Anyone see signs of a slowdown in Manhattan?

I think I've aither seen it and/or felt it in Manhattan. In the more desirable areas (not meaning to pick a fight here) it feels very gradual and subtle, but is there all the same. On the other hand, I don't feel the world crashing in either (yet....).

Saw an E. Harlem condo get cut $210K yesterday, so there is def. price cutting goin on.

But then again, it may have been overpriced to begin with, and of course you're right, it's not really a desirable area...

http://www.millersamuel.com/press/view.php?V=1205375036CzTDp

I just listened to Jonathan Miller's clip from Bloomberg. He said he's more concerned about 2009 than 2008. Factors that would bring the market px down are more layoffs (who wants that though). And he's again saying that a full 1/3 of sales are going to foreign investors in Manhattan. In general he says prices are pretty sticky now. :-( for the would-be local f-t buyers that is.

I haven't seen much decline, good properties still selling at better prices than last year, crap properties hanging around a bit more. Price cuts I'm seeing on good properties started out with insane asking prices to begin with and even after the cut, are priced higher than last year. Tough to find properties are still tough to find and priced accordingly. Inventory still really tight with lots of "opportunistic sellers". I would say the market is stable, with moderate growth, and some caution in the wind. No real "deals" out there from what I can see.

There is still a lot of money out there and people are still paying record prices. Where I think prices will come down are on the studio and one bedroom apts. Larges apts will continue to get top price.

The gild is off the lily in the RE market. The best that can be said is that in some segments the market is holding (grade A properties), some segments are already showing signs of sliding or not moving at anywhere near the pace of prior years (b-rate properties generally; but also new whispers that the Upper West Side has already shown an actual first quarter decrease in value), and new construction is on the precipice of disaster in many cases. Every day that goes by the economic news worsens. Credit continues to tighten, private equity is gasping for life, the dollar is plummeting, inflation fears are being sounded louder, bad winds are blowing in bond markets... how much worse it all gets is anyone's guess--but that it will get worse is accepted as a virtual given on Wall St. There hasn't been a single encouraging ecomonic indicator in weeks (or months for that matter). A bad storm is brewing. RE agents may be singing the same tune they were in 2007 trying to keep the pressure to buy up during those open houses, but bad stuff is coming...

Very well said, kylewest. Certainly, prime areas/prime units are steady and best positioned to weather the storm but I definitely feel like there will be some contraction in the overall market. The amount of construction that has occurred or is currently occurring is very high for the current market to sustain at these price levels.

The first step in a property collapse is prices start to "stick," then inventory starts to grow, then prices start to fall. Or in NYC, new developments withhold apartments so as not to flood the market. But that can't last forever.

I heard it in Miami 2 years ago - "foreign buyers" are buying everything up, it's a "special" market because there's no place like it in the world. Two years later: prices down 25% and still falling, and tens of thousands of apartments are on the market.

I did an interesting comp: a house near one we bought in Potomac, Maryland in 1972 is listed for $739,000. In 1972 it would have cost about $73,900. That's a tenfold increase in 36 years, which is about the historic norm. In Manhattan prices have gone up sevenfold in ten years. Why would anybody think it's sustainable? Not even Warren Buffett's income has gone up sevenfold in ten years.

stevejhx, there is no way with a straight face you can compare Manhattan to Miami. The new build inventory here is a tiny, tiny fraction of what it is in Miami. I don't understand why you continue to make such absurd comparisons. Additionally, you have yet to answer any questions regarding inventory comparisons between the two cities.

As far as your interesting comp, it is not an interesting comp at all. You can't compare the two and there are so many ways to tell you how stupid the comp is, I don't have the time to do it.

A fractious Wall Street rebounded from an early plunge to finish moderately higher Thursday, after Standard & Poor's predicted financial companies are nearing the end of the massive asset write-downs that have devastated the stock and credit markets.

Basic premise: Don't people have to live someplace? As the city ages and becomes more family friendly are mid level executives really just going to keep renting? Laid off wall street guys still have alot more money than most of us schmucks on this board.

Take all of the drama out of the equation on both sides and you still have a fundamental fact. People need homes. People prefer to own rather than rent. People move into and out of the city.

Is this activity just "static" or is it the REAL market that has been supporting the NYC boom since day one.

I don't know. But beyond speculators, there are still just alot of people who need a place they can call their own -- and this city is attracting way more of them than most any other place in the U.S.

Even after the write-downs are done, it will still take awhile for credit markets to recover, consumer confidence to rebuild, business to pick up, and investment banking to resume.

That being said, I've seen crappy, stale apartments get price reductions, but new listings are still going for the gold. Of course, most are sitting around with plenty of lookers but no takers. It will be interesting to see what happens in April once Q1 results are announced and inventory starts to increase...

Source: malraux from idiots thread:

"...Dow will be below 11,000 by the end of 2007!!..."

"...Housing market down 20%! - no - 30%! - no - 40%! - no - MORE! - by the end of 2007!!!..."

"...The subprime/Alt-A debacle would tank the Manhattan real estate market FOR SURE in 2007!!..."

"...A bad bonus season would tank the Manhattan real estate market FOR SURE in 2007!!..."

"...High inventory would tank the Manhattan real estate market FOR SURE in 2007!!..."

"...Manhattan real estate selling for fifty cents on the dollar by 1 January 2008!..."

It's the same hue and cry these people made in 2006 when they said it was the end of the road and that real estate prices in Manhattan would collapse.

It's the same hue and cry these people made in 2005 when they said it was the end of the road and that real estate prices in Manhattan would collapse.

It's the same hue and cry these people made in 2004 when they said it was the end of the road and that real estate prices in Manhattan would collapse.

It's the same hue and cry these people made in 2003 when they said it was the end of the road and that real estate prices in Manhattan would collapse.

And so on....one day, of course, they'll be right - the market will recede to a greater or lesser degree for a while - that's what markets do - they go up and down.

What I've taken serious exception to, and why I started this thread in the first place, are the idiots who make grand, sweeping claims in either direction about the real estate market in Mnahattan based on faulty logic and feeble reasoning. Look, I don't know if even I'd buy right now, unless a very special property came up that was a rare and unique opportunity, and I was a fully informed buyer and sanguine about the current state of the market, and I was not buying to flip but to live there with a long(-ish) time horizon. But as far as the asshats who spout ridiculous predictions laced with their schadenfreude at the possibilty of watching people take a hit on real estate - well, it's just idiotic. "

"Take all of the drama out of the equation on both sides and you still have a fundamental fact. People need homes. People prefer to own rather than rent. People move into and out of the city.

Is this activity just "static" or is it the REAL market that has been supporting the NYC boom since day one.

I don't know. But beyond speculators, there are still just alot of people who need a place they can call their own -- and this city is attracting way more of them than most any other place in the U.S."

I don't know exactly how much inventory all these condos are really adding if you consider the pied-a-terre crowd. Unless we are talking owner occupied or rentals you aren't really adding squat.

I've heard it all before: 10,000 apartments sell each year in Manhattan (fact), "official" inventory of 5,600 or so apartments listed (fact), or a 6+ month supply = buyer's market (by definition 6+ months' inventory), apartments held back by developers - who knows how many? - so as not to flood the market, 30,000 more units coming online in the next 2 years. No market transparency regarding actual inventories of unsold units (fact: no MLS).

The fact is - since I lived through it here and there, & have friends who've lived through it in California - that the "boom" started later in NYC. That's all. Construction started later. There was, in fact, less of it, and less speculation, but many of the people who were buying are the ones now losing their jobs in the financial industry, b/c it was all built on a house of cards: how can you rate a bond backed by a subprime mortgage AAA? Not possible.

