My theories on the high-end market (currently 5-15mm properties)
Started by bfgross
almost 17 years ago
Posts: 247
Member since: Jun 2007
Discussion about
Unlike many, I think that the high end of the market in Manhattan will suffer the most of any segment. Why? Basically people who have bought apartments that currently fall into this price range were overwhemingly Wall Streeters, hedge funders, private equity and related businesses, and to a lesser extent, wealthy foreigners. These businesses are now either completely dead or in serious peril.... [more]
Unlike many, I think that the high end of the market in Manhattan will suffer the most of any segment. Why? Basically people who have bought apartments that currently fall into this price range were overwhemingly Wall Streeters, hedge funders, private equity and related businesses, and to a lesser extent, wealthy foreigners. These businesses are now either completely dead or in serious peril. Foreign buying has slowed dramatically, and most of the European buyers all the sudden have a whole host of issues to deal with at home.
Basically overnight, Wall Street's capacity needs have virtually halved. Layoffs are mounting by the thousands, and we are not nearly done with them. Just as negatively, the jobs that will be left will generally not be paying anywhere near the jobs of old. Hegde funds are private equity shops are closing by the thousands, yes thousands, and the ones that survive will be forced to operate very differently than in the past simply because the prime brokers who service them will be forced to limit that leverage. The big investment banks have been de-facto socialized and will not be levering up their balance sheets for many many years, Boards of Directors simply wont allow it. For all these reasons and more, I think it will be many, many years before Wall Street comes back in anywhere near the way it existed over the 2002-2008 time period.
For simplicity's sake I group the 5-15mm owners into three categories:
Top third: they made enough money to not be dramatically affected by the downturn, even as their own jobs may not nearly provide them with anywhere near the income of the recent past, they will still be able to make do with some cutting back and economizing, while continuing to live their seven-figure (and above) Manhattan family lifestyles. For them, the downturn is a real nuisance, though not a serious threat to their well-being. These are people who have been making a lot of money for far more than the past five or six years, generally over 50 years old, with net worths of $30-50 million or more.
Middle third: these are people who made the vast majority of their net worth in the past 5-6 years, some are two-earner families where one spouse has lost a job or the higher earning spouse has suddenly seen their earnings power cut dramatically (read: 99% of Wall Street MD's). They bought a $5 million place on CPW or Park Avenue 4-5 years ago, perhaps borrowing against their restricted Lehman, Bear, Merrill, or Morgan stock, put another million into renovations, have two kids in private schools and a $3 million Hamptons house and generally have a seven figure pretax lifestyle. They now find themselves very house rich, very cash poor, and with very uncertain prospects. They may have a few million in the bank and some stock left, but the value of their real estate is at least as great, if not greater than their liquid assets. No way they can get by on a few hundred a year longer term. They may be able to wait this out a year or two, but at some point in the fairly near future, they will be faced with some very unappealing choices......
Bottom third: these are the owners of the apartments we suddenly see coming on the market now, these beautifully and very recently renovated apartments where we wonder why someone would go to the trouble of spending a fortune to renovate last year just to blow out now. They are just a poorer and unluckier version of the middle third. Maybe they are Lehman or Bear employees without jobs or much extra cash who saw their entire restricted stock (which was half their net worth) implode overnight and suddenly be worthless. Even Merrill Morgan and Goldman stock is down 65-80% from the peak. They are your forced sellers, and they are the ones making the market right now in the high end.
My single biggest question is this: WHO IS GOING TO TAKE UP THE SLACK HERE AND BE THE BUYERS? There arent any industries providing the kinds of jobs to support these high end apartments. Not foreigners, not oil-rich Arabs or Russians, or Japanese or anyone I can think of. Sure there are always a few but not nearly enough to support this segment. Especially not for the thousands of high-priced apartments in loft buildings in places like SOho and Tribeca and all sorts of other once-marginal areas. Additionally, I am not at all sure that 2-3 years from now, the paradigm that had emerged over the last 15 years or so that Manhattan was, for many wealthy individuals, a better alternative to surburban life, will not reverse course and shift yet again. The budgetary problems and likely impending tax increases will almost certainly cuase a serious reassessment of this.
I do expect much more pain in the high, and I welcome comments and critiques.
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Response by nyc10022
over 16 years ago
Posts: 9868
Member since: Aug 2008
ha.
would not be surprised. similar levels of stupidity.
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Response by se10024
over 16 years ago
Posts: 314
Member since: Apr 2009
"does anyone think taxes are not going to make a major league dent in this market?"
bfg you forget that wonderboy loves to pay taxes, so in fact the city will attract like-minded people
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Response by nyc10022
over 16 years ago
Posts: 9868
Member since: Aug 2008
Yes, I hear there is a huge community of folks who want to pay more taxes, but they don't want the schools to be good, or to have their garbage picked up.
They'll be coming here in droves next year and buying up all the condos.
This thread is so hijacked...I wish it were on topic but all hope is now lost
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Response by w67thstreet
over 16 years ago
Posts: 9003
Member since: Dec 2008
bonerboy has gotz no cluz about his future.... hey just look at the homeless guy picking up cans outside your Starbucks seat.... the only difference between him and you is 12 more months of 0 commissions....
If i were you, i'd cut back on the lattes and go for the $1.79 small... it'll stretch your budget....
