“Holding Out For Better Prices” In New York
Newsday reports from New York. “Two months ago, Chuck Davis finished building a new three-bedroom, two-bath ranch in Shirley, and he put it on the market for $315,000. So far, however, Davis hasn’t had any calls on the house, which, although new, is competing with 1,000 existing-home listings in Mastic and Shirley.”
“Buyers are holding out for better prices and, in some cases, are worried about selling the home they already own. So, even with limited new housing inventory, builders like Davis are feeling the downturn, and are, in turn, slowing their production. ‘I’m maxed out right now until I unload some of these homes,’ Chuck Davis said.”
“Similar stories abound, and the incentives are growing. Builder Alec Ornstein in Garden City, is offering buyers an upgraded kitchen or, in some cases, a year of paid real estate taxes. Steven Klar, an East Meadow developer, is throwing in a Mercedes with some of his homes. ‘It’s a buyer’s opportunity right now,’ Klar said.”
“But for many would-be new home buyers, it’s not that simple, said Centereach resident Phyllis Lombardi. Last spring, Lombardi and her husband were to close on a new $612,000 home in Mount Sinai built by Pulte Homes.”
“After putting their home up for sale last November, the Lombardis found that they had hit the market with exactly the wrong timing. May approached, their new house was ready for closing, and they still hadn’t sold their existing one, even after dropping the price twice.”
“So they pulled out of their deal with Pulte, which refunded all but $20,000 of their deposit. ‘I essentially feel like I paid $20,000 for the fun of picking out my colors and watching the house being built,’ said Phyllis Lombardi.”
“Now, the Lombardis are trying again, especially since Pulte said it would put the $20,000 toward another house if they buy within a year. This time, though, Phyllis Lombardi said she’ll sell first. ‘Even if you had to find temporary housing, it’s better than what we went through,’ she said.”
“Robert Wieboldt, executive VP of the Long Island Builders Institute, said some builders may be forced to drop their prices. Others are holding off buying any new land.”
“‘It’s a little tenuous right now,’ said Victor Irizarry, president of Whitford Homes in Ronkonkoma. ‘You’re always anticipating moving forward, but right now, I’m holding back a little bit.’”
“Experts said they’re hoping builders and bankers remember lessons of the early 1990s to prevent severe losses. And they’re hoping for a spring 2007 comeback. Said Ornstein: ‘If you didn’t overleverage and overpay for land, you … should be in a strong position to be able to hold on.’”
From Inman News. “‘There’s a very big standoff going on … It’s like a buffet table at a banquet where they keep bringing more plates from the kitchen,’ said David Michonski, CEO of a large brokerage firm in Manhattan. It’s as if buyers are thinking, ‘I like this shrimp, but maybe there’s lobster coming out,’ he said.”
“The slowing market in Manhattan, he said, is being driven more by an oversupply of new properties than by the resale market. Inventory is up 65 percent from last year in Manhattan and the majority of those properties are new construction, he said.”
“Today buyers in many markets know they have the upper hand and are letting homes sit on the market longer in hopes of finding a better deal. There’s a lack of urgency in pushing buying decisions, brokers say.”
“‘I don’t see a lack of confidence (in home buying),’ said Jeffrey Bastress, broker in Sterling, Mass. ‘I see it more as they know they have choices so they think, ‘why rush into it?’ With interest rates remaining low, buyers today are more likely to wait on the sidelines until they find a good deal, he said.”
“Once buyers do make offers, they’re being tough in what they ask for, Bastress said, referring to a recent client who at the last minute demanded another $5,000 off the home’s asking price for no reason other than knowing the seller had no choice but to agree.”
“Bastress said the reason buyers aren’t moving quickly comes down to the fact that they have no compelling motivation to do otherwise. They know they have the upper hand and though Bastress said he hates to use the phrase ’sweet revenge,’ ‘that’s exactly what they’re doing.’”
“Home sellers, meanwhile, see the future as the unknown and some think that next year’s market may be worse so they feel they have to sell now, he said. ‘The advice I give sellers is that you’re going to have to put a price on your home that you won’t regret selling for and also a price that if you don’t sell you won’t regret keeping it,’ Bastress said.”
Manhattan is ridiculous - I am not sure of the avg /sq ft, but apts need to come down - both rent and purchase because most people do not earn the 300000 needed to live somewhat ok there.
I look forward to 1200/mo 1 bedroom, decent apts…
Manhattan is one of those areas that I would not bet against. I am sure it is going to come down, but how much, and how far, I have no idea.
My reasoning is; Manhattan, is (please don’t kill me for this) special.
People are willing to live like paupers even though they make 80K a year, just to say that they live in Manhattan. The opprotunities in Manhattan, for many career paths, are unlike anywhere else in the world.
The world revolves around NYC, and I just think that causes the home prices/rent prices to really disconnect from the rest of the country. Salaries are higher, but not high enough to support the prices. However, the “cost of missed opprotunity” by not living in Manhattan is (precieved?) high.
I don’t really know much about the NYC RE market, but I would temper my bets in that location. I think that it will always be very expensive to live there; more because people have an “irrational exhuberance” about the area, and what the idea of living there brings.
All that said, I do expect prices to come down there. Just not as drastically as other locations.
Hello Michael,
Manhattan and Silly.con Valley in CA are heavily dependent upon the Fraud Money whose primary source is the Scam Market, operated by Bankrupters and Fraudsters of NYC (BFNYC).
You probably have no idea about how the housing in Manhattan and Greenwich did during the past depression, or do you? Or, do you believe that our economic manipulators wouldn’t allow a depression.