Property prices cannot increase more than incomes in the long-run. It's a fact. I heard the same thing during the dot.com boom - remember the "New Economy" - and now during this real-estate boom. None of my comparisons are ridiculous, guys. Just wait. I'll be smiling at you in a year or so.

Stevejhx... you convinced me. I am going to Potomac, MD. And maybe I could get an even cheaper place off Shady Grove Road in Gaithersburg, not far from the Metro.

What city is this again?

Gaithersburg, ha? Kind of far out. We lived off the Falls Road Golf Course. 11554 Bedfordshire Avenue, to be exact. I went to Thomas Wootton High School in Rockville.

Guys, it's happened before: property prices have collapsed in NYC. And they will again. It's more than supply and demand; it's "affordability." I made about $650k last year, & I think prices are too high for what you get. Will they fall as much here as they are falling in Miami (with more to go)? I don't think so. But a 25% decline, as in the last bust, would be about right, over a period of a year or so. Median property prices cannot exceed median incomes for long - and that's just one more indication that things are overpriced.

I'm not sure what "schadenfreude" is, JuiceMan - I heard it the first time yesterday, talking about Spitzer - I'm just trying to be realistic. I didn't make any of those comments from your self-described "Idiot's Thread"; belittlement really isn't a very good rhetorical weapon. The fact is, the median household income in Chelsea is $59,400. The median price for property listings is $1,599,000. Do the math yourself.

Eureka! I just figured it out! The difference between you guys and me is that you guys believe in magic, and I don't! You think that magical things can happen in Manhattan that have never happened anywhere else on the face of the planet, ever, in all of recorded history.

You're right! This is a magical place, where all the laws of economics can be ignored! Where property prices go up forever regardless of people's incomes, or the availability of credit, or inventory overhangs....

And where the rain may never fall till after sundown!

What a wonderful place we live in! Manhattan! Up, up and away! Would you like to ride in my beautiful balloon? We could float among the stars together, you and I, for we can fly, we can fly. Up, up and away my beautiful, my beautiful balloon!

Or should I say my overpriced condo?

Schadenfreude: taking pleasure in the misery of others.

For example: Wall Streeters watched the Governor's fall from grace with a healthy dose of schadenfreude.

I think the point of all this is that the time for irrational exuberance in the NYC RE market has passed. Crash or correction or cooling--whatever happens, it will calm down some. While one may argue the fundamentals underpinning Manhattan RE generally are solid (other may disagree), I think it's hard for anyone to say with a straight face that the outrageous run-up in prices in the past 2-5 years is sustainable.

That's correct, kylewest - and I doubt anyone would disagree. But here's the key question: What does it mean for a run-up to be "unsustainable":

1) That the rate of increase will slow (perhaps to a complete stop), or
2) That past gains will be erased to the point where the long-term rate of increase approximates some historic norm?

Scenario 1 means that prices stay about where they are until they eventually resume rising at a normal pace. Scenario 2 means a substantial decline, back to the levels of three-five years ago.

Interesting article from NY Sun.

http://www.nysun.com/article/72872

Exactly West81st, and #1 is a much more credible argument.

stevejhx, you are one frugal dude. You made $650k last year, 60% in the stock market, and yet you still live in a $4000/month rental in Chelsea? Wow, your tax bill must have been something fierce. You should talk to someone about buying real estate and getting yourself some deductions.

I think a lot of us get misled by price reductions. When you see a lot of properties being slashed by 20-30% over the course of a few months, it's natural to assume that the market is dropping like a stone. Maybe it is. But from what I've seen, most of those properties are still priced near or even above last year's comps. They were originally priced for a continuing bull market. That phase seems to be over, though there are still plenty of stupidly-overpriced new listings. What happens next is anyone's guess. All we can really say at this point is that people who didn't buy in 2007 probably didn't miss much, and people who didn't buy in 2005-2006 may get another shot at similar prices, plus normal inflation.

JuiceMan, why do you have to insult everyone who is cautious about buying property in today's uncertain real estate market? Your comment directed towards stevejhx was really off-base and uncalled for. How does your attack on this person relate to the subject of this post - "anyone see signs of a slowdown in manhattan?" I read these posts on Streeteasy to get information on the real estate market and your aggressive comments attacking certain people aren't helpful and make you come off as a really bitter seller/broker. Not sure if that's what you are but that's what it sounds like... Anyhow, sorry for being off-topic too but I just thought it needed to be said.

Btw: Warren Buffett who is currently ranked by Forbes as the richest man in the world w/ an estimated net worth of $62 billion still lives in the house he purchased in 1958 for $31,500. Today that house is valued at $700,000.

i've been looking at apartments in the NYC area (manhattan and brooklyn) for the past couple years and the buying frenzy that was prevalent in NYC through 2007 officially seems over from the open houses i've attended during the last 6 months. from 2005-2007 nyc real estate seemed to move faster than hot cakes - a property would be listed and sold within hours, days or weeks. that is not what's happening today. many apts i saw in september '07 are still on the market today - over 6 months later. i'd say that's a sign of a slowdown.

I agree with neutral, but I also agree with the comments about the good, well priced apts going very quickly. Basically, the so-so places are not going as fast as they used to.

Nope neutral, not a seller or broker. I also read this board for information and lots of people on this board make cautious comments that are fact based, intelligent, and realistic, which I appreciate. See posts from kylewest, tenemental, urbandigs, etc. What irks me are folks that opine about the world ending and colossal market failures with weak arguments and baseless bullshit. Stevejhx currently holds the record for consecutive bullshit posts and I feel the need to point it out so that others don’t waste time reading any of it. If you look back at most of my past posts, I am actually quite neutral and try and give helpful advice where I can. I just have a real aversion for bumbling horseshit.

ok, maybe not neutral.....

stevejhx just out of curiosity how long you been renting for?

stevejhx, supremely entertaining posts, especially that last one - you nailed the Mary Poppins-ness of Manhattan RE bulls. I'm with you in that some people on these boards are a bit too doggedly optimistic - I just don't see even prime Manhattan doing as well as some are predicting, in spite of all the problems going on. But I also have a hard time seeing the 25% decline you're forecasting. The biggest difference (for me) when comparing previous "busts" is that major cities are attracting many one-time suburbanites, a large chunk of whom are very wealthy people. That, along with the fact that many, many people are and will be renters, is what makes your Chelsea median income vs median asking price argument a little flawed.

"Economists in the latest Wall Street Journal forecasting survey are increasingly certain the U.S. has slid into recession, a view reinforced by new data showing a sharp drop in retail sales last month.

"The evidence is now beyond a reasonable doubt," said Scott Anderson of Wells Fargo & Co.

Thirty-six of 51 respondents, or more than 70%, said in a survey conducted March 7-11 that the economy is in recession." WSJ

I just think that NY real estate is a lagging indicator here. How far down remains to be seen.

Stevejhx / bjw2103,

I see you've solved the Juiceman/spunky braintrust. That didn't take long (what 30 seconds?). Don't worry, nothing you say or demonstrate will ever change their opinion that Manhattan real estate can only go up, up (and awaaaayyyy). If the Almighty covered Manhattan with a steaming dump, they would argue that real estate would be going way up, for all the daisies that would suddenly be sprouting.

Can't fault them for a lack of optimism, though. Just think of them as the Black Knight from Monty Python's Holy Grail.

Been renting for 4 years. I do own real estate on Long Island, but there's no substantial tax break from owning - property taxes are eaten by AMT, mortgage interest limited to the first $1 million.

Thanks, JuiceMan, for the "Bullshit Posts" award. I wear it proudly. "Bumbling horseshit," as well. I do agree with some of the things you're saying, just that I don't think that these price levels in Manhattan are sustainable. I don't think a sevenfold increase over ten years is sustainable, not only because income levels haven't gone up that much, but because such price increases are never sustainable. BTW although I do currently have large positions in commodities, I do think that those prices will fall again. In fact, I'm sure of it, just don't know the timing yet.

