real estate sales current status

a dribble of volume at 900/ft is meaningless. with 3 years of inventory on the market you would need a deluge of activity to even begin normalizing things. it's simple - price fall 30-50% further and volume picks up. those dozen buyers will disappear as soon as someone hits their bid.

Neil - obv your a broker. I have been looking - maybe I'll run into 1 other person at any given open house. I would suggest you line those buyers up for the whole buildings 'cause apartments are already hitting $600sq ft in very good neighborhoods. Perhaps you should get out there - oh wait sounds like you already are (out there). And I highly doubt you've seen a 50% increase in deals. Unless you only had 1 to begin with - what a bunch of bs.

This can't possibly be the real Neil Binder (of Bellmarc). Looks like a gag post.

Yeah, the brokers are out in force today with the 'sideline buyers are flooding the market' yarn. Sure, there are buyers out there (I'm one of them), we go to open houses. Unless sellers wake up to reality, though, we ain't buyin. The inventory numbers don't lie ...

nyc10025, I am in contract on my 2br and no where am I down to $600. My apt. is in 'very good neighborhood'. Stop dreaming!!!

there's fear in the air....

Ceteris paribus, the thing I just can't shake, that just bugs me, is my constant reminder of the absorption levels. Let say there was zero inventory, (in spite the fact there is now 10,200 or so) every freakin day, whatever the new daily inventory is, the new in contract number is 20%-25% of that number creating a ratio of 4.5 to 1 or so. This has been going on for 4 months or so, that's a bunch of days. Put another way (irrespective of price), there are not enough buyers out there to absorb the new inventory, much less the existing inventory.

I want to clarify my statement relating to activity levels. December was about 25% of a usual market, which I use as the beginning of last year as benchmark. Current levels of activity are about 35% to 40% of a standard level of activity. While there are obviously pockets that are doing better than others, we are seeing strength in the east side, west side and midtown markets. Downtown has been pretty slow and the financial district has been pummelled. Open houses vary greatly. We have some with no activity and others with in excess of 10 buyers. The key is the pricing. If the apartment is priced at retail it gets not attention. If the apartment is priced to sell it gets a lot of attention. A couple of Bellmarc brokers had a very good response on aggressively priced properties displaying in excess of 25 names on the log roster for a Sunday. However, that is unusual. I suggest that you look at bellmarc.com and check the inventory listing report. We show every type of property by area and price range and the amount of inventory we have in that category. Product is up 15%.

Are you comparing December and January activity levels to December "usual markets" and January "usual markets," neilbinder?

Obviously, December is always a low volume month and things naturally recover at least modestly in January. Activity levels are always fairly seasonal in nature.

Thanks.

Can i also find all the details of the 1/2 price condo auctions on bellmarc.com?

My comparison seeks to set up a benchmark of average within the framework of the prior 12 months of which last january was a reasonable portrayal of the general median level of activity. December and January was running materially below last january and on a january to january comparison we ran about 30% of the prior period. In the month of february (this month) we are running materially better and it seems to be about 50% of prior january benchmark. The bottom line is that people are busy though there is a lot of fighting between sellers and buyers. I believe the trough has past however, I don't believe that it is smooth sailing going forward.

neilbinder:

"We show every type of property by area and price range and the amount of inventory we have in that category. Product is up 15%."

Neil, Noah's widget shows inventory up 47% over the last 6 months. From 7,000 to 10,275. Why do you say product is up only 15% ?

Uppereast - I wasn't implying that every apartment was at 600/sqft only pointing out that there are already aparments on the market for that price and to highlight the lunacy of neils assertation that he had a line of buyers ready to 'buy up the whole buidling at $600 sqft. btw - 20 pine is now at $655 - get those building buyers ready!!

Neilbinder, your personal reflections on the market are interesting but..well...pricing follows supply and demand balance (see the charts on the urbandigs.com site)and right now Rosy O'donnell is on the one side of the tetter totter and well...it guess it really doesnt matter what's on the other side.. but you get the metaphore

Uppereast...congrats on your sale but I'm seeing both...I'm looking at alcove studios and there are apartments for $475k and they are not budging but I'm also seeing apts. that have dropped to $360k and will probably go lower as they stay on the market longer and longer.

During the Carter administration the inventory was, at it's peak, about 4 years.
HELLO, is said," 4 Years".
Think we are heading for deeper waters that the Carter administration years?
You bet your life jacket we are.
Wake me when the inventories hit 4 years...I'll show you some deals.

then the Carter administration years
(sorry...typo)

Nellbinder/Belmarc Broker:

If your activity is up 50% why doesn't it show on UrbanDigs contract closing chart.

Or are you _the_ _only_ broker up 50%, while everyone else is down???

Just questioning your subjective rosy assessment while you talk your book up.

