1991 NYC RE, rental market "A refresher Course"

And i don't give a ratz azz about what the Fed does w/ IR or inflation. NYC RE is currently being driven by supply (start counting the units brokers) /demand (housing formation) and the Cash Flow drain of mortgages vs. rental (imputed or otherwise) income. Nothing more nothing less.

reminds of the first time i did the east river in an old (very) sailboat with an even older diesel. didn't really understand the tide tables...got right about there and started ever so slowly to go back down the river. not a good feeling. cranked the motor, went backwards more. can't tell you how long it took to finally clear the throgs's neck bridge. perfect analogy.

I remember reading some statistic about the volume of water that gets funneled into the east river, it's the one place you don't want to fall in.

its not even really a river, it is a tidal strait, super strong currents

How many shadow units that will go into the rental pool in the next year?
5,000? 10,000? More?

eastside... since you a newbie ill cut you some slack and admit i was a bit harsh. It's not you per se that I have a problem w/. but the industry in general. 20 yrs ago when I went to look for a rental in colllege, do you know what it cost me.. 1 month... do you know what my landlord paid to get me in? one month.. .15 yrs ago when i did my flips, do you know what the brokerage fee was? 6% do you know what it is today? 6%. Do you know I had to actually use travel agent to book my tickets to mexico 17 years ago, do you know the last time I spoke to a travel agent?

Do you know when my wife started if you had breast cancer.. they'd take out both boobs and the ovary for good measure then chemo you to death... just to be on the safe side... do you know how they do it now?

You can fill in the rest... but finally wtf, I've rarely seem ugly, handicapped or seriously minority looking (fill in blank) RE borker. Although the gays seem to fill your ranks (cool it, I've got a gay guy in the house)... just an observation.

maly irrelevant, cause everyone is a renter (think imputed rents)....

it sounds like, if i am reading this right that you are saying as other industries or practices have changes, that real estate needs to, and the best way to do that is to eliminate people who do what i do for a living. fortunately for me, there are enough people around that either won't do it for themselves or can't, or just want someone to hold their hand.

w67thstreet you should teach a seminar on buying R.E. in NYC, you're hilarious, you break everything down in easily understandable terms & you know what you're talking about. I'd go for sure :)

Hi, I want to convince you of something, so I'm going to state my case after I insult you by calling you a buffoon.

Then, I'll present my case and finish with references to me using illegal drugs and I'll also spell words with a z at the end of them so you know how smart I am.

Remember, I'm not really after you thinking I'm smart, I just want you to think I'm cool and funny.

z

Luchias... I was an economics TA, but went wall st. for the money... (I always loved teaching and I was voted TA for that econ section, but i kept it pg13). Let me tell you my wife didn't i knew what the hell i was talking about when i walked away from my $2.5MM bid, guess who outbid me?, a REALTOR!!!! Howz you likez them apples now, borker... LMAO...

Piggie let's make out.. you've never had sauce that was rich, tasty and filling at the same time....

That's the problem with bomb throwers, they never consider data relevant (until it goes their way.). Bulls and bears never know when to stop.
You might be right, but you haven't even started to make a case for your beliefs. At this point it's more religion than science.

"You might be right, but you haven't even started to make a case for your beliefs. At this point it's more religion than science." Ha. Welcome to the SE message boards.

maly... i've got experience on my side, take it or leave it... does my scenario seem plausible? or do you think Rushmore buyers will get a 100% in the next 3 yrs? What happens to all these failed developments, do they bulldoze them like in Arizona?

The writing is in neon in 700pt font in front of your computer, and the 10,000 official shadow inventory from Sam Miller. LMAO

I personally there are several plausible scenarios, from 3 to 8 years of recovery time on the rental side, with another 2-3 years of extra lag time on top for the purchases to follow. New York is very plastic, with lots of booms and busts. This wasn't the stupidest bubble, this won't be the worst crisis.

maly, you really don't think this was the worst bubble... so you think 89-95 was worse... hmmmmmm how do i say this.... NO!

R U FUCKING KIDDING ME, do you know the kinds of LOANs people were DOING IN 2003-2008? Do you know the % of take home pay people use to "live"? Do you know how many people lived of the trough of refuse from NYC RE?

well at least we can argue about something... : )

so...in 12 yrs you break even? are you kidding?

w67th, remember, stick with what you know, when trying to prove a point, make sure to spell at least one verb and one noun with a 'z' and also to mention either your penis size or your Porsche

do you worship him or does it just seem like that?

