If we are keeping score the reasons to sell now far outnumber the reasons to buy now. One look at the numbers on Urbandigs shows that in the last 30 days there were 1,990 new listings and only 411 contracts signed. On that note, I heard a story this week from a broker that I thought was really stunning. A co-op board turned down a potential buyer because the price offered was too low. Nothing to... [more]
If we are keeping score the reasons to sell now far outnumber the reasons to buy now. One look at the numbers on Urbandigs shows that in the last 30 days there were 1,990 new listings and only 411 contracts signed.
On that note, I heard a story this week from a broker that I thought was really stunning. A co-op board turned down a potential buyer because the price offered was too low. Nothing to do with the buyer's qualifictaions or financials. Instead, the broker suggested that the co-op board had a fiducuary duty to the other shareholders in the co-op, not to accept a low ball offer. (I guess that over rides any duty due to the selling shareholder) A low ball offer which had the potential to impact the valuations of other apartments in the building.
I suggested that the market always has the last word. The New York City apartment market is fairly efficient and those who choose to ignore the market do so at their own peril.
The broker further pointed out that not all sellers who have listed their apartments for sale actually have to sell. If sellers do not get their asking price they simply won't sell. And low ball offers will not get past the co-op board so why bother accepting an offer well below the asking price.
These sellers I suppose are just "testing the waters." If they get their price, great. If not, we'll take it off the market. Things will be better in a few years. To paraphase the thoughts of a seller, "Why should I sell now at a price that's 20% or 30% lower than what I think the apartment is really worth. Surely, 2 or 3 years worth of mortgage, maintinence and taxes won't sum up to 30% of the apartment price. I'll just wait a few years until things are better."
Today, 10,000+ sellers are "testing the waters" up from just under 7,000 at Labor Day. There are probably as many different reasons to sell now as there are sellers.
Make no mistake though, many of them cannot wait to sell. Job loss, income loss, lost it all with Madoff, schools, kids, kids grown up, new development purchase is ready for closing, these reasons will be the most popular. Some sellers may even be trying to time the market!
Maybe there are some sellers who do not have to sell. I would argue that selling an apartment is a huge hassle. Most people who go to the trouble of listing do have some real honest intent to make a sale.
There are, however, no buyers who have to buy.
Everyone looking to buy an apartment is already living somewhere else. And as I often say to my better half, just because something is on sale does not mean you have to buy it.
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Response by spinnaker1
over 17 years ago
Posts: 1670
Member since: Jan 2008
Jake - Thanks for the thoughtful post. The members of the co-op board in your example reminded me of the three monkeys; speak no evil, see no evil, hear no evil. What a predicament for the seller who obviously needs to sell. I wonder if this is an isolated example or a sign of things to come. I did a search yesterday and found that 2% of Manhattan properties listed within the last 60 days have entered contract. It would be interesting to compare this figure to the height of the market. I can't imagine what sellers are expecting to gain from testing the waters in this ugly market. A lesson in pain. Kinda like opening your 401K statement.
Patiently waiting for the spring flood...
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Response by broadwayron
over 17 years ago
Posts: 271
Member since: Sep 2006
I posted about the same thing happening (Board rejected a low offer... actually, it was the OFFERING PRICE!). My post was about what happens to that seller? He eventually raised the price by about 50K (it was a low-priced place to begin). But, I wouldn't want to be in that situation.
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Response by malthus
over 17 years ago
Posts: 1333
Member since: Feb 2009
Interesting anecdote. Never underestimate how quickly people will look to their own self-interest when things go badly. I wonder how long they can lock that person into keeping her apartment. Sounds like a lawsuit in the making.
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Response by uppereast
over 17 years ago
Posts: 342
Member since: Nov 2008
Do they let the person rent out? This is a nightmare.
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Response by spinnaker1
over 17 years ago
Posts: 1670
Member since: Jan 2008
I wonder what action the board will propose when their former neighbor can no longer make their maintenance payment.
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Response by NYRENewbie
over 17 years ago
Posts: 591
Member since: Mar 2008
And when that person can no longer pay the maintenance charges, doesn't that cost fall on the rest of the co-op members who are forced to pick up the slack? They could be cutting off their noses to spite their faces.