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Response by wonderboy
over 16 years ago
Posts: 398
Member since: Jun 2009
LOL - you all sound so bitter that you will never be part of the high-end purchasing demographic. Go back to discussing your bargain basement $900,000 apartments and don't speak of what you have no business/idea of what you're speaking about.
As a recent purchaser of a high end property in this range, Id like to make a few comments. i recognize that there are a lot of r.e bears on this board, of which I was one for a several years...as well as bulls and brokers, so Ill try not to make any (intentionally) inflammatory remarks.
first, its important to recognize that the high end apartment market is highly idiosyncratic - it is not efficient, transparent or liquid - and in many ways, is not even a true market. no two apartments are the same, pricing on comps can only be seen on a delayed basis, and there isnt much regulation. no matter how much work and logic you throw at the selling broker, you may not be able to convince them.
second, supply and demand drive the high end r.e mkt in manhattan, and right now there is very little new capacity coming. pre-wars obviously cannot be created and to my knowledge, there are few if any plans to develop new large family sized properties right now. another recent thread actually showed a map of discontinued projects. that isnt to say that there is no existing inventory of 10, 11, 12 room apts, bc inventory is close too, if not at, an all time high. however...
inventory numbers can be deceiving. not all apartments are created equal. you may see 8 ten room apartments available on the UES, but how many of them are truly desirable? like me, im assuming that most high end buyers are discerning and highly selective. buyers at this level often have to pay cash for their home, as many buildings dont allow financing, and the constraint is not cash but features. good properties always sell.
fourth, members of SE are not the only informed r.e patrons. we all know of the coming social economic headwinds. higher taxes, more crime, fewer jobs, more homeless. but our families are growing, we need a home for them, and there are only so many great apartments in nyc...and when they come for sale it can be hard to pass up.
lastly, only time will tell. most markets these days are correlated. the fact that the stock market has risen 35% above its lows from March influences the r.e mkt, which has also probably seen its lows for the time being. maybe hi end NYC r.e wont rise much, and this 25-35% off peak is the new reality, but its hard to envision all financial assets rising and real estate in the global capital of the financial markets falling. perhaps the Dow will fall to 5000 in 2011, and real estate along with it, but who has time to wait?
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Response by OldWest
over 16 years ago
Posts: 112
Member since: Jun 2008
I wish I had your apartment, WonderCluck. Just so I could play some video games and grab some gumballs from the machine. When you grow up, you'll quickly realize that you really didn't have a clue as kiddie.
I guarantee you there are plenty of people on these boards with $5m+ apartments and second homes. And that doesn't matter.
Wear your watch. It's thicker than your penis. Your benchmarks are whacked. Grow up
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Response by 30yrs_RE_20_in_REO
over 16 years ago
Posts: 9877
Member since: Mar 2009
"so Ill try not to make any (intentionally) inflammatory remarks."
Boy are you in the wrong place ;).
"first, its important to recognize that the high end apartment market is highly idiosyncratic - it is not efficient, transparent or liquid - and in many ways, is not even a true market. no two apartments are the same, pricing on comps can only be seen on a delayed basis, and there isnt much regulation. no matter how much work and logic you throw at the selling broker, you may not be able to convince them."
Depending on what definition of "high end" you are using, I would disagree with that in that there are many in the latest range being used ($3 to $10 million?) which are "lines" in new construction buildings and aside from minor variations in view are not only "similar" but pretty much "carbon copies". Although when you are talking about prewar Coops, the statement carries a LOT more weight.
"second, supply and demand drive the high end r.e mkt in manhattan, and right now there is very little new capacity coming."
Just to play Devil's Advocate, there was a recent poster who came on here about ?a week ago? who claimed he was a "high end Wall Street type" who basically said everyone on WS was going to be putting their units on the market at some point in the near future. I challenged that concept at the time, but if I'm wrong and he's right, you will see a bunch of fully "comparable" units on the market at the same time in the high end as defined in this thread.
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Response by anonymous
over 16 years ago
Just to play Devil's Advocate, there was a recent poster who came on here about ?a week ago? who claimed he was a "high end Wall Street type" who basically said everyone on WS was going to be putting their units on the market at some point in the near future. I challenged that concept at the time, but if I'm wrong and he's right, you will see a bunch of fully "comparable" units on the market at the same time in the high end as defined in this thread.
I don't recall seeing that. Please don't make shit up. It is hard to figure out who to listen to and who not to. Could you provide the link?
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bfgross
12 days ago
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Carnegie, let me posit this. 90% of the families who live the park avenue/central park west/fifth avenue/west end avenue lifestyle including nannies private schools and second homes with the primary breadwinner in finance or big law either have their homes on the market, aren't sleeping well at all, or are extraordinarily lucky. The other 10% are really rich and this isnt affecting them. Hence prices in the mid/high-end are getting slaughtered and the Hamptons are even worse. This dynamic IMO hasnt changed one whit in the last 4-5 months."
Asshat.
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Response by Dwayne_Pipe
over 16 years ago
Posts: 510
Member since: Jan 2009
"There is always at least a few idiots to make the claim.
No wonder who it is now..."
Well played, Sir! No "wonder", indeed!
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Response by wonderboy
over 16 years ago
Posts: 398
Member since: Jun 2009
OldWest
I am pretty sure there are people here who have the means to purchase or own $5M residences, but you aren't one of them sweetie. Nor is west67th, nyc10022, Dwayne_Pipe, columbia, and the rest of you paupers.
