NYT: Sharp Price Drops in Manhattan Apartments

Old news.

Not old news to all the people saying just yesterday that NYC is not 20% down.

LICC today: "Old news."

LICC yesterday: "So steve has to assume a 30% decline in price to justify his analysis. Sad."

Where's Juicy to comment on this?

Most people yesterday, including myself, were saying that the market is 20% down. I think the relevant section for what many have been bickering over is this:

"The reports issued by the major brokerage firms show that the steepest declines in sales and prices occurred in the largest and most expensive apartments, where banks are requiring large down payments from buyers seeking mortgages. Sales were also off sharply in new condominium developments, which have been hit hard in the economic downturn. Mr. Miller put the decline in sales of new condos at 61.7 percent.

The strongest activity was reported in smaller, less expensive apartments, often bought by renters buying their first homes. They benefited by low mortgage rates available for loans that conform to federal guidelines, and a federal tax credit available to many first-time home buyers."

Most of us, even those on this board who pretend otherwise, aren't in the market for large, expensive apartments. Those of us hoping for the gap to narrow between what kind of apartment we can live with and what we can afford are not seeing the enormous price declines. This speaks to Ali and AR's points about the conforming mortgage market doing rather well even as the jumbo market gets hit. The declines in expensive apartments are masking relatively stable prices on the lower end of the market.

That's the big unwritten story here evnyc. There is sustained activity and therefore price support at the lower end of the market. As we discussed yesterday, the uncertain future of condo developments is, in part, supporting this. I think someone also pointed out that people in outlying areas are seeing this as an opportunity to come to the city.

Interesting, UWS, I hadn't heard that but I am unsurprised. I must have missed a lot of the discussion yesterday, since the usual hyenas on the board were out in force. I have little doubt that the upper end will suffer huge declines and that certain condo buildings will go bust. I'm less sure about the effect of those busts on the overall market, and a lot less sure that the lower end will see the kinds of price declines that are becoming evident at the higher end. I just don't know.

decline in the high end ultimately shifts all buyers higher which causes the low end with less buyers and therefore lower prices.

evnyc: I think it's reasonable to expect a trickle-down effect from the damage in the luxe and low-luxe markets. We've already seen former $5MM properties crowd out $3MM listings, which in turn compress what used to be $2MM apartments down to $1.5MM, and so on down to around the $1MM mark.

There might be a bit of a firewall at the $800K-$1MM level, because buyers give in to the lure of lower rates, full deductibility, no mansion tax, more favorable rent-buy math, etc. That firewall is hardly impermeable. It dampens the domino effect, and slows it down, but there's no way to stop it altogether.

I think we all agree that the low end has held up relatively well, and has a good chance of continuing to outperform the luxury sector. The question is how wide the divergence will be, and how long it can be sustained before the dam cracks, or collapses.

West81st: "The question is how wide the divergence will be, and how long it can be sustained before the dam cracks, or collapses."

What would you see bringing this about - economy wise?

this report os true as of 8 weeks ago funny thing happened in the last 6 weeks contracts got signed! won't close until the end of summer beginning of september this market is quick to change but not quick on reporting. Streeteasy listings in contract & closings will give you all a truer idea of what is happening right now

> Not old news to all the people saying just yesterday that NYC is not 20% down.

LOL.

The wonders never cease.

These numbers are outdated! Sure they're Q2 closings, but the market is falling so fast that it makes these numbers old news. Many of Q2 closings were put into contract 6 months ago (ie contract signed in Jan and unit closed in April).
What will give us a better read on the market is where contract signings took place last week. Prices are down 30% to 35% from peak levels. Considering the unemployment numbers today, we head lower from here.

Also, are folks missing this...?

Average sale price
Elliman: -28% over last quarter
Corcoran: -8% over last quarter
Halstead/BHS: -16% over last quarter

Median sale price
Elliman: -14% over last quarter
Corcoran: -8% over last quarter
Halstead/BHS: -12% over last quarter

These are declines off the 20% decline, no?

We're talking 10-30% ADDITIONAL declines...

I kinda feel bad for the bulls because they dont realize the incredible price action they saw on the way up is going to be the same price action they see on the way down. Bubble market always over do things on the way up and the way down. Manhattan RE RIP

"What would you see bringing this about - economy wise?"

Keep your eye on the Chinese banking sector...

" kinda feel bad for the bulls because they dont realize the incredible price action they saw on the way up is going to be the same price action they see on the way down"

From that stats, its actually worse... faster declines than the incline was by far. And this is true for the national as well (looking at the updated shiller chart).

froma related Crain's article...

"Still, the market’s weakness can be seen in other stats. For one, apartments are taking longer to sell. The average time on the market before a sale was 18.4 months in the second quarter, compared to the 9.9 months seen for the last decade, Mr. Miller said."

and

"82% decline in sales volume for properties over $10 million in the second quarter"

http://www.crainsnewyork.com/article/20090702/FREE/907019964

I particularly like the new meme from the board above:
Forget about the Irish carpenters, buyers from Queens are going to provide price support for this market.

