Anecdotal evidence from someone in the trenches...

I'm in "the trenches" as a buyer. Here's a new twist. Listing brokers are not lowering listed prices, but informing "interested parties" of lower prices that will not be reflected in their listings.

That is interesting. How significant are these unlisted lower prices? Should we expect to start seeing apartments trading at 10-20% below ask?

NYRENewbie- That's a classic defense response. I'm sure that's not the only trick being deployed. It will not last. For that to have legs you need buyers coming out. As this market deteriorates there will much fewer buyers to deploy this tactic towards. The only thing that will attract buyers in the future will be much lower prices.

I have heard this tactic being used a lot of new developments. Since they are reluctant to lower price, once you show interest they are willing to work with the buyer. This will eventually subside and lowering the price will be the only way to attract buyers.

Your story just show how the deteriorating process works. First you start to save the vessel by pumping the water out. Then you slowly realize that it can't be saved and you abandon ship and hope to be rescued.

Someonewhoknows -- interesting. I wish more here would post about the boros, some of us actually live there and are looking to buy (and not in the new LIC and Williamsburg developments).

I'm curious what anyone's prognostications are for neighborhoods in the boros that aren't the trendiest and aren't the further-out or run-down. People seem to mainly comment on prime Manhattan or really iffy neighborhoods.

Will neighborhoods like Astoria, Kensington, Woodside, Prospect Park South stay fairly stable price-wise? Anyone have any anecdotal or historical info to share on this?

NYRENewbie - that's interesting. Not surprised, really. I've seen several listings on craigslist or the Times that give a reduced price but if you access the listing through their company's direct website -- the price is the original asking. Could be they forgot to edit it, or could be they are marketing to different groups..?

I strongly view most asking prices as suggestions. One recent one we looked at sported new, but horrific renovations (peculiar taste and very, very shoddy workmanship) - some of which hadn't even been finished and parts were missing! It had been purchased a few years before for roughly 35% less than current asking. I have to assume that whatever the apartment looked like in 2005 was measurably better than what these people did to it this year before they listed it. Yet they feel they should be getting a 35% increase? The apartment has had offers fall through, has been on the market a long time and has had some reductions and their broker suggested they'd be flexible. I'll say....

Tandare - I've posted several times my prognostication (read: desperate hope!) that prices in the non-chic, but pleasant parts of the boros won't drop - or at least not at the same rate as everyone seems to think that they will in prime Manhattan or in the 'newly trendy' (LIC, Willy-B, Brownstone Bklyn, etc.) nabes.

Granted, I am EXCEEDINGLY biased. My business is primarily focused on neighborhoods like Pelham Parkway, Kensington, Midwood, Rego Park, Bayside, etc. that are disparate in geographical terms but share other common threads. Specifically, they are within the municipal limits of NYC, but in areas that most movers and shakers in this town have never heard of, let alone would consider moving to. Yet when we quote figures like "NYC is a city of 8 million", it is in these neighborhoods and others like it that 90% of New Yorkers live in, not Manhattan from the Battery to 96th St.

The underlying premise behind my 'theory' is twofold: A) It obviously wasn't the I-Bankers and other such suddenly-poor who've driven the increase in prices in these areas in the past few years. Nor was it investors, as the number of condos in neighborhoods like this is relatively limited, and even those few that exist did not attract a bevy of flippers looking to make a quick-buck and thereby generating artificial demand. Rather, it is/was the general urban renaissance, the reversal of white-flight, the clamping down on crime, etc. that made these neighborhoods attractive for middle-class New Yorkers who might have spread to the suburbs in a different generation. Those people are now buying here, and will continue to buy here, barring a return to the bad ole' days of the 70s and 80s crime waves.

B) While the prices for certain kinds of apartments in prime Manhattan seem completely out of whack with their actual value (step back and think about how foolish it seems to spend $700K on a studio - a BOX, for all intents and purposes), the same cannot be said for apartments in solid but un-chic neighborhoods in the outer-boros. There's obviously a wide range depending on area, but generally speaking, even at the peak of the housing boom, you could/can find a 2-3 bedroom co-op for anywhere between $175 - $325K in many beautiful, perfectly decent, safe, subway-accessible neighborhoods in the outer boors. While the 2007 price may well be double what the same apartment sold for in 2002, the fact is that the '07 price reflects the 'actual value' of the apartment more. Unlike the out-of-whack 2007 prices in prime Manhattan, I would argue that the peak-of-the-market prices in the boros came closer to what the apartments 'should' cost than their severely depressed, underpriced prices of 5 years ago. Thus, the boom didn't drive up prices to unsustainable levels, it merely brought them up to where they should be (or perhaps, no more than 10 - 15% higher than that.)

