Inventory - What will happen?

inventory definitely increasing in the searches I run

There was supposed to be a post-Labor Day bump (see "orgasmic inventory explosion" thread). There wasn't. Then everyone thought it would come after the holidays were over. They're over. No explosion. Then there were mumbles about an October inventory explosion, but the reasoning behind that was even less convincing and I don't see any indication that it will happen.

Inventory sucks, and in the lower end of the market a lot of deals are going for substantial premiums over 2007 prices. It's pretty dismal for buyers.

I have actually seen quite a bit of inventory on the lower level in my searches over the past couple of weeks, much better than the summer, as should be expected. Unclear if the good inventory is quickly going into contract at this point

dcorreale, we must be looking in different markets. Try searching for $600k 2-bedrooms; it is a very different story.

I agree with evnyc, and my "low end" is even a bit lower... looking for 1.5 or 2 BR's for $500K.
I keep seeing all the "prices are dropping and inventory is rising" threads, but in practicality, I see none of it. Actually, prices have risen in the last 6 months, for my searches.
Although, I think I'm in the minority, since so many folks are posting about the dramtic price cuts on $1.5mil apts, and that means nothing to me.

as a shopper in the $1.5m manhattan range, i agree that the inventory sucks. i wish i had made moves back in january.

evnyc & broadway: I think you are definitely looking at different markets. I'm not sure there will ever be much inventory for the price levels that you are looking for in the near future. Those are some difficult parameters for your search. (I am presuming that you are looking in Manhattan) To put that into perspective, you would need $500-600/ft prices (assuming ~1000 ft), and, on average, we aren't close to that yet.

thoth-
I have Manhattan in my search, but the only parts that yield results are like, 2 Bridges (I hate that area), or 500 sq ft 2BR's in the LES/EV, or places that have crazy high maint. That's fine, though. I lived in Manhattan for 7 years, then moved to Brooklyn 4 years ago, and like it much better. But... I'm pretty picky about the 'hoods (Cobble Hill, Brooklyn Heights, Carroll Gardrens, etc.)
So, I don't expect much inventory, but if there were a "crash" as the bears have predicted, I would expect that to affect the entire market.

BroadwayRon, I've observed the same thing, and yeah, price cuts on $1.5 million apartments are of no relevance to my search. Frankly, a few people got some pretty darn good deals in 2009 and then prices started popping right back up. I'm amazed and a bit ashamed of my overconfidence that things would continue to decline.

Thoth, yes, it's very limiting and any part of prime Manhattan is out. So is most of prime Brooklyn, although there's always the occasional exception.

I am looking for $1 MM and under 3 bedrooms in Brooklyn or less desirable Manhattan areas. Last couple of weeks have been pretty good as far as inventory is concerned. I was hoping for better, as I have been looking for over 2 years and am waiting for the market to catch up to the fundamentals, but have seen a few places I could actually see purchasing for a small discount off of ask

According to UD charts, inventory has increased by around 600 in the past 2 weeks, from in the 8200's to now in the 8800's. That seems like a pretty big bump. Certainly in 2 weeks.

In addition sales are still a slow 150 7 day average, and ~600 30 day average

I've been studying the under $400,000 studio markey south of 23rd Street and prices seem to
be almost as high as they were at their peak, and with even fewer apartments on the market
in that price range. Has anyone else come tot hat conclusion?

Don't buy now and be priced out forever!!!!?

I ruled out Manhattan quite a while ago, because prices just too high in areas I actually, affirmatively like (23 or so and below, but not fidi, not les), and also I truly do not want to hassle with a coop, especially since I may move out and rent at some point. So..I'm looking at wmburg, and trying to decide on 1) very nice place and location in edge or nsp2 at say 850-900 psf but including view and balcony, or 2) a building i don't like in wmburg at quite a bit less (the problem is that most of the less expensive places are such crap construction, or have some location flaw like next to a bus run, or a warehouse that operates). If prices were lower this would be an easier choice, lol. I don't care if the price falls say 15% (obviously it ain't good, though), but a massive fall would be very bad, but rents are so strong that I see that as a low risk (and there just seems to be so much pent up demand). I don't have any clue as to what inventory means...

