My theories on the high-end market (currently 5-15mm properties)

"much more pain in the high end apartments" who cares...

thanks Julia, thats quite a contribution!

The Martians! will save us. Agreed w your statements above... thank goodness I bought my wife in a doc box, 10 years ago... she's laying some nice golden eggs.

I would like to add this theory of the "uber" rich family that is not affected by this depression as horsepoop (your top 1/3)... this depression unlike all other slowdowns hit the richest the hardest and first. What person making $1MM to $10MM/yr did not have every stinking red nickle in the equity or RE market in the last 10 yrs? B/C the RE is inherently difficult to mark to market (thxs RE Borkers) and is a lagging indicator... it follows that it will take time for prices to adjust.. .especially in light of the equity (leading indicator) and job (coindent/lagging indicator) having not yet fully adjusted.

Dow 6500.... himwhothinksheknowstoomuchbutdoesnotknowhatthefheiswritingfromhisjailcell

i happen to agree with you. The evidence so far supports your hypothesis
just for fun we looked at several of the high priced apts in the UWS. Many are crap with cosmetic fixes that would draw the ire of the HGTV crowd
Location is worth something but a dark apt at a hot location with crappy things is worth 3x of a similar apt 10-20 blocks north?
clearly not sustainable except by ego
the newly renovated and nicer ones will survive to a degree but given a "normal" market you couldnt flip these and make money
Hope these folks enjoy their nice new apts
...
at least while the severance check is still fueling the fun
Thx TARP

Oh I forget... we are starting to get into a serious feedback loop with RE=>down=>equity market down=>more job losses=>RE down... I am pretty confident that RE will severely over-shoot on the downside....

himwhodoescharityworkinaforeigncountrybymeansofwiringmoneytosaidforeigncountrywhilenotsupportingthehelpfulunionsandundeservingamericansinnyc

julai you care as doing the same monotonous job on a $50MM deal or a $500K deal leads to different outcomes in your field... it's like if my wife spent 10 hrs on a open heart President Bush and got $1MM for it and only got $100 for doing the same 10hrs on a Dominican illegal alien.... yep... RE Borkers... their compensation is like totally tied to their skill level.... :)

Don't worry Julia I take it out RE Brokers on SE, b/c I am too polite to tell my neighbors and my friend's wives (who are RE brokers) to drop dead. Gotta keep up our social graces in real life or else this city would truly be unbearable to live in :)

w67th - if u think making $$$ in RE is sooo easy, why don't u try it?

I'm with Julia. Who cares? Were all a bunch of poor working slobs who can't afford $5 million + apartments.

interesting, but I'm wondering more about the people in the "starter" market, the studios and one-bedrooms - must be lots of layoffs in that group, and/or reduced earnings, and you know the sales pitch: "hey, you're young, your biggest $-earning years are ahead of you.... spring for it."

"w67th - if u think making $$$ in RE is sooo easy, why don't u try it?"

I think like any job in the midst of a bubble, being a boker in the bubble *was* rediuclously easy to make a lot of money. Just as it was rediculously easy for a lot of people to make money in Technology 9 years ago. I'm curious what happens now. Those who've developed relationships in the past will be fine, even at a lower sales rate/price. A lot will be wiped out of the industry though.

> Who cares?

Yes, the market is tanking. Who cares?

What is this, a real estate board or something?

AR.. I'm a principal in commercial RE.. my dad bought his first property in the late 80's. I've flipped entire floors of condos in early 1990's when they were 80% below 88' prices and I've got closing documents that shows $300psf on some nice condos in east 30's and 40's. Sold all residential units except one co-op in 2004 and just been hearing it from the wife..... "when we gonna buy?....we have a new baby... we needz roots!.. I thought u were a RE guy.... blah..blah..blah" She's lucky she's hot and a doc and I don't think divorce is not the first option.

Here is my beef w. RE Brokerage as an industry... as the market gets more efficient the transaction costs come down... correct? It used to cost me $200 in commission to do a trade at Dean Witter... now it costs me $10 Etrade... Buying meat meant buying a cow and slaughtering it yourself (not pleasant)... to get lease done with an attorney cost me $3K... now I can buy a boiler-plate lease on-line for $30.... See where I am going with this? Follow along AgentR and all you other Borkers... now I cannot believe in this day and age... one of you people would even take on a listing w/o measuring (watch out for the flurry of flying ferragamos!) the actual footage and height. Come on people! (I am now standing up and screaming like Connor). Peace out!

lowery pls don't buy RE Borkers speak about RE having distinct segments... if I put enough studios together... I gotz me a 5 bdrm with a $10K/month maintenance cost LMAS. All RE is relative... $10MM units crashing must (financially proven) have an affect on that $2K rental in Hoboken... all markets are interconnected... gas, gold, equity, RE, fish, poultry, power... you should have been in my TA sessions.

