OH report 2-22-09

have mentioned this in some other posts so forgive my if you've already seen.

i think we can all agree that the problem is uncertainty. uncertainty about everything. the cure for uncertainty is not a lower price. half the people here and brokers are saying jack up the price unrealistically so you can negotiate it down...the other half (with whom I personally agree) say that is crazy.

it is too soon for large groups of desperate sellers to emerge. if and when that materializes I suspect that will ultimately scare the hell out of potential buyers particularly if owners (and developers) have continuing price decreases, "why buy this week when it will only be less next week?"

the only possible cure for uncertainty (and I would be loathe to attempt to estimate a probability) is time and a slow readjustment of attitudes and prices. the problem is that with rents dropping few people "need" to buy. without desperate sellers (and as noted above this may not be for the best by any means) individuals are reluctant to dramatically lower "their" price plus they really don't have any benchmark short of 50% to understand what a compelling drop would look like.

so...just like the credit markets for the last year, we are frozen in place.

not a pretty picture.

A year or two ago buyers were forced to make decisions to buy based on the pressure that if they did not buy now the price would be higher tomorrow. I wonder if sellers will ever feel that same reverse pressure that if they do not lower prices enough today, the prices will be even lower tomorrow.

if you think about it, that's a very different emotional mindset. also, why would buyers opt into a market that felt like that?

http://online.barrons.com/article/SB123517384563737163.html

Columbiacounty - I have to disagree. There are cracks appearing all over the place. Inventory is through the roof. Prices are moving and people are buying. There are likely as many reasons for these transactions as there are transactions. Everyone has their price both on the buy and the sell side. Deals are happening as the market is falling. We're just getting warmed up.

i can't tell you how much i hope you're right....that would be terrific.

I went to a few open houses on the upper East Side. They were pretty much lbeds converted into 2beds all in the <500K range. Last year, I never thought there would be a chance of getting this type of place on the Upper West or East sides. After today, we believe it will be available going forward.

reddog2669- I bet we have similar properties in our saved-sales lists (although I'm not looking to buy in the near term). What did you see?

I saw a lot today. I'll post my notes as time permits. Here are the first two write-ups:

340 West 86th Street #4BE Condo, 3/4 beds 2 baths $1,795,000 CC $1428 RET $754
http://www.streeteasy.com/nyc/sale/380950-condo-340-west-86th-street-upper-west-side-new-york

This competent combination works best as a 3BR with lots of entertaining space. Pocket doors do allow the den/playroom to serve as a closetless guest/4th BR if needed. The public rooms and the modest MBR face one of the nicer stretches of 86th Street. Two adequate kids’ rooms are in the rear of the apartment, with a hall bath between them.

The minuses here are hard to miss. First, there’s the building. The common areas are dilapidated, and services are very limited. Doorman is 4-11pm only. Although the CCs aren't terrible, they seem high for what you get. Inside the apartment, the kitchen - which looks nice in the pictures - is weird; the floor isn’t flush with the rest of the apartment, and the arrangement of appliances seemed awkward.

334 West 85th Street #5AB Co-op 3 beds 3 baths $1,495,000 maint.$1768
http://www.streeteasy.com/nyc/sale/380961-coop-334-west-85th-street-upper-west-side-new-york

This was my first visit to this mid-block mid-rise. It’s an odd one. The door from the sidewalk doesn’t appear to be the real entrance; it feeds into a kind of portico that leads to the actual entry door. There’s no doorman, and the tiny lobby is bare-bones. The elevator and fifth-floor hallway are equally charmless. Entering #5AB, visitors are greeted by the brick wall of a narrow corridor that is the apartment’s main artery. Exposed brick is fine, but it’s not a “wow”-inducing introduction.

That’s the bad news. Otherwise, this combination unit is quite stylish, especially the well-appointed great room that faces beautiful rooftops across 85th Street. Very West Village, I thought. The bedrooms are small, and the closet of the smallest one houses the washer/dryer. The MBR has a nice dressing/office/anteroom and a chic bathroom. One of the two hall baths is well renovated too. The listing touts the possibility of buying roof rights from the coop, but when the broker was pressed for details, the story didn’t hold up very well. I doubt it would be a very good investment anyway, given the limited upside of this type of building (no doorman, no live-in super, no amenities…). Even as-is, the apartment may be “overimproved” – i.e., there’s more money in it than will ever be recovered.

340 West 86 4BE - we took a look today also. "Additional assessment to update 2 new elevators and renovate the common area corridors (to mark the bldg's centennial): 1066.70 per month thru Dec 2011." Here's hoping for bigger price chops.

$3,334/mo in carrying charges? (for 33 months) seems kind of high.

