Is it just me or has the market really turned?

Anecdotally, I find that people who are 5+ years younger than me have more of a desire to settle down and "own" something than my peers (many of whom bought only when it became unavoidable - nonNYC). Maybe it's all the media emphasis on home improvement, decor, etc. I couldn't imagine watching Trading Places or other shows of the ilk in my teens or 20s, but that's what people have grown up with. It's not just RE, I think of all the 20-somethings I know who wouldn't bat an eye at buying a 5k+ engagement ring even with student debt.

Ichian sounds genuine - maybe there's a small uptick downtown in her segment, I don't know, I haven't looked.
Doesn't say anything about broad trends or the overall market.

Aboutready, you know the Chelsea/GV 1BR market so well that you're positive that Ichian's account could not possibly be true?

I think the dynamics of the 1BR market are probably much different than those in the family-sized apartment market. I know the 2 and 3BR market very well in my chosen neighborhood but couldn't purport to guess what's going on with smaller apartments.

Actually I follow the entire downtown market, but not so much fidi. And I keep track of sales for all sizes. West village maybe. Chelsea no way.

And there is a small but non-zero population of 20-somethings who have parents who desperately want to give them downpayments to buy something, anything. My parents are far from wealthy but have approx. 80k that they will just fork over to my younger siblings in the event that they find anything they want to buy (I told them to keep my share). You can pull out all the economic forecasts you like, rent v. buy equations, demographic studies you like but this is something they're really adamant about. They have saved all their life to try to leave us a little something and the only acceptable way to spend it is on RE.

In NYC, the $ numbers are larger, but I've known more than a few people in the same situation.

Blah blah blah. NYC was a hard nut to crack 40 yrs ago. It still is. Never heard the Sinatra refrain about being able to make it there or anywhere?

Thank goodness for inflation. Hold onto it long enough and the payments become cheaper than a pack of cigarettes. That is if inflation and Bloomberg's tax hikes continue at their current pace...

10023, that's been a factor for the past 10 years. yes, like the foreign investors it is real, but apples to apples are current comps. what's bizarre about the above post is that chelsea as well as many other non-fidi parts of downtown didn't START to fall until recently. the whole time sequence is horribly out of whack.

moore? what inflation? the number of unicorns?

Well, uptown, many 3br+ listings that came on the market in the last 12 months before the fall were either taken off the market, rented, or closed substantially below 07, 08 comps. There are listings that remain perpetually on the market due to crazy high prices (higher than '07 even) and no-one pays them much attention. They're off my radar until they come close to current comps.

What has happened after Sept to create buzz - a few new listings came on that were of relatively high quality (snd priced lower than '07 highs) sold quickly. And due to more realistic pricing, the few older listings that came back on the market in Sept sold - some for higher than the comps that closed earlier this year.

10023, i don't follow your market closely, but i do have a look here and there. downtown has had a way different pattern.

i agree with all that the product available right now is mostly crap. and some people appear desperate to land one of the few good apartments. one wonders why. do people not think that it isn't unusual in the slightest for there to be very little fresh inventory right before thanksgiving? people just love to work themselves into a frenzy to justify buying.

There is a reason that I don't typically post here, and it is because of these angry tirades that ensue for some reason in these threads where people feel like they have to "outsmart" each other. Bottom line is that no one knows where the market will go no matter how much experience anyone professes to have. My understanding is that the purpose of this forum was to ask and provide advice, nothing more.

I am not a broker; I am a 27 year old recently married, working and living in Manhattan. I had a tough time from July-yesterday getting my first real estate transaction done. The OP was genuine in her question, and I simply wanted to pass on my own experience since I am freshly out of the market. I personally saw a number of apartments that I bid on or about to bid on snatched up at all-cash offers, some near or even above cash. Of course, the market is not 2007 but things that are priced well have begun to move. Although I bid above ask, I am happy with my transaction as it was priced well for the building and glad to be out of this market for a while. Take it for what it is, and I will not comment further in this thread.

