RE continues to trend down NYC

There were also several new developments slated to come to market already and were pulled from the market with no sales after a few weeks or delayed to go on the market at all. So there is more waiting in the pipeline even while the current listed inventory has to go.

Buyers are having price fatigue and sellers and developers need to get with the program.

I think most markets not just real estate are looking to see what direction this election will end in.
Whether we elect Robert Baretheon or Cerci Lannister doesnt matter as much as it being so close to call as markets hate uncertainty.

Eh...if that's the case we should see a big spike in contracts in mid-Nov--Dec. if the mentally stable candidate wins. We shall see. It seems like it would be more of an issue for short-term investment vehicles like stocks than with RE.

I think in your example the Donald is definitely Cersi not Robert.

The top, as I've said many times, was Q2 last year. Doesn't mean the decline was fast, it just means that was the top.

CCL3,
I don't think you will see a big spike in Nov/Dec because that is a historically slow season. Wait till bonuses are out in Q1 2017 for a better idea of which way the market is headed.

The market in 3mm and above range condo is def soft to down. My prediction is that new condo pricing will come down a bit more to low 2k per sq ft in prime area and perhaps $1800 per sq ft in lesser areas such as turtle bay. Coops will stay firm. Average condo market will remain flattish in $3mm plus range. High end luxury is where the oversupply is. This is compounded by high taxes of almost $2 pe sq ft for these developments.

Link to previous discussion.
http://streeteasy.com/talk/discussion/41325-how-much-did-high-end-3mm-came-down-yoy

Reposting:
Nice report from Corcoran which shows market down 5% on per sq ft basis for resale condos (page 9). Coops staying strong.
http://media.corcoran.com/pdf/reports/2016_Q2/Manhattan_Q22016.pdf

I'm hoping that price drops in Manhattan are going to put downward pressure on Brooklyn...There needs to be adequate price differential to justify buying in Brooklyn rather than Manhattan. If the new construction out there could get down to the $1200 sq ft range that would be very attractive. :)

"I think in your example the Donald is definitely Cersi not Robert"

Sorry as a a centrist that historically votes both sides of the aisle I find them both equally appalling.
They each have the bad qualities of both Robert and Cerci.

Ive wanted a businessman to be president for the longest time but he is the worst option.
Ive wanted a woman president for the longest time and she is the worst option.

Number of Coop sales substantially down in that Corcoran report.

Streeteasy condo index, which is still alive and compares apples to apples, is still up YOY ~3% and MOM 0.1% for all manhattan. See below link.
http://streeteasy.com/blog/q2-2016-market-report/

Hillary is an aging Daenerys Targaryen. Donald is Theon Greyjoy, but is fast turning into a male Lysa Arryn.

Theon Greyjoy or Reek?

So market will go up or down?buy now or sell now?

the market is continuing down.
But that doesn't mean you have to buy or sell. You can stay put and not look at real estate as trade.

Interestingly, if Trump were to win and a Republican Congress holds, tax cuts would significantly impact the top 1% and ultimately cause an increase in after-tax cash flow. Outside of nuclear threat (which will not be priced in, most likely), this should be bullish for NYC real estate. For every $1m in income, there should be an approximate increase in aftertax cash flow of btwn $100-200k per year. If she wins, things will likely carry on as usual, as she is basically an extension of the past 8 yrs, with a slightly more rightward bent. If the election is the primary cause of falling prices, we should see stability next year.

However, if this is more of a supply/demand issue (my thesis), I don't think the overhang will be fixed by the end of this year.

I'm throwing it out there because I am seriously looking now and internally debating whether I should roll the dice for one more year. Ultimately, it probably won't matter either way, because even if we see a 5-10% drop in prices, in the long-run, it may not make any significant material difference, in terms of mortgages or downpayments...but I would hate to be the sucker that buys at the top!

NYC, If all you think is possible is 5-10% drop, it is time to seriously look now and perhaps can get a good deal which may be 5-10% or more below comps. Look for poorly marketed, price cuts and more than 3m old listing. These are the ones you can negotiate a good price on. Real estate is highly inefficient.

Let me add listing from serious sellers. You will see that in price cuts, hear from the broker or in ownership history (getting transferred from a joint name to a single name; divorce etc.

nyc1234,
Do you think most of the people in the top 1% buy Real Estate based on their cash flow or their assets?

30, I think it is both unless you are talking about $5mm+ apartment. I would think at $10mm, it is mostly assets. Taxes in either case do not have too much impact unless we are talking about drastic reduction of 10% or so. In that case, who is to say the companies will not reduce the total salary/bonus.

>Outside of nuclear threat

??

Aren't like 50% of the buyers of the $10m+ apartments wealthy foreigners? In which case cuts in US tax rates are not going to have any effect (remember we are talking federal income tax here, not RE taxes which are on the local level). I agree that this is more of a supply and demand issue, not an election issue. The betting odds and polls have been consistently in favor of Hillary--it's not a close election (knock on wood).

I presume "nuclear threat"=risk of Trump getting us all nuked into oblivion with itchy trigger finger after receiving a mean tweet.

@fieldschester

Just making sure you were awake in regards to Trump's nuclear threats. I think he will do everything in his power to prevent his name from melting off his buildings so it probably is a non-issue.

