Speaker 1: These se is Bloomberg Business Week with Carol Messer and
Speaker 1: Tim Stenebek on Bloomberg Radio.
Speaker 2: I am so excited for our next segment because we
Speaker 2: get to talk about a dream that I think will
Speaker 2: never come true for me, which is owning a home
Speaker 2: in New York City, well.
Speaker 1: Like a seven or ten million dollar penhouse, right right.
Speaker 2: I mean, I don't know what am I going to
Speaker 2: do own like a studio, Like I'm going to be
Speaker 2: forty someday and I'm going to be in a studio,
Speaker 2: you know. But Tim, to me, you embody the classics
Speaker 2: of the American dream. You've got the beautiful family, You've
Speaker 2: got a home that you're quit to remind me as
Speaker 2: an apartment.
Speaker 1: Apartment, so it doesn't count quickly outgrowing it.
Speaker 2: Yes, yes, says you've got an another baby there, but
Speaker 2: here to help kind of potentially crush our anxiety levels
Speaker 2: when it comes to the real estate picture or fuel them.
Speaker 2: Who's to say is Francis Kadsen, agent with Douglas Ellman.
Speaker 2: Francis has three billion in total sales, selling an excess
Speaker 2: of three hundred and fifty million an annually, so a
Speaker 2: great pulse on the market. Francis thank you for coming
Speaker 2: in studio with us. Talk to me about the outlook
Speaker 2: in New York City. Is there any any optimism for
Speaker 2: me out here?
Speaker 3: Well, Madison, I think it depends on which side you're
Speaker 3: standing on. I mean, I think that the luxury sector
Speaker 3: over four million is having the most fun right now,
Speaker 3: to be candid, because there's the most opportunity when there's
Speaker 3: this unknown variable, there's a lot more negotiability. They're a
Speaker 3: little bit less dependent on any rate. They're exempt from.
Speaker 1: It, to be honest, because they're playing with cash.
Speaker 3: Correct And just to be clear, the sixty five percent
Speaker 3: more cash deals that we're seeing are not necessarily because
Speaker 3: there's more cash deals. It's just that the mortgage deals
Speaker 3: that were happening have slowed down, so those that sixty
Speaker 3: five percent just looks front and center.
Speaker 1: Well, it used to make sense even if you had
Speaker 1: for seven million dollars to spend on apartment on an
Speaker 1: apartment in cash rates were so cheap, it used to
Speaker 1: make sense to actually take out a mortgage because you
Speaker 1: could take out a mortgage for two point five three
Speaker 1: point five percent and then throw that other money in
Speaker 1: the s and P five hundred and you know, or
Speaker 1: do whatever you wanted with that other money, but now
Speaker 1: that's not the case.
Speaker 3: So therefore cash is king because sellers are really wanting
Speaker 3: to take advantage of unloading the asset. They want to
Speaker 3: get out of New York, they want to downsize, whatever
Speaker 3: it is. And this is the opportunity because people have uncertainty,
Speaker 3: they're not sure, there's a malaise in the market, there's
Speaker 3: an unknown should I time it? But these ultra luxury buyers.
Speaker 3: There were three sales done over fifty million or over
Speaker 3: the past week and a half, one in the West Village,
Speaker 3: one in Gramercy. It's happening. People are doing it big
Speaker 3: time on the fifty million plus. But it's the entry
Speaker 3: market that has the least to spend, the most to
Speaker 3: lose on the and are the most impacted right now.
Speaker 2: In my opinion, what does that even start to look like?
Speaker 3: In what way? Like?
Speaker 2: Who can buy a home at the entry level right now?
Speaker 3: So I think it's for parents who can help bankroll
Speaker 3: the down payment because that's the most illiquid part for
Speaker 3: these buyers. They can probably manage the mortgage and the
Speaker 3: common charges. If they can make it work with the
Speaker 3: relationship of alenda, that can give them a little bit
Speaker 3: like a quarter or a half a point down. But
Speaker 3: at the end of the day, people are having to
Speaker 3: grieve and say goodbye to two point seventy five to
Speaker 3: three and a half percent rates and get ready to
Speaker 3: take six point eight to five percent rates, which is
Speaker 3: meaningful when you're carrying a certain income and you're hoping
Speaker 3: not to rank because you want to own equity.
Speaker 1: It's hard, Francis. I mean, there's it's We've been talking
Speaker 1: real estate a lot this afternoon. But I wonder about
Speaker 1: just the lack of supply that we're seeing right now,
Speaker 1: and if the story in New York is at all
Speaker 1: different than the story in other parts of the country.