True enough, moore23, about New York being a tough nut to crack. This isn't a new phenomenon. I moved to NYC almost 15 years ago, and the same apartments that were hard to afford then are still hard to afford now. I make a lot more money now, but so do a lot of other people. I remember when ten years ago a friend bought a million-dollar loft in Soho. It seemed like an unattainable dream for me. Now I can afford a million-dollar place, but no way that will get me a floor-through loft in Soho. The problem is that so many people desire floor-through lofts in Soho. (Not me, anymore, but that's another conversation.) I don't feel that the market is inherently out of balance because an Average Jane can't afford an apartment that half the people in this city would give their left ear for. It is precisely because many people would give their left ear for such an apartment that Average Jane will never be able to afford it. This sentiment doesn't make me a perma-bull; I waited until Q3 of this year to buy and assume prices will still decline a bit -- or at the very least will remain flat, with small hills and valleys, for quite a while. But I'm not surprised, nor personally exercised, about the fact that prime New York real estate is and will remain really bloody expensive.

spare me. if you've been looking here for awhile you know exactly the potential response.

snatched up at all-cash offers? how the hell do you know that? a broker told you so?

There isn't never much good inventory (by my definition). What made the bubble the bubble up here was the frenzy over crap inventory. If good inventory is priced "reasonably" relative to the most recent comp, it will sell in the current market - the difference is that there won't be a bidding war today and that the "good" apartment won't be priced 20-30% above the last comp as in the late great bubble.

The usual squabbles I have with the other uptown posters is over what constitutes quality and what discount to the last comp will make a quality property go into K quickly.

What hasn't happened yet is the massive discounting that WILL continue with the large inventory of hohum condos and shaky conversions as well as co-ops with huge mtges & high maintenance. And what no-one knows for sure, though of course bears/bulls will predictably fall on opposite sides is how much that discounting will affect better quality properties.

10023, i agree with you. there's always been relatively little that's good inventory. what i found interesting recently when looking in midtown east and the UES is how many cookie-cutter post war units had been truly transformed into something decent. you can't do anything about ceiling height, which is pretty much a killer for me unless there's a tremendous amount of light, but there had been some obvious efforts to turn the ho-hum into something nicer, and it sometimes worked.

Aboutready, is it inconceivable that she's actually looked up the closing prices for the apartments she lost out on? Wouldn't you? Give the woman a break.

Take 1965 Bway, for example. It was conceived and built in the mid-90s and the rent vs. buy ratio has never ever made sense there. Right from the beginning, you were paying a premium to own. Then the gap got larger and larger because it acquired some mystique, not as much as say, 111W67 but sufficient to make the rent vs. buy gap huge. I have gone through the ownership of most of the units (ones not held by opaque corps) and there will always be fewer "marginal" sales there and the factors that affect prices will be different than say, those that affect prices at 10W66. But it's not immune to the broader market, and as W67 points out, holding off on buying a 2br unit for a year can save you $1m.

But I'll bet you anything that if the allure of the building holds, that it will always be pricier to buy than rent in that building compared to other buildings in the vicinity. I don't understand it, but there it is.

miette, i have phsyically gone through ALL of the closing prices for chelsea apartments closed in the last two months.

check out the downtown comps thread.

AR: when times were more heady, people bid up tremendously for those postwar buildings, almost as much as "better" buildings on a per-square-foot basis. I owned in a building like that, and the fall is precipitous and reflects the broader market much better than the prices in a quality, prewar apt in great shape with decent light.

People bid up even more for new construction in B- locations on the UWS (RSB, lower WEA) and you have prices dropping off the cliff. What everyone is waiting for are prices to start really falling for great apts (say, 1m for a C7). Could it happen? Sure, but waiting around is getting a little hard for some so they're emptying their wallets now. I can't say that I disagree with buying an apt that you will love forever, assuming you are not totally apocalyptic-minded (and even if you are, because hey, we will all die someday).

Disagreement with aboutready is not allowed.

Nor are guests to her apartment allowed to use the toilet.

10023, of course. and there are numerous building where rent isn't even an option. but generally for all but a certain subset of apartments rent/buy should have a certain ratio that allows for the value of owning. i don't think there is no premium to owning, but it ought not to double the cost of renting.

Up here, it feels like people are chasing the same buildings, same lines of apts, over and over.

Aboutready: I believe you. But she didn't say she bought in Chelsea; she said "Chelsea/Greenwich Village," which could mean Avenue C for all we know. And she didn't say that the other apartments went for peak prices; she just said that the ones that were priced well went quickly for at or near ask. I have no doubt that well-priced apartments are going quickly these days. This is why I find it puzzling that you find her story so inherently suspicious.

