Even brokers now admitting 2005-2006 levels are the appropriate asking prices.

I made 5 offers in writing in the UWS this weekend at 30% below ask
None of the brokers presented the offer to the seller. All claim they already have better offers. Each of the 3br apts I made the offer on have been on the market over a year and have seen prior price reductions.
Common story from all of them is
1. Last year this would have sold for x
2. We have already priced it down for the market

The reality is that last year it would not have sold for x -- and it did not
They have it priced at a point that may have drawn offers in last years market, but likely not sold
Hard to believe that all these apartments are sitting with offers 10% below ask and they are not able to converge and move them. The mindset that the prices "are at 2005-6" is not yet prevalent.

I predict that all these 5 will sell closer to my offer than their rubbish claims. The question is when we may get there.

There was a two-bedroom resale listed yesterday at Plaza57 for around $1.4m, "1400" sf. That's someone who is pricing in the 2005 range, and for a new development as well.

Joedavis, for one they may be legally obligated to present offers. They'll never know what it could have sold for last year because at that time they would have turned down that level! Aboutready I will check out Plaza 57. I think developers are the ones who will drive the market down. They are not emotional, and at a price most people will take the amenities an condo property rights instead of a prewar coop.

They 'when' for the next wave of reality is Q1. In Q1 the Q4 numbers will be published and some sellers will unveil properties in hope of bonuses to come.

Rhino, it's a resale, which makes the price even more remarkable to me. Most resales in condos show absolutely no inclination to face the fact that this is not the market of last year, often pricing apartments at levels higher than 2007 (to make up for closing costs, I assume, but good luck with that).

So they are trying to flip a new development condo? Maybe the buyer bought preconstruction, and was sorta struck at a 2006 level, took delivery of the place in 2007... Their circumstances could have changed and now they are pricing to get out alive. Do you have the link? I searched Plaza 57 on here and came up with nothing...Wait is it actually fickle enough that the space in between could have tripped it up...

PS: The Plaza is offering apartments for 33x the annual rents offered by owners and/or the sponsor. I didn't bother to look but I am sure the maintenance is pretty low, ha.

It closed in '06. Sometimes new listings don't immediately appear in the building listings, I don't know why. Anyway, http://www.streateasy.com/nyc/sale/369690-condo-207-east-57th-street-sutton-place-new-york. It doesn't look like 1400 sf to me, but almost all of the new development square footage claims look crazy by old floorplan standards.

Ah its called 'The Place'. Interesting that the one seller there has dropped to $1000/ft. A building like that surely made sales in the $1500/ft+ range. Still asking 18x rent. The glut of luxury one beds, giving lending standards growing more difficult, is going to be unreal. I imagine a point where you can pick up a condo one bed, rent it and make a nice monthly profit.

Sorry for the mistake. I agree the glut will be unreal, but I think you'll need to include larger apartments as well. Your condo rental profit may be negatively affected by rising real estate taxes as abatements expire, and rising common charges to cover shortfalls by non-recoverable receivables.

Oh for sure, I just expect the smaller apartments to be even worse, as first time buyers will have a much harder time getting loans. Also, buyers will want them cheaper because their holding periods are typically shorter. As far as profit, I mean there is always a purchase price low enough to create a positive pre-tax carry vs. the rent value. Its going to be incredible interesting in 2009 and 2010. Deniers aside, the fact we hit the market down 15-20% from Q2 to Q3 is faster than I would have imagined. Maybe the information age hastens the decline relative to the late 80s/early 90s downturn.

"None of the brokers presented the offer to the seller."

Brokers ARE obligated to present an offer to sellers.

Non-sequitur: My father in law offered $35k on a $55k asking price on Park Avenue in 1972. The broker said they would not present. He said he would find a broker who would. The offer was accepted. Maybe offer 50% of peak value until its accepted. Hard to imagine it will be before 2H 2009 at the earliest.

Ten days ago I made an offer, 25% less of asking price, in Harlem. The broker snubbed me and told me she would not even tell the owner. I wanted to send her evidence of the state of the market to present to the owner, the broker said never mind....Is there anything I can do?

mimi - what type of place/where in harlem?

hitting some open houses there today.

one of the places we wanted to see up there is listed as "temporarily off market." we asked our broker to check what was going on. she forwarded us an email from the listing agent saying "despite having 4 offers in cash, the owners decided to stay in town." i don't totally believe this because the same listing agent said a similar thing about another place, and now that place is back on the market again.

Yes, Steve is right. Brokers MUST present every offer to their clients, as they have a fiduciary responsibility to do so. Ethics get broken when a broker only presents DIRECT offers and not offers from co-operating brokers, so as to protect their own higher commission at closing. Yes, this happens folks. Its way more rare than common, but it happens.

When there is a low offer, that may be lower than a previous bid that the seller already rejected, the broker STILL MUST SUBMIT IT! What happens if this bid eventually comes higher? By not submitting you may not get that far, and the buyer may just walk.

In these cases, I usually send an email with the offer attached to my client and explain to them something like this, "Dear Client, I know you already rejected an offer higher than this one, but by law, I must submit ALL offers received from marketing efforts. You never know when an offer may raise their bid upon a counter-offer by you. I suggest you review this offer, and at the very least consider some type of response."