That's what you get for getting stoned in Thompsons Sq. :)

so, ur a commercial RE broker then 67th. what kind of skill do you feel u have over us residential re brokers?

Julia "much more pain in the high end apartments" who cares..

nice comment..It is 50% of what matters..that's why we ALL care. The only 2 things that matter are where does the high end establish equilibrium and where does the low end establish equilibrium. Once these 2 extremes are established EVERY other apt in the city can be priced and value determined on a relative basis.

"so, ur a commercial RE broker then 67th. what kind of skill do you feel u have over us residential re brokers?"

Pretty simple... not having gone on record with horrible predictions. Never seen a commercial broker anywhere near the bad calls of an Agent Rachel or Christine Toes... and I wish I could say these were the exceptions.

AgentRachel, you still haven't learned to spell? One more time: Y-O-U

kas, y do u care?

AR... principal.. I gotz $ in the game... I'm not taking crumbs as the cake is passed around... I'm in there baking and sifting... when the market warrants it.. I'll be out looking for some good commercial condos/co-ops. It will be the greatest buying opportunity in a couple of years when I am no longer on this blog.. .that's your signal to tell your clients to buy :)

Like a friend of mine says... I'm like a vulture high up in the sky...circling. The other item I've found with commercial RE brokers is that they are a cut above and will almost almost ( the good ones) cut their commissions to make both parties get a deal done. FYI... that's what the 6% is to be used for.. to bring the principals together to get a deal done... that fact is lost on 99.9% of RE brokers.

True story... a residential broker did a deal on one of my flips.. got paid good coinage (on my business side)... Liked him and my wife was nagging... so bid on a 3bdrm in mid 2000, the broker already made $50K in 3 months with me... but when seller asked for re-bids... I walked up to this broker and said.. I don't like losing... I expect you to cut your commission from 3 to 1% and get me above the other party. He said sure... got the commitment letter, haul ass to seller's attorney to drop off checks and my broker calls me 5 minutes before to say.... "why do I have to take a cut in my commission?" I said dumbass... cause you talk all the time about "relationships", you gave your "word", told the seller's broker this was part of the deal, the 6% is used to get a deal done in RE deals, and 3% of ZERO is f'n zero. But I digress... when there is overcapacity in the deer population we cull by shooting.. .we'll be humane and let the borkers take wood-shop and change careers... I need more cabinets. :) Cheers!

"lowery pls don't buy RE Borkers speak about RE having distinct segments..."

I think there are distinct segments, but they all spill over into each other. I'm not sure which is more vulnerable in this downturn, the $5-15mm as OP says, or the $385-$900K studios and one-brms. Can we imagine a scenario in which people in a certain income class and age group took for granted that $160,000 is a first-year salary, their salaries always go up, etc. etc...... and voila, we have a first-time home buyer paying $900K for a Manhattan condo? Small dnpmt, jumbo ARM?

Only the residential RE brokers know for sure what the makeup of buyers has been and is. It's too bad people hurl invective at them, because they have more information than anyone else on this forum.

"because they have more information than anyone else on this forum."

All evidence to the contrary.

And how would one broker have info on the breakdown of Manhattan buyers?

I tend to agree with bfgross, and would even argue that the $2-$5MM properties will suffer quite a bit as well, for basically the same reason - the buyers were the poor man's version of your 2nd and 3rd group, and they're just as screwed.

The other factor that I think may protect the under $1MM market is the government. I don't think any of the policies that I can see attempting to help homeowners (conforming mortgages, tax deduction, various proposals to ease mortgage payments) cover the $1MM+ properties. This didn't matter much during the bubble, but I think it may now.

newbuyer: only reason i think the 2-5mm market holds a bit better is that your basic high-end law partner or very successful doctor (and double income professional households) can basically afford to support this market. These professions are affected much less than the WallStreet/hedge fund/PE hegemony, and their prospects are only somewhat worse than a few years ago. However, I think they get hit also, as will the lower end. I just think that, contrary to what RE pros will tell you, the high end this time around will get clobbered the worst.

bfgross... you too have sleeping issues? if you don't think people jumped/pole vaulted income brackets in this bubble creation you are sadly mistaken... just ask the Mariachi player :). Wife is a doctor and I know for a fact a lot of her colleagues bought homes way beyond their means. However given the numerous complications in determining RE prices... the fact a group of professionals have steady income... does not preclude them from side-stepping the RE train wreck... and dumping RE. If I actually owned and saw all the tea leaves in NYC... I'd undercut 30% get the hell out and lick my wounds while consoling myself that the $5MM CPW 4bdrm is gently floating towards our lowly $700K/yr income :). B/f people get their panties in a bunch.. that's my on-line income :)

I have said again and again, there is no fundamental reason NYC RE will stop at 2004 or even 2000 level, when the greatest asset bubble (this was a worldwide phenomena crossing all borders from Beijing to Johannesburg) in the history of mankind gets unwound at 10x the speed it was built up all bets are off. Glad to be a spectator (renter) at this point.

