Update: Urbandigs-Market continues to Fall

I will start off with an actual deal from last week in Brooklyn:

The asking price when we bid was $1.135mm, they lowered it after accepting our bid of $999k. So we achieved a discount of 12% off the asking price not factoring in the commission rebate from us($14,985k). Original list was $1.295, there was also a recent comp that closed at $1.295 this year, same line 3 floors up.

If you are a buyer, be patient there is an opportunity to negotiate out there and it should continue to get more favorable for you.

What are we experiencing/seeing? I am getting quite a few emails with price reductions of properties, feels like everyday. The other day I received an email for a nice looking 2/2 in Brooklyn heights announcing they would cover the mansions tax, this is a new Listing. I believe the asking price was $1.350mm?

Some historical mortgage data
https://fred.stlouisfed.org/series/MORTGAGE30US

To paraphrase Morrissey "Some apartments are better than others". ( ;

Keith Burkhardt
TBG

FYI the listing I reference is a two bedroom / two bath, doorman building with the usual suspects for amenities.

Have you been hanging out with 30?

Hey I've always got that PMA! (positive mental attitude). But the market is what it is... Up and down up and down that's all anybody knows.

Guess I got logged out, logged in with Keithb. When West 81st Street started working with me, I dropped the Burkhardt group handle...

Unless an incredible spike in volume occurs this will be the slowest October in terms of contracts signed in over a decade.
https://www.urbandigs.com/forum/index.php?threads/still-doing-1400-deals-a-month-but-for-how-long.614/page-6

"Some historical mortgage data
https://fred.stlouisfed.org/series/MORTGAGE30US"

Mortgage rates highest in 20 years? I wonder what could happen? Good thing there won't be a recession.

>>When West 81st Street started working with me, I dropped the Burkhardt group handle...<<

Where his West 81 these days? Haven't heard from him in a while.

I think he's still on the upper west side, we spoke on the phone but that was probably 2 years ago!

Interesting housing notes by Jonathan Miller:

https://millersamuel.com/note/november-4-2022/?goal=0_69c077008e-e95c3ff85f-120795059

Interesting point that the market has fallen exponentially year over year. But when compared to the last quarter of 2019 the decline is not quite as shocking.

We're advising clients is to bid aggressively as we try to separate the wheat from the chaff to identify sellers that either really want to sell or better yet have to sell. Every apartment has a different story to tell, so you have to make your opportunity and be patient and disciplined.

I think at the very least we're finally at a point where sellers are in the 'acceptance' stage, and I feel like we only recently got there. Now let's see where this market goes over the next three to six months.

Keith Burkhardt
TBG

https://www.urbandigs.com/forum/index.php?threads/still-doing-1400-deals-a-month-but-for-how-long.614/

What can really catch you off guard is the fact that even in this market the right apartment at the right price, location can see quite a bit of activity. This is from a couple of days ago on an apartment in Park slope. Of course this is far from the current norm, however the last couple of weeks personally we have seen things pick up. We currently have three offers out, two in Brooklyn on brownstones and one on a three-bedroom on the upper west side.

Not sure if it's just coincidental or perhaps the slight downturn in rates?

"Keith,

Thank you so much for presenting such a comprehensive package on behalf of your buyer, as always.

Please extend our sincerest thanks to your client for their bid. Their offer came in 8th place. The seller has accepted a significantly higher/non-contingent offer. We will be in touch right away should the deal not pan out.

We wish you and them the best of luck and will keep you in the loop on any listings we come across that might suit them.

Hoping to do another deal together soon...

All best,

XXXXX"

10y off 90bps from the recent peak and mortgage rates off 100bps plus off. Will it hold despite QT? I think even Nada can't tell. Now 30y Jumbo with relationship discounts etc is 5-5.25%. Not that far above 4.50-4.75 in May/June this year when the market was still booming. That gotta help the transaction volume.

Rates may be less of a concern than general economic outlook amongst the PMC: Big Finance is clearly setting expectations for a winter of discontent, and Tech isn't helping with their slowdown. At the same time, there may be some Bahamas-based tainted love nests available next year at bargain prices.

I don't know if all of big finance is extremely pessimistic. Morgan Stanley doesn't seem to be nor does Goldman Sachs. I know others are certainly much more pessimistic, guess we'll find out who's right.

I've stopped being overly concerned about short to midterm gyrations. I'm not a trader, I'm trying to think in blocks of 7 to 10 years.

In my opinion this is probably a good time to be ramping up your search for a home if you're someone that prefers to buy versus rent. I don't know where the bottom will be, but I know prices are falling and competition is thin and although rates are up, they're actually quite reasonable. We currently have an accepted offer on a 3-bedroom 3-bathroom condo on the upper west side. Trading almost $700,000 below where an identical unit traded in 2017. Keep an eye on our website.

https://www.goldmansachs.com/insights/pages/spiking-tech-layoffs-dont-signal-impending-recession.html

Keith Burkhardt
TBG

https://nypost.com/2022/12/09/goldman-sachs-ceo-david-solomon-to-half-partners-bonus-pool/

A tough time industry to work in for sure:

"It’s not just underperforming divisions that are facing smaller bonuses. At Goldman Sachs, traders are facing cuts to their bonus pools even though the global markets division brought in $25 billion in 2022 — a 15% increase in revenue from 2021, Bloomberg reported."

