“The Tip Of A Spreading Iceberg”
Readers suggested a topic around New York housing. “My wife and I live in Queens NY. We want to buy here. In 1997-98 the houses we are interested in were around $300,000. Now they are still around $600,000-$650,000, down from $700,000 in ‘05. A return to the mean should put the prices at around $400,000, which I think is fair value for these houses.”
“Am I being realistic that the prices will come down to this? When can I expect that I could buy? I know it’s all conjecture, but I’m hoping the end of ‘07.”
“We are looking mainly in Astoria and Forest Hills (not F H Gardens!) for an attached house. I think there is something like 16 months of inventory in Queens, so I really expect and hope for the sfh next year. Wall Street in swimming in bonuses right now. But if there’s a recession and the market tanks, the firms are very quick to lay-off.”
A reply, “I’m thinking it depends where in Queens. With the big Wall Street bonuses, LIC, Jackson Heights, and esp. Forest Hills might become even more expensive. But other areas might keep on dropping.”
Another said, “Jackson heights is a cesspool imo. If a pre war coop is what you are after kew gardens is similar but a much nicer area with the LIRR close by and some decent restaurants, forest hills is totally overpriced.”
“I would wait it out for a sfh in Queens. Just hang in there the prices will be down alot more. I think i will wait in fact my wife even said yesterday maybe we can rent for a long time! It is finally sinking in. BTW, I live in a coop owned by my wife’s family with dirt cheap housing cost so i am in no rush to buy these days and I just save and invest more and max the old 401k. Good luck.”
One did the math. “Take the median household income, multiply by 2 — that’ll be your price in 2009. Forget Wall Street bonuses… for those still employed there by then they will only be a fond memory.”
From Newsday. “For more than 20 years, Maureen and Vincent Virga both worked full-time in Levittown and never missed a mortgage payment. Then unforeseen and serious medical problems forced Maureen and Vincent to miss work for extended periods during the past three years. The Virgas were unable to make their $2,300 mortgage payments. They ended up in foreclosure and are in danger of losing their Cape-style house.”
“More and more Long Islanders are finding themselves in the same financial squeeze as the Virgas - unable to keep up with their mortgage payments. A Newsday analysis of recent foreclosure data shows that the total number of Long Island homeowners who received new legal notices of foreclosure, called lis pendens, rose 75 percent during the past two years.”
“And experts warn that the worst is yet to come, and as the economy is not expected to gain much ground. ‘I see a lot more Long Islanders in danger of losing their homes,’ said Westbury bankruptcy attorney Craig Robinss. ‘A lot of people are living at the edge.’”
“In those four months, 2,971 Long Island homeowners received lis pendens from their mortgage companies or banks, compared with 1,700 in the same period of 2004, according to the Long Island Profiles data. Most of them were likely in default for at least three months before receiving the lis penden notice.”
“The recent slowdown in the housing market may make the situation worse. Because of the glut of houses on the market and flat or falling prices, it’s harder to cash out their biggest asset. ‘I think what we’re seeing now is really the tip of a spreading iceberg,’ said Pearl Kamer, the chief economist of the Long Island Association. ‘And it’s going to affect more than the lowest-income neighborhoods on Long Island. It’s going to be a middle-class phenomenon too.’”
“Queens’ lis pendens are up 27 percent from a year ago, however, and that could lead to an increase in actual foreclosures in the months and years to come, according to chief executive Ryan Slack, who estimated that defaults and foreclosures could rise for as long as two to five years.”
“Elizabeth Nielsen, who bought her home in 2002, is now in foreclosure and trying to declare bankruptcy to find a way out. The single mother of two said she is constantly weighing which bills to pay and when.”
“Nielsen now thinks she would have been better off if she’d never purchased a home. ‘I came out here [from renting in Queens] and I’ve been struggling ever since,’ she said. That’s the refrain from many troubled homeowners today.”
“During the housing boom, many purchasers found homes beyond their means, yet bought them anyway, wanting to get in before prices went higher. ‘The market just ran up beyond what people are making on Long Island,’ said Todd Yovino, a real estate broker in Huntington, which focuses on foreclosure sales.”
“The boom also led to a growing availability of mortgages for anyone. Need a mortgage without a down payment or a low teaser rate? No problem. Don’t have perfect credit? Take out a subprime loan that will cost you more in points and interest, but at least you’ll get the house. Said Yovino: ‘We got away from the basics.’”