For RE Borkers.. .they are giving free mariachi lessons for out of work RE professionals at Juliard room 205... bring your sombreros. :)

in my humble opinion, as a real estate professional in the industry many years, it is beneficial to hear what is going on in a week by week or month by month format, and then one can see the glaring changes occuring,. My company analyses data on a weekly and monthly basis to see what is moving and what is not and to strategize as to how to move forwards. Right now we are seeing as follows: 1. DRAMATIC slowdown in purchases of property over 5 million, the number going into contract even compared to the summer is down 40 percent, and down 80 percent from the same time last year. One major firm had only two deals over 5m go into contract since october. This is extremely low. Similarly the mid range is off by about 20 percent, the deals that are happening are fewer and further between due to more strict adherence to standards by the banks EG no more 10 percent loans, rather 30 percent down. which eliminates a whole group of buyers. This also creates a default scenario for buyers who had been hoping for a loan with 10 percent down., Lastly the group under 1 million we have only seen a small drop in price and speed so far, this is due to the fact that the loans are conforming and that the buyers are not trading one property for another. So far the only still moving market with any momentum is under 1 million.

nycbrokerdax... come on! Don't be so "professional"... it makes me look bad :)

bfgross, I disagree with you on the buyer profile of the $2-5MM apartment.

My wife and I are a double income professional household, and do fairly well. We would have to stretch to afford a $2MM place, and a $5MM place is nowhere on our horizon. Further, I work with lawyers at top firms all the time, and don't know a single partner who recently bought in Manhattan. Some of the older ones live here, but that's because they bought before the run-up. The younger partners move out because they can't afford decent family apartments (what I mean by by the $2-5MM range), not by a long shot.

Don't know as much about the doctors, but tough to believe there are enough of them who make more than the lawyers.

And keep in mind, that lawyers and doctors went to grad school for a while which means (1) lots of grad school debt, and (2) less time since grad school to accumulate the savings for downpayment.

Do the math. Let's take the midpoint of the range, $3.5MM. In today's jumbo market, you're putting at least 25% down, likelier 30%. So $900K - $1MM down. Plus closing costs, any renovations, plus a big cushion to show the bank and perhaps the coop board. Then, after all that, you have monthly payments on your jumbo + taxes and maintenance of well north of $15K. I don't know a lot of people outside of finance that can afford that downpayment and those monthlies.

Maybe 2 years ago, with 10% downpayments and stretching for monthlies in the hope of a quick and profitable flip. Not now.

For the umpteenth time bfgross. "The buyer makes the market not the seller", Thomas Hobbes. whenever you think of real estate, think of the "Calvin and Hobbes" cartoon. Then think of my favorite Thomas Hobbes quote. Ask what you will. You can only get what someone pays you.

bfgross: Great analysis. I think you've summed it up perfectly! There are two more points I'd like to add. First, purchase price is just one component of the price of a property. I think that now more and more people will be focused on the costs of living associated with a certain lifestyle. For example, many large, 9-room apartments come with a $5,000/month maintenance bill plus private school tuition payments of $100K per year or more. These costs could be rising, too. Living in the city for many families usually means keeping a second home outside the city which could cost another $100K for taxes, mortgage, maintenance, etc. Compare all of this to, say, keeping one home in a suburb with great public schools, and you're looking at the city family lifestyle costing more than $200K per year versus a suburban lifestyle. That's $400K before tax, which I believe is what many I-bankers made this year IN TOTAL (if they were lucky)!!!!!

Second, the school situation in the city is getting worrisome. Private schools do not yet know what Sept. 2009 will look like since contracts are not due until March 1st. My guess is that people will be hesitant to write checks to schools whose futures seem tenuous. Which ones will have balance sheets to carry them through? Hmmm, sounds like Wall Street firms.

