‘The Price Is Negotiable Even Before They Ask’: New York
The New York Post has this update from the Big Apple. “Not only is the inventory of available housing in New York at a 10-year high, prices for properties are sliding in the opposite direction, as the sellers’ market has all but faded into the sunset.”
“‘Buyers have been telling us it is now fairly common for the brokers to tell them that the price is negotiable even before they ask,’ said Jonathan Miller of Miller Samuel appraisal firm. ‘That’s not something we have seen until very recently.’”
“With the glut of new construction flooding the market with condominiums and co-ops, developers and their publicists are upping the ante to help move inventory, not to mention formerly unheard of negotiability.”
“Things are getting so competitive throughout the city that one condo development at 55 Berry in Williamsburg is reportedly throwing in the towel and switching from sales to rentals after posting numerous price reductions. ‘Sellers who were unable to move their properties in the spring may be feeling more pressure to be realistic as inventory builds, despite the easing off of mortgage rates,’ Miller added.”
“The price slashing isn’t just affecting the average buyer; even the high-end market is feeling the heat. NBC anchor Stone Phillips had to drop the price of his co-op just off Central Park West over $1 million to $4.45 million before he was able to unload it earlier this month. He first listed it last fall for $5.5 million.”
“Britney Spears had to wait even longer before someone snapped up her NoLita apartment, which she listed for $5.5 million in 2004. The 4-level pad eventually went to contract a few weeks ago for about $4.45 million. And Star Jones has just taken her Yorkville triplex apartment off the market after it sat for over a year and a half, with a last asking price of $2.25 million, down over $300,000 from her original price.”
The New York Sun. “Investment crazes come and go, invariably bloodying the eager buyers who are 100% convinced they’ve latched on to a sure-fire winner. The latest is the housing boom, which some Wall Street professionals insist has already evolved into a housing bust.”
“The chief investment strategist of Raymond James Financial, Jeffrey Saut, is warning clients that the ongoing collapse of residential real estate has far-reaching implications for both the economy and the stock market. The associate editor of a monthly investment letter, Michael Larson, tells me the market is on the verge of realizing the third phase of the housing bust, which he believes has very negative implications for stock prices.”
“The first two were the stiff declines in homebuilders and suppliers of home products. Next on the list, Larson says, are the financial institutions, notably those banks and sub-prime lenders that provided the financing for super high loans on inflated properties.”
“Larson notes that a lot of people on Wall Street seem to think the likely end of higher interest rates in the current credit-tightening cycle is a significant plus for the economy as a whole since it should ensure a soft landing. Our housing bear disagrees. On what basis, he asks, is it rational to expect a soft landing in a period that has produced the biggest real estate bubble in history?”
“Private investor Neil Weisman..thinks it will take the housing industry at least five to seven years to work off its excess inventories, rather than the one to two years many Wall Streeters are projecting.”
The bears have spoken: the bulls are dead, long live the bears!
GRRRRRRR!!!
Has anyone seen Star Jones’ place? There was a writeup in Architectural Digest a few years ago w/pix. To say it was garish and in bad taste would be an understatement.
Who the hell is Star Jones?
http://thesuperficial.com/2006/02/star_jones_and_al_reynolds_fig.html
The Superficial is one of the funniest sites ever…I like to visit it right after I read up on one of Iran’s latest stunts. A little levity. Nothing like a little Nicole Richie juxtapositioned with Ahmadinejad.
Try Snarkywood too. That one is updated less frequently but is also very funny. This one put me on the floor
http://www.snarkywood.com/2006/07/hasselhoff.html
Yup. The picture of the Hoff in the white suite/black boots is my screensaver.
Actually, I spent some time with him at a charity dohickey dance, and I gotta say, even if the man is corny as a tortilla, he has a helluva heart and helped to raise $$$ for my favorite kid’s charity.
ps…try this for more hilarity…http://shoeblogs.com/
and while we’re in the mood…
http://gofugyourself.typepad.com/
One of the no-talented blow hards on The View. I believe her contract is not going to be renewed. Maybe that is why she is selling her tri-plex.
I can tell a lot about you from your question:
You’re a man.
You don’t watch “The View”.
You haven’t been unemployed during the last ten years, with absolutely nothing to do during 10-11 a.m.
You don’t watch “Inside Edition”.
“Who the hell is Star Jones?”
Exactly! Well put.
http://www.gawker.com/news/real-estate/star-and-als-own-private-idaho-177718.php
i don’t see what the big deal is. it’s european styling which is very popular in NYC. there are stores here that sell $3000 faucets
Oh yeah, that’s lovely. If you’re channeling Liberace!
one of the best things about living in manhattan is that you can easily furnish your apt. — in great style — FREE, (street “mongo”), just picking great stuff up on the street. the other day, i picked up a 42″ octagonal beveled glass tabletop around the corner, and toted it home on my scooter. perfect for the garden table! and it happens every day in manhattan. absolutely beautiful stuff. i guess trump (et al.) is remodeling!
