‘We Are Reaching A Saturation Point’ In New York
The New York realtors have their February numbers out. “Sales of existing single-family homes in New York slowed in February, according to preliminary single-family sales data accumulated by the New York State Association of Realtors. The February 2006 sales total decreased 6.4 percent to 5,197 compared to the February 2005 sales total of 5,554. The February 2006 sales total fell 16.1 percent from the January 2006 sales total of 6,193.”
“The boom in luxury housing may be reaching its crest and market saturation could drive lenders to cut back on the funding of new projects, first-quarter real estate statistics to be released today by some of the city’s largest firms suggest. ‘With the inventory coming on, we are reaching a saturation point,” an appraiser who is an author of one of the reports, Jonathan Miller, said. ‘There’s a lot in the pipeline.’”
“‘Without Wall Streeters’ spending, we were looking at a fairly flat market,’ said Jonathan Miller, CEO of Miller Samuel. ‘This is further evidence that the housing market is not seeing the big price gains we’ve grown accustomed to in the past several years,’ Miller said.”
“The inventory of apartments available for sale in the first quarter rose 15.8% from December, and a hefty 59.6% from a year earlier. It’s at the highest level since Miller started tracking it in 1999. That’s a cause for concern, because it means there are more apartments competing for buyers, he said.”
“‘Bigger Wall Street bonuses shifted the mix to larger apartments during the quarter,’ Miller said, lifting the median. But, he noted, price per square foot was mostly unchanged, at $1,004.”
“Another sign of weakness is inventory and time on the market. The average apartment now spends 138 days on the market, compared with 98 a year ago. Part of that is, with prices so high, there’s a lot of building going on. ‘New developments have added a lot to the inventory,’ said Pam Liebman, CEO of the Corcoran Group.”
“The 2005 market started out with a bang: plenty of Wall Street bonus money, lots of demand for housing and historically low inventory of available property. By the end of the year, stagnation had set in, leaving the numbers, which had peaked in June, ending approximately where they began.”
Last month’s housing market conventional wisdom: Soft landing
New conventional wisdom: Saturation
P.S. I am reminded of a very smart guy who, around late 1999, commented to me that it seemed like almost everyone who could have bought a PC had already done so. The take home message then and now is that market saturation preceeds a crash.
Saturation…love the word and the concept.
The home buyers are saturated as well as the consumer.
Simmsays…
http://www.AmericanInventorSpot.com
AmericanInventorSpot.com
One thing is rather unsaturated: Homedebtors bank accounts.
nice of them to come out with February’s numbers now that we are in April. could this have been an intentional delay to try to encourage a little spring momentum before buyers could realize the overwhelming surge in inventory?
if we’re already back to last June’s prices, then it looks like there’ll be a healthy loss before 2006 is over.
Their release came out on April 2nd. even though it’s dated in March. The laziest realtors?
Lazy like a fox! I still think they are just holding back the bad news — thanks Ben for posting this!!
PS - so really, where exactly in the Northeast are all these pending sales contracts/existing home sales happening?
Also, can’t wait to see which NYC papers have the guts to cover this
the Daily News has been doing the best job so far, but overall the coverage has been poor. pretty sad that the Times gets scooped by the Daily News
very good question. sales have gone of a cliff in the expensive areas like NYC metro and Boston metro. I wouldn’t be surprised if many of the sales were from equity refugees from the aforementioned spots who sold out and bought in more rural areas like Upstate NY, VT, NH, ME, western Mass, etc
I wish that were true, that sales had gone off the proverbial cliff in NY. But I just don’t see evidence of that, and we’ve looked on and off over the course of the past few years. It’s a bit slower, yes. And some coops are sitting longer. But I’ve just not seen real evidence of any real slowdown in the sales of brownstones and brick and limestone townhouses in Brooklyn. And even the coops and condos remain priced very high.
Please keep in mind, I believe this market insane, and that its clearly moved beyond the means even of an upper middle class person to buy into. And the surge in inventory could presage a problem going forward. But as of yet real evidence of a crash, soft or otherwise, is hard to find …
Can’t speak for downstate, Ben, but upstate no one is really into transparency or informing the public…..which is considered to be rather stupid and below those running things. So I’d say the late #s are par for the course.
Flat market, my butt- with inventory the way it’s moving there is no market that can sustain price stability. You had some good inventory numbers yesterday- and we posted some of our own today:
BubbleTrack.blogspot.com
your graph there says it all. we are poised on the edge of the abyss. NY Realtors must be in full panic mode. Sellers are in complete denial
yoy loss by june -they’ll release those numbers in september
“By the end of the year, stagnation had set in, leaving the numbers, which had peaked in June, ending approximately where they began.”
This jibes with my observations on the SF Peninsula. The first little cracks in the market started to appear in June 2005. Some sellers were having to settle for less than their asking price. But to my disappointment those small cracks have remained just that, small cracks. Homes continue to sell quickly around here. Inventories are about the same as this time last year. I am tracking single family homes, not condos.
inventory is the story. sellers can ASK for whatever they want, but unless they start cutting prices, very few will buy.
I am convinced that many of those who did buy recently in NY were buying truly “distinctive” properties that don’t come up for sale all that often. In particular, there was one $40 million place and one $25 million place that sold in Manhattan during the 1st quarter.
