Interviews Stephen Wald, Founder and Principal Broker of Stephen Wald Real Estate Associates.

0:00 Speaker 1 Good morning. This is Mike Stolar for the Stolar Real Estate Report on the CATS Roundtable. What’s happening in the residential market today? Our interest rates going to drop? Are their sales going to increase? Are they going to be new development? What’s the effect of the NRA settlement. I don’t know all of the answers, so I broke my

0:17 friend Stephen Wald, who is the founder and principal of Stephen P. World Real Estate Associates, operating since nineteen eighty five in the metropolitan New York area. Thanks for being here today.

0:29 Speaker 2 Happy to join you today, Michael.

0:31 Speaker 1 So let’s get to the subject about the NRA rules about commissions. I think it’s the subject that people want one of Clarence.

0:41 Speaker 2 The NRA rules will vary in their effect across the country.

0:47 Speaker 1 Okay, for the layman, what is the NRA rules?

0:51 Speaker 2 What the NRA ruling really sought to accomplish is to separate out buyers, brokers fees ease from representation. Normally you had sellers paying a fee, and in most parts of the country, especially in New York, the fee was just split fifty to fifty between a seller’s agent and a buyer’s agent, and the court sought to protect the buyers,

1:18 to make sure buyers weren’t being pushed into paying extra money for buyer broker representation.

1:24 Speaker 1 So what’s going to happen now, specifically in the New York market.

1:29 Speaker 2 I don’t think much will change, because we’re in a marketplace that is quite expensive, where the commission is really part of the purchase price, and when the numbers trickle down, there’s a net amount of money paid to the seller who’s paying the broker’s fee, whether it’s the buyer paying it to their own broker or the seller’s agent. Splitting

1:53 a fee which has now become the seller agreeing to pay the buyer’s broker separately, still nets out a net figure to the seller, and buyers are not used to paying broker fees, and when a buyer is faced with paying a broker’s fee, it’s something that’s not financiable through your mortgage payment. And for the most part, I think

2:19 you’ll see many people advising sellers to offer a broker’s fee to the buyer’s broker.

2:26 Speaker 1 And that will be in a specific documentation that is going.

2:30 Speaker 2 To be specific in a listing agreement. The Real Estate Board of New York listing agreement as they prescribe to be used in the marketplace, will now show a separate buyers broker fee that will be subject to the buyer’s broker approving. It really creating a separate agreement now between the seller and the buyer’s broker. It won’t be something

2:57 that’s just taken for granted as it was in the past.

3:00 Speaker 1 Hey, let’s talk about the market. You were saying to me the other day, if interest rate drops it’ll help the market.

3:05 Speaker 2 What’s happening, Well, we’re in the post Labor day boom of listings. For example, today about four hundred plus listings hit the market, which is typical when you have Labor Day passing us. This year, I think it’s a lot more listings people have been waiting. Interest rates have also come down, so we are now seeing conforming loans, which

3:28 are lower priced properties actually below six percent, and we’re seeing jumbo mortgages somewhere around the six point twenty five percent range. People have been waiting for this for the last two years, but I really believe we need to see more of the five percent range to really start making movement in the market. Now.

3:47 Speaker 1 Are we seeing any movement in the cooper in the new business developments, the luxury apartments and so on.

3:55 Speaker 2 What’s happened is there’s a lot of super luxury developments that have been on the market for the last five to seven years, and they’ve been slowly absorbed little by little. So inventory has decreased. And when you’re buying super luxury, you have that open checkbook mentality. If you want it, you buy it. There’s still negotiability, but as the supply decreases,

4:19 that no negotiability decreases as well.

4:22 Speaker 1 Okay, and I believe the supply is decreased because there are not that many new construction of luxury apartment buildings being built.

4:30 Speaker 2 We’re not seeing the amount that we saw over the last five years, which really began when interest rates were in the two and a half percent range.

4:37 Speaker 1 Now, where do people get At Boggain, we were talking about this, the opportunities for a young family. Where should they be? Upper east Side, Sutton Place, Midtown East. What do you see?

4:48 Speaker 2 You will see the best most value driven real estate in my opinion, Midtown East Sutton Place area where you could buy a two bedroom, two bathroom co op, not a but a co op somewhere from the mid eight hundred thousand ranging up, and you won’t find that too many other places.

5:08 Speaker 1 Now, how far up do you consider the Upper east Side?

5:12 Speaker 2 Upper east Side is really up to ninety six straight east ninety sixth Street.