And I don't think that Brazil or China are overvalued markets - compare their annual growth rates to the forward P/E's, & you'll see they're lower than the US market's P/E, and the US is probably experiencing negative growth right now.

Guys, everything, always, comes back to equilibrium over time. Just keep on remembering that when they're not in equilibrium, people make up new terms for the impossible: the "New Economy," for instance, when Internet-based businesses where valued more than IBM. Or you can be like Hugo Chavez in Venezuela, and try to control prices, which leads to shortages. Or Robert Mugabe in Zimbabwe, and send people to jail for refusing to sell goods below their cost of production.

The reason for all the overbuilding in the past was precisely because there was a disconnect between the cost of production (building costs) and the price of the goods (real estate); the ratio was outside the historic equilibrium, so everybody piled in and started to build more. Well naturally, that has the effect over time of driving prices in the opposite direction, usually downward more than upward. That's what's happened in the credit markets: from buying these "AAA" rated securities that were really close to junk en masse, to nobody wanting them at all, so banks, by law, must mark their value down to $0 because there is no market for them, even though they are hardly worth $0. Of course they're not worth their face value with defaults, but nor are they worth $0. In a few months, when the credit markets recover, banks will be able to remark those $0 securities upwards, which will increase their profits.

FYI except for the credit markets and real estate, I don't think we're in a recession at all. My work is very sensitive to economic swings; business died from mid-September through December of last year, then they came back like a lion in January & I've been working 7 days a week since then. So in my opinion much of the doom and gloom actually happened in the 4th quarter of last year, at least according to my workloads.

Remember real-estate bulls: Up, up and away with your overpriced condos! They cannot remain at these levels. In the olden days, you could get a mortgage for no more than twice your income, and only if you put 20% down. Those were the rules for decades; they changed in 2000 with all of these exotic mortgage products and securitization, where banks didn't have to keep the mortgages on their books, and so saw no risk (when considerable risk actually existed). Now that we're getting back to reality, 20% of the median price for an apartment in Chelsea ($1.6 million) is $320,000. That means under the old rules you would need $320,000 in cash an income of $784,000 to afford the mortgage for a median priced property in Chelsea. How many people who are posting to this thread could afford a median-priced property in Chelsea based on the historic rules for lending? Not many, I bet.

So when you see all these "new rules" for mortgages, guess which way we're headed: back to historic lending criteria. No more 0-down mortgages (making it advantageous to walk away from the property if prices fall), no more liar's loans, no more piggy-back loans, no more unaffordable ARM's. Back to old-fashioned prudent lending practices. The credit feeding frenzy that caused this is now officially over, and no bank is going to go back for a long time to come.

So let me understand this stevejhx you own a house in fire island and have been renting in NYC for 4 years. I just want to try to get an understanding of your RE fire island own and Manhattan rent hedge strategy. BTW where in fire Island to you own property?

stevejhx, the first time you posted I thought you quite a bit of good information to share. I think your rent buy analysis is a great exercise for new buyers to go through and it is important for folks to truly understand what the benefits of home ownership are. Further, if you are saying that you feel prices are inflated, cannot continue to rise at the current pace, and will require some leveling out to be more in line with historical norms, ok I think that is a good discussion. If you want to talk about the price levels of new devs and the sustainability of those prices, ok, that is a good discussion. If you want to discuss how much AMT sucks and how it erodes a chunk the benefit of home ownership, you will have a lot of takers there.

Where you lost me is the comparisons of Manhattan to Miami and your prognostications of Manhattan real estate being down 25-40% (from current levels) in 5-7 years. It puzzles me how someone can make good credible arguments and highlight real areas of caution but also make broad generalizations about something that is, without total U.S. economic collapse, an impossibility.

Get a chat room.

Spunky, it's a very easy strategy: I moved from the West Village to South Beach after 9/11. Hated South Beach, came back to NY, but I rented in an 80/20 building when I came back here b/c a) I had a studio in South Beach to sell; and b) I had a deposit on a luxury apartment whose developer had gone bankrupt so everything was in limbo. I sold the studio and once the luxury apartment came out of bankruptcy & I flipped it (not my original intention, but after 4 years that's what I did) for $1 million (now worth below $750,000) I started to look for apartments in Manhattan to buy. At the time I was willing to pay $1,000 psf, but when I went to open houses, there were lines around the block to see properties. Junk was selling for $1 million plus. I saw a 2-br 1 ba in London Terrace, and there were so many bids on it that they were going to "hold an auction" on the Thursday after the Sunday open house, invite all the bidders to stand there and hold a viva voce auction!

I said, "No thanks," moved from renting a 1-br 1-ba apartment to renting a 2-br 2-ba apartment around the block, & invested my money on Fire Island, where (I knew for a fact) prices hadn't risen in 6 years. I like to buy things as the lowest bidder, not the highest bidder, so it seemed like a much wiser thing to do: invest my money in an area that had not appreciated so much, where it was difficult to sell property, not where there were lines around the corner. That's why I made the decision I did - I buy in buyers' markets, not in sellers' markets - so my strategy is to hold on tight and wait for property prices to fall. Maybe I'll be wrong, but I don't think so, and in the meantime I just let my funds accumulate in the stock market.

Someone commented on my frugality: yes I made 60% in the stock market last year, but I don't anticipate ever making that amount again, though I might. Yes I had an extraordinarily good year at work last year and so far this, but I'm self-employed and have seen downturns in the past. So under no circumstance will I borrow more than twice my self-employment income for a mortgage, nor will I count investment income as a substantial part of my overall income for mortgage purposes, since it can vary - and even go down - in the short-term. I can easily afford my $4,600 monthly rent and my $2,000 monthly mortgage + maintenance charges for Fire Island on my self-employment income. But at these prices I can't afford to buy the same property across the street using the standard mortgage ratios (20% down, twice annual income), even with the dubious "tax benefits" of owning, since it would cost about $1.3 million to make the purchase, and the tax abatement would disappear over time.

Guys, I don't mind leverage (margins) on the stock market, because properly managed you can make a lot in the medium-term, and it's highly liquid. But this much leverage on a home is just plain ridiculous because real estate is not liquid, it can take years to reverse a negative equity situation, I'm not taking out a 0% mortgage, a mortgage for more than I can prudently afford, a piggy-back mortgage, a negative-accruing mortgage, or anything else so ridiculous. Buying individual properties to flip or to rent out is a) very risky if you get stuck and can't sell; and b) very risky if you get a bad tenant. It makes no sense to spend more out-of-pocket to buy than it does to rent. You can love your up-up-and-away fantasies about the future of property prices in Manhattan; you can engage in all sorts of dangerous speculation; you can hope that the rain may never fall till after sundown, but look at the past - every bubble in history has popped. Real estate takes longer to pop, but pop it has and is, and it takes a long time to recover.

Be reckless. Suits me fine. Warren B. never buys things at their peak. He sells at the peak and buys in the trough. He's not always right, but it sure looks like he has plenty of cash right now for a reason.

Oh - I'm not taking out a 40-year mortgage, either. I want my property paid for before I'm 90.

Spunky, it's a very easy strategy: I moved from the West Village to South Beach after 9/11. Hated South Beach, came back to NY, but I rented in an 80/20 building when I came back here b/c a) I had a studio in South Beach to sell; and b) I had a deposit on a luxury apartment whose developer had gone bankrupt so everything was in limbo. I sold the studio and once the luxury apartment came out of bankruptcy & I flipped it (not my original intention, but after 4 years that's what I did) for $1 million (now worth below $750,000) I started to look for apartments in Manhattan to buy. At the time I was willing to pay $1,000 psf, but when I went to open houses, there were lines around the block to see properties. Junk was selling for $1 million plus. I saw a 2-br 1 ba in London Terrace, and there were so many bids on it that they were going to "hold an auction" on the Thursday after the Sunday open house, invite all the bidders to stand there and hold a viva voce auction!

