[New New] Market Firming up threat

*thread. Typos are the bane of my existence.

Thanks Multi.

I really wish SE would bring back the function allowing readers to jump to the end of a thread. Ridiculous to have to scroll through the entire thing each time.

Encouraging, we recently had a board turned down on East 57th Street. It's a terrific listing at a great price point, especially relative to other recent sales in the building. We've also seen a little bit of an uptick in showings over the last week.

Another one I was have been watching went into contract today. Listing price higher than 2015 close, but I will be watching to see actual closing price (assuming board approves the contract).

A property in my search parameters went into contract today for the fist time since Sept (of about 60 that I follow). It was one of the cheapest and well-located, but needing a gut reno.

Olshan Report has been at 20+ for a couple of weeks. Perhaps the stock market rally has caused a little upward blip on the downward market.

Was it by any chance the 5/5.5 at 860 UN Plaza that went into contract at 2.695? That is one that I had been watching out of sheer fascination, so technically another 2 I have been watching went into contract today, but that one was not competing with my listing.

Resales are ok and doing better than last year in volume but not much better. Urbandigs in the process of revising data by including more than 5y old buildings into Resales. So want to wait a week or so before quoting the numbers.

I think that is a good move in terms of providing a better market picture. Counting a 4 1/2 year old resale (which probably went into contract 6 years ago) under "new construction sales" really doesn't make sense to me. Especially since the current dynamic is really Sponsor sales (with everything good, bad, and indifferent that goes along with that) vs resales (even if they just closed yesterday).

MCR, with respect, being 11 minutes walk from the nearest subway and surrounded by diplomats fails the "well-located" test for me.

Hey guys! Yeah, we used to have recent development and new development combined in one tab. We made a change so new Dev is on its own and recent Dev is considered resale. Figured it's better that way.. hopefully it helps you guys interpret trends more accurately

https://www.urbandigs.com/resale-charts/all-manhattan/all-proptypes/all-beds/

Thank you. It makes sense. Resales category is looking certainly better on YOY basis. Pending sales up 22 percent and Market pulse 16.7% (level .35 is still poor). Streeteasy condo index in a few days will give little more information.

Very welcome! Yes it definitely is.. kind of shocked it was that positive when I saw it. We had to double check

The revised data basically confirms which I see anecdotally:
- New Developments, which are mostly high priced, are the main issue.
- Resales while not strong, are moving and doing ok (except for high down payment coops, couple of areas which have fallen completely out of favor such as Turtle Bay) but not great by any means.

The numbers don't make sense to me. If current New Dev Pending Sales are 327, down 28% YOY, it means last year it was 454. If current Existing Resales Pending Sales is 2175 up 22% it means last year it was 1783. Total 2237.
But Market Wide Pending Sales is 2,490, down 0.1%
Where am I screwing up my math?

I am suspicious of YOY increase in resales too.

@300: " (except for high down payment coops, couple of areas which have fallen completely out of favor such as Turtle Bay)" - Agree as the bulk of sales I am watching are high down payment coops in Turtle Bay, and they are not moving at all. The listings I am watching that have gone into contract are technically categorized as "Sutton Place" by Streeteasy, but they are in the higher 50's and a little to the west of Sutton Place itself.

@George: "11 minutes walk from the nearest subway and surrounded by diplomats fails the 'well-located' test for me" - Fair enough.

30 is correct, looking at the UrbanDig's pending sales as of yesterday and the year ago data for total, existing, and new - there appears to be ~300 units missing from the year ago period (year ago new + existing is 292 units short of year ago total). This discrepancy does not show up in the October contract data.

At 30yrs..

Resale pending - 2169
New Dev pending - 327
Total - 2496

Market wide says - 2488

I'll try to find out what is causing the discrepancy of 8 listings

I think 30 is questioning yoy percent changes rather than current absolute numbers.

When you parse out different categories for YoY and then compare to the whole, it could appear like this. We checked that few days ago, all seemed ok.

Probably previously new development moving into resales will change it as Resales new number will keep on increasing.

Could be.. also in Jan, the charts will change as buildings included for each tab will update a bit.. we are curious on that too

If market wide is virtually unchanged YOY, and categories have been rejiggered to shift data away from New Dev and towards Resale, I think it's reasonably safe to say that the actual YOY change numbers are a lot closer to zero for both of those categories and the respective +22%/-28% are due data moving categories as opposed to actual market changes.

