Top Broker: NYC Real Estate in Steep Decline

holy f*ing sh*t. If thats even close to true, my projections have been blown away...

talk about vindication for dco...

finally, a broker comes over to the dark side and admits that gravity is real. POP!

Well, once their "market is great, BUY" story ended, they need a new pitch, and "market has tanked, BUY" was the only thing that would work.

They don't care as much about prices as they do volume.

So, worst case is to have things down a little, with folks expecting more declines. They want to say "bottom" as quick as possible once the cherry is broken.

But if THAT doesn't point out how scummy these motherfuckers are...

These are the SAME PEOPLE who told us things were hunky dory like, what, TWO WEEKS AGO?!!?

Probably just a broker fishing for oportunists...but still...and I hope a lot of sellers are watching 20/20 Friday.

This meltdown was actually never that close to us until this week...my wife and I know three NYC couples where one of the spouses work at Lehman or AIG. And if we know three, there must be a lot of people vulnerable, we don't work in those fields. Another couple (he works at BAC) are putting the studio on the market that they bought next door to their apt for future expansion. An AIG couple is talking about rushing their NYC apt to market before a crash to buy in an already soft Westchester market. The tide is turning. The market is going down and will accelerate when people that have to sell start undercutting the sellers who are wishful thinkers.

New quote of the day: "The masters of the universe are out there, figuring out which planet they're on right now."

"talk about vindication for dco..."

And stevejhx?

And an orgasm for Stevejhx.

stevejhx, I don't think it's about vindication (though I still find this need for it a bit strange), because you were mostly pointing to accurate things since I remember you posting here. Let's not get all worked up because one broker "went to the dark side" though - this thing will take its time before any big proclamations can be made.

nyc10022, do you want to out yourself as EddieWilson, or should I? ;)

Aside from the obvious (large broker admitting prices are headed downhill), the most interesting thing here for me was the notion that if you are in finance - ANY kind of finance, coop boards will be unwilling to take you in. So if you are trying to sell your coop, you have a MUCH smaller pool of people to sell to, taking prices down further.

I think this is a big deal.

By the way nyc10022 I like you're analysis of the "new spin" and what a PR move for that broker to be the first to say it. But really, it's fucking hilarious if you think about it. It's amazing how brokers, who aren't ALL bad people, become conditioned to somehow lie even when they tell the truth.

What I mean is, there is always an ulterior motive, especially if they are telling the truth.

isnt kathy sloane the broker recently accused of tax evasion? next thing you know we'll have al sharpton on tv talking about fiscal policy

I do think that properties $4 million and up are going to be hit with much higher % price drops than properties in the $1.2 million and under bracket. There are a lot of very expensive properties that are ridiculously overpriced versus less expensive properties that may need a slight adjustment.

I know that a lot of peopele have been waiting to pounce on this and it is an accurate prediction. I do also think it is important to mention, before everyone goes off the deep-end, that one broad statement about price declines does not fit all apartments, in all buildings, in all neighborhoods and in all price points the same. Again, I am not suggesting prices aren't going to fall, just that there are often a lot of over-generalizations and "absolutes" thrown out there in comments and some discretion should be used to balance that. Just my 2 cents, although it may be worth 1.5 cents in this market.

Ever see the Harrison Ford movie, Regarding Henry? It's in the early 90s, he's lost his job and his wife says all they have is the apartment and it's not worth what it used to be.

Anyway, how will the new RTC change this?

"Ever see the Harrison Ford movie, Regarding Henry? It's in the early 90s, he's lost his job and his wife says all they have is the apartment and it's not worth what it used to be. "

Totally... it was on cable like 2-3 months ago, and I was totally thinking about that part as well...

And they called my cinematic Little Black Arrows scenarios fantasy....

Waverly : they are all going down...I don't care what the price level. It was only a few weeks ago that conventional wisdom said the 2 million plus market would be stable no matter what...the affluent will remain affluent...blah...blah...blah.

"Anyway, how will the new RTC change this?"

Simple. The new RTC is massive pen, basically a cage, where all of those snarling, slobbering, and if I may say so, altogether unpleasant and pesky little debts will be thrown. Now let's hope they don't escape.

And like most investments on Wall Street, the lower it goes the more likely they are to unload it.

The substantial amount of new financial regulation coming down the barrel isn't going to help the situation either.