10023 i agree with you. but many of today's purchasers are not buying the love forever apartment.

they're buying the starter apartment. big mistake.

What can I say? Folly of youth, parental pressures.

Aboutready, how many is the minimum number of bathrooms you might suggest in the non-starter apartment?

Couple - 2 bathrooms.

miette, maybe it was a genuine post. i found some of the details very suspect, and the link to that NY times article even more so.

i spent a lot of time on here defending people, saying they weren't brokers. and, guess what, they almost always were revealed to be so. if i'm wrong here, i'm definitely sorry. but no, avenue c wouldn't be chelsea/greenwich village.

and please, it was more than just one thing, but this sentence is a doozy:

"I personally saw a number of apartments that I bid on or about to bid on snatched up at all-cash offers, some near or even above cash."

Really. Things have progressed so quickly and so far? Really, i follow this market with a fine-toothed comb. this doesn't make a bit of sense to me.

how the f could you possibly know if something you're about to bid on (particularly numerous units) have been snatched up with all-cash offers? unless you have the worst lying sleaze-bag broker in the world. maybe?

Aboutready, maybe you're right. I'm probably predisposed to believe her. This summer, before I found the place I ultimately bought, I was outbid by an all-cash offer 10% above the asking price on an apartment(!). (And yes, that deal has closed, and the broker was telling the truth.) So it does happen.

miette, i'm not saying it doesn't happen. crazy stuff happens all the time. really. but there's no pattern of it yet. could it form? maybe, but not likely for more than a month or so given current Fed policy changes.

it's hard. very hard. and i feel for the young ones who have no historical reference for their purchases. if you've been only looking for the last 5 or so years it's very hard to have a reasonable idea of what things might be worth.

I'm not sure anyone has a clear idea of what things are actually worth at this point in time. Take the $1 million Soho floor-through loft I mentioned above that my friend bought in 1999. Is the 1999 price really what that's "worth" today? It's not like the rent-buy ratio on that place made a lot of sense in 1999 either. Was that already the bubble? I don't know. I'm just not sure the fact that I've been following NY real estate for a lot longer than the twentysomethings who posted today gives me a much better sense of what things are worth. In 1999, when the Soho loft was $1 million, associates at NY law firms were making half what they do today (and there were fewer of them). No one below very senior levels in the creative professions (editors, art directors, etc.) -- or in most professions, for that matter -- was making six figures. Now even some huge percentage of city employees make six figures. New York wasn't yet thoroughly Guilianified and Bloomberged; fewer people wanted to live here, even just ten years ago. A lot has changed in the past decade.

miette, please. 15 years ago young partners at law firms had no problem buying classic whatevers.

we are in that world. in 1995 we could afford to buy, and if we were two or three years older we would have been able to buy our forever apartment. in 2000 we could sort of afford to buy. now we can again, but it's been a huge battle.

at the risk of sounding like matt, i'm back to my earlier question. how do you buy an apartment when you still have large student loans? particularly in this environment.

and i think your date calculation for when NYC became excessivly attractive is off, as well. 9/11 didn't cause any mass exodus, au contraire. in 2001, my husband was making almost $300k as a senior associate. do you think they now make $600k?

Back in 01 when your husband was making $300k, was that when you first determined that you "fit in as a person in a household which makes a certain amount of money that makes it very cost ineffective for me to work in a traditional sense."?

Definite pickup.

I think it is short lived. Very

You two are talking across each other. 1999 is not 15 years ago, and prices had already escalated to the point where junior partners at law firms could not afford to buy their forever apt. 1994 - yep, no problem, and the $1m loft was probably 600k.

And I don't get why you need a historical reference - simply, rent vs. buy doesn't work in the vast majority of scenarios and by a huge margin. So why buy? Unless you find the property you can't easily rent or you find the property where rent is pretty close to buy.

10023, i was clearly referring to two different time periods. 15 years ago were the partners who could afford literally anything. and then 10 years ago were the people i was mentioning. sorry confusing, but not talking across each other. and in 1999 i disagree, totally. i know many partners at top law firms who bought their forever apartments, particularly lofts, in 1999, at the time they made partner.

