The Real Deal: Second Wave of Pain for Condos

I actually found the second part of this article detailing losses in certain buildings more telling:

http://therealdeal.com/newyork/articles/falling-fortunes-for-buyers

But they are reporting the obvious suspects. There is much more. How about all the tony buildings that are seeing serious price cuts in rentals. How about that two investors at The Harrison have been unable to rent their investment apartments for three months (and counting), have been forced into price cuts and incentives and can't move them even offering free gym memberships to the equinox.

How about that an investor owner at the Setai has not been able to rent out his apartment at The Setai for 3 months even with a price cut from $7500 to $6500 -- and that includes a free breakfast at a michelin star restaurant every morning and a tony gym.

What about the price cut at the Park Millennium - prime UWS, 1400 sq ft, 2/2.5 from $8250 to $5750

What about the fall of high, high end rentals. How about the 116 Central park south rental with incredible views of the park in a gut renovated apartment that fell from $17,000 to a price that came to $9000 ( with incentives) -- and still no takers. And there are 3 other apts in the building that are used to $16,000 rents that are empty in spite of serious slashes. The good ol' days are over my friends. Now a building with no gym cannot command big prices. Same too at the Park Imperial and Sheffield 57. Trouble. Right here in River City.

Plus the cuts on Riverside Blvd are a endless source of untold amusement. There may be Chinese investors buying up 2 beds at the Rushmore (as one broker was bragging) but when they can't flip them or rent them out anywhere close to their monthly nut, investors will continue to flee. And then where will we all be re: rent vs buy?

Buying to flip in this market is absurd. You need 20% appreciation just to break even.
Buying to rent is equally absurd when $1,000,0000 generates $4,000 before fees

New Construction has two big negatives, unsold units(sponsor risk) and reduced equity for buyers that
default skipping out on unpaid common charges.

58% of all units sold in 2006 were new construction. and, in terms of the bigger picture, they hadn't really even started then.

new construction also has huge mobility issues. people who MUST sell can't hope to cover their costs and debt in many instances. someone who bought in 1995 can always undercut the current market and get out, unless it's a condo that's been heloc'd to death.

Ideal apartment was completed no later than 2003. Adjusted for home price appreciation average unit is above water, sponsor is out and not in possession of unsold units.

its the glut I predicted...

RS: Buying to flip in this market is absurd.

Nevertheless, many many investors did so in the past five years. The first flippers made money but now that is not possible. So, investors are more wary about investing in this market. That will have a ripple effect on the market as a whole. And for those that continue to say that Miami has no correlation to NYC, let me point out once again that this is exactly what happened in Miami --first wave down was due to short term investors pulling out of the market. Other factors are also similar - high unemployment, plummeting rental prices, etc. Yes it is a different market but downturns have patterns. By the standard pattern of other bubble cities, NYC woes are not over.

It's like showing up at the pool after they drain the water....

I actually do know of some people who bought new construction unaware that prices had stopped rising.

Beware the shadow borker inventory. Hahahaha

58% new condo sales in 2006, mostly in $1000psf and above level. In my math world, high numbers pull up averages. Now let's say 100% of NYC owners spent phantom income or at least did not save over the last 10 yrs based on phantom equity even though 90% of NYC housing stock never traded hands..... Does anyone else besides myself see the what will happen to NYC when ppl try to lock in any % of their phantom equity in the next 5 years?

I may have to adjuts my unicorn to $300 psf.

I may have to adjuts my unicorn to $300 psf

hahahaha

The remarkable thing about these condos with lots of resales is how absurdly high the ask prices still are. Something has got to give....but it doesn't seem to have happened yet.

I thought 20 Pine was repulsive when I walked through it, ....and that was before I realized to my horror, as I looked out the back of the building (where an entrace used to be) that I once worked in the place for like a year when it was office space

I agree W67. That phantom effect will weigh on the market. Take this mint apt in trendy Tribeca that just sold for about $1000 psf. The sellers lost $300,000 in the sale, a tad over 10% from their 2005 purchase:

http://streeteasy.com/nyc/sale/406498-condo-73-worth-street-tribeca-new-york

And while 300k is a huge loss, you just know that sometime in 2007, these sellers listed this apt in their personal wealth spread sheets between 4-5 million. So even though they only lost 300k, psychologically they lost about 2 mil. I bet they are pulling in their horns and they probably won't be making rash RE investments in NYC anytime soon. Multiply that by...........???? What do you call a hornless unicorn?