TWO MOST CYCLICAL INDUSTRIES ARE: TECHNOLOGY AND FINANCIALS!
Jas Jain
At first I thought you wrote, “the two most ‘cynical’ industries”, which is true also…
Jas,
First, our govt cannot prevent anything, only react to it and try to make everyone feel better about it.
So, yes, I am totally convinced that if a depression is in the cards (still 50/50 on if we are heading there or not) it will happen, no matter what the govt wants.
No, I do not have any idea what happened up there during the last depression, but I would love to know.
I would never say NYC is immune to this, only that it is going to correct less then other areas. Also, NYC has something similar to FL (rent controlled vs. Save Our Homes) which makes the cost of living far less expensive for some then others. Another factor (imho) keeping the prices high there is the presense of govt manipulators like this; shifting the burden onto those not in rent-controlled units. This is very similar to FL, where we are shifting the tax burden to those who bought most recently. This totally “screws” the market (for lack of a better term) and creates some unpredictable results.
Hello Michael,
A blog is not the best place to learn detailed history (general history is not only useless, but mostly harmful).
“No, I do not have any idea what happened up there during the last depression, but I would love to know.”
When I read the history of Greater NYC area during 1930s, it fared much worse than the national economy and housing. One example, a estate in Greenwich that was bought for $1M was sold for $75K.
“I would never say NYC is immune to this, only that it is going to correct less then other areas.”
You got it backwards. Also, higher they go harder they fall! You really need to understand the source of wealth in Manhattan, in particular, and NYC, in general. There have been other finance capitals of the Western World, you know. The nest one would be not in the Western World, but Shanghai. In case it is news to you, Bankrupters and Fraudsters of NYC are already trying to move more and more of their operations to Shanghai. When China takes over the US, as the largest economy, where do you suppose the wealth will go to?
Best of luck to you.
Jas Jain
London is enjoying its renaissance as a global finance capital since 9/11. We don’t hear much about this.
Jas:
You’ve obviously never been to Shanghai.
The only major developing country that may be more corrupt than the U.S. is China. Shanghai is a joke. It’s a lot of tall buildings with no one living in them. The people live in shacks next to the skyscrapers.
China is in an even more economic tenuous position than the U.S. Which is why they need our economy to stay afloat, which is why they’ll keep buying our dollars.
Condos in the major Chinese cities have been in a crash for over a year. Some projects are off over 40%.
–
“You’ve obviously never been to Shanghai.”
Hello Justin,
True. One of my best friends (a Swiss) owns a condo there and has been asking me to come for a visit.
I agree with you about corruption in China (worse in India), but after the Greater Depression, the economic power will shift to China and Shanghai will still be the finance capital of China.
I AM VERY BEARISH ON CHINA AND INDIA OVER THE NEXT SEVERAL YEARS. China will recover but India will not.
Remember: Chinese are very practical people, while Americans and Indians are ideological. Democratic Dupes!!!!!! “Democracy is the worst system except for all the rest?” LOL.
BTW, I have read every important book written on the subject of democracy that I could find. I have never known, or heard, of any American or Indian who has done that. A dupe has no need to study a subject; he, or she, simply knows.
Jas Jain
“I have read every important book written on the subject of democracy that I could find. I have never known, or heard, of any American or Indian who has done that.”
Probably one of the most ridiculous posts ever made on the board.
I’ve studied in Japan, China, and Vietnam (and of course, the U.S.). The only one without major corruption problems is Japan (which has its own problems, for sure). China is teeming with corrupt officials who make 100 times what the average honest worker ever will. I have no reason to believe that the Chinese system (which is not practical, it is based on confucianism with a lot of value based on “showing off” and “saving face,” consensus before efficiency, and obsolete hierarchies) would be superior to the U.S. or Indian model. After all, a business owner in China not only cooks the books to make profits appear larger, he also has to do it to save face, pay bribes, train underqualified workers, and support “the party” (another form of bribe that’s public). Add that to the fact that he might find himself in jail if the gov’t decides to seize his property and throw him in there (for any reason, no “innocent until proven guilty”). While I agree the U.S. system is lousy, there’s no way that China is better. They are becoming more global, so it’s a given that they will start to have increasing influence (considering their absolutely MASSIVE population). But whether or not that influence will surpass the U.S.’s is doubtful unless they drastically clean up their act.
While I agree the U.S. system is lousy, there’s no way that China is better.
Now… but there’s is evolving while ours is devolving. Don’t assume that their system is static.
Jas: I’m sure it’s not lost on you that the ‘Great Crash’ happened on Oct. 24. ….This as we surpass record 12000 DOW today.
Superstitious?
“You probably have no idea about how the housing in Manhattan and Greenwich did during the past depression, or do you?”
Did you say depression? Impossible. Are you looking solely at history to predict the future? A lot has change in America since the Great Depression. My Chinese manufactured crystal ball says a good recession with some deflation is likely. A depression is very unlikely.
A lot has change in America since the Great Depression.
Yes, all for the worse. Depression isn’t impossible, it’s unavoidable.
one other comment
NYC is one dirty bomb attack away from a total real estate collapse. That’s what it would take to really destroy the NYC housing market.
With 24,000 new condos coming on the market, I think people are going to learn one more time that Manhattan is not that special.
Prices fell 50% from the peak in the 80’s. Manhattan was pretty darn special even then!
I almost got in a fistfight last night debating Manhattan real estate. I said that the level of prices and new construction are silly. All I was told is, “Manhattan is special”. They couldn’t believe that I didn’t want to pony up $1,000 per square foot to buy here. Denial is so rampant. Any Wall Street turn down, coupled with a housing turndown, will pummel Manhattan.
