Who said?

A garbage year indeed. Volume down by half since the peak in 2013.

https://therealdeal.com/2020/12/28/a-garbage-year-the-state-of-manhattans-luxury-resi-market-in-2020/

Coops were killed whereas lower priced townhomes did well. Who has been ragging on coops and talking about lower priced townhomes?

Some George.

Some good articles, certainly worth reading the whole thing.

Doesn't take a rocket scientist to recognize that this global pandemic has crippled a sizeable portion of the world. Now it's time to focus on recovery. So do you think the worst is over? I think it is as long as the vaccine roll out is seamless and it's as effective as the science is currently telling us.

I don't think it will be a straight line up, I do believe we now begin the difficult task of getting back to normal or at least some new version of it.

How many thought the equity markets would recover so quickly after they collapsed last spring? Certainly glad I went 100% back in.

“That first wave of buyers were the ones who had to move,” he said, and most deals were under $2 million. But since September, sales between $2 million and $4 million in Manhattan have begun picking up, exceeding the volume of contracts signed in the same months last year."

Keith Burkhardt
TBG
#pma

Do people think ultra-luxury has bottomed? I was calling 30-40% off original asks/actual in 2015 three years back. It seems that we are pretty close to that in certain buildings. But not sure on an average ultra-luxury is down 30-40% (without using actual data probably 25% on a average). My opinion is that ultra-luxury has further downside of 10-15% from here till the time some units are down 50% from the original inflated asks (Getty does not count in my opinion as it does not have the helicopter views and was ridiculously priced from the beginning).

https://streeteasy.com/talk/discussion/43143-price-prediction-for-ultra-luxury

Also, I have seen 20 percent average decline from the peak in some marquee near ultra-luxury buildings which had traded close to $3k per square foot without any special views.

We are already seeing a situation where some ultra luxury is holding up well (220 CPS) and lower quality product is getting killed. I expect that this would continue. Why would one buy in 1 or 15 CPW or 1 CPS or 25 Columbus Circle when these buildings are all aging and yesterday's news? The limited number of $10m+ buyers will converge on a few winners and the rest will suffer. I'm already seeing it in rents.

One of the trends I'm seeing where I bought the weekend house is an enormous price differential between new product and product that is 20 years old and showing its age, with "new" selling briskly and well above replacement cost while 15+ year old luxury sells for barely north of the value of the land, even if it has all the greatest finishes of 2005.

George, Good point about excessive market premium for new construction. However, not sure what 220 CPS resales are going to be. Current sales are contracts signed previously as the apartments to my knowledge (could be wrong on this) are finished one by one. And developer is still holding on to the unsold inventory with enough profits booked.

If 15 CPW is any indication, this building will maintain value.

There really hasn't been a >$10mm sale in the last couple of years in CPW15. So we do not know whether the peak values of 2015/6 with hold. If you bought in the beginning, you clearly made a lot of money.

The people in all those buildings I named are nervous. There are younger, taller, trendier girls arriving at the dance.

Just look at the number of "off market" and "unavailable" listings in the buildings I named.

Here's a sale nearby over $10m in a building that set records back in its day.

https://streeteasy.com/sale/1376829

Original purchase price is 9.4m adjusted for inflation. Sold for $1m more in August 2020. After closing costs, the owner got a real rate of return of 0 and had his money tied up for 15 years.

I missed the sale of the unit above for $15.8m in early 2008. The original owner, one Ricky Martin, made $9m and the next owner then lost $6m. Maybe it's bc nobody gives a hoot about Ricky Martin anymore.

$10M listings are 2% of Streeteasy -- and a lot of those are multifamily buildings, not billionaire pads. They can't be more than 0.2% of NYC housing units more generally.

Median sale in NYC is like $650K. When I browse for unremarkable studios in unremarkable co-ops, things look pretty flat. 10% lower than Feb 2020, sure, but no worse than ~2yr ago and noticeably higher than the (luxury) peak in 2014-15. If we stick to median-ish price tiers and shift gaze to larger units in less central neighborhoods, prices are actually up YoY.

