The ‘Quick Money Days Are Gone’ In New York
Some reports from New York. “Through the first five months of the year, single-family home sales tumbled 12 percent from 2005, according to the Orange County Association of Realtors. Price reductions have become commonplace, and homes are staying on the market longer, say people in the business of selling homes.”
“‘What’s affecting the market the most is, the investor is out,’ said (broker) Chris Scibelli.”
“These days, the speculators have moved on to gold or oil, or maybe animal pelts. ‘We’re getting back to really doing real estate,’ Scibelli said. ‘The quick dollar, the quick money, those days are gone.’”
From Newsday. “Potentially predicting future home price declines, the median price for homes under contract in Suffolk County dipped slightly last month, while the contract price in Nassau County saw a tiny increase. Even in closed sales, there’s more definitive evidence of flat prices and a weaker real estate market.”
“‘Houses under contract are a leading indicator,’ said Martin Cantor, chief economist for Sustainable Long Island, an advocacy group. ‘It’s now becoming a buyer’s market that tends to have flat prices or diminishing prices.’”
“There’s also anecdotal evidence that still-high prices and taxes are keeping some buyers from looking at Long Island at all. Traditionally, typical first-time home buyers purchase a house in Queens and then move to a larger home on Long Island. ‘That’s not happening like before,’ said Buddy Hoosein, broker in Hollis, who said buyers are choosing to go to lower-cost areas instead.”
The New York Times reports on problems with preconstruction condos. “More than 100 condos went on sale a few weeks ago at deeply discounted prices on 50 West 34th Street. The average price of a studio condominium in Manhattan is nearly $500,000.”
“When prices over all were cut by $10 million last month, it had the appearance of a closeout sale at an appliance store. ‘There are substantial discounts available to the buying public for a limited time only,’ said Elliott P. Joseph.”
“The project is caught up in a legal struggle between the owners of the building and the sponsor firm they contracted with to convert it to condos, and some previous buyers have already backed out of their market-rate deals.”
“The Herald Towers project is an unusual example of what can go wrong, sending a chill through the lives of buyers who were early purchasers and their brokers, who lost commissions and lost the trust of some of their clients. If the case drags on, it could erode the public’s confidence in condominium developments.”
“Buyers of more than 70 of the 125 units previously sold backed out, according to some of the brokers who lost commissions on these sales.”
“But as soon as the deadline to rescind a purchase agreement had passed, the Property Markets Group filed another amendment to the condominium plan lowering prices, infuriating many buyers who had stuck with the project, but now saw identical apartments offered for far less than they paid.”
“‘I feel that I am getting ripped off,’ said David Yoon. After learning of the price cut, he found himself unable to back out of the contracts he had signed to buy two apartments for his family. Then, he said, when he tried to buy another apartment for himself at the discount price, he was turned down.”
“, said, ‘We are giving them away,’ (sponsor) Mr. Joseph said. ‘And if the buyers are making money, I am losing money, but I hope to gain that back in litigation from the seller.’”
“John Jun, a broker with the Corcoran Group, said he completed deals for six apartments at Herald Towers: two buyers backed out, and four have already waited a year or more to buy, only to see the prices drop. ‘New York City developers have credibility,’ he said. ‘But these buyers are angry. People who stayed in and didn’t give back their apartments deserve some kind of discount. It really is unfair.’”
Thanks to the readers who contributed to this post.
Trying to get this post unstuck.
“‘I feel that I am getting ripped off,’ said David Yoon. After learning of the price cut, he found himself unable to back out of the contracts he had signed to buy two apartments for his family.
No, Mr. Yoon. You’re just stupid.
Time to break out the world’s smallest violin again. But hopefully, Yoon will be able to sue his way back to “guaranteed” profits.
“When prices over all were cut by $10 million last month, it had the appearance of a closeout sale at an appliance store. ‘There are substantial discounts available to the buying public for a limited time only,’ said Elliott P. Joseph.”
Yes, they are limited. In a few months, those prices will not be available. They will be LOWER.
Interesting theory from Doug Noland on PrudentBear’s web site that I tend to agree with:
“Interestingly – and in “Classic” Credit Bubble Blow-Off Dynamic Fashion - Household Mortgage Debt expanded at a 13.6% rate during the quarter, up from the fourth quarter’s 13.4% and Q1 2005’s 11.8%. I suggest that Ongoing Massive Mortgage Credit Inflation explains why general home prices have held up so well - to this point. Total Household debt expanded at an 11.6% rate, up from the fourth quarter’s 11.1%. ”
I think this IS what has been holding up prices.
Absolutely true - I used some of my HELOC from my NYC home to put a small binder on a new house in Florida to lock it in before I sold here (nothing comparable to the new home was on the market at the time and I wasn’t going to flip - was actually going to live) - a leveraging out of the bubble value of my current home - then I discovered this website - am bailing on the binder - have my current home in contract to actually sell before I buy - and will wait to lowball - with my bubble profit money in the bank. And now there are hundreds of comparable homes on the market where I was looking where there were literally none a year ago.