I said, "No thanks," moved from renting a 1-br 1-ba apartment to renting a 2-br 2-ba apartment around the block, & invested my money on Fire Island, where (I knew for a fact) prices hadn't risen in 6 years. I like to buy things as the lowest bidder, not the highest bidder, so it seemed like a much wiser thing to do: invest my money in an area that had not appreciated so much, where it was difficult to sell property, not where there were lines around the corner. That's why I made the decision I did - I buy in buyers' markets, not in sellers' markets - so my strategy is to hold on tight and wait for property prices to fall. Maybe I'll be wrong, but I don't think so, and in the meantime I just let my funds accumulate in the stock market.

Someone commented on my frugality: yes I made 60% in the stock market last year, but I don't anticipate ever making that amount again, though I might. Yes I had an extraordinarily good year at work last year and so far this, but I'm self-employed and have seen downturns in the past. So under no circumstance will I borrow more than twice my self-employment income for a mortgage, nor will I count investment income as a substantial part of my overall income for mortgage purposes, since it can vary - and even go down - in the short-term. I can easily afford my $4,600 monthly rent and my $2,000 monthly mortgage + maintenance charges for Fire Island on my self-employment income. But at these prices I can't afford to buy the same property across the street using the standard mortgage ratios (20% down, twice annual income), even with the dubious "tax benefits" of owning, since it would cost about $1.3 million to make the purchase, and the tax abatement would disappear over time.

Guys, I don't mind leverage (margins) on the stock market, because properly managed you can make a lot in the medium-term, and it's highly liquid. But this much leverage on a home is just plain ridiculous because real estate is not liquid, it can take years to reverse a negative equity situation, I'm not taking out a 0% mortgage, a mortgage for more than I can prudently afford, a piggy-back mortgage, a negative-accruing mortgage, or anything else so ridiculous. Buying individual properties to flip or to rent out is a) very risky if you get stuck and can't sell; and b) very risky if you get a bad tenant. It makes no sense to spend more out-of-pocket to buy than it does to rent. You can love your up-up-and-away fantasies about the future of property prices in Manhattan; you can engage in all sorts of dangerous speculation; you can hope that the rain may never fall till after sundown, but look at the past - every bubble in history has popped. Real estate takes longer to pop, but pop it has and is, and it takes a long time to recover.

Be reckless. Suits me fine. Warren B. never buys things at their peak. He sells at the peak and buys in the trough. He's not always right, but it sure looks like he has plenty of cash right now for a reason.

stevejhx I am still trying to understand this. You rent a place that you live in and own a place that you don't live in. The place that you rent you live all year round and the place that you own in Cherry Grove
Fire Island you own.
Maybe I should rent a place in the city 11.85 months out of the year and own a place in Aruba .15 months out of the year.

FYI I don't own a place in Cherry Grove.

I spend 4 days a week on Fire Island from April 15 through September 15, and I work there when I'm there. If you can afford to buy a place in Aruba and want to spend all that time traveling back & forth, I recommend you do it.

I don't know why you see a disconnect between renting a primary residence and owning a vacation home. I do what's most economical. Your question implies that there is something "special" about ownership of a primary residence, when I don't think there is.

Can I remind the posters about the original question. Please, are there FACTS out there on a slowdown, or even anecdotes from broker conversations and openhouses. I specifically asked to put aside the hopes and fears. Most of what I'm reading is tertiary, wall street, credit, miami, not to mention the personal back and forths.

Pops-- thank you. These people need to take their relationship off-line. Also thank you to the folks who did answer the original question. I do agree that the rush to buy has been dispelled. I've seent that push from brokers to put a bid in immediately is gone and that they will pull you aside and say you can take x dollars off the price and the buyer would be receptive. So that means it's not a frenzy anymore, not sure that it means prices are dropping though.

Hey LP1, I think all my comments are quite pertinent to your original question. Wall Street, Credit, Miami, San Diego, Maryland, all have to do with the housing market right here, and the fundamental question: are things in equilibrium? How did we get in this mess?

Or did you not read the news today about Bear Stearns, the largest underwriter of mortgage-backed securities in the world that just got bailed out by the Fed? If you want to know what is and what will happen in the real-estate market in Manhattan, these events are a lot more relevant than "brokers' anecdotes," which if you've read the Rosy Scenarios published routinely by the National Association of Realtors, are pretty worthless, even when they claim to be "economic forecasts."

LP1, the problem is that in the past, stevejhx has hijacked multiple threads to spew doom and gloom rhetoric regardless of the topic. We have tried to get him to post his thoughts on the idiots thread (not that he is an idiot but that thread is most suited for the back and forth of market conditions). That said, you did ask a highly contentious question that everyone has an opinion on. These "facts" you are looking for are interpretable and therefore subjective. You are going to get highly animated discussion when you ask this type of question.

Pops, get a chat room? This is a blog dumbass. Here is a definition if you forgot what it is used for.

http://en.wikipedia.org/wiki/Blog

Hey JuiceMan, nice to be insulted by you again! Here's the original question:

"I keep thinking prices have to come down, but honestly I don't see it (yet?) I do see price reductions out in Brooklyn, and people who have price parkslope as if it were Manhattan are either delisting or cutting. I'm looking for some real or anecdotal evidence, not hopes and fears. Thx!"

Here's what I originally answered:

"The first step in a property collapse is prices start to "stick," then inventory starts to grow, then prices start to fall. Or in NYC, new developments withhold apartments so as not to flood the market. But that can't last forever.

"I heard it in Miami 2 years ago - "foreign buyers" are buying everything up, it's a "special" market because there's no place like it in the world. Two years later: prices down 25% and still falling, and tens of thousands of apartments are on the market.

"I did an interesting comp: a house near one we bought in Potomac, Maryland in 1972 is listed for $739,000. In 1972 it would have cost about $73,900. That's a tenfold increase in 36 years, which is about the historic norm. In Manhattan prices have gone up sevenfold in ten years. Why would anybody think it's sustainable? Not even Warren Buffett's income has gone up sevenfold in ten years.

Perfectly legit: "real" evidence is what has happened in other markets that have experienced precipitous gains in prices. Comparing where the NYC market is to where other markets are is perfectly legit, too. Comparing "rumors" about foreign buyers - a comment made by someone else before me - is perfectly legit, too. Any subsequent answer I gave relates to how people responded to my post, so drop the accusations and the personal attacks. "Dumbass" is completely unwarranted.

If I thought prices were going up, I'd be the first to say so. I just compared Manhattan with the rest of the country, and the state of the mortgage market. Or did you not see what happened to Bear Stearns, today? Or is the availability of financing not relevant to market prices?

Basically, who cares what prices sellers are asking. The issue is what buyers are willing to pay, and what banks are willing to finance. In my old building in Miami - yes, Miami! - one person is asking $959,000 for an apartment identical to one that is listed for $750,000 two floors below it, with the exact same view and everything else. So if the apartment can't sell for $750,000 after nearly 3 years, who cares if someone else has a fantasy that their apartment is worth $959,000?

Bloomberg said it the best: revenue from real property conveyance tax in NYC has ground to a halt. Ask whatever price you want; the mayor says nobody is buying, and he should know.