The point is that the offer is conveyed to the seller. Sellers sometimes get very emotional and upset during the selling process because often the apt doesnt sell as quickly as they hope or bids not received as high as they were originally told. The broker usually gets the brunt of the blame. But not submitting a bid received is the worst thing to do in a service related business.

Brokers are avoiding reality because they risk losing their listings to other brokers who continue to feed fantasy to sellers. You know, like the ones who closed on new dev a month ago and now want a 50% premium.

Depending on how you count it, inventory is HUGE right now:

Sales in Manhattan
We found 9,530 listings
Median price: $1,200,000 Median size: 1,150 ft² Median price per ft²: $1,134
Information on Manhattan

At current uptake levels, we're talking a 3-year supply. Prices ARE down to 2006 levels more or less, but they still have an enormous way to go before this bubble deflates right back to where it should and will be: 2003 prices.

joedavis & mimi - The broker must present all offers to the seller. If they have already received offers at that level, however, the seller may have said "don't even bring me offers below $X" or some such - and the broker would have to respect that. I'm just saying.

Did you present your offer as "highest and best"? Or were you open to counteroffers?

The broker reactions have ranged from
If you are serious please present an offer > # <-- I replied to this person and have been ignored
to
I can present it to the seller but will recommend to him that he rejects your offer

"I'm just saying."

You're wrong. The seller cannot instruct the broker to violate the law. ("Don't bring me any gay buyers. I'm just saying.")

"but will recommend to him that he rejects your offer"

Buy now or be priced out forever!

FOR THE LOVE OF GOD,,,.,,

************ DO NOT LISTEN TO BROKERS *****************

They're only after their commission, it's OVER. it's the buyers market... If they don't take your offer price NOW, that price WILL become their ASKING price in 3 months. TRUST ME. they know that too, which is why their so scared.
tell them either take my offer now, or ask [my offer price] in 3 months (as your asking price) and I'll offer 30% less

DO NOT GIVE IN TO BROKERS.

inventories are EXPLODING and getting more and more, with new condos popping up all over the place.

Noah, tina24hour, just out of curiosity--what happens when your apartment is about to go into contract and you read in Streeteasy that somebody bid on your apartment? The bid was for much than what I got, and I was going to take the apartment off the market if I didn't get the contract price as I didn't have to sell but wanted to. I had told the broker to only tell me about serious bids. I wasn't interested in knowing about every person who saw the apartment once and said they would think about it

In a way I could see the broker's point but it did make me wonder what other important things I wasn't told

sorry--meant much less than the contract price

Any reason not to mail the offer, in writing, directly to the owner (at the address of the apartment) with a note explaining that the broker told you they weren't going to show the owner the offer?

stevejhx - good point. Although it is not discriminatory to set a floor for sale price, so I'm not sure it's illegal. But. As a broker, I hate defending other brokers and will try to refrain from doing so in the future.

joedavis - did you demonstrate that you were open to counteroffers?

NYInmyblood - many sellers tell brokers not to bother with bids below X, or that only serious buyers bids, etc..thats normal. But where I differ is that as I work to get bids in to my sellers, no matter where the bid is, I always submit it to my seller for review. Whether they review or not, is something out of my control, but they receive the offer in writing and I have a correspondence to back me up that it was sent.

You never know when a low bid may decide to raise it, so it makes no sense not to consider all offers, no matter how low. Now, in terms of quality, its supposed to be the brokers job to pre-qualify, especially for co-ops with restrictions on what they will accept. So, when I get an offer from a buyer that is not qualified, i STILL submit it, but I advise my seller specifically WHY I think this buyer is not strong to pass the board and is a risk to pursue. In the end, they advise me.

If they want to continue, I send the managing agent the details of the buyer and ask them for an opinion on strength. If they say its weak, chances are the seller will agree that it might be a waste of their time to go forward and ultimately get a rejection. But to hear that an offer was never passed on, no matter how low, as a seller I would get infuriated.

To follow up on what Tina is saying, my understanding is that the broker's duty to present all offers to the seller is part of the broker's fiduciary duty to the seller. The seller has a right to be brought all offers, which the seller could waive (by, e.g., instructing broker not to bring offers below $x). A buyer has no right to have his offer presented. In the case you're describing, Steve, the right not to be discriminated against is one that the buyer would have, so it's a different situation.

All the above discussion about offer presentation is correct EXCEPT that no one has noted that the offer must be WRITTEN. If you say, "I'd like to bid $5 million" -- the agent is under no obligation to present that. If you email "I'd like to bid $2" -- the agent IS under an obligation to present that.

I often have agreements with my sellers -- "Ignore anything under $1.5 million" -- but if those offers come in in writing, they are still presented even as I tell the buyer that they'll probably get blown off.

If you feel that a WRITTEN offer is not being presented to the seller, you should go to your agent's manager and discuss.

ali r.
{downtown broker}

very interesting discussion.
Tina -- yes in at least 2 of the cases I indicated being open to a counter offer, and even left some leeway in my original offer (25-30% below ask). I was told they had better offers

In 2 other cases, I gave my projection that in 6 months + the market will be 30% below what it is today and the person would likely then sell at that price. I was willing to offer that price today and could close in 30 days. The broker wrote " you are very wrong on both counts" -- namely the future price and that he would not be able to sell till then. This is for an apartment in estate condition listed by this broker for 397 days with 1 price cut to date -- to a price that was reasonable for the market peak for an apt in better condition or on a higher floor.

