These se is Bloomberg Business Week with Carol Messer and Tim Stenebek on Bloomberg Radio.
I am so excited for our next segment because we get to talk about a dream that I think will never come true for me, which is owning a home in New York City, well.
Like a seven or ten million dollar penhouse, right right.
I mean, I don't know what am I going to do own like a studio, Like I'm going to be forty someday and I'm going to be in a studio, you know. But Tim, to me, you embody the classics of the American dream. You've got the beautiful family, You've got a home that you're quit to remind me as an apartment.
Apartment, so it doesn't count quickly outgrowing it.
Yes, yes, says you've got an another baby there, but here to help kind of potentially crush our anxiety levels when it comes to the real estate picture or fuel them. Who's to say is Francis Kadsen, agent with Douglas Ellman. Francis has three billion in total sales, selling an excess of three hundred and fifty million an annually, so a great pulse on the market. Francis thank you for coming in studio with us. Talk to me about the outlook
in New York City. Is there any any optimism for me out here?
Well, Madison, I think it depends on which side you're standing on. I mean, I think that the luxury sector over four million is having the most fun right now, to be candid, because there's the most opportunity when there's this unknown variable, there's a lot more negotiability. They're a little bit less dependent on any rate. They're exempt from.
It, to be honest, because they're playing with cash.
Correct And just to be clear, the sixty five percent more cash deals that we're seeing are not necessarily because there's more cash deals. It's just that the mortgage deals that were happening have slowed down, so those that sixty five percent just looks front and center.
Well, it used to make sense even if you had for seven million dollars to spend on apartment on an apartment in cash rates were so cheap, it used to make sense to actually take out a mortgage because you could take out a mortgage for two point five three point five percent and then throw that other money in the s and P five hundred and you know, or do whatever you wanted with that other money, but now that's not the case.
So therefore cash is king because sellers are really wanting to take advantage of unloading the asset. They want to get out of New York, they want to downsize, whatever it is. And this is the opportunity because people have uncertainty, they're not sure, there's a malaise in the market, there's an unknown should I time it? But these ultra luxury buyers. There were three sales done over fifty million or over the past week and a half, one in the West Village,
one in Gramercy. It's happening. People are doing it big time on the fifty million plus. But it's the entry market that has the least to spend, the most to lose on the and are the most impacted right now.
In my opinion, what does that even start to look like?
In what way? Like?
Who can buy a home at the entry level right now?
So I think it's for parents who can help bankroll the down payment because that's the most illiquid part for these buyers. They can probably manage the mortgage and the common charges. If they can make it work with the relationship of alenda, that can give them a little bit
like a quarter or a half a point down. But at the end of the day, people are having to grieve and say goodbye to two point seventy five to three and a half percent rates and get ready to take six point eight to five percent rates, which is meaningful when you're carrying a certain income and you're hoping not to rank because you want to own equity.
It's hard, Francis. I mean, there's it's We've been talking real estate a lot this afternoon. But I wonder about just the lack of supply that we're seeing right now, and if the story in New York is at all different than the story in other parts of the country. And I go back to what fajo J. Powell said about and this is for starter homes. I mean, you know, there's new construction coming online. There are new developments happening all over the country because there's demand for them. We
just don't have the space here in New York. We're not going to be seeing like you know, Lenar come in and build a bunch of homes, for example.
So here's what we're seeing. We're seeing bidding wars up seven point four percent around the country, but We're not necessarily seeing it in New York, but because there's a down, there's a down of inventory. It's about twenty three percent down on inventory for under four million. We're seeing that change in terms of bidding war for the lower the under luxury price point around the country. You're right, there is a level of need and supply and demand New York.
You're right, it's not getting any larger. But the problem is is that it's so expensive people can't make the numbers work. So New Jersey, Brooklyn, Long Island City become very interesting because there's people want to say they don't want to burn it all out, but at the end of the day, people like to park their cash in New York City. It's a hub.
What are you seeing when it comes to foreign buyers right now? Has they dried up big time? No time?
Really, No, it's happening. I'm doing deals with Germany, Russia. It's happening.
Yeah, Russia, yes, yes, go into detail please.
I can't, but suffice it to say, people want to get money out of certain countries and park it, and it's happening. It's happening with Asia.
I just want to make sure we're allowed to do deals with Russia.
How does that We're not discussing anything other than to say it's happening, and what's the How luxury are those we're talking fifteen million plus. Yeah, yeah, yeah, there's a lot of discretionary income. But it's more than that. It's a hub. We have a very different tax allowance here than we do for the actual New YORKA sure, go figure.
Yeah, what is that looking like in terms of the impact on availability of units for renters out there? Are we still seeing a lot of units that are sitting empty?
Because so that's a really good question because last year in November, we had a vacancy rate less than two point seven percent and rentals were up forty percent. Now we're seeing the rents softened in the early part of twenty twenty three because we expected a big sale push, but because the rates started to really impact that and the inventory was down because nobody wanted to let go of that really good rate that they had as a seller and have to take on almost double digit carry.
We sort of got back into the rental market. But the rental market went from one month op again to now fully no we're not negotiating, but now again it's it's measured because parents are coming in and deployment of foreign investment coming in to offset that parents. So the rental market's moody.
We have thirty seconds left. But common charges are the killer.
Yes.
I talked to somebody, Yes, colleague killers trying to buy Yes, and they just can't make the numbers work because of common charges.
But is it the common charges or is it the combination of the rate because the rate was so artificially low it offset the standard common charge job you know, fifty seven hundred bucks or thirty seven hundred bucks depending on the size, or twenty charges. Yeah.
Wow, common charges, Mattie, are optimistic.
I mean, it's not going to happen for me, you know, I just think. I just think how I mean, Okay, what's happening with rent? Really quickly? Is my Is my rent going to get any better this year?
Next years? It depends on what happens with the rates. I think that quarter point hike sort of really pushed things over, even though inflation has steadily come down. So I think the rental market will adjust when we see rates adjust.
All right, got to time the market, I guess Tom timing.
Francis Katzen from a Douglas Element. Really good to have you with us this afternoon. You're listening to Bloomberg