[NEW] Market Firming up - Indicators

Link to the old thread.
https://streeteasy.com/talk/discussion/45147-market-firming-up-indicators

yeah, should have included that...cheers

God bless you for making a new thread.

Fed Cuts Rates by Quarter Point but Faces Growing Split

The Federal Reserve cut its short-term benchmark rate by a quarter point to cushion the U.S. economy against global headwinds. Officials left the door open for more cuts but were split over the outlook for further reductions.

Another round of trashing the world

Anton, Care you elaborate on what you mean?

Perhaps the subject of this thread should be changed, because at this point it's a bit misleading.

Resales:
I think "stabilization" is probably more appropriate description of the market in the last few months rather than firming up.

Streeteast condo index down in August. Pace of decline is much slower in the last few months (April to August -0.6%; YOY 4.9%).
https://streeteasy.com/blog/august-2019-market-reports/

While the number of sales are higher than last year 14.8% YOY, supply increase is also 9.8% up YOY reflecting off-market coming back and unsold new development pressure; Urbandigs data.

thanks. SE should go back to the old format of allowing users to click on a specific thread page rather than having to scroll through an entire thread to get to the end... are you listening SE???

300 - it will be interesting to see the information when Q3 ends and when you start slicing the data by price point. My sense is that the market has slowed to a weak crawl for more expensive properties, notwithstanding growing volumes. It makes the numbers you are posting all the more interesting that show overall volumes up YOY.

Urbandigs already has that breakdown on their website. Basically $5mm and above, not good due to pressure from new development.

300 - why do you think that it is pressure from new development causing the problems at $5mm and above? It seems that the gross sales numbers are awful, not just as compared to supply. I think that new development makes the numbers even worse on a relative basis, but I would think that the new development inventory (and aggressive sales tactics) would improve the gross sales while in fact they are declining.

TeamM,
Add to that according to Miller there are actually 9,000 units of new condo supply In Manhattan. As I pointed out in another thread you've got projects nearing completion that have not officially listed yet - although many if them are secretly on the market just like Central Park Tower was for a year before admitting that listings were live. You have lots of projects which are 20% or 30% sold when closings start rather than 80% sold. You've got Hudson Yards where 15 claimed to be over 50% sold when closings started but only 100 out of 285 have actually closed and as a result of slow sales there they didn't "open" sales at 35 till 6 months before closings are supposed to start (which is imminently - the hotel opened and they have "model residences" inside the building). The XI seems virtually unsold.....
I could go on all day.
You've got the 88 story, 276 unit project 125 Greenwich St in foreclosure, and I've been speaking with lenders who have told me off the record that there are a number of other projects where developers have essentially handed over the keys but the marketing has been kept in place simply to avoid the bad press/panic.

30 - the direness and scope of your post does punctuate another issue, and perhaps that's the point that 300 is making - the problem at higher price points is so incredibly bad (in part because of new development) that perhaps it is dissuading buyers from entering the market at all. In other words, buyers don't want to purchase in resale too because it looks like the prices will crash and so everyone is going to the sidelines to wait and consider options in the future.

Some of the potential buyers at higher price points are also leaving the city entirely, as discussed elsewhere, although I don't have numbers associated with that part of the issue.

Besides new development pressure (even though many of the unsold are not in the most desirable areas) >$5mm may be suffering from increased transfer tax in the last couple of months. The effect of that is likely to reduce in a few months. So we wait for more data.

From Fritz Frigan's Open House Report this week:
"The average in NYC dipped this past weekend to 3.11 per open house – it is a 16% drop in traffic compared to the weekend before, September 8. This is disappointing. Last year we saw a jump to 4.20 attendees per open house on the weekend of September 16, 2018. It seems that post-labor day jump was truly short-lived.

82 open houses (21.5%) had zero attendance. Each time this number goes over 20%, it is not good. It is slow."

So if this Fall ends up slower than last Fall, and everyone agreed last fall was a disaster....

300 - my apologies if I'm being dense, but when you refer to the new development pressure, are you referring to the dynamic that the high inventory and downward pricing pressure in that segment is causing market paralysis across resales as well?

Do you believe that the effect of the higher taxes will reduce because people will adjust pricing to factor it in?