The one who said she would advise the seller to reject my offer is an interesting case. She points to other asking prices and indicates she is in line with them. I pointed to various closings (sent her ACRIS data) and now there is no reply. This one has been on the market for over a year as well. She has had 2 price cuts (2 million to 1.8 and then to 1.5 -- the 2 million and 1.8 were beyond optimistic. The 1.5 is optimistic given the condition of the building -- 1.2 she would have sold for and was my offer.

I may need to change my strategy and find apts that have been on sale for a short period but have seen multiple price cuts

Oh so does an email from their agency link count as a written offer or not?
My email clearly states that I am formally making an offer to purchase

I agree with Noah - I have never failed to bring an offer to a seller, and I have never had a co-broker refuse to submit an offer. I work with a lot of buyers, even lowball buyers, and haven't had this problem. That's why joedavis and mimi's experiences, especially in the current climate, are so unnerving.
On the other hand I have had listing agents reply to my buyers' offers with "(seller) has already rejected a bid at that number, didn't even counter it, so do you think your buyer will come up at all?" That's why I'm asking if joe or mimi demonstrated any flexibility...

On top of Ali's comment, I ONLY accept offers in writing or via email from the buyer. Getting an offer verbally of $2MLN at an OH, without the buyers full name, attorney information, general financials, etc.. is usually someone just playing a game. If they are serious, they will have it in writing in some form without hesitation. if they are not, they wont.

Good point Ali

Thanks. I was infuriated. As I read about the bid here I have no idea if there were written offers. When I sold another apartment the broker left a sheet with the names of all people who had seen the apartment and any pertinent information.

We were kept in the loop without constant phone calls or emails about so and so saw it and liked it.

My other question is that my broker told me somebody liked my apartment but had only seen five other apartments. As the buyer didn't have a broker, my broker was going to represent her.

Obviously I'm not a broker. But that stuck me as unethical or verging on it. My open houses were "hot" and when the broker told me that I exploded as I didn't like my apartment being used for other business. That was what truly infuriorated me. I was going to ask on Streeteasy but felt that I would jinx something.

Do brokers get business from a seller's open house?

I decided to let all this go as I did well

Joe - I'd follow Ali's suggestion and speak to the sales manager for the agent who said she'd advise her client not to accept your offer. It's beyond weird.
An email does count, but it may be hard to prove the agent received it. Do you have an email reply from the agent?

All of that may feel like a waste of time, though, unless you really want the place. Your new strategy - look at properties that are new to the market - may yield better results. Sounds like that other one may be trapped in a time warp (the listing agent may be in "estate condition" too).

joedavis, it sounds like you are sending offers directly and not through a buyer's broker. Perhaps the agents / sellers are not taking you seriously if you don't provide the typical financial background info that often accompanies a bid submitted broker to broker. It should be quite easy to pull this info together, and may make the seller brokers take you more seriously.

NYinmyblood - yes, absolutely: brokers get new clients from open houses. As your case demonstrates, it shouldn't adversely affect the relationship between seller & broker. If it did (i.e, buyer was inclined to purchase your place, but broker steered buyer to another sale) - THAT would be illegal. In your case, it sounds as if everything was on the up and up.

"Do brokers get business from a seller's open house?"

100%, absolutely, positively, YES! hence the conflict of interest that many sellers believe exists with the current brokerage model. When I first started, I used to work with a top agent whose business model was

a) try not to show any co-operating brokers the first 2-3 weeks, ignore emails, calls, etc..try to get a direct deal first to get double the commission

b) on any sign during an OH showing, a buyer shows a lack of interest or doesnt seem too crazy about the place, jump all over them and try to earn them as a new buyer client and go into the OH with a few places that compete with yours so that you are ready with a couple of 'great other deals', that are out there.

Now, I left this agent soonafter I realized how they were conducting business, as I found it totally unethical. The agent laughed at me when I started urbandigs and was telling honest things on the market. The agent told me that I would never be a top performer doing this, and this is how the industry works.

You guys have no idea how often this occurs out there, its scary. Id like to think this brokergae model in Manhattan is antiquated, and on the verge of collapse on any slowdown. Id also like to think that some agents dont bully business, dont payout for leads, dont farm buildings and gain exclusivity on their farm, dont perform behaviors that are not in the best interest of their client, dont focus on their commission rather than getting the best deal for their client, dont get on the board simply to gain business by being able to threaten in house sellers that are considering using outside agents to sell their property, etc..Id like to think this, but it would be very narrow sighted.

You think Dolly Lenz gets her business because she is so smart and is that great of an agent? Do you see this woman talk on TV? There are structures in place behind the scenes, trust me. This industry is far from ethical and a level playing field. Question is whether a new innovation may arise to threaten it that is in best interest of the consumers. I think it will.

