NYT Article - 2 April 08

Thanks Samrock. Combined with the information in the links below, it is clear that the national crisis is fading, and that the Manhattan real estate market, though not immune from national economic and Wall Street-centered problems, is very, very strong.

This doesn't mean that we are not going to see price decreases at all. We probably will in the next 2-3 quarters. The bumpy ride is not over. But I would expect them to be relatively shallow, short-lived, and to be very centered on certain emerging areas and types of properties -- perhaps walk-up co-ops in emerging areas if indeed not eligible for the conforming loan increase. But price stability would likely return not too long after price declines -- as buyers eventually purchase the lower priced property and inventory again decreases.

http://www.nytimes.com/2008/04/02/business/02stox.html?_r=1&oref=slogin

http://www.nytimes.com/2008/04/02/washington/02housing.html?hp

The final line of the article is the most meaningful sum: properties will linger longer and buyers will be more cautious.

That article should not have been in the NYT....it should have been in the Real Estate Journal of Duh.

Don't start dancing in the streets singing kum-baya just yet, boys and girls.

1) The price increase is skewed by Lloyd Blankfein and his types buying at 15 CPW, and Jimmy Cayne and people of his ilk buying at the Plaza. So yes, the $15MM+ market is still strong. By definition, $15MM+ will always be strong. There's a big difference between mean and median, especially when the number of transactions goes down as significantly as it has.
2) Besides, most sellers are offering incentives on the back-end (free closing costs, free common charges, free move-in allowances, etc) that aren't reflected in the top-line sales-price figure.
3) Furthermore, most of the closings in this quarter were for contracts that were signed back in 2007 when most of these new development condos were still under construction.

Inventories are still growing, new units are still coming onto the market faster than they are being taken off and the full extent of the market pressure has yet to be felt. Most bonuses that will be paid in 2009 will be flat to down, and all those newly unemployed will be looking to unload their units.

Here we go again...

"Don't be TOO interested in THESE results, because they don't accurately reflect what I want you to think." "These numbers reflect earlier numbers that don't count, but the NEXT quarter's numbers should tell the REAL story" (and for how many quarters have we heard that same song now?). So now it's the 2009 bonuses that will take the market down, right iMom? Like it was going to to be (absolutely positively for sure no doubt about it) the 2008 bonuses?

Honestly, if you go back and look at the appropriate boards on streeteasy from April of 08, you'll see the EXACT SAME PREDICTIONS were made for the 2008 market. It's rather eerie, actually.

Look, I have absolutely no doubt that as khd said "...properties will linger longer and buyers will be more cautious..." No doubt about it at all. But this nonsense of "THESE numbers reflect LAST quarter so I can basically discount them, but NEXT quarter will tell the story, and it's NEXT year's bonuses that will tank the market" has been going on now, oh, for about 8-10 quarters already.

I'm sure your buddy steve will jump in here with an epic post chock full of numbers, statistics, graphs, pie charts, an electron microscope, tweezers, and a million analytical 'facts' why he, and ONLY he, knows the precise direction and how far the market will go (sigh) while he informs us how much he's earning on a daily basis and how he sold his property in Florida and now it's selling for alot less.

Oops - meant "Honestly, if you go back and look at the appropriate boards on streeteasy from April of 07, you'll see the EXACT SAME PREDICTIONS were made for the 2007 market. It's rather eerie, actually."

Sorry!

"Nobody knows anything."
- William Goldman, "Adventures in the Screen Trade"

"There are three types of lies: lies, damn lies, and statistics."
- Attributed to various sources (Disraeli, Twain, etc.), all of them much wiser than any of us.

Hi Guys. I am relatively new to this whole thing so forgive me if I sound like an idiot. I hear occasionally you talk about free common charges. Is this something that they actually negotiate? I have heard about the transfer taxes being waved, but never of this. Can someone enlighten me?

Nice post, Malraux. You know, I remember that from say 2006-q1 2007 inventory rose to something like 7800. Now, this is what I think.

1) Wall Street layoffs are bad for the market. Their negative impact will be felt more acutely in different areas.
2) People who bought into new developments looking to flip will get hurt if they need to sell fast. This will add to inventory and drive down some prices.
3) Lending standards and rates are tough right now, but I think Bernake and Paulson are finally hitting their stride. While we won't see a return to subprime madness (which never was a factor in Manhattan anyway), we will see mortgage rates come down over time as spreads narrow, and the requirement of 20% down will become a fixture, which I think is a good thing.
4) Emerging neighborhoods will see price depreciations first and they will go down the farthest.
5) Wall Street will make a nice come back in the last half of 08, and M and A will pick up again big time in 09, leading to big bonuses again in 2010.

Between now and then it will be more of a buyers market. Rental market will heat up over the coming months as more people wait on the sidelines, driving up rents in luxury buildings, coops and condos. The only people who will get hurt in all of this are people who bought in say 06 and 07 who wanted to flip or who need to sell. Everyone else should hang on. If the markets pick up and we skirt a recession, as Steve thinks we will be back in line sooner rather than later.

Buddyparker: Those concessions are ways to effectively lower the selling price of an apartment without having the price reduction reflected in public filings. They are among the many ways developers and sponsors manipulate the data available to the public, to preserve the illusion of ever-rising prices and prevent the perception of a softening market. Resales are somewhat less vulnerable to this kind of distortion.

Thanks west81st

look, if you want to look at prices, then you must understand that:

a) its lagging data
b) contains sales from very high end
c) contains NEW DEV sales closed recently but signed in contract many months earlier that had to wait for completion

There is nothing that can be argued about the 3 points above. Therefore, prices will continue to be positive for the next few quarters and paint a very bullish picture for manhattan real estate as new dev deals of generally 1200+/sft are CLOSED and counted in future pricing reports.

