streeteasy Q3 market report

I guess I'm going to have to wait a while longer for prices to drop.

so where is the crash?

To my knowledge most of the WS craziness just happened this month -price slashes are happening now - and they are - every day about 200 prices decreases. Wait and see. It will take 3 years to hit the bottom

sorry I mean last month - September. Forgot it's October

As much as a crash will make it even more affordable for a lot of people to buy in Manhattan, lets not be so cynical. The truth is we could very well see a correction around 20-25%. Manhattan is a very small island and many people want to live here. There are areas in Manhattan that may not even see a drop. For the simple reason some owners don't have to sell, some owners for instance in Park avenue (80th- 30th street) have their apartments fully paid off. These individuals don't need to sell and certainly not in one of the city"s worst markets since 9/11.

If you look on streeteasy now, you can tell individuals are putting their apartments up for sale. These are big opportunities, anyone who is trying to sell right now are in a panic. A 20-25% drop from asking price is reasonable now, its a buyers market if the seller refuses and sticks to his price then walk away. In another 6 months the economy will continue to struggle economist do not really know how long this recession could last. I would say keep an eye out for the neighborhoods that you would like to live in and monitor the sales comps in the upcoming months. You will eventually find the right opportunity like many buyers did after 9/11 and they made huge sometimes ridiculous profits in one of the biggest NYC bull markets of our history. As Cramer always says Bulls make money, Bears make money, and pigs get slaughtered. Lets take advantage of those pigs and buy near the bottom.

No crash. We're in for some bumpy times. Not sure about the three year prediction. Things change very, very fast these days. Look at the last three weeks, not to mention Barack Obama and Sarah Palin.

The next two or three months will be difficult, but I wouldn't be surprised to see a quicker than expected recovery, albeit perhaps a sluggish one.

The time after Thanksgiving is a usually light in RE anyway, so could present really good buying opportunities this year.

No crash?

A crash is definitely possible.

1) Most of the fundamentals that drove up prices in the city - Wall Street money, foreign buyers, easy credit- have completely changed.

2) Prices now exceed historical "Price to Rent" ratios and it is more expensive to buy a place than rent the equivalent place. Whether it costs 10% more or 50% more is debatable, but it definitely costs more to rent than buy right now, and there is a good chance rents will decrease as well. Also, historically it's been cheaper to buy than rent, to compensate for the risk and illiquidity.

3) Most importantly, prices are basically 2x what they were in 2000. Prices have been steadiliy increasing in NYC for 15 years - what comes up, most come down.

The counteragrument, of course, is what brokers tell you "there is just so much demand" and "New York is so nice and clean now" .. but NY has been desirable since the late 1990s when prices were much cheaper. I do think the most major fundamental change is the number of families wanting to stay in the city, but this alone won't save the market - inventory is piling up in the 2-3 BR category (read today's nytimes).

I am not predicting a crash - who knows what will happen - but to categorically deny the possibility of one seems a bit premature.

Here's the Real Deal's take on the whole matter:

Residential market plagued by price cuts, contract breaks

By Sara Polsky

Price cut and contract break statistics for the third quarter of this year reflect economic upheaval, a market report released today suggests.

According to Streeteasy's third-quarter Manhattan market report, price cuts increased significantly last quarter. There were 2,900 cooperative and condominium unit listings in the third quarter with price cuts from the original prices, averaging 6.6 percent.

Price cuts in condos increased 152.5 percent over this time last year and 2.1 percent over last quarter, the real estate data site found. The largest price cuts were at 1120 Fifth Avenue, where a unit originally on the market for $20.4 million was listed for $12.9 million in the third quarter, a decrease of 36.8 percent; and at 18 West 48th Street, where a unit first listed at $1.2 million was then on the market for $790,000.

Frances Katzen, a senior vice president at Prudential Douglas Elliman, said she is seeing higher-percentage price cuts in the $1.5 million to $2 million range. She has seen some properties with cuts of more than10 percent off the purchase price.

The co-op market held up better. The number of price cuts in co-ops decreased in the third quarter 3.1 percent compared to a quarter earlier, but increased 177.5 percent over the third quarter of 2007. Sofia Kim, vice president for research at Streeteasy, said co-ops may be selling better than condos without price cuts because they appeal to more established buyers, while condos attract more first-time buyers.

Kathy Braddock, co-founder of real estate consultancy Braddock and Purcell, said condo prices may be decreasing because they are often investment properties. "You may have seen more price cuts because they're more aggressive to begin with, because it's an investment opportunity," she said.

Home buying slowed down in the third quarter with 291 broken contracts. The number of contract breaks increased 17.1 percent between August and September. Braddock said the increase was steeper than usual but was a logical reaction to economic unease. “I think [it's] for obvious reasons.” She said the broken contracts probably came from “people who possibly worked at companies that no longer exist, people walking away from a deposit because they're afraid or they've lost their job or they want to be particularly cautious.”

Elliman's Katzen said financing is also more of a problem now, because lenders are uncomfortable lending even to buyers who don't work in finance. “Due to the financial sector and the jitters, the banks are uncomfortable lending,” she said.

In the luxury market, which for a while was impervious to market conditions, the median price dropped 8.9 percent since last quarter, but increased 5.9 percent since this time last year.

Quite a contrast to the brokerage reports. Quelle surprise!

Pretty dramatic actually - big increase in price cuts AND a pretty large median price cut (6%) - and that is just asking price!

And that 6% median price cut is only taken off of the last list price - not necessarily the original ask price. Obviously many original list prices have been aspirational, but nonetheless that spread would be much greater than 6% in many cases. A recent example: this broker adjusted the final list price after the contract closed so that it looks like the apt. sold for ask - it really went for 10% off of the list price on the table when the contract was negotiated:

http://www.streeteasy.com/nyc/sale/318557-coop-114-east-84th-street-upper-east-side-new-york