What were junior partners making at Amlaw 100 firms in 1999 (prior to the big bump that most got, if you remember the SV firm that raised)? I thought that they made about 300k (I know the boutique scene better) - absent a similarly high-earning spouse, did they buy $1m downtown lofts? That's stretching it, in terms of affordability?

well, isn't 1999 kind of a dubious year for comparison? in 1998 there were all sorts of things i could afford. who knew the urgency?

anyway, the senior associates made close to $300k just prior to 09/11, and then despite no decline in firm profitability went down to about $240k. the partner pay, depending on the firm, was much higher. much, much higher.

i realized i didn't answer your question fully. law firms are still private. they have there own rules. a couple of very top law firms have a rule that they most highly paid partner can't make more than 4 times the least paid.

We bought in August. I was hesitant because I thought we maybe should wait until November thinking things would go down further. It seems, however, that shortly after we bought, the inventory ebbed for apartments in the range of ours. We've been told that our apartment has already appreciated from what we paid. I have no way of knowing if that is true, but our realtor did get in touch with us and asked if we're interested in selling.

how much more did they think you could get than you paid?

I have no idea what junior law firm partners could and couldn't afford ten years ago. My point was that professional salaries have gone up significantly in the last decade. The big salary leap in law was from the late 90s to the early 2000s. In the late 90s first years were making $80K. Now they make twice that. If classic 7s in solid neighborhoods were a million dollars each, there'd be about umpteen midlevel associates (and umpteen people in other professions) who could afford them. Which is why, absent more of a sea change than we've seen to date, you're not going to find a decent classic 7 in a solid neighborhood for $1 million anytime soon. There are not umpteen classic 7s in prime Manhattan to go around.

Generation X certainly did get the shaft from the baby boomers. I dont know what people are talking about. The baby boomers are the first generation in American history to leave their kids worse off. They are leaving us with all this debt. They have forced interest rates down in defense of their assets (leaving it all mispriced for long term gains) and created the largest real estate bubble in history. Entitled? WTF are you talking about.

This desperation to own is misplaced. Parents who push it so hard dont realize that you can get appreciation again like we had from the 1970s because (1) we're not starting from a period of high interest rates and going to a period of low, and (2) many of the places we are talking about already underwent a transformation.

We should see classic sixes for $1mm however. And are entry level lawyers really driving the market? I do agree that its the $250-300k earners who drive the market around. And it isnt that the $$$ has changed a lot. The issue today is how many fewer finance earnings in that range are being created annually to absorb the stock left by departing familities and new construction. Apt23 post resonates. There is something absurb about $2mm pricing for apartments too small for two kid families. I bet if we could get the data, the spread between a classic seven and a 4 bed house in Larchmont is at a historic high. Manhattan needs to adjust enough to make this a less absurd tradeoff. Tough to say exactly how much that adjustment needs to be from here. I think we are running on bull market fumes because the pace of wealth creation is way down. I mean how many hedge funds were launching from 2004 to 2007.

To address the OP's question, we had a mini-spate of activity in the summer (basically it seemed like our seasonal spring activity came late) and we're having another now, which is probably psychological (buyers want to get settled before the holidays) and rate-driven (at the low end, money's still cheap, but there's no sense that will be forever).

Whether that means the market has "turned" is too early to call. My own personal opinion is that pricing has been established, and that we'll see more sales volume as buyers feel the market has steadied. But in terms of pricing, I think we'll bump along where we are (maybe with little seasonal bursts) for the next two-three years.

ali r.
{downtown broker}

These mini-spates are the last buyers of the bull market chomping at the 25% discounts. When they are done, the market is going to have to stand on its own two feet, and all these condo developers are going to have to shit or get off the pot.

CC, the reason they have bought despite the student loans is because it is simply more edumacation. Being in finance, they need to learn "buy low, sell high" and "thou shalt not go long a risk asset with negative carry". So it's just an extension of the student loan, grad school if you will.

They bought because when they graduated in 2004-2006 the previous 10 years which form the reference point for wealth creation suggested that real estate was the way to go. I bet MBAs and lawyers who graduated in 1997 and 1998 did not buy giant apartments with reckless abandon....because 1988-1998 did not suggest that owning an apartment was a wealth creation exercise.

No dummy, you bought tech stocks on the dip in 2000-2001. Not that website crap, but that quality Internet infrastructure stuff. You know, the real stuff.