IMHO it will never be cheap to live in Manhattan. This does not mean that it will always be as expensive as it is today.
–
“IMHO it will never be cheap to live in Manhattan.”
On a relative basis, to the rest of the US, it will get lot cheaper “to live in Manhattan.”
OK, what will happen when the income from finance falls 90%+ and 80% of the jobs in that “industry” are lost? Can’t happen?
Jas Jain
Also let me hark everyone back to the 70s, when an eroding tax base from fearful, fleeing city dwellers made housing so cheap you could hardly give it away. There was a great study recently done last year on the state of housing in NYC:
http://www.law.nyu.edu/realestatecenter/publications/SOC2005.htm
The study tracked all kinds of data, but what is most interesting are the figures on subprime lending in neighborhoods - the poorer areas of the city were the likliest targets of such lending.
Understand that if this thing pops hard, those neighborhoods will suffer. When they suffer, crime will go up - especially robberies and muggings. If and when that happens, watch how quickly the bloom falls off and the rest of NYC. We are absolutely a riskier market than many areas should a downturn come.
sorry shouldve said ..”bloom falls off of Manhattan and the rest of NYC”
Succinct & correct, also IMHO.
Sorry, my comment was to Jim A.
I just sold my 350 sf studio on upper eastside. 5 days on market; first open house. $259K. Price it right, and it will move.
I am timing the market to buy in NE Florida. I’ll rent a year or two while things settle out. I expect an overall 20-30% drop in Daytona/Jax; but will start getting ready to buy when homes drop 20%.
gordo nyc
As a NYer I tend to agree NYC is special. After the 80s RE crash, and values went down (gasp!) NYC still was a scary crime ridden city and the reputation to go with the grime. Giuliani cleaned up the city, and families began returning again. NYC is fundamentally changed from that point of view. Manhattan is a finite island and will definitely keep prices inflated on a permanent basis. If there will be downturns it will be in the new found hipster hotspots such as DUMBO that really still remain crappy hoods to live in. Watcht he outer boroughs dip far more than Manhattan. NYC will come down to Earth, and prices are already down, but NYC is no Naples, Phoenix, CA, or Miami.
Yeah BABEE.
http://www.brownstoner.com/
Check out the house of the day
or the Craigslist ad:
http://newyork.craigslist.org/brk/rfs/221483275.html
$1200000 Lovely Two Family Townhouse
Delightful Three Story, Two Family Brick Townhouse. Lovely original accents throughout the house including 3 WBFP’s. Fabulous deck leading to landscaped garden. Convenient location.
Those pictures made me WEAK…For those who are not obsessively following the brooklyn Market– this is progress.
God, plant me in one of those brownstones, and just bring on the collapse of Western Civilization– I don’t care.
Please hold me back if I start to get weak prematurely—Who ever here said to stay out of the barber shop or risk getting a haircut was right…I am not going to go on any Bklyn hometours or, when/if they come here, Auctions.. I was all gloom and doom last night but Just the sight of those pictues and I am all a flutter. Fellow NY watchers– how low of a price do you think is realistic to hope/want/wait for a Brownstone in a not yet Gentrified Bklyn neighborhood?
For this New Yorker, it’s getting discouraging. There’s certainly more inventory, but as of today, home-owning friends and coworkers are still gloating about their enormous paper gains. The median price has declined but individual places seem to keep rising. I’ve been watching my cousin’s townhhome on Zillow, and at least according to that site, it’s gone UP in value BY $750k in the LAST MONTH (Zillow says it’s now worth $9 million, don’t ask what she paid in 1994). I’ve totally stopped making my bearish speeches in social situations.
I haven’t lost hope — I still think the flood of new condos is going to dampen prices in NYC, and as things continue to slow, the “get rich quick” mentally will gradually be replaced by a “don’t lose money” concern.
I’m not sure if NYC is truly “different” (obviously it’s unique), but I DO think places like AZ, FL, and NV are “different” in that they are experiencing a far more extreme, speculation-driven correction than elsewhere.
Get rid of rent control and (non-rent-controlled) prices will come down. The Stuyvesant Town unit which just sold yesterday is Exhibit A.
I think (someone can correct me) that rent de-regulation hasn’t worked in Boston.
If rent de-regulation happens in Manhattan, the borough will be full of extremely rich people and extremely poor people (there are quite a few housing projects). Should be fun for the class war aspect. Unless the rumored plans of privatizing the housing projects happens, too. Outerborough “les cités” for the poor/second class citizens to come, I guess.
FWIW, we need to remember that apartments and houses aren’t just assets floating in space, or commodities in a market. They’re peoples’ homes first and foremost.
True, but builders and landlords don’t owe someone a home at below market rates. It is extremely unfair to require this. If the government wants cheap housing, let them provide it. Rent control guarantees that nobody will build any new housing in an area that is subject to it.
Rent deregulation has worked in Boston; it’s made the place pretty safe for the wealthy.
Rent deregulation in New York would make it easier to find an apartment in NYC, as it would likely cause between a half a million and a million people to leave town. Dregulation is effectively happening anyway, even if slowly.
Dregulation is effectively happening anyway, even if slowly.
