Rising Rates and Buyers' Purchasing Power

Over the Holiday I was enthralled by a classic work of cinematic art- It’s a Wonderful Life by Frank Capra The protagonist George Bailey, played by James Steward, sacrifices his plans of exploring the world to take over the family business.  George takes his late father’s position at the Bailey Brothers' Building and Loan, a longtime competitor to a ruthlessly financial shark Mr. Henry F. Potter, the local banker and the richest man in Bedford Falls. In the spirit of free market capitalism George is determined to keep the Bailey Brother’ Building and Loan business alive.

Source: https://www.theatlantic.com/business/archive/2016/12/its-a-wonderful-life-banking/511592/

A shocking comparison to today’s banking system, George Bailey often personally knew the loan recipients, offers the working middle class a fair interest rate, and rarely sought out to profit in excess of a high yielding return. Not much of a business man in today’s world-George Bailey would never make it on Wall Street. A long gone era in American both in social customs, and home loan rates. According to It’s a Wonderful Life, George Bailey was giving out loans to build a brand new house was and the amount? - $5,000!

http://themortgagereports.com/21682/how-mortgage-rates-affect-buying-power

FUN FACT:  Did you know, for every 1% the interest rates increase, a buyer pays an additional $58 per month on every $100,000 they borrow (3.5% – 4.5%)

Rates have risen, Banks may not give us $1M+ loans solely on a handshake but none the less this month, I decided to outline what today’s market means for investors, buyers, and homeowners in New York.

In applying for a loan, lenders/banks often qualify buyers using an Debt to Income (DTI) ratio. You’re debt including your new mortgage, common charges and taxes plus such liabilities as credit cards, student loans and revolving credit, collectively cannot exceed 45% of your income. The bank needs to insure your income can offset your debt obligation.

To determine your DTI, add your total monthly debt obligations including the following items:

• Car loans and leases 
• Student loans
• Installment loans
• Alimony or child support
• Credit card minimum payments
• Projected mortgage payment
• Common charges, taxes and insurance

In order to determine DTI, divide your total future debt obligation by your monthly gross income[1]. As an agent, we assist in evaluating your DTI to qualify you for a co-op or condo. 

FUN FACT:  Did you know Co-Op Buildings look for typically 28% DTI or less, whereas Condo Buildings follow lending guidelines of 40%-45%.

Sources:

[1]. http://themortgagereports.com/21682/how-mortgage-rates-affect-buying-power

[2]. http://www.realtor.com/news/trends/top-real-estate-trends-2017/

[3]. https://www.theatlantic.com/business/archive/2016/12/its-a-wonderful-life-banking/511592/

Timeline Guide for Buyers in NYC

Can't Hear Yourself Think, Again?

Highway facing, Avenue facing, Precinct facing, Alley facing, Do you hear what I hear? Beeping, bopping, honking, screaming, sirens wailing, contractors riveting, hipsters partying, dumpsters dumping – at time's your apartment isn't as tranquil as you'd like for it to be – get real you live in NYC! Although many times the noises that penetrate your double pane windows come with the territory of living in a densely populated and rather noisy city – we’re convinced there’s a cure.

The easy fix is the “go-to” city windows or thicker glass and/or a thicker space between the panes where air acts as the best noise insulator, but sometime the noise comes from inside the building. It can be the annoying and inspiring fashionista who trots around in her pumps above your head at all hours or the all night wailing of a new born child for months right next door – then what do you do?

Did you know “noise” is airborne? Specific materials and construction methods can hush noise in your home. The more extravagant fixes to silence annoying noises include, adding rails, springs, pads and special wallboard that can run into tens of thousands of dollars. In fact, you’ll be surprised to know that you can even open up your walls and insulate the floor/ceiling diaphragm between the spaces with either recycled denim or rock wool, which was quoted to be more effective than fiberglass batting. [1]

Photo Credit: https://static01.nyt.com/images/2013/10/24/nyregion/24cityroom-city-noise/24cityroom-city-noise-jumbo.jpg

Through the simple installation of specialty soundproof drywall, with solutions like the Echo Absorber or brands featured below, are other alternatives your contractor can use.

- QuietRock 

- QuietWood 

- QuietCoat 

- Soundbreak XP

You can read more about these brands here.

