What Amazon’s Cancelled NYC HQ Means For Local Real Estate
Q: How does Amazon’s decision not to build a headquarters in Long Island City affect real estate locally? for Kimberly, Queens, NY
A: Amazon said last week that they are cancelling plans to build a corporate headquarters in Long Island City, Queens. Anticipation about the new Amazon HQ drove higher real estate demand in the area as soon as it was announced in November as real estate brokers were banking on the ‘Amazon Effect’ as they were seeing an influx of people buying apartments in Long Island City. Signed condo sales contracts since the Amazon announcement were nearly triple from the same period last year. Amazon’s pull out demonstrates the dangers of speculation laid bare.
Economist John Kenneth Galbraith said “genius is a rising market.” Hot markets attract speculators who think that they can’t lose if they invest in the ‘right’ market at the ‘right’ time. This is dangerous thinking that leads to dangerous behavior. The reality is that just as there are lots of ways to make money in real estate, there are also lots of ways to lose money as well. The additional competition present in hot real estate markets may in fact offset the additional opportunity those markets present to investors.
The key to operating your real estate business effectively in a hot local market is adhering to the fundamental rules of real estate investing like never overpaying for property. You will have to contend with lots of pressure to raise your offer prices when you attempt to buy real estate in a hot market, so expect for a higher percentage of your offers to be rejected—that’s ok. Never succumb to pressure to overpay for property, whether that pressure comes from a Realtor or anyone else. The listing agent’s goal is to get the house sold, so it makes sense that she wants you to increase your offer price when you buy–that makes her job easier, so of course she’s going to pressure you to raise your purchase price. Resist this pressure, stand your ground based on the maximum allowable offer you calculate and are willing to pay for a property, because overpaying can be disastrous to your bottom line.
As billionaire investor, Warren Buffett said “no one ever got rich paying too much for something.” In the long run, market basics are what matter most (supply & demand, jobs and the local economy).
New York City is the economic engine that fuels tri-state area real estate and this one event won’t have that much of a dramatic effect one way or
another-whether they opened a HQ in LI City or not. The other thing to consider is that despite Amazon’s decision reversal, Long Island City received lots of free PR that likely will benefit owners and real estate professionals in the area regardless.
Thanks for your question, Kimberly. For more real estate information and tips visit my blog at geraldlucas.com.