Also, has anyone ever tracked Pamela's forecast accuracy:
Pamela Liebman, the chief executive at the Corcoran Group, said she expected prices to stabilize and then perhaps rise “a couple of points” a year.

Uh, that's a pretty safe forecast -- prices always stabilize. The question is when and at what level.

This morning in the CNBC lower ticker, the following news headline was crossing about every three minutes;

....Manhattan apartment sales decline 50% in the second quarter. Prices fall as much as 24%......

History has repeatedly demonstrated that rice breaks from bubble peaks take longer and decline further than most people care to predict. The state's finances are also in deep cr*p and that is in no way supportive of any price stability and certainly not appreciation. Wake me up in 2011.

Haven't posted in a while but I see that things haven't changed much. :)

"These are declines off the 20% decline, no?"

Don't you think the YOY stat is a little more pertinent here? Median resale down 25.6% from last year. Average sales price is a problematic metric, I think.

What these numbers fail to show is that in Q2 of 2007 there were 4,000 transactions (in Q2 of 2009 there were 1,500 transactions.)
Sure we're down 50% from 08 but I'll let you bulls do the math as so how much we're down from the top.

Jazzman...you're right...manhattan apartments are still priced way over the top...but they are heading in the right direction.

> Don't you think the YOY stat is a little more pertinent here?

Not at all, if the comparison period wasn't the peak.

Daytonflyer asked: West81st: "The question is how wide the divergence will be, and how long it can be sustained before the dam cracks, or collapses." What would you see bringing this about - economy wise?

Mostly time. I don't think anything has to change on the macro level. They call the process "trickle down" because it takes a while to run its course.

"Not at all, if the comparison period wasn't the peak."

To clarify, I don't think it is. I think its one quarter behind.

I think the "real" number everyone wants is fall from peak.

West81st, I completely trust your judgment, but I'd like to know why you think a dam cracking is inevitable at the lower end of the market. Isn't it equally possible that the $800k-$1m 2-bedroom market (my aspirational market) bumps along for a few years without seeing significant declines, due to people arriving in the city and the lack of acceptable family-sized apartments in that price range, then picks up where it left off the next time the economy heats up? I'm not considering the million-dollar studios; those were idiotic even at the peak of the boom. I mean the large jr-4s and legitimate 2-bedrooms that you could actually attempt to raise a family in.

With all of the stories about price declines don't miss the unemployment news today.

http://news.yahoo.com/s/ap/20090702/ap_on_bi_go_ec_fi/us_economy

Can someone please explain to me why they think it's a good time to buy when unemployment numbers are so atrocious?
Doesn't it make sense that in an environment where banks actually expect you to have the financial ability to repay a loan that with more unemployed people there are fewer buyers.

And, isn't it safe to assume that with so many unemployed the prospects of most of them finding new jobs is bleak? If they can't find jobs they eventually burn through their "rainy day" funds and default on their mortgages. Then a year or so later the bank takes back their home which increases supply. Accordingly, it's going to take 12 to 18 months or so before the people who were laid-off this week to lose their home to foreclosure? For many of the unemployed there is little hope that they will keep their homes.

This down cycle is going to take a long time.
NYC real estate won't bottom for a couple more years.

west81st - I agree that there will certainly be a trickle-down effect, but I think it will slow in that $800k-$1 million range for the reasons you mentioned, but also because there are only so many apartments that can trade at $5 million and then $3 million and then $2 million and so on. The overwhelming bulk of apartments that trade are nowhere near these price points. It won't stop the downward pressure, but it should temper it a bit for some of that market under $1 million (nicer properties; better neighborhoods; higher floors/views VS 2nd floor; no light; fringe neighborhood).

I just love how everyone is getting frothed up over a Times article and sales stats that mirror what we have been talking about for months now. What's the real story here?

Let me help... contract signings have been increasing 35 - 40 % month over month since the end of the first quarter. Today the running daily closings are 38 averaged over 30 days, yesterday we had 91 closings. Who would have predicted 91 closings on July 1st even a month ago? Where are the summer doldrums?

Echoing West81st (usually a safe bet), I don't think lower-end apartments are immune to downward price pressure, they're just not so prone to quick, drastic price cuts. Prices have dropped, are dropping and will continue to drop going forward.

If you accept that the bread-n-butter buyer (the conforming loan buyer) is the buyer for <$800K apartments, then I think you have to admit that those buyers are also the ones getting hit the hardest by the bad economy. Trophy apartments are suffering due to a lack of overall numbers of buyers (who have the money, but are disinclined to piss it away on a bad buy). In my opinion, the prices of <$800K apartments will suffer due to a lack of pure buying power among the interested pool of buyers.

My view of what's happened in April-June is that people who were preparing to pay pre-September 2008 prices are VERY comfortable paying current prices. They had their heads in a certain place, and they were shocked pleasantly when the market actually took a few steps TOWARD them. So they buy. If I had the $$, I might do it, too. Why wait?

