NYTimes real estate sections tip their hand

http://www.nytimes.com/2008/04/13/realestate/13deal3.html?_r=1&ref=realestate&oref=slogin

Hi Poorishlady. I think Manhattan is unique in that the market can be soft and strong at the same time, kind of like your friend Barack Obama.

I'm not sure if the fact that the insert wasn't included was by design, by the RE companies cutting back, or just a bad paper boy. But could be a decision on where to best place resources.

It's interesting that we are now in April 2008, and we're still arguing about whether the market here is going to come down. Some parts of it probably will, I don't think the decline is going to last long or be very deep, so I am not sure it's worth waiting for. Also, I think the debate in a year will probably be largely the same, but more about whether the market will decline some more or whether it is starting to go up. People will point to the statistics of their choice to make their case. The biggest wild card may be the credit market, in terms of interest rates and how difficult it is to get financing.

The NYTimes article below demonstrates how the market may be better than we thought. I'll repeat my September 11 Theory: I actually think that September 11 depressed prices much more than people think -- and that this was a lingering reason why prices did not go even more through the roof. Commentators frequently mention that Manhattan is actually underpriced relative to other international cities. While there is certainly a financial crisis of confidence out there, there is much less of a security crisis of consciousness than there was three or seven years ago. In a sense, this will help things stay in balance.

One of the things that amuses me on this board as a non-native New Yorker is how tough and mean people are, but also how scared they are to negotiate. Inventory is rising and prices are soft. I think it's a great time to cajole and jawbone some good deals with sellers, assuming you are not looking for a quick flip. I know that there are individual differences and circumstances, but if you are in the market and feel you should be in the market to buy, maybe it's time to aggressively bargain.

http://www.nytimes.com/2008/04/13/realestate/13deal3.html?_r=1&ref=realestate&oref=slogin

http://www.nytimes.com/2008/04/13/realestate/13deal3.html?_r=1&ref=realestate&oref=slogin

Hi Poorishlady. I think Manhattan is unique in that the market can be soft and strong at the same time, kind of like your friend Barack Obama.

I'm not sure if the fact that the insert wasn't included was by design, by the RE companies cutting back, or just a bad paper boy. But could be a decision on where to best place resources.

It's interesting that we are now in April 2008, and we're still arguing about whether the market here is going to come down. Some parts of it probably will, I don't think the decline is going to last long or be very deep, so I am not sure it's worth waiting for. Also, I think the debate in a year will probably be largely the same, but more about whether the market will decline some more or whether it is starting to go up. People will point to the statistics of their choice to make their case. The biggest wild card may be the credit market, in terms of interest rates and how difficult it is to get financing.

The NYTimes article below demonstrates how the market may be better than we thought. I'll repeat my September 11 Theory: I actually think that September 11 depressed prices much more than people think -- and that this was a lingering reason why prices did not go even more through the roof. Commentators frequently mention that Manhattan is actually underpriced relative to other international cities. While there is certainly a financial crisis of confidence out there, there is much less of a security crisis of consciousness than there was three or seven years ago. In a sense, this will help things stay in balance.

One of the things that amuses me on this board as a non-native New Yorker is how tough and mean people are, but also how scared they are to negotiate. Inventory is rising and prices are soft. I think it's a great time to cajole and jawbone some good deals with sellers, assuming you are not looking for a quick flip. I know that there are individual differences and circumstances, but if you are in the market and feel you should be in the market to buy, maybe it's time to aggressively bargain.

http://www.nytimes.com/2008/04/13/realestate/13deal3.html?_r=1&ref=realestate&oref=slogin

I think one area that can be a major source of negotiation, particularly in new developments, is closing costs. Even sellers unwilling to negotiate on price have been willing to negotiate on closing costs, particularly on state and local transfer taxes.

Will, Miller Samuel always uses the same methodology to calculate their inventory number, so any bias this quarter would have - on average - showed up in prior quarters. You didn't hear of Dolly Lunz - a regular on Goldilocks Larry Kudlow's program praising the strength of Manhattan real estate (at the $10 million plus mark) - circulating emails trying to PROVE that Miller Samuel UNDERREPORTED the numbers in the past, did you?

No.

You will also note that the Real Estate Section in the New York Times has a policy of not investigating the real-estate industry, or of publishing overly critical articles. I don't have the reference (tried but it's not posted anymore), but the editor did a Q&A blog recently, and said as much.