This sold 25% over ask. How?

https://streeteasy.com/sale/1425074

We were one of the bidders, exceptionally low maintenance. I actually lived in this building when it was a rental in 1982, $200 a month.

Bpc, I wouldn’t read too much into a single sale in an area with generally few transactions making it hard for the seller to price.

Linking previous thread
https://streeteasy.com/talk/discussion/45280-new-market-firming-up-indicators

I remember when the unit was listed and it had something like both the highest number of page views and highest open house attendance of any listing in Manhattan. In a week where the average open house attendance was 2.71 this listing had 46. So there is little question the listing was underpriced - the uncertain part was it "brilliant marketing" or just a goof and they could have done better if they had asked for even more initially? We will never know.

300's rule of $1000/sf would have worked well here ... approx 55 -foot by 25-foot footprint equals 1375 sf -- adjust down for being so far east, but adjust back up for the low maintenance. More surprising that a one-bath traded at that, but the original listing promised you could add a bath. It is a walkup, but ceiling height and WBFP balance that out, presumably. The risk of being one of only four co-op owners is what's hard to price, and clearly, more than one person thought that risk wouldn't be gigantic.

How realistic is $300 of coop maintenance? After tax, how much is going into the reserve fund? If it seems too good to be true...

George, I am guessing heat and hot water is within each apartment. Major projects have assessments. There is unlikely to be a reserve fund. Taxes I am sure are very Low and no super, elevator, or managing agent reduces the expenses tremendously.

How about if the Coop owns a commercial unit which produces substantial income?

Ali,
Over the past 30 years I have found that most purchasers have no clue what owning/living in a small Coop is like. There are plenty where shareholders used to rotate who would do the super's duty weekly or monthly that are8even self managed anymore.

30, From the Google map, it does now look like there is a commercial unit but Keith would know more details.

It's zoned S4, so maybe that is an office on the ground floor. Total tax $2000 a year. Which makes me wonder: at some point, are entire neighborhoods reassessed so as to bring assessed values up to market, or are buildings like this basically a way for rich people to get exempted from paying their fair share to run the city?

Tax increase is a slow process. They will for 5-7 percent per year. Rich people are buying BK townhouses for low taxes. So not paying fair share is nothing new. De Blasio owns in Park Slope.

And “fair share” is a loaded word when it comes to real estate. Should “fair share” be defined by market value or some equivalent of possible use of services - say number of bedrooms or a combination of two.

Taxation bias towards property rather than income also hits middle-class/upper middle-class harder than truly "rich," because property/housing consumption 1) starts at a somewhat minimum level and 2) doesn't scale up at the same rate incomes do. (Presumably, in most markets, it hits poor/working class even harder still, as landlords pass-through property tax increases in the form of rising rents).

Poor use as much city services as the rich. So the taxation with some factoring in of use of services will tax the poor even more. Just separate Manhattan below a certain street from other areas (for money collected and spent) and see how much the real estate taxes for Manhattan will come down. That is why “fair share” is a loaded word.

We did indeed submit a bid on this unit. However the apartment I lived in many moons ago was actually at 631 East 6th Street. Although the 80s seem like yesterday to me.... It actually was quite some time ago!

This is a lot to read, but gives a good idea of how the NYC Property Tax system got where it is:
https://www.gothamgazette.com/state/8712-an-old-unfair-system-new-york-city-s-property-tax-conundrum-part-i
The software is not letting me link to all 3 parts, but you can get from one to the next.
(NB I don't agree with everything they say - for example they ignore the huge impact rent deregulation has had on Coop/Condo assessments - but in general they cover a lot of the issues correctly).

In terms of "fairness" currently homeowners in poorer neighborhoods pay about double what homeowners in affluent neighborhoods pay in terms of the percentage of actual value they pay in taxes.

Total tax collections have more than tripled since 2001 (which is a lot if you think about it), but if you look at city budgets and realize just about the only way for the city to significantly raise revenue is Real Estate Taxes, they will probably have to double again over the next 5 or 6 years (i.e. a 600% increase in 25 years).

Taxing the Real Estate owned by religious organizations would provide a substantial boost to revenue.

