The Value of Historic Comps?

It's interesting, but less of a factor for co-ops, where price history goes back only to 2004. Five years isn't much of a perspective. More for condos, where you can go all the way back.

I factors in greatly falco. I for one am predicting closer to 2001 prices (with maybe a quick overshoot into 1997-2000 prices)... and would make no bid even at 2004 prices... (which I believe alot of current "in" contract are going into w/...=> they are willing to catch the knife at 2004 prices, cause that was what their mind was anchored at and no amount of rent to own ratio was gonna stop them IMHO)... so sit back relax and have a beer.... the best part of a roller coaster is the weightlessness of the drops :)

if "a lot" of apts. are selling at 2004 prices, then that is what the bottom will be. If people are willing to pay 04 prices, then there is no logical reason for prices to decline to those of 1997.

alpine, w67 didn't say that a lot of properties are going into contract. We all know that volume is way down YOY, even if some people got excited by a seasonal uptick. w67 said that of the units going into contract now, a lot of THEM are at 2004 prices. Big difference.

so then why is inventory now below 11,000, per UD?

Look at UD's 30-day numbers. New Listings are at 1,684 while Contracts Signed are at 1,015, yet the inventory dropped by 205. Have you noticed the new Corcoran and Halstead listings that don't include a full address? Noah has talked about needing to revamp his charting and I believe he expects it ready by the end of the year.

Here's a Miller Samuel supply vs. demand chart:

http://www.millersamuel.com/charts/gallery-view.php?ViewNode=1168397658DtFJU&Record=9

Note that in Q109, the last qtr charted, the Demand (Number of Sales) is the lowest on the chart, which starts at Q400, and that Supply (Listing Inventory) is the highest.

apts sold at 07 prices and declined a bunch since then. that argument doesn't really work about the 04 prices. sure some can sell at 2004 prices (although i am sure closings will reveal the "prices" are even less) in the spring and still fall even further after the dead of summer and the uncertainty that awaits us this fall.

broken record time...

the idea that current prices are a function of prior prices only makes sense when incomes are stable or rising.

income will always be the actual determinant of pricing because even if you posit having sold your prior property at a relatively high number (which is a pipe dream) if you believe that your income or level of income is at risk you will look for new apartments at a lower price.

income and the relative availability of credit and its terms

you're right...its funny, though and making me feel my age because i never thought of credit availability as an inducement to buy but of course it has become that way.

I think 30 yrs said something along the same lines the other day. We have a large number of people who think that rates above seven percent and more than ten percent down for condos is somehow unusual.

And income has been stagnant or declining for what, over a decade now? If real estate prices were really tied to income, we never would have had a bubble in the first place. Excess credit masked a lot of problems, for a very long time, at least in the US.

I think historical prices are good for one thing only. If the overall market has declined X%, then it would be good to know if a property is not priced down X% from historical sales.

"If the overall market has declined X%, then it would be good to know if a property is not priced down X% from historical sales."

That never happens because every single apartment in Manhattan does not decline by the same percentage. Declines vary based on location, ammenities, size, whether it is a co-op or condo, upgrades, views, etc. So historic sales are really not important. What is improtant are RECENT COMPS.

I never said that recent comps are not important or even that historical prices are that important. Obviously, things don't decline in a uniform way. But as one teeny, tiny metric, it's good to know.

The biggest historical stat to look at is rent/sale ratio and cap. rates for a particular city, if not a specific neighborhood. Barring massive gentrification, extraordinary economic situations (e.g. Great Dep), that should be
fairly constant. Which is why we're in a load of trouble right now.

Thank you, 10023. I've been forgetting this of late. Do you know what the historical rent/sale ratio has been?

In many areas, to be sure, there *has* been massive gentrification. Just something to keep in mind.

10023, it's not that i disagree, but i think you can't discount affordability. credit products can mask lack of affordability, as can underwriting standards. it isn't particularly common for rents to be declining at the same time sales prices are declining, and in this instance making sales prices play catch up to rental reductions. which is key, as i believe we'd agree. and evnyc, the massive gentfification only adds to the inventory.

the inventory issue obscures some things, but the bottom line is that we've been adding enough monthly to have a huge overhang yearly, not counting shadow inventory. i've seen some of that shadow inventory, as most conservatively defined as units without owners(other than developers or lenders) available but not on the market, be added recently as they've fallen out of contract, but not many.

almost half of the properties listed are for more than $1,000,000 (over 7500, i believe). the conforming guaranteed loans have goosed the market almost (not quite, need higher down payments, particularly at the high conforming loan level) as much as earlier maneuverings, and i'm reading of fraud there, and now. evnyc, your postings yesterday depressed me a bit. live propoganda free, and prosper.