Agreed, Moopheus. Also, rent control and rent stabilization two different things. The first is a holdover from post WW2. and is limited to tenants who still live in the same apt. since that time or to some of their relatives. Stabilization is newer, affects many apt buildings rehabbed in the 70’s with huge tax abatements paid for by taxpayers. Helped keep people with jobs in the city in the 70’s–when they place was crime-riddden and people with jobs were abandoning the place, and owners were just walking away–hell, even the feds told New Yorkers to drop dead. There are plenty of projects on Amsterdam Ave. in the 80’s next door to high-rise condos. The poor will not leave NY-it’s one of the best places in the country to be poor. Middle and upper middle class folks will leave–and take the tax base with them.
“If rent de-regulation happens in Manhattan, the borough will be full of extremely rich people and extremely poor people (there are quite a few housing projects).”
Sounds like you’re talking about the situation today. If rent control ended tomorrow, more middle- and upper-middle class people would live in Manhattan and poor people living there now would be forced further away. As they should be - they are unwilling or unable to compete effectively in the country’s most competitive market.
” If rent control ended tomorrow, more middle- and upper-middle class people would live in Manhattan and poor people living there now would be forced further away.”
You’re joking right? Please confirm. Manhattan studios 400sqft) are getting 2000/month minimum right now with rent control. Double that without controls then tell me how “more” 55k/yr middleclass will be living there….
Manhattan studios 400sqft) are getting 2000/month minimum right now with rent control. Double that without controls
Captain - You exaggerate horribly, you are insulting, and you don’t know crap about how the world works. What was your question?
I happen to live on the upper east side during the week and go home on the weekend.
Now I’d like for you to qualify your statement; ” If rent control ended tomorrow, more middle- and upper-middle class people would live in Manhattan and poor people living there now would be forced further away.”
Asking you to back this up is is hardly an insult.
Actually, I think the average studio in Manhattan is @ $2,400. Really. One bedrooms are @ $3,100.
Pete: In NYC, there are huge tax breaks for developers who build condos/rental apartments, leaving a certain percentage for middle-income and poor people. Also, IIRC, developers can purchase such tax breaks from other developers, much like air rights (someone maybe can correct me). It’s how a city government gets low-cost housing built. Also, rent regulation was originally a benefit for both landlords and tenants (esp. when rents overall were much lower, say in the 70s and 80s; it guaranteed a steadily, if low, increase in rent from tenants).
“Actually, I think the average studio in Manhattan is @ $2,400. Really. One bedrooms are @ $3,100.”
Ok…. I was LOW by $400. Imagine what it would be when you pull controls? But what do I know? I only live here.
I guess the barking lap dog from HillBillyLand realized that nipping at heels isn’t such a good idea.
Thank you for posting up current data JMunnie.
I feel pretty good in my rent stabilized 2BR 2 BA 1100sf high floor apt overlooking the Hudson River at $3200/month. I got a ‘preferential’ rent years ago and moved in with free rent right after 9/11. taking the 1 year leases on the rise up has kept the price down. If I renewed 1 year they will jack my rent 4.5%. If I move out the next tenant would pay around $4500/month right now, and I think they would get it fairly quickly. If my rental was a condo it would easily be a $1.1M place.
people, people. Not all Manhattan is 2000+ for a studio. Some neighborhoods are higher, some are lower. To me, 400-600 sq ft is a closet and I canot hink of living in a closet, except on a s/t basis.
Apts of this size should not be more than 1200-1300 if they were priced realistically. Let us not forget what you are getting: usually a shadowed apt looking at a brick wall, no closet space, bad plumbing, noise and lots of little scurrying pets. EWWWW.
“Rent de-regulation hasn’t worked in Boston”
What we do know about Boston is that price declines came sooner and faster than they are coming in Manhattan. This tends to support the view of Paul in Jax that getting rid of rent control would rationalize Manhattan prices sooner.
Rent control sucks the big one. The new renters subsidize the old renters and the old renters still piss&moan about everything. I hate rent control tenants.
There was an article about the Stuyvesant buildings in the Times today. What kind of “middle class” lifestyle is it to live in New York City without air conditioning?
Stuy town just added AC in the last few years, but the complex really is a glorified project.
I look forward to 1200/mo 1 bedroom, decent apts…
considering Tishman Speyer yesterday paid 5.4 BILLION for Stuyvestant Town (rent stabilized lower-middle class housing projects), the 1200/mo 1 BR is a dinosaur.
I don’t think those existed even when my dad worked in Manhattan in the 1960s.
TxChick:
P.Cooper Village/Stuy Town was built right after WWII. I think, but am not sure, that Robert Moses was behind the plan. And a lot of NYers don’t know it’s there; it’s a goodly distance from the subway (for NYers, that means more than a 10 min. walk) and family oriented. It also has one amenity that you could spend $1000 a sq. ft. in Manhattan and not have: ONSITE PARKING.
Stuy town is a nice place. Some of the apartments are huge.
From the outside, it really does look like a housing project. I used to live accross the street from a real housing project (the Frederick Douglass Houses, @ 104th and Columbus) and Stuy town looks more or less excatly like the Douglass Houses.
Inside, though, it’s a really nice place. Very spacious. Clean. Lots of families. Onsite parking. Very nice.
I love how these pukes attempt to frame prudent money as “low confidence” and “no urgency”.
What these charlatans are wishing for is a return to “buy now or be priced out forever” mentality. Those dumbasses already got suckered. There are none left except the sellers/speculators themselves.
““Experts said they’re hoping builders and bankers remember lessons of the early 1990s to prevent severe losses.”
Those “builders and bankers remember lessons of the early 1990s ” and acted on that would have lost out in competition to those who chose to ignore the lessons!!!!!!!
