Manhattan market prognostication 2023

Nada purchases an apartment.

Nada, We already have one on Jan 2023 SE price index reading. I have a feeling that I will win.

What percentage change Dec 23 vs Dec 22 in SE Index are you calling?

LOL, Keith. Anything can happen.

300, I am so toast on our 9/22 to 1/23 wager…. No confidence to make a 12/22 to 12/23 call at this point. You?

I suspect partial work from home crowd is keeping the bid underneath as they look for that extra bedroom.

It seems all depends on layoffs and recession. Layoffs are starting to happen but the pace doesn’t seem to be alarming.

It’s just a matter of time, especially in high-income jobs.

For example, while 2022 investment banking revenues seem flat to 2019/2020, giving the appearance of renormalization after a heady 2021, it doesn’t seem so rosy once you scratch the surface. Headcount is up over the past 3 years by a good chunk (30%?). And quarterly revenues have been on a down ramp, dropping 40% between Q1 & Q4 to make the average look decent. But the current run rate is 25% below 2019. So 30% more employees and 25% less revenue than 2019 ain’t gonna sustain.

Other areas of banking seem like they’ll do better. I am guessing private equity will be rough. Tech will be rough. Lower-income jobs will probably remain robust, but I think that just pressures high-income jobs via rates. As long as broad employment remains strong, rates will remain high to combat inflationary pressures. But that’s not a winning formula for the high-income industries.

Goldman's CEO said (in his year-end message, no less) that there is another round of job cuts coming in the next few weeks -- could be up to 8% of their workforce, ~4,000 people (unclear where that might be concentrated economically, regionally, or otherwise, but it's probably not mostly coming from the cafeteria workers).

We didn't see a burst of activity in the fourth quarter. However we have had half a dozen new clients call us over the last week, along with current clients picking up where they left off last year. No one is in a rush to buy, they're hunting for deals.

We continue to struggle with brownstone sales in Brooklyn, very competitive, at least for the better houses in prime locations. We have an accepted offer on one particular home, but the seller refuses to deliver it vacant.

We just got back from Colorado, market in summit County seems to be getting hit pretty hard. I wonder if George is somewhere out there? It's never been cheap to buy in Aspen, Vail etc, but prices went cuckoo there during the pandemic. Vail and Breckenridge were exceptionally busy over the Christmas / New Year holiday, the current economy didn't seem to dent holiday travel.

Current market in Palm Beach county is also significantly slower than last year. Sales of condos seem to be getting hit the hardest. However as 'season' starts, I can confirm it's exceptionally busy down here. The restaurants, golf courses and beaches are very crowded.

https://www.cnbc.com/2023/01/04/manhattan-apartment-sales-plunge-q4-brokers-fear-frozen-market.html

Keith Burkhardt
TBG

A coupla link from WSJ taking same points as me — high tech layoffs and a “richsession” where the better-off are gonna feel it more:

https://www.wsj.com/articles/tech-layoffs-are-happening-faster-than-at-any-time-during-the-pandemic-11672705089

https://www.wsj.com/articles/get-ready-for-the-richcession-11672615577

WSJ hit the nail on the head, and same discussion I had with some consumer analysts a month ago.
This a top-down rather than bottom-up recession in the making
A lot of companies are still struggling to find line workers & bidding up for retail/distribution/warehouse/factory staff while laying off white collar back in HQ.

Silicon Valley layoffs showing how bloated big tech got, with some of these companies being 2x the staff they were pre-COVID or at least back to a 2016 comparison, without productivity/new product lines and their revenue/profitability to show for it.

Bank side should be interesting, they never went as crazy hiring the last 5 years as west coast did, but they did pause the usual ~5% layoffs for quite a while. So we may continue to see 5%-ish rounds just to get back to normal cycle.

Hmm. I have two "sweet spots": the major one is helping people over the hurdles of tough co-op boards and that's a very word-of-mouth business; things are slow for me right now. Generally when that happens, that means either those buyers feel so rich that they don't foresee any issues, and are just going to trust to God and Board Packager, or they feel so poor that they're not going to bother to buy. I think both things are true, so I predict the higher-end co-op market does reasonable volume while prices come down ~5%, and the one-bedroom/two-bedroom co-op market stalls out a bit in terms of volume.

ali r.
{upstairs realty}

I am guessing this trend, from the article Keith linked, will continue for a while:

>> Rising interest rates have also moved more Manhattan buyers into all-cash deals, which accounted for 55% of all sales in the fourth quarter, the highest on record, according to Miller.

As people wake up and realize they can get risk-free interest at 4.75% over the next year, they will probably be more mindful of their cash. People haven’t really moved money out of banks ripping them off on low interest, which I am guessing is keeping cost of capital at banks low and fueling lower jumbo rates.

Contract signings were down sharply in all New York markets according to Urbandigs last qrt. Sooner or later something's got to give, prices need to fall in a more meaningful way.

