Be Careful With Private Developers

The government did and is still doing a great deal to ease the country out of this recession, but did some individuals use this opportunity for personal gain? The Task Force on Public Benefit Agreements is trying to restrict the public subsidies which are given to private investors. The Task Force along with the Comptroller are working together to ensure the public subsidies will be used more appropriately and are not taken advantage off.  It is too often that private developers promise to create jobs and stimulate the economy in exchange for public subsides, but often that these promises are made just to get the subsidies and the developers fail to produce any substantial results. 

Courtesy of Google Images

This is just another step to make sure the private sector does not take advantage of the government and public when their backs are turned.  It is similar to increasing oversight on banks, so that the reckless investments that lead to the economic meltdown does not happen again. 

Do Rankings Matter?

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Forbes Magazine recently came out with its annual list of the priciest zip codes in the United States.  But, has the economic downturn made these areas less exclusive?  Rank one was awarded to Duarte, California.  West Village (10014) is once again New York’s most expensive zip code but fell to rank five from rank three last year, with the median property value of $3.795 million.  Furthermore, the Upper East Side is rank seven, Soho/Noho is rank nine, Tribeca is rank twelve, and East Village is rank twenty two. 

These rankings do not seem to alter or affect the quality of the neighborhoods, but they certainly do alter the mind stage of an investor.  A potential investor will be more likely to invest in a property in one of these neighborhoods after it has been listed in one of the most prestigious magazines.  

It Pays To Go To School

Courtesy of Google Images

Investment in and demand of private construction is starting to decline as the costs start to increase.  But, New York’s construction industry has a new favorite customer: the education industry.  As commercial construction has steadily decreased over the past two years, construction in the educational sector has gradually increased as a percentage of the total construction activity.  Investment has gone up from $4 billion in 2008 to about $5 billion in 2010, but there is some uncertainty on how long these investments can continue because of the decreasing government budgets and dwindling private endowments. 

After the economic downturn, there were massive layoffs and the unemployment rate soared.  And, even when Wall Street started hiring again because many of the top firms fired too many employees, there was a lot of structural unemployment.  With no other options, a lot of people who were unemployed decided to return to school and students who were graduating decided to stay in longer.  Thus, one can make the assumption that the increased construction in the education sector can be attributed to the increased demand for higher education, and indirectly the stagnant economy.  

New Status Quo Favors Landlords

One year ago, it was quite common for landlords to offer incentives or discounts to attract new tenants to lease the vacated apartments, but now that the vacancy rate is floating around 1 percent, the incentives and discounts are starting to disappear.  Moreover, landlords are trying to justify rent increases.  However, it is unlikely that the prices will move anytime soon because of the city’s report on the stagnant unemployment rate and increase in the vacancy rate in August. Landlords are also more careful with who their new tenants are because it is difficult to tell how long they will be employed for. 

Courtesy of Google Images

Brokers and owners are hopeful that the market will become stronger in the 2011 when the inventory brand new apartments decrease significantly, causing a decrease in supply and giving favor to the landlords.  Furthermore, it is important to keep in mind that the trends in each neighborhood, in New York City, are quite different.  Renters might still be able to negotiate concessions or incentives in one area, while finding it quite impossible to fight off an increase in another. 

This trend seems to follow the patterns of a self-fulfilling prophecy.  The landlords are eliminating discounts, and pushing for rent increases because they feel the market will improve shortly; all the while, the employment rate is predicted to be stagnant for the next couple of years, and Wall Street banks have suspended hiring because of low volume trading and are even starting to lay off employees. 

The Cool Kids

New York City is home to people from all over the world, and those who live here never want to leave.  But, for first time residents it is quite difficult to decide where they want to settle down in the huge city.  This article provides an analysis on which neighborhood would be best suited for each individual, and whether they can afford it or not! 