But there's still a TON of inventory on the market - and more to come - and where will the buyers come for those places? Many people have lost jobs, overall employment in NYC (and everywhere else) is still dropping, compensation is crashing - how, exactly, is the average hopeful buyer now supposed to feel confident about amassing a $175K downpayment and paying a $625K mortgage?

I really don't think NYC is immune to the psychology (and reality) that's hit the rest of the country - even if people CAN reach to buy the 'home of their dreams', they're much less likely to take a gamble. It's been proven to be a stupid play in many cases. I think that that pyschology prevails now and will continue to dominate real estate for a while now.

People will buy when they're very comfortable doing it. IMO, current prices don't give enough people that comfort. Prices - at all levels - still have to come down.

evnyc - why do you think that the 2 bedroom apartment will see more demand in the next year or two RELATIVE to other units? Prices for two bedrooms have been set by the market and as long as the demand for them stays consistent, RELATIVE to other units, then their prices should rise and fall with other units.

The same theory is true with low end vs high end. It seems from the recent data that lower priced apartments are fairing better in this market than the high end of the market. This data shows a shift in demand patterns. As times get tougher and as the government uses my tax dollars to give some guy $8,000 off his purchase then it makes sense that lower end units will perform better as the demand for cheap units has increased relative to high end apartments.

So unless you think demand for 2 bedrooms will increase relative to other unit sizes then expect prices to move with the market.

UWSmynabe - what's your point - Vegas has had month over month increases in closings for a year, yet their prices have fallen month over month for a year - more transactions don't mean higher prices.

"I think you have to admit that those buyers are also the ones getting hit the hardest by the bad economy."

I guess my observation has been that layoffs have been mixed, with more hit towards the top. Generally if you have a job and manage to hang onto it, which is still the vast majority of people, that 2-bedroom for under a million might be looking mighty nice. Inventory has ticked down, according to Noah's charts:
http://www.urbandigs.com/charts.html

Surely some of that is summer melt, but some could also be owners deciding they don't have to sell in the next 5 years and can stand to stay put or bought early enough in the boom to rent for a year or two or just let a relative live there for a few years. I just don't expect the job losses to have as significant an impact on this market because I've observed so much interest. And again, condos that go bust may themselves prove to be great bargains, but I think they will just reinforce the desire for a stable coop situation and not wind up affecting prices as much as I once anticipated.

Jazzman, prices don't rise and fall in lock step. Studios and one-bedrooms rise faster during boom times and fall faster in down times; that's been pretty well established. Family sized apartments generally retain their value better; even now, it's the trophy apartments that are taking the big hits, n'est-ce pas?

"due to people arriving in the city and the lack of acceptable family-sized apartments in that price range"

1) We don't have fewer acceptable family-sized apartments than before. The crunch was already here and priced in
2) And now its less so. You think people arriving in the city is more than people in that range leaving the city? And it doesn't even have to be a net loss... it just needs to be less of an influx than before. I think its pretty clear we have that.
3) Lets not pretend this is an absolute set of ranges. Stuff will slide between ranges. If the range right above yours gets decimated, you don't think that has an effect on supply/demand curve in your range? Supply for sure... because apartments will change prices. If the $1.5s become $1.2s, they're suddenly in the different range.

Strongly constructed arguments can be made from either side, so perhaps the most prudent advice would be to "consider the source." Owners, relatively new buyers, and real estate professionals are almost all going to make an argument for an already-reached bottom while renters and those still adopting a wait and see approach will argue the opposite.The real challenge is in finding educated, balanced, un-biased input.

Jazzman - Vegas clearly demonstrates the impact of foreclosure pricing. Something we thankfully don't have here. But I'll play along..

So let me see if I have this correct, there are 100 UWS 2br's for sale today priced between 800k and 1M. Two months ago that number was 30% higher. So with this declining inventory we can expect better prices, which will be terrific for many people. Does this mean the last one left will be worth zero?

"You think people arriving in the city is more than people in that range leaving the city? And it doesn't even have to be a net loss... it just needs to be less of an influx than before. I think its pretty clear we have that."

We had that discussion yesterday. According to available data, population growth in this city remained steady through January. So people are coming. During the boom years we also had condos adding family-sized apartments to inventory; if those types of developments start failing, again, that may support demand for family sized apartments in stable buildings.

Of course I'm not pretending this is an absolute set of ranges. Are we now seeing the $1.5 million range being decimated? Because last I recall that's not what anyone's been saying.

Well, evnyc, no can tell what to do or think. I still think patience will be rewarded, and I think the stats support that view. At least, the stats most meaningful to me.

Yes, the layoffs have been mixed, but a very wealthy person who loses his/her job is still a potential buyer/owner of an apartment. A mid-to-low-end money earner isn't, at least at current prices. Every job lost at that level is just one less buyer for the conforming-type apartment.

