Recovery On The Horizon: Anticipating Shifts In The Real Estate Market

Jamie
Nov 19, 2023
14 min read

Updated: Dec 3, 2023

In real estate, just like any other business, there will be good times and there will be bad times. The way things are going, it’s pretty clear we’re not in good times right now. But that doesn’t mean you can’t still take steps to put yourself in a good position to seize opportunities when the real estate market rebounds. Join Jamie Heiberger Harrison in this episode of REal Talk with Jamie as she unpacks some of the latest trends, updates, and outlooks on the market with Gary Malin, COO of The Corcoran Group, and Neil Garfinkel, Managing partner at AGMB LLP and REBNY Broker Counsel. Tune in as they discuss things like interest rates, digital audits, the best time to list a home, and some indications of a turnaround in the horizon.

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Recovery On The Horizon: Anticipating Shifts In The Real Estate Market With Gary Malin And Neil Garfinkel

Neil, how are you?

I am good. How are you doing?

I’m doing okay. Thank you. Are you enjoying your summer?

We’re getting ready to move. We’re moving from the 17th floor to a bigger space on the 8th floor.

You’re talking about your office, right?

That’s right. You can imagine it’s a crap show in terms of all the details. It’s always something. How’s your neck and eyes?

Everything is good. It takes time, but I’m fine. What do you think? It still looks pretty slow to me out there. We’re getting a couple of deals here and there, but that’s it. I’m quiet.

We’ve reached a plateau, and commitments are fairly steady. We’re supposed to do a hundred closings a day. We’re doing twenty-something a day.

It’s hard to believe you even have that many, Neil.

We represent 200 lenders, so just the right volume. The truth of the matter is there are a lot of firms that used to do it. They’re not doing it anymore.

I'm already seeing Citibank. I told you in September. It might not even come to you because you guys are always representing so many banks. I'm sure this isn't on it for you, but have you seen what they're going to require us?

Even little things like we need to know every check you wrote and what the disposition of the check was. We went through a huge example by Wells Fargo, Bank of America, and Chase. I don’t know how most of the other firms are doing.

I went through it too. I’m telling you, I’m not going to comply with Citibank. I already spoke to some people because wherever I can’t comply, I’m just going to be sending everything to you. This way, whatever they are going to give to me. I don’t want them to just, do you know what I’m saying? That said I’ll have this way. I know you’re doing my stuff on my banking for my clients. I’m not going to kill myself to comply. Gary, how are you?

Anything to spend time with Neil Garfinkel after his wonderful outing. I feel like I’m in the presence of God. I was honored by something called Heroes to Heroes, and Gary was very nice. He took a foursome.

Gary, you’re making us look very pale right now.

It’s called golf. I played five days of golf.

Good for you.

You should see my ankles though. My kids are laughing at me. They’re like, “Your feet and from your arm up or two different colors.” I’m like, “It’s called golf, kids.” We have a two-day golf tournament on Wednesday and Thursday.

You’re going with Steve Mitchell.

Our The Masters thing. Steve and I are defending champions.

Do you play with Mitchell?

We play and we drink.

Playing is questionable. Drinking, you’re good at.

I’m a scratch drinker.

You guys are very funny. It's a good thing that you can laugh and be excited about golf because not all that much going on in real estate. What's going on, Gary? Update us. What are you seeing?

All is good. Life in the city is wonderful. I love it. I couldn’t be any happier. My son turned 21. My brother turned 40, and my birthday. I’m 55. We had three big birthdays.

Happy birthday.

I didn’t know it was your birthday. What day?

Maybe you should put me on your calendar. I don’t want to repeat every year.

I’m going to.

Me too. What year is it? What’s the date?

July 18th.

I’m already there.

My son came in with his girlfriend for the weekend and we all hung out. I’m taking my brother out in Mountain Ridge and my daughter at 7:30 for dinner to celebrate his birthday. It’s been a busy week in the Malin household.

Tell us what’s going on in New York real estate.