The original Ponzi scheme, the 1929 crash and the cyclical busts of the Industrial Revolution come to mind.
You really should take a longer view, I believe the reason why so many get fooled in boom times is that they personally haven't experienced one.
I could have bought a 1br condo in Battery Park City for $360,000 in 2002. 3 years later, they had doubled in price (recovery)- by 2007, people wanted $1,000,000 (crazytown.). People are by and large irrational because they do not study history.

sounds pretty logical to me. sooner or later someones got to pay for all the empty spaces both commercial and residential.

Maly, yes and tons of idiots doing 2005/2004 trades and high fiving themselves silly.. yippee I bought 1br battery park for $500K, sounds great until maly says yeah I saw that for $360K in 2002, and the unemployment was 6% in 2002 vs. 10% now... see the difference ....

that whole religion/science question regarding empty space? inventory? wouldn't it be lovely if we had real-time info, and the rational behind it?

the hubby felt that the closings of the chocolate by the bald guy store on east 18th or whatever and the closing of the starbucks at 28th and 3rd and one more closing i can't recall(memory fail, medium signnificance if i recall) all showed distress.

none necessarily did, although they didn't necessarily imply growth as well.

the starbucks location was the most likely to have some real implication, although the ccbtbm location was superbly busy during prime times. interesting.

http://www.bisnow.com/new_york_commercial_real_estate_news_story.php?p=5117

I was on a coop board in a gentrifying nabe 2003-2007 and I saw some terrifying application packets: 1 month Adj. with teaser rates and no caps written on income that a few phone calls revealed to be fraudulent. We turned them all down, but it put the fear of god into me, and I sold.

"How many shadow units that will go into the rental pool in the next year?
5,000? 10,000? More?"

A few months ago, it was speculated by several
experts" that the amount of shadow inventory was between 100% and 200% of booked inventory.
At that time I think booked inventory was like 11,000 units?

That would put shadow inventory at, say 10,000 to 20,000 units?

I don't want to be callous, 10% represents 1,000's of people in distress, especially the young, the uneducated and the recent graduates. I should know, I graduated in 1991. Good times!
At the same time, you do have to remember 2/3rd of people are renters in NYC, and homeowners tend to be richer, older and more established than average. I think the final picture will be more mixed than bears believe.

what's your point?

W67 the difference is the repeal of glass-steagal let all the wall street sharks rape and pillage the american public all in the name of providing "the dream of home ownership". In 91 you didn't get rich buying real estate, you got rich selling the real estate you inherited (like trump or helmsley). Today everyone is a guru and trendspotter. It's easy to look smart buying into a 20% annual growth market. A lot of 25 year olds were tech stock fund whizzes in 1999 forcing the old guard value investors out of business. Those whiz kids are all gone now.

Interesting that the RE brokerage game hasn't changed much. That's because money is made on hyping markets into bubbles and withholding info. Better to have less technology/info available if you want your public to be ignorant.

That a bit of humility is in order. Speculation runs both ways and not one of you can be sure about the future.
You guys are jumping the shark, same as the crazed bulls 2 years ago.
It's always good to realize you are not omniscient, just because you were right doesn't mean you will be in the future. Look at all the facts and bits and data, rather than discounting out of hand what doesn't fit your view.
20,000 extra luxury rental units, 12% unemployment that's a bleak market for sellers, but you know what? One good year on Wall Street and bonuses will start the machine away.
My point is that you don't want to be as blind as that silly bullish guy who said "crash? What crash? Buy now or be priced forever" in fall 2007.

where's the data supporting the other way? wall street cannot operate in a vacuum. non wall street is dying the death of a thousand cuts across the country. municipal governments from the state level on down are short by huge orders of magnitude. what we are experiencing is the end of a multi-decade cycle.

will we be in the bunkers? no.

will nyc be able to support the number of 7 figure properties currently held? no.

And the tax rates people have to pay this time around are much higher than they were when the bubble broke in the 90's and not just property taxes but income taxes, sales taxes, school taxes etc etc

Wouldn't it be nice if Wall street and Main street were on the same page. Ha!
So far this year, the indexes seem to be rising in tandem with layoffs, ahem, corporate profit expectations. Million dollar apartments are pretty much all about Wall street, not so much about Main street. Who knows if we've hit bottom, have another 20% to go? It seems pretty obvious whatever will happen will be slow and painful, but I wouldn't play prophet.

maly, let's just see, shall we.

how long can corps make money if no one is buying their stuff?

how long can market go up based on companies exceeding vastly lowered expectations?

aig has gone up close to 50% in the last week? why?

