate pace of interest rate decisions" would continue. In response, rates spiked but eased with the July 12 release of the Consumer Price Index Report. The Fed's 25 bps raise at its July 26 meeting was anticlimactic as it was long expected and banks had already factored it into their rates. Despite the hawkish tone in June, it’s not expected that the Fed will be as aggressive in further rate hikes in 2023, suggesting rates could stay around current levels. But as Yogi Berra said, "It's tough to make predictions, especially about the future." With both signed contracts and new listings down in Manhattan and Brooklyn and a seasonal lull anticipated in August, the summer is shaping up as a long one for agents and brokerages. (THE REAL DEAL) Mayor Eric Adams launched the "Get Sheds Down" initiative to improve sidewalk construction sheds and scaffolding in NYC. The plan encourages prompt removal and replacement with aesthetically pleasing alternatives like safety netting. (NY1) Rental brokers oppose a Council bill that would stop landlords from charging applicants for broker fees. They argue it may lead to fewer listings, higher rents, and less experienced brokers. (THE REAL DEAL) The share of Manhattan home purchases without financing jumped to almost two-thirds (65%) of all deals in Q2, a record high in nine years of data-keeping. Cash buyers represent 75.4% of all sales properties $5 million and up. The high end of the market is showing a lot of strength with the median sales price for the luxury market was a 3.9% increase over the prior year and the fifth rise in six quarters. (BLOOMBERG)

While the first quarter of 2023 started off with promise, continued interest rate increases, general economic uncertainly (i.e. in the banking sector), and low inventory levels resulted in a lackluster second quarter, especially in Manhattan. The market slowed even further in June, an earlier-than-usual start to the summer slump, as both buyers and sellers seem stuck in their wait-and-see stance. This month in our newsletter, in addition to our usual focus on the Manhattan and Brooklyn markets, we will also include a brief section specifically on mortgage rates and the macroeconomic climate. We've also brought back our monthly collection of homes highlighting certain price points/areas or features. While Manhattan contract activity was nowhere near the unusual lows of Fall 2022, things fizzled rather than heated up as the spring turned into summer. March contract activity – which was essentially even with historical averages for the first time since August of 2022 – was a peak and not the start of a trend as many had hoped. The failures of SVB and Signature Bank in March arguably brought on a wave of buyer hesitancy, and contract activity in April dipped well below historical averages. Contracts signed seemed poised to recover in May, but rate-relief never came and economic uncertainty continued to mount (including the collapse of First Republic) leading to another dip in contracts in June. Listing traffic, new inventory, contract activity, and open house attendance have all declined sharply since Memorial Day. Though traffic had been building, open house attendance changed course in June with almost half of all open houses reporting zero visitors consistently each week. Inventory had been surpassing historical averages in the earlier part of the quarter, but fell short in June, likely due to sellers holding out in the face of diminished demand. Despite all this, prices in Manhattan have not declined significantly and remain neutral. There is some negotiability, but not enough to motivate buyers causing the lack of activity/transactions. As expected, days on market has increased and – 29% of homes sold in Q2 took 180+ days to enter contract. We don't expect to see many price reductions until fall, as sellers may be waiting out the slow summer in hopes of greater buyer interest and traffic in the fall. In Brooklyn the market remained resilient, with overall metrics still positive relative to historical performance (albeit more restrained than what we've seen in the last decade). Once again, averages were buoyed by the continuing strength of certain neighborhoods/property types, while other areas, most notably South Brooklyn, have been experiencing many of the same challenges as Manhattan. Brooklyn contract activity was down compared to Q2 2022 – the last strong quarter before elevated rates and economic uncertainty began to weigh heavily on buyers, but was still above historical levels even with lower-than-usual new inventory levels. While inventory ticked up in May, with new listings over historical averages for the first time since June 2022, June saw another sharp decline, keeping competition high and negotiability low. Median sales prices rose compared to the first quarter, and the median listing discount – calculated as a rolling 2-month average of the difference between the original asking price and the closed sales price – declined in both May and June. Q2 also saw a greater percentage of over-asking sale prices (23.01%) compared to Q1 (20.03%). While still nowhere near early 2022 levels (33.7% of sales closed over-asking in BK in Q2 2022), current price metrics and activity levels in Brooklyn indicate an active market, constrained more by lack of inventory than limited buyer demand. There continues to be massive variation among neighborhoods, product type, and price-point. In the most in-demand areas