I just don't get it

Btw -- that was originally directed to Noah at Urbandigs.com, more as venting than expecting him to have the answer... but I'd love to hear what people think...

if you haven't already,read the tipping point by malcolm gladwell.

how many apartments have sold in the last 6 months between 1,300 and 1,500 sq ft as a percentage of apartments in manhattan?

why did so many supposedly smart people buy Facebook stock on friday as high as $42?

dtr - you've asked the million dollar question. As Seinfeld would say "Who are these people?". Who the hell is buying (especially coops - which rules out all that foreign buyer crap)? The only theory I can come up with that makes sense (mostly based on anecdotal evidence) is that the trillions in bank bailout money is still filtering thru the NYC economy -- the painfull layoffs that everyone expected never happened - and for every IB or trading job lost there has been a new compliance officer or high level IT position created to offset. The party is still on.

downtownrenter
43 minutes ago
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Noah -- I just don't get it. The banks (except C) aren't that far above their '09 lows. On the Street, everyone knows a big round of layoffs is coming. Taxes are ruinously high. City and state finances have temporarily improved but are headed back over a cliff. Aside from tech (which is definitely growing fast), other big city industries are flat to down. Yet rents (which aren't supported by foreign demand) are near, if not at, all-time highs. Prices in the Village and Tribeca are setting records, while prime UES and UWS are close to if not at the '07 highs. Nice (not trophy) apartments downtown are now easily $1,300-1,500 a square foot.

The demand is real. It can't be denied. I just wish I had some idea where it was coming from. Who's paying these prices?

LOL!

I get it. I track UWS sales, 3br apts. Ignoring all the high-end condo foreigner sales, there are still a few buyers out there who are employed, but more importantly, have done family money. Big flow of money from boomer parents to their kids.

The reference to buying FB at $42 says it all. For those with investable assets, faith has been lost in the retail equity game. The scandals of recent years have done nothing to boost the average person's faith in the soundness of the equity markets. Ergo, dump your money into something you can see, touch and live in. "NYC RE is dead. Long live NYC RE"

easy to explain:

the 1% riches is getting richer day by day under this evil system; and the poor already have the safe net (Mitt was 100% right on this). It's the sincere saver middle class got screwed.

thus the UES/UWS price is at at time high now

my reference to FB stock was not as an alternate investment. it is yet another indication that just because a bunch of people buy something (in this case FB stock at $42) doesn't mean that its smart or worth it. this incessant chatter that the market sets the price and therefore its rational is nonsense. people make up a market and just because a bunch of them are continuing to buy some apartments downtown at high prices doesn't mean much more than that.

cc: it is irrational vis-a-vis RE prices bcs rent-buy ratio is out of whack. The question is where does the $ come from? My sense is that many families choose to distribute some of their assets by giving $ to kids, who buy RE.

i guess it is too difficult to conceive that most of these people are more successful than you, huh?

10023: no doubt that's true. the amount of unrealized gains from the boomer generation cannot be underestimated...particularly in manhattan real estate.

I think that the OP touched on a surge in demand in the market as a whole, not just the sales market. Family money can explain some of that as parents help out even kids who are renting, but I think there is more to it than that.

The family money explanation intuitively makes the most sense to me, though. The condo we rent is being sold. We could buy but it has a couple drawbacks, the most obvious being it's about $1250 a square foot in an lousy elementary school district. The folks who live beneath us have kids and want to expand. They're thinking it over. She doesn't work, he's a (without being too specific) low-paid professional. It took a couple seconds of Internet digging for me to figure out whose money they'd be spending...

More families wanting to stay in Manhattan more boomers wanting to move into the city = more demand and less supply...that answers a lot of your question, particularly in regard to co-ops. I experienced the competition first hand during my purchase process, asking myself the same damn question...where the hell are all these cash-buyers coming from? I know that is part of the answer...

On last night's episode of Girls, Hanna's mother hinted that they would continue to support her if necessary. Art imitates life.

where are west67 and inododo to refute the first hand experience of actual apartment hunters? we need dodo's case shiller data to tell us how wrong you are, that it's really alright, prices are actually lower than they were in the civil war. we need west67 to call us lemmings and unicorns and to lhazzzzzzzzzzzzzzzzz off.

