Ohio market hits bottom after 37% price decline

2002-3 prices. Where would that put us for NYC?

Eddie Manhattan RE prices will come down to 1991 prices. Then they will rise only to come down again. Prices will positively come down at least 15-- 50%. Its a fact, it will happen, it must happen and you can bank on it.

if only sarcasm were truth...

No I really mean it Eddie it's a done deal. It's going down and it's going down hard. All you have to do is read the headlines and listen to the radio. How can anyone think otherwise. Rents are sure to crash in Manhattan. 2 Bedrooms in prime areas of Manhattan will be had for just 1200 per month.

Do you think being sarcastic about the crash will make it not happen?

Ah, spunky has come back to life!

2003 prices will put us 50% down from last year's highs. We've already seen the inventory figures rising (except JuiceMan, who doesn't) and slashed prices, selling at a loss, the spring "season" a washout.

Just wait.

> 2003 prices will put us 50% down from last year's highs

Wow. I might have to up my decline estimate

"We've already seen the inventory figures rising" - except apparently the figures don't support that:

http://www.urbandigs.com/charts.html

I know - I know, this chart only shows a decrease because of a summer slow down and people pulling their listings and the numbers will jump come the fall and these are still at 10 month levels and blah blah blah. Fact is - inventory is currently declining - not rising.

I don't think spunky is being sarcastic at all. The end is near. I can speak of the financial district, where I live and own.

A decent 2-BR rents out at about 4500/month, which implies a price of about 650k. But a lot of 2-BR's in the neighborhood are listed at 1.2MM-1.5MM. That's 45-65% hit the owners are going to take. OUCH!!

But wait, it only gets better!! Wall Street is dead and will take years to recover. So many 20-something's and 30-something's, currently working on the Street and living around here, are getting axed left and right. They will flee the neighborhood in droves, which will drive rental prices down at least 10%. Chalk up another 10% decline in property!!

Think that's it? Couldn't be more wrong!! Banks will become more averse to lend money in Manhattan as property prices plummet, so nobody will be able to buy in the Fidi at 12 annual rent if rates shoot up to the double digits. That's another 10-15% decline in property!! Easily!!

But as we all now, real estate overshoots on the downside, just like it does on the upside. If the "bottom" should be around 70% lower, then prices will probably drop about 80%!!

And lest us forget the opportunity cost. As these listings are just sitting there with not a single viewing or bid for months at a time, the owners are getting raped by not being able to invest elsewhere.

So, basically, nobody should pay 1.2MM-1.5MM for a 2-BR today, because those place will be going for about 150-200k by next fall. And that's in nominal dollars. Subtract another 10-15% from that to get real dollars.

Add another 10% deduction for the lowball offer which the owner will have no choice but accept. You are not about to pay a fair price, are you!? You have to get a deal.

Look at some of the listing in that in the 1.2MM-1.5MM range and put offers of about 110k. That would teach the owners a lesson and will wake them up from their denial.

LOL - you forgot the earthquakes, hurricanes and terrorist attacks - maybe even they'll all happen in Cleveland

"you forgot the earthquakes, hurricanes and terrorist attacks"

Yes, sorry. I forgot that the new world trade center is not going to improve the neighborhood. It's just a new terrorist target. You have to be paid about a 20% premium to own in the FiDi.

So, offer 95k instead of 110k. And you would be a FOOL not to ask for a 30 day mortgage contingency.

Wonder if the Ohio markets are really in upswing, or if it's a fool's rally ....

but no - that cannot happen because real estate prices never go down

"So, offer 95k instead of 110k. And you would be a FOOL not to ask for a 30 day mortgage contingency."

Don't forget to ask the seller to pay the flood insurance premiums for the next 30 years.

Click the 6 month... we're still way ahead of Feb/March/April.

Also, given that apartment sales have slowed 40%, that means inventory as expressed in months, is WAY higher.

