What's Going On with this Crazy Market?

All apartments outside of Zone A are worth more to account for the lower value of apartments in Zone A.

It's now known as "The Non-Zone-A Effect".

Quadruple mint!!!! (Triple mint plus non zone A)

Somewhere between May and November the market got red hot!
Where you been Formerenter Van Winkle?
Wake up and smell the coffee.
Buy now or be priced out forever.

I understand the lack of inventory, but this huge increase for a stale apartment is an absolute outlier. It's not even a condo that would appeal to foreign buyers. I would be shocked if, even in this low-inventory market, an ordinary product where $1M is a stretch would go for $285,000 more than that. So, no, I haven't been asleep at the switch. I just think that this one is completely off the charts. Guess time will tell.

We have officially coined a new RE description, bernie.
It's officially my coinage but I'll let you share it with me.

Well, I looked at the listing now, I think they might have made some subtle changes to the kitchen that made a big difference, but I'd probably have to see it to appreciate it.

huntersburg is going over there, wearing his chef's apron.

"You can leave your hat on,
you can leave your hat on..."

Truth: http://streeteasy.com/nyc/talk/discussion/33160-what-makes-a-renovation-high-end

love

The contractor should leave some high-end weed in the fridge.
as a housewarming gift.

Former
My post was all sarcasm...too bad they don't let you use that font here.
This new pricing is delusional. At least you have a notion of where this price will go.

Hey Falco. I guess that I was in such a state of shock over this one that I didn't catch your sarcasm. :) I can't imagine that any reasonable buyer wouldn't do their due diligence and see the recent attempt to sell this apartment at a much lower price. But I just don't get how the broker, who's the same broker who listed the apartment the first time, would use this strategy.

Don't rule out crazy owners.
They look around at recent asks (which demonstrate a sizable jump) and think, why not me.
Brokers are just the salesman. Probably thinks the reprice is idiotic as well.

this market is borkers heaven.

an ask is just an ask..the seller will learn the hard way or it simply wont trade. Its interesting to think that at all times, x% of the mkt is overpriced inventory that is likely just testing the mkt with no real intentions of selling unless a bidder pays up for whatever reason

Hi Noah. Ordinarily I would completely agree with you. But in this case we're dealing with the same seller and the same broker, who've both tested the market already. So you would think that the seller already received the message. Also, in this building, Apartment 4HW, one floor lower, closed on Feb. 29, 2012 according to Streeteasy for $720,000 a whopping $565,000 less than this seller's asking price! (and 4HW looked to be in nice condition with a remodeled, though not high-end, kitchen) But to me, that's even less relevant, because all that any seller in denial needs to consider is his/her failed attempt to muster any interest at an ask of $1,000,000. If they truly believe that this is a "different market" then maybe, just maybe, they could justify asking $1.1M to get $1M.

yes I would have thought the seller got the message, but apparently they didnt. What a listing "tried and failed" to sell for is good information to use. The market in may when they took the listing off was actually the height of deal vol for the year. Not sure what the seller was thinking. The agent could have explained why it may be worth it to keep listing on mkt a few months longer. Mkt is still strong/tight today, by deal vol is significantly lower than in may/june. Add on the impact it has to have a listing taken off at 1m after not selling, and back on at 1.285m 6 months later in a mkt that is less active.

For comps, 4hw (913sft listed) is a very relevant sale. sft keeps changing on the 'hw' lines -- nothing abnormal there as brokers estimate size -- but someone paid $720k for the same apt, same exposures, same config one floor lower and signed in late 2011...mkt today maybe is slightly higher than back then. 1-4% time adjustment maybe. Then factor in 1 floor higher premium (say $25k to be nice) and then add in any renovation premium u see. Add up the #s and Thats where the mkt likely will bid for 5hw. Add in that you have a 2nd highly relevant comp sale in 2hw (950sft listed), also signed in late 2011 for $760k...this shows the difficulty in valuing Manhattan re. Here is same layout/config/exposures two floors lower and yet it sold $40k higher than 4HW. Why? maybe the condition but it doesnt appear thats it. Maybe someone wanted a 2nd floor or low unit for easy access in/out or other reasons, and that fit the bill and they paid up a bit for it. Either way, you got two same line, highly relevant comparable sales fairly close in proximity to the target floor and signed into contract less than a year ago...fair value for 5hw should be fairly easy to determine with these two sales. Lets see how the mkt ends up valuing this one and what floor + reno premium 5hw(900sft listed) ends up getting over 4hw/2hw comps.

