It's official, the NY Times says prices are going down

http://www.nytimes.com/2008/11/09/realestate/09cov.html?_r=1&ref=realestate&oref=slogin

I'm beginning to believe!

"Jonathan J. Miller, the president of Miller Samuel, agreed that the weakness in the housing market is likely to continue and spread, especially because banks have made it so difficult for buyers to get mortgages"

I see. So it has nothing to do with layoffs, or overpriced properties? Though I do agree that banks have made it tough for the unqualified to get a loan. I still get HELOC applications on my co-op.

Not good for sellers. The Times says 10-15% a comp ale, so now all savvy buyers will want at least 20%. Also, inventory is cresting above 9k, and I though it would take until Q1 for that to happen. I really believe that, when this is all done, Stevejhx will be proven correct about a 50% decline from peak to trough. Manhattan is just at the beginning of what will be a prolonged downturn. Buyers are in control, at all price levels. My wife's sister has a place in the Hamptons. I was at a party out there in August, and this broker told me that things were already getting ugly. She called my wife last week and startled to rattle off properties that could be bought for a "bargain". I took the phone and told the broker not to call back until after Feb., and that maybe, we might consider thinking about looking at some stuff...she was ecstatic about such a response.

the same thing is beginning with rentals. friends are able to negotiate move in dates, lower prices, landlord paying fees, etc.

people are waking up to reality from fantasyland. Its about time. Denial is an ugly thing.

Where's spunky?

So true. Urbandigs, I have been having a blast this week trading AA. I must admit that I have never traded stocks before, but this environment is absolutely perfect. I have been loading up on companies that I love with the expectation of having to wait years to achieve my goal, and have been keeping money available to buy more if the stock drops. The stock goes up 20% plus in two days, I sell it, and then in two more days buy it back at the same price. This is like taking candy from a baby for a value investor like me who, unlike a trader, purchases the equities initially with the expectation of having to wait years for the profit. However, when you use time as an ally, sometimes you only have to wait 72 hours to achieve your goals, then all you need is is the discipline to sell and not worry if the stock goes up even more, for that is a suckers game, like doubling down in Vegas.

Loved the conclusion:

%u201CA lot of people also said they wanted to wait to do anything until after the election, regardless of the outcome,%u201D Mr. Sholeen said. %u201CThere was a lot of anxiety before it happened and people%u2019s attention was focused on that and nothing else.%u201D

But now that it%u2019s over, agents say they%u2019re hopeful that buyers and sellers will refocus their attention on real estate.

Uh huh...

Sorry - looks like quotation marks don't copy too well!

"buyers and sellers will refocus their attention on real estate."

And they will. As they watch it fall.

“With the markets crashing, people have been seeing their money go away, and they’re thinking twice about buying a sweater, let alone an apartment.”

Is that called "buyer sentiment"? One wonders if it takes on a life of its own that has nothing to dow ith fundamentals such as employment statistics, mortgage rates, comparison of rents to buying costs, etc. It could feed a momentum effect. Although I won't be one of the lucky ones, can you imagine if about a year or two from now someone strolls into an apartment and is able to offer 100% cash? Well, the seller has two choices.... they can take a buyer substantially below even their reduced price who has 100% cash, or they can, er, mmm, uh....... take their chances.

This is going to be so great. I love that rents are falling too. The realtors keep saying make a deal now because rents are going to be on the rise. I know for a fact that Ogden is dealing. I'll report back in December if they lower my rent or offer incentives

mh23 - youll have short term cap gains for these trades, so take that into account. Long term trading for me is very difficult. I just dont get it. Never did, and I think rightfully so. I sell when markets are high and complacency sets in. I buy when panic, fear is high and selloffs are fierce. Knowing when to dump a loss and to dca into it is an art that is hard to learn; have to make many mistakes to learn it.

