Bidding wars in the suburbs (Part 5)

The eagle-eyed among you will notice that I skipped Part 3 and 4, as a certain developer named Trump has been prone to do when numbering floors.

After a dozen articles about rich people buying mansions in Greenwich, the NYT has discovered that there are people who buy and sell homes worth less than $1m, and they too are looking afield.

https://www.nytimes.com/2020/08/30/nyregion/nyc-suburbs-housing-demand.html

"The suburban demand, driven in part by New York City residents who are able to work remotely while offices are closed, raises unsettling questions about how fast the city will be able to recover from the pandemic. It is an exodus that analysts say is reminiscent of the one that fueled the suburbanization of America in the second half of the 20th century."

Seems like a lot of people have given up on NYC, sounds like you may have too. I wonder how much of this will end up being a long-term over-reaction (i.e., a 10-year commitment) to a short-term pandemic (i.e., it’ll be over one way or another in a year or so). I imagine a decent amount of regret will surface in therapy sessions over the years.

From where I am sitting, I can’t help but feel giddy. Asking rents I’m looking at are 30% lower than ~5 years ago. The apt I rented in 2010 is on the market asking ~15% less than it did back then. And the post-summer chopping has not even hit full-swing as hope dwindles.

Actually, it’s more like 25% less than ~5 years ago. Sorry, my math was overcome by my giddiness.

George, Curious if you work in commercial real estate?

Do people really believe that their is ZERO connection between what these units rent for and their sales values are?

@300_mercer - I have it in my head that George works in complex re-insurance for a firm like Lloyds based on various comments, but inquiring minds would like to know.

@30yrs - I think people suspect but are hoping to ride out the storm.

@Inonada - Timing of pandemic looks like it is working out well for you in terms of finding killer next place.

I just think it's funny that people are so quick to recognize that their apartment which used to rent for $25,000 with the tenant paying the fee, but now goes for $18,000 with them paying the fee, yet somehow they totally can not comprehend that they bought it for $9 million and now it's worth $6 million.

BTW I'm willing to bet this insane increase in near NYC suburbs is going to be followed in the mid-term future by some not too subtle withdrawal symptoms.

MCR, I’m just playing the cards I’ve been dealt. I have been delaying moving the past couple of years for the option value of something big coming up, as opposed to moving for something small. It seems my option has struck.

I guard my winter renewal date dearly, but I think an early summer renewal would have been better. In April, I put 2+2 together and got a house on the beach for the summer. Unlike you, it pains me to have more than one home until I invent that multiple body thing. But this year, my normal beach plans were not gonna happen. I think the optimal play would have been to decamp from paying NYC rent in April/May/June, and then come back in the winter. But those were not my cards.

One set of friends were actually dealt the June cards, and they did decamp to a non-NYC home. I’m not sure if they’re going to catch the winter for the return vs sometime higher-demand (e.g., next summer).

There have been a few instance of friends playing their cards poorly. E.g., renewing post-March only to decamp for a period. Or else signing a 2-year renewal months ahead of time despite warning signs that something might be up in Feb, only to immediately decamp to second home.

OK, I think I’ve found Mrs. George, MCR.

https://www.google.com/amp/s/www.wsj.com/amp/articles/parking-garages-idle-as-car-owners-pull-out-of-new-york-city-11598874770

The family rented a home in Darien, Conn., in mid-June. When Ms. Smith and her husband, an investment banker, saw how much time their children, aged 7 and 10, spent outside, they decided to abandon Manhattan and buy a home in nearby Westport. “I was like, all right, maybe it’s time to give up my dream,” she said.

“I was like, all right, maybe it’s time to give up my dream,” she said. Ouch.

Like I said, I am very bullish on the prospects of the suburbs for therapists.

My problem is I never gave up the dream, so I remained quite poor for many years!! Lol, but happy..

Westport used to be considered a commutable suburb- tho the furthest out one

@inonada - Ha! Cute family in the pic.
@keith - poor in material goods, but rich in culture.
I do like Westport as far as suburbs go, and I suspect the Georges, er . . . Smiths, will be happy there. Truth be told, I am secretly happy for the any of the kids whose parents decide to decamp to the suburbs because I can't help but project my own preferences onto them. I love New York as an adult, but always get a weird pang of sadness when I see the kids playing in the concrete fenced-in playgrounds.

I called Apple stores to get an appointment (all sales by appointment now) and there is nothing anywhere in Manhattan for almost 3 days. Is this a sign of activity picking up as people are coming back into the city after their summer?

More likely the Apple store being chronically understaffed and still keeping shorter hours. Is the one at 5th & 58th back to being open 24h?

