Manhattan Won't Avoid Property Crunch - Wall Street Journal - Heard on the Street - 9/22/08

It certainly will not escape. Look at that graph - there is nothing fundamental to justify that insane runup in prices. They will be down to an average of about 300k by the time this is all over - a drop of about 70%. I can't imagine how dumb the money is that is buying right now (if anyone actually is....).

If you're buying now, its clear you don't have a clue. If you are in a contract you signed for new construction I would be looking for any way out possible. In 6 months you won't be able to get a mortgage because the appraisal will not warrant the agreed price. Expect to come up with at least 30%. Good luck.

Are people actually agreeing with ma after all these months?

So if you haven't signed a contract but have one on your desk to buy a 2 bedroom co-op what would you do? Would you just walk away as the market is too unstable or would you re-start the negotiation? And if you would, at what discount?

stevejhx I'm still trying to figure out your recommendation of going long Latin America funds for the past two months. Then your recommendation of selling your funds after a 1000 pt three day decline last week on Wednesday. Then on Wednesday after the close your recommending short selling the market and your recommendation of covering your short on Friday after the market reversed direction and went up about 900 pts. Netting you a six figure loss. For the past two years you are forecasting a 50% decline for real estate in Chelsea and the surrounding neighborhoods. I guess a broken clock gets it right at least a couple times a day.
Dco and anon two of the same praying there hardest for property values to crash in Manhattan so they can qualify for a studio.

dca1125, you can always try to renegotiate, what does it hurt? That said, without knowing more details about the co-op, it is difficult to give advice. It may be priced reasonably, could fit your particular situation, etc.

"I'm still trying to figure out your recommendation of going long Latin America funds for the past two months."

I'm still long them.

"Then your recommendation of selling your funds after a 1000 pt three day decline last week on Wednesday."

What I said was pre-bailout.

"Then on Wednesday after the close your recommending short selling the market and your recommendation of covering your short on Friday after the market reversed direction and went up about 900 pts."

What I said was pre-bailout.

"Netting you a six figure loss."

Yes I had a loss - during the worst market conditions since the Great Depression. I couldn't avoid the loss because it was in mutual funds, which settle at the end of the day. Had they been stocks, I would not have had a loss.

If you need to know, the loss is of just about what I earned last year, so I'm down slightly but not much. If Lehman had not been allowed to go bankrupt - which was so, so stupid because now the government, to save a penny, is rescuing the entire world at the cost of trillions - then I'd be ahead. Neither I nor anyone else could have predicted last week, where people were buying treasuries with negative interest.

"For the past two years you are forecasting a 50% decline for real estate in Chelsea and the surrounding neighborhoods."

Not Chelsea - all of Manhattan. And I stand by it. You are attempting to engage in the fallacy of extrapolation - because I was caught in the worst market conditions ever in modern times you seek to discredit my prediction for Manhattan real estate. Unfortunately it doesn't work like that.

And if you need to know, I've redoubled my position exactly where I was - the market was way oversold, I took my losses and move on. I can't reinvest in exactly the same instruments since I then couldn't use the loss to offset my future gains, but reinvest them in the same markets I have.

However, by NOT buying in Manhattan during the last 4-year feeding frenzy, I will save much more in losses than I incurred last week. Liquid assets are easily disposed of - real estate is not.

"Dco and anon two of the same praying there hardest for property values to crash in Manhattan so they can qualify for a studio."

Another useful post by houser.

And I stand by it.

houser- "Dco and anon two of the same praying there hardest for property values to crash in Manhattan so they can qualify for a studio."

HAHAHA. You could have at least said a 1 Bedroom. I mean really a studio, that's not right. HAHA. Hey by the way where have you been, I missed you.

I've heard the noise from Stevejhx for months and nothing has moved. I hope you're right but i don't think so.

julia- I think it's in your best interest to buy now. All those units won't last.

I'm renting...and i'm just trying to bring some reality to the site.

> I've heard the noise from Stevejhx for months and nothing has moved.

You must not read much. TONS have moved, and the average Manhattan apartment has already declined 6-7%. That means a number in double digits...

agree with julia -- nothing I am looking at has moved

I almost signed contract in march '08 then got cold feet, prices did not make sense, thanks to stevehjx for his posts. Have been tracking my favorite properties. My favorite apartment (new construction) has dropped 12.5% and many others i am looking at have moved 5-7% down, have not sold, or have come off the market. Glad I waited, will purchase when it makes sense for my situation.