I would have said buyers can take a little more time to make an offer but if a property is nice and well priced, it still goes really fast. Just experienced this with a property in UWS, first open house last Sunday, we made a bid on Thursday and the broker told us they already had various offers and the owners had accepted one offer, well above asking price and all cash.

stevejhx, that wasn't meant to be an insult. Note the use of the "in the past" in my post. I think your posts on this thread are right on point to the discussion. Also, note from my post above that my issues with past posts were around catastrophic prognostications, not with you or your current views. So, how about we move on and have a good discussion?

and by the way, I was just in Miami this week. Manhattan is the farthest thing from Miami that I have ever seen. I am bullish on Manhattan real estate after being in Miami. Also, I read somewhere on streeteasy that the NYC tax revenues have slipped as much as they initially thought, so not sure how true that statement is.

should be have not slipped

If you don't see the storm brewing, you must be a weather man.

Hey JuiceMan, I agree: let's restore civility to this, okay? No more ad hominem attacks; they add nothing.

Now, on your post. First, my prognostications have not changed, nor, given today's events, will they. I still believe Manhattan is 20% to 25% overpriced, and that prices will fall.

That said, I, too, was in Miami last weekend, and Manhattan is not Miami. Miami went up much higher and much faster, and it will fall much lower and much swifter than Manhattan. Prices are down 25% in 2.5 years there, and they have another 25% to fall. That will not happen here.

I also don't believe we're in a recession, or my self-employment income would fall to zero as it always does, rather than being a record, as it currently is. The recession happened in the last quarter of 2007. By May-June I think this will be clear.

I also don't think that what is going on in the financial markets is real. It's an accounting problem. If an institution holds an asset for trading purposes, it must mark that asset price to the market price every day. Right now, there is no market price for mortgage-backed securities, so they must be written off in their entirety. However, they are NOT worthless. True, they're not worth their face value, but they're not worthless. The market just has to start finding a price for them, which will eventually happen.

Think of what happened to Argentine debt when they defaulted; people bought it at 20 cents on the dollar, it then rose to 80 to 90 cents on the dollar. Same thing will happen in the mortgage-backed securities market, within a year or two as these defaults are worked out.

I also think that the failure of Bear Stearns - don't expect the firm to survive - marks the beginning of the end of this. They're a big player with a small balance sheet. Merrill Lynch will survive. Citigroup will not come out of this looking like it currently does: expect massive layoffs. Countrywide is dead. Only BofA - which never issued subprime loans and is not a major investment-bank player - and JPMorgan - ditto on the subprime loans - will survive.

This is all related to the original post: what's happening in the credit / housing markets in this country.

The Manhattan real-estate market is opaque, which benefits sellers. Until recently co-op sale prices were not recorded or publicly available, which meant that there was very little accurate market data since co-ops formerly accounted for 80% of the real-estate market in Manhattan. That's changed. Still, there is no MLS here, so there's no accurate accounting of listings. That's changing with StreetEasy and other websites. But I don't believe Miller Samuel or any other "survey" of real estate companies; they have too much of an incentive to lie.

That's why I don't rely on anecdotes.

In the past (and present) here & in Miami, people have mentioned "foreign buyers": that was a myth in Miami, & I think it's a myth here. Wall Street bonuses were in the past mentioned as a driver of Manhattan real estate, and I believe that. Just no more. Unless you think that Bear Stearns is actually going to be awarding those declared bonuses! (Over the Fed's dead body, I think.)

This all happened because of loose lending standards. Who benefited from those standards? Wall Street bankers making huge commissions trading AAA-rated bonds backed with subprime junk. Well, that party's officially over as of today. Something like 80% of mortgages in NYC outside of Manhattan were subprimes after 2000. If you think there's no exposure in Manhattan to that, think again: "feeding frenzies" start from the bottom up, and that's how they collapse.

I've seen this before, guys, in London in 1989, in Miami in 2006, now here. There are no foreign buyers; there are no more Wall Street bonuses; there are no more subprime or Alt-A mortgages; there is no market for securitized mortgages. It's over, and once the financing is gone - as it is - prices will come down quickly.

If banks won't lend to Bear Stearns, why would they lend to you?

Here's my rule of thumb, and it's no gloom and doom: when prices come down to the point that I can take out a historic mortgage - twice my salary, 20% down - and that gets me the same out-of-pocket expense as renting a substantially equivalent property, then I'll buy. Right now it's much, much more expensive to buy - I rent a 2-br 2-ba apartment for what could buy a studio for under that scenario. I've lived in a studio; never again.

Unless you think that the credit markets are going in any direction but back toward the historic norm - twice your salary, 20% down - then you should sit tight. If you think you can get any of those crazy mortgages right now that banks can't offload so you can buy an overpriced property, you should buy. I'm betting millions that I'm right: mortgage = twice your salary, 20% down. If that happens, then prices will crash.

Hey JuiceMan, I agree: let's restore civility to this, okay? No more ad hominem attacks; they add nothing.

Now, on your post. First, my prognostications have not changed, nor, given today's events, will they. I still believe Manhattan is 20% to 25% overpriced, and that prices will fall.

That said, I, too, was in Miami last weekend, and Manhattan is not Miami. Miami went up much higher and much faster, and it will fall much lower and much swifter than Manhattan. Prices are down 25% in 2.5 years there, and they have another 25% to fall. That will not happen here.

I also don't believe we're in a recession, or my self-employment income would fall to zero as it always does, rather than being a record, as it currently is. The recession happened in the last quarter of 2007. By May-June I think this will be clear.

I also don't think that what is going on in the financial markets is real. It's an accounting problem. If an institution holds an asset for trading purposes, it must mark that asset price to the market price every day. Right now, there is no market price for mortgage-backed securities, so they must be written off in their entirety. However, they are NOT worthless. True, they're not worth their face value, but they're not worthless. The market just has to start finding a price for them, which will eventually happen.

Think of what happened to Argentine debt when they defaulted; people bought it at 20 cents on the dollar, it then rose to 80 to 90 cents on the dollar. Same thing will happen in the mortgage-backed securities market, within a year or two as these defaults are worked out.

I also think that the failure of Bear Stearns - don't expect the firm to survive - marks the beginning of the end of this. They're a big player with a small balance sheet. Merrill Lynch will survive. Citigroup will not come out of this looking like it currently does: expect massive layoffs. Countrywide is dead. Only BofA - which never issued subprime loans and is not a major investment-bank player - and JPMorgan - ditto on the subprime loans - will survive.

This is all related to the original post: what's happening in the credit / housing markets in this country.

The Manhattan real-estate market is opaque, which benefits sellers. Until recently co-op sale prices were not recorded or publicly available, which meant that there was very little accurate market data since co-ops formerly accounted for 80% of the real-estate market in Manhattan. That's changed. Still, there is no MLS here, so there's no accurate accounting of listings. That's changing with StreetEasy and other websites. But I don't believe Miller Samuel or any other "survey" of real estate companies; they have too much of an incentive to lie.

That's why I don't rely on anecdotes.

In the past (and present) here & in Miami, people have mentioned "foreign buyers": that was a myth in Miami, & I think it's a myth here. Wall Street bonuses were in the past mentioned as a driver of Manhattan real estate, and I believe that. Just no more. Unless you think that Bear Stearns is actually going to be awarding those declared bonuses! (Over the Fed's dead body, I think.)

This all happened because of loose lending standards. Who benefited from those standards? Wall Street bankers making huge commissions trading AAA-rated bonds backed with subprime junk. Well, that party's officially over as of today. Something like 80% of mortgages in NYC outside of Manhattan were subprimes after 2000. If you think there's no exposure in Manhattan to that, think again: "feeding frenzies" start from the bottom up, and that's how they collapse.

I've seen this before, guys, in London in 1989, in Miami in 2006, now here. There are no foreign buyers; there are no more Wall Street bonuses; there are no more subprime or Alt-A mortgages; there is no market for securitized mortgages. It's over, and once the financing is gone - as it is - prices will come down quickly.

If banks won't lend to Bear Stearns, why would they lend to you?