While Class I properties have the most stringent caps on assessment increases, the tax rate has increased way more than other taxes classes:
https://www1.nyc.gov/site/finance/taxes/property-tax-rates.page
(Note all 4 classes started equal at 8.95% in 1981)

As far as "Should “fair share” be defined by market value or some equivalent of possible use of services - say number of bedrooms or a combination of two" property taxes have been ad valorem ubiquitously for so long that the terms are used to define each other (i.e. "Property taxes are a type of "ad valorem" tax" and "An ad valorem tax is a tax based on the assessed value of an item, such as real estate")

30, Do the public services cost much less in poorer neighborhoods vs affluent neighborhoods? Why wouldn’t poorer neighborhoods be charged what it costs to run their neighborhood or the school money allocation can be in proportion to taxes collected. I know I am being controversial and it will never happen in NYC.

What one might ask if they were looking to cut costs is if the administration actually believed the narrative that crime has consistently been going down for 3 decades, that New York is the safest big city anywhere, etc why we are doubling the size of the transit police force rather than reducing the policing budget? Looking from the outside one might come to the conclusion that rather than "things keep getting safer" there is increased worry about social unrest (see https://www.foxnews.com/us/dozens-arrested-in-anti-police-protest-in-new-york-city )

When I talk about costs of aging infrastructure which haven't been addressed/budgeted for, this is the type of thing I'm talking about:
https://nypost.com/2019/11/24/massive-water-main-break-in-sunset-park-floods-streets-sidewalks/

(And they seem to be occurring more frequently)

From looking at Noah's numbers, it doesn't seem like New vs. Resale is the main driver of difference, it's the neighborhood. Some neighborhoods look reasonably healthy, others are in the tank. For example, look at the latest market pulse numbers and their YOY change:

Greenwich Village: 0.58, +28.9%
Lower East Side: 0.29, -54%
Upper West Side: 0.51, 0%
FiDi: 0.13, -23.5%
Upper East Side: 0.33, +10%
Tribeca: 0.25, 0%

If you are selling in FiDi, it's not a good market, whether you are selling a new development or not, it's only a difference of degree.

Once again after hearing anecdotes of a heating up market in November the actual numbers show otherwise. Number of contracts down YOY 2.3% and last Fall was roundly decried to be a disaster (so this is worse than a disaster).
Market pulse is a terrible 0.35 unchanged from last year's disaster but is being buoyed by 3 false flags to improvement:
1) Pending Sales is only up because closings are taking longer, not more units being sold,
2) Off Market continues to be at record numbers, and
3) New Listings down because when owners hear what price they can get they don't even bother trying to sell (note that even with New Listings down by 10.6% YOY, Active Listings still up by 4.5 % YOY).

And while I don't really believe either of these numbers are accurate, just for illustrating a rough idea of how bad things are:
Jonathan Miller has stated that the real supply number for new condos is 9,000 units including what's in the pipeline actually being constructed currently. Monthly sales of 83 would indicate a sellout period of over 9 years even if not a single new project was added.

monthly sales cannot be that low, 83? are you kidding?

https://www.urbandigs.com/newdev-charts/monthly-closed-sales/all-manhattan/all-prices/all-beds/new/?is_sothebys=true&agentid=58

New Dev month closings.. hope shareable link works, sometimes it doesn't I'm told

Link worked for me. Thanks for posting Noah! On another note I always suggest to all of our clients to read urbandigs. I'm happy to tell you that most are already doing so!

It's so crazy! Nearly doubling last year's data according to urbandigs' website. Looks like the fake data produced by the FASAB 56 legislation and the ongoing undocumented QE4 really work

Break the pill in half next time Anton

Reno, I just took a pill and I think our country is run by Xi and Putin. Each congress man or woman has a handler. Hence, the real estate will go up.

One thing to note, April through June was probably taken from future months with mansion tax policy change taking effect July 1 and rush to close before that..

Also, most of these closings are deals signed years or many months prior. So more a function of the build cycle and when CoO granted and bulk closings can begin. For a better look at new Dev demand, look here at pending sales

https://www.urbandigs.com/newdev-charts/pending-sales/all-manhattan/all-prices/all-beds/new/?is_sothebys=true&agentid=58

PS: thanks Keith for all the kind words and advocating for UD!!