If you want to know what is going on RIGHT NOW, you look at inventory trends & sales volume as for the health of the current environment. We are at now now. I have a post on this that I wrote 2 days ago when the bloomberg article came out, but I am waiting for Jonathan Miller to give me a quote on the discussion topic. Should publish today once I get it. Im not sure what he will say in regards to this topic.

Digs is right. If you took out the closings on contracts that were signed several months, or even years ago, the numbers would look worse.

Digs, what do you think about my opinion of where Wall Street is heading. Also, where do you think luxury rentals will go given the slowing sales market?

Let us know what Miller says or when you post it - would be an interesting read.

Also. You have a better sense of the market than Miller. I made some predictions on Curbed in 06 and 07 about price appreciation and velocity, and he disagreed. He was wrong. Miller is ok at compliling info, I guess, but he lacks your feel for where the market is heading.

on phone with him now

mh23, thanks for the great analysis.

Sorry to be a broken record of good news, but...

http://www.cnbc.com/id/23914717

http://www.cnbc.com/id/23912176

he is in same camp. My sense of the market is what I predicted 3 months ago: slow sales volume, rising inventory as a result of diminishing buyer confidence as the first phase of the correction process. 2008 will be the year that inventory rises.

mh23 - i think your pretty spot on, but if jobs are lost and wall street gets hit, I think rental's will see negative effect. Logic says that buyers will wait and sellers will now rent, but if economy is in recession and jobs are lost, the 50% gain in rental rates in past 2 years SHOULD see some softening. You are seeing it already in the form of mgmt offered OP's and free rents, to avoid lowering rental price.

urbandigs, your rental analysis is true and is already happening.

will, broken record of good news? how about this?

http://www.bloomberg.com/apps/news?pid=20601087&sid=aWNW6ABxw9.Y&refer=home

The IMF considers the current 'financial crisis' in the US as the worst ever since the Great Depression.

PEOPLE- if that doesn't bring to light the DEEP GRAVITY of the situation we are in right now, and how close we are teetering on the edge, pass me the peace pipe.

To compare a crisis as the worst since the Great Depression, and to have an institution like the IMF publicly state that.

Stop looking at blips on volatile data the always get restated/adjusted. Instead, pull yourself away from the microscope, stop hunting for the few blips of hopeful news, and acknowledge the big picture situation which we are in.

That 22% increase for studios directly correlates to what I feel my market value is for my studios. Most people read the NYT for Manhattan direction. Hopefully this will change sentiment in a more positive direction. Less anxiety.

ok, post is up with JM's quote..finally got it. Just so you guys know, I wrote the piece Monday after the bloomberg piece, and not after Q1 report was released. But JM & I are on same page as far as prices being stale, misleading, and lagging; not representative of what we see right now.

Not that market is tanking, not by any means! Simply, lower buyer confidence, slower sales volume, and as a result, rising inventory.

Malraux: Everything in my post is true and has been corroborated by others on this board. Your juvenile rant and snide comments don't change the facts.

1) Ultra luxury ($10MM+) units skew the rest of the market.
2) Increased seller concessions equal defacto price reductions.
3) Housing sales are a lagging indicator.
4) Steadily rising inventory has accelerated.
5) People on Wall Street get paid once a year for results that were produced the year before.

You may not WANT to believe it, but these facts are undeniable - unless you are so out of touch with reality that you actually think that we're still in 2007. And don't lump me and Steve (or anyone else, for that matter) together. If you have a problem with his posts, take it up with him. I stand by my comments. I'm not responsible for anyone else's.

The WSJ seems a little more skeptic on future of Manhattan real estate than the NYTimes.

Housing Slump -- in New York ?
Manhattan Loses Bulletproof Luster As Home Sales Fall
By MICHAEL CORKERY April 2, 2008; WSJ Page C15

http://online.wsj.com/article/SB120710067257782271.html

UrbanDigs: just curious, what is your plan? Your career is, in many ways, tied to the health of the real estate market. And you rent. When the market drops will you buy into it? If so, do you have a "bottom" in mind? If this is too personal, no worries. Just curious how someone who rents and is who works in the industry will respond if they see price drops...

iMom:

I didn't rant, and I wasn't snide. When I wrote that people (just like did exactly above) made statements in the past 8-10 quarters that went "...Don't be TOO interested in THESE results, because they don't accurately reflect what I want you to think." "These numbers reflect earlier numbers that don't count, but the NEXT quarter's numbers should tell the REAL story" (and for how many quarters have we heard that same song now?). So now it's the 2009 bonuses that will take the market down, right iMom? Like it was going to to be (absolutely positively for sure no doubt about it) the 2008 bonuses?..." I stand behind that statement - it's absolutely true. Go on the boards and read it for yourself in black and white. If you don't like the 'undeniable fact' that this is the case, taht's your issue alone.

As to your assertion that "...Everything in my post is true and has been corroborated by others on this board...," uhhh, no it hasn't - in fact, there's been quite a fair amount of disagreement just as to exactly what these 'undeniable facts' might mean.

When you write "...You may not WANT to believe it, but these facts are undeniable...," let's look at those 'undeniable facts' of yours, shall we?

1. The average sales price reached a new record at $1.72 million, up 33.5%from Q1 2007 according to Miller.

2. Halstead/Brown Harris Stevens report (not online yet) has the number at $1.69 million, up 46% from their numbers last year.

3. We all know those numbers are inflated by the 15 Central Park West and Plaza closings, so what about the median?

4. Elliman has the median sales price at a record $945,276, up 13.2% over last year.

5. Halstead/BHS has it at $855,000, also a record and up 13%. In essence, even factoring the 15CPW/PLAZA 'bump,' those are some damn strong numbers.