Here's my rule of thumb, and it's no gloom and doom: when prices come down to the point that I can take out a historic mortgage - twice my salary, 20% down - and that gets me the same out-of-pocket expense as renting a substantially equivalent property, then I'll buy. Right now it's much, much more expensive to buy - I rent a 2-br 2-ba apartment for what could buy a studio for under that scenario. I've lived in a studio; never again.

Unless you think that the credit markets are going in any direction but back toward the historic norm - twice your salary, 20% down - then you should sit tight. If you think you can get any of those crazy mortgages right now that banks can't offload so you can buy an overpriced property, you should buy. I'm betting millions that I'm right: mortgage = twice your salary, 20% down. If that happens, then prices will crash.

ninux: Thanks for sharing your UWS bidding experience. Would you mind disclosing the address/listing ID?

In an earlier post, Kylewest mentioned the Upper West Side as one market where an actual decline is already perceptible from year-ago levels. The UWS happens to be the only market I watch, and I watch it pretty closely.

From what I've seen, in the past month we may have crossed a minor event horizon, where a critical mass of serious/motivated sellers (and their agents) have adjusted their expectations to reflect year-ago comps. That doesn't mean they've acknowledged a declining market - just that they've cut the ridiculous 20% year-on-year expected gain out of the asking prices, and are trying to get what they might have gotten last year. Some properties even seem to be below that level, but not by much. Anyway, it's hard to get exact apples-to-apples comps among pre-war apartments in varying states of renovation or disrepair. One thing I have noticed is that older, mid-level apartments are being hurt by competition from amenity-heavy new construction. The pure pre-war buyer will always want what he wants, but people who simply need a third bedroom for the new baby have more options that they did two years ago, and it's affecting prices.

Some new developments - like the Ariel twins - seem to be holding up quite well, so there's no sign of free-fall. The market might freeze up because of the ongoing credit crunch. That's likely to be a transitory phenomenon, mostly affecting highly motivated sellers and cash-rich or very credit-worthy buyers. (Anecdotally, by the way, the people buying buildings like Ariel East/West right now aren't the legendary Europeans or even bonus-driven investment bankers; they're youngish couples with kids and a lot of cash, often handed down from prior generations.)

Another complicating factor is that the UWS has become a rich-person's market, and to some degree that transformation may be self-limiting: the more the UWS loses its distinctive lefty-intellectual flavor, the less reason there is for the neighborhood's traditional base to pay a premium to live there. The #1 train isn't that much nicer than the #6. Family money is helping, but there are no reliable statistics for liberal families with inherited wealth and lots of kids. So keep watching. Whatever happens, it won't be dull.

Hey JuiceMan, since you recommended I post on the Idiot's Thread, I did. And here's what I wrote:

We should all remind ourselves of my friend Malraux's first post, those many weeks ago. Let's take them on one at a time:

Malraux: "Dow below 11,000 by the end of 2007!!"

Fact: Down Jones Industrials one year chart: 11,634.82 - 14,198.10. No, we didn't make it quite below 11,000, but came pretty damned close, and who knows where we're going.

Malraux: "Housing market down 20%! - no - 30%! - no - 40%! - no - MORE! - by the end of 2007!!!"

Fact: Case Schiller index down over 10% since 2Q2006, back to 2005 levels, and falling.

Malraux: "The subprime/Alt-A debacle would tank the Manhattan real estate market FOR SURE in 2007!!"

Fact: "Foreclosure filings nationwide jumped 60% in February compared with the same month last year...."

Malraux: "A bad bonus season would tank the Manhattan real estate market FOR SURE in 2007!!"

Fact: Bear Stearns just collapsed, Citigroup working with John Reed to restructure, forecast of 30,000 jobs lost.

Malraux: "High inventory would tank the Manhattan real estate market FOR SURE in 2007!!"

Fact: Bloomberg says real-estate taxes revenues have collapsed, ordered 3% reduction in city budge.

Malraux: "Manhattan real estate selling for fifty cents on the dollar by 1 January 2008!"

Fact: I never remember anybody saying that, and it's a ridiculous thing to say - just Malraux's hyperbole - but the trend is clearly down.

Malraux: "It was ALL GONNA CRASH by the end of 2007!!!"

Fact: 2008 has just begun, and not very auspiciously.

Did anyone see Sharpton's comments yesterday that Paterson would "step up" and be the next Dinkins? If that's to be true, and if any of his policy-making affects NYC, then we are doomed and Manhattan housing would probably revert to the early 90s. Scary thought and scarier that someone actually "thinks" Dinkins contributed ANYTHING positive to this city. But then again, look who made the comment.

" I still believe Manhattan is 20% to 25% overpriced, and that prices will fall."

Fair enough stevejhx, but believing Manhattan is overpriced 20 to 25% is different than prices correcting 20-25%. There would have to be a huge inventory swing for that to happen and I just can't see how that takes shape.

"Miami went up much higher and much faster, and it will fall much lower and much swifter than Manhattan."

Miami is plunging because it was, and continues to be, overbuilt. The number of empty 1000+ unit sky rises that were visible (and in construction) was amazing to me. Manhattan has not been overbuilt. It is difficult build here (cost, regulations, neighborhood associations, other red tape) and was so even during the boom. Sure, we have some inventory to get through at some very aspirational prices, but it is a fraction of the issue Miami faces. Not even close. Add that to the population differences, attraction of the city, etc and I just don’t see the correlation.

I’m not arguing that pricing will go up forever at historic rates but I have yet to be convinced that we will see measurable price declines in the near future.

I request that JuiceMan and stevejhx stop posting to this thread and start their own please.

I request that you read the posts and realize that they are answering the question you asked. You are going to get many perspectives when you ask a wide open question like the one you did. What are you expecting, a yes or no answer? Ok, let me make this easy for you. stevejhx says, yes. JuiceMan says no. Better? If you want hard data, wait till the next Miller Samuel report, otherwise you are stuck with anecdotes.

JuiceMan, I'm glad we're at peace!

I agree with you on Miami. The skyline is unrecognizable from 2 years ago.

Manhattan's a different animal: I agree with that, too. But what was driving prices higher was Wall Street bonuses, and that party's over as of yesterday with Merrill Lynch, today with Bear Stearns, tomorrow with Citigroup, and who knows what will happen with Lehman Bros. the next day.

Here's how inventories build up quickly: nobody will lend you money. That's basically what's happening right now: nobody's lending money for mortgages because nobody knows what will happen to the price of the collateral, and therefore nobody is willing to buy mortgage-backed securities so banks will have to keep them on their books and they won't because they don't want or need the risk right now. The jumbo-loan market is dead, and will be even when the limit is raised because it's still barely enough to buy a one-bedroom apartment.

Go back to my case study of what would happen if banks, as in the past, would no longer lend anyone more than twice their income with 20% down. You'd need to make $800,000 a year to buy the median apartment in Chelsea, and have $320,000 in cash. Except Wall Street, very few people make that kind of money. And Wall Street ain't making that kind of money, or anything close.

Herb Greenberg thinks it's the beginning of the beginning, which is encouraging because I almost always disagree with him. I think in terms of mortgages we're seeing the beginning of the end. Prudent lending practices are being implemented, and codified. Once that happens prices will be forced down, because nobody will have or make enough to qualify for a loan that will cover these prices.

That, curiously, will have the effect of driving inflation down since rental prices will also fall, which will cause a fall in owner's equivalent rent, which makes up 40-something percent of the CPI. Owner's equivalent rent started to get disjointed from actual rents in 2000, which is when the 20% down twice your income mortgage standard died, causing rents to vary significantly from property prices. That will come back into equilibrium, too.

All the cards are there, JuiceMan, from Malraux's initial post on the Idiot's thread. The year might be wrong - 2008 instead of 2007 - but the forecasts aren't that off.