Noah: As always, thanks for the data!

That chart on New Dev pending sales is certainly eye opening. Looks like Manhattan New Dev maxed out close to 1,000 pending sales at the end of 2014, and has been on a steady decline ever since to the 300s now. That's an ominous looking chart if there is one, but it's made worse by the fact that new supply is still coming online.

http://www.mns.com/manhattan_new_dev_report
You'll have to download the PDF to access the granular data. While I agree with Noah that there is a significant impact by the change in Mansion Tax I still think a 44.4% drop in transaction volume can't be ignored.

Also look at the median $/SF closing prices by neighborhood. When you see Fidi @ $1,367/SF and Tribeca @ $1,743/SF and compare them to current New construction asking prices how do you reconcile the difference?

New data point: 455 E57th 7B just went into contract. Sellers appear to have been trying to move their apartment since October 2016. Started with listing price of $995 in October of 2016, and now finally in contract in December of 2019 with listing price of $599. I will be watching to see if this contract gets approved and if so, what actual closing price is. This is an adorable renovated unit in location that I love. When I saw it drop to $599, I said to myself, somebody's got to pick this up, and sure enough, it went into contract fairly quickly. I feel like this has to be the bottom?

I looked at this one for myself. I just can't imagine this co-op board allowing this sale to take place, although of course I feel they should. The market is the market.

@Keith - Right? Insane!

Problem with that one is high maintenance. $2800 per month for call it 850-900 sq ft including walls etc. Usually it will be $2200. So 7200 extra per year at 2.5 cap rate.

Price is still pretty good.

Maybe the bottom is when the 3BR/3BA sells for $700k. Entertainingly, the only other similarly priced 3/3's that Streeteasy finds in that price range are in Jackson Heights ("Similar Sales you might be interested in") https://streeteasy.com/building/455-east-57-street-new_york/2c

Oh my. Miss Havisham called and she wants her apartment back.

Really surprised to see UWS 1 bedrooms under $500k languish like this.

https://streeteasy.com/building/116-west-72-street-new_york/2e

https://streeteasy.com/building/320-west-84-street-new_york/1e

Can anyone who would buy that unit afford to renovate it?

Calling it 3 bedroom is really a stretch. Barely 1100 sq ft. Just look at master bedroom size. Also the board needs to take the stick out of their axx for lower the down payment to 25 percent.

3 bedroom is artistic representation. Sold as 2 bedroom and 2 bath.
https://streeteasy.com/sale/9520

This is one of those situations where someone with $400k in the bank decides to put it up bc they are dedicated to Manhattan and their alternatives are 1brs. They will suffer the low floor, no view/light, no closet in the so-called MBR, cooperative ownership, and the need for reno in exchange for having separate cages for their preschooler and their infant. I think it will sell.

I think it is a very nice size for a two bedroom as master bedroom otherwise is way too small including closet space. Price is good. Would be at least $200k higher if it weren’t for 50 percent down and I am sure difficult board.

@george lol! That last post gave me a good chuckle. Separate cages..

Ditto Keith on separate cages. Spot on analysis!

If Mr. Front Porch and I wanted to live on the East Side, which we don't, it would be a good apartment for us. We would be gaining a second bath and paying the roughly $400K premium for the second bath over time in increments of $2000/mo maintenance over our current maintenance, so for 16 years that maintenance would seem tolerable. But 30 you are spot on ... we would just live with that kitchen. And of course there would be board problems because half the people on the board wouldn't believe our declaration of no intent to renovate.

These are the most popular apartments on Streeteasy for 2019. What trend do you notice?
https://streeteasy.com/blog/the-best-manhattan-apartments-in-2019/

Too be honest every time I see these listings in Beekman I stifle a scream. Tiny bedrooms, staring at brick walls 2 feet away, no closets , as

Too be honest every time I see these listings in Beekman I stifle a scream. Tiny bedrooms, staring at brick walls 2 feet away, no closets , as in why is this desirable? And high maintenance on top of that!’l
Then again I am in 3,000 sq ft in an “undesirable “ part of town living a good life

@ph41 - We've had this conversation before. Nobody understands why I prefer our tiny Beekman apartment to the estate we have in another city except my friend whose husband dragged her to live in Dallas, Texas because the spreadsheet made no sense in her preferred neighborhood (Tribeca). And FWIW, the apartment we are discussing is Sutton Place, and high Sutton Place (north side of 57th street - LOVE that location); were it in Beekman, I am not sure it would stand a chance even under George's hilariously grim analysis.