Doesn't appear to be anything near or midterm to add any strengths to the market. If sellers remain stubborn through the spring, it's going to be a long slog.

What we're finding though, are sellers that don't have the option to hold or rent, and are making deals. As a buyer you've got to find that market. In the beginning of covid sellers held on because they felt there was a tangible end in sight, and the underlying market at the time was still good with very low interest rates. They proved to be smart. At the same time some of our buyers made some excellent purchases then, in one or two cases I remember getting a 20% discount off ask from sellers less sure of the future. I just don't see much light at the end of the tunnel, currently.

One place where NADA and I seem to bump heads is on buyer mentality. He's pointing to the mathematics of a transaction, the value of cash etc. The people that I meet, at least most of them need a place to live and prefer to own versus rent for a variety of reasons. They're willing to take that down payment money that could be making 4% in a money market or CD and use it as a down payment on a home. And at least in my experience with clients that put a 10 or 20% down, it doesn't come near wiping out there cash/equity position.

What keeps me up at night are the financial markets, perhaps I'm being a bit dramatic. Although my positions are all fairly long-term, it's very tangible when you see your account down 20%.

On the other hand, my house provides me with a daily utilitarian use. I don't think I've ever checked the 'zestimate'. And once I closed on my home, I continued to put money into equities (the last year I've been hoarding cash, which now sits in a money market account making about 4%).

I know this is a real estate forum, but my mentality was I bought a house to live in. I use primarily stocks to build wealth.... Invest.

Re: richcession
New story this evening that Amazon layoffs are now expected to be 17,000, more than originally expected 10,000 and largely based on the corporate&tech side, not warehouse/logistics.

https://www.wsj.com/articles/amazon-to-lay-off-over-17-000-workers-more-than-first-planned-11672874304

I just saw that too. The layoffs seem like they’ll be a continuing story of “more than expected”.

>> The people that I meet, at least most of them need a place to live and prefer to own versus rent for a variety of reasons. They're willing to take that down payment money that could be making 4% in a money market or CD and use it as a down payment on a home. And at least in my experience with clients that put a 10 or 20% down, it doesn't come near wiping out there cash/equity position.

Rate pressure affects different people in different ways. I am guessing the customers you describe are not willing / able to buy as much home as they would have when rates were double. A friend of mine I just saw bought a home in late 2021 at 1.5x the budget he had set. He thought it was beyond his budget until he ran the numbers with the 2.x% Fed special mortgage. He wouldn’t be a customer for such a home at current rates, because he could simply not afford it. I’m guessing he’s not the only one.

I also recall a good number of people on this forum falling over themselves to lever their RE purchase as much as possible, because they thought they could do better than 2.x% in stocks, munis, etc. At 5.x%, people will think harder about that.

Look at yourself: were you talking about hoarding cash a year ago to earn 0%?

And then there are buyers like this one who swooped in and bought Rupert Murdoch’s guest/staff apt for $12.5M cash — $2.5M less than Rupert paid for it in 2014:

https://streeteasy.com/building/one-madison/57a

Now I’m guessing Rupert didn’t give a rat’s ass about cap rates, gains/losses, etc. But the buyer seems like they’re in it for the money, having put it up for rent immediately:

https://streeteasy.com/building/one-madison/res57

They’re hoping for a cap rate of 2.9%, but given 2 months on the market with no takers, 2.4% seems more likely. I don’t know their story, outlook, etc., but to me getting 4.75% by lending to Uncle Sam over the next year seems like a more attractive risk/reward situation.

In my particular case I was anticipating a slowdown in the real estate market, my business. I'm pretty conservative, because I've been through the mill a few times. So just building myself a little extra cushion, the 4% is icing on the cake.

Certainly no argument from me that people are going to adjust their purchase price according to the rates and what they can comfortably afford. I have clients today that have reduced their budget according to current market conditions. However higher 'savings rates' haven't seduced them into renting versus buying.

Although my income has quadrupled since I started TBG, I've been in the same house that I bought in 2011. But my vacations have improved ; )

Guess I'm just saying you can have your cake and eat it too, buy a house and get a guaranteed 4% from your uncle. Or if you prefer, rent and take that 4%.... Plenty of smart people in New York City that don't have the money that Murdoch has choose to buy their homes. I'm just saying it's as much an emotional decision as a financial one.

Just finished watching the first two episodes of the Madoff documentary on Netflix. Amazing how greed will cloud even the most lucid minds.

@nada - AMZN just went on the record and corrected the "leak" with an official statements that ACTUALLY it's gonna be 18k..

Re: "owning" ones home in NYC, I think is itself something of an oxymoron, the more I split my time between NYC & nowhere.

My NYC RE taxes go up about 11%/year while my maintenance goes up 7%/year, all-in my monthlies go up ~8%/year on average, but it's extremely lumpy. Sometimes its 1%, sometimes its 25%.