Richard, You are pointing out the critical flaw in thinking of some of the bears on this board. They have been calling (or hoping) for whole market down 30-50%. As you point out, there is huge disconnect in "affordable" call it below $1500 per sq ft finished in good areas, and ultra-luxury bubble prices. Naturally, there are properties in between.

Ultra-luxury and in general most new development bubble prices I should say.

The SE Price index is a better metric for tracking prices, due to the issues controlling for mix in medians. For Manhattan, it's down ~20% from it's peak, which was 2017-2018 and is at 2013 levels at this point. It's down about 10% YoY. Who knows where it's headed, but I suspect that the pandemic means at least a few more quarters of decline.

At this point, I'd say the bears were more right than not. I'm not sure about 50%, but hitting 30% decline definitely seems possible.

Are we looking at the same index? Post actual levels please? I have it 10 percent of the peak.

Off the peak.

11.1% off the peak.
7/1/2016 $1,150,388
8/1/2016 $1,148,885
9/1/2016 $1,148,177
10/1/2016 $1,146,808
11/1/2016 $1,148,866
12/1/2016 $1,148,583
1/1/2017 $1,157,045
2/1/2017 $1,149,167
3/1/2017 $1,145,051
4/1/2017 $1,152,096
5/1/2017 $1,154,104
6/1/2017 $1,159,746
7/1/2017 $1,158,429
8/1/2017 $1,158,995
9/1/2017 $1,159,704
10/1/2017 $1,165,242
11/1/2017 $1,166,238
12/1/2017 $1,161,612
1/1/2018 $1,165,521
2/1/2018 $1,156,212
3/1/2018 $1,159,038
4/1/2018 $1,161,300
5/1/2018 $1,157,069
6/1/2018 $1,153,895
7/1/2018 $1,152,495
8/1/2018 $1,153,837
9/1/2018 $1,144,027
10/1/2018 $1,139,816
11/1/2018 $1,135,971
12/1/2018 $1,129,541
1/1/2019 $1,121,886
2/1/2019 $1,114,008
3/1/2019 $1,111,582
4/1/2019 $1,106,146
5/1/2019 $1,107,037
6/1/2019 $1,109,062
7/1/2019 $1,106,662
8/1/2019 $1,098,888
9/1/2019 $1,095,034
10/1/2019 $1,092,408
11/1/2019 $1,093,100
12/1/2019 $1,084,548
1/1/2020 $1,084,941
2/1/2020 $1,079,724
3/1/2020 $1,074,645
4/1/2020 $1,078,178
5/1/2020 $1,074,652
6/1/2020 $1,067,500
7/1/2020 $1,064,831
8/1/2020 $1,055,829
9/1/2020 $1,053,382
10/1/2020 $1,048,501
11/1/2020 $1,036,888

Covid Impact so far in the numbers 4%. Another 1% which is not in the numbers yet in my opinion.

And what do you say to people who were bearish in 2010/11/12? And I not taking about relative performance of SPX vs NYC real estate. SPX clearly has been a better return.

taking = talking

300, this is unrelated, but do you have a background in finance? Reason I ask is because you use the StreetEasy forum like Bloomberg chat, sending 1 sentence then another then another, etc.

I do in previous profession and because of that I can’t collect all my thoughts at once. Good catch.

I have been more bearish the more expensive a property gets, because that's where pricing went the craziest and developers most overbuilt. I walk by these half-completed construction sites with signs saying "1 BR to 3BR starting from $4 million" and SMH. I also SMH at $800K one-bedrooms, but home pricing in the suburbs and nationwide is rising so rapidly that an $800K house isn't so ridiculous anymore. If there's a tailwind in NYC real estate this year, it's because there's a tailwind in every risky asset.

Maybe I'm reading too much of my own situation onto the market, but I think the mayoral primary in June is going to be quite influential on resi real estate prices. If we get another incompetent bozo, and I'm betting that we will, I will expect to see more bearish outcomes for city real estate for the next several years. A lot of the people who came here in the last 25 years who are capable of paying $4M+ for an apartment, are fair weather New Yorkers. I have no more desire to hang around bad old NYC than my parents' generation did. I can always relive the rough days of NYC while reading Catcher in the Rye out in Nowhere.

Now that a good reason to be bearish assuming you are talking about high $ per sq ft.
“I have been more bearish the more expensive a property gets, because that's where pricing went the craziest and developers most overbuilt.”

