Manhattan ‘Teetering Toward Long Downhill Slide’
A housing report from the New York Post. “The top-heavy Manhattan residential real-estate market is teetering toward a long downward slide, new sales data show. Third-quarter market reports released today by the city’s top four real-estate companies show that apartment prices have dropped, while two of the surveys say prices have sunk below last year’s third-quarter numbers.”
“‘My phone has nearly stopped ringing,’ said one high-end broker who requested anonymity. ‘It’s a scary time in this business.’”
“A chilling report by Brown Harris Stevens shows the average sale price for cooperative apartments slid by 4 percent in the past 12, while condos fell 6 percent, compared to the third quarter of 2005. Halstead Property notes that the average apartment price is4 percent less than a year ago, and 10 percent lower than the second quarter 2006.”
“Weighing particularly hard on the market is the average sales price for a Manhattan co-op, which has dropped 16.1 percent in just the last quarter, according to figures by Prudential Douglas Elliman.”
“The negative numbers represent a stalemate between buyers and sellers, an overabundance of properties for sale and a boom in the construction of condominium developments. The Corcoran Group reports a 17 percent drop in deals closed in the past 12 months from 3,597 to 2,996. Corcoran CEO Pamela Liebman says there are fewer deals being struck because sellers are still sticking to their asking prices while more buyers are taking a wait-and-see attitude.”
“‘Buyers don’t feel the same urgency as in the past,’ she said. ‘They feel more empowered to make low offers or just wait.’”
The Daily News. “The average sale price of a Manhattan apartment fell 7%, the latest indication that the city’s housing market is cooling. The statistics reflect the frustration of apartment sellers, who struggled to find the right strategies now that they no longer have the upper hand.”
“Some had to cut their asking prices. Others decided they didn’t want to play the game at all. ‘We were just putting our apartments out there to see what we could get.’ That’s what some clients told Jonathan Miller, the CEO of appraisal firm Miller Samuel, when they yanked their flats off the market.”
“Inventory has increased 94.4% since the runup began in the 2004 fourth quarter. It’s 32.3% higher than a year ago.”
The Associated Press. “Inventory levels reached their highest level in more than 15 years in the third quarter, according to a report by Mitchell, Maxwell & Jackson Inc., an appraisal firm. ‘I think we’re seeing the beginning of a buyer’s market that hasn’t fully manifested yet,’ said Michael Martin, director of research at Mitchell, Maxwell & Jackson. ‘We’ve still got sellers who aren’t willing to dramatically cut prices and buyers are simply taking their time and being much more discretionary.’”
“The higher end of the market, which includes apartments valued at $2.5 million or more, took the biggest hit as the number of sales transactions plunged 40 percent, and prices declined 6 percent for three-bedroom units and 14 percent on average for four bedrooms and larger between the second and third quarters, the report said.”
“Martin blames a buildup in inventory for much of the slowdown. He said the surge in new condominium developments, and flurry of condo conversions in the past four years have resulted in large amount of unsold apartments sitting in the market.”
“In the past 12 to 24 months, developers brought a record 24,000 new apartments onto the market, the report said. In September, there were 9,990 units listed for sale, up 8 percent from 9,279 in August and up 21 percent from 8,280 units a year ago.”
“‘That’s really the biggest factor in the market because it all comes down to supply and demand,’ he said.”
“Demand for condos started to cool in the second quarter, said Martin. ‘The first part of the year was really carried through with bonus money from Wall Street because bonuses were at record levels, so that really kept things moving,’ he said. But inventory began building in the second quarter as demand started to die down, he said.”
“Martin said he hasn’t seen inventory this high since the late 1980s. The inventory glut, high interest rates and weak economy back then subsequently led to a housing crash in the early 1990s, that saw prices sharply tumble. Martin said home prices fell 38 percent on average between the time prices peaked in the second quarter of 1989 and the time prices troughed in the third quarter of 1993.”
The USA Today. “At the end of the second quarter, there was an 11.9-month supply of condos and co-ops for sale, up from a 6.6-month supply a year ago. About 60% of that increase was from the construction of new condos, says appraiser Jonathan Miller.”