And the numbers don't lie - NYC is still losing jobs in almost all sectors. Sure, people are being hired too, but the overall direction is shrinking employement AT ALL LEVELS. And even when people are keeping their jobs, their overall compensation is often dropping. In law - where I work - the trend is clear -- people are getting cut, overall compensation is being cut, and hiring is virtually frozen. That's not gonna change this year. And the people who go on to other jobs are doing so for less money than they made at my firm.

And inventory has ticked down, sure, but that isn't explained entirely by contract signings. Yes, activity has picked up, but until today, there hasn't been a single day on UD's chart where the number of properties coming ON the market wasn't greater than the number of properties being taken off through contract signings.

So, a lot of places are being pulled (as you noted). Why would that worry you? At worst, they'll be put on the market at the same price at which they were listed before, but it's just as likely sellers are just ignoring reality and trying to put off the inevitable. There's virtually no reason to believe prices are going to climb anytime soon.

Whoops, I meant through December. January's figures will be included in next year's census reports.

evnyc: I feel your pain, because I'm helping three families who are looking for a 2BR/2BA. You would think a budget of $900K would be ample in this environment; but in prime neighborhoods, substantial compromises are still necessary in that range. It's frustrating to see the property those buyers really want still priced around $1.2MM. Then again, it used to be $1.4-1.5MM.

I think there's enough inventory - and sufficiently sluggish activity - at that $1.2MM price point that we can expect some nice product to slide under $1MM, which would then become the new normal for a legitimate 2/2 in a solid, doorman building with reasonable services and monthlies. There's no way to be sure, but the process continues to point that way once you get past the spin about the recent pickup in transaction volume.

One other point: I think the divergence between coops and condos is smaller than you suggest. Condos pulled coops up - probably more than made sense - and they are likely to pull coops back down. Rationally or otherwise, buyers do substitute.

Word to West81st.

JKB, well said. I am hardly arguing for increases. I'm not certain that all the apartments I see being pulled will end up back on the market in a year or two, and at least on my low-to-middle job level, there is starting to be some movement. Patience is a virtue; at the end of the day, I'm just chomping at the bit to buy, and anxious that I am not going to get a chance to do so after all.

THE NYT is really pathetic. First look at who they interview for comments. Total biased bs. Second, the bottom line is that they miss the real story...

"Many of the sales reported in contract in the last few weeks will not close until later in the summer or the fall."

IF THEY CLOSE AT ALL

A number of statistics supported this view. The inventory of apartments on the market, and the number of days an apartment lingered on the market before it sold, were up sharply from a year ago, but down a bit from the first quarter as the market strengthened. Streeteasy.com, a real estate Web site, said that 2,477 apartments went into contract during the second quarter, an 82 percent increase from activity in the first quarter.

WHAT ABOUT ALL THE SHADOW INVENTORY? WHAT ABOUT ALL THE STUFF THAT HAS BEEN TAKEN OFF MARKET? SURELY AN 82% INCREASE IS NOTEWORTHY, BUT WHAT ABOUT THE REAL STORY OF AN EXPLOSION OF INVENTORY AND SHADOW INVENTORY.

COME ON NYT, GET YOUR HOUSE IN ORDER

W81st - I see 28 for sale, 19 in contract and 52 sold in the 1M to 1.25M range (UWS 2/2 coop). Seems like healthy activity and support there.

That's the structure of the industry. Who would you suggest they contact to get input on the NY real estate market?

OOPS, I forgot to consider Jazzmans "Vegas effect" - so, yes w81st, you should see these prices decline as long as we can get that inventory down.

There is an element of capitulation in this thread.

One of the things that caused people to bid up prices was a sense of urgency -- by now or be priced out forever. I remember one NYT article where the buyer of a $3-6MM apartment was shocked at how much less they could afford this year than last (when they had put off buying). This was based on expected price appreciation to exceed wage increases. So, the only meaningful inventory was what is available on the market today, because you'd be able to afford less tomorrow.

Now, we pretty much have everyone, including Pam, saying that property prices aren't going to go up anytime soon. Once that urgency is gone, it becomes much more of a buyers market as it changes your calculus as a buyer. You don't even need an expectation of further price declines for this to take effect -- just for expected price increases to be less than wage increases.

At this point, sellers aren't just competing with current inventory: there's an entirely new set of inventory in the decision. They are competing with all present inventory + all expected future inventory, because it will likely be priced better in real terms. That's a lot of inventory.

Malthus - I would suggest they do their own due diligence. When a stock price crashes, where do they get their info from, do they interview people? When apartment prices are following, where do they get their info from?

Hardly any real work went into writing this pathetic piece.

"Owners, relatively new buyers, and real estate professionals are almost all going to make an argument for an already-reached bottom "

Of course, this is the same group that 1) told you there would be no decline and 2) on the first week the decline was official, told you that was the "buying opportunity of a lifetime".

In the end, you don't even need to do much prediction.... RE markets don't bounce, they just sit there. So, wait until the upturn is actually confirmed will only cost you a couple of points in the big picture. Much better than risking losing another 20%

SkinnyNsweet: Capitulation in real estate occurs when people stop talking about it. Capitulation in any market occurs when people don't want to participate anymore and the level of interest has subdued. When there are 50 comments on an article that was written on a third party website within a few hours, that is hardly capitulation but rather confirmation of a downtrend.