ps: love the 3 sizes for what appears to be exactly same footprint..hard to read it though

Noah,
Comps seem to be losing their effectiveness. The market changes so rapidly that comps 6 months old can be wholly outdated. As you know inventory is practically non existant while sales/demand is very strong. In this quickly changing market how can you use something from 6 months or even 3 months ago to justify a price? Maybe you can use comps in Boise, Idaho but not here.

The question is since comps are not efficient anymore then what do you do? Maybe just look at inventory as a point in time. Judge what else is available at the moment and then make your selection on what you can best afford.

shill city

Thanks, Noah, for your analysis. Always very helpful. Can you wave a magic want and create some inventory!?! My name, "FormerRenter," was the optimistic name that I selected for myself almost a year ago, when I never expected to still be a buyer. So, yes, I've been looking to buy - and I assumed that, after I became an owner, my moniker, "FormerRenter" would have been accurate for years to come! You can be sure that I'll be watching this listing with great curiosity.

SteveF, as for your comment, I suspect that Noah will lend some great insights, but here's my thinking. Perhaps there's some truth to your point that comps are losing their efficiency. However, I do think that they are still the baseline but that you just can't stick quite as tightly to them right now as you could in the past. I suppose that in the classic macroeconomic supply and demand sense, in a market like this, where there's so little inventory, you're likely to see more aberrations with buyers (like me) who are so fed up with nothing to buy that we just throw in the towel and buy product that we don't really want (we compromise more) or we just pay more than we want to. I think that this could go on for a little while, but eventually the more classic forces of supply and demand will tend to normalize and we'll see a much tighter use of comps.

stevef - I disagree with this that comps have become inefficient due to recent supply/demand trends. We still have good deal vol and large #s of sales data coming in from an active calendar year. Yes the mkt is tight, but still, relevant comps data should be identified and used when looking at any target unit.

In an illiquid and inefficient market like this one, the best data we have to value any 1 individual unit is (in order of relevance):

a) same unit resale
b) same line, size/config comps within 2-3 floors of target unit
c) same line, size/config comps within 3+ floors of target unit
d) same br/bth but diff config/line within 2-3 floors of target unit
e) same br/bth but diff config/line within 3+ floors of target unit
f) etc.

The idea of valuing recency over relevance just doesnt work for me. I know some brokers do that and just look for price per sft trends, disregarding how floor differences, time differences, or reno differences impacted the sale. Brokers were trained to focus on recent sales (say 6 months or less), because of challenges with tracking market changes over time. So they sacrifice relevance and quality, to go for recency of sale to todays market. The more variables you introduce by looking at non-relevant sales, the more adjustments you have to make, the more the comps analysis attempt is degraded until it becomes useless. 1 or 2 good comps is really all u need. 3 is ideal.

The SE condo index gives us a very good start point to discuss general price action over time -- I use it all the time for my clients, and it allows me to confidently use a highly relevant comp that may be 1,2 or 3 years old. And that is based purely on repeat same unit condo sales, parlaying the argument I discuss here for a comps analysis -- quality of comp being most important. The methodology of this index is a nice read on how one should also approach a comps analysis

http://docs.streeteasy.com/research/SECMI_Methodology.pdf

I much rather know what someone paid for the exact same unit 2 years ago, than what someone paid for a less relevant, different size br/bth 4 months ago. If thats not avail, and Im analzying 5hw, I much rather focus on sale of 4hw signed a yr ago than look at the most recent GCE sale for 530k that is smaller but closed 4 months ago. The more of these reports u do over the years, the more u see how the mkt ultimately values the target unit and how close u were, the more u get to master the art of seeing how this mkt works in regards to relevant comps analysis. Ive done 100s of these over the years, and try to keep tabs on all the ones that didnt result in deals for my clients..I still think its the way to go in todays mkt once a target unit is identified. It gets tricky when there is no relevant data.