“‘There are a lot of deals right now in the very high end,’ he says. ‘The remainder of the market is quiet. Volume is dropping. We are seeing sellers be a little bit more realistic in pricing.’ At current prices, it makes more sense for a lot of renters to remain tenants.”
It has been reported that Wall Street business slumped suddenly in July and August, and profits are forecast to fall 20 percent or more next year.
Not a disaster for the city’s econonomy — Wall Street is cyclical. But this year may be the last one for big bonuses for a while. How many brokers will be dump enough the blow the big payday on overpriced housing? Even if they do, in 2007 that stimulus won’t be there in 2008.
The last round of “Record Wall Street Bonuses” did just about nothing for the NY metro area..
jb
I know half a dozen derivatives traders in Manhattan. All of them have been doing well for the last 3 years. All of them would like to buy an apartment. All of them can afford to pay cash for it. None of them is willing to do so at the current prices.
That is the best Freudian slip in a long time. There are many ways to interpret that.
Gee, could that be because a big hedge fund blew up with all it’s associated damage?
Not really any big hiccups due to that so far txchick. Disappointed myself.
Don’t forget Refco. Nothing came from that either. Then there’s Fannie Mae in late 2004…
The fact that none of this is really moving the markets makes me highly suspicious. Can’t imagine that everyone has “insured” themselves against all possible scenarios (via derivatives, etc.). Somethings gotta give.
I’m a little intrigued by the fact that we don’t seem to be hearing anything in the MSFM about possible domino effects.
Maybe it’s because I’m so far away from the action (being in Australia). But then again, maybe not :).
If we’re really talking about I-bankers, the question is: How much of those bonuses will be dumped on blow. (Answer: A lot . . . and hookers too!)
this incredible nonsense from the daily news article quoted above:
“‘The numbers show a soft landing,’ said Jonathan Miller, the CEO of appraisal firm Miller Samuel, who released third-quarter statistics yesterday.”
soft landing??? the plane’s barely stalled, jon! the engine’s still sputtering! when we land nose first, wheels won’t matter mr. miller!
jonathan miller will eat those mushy words “soft landing” in 2009, or maybe by 2008. or maybe even by 2Q07. but the longer the way down, the harder the landing will be. these people are motivated to make transactions; doesn’t matter if it’s UP or DOWN — except to the buyers. they might just decide to wait a bit more….
All it takes is a few minutes on Miller’s blog to know he is a straight shooter.
jb
[sarcasm off]
Are you serious?
what market is NOT off 10% from may 05 ?
any
Well, The Inland Empire is the ‘Center of the Universe’ as of 6 weeks ago. Sounds like they are pretty confident out there. NOT!
Los Angeles
In nyc, two friends listed a 2b/2ba in great coop with windows on park in west 80s. Nearest comp is 1.4, they listed for 1.2, they just had realtor’s tour, with most ok with the price and a few suggesting it’s a little high. Luckily, both are now reading this blog and patrick.net–and are more than willing to move on price. Their realtor has brought in 2 couples for second looks–people who know the building and want in…but the official listing isn’t til Friday. Saw Tom this am with his dogs, and he’s willing to drop 50K before Friday listing. They want to buy in Vermont, and figure what they lose in Manhattan, they gain on the price drops there. Because of the posters here, they are both really ready to do what they have to do to sell. Will post the results.
“2b/2ba in great coop with windows on park in west 80s. Nearest comp is 1.4M”
i’m all eyes for the final selling price.
Are they sending a 5% commission to Ben Jones?
Perhaps you can counsel them to wait and rent before purchasing in Vermont? Especially if they are unfamiliar with the area/climate. They should be able to shave at least another 20% off of their purchase if they wait another year or so.
“As potential buyers try to wait it out, they’re driving up rents. Miller says rents have risen 10% to 20% in the past year.”
Can anyone confirm this? They’ve been saying the same thing here in D.C., but rent on our apartment stayed exactly the same this year. We’re moving anyway to rent a house and we’re getting it for 10% below what the last tenant paid. IMO, the rental market has gone soft here in D.C. proper.
More importantly, is this asking rents, or actual paid rents? I cannot imagine anyone would stay in place if their rent went up 20% given current wages.
i think they’re talking about new leases…can’t quite confirm yet - not looking to rent elsewhere yet
I’ve noticed a lot of ads that include “wishing rents”. By this I mean rents that are way higher than actual going rates… That stuff tends to sit empty though.