That’s downright conservative compared to some of the things I’ve seen in Manlius.
http://tinyurl.com/qwfw2
There ya go! I especially love the bedroom you peer down over the railing at. I’m imagining this is great for those special parties where you invite others to watch.
Now, I like that one, or I would with all the crap removed. The house is nice.
My wife’s uncle had a trash route in Skaneateles. He got all sorts of stuff for free: laptops, furniture that appeared brand new, and lots of cool “toys”.
OT- I went to college in upstate NY, and I could never figure out how to pronounce “Skaneateles”. Isn’t that near Syracuse?
Skinny atlas
Off Topic - Speaking of excess inventory, does anyone have a site that allows them to view foreclosure information for their area for free? And I’m not talking this 7-day free trial than we charge you type that I find all the time.
Off Topic…
Damn right your off topic, we’re chatting about Star Jones here!!!!
I needed that.
LOL
On what basis, he asks, is it rational to expect a soft landing in a period that has produced the biggest real estate bubble in history?
Indeed, but’s it the reporters that should be asking this question to every propagandist they quote as a source.
I remember they were making a big deal about those condos in Williamsburg. All the “fashionistas” and the “Sex in the City” types were getting so excited about it. I wonder how they feel now.
And I wonder how all those people who bought overpriced condos in the ghettos with the hopes that the neighborhood was “up and coming” and all the “sketchy types” would be priced out.
I’m loving this! I feel like the little piggy who worked hard, and built his house out of brick, unlike the lazy piggies who looked for the easy way out.
It really is amazing how many “Luxury” condos are going up in fringe areas of New York. Half a mil for a one bedroom out of Manhattan and not near shopping or subway.
Buyer beware indeed!
Williamsburg is pretty much a joke. My wife and I looked at a bunch of the new condos and lofts going up. This was last summer when I was still on the fence about the coming collapse. These very expensive “luxury” condos are set in real dicey neighborhoods. They are crammed into little sliver lots where tenements have been torn down. We looked at a bunch of condos under construction and noticed that to get to the subway you had to go through a housing project. How would you like your wife coming home at 6 p.m. on a December night and walking through the housing project? It made me want to plunk down that $800,000 right now.
We were on our way to LaGuardia two weeks ago. The amount of condos we are still seeing under construction in Brooklyn is mind-boggling. It is going to be so ugly here and we are in the epicenter of “it will be different here”. Yep, it will be like Katrina just went through.
“‘Buyers have been telling us it is now fairly common for the brokers to tell them that the price is negotiable even before they ask,’ said Jonathan Miller of Miller Samuel appraisal firm.”
That has certainly been my experience in the L.A. area.
Ditto. My wife and I agreed to attending open houses every 6 months or so to get a first-hand pulse of the market until we eventually/hopefully buy a place in 3.5 years. This weekend we went and saw a 1800sf 3/2 POS in a so-so area on a very large lot (27k). Asking was 995K, but was “significantly reduced” to 899K. Perhaps, but that just means it is now 120% overpriced vs. 150%. When I asked about price, the realtor replied told us, but followed with “but very negotiable”, which I seriously doubt. One of my pet peeves lately are all these listings that advertise, “SERIOUSLY MOTIVATED SELLER!!!”, but still price their homes in la-la land. It’s more like, “seriously desperate to pass the buck to some greater FB!”. Please…..
We’ve looked at several places that have had approximately 20% price reductions (as you said, from insanely overpriced to just ridiculously overpriced) but the agents have come right out and said “There is a lot more room to negotiate” or something along those lines. My favorite so far was one agent who said “Just make an offer. My client just wants an offer. Please.” The house was already listed for less than what the owner paid in 2004.
It’s always fun to ask them why there so motivated. Usual reply is “Well, ….ummm…..(cough-clear the throat)…you see….ummmm…well….oh yeah, we need to be closer to my wifes mother. Isn’t that right honey?…yeah, that’s it - closer to mom.(followed by worse liars face ever)” Although a good realtor probably has a cheat-sheet of good excuses to refer to when put on the spot by potential sellers when asked this question.
I agree with you. It’s an idiotic thing to put on a listing.
“Downsizing” seems to be the one I hear most often. “The sellers’ kids are grown and they’re downsizing.” Yeah, maybe, but they only bought 2-3 years ago.
I am just getting ready to sell here in NYC, so I have been following the market closely. The top end (in NYC “top end” is pretty high, greater than $10,000,000) of the market is getting soft. That was the topic of the Post article. But overall, the sales have not slowed down as much as I would have thought. I am a bubble believer, and I expected things to really dump, especially after this summer. But the market for the average apartments is still pretty strong. The rental market is through the roof!!
NYC has a lot of new buyers, immigrants (not poor, believe me!), job transfers, college kids wanting to hit it big. There is a lot going on in NYC, that pumps up the numbers against the national trends. Anyhow I am getting out now because I think that mortgage rates will be the single biggest factor to lower the prices here. Demand is still strong to live in the Big Apple.