You will know when capitulation has started once articles like this don't solicit much reaction. We are a long way from there.

nyc10022: I agree that real estate markets don't bounce, but (as I catch my breath waiting for the onslaught), I actually think this one might be different. Only because of the overshoot factor. When something does overshoot it generally bounces back (usually a 30-35% retracement of the overshoot).

lr10021: Agreed. That's why I said an "element of capitulation". One particular part of the argument: price appreciation won't outstrip wage increases, notably didn't garner any comments. It was uncontroversial.

I understand it isn't complete. One step at a time.

Thanks, evnyc. One last general point. I'm not a born-and-bred New Yorker (who is?), and it's easy, after living here for a while, to think that you're always competing for real estate with a few million people with insanely high salaries, trust funds, parental help, etc. etc. etc. And sure, there are many of those people out there.

But it's just as rational to assume that the majority of the market is just like you (and me). If you can't afford what you want, there are thousands and thousands of people out there who can't either. Ultimately, unless the floods of crazy cash start flowing again, that sets a baseline for where real estate prices will land.

IMO, we're getting to the point where it's not a matter of what people WANT to buy, but what they CAN, in fact, buy. Some people can buy at current prices, and they're doing it (albeit, still with discounts). But once they're gone, I don't see a next wave of moneyed buyers stepping in to replace them.

My reality is that we can't buy what we want right now. So we'll trade up, but rent. We don't want to wait for more space, but we also don't want to reach to buy (and see no compelling reason to). Not a perfect scenario, but it's a LOT better than buying too high, straining to own and potentially having to sell at a loss. No thank you.

In this town RE is all about jobs. Big bonuses aside, the bulk of the folks in this town work in non-banking jobs and do not experience end of year windfalls. RE lags employment so until the job market returns with real sustainable middle+ income earnining work the RE market has but two choices.
1) stabilization (which is when we see 6mo inventory supply)
2) decreasing home values
It doesn't matter if sellers make this realization. Reality bites! Put your place on the market and price it at your dream price and watch it collect dust. Sellers will have to compete hard for the available qualified buyers. Compete means 'SALE'. I'm having a RE sale, 50%,60%,70% off peak comps. that's what it might take to close a deal this summer.

"To clarify, I don't think it is. I think its one quarter behind.
I think the "real" number everyone wants is fall from peak."

I agree, but isn't YOY closer to that than QOQ at this point? I think most people agree the peak was somewhere around Q2-Q3 07, no?

"You don't even need an expectation of further price declines for this to take effect -- just for expected price increases to be less than wage increases."

Bingo. But when you combine that with the (dare I mention it) spread between costs of ownership and cost of renting in NYC, there is little economic reason to buy at all. Until that spread narrows (either via price drops or rent increases) volume will stay low. And I think most of us know how exactly that is going to narrow.

> I agree, but isn't YOY closer to that than QOQ at this point?

They're both wrong if that is the goal.

Which is why I was talking about the decline rate over the 2 or 3 quarters.

But, at least the recent quarter shows the recent movement. The YOY is the worst one to go off IMHO.

> I'm not a born-and-bred New Yorker (who is?),

I am... and there are several others here (alan, for one).

"But, at least the recent quarter shows the recent movement. The YOY is the worst one to go off IMHO."

Why? It mitigates seasonal impact, and encompasses more of the time period marked by the recession.

"So, wait until the upturn is actually confirmed will only cost you a couple of points in the big picture. Much better than risking losing another 20%"

I agree with your general thought - the only issue is that this is somewhat irrelevant to potential buyers. If you're just buying a single home, what the general market is doing is far less important to you than your ability to find and negotiate a good deal. Although it is obviously good fodder for these kinds of discussions.

> Why? It mitigates seasonal impact, and encompasses more of the time period marked by the recession.

And includes part of the bubble period. Measuring a decline by counting the increase before is about the worst math you can do.

Yes, seasonality is a factor, but I'll take a little off for seasonality in exchange for not including a bubble period whose effect is orders of magnitude bigger. Thats the equvalent of penny-wise pound foolish.

And, in the end, why does it matter so much to you?

The stats are around, someone just needs to pull them. Why stick to an incorrect number when the correct one is fairly easy to get. You just have to pull it out of the reports.

nyc10022,

Can you pls. tell me where you saw the reference to the "quarter-over-quarter" negative returns you posted? (I've only seen "year-over-year" numbers so far.)

Thanks!

nyc10022:

Also, are folks missing this...?

Average sale price
Elliman: -28% over last quarter
Corcoran: -8% over last quarter
Halstead/BHS: -16% over last quarter

Median sale price
Elliman: -14% over last quarter
Corcoran: -8% over last quarter
Halstead/BHS: -12% over last quarter

These are declines off the 20% decline, no?

We're talking 10-30% ADDITIONAL declines...

"And includes part of the bubble period."

