“Developers Are Running For The Hills” In New York
A housing report from the New York Times. “In the last few years, renowned architects and enterprising developers have rushed to put their stamp on Manhattan with contemporary condominium buildings that have seemed far more inventive than the staid old co-ops of the Upper East Side. But now, they are looking at the horizon and fearing that there will soon be a glut.”
“There are currently 28,258 new condominium units either under construction or being planned in Manhattan, according to Cushman & Wakefield. Real estate experts do not believe that all of these projects will be built, or at least built as condos.”
“‘I’m getting five calls a week from people who own sites and want to sell them,’ says Michael Forrest, who works in the New York office of a real estate investment brokerage. ‘I’m surprised at how many developers are running for the hills.’”
“Real estate brokers are advising developers to turn some of these projects into anything other than condominiums. And some major banks that lend to condo developers are cutting back on loans for proposed projects or for land that developers want to buy.”
“The developers of a condo conversion project at 485 Fifth Avenue (41st Street) returned deposits to prospective buyers and sold the project to the Global Hyatt Corporation, which will convert the office building into a hotel. The Related Companies has turned seven apartments in its new 39-unit building called Astor Place into rental apartments.”
“Still, the inventory of unsold Manhattan condos has jumped by more than 70 percent in the last year. As of Oct. 31, Manhattan had 4,115 condos available for sale, compared with 2,381 a year earlier, according to the Miller Samuel appraisal company.”
“For the most part, (developer) Veronica Hackett said, she says no to the weekly calls and e-mails she gets from other developers trying to sell her their problematic condominium projects. ‘I think today people are having enormous difficulty getting their costs in line,’ she said.”
“Developers are considering other sites only if they can profitably use them for something other than condominiums, said Robert Knakal, the chairman of Massey Knakal Realty Services Inc.. As he put it: ‘Some developers are not willing to build condos anymore unless they really get a great deal on the land.’”
“Credit Suisse First Boston has become so cautious that it is generally not lending to developers who want to build condos on midblock sites in Manhattan or on sites that do not have a supermarket or dry cleaner within three blocks. ‘We’ve turned down several projects based on their location, whether it’s a certain part of town or a certain location on the street,’ said Robert Brennan, a managing director.”
“Some real estate brokers are encouraging uneasy building owners to abandon the condominium market entirely. Mr. Forrest of Marcus & Millichap was hired last month to advise the seller of a 20-story office building five blocks north of Madison Square Park who was considering selling the building and marketing it for potential condominiums. But Mr. Forrest quickly saw that there was too much competition from other projects. ‘I’m telling him to sell it as an office,’ Mr. Forrest said.”
“In the financial district, Mr. Forrest finds few buyers for building sites. One of his clients, a developer who was buying a five-story office building on Stone Street, wanted to sell it before he even closed on it. After six months of shopping the location for $16.5 million and not getting offers he liked, the owner decided to convert it to condos himself, although he’s entering a neighborhood heavy with inventory.”
“‘He paid a price that won’t allow him to keep it simply as a five-story commercial building,’ Mr. Forrest said. ‘He will lose money if he doesn’t build.’”
The East Hampton Star. “The fact that the number of sales on the South Fork has declined, along with the overall volume in dollars, does suggest a market in transition. ‘Prices have gone down a little,’ said Susan Breitenbach, a senior VP with the Corcoran Group’s Bridgehampton office.”
“The number of sales of houses priced between $1 million and $2 million went down 50 percent this quarter, and sales of houses priced between $2 million to $3.49 million went down 32 percent. The number of sales of ‘entry-level’ houses (those priced under $500,000) decreased by 46 percent, according to (broker) Judi Desiderio. ‘I attribute it to a sheer lack of inventory, certainly not a lack of interest,’ she said.”
“HREO.com, which deals in East End real estate, lists 5,528 houses for sale. Of those, 2,628 are priced between $1 million and $3.5 million.”
“A majority of improperly priced inventory sits on the market. It is a situation that has, in some cases, led to deep price cuts. ‘A flawless 5,000-square-foot new traditional on 1.4 acre, well landscaped with a pool, started at $3.2 million and is now down to $2.4 million,’ said Ms. Desiderio.”
“‘After January, prices will increase,’ Ms. Breitenbach predicted. ‘The market is only going to get better.’”
“In some parts of Westchester, the market is clearly in a downturn, if not a full-blown real estate recession. In most towns, villages and cities, real estate agents report flagging sales and increasingly frustrated sellers. Homes are staying on the market longer, inventory is building and buyers are biding their time.”
“At smaller in-fill projects, like the new town houses for sale on the south side of New Rochelle on Pelham Avenue near the Long Island Sound, none of the 10 units at AnnMar Gardens have sold since they went on the market early in the summer.”
“Agent Rose Bulfamante said that because of the slow market, the developer was considering dropping the asking prices, $779,000 to $849,000, on the three-bedroom units and offering the incentive of a year’s membership at a local beach club.”
