So, as a Manhattan owner, what should I do?

Why would you sell? Sounds like you're in a solid position.

Are you talking about stocks or your home? Selling your home is not as simple as "the market will tank further". Even if it does "tank further", you might not find a place you like better than what you currently have. Of course, I'm assuming you like your current place. If you don't, then, sure, get the hell out. But, why would you have bought a place you didn't like? I know, even if I sold my place for a profit, I still couldn't find anything I like better without spending more. I've looked, and they don't exist. I also looked at rentals, and for roughly the same monthly cost, they all suck. And, they're rentals, so I'd have a bunch of renters as my neighbors. That's not a dealbreaker (I'm a renter from time to time), but all things considered equal, I'd rather live in a building of owners.

Transaction costs can be very significant, and it seems like we're well in to this, so not sure if you could really avoid much of the hit.

If there is one thing that does work in times like these... consider upgrading in 6 months...

Love our place - at this point, we would be recouping our significant downpayment and renovation costs (assume we go back to '05 prices). My concern is that the market will tank another 30-40% and make us underwater.

It sounds like it is worth at least listing the place at a very competitive price (relative to recent listings going into contract) and seeing if anybody bites. Until you have a real offer that is at 2005 prices it's all academic ....

I never post anything, but I do occasionally take a look at this discussion board...don't get scared or do anything rash based on the extremists that contribute here...things are going get bad, but not that bad...plus, if you don't need to sell, then ride this out....I don't care what anyone says, this is still New York City and personally I will never live anywhere else

You have a legitimate concern, as Manhattan housing prices could follow the financial markets lead. But nobody can make a major financial decision for you. Can you afford your current place comfortably?

There are two ways to look at it: the personal and the financial.

From a personal standpoint, if you like where you live, stay put. If you don't, move.

From a financial standpoint: I'm guessing you want to sell and buy something else. Only sell if you have a clue what that something else is. Otherwise, go long on manhattan.

You might not be able to sell now for lack of takers. Sales are off 75%, which may mean sales are off entirely at the moment. Anyone have thoughts on this?

Yes, but can you find a place you love at a price you're willing to pay right now? Plus, moving's a bitch.
Does being "underwater" really matter, anyway? You were underwater as soon as you bought the place, no matter when you bought it.

10023, don't you have a family and kids in PS199? How long do you plan on staying in your current place? I understand you are concerned (especially after reading the doom and gloom on this site) but selling your place to time a market downturn? Seems a bit extreme and a scenario that has the potential to make you and your family very unhappy.

"Only sell if you have a clue what that something else is."

bluerain, very well said.

A year ago, I would have said that we would be here indefinitely. But now, who knows. Employment "reasonably" secure, but it's not as secure as tenured post at Columbia. By underwater, I mean owing the bank money (so we'd need to go to 2002 pricing).

Nope, no place we can envision being except right here (PS199 and school issues being a huge factor). We could sell and rent in the same zone right now I suppose.

If you have kids to raise and are not expecting needing more room, there is no need to sell. Like anon said, sales are so scarce, I doubt you could find a buyer. You're in a illiquid market, and being rash does not help. I have clients who are upset about buying in the last year, and seeing properties listed in their building for less than they sold, but what are they going to do? You buy a place to live in it. If you want to trade in and out with your money, that's what I'm for.

How scarce are buyers exactly? What if I started off at a 2002 price point?

No buyers? I thought there were Europeans all over town buying anything in sight.

you would have had me nibbling at the 2002 price
what is it?

In theory, I think the best thing to do right now is price low enough that you have more than 1 bid. For my property, I believe that number would be 800/sqft. No comps have closed that low since '02. The latest closed comps are in the 1200-2000/sqft range.

In fact, I think if anyone needs to sell, they should perform the following mental exercise - what is the maximum price at which you will get more than 1 bid? Obviously not $1, or $2 or $50,000...

Personally, I'd be interested in some 2002 price points...

Maybe that means you start a little higher, as you only need 1...

I would be a seller after all, so I want to get the most $ possible in the shortest amount of time. I figured that if I priced it at 800/sqft, that we would definitely get more than 1 bid and lots of interest should get us marked to market very quickly. It's too bad that I can't actually know what my place is worth these days because of lack of closed comps.