Couple of observations. One, its funny that some folks want to find justification in a seller's broker's breach of fiduciary duty in not presenting an offer, by qualifying said offer, by raising issues such as 'did you make it clear you were open to counter offers?'. Fiduciary duty is duty. By extension, in a market overflowing with inventory, ample evidence of a -20% from peak leading edge, how low can an offer be to actually illicit this response? I would think offers in the 65%-70% of peak value range would be viable...if not outright, then at least as a leader into a negotiation. Are the sellers brokers in question out of touch, or still hanging on to their superiority complex developed in the 2004-2007 timeframe? Seriously.

"Question is whether a new innovation may arise to threaten it that is in best interest of the consumers."

Outlaw commissions being paid entirely by the buyer. Watch the industry change fast.

kas242 -- i indicated in my emails that we are able to close in 30 days. If the broker were to ask for financials, the package would be provided to them. In 3 cases I attached a pre-approval for an 80% loan obtained the same day from the mortgage company.
The behavior being exhibited is quite at odds with the expectations one has.........
I should have mentioned that there is a 6th offer I had made over a week ago Monday to which I got no response from the agent, so 5/6 did acknowledge the email.
Another one where I made an offer of 900k on an asking price of 1.05m informed me that the property was grossly underpriced since it would "normally be worth $2 million"
Couldn't help laughing.
About using a buyer's broker, have to think about it --

"Outlaw commissions being paid entirely by the buyer"

I think that is where we will be headed. In fact, Im banking on it.

Stevejhx--think you mean commissions being paid entirely by seller. I'm as OK with that as any seller could be but not with a six month exclusive. And can only blame myself for agreeing to it
I think 3 months is more realistic as it takes at least six weeks to see if you can work well together. If the standard contract time was three months brokers would be more inclined to work harder

Tina--it ended well so I have no regrets nor will I wonder how strange it is that the perfect buyers came just a month from the end of the contract time. People did go to the open houses--and if the broker used it to solicit business so be it. Yet it was on my dime so to speak. At the time it seemed very important. Now of course I'm happy I sold for a decent price

Noah thanks for being so candid. I read urbandigs because you say what other brokers won't and it's much appreciated

This may be boneheaded but I will ask it anyway. Isn't the commission technically paid out of the buyers payment, which would otherwise go to the seller? Isn't the commission 'economically' paid by seller in the sense that the buyer has a max bid that they offer, and seller nets 94% of that number, regardless?

PS: All this erratic behavior by brokers is just symptomatic of drug withdrawal. "Normally be worth $2 million". My experience is you don't need a buyers broker because at best they psychologically push you to transact when sometimes, in fact many times lately, the best course of action is to do nothing. The internet gets you access to listings. Further unscrupulous sellers brokers give the buyer without a broker the priority attention.

joedavis, I wasn't suggesting that you use a buyer's broker. Given the current brokerage model, I think you are doing yourself a favor by presenting your offers directly. It sounds like you have had all important $ info in line and made it available. I agree with Rhino's comment that many brokers are suffering from 'drug withdrawal'. If you have the stamina to keep making offers, I think the tide will turn for you in the spring.

By spring, the last of the qualified, optimistic, 2008 bonus-getting, and cash rich buyers will find a place. If sellers don't take what they can get by Q2 2009, then another wave of reductions hit in summer and fall 2009. Anything further than that seems more a function of interest rates. If interest rates are the same, then -40% from peak seems like the summer 2009 deal price. Sure some people have cash and job security, but their human nature will not have them anxious to pick -35% as the bottom without seeing increased in the data... Hard to see a positive year over year comp before 2011.

NYinmyblood - even if you signed a six-month exclusive, you can get out of that exclusive with a new legal document severing ties with the listing agent. No one should remain locked into a relationship that isn't working. Every seller should know this! The broker is protected, because if any of the buyers who saw the apartment through the broker choose to buy, the agreement protects them retroactively. But you do not have to stick with a listing agent if you are unhappy with the service you are receiving.

And the three-month exclusive is already pretty standard here in Brooklyn.

"think you mean commissions being paid entirely by seller."

Correct. My bad.

Tina-I think I came across as a serious buyer. I'm paying cash. Nothing in that building is selling now, though it was pretty hot in the last couple of years, reaching very high prices per sqf for Harlem. Offered, as I said, 25% less the listing price. Bypassed the possibility of working with a buyer's broker (though I want to work with Noah, actually), so I made it more interesting for the seller's agent. She laughed, told me to forget it, and instead of saying, -look, this is a great apt, could you go a little higher, etc, etc, she just said no way, good-bye. I told her: ok, you have my email, let me know when the seller is ready. More info: I offered double the price the owner bought the apt for about 5 years ago. And it has not been inhabited for a couple of years, and they are still paying the mortgage...

Mimi - how interested are you? Maybe Noah could help you break through...

Cue cold water splash to the face. Are we really considering banging down the door to pick a bottom 25% from the top in a marginal neighborhood like Harlem...with a seller and broker who have blinders to reality? I obviously do not know you, but I implore you...do not. Sub 96th Manhattan is down 20% as a whole, Harlem should be down 30% by extension... "Break through"? Just reading a little of Noah and his website, I doubt he would agree to help you chase this property.

Tina-my mistake was not waiting longer. The place has pt been sitting in the market for a long time. The broker is a rookie and is working the listing very, very poorly. In three months I'll buy it for the price I offered or less -this time I'll probably call Noah. I am really interested, but not desperate, as this will not be my main residence.