You are correct - the financial industry professionals who recently signed up for the big, layered lifestyle are squirming right now, and it's not because of what they paid for their place, it's because of the future costs they signed up for, and the inability to back out of writing those checks at a time when holding on to all the cash you can get your hands on is the only way to create wealth.

bfgross, great analysis. I agree with everything you said. With the financial sector destroyed, NYC is no longer the same city. With revenues drying up, taxes increasing, and violent crime rising, the quality of life in the city has deteriorated and will only get worse. In the next several years, expect to see a massive exodus of working professionals out of the city and into the suburbs. NYC will be a bigger version of Detroit.

bfgross said "So far the only still moving market with any momentum is under 1 million". Is it possible that this market holds, as people look to downsize to more affordable places?

w67th you stole my example(about buying stock that is) regarding the residential real estate commission model. I was paying my $300 to Merrill Lynch via my CMA account. Talk about borkers, the broker ML assigned to my measly little account knew less about stocks than my daughter.

I left a big RE firm at the end of last may and abandoned the sales market altogether to focus on rentals(getting ready to dip my toe back into sales) and a new commission schedule...basically name your price(hey even a "borker" needs to make a living?)...lol. www.theburkhardtgroup.com Would love to hear your opinion, I am starting to appreciate your humor, so fire away.

Want to be an angel to a fellow golfer, sailor and I'll throw in skier, surfer former underground music legend. I had a meeting with a very big player in residential RE who will be rolling out a similar model in 09 I would love to beat him to the punch-otherwise I will end up working for him. Just played Arnold's course(and was married) at the Four Seasons, Costa Rica...what a wonderful course.

Not even close.

You think its only the folks who used to look for $3 mil apartments who will need to "downsize"? How about all the folks who used to make $200-300k and were buying at $1mil. Or $150k buying at $600k?

You really think Wall Street didn't have any of those? Take a look at the new construction... some of the buildings had ONLY 0, 1, 2 bedroom places.

And where is the assumption that folks needing to downsize will look to pay 2007 prices?

And add in the fact that volume has slowed to a halt. That means nothing is selling.

Sounds like waaaaay too much wishful thinking to me. Or, another case of hotproperty trying to rationalize.

You a broker, hp?

nyc 10022, WHat do you do for a living that you are able to hang out here 20 hrs a day?

nyc10022 and stevehjx are married to each other -- their job is to argue misc cases on streeteasy and they get paid 100k+ each for the analysis and distraction

anyone else have an opinion on bfgross - "So far the only still moving market with any momentum is under 1 million". Is it possible that this market holds, as people look to downsize to more affordable places?

how about you actually look at the stats, before making wishes?

hotproperty. I never said the only market moving with any momentum is under 1 million. That may be the case but that was not me.
that was nycbrokerdax.

Sorry bfgross. Didn't mean to misquote you. Maybe NYCbrokerdax can comment further on the statement.
"So far the only still moving market with any momentum is under 1 million".

brokerdax-

I'm unclear how the volumes you speak to across those 3 segments equates to -75% 3q y/y transaction volumes. If average prices in manhattan are under $2mm, then the volume of sales in the $5mm segment, while garnering much headlines and creating difficult compares from 07 new bldg intro's, should not be enough to create that down 75% on its own. And if you only cite -20% volume declines in the mid-range, then the $1mm and under, which is still a sizable portion of the 2,000 or so quarterly closings, must be gettting hit ALOT harder than the "only market with any momentum" which you indicate. Just curious how u can reconcile that...thx

"If average prices in manhattan are under $2mm, then the volume of sales in the $5mm segment, while garnering much headlines and creating difficult compares from 07 new bldg intro's, should not be enough to create that down 75% on its own."

Its not. To get a 75% volume decline, you pretty much need the entire market to move signficantly.

joedavis we'r a 3some

burkhard.... another cell mate... come along my friend... into w67 world. You my friend are an entrepreneur... so we're cool.

Just off the cuff remarks... you are arbitraging the fact rental prices (sales also) have risen so far that a month's rent in economic terms is more than sufficient compensation to do the work of a RE borker... since I'm trying to be nice... I'll think of something to be helpful while I walk the three legged mariachi dog... gota get to juliard later :)

I just reported a story on high-end markets nationally for Worth, a personal finance magazine.

The gist of it is that the more restricted a market is, the better it is holding up. Georgetown and Aspen are doing better than the Hamptons, presumably because the first two are both very geographically limited areas.

This is sort of the same conclusion that you'd get reading the recent (November, I think) Real Deal package on luxury markets.

Extend that theory to New York, and you have support for the classic gold-plated locations -- Park and Fifth Avenue -- rather than for "new" luxury like tricked-out Harlem brownstones.

ali r.
{downtown broker}

"are doing better than the Hamptons, presumably because the first two are both very geographically limited areas"

funny, they used to say that about the Hamptons... (and why prices would always stay higher than the Catskills)

Supply only matters relative to demand. There are tons of small areas, but if no one wants them.