My RE taxes in nowhere have in 2 years gone, well, nowhere. Looking at Zillow history they appear to be flat for the last 10 years, last big adjustment was ~25% uptick 2 sales ago in the mid 2000s.

Out of curiosity I checked my hometown of nowhere, CT and actually because our mayor played a lot of fiscal games, taxes have actually been down the last few years and essentially flat for 15+ years. In other words - down in real terms.

In a way, one of the great lessons of the pandemic for me was that the idea of retiring in NYC is insane at even my high income. One of the main points of owning your place is paying off the mortgage and having low, minimally increasing, predictable costs in retirement.

I look at my parents & in-laws living a good life in retirement, feeling flush and able to travel & spend more freely.. I can't imagine them doing so with constantly escalating housing costs. At that point why not just rent?

Increasing real estate taxes in NYC are indeed the biggest reason for prices being stagnant in NYC. It is not going to change.

@300 - friend and I were talking today about if we are going to see some interesting effects around this, say, 20 years out do to the changing nature of new developments since the housing bubble.

Buildings (and neighborhoods to a lesser extent) tend to be generationally segregated. Broad market high-amenity, high-staff buildings built in the boom are currently filled with people in their 20s-40s. These are the types of buildings with the highest YoY increases as labor component tends to go up faster than inflation, and having more common areas filled with more stuff to clean/repair/replace regularly costs more.

To add to this, many of these buildings are still on long tax abatements.

So what happens ~20 years out, do these buildings clear out and turn over to new young professionals? Do the aged out move to older buildings in UWS/UES which are currently occupied by boomers.. or out of the city? Do they age in place and vote to downscale the service level of the building year by year?

Separately - will the city ever reconcile the disparities in RE taxes between boroughs & housing unit types? As much as my taxes have shot up, its clear comparing to Manhattan condos that my Brooklyn condo, whether compared on a sale price basis or attainable rental income basis.. is undertaxed possibly by half, so lots of room for it to go up more rapidly.

Steve,
Any new developments with tax abatements declines in prices relative to the market as they get closer to expiration of abatement. After-all initial price reflects the value of the tax abatement. On top, there is a newness premium of say 5-10% which declines in the first 10 years except for a few buildings which become highly desirable.

In my opinion, these new buildings of last 10-15 years will become what UES/UWS old post war condos are. Amenities will not change but will just degrade in quality. Gradually average age increases as there are always some people who will stay.

City is unlikely to fix its tax system due to politics involved. I see many 3+ units buildings where the taxes were increased less that the permitted cap. New condos are fxxxed every where. Very soon (few years at most), the city will run out of room to increase taxes in Manhattan and it will then be BK prime turn. After all city spending is out of control and had been like that for a long time.

But people go where the jobs and network effects are (So much for UBS moving to Stanford). So this will continue. There is a reason you have not moved full time to your CT home.

"I see many 3+ units buildings ** in Brooklyn ** where the taxes were increased less that the permitted cap."

I think banks would be well advised to formulate and implement creative short sale programs now because if they wait until the floodgates open they will end up behind the 8 ball.

But what do I know? No one could have possibly predicted any of the things which are going on now.

Keith>> However higher 'savings rates' haven't seduced them into renting versus buying.

Probably not for your customers, but when did I say that?

All I said is that as rates float near 5%, with banks paying only 1%, people will become more mindful of where they leave their cash. Meaning they will move money out to earn “proper” interest, forcing banks to increase deposit rates and then raising jumbo rates that are financed with (currently cheaper than proper) cash deposits.

I'm surprised more people aren't taking advantage of these interest rates for their savings. I don't consider myself very financially sophisticated, however I did move all my Chase non brokerage cash into a CIT bank money market fund about 7 months ago. Also just made a large purchase of treasuries (large by my standards). Now only have retirement money in stocks etc.

Honestly I don't remember what I was thinking when I read that. Perhaps I misunderstood your point, think you meant that rather allocate down payment money to treasuries etc rather than a real estate purchase. I need to read more mindfully, especially this stuff you write which frequently goes over my head.

You probably just read between the lines to infer what you think I meant.

I am guessing that on the margins, the savings rate probably does push people toward renting somewhat. Suppose a family has $250K for a down payment and could afford payments on a $1M mortgage in 2021 at $4K/mo and buy a $1.25M place. To keep payments the same at $4K/mo, they can now only afford a $650K mortgage and buy a $900K place. But perhaps they just won’t be able to fit into a $900K place, which pushes them toward renting.

Does the higher savings rate push them further towards renting? I would think so: 4.75% on $250K yields $1K/mo. To a family that can afford a $4K/mo mortgage but not $6K/mo, that’s a material difference.

Of course, the emotional push may be stronger, but the market has a broad mix of people across the entire emotional-financial spectrum.