$1,400,000??! Where I live (Columbus, OH), that would buy you the governer’s mansion, or an entire block of post-war ranches, or three McMansions with an obnoxious hummer in each garage. Basically, that is 10 times what my house cost me. I just cannot believe that living in New York justifies that kind of premium.
there’s a nice mansion up the block from me (riverside dr. & 108st). it’s only $29M. reduced from $31M. better grab it!
Would that be J. Roger’s place?
nope. his is a brownstone (with the motorcycle cage next door) bet. 107-108.
this is the freestanding MANSION on 107 & rsd n. corner (my mistake — i said 108).
it’s listed in the nytimes. with photos!
It’s been reported that the Harkness Mansion just sold for $46 million, setting a new residential price record for Manhattan.
And with the savings you could still fly on JetBlue non-stop to NYC every 6 weeks to partake of shows, nightlife, shopping, culture, etc, and still be ahead.
$1.2 million for a nice apt in Manhattan makes more sense to me than spending a few million for a mansion in Westchester, and I bet on a %age basis prices hold up better in the city. Prices are high in NYC because so many people get high utility from living in NYC, whether it’s making a packet on Wall Street or pursuing an art career or just being a hanger-on.
Plus, Manhattan is competing directly with London, Paris, Moscow, Hong Kong, etc., and prices compare very favorably to those places.
“$1.2 million for a nice apt in Manhattan”
Who said anything about nice!? No offense to this person’s friends, but 1.2 for a two bedroom likely translates to dump.
A lot more jobs in NYC that pay enough for 1.4mm to be affordable than Columbus
“$1,400,000??! … I just cannot believe that living in New York justifies that kind of premium.”
You’re kidding, right? $1.4 M is cheap for a 2BR in NYC. I’ve seen studios that cost more than that (seriously). A really nice 2BR in Manhattan is usually closer to $2 M, and sometimes way more than that. A cozy 1600 sq ft. townhome will cost you $5-7 million in much of Manhattan.
My point is, yes, clearly NYC does justify the premium.
Low Tenant,
I think your prices reflect the recent past. My friend Joy is an exec vp with corcoran–says the market started to slow and then die around May-June. Summer was nothing but some low-end bargain hunters and even they are gone.Don’t know where you live but in the west 80s I’m watching brownstones on 84rd, 88th and 81st, sit for more than a year and a half empty–just the agent’s signs have changed. Check with friends you may have in real estate–the chill is everywhere but renting. The NYTimes continues to cheerlead, did a much better job on the early 90s downturn.
Spike, I truly want to agree with everything you say and more. However, I see a mixture in NYC, some stuff gone stone cold, other stuff still moving. For instance, a big glass condo that just went up outside my window appears to be crawling with yuppie househunters all day. The bright side is, there are seven or eight other big condo towers going up nearby, and I’ve got my fingers crossed that disaster awaits them.
“10% to 20% in the past year.”
this is ‘hyperbole’ at my kindest. but vacancies in nyc (manhattan) are at historic lows, ~.5%!
and with quite a bit of that new inventory destined for repartmentation, i doubt any recent increases in rent will sustain upward movement for more than the next 6 mos…. no data — just a guess. (i rent an apt. but guaranteed the tenant 3 years of no raises — through next year.)
My unscientific and anecdotal view of the NYC rental market is the same as Mr. Miller’s: 10% increases on market rate apts., with not much in the way of bargains in Queens or Brooklyn. Conversely, great rental deals appear to be available in the close-in suburbs of lower Westchester. YMMV, etc.
I agree - the closer burbs are slowly bursting. On LI northshore (20 miles from Manhattan) where I live there are 3 houses I have been watching for 6 months now - the first was a flipper (I assume), it closed last November and work just started now - I am guessing someone bought it again; the second is a new McMansion that started at 1.8 M and is now down to 1.5 with open houses every weekend since April and virtually no traffic; the third is an internet auction that started back in June at around 900K and is down to 745K for the opening bid (link is )
I’m also a DC resident. I have not heard any stories about rents going up. If anything, the expectation is that all the new stuff coming on line in logan/u street/noma will ultimately end up as rental units because the owners (whether flippers or developers) can’t sell them for the price they want.