“The downturn in the housing market has compounded the problem, especially for homeowners without any equity. ‘If you bought the house with none of your funds and the market turns 2 percent down, you now have negative equity,’ said Beth Marten, who heads a real estate agency representing home buyers. ‘I think a lot of people who have gotten into the market in the last three years or so are facing that.’”
“As a result, Long Island may start to see more short sales, when the bank accepts an offer that’s less than what it is owed, Marten said.”
“‘If you bought the house with none of your funds and the market turns 2 percent down, you now have negative equity,’ ”
This is wrong, in fact if it only goes up 5% you are still in the hole it costs 6-8% to sell a house (commissions + title/escrow fees). All you need is a flat market to churn out more foreclosures which then causes a down market which churns out more. Opposite of run up.
Many of the teaser-rate IO loans have negative-amortization built into the contract regardless of the market. Add a declining market and I bet we see people owing 200% real soon (not a lot, but a few fools worthy of being paraded out in the main stream media). Once these stories hit the press, next year or the next — the real turn in “investor” logic will occur.
Plus, even just a flat market means no House ATM, so there’s no equity to “tap” to get through a rough patch.
And where was the rough patch in the last 5-6 years? Life was good, great housing related employment….. and still people were spending their paper equity like drunken sailors. Now, the soon to be unemployed or underemployed have little income and no more ATM, a double whammy. But no recession coming here, nope.
That’s not true. Only for serial refinanciers. For most, the cash-out re-fi and helloc are still going strong and they have plenty of “equity” given the 300% run-up on the coast in the last 5 years.
wrong, as usual.
I guess November was a poor month for cash-out refi? Oh it wasn’t? QED
Very enlightening. Thanks!
Classic response.
“With the big Wall Street bonuses, LIC, Jackson Heights, and esp. Forest Hills might become even more expensive. But other areas might keep on dropping.”
Somebody tell me - who with a big Wall Street bonus moves to Queens except Forest Hills Gardens or Jamaica Estates.
Thank you, Chester, for asking the question. I would not have been as diplomatic.
“Wall Street Bonuses will push up housing prices in Queens.”
BWAHAHAHAHAHAH!!!!!
What a freaking joke. No way.
all of the Wall Streeters will want o buy into the ugliest most pretention building in NYC ever! Glass bottomed jacuzzis in the ceiling of the lobby!
http://www.curbed.com/archives/2006/11/02/william_beaver_house_revealed_rated_nc17.php
http://www.nytimes.com/slideshow/2006/11/01/garden/20061102_CURRENTS_SLIDESHOW_1.html
this website will make people laugh
http://www.williambeaver.com/
wes chester you would be surprised quite a few areas in queens are at price points that are only affordable (in the traditional sense) to very high earners
800k for a 3/2 sfh 1800sg ft on a 20×100 lot but hey the taxes are low!
i was in brooklyn today (williamsburgh area) i just do not get that whole scene. sure it is close to the city but the transportation options are few and far between and they are building these condo’s in highly industrial area’s with the always
comfortating proliferation of graffiti
i grew up in nyc so nothing really shocks me but 800k 700sq ft places in out of the way, crappy roads, urban decay is nuts
I work in LIC, I can’t imagine why folks would want to buy there. There are NO grochery stores, Pharmacies, the restaraunts that are there are OLD. There is no nite life, and the subways and traffic are rediculous. WHY would anyone want to move there?
LIC
closer to Laguardia Airport, Hunters Point hookers and Rikers Island Jail!
This misguided view of NYC abounds in sellers’ and RE agents’ minds — that somehow a few gekkos on wall st. justify a half a mil for every home in nyc - including teardowns in dicey neighborhoods.
Patience. The figure to watch here is income income income — the median income in nyc (around 60 thou a year for homeowners) can in no way support these home prices.
Easy loans, appraisal fraud and mortgage fraud are a way of life here — it is no different from any other bubble market. What is different here is because housing data are not openly shared, it’s much easier for sellers/re agents to b.s., but don’t believe the hype - -the market has not bottomed, the inventory is not going down and prices will continue to decline in 07, 08 and probably beyond.
I have a vague recollection that there was a bill in front of the NYS Assembly to make sales prices for co-op apartments publically available. Like most good ideas, it died in Albany. Anyone care to put down odds on such a measure coming to pass?