I'm looking at one bed or maybe a large studio.

buyerbuyer:

you can purchase in Astoria for under 500/ft

Aren't we now in between the end of August and the end of August?
600 new listings?
Long ways to go before I'd call this a crash.

end of August and end of September

It also seems that the time on market seems short - especially for better units. Not much room for aggressive bidding.

From urban digs

1-DAY 7-DAY 30-DAY
NEW LISTINGS 99 527 2,031
PRICE CUTS 10 34 130
CONTRACTS SIGNED 37 158 643
TOTAL INVENTORY 8,816 8,728 8,452

Two thousand plus new listings against 643 contact signings in ten last thirty days.

"Two thousand plus new listings against 643 contact signings in ten last thirty days. "

How does that compare to the past?

lowery- 600 is the increase in inventory. there have been over 2k listings in the past 30 days.

Sure inventory is relevant in determining prices... I think the story here truly is the government doing absolutely everything in it's power stimulate demand. Forget the 8k tax credit, mortgage rates are going down for the foreseeable future; even lower than back in 2009 when some wished they bought. You may have missed some solid deals but you'd have a 30 year mortgage rate around 5%. You purchase in the next few months and assuming the economy doesn't magically turn around, the Fed will print more money, and you're looking at a 4% 30 year mortgage. For those of you considering a 1.5M purchase, with 20% down the difference in interest payments is ~$256k with a 4% vs 5% mortgage- or $713 savings monthly. As long as the government continues their Keynesian ways and there are no more exogenous shocks to the economy, prices will remain stable. Also in my opinion aside from the ridiculous amount of condo shadow inventory inventory, the only people I know selling their units are the one's looking to trade up.

I just did extensive work on getting a 30 yr fixed jumbo mortgage (refi) and I could not find one in the 5% range unless you put down 30 - 35% ( and we have excellent credit). Also generally, that low rate is only applicable up to $1 million. I checked with at least 5 banks and half a dozen mortgage brokers and a multitude of internet based nonsense companies. I eventually paid 5.125, APR just under 5.2 That was the lowest I found. We locked in two weeks ago. Also, a few banks would only give those rates if we made substantial deposits in the banks at not very attractive rates. So, yes those rates are out there but they are encumbered, difficult and a lot of work.

I would be interested to know if anyone has recently found a better rate or different requirements. Btw, I just don't see 30 yr rates going down to 4%. Since we locked, the rate at our rate ticked up an eighth of a point.

Apt23, good info, thanks for chiming in on this. Did you find that "up to $1 million" was the banks own definition of "conforming?" When I first started shopping for a loan, Wells Fargo told me $750K was their Jumbo level, but I always understood $729,750 was universal. Was also talking about putting 25%+ down, and that seemed to be the starting range for the best rates.

Haven't actually gone through the whole process yet so trying to get a feel for how things actually turn out. Did your lender also require a certain percentage of cash available after sale?

0% policy cannot last. Summer gone. Watch out below. Tis the beginning of a shift in economic policy. It's help Lindsay w drug problem. It's the 12 arrest, put that overblown crack addict behind bars syndrome.

NYC10007: Yes, it seems the banks are stuck on whatever their "limit" is. We could take more than $1mm but it always required even more downpayment and it was always a much higher rate. It seemed like a polite way of saying: we are not taking any more risk than this. If we do, you will pay for it thru the nose. And, btw, we only got it because we moved our brokerage account into their bank. Re: cash available. It wasn't discussed but that could be because we have plenty of cash on hand after selling all our RE into the bubble. I am conservative and only put a small percentage back into RE and a small % into equity markets.

W67: I agree re 0%. Can't last. And banks are being stern taskmasters. They are clearly in driver seat and they are out for their pound of flesh. So after we flush out the cash buyers, the banks are going to turn everyone else into very conservative purchasers. I expect alot of downsizing and much lower prices. But love the Lindsay metaphor. Biggest crack addict was Countrywide. Can we all get together for a toast when the orange guy from country wide goes to jail. SEC has him nailed.

ZIRP (zero interest rate policy) isn't going anywhere anytime soon. And I'm surprised to hear that from W67. Mr. Deflation himself.

The U.S. would need to experience 4-5 yrs of 5% GDP growth just to get the unemployment rate down to 5%. There is not a chance in hell rates are going anywhere and bond buyers know that.

