NY Times: "Fears of a New Chill in Home Sales"

You should have been at the conference I was at on Monday, at Hofstra University, about real estate and the economic crisis. Top people from Standard and Poor's and top business schools.

The take-home message: Home prices in NYC and elsewhere are due to fall more. We have not hit bottom, absolutely not, not even in Manhattan.

Implication for sellers: Price well now and sell as quickly as you can, because over the next 2-3 years prices are going down. Pricing well to me means pricing where the market is going, not where it is, so if you want to sell you should do something that feels like under-pricing and do it right now.

Implication for buyers: Waiting will get you lower prices, yes, but interest rates are heading up, although the timetable is impossible to say, most people agree.

Implication for investors: Don't buy commercial real estate, period. Just don't buy it. To me I'm including mixed use properties as stay-aways. As an investor in residential real estate, I am positioning myself to snag some great deals in 1-2 years, anticipating further declines however after purchase (because nobody can time the market perfectly). The idea is to expect appreciation over 10 years and get cash flow in the meantime.

Inflation remains a real possibility, including stagflation, which is bad news for everyone. Personally I don't see how inflation can be avoided because of government stimulus (which saved our collective asses) and declines in productivity. By definition inflation is too much money chasing too few goods.

I would like to write a journalistic report on this conference--I was a journalist for over 20 years, that's what I used to do for a living--but I don't have time, and there isn't anybody out there who will pay me to do that kind of thing anymore. So I apologize for the lack of substantiation of the above bullet points, but that's what the speakers agreed upon.

{Manhattan real estate agent.}

Thanks Fluter. Can you tell us who was speaking at the conference?

Interesting, esp. on commercial real estate. Cap rates are way too low.

By the way, to the original post, the sky has been falling for some time. The government put up some netting to try to catch it for awhile. It clearly worked to a certain degree. Now that netting may be gone.

Fluter, thanks for your insights. I don't disagree--and haven't disagreed--that prices will slide, especially for commercial properties. But quoting Standard & Poor's, which arguably was an instrumental force in the mortgage crisis, should convince no one.

As for buying real estate, waiting could prove to be a wash at worst. That's because competition will be heavy when everyone thinks the bottom has been reached prices will rise, as competition surely will make happen over the long term. In addition, mortgage rates can go only up, as they have been for the last three weeks.

(I am, btw, also a real estate broker and longtime former journalist who can't seem to stop writing!)

John Talbott, in the book "Contagion" about the financial meltdown, says that prices should end up at (I think) 1997 prices X 30%. 1998 was about when prices started rising out of context with demand and the 30% is for inflation.

I don't know if this will apply to the New York area, but we're renting and sitting with cash so even if interest rates go up, it shouldn't affect us. The problem is, as with the stock market, the government is determined to prop up its bubbles.

Fluter: if you see an opportunity in a bank sale residential property that is particularly nice, would you buy now?

look at the rate declines of the last two days--as we gobble up huge supply of cash man bills 15 minutes ago-- erasing in two days the rate increases of the last month in the 0-3 year sector--rates will remain low for some time--stox have broken some key supports, tho from lofffty levels--if a pukeshot in stox (not a ridiculous concept) develops we could see rates lower than yet seen!!

i eill concede that many of the properties ive watched for a long time have traded of recent---after big price reductions and, where closed, at way cheaper prices than last asked--but they have traded nonetheless--i remain bearish nyre and will consider a cash purchase next sumer or later--fluter's right--buy with the plan that the trade go against for a bit, but with the comfort of buying weakness and buying somewhere in the trough and be prepared to hold

I am looking for a pre-war 6 or 7 in Carnegie Hill and have noticed that apartments are selling. They seem to be selling at 2005 prices. While properties had been sitting, now they have multiple bids if they are priced close to 2005 levels. While I would like to see prices come down some more, I am not so sure they will in the market that I am looking at and may even go up due to buyers with Wall St. bonus money. There is definitely more buyers looking. I am curious to know why people on this board would think prices in Manhattan will go down (other than due to higher interest rates).