Was wondering how Rye/Rye Brook/Port Chester are doing these days in Westchester Co.?
I don’t see a whole lot of Wall Streeters taking their bonuses and buying in Queens. Fifth Avenue, Central Park West, Southampton, Mamaroneck, Darien, sure. But no offense, not Queens.
I realize only a handful of people made $50 million, but the folks who got only a few hundred thousand are still trying to work their way up the food chain. They’d rather buy on Third Avenue than Queens. And if they can’t afford Third they’ll buy on Second, or First, or heaven forbid York.
This will stratify the really high-end areas even more than they are now, but that’ll just take us back to the way it always used to be up the early 1990s.
Greenwich CT, Rye NY, and Scarsdale NY. Mamaroneck and Darien are for the 2nd or really 3rd tier
… e.g. $250K-$500K types.
I’ve never bought a house before, and I’ve been shocked by the market over the last five years. I always understood housing to be so basic a need as to be one of the key determining factors in real inflation. (The price of mink stoles can shoot through the roof, but no one will notice.) Since the goverment is committed to keeping inflation low, I’ve been guessing the values of houses by taking a known realistic value and compounding it a 3.5%, a fairly generous value for inflation. By that method, a fair price on a $300K home is $426K (I calculated from the start of 1997 to the start of 2007 and rounded up.) How is everyone else calculating reasonable values? I’m not even considering buying property until values return to some kind of reasonable levels. I tell all of my friends to buy Krugerrands, canned food, and ammunition.
Despite what numbers the government puts out, I think a more realistic estimate for inflation is something more like 5-8% over the past decade, although even then prices are out of whack.
There are two main forces driving inflation: energy and public debt service. What kills me is the amount of debt that California took on during the tech boom. And then when the collapse came, the state and municipalities took on more debt just to provide basic services. But even then, the quality of that service is beyond mediocre.
yeah, but if inflation was REALLY 8% for the last 9 years (which it probably was/is), then housing prices would have has to double since 1997 to just keep up with inflation (forget taxes and insurance).
WTF?
According to Prof Schiller. Houses appreciate at about 2%-3.5% historically. So I think your numbers are generous.
They match my judgment of fair value.
no, my point is the following — schiller’s chart was supposedly adjusted for inflation. There was deflation in housing prices b/c of mass production lowering materials costs + great depression).
If the adjustment used the CPI, which we all agree is under-estimated, then maybe his chart is off. Not saying there is no bubble, but I would like to see the chart with more realistic CPI adjustments included.
Hedonics, my friend. What’s inflation when your ipod holds more songs and your computer downloads porn faster. How can you put a price on that? Well, Hedonics can, and it’s keeping inflation in check without doing a thing!
Inflation?
Poor mans view - if your buying goods (groceries+supplies) it hasnt gone up anywhere near that much.
Here is the catch!
If your buying services.. your paying through the nose… yes our economy is less mfg and more services therefor more costs are higher..
hint … dont use high cost services… use discount shops… shop at costco, service your car at discount tuneup shops–not dealer. ….
Not only will you save money.. but dont feel the inflation pinch…
Oh yeah, you forgot, don’t eat out. That one is a real inflation magnet.
Josh
http://www.preparedness.com/
My opinion only, but I believe the “next big thing” in terms of runaway growth potential will be the preparedness industry. It’s beginning to dawn on more and more people - especially in the wake of Katrina - that in quite a number of dire scenarios, ranging from natural disasters to LA-style riots to economic collapse, they will effectively be on their own, and they’d better plan and prepare accordingly.
The poor will be on their own, as will people whose net worth is predominantly their house. The truly wise and wealthy will be able to adjust and have resources to fall back on.
Hey Sammy, where are the sawed off shotguns for tight hallway work etc.?
I say greentech. The buzzword is and will be “global warming” (there’s probably some truth to it but the economy will be overblown again as “different”).
A Manhattan buying spree could ripple and push extra middle-income buyers to Queens but the big bonuses might be in Connecticut anyway.
I think that most of the people who made a lot of money this year on Wall Street already own RE. All the money sloshing around NYC these days certainly doesn’t hurt the local real estate market, but its impact will be somewhat limited.
Yes, and they got far bigger fish to fry than flipping a condo or two.