But yes, this market is wonderful and Im day trading again since my re business is mostly buyers and I advised all them to hold off for a bit. They didnt need me to tell them that though as they are very savvy. I do have some buyers that are eager to bid now as long as price is right and product is right. But no rush.

Watch out for another wave of forced selling if alt-a and prime securities gets downgraded. When you see a headline that says something like, "5,673 alt-a securities downgraded by S&P, another 12,000 on neg watch...", just know that capital will have to be raised to meet requirements. This story is not over yet.

oops it happened Thursday.

http://www.housingwire.com/2008/11/06/sp-cuts-ratings-on-341-billion-in-alt-a-rmbs/

"Standard & Poor’s Ratings Services said late Wednesday that it had cut its ratings on 1,078 classes from 86 U.S. RMBS Alt-A deals issued in 2006 and 2007 — the latest blow to investors in an already battered mortgage market, and evidence that the nation’s mortgage crisis is moving up the proverbial value chain. In aggregate, the classes with lowered ratings had an original par amount of approximately $34.1 billion, which has been paid down to approximately $28 billion, S&P said.

The cuts should hardly be a surprise — S&P had warned in mid-October that it may cut ratings on as much as $351.7 billion of Alt-A securities."

>Although I won't be one of the lucky ones, can you imagine if about a year or two from now someone strolls into an apartment and is able to offer 100% cash?<

lowery, there will be no need to offer cash. They'll be happy just to see a potential buyer knocking on their door.

I negotiated the price of my first Manhattan apt. in late 1995. The seller purchased the apt. in 1987 and was listing it for 40% below his purchase price and I nailed it for a further 20% chop. All that with 25% down but I must say, the loan was a total PIA to get as banks were VERY reluctant at the time to loan on co-ops. I suspect getting a loan on NYC RE will get more difficult that it is today as time moves on.

Here's another article on first wave of panic selling from New York magazine...

http://nymag.com/guides/cheap-living/buy-apt/?mid=streeteasy

"They'll be happy just to see a potential buyer knocking on their door."

Sigh ....... even so, I'm one of the people who just feels grateful to have a steady job with good benefits, and negotiating that great deal of a lifetime when the market bottoms is a luxury when I'm just learning to crawl and walk all over again. So be it.

cccharley - I am in an OgdenCap building too. Just got lease renewal form. They was 2% increase. This after I got them down to less than 1% increase last year (for whatever psychological reason, they refused to keep it flat, but the increase ended up the price of a cab ride).

I am convinced that I could keep it flat or even negotiate a reduction, but won't get the chance to find out since we outgrew the apartment and need to move. Will be interesting what kind of deal we can find.

They want, not they was, sorry.

lowery, hell is you have stable employment and enjoy your apt., I wouldn't loose sleep over the market's ups & downs. It will awing both ways (and sometimes to extremes) as it always has in the past. I never looked at the market much between 1996-2004 until we decided to change the scenery. In 2006 I sold the second apt. only because I started watching the market & risking renting forever.

newbuyer - which building? we are in windsor - my friend said mgmt told her we would be in a position to bargain a bit this year- we had lots of problems as well- elevators, brown water, construction etc. I know that new tenants are being offered a month off. We also aren't renovated and they are offering our apt for the same rent fully renovated. We were actually under market up till this year - under market at over $3000 a month - what a joke. We have outgrown it too but will have to stay in a 1 br due to the economy. I've called peter cooper and said to contact me if they reduce rents. Their 1 brs are quite large and can be split. We were raised 3.6% last year - those bastards - they lied to me about reductions as well. I am angry and called them on it. So we'll see what happens next month when I get my renewal

"In 2006 I sold the second apt. only because I started watching the market & risking renting forever."

Hey, good timing! No complaints here. I'm lucky in that I was not hit suddenly over the head as people on Wall Street were. I had a gradual awakening and finally had to join the employed class when I faced facts. Happily, I did not purchase based on my peak income, and instead aimed for the most affordable, sustainable, predictable apartment possible, knowing it was time to hunker down.