"things are going get bad, but not that bad..."

somehow this sounds like the new "home prices never go down". things are going to go really bad for sure for people that work in real estate, finance, and related, at the very least. so, "not that bad", well, depends for whom.

this is time for defense and for making sure that you don't suffer without need on predictable ways. if there's a lot of equity you would like to secure, you need to sell. if you are smart enough to anticipate that being underwater would bother you (many people cannot anticipate these things), then act accordingly. also take into account that the downpayment that you secure could be enough to get you an entire home for cash in another place in the country if you decide to relocate or plenty of stock on the cheap for a nice investment portfolio. $200k today are worth what $400k where worth last year (investment wise). cash is king, i'd say cash it in.

Admin, bingo. You're thinking what I'm thinking. Cash is indeed king these days. The problem is moving away from NYC would be a complete change in lifestyle that we're not quite ready for (mentally). I'm not the breadwinner, and the breadwinner is enjoying said "reasonably" secure employment thoroughly. The thing is, it's always better to quit when you have the choice rather than the other way around.

nyc10023, what exactly do you gain if you get your 800/psft price? Is the thought that you can rent, wait out the market, and then buy at 600/psft? I really don't get your logic.

Ah, my logic is that if I price at 800/sqft or whatever is a very attractive price point, I will quickly find out what the real market value is (hopefully not 800/sqft) because of lots of buyer interest. And yes, the thought is to rent. I sold previously at 1000/sqft and bought back in at same price (but way better location & building).

nyc10023, let's ask the question in a different way: If the market were a complete reverse right now (prices still on the up and up, everything is rosy), would you sell? Or would you thank your lucky stars that you bought in at a price you could afford, in a location / school district that you like, and with enough space for your family? If the answer is that you wouldn't sell in more 'positive' market conditions - that you would just enjoy your place, live your life, watch your kids grow up -- then continue to do that right now. Unless you planned to sell in 2009 or 2010 as a matter of course - then accept that you are having the knee-jerk reaction that a lot of others are also having, and then go back to living in the apt. that you chose for many good reasons.

If the market was rosy, I would be doing what I did last fall - contacting the brokers I knew and telling them that we would definitely sell for the right price (i.e. 1800+/sqft). It never hurts to do that, and you're not officially putting your place on the market, with the ensuing annoyance of showings.

Don't take this the wrong way, but if you weren't smart enough to see the top, you're not going to smart enough to see the bottom. Why go through the hassel (and expenses) of trying to hold onto some "equity" you have built up? To make a few bucks? You can sleep at night and not worry about it, or you can treat your home like a growth stock. Your call. I'm interested to see what would happen if you did try to sell it, only because of how illiquid the market is.

As a buyer looking for cheap deals and have encouraged people to sell now, I would say hold if you plan to stay there for 5 years. If you think that you will move in next 2 years, sell wait hope that things drop more, get a bigger one for same price.

If you price it for 800 psf, people will bid at 600-700 psf. And if there are enough, it will go above 800 psf. There are lots of low ballers (including me) just testing things out.

as a mental exercise though only i imagine that i'm in your situation and trying to put together the variables i'd look at withh my age and same family structure (30s, 1 baby, maybe a 2nd on the way).

. calculate monthly cost of renting a place slightly better that what i own. i not only want to cash in on my house, i want to save on monthly carrying costs and enjoy a bigger space. (to those that call me greedy, this was possible at least not so long ago and lowers the chance of regretting the move)

. if that monthly cost of renting is below the current carrying cost of owning, i'll add that savings to the final calculation. (put a less than 100% prob that the mtg interest deduction will stay as it is now and add maintenance costs in addition to what you pay to the building... this is me again, as i would keep my house in nice shape)

. if the $ cashed in by selling after transaction costs is a relevant % of my net worth (say 20%-30% on) i'm more than willing to go through the headache of the moving, showings, ... specially if i add up monthly savings for a bigger space. also, i put a premium on cash, so if my net worth is linked to more real estate somewhere else, forget it! i cash in to diversify and have cash to profit from the downturn. same if my net worth is not liquid (like partnerships, small biz ownership, ...).

also, i forgot, i would consider how many years (at our current savings rate, counting retirement and college savings) would take us to save what we are cashing in (and it's at risk of disappearing without any upside for a long time). if it's 2 years or less... i'm not sure i'd go through the trouble. if it's more than 5, i'd do it.