Gordo
Yep, college kids wanting to hit it big buying a place after the second bonus, not realizing that they will be laid off before the fifth bonus.
i don’t think NYC is crashing, but a lot of spoiled people are panicking now that the market is back to normal inventory levels and RE is taking months to sell and you have to bargain.
I looked at propertyshark records of co-op sales in Forest Hills/Rego Park area of queens where i live and it’s either flat of up 10% or so over 2005. Like all RE in NYC, it depends on the building. Good buildings will command a nice premium over an average building on the same block. If I had the money i would pay the premium in a hearbeat to live in the same building where Calvin Klein is president of the board and owners include Chelsea Clinton and Nicole Kidman.
even after a 70% gain in the last 3 years my queens apartment is still affordable for the average married couple with no kids yet. the only obstacle is the down payment and this is what is really going to slow things down. You have to put at least 20% down here and have 6 -18 months of cash in the bank after you close.
I would think that Chelsea would actually lower the price… Imagine the Secret service tapping into your phone, and into your life, just to make sure she is not being attacked….
“I would think that Chelsea would actually lower the price…”
i seriously doubt any manhattan co-op board would approve her. no board would approve nixon after he resigned. that’s why he moved to n.j. seriously.
Actually, a lot of buildings turn down the rich and famous; they are, in fact, a pain in the ass to have around your building.
“If I had the money i would pay the premium in a hearbeat to live in the same building where Calvin Klein is president of the board and owners include Chelsea Clinton and Nicole Kidman.”
REALLY!!!???
dba,
you state: “a lot of spoiled people are panicking now that the market is back to normal inventory levels ”
yet the article states: “Not only is the inventory of available housing in New York at a 10-year high, prices for properties are sliding in the opposite direction, as the sellers’ market has all but faded into the sunset.”
how do you square this???
Thank god I don’t live in NY! Chelsea Clinton…Please!
I agree NYC has a lot going on - but it’s ALWAYS had a lot going on. That is already factored into the price (just like San Diego weather, etc.).
The question is really whether buyer psychology has changed/will change. Do buyers think that prices are going to hold? If buyers don’t think prices are going to hold, then they won’t buy (or will buy in fewer numbers, at reduced prices), regardless of how happening NYC is.
‘the market for the average apartments is still pretty strong. The rental market is through the roof’
How does the cost of buying compare with the cost of renting in those apartments?
in my case i bought for $135000 in 2003. rental rate is around $1200 - $1400. building requires 20% down.
at 6.25% my payment is $700 for the mortgage and $550 for the property taxes, HOA fees and all utilities. I did some math a while ago and at 8% interest the rent is about the same as buying it at $180,000 or so.
For manhattan, in a good area a 400 square foot studio will rent for over $2000 a month. $3000 in some top notch buildings. that area around berry street mentioned in your article is a very expensive rental area.
Rents are very reasonable if you look for sublets! I am paying $1440 for 500sq. ft 1 bedroom in the upper east side (64th).
Sublets like this tell me the market is getting ready to shift.
“For manhattan, in a good area a 400 square foot studio will rent for over $2000 a month. ”
My sister and her husband rent a small two bedroom (900 sq feet) on w96th between riverside and west end for $2900. New buliding, doorman, they’ve been there a little over year.
Yeah, on West 96th. I love the Upper West Side but that’s getting pretty “upper” for me. Let’s see them get that deal in the Village or Tribeca or Soho.
i don’t think you’ve been to the upper west side recently (last 10 years). the low hundreds (up to columbia) along riverside drive is the most beautiful area of manhattan, bar none.
“How does the cost of buying compare with the cost of renting in those apartments? ”
there is no way that the rental pencils out to the peak or even -20% off peak prices. i’d say that w/o an “exotic” mortgage — which most co-ops won’t approve (not so sure about new construction), RENTING IS A FAR BETTER DEAL, probably about 1/2 the cost of owning in manhattan.
i’d say that w/o an “exotic” mortgage — which most co-ops won’t approve (not so sure about new construction), RENTING IS A FAR BETTER DEAL, probably about 1/2 the cost of owning in manhattan.
If you are comparing the cost of owning then the type of mortgage is irrelevant as capital repayments are not a cost.
The type of mortgage is only significant when assessing cashflow.
I can give you my experience. We pay about 50% of what I figure it would cost to own in the city. We pay $2,500 per month. To own you have mortgage plus taxes plus maintenance charges. Some of these buildings should be charged for rape for what they charge in “maintenance”. There is no way we could live in a place similar to where we are living for under $5,000 per month. Of course we could put down a huge down payment ($150,000 or so) which I don’t have any way. Renting has never been a better option in the City. Until owning comes in line with renting, owning is overpriced.
$1,000 per square foot for a 4th floor studio walkup. Who saw that dipsh#t walking down the road?