Closed from midnight to 6am.

Private schools are mostly open in person after phase-in period or small delay. I spoke to a couple of families who were in their summer homes coming back after Labor Day.

if rent dropped by 25% and selling prices don't, then the rent vs buy calculation becomes even more ridiculous than pre Trump Virus days

Rents on an average are down 5-8 percent YOY. More at very high end say $20k plus.

The cost of a 10' UHaul for this Saturday one way from 10022 to Nashville is $1855. From Nashville to 10022, it's $541.

https://nypost.com/2020/08/30/moving-companies-in-such-high-demand-as-new-yorkers-flee-the-city/

Maybe it's because that idiot in Gracie Mansion has decided to kill all indoor dining until June 2021. Seriously.

https://nypost.com/2020/08/31/de-blasio-hints-indoor-dining-wont-return-until-covid-19-vaccine/

300, are you sure about that? I decided to check some random Equity Residential building to see what’s up. Here’s the cheapest that shows up.

Spent 4 days on the market and went for $3450 in June 2019:

https://streeteasy.com/rental/2746202

Came back on the market exactly 1 year later at $3280 (5% less). But look at the near-daily updates down to $2865 as of a few days ago (17% less) before bouncing to $2915 (15.5% less).

https://streeteasy.com/building/prism-at-park-ave-south/8a

Do you have other data points, or are you just stale? You’ve been saying 5-8% for some time now.

It's kinda entertaining to watch the price changes at Prism (and probably lots of such buildings). Almost 20% of the units are on the market at this point. Clearly, pricing is coming from a computer: near-daily changes, sometimes for as little as $5, across dozens of apartments.

It seems like the algorithm is pricing is based on percent of apartments available, rather than the percent change in apartments available. If you're at 8% availability but have been adding 3% each month for the past 2 months, then perhaps you should get ahead of the curve.

In any case, I think people may be mis-estimating the "dead man walking" effect. There's a bunch more apartments vacant in all but name: the tenant has already left for all practical purposes, and we're just waiting for the lease renewal to roll around. This'll continue into spring of next year, I imagine, before net returns in the summer counteract the trickle of "dead men walking" left by that point.

Look at rental charts. Also need to factor in renewals when as George mentioned that he got 2 weeks free.
https://streeteasy.com/blog/july-2020-market-reports/

Look through other listing at 300 Mercer Street. From what I can tell 1 month free on 13 months lease. Sticker seems unch. 2 months on 26 months. High $ per sq ft may have takes 10 percent or more of a hit.

https://streeteasy.com/rental/3095355

I think StreetEasy engages in some smoothing of their index. Miller Samuel shows a YoY drop of ~10% net effective as of July:

https://www.millersamuel.com/files/2020/07/Jul20MHTrent-conc-scaled.jpg

But I think the real story is inventory. Look at the spike that started in May, it shows no signs of abating yet:

https://www.millersamuel.com/files/2020/07/Jul20MHTrent-nlINVmos-scaled.jpg

Of course, this is skewed toward the lower end.

I don't think anyone has very good numbers because there's no way of knowing the actual deals that were or are being struck both in terms of lease rents and concessions; you've got tons more inventory than is being officially listed; some landlords are almost randomly reducing and/or increasing rents (while talking about fancy pricing algorithms). There are certainly tons of deals being done at -20% from a year ago, as well as an unknown number of units which haven't paid any rent in several months (but it looks like it could be over 20% according to some sources). And as inonada stated there are also tons of units which have actually been vacated for most intents but tenants are still paying out their leases. Right now on the floor below mine half the units on the floor below mine have notices taped to their doors that they are being made ready for new tenants so please excuse the construction, etc; half of the remaining units on that floor moved out over the last few days, and only one unit has been listed on that floor on the website this year.

On the sales side since the Real Estate "re-opening" date of June 22nd there have been 4,967 new listings and 1,222 contracts signed. UrbanDigs shows total supply of what it labels as "Existing Resales" as up 38.7% YOY.

Whatever is happening in the sales market & high-end rental market, you figure it is much more punctuated in the entry-level rental market. When you’re any / all of young, unencumbered with crap, and work remotely anyhow, it’s really easy to just get up and go. They’ll be back next year, but in the meantime why not go off and be somewhere else?

If rich people are decamping to existing / extra second homes (i.e., flat or increased costs) as a lifestyle choice, why wouldn’t people of more ordinary means do the same if it also meant saving $40K on rent? Like I said, had I been in a summer renewal cycle I would have left and come back in the winter. And it’s not even about saving money for me, I’d just do it for sport.