LookingAround: Great catch on the fine print. When I looked at #3A last summer, the agent told me the work (and the assessments) would be over with by the end of 2008. Probably an innocent mistake, right?

Anyway, let's go around the corner to...

505 West End Avenue #3B Co-op 2 beds 2 baths ↓$1,699,000 maint. $1997

I saw no surprises in this estate-condition corner classic six. The rooms are well-proportioned; the floors show promise; the kitchen cabinets are original and bear a coat of paint from every administration since Wilson. As is often the case in a 1915 six, a shaving closet will have to do for Mom and Dad’s ablutions, because creating a master bath would be a daunting project.

505 WEA has reasonable curb appeal, but the common spaces are quite ordinary and the building doesn’t stand out in any way. Also, twenty years after the conversion, 505 remains in transition - as evidenced by the seven occupied apartments that were marketed unsuccessfully over the past two years. In 2007, #3B would have been drawn great interest. Today, it just adds to a glutted sector. A recent $50K reduction, after more than three months on the market, will not cure what ails this listing.

sorry to repeat (once again) one of my mantras, but my strongest impression from what i see and from what people report on the market these days is that apartments with significant compromises (especially if they're in neighborhoods that are desirable on paper) are simply not being discounted appropriately yet. Lousy layouts in good buildings, units on the bad-view side of good-view buildings, decent units with inflated monthly charges or substandard services -- all of these are still being priced with far too slim discounts compared to units in the same buildings/neighborhoods without those compromises.

Off the top of my head, it seems to me that while units as a whole have declined in price across the baord, units with flaws are still only 15% or so below their no-compromise coutnerparts. That figure needs to be much more like 25%-40%, by my estimation.

One mitigating factor is being in an unusually good school district, in which it doesn't matter how lousy your unit is, you still get the benefit of that good address. But I think there's too many lousy units in good districts coming on the market (or will be, especially when the end of the school year comes into view), and that they, as a class, have to come down a lot more to make up for their deficiencies.

473 West End Avenue #12B Co-op 3 beds 2 baths $2,099,000 Maint. $2164

If you like your pre-war radically updated, this opened-up six may be of interest. The LR, DR and foyer have been merged into a single space that also opens to the kitchen via a pass-through and a doorless passage. There’s some flexibility in sleeping arrangements: the maid’s room is a decent space with dual access, and both bedrooms are corners with en-suite baths and walk-in closets; the front (second) BR is long enough to be split into two small rooms. Part of the dining area could become another bedroom, though that might kill the open plan. The river view from the rear (master) BR suite is legitimate.

Whatever one may think of the design concept here, I found the execution erratic. In the kitchen, for example, the countertops are a mix of eras that includes a lot of old Formica. Elsewhere, the floors have been bleached - except in the front BR. At the doorway to that room, the floor color bleeds jaggedly from pale to dark. These aren’t big issues, but they do suggest a worrisome tendency to cheap out on finishes – or to not finish at all.

#12B offers a contemporary alternative to the two on-market “C” line units. The lines offer similar packages of space and views, and have historically fetched similar prices. #11C and #4C have waged a bit of a price war, and are now well below #12B. Associates of the respective listing brokers have told me that both “C” units have offers close to their reduced asking prices. Even if that’s true, #12B might have to drop $200K to reach the current price-discovery zone.

201 West 89th Street #12A Co-op 2 beds 2 baths $1,850,000 maint. $1973 (incl. electric)
http://www.streeteasy.com/nyc/sale/385630-coop-201-west-89th-street-upper-west-side-new-york

Here’s a refreshing change from sellers who don’t “get it”. This thoughtfully renovated corner six arrived on the market priced $275K below the peak comp on a much lower floor. Almost everything about this apartment impressed me. The kitchen wing makes smart use of space and light by allocating all three windows to the kitchen itself, and dividing the remaining area between two small, windowless rooms for the home office and laundry. Kitchen workspace and storage are commendable. I’m not sure about the counter material: a light-colored granite, maybe?

The LR/DR has a coffered ceiling and built-ins that I think work well because the ceiling is high and the room is spacious. The view of a modern high-rise across Amsterdam is unexciting. The bedrooms get better views. Both have an open outlook to the south, and the corner master also looks east along 89th Street to PS166, which has a really nice roof. The bedrooms are carpeted, and I didn’t peek underneath to check floor condition. Splitting a bedroom might be possible, but the room shapes and window position don't encourage it. So, with the maid's room gone, this apartment is a 2BR, plain and simple. The baths (one en-suite, one in the hall) are original and appear to be in good condition. On my way out, I noticed significant paint loss on the front door. That surprised me, and might be a sign of incipient neglect.