I must go now children, my vehicle awaits me downstairs. But if I may, I'd like to ask you not to make yet another nouveau-riche mistake by speaking for the high-end demographic when you are obviously ignorant to the subject.
And west67th, dear, ask your creditors to step up your meager allowance and buy a real apartment and not that low-class sub-2M dump on Broadway. I don't expect you to match my palatial duplex, but I expect you to think of me before you squander your modest dwindling capital on such low-class rubbish.
tata!
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Response by OldWest
over 16 years ago
Posts: 112
Member since: Jun 2008
wunderlust: you are sooo right. As always. And calling me sweetie? Hmmm, trying to throw off the scent?
And keep counting on that One Madison commission. I'm sure it will come in someday!
But if you knew your high-end market like you pretend you do, you would know that it's not the price that counts but the ability to get past the co-op board. I am afraid you could never pass the board at most of the buildings.
And later, when you grow up and lose the brill cream in the hair, you'll wish you never pissed off those people who you need to help get your children into the right schools...
If only money WAS everything!
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Response by happyrenter
over 16 years ago
Posts: 2790
Member since: Oct 2008
back to the topic at hand:
the high end of the real estate market in manhattan has always been the most unstable, boom/bust segment. i can speak of my parents' building, one of the top coops on the upper west side. in the late 70s people bought 11 room apartments for under $100,000. When my parents bought in the mid 80s, (1985) the price had risen to around 600k. Prices crashed and did not recover to that level again until the mid 1990s. we all know what happened between the late 1990s and today. It is a highly volatile market and anyone who claims that they know for sure what direction it is going is being silly.
here is what we do know: there has been an enormous shift of wealth and income toward the ultra-wealthy in the United States and globally over the last 30 years. this shift has driven enormous real estate inflation in areas where the wealthy are concentrated. manhattan, malibu, central london, east hampton, etc. have seen real estate soar. i see know evidence that we are going back to the good old days when CEO's made 10-50x what an hourly worker made, rather than often 1000x today. So I think manhattan real estate will probably not collapse. but there is no question that the wealthy have suffered enormous economic reversals, and that is leading to a disproportionate downward movement in high end real estate.
as for predicting the future, difficult to do.
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Response by OldWest
over 16 years ago
Posts: 112
Member since: Jun 2008
I can't speak to west side, but I can for east side park. We go back to 1985 as well. Co-op. There was quite the boom for co-ops back then but boards for the older ones were still fairly strict.
I think the difference these days is the international nature. Sure, there were international buyers back then but not like today. The condos are part of that trigger.
That and leverage. Much more used today.
By definition, there is always a high-end. And a low-end. And a middle. Just take the top 15%, bottom 15% and everything else in the middle.
But the number of people who can afford the high-end has certainly dropped. It went up dramatically, then declined. We can find the numbers of households with liquid net worth over $10 million somewhere.
Do the top 0.001% of buyers change? not really. Going from a net worth of $2 billion to $1 billion doesn't change the ability to buy a $10 million apartment. But that's not high-end. There are less than 1,000 billionaires in the world. Different market completely.
There ARE fewer buyers on the high-end as defined by this thread's title. That's a fact. The shake-out will take longer but it is already in the works. I can remember when a 6,000 square foot apartment on Park was under $400,000. Buying a $10 million apartment even in a condo takes certain wealth and much of that wealth for many people is gone.
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Response by nyc10022
over 16 years ago
Posts: 9868
Member since: Aug 2008
"By definition, there is always a high-end. And a low-end. And a middle. Just take the top 15%, bottom 15% and everything else in the middle."
Ha... of course, if everything goes down 50%, that high end still exists... its just much lower.
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Response by nyc10022
over 16 years ago
Posts: 9868
Member since: Aug 2008
"I am pretty sure there are people here who have the means to purchase or own $5M residences, but you aren't one of them sweetie. Nor is west67th, nyc10022, Dwayne_Pipe, columbia, and the rest of you paupers."
Why is the last resort of the folks proven dumb always "uh, but you are poor".
What is this, 3rd grade?
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Response by bjw2103
over 16 years ago
Posts: 6236
Member since: Jul 2007
"Why is the last resort of the folks proven dumb always "uh, but you are poor".
What is this, 3rd grade?"
I'm not a big fan of alpine either, but that's exactly the same stuff you say to him, isn't it?
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Response by wonderboy
over 16 years ago
Posts: 398
Member since: Jun 2009
OldWest,
I find it hilarious that you are still trying to convince yourself that I'm a broker.
Oh, and one more thing sweetie, when you are at your residential co-op meeting, and after you are done discussing how your 90 year old neighbor Larry should be banned from the community pool because his backhair keeps clogging the filters, you should start by understanding that money is everything... and I have it, before you even attempt to repeat it again. If you do a good job I promise I'll get you out of the mayhem of living in a luddite residential community and into your first showstopper of a house, Duke Semans mansion maybe?
tataaa!