Mimi, you are offering double the 2003 price? Doesn't that reflect the peak of the market? So in other words, -25% from the ask is equal to 2007 peak price, and the seller broker has a tude? Were the streets paved with gold up there when I wasn't looking. I've been to Sylvia's once, and it wasn't that exciting.

Harlem is different. We may never see 2003 offering prices even if true in the rest of the city. Harlem went for like $200 psf in 2003 ...

Harlem went up 300% in that period, rest of the city about 100 %, I think. Owner bought at about $220 sqf. I offered about $480, asking price is about $650. I am realizing that, oddly enough, Harlem sellers are in more denial than sellers in other areas, in spite that the potential danger of buying there is higher. The neighborhood is caught in a middle of a complicated gentrification process, and everybody can imagine that the zillion stores in 125th will not rent that easily. I look at it in the long term and just feel it will be the place in 15 years.
Rhino, a comparable sold 6 months ago for $800 sqf.

"even if you signed a six-month exclusive, you can get out of that exclusive with a new legal document severing ties with the listing agent."

tina24hour - how does one do this? i have a friend who signed an exclusive with a broker who she now wants to terminate.

ITM - your friend should consult an attorney - it should be pretty straightforward. As I mentioned, the broker still gets to work the clients she/he obtained during her/his tenure. In that way, if the broker manages to effectuate a sale, he/she still gets a commission and does not have to co-broke with the new listing agent (the new listing agent should be apprised of this fact - and ideally furnished with a list of buyers from the previous broker).

mimi and kspeak
we may want to talk -- have been looking in Harlem as well for similar things to the 2 of you, and I agree that the people there seem less willing to cut prices than in the UWS.
New developments are not budging more than 10% -- one of my friends finally just went into contract on one of them

Brownstones are all over the place and prices on shells got cut but getting construction loans is hard. The ones in good shape are not cutting.
Mimi I wonder if the ones you are looking into are the ones on 117th or 118th by Lenox. 106 w 123 is one building where prices are way down and it has higher end finishes than many -- still not too attractive, but if you look you'll see an apt for $625k that is anomalous. We went and looked at the ground level triplex a while back - priced at $1.3 million. Finally sold on a best and final auction for ~$625k. This seems to have spurred another apt down to the $625k that was originally asking more.
104 W 123 has an apt for $525k -- same agents -- interesting
Not sure why these people are pricing down and others are not.
There is a large new condo almost finished on the same block on 123rd by Jeffrey Bennet -- I have seen 2 other buildings by him -- they are nicely done and usually near the upper end of the prevailing prices.
Harlem has so much pending stock from new developments that it seems crazy that they are sticking to their guns.
Nearly decided to buy 111CPN apt 3b when they dropped the price from 1.96 million to 1.2 million despite their hefty maintenance, but when I followed up I was told that was a "typo" -- lol -- and they jacked the price back to 1.9 million
Same agent has a building on 2xx w 113 that is a remodeled brownstone size that they brought to market at >1000 psf. Amazing -- this is not the most attractive block and some of the local police told me that 111-114 streets still have drug and gang issues
They reduced the penthouse from $1.3x million to 999k, only to raise the price back the next week to 1.1 million. You guessed it -- another typo.
Either we have a lack of competence or lack of glasses or weird psychology at play with some of these folks.

As to 2003 pricing in Harlem -- 200psf -- don't rule it out. If crime does not return and we don't have large empty partially finished towers that were abandoned by developers who ran out of money then I agree that $400-500 psf may be the floor.

joedavis - one man's opinion, but I don't think there is anything wrong with your strategy. I would lowball bid on EVERY apartment you are seriously interested in, whether new listing, stale, or anything else. You only need one seller to accept, so might as well play the odds.

I am pretty firmly waiting, but may well adopt a version of your strategy in 1-2 years, especially if asking prices don't sufficiently adjust by then (which they well may).

I found that the agents tend to get pretty talkative at OHs, and sometimes over the phone. You can often learn a lot about the sellers and their motivations that way, helping you figure out your bid strategy. Good luck!

I think it is too early for Harlem - it will take time. There is definitely a glut of condos ... but I think sellers mentality is a bit "the neighbhorhoods is changing rapidly and even though prices are falling in the rest of the city, this neighbhorhood is so much cheaper and is getting better everyday."

The reality though is that gentrification is likely to slow, if not partially reverse, during this downturn. That being said spent the day up there and in walking around ... I don't see it totally reverting. The changes are pretty amazing. Especially southwest harlem (near morningisde heights) and the best brownstone blocks between Lenox and St. Nicholas (e.g. 118th-120th). But I still think it will be a block by block story for the next 5 years and I would not buy up there expecting it to IMPROVE in the near future.

Saw a bunch of brownstones today (6). Little traffic and 4 were open houses. One of the selling agents (who does a bunch of business up there) told me no brownstones have sold since August. There have been price reductions, but not quite enough for me ... but pretty clear (even explicit) indications that prices are flexible.