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Response by aboutready
over 17 years ago
Posts: 16354
Member since: Oct 2007
And that's why many co-ops eventually lower their standards. But it can be a painful process, particularly if you have a head-in-the-sand board.
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Response by looking2return
over 17 years ago
Posts: 182
Member since: Jan 2009
For a place I looked at last year (around May) (an estate sale in horrible condition) I was told by not to bother offering anything less than $600k because the board had already rejected another offer around there. So I didn't make an offer and won't bother to look at anything else in a building with such a wise board.
Well, now it's listed <$600k and still no takers. Way to protect that value, board!
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Response by waverly
over 17 years ago
Posts: 1638
Member since: Jul 2008
Jake - I don't doubt this broker told you that story, but remember, the broker may not have been telling you the truth about why the person was turned down. I think brokers have earned much of their bad reputations, and the list of their lies is long, so it may or may not be true what this broker said. If you believe that brokers make up other offers than you should take this statement with a grain of salt as well.
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Response by waverly
over 17 years ago
Posts: 1638
Member since: Jul 2008
Sorry...interrupted by some actual work for a moment. My point is that it could easily be a sneaky broker-trick to get a higher offer.
"Well, you'd better not waste your time with a low-ball bid. This board turned the last offer down for no other reason than it was too low."
See, that actually seems like a pretty believable scenario to me. Just my 2 cents (or a share of Citi if you prefer).
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Response by kspeak
over 17 years ago
Posts: 813
Member since: Aug 2008
>>> These sellers I suppose are just "testing the waters." If they get their price, great. If not, we'll take it off the market. Things will be better in a few years
This is the thinking that I think will get people into trouble. Of course if you think things will be better "in just a few years" you would try and wait it out. But I don't see a recovery in "just a few years." Even if the economy begins to recover in 2011 or 2012 it does not mean real estate prices will. During the last downturn in NYC it took prices 10 YEARS to recover to their boom levels. This is why I don't think prices will bottom at the end of this year - too many people are trying to wait it out, many of them burning cash in the process, making them even more desperate sellers when they finally sell. The longer prices trickle down, the less sense of urgency buyers have and the greater discount they demand - they say, why buy a depreciating asset now when it will be cheaper in 6 months? In my opinion, the people buying now are the so-called "sideline buyers" that brokers said would prevent a downturn. Problem is, there just aren't enough of them - this is why for every 1 contract signing you have 4 places coming on the market. So I wouldn't count on this being over in a few years, with so many structural problems: permanent changes in Wall Street comp and permanent changes in the way credit will be used, likelihood of higher taxes in the long-term, etc. That said, I think the greatest percentage declines will happen in 2009 and 2010 and it's not crazy to jump in and buy late this year or next year, even if it is not the exact bottom.
Lastly, I think co-op board that reject bids because offer are "too low" are setting themselves up for all sorts of problems - lawsuits, people not paying their maintence, etc. This won't last forever.
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Response by jake
over 17 years ago
Posts: 277
Member since: Jan 2007
True Waverly true. And as we all know the board does not have to provide a reason for the turn down. But I do think this broker in particular is honest and it was their strong belief that the reason for the turn down was the low offer. This was not an apartment that I had seen or will see.
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Response by waverly
over 17 years ago
Posts: 1638
Member since: Jul 2008
Jake - good points and I appreciate the information. This is something we should all keep on the lookout for, to see if this is a coop board issue or a sneaky broker-trick. Either way, knowledge is powere and I appreciate you passing the information along.
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Response by HHH
over 17 years ago
Posts: 11
Member since: Feb 2009
More reason to sell from a previous blog i wrote:
I think the problem is people are still delusional about prices, every other assets (credit, stocks, mortgages, commodities, international...) are down at least 50% meaning that real estate in NYC remains the priciest asset outthere so for choice in a global portfolio you are better off putting your money somewhere else for the long run, you can not find jumbo loans anymore and if you do after weeks of hasle and paper work then you pay 2% more than any other mortgage, bonuses on wall street are something from the past and now people are paid in stocks over three year periods that means no cash for deposits or high maintenances. All in all prices ought to come down. For comparision S&P from 2004 is down 30% so if you think 3 beds were going for 1.2 at the time cheap math should put current 3beds closer to 1 than 1.5. 700$/sqft? anyone remembers 1991 housing crisis when people out of fear and lack of cash were hitting one beds for $70K?