The dirty little secret of competition — it rewards those who engage in bad behavior in the short-term, e.g., 4-6 years. Add to that the fact that Corporate Crooks are playing with someone else’s money and they have no reason to behave responsibly. And if they do, they are likely to lose to those who don’t.
What a system!
Jas Jain
‘Those “builders and bankers remember lessons of the early 1990s ” and acted on that would have lost out in competition to those who chose to ignore the lessons!!!!!!!’
Spot on. In a moral-hazard socialized credit system, the problem isn’t finding money to lend, it’s finding chumps to lend it to. Either you do it or your competitors will. You pocket the profits while the Ponzi scam lasts, then bail and dump the inevitable losses on the taxpayers, foreign central banks, or whatever other bagholders you can find. Wait 2 or 3 years so that everyone forgets about it, then repeat in some other industry.
“The slowing market in Manhattan, he said, is being driven more by an oversupply of new properties than by the resale market. Inventory is up 65 percent from last year in Manhattan and the majority of those properties are new construction, he said.”
Can somebody help me on this one? How is the increased supply slowing sales? I thought two things were at work here (well there is more than two). One is the slowdown in units being sold, the other is inventory that is skyrocketing. I do understand that buyers maybe afraid of dropping values but, just having a bigger inventory is not the reason sales are slowing.
Here are a couple of reasons:
(1) Rising inventory usually means lower prices. Buyers see all the inventory and expect this to be reflected in lower prices. But sellers haven’t lowered prices much for whatever reason (entitlement, relying on equity for retirement, HELOC’d too much and underwater). Thus, stalemate. And fewer sales.
(2) Many buyers first need to sell their homes in order to trade up. The increased inventory and decreased amount of buyers make it hard for these buyers to sell. Thus, fewer transactions.
and (3) exit of speculators. For that to happen, we needed some initial stumble in the rise of prices. That stumble was perhaps brought about in Florida. By rises in interest rates, rises in insurance premiums, and the general “affordability” issue that limited the pool of greater fools. Once the stumble got some publicity, it got some flippers to pull back, and then the same herd mentality that caused the run-up comes into play on the way down.
Remember, ‘we could have sold more if we had more inventory’?
(Manhattan is one of those areas that I would not bet against.)
Three things are going on. Cyclically, you have the bubble. Structurally, places closer to the center are becomming more valuable relative to those on the outskirts in regions with economically viable central cities (there is now a shortage of those, relative to the number of people who want to live in them). Third, you have unprecedented condo construction in the viable, and would-be viable Downtowns.
I still say you get a big decline in Manhattan and places like Brooklyn, where I live. These areas have had a far bigger run-up during the bubble that joe-suburb. The structural change is already priced in, leaving city and suburb to fall by the same amount.
Just to follow up, Mastic-Shirley is pretty much Joe-suburb, way out from the center (but with a commuter rail stop and near a beach). There you have a typical home that someone is trying to sell for $315,000. Well, in my middle-class Brooklyn neighborhood, a rowhouse identical to the one I bought for $200K in 1994 went for $1 mil at the peak.
I’d rather live here than in Mastic-Shirley. These days most people would. But it’s a strech to say my close-in neighborhood — which probably cost MUCH less than Mastic-Shirley 20 years ago — will fall by a lower amount.
mastic-shirley is more working class than joe suburb. pretty small houses, lots of junky areas.
I looked at summer houses in Mastic Shirely five years ago. Most 2BR bungalows were in the $85-100K range. $300K for one today… Greater Fool pricing.
Spastic Beach is where you live when you’re working in the Hamptons as some sort of servant for the summer. Shirley is full of housing projects.
Amen, brother. The building they are doing in Brooklyn makes the building in Manhattan look sane. When this thing really turns down those $900,000 condos and lofts in Williamsburg and Park Slope won’t look like such a great deal. All it takes is any one of those neighborhoods turning down a little, riff-raff returning, and those will become some high-end slums.
(When this thing really turns down those $900,000 condos and lofts in Williamsburg and Park Slope won’t look like such a great deal. All it takes is any one of those neighborhoods turning down a little, riff-raff returning, and those will become some high-end slums.)
I don’t see the return of the welfare-dependent poor. But I do see units becomming affordable to the affluent. At $400K to $600K, the condos will sell. Or they will rent for the equivalent.
Even if you believe good things about NYC, the prices are too high.
These articles keep referring to “buyers”, as if there is a hoard of them out there just patiently waiting for token price drops. The reality is all together different, the buyers are a mirage. Case in point: Stifel Nicholaus downgraded subprimers NEW and LEND today, estimating that 20-50% of borrowers would not qualify under the new underwriting standards that NEW adopted last week.
I agree that this mantra of “buyers waiting on the sidelines” is BS. The number of sales going on now is an accurate representation of how many people out there 1) aren’t priced out and 2) aren’t “owners” who won’t or can’t move up.
Now, in NYC that still means a lot of money changing hands, but the huge transaction volume of the last few years was clearly a case of borrowing sales from the future.
Aren’t we buyers waiting on the sidelines?
Yea — there are a few thousand thinly distributed blog readers who are buyers — in five or more years…
GS- I see your point– not the groundswell of support they are counting on…
Yes, maybe, but some of us who have recently sold property are delighted to find that the excess of new houses also leads to some wonderful renting opportunities that were not previously available. Desperate would-be sellers are renting out at below-previous-market rates. Case in point: I am living in a 3BR 4BA brand-new waterfront house for $1000 a month. Plus heat which will be substantial if I stay in Maine much longer. But I might just keep the house going over the winter at 48 degrees and go rent in FL for a while. Or back to az place.
