Incase you dont know a short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan. Search the recent sales listings and you’ll find dozens of advertised short sales, some being creative with their wording and saying something like “owner must sell.” Everything from town houses and co-ops to cond-ops and condos. Up until now, most short sales have been in other boroughs or the suburbs, but make no mistake- they are making their way into Manhattan. Property values are down as much as 25%, and many people who bought in 2006-07 are finding themselves underwater and grasping for a short sale. The New York Times tells some stories that will make you shake your head, but here are the basics of what Manhattan is looking at, beginning with a startling statistic:

Lis pendens filings (the first step in the foreclosure process for houses and condos) doubled in Manhattan from 334 in 2008 to 724 in 2009. There are 382 through the end of June this year.

And just because there are a growing number of short sale listings doesn’t mean they are happening quickly. While it is generally regarded as a softer landing for an underwater homeowner, it’s a laborious process involving many parties, many negotiations, and many months to even have a chance of happening.

First there is the art of pricing by the seller- low enough to create interest (and hopefully a bidding war) but not so low as to raise objections from lenders. Banks will never broadcast how much of a loss they are willing to take on a short sale, and negotiations can often come down to getting everyone to offer something the bank will agree to. Lower than list price will work, but lowballing an offer will never get approved. A seller must first get an application in hand, then submit it to the bank, then convince the bank in writing that they can’t pay the mortgage.

Then, when negotiations do start, buyers have to negotiate with the seller and the seller’s lender, and the seller has to negotiate with the lender as well around the terms of forgiving what’s left owed on the mortgage, whether the lender will sue for the loss and whether the seller will have to pay income taxes on a forgiven loan. To top that off, many mortgages are owned by more than one investor, all of whom must agree to the terms. And then there are everyone’s fees… If the short sale does go through, the seller tends to walk away with nothing to show for it- other than getting out from under a mortgage they couldn’t afford.

In the end, it can easily take more than 6 months or more, and banks routinely decline sales even after that long. Unfortunately, for both the buyers and sellers, the only thing moving fast about short sales is the number of them being listed.

Photo Credit: TheTruthAbout

After first listing it in 2006 for $24.9 million, Sting chopped the price on his 88 Central Park West duplex apartment to $19 million more recently- and the sale is now final at $17.75 million. That’s a 29% decrease from the original listing price. Someone may need to call the Police, the price dropped so much- that’s got to sting… So sorry, I couldn’t help myself.

Sting bought the 6,600 square foot apartment, four bedroom spot from Billy Joel in the 1980’s, but the string of rock and roll royalty owners will fade with now owner, Michael S. Naify. He comes from San Francisco Bay area, not the rock and roll hall of fame.

Photo Credit: Scott Ableman

The Duke Semans mansion, one of just a handful of mansions remaining on the Gold Coast of Fifth Avenue, is about to sell for $40 million. If it goes through, the sale would be the biggest townhouse sale since the beginning of the recession. Along with the talk of an impending sale of Brooklyn’s Clock Tower penthouse, is this an indicator that the luxury market is coming back to life?

The 19,500-square-foot mansion has 11 marble fireplaces, 12 bedrooms, 14 bathrooms, three elevators and a long history of storied owners. It was originally built in 1901 with tobacco money by ancestors of Doris Duke, and current owner Tamir Sapir, a native of the Republic of Georgia, bought it for $40 million in 2006 after working his way up from a taxi driver to an oil billionaire. The rumor mill says that the buyer is an unidentified Russian, but not Nets owner Mikhail Prokhorov.

According to the NY Post, the mansion needs major renovations, and that Sapir’s plans to turn it into an art gallery for his exotic collection never made it to the canvas. The building has been Landmarked since 1974 so whatever is going to be done to the interior the exterior will remain a reminder of NYC storied past.

Photo Credit: NYPost

Mortgage rates dropped to an average of 4.59% for a 30 year fixed-rate mortgage last week, the lowest ever recorded by Mortgage Bankers Association since they began keeping track in 1972. And they may not stop there- Zillow’s Mortgage Marketplace reported the average at 4.37% on Tuesday of this week.

While the low rates aren’t creating a spike in demand, new-purchase mortgage applications did show an increase for just the second time in the last two months, according to the Wall Street Journal. We can attribute some of the drop in applications and sluggish growth to the home-buyer tax credit that pushed demand to the early part of the year, but that doesn’t change the fact that home purchases are down 40% from where they were in April.