Can I prove this theory? No. Is it based as much on optimism as it is on objective analysis? Probably. But I still believe it has a reasonable undercurrent of truth.

And if it doesn't, I'll be underwater. Real fast.

SOMEONE-------What you are sadly missing, is that the people and areas you are discussing are the cause of the problem, with the new guidelines in place they just won't qualify for the NEW mortgages, there are no more stated programs, and the new ratios wont qualify them for the purchases, they will only qualify at a much lower number. remember real incomes have decreased not increased. And your buyer is not a cash buyer. Your optimism is just pure optimism, you should go play the lottery.

t

This is not that complicated, at least not as complicated as most are making it out to be. You now need at least 20% over every purchase in Manhattan. You now need 30% if you are self-employed. And you will now be more vetted than Sarah Palin by Katie Couric by your mortgage company. This now means that the buyer pool is significantly less. Now factor in that 30% of Manhattan works in Financial Services and another 10% are somehow connected to the industry. Translation, even LESS potential buyer. Now most Manhattan buyer are most likely stock holders or somehow has assets related to the market. Translation, less buyers. Real estate will, and is falling in Manhattan, but will it bust, no way, we are still on an island. Common sense and simple math say it will fall about 30% across the board over the next 40-60 days. I do not think that those that bought since from 2004-present will see a return on investment, but I do feel (using the above equations) that Manhattan real-estate will drop to 2002-2003 levels. Some agents will continue to ask for unrealistic numbers, but that is why it is an "asking" price. Buyers not be scared off by the ask and should make offers at NO LESS than a 30% discount. If you are a buyer, and you waited, this is your time. If you just bought, well, it is sort of like just paying rent. Good luck to all.

SWK, I tend to agree with your reasoning, and the neighborhoods you mention are all good ones. For a person of middle class income without hordes of cash or family to borrow from, living in NYC is chasing to get ahead of the trends, because what people call "gentrified" areas become too expensive for most peoples' incomes. However, I also wonder if being in the middle one might be hit from above and from below. Low income subprime borrowers have bought homes they couldn't afford, or have refinanced homes for more than they're worth, and we were already hearing nightmare stories about places like South Jamaica and Williamsbridge, with whole blocks of foreclosures, before anyone even dreamed that two hedge funds would become insolvent and have billions of cash injected into them by Bear Stearns. When that hedge fund news hit, I don't think more than a handful of people dreamed that i-banks would lay off within a year or two or that Manhattan real estate would tumble.

I agonized over this crash from the top scenario and talked it over with someone who first mentioned to me the possibility of the crash not only starting from the bottom of the market, but from both directions, meaning that eventually the middle would be hit. My hunch right now is that all markets will be affected across the board, but who knows?

Yes, this forum seems to deal about 90% of the time with Manhattan and certain neighborhoods along the edge which are thought by some to be fashionable, and thought by others to be a laughable embarrassment ("What? You live in LIC?! HAHAHAHA!") So it's no wonder the markets in Kensington and Bayside and Middle Village don't get much discussion. Most New Yorkers live in places like Gravesend, Pelham Bay, Country Club and Fresh Meadows. We won't be immune just because we're not investment bankers, but I don't believe that the more expensive neighborhoods are where the most prudent investors necessarily buy.

A month ago, we came to agreement to buy a 2 bedroom apartment on 60th Street between Park and Lexington Avenue. It was a very nice apartment that the sellers had bought a year ago and renovated to be lovely and modern (our aesthetic) so that it really was in "move in condition".

It took their attorney 2 weeks to get the contract to our attorney and it arrived a week ago Friday....as the sky was falling and the television was blaring PANIC.

We had our broker return to the seller to say that the world had changed and we wished to reopen negotiations. We suggested a 20% discount.

Seller came back to say that they wouldn't reduce the price by a dime.

We walked.

We are very qualified buyers and this is a co-op. We don't need the apartment as our primary home is in Florida and we spend the summer here in NY and thoroughly living in a hotel on the Upper Eastside. My wife was just getting utsy.

SO.........NOW I'VE DETERMINED THAT IT MAY SOON BE A GOOD INVESTMENT TO BUY AN APARTMENT.

My sense is that the PREDATOR'S BALL will begin in February or March. It's like they say in "On Death and Dying", there are stages through which sellers will have to pass and now they're in "Shock and Denial". People are taking apartments off the market until the end of the year. MISTAKE.