Many of the other sales may have been similar, albeit on a smaller scale. the buyers of these types of pads are looking for something very particular and will buy it when they see it. they do not reflect the wider market, although the very high prices they pay skew market measures such as median price paid and price per square foot (many of these ultra luxury places have prices per sq ft double that of normal homes).
I am convinced that if NY realtors broke out the sales into price categories, you would see almost total stagnation in the prices that most people are looking at.
It’s not going to take long for realtors to realize that a house which sells at $500k is worth more to them than an unsold house priced at a million. It will be amusing to watch realtors change tack after so many years of hyping price escalations. They lead the charge up, now they will lead it down.
I agree. To the surprise of many on this blog, RE agents will become “bubble popper’s” best friends as they lead the price drops.
There might be an emerging opportunity to be one of the first workers in a new RE-industry job category:
“List price reality check counselor”
If you are looking to buy a house, every weekend you see new inventory coming on the market. The choices become progressively overwhelming and there are no bidding wars to scare anyone into hastily buying. And all the while you hear about prices normalizing, flattening or falling. You’re not hearing about rapidly increasing prices that will leave you behind. You may have it in the back of your mind you want to be moved in before school starts in September and you know you better make a move by late June to pull off such timing. At the same time, if you missed the September deadline waiting until next year might actually work in your favor. So you aren’t going to get crazy.
You then hear about asking price reductions and more and more sellers accepting low ball offers.
I’m not in the market to buy, but if I were, I’d be lowballing like crazy. It would seem that for now the notion of insulting sellers with low offers is not a big concern.
Better rude than robbed.
I think it’s a little early for lowball offers. sellers are still in total denial. look at the asking prices– they are truly insane.
best strategy is just to stay away until at least the end of the summer, even longer if you can possibly wait. sellers will get antsy quick if no one is even looking at their overpriced sh*tbox
I agree — bubble deflation takes time to work its magic on affordability levels.
But buyers will get the message more loudly when ten people present offers for 30% off list, rather than having no offers.
I would encourage low balling. Nicely explain that prices are overvalued (cite some reasons) and give them your offer. Be prepared for some namecalling, give them your card, and ask them to call if they reconsider.
Sounds good on paper but it’s not realistic. There’s no reason for sellers to drop their prices right now. Even those who are leasing out their properties for negative cash flows will hold on untill the bk judge slams the gavel. You will not significant price reductions untill the banks start selling off their inventory. Then and only then will you see market value
I love that!
I feel the need to repeat that in our target community north of Syracuse we stopped looking at homes until ours sells. Every house we thought we’d be interested in keeps selling. Friends here keep telling me nothing moves here in farmland until close to school ending. (We went on in late Nov) We’ll see…..
mad_tiger
I posted newspaper reports from 1989-1992. Everything is going according to script. First sales tank, inventory raises. prices increase!. peoply worry and last few hold outs pay little less than asking (which was already high), YOY declines enxt to nothing.
people wonder may be NAR is true, prices really found ahigh plateau. people wondered WHO IS BUYING!!!
when sheeple are resigned to renting when the action begins. last time there was no reset, just stagnant prices and later coupled with job losses (in Socal) recession hit . then the action began with in 6-12 months, every where in Cal there were double digit decreases
I’ll post little later in the day - some action from 1989-1992.
Desidude-
From the articles you’ve tracked, is the time frame now for all these events compressed or does it seem to be occurring at the same speed as before?
I agree–this is starting to look like the same movie from 17 years ago all over again. Maybe I’ll go out to the lobby for some popcorn and come back when we get to the good part.
You don’t need to go back as far as 1992. Look at some of the newspapers from the dot-com era. Same thing, different asset.
Yes, psychologically the dot com crash was the same thing. But compared to the real estate bubble the dot com crash was over in the blink of an eye.
True, good point. It’s surprising to me that America stumbled from one bubble into another. I thought the memory of one would prevent the creation of another.
Maybe better to say America was prodded from one bubble to another. The guy holding the prod Delphically uttered to the cattle in Fedspeak.
Yes, and the only reason it was not prolonged is because “Banker Allan” gave away money to stop the down turn…
Ditto here in the south bay….
It also shows how much the NYC real estate market lives or dies by the Wall Street bonus checks, especially at the high end. I would predict however, that if the collapsing market elsewhere and a high level of foreclosures and bankruptcies cause a drag on the economy as a whole, those bonus checks just might not continue to support today’s high prices.
The calm before the storm, you can feel it in the air. Everyone that bought a house are walking on eggshells. They have become very tense and irritable. All I have to do is walk outside my office, the sad part about it is i’m in the business of making affordable energy efficient homes and many of my worker’s just recently bought conventional homes. There reasoning is they could not wait any longer, they had to buy before interest rates got too high.I’m goning to sit back and watch it all unfold.
IN TECHNICOLOR
for those interested in Westchester County, NY…
Sales of single family homes in Westchester were down 21.7% in February compared to February 2005. Sales dropped 34% between January and February of this year.
median price was up 12.1% in Westchester for the year, but the interesting fact is that median price DROPPED 7.8% between 3d and 4th quarters, 2005. Given the dismal sales numbers for the first quarter of 2006 so far, it seems safe to say that this price plummet is ongoing.