300: I was using the SE chart, which just rounds everything (1.2 was showing as the peak and 1.0 was showing as the number for now). I didn't see the download option for the data until now and have gotten the actual spreadsheet. But using the actual numbers, isn't it a 12.5% decline from peak ($1,166,238 vs. $1,036,888), or am I not reading the numbers correctly?

Based on these exact numbers, we are either back to 6/08 or 4/14 price levels.

What do I say to people who were bearish in 2011 and 2012? I'd ask why they were bearish. People can reach the wrong conclusion with faulty logic, and vice versa. You also have to take into account opportunity costs for the funds they would have used for real estate. It's perfectly rational not to lock up capital for one use if you find another use more attractive. You don't even have to be bearish about the other alternative for this to be the case.

New/old -1. Or 130/1166 will give you 11 some thing percent.

From the alternative asset investment point of view, SPX has been a clear winner. But do keep in mind that for many people, buying an apartment does not mean they reduced spx allocation. Otherwise, you wouldn’t have so many all cash buyers or high percentage down in condos.

I've been clear on why I'm bearish now, but if I wanted to make a bull case, it would be that I like investing in beaten down assets. NY luxury real estate is such asset, or is becoming one as prices fall but all other risky assets appreciate. The key would be to find the most desperate seller of a prime asset. A second big bull factor would be that the "progressives" in DC seem eager to serve the wealthy, which could include restoring the SALT deduction and raising the cap on mortgage interest. DC progressives, like the GOP, also support continued printing of dollars, which has basically no downside except inflation, which hurts the poor more than the rich, so why not party like it's the Roaring 20s?

I will lament restoration of SALT deduction if it is reinstated and likewise resent the hypocrisy of progressives who favor SALT deduction. With respect to QE being tantamount to printing money, I have read quite a bit more about it and now understand how it does not equal printing money. I now lean towards the view that it is a tool that if employed responsibly can even out the cycles inherent in capitalism in a productive manner.

My personal opinions on SALT deduction and QE aside, I lean towards the bull case that George makes because I believe the majority of
voters on both sides of the aisle will do whatever they can to keep the party going, future generations be damned.

George: 100% agree with you on the governance issue. I wouldn't be as harsh as to disparage people as "fair weather", though. Why should people stay in an area that's not run well, has high taxes, and high cost of living?

300: My original point was simply that you didn't have to be bearish about NYRE to decide the money was better spent elsewhere. Even if you thought NYRE was awesome, if something is even more awesome, then it's perfectly reasonable to not buy NYRE. The other point is the lens someone is using for this decision. If they are considering it as a consumption decision, they are not going to have the same math as those who are viewing it as an investment. I suspect people who buy NYRE in cash are probably the former, or have a completely different investment perspective in mind (just looking to park money somewhere).

Thoth, It just depends on how much money you have and what freedom premium you put on owning an apartment (in general the richer you are higher the premium - Nada’s aside who can rent may be 30 perfect cheaper renting than buying ultra luxury). After that you can decide what you call it. A big percentage of Manhattan buyers have enough money to put into SPX after putting a down payment. If you have 60/40 portfolio right now, you can go 60 equities /15 cash and 25 downpayment and in 12 months most people Manhattan buyers will accumulate enough cash to be close to 25 percent cash.

@thoth that's exactly right, you have people buying a primary residence that view it as they would any other investment of their capital, most of these people will probably continue to rent. And you have others that are more focused on finding a home they'll love and enjoy and can customize to their liking along with the predictability and some might stay stability of ownership. They realize that the 20% deposit may return them more somewhere else. However, after buying their home, they continue to invest, earn and save. Buying and owning a home doesn't preclude you from investing in stocks.

It's interesting these heated debates about buying versus renting typically only happen online. Who really cares which path an individual takes? However, here on Streeteasy, it can get as heated as talking about climate change or vaccines : )

Keith Burkhardt
TBG

Is it 1999/ early 2000 for stocks? I do not know. But I am very cautious given the supply from IPOs.

Is it 2007/8 for Manhattan non-ultra luxury resale real estate? I do not think so. Are we going to have a boom? I do not think so either. Could we get a reasonable mayor. Possible.