If a year ago you would sell for $1800 psf, how could you possibly consider $800 psf today as palatable? That seems like such a difference in price....worlds apart even.

Because I'm not emotional about real estate - it's just another asset. Take a loss now, or take a bigger loss later?

Admin: Based on your analysis, if I ran our numbers - all indicators say sell. Renting is about equal to carrying costs, but the equity that's left is a good chunk of our net worth AND it would take a while to save. That's what is worrying me. Even early last year, the indicators pointed to sell - I really thought that it was the height of the market. But my spouse got a little emotional about our home. This year, with the economy in the tank, there's a little less emotion involved.

What building do you think you have been able to sell at $1800 sq/ft last year?

Don't want to give away my address, sorry! Take my word for it. Many brokers were tossing out numbers to me that worked out to 1800/sqft+. I would have taken 1700 and run, if it weren't for actually having to keep our place in mint condition all the time.

Putting an apartment on the market is quite the pain, but I find that my apartment never looks better than when I'm getting ready to sell it, so, if you're like most people, at the very least your place will look better than ever.

If you bought at a $1000 psf, and you're in a very good school district, there is the chance you may lose little if anything. Of course, perhaps not. I lean to the conservative in financial decisions, and in these uncertain times there is quite the appeal in cash, particularly when your rental costs will be roughly the same. I've put places on the market and removed them before (my broker still speaks to me because I do relist them, and with him). It's hard to remove the emotion, but I agree it's ideal if you can.

I agree with jifjif. If you price at $800/sf and comps are at $2000/sf, buyers (and lookers) will smell blood (rightly or wrongly) and bid $600/sf. Real buyers will increasingly lose interest as the price approaches $800/sf. After all, you will be pricing for people who are looking for bargains, and will likely see the price you set as the ceiling.

I wouldn't sell unless you want to take advantage of the market to trade up. While prices are currently down a bit, they are certainly not tanking and while there are certainly fewer deals being made, they are being made and at prices that resemble late '06 which wasn't too shabby. This is also traditionally the slowest time of year. Hold tight and reevaluate in mid January.

All good points. It's an interesting point that if you price "too low" that you will only attract bargain hunters. Very difficult to price these days.

I agree with sbragar, you wouldn't want to list it right now. One of your prime appeals is the school zoning, you'd want to put it on closer to March, when people are more likely to be confronting the issue. I also don't think you'd want to price it too low, more like $1200-1250 psf. Right now people feel they're entitled to a deal, and want to deal to get said deal. Give them some room.

I'm a new homeowner and I flirted with the idea to sell and recoup some of my closing costs (not all), in hopes of re-purchasing while the market is "down." I got in on a good deal @ $1144 sq/ft while comps in lower floors in my building were around $1200.

To be honest, I don't see any price movements in my neighborhood (columbus circle). I've seem some drops in the east side of town, but I prefer west. I'm not trying to be bring down the bears, as I'd like some opportunities too, but maybe the latest figures catered primarily to desperate sellers and ultra-high end?

I'm in a new building, but have a studio. Maybe those 1BR buyers are now downgrading and keeping us little guys above water? Only time can tell, I guess.

Dear nyc10023,

Perhaps you are restless for other reasons than real estate, and thus looking to make a change. You already moved once. Your spouse likes their job...likes the apartment...kids like the school.

Doubt you'd save all that much equity if you moved. You'd have rent flying out the window. Transaction costs, moving costs, etc. Sure the market will probably tank further. Then it will eventually recover some.

Maybe a higher paying job you love is another answer...and look at the home as a home. ---If you move, you'll have the same life. What's to stop you getting restless again?

Just a thought.

fran, restless?

i'm more pragmatic and see it as a financial decision. selling to rent does not mean you are going through a mid life crisis.

you can rent in the same neighborhood, no need to change living arrangements dramatically. besides, nobody ever went broke by taking profits. so "cashing in or not" is a fair question to ask. even if you end up deciding to stay put it's very smart to question what to do and have a clear idea of what was important in making your decision. at the very least you get useful info for the future.

by the way, i don't buy the "it's stupid to time the market" neither on the stock mkt nor real estate. i time it quite successfully. to me "do not time the mkt" sounds like a salesman trying to get you to pay him fees on a continuous basis.

Well if it's just a financial decision, it should be an easy one.

