Sunday, October 02, 2005

No Flipping in Big Apple

A story by William Neuman in the New York Times says flipping is not an issue in Manhattan, where the real estate market is an entirely different animal than everywhere else. Here's an excerpt:
Is Speculation Rampant?

Market bubbles, whether in stocks or real estate, are typically characterized by an increase in speculation.

So is New York rife with people rolling the dice on real estate riches?

An analysis of sales going back to the mid-1980's found little evidence that flipping property is common.

The study, done at the request of The New York Times by the appraisal firm Miller Samuel, which tracks both co-ops and condos, found that of 4,339 condo sales in Manhattan last year, 5.9 percent involved apartments that had been bought and resold within 18 months. Since 1997, that number has remained relatively constant, ranging from 5.9 to 7.5 percent annually.

Flipping, if it goes on at all, is done almost entirely with condos, because co-op boards favor owner occupants and make the resale process too cumbersome. Figures for co-op sales since the mid-1980's show that 1.3 to 4.9 percent of all transactions each year were for apartments that were held for 18 months or less. But assuming that almost none of the co-ops were sold by speculators, those sales were most likely occurring because of situations like job transfers or changes in income - and the same would apply to many of the quick condo sales.

Only a small part of the overall sales, therefore, would be by flippers hoping for quick profits, according to Jonathan J. Miller, president of Miller Samuel. "The way I characterize the market flip phenomenon in Manhattan is that it's a non-factor," Mr. Miller said. "It's not influencing the way projects are being developed, it's not influencing the way properties are being marketed, it's really incidental to the overall market activity.

— The Boy in the Big Housing Bubble