Yes to your first question. People who are buying $5mm plus resale in many cases have the money to pay 30-40 percent premium for new development as well. Whereas, some one buying a real 3 bed room ~2000 sq ft nicely finished priced at 3mm in a prime area typically does not have the budget to pay 30-50 percent more and pay higher real taxes in addition.

Olshan report shows another rough week for $4m+ in Manhattan and shows a third quarter that is pretty significantly down from last year. https://olshan.com/marketreport.php

Wow, the W. 13th St sale looks rough.

"The No. 2 contract was a townhouse at 336 West 12th Street, asking $13.5 million, reduced from $24.5 million when it went on the market in August 2016. The property comprises 2 structures that total 7,500 square feet: a 4-story house in front and a 2-story carriage house in the rear, which is accessed by a covered pathway, one of the few remaining “horse walks” in New York City. The house was purchased for $11.6 million in 2008 and then renovated. The main house has an elevator, 4 bedrooms, and 3 powder rooms. The carriage house measures 21’ x 10’."

300_mercer, I mean the next round of QE will make things uglier

Thanks.

Love the deal at 993 5th Avenue, 27.5M. Co-op does not allow financing.

All the brokers that I've been talking to say the same thing, it's feast or famine. We're very busy on the buy side. Listings have been a mixed bag, with one exception, our listing on East 16th Street had 12 groups at the first open house, follow up showings have been very strong as well as private showings, 8 scheduled so far for this week. Our Brooklyn listing on 2nd Street in contract after 1 open house.

Bankers that I've been talking to tell me things are slow, but seem to be picking up.

Keith

I'm curious as to what the story is with 993 5th. In your entire career how many times have you seen a listing come on the market and in 3 days have a fully executed contract? I'm inclined to believe it's more likely they had a contract out, the buyer wasn't getting it back and they made it public to force their hand.

Even in the worst markets I've ever seen there were still deals being done. In 1981 when mortgage rates were 18% Coops were still trading hands. In the first half of 1992 I sold 6 studios in 6 months in one building (200 West 20th St) and about 20 studios in Tudor City. Of course the entire dollar volume of all those transactions wasn't much over half a million dollars.

Three Days? My computer says it was listed on Sept 3 and updated as CS on Sept 19th (still quite fast, of course).

Here's one worth listening to start to finish! Not to knock some of the other vlogs, but asking brokers about the real estate market is sort of like asking tobacco companies about cancer ; )

https://medium.com/@noahrosenblatt/talking-manhattan-jonathan-miller-appraiser-at-millersamuel-e7b383039564

Great market pulse chart up during the interview. Also interesting the Jonathan noted 20 to 25% of all contracts don't close. I didn't know that.

Keith

"Ya see, the number one thing is units and inventory trends lead price direction."

Very interesting conversation. Thank you for posting the link.

Thanks for plugging the Jonathan Miller podcast! Good stuff on that one.. this market is about to get hit with you q3 numbers, so that won't help unless headlines explain the reasons.. this really is a policy driven reset, versus a cyclical down cycle

I don't know Noah, I think it's a little bit of both. Market was softening end of 2015, SALT certainly threw fuel on the fire. A strong economy but with a lot of drama/uncertainty surrounding the presidency, global economic contraction, currency controls.

And maybe just the fact the buyer was running out of steam after quite a run. It's easy enough to recognize the signs of a contracting market, not always so easy to understand the why.

Keith

It's a lot of both. SALT, transfer tax, pied a terre tax (coming soon!), universal rent control (just wait for it!), a strong dollar policy, reversing the reforms ofbpast mayors, a truly awful schools chief, a trade war with China... all are policy negatives. There are cyclical negatives from the luxury market being overbuilt. And macro negatives too, notably millennials moving out of cities towards suburbs like Boomers did. The broad macro cycle that favored cities like NYC since the early 1990s and fueled a massive run-up in prices appears to be reversing. For all these reasons, I've put my buying on hold. I'll come back when prices readjust to reality, which is far worse than most sellers and their cheerleaders in the brining community realize.

*broking community

" For all these reasons, I've put my buying on hold."

I think that is the key takeaway here for many buyers.

But whether it's a sound strategy or not, time will tell. In 2009 most people on these boards thought the market would continue to decline. And those voices were very strong. Instead the market did the opposite for approximately 6 years. And I knew some of these people personally.

