The Power of New Development

The Weekly Recap

US pending home sales surged 8.1% in January, apartment rents fell across the US over the last 6 months and according to recent data, those who signed leases in January spent 3.5% less than in August. Bank of America gets on the Jamie Dimon train and expects the Fed to raise bank rates to 6%. US house price inflation slowed to 6.6% YoY in December, Mortgage demand is at a 28 year low. Amazon employees will be able to use company stock as collateral for mortgages, Europe and Asia are vastly outpacing the US pre-pandemic office occupancy at 90% and 110% respectively while the US lags behind at 45%. Praise be, Elon Musk is the richest person in the world again and who said Fed meetings can't be entertaining? A virtual event with a Fed governor was scrapped after its Zoom room was hacked with porn yesterday.

The Power of New Development

Inventory rates in NYC continue to increase week over week and month over month over the past 6 months. We're seeing a lot of resales come to the market but we're also seeing projects that were delayed because of supply chain issues and labor shortages due to the respatory virus that we no longer speak of, finally being completed and beginning closings.

Here are some things to look at for and why buying New Development may be a smarter move than searching re-sale:

Higher Appreciation Rate: As we look at the laws of supply and demand, if you get in early on a new development project your opportunity for higher appreciation in a shorter amount of time goes up. Let's say you are one of the first 10% of people to purchase a 1 bed/1 bath. As inventory, or supply, in the building dwindles, prices will go up because the demand market has shown itself to exist. There is no better comp than a direct comp in your own building. If the unit you purchased was $1 million, and then the person who bought the same line 1 bed in the LAST 10% of people to purchase paid $1.1 million or $1.15 million, when you go to sell you're able to point at that unit as a direct comp to help you justify your higher than purchase price pricing.

First One In: There's nothing like being the first person to own and live in an apartment that no one has ever lived in before, all the appliances are brand new, not a single scratch on the floor and everything is in perfect working order. There's an incredible value to being the first one in.

Higher Resale Opportunity: Piggybacking off being the first one in, an overwhelming amount of inventory in NYC that hits the re-sale market are older units in older buildings. With the average person living in their apartment 5-7 years, it is way more palatable for a buyer to purchase a unit that is only 5 years old than 50 years old.

Closing Costs: One thing to watch out for in New Development sales is that there is an increase in closing costs for the buyer. The sponsor who is selling the unit will pass down the New York State and New York City Transfer taxes to the buyer (normally a seller cost), they will pass the cost of their own attorney onto the buyer, and the building will usually ask for two months of common charges up front for a capital reserve fund for the building. Not to fret! All of these items are negotiable and I always make these closing cost expenses as part of any initial offer to a sponsor

Here are some of my favorite New Development Projects in NYC, any questions please don't hesitate to reach out! Happy to schedule a showing or answer questions.

130 William Street

35 Hudson Yards

One Wall Street

The Westly

The Lantern House

Market Performance

Here are how some other asset classes performed this week as of this mornings opening bell.

NYC Market Update

A new weekly section! Here is a week over week view of new inventory that has come onto the NYC market as well as newly signed contracts that have taken place. The spring selling season is upon us.

Mortgage Rate Update

In the beginning of the year, the 30 year fixed rate mortgage decreased with expectations of lower economic growth, inflation and a loosening of monetary policy. However, given sustained economic growth and continued inflation, mortgage rates boomeranged and are inching up toward seven percent. Lower mortgage rates back in January brought buyers back into the market. Now that rates are moving up, affordability is hindered and making it difficult for potential buyers to act, particularly repeat buyers with existing mortgages with super low rates. Locking in a rate now hedges your bet against future inflation.

News You Can Use

• Fed Might Raise Policy Rates to 6% Reuters

• Mortgage Demand From homebuyers Drops to a 28-Year Low CNBC

• Consumer Confidence Slips Again Fox Business

• Apartment Rents Fall as Crush of New Supply Hits Market WSJ

• A Rush of Homes Go Under Contract in January CNBC

• As Americans Work From Home, Europeans and Asians Head Back to the Office WSJ

• Mortgage Rates Getting Closer to 7% CNBC

• JP Morgan's Jamie Dimon Says US Interest Rates Could Hit 6% Reuters

• Key Fed Inflation Measure Rose 0.6% in January, More Than Expected CNBC

• NYC Remains the Most Expensive Real Estate Market in the World NY Post

• Fed Event Scrapped After Being Hacked With Porn in Zoom Room Bloomberg

The Deep Insight

Puppy of the Week

The puppy of the week this week is Romy! She's a black lab mixed with 19 other species of dog because SCIENCE! Romy likes to stand on her hind legs while eating her puppacinos from Starbucks and communicates in different scenarios with different types of barks. Her favorite thing to pee on is flowers and likes sleeping under the bed or on your head. Romy's other hobbies include digging holes, chasing balls and running away from baths. Bask in the glory that is Romy.

Contact Me

Feel free to reach out to discuss more in-depth about your real estate goals, share your thoughts about my newsletter, or lobby me to have your dog featured as the dog of the week in my monthly newsletter. Looking forward to hearing from you!