“‘Even a community like Bronxville doesn’t exist in a vacuum when it comes to this market,’ broker Leah Caro said. ‘Some places may be more insulated than others, but only a rare few are altogether immune.’”
“Sean and Lynn Leary, whose vintage 1920s colonial in Pelham Manor has been on the market since July, many have had to adjust their sights. The Learys’ house came on the market for $1.289 million and sat without offers throughout the summer and early fall. The couple have since lowered the asking price to $1.199 million, and Mr. Leary has torn down the original two-gar garage and is building a new one in its place.”
“‘Some people say it’s an ego thing with sellers not wanting to accept lower offers,’ said Mr. Leary, a commercial real estate broker, ‘but that’s not really the case, at least with us. It’s more about sellers like us who are just trying to understand what’s happening. Sometimes, it feels like we’re trying to catch a falling knife. We’re trying to anticipate what’s going to happen next.’”
“‘It’s pretty clear to me that nationally we’re seeing a pullback in the real estate market. In some places, it’s truly a burst bubble; in other places, like in Westchester and Putnam, it’s more like a correction,’ said P. Gilbert Mercurio, CEO Westchester County Board of Realtors in White Plains.”
PBS has this related report:
‘NOURIEL ROUBINI, New York University: Here is my building. There is another one that is just being finished right there. There will be 500 new units. Now, another site right across the street is going to be a 40-story-high residential building. If you look here, in Tribeca alone, I have a map that shows you all the new developments that are coming up in the next year-and-a-half. You see…’
‘PAUL SOLMAN: This is the black?’
‘NOURIEL ROUBINI: Yes, these are all the blacks. If you count them between northern and southern Tribeca, there are about 80 new residential developments. That’s the glut.’
Nouriel did a great job on the Lehrer report last night — bravissimo!
But I am curious — is Yardeni really as dumb as he seemed, or is it just that he has a job to do for the people who pay him, which is to convince all the NYC cab drivers and hair dressers to keep on investing in Manhattan residential RE until the inventory colon is cleansed?
“…NYC cab drivers and hair dressers…”
Nice.
taxpayers pumped 20+ billion into NYC
even w that it’s getting soft
can’t stop the market ,dude
I thought it was the giant printing press that was dumping $$$ into NYC. Taxation is political anathema.
Stucco, where is that printing press? I’ve looked all over this city and I can’t find it. I want some of that free money. If you find out the address, I will run right over. I will split the loot with you 50/50. Maybe I can afford the “luxury” lifestyle every new building is selling.
I don’t see what printing up money can do to fix a glut. At any price, who wants to own an empty condo in NY?
Everyone coming across the border.
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Carrying cost (monthly maintenance charge) in Manhattan is nasty.
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Ask Curbed: Rising Maintenance Charges
Friday, November 17, 2006, by Scott
http://www.curbed.com/archives/2006/11/17/ask_curbed_rising_maintenance_charges_.php
I think money can go a long way towards creating a glut, but then printing more money is no way to fix it.
Talk to some cab drivers and hair dressers. They can fill you in on how to obtain free money for real estate investment purposes.
I could try to talk to an NYC cab driver but I wouldn’t understand a f#cking word he was saying. They are lower forms of life than the rats. If you live here, you have to hate them all. Thank you for the rant time.
طهران تهدد باستخدام النفط في حال تعرضها للعقوبات
قال قائد الحرس الثوري الإيراني يحيى رحيم صفوي إن فرض أي عقوبات دولية على بلاده قد يؤثر على تدفق النفط بالخليج العربي. بالمقابل استبعدت واشنطن استخدام النفط والغاز في الجولة الأولى من العقوبات, مشيرة إلى أنها تؤيد عقوبات تدريجية.
I’ll drink to that. (LOL)
MY NYC experience wasn’t complete until the day I was cursed out “in the name of Alah” for walking across a crosswalk, with the light, near times square.
Gekko said:
Tehran threatens to use oil in the event of sanctions commander of the Iranian Revolutionary Guard Yahya Rahim Safawi that any international sanctions imposed on his country would affect the flow of oil to the Arabian Gulf.Conversely ruled Washington to use its oil and gas in the first round of the penalties,She pointed out that she supports incremental sanctions.
What’s to celebrate?
‘After January, prices will increase,’ Ms. Breitenbach predicted. ‘The market is only going to get better.’
Once again, another REIC imbecile spouts garbage based on absolutely no facts. Besides, who exactly does it help when starter homes are priced at $500K? Certainly not the buyers or current owners. The PITI would send nearly everybody to the poorhouse.
Spoken like a true arrogant real estate agent. Well, all the posturing in the world is not going to make the coming long winter any shorter or warmer, particularly in houses of cards like the Hamptons. A lot of people out there who were only recently congratualting themselves on how smart they were for buying in the Hamptons will soon be asking themselves what the hell happened.
“What is driving the market are individuals buying their second, third, fourth, or even fifth house, according to Jason Schommer, a vice president at the Bridgehampton office of the Corcoran Group. “We’re purely a second market. I’d bet 75 percent of the transfers are from these buyers.”