I don't argue that there are not headwinds for this real estate market from a variety of sources. But typically by the time you figure out what markets are doing, you've missed it. One thing we know for sure, the markets are down since 2015.

So many people rushing to buy in 2014/2015. when things cool off, fear creeps in.

Keith

I'll offer a few random thoughts and questions from a non-pro:

1) The interview was excellent.

2) There's some discussion about Q2 being relatively strong. In the luxury market, I was under impression that new contracts were approx flat to slightly down, but maybe I'm wrong. Does anyone have the numbers? I'm curious as to where we are in luxury YTD measured YOY.

3) I agree with that sentiment that this is a reset rather than just a down cycle. The challenge is that it is very hard to see where those numbers will land for pricing. There are a lot of pile-on forces that could result in prices continuing to decline for years unless there is a policy shift, such as reversal on SALT.

4) I think that the lower end of the market will do better than luxury in the short term, particularly from a standpoint of transaction volumes, but eventually it will all trickle down, and everything will get hurt badly if the economy turns.

5) I think that the Sellers who materially cut prices fast right now (particularly at the luxury level) will look really smart a few years from now, unless there's a tax policy shift. I think that Sellers who are slow to cut prices and get a deal done are going to be kicking themselves. There's still enough luxury buyer demand to get some deals done now if Sellers cut prices meaningfully, but that demand will be filled quickly by those Sellers who cut first, and I don't think that demand will replenish particularly quickly - instead I think the opposite will occur, meaning that inventory will rise more and the demand won't be there.

I still think if you look at the numbers we are still at the beginning of price contraction not "a great buying opportunity" as many have been saying for the last year. I still think the bottom is going to end up 35% to 50% off peak prices. And I agree with TeamM that early adopters to new market pricing will reap the benefits of snagging the buyers who have been waiting for small price adjustments and leave the rest to the majority of the market which is waiting for larger price adjustments.

George,
Since I make my own pastrami I guess I'm both.

TeamM,
The was a big bump up in closings in June - like 37% YOY. The thought is many all of those were expedited closings which would have occurred in July, August, etc and each one of those will now show up in Q2 stats and be robbed from Q3 stats. This would make Q2 stats look better add Q3 stats look worse.
I agree with you that we didn't see a huge bump in Q2 contracts but that may simply be that a number of the quick closing deals in June never had contracts reported.
However let's remember how terrible both Q3 and Q4 were last year, how brokers were decrying it but also telling us how vastly improved things were going to be in Q1 and Q2 of this year. Aside from those June closings, that by and large didn't happen.
I think Noah is saying what a lot of people who publish stats are hoping: fat people who buy ink by the barrel are going to soft-pedal the headlines when Q3 stats come out. Personally I don't think that's going to happen - I think we are going to see the usual sensationalist headlines and dire market consequences as a result.

We'll see. I believe in being fearful when others are greedy and greedy when others are fearful. Right now there's a bit of fear, but I've been in the market and found little but greed. Sensationalist market headlines might help break the present standoff between greedy sellers and fearful buyers. However, Manhattan real estate has been rising since the '80s, and it will take more than a few quarters of headlines to undo decades of excess.

I also agree with TeamM that the winners will be those sellers who grab the limited number of buyers who have been waiting for a small market correction and leave the majority of buyers waiting for a big market correction for those slow to adapt (insert quip about "The Quick and the Dead" here).

George,
In my experience the tipping point comes when the market has gone down more than the average person's down payment (minus 5% to 10%) and foreclosures get into swing. This time around in general we have seen a lot more all cash/high cash deals which should temper this, but we've also seen a lot of deals reported as all cash where there was shadow financing of various sorts. We have also seen the tip of the iceberg in foreclosure activity picking up, but so far mostly in marginal neighborhoods. But in NY foreclosures generally take a year or more so we are just starting to see Manhattan condos which were bought at or near the peak by people who were expecting to be able to flip them relatively quickly but got caught in that game of musical chairs.

Here is an example:
https://streeteasy.com/building/325-5-avenue-new_york/35e
I'm pretty sure this is closing in the mid-$800k's. It doesn't take too many transactions like that to start making the market.