Question is, how many buyers will there be for 1 bedrooms with $5k maintenance...

front-porch... :)... Worth is worthless :) POS p finance rag... it's laughable... I thought the entire island of manhattan was a restricted market? It's an island? no?

This depression is an inverse one... burger flippers aren't gonna feel it... Park and Fifth... well they're trying to figure out what equity shares to sell to get a refund from Uncle Sam in the next two days. Top 1% is learning mariachi... did you see what my Gulfstream is priced at today? or my 50footer swan?

Pls... people get with it.... in 30 years they'll be studying this depression in HBS as a case study of financial leverage gone awry and the 10 years it took to correct it. Peace out!

Ali r:
I agree with your article to the extent that, amongst all the high end properties out there, the ones in new developments and non traditionally "gold plated" locations will get hit worse. Yes thats you Tribeca and Soho.
But i still maintain that even for Park, CPW and Fifth, the jobs that support the underpinning of that pricing have, virtually overnight, collapsed, and that there are simply not nearly enough qualified buyers to come anywhere near to taking up the slack for the apartments that i contend will be put on the market over the next couple of selling seasons.
Peace out

bfg: There are hundreds, thousands, maybe even tens of thousands of qualified buyers for every apt on Park, CPW and Fifth. The only thing stopping these qualified buyers from emerging is the dual stupidity of sellers and their brokers from allowing price discovery and equilibrium to occur.

So what will happen, bfgross? Will panic set in?

patient09: good point. obviously what i mean is that AT CURRENT ASKING LEVELS there are few interested and qualified buyers. Hows that?
mrsblogs: I never once used the word panic in my original post, though i imagine a few of the bottom third are experiencing panic. Let me ask you a question. For the rest of the country whose housing downturn started two years ago or more, has panic set in? I never said anything about panic, we are just late to the party here in Manhattan, thats all.

bfgross... I want my "peace out" :) back.

mrsblog... for a lack of a better word, panic will set in... but it'll be a panic in which a husband and wife or husband and husband (let them get married who does it hurt?) will quietly look at their income/expense and start to rationalize what are necessities and what are items to keep up with the Joneses. bye bye 2nd homes, bye bye yachts, $100K + plus cars, 3 nannies, tennis lessons, trips to Maui...

Some people will be able to handle this, others will file for divorce, lots of bankruptcies and mostly people who thought they could hang with people two or three income brackets above their prior (b/f 1999) lives will need to accept their income/consumption potential for their next 30 years. This I think more than panic... is the driving force of the recent cut-backs on luxury items... as an economist... I think a full 2/3 of all luxury consumption is based on "I deserve it" versus actual income based consumption.

Peace out 2x!

patient09... 10Ks of qualified buyers... yes yes yes... but if you asked me and the mrs. if being on 5 East 75 is worth $500K, I'd say where do I sign. Qualified, but willing to use up more than 30% of yearly income to live is gone for a long time (at least 10 yrs) and as I said... when everyone is pinching pennies I don't see the "demand" for highly priced CPW and 5ave units for a long time... don't get me wrong there will be a price differential for CPW versus 10 West 70th, but that will shrink as the cash becomes more valuable and a better store of value vs. NYC RE. Look at Gulfstream IV versus V, the differential is decreasing...

Peace out 3X.

oh.. if u r a mariachi player... no panic :)

Soup for everybody today!

nice.."Look at Gulfstream IV versus V, the differential is decreasing"...you seems to be buying my argument of premium compression that I have spoken of on other threads. awesome!

"anyone else have an opinion on bfgross - "So far the only still moving market with any momentum is under 1 million". Is it possible that this market holds, as people look to downsize to more affordable places?"

I am not as adamant about it as nyc10022, but I generally agree with him on this. Downsizing will happen all the way through the food chain. Yes, former 2-3 bedroom buyers may be buying 1-bedrooms and studios. But former 1-bedroom and studio buyers may be moving to Brooklyn, or Hoboken, or Queens, or moving back in with their parents. And everyone, at all levels, will at least consider renting, which, unlike buying, doesn't tie up any cash at a time when cash may well be needed.

ali r:

Sorry but your story that the high end exclusive areas are holding up better is already out of date and wrong.