Rents are about half the mortgage. The maintenance costs /taxes on apartments in manhattan can kill you. A dollar per sqft or more in some instances. Average one bedroom rent ranges from $2400-$2600. Average one bedroom costs $550-650k. Pretty darn expensive especially after you add in the maintenance.
Believe it or not, I think the cost to own vs. rent in Manhattan is become alarmingly similar. And I’m talking 100% financing! THAT is how disgustingly crazy the rental market has become. I should know- I live in the West Village and just endured a horrific search for housing (I ended up renting another place in the same building). My rent on the old place went up at least 50% and now I am paying 15% more to live in half the space. Looking at comparable coops in the area, I noticed that you can buy a small studio in a full service building for between $350-$400K (plus monthlies of around $500), which would EASILY rent for between $2300-$2500/month. With zero down on $350K + $500/month coop fee + $100 insurance and using a conventional 30-year mortgage, the monthly payment comes out to roughly $2800. But when you factor in the tax deduction, that comes out to a net around $2300/month. Numbers like this make me wonder whether NYC will crash at all.
“Private investor Neil Weisman..thinks it will take the housing industry at least five to seven years to work off its excess inventories, rather than the one to two years many Wall Streeters are projecting.”
I agree with the private investor. Wall Street can’t tell the truth.
Simmssays…Help for Carpal Tunnel
http://www.americaninventorspot.com/speech_to_text_helps_carpel_tunnel
I’m dying to get this blog’s reaction to the presentation David Lereah gave at the NAR meeting in mid-August. Take a look at the charts, you’ll need no further proof that the market is tanking.
http://tinyurl.com/mefvp
What do you think he meant to suggest by all the bubbles in his slide background, or by the polar bear on the cover page?
Those must have been somewhat tongue-in-cheek. Kind of reminds me Chris Thornberg’s presentations. All the data is sitting right there, they just can’t connect the dots in a straight and obvious line. In other words, even though all the data points are at the extremes, the conclusion is that there will be a “soft” landing. Really? Why? Just because that would be best? It must be fun to defy reality when it’s staring you right in the face.
the polar bear on the cover page?
__________________________
The slide with the Guillotine was unavailable!
People don’t realize that Polar Bears are THE Apex predator in North America.
They are bad m-fer’s. Humans have been and historically are prey to polar bears.
Too bad they will be extinct in the wild in my lifetime.
All of the historical analysis seems fair. The only problem is forward projections. David as well as the home builders always seem to assume that sales and prices will more or less level out from here. They don’t get the meaning of a strong down trend.
“The associate editor of a monthly investment letter, Michael Larson, tells me the market is on the verge of realizing the third phase of the housing bust, which he believes has very negative implications for stock prices. The first two were the stiff declines in homebuilders and suppliers of home products. Next on the list, Larson says, are the financial institutions, notably those banks and sub-prime lenders that provided the financing for super high loans on inflated properties.”
The train wreck seems to proceed in slow motion, with the real world a far cry from the financial economist’s fantasy land of an efficient market where prices adjust instantaneously to reflect new information.
On the one hand it seems in slow motion, but on the other hand, in the relatively short time I have been addicted to this blog, things have changed massively.
When I started lurking, it seemed to be us bears against the world. Now the world agrees!
I was in a meeting last week with a board director of one of the biggest banks in the world. Without prompting by me, what subject did he mention as being the biggest threat to the US economy? Yup.
Regards,
Loafer
Thanks for the info. That is very interesting!
Loafer,
You implied, but did not actually state, what subject the director said was the biggest threat to the US economy.
Specifically, what did the director say was the biggest threat to the US economy?
(Demand is still strong to live in the Big Apple.)
It will be stronger when the price falls to something people can afford.
Yes. NYC is a desirable place to live and can legitimitly support some of the highest real estate prices in the world, but the laws of economic fundementals still do apply. Anytime someone mentiones prices being too high in the City, the common answer I hear is “well, it’s New York City”, as if that magic phrase excuses the city from following the laws of economics.
Well, NYC actually lost population in 2005. Also, in the early 1990’s, prices in the city did fall. It can and will happen again.
Yes, it could lose about 40% off the top, but that will still be expensive! Ain’t gonna lose much more IMHO, unless there is a major terrorist attack, like a small nuke or a biological weapon that will kill many hundreds of thousands. Hate to even think that way. After all NYC is “terrorist” (Islamofacist) target # 1 in the USA. Sorry for the ramble.
And everyone making the NYC is different argument seems to forget that NYC has ALWAYS been NYC and hence a very desirable place to live. What’s changed? That, they have no answer for.
it was a toilet 15 years ago, the last 2 mayors have done more for NYC than anyone can imagine. crime is lower than many suburbs. no more porn everywhere you look.
back in the 1980’s the media called the flight to the suburbs “White Flight”. Things are A LOT different now. It’s a whole different city from when we had the last housing bust.
Yep, totally safe for tourists now. Tourists and salarymen, that’s Manhattan now.