6.Sales are slowing, and inventory is up. Elliman reports that the number of sales dropped 34.3% this quarter to 2,282 units, compared to 3,474 units sold in the prior-year quarter.

7. Halstead/BHS saw only a 1% drop

8. Corcoran also saw a "slight drop."

So in the end, it seems like all the analysts agree that these trends show a slowdown on the horizon, but not a crash. As I said above, you can predict taht the 2009 bonus season will be the final straw to excoriate the market, but that's EXACTLY what what said one year ago, and WHOOPS!, so sorry!

Maybe you're the one who's 'out-of-touch.' I just don't remotely see any kind of a crash in these numbers. As I said above, I basically agree with khd that "...properties will linger longer and buyers will be more cautious..." But those are two very different things. So don't talk to us about your "undeniable facts." What you have are suppositions, inferences, and positions, and nothing nore, regardless of who 'corroborates' your POV, even if it is stevie.

The article%u2019s headline is deceptively upbeat in reporting increased prices. Reading the piece through to the end, the point seems to be that brokers are sounding cautionary warnings about what we are likely to see for the next few quarters, but at the same time no one anticipates as deep a slowdown as the rest of the country experienced. Some excerpts that convey very different info than reading the headline alone would provide:
%u201CAlthough prices are rising, sales are slowing, and executives of the four largest brokerage firms in Manhattan said they see some trouble, though not disaster ahead...
%u201CThe firms disagree, however, on the extent of the slowdown in sales in the first quarter. According to Prudential Douglas Elliman, the number of sales fell by 34 percent in the first quarter, to 2,282 apartments from 3,474 last year. Data analyzed by Brown Harris Stevens and Halstead Property showed a 1 percent drop in sales. Corcoran also said it saw a slight drop.
%u201CNo one disputes the fact, however, that inventory is rising, and after a wave of bad news in the financial world, a crucial underpinning of New York%u2019s economy, fewer buyers are signing contracts.
%u201CAll five boroughs are also facing an escalating number of foreclosures.
%u201CThe brokerage firms reported that the number of buyers who went to contract in the first quarter was far lower compared with buyers last year.
%u201CBrokers are not as optimistic, however, about the next few quarters in Manhattan. Sales in the first quarter were strong in part because nearly a third of the apartments that closed were for condos that buyers signed contracts for at least a year ago, according to data tracked by Brown Harris Stevens and Halstead.
%u201CNow buyers have more choices, with an inventory of 6,194 apartments compared with 5,923 at this time last year, according to Prudential Douglas Elliman. The brokerage firms reported that the number of buyers who went to contract in the first quarter was far lower compared with buyers last year.%u201D

Sorry. Quotation marks came out as strange percentage signs, numbers and letter. Hope you can still make sense of post

Im ALWAYS looking to buy, when I dont already own! For me, I would need an apt that I can grow into as we are just now considering kids. So, either I buy a 2BR/Con3 or a 3BR that I can hold for 5-7+ years and be comfortable in. Right now that product is about 1.3-1.5M here considering about 1300-1400 sft or so. Outside my affordability. So, either my salary rises (which thankfully it is) or product gets more affordable (opportunity pop up?). In meantime, I wont stretch myself in a industry whose agents are independent contractors with no bonuses.

I have a biz model for urbandigs so who knows how that may change in years to come if it works out. For now, its just about writing good content, building the brand, and working with as many clients as possible. Thankfully, I have a very healthy pipeline of buyer clients via urbandigs.com. Most of my colleagues who do not have sales exclusives dont have that luxury.

kylewest - comment on my piece today on urbandigs! Exact point I am trying to make, except 6200 is still not enough inventory to offer many options! Lets get to 7500 or so for that.

Sounds like a good plan. I am sure it will work out for you.

So for those us who are looking to buy (as a home and not an investment) and are anticipating holding on to the property for 5 years, is this market volatility really an issue?

Malraux: You must have Steve-like time on your hands by the length of your post. I'm posting from work, between meetings and phone calls, so I'll have to be brief. One more time:

1) Ultra luxury ($10MM+) units skew the rest of the market.
From the NY Times article: "The huge price increase reflects the sale of an unusually large number of very expensive apartments, which skewed the average. In this year’s first quarter, 71 apartments sold for more than $10 million, compared with 17 apartments in that range for all of 2007. This year’s first quarter also included the sale of dozens of apartments at the extremely high-priced 15 Central Park West and the Plaza Hotel."

2) Increased seller concessions equal defacto price reductions.
From West81st: "Those concessions are ways to effectively lower the selling price of an apartment without having the price reduction reflected in public filings. They are among the many ways developers and sponsors manipulate the data available to the public, to preserve the illusion of ever-rising prices and prevent the perception of a softening market."

3) Housing sales are a lagging indicator.
From urbandigs: "JM & I are on same page as far as prices being stale, misleading, and lagging; not representative of what we see right now."

4) Steadily rising inventory has accelerated.
From urbandigs: "My sense of the market is what I predicted 3 months ago: slow sales volume, rising inventory as a result of diminishing buyer confidence as the first phase of the correction process. 2008 will be the year that inventory rises.

5) People on Wall Street get paid once a year for results that were produced the year before.
From mh23: "M and A will pick up again big time in 09, leading to big bonuses again in 2010."

