Housing market in California is about to take second major leg down

Yeah but the GOOD news is that over 50% of CA mortgages were variable after 5 years...and rates are so low now, thousands will see their mortgage payments FALL, which is the opposite of what many analysts feared back in the bubble years. But yeah, prices will probably fall a bit more.

J10006,

Take a look if you still think the same after reading:

"90% of Option ARM borrowers make the minimum payment, which doesn't even cover interest. Regardless of where interest rates are, the recast to a fully amortizing payment will be much higher than the minimum payment the borrower has been making.

Payment shock = instantaneous toxicity. Can't refi because loan balance is higher than when you started and the home price is WAY below what you originally paid. These things default like none other."

http://www.urbandigs.com/2009/02/you_worry_about_resets_im_worr.html

great. the nice properties are going to just start showing up in REO auctions soon there. it'll take i think a couple of years in manhattan. i'm not gonna bid as i don't plan to stay in the northeast. but it's going to be great for those on the sidelines committed to the city.

the editor of the FT said sth very interesting in the NBR a couple of days ago. how both objectives of obama are actually incompatible, so it'll just not work. the objectives are helping the banks and helping homeowners. one is the debtor, the other the creditor.

just read that SS is hitting the red as we speak in 2010 as supposed to in 2017 as it was estimated last year. obviously the recession is to blame. guess it might help to speed up the discussion on how to change the system or at least speed up it's demise.

what's this thread have to do with Manhattan RE? If your trying to connect Californis'a plunge in prices to Manhattan, RE, you have done a very poor job.

alpine did you read anything about timing lags on previous real estate bubbles? not every place collapses at the same time. manhattan was the last to fall, the nice drops here are just starting.

still has nothing do with CA. There are so many diferences between CA and NY that I have already pointed out in odler threads.

lol alpine, you are a hard core RE believer. what was the fuel of the bubble? you'll see the light after answering that correctly. the credit bubble made "real estate is local" totally obsolete. don't even dare to bring "coops will save us!", go with that to jonathan miller, he will explain you why is also a myth.

Alpine evidently you're a twit,the fall here will be just as bad as California. Wall Street has been transformed and will lose over 100,000 jobs in total before this all plays out and another 175,000 private sector jobs before this Ponzi Scheme wounds down and hits New York where the architects of this house of cards live. There are no more high paying jobs to sustain the outrageous prices during this real estate and credit bubble. Get it yet or do you need to be hit upside the head?

Alpine, from an investor point of view, if you have the choice between a nice property in LA or SF 60% off and a nice property in NY 30% off, which one would you pick? And which one do you think Wall street people, who approach any spending like an investment, would pick over the other?

"the fall here will be just as bad as California."

Really? Does NY have the same foreclosure rate as CA does? If it does, then I stand corrected.

"from an investor point of view, if you have the choice between a nice property in LA or SF 60% off and a nice property in NY 30% off, which one would you pick?"

I have no interest in living in CA, especially LA. So I would choose the NYC property. It's silly just to live somewhere because you can get a better buy there.

Alpine do I need to slap some sense into you again? New York RE was still appreciating in 2008 while the CA was alreaady in the second year of collapse....get it? Let me connect the dots.......we are in maybe the 3rd inning of this collapse and CA is in the 9th inning...get it? Oh and don't forget this is a doubleheader....stay tuned while I keep slapping you upside the head!!!!

sledgehammer,

I would go with NYC. I'm a wall street guy but don't really understand this question.

Investment wise? New York City would be a better investment than SF or LA. NSF's and LA's high end RE are both dependent on the financial sector so the question really makes no sense. Why would SF or LA be a better investment? LA and SF will plunge even further than New York.

according to John Miller and Noah at UD, RE in NYC was NOT appreciating in 2008. It only appeared that way because of closings at new devleopments. Most experts woudl put the peak at around the summer-fall of 2007

Alpine, from an investor point of view, if you have the choice between a nice property in LA or SF 60% off and a nice property in NY 30% off, which one would you pick? And which one do you think Wall street people, who approach any spending like an investment, would pick over the other?

_____

If this were the case, everybody would be fleeing to Dallas/Houston to invest since their luxuy market is stable and is 70% lower than SF and NY's.