I agree that there will be 20% - 30% discounts from today's prices for those who wait 4 - 6 months. What happens next, anyone knows.

Final point, special and spectacular very expensive apartments will likely hold value.

Because I deal exclusively with apartments (as opposed to homes), my buyers were never, and are still not, the types who took out 'liar's loans' (no income verification, subprime, etc.). Co-op boards in the outer boros are no less strict than they are in prime Manhattan: while the exact QUANTITY of assets you need to have in Queens or the Bronx is less than what would be insisted upon in Manhattan, a working class co-op board in Flatbush is just as interested in L-to-V ratios and post-closing available liquidity relative to monthly costs as a building on the Upper West Side. Co-op boards and their endless scrutiny and vetting of potential shareholders have the same goals and techniques in the outer-boros just as they do in prime Manhattan.

That scrutiny has staved off a wave of foreclosures in co-ops all over the 5 boros. It kept investors and their tendency to artificially drive up demand out of the picture. It prevented people from pulling out more equity out of their apartments than actually exist. And co-op boards never, ever, in any neighborhood anywhere, allow 100% financing of purchases.

The biggest differences between prime Manhattan and the outer-boros - and the reason why I *HOPE* any decline in Manhattan will not affect co-ops in the outer-regions as much - is the fact that I-bankers were never buying in these areas anyway. My buying pool always was and is middle-class working folk who have not (yet, anyway) experienced layoffs en-masse the way Wall Street has/will. Yes, credit does not flow as freely anymore and the banks' requirements have gotten much stricter, but they still may not have reached the standards of a typical co-op board. Just because you could have gotten 100% financing on a liar's loan 3 years ago doesn't mean the board would have accepted you, and now that standards have gotten stricter, the banks are catching up to the criteria imposed by the boards, not necessarily surpassing them.

SomeonewhoKnows- I think another thing that supports your argument is that in a downturn, people who want to buy extend the amount of time they expect to live in a place. I'm one of those people. I could afford in Manhattan, but the places I could afford here wouldn't necessarily hold me and my family for more than 5 years. As my SO and I have looked, the outer boroughs have become more and more attractive, because we could afford the space we would want over the much longer term. That said, we're not seriously looking anymore, because we're not in a hurry and we want to see what happens in the market. When we do start seriously looking again though, it will probably be in an outer borough. Of course, I'm just one person, so this is totally anecdotal, but there's nothing special about my situation; there are probably others.

SWK - very interesting - any thoughts on rising maintenance costs possibly squeezing older coop owners in outer boros? I hear lots of screaming, and sense we could have a divergence in philosophy between longer-term residents, especially on fixed incomes, and newer arrivals like me who want more services, more improvements, and can afford them.

dca1125 - yours is the most interesting story from the trenches I've yet heard - there can be no more qualified buyer than you and your wife, and there is no more prime a location than 60th b/w Park and Lex. I agree about the predator's ball. I could not wait for it because prices got to the point where even in a predator's ball I would have been priced out. I do not agree, however, that certain apartments will hold their value. If that were true, the first buyers at The Plaza would not all be bailing out so soon (will probably take haircuts). After all, there's only one The Plaza, right? Then there's that wonderful old building on Park around the corner from your would-be home that Trump stamped his name on, with the huge wrap terraces and languishing on the market super-trophies. I think the trophy properties will tank, the brownstones on the UES and Gramercy Park and Washington Square will hold value the most (because they're single-family homes), and by the time it's a predator's ball it will be because there won't be many predators left. Your wife should be happy, though. Maybe she'll end up having a house warming party on one of those wrap terraces in Trump's project on Park Avenue. LOL

Hm, I suppose I need to add a caveat to my last statement. We are actually a little unusual because we're not worried about the down payment or financing. We're not interested in buying a place that pushes the limits of what a bank would give us, and we have savings that are not in the market (since Jan 2 anyway).

Lowery - interesting question to which I have no answer. Rising fuel costs and the general cost of living have raised maintenance costs everywhere, and the general rule of thumb is that maintenance goes up, but never goes down. That said, I don't recall ever having an apartment that had more than a 10% increase in maintenance in a given year - and that's a pretty hefty extreme. Dollar-wise, if you're already affording $500 a month in addition to a thousand dollar mortgage, it's not likely that an extra 50 bucks in monthly expenditures is going to break the bank. Nevertheless, perennially rising real estate values meant that any old-timer who couldn't afford an increase could sell at a very handsome profit. Whether that will continue in teh future is anyone's guess.