I think many will be dumping their money in RE in “the next big places”, which most of us don’t even know about. Those buying in the usual places will be driving some very hard bargains. If they make a bad deal in the Hamptons and the Hamptons crash - which they will - their reputations as brilliant dealmakers will be sullied and they just can’t have that.
Speaking to industry folks, I know the construction industry is in a curious place. Lots of work out there, but design firms are cutting fees to the bone to get the work. Same with CMs, they need volume or they will die. Brooklyn still has a ton of condos in the development pipeline moving forward and projects 2 years out are underway.
I spoke to a curtain wall manufacturer the other day, one of the biggest on the North american continent. They are busy as hell and booked up through 2007. Lots of glass walled condo towers. He told me about two of the biggest CMs in NYC turning down a 50 story Williamsburg mixed use project with a major hotel chain anchor as they are just too busy. In general he is flabbergasted by the amount of work in Brooklyn, way more than Manhattan.
Whether anyone really lives in these units in the end is another story but to me is not the biggest piece of the puzzle. The recent high priced record breaking sales of office buildings scare me a bit, and is clearly froth at the top level. Too much money chasing a limited supply of inflated assets being traded back and forth. It’s flip your house, billion dollar style. We are seeing speculative office buildings being planned in Manhattan and Long Island City. In the 1980’s it was this kind of office build speculation that crashed the real estate market in NYC.
But the sales of these office buildings requires companies willing to spend an ungodly amount of money on rent. This means they need to charge higher and higher fees, spend more to retain top talent who then have to spend their money on platinum priced apartments. What do lawfirms have to charge to afford $100/ft rents? As long as the market keeps hopping along and deals are done, they can swing this. The last bubble to deflate will be the stock market/Wall Street. When this happens, there will be nothing to support the cost of these buildings.
NYC wont be brought down by the housing bubble, it will be the popping of the commercial bubble, which was brough on by a housing bubble related stock market downturn. A great part of the current commerical bubble in NYC is spurred on by a tightening availability of space and companies trying to lock in space and rents now. It’s buy now or be priced out now, but for office space. One of the reasons of commerical space shortage has been the conversion of millions of SF of office space to condominiums.
Here is a critical piece on the New New York: Sterile condos created for terminally hip inventment bankers with bonus money to spend on buying a life:
Condos of the Living Dead
Long, but a good read…
I love that article, i posted the link here before once myself
I posted a link above to a perfet example of trendiness gone mad in an attemtp to package condos. this is the perhaps the worst/best example I have seen yet
http://www.curbed.com/archives/2006/11/02/william_beaver_house_revealed_rated_nc17.php
“New York is a city that was built out of risk and danger, with much more poverty and failure than riches and success.”
Very true once you find your way through the pretention.
Whacky weather. The icebergs in far north of Canada are melting away. It must be very distressing to buy a house on a melting iceberg ? Sink or swim.
Don’t worry about Long Island. Although prices have decreased they are just about done decreasing. Plus there are several select neighborhoods that will certainly not see further price declines because of the special nature of those neighborhoods. I have all of this on the sturdy word of several Long Island homeowners.
God forbid anybody face reality. Something tells me reality is going to have to face them.
The wretched traffic and sky high breast cancer rates on Long Island make it a place people want to LEAVE, not go to. The outmigration has begun.
I don’t think you caught that bulge in NYCBoy’s cheek.
I had and was just expanding on his overall negative commentary.
Isn’t Grumman paying new grads 200K so they can afford a 600K 3/2 POS in Bethpage?
I hear the same thing in Richmond, VA. There are homes on the west end of town that have $200.00/sf listing prices. I know this is not a large amount for NYC, however — it is Richmond, VA. I am not puting down Richmond. There is still alot of land around Richmond and why anyone would pay that much for a home here, I have no idea.
nycboy i hear the same thing not in this town blah blah blah
well i have friends who live in very nice town on long island and
it is littered with for sale signs that have been there for months
it will be a fun thing to watch this spring
these homes that are priced in the 1.2-2.5 range all have alot to give in the way of price reduction and just from glaning at the local rags and net listings there is a mountain of inventory in those price range’s
and for those that do not know the taxes on these long island homes are astronomical in some areas well above 20k
but hey if you can afford a 20k yearly tax bill what is 12k or so a month for a mortgage
I live in Queens, and prices here are still unafordable 2 houses on my street were for sale, not sure if they sold but the sign is down, house is empty and no one has moved in.