And the only city in America that the Federal Government had to bail out of bankruptcy in the 1970’s was New York City. 1 billion dollars of taxpayers money for the 9/11 memorial. We sent money for the 9/11 families for relief and the city fathers spend it on their ego. Next time NYC comes to Washington for a hand out, screw em.
I think there should be some distinction made between Manhattan and the “other boroughs.” Specifically, Brooklyn, Queens, Staten Island and the Bronx. It seems that much of the data you see about “NYC” is aggregate, which sometimes even includes parts of northern NJ as well as Long Island. There are indeed areas of “NYC” that are still relatively affordable- coop apartments for under $150K, single houses for under $400K, etc. Albeit, these are most definitely in the outer limits of the city and more often than not in questionable neighborhoods. Although affordable, these parts of NYC are not particularly desirable save for their proximity to Manhattan. These are the areas that are most prone to a downfall in a weakening market. On the other hand, when you take Manhattan in isolation, it’s almost as if over the past few years, people have come to accept/tolerate a much higher cost of living while accepting a lower standard of living. It’s one thing for the price of coops and condos to soar. But Manhattan rentals have soared in tandem, perhaps even higher. Even though there are much more affordable areas a mere subway ride away, there are legions of grown adults who will tolerate roommates, noise, and tiny cramped spaces to live in Manhattan. It isn’t purely economics; they can surely afford large places “out there,” but they choose to live in Manhattan at whatever price. Until that mindset changes, I don’t see a market crash here. And trust me, I would LOVE, LOVE, LOVE to see it crash.
I should add that I am trying to time the RE markets both here in NYC and in Florida. I am a cash buyer in FL, so if mortgage rates hang on a little longer here for my NYC buyers, I just might be to do it. By the time I get ready to buy in Florida, if prices don’t drop 25%; then I am a renter with cash in his pocket. I may rent anyhow, just to see what kind of deal I can get on the bottom. I bought my studio in NYC in September 1996 for $29,000 and I expect to sell for about $230-240,000. I have good real estate karma.
Everyone says it is so hard to time the market, but I think otherwise. It might be difficult to pick the precise tops and bottoms, but these curves move so slow, that an informed individual has a couple of months at least to buy or sell.
Pricing right is the key. And people with good RE karma don’t get greedy, consequently we can move the properties. Having to chase falling prices downwards has got to be the worst feeling in the world. Ush I feel so sorry for so many FBs who haven’t a clue whats in store for them. gordo in NYC
How many sqft is your studio?
I’m interested to compare to London prices…
Regards,
Loafer
375 sf. $650 per sf. Most luxury units are pushing $800 psf. It is a three flight walkup, clean, safe. Nice looking building with carpeted stairs and pics in hallway, etc. Not the projects-look of some rental buildings. Good location, Upper Eastside at 89th & 3rd. Five blocks to Central Park, Two Blocks to Park Ave.
About the same as my house in London.
Peak prices over here are now c.$4,000 per square foot, but that’s just for the Russians and other billionaires…!
Regards,
Loafer
Over $40,000 per sq. m! Wow!
Are the peak price more property specific or area specific i.e. Chelsea average?
“Are peak prices”—grammar attack.
Very property specific, and more related to fit-out.
Underlying peak prices are probably something like $2,000.
Regards,
Loafer
Well, good for you! Lot’s of luck with that! Let us know how it goes.
I would be totally clueless if not for Ben Jones and this blog. gordo
“The price slashing isn’t just affecting the average buyer; even the high-end market is feeling the heat. NBC anchor Stone Phillips had to drop the price of his co-op just off Central Park West over $1 million to $4.45 million before he was able to unload it earlier this month. He first listed it last fall for $5.5 million.”
“Britney Spears had to wait even longer before someone snapped up her NoLita apartment, which she listed for $5.5 million in 2004. The 4-level pad eventually went to contract a few weeks ago for about $4.45 million. And Star Jones has just taken her Yorkville triplex apartment off the market after it sat for over a year and a half, with a last asking price of $2.25 million, down over $300,000 from her original price.”
The Donald the Bull of them all will no doubt drop his price from 45 million by 25%
HOT DAMN!
Although New Yorkers would never admit it, one thing NY has in common with LA is the disconnect between reality and appearance. Appearance: everyone in Manhattan is an IBer and lives in a designer loft or coop (viz. New York Magazine, Sex in the City, NYT RE featured listings, etc.). Reality: 3-4 unrelated people sharing a 2-bedroom 3-story walkup in a 100+ year-old building. If you doubt the reality, check median income figures and housing stock stats.
Yes, there is a great demand to live in the city. Couple that with governmental policies (particularly rent regulation and tax policies that encourage building condos) that artificially restrict supply and you will have sky-high rents. But the mistake people make is assuming that sky-high rents will justify sky-high sales. Anyone familiar with rental & sales history in Manhattan over the past 30 years knows otherwise.