As for services and improvements, I don't recall ever coming across an older building in the boros that did the kinds of improvements a luxury-seeking buyer might want. Neither a 1930s nor a 1950s co-op is going to have the available space to add a gym or a garage if it doesn't already have one. The appeal of co-ops in the outer-boros (and as usual, I'm excluding the new-chic like LIC and Williamsburg) is not so much the amenities that you get in the buildings as it is the fact that you get generally spacious apartments in clean, safe and pleasant buildings and neighborhoods for literally a fraction (could be as little as 20%) of what you'd pay for a comparable apartment a few subway stops away. Considering the comparability of the actual space, the difference between what you pay for a red-brick 1950s or a white-brick 1960s co-op on the Upper East Side vs. what you'd pay for the exact same apartment 5 subway stops away in Forest Hills is astounding.

> A) It obviously wasn't the I-Bankers and other such suddenly-poor who've driven the increase in
> prices in these areas in the past few years. Nor was it investors, as the number of condos in
> neighborhoods like this is relatively limited, and even those few that exist did not attract a bevy
> of flippers looking to make a quick-buck and thereby generating artificial demand. Rather, it is/was
> the general urban renaissance, the reversal of white-flight, the clamping down on crime, etc. that
> made these neighborhoods attractive for middle-class New Yorkers who might have spread to the
> suburbs in a different generation.

Wouldn't this story have applied to a huge chunk of the country?

The missing point here is CHEAP MONEY fueled much of the increase. Many of these neighborhoods now have foreclosures. Folks overextended themselves. The prices went up, but the incomes didn't.

Not to mention, many of the neighborhoods were getting folks priced out of the yuppie areas (yes, I know multiple folks who ended up in Midwood and a couple of those other areas after having to leave park slope). That also helped push prices up.

There was stupidity throughout the city. But at least the co-ops required 20% down. Once you get into areas with a huge portion of private homes, you are talking about a lot of overextended folk...

NYC10022 - Again, what distinguishes apartments in 'fringe' outer-boro neighborhoods from the rest of the country:

1) Far stricter restrictions from co-ops than the banks ever imposed, thus keeping out the truly unqualified buyers.

2) Virtually no investors/flippers artificially driving up prices during the boom, and causing a concomitant tanking once they exit stage left. The demand in the boom comes from the same source as the demand is the same as the demand in a non-boom: owner-occupants needing a place to live.

3) Downpayment requirements insure that buyers can't finance too much of the purchase, nor pull out more than 80% of equity.

Yes, the disappearance of cheap money will hurt, but as I've reiterated innumerable times, people who really shouldn't have qualified for a loan weren't buying co-ops anyway. They were prevented from doing so by the boards.

NYC10022 - Don't leave Manhattan out of any of that figuring. Let's face it people sold their souls to live in Manhattan. All of their equity is in their Condo/Co-op. Now they must ride this out or sell for a loss. Cheap Money is a very relative term. I just have to face it, I am now sitting on an investment worth 30% less than what it was 8 months ago.

Lowery,

Please spare me the great Donald Trump and a terrace in Manhattan. I cannot think of anything I'd rather not have. As for the Plaza, there are manifold problems there. Yes, it's one of the great landmark buildings in Manhattan and yes, there are plenty of trophy names having bought there. That said, the developer is an Israeli company and one questions the quality of workmanship (I don't know if they've ever worked in Manhattan before). Not too many have moved in yet and that causes a problem.....we have friends who live there and their apartment has a spectacular view from every room.

When I speak of special and spectacular apartments, I'm talking about the great old buildings with huge apartments (think 15,000 sq. ft). Those are few and far between and will hold their value.

That said, an 1,800 - 2,000 sq. ft. apartment between 59th Street and 72nd Street, Lexington Avenue and Fifth Avenue will he hard hit...........especially ones that are "just average".

And whilst co-ops are probably most safe as they generally restrict financing to 50% and are careful to only allow buyers they think are financially sound, the pool of BUYERS will be significantly reduced. My call is that SELLERS will be more willing to accept lower offers from buyers with the right financial and social creds for fear of a turn down. And the point I'm making is that for those who meet criteria, this will become a good time to buy.

All that said, I think we agree.

> 1) Far stricter restrictions from co-ops than the banks ever imposed, thus keeping out the truly
> unqualified buyers.

Except that most of the nighborhoods you mentioned have TONS of single family houses. Midwood? The majority of housing is one or two family, not co-ops.

> 2) Virtually no investors/flippers artificially driving up prices during the boom, and causing a
> concomitant tanking once they exit stage left.

I don't think you quite know the markets you are talking about. If you don't think there were investors/flippers in Midwood, then you don't know Midwood...