At a point, declining values make those second, third and fourth homes look less like toys and more like disasters.
The toy sales are typically the ugliest. Whoever ends up with the most toys loses!
“We’re purely a second market.”
It sounds more like they are a second, third, fourth or fifth market. This is a direct consequence of Greenspan’s anti-gravity experiment of holding the real Fed Funds rate at negative levels for a protracted period of time in the early 2000s. One of the experimental results was a pernicious distortion of the housing market towards a glut of speculative building and flipping in high-priced areas.
Does the Fed plan on more of the same, given that Greenspan’s experiment has already resulted in condo and McMansion gluts plus a giant flipper-flop?
“A flawless 5,000-square-foot new traditional on 1.4 acre, well landscaped with a pool, started at $3.2 million and is now down to $2.4 million,” said Ms. Desiderio.” - http://www.easthamptonstar.com/DNN/HomeNov162006/BusinessRealEstate/Properties/tabid/606/Default.aspx
Next stop for a home like this $1.6 million.
Who wants to buy if it’s going to cost less next year?
“For buyers it’s really important to understand the market, not what’s reported on CNBC or The Wall Street Journal,” he said. “Those sources compare statistics nationally, taking into account real estate prices in Kansas City as well as Malibu - it gives a skewed view of the world.”
=====
Skewed?? God forbid buyers consider intrinsic value - aka shelter - when buying into an area featuring 5 to 8 million dollar “starter homes for the rich.”
It is currently happening throughout all the United States and constitutes a catalyst of the impact phase of the global systemic crisis. The US consumer, i.e. the US middle class, basically becomes insolvent[11], victim of overwhelming debt, a negative rate of saving, the bursting of the real estate bubble, the rise of interest rates and the collapse of US growth. All these elements are dependent, and mutually reinforcing, to plunge the United States, starting from the end 2006, into an economic, social and political crisis without precedent[13].
http://www.newropeans-magazine.org/index.php?option=com_content&task=view&id=4906&Itemid=110
Good post Dave Chiang. I don’t think people grasp the enormity or severity of this. Reporting on every subtle nuance of the fallout, reminds me of the sheepies following the market down. The American credit bubble debacle will end in depression. How anyone can feel good going through that is beyond me. If you think the American way of life will not be changed forever, think again. For the American government to have done this to her people, makes me ashamed to be an American.
I too think we may be in for a sever recession or even a depression but its important to remember that its all just bits of paper and computer records. The people are still the people and have the same skills they had before, the mines are still full of resources and the factories haven’t disappeared. Even in Germany with hyperinflation and the collapse of the Weimar Republic, its important to remember that 10 years later they had conquered western Europe, central Europe and most of European Russia.
You might want to consider what happened to Germany just three years after that.
I’m not sure that the Third Reich circa 1942 is really the “success story” anyone here is hoping for.
ROTFLMAO!!!
Yes. what you are saying is true. However, we have slowly but continually eroded our manufactring base. When the time comes there will be no more “factories.” In addition, our human capital has been trained to sell houses and trade bonds. It is not like we have a flood of engineers out there waiting to be nleashed on the world.
No. This one could be worse.
Wasn’t implying that the 3rd Reich is a good example of how to get out of a depression :-). Just saying that the physical and human capital doesn’t cease to exist just because of a depression and thus recovery doesn’t have to take decades.
I like the byline of the NYT piece, “Changing Course to Avert a Glut,” which brings to mind a favorite recurring theme on this blog:
“Hurry up and slam the barn door shut. Never mind that the horses already ran away yesterday.”
— FORECLOSURES SURPASS 1 MILLION MARK IN OCTOBER
By RealtyTrac Staff
Foreclosure Filings Increase 3 Percent From September, 42 Percent From October 2005
http://www.realtytrac.com/ContentManagement/Library.aspx?ChannelID=9&ItemID=1433&accnt=64847
— Calculated Risk, 4 November, 2006:
the NY Times article: Mortgage Lesson No. 1: Home Is Not a Piggy Bank
From the article:
“In the first six months of this year, even with interest rates rising, more than $511 billion was extracted from homes through cash-out refinancing and home equity loans, and that was more than the amount taken out for all of 2005, a record year for mortgage equity extraction.”
This is not correct. From the Federal Reserve Flow of Funds report, mortgage debt (including home equity loans) increased a total of $436.4 Billion in the first 6 months of 2006. Total household mortgage debt was $9,324.5 Billion on June 30, 2006 as compared to $8,888.1 Billion on Dec 31, 2005. (See line 32 in linked Fed report). Line 32 includes “loans made under home equity lines of credit and home equity loans secured by junior liens.”
And that is total mortgage debt. To calculate MEW, household investment in housing has to be subtracted from the increase in total mortgage debt. This includes investment in new homes, home improvements, and various taxes and fees.