I've read about what stevejx has said on streeteasy, this isn't vindication for him after all because it isn't ever the right time to buy an home.

I heard from someone in London that the news media is much more meanspirited about wallowing in Schadenfreude, and they have broadcast the stories of Lehman bankers who complain loudly that they have huge mortgages they won't be able to afford.

waverly, I sort of see your point about different markets, but they're all inter-related, because people spill over from one market segment to the next as they get priced out, and some people move up notches as they make profits and reinvest. Layoffs will be in all income levels.

"it isn't ever the right time to buy an home."

I've said on multiple occasions that it's always better to buy a home - when it's cheaper than it is to rent one.

This agent is pulling numbers out of her a$$. She did not provide a single exmaple of an apartment that SOLD for 1/4 less than it's peak price.

she did actually -- you missed it alpine
she said in a month $5 million will be $3.5 million for a specific apartment she is talking about
She is clairvoyant

So far I see no evidence of this kind of drop and stern developers at Harlem (ready to fall like a rock) developments like Graceline, Kalahari etc are still rejecting our 10% below ask offers. My mistake -- I should try 30% off now

i am rooting for 30, 50, 90 off of course, but seeing is believing

try the discount at soha 118! they seem in a hurry to try to move inventory. they tried listing a couple for rent but i think that it didn't work either.

"she did actually -- you missed it alpine
she said in a month $5 million will be $3.5 million for a specific apartment she is talking about"

That is a HYPOTHETICAL example. An ACTUAL one is an apartment that has already sold.

By the way, here's Kathy's only Park Avenue listing at $11,650,000:

http://www.brownharrisstevens.com/detail.aspx?id=882739

Make an offer for $9,000,000. It looks pretty tired to me. I wouldn't pay a nickel over $6,000,000.
And who would want to live with all those stuffy old farts anyway who paid $900,000 for the same apartment in 1991 and are now sniffing their noses from their perch on their fascist board.

> That is a HYPOTHETICAL example. An ACTUAL one is an apartment that has already sold.

Alpine, you got caught in a sarcam trap...

have people forgot my public diary since the beginning of this entire crisis last July 2007! Now these TOP brokers come on board, yes, lets give them all the credit for they are truly ahead of the curve.

my question is, how many bad appraisals and pricings did these top brokers do to secure these high end listings. Now credibility is at stake, and Im sure you will see more wake up. I recall 7 months ago, I was visiting a top team at elliman's listing, and I tried to explain to him the current crisis and the fact that his listing was way overpriced. He never sold it, expired, and he told me and I quote, 'why would I advise my client to lower the price, he deserves to make as much money as he can, and the credit crisis will not affect Manhattan'.

idiot!

soha118 may discount but it is ugly with poor finish quality, bubbling floors, randomly placed columns spontaneously emerging in living rooms and so forth. Given how they raised prices, and the shoddy quality they will likely get hit but their sign says they are mostly sold, so to "protect values" they will likely focus on renting rather than discounting

Well here is a gold plated building for you -- an open house too
http://www.streeteasy.com/nyc/sale/136953-townhouse-9-e-62nd-st-lenox-hill-new-york
I suppose it could take a 30% or 50% or even 70% cut and then be in line

http://www.streeteasy.com/nyc/sale/16138-coop-204-w-85th-st-upper-west-side-new-york
price raised 150k 1 day ago
apparently not a top dog broker

I was converted from a bull into a bear about 10 months ago based upon the arguments made by urbandigs and steve. It seems to me, as I predicted last week, that listings will approach 9000 by years end. Now, these increased listings will be done, in spite of the fact, that the seller knows that they are coming to market at a terrible time...why? Because they need to sell. These are the best times to be patient on the sidelines. I predicted a 30% decline over five years, but based upon the deteriorating conditions, that 30% number may come in much faster, and steve may be correct about an overall 50% decline. My sense is that by the end of q1 09 the market will be overflowing with listings that need to be sold. If quality of life has not begun to visibly decline, you may see some vultures going after the top properties for massive low bids, e.g. that 5mil coop for 2.6 in cash. If, that happens, units in the 2.5- 3 mil range will be selling for their listing price in 2004, just as steve predicted.