As far as the assets or income question, this all depends on the price. I think over $5m, if I remember data correctly, cash is ~40-50% and foreign buyers are btwn 25-50% (think 25% on low end and 50% above $10m). If someone has more accurate data, please share.

That still leaves a large portion of the market that is mortgage-based. At below $3m, I think mortgages are closer to 60-70% (again, I'm going off of memory, so the number may be off).

To be clear, I am not in the $5m+ range, mainly looking in the $2-3m range. I've noticed significant "price reductions" here. I put that in quotes because some of the original listing prices were insane. I definitely think the buyer of the $2-3m apartment will be affected by income taxes, if there is a Trump win. Going from after tax income of $580k per year to $700k per year would make a difference.

1% income btw is only $400k so they are probably many buying with mortgages, especially since 70% of this group is earning income as opposed to capital gains. 1% net worth hovers at ~$10m, which allows for more asset purchases. Rather than looking at it from a 1% approach, I think it is more accurate to look at it from a price approach.

@300 mercer

Companies will not likely reduce incomes if their corporate tax rates drop 10%, in my opinion, as this will create friction and potential lay-offs, and in a tax reduction environment, the CEO needs to simply sit tight and change guidance to focus on after tax P&L, and derive bonuses from that alone. Basically, if you can increase your net income 20% doing nothing and thereby increasing your C-suite bonus, why rock the boat?

nyc, Good point on corporate taxes. Are you seeing good prices in $2-3mm range? I have seen some good prices in $3-5mm range but not in low to mid 2s. Good price for me is <$1300 per sq ft for a condo with luxury reno, good light, no special view in prime manhattan. Appreciate if you post some examples of listing you think are well-priced and at what price you will pull the trigger. Thanks.

nyc1234,
I agree with your analysis (also based on my gut feel rather than hard data) and if you are looking at the very bottom of the top 1% income wise I think they are affected by cash flow. But when you go above this (as you say to $5MM purchases) I think it largely shifts to an asset based purchase.

Anything above $1 million I hear is moving extremely slow, especially with these heat in the last two weeks of August. Wait until Labor Day it'll pick up after.

Does that mean if we have an Indian Summer sales won't pick up? The weather excuse is a bit too convenient. An air conditioned taxi or uber can take you to see listings too.

I think it's more likely that people are on vacation rather than the heat. OTOH August is historically the busiest month for rentals.

After August, sales do not tend to go up either though. We are about hit the slow period for real estate.

Also, helpful data:

http://ny.curbed.com/2016/8/18/12541328/manhattan-condo-sales-all-cash

I could be interpreting that incorrectly, but I think it points to more sales being asset based than we had supposed. And that is only the all cash sales where I think a lot of sales that are 50% cash or more are largely asset based.

I agree, my numbers were conservative. Cash buyers seem to be higher than we expected.

I agree that prices peaked, though I think that happened in 2014, you will need to rely on closed prices relative to ask. Just about everything went into a call for highest and best after the first open house. It was a wild year! And everything blew through the asking price. In 2015 we saw things 'normalize' a bit, it was much easier to get an offer accepted, not a walk in the park by any means. But better. Then beginning around August 2015 we saw things start to cool off, was a good time to be a buyer after a tough couple of years. Market went real quite from around November-Easter 2016 and then boom! Buying picked up. You can follow the trail via the data, check Urbandigs.com.

The market is currently slow, as it should be in August and for the moment we can only guess where it goes post Labor Day. I think we see a normal, healthy sales market which is a nice place for buyers. 2016 has been a record year for us, we are certainly a tiny slice of the market, however our activity is a pretty good market indicator. There is no (current) reason for this market to go off a cliff. However after a 7 year run -up one can expect things to cool off a bit. The song remains the same; people want to own, rents are not cheap, money is.

Keith Burkhardt
The Burkhardt Group

The price of money (i.e., the level of interest rates) is definitely a concern at the lower price points. I had a client who just got 3.3.75 percent on a conforming co-op in Cobble Hill.. that may be as good as it gets for awhile.

ali r.

I believe dirty money was a big driver of the ultra-luxury $3k+/sqft developments. This money is likely to dry up for the foreseeable future. For those who missed it, examples of dirty money. Rest of the market will continue to be fine but large price increases are unlikely due to pressure from high end.

http://www.wsj.com/specialcoverage/malaysia-controversy
http://nypost.com/2016/03/18/walker-towers-51m-mystery-buyer-finally-revealed/
http://therealdeal.com/2016/08/19/former-hakkasan-nightclub-chairman-arrested-in-1mdb-scandal/

I think people have gotten too used to extremely cheap money to fund their purchases. Even with rates going up they are still way below what they were for most of the time I have been in Real Estate. Even 3 years ago were 30 year fixed over 4%? And when I started buyer real estate rates were at 18%!!! Imaging what would happen to prices if rates went up to 6% and that would still be well below the average rate during most o my career.

30y, Rates will not go up without significant inflation and economic growth. It is a different world now. Even if fed raises rates, all the central banks are buying bonds. This will keep 10y bond yields around 2%. We can forget about negative impact of potentially higher rates (I mean 10y treasury at 3.00 or higher) for a while.