The bottom line is the rental market is getting overpriced considerably. A lot of people are finally being priced out of the market. The landlords certainly had their time to do what they did rightfully so, but I see vacancy started to slowly but surely creep up. People can’t afford what they’re asking for. Apartments have gotten crazy.

The sales market in June and July were better than in previous months. When I see a lot of my agents and talk to them, they say they're busy or feel busier. They have a lot of buyers who want to jump in, but there's not enough inventory to meet the demand. With interest rates where they are, people mentally, in my personal belief, need to see 5% to 5.5% to feel like they can deal with what they’re dealing with.

They can’t take it 3.5% or 4% mortgage and go from 6.5% to 7%. They can’t stomach it. They could stomach 5% to 5.5%, is what I think. Maybe a little bit higher. It’s got to work itself through the system, but it’s a tale of different agents. You speak to someone who is busy and doing well, then you speak to others. Their business is quiet as could be. The difference is how long you’ve been in the business and how you generate business. What are you putting your time on? What are you motivating? What do you network with? Are you building your pipeline? Some are just reacting to the market, and some are managing the market. It’s different.

Gary, along those lines, it’s a good time to maybe suggest to people out there. What is it that you would recommend your agents with you at this time? Is it context all of your past rentals, buyers, or renters in the last five years? What would you say? Drum up some new business or leads.

First and foremost, check every single thing about you that exists online and make sure that it’s accurate. Is your bio up to date? Is your Instagram up to date? Is your LinkedIn up to date? Do you have marketing materials that reflect who you are and what you do at this point in your career? Pick up the phone and call your past clients. Don’t email and text, call. Take them out for a drink or meet them somewhere. Do something. Create a client appreciation party.

I know nobody wants to spend their money but the bottom line is you got to build your pipeline. The only way you're going to build your pipeline is by going out there and doing it. Too many people are waiting on the sidelines for business to show up. I appreciate that some don't have the wherewithal or resources, but there are a million things you could do. I call it a digital audit. You should do a digital audit of yourself.

The only way to build your pipeline is by going out there and doing it.

There are so many things that people go online and Google themselves. They would find out what this being represented in the world about them is not who they are anymore in this industry. I always tell people, “You’re being interviewed right, whether you realize it or not." If your digital footprint isn't good, you might be losing opportunities you shouldn't lose. You have to do a whole spring cleaning of yourself and put yourself in a position to be successful when that business does come back.

There’s another piece to that too, Gary, which is if they Google themselves and their listings on a regular basis, they will find out if someone is spoofing them and beat them. I got another email from the legal line. It’s happening more and more. At least, if they’re aware of the fact that there are bad people out there who are trying to collect $200 for an application fee pretending to be someone else, they will find out about that. I know it’s not necessarily what people want to hear. They want a better resolution to that, but at the very least, at least know about it so then you can try to be proactive about that. It’s more than just the marketing piece. It’s the protectionary piece as well.

I want to point something out. I’m sure you guys are aware of this, but how do you feel, Gary, about people going out there and charging 1% or 2%?

My whole philosophy in that has never been anything different. The best lawyers, best doctors, best financial planners, or best athletes charge the most. Why? It’s because they’re worth it. If as a real estate agent, toy think the more experience you get, the less you should charge, you’re probably in the wrong business because if that’s all you’re willing to accept, then there’s a huge problem. In my personal opinion, you don’t know how to sell your value.

The market has spoken in many ways at least in our market. When all these other so-called low-price companies came in, they didn't make a dent in the market. You want to work with a professional. If you're first response is to cut your fee, I would never hire you. I’d be like, “Next.” If you don’t believe in yourself so much and you think the way to get me as a client is to be cheap, what corners are you going to be cutting while you’re representing me? For me, it’s the quickest way to go out of business.

The best of anything in life charge the most why because they're worth it. If you think the more experience you get the less you should charge, you’re probably in the wrong business.