Joedavis: I'm pretty sure that's a re-listing, not a price increase. Streeteasy's matching algorithm sometimes can't distinguish between those scenarios, and it seems to err on the side of matching in cases of ambiguity. If you look at the timeframe, this one is fairly clear.

More generally, joedavis, are you sure you're really a buyer in search of a $1.25MM 3-bedroom? The closer the market comes to your supposed goal, the more vigorously you grasp at straws to insist that it isn't happening.

w81 -- i think the answer is that i am exhibiting an over-anxious desire to get that apt now, and the rate at which the market is getting there does not match my greed/need

both a colleague and I had offers rejected that are barely 10% below ask at several of the Harlem new developments in the last 2 weeks, and clearly this counterpoint to the discussion here sours the mood.

you are right -- it looks like a relisting for that property -- i should have looked at the dates
so with 150k over 2006 ask, we could get them down to 2006 prices if they would budge 10% which seems very reasonable to accomplish, except for the recent rebuffs

if an attractive apt at that price were to emerge in the next little bit I would gobble it up irrespective of the market trends-- assuming one can still get a satisfactory loan.......which is another emerging conundrum

"have people forgot my public diary since the beginning of this entire crisis last July 2007! Now these TOP brokers come on board, yes, lets give them all the credit for they are truly ahead of the curve"

Absolutely, UD, you were one of the few....

As posted earlier on this board, a broker said to me on SUNDAY... "financial crisis, global recession? uh, they say that EVERY year".

>As posted earlier on this board, a broker said to me on SUNDAY... "financial crisis, global recession? uh, they say that EVERY year".

Goes to show how "smart" brokers are. Was it the broker's masters in Economonics, or the Columbia degree in Financial Mathmatics behind that statement?

bachelors in hair coloring

Corcoran statement on the matter (from curbed.com):

"Please be advised that tonight's episode of '20/20' will include an interview with Brown Harris Stevens agent Kathy Sloane in which she claims that 'Manhattan's finest co-op apartments may have already lost a fourth of their value as a result of the financial crisis.' So far, Corcoran has no evidence to support that claim. We have not seen a wave of panic selling."

So, the brokers tell us for years that the Manhattan market is immune from a decline. Now, suddenly, they're all fighting each other on predicting the... uh... decline?

Jeez, the nerve of these folks never ends...

"i think the answer is that i am exhibiting an over-anxious desire to get that apt now, and the rate at which the market is getting there does not match my greed/need"

joedavis - I was in a similar position as you a couple months ago. All the pieces were in place, but the prices just weren't falling, or weren't falling fast enough. So the wife and I took a deep breath, calmed down and decided to officially become sideliners. So now I'm still paying attention, but am nowhere near as stressed, because I can be patient. We'll rent for 1-2 years, and will buy when the right opportunity comes along.

Not sure if this is an option for you, but if it is, it might be worth considering.

"So far, Corcoran has no evidence to support that claim. We have not seen a wave of panic selling."

Do unemployed real estate brokers get severance packages? Surely they have lots of cash hoarded away. I feel badly for the youngest, last-ins of the bunch, because they've had to eat doodoo with the hopes of working their way up, but now they'll be ..... out the door.

I really doubt there has been a 25% decline so far in top-end properities. But it does seem reasonable that we are starting to see 10%-like declines from the "tippy-top."

I'm a bit cynical about the 25% report, though. I've spoken in the past about residential sales gridlock. Sellers in denial and buyers on strike. That's the worst of all worlds for a broker. No sales. Doesn't really matter all that much if prices are rising or falling for a broker as long as there is lots of sales volume. "Cha-ching!" I can't help but wonder if there could be some (perhaps subliminal) motivation in a story like this to nudge sellers to get off their rumps and happily accept a bid "only" 10% below their asking price. Sell now while the selling is still (relatively) good!

It's a process. And it's probably starting to work.

"Fasten your seat belts, it's going to be a bumpy night." Mae West

Brokers are starting to sound like Pravda - they're telling you that the grocery stores are full of milk, they show you a picture of the one grocery store in the country that they stocked full of milk, yet you go to every other grocery store and there's no milk.

I'm sure I'm not alone in having lost money this week. Unnecessarily. Had they bailed out Lehman, I'd have no losses. Supply-side Republicans that they are, they let it fail, and now wind up having to rescue not it, but the entire financial system!