I rent a 2 br for $1100, in a 2 fam. Even if i rented out the illegal basement convereted the garage to a bedroom, i still would have to pay at least $1600 or more just for my apartment, and then have to deal with 2 renters and one could cost me a fortune in legal fees for renting the ilegal basement apartment, if they get pizzed at me. That is the reality of a $700,000 2 family house in queens so $400,000 or less is really a very fair value.
Also Long Island city is getting built up real fast lots of high priced condos, on jackson ave and only ONE C-town food store, plus parking is bad on the side streets due to all the construction, and the one main parking garage is always full. That will change when they all stop this nonsense.
Not a whole lot of building here in Sunnyside, unless you tear down the existing building. But its just a matter of time before Long Island City gets all its single double story factory Buildings torn down (putting thousands of people out of work) just to make room for apartments, you should see some of the fantasic views of manhattan from here…
I guess a major recession would help stop this nonsense, but lots of those factory workers still may lose their jobs.
Just think all the high end 1970″s stereos Mac Intosh, Fisher speakers, KLH, Advent even Lafayette, all sorts of things were made right down the street from where i live.
I have noticed “Now Renting” signs on the new Queens Landings Condos that just went up. I guess sales aren’t as brisk as they want.
“In those four months, 2,971 Long Island homeowners received lis pendens from their mortgage companies or banks, compared with 1,700 in the same period of 2004, according to the Long Island Profiles data. Most of them were likely in default for at least three months before receiving the lis penden notice.”
For every homeowner at this stage, there have to be at least 10 having trouble with bills, pulling back. Then there are another 20 who are having problems but planning on riding out any downturn on credit cards. Scary stuff.
I am assuming the same effect being witnessed in long Island will ripple outwards from the metro NYC area. North Jersey, north fo Westchester, and CT further out will feel many of the same effectes. Long Island is a little different as it’s more closely tied to NYC than NJ, CT, or Westchester, but it will be the outlying areas that drop first.
The gravy train in NYC will ride on a bit further, but I know people are still having trouble selling apartments in Manhattan. Friend of mine finally has an offer on his apartment after having it on and off the market for over a year. 1br 1 BA prewar UWS with a nice terrace, started at $1.55M….and they got an offer somewhere between $1.25M and $1.3M. By the time he factors in closing costs, renovations and realtor fees, I think he is taking a loss in the neighborhood of $50K.
Doesn’t NY State have some sort of tax on real estate transactions over $1M? Maybe it’s on purchase rather than sale, but still you have to pay it one way or ‘tother and account for it in the P&L.
NY real estate transfer tax is 1.425% on sales over 500,000
So on a $1.3M sale there is an $18.5K transfer tax.
Yep. New York has a 1% “mansion tax” if the price > $1M
You know if he has a brain that functions correctly. He would realize that a $50K loss this year is far better then $150K+ loss next year.
You know if he has a brain that functions correctly. He would realize that a $50K loss this year is far better then $150K+ loss next year.
true, except he traded up to a $3.8M condo with a $2M mortgage. They are happy to get the other place sold and the new place will likely be their last apartment, but I can’t fathom the monthly costs. Between taxes, PITI and maintenance, he must be dropping close to $18K a month. He’s gen counsel at the US division of a third tier international banking firm, I dont get how he can swing it.
One of the more widely known explanations comes from the Austrian School of economics. Austrian theorists who wrote about the Depression include Hayek and Murray Rothbard, who wrote America’s Great Depression in 1963. In their view, the key cause of the Depression was the expansion of the money supply in the 1920’s that lead to an unsustainable credit driven boom. In their view, the Federal Reserve, which was created in 1913, shoulders much of the blame.
In the Austrian view it was this inflation of the money supply that led to an unsustainable boom in both asset prices (stocks and bonds) and in capital goods. By the time the Fed belatedly tightened in 1928, it was far too late and, in the Austrian view, a depression was inevitable.
From Causes of the Great Depression in Wikipedia.
I think that things are worse than “scary.”
Our day of reckoning is fast approaching - President Bush’s changes in the Bankruptcy Law was the obvious reason that the business community forseen a terrible bubble that will cost them dearly - so they have enacted tougher measures - this is in fact just another attempt to squeeze those for a few more cents on the dollar until they are completed void of any cash. This very blog may one day go down as the pre-emptive theorist who preached dire warnings against the backdrop of “inaccurate and deceiving” messages from those who will call sunshine till the day money stops dead….