But among the numbers that might not bode well is the listing inventory, which is 59 percent higher than last year, and almost 16 percent more than the previous quarter.
“Also troubling is the average 138 days it takes to sell an apartment - 44 days longer than it took to unload a flat during the same period last year”.
The bigger they are, the harder they fall.
Inventory in Westchester is up, up, up.
Portland,
do you have a better source for inventory numbers than Realtor.com.? that’s what I usually use, but I’ve heard it’s not the most accurate.
I don’t, but I know others on this blog do. However, when I’ve looked at these other methods, Maine is not covered.
I’m not sure why Realtor.com would be inaccurate other than the fact it would not include 4 Sale by Owner listings. I’ve heard others say the same about Realtor.com not being accurate, but I’ve never gotten a really good explanation as to why this is the case.
For directional purposes, I think it’s perfectly fine.
In NYC, a lot of the larger brokerages (Corcoran, BrownHarrisStevens, etc.) don’t use the MLS, so their listings won’t be on Realtor.com.
There’s been a lot of new construction, at least in the area around where I live in Brooklyn–dozens of new buildings, thousands of units, all “luxury.” More on the way. Hopefully, Bruce Ratner will be building his Ratnerville into a collapsing market.
The wife and I went to see a two-year-old condo for sale on our street last weekend. $730K for a 2BR that sold for $385 2 years ago. When I first moved down here 7 years ago, the landlord was still throwing out the crack dealers and there were empty lots.
Skeptic,
As potential buyers in NY we found around xmas time that about 20% of the homes on realtor.com were already gone. Realtors were just really sluggish about removing them from website…maybe even waiting for close. It was very frustrating when you’d have a list of homes you wanted to see and the broker would tell they were already gone. More than once, it was so bad we just cancelled our outing because there were no “good” ones left.
It surprises me a little bit that New York has a inventory glut . I always thought the demand was high in New York .I guess high prices and overbuilding can bring any market to a halt.
there hasn’t even been that much new construction in NY compared to the rest of the country. I think the inventory glut really is the result of a psychological shift in the market in the last 6 months. buyers have become skeptical that these prices are justified. and the new uncertainty is causing some homeowners who might otherwise have waited to put their homes on the market now, lest they lose their opportunity to cash out at ridiculous prices. it is NASDAQ in 2000 all over again
There actually has been a lot of new construction in NYC, just more luxury-level and condo conversions. Plus, Brooklyn has crazy new construction. NYC is very different in terms of housing stock but I think we’ll still see pretty big drops here.
Not much building in NY?….you haven’t been to Baldwinsville, huh? W/O the crash they were talkling moratorium there. I”ve never seen anything like it.
A lot of migration out of the NY tri-state area these days.
The problem is that many of the scummers from NYC area, NJ and CT end up going north instead of south. But then again, 2 or 3 oppressive winters in a row will push them out.
I was delighted to see the Westchester numbers. Especially since our broker told me last weekend things were “booming.” I never expected things to look so bad, so fast.
I wonder what your realtor will say when you drop these stats on her.
probably something like, “oh sure, sales are down in X,Y,Z towns, but not where you’re looking. you better move fast.”
Reading current market conditions on realty times is somehow entertaining but quickly turns into boring when you realize they have long run out of creative words to make sinking markets look good. It’s probably educational to read what con artists have to say so we won’t be fooled again.
Did anyone see MSNBC’s morning call this am? They were supposed to have a piece on ‘How to re-evaluate RE or houses”….I missed it…caught the tail end with something about Arizona still being a hot market…..
I watched it…Talked about the matrix a little (Jobs, bla bla) and then reported the most inflated markets…Three of which in Southern California….What was interesting was they said that Arizona was not inflated….Completely inconsistant with all of Ben’s blogs…Confused ????
After the 1987 stock market crash, the median existing home price in the NY area was flat for two years (falling relative to inflation) at an absurdly high level, although sales fell. It took until 1990 for houses to start to move at lower prices. The stagnation lasted years.
The question is, will foreclosures/builders push prices down to normal levels faster this time, allowing the market to recover faster. Or will sellers hold out for seven years again.
we’ve already been in a period of stagnation for 6 months. it might last longer, who knows. but as inventory continues to build, there will be significant pressure on sellers to cut prices. I would not be surprised to see real price cuts by the end of this summer (i.e., within 1 yr of the peak). My guess is that 2005’s gains are gone this year– which means about a 10-15% loss from the peak.
a little ot…….
some guy is posting away at sd investors board how he got jipped out of $800 on his security deposit. He really wants his money back - because (drum roll please……)
“I just want my $800 so that I can sign up with Bruce Norris or one of these other Gurus and start investing in Real Estate.”
“The National Association of Home Builders (NAHB) reports that “U.S. home builder sentiment fell in March to its lowest level in nearly three years in response to rising mortgage rates and softening demand.”
This just doesn’t jive with home building stocks in the market place…but does with builder incentives…
AZgolfer…Are you blogging ??? I have a question for you….
Two interesting articles:
1) Investor frenzy on US real estate.Australian companies are sinking more money into US real estate than investors from any other foreign country. Evelyn Iritani reports from Los Angeles.