Q2 2008 is part of the bubble? I don't think so (check the report from a year ago - prices starting to come down, and volumes took a big hit). It matters because it helps have a better discussion if we can get a more precise reading on what's really happened, rather than float rough or confusing figures out there. And I'm pretty sure you were curious to see what YOY stats would be a couple quarters down the line as of last year. Well, here we are.

Q2 2008 was only down 2% from Q1 2008 for Manhattan apartment price averages. Sale price/ask ratio of 98%, with 90 days on market as average. I'd still call that peak. Numbers like that seem eons ago.

HDLC, right, and that's my point. It's much closer to peak that Q1 2009. Isn't that what we want as the baseline?

*than*

How refreshing to get 68 comments down a thread with almost all of the comments being thoughtful and adding to the discussion and people being civil even where they disagree. It's remarkable what the absence of a few of the argumentative/offensive usual suspects will do for the quality of a thread.

sidelinesitter, don't jinx it!

I agree sidelinesitter..... :)

bjw - I was thinking the same thing when I wrote it. I hope I didn't blow if for everyone

Two comments:

Following on what Burkhardt said, I trust this board because it's biased, provided that people confess their biases. It would be laughable for a guy like wonderboy to profess not be a realtor or recent buyer. I'm in the market for a 2/2 (convertible 3) and I don't want to pay more than 680K. Therefore, I hope prices continue falling steadily. In the last year I think the facts have increasingly supported such an outcome, so I'm happy. The problem, for me, arouses when people say they are in the market for something ("my aspirational market", evnyc called it, all dewy-eyed) and then argue with everybody that said market won't come down. Why bet against your interest/desires? That reeks of tricky realtor to me.

Second comment, on what West 81st said: we all have different concepts of what desirable means. For me, to be in the PS199 catchment, in a full-service building, even if it outwardly looks like public housing (Lincoln Towers, of course) would be very desirable. There are true 2/2 in Lincoln Towers currently asking 880K. So that's way below what his client's were looking for, probably a few blocks away, in a group of buildings that are, for better or worse, totally full-service.

Finally, a "hard news day." I think that's the main reason there is thoughtful dialogue rather than the all-too-frequent mindless chatter.

FYI: Miller Samuel data generally suggests Manhattan prices peaked in 2Q2008, not 1Q2008.

http://www.millersamuel.com/data/report.php

(I focus upon Manhattan coop price per square foot so as to avoid closing issues with new construction condos. And that data suggest a 20% decline from peak.)

See, Tromp, I'm going to elbow you right out of the way if that apartment ever comes along in that price range.

Perhaps I should clarify: I am not betting against anything. I've been on the boards for a year now, and everyone here ought to know better than to accuse me of being a realtor as I've been quite straightforward about what I'm looking for and what I can afford to pay and that I am a renter. What I am suggesting is that there is a level of certainty regarding price drops that I feel might be unwarranted. All I'm really doing is asking questions about why people feel so certain that X will happen in the near/mid-term future. I think they're perfectly reasonable questions, given the data available. I'm not making any claims about what will or will not happen.

At the end of the day, you have to balance your "dewey-eyed" desires against the reality of the marketplace. That was true on the way up, and it remains true on the way down.

West, I'm sorry I missed your post above. Thanks for the insight on the condo/coop divide, and it's sort of nice to know that there's others out there in a similar situation (although, they are my buying competition, too - and I sense that there's quite a bit of it out there).

"The problem, for me, arouses when people say they are in the market for something ("my aspirational market", evnyc called it, all dewy-eyed) and then argue with everybody that said market won't come down. Why bet against your interest/desires? That reeks of tricky realtor to me."

Don't you think that's being a little paranoid? If I had a dime for every time someone wrote someone off as a "broker" or "bitter renter" just for disagreeing with them... Seriously, as to your point about "betting against your interest/desires" - that's really just cutting emotion out of the equation as much as possible. If you legitimately don't see a persuasive argument for price movement in one direction or another, why just "bet" for it just because it suits your interests? And I don't think evnyc is "betting" here, just laying out his opinions/questions.

Also, I realize it was a typo, but does the problem really arouse you? :)

Manhattan Apartment Prices Drop as Lehman Effect Hits Home

July 2 (Bloomberg) -- Manhattan apartment prices dropped for the first time since 2002 in the second quarter as the collapse of Lehman Brothers Holdings Inc. and Bear Stearns Cos. caught up to property owners in the nation’s most expensive urban market.

The median price fell 18.5 percent from a year earlier to $835,700, New York appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said today. The number of sales plunged by half, the most since Miller Samuel began keeping data in 1989.

“The standstill that existed after Lehman Brothers has been broken, and it was the sellers that cried ‘Uncle,’” Pamela Liebman, chief executive officer of New York-based property broker the Corcoran Group, said in an interview.

Values are falling broadly in Manhattan for the first time in the almost four-year U.S. housing recession, with declines now seen in co-operatives and condominiums of every size and price. Private-sector employment in the city dropped by 91,200 jobs, or 2.8 percent in the 12 months through May as Wall Street losses and asset writedowns topped $1.4 trillion.