5:16 Speaker 1 Okay, what about the townhouse market, which is something that you’ve been involved with heavily over the years.

5:21 Speaker 2 The townhouse market has its peaks at times and then it drops down significantly at times. What we’re facing now is since COVID, the cost of construction has really gone haywire. So if you need a property that’s already done, you’re going to really pay a premium. If you buy something that needs a major rehabilitation, there are bargains to be had.

5:48 Speaker 1 Okay. With regard to the rental market, the rental market has been crazy. The pricings are enormous. I was with the developer who is building a building on fiftieth and Second Avenue and he’s getting projecting one hundred and twenty dollars a foot. And he also advised me on his property on Columbus Circle and sixtieth he was getting as

6:10 high as one hundred and fifty five dollars a foot. I mean, how could people pay these rents.

6:15 Speaker 2 They barely can pay them, and the really super high end of the market, it’s the same person that’s not buying a super trophy apartment. They’re putting it off for certain reasons, and they’re willing to spend on a monthly basis a lot of money. But marketplace is really putting a lot of people out where they can’t afford what

6:38 they would have. A few years ago during COVID, there were these major bargains in the marketplaces. People were exiting the city and that’s pretty much gone, and all these lease renewals are really at much much higher rates.

6:51 Speaker 1 What about the co op rules creating a problem for the seller.

6:57 Speaker 2 You have co ops that are still so restrictive, and I really wish there’d be more of a push to change co op rules and buy laws to make the more condo like more user friendly because people don’t want to be locked into co op board restrictions such as the inability to sublet easily or financial requirements that are

7:19 too strict. And the competing condominiums which are really newer buildings, amenity driven, they really do much better in the marketplace now.

7:30 Speaker 1 Over the years, you’ve done significant about the business on the Norfolk and the Hampton’s what’s happening out there today.

7:38 Speaker 2 I really think, especially coming off the summer as of Labor Day, the market is really strong. It hasn’t really been strained by interest rates as much as the New York City first home primary residential market, because it’s a luxury purchase and if you have the money and you want something, you’ll figure out how to purchase it. The

8:01 other issue that I’m seeing, which is on the other side of the coin here, is that initial pricing on properties have become too high and they haven’t come down enough yet, where you’ll see a two bedroom, two bathroom, really summer cottage, and I don’t mean mansion as in the old days when they said to summer cottage, but

8:20 a really small house that may be on a quarter of an acre, and the opening price is a million five, a million six, and I just don’t think that’s really there.

8:29 Speaker 1 I mean people, you know, they look at the prices that you read in the paper at twenty million, thirty million dollars, that market still continues to be strong.

8:39 Speaker 2 That market is strong because it’s for the open checkbook buyers. The same person who’s buying the trophy apartment in New York, or someone who has major property could be had on the West coast and they want a summer home in the Hamptons, and they want what they want. And if you want something south of the high with a pool

8:57 with ten is ten thousand square feet with all the bells and whistles, those properties don’t come up every day, So there’s a market, there’s a buyer usually waiting for something. There may be more flexibility in the marketplace now. People are not embarrassed as they were years ago to make lower offers, so I think brokers are advising clients to

9:19 price slightly higher.

9:20 Speaker 1 What’s happening in North Fork in the Wine Country.

9:24 Speaker 2 You’ve seen a lot of the vineyard properties become developed. There’s been a lot of residential development where the vineyards are because it’s become very desirable. You have a lot of the better restaurant people opening up on the North Fork.

9:41 Is a whole foody culture on the North Fork, and it still feels as if it’s less expensive than being in the Hamptons, and people have no issue going there, same as your people who are willing to go upstate to Hudson. Right now, because I think it’s just as good as going out east to the Hamptons.

9:57 Speaker 1 So you say Hudson County State is also doing relatively well.

10:02 Speaker 2 Oh, I think so. I don’t think there’s any issue. There’s no pullback in the markets.

10:07 Speaker 1 So your thoughts for the future, the next six months, where do we go? What’s going to happen?

10:11 Speaker 2 Well, as they always say, by lo and sell high if you can, but watch the interest rates. The election is around the corner. Rates should come down, I really believe towards five percent, which will really incentify people to start looking again. I also believe that pricing will come down to meet the demands because people are waiting just

10:33 for a decrease in interest rates.

10:36 Speaker 1 So I’d like to thank my friend Stephen Wold, Stephen P. Wold, the Associates, real Estate Advisors and Associates to being here and I’ll see you next week. Thank you. Michael