WSJ: Manhattan "In Equilibrium" at Under $3mm

Anyone who thinks the "current" sales pace (ie Q2 2010) is "normal" or will continue has zero grasp on the economy. We're heading into the next leg down in RE prices right now.

NYC10013, let's not jump down people's throats or anything. The sales pace now is unequivocally slow, and inventory is actually declining, so I'd agree it's a bit silly to be looking at just that snapshot of the market and extrapolating, but until we see the market flooded with new listings and re-listings (which may well happen in 4-5 weeks), I wouldn't rush to say "we're heading down right now." This is seasonality at its finest.

Q2 2010 is going to end up proving to be VERY ACTIVE when you ultimately see where Q3 2010 is shaping up. This is why we need REAL TIME ANALYTICS! And honestly, knowing the flaws in the system and data, not sure I trust some of these studies without knowing their data methodology for the index..

What is the # of listings they use? What is ACTIVE inventory? How do they determine it, is it by any and all listings set to ACTIVE and on broker websites? That is highly flawed! Think of how many listings are set to ACTIVE, yet have not been updated by the listing broker for 30+ more days. Yes there are alot. And open listings? And duplicates? And co-exclusives? And embedded flaws in system? And what about the 1-12 weeks lag in ACRIS catching public record? You can have 30 sales get recorded after this measurement that actually closed in the period OF the measurement. People need to understand the flaws before looking at these things. If these things are addressed, then fine, confidence in the ratio should rise.

I have ACTIVE at 6,977 after all the scrubbing and algos/rules to get rid of flaws/stale listings. Im 100% positive they have ACTIVE way way higher for this index.

No question Q2 was brisk. But making such a bold statement like absorption rates have been cut in half is pointless, perhaps even misleading as it makes it appear that things are just going swimmingly, which is so, so far from the truth. Hey Digs where do you think absorption rates will be pegged 12/31/10?

Couple of points, not sure how well the article deals with the discussion.
1) Summer is normally slow
2) Spring buying was higher than normal for two reasons
a) home buyer tax credit(even the well to do like free money)
b) credit conditions freed up some and transactions got done which couldn't a year earlier
3) Manhattan has a relatively high coop mix which even under a loose credit environent would get
done at low loan to values due to coop board requirements.
4) Manhattan has more worker mobility than other areas and it would be reasonable to expect a bump up
in housing turnover that shows up in sales volumes.

Basically Manhattan is best of breed, and even in a weak housing market Manhattan will fare better than the country as a whole.

Noah. Your did real work on all of this. What compounds the flaws of the studies is that they are comparing today's flawed numbers to yesterday's flawed numbers. IOW, both stats, while not garbage, can't hope to be used with the kind of precision these people pretend to use them.

As to "where is the market today" no one knows because what matters to a market with slow transaction times like RE is the next quarter or two for the people who want to buy or sell. So what will the next two quarters bring us in the way of employment and financial market stability? Both of those are not something we can take for granted anymore.

If things stay stable then I think the same goes for NY RE. People who know at some point they have to sell will still hold off because they are permitted to. So demand will not be overwhelmed by inventory. But if there is another shock to the system. Or if there is clarification regarding FinReg and we see it means a slower banking system, then the market will head lower.

So much of NY RE at the margin today depends on Wall Street that it is probably the one thing you really need to look at to determine the future.

The Barbanel piece is interesting because it says not that the real estate spring was hot (which is seasonal and which many of us experienced) but that the real estate summer was hot, which is a little more unusual.

I agree that we are all waiting with bated breath for Digs' scrubbed numbers, but looking at the best data we have now, it looks like Manhattan is doing well in the mid-price points... which to me indicates that lending is back.

To those of us who heard the crickets chirp in 2008 (I had one $2mm downtown property I sold FOUR times before I found a buyer with both will and funding) that's a good thing.

ali r.
DG Neary Realty

this piece features an appraiser who misses the free money he earned for years, while helping inflate the bubble of stinky gas

I don't know why you guys waste your time with WSJ real estate articles.
Every article that's been posted on here from WSJ for the last six months has been torn to shreds.