So...you have investors who helped spike the upticks spooked. Makes sense.

But it seems you also have people who want to buy and thought they never could and now are chasing the [reduced prices][falling knife] [insert noun adjective or whatever]. In wmburg the warehouse11 building, which ostensibly attractive but has build quality issues, is going to hit 50% in contract within two weeks or so of reopening (i know because i looked at it), which shows pent up demand on some level at 550-650 sf over there. Whether or not it makes sense, it is happening. I was hoping we would have a buyer's strike until sanity prevailed in general.

Jim: There isn't sanity anywhere. Look at this apt. They raised the price 10 % for Spring. There are 15 other apts for sale in building (not counting shadow inventory including several other 2 beds.) 498 days on the market but this Spring will be different from the others in spite of high unemployment, flippers fleeing, rents falling, cashless bonus pools. Spring brings forth delusion. This is why I am going to rent again. It is not that I don't want to buy but I can't listen to another broker say this is the time to BUY!! Please wake me when reason returns.

http://streeteasy.com/nyc/sale/71556-condo-100-west-58th-street-central-park-south-new-york

couple things i wonder about:

- in buildings where peak-era purchasers can look at rough comps and see how much they've lost, i wonder why we don't get wails of pain postings ever; are any of these people down 25% on paper from actual purchase price (very different from lost paper gains) walking because they are 28, and lost their job on the trading floor, and have little to lose?...

- for all the talk about deposit placers in contract walking away it doesn't seem like very many people have surfaced who really did that (crying to the AG on some dubious claim, is very different from making an economic evaulation and walking.....and if the AG route fails, then these people would face the tough choice)

- i too wonder when sanity will return..it just seems like we're not too close....

jim, some people really think these are "good" prices. the bankruptcy/foreclosure process takes a long time in manhattan, our busts take longer to arrive. there are a lot of buildings with a lot of units out there. patience.

i just ran across a building on RSD in washington heights. condo conversion, 59 units, 8 have closed in 10 months, under $500 psf. the alexander. tempo. 303 east 33rd. the banks aren't forcing the issue yet, and in some of these it's still premature. but it will happen.

also, i'm fascinated by Related and others going ahead with plans for huge projects. maybe they think they have the wherewithall to hold long-term, but they are going to crush the little to medium developer in the near term. developers love to develop. the second credit thaws they will be there to develop all those vacant and prepped lots.

"What do you call a hornless unicorn?"

A buyer with horse sense.

ar: where is the building on RSD? did you read that goldman sacks just pulled out of related's biggest deal -- the rail yards. it's not easy for any of them. in spite of the hubris there has to be some shakin in boots goin on.

I can't see the same volume of sellers on the downside as occured on the upside. Owners respond differently to upward vs downward price movement.

Riversider. Id like to see your unicorn, that's NOT a unicorn. It's a chihuahua poodle mix, it's not even hypo allergenic.

i did read about the rail yards. and i was amazed that related insisted they're going ahead. and ratner. bizarre.

here's the washington heights condo. http://streeteasy.com/nyc/closing/953961

rs, it's not just the sellers. it's the new development. they'll be competing against each other. and it will be interesting and messy and quite likely ugly.

Existing owners have a perception of value, and it's very much derived from price paid. Many are inclined to hold on for years waiting for the price to rise. It's often when Financial or Life circumstances force the sale that they don't hold on.

Also included as pushing toward the sale are when rents don't cover carry by a significant margin..

RS, what do you think is one of the primary drivers of price correction? distress. this is a very small market. it doesn't take much distress when supply is also increasing so much faster than demand.

RS: It's often when Financial or Life circumstances force the sale that they don't hold on.

Or when they finally get a clue that the longer they hold on, the more they will lose. If the media starts reporting the kind of gloom and doom that they did in other bubble cities, there will be a rush to the exits. If and when the Real Deal story hits main stream media over and over, sellers will get more realistic -- they will sell before they have more competition and their price will no longer be based on what they paid. That is what happened in other bubble cities. We will see if it happens here.