And how many young adults in non-high end jobs but were scraping their rent together every month to share a 3 or 4 BR apart in some relatively newly "cool" area of town are either going to leave NYC when evictions begin or already have and what are the chances of them coming back and sticking their heads in that lion's mouth again unless everything that they liked about being here (bars, restaurants, 59 kinds of yoga, Broadway, Off Broadway, etc, etc, etc) is at least close to fully back where it was? As I've said before I think the first thing that has to happen is retail (and that includes restaurants, clubs, "experiences", etc) needs to come back first in order to give people a reason to live hear as opposed to trying to get away with as much WFH as possible. You may see people time sharing rentals with people they trust or the overbuilt hotels may have to keep prices low enough that people can just spend a couple of days every week in them.

Of the few people I know in that crowd, some upped & went back home to live with their parents in March.

Hell, I even know a not-so-young couple in the “mass affluent” camp who moved back home with their parents. Husband quit his job pre-Covid and had started looking for the next thing when Covid hit as they were visiting said parents. When lease was up in May, they just came back to pack it all up. Why renew a $100K lease when you can just as easily figure out the next thing with the parents doing the cooking, laundry, & spoiling, especially when they don’t have a lot of years left and your recent/foreseeable life is far away from them.

I happen to be slightly plugged into the millennial crowd, I have a daughter and son-in-law in their early thirties. They have quite a diverse and extensive network of friends, she's been living in the same house for 32 years. They never left, have no intentions of leaving and as far as I know none of their friends have left or plan on leaving New York. They're not in New York just for the bars and the clubs, they just love New York City.

If you're accustomed to City Life and it's something that you enjoy, even without full access to bars and restaurants, I think it beats the blandness of most of suburbia for many people.

Yeah, file that one under pyrrhic victory as they the not-so-young couple blows their lease savings on therapists and divorce attorneys.

Older Millenial here. I'd say >20% of my friends and coworkers have moved out. Younger/poorer ones back with family, couples/families to the suburbs. Most are renting, not necessarily committing to suburban life, though a few have bought.

Among folks over 50, a similar number (perhaps north of 30%) have decamped to 2nd homes, but none of them have put their primary on the market that I know of. As a group, they have more equity + stronger cultural ties in the city than the folks my age.

In negotiations for an Oct 1 lease renewal right now. Comps in my (condo) building are down 20-25% YOY, but I doubt my landlord will go that low.

RichardBerg, maybe you could try to move within your building?

Landlords are having a hard time because rents so rarely if ever go down. The pricing algorithms have gone totally haywire as ionanda pointed out. However, it may be in their best interest to keep prices high and run vacancies. If there is a group of tenants who hate moving and will pay whatever, while another group has left and won't return, it may make sense to keep prices high. If you lower prices, everyone will expect a reduction.

George, whoever hold prices high will push tenants to other landlords who are willing to lower the prices. Is it prisoner's dilemma?

I think rents will start bouncing back next year to reclaim some of the lost ground as the exodus starts reverting.

As a LL, I think the optimal play is to meet the tenants halfway as the renewals roll around. E.g., take 10% off rather than 20%, or match the lower headline rents but not the free month. Enough to acknowledge the reality and get it close enough “not worth moving”. That way, you spend the next year 95% occupied at 90% of the price rather than 80% occupied at 95% of the price. More importantly, you are going into next year with a full building and a degree of goodwill that will retain your tenants. E.g., I imagine that although George swallowed the bitter pill of just 2 free weeks because he was otherwise occupied, he'll be outta there as soon as is practical.

As far as I can tell there are a lot of landlords who are telling existing tenants they will neither reduce the face amount on rents or offer free rent to existing tenants even though they are offering both to new tenants. The result is lots of bad will - I believe there is a non-insignificant number who are re-signing and then just not paying rent knowing there is a moratorium on evictions. The courts are going to be busy.

I do think it's a prisoner's dilemma, BUT there are high switching costs. Movers are naming their own price right now, so you could easily spend a month's rent just on moving costs. That will cool off in a few weeks, but then you add the broker fee (if any), move in fees, application pains (esp in condos and coops), and general life disruption. A tenant has to be motivated. Hence landlords know that they can throw a bone of two weeks free and tenants will bend over. BTDT.

The alternative is to leave for good. This article has great stats on those trends.

https://www.bloomberg.com/news/articles/2020-08-31/new-yorkers-flee-for-florida-and-texas-as-mobility-surges

I offered 13% off. He countered 4% off. I will probably reply "ok, your price but month to month" and spend the fall co-op shopping.

