Frederick Peters doesn’t mean to frighten would-be brokers when they interview for jobs at Warburg Realty Partnership. He’s just telling it like it is: The New York residential market is cooling and the competition among brokers inside it is fierce. Expect to work hard – and don’t expect to walk away with a big check that first week on the job.
Peters has been president of Warburg since 1991 and a broker since 1980. In that quarter-century-plus, Peters has seen boom markets, bust markets, and those markets where no adjectives really jump to mind. During a recent podcast interview with The Real Deal in Warburg’s Madison Avenue headquarters, Peters talked about the effects the current market’s slowdown could have on prices, sales, and the number of new brokers entering New York real estate. The interview is part of The Real Deal’s regular podcast series, and can be heard in full here.
THE REAL DEAL: You told The Real Deal toward the end of 2005 that real estate prices in New York had reached a plateau. What do you mean by that?
FREDERICK PETERS: Plateau is more a concept than an actual fact in real estate because prices are always a moving target. Over the last six months or so, prices have leveled off on average. They looked to be staying pretty flat. Where that leaves you is in a marketplace in which the fundamental trend is neither up or down in a dramatic way.
TRD: Is that going to hold for the rest of the year?
FP: I don’t do ‘rest of the year.’ I prognosticate, but I don’t do years. I’m anticipating a relatively stable market for both of the first two quarters – no dramatic upswing, no dramatic downswing.
TRD: Does ‘soft landing’ replace the bubble talk of 2005?
FP: God, I hope so. I do think that a fair amount of the bubble talk was kind of irresponsible on the part of the journalists who were promulgating it.
TRD: But do you think some brokers, perhaps, participated by over-pricing units or hyping prices in units just to draw interest or to draw a buzz?
FP: Actually, I don’t think it was either to draw interest or to draw a buzz. Brokers overprice property generally for one reason and one reason only – which is that they’re competing with other brokers to get the listing. And you have auction fever even before there’s a buyer in a hot market among brokers who are competing amongst themselves to get the listing from the seller, and that will often cause brokers to over-hype the price because they think that’s going to win them friends in the seller’s corner.
TRD: Speaking of listings, do you anticipate an MLS for all of Manhattan?
FP: For all practical purposes, we function in an MLS environment already in that every firm which belongs to the Real Estate Board of New York, which is pretty much hundreds of firms in Manhattan, are sharing their listings within 72 hours. So, we’re functioning in an MLS environment already. We don’t call it an MLS, but it quacks pretty much like a duck.
TRD: Turning to new development, do you think there’s too much condo construction in the city right now?
FP: I think it’s complicated in any marketplace, but certainly in a marketplace which is cooling, which our marketplace has been for the last six months. A cooling marketplace has more problems with absorption than a heated marketplace. So, when you take a cooling marketplace and move thousands of new units into it, there’s inevitably going to be a certain amount of pressure.
TRD: Do think the slowdown in the market is going to cause a decrease in the number of brokers?
FP: It’s definitely true that we have been flooded in the last few years by people who believe that brokerage involves carrying some keys, unlocking a few doors, and then receiving a big check. We’re an industry with a low bar for entry. So, I can only hope that we attract people who are serious about making it a career and recognize that you probably have a few years before you make even a remotely reasonable amount of money.
TRD: Do you tell new brokers this?
FP: Oh, man, I am the most depressing interview you can imagine. I absolutely tell them that. And I tell them that they need to expect that in the first year they’re going to make almost nothing and that it’s going to be incredibly frustrating. I have a laundry list of bad news. You need to be determined, because nothing I am saying is untrue.