Hell, haven't you told us that YOU are exactly one such of these investors?

> 3) Downpayment requirements insure that buyers can't finance too much of the
> purchase, nor pull out more than 80% of equity.

I don't think you know what you are talking about here.

There is TONS of inventory that had no such "downpayment requirements".

NYC - You're right that virtually all of the decent neighborhoods in the outer-boros have a significant stock of single-family homes, many of which may well have been purchased with flimsy mortgages. But as my business is exclusively co-op/condo, and there are very few condos in these neighborhoods, I am referring specifically to co-ops.

There are very few to no flippers of INDIVIDUAL UNITS (as opposed to sponsors or people who buy packages of rental units) in the co-op world. I know that, because I'm invested in co-ops all over the City and have been for the past 5 years, and don't know anyone else who does what I do.

There is absolutely, positively NOT tons of inventory in the co-op world that has no downpayment requirements. I would challenge you to show me ONE co-op building anywhere in the boros that doesn't require a bare MINIMUM of 10% down (and many, many of them require 20%).

Thats all fine and good. But now hugely relevant. When single family houses tank and are cheaper than the co-ops, you think the co-op prices will somehow be protected?

You don't need YOUR house to be in foreclosure for the foreclosure down the block to affect the price on yours.

If you aren't in foreclosure on your co-op, do you really think it matters that the foreclosure is in the house across the street, rather than the apartment next door?

NYC single-family homes have seen an ENORMOUS run-up in foreclosures of single-family homes over the past two years without a deleterious impact on co-op prices. In Queens alone, there are literally 100 - 150 homes scheduled for auction every single week! And some people, believe it or not, prefer co-op living to private homes.

Who knows how this all plays out.

I'm sorry folks, but it's pretty hard to put any trust in the perspective of anyone whose coin comes from the RE industry. Outside of the inherent bias, there is the subtle distortion of having adapted to a bubble economy. 2-3 years into the pop, it will be interesting to see what the perspectives are, who has adapted and survived, and who could adjust to the new realities. The very fundamentals of thinking in a bubble are different than at normal times.

I was seriously in the market last Spring after renting in NYC for 10 years, almost went into contract. Events spooked me, and I held back. Now, I won't get near buying until the dust and debris settle. I'll wait until there is a clear bottoming out in prices, even if I don't get in at the absolute minimum. There is just too much chance that things could drop too much. I'm not a flipper or clear long term New Yorker. I have to be able to sell if needed, and don't have the depth of pocket to absorb a loss on the size of the investments required to purchase here. If there are more like me in the population now due to market/economic events, then I assume the buying will dry up quickly.

About manhattan vs. other parts of the city or tri-state for that matter - here is an argument that is important - relative value. The discussions on how bankers never bought in LIC or some other area, so its going to be okay don't hold ground. Simplified example of rel val. If I want a 2BR apt, and prices in the city fall from $1MM to $700k, why will I buy something similar in Hoboken or Brooklyn Heights for $650k? And the same logic can be applied 5 miles at a time to any other place till you reach the outer neighborhoods. Yes, the correlation is not 100%, but you have to see a fall. So anyone living in their tiny little bubble, wake up to reality. Housing as a product is repricing and absolute values have to fall everywhere. The percentages may vary, but they will be negative.

The second problem will be credit. Did any of you find out the difference between a conforming vs a jumbo rate over the last few weeks? Just shows how relatively higher liquidity can bring down the borrowing cost by a big margin. The secondary sales and securitization markets are now dead and mortgage lenders are not keen to add risk. Lack of liquidity will hurt us all... Housing will suffer across the board.

This thread was about anecdotal evidence, so here is mine. Buyers pulled out at the last minute (I don't know the reason) on an apartment my acquaintance was selling in midtown - a small 2BR coop in good condition. Original asking was $1.05MM and supposedly not overpriced. He got a $950k level in May after some negotiation though its fallen through now. The seller has now dropped his asking price to $925k approximately and is willing to go slightly lower than sit on the negative carry which is smart of him. Please don't press me for more details as I already wrote what I know about the situation.

rational, "Simplified example of rel val. If I want a 2BR apt, and prices in the city fall from $1MM to $700k, why will I buy something similar in Hoboken or Brooklyn Heights for $650k? And the same logic can be applied 5 miles at a time to any other place till you reach the outer neighborhoods."

Absolutely. Also why coops won't hold 100% of their value while condos drop. If I could afford a $500K coop and the $750K condo across the street has a fire sale, why wouldn't I buy the condo for $500K? If I can get the condo for $500K why would I pay the same amount for the coop?

