All Bets Off?

Of course this is just one small broker’s view on where we stand as we round second base of what has been a strange summer, for many reasons. Here is a quick recap of how the months played out since the year started.
I had spent the month of December in Costa Rica as usual, though this time we were also married there and had an amazing time with our friends and family. I managed to put all the economic turmoil out of my mind, (well except when at the Four Seasons I noticed if you wanted milk in your coffee it was $2.50!). But I even got over that, though it did have me mumbling to myself.

The previous summer turned out great after starting The Burkhardt Group and offering discounted fees. The fall was terrible, though two large deals saved the entire season and paid for the trip and honeymoon. I should thank Andrew Heiberger for part of that; I rented him a townhouse in the West Village for his development company Buttonwood (which he did a wonderful renovation to!).

Ok so now I’m back and its January, there is a palpable gloom in the air, I’m getting like 5 calls a week from people whom have lost their jobs and need out of a lease. But with all that doom and gloom I was actually getting calls from people who were looking for better digs, lower rent etc... I did my best to help extricate people from leases, gave those I could not help advice on how to deal with their landlord while trying to break their current lease. I did many deals at “consultation” rates or sometimes for a promise of future business. It was by no means a great month (for many reasons) but I was able to make a living and get the bills paid. I remember talking with clients during this period and even those who still had their jobs felt things were tentative at best, that anything could happen at any time.

February: I was considering other options to make a living or at least supplement my Real Estate income, but for the last 20 years this is all I have done. There was never a time I could not earn enough income to “survive”. This was worse than the early 90’s by far! But little by little I kept getting calls and with the flexibility of working for myself was able to continue to create deals. I mixed it up, doing some flat rate consultations, I had a number of people consolidating households and moving into a new, Less expensive home, did some short term furnished deals where the owners were heading overseas to take shelter from the financial storm elsewhere or pursue job offers. All in all at the end of February I had done pretty well. But like many I was very cautious, I did not feel like I really had any traction, was fixed in the moment and had not felt at all like, “OK we are getting through this”. It certainly didn’t help that I was reading a lot the “Fed reserve conspiracy” literature and was leaning towards the financial Armageddon theory. You know buying physical gold and stuff like that. And believe me there is no shortage of information on the topic available on the internet! I could go off on a serious rant here…another time though. To sum up the month from a strictly financial perspective; solid.

March: Just to recap for some of you, I stopped focusing on sales quite a while back, so what I am talking about here is rental side business. Half way through March I finally felt like I was seeing some light at the end of the tunnel. I was busy as hell and when it was all said and done I had a record month, fueled by landlord incentives, lower rents and availability in neighborhoods that didn’t exist a year ago. Also some of my innovative practices such as giving away gift cards or paying to have a wall put up were appreciated by my clients and the word spread. It turned out to be a record month both in transactions completed and fees collected (95% of which was paid by the landlords). I must admit I remained bearish on the sales market and equities market, but in my own little micro world things were rolling along. For the first time in what seemed like a very long time I felt like I did have traction.
Since March I never looked back and have never been busier! This has by far been the busiest late spring/summer I have had in 20 years in this business. But all that time I kept waiting for the other shoe to drop, waiting for that “double dip down”, waiting for another implosion of the equity markets that would lead to another big leg down for real estate values. But as I sit here today I am starting to feel like I was wrong. As earnings come in although not great by any means, companies are functioning, making money, selling products.

I think we may actually be through the worst…did I just say that? We certainly just saw a real flurry of positive sales activity in Manhattan. That said I believe we are still shaking things out and will continue to for at least a couple of years. We are settling into the new “normal” and sellers and buyers are indentifying this new normal and participating, those that are living in the past will wither and die. Many battles are being waged and will continue to be waged (New construction buyers circa 2007-2008), many have been hurt and will either throw in the towel or be in for a long wait to get back to even. Many have been wiped out and we can only all hope for the best for them and their families.

But still as I write this opinion, I have that little voice in my head whispering “don’t be a dummy, this ain’t over yet”. Have I been lulled into some false hope that we are turning a corner, are we simply in the “eye of the storm” encircled by a treacherous storm system waiting to wreak havoc? I don’t know. But it does feel good to feel good again. It feels good that I learned a very important lesson about what can happen and to be a prudent with money. For me this was personally a very big wakeup call and slowly but surely I am coming out of this mess standing on my two feet.

Of course what the hell do I know about macroeconomic systems, really I know very little. But hell even the best minds in the world rarely get it right, certainly my stock broker (past, a long time ago. I learn fast) didn’t get it right! And if I would have actually bought those short positions 3 months ago…I would be getting killed right now! When it comes to financial stuff I should emulate George Costansa (yes that George) and just do the opposite, if I did I would be a very rich surfer/mindfulness practitioner who happens to make a living in real estate.

Enjoy the rest of your summer! Can you believe it’s almost August!

Mood: Cautiously optimistic. :o

Warning: If history is an indicator of future events, my slightly optimistic "call" will bring hell down on us. :)