Biggest real estate firm in Jackson Hole just shut down and threw 70 brokers out of work:

http://www.planetjh.com/news/A_104591.aspx

“The market is really struggling – almost to the point that it has atrophied,” Cheek said Monday afternoon. “It’s been really difficult for everybody, but I feel sorry for the staff. They deserved more than that. We brokers will be fine.”
Cheek said market conditions are similar to those experienced during the recession of the mid-1980s.

ali r:

Sorry but your story that the high end exclusive areas are holding up better is already out of date and wrong.

Biggest real estate firm in Jackson Hole just shut down and threw 70 brokers out of work:

http://www.planetjh.com/news/A_104591.aspx

“The market is really struggling – almost to the point that it has atrophied,” Cheek said Monday afternoon. “It’s been really difficult for everybody, but I feel sorry for the staff. They deserved more than that. We brokers will be fine.”
Cheek said market conditions are similar to those experienced during the recession of the mid-1980s.

Sorry to see them go, but note that's the largest "locally-owned" brokerage. It's not the largest brokerage.

Hubby and I were just out there in August, and there's a real estate office every fifteen feet.

ali r.
{downtown broker}

This wasn't just any real estate office. Real Estate of Jackson Hole was the exclusive affiliate of Christie’s Great Estates for the states of Wyoming and Idaho, and the exclusive real estate brokerage firm for the Jackson Hole Mountain Resort. Sooner or later this story will be picked up by the NY Times or WSJ.

And aren't all real estate firms "locally-owned" even if a franchise of a bigger firm? Who was bigger in Jackson Hole? I have a neighbor with a house there (and a vacant lot he bought on "spec") he is out there now, and says this is a big deal, not some dinky little firm.

If you want another example, take a look at Desert Mountain in Scottsdale Arizona, wonderful place of mostly multi-million homes, with 6 (!) golf courses. Sales off a cliff, maybe 4 per month, inventory up to 150 homes a 3 year supply. The high end is not immune, maybe just slower to crack as fewer sales mean comps don't show up as fast.

The Sotheby's affiliate is bigger, for one, with a listing of about 100 brokers.

In terms of locally owned vs. not, it depends. Some big firms license their names but also operate their own offices. NRT (the company that owns Corcoran) owns 850 offices, but they also franchise through names you know like Coldwell Banker and Century 21. In fact, the company boasts that they control one out of every four real estate transactions in the United States.

Also on JH I found this blog link, which I like http://jacksonhole.locale.com/blog/

The broker indicates that things are clearly slowing, but also notes that a 33-acre eight-figure property went into contract in November.

ali r.
{downtown broker}

"And how would one broker have info on the breakdown of Manhattan buyers?"

They would know only the profiles of the sellers and buyers they personally dealt with, and indirectly those that their colleagues at their agency have dealt with. This is valuable information that they can't share in too much detail, but it is as much a part of the story as sales and inventory data. I'm curious how leveraged the new-construction condo market is in Manhattan and Brooklyn, for instance. Do people who pay $50MM for a condo have 80% financing? Does everyone who buys Park and Fifth Ave. coops work on Wall Street? Etc.

What is the thought on price compression?

I came across this and thought it was worthy of being bumped up for a status check after six months. I'd start by saying that it might make sense to adjust the range being discussed from $5-15mm to something like $5-10mm or $4-8mm. It's just not clear that there actually is a market above about $8mm at the moment. In most places at most times, this statement would be so obvious as to be trivial, which is why it says something about Manhattan RE in the bubble years that there really was a period where $8mm and up trades were a market, not occasional bespoke oddities. I don't mean to suggest that I'm any authority on the $8mm+ end of the market, as I very much am not; my comments are based on the simple observation that a couple of years ago there were quite a few $8mm+ transactions - both prime UES/UWS established coops and high end new condos - and now there aren't.

There is now more evidence than when this thread started of the lack of bids to support multimillion dollar properties. bfgross was right that the Wall Street bid is gone and that there is really no fallback buyer universe for the properties over $5mm. Even well below that level, newbuyer99's math halfway up this page on a $3.5mm purchase and analysis of who the likely buyers are for that property (mostly finance types as well) still makes sense today. In the prime UES/UWS coop market, there have been relatively few transactions in large apartments (say, classic 8s and larger), but several of the ones that did get done did so at reset-the-market type prices. In the high end condo market, my impression is that the developers are seeing how long they can hold their breath and those few buyers with the means to do the $4mm and up purchase are waiting them out. Between listed and shadow inventory, there are a lot of large apartments to get absorbed as the condo glut works its way through the system.

Finally, my 'best comments from the original thread' awards for posts that still make great sense with six months of hindsight go to bfgross for the original post and to nycbrokerdax and newbuyer99 for their responses.