About anecdotals..... I heard from a guy who handled the closing several months ago, i.e., spring '08 for a friend of his who "flipped" his FiDi condo at a loss. He walked away from the table with $85,000 less money than he came with, literally paid money out of his own pocket to be rid of it. This was not after the most recent batch of bad news; this was back when people were debating whether prices had leveled off or were beginning to drop, while people on streeteasy were parsing news releases and Case Schiller. It's already well under way.

"NYC single-family homes have seen an ENORMOUS run-up in foreclosures of single-family homes over the past two years without a deleterious impact on co-op prices. In Queens alone, there are literally 100 - 150 homes scheduled for auction every single week! And some people, believe it or not, prefer co-op living to private homes. "

Are you comparing single family homes in one place to co-op prices in another? Is that the stat you are basing this on?

If you don't think the foreclosures in midwood or pelham or canarsie or (pick a neighborhood) haven't affected the co-op prices in that SAME neighborhood, you are delirious...

When midwood entire houses are down to old co-op price levels, you really think those co-op prices are holding?

BTW, in the last big Wall Street crash, outer borough homes took a beating as well...

This idea that the national market can tank and the Manhattan market can tank, but somehow outer brooklyn is golden? I think that is very wishful thinking... especially when credit problems hit there FIRST...

You are all overreacting. Yes, there is a dramatic crisis in the financial markets, but some people are going to make money off of that, and other groups will do well also (lawyers, business consultants and workout firms). What hasn't changed is that Manhattan, esp. coops, are owner-occupied, and that this is still a desirable place to live, not to mention the place where any laid-off financial worker is going to be looking for the next job (or putting together their new firm or whatever). It is too soon for anyone to predict the impact on prices. I think the ultra-luxury market will take a hit, because the people who could afford those places had hit tough times. But the mid-market will hold ground because that's exactly where all of THOSE people are going to shop for homes. The alternative is to live outside the city or to continue renting. To the extent that units change hands, prices in the mid-market in prime areas should hold or drop slightly. All this talk about a 30% price drop is silly simply because no seller is going to cut their price that low. They would be better off renting their place out at a break-even proposition than to take a 30% haircut.

Also, Manhattan buyers are the best qualified in the country. The credit standards may have changed for many, but lenders will want to get good deals done and there will be loans (at historically low rates) for the next while.

Yog, respectfully, I do not think that you have been tracking for-sale properties. Owners are already parting with over 22% losses. See multiple examples on this thread and on this site. So why is 30% so unthinkable? I assume you are working on the RE side to have that much optimism. I mean personally I am not worried, I think Obama promised to give everyone a refund in Manhattan if you lose money on any investment, so we are all protected.

> other groups will do well also (lawyers, business consultants and workout firms).

Segments will do well, but lawyers and consultants overall will lose jobs. OK, add 100 bankruptcy lawyers, but lose 1000 of all the other kinds. It doesn't net out.

Look around the city... the biggest law firms in town are shedding jobs, not adding to them.

> What hasn't changed is that Manhattan, esp. coops, are owner-occupied, and that this is still a
> desirable place to live, not to mention the place where any laid-off financial worker is going to be
> looking for the next job

They can look, but they won't find it.

I personally know 3 folks who have already left town in the last few months because of the finance job market here.

> But the mid-market will hold ground because that's exactly where all of THOSE
> people are going to shop for homes.

And when those people have half the money they used to, guess what happens to prices...

> All this talk about a 30% price drop is silly simply because no seller is going
> to cut their price that low.

Hey, I think we have another one for the "would you BELIEVE people actually said this 2 years ago" collection!

" All this talk about a 30% price drop is silly simply because no seller is going to cut their price that low."

Not right now, not at the beginning (except for a few outliers). It will begin with smaller cuts, and will snowball. That is what downturns are like, you don't reach bottom immediately. And this crisis has been a slow motion one, whatever it has seemed of late. The gov't, before the bailout, has dumped enormous amounts of money (either real or implied), over the last year, and yet things have continued to fall apart. Many economists question the long term impact this bailout will have, as it is not truly addressing the core problem of the downturn. So, noone knows what will happen over the next few years, but it will almost certainly go down. And 30% isn't silly. People would have called the currently government bailout INSANE a year ago. Imagine someone posting it here. But look where we are - nationalizing the financial industry to a large extent. 30% decrease in Manhattan RE doesn't seem so crazy in that context. Seems fairly mild in a way.