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Response by bfrank
over 16 years ago
Posts: 1
Member since: Jul 2009
Wonderboy is Prada_Addict and perhaps BRABUS
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Response by notadmin
over 16 years ago
Posts: 3835
Member since: Jul 2008
"you should start by understanding that money is everything... and I have it"
wonderboy = wonderbra? you remind me of the song "I'm just a gigolo and everywhere I go, People know the part I'm playin'. "
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Response by aboutready
over 16 years ago
Posts: 16354
Member since: Oct 2007
bfrank, i was just thinking exactly the same thing. or maybe princessedna after some english refresher course.
when will he become wonderman, one wonders?
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Response by wonderboy
over 16 years ago
Posts: 398
Member since: Jun 2009
bfrank, why would you think something like that?
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Response by nyc10022
over 16 years ago
Posts: 9868
Member since: Aug 2008
> I'm not a big fan of alpine either, but that's exactly the same stuff you say to him, isn't it?
And I thought we could make it a week without the hall monitor....
Check the threads, alpine is the one who started the concept.
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Response by nyc10022
over 16 years ago
Posts: 9868
Member since: Aug 2008
wonderboy
about 18 hours ago
> LOL - you all sound so bitter...
ROTFL.
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Response by bjw2103
over 16 years ago
Posts: 6236
Member since: Jul 2007
nyc10022, hall monitor? Please. It's just funny when you call people out for that when you say things like this: "Dude, you live in New Jersey. You can't afford where I live. AND, I didn't lose all the money you did. I know you're poor because not only do you live in New Jersey, you have the grammar of a 3rd grader..." Sorry you don't like to be called on it yourself.
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Response by happyrenter
over 16 years ago
Posts: 2790
Member since: Oct 2008
can we PLEASE stay on topic?
is there anyone who seriously disputes that:
1. there has been a significant wealth effect from asset depreciation.
2. unemployment--and especially unemployment among high earners--has reduced demand.
3. job, income, and other forms of economic insecurity have reduced confidence.
but also
4. the dramatic increase in income and wealth inequality has led to a long-term, secular increase in manhattan real estate values over the past 30 years.
5. quality of life in NYC has improved, increasing the desirability of living in Manhattan.
6. the market has 'priced out Armageddon,' ie it seems highly unlikely that real estate values in Manhattan are going to go to zero.
all of this indicates to me that high end manhattan real estate remains under considerable threat even after the 30% and more declines in that segment of the market, but that while high end real estate will continue to come down we are unlikely to see a real bargain-basement situation.
anyone want to make a different case?
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Response by w67thstreet
over 16 years ago
Posts: 9003
Member since: Dec 2008
absolutely happyrenter... we should stay on topic that manhattan high end (and therefore ALL) mkt will continue to fall/struggle/slide sideways/jigger about the decline trend lines BUT!
I've got one question for bonerboy/shrimpie/ericho75.....
What is this thing? I've heard of it, but I am seeking expert opinions.... this thing... this thing ... what is it called... OH yes, what is this "refractory period?"
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Response by wonderboy
over 16 years ago
Posts: 398
Member since: Jun 2009
*rolls eyes*
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Response by nyc10022
over 16 years ago
Posts: 9868
Member since: Aug 2008
> nyc10022, hall monitor? Please
Exactly... and you're still doing it....
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Response by w67thstreet
over 16 years ago
Posts: 9003
Member since: Dec 2008
bingo! wonderboy = agentrachel
I get that you are rolling your eyes agentrachel... but what's going on with your hands?
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Response by nyc10022
over 16 years ago
Posts: 9868
Member since: Aug 2008
ha. i think yo ugot it!
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Response by happyrenter
over 16 years ago
Posts: 2790
Member since: Oct 2008
w67th, that's helpful. "we should stay on topic....BUT" and then you go right back to the idiotic side discussion.
apparently no one is challenging my market analysis.
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Response by bjw2103
over 16 years ago
Posts: 6236
Member since: Jul 2007
"all of this indicates to me that high end manhattan real estate remains under considerable threat even after the 30% and more declines in that segment of the market, but that while high end real estate will continue to come down we are unlikely to see a real bargain-basement situation.
anyone want to make a different case?"
happyrenter, that's a pretty thorough analysis and one that's tough to argue against. I would add that as long as low-end volume is there (as it currently is, it seems), the likelihood of bargain-basement prices at the high-end is significantly lowered.
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Response by bfgross
over 16 years ago
Posts: 247
Member since: Jun 2007
bjw: i actually would have to disagree with you. NYC remains the land of opportunity for so many younger people in lower paying fields like the arts, media, etc.. and is a very desirable place for younger people who dont have families, schoolds, coop boards, high maintenances and taxes to worry about. I dont think that has changed much since last year. I think the low end has relatively little to do with the cohort group that I originally started this thread writing about.
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Response by wonderboy
over 16 years ago
Posts: 398
Member since: Jun 2009
Who and what is an agentrachel?
Is she well dressed, good looking and wealthy like me at least?
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Response by wonderboy
over 16 years ago
Posts: 398
Member since: Jun 2009
Ok, so I'm PradaAddict, Alpine/President then I'm BRABUS, PrincessEdna and now I'm Agent Rachel.
I'm glad I'm piquing your interests but no. Sorry.
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Response by bjw2103
over 16 years ago
Posts: 6236
Member since: Jul 2007
bfgross, maybe I misinterpreted what happyrenter was saying, but I was trying to say that I don't see $5m properties trading at $1m. They'll definitely get hit - hard - but I don't know what people out there are really expecting. If the high-end really does fall that much, what does it mean for the low-end? I don't think we'll see many properties go for under 6 figures in Manhattan, and that's the only possible outcome I can see from the high-end truly hitting bargain-basement prices.