Maybe not quite convincing enough to bet the farm on. However, this is definitely a bit more negative. This will continue to put pressure on the real estate market, and that should put buyers in a stronger position as we move through this.

"We believe that the Fed’s rate hikes and shrinking bond portfolio have been stringent enough to cause an economic contraction within 2023," the economists said in the report. "And if the Fed does not pause rate hikes until it sees the contraction, a deeper recession may ensue."

Fox Business: Brace for a recession in 2023 as job losses top 2 million, Citi says.
https://www.foxbusiness.com/economy/brace-recession-2023-job-losses-top-two-million-citi-says

I was thinking mostly of the NYC markets, of which the finance industry has been a strong driver. Not in terms of general economic direction, but in terms of direct bonus cash for those downpayments, summer homes, etc. 'Nada points out the article about lower bonuses for the dealmakers and traders, but the back office areas will be affected as well, both through smaller bonuses and layoffs. Hiring freezes are kicking in, while the industry figures out what is the size for a company in the next 1-3 years.

Aaron2,
In quite a number of years in the NYC area market the "selling season" was different than the rest of the country where it largely revolves around the school calendar. Instead (especially in Manhattan) there was a big spike in sales starting when bonuses were announced and tapered off as the pool of "bonus buyers" decreased as they bought places and were no longer on the market looking.

Some more thoughts on bonuses and NYC Real Estate:
https://www.urbandigs.com/forum/index.php?threads/will-bonuses-lead-to-january-feeding-frenzy.240/
https://www.urbandigs.com/forum/index.php?threads/bonus-season-and-the-nyc-market.531/

Good market for buyers , really challenging for sellers

Nada you often reference vanguard, here's what they have to say about a recession coming. Are you in agreement?

https://www.investors.com/etfs-and-funds/sectors/sp500-vanguard-predicts-global-recession-next-year-why-to-believe/

Yep, recession seems more likely than not.

Bloomberg recession indicator @ 60% yesterday, down a bit from mid/high 60s a week ago

It's a good that even though a recession is imminent that it's still a great time to buy Real Estate!

Conforming
Loan Type MI Type Interest Rate Discount Points APR
Conforming 30-year Fixed 6.000% 0.750 6.125%

Jumbo
Loan Type MI Type Interest Rate Discount Points APR
Jumbo 30-year Fixed 5.250% 0.875 5.338%
Jumbo 5-year/6-month ARM 4.875% 1.000 6.044%
Jumbo 7-year/6-month ARM 5.000% 0.750 5.882%
Jumbo 10-year/6-month ARM 5.125% 0.875 5.742%
Rates shown are for purchase loans only. This information is accurate as of 12/18/2022 8:43:55 AM (CT) and is subject to change without notice.

Some surprisingly lowish rates, All things considered. This is from Wells:

Conforming
Loan Type MI Type Interest Rate Discount Points APR
Conforming 30-year Fixed 6.000% 1.000 6.149%
Conforming 15-year Fixed 5.500% 0.875 5.726%
Conforming 5-year/6-month ARM 5.625% 1.000 6.511%

Jumbo
Loan Type MI Type Interest Rate Discount Points APR
Jumbo 30-year Fixed 5.375% 0.625 5.441%
Jumbo 15-year Fixed 5.000% 1.000 5.169%
Jumbo 5-year/6-month ARM 5.000% 0.750 6.070%
Jumbo 7-year/6-month ARM 5.000% 0.875 5.894%
Jumbo 10-year/6-month ARM 5.125% 1.000 5.753%
Rates shown are for purchase loans only. This information is accurate as of 12/21/2022 9:17:59 AM (CT) and is subject to change without notice.

So just double the lows?

This pretty much mirrored our experience this year. Fairly normal first half of the year and then business dropped off by about 50%.

https://www.olshan.com/marketreport.php?id=668

Happy Holidays!

Keith Burkhardt
The Burkhardt Group

Just for fun, and since making predictions is free. And as I've stated many times here, in my opinion nobody knows what the market's going to do....

I think we avoid a recession and the s&p 500 will be up 9% at the end of 2023.

Nada? I look forward to another round of free drinks at your house ; )

Hope everybody had wonderful holidays and I want to wish everyone a joyful and prosperous New Year! I'll check in on these responses when I get back from vacation!

The Wall Street Journal: Wall Street and Fed Flopped in Trying to Predict 2022.
https://www.wsj.com/articles/wall-street-and-fed-flopped-in-trying-to-predict-2022-11672050603

Keith Burkhardt
TBG

According to Optimal Blue 30 year Jumbos are skyrocketing.
https://www2.optimalblue.com/OBMMI/widget.php

https://amp.mortgagenewsdaily.com/article/63ab71697f5ddd493203e778

Keith…

Recession: yes, probably.

S&P: I’ll reference Vanguard’s 10-year expectation at 5% +/- 18%.

Cash: 5% +/- 1%.