I still think many of you are over-reacting. Fact is that the S&P500 is only down 2% since the Lehman bankruptcy. What does that tell you? The broader economy is not crashing. And so while the problems in the financial sector will touch us all, there is no support for the proposition that people will sell their Manhattan homes like a fire sale. Where are they going to live?

I think many of the price cuts mentioned as examples are new condo construction that were very highly priced and in "gentrifying" areas. Those will see the greatest decrease. Unlike stocks, real estate prices do not move quickly because there is no such thing as instant trading, and people live in their homes. Developers in need of cash flow will cut first, but those are the most expensive apartments in a category. There will be increasing interest in value -- the best bang for your buck, which right now are pre-war coops, particularly as the coops are very financially stable.

I am not denying the changing environment, I'm just trying to suggest a little perspective on the hysteria. This is a great city to live in and in order for prices to drop, you would need people to want to move out and sell at a big loss. Even if that becomes a trend, that is not going to happen quickly. Remember Manhattan is mostly coops and many owners showed economic power on the way into the apartment. For the most part, they want to keep living where they are.

I think the reductions will happen first in the new condos in "up and coming" areas like Greenpoint while core areas like Tribeca, UWS, Soho, etc will hold or gradaually draft lower over the next two years.

Remember two other things:
1. A lot of people were waiting on the sidelines for prices to drop. Presumably, those people will start buying after a significant drop.
2. For anyone who has lost money in the stock market, your home is now your most valuable asset, and while it gives you shelter you will be reluctant to sell it at a loss unless circumstances require it.

Yog is right.
There will be no fire sale. However, quoting Jimmy Cliff" The Harder they come, the harder they fall"
The 1998-date rate of coming may be matched by the rate of the fall.

> Fact is that the S&P500 is only down 2% since the Lehman bankruptcy. What does that tell you?

It tells me that everyone knew about the Lehman problems well in advance... the market was down about 25% before that point.

> Unlike stocks, real estate prices do not move quickly because there is no such thing as instant
> trading, and people live in their homes.

Agreed. Which just means we're going to see declines for a while to come...

> This is a great city to live in and in order for prices to drop, you would need people to want to
> move out and sell at a big loss. Even if that becomes a trend, that is not going to happen quickly.

Agreed... but you are forgetting that its been almost 2 years in the making. If it happened tomorrow, that wouldn't be "quickly". This is a long time coming.

> Remember two other things:
> 1. A lot of people were waiting on the sidelines for prices to drop. Presumably, those people will
> start buying after a significant drop.

The mistake here is assuming that the people LEAVING the market when problems surface will be less than those that enter it. This is a very big mistake.

> 2. For anyone who has lost money in the stock market, your home is now your most valuable asset, and
> while it gives you shelter you will be reluctant to sell it at a loss unless circumstances require
> it.

Which is why intertia held out for so long. But once the pressures hit, its a little too late.

If you think people won't sell at a loss, its time to open a paper and look at the rest of America.

Yes, there is intertia and folks who don't want to sell at a loss. But thats been the case for years now, and its pretty much come to a head.

NYC - just to answer your question about foreclosures - yes, they have SKYROCKETED on single-family homes in the non-chic parts of the boros over the past two years. But we have not as yet seen a precipitous price drop in co-ops in that time. I can show you a list of a couple dozen outer-boro coops I've sold in the past two years, and you can compare current prices with what I got for my units. Some areas have slight declines (nowhere near 30%), others are stable, still others have continued to rise.

Anecdotal evidence, yes, but what else can I base my assessment of the market on when everyone only focuses on prime Manhattan?

Novel ideal... how about basing Brooklyn assessment on Brooklyn stats?

2Q sales numbers were down 44%, and average prices down another 8%. Partial Q3 numbers should be out soon...

More info from the trenches. So I bid 30% below asking on the apartment that was offered to me as an "inside offer" at 10% below asking. Not only was my offer rejected, I was told the apartment was being taken off the market.

SomeonewohKnows - I like your posts. Thanks for sharing.

You too NYRENewbie

Things are definitely getting interesting...

Thank you, EVillager. Quite kind.

I was told that the apartment was being taken off the market, but I checked again and it is still listed.

I'm curious how others are handling the compts issue. Using compts from last year's over inflated market seems like perpetuating the bubble to me, even if current bids are flat. Any advice?

Nobody can say for certain what direction the market will take, but even with all of the negative news swirling, it would take a brave (and/or desperate) seller to say to himself: "OK, I realize my exact apartment fetched $500K last year, but I'm going to take $400K for it because credit is tight and the market is projected to drop." This reluctance is especially true when talking about huge investments people expected to make a mint off of, as well as homes that many owners consider 'special', 'unique' and 'different'.