(www.theage.com.au/articles/2006/04/01/1143441376327.html)
2)More risk foreseen in the hot housing market
Longest boom in more than 40 years
(www.theglobeandmail.com/servlet/story/LAC.20060404.RREALESTATE04/TPStory/Business)
I can pretty much guarantee that the Australian companies are mostly investing in commercial RE in the US, not housing.
OT…but something for the masses. A friend, a fellow bear, gave this to me yesterday and said, “You’ve got to read this.”
This is an article from the East Bay Express, entitled “Dirty Deeds”. It is written through the eyes of Bill Denny, who is the Deputy District Attorney of Alameda County (Northern Ca, SF Bay Area). For the past 8 years he has been running the real estate fraud unit…. EIGHT years….and this guy has a lot to say on the subject. It is a VERY intriguing and eye-opening article. It’s long but well worth the read.
An excerpt:
Bill Denny looks like he is always tired. His suit is rumpled, and his eyes bear the marks of poring over thousands of legal pages: quitclaim deeds, reconveyances, and mortgage refinance documents. Since 1998, Denny has run the real-estate fraud unit for the Alameda County District Attorney. But for all the hours he pours into his job, he knows the criminals usually get away with it. For example, over lunch at a greasy Fruitvale restaurant, he demonstrated how to steal $30,000 with a napkin.
“Gimme a pen,” he said, and started writing. “Okay. Take this to the recorder’s office on Oak Street this afternoon. All you have to do is get Joe Smith to sign here, or let’s just forge his name. Just sign right there. Go to the assessor’s office and find out the assessor’s parcel number, ’cause that’s required by law. The notary is sealed here, witnessing the signature of Joe Smith — you can find a crooked notary in about ten minutes. You can take a cocktail napkin to the recorder’s office, and as long as it fulfills these requirements, there’s now on record this property being conveyed to you.”
This would be good for an topic by itself.
BayQT~
I know its a free country , but best that this information did not get in the wrong hands .
Well, Wizard, it is a local public newspaper so who knows who is reading this. But, as the article states, this guy is a Deputy District Attorney…it’s already out there. And, of course, we don’t know who is reading this blog…Ben’s blog is pretty popular. It just depends on what is done with that information and the enlightenment.
BayQT~
Sorry , I just get worried , of course your right ,its public knowledge now if it was in the newspaper.
No problem. In re-reading your response I realized that you were really talking about the information given so clearly that any crook reading the article would probably try. But you know what? I feel the same way every time I watch the news, or Dateline, or 20/20, etc, where they tell you what some crook did and how they did it. I know the public has to be informed, but at the same time, the crooks are being educated.
I *did* like Bill Denny’s extreme example, though. Hopefully, it also opened the eyes of the right people so that they won’t be duped.
BayQT~
Link:
http://www.eastbayexpress.com/Issues/2006-03-29/news/feature_1.html
Good read sfbayqt…..and, a little scary if it is nation wide…
It certainly is, isn’t it. Very scary.
BayQT~
I live in Manhattan, and my sense is that NYC is on the same crash-course as everywhere else, but on a delayed time frame.
There are tons of high-end condos ($2-$6 million per unit) under construction here - you see several new buildings going up in every neighborhood. Toward late summer and fall, I believe the inventory numbers will start to really weigh on psychology and prices.
This is not based on any scientific data, but I believe there are far fewer flippers in NYC. However, there are a lot of fly-by-night developers trying to do conversions and new buildings.
As a Wall-streeter myself, I can confirm that bonuses were big last December, and so far this year is steaming along pretty good. A lot of us are seeing a little hesitation creeping into financial markets though, and it’s not unlikely that a significant slowdown is in store for mid-late 2006.
If the financial sector stays strong through the year, there will only be ongoing stagnation and flatness in NYC real estate, even while some of the outlying areas dribble downward. However, if we have any shock to the financial system this year (not a remote possibility) and bonuses take a big hit at year-end, I believe it will spark the high inventory situation into a genuine correction, probably 25-50% declines over the next 4 years or so.
WOW…What great info from NYC….
Here was another article fun to read (Poll taken 12/22/05)
Housing Bubble Burst Coming Soon, Say PollingPoint Respondents
Link: http://www.pollingpoint.com/results_122205.html
UPDATE FROM NYC: Well, my wife and I are looking to move into a new rental from our old rental. We found an honest broker (it helps to get one if you want to see decent apts in NYC) and he confirmed my suspiciouns: vacancy rates in NYC are a little over 1% these days, down from 4% last year. The broker explained that folks are bailing from their co-ops / condos (NYCers don’t buy “houses,” we buy co-ops and condos and townhouses if you have megabucks) and shifting into rentals. So, of course, rents are way up. I know, it’s crazy. My old landlord raised the rent $300 to $3,000 a month. My wife and I balked, but they found someone to take it pretty quick. Anyway, we’re “downsizing” a little, at least in terms of rent. Our new place is a comparable 1 BR that goes for $2,500.
A couple of additional notes. First, according to Bloomberg, 80% of NYC buyers rely on ARMs, so there’s a ton of leverage holding things up here now. Second, Jon Miller (owner of real estate firm Miller Samuel) says that “Some people are in a panic, putting their units on the market because they’re worried about where the market is going.” So, I can tell you this: there are way too may folks who make marginal money by NYC standards out there levered to the gills with crappy studios ($425,000), 1 BRs ($700,000), and 2 BRs ($1.5mm) under their belts. And I’ve seen the loan to value ratios for a lot of apartments (my wife is a realator — the good kind), and those ratios are UGLY. Prices fell about 40% on a per square foot basis during the last real estate bust in the early ’90s.