If nada is right about timing the rebound, he might even come out ahead by re-renting early next year.

RB, I think month-to-month is your best play even if you end up renting. Look at the price history of this guy I posted earlier:

https://streeteasy.com/building/prism-at-park-ave-south/8a

June 2015: $3520
June 2018: $3335
June 2019: $3450

June 1 2020: $3260
July 1 2020: $3125
Aug 27 2020: $2865

I’m guessing we’ll bottom in a few months during the winter. I think the optimal play from the renter’s side is to get a new place at 25% off or whatever irrespective of a price match at the current place, locking in the lower rent for years either contractually or defacto via the lower base. While I could possibly get 25% off on a renewal at my current place, it would burn up all the goodwill I’ve built up over the years and result in above-market increases next year and beyond.

If your fall coop search does not yield fruit, then you have the option of jumping ship in a few months.

Of course, my prognostications may end up totally wrong....

I'm not sure we will bottom in a few months. You've currently got a lot of inventory which I don't see being rented so fast, we agree that there are a bunch of people actually gone but just riding out the end of their leases, and you have a large number who are only still in place because of the moratorium on evictions which can't last forever. So where is the demand going to come from to fill this fairly large void? I think if you renewed your lease without a discount in April or May with some resentment, spent a year overpaying, and you landlord still won't match the 25% lower rents you're seeing (if you want to), and by then the shortage of movers will likely be abated, that just might be enough to get you to move even if you didn't really want to just by feeling ripped off by your current landlord. So that could see things still headed South through next Spring (possibly - that's a lot of crystal balling there).

>> The result is lots of bad will - I believe there is a non-insignificant number who are re-signing and then just not paying rent knowing there is a moratorium on evictions.

Well, only to year-end now.

https://www.nytimes.com/reuters/2020/09/01/us/01reuters-health-coronavirus-usa-renters.html

>> Hence landlords know that they can throw a bone of two weeks free and tenants will bend over. BTDT.

Ouch, sorry to hear that.

Seriously, why didn’t you just pack up to your new place in Nowhere, U.S.A.?

Of course a lot depends on the "new hire" job market, which I don't have a great handle on. When do you think that's going to pick up? Did companies just delay a couple of months or did they just cut out a whole year's worth (or a significant percentage thereof). Because if it's the latter the new batch of renters get delayed a whole year, don't they? Or what am I missing?

30yrs, I don’t disagree on your w.r.t. your timeline and things possibly bottoming in the spring rather than the winter. It’s more that I think the return cycle will pick up as we head into next summer. A decent chance that a vaccine is in place and starting to be deployed, but even without that I think the temporary migrators will be net incoming rather than net outgoing.

In general, I think you have:

- People coming & going from the city based on a regular cycle. This is net zero year to year by definition.

- People leaving the city during a recession, with a net return as the economy grows again. This is net negative right now and will be net negative next year.

- People leaving town temporarily. This is net negative now but will be net positive next year.

I think the migration from the third flow (special to this time) is far larger than the second flow (what we saw in 2009 onwards). I’m not saying it’s a net win, but more like the 10 million jobs that were “created” over the past 3 months after the 30 million lost (or whatever the actual numbers are).

>> Of course a lot depends on the "new hire" job market, which I don't have a great handle on.

As one datapoint, my company has been hiring at full pace since March and then some. Haven’t opened the office yet, optional work from home was extended through at least the middle of next year to give people clarity about school year planning. I don’t think we’re the only one.

All those new hires, guess where they are working from? Wherever they call home right now, which is usually not NYC. And when the office starts coming back, they all start trickling back in on top of the normal flow.

In a recession, 100 jobs in NYC becomes 95 jobs. But it’s not a straight loss of 5 jobs. Rather, 20 jobs reshuffle while 5 jobs are lost. I’m saying that any of the reshuffling jobs that involve people needing to move into NYC have had the move-in date delayed by a year or so.

I think the people coming / people going story is more complicated.

I have a young child and I see many people in similar situations leaving. Those people were going to leave anyways eventually because many can't afford bigger apartments as they have more kids or when the kids get bigger, but a lot of new parents hang onto the city as long as they can. Those parents collectively has decided that the time to leave is now. That is 'leaver' pull forward resulting in more leavers now but in theory could result in less leavers in each of the next 2-3 years.

On the other hand, I think that NYC has had less inward migration over the past few years among recent college graduates as you needed to basically be going into banking or legal to justify the rents. If rents next year are a lot lower and there is a vaccine, I can see many more new grads in lower paying fields finding ways to split units and make the rent work in Manhattan. Those grads in the past few years went to smaller cities because of cost of living. Likewise, falling commercial and office rents could attract new young businesses looking for cheap young talent.