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Response by happyrenter
over 16 years ago
Posts: 2790
Member since: Oct 2008
bjw and bfgross,
i think i would split the difference between you. let's take the average property that traded for 6 in 2007. Today, it is probably trading for somewhere in the neighborhood of 4-4.5 (this is an average folks, PLEASE do not try to refute the point by naming specific properties that have traded for more or less than this). Is that property, on average, likely to go to 1? I find that very hard, if not impossible, to believe, short of a complete and total collapse of the US economy or a major catastrophe in NYC like nuclear terrorism. So setting those possibilities aside, the armageddon scenario seems unlikely.
i think a reasonable worst-case scenario for the peak $6 million property would be, on average, a bottom of $1.5. A best-case scenario, obviously, is that we have already hit the bottom. I would probably come in between those and say an average bottom of $2.5 to $3 would be likely.
i agree with bfgross that there will be significant compression between the high, mid, and low ends of the market, but of course it is true that the markets are not completely disconnected, and compression can only go so far.
i am using $6 million to represent the high end, but of course in NYC there was at least at one time a market for apartments and houses for 5 or even 10 times that price. but a nice prewar coop on park avenue or cpw that peaked at $6 million seems like a reasonable representative of the high end.
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Response by wonderboy
over 16 years ago
Posts: 398
Member since: Jun 2009
The high end will always be there. There will always be the ruling class with $$$ to drop on high-end real estate (as evidenced by the few places which have sold around $25-40m during the past few months). The recession isn't for everyone.
I personally don't give a rats ass what happened in 1996. We are in recession so obviously the amount of high transactions are down but not gone. In a year or two (or three), everything will be back to normal.
And nyc10022, save the retort. I'm sooo over it.
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Response by 30yrs_RE_20_in_REO
over 16 years ago
Posts: 9877
Member since: Mar 2009
I think that most people believe that the distrtibution of both income and wealth is much more homogeneous in this country 9and even in Manhattan0 than it actually is. Top 15%? How about top 2% or 1%? that's what's always been the wealthy in just about every place you could think of - and that's being conservative (i.e. it's probably a lot more likely to be 0.3% than 15%).
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Response by nyc10022
over 16 years ago
Posts: 9868
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> And nyc10022, save the retort. I'm sooo over it.
Yes, I know its hard to hear how wrong you've been.
But your only real solution is to, well, stop being so wrong.
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Response by nopigsorshrimp
over 16 years ago
Posts: 398
Member since: Jan 2009
yepyepper, sorry itz been three hours since you posted without comment by me. (for those of you who are wondering who yepyepper is, its my little rottweiler / chihuahua mixed breed w67thstreet who also happens to own a Porsche in case he didn't mention it during this 24 hour period).
you must LOVE being a little doggie running around town, looking up the skirtz of the ladiez and then pooping on the sidewalk with your wife the medical doctor (also all you new readers, make sure you know his wife is a doctor, oh, he also owns a boat) cleaning up after your messes.
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Response by Dwayne_Pipe
over 16 years ago
Posts: 510
Member since: Jan 2009
Wonderbra: Yes, everyone is a gazillionaire on the internet, even you. Tell me, Mr. Buffet, how is it that your diction and writing style belie a high intelligence? And since there is a strong correlation between intellectual horsepower and wealth, I believe quite strongly that I am worth a good bit more than you are.
Now go polish my luxury sedan, which unlike you I paid cash for. I'll even give you cab fare to my parking garage...
'/%3e%3c/g%3e%3c/svg%3e)
ha.
would not be surprised. similar levels of stupidity.
"does anyone think taxes are not going to make a major league dent in this market?"
bfg you forget that wonderboy loves to pay taxes, so in fact the city will attract like-minded people
Yes, I hear there is a huge community of folks who want to pay more taxes, but they don't want the schools to be good, or to have their garbage picked up.
They'll be coming here in droves next year and buying up all the condos.
wonderboy = shvo?
Naw
Maybe Jared Seligman?
http://www.prudentialelliman.com/MainSite/Agents/Agents.aspx?BID=JARS#Mylistings
But he doesn't have any listings over $3.2m
Maybe the high-end is dead. After all, if a smug, self-promoting twat can't tell you how to stage your apartment, who can? http://nymag.com/daily/intel/2009/03/broker_to_the_stars_jared_seli.html
This thread is so hijacked...I wish it were on topic but all hope is now lost
bonerboy has gotz no cluz about his future.... hey just look at the homeless guy picking up cans outside your Starbucks seat.... the only difference between him and you is 12 more months of 0 commissions....
If i were you, i'd cut back on the lattes and go for the $1.79 small... it'll stretch your budget....
LOL - you all sound so bitter that you will never be part of the high-end purchasing demographic. Go back to discussing your bargain basement $900,000 apartments and don't speak of what you have no business/idea of what you're speaking about.