The following table is a comparison between the NY Times numbers and my estimates of MEW:
MEW Comparison: NY Times vs. CR (billions)
Year NY Times CR estimate
2001 $210 $156
2002 $260 $331
2003 $410 $453
2004 $458 $504
2005 $483 $540
2006 (first half)
—–$511 $156
The lenders have invented all the loan product they can to try to qualify people .The only thing else the lenders can do is come up with a loan product were you don’t have to make any payments for 5 years and you don’t have to qualify ,(they are about at that point now).
Its going to be a brutal ‘dump market ‘in the 2&3Q of 2007 .Don’t the people who are waiting to sell think about all the other people that have that same plan ? Positive psychology will not overcome supply and demand factors .I still think the correction will be brutal next year .
“Positive psychology will not overcome supply and demand factors”.
Haven’t you ever contorted your body after sending the bowling ball down the lanes? It’s a very effective way of altering the path of the ball.
I just wave my arms in the direction I want the ball to go.
“Don’t the people who are waiting to sell think about all the other people that have that same plan?”
Bingo, Wizard! And the answer is HELL NO. Financial genius is a rising market.
They certainly didn’t look around and think about the fact that the other buyers had the same get rich quick plan on the way up. No need to expect them to get any smarter in the interim.
“Real estate brokers are advising developers to turn some of these projects into anything other than condominiums: rental apartments, hotels or office buildings. And some major banks that lend to condo developers are cutting back on loans for proposed projects or for land that developers want to buy. Before granting loans, they are requiring developers to put more of their own money into their projects, to lower their prices or to sell more units in advance.”
This paragraph (from the NYT piece) is a snapshot of a hard landing in progress, IMO. The brokers and banksters are suddenly exercising precaution, which has the effect of throwing a wet blanket on the bullish euphoria which drives parabolic price blowouts.
They can stop the developers from building, but they can’t stop the GF’s from getting loans that Fannie Mae and Freddie Mac, and eventually the American taxpayer, end up buying. We are the ultimate bagholders along with Asia and the Saudis
“And Westchester hasn’t been a market driven by speculators,” he said. “What we had was a feverish market with very high prices, and we were due for some relief.”
I love when Ben throws the New York threads up there. There is so much about California and Florida on here that sometimes I really feel in the dark. Thank you.
I ran the quotation I included above through the Bull$hit meter and my Bull$hit meter exploded. A “feverish market with very high prices” is the definition of a speculative market, you @$#ing idiot.
Westchester has no business commanding the high prices it does. Yes, it has a lot of phony snobs but not everybody is filthy rich to justify these ridiculous prices. Bronxville is a cute town but to pay a million dollars just to get in to Bronxville is just stupid. Metro North may take you right to Grand Central Station but it seems to also allow every hoodlum and loser to come on up from the South Bronx and get off at Bronxville or any other spot between the Bronx and North White Plains. Good public transportation can be a double-edged sword. I wouldn’t like that too much.
I saw something in Scarsdale yesterday that I have never seen before. I saw “For Sale” signs. That is a first. I saw two of them within 2 blocks of each other. It is clear that the mania, even up in Westchester paradise, is dying down. The fact that these real estate boobs don’t think buyers in that area were stretching is laughable. I also found out that the local governments are spending like Charlie Sheen at a whorehouse. They have a disaster ahead that is going to wipe out families.
I loved reading the two articles in this thread and considering them at the same time. We learn that the high-end in Manhattan is immune to a downturn. We learn that the high-end in Westchester is immuned to a downturn. Woo-hoo, everybody in the New York area is filthy rich. I’m not filthy rich. Our family income would put us in the top 2 - 5 percent in most cities and we can’t afford to buy anything in Manhattan. I bet we are even top 10 percent in Manhattan. Help me out, my friends. If a family in the top 10 percent can’t afford to buy, then how the heck is this thing supposed to last?
Sorry for the length of the post. I just can’t believe the nonsense I continue to read.
NYCityBoy prediction: By the end of the real estate disaster both Manhattan and Westchester will suffer 40 - 50 percent haircuts. It really is different here. We are starting from a much higher cliff from which to jump. Recession 2007 will end all illusions.
my wife was looking for something in westchester and the demographics she saw were $80,000 family incomes in areas where homes are $700,000. i never tried to explain it.
Westchester isn’t the only property tax catastrophe on the horizon. Nassau, Suffolk and most of New Jersey is right up there. Idiot localities hired tons of government workers at crazy salaries. What’s killing them is the retirement benefits and free medical care in retirement. that has to be paid first before anything else.
cops in nassau and suffolk are making $100,000 a year or more. teachers are around $70,000. The last catastrophe in nassau was in 2000 when the republicans were sent packing. back then taxes were a lot less than the $7000 average that is now.
Clearly the answer here is for everyone to get a job from the gov’t and then we can all have great paying jobs and benefits.
LOL. When I moved to LA 1991 one of the first things I noticed was that all the biggest employers were supported by taxpayers and nobody else. No private sector, no good. Cali is a disaster that goes on happening, and possibly a precursor of our national fate. Sorry to read like Jas Jain.
“everybody in the New York area is filthy rich”.