Would be happy to discuss offline .. very serious about area (S. of 125th street) .. looking at brownstones ... but I think it will take a while for prices to adjust.

correction - i meant to say "near mornginside park."

if crime really spikes, all bets are off. i think to buy there you have to believe crime isn't going to double ....

kspeak -- please email me at harlemhouse@mail.com thx

I wish you all luck. It's very difficult to cull out the price appreciation due to real secular gentrification and cyclical strength that pushes buyers at the margin into neighborhoods for more space and exposure to positive neighborhood change. I would think anything that went up the most, would be exposed to more severe price correction. That would go to marginal neighborhoods like Harlem, or glass condos below 96th street that flew on cheap money and 10% down. Very interesting to hear the brazen attitude. That said $480 vs an ask of $650 and a few month ago comp of $800...the sellers probably already feel shook up not to be getting the $800...and by the time they'll take the $480 it might no longer be there. With a run up like $220 to $800...hard to conceptualize. Is that a gut reno to a finished place or is that all pure appreciation?

Rhino-no reno, just pure appreciation.

Maybe the thing to do is to buy a brownstone between 2-3 partners and subdivide?

Joe - will email you.

Rhino - Harlem is an interesting place. There is no doubt emerging neighbhorhoods come down harder. I think the problem is when you start looking at Harlem before 2003 it wasn't "trading with prime manhattan" so to speak. It wasn't even on anybody's radar screen. Until around 2000, even the stretch above Central Park looked like a complete warzone: tons of vacant lots, no real retail, bombed out buildings, garbage everywhere. So I think it is difficult to look at % appreciation just because it was so ignored it was like the Wild West.

My general view is that Harlem trades WITH prime but not superprime Manhattan now, albeit at a discount. If prime but not superprime Manhattan declines 30%, I would expect Harlem to fall even more. By prime but not superprime, I mean Manhattan South 0f 96th excluding West Village, Tribeca, Central Park West, and UES west of Park. The major disadvantage to Harlem is it lacks the retail of "prime Manhattan" - although the basics are at least covered now (groceries, dry cleaning, drugstores), it's just the restaurants are a bit lacking, although there are a fair number of acceptable options. Architecture/aesthetic beauty/subway access/parks are all great. In my view the "fair" discount to prime Manhattan is 30%-40% based upon what it has right now. Not sure if condos are priced this way, since not looking at this market. So it's hard to envision it going back to $200 psf, unless crime explodes or the rest of Manhattan goes to $400-$500 psf.

Well I guess I am coming from the mindset that Manhattan will get cut in 1/2. Sorta like $700-800/ft for luxury condo space that peaked at $1500/ft...and your 'prime' Manhattan coops as you describe at $600/ft down from $1100-1200/ft. So in my 2010 world view, I guess Harlem goes to $300-350/ft from $800...a little bit more than Manhattan prime % wise, but preserving the investment returns of the true pre-2003 pioneer investors...keeping 50% returns vs. 2003 vs. Manhattan prime back to 2003 prices for zero returns on a 2003 to 2010 basis....kinda like the zero that 1988 to 1996 was.

I could see $350 as a possibility, but not $200 psf, with crime.

I am really looking at brownstones so not following the condo market. Brownstone in good condition cost 1/3 of what they would anywhere in prime Manhattan

The price of brownstones in prime Manhattan is driven by pretty high end folk. I'd assume those face some retrace as well. I am only vaguely aware of how their rarity value had them screaming up much more quickly than the broader Manhattan real estate market. I'm also not sure how well we can count on crime as static, with all the budget cuts coming and retail unemployment. What's the alternative in Park Slope cost? I have to admit living in a brownstone is something special.

If crime rate goes up significantly, I'd expect an adverse impact on townhouse prices, relative to comparable spaces in doorman bldgs.

I agree that having a brownstone is special - that is what drove me to look at Harlem but have started liking the neighbhorhood. Also once you buy it, you're done. Never have to move, you never run out of space.

Rennovated brownstones in Park Slope are near $3 million I think. But that doesn't interest me. If I am going to have a 45 minute - one hour commute I might as well move to West Chester.

Pretty sure you haven't been able to get a brownstone for under $2mm in Manhattan for less than $2 million since the mid 1990s. I am not counting some of the tiny ones you see in West Village that have like 2 floors.

I have done a ton of research into crime and recession - link pretty minimal, except to the extent it affects size of police force. I think they will trim the force but I think this lesson has been learned. I am sure crime will increasee, but don't see it going back to the early 1990s either.

Brownstons in Harlem need to fall more before I bite, but I think this will happen.

I've seen vacant and near-vacant brownstones on the Upper West Side so. of 96 and Chelsea for under 2m as late as 2005.

There is no such thing as "near vacant" - even one rent stabilized tenant (I think) ruins the whole thing. I think there had to be some kind catch - run down condition or rent stabilized tenants. I've done a lot of research on this. In 2005 I looked at several floor throughs of a brownstone in Chelsea for $1 million, so I doubt the whole thing would have gone for $2 million. I realize not everybody wants a brownstone, but if classic 8s were going for $2 million at the same time, that seems strange.

I think the $2 million and under brownstone in Manhattan could not really be found since 1999 or so ...

