Ben Scaglione’s six-month search for a one-bedroom landed him in Brooklyn Heights.
“When we saw this [apartment], light bulbs went off,” Scaglione said.
Scaglione, who was working as a chef before the restaurant he was employed at shut down, put up a $630,000 cash offer for the apartment, which was asking $600,000. The sponsor selling the unit then came back and asked for $20,000 more from Scaglione, who couldn’t secure a mortgage.
Still, Scaglione decided to complete his journey to homebuyer status and get the place. He’s not alone.
In the past year, New York City rents have more than recovered from their pandemic-era lows, driving those with some cash to spare to the alternative.
Douglas Elliman broker Keyan Sanai fielded a recent phone call from a panicked client who was convinced she should buy after finding out her rent would rise $1,200, back to pre-pandemic levels from its Covid concession.
“People want to be first-time apartment owners because they feel they’re wasting their money on rent,” Sanai said.
However, the market that awaits first-time buyers is full of competition and lacking in inventory.
“As soon as a promising property is listed, it’s quickly absorbed, and there are buyers, multiple buyers, waiting on the sidelines,” said Becki Danchik, a broker with Coldwell Banker Warburg.
The median sale price in Manhattan rose by nearly 30 percent since February of last year and inventory has fallen by more than 20 percent, according to a monthly report from Compass. Downtown, Midtown and the Financial District — areas that bore the brunt of the exodus Manhattan saw at the start of the pandemic — accounted for over 70 percent of sales last month.
“It’s been a tough two years and I think folks are just excited,” said Emily Margolin, broker at Douglas Elliman. “The buyers on the ground are really hopeful.”
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Navigating the housing market can be tricky for first-time buyers. Some are tempted to move too quickly into homeownership, while others don’t understand the nuances of the market.
Sanai said he advises his clients against buying for the sake of it, thereby locking themselves into a long-term commitment before they’re ready.
“You buy an apartment you don’t like, you can sell or rent it but do you want to be a landlord?” he said, adding that selling is often a hassle. “I would not buy based on emotion, but I’m getting a lot of that.”
Margolin said some buyers don’t understand just how low interest rates have been and balk at mortgage rates that are slightly higher than they were a year ago, but still well below historical norms. They also have to wrap their heads around the idea of catering to the whims of a co-op board, whose vetting processes can delay a move-in date.
“I usually have a good 45-minute call with them to talk them through the process,” Margolin said. “And then I’ll do it again.”
No one is safe from the heated competition in the current market, Ashton Monroe, a first-time buyer specialist on Sotheby’s International Realty’s Field team, said.
“Nine times out of 10, if I’m talking about a bidding war, I’m talking about it with one of my entry-level deals,” Monroe said. “It can get a little bit overwhelming and it does kind of discourage [buyers] in a sense. But again, our job is to encourage and just say that there’s a light at the end of the tunnel.”
The squeeze market has led some buyers to drop out of the hunt, waiting for new inventory to enter the market in the spring.
“I’m not a broker who will put pressure on a first-time buyer,” said Julia Boland, a broker with Corcoran. “Sometimes you have to let them go through it and lose it. No matter how hard you might try to position them to win it, they have to come to their own realizations.”