@30yrs - Yes, I see the trend. Depressing indeed.

Finally, @Obruni - Agree. Depressing, depressing, depressing.

In my experience, Sutton/Beekman is a very specific submarket that appeals to a fairly limited group of people. But those that want to live there, won't live anywhere else. We worked with one streeteasy regular for about two years before they found their perfect home in the neighborhood. I happen to like the neighborhood very much.

Anyway since this thread is about the market firming up. Here's a clip of Fritz Frigans excellent open house survey:

'Manhattan – the average jumped to 2.34, from the weekend prior when we recorded 1.69. A nice 40% recovery, but this is expected when compared to Thanksgiving weekend, which is ALWAYS slow (why are you guys holding open houses on Thanksgiving weekend?). Last year, on December 9 weekend, the average was 2.37, so pretty much the same. The East Village (4.00), Central & West Village (3.00) were all above the average, and so was the Upper East Side (2.90) and Upper West Side (2.61). I find it interesting that in the last four weeks the UES is showing stronger numbers than the UWS. Not sure why, we are getting a solid number of surveys from both locations. Other Downtown Areas were very slow (0.91), and not much better in Midtown West (1.17). It was also slow in Chelsea (1.70) and Midtown East (1.86). See the rest below.

Brooklyn – the average jumped very nicely to 4.51, from 2.88 the weekend prior. Last year, on the weekend of December 9 Brooklyn recorded just 3.33. Strong traffic in Park Slope, Downtown Brooklyn, and some other areas with 5-6 visitors, but beware of small sample sizes. Williamsburg was below the average with 3.00 from 11 open houses. We received 37 open houses from Brooklyn. '

The most visited open house was a townhouse in need of a gut renovation in Brooklyn. There were 19 visitors and multiple bids after the first open house.

Keith

Thanks, Keith. That survey reinforces what Noah's data shows for Manhattan, especially the weakness downtown outside of the Village.

On a positive note, I have seen some listings that I've been keeping an eye on go into contract recently, but the flip side of that is almost all of them had major price drops and/or were priced very competitive from the get go (as compared to comps).

Mr. Frigan also states:
"60 open houses, 19% were super lonely, with zero attendance. When this percentage comes regularly down to 10-12%, it will be the sign of buyers coming back. In the meantime, join your friends to sing in the Sgt. Pepper Lonely Hearts Club Band!"

Cash-out refi's surge as sellers can't get money out by sales. What could possibly go wrong?
https://www.cnbc.com/2019/12/09/refinancing-surges-as-homeowners-pull-out-the-most-cash-in-12-years.html?__s=kup1asgyc5r1hupsyqkp&utm_source=drip&utm_medium=email&utm_campaign=%F0%9F%93%88+2020+Boom+or+Bust+%2B+Slowest+Foreclosure+States&utm_content=%F0%9F%93%88+2020+Boom+or+Bust+%2B+Slowest+Foreclosure+States

I was thinking about this as greatest risk to coop to the extent I could imagine a seller whose sale was not approved by board b/c of price protection taking their equity out in refi and then stopping maintenance payments. I need to read the article but am most curious as to what refi appraisals are coming back with in terms of valuations.

Mcr, Banks keep personal credit in mind when lending jumbo. Not many people in 50 percent down coops in Manhattan will risk ruining their credit. They coops will also have restriction in amount gov can refinance. So coop has a lot of protection in terms of equity cushion.

I’m not worried about shareholder not making mortgage payment to bank; would be worried about shareholder not making maintenance payments as means of making life difficult for coop that might be making life difficult for them. I would guess coops would be a lot slower to act with significantly less expertise/skill than a bank would.

If max financing is typical (70% or less), there is nearly always enough equity to have the Board repaid, at least on the UES, maybe not Staten Island. The board being out of pocket is a problem in condos with 100% financing and maybe some coops with ridiculous charges like the coops managed by hotels. Coop foreclosure is non judicial, so it's quick.