Anecdote alert:

A friend of mine was offered their rent renewal at Madison Belvedere. She was paying 2500 for an alcove studio, they offered 3100 to renew. Looking at the listing prices for other studios in the building it doesn't seem like she has a ton of negotiating power. Other studios are asking 3500. I have no idea if anyone actually pays that, but like the OP said, there is demand coming from somewhere.

UES10021
11 minutes ago
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Anecdote alert:

A friend of mine was offered their rent renewal at Madison Belvedere. She was paying 2500 for an alcove studio, they offered 3100 to renew. Looking at the listing prices for other studios in the building it doesn't seem like she has a ton of negotiating power. Other studios are asking 3500. I have no idea if anyone actually pays that, but like the OP said, there is demand coming from somewhere.

inonada?

Baby boomers near or at retirement, with lots of money saved up. They've already invested in stocks, bonds, art, precious metals ---- now where to put the money?

It's a no-brainer, and you can kill two birds with one stone: (1) Put the money in real estate, and (2)buy a condo or a co-op so you don't have to mow the lawn, clean the gutters, all that stuff retirees hate to do, and (3) still have an actual roof over your head, in a city that has great art, dining, the best medical services in the world, and *no need for a car*. It's a retiring baby boomer's dream come true.

Actually, that's killing *three* birds with one stone. What's not to get?

Isle_of_Lucy
2 minutes ago
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Baby boomers near or at retirement, with lots of money saved up. They've already invested in stocks, bonds, art, precious metals ---- now where to put the money?

It's a no-brainer, and you can kill two birds with one stone: (1) Put the money in real estate, and (2)buy a condo or a co-op so you don't have to mow the lawn, clean the gutters, all that stuff retirees hate to do, and (3) still have an actual roof over your head, in a city that has great art, dining, the best medical services in the world, and *no need for a car*. It's a retiring baby boomer's dream come true.

Actually, that's killing *three* birds with one stone. What's not to get?

20 comments

the taxes and the weather.

Re: Baby boomers near or at retirement, with lots of money saved up.

Yay, another item for the why Manhattan is different list -- "It's a Baby Boomer retirement mecca!"

(just ignore the highest taxes in the country and the weather's kinda sucky for 5 months)

weather is sucky here from Dec - Apr but sucky in Florida from May to Oct.

Most people who can afford to buy Manhattan apartments can also afford NY taxes, and most of these people are also smart enough to figure that out ahead of time, well before they sign a contract and move all their belongings.

As for the weather, I guess it depends on how you define "sucky". For a lot of people, Florida is way too hot. And it's also :::Florida:::

Everything's a trade-off, and if you think moving to Florida is weather-and-tax heaven, there are a lot of people who certainly agree with you. I was my take on the OP's "not getting it".....to me, it makes perfect sense. Your mileage may vary.

*It* was my take......

Lucy got it right. We bought one house stayed in for 30 years paid it all off and now close to retirement moved back into the city. Proceeds from house enabled us to buy a comfortable 2 bed UWS. Baby boomer friends all doing the same thing. No lawns, cars, gutters. Saved tons on money on that alone and used to pay maintenance and mortgage.

So what Isle_of_Lucy is saying, if I understand correctly, is that Manhattan has now become so desirable that it is disconnected not just from the health of I-banks but from local tax rates, school issues, and the overall economy -- all the factors that traditionally drive real estate prices. People with money, whether wealthy baby boomers or foreigners, want to own property here so much that they will buy pied-a-terres for millions of dollars and/or subsidize their barely/non-working children to live here.

I guess so. I guess the rest of us -- even the 1 percenters who aren't the 0.1 percenters -- will just move. Which isn't the end of the world, and I don't mean to suggest it is. But I'm not sure if those folks are paying city and state income taxes, which could put the city in a strange bind -- rising real estate prices but higher taxes and falling real wages for almost everyone who actually works here.

downtownrenter
8 minutes ago
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So what Isle_of_Lucy is saying, if I understand correctly, is that Manhattan has now become so desirable that it is disconnected not just from the health of I-banks but from local tax rates, school issues, and the overall economy -- all the factors that traditionally drive real estate prices. People with money, whether wealthy baby boomers or foreigners, want to own property here so much that they will buy pied-a-terres for millions of dollars and/or subsidize their barely/non-working children to live here.

