There are developments in Williamsburg (and in Manhattan I think, but I'm not following that, so not using that example)which are selling at a rate that will take easily four years or more to sell out -- 80 metropolitan, or the Edge, for example. My thesis is: Developers consciously did not price at a market clearing level in 2009, because it was perceived as a market crisis time, and there was... [more]
There are developments in Williamsburg (and in Manhattan I think, but I'm not following that, so not using that example)which are selling at a rate that will take easily four years or more to sell out -- 80 metropolitan, or the Edge, for example.
My thesis is: Developers consciously did not price at a market clearing level in 2009, because it was perceived as a market crisis time, and there was some hope of a rebound in sales volumes once the crisis passed. [also, obviously, this required some agreement with fiance providers]. In 2010 they kept prices more or less level, and under post-crisis market conditions with historically low interest rates, some buildings still sold out 10% or less in 2010, implying, at that rate, an additional four or five years to sell out in some cases. Developers do not have a five year plan for sales, i.e., are not willing to wait five or so years to sell out, but only held off prices cuts in anticipation of post-crisis sales volumes that have not materialized. Such developments will cut prices further soon.....
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Response by truthskr10
almost 16 years ago
Posts: 4088
Member since: Jul 2009
It's more simple than that, regular apartment sales are by regular people who refuse to lose a dollar if they can on their underwater homes, so they'll wait out as long as they can. It's a pyschological barrier that makes them treat it different than say stocks.
Developers are from a business standpoint with mezzanine loans, investors, etc and it's a business first. Like stocks, you have bad timing, bad inventory, etc. you cut losses and move on.
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Response by buyerbuyer
almost 16 years ago
Posts: 707
Member since: Jan 2010
truthskr10, I m not sure how your point fits with developments that have had such slow sales and have not yet cut prices to a market clearing level. They haven't yet cut losses and moved on.
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Response by truthskr10
almost 16 years ago
Posts: 4088
Member since: Jul 2009
I think the next 6 months you will see changes. THings happen in clumps between quarters. You'll see sporatic blocks of in contracts. And I expect the same for Williamsburg as Manahttan (have not followed as close as Manhattan).
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Response by bjw2103
almost 16 years ago
Posts: 6236
Member since: Jul 2007
buyerbuyer, I think for the most part you're right - cuts are inevitable, as most developers are fighting the clock. I have heard that Douglaston does not have any underlying debt on the property at the Edge - if this is true, they can hold out much longer than you might expect. I can't speak for 80 Met, but they've been holding out for over 3 years now (though there have been some decent price cuts there in most units). While truthskr might be right, and the next 6 months will look dramatically different, I can't see anything happening within that time period that will force a sudden shift. But I'd guess the guys looking at the books are the only ones who really know what the timeframe is. Most of us here are just working off conjecture and educated guesses.
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Response by truthskr10
almost 16 years ago
Posts: 4088
Member since: Jul 2009
"But I'd guess the guys looking at the books are the only ones who really know what the timeframe is. Most of us here are just working off conjecture and educated guesses."
fo'sure and agreed
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Response by maly
almost 16 years ago
Posts: 1377
Member since: Jan 2009
Also, while some developers have loans and negotiations, in the end banks and developers only dump when they think it's over. I would characterize the Edge, 80 met, Toren, Oro and all the large Brooklyn condo buildings as "still fighting," on the yardstick that goes from "woohoo, I'm on the top of the world" to "must.get.out.now."
They're doing little cuts, and playing games with inventory, hoping to feint and weave through the raindrops. Whether they succeed or not, I don't know. It seems to me we have a bit more to go before we hit bottom, but all it takes is a few hundred buyers. If the market continues to slow down, and they cut bit by bit, they might avoid capitulation.
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Response by truthskr10
almost 16 years ago
Posts: 4088
Member since: Jul 2009
I am miffed as to the lack of attempted short sales over the last year (manhattan non new dev).
Maybe(banks) too aggresively anticipating the rebound. This should be an interesting year all around.
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Response by buyerbuyer
almost 16 years ago
Posts: 707
Member since: Jan 2010
bjw, the Edge office actually emphasizes (which seemed a bit weird to me, to discuss with potential buyers) that they will never cut more than they are now because it is tied into requirements of pricing levels needed to pay off financing.
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Response by w67thstreet
almost 16 years ago
Posts: 9003
Member since: Dec 2008
hahahhahahahaaaaaaaaaaaa..... good cop bad cop..... hahahaaaaaaaaaaa... MR.VALENTINE has set the price.... hahahahahhahahahaaaaaaaa
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Response by Topper
almost 16 years ago
Posts: 1335
Member since: May 2008
That may be true, buyerbuyer. Banks have been engaged in "extend and pretend" for quite some time. But we may be approaching the point where banks (or their investors) decide it's time to clean up the books.