Of course, I think that the great unknowns are if the worst of the economy is behind us (as the stock market seems to be implying), vaccine timing/availability, and the trend in city leadership/services/budget/crime.

The pulling-forward of leavers is a good point, which again speaks to a relative increase in demand next year.

While I don’t dispute the rent being too damn high overall, I don’t think this story is new. Here’s a chart of median rents going back to the 1990’s:

https://www.millersamuel.com/charts/manhattan-rental-to-sales-price-ratio-median-annualized/

I’ve been an active follower / participant in the market for more 2/3rds of those years, and the picture painted by that chart is accurate. Yes, $42K annual rent as of pre-Covid 2020 is a high burden. But so was the $40K in 2015. As was the $35K at the recession bottom in 2009. As was the $40K high in 2008.

But right now, we are witnessing a rapid deterioration from $42K at the start of the year to $40K at the start of summer to $32K at the end of summer. It’s still a high burden, but it’s back at 2005 levels.

Meanwhile, average income is Manhattan has doubled since 2005:

https://fred.stlouisfed.org/series/PCPI36061

The story for the median resident in Manhattan is probably less rosy as that data is skewed by increasing income inequality. Nevertheless, I’d wager the median Manhattanite (entry-level or otherwise) has seen income growth of 50%, half of it from inflation and the other half real.

The danger for NY is that the middle continues to hollow out. Ken from Citadel will still have his vacant $200m place paying relatively little in property tax and probably has his income tax liability well-minimized, and the poor will always be with us, but the $300k to $2m crowd throws in the towel and heads to Nashville. Stats on that are hard to come by until after it has happened.

As for why we aren't staying long term in Nowhere, the issue is schools. They had a surge of enrollment and filled, but we have apps in for fall 2021. We'll be back in NYC in a couple of weeks assuming our school actually reopens.

I have yet to meet anyone in NY who is being told to come back to the office. Europe and Asia are closer to business as usual.

Also I talked to a friend who owns some self storage businesses in the tri-state area. His occupancy and rates have never been higher.

Assuming you make the permanent move come next year, do you think you’ll be working remotely from Nowhere or finding a new job?

I feel like the "mass affluent" families I know have always left the city at a certain point for the reasons Paul and Inonada have highlighted. It has always been a tough adjustment for the yuppies who love the city in their early professional years to realize that while they could afford it on their own, it takes a salary or net worth that very few attain to raise a family in the "mass affluent" style in which many of the yuppies themselves were raised in New York. I would be interested in statistics on any increase in the "hollowing out of the middle," and to the extent there has been a hollowing out of the middle, I believe that is a nationwide/worldwide phenomenon attributable to bigger issues that are not unique to NY.

Meanwhile . . . I just got off the phone with a rug dealer in one of the outer burroughs who was proudly telling me how his daughter is starting at one of the big law firms in the fall in the city, and all systems are go as she looks for her first apartment in the city. He is an immigrant and was practically in tears with pride. So awesome.

While the issues aren't unique to Manhattan, the effect is greater here.

https://www.wsj.com/articles/suburban-home-prices-are-rising-but-so-are-most-urban-home-prices-11597331394

The subhead: "Median urban home prices were flat from a year earlier, dragged down by weak demand in San Francisco and Manhattan"

One factor we haven't discussed is the sea change of the relative desirability of Brooklyn (and other boroughs to a lesser extent) vs Manhattan. I think this probably leverages the downwards pressure on Manhattan prices from demand decreases.

@George - I am curious as to how NYC compares with let's say Aspen, Colorado? My family had a place in Aspen growing up, and I had no idea about the economics of the town until I went there for a few months after college with friends to enjoy a place as adults that we had all loved growing up. Quite the rude awakening when I realized that I could not afford a place to live on my own income; those of my group who stayed all moved into their family places. That was not in line with my sense of self so I left and wondered how any "real" people could work there to staff the hotels and restaurants. I did some reading up (this was 30 years ago) about the challenges that cities to which great wealth gravitates face with respect to affordable housing. What does Aspen look like today? And, is there any world city that does not tend towards socialism that copes better than NY? I don't know the answers to these questions but suspect you might because you seem particularly well versed in these areas.

@30yrs - The "mass affluent" families I know who stayed mostly live in Brooklyn. However, sadly, even one of those families had to capitulate a year ago as their kids entered middle school and they realized the financial pressures of staying in the city were too great.