I guess so. I guess the rest of us -- even the 1 percenters who aren't the 0.1 percenters -- will just move. Which isn't the end of the world, and I don't mean to suggest it is. But I'm not sure if those folks are paying city and state income taxes, which could put the city in a strange bind -- rising real estate prices but higher taxes and falling real wages for almost everyone who actually works

Or you could suck it up, make more money and stay like the rest of us.

In our co-op, we have been seeing a lot of retirees trading their big suburban homes for a 1- or 2-BR in the City, as well buyers in media, medicine, non-IB banking, and consulting.

Manhattan is NOT disconnected from Wall Street, school issues or the overall economy. Not even in the 3br+ market on the UWS. If it were, we would not have seen the very real correction/drop in prices from '08 to '11. When panic set in, precious few people were buying. But when the market recovered, many of the sales in the niche market that I follow derive from some kind of intergenerational wealth transfer. I don't see as many buyers of 3br+ apts that are baby boomer empty nesters.

To 10023's point re: panic setting in, I can't think of anyone who bought between late 2008 and late 2009. I do know five buyers of 3br+ apartments plus one townhouse buyer since the beginning of 2010. Four UES and 2 UWS (CPW). All are Wall Street - four single incomes and two double (both WS) income. Most are very late '30s to mid-40s couples with nursery to elementary school age kids, with the exception of one baby boomer with nursery to elementary school age kids. None involve any intergenerational wealth transfer. I'm not concluding that this is representative of anything beyond these six examples, but it seems at least possible that there is a pattern here - namely mid-career Wall Street people who have reached a point where their families need more space and where they have accumulated enough wealth over 10-15 years that they can buy that space without betting everything on real estate. In terms of relevance for the market, the question then becomes what the pipeline of such buyers looks like given recent Wall Street reality and the outlook for number of jobs and compensation level per job (a.k.a., rate of wealth accumulation).

All of the apartment buyers above bought co-ops, by the way. I don't happen to know any recent buyers of family sized new dev condos. When I look at condo closings on SE I see a lot of foreign names and LLC's c/o such and such law firm. I suspect that this is not random either.

I think intergenerational wealth transfer (which has always been a factor in NYC real estate) has been a greater factor recently, due to the raising of the gift tax exemption.

That said, when we talk about the 3-BR market, we're talking about a TINY market. We can see the elephant in a lot of different ways (ss sees the young Wall Street couples with kids, I see the tech and Hollywood people, others of you see the bsby boomers) but it just doesn't take that many interested customers to really move the needle.

To use Jon Miller's numbers: 1377 co-ops sold in Manhattan in Q1. 10.9% of those were 3-BRs. So we're talking 150 apartments -- Manhattan-wide.

So you only need demand from 160 customers for that niche to look "hot."

ali r.
DG Neary Realty

thx ny10023-- a reality check

"it seems at least possible that there is a pattern here - namely mid-career Wall Street people who have reached a point where their families need more space and where they have accumulated enough wealth over 10-15 years that they can buy that space without betting everything on real estate"

There's more than one way to make money; Wall Street doesn't hold a monopoly. Other than that, I agree 100% with your sentiment. It's just plain *people* (Wall Street or otherwise) who have accumulated enough wealth over 10-15 years......

"All of the apartment buyers above bought co-ops, by the way."

There's a reason or two for that!

"I think intergenerational wealth transfer ..... has been a greater factor recently, due to the raising of the gift tax exemption."

That's the primary reason, and that's what you've been seeing over the last two years. And it's likely you'll continute to see this until the exemption expires at the end of 2012.

sidelinesitter: can it be that such people exist? A segment of the buyer market that works really hard over extended periods of time (15 years) in order to accumulate hard-earned wealth that is used to purchase a home (vs. a short-term investment property) in a city that they are happy to live/lay down roots in?

If you read this website, you would never sense that this buyer actually exists; it is always the "foreign buyer", the "irrational bubble chaser", or the "trust fund kid".

Maybe it's because the buyer you're describing isn't spending her/his day reading and responding to real estate posts on SE; rather they are working their asses off in order to make ends meet.