and products, bidding wars are still common albeit with fewer participants. Anecdotally, what we have seen for the most in-demand properties is 2-5 strong offers from the most competitive buyers – instead of 8-10 offers that run the gambit – with winning bids still coming in substantially over ask with very strong terms. It might be hard to believe it was only Q2 of 2022 when rates started going up last year. The average rate then on a 30-year fixed jumbo loan was about 4.25%, and the average rate this year over the same time period is a whopping 1.625% higher. Rates this last quarter bottomed out in early April (around 5.375%) but increased steadily over the quarter and have only gone up further in July. The last meeting of the Fed took place on June 13-14 and as widely expected, they did not raise rates at that point. While mortgage rates reacted favorably to this news, the industry's optimism was short-lived. Last week, the Fed released the minutes from that meeting and it turned out that we were shockingly close to seeing the 11th straight increase in rates and that it is almost certain that the Fed will continue to steadily raise rates for the rest of the year. According to Chair Powell, “We expect the moderate pace of interest rate decisions to continue.” CME Group’s FedWatch tool puts the probability of rates being increased later this month at 88%, and financial markets are telling us that there is a 95% probability that the Fed is going to increase rates by another 25 basis points to the range of 5.25 - 5.50%. In response to the Fed's hawkish stance, we are now seeing conforming 30-year fixed rates over 7% at most banks. Recent macroeconomic indicators offer some cause to be optimistic. Recent jobs data was a mixed bag with some indicators up (which may embolden the Fed) and others missing the mark (which could counsel restraint in further rate increases). The payrolls jobs report from this past Friday showed 209K jobs added in June, the first miss vs expectations in over a year, and revisions helpfully subtracted 110,000 jobs from the May and April data. But data also showed the labor force participation rate among 25-54-year-olds (prime working age) at the highest rate we've seen since May 2002. On the inflation side, the ISM manufacturing index, also known as the purchasing managers' index (PMI), a monthly indicator of U.S. economic activity based on a survey of purchasing managers at more than 300 manufacturing firms, showed a decline from 44.2 to 41.8, a level which has historically coincided with headline #CPI inflation of close to zero. Services inflation follows ISM very closely and is on the decline as well. The next CPI report comes out next week and may force a real debate within the Fed on the upcoming rate increase. While it seems unlikely that any of these trends will cause the Fed to change course now, they may strengthen the argument that inflation is continuing to moderate and rate hikes are no longer needed. Normalizing rates – or at least the prospect of imminent normalizing rates – should hopefully spur the real estate market into action with plenty of pent-up demand and supply. A dozen national real estate groups have joined New York landlords' legal fight against the state's 2019 rent stabilization laws, filing briefs asking the U.S. Supreme Court to overturn the landmark legislation. While they have been unsuccessful in the lower courts, if it chooses to hear the case, this Supreme Court could be landlords' best shot. (BISNOW) New York became the first state in the country to ban natural gas and other fossil fuels in most new buildings constructed after 2027. The ban does not impact existing homes or buildings with gas stoves. (NYTIMES) Available office space in Manhattan reached an all-time high in 2Q 2023, with 70.3 million square feet (19.7%) ready for leasing. (THE REAL DEAL) It seems like Manhattan deals fell off a cliff this spring, but the numbers are less shocking than they appear. Co-op and condo sales plunged more than 30% in the second quarter of this year compared to the second quarter of 2022, the heyday of the pandemic-era sales boom, but those uneven comparisons will end soon. (BRICK UNDERGROUND) Mortgage rates have soared to their highest level of the year, dealing another blow to prospective buyers already socked by high prices and a shortage of homes on the market. According to Freddie Mac, the average rate for a 30-year, fixed-rate mortgage climbed to 6.81% as of July 6, driven by a resilient economy, persistent inflation and a more hawkish tone from the Federal Reserve. (FORBES)

While the market seemed to be gaining momentum in early 2023 after a very slow second half of 2022, various economic factors (stock market fluctuations and distress at banks) dampened transaction activity starting in early March. As rising rates made borrowing more costly, many sellers refused to budge and buyers were left waiting for price drops that never came. Though sellers have finally begun to react to diminished buyer demand by lowering prices and increasing negotiability, until something really gives, this trend will likely continue through at least the first half of 2023. It is important to note that while many indicators appear weak, they are largely in line with pre-pandemic historical averages or weak-to-average years like 2018-2019, but other forces have kept prices relatively stable compared to those years. Market-wide there were 2,500 sales in Manhattan