A sign of weakness in the high end? http://www.nytimes.com/2009/07/19/realestate/19deal1.html?ref=realestate (i.e. vulturism)
As a recent purchaser of a high end property in this range, Id like to make a few comments. i recognize that there are a lot of r.e bears on this board, of which I was one for a several years...as well as bulls and brokers, so Ill try not to make any (intentionally) inflammatory remarks.
first, its important to recognize that the high end apartment market is highly idiosyncratic - it is not efficient, transparent or liquid - and in many ways, is not even a true market. no two apartments are the same, pricing on comps can only be seen on a delayed basis, and there isnt much regulation. no matter how much work and logic you throw at the selling broker, you may not be able to convince them.
second, supply and demand drive the high end r.e mkt in manhattan, and right now there is very little new capacity coming. pre-wars obviously cannot be created and to my knowledge, there are few if any plans to develop new large family sized properties right now. another recent thread actually showed a map of discontinued projects. that isnt to say that there is no existing inventory of 10, 11, 12 room apts, bc inventory is close too, if not at, an all time high. however...
inventory numbers can be deceiving. not all apartments are created equal. you may see 8 ten room apartments available on the UES, but how many of them are truly desirable? like me, im assuming that most high end buyers are discerning and highly selective. buyers at this level often have to pay cash for their home, as many buildings dont allow financing, and the constraint is not cash but features. good properties always sell.
fourth, members of SE are not the only informed r.e patrons. we all know of the coming social economic headwinds. higher taxes, more crime, fewer jobs, more homeless. but our families are growing, we need a home for them, and there are only so many great apartments in nyc...and when they come for sale it can be hard to pass up.
lastly, only time will tell. most markets these days are correlated. the fact that the stock market has risen 35% above its lows from March influences the r.e mkt, which has also probably seen its lows for the time being. maybe hi end NYC r.e wont rise much, and this 25-35% off peak is the new reality, but its hard to envision all financial assets rising and real estate in the global capital of the financial markets falling. perhaps the Dow will fall to 5000 in 2011, and real estate along with it, but who has time to wait?
I wish I had your apartment, WonderCluck. Just so I could play some video games and grab some gumballs from the machine. When you grow up, you'll quickly realize that you really didn't have a clue as kiddie.
I guarantee you there are plenty of people on these boards with $5m+ apartments and second homes. And that doesn't matter.
Wear your watch. It's thicker than your penis. Your benchmarks are whacked. Grow up
"so Ill try not to make any (intentionally) inflammatory remarks."
Boy are you in the wrong place ;).
"first, its important to recognize that the high end apartment market is highly idiosyncratic - it is not efficient, transparent or liquid - and in many ways, is not even a true market. no two apartments are the same, pricing on comps can only be seen on a delayed basis, and there isnt much regulation. no matter how much work and logic you throw at the selling broker, you may not be able to convince them."
Depending on what definition of "high end" you are using, I would disagree with that in that there are many in the latest range being used ($3 to $10 million?) which are "lines" in new construction buildings and aside from minor variations in view are not only "similar" but pretty much "carbon copies". Although when you are talking about prewar Coops, the statement carries a LOT more weight.
"second, supply and demand drive the high end r.e mkt in manhattan, and right now there is very little new capacity coming."
Just to play Devil's Advocate, there was a recent poster who came on here about ?a week ago? who claimed he was a "high end Wall Street type" who basically said everyone on WS was going to be putting their units on the market at some point in the near future. I challenged that concept at the time, but if I'm wrong and he's right, you will see a bunch of fully "comparable" units on the market at the same time in the high end as defined in this thread.
Just to play Devil's Advocate, there was a recent poster who came on here about ?a week ago? who claimed he was a "high end Wall Street type" who basically said everyone on WS was going to be putting their units on the market at some point in the near future. I challenged that concept at the time, but if I'm wrong and he's right, you will see a bunch of fully "comparable" units on the market at the same time in the high end as defined in this thread.
I don't recall seeing that. Please don't make shit up. It is hard to figure out who to listen to and who not to. Could you provide the link?
http://www.streeteasy.com/nyc/talk/discussion/5465-chasing-the-market-down-our-favorite-price-choppers-?page=8
"
bfgross
12 days ago
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Carnegie, let me posit this. 90% of the families who live the park avenue/central park west/fifth avenue/west end avenue lifestyle including nannies private schools and second homes with the primary breadwinner in finance or big law either have their homes on the market, aren't sleeping well at all, or are extraordinarily lucky. The other 10% are really rich and this isnt affecting them. Hence prices in the mid/high-end are getting slaughtered and the Hamptons are even worse. This dynamic IMO hasnt changed one whit in the last 4-5 months."
Asshat.
"There is always at least a few idiots to make the claim.
No wonder who it is now..."
Well played, Sir! No "wonder", indeed!
OldWest
I am pretty sure there are people here who have the means to purchase or own $5M residences, but you aren't one of them sweetie. Nor is west67th, nyc10022, Dwayne_Pipe, columbia, and the rest of you paupers.
I must go now children, my vehicle awaits me downstairs. But if I may, I'd like to ask you not to make yet another nouveau-riche mistake by speaking for the high-end demographic when you are obviously ignorant to the subject.
And west67th, dear, ask your creditors to step up your meager allowance and buy a real apartment and not that low-class sub-2M dump on Broadway. I don't expect you to match my palatial duplex, but I expect you to think of me before you squander your modest dwindling capital on such low-class rubbish.
tata!
wunderlust: you are sooo right. As always. And calling me sweetie? Hmmm, trying to throw off the scent?