I know it is off topic but i wanted to show some of the greed still in the market dwn here in Wilmington, NC. Public records show that a builder bought this property for $576,000 on 06/08/06.
http://www.intracoastalrealty.com/wilmington-real-estate/find-a-home/home_search_details.asp?listingnumber=369111
Check out the asking price and profit in two months of “owning” . Now that is some avarice.
It is true that prices in NYC are expensive because it is a desirable place to live. That makes fundamental sense. However, people often confuse this argument with one that says that prices should go up because NYC is a desirable place to live, which doesn’t make sense. It is the same fallacy as believing that the stock price of a company should go up because it is a good company, which isn’t correct.
In Wilmington? Nothing against the place but … I know other locations in NC I’d pick way, way over Wilmington.
Agreed but there is a very strong desire to be here by alot of people.(which I never understood) It is more than regional. The jobs are limited to medical and service industries. The loyalty of those living here to this place is unbelievable. I had to shriug my shouldewr sas I saw that listing I posted.$135,000 of profit in 2 months. There is going to be some slowing of the economy here when the new tax assesment come in as they have not been done since 1995 or thereabouts due to a decline in the housing prices. Now the city government will be only more than happy to reap the rewards of the new valuations.
The inflation-adjusted price of homes for the last 100+ years tells the whole story:
http://graphics10.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
Short version of link:
http://tinyurl.com/e4so5
Share the above link with your friends and neighbors! Discuss at parties! Hand out printouts at open houses!
HOLY …. this one is going to hurt!
in the ‘89-’96 manhattan housing bust, i saw both a bond trader with columbia mba and a commercial r.e. salesman ride their apts. right to the bottom, after buying at the 1986 peak, in one case -30% and in the other about a -45% loss. AFTER owning for 10 years they lost bigtime! no one is immune to the lure of what you think YOUR pad is worth.
and so it goes.
in many ways the nyc market will be very representative of every area in the national bubble: you’ll have huge 60% wipeouts for the real dogs, and as little as 20% in the most select el primo properties — and everything in between. but i agree with the article that it will take a good 5-7 (i’d say 8…) years to reach the bottom. sellers are usually the last optimists….
‘ The slowdown in the national residential real estate market has hit the Albany, N.Y., region. Sales of single-family homes in July fell 15 percent in Albany, Montgomery, Rensselaer, Saratoga, Schenectady and Schoharie counties, compared to the same month a year ago, according to data released Monday by the Greater Capital Association of Realtors.’
‘ GCAR officials predict sales in 2006 will finish 5 percent to 8 percent below last year’s volume. ‘This is not to be interpreted as a housing bust, but rather a still solid market that will not set another record for residential sales,’ said GCAR President John McNamara. ‘The market is definitely moving away from being the seller’s market that it has been for several years.’
Ben,
I live in Albany county. I was talking to a guy who is selling his house in Clifton Park (Saratoga county). His realtor told him to price 15% below last summer’s comps if he is a seller…
Hi there! I live in Clifton Park — moved here this summer from Tennessee. I looked at some townhouses and compared the listing prices to the last sales prices — the listing prices are well over 100% of 2001 levels. On top of high asking prices (as compared to 2001), the property taxes in upstate NY are absolutely unbelievable. And there is certainly no shortage of land.
Thanks for the info Ben. The slowdown is creeping upstate.
imo peak oil — or any spike in gas prices — could help to support high inner city prices, especially if the city happens to be nyc. irregardless of peak oil, itulip.com posits that the bust will mirror the boom in terms of hitting the exurbs first (which bubbled last), then the bust will work its way back to the center cities, all over a 10-15 yr period.
‘This is not to be interpreted as a housing bust, but rather a still solid market that will not set another record for residential sales,’ said GCAR President John McNamara.”
It’s one thing to spin data, but jeez this is a new high in audacity. Speaking as if he were Moses holding the tablets, he commands how we should interpret the data. What stones this guy has.
Thanks for some encouraging news on the NYC front, where full validation has been slow in coming for us bears.
I admit, NYC has become vastly more pleasant to live in over the last 25 years, so the vast price increases since the 70’s are not entirely reversible unless, as someone pointed out, we get some even nastier attention from the jihad boys.
Nevertheless, there will be a sharp correction here, and the biggest reason will be the hundreds of “luxury condo” buildings going up all over town. People in NYC make good money, but there are thousands and such units in the pipeline and, once the upside scenario is gone, there simply won’t be enough people who will want to stomach a $15k monthly payment for a 2BR.
“hundreds of “luxury condo” buildings going up all over town. People in NYC make good money, but there are thousands and such units in the pipeline and, once the upside scenario is gone, there simply won’t be enough people who will want to stomach a $15k monthly payment for a 2BR.”
you got it! it’s ‘the pancake effect.’
What I worry about is that the NYC correction will take the form of a kind of reverse-hedonic adjustment rather than a big price drop — that everyone living in those god-awful 60’s rabbit-warren buildings (which have converted to co-ops and condos in recent years) will take this opportunity to trade up to one of the new condo buildings (which will be selling for less than expected but still alot), thereby propping up prices for everything EXCEPT those sketchy 60’s buildings, which will subsequently deteriorate into cheap, run-down rentals.