"We've already seen the inventory figures rising (except JuiceMan, who doesn't)"

steve, can you reference joepa's post above and let me know which way inventory is going? I'm having a tough time understanding that graph.

Who cares about Ohio???? Why are you wasting my time???

"Click the 6 month... we're still way ahead of Feb/March/April"

Everyone keeps point this out -- and urbandigs/streeteasy correct me if I'm wrong, but I could swear that in around May Streeteasy's/Urbandigs' catch mechanism merely changed, and their charts picked up previous inventory which was always out there but wasn't being reflected previously. I think that's why you see that precipitous jump in inventory in May. It's not that inventory actually went up but that the search function was changed to now catch some additional inventory. Thus, if you account for that glitch, I think that inventory has remained relatively unchanged since February.

Wow - I should really review my posts before clicking reply. I apologize for the grammar issues.

> Thus, if you account for that glitch, I think that inventory has remained relatively unchanged since
> February.

Assuming this is in fact true (with absolute number of for sale), add in that the pace of sales has decreased 40%, that would mean months worths of inventory is up 150%.

And thats even before phantom inventory being pulled off the market...

"that would mean months worths of inventory is up 150%" - you lost me on that.

up 150% from where? Assuming you account for that glitch, this chart shows that inventory is essentially up 0% since February and is currently on the decline. I don't get your 150% figure.

BGarcia you are so right about the downfall of the financial district and what major impact this will have. The Financial district will get crushed. All you have to do is read the following link and see for yourself.

http://beta.therealdeal.com/articles/financial-district-attracts-recent-grads-from-ues

I tend to agree with Spunky on this one... short term, likely HAMMERED down there, lots of inventory.

But, that might help with getting critical mass and some needed services down there, when all the inventory finally fills up.

> up 150% from where? Assuming you account for that glitch, this chart shows that inventory is
> essentially up 0% since February and is currently on the decline. I don't get your 150% figure.

Inventory is generally expressed in months worth to sell, not in number of apartments listed. So even if listings stay the same, a 50% decrease in sales means months' worth of inventory has doubled...

And, sorry, my math was off, a 40% decline in sales on the same number of listings would be a 67% increase in months' worth of inventory...

Look, I think that if you're a betting person, Manhattan residential real estate prices are certainly going down rather than going up in the next twelve month period.

What I object to here is trying to draw any correlation (whether bullish or bearish) between the residential real estate market in Manhattan, and that in Cleveland. It's comparing apples to bowling balls. Inferring how our market may or may not behave based on the Cleveland market is just plain stupid.

Period.

Eddie - how do you fuzzy math calculations account for all those buyers on the sidelines who havent purchased over the past few years but will likely need to buy soon (most people are not pro - renting market timers like Steve and believe that they need to own)?

So if inventory is up but sales are currently down you also need to factor in the build up of buyers on the sidelines that will need to buy sometime soon. I guess it would be something like "near term buyers"

> but will likely need to buy soon

Given that most people in Manhattan rent, I'm not sure about this "need to own" idea.

That being said, there are some folks on the sidelines, but history says that when markets decline, many folks jump to the sidelines. There might be people willing to jump into the market, but there are also folks who will leave the market as it declines. History shows that folks are usually on the wrong side of entering/leaving markets...

petrfitz, would you please stop speaking for us sideliners. I am one, and I don't feel that way at all. No one needs to buy. A person may want to buy, but renting takes care of the needs just fine. Owners, however have plenty of reasons why they may need to sell: drop in income, change in relationship status, growing family, change in employment requiring a move, health issues, death (estate sales), they stretched too far and can't handle an arm reset, etc.

Shit, that was me. I know, I really need to move over my saved data and make this the Insider account.

tonyb - you are on the sidelines because of 1 of 2 things - you either never had enough money for a down payment, or you are a market timer. or both.

petrfitz, pretty much anyone who could buy in NYC has already bought in NYC. My guess is that 90% of the "sideliners" are people with a dollar and a dream. If the market does come down far enough to meet these people's price they'll be too scared to buy anyway. If you're scared to buy into a rising market you're going to be scared to buy into a falling one as well. People who don't participate in a boom don't participate in a bust either.