Can you look at an ask and say, 2004 comp is X dollars so no matter what your ask is, I'm offering a 2004 comp. Nothing to negotiate or, is this a fantacy???
P.S. I'm not bidding on anything, just a question on price consideration.

you can...but if seller doesn't agree--what diff does it make?

columbia,
Needless to say.
The question is, do I stick to historic comps to asign values for the purpose of bidding and negotion. In other words, how low should I bid and, where is the ceiling?
This elimiates my 'love' componet and helps in making a solid analytical LT desion.

Yes it is a fantasy because "take it or leave it" offers are rarely successful. Negotiation is a 2 way street.

true that

bid what you think is correct based on your personal financial situation. try to avoid falling in love with a particular property.

falco, of course you can't, because of many things. you have to know if you are comparing apples to apples, ie, floor, condition, arms-lengthiness. you have sunk costs (renovations) that an owner may wish to recoup, which may affect value.

Having said that, there is some value in comps, both within a building and a neighborhood (perhaps more importantly). Also, over time you can get a very quick sense of how floor plans compare, not just in terms of size but in terms of usable space, and what they have generally traded for by neighborhood depending on condition. That takes work (or a bored friend on SE). And having a good list of such comps (ideally with the unit in question!!), can make your negotiations more intersting.

"I think 30 yrs said something along the same lines the other day. We have a large number of people who think that rates above seven percent and more than ten percent down for condos is somehow unusual."

I'm pretty sure I remember Barney Frank (who is on my "hit list" along with Greenspan and a bunch of others in terms of culpability) saying (a while back, before or around the time the $780B was announced) something along the lines of "Well, people who can put down 20% and have good credit can still buy homes, but what about those that can't, what happens to them?". I got so furious..... WELL THEY SHOULDN'T BE BUYING FUCKING HOMES THEN, THAT'S WHAT SHOULD HAPPEN TO THEM.

"Here's a Miller Samuel supply vs. demand chart:"

Didn't Miller come on here the other day and say that shadow inventory exceeds the sum of both Sponsor units acknowledged as being on the market plus re-sales together? Well, put that in your chart and smoke it.... ;).

"Yes it is a fantasy because "take it or leave it" offers are rarely successful. Negotiation is a 2 way street. "

I've had plenty of success (on both sides) with take it or leave it offers. You just have to make GOOD one's, not unreasonable one's.

However, I will say that it is rare that a buyer pulling up old numbers and using those to justify ANY offer are successful. You may want to use them to figure out what you want to pay, but in NEGOTIATING with a seller, there's pretty much ONE thing which works (in terms of throwing a piece of data at him to change his mind about his price): throw another unit at him which is as good or better than his that you can get instead of his at the number you want him to accept and tell him whoever accepts your offer first is the one you are going to buy. Sellers aren't competing with other sellers from 2004, 2001 or 1997. They are competing with other sellers TODAY. THAT is who they have to beat, so that is what you have to convince them they have to do. It's also easier to show why they should accept your "lowball" offer that way than to enter into some esoteric argument about what year prices have reset back to.

but also, we are back to 'averages' again and why i hate them: you will find that prices may have reset to "year X" but that in fact "X" is a variable depending on the building. location, etc. If the average reset is 2004 (for argument's sake0, it may be that for one building it's 2001 and another it's 2005. So how do you use any year to justify to your number on any specific building without showing the year IN PARTICULAR that sales for the building you are talking about? And unless a building is fairly large with a lot of sales, that can be a very hard thing to do.

"I've had plenty of success (on both sides) with take it or leave it offers. You just have to make GOOD one's, not unreasonable one's."

Yes, I'm sure take it or leave it offers within 5-10% of asking are successful. But when the take it or leave it offer is a lowball, as many are, I doubt that is the case.

When looking at previous years comps shouldn't historical interest rates also be considered?

Say your comp is from 2005 and interest rates were 2% higher than current rates. Would a $1M property at 7% be equal to a $1.2M property at 5%?

"Yes, I'm sure take it or leave it offers within 5-10% of asking are successful. But when the take it or leave it offer is a lowball, as many are, I doubt that is the case."

Look at the discussion of the sale of 9B at 490 West End. Asking $1,975,000, sold $1,500,000. Somehow I think a take it or leave it offer of 20% offer would have done well if played right. Or do you think they would have taken the $1,500,000 over the $1,580,000? And I'll go further on a hunch and say the offer was a take it or leave it offer or close to it; or do you think they started at $1,025,000 and met in the middle?

touche

columbiacounty.... foil or sabre? chk your email....

just passing thru.... oh yeah... take it or leave it is very effective IMHO in a downward mkt w/ desperate sellers... yo spinnaker1....

epee, silly.

gotcha...great hearing from you. doing some running around today...back to you shortly.