Hosuing is still the best performing asset i thought i'll add up some numbers from case shiller this am If we now look at an historical sample of housing vs the dow jones we can see that the former is the best performing aaset by a long way, and this even includes Detroit (where slumdog Millionnaire 2 is set to be filmed)
Since 2000 Dow Jones -20% since 2008 -34
Sates AZ +24% -34
San Fran +30% -31%
Wash +76 -19%
Miami +65% -29%
Bost +53% -7%
Detr -19% -22%
NY +84%!! -9%!!! ANYONE?
That leaves a lot of room for NYC real estate to correct
i believe housing has a lot to go down as an asset class, and i agree with you that housing are long cycles and once start going down takes a long time to find a bottom, the case in Japan is a great example in late 80s everybody thought there is no way that Tokyo real estate can go down, small island, no space for the population and guess what following the same credit bubble we are experiencing today housing was down more than 80% by 2000 and still is down close to that number...add on top of that a generational gap (great study from the FED) showing that the pick of baby boomers is 2011 and Generation Y (smallest generation ever) kicks in you have a lot of supply for lower demand unless u believe imigration is going to ramp up (probably not buying NYC condos anyway!) so all the baby boomers who have no more 401K left need to downsize and retire in the sun or not that means they will need to sell their houses too...hope that helps
Jake - Thanks for the thoughtful post. The members of the co-op board in your example reminded me of the three monkeys; speak no evil, see no evil, hear no evil. What a predicament for the seller who obviously needs to sell. I wonder if this is an isolated example or a sign of things to come. I did a search yesterday and found that 2% of Manhattan properties listed within the last 60 days have entered contract. It would be interesting to compare this figure to the height of the market. I can't imagine what sellers are expecting to gain from testing the waters in this ugly market. A lesson in pain. Kinda like opening your 401K statement.
Patiently waiting for the spring flood...
I posted about the same thing happening (Board rejected a low offer... actually, it was the OFFERING PRICE!). My post was about what happens to that seller? He eventually raised the price by about 50K (it was a low-priced place to begin). But, I wouldn't want to be in that situation.
Interesting anecdote. Never underestimate how quickly people will look to their own self-interest when things go badly. I wonder how long they can lock that person into keeping her apartment. Sounds like a lawsuit in the making.
Do they let the person rent out? This is a nightmare.
I wonder what action the board will propose when their former neighbor can no longer make their maintenance payment.
And when that person can no longer pay the maintenance charges, doesn't that cost fall on the rest of the co-op members who are forced to pick up the slack? They could be cutting off their noses to spite their faces.
And that's why many co-ops eventually lower their standards. But it can be a painful process, particularly if you have a head-in-the-sand board.
For a place I looked at last year (around May) (an estate sale in horrible condition) I was told by not to bother offering anything less than $600k because the board had already rejected another offer around there. So I didn't make an offer and won't bother to look at anything else in a building with such a wise board.
Well, now it's listed <$600k and still no takers. Way to protect that value, board!
Jake - I don't doubt this broker told you that story, but remember, the broker may not have been telling you the truth about why the person was turned down. I think brokers have earned much of their bad reputations, and the list of their lies is long, so it may or may not be true what this broker said. If you believe that brokers make up other offers than you should take this statement with a grain of salt as well.
Sorry...interrupted by some actual work for a moment. My point is that it could easily be a sneaky broker-trick to get a higher offer.
"Well, you'd better not waste your time with a low-ball bid. This board turned the last offer down for no other reason than it was too low."
See, that actually seems like a pretty believable scenario to me. Just my 2 cents (or a share of Citi if you prefer).