The price of studio apartments declined 16 percent from a year ago to a median of $405,000, according to Miller Samuel. One-bedrooms dropped 17 percent to $650,000 and two-bedrooms fell 23 percent to $1.27 million. Three-bedroom units fell 37 percent to $2.35 million and four-bedrooms plummeted 47 percent to a median of $3.92 million.

The Miller Samuel-Prudential data reflect for the first time what sellers have known for at least six months: The way to lure a buyer in the current market is to cut your price.

Price Cuts

About 32 percent of second-quarter listings included discounts from the original asking price, according to StreetEasy.com, a Web site that gathers Manhattan property listings from brokers. The deepest concessions were on Central Park South and in the Financial District, where list prices were pared by an average of 10 percent.

“The sellers who want to sell are reducing their prices,” Liebman said. “The ones that aren’t, are either sitting on them overpriced or waiting for another day.”

James Rosenthal didn’t want to wait.

Rosenthal and his Upper West Side neighbor on Riverside Drive near 77th Street put their adjacent apartments up for sale in February 2008 for $6 million, hoping to lure a buyer that wanted to maximize the 3,800-square feet of combined space.

Then Bear Stearns collapsed and the neighbors cut their price to $5.75 million, then to $4.96 million. The properties sold for $3.6 million, a 40 percent discount from the original asking price, on April 20, said Rosenthal, who is a senior vice president at New York real estate brokerage Brown Harris Stevens as well as a recent seller.

Neighborhood Declines

==============================================================================================
“As the seller you don’t control the market,” Rosenthal said. “The buyers control the market.”
==============================================================================================

On the Upper East Side, the median price of existing co-ops fell 20 percent to $758,000, while condominiums in that neighborhood declined 4 percent to $1.22 million, according to Corcoran. On the Upper West Side, co-op re-sales slid 8.5 percent to a median of $700,000 and condos were down 22 percent to $893,000.

South of 34th Street median prices for condos and co-ops combined dropped 16 percent to a median price of $880,000, according to StreetEasy.

While home prices have been falling nationwide since 2007, Manhattan held up in part because of new luxury developments that sprouted up and were planned during the housing boom.

Luxury Condos

New condominiums in buildings including 15 Central Park West and the Plaza went into contract at record prices between 2006 and the beginning of 2008. Closings on those sales continued to appear in public records and in broker statistics through the beginning of this year, which kept median prices high, said Jonathan Miller, president of Miller Samuel.

The average price per square foot of condos on the Upper West Side fell 29 percent in the second quarter to $1,145 because only one apartment closed at 15 Central Park West compared with 57 closings in that building a year ago, said Gregory Heym, chief economist for Terra Holdings LLC, which owns brokers Brown Harris and Halstead Property LLC.

New developments comprised 27 percent of all sales in the second quarter, down from 35 percent a year ago, Miller said.

Property brokers and Web sites issued five separate market reports today. All showed price declines. The groups base their findings on closings culled from city records and their own data.

Brown Harris, Halstead and StreetEasy said in separate reports that median prices dropped 19 percent from a year earlier. The Corcoran Group, which conducts its survey with the property research Web site PropertyShark.com, put the decline at 13 percent.

Fewer $1 Million Sales

The fall stems in part from a shift to more sales for less than $1 million. Of 1,532 deals closed in the second quarter, 61 percent were for less than $1 million versus 49 percent a year ago, Miller said.

Buyers in higher price brackets are struggling to obtain mortgages for more than $729,750, the limit on home loans that federally controlled mortgage buyers Fannie Mae and Freddie Mac can purchase or guarantee.

So-called “jumbo” lending, which includes refinancing as well as home purchases, dropped to $98 billion last year from $348 billion in 2007, according to the Bethesda, Maryland-based newsletter Inside Mortgage Finance. Jumbo loans fell to $11 billion in the fourth quarter, or 4 percent of the mortgage market, the lowest quarterly amount since Inside Mortgage Finance started tracking that data in 1990.

“People can’t borrow as much,” said Prudential Douglas Elliman CEO Dottie Herman. “So they can’t spend as much.”

To contact the reporter on this story: Oshrat Carmiel in New York at

Hey bjw - you know how typos can start fights...

I know, I know, but that one was too good to pass up. More of a Freudian slip than a typo, though, and I know I've made it myself.

Hi HT1... I recommend a name change: controlC

evnyc, why don't you like at it from the other side of the coin and ask what is it that will hold up these prices at the current levels. If supply greatly exceeds demand, unemployment is going up, income levels are going down, and there is uncertainty in the market, then economics says the prices must continue to drop until we reach equilibrium. There are not enough new buyers to boost the market because renters with the means to purchase can continue stay put, watch the market continue to drop, and strike only when they feel the best long term bargain is available. Anyone relocating to the city would still have sticker shock at existing prices, even in a down market, so that's no boost. The price chopper thread has been very interesting of late because there are some real "low ball" closing prices off of last ask which indicates that asking prices still have a way to drop and aggressive buyers may be able to get that 680K 2BR/2BA sooner than you think.

whenever an apt. sells for a lowball price, it is usually because the apt. was priced well above comps. Apts. that are fiarly priced at the comp level rarely sell for well below asking. So don't hold your breath waiting for that $680k 2 bed/2 bath.