So you see, Malraux, there IS corroborating support for each of my arguments. The fact that others have made these statements in the past does not invalidate them today. The credit crunch didn't really hit NYC until the beginning of 2008, the full effects of which will still be reflected in these Miller Samuel reports for quite some time. Again to quote urbandigs: "prices will continue to be positive for the next few quarters and paint a very bullish picture for manhattan real estate as new dev deals of generally 1200+/sft are CLOSED and counted in future pricing reports. If you want to know what is going on RIGHT NOW, you look at inventory trends & sales volume as for the health of the current environment. We are at now now."

So enjoy your backwards-looking, lagging-market-data reports while you still can. I'm just calling it how I see it TODAY, and how most people agree is coming on the horizon.

Wow...my last post wasn't as brief as I thought it was. Most of it was copied and pasted, though.

klm13, others on the board will simply say "no," but I don't really get that line of thinking. If prices were to drop next year by, let's say, 8% for a $1.2MM property, that's an extra $96k you get to keep when you sell in 5 years, as well as mortgage interest saved througout. The bigger questions, in my opinion: Are you confident that prices in your part of the market will drop? How comfortable are you waiting for them? My personal answers are very and very.

iMom:

1. The average sales price reached a new record at $1.72 million, up 33.5%from Q1 2007 according to Miller.

2. Halstead/Brown Harris Stevens report (not online yet) has the number at $1.69 million, up 46% from their numbers last year.

3. Elliman has the median sales price at a record $945,276, up 13.2% over last year.

4. Halstead/BHS has it at $855,000, also a record and up 13%. In essence, even factoring the 15CPW/PLAZA 'bump,' those are some damn strong numbers.

So you see, iMom, there is corroborating support for each of MY arguments. The fact that these are factual results based on the most recent quarter does not invalidate them today. Again to quote urbandigs: "prices will continue to be positive for the next few quarters and paint a very bullish picture for manhattan real estate as new dev deals of generally 1200+/sft are CLOSED and counted in future pricing reports." So I guess the 'crash' you're calling is now in 2009, right? Definitely 2009?.....

So we're back to my quote from the 'idiot's thread' I started -

"...Dow will be below 11,000 by the end of 2007!!..."

"...Housing market down 20%! - no - 30%! - no - 40%! - no - MORE! - by the end of 2007!!!..."

"...The subprime/Alt-A debacle would tank the Manhattan real estate market FOR SURE in 2007!!..."

"...A bad bonus season would tank the Manhattan real estate market FOR SURE in 2007!!..."

"...High inventory would tank the Manhattan real estate market FOR SURE in 2007!!..."

"...Manhattan real estate selling for fifty cents on the dollar by 1 January 2008!..."

It's the same hue and cry these people made in 2007 when they said it was the end of the road and that real estate prices in Manhattan would collapse.

It's the same hue and cry these people made in 2006 when they said it was the end of the road and that real estate prices in Manhattan would collapse.

It's the same hue and cry these people made in 2005 when they said it was the end of the road and that real estate prices in Manhattan would collapse.

It's the same hue and cry these people made in 2004 when they said it was the end of the road and that real estate prices in Manhattan would collapse.

It's the same hue and cry these people made in 2003 when they said it was the end of the road and that real estate prices in Manhattan would collapse.

And so on....one day, of course, they'll be right - the market will recede to a greater or lesser degree for a while - that's what markets do - they go up and down.

So enjoy YOUR backwards-looking 'we've been saying THE SAME THING FOR FIVE YEARS RUNNING' reports. I'm just calling it how I see it TODAY, and how most people agree.

Thank you for your analysis, tenemental. It would certainly be nice to keep an extra $96K by waiting (although we are interested in 1 bedrooms in the $800K range) but we have to find an apartment anyway since we will be moving back to NY this summer, will have to buy furniture and will have little time to apartment search in the next two years. Considering brokers fees for rentals and the costs of breaking a lease (two factors that chip away at that $96K) it is hard to know whether waiting will really make us a whole lot better off. I don't mind not making a profit when I sell in another five years (as I said, it is primarily a home, not an investment), I just don't want to find that I have lost $100K either. Thoughts?

malraux, you are missing the MOST IMPORTANT POINT.

You see, your "boy who cried wolf" analogy is quite entertaining. But you have completely forgotten what happens at the end of that story and who gets screwed.

THE WOLF ACTUALLY COMES, but nobody believed the boy, and we all know what happened after.

Well, looks like the Wolf is HERE. We just had the largest drop in Manhattan sales volume since 18 years ago (remember what happened then?), this headline has sat on front of Bloomberg.com the entire day now.

So, just like in the "boy who cried wolf" story goes, go on, continue playing your part. See what happens next.

I think that we need to take a good look at what has driven up the inventory numbers, as well as what has caused the slowdown in transactions.

1) With respect to inventory, a few observations must be made. First, this is traditionally the time of year that people list. Second, some people have been laid off or fear being laid off and are listing out of fear or need. Three, some people bought to flip, not many, and they see that they may take a loss if they don't sell soon. With all of those factors at play at one time, we still have numbers that are appreciably lower then where they were for 06-07 (The inventory reached 7,800 at it's peak). While the trend is surely heading up, we are not anywhere near historic highs.

2) With respect to transactions, two very important events ocurred during the first quarter. 1) The credit crisis that began in August reached a zenith. Mortgage rates are higher then they have been and lenders are stricter than they have been for years. This, in and of itself, reduces the number of deals that would have ocurred in 06. Two, Bear Stearns was bailed out, and I believe that froze the market entirely for the last two weeks of March, and has generated an enormous amount of fear and uncertainty. There are stii buyers with cash, but they decided to wait based upon the Bear collapse, and an overall feelng of uncertainty.