Still, it would be so sweet to have oodles of cash when sellers get desperate and all the buyers are spooked or simply out of cash.

Im sorry I was raised 5% last year

>Hey, good timing!<

Thanks but only in hindsight. :) At the time, I was speculating it would be a good finacial move but that was far from certain and had my doubts more than once. However, the sale didn't come without its costs as it turned our lives upside down for a few months and finding a nice apt. to rent was a huge PIA at the time.

"Jeffery Sholeen, a senior vice president of the Corcoran Group, said he found it hard to believe that co-op prices had dropped that much. “It could be that large apartments in co-ops weren’t selling or they weren’t available,” he said. “But there’s still big demand for larger units on the Upper West Side.”

Perhaps Mr. Sholeen should have a conversation with West81st....

cccharley - we used the same argument last year, i.e. new listings for an apartment just like ours for less than they were asking us.

I agree with you - from what I see and hear, everything is negotiable these days.

We are lucky that neither of our jobs is directly impacted by the economy, and we have a decent amount of savings as a cushion (was supposed to be for downpayment, and will be used for one when we do buy). We'll end up paying $1000-$2000 more in rent than we do now to upgrade, but we can afford it without stretching, and it's worth it to not be cramped - life is too short.

New - you forgot to tell me which building you're in. We are lucky enough to have an L so we put up some sliding panels to give my 2 yo a small room. We like it here because of the park.

serge, "the sale didn't come without its costs as it turned our lives upside down for a few months and finding a nice apt. to rent was a huge PIA at the time."

Yeah, it's a true PIA. Best not to think of one's home as one's investment, because when you sell, you can't live in it anymore. Still, if your timing is just perfect, it can really make a big difference for you. I still see tons of new construction going up in Manhattan, and the future looks very mysterious to me. I would not want to make too-precise predictions.

wow, i've been waiting literally almost 4 years for this downward spiral to come, and finally it's here!!! back in 2005 when we were looking to buy we couldn't find anything other than studios for $500k. i hope the good news just keep coming :-)

Bring. It. On.

This is bittersweet news. Good for many, ruinous for some. While I deplored the greed machine that enabled the seemingly never-ending upward spiral in prices, seriously large numbers of people (remember the families, people, and the cabbies, the caterers, the owners of small restaurants, the waitstaff, the people in publishing, advertising, etc., it's not just those directly involved in real estate) are getting destroyed on the way down. It's ugly, and so sad because it never should have happened.

Too many people believed that:

"NY real estate never goes down"

"You better buy now or be priced out forever"

Shit, half the bears on streeteasy probably started believing this during the boom.

The Upper East is up 9.1% and the Upper West is up 29.5%. The areas that are more fringe are more effected by the downturn.

Those numbers still reflect units that went into contract during far rosier times. As do the fringes, which makes the visible declines that much more startling.

rentals on the upper east side are coming down

"youll have short term cap gains for these trades"

There's also the wash rule.

And this:

http://nymag.com/guides/cheap-living/buy-apt/?mid=streeteasy

Still twice the cost of an equivalent rental, even with the "reductions".

while it is true that this downward spiral will hurt many, the fact of the matter is that NYC RE has gotten so out of hand -- many of us of middle-upper means have been simply priced out of the market. My HH inc would make me very upper class in 95% of the country, but i've been unable to afford a 3BR with a 2nd kid on the way. As a 1st time buyer over the past years you need to have tons of dough, or work on Wall St to be able to drop a 7-figure bonus down in cash to scoop up these places. My broker was confirming the same thing with another client couple of hers -- one's a doctor and the other a prof. and they also can't afford a family home where they're not crammed into a tiny space. We've all been simply priced out, unless we were also on the ride tripling our investment over the past decade or so (and I certainly no sympathy for those either..). So while I'm sorry some will get hurt, I'm rooting for this thing to go as low as possible...
So where is the real value? 2005 prices? 2002? 1998? 1992? My hope is next year to land a Classic 7 for as close to a mil as possible. Realistic? who knows...

tripel, I agree on many levels. Since this bubble truly took off in the 2004 time frame, and the prior increase in home prices was partially fueled by the dot.com bubble, it's hard to say where it will be when all of the artificial wealth evaporates. The crash will be compounded by the fact that there will be many people who will have to sell, and mitigated slightly by the fact that there are many people who have been trying to buy who may find a 30% reduction compelling.