Yes the mkt changes rapidly, but the point of the comps analysis is to give us a start point..a range of possible fair mkt value using highly relevant data available to us and adjusted properly for time, floor, reno, etc.. to target unit. To either create a pricing strategy for sell side or bidding strategy for buy side. One should take comfort knowing what someone else bid for a highly relevant/same unit comparable sale..as opposed to something not relevant at all. I would think at least.

Hahahahahaaaaaa.

3.25% 30 yr fixed.

The data point that explains all. The comps is just ruffage.

Like looking at why IBM bond is trading up 700 bps and not discussing the interest environment.

ok Noah excellent points. Thank you. Say in a year the inventory we have dries up and the demand picks up. Now you have 10 buyers for only one unit as opposed to last year when you had 3 units supply and 5 buyers. Don't comps as the benchmark get thrown out the window? You can only compare apples to apples if the parameters don't change(ie close amount of demand/supply). How do you account for the changing dynamics? I guess you might use SE and Urbandigs data :). But seriously how can an appraiser/agent/bank quantify the new 10 buyers/one unit market scenario? They can't. Bidding wars will develop which drives prices higher then what does the appraiser do then? The market condition dictated the price not the comps.

Bidding wars. Hahhaahahahajahahahajajajajajajajajjaaaaaaaa. Hahahahahahjanaaaaaa.

Hahbahahahaaahanajajjaaja

Omfg. Hahahahahahahahahahahajajhahajahahhahahahhhaaa

HahahahuahahahahahahahhahahahahahhahahahhahahhahahaaaaAAAaaaaaaaaaA

Help me. It's coming out of my nose. Hahahjanahanahjajajajhajjahjajahahahah.

Infinite piece increases!!!!! Hahahjanahhanahahahhahahajaja.

Bidding wars!!!!!

Infinite. Price. Increases. When put together it makes me laugh!!!!! Flmaozzzzzzzzz.

>Infinite. Price. Increases.

Sprint?

Is our little shill really arguing against comps now? This is hilarious.

The WSJ just wrote about this: Can't Sell? Try Asking More
In a bid to attract trophy hunters, some high-end sellers are taking a counterintuitive and risky step: raising the price

http://online.wsj.com/article/SB10000872396390443768804578036772651136566.html?KEYWORDS=increase interest real estate price

4hw was a foreclosure. Seller is a bank. Listing has a host of financial requirements. That said, for 900 sw ft coop on a busy street 1mm seems fair.

Well, it seems that, finally, we're getting some inventory. Tomorrow, Sunday, Jan. 13th, has a bunch of Open Houses with some fairly decent product. I've been noticing that good product that has its first Open House tends to have over 20 people who "save" the Open House on Streeteasy, so that's a good indicator of how mobbed you can expect it to be. An apartment that I'm interested in has 38 saves. I would expect that the number will go down substantially for its 2nd Open House, as 1st Open Houses seem to bring out all of the curious folks who've been eagerly waiting on the sidelines.

Regarding the listing that was the subject of this thread, the asking price is still $1,285,000, still totally out of touch, and the number of "saves" - a grand total of 1 - would seem to confirm this. Similarly, I've noticed a bunch of first time Open Houses where there are only 2 or 3 or 4 "saves," which suggests to me that its not great product (for whatever reason - condition, light, view, location, etc.) or it's not priced right or some combination of the two. I think that it just about always comes down to price, for obvious reasons because price is the great equalizer in getting people to compromise on product that's not ideal.

Any observations on inventory / price trends out there? Anecdotal thoughts, rather than statistical ones, as we all know that the statistics lag months behind.

I've noticed in non-Manhattan real estate markets that some owners are just habitual listers. They list their property above market, which generates almost no traffic, then as the market warms up a bit, they increase the price, which still generates almost no traffic. They're perpetually over optimistic and think that their home outshines everything else, as seen through their selective rose-colored glasses, so they expect other people to share their delusions. Perhaps that is the case here.

Don't buy yet the mortgage rates are going up the second half of the year. The buyer already drying up because consumer confidence are down because of the raise taxes and the upcoming debt ceiling disaster .The suburbs with the 400 & 500 's thousand should hold but manhattan has a rude awakening coming.