So as a sideliner, I'm staying a sideliner until I recover the capital that I (unnecessarily) lost - another 6-12 months. But I still have cash, and an asset (co-op) that I am selling, but can afford to pay. What about the sidelined BSC, LEH, MER people? Tens of thousands of jobs lost in the city. The culture of risk - 100 x 1 leverage - is gone. Huge bonuses based on assuming short-term risk will be replaced by lower salaries and modest performance bonuses as conservative commercial banks take over the derring-do investment banks. The entire business model that Manhattan real estate has been based on has died.

"why would I advise my client to lower the price, he deserves to make as much money as he can"

Urbandigs, I fully agree - there are bad brokers out there who are causing the market to clog. On Fire Island I have a good broker - he told me my co-op was overpriced at $580k. He's right. But it's priced at that level because there are two others listed for $575k, one being a unit that is vastly overpriced, not updated, not painted, no air conditioning, no skylights (making it very dark), the other one being a unit similar to mine, better appointed, but with no view. All in all, my unit - which needs a new kitchen which I was going to do but changed my mind - should be equal to that.

So I told the broker to tell buyers to make an offer, I'd take $560k wink-wink, but I can't have a bayfront unit be the cheapest listing of the three - it will make me look desperate to sell, which I'm not.

The same thing happened to me when I was selling in South Beach 3 years ago. Sellers were convinced their units were worth way more than they were. I accepted a $1 million offer that my upstairs neighbors rejected. Their unit is still on the market, now for $697k, and it will fall to below $500k before anybody buys it.

You have to play within the market, but be flexible.

It's just nonsense that Wall Street bonuses - predicated on a fabrication as we've all now seen - can drive prices up, but won't cause them to fall. I stand by my prediction - 50% fall, and a 50% reduction in the number of real estate agents.

Topper: Bette Davis, not Mae West. Otherwise, excellent post.

Down 50%?

It's quite conceivable. Based upon Miller Samuel Coop/Condo Manhattan "price per square foot" data that would bring us back to 2000-2001 pricing.

Steve, when you say you expect a 50% decline, do you think that an apartment like this (336 West End, apartment 14D, prime UWS large prewar 1 BR) http://www.streeteasy.com/nyc/closing/730775 which recently closed for $815K will sell for $407.5K? If so, that would put us way lower than 2004 levels (earliest comp for same line in building is apartment 7D in 6/2004 for $560K http://www.streeteasy.com/nyc/closing/11761 )

Or, are you expecting different levels of declines in different areas - I'd be curious to hear your thoughts.

Down 50%?

A further perspective. Stocks are now selling at their March, 1998 levels.

No particular reason the Manhattan real estate prices couldn't return to their 2000-2001 pricing.

stevehjx, why do you think that the prime Manhattan sellers are any different in their approach than you are with your FI place?

BTW, if that FI complex is 12-mos. inhabitable (probably isn't), you might as well live out there and telecommute - save yourself $54,000 after-tax in one year - in fact, why not rent in the East End of LI off season if your FI place is only 6-mos-inhabitable?

Still waiting for that dinner at the Luxembourg.........

"have people forgot my public diary since the beginning of this entire crisis last July 2007! Now these TOP brokers come on board, yes, lets give them all the credit for they are truly ahead of the curve.

my question is, how many bad appraisals and pricings did these top brokers do to secure these high end listings. Now credibility is at stake, and Im sure you will see more wake up. I recall 7 months ago, I was visiting a top team at elliman's listing, and I tried to explain to him the current crisis and the fact that his listing was way overpriced. He never sold it, expired, and he told me and I quote, 'why would I advise my client to lower the price, he deserves to make as much money as he can, and the credit crisis will not affect Manhattan'.

idiot"

Not sure how many brokers are in Manhattan but say there are 2000 brokers and the number 1 or 2 ranked brokers out of 2000 that you call idiots are behind the curve. What is your ranking? and what makes you better than the 1 or # 2 ranked real estate broker. Did they achieve that sales ranking by being stupid, and dishonest?

stevejhx -- here is a formal offer of $290k cash for your FI place.
Following your projection and advice.

Did anyone actually see the 20/20 segment last night? I forgot to set Mr. TiVO.

Sorry, JohnDoe, I'm not an insider so I can't tell you about that property. I've always said however, that in general, we are going to retreat to 2003 prices, when they were in line with rents. For most - not all - that means a 50% decline. It is exactly what's happening in the rest of the country - down 33% so far, and falling.