Ok so last summer the absorption rate was 20 months. I mean how many different metrics do we need to spotlight that last summer was a disaster and every YOY figure is going to make right now look so rosey?

Can I offer a prediction? Nothing significant is going to happen until the fourth quarter, in real estate or stocks. Post elections, it will be a highly active quarter.

When speaking borker babble, I request all lemmings to start every conversation with the following.

'having come off the greatest real estate bubble known to mankind, akin to the tulip and south sea pearl disasters where fortunes were lost in a matter of years, I believe this data point supports the following.....'

Please continue on this merry conversation.

Fwiw, I didn't need ud numbers to predict manhattan would be down 50% nor prime NYC re would be trading at $500psf before all is said and done when I first came on SE, and I don't really need anyone to tell me this last year was truly the most amazing sucker lull I've seen in my lifetime. People are gonna cry when their 'smart' move being shown for what it is. To all the sellers who feigned hardship and sold with 80% of the bubble gain, I commend you on finding that lemming.

They only interviewed brokers for this piece. hmm

KeithB - well not sure about that far off, but the next few months certainly will see rising absorption rates as that metric is lagging with the lag of closed recorded sales. It fell mostly because of the rise in the last few months of closings from the surge in action from Feb-April...But May-present saw a big falloff in signed deals, so that will ripple into absorption rates right as real time inventory likely starts to rise after Labor Day and recorded sales falls with the lag of pending sales

Where did this 9 month absorption rate = equilibrium come from?

Didn't it used to be 6 months? Moving the goalposts?

What are goalposts? Doesn't goal mean prison in the British Isles? I'm so confused ... maybe I'll buy a condo.

Have people been watching the 10 year treasury? 2.49% One wonders whether we'll see sub 4% mortgages.

IMO, the most informative part of this article was from Dolly Lenz:

Dolly Lenz, a top-selling broker at Prudential Douglas Elliman, said that buyers have begun holding back. "There is a lack of confidence and a lack of direction," she said. "You can feel the mood and it is not a good mood. There is no rush to buy and people are gambling that prices are going down."

Brokers for the most part are by nature bullish on RE and have tinted view on it, even if they're being completely honest. Call it selection bias. As such, whenever I hear anything neutral or negative from one (save UD), it speaks volumes. The non-cynical view is that Dolly is saying it like it is. The cynical view is that she just wants transactions, and the spread between bid and ask is too wide, and she thinks it's easier to tighten it by prodding sellers down (both on personal transactions and in the media) rather than buyers up.

In general, my prognostications are long-term. However, given this level of chatter, the huge drop in sales after Q2 that mimicked the rest of the nation (yeah, I know, tax credit doesn't matter here), and the national/global economic worries (chatter that might not make a lot of difference long-term but affects the psyche of people in the market), the short-term picture doesn't look great either.

If you look at Q2 2010 ppsf vs. Q2 2009 ppsf, it was more or less flat. Sales closed Q2 2009 were struck at the bottom of the panic in terms of economic outlook. Those struck in Q2 2010 were at a relative high-point in terms of economic outlook and had the added boosts of the tax credit and lower interest rates. The fact that Q2 2010 wasn't a lot better speaks volumes, IMO. The fact that we've seen increased perceived economic uncertainty for deals struck to close in Q3 and Q4 just doesn't bode well.

My conviction on these short-term prognostications is low, and I don't expect a big move at all, but it should make for an interesting couple of quarters to watch.

In my opinion the profit motive is gone from the real estate equation. What will drive demand going forward will be normal housing turn-over related to changning family size and job location. If one hold the view (as I do) that real estate in NY will be in line with inflation or perhaps a drop better, then there is no reason to speculate in a macro sense.

Yo inonada. Buying a studio to score two sets of twins is a 'gamble'. Expecting the tide to go out after a full moon, with ten cheeks in the air is a given. Dolly, still shilling with her fake boobs.