"I don't mean to suggest that I'm any authority on the $8mm end of the market, as I very much am not; my comments are based on the simple observation that a couple of years ago there were quite a few $8mm transactions - both prime UES/UWS established coops and high end new condos - and now there aren't."

Ummmm, in the past few weeks there have been closes on an approx $40m purchase, a $37.5m purchase, a $32m purchase and a few others in the 20m and 10m range.

really? where?

156 East 81st Street - $32,000,000,
225 East 74th Street #PB- $12,750,000,
25 Columbus Circle #PH78 - $37,500,000
152 East 81st - $40,000,000

Sorry, the last one = #1. Ask 40m, sale 32M

couldn't find #2.

Well look harder because I see it.

40 Fifth Avenue #PHA $8,000,000.
17 Prospect Park West Brooklyn - $8,450,000

where: http://www.streeteasy.com/nyc/building/225-east-74-street-manhattan?

255 East 74th St PHB. Buyer: PHBC LLC Agent: Town Sales & Marketing

$12,750,000,

does madonna really count? she's rich no matter what time it is people

25 Columbus Circle #PH78 - $37,500,000 is more costly than Madonna.

she's rich no matter what time it is people

Only a few special types of people start or finish a sentence with the word people. Why is that?

Oh and

11 East 74th St $18.125,000

163 East 73rd St $8,250,000

fuck'n wonderbra.... 3 units above $15MM in last 9 months... THAT PROVES Sidelinesitter... you clueless broker.....

In 2006-2007, it seemed $15MM was the new $1MM starter apt....

oh oh oh wait for it... wait for it.... HEREZ shrimpie!....

Loser bonerboy=shrimpie=colonlklink

So pathetic youz gotta create a whole "kingdon" of dufus broker "friends"...... SERIOUSLY.... ask your inner child if you're happy?

9 months? w67th apparently doesn't know how to read.

ALL of these sold within the last 3-4 weeks. And I wasn't even finished, I can continue if you wish?

Yea...I thought so.

Now get back to your crappy w67th street box.

While i agree that many have been hurt, many have made amazing profits. Many funds have rebounded 70% -- and for those who started at the bottom -- it is quite an amazing year thus far. The flip side of the trade...

"ALL of these sold within the last 3-4 weeks."

17 PPW went into contract last summer, closed in November.

The stupidity cup runneth over. One hardly knows where to start. wonderbra proposed 8 properties to refute the argument that the very high end coop and new condo market has pretty much seized up.

Of course five of his bright ideas were townhouses, not apartments, so that was helpful. Of those, two sold to Madonna. These strike me as more the ultra high end "bespoke oddities" that I spoke of above, rather than evidence of a market (a term that to me implies some volume of transactions, some price transparency through comps, etc. without which you have a transaction but not a market). If there is a "market" for $40mm trades with rock stars and billionaires it might deserve its own thread, although I think that thread would be short. One of the other examples went to contract over a year ago in Brooklyn, so that's also pretty helpful perspective on Manhattan today. Thanks. But my favorite example of the alive and well market above $10mm has to be 163 East 73rd, which sold for $5.8mm. Which tells us exactly what, other than the non-existent critical reasoning skills of the boy wonder?

The full floor penthouse in the Time Warner Center, was also a helpful addition to the list. Yeah, the latest from the Arab prince and Russion oligarch segment really means a lot for the part of the market the bfgross was trying to discuss in his original post.

Which leaves us with exactly two sales in any way related to the actual topic here. Of course 2 for 8 is not a bad showing at all, considering the source.

Better perspectives on where the high end MARKET (as opposed to one-off sales to rock stars) might be would be the NYT article below or the luxury market analysis in the Q2 Miller Samuel report (also below), which has the top 10% of sales at an average price of $4.8mm, down from $6.4mm a year ago and a median price of $3.7mm, down from $5mm a year ago, with the threshold for getting into the top 10% ($2.6mm) at the lowest level in 2 years.

http://www.nytimes.com/2009/03/29/realestate/29deal1.html?_r=1&scp=3&sq=first%20quarter%20%244%20million%20real%20estate&st=cse

http://www.prudentialelliman.com/NYCPhotos/retail_reports/Manhattan_Q2_2009.pdf

time for a yawn?

"I take it out RE Brokers on SE, b/c I am too polite to tell my neighbors and my friend's wives (who are RE brokers) to drop dead"

I'm not. Once, a neighbor who was a realt-whore told us how she basically screwed some guy by neglecting to tell him some vital fact about the place he was buying. I told her what I thought of that. She said "Are you implying I am unethical??". So ol' Dwayne said "I'm not implying anything, I'm TELLING YOU to your face I think you're unethical!!". The look on her face was priceless. PRICELESS...