last quarter, a pace similar to what we saw in historically slower years such as 2018 and 2019. Much has been said about a drastic decline in sales year-over-year (-38%), but the significance of this figure is exaggerated in light of the fact that Q1 2022 had set a fourteen-year record high for first quarter sales. The total number of contracts signed last quarter was also significantly below last year (-37%), but was up compared to the end of 2022 and seemed to gain momentum until the bank collapses in early March. Transaction activity also paled compared to buyer interest -- open house traffic and inquiries have been up consistently last quarter compared to the end of 2022 -- which indicates that the market is hopefully poised for a recovery. Even with new listings lagging compared to last year, longer time to contract and fewer signed contracts caused Manhattan total supply to increase. However, current inventory is still 13% below historical first quarter averages, and the lowest for a first quarter since 2017. Inventory levels varied based on price-point and size: there were fewer lower-end, smaller apartments on the market as buyers gravitated toward these units, leaving more options on larger, over $1M apartments. Prices declined for the second consecutive quarter with median price at its lowest point since Q2 2020 and average price at a two-year low. However, some of this could be attributed to an increased share of sales in the lower-end of the market (smaller homes and co-ops). While demand for these smaller, lower-priced home saw a marked decline during the immediate post-pandemic recovery as buyers sought larger spaces and took advantage of low mortgage rates to stretch their budgets, sales under $1M comprised 50% of Manhattan closings in the last quarter, their highest market share in three years. While it remains to be seen how the rest of the Spring market progresses in Manhattan, it is clear that consumer confidence and interest rates will both play a large factor. Mortgage rates have been volatile, but trending downward for 5 weeks since SVB collapsed, and ticked down again since the March inflation data came out earlier in the week. If inflation continues to come down we can expect rates to follow, and mortgage rates will eventually drop as well. The Brooklyn market was affected by the same factors last quarter, albeit far less noticeably. Higher mortgage rates and overall economic concerns have cooled the market, but the borough continues to be teflon-tough in the most in-demand neighborhoods. Most notably, inventory was again down by double-digits (from already record-low figures). Fewer new developments hit the market and on the resale side, many sellers appear hesitant to list in a weaker economic climate and even more hesitant to let go of their low-interest mortgages to commit to a high interest rates when prices have not budged much in many neighborhoods. This is the sixth consecutive quarter of declining inventory, reaching the second lowest number of available listings since 2014 (excluding the pandemic “pause” in 2020). While both total sales and contracts signed were down compared to last year, which was an outlier, both figures were on par with pre-pandemic Q1 historical averages (2010-2020), indicating that despite massively constricted inventory, Brooklyn buyers are still pushing to get deals done. Brooklyn median price decreased 7% year-over-year last quarter making Q1 2023 the lowest median price we’ve seen in Brooklyn in the last ten quarters, but this reflects more of a shift in the types of sales rather than a drop in prices. The majority of sales were below $750K with buyers gravitating toward smaller homes, and resale condo and co-op median sale prices actually increased year-over-year; only new development fell. Looking at the various sub-markets, median sale prices increased last quarter in almost all of the most in-demand Brooklyn neighborhoods, including Williamsburg & Greenpoint, BoCoCa, Brooklyn Heights, DUMBO, Downtown, Fort Greene, Clinton Hill & Prospect Heights, with a meaningful decline in only in Park Slope & Gowanus (-17% Y-o-Y, due almost entirely to the fact there were essentially no new development closings there this quarter) and South Brooklyn (-13% Y-o-Y). Clearly the Brooklyn market remains strong in most areas, and while economic uncertainly and interest rates have put some buyers on the sidelines and "upgrades" on pause, there are still more buyers than homes in many areas, and we continue to see bidding wars on many properties. The average number of inquiries received by for-sale listings on StreetEasy was 9% above its pre-pandemic level in February indicating strong buyer interest, However, with affordability as a top concern, NYC buyers have shown patience in finding a home within their budget. (STREETEASY) Beginning in 2024, Local Law 97 requires that residential and commercial buildings of 25,000 SqFt +reduce greenhouse gas emissions and meet new energy efficiency goals, or face severe fines. Despite some available grants and rebates, updating the required infrastructure won’t come cheap.(NY1) After a tumultuous few years, many hoped that the housing market would improve this spring. No such luck according to Jonathan Miller, a leading appraiser. “This is the year of disappointment... The sellers aren’t going to get their 2021 prices, and buyers aren’t going to get a substantial savings on the price." (NYTIMES) Mayor Adams outlined his plans to create more affordable housing, including controversial ideas to convert offices to apartments and a “modern-day, almost-SRO concept” of shared dormitory style living. (GOTHAMIST) Recovery is lagging for NYC's commercial real estate sector. According to New York Fed, “While the residential rental market has bounced back, the retail and office markets have remained slack - largely due to the shift to remote work and online shopping.” (REUTERS)