"stevehjx, why do you think that the prime Manhattan sellers are any different in their approach than you are with your FI place?"

I don't understand what you mean. In the case of Fire Island, there are 3 units available in an area the size of a postage stamp. The units are virtually identical. It's easy to do a compare. Not so much in Manhattan.

It's inhabitable from April 15 through December 1. I closed up yesterday - nobody's there, I'd go bananas if I had to be there all winter long: there are only ferries on the weekend in the winter. Imagine being stuck on a freezing cold sandbar for months at a time. It's Unibomber country.

Anyone who looks to brokers for a prediction of what the market will do should really just stop and think a moment. BROKERS KNOW NOTHING. Their skill sets top out at unlocking doors and drinking coffee. There is no education requirement for brokerage outside of the silly state offered real estate courses. They talk and repeat everything they hear. This Kathy Sloane put her foot in her mouth big time. There could be some decline but its not guaranteed and we won't know for months. I want a decline in prices just as badly as everyone else, but let's wait and see what's real here. Planning purchases based on the word of a real estate broker is dumber than investing in Lehman right now.

"BROKERS KNOW NOTHING."

They seemed to know when things were going up.

steve, the time to sell on FI was last year - back to where prime Manhattan will revert to, I don't agree with you that they will revert to parity with market rents - prior real estate downturns led to purchasing a coop or condo being less expensive than renting, not the same - good luck with your listing, but I think if property anywhere is going to take a 30-50% haircut, it's Fire Island first.

oops

Isn't this lady having some legal troubles?

the thing people forget is real estate crashes are nothing like stock market crashes - they are slow and trickling as supply and demand finds equilbrium.

in a market with downward fundamentals, there are always people who 1) need to sell, or 2) want to sell now because in their view it will only get worse. but they never start by slashing prices 30%. they take prices 5% less than what prices would have been in 2007, and the buyers are people who think this is as good as it gets. once those buyers are gone, the next set of sellers has to find new buyers, and those buyers want even bigger discounts, and so on.

Yes Tony. Back in March, Sloane was charged with tax evasion.

"the thing people forget is real estate crashes are nothing like stock market crashes - they are slow and trickling as supply and demand finds equilbrium."

The end result is the same; both markets tend to revert to the mean in terms of historical levels of appreciation. But you're right - stock markets, being more liquid, can have quicker daily swings, while real estate corrects like an old man pees - a little bit at a time...

One additional caveat about predictions of percentage declines: it's important to define the baseline/index value. For a broker like Kathy Sloane, the market is down 25% if she has to tell her clients to settle for 25% less than they would have ASKED before the correction. Consider this example:

http://www.streeteasy.com/nyc/sale/161680-coop-8-union-square-south-greenwich-village-new-york

To Sloane, this was an $8MM apartment in January; it's asking $5.9MM now. Has the market for new-construction penthouses with views of Union Square dropped 26% since December? Maybe. Or perhaps the old price was ridiculous, and Sloane would rather blame the market than admit that a lot of her high-end listings were priced at aspirational premiums.

I have no idea how big the decline in any market segment will actually be. I don't even know how to meaningfully define "segments", since each sale is a unique situation. I do know, though, that if the baseline is prevailing Q1 2008 ASKING prices, the decline will be huge across the board. A lot of people in the industry seem to have believed their own BS about where the market was, even as the bid-ask spread widened and sales volume dried up.

I predict 70% down from peak asking prices by the time we hit bottom.

Such a critical point to keep in mind, W81. Asking prices - particularly initial asking prices - in prime Manhattan are indeed very often delusional (consider, as an extreme example, the nitwit who closed on a penthouse at 15 CPW in May/June for $25.8M and now has his apt on the market for $80M.) Many sellers and the brokers who enable their habit seem to harbor insane ideas about the continuing exponential rise in prices. But while a steep decline - of the variety predicted by many of the doom-and-gloomers here - would wreak havoc on so many Manhattanites' portfolio, a tamping down of the unrealistic asking price obsession would not be a bad thing at all, and may in fact have positive repercussions (re-encouraging commerce, etc.)

That is, 'But while a steep decline - of the variety predicted by many of the doom-and-gloomers here - ON ACTUAL CLOSING PRICES would wreak havoc....'