I think the best investment a young MBA or lawyer could make for themselves is a $900k condo one bed, down from $1.1mm. How could that not be a smart investment in ones future?

dunno about classic 6s in UES and UWS, but still lots of empty new condo towers out there......

i realize this is harlem, but still. it's always those previously emerging neighborhoods that show the stress first.

http://www.streeteasy.com/nyc/sale/479886-condo-380-lenox-avenue-central-harlem-new-york
Two Years Free! No Mortgage Payments/CC/RE Taxes!

nyc10023's comments on this thread are so dead-on for our beloved UWS that I can't add much. One remark in particular bears repeating:

"What made the bubble the bubble up here was the frenzy over crap inventory. If good inventory is priced 'reasonably' relative to the most recent comp, it will sell in the current market - the difference is that there won't be a bidding war today and that the 'good' apartment won't be priced 20-30% above the last comp as in the late great bubble."

Amen to that post, especially the first sentence. The run-up on truly great apartments was one small aspect of the bubble. Arguably, that part wasn't a bubble at all, because it was largely driven by fundamentals: scarce inventory chased by a rapidly expanding pool of very wealthy buyers.

Did the "truly great apartments" go up and down differently than the rest of the market? Are rents for them as a fraction of price any different than the rest of the market? In my view, not really, but I'm curious to hear your take on it.

That is a myth. Shit apartments actually rise more from trough to peak. Relatedly, the sales data are skewed right now to understand the drop in values...because its a better mix of apartments that manages to sell at all in a market like this.

This notion that the bubble affected primarily the relative value of crap to quality is a guide to understanding the unwinding of the market.

I think we'll know the market has turned when the market for "crap apartments" solidifies. Saying the market has solidified because the most desirable properties are selling misunderstands the bubble.

I'm late on this discussion. Was the original poster worried that the market has turned downward? We know that certainly it's not the opposite.

The best investement a young MBA or lawyer could make is to take the word "investment" out of one's real estate vocabulary.

Inonada: The overall inventory is low and I haven't run the numbers, but "great" apartments are just outliers by nature. As for rents, it's building by building. Hard to do rental v. buy comparisons because of restrictions in renting, though of course, things have changed (remember the 50W67 rentals) and co-op rentals are significantly discounted to account for the short-term nature of the lease & paperwork required.

It's easier to do buy vs. rent for the better condo buildings (e.g. 111W67, 1965Bway, 45W67, 155W70, 201W72 etc.) and as far as I can tell, going back to '98/'99, it has been cheaper to rent v. buy in those buildings. The larger units in those buildings and the 4+br (usually combos) haven't come up for rent very much at all in the last 10 years, so again, you can't build a rent v. buy comparison for all apartment sizes. In this market, I would think that any apartment in those buildings offered for sale in those buildings, are also available for rent whether or not they are listed as such.

Skinny: exactly. But brokers/media are using those examples of apartments to create buzz. That is the job of a sales broker.

I think you are wrong about it being cheaper to rent than buy in '99. In '99, you could buy a junior one bed in the Astoria for $180k.

Interest rates were around 8% and rental value of that apartment was at least $1800.

Rhino: I said "it has been cheaper to rent and buy" in "those buildings" (triple underline, triple bold for emphasis). Not true for the broader market. Not true for the rest of the UWS, and certainly not true for NYC.

If we know that rents are similar but prices are more than double...Dont we know that buying must have been much cheaper than rent in 1999?

When investment comes out of the real estate vernacular is when I will buy. Not now.

I dont think that could be true, but if you say so...Unless they have hotel-like maintenances.

Buying was cheaper than renting in most buildings in '99, but not ALL buildings. You were already seeing a gap in the more desirable condos on the UWS.

Ok...I am not sure what to gleen from that statement. All we know is condo buying is absurd at current asks.