Here is another question about inventory. Over the past few years, families that formed in small one bed apts, may be looking to upgrade now due to children. If you bought in the past few years, you likely did so with very little down payment. If you are now looking for a 2 bed, you are in jumbo mortgage territory. But unless you have been doing some massive saving, would you have the 30% down payment for your $1mm plus 2 bedroom? You would probably have to have a 25% profit on your one bedroom to even to get close to a down payment on a 30 yr fixed jumbo-- which is not going to happen. So you either get risky and get a short term ARM, you stay put (keeping inventories lower) or move to the burbs. Which do you think will happen.

They will move to the outer boroughs or the suburbs.

I would think a lot of recent 1 bedrooms purchasers will just stay put and extend and pretend with life issues. You can't move if you can't come up with a bigger down payment -- even in the burbs. I wonder if this is why posters on this thread might be having problems with inventory in the studio/one bedroom end of the market.

RB, yes, low end market has not been nearly as affected by crash as they top end. Most prices are down very small percentages and for desirable properties, are even up slightly. Apt23, there's some truth to what you say, but given how little prices have moved down in those markets they aren't going to lose very much, so why stay if they don't need to? I think your assumptions that most people put very little down are off-base.

evnyc: the 5% mortgages are well advertised. what is not well advertised is that those rates require 30% down payment and are only good on amounts up to $1 million (for 30 yr fixed jumbo). I only found that out when I checked with many different banks and mtg brokers when I refi'd in the last few weeks.

My point is that buyers in the last few years did not have to put that down that kind of money. Co-ops may insist you put up to 25% down but not condos. I don't have figures but given the gap between incomes and condo affordability, you have to assume the down payment in most of the condos sold in the past few years was low. If those buyers want to upgrade now they will have to do so with much higher down payments. (unless they resort to riskier ARMS). Therefore, they may not move at all (until forced to by financial circumstances), keeping inventory lower.

i bought a one bedroom a few years back and put 27% down. most people i know put atleast 20%, and some as much as 40.

Real Life Example: a friend of ours purchased a true 2 bed CONDO in a prime Manhattan area (UWS, below 85th) in October 2009 for UNDER $800K. A similar unit in the building closed in Feb 2009 for $700K. Comps in his building are now for sale for over $950K.

You guys missed the bottom. See graphic that shows we all should have bought in April 2009, when tumbleweeds were rolling through open houses:

http://www.nytimes.com/interactive/2009/04/29/business/2009-wide-housing-graphic.html

From here it will just tick up and down ever so slightly for months, but the overall graph will show slow incline upward. The rest of the country will follow.

BTW, a friend of mine in Florida says they're building again (!) and the locals are rushing to buy because they feel the bottom is passing them by down there too. They're buying at prices not seen since 1995, but a few months ago they were at 1990 prices. House flippers are having a field day, buying at $80K, selling at $150K. But a few months ago they were able to buy at $50K and sell at $150K.

It's over, people.

ekar: perhaps i'm wrong. there were so many stories in the NYTimes in the crazy days about people leveraging their apts. Did you and the people you know buy in co-ops which have high down payments as requirements or did you buy condos?

Apt23, I'm not disputing anything you said about mortgages. I do think your assumptions about how much people were putting down are off, for a couple of reasons. First, the vast majority of housing stock in the city is coop, so those buyers were required to put 20% down. And as for condos, if there had been widespread low down payments, wouldn't we have seen far higher default rates by now? Sure, there's some people camping out and praying, but if you're in the sub-$1m market (which is the only market I look at) chances are pretty decent that if you need or want to sell, you'll come pretty close to break-even. Maybe things are different in the over-$1m market, but again, we aren't seeing huge waves of defaults. So in the absence of numbers, I think your assumptions about down payments might be largely incorrect.

Re Fla: went to a hs reunion. A friend who is a doctor in Fla. just bought the empty lot next to his house from a friend (so he didn't want to bargain too hard on the price) and paid less than the seller paid when he bought it 20 years ago.

Re Vegas: Ran into a friend who is a lawyer in Vegas. He has moved out of the house he paid 350 for, because it is worth 120 and it is for sale as a short sale; he purchased for a cash a nearby home for 95k.