Your theory about September 11 is also wrong. Go here:

http://350bleecker.com/policy/sales.html

where you can search on sale prices on identical or nearly identical units in the same Greenwich Village building, thus somewhat duplicating the Case-Schiller methodology:

1) On 11/18/00, apartment 4L closed for $325,000.

2) On 4/15/02, apartment 5M - virtually identical to 4L - closed for $350,000. That was the first closing in that building after 9/11, and is a (historically normal) 7.6% increase in price in about 18 months.

3) On 08/01/02, apartment 4L - same as above - sold for $400,000, or a 14% increase in 8 months, or a 23% increase in less than 2 years.

4) On 1/30/03, apartment 4M - virtually the same as above - sold for $419,000, or 29% higher than 2 years earlier.

5) Jump ahead to 10/06/07, and apartment 5K - identical again - sold for $775,000.

6) Jump back to 05/13/99, and apartment 5R sold for $235,000.

So from May 1999 through April 2002, the price rose from $235,000 to $350,000, a whopping 49% increase in price in 3 years.

From April 2002 through August 2007, the price rose 221%. From May 1999 through August 2007, the price rose 330%.

Never before in the history of the world have real estate prices risen so much so quickly. September 11 DID NOT depress the price of real estate here: it merely slowed it down temporarily, but prices still rose.

"Commentators frequently mention that Manhattan is actually underpriced relative to other international cities." Who cares? What matters in Manhattan (and in all other cities in the world) is the price of real estate relative to incomes. Property prices in Manhattan are unrelated to incomes in London.

Steve, I know that prices, after a brief contraction, did rise after Sept. 11 by quite a bit. My point is that they would have risen even more but for a crisis of confidence in terms of security that lingered much longer after the period at issue. I think we are beyond the security concerns now, but I do not discount that the current financial crisis will have impact. I know we disagree on our predictions, but let's just agree to disagree. Neither of us has a crystal ball.

"Prices would have risen even more but for a crisis of confidence...."

What do you base that statement on? It's completely unknowable and pure conjecture.

What is knowable is that the dot.com bubble burst shortly before 9/11, and Wall Street bonuses fell because of it, and median prices in Manhattan are closely correlated to Wall Street bonuses.

Will, how do you explain stagnant rents and therefore very high price/rent ratios? The value of BUYING in NYC went up by a lot more than the value of LIVING in NYC. To me the only possible explanation for that disconnect is an easy credit market - and that's over. All of the (valid) bullish arguments for NYC (quality of life, etc) apply to rents as well. Rents, not sale prices, are the true barometer of value creation during a credit bubble.

Will---
"The biggest wild card may be the credit market, in terms of interest rates and how difficult it is to get financing" What do you think the analysis people are using is. Exactly what you stated is why the prices will drop. The only other major factor that you left out is Job. Good paying jobs that are being cut by the thousands. NYC's economy is more dependent on wall street than any other place on the planet. It's all of these reasons why prices will drop by 20-30% by the end of the year. I would say that price will decrease for the next 18 months. Wait until you start to see the City of New York start to have terrible financial problems from lose of taxes and bond down grades. Services will begin to suffer and this is just another indication of terrible times ahead.

Whenever Wall Street suffers, NYC suffers.

dco as some have indicated people are terrible at predicting short-term market movement at the best of times, and predictions are particularly bad during a crisis.I like the look of the yield curve and it is finally sloping upward.Declining dollar is making American business more competitive internationally.
What's not to like. Is there a possibility of a correction in Manhattan absolutely but no one not even this jerk stevjhx will guarantee there will be a correction. Like I said before where waare stevejhx predictions that he made in 2006 for 2008.

I guess I am still amused (maybe bemused) about people here who are actively talking down an asset that they would like to some day buy into. If I talked down Princeton, and got enough people to do so, maybe they'd lower their tuition. But what would be the point? Would a Princeton education have the same power and value afterwards? Probably not for a while.

I know certain people will say they are stating the facts, not talking things down, but in a reality-based world, psychology has a great deal of impact on economic behavior, which in turns affects markets. (There was a Sunday NYTimes OpEd on this a couple of weeks back.)

Spunkster, glad you're almost talking sense. Not posting in 2006 has nothing to do with what I'm saying now. Been there, done that.

will - Princeton is free for the plebes. And I DO own property. Just not in overpriced Manhattan.