WEBVTT - NYC Real Estate Sees Summer Cool Down

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<v Speaker 1>You're listening to Bloomberg Business Week with Carol Messer and

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<v Speaker 1>Tim Stenebek on Bloomberg Radio. Met you remember last week

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<v Speaker 1>we talked about how how more Manhattan buyers were paying

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<v Speaker 1>cash in at any other time on record. It was

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<v Speaker 1>sixty five percent of purchases in the second quarter. We're

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<v Speaker 1>done without financing. This was according to Miller, Samuel and

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<v Speaker 1>Douglas Eleman.

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<v Speaker 2>Yeah, because financing is so expensive. If you have the cash,

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<v Speaker 2>you're more likely to use that, because otherwise you're going

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<v Speaker 2>to be paying six or seven percent on.

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<v Speaker 1>A mortgage exactly. So all right, let's get an update

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<v Speaker 1>on what our next guest is seeing firsthand. We welcome

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<v Speaker 1>back Barbara Fox. She's president Fox Residential Group. She's an

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<v Speaker 1>Upper Eastsider herself, although not born in New York City,

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<v Speaker 1>joins us here on the East Side in our Bloomberg

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<v Speaker 1>Interactive Broker studio. Hello, Hello, how are you?

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<v Speaker 3>I'm well? How are you guys?

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<v Speaker 2>We're doing great. We're surviving the heat, I guess heat

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<v Speaker 2>and then the rain here. How has the market been well?

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<v Speaker 3>I wish that our market this summer was as hot

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<v Speaker 3>as the weather outdoors. I really do.

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<v Speaker 1>Is it down from last summer.

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<v Speaker 3>It's down from last summer. Yes, it's not as as

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<v Speaker 3>buoyant as it was last summer. It is the spring

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<v Speaker 3>market and the early the spring and early summer markets

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<v Speaker 3>were a little were pretty active. They were they were,

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<v Speaker 3>they were, There was a lot of activity, There were

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<v Speaker 3>sales being made, there were things coming on the market, surprisingly,

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<v Speaker 3>but mainly it's that was in the smaller units one, two,

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<v Speaker 3>and even three bedroom units, not the super luck stuff,

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<v Speaker 3>but the lower the lower price stuff. But that's fallen

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<v Speaker 3>off now. It's we're in the summer doldrums.

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<v Speaker 1>Is that?

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<v Speaker 3>Oh?

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<v Speaker 2>Sorry, no, no, I mean I was going to ask

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<v Speaker 2>about you know, Carol was talking about the fact that

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<v Speaker 2>more buyers are cash now than ever before, and well,

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<v Speaker 2>it's a very expensive place to buy real estate, so

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<v Speaker 2>that means a lot of cash in these transactions. Is

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<v Speaker 2>it only the very wealthy that are transacting right now?

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<v Speaker 3>Actually it's not. The very wealthy always transact and they

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<v Speaker 3>can pay cash. However, the bulk of the people who

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<v Speaker 3>are buying in New York City really can afford to

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<v Speaker 3>pay cash or don't want to pay cash. They do

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<v Speaker 3>it if they have to because of the interest rates.

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<v Speaker 3>The problem with the market right now is that these

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<v Speaker 3>high interest rates are causing people to be forced to

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<v Speaker 3>pay lower prices, and there is a there's a juxtaposition

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<v Speaker 3>between what the buyers think and what the sellers think

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<v Speaker 3>that still exists, that's very much in existence now. It's

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<v Speaker 3>it's really as it's a difficult situation, and the sellers,

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<v Speaker 3>who are pretty savvy in New York, have been gotten

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<v Speaker 3>so used to these very high inflated prices that they

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<v Speaker 3>aren't really coming down to reality at this point, and

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<v Speaker 3>that the only way to do transactions. I mean, the

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<v Speaker 3>buyers are very cautious. They're not going to overpay. They

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<v Speaker 3>will look at a million things.

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<v Speaker 1>Because they can. If they've got a higher interest rate

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<v Speaker 1>and a mortgage, right, they've got to kind of reduce

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<v Speaker 1>what they can pay essentially for the pass.

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<v Speaker 2>Indeed, all right, so what kind of properties are moving

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<v Speaker 2>then right now? Which ones are are are people willing

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<v Speaker 2>to actually sell?