I really hope this doesn’t happen, but remember, most of the nice places in NYC are inhabited by people who put down 20-50% and were not allowed to HELOC.
My sense is that once the panic sets in, all those who have HELOC loans and was spending like this boom could just go on forever and ever in the past 3 years will get a nasty reality check and realize what they have done. By then, you will see a slow down in consumer spending and mass layoffs everywhere, the stock market will crash, unemployment wil go through the roof, and hyperinflation, and then tell me who will rent a $1700/month 1 bedroom sublet on E96th St? Who are we kidding here?
“thereby propping up prices for everything EXCEPT those sketchy 60’s buildings, which will subsequently deteriorate into cheap, run-down rentals.”
Can you actually use the word “cheap” and “rental” in the same sentence as NYC? I would LOVE to see cheap, run-down rentals. Sure beats the $hit out of “exhorbitantly expensive” run-down rentals which is really 75% of the market-rate housing in Manhattan today. I don’t blame landlords for getting as much money as the market commands. But if I’m paying $2500/month for a 400sf studio, I should at least get a microwave and/or dishwasher in the kitchen! It’s disgusting, but it’s reality. People in Manhattan are nuts for putting up with this nonsense.
I also have to second the comment about coops and financing. 75% of homeownership in NYC is still coop, and even the “cheapest” coop building requires sound financials in order to be honored with the privilege of buying a coop unit- typically at least 25% down, substantial (six-figure+) liquid assets, perfect credit, high/steady income, etc. And 90% of coops do not allow parents to purchase for children, or even provide the down payment! Plus they place strong disincentives to sublet. Accordingly these are not people living on the fringes using HELOCs to get by. I’m sure most people who have never dealt with the Manhattan housing market would never believe this kind of insanity. But indeed people who own in Manhattan usually can afford to comfortably. So unless there is a huge shock to the economy or a huge flight of jobs elsewhere, distress sales in Manhattan will be few and far between. It IS different here.
Oh, and yes, they aren’t making any more land in Manhattan either.
luxury condos means 2 bedrooms for close to $900,000 like this place.
http://www.arrislofts.com/availability_01.php
The $5 million dollar places are in old co-op buildings with strict boards and the premium you pay is that the building is exclusive. you can buy a penthouse condo for $3 million but you don’t know who your neighbors are. People like Britney Spears buy co-ops because they can refuse to let anyone enter the building without buying the seller’s apartment like a condo. Britney Spears doesn’t want a condo with the peons pestering her for autographs. she wants an exclusive building where the security won’t let anyone up and many of the current residents have a lot more money than her and don’t care who she is. Even if you had the money to buy doesn’t mean you can. if the HOA doesn’t like you, you don’t get in. One building here refused to let Madonna buy in. there is no $15k mortgage payment because the top buildings with these huge price tags require 50% to 100% down, just to keep the peons out.
yes, for the most select co-ops in manhattan — there are only about 50 such buildings — the boards are a power unto themselves. as i said, all of the top buildings refused to allow nixon to buy.
Britney Spears? Give me a break, there’s no way she could afford a co-op in one of the real “A-list” buildings. And there’s no way any of them would let her in, even if she could afford it.
To even be interviewed by the co-op board of one of those buildings, you have to demonstrate a $100 million net worth, and apart from that, they want people who will still be rich 25 years from now, not some cheesy pop star. By the way, Madonna didn’t get turned down by ONE of those buildings, she got turned down by ALL of those buildings.
A premium co-op in one of the top buildings on Park Ave. is like an island in Maine — lots of families have them, even middle-class families who bought many years ago, but if you want to buy one, the price of entry is high indeed.
Many of them don’t let Jews in either.
Since 9/11, increasing numbers of NYers bought places upstate and in the Hamptons, driving prices through the roof in those parts - particularly the Hamptons. These toys will be sold off before primary residences are sold.
you are behind the powercurve. i was at the hamptons two months ago, and everything is for sale. literally everything. compared to NYC it’s beyond belief.
Check out this monstrosity that is going up on the west side of the Village. The full development is three buildings that look like this. How they are going to find the millions and millions even to fill these small things are beyond me. These buildings are completely out of touch with the feel of the West Village. It is horrible.
Okay, I didn’t get the URL to go in. The building is at 165charlesstreet dot-com. Heinous!!!
Two things to add to the thread:
1) I unfortunately lost my shirt in ‘95 when I couldn’t sell the classic six on W 71st a block for the park that I bought in ‘89 for even 25% (my downpayment) less than I paid for it. Without going into details, the numbers involved are laughable compared to today. Instead I couldn’t sell and got foreclosed. No “short sales” then, though they did have me by the short-hairs.