With all of that being said, I predict the following going forward. I believe that the fed and treasury have finally gotten their arms around the problem. The stock market is showing signs of renewed confidence, and even the credit markets are starting to come around a little bit. Subprime is done, and 20% down will be the new standard. Unqualified people won't be getting loans, but none of these people were buying in Manhattan for the most part anyway.
Manhattan prices will stay stable for the remainder of 08 (give or take 5%). Transactions will start to heat up in May and, if rates come down and credit issues abate, we could see a busy summer and fall where buyers on the sidelines come in and try to get a bargain (and some of them will). I think that Wall Street will stabilize, and have a good second half. 2009 bonuese will be lower than this year, but not negligible. 2009 will see more buyer activity leading to lower inventory. 2009 will be a good year for m and a. We will skirt a recession and inflation concerns will abate. The Fed talks about raising rates, and buying starts to heat up. 2010 bonuses are substantial, back to a sellers market.

"That article should not have been in the NYT....it should have been in the Real Estate Journal of Duh."

khd, good post, made me laugh.

malraux, nice to see some good old fashion common sense back on this board. Good post.

Malraux: You're grossly misrepresenting my points. I never said anything to the effect of:

1) "...Dow will be below 11,000 by the end of 2007!!..."
2) "...Housing market down 20%! - no - 30%! - no - 40%! - no - MORE! - by the end of 2007!!!..."
3) "...Manhattan real estate selling for fifty cents on the dollar by 1 January 2008!..."
Most importantly, I never used the word "crash." So stop saying that is what I think will happen and stop putting these words in my mouth.

I seem to have triggered a highly-sensitive, perhaps deep-rooted, emotional outburst from you. You seem personally offended, angry almost, when other people express a viewpoint that is different than yours. So much so that you started your "idiots" thread just to tweak those who disagreed with you in the past - the same thread that you seem to have revived here, right after I posted my thoughts that you've obviously taken exception to. This seems to be an emotional sore-spot of yours. Is it because deep-down you really don't want housing prices to decline? Or is it just the fact that someone disagrees with you, and that real-estate just happens to be the subject at hand?

Did someone tell you in 2003, like you said in your last post, that Manhattan real estate prices would collapse? Did that really bother you? Did you hear it again in 2004, in 2005, in 2006 and in 2007? Did it bother you more and more each time your heard it, so that now when someone brings it up again that you revert back to your initial pain?

Let it go, Malraux. The market can soften without there being a collapse. Sellers can (and have) reduced their asking prices without their values falling to zero. They can offer incentives like transfer taxes or free common charges to entice buyers to pull the trigger. It's okay. It's not the end of the world. Manhattan will still be standing. Just because the market recedes a little doesn't mean prices won't increase again in the future, or that the people who saw it coming are "idiots." I don't think anyone (other than Steve, but he's clearly an outlier in many ways) is saying the market will utterly crash.

I'm just pointing out that much of the data in these reports are from a few months ago and that today's data will be captured in the future. That inventories have been steadily rising. That sellers are more flexible to negotiation today than they were 6 months ago. That's all. These facts have been reported by many others, via multiple outlets. There was nothing personal intended and there's no need to become emotional. But this seems to have released a torrent of pent-up frustration with you. Look, I understand. Do whatchu gotta do. Say whatchu gotta say. It'll all work itself out eventually.

Very well-thought-out post, mh23.

Gawd! this NYT article is pathetic.

So if all apartment sales in NY come to a complete halt, and bill gates buys one $10M condo here, NYT would publish an article showing how the average price of Manhattan condo goes from $2M to $10 M !!

and spunky and eah start to do cartwheels on the streets!

While the article explains the reason for the counterintuitive headline in 2nd and 3rd paragraphs, the headline is clearly misleading - more befitting fox news or the SUN, rather than NYT. What bit of respect I had for NYT has been constantly drained away by their real estate section.

Does anyone from NYT real estate section read these threads? If so, can you please share with us what you think of the often made accusation that you guys are on Broker payrolls?

I am an agent who was not as bullish as most during the boom, and I am not as bearish as many now.

Sellers should note that inventory that is appropriately priced still moves quickly. I have a house in Nassau County -- which is way more dead than NYC -- and I got a full-priced offer two days after I listed it. There are always hurdles between offer and close, but I think one reason the buyers are interested is that I wasn't pretending I thought it was still 2006 when I priced it.

In the city, larger inventory that is appropriately priced still flies. A place that we are seeing weakness (and I was quoted to this effect in the WSJ today; I am not in the Times article) is in the one-bedroom market, which is arguably often a more discretionary buy.

Yes, we are seeing buyers on the sidelines, but many of those -- forgive me guys -- aren't "real" buyers. People who say "Wow, prices are swinging down, I choose not to speculate now" -- well, that's not the same category of motivation to buy as klm13 (relocating, and needs a residence) or me and my husband (thinking about kids, so we need a larger apartment).

It's a little like that old Econ. 101 distinction between "structural" and "cyclical" unemployment -- no one is questioning that we are hitting a cyclical downturn, and that shakes out the momentum players.

Certainly, that will slow down industry volume as a whole.

But the structural buyers and sellers are still here, and they're still transacting. For one thing, money is still cheap, and for another, the city is a pretty nice place to live.

Twenty years ago, we had a falling stock market, a crack epidemic, and double-digit interest rates.

I think we're in a dip now in 2008, but I don't think we have to live through that again.

ali r.
[downtown broker}

Yeah, Eric, I am doing cartwheels. When you own, you will see. You simply don't care about shifts in the market. It is interesting and makes for good chat. That is it. I have no decision pegged to the market. I will buy another investment property within six months regardless of what the NYT or the WSJ says. I will find the right deal and move on it.