The action is in refinancing. Applications to refinance were up 9% this week, and up close to 30% over the past month, comprising a full 80% of mortgage activity for the week. But even here there isn’t as much activity as you would expect. Many who would have jumped at refinancing for this rate a few years ago have to consider loss in equity, a lower income, or changes in their credit. And many are looking to sell their homes in the next few years, so closing costs come into play.

How low will mortgage rates drop past record lows until demand picks up enough to stabilize them? After a tumultuous two years and the home-buyer tax surge, answering that question will be tough.

Photo Credit: andrew mace–

Back in February I gave you the video tour of Brooklyn’s Clocktower Building at One Main Street in DUMBO. It was listed at $25 million. While the building itself is almost as amazing as the views it offers, charging 3x what any other condo has ever sold for in Brooklyn is, well, dumbo. Who’s going to pay that? As it turns out, somebody out there is going for it…

The Real Deal reports that the listing is off the market and negotiations are underway. According to them, there is no contract signed yet, as the mystery buyer “is not sure whether [he wants] to buy it or rent it, or rent it and then buy it down the road.” The four bedroom, three and a half bathroom apartment with its incredible views of New York Harbor and the Brooklyn Bridge through four 14 foot glass-faced clocks was created by David Walentas, founder of Two Trees, beginning in 1998. If he gets anywhere near his $25 million asking price it will dwarf Brooklyn’s largest condo sale ($8.495 million) and its most expensive home sale ($11 million). The way it sounds from The Real Deal, it’s only a matter of time…

Photo Credit: Curbed & The Real Deal

If you park a car in Manhattan with any kind of frequency, you may find yourself walking from the lot to the office shaking your head and thinking, “It’s so expensive to park here…” And, in fact, you’re right. According to a Wall Street Journal article, parking in Manhattan is, indeed, more expensive than anywhere else in the country. Specifically, Midtown and downtown Manhattan have the highest monthly rates, Midtown charging a median of $538/ month, and Downtown asking $529/ month.

The Good News

There is a silver lining in all of that green: both of those rates are down from last year. Midtown is down 2% and Downtown 6%. What’s more, the City is not the most expensive place to park in the world. According to Colliers, eight other central business districts are more expensive, the most expensive being London where monthly parking costs $933. At the same time, the daily parking rate in Downtown is $31, down 18% from 2009 and lower than either Boston or Honolulu. Midtown rates are still the country’s highest, though down 9% from last year, at $40/ day.

Tellingly, the use of public parking is also down. According to long-term trend numbers, The Department of City Planning shows that the number of people driving into Manhattan is down 57,000 between 2000 and 2007, even though the number of jobs increased by 212,000. While the job numbers have surely changed since 2007, I would guess that public transportation use has gone up as well.

Photo Credit: Daquella manera

Have you had the strange feeling that lenders are lowering the numbers on appraisals? Hearing stories about deals that are all set to go- contract signed, buyers have the mortgage, you’re ready to sign the papers- until the appraisal comes back dramatically lower than the price in the contract and the lender demands the mortgage is cut. Of course you say no and suddenly the deal is off.

It’s not just a strange feeling- it’s happening across the country. The Real Deal reports http://therealdeal.com/newyork/articles/low-appraisals-sabotage-more-deals that lenders may “unilaterally be lowering the numbers on appraisals submitted to them.” Why? To avoid accusations that the loans they want to sell to Fannie and Freddie are based on even slightly inflated appraisals.
Even Frank Gregoire, the vice chairman of the National Association of Realtors’ Appraisal Committee, says it’s a big problem, and he points to high numbers of sales “sabotaged by lenders and underwriters arbitrarily reducing the value estimate.”

Here’s what happens: The lender gets a cheap electronic valuation based on public data with no on-site visit and puts that up against the numbers from the appraiser. If there is any difference, lenders will simply cut the value and/or demand an explanation from the appraiser.

NEW RULE

As of September 1 all this may change, as that is the date Fannie Mae will prohibit lenders from changing appraisers’ numbers, requiring instead that they contact the appraiser to work it out or order a second appraisal. Appraisers are, understandably, happy, and they think buyers should be too. The comparisons used by electronic systems can be wildly inaccurate, and the Real Deal even tells one story of a “comp” being a vacant lot, which would obviously come in well under the home being appraised. Add to that the growing use of inexperienced appraisers by some management companies and you can see why the situation is deteriorating.