Apt23: Condos form a very small part of the market in good-school-district-UWS. They have traditionally been priced 10%+ higher than co-ops, so even if there are significant defaults, to get the most "bang for buck", you would look at co-ops. Real life example - quite a few distressed/need-to-sell sellers in 200RSB but even at "distressed" prices, on average, priced higher than similarly sized co-op apts.

One benchmark I (and W67) like to use is the Lincoln Towers. Good school district, large apts, not-so-attractive postwar facades, doorman.

2b, 2b, with large dining alcove - so convertible 3 - around 1200 sqft

1999 - 400k
2000 - 450k
2001 - pre 9/11 - 500k, post 9/11 I saw a low floor 2 adjacent units for sale to be combined 800k (with parking space)
2002 - 600k
2003 - 650k+
Steady appreciation, now anywhere from high 700s and I think a few have cracked 1m.

Co-op board requires 20% plus 2?3? yrs of carrying costs in liquid.

Is the economy better than it was in '99/'00? Don't think so. Yes, people who live there tend to stay even if the values have dropped because it's a good school district, and the convertible 3s can accommodate families of 4 for a long time (maybe forever unless you're Rhino).

Ev, I have a fundamental view that prices "belong" around 600k (in today's dollars) but it might take a long time to get there.

needsadvice: where are these properties in florida for $80k?

Nyc10023, if they ever get there! I agree that the fundamentals are way, way off, but I don't see what would knock them down at this point.

Ev: But it doesn't matter what knocks them down (as in what specific event) or the process. In the long-term, these prices given current and projected economic conditions can't be sustained. Of course, you could wait out the entire childhood of your little one/s waiting for it. You have to find the solution that is the best fit for your personal circumstances. I can't see why one would buy if one thinks that fundamentals are off unless affordability is not an issue.

NYC10023: if banks now require 30% down, do you think that would have any adverse affect on your micro market example? certainly it would stall the buyers who were stretching to put down the required 20% and affect residents who wanted to upgrade.

its all old news and often feels like beating a dead horse but our economic problems have, at best, not gotten worse. depending on what and who you read, the states as a group face a budget shortfall of around $150 billion for the next fiscal year and this assumes that the feds continue aid at the present level.

we can all yell and scream about unproductive and overpaid state and municipal workers but when they get laid off, that is money out of the economy and it is unlikely that they will find jobs in the private sector.

rather than wondering what will knock prices down, I wonder what if anything will create jobs.

how long can our economy continue if unemployment continues?

cc: i believe in the resilience and innovativeness of this country and I tend to not dwell on the gloomy nature of a lot the market noise. But I do have real concerns that were echoed in an interview with Norman Augustine this morning. The US ability to compete is compromised and the polarized government (ie both parties) is not providing a fertile atmosphere for jobs through financial incentives, education or immigration. I have been flipping RE for 25 years. The macro environment is not conducive long term to continue to do so.

http://www.cnbc.com/id/15840232?video=1598873617&play=1

80K Florida properties are single family homes in Fort Myers and Cape Coral. AVOID Lehigh Acres, it's very rural but for some reason developers put in tracts of $250K (at the top) houses. Nobody wants to live in that area, too far out, no stores or infrastructure, all trailers. 250K houses went unsold and are now full of squatters.

Fort Myers is your best bet, buy for around 80K, rent out until you retire, then you're all set. Piles of northerners (Michigan is what I've heard) have figured this out and they are buying at a fast clip. Foreclosures and bank owned properties are sold all cash, hours after being listed. Or wait until a flipper is done with it and pay $150K, but it's in great shape.

McMansions on waterfront canals were going for $200K, now $250K, but still better than the $600K they used to be.

I use FloridaMoves website (coldwell banker) and will make my move soon. If I can beat the stupid flippers to it.

apt23: Of course, requiring 30% down in the jumbo-co-op space has had an effect and will continue to have an effect. I too, refi-ed recently, and needed to have at least 30% equity to do so (jumbo). In the micro-market I observe, the pool of buyers has shrunk. People buying either have equity or lots of bkground/bonus $. One shudders to think what the prices would be if there weren't the 30% req. And lots of banks are requiring 2 appraisers (good idea) for jumbo loans.

needsadvice--are you going to buy in Florida without actually looking at it? I am asking because I have been thinking about Florida and Arizona, but I am not sure if I want to do this without looking at properties.

