CS Index: decline slowing nationwide, accelerating in NYC

Doesn't include Manhattan, sorry.

Sure it does - Manhattan townhouses are included.

"Manhattan townhouses are included."

Which make up precisely 0.8% of the inventory.

A real statistical indicator.

Does anyone know definitively whether the Case-Shiller Index includes Manhattan? Just townhouses and no condos or coops? What about the "Condominium Index"--just condos and no coops?

I thought it was a good indicator for Manhattan real estate, but perhaps I was wrong.

Why does NYC lag???

Case Shiller does NOT include apartments, only houses. So 99% of the inventory is excluded. Also, the index only includes REPEAT sales, so new construction is also excluded.

NYC is not 99% apartments. Manhattan below 110th may be more than 90%, but NYC as a whole is not 99%. And its an index of the NYC AREA, as it is with the other cities. You are a real a-hole in your constant desire to pretend that 95% of the people in metro NYC do not exist, including yourself (because you are bridge and tunnel too.)

There is a condo-only index from NYC and four other major cities, but both indices exclude coops.

And directionally, and in terms of magnitude, both track close enough to the various brokerage reports to be a useful indicator, though not iron clad measures.

Think of it like knowing what Newark weather is like to know how you should dress in Manhattan. Useful, but not 100% accurate.

People here are only interested in prime Manhattan Jason. Nobody here gives a rat's ass about the Bronx or Staten Island.

mutombonyc, because we're so special. That's only partly a joke. It's very hard to convince this market that Manhattan is not invincible, despite the fact that's it's gone down before.

AR,

I got you and thats it in a nutshell.

You're right, Jason. NYC is not 99% apartments, I never said it was. According to the census, New York County (approximately the same as Manhattan) is 99.1% apartments.

http://quickfacts.census.gov/qfd/states/36/36061.html

"And its an index of the NYC AREA, as it is with the other cities."

It's a metropolitan area that includes parts of Pennsylvania and Connecticut, from Bucks County to Hartford. It is decidedly NOT the same as Manhattan, or even close.

"You are a real a-hole in your constant desire to pretend that 95% of the people in metro NYC do not exist, including yourself (because you are bridge and tunnel too.)"

No - I live in Chelsea. If I am an a-hole because of my "constant desire to pretend that 95% of the people in metro NYC do not exist," then what must you be to make claims about Case-Shiller and Manhattan that are entirely false?

"There is a condo-only index from NYC and four other major cities, but both indices exclude coops."

The home-ownership rate in New York County is about 20%; 80% are renters. Of that 20%, 33% are condos:

http://www.bloomberg.com/apps/news?pid=20601103&sid=a0C7oRx2RDaw&refer=news

Meaning you're talking about an almost nonexistent population.

"And directionally, and in terms of magnitude, both track close enough to the various brokerage reports to be a useful indicator, though not iron clad measures."

First, you have no proof. Second, it's just plain untrue as prices in the outer boroughs didn't rise nearly as much as they did in Manhattan, where there is a shortage of owner-occupied housing.

"Think of it like knowing what Newark weather is like to know how you should dress in Manhattan. Useful, but not 100% accurate."

If you think property prices in Newark are in any way related to property prices in Manhattan (which is what you're saying, not only here, but in your implication that Case-Shiller is applicable to Manhattan) then you are completely bonkers. Sorry, but you are.

Jason and Alpine: Thank you very much--that was very helpful. It would be nice if the brokerage houses aggregated their data going back as far back as the 80's like the CS Index so we could get a historical view of Manhattan apartment prices. It would be interesting to have hard data to look at -assuming that we will also revert back to the mean with the rest of the country (sorry to be so Manhattan centric again).

Miller Samuel has a report on their website that goes back 10 years:

http://www.millersamuel.com/reports/pdf-reports/MMR08.pdf

BenJo, here are data from 1 building in the West Village that go back 10 years:

http://350bleecker.com/policy/sales.html

You can find the initial 1984 prices here:

http://350bleecker.com/policy/offering_plan/part_1.pdf

on page 10. They were $900 per share for nonresidents, effectively UNCHANGED in the 14 years from 1984 through 1998 ($944 per share). Searching through newsletters & the amendments, you can find other price data.