Which is why Fannie Mae’s new “appraiser selection” standards will be a big shift. They want appraisers to “be experienced, ‘have the requisite knowledge’ about local market conditions, plus access to all local data sources.” They even say that experience is more important than fees or turnaround times.

When September comes, look for less of those strange feelings and more honesty in appraisal numbers to come.

Photo Credit: Patrick Q

Rush Limbaugh has been a consistent hater of New York taxes. With shows boasting titles like “El Rushbo to New York: Drop Dead,” his feelings have about as much subtlety as the ornate decor of his opulent condo. Making good on his promise to get out of New York because of the high taxes, Limbaugh’s penthouse at 1049 Fifth Avenue has been sold. It went for $11.5 million, after first being listed for $13.95 million in March and seeing a price chop of $1 million in April.

The condo is full of opulence. From the hand-painted ceiling murals to the gold leafing, well, everywhere. It has 10 rooms, including a phenomenal 30-foot-wide living room with fireplace and 4 terraces overlooking Central Park. Did he take a price cut? Sure. But he bought the place for just $5 million in 1994. He still has those taxes to pay the transfer taxes, but he’s still more than doubling his money. And taking it to Florida.

Photo Credit: Curbed

Manhattan 2Q 2010 Market Report

The 2009 Manhattan real estate market is beginning, if slightly, to recede into the past. This year’s market is stronger than anyone could have hoped for last summer, which means we can all spend a little more time worrying about how to beat the heat than if sales are going to pick up. In fact, they are up 15% from last quarter and 80% from last year- something to smile about. While the first time home buyers’ tax credit is over, its effect was strong and the purchasing pick-up is making its way into higher end properties. The rest of the year looks to be driven by the dramatically low mortgage rates and lower, stabilizing prices.

2Q Market Report Overall

• There were 2,756 sales in the second quarter, up a dramatic 79.9% from 1,532 sales last year and up 15.6% from 2,384 sales in 1Q. This is the highest number of sales since 2Q 2008, and above the 2,411 quarterly average over the past decade.
• The median sales price for a Manhattan apartment was $899,000, up 7.6% from $835,000 last year and up 3.6% from $868,000 in 1Q.
• Average sales price rose 9.1% to $1,432,712, up from $1312,920 last year, and up 0.4% from $1,426,994 in 1Q.
• Price per square foot remained stable, down just 0.5% to $1,051 per square foot from $1,056 last year, and up from $1,038 in 1Q.
• Available listing inventory (excluding shadow inventory) was 8,157, 13% below the prior year but up 1.6% from the prior quarter.
• “Shadow inventory” is estimated at 6,500 units.
• Average Days on Market was 105 days, down from 162 last year and down from 124 in 1Q.
• The Listing Discount was 9.1%, up from 7.8% in the prior year quarter and up from 5.4% in 1Q.

Manhattan Co-Op Market

The Co-op market saw a sharp rise in sales, comprising 43.7% of all apartment sales this quarter, though still under the 5 year average of 47.9%. Studio and 1 bedroom apartments were down from 61% to 56% of total sales, indicating a rising demand for the upper-end of the co-op market. There was also an encouraging overall stabilization of price indicators.

• There were 1,203 sales in 2Q, up 65.2% from last year and 8.3% from 1,111 in the last quarter.

• Listing Inventory was 3,948 at the end of the quarter, 10.3% below last year at this time, but up 3.6% from last quarter. The monthly absorption rate is 9.8 months, almost one month faster than the past decade’s average of 10.5 months.

• The median sales price was $697,501, 7.5% higher than last year’s 2Q $649,000 and 1.8% higher than last quarter.
• Average sales price was $1,113,173, 4.2% higher than last year’s 2Q but 1.8% below last quarter.
• Price per square foot was $943, 2.8% higher than last year’s 2Q mark and 3.9% higher than last quarter. By region, the East Side was at $1,001 per square foot, Uptown at $653 per square foot, Downtown at $910 per square foot, and the West Side at $946 per square foot.
• Co-ops averaged 92 days on market, down from 141 last year at this point and down from 110 in the prior quarter.
• The Listing Discount was 7.3%, down from 8.7% last year but up from 3.8% in 1Q.

Manhattan Condo Market

The big story in the condo market is that sales numbers are up, as they are all over the City, but the price indicators remain mixed. Notably, the listing discounts have risen, pointing to a trend of sellers testing the market by setting higher prices but meeting resistance from buyers.