"...I never said anything to the effect of - Dow will be below 11,000 by the end of 2007, Housing market down 20%! - no - 30%! - no - 40%! - no - MORE! - by the end of 2007, or Manhattan real estate selling for fifty cents on the dollar by 1 January 2008!...I never used the word 'crash.' So stop saying that is what I think will happen and stop putting these words in my mouth"

And yet in your first thread you said "...Most bonuses that will be paid in 2009 will be flat to down, and all those newly unemployed will be looking to unload their units..." If that isn't you insinuating that starting in 2009 we should see/feel a major market shift, than what exactly are you saying? What is especially humorous to me, as I've pointed out above, is the exact same kind of claim people made one year ago that the 2008 bonus season would tank the market. If you can't see the the correlative similarity to your prognostication, well......

"I seem to have triggered a highly-sensitive, perhaps deep-rooted, emotional outburst from you. You seem personally offended, angry almost, when other people express a viewpoint that is different than yours."

Nope, just when the claim their OPINION to be "undeniable fact corrabrated by others." Your p.o.v. I could care less about. Your "UNDENIABLE FACTS" are what are in question.

"This seems to be an emotional sore-spot of yours. Is it because deep-down you really don't want housing prices to decline? Or is it just the fact that someone disagrees with you, and that real-estate just happens to be the subject at hand?"

Nah - just when they claim their opinion to be "UNDENIABLE FACT."

"Did you hear it again in 2004, in 2005, in 2006 and in 2007? Did it bother you more and more each time your heard it, so that now when someone brings it up again that you revert back to your initial pain?"

Wow, they should have cast YOU as the shrink on that new TV cable show 'In Treatment' - you're a natch!!

"Let it go, Malraux. The market can soften without there being a collapse."

No kidding, it's what I've been writing in my posts for the past year or two - not inferring 2007, then 2008, then 2009 bonuses will potentially be the final straw. You know the saying - even a stopped clock tells the correct time twice a day...

"Sellers can (and have) reduced their asking prices without their values falling to zero. They can offer incentives like transfer taxes or free common charges to entice buyers to pull the trigger. It's okay. It's not the end of the world. Manhattan will still be standing. Just because the market recedes a little doesn't mean prices won't increase again in the future, or that the people who saw it coming are "idiots."

Gosh, I could just listen to you all day long, but....

"I'm just pointing out that much of the data in these reports are from a few months ago and that today's data will be captured in the future....(blah blah blah blah blah blah blah)...But this seems to have released a torrent of pent-up frustration with you. Look, I understand. Do whatchu gotta do. Say whatchu gotta say. It'll all work itself out eventually."

Wow - now you're so even-handed, wise, and zen-like in your outlook. Except for you "UNDENIABLE FACTS." Just be sure to tell us all when we can dance in the street again and sing kum-baya.

Your post makes a lot of sense, front_porch. Even though we are talking about the New York market, not everyone is tied to Wall Street.

Things that Malraux believes to be FALSE:
1) Ultra luxury ($10MM+) units skew the rest of the market.
2) Increased seller concessions equal defacto price reductions.
3) Housing sales are a lagging indicator.
4) Steadily rising inventory has accelerated.
5) People on Wall Street get paid once a year for results that were produced the year before.

If you ask Malraux, he will argue that:
1) Ultra luxury ($10MM+) units DO NOT skew the rest of the market.
2) Increased seller concessions ARE NOT equal defacto price reductions.
3) Housing sales are NOT a lagging indicator.
4) Steadily rising inventory has NOT accelerated.
5) People on Wall Street DO NOT get paid once a year for results that were produced the year before.

But of course Malraux is right. The NY Times said he is. And anyone who thinks otherwise is an idiot - because he said so. He'll even start a thread about you to rub it in - because he's like that. In his universe, up is East, down is white and every apartment owner is 33.5% richer today than last year because of all the apartments that were sold at 15 CPW and at the Plaza. Never mind that the volume of sales is down 34%, the sharpest decline in 18 years. Nah, that doesn't matter. All that matters is that for another year, a newspaper article proclaims that NY RE has reached a new record high.

Let's take a look at the headlines from each of the news outlets, all supposedly reporting on the same exact story:
Bloomberg: "Manhattan Condo, Co-op Sales Decline Most in 18 Years"
WSJ: "Housing Slump -- in New York ?"
NY Times: "Manhattan Apartment Prices Hit Record High"

Gee, I wonder which headline all the bulls will cite as evidence of their wisdom and market prescience? Fewer transactions, be damned! We want appreciation! That's the only measure of the market we care about. We're rich!

Eah - good for you! nothing like throwing good money after bad to justify your earlier decision.

front_porch - good post! finally a bull who talks sense!

Only caveat there is if the financial industry goes through tough times resulting in (a) lower revenues for city of NY, and (b) higher degree of unemployment in the city, then you might see some of the things we saw in the city during the bad days. Broadly, however, i do agree with you that seeing the 70's version of the city when it was unsafe to go to Chelsea after sundown is improbable.

I tend to be bullish by nature but I just don't see how valuation fixes itself in NYC without a pretty serious setback in prices. It costs 30-50% less to rent than buy based on most comps I have done the math on (sometimes even the exact same unit). In a low-rate, real estate bull market I can see how the price/rent ratio would be out-of-whack. However, we are entering into a tight-credit, real estate bear market. If anything, I could see things overshooting on the downside. Hard to argue rents will rise given the fall in income that's about to occur so that won't fix it.

I would like to believe in a shallow, short-lived downturn but I just can't ignore the facts. To get valuation back to normal requires a 20-40%(?) fall in prices. And if we get such a fall, the overshoot on the downside may become self-fulfilling as people run from NYC real estate as an asset class.