Also remember that with interest rates as low as they have been, there has been a ton of cash-out refinancing so even those who didn't purchase at the peak still got their financing then, and the most likely people to walk away from properties in a turndown have always been those who already took out their equity in a refinance.

@30 I think this idea of people walking away from condos that they cashed out of applys mostly to market's outside of prime New York City. I also own and invest in Florida which was hit very hard in the mid-2000s. Even here I think people learned their lesson and have not over extended, along with a slightly more difficult process to get a mortgage. I understand people's memories can be short, but I think both lenders and the public at Large remember the sting of 2008. Buyers are being more conservative in general, maybe not all but most.

I don't think there are many people who bought condos with 5 % down in prime New York City. And in my experience people that can pay 1.3 million dollars for a condo, usually have the means to absorb a loss if they're forced to take one. It's not as ruinous as if someone making $40,000 a year and putting down 2.5% on a $300,000 loan in Orlando loses their job, or their loan resets as the market tumbles. Yes New York City is different, especially with the majority of sales taking place in Co-ops which require 20% down and strict post close liquidity requirements. I do close to 50 deals a year, I can't say I've met a client that I felt was stretching well beyond their means. Typically these are highly educated, well paid individuals in a two-income household.

You will need a very significant jolt to the economy to see the kind of price destruction you're predicting. I'm not saying it won't happen at some point in the future, it always does. Currently I don't see a collapse of New York City real estate anytime soon.

As I pointed out to you in another thread, I'm very conservative when it comes to real estate that I live in. I live well below my means, I have no mortgage on my primary residence. If the s*** hits the fan so be it, I'm financially prepared to weather some storms, storms always pass. And I have to say the clients that I work with take a similar approach to purchasing real estate they're going to live in.

Keith Burkhardt
TBG

I keep hearing people banging the drum that the problem remains at the top end of the market. But when I look at the numbers for studios I see "ok" performance in new contracts/pending sales and downward indicators for everything else.
https://www.urbandigs.com/marketwide-charts/all-manhattan/all-proptypes/studios/

Noah's predictions about rough headlines regarding Q3 are all coming true over the last day.

It seems like every headline at the moment is uniquely rough. Basta!

Any links?

There are lots of them. I tried to paste a bunch but SE thought it was SPAM.

https://www.housingwire.com/articles/manhattan-home-prices-fall-as-mansion-tax-kicks-in/

https://www.nytimes.com/2019/10/02/realestate/its-now-a-buyers-market-in-manhattan-real-estate.html

I especially like the broker comment that we're "near a bottom." I'm still not sure who's slimier - a used condo salesman or a used car salesman.

New condo salesman.

Only one worse will be 1 Manhattan Square.

Brokers have been saying for a year how the down market is almost over and how this was a good buying opportunity. I think we see that if anything the downward trend is accelerating and these headlines are most likely to knock anyone who was on the fence backwards. This feels very similar to the late 1980s where we had the stock market crash October of 1987 (and just about every broker said it wouldn't affect the Real Estate market), prices didn't budge much till 1989, but by 1992 we had reached bottom and things had crashed.
This feels a lot like late 1989 when brokers were finally admitting that there was an issue but claiming that there was nothing to worry about.

Based on data it would appear the real estate market been falling since sometime in 2015. The bottom line is nobody knows when it will stop or how deep it will go. if you really did know with any certainty, you wouldn't be wasting your time on a streeteasy forum.

A behavioral patterns I've noticed, most people who are bearish typically remain bearish for too long. If the market Falls another 15% you'll think it's got another 15 to go. We certainly saw that behavior in 2009. Personally I think this is a reasonably good time to purchase based on where prices had peaked in 2014. We've been in a declining cycle for almost 5 years, and cheap money is just icing on the cake.

If you want to try to time the perfect bottom, well best of luck to you. If you want to buy a home to live in, enjoy, that you can comfortably afford, go ahead and purchase. I purchased my home because it was right for my family, and we've love living here as well as the process of making it our own and continuing to add and improve it.

I took a much different approach to buying an investment property that I own. I certainly respect the fact that many people on here are looking at their primary residence like they look at a stock. But in my humble opinion there's more to a home purchase. And another thing we know for sure, over longer periods of time New York City real estate goes up. so I get it if you're buying for two or three years, yeah I'd be worried and probably wouldn't pull the trigger. But if you're in it for 7 to 10 years, you'll be fine.