As an actual “bear” here circa 2010/2011/2012, it was about opportunity cost.

Unlike Keith & 300’s well-heeled buyers, I simply did not have enough money to both buy a 10+ year apt and have plenty left over to invest. I don’t come from great wealth, nor do my friends and colleagues, so the notion of having a net worth equal to 100% of a 10+ year home in your 30’s was foreign. Buying would have precluded me from investing elsewhere.

So the choice for me was to take that down payment and put it in an apt where it would earn zero in my expectation after 10 years or become 2-3x. The former ended up at 0 while the latter ended up at 5x.

>> It's interesting these heated debates about buying versus renting typically only happen online.

Nah, it happens in real life too. I’ve gotten a lot of questions over the years about why I don’t buy a home. It’s greatly reduced as the years have gone by. Why? Not sure. Perhaps a combination of age, end of RE bubble mentality, and seeing that I was “right”.

Thoth>> I suspect people who buy NYRE in cash are probably the former, or have a completely different investment perspective in mind (just looking to park money somewhere).

I suspect the mentality runs more broad than that.

For a good number of people, their approach to money seems to be “If it earns more than zero, it’s a win”. Net worth is not fungible, and their portfolios falls into buckets. So SPX allocation is not affected by the RE allocation, etc. You hear that viewpoint from 300, Keith, MCR, etc.

For me personally, I’m more a “If I’m not on a path to earning 7-10% after-tax on my full net worth, I’m losing” type of guy. It has nothing to do with my spending, retirement, etc. It’s just what the money demands, and I am not to disrespect it as its custodian.

A number of people from my parents’ generation had built up nice little nest eggs early in their careers. It took me a long time to understand why they are not all sitting on $100M fortunes today.

On a relative basis SPX has been a clear winner. And I remember back in the day your arguments were all on a relative basis. So consistent.

Based on the standards on this board I wouldn't exactly call myself 'well healed'. I purchased a home which I could comfortably afford, put my head down and continue to invest in stocks for the last 15 years. The key in general is simply living within your means, I did this when I lived in Manhattan and Brooklyn and I currently do it.

Many of the clients I work with fit this profile, especially since they're very efficient income generators. I don't think I'm working with extraordinary clients when it comes to wealth, but for the most part they've got their house in good order.

I think the rationale for owning becomes a lot more compelling with the more normal/liveable homes that you'll find sold on my website via the transactions tab. Nada, your particular situation is completely different. The rent buy spread is off the charts... And since you don't care about owning a home, more power to you and keep on renting!

For the 1.8 million three bedroom three bath I just sold , the spread is a little bit more realistic. As you would say, perhaps not the best use for the cash you are custodian of on a purely return basis. However since these buyers are young, have close to $2 million liquid, this purchase is not stretching them. And since they're purchasing with a very long time horizon, in his words" I couldn't see paying $12k a month in rent, which will certainly go up, for the next 10 to 15 years".

Most of my friends are not in finance, and even though many have well-paying careers, if you talk to them about the SPX they look at you like you have three heads. Now most of these friends also bought beach houses in the'90s along with their Manhattan / Brooklyn homes. If not for this real estate, much of their money would simply have been piddled away. Most of these friends are creative types.

So I think everybody's situation is vastly different. they have different wants and needs and the kind of quality home they want to live in. Certainly some aren't financially qualified to take on homeownership at a particular stage in their life, and are better off renting and hopefully saving.

And for the record, other than Streeteasy, I've never had even a moderately heated conversation about buying versus renting with anyone. Maybe a few relatives when I was younger, "why you going to pay some other a***oles mortgage".

And considering I started this company as a discounted rental brokerage model, I certainly never had any hand in telling someone they should buy versus rent (though I have told a few people they would be better off renting including one very recently) And you won't find any such information on our website or any other digital channel I might be on. People call me up after they've already decided they want to purchase, and I just try to make that process a bit more efficient/effective/educated, along with adding a tangible financial component.

Happy New Year!

Keith Burkhardt
TBG

>> However since these buyers are young, have close to $2 million liquid, this purchase is not stretching them.