Does anyone know why streeteasy would 'all of a sudden' eliminate all discussions on a piece of property? Including two 'current' discussions?

which property discussions?

"Existing owners have a perception of value, and it's very much derived from price paid. Many are inclined to hold on for years waiting for the price to rise. It's often when Financial or Life circumstances force the sale that they don't hold on."

Exactly. Which is what 1) stretches out market corrections over years and 2) leads to horrific RE decisions.

As i read all these comments I find myself longing for the other side of the argument., Does anyone see any reasons why the market might bottom out and stabalize at these level? One thing is universal in all markets (from tulips to condos)......when everyone is bearish price will NOT go down.

MMC.. let count the nyc re bears on se;
me, aboutready, apt23, oldadmin(used to be just admin), somewhereelse (aka nyc10022), marco_m, happyrenter, liquid09, (am i missing anyone?).... oh! columbiacounty.... also.. but he sold and got the hell outta dodge... his wife praises him hourly..... i think it should be done on the half hour also... FWIW.

Vs. the millions and millions upon "owners" that think this will all clear out in 1 -2 yrs and the current 8.5K listings asking for greatest bubble pricing - 15/20%, and some who ARE F'n asking for more... so let's get back together again.. when the ratio goes from .0000000000000000000000001% to .000000000000000000000002%, m'okay.

> when everyone is bearish price will NOT go down.

You really think everyone is bearish?

mmc what your suggesting is SE heresy

w67 -- I think you forgot...Steve.

MMC285, the opposite side of the coin is people who have been on the sidelines for 7 years now, incomes increasing but the Manhattan RE market completely outpacing it. Show me a NICE two bed/two bath, 1500 sq feet, UWS for $1-1.25M, and I'm calling the moving truck today. I think there's a lot of demand by dual income families, no kids, w/incomes 275k, I and I think there's quite a few of us out there, who have never worked for an Ibank.

Moxie: Thank you for your moxie and spirit. I'm so tired of all these people thinking they are so right. You're such a maverick with your outsider stance, going against the grain, calling out the politically correct. That's what this great country needs more of...mavericks like you who are willing to call it like they see it. No spin. Not afraid of those who will say otherwise with their skewed data and half truth arguments. Just plain maverick talking that speaks to what our great forefathers had and what the great people of this country need today.

sk n sweet..as Oscar Wilde said "i'm not young enough to know everything"

Hmm. Probably.

well..skinny..this ain't so easy...what's more ridiculous: a) denying this market is stabilizing because appears volumes there, active bids for places priced at the new market levels, lots of ask prices don't show desperation, the poster-child big developments with unsold units aren't actually in bankruptcy..or) thinking 25% off a crazy bubble is enough when the economic fundamentals have gotten much worse, rentals going backward in time, and you can pay a 1000psf for a walk-up in the ev if youre so inclined..or who knows what at some luxury condo...or that a 23 year old condo where i used to live would sell at new bargain price of say 1000psf in chelsea...

skinny... thatz funny. GO PALIN! yes.. forgot stevehjxer

Jim, for the f'ng umpteenth time, there is pent-up demand and a lot of support by the gov''t. I'm surprised prices aren't stronger. this isn't a linear process.

skinny, maverick-y and full of truthiness.

MMC.. let count the nyc re bears on se;
me, aboutready, apt23, oldadmin(used to be just admin), somewhereelse (aka nyc10022), marco_m, happyrenter, liquid09, (am i missing anyone?).... oh! columbiacounty.... also.. but he sold and got the hell outta dodge... his wife praises him hourly..... i think it should be done on the half hour also... FWIW.

Forgot me. The consensus is far from bearish.

"what's more ridiculous: a) denying this market is stabilizing because appears volumes there, active bids for places priced at the new market levels"

I think the claiming "stabilization" is the rediculous part when the medians just dropped AGAIN.

Granted, this guy seems to painfully confuse volume and prices, so not surprising that he'd be getting it wrong.

> active bids for places priced at the new market levels

Yes, activity at the LOWER prices is sure a sign of rising prices. Genius!

> ask prices don't show desperation

Yes, if there is anything we've learned... ASKING PRICES tell us where the market is heading.
I love it!