If the market does come down you'll most likely see the activity is driven by homeowners swapping apartments, downsizing, changing locations, etc...

80sman - i think that this is a wonderful time to have a lot of cash. There are so many deals out there now and such little competition. I agree most sales in the next year will be trade ups, swaps etc. Just another case of the rich getting richer.

Perfitz and others: Just because someone can afford to buy something, doesn't mean they will. Especially when the something is such a massive purchase. As a simple example, many people I know in Manhattan can afford to own a car, but they don't. There are substitutes, such as public transport, cabs and renting cars. Those that do own cars make an educated choice, deciding that the costs and hassle are worth what they get out of the car.

Similarly, people choose to buy in NYC, comparing it to the other choices they have - i.e. rent or live outside of NYC. I know plenty of people that can afford to buy that choose to rent, or choose to live outside of NYC and commute. There are tons of reasons not to buy in NYC. You're right that market timing is one of them. But others include - wanting a house instead of an apartment, being unsure of your future geographic plans, being unsure of your future family plans, opportunity cost of investing in something else (say starting your business). For example, the main reason I am probably not buying right now is market timing, as you suggest. However, the main reason I didn't buy in 2003 (although I could afford to and considered it), is that I was single, figured I wouldn't be single forever, and didn't want to go through the hassle and transaction costs of buying a place I'd grow out of quickly. Transaction costs ($$ and otherwise) are a bitch, and I believe buying a place only makes sense if you plan to live there for a relatively long time frame - say 5-10 years.

Of course, if you expect the market to go up considerably, you might buy despite all those good reasons. But that's not *needing to buy*, that's speculation (admittedly very successful speculation if you bought in 2003, for instance).

newbuyer congrats on your decision to not buy in 2003. It probably cost you about $300K in equity. Equity which you now could have leveraged to trade up to a place that you can now never afford.

> newbuyer congrats on your decision to not buy in 2003. It probably cost you about $300K in equity.
> Equity which you now could have leveraged to trade up to a place that you can now never afford.

Where, in this market, you could lose not only your mythical $300k but yourr initial investment as well.
Thats the awesome thing about leverage!

Perfitz, congratulations on buying in 2007. If you weren't lying, it cost you a LOT more than $300k in equity.

Got to love how "you should have bought in 2003" is the argument for buying today. Only a money loser would fall for that one...

"If the market does come down you'll most likely see the activity is driven by homeowners swapping apartments, downsizing, changing locations, etc..."

So then who will replace the homeowners who leave Manhattan or die off? You need new buyers in order for there to be a stable market. If your solely relying on people to "swap" apartments, then the market will CRASH.

Fast Eddie Wilson, the fact that you could ask" 2002-2003 Where would that put us for New York City prices, says it all. You know nothing about real estate pricing for Manhattan if you are asking that.And to profess such knowledge of this market leads me to believe you actually know less than I thought and that was ZERO to begin with.

Hi, bread was 5c in 1951. Every time I go to the store I remember this, so I don't buy bread.

Right now I weigh 85 pounds.

I'm 6'2, male

Perfitz: First of all, if you'd read my post carefully, I am well aware that buying in 2003 would've made me a lot of money. Second, your point is idiotic (I wasn't going to resort to insults, but you invited it with your tone). Just because a bet works out very well doesn't make it any less risky or any less of a bet. Congratulations to you and everyone on this list for not putting all their money into Google stock 5 years ago - you'd all could've quintupled your money. So what?

Second, I didn't say I couldn't afford to buy right now. That was precisely my point. I can afford to buy and choose not to, primarily because I think the likelihood of the market dropping is much higher than the likelihood of it rising. That makes me a sideliner, and a patient one.

And splat, your analogy is equally silly. Eating is a necessity. Owning NYC real estate is not.

30-40% decline in NYC and will remain there for years. Guys home prices are still falling.