Do the less-bearish just assume that price/rent is structurally higher? If so, based on what (other than the fact that we're coming out of a bull market)? Yes, NYC is a great place but that's factored into rents as well so those arguments don't hold up.

Thank you klm13 and eric for the compliments. I don't know how bullish I am on prices, I think we might see flattening or even slightly down pricing, but this idea of a world where there are no transactions until there's a 30% drop in prices doesn't make sense to me, and it doesn't seem to be the market that I'm either an agent or a principal in.

The nice thing about being an agent, of course, is that I'm not terribly invested in either the bull or the bear case -- I'll have business either way.

As a principal, however, I do have a point of view -- and I'm still going to buy.

ccdevi made a good point on the WSJ thread where he/she compared apartments to plasma tvs -- even though plasma tvs have for years been an asset where prices were forecast to come down, there have still been buyers along the way who enjoyed the utility of the asset for a couple of years even though they "could have" gotten cheaper pricing had they waited.

For myself as a principal, I'd rather have the utility of the larger apartment sooner, even at the risk of a drop in prices -- but then again, I don't think the slide of anything that I'm looking at is going to be more than 10%.

ali r.
{downtown broker}

The plasma TV analogy is badly flawed. A TV is a relatively trivial purchase that will - regardless of the price - depreciate quite predictably to a resale value of zero. Never in recorded history has anyone bought a TV on the retail market with the expectation of reselling it at a profit.

There's a word for a housing investment that builds equity like a TV. The word is "rent".

I do think there's something to be said for buying when you're ready to buy, and enjoying your home even if the market moves against you. But it's amusing to see the real estate industry shifting from "Buy before the price goes up" to "Buy so you can start enjoying your new home now."

Hmmm, klm13, you and I are indeed in very different situations.

Here's a thought on your last comment ("I don't mind not making a profit when I sell in another five years (as I said, it is primarily a home, not an investment), I just don't want to find that I have lost $100K either."):

Even if you buy and sell at the same price, don't forget to factor in closing and other transaction costs. These are especially high in new construction (approx 5% of purchase, though maybe 4% in your case since there's no 1% mansion tax). Then factor in 6% for the broker you will likely hire when you sell. Also factor in the difference between your monthly outlay for rent vs. purchase (the NY Times has a rent vs. buy calculator that's referenced here often). Lastly, factor in your opportunity cost (the interest your down payment money would have made otherwise). Simply put, you will have to see decent appreciation just to keep from losing money vs. renting. That's a big uncertainty now in pretty much every part of the market but ultra-lux. Pardon my recap of the basics; not sure of your experience level.

The 8% number I used above was conservative. I wanted to focus on your question and not attract a lot of comments regarding what % drop to expect. The non-lux market (fewer amenities, buildings that are fine but not necessarily fancy, walk-ups, etc.) will possibly take a pretty good tumble (though of course not everyone here agrees), so if we call it 12% you're back up to $96k. If your research led you to feel that a significant drop was likely, could you find the time to search for an apartment after all?

In my opinion, this is the kind of market where it may be wise to get a rental w/ and some inexpensive furniture to tide you over. Some parts of the rental market have come down a good bit, and you'll sometimes find incentives (1st month free) that cancel out a lot of the broker's fee.

Maybe I see more of this looking in the non-lux market, or maybe it's the fact that I'm looking for a 1br, which seems particularly soft (as front_porch will attest), but I think there was in fact a ton of stretching done by purchasers in the last few years. When prices were on an ever-upward trajectory people didn't fear the need to stretch tight each month; they'd be selling at a profit shortly. People didn't worry about their tax abatements expiring; prices would be up so much by the time they sold it wouldn't matter. People had dreams of huge profits like the folks who bought in 2003. Co-ops provided a degree of protection, but it's not the cure-all some like to think. There are plenty of 20% co-ops (almost everything I see), and if gifts or parents-buying-for-children are allowed, who knows how much liquidity the buyer really had? In the new dev condo market, we are going to see many people having trouble. Remember the article w/ the 26% increase in liens by condo boards for unpaid maintenance a few months ago? When the prospect of holding your apartment at least medium-term or living for years without appreciation or, gasp, with depreciation, looms large, the willingness to stretch ends.

My point is, "the stretcher" market is going to take a massive hit. Who thinks they stand a good chance of near-term appreciation these days? The starter studio/1br is dead. Are you really going to sell at a significant profit in an appreciably short time to roll the proceeds into your next purchase?

Front porch: "I don't know how bullish I am on prices, I think we might see flattening or even slightly down pricing"

If you see flattening or "slightly down" pricing in this market, you are bullish :-)

Also, I understand your overall view of the situation, though I dont agree with it. Your view seems to be "I feel better living in my own house, even if it costs me 10 - 20% hit in the 2 - 3 year term". For me personally, I think the pros of renting (flexibility) and buying (doing up my place real nice) sort of cancel each other out - leaving mostly the price question, and yes, I do mind taking a 10 - 20% hit in the 2 - 3 year timeframe.

It's interesting to me that many of the posters on this board are working with relatively low downpayments and relatively short time horizons.

Remember that the power of real estate (despite what my industry said in the last boom) is that it is about the long term. Real estate isn't wonderful because it's an investment that mainly goes up -- though luckily in our lifetimes it has -- but it's that paying a mortgage is an enforced savings discipline.

In fact, it's basically the only savings discipline that still works in a country that doesn't save.

Equity grows not because the "investment" grows, (Robert Kiyosaki will tell your your primary residence isn't an investment), but because you end up paying off principal drop by drop with money that you would otherwise have spent on lattes or shoes.*

*Yes, I said this stuff during the boom too.