I think it depends upon who you’re renting from. We just moved out of one of the Crapalon Bay Communities because they raised our rent by 5%. Meanwhile our building was probably more than 50% section 8. Our new single family cape, in a much, much, much better town is the same as the rent on our old 1400 sq. ft. two-level apartment.
A private landlord is interested in having good tenants that won’t piss off the neighbors or destroy the property. A holding company like Crapalon (Avalon Bay), doesn’t give a flying fig, especially when they get so much of their money from the government (section 8 subsidies). Also our building, only four years old is showing serious signs of wear. Rust around the doorway, leaking roof, warping cabinetry, etc.
This is so true — the kind of place you choose to rent so determines the price. We always rented in brownstones in the Village in Manhattan from individual owners, where rents were half per square foot what my wealthier trader-type friends were paying for uptown highrises. And I’ll take a Village brownstone any day over some corporate 40-story cracker-box.
Yes, so you can be awakened by your upstairs neighbors footsteps at 3AM. No thanks!
Our rent (Brooklyn, Park Slope) went up more than 23% last spring, and we’re still paying ~20% less than the newest tenants because our apartment hasn’t been “renovated”. The only reason we accepted the increase is because we’re moving next spring and the cost to find a new apartment for only one year would have made moving a financial wash. We look at craigslist and at apartment listings in local realtors’ windows, and the rents do seem to be getting kind of outrageous. I can’t really quantify it, but 10%-20% sounds like a conservative estimate to me.
From Moody’s:
Housing at the Tipping Point: The Outlook for the U.S. Residential Real Estate Market
“Begin managing your risk from exposure to U.S. housing market imbalances with the Moody’s Economy.com Housing at the Tipping Point study.
“This study will assist builders, investors, and lenders to:
“Assess the severity of the unfolding housing downturn
Identify housing market imbalances
Manage exposure to significant house-price drops one year out”
It’s also worth pointing out that the report (which I assume won’t tell most people on this blog anything they don’t already know) is $3,995 for non-Moody’s clients, and an incredible $3,495 for clients — what a deal!!!!! Plus, call within the next 10 minutes and you will get a popeil “super scrubber” TOTALLY FREE!!
Can I get a “pocket fisherman” instead of the “super scrubber”?
The Ronco Housing Market Report now can be yours for just 4 easy payments . . . .
lol.
Another OT:
Forecast: Local housing plunge
Research firm predicts 18.6 percent price drop in Fort Myers area
Housing prices to drop in 2007: But Mid-South likely to see small increases
munnie,
see the aol article about the moody’s report. several posters have linked to it in the bits thread.
Thanks! (I saw it, of course, right after I posted…)
Down 6% off of an avearge 2.5 million dollar condo? Good god… that means that the price would only be around 2.3 mil! holy-moly! what a steal!
Seriously- this is one thing I fail to comprehend,which is why on earth would you pay 2 million for a condo? Do these people watch too much Sex in the City or something? I’ve been to NYC 3 times, and I find it hard to believe anyone wants to live there THAT badly.
I suppose it doesn’t look that bad to the thousands of New Yorkers who make $2 million in a month, or even to the hundreds of thousands of folks that make that much in a year or two.
Setting aside the debate of which is “cause” and which is “effect”, if a lot of these 7-figure earners in NYC would be ordinary schmoes earning $70k in Cleveland, then housing in NYC might be almost a bargain.
(“As potential buyers try to wait it out, they’re driving up rents. Miller says rents have risen 10% to 20% in the past year.” Can anyone confirm this? They’ve been saying the same thing here in D.C., but rent on our apartment stayed exactly the same this year.)
I expect there was a transition period, however brief, where people stopped buying, pushing down rental vacancies even as owner-occupied vacancies increased, and pushing up rents. We are in the transition, which will continue until for-sale units return to the market as rentals.
Moreover, a rising share of NY apartments are market rate. That means volatility. So you have rents jumping, but you could also have more of a crash when the market turns. Regulated rents keep rising, slowly at the legally prescribed rate, if they are lower than market rents. Market rents could make big moves in either direction as greed and fear sweep through.