Can someone tell me how it's possible that people think the worst is over. The banks are still going to face tremendous losses, at least 3x more.

Here's another question, How can you possibly think that a recovery can occur when people can't get loans?

Most American's have $20-30K in credit card bills, how in the world do you think the same people are going to get 20-30% for a down-payment. And that's assuming they have great credit.

If 100 homes sell this month and 110 next month, is this a recovery? Without put it in perspective some would boast that it was a 10% increase. It's BS. This is not the bottom, it's the beginning.

Newbuyer99, is your name Steve in real life?

The majority of people who own Apts in Manhattan are on the verge of foreclosure and if they don't sell soon they will have their apt repossessed. Most people who own apts in Manhattan are living paycheck by paycheck. Most apts can not be rented because very few people are interested in renting in Manhattan. Most co-ops only required 5% down and never request additional financial information. Therefore most people who own co-ops are not financially sound. Having to put 30% down for a co-op is unheard of
Manhattan RE will crash it's a done deal

petrfitz, as I said above, tonyb is me (I need to make tenemental an Insider account and move over my saved data).

I've been through this in detail w/ my pal Spunky before, so I'll simply say that I've been seriously looking since I had some, but not much, money saved in 2005. I'm thankful I don't live in what I could have made a down payment on then. Fast-forward to now, and I have plenty for a down payment and a co-op friendly reserve. 80sMan, sorry, but that was a ridiculous generalization.

As for your accusation of "market-timer," (gasp), which is it? Are you the incredibly savvy investor who makes the brilliant moves, or the person who throws buckets of cash around indiscriminately? I doubt I'll time the market perfectly, but I've been following it closely enough to know that in my segment I'm better positioned now than I was in the first half of 07 (I started seeing a downward trend in the later part of that year). I'm not looking for an investment property, but a long-term home (and no, I don't think a long timeline justifies paying too much. Just because the price will come back doesn't mean you couldn't have saved an amortized bundle). Maybe I buy next year at a nice discount to 06/07 and prices go down even more in 2010. Oh well, I'll still be glad I didn't fall for the hype and buy at the top. I would buy now if I found something I expected to enjoy long-term that was priced where I thought it should be. There's just no pressure to accept less or pay more.

As newbuyer99 said (and I've said previously), "I think the likelihood of the market dropping is much higher than the likelihood of it rising". Congratulations to anyone who bought in 03 or before. It wasn't a remote possibility for me, but how does buying at an inflated price at a time when I'm watching my segment decline and seeing every indicator point down help? My rent is less than my mortgage interest - tax deduction + maintenance would be. I save money every month and become a stronger eventual buyer. How you dismiss all that is beyond me.

I agree tenemental you certainly will pick up a cheaper apt in 2008 than you would have if you bought the same apt in 2006 or 2005. Prices are crashing in Manhattan particularly those in prime areas. I'd wait because they already dropped at least 10%-20% from last years sales prices and before you know it they will be down at least another 30% in a few months. It's a done deal.

"The majority of people who own Apts in Manhattan are on the verge of foreclosure and if they don't sell soon they will have their apt repossessed. Most people who own apts in Manhattan are living paycheck by paycheck. Most apts can not be rented because very few people are interested in renting in Manhattan. Most co-ops only required 5% down and never request additional financial information. Therefore most people who own co-ops are not financially sound. Having to put 30% down for a co-op is unheard of Manhattan RE will crash it's a done deal"

If only sarcasm was enough to turn back the market crash...

It's not sarcasm. If you read all the newspaper headlines they all predict Manhattan RE will crash. How could you argue the majority of the media and what 95% of the population is telling us.
Eddie I agree with you. You can't turn back the clock on the Manhattan RE crash. How could you it already happened.

Well, something like 95% of the population does live in areas that have already gone down 15% at least, some 25%. So you might have something there.