Two more members of the “Depression Camp”? Welcome.
Why do they assume all those brookers who all get a $1 million bonus will immediately go on a transe and buying spree in real estate or expensive cars…
As is with star athletes who get $100 million contracts, most of them are SURROUNDED by money grabbing “friends” or (very extended) family and a lifestyle that consumes all that money very quickly.
We live in a capitalistic system optimized for money extraction after all… and real estate can only be so sexy vs. jewelry and high end cars.
That said, the middle class is pretty is pretty much over. As the article on foreclosures show, you can work your a$$ off and pay faithfully the mortgage 20 years, and a small illness or a few weeks of hard time can bring it all crashing down.
Kudos to the 160k/yr manager who gets a 300k mortgage on a 120k house… it proved the “middle class” in America was really just what is living in slums in other countries but got to live with a car and a house while this country was not “saturated” and full of natural riches to be exploited from unwilling natives or a defenseless environment. Now that America has a population density to match the rest of the planet, the natural pyramid of wealth will revert to the top 1% controlling 50%+ or more…
It was just a mirage in the end.
Although realtors will be the last ones to say that “here it’s different!!!”
The 19th century and before in the USA had a social/class structure that you are describing with much less density and plenty of resources. It was plentiful coal and then cheap oil that enabled the industrialism and the middle class that resulted. Now, with industry moving to other shores (with most of the remaining oil / natural gas nearby on those Asian shores), we’ll revert to where the USA class structure was in 1850 over time, albeit, with a different tech base and social structure (hopefully).
That trend does not bode well for suburban McMansion values over the long run even beyond normal real estate cycles. We’ve had long runs of deflation before (1869-1896 come to mind). This one will also start from monetary (credit this time) contraction and move into what is the real value of a McMansion 20 miles from employment and the primary entertainment are the strip mall restaurants. I don’t believe such property will ever see its 2005 value (in gold) again.
I think you make an interesting argument on the suburbs and deflation. I tend to agree with you, but I’ve heard compelling arguments from the other camp as well. My gut tells me that the far-flung suburbs you describe will become wastelands because they make little sense. However, people are not always rational. It will definitely be interesting to watch it play out.
Not all suburbs will die…those that have economic and/or entertainment centers (became cities in their own right) may do quite well, relatively. The problem with most suburbs is the infinite land available for more building….and they will build. It took twice as long for Round Rock to recover its value as it did old Austin. Even with Dell’s major site 3 miles away, my old house bought in 1985 (no Dell then) for $78K is only worth $110K today.
There are a few exceptions…parts of CA come to mind like Silicon Valley with its restrictions.
Throw an unpredictable and volatile energy future on this and, well, you get the point.
In the Metro NY area, the Bonuses are the only optomistic point that realtors can cite. But the concentration of the money is too high to have a direct effect. The trickle down takes time. And every other industry in the area is having a mediocre year. Furthermore, banks cut heads at the first sign of trouble. As they say: “Historical performance is not indicative of future results.”
Indeed. How many thousands of people on Wall Street get substantial bonuses? 10,000? Fine. How many housing units exist in the City of New York? Two million, maybe?
The REIC in DC is chirping on the 45 new congressmen who are coming to town in January. They will absorb the 25,000-plus units for sale in our area, I guess, just like the Wall Streeters will solve NY’s problem.
When pigs fly.
http://www.millersamuel.com/press/view.php?V=1163946814ZaVfo
New York Times November 19, 2006
Changing Course to Avert a Glut
Christine Haughney
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. They are trying to figure out how to avoid flooding the market they once fought to build in.
There are currently 28,258 new condominium units either under construction or being planned in Manhattan, according to Cushman & Wakefield, the commercial real estate brokerage.
Of these, 14,430 units are in buildings that have already broken ground, and 13,928 units are in buildings that are being planned. If they are all built, the total will approach the borough’s current stock of 36,000 condo units and will be equivalent to a fifth of Manhattan’s 138,000 co-op units, according to census data supplied by the Real Estate Board of New York.
But with a softer real estate market in New York and a growing inventory of co-ops, condos and houses in the region, real estate experts do not believe that all of these projects will be built, or at least built as condos.