Needsadvice - How much a 80K Florida property in Ft. Myers is renting for? Does it cash flow at 80k (post maintenance & tax)? Does it cash flow at 150K?

What is the current vacancy rate in the area? What's the unemployment situation? Might not be so easy or profitable to find reliable renters and be an absentee landlord.

It's very interesting that despite the huge overhang of shadow inventory (the hidden mountain of foreclosures to still enter the system), they've started building in Florida. The best of luck to builders and buyers, I guess...

What is the source of the claim that they are building again in fla...that seems hard to believe, and, in any case, does not change the huge number of apartments for sale

NYC10023, yes, that's the problem: there's no reason this market couldn't remain irrational until I have grandkids (horrors). In the meantime, if I can find a decent 2-br in my price range, it would cost about the same as renting a decent 2-br in the same areas - and I do mean within $20 of my current rent on a 1/1. My rent no longer goes up, I get an extra bedroom and hopefully an extra bath, I'm not shelling out any more per month, and I get a nice pat on the head (and the wallet) from the government for helping it prop up the real estate market. Could I rent a cheaper 2-bedroom? Sure, if I was willing to consider a sketchy area, a walk-up, or giving up laundry in the building and dishwasher, but all of those things are deal breakers. From where I stand, rent/buy fundamentals look pretty good. It's just a matter of finding the specific apartment.

And, just to further clarify, I think the "average" fundamentals of the city are completely skewed by the upper-tier markets. On the low end, rent/buy doesn't look nearly as bad in a lot of cases. So I don't really care what happens in the $1m+ market.

Ev: I don't understand. So a decent 2-br for rent costs you within $20 of a current rent of a 1/1 - so why wouldn't you be renting that 2/2 already?

That's to buy, not rent. My down payment isn't exactly earning much, either.

Interesting pricing history on the Lincoln Towers 2/2's.

I think most would agree that the patient buyer who waits until $600k is more likley to end up directionally right than wrong. Degree of drop and timing are anyone's guess. But if you're taking a view on the market, then you've also got be taking a view on rates. If the market falls 30%, it is not crazy to think that a big part of the fall may have come alongside a sharp rise in mortgage rates back to historically average levels. A cash buyer loves this outcome. On the other hand a regular-20%-down buyer sitting on the sidelines has to think very hard about it in terms of ultimate affordability.

What if $600k turns out to be right. Question is, are you still glad to have waited if you wind up finanicng the purchase at 8%? The monthly mortgage payment in that hypothetical instance is very similar to what could be obtained on a purchase today, estimating today's market for the 2/2's based on the comments above. Admittedly the down payment at $600k is smaller so there would be some cash leftover. It just doesn't feel like a no-brainer easy decision to me, EVEN IF you believe prices are more likely to fall than to rise.

drujan: don't know about cash flow, all I know is that it a 3/2 house rents quickly at $1200, $1500-$1800 in good neighborhood. Average Taxes about $2000 per year, yard guy $80 a month, insurance $400 a year. You tell me if it cash flows, all I know is my uncle did it and he's covered all his expenses and makes a small profit each month at $80K investment. He'll retire in about 6 years and he's set. His realtors act as "property managers" for $50 a month.

Unemployment is high, so not without risk. Renters are picky, condos are sitting empty, but houses rent easier. Good school districts move fast.

buyerbuyer: Building is a no-brainer, with many lots in Cape Coral going for back taxes or low prices, $5-$10K. There is one block a friend of mine lives on and there are 8 new houses going up. They're selling around $180K-$190K, and are on canal lots with boat space. They are actually SELLING. Best areas: south cape coral canal houses/lots, south ft myers for future rentals. AVOID east of I-4, full of new overbuilt developments.

UWS77-No, will look this winter when I go on vacation. In the meantime, I'm keeping track online, and prices have been ticking up since May.

If I had a bucket of money, I'd buy on Sanibel Island, Captiva or Marco Island. Their market is off 30% from the high, but has been upticking since Feb. Sanibel is especially good for long-term since they can never have more than 6,000 units built on the island and they are close to build out. Only a few scattered lots remain over an area almost as big as Manhattan.