No question there is some big money in the NY area - just like many other places. However, for every genuine rich person - i.e., those that give these towns their prestigious names, there are multiples of people investing all their energies to keep it together. These folks are almost always just one event away from the edge.
Often times you’ll have a retired school teacher in one house that’s worth $800,000 that cost him $80,000 in 1980 and next door you’ll have another $800,000 house occupied by DINKs with $200,000 in salary who are barely juggling the monthly bills.
One day one of the DINKs loses his or her job and it’s over the edge. Or their ARM resets and it’s over the edge. Or she has a child and decides not to return to work and it’s over the edge.
Meanwhile, the school teacher can barely afford the $15,000 in propertry taxes and heads for parts south because buying in a less expensive area is the only way to actualize his home appreciation. And that home appreciation is now something they need to live comfortably.
Whether you’re the teacher or the DINK, you both have to get out. Hardly filthy rich.
Hang in there, City Boy. I hail from theres myself - in the 80’s, you couldn’t go to a party and not hear people talking about real estate. We even had to endure the rise of “The Donald.”
The ass-wacking that followed was sublime. Prices dropped in waves. Many, even those able to keep up the payments, just walked away in despair.
Ultimately, it became cheaper to buy a place in Manhattan than to rent one - because everyone “knew” buying real estate was a really bad idea.
Be patient, buddy. You will likely be surprised at how low it goes.
Hubris has a tendency to turn corrections into hard landings. And NYC is the hubris capital of the universe.
Could not agree more!
Mark Haines reinforces this every morning on CNBC with his signon phrase.
Residents of Manhattan have at various times considered themselves in a universe unto itself. It’s not hard to do. Everyone from Seattle to Florida sees their market differently, and maybe a bit immune to problems facing the rest of the country.
I was born in Manhattan. My family left in 1974 as the city was facing bankruptcy. I can remember the scorn as the United States government was considering a federal bailout. If Manahattan had been on fire in the seventies, most of the country wouldn’t have urinated on it. People would do well to remember history.
Amen, RJ. I was there, too. And I remember the Daily News headline:
“FORD TO CITY: DROP DEAD”
I also found out that the local governments are spending like Charlie Sheen at a whorehouse.
This is something that polite people shouldn’t talk about in public.
Why limit your aim to local governments? It seems like the global business plan these days is to use whatever form of borrowing is readily available to live for today and worry about repaying the credit card bill tomorrow. Except for those pesky Asian savers who keep tempting us poor Americans by driving down our borrowing rates when they buy our debt…
Spot on GS. Corporate needs a taxcut? Sure!!! NO problem! Here ya go! Have a $xxx Billion tax cut! We’ll just borrow the money and let the wage earners and their children shoulder it. It’s a good thing as the economy is roaring!
I agree 100% with this post. Actually, if you are earnig $200,000 a year that puts you in the top 16% in Manahhatn. Take home after taxes is about $10,000 a month. (less if you count the fact that you also get hit with the AMT). Manhattan is certainly “wealthier” than the national average. However, if you are looking for a 2 bedroom for a family in Manhattan. I would say forget it at that salary. I think they have all blown way past $1 million. I guess it might be possible if you could find something for a million. What’s the mortgage paymet on $1 million loan? $6000/month? That is 60% of your net take home income. Good luck!
“Still, the inventory of unsold Manhattan condos has jumped by more than 70 percent in the last year. As of Oct. 31, Manhattan had 4,115 condos available for sale, compared with 2,381 a year earlier, according to data from the Miller Samuel appraisal company.”
Has anyone notified the economists at The Board that there is a condo glut in Manhattan and probably in every other major city on both coasts as well? Because maybe if they noticed, they would put two and two together and suggest to BB that reflating is not a great idea. Reflating would only encourage more building on top of a glut which is plain to see for anyone who bothers to look around. Our country already has a serious housing market imbalance thanks to the pernicious effect of inflationary distortion, and reflation would only worsen the situation. It would also behoove the Fed to pursue policies that do not encourage its generals towards a coup de’tat exectuted through MSM channels.
But the condo glut in Manhattan is different than a condo glut in Florida or San Diego or Las Vegas. In those locales a condo is traditionally a small part of the market, a curiosity in many places. Condos are to Manhattan what SFHs are to other areas of the country. This is like having subdivision upon subdivision popping up in the Phoenix desert. Too few people seem able to recognize or admit this in NYC. Most people in other cities don’t consider condos. A condo implosion can have less impact on SFHs. In Manhattan, that’s all you’ve got. That is what makes it scarier here.
Excellent point. However, I submit that the vertical condo boom in NYC may be roughly equivalent to the condo + McMansion boom in places with more land to build on like SD.
Stucco, I agree totally. I try to tell that to people here that say, “yeah, but there is only so much land in Manhattan.” I always say that Manhattan does vertically what other areas do horizontally. They look at me with a glazed look. It’s like I just handed a chimp a Rubik’s Cube.
From Roubini’s description on the Lehrer report last night, it sounds like Manhattan is not running out of sky yet.
here’s some crzaziness.