I was just thinking about Alan Hart's comment from an old thread in which he said that he found the term "rich" vulgar and preferred to refer to that group as "the criminal class" as I was going through those friends who are raising their kids in Manhattan. A few fall into the international wealth category, and a few fall into the generational wealth category, and I realized that I don't have any old friends who were raised in New York who are raising their children in NY who don't fall into either category. I have self-made friends I have met as an adult who are doing it, but I cannot think of anybody I have known for more than 30 years who is doing it "on their own," and even that group appears to be under tremendous pressure, as I was shocked to learn that one of my old friends was front and center in the college admissions scandal. When her name was publicized, I was sure she had succumbed to intense social pressure to get her son into Yale, but was that much more devastated for her when I learned that she has resorted to fraud to get her son into USC, a school she never would have considered for herself. Just my opinion, but not the worst thing in the world for many of that ilk to be forced out of Manhattan and realize the world is much bigger than that famous cartoon depicts. This is not a woman I would have ever thought would cheat.

https://www.bloomberg.com/opinion/articles/2020-09-02/talk-of-new-york-city-exodus-to-suburbs-is-ahead-of-reality?srnd=premium&sref=5WyK57cE

George, do you mean because cannot get a seat in the Nowhere public school you are coming back to NYC?

Why not try some private school suppose it should be very affordable comparing to those in NYC

Imagine in 1988 we just walked into WV Nursery school and signed up! Their mom went there, so we were the first second generation to attend.

westsiderag.com: Upper West Sider Who Broke Her (Rent-Stabilized!) Lease to Flee to Vermont Finds Rural Bliss Didn't Last.
https://www.westsiderag.com/2020/08/30/upper-west-sider-who-broke-her-rent-stabilized-lease-to-flee-to-vermont-finds-rural-bliss-didnt-last

@mcr not sure what Aspen was like back in the day when you were hanging out there as a kid. The sounded exponentially expensive when you were there post college. These days even a modest wood framed house of say 3500 square feet will cost you $10 million. At least around Vail and Beaver Creek you can find some relatively affordable housing and still be a ski bum if you wish...

Keith, Thank for the West Side rag link. My gym is open starting today with specialized air filters and it was great to push some weights (Building gym I have access to was closed as well) rather than just long walks. This is what I was missing the most. For dining, I actually like the outdoor scene and hopefully we will have some solution for Dec and Jan. Nat Gas is cheap. So perhaps gas heaters in semi enclosed spaces.

>> The danger for NY is that the middle continues to hollow out.... (as) the $300k to $2m crowd throws in the towel and heads to Nashville.

Oh dear, my heart bleeds for the travails of that poor middle. If we are supposed to change from “the rich” to “the criminal class”, can we swap out “mass affluent” and just call it “the whiny class”? (With due apologies to the non-whiny member of those who earn a “middle” income of merely $300K to $2M.)

I think what happened is the number of high earners in the $300K to $2M increased, and to the whiny subset it no longer felt special enough because “so many” others enter their ranks. Sure, they can buy / rent the same apartments as before, but now they wanted even shinier apartments the others don’t have have.

As a reality check, only something like 2-3% of NYC households cross this “middle” threshold.

You basically said what I was thinking nada, George really had me scratching my head with that one.

$300k is good money if you send your kids to public schools. You can buy a non renovated but perfectly livable 3 bed room post war coop for well under $1.5mm on UES. Naturally you wouldn’t be taking fancy vacations or have a summer home. And most meals will be cooked at home.

If you make $300k I think you can rent a lot nicer apartment than you can currently buy, or you could rent a year ago.

I have heard that talk track (lamenting the plight of the $300K-$2M) quite a bit from those I know who grew up with a lot of privilege; not so much from those I know who came from more humble beginnings. Those I know who fall into that camp have learned that they get no sympathy from me. I have had so many of these conversations on the subject that I am considering starting a blog entitled "How to Burn Bridges and Alienate People You've Never Met" in which an essay on that topic would be the opening post.

Well, I'm officially month-to-month (plus a small decrease). Time to keep eyes pealed.

The downtown market can be strange. 3mo+ concessions in the luxury rental buildings and vacant condos. Hundreds of new cookie-cutter construction sales trying to cling to valuations that sucked on first offering, let alone now.

...And then there's this co-op, which went for 25% over its 2018 price after just 2wk on the market: https://streeteasy.com/building/potter-building/4e I can spot a couple new finishes, but they're firmly in the category of "different" rather than "better". Whiner-class folks shouldn't be bidding at the price, when you can rent comparable places for $6-7K now (down from $9-10K not long ago).