I'm thinking 2001 levels (about $600 psf for a decent coop, $650-700 for a typical condo, and who knows what will happen with the new construction), and given the recent speed with which things have been falling, by late 2009 or early 2010. Prices will not be rebounding quickly, if at all, for a good, long time. Wall Street is fundamentally restructuring.

well, lets not also forget that the reason a lot of folks in NYC HAVE those incomes in NYC is because they're in NYC. Its not fair to say "this salary would get me X in kansas" when you can't get that salary in Kansas. We've had incredible wealth here, and the engine of Wall Street and the major crumbs that fell off. $100k secretaries with no college degree? Some people get caught in the trap of low income and high espenses, but I think for most we only have these financial opportunities because we are here.

true NYC, but even if my HH salary was half we could live like kings in much of the country.

aboutready, do you know where I might find a historical track of PSF? Might seem like a decent barometer.

I've always heard that 3 things make NYC RE different from everywhere else: geographical limitations (ie it's an island and there's only so much turf), Wall St and Euro investment. Of those you've got to believe that only #1 is not plummetting right now, and even then, hasn't there been unprecedented development of late, such that supply is really heading in the opposite direction of demand right now?

My broker is a wonderful woman and I really respect her ...but she keeps funnelling me listings ....and im interested in seeing them only to track the decline. There's zero chance I would buy anything right now, with no indication that it'll do anything but continue to slide for the mjority of the next year (maybe more..?)

the one thing that i'll be eternally grateful for is that having been looking for the past year or so, i've had all my dough sitting in cash .... i figure i've saved 6 figures by not being in the market.

So, licking my chops for a big big correction for next year ... again, sorry for those of you who will take a bath, but if you only make 120% rather than 300% on your investment, well ...not too sorry

nyc10022, on this board last year I was told that we (my husband is a partner in a second tier law firm) probably couldn't reasonably expect to afford to buy a decent apartment and send one child to private school. Fifteen years ago that salary would have gotten us a classic six on Park Avenue. We're not talking about secretaries, we are talking about people with very decent careers who would have had to stretch enormously to afford a home. Many people did, and now they are saddled with a depreciating asset, huge expenses, and often employment insecurity.

The incredible wealth of which you write was largely illusory.

(i actually meant 20% ...but you get it..)

I was lucky enough to wig out when the Dow was at about 13000 and put everything in cash. tripel, many will lose, not make a thing.

"geographical limitations (ie it's an island and there's only so much turf),"

This is not true - land has been added - Battery Park landfills, the unused West Side parcel 59th-72nd Street. Buildings can be built over water, and it has been done, not only in NY, but in NJ.

I'm curious whether the people who stretched to buy the homes their families needed at the height of the market would be in the market to sell, necessarily. The only scenarios I can imagine in which the owners being derided/pitied here would sell at a loss would be (a) job loss; or (b) a decline so rapid and precipitous that it's profitable to buy a second property at lower price and deliberately default on the more expensive. But when (b) has happened in markets like CO/TX, presumably financing was easier.

aboutready congrats on your move! i began shorting by then (which brought me nice returns) but the toughest call of all for me was to advice my in laws to get out of the stock mkt. thanks god it plunged!

until then i was very nervous about having asked them to do so. now they are as happy as somebody can be with their decision!!! :-) :-)

"I'm curious whether the people who stretched to buy the homes their families needed at the height of the market would be in the market to sell, necessarily. The only scenarios I can imagine in which the owners being derided/pitied here would sell at a loss would be (a) job loss; or (b) a decline so rapid and precipitous that it's profitable to buy a second property at lower price and deliberately default on the more expensive. But when (b) has happened in markets like CO/TX, presumably financing was veasier."