My folks own two 4 story single family brownstones on the UES, very pretty block, east of third avenue. They live in one and rent the other one out. The one they rent out generates positve cash flow (somewhere around $12K a month) and covers the remainder of the mortgage on the first house. The catch….they bought the 1st house in 1978 for $178K, the 2nd in 1986 for $850K (nice 80’s bubbble there BTW, the 2nd house was underwater for several years unitl the early 90’s). Currently they are somewhere in the neighborhood of $3M each. Identical lots/ down the street that have been top to bottom renovated are on the market for $5M plus. Insane. One day they will sell both houses together, the wider lot is more valuable, but likely not for a few years.
You’re right! When prices are too high they will fall. It’s amazing how nobody lives in a bubble zone and everyone’s piece of shit house is worth whatever they think it’s worth.
““Sean and Lynn Leary, whose vintage 1920s colonial in Pelham Manor has been on the market since July, many have had to adjust their sights. The Learys’ house came on the market for $1.289 million and sat without offers throughout the summer and early fall. The couple have since lowered the asking price to $1.199 million, and Mr. Leary has torn down the original two-gar garage and is building a new one in its place.”
“‘Some people say it’s an ego thing with sellers not wanting to accept lower offers,’ said Mr. Leary, a commercial real estate broker, ‘but that’s not really the case, at least with us. It’s more about sellers like us who are just trying to understand what’s happening. Sometimes, it feels like we’re trying to catch a falling knife. We’re trying to anticipate what’s going to happen next.’”
Hey Mr Leary, a drop of 8% after six months is a joke. If you want to really understand what your house is worth. Find out what it cost in 1997 and add 25%.
I still sometimes wonder if we are wrong about Manhattan. I can’t help it. The dogma is pervasive and often repeated. “Manhattan is immune” . All those foreigners will start buying if the locals don’t. Apparently, there are a ton of wall street people and foreigners just waiting to buy the 14,000 condos going up. I have decided it doesn’t matter. I will wait and reevaluate in 2009. I am not going to buy, if all 800k gets me is a one bedroom closet and the added cost of 1500 a month of maintenance and taxes. Forget it. I will continue renting and avoid the hassles of homeownership not to mention the current higher costs. I opened the Times this morning and just got so irritated with this article. It still tried to make the case that there won’t be big price drops in this city. How many people in this city make 300k and above with 1 million bonuses every year? Are there that many of them? I also find the proposition that the outer boroughs will have price drops but Manhattan won’t insane.
‘All those foreigners will start buying if the locals don’t.’
This is all we heard out of Florida in early 2005.
We shouldn’t forget about that army of smart cab drivers and hair dressers who will be there to buoy up the Manhattan market when the big boyz dump, either.
OK, for you Sam, more of what I just told City Boy. You are looking an un-precedented mania right in the eye. Be patient, forget about real estate, take some piano lessons.
Nothing, whatsoever, has changed in Manhattan, or anywhere else in the country, to justify the run-up over the past five years. Oh, except for bloodiest and most savage terrorist attack in American history.
You could buy a one-bedroom apartment, in a doorman building, on the Upper East Side (proper, none of this “El Barrio” sh*t masquerading as traditional Park Avenue), for between 125 and 200K, depending, during the 90’s.
So be generous and double those numbers - that is what you will be looking at in a few years. Hang in there.
Manhattan trades at a premium to The Bronx, Brooklyn, Jersey, Staten Island and Long Island. That won’t change. But I think the premium, although not exact, stays rather fixed. As those locations went up it made more sense to buy in Manhattan. Why buy in Brooklyn for $700,000 if you can buy in Manhattan for $800,000? If Brooklyn goes to $400,000 (it should go below) then Manhattan will drop. This is not complicated stuff but Manhattanites don’t get it. I believe this would be called “equilibrium in the marketplace”.
A co-worker talked to somebody the other day that built condos in Brooklyn. The high-end is $800,000 and they overlook a highway. He askde the guy, “how that was going?” The response was, “not very good”. Holy $hit, you mean some idiot wasn’t there to snap up an $800,000 condo in Brooklyn that overlooks a highway. Oh yes, bad things in store for Manhattan and their “luxury premium”.
Luxury premiums in places like Manhattan and La Jolla are here to stay, as they reflect intrinsic value. But a glut at the top will sink the prices all the way down the chain below as mania pricing gives way to fire sale pricing.
buyers will flock to the better locations as prices drop. the second tier and borderline neighborhoods will get hammered. I agree the multiple should remain relatively constant, so as the second tier neighborhoods start to look cheap again, the better neighborhoods will have to come down. it will be like a price war between neighborhoods
Agree. We have learned from the Cagan “fire burn” piece and various other sources that the pricy stuff drops first. Then, as you say skep-tic, anybody who has actual money is going to prefer the better locations if the price differential is reduced, and so the junky stuff drops next, which eventually brings the pricy stuff down more.
“buyers will flock to the better locations as prices drop.”