PS: Thank me that you're not getting your own posts in email...

did anyone see the article on wsj about solaria. it contained this nugget:

Throughout the five boroughs, there are 22,000 units of newly constructed high-rise apartments that have not yet hit the market, the majority of them luxury condominiums, says New York real estate appraiser Jonathan Miller, president of Miller Samuel. If those off-market units are dumped onto the market tomorrow, that’s 18-24 months of inventory at the current pace of sales, he adds.

http://blogs.wsj.com/developments/2009/11/20/luxury-high-rise-condo-auctionin-the-bronx/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Fdevelopments%2Ffeed+%28WSJ.com%3A+Developments+Blog%29

While I am dispositionally a bear, I agree with comments that there's really no way to tell where the market is going from here. The big wild card is the government. I note that through FHA the government is allowing buyers to buy apartments in approved new developments with 3.5% down (maybe less with housing credit). If not for this, many developers would be sucking even more wind. On top of this, due to government's change of accounting rules and liquidity flood, banks are hesitant to take back property.

All I know is that so far this is not playing out like the early 90's.

Rhino: I just hate general comments - it's kind of building by building, block by block up here. Rent v. buy ratio can vary widely - still skewed towards rent, but not all the same and some buildings skewed to rent much earlier.

Funds availability through FHA is definitely the big issue right now.

Can you buy as an LLC with an FHA loan?

If you can, it just seems like people are spinning the roulette wheel again.

Also, what Jasonklye just mentioned is worth considering. Can crazily lenient lending terms at FHA really help absorb those 22K in inventory that already have a bad name? And when will FHA finally come to roost for its sooner-rather-than-later bailout? What happens with new devs is really the crux of the issue...

fha is going to be a political nightmare for this administration. republicans are calling for a hearing on the program, and the have recently changed the guidelines.

http://www.housingwire.com/2009/11/20/fha-condo-financing-evaporating/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+HousingWire+%28HousingWire%29

In a letter to lenders, the Federal Housing Agency (FHA) produced new guidelines that would constrict financing for condominiums. Since then, brokers and condo owners report that FHA financing for condos is going from a flood to a trickle.

I think we've drifted away from newyorkgirl's question/post.

Yes, I feel like there is more competition for the better quality apts in some markets today. You've heard all the theories for this, but I don't think anyone is going to jump in there and say that the market has turned.
Hang tight, be patient if you really want to buy. Something will come up sooner or later.

West81st and nyc10023, let's look at the greatest of all "great buildings." All bow to the Altar of 15 CPW before we can commence discussion of the Great One. OK, now we can continue.

Looking at the high-floor B-line (2367 sq ft, 2 BR / 2.5 BA), asking rents were $26K to $30K over 6 datapoints since Oct 2008. The latest sale was $11.7M in that line, same-ish floor. That works out to annual rent being 3% of price, which is a lower rental rate than the "less great" portion of the market. To argue "that part wasn't a bubble" seems silly to me. In my eyes, a bubble is defined relative to some valuation fundamental, and in this case, the "greater" the apartment, the worse the bubble. Note that even "greater" apartments in that building have been available for rent: e.g., a couple of instances of the high-floor C line at 2761 sq ft for $35K, a couple of instances of the high-floor A line at 3100 sq ft for $40K. I simply chose the B-line since it had a recent sale.

If you want to argue that the fact that at the high-end the desire to own is stronger and "the money doesn't matter" compared to the premium people are willing to pay, then by that argument the same is true to a lesser extent of the whole market, and there was never a bubble in any segment at all.

I also did a quick perusal of 1965 Broadway, and it seems that it is at "normal" annual rent/price, at least for the A line: something in the range of 4-and-change-%. I.e., unlike what you say was the case in 1999, I no longer see a "buy" premium that is higher than the rest of the market. Perhaps "hot" buildings might start out with a higher "buy" premium, but then it fades after a decade?

All market segments overflow into/from other market segments. Look very closely at those empty new condo towers, some of which aren't even finished yet. So a new condo on 33rd b/w 2nd & 1st is a different block, different type of apartment, different neighborhood, than 111 W. 67. Absolutely no impact by one upon the other? And absolutely nothing to do with the Solaria, or with those empty condos in Harlem north of 125th Street? Oh, sure................

Disagree that 15CPW is the greatest of all great buildings. Not enough history. But it's certainly a premium building on the UWS.

Let's parse your arguments:
1) Your first point is exactly what I am saying with respect to premium apartments - the rent/buy ratio is worse/more skewed than the rest of the market. This is true now, and my argument is that it has always been true for new premium buildings on the market, especially when they first come on the market.