Finally, if anyone wants to read headlines that cover the spectrum from the last real estate boom / bust cycle, check out:
http://www.youdovoodoo.com/80sbubble.htm
“there are way too may folks who make marginal money by NYC standards out there levered to the gills”
this is what all the NY RE cheerleaders conveniently ignore: for every one true wall st. bigshot, there are 5-10 wannabes living way beyond their means.
2007 is going to get really interesting when all of those ARMs adjust.
Great point! The wannabes are the marginal buyers in NYC.
Get long Vega….Thanks for what appears to be honest and informed information on NYC….LEVERAGE…Ouch!!…Are these the twenty somethings or thirty somethings ???
Also, that was a great link for 1981 data….Worth a look if you are not one that had a personal experience with it…I did…It was very painful…
scdave, RE: your question on age as it relates to misusing leverage in NYC, from what I’ve seen it’s what you expect: mostly twenty and thirty-somethings.
Keep the faith.
How are coop buyers getting through the board approvals with marginal income and “ugly” loan to value ratios. I can see this happening with condos (BTW for the first time more condos than coops are selling in Manhattan, perhaps this is why).
A couple of notes of my own. First, the Manhattan real estate market is not related in any way to the upstate market and only loosely linked to the Westchester and Long Island markets which themselves have more in common with Fairfield County, CT and Bergen County, NJ than the rest of New York State.
Secondly, rents aren’t the only thing being forced up by condo conversions. Hotel room rates are also shooting up as more hotels are being converted to condos.
there are ways of getting around some co-op boards. for example, it seems fairly common to have two loans: one for the “downpayment” and the other for the mortgage. some employers provide “downpayment assistance” for just this very purpose.
True, that may work for some coop boards. However, most seem to want two to three years of tax returns and also a few months of recent bank statements for precisely that reason. Many also have “cash requirements”, some amount of cash or near cash assets you should have left over after buying the place. In the high end buildings on Park or Fifth (or even Madison) cash requirements are normally a multiple of the apartment price (e.g. to buy a $1.5 million apartment, you should have at least $3 million in near cash assets before buying).
UES, your experience in NYC may differ from mine, but here’s what I see:
First, yes, you can’t get by a hard-core co-op board with average or even good financials. But, there are plenty of co-op boards that are much less concerned about financials. In fact, they want to see new blood pay HIGH prices in their building because it only raises the mark-to-market prices of THEIR co-ops.
Second, I have to disagree with you on your comment about the Westchester, Long Island, and Connecticut markets only being loosely linked to the NYC market. IMO it’s one massive ball of wax, mostly driven by a need to work, or support those who work, in Manhattan. Many people choose to live in the burbs, despite the fact that they have to work in the City. If jobs in the City tank, home prices in the burbs will tank, too. Check out the link I posted earlier.
“I have to disagree with you on your comment about the Westchester, Long Island, and Connecticut markets only being loosely linked to the NYC market. IMO it’s one massive ball of wax”
I would go further and speculate that certain suburbs of NYC correlate certain neighborhoods within NYC pretty closely.
for example, I wouldn’t be surprised if the high end in the premier towns in Westchester and Fairfield Counties closely track the market for UES co-ops.
just a guess
My bet is “Get Long” has it right…
I checked out your link which was very interesting and defintely parallels what is happening now (the Hoboken articles were very interesting). While I agree that surburban buyers and Manhattan buyers both get their money from the same sources (many Manhattan residents reverse commute to the burbs), they aren’t buying the same type of property. Someone looking for a 4 bedroom house in Westchester County is probably not going to buy a two bedroom apartment in Manhattan. They may check out a house in Greenwich, CT though.
“Someone looking for a 4 bedroom house in Westchester County is probably not going to buy a two bedroom apartment in Manhattan.”
this may be true on an individual basis, but more broadly, the types of people who buy Park Ave co-ops and mansions in Scarsdale are very similar. they work in the same industries (if they work at all), probably have similar backrounds, etc.
the high end throughout the tri state area swings to the same beat
How are coop buyers getting through the board approvals with marginal income and “ugly” loan to value ratios.
This probably happens occasionally in the outer boroughs - they’re part of NYC, too.
As we usually do, the spouse and I were looking in realtors’ windows while taking a walk through our neighborhood (Park Slope) last weekend, and at one realtor we noticed several postings for co-ops in Ditmas Park (Brooklyn) that looked suspciously like flips. We wondered how flippers could possibly get through a co-op board, and then we noticed the note at the bottom of the listing, “no board approval needed”. I had heard that boards in the outer boroughs were less strict than in Manhattan, but I didn’t expect they’d be this lax.
Speaking of vega, are you willing to share insights about why volatility has been so low for the past ??? years (can’t recall how long this conundrum has been with us already)?
Thanks for any information you can share from your vantagepoint.
Best,
GS
Yeah, vol is way low! Which is to say the bull market in equity vol in the late ’90s and through the dot.bomb crash is way done. And the bear market in vol we’ve seen since (it really started in the first quarter of ‘03) is definitely due to all the marginally good economic data we’ve seen. Things have been pretty good (supposedly), so stocks have really just ground upwards over the last three years. So vol is in, which means you can buy insurance for your portfolio (puts) very cheap.