>> I'm surprised more people aren't taking advantage of these interest rates for their savings.

That’s because you think all people act purely financially. From what I’ve learned on this forum is that the emotional component is very strong for some people.

https://www.wsj.com/articles/the-42-billion-question-why-arent-americans-ditching-big-banks-11670472623

Alicia Gillum has been with Bank of America for 26 years and says she has no interest in searching for a new bank, even though her savings of more than $100,000 is earning almost no interest.

Her loyalty has earned her Platinum Honors Tier status, which affords her a 0.04% interest rate on her savings instead of the 0.01% rate the bank pays to customers of its basic savings accounts.

Ms. Gillum, a 45-year-old who works in sales at a healthcare company in Phoenix, said she also gets no-fee banking services, discounts on mortgage origination fees and reduced interest rates on auto and home-equity loans. Savings is “on the back burner,” she said.

“I don’t have any kids, I’m not married, and everything is in line,” Ms. Gillum said. “I don’t think I need to change anything because I’m not having any issues.”

Looking up the job on Glassdoor, this person forgoing $5K/yr of interest probably makes in the neighborhood of $100K/yr. But the emotional attachment to inertia is stronger than the urge to earn $5K/yr more by spending 1 hour to open another account, link them online, and transfer money.

I would say more like 15 minutes to open a new account online. Maybe 30 if you include funding it ;) I locked in 4.8% on a 6-month Treasury, sleeping much better, lol.

I've been with Citibank since September 1982 when Arthur Andersen got us employees free checking.

"...said she also gets no-fee banking services, discounts on mortgage origination fees and reduced interest rates on auto and home-equity loans."

Psychologically, many people see the opportunity to save on expenses (e.g., recurring bank fees) as a greater good than making money on investments. This is often a function of the personal history where they may have worked their way up from a position of having no spare investable cash to one of creating and increasing savings. Habits formed by the constraints of the early days can be hard to break.

Depending on their age, they may also be influenced by the view of their parents/grand-parents generation, whose experiences through the great depression instilled a certain distrust of 'investing' (As well as received traditional religious views that considered thrift as a greater virtue than speculation. On the other hand, we now have the 'new' view of effective altruism that considers it one's duty to make lots of money so you can give it all away).

Can’t one simply open up a brokerage account at their favorite bank, where balances get included for “status”, and park the brokerage in T-bills (or a T-bill ETF) paying 4.x%? Or does that run against emotions / get considered “investing”.

I do like Citibank as much as the next person, but at current rates I’m willing only willing to park <1% of my cash there for convenience.

Yes but they don't make it easy. You basically have to administer your own bond fund by hand. (You could buy a bond ETF, but then you don't get the choice of letting the short end of the ladder mature when you have a cash-heavy period coming up; have to sell, potentially taking losses.)

So what do y'all think the Elliman Q4 report for Northern Manhattan portends?https://millersamuel.com/reports/elliman-report-northern-manhattan-sales-4q-2022/?utm_source=Miller+Samuel+Email+List&utm_campaign=6d01b824fc-RSS_Reports-EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_69c077008e-6d01b824fc-120786061&goal=0_69c077008e-6d01b824fc-120786061

>> You could buy a bond ETF, but then you don't get the choice of letting the short end of the ladder mature when you have a cash-heavy period coming up; have to sell, potentially taking losses.

Pick a short duration? Something like BIL has a duration of ~7 weeks. The yield is more than 1bp per day. How often does the daily change in price exceed that? About once every month or two.

The Vanguard Federal Money Market Fund VMFXX (the interest currently is 4.22%, but it will go up to 4.47% after the Fed raises the interest of 25% at the end of January meeting. This fund can serve most people very well. No need to worry about the bond ladder management or the potential loss due to interest rate for the bond fund.

25% should be 0.25%, LOL

Regarding Nowhere: inventory in top resort markets is extremely thin. What is listed is isht that's way overpriced in hopes a sucker comes. Actual inventory that people really want to sell (and priced accordingly) is virtually zero, and it is still moving quickly.

Rental market is still very robust but shifting. It was monthly rentals during WFH. Now more seasonal (3-6 mos) and short term. Lots of new restrictions on short term rentals and demolition which is confounding some markets. Record snows this winter may help spur sales, esp in California where there have been some very dry winters.

Ultimately WFH helps resort markets by raising demand. Supply will never rise because most land is built - that's what happens when you're surrounded by BLM and other conservation land. After doubling and even trebling, markets are taking a break.

No signs of a crash, and it only takes a few buyers to move a tiny market. A condo in Aspen recently sold at $7545 a foot or $25.9m. Precisely a year earlier it sold at 18m. No renovation. Someone just really wanted it.