My uninformed guess is that the buyer you describe comprises a much bigger portion of the 2-3 bedroom market (stretching up to $5mm) than we are willing to acknowledge.

The op didnt mention three bedrooms. Or uws. Or even sales specifically.

sorry for the late entry here, was in the field all day. So yea, the demand is definitely real as the #s dont lie. We are still seeing a pace of 1,200+ deals signed a month, with less "stuff" coming to market each month. Q3 report will probably be the one to show it.

Its getting to the point where "nice" apartments, not "great" apartments are getting a nice bid. Tells me there are slim pickings out there, yet properties are trading. Odd feeling. My buyers know very early that we cant take a chance not bidding on a quality apt that is remotely priced right these days. Thats the thing, what if we are seeing pent up demand from lower volume levels the past few years? And now they are all more confident, see Manhattan as more stable, and see the renting alternatives.

My buyers are all over the place in terms of employment ranging from investment professionals, to controller, to university professors, to pharmaceutical/biotech, associates at law firms, pr/marketing executives, etc..I cant speak for my colleagues on this but one thing I do know is that the depth of the Manhattan buyer pool never ceases to amaze me..it seems Im not the only one with a thread like this. Cant we admit that interest in Manhattan property spreads from family to younger generations as money is passed down, to older generations/retirees, to foreign investors/families, and to all the independent Manhattan buyers who just worked there asses off for years to at one time own a piece of this city

When I hear fundamentals talk I ask myself, is this market trading on fundamentals or buyer confidence? Or both? I would think buyer confidence and interest in rare well priced quality property is quite high right now -- and we dont have all those 1000s of new dev units about to hit the market the last time buyers felt this confidence in '07.

Im not saying the fundamentals dont count, they do, but until something crazy happens that causes markets to 'rattle' the world by crashing 20-30%+, confidence has a more direct role in whether or not Manhattan real estate sees rising or declining volume. And we have been rising, and less stuff is being listed for sale -- so what does that tell us? Why would sellers not want to flood the market with inventory if the market is so strong right now?

Clearly the past 3+ months of market activity is not trading on buyers views on deteriorating wall street jobs/bonuses fundamentals. They are not focused on rising re taxes because comparable rental rates are soaring and they can use the tax shelter..to a point of course, the markets will equalize the value of an apt whose monthly carry rose far above the broader market.

Manhattan is a market like all others, except it trades differently. Like most local re markets. Right now is probably the pinnacle of the move but until either bids disappear for whatever reason or a flood of units come to market, I think we will continue to see deal vol high as buyers race each other for most desirable and well priced product to come onto the market. Then it'll be summer, and we will slow down and the frenzy will be over.

Ouch! Bears? Dodo? West67? Brooks?

Eboc, bears justifying their pov, and wannabes upset they lost their shot.

if this is what we see today, what do we see in 3 years ? I know its so cliche but...its only an island..not gettin any larger

When stupid permabear brooksie finds a listing that is 650 or so per foot, he declares "midtown east on its way to 500 per foot"

West67 says flmazzo

Dodo sites statistics

Where are you boys? Nothing to say?

They are on vacation. When they come back, you can play with them. In the mean time, you have columbiacounty.

In my case and others (youngish professionals) it is the rents that are motivating. They math starts to become painful so you find a way to make it happen. I didn't want to buy really, but when you crunch the numbers it is dumb not too. A lot of people I know are feeling same. With rents so high, no tax benefits it just makes sense. My monthly outlay will drop by 25-30% (although neighbourhood not as expensive generally). Plus, putting money into the markets does not seem to be working out so well...

>They math starts to become painful so you find a way to make it happen. I didn't want to buy really, but when you crunch the numbers it is dumb not too.

What exchange rate did you assume?

what a difference a day makes. or a poster.. "2005 prices again. .. actually worse" then "I just don't get it"..

http://streeteasy.com/nyc/talk/discussion/31098-2005-prices-again-actually-worse

Not a day. Just the correct perspective founded in reality, and yours, founded by sitting on your ass.

no you weasel just use data that isn't skewed.. reality. go try to bench 135 lbs now. be sure to use a spotter
somewhereelse
2 minutes ago
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I check the measure the bulls were using to show prices were going up years ago... the medians... I also look at the medians by number of bedrooms.