Sure they will! Rich, smart guys are always first in line to buy when prices are dropping like a rock…
To empirically test your hyptothesis, why don’t you check how fast homes sold in Silly Valley after the dots bombed. Then conduct a thought experiment by reflecting on the effect of high rates of housing price inflation on the number of speculators gambling in ultra-rich areas, and how that might reverse when prices are falling.
if you only read the NYTimes you’d think that everyone in NYC went to Choate and Harvard and lived off a trust fund. Of course these people exist and there are more of them in Manhattan than elsewhere, but they are still an incredibly small portion of the population.
The Times gives a false impression of the working rich as well. Yes, you’ve got IBers who are making $200k to start, but there are no more than a few thousand of these people hired each year, and turnover is very high. The people who are getting 7 figure bonuses are truly an elite group too– there are not hundreds of thousands of them walking around.
The reality is that NYC is filled with far more average people than any NY-centric media source would have you believe. It is just not sexy to portray NY as the home of government employees, moderate income corporate middle management, hotel and restaurant staff, broke ass media types, etc. But these are the majority of the people who live in NY.
sam,
Forget about buying for another two years minimum. Manhattan will crater just like the rest of the bubble markets. And if it doesn’t, are you really willing to spend $800K for a tiny one bedroom in Manhattan?
Wouldn’t you rather rent for thousands less, save for retirement, travel, eat out, and worry less about the enormous monthly nut that comes with an $800K mortgage?
“‘He paid a price that won’t allow him to keep it simply as a five-story commercial building,’ Mr. Forrest said. ‘He will lose money if he doesn’t build.’”
That’s right baby, double down!
One thing the article about Manhattan touched on was the addition of office space in Manhattan. “If the condo market softens, just convert it to an office building” is the mentality. Does anybody else see the problem with that? There is a glut of office space under way in the city as well.
Bank of America is building an office building at 42nd St. and 6th Ave. It is supposed to be the second tallest in Manhattan, from what I’ve heard. The boys in Charlotte don’t like jobs going up to NYC. Who will fill the floors that BofA wishes to lease out? Hmmmmmm…….
Then we still have the issue of Ground Zero. Eventually (god only knows when) that will have something rebuilt on the site. That will add a ton of office space. Too bad so many jobs have already gone to Jersey City and other areas. Plus Wall St. is not expanding their job base. Computer automation will continue to whither the financial job base. Last night I saw on CNBC that the NYSE will most likely go from 5 trading floors to 2 or 3. That means some traders will be out of work. Any bump in the road for hedge funds will be devastating. Plus much of the financial world is shifting to Berlin, Tokyo, Beijing, etc. New York is still the financial center of the world but it’s heyday is winding down. Computers have broken down distances. I just don’t see the demand being there 5 years from now for all of this office space. Will they just convert the offices to condos?
The macro possibilities in this economy are not being taken into account at all for the city. We have a potential economic downturn. We have a residential glut coming. We have a commercial/office space glut coming. We have a shrinking job base due to automation. There are a lot of challenges that directly impact housing and they are all being pooh-poohed in the face of the Wall St. Goldilocks rally now taking place. A year from now many people will realize that Goldilocks was just another whore.
There are very few people in NY today who are not scared about losing their jobs. It’s unreasonable to expect people to pay higher prices on one hand, and not know whether they’ll be employed in a year on the other hand.
I’ll add to that that there are very few people in NY who are withing 10-15 years of retirement who have an idea how they’re gonna pull it off. Most are looking at finding a way to replace their healthcare and SS that they know they’re gonna lose.
I thought the idea that bonuses were going to save the market was already played out last year. Do these RE pimps really think the same people who are cutting off the loans for developers are going to rush into the market with their bonus checks?
actually you got is backwards
there is a glut of residential condos BUT there is a shortage of commerical space, and this is really what will undo NYC. So much class B office space was converted to residential in the last few years, office rents have sky rocketed in NYC. Most jobs in the city are based on 3 things, service sectors , wall street related, healthcare, and of course public sector jobs. The service sectors range from advertising, design, legal services, acocunting, etc…When these service firms cant afford to be in NYC they will hire fewer workers or end up moving out of NYC. I read where the CEO of GVA Williams said something to the effect of I have to worry if law firms are paying $100/ft rents, how much do they have to charge us to afford those rents?
$30 a foot is the new low, $100 a foot is not unusual any more. These kind of rents will only serve to destroy small buisnesses in NYC and take the jobs elsewhere. Kick out the employment leg of the stool, and NYC situation is shakey, take out another leg of ridiculous housing costs and you hace a collapse in the making.
I love how the NYTimes opens articles by saying how bad the market is, and then proceeds to quote every RE broker in a 100 mile radius who predictably says that their area is different. Of course, the sterling reporter never asks, “if every area is different, then why is the market as a whole so bad?”
>‘I attribute it to a sheer lack of inventory, certainly not a lack of interest,’ she said.”
“HREO.com, which deals in East End real estate, lists 5,528 houses for sale. Of those, 2,628 are priced between $1 million and $3.5 million.”