And keep counting on that One Madison commission. I'm sure it will come in someday!
But if you knew your high-end market like you pretend you do, you would know that it's not the price that counts but the ability to get past the co-op board. I am afraid you could never pass the board at most of the buildings.
And later, when you grow up and lose the brill cream in the hair, you'll wish you never pissed off those people who you need to help get your children into the right schools...
If only money WAS everything!
back to the topic at hand:
the high end of the real estate market in manhattan has always been the most unstable, boom/bust segment. i can speak of my parents' building, one of the top coops on the upper west side. in the late 70s people bought 11 room apartments for under $100,000. When my parents bought in the mid 80s, (1985) the price had risen to around 600k. Prices crashed and did not recover to that level again until the mid 1990s. we all know what happened between the late 1990s and today. It is a highly volatile market and anyone who claims that they know for sure what direction it is going is being silly.
here is what we do know: there has been an enormous shift of wealth and income toward the ultra-wealthy in the United States and globally over the last 30 years. this shift has driven enormous real estate inflation in areas where the wealthy are concentrated. manhattan, malibu, central london, east hampton, etc. have seen real estate soar. i see know evidence that we are going back to the good old days when CEO's made 10-50x what an hourly worker made, rather than often 1000x today. So I think manhattan real estate will probably not collapse. but there is no question that the wealthy have suffered enormous economic reversals, and that is leading to a disproportionate downward movement in high end real estate.
as for predicting the future, difficult to do.
I can't speak to west side, but I can for east side park. We go back to 1985 as well. Co-op. There was quite the boom for co-ops back then but boards for the older ones were still fairly strict.
I think the difference these days is the international nature. Sure, there were international buyers back then but not like today. The condos are part of that trigger.
That and leverage. Much more used today.
By definition, there is always a high-end. And a low-end. And a middle. Just take the top 15%, bottom 15% and everything else in the middle.
But the number of people who can afford the high-end has certainly dropped. It went up dramatically, then declined. We can find the numbers of households with liquid net worth over $10 million somewhere.
Do the top 0.001% of buyers change? not really. Going from a net worth of $2 billion to $1 billion doesn't change the ability to buy a $10 million apartment. But that's not high-end. There are less than 1,000 billionaires in the world. Different market completely.
There ARE fewer buyers on the high-end as defined by this thread's title. That's a fact. The shake-out will take longer but it is already in the works. I can remember when a 6,000 square foot apartment on Park was under $400,000. Buying a $10 million apartment even in a condo takes certain wealth and much of that wealth for many people is gone.
"By definition, there is always a high-end. And a low-end. And a middle. Just take the top 15%, bottom 15% and everything else in the middle."
Ha... of course, if everything goes down 50%, that high end still exists... its just much lower.
"I am pretty sure there are people here who have the means to purchase or own $5M residences, but you aren't one of them sweetie. Nor is west67th, nyc10022, Dwayne_Pipe, columbia, and the rest of you paupers."
Why is the last resort of the folks proven dumb always "uh, but you are poor".
What is this, 3rd grade?
"Why is the last resort of the folks proven dumb always "uh, but you are poor".
What is this, 3rd grade?"
I'm not a big fan of alpine either, but that's exactly the same stuff you say to him, isn't it?
OldWest,
I find it hilarious that you are still trying to convince yourself that I'm a broker.
Oh, and one more thing sweetie, when you are at your residential co-op meeting, and after you are done discussing how your 90 year old neighbor Larry should be banned from the community pool because his backhair keeps clogging the filters, you should start by understanding that money is everything... and I have it, before you even attempt to repeat it again. If you do a good job I promise I'll get you out of the mayhem of living in a luddite residential community and into your first showstopper of a house, Duke Semans mansion maybe?
tataaa!
Wonderboy is Prada_Addict and perhaps BRABUS
"you should start by understanding that money is everything... and I have it"
wonderboy = wonderbra? you remind me of the song "I'm just a gigolo and everywhere I go, People know the part I'm playin'. "
bfrank, i was just thinking exactly the same thing. or maybe princessedna after some english refresher course.
when will he become wonderman, one wonders?
bfrank, why would you think something like that?
> I'm not a big fan of alpine either, but that's exactly the same stuff you say to him, isn't it?
And I thought we could make it a week without the hall monitor....
Check the threads, alpine is the one who started the concept.
wonderboy
about 18 hours ago
> LOL - you all sound so bitter...
ROTFL.
nyc10022, hall monitor? Please. It's just funny when you call people out for that when you say things like this: "Dude, you live in New Jersey. You can't afford where I live. AND, I didn't lose all the money you did. I know you're poor because not only do you live in New Jersey, you have the grammar of a 3rd grader..." Sorry you don't like to be called on it yourself.
can we PLEASE stay on topic?
is there anyone who seriously disputes that:
1. there has been a significant wealth effect from asset depreciation.
2. unemployment--and especially unemployment among high earners--has reduced demand.
3. job, income, and other forms of economic insecurity have reduced confidence.
but also
4. the dramatic increase in income and wealth inequality has led to a long-term, secular increase in manhattan real estate values over the past 30 years.
5. quality of life in NYC has improved, increasing the desirability of living in Manhattan.