"because I was caught in the worst market conditions ever in modern times you seek to discredit my prediction for Manhattan real estate. Unfortunately it doesn't work like that."

Oh, it works like that, Steve.

So steve has been wrong about NYC real estate for the last 8 years, thinks he can day trade and took big losses with dumb trades last week, and he still thinks everyone should listen to his advice when making major financial decisions?

Ah,...

THE CLASH OF THE EGOS

resumes. Funny, how different male postings are from female ones. Something to do with testosterone swings, I guess. We can, indeed, be strange.

I have to say that I am starting to see real movement in my range. I'm going to be sitting on the sidelines for at least another nine months (maybe more) - but I'm seeing more 2br, 2ba apts. coming at $1.25 and lower. Also the inventory is slowly starting to tick up.

ONE LAST TIME TO ASK THIS............and thanks JuiceMan for your answer.

We're talking about a 2 bedroom apartment that's nice and that has recently been re-done to our taste. My wife tells me that we "honestly" can move in without doing a thing.

We live in Palm Beach and spend the summers here in NY. Have lived in a rental for the last few summers and that's fine with me. My wife would like to make our life easier by buying an apartment.

This apartment is in the right location for us and it was priced at the price the buyer paid for it a year ago + what he put into it + his brokerage cost of selling. He and his wife just had a 2nd child (unexpected apparently) and they want to sell this and buy a larger apartment.

I knew that we were paying "over the market" but were we to buy something else in the same building we would have had to put that much into it so this made sense at the time.

BUT NOW IT'S THREE WEEKS LATER AND THE WORLD HAS CHANGED.

Broker says to offer 10% less. Wife says to offer 20% less. I have no idea what to do. It would be easy to walk away. It would also be easy to lower the price in the contract and give our attorney a deposit check to hold for a week with a TAKE IT OR LEAVE IT approach.

HELP.

WISDOM?????

dca1125- The answer to your question, is already in your hesitation. Good luck.

dca1125,

Also you must factor in the possibility of crime returning to certain parts of the city once the economy turns. Its foolish and naieve to think some amount of crime will not return. Hopefully the next Mayor is not a bleeding heart liberal who is soft on crime.

dca1125, what neighborhood and what is the price per square foot? Doorman? Light? Building quality? How long do you plan to own it? Does the co-op allow pied-a-terre's?

This has nothing to do with real estate, but Juiceman's comment could not go unanswered. All the evidence (of which he is clearly ignorant) suggests that the drop in crime in NYC and other urban centers had very little to do with who was in the mayor's office or, for that matter, particular policing approaches. Giuliani and Bloomberg had very good economies. If Juiceman thinks that increase was due to increases in cops and other City Hall policies, he might be surprised to learn that those policies-- especially the increase in street cops-- were put in place by that "bleeding heart liberal" David Dinkins. And now, back to RE . . .

dca1125

You obviously sound quite financially secure. If you're not real concerned about the possibility of having a multi-year paper loss - and like the lifestyle advantages of ownership - you probably have a good shot at getting the place with a 10% haircut. I'm skeptical the current owner would go for a 20% cut.

If the financial outlook is more important, though, I'd walk. You life in Florida. Imagine how you'd react to a Florida seller saying:

"...it was priced at the price the buyer paid for it a year ago + what he put into it + his brokerage cost of selling."

Manhattan is just two years behind Florida when it comes to real estate prices. It has just begun to crack.

IMHO.

cherrywood - "might be surprised to learn that those policies-- especially the increase in street cops-- were put in place by that "bleeding heart liberal" David Dinkins" - agreed

to say nothing of the dramatic improvements in infrastructure, i.e.,
bombed-out neighborhoods restored to living communities - Dinkins.

I always love when people credit Giuliani for the resurgence of
Times Square. Let's see, that process started back when ..............

How many terms did David Dinkins serve?

Oh that's right, it was just one...usually when you are a good mayor (See Giuliani and Bloomberg) you have no problem winning a 2nd term as its based on facts, results and what you have done for the city...