>>> These sellers I suppose are just "testing the waters." If they get their price, great. If not, we'll take it off the market. Things will be better in a few years
This is the thinking that I think will get people into trouble. Of course if you think things will be better "in just a few years" you would try and wait it out. But I don't see a recovery in "just a few years." Even if the economy begins to recover in 2011 or 2012 it does not mean real estate prices will. During the last downturn in NYC it took prices 10 YEARS to recover to their boom levels. This is why I don't think prices will bottom at the end of this year - too many people are trying to wait it out, many of them burning cash in the process, making them even more desperate sellers when they finally sell. The longer prices trickle down, the less sense of urgency buyers have and the greater discount they demand - they say, why buy a depreciating asset now when it will be cheaper in 6 months? In my opinion, the people buying now are the so-called "sideline buyers" that brokers said would prevent a downturn. Problem is, there just aren't enough of them - this is why for every 1 contract signing you have 4 places coming on the market. So I wouldn't count on this being over in a few years, with so many structural problems: permanent changes in Wall Street comp and permanent changes in the way credit will be used, likelihood of higher taxes in the long-term, etc. That said, I think the greatest percentage declines will happen in 2009 and 2010 and it's not crazy to jump in and buy late this year or next year, even if it is not the exact bottom.
Lastly, I think co-op board that reject bids because offer are "too low" are setting themselves up for all sorts of problems - lawsuits, people not paying their maintence, etc. This won't last forever.
True Waverly true. And as we all know the board does not have to provide a reason for the turn down. But I do think this broker in particular is honest and it was their strong belief that the reason for the turn down was the low offer. This was not an apartment that I had seen or will see.
Jake - good points and I appreciate the information. This is something we should all keep on the lookout for, to see if this is a coop board issue or a sneaky broker-trick. Either way, knowledge is powere and I appreciate you passing the information along.
More reason to sell from a previous blog i wrote:
I think the problem is people are still delusional about prices, every other assets (credit, stocks, mortgages, commodities, international...) are down at least 50% meaning that real estate in NYC remains the priciest asset outthere so for choice in a global portfolio you are better off putting your money somewhere else for the long run, you can not find jumbo loans anymore and if you do after weeks of hasle and paper work then you pay 2% more than any other mortgage, bonuses on wall street are something from the past and now people are paid in stocks over three year periods that means no cash for deposits or high maintenances. All in all prices ought to come down. For comparision S&P from 2004 is down 30% so if you think 3 beds were going for 1.2 at the time cheap math should put current 3beds closer to 1 than 1.5. 700$/sqft? anyone remembers 1991 housing crisis when people out of fear and lack of cash were hitting one beds for $70K?
Hosuing is still the best performing asset i thought i'll add up some numbers from case shiller this am If we now look at an historical sample of housing vs the dow jones we can see that the former is the best performing aaset by a long way, and this even includes Detroit (where slumdog Millionnaire 2 is set to be filmed)
Since 2000 Dow Jones -20% since 2008 -34
Sates AZ +24% -34
San Fran +30% -31%
Wash +76 -19%
Miami +65% -29%
Bost +53% -7%
Detr -19% -22%
NY +84%!! -9%!!! ANYONE?
That leaves a lot of room for NYC real estate to correct
i believe housing has a lot to go down as an asset class, and i agree with you that housing are long cycles and once start going down takes a long time to find a bottom, the case in Japan is a great example in late 80s everybody thought there is no way that Tokyo real estate can go down, small island, no space for the population and guess what following the same credit bubble we are experiencing today housing was down more than 80% by 2000 and still is down close to that number...add on top of that a generational gap (great study from the FED) showing that the pick of baby boomers is 2011 and Generation Y (smallest generation ever) kicks in you have a lot of supply for lower demand unless u believe imigration is going to ramp up (probably not buying NYC condos anyway!) so all the baby boomers who have no more 401K left need to downsize and retire in the sun or not that means they will need to sell their houses too...hope that helps
Looks like the place to which I was referring was pulled from the market...
http://www.streeteasy.com/nyc/sale/358912-coop-96-schermerhorn-street-brooklyn-heights-brooklyn
The 299K offer was supposedly accepted by the seller, and rejected by the Board.
Bonehead co-ops moves like this are just why this thing is going to be dragged out for a WHILE...
another reason not to buy a co-op.
$ cost average down?