>>> You're right not everybody will need to sell, but there are other reasons besides job loss or the "easier to default" argument. People get jobs in new cities, they get divorced, they have more children and need to upsize - I think this is especially true in NYC where even people who spent one or two million bucks actually can run out of space, probably the only place in the entire country where if you spend a million or two you actually can run out of space still.

kspeak, a million is peanuts -- id go so far as to say you cannot have a family in Manhattan in an apt at that level, in this recent/current market, which simply underscores the absurdity of it. My work takes me to Nashville regularly, and a million buys a mansion there ... NYC is ridiculous. So many 3 brs that I've seen in OHs have been owned by a Wall St single, with BR2 the TV room and BR3 the office. In many cases they were bought simple as investment as the market was soaring. As you may be able to guess, I'm quite jaded about Wall St types, as they've driven up this absurd market and now our tax dollars will be paying for their excesses for the foreseeable future..

What would force us to sell?
1) Job loss, and no immediate job offer on the horizon. We're not from NYC originally and it doesn't make sense to stay here if we're unemployed. We are from a much lower COL city. I would be very open to selling by public auction just to get a fast sale and out of here. For us to lose our downpayment entirely, prices would have to go down by 50% or more. That's not impossible of course.

2) If the public school that we're zoned for don't work out for our children. We chose this area specifically for its zoned public schools. If they don't work out, we'll put our 3 children in privates (tuition is 30k+/yr and rising well in excess of inflation) and move somewhere cheaper in the city. Absolutely willing to take a loss on our place because any place we'll be moving to will be cheaper, so mortgage would be lower (my goal would be to halve the mortgage).

3) Personal catastrophe - death, divorce, illness.

One more reason: Foreign investors dumping specially as the values of the USD rises versus their local currencies.

Their financial sectors are in a world of hurt, RE markets (residential & commercial) are plunging & their unemployment rates are rising. Why on earth would they need another investment headache in a foreign market. As I understand it, lots of their Manhattan RE financing was done with short term balloon type loans......if so, best of luck refinancing with terms that remotely resemble "attractive".

cccharley - didn't mean to ignore your question. I'd rather not say what building for personal reasons.

"This is bittersweet news. Good for many, ruinous for some. While I deplored the greed machine that enabled the seemingly never-ending upward spiral in prices, seriously large numbers of people (remember the families, people, and the cabbies, the caterers, the owners of small restaurants, the waitstaff, the people in publishing, advertising, etc., it's not just those directly involved in real estate) are getting destroyed on the way down. It's ugly, and so sad because it never should have happened."

No, those people were more likely to be screwed on the way up. Cabbies and waitresses were NOT buying the new condos... they were priced out of this market. I know a good amount of folks in publishing, and they were not the ones buying (unless they had a banker husband).

Now that we are coming back to reality, great for them. Rents are lower, and if they want to buy and have saved enough for a down payment, they will be looking at very substantial discounts.

The greedy are the ones who are getting hurt. But lower prices for housing is a good thing.

"If they don't work out, we'll put our 3 children in privates (tuition is 30k /yr and rising well in excess of inflation)"

First your children have to get INTO private school. Increasingly impossible! Do you have enough money to donate a building wing? Are you buddies with the trustees? Good luck to you.

"Now that we are coming back to reality, great for them. Rents are lower, and if they want to buy and have saved enough for a down payment, they will be looking at very substantial discounts."

Re the cab drivers and waitresses, etc. - their incomes are going down now, so lowering RE prices are probably just a wash.

True, they're getting it both ways. But when there is a recovery, will be nice if their basic needs are cheaper. Falling RE prices are a good thing for them.