> ridiculous

exactly.

somewhereelse: Jim was addressing me when he wrote that, but I'm not sure he understood the thread. Just for clarity, is the "this guy" in your post me?

Because I can see Russia from my front porch right now, and the good real american people deserve that which will make them healthy with jobs and the economy and the liberal media will skew these jobs until the good people have the jobs that were promised to them by the great founders. That's why we have to focus on jobs and housing costs and truth-telling.

skinny, thanks for the clarification.

geez..somewhereelse if i am "this guy"...let me clarify...it was a lightheartedly meant comment responding to skinny's preceding comment saying that moxie was speaking truth to power, and i was trying to say that the "truth" is murky here....

i was not trying to present a full description of the bull or bear argument (personally i lean heavily to the logic of the bears, but i wonder if a combination of govt policy, and people still thinking of the boom days will keep things from aligning logically, so maybe we just get a slight further drift down, with rent/buy staying fairly out of whack...but i dont know)...

i don't think asking prices tell us where the market is heading...however, when tons of asking prices are out of line with reasonable assessment of market levels it means something is screwed up.....

i was sort of joking...like..ok..who is more nuts 1) the person who isn't see how wonderful things have been lately in the market ...or 2) the person who thinks 25% of wacko prices means all is back to normal

somewhereelse
about 24 hours ago
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its the glut I predicted...

tell us again about how you used to have problems with the post office that no one else seems to have.

aboutready
6 minutes ago
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skinny, thanks for the clarification.

looky here, muscle toilet whore calling someone else skinny

The problem with asking prices is you have the water line problem. Between all the purchases and refis for the last 4 years, Nobody is going to ask an amount that is under what they owe, plus tax they have to pay on the gain from what they paid(refis population) and the brokerage and transaction costs. That puts their asking prices at a great divide from closing prices. To sell for less than that means they have to cut a check to the bank. Nobody is going to do that unless faced with a more dire stiuation, like bankruptcy. Otherwise they will scratch and claw and try to ride it out or rent it.

The alternative which will have to come if the market remains so is a more digestable short sale program.

That seems logical, but you wonder how long so many can hold out, particularly if they lost a job...oh well

Since I finally paid the 10 bucks for se, I now sometimes go google people who have bought at ridiculous prices and try to get some sense of who the hell this is person is.

truthskr: Very good point. This seems to me to be why the market is "stalled" at down 20-25%. It is a curious number to be down by and to stay stalled at it for a while, no?

We won't likely go lower until the banks start to play ball. And the banks, incidentally, have a very good incentive to make everyone think they aren't going to play ball until much later.

jimstreeteasy
Since I finally paid the 10 bucks for se, I now sometimes go google people who have bought at ridiculous prices and try to get some sense of who the hell this is person is.

Congratulations

yes forgot rhino86.... go PALIN... awwww... look at that troll having to constantly coming up with new handles and new IP addresses.... so funny...... go getz yourself a new line from att.,

As to asking prices.... put yourself in a lemming sellers' pradas... it's just play money at the moment, just 5% a signature and some built in equity... and all those borkers/media telling you Spring 10' bonus was gonna be banging! It's like a chess player who thinks one step ahead. To me with all the ramblings about bonuses, I had a gut feeling something was gonna give.. even if bonuses were paid for... and now kicking back and waiting for the first wave of lemming buyers to fall off the cliff has brought a little more clarity as to:
1)non cash portion of bonues;
2) with fed taking away the spiked punch bowl, NOT looking good for a housing bubble anytime soon, if ever;
3) Volcker is gonna have Obamas' ear in terms of balancing savers/spenders with IR and ditto w/ breaking up banks;
4) Obama is on board with taking on banks and necessary leverage reduction and regs of CDS/derivatives (crazy source of $ for banks);
5) Taxes... esp. w/ regards to home mortgage, carry, + marginal tax rate.....
etc etc etc.... me thinks the sellers' market is slowing waking up, don't you?

Give it till summer, another leg down..... full panic mode for sellers in spring 11'.

i can see how the words "mmc what your suggesting is SE heresy" clearly define me as a bull.