This data series is the same as the Case-Shiller series, and presents very different results than the median prices of Miller Samuel.

Extrapolate.

FIrst of all Steve, I was responding to Alpine on the 99% figure. i never said YOU said anything.

Secondly, I said "NYC" which means New york city, NOT new york county. When I mean to refer to Manhattan, I say Manhattan. I believe EVERYONE knows by now that the CS index is not "Manhattan."

Third, your isolated data set for a Greenwich village apartment bldg could hardly be said to represent Greenwich village real estate prices, let alone Manhattan or NYC.

Fourth, alpine (and possibly others) - streeteasy has real estate data on the NYC area, not just Manhattan below 96th and above chambers but excluding the LES and RI. "People" do care about those areas because the vast majority of people in the area and I would surmise on these boards in fact LIVE in these "fringy" places.

Fifth, Miller Samuels, Urban digs, Goldman Sachs and others have said essentially the same thing - that because there is NO OTHER reliable indicator of NYC area prices, the CS is as good a proxy as any. So I did not make the idea up, experts who all quote when its convenient did.

Always love the respectful dialogues on Streeteasy!

I am of the view that we have, indeed, experienced rampant "price" speculation in Manhattan in recent years. Take a look at these price Case-Shiller Price increases for well-known speculative markets for the period 2000 to 2006 (inclusive):

$1 Grows To:

Las Vegas: $2.32
Los Angeles: $2.71
Miami: $2.82
San Francisco: $2.14
Washington D.C.: $2.41

What about New York?

Here I go with Miller Samuel Manhattan condo/coop price per share foot for period 2000 to 2007 (inclusive). I added an extra year to Manhattan as it took at least an extra year to peak out.

$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. And they also show how New York has kept pace with the leading speculative metro areas of the U.S. I am less fond of using "share" results from a single NYC building.)

Jason, alpine said 99% after I said 99.2%. The actual figure is 99.1%.

No one here talks about anything other than Manhattan. Sorry.

This is inconsistent: "your isolated data set for a Greenwich village apartment bldg could hardly be said to represent [...] Manhattan or NYC" and yet "the CS is as good a proxy as any."

How can you you claim that the Case-Shiller data from Bucks County to Hartford, including NY, NJ, PA, and CT, are more reflective of Manhattan than the individual price data on individual apartments specifically in Manhattan.

Or to claim that "knowing what Newark weather is like to know how you should dress in Manhattan," yet simultaneously claim that knowing the weather in Greenwich Village is less accurate than knowing the weather in Hartford?

Sorry - you're out of your league here.

Just as an fyi, the CS New York metro area is cap weighted. As such Bucks County and Hartford represent very tiny allocations of the index.

And Manhattan represents almost nothing at all.

"You are a real a-hole in your constant desire to pretend that 95% of the people in metro NYC do not exist".

LOL. I wish 95% of his posts didn't exist...

I know, Admiral - the truth hurts.

Oh sorry, I thought they were talking about Alpine, not Steve. Sorry, didn't mean to dump on you Steve.

Sorry, didn't mean to ignore you, Alpine - i meant to dump on you.

"FIrst of all Steve, I was responding to Alpine on the 99% figure. i never said YOU said anything."

See, he WAS beating up on Alpine. Steve, why did you jump in front of a bullet intended for Alpine??

I am hardly inconsistent, Steve. When trying to extrapolate historical price changes for NYC going back 20 years, the various experts use the CS index as the best available proxy. NONE would use a single GV bldg to approximate the same.

Just to be consistent myself in my personal drum beating, I'd like to point out that if you look at the Miller-Samuel report, prices on average seem to have tripled from 1999 to 2008. In 1999 we were about 6 years into an up cycle which historically has been 5 years up / 5 years down. Anyone want to talk about what that means about the possibility of prices returning to what they were 6 years into the up cycle?

cs does have a condo index for new york. calculated risk links to it at the bottom of this piece:

http://www.calculatedriskblog.com/2009/04/tiered-house-price-indices.html

Sorry Admiral, all is forgiven on both sides, I hope.