My wife & I were hanging out with a friend who used to live in NYC, deciding between his favorite former haunts for a drink. I have finally discovered where Nowhere is actually located:

https://maps.app.goo.gl/NggZidAvuq8vg2HBA?g_st=ic

And it’s only about $1000 ppsf:

https://streeteasy.com/sale/1499200

I think it's a bit of A tale of two cities in eagle County. Aspen has always been a ridiculous market and a playground for the uber wealthy, it's a perfect hideaway not easy to get to. I think there's a very large differential between those buying $18mm homes and the other market where people require financing. Looking at the numbers it seems like things are slowing down in the under 2 million market for small homes and primarily condos / townhouses.

That said I think we're still in the early stages of the real estate decline countrywide. But that's just my opinion based on my observations of the data. Time will tell.

39.3%: Decline in new August listings, 2021 to 2022.
25%: Decline in pending August sales, 2021 to 2022.
32.5%: Decline in closed August sales, 2021 to 2022.
12.5%: Increase in median August sales price, 2021 to 2022.
Source: Vail Board of Realtors

According to Douglas Elliman the market share at end of 2022 of studio and one bedrooms was 53.9% up from 48.7% in 2021, and took on average 90 days to sell in Manhattan.
CPI coming out late this week, if numbers are good the ten year note will drop another 30 basis points, maybe, equities too will rally.

inonada,
Some friends of mine have performed there and there used to be a nice Greek restaurant next door which I ate at a number of times.

Small world

Prediction for 2023 — this listing comes back to market yet again:

https://streeteasy.com/building/34-west-13-street-new_york/4th-fl

Does anybody have a handle to our original thread about the unit from when it first listed?

https://streeteasy.com/talk/discussion/47145-fps-decoration-discussion

Another small world:
I almost emailed you to ask you that same question a couple of days ago.

Thanks, 300.

30yrs — great absent minds think alike!

The return of aspirational pricing?
https://streeteasy.com/building/35-wooster-street-new_york/ph?card=1

Well, there's a Story there I'm sure -- apparently not sold back in 2017, now gutted and back on the market as a larger combined space and ~1.2m more. And comes with a proposed plan that took 2 years to get approved, which combines the worst aspects of rabbit warren architecture and open plan design. (4000 sf and an MBR that's only 13x16?) I could find my way to loving that much raw loft space at a lower price (maybe ~$5m?), but not if I had to take that floorplan.

I like lofts but this one is not optimal use of space with so much wasted space in that yoga studio which is coming out of living room. Staged pictures very strange aesthetics as well.

34 west 13th

I think Id rather rent the penthouse in the building at $25k and put my $4mm in the JP Morgan Equity Income ETF.

truthskr10,
At today's interest rates, adjustment for lower rental worth, etc. puts the 4th floor under $2.5M?

30yrs
The bedrooms/bathrooms floorplan/layout is definitely tough but its prime village with $1.90 p sq ft maintenance.
And lets face it, today's $2 per sq ft maintenance is yesterday's $1.50.

With over 150 saved users for the unit page, that is substantial interest. If it does sell, Id be shocked at any number that exceeds 18% off ask. THats $3.2mm

Coops have been stubborn at an average of $1200 p sq ft. And GV is not average. But that comes to $3.3m/$3.4m

$2.5mm is $900 p sq ft. I have a hard time seeing that happen.

What is does say to me is that Nada's rent over own argument has never been stronger :)

Look right across the street.
https://streeteasy.com/building/43-west-13-street-new_york/4

I'm going to take the liberty of rephrasing your post to how it sounds like to me and I apologize in advance for putting words in your mouth but here goes:

inonada has been right all along that sales prices aren't justified by rents and they (sales prices) are too high. But that doesn't mean they will come down.

>> What is does say to me is that Nada's rent over own argument has never been stronger

I dunno about that…. I’ve been here, on and off, for about 15 years now. I think the argument was strongest back when I started. It was weakest somewhere around 2020 / 2021. It’s become somewhat stronger now, but not as much as in 2008/2009.

>> But that doesn't mean they will come down.

I agree with that. As I thought would happen ~15 years ago, prices can just go sideways for a decade or two and let inflation do the work. If that works for you, great. If not, put your money elsewhere.

30yrs
(43 west 13th #4 ) You found the one below $1000 p sq ft comp, lol. Chapeau
But is it though?

Its not like the extra 2200 sq ft is evenly distributed to more bedrooms and bathrooms.
It is a more desirable square than a rectangle unit, but not just one but two stairwell and elevator shafts in the footprint.
And sold in September of 2020. It was the zombie apocalypse and no vaccine yet.
Half the city in this unit's demographic was on semi permanent vacation out of town.

And the streeteasy generate reports feature doesnt find much for either argument. Just this one...
https://streeteasy.com/building/35-east-12-street-new_york/8c
(paramaters: GV over 2000 sq ft , coop , between $2mm and $4mm)

****
"inonada has been right all along that sales prices aren't justified by rents and they (sales prices) are too high. But that doesn't mean they will come down."

