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December 2001

Survival Guide For Buyers and Sellers in a Recession

In the 22 years I have run Olshan Realty, I have seen many market cycles: the heady days of coops conversion in the early 80s, the new construction condo boom, the stock market crash of 1987, not to mention interest rates anywhere from 18% to the current lowest levels seen in 30 years-in the 6% range. We are now in a new cycle, a recessionary trend that started before September 11.

There are certain fundamentals that come into defining recession strategies for buyers and sellers of real estate. The following is a road map for navigating in unpredictable times.

Analyzing the Market

The first question posed is where are we on the market curve? The market can do one of three things:

1. Go Up.
2. Go Down.
3. Stay The Same.

Up went out of the equation on September 11. Since that time, we have seen erratic prices and behavior across the entire market spectrum. Prices have not collapsed, market supply is stable, but the inventory is sitting longer.

These trends mimic the start of the downturn of 1989-1992. However, the fundamental underpinnings are markedly different, and they point to a different end result. Let us first look at those differences.

 1989-1992  9/11/2001-12/3/2001
1. High inventory1. Low inventory
2. New construction condo boom2. Little new construction being built
3. Low end under $1million, particularly 1BRs holding and studios, suffer.3. Low end under $1 million holding better than high end and selling well
4. East Side sells better than West Side4. West Side holds better than East Side.
5. Mortgage Rates in the 8% range5. Mortgage Rates in the 6% range
6. Dow 12/3/1991: 2930
NASDAQ 12/3/91: 533
Prime Rate 12/3/01: 7.5%
6. Dow 12/3/2001: 9764
NASDAQ 12/3/2001: 1905
Prime Rate 12/03/01: 5%
7. Pre technology revolution and Internet boom7. Post technology revolution and Internet boom
8. NYC environment was poor: high crime, characterized by soaring homeless population, quality of life diminished.8. NYC environment is characterized by improved quality of life, low crime and revival of the city during the Giuliani era

So when you look at these factors, you begin to wonder how long and steep this recession will actually be. One thing to note is that psychology and perception are an integral part of the Manhattan market and the current environment has fueled a discount mentality on the part of the buyers. They get 25% off in the stores and they want 25% off on real estate. All that may seem logical to a buyer but I am here to tell you that if every seller in Manhattan lowered their price by 25% today, there would be hardly one apartment left on the island in 30 days.

Apartments are not like sweaters or stocks. They are homes and for better or worse, it's the one thing after children and pets that people get emotional about. This is why when real estate increases, it appreciates faster than it deflates.

We are now at a point in the market where we have a gap. Sellers want yesterday's prices and buyers want a bargain. So what do I do if I am a seller or buyer?


The strategy now is to preserve equity. Put an aggressive fair market value on your apartment adjusted for September 11 and don't wait for inventory to build. I have seen aggressive sellers put properties on at lower prices and end up at a higher value because the low price sets up an auction climate and creates a bidding war. Be disciplined and get ahead of the competition and market. Price is the single most important decision a seller can make. This is where you need an excellent, experienced, honest real estate agent to help you. Don't succumb to greed or ego and let yourself be sold on a big fat price only to let the broker get the exclusive signed at a high asking price and beat you down later and watch your equity erode over time. The big prices belong on about .01% of the inventory characterized by large, light apartments or houses in top locations offering interesting or unique architecture which have been recently renovated in timeless taste.

If you have a property that has been sitting since 9-11, cut the price. It's never too late to adjust the price and change direction. A marketing report from the broker carefully detailing the activity on the unit and listing the competing properties on the market can help you evaluate the situation.

Other simple marketing tips are to try to improve the presentation of the property:
clear the clutter, make everything sparkling clean, perform minor cosmetic repairs as indicated like plastering and painting over old worn spots, grouting tiles, refinishing floors and painting if necessary. Replace plastic and ceramic knobs and hardware with chrome or brass fittings. Lastly, allow your apartment to be shown all the time, anytime.


1) Price aggressively but fairly.
2) Be ready to respond quickly to market changes.
3) Make your apartment look better than the competition.


You are buying a home and don't expect to steal it. You have the best financing environment seen in the last 30 years--so don't blow it. And don't presume prices are going to plummet. There is still little inventory but prices are more flexible. We haven't had a construction boom in over a decade.

If you are looking for good investment grade real estate, focus on location. The best locations hold up in the toughest times. The formula for success is to buy the biggest thing you can afford in the best location. And don't be afraid to buy a wreck. There is tremendous upside in investing in a sensible renovation.

No one is going to ring the bell and tell you that this is the top or bottom of the market. For the first time in seven years, we are looking at buyer's environment.

Don't wait. Look and BUY. Make educated offers, and lock into a cheap mortgage. Don't expect to steal anything. Many properties were lowered after 9-11 so expecting more than a 10% decrease off the new price is probably unrealistic. Don't presume that this dip is going to be a long window of buying opportunity either. There are some very good deals out there and the sharp, experienced value-added brokers at Olshan know where they are.


1)Don't expect a steal.
2)Buy wisely, in a building or location less likely to depreciate
3)Use an experienced broker who can keep you informed, and who will guide you to the best values.

On a personal note, I'd like to say that if September 11 says anything, it serves as a reminder that life is too short. You only go around once and you should enjoy every day. Cherish your family, don't give up vacations, work hard and enjoy life. If you want a new home, buy one. There are few things in life more enjoyable and rewarding.

New York City has afforded me an opportunity to have a company that has helped thousands of people from across the globe find homes. There is no greater city in the world. One thing you can count on is that it will rebuild and it will be better. It will remain the financial and cultural capital of the world. Resilience is a way of life. It is a New York state of mind.

So here's to New York, 2002, a quick recovery and a new era of peace and prosperity.

Donna Olshan

Emily Chen
Private Wealth Real Estate Services
Chief of Research


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