And since most residential real estate is bought with a lot of leverage, it doesn't absorb a lot of your liquid net worth. The New York City condo/ Co-op buyer is a different animal. They have the means to weather cyclical storms, are well-funded and most households have two strong income streams. The majority of my net worth is in 3 ETFs, I'm not breaking a sweat because I know I'm not going to look at that money for 10 years. Do you think the s&p 500 will be higher or lower 10 years from now?

So what's the absolute worst thing that could happen if you bought a home that you can afford today? Do you really think it'll be worth less 8 years so now?

Keith Burkhardt
TBG

Didn't all people see at this moment, both the stock market and RE market are near the historic peak?

Rents have remained steady increasing according to the StreetEasy index, unlike during the downturns in the late 80's and 00's.

Indeed. Rental market below $15k per month rent is decent. The current issue is high-end or poorly located new development supply driven rather that fundamental economic conditions being poor.

Olshan report this week shows that the #1 contract in Manhattan (157W57th; 67B) was asking $22mm after that unit sold for $28mm in 2015.

That is more or less in line is what ultra luxury (say more than $4k per sq ft original sales price) is trading below its peak actual sale prices. I am surprised it is not down more as original prices for ultra luxury in 2014/15 were so ridiculously high without any bearing to actual building cost.

Down 22%. I can't wait till my 35% to 50% crash prediction comes true and everyone who's been saying that's crazy claims they said it first.

Also I think indicator of how big 217 W 57 is going to crater.

BTW 77 Charlton St by Toll Brothers - one of the fastest to sell out their projects - now on the market for 1 year. How may have they sold?

30, Problem with your prediction is that you never to care to differentiate between price points. Ultra luxury is down 20-25 percent and can easily come down another 10 percent but average apartment?

While you have been shouting from roof tops for last 3 years at least for 35-50 percent decline, some segments as in BK townhouses have gone up. Care to acknowledge that.

You need to check your facts.

Market Pulse has plummeted to 0.33.
If you add back in the record number of Off Market it would be at 0.21.
If you also add in all the Sponsor Condos which are actually on the market but as shadow listings because developers are shaking in their boots and afraid of buyers realizing what dire shape they are in MP would be about 0.14

Add to this the most recent Open House Report from Fritz Frigan:
"Here is my Thursday report on what happened last weekend. Not much. The average for NYC dropped like a stone to 2.41! This is a 21% drop in traffic from the weekend prior, when we recorded 3.07. I guess the weekend of Rosh Hashanah is not a good weekend to hold open houses." (I guess you can choose to blame it all on the holiday - I guess we'll see next week).

I'm going to guess that impeachment proceedings are only going to throw more doubt into the market. If this is all going on during the rosiest economic times (including All Time Low mortgage rates) what happens when the bad news starts rolling in?

You are just avoiding the question I asked.

The question is: Are you predicting all market segments to be down 35-50 percent?

Let me ask a second question: Did you continue to stay bearish in 2009-10?

Correct your misstatement and I'll consider answering questions.

You can correct as I do not know which misstatement and I will happily acknowledge that misstated

You can correct as I do not know which misstatement and I will happily acknowledge that I misstated.

Hello. I am new to all this but just got done reading the entire prior thread. Lots of great info there. Question for all of you: any thoughts on whether tax laws are likely to change and in which direction? I am considering purchasing a townhouse in Brooklyn but if the laws are going to significantly raise taxes, I might be better off waiting since that would put downward pressure on pricing.

As long as fvckers keep printing money crazily, the RE price will stay at peak

We have a new resident bull!!

77 Charlton is a tough sell - and not sure it has anything to do with the properties themselves, but the unrelenting amount of construction that is going on in that micro-neighborhood. There's the block of demolition for the new Disney building; the huge development around St. John's whatever it is, plus other QOL issues due to the Holland Tunnel traffic. Cannot imagine paying top dollar for those lovely properties, and then have to live in a war zone.