Riversider?, WTF is normal post a bubble? Jeez. You reek of self serving coop owner on rsd.

"In my opinion the profit motive is gone from the real estate equation."

I believe it is that view setting into people's psyche that is most damning long-term, but I don't think the profit motive is gone from the mind of most people. I think people (homeowners and investors) en masse are only just starting to figure that out. Some run out of money (can't feed the beast any longer), some see that the momentum is gone, etc. Still too many people have the profit motive, and I think it'll take a good decade from the bursting for that to really set in. Recall the statistic that current recent buyers think home prices will increase by 10% annually for the next decade.

"Buying a studio to score two sets of twins is a 'gamble'."

I agree: buying a studio in Tudor City is a gamble. However, buy a penthouse loft in Soho, and that's a sure investment in your own future, my friend.

Ino
I agree with that and have no doubt some segment of the population believes after a couple more months of stimulus we go right back to resuming the bull market. But the rational person must see that we didn't get to the current situation over-night and it will take at least as long to get out of it. In the meantime we can look forward to several years of below average returns in just about every asset class as well as GDP growth. Probably the only exceptions would be precious metals and maybe farmland in Canada

Did you just say deflation ?

So, Inonada, you don't think Dolly's perspective from the tippytop of the market - which has stalled - could affect her viewpoint of the market overall? When I read the article this morning, that was the first thing that jumped out at me. She doesn't mess around with the "low" end of the market, so I assumed her view was colored by that fact.

"Basically Manhattan is best of breed, and even in a weak housing market Manhattan will fare better than the country as a whole."

Your conclusion doesn't actually match the statements you made before it... none of them demonstrate we'll fare better.

Mainly because none of them look at how much of those factors were already priced in.

Manhattan is best of breed, but its also far more expensive. It might be twice as good as anywhere else, but if its 3x as expensive, that doesn't mean the market is going to do well.

NYC economy seems to be holding up relatively well compared to the rest of the country. This should underpin demand and help keep prices more stable here than else where. In this economy that's best of breed.

Relatively well? WTF? Flmaoz. Just cause your social security check hasn't stopped coming.......

N. Roubini just upped his chances for a double dip recession to over 40%. Economy must be cruizin.....

"NYC economy seems to be holding up relatively well compared to the rest of the country."

You were better off just leaving your assertion unsupported. This claim is just wrong.

crains:
"Personal income declined in the New York City area by 4.1% in 2009, driven largely by weakness in the finance and insurance sector, a report released Monday by the U.S. Bureau of Economic Analysis showed..... The drop-off in income in the New York area was well above the average national decline of 1.8%"

Given you just noted that doing better would mean more RE stability, by your logic, this is the clean conclusion:

We will be less stable. And we will have less demand.

Right? Just going by your logic.

nope, cherry picked, how about manhattan 2010 from the group likely to buy homes. Wall Street hiring rebounded somewhat.

compare manhattan to southern california...

> nope, cherry picked,

No, it wasn't cherry picked. It was a pretty direct counter of your claim.
You said "NYC economy" and talked about demand. I gave the numbers for NYC area, and it was income, which is the best number for demand.

You were off.

Now you want to change the story? I guess *you* want to cherrypick.... only manhattan now (a relatively small piece of NYC) and now only a subset within that?

Now *that* is chrrypicking.

Of course...

"In the New York area, the biggest chunk of the decline —2.7 percentage points of the 4.1% drop—was due to a falloff in the finance and insurance sector,"

So, the first claim was off. Second claim doesn't seem to be doing any better.

You ready to recant?

> compare manhattan to southern california...

Ah, changing that story, too. OK, say Manhattan will do better than southern california.

40% would be better than the 50% drop of southern california.

You're just making my case....

"will fare better than the country as a whole."

(as long as you define the country as a whole as southern california)

from the same Crain's article: "job losses were stunningly low in the city -- 130,000 fewer than expected by city officials."