I can see how many people may have become investors by using their HELOC’s to take “positions” in second homes and investment homes.
WIthout actually ever cashing out the value of your home during the bubble run up - all that “wealth” is paper, and the whole house of cards can crash down really quick if you get caught up in rising rates and no way to sell the investment properties.
My vote for Winner of the Week!
Seems like several chinese names in there. Nothing like asian bull and bear markets for volatility and the emotions of fear and greed. Check the volatility of the asian markets vs the US in May and June this year.
Perhaps Crazy Eddie should come out of retirement with those tv commercials for condos.
Actually, it’s more local than that: the Herald Towers project is near an area known as “little Korea”, and is being marketed by Korean investors to Koreans living in the neighborhood. It’s a hotel conversion by way, and is apparently being managed by seriously incompetent people.
http://www.curbed.com/archives/2006/05/25/herald_towers_prices_plunging.php
“Buyers of more than 70 of the 125 units previously sold backed out, according to some of the brokers who lost commissions on these sales.”
Bubblefucius say:
Man who buy studio in Manhattan soon realize he must go outside to change his mind.
Long Island Real Estate will be pronounced dead by the winter. The Hamptons market has recently undergone a change and the smart money is beginning to silently file out. Following is where you can click on a
recent report that talks about specific price declines
in this area: “Real Estate Market in the Five Eastern
Towns of Long Island” in PDF
Format-http://www.suffolkresearch.com/report.pdf
That report was back in April and it’s gotten decidely worse. And here comes hurricane season.
“‘I feel that I am getting ripped off,’ said David Yoon. After learning of the price cut, he found himself unable to back out of the contracts he had signed to buy two apartments for his family. Then, he said, when he tried to buy another apartment for himself at the discount price, he was turned down.”
This looks like a speculator who wants to average down his overall cost.
Is it right for the developer not to allow him to buy another unit at the price offered to everyone else?
I was wondering the same thing. That doesn’t right or prudent for that matter. I wonder if Mr. Yoon has any recourse regarding that rejection.
Housing Wizard….can you comment on this?
BayQT~
Well IMHO ,without knowing all the facts , Mr Yoon might have a lawsuit that could have teeth .
Mr. Yoon went beyond the time allowed to rescind the purchase agreement ,so that works against him .
Because the price drop was dramatic ,and the project owner and condo developer are in a lawsuit , one could say that the price drop went beyond normal market conditions ,making it good faith to lower all units ,(and not stick just a few with the higher price ).Also they refused to let him buy another Condo at the discounted price ,(so that he could average his lose ),so that shows a bias toward this borrower .
Apparently the owners of project knew they were going to reduce the prices prior to the ” rescind deadline”,therefore one could make a case for owners lack of disclosing know facts or bad faith to parties that had a rights to rescind ,(had they know of the pending price reduction ).
The fact that the owners immediately dropped the price right after the rescind deadline shows a plot to deprive parties of facts that would of caused them to exercise “the right to rescind”.
Anyway , I’m not a lawyer ,so just a humble opinion on this from a layman .
Thanks Wizard. Someone from the legal field may chime in with additional facts. I think it’s quite interesting that the developers are refusing to allow him to buy another unit at the reduced price. Frankly, I think the developers are walking a tightrope. Trouble’s probably brewing.
BayQT~
Bubblefucius say:
Man who buy studio in Manhattan soon realize he must change his shorts after seeing the new NAR numbers…
Update from the Maryland DC Suburbs. The phenominom of the sign spinners has arrived in Western (the good side) of Montgomery County from South Flordia, just in time for the tourists and relatives visiting from NY. In Rockville alone there are several condo developments actively selling with spinners (one at corner of Old Georgetown and 355, one next to Target, the old pavillion apartments, the condos in downtown rockville (above what will be the new Rockville mall), the last condo bulding in King Farm, a conversion of some of the King Farm apartments, and the Fitz conversion. In addition, there are several more being planned planned (across from White Flint mall, behind Twinbrook Metro, behind Rockville Metro, behind Shady Grove Metro, and the site of King Automotove). Like after every real estate bust, the DC area will keep going for an additional year or two and all of the money that has given up on the rest of the US (especially NY area) will come to buy these things, just before the area crashed.
Hey, more job growth in Florida… a need to fill job vacancies for well paid sign spinners… (wink)(smile)
From Westchester County, north of NYC……SFR median prices are off -15.6% from what appears to be the peak of August 2005. Volume down by about double that….-30%. Still a ways to go, IMO. And in Fairfield County Connecticut, FOR SALE signs are everywhere.
Suzanne says this is wishful thinking. The investor is still “in” real estate, the problem is he can’t get out and we’re running out of greater fools.
Long Island MLS numbers:
03/31/05 15,524
02/19/06 24,691
03/25/06 26,893
04/03/06 27,143
05/03/06 29,196
05/11/06 30,089
05/21/06 31,048
06/05/06 31,662