Definitely not my words. :)
Everything cycles , as does rent vs buy. I think this is the ground floor for the next phase of renting more beneficial than owning.
And what I didnt express is while Nada's position(s) have generally been on the pure math, Im leaning on the intangibles that put now ahead of 15 years ago..
New York's decay in so many areas , combined with unique inflationary cost of living aspects happening to NYC makes being in a more transient position a safer "investment"

At least to me.

While there are shifts on the intangibles on a personal level to me, I don’t really see it that way on a market level.

Broadly, to me NYC seems much shinier than it used to be 15 years ago. There is an increase in “colorful characters” in some places, but on the whole it seems like a wash. Does cost of living seem higher / unique? Not particularly. Inflation has been 42% since 2007. Rents, even at their 2022 peak, were about that. In a rate environment that is the same as 2007, RE prices are 30% below where inflation would have put them at (and likely dropping). Have other costs broadly outpaced inflation? It doesn’t seem so. Sometimes people conflate “better stuff” and their expanding tastes with inflation, but I think when you look at “same stuff” it on average has tracked inflation.

I told you all at the beginning of the thread about 13th Street.

While I agree with inonada that the city is generally shinier than 2008, the pricing levels are also far away from where they were then, so we are more than paying for it.

For example, there's no more sub-$2M 3-beds ~2000 sqft, near Union Square anymore, let alone just about anywhere in Manhattan... let alone pricey Brooklyn hoods. You are looking at $4M+ for that now... even in Williamsburg.

For $2M maybe out by Red Hook or Prospect Heights.. maybe.

I think the general frustration is that the city "isn't what it was" 5 years ago, but sales prices haven't gotten the message except for a brief few months in 2021ish.

Steve, That hasn't been the case since 2009/10 recession unless the place needs a reno. Compared to rest of the country, Manhattan really hasn't gone up. BK is a different story as QOL has improved in many parts of BK due to gentrification and amenities. These parts of BK are now more expensive than some parts of Manhattan say Midtown East and even Chelsea.

"For example, there's no more sub-$2M 3-beds ~2000 sqft, near Union Square anymore"

@300 - agreed, that's why I said "generally shinier than 2008"

I think gentrification, newer construction, and COVID changing live-work time/space balance has created interesting Manhattan-Brooklyn inversions.

I'm not really sure how much more BK Heights/Dumbo have had QOL improvements since 2008, but their prices sure have huge upticks.

I have contemplated moving to Midtown East or LIC for my "city place" for easier office commute than North Brooklyn, and probably get more bang for buck. Interestingly, Midtown East the bucks probably go further than LIC due to similar inversion reasons.

The SE index of same home resales in Manhattan is only up 8% since 2008. Brooklyn is up 3%. CPI is up 41%. This means the same RE got ~30% cheaper. The shinier stuff costs more, but that’s how it works.

Brooklyn's interesting because it's a fairly large borough. Relatively small portion of it became hot / trendy, and that's where we saw the relatively large price increases over the last 15 years.

Williamsburg, Greenpoint, Boreum Hill, Windsor terrace , cobble Hill, crown heights, prospect heights etc

@Keith - agreed that BK is a wide net to average across, and arguably so is Manhattan because it picks up less hot areas like uptown

That said, while the "emerging markets" of BK you listed saw huge gains, even "prime BK" (BK Heights & Dumbo) saw some pretty outsize growth compared to Manhattan!

A good friend basically doubled his money on a 2bed/2bath BK heights unit ~2006-2018 with NO RENO. Can confirm he isn't BSing as the sales come up in streeteasy. Another friend had a studio in the same area that tripled in price over shorter time frame, post 2009, again sales data online so I can audit veracity.

So it's hard to square that with BK being up 3% since 2008 right?

I never really followed the Brooklyn market. Mostly I recall being entertained by people on SE a decade ago from Midtown East decrying the insanity of people paying $1K+ ppsf in Williamsburg when they could be buying in Manhattan for the same amount. They just couldn’t wrap their heads around the idea that new dev holds an attraction over 60’s coops for some people.

That said, I know one person in DUMBO with a place that did 5% between 2005 & 2016. Slightly below market over that period, but regardless closer to SE index than 2x or 3x often proclaimed here. Makes me wonder about the source of the discrepancy.

BTW, does anyone else get the feeling that Brooklyn may be getting its Manhattan ultra-lux moment circa 2012? I’m all for development, but it seems to me there’s enough opportunity to build in Brooklyn until the cows come home. And by 2030, we’ll be talking about the obviously foresee oversupply in the Brooklyn yuppie market. I recall “They’re not building any more of Manhattan” as a rallying cry in 2008-2012. That is true, but it didn’t stop ultra-lux dev supply from meeting demand. In Brooklyn, it seems doubly so. With a potent mix of “Brooklyn is hot — I heard so-and-so quintupled their money”, seems like a fun market to watch.