To me it's clear that investors have speculated over real estate for the last 8 years. If you still want to consider making money flipping properties, you don't invest where the market is still declining (NY) or where it's stable (Dallas/Houston), you invest where you think it has bottomed out. LA of SF will most likely bottomed out before NY. I picked these two cities because these are the city that can compare best with NY in term of prestige. There are of course other parameters to look at (like CA being borderline bankrupt), but still, after NY, i think that's where most people would want to live.

sledge, LA yes, but I think SF proper has been fairly resilient as well, at least until now. And SF is the city that comps most closely to NYC.

aboutready , you may be right about SF price, i recall prices hold pretty well but last time i've read comps, SF properties had dropped over 30% in value, still quiet more than NY.

LA is really not comparable to NYC. It's a thousand times larger with more land. I think the cities that most compare to NYC are SF and Seattle.

One thing the brokers all forget in the "limited land" argument is the ability in Manhattan to build vertically.

crescent22, yes, there's alot of building ability here. even if you limit it to corners and empty lots. and there's a ton of commercial space that will not be utilized, both new and old, anytime soon.

If a second leg of price chops will take place in CA why can't it happen in NYC? Warren Buffett said NY will be the last to come out of this depression, I believe him.

I live in LA and have been actively looking at properties in NYC. So I have some perspective on both markets.

However, on the issue of the RE market in Los Angeles, I have to laugh at all the generalizing of the market. LA is HUUUUUGGGGEEEE. You can't pour over stats and generalize about the market as a whole. There are unquestionably pockets/neighborhoods in LA that are in decline, steep decline even. And then there are a number of neighborhoods that are quite resilient and are probably off no more than 10%.

Los Feliz, for instance, is virtually unchanged. West Hollywood is maybe off a bit. Studio City is relatively unchanged, maybe off a bit. anta Monica proper is VERY resilient. And on down the line.

Now, when you get outside LA, and into Orange County, that's where the real damage is.

But stop wasting your time speculating about the "LA market". It's far too huge to be lumped into one single aggregate.

Well said Prothchild. Finally someone with a bit of common sense.

alpine: "Most experts woudl put the peak at around the summer-fall of 2007."

When I take the Miller Samuel data is see Manhattan coop (median and price per square foot) I see a peaking in 2Q2008. (I used coop prices to largely avoid the problem of new new construction condos which closed long after their initial contract.)

Manhattan simply seems to have peaked long after the nation as a whole - and the New York metro area as well. Seems to me that its bottom could similarly trail that of the nation as a whole as well.

Median prices relative to median incomes in Manhattan rose to astronomical levels during the current cycle. The absolute level is extraordinary - and the percentage increase in that ratio over the past 10 years has been extraordinary. The correction has just begun.

"When I take the Miller Samuel data is see Manhattan coop..."

should read:

"When I take the Miller Samuel data for Manhattan coops..."

The below interactive chart from the New York Times underscores how current New York price/median income ratios have become. CLICK ON THE LINE FOR NEW YORK. We're #1. And Manhattan is far worse than the New York metro area in general. But the correction is on its way.

http://www.nytimes.com/2009/04/22/business/economy/22leonhardt.html

Where's the data that says Manhattan is far worse than the NY metro area?

Is it possible that the medium income to home value stat is less meaningful in NYC than other places because the % owners vs. renters is so different? There's a large segment of the rental population that will never own in the city. They will either be life long renters or move to suburbia. The demographic change in the last few years, with more families staying in the city and buying big apartment would account for some of the change in the ratio of medium income to prices.

In no way an I saying prices aren't going down. I'm just trying to sort out what are the most relevant data to look at.

MeMe, sure, some will never own a piece of NY: They are called Working Class.
Unfortunately, the young Middle Class in NY should not be withdrawn this privilege, after all, this class is driving the economy more than any other.

MeMe

"Where's the data that says Manhattan is far worse than the NY metro area?"

2007 Manhattan median income: $48,631
1Q2008 Median One-Bedroom Manhattan condo/coop price: $710,000 (per Miller Samuel)

Manhattan price/median income: 14.6
(Imagine what the ratio would look like for a two-bedroom apartment which would be more analogous to the figure for the New York metro area!)

New York metro price/median income: 6.9

Hey Topper. Is there any historical data available for those figure on Manhattan? Thanks

I don't have easy access to a Manhattan median income time series. We do, however, know that Manhattan real estate prices have risen significantly faster than New York metro real estate prices since 1989.