Guess the majority of NYC didn't agree with you...

dca1125
seems like you really like the place you found, otherwise you wouldn't hesitate so much. let me give you my two cents: walk away or ask for a 15-20% cut. i agree with topper that the current owner will not likely go for anything over 10%, but 10% is not enough to compensate you for the financial risk you are taking now. so that probably means you should just walk away. you are looking for a 2 bd apartment that is not even your primary residence. inherently, that means a large part of that is for investment purposes. for all intents and purposes, we are almost at the peak in terms of pricing in manhattan. what's your rush? and more importantly, how would you feel if you could get the same place (or very similar) in a year at 15-20% less than you paid for it now? how about 2 years from now, when you could have gotten it for 20-30% less? have discipline and walk away, or renegotiate to a level that you can genuinely be happy that you didn't go all-in at the top.

"to say nothing of the dramatic improvements in infrastructure, i.e.,
bombed-out neighborhoods restored to living communities - Dinkins.
I always love when people credit Giuliani for the resurgence of
Times Square. Let's see, that process started back when .............."

This is CLEARLY spoken by someone who didn't live here. The city got worse each year Dinkins was in office. Murders peaked. Folks running away in droves.

Times Square improved by Dinkins? We kidding with that?

He left office in 93. At that point, the city was absolutely still in decline.

I am about as far left politically as you can get, but NYC is absolutely correct. Dinkins was a complete trainwreck for NYC. Rudy, while not perfect, did a great job as Mayor. Bloomberg, in my opinion, has also been a terrific mayor for NYC. Remember, too, that Bloomberg didn't have a great economy when he came into office. There were HUGE budget deficits from 9-11 and the city recovered well. Bloomberg deserves a lot of credit for that.

Thanks for the constructive comments I've just read. A board like this is good for getting a sense of things. Clearly, your comments will go into the cumulative thinking.

Ironically, Bloomberg had some of the lowest approval ratings of all time (lower than dinkins) when he first got into office. It was just post 9/11, and much of the city was calling him the :out of touch billionaire" because of tought decisions he had to make early (like raising property taxes).

Few people understood that he was almost perfectly on target... outside of his not totally standing up against the unions (which is political suicide in this town), the guy has made few missteps.

That he set aside emergency funds for a slowdown while everyone else in town saying it would be sunny forever, definitely makes him one in a billion as far as politicians go. See the absolute mess of scum and criminals that is NYS politics for a clear counterexample.

Ironically, Bloomberg had some of the lowest approval ratings of all time (lower than dinkins) when he first got into office. It was just post 9/11, and much of the city was calling him the :out of touch billionaire" because of tought decisions he had to make early (like raising property taxes).

Few people understood that he was almost perfectly on target... outside of his not totally standing up against the unions (which is political suicide in this town), the guy has made few missteps.

That he set aside emergency funds for a slowdown while everyone else in town saying it would be sunny forever, definitely makes him one in a billion as far as politicians go. See the absolute mess of scum and criminals that is NYS politics for a clear counterexample.

Ironically, Bloomberg had some of the lowest approval ratings of all time (lower than dinkins) when he first got into office. It was just post 9/11, and much of the city was calling him the :out of touch billionaire" because of tought decisions he had to make early (like raising property taxes).

Few people understood that he was almost perfectly on target... outside of his not totally standing up against the unions (which is political suicide in this town), the guy has made few missteps.

That he set aside emergency funds for a slowdown while everyone else in town saying it would be sunny forever, definitely makes him one in a billion as far as politicians go. See the absolute mess of scum and criminals that is NYS politics for a clear counterexample.

Ironically, Bloomberg had some of the lowest approval ratings of all time (lower than dinkins) when he first got into office. It was just post 9/11, and much of the city was calling him the :out of touch billionaire" because of tought decisions he had to make early (like raising property taxes).

Few people understood that he was almost perfectly on target... outside of his not totally standing up against the unions (which is political suicide in this town), the guy has made few missteps.

That he set aside emergency funds for a slowdown while everyone else in town saying it would be sunny forever, definitely makes him one in a billion as far as politicians go. See the absolute mess of scum and criminals that is NYS politics for a clear counterexample.

Ironically, Bloomberg had some of the lowest approval ratings of all time (lower than dinkins) when he first got into office. It was just post 9/11, and much of the city was calling him the :out of touch billionaire" because of tought decisions he had to make early (like raising property taxes).