NYC has been shielded tremendously by all the stimulus money coming through Wall Street. We should be thankful.

ali r.
DG Neary Realty

ali, aren't you the broker who declared the recession over? Well i want you to pay attention to the revised 2nd qtr GDP # tomorrow. Now draw a straight line from 3.2% (1st qtr), to 1.4% (revised est.) then ????. What's your best guess for 3rd qtr, right bf bonus season? FLMAOzzzz

That is a non-annualized GDP growth of .8% then .35%, and hell most economists assume a steady state 2-3% inflation, or .75%/qtr inflation. Now that's growth that'll make NYC RE go straight up!, or not.

"So, Inonada, you don't think Dolly's perspective from the tippytop of the market - which has stalled - could affect her viewpoint of the market overall? When I read the article this morning, that was the first thing that jumped out at me. She doesn't mess around with the "low" end of the market, so I assumed her view was colored by that fact."

I think that's right, evnyc. I think there might be two things going on here.

First, the ability of the high-end to "hold the line" is just much larger, as is the stubbornness. The typical person with a property listed at $5M has the wherewithal to bleed $150K a year in negative carry w.r.t. renting it out. Less so, I believe, for the $500K property holder to bleed $15K a year. I think the increased stickiness of prices is well-known the higher the value of the property, and this is not at all Manhattan-specific.

Second, the government incentives just aren't there at the high end. Fixed 30-year rates of 4.5%? Nope, more like 5.5-6.0%. Put down 20%, or maybe just 3.5%? Nope, 30%. Tax breaks? Minor. All this, in addition to generally-higher price-to-rent ratios compared to the lower end, serves to make the rent vs. buy even more pronounced. Now that the sentiment of "prices always go up" is fading (a few years of negative carry at $150K a pop on that $6M purchase, plus a drop of $1M in price, dampers that parade) and the "I must buy as a lifestyle choice" folks have bought, and the buyers who try to strech just cannot (30% down, income uncertain), who's left? The type that can afford it but think "why buy a $5M place and carry it for $275K a year, tying up $1.5M (which works out to $100K a year even at the 6% return demanded by senior debt-holders) and signing up for $500K transaction costs, when I can rent it for $180K?"

The $3-$5M or higher property is in a great deal of trouble. It's not where you want to be.

Cool. Just checking. My husband and I had a bit of a dust-up on how to interpret Dolly's comments. As a low-end $500k-style shopper myself, I will say that it is one segment that has definitely not tanked. And the open houses we've been attending are packed. With a baby on the way, we're between a rock and a hard place: can't afford to rent a 2-bedroom at $4k+, and the low-end 2-bedroom sale market is just as delusional as it was pre-bubble. We're still looking, but definitely thinking about moving out of the city entirely. We disagree daily on whether there will ever be more appealing listings or an eventual correction in the low end market.

I try to stay away from any discussions about the top end, which is in my view anything over $1m. It's unfathomable to me; I don't know anyone in that bracket, nor do I expect to, so the psychology is beyond my ken.

Most importantly, congrats on the baby, I think this might be the first time I heard. Either that, or I have a bad memory.

These $500K 2BRs, what is the going rent on them? If it's anything like $2500+, the market may not be acting that delusionally, IMO. It could be acting quite predictably to government levers being pulled to make the prices appear attractive.

evnyc - Feel the same way with respect to lower priced units. Personally, I don't anticipate significant declines in the low-end segment. Unless there's a mass exodus from New York all together, units on the low-end should be SOMEWHAT insulated from huge price declines as demand for these will fare better than higher priced units.

Oh, thanks, Inonada. Currently we're paying over $3k for a 1-bedroom we love but that is the opposite of child-proof. The 2-bedrooms in the $5-600k price range cost, all in, about the same on a monthly basis, and it isn't like our down payment is earning any sort of spectacular interest. Rent for the 2-br condos we've checked out seems to be hovering in the $3k-$3200 range, so even though I don't anticipate a huge increase in appreciation, I think AC1081 is right: unless there's some sort of mass exodus from NYC, that range remains relatively insulated from declines.