Based upon Miller Samuel Manhattan coop price per square foot data 2Q2009 prices were in line with 4Q2006 prices.

Seems to me we still have a long way to go down.

This isn't going to be over until expectations are much more modest than a gentle flattening and small price appreciation.

"One report, by Brown Harris Stevens and Halstead Property, put the average price of a Manhattan apartment in the second quarter at $1.26 million, a decline of 24 percent from the same period in 2008."

Is this really old news to people denying it yesterday?

Core area apartments of good to better quality are holding up. The marginal quality apartments, the apartments with high monthly costs that people thought they could scoop up for a bargain, and the ultra-expensive apartments in the $1500-$2000 range and up that were purchased in 06-08 are what is really at risk. The rest will do fine and although they could drop 10%, they'll be great long-term investments. Like properties bought in 1989.

People who bought before 2002 will be fine...To say people who bought in 2004-2005 are fine is far off. People who bought in 2004 are selling today for what they paid and eating all transaction costs. At the leading edge, our cousins just sold $100k below their total cost basis on a purchase made in 2005, including a couple hundred grand in renovations. The only people who will be fine are those who bought when it made sense relative to renting. The crossover point was roughly 2002. Maybe a little earlier.

I'm guessing, Rhino that "average" in the BHS and HP reports refers to the "mean." "Median" would be more relevant. The numbers are still rather unrealistic as there has been a shift to low-end sales from high-end sales.

Wish it were a 24% decline. I'm sticking with a 20% decline based upon MS coop ppsf data.

Admittedly, no stats in real estate are perfect.

"Can you pls. tell me where you saw the reference to the "quarter-over-quarter" negative returns you posted? (I've only seen "year-over-year" numbers so far.)"

I'm just talking about comparing the quarter change vs. the last set of quarter changes...

Its an imperfect science. I think the market is down 30%. And when I say so, I mean what it takes to get something off your balance sheet TODAY, put on the market TODAY...not Q1 or anything else that can be proven in stone. That Pamela something from Corcoran has said so, and based on my anecdotes and sense of specific listing I have followed, seems right to me. This flurry of activity we have seen has done little to clear inventory. If you put an apartment on today, you are in for a rough road through March.

> "And includes part of the bubble period."
> Q2 2008 is part of the bubble?

imho, yes, absolutely.

If you bought in 2004 or 2005 and are selling today at break even, minus transaction costs, then you had the benefit for 4 or 5 years of living without paying for rent. It is hard to say that wasn't worthwhile.

"imho, yes, absolutely."

Read the rest of the post, as well as the report from back then. I don't agree.

NYC was very quirky relative to the rest of the country. Q2 2008 marked the end of its bubble.

"If you bought in 2004 or 2005 and are selling today at break even, minus transaction costs, then you had the benefit for 4 or 5 years of living without paying for rent. It is hard to say that wasn't worthwhile."

Where the hell do you people come from? Ever heard of interest payments [i.e., the equivalent of rent]? Maintenance? Taxes? Or did you get an interest free loan for an apt with zero taxes and maintenance? Jesus Christ.

Interest payments, maintenance and taxes would be lower than your rent. Interest payments are not equivalent to rent. Interest payments were low the past 4 or 5 years. You have also amortized the principal in the loan over this period of time.
No need to use the Lord's name in a real estate discussion.

> Read the rest of the post, as well as the report from back then. I don't agree.

I just looked it up.... Q2 prices were higher than Q1 according to Miller Samuel report on their site.

Q2 2008 median price - 1,025,000
Q1 2008 median price - 945,276

"Interest payments, maintenance and taxes would be lower than your rent."

Um, wrong - with 10% down on anything bought in the 2004-08 time frame, rent on an equivalent property would have been lower.

"Interest payments are not equivalent to rent."

Yes, they basically are, except you get a tax deduction.

"Interest payments were low the past 4 or 5 years."

So what - you still pay them, don't you? You act like they are meaningless or something.

"You have also amortized the principal in the loan over this period of time."

You just said that after selling and deducting closing costs, you would break even. It's irrelevant that you paid principal payments if you sell for a sufficiently lower price than you bought, which negates the benefit of such payments.

"I just looked it up.... Q2 prices were higher than Q1 according to Miller Samuel report on their site."

Right, but average price was down, and Miller notes in the report that volumes had really dropped. Again, I'm just saying that report measured peak or just a blip after peak (which, given the approximate lag, points to peak being mid to end of 2007, as I've been saying), so looking at YOY on the current report makes a lot of sense.

rhino, you are missing the bigger picture. Why is someone selling today? If they are selling to buy something else, and the other apartment has also come down in price, they are likely to be fine.