WEBVTT - High Rollers Spend Big on NYC Real Estate

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<v Speaker 1>These se is Bloomberg Business Week with Carol Messer and

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<v Speaker 1>Tim Stenebek on Bloomberg Radio.

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<v Speaker 2>I am so excited for our next segment because we

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<v Speaker 2>get to talk about a dream that I think will

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<v Speaker 2>never come true for me, which is owning a home

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<v Speaker 2>in New York City, well.

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<v Speaker 1>Like a seven or ten million dollar penhouse, right right.

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<v Speaker 2>I mean, I don't know what am I going to

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<v Speaker 2>do own like a studio, Like I'm going to be

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<v Speaker 2>forty someday and I'm going to be in a studio,

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<v Speaker 2>you know. But Tim, to me, you embody the classics

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<v Speaker 2>of the American dream. You've got the beautiful family, You've

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<v Speaker 2>got a home that you're quit to remind me as

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<v Speaker 2>an apartment.

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<v Speaker 1>Apartment, so it doesn't count quickly outgrowing it.

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<v Speaker 2>Yes, yes, says you've got an another baby there, but

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<v Speaker 2>here to help kind of potentially crush our anxiety levels

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<v Speaker 2>when it comes to the real estate picture or fuel them.

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<v Speaker 2>Who's to say is Francis Kadsen, agent with Douglas Ellman.

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<v Speaker 2>Francis has three billion in total sales, selling an excess

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<v Speaker 2>of three hundred and fifty million an annually, so a

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<v Speaker 2>great pulse on the market. Francis thank you for coming

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<v Speaker 2>in studio with us. Talk to me about the outlook

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<v Speaker 2>in New York City. Is there any any optimism for

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<v Speaker 2>me out here?

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<v Speaker 3>Well, Madison, I think it depends on which side you're

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<v Speaker 3>standing on. I mean, I think that the luxury sector

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<v Speaker 3>over four million is having the most fun right now,

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<v Speaker 3>to be candid, because there's the most opportunity when there's

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<v Speaker 3>this unknown variable, there's a lot more negotiability. They're a

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<v Speaker 3>little bit less dependent on any rate. They're exempt from.

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<v Speaker 1>It, to be honest, because they're playing with cash.

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<v Speaker 3>Correct And just to be clear, the sixty five percent

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<v Speaker 3>more cash deals that we're seeing are not necessarily because

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<v Speaker 3>there's more cash deals. It's just that the mortgage deals

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<v Speaker 3>that were happening have slowed down, so those that sixty

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<v Speaker 3>five percent just looks front and center.

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<v Speaker 1>Well, it used to make sense even if you had

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<v Speaker 1>for seven million dollars to spend on apartment on an

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<v Speaker 1>apartment in cash rates were so cheap, it used to

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<v Speaker 1>make sense to actually take out a mortgage because you

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<v Speaker 1>could take out a mortgage for two point five three

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<v Speaker 1>point five percent and then throw that other money in

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<v Speaker 1>the s and P five hundred and you know, or

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<v Speaker 1>do whatever you wanted with that other money, but now

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<v Speaker 1>that's not the case.

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<v Speaker 3>So therefore cash is king because sellers are really wanting

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<v Speaker 3>to take advantage of unloading the asset. They want to

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<v Speaker 3>get out of New York, they want to downsize, whatever

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<v Speaker 3>it is. And this is the opportunity because people have uncertainty,

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<v Speaker 3>they're not sure, there's a malaise in the market, there's

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<v Speaker 3>an unknown should I time it? But these ultra luxury buyers.

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<v Speaker 3>There were three sales done over fifty million or over

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<v Speaker 3>the past week and a half, one in the West Village,

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<v Speaker 3>one in Gramercy. It's happening. People are doing it big

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<v Speaker 3>time on the fifty million plus. But it's the entry

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<v Speaker 3>market that has the least to spend, the most to

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<v Speaker 3>lose on the and are the most impacted right now.

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<v Speaker 2>In my opinion, what does that even start to look like?

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<v Speaker 3>In what way? Like?

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<v Speaker 2>Who can buy a home at the entry level right now?

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<v Speaker 3>So I think it's for parents who can help bankroll

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<v Speaker 3>the down payment because that's the most illiquid part for

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<v Speaker 3>these buyers. They can probably manage the mortgage and the

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<v Speaker 3>common charges. If they can make it work with the

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<v Speaker 3>relationship of alenda, that can give them a little bit

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<v Speaker 3>like a quarter or a half a point down. But

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<v Speaker 3>at the end of the day, people are having to

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<v Speaker 3>grieve and say goodbye to two point seventy five to

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<v Speaker 3>three and a half percent rates and get ready to

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<v Speaker 3>take six point eight to five percent rates, which is

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<v Speaker 3>meaningful when you're carrying a certain income and you're hoping

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<v Speaker 3>not to rank because you want to own equity.

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<v Speaker 1>It's hard, Francis. I mean, there's it's We've been talking

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<v Speaker 1>real estate a lot this afternoon. But I wonder about

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<v Speaker 1>just the lack of supply that we're seeing right now,

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<v Speaker 1>and if the story in New York is at all

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<v Speaker 1>different than the story in other parts of the country.