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<v Speaker 3>Well, the people that are selling. It's really an interesting

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<v Speaker 3>market right now because most of the people who are

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<v Speaker 3>selling are people. There's not a lot of products coming

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<v Speaker 3>on the market because because of the people, because of

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<v Speaker 3>the interest rate situation. If people are moving, they don't

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<v Speaker 3>want to have to pay a higher interest rate for

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<v Speaker 3>a new apartment, so they aren't there's not a lot

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<v Speaker 3>of movement in the in the market.

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<v Speaker 1>You're saying there's no movement or what? What does sell? Less?

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<v Speaker 3>Expect? It does sell, and people are always having to

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<v Speaker 3>sell for various reasons, moving or whatever. And what sells

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<v Speaker 3>fastest are new developments and the nicely renovated apartment.

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<v Speaker 2>Is that because if you're a new developer, can you

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<v Speaker 2>figure out a way to give people a four or

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<v Speaker 2>five percent mortgage rather than a six or seven percent mortgage?

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<v Speaker 3>I present, I don't really think that's happening right now,

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<v Speaker 3>but I'm sure what.

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<v Speaker 2>Is the diff happen between now? Barbara and you're not

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<v Speaker 2>nearly old enough, But some people remember the eighties when

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<v Speaker 2>rates were not only this high, but a lot higher.

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<v Speaker 3>I remember, I remember in the seventies and eighties when

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<v Speaker 3>the rates were eighteen percent.

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<v Speaker 2>How are people trading properties at those levels?

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<v Speaker 3>The problem is that we've gotten used to two and

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<v Speaker 3>three percent interest rates, and it's very hard to go

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<v Speaker 3>back and think of, you know, six and seven percent.

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<v Speaker 3>But the interest rates have more than doubled in the

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<v Speaker 3>past couple of months. And that's what's really scary to buyers.

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<v Speaker 1>But still down from a historical basis. That's what's kind

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<v Speaker 1>of crazy. Yeah. Remember Mark Mike Snyderho used to work here.

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<v Speaker 1>He used to talk about his mortgage rate in the seventies,

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<v Speaker 1>eighties or eighties. I guess it wasn't He would talk about,

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<v Speaker 1>you know, high teens.

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<v Speaker 2>Now that was on probably like an eighty thousand dollars

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<v Speaker 2>house in Columbus, Ohio, but it was still high for

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<v Speaker 2>them at the time. It was a lot.

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<v Speaker 1>It was a lot when people do like we used

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<v Speaker 1>to talk about foreign buyers in terms of real estate,

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<v Speaker 1>do we see that? Is that?

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<v Speaker 3>And it kind of there's not a lot of foreign

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<v Speaker 3>buyers around right now, but there used to be, right,

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<v Speaker 3>Oh my god. Yeah, the market was fueled a bout

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<v Speaker 3>foreign buyers in the past years. But it's it's much

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<v Speaker 3>slower now. There are always people coming into New York

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<v Speaker 3>and needing to move and buy and whatever, but it's

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<v Speaker 3>much it's much less, much many fewer buyers from afar.

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<v Speaker 1>Can I answer a question, Yeah, And I was like,

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<v Speaker 1>so what about Brooklyn, because I feel like Brooklyn, if

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<v Speaker 1>you've got kids and families and you're staying in New York,

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<v Speaker 1>you any thoughts on Brooklyn.

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<v Speaker 3>I don't really do Brooklyn either.

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<v Speaker 2>I get that the city completely.

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<v Speaker 1>What do you guys sexy in the city you carry?

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<v Speaker 3>I have people in my firm that do Brooklyn, but

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<v Speaker 3>they know Brooklyn, and I really don't want to even

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<v Speaker 3>speak on it because I don't know what that wells.

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<v Speaker 1>So when you look at all, right, if you look

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<v Speaker 1>at Manhattan specifically, the hottest part of the city, is

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<v Speaker 1>there an area.

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<v Speaker 3>Area, Downtown remains probably the hottest area with the highest prices. Interestingly,

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<v Speaker 3>and all areas downtown, there are not any specific areas

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<v Speaker 3>that are higher than others.

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<v Speaker 1>And I love downtown.

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<v Speaker 3>Yeah, we had a great story of downtown.