I saw a vacant 4-story in Chelsea (I believe the brokers were Blum & his wife) in 2004 for just under 2m - terrible condition, but vacant. In late 2003, there was a sub 2m on West 95th or 94th, good condition, single family. IMO, one or two RS tenants is not a big deal. In 2005, there was a 2.5ishm vacant townhouse on West 71st street.

I agree that the best thing you can buy in Harlem is a brownstone. I will not be living in NY permanently, so a condo is my only option. And I don´t like the new ones, so I only have pre-wars or brownstones turned to condos in my horizon. I prefer south of 125 and also agree that the closest to the west the better. People that bought in Harlem in the last 5 years feel proud of their choice. There is a mystique there that you don´t have in, let´s say, Murray Hill. Great architecture, a cultural heritage, the smell of change. I see less buying to flip there, more an `I am going to have a better home in Manhattan and I am going to make it happen´This might keep the prices from falling more than in the most boring, bland neighborhoods in NYC. Maybe that´s also why prime Brooklyn is not falling faster or deeper that those.

kspeak, given your research on brownstones in harlem, what premium is appropriate for a brownstone that's 21' wide vs 15' wide? it seems to me that there's a huge difference in terms of light as brownstones tend to be so dark. what's the supply of the wider ones with respect to the thinner ones?

admin
it is hard to pin the premium on 21 vs 15 ft
very few properties come on the market
15 footers seem to peak at 2 million though there is one at 2.9 right now
20 footers range upto 3.x but there are many that are currently available for 950k (with tenants) to 2.1 or 2.2
clearly the wider the better
but if you are going to make it into a single family and use a predominantly loft style the smaller ones are no worse
many 20 footers are chopped up into small rooms - disaster
I would not go below the 15 or 16 width
you losr too much to the stairs

mimi - I agree about the cultural heritage and mystique ... I just like the feel. But you can't buy up there on the expectation of near-term appreciation (even 5-7 years is unlikely). I think we'll see prices fall even more during 2009. Not a single brownstone has sold in 3 months.

agree with joedavis about width issues. it's difficult to say the premium for width - it seems more of the 15-17 feet ones are "done" and the wider ones need work.

i think if brownstones are opened up (instead of sectioned into little rooms) they get plenty of light. especially in harlem because there aren't high buildings near the brownstones. on UES and UWS especially the brownstones always seem to be near high buildings which makes them especially dark.

good point, thanks both!
there are several brownstones for sale around where we are living (just west of morningside park) without any movement at all but no cuts in prices either (yet). most of them had been renovated, a few with good taste (IMHO).

kspeak - can you explain your commute point? Where do you work that the commute is significantly longer from Park Slope than Harlem?

admin
i am aware of a couple of them on the east side of morningside park that are priced pretty high and 1 that is on 117th or 118th that is a rooming house that has been for sale forever
and 1 on 115th also for sale forever
i would buy one there if it ever came to a reasonable price
none of the ones I am aware of are quite where i would like them to be

I think brownstones in prime manhattan are the one are of the market that will not retreat to 2002 levels. The reason: brownstones did not start to really appreciate until or 2003 or so, unlike coops and condos which began their epic rise in 1999, and since then they have shot up. I think there has been a major structural change (the decline in crime) that fundamentally changes the equation for living in a townhouse. The prices will come down, but this is one area of the market where I would not count on 2002 prices.

It seems like brownstones accelerated at a higher rate in 2003-2007, though. If we take the whole period from 1999-2007, are brownstones behind coops/condos or ahead? It really does seems like crime and interest rates, as the two largest unknowns, render analysis pretty hopeless.

Harlem is a big area, but I am talking about a specific section - South of 125th street, west of 5th avenue and East of Morningisde Park. I think this is the area joedavis and mimi are looking at too ...

As for the commute - this section of Harlem has the 4/5 (on 125th and Lex), the 6th (125th and 116th & Lex), the 2/3 (Lenox/6th and 125th & 116th), the A/C and B/D (Fredrick Douglas/125th and 116th and 110th). With the express trains, you can be in midtown in 10-15 minutes. For subway options, Harlem is better than UES or UWS in terms of number of options.

I kind of agree w/ happyrenter about townhouse prices and crime. I do think crime might increase a bit, but I don't see us reverting back to the early 1990s. You have to believe crime isn't going to spike to even consider Harlem. Even if crime does increase ... it would have to increase A LOT to make living in a townhouse scary to me ... Philadelphia for example has way higher crime and almost everybody I know there lives in a townhouse near Center City.

I see Harlem brownstones coming down in price though. Financing issue is a major one - many are zoned as multifamily. The price point of most - $1.5 - $2.5 million - means many of the buyers are reliant upon financing (unlike South of 96th street where the minimum price point of $5-$6 million probably mean more cash buyers). But who knows ... value is so good ... $300-$400 psf for good condition (e.g. needs updating but in good shape) and $500-$700 psf for mint condition (rennovated kitchen/bathrooms, central A/C, etc).

Oh yes, prices will come down No question. But Harlem brownstones sold for basically nothing not that long ago. They can come down an awful lot and still not get close to that.

Exactly - that's my point.

I had the opportunity to buy 235 (?) W 132nd (complete shell) for 500k in late 2004. Passed on that. I think Harlem prices will come down faster than you think, even on brownstones.