As for Manhattan, no, we don't have anywhere near full capitulation yet. We still have shills and brokers arguing that NYC is immune from the larger issues, and a bunch of Russians will buy all our apartments. We have a good year or so before the denial ends and we actually see the worst of the crash...

Spunky, pal, where in my post did you see me say that I could buy something this year for less than I could have in 2005 (though I did recently see the first apt I ever considered, an HDFC dump, being offered at the exact same 2005 price, so maybe...)? And "next year" means 2009, not 2008. Not that I'm not in better shape this year than last. See the "market movement with comps" thread.

There are many adult literacy courses available free of charge in NYC. If you can't find one, let me know. I'm always happy to help a friend.

Fast Eddie "We have a good year or so before the denial ends and we actually see the worst of the crash".Why Eddie real estate genius can't it take two years or even three or four years for the denial to end. You talk out of your ass and have nothing but air to back up your your worst of the crash scenario. How about this genius quote "in 2-20 years real estate in Manhattan will appreciate in value". Thats my quote.

EddieW why don't you just focus on your analysis of neighborhoods in Manhattan. I have to give you credit in that regard. You appear to have a better understanding and insight on the benefits, features , disadvantages , nuances etc of various Manhattan Neighborhoods than most on this board. I do find your opinions in this area very interesting.
However, your constant rooting and promoting for a crash is getting tiresome.

What none of these "I am waiting for a decline to buy" posters can never answer is:

How much of a decline in sales price do you need to realize to offset the money you spend in rent (about $50K/year) while waiting to time the market, the higher interest rates you will have to pay (2% over 30 years), the missed tax incentives etc?

Can any of you market timers answer this question?

Pete, happy to answer your question. I just ran some numbers using your $50,000 annual rent, a $1 million purchase price (20x annual rent - seems about right), 20% down, 7.5% fixed rate over 30 years, tax shield at 40% rate and a discount rate of 4.5%. My math shows that a 4.7% decline in prices would make it worth your while to wait one year to buy. This takes into account the present value of interest paid over the life of the loan, offset by the appropriate tax shield.

A 4.7% decline over the next year seems pretty reasonable to me.

"How much of a decline in sales price do you need to realize to offset the money you spend in rent (about $50K/year)"
First off average rents are not $50k/year - not even close. Even market rent rates are for marginal demand. Most pay rates below current "market." Secondly, you need to net that "$50k" against the after-taxs cash outlay of mortgage interest, condo/coop fees, and taxes. As many on this board have pointed out, at current prices, the cash outlay is probably greater than comparable rent. And lets not forget closing costs both to buy and to sell, which are exorbitant. Put all those together, I would need a GAIN (not a decline) to break-even from renting.

There seems to be so much arguing back and forth which really just serves to increase everyone's blood pressure. Sometimes, I can imagine people shouting into the computer while they type their responses. While I have to admit, it can be entertaining at times (if it wasn't, would I continue reading these boards??) I sometimes just wonder why people feel the need to convince the other side why they are right. Isn't it possible to look at the same set of facts and circumstances and then draw two different conclusions? I thought that was how a market works anytime someone sells and someone buys. Here's a crazy idea, how about people just state their case, present any new findings and then let it be?

If you have to label me, I'm in the bear camp. It seems obvious to me that things will fall. Could I be wrong? Sure. But I'm willing to bet a large portion of my life savings that I'm not. Only time will tell. By the way, if I'm right, instead of going around letting people know I was right, I suspect I'll be too busy coordinating with the movers to unpack all my stuff in my new digs.

Special K - I think the problem here is that - rather than taking the term "bear" or "bull" to express a current viewpoint that one holds on the market - many posters here take that term to define who they are and what they represent. Steve (not to single him out but he does seem to be the poster boy for this argument) seems to identify being a bear as one of his intrinsic, inalienable and fundamental beliefs -- as much as someone would identify themselves as being Jewish or Muslim or American. Somewhere and somehow, too many people on here have taken up the "bear" and "bull" positions as if they're the North and the South - fighting for a way of life.

