During this holiday season, developers of residential condominiums in New York City must be sending letters to Santa Claus, asking St. Nick for his assistance in the sale of units.
While many brokers and developers are hyping to the public that there are sales taking place, the truth, according to industry leaders, is that little or no sales activity has taken place since the fall of Lehman Brothers in September. The combination of layoffs, reduction in bonuses, the frantic stock market and the fallout of Bernie Madoff’s empire is creating havoc in the fragile market.
And units that are closing, some experts say, are generally those in buildings that have made some headway in terms of construction.
“Sales of condominiums in buildings which are not in final stages of completion of units are far and few,” said a managing director at one of New York’s leading residential brokerage firms, who asked for anonymity.
Trade sources say that at least 10 percent of scheduled closings are not taking place due to purchasers’ inability to secure mortgage financing. In the rare case where closings are taking place,
developers are “overjoyed that closings have finally occurred,” the
managing director said.
In these dire times, when sales are scarce, nearly all developers of condos are offering major incentives to purchasers, including payment of closing costs (legal fees, transfer taxes, title insurance), price reductions ranging from 5 percent to as much as 15 percent, free storage units, free in-house health club membership, the payment of common charges and maintenance fees for periods of one to two years, and increased commissions to buyers’ agents.
“If a developer really wants to sell a unit, he must provide very attractive incentives as an inducement for the sale,” the managing director said. “If the building is under construction, and no actual model can be viewed, you’re better off [closing] the sales office until the spring.”
In the outer boroughs, sales are slow, especially in Williamsburg, downtown Brooklyn, Park Slope and Long Island City. For example, in many developments in Long Island City, certain developers have not registered a new sales contract for close to a year. Developers of many condos where sales have stalled are now resorting to renting the units.
Real estate leaders do maintain some hope, however, that the recent actions by the Federal Reserve to reduce the discount rate might aid in the sales of condos in various stages of development.
Michael Stoler is a columnist for The Real Deal and host of real estate programs “The Stoler Report” and “Building New York” on CUNY TV and on WEGTV in East Hampton. His radio show, “The Michael Stoler Real Estate Report,” airs on 1010 WINS on Saturdays and Sundays. Stoler is a director at Madison Realty Capital as well as an adjunct professor at NYU Real Estate Institute, and a former contributing editor and columnist for the New York Sun.