Seems like lots of inventory is available, Ms. Judi.
‘5,528 houses for sale. Of those, 2,628 are priced between $1 million and $3.5 million.’
Lets just take the lowest figure: 2,628 x $1,000,000
That’s some serious money they need to fill that bucket.
I had the same reaction as you, Gekko, but when I reread the paragraph, I thought it COULD be that her comment referred only to the under-$500K category, in which the inventory may indeed be limited. So she COULD be saying something rational. A further version of “pricy stuff falls down first”.
“Over the past five to 10 years, many sellers have placed “come-and-get-me-prices” for which no price precedent had been established, which may give the impression of really high prices, said Mr. Van Sickle. But a majority of improperly priced inventory sits on the market. It is a situation that has, in some cases, led to deep price cuts”.
The price cuts have only just started in the Hamptons. All the post 9/11 brilliant real estate investors out there are about to have their IQ’s adjusted.
Are these the same brilliant people that brave four hours of sitting in traffic to go from NYC to the Hamptons?
The same billiant people who buy Hummers not for the snow, but to say F_ck You to people? The same billiant folks who feel gas prices are unfair?
The same brilliant folks who go to a restaurant not to eat food but rather to be seen?
Over the cliff you lemmings.
Some folks in the Hamptons trying to dump properties are advertising on Phila. CL.
They sure do know where to fish for GFs. Some Philly-ites with tendencies to pretension are now summering in the Hamptons; NJ Shore is just too bourgeois I guess.
(I was actually told by a friend of mine last summer: I don’t go to the beaches in Jersey.)
OK you’re all that and a bag of chips and you date Miss Thing.
You probably shouldn’t talk to folks like me who don’t share your elevated status of human personhood.
Guess I won’t be seeing you in Cape May! :p
Philadelphia has freedom, cheesesteaks, cream cheese and apparently some phools.
This is the first article in the Times on NYC real estate that even acknowledged that there MIGHT be a problem. The paper has become so dependent on REIC-porn ads aimed at the top .1% income bracket that it can barely stand to look at the imminent disaster in its own backyard. Sad. A real journalistic failure on the part of a paper I generally admire.
NYTimes has gone to sh*t in general in recent years. it stopped being a paper for NYers and became a paper for yuppies worldwide. It’s more like NY Magazine now than a real paper. The Post and Daily News are far more relevant to the majority of the population
All I have to say is this. The NY Times hired a perfumer critic.
A friggin’ perfumer critic.
The Times is useless, the t-rex of dinosaur media.
just a note. wall street bonuses are up, the housing market is suffering. another bubble myth debunked.
That reflects the Wall Street business model: Life is a zero-sum game, and my bonus comes out of your pocket.
“‘After January, prices will increase,’ Ms. Breitenbach predicted. ‘The market is only going to get better.’
NO
I thought they said homebuilding was up 31% in the Northeast?
Theme song next year in Wannabee World (the Hamptons): “I’m going back to New York City, I do believe I’ve had enough”.
Portland, the lines that come before that line are even more appropriate here.
“I started out on burgundy but soon hit the harder stuff
Everybody said they’d stand behind me when the game got rough
But the joke was on me, there was noone there to even call my bluff”
I’m guessing a lot of FBs will feel those lines very personally.
Up on “Housing Bubble Hill”, it’s either fortune or fame
You must choose one or the other though neither are to be what they claim…
Not to sound bullish, because in the macro sense, I ain’t … but there are not really many signs of capitulation/collapse in NY. No, lemme be clearer: There are no signs of it. So far sellers list for a long time with one realtor, and then try with another realtor. Most homes are going under asking, but not by much, less than 10 percent at very most. And we just placed bids on two brownstowns in shoulder neighborhoods in Brooklyn, bidding ten percent under, and watched ‘em both go at just about asking price.
After a very slow summer, I’ve noticed a pick up this past month. Fewer homes sitting on market. It will be interesting, tho, to see what happens as holidays and winter sets in. I am NOT clear where the buyers are coming by their money, as the Manhattan coop market has slowed.
One possibilty, informed by history: If you look at the housing recession of 1989 to 94, 95, Los Angeles was going great guns into 1991, and a lot of people began to insist that a collapse would never come. Foreigners buying, not enough land, all the usual mumbo jumbo.
Yeah, well. The collapse came
Still, folks should be aware that NYC is a very paradoxical market just now
Just about all markets are paradoxical just now. What is very unusual about all of this is that prices are coming down, without any clear economic shock.
If ANYTHING goes wrong in the world - job losses, an interest rate spike, what have you - all bets are off. New York City is NOT “different.”
I agree, to a point. NYC is not different in that the median family income–$50,000–is insanely unbalanced when you look at dumpy brick rowhouses going for $850,000. That disjunction makes no sense.
On the other hand, there’s a lot of money sloshing around NYC. Absent anything going wrong in the world–job losses, rececession, etc–it’s not a given that the market collapses. And I write that as someone who would love to see the thing give way …