The February data in Manhattan seems counterintuitive at first given that the prevailing sentiment we hear is that there is "no inventory." Inventory is in fact not off from historical trends -- overall supply is close to normal levels and new listings coming on the market are over 400/week which is expected for late February. Buyer interest has also picked up substantially based on open house attendance and anecdotally on the response we've been getting on our listings. So why are signed contracts still down substantially year-over-year and compared to historical averages? The answer seems to be the unusually high number of listings being taken off the market by sellers. Listings being taken off market are up drastically year-over-year (10% marketwide and over 25% for resale) and even more compared to an average year (e.g. number of resale listings taken off-market is 33% higher than February 2019). Sellers who are not getting the offers they want are more readily pulling off-market to either wait it out or rent out the properties rather than adjusting pricing or expectations to make deals happen. New listings are being absorbed quickly, leading many buyers to feel like existing inventory has grown stale. With buyers interested but in no hurry to transact, they simply seem to be waiting for more options. Without a glut of new listings or adjusted seller behavior, we are unlikely to see contract figures catch up to historical levels this Spring. It is important to note that despite being below historical figures, the market is much stronger than the Fall. February closed with five straight weeks of growth in the number of signed contracts (with a blip during President's Day week) and the end of the month seemed to be trending upward closer to historical levels. Buyer activity at Manhattan open houses has remained consistent since the start of the year – 2.2-3.1 visitors per open house on average, which is higher than anything we saw in Q4 of 2022. Manhattan median closed sale prices during February declined about ~7% year-over-year, but we expected this since these deals were negotiated in Q4 of 2022, what many consider the bottom of the market. On the ground now, prices for new listings do not seem to reflect further discounts. Median PPSF -- which is a measure of condo, not coop, pricing -- ticked up slightly in February hitting record levels according some data sources. Rather than indicate an upward shift in prices, our best guess to explain this trend is that only the strongest (more luxurious or in better condition) condos entered the market in the second half of the year, with sellers of weaker units sitting tight until the overall market improved. In Brooklyn, some have pronounced that the borough is entering a "buyer's market" but this does not reflect what many of our buyers continue to experience. This is because Brooklyn is the proverbial tale of two cities. Some areas of Brooklyn have declined (with overall supply up and lower demand) creating pockets of opportunity for buyers and bringing down overall metrics. However, competition remains fierce in other areas of the borough (i.e. NW Brooklyn, which includes areas like BK Heights, Fort Greene, DUMBO, Park Slope, BOCOCA and Prospect Heights), where demand continues to dramatically out-pace supply. In February, South Brooklyn (everything south of the Prospect Expressway) accounted for 57% of total inventory but only 41% of contracts. On the flip side, listings in NW and North Brooklyn (Greenpoint & Williamsburg) made up 28% of total inventory but a whopping 42% of February contracts. While there is some variation between inventory / contract activity in certain areas of Manhattan, it is nowhere near this magnitude. The disparity has made marketwide Brooklyn figures (and headlines) somewhat meaningless, and it is critical to have an advisor familiar with the sub-markets to be able to provide accurate advice. While it remains to be seen how 2023 will unfold, anecdotally we've recently had good traffic at all our new Manhattan listings, while our Brooklyn buyers have been frustrated by very minimal new inventory. Assuming interest rates remain stable, we are cautiously optimistic for the year but expect transaction levels to remain below historical averages at least through the Spring market unless there is a shift in seller sentiment. After months of going down, mortgage rates have risen again, now up 0.75% from where they were at the start of February. (HOUSINGWIRE) While some BK metrics suggest an increasing buyer's market, but on the ground buyer demand has remained strong and discounts remain hard to find. (FORBES) A new study by RentCase highlights some interesting data points, notably that three NYC boroughs are home to some of the smallest apartments in the county... other top-5-smallest locales include Seattle & Portland. (TIMEOUT) Ranking NYC's Most Expensive Neighborhoods - Nolita officially unseated Billionaires’ Row for the highest average price in 2022 (TRD)