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Response by buyerbuyer
almost 16 years ago
Posts: 707
Member since: Jan 2010
That's my suspicion, Topper. Putting my OP more succinctly, I think that not cutting prices was based on the hope that the market would come back in sufficient volume to sell out in a reasonable period, not on the idea that they would truly hold out forever. Now, lacking sales....it's time for tough choices.
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Response by bjw2103
almost 16 years ago
Posts: 6236
Member since: Jul 2007
buyerbuyer, I'm not sure I'd buy it (pun kind of intended) - why would they tell you they're holding a ticking time bomb? Sounds like a silly broker ploy. For once, I'm with w67th.
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Response by buyerbuyer
almost 16 years ago
Posts: 707
Member since: Jan 2010
bjw, my main point was responding to your statement that they may not have financing ; either they are flat out lying or there is financing for the building (it's a mega-project, so, anyway, it doesn't MAke much sense that they dON't have financing). As for their true negotiating stance, who knows what is driving it.
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Response by streetview
almost 16 years ago
Posts: 331
Member since: Apr 2008
When does a new development become "old". These have to age. The unsold units start competing with secondary sales in the same building.
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Response by csn
almost 16 years ago
Posts: 450
Member since: Dec 2007
Some of the developers have gone to rentals on their unsold units until the market become more stable. In that case there might not be much of a push to lower prices.
It's more simple than that, regular apartment sales are by regular people who refuse to lose a dollar if they can on their underwater homes, so they'll wait out as long as they can. It's a pyschological barrier that makes them treat it different than say stocks.
Developers are from a business standpoint with mezzanine loans, investors, etc and it's a business first. Like stocks, you have bad timing, bad inventory, etc. you cut losses and move on.
truthskr10, I m not sure how your point fits with developments that have had such slow sales and have not yet cut prices to a market clearing level. They haven't yet cut losses and moved on.
I think the next 6 months you will see changes. THings happen in clumps between quarters. You'll see sporatic blocks of in contracts. And I expect the same for Williamsburg as Manahttan (have not followed as close as Manhattan).
buyerbuyer, I think for the most part you're right - cuts are inevitable, as most developers are fighting the clock. I have heard that Douglaston does not have any underlying debt on the property at the Edge - if this is true, they can hold out much longer than you might expect. I can't speak for 80 Met, but they've been holding out for over 3 years now (though there have been some decent price cuts there in most units). While truthskr might be right, and the next 6 months will look dramatically different, I can't see anything happening within that time period that will force a sudden shift. But I'd guess the guys looking at the books are the only ones who really know what the timeframe is. Most of us here are just working off conjecture and educated guesses.
"But I'd guess the guys looking at the books are the only ones who really know what the timeframe is. Most of us here are just working off conjecture and educated guesses."
fo'sure and agreed
Also, while some developers have loans and negotiations, in the end banks and developers only dump when they think it's over. I would characterize the Edge, 80 met, Toren, Oro and all the large Brooklyn condo buildings as "still fighting," on the yardstick that goes from "woohoo, I'm on the top of the world" to "must.get.out.now."
They're doing little cuts, and playing games with inventory, hoping to feint and weave through the raindrops. Whether they succeed or not, I don't know. It seems to me we have a bit more to go before we hit bottom, but all it takes is a few hundred buyers. If the market continues to slow down, and they cut bit by bit, they might avoid capitulation.
I am miffed as to the lack of attempted short sales over the last year (manhattan non new dev).
Maybe(banks) too aggresively anticipating the rebound. This should be an interesting year all around.
bjw, the Edge office actually emphasizes (which seemed a bit weird to me, to discuss with potential buyers) that they will never cut more than they are now because it is tied into requirements of pricing levels needed to pay off financing.
hahahhahahahaaaaaaaaaaaa..... good cop bad cop..... hahahaaaaaaaaaaa... MR.VALENTINE has set the price.... hahahahahhahahahaaaaaaaa
That may be true, buyerbuyer. Banks have been engaged in "extend and pretend" for quite some time. But we may be approaching the point where banks (or their investors) decide it's time to clean up the books.
That's my suspicion, Topper. Putting my OP more succinctly, I think that not cutting prices was based on the hope that the market would come back in sufficient volume to sell out in a reasonable period, not on the idea that they would truly hold out forever. Now, lacking sales....it's time for tough choices.
buyerbuyer, I'm not sure I'd buy it (pun kind of intended) - why would they tell you they're holding a ticking time bomb? Sounds like a silly broker ploy. For once, I'm with w67th.
bjw, my main point was responding to your statement that they may not have financing ; either they are flat out lying or there is financing for the building (it's a mega-project, so, anyway, it doesn't MAke much sense that they dON't have financing). As for their true negotiating stance, who knows what is driving it.
When does a new development become "old". These have to age. The unsold units start competing with secondary sales in the same building.
Some of the developers have gone to rentals on their unsold units until the market become more stable. In that case there might not be much of a push to lower prices.