I'll take the Case-Shiller data from a single, relatively decent Manhattan building over Case-Shiller for the NY Metro Area or the mean or median prices any day. Prices in prime Manhattan tend to move in tandem; the property mix is not held constant in the median or mean. If a property in 1 building cost $200,000 and a similar one a few blocks away costs $200,000, if the former increases by 20%, the latter is likely to increase by the same amount.

"the various experts use the CS index as the best available proxy."

For Manhattan? Who? Show the reference. It's not true.

"NONE would use a single GV bldg to approximate the same."

All would use the aggregate of all buildings.

IMHO, the data from late 90s and all of 2000s are all skewed to the upside, so it's interesting and useful to see a real comp--albeit just one west village building (which fascinating--thanks steve)--alongside the broader NYC CS index for data in the 80s. It paints a pretty grim picture if you believe in mean reversion. And thanks to all who contributed.

However, I think there is probably a minimum level below which Manhattan apartments (if maintained well and in good neighborhoods) will not go down even if there is a 50% peak to valley price correction, because I think most owners in those kinds of apartments are wealthy enough and/or sufficiently employed to ride out the storm for a multi-year term -- they just won't sell until the markets turn. Thoughts?

"If a property in 1 building cost $200,000 and a similar one a few blocks away costs $200,000, if the former increases by 20%, the latter is likely to increase by the same amount."

Problem is "similar" is not a mathematical function here. I'll take median over someone trying to say two apartments blocks away are the same.

Yet again, nyc, you interpret things in your own unique way. Take out "a similar" and you can say the same thing: "If a property in 1 building cost $200,000 and one a few blocks away costs $200,000, if the former increases by 20%, the latter is likely to increase by the same amount."

It doesn't really matter if they're the same. The point is that property prices rise and fall in tandem, which is not reflected in means and mediums because the mix is not kept constant.

"It paints a pretty grim picture if you believe in mean reversion."

It paints a pretty grim picture whether you believe in mean reversion or not. In much the same way, i am constrained by gravity whether I believe in it or not...

There seems to be some confusion about Case Shiller and Manhattan. The CSI index DOES include Manhattan, as well as the remainder of the boroughs, Long Island including the East End), Fairfield County, Westchester County, Parts of Northern NJ and one county in PA (name escapes me). It DOES NOT include co-ops, condos, foreclosures (with a few exceptions) and new dev. It does include Manhattan Townhouses but in 2008, they (according to my report) accounted less than 2% of all sales. There are significant timing problems with the index in this region since Long Island saw weakness 3 years ahead of Manhattan, Queens 2 years ahead of Manhattan and Brooklyn 1 year ahead of Manhattan. There's a lot thrown into the mix to consider here so take CSI for what it is, a good macro view of the entire region. If that is what you want, then it is a good indicator to look at.

"If a property in 1 building cost $200,000 and a similar one a few blocks away costs $200,000, if the former increases by 20%, the latter is likely to increase by the same amount."

Very often, this is not the case. What happens is that when you move from a bad market to a good market, the apartments in the "bad buildings" go from almost unsellable at any price, to "ok, it's not quite as good as the other one". In the good buildings they go from being a little hard to sell because the market sucks, to very easy to get rid of. But price wise, the bad buildings go up MUCH more than the good buildings.

For example, take Tudor City. One of my clients bought about 50 studios there when you couldn't give them away (the early 90's) for between 8,000 and $17,000 each. Today (let's pretend we're still at the paeak, so I really mean last year?), they were worth about $250,000 to $300,000. In other words, about 2,000% to 3,000%. You think other buildings within a few blocks radius had the same percentage increases? I don't.

if you want to go looking, check out 85 8th Ave; 77 Bleeker, 250 mercer, 407 Park Avenue South, 50 Lexington, 340 East 93rd, 140 West 69th, 2025 Broadway (i can keep going.....) and see what's gone on there vs what's happened in other buildings withi8n a few blocks og them.

