A look at buyers and sellers
By Lauren Elkies
The bleak economy and credit crunch have claimed their share of victims in the New York City real estate world, but under the surface they have also shifted the foundations that buyers and sellers became accustomed to when the market was peaking.
This month, The Real Deal offers a series of stories about how buyers and sellers in the five boroughs and in the surrounding suburbs are dealing with one another and with the new financial terrain a little over a year into the crunch.
While prices have softened in some neighborhoods, first-time buyers are having more trouble than ever securing mortgages and getting a piece of the action (see Amid mortgage woes, first-time buyers seek solutions).
As their purchasing power has decreased, the pace of sales of the smaller units they tend to buy has slowed, creating a pileup of inventory. In Manhattan, there has been a sharp drop in sales of studios and one-bedrooms this year.
Meanwhile, some buyers fear more foreclosures could result in a growing number of vacant buildings, particularly in fringe areas of the city, which could contribute to an uptick in crime (see Watching for broken windows).
Experts weigh in on whether the so-called “broken windows theory,” which suggests that crime increases in areas of neglect, will play out in places like Crown Heights, Bedford-Stuyvesant, Bushwick and other neighborhoods with high foreclosures rates. Crime, of course, can put a damper on the appeal of a neighborhood and depress prices, driving away potential buyers.
In more prime areas, foreign buyers, who have been capitalizing on the weak dollar and propping up sales activity in the city, are now starting to pull back. As the dollar has started to rebound (at least a little), brokers say those with primary addresses in other countries are finally starting to hesitate and wait for deeper price cuts (see Fewer foreign clients buying).
On the seller side, market conditions and anxiety about the economy are causing some to drop asking prices to increase their chances of a sale, and prompting others to take their listings off the market altogether and wait until the market swings back (see Sellers feeling the pressure).
Even buildings are being put through the wringer. Co-ops have long put potential buyers through a rigorous board approval process. But now, lenders are turning the tables on them and more closely scrutinizing their books.
And, whether at a co-op or condo, gentrification continues to cause tension between existing board members and new residents, especially when the newbies push for expensive cosmetic upgrades for the building (see New buyers clashing with the condo board).
In the Financial District, the credit crunch has translated into fewer buyers at open houses (see Open house traffic hits wall in Financial District). And in the South Bronx, it has put activity on hold. The difficulty in securing cash has made it harder for small investors to buy into the area and stymied new residential development and rehabs there (see South Bronx buzz fizzles).
Beyond New York City, in suburbs like Westchester and Nassau and Fairfield counties, foreclosures on the rise are helping depress the overall market for sellers (see New York City’s suburbs slip).
And in parts of New Jersey and Long Island, there’s a real estate domino effect taking hold for so-called “trade ups” (see Trading up slows down).
Experts told The Real Deal that some sellers looking to unload their “starter homes” are out of luck, in large part because the buyers they need are unable to secure mortgages. And, until they pull their equity out of their homes, they don’t have the money to become buyers themselves.