Few people understood that he was almost perfectly on target... outside of his not totally standing up against the unions (which is political suicide in this town), the guy has made few missteps.

That he set aside emergency funds for a slowdown while everyone else in town saying it would be sunny forever, definitely makes him one in a billion as far as politicians go. See the absolute mess of scum and criminals that is NYS politics for a clear counterexample.

Ironically, Bloomberg had some of the lowest approval ratings of all time (lower than dinkins) when he first got into office. It was just post 9/11, and much of the city was calling him the :out of touch billionaire" because of tought decisions he had to make early (like raising property taxes).

Few people understood that he was almost perfectly on target... outside of his not totally standing up against the unions (which is political suicide in this town), the guy has made few missteps.

That he set aside emergency funds for a slowdown while everyone else in town saying it would be sunny forever, definitely makes him one in a billion as far as politicians go. See the absolute mess of scum and criminals that is NYS politics for a clear counterexample.

sorry for the quadruple, I only hit the button once but then it froze up...

sorry for the quadruple... i only hit the button once, but it hung up on me...

nyc10022, absolutely agree with the Bloomberg assessment. One of the few politicians I've seen who's relatively unafraid to make "tough" decisions/announcements when he genuinely believes they're ultimately for the best. I will say it's tough to give a total thumbs-up or thumbs-down to a mayor, as it's never that clear cut. I wasn't here during Dinkins' run, but I have to imagine the effects of some of his work didn't truly manifest themselves until he was well out of office. The same is true for Giuliani, Bloomberg, and anyone else really.

Also, I realize I may be minorly fixated on this, but nyc10022, you absolutely have to be EddieWilson reincarnate here. He loved the phrase "We kidding with that?" as well. Convenient way around the self-imposed exile til February, no?

Barclays May Eliminate 5,000 Lehman Positions in Three Months

By Yalman Onaran

Sept. 23 (Bloomberg) -- Barclays Plc, the U.K. bank that bought parts of Lehman Brothers Holdings Inc.'s U.S. businesses, may cut as many as 5,000 jobs at the bankrupt company, Wall Street recruiters said.

The estimate, based on the $2.5 billion Barclays set aside for severance and retention costs, would mean half the Lehman employees transferred to the London-based company may be let go. Barclays, which paid $1.7 billion for the business, said it will decide in three months who will be offered permanent positions.

``They've paid for the right to choose through the ranks who they really want,'' said Jo Bennett, a partner at executive search firm Battalia Winston International in New York. ``They'll look at overlaps, decide whether they want to stay in all the businesses Lehman was in.''

Lehman, with more than 20,000 employees worldwide, filed for bankruptcy protection last week after it failed to find a buyer for the entire firm. Banks and brokerages have reduced their ranks by 120,000 since July 2007, when the subprime market crashed and sparked more than $522 billion in writedowns and credit losses.

Barclays won approval from U.S. bankruptcy court last weekend for its purchase of Lehman's U.S. trading and investment- banking business. Barclays Capital, the securities arm, already had some 5,000 employees in the Americas region before the acquisition.

``We're evaluating where we do have overlap between Lehman and Barcap employees,'' said Rich Ricci, chief operating officer of Barclays's investment-banking division, who will be running the merged U.S. businesses. ``We'll try to identify the best one for the seat.''

Job Estimates

The $2.5 billion Barclays set aside could cover costs associated with cutting as many as 5,000 jobs or as few as 2,500, depending on the pay level of the people involved, according to estimates by Battalia Winston's Bennett and Jeanne Branthover, a managing director at Boyden Global Executive Search Ltd. in New York.

JPMorgan Chase & Co. decided to keep 45 percent of Bear Stearns Cos.' 14,000 employees after it bought the investment bank in March. JPMorgan also fired 4,000 of its own employees during the merger.

Nomura Holdings Inc., Japan's biggest investment bank, agreed this week to buy Lehman's Asian unit and two of the firm's European divisions. Nomura said it would keep about 5,500 Lehman employees in those regions. Lehman is also in discussions to sell its investment-management unit to private-equity bidders including Bain Capital LLC and Hellman & Friedman LLC.

Fixed-Income `Overlap'

Barclays and Lehman have similar fixed-income divisions, creating redundancies. Lehman's cash equities division would be a new business for Barclays in the U.S. Lehman ranks No. 4 in U.S. equity underwriting this year, according to data compiled by Bloomberg.