Like emerging market stocks, it will fall just as much or more in percentage terms, but will hold a nearer lower in terms of a yearly reference point. Emerging markets stocks down 65% to 2005 levels, vs. the US stock market, roughly 45% to 1999-ish levels. My dates are close, may not be exact. Morale of the story, some of the secular story remains true, albeit inside of a cyclical correction.

saw the comment below and am wondering what is the story with brokers not conveying offers to their sellers? has anyone else had this experience? We've made several offers in the last few months and the selling brokers basically told US to go back and raise our offers before they would convey it to their sellers. Aren't they obligated to relate the offer to the sellers?

so once brokers accept that "we are at 2005/6 prices" that really means "we are at 2002/3 prices"?

Admin, are you the administrator or is that just your handle? I think it means that sellers would take 2005/2006 prices, but buyers are still not transacting, so the answer still unknown in an illiquid market with downward bias! Lot of green between 2002-2003 and 2005-2006. I think it means 2004...Especially for smaller apartments (2 bed / 1 bath or smaller).

Bubbleburster....yes they are obligated to convey an in-writing offer. That was the accumulated knowledge of this post, before it turned North on Lexington toward Harlem (which is perfectly fine...)

I think getting to 500k for a shell is totally reasonable
there are a bunch sitting at a million now and not selling
however there are still sellers dreaming of a million+ (1.3)for their wonderful shells with glorious details and "location"

these I think will crash -- less sure whether the ones already fixed up niely will drop by the same %
but if I can get a UWS brownstone for 2.2 vs a shell in Harlem for 0.5 it would seem that the UWS choice is easy to make
There was a recent sale for 1.8 on West End but I learned about it after the fact
Also there were some on 1xx Manhattan (around 106) in that range -- again learned too late

I think the shells are in trouble...there is no financing renovations in this market, and anyone smart enough to have the cash is likely rightfully cautious.

bubbleburster - yes, they are obligated, if you made the offer in writing. See Ali's comments above. Talk to the sales managers at the listing agent's brokerage.

> Common story from all of them is

And the common story is that none of these brokers are successful playing these games.

Sales are down 75 fing percent.

Can't get much more "try again" than that.

I gather from this thread that my intuition about Harlem owners being even more anchored in their dreams than the rest of manhattan has a point. This could mean that the prices will fall, but later, when the 30% less than Harlem has been offering against other areas begins to thin. People loves to have 30% more space than in the UWS for the same money, but the day this difference goes to 10 or 15% people will be thinking twice about the lack of restaurants and the slightly higher crime numbers. The funny thing is that people that bought in 2003, like the owners of the place I like, can sell this place to me at more tan 100% net gain, pay the mortgage and pocket over u$s 300.000 on top, which sounds just great, since now you can invest it in things you know are going up. But this incredible gain seems not good enough to them. I wonder who is going to win this war. If people like me gives in and offers just 10% less, the market will favor the sellers. If we keep on waiting, they will have to give in. I guess inventory will tell, but then, a big portion of it will be crappy apts. This process seems slower than expected. The players will be the sideliners, which will have to curb their enthusiasm....

Please tell me what "things you know are going up"? :)

Most people can't do the mercenary thing and sell their apartment and sign a 2-year place the next day. Also, they may feel emotionally a part of the Harlem Renaissance. I guess the question is, are their Harlem brownstones to rent? Sign a two-year lease. See first hand how the neighborhood holds up in a downcycle.

Rhino, the place I am interested in is empty. Owners live several blocks away. They paid the mortgage in another place where they live, and are still paying the debt in the vacant one.(I got this form ACRIS, I love the tool, but I would hate to have people peeking into my mortgage situation!) So they don´t need to run and rent.
I think that stocks like Berkshire will go up faster that RE in Harlem. Do you agree? I am not interested in buying more stock, because I already got burned badly for not being diversified enough. My big question is the correlation between stocks and real estate.

In Manhattan the correlation is high...with a lag. 1986-1999 is a nice stretch of time to look at. Stocks will lead real estate on the way up, because Wall Street hiring chases stock prices and wealth effect lags employment for real estate buyers. Mathematically, stocks broadly are a good investment here with a 5-year time horizon or more. If in 2009, the S&P trades to 600 (-35% from here), then real estate is in double the trouble, so you have a 'natural hedge'. In other words, you sell your stock, lever it 4 or 5 to 1 and buy real estate in 2010.

If you believe this is a severe recession (rather than a standard recession), then the bias for the stock market remains down in 2009. On the numbers, comparisons to the Great Depression are silly. I chose to trade the stock market, because I don't think I can guess whether this is a standard or severe recession. 2002 was 'sub standard'. 1982 was 'severe'. I think 1991 was your 'standard' variety. We are trading at 15x 2009 EPS, which is 'average' valuation on a market earnings figure that is down 35% vs. 2008. So average valuation on a 35% haircut to 2008 peak eps. Honestly, my numbers may be stale by the second. I am holding stocks here for a trade... I wouldn't invest until we see a retest of the low...or a confirming breakout over 1000...

? 1986-1999 is a nice stretch of time to look at. Stocks will lead real estate on the way up,

Stocks bottomed in 87. Manhattan prices didn't bottom until 1991.

So, at best, prices will start moving up in.... 2012...