There appear to be factors that are causing pressure.
1. New taxes, discussed at length on this thread
2. Too much new supply coming online
3. There has also been a net exodus of population in NYC. Remember that in 2018, the net migration of the city actually declined by 100k. This is very significant. The real estate demand curve is not very elastic. If demand declines only marginally, it could have a substantial impact on prices
4. The idea of further rate cuts and a possible recession is making people (like me) hesitate in buying right now. I am content to wait another year or at least until q1 which sounds like it will be bad

offsetting the above are low interest rates.

All signs suggest to me that things get worse before they get better

Aye: Factor #5 is the withdrawal of Chinese money. I think that single-handedly was fueling much of the froth in NY RE. The way things are going with China, that's not coming back anytime soon.

Factor #6 is governance. de Blasio isn't Bloomberg, and his successor might be even worse.

The current budget calls for increasing Real Estate Taxes 20% by 2023.

So I bought a 3 bedroom in 2010 so I realize the importance of buying when there is blood on the streets. This market is awful even in the 1.5 mil ranges. Apts in my building are off 15% from peak and still sitting. My building is tax abated so SALT should stimulate sales not hurt them. As others have noted however the rental market is doing OK (my apt is currently rented.)
In addition to all of the above I know a lot of young professionals who simply prefer renting to buying and it may be a trend that continues.

One more factor to consider is the "opening" of the other NYC boroughs. As Brooklyn, Queens, Bronx, etc. have become more desirable, it can be looked at as if there is entire boroughs of new supplies. 20 years ago, I would never have thought about moving to BK. Manhattan becomes less expensive as supply from other boroughs continue to come online.

Especially when you are talking about apartments. There has always been a market for houses in the boroughs, but Coops in a lot of areas was a non-starter (and Condos didn't exist). Back in the 1990s when we were buying a lot of foreclosures there were times we had had trouble even finding brokers who would even take a Coop listing in many neighborhoods (even Forrest Hills). Now there are a ton of buyers who back then would have been Manhattan buyers who aren't looking at all there because they prefer Brooklyn. We are also currently do a bunch of sales in The Bronx more than 1000% increase in price.

But we have also seen some "luxury" projects in areas which may not have justified them depending on brokers pushing buyers who had little experience with Brooklyn neighborhoods. I think a bunch of those could find themselves in trouble at the market retrenched.

So--while I agree with everyone here re: market not being great, I've been searching for comparable rentals, and the price continues to edge up significantly. This seems to argue against the idea that there's an overall drop of housing demand.

Ex: something similar to a 2M classic six on UWS rented around <7-8k in 2017 now rent for 8-9k. This is a market everyone knows well on this board I feel like. Doesn't feel like the overall demand is dropping in this kind of segment, but price is DEF dropping. 2M on UWS in 2017 is now 1.8M, esp. if need reno.

In most of the resale segment at appx $1500 per sq ft finished, buying is clearly cheaper with 10/1 I/O at 2.50 from Wells. I have even seen 2.25 for refi coop form another back low LTV.

300 - when you do that analysis, are you just comparing carrying costs between renting and owning?

Setting aside the obvious (and real) issues of some assumptions around depreciation/appreciation (which you could just zero out) and the option value in each scenario (which you could also zero out), it seems to me that you'd have to at least includes something in your comparison for:

1) Relative transaction costs in the two scenarios.

2) Some sort of minimum return on the equity invested. You could do some sort of muni bond in your analysis.

There are few soft factors which vary depending on individual view:
1. “Freedom Premium”: ability to customize, not having to move and not having a landlord. The more money you have, the higher the premium. If you are worth $100mm, you may pay 25-30 premium to own vs rent. If you have no saving, no premium. I use zero.
2. I use 10y hold and transaction costs can be minimized by getting buying rebate from Keith Burkhardt with full service. He will even sell it for you at a reduced commission.
3. If advanced analysis, you will put in your view of risk and return. For average market analysis, you would put long term appreciation in property value. The moment you use even 2 percent annual appreciation, your analysis will say buy. Anything thing negative will always say rent. I assume zero. So no need to even perform buy vs rent analysis if you have appreciation or decline view on what you buy.

On 3, you can not assume a cost of capital or alternative return without inputting your assumed return.

For more that $3mm purchase, say down payment is $750k. Many people buying $3mm apartment probably will just reduce the net cash they hold by $300-400k. Only half may come from selling equities.

