But the peninsula is still no picnic for homebuyers, as the market there and on the East End remains tight and rife with bidding wars, according to a quarterly report published in the Real Deal.  But the Long Island peninsula is still no picnic for homebuyers, as the market there and on the East End remains tight and rife with bidding wars, according to the report,

Sammuel Miller stated in the report, “The market is levelling off as it’s coming out of the pandemic-era housing boom.”   He when on to say “When we look at median pricing, [it’s] 27.8 percent higher than pre-pandemic, which in three years shows you how much housing prices have expanded on Long Island.”

The median and average sale prices on the North Fork were $935,000 and $1.2 million, respectively, the third highest in history. Listing inventory surged year-over-year but remained down more than 50 percent from before the pandemic, leading to 28 percent of homes undergoing a bidding war. That’s down from nearly 41 percent last year, but still high.

“Supply is still struggling to keep up,” said Miller. “We need to see inventory pick up faster to enable more activity to occur.”

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The impacts to both the residential and commercial real estate markets have been material as borrowing costs have increased significantly. It is expected that “rescue equity” will be needed to replace the capital shortfalls as values decline and cost of debt rises. Further, negative leverage is occurring as mortgage rates trend above capitalization rates which is unsustainable.

Transactions have slowed, deals have stalled and there has been a lack of current data points which has reduced clarity with respect to price discovery and valuations. The majority of investors surveyed by PwC expect capitalization rates to increase over the next six months. 

Cost of Capital 

The increase in base interest rates directly affects financing rates. Various debt sources are quoting and achieving mortgage interest rates 6% and above. This is creating a situation where debt coverage ratios are too low based on existing cash flows and this, in turn, is forcing lower leverage and greater equity positions. 

Capitalization Rates 

In the 3Q2022 PwC Real Estate Investor Survey, it was noted that “The current rising-interest- rate environment has many investors in the commercial real estate (CRE) industry using the words selective, tentative, and cautious to describe their approach to acquisitions today.”

The majority of investors surveyed by PwC expect capitalization rates to increase over the next six months. This translates to slowing transaction volume but also directly impacts pricing expectations. 

Investors expect, and the data is showing, that capitalization rates are increasing. We have also heard of specific transaction examples including repricing of deals and simply offers at lower levels owing to the increased cost of capital.

Property Values 

The next question is whether these capitalization rate increases are translating to property value declines.  We must continuously keep our ears to the ground and talking to investors and brokers which is a must in this environment. 

• Investors have become selective, cautious, and tentative as cost of capital has increased.
• Volatility in the market has led to the disconnect between buyers and sellers thus reducing transaction volume – both in number of sales and overall price volume.
• Although the number of transactions has dropped precipitously, market participants are saying that price discovery is demonstrating that values are trending lower.
• Negative leverage is present in the market and this cannot be sustained which is putting downward pressure on values.
• Brokers report re-trades are occurring at lower pricing and higher indicated capitalization rates. 

Photo by Chris Liverani

Photo by Blogging Guide

Content courtesy of NewMark

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“If you are not working, if you are working only part-time, we’re going to have the banks and financial institutions waive mortgage payments for 90 days,” he said at a news conference Thursday. “That will be a real-life economic benefit. It will also be a stress reliever for many families.”  To listen to his announcement click here.

Recently he placed a moratorium on evictions for tenants.  

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Image Credit Architectural Digest

It might not be a second headquarters in Long Island City, but Amazon is far from done taking up office space in New York City.  However, Amazon’s new office space will not be receiving massive tax breaks from the city or state according to the report.

Amazon’s new Hudson Yards comes just weeks after Facebook picked up 1.5 million square feet in the Hudson Yards complex itself. The Real Deal took a deep dive into the rising importance of tech tenants in New York’s office leasing industry in its December issue.

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While City landlords were infuriated by these provisions of the recently enacted Housing Stability and Tenant Protection Act which predominantly apply to long term urban rentals, North Fork and Hampton landlords should be aware that important aspects of the legislation apply statewide and effect them directly.

Buried away in the final bill signed by Governor Cuomo are two provisions that will significantly affect real estate rentals on the East End of Long Island.   The first item pertains to the amount of security deposit a landlord could hold.   “No deposit or advance shall exceed the amount of one month’s rent under such contract.”  Historically landlords have collected rent in advance for a seasonal rental and now it is not possible with the new legislation.  One article I read suggested that landlords could use Letters of Credit to work around this.