"Interesting that the RE brokerage game hasn't changed much."

The game has changed PLENTY; are you a broker since 1991? I can tell that from the inside, things are VASTLY different.

How so?

I hear you W67. I wasn't an agent during the last little bloodbath, but that sounds like it was a paper cut compared to what we're experiencing right now.

Data is fantastic, I believe it data, I also believe in shoe leather, I have been investing some of that. Somebody in the office had to explain to me, back in the day, if you wanted to rent in Manhattan you gave the broker 15% to get your apartment. 15%! Our app forms still say 15% ! The tenant handed over 15%?? I can't get over this.

Well now there are hundreds of apartments I can find immediately labeled "OP," for Owner Pays. And the owner is paying one month's rent to the broker, so we can run around saying "No Fee," which we do in my office...at some companies they brokers still collect their own fee from the tenant AND take the OP, which is surely illegal, but I have it on good authority this is happening... We're talking rents $3,000 and up, which is at the average for NYC and going up from there.

In addition, many LLs are offering OP plus 1 month's free rent. Some are offering two months free rent.

Somebody try to tell me this isn't a massive, massive readjustment.

Some LLs are offering gifts to brokers too, I saw a gift card offer....

What kind of apartments are these? Well I visited a chic doorman building on the Lower East Side to begin to find out. Several vacancies in a nice happy rental building ideal for someone with hipster fantasies who also happens to have more money than the typical jazz drummer.

I only looked at two units. One apartment has its own back yard. Very nice place, spacious, great for sharing, a little over $4000. The other apartment was completely and recently redone on the inside, painters are coming back for their tools, bay window. $3200. They have more vacancies but I got the idea.

Then I went to the UES and visited a walkup in a solid area with several vacancies. Very modest rents for the area, something under $2000. Walk-up, tired looking, but the area is very appealing.

Today I am showing a nice unit in West Greenwich village that has been sitting on the market since I've been a licensed real estate agent (that is, one month... I'm new to agenting but I've been a real estate investor for years). This is OP, rent is a little over $3000. Good rep on the building, I don't know why it's sitting unrented during prime rental season. OP in the West Village ?

I should say as a LL, if something isn't rented within a month or two something is wrong. Often when a tenant is moving out my property managers gets somebody in there seamlessly, with no or minimal loss of rent. 5% vacancy, maybe even up to 10%, is OK but more than that something is wrong.

My instinct is, if this is happening in these areas, the less desirable residential areas in New York City must really be hurting.

{Manhattan real estate agent.}

cc, because their payrolls are guaranteed by the taxpayer, not corporate debt!!

just joking. sort of.

maly, what drugs are you on and where can i get some? when the white house tells you they were wrong and we are in much worse shape than they predicted three months ago, well, it makes me pause.

Fluter - I'm trying to get my head around someone who wrote what you posted just above really being a broker. You seem too rational and thoughtful, not to mention that absence of broker jargon. I'm highly suspicious, but I guess I'll take your word for it (the alternative, which is that you are impersonating a broker, being too preposterous to imagine - I mean, who would do that?). I may have to add you to my broker non-sh*t list. It's pretty short; so far only urbandigs and 30_yrs.

hey--even i think she's terrific. always honest about what she does and doesn't know -- a breathe of fresh air. my idea of what a broker should be and provide. A+

there are definately brokers taking additional fees on OP listings. Standard OP is one month (8.3% or one year's rent or so) so they are collecting the difference between that and the old 15% standard. Personally, I have done mostly OP rentals lately. The occasional "fee" apartment, but I have lowered my fee to equal the one month of rent to make it palatable and reasonable given the market. The only "full fee" listings I can even entertain are "co brokes" between my firm and another. And those only usually exist where one or the other of us have an exlusive listing on an insane condo or townhome rental. People who are willing to pay 8k plus per month in rent will pay a fee to get exactly what they want. And it is done with full disclosure.

Fluter: But also back in the day circa 1991, about the time I started doing this there was virtually no sales market downtown, owners were paying the brokerage fee's on rentals(OP) and offering a free month.