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<v Speaker 2>We had a great story about a Grench village loft

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<v Speaker 2>that's for sale right now. It's only four million dollars

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<v Speaker 2>and I say only because it's a six thousand square

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<v Speaker 2>foot loft. And the problem is the tenant, kay is

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<v Speaker 2>only twenty three hundred dollars a month. You know, it's

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<v Speaker 2>rent stabilized, and if you want to buy the thing,

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<v Speaker 2>you have to I guess wait until the tenant either

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<v Speaker 2>dies or moves out. Yeah, his or her own volition.

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<v Speaker 2>Do you come across lot of issues like that because

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<v Speaker 2>that seems so weird, but it happens in New York.

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<v Speaker 2>Everybody knows somebody who pays nothing for an apartment because

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<v Speaker 2>their parents got it rent stableize. Is that a problem, well,

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<v Speaker 2>a lot.

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<v Speaker 3>Of It's not a problem for us per se, but

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<v Speaker 3>it is a it's a problem for landlords in the

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<v Speaker 3>city because they have a lot. In some of these buildings,

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<v Speaker 3>they have rent rent stabilized, rent control tenants. I mean

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<v Speaker 3>they have tenants that are I actually went to see

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<v Speaker 3>a townhouse recently that was many six units and the

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<v Speaker 3>one or two of the tenants we're paying under three

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<v Speaker 3>hundred dollars a month for these one bedroom apartments and

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<v Speaker 3>they had been there for fifty years. So it does

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<v Speaker 3>still exist in the city.

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<v Speaker 1>I know people who went to court to like you know,

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<v Speaker 1>had run control.

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<v Speaker 3>All right.

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<v Speaker 1>So I think about our audience as I like to

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<v Speaker 1>ask this question. But they're smart, they're investors. We bring

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<v Speaker 1>on different guests to kind of help really put together

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<v Speaker 1>what the economic outlook is and the market outlook based

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<v Speaker 1>on what you're seeing, do you think we're moving towards

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<v Speaker 1>a recession? Do you think I don't know, what would

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<v Speaker 1>you tell our.

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<v Speaker 3>Audience you know, it's I'm really probably not qualified to

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<v Speaker 3>speak about the economy, but market cycles. That's market cycles.

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<v Speaker 3>And what I see right now is there there's a

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<v Speaker 3>disconnect between buyers and sellers, and which is what's causing

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<v Speaker 3>the rift in the market right now. And once the

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<v Speaker 3>buyers buyers have to understand that they are in a

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<v Speaker 3>very unique position right now with regard to New York

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<v Speaker 3>City real estate purchasing, because they are on a trend

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<v Speaker 3>where the prices are coming down. They have been going

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<v Speaker 3>up for twenty years and they're coming down a little now,

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<v Speaker 3>not remarkably, but they're coming down. Sellers are much more flexible,

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<v Speaker 3>or they need to be much more flexible in priced

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<v Speaker 3>to make these sales happen. So once the buyers understand

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<v Speaker 3>that they can get good buyers, they're going to move

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<v Speaker 3>into the market because they don't want to miss this

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<v Speaker 3>market right. And then the sellers hopefully are working in

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<v Speaker 3>concert with this and they think, well, if I don't

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<v Speaker 3>take this offer with yeah, it may there may not

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<v Speaker 3>be another one down the road.

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<v Speaker 1>So I'm looking at this sixty million dollars single family

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<v Speaker 1>townhouse at five E sixty fourth Streets, So maybe they

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<v Speaker 1>need to come down a little bit, Matt. It has

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<v Speaker 1>seven bedrooms.

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<v Speaker 2>Yeah, and what a great address. Also, you're right across

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<v Speaker 2>the street from Central Park right there.

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<v Speaker 3>It's the it's the prime neighborhood. But it's a lot

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<v Speaker 3>of money. And but you know what, there are people

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<v Speaker 3>that buy these buildings. We still sell them and they're

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<v Speaker 3>they're still going. And for some reasons that are not affected.

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<v Speaker 3>There are taxes.

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<v Speaker 1>Only sixteen thousand dollars in this house.

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<v Speaker 2>I don't get that.

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<v Speaker 1>I don't know. I got to work a month. That's

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<v Speaker 1>a month, by the way, is it a month?

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<v Speaker 3>I assume definitely.

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<v Speaker 1>We get to run. Barbara. Always good to check in

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<v Speaker 1>with you. Barbara Fox over at Fox Residential.

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<v Speaker 3>You're Matt. Thank you.