• There were 1,553 sales, almost double the 804 sales in last year’s 2Q, and up 22% from the 1,273 sales last quarter.
• The listing total was 4,209 units, excluding “shadow inventory,” which was 15.5% below last year’s 2Q and virtually identical to last quarter’s 4,218 listings.
• The median sales price was $1,100,000, which is 10.1% higher than last year at this point, and 3.3% higher than last quarter’s $1,065,000.
• The average sales price was $1,680,236, up 9.5% last year at this point, and holding steady with last quarter’s $1,690,399.
• The average square footage of properties sold was 1,482 square feet, up from 1,299 square feet at the same time last year.
• Average price per square foot was $1,134, down 4% from last year at this point, and down 1.7% from $1,154 in 2Q.
• Average days on market was 115, down dramatically from 181 in 2Q of last year, and down from 135 in 1Q of this year.
• The listing discount was at 10.5%, up from 7% last year and 6.7% last quarter.

Manhattan Luxury Market

The luxury market is seeing signs of renewed life, working off excess inventory and seeing price indicators stabilize.

• There were 1,304 listings over the $3,000,000 threshold, 29.3% fewer than 1,844 at this time last year and 13.2% fewer than the 1,502 listings last quarter.
• The median sales price for luxury apartments was $4,093,365, 11.8% higher than last year’s $3,660,608 but down 10.7% from $4,582,125 last quarter.
• The average sales price was $5,169,161, up 8.6% from last year at this point, but down 6.9% from last quarter.
• Average price per square foot held steady at $1,843, changing little from last year’s $1,848 and last quarter’s $1,881.
• The luxury market averaged 146 days on market, well down from 182 days at the end of last year’s 2Q as well as last quarter’s 193 days.
• The listing discount was 6.4%, less than last year’s 8.6% but higher than last quarter’s 3.6%.

Manhattan Loft Market

Like in other parts of the market this quarter, sales were up. But unlike any other sector, the sales in the loft market were up 263.9% from last year! That’s the good news. Less emphatic are the price indicators, that brought back mixed results.

• There were 262 loft sales, up that amazing 263.9% from 72 last year, and a 45.6% increase from last quarter. The mark was well over the 193 sale quarterly average over the past 20 years.
• Listing inventory was 548, 25.6% below last year at this time and 1.4% below last quarter.
• The median sales price was $1570,000, 15.9% below last year at this point, but up 12.1% from last quarter.
• The average sales price was $2,057,776, 5.7% higher than last year at this time and 0.9% higher than 1Q.
• Price per square foot was $1,145, down 4.3% from last year at this point and 2.1% up from last quarter.
• Days on market was 80, the quickest number in over 10 years. Last year at this point the average days on market was 138, and last quarter was 146.
• The listing discount was 5.4%, lower than last year’s 7.2% but above last quarter’s 3.3%.

When a major business closes, it’s hard to know exactly what the impact on the surrounding community will be, but there are sure to be economic and real estate ripples. St. Vincent’s Hospital closed at the end of April, and the community lost 3,500 hospital employees, thousands of visitors to patients, and hundreds of suppliers as customers. Since the closing, more than 20 small businesses have closed in the neighborhood. The majority are in food service or retail.

The Greenwich Village-Chelsea Chamber of Commerce has been trying to assess and deal with the fallout, and New York University is doing a long-term study. Early numbers from the chamber’s own survey of Greenwich Ave. and Seventh Ave. businesses show that half the stores lost anywhere from 20 to 50% of their business. Many businesses are reducing hours, inventories and staff numbers to stay afloat.

Tony Juliano, the chamber’s president, put the matter plainly in the Villager: “People have been scrambling to find new healthcare for the community. But up till now, few have been looking at the impact on business, and that’s our job at G.V.C.C.C.”

In addition to looking at lower sales numbers, businesses are not seeing their rents go down even with the rising commercial vacancies. For example, Artepasta’s former Greenwich Ave. at Perry St. space is offered at $40,000 per month.

What’s Being Done?

- The GVCCC is currently talking with landlords about lowering or at least keeping rents static, and local assembly members are working around the politics.

- Google is also planning to create an Internet portal for every small business in the City, allowing merchants to review and change for accuracy.

- Other business owners are calling for the community to band together and patronize each others’ storefronts.

- Local meetings are being held to alert business-owners about free services, counseling, and loans.

With 20-50% drops in business and rents not moving, something has to give. A lot depends on what will replace St. Vincent’s, which was in operation for 161 years, and how the property will be developed.

Photo Credit: Mattie_Photos