If somebody makes a profit on all this info, I am owed a nice dinner.

walter7, no arguments on deflation for RE assets. It's our zero i.r. policy that is rewarding spenders and payment buyers for prada shoes that I've got an issue with. And really is a 8% mortgage and 4%yield for savers/retirees "abnormal"? Me thinkz the fact it would take 250 years to double my money in a money market account is fking hilarious...

needsadvice... WOW! "no-brainer" haven't heard a financial retard stmt like that in 3 years.. DUDE. Quit your job.... get thee to Cape Coral bf all the no-brainers beat ya to it... FLMAOz... oh btw, my fking equity portfolio is flying...

yo nyc10023, notice the crazy activity at the rushmore? I got like 20 units emailed to me...
http://streeteasy.com/nyc/building/the-rushmore

35 active listings... and indeed Lincoln Towers is the co-op in the mineshaft.

"80K Florida properties are single family homes in Fort Myers and Cape Coral. AVOID Lehigh Acres, it's very rural but for some reason developers put in tracts of $250K (at the top) houses. Nobody wants to live in that area, too far out, no stores or infrastructure, all trailers. 250K houses went unsold and are now full of squatters."

@needadvice, speaking of Lehigh Acres, Harper's just ran a great article on its century long history.
Subscription req.

Paradise swamped: The boom and bust of the middle-class dream
http://www.harpers.org/archive/2010/08/0083064

Yes, W67. Very convenient proxy for the market, Lincoln Towers (or whatever fancy term fits). Always lots of turnover due to sheer size of building, always some estate sale due to those oldies (and there are a lot!)

Ev: I have no vested interest in Lincoln Towers other than maybe touting it to keep up prop values for friends & acquaintances - but I wouldn't do that. You could do worse than Lincoln Towers. Good school district, MANY kids, good playgrounds. Convenient enough. There's a convertible 2-br (dining alcove) in 140-142 WEA asking 580ishk, duking it out with their neighbors 20/24J. There's also the aforementioned 2/2s asking 895k. Just saying. If you accumulate enough capital, you can always acquire the mirror image apt next door (floorplans all on www.lincolntowers.com).

The A line at 180 WEA is intriguing - large 1200sqft 1br.

Thanks for the suggestion, NYC10023; it certainly looks intriguing. We're pretty much priced out of Manhattan, and in Brooklyn there's the occasional real 2/2 in our price range, so that is where we're concentrating. We're not expecting a palace, but the chopped-off dining area is a pet peeve of mine.

My reservation about Bk is that apts are priced much higher per sqft over rowhouses. If there is the slightest chance that you can buy a rowhouse (2 or 3 fam) with a family member (retired parents looking to move closer to grandchildren?), I would pick that over an apt.

Perhaps that's generally true comparing single family houses, but it certainly isn't always the case. We also kinda hate row house layouts, especially when they're chopped up into snaky, dark walk-ups. The grandparents aren't going anywhere, least of all here. Thought about it with a friend, but any row house in a decent school district is going for $1.7m and up - way, way above my price range of $600k for a 2-br, and our combined purchasing power maxed out at $1.2. Plus usually you don't get the second bath and have to take on additional renovation headaches; row houses were one of the first things we eliminated.

Hmm, I am really, really bearish on apts in Bk. Even in up and come areas.

Inventory now over 9,200 at UD. I thought it would stick around 9,100, but now I wonder how high this is going to go.

my new systems have Active Inventory at 8088 up 4.6% in last 6 mos, up 5% in last 3 mos

Thoth, I had the exact same thought. With sales so slow, inventory easily could keep increasing through the fall/ winter and put solid pressure on prices

7 day new contracts average at 133 today(I know this is based on the old UD site, so might not be accurate but is consistent), which would be 532 monthly. anyone know what a typical october could be

Noah, 5% in the last 3 months huh? That's not very many. You're the man. Thanks for the info.

stevef, and the # of new contracts...any comment

pending sales metric is down 22.5% during same 3 mos time..guys, the day is quickly approaching. final testing now..should go live by monday..god willng, no more setbacks please

UD: as always, thanks for your comments and info. That pending sales number is telling.

jstreet: Yep - next Spring season could see another leg down if this keeps up.

anytime!