Courtesy of Bryan Christie

1. Upper East Side ($995,000) - The most popular 2 bedroom apartments appeal to most young couples, who are planning to raise a family.
2. Financial District ($549,855) - This area is mostly populated wall street workers, who want amenity packed apartments.
3. Midtown West ($675,000) - The area is the cheaper alternative to the Upper West Side.
4. Chelsea ($1,250,000) - This area is home to the most affordable high-end condos.  
5. Greenwich Village ($1,148,500) - Parents are buying a majority of the real estate for their children who are studying in the area.
6. Midtown East ($280,000) - A perfect place to buy a first home because of the low interest rates and  low prices.
7. Upper Manhattan ($441,500) - Washington Heights is one of the most popular places to live in the area.
8. Upper West Side ($1,797,500) - Spacious 3 bedrooms near Central Park get plenty of offers.
9. Tribeca ($1,257,500) - A hub for new and unique apartments.
10. West Village ($645,000) - Low prices for a very popular neighborhood.
  
Statistics Courtesy of nymag.com

The Transformation of Union Square

Courtesy of Google Images

Once a decaying area, in the late 1980’s and early 1990’s, Union Square is now one of the most sought after neighborhoods.  According to real estate experts, lease rates have gone up from around $12 per square foot to $40 per square foot; the area’s success can be attributed to high pedestrian traffic, a combination of residents, office workers, and students, and public transportation.  Moreover, Union Square is the newest home of Nordstrom Rack, Duane Reed, Citibank, and Best Buy.

Although, every area in New York was affected by the recession, Union Square was quite resilient because of the lack of multinational corporations.  Furthermore, the 25-year renovation project, the 150,000 a day visitors, and eateries have replaced the suspicious, drug hub and transformed it into the "cool place to chill out".

Union Square is often a popular get together spot for students from New York University, Fordham University, and other nearby schools.  Students come to the area to study at Starbucks, take a walk in the park with friends, or to shop, and thus, it is safe to assume that Union Square is not simply another location to hang out, but it is a special place that unifies the community.  

Patterson Crafts New Agency

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In a very unique move, Governor David Patterson has decided to unite the state's  housing agencies into the New York State Homes and Community Renewal.  This organization will consist of three departments: Finance and Development, Housing Prevention, and Community Renewal, that will overlook all aspects of the New York real estate market.  With this new agency, the Governor hopes to reduce the current $9 billion budget deficit, and increase the transparency of the institutions it monitors. 
                               

Asymmetrical information has overwhelmed the economy for some time, and like many other politicians, Patterson is taking a step in the right direction by trying to eliminate future recessions from their source.  With less moral hazard and adverse selection, the New York housing market will be more efficient, lucrative, and secure for the consumers and lenders.  

Long Island Rental Market Gains Momentum

While the market for buying/selling homes remains stagnant, the rental market seems to gaining momentum in Long Island, NY. Investors who are trying to sell their properties find that they cannot do so without taking a significant loss, therefore, they are starting to put them on the rental market. Furthermore, the rent helps cover the cost of increasing expenses, especially taxes.  

According to the New York Times, the inventory of single family homes continues to rise, and so does the demand (especially as the new school year begins).  Moreover, potential buyers are renting because of the increased down payments of 20 to 40 percent compared to the previous rates of only 10 to 15 percent, and because mortgage payments are significantly higher compared to rent in the current, uncertain economy.

                                                                   Courtesy of Google Images

Trump Soho Manages a Comeback

After suffering scrutiny from dissatisfied consumers, and because of sluggish sales in the market, Trump Soho is struggling to stay in business. According to Curbed NY, the agitated buyers filed a lawsuit against developers after they found out how exaggerated the sales numbers were. According to the buyers, reporting inflated sales violates numerous laws and is grounds for cancellation of their agreements. Trump Soho offered discounts up to 25% in order to keep the buyers from terminating their contracts. 

In its latest attempt to stay afloat, Trump Soho received $20 million in loans after a mortgage restructuring agreement with iStar financial. This additional financing, from iStar financial, signals continuing confidence in their biggest client. This is excellent news for the developers, since the condo-hotel prices are steadily sinking. The building recently closed the first two UNDER $1 million properties for $922,073 and $869,737 after having sold units for OVER $2.2 million.  

                                                                  Courtesy of NY Curbed

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