Since I have such a long view, to me a 10-20% hit in the 2-3 year timeframe isn't significant because I'm not crossing over from renting. I'm just changing the form of an ownership position I've already held for a dozen years, and expect to continue to hold for decades more.

ali r.
{downtown broker}

I'm not exactly the Wall Street whiz kid, and I've been behind on the news the last two days, but it seems really, really odd to me that folks are talking about the national crisis fading when today, for the first time, Bernanke admits the possibility of a recession, and UBS has reported a $12B 1st Q loss (I know they're Swiss, but obviously our problems have been spreading around the world). It seems like we've got a lot more trouble ahead.

you may feel the market is going to crash, you may be right, but those of you insult people who have made a fortune in real estate the last X years are just odd. they know nothing and are stupid, you know everything, and yet they made all the money. strange.

Actually, I've never said crash, but I do expect a downturn (I'm already seeing one in my part of the market).

I didn't mention anyone by (screen)name, and the phrase I used was "it seems really, really odd to me." Do you actually consider that an insult?

You make no mention of the two points I referenced, and instead accuse me of saying things I didn't say (Stupid? What?). You asked me a question on the WSJ thread, and I took the time to give you a thorough answer. Your response here was pretty hostile and defensive, no?

klm13: Tenemental is right re: other costs to consider when buying/selling that you have to take into account. If I were you: buy IF you find something you love and can afford AND if you plan to stay in it more than 5 years. I am also looking for a 1 BR (preferably 2, but what can you do) in a similar price range but am in no hurry because I have very cheap rent. If you are not going to hold onto your purchase for awhile, renting right now is probably a lot cheaper. Also, if you've never lived here, you really want to research the neighborhoods before making such a crazy big purchase. It is not easy to drop in and out and find a place in NYC. Plus if you want to resell soon, this is a really bad time to speculate.
Good luck!

Front_porch: You're grasping at straws. "Quick, you dumb, spendthrift Americans - put your money in real estate or you might spend it!"

Now that lenders are back to requiring meaningful downpayments, the serious saving happens BEFORE a purchase, not after it. A 30-year mortgage builds very little equity in the first decade. A balloon builds even less, and an IO builds none. A property might appreciate at a rate faster than inflation, or it might not. In either case, that's not saving; it's speculation.

A lot of us have no trouble at all saving in vehicles that don't carry transaction costs of 5-10% on both ends. People who need disciplined savings regimens should avail themselves of 401-K plans and other tax-advantaged instruments.

The "home as piggy bank" pitch has is good marketing, but it has very little economic validity.

Eah - good for you! nothing like throwing good money after bad to justify your earlier decision

Ahhh Eric. Catch up. I have been doing this for many, many years. Very well insulated from bad markets.

Again, when you buy, you'll understand.

tenemental, I wasn't responding to your last post, more of a general comment regarding several posts on this thread.

west 81: nah. historically many many people buy a house and live their 20+ years (probably much more so outside nyc) and indeed it works as a very nice savings tool, savings they likely wouldn't otherwise save. Sure could you just as easily use 401ks, etc, but many people don't, lots of people live check to check and a mortgage payment makes them save. You said it yourself, they "should" avail themselves, that doesn't mean they do. So its simply not correct to say it has very little economic reality, is it important for everyone? no of course not. but so many people on this board take whats important or not to themselves and draw broad conclusions from it, take cartman who thinks everyone wants to have the flexibility to run off to Europe for a year.

West81st: I agree - I've had no trouble saving saving so far, and I don't own a home (well, not one in this country at least)

ccdevi: Yes, from about 1998-2006 people built tons of equity in their homes. You have that recent history to support your argument, and nobody should dismiss it. My point is simply that the recent wealth-building power of real estate came not primarily from paying down principal, but from appreciation and, to some extent, enhanced tax benefits.

A typical mortgage has an amortization schedule of thirty years, and lasts about five years - maybe seven if rates are stable or rising and refinancing is unattractive. That means the principal paydown on a majority of mortgages, over their entire lifespan, is negligible. That's not even considering the effects of cash-out refis, HELOCs and other equity-draining mechanisms.

If somebody is incapable of saving any other way, I guess a mortgage is better than no savings at all. That's about all you can say for it, unless you have a vested interest in real estate.

imom, on curbed.com I have previously criticized the mix of numbers that the luxuryloft guys use (they use contracts signed in the prior month as well as closings in that month) but they are consistent and they do report up to the last day of the month so their numbers may be the most current we can see publicly. Plus you can see history of their numbers on their site:
http://www.luxuryloft.com/luxuryletter.php

They only concentrate on the high end but I would say that this is where ib money has the biggest influence until you hit the "megaluxe" price band. Let me know what you think if April's report which shows March 2008's activity with the caveat I mentioned above.

west: I agree that appreciation has created enormous wealth lately and that there is no guarantee that that will continue, and in the short to mid term it seems likely it will not. But that doesn't change the fact that people who own all or most of their lives are constantly paying down a mortgage and thus have forced savings. Now yes you and I don't need that, cartman too apparently (I again note that he points this out his individual circumstance as informative or even conclusive on the issue, but I digress). But many people do, again many people have very little savings, are spending almost all of their money and not looking to the future, either because they are reckless or they simply don't have the means to. Isn't this proven in that the data that show that savings in the U.S. is virtually nil. I mean heck how many people are just making the minimum payments on their credit cards (although any of you doing that, please don't save, forced or not, pay your credit card bills).

The principal paydown on individuals mortgage may typically be very small but if people are going from mortgage to mortgage their whole lives, its not inconsequential.

Anyway I am not suggesting this is a reason to buy, just a benefit for a significant portion of the population.