30yrs_RE_20_in_REO - Thats very true - like Morningstar's "beta" rating for stocks (I'm not comparing stocks to housing, just the term). Emerging markets or weaker buildings often rise faster (as a percentage) when going from a weak to strong market and fall faster from a strong to weak market.

mutombonyc "Why does NYC lag???" We were the last in primarily because of Wall Street bonuses and the weak dollar. Without Manhattan, the NYC region would have showed overall weakness much sooner. The irony here is the compensation records were set in conjunction with the spoils of reckless securitization (securitization is not a bad thing in and of itself) activity generating faux profits which is what help accelerate the downfall in other housing markets as loans went bad.

JM,

Thnk you that was well put.

Thanks, JM. Always thoughtful comments and insights.

Do you have a view as to how much further lower Manhattan prices will go and how much longer the slide will take?

Many thanks.

"No one here talks about anything other than Manhattan. Sorry."

Woah, Steve, I'm usually with you but this is just wrong. You may decline to pay attention to the Brooklyn threads, but they certainly exist.

You can find the list of what Case-Shiller includes here:

http://www.urbandigs.com/2007/08/problems_with_caseshiller_inde.html

Of course, this blog directly contradicts jason's statement that UD believes Case-Shiller a good indicator for Manhattan - it says the opposite.

No one doubts that there are short-term differentials in property price movements, and that good areas rise faster and fall slower than bad areas. Chelsea is a prime example - 10 years ago it was a wasteland. But taking Pike, PA or Newark as more indicative of Manhattan market movements than comprehensive Manhattan data - albeit for one building - is sheer folly.

evnyc,

If Manhattan decreases the outer boroughs wll follow suit.

30yrs - you are correct about Tudor City being a rather different entity. But the figures I pulled from 350 Bleecker indicate a 700% increase in property prices since 1998; it would be about 1,000% from the early 90's. And I'm sure that if you bought 50 of them, you'd get an even better price.

Apples to....

Topper - It's all about credit. Conforming mortgage wheels have been greased by the Stimulus and bailouts of Fannie and Freddie - nothing on the Jumbo yet meaning that 40%-50% down payments are being required for jumbo financed deals - that still knocks many out of the box in this market - Credit must stabilize before housing will. The value of housing in a market and what type of financing it falls within (conventional v jumbo) are key in understanding when stabilization will occur. We could be last out after being last in because of jumbo underwriting as a total market, but within our market, entry level may be first out before high end.

For 350 Bleecker, would it be correct to say that there was a ~0% increase in the price per share from 1984 to 1998 for outsiders?

Thanks, JM.

JM,

its a privilege to read your commentary on this blog. your insights are greatly appreciated by many including myself

bart22 and Topper - thanks - this thread has has been a very productive conversation - great contributions by all - it's hard to stay out of it. ;-)

Yes, Topper, it would be correct to say that for outsiders, prices did not increase for 14 years. In fact, between 1988 and 1998, prices fell: in 1998 I paid less for my apartment than either of the prior 2 owners, and 3 other virtually identical apartments sold for the exact same price at the exact same time (4G, 5G, and 5E).

From 1998 to 2007 prices increased about 700%. They have subsequently fallen by about 30%. For all the reasons discussed here and elsewhere, I believe we have another 40% - 50% to go.

Property prices are a function of income and leverage - incomes are way, way down in Manhattan, and we all know the status of credit.

mutombonyc - Brooklyn, at least, seems to be taking its sweet time. Queens seems to be leading the pack.

Thanks, Steve. Pretty interesting perspective for the earlier 14-pear period. I'm guessing, previews of coming attractions.

30yrs_RE_20_in_REO, were those Tudor City studios rent-regged, and did the include tenants as a free bonus?

Is that really Jonathan Miller of the Samuel Miller appraisal group? Wow.