I don't buy @30's take as a blanket statement, though. No way could you rent something like https://streeteasy.com/building/90-gold-street-new_york/20c for less than the carry + transaction costs.

>> I would be interested in statistics on any increase in the "hollowing out of the middle," and to the extent there has been a hollowing out of the middle, I believe that is a nationwide/worldwide phenomenon attributable to bigger issues that are not unique to NY.

Here, you can see how much the middle has been hollowed out in NYC:

https://ibo.nyc.ny.us/fiscalhistory.html

Look at the “New York City Residents' Income and Tax Liability” spreadsheets by year.

As you can see, in 2006 there were 49K households across all of NYC whose income was $350K-$2M (c’mon, who counts $300K as the middle — even the IBO doesn’t put a threshold there). By 2016, this has been hollowed to a mere 83K. Can you imagine being one of the 49K, and then all of a sudden 34K randos show up to buy the same things you are buying, with suppliers gladly meeting their demand? The nerve! After all, the 1292 anointed ones at $10M+ only had to put up with another mere 120 people in their ranks. That’s fewer than you could fit in 1 floor of Kenny G’s apartment!

@multicity -- I was born "whiner class" (my dad was the original Karen) and finally find myself back there in middle age. You have my permission to satirize the shit out of us. We deserve it.

Congrats on getting your month-to-month, RB.

Nada, I have seen that in the last 10-15 years desires have gone up. As an example, most people working on trading desks used to get sidewalk cart coffee and bagel or diner coffee and egg sandwich special for breakfast but now I see a lot more people getting cappuccinos / lattes.

Another example is fancy new condos were very few and interior renovation standards were much lower.

And the student housing options in colleges are much fancier now vs 15 years back leading to increased minimum living standards in new graduates.

Is an open floor plan with stainless & granite really more expensive than the interiors people put in their UWS Classic Six back in Mrs. Maisel's day? I'm skeptical.

I mean, if you want to import some vaguely Euro-sounding brand of marble sink, sky's the limit. But that smells like a desire to pay more for the sake of paying more, not because the coffee actually tastes better.

Richard, People rarely put stuff like central ac and expanded their bathrooms. They renovated with mostly everything in place and likely kept the doors and moldings. They likely didn’t put electric ovens needing electrical update in combination with central ac.

Yep, that’s how GDP works. People don’t want more stuff, they want better stuff. So people produce better stuff, not more of the lesser stuff. What the hell are you gonna do with 64 oz of burnt coffee made with stale beans?

I think Greenspan really liked the idea of GDP per unit weight. The physical weight of the country’s GDP hasn’t increased all that much, but its value has.

Yep, that’s how GDP works. People don’t want more stuff, they want better stuff. So people produce better stuff, not more of the lesser stuff. What the hell are you gonna do with 64 oz of burnt coffee made with stale beans?

I think Greenspan really liked the idea of GDP per unit weight. The physical weight of the country’s GDP hasn’t increased all that much, but its value has.

Richard, People rarely put stuff like central ac and expanded their bathrooms. They renovated with mostly everything REMAINING in place and likely kept the door and moldings. They likely didn’t put electric ovens needing electrical update in combination with central ac. And high-end marble is far more expensive that granite. Calacatta can be $150 per sq for material alone.

I am not judging what is right or wrong, just trying to provide color on increasing lifestyle expectations.

Fridges over the years. You decide.

https://bigchill.com/us/blog/refrigerators-through-the-decades/

20 years ago you could do renovations for <$100/SF where the end level of finish was better than 90% of whatever else was on the market. Today those renovations might be "passable".

I don't think someone making $300k is looking at that Gold St apartment, but I do think this is about the same cost (if you don't run your cost analysis to tilt in favor of buying over renting):
https://streeteasy.com/building/15-cliff/25f

There was a time when half the agents Downtown thought they were going to sell Matt Dillon a unit in 145 Nassau St at 80% less and that one didn't sell in 2 weeks (although it will be interesting to see what number that closes at. Even at a "good" discount they probably overpaid.)

20 years ago you could do renovations for <$100/SF where the end level of finish was better than 90% of whatever else was on the market. Today those renovations might be "passable".

I don't think someone making $300k is looking at that Gold St apartment, but I do think this is about the same cost (if you don't run your cost analysis to tilt in favor of buying over renting):
https://streeteasy.com/building/15-cliff/25f

There was a time when half the agents Downtown thought they were going to sell Matt Dillon a unit in 145 Nassau St at 80% less and that one didn't sell in 2 weeks (although it will be interesting to see what number that closes at. Even at a "good" discount they probably overpaid.)