Believe it or not there actually was a co-op market in Ditmas Park, Midwood Brooklyn circa 1990. My first job in real estate was working for a family That converted about 50 buildings from rentals to co-ops at this time. A decent percentage of insiders would purchase and we sold out the vacant units that we had pretty quickly in most buildings.

This was a neighborhood I liked quite a bit back then, Cortelyou road was a interesting business district. With a great food co-op, book stores etc.

Transportation from there isn't great, perhaps that's what kept it from really developing. That said it still remains a great little hidden neighborhood. Many people are unaware of the beautiful Victorian homes and tree-lined streets just off of Flatbush Avenue

Keith Burkhardt
TBG

Yes but 3 years later many of those same conversions were down >50%.

Are they still down?

I sold this apartment for about $60k, I believe it was also my office. But I could be mistaken it was some time ago.

https://streeteasy.com/building/1818-newkirk-avenue-brooklyn/5d?context%5Bcontroller%5D=%23%3CBuildingController%3A0x000055c34078d9b8%3E&context%5Bcurrent_user%5D=1025566&hide_if_empty=true&section=sales

TeamM, Let me add one more statement. It is a variation of “Freedom Premium”. There are people for who a nice reno is not worth extra $400 per sq ft even if they can afford it. They are perfectly happy with good quality rental finishes. For example, they wouldn’t want to pay $10k for a sub zero and will be perfectly happy with $2500 stainless steel Fisher and Paykel. They couldn’t care less about skim coated walls painted in the color they like, custom window treatment and closets even if they can afford it. They do not care about having to move. So buying in Manhattan is not for them. They will be equally happy with renting despite having more than enough money to buy. They will be torturing themselves with buy vs rent, if they do it, as they will be perfectly happy renting.

Just add context to my above post, that was 1989 or 90.

300 - I agree that the soft factors are very tough to judge. That's why I think zeroing them out is probably the easiest thing (e.g., freedom to move v. freedom to customize). If the soft factors aren't zeroed out then a rent v. buy analysis becomes too vague to have much value.

I do think that you need to fully allocate the transaction costs for each, and if you have a way of reducing them through broker rebates on the buyside then that's fine but you also need to include the sellside transaction costs in the buy/hold/sell analysis. If you aren't including the "sell" part of the analysis then you need to decide whether you are comfortable assuming refinancing after 10 years at the same rate and the costs of doing so.

I agree that you need to put an assumed rate of return on the equity part, and that's why I suggested something fairly conservative for purposes of the assumption.

I do add transaction cost with 10y hold with buying broker rebate. I also add some allowance for periodic upkeep which the renter’s do not have to pay.

Latest UD numbers indicate a stagnant market at best. YoY numbers are as follows:

Supply: 8.6%
Pending Sales: -1.85%
Market Pulse: -8.6%
Days on Market: 8.3%
Off Market: 7.2%

Might have to start a new thread with a more accurate title! It also feels like Days on Market has been going up pretty relentlessly over time - wonder what that looks like from the peak?

Stagnant indeed. Definitely no firming up. Market Pulse for resales is flattish to last year.

Thoth,
You know things are bad because people who have been denying/downplaying that the market is going down, trying to paint a rosey picture of a market turnaround, saying "now is a great time to buy" for the last 2 years, are now hedging their bets saying things like "of course the market is going down. No one is denying that."
From Fritz Frigan's Open House Report this week:
"The average for all of NYC dropped to 2.38, from 2.62 the weekend before. October is sliding (3.00 on October 6, 2.62 on October 13 and now 2.38 on October 20! Ouch!)."
And "When 98 open houses, out of 424, did not have a single soul to attend, you know it was slow. 23% of open houses were super lonely!"
I'll repeat what I've said before:
Everyone acknowledges last year was terrible. The numbers this year are worse. The news outlets and public sentiments almost universally are squawking about how prices need to come down. Unless there is a significant event on the positive side which would cause a course correction it's pretty clear what's going to happen.
Interviews with brokers are now talking about the volume of buyers who are making "unrealistically low offers." My response is if a small fraction of buyers are making low offers it means some people are fishing/probing for weakness. But if everyone is doing it then they aren't "unrealistically low offers," it's where the market is going.