It always amazes me how quickly the market turns, and what happens to renters and buyers as they watch the bottom disappear behind them in the rearview mirror.
A perfect recent example of this is the New York City rental market, which quickly went from high inventory, drastically reduced prices, and incentives galore in the Spring of 2021, to a dearth of inventory, dwindling free rent, and over-compensated price increases only a few months later. Timing the bottom of the rental market in 2021 was virtually impossible. For renters waiting on the sidelines, it just came and went like a passing bullet train.
At the risk of presuming too much about you – my audience – I am going to share a cocktail metaphor to help explain the turn of a market. Hopefully, this humorous bit of imagery will encourage you to think twice about attempting to “time” the bottom of the rental or sales markets, rather than taking advantage of price flexibility, loss aversion, market uncertainty, and less competition with a more aggressive strategy or by gathering more information.
Imagine a man sitting at the bar, sipping his favorite “on the rocks” cocktail. Maybe it’s a Gimlet with a lime wedge garnish or a Mojito with a mint sprig on a hot summer day – or a Manhattan or Martini while he waits for a quiet table in the corner.
Now, imagine you are one of the several lucky ice cubes dropped into his cocktail (yes, in this metaphor you are a ‘ROCK’!). Released from the grip of the ice tongs, you gracefully tumble to the bottom of the glass dancing and flipping with glee, eagerly anticipating being doused with alcohol and vegetation – fulfilling your lifelong ice cube dream.
Your new, floor-to-ceiling windowed, loft-like container is served atop a fancy bar napkin to the patron, who greets you with a welcoming grin. He sips, he talks, he sips, he checks out the results of the Olympic Artistic Swimming finals, he sips again. Eventually, after several swigs and nips, you and your fellow cubes begin to feel the naked liberation of fresh air and the faint glow of florescent bar signs, as you wade in a shallow pool of what little remains the alcohol. For a moment, you bask in the glow of your freedom, until you realize, your time is limited. You are warming to the temperature of the room and your environment is changing rapidly.
As you begin to melt, you do your best to resist the inevitable by clinging to the other ice cubes for comfort, and begin congeal into one unified ice rebellion at the bottom of the glass. Suddenly, the patron feels a craving for a cube of ice (and what little alcohol remains on it) to munch on, and turns toward the glass for satisfaction.
He brings the glass to his lips and angles it slightly, expecting you to slide effortlessly into his mouth, yet, nothing happens.
You hold tight, cling to the other cubes for strength, and grip the walls of the glass. He gives the glass a slightly steeper tilt, but still you will not free yourself from the group and slide to your destiny. You feel compelled to hold out just a little longer – you are waiting for the perfect time to leap. With another tilt of the glass, you curse a couple of weak water droplets and a lazy lime wedge slide by, but still you wait.
Suddenly, he gives the glass a gentle shake and pitches the glass to a near-90-degree angle. The pure physics of the situation are against you. The cube next to you wriggles free of the congealed mass and begins to slide to the mouth of the glass. It’s at that precise moment, you and the rest of the melting cohort recognize your harsh reality – you cannot hold out any longer. It is time to go! You panic, release your hold on the bottom of the glass and plow forward as one, reckless, out of control, desperate mob. SMACK. You come to rest against his moustache hair and upper lip, completely missing his mouth.
Remember, you are rarely ever the only ‘rock’ in the glass. As the glass empties (inventory decreases) and environment changes (market or competition), the melting, congealing mass of ice (you and the other buyers or renters) – all waiting for the “right” moment to pounce – inevitably rush forward, desperately trying to win the race to the bottom. This momentum quickly shifts the power balance to the other side and the “bottom” disappears behind you.
Lesson: Instead of leaving your fortunes to physics or fate, control your path and your achieve your goal with a sound plan, strategy, preparation, persuasion, and negotiation.
My name is Eirik Davey-Gislason and I work in real estate in New York City. This blog is an opportunity for me to educate everyone who has a horror story or is on the verge of one. By sharing, preparing and advising my audience on what to expect, what is normal, what is right, and what is wrong, I hope to do my part to expose the wrong-doers and shape the future of this dysfunctional thing we call NYC Real Estate.