Is this The War of Bearish Aggression?

petrfitz, nice job with your assumptions again. My rent is less than half of the figure you quote. With even a 10% drop in sales prices I'm looking at a nice 6-figures in amortized savings over the years. I'm likely looking at a conforming loan (a medium-sized, non-lux 1 br co-op w/ a little extra down payment if necessary), and those interest rates still haven't changed that much. Not to mention the possibility of a future refi, and higher interest rates will just put additional downward pressure on prices. As for tax incentives, you must have missed what I said above. "My rent is less than my mortgage interest - tax deduction + maintenance would be." And I forgot opportunity cost.

I don't consider myself a "market timer." Those are your words. Following a big, clear trend isn't the crap shoot you make it out to be.

east_cider & Special_K, well said.

> Fast Eddie "We have a good year or so before the denial ends and we actually see the worst of the
> crash".Why Eddie real estate genius can't it take two years or even three or four years for the
> denial to end.

It absolutely can... it just never takes less than a year.

Fast Eddie Wilson: I say the denial ends in 7.5 years and in 5.2 years from today, prices in Manhattan are 7.5% higher than they are now, and in 2.5 years the denial subsides for 6 months and then shoots back up to its peak for years 4-6.In years 5 and 6 people are in such denial they attend RA meetings (Real Estate Anonymous) to deal with the guilt and shame of their denial.

If only sarcasm could stop the crash...

Well, at least its clear the bulls are running out of rationalizations...

Spunky, it seems that we are in agreement that the FiDi is going down the tubes and going down the tubes fast. I figure that there are some deals to be had in the imminent panic though.

Further up the thread, I proved that there are places around here which are 90% overpriced. So i looked at this unit...

http://www.streeteasy.com/nyc/sale/326694-88-greenwich-st-wall-street-manhattan

That owner has to be living paycheck to paycheck. He can't sleep and can't figure out a way to get his money back. I can see the whites in his eyes from here, and smell the panic from 3 miles away. He must have bought it within the last 12 months on a 1-year ARM, and is facing 15% interest on his mortgage when it resets. OUCH!! Also, I am sure he has had no bids whatsoever this year. How could he have had bids, if the place hasn't sold???

I e-mailed the broker and offered $129,995. That's a very generous offer, considering the enviromnet we are in, falling rents, a slumping real etstate market, all the inventory of unsold homes, recession, tens of thousands of people leaving NYC for good, imminent tax hikes, RE taxes going up, interest rates on mortgages going up, no money to be had for a mortgage, a neighborhood that sucks and is full of terrorist targets, etc, etc. I explained my reasoning to the broker too.

Problem is, I haven't heard back from the broker but I really want to start the negotiation process. How long should I wait for him to present the offer to the owner? I don't want to appear too eager and lose my bargaining power. Also, I thought about e-mailing him again and saying that my offer goes down 10% a week from now on. Does that seem like a good idea?

BGaria, that's funny stuff. :)

This sounds like my brother-in-law. The cheapest rich dude I have ever known & his offers are insulting as hell. I thought I was bad but nothing like this. The chap loves to steal Manhattan real estate, it's sort of a hobby. However, he is patient as hell and waits for the buying environment to get just about right.

BGaria, you insist on leaving out a discount for hurricane and earthquake risks. I can't help you anymore because you're determined to waste money overpaying. And don't forget how close that area is to Newark, New Jersey. As the market goes down, urban blight will spread, and 88 Greenwich will be a bad area.

has anyone figured out that EddieWilson and Stevejhx are the identical person?

Same positions
Same style of posting a negative article as worthy of its own discussion topic
Same argument style
Same style of rebuttal, interspersing the original quote and his response
Same claim to have worked at an investment bank, but seemingly not in the investment banking group itself
Same language style and pedantry related to language
Same self-corrections of their own posting
Same imperfect ability to do math
Same level of anger
Same reference to "they" and "them" as out to get people who don't think real estate is going up

what else is the same ... anyone care to point it out?