The other troubling item effecting the East End is a provision requiring deposits to be returned to tenant within 14 days.  “Within fourteen days after the tenant has vacated the premises, the landlord shall provide the tenant with an itemized statement indicating the basis for the amount of the deposit retained, if any, and shall return any remaining portion of the deposit to the tenant. If a landlord fails to provide the tenant with the statement and deposit within fourteen days, the landlord shall forfeit any right to retain any portion of the deposit.

Landlords must be aware of these new regulations so as not to violate the law or their pockets.  Click here to read a summary about the NYC Rental law of 2019

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As part of the deal, Cuomo offered Netflix up to $4 million in tax credits through the Excelsior Jobs program if the company creates the 127 new jobs by 2024 and retains them along with its current 32-person New York City workforce for another five years, according to the governor’s office. This is the same initiative the state offered Amazon to build a campus in Long Island City, Queens.

content courtesy of the Commercial Observer

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The best option, once the curb appeal projects are done is to tackle the bathrooms according to a recent report by Zillow.

The key is making smart decisions about what to upgrade, because home-improvement projects don’t necessarily pay for themselves and some improvements actually cost more than they return in value.   A good rule of thumb to follow is a smaller and inexpensive upgrade typically brings a bigger reward than a more involved and time-consuming project.

 “Do” list for sellers:

• Dive into the “curb appeal” projects first.  New paint inside and out and basic landscaping and yard are typically the most common and necessary improvements.  Keep in mind choosing the right eye-catching colors can increase a home’s value as well. The report found that yellow homes sell for nearly $3,500 less than expected, while the right color door can lead to an extra $6,000 in a seller’s pocket.
• Upgrade the bathrooms for a good boost in home value.   A mid-range bathroom remodel including replacing the toilet, tub and light fixtures, adding a double sink, tiling the floor and hanging some wallpaper will give you the most bang for your buck.
• Install new windows, but get too fancy and you’ll end up breaking even.
• Pay attention to current design trends as the right design can show buyers the potential in your home.  Warm modernism and organic accents are in, bold colors and an overtly rustic feel are out.

Important “No Nos” for sellers:

• Don’t Focus on the kitchen at any level as its among the worst return on investment of the home improvements at about 50 cents on the dollar.  The kitchen is one of the few rooms in a house where different people want different utility.  A new kitchen could easily cost you $30,000 only to turn off some potential buyers who would have done it differently.
• Don’t bother with the basement.  The only renovation we studied that paid off worse than a kitchen remodel was finishing a basement, at a bit less than 50 cents on the dollar, even if you add a bathroom.

Click here to see some construction cost calculators to help you decide on what to do in your home before you sell.

Article Content Credit – Seeking Alpha

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Adelaide has sold over 1,400 properties valued at over $20 billion in every asset class of Commercial real estate.  She has sold over $1.4 billion in the last six years, spanning NYC, Miami, Boston, Chicago and most of the northeast corridor.

In this very insightful and intuitive interview great subjects are addressed.  Enjoy.

0:17 – Where do you think investment sales are in New York at the moment?
1:11 – What are the weak parts in the investment sales market?
2:35 – “On a high note” . . . How do you think legalized weed will affect retail and real estate in general?
4:08 – In terms of opportunity zones, are you worried about inexperienced investors?

Click here to watch the Commercial observer interview.

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New York is the world’s leading city for both residential and commercial investment, cementing its position as a global wealth hub, according to Knight Frank and Douglas Elliman’s 2019 wealth report. The study, which surveys global trends among the highest-wealth individuals, looked at property investments of $10 million or more.

It wasn’t all good news for New York, however. The city fell to second place on the overall wealth ranking, beaten by London because of two metrics: the number of high net-worth individuals and lifestyle, which refers a city’s security and affordability.

While London beat New York for most resident high net-worth individuals, defined as those with over $30 million, New York still has the most billionaires, with 94 resident in the city. New York also saw the highest rate of new high-net worth individuals, adding 55,434 in 2018 alone.

Image courtesy of Real Deal

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