When I say that Manhattan is 20% to 25% overpriced, I mean that I believe that that's how much prices will fall. Manhattan is more overbuilt than you think: only 10,000 apartments change hands each year, and 30,000 are scheduled to come online in the next 2 years, plus the usual turnover. I think if the market were transparent you'd see that there's a lot more availability than is currently thought, and that's only going to go up and up and up.

And, JuiceMan, this from Uncle Ben today:

Bernanke outlined four responses the Fed is pursuing to alleviate the crisis: prohibiting lenders from issuing loans that borrowers cannot repay, making lenders verify the income and assets of the borrower, requiring escrow accounts for higher loans as hazard insurance, and banning "loan-flipping" repayment penalties that make borrowers refinance at a higher rate.

That's what the government is doing; private lenders are doing more.

There is no more credit. No more fancy loans. No more 10% down without putting the rest in escrow. It's over. Done. Finished. We're going back to prudent lending standards, and when we do, no one living in Manhattan will be able to get a mortgage to cover these prices, unless they make $800,000 a year. Only bankers do that, but not anymore....

stevejhx could you tell us what the weather would be like NYC 3 weeks from now. I would also appreciate where the Dow will in Nov. of 2009. If you can also let me know who our next President and Vice President will be I would also appreciate that as well. I just want to have all the info at hand prior to your forecast of a 25% reduction in Manhattan RE.

stevejhx: If you're 100% right, what happens to "AAA" co-ops that have always required 25-50% down anyway? A return to sound underwriting has no direct effect on that market, because co-op boards have the lenders' job for them during the go-go years, in the name of stability and keeping out the riff-raff. If new-construction condos in fringe neighborhoods sink because buyers can't get mortgages, do they take 10021 down with them? I doubt it, though market psychology isn't always rational.

I think you exaggerate the degree to which the surge has been driven by easy credit, because buildings with stringent requirements have gone through the roof too. I guess the double-whammy of tight credit and Wall Street contraction could deflate all market strata. But at the high end (and even the upper end of the mid-market), co-op owners have so much equity that their most likely reaction to a market collapse is to stay put, not to panic-sell. I think that translates into a glacially slow market with some distressed buying opportunities, not a broad-based rout.

Sorry, previous post should read: "...co-op boards have DONE the lenders' job..."

Ninex - just curious, which property? Or, if you don't feel comfortable posting that, which area of the UWS. We've experienced something similar.

Hey Spunky, thanks for your clever comments. I have no idea where the stock market will be in November 2009, and weather is random.

But the supply of credit isn't. Rather than just ask sarcastic questions, state your case: why you think things are hunky-dory right now. I've stated mine, & am betting on it. I might be wrong, JuiceMan might be right. I have no way of telling, and neither does he. My numbers add up for me. Do your own math.

Under traditional lending standards, if you make $800,000 a year, then you, too, can afford a median-priced apartment in Chelsea. If you don't, you can't. Case closed.

And LP1: you don't control what people say on your thread; everything I've read is completely relevant to where the Manhattan market is and may or may not be going. Different opinions, lively (but relevant) postings. This is a discussion, not a monopoly: you may have asked the question, but you don't control how people answer it.

Hey Spunky, thanks for your clever comments. I have no idea where the stock market will be in November 2009, and weather is random.

But the supply of credit isn't. Rather than just ask sarcastic questions, state your case: why you think things are hunky-dory right now. I've stated mine, & am betting on it. I might be wrong, JuiceMan might be right. I have no way of telling, and neither does he. My numbers add up for me. Do your own math.

Under traditional lending standards, if you make $800,000 a year, then you, too, can afford a median-priced apartment in Chelsea. If you don't, you can't. Case closed.

And LP1: you don't control what people say on your thread; everything I've read is completely relevant to where the Manhattan market is and may or may not be going. Different opinions, lively (but relevant) postings. This is a discussion, not a monopoly: you may have asked the question, but you don't control how people answer it.

West81st, some of your analysis is good, & I don't know the answer, except to say that co-op prices would rise and fall along with the general market, & there's plenty of competition out there. However, most co-ops for mere mortals allow 20% mortgages, and prices were affected by the Wall Street boom that's now over. As I said, NYC didn't go up as much as some places (Miami, Las Vegas), & it will always be very expensive, but I don't see how, unless you have oodles of dough, you'll be able to get financing at these prices. None of the new construction is co-ops, however, so I see that as the real threat.

And I didn't do that last post twice - the site crashed!

west81st: 159w 74th

stevejhx I'm not as smart as you for if I was I would own a home in Long Island and live in it part of the year and rent an apt in Manhattan and live in it most of the year. Then I would hope for a 25% drop off in prices in Manhattan and go from renting to buying and then go from owning to renting in Long Island.

I'm with West81st, stevejhx, you are taking things to an extreme and it just doesn't fly with me. I've heard all of the reasons before, am well aware of the issues, but there is a light at the end of the tunnel. These issues are temporary even though many on this board feel the world is ending.

I'm off to Europe for a week. Will be interesting to see how our mess is viewed through non U.S. biased media. I'll check in to make sure LP1's thread is moving along.

Well perhaps if President Bush keeps talking, we'll have the Great Depression of 2008. I think the stock market dived about 200 pts just while he was speaking.

He doesn't believe in intervention, except in Iraq.

You guys are free to disagree - that's what makes America great! Just let's not make things personal.

I think the Bear Stearns thing is a hugely big deal, trumping just about everything heretofore said. That said, I think that if we don't break through the 1-year low on the Dow with this - and we haven't - then we're not going to. I think the market will be rough in the short-term, but will start recovering.

Face it: Bear Stearns is basically gone and it will be entirely gone shortly, and it's all because of the mortgage mess. We haven't seen anything like that since Long Term Capital went under. It's going to lead to a change in the regulatory environment that will make the reckless lending that caused all this all but impossible in the future.

The property market must come back to equilibrium, and that process is underway. Whether it be a gradual fall like in the 80's, or something abrupt like the collapse of Bear and a change in the regulatory environment, it just has to happen. To me - it's America, feel free to disagree! - this marks a turning point. We're at the bottom of the stock-market and mortgage-backed security debacle; maybe another quarter to go. The Fed will supply liquidity and keep interest rates down, prevent firms from collapsing. In my opinion - an it's only an opinion - the next step in that process is the relatively illiquid property market, where people tend to stick to their sticky prices. But if banks won't lend people enough money because their incomes aren't high enough, then sticky prices will have to come down. No appraiser can affect that: twice your verifiable income is twice your verifiable income, and there's no way around that.

ninux: Thanks. Guess I can scratch that one from my agenda of open houses for this Sunday. According to the listing, it's still scheduled:

http://www.corcoran.com/property/listing.aspx?Region=NYC&ListingID=1202754

JuiceMan/Stevejhx: Thanks for a lively discussion. I think you both make a lot of valid points. There should be some great buying opportunities, for the reasons stevejhx cites; but there's also a lot of solid support under the broader Manhattan market. Should be a good time for opportunistic, cash-rich buyers, and a bad time for motivated sellers. (Anybody have a .pst file of Bear Stearns Managing Directors? Might be a good time to cold-call them.) Everyone else might be in for a couple quarters of navel-gazing.

West81st, correct me if I'm wrong, but there are plenty of condos in prime areas where you may have over-extensions.

Pops: Absolutely, and every one of those over-extended condos is a potential buying opportunity.

But realistically, what percentage of the prime Manhattan market are we talking about here? 10%? New construction notwithstanding, this is still a borough of established, stable co-ops. And of the 10% in question, what portion is likely to go into severe distress, even in a major recession? Plus, those condos you're talking about are exactly the the kind of apartments that are most likely to find price support from foreign buyers.