I’d consider myself a buyer on the sideline. At the moment, I just don’t see any upside to getting involved now and a LOT of risk associated with purchasing a home. For the time being, I’m quite happy to continue renting while paying down some debt and saving up for a 20% downpayment to avoid PMI. It will take a lot more than 5-10% off peak Summer 2005 prices to motivate me into making a decision before I’m ready.
So if a seller wants me to purchase, he can either lower his price significantly (30% off 2005 highs) or wait for me to get into an optimal financial position to purchase. I feel fortunate that 18-24 months from now will probably be an ideal time for both conditions to be met.
Lowering the asking price for a “$315k (circa Q2-05) home” from $285k to $275k isn’t going to cut it. I’ll wait until the price goes below $250k and then offer $200-225k. If that home sells beforehand, fine–there will be plenty more just like coming on the market over the next few years.
I disagree. There are buyers out there, but at a price point. Those buyers hold dollars in strong hands. The weak hands are the sellers….. at the moment.
Price point = 50% off recent peak
Bullseye
“Price point = 50% off recent peak.”
agreed. in 2012 or so. prices are very sticky on the way down in manhattan. but we lost 47% in the 90s downturn. and this is much, much worse.
of course, i don’t expect my own place will lose more than 25% or 30% because of it’s unique value, great neighborhood, garden and villa amenities, etc….:)
but 40%-50% off 2005 peak for average manhattan properties? sure, by 2012… maybe 2014. sounds reasonable.
and it took from 1989 until 1996 before real market capitulation. it might be a bit quicker and more violent this time around because of the huge overhang of new inventory. when that boom comes down it’s going to crush everything below it.
not much different at all from everywhere else in bubbleville.
“It’s like a buffet table at a banquet where they keep bringing more plates from the kitchen,’ said David Michonski, CEO of a large brokerage firm in Manhattan. It’s as if buyers are thinking, ‘I like this shrimp, but maybe there’s lobster coming out,’ he said.”
More like, “Jeeze, we’ve stuffed ourselves. Anybody at the table still hungry? Nope? Everybody who could possibly take another serving? Nope, let’s leave, then….”
At this buffet of gluttony, there is too much indigestion and food poisoning from all those toxic loans and overpriced crappy homes. It’s time to go home, take some stiff medicine and go to bed for 5 years or so.
Manhattan crashed catastrophically in 1974 and less dramatically in the late 80s. It is now a “hollow” city, the middle class having been displaced by the very wealthy, most of whom occupy their coops for only a small part of the year. This model works for Aspen (the only RE market I do not expect to see decline significantly), but is unsustainable for NYC.
BTW, it wouldn’t surprise me if yesterday’s sale of Stuyvesant Town/Peter Cooper Village for $5.4 bil marked the top in the Manhattan market. I also see last week’s sale of a Jasper John’s painting for $80 mil as marking a top in the art market, which is closely related to Manhattan real estate.
(BTW, it wouldn’t surprise me if yesterday’s sale of Stuyvesant Town/Peter Cooper Village for $5.4 bil marked the top in the Manhattan market.)
There has to be some reason why Metlife wanted the whole deal done, start to finish, in less than two months.
Actually, A Klimt just sold in June for $135M bought by Ron Lauder of Este Lauder fame..
http://tinyurl.com/zw8of
Will the art bubble go down with the housing bubble?
Many fewer Klimts exist than Johns. Also, the Klimt becomes the centrpiece of the Neue Museum (86th and Fifth) and its price can be at least partially explained because of this. The Johns was sold to an insecure hedgehog (hedge fund manager) looking for a trophy to demonstrate his aesthetic savoire faire. This totally pathetic fool got taken to the cleaners by a savvy David Geffen. Same thing happened in Japan at the top (1990) when a Van Gogh was sold for $82 mil to “an industrialist” subsequently convicted of fraud. The art market is often a great “tell”.
Let me rephrase my question: Will the art bubble go down with the housing and hedge hog bubbles?
GS, I think it one ,and the same. Excess liquidty…Stratospheric before the fall. Houses, toys, debt, etc…Saw a blurb on CNBC yesterday. Wages are the last to rise before past downturns..Wages rose last month past inflation for first time in 5 years? …..signed: waiting and watching the water recede.
And how much does it cost to get a sofa to match?
I do not understand why someone would buy a house without the contingency of requiring their current house sell before settlement on the new house. My daughter, upon my insistance, had that contingency in a contract. It was accepted and everything went smoothly. What people seem to forget is that these house transactions are major financial transactions and should be treated as such.
Sellers don’t want such contingency clauses (aka Hubbard clauses) for the same reason buyers want them. They may be common in other parts of the country, but are practically nonexistent in the northeast. And if was was selling right now into this market, I wouldn’t agree to such a clause either.
Lex-This was in Maryland.
By the way, there are many ways around that clause that makes it pallatable to both buyers and sellers.
“…there are many ways around that clause that makes it pallatable to both buyers and sellers.” True, ‘tho the workarounds I’ve seen essentially result in an option agreement, and depend on the seller not being in the same boat as the buyer, i.e., having to sell in order to close on a purchase. I would be very interested in seeing the variations on the typical Hubbard clause.
Had a friend who bought new construction in Shirley back in the late 80’s (1989 I think). He was just married and everyone told him to not throw money away on rent, etc. So he bought the only house he could afford and commuted 2 + hrs to NYC. After a couple of years the commute was killing him and he sold in the mid-90’s. He had to bring about 40K to the table at closing. I think we will be seeing a repeat of this again in the near future.