For all the blathering and doomsdaying on this board, the fact is that in chic areas, we have not seen an appreciable decline in prices on CLOSED SALES. In other words, an apartment that closed for $500K in September '07 did not close for $400K in September '08. Now, it could well be that ASKING prices are being slashed, and that six months from now we'll be able to look back at the closing stats for the previous six months and see a clear decline in closing prices year-over-year, but that has yet to occur. Right now, at this moment, cries of decline! decline! are speculation because data of CLOSED SALES does not show a widespread, universal decline. When that data becomes available, if it becomes available, then people will price things according to the latest comps. Until then, with the exception of desperate or panicked sellers, I don't think most people have the gumption to list something for sale at a price substantially lower than recent closed sales.

yeah but what about rents. I need my rent to go down big time next year. I know it's coming and boy oh boy I can't wait.

Desperate/panicked sellers --> asking prices below prior-sale comps --> closed sales below prior-sale comps --> reduced expectations --> asking prices below prior-sale comps --> closed sales below prior-sale comps --> reduced expectations --> asking prices below prior-sale comps --> closed sales below prior-sale comps --> reduced expectations...

Add in more desperate/panicked sellers if the local economy severely contracts and savings are drained, and you have the potential for a perfect reversal of the market psychology that prevailed from 2002-2006.

Will this actually happen? Maybe; it's certainly a plausible scenario. Has it actually happened yet? No. Did anyone claim that it has? So far, we're in the first rotation of the potential deflationary spiral, with a few motivated sellers cutting prices, and others starting to reluctantly and half-heartedly follow suit.

West81st, I think it's more than a plausible scenario given what's happened in the last couple weeks. But you're also right that it hasn't happened yet, despite some whooping and hollering around these parts. I think that's a bit of wishful thinking mixed in with the less-than-classy celebrating that you described so well with the Paul Brown quote (or maybe it was Jim Brown, not sure). I am curious to hear from people out there on the market right now though. I've been offering advice here and there to a friend looking to buy, and from that small experience, looks like more than a few sellers are taking their listings off or not yet ready to negotiate too much, at least in good Manhattan areas.

bjw: The most recent and famous apostle of low-key celebration was Barry Sanders. He attributed the humility of his post-touchdown ritual (hand the ball to the official, thank your linemen, get off the field) to his father - who was, as it happens, a big fan of Jim Brown.

West81st - the first time I came across that quote was in some SI interview with Jason Giami (of all people) when he was still with the A's. I think it's a great and powerful message.

Not so fast, W81.

The sellers most likely to be desperate and panicked are those who bought recently for peak prices, not those who have been in their apartments for many years.

Those recent buyers have very little to no equity in their apartments. Thus, even if they want to sell at below comp prices, they may not have the capability to. If you've financed 90% of your property (plus 2% in mortgage recording tax and a couple more points in a host of other fees) and don't have the cash to make up the deficiency, you don't have the luxury of selling at a price lower than the amount you owe. The means by which prices rose (panicked buyers afraid of being priced out -> bid on prices above comps -> closed sale above comps -> panicked buyers afraid of being... etc.) cannot exactly be reversed, at least not at the same pace.

SwK: I basically agree. A lot of seriously distressed sellers will hang on for dear life. That's why I've always thought estate sales and empty nesters would lead the market down, at least in my sector.

There will, of course, be some distressed fire sales at 30% below same-building comps by sellers who need cash immediately. But the reason I think the broader market has room to drop is that so many people have TONS of paper equity. They will be sad to have missed the bubble, but when the time comes in their lives (or in the liquidation of their estates) when it makes sense to sell, many will sell, fot whatever price the market will bear. Many will still walk away with a mountain of cash, even at 30-40% below the highest bubble-inflated comp. And if they want to live out their golden years in Florida, Arizona, Nevada or California, their money will go a lot farther there than it would have three years ago.

> The sellers most likely to be desperate and panicked are those who bought recently for peak prices,
> not those who have been in their apartments for many years.

I don't think you get human nature. It doesn't matter that they bought in at 10 cents in 1895, when stock prices dip 20%, people are calling their brokers left and right and pulling money out (my broker friends are attesting to this daily).

In terms of RE, even leaving out folks who refinanced and are underwater, it doesn't take much to bring about panic in owners. And, remember, it doesn't have to be everyone. RE markets are defined at the margins (partially because of low liquidity).

Not to mention, "peak" will probably cover everyone who bought in the last few years. You are talking a LOT of buyers.