Now, it's certainly possible that the tail could wag the dog: the weakest 10% of this market is extremely vulnerable right now, and a fire-sale of condos by developers and laid-off I-bankers could drag the whole market down. Maybe even people who put 25% down on co-ops will plunge into negative equity, and maybe the Europeans will stand on the sidelines smirking. I just think the market has many potential sources of support, and a house-of-cards collapse is just one scenario among many.

pops he any interested the neighborhoods you think are prime now go back to your tent under the Triboro. I'll send you a bottle of Thunderbird shortly.

West81st, just did a quick search out of curiosity and, understanding the fundamental flaws with the search, there are 2054 condos vs 1374 Co-ops listed in what I consider "prime," that is: Sales in Chelsea, Flatiron, Gramercy Park, Greenwich Village, Noho, Nolita, Soho, Tribeca, West Village, Central Park South or All Upper West Side. Again, I recognize that this represents only the listed items, and not the actual amount of property in existence, however it can't be discounted that condos represent about 60% of the market.

if stevejhx is correct that no one will be able to get mortgages over 2X salary then what would that do to the rental market in NYC? Owners are not going to sell properties at a fraction of their present day worth. They will rent them. No developers will build new buildings severely limiting the number of units for sale in NYC. Therefore, everyone will have to rent. Rents will go through the roof.

I find it impossible that stevejhx's scenario will happen. Lenders will still lend. They will just be more prudent to whom they lend to. They will also build in (and lobby for )verbage that will enable them to take properties sooner in the default process.

The financial world is not going to change all that much. The powers that be in the govt own too much real estate and have friends who make too much money in RE and finance.

Most likely, this summer and fall the Bush administration will bail out the banks at the expense of the citizens of America bringing the government more into debt. They will also pump up reserves in the national reserve then dump it into the market in the fall. The increase of oil supply will artificially lower inflationary numbers and mortgage rates just in time for the election.

All the above only makes the country's long term health worse but it wont collapse soon. Hopefully another democratic administration can pull us out of the mess created by the Republicans.

Spunky thanks, that's really a nice thing to say.

..and very grammatically correct.

Spunky,
RE: English
You're doing it wrong.

also keep in mind that some owners who are sitting on ARMs are not going to default. Some are actually going to have cheaper mortgages and home equity lines.

I own several properties in Manhattan. One property is worth 3 million and only has an equity line of credit for $150K in an adjustable rate. My payments went from $1100 to $725 per month and will go down again in April when the Fed lowers the rates again.

Another property, an apartment that I own, has a 5 year ARM about to reset in December. I couldnt get a fixed mortgage on this property because of a high percentage of sponsor owned units in the building.

If the Fed keeps lowering lending rates my mortgage payments will actually go down on this property in December and I will not have to re fi. I know that it could very well go up but the increases will be gradual like the decreases have been. I can pay off the mortgage or re fi when I see the rates ticking up.

This aint the end of the world and there are people who are going to make a lot of money in RE this year.

I now know how Alice In Wonderland felt...reading this blog is amazing. The entire country is in a real estate bust BUT ONLY MANHATTAN WILL CONTINUE ITS UPWARD TREND. Stop taking your Prozac and get a grip on reality...it's going to happen in Manhattan it's just when and how bad.

Julia - your argument that Manhattan is the same as the rest of the country. Can you name any other ways that Manhattan is the same as the rest of the country? Dress, Food, People, Foreighn Visitors, Shops, anyting?

Its not. You cant say an island that is the center of business, travel, fashion, culture, etc etc, is in anyway like Peoria or even Chicago. Its completely different on macro and micro levels from everywhere else in the country.

That fact that is has not dipped when almost everywhere else has is a testament to that.

Manhattan is not the same as everywhere else but I'm a vendor and deal with corporate accounts. Every client I see has a doom and gloom forecast. I have a mix of financial, legal and other clients and that's what i'm hearing every day for the past few weeks.

I can tell you another way that Manhattan is not like the rest of the country: we have more investment bankers about to be out of work than anywhere else.

blah blah blah - iBankers this and iBankers that. I know tons of people who own RE in Manhattan. NONE of them are iBankers. the real estate owners that I know are heads of media companies, writers, models, actors, ad execs, lawyers etc most of them have NOTHING to do with iBankers.

iBankers are not the center of the Manhattan universe. Most iBankers work in the field for a few years and then get burned out. Most dont buy Manhattan real estate.

Julia - I am in media and I am making moire money than I ever have. I am hiring so are many of my vendors. Its not all doom and gloom.

petrfitz - if you're saying that banking, sales and trading have no effect on other industries in the city, you're talking out of your you know what...I'd like to see when will be the next time Bear comes to you for and AD piece...

Oberon - you do know that your name means "King of the Fairies"

You sound scared and are living up to your name.

Pops: That condos vs. co-ops comparison in listings is interesting. You can read it a lot of different ways.

Most of the non-rental housing stock is low-leverage co-ops. Most of the inventory that's on the market is high-leverage condos, many of which are new construction. What that might foretell in a credit crunch/recession, in very simplistic terms, is a volatile condo market with relatively rapid turnover and big moves up or down, and a quiet co-op market that looks volatile only because the low percentage of units changing hands have their prices set in large part by the much more active condo market.

Beneath the turbulent surface of that co-op market, what's happening to most units is probably the same thing that's been happening during the run-up: nothing. People buy apartments and live in them for a long, long time. Until those people are forced to sell, or elect to sell because their communities are crumbling, the big moves up or down will be something of an illusion - interesting for the fortunes they make or break and the household wealth they create or erase on paper, but largely irrelevant to the way most people actually live.

petrfitz: You may fancy yourself a Shakespearean scholar, but that doesn't make your stereotyping any more persuasive, whether the target is "fairies" or investment bankers.

From my experience, your characterization of investment bankers is completely inaccurate. I have been in the business sixteen years; nearly all of the people I worked with when I started are still in it. Nobody I have known in fixed income trading or financial IT has burnt out (nor, for that matter, have they snorted coke in the men's room, or spent exorbitant sums in strip clubs or brothels). It's a career - more volatile than most, I suppose, but there's an element of self-selection among the people who enter this field. Most of us knew it would be hot when we got here, and we walked into the kitchen anyway. People do leave for personal reasons, but that happens in media too, and medicine, and academia, and the military, and every other field.

I don't know for sure that bankers are over-represented among Manhattan homeowners; but I'd be very surprised to learn that they are significantly UNDER-represented. Do you have any basis for that claim, or is it just your media-centric view of our little island?

petrfitz - no I didn't know what it means, but you got great wikipedia skills nonetheless...as for being scared - I'd rather be scared and positioned to anticipate and precede, than engage in another brouhaha and then get hit over the head...

Bottom Line - Condo prices can not continue to go up forever and even the Foreigners will stop investing at some point once they see no way to make money (especially idf the dollar starts to rebound after the summer). Anyone that denys this is deluded. I have gone to multiple open houses where the rent vs buy comparison is completely out of whack ( 1 mil to buy and 2k in CC costs, 3.5K to rent!!!). That means investors can no longer think about making enough value on renting nor can they count on prices skyrocketing anymore. That means they will exit the market until things return to their favor.
I think the power Manhattan brokers currently hold is being abused and it will ultimately bite them the way it always does. They are trying every trick in the book to keep prices up and at some point they will run out of fools to sell to. The good news is these same brokers will make money selling the apartments at a lose for their clients so its a win-win for them.
My other thought is when people that are making over 250/yr feel that they have been priced out of a measly 1 bedroom, something is wrong out there.

I believe financial services jobs make up about 5% of NYC jobs, of which traditional "investment banking" jobs represents a very, very small proportion of that. So, my guess is that investment banking types' impact on Manhattan real estate is precisely zero. Clearly troubles more broadly in financial services could prove troublesome for the resiliency of Manhattan real estate, I agree, however.