You are correct. That's why I wasn't calling you a "bull", whatever that means. I don't care if you are a bull or a bear.

I was objecting to your passive aggressive effort to cast SE posters as closed-minded and unable to substantively deal with criticism.

once again i think you read quite a bit into the remark..."objecting to your passive aggressive effort to cast SE posters as closed-minded and unable to substantively deal with criticism."
huh?...this is what you gleaned from my statement?...take a deep breath

because if you have made one thing perfectly clear it is how open minded you are...

What was your point, then?

"I find myself longing for the other side of the argument., Does anyone see any reasons why the market might bottom out and stabalize at these level?"

my point was he/she will not readily find those views here...

"somewhereelse: Jim was addressing me when he wrote that, but I'm not sure he understood the thread. Just for clarity, is the "this guy" in your post me?"

skinny, I meant Jim... and I agree with you.

moxie, there are a ton of threads here with people who are looking to buy, like right now. if that isn't bullish, i don't know what is.

i think what bothers the permabears on these boards is that we finally have a normal RE market: product moving 3-5% below asking, not every apt in a bidding war nor are prices collapsing, despite all their dire and factless predictions. we've hit bottom. doesn't mean we shoot straight up either. people want to live here and there is huge pent up demand. this has stabilized NYC RE. the macroeconomic picture is improving in fits and starts. the stock and bond markets are predicting recovery. sorry bears but you're not going to snag your dream apt at $400 sq/ft.

time will tell. popcorn until 2012, maybe 2013.

wannabuy... sam zell bought a shitload of units for $551psf.... even if he condoed and flipped them at a 50% profit in 2 years... he'd be flooding the mkt with $800psf units in PRIME NYC. So I ask you r we at the beginning of a long protracted 5% declines per annum to $1000psf, $800psf (current), $600psf and eventual $400psf? My money is on $500psf (that's where i am comfortable given my finances, where I think mkt will settle out at, and current desire to own a C7 in nyc)..... I think you can make a case for $400psf if inventory spikes to 12k units again.....

Um. No. I don't buy your explanation for one minute. You didn't even get that my comments were a joke until much later on, which revealed your initial meaning.

You were being rude and trying to disparage members of this community without taking responsibility for your words. I responded in a light-hearted and funny way. Now, you want to go meta rather than just accept responsibility for your initial comments, so, ok let's go meta:Ladies and Gentlemen, I introduce the joke debriefer...

Heresy doesn't simply mean that the ideas are not represented. Its use implies that the ideas are actively marginalized as unorthodox through unjust expressions of power against the weak. It was the basis for my response to you.

Further, you latched on to the faux populist rant as reifying your position. Palin, channeled by me, isn't complaining that conservative views aren't available -- she's witlessly complaining that her views are unfairly marginalized by a liberal elite media cabal. That's what made it funny when you unwittingly jumped on my channeled comment. If you were simply complaining that the view isn't represented, the Palin comments wouldn't have made any sense to you -- but they did; you immediately identified with them, and it revealed that the underlying meaning of your previous utterance was to speak truth to a power that was unfairly dominating the conversation.

And, that's the last appearance of the joke debriefer for a while -- hopefully.

Can we get back to the main point of this thread now?

you are so skinny and sweet! lovez ya to pieces... can you do palin again and bring back the "joke debfriefer" anyday!

wow...i really think you need to take a deeeeeep breath..as you "don't care if I'm a bull or bear"....i don't care to listen to the ravings of a clearly under medicated lunatic...
your right i didn't get your initial remark was dripping with sarcasm because it was so clearly genuine. i strongly recommend doubling your dosage or maybe just take a bigger hit. if your skinny and sweet i can't wait to meet chunkyNpissed

w67th: do you think your comfort zone of $500/sq ft colors your preception of the market? i like to think of myself as objective. i had been bearish on RE until Q4 '09. i thought prices would fall more but reality set in, i changed my tune and am now in contract. it is useless being a permabull or bear. i like to act based on what is in front of me.

wannabuy, do you think that your perception that prices have hit bottom is colored by the fact you are in contract?

