US Home Sellers Cut Prices as Tax Credit Ends

OMG this is the end of RE as we know it!!!! keep renting as RE will crash...you will show it to all those RE owning fools and landlords!!! Be afraid, make no investments, there is NOTHING worth investing in....be very afraid!

Don't get hysterical man. I'm sure your lenders will negotiate with you to restructure your loans. Look at the bright side, less buyers in this category means more renters for you -- maybe you will even see rents stabilize soon.

This has a minimal to no affect on Manhattan RE.

Maybe. On the other hand Corcoran reported that 60% of the apartments sold in Manhattan in Q1 cost less than $1M.

That's fine but there is still the income component. Even if every single one of those apts sold under 800K were eligible for the credit, I highly doubt they would have went unsold without the credit. It's a nice to have in the small % of applicable cases.

I'm not so sure. Its only anecdotal but I know folks who put in multiple bids on apartments and lost in each case. Now that the credit is gone they have stopped. So in addition to the question of whether a place may have sold, you have how much that place would have sold for absent multiple bids, at least some of which came from credit seekers. The question is how much.

????? Millly?

Seems to me that the expiration will, indeed, have an impact upon studio and one-bedroom prices in Manhattan. Not so much for higher-end properties.

petrzitz, you're back!

malthus, that's one piece of the puzzle. The next is the federal government's deficit, up significantly from last year's - meaning tax revenues are down. The trade deficit is up not on volumes, but on the price of oil. Fiscal tightening in Europe is already underway - it will throw Spain, Portugal, Greece, Ireland, and the UK into another recession. LIBOR is twice the normal rate. Banks aren't lending - they're trading.

It would be nice to think that we're in a V-shaped recovery and that everything will be hunky-dorey. Lots of people seem to be betting on it. Lots of people are going to be very disappointed as the economic data come in for this quarter. They're not going to be pretty.

Most people buying in the 600K+ range won't qualify because of income restrictions. 8K credit on 400K-600K is 1.3%-2%. I can't see a buyer walking away over that small of a %. I would love to see stats on purchases in NYC and buyers that qualified for the tax credit.

bobbie - that's not the point. The point is the economic stimulus that that tax credit provided affects everyone, and it has disappeared.

I don't think this "recovery" is turning out to be all that much of a recovery, based on the actual tax revenue statistics, and the price of gold. As soon as central banks do away with guarantees and swap facilities (for instance), everyone bolts from the market. See Europe.

I think now we're at a point where the government stimulus isn't doing any more good, and it's not sustainable because of the high cost of the debt. But the private sector recovery is not yet self-sustainable. It honestly has me quite worried.

Steve & perfidiotz: we look forward to seeing you at tonight's mixer. Steve's bringing the Nestle Strawberry Quik and milk.

stevejhx: "Banks aren't lending - they're trading." - This.

Why would the banks give out RE loans when they know perfectly well RE is an overpriced liability on their books? They make money on trading now, to hell with Joe Middleamerica, no new loans, drag out foreclosures for as long as they can in the vain hope the RE prices improve. With increasing unemployment, financial instability, potential deflation looming, why invest in bad "assets?"

"Bank of America Corp., JPMorgan Chase & Co. and Goldman Sachs Group Inc., the first, second and fifth-biggest U.S. banks by assets, all said in regulatory filings that they had zero days of trading losses in the first quarter."

http://preview.bloomberg.com/news/2010-05-11/jpmorgan-traders-match-goldman-sachs-s-first-quarter-with-no-trading-loss.html

No mixer, AH - sorry!

pulaski, I was watching the CNBC special on Enron a few weeks back, and what's going on today reminds me precisely of the environment - not the fraud, just the environment - of the dot.com boom. You know, the "New Economy."

Remember that?

There is a disconnect - as there was then - between what was actually happening and what people thought was happening. By "actually happening" I mean the real statistics: rallying on a bailout - which indicates how bad things really are - makes no sense. Rallying on housing data that is skewed by an expired tax benefit makes no sense. Rallying on trade data when the data show that trade has actually declined - makes no sense.

I'm normally a stock market bull, but my business is very sensitive economically. I was deadly busy through March of this year, April was average, May has been completely dead. No one has any work.

It makes me think that the economy ground to a halt in the second quarter. I could be wrong, only time will tell, but the correlation between my business and the economy in general is almost always 100%.

Eh. Might have some impact nationally but very little impact in Manhattan.

Yes I know, bob - we're an island unto ourselves and nothing that happens nationally or internationally affects us.

My point is that the economy as a whole is nowhere near as strong as people seem to think it is. I may be wrong.