Chester Court is a well-run coop with excellent amenities. Like Astor Court next door, it competes with buildings west of Broadway. Nonetheless, Amsterdam is Amsterdam, and the location may be a concern in a downturn.

wishlist, saw a conv2 at 330 E 70th, 505 E 82nd (out of my price range though(, 520 E 72nd st and 509 E 77th. the two that picqued our interest were 330 E 70th and 520 E 72nd. 330 E 70th had a nice space, was livable but could be renovated over time. 520 E 72nd did a nice job maximizing their space. the apartment is tight but they seemed to do a great job compensating for it. 505 E 82nd was nice but out of our price range for now. 509 E 77th #1b did not rub my wife very well.

Since we have most of our savings tied up in CD's until November, we are forcing ourselves to wait until then to start bidding.

The problem with real price chops now is that it will scare buyers away. If instead of dropping prices by 5-10% sellers were to drop their price by 30% it would scare buyers. Buyers would say "If prices are already down 30% they must be headed down 50%. The economy is still bad so prices must be headed even lower." That's the problem with deflationary markets, buyers think that if they just wait a bit longer things will get even cheaper. My guess is that sellers are correct in listing their properties at the same price point as other sellers. But then when they get an offer, any offer, they should take it. Ultimately prices aren't going back up until we start seeing net employment in the city for several months in a row. It's going to be years away. I just don't understand the mindset of anyone who is buying right now.

I agree it is only going to go down and then flat line,so you will have plenty of time to buy.I was at an open house on Sunday,when a tenant from an adjoining unit came in and was talking to the agent.He asked how the market doing?The agent thought we were out of ear shot and whispered that it is " a bloody nightmare" and only getting worse.That most everyone are placing very low bids in multiple units....

jazzman,

i totally disagree. pricing high in a down market like this is the kiss of death and you aren't going to get offers if you are behind the curve. the fact is there are now enough units priced well below peak comps that if you price "at the same point as (most) other sellers" you will be pricing your apartment well above some other similar units. those places are going to get the precious offers that you advise all sellers to take. your unit will languish. when i sold in 2007 the situation could not have been more dissimilar but in this market, if i owned real estate i wanted to sell, i would either rearrange my life so that i could stay in the unit for another ten years, or i would put it on the market for 20% below peak comps and expect to sell it for 30-40% below peak comps. that's the reality right now.

if there are some buyers who get scared away by falling prices, those people are not going to be lured back in by irrationally high prices. those folks are simply scared and aren't going to buy now. fine. the people who are going to buy are the ones who are excited by falling prices and want to get in to something at a great price. give them a reason to consider jumping the gun on the market bottom. otherwise, be prepared to own your apartment for a long time.

happyrenter - I agree with you - perhaps I should better explain my stance. I think right now if I needed to sell my unit I would list it about 10% below peak levels (I feel many are already listing it there) - then I would hope to sell it 25-30% off peak levels. My point was that if everyone dropped their listings to 25-30% off right peak right now, then buyers would not pay those prices as they would expect a 40-50% discount. Buyer's will only buy a "deal" right now - so if you price your listing too low they will still expect 10-15% off your listing price.

I kinda support HR: hate to say that in print, but. I am a qualified buyer. Have my sights on 3 units. However, I think the units are so overpriced, 35%-45%. I won't even bid. Owners have no idea there is interest. In the interim, some may say, "you should show your bid, you never know what may happen." Good point, but I counter by two points. 1. I don't want the owner to have the knowledge where a bid may be, let them suffer and keep marking it down. 2. By incorrectly listing their apt, they are letting new, fresher, daily competition show up, I may find something I like better in the mean time.

It looks like 473 West End Avenue #12B is also available for rent for $8,500.
http://www.streeteasy.com/nyc/rental/460273-coop-473-west-end-avenue-upper-west-side-new-york
That's a price-rent ratio of over 20. Even assuming that's a realistic rent, is that a justifiable p-r ratio in this market?

patient:exactly.
jazzman: i don't think you have your finger on the pulse of the market. you think many people are already listing at 10% off peak comps? many people are already listing at 25% off peak comps and some are listing at 35% off peak comps (see west81st's most recent post on the uws comp board). if you list at 10% off peak comps you are well behind the price curve and you will be very unlikely to generate interest.

ord: I would say the rent and the sale price are both way too high, flat-out. You can get a nice 2BR+office for a lot less than 8500, and not deal with a coop board.

You're probably right about the ratio too. I would add one caveat: the ratio on a coop would tend to be higher, because coops are generally less attractive rentals than condos or straight rental properties, and coop owners have less flexibility when renting. Hence, the monthly rent tends to be lower relative to the value of the property.