Most of the rising inventory is not suitable as rental property. NYC is unpredictable but other places rents will still have costs driving minimum prices. Think about an analogy; new cars, just because Ford is in trouble doesn’t mean you can get a $9000 Expedition.
it’s at least another 10 years before they start subdividing mcmansions — step f in the itulip.com scenario… sometime around 2016….
Yup, you’d need to do some serious “market repositioning” of the “Conspicous Consumption Castles” [CCCs added to the abbreviations list] so that they become suitable for renting. 20 ft ceilings in a 700 sq ft rental?
2011: “I wanted a t-shirt but could only afford a house.”
“20 ft ceilings in a 700 sq ft rental?”
you’d be surprised at how many manhattanites have weird fantasies of ‘vertical’ living.
as for the t-shirt, how about, “zone me down!”
The MBAA (Mortgage banker) just published last week mortgage applications stats. It looks like home sales may be rebounding strongly. Though it is just 1 week stats, but the data is such strong that I think we should not take it lightly. It increased a lot last week compared to 2 weeks ago (up 11.9%), and it also increased a lot comparing last week this year to last week last year (up 11.5%).
Anyone has any possible explanation to this phenomena? I don’t see any public holidays around end of Sept. Thought of Katrina last year may throw off this year last week data, but still does not explain the hige incerment last week compared to 2 weeks ago.
http://www.mortgagebankers.org/NewsandMedia/PressCenter/45473.htm
any opinion on the brooklyn brownstone market? seems to be holding up thru this but i think it will have to turn down no?
Ron- I’ve been trying to get a read on this for a while and it’s not easy to do so w/ any accuracy. As far as I can tell (anecdotal evidence), Bklyn remains pretty firm. There is a lot of construction out there, but the old places possess character that can’t be replicated in a condo. Taxes on them are relatively low, too. Upkeep is pricey, though.
Yup. Those brown babies are going down. A visit to “just reduced apartments” (townhouses/brownstones are included under this slightly misleading heading) at natefind.com gives an idea how prices are being slashed and brownstones are sitting.
However, things are worse than they seem because the site only shows latest price cuts. Furthermore, brokers here, like everywhere else, like to play the relisting game to reset days on market to zilch.
Also, exotic lending, originally thought to be less prevalent in NYC is actually the opposite as mentioned in a recent article posted by this blog. For the remaining decade, ARM’s will go “click, click, click”.
Furthermore, these brownstones take big bank to renovate, maintain & service. A lot of buyers only saw the historic benefit and appreciation, but not the liability. I’ve visited many a mid-renovation openhouses, one this past weekend. The average price of one in need of a gut renovation is probably about 1 mil. A gut reno can cost up to $500K. So, it’s like buying a small plot of land for $1 mil and building a brand new $500K-home from scratch.
Fort Greene brownstones that sold for $300K to $500K (renovated might I add) in 1998 topped out at about $1.5 mil last year. I don’t think a 50% drop to $750K over the next decade is unreasonable. Average prices dropped almost 40% during 1988 to 1993. This IS the biggest run-up (300%) in traceable Brownstone Brooklyn history. Wall St. bonuses aint savin’ Brooklyn. There’s a lot of denial out there - just like in January 2000.
I’m talking out of my bearish ass but I think I’m right. Somebody please correct me.
It’s official. We’re taking a breather here in Tucson. Oh, yes, and be sure to continue consulting a Realtor:
http://www.azstarnet.com/opinion/149403
Meanwhile, on the front page of the same paper, the terminology isn’t so rosy:
http://www.azstarnet.com/dailystar/149514
dl-
where are you? Prices are down. NY is different.
Glad to see MSM at least asking appraisers (who are a bit more afraid to spin the market than realtors) about the state of things.
And thanks WT Economist - I also think that when these condo units repartment themselves and strapped small-multifamily buyers face more mortgage payments/expenses you will see rents get more competitive. If looking at all of NYC, it’s these small multifamilies to watch to see how the rental market is faring, not the big manhattan hi-rises. Also I expect many, many more of these boro buildings to be carved up into smaller, illegal spaces to rent out - as happened in prior busts.