There is definitely more buyers looking. I am curious to know why people on this board would think prices in Manhattan will go down (other than due to higher interest rates).

chbuyer, it's because they have missed the chance to get a great deal early in the year when the market was dead(no buyers, desperate sellers). Now they are extremely frustrated and emotional. Some can't stomach the idea that they will be paying much more for an apt then say 6-9 months ago. But they can always yell from the rooftops that "prices will fall!". That is easy so they do it. Yes you are correct buyers have returned. I think, my prediction, is that the late winter/spring season of 201 will be one of the best in a long time. Buyer thoughts "let's see how the rest of the economic year plays out, just to make sure the economy is back and then we'll start looking right after the holidays" This spring season will be awesome, awesome I tell you. :)

Here are the details of the Hofstra University conference:

http://www.hofstra.edu/home/News/PressReleases/10192009_RealEstateConference.html

Scott Rechler was the keynoter and a great big bear. He sold his company for billions just before the bust because he and his partners saw it coming. He showed us the data they were following, and it was the Holland tulip bulb phenom all over again so they sold. Shares have fallen from something like $57 to something like $5.

Yes, 2005 prices and thereabouts were cited on Monday.

Mimi, if I had the cash I would buy real estate right now. But there's no need to rush, because the deals will still be there in 1-2 years, I do believe. I got a kitchen/bath reno to do in my primary residence and I have an allergy to debt, so that's getting done in early 2010.

If I bought now I would find distressed seller(s) and put them out of their misery. There are plenty of them around.

I also wish I knew more about the Real Estate Owned market, but I don't, so I can't broker that well enough, and even if I did I don't know how to make connections at banks that could use my services as a real estate agent.

And any prop I would buy has to cash flow, because appreciation isn't there. That means it must a strong residential rental market, and I'm assuming depreciation over the next 3 years at least, which bothers me not at all if rental demand is there.

The non-obvious thing to many people is that the sales and rental markets interact in complex ways that vary regionally. So you can have a strong rental market pocket and sales are slow or even dead in the water--this is Dearborn, Michigan, right this minute--or you can have a moving sales market with low rents (not sure where that is right now, or if it exists). The whole area/community needs to be analyzed as an organic whole, which is what smart investors do.

Among other interesting things I heard on Monday is that regionally, differences are huge. I guess we all knew that, but I did not appreciate the magnitude of the difference.

Five states--California, Florida, Arizona, Michigan and Nevada--are driving a big chunk of the nationwide foreclosure statistics, for example. I've said before that Detroit (my hometown) is in a death spiral and indeed it is, and the data show a small run-up during the bubble and a catastrophic slide occurring now. It's turning into Mississippi, or New Orleans without the hope, or something like that.

But New York is well-positioned to bounce back as soon as any bounce happens, and it is expected to be an early recovery area. Not so Long Island, which has a bleak long-term prognosis for a lot of reasons.

{Manhattan real estate agent.}

Thanks Fluter. Very useful.

Fluter,
Why does Long Island have a bleak long-term prognosis? What about Westchester?

Scott Rechler sold but is heavily reinvested in Long Island real estate.

It is hard to keep track between the family members who is where and doing what.

Reckson Realty basically owns most of Long Island office space. It's going to be a very hard time for them I think in the next 2/3 years.

ch buyer, if you couldn't tell, steveF is a moron. He still denies that prices declined. All through the decline, he said prices would be going up that month. And its been a year and a half of him consistently being wrong.

He's pretty much the joke of this board.

"chbuyer, it's because they have missed the chance to get a great deal early in the year when the market was dead(no buyers, desperate sellers)."

Of course, in the period steveF is talking about, he claimed that buyers were lining up and there was no decline. He's lying now, too.