On a side note, as a seller in a down market I would probably avoid using a broker who lives in the building. It seems that she's having a harder time than disinterested outsiders adjusting to changed valuations. Of course, it could be purely the sellers' fault.

west81st,
smart as always. in this market i think it is more important than ever to work with a good broker--someone who does enough deals to know the market. some of these brokers who sell one property every few months just have no sense of where the market is. since they haven't sold anything in the bear market they really don't understand the bear market. west81st has made the point that there should be a consolidation with the top players. i agree.

I have to agree with hrdnitlr and patient 09. I went to 5 open houses this weekend on the UES and I am still seeing pricing in the 700 - 1000 sq ft range for average or sub average apartments. $780 a sq ft for a 500 sq ft apartment is too much. I don't think we'll see a huge uptick in sales until the price per square foor hits the 350-500 range on your average apartment.

Two points:
1. Important to remember that the RE market moves slowly compared to others and in a down economy lags being other economic indicators. No need to shout about unrealistic sellers. Prices are trending downward--there's no debate about that any more. But expecting reductions of 45% from peak is unrealistic in just 4 months since every witnessed the world sort of unravel.

2. No seller is going to move 45% off asking and I wouldn't bother to make such a bid. Incremental movement downward is necessary first--you can't cram a 45% discount down anyone's throat no matter how unrealistic their ask price is. If they set the price at peak or more, they are nuts and aren't going to listen to any reasons for a 45% cut. If they were more realistic and priced the apartment below peak, they aren't going to reduce it another 45% because they feel they've already cut the price in a sense. If 30% of more off peak is what you are seeking, for the most part you just have to wait for the market to move there--and it will if it is meant to. Sellers are doing what sellers do and buyers are doing what they do. This isn't NYSE with instantaneous market corrections.

Thanks, West 81st. I concur that the price and asking rent of 12B are too high. And a good point on the p-r ratio for coops. I didn't think about that, but it makes sense.

Next stop on Sunday's tour:
336 Central Park West #7B, Co-op 2 beds 2 baths, $2,995,000 (33% down), maint. $2893.77, 2% flip tax by seller.
http://www.streeteasy.com/nyc/sale/385031-coop-336-central-park-west-upper-west-side-new-york

There is much to admire in this well-kept six. The living room has a stately, wood-burning fireplace and a pretty park/playground view. The master suite also overlooks the park, with a dressing room (corridor, really) that goes on forever. The kitchen is handsome, combining old and new elements effectively, though the tile floor is darker than it looks in the pictures and might seem a bit dated to some. Better bathroom access for guests would be nice.

One important note about the layout is that there’s no viable way to create another bedroom. Although the dining room is big, the traffic pattern to the kitchen precludes division. As a result, what you have here is an excellent classic six, for serious adults, in a well-preserved Art Deco co-op. It needs to stay exactly that. The initial price is only about 5% off peak, but the sellers are motivated.

"But expecting reductions of 45% from peak is unrealistic in just 4 months since every witnessed the world sort of unravel. "

We got 20% in two months, and things have gotten worse... so I don't think 40% in 4 months is that crazy.

nyc10022: what I meant was since October, four months have passed. Expecting things to already be down 45% would be fairly unprecedented in RE. Especially in NYC. The market takes longer than that to move that much. Screaming while waiting that it isn't moving down fast enough was what I was addressing. It's kind of funny how high emotions run in RE. The fury I read on many threads directed toward "sellers" as a genus of animal is amusing. It's all falling...patience! No need to stomp feet and shout "hurry up!"

"nyc10022: what I meant was since October, four months have passed. Expecting things to already be down 45% would be fairly unprecedented in RE. Especially in NYC"

Yes, I get that... what I'm saying is that 20% decline we got in 2 months after october... that was also unprecendented. Not only here, but it was the quickest decline of any city in the biggest RE decline in history.

So, we're well into unprecendeted territory... which is why another decline of the same magnitude, as the economy continues to get worse.... and stocks are already past that decline.

It just doesn't surprise me at all.

I don't think it is fair to say there was an across the board 20% drop in Nov and Dec '08. Some sectors or particular units perhaps, but not across Manh. 20% as of today? I'm more inclined to agree.

also, based on discussion on another there is probably a real difference in view between 10B and 7B, so I'd argue that 7B is pricing at peak (or above) levels.

"I don't think it is fair to say there was an across the board 20% drop in Nov and Dec '08. Some sectors or particular units perhaps, but not across Manh."

Of course not across the board, some was even more. The median was down 20%. And that was the median across manhattan. And that was months back.

"20% as of today? I'm more inclined to agree."

Not me... I think we're well past that already.