Arlington, VA rents keep going up, up , up. It’s getting a little scary. The demographics are changing rapidly with low-income, middle-income families fleeling the area. This is wreaking havoc on Arlington Public School System. Enrollment has been declining every year since the housing madness started. Families are moving out and high-income no family couples or individuals are moving in.
Kinda sad.
Doas anyone remember NYC in the 70s?
I do, you could not GIVE away apartments in the city. Maintenance was often double your mortgage! Many thousands of landlord simply walked away from thier buildings. The city became the ouners of thousands of buildings.
I do. Prices for apartments tanked, as they did again in the early 90s. But I don’t remember rents for livable apartments ever being cheap. And NYC RE history of the 70s probably deserves a blog of its own.
Worry not though Manhattanites! They are going to throw in jail all those nasty evil chefs using trans-fats in your food. You may end up poor or homeless , but the State is looking out for your arteries!
(1970s. Prices for apartments tanked, as they did again in the early 90s. But I don’t remember rents for livable apartments ever being cheap. And NYC RE history of the 70s probably deserves a blog of its own.)
The whole city was going down the tubes in the 1970s. In the 1990s, people freaked and fled because they thought it would happen again. It didn’t, and they have been kicking themselves ever since, supporting the market after 9/11.
Aside from our bad state government, we have just one problem now — the prices are just too high. Once they come down, things will turn around. As it is, they are choking us.
Did anyone read the article in the September issue of Vanity Fair by A.A. Gill entitled “Condos of the Living Dead”? I wish I could provide a link, but it was a wonderfully sarcastic, insightful analysis of the “New New York” and the utter sterility of the various residential projects that have been built during the boom. A couple of great quotes:
“This new catwalk of New York condos looks like a clearance sale from Europe and the Middle East.”
“This building boom isn’t a great expression of design and architectural excellence. It’s a massive speculation to relieve bankers of their bonuses, and bankers’ money is sterile. It buys peace and quiet and second-rate ideas. New York is a city that was built out of risk and danger, with much more poverty and failure than riches and success. Fund managers kill the thing they crave. They want to buy their way into excitement and that old promise of the New York vista, but they drive it out and make it extinct. The final, unpalatable, zero-tolerance truth is that hedge-fund managers, bankers, cynical architects, and insecurity-exploiting designers are far more damaging to the unstylized life of a city than all the junkies, prostititutes, pan-handlers, urban cowboys, bag ladies, homeless, and graffiti kids they replace.”
Amen, brothah! Wish I’d said that.
http://www.vanityfair.com/commentary/content/articles/060918roco02
Posted here last week. Very funny.
Thanks, Lex, I thought it was such a great commentary about the effects of the housing boom in Manhattan, great reading.
“This building boom isn’t a great expression of design and architectural excellence. It’s a massive speculation to relieve bankers of their bonuses, and bankers’ money is sterile. It buys peace and quiet and second-rate ideas. New York is a city that was built out of risk and danger, with much more poverty and failure than riches and success. Fund managers kill the thing they crave. They want to buy their way into excitement and that old promise of the New York vista, but they drive it out and make it extinct. The final, unpalatable, zero-tolerance truth is that hedge-fund managers, bankers, cynical architects, and insecurity-exploiting designers are far more damaging to the unstylized life of a city than all the junkies, prostitutes, panhandlers, urban cowboys, bag ladies, homeless, and graffiti kids they replace.”
What a great last paragraph.
And don’t think for a minute these contractors and developers haven’t cut corners every way they can to maximize profits. Crappy design, crappy construction — and buyers left holding the crumbling bag.
The MBAA (Mortgage banker) just published last week mortgage applications stats. It looks like home sales may be rebounding strongly. Though it is just 1 week stats, but the data is such strongly positive that I think we should not take it lightly. It increased a lot last week compared to 2 weeks ago (up 11.9%), and it also increased a lot comparing last week this year to last week last year (down 10.9%). 2 weeks ago, the index was down 22% compared to same time last year.
Anyone has any possible explanation to this phenomena? I don’t see any public holidays around end of Sept. Thought of Katrina last year may throw off this year last week data, but still does not explain the hige incerment last week compared to 2 weeks ago.
http://www.mortgagebankers.org/NewsandMedia/PressCenter/45473.htm