Brokers acknowledge new economic realities

Wow! Thanks for the link dwell. It sounds like the brokers are no longer supporting the Catch 22 of recent compts determining pricing. I wonder how Coop boards will handle the news that prices are coming down. And what will happen in new developments that have been holding firm to their list prices in a market that has changed dramatically in a year's time. Could get interesting.

Hey NYRENEW,
I was kinda floored by it, especially when Binder admitted fear. And how bout the price chop? $1.6 to $995?? Good for buyers, bad for sellers.

Video also at:

http://ny.therealdeal.com/webcasts
It's the Nov 10, 2008 video

I'm heading out to see a bunch of apartments with someone now. Probably a big waste of time because short of a MAJOR distressed sale, I ain't buying anything. More market research...

Good they're panicking, because it hasn't even started yet. The world came to an end on September 17 (thank you Hank Paulson for letting Lehman go under!). IF things were going to slow down a lot before that, after that - the end.

http://www.nytimes.com/aponline/business/AP-Financial-Meltdown.html

There has never been such a fierce pullback in consumer spending in such a short period of time. After September 17 recession became a self-fulfilling prophecy.

Steve,

So when do you estimate the watershed shift will come? When do ya think we'll see lotsa $1.6 mil apts chopped to $995K?

I don't know when it will happen, but yes it will.

We haven't begun to feel the effects of the collapse of Wall Street yet.

Thanks Steve.
Always appreciate yr POV.

I seriously considered buying a particular apt in early 2007; had a view of Central Park, gorgeous. But, felt it was over priced. It did sell at the asking price, but in today's market, it's be price chopped at least $300K. Man, so happy I didn't buy.

I could be wrong, but I don't think I am.

Jacky Teplitzky embellished her "$1.6MM-->$995K" example slightly (what a surprise). The last price on that listing at Sotheby's was $1.35MM, so she really only cut it 25%. The apartment did debut at $1.675MM, the week Bear Stearns crashed. Nice timing.
http://www.streeteasy.com/nyc/sale/364607-coop-151-east-83rd-street-upper-east-side-new-york

It's still no bargain - just a nice empty-nester with toxic monthlies.

maintenance is insane. I like the size for me but I need the price still cut in half with that monthly

Hi Steve, you make some great points! I hope this link works because I think you might enjoy it as much as I did. Be well.

http://www.nytimes.com/2008/11/16/realestate/16deal1.html?ref=realestate

Love the "guaranteed lowest price." A sure-fire way to make sure nobody buys if they think prices are going to fall. Which they are.

Good catch West 81st. Dang, how those brokers lie! $1.6 for E. 83rd was a bubble price. I think it's worth $775K-$875K. It may be 2 bdrms, but it's 4 rooms.

For anyone interested in the Teplitzky price-chopper, it is actually owned my a middle-aged fashion exec. who has already found a new place. If you have a thing for 'vintage' bathrooms (i.e have barely been updated in 80 years) and a truly horrendous kitchen with some of the ugliest tile known to man, then you might have a lot of wiggle room when making an offer on the current $995,000 price.

For you bulls out there...it's a sign of the times..that middle aged fashion exec would've taken 1.5 if he/she could have. I think anyone who bids more than 30% below asking is crazy at this point. That's where the value will be in a few months anyway..the sellers who sit on their properties out of greed will wish they took 30% below asking the way things are headed!!!!

What would be a reasonable maintenance charge for this apt? I have no interest in this apt, but am curious.

That $995k apartment has one bad kitchen. With the insane maintenance and the kitchen, the price will have to be cut by at least another $100,000. I can't believe they listed that dump for $1.6 million.

Sellers are drinking the cool aid served to them by the brokers, who are so desperate to make a sale that they won't give a potential client the bad news they don't want to hear. How many weeks of open houses will sellers' brokers tolerate with 5-6 people showing up when properties are WAY overpriced--at some point they are going to have to give the sellers a dose of reality--things are bad, and people may have to start taking losses on their properties. I am looking at one place that was purchased 2 years ago for 1.2, renovated, and is now on the market for 1.5. There is no way this was a 250k renovation..and how could the seller honestly think they will be able to flip a property now and make money? Any buyer should bid 30% below or more..because of the significant risk to the buyer at this point of a prolonged down market. Just like other investors, sometimes you have to take losses to get your capital out.