Archive (666 Greenwich Street) 1991- *Studio's were $1295 a month, no fee(OP to broker) free month on a two year lease.

Today: $3600 no fee(OP to broker) free month on a one year lease. 2006-07 peaked at about $4300-$4500.

*Studio=duplex with two full baths approx. 700F2

OP= 1 months rent

(KeithB formerly "theburkhardtgroup")

rockrose if offering those types of concessions on all of their buildings now, so far as I know.

"Bulls and bears never know when to stop."
"I personally there are several plausible scenarios"
"just because you were right doesn't mean you will be in the future"

agree 100% with those 3 maly, but specially liked the 1st one. in general, knowing when to stop is more difficult for many than knowing when to start.

Fluter thxs for update. Familyguy, I was offered $2mm w/o a credit check in 2004. Yo Keith,et all.

1) rental mkts resets every year so is a predicitve mkt, given sales # is married to rental thru the magic of rent/buy historical ratio, where does sales go from here?

2) WTF is an sales only agent? That's like a plastic surgeon that's not an MD to begin with. Eastcider, is you see a pregnant couple wanting to buy a 1 bdrm, an honest broker at this time would say I can lock you into a rental for 3 yrs and you should buy a 2 or 3 bdrm if you decide to have another child anytime. But the rental is a better option. Then if the couple says we like living for the moment and renting is for homeless people, then by all means selll them a $3mm 1 bdrm in rushmore.

Great thread.

Familyguy, are you still tuning in? Ifso I am curious about your post:

I was on a coop board in a gentrifying nabe 2003-2007 and I saw some terrifying application packets: 1 month Adj. with teaser rates and no caps written on income that a few phone calls revealed to be fraudulent. We turned them all down, but it put the fear of god into me, and I sold.

Am curious which nabe this was. Don't say the co-op but can you reveal the nabe?

thanks, GG

900K?

so..that's another part of the story.

so your prior family circumstances (meaning just out of law school, moving to ny, etc) in 2007 couldn't possibly afford that apartment even with an income of $250 K.

that sums it all up to me.

One other thing, given the lack of new family formations and people moving to NYC in general, the 20k shadow might as well be 50k. Oh also remember when a renter moves to get cheaper rent the LL gets to taste the new mkt reality, and as long as there is some slack in inventory this game of musical chairs/chicken between LL and tenants goes on and on like Celine Dion.

"Oh also remember when a renter moves to get cheaper rent the LL gets to taste the new mkt reality, and as long as there is some slack in inventory this game of musical chairs/chicken between LL and tenants goes on and on like Celine Dion."

heard nannies in the playground yesterday subletting spare rooms, first time for them. applies to lower bronx, not manhattan, but still, this household "consolidation" has just started imho. they seemed happy to lower living costs so far (some are losing long term positions and working part time or per hour)... taking in roomates was already common for young graduates or newly arrived people but not for middle aged women imho.

one of the issues for a while in nyc was the total lack of livable housing for less than $1000/month (unless project or rent control). higher willingness to rent a room vs the whole house will push that lower limit to new low levels while increasing vacancy rates.

anyway, for all those that despise biased practical examples (like myself but unlike the nytimes), if they are isolated cases or a trend... only time will tell.

the thing is that a couple of days ago NPR did a program about this same thing. so it resonated a little bit more.

"circa 1991, about the time I started doing this there was virtually no sales market downtown"

How are you defining downtown? We were doing like 60 sales transactions a month as a small office.

"WTF is an sales only agent? "

An agent who only does sales and not rentals. Back in 1991 (to tie back into the thread title) and before that, most brokers were "sales only" or "rental only". Many companies had policies that if a "sales agent" got a rental client the HAD to turn them over to a rental agent and vice-versa. I remember at Bellmarc, they even had sales territories and you could only show apartments within you office's territory; so, if you worked in the Village office and got a buyer who wanted to buy on the Upper West Side, you had to refer them to an Upper West Side agent.

"How so?"

Well, first and foremost, you still had mostly open listings instead of exclusives, and firms either didn't co-0broke their exclusives at all or chose very carefully who the would co-broke with. So, different brokers actually did have different listings to show. To me, that's a HUGE difference.

30 yrs what does it mean to "Co-Broke"? I've heard this term several times but not too sure what it actually means.

It means you AND your partner are both broke.

a co-broker means that a particular agent or a particular agents firm has an exlcusive right to rent a property, and that owner is not paying a commission. if you have your own agent they must split the fee, hence co-broker.