I struggle with that a lot, but not as much anymore. I’m curious, Neil, your thoughts on it. Often, Gary, I don’t know about Neil, but they try and get the price lower on fees all the time. I pretty much do stick to my fee these days. It’s tough especially when it’s quiet. It’s probably different though on your end of it than our end of it all. It’s a different end of the business.

I completely agree with that, and the price points are far different. I always say we’re not the cheapest and the most expensive. We’re a good value, and you get what you pay for. At this point in my career, I’m like, “Go find someone else. I agree.”

That’s what I say too. You’re right. The second they start doing that, if they don’t back down once you’re not interested, then you know they’re going to be all over you the whole time anyway.

If they want to go to a big firm and pay hourly and they want to do that, that’s great. That’s okay. Have at it, but that’s up to them.

Gary, a big question out there would be if somebody's going to list, when should they list?

I would do it right after Labor Day or between now and the end of Labor Day. Historically, good market or bad market, things are going to die down. People are going to decompress, go away, kids are back, and vacation time. I would make sure that you’re ready to go, but that doesn’t mean you can’t do some planning now. Get your agent in and get some pictures taken. Clean up your apartment and paint the stage. Whatever is necessary, get it prepared. Don’t start that process after Labor Day. Get it all set to go.

Right after Labor Day, give or take, I would hit the market because there are a lot of buyers out there who want to buy. They've capitulated. It's the sellers that have capitulated as much as the buy side. No one is forcing you to sell your apartment. If you don’t get the price, you don’t get the offer or whatever. That’s fine, but if you need to move, I would say right after Labor Day if I was any age. That’s when I’d be preparing to do this. Between now and then, I would do nothing in terms of doing anything other than establishing the baseline for marketing when it’s time to go.

What about staging? Do you think it’s important these days?

It’s always important, depending on the apartment. An empty space always looks smaller. A filled space looks bigger. You imagine yourself living there. You can see yourself physically and how you would live there. Most people don’t have a good sense of space, so you don’t know what size couch you could fit and the dining room table. Is this an eating kitchen or not? Depending on the price point and what you're looking to accomplish, you want to take out as many questions as a buyer could potentially have. One easy way to do that is to stage it.

What do you think about the trend ahead in September once we get there? Do you think it's going to be your coop resale? Do you think it's going to be condos? Where's the new development? What do you see the trends will be?

People want condos more than they want coops in the sense of flexibility and not dealing with all the issues that come along with that but the price point is quite different. Depending upon who you are and what your circumstances are, coops are beginning to some degree to realize that they need to have some modern approach to dealing with these things because they’re losing value. They need reserve funds. They need a lot of different things for their buildings. That’s important. New developments are tough. It’s expensive.

The way the city has been, getting people to put shovels in the ground and get stuff done, it’s an expensive proposition with inflation and the cost of goods. It’s tough for a lot of owners to make out living. We have a lot of new developments that are showing great activity. I would go look at them all and see if there’s any negotiability, but it depends on the person. Some people want to buy something where they can put their stamp on it. They want to do their own renovations, and some people want to drop their bags, be done, and call it a day.

Different strokes for different folks, but they all suit different needs and also where you want to live. You might not have as many opportunities to buy exactly what you want if you only focus on one thing. Looking at the broad spectrum, and then playing the numbers after the fact is what most people will do. Unless you're so averse to how intrusive a coop process can be.

The demise of the real estate agent is overly exaggerated. It's such an emotional business. You need to touch things. You need to be in the property to feel it, to understand it.

Would you tell folks to use this time? You’ve talked about that before, but go look at properties and experience properties. I wrote an article a couple of years ago The demise of the real estate agent is overly exaggerated. What I meant by that was it’s such an emotional business. You got to touch things. You have to be in the property to feel it and understand it. You can’t go by square footage because everyone computes square footage differently. Everything lays out differently.