Just bc the other side played a good game of "get em' bf the banker's bonus" doesn't mean the NYC Re can't fall further.... like I said, I've got a gut feeling $500psf is not too far off the mark in the next 1-2 yrs and that came from much "experience" and analysis on my part. I WILL only readjust my $500psf call when I see 3 quarters of stabilizing rent rates. Only then will I take a peek, re-calculate, and decide to "buy."

Been fun wannabuy... just don't be a new spinny with "my unit is special" speal.... but let's go to the tape qtr after qtr after qtr... just keep checking back, ya hear now?

toe to toe qtr to qtr sounds good to me.

ar: you got me backwards. i was bearish but saw signs of a bottom so bought. i wouldn't call myself bullish. i don't think RE is going to rocket off the lows as the stock market did in march '09.
it feels, looks and smells like a bottom to me though. i think i would describe myself as neutral, nervous and hopeful.

wannabuy, I see your point of view. I can't ,and maybe you can't, separate it from where you bought and at what price level (my understanding is that you bought in williamsburg at decent prices in what has proved to be a pretty quickly selling building). At the risk of having some wmburg-doomsayers jump all over me for this, I think that is less risky than buying at whatever the going rate is at some slow-selling, three-quarters unsold place in manhattan or in wmburg, both in absolute terms of amount at risk (obviously), or relative decrease risk. Just my feeling! My point being, there are some segments of this market that are still crazier than others. Now...obviously...is the sky really really falls, nothing is a good investment right now, and there will just be degrees of catastrophe.

"it feels, looks and smells like a bottom to me though. I think i would describe myself as neutral, nervous and hopeful."

I think this sums up how a lot of people feel. Someone once said about real estate that if you're convinced you're at the bottom.....you already missed it. Most of that has to do with the lag effect of information. By the time we see prints and closings or reports from the major brokerage firms.....months have elapsed.

People also forget that we are talking about homes here not stocks or bonds. There is an emotional side of owning one's home that is irrational and is not jut summed up by the math of a buy v. rent decision.

But $400-500 a sq ft.....???? Wow that's a little extreme! I'm going out to buy some guns and some canned goods just in case...

wannabuy, best of luck to you, and congrats. enjoy your home. we obviously disagree on where prices are headed, but hopefully your home will be your home for many, many years, and you will do fine under either scenario.

jim: i feel the same way about w'burg. i love the neighborhood. it has a vibrancy and ease that the west village had before it became an overpriced boutique(and lost it's edge). it has great potential. yes if china decides it wants its money back we're all screwed. but i am old enough to have lived through plenty of other scares('82, '87, 9/11) and things always worked out.

MMC: if i caught the exact bottom i would consider it luck, not prescience. but i think we're close enough. calling tops is even harder though. most people get caught at that extreme. just look at the RE panic buying of late '07 and early '08. big volume surge at the top is almost always a bad sign.

AR: thanks!

w67
I think your assesments are dead on and your logic is sound,and I've quitely been of the camp that $500 per foot is were this market belongs, given all the factors out there. But thats as long as sanity prevails. It usually doesn't and the government or the market changes rules on us somehow and someway to bring insanity back.
So I wouldn't be totally surprised if we hit $500 psft, it should be $500 psft, but I think something(don't know what) will keep that hard deck higher. I think the floor will be $700 psft.Now that's median average for manhattan closings. I have a hard time believing it would go lower.
And you know I've been screaming about the rental market for some time as well.
3 quarters of stablized rent indeed provides a pattern.

wannabuy
Congratulations and good luck. If you plan on holding on to it for 6 plus years and can afford it you should not worry about it.
On China, you shouldn't worry about them wanting their money back. This year was a long and slow lesson for them to realize they are not as independent as they think. Keep in mind the US takes around 25/30% of their exports and Hong Kong another 15/20% . And I'd say half of Hong Kong's imports of China go back out to mostly the US and then Europe. You wont get much transparancy on whats going on there in the news but do expect them to half there own quiet substancial recession.

Thank u truthy. I mean if you are a nervous miss the rally lemming, id suggest just 1qtr of at least stabilizing rent. For the truly ballzy, go 4qtrs of stabilizing/increasing rents.

Ha, no but 2 quarters would certainly be enough to take out the dice for me.
And it would be more attributable to impatience.
Not in love with my rental but hate moving so I might get excited and be susceptible to premature evacuation.