The Real Deal New York

Bring it on, Mr. President

Fears of Trump missteps add new volatility to Manhattan’s luxury condo market

December 01, 2016
By Miriam Hall and Kathryn Brenzel

Leonard Steinberg and Elaine Diratz

Leonard Steinberg and Elaine Diratz

In the days following the presidential election, clients called Compass President Leonard Steinberg nonstop. Emboldened by Donald Trump’s upset victory, some clamored to pour money into New York residential real estate, while others wanted all plans put on hold.    

“There are so many unknowns at this point,” Steinberg said. “How this election impacts the world, we don’t know.”

As Trump raced to flesh out his team last month, financial markets flashed their own verdicts. By late November, the dollar had soared to a 14-year high against a basket of major currencies. Meanwhile, U.S. stock indices hit record heights, led by a 1,000-point-plus jump in the Dow Jones Industrials in just 12 trading days, with such financial firms as J.P. Morgan and Goldman Sachs pacing the pack.

Steinberg said that surging bank stocks make people feel wealthier and that “could fuel their entry into the residential market and put prices on an upward trajectory.”

Such hopes come as a welcome relief after a third quarter in which supply swamped demand for luxury properties. Overall, residential sales in Manhattan plunged 18.6 percent in the period year-over-year, according to a report by Douglas Elliman. Meanwhile, listing inventory increased 10.8 percent, to 6,263 units, an overhang that forced many landlords to offer more concessions.

Now, with a candidate who sold himself to the American public as a shrewd businessman soon to take charge, some residential property brokers have a new spring in their step. “He is, foremost, a great builder,” Elaine Diratz, Town Residential managing director of new development, said. “Any time you have a businessman in the office, I think people will be more open to business deals,” added the former senior vice president at the Trump Organization.

Donald Trump (credit: Gage Skidmore)

Donald Trump (credit: Gage Skidmore)

Such optimism, however, comes at a cost. Hopes of stronger growth fed by big tax cuts, a proposed $1 trillion in spending on infrastructure, and less regulation of banks and others drove 30-year mortgage rates up just over half a percentage point by Thanksgiving. What’s more, that rise came even before the likely move by the Federal Reserve to hike rates at its mid-December meeting.

Melissa Cohn of FM Home Loans noted that it’s been decades since we have witnessed so large a move in borrowing costs in such a short time. Typically, pricier mortgages crimp housing demand. This time around, Cohn has her doubts, because rates remain low by historic standards. “Having to pay mortgage interest at 4 percent versus 3  percent is not a staggering difference,” she explained.

Harder to live with is a graver peril some see in a president-elect who has threatened a trade war with China and a ban on Muslims entering the country. “Will foreign buyers continue to invest in New York City? In the United States?” asked Charles Bendit, co-CEO of Taconic Investment Partners, at a panel discussion held by the Real Estate Board of New York last month. “Until people start to get somewhat comfortable, I’m concerned that condo sales might come to a screeching halt, at least as it relates to foreign investors coming in and buying.”

By raising the cost of U.S. assets in foreign currencies, the run-up in the value of the dollar only heightens those odds. But there again, some brokers see such concerns as overblown. Charlie Attias, a Corcoran broker who represents overseas buyers, pointed out that after the election, he received calls from two international investors with “substantial” property holdings here. One was Swiss, the other Africa-based. Both saw a Trump presidency as a boon for the market.

“They feel that since he’s a business person and a real estate person, especially in New York City, he’s going to facilitate business, real estate investment and construction here,” Attias said. Many other brokers insisted it’s too early to tell what impact Trump will have, especially given all the other factors in play around the globe. Brown Harris Stevens broker Kathy Sloane noted that the shock of the summer’s Brexit vote — and more recent turbulence in currency markets — have made people even more fearful and determined to wait to see how things sort themselves out at Trump Tower. 

“[Buyers are] going to want to know who’s been appointed to the cabinet, who’s been appointed secretary of the treasury and secretary of state,” she said.

Others wonder if all the focus on the incoming president way down in Washington is misplaced. “I think Bill de Blasio has more of an impact on New York real estate than Mr. Trump ever will,” Elizabeth Stribling, the chairman of Stribling & Associates, said. 

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