30 - ew, that's fugly..

I know coop would be repaid ultimately, but things could be bumpy along the way for coop that does not have deep enough pockets to withstand short-term cash flow crunch. These are not going to be the 50%-down coops, but it is not unfathomable in a coop that might live a bit closer to the edge.

Re:They coops will also have restriction in amount gov can refinance.
While not a big issue in 50% down buildings it can become an issue in a building which has both more normal cash requirements and floor prices. Without floor prices, a Board could reasonably say the are rejecting a refinancing because they felt the amount violated the Coop's cash (i.e. equity) requirements because they thought the valuation being used was unrealistically high. But when you have floor prices and the valuation is in line with those?
Example: 25% cash building. Floor price on unit $2 million. Shareholder attempts to sell, gets $1.7 million, Board rejects. Shareholder wants to refinance instead taking out $1.5 million, gets appraisal at $2 million. Can the Board say the $2 million is unreasonable at the same time having that as the floor price?

@30yrs - exactly why I am wondering where these refi appraisals are coming out.

https://www.brickunderground.com/buy/new-construction-condos-developer-incentives-paid-common-charges-transfer-mansion-tax-nyc

Most popular apartments on Streeteasy, Brooklyn version:
https://streeteasy.com/blog/best-brooklyn-apartments-in-2019/

Urbandigs resales statistics looking very good on YOY basis but absolute market pulse number still at not so great 0.42 (up 20 percent YOY) and pending sales up 24 percent YOY.

Keith, Are you getting lowball bids accepted or getting bid away? Of the day posters here, you have most acce

Urbandigs resales statistics looking very good on YOY basis but absolute market pulse number still at not so great 0.42 (up 20 percent YOY) and pending sales up 24 percent YOY.

Keith, Are you getting lowball bids accepted or getting bid away? Of the day posters here, you have the most real time market info.

It's a mixed bag, but for the most part we're getting reasonable offers accepted on the properties our clients are bidding on. The majority of 'low balls' that we've tossed in have been quickly rejected usually with "we have several much higher offers". Some buyers want to test the market and sellers. A number of our current buyer's have come up to numbers that were acceptable to sellers even after a lowish offer was initially submitted. For what it's worth we've been very busy for the last month. We currently have three offers accepted and contracts out, another three offers out not yet accepted. 12 deals in contract. And we continue to attract a strong number of new clients

Recent closings: 86 Garfield place Brooklyn townhouse, 467 Greenwich Street, 310 2nd street, 372 DeKalb.

As I stated previously, I don't consider what we happen to be doing as a proxy for the whole market. It certainly is still a buyer's market on the vast majority of listings. Many sellers are still struggling to get property sold. Many probably can't go down to a number that would be acceptable to buyers because Co-op boards would not accept these valuations.

As a broker or agent to be successful in this market you need to have a strong client base. If you are primarily listing properties, you'll need sellers that will listen and properties that are well located.

It will be very interesting to see where things go in 2020.

Keith Burkhardt
TBG

300: Not sure those UD numbers are very good in context, since price / sq ft, median sales price, median listing discount, and off market are all still trending in the wrong direction YoY.

Keith: Yes, it'll be interesting to see what happens when people re-list in January.

I still think what you are seeing in those "good" UD numbers is due to the change in the way they account for existing resale vs new developments.

Here's what we did. When we originally launched new Dev charts we created a new category called recent development to track the set of buildings that were been 5-15 years old, thinking that this subset should be treated differently than resale.. so all the new devs built 2004-2013 etc. We grouped recent development with new development in the charts.. That was the issue. Resale charts consisted of all buildings over 15 years old..

The recent change simply stripped recent developments from new development tab

Here's what we did. When we originally launched new Dev charts we created a new category called recent development to track the set of buildings that were been 5-15 years old, thinking that this subset should be treated differently than resale.. so all the new devs built 2004-2013 etc. We grouped recent development with new development in the charts.. That was the issue. Resale charts consisted of all buildings over 15 years old..

The recent change simply stripped recent developments from new development charts tab and placed that dataset back into regular resale tab. So now we have a resale tab of charts that consist of all buildings over 5 years old.. with new dev being less than 5 years old.

We feel that's a better indication of resale than the original idea. Hope this helps