If you are going to talk about things that affect everything nationally, how about the oil spill and costs of cleanup? Now that one will be a doozy.

Wont be at the mixer...out West selling a property for a tidy profit and buying another.....wait until you tools see the news......

".out West selling a property for a tidy profit"

Yes, petrzitz - I hear Las Vegas is up 500% this month.

bob420: "how about the oil spill and costs of cleanup?"

People need to put things in perspective. While this spill is large, at 10,000 tonnes (so far), it pales in comparison to Ixtoc 1 spill at 476,000 tonnes not to mention the oil spilled by the retreating Iraqi's in 1991. That was one and a half Million tonnes. Main stream media is camped out on the beaches of LA just waiting for the oil and when it does, they will blow this thing even more out of proportion.

http://news.bbc.co.uk/2/hi/uk_news/magazine/8664684.stm

Also, BP made $6.1 billion in Q1 2010. BP makes $93 million a day. By the time this is over, it will take them a month worth of profits to pay for this if that much.

Steve: it may not make sense, but it's the rallying that makes Wall Street brokers money and because of that, it will continue. The lobby in DC is too strong to make any effective change happen. "Free market" is a myth, Madison Avenue PR wins and we will all be poorer for it.

Steve....wait.....you will look like a fool (even more of one....)

Stories on national real estate have NOTHING to do with Manhattan...if they are bearish. Bullish stories always do, however.

US Home Sellers Cut Prices as Tax Credit Ends
Who could have seen this coming?

Me! Because the tax credit went to the seller, not the buyer(I won't repeat the logic).

Outside of the fact that our government foolishly spent tax payer money, no big deal. We'll go back to equilibrium. All this tax credit did was borrow futures sales and/or temporarily raise prices for the benefit of the seller.

Does anyone think that a bunch of people are totally confused about their taxes and their ability to qualify for the credit?

We get a question every day from some knucklehead that can't financially tie their shoes -- and they're going into $1M+ transactions. You've got an entire movement around Joe The Plum, who was, obviously, mixing up revenue for his small business with income. Most people don't even realize that their taxes went down last year.

Does anyone want to bet that more than a couple of buyers in Manhattan over the past few months didn't understand that the credit didn't apply to them?

I think that pretty much every single person who complains that they pay too much taxes are complete dumbasses. I will bet you that they put more effort into complaining about their taxes and reading moronic Ayn Rand books than they do spending their money in ways that will decrease their overall tax burden. If you are not maxing out your 401K, starting a small business, saving for college pre-tax, investing in tax free munies, etc taking advantage of a majority of tax benefits then STFU.

Spending $3K a month on a Hummer does not allow you to complain about taxes. It makes you a f'ing moron.

Well either way you put it there are more causes than outcomes.

Well, you are basing the size of the spill on BP estimates. If the recent estimates of 50,000 to 70,000 barrels a day are accurate, it is much bigger than Ixtoc.

The shrimp boat capt's loss of income most certainly will drive NYC RE prices down.

Perfidiotz: "out West selling a property for a tidy profit and buying another.....wait until you tools see the news......"

Here's the news ... specifically, an "I've got some good news and some bad news" joke!

Borrower Default Notices Decline in April But Banks Pick Up Pace of Liquidation
http://www.mortgagenewsdaily.com/05132010_foeclosures_realtytrac.asp

some highlights:
*** "One in every 387 U.S. housing units received some type of foreclosure filing during the month."
*** "...the final step of the foreclosure process, bank repossessions, set a new monthly record."
*** "...foreclosure activity has begun to plateau - but at a very high level that will not drop off in the near future."
*** "We expect a similar pattern to continue for most of this year, with the overall numbers staying at a high level and ripples of activity hitting the various stages of the foreclosure process as lenders systematically work through the backlog of distressed properties."

And BEST OF ALL:
*** "As usual Nevada, Arizona, and Florida topped the list of states with high foreclosure activity. This was the 40th straight month that Nevada had the dubious distinction of being number one. One in every 69 housing units in the state received a notice in April, more than five times the national average, and there appears to be no end in sight. Overall activity increased 10 percent since March and REO activity was up 57 percent."

Talking about the sand states, strategic default seems to be a trend accentuating:
http://www.cbsnews.com/stories/2010/05/06/60minutes/main6466484.shtml
http://online.wsj.com/article/SB10001424052748704307804575234193315017382.html

"Spending $3K a month on a Hummer does not allow you to complain about taxes. It makes you a f'ing moron."

And spending 10x on that on a dry hole in the ground in Vegas makes you even dumber than that... it makes you Perfitz.

Back to the first posting on this. This is not relevant to high end Manhattan Condos and Coops.