During the recent bull market:

Here I go with Miller Samuel Manhattan condo/coop price per share foot for period 2000 to 2007 (inclusive).

$1 Grows To:

Manhattan condo/coop: $2.80

You might also be interested to see the comparable Case-Shiller figure for the New York metro area:
$1 Grows To:

New York Metro: $1.98

(I know the Miller Samuel numbers don't use the same methodology but I do think they do reasonably accurately show how much more robust the Manhattan market was relative to the New York metro market.)

Topper, As I re-read my comment the "where's the data" sounds confrontational, what I meant was "do you have a link or a source I can google to see this info?"

Using the $48,631 number and and a mortgage of 3X income -- are you saying one bedrooms need to go to the $150k range? My gut tells me that a lot of the people making under $48k are retired and in rent controlled/stabalized apartments until they die, or are on public assistance. Because most cities don't have rent stabalization laws these people could be skewing the numbers for NY.

Approximately 3-5% of the rent stabilized apartments have been exiting the program yearly since around 2002-03 (can't recall exactly). And the pace is expected to increase. Also, the rates for prime Manhattan destablization would be much faster than most other areas as the tenant whose apartment hits the $2000 a month level is much more likely to have also obtained the income level needed to destabilize.

MeMe, on another level, there are many tales of public service professionals and other retirees who bought apartments years ago and now can't even afford the maintenance of those apartments because of increased expenses and real estate taxes.

Yes, it did, MeMe. But I often find my own writings sound that way after I re-read them! No problem.

I'm actually not making any really bold assertions. Just simply that Manhattan real estate is very expensive on an "absolute" basis, a "relative" basis, and an "historical" basis. That is the case for many premier cities around the world and renters there also easily exceed owners.

But at some point you just have to use some common sense and take a breather.

I would also say that Manhattan real estate is al very expensive on an "economic" basis as well as witness the relationship between prices and rents. (But that is a whole other thread!)

Personally, I think Manhattan residential real estate prices will ultimately dip ~50% peak-to-trough.

Caveat emptor!

No, SF proper is down 16%, the BAY AREA is down 30%. So yes SF comps to Manhattan quite well.

San Francisco market cannot be comped to Manhattan, or anywhere really, because home sales are basically frozen in many parts of "the City" (as they like to call it.) I read a report that stated during the past six months, period ending 4/15, there have only been 29 home sales total in many of the City's most affluent neighborhoods including Pacific Heights, Presidio Heights, Sea Cliff, the Marina, Cow Hollow and St. Francis Wood. There have been some sales in the Richmond, but that is an area more comparable to Queens than Manhattan, and prices are down 30% from peak. Moreover, bank foreclosure sales accounted for 17% of home sales and 6% of condo sales throughout the city during this period.

So if San Francisco is being comped favorably to Manhattan, then there are some scary days ahead for Gotham.

the median income for Manhattan is totally useless for predicting RE values. Your lumping in hedge fund managers with people who live in housing projects who will never buy RE in Manhattan. It's a totally useless number.

Why do people like McHale think that every downturn has to be the same amount of time and severity as others?
Because it took California 4 years to reach bottom it has to take NY the same?
That kind of logic is completely unfounded.

Maybe the downturn in NY will only be 1 year...maybe 1.25 years, maybe 3. But to say that NY is the last one in and the last one out is very outdated. The globalization of economies has put everything on a closer timeline.

Always nice to hear some cheery words from the house pollyanna!

HDLC: "San Francisco market cannot be comped to Manhattan, or anywhere really, because home sales are basically frozen in many parts of "the City" (as they like to call it.)"

ME: Yeah, the same is true in Manhattan, where every report says transactions are down 30-50% or more.

HDLC: "I read a report that stated during the past six months, period ending 4/15, there have only been 29 home sales total in many of the City's most affluent neighborhoods"

ME: Yeah, and Miller Samuals and others have said that sales are far and away the slowest in Manhattan's richest neighborhoods.

HDLC: "There have been some sales in the Richmond, but that is an area more comparable to Queens than Manhattan, and prices are down 30% from peak."

ME: You are a giant tard. In your world, does "Manhattan" not include Inwood, Washington Heights, Morningside Heights, the Harlems, Yorkville, the LES, Chinatown, Roosevelt Island, Hells Kitchen, teh far east village and Fidi? Believe, having been born and raised in SF and being VERY familiar with the real estate market there when I tell you that the Richmond District (as opposed to the CITY OF RICHMOND which a different place entirely) is far closer in relative price to the rest of SF than queens is to Manhattan. In fact, I would go so far as to say that the Richmond district average prices are about the same as SF average prices, since there are many neighborhoods much cheaper than the Richmond district.