Everybody’s situation is different, and everybody’s outlook is different. That’s fine, I was just explaining where I and most people I knew were circa 2010. We simply didn’t have millions lying around in our 30’s. No family money, and no 4-5x ride on the SPX train, so you simply had to have earned it. And not a single one of my well-paid friends had careers netting them an extra $4M pre-tax going straight into savings over a decade starting in their 20’s.

Yes this young couple is a little bit different, has a successful startup he founded. No family money.

However in 2010 for let's say 800k you could get yourself a nice apartment, if you were of the mindset to be a buyer versus a renter.

So with 20% down we're looking at 160k+adequate reserves etc.

Keith

Housing appetite comes into it too. Some people would be happy to call an 800K apartment a "10yr home", others would want to add a zero to that before committing.

Indeed.

I think SPX long over housing purchase decision has been a good one if you had limited investment $s but I would hardly call the people making that decision big bears on housing - they were not really making an absolute call on housing prices in Manhattan. However, there have been people calling for gloom and doom without ever taking about their preference for say SPX.

Proof that the only weakness is high end, new construction, large units:
https://streeteasy.com/building/1600-broadway-on-the-square/ph3b?context%5Bcontroller%5D=%23%3CBuildingController%3A0x000055b3dc486058%3E&context%5Bcurrent_user%5D=1040784&hide_if_empty=true&section=sales

>> Yes this young couple is a little bit different, has a successful startup he founded. No family money.

There is probably some difference in viewpoints of “one-timers” vs “chuggers”. A one-timer coming into that sort of cash tends not to know if it’s ever going to happen again and/or how it’s going to grow. So family money, IPO money, biotech options 10x-ing in value, etc. It may happen again, it may not, so they tend to be conservative and use the money as if it were the last big chunk they ever see. E.g., buy the apt they’ve always wanted.

Chuggers know the money will continue coming year after year, whether in the form of salary, career growth, and/or investment growth. There is never a large slug of money, just ever-increasing / ever-compounding chunks. You could buy the apt now, or you could buy a nicer one down the road, or (in my case) repeatedly fail upwards w.r.t. home-buying into renting increasingly stratospheric apts.

With respect to the $800K apt circa 2010, saw that from a chugger. Let’s say net worth & projected income were in that ballpark — call it $500K. So sure, a $160K down payment totally reasonable fraction of the $500K squirreled away after a decade or so.

Fast-forward a few years to (say) 2013, it becomes a matter of WTF. They’re now earning (say) $750K with a $1M net worth and “stuck” in a 1BR with a toddler running up the walls in the living room / nursery, because it’s “silly” to buy & sell a home after 3 years. So they suffer a few more years and finally call it quits and move to an apt more appropriate for their income / wealth / needs.

In contrast, I know an alternate chugger with same income/wealth circa the same period that bought a $2M-ish apt, using all-ish their money for a down payment. I am sure chugging allows them to upgrade significantly at this point if they wanted to, but apt is of a reasonable size for a family that’s been growing so they don’t. Even though they “lost out” on $2M of SPX returns relative on their $500K down payment (say), seems like a more reasonable choice than buying a 1BR when 10-year plans are otherwise. Unless 1BR was considered an investment, of course.

You could get a two bedroom two bath for around 900k at 245 East 93rd Street circa 2010... don't have time to do a lot of digging, but I'm sure there were enough of other two bedroom options as well at that price point.

I know a guy in precisely that circumstance - late 30s, poor parents but making good money now, bought a little 1BR coop in a 1960s building for $800K about 8 years ago, used his excess income to pay down the mortgage, now has 2 infants at home, and feeling trapped because he needs to sell his current coop to free up cash to buy a new place (cash-out refi apparently isn't an option). If he's lucky, he can sell it for what he bought it for 8 years ago, and yes he missed the whole SPX run-up. He wishes he had rented his primary residence and bought his shore house, not the other way around. There is some remarkably bad financial advice out there, and I'd put "own your own home and pay it off" in that category.

I think everybody's situation is different. I own my primary residence, mortgage free. I have the majority of my net worth in the stock market(7figures). I'm not an extraordinary person with a large income, at least buy NYC standards. I also owned an investment condo on the ocean which I recently sold, made a nice return.

