Expectation of RE prices by Year End - Shadow inventory in condo developments.

RE_PRO
Post the link in it's full printed format. We all don't subscribe to the WSJ.

Yes, there is tons of shadow inventory.
I was in contract in the FiDi area and elected not to close, something I am very glad I did. There were 163 units for sale and only 76 have closed, leaving unsold of about 87 units. The Sponsor has 16 units for sale, leaving a shadow inventory of 71 units. I am sure it is the same in other new developments. It would be interesting to see this type of analysis for other buildings.

google this :manhattan unravel, WSJ

click on the link and u will see the whole article.

Maraman, so did u lose ur downpayment? Just curious ur underlying reasons why you would buy FiDi the first place? I was down there a few weeks ago and I just didnt see anything around.. no community, no grocery stores, empty streets only..

I have an action going with the AG, two others are suing Sponsor. I am optimistic about getting something back. Signed in 2007, when things looked a whole lot better.

I think the "unravel" will be a slow process.

We're probably down about 20% from the 2Q2008 Manhattan peak. I'd expect another 10% decline by year end 2009. And I'd expect another 15% decline by year end 2010.

The shadow supply is an important factor. But the most important factor is that prices are out-of-touch with reality. Example: price/rent ratios.

What I think are key factors are:

Employment and income: dont know how much of Manhattan will be affect by the financial industry income destruction. If you tell me that 40% of Manhattan are apt owners, I would say that we are in big trouble.

Supply: Another 4000-5000 condos by year end, how are we going to get rid of this supply on top of other sellers

Income: People from financials are making half or less than half of what they made in 08 per Bloomberg.

Lack of Jumbo Loan lenders: Manhattan top end will all be jumbo loans and banks are less relectant to lend since they can't securitize thse loans with easy, unlike conforming loans.

Cost of living in the City is very high: 200k pre-tax just to live comfortable.. have friends leaving NYC to live in North Carolina and other places.. will live a better life at other states without the stress and political crap that people play at work.. My gosh there are so many liars and chest beating animals in the financial world it it is unbelivable. They are articluate but dont know shiza but pretends and say it with conviction with the top guys beliveing becasue they are dumbass.

Topper, three weeks ago I would have agreed. Not no more. I still think that after the initial descent, which will be (and is being) faster than I expected (UD hit that one) there will be a couple more downward bumps as unemployment remains high and developments are finished and move through the bankruptcy process. But right now I am stunned.

Seems like the quickness of the decline will depend on how much of the market "needs" to sell. This would be new construction and those speculating in condos. The fact that most apartments are coops will make the decline occur painfully slow relative to other markets, as owners try to retain as much of their equity as possible. This of course does not take into account the current difficulty of getting jumbo loans.

I'm seeing coop prices fall. It doesn't take much distress in a market this small.

need to sell doesn't only mean can't afford....if you believe the market is going to continue to get worse and worse, it becomes prudent to sell even if you don't need to....

yo CC! & AR!

90% of NYCers will never amass more than $1MM in cash assets in their prime earning years (just say $250K gross, $150K after taxes, rent/carry charge of $50K/yr, some trips, food etc.... of $50K, save on a good year $40K to $50K/yr, I assume 20 yrs of this slog and you get to save $1MM... given the equity mkt lately, let's just say 1 or 2% real rate of return over the 20 yrs)... if you can "sidestep" this bubble bursting and keep $500K in bubble equity while riding it our renting.... hell that's 10 yrs of your life back...

so as CC points out, it doesn't take much of a financial genius to dump and rent for the next 3 yrs.... back to OP question.... tons of shadow inventory that's ready to just see his/her neighbor's unit get done and out comes another one.... funny thing, my e-mails from SE in the last few days have included a bunch of units that went into contract, but lo and behold the exact unit on a higher floor gets "newly listed."

Anybody else seen this? I think it's the pretty girl gets nervous 2 weeks b/f prom nite syndrome...

How many coop apartment and how many condo apartment are there in manhattan? how many apartments are for sale vs only rental units? anybody knows?

w67th, yo yoself. why you not coming to our little soiree?

eurocash, it's a hard number to nail down right now. excess of both, numbers moving due to unemployment, etc. historically very high rental v. ownership rate, still high, but not quite as high.

Underneath everything you guys have read, the JUNK bond market is on a tear.

http://finance.yahoo.com/echarts?s=SHIAX#chart1:symbol=shiax;range=1y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

I expect another 10-15% downside at the MOST over the next two 2 years in Manhattan. Prices will then stabilize and remain flat for a number of years.

"I expect another 10-15% downside at the MOST over the next two 2 years in Manhattan. Prices will then stabilize and remain flat for a number of years."

Fast forward 2 years. Apartments are down 10-15% from now and are expected to be flat for 5 years after. Rentals are also down 10-15%. Rentals will increase over 5 years in similar $ amount to the $ amount increase in a similar condo apartment's maintenance.

Do you buy or rent in 2 years?

I expect another 10-15% downside, now, as we speak (or write, rather).

Junk bond market, esoteric a bit much, no?

We've had our 20% decline and reports(Goldman and others) calling for a 50% peak to trough should not be ignored. The risk is too great to buy or even hold a newly purchased unit. Housing is stabilizing in the most decimated areas of the country where prices have come down 40-50%+. NYC RE has always lagged other housing busts.

"I expect another 10-15% downside at the MOST over the next two 2 years in Manhattan. Prices will then stabilize and remain flat for a number of years."

Say thats true... thats a 35-40% total decline. Add in flat for a number of years, you're talking almost a decade and a decline in real terms of like 55-60%

quick example...Lincoln Square...alcove studios were selling for over $400k now recent listings are $300k.