> Now they are extremely frustrated and emotional.

Now steveF is just talking about himself. He blew all his money on his condo "investments" and now he can't sell them... so he's been posting here daily hoping to convince someone to bail him out.

"Some can't stomach the idea that they will be paying much more for an apt then say 6-9 months ago. But they can always yell from the rooftops that "prices will fall!"."

Guys like SteveF can't admit they LOST A TON so the'll scream "PRICES ARE NOT GOING DOWN" over and over again.... even as prices cratered

Of course, the facts have shown that SteveF has been 100% wrong.

"I think, my prediction, is that the late winter/spring season of 201 will be one of the best in a long time."

Apparently, we have to go back in time for prices to go up.

But, keep in mind, SteveF is the moron who has said this EVERY month about the next month... for 18+ months. And he's been wrong every time.

At least his desperation is consistent.

> Buyer thoughts "let's see how the rest of the economic year plays out, just to make sure the economy
> is back and then we'll start looking right after the holidays"

SteveF said the EXACT same thing about fall.... and the summer before that... and spring before that... and... whoops!

> This spring season will be awesome, awesome I tell you. :)

I guess he just means that as a joke.

"But New York is well-positioned to bounce back as soon as any bounce happens, and it is expected to be an early recovery area."

Notice how this isn't supported by any facts or data. A claim is made, and nothing else. Sounds like wishful...

> {Manhattan real estate agent.}

OH.

ok.

I got it now.

One of the morons who said we wouldn't decline in the first place.

Back to shill again, I guess...

With higher unemployment rates and tight credit, real estate is going nowhere but down for the next couple of year.

According to the speakers, Long Island has a bunch of problems. These include high taxes, high housing prices and a net outflow of residents (young people don't stay here unless they have to, in general, as all of us who live here know). We have a complicated government structure that causes multiple layers of taxation, and we have high utilities in part because of the Shoreham Nuclear Power Plant and other "legacy issues."

The speakers didn't mention this, but one of the biggest problems LI faces is constant traffic snarls. It damages productivity. Corporations don't even consider relocation to LI, they said.

Because it has economic diversity and is a global city, unlike, say, Phoenix, New York City is indeed positioned to be an early bounce-back compared with other cities, nyc10022. One speaker specifically cited corporations that wanted a presence in Manhattan but couldn't afford it during the bubble, but can afford it now, and they are sniffing around.

But the bounceback isn't happening soon. NYC is going to experience another wave of unemployment first. One of my clients told me government layoffs are happening in NYC soon after the elections. Unemployment is a lagging indicator and a crucial one.

{Manhattan real estate agent.}

Fluter on the Money !!

SELL IF YOU CAN Anyone on this board
Tell your friends etc..BID on Nothing till 04/10 earliest

Suffolk County in particular is in a deep problem at high end BIG Declines (homes 800k+)coming soon!

4/10? You think there'll be a large correction in such a short time?

"Because it has economic diversity and is a global city, unlike, say, Phoenix, New York City is indeed positioned to be an early bounce-back compared with other cities, nyc10022."

Your logic is simply poor. It was a global city before it crashed. What matters is pricing relative to value and income.

NYC was global and diverse and all these things before the crash... but it was also overpriced even considering. Pointing at the original factors doesn't change that.

The original factors are why NYC is STILL many, many times more expensive than Phoenix. Its already priced in, in fact, overpriced in. That doesn't bode well for prices.

Brokers listening to other brokers for advice on market movements is like SteveF quoting alpo.

Ever heard of a stock Market crash ANYTHING POSSIBLE

What I've been saying for a while... no, things aren't definitely going to drop major again, but I think you can rest assured they aren't jumping up in Manhattan anytime soon.

Given that its SO much cheaper to rent relative to buying (even now), its essentially like being paid to wait.

Even if you miss the bottom by a couple percent, to me a fair price to ensure you don't lose another 10% leveraged.