Sell.

Clearly the market has no where to go but down.

You may pride yourself on your "market timing" skills, but usually it comes down to the guts to actually pull the trigger & not wait for more corroboration of one's instincts.

The fact you were asking for advice from strangers made me think you were being emotional...a true pragmatist with excellent "market timing" skills would just make the decision, which isn't rocket science, and dump the asset.

fran, i have reasons to be happy with my timing abilities (so far, so good, but who knows!). there's nothing wrong about asking for points of view (nyc asked, not me by the way). it doesn't mean you are clueless, it might help to see the issue from a different perspective.

talking finance is common among the rich, they go for advice back and forth and that way they learn. it shouldn't be the taboo that still is for the middle class and women.

i always try if what i have to say might help somebody. but i get more advice that what i deliver, from great minds through newsletters mostly. i don't know them, so they are strangers if you want and very generous, i always find something useful.

The other thing to do would be to hedge by shorting REITs.

problem is the commercial focus, and the national factor. You can get double screwed when the national market returns, and NYC is 2 years behind.

Well Admin,

I have reason to be proud of my market timing skills, too. And yes, I am rich also. No need for you to patronize me.

My post was to nyc10023, not you. ---Also, my point stands. I think once one knows a market move, much is to be lost by sitting on the sidelines "hoping" it gets better...and afraid to act.

If the goal is to get equity out of an apartment....it's logical to sell now, and not when the market has further declined, and there is more inventory built up.

yes, but in practice i don't see which would be the appropriate instrument to use. there are very few residential REITs, none based solely on NYC. shiller's city specific futures have no volume and huge spreads.

i did go short RE using puts (on commercial REITs, homebuilders, ...) long time ago. is tricky to get the strike and maturity right with options. now they are too expensive due the the huge volatility and during the last 18 months they have gone down a lot already.

like bill gross says, it's cheap to hedge against a crisis way before the crisis shows up. when it's here, it's too expensive.

All good points. It's hard to act unilaterally, when your spouse wants to stay and not move. It kind of sucks knowing what to do, but not being able to act on it for various reasons.

The breadwinner should make the financial decisions. That's just common sense.

Whoa, broadwayron, who just rolled back time to 1952?

Common sense to stay married and be happy is to listen to your wife.

This thread has been interesting in that it has shed some light in my mind on why at least some of the people are selling now. Some are selling because they have to, but it may not be true, as I had been assuming, that people would just stay put if they felt they could. I guess the "if they felt they could' potion has a lot more nuance to it than I had been taking into account, especially given the rapid deterioration of economic conditions.

Haha, yeah, that did sound a bit un-pc. Retro thoughts aside, I find it funny (or, odd) that someone is afraid to be underwater on a place they love a few years after they bought it, when the reality is, they were underwater the moment they closed. Just like buying a car... the moment you drive off the lot, you are "underwater". Why is that such a big deal? Does that make living there any different?

Not unless you may need to sell it in the future, and can only do so at a much lower price than today. And you weren't, according to the market at least, underwater if you bought in 2005, you still had a year or year and a half of appreciation before the downturn.

I wouldn't sell my home just because of market conditions because moving is a PITA. But what would you do if you signed a contract back in August? Would you go forward with the purchase or forfiet your 10% to get out of the deal?

"Many brokers were tossing out numbers that worked out to 1800/sqft"

Of course they were. That's what they do. Lies to get your business, what an industry. If you are not in new construction (which you're not) or one of the top three UWS buildings, I find that valuation hard to believe.

Does it even matter anymore? The market has turned...

One thing I'm not hearing in all this is, what about the kids? You don't need to sell; you KNOW what to do; your spouse (the schmuck) doesn't want to sell - giving your kids some stability by staying in an apartment you love, in a good area with good schools, doesn't sound like a mistake to me. Chill! Open a bottle of Cabernet in that lovely apartment of yours, pull your loved ones close & enjoy. ...and Happy Holidays, by the way!

drdrd, very nice

Well. Not going to address the breadwinner part of the thread. I should clarify what I mean by "underwater" - by that I mean your mortgage is greater than the market value of your property. I agree that 1800/sqft was an insane number. But I would have been very happy with 1500.

It's definitely interesting hearing other people's thoughts. At the end of the day, if I see something really compelling out there in the same school zone, I will put my place on the market.