In fact I just checked Trulia and the median sales price in SF is $600k, while the Richmond District is as follows: inner Richmond is $445k, central richmond district is $834k, and the outer richmond is $697k - so the average of the three is $659k, or TEN PERCENT higher than the overall city of SF. So you are a tard. See http://www.trulia.com/home_prices/California/San_Francisco-heat_map/

HDLC: "So if San Francisco is being comped favorably to Manhattan, then there are some scary days ahead for Gotham."

ME: Who said it was a FAVORABLE comparison?

HDLC, what jason said. but i'm not feeling testy, so you can take out the tard references for my version.

But he's right, Richmond is quite nice, and close to the park.

So in fact the Richmond District in SF is more akin to Murray Hill than it is to Queens, since both are slightly above average for "The City" per Trulia. What is like Queens to SF? Oakland, Alemeda, Berkeley, or San Bruno.

Given its proximity to GG park, I think of it as kind of like Morningside Heights. A lovely alternative for families who want close proximity to the park and slightly more product for the price. Kick ass restaurants in Richmond, also. Almost a Morningside Heights meets village situation.

I could buy that, but it stretches the entire length of the park, so its more akin to the UWS above LC, Manhattanville AND MH.

Yeah, you're right, it is a big area. Inner to outer is quite the stretch. btw, Berkeley? I know she ain't san fran, but that's a bit harsh. there are all those Cal people there. (nothing wrong with Queens, btw, so no hating, just saying that Cal does give the area quite a huge boost in vitality). and Alice Waters did some crazy shit over there (read the United States of Arugula).

No one ...and I repeat NO ONE...who has ever been to the Richmond would EVER compare it to Murray Hill. You lose ALL credibility with a statement like that. Culturally, the Richmond IS more like Queens than any area of Manhattan. Having attended Cal, I've met more than my share of people from working class to middle-class families in the Richmond who were striving to "get out of the Avenues." Your nasty attitude is quite typical of those who were reared in "the City" and falsely believe that dowager San Francisco is some type of Manhattan by the bay.

aboutready, it is cloudy and cold in the Richmond all day long for weeks on end from June through August.

Without a doubt, the best part of SF is Pacific Heights. That is ULTRA PRIME. I would compare it to Park Ave.

Well, I wouldn't choose it, just saying it's not really Queens. I don't drive. The Mission is where we'll land if we move to San Fran.

Dowager San Francisco? What are you talking about? Anyway, he was talking about price, not culture.

" Your nasty attitude is quite typical of those who were reared in "the City" and falsely believe that dowager San Francisco is some type of Manhattan by the bay."

Agreed.. its not Manhattan. It manages to have much less activity, nightlife, and culture, yet somehow have twice the dirt and grime and 5x the homeless people.

SF is boston with fog instead of snow... not really cities, just glorified towns.

Well, I guess you think there's only one real city then, 10022. Unless you'd add Chicago and Houston, maybe? Or LA?

I don't know, I think it has a tremendous amount of vitality. I only need so much nightlife, and the Embarcadero to the waterfront blows our west side path away. I think both cities are great, just a bit different. And any city that has better weather (and a more tolerant population) will have more homelessness. Seattle has a ton also. I don't get the dirt and grime comment, avoid the Tenderloin. Market is kind of hard to avoid entirely, but it certainly doesn't bother me any more than Times Square or Fifth Avenue in the 50s with their throngs of hapless tourists.

I will one-up all your SF expertise. I was BORN and RAISED in SF AND went to Cal. I lived in SF until I was 29. But none of that matters - yoy claimed that the Richmond was somehow fringy to "real" SF an was akin to Queens visa vis Manhattan. In fact, the Richmond is MORE expensive than SF on average, so from a real estate price POV cannot be akin to queens. Furthermore, the Richmond is a huge swath of real estate in SF. To claim that the few people you met from there are somehow representitive of the entire neighborhood is laughable. And "culturally" its not Queens - as though there is a single cutlre that represents Queens.

AND the RIchmond is geographically in the center of SF - so its hard for that to be fringy. And no I am not from the Richmond - I wsa born in the Haight.