Reasons to sell

One phrase used often by posters who think the market will not have a severe decline is along the lines of: "Buyers don't have to sell, they will wait for their price" No doubt there are some of those. However, there are many who HAVE to sell. On average, American move every 7 years, which implies 14% turnover every year. Read the obituaries in the NY Times, many of them will have a co-op to sell,... [more]

One phrase used often by posters who think the market will not have a severe decline is along the lines of: "Buyers don't have to sell, they will wait for their price" No doubt there are some of those. However, there are many who HAVE to sell. On average, American move every 7 years, which implies 14% turnover every year. Read the obituaries in the NY Times, many of them will have a co-op to sell, and with a step up in basis at death it will be tax free to the heirs so they will take whatever they can get. Many wealthy suburbanites have pied-a-terres. As they lose their jobs, or half their assets in the market, some of those will be sold to lower expenses and free up cash. People get divorced. If the co-op is a major asset, it is often sold because neither party can afford to buy the other one out. Co-op rentals are limited to 12 or 24 months. So you can delay selling but only for so long. We should see increased listings as co=op renters from last year hit the market. My wife owned a 5th floor walkup one-bedroom on Charles St when I met her in the mid-80s. Too small for 2 people, it was tiny, so we rented on St Marks Place. She rented it for a year and was forced to sell by the coop rules. She had paid $120k, sold it for $140k, and in 1990 it would have been down to $85-95k, so being forced to sell turned out to be good. Foreclosures. Now that prices are starting to drift below 2006/07 prices, you will start seeing 10% down condo owners make the economic decision to mail in the keys and walk away. Moving out of NYC. Unemployed people will tend to head back to where they came from. Some employed people (such as BofA in Charlotte buying Merrill Lynch) will get transferred out of NYC. Net net, expect to see out-migration from Manhattan the next few years. Moving down in NYC. Many who stay and have jobs will have lower incomes/bonuses, that can no longer support their current living arrangements. Some will sell and either rent a comparable apt for less than the cost of owning, or buy a smaller apt. Retirement. Many older Wall Streeters (post 50) already have 2nd homes. Some will get laid-off and decide to move there and sell the NYC apt. And some will say why work for no bonus and chose to retire and move to Florida (no income tax!) and play golf year round. Financial jitters. Anyone who bought pre 2005 is looking at their big gains evaporate, some will decide to take what profits they can now before they disappear. All in all, there are many reasons to sell in a declining market. Yet there are very few reasons to buy when you know it will be cheaper in 6-12 months and rental prices are dropping at the same time. [less]