Now if only the inventory wasn't so depressing...

I am looking for a 1 bedroom under 500K and I have noticed quite a few co-ops for sale that are pictured empty, which seems unusual in NYC. An empty home always speaks of desperation, that you tried and failed to sell and had to move. Another sign of desperation is the number of co-ops that come on the market at a high price, sit there a few months with no interest and are then de-listed. I guess it takes time to accept that the 900K one bedroom you bought three years ago is now a 600K one bedroom. I guess lots of people in the city can sit and wait, but the people who really have to sell will become the "comps" that the paralyzed sellers have to contend with.

evnyc - congratulations on the news! You will definitely want that second bedroom.

For what its worth, we currently have a 2bdr rental near lower east side / Chinatown borderland at 1000sqft at about $2750 per month. So there are some rentals out there which could fit your need if you are flexible on location.

I do expect better from the NY Post (that somehow doesn't sound right does it).
After reading today's "Just Sold" in the Post, just 4 manhattan units in this issue (usually there are more) I can't imagine what excuse they have for listing 52 Thomas for their Tribeca example, a unit that closed almost 2 months ago!
Is it possible....not another closing in Tribeca for the last 60 days to choose from?

And using the example they did for FIdi....using unit #3530 at 15 Broad (Starck Downtown). The only over $1000 p sq ft sale in the building in over 6 months! A building averaging $900 per sq ft.

http://www.nypost.com/p/news/business/realestate/residential/just_sold_xfQKnlR4O8CsOQPFJdgJDL

I know readership is down with Paris and Lindsay not frequenting Meatpacking area (all puns intended) but come on Post...no you too.....

> from the same Crain's article: "job losses were stunningly low in the city -- 130,000 fewer than expected by city
> officials."
> "NYC has been shielded tremendously by all the stimulus money coming through Wall Street. We should be thankful."

Horrible analysis of the piece.

Less that catastrophe (which was what was expected) isn't good or "shielded". Its high numbers, just not apocalypse high.

And, again, DOUBLED the national decline in income.

Thats not shielded, thats getting smacked direct in the ass. We're worse than average.

Thanks, Lecker, good luck with your rental. We have a lease through next June and are looking to avoid having the "should-we-stay-or-should-we-go" conversation that inevitably comes with the lease renewal. For the next decade, if at all possible.

Dolly Lenz, a top-selling broker at Prudential Douglas Elliman, said that her husband has begun holding back. "There is a lack of confidence and a lack of direction," she said. "You can feel the mood and it is not a good mood.

Small circles, big circles, then up, up up up up........ (get ready for it)..... Almost there.... Then down. I need a cigarette.

The idea that the crime is confined to the projects is nonsensical.

I grew up a couple hundred feet from the projects. There was a point in NYC history where the projects went from ok to really bad, when they changed the process for selection. I remember those years very well.

The change in the neighborhood was very dramatic. Crime jumped outside the projects for sure.
In the end, we shared the same strip malls, supermarket, delis, etc. with the projects.
We shared the same schools.

There were good people in the projects, and there were bad people in the projects. And, guess what, the bad people occasionally left their apartments! and they'd sometimes be in the same places as me.

And then, guess what, the demographic of the neighborhood outside the projects changes as well.

If you have a doorman, great, that in itself will help (just as it does in good neighborhoods). But pretending that the projects are these walled off cities is just not accurate.

I have friends who moved into a nice doorman building across from the projects on 103. They're been fairlys afe in the building. Do they take to take a lot of precaution coming home from the subway? Yes. Does the doorman help there? Only on the last block. They're always talking about how its worse for her than him, but its worth it for the price.

I have another friend with no doorman, he had a push-in.

The claims that the projects are isolated is just not intelligent. There is an effect. Does it mean move/don't move? Of course not. But you need to consider all the elements.

(sorry guys, ignore, wrong thread)

streeteasy, remove this and above post if you can