The streeteasy index leaves out the majority of the market... miller samuel gets all apartments.

you cite somewhereelse as your reference? He's still afraid of Jehovah's Witnesses spooking him.

The simple answer, there is more demand than supply. Have you looked at traffic, schools, your line at the local Duane Reade. We are at capacity. The suburban areas are filled with inventory. If you go outside the city, the for sale signs are everywhere. Your example talks about banks, but fails to mention lawyers, doctors, hedge funds, technology, hospitality, etc..Maybe all the fat cats are down sizing to smaller apartments who knows..
you should figure out what you can afford, take advantage of the artificially low rates and buy something, no more worrying about rents..over time it will pay for itself..

Weasel? See, the difference is that you look at data. I talk to and listen to people. Cant hou hearwhat the people are saying?

But what do you out there say about a co-op apartment in Chelsea, tiny (400 sq. ft.) where buyers are expected to have 4 times the amount of the purchase price ($550,000) in liquid assets to be able to buy the apartment. I wanted to retire in New York because of all the artistic possibilities -- theater, opera, off-broadway theater, the list goes on -- but now more than ever I am convinced that New York is only for the super rich, unless you were fortunate enough to be able to become esconced in the city years ago when one could buy the same studio for $35,000!!!!!!!!!!!

Do I have to move to Florida?

I am reading that RE in manhattan is not affordable. The economy blows and people can move to the burbs where it is more affordable or retire in Florida. That means to me RE in manhattan will continue its slow decline. "it's the economy stupid"

EBOC, *thank you* for your intelligent and thoughtful post. You clearly get it.

Riccardo, clearly prices have gone up over the years but so did the requirements for coops. I think that 75% of people living in those coop buildings would not themselves be approved today. So they are very much incentivised not to sell as they would not be approved anywhere else. So there is a big delta between a relatively few new buyers today and the rest of the city in terms of wealth.
That said, you should look in sutton place, yorkville, hells kitchen - RE there has been going down.

Brooks2
36 minutes ago
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I am reading that RE in manhattan is not affordable. The economy blows and people can move to the burbs where it is more affordable or retire in Florida. That means to me RE in manhattan will continue its slow decline. "it's the economy stupid"

the only people that think it is in decline are those that aren't actually looking to buy or rent brooksie. sitting on your fat ass all day looking for "price choppers" isn't the same as looking for a home to purchase or rent. but you don't understand that.

Riccardo, my firm has been based in Chelsea for decades, and we place first-time New Yorkers in Chelsea ALL the time.

I acknowledge that it's tougher now than it used to be (when I bought my first studio in Chelsea in 1996, it cost $65,000, and I was the only person at the board interview wearing a suit) but then again, when I bought, interest rates were 8%.

Email me (below) if you want to talk.

ali r.
DG Neary Realty
ali [at] dgneary [dot] com

Riccardo - I think that chelsea co-op studio example u mentioned is not the norm. most co-ops will look for 20% down, with the occasional 25% requirement and then look for d/i ratio below 25-28% and post closing liquidity of 1-2 yrs of maint+mortgage + other monthly debt obligations.

I dont think its as tough for most of the chelsea co-op studio inventory out there than that statement makes it appear. Basically for a $500,000, 20% down, 4% rate --> buyer should have min. salary of $150,000 (no other monthly debts) and liquid assets of $170,000+ (18mos liquid post-closing) or so to pass most of the coop boards out there. Obviously tweak if you have more debts or rate is lower or buyer has non-liquid assets to show also.

Boards usually look at the entire picture of the buyer, so even if d/i ratio is 29% or even 30%, if employment history, salary, and liquid assets are good, a board may be more liberal on one of the many areas they look into.

All the buyer has to do is provide a standard rebny financial statement, picture of their employment situation, and the seller broker can call the managing agent to see if any specific co-op might look unfavorably financially towards a prospective purchaser. Buyers out there over time tend to pick up on what they can buy fairly quickly, and what they cant.

Sideline: interesting that your perspective is so different. CPW co-ops are the one chunk of the market that I rarely look at. Because the buildings that tickle my fancy aren't really your "bread-and-butter" ones. The people I know in the same position as your friends are renters for the most part or bought and upsized a while ago.