OT:
How Could the Housing Slump Affect the Nation’s Economy?
“Earlier this month, Federal Reserve Chairman Ben Bernanke highlighted the risk that the sinking housing market could put a dent in U.S. economic growth in the second half of the year. Mr. Bernanke, answering questions after a speech in Washington, said the housing sector is undergoing a “substantial correction” that will likely shave about one percentage point off of the nation’s growth in the second half, “and probably something going into next year as well,” estimates close to private forecasters’ views. But he also said it is tough to predict how the weakness will impact the overall economy.
“The Online Journal asked Celia Chen, director of housing economics for Moody’s Economy.com; Christopher Mayer, a Columbia University housing economist; and Susan Wachter, a professor of real estate, finance and city and regional planning at the University of Pennsylvania’s Wharton School, to discuss their views on how the housing market could shake out and how big a ding it could put in economic growth.”
“Home sellers…think that next year’s market may be worse so they feel they have to sell now.”
Is seller psychology changing or what? This is 180 degrees from late Fall early Spring. Some sellers are finally catching on to their predicament: sell NOW at a small loss or be stuck next Spring!
“Buyers think that next year’s price may be lower so they feel they have to wait now.”
180 degrees - YES!
“Experts said they’re hoping builders and bankers remember lessons of the early 1990s to prevent severe losses. And they’re hoping for a spring 2007 comeback. Said Ornstein: ‘If you didn’t overleverage and overpay for land, you … should be in a strong position to be able to hold on.’”
I think it’s safe to say that the lessons of the early ’90’s were completly forgotten this time around.
Hope springs eternal. One of the things that will prevent the spring 2007 comeback is that they will in fact go on building and building just to stay afloat for as long as they can.
My NY Real Estate Story, which I’ve told before so forgive me if you’ve already read it:
In 1995 I bought a tenement 1br for $62,000. It had sat on the market, empty, for over a year. Most 1brs in the LES and EV were about $85K or less. My apartment had sold for $120,000 in the 80s and had been taken by the bank in foreclosure. So, it was listed for half of what the previous owner had paid a decade prior.
I bought it because it was a little bit cheaper to own than it would have cost to rent. I saw that rents were going up and I needed a place to live. I was making $25,000 a year and still needed a roomate so I could cover the maintenance and mortage of $800/mo.
In Dec. 2004 I sold that 1BR for $535,000. At the closing, the buyer’s cashier’s check had a typo in my name so I couldn’t cash it. It took one week to get a corrected check. The reason for this was because the buyer’s had sold their apartment and accepted a check IN MY NAME to buy mine, and the people who bought their apartment had accepted the check IN MY NAME as payment for theirs. Three apartments closed that day, and I was the only person who cashed a check. Everyone else bought another place.
In my opinion, that is why there aren’t as many buyers. Everyone has pushed their money around in this pyramid scheme and nobody else can get in. I would also add that even with the nearly $450 profit I made, my wife and I couldn’t afford a two bedroom in the same neighborhood because the mortage on the balance and maintenance would have killed us. We invested the money with a financial planner and it is doing well, but the appreciation on our old apartment has kept pace. It probably went up to $600K. Our portfolio is worth $535K now.
Now I live in Queens, which took a year to adjust to, but I like it now.
New York , New York!!!!
If ever a case could be made for the “it’s different here” camp , NYC would be the place.
You have to remember that the average Wall Street salary last year was over $289,000 . Expected to exceed that this year. That’s an average of course and not a median , but still..
However. This holds true only as long as Wall St chugs onward.
You cannot overestimate the impact of Wall St on NYC real estate.
I’m not sure that a market crash would have too much impact initially , but a long slowly deteriorating economy , stock market would eventually kill the market there as well. It just may be stickier than elsewhere.
And the difference between average and Median is significant in this case. Ranking in in ops and the bazillion associates etc who make from 40K up to 100K in, is offset by individuals who pull in the Dick Grasso and Hedge Fund money. Seeing as the investment banks and just normal banks need their ops teams to support them, there are alot of low pay individuals out there.
No question, NY is “different” in that, if there’s a major downturn in the finance sector, it will have a much bigger effect here than all the other combined factors affecting other markets.
Right now in NYC we’ve got masses of 28-year-olds receiving Christmas bonuses of $400k, and masses of 40-year-olds getting annual bonuses way into the seven figures. Those people just don’t care much about where the Real Estate market’s headed, they just want what they want and they can write the check.
However, these people DO care about where the securities, commodities, private equity, etc. markets are headed, and if those turn down, the play-money dries up in a NY minute.
Wall Street employees make up only about 4% of the NY City workforce.
Exactly. I guess only people who 1) have never lived in Manhattan or 2) never get out of Wall Street think the whole city is packed with traders. Thankfully, you can go months and months without meeting a single one!
Does the 4% count lawyers, consultants, accountants, etc.? Probably not, and all of them are feeding at the same trough.
Also, as we all know, prices are set at the margin, so it doesn’t take all that many freshly-minted rich guys to move markets in a place like Manhattan.
Again, prices are set at the margin, and a cash-flush 4% can certainly drive the market (especially when that 4% accounts for a much greater share of overall wages).
“Now, the Lombardis are trying again, especially since Pulte said it would put the $20,000 toward another house if they buy within a year”
This is a VERY telling sign of Pulte’s desperation. How many builders would have agreed to this last year?
“‘It’s a buyer’s opportunity right now,’ Klar said.”
It’s a GF’s opportunity to catch a falling knife right now.