Lehman's U.S. units were attractive for Barclays because ``the areas of business overlap are limited, particularly in equities and M&A,'' Ricci, 45, said.

Eight of Lehman's top employees were guaranteed two-year contracts ranging between $10 million and $25 million a year, the Times of London and the New York Post reported Sept. 21.

While Barclays has said the retention of eight ``critical'' Lehman employees was a prerequisite to the deal's closing this week, neither firm has identified who they are.

``What we're paying people that we're retaining is in line with the market and the current market environment,'' Ricci said. ``There's nothing silly in those deals. We're a very disciplined shop. The speculation has been exaggerated.''

While Lehman's investment-banking and advisory businesses were continuing to function this week, the trading units couldn't open for business because the risk management and trading systems of the two firms couldn't be integrated in time, Barclays said in a statement yesterday. Those divisions will resume functioning ``shortly,'' the U.K. bank said, without offering a time frame.

``We are bringing businesses back on stream in a sequenced way,'' Ricci said.

To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net.

bjw - there was nothing that Dinkins did that was good, unless you count losing to Giuliani. I also agree with the solid assessment of Bloomberg and with you on the point that no one will be 100% for anyone. Mayor Mike will be missed and I hope we will get someone close to him.

"nyc10022, absolutely agree with the Bloomberg assessment. One of the few politicians I've seen who's relatively unafraid to make "tough" decisions/announcements when he genuinely believes they're ultimately for the best."

Which has to come at least partially from the fact that he didn't need campaign contributions. The rest of this city is SO far in the pockets of the unions and other folks who don't have our best interest in mind. I think NYC is going to go through a few years of pain if we get a putz like Weiner in.... who not only doesn't get NYC, but clearly owes a lot of cash to the unions...

"I wasn't here during Dinkins' run, but I have to imagine the effects of some of his work didn't truly manifest themselves until he was well out of office."

Possible, but that could also be negative effects. He was bad for business, bad for crime, etc. He fiddled while riots went on in the streets. Crime was really the biggest issue in NYC then, as it kept away $$ and business as well - and he was about as bad as you could get on the issue.

Maybe we needed a low point to get a Republican like Giuliana elected, but I wonder how much quicker a recovery we would have had had it not been so bad with Dinkins.

END OF THE STORY.................I asked our broker to go back to the sellers with a reduced price. They declined our offer and made no counter-offer. I asked our attorney to send the contract back to the seller's attorney with a nice note. Deal is dead. As everyone here has said, big deal. There will be more where that came from.

From the seller's point of view, how silly to pass up someone who would easily pass the co-op board and wait.

Thanks again for validating my own thoughts.

Thanks for the update.

I think you are seeing someone who clearly has a mental block about "losing" money on an apartment, and wants to recover costs. They'll take the threat of a BIG loss over having to admit that they might not have made money. And they aren't alone, this is why you get such intertia in Real Estate. It is SO personal to people, and they take numbers as insults.

I get if they want to play hardball. But no counter... that is just stupid. And I think that will become fairly clear as the months drag on.

dca1125

Keep us informed of any future updates, its great to see 'real' info on the current market

dca1125, definitely keep up posted if / when they call you in mid-November to ask if your offer might be back on the table. I recently walked away from negotiations. I won't be surprised if I hear from the sellers in a couple of months once they have sat on the unit for a while. It was bittersweet to "lose" an apartment that I think is exceptional in all ways but price. But I know I did the right thing in light of the unstable market.

I presume some of you are regulars on this board. This is my first go at it and, frankly, I really appreciate the feedback you all gave a total stranger.............that said, I'll keep you posted if I hear from these folks.

There is no rationality in their reaction. Totally emotional.........or maybe they think they're being cool negotiators. In this market and with an "average 2 bedroom apartment" in a co-op, and having a qualified buyer, you have to be reacting emotionally not to try to get to the finish line.

My guess is that by February the market will be flooded with product and we'll buy something better at a higher price but with real value.

DCA-you may have another shot at the place if the market really deteriorates. In the interim you've bought yourself time. My two cents is that you made the right decision.

The best part about Dinkins was Bob Grant's nickname for him: "The men's room attendant"...

Bob Grant is a pretty bad racist though... see what he said about MLK.