One last try:
20 years ago you could do renovations for <$100/SF where the end level of finish was better than 90% of whatever else was on the market. Today those renovations might be "passable".

I don't think someone making $300k is looking at that Gold St apartment, but I do think this is about the same cost (if you don't run your cost analysis to tilt in favor of buying over renting):
https://streeteasy.com/building/15-cliff/25f

There was a time when half the agents Downtown thought they were going to sell Matt Dillon a unit in 145 Nassau St at 80% less and that one didn't sell in 2 weeks (although it will be interesting to see what number that closes at. Even at a "good" discount they probably overpaid.)

So about my 300k to 2m range... the bottom end is where two recent graduates of law, medical, business, or some other professional school are likely to be at current starting salaries. Two administrators in city government could also hit 300k. After becoming a partner, opening their own practice, or becoming EVP of Whatever, many will gross 1m each. So it's not a crazy range.

I won't opine on whether they complain too much, only to say that they vote with their feet. Why do they matter? Because the wealthy don't pay taxes. Income is taxed, wealth is not (except real estate). These mass affluent people are where the money is if you don't want to tax the middle class. The fact that there are so many more, along with rising home prices, has stabilized reckless city budgets for years now. But the music is stopping.

Time will tell, but I still hear the music.

Listen closer

https://www.nbcnewyork.com/news/coronavirus/budget-cuts-leave-nyc-parks-dirtier-and-more-run-down-city-residents-complain/2572329/

Another last try (Motley Cru, Kiss, Cher, Streisand all did it):

20 years ago you could do renovations for less than $100/SF where the end level of finish was better than 90% of whatever else was on the market. Today those renovations might be "passable".

I don't think someone making $300k is looking at that Gold St apartment, but I do think this is about the same cost (if you don't run your cost analysis to tilt in favor of buying over renting):
https://streeteasy.com/building/15-cliff/25f

There was a time when half the agents Downtown thought they were going to sell Matt Dillon a unit in 145 Nassau St at 80% less and that one didn't sell in 2 weeks (although it will be interesting to see what number that closes at. Even at a "good" discount they probably overpaid.)

I agree the market rent for 90 Gold is in the low 4s. I just don't see how such a renter could come out ahead of $750/mo maintenance (i.e. >4% cap rate), unless they move every 2 years.

Speak of the devil, the #20C listing agent called me this morning, mentioning they'd entered contract "just a smidge" under ask. I sense the 1MM segment will reawaken before ultralux does.

On the subject of rental prices dropping:
https://streeteasy.com/building/soho-55-thompson/801
03/07/2018 Manhattan Skyline Listing is no longer available on StreetEasy Last priced at $17,500

Today $12,950

Interesting comments from Evercore's survey of housing market conditions. Nationwide data, but seems consistent with what is being seen in NYC.

~~~~~~~~~

- Activity across the nation's suburban markets is generally strong, but has pulled back some in recent weeks, while some rural and urban markets are starting to see activity pick up a touch.

- It general, close in suburbs, and detached homes in more urban settings, are performing better than other suburban and urban markets. It should be noted that the softness this week was driven primarily by homes in outer ring suburbs, exurbs and some dense urban neighborhoods.

Another example of rent collapse at the high end: https://streeteasy.com/building/beaver-tower/rental/3185653

2350sqft floor-thru with a private elevator would have commanded like $11K a few years ago, now asking $7250.

Owners are also trying to sell ($2.15M), but face stiff competition from the building's penthouse @ $1.6M. Good luck with that.

@Inonada - Thank you for the data, as well as the commentary. I concur with your interpretation. However, I do give George credit for his caveat re his hypothesis: "Stats on that are hard to come by until after it has happened."

FWIW - Although I don't actually know George, I feel like I "know" "George" because I am so used to hearing his point of view, and he articulates it with the skill of a trained debater much like many of my FedSoc [former] cronies do. I would not be surprised if George has a law degree that he just keeps in his back pocket for fun/and or was on the debate circuit at a competitive university. In any event, sifting through the back and forth between George and Inonada is SE at its best for me. I am in Inonada's camp, but I admit that George has deftly left me in the position of needing a few more years before I can render a verdict.

And, because George has neglected my question on Aspen, I just did a little research out of curiosity. Very interesting. My money is on Aspen's always being Aspen. I have been to many of the great ski towns, but none that I have been to compare to Aspen. It is a rare and special place on the planet, and I suspect those with great wealth will find a way to keep it that way. https://mountainjournal.org/aspen-colorado-bodes-will-for-jackson-hole-and-bozeman