By the time credit stabilizes where it would have an impact on jumbo loans in Manhattan, I would surmise that we will be entering a phase of higher interest rates, which will prevent higher housing prices if not depress them further.

Steve,

As an additional fyi, the share price-only return on 350 Bleecker from 1984 (I assumed 12/31/84) to last transaction in 2008 works out to 7.6% CAGR. Plus, of course, the presumed net implicit rent one would have received.

That includes good (extraordinary) and bad times.

Steve--thanks for that urbandigs link. Really on point.

And that CAGR, Topper, is still twice the normal rate for owner-occupied residential real estate. Run it from 1998, however, and you get a much higher rate (don't feel like doing the math now, sorry!).

No, i said for historical Manhattan going back 20 years. Not for all times. Re-read what I wrote.

alanhart: "30yrs_RE_20_in_REO, were those Tudor City studios rent-regged, and did the include tenants as a free bonus?"

Nope: all vacant REO.

stevejhx: but it's NOT just Tudor City: I cited a list of other buildings where it's exactly the same and could if given any point in Manhattan could probably pick a building within a few blocks which would be similar (geeze, I think just with the list i already put up I've already covered more than half the neighborhoods in Manhattan). In addition, these 50 apartment were bought ONE AT A TIME (well, perhaps a few were bought 2 or 3 at a time), there was not a "package deal" with a big discount. Anyone who wanted to buy these as REO at the time could simply have done so.

"Yet again, nyc, you interpret things in your own unique way. Take out "a similar" and you can say the same thing: "If a property in 1 building cost $200,000 and one a few blocks away costs $200,000, if the former increases by 20%, the latter is likely to increase by the same amount."

It doesn't really matter if they're the same. The point is that property prices rise and fall in tandem, which is not reflected in means and mediums because the mix is not kept constant. "

Yes, my "unique way" is not making things up.

What you are saying is simpy not true. Apartment types don't all move in tandem. Look at the stats. 1 bedroom vs. 2, doorman vs. no... they can have fairly different movements over time. 1 Beds used to get killed the most in declines, 2 bedrooms the least. Building types, host of variables.

Pretending everything moves in lockstep is simply wrong.

Just look at the per-share prices of the apartments at 350 Bleecker & you will see there is not a material difference in price based on apartment size. There is some, but not statistically valid.

Markets move in tandem. If the price of potatoes goes up, the price of rice does not go down. Yes there are fluctuations and variations, but is far more accurate to follow the same apartment over time than it is to follow means or mediums, even if you only use one building.

I'm not making that up. It's the Case-Shiller method. If you use the Jonathan Miller method you will get wide variations in prices among apartments. That is because the sample is very, very small, and not homogeneous. The sample in my example is small, but homogeneous, making it more accurate.

Indeed, the price ratio between apartments at 350 Bleecker & London Terrace has remained the same: a 2-bedroom 1-bath at 350 Bleecker costs about as much as a 1-bedroom 1-bath at London Terrace, and it has for years.

"Just look at the per-share prices of the apartments at 350 Bleecker & you will see there is not a material difference in price based on apartment size. There is some, but not statistically valid."

This is more of an anomaly for this building than a market normality. I would say that for greater than 50% of Coops this is not the case.

"Indeed, the price ratio between apartments at 350 Bleecker & London Terrace has remained the same: a 2-bedroom 1-bath at 350 Bleecker costs about as much as a 1-bedroom 1-bath at London Terrace, and it has for years."

Really? In 2003 1 br's in London Terrace were going high 400's to 500's and 350 Bleecker 2 br/1 ba were going at 660,000 and 677,000?

BenJo
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Is that really Jonathan Miller of the Samuel Miller appraisal group? Wow.

By the time credit stabilizes where it would have an impact on jumbo loans in Manhattan, I would surmise that we will be entering a phase of higher interest rates, which will prevent higher housing prices if not depress them further.

Exactly in about two years when we can't finance our deficit spending and national debt the bottom will fall out when interest rates spike..........hold on to your balls. Hey why did the GI's in Vietnam always sit on their helmets when flying in choppers..... :)