Hallucinating homeowners?

Stuart Elliott
The benefit of being the editor of a New York City real estate trade magazine is that you can insult the public at large with relative impunity — because they are not the primary audience.

Of course, I’m kidding.

But I did stumble upon a survey recently that indicates that a lot of the criticism of real estate brokers as being too boosterish may be partly misplaced. It’s actually the homeowners who are to blame.

Real estate agents always get accused of being Pollyannas about the market, largely because they often push the view that prices are going to go up no matter what. But a fourth-quarter survey by home-tracking website HomeGain.com found that a greater percentage of homeowners nationally believe prices will rise in the next six months, as compared to real estate agents.

Surprisingly, nearly double the number of homeowners — 22 percent, versus 12 percent of brokers — thought prices were on their way up. And only 30 percent of homeowners thought prices would drop — much less than the 46 percent of brokers who believed things would get worse. (The remaining respondents thought things would stay the same.)

That chart is part of the treasure trove of statistics to be found in The Data Book 2011, our comprehensive almanac of the past year in real estate, which I’m excited to say comes out this month.

There is no better place to get up to speed on what’s going on in New York City real estate (and the national market, to a degree) than in those 120 pages. We cover the entire New York waterfront — literally and metaphorically — when it comes to the commercial and residential markets, looking at all the benchmark stats, from cap rates for building sales to hotel room rates, and from office rents to condo prices. We also provide exhaustive rankings of the top players and deals of the last year.

Page 44 is where you will find that survey about where the market is heading. The HomeGain report also has another interesting stat about homeowners: Apparently, 76 percent of them feel their home is worth more than its asking price.

So, I guess while we knew the maxim “buyers are liars” already, sellers might be delusional as well. In Manhattan, appraiser Jonathan Miller estimates that only one-third of homes on the market are priced within 10 percent of their actual value. Usually, that figure is around two-thirds.

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While this disconnect between buyers and sellers may have been a bigger problem in early 2009 following the Wall Street meltdown, it shows that sellers still have to come to grips with reality. Check out reporter Sarabeth Sanders’ story, “The leftovers market.”

The irony is that things on the commercial side of the market — which once looked far worse off than the residential side — are now greatly improving, as we detail in a number of stories in this issue.

In our package on real estate investment trusts, we look at how the once-battered REIT sector is now going strong. The same is true of the hotel market, which has seen room rates and occupancy levels come back dramatically. Check out our Q&A with hotel experts.

And on the Manhattan office leasing front, activity has been strong enough that forecasters at some commercial brokerages are revising their predictions upward and talking about record rents again. The amount of leasing activity in 2010 was the highest in four years, with 26.3 million square feet of deals inked in Manhattan, according to Cushman & Wakefield. As the Data Book details, a strong fourth quarter in particular helped drive a lot of this trend. Based on the current market, Cushman predicts we’ll hit a record $90.24 per square foot in average asking rents in 2014. Which is good news.

Finally, with all this discussion about delusional homeowners, don’t think we are letting our guard down, either, when it comes to spin from the industry. We always remind our reporters to keep their “BS detectors” on to filter out noise from market reality.

That’s in order to provide you, the reader, as always, with the best and most reliable information about what’s going on in New York City real estate.

 Stuart Elliott