"The stupidity cup runneth over". LOL, Sideline. It certainly does.

*yawn*

The high-end market will always be there. Period.

high-end is a relative term.

*gag*

Wonderbra said "The high-end market will always be there. Period."

LOL. Every recession (and i've seen many of them now), some clown states "the high end will not be affected, because if the people who buy (insert product here - high-end real estate, boats, rolexes, etc) will blah blah always be able to afford blah blah blah because if you have to ask you can't afford it anyway blah".

It never holds true; the market for yachts, luxury real estate, luxury ANYTHING gets hit the hardest. The market for staple products - cornflakes, toilet paper - remains relatively unaffected. So you have it completely backwards. But the high end? It gets CREAMED!

When did I ever say it won't be affected, fool? I said it will always be there and it always will.

wonderboy: could you get off my thread please??

bfgross - apologies, by the way, for messing up your thread. It was not my intention to drag it off topic in reviving it. Hopefully it will get back on track and and people can just scroll over the last few days of posts.

gross, cold you please stfu?

Here's something pertinent to the thread and worth re-posting: A judge, deciding an IRS case, handily summarized the early history of 834 Fifth Avenue:

"In 1929 Anthony Campagna, a builder, purchased the land at 834 Fifth Avenue on which the apartment house, known as 834 Fifth Avenue, was erected. The building contained 24 apartments which were offered for sale to the public on a cooperative basis. Ten of the apartments were sold. The total number of shares of 834 Fifth Avenue Corporation stock was 36,000 of which about 16,000 were issued to the apartment owners. The remaining 20,000 shares were owned by Anthony Campagna individually and by the Anthony Campagna Corporation. That corporation's business was to buy, build on and sell real estate.

The purchaser of each block of 834 Fifth Avenue Corporation stock, allotted to him on the basis of the value of his apartment, was required to sign a 99-year lease, obligating him to pay his portion of the total expenses of the corporation. When the petitioner purchased his stock the sale of the stock to anyone other than an assignee of the lease was prohibited. This situation continued through 1932.

The apartment building was encumbered by a $2,800,000 first mortgage and a $350,000 second mortgage. The Campagna Corporation paid one month's ‘proprietary‘ rental and thereupon defaulted. Thereafter in 1932, the 10 individual stockholders formed a new corporation, called 834 Maintenance Corporation, which took over the Campagna stock and paid the maintenance or rental burdens chargeable to that stock. The Maintenance Corporation tried to rent or sell the apartments. Some were rented but none were sold. Its stock was stipulated to be worthless on December, 1932. In 1933, the 834 Fifth Avenue Corporation cancelled the ‘proprietary‘ leases and assigned the rents to the holders of the first mortgage but it still held the legal title to the property. On December 31, 1932, 834 Fifth Avenue Corporation was solvent. At that time the apartments could have been rented for only sufficient to cover about two-thirds of the mortgage interest, taxes and operating expenses of the building. On that date the corporation had paid its taxes and owed interest on only the second mortgage."

wonderboy,

by definition the high end market will always be there. there is a high end market in detroit--it's just that it starts around $150,000 for a home. the question is not whether a high end market exists, but rather what it looks like and what range it covers.

sidelinesitter: back to your post from a day or two ago: I agree with your thoughts that the real market I am talking about is probably more like 3-10 million rather than the 5-15 i outlined in the original post. Six months later, I think it is crystal clear that the high end is, in fact, suffering the most, and will not come back anytime soon. Two other points I would make: one, does anyone think taxes are not going to make a major league dent in this market? Even if the current House proposals on BamaCare do not come to pass, we KNOW the 300k-1mm+ taxpayer is going to get socked in the coming years, all the more so in NYC. Between city, state, federal and extra levies, tax rates for the high earners are going to be fully 10% higher in 2010 than they were in 2008, get used to it. 60%+for a million dollar earner. Those are Canadian rates, ladies and gentleman. Also when I wrote the post originally I did not mentioned the state of Big Law was in equally as much peril as that of the finance business. Truly fearsome headwinds.

"LOL. Every recession (and i've seen many of them now), some clown states "the high end will not be affected, because if the people who buy (insert product here - high-end real estate, boats, rolexes, etc) will blah blah always be able to afford blah blah blah because if you have to ask you can't afford it anyway blah"."

Irish carpenters, doctors, oil shieks, bla bla.

There is always at least a few idiots to make the claim.

No wonder who it is now...

happyrenter, there will always be a market for $15M+++ properties in New York.

just like there was in 1996? you're showing your (lack of) age.

wonderboy = shvo?