Anyway, blah-blah-enough-of-that! But keep your eye on the VIX. It’ll spike to 30 or 40 from 11 where it is now. When that happens, I don’t know. But I do know there are a lot of folks out there who are still selling options (and therefore vol) because the only thing they can remember is vol comming in.
Stay well!
That’ll change as funds begin to anticipate a turn in the economy. Most of the big macro hedge funds are very, very bearish. Most other big customers of Wall Street (think mutual funds and pension funds) are pretty bullish. In fact, the Bullish % of investors is at a very high level according to Mark Hulbert, and that’s rarely good for stocks, i.e. a bearish indicator.
Get long; Please continue to visit Ben’s site…You are obviously a very sharp tack and your comments con only improve the blog…
Sorry; can..not…con
Do you think hedge funds have tried to corner the market on volatility (”Get shorty”)? If so, when will their efforts collapse? (So far as I know, every time in history a group of speculators has tried to corner the world market on anything, a spectaculor crash ended their efforts… e.g.,
http://en.wikipedia.org/wiki/Black_Friday_(1869) )
Better link to 1869 Gold crash info:
http://en.wikipedia.org/wiki/Black_Friday_%281869%29
To SFbayqt,
On an earlier (yesterday) thread you replied ‘taking the position of a devil’s advocate’….Just for your info to set the record straight, I am a renter…and no I don’t take affront to your comments, this is just for clarification….
Salinasron….This is the site for that risky market info…
Welcome to The PMI Group, Inc. site
It’s true that there are only so many “bigshots” in NYC, but keep in mind, there are teaming masses of mid-level professionals here that make $300k-$700k per year. And of course they often marry one another and combine those incomes, so there is a big upper-middle class in NY that has plenty to spend if they choose. These people are generally smart, though, and most of them see the writing on the wall in terms of real estate. I predict an ongoing buyer-seller game of chicken, with no big moves on price unless and until there’s a shock to the economy.
Mid level proffessional who ? For god’s sake what could they possibly be contributing to justify those kind of salaries ?? I thought Silicon Valley was bad…At least their high income here is based on proformance of the stock…
if you’ve been working on wall street(sales, trading & research or investment banking) for, say, four years and are making less than $300k, you’re a loser.
scdave, we’re talking all those folks in the mid-associate ranks at i-banks, law firms, consultancies, all those analysts at hedge funds, all those biz VPs, etc. — basically, anyone with an MBA or JD who’s been out 5-9 years but hasn’t (yet) ascended to the top echelon of their profession.
OK LowTenant….I don’t think I quite grasp the amount of jobs that revolve around finance in NYC so your response makes sence…
I wouldn’t go that far. several of my very close friends have been i-bankers for about 6 yrs (since we graduated from college), and I would guess only 1 of them makes over $300,000. Now this isn’t small change for someone still in 20’s, but I wouldn’t say they’re all rolling in money.
in fact, the average income for someone in financial services in NY is $122,000. see http://www.fdic.gov/bank/analytical/stateprofile/NewYork/NY/NY.xml.html
5th year associates at top law firms make close to $300,000 as well. again, not small change, but not overwhelmingly rich. at lesser firms (which are where the majority of lawyers in the city work), the pay is much less.
see http://www.nalpdirectory.com
again, none of this is to argue that there isn’t a whole lot of money sloshing around NYC. just that some people who roll in an elite circle may overestimate just how well off the majority of NYers are.
skep-tic, what you’ve said is consistent with what I wrote — you’ve mentioned some people that are 5 years out making $300k, I generalized about people 5-9 years out making $300-$700k.
sorry, my mistake. I thought you were suggesting this income is typical. I’m just saying that while these people definitely exist, they are definitely above average, even in NYC
Keep in mind that median family income for the whole city is something like $29K.
Thanks to taxes a $300K - $700K income in NY is not what you would think. Figure 50% at least for taxes. So they really have $150K - $350K. When you’re earning that kind of income you outsource much of your life. Big apple is exspensive! Simple lunch from a deli $10 x 5 x 50 weeks = $2500. Dry cleaning $50 per week x 50 weeks = $2500 - just two incidentals. - - Exspenses rise to meet income - Ben Franklin
I recently found a neat little feature at the US Census site where you can put in a Zip Code and get the population. It also includes several metrics on # of Housing Units. It would seem one could take total listings in a Zip and divide it by total # of housing units to get yet another point of reference on inventory levels across different Zips.
The site is:
http://factfinder.census.gov/home/saff/main.html?_lang=en
You can also try Googleing; “Detailed Profile” then the zip code…
For all you NYC posters, the Manhattan mkt can be strange, but NYC’s whole market has lots of SF homes and small apartment buildings, and condos, many of which have been bought by both flippers and folks who have risky loans. As for co-ops, it is usually harder to get by the board, but there certainly are sneaky ways to get hidden loans to make it seem like you’re putting 20 percent down when you’re not. Only the most rarified Manhattan co-ops can usually afford to do the due diligence necessary to ferret out these shaky buyers. But believe me, it’s going on in the Boros, which by far have more population and housing stock than the city, and the boros’ fortunes will affect Manhattan’s fortunes immensely.