In some cases, developers are trying to sell their lots before they start construction. “I’m getting five calls a week from people who own sites and want to sell them,” says Michael Forrest, a senior associate who works in the New York office of Marcus & Millichap, a real estate investment brokerage based in Encino, Calif. “I’m surprised at how many developers are running for the hills.”
Many other developers are saying that they will go forward with buildings only in the parts of Manhattan that they see as fail-safe, like certain blocks in Midtown and on the Upper East Side and Upper West Side, and at the highest end of the market.
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.
Some condominium projects already on the market have been shifted to other uses. 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 — partly because of a complicated tax structure and not just the state of the condo market.
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.
If by “substantial bonus” you mean, “over $2 million” maybe that’s correct, but I’d guess there are hundreds of thousands of New Yorkers getting over $75k in bonus this Christmas. Just in the rinky-dink outfit I work in, there are 500 local people getting Christmas bonuses between $80k-$500k. Multiply that by several thousand companies… you better believe that has an effect on real estate.
“Indeed. How many thousands of people on Wall Street get substantial bonuses? 10,000? Fine.”
If real-estate transactions were like the stock market with contracts signing prices immediately reported to the public, the bonus news would certainly have caused an up-tick in the market. The with all of the blood baths that we have been hearing about and the many more that are sure to be reported how long could the rally run? If I could I would certainly be selling short into such a rally. There are probably developers taking the opportunity to unload the land that has been making them sweat since the end of summer. There are probably empty nesters reading the news thinking “Now is our chance!” When the next wave of bad news hits, maybe the year-end statistics for the market, that glimmer of hope will be gone. It will come up only in conversations on the topic of “How could we have been so stupid?”
I live in a prime area of Brooklyn (Carroll Gardens) and pay $2,200/mo. for a nice 1,200 sq. ft. apartment with private outdoor space in a nice brownstone a block from the subway. Comparable apartments are on the market for $750K to $1.0MM. My rent is probably a little below market, but something is clearly out of whack here.
ck why on earth are you “throwing away” $2200 amonth on rent
have you not heard of building equity?
sarcasm off
after all it is a buyers market, or is it a sellers market ,
screw it we need any transactions we can get
sincerely mr.realtor
Is it rent-controlled?
No, then it would be $500 and it wouldn’t be nice. My friend lived in Carroll Gardens and payed something like $1100 (I am not nosey) for a 1 BR. I would guess 700 sq ft. Not a very nice place, but ok by NYC standards.
We need to start a Brooklyn/Queens bubble blog here. I’m in North Williamsburg Brooklyn and fishing for the info is all over the place. Most info centers around the other market, West Coast, New England, Florida, SW, ME. Curbed.com is ok, but nothing focusing in on the 2 boroughs and not much to see there.
Some people think the earth is flat and the dowturn will not affect the outer borough market in NY. ha! How do we start a blog here for this specific area?
Stefanie!! Here Here!! Somebody who has more techie knowlege than me definately needs to start an NYC focused housing bubble blog. The demand is certainly there and there are 8 million people in NYC alone. Perhaps Grim can start a separate blog on this area.
Here is the new NYC blog I’ve created and will manage.
All are welcome!
http://nychousingbubble.blogspot.com/
this is typical for queens
decent area but this house was 350-400 5 years ago
http://newyork.craigslist.org/que/rfs/250231195.html
That’s a nice small house…but no way! $700+K! Wall St people are not buying those (well, perhaps the admins :-)).
What mover/shaker on Wall St. is going to commute from Bayside everyday?
Puhleeeeease!
I’m sure some honest RE professional will give you a very logical reason why this house DOUBLED in price in 5 years.
Probably it’s the house fairies.
“We want to buy here. In 1997-98 the houses we are interested in were around $300,000. Now they are still around $600,000-$650,000, down from $700,000 in ‘05. A return to the mean should put the prices at around $400,000, which I think is fair value for these houses.”
This is as common here in SF Bay Area. No that 600k home which sold in 1998 for 200K is only worth around 300K.. end of story!
“The downturn in the housing market has compounded the problem, especially for homeowners without any equity.”
This is why it is SO important to require a downpayment. 20% used to be the standard. All these crazy no downpayment, “liberate your equity” loan programs, and then people have no safety net in their homes. All the overhead, all the responsibility, and nothing to fall back on.
Equity has become a “quaint” notion, like it’s so old-fashioned to make a downpayment, build equity and not tap the house unless absolutely necessary.