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<v Speaker 1>And I go back to what fajo J. Powell said

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<v Speaker 1>about and this is for starter homes. I mean, you know,

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<v Speaker 1>there's new construction coming online. There are new developments happening

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<v Speaker 1>all over the country because there's demand for them. We

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<v Speaker 1>just don't have the space here in New York. We're

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<v Speaker 1>not going to be seeing like you know, Lenar come

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<v Speaker 1>in and build a bunch of homes, for example.

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<v Speaker 3>So here's what we're seeing. We're seeing bidding wars up

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<v Speaker 3>seven point four percent around the country, but We're not

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<v Speaker 3>necessarily seeing it in New York, but because there's a down,

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<v Speaker 3>there's a down of inventory. It's about twenty three percent

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<v Speaker 3>down on inventory for under four million. We're seeing that

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<v Speaker 3>change in terms of bidding war for the lower the

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<v Speaker 3>under luxury price point around the country. You're right, there

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<v Speaker 3>is a level of need and supply and demand New York.

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<v Speaker 3>You're right, it's not getting any larger. But the problem

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<v Speaker 3>is is that it's so expensive people can't make the

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<v Speaker 3>numbers work. So New Jersey, Brooklyn, Long Island City become

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<v Speaker 3>very interesting because there's people want to say they don't

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<v Speaker 3>want to burn it all out, but at the end

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<v Speaker 3>of the day, people like to park their cash in

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<v Speaker 3>New York City. It's a hub.

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<v Speaker 1>What are you seeing when it comes to foreign buyers

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<v Speaker 1>right now? Has they dried up big time? No time?

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<v Speaker 3>Really, No, it's happening. I'm doing deals with Germany, Russia.

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<v Speaker 3>It's happening.

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<v Speaker 1>Yeah, Russia, yes, yes, go into detail please.

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<v Speaker 3>I can't, but suffice it to say, people want to

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<v Speaker 3>get money out of certain countries and park it, and

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<v Speaker 3>it's happening. It's happening with Asia.

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<v Speaker 1>I just want to make sure we're allowed to do

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<v Speaker 1>deals with Russia.

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<v Speaker 3>How does that We're not discussing anything other than to

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<v Speaker 3>say it's happening, and what's the How luxury are those

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<v Speaker 3>we're talking fifteen million plus. Yeah, yeah, yeah, there's a

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<v Speaker 3>lot of discretionary income. But it's more than that. It's

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<v Speaker 3>a hub. We have a very different tax allowance here

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<v Speaker 3>than we do for the actual New YORKA sure, go figure.

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<v Speaker 2>Yeah, what is that looking like in terms of the

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<v Speaker 2>impact on availability of units for renters out there? Are

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<v Speaker 2>we still seeing a lot of units that are sitting empty?

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<v Speaker 3>Because so that's a really good question because last year

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<v Speaker 3>in November, we had a vacancy rate less than two

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<v Speaker 3>point seven percent and rentals were up forty percent. Now

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<v Speaker 3>we're seeing the rents softened in the early part of

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<v Speaker 3>twenty twenty three because we expected a big sale push,

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<v Speaker 3>but because the rates started to really impact that and

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<v Speaker 3>the inventory was down because nobody wanted to let go

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<v Speaker 3>of that really good rate that they had as a

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<v Speaker 3>seller and have to take on almost double digit carry.

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<v Speaker 3>We sort of got back into the rental market. But

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<v Speaker 3>the rental market went from one month op again to

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<v Speaker 3>now fully no we're not negotiating, but now again it's

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<v Speaker 3>it's measured because parents are coming in and deployment of

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<v Speaker 3>foreign investment coming in to offset that parents. So the

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<v Speaker 3>rental market's moody.

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<v Speaker 1>We have thirty seconds left. But common charges are the killer.

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<v Speaker 3>Yes.

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<v Speaker 1>I talked to somebody, Yes, colleague killers trying to buy Yes,

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<v Speaker 1>and they just can't make the numbers work because of

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<v Speaker 1>common charges.

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<v Speaker 3>But is it the common charges or is it the

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<v Speaker 3>combination of the rate because the rate was so artificially

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<v Speaker 3>low it offset the standard common charge job you know,

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<v Speaker 3>fifty seven hundred bucks or thirty seven hundred bucks depending

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<v Speaker 3>on the size, or twenty charges. Yeah.

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<v Speaker 1>Wow, common charges, Mattie, are optimistic.

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<v Speaker 2>I mean, it's not going to happen for me, you know,

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<v Speaker 2>I just think. I just think how I mean, Okay,

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<v Speaker 2>what's happening with rent? Really quickly? Is my Is my

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<v Speaker 2>rent going to get any better this year?

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<v Speaker 3>Next years? It depends on what happens with the rates.

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<v Speaker 3>I think that quarter point hike sort of really pushed

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<v Speaker 3>things over, even though inflation has steadily come down. So

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<v Speaker 3>I think the rental market will adjust when we see

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<v Speaker 3>rates adjust.

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<v Speaker 2>All right, got to time the market, I guess Tom timing.

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<v Speaker 1>Francis Katzen from a Douglas Element. Really good to have

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<v Speaker 1>you with us this afternoon. You're listening to Bloomberg