2) There is no way on Earth Britney Spears would be even remotely considered for an elite co-op on Fifth Ave, Park Ave, Central Park West or Riverside Drive. Read the book “740 Park” for insight into that. Britney’s building, the “Silk Building” on west 4th st and B’way is a condo and famously open to celebs–although its most famous resident was Keith Richards back in the glorious ’80s.
As for Manhattanite’s studio on 89th & 3rd (Rupert Towers, right?) Man, if you can get $650@ sq ft for the place sell it and get out of Dodge. Rupert Towers are well located “projects” (you can see its twin in The Bronx as you head north on the train) designed and built in the 70s to be rented to a now vanished breed of “Manhattanites” — middle class people. A 400 sq ft studio there is “worth” — whatever that means –maybe around $150K. I should add, IMHO.
“As for Manhattanite’s studio on 89th & 3rd (Rupert Towers, right?)”
wrong. i live on riverside drive.
No need to focus on the fuzzies (how rich NYers are and how desirable NY is, etc.) the numbers tell the story. Halstead is the only major broker that publishes a monthly market report and it’s prepared by an economist, Gregory Heym. According to their reports the peak median price for an apartment in Manhattan occurred in June, 2005 for $831,000. The July, 2006 median is $747,000. That’s a nominal price drop of 11%. Adjusted for inflation it would be 15%. The nominal drop in median price for one month, from June, 2006 to July, 2006 was 7%.
So, NY will not be safe. It may not be the absolute pit that Phoenix, San Diego and South Florida will be, but it won’t be far off. My prediction: with no recession, prices will be down 20% to 30%. With a recession next year, the bottom will be closer to 30% to 50%. But the bottom won’t happen for 5 years.
monthly Manhattan market reports:
http://halstead.com/resources_reports.aspx
Halstead’s numbers are interesting, but even they do not reflect the larger market, so I think perhaps the decine is more painful already in NYC as a whole (and will be in the future). The city (which incuded 4 other boros- Brooklyn being the largest) is a market of predominantly SF/multifamily homes with median incomes in the boros at around 50K - and not much higher in all of manhattan, at least not high enough to support housing costs.
It is “different” here in that the boom times benefitted us all very well — but the boom times were enjoyed with risky loans and piled-on debt -just as much as the rest of the nation. Our incomes in the city have never really justified higher housing costs -and that was true to a ridiculous degree in the boom.
I fear NYC stands to hurt far more in a bust than many well-off Manhatttanites can visualize from their condo terraces. Once there is a bust, we will have more crime, and more crumbling infrastructure. Our population is declining even now in good times because it is too expensive to live here - in bust times it’s going to get worse, and there goes your tax base.
I’m not ready to say NYC will fall into a 1970s hellhole yet, but our downturn may be lot less pretty than other bubble cities.
I believe, truly believe, that my children will be able to live in Brooklyn when they grow up. At these prices, that is questionable. These prices are questionable.
I haven’t read all the comments on this yet but I have something useful to add…I think. I like in NYC and work on Wall Street running a hedge fund. And yes I have been shorting housing and subprime for 12 months or so. It feels good when you get something right.
Since 2001 I have been renting a 1000 sq ft. 1 bedroom, 1.5 bath luxury building, center of midtown (great corporate location) for between $3400 and $3050 - the rent went down for a few years and then back up. I just signed for 2yrs at $3600.
In 2001 I was seriously looking at buying a condo and I had two narrowed down for about $550 per square foot, at about an additional $1 per square foot maintance and taxes (that is considered a very good amount). Both places were on Park Ave right below GC - so not the BEST BEST part of Park Ave but still a very premium address. One place was 1050 sq ft and the other was 1800 - the 1800 place I would have needed help from my parents but it would have been a forever home in NYC. The smaller 1050 sq ft place would have also been a nice home but it would get a little tight eventually.
Anyway at the time someone handed me a Goldman Sachs real estate report which showed how histrically NYC condos sold for about $450 a square foot and went as low as $300 in certain periods. GS does good work and this report scared me. Coming off the great nasdaq bubble in 2001 I for sure thought prices were headed down. The reason I ultimately did not buy in NYC in 2001 was the 1.5% (or so) mortgage tax - when I ran the numbers that chunk was a killer.
Obviously the prices of those condos have both basically doubled, if not increased 150%. Though notice my rent has only gone from 3400 to 3600 in the same time period. Today NYC luxury condos sell for over $1,000+ sq ft - insane by historical measures. Now I firmly believe we will see 2001/2000 prices again in NYC but it certainly is hard to fathom - people have accepted that NYC is such a global market prices cannot really go down. Similar people used to say the same about LU and NT when they were $60 stocks.
I think the key to NYC real estate is wall street employeement and the bonuses. As soon as the layoffs start, from the weak stock market that will be coming soon, NYC real estate will trend down. Pre-1997 you couldn’t give a 1 bedroom away in NYC, much less a studio. Does anyone remember those times? Yes crime was higher but still.
Just my two cents and some real life historical review.