Another option is Soundseal, a manufacturer of noise control materials and a conductor of symptomatic noise from high heels on hardwoods to the quick slamming of kitchen cabinets was quoted in the New York Times to have had a 15% increase in sales. With opinionated inhabitants of New York, your upstairs fashionista neighbor, and the speed racing cabbies of the city streets, we understand the demand for their services.

“Unfortunately, apartment noise is not relegated to the one percent. Sirens, rooftop fans, construction and upstairs neighbors who clomp about like a team of clog-dancing Clydesdales are common conditions of NYC living. [2]” If you don’t have a general contractor, might we leverage our network and connect you with ours, Jamal Elnatour from Dynamic Construction. Jamal recently worked with on of our clients, embarking on a $15,000 soundproofing home investment for her apartment in the East Village. Below is his insight of the simple steps taken during the 2 week process of soundproofing:

1- Remove existing walls to studs
2- Install sound proof fiberglass between studs
3- Install ridged sound proof sheets on studs
4- Install 5/8" sheet rock
5- Tap, close all walls and sand off
6- Paint your newly sealed walls

Feel free ask us for his contact information or go to his website to learn more and get a better understanding of what the cost associated with soundproofing. 

You will always have sound transmittance from solid material connections - sheathing-joist-sheathing - so expectations should be tempered. One of our very own clients, a purchaser of uniquely acoustic apartment in Lower Manhattan, decided to soundproof her home prior to moving in. There was little to no insulation between the existing walls and the previous neighbors were going at it hearing every little sound. Amble chose to hire Jamal to remove the existing structure and replace with both soundproofing and new drywall for the utmost in noise reduction. Here’s to wishing her a good night’s sleep in her new abode.

Sources:

[1]: http://www.houzz.com/discussions/776410/soundproofing-between-levels-in-an-old-multiple-story-home

[2]:http://www.nytimes.com/2015/12/13/realestate/soundproofing-for-new-york-noise.html?_r=0

The Value of a View

“And… (as your broker whips open the shades), the view of the city is truly spectacular!”

If you are lucky, from time to time, you witness these intangible pieces of metropolitan beauty. The view of skyline or city scape, literally painted across your window or terrace, is a rarity. A piece of art so to speak that will never be the same. The view is always subject to passer-byers, the random taxi or Uber service, the changing weather, sunrises and sunsets, a boat in the harbor, shooting stars or even plane landing at LaGuardia. Always subject to spectator’s opinions, but at the end of the day the view is a valued asset to the collector, or in this case the buyer.

A view is subject to a number of different value factors such as the sight of major land marks, the free and unobstructed point of view, and the light that emanates into your living space. Methods such as the "Fuzzy Delphi" show that a pleasant view could considerably increase the price of a home, up to roughly 50%. Using the Fuzzy Delphi method, brokers would compare two similar properties located in the same neighborhood by their views. Properties with view of important monuments ( Freedom Tower and Empire State building included), sights of the sea and urban parks attract the highest premium, more than 40%. On the flip side, an unpleasant view; a brick wall, industrial installations, unpleasant neighboring building, power lines, metal bars, alleyways, uncontrolled disposal sites or trash receptacles could lead to a decrease in price of the homes by as much as 25%. [1]

This may sound like a simple math equation, nothing could be further from the truth. Most brokers find it difficult to find a comparable property with a similar view. In this case, the property becomes very similar to Art and that it's a one-of-a-kind and hence the intangible increasing the value exponentially

You'll be surprised by the following price variations attributed to views when comparing two similar properties [2]:

- Rooftop or large porch, Partially Obstructed View (3%-5% increase)

- Unobstructed View from Medium Elevation (6%-8% increase)

- Unobstructed View from High Elevation (9%-12% increase)

- Unobstructed Water View (15%-80% increase)

Manhattan's history of limited lateral space to build gave rise to the ingenuity of skyscraper buildings. Shopping for real estate in the city means looking beyond the physical metrics of living space, or the price per square foot (terra logic). The intangible characteristics of natural light and city views are no longer valued as just "added perks". They continued to be quantifiable assets baked into the value of the property.

Resources

[1] http://www.sciencedirect.com/science/article/pii/S0169204611000673

[2] http://www.apartmenttherapy.com/how-much-is-a-v-156527

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