2) I am not saying that there was no bubble w.r.t. premium properties - just that it has never made sense to buy for a longer stretch of time in those buildings than in other buildings in the same neighborhood. My theory is that it has nothing to do with the bubble or desire to own at the high end, rather it has to do with the pricing of new luxury construction on the UWS since the mid-90s, always priced significantly higher than the existing post-war co-ops and rentals that were built prior to that, and the prewar stuff as well (barring exceptional apts with views/pedigree). I remember when 200RSB 1-bedroom condos were being flogged at 375k+, when rentals were to be had next door (at 160 & 180) for low 2000s.

3) Agree that 1965Bway has experienced a change in rent/buy ratios lately, but up until very recently, rent/buy ratios were not the same as other buildings. 11E closed at 1.7m, probably would have gone for 2.5m pre-Lehman. I don't think that it would ever have commanded a rent of more than 8k.

The bubbles in the lemming juice is making me gassy. Look out below!

Lowery: Eventually, everything has a knock-on effect. All I am saying is that the market does not reflect it YET. The original poster was wondering if the market has turned, and my answer is NO, but some quality stuff has been selling quickly lately because prices appear reasonable to that subset of buyers. This in turn, has been used to create buzz.

So why are these people still buying? Unless things go apocalyptic and none of us are really adequately prepared for this (sorry, predicting RE collapse is not preparation), you will never entirely get rid of the small percentage of buyers who have the cash and just feel like buying RE, esp. if it's "quality".

Another new construction pricing example:

http://www.nytimes.com/1998/09/11/nyregion/residential-real-estate-selling-condos-in-a-rental-market.html?scp=1&sq=%222%20columbus%20avenue%20%22&st=cse

Smallish 2-bedrooms were selling for 700k+ like hotcakes, when you could rent the equivalent for $4k, and you could certainly buy 2b2b postwar for 400k, and the difference in rent between brand new 2b2b and 80s-era 2b2b was not that great.

Miette: "40% of pretax income? Try 5% of pretax income, assuming a modest 6% average annual interest/investment return rate."

That's assuming quite a bit, since many of 2009's (expected) retirees have seen 60% rate DROPS.

nyc10023 - I'm not arguing with you that people would buy quality before junk, but ..... if junk is priced around what quality is priced, and then the junk goes unsold, there is not more competition for quality; there is less - there is even less competition for junk, and then there is so little competition for quality, because quality always competes with the junk ultimately, the price for junk gets so attractive that ..... we all know what happens

I agree with many that predicting is impossible. I'm glad to hear that things are picking up somewhat. I doubt anyone hails that as a return to boom times. I think the empty new glass towers, especially in locations like Harlem and Wmsburg and LIC and whatever the Columbia Street area is being called these days (Cobble Hill Very, Very West?), is a terrifying thing staring us all in the face.

Not sure where to post this inqiry for those (about ready and others)that post frequently on the market trend/price chopper threads --- are your postings there, roughly speaking, really juicy discounts that were hard to find....or representative samples?

jim, a bit of both. but more representative than not. comps are hard because you have to find the same line, size, hopefully condition, floor, etc. in many cases if i could just select any similarly sized and shaped unit i would have a comp that would be noteworthy. but then you're not accounting for light, view, etc. so think about that. i am only choosing a very small percentage to highlight, and yet the examples are not insignificant. in other cases i am fairly certain of what the price per square foot in a building would have been in 2004 or 2005, but without the actual comp i'm not going to post it.

are there some units that surprise to the upside? absolutely. are they at all the norm? no. are my comps fairly representative? mostly, although the bank sales, etc. are not. but it's always those deals on the fringes, estate sales, divorce, distress, new development, emerging markets, that jumpstart downward momentum. alcove studios and small one bedrooms are still often selling at or above 2006 pricing, but that has been changing rapidly as well, which to me is interesting given the conforming loan advantage.

and i think the fha issue has been huge. it hasn't been widely used yet in our area, but many developers are trying to secure approval. to the extent that they have believed it may be forthcoming, and lending may become so much easier, they've had little to no incentive to cut prices drastically. we'd be naive to think that what happens in the new construction market in brooklyn, harlem, etc. won't affect manhattan.

thanks ar.

