Halstead Property

Diane M. Ramirez
President
dramirez@halstead.com
(212) 381-3203

Manhattan's Value Menu

by Tom Acitelli 

Photo Caption: Diane Ramirez, veteran broker and president of Halstead Property, has seen recessions come and go. From her East Side office perch, the 61-year-old explains why this one ain’t the 1970s.

Location: Things are bad out there. Who’s buying apartments in Manhattan right now?

Ms. Ramirez: Apartments, to some degree—not to some degree—they’re your homes. It’s the people that need homes. Life goes on and you need homes. … The bottom-line issue of who is buying is, it’s all value purchases.

What do you mean by that?

The sales that we’re seeing are the buyer perceiving it as value; and that definition is in the mind of the buyer. It’s your first-time buyers; your renters who don’t have an apartment to sell; and cash is king, to some degree, and even at the low end, the younger buyers are finding ways, through parental help or whatever. But then it’s someone who needs to move up—they have a larger family, they’re buying the five- or six-million-dollar apartment. It’s value; it’s all very much a value-driven purchase.

You got into the business in the mid-1980s?

I actually got into the business in the mid-1970s.

How does this compare, the current crisis, with past ones in the city—especially the mid-1970s, because everybody says that might happen again?

The mid-1970s was very different and the city was going bankrupt, so that was an interesting time. It was a very different time because it was before the co-op conversion craze; this was a renter’s town back then. … The late 1980s, we were in a recession, but the difference was, we went into that recession following a development boom; we had a lot of product that was for the investor market, and, if you’ll recall, the tax laws changed. So we had a great deal of studios and one-bedrooms in the marketplace, truly an oversupply. … That really hurt us. That’s why we stayed, in New York, in a recession longer than, I think, a lot of the other cities did.

In this instance, we really went into this current crisis as a city in relatively good stead. We were economically doing better than the nation. Now, things have tumbled for everybody—but we still went into it strong; our supply numbers were, as you know, dreadful. We had no supply. That’s what made me believe we were going to be able to slip through the crisis in the beginning. But, what it turns out [to be] is, the supply is not really the issue right now; it’s the demand. And the demand will eventually impact our supply.

How so?

By the demand being off, the supply is going to slowly build. So that’s what we have to keep our eye on. It’s that incredible hesitancy—and, I want to even say, fear—that’s in the marketplace that has the demand off.

Two questions brokerage-related. Given the economy and given the state of the market, have the number of brokerages peaked? Are we going to see a lot of acquisitions, mergers, some going out of business?

Yes. I think it’s that turning time in the marketplace, whenever there’s a crisis. I say, when you say ‘acquisitions,’ I think it’s going to be more like ‘tuck-ins.’ I don’t think there’s going to be a big buying spree; I don’t think anyone’s willing to pay huge numbers for companies at this point. I think there will be people that go out of business.

Do you have anybody in mind?

No. You can’t predict; I’m not looking at their books. And maybe it isn’t necessarily go out of business, but maybe align themselves with other firms. This is a time you’re going to see things happening.

How do sales brokers’ marketing budgets work?

Every agent has a budget, and it’s based on their production.

So, in a down market like this, the budget would be contracting?

It’ll be naturally contracting. We always have ways to supplement some because, sometimes, at the time you don’t have a budget, you may have a fabulous property; so we’re always able to support you if you can’t. And you can always put your own dollars into it, and we encourage that.

Halstead’s fourth-quarter market reports showed prices flat or starting to drop. What’s going to happen?

I think you’re going to see the prices dropping, but I think people are predicting big drops; and I think, again, we’re going to the value. You’re not going to see huge plummeting of prices. The bargain hunters and the bottom fishers are not buying apartments; it’s people that are looking for a home and are willing to pay a value price for it that are buying now.

When you say ‘big’ price drops, do you mean not 20, 30 percent?

I think in this market it’s very hard to deal with very broad strokes. For instance, under $1 million is very strong, and you’re not seeing very much negotiability or what you call price drops because we don’t have a lot of supply. … As you move up, you’re starting to see a little more product and a little more negotiability. And as you go up the ladder in price points, some of the prices were sky high to start with. So does that mean it’s a price drop? Or does that mean you’re now priced appropriately?

You mean they were priced too high to begin with?

Yes. I think a lot of the very high-end market, where was the value base of the original asking price?

Lifestyle marketing emerged during the boom as the big way of moving new condos. They were marketed as child-friendly for young families; as de facto nightclubs for single people; whatever. What’s the next trend in marketing?

Maybe I’m overusing the word, but I think value and opportunity is going to be the way everyone goes. The paradigm has shifted—it’s no longer ‘I must have it’; it’s ‘Do I need it?’ I think across America you’re seeing people going back to value. … It’s not for the latest/greatest—you know, is there a refrigerator for your Fresh Direct. It’s ‘Is it the space, is it the home I can raise my family in?’ 

Is that enough, though, to sustain the industry as it’s grown? Even in good times, in Manhattan, there’s usually no more than 10,000 apartment trades annually. Are we going to see a lot of brokers leaving the business and the ranks thinning a great deal?

You still have a city that’s growing, if you look at the mayor’s numbers; this is still a city where people are moving. Of course, we have a job-loss issue and that’s a major concern. But I don’t believe that we have overbuilt.

So, therefore, the transactions that happen will be normal transactions. Some of the numbers you’ve seen are developments that were 18 months, two years in development that all of a sudden all closed within a period of time. You’re not going to see that because the cyclical development phase was leaving us before the crisis hit. … The development was leaving us anyway, and certainly will, with the inability to get financing. So you’re not having an infusion of a lot of new product.

You recently told Grandparents.com, in response to a question about how the current crisis will affect your grandchildren’s house-hunting, ‘The problem right now is in the market for mortgage products. I think that after all this, what will probably be gone will be the risky products, because this is about people who probably should not have had a mortgage in the first place.’ What is the sort of mortgage-lending situation right now in Manhattan?

[Sellers and lenders] are requiring, pretty much across the board, from what I’m hearing now, about 30 percent down.

Even for the condos?

You can always find a bank that’s going to give you a little more. And, again, the more you have, the less they’re going to want. But across the board, we’re seeing about 30 percent down. So, we’re going into an environment where debt is not going to be what we should all be carrying. … I think people are going to wait until they have a little more equity before they make their purchases, whether it’s for TVs or your home.

Tuesday, February 10, 2009