You are absolutely right. As i mentioned above, there are really terrific opportunities to rent beautiful new places from desperate builders/sellers.
In Manhattan? Please clue me in!
There’s one factor, I think, that’s being ignored re: NYC RE in this (great) discussion - that a lot of weird deals got made at the peak.
An example: my friend and his rich wife moved to NYC a bit over a year ago. They couldn’t find anything in Manhattan that worked, so they bought in Park Slope. They paid about $1MM for _half_ of a brownstone.
So, how do you buy half of a brownstone? You enter into a two-unit co-op with the other half. As one would expect, this arrangement has not worked out well.
There are a lot of weirdo situations like this - properties that have been cut into odd arrangments, etc. My guess is that people like my friend are going to watch their properties fall below the 50% mark on the way down, even though they’re in desirable nabes, in desirable school districts, etc.
Regarding Manhattan real estate:
Was reading a bio on Jim Rogers( he of commodities fame).
He bought his place in Manhattan in 1979 for something like 120K. Belonged to the Cathololic church. Claims he could sell today for 10 million, which he admits is insane.
Yes, Manhattan is ridiculously overpriced, and there is a bubble. But it IS different here. Why? Because unlike the bubble markets in FL and the west/southwest, the cost to rent vs. cost to own have become sickeningly comparable. It isn’t that the cost to own has gone down. Rather, the rents have skyrocketed to obscene levels. Case in point, a typical 500 sq. ft studio in a downtown doorman building will rent these days easily for $2500 at the low end, probably more. The same apartment in a coop building will sell for $400K. Assuming 20% down and a 30yr conventional mortgage at 6.25% and $500/month maintenance, the monthly payment is around $2500, but much less after tax deduction. What is particularly perplexing is that people must have impeccable financials to rent in Manhattan; most landlords require proof of 45-50 times the monthly rent in income, perfect credit and sound financials. It isn’t like they could fudge their income like they could on a stated income mortgage. Sure, the drive-up in rents was largely instigated by panicking homeowners who cashed out. But renting has gotten to such an absurd level, yet people are more than willing to pay these insane rents- Manhattan still has less than 0.5% vacancy rate. Buying looks downright good right now by comparison!
Unfortunately, the only way we are going to see significant reductions in NYC prices (greater than 20%) is only if the economy really, really tanks. Not only would Wall Street need to cut its workforce and bonuses, the “kidults” would no longer be able to tap the ATM at the Bank of Mommy and Daddy (since their own housing ATM will be empty). But this is a pretty extreme scenario, to be sure…
“Case in point, a typical 500 sq. ft studio in a downtown doorman building will rent these days easily for $2500 at the low end, probably more. The same apartment in a coop building will sell for $400K. Assuming 20% down and a 30yr conventional mortgage at 6.25% and $500/month maintenance, the monthly payment is around $2500, but much less after tax deduction.”
I’m not going to quibble with your calculations here, but just point out that you’ve left out an important variable: the maintenance. You can’t calculate the cost of living in a coop just on principal+interest; you have to add the maintenance as well, and that is substantial. My non-doorman coop in Flushing charges around $400 in maintenance for our studio apartments. With very few amenities, that mostly pays for taxes, mortgage on the building, insurance and heating costs. An amenity-packed Manhattan building, with higher taxes and insurance, possibly a larger mortgage, and certainly higher staffing costs, is bound to charge more.
Does anyone have any hard numbers on maintenance fees in Manhattan coops?
there are no data on mtce in NYC. A good rule of thumb is ~1.50 per sq ft per month.
He also forgot many co-ops require 1/3 or even 50% down in some buildings.
Um… re-read my post. I included a maintenance of $500/month ($1 per sf, which is on the low end, but still realistic). To think… owning is actually cheaper in this insane city.
This “city’ includes outer boros -where renting is still much cheaper than owning- and in Manhattan, average studio rents are closer to $1800-$2000 (see craigslist)…however, there are lots of studios now (see same) that are going down in price –they are the most risky properties to have in a downturn, and manhattanites and other boro dwellers are falling over themselves to shed them. As the backlog buldges, rents will go lower.
Those who buy studios now can expect steeper and further price drops…
What is the median rent in NYC for a one bedroom? When I moved here 2 years ago it was $2600. I pay $2250 on a 850 sqft one bedroom with a fireplace, W/D and dishwasher. A Walk-up but very nice. Unless rents on a one bedroom are now over
$4000 I can’t see how your calculation is correct. A one bedroom costing around $600k (with nothing down) would have around a $5000 monthly cost including maintenance and taxes. Are one bedrooms now 4k? I doubt it. I still think buying is still about 25% overpriced compared to rents. 50% overpriced–I wish but doubt it. Whatever it is someone like me, a doctor, still has trouble affording Manhattan. Maybe it will be an island of hedge fund managers one day, but somehow I think all that funny money will disappear. Eventually.
there are plenty of 1 BRs downtown going for $4k a month.
4K seems to be the going rate for a 1BR in a FULL SERVICE building. Accordingly, $2250 sounds like a decent deal in a walk-up tenement/brownstone/townhouse building with no amenities. But then again, outside of the West Village, Chelsea and SoHo, a walk-up non-doorman building 1BR does not go for $600K (nor would it rent for only $2250).
Good catch on the maintenance. It never goes down and it can be a big bite. Interesting article from the last trough.
http://tinyurl.com/yc89ld
great article, knock! and 1994 was not even the bottom … not really until 1996. but it shows how monthly maintenance fees become increasingly important in controlling price in a normal, fundamentals-driven, rather than bubble market.