Speaker 1: And I go back to what fajo J. Powell said
Speaker 1: about and this is for starter homes. I mean, you know,
Speaker 1: there's new construction coming online. There are new developments happening
Speaker 1: all over the country because there's demand for them. We
Speaker 1: just don't have the space here in New York. We're
Speaker 1: not going to be seeing like you know, Lenar come
Speaker 1: in and build a bunch of homes, for example.
Speaker 3: So here's what we're seeing. We're seeing bidding wars up
Speaker 3: seven point four percent around the country, but We're not
Speaker 3: necessarily seeing it in New York, but because there's a down,
Speaker 3: there's a down of inventory. It's about twenty three percent
Speaker 3: down on inventory for under four million. We're seeing that
Speaker 3: change in terms of bidding war for the lower the
Speaker 3: under luxury price point around the country. You're right, there
Speaker 3: is a level of need and supply and demand New York.
Speaker 3: You're right, it's not getting any larger. But the problem
Speaker 3: is is that it's so expensive people can't make the
Speaker 3: numbers work. So New Jersey, Brooklyn, Long Island City become
Speaker 3: very interesting because there's people want to say they don't
Speaker 3: want to burn it all out, but at the end
Speaker 3: of the day, people like to park their cash in
Speaker 3: New York City. It's a hub.
Speaker 1: What are you seeing when it comes to foreign buyers
Speaker 1: right now? Has they dried up big time? No time?
Speaker 3: Really, No, it's happening. I'm doing deals with Germany, Russia.
Speaker 3: It's happening.
Speaker 1: Yeah, Russia, yes, yes, go into detail please.
Speaker 3: I can't, but suffice it to say, people want to
Speaker 3: get money out of certain countries and park it, and
Speaker 3: it's happening. It's happening with Asia.
Speaker 1: I just want to make sure we're allowed to do
Speaker 1: deals with Russia.
Speaker 3: How does that We're not discussing anything other than to
Speaker 3: say it's happening, and what's the How luxury are those
Speaker 3: we're talking fifteen million plus. Yeah, yeah, yeah, there's a
Speaker 3: lot of discretionary income. But it's more than that. It's
Speaker 3: a hub. We have a very different tax allowance here
Speaker 3: than we do for the actual New YORKA sure, go figure.
Speaker 2: Yeah, what is that looking like in terms of the
Speaker 2: impact on availability of units for renters out there? Are
Speaker 2: we still seeing a lot of units that are sitting empty?
Speaker 3: Because so that's a really good question because last year
Speaker 3: in November, we had a vacancy rate less than two
Speaker 3: point seven percent and rentals were up forty percent. Now
Speaker 3: we're seeing the rents softened in the early part of
Speaker 3: twenty twenty three because we expected a big sale push,
Speaker 3: but because the rates started to really impact that and
Speaker 3: the inventory was down because nobody wanted to let go
Speaker 3: of that really good rate that they had as a
Speaker 3: seller and have to take on almost double digit carry.
Speaker 3: We sort of got back into the rental market. But
Speaker 3: the rental market went from one month op again to
Speaker 3: now fully no we're not negotiating, but now again it's
Speaker 3: it's measured because parents are coming in and deployment of
Speaker 3: foreign investment coming in to offset that parents. So the
Speaker 3: rental market's moody.
Speaker 1: We have thirty seconds left. But common charges are the killer.
Speaker 3: Yes.
Speaker 1: I talked to somebody, Yes, colleague killers trying to buy Yes,
Speaker 1: and they just can't make the numbers work because of
Speaker 1: common charges.
Speaker 3: But is it the common charges or is it the
Speaker 3: combination of the rate because the rate was so artificially
Speaker 3: low it offset the standard common charge job you know,
Speaker 3: fifty seven hundred bucks or thirty seven hundred bucks depending
Speaker 3: on the size, or twenty charges. Yeah.
Speaker 1: Wow, common charges, Mattie, are optimistic.
Speaker 2: I mean, it's not going to happen for me, you know,
Speaker 2: I just think. I just think how I mean, Okay,
Speaker 2: what's happening with rent? Really quickly? Is my Is my
Speaker 2: rent going to get any better this year?
Speaker 3: Next years? It depends on what happens with the rates.
Speaker 3: I think that quarter point hike sort of really pushed
Speaker 3: things over, even though inflation has steadily come down. So
Speaker 3: I think the rental market will adjust when we see
Speaker 3: rates adjust.
Speaker 2: All right, got to time the market, I guess Tom timing.
Speaker 1: Francis Katzen from a Douglas Element. Really good to have
Speaker 1: you with us this afternoon. You're listening to Bloomberg