Look at the sale price vs 2006/7 in this building which I pulled up at random.
https://streeteasy.com/building/sweeney-building#tab_building_detail=2

And this one. I have not been able to understand why index statistics do not show an increase.

https://streeteasy.com/building/the-clock-tower#tab_building_detail=2

One more random example. Simply did a search for condos for sale in Dumbo and skipped new developments.

https://streeteasy.com/building/j-condominium/30e

If I had to guess, it’s probably selection bias on what people use for reference.

SE is probably looking up every ACRIS record in the full borough. People tend to pick and choose based on biases.

Brooklyn is also huge, so you are onto something with selection bias.
Brooklyn has 2.7M residents with ~1.1M housing units.
When we talk about Brooklyn on SE, we are probably thinking of the priciest 100-200K units in the fanciest hoods. This pat of the market is probably no bigger than the UWS.

Residents:
Dumbo - 5k
BK Heights - 25k
Greenpoint - 35k (1/2 fancy)
WB - 150k (probably 1/3 Hasidic, 1/3 fancy)
Carrol Gardens 12k
Park Slope 67k
Cobble Hill 8k
Boerum Hill 12k

Thank you. That is certainly one possible reason for disconnect. Prime BK may be on fire but other parts are going nowhere for Streeteasy BK price index to be up very small.

You also have some outlier Brooklyn neighborhoods that are pricey, not on many people's radar. Manhattan beach and parts of Bayridge with the large homes overlooking the Verrazano and the New York harbor. We assisted a buyer in this neighborhood, my first sale there at close to 5 million. I actually turned him on to some of the prime Brooklyn neighborhoods that he wasn't familiar with and we showed him a few brownstones. He felt these were too confining and small and wanted a big traditional sprawling house, which he bought.

Not too long ago much of Brooklyn that I work in from Williamsburg to Carroll gardens was $600 a square foot. I remember when these Brooklyn neighborhoods got to a thousand a square foot that seemed pretty exceptional.

But if I really want to scratch my memory banks I remember when they built 100 Jane Street and it opened at $500 a square foot, seemed outrageous.

At least it doesn't seem like that long ago.

Not long before that you could buy any loft you wanted for $200/sf

And shortly before that, a cheeseburger for a nickel.

BTW I think Keith is off by 1.

Anything to bump the drug ad spam. Come on Streeteasy!

Current Mortgage Rates for NEW YORK COUNTY, NY
Thank you for contacting me in regards to mortgage interest rates. I've included below a selection of current rates for a few of our many products. I'd be happy to discuss options with you and your client based on their particular needs.

Conforming
Loan Type MI Type Interest Rate Discount Points APR
Conforming 30-year Fixed 5.750% 0.875 5.874%
Conforming 5-year/6-month ARM 5.500% 1.000 6.661%
Conforming 7-year/6-month ARM 5.750% 1.000 6.493%

Jumbo
Loan Type MI Type Interest Rate Discount Points APR
Jumbo 30-year Fixed 5.000% 0.750 5.089%
Jumbo 10-year/6-month ARM 4.750% 0.875 5.644%
Rates shown are for purchase loans only. This information is accurate as of 1/18/2023 9:57:32 AM (CT) and is subject to change without notice.

Anything to bump the drug ad spam. Come on Streeteasy!

Current Mortgage Rates for NEW YORK COUNTY, NY
Thank you for contacting me in regards to mortgage interest rates. I've included below a selection of current rates for a few of our many products. I'd be happy to discuss options with you and your client based on their particular needs.

Conforming
Loan Type MI Type Interest Rate Discount Points APR
Conforming 30-year Fixed 5.750% 0.875 5.874%
Conforming 5-year/6-month ARM 5.500% 1.000 6.661%
Conforming 7-year/6-month ARM 5.750% 1.000 6.493%

Jumbo
Loan Type MI Type Interest Rate Discount Points APR
Jumbo 30-year Fixed 5.000% 0.750 5.089%
Jumbo 10-year/6-month ARM 4.750% 0.875 5.644%
Rates shown are for purchase loans only. This information is accurate as of 1/18/2023 9:57:32 AM (CT) and is subject to change without notice.

steve123, I think neighborhood bias is part of it. The very definition of “prime” tends to pick winners over losers. For example, I recall Bushwick and Red Hook being touted a decade ago along with the other places your list. But those are now missing from your list. (FTR, I have no clue about these neighborhoods, their prices, etc. Just using it to illustrate how winner bias creeps in.)

Even within neighborhoods, people focus on whatever they want to focus on. And they dismiss whatever they want to dismiss. For example, there is / was a narrative here that Manhattan’s price stagnation is coming from ultra-lux oversupply. But in reality, the SE index has gone sideways for the past 18 years. Any actual trajectory is met with “Well, that was a stupid purchase in an it building” or “Well, that neighborhood had lots of buildings added, creating competition” or “Well, that neighborhood used to be cool but then everyone realized cobblestone streets are noisy and grimy”.