6. the market has 'priced out Armageddon,' ie it seems highly unlikely that real estate values in Manhattan are going to go to zero.
all of this indicates to me that high end manhattan real estate remains under considerable threat even after the 30% and more declines in that segment of the market, but that while high end real estate will continue to come down we are unlikely to see a real bargain-basement situation.
anyone want to make a different case?
absolutely happyrenter... we should stay on topic that manhattan high end (and therefore ALL) mkt will continue to fall/struggle/slide sideways/jigger about the decline trend lines BUT!
I've got one question for bonerboy/shrimpie/ericho75.....
What is this thing? I've heard of it, but I am seeking expert opinions.... this thing... this thing ... what is it called... OH yes, what is this "refractory period?"
*rolls eyes*
> nyc10022, hall monitor? Please
Exactly... and you're still doing it....
bingo! wonderboy = agentrachel
I get that you are rolling your eyes agentrachel... but what's going on with your hands?
ha. i think yo ugot it!
w67th, that's helpful. "we should stay on topic....BUT" and then you go right back to the idiotic side discussion.
apparently no one is challenging my market analysis.
"all of this indicates to me that high end manhattan real estate remains under considerable threat even after the 30% and more declines in that segment of the market, but that while high end real estate will continue to come down we are unlikely to see a real bargain-basement situation.
anyone want to make a different case?"
happyrenter, that's a pretty thorough analysis and one that's tough to argue against. I would add that as long as low-end volume is there (as it currently is, it seems), the likelihood of bargain-basement prices at the high-end is significantly lowered.
bjw: i actually would have to disagree with you. NYC remains the land of opportunity for so many younger people in lower paying fields like the arts, media, etc.. and is a very desirable place for younger people who dont have families, schoolds, coop boards, high maintenances and taxes to worry about. I dont think that has changed much since last year. I think the low end has relatively little to do with the cohort group that I originally started this thread writing about.
Who and what is an agentrachel?
Is she well dressed, good looking and wealthy like me at least?
Ok, so I'm PradaAddict, Alpine/President then I'm BRABUS, PrincessEdna and now I'm Agent Rachel.
I'm glad I'm piquing your interests but no. Sorry.
bfgross, maybe I misinterpreted what happyrenter was saying, but I was trying to say that I don't see $5m properties trading at $1m. They'll definitely get hit - hard - but I don't know what people out there are really expecting. If the high-end really does fall that much, what does it mean for the low-end? I don't think we'll see many properties go for under 6 figures in Manhattan, and that's the only possible outcome I can see from the high-end truly hitting bargain-basement prices.
bjw and bfgross,
i think i would split the difference between you. let's take the average property that traded for 6 in 2007. Today, it is probably trading for somewhere in the neighborhood of 4-4.5 (this is an average folks, PLEASE do not try to refute the point by naming specific properties that have traded for more or less than this). Is that property, on average, likely to go to 1? I find that very hard, if not impossible, to believe, short of a complete and total collapse of the US economy or a major catastrophe in NYC like nuclear terrorism. So setting those possibilities aside, the armageddon scenario seems unlikely.
i think a reasonable worst-case scenario for the peak $6 million property would be, on average, a bottom of $1.5. A best-case scenario, obviously, is that we have already hit the bottom. I would probably come in between those and say an average bottom of $2.5 to $3 would be likely.
i agree with bfgross that there will be significant compression between the high, mid, and low ends of the market, but of course it is true that the markets are not completely disconnected, and compression can only go so far.
i am using $6 million to represent the high end, but of course in NYC there was at least at one time a market for apartments and houses for 5 or even 10 times that price. but a nice prewar coop on park avenue or cpw that peaked at $6 million seems like a reasonable representative of the high end.
The high end will always be there. There will always be the ruling class with $$$ to drop on high-end real estate (as evidenced by the few places which have sold around $25-40m during the past few months). The recession isn't for everyone.
I personally don't give a rats ass what happened in 1996. We are in recession so obviously the amount of high transactions are down but not gone. In a year or two (or three), everything will be back to normal.
And nyc10022, save the retort. I'm sooo over it.
I think that most people believe that the distrtibution of both income and wealth is much more homogeneous in this country 9and even in Manhattan0 than it actually is. Top 15%? How about top 2% or 1%? that's what's always been the wealthy in just about every place you could think of - and that's being conservative (i.e. it's probably a lot more likely to be 0.3% than 15%).
> And nyc10022, save the retort. I'm sooo over it.
Yes, I know its hard to hear how wrong you've been.
But your only real solution is to, well, stop being so wrong.
yepyepper, sorry itz been three hours since you posted without comment by me. (for those of you who are wondering who yepyepper is, its my little rottweiler / chihuahua mixed breed w67thstreet who also happens to own a Porsche in case he didn't mention it during this 24 hour period).
you must LOVE being a little doggie running around town, looking up the skirtz of the ladiez and then pooping on the sidewalk with your wife the medical doctor (also all you new readers, make sure you know his wife is a doctor, oh, he also owns a boat) cleaning up after your messes.
Wonderbra: Yes, everyone is a gazillionaire on the internet, even you. Tell me, Mr. Buffet, how is it that your diction and writing style belie a high intelligence? And since there is a strong correlation between intellectual horsepower and wealth, I believe quite strongly that I am worth a good bit more than you are.
Now go polish my luxury sedan, which unlike you I paid cash for. I'll even give you cab fare to my parking garage...