Market reports, anecdotal data and the media have all pointed to the high-end market having picked up. The increased activity we’ve been seeing has been greatly fueled by a preponderance of all-cash buyers. They have been coming out of the woodwork both out of necessity and negotiability.
- On the necessity front, today’s tight financing environment has most affected the jumbo loan market segment, forcing high-end buyers to put 50-80% down towards the purchase of their new home.
- On the negotiability front, with so many buyers looking to squeeze every last possible dime from the price of the property, an all-cash offer commands some level of discount versus a financed one. All-cash offers have been favored in bidding wars particularly by those sellers wishing to avoid the months that often pass between a signed contract and closing due to bank hurdles.
It’s the cash in the equation that has helped the luxury market segment gain some footing over the last two quarters. Looking forward, we’re waiting to see how deep NYC’s pockets are in terms of continuing the support of the high-end market.
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One thing to consider is this: In early-2009, Wall Street generally drastically cut back the amount of cash paid out in bonuses and increased the amount paid out in deferred stock. With a two to three year vesting period, much of that deferred stock will be paid out in early-2011. Add into the mix another fact: the price of bank stocks have more than doubled since early-2009. This means that many employees working on Wall Street will see a large payout in Jan-Feb 2011. Of course, they may choose not to buy real estate with that money, but the “all-cash pockets” will be refilled. If the general economy recovers by early-2011, then there is a potential for an active real estate market in NYC at the high end.
Clueless sellers don’t realize this, but the worst is yet to come for NY real estate. All this BS about all cash and record low mortgage rate haven’t made a dent in the real estate recovery. Now the fear of a double dip and more layoffs on Wall Street ain’t going to get people to buy more real estate. The crash of the NY real estate didn’t kick into full gear until 3 -4 years after the 87 crash, when ALL sellers are totally frustrated and realized that absolutely no one is buying, as even buyers with cash is waiting for the prices to crash.