And I’ll add that ultra-lux is at most 5% of sales, so it cannot really shift the index much. Yet it gets all the attention, with broad market movements described in its context.

44 E 12th Street #8E
Sold for $492,000
Located at 44 E 12th Street. Sold on 8 Mar, 2000.

Sold 2022 $1,595,000

60 W 13th Street #10F
Sold for $325,000
Located at 60 W 13th Street. Sold on 20 Apr, 1999.

SHARE
Get more information about this unit & past activity
Original Filing
Filed on 07/06/1999
Buyer(s)

Seller(s)
Unit Details Condo
Size: 875 ft²
Price per ft²: $371

Sold 2022 $1,330,000

I have many friends in New York City that have owned their home for 20 plus years.

Family that have owned homes including brownstones for 50 plus years.

To each his own whether you want to own the home you live in or rent it, however time, location and some other important factors seem to weigh in your favor if you choose to own.

For me personally when I bought my home, I wasn't worrying whether I was going to underperform the s&p 500 by 5%. I just wanted a place to put all my s*** long-term, with a somewhat predictable cost.

Here's another random one in a different neighborhood.

245 West 74th Street #8A
Sold for $1,334,427
Located at 245 West 74th Street. Sold on 29 Mar, 2005.

Sold 2021 $1,925,000

Here are a few factors for Manhattan which drag down the index: Stuffy coops (>40% down), Mid-town east, FIDI, 421A abatement expiration, most new development resales with ultra-luxury declining the most.

It gets a bit more difficult to find similar trades on the upper East Side when I searched between 5 million to 10 million in co-ops.

However, notably it also seems most owners of these larger homes on the upper East Side are holding them for long term, not that many trades in many of the buildings.

Promise this is the last one! In case you wanted to live in the beautiful neighborhood of Bay Ridge Brooklyn on shore road. You can retrace the steps of Tony Manero, and at least when I was a kid get some of the best cannolis in the borough!

9437 Shore Road #A7
RECORDED SALE
$505,000
Sold on 5/31/2016
Sale verified by closing records
Last listed for $524,900

Sold 2022 $722,000 (to bed one bath 1400 ft)

UES stuffy coops >$3mm are down 15%-30% from their peak in 2007 or so. Probably the worst performer except select ultra-luxury.

All they need to do it drop the downpayment to say 25% to arrest the decline. Some of them are looking attractive price wise at just over $1000 per sq ft (9 ft plus ceilings and washer dryer allowed) in estate condition.

Keith I hear you on the "place to put my s*** longterm with somewhat predictable cost".
That's what I thought I was signing up for.

Having rented in Manhattan condos 10+ years, owned a condo in BK over 5 years, and owned a house ~3 years.. I have found owning a condo in BK to NOT be much more predictable cost than simply renting in a condo in Manhattan.

Part if it is BK new dev condo is having its taxes/maintenance normalized to real levels after sponsor control. Part of it is just that not many buildings are well run, and building staff cause maintenance to increase above inflation, not to mention city RE taxes..

Looking back at the Manhattan condo I used to rent, spot checking some sale lists tax+maintenance against previous historical listings.
1BR - maint&tax ex: 2012 - $1800, 2022 - $2800 = Monthlies up $100/year
2BR maint&tax ex: 2012 - $2000, 2018 - $2400 = Monthlies up $66/year
Studio - maint&tax ex:2011 - $1000,2022 - $1700 = Monthlies up $64/year

The funny thing is my rent in the same building for a 1BR went from $2900 in ~2010 to ~$3500 when my last lease ended in 2018. So +$650 in 8 years. Monthlies went up $75/year.

It seems like owning in the same building for the same timespan, my maint&tax may have gone up a similar dollar amount as my rent did. Plus I'm sure homeowners insurance went up in 8 years, not to mention the appliance replacements and HVAC repairs that were needed over that time.

Similar my BK 2bed condo I own has monthlies up ~$100/year on average. Plus we already had our first one-off assessment.

Meanwhile RE tax on freestanding homes in many areas increases well below inflation.

Love it. Response to post about potential sources of bias => more biased examples. I don’t recall Keith ever posting an example that simply met, never mind underperformed, the market. Don’t worry Keith, they won’t take away your RE license if you do ;).

There are plenty that underperform the market, I've never said anything differently. I'm simply presenting a counter to the negative bias. Not everything loses...

Nada,

Any idea why Zillow index is performing so much better for BK? I am filtering by Condo/Coop. For BK, I do not think they factor major reno as they get the reno info from tax records.

https://www.zillow.com/home-values/37607/brooklyn-new-york-ny/

Park Slope very wild. Do not think that is correct.
https://www.zillow.com/home-values/197044/park-slope-brooklyn-new-york-ny/