YUP, Close to LGA, and not even close enough to walk to the 7 train subway stop on main st. that means a bus ride and a walk to your new home (in the rain heat snow) Or you can to drive to work…..hmm then pay to park, and $2000+ yr car insurance…..yes very very affordable.. LOL
http://www.newsday.com/news/printedition/stories/ny-enhome175019254dec17,0,3969195,print.story?coll=ny-top-headlines
CASE STUDY: Carol Fitzsimmons
BEFORE FORCLOSURE POSSIBILITY
Total Income: $160,000
Mortgage:$3,000 a month
Electric: $200
Cable and Telephone: $200
Gas:$200
NOW
Total Income: A third of prior wages
Mortgage: Owes $40,000 in back mortgages costs
Other expenses: Spend $25,000 on repairs that weren’t reimbursed by insurance; $30,000 in legal bills. Fitzsimmons isn’t paying utility bills because her home is currently uninhabitable.
Total loss from damage (flood):$300,000
CASE STUDY: The Virgas
BEFORE FORCLOSURE POSSIBILITY
Total Income: As much as $150,000 a year
Mortgage: $2,300
College Tuition: $43,000 a year
Electric: $350 a month
Telephone and cable: $140 a month
Oil: $320 a month
NOW
Total family income: Maureen is earning about $2,000 a month in Social Security Disability. Vincent will begin recieving penson money come February.
Mortgage: $3,000 (includes and extra $700 a month to make up the debt)
Trustee payment: $975 a month
Medical co-payments: $975 a month
Electric: They owe $4,500 to LIPA plus normal payment.
College tuition:$18,000 owed for this school year.
Utility bills: Roughly the same
CASE STUDY: Elizabeth Nielsen
BEFORE FORCLOSURE POSSIBILITY
Income:$43,200 ($900 a week)
Mortgage:$2,300 a month
Oil: $300 a month
Electric: $300 a month
Cable and telephone:$150 a month
NOW
Mortgage:Required to pay $2,900 a month to mortgage company and $1,200 a month to the bankruptcy trustee.
Oil:$600 a month
Electric, cable and telphone: Roughly the same
Question: what does a bank do with a short sale? Do they write off the balance of the unpaid loan, grateful to get anything, or is the signer of the loan still on the hook for the balance? Thanks for the info.
both scenarios exist. They can enter a deficiency judgment for the money or they may just write it off.You need to negotiate if you want them not to enter a judgement. They may also send the homeowner a 1099 for the money the bank doesnt collect
when i lived in nyc in 1989, you couldn’t give a 1br coop away for $150k.
“Wall Street in swimming in bonuses right now.”
If I recall correctly, last year was also a banner one but did not survive hype with respect to NYC home sales. All eyes on 1st 1/4 report ‘07.
Wow! The insiders speaking in plain, truthful English. It’s as if I’ve woken up from a bad delusional dream, and was slammed back to reality. It seems like the kool-aid is wearing off, and clarity of thought is establishing itself once again.
For more than 20 years, Maureen and Vincent Virga both worked full-time in Levittown and never missed a mortgage payment.
Then the house should be practically paid for, right? They should be able to downsize and come out with cash in their pockets, or re-fi for a new 25 year term and pay next to nothing.
Unless….
unless…….the Virga’s refuse to face reality and are blowing their entire life’s savings and credit score on trying to hang on to their beloved oversized house. If they were more financially savvy, which most arent, they would have downsized a long time ago and had insurance to pay for the husband’s medical expenses.
as someone who lives in the FH area, unless you have a cash based business don’t plan on buying a house. A huge percentage of the homes in the area if not most were bought decades ago and have been paid off or the payments are pretty low. The taxes are dirt cheap compared to the burbs. No coop board.
SFH and condos in NYC are a dream come true for small business owners who cheat on their taxes. they can get a stated income loan with no other investigation. I’ve seen coop boards deny entry to people who got stated income loans and whose taxes showed too little income to qualify to buy a coop.
RE is like a legal way to launder money in NYC
In my zip code (11355 - Downtown Flushing and southward), sales prices for SFHs have been averaging $500-600K in 2006. As recently as 2001, the average was around $200K. There was no fundamental reason I can discern for this run-up. There have been a lot of teardowns, replacing SFHs with either condos or 3-4 family rentals.