I'm not sure how owning the shore house would have made your friends situation any better? I think this falls into making sure you make a good decision when you buy, something you can comfortably afford and will be able to grow into. If you can't comfortably afford it and can't grow into it, rent.

Nada: this is a condo in a very well established building, probably could have paid significantly less if you hunted for a co-op.

https://streeteasy.com/closing/1019908

"There is probably some difference in viewpoints of 'one-timers' vs 'chuggers'. A one-timer coming into that sort of cash tends not to know if it’s ever going to happen again and/or how it’s going to grow. So family money, IPO money, biotech options 10x-ing in value, etc. It may happen again, it may not, so they tend to be conservative and use the money as if it were the last big chunk they ever see."

Exactly. I am only one data point, but my savings came from working much harder from 25-35 than was sustainable for me over the long haul, plus a one-time lucky "right place right time" windfall that came from being in SF from 1994-2001 (it was raining money in a way that did not strike me as sustainable). I had set a "quitting number" for myself and did indeed quit when I hit that number. I then started focusing my time on things that I personally enjoy (none of which are particularly lucrative). As a result, I need to budget and be relatively conservative with my spending.

Mr. MCR, on the other hand, is a completely different story. Work is easy for him because he loves what he does and happens to be quite good at it. Not only does it not impinge on his health or time, his work is also a genuine source of joy and energy for him. The money that flows from it is just a byproduct of his doing what he genuinely likes to do. Thus, his attitude towards money is completely different than mine.

Guess I'm just saying regardless of whether you're renting or buying you need to make sound financial decisions.

I've always lived well within my means, I learned the basics of compounding returns from my grandfather (who was a liquor salesman, but had been investing in the stock market, mostly utilities since the 1930s, consistently). He lived in a modest house, and just kept investing. My father was the opposite, a renter almost his whole life and spent all of his excess cash saved by renting on vacations etc... I wound up taking care of my father financially until he passed. My grandparents lived comfortably until they passed at 96 and then 99, 100% debt free.

The guy in his late 30s with the two infants at home should have been working on building liquidity instead of paying down a cheap mortgage. Buying a shore house wouldn't have fixed his problem.

Shore house aside, I take George's point to be that the conventional wisdom on which many of us were raised was that buying a house was always a sound financial decision if you could find a way to make it work, and there was little risk in stretching to buy that house.

That is simply not the case anymore (if it ever was), and it is certainly not the case in Manhattan.

It's always been the case that you have to pick the right house, not just any house. Even the "golden age" of Boomer realty advice saw the extinction of the Rust Belt, after all.

With $800K to spend in NYC circa 2010, I would have put my money here: https://streeteasy.com/sale/264170

(this is not just spitballing with hindsight bias; I toured this unit when it was on the market, then spent 2010-13 renting a condo in the same neighborhood / size / price point)

" I own my primary residence, mortgage free."

And where in Brooklyn is that?

It's this never ending discussion about how other people should use their $. I don't get it.

https://www.millersamuel.com/charts/one57-same-unit-%E2%80%A6alysis-fall-2020/

QUESTION: Who said:

"How long before DJT starts his scorched earth dismantling of the government, judicial system and economy?

"It's not that I don't thing he'll be out on January 21 (although there is little he could do to try and stop that which would shock me) it's that I think he will try and make it as hard as possible for the incoming administration even if that means doing serious damage to the country. So over the next 75 days I think he'll throw monkey wrenches like firing bunches of Federal employees, signing ludicrous Presidential Orders, etc because if he's not going to be President he wants whoever is next to look bad so he will look better in retrospect."

"I also think there is a decent likelihood that he will come out with both dog whistles and perhaps outright calls for violence by his most lunatic fringe supporters and I'm not so sure they won't take him up on the proposition."

"Don't forget this is the guy who encouraged his supporters at his campaign rallies to beat up dissenters promising he would pay for their defense."

"So when does DJT actually come out and tell them 'start shooting'?"

ANSWER: 30yrs is right again. I do not envy his being the smartest guy in the room. That is a guaranteed recipe for depression.

Some people appear to have slept through the entire summer. In a way, I envy them.

Midtowner - You have to read the George Floyd threads for full context. Nobody in this discussion was sleeping through the summer.