3 Factors Causing A Perception Gap Regarding Hoboken Condos
There has been much news of the housing crisis and in many parts of the country it truly is a crisis. Take a quick look around Manhattan and the outer boroughs, though, and you’ll see most neighborhoods still have new residential buildings going up all over the place. The New York City real estate market may have changed a bit from two or three years ago, but a crisis in New York? The sales numbers in Manhattan are still on the rise with the average sales price over $1.7 million and price per square foot up to almost $1,300. I believe the Hoboken condo market is greatly influenced by Manhattan real estate. It’s not my intention, however, to debate the market’s direction. Reasonable people will always disagree on that. Instead, my focus here is the psychology of the market news – good and bad – as it effects buyers and sellers of Hoboken real estate.
1. Buyers Are On The Fence – Many Just Can’t Commit
Having heard that the real estate market is in a tailspin, many potential buyers of Hoboken real estate take the negative view. Afraid that Hoboken real estate sales prices are going to tumble, they actively look but can’t bring themselves to actually buy. I repeatedly hear them say “we’re waiting because the market hasn’t hit bottom yet”. Inventory of Hoboken condos is fairly high. (Brownstones are a completely other story and continue to be snapped up at record prices of over $2 million). We currently have over a 6 month supply of units actively for sale.
2. Sellers Overvalue What They Own
It is an interesting phenomena that once we aquire something, we attribute greater value to it. This may be even more true with property, which is often also “home sweet home”. Most owners take great pride in their homes and have pleasant memories attached to living there. Owners tend to greatly overvalue their properties. Hoboken condo owners are especially used to hearing how the people down the hall doubled their money on the same Hoboken condo unit in just a few years. They want to do the same or at least make a nice profit. Sellers tell me all the time that they want to get their money back, plus cover the realtor commission and then tack on another 10 to 20% for ‘profit’ as if it is automatically deserved. My constant suggestion is that they go out with me and look at the other properties on the market at that price to see how they compare. After all, that’s what the buyers will be doing but they never do it. What better way to gauge market value than to go out and shop the market?
3. Nobody Trusts Realtors
Most Hoboken buyers start their search for a condo on the internet. Photos, however, only go so far. Eventually the buyer wants to see actual properties. Next, the buyer will start going to open houses. The agent hosting the open house, very often the listing agent, wants nothing more than to sell their own listing and get both sides of the commission. (It is typically split 50/50 between the listing side and the buying side). They are not likely to tell a potential buyer that a condo is overpriced. The listing agent is an agent of the seller and has a fiduciary duty to obtain the most money possible for the seller on the sale of the property. Finally, buyers may go out looking with a realtor. Since almost every condo for sale in Hoboken is listed on the MLS they can work with whichever realtor they like and see any agent’s listings. This agent, however, does not make a penny unless the buyer actually buys something. So their motivation is to convince the buyer to buy. While a good realtor may point out pros and cons of different properties and give an opinion as to value, there are agents who will say anything to make a sale. No wonder realtors as a whole have a bad rep. Sellers typically interview several agents before deciding to list a condo for sale. Realtors come in to put on their horse and pony show about the exceptional marketing they will do for the seller. What the seller wants to know is how much can I get? A good agent won’t have the interest or time to take an overpriced listing that won’t sell, but many other agents will do it just to get the listing. The seller is inclined to look most favorably on the agent who urges the highest possible listing price. That agent may already be thinking about how long after the papers are signed it will take to do a price reduction, or “improvement” as they are now called.
The Bottom Line
Until everyone takes a step back to see things more objectively, we are likely to continue to see a build up of inventory in the Hoboken condo market. Buyers have to remember the tax advantages of buying, the risk of interest rates rising, and the long term benefits of owning (stability, building up equity, possible long term capital gains). Sellers need to see what they are competing with in the market place to price their condos realistically. They also need to focus on the particular features of those units that sell quickly and how their condo stacks up in comparison. Things like location, storage & closet space, layout, and quality renovations all matter. The good news is that there are some smart buyers and sellers out there who are making deals and, as is the case in Manhattan, we are by no means in crisis mode here in the Hoboken real estate market.