The statistics show that the median price for an apartment sold in Manhattan in the third quarter of 2011 was $855,000, an increase of 1.2% compared to the same period in 2010 (source: Miller Samuel).

The flow of foreign buyers investing in New York stays consistent. Many consider the investment in the U.S., and especially New York City, safer than betting on their own countries.
The number of signed contracts, as a result, has been increasing in the previous months. In December they were 9% more than the month before while in November the increase was 7% compared to October.

U.S. Treasuries vs. Real Estate
Historically institutional investors have two options if they want to “park” their cash in safe investments. The first option is Treasury Notes – which historically is risk-free. But if you want a higher return on investment, the other option is Real Estate.
According to the company Real Capital Analytics, the difference between these two asset classes in terms of returns is the greatest that has been registered in the last ten years. Particularly there was a peak last September (most recent data set available) when the 10yrs treasuries yield was around 2% while the overall real estate sector at a national level was yielding 7.1%.
With inflation at 3.9% (for the 12 months leading to the past September), the treasuries have a negative yield in real terms.
Suddenly real estate becomes way sexier than the debt markets.
Manhattan could assume the title of the “treasury note of the real estate world” since it is a market less risky given the ever present strong demand and consequent liquidity. This explains the slightly lower returns. Nevertheless a 5.42% average Manhattan yield is way higher than a 2% offered by treasuries; without taking in consideration the potential for upside in real estate prices and protection from inflation.

Apple in the midst of a New York Icon
Apple has unveiled its new store in Grand Central Station last month. The minimal design, brand signature of the Cupertino-based mighty company, is a perfect fit for the vast unique open space at the historical site. A classic/modern pairing that works insanely well (as someone might have put it) and already attracts a flood of visitors!
This store alone is expected to generate over $100 million in sales for Apple this year.

Mortgages
The fact that treasuries are bought nowadays in great quantity by scores of investors who remain uncertain about the broad economic environment helps keep mortgage rates very low. In fact, mortgages are often tied together with treasuries by definition and fluctuate accordingly.
The retail mortgage market is on a good path to recovery and is functioning more fluidly each quarter.
The requirements for obtaining a mortgage are more stringent than a few years ago (obviously): credit score, financial soundness and down payment required from the applicant are the key hurdles to face. The goal of approval is getting more and more achievable by qualified candidates.
If in 2009 private banks were requiring a down payment of 40% now that number is closer to 20%.
In order to obtain a Fannie Mae or Freddie Mac approved loan up to $625,500, the minimum credit score required is 740.
On the other end, the securitization for jumbo mortgages above the Fannie and Freddie levels is still very limited. Banks are less inclined to originate loans that have to keep on their balance sheet instead of selling on the secondary markets through securitization.
Therefore who has the cash or access to finance for jumbo loans can grab really interesting opportunities in middle to luxury segments of the market.
The important positive note is that there’s basically no more fear of being denied financing in new construction projects (typically condos) that were once stigmatized and sometimes stalled. If the buyer is qualified, a mortgage will be available to the individual.
In my opinion, the residential market is sustained in the lower segment by the more comfortable access to financing while sometimes inflated for the top ultra-luxury segment where resources are sometimes narrowly employed in trophy assets that might eventually disappoint (remember Donald Trump experience with the Plaza). Looking into the middle segment ($1 million – $3 million) very interesting deals can be found. Romans used to say: “in medio stat virtus” – or “in the center lies virtue.”

This is it for today, my Dear Friends.
I am always available to answer your questions and provide you with more information on New York City real estate.

Warm Regards,
Riccardo Ravasini