What may be listed as 1,200 square feet could be a nice-sized property. Certainly, looking at pictures, anyone could use a wide-lens camera which they do, and everything looks huge. You're talking about taking the time to go out. If you're a buyer, go out and look at stuff. That's how you educate yourself. That's how you put yourself in a position to be ready to take the next step as far as I'm concerned. My sister-in-law just put an offer on a property out on Long Island. A beautiful pre-war building. She was nervous and I said, “You’re not buying it as an investment. You're buying to live there. Don't worry. If you're completely overpaying, that would be fine, but that's not the case. Buy with your heart." You have to be smart about it but don't worry about the price point per se. You're going to live there, hopefully, in the next 10, 12, or 15 years.

Many people have analysis paralysis. Analyze and do nothing. The bottom line is everyone always wants to buy low and sell high. In a market like this, you’re not going to know where the low was until it’s in your rearview mirror. All of your circumstances need to be factored into making a decision as Neil said. You’re buying it for the long term. Put a little more money down if you have the opportunity. The prices are probably a little bit negotiable.

You can get a little bit lower price. Put a little bit more money down or the same that you would have before. Do an arm or do an IO. Figure out how to play around with your payments, and then eventually, you can marry the payments with the price that you got. If you lease, you go out and look at apartments and you see a lot. You can start to know. All of a sudden, I started ten apartments that I love. None of them have gone into a contract or the ones that have at or below, you can start to get your own due diligence and get your own data to make your own decision.

Maybe you'll eventually convince yourself, "I bought this when I wanted to a month ago. I could have bought it for this and sold for that." That's a problem. Maybe that's what gets people off. The sidelines that make them commit is realizing that there’s no perfect timing. Timing is luck. It’s not skill. If you make your decision based on what Neil said, screw your family. This is where you are and where you want to be. This is your lifestyle. Are you going to care about this in three years or are you going to spend the next 90 to 120 days abusing yourself mentally because you can’t make a decision but you’re miserable living where you live? That’s not a healthy balance to me. I sold my house and moved. I didn’t get every last dollar I wanted but I wanted to leave.

Someone said, “There’s no such thing as buying bad. There’s only such thing as selling bad.” If you think about that, it’s buy for the right reasons. Don’t worry about the sales piece.

They can’t handle it. The vast majority of times, interest rates have risen over the course of time. It was a step up over an extended period of time. It never felt as bad as it felt. Whereas this one was so much in such a short period of time coming from such cheap money that it’s like, “Who knows if 3% rates are ever going to come back?”

It’s like sticker shock. The one thing I will say that I’ve noticed and I wonder if you guys have touched on this too. It’s something that could be helpful for the entire industry. Neil, you can validate this if it’s correct or not. There’s a bunch of lenders. You can get money out there for construction. People who were afraid to buy where there was full gut in estate sale, a house that needed work, they should look into that. Some of the banks are offering it. Citizens are still offering it. I know Madison Jay, through them, is doing single families. I'm sure some of the smaller banks. I think TD might still be. What about you, Neil? Do you hear about construction loans?

We do a little bit but there’s a product out there for everything. Take the time to explore and put your time in. You’ll find it.

Last question, Gary. When do you think that we could see a turnaround where it will be noticeable that people are listing? How much longer do you think it will be? Will we be significant?

My gut would tell me the second quarter of 2024. It would probably be the time when you would start to see it be noticeable. You’re going to have a nice decent little run during the fall, but we know what happens come November in this city. It’s going to slow down, and you got to get through winter. Unless something changes quickly with interest rates, which I do think would be the one thing that could change any of these things. Let’s say the natural evolution. My gut would be the second quarter of 2024. You could start feeling a better sense of recovery.

I agree wholeheartedly. If one of these lenders comes out and says, “We’ll give 5% on the 30-year,” we will all be crazy busy.

People will forget very quickly how much pain they feel now. That’s what I try to tell people. The bottom one is I’ve lived through a lot of bad markets. I’ve seen a lot of bad things. One thing I do know is the end. The question is when? Some people don’t have that perspective. Some people can only remember the market they’ve been in. They don’t know what it was, so you have to give them context. This just feels worse, more cute, and more long-lasting because there are so many other things that are on top of it that push people down. That’s what you have to remind people. Good times come to an end and then they come back. It’s just a matter of how long.