PS - The co-op and condo market in Brooklyn and Manhattan is already seeing price declines. Right now, I can move back into my old ‘hood, for about 70-80 thou less for same sq feet as I sold back in September (amazing!), or choose an apt at same sq feet for same price in Manhattan (even more amazing!). It is true I think that the co-op/condo mkt is the canary in the coal mine here–it is leading the decline and should be watched carefully– which of course I’d love to do more of if NYSAR would only gather that data- or REBNY would release it on time
I agree — all the stories you hear about co-ops demanding 100% down, demonstrated minimum $100 million net worth, etc. are true, but they’re only true with respect to the “A-list” buildings. As you get into all those white-brick eyesores with the 7-foot ceilings, co-op boards are just trying to keep the comps up. I suspect the same co-op boards could resist downward pressure on prices by refusing to allow sales below a certain price.
Had a friend that owned a Condo in Hawaii that had the same type of absurd underwriting by the coop board…They think they can hedge the overall market forces that way…He would tell me that he was the poorest one in the complex and he is worth 50 mil….Purchased in 1988 for 2.2 mil….sold in 1994 for 1.0 mil even and was licky to get it…..
Maybe I should start proof reading; Lucky not licky…
You may be right about the white brick buildings (though apparantly even some of them have become a bit “uppity” in the last few years. However, there are a large number of “B-List” buildings (e.g. pre-wars east of Park Ave) which don’t demand that you are absurdly wealthy but do want to ensure you can afford the apartment.
PS - The co-op and condo market in Brooklyn and Manhattan is already seeing price declines.
Someone might want to explain that to our neighbors. See Moopheus’s post above about the open house we went to last weekend. This couple is shooting for 53% appreciation on their “investment” in less than two years. (BTW, they put 20% down and don’t appear to be leveraged out the @$$, so if they get their price a good chunk of it will be pure profit.) The OH was surprisingly well attended. We intentionally went late to get an idea of how many people had “signed in”, and there were several names on the list as well as several in the apartment looking. Kind of discouraging, but I’m watching the listing at the realtor’s web site. It’ll be interesting to see how long this stays on the market and how much it ultimately sells for. There’s been a lot of building on the outer fringe of Park Slope in the last few years with several more buildings underway.
Thanks MsTerra - read the post - and speaking of due diligence to Moopheus and anyone else who may be looking at new construction - go over the building with a fine tooth comb and a real structural engineer. Many of these fancy “new construction” condos are built-like-crap moneypits. Might not be able to give them away in a few years. Also I’d suggest patience on everything else — prices aren’t going down uniformly by any means (still lots of clueless sellers and some buyers too) but they almost certainly will everywhere in the boros in the coop/condo mkt — I can’t believe they’ve descended so quickly in my old nabe, but they sure have.
For us the RE market in NYC is more of a spectator sport, since we’re planning to move back to the Boston area next year, so no danger of us getting into some el cheapo new “luxury condo”. (Not that there would be anyway…) But yeah, we watched this building going up, and it went up pretty fast. Same with most of the recent construction. If I were seriously looking I would be concerned about where corners were cut.
I dunno. I have monitored this market pretty carefully. I don’t see those sort of drops. The coop/condo market MAY be platteauing, but at a very high level. And townhouses seem to be going up in price still ..
“MAY be platteauing, but at a very high level”
and permanently so, no doubt…
Boards are interesting that way… my wife and I have been eyeing the market here for 2BR/2BA for the last 2 years, and have seen some interesting stuff. Mid-level co-op on the UWS in the 90s (WEA) asking for 100% of purchase price in liquid assets + 2 years maint liquid AFTER 30% down. Crazy.
$1000sqft is unsustainable… we’ve got a large 1BR (900sqft+) for $2000/mo rent in midtown in a good building, an apartment that would easily sell for 700k+. The disparity in prices between purchase and rent make no sense.
Even more interesting to me is the Brooklyn brownstone market. There has been incredible appreciation in formerly scary neighborhoods like Bed Stuy, Ft. Greene, and Clinton Hill, where buildings that ran in the 400s-500s a few years back are now in the 1.2-2mil range. There is no way on earth those kinds of gains are sustainable… I just don’t see it.
The key is “formerly scary”–some parts of those neighborhoods are still a little rough, but crime is way down in much of ft. greene & bed-stuy. A few years back I had reason to be walking around downtown brooklyn and Ft. Greene late at night on a semi-regular basis and never had a problem.
For me, living too near Junior’s cheesecake would be a problem.
In case you didn’t see this today:
Apartment Prices Up Again After a Slump in Manhattan
Shaking off months of fretting over rising interest rates and bursting real estate bubbles, affluent buyers stepped up their purchases of large Manhattan apartments in the first three months of the year, pushing average sale prices above those of a year ago, according to several market reports released yesterday.
After several quarters of declining average prices and withering sales, the average sale price was reported to be $1.3 million, a 7 percent increase from the same quarter in 2005, according to one report, by the brokerage firm Prudential Douglas Elliman.
Although the increases were far below the 25 percent to 30 percent annual increase reported the year before, brokers celebrated the new numbers as an indication of a second wind blowing in a housing market that had been buffeted by caution and anxiety.