Thoughts?

Siggy,
Your thoughts are accurate. Be careful on that 30% number, you might own what you don't want. We go to a lot of open houses as we are serious buyers. The prices being offered are irrelevant. We simply are shopping for the apt we want, take notes, and move on. We never speak of price interest with the person representing the property. We just tell them it is beautiful (if it is). If conversation moves forward at all, we just tell them to please call us if the owner gets to the point where they are seriously considering selling the property. Sometimes the broker will say something like, "what do you mean? they are trying to sell it". Then you just kind of smile at them and say, ok, sure. This market is so dislocated, that it is rational for owners to not want to rush to offer their asset down. The way it will probably occur, is that there will be a handful of legitimate panicked transactions that will reprice the whole market. Unfortunately, this won't happen till March-April '09.

Great advice. Thanks so much..

March-April 09 is pretty damn close, a mere 5 months away. Give or take another 5 months for those comps to become THE comps everybody considers valid and you have a generalized meltdown. By this time next year we'll be 20% down at least. My impression is that the downturn is moving faster in NY than it did in, say, posh areas of NJ in late 06-early 07 when people down there would really scream their lungs out that the RE crisis was limited to FL, CA and NV. Nobody would say that now.

NY will not be down 20% by this time next year. If you look at the Case Shiller Index, we are only down 6% year over year and I think it's a stretch to suggest that the declines are going to more than triple overnight.

alpine...don't forget we are pre-bonus right now in the worst economic slow down since the great depression--those are undisputed facts. There will be few wall street buyers between now and the end of '09. The single biggest cohort of buyers will no longer be buyers...that will drastically affect prices. Those who were banking on big bonuses to cover mortgage payments (or to make end of year payments on I/O mortgages) will have to or want to sell, and they will likely sell at a loss. Obviously there are exceptions, but this is going to be bad. Sellers should start to think about taking low balls.

The thing I don't understand, is why bulls and brokers feel that this slow down is different from other slow downs...in fact, brokers' incomes have been based on crazy prices, from income on highly levered securities, the likes we will not see ever again. This will bring down incomes on wall street at least for a while, and the prices people will be willing to pay will drop. This is a slowdown like so many others in NYC history. I think the bulls on this site and other blogs just don't want to see a good thing go..but as robert frost said, "nothing gold can stay." It's over guys. Start telling your sellers to change their strategy--even look at the link at the top of this thread!! The heads of these brokerage firms are saying the same thing...the word isn't trickling down to street level brokers or their clients. They will all get burned when the market turns into a fire sale. I have ibanking friends who planned to buy this year, but have told me they will be sitting out a year or 2...

alpine, if you think we are only down six percent, and that year form now we will only be down 26%, you aren't paying attention. the market is down 20% NOW.

To All
I am as annoyed as everyone about this question about how much the market is down. Do we use closed, reported transactions, or live market listings. The problem is that this market is moving quickly and really close 2-5 months away from picking up speed to the downside. Alpine may be right, that on a lagged, reported basis, we are down 6%. But, for those who are focused on day to day changes, Happyrenter is absolutely correct 20% works for me as well. You don't HAVE to show closed comps to prove the 20% number, LISTING OFFERS will suffice.

"alpine, if you think we are only down six percent, and that year form now we will only be down 26%, you aren't paying attention. the market is down 20% NOW."

Agreed... I think he's officially wrong already.

Miller Samuel had 9.4% decline Q3 over Q2, and that barely includes panic time...

As I posted in another thread about 333 CPW (sorry, don't remember the apt. # but I'm sure you can find it, it's the one that just dropped another 200K today) that listing is already about 40% below it's initial ask in 2007. Fast forward a few additional price cuts and some concession to the buyer if and when it finally sells, and we're talking 50% off OLP. And no matter how you spin it, the aspirational 2007 price had to reflect somebody's perception of reality. Also, I'm not sure, but I don't think the apt. is a flip, which is where you usually see the crazy high OLPs. So we're at least 20% down (sorry 21, oops 22, I mean, it's moving down too fast for my fingers on the keyboard to keep up)