One broker has the exclusive listing for sale and another broker procures a buyer. You probably don't hear the term used much anymore because it's almost every deal, so they don't name the puppy.

still happens a fair amount in rentals. sorry, that was my angle

"You guys are jumping the shark, same as the crazed bulls 2 years ago.. It's always good to realize you are not omniscient, just because you were right doesn't mean you will be in the future. Look at all the facts and bits and data, rather than discounting out of hand what doesn't fit your view.
20,000 extra luxury rental units, 12% unemployment that's a bleak market for sellers, but you know what? One good year on Wall Street and bonuses will start the machine away. "

What's funny is, that last line is exactly what he just called everybody else.

"One good year on wall street...." sounds EXACTLY like the crazed bulls 2 years ago!

"Look at all the facts and bits and data, rather than discounting out of hand what doesn't fit your view. "

Ironically, isn't that what you just did?

co-brokers ugly second cousin (in the renatl market) is the CYOF, collect your own fee. that is when a fellow broker is greedy, takes an owners paid commission for his/her self. unless that agent is really really good at their job their apartments tend to sit on the market awhile

eastsidebroker: how do you handle it when you get an exclusive with a 1 month OP?

I was going to try & rent in Manhattan but I found a full one bedroom in Astoria for $1000 a month & I can be in midtown in 10 minutes. How long has it been since a true one bedroom went for $1000 a month in Manhattan...does anyone know?

if i think i have a very good chance of renting it quickly myself than i might list for a weekend (max) as a cyof to give myself the opportunity. if it doesn't rent than i would offer it out as an op listing. i don't want the listing to sit there because i am looking to make some extra money for not doing anything, but then again, i like to sleep at night

plus, if that landlord has other listings, or knows others that want to list, then if i rent it quickly then i get that future business. i think it is a shame when i see cyof listings that are beautiful well priced apartments sitting there for months and months

when you say outside OP, though, you mean 1/2 a month, right? You don't give away the whole month and keep nothing, do you?

the whole month....i get a 10% listing fee for pushing the paperwork around when a deal comes in

10% of what if it's an outside broker? Sorry for being so dense. If another firm rents it and gets the whole month, where does your 10% come from?

I'm sure it was a long, long, LONG time ago when one bedrooms in prime Manhattan rented for $1000 a month. On a side note, Astoria is very nice, congrats on find affordable housing there IluvNewYork.

great topic w67thstreet - - just wish you'd tagged it as a "Rental" discussion rather than "Sales" - - I nearly overlooked it.

This is typical of new inventory coming online - - third-tier location (far west side, far from subway), lots of units to fill, buildings still under construction, unit sizes heading smaller (don't let sample floor plans fool you - - they're showing you their largest units, not the typical ones),openly advertising 2 months free rent:

http://www.rockrose.com/residential/search?id=6122

Also, just FYI, one of my favorite rental threads:

http://www.streeteasy.com/nyc/talk/discussion/10849-silver-towers

anotherguy, sorry but I am a renter trying to read the tea leaves on sales side although the last 100 cups of tea all spelled "BUST" on the bottom, coincidence?

Like the sun to our planet, Rentals are gravitationally related to sales and vice versa, and in fact one could look at RENTals as the SUN and sales as earth in terms of size and influence in NYC. Now come along to my other thread which will explain 2007.

ditto here... I remember a lot of NYC around the world travelers in 1991 also... LMAO..... this movie is so familiar....

http://www.nytimes.com/2009/08/30/realestate/30cov.html?_r=1&hpw

I kind of wish my parents had considered a second place in NYC back in 91, a ped a teierre of sorts. As long as the maintenance wasn't too high it would have been a good place to hang out in the city and worth a lot today, obviously not as much as a couple years ago but a lot more than 1991!

w67 - you make a lot of sense in this thread

How the rich get richer.

The one thing to remember on the vulture front, is that by definition some of the first waves of buyers will take a loss, bc the rental market will go further away from them... but that's okay cause that's free mkts, no? Now just imagine, if you time it correctly within a 2 to 3 years of rentals firming up and you can re-fi this baby for 100%, i.e. you get all your capital back, your returns are "infinite." NOW thatz how the big boyz rollz, and I just can't wait to see apt buildings in the Bronx go for 7x RR again... the last time I was too young and not enough capital....

Assistance