“Compared to what my friends in California and Las Vegas tell me, New York seems to be holding its own,” said Dottie Herman, chief executive of Prudential Douglas Elliman.
Pamela Liebman, president and chief executive of the Corcoran Group, said, “It shows that the New York market, after having a lackluster fourth quarter, is back in full swing with strong numbers across the board.” She said recent transactions logged by her firm suggested that the stronger sales trend would continue into next quarter’s figures as well.
Indeed, according to sales figures provided by Prudential Douglas Elliman, the number of sales of apartments with two or more bedrooms rose 44 percent in the first quarter of this year, to 1,017 from 705 in the last quarter of 2005.
Yet there were some signs of caution in the figures released yesterday. Although prices were up 7 percent to 8 percent from figures reported a year ago, depending on the report, they remained below the spikes in prices reported last spring. And the inventories of unsold apartments also rose significantly, with a rising supply of new condominiums coming to the market. Hundreds of additional new or newly converted condominium apartments are due to come on the market this year.
Each brokerage firms tracks inventory differently, but in the first quarter they showed the same trends. Prudential Douglas Elliman put the current unsold inventory of apartments at 6,904, up 60 percent from the 4,327 it reported a year ago and 16 percent from the previous quarter. Corcoran listed 9,206, more than double the 4,492 it listed a year ago, and up 10 percent from the previous quarter.
Jonathan J. Miller, president of Miller Samuel, an appraisal firm that prepared the Prudential Douglas Elliman report, said that when the changing mix of apartments sold is taken into account, using the average price per square foot, condo prices actually declined slightly from the previous quarter, by 4.2 percent, while co-op prices rose by 2.8 percent.
Mr. Miller said that looking at the numbers this way suggested that price appreciation was “essentially flat.”
“Right now I see there being parity between buyers and sellers,” he said.
Gregory J. Heym, the chief economist at Halstead and Brown Harris Stevens, offered a more optimistic interpretation. “People really became confident again, and people got bonuses at the end of the year,” he said. “The strength continues to be there.”
During the second half of last year, sales of studio apartments and one-bedrooms remained strong, perhaps as buyers rushed to lock in mortgage rates, and were up this quarter as well. Although prices per square foot on smaller apartments have sharply trailed larger ones over most of the last decade, Mr. Heym’s data showed that average prices on one-bedroom and studio apartments in Manhattan were both about $905 a square foot, close to the $1000 average for all apartments.
At a glance, it’s not clear whether the numbers they’re touting are seasonally adjusted. It seems to me that if first-quarter numbers were not well above the previous quarter in real terms, a real bloodbath would be underway.
“the average sale price was reported to be $1.3 million, a 7 percent increase from the same quarter in 2005, according to one report,”
So yes the numbers are seasonally adjusted.
The beginning of The Post article makes it seem NY is immune to any problems. It ends on a sour note. The problem is the headline, and the 1st few paragraphs imply buy now. Since the yield curve was inverted off and on, and there’s talk of a slowing economy this year, Wall Street might not make as much this year. This year won’t be like last’s IMO. Especially in NY, which is so affected by Wall St’s fortunes.
I’m not sure I see the sort of price drops in NYC that so many here are talking about.
“Jonathan J. Miller, president of Miller Samuel, an appraisal firm that prepared the Prudential Douglas Elliman report, said that when the changing mix of apartments sold is taken into account, using the average price per square foot, condo prices actually declined slightly from the previous quarter, by 4.2 percent, while co-op prices rose by 2.8 percent.
Mr. Miller said that looking at the numbers this way suggested that price appreciation was “essentially flat.”
“Right now I see there being parity between buyers and sellers,” he said.
Key here is large manhattan apts — truly a smallish segment of buyers in NYC — but even on their end, inventory has ballooned and prices haven’t seen last year’s spikes. For apts in the range I sold my Brooklyn place for (less than half of 1.3 mill I can tell ya) –things look quite different from my craigslist perspective. You can actually get deals in Chinatown, East Village and UES-UWS for apts listing same square footage (around 700) for what I sold my Brooklyn place for in Sept. last year.
What would be really great is a set of data not from one realtor report but from city sales records of homes, co-ops, condos across all price ranges. Also would like to know how many places went for below ask — anecdotally, NY Times sales is constantly listing places now that sold below the ask in its Sunday section, but that’s just four homes per week.
From your mouth to God’s ear!
The market, to my mind, seems sluggish but not slow, precisely. I’m talking in Brooklyn. Coops priced too high sit, but townhouses priced right (right being a very relative word–$1.4 million can be “right”) seem to move within a month.
The affordability question, that is the number of upper middle class families we know that have simply taken themselves out of the house-hunting game, seems most likely to break the back of this thing.
My friend from Westchester has had her home on the market since January. She has an incentive to be brutally truthful - which is that her employer has guaranteed to cover her loss on sale of property from her valuation in January of $925K. She advised that she put in on the market in January for $899 to be aggressive and sell quickly. There are 15 other homes like hers in the area for sale. To date it has not sold. Her realtor told her to relist for $839K for a quick sale. Also I like near Hoboken - a stroll through OHs for condos this weekend was eye-opening. Condos are staying on the market a long time - inventory is not moving - price wars are a thing of the past. We are at a turning point here..