I don't fully understand the fha and financings issues, but I am puzzled by your emphasis on it being so potentially huge. I can see the failure to get 50% being a bar to financing as a serious problem in particular condos, but if getting over the 50% problem, and somehow smoothing financing would be all it would take to get this market back on its feet, then that would worry me, because that makes it sound like the only problem in this market is financing liquidity, and I have the impression that there are many more fundamental problems such as ny tax/fiscal outlook, finance industry shrinkage, and a perhaps most of all a lot of bubble-greater-fool wishful thinking that led to idiotic prices (no matter the economic fundamentals).

no, jim you aren't getting what i'm saying. i'm saying that the potential prop of the fha issue is keeping the marginal areas from falling apart. and i mean completely apart, in terms of price wise. it is not a 50% sold problem, although it is that too, it's a down payment issue. if those developments fail, the ramifications will then be felt far and wide.

this is really only affecting first time home owners, but they are keeping numbers up, conforming loan wise. and new development conforming sales wise, FHA is it. if it's gone, say goodbye to certain markets.

Its all about finance shrinkage (incomes and # employed) and financing liquidity. Rest is dinner conversation.

rhino, no. that's your emphasis. but believe it or not it's not entirely about finance shrinkage. although shrinkage is always a great topic.

I'm not sure how you (or I) can argue this. In Manhattan, prices follow finance industry - # employed & total comp. It was not a coincidence that HF/PE growth took off in 2004, i-banks fought hard to keep people.

Of course my opinion is "my emphasis". Yours is "your emphasis". Neither is "fact".

demographics, my sweets. demographics.

and that's not true over time. in the 1980s-90s finance industry people made a decent living, as did many others. prices certainly didn't "follow' the finance industry. i know someone who bought a four story town house in the east 90s in the mid 90's, a surgeon, they pay less than $4000 a month on their mortgage, and that's with a refi a number of years ago.

I am not saying it true over time. I am saying that epic leverage made for higher values in the 2004-2008 timeframe. Real estate has always been cyclical. However, I'd argue that 2004-2008 was special in the sense that finance incomes/easy borrowing was historic. Normalization of this, from both the perspective of financial industry (and feeder) incomes/numbers employed, and availability of financing for all buyers is what we are seeing here. So yes, its all about that in my view. In this cycle, its all about that. Not in every cycle. I mean how much of the S&P was banks at the top? NY will always be NY, but if finance goes back to 1980s/1990s style you dont churn out enough $500k earners to support this. Besides, the NYS and NYC budget is driven by finance anyway, so thats one of your two remaining drivers anyway. Yes, its all about borrowing and income.

aboutready
28 minutes ago
demographics, my sweets. demographics.

Does that sound like the Wicked Witch of the West or the Witch from Narnia?

It sounds like fluff. Is it demographics when there are fewer mid-level earners at banks...and many fewer banks? That's not sweet for Manhattan real estate.

rhino, quit being so dogmatic. i agree with you on so many levels. obviously the contraction in the number of highly paid earners will affect the market.

but if you think that each sale of a 400 sf yorkville straight studio for 5 times what it sold for 10 years earlier is due to increased wages in the financial sector, you're wrong. during bubbles normal people choose to make due with less at a higher cost in order to "get in the game." it's a multi-faceted phenomenon, and the collapse of it is multi-faceted as well.

Momentum is ever present. Yes, the other major part of the five-bagger was lower interest rates and easier loan terms/qualification. Higher leverage at banks allowed those firms to make more money per employee. It also let them lend out to a zillion hedge funds. All the sudden there were opportunities for second and third year post-MBAs to go from banking and sellside research making $300k to $1mm or more in a year. Every cycle has its main culprit. Every cycle definitionally involves momentum.

NY rent rolls are 40% finance. That doesnt include law firms that derive most of their business from finance. Its just the story of NYC over the last decade. Finance should be back to being just another option for well educated undergrads..not the only option. There was something weird about all the medical doctors in my MBA class....all wanting to do health care venture capital.

rhino, i agree. and we have a very small supply, relatively, of units, particularly decent ones.

but think of florida. it had crazy price appreciation as well, even with massive increases in supply. i personally am fond of finding fault in the financial world, and think that the massive upward redistribution of wealth has been downright awful. but there are many, many factors, even inclduing the irish carpenters. the synergy between those factors is what causes a bubble, and makes it something more than a simple supply/demand/availability issue.