The inventory increase I was relating to was from December to the current point in time. Not from January. The increase in activity relates to offers and acceptances where both attorneys have been contacted, closings will appear on these transactions in three months. During the Carter administration, there was practically no inventory because inventories really began gaining steam around 1978 when rent stabilization made it impossible to run rental properties and generate profits. Condos really didn't come into the market for another 10 years. Comparing that era to this one is not logical from my point of view. This recession is a function of a credit squeeze and the ripple effect as a result of the traumatic decline in securitized debt instruments. The fix is not hard -- enormous infusions of capital into the markets. That problem is being fixed, it is the emotional trauma that is scaring the dickens out of everyone.

Neil...not sure i understand your comment ....ie the trough has past? you believe we hit bottom already? If so, i would vehemently DISAGREE.......manhattan has just started to fall from its VERY OVERINFLATED PRICES......sellers havent come to terms with the fact that prices are coming down...foreign investors are nowhere to be found AND the wall street bonuses are gone...it will take a good year before you start seeing the beginning of a bigger decline...just my opinion...

Neil - really appreciate your point of view. Keep posting!

Neil I just returned from Lake Tahoe in California. It's a resort town but condos that were selling for around $600,000 about a year and a half ago are closing in the $275,000 range. I know it's a totally different market but some people on this post think we will see prices fall this much in the NYC real estate market. Do you see any signs of prices coming down that much in the NYC market? If so, what type of units and buildings and in which neighborhoods. If not, why not?

folks -- please check this thread started also by Neil
3 days into the year
he is right that properties are still selling and maybe at a rate less anemic than in December.
however, given the previous post and this one I suspect Neil is the forlorn drummer, drumming to his own beat as Rome is engulfed in fire.

To be fair, many of the properties that are showing dramatic price reductions so far have issues, and most are not asking much less than 2007/8. However, these are not moving and they are going to creep or plummet down before there is a genuine sales uptick.
The looking activity is completely understandable -- no shortage of buyers looking for deals to make up for years of being progressively tuned out.
However, the prices need to go to the level where people can afford things or this is just a beauty contest.

My sympathies to Neil and his many helpers. May their wings flap often and hard to keep them aloft as the drummer beats a hole in the drum.

http://www.streeteasy.com/nyc/talk/discussion/7407-bellmarc-owner-seeing-increased-buyer-activity-any-brokers-care-to-comment

sorry the paste did not work in the last post

To everybody out there: Mr Neil is surely very well informed but, unless you want to be silly and fool yourself, has a HUGE BIAS and at the end of the game, has been making money and will be making money by selling,. I believe he is hurting now, and his priority, despite protestations offered and surely to come, is to convince you to go and shell out your money, faster and just more of it.
His analysis is anecdotal and misleading. When he says the fix of the recession is not hard I think he is being disingenuous

Inventory is VERY HIGH and not being absorbed.

He is trying to convince us, maybe himself that it's a good idea to buy now
Same old trite mantra.

I have been hearing people saying the market is inflated and going to come down for thirty years. However, the facts are that the prices reflect earning power. People are earning enough to support mortgages that inflate prices. I propose that in the long term people are not going to earn less. When mortgages go down people can borrow more. This is because people don't buy in price rather they buy on cost and normally they buy the most they can afford. I propose that Manhattan real estate is a unique product because the cost of constructing a unit is astronomical requiring large levels of capital that most small developers cannot hope to afford. In addition, the building codes in new york city are so arcane and the union rules so restrictive that many large developers who come to New York quickly leave. Foreign buyers are still here, mostly from countries where there are repressive governments or political uncertainty so investors are seeking to protect their wealth. Trust me, half the wealth in Venezuela would love to come here if they could get their money out. The russsians are anxious to come. The irish love to come and the isreali's love to come. These countries permit their citizens to ignore foreign generated income from their onerous tax laws. The level of demand will rise and fall based on the strength of the dollar compared to their own country's economies. Go around and look at almost every building going up in Manhattan at the current point in time -- they have been funded by foreign money. The Chinese have set up a soverign fund to come to New York City to buy real estate. No, the longer term prospects for the foreign buyer are reasonably good. A number of years ago I read a study that said that New York City was actually losing housing stock and that just to stay the same we had to generate over 75,000 per year. Indeed New York currently has a housing crisis because of the huge demand relative to supply. That is why developers like Larry Gluck of Stellar Management are buying Mitchell Lama projects like crazy and converting them to cooperative ownership. He knows that if he can get the tenants out he has a line a mile long to buy them. New York has a huge unfulfilled demand--the issue is at what price. I propose that's the real picture. Lower the price and the buyers come out in enormous numbers. Some will insist that whatever price the market goes to that it's still to high and they will wait. Others will say "Gee, that was at $1,000,000 when I looked last year and now I can afford it at $800,000. Let's go!" There are enough of the latter to more than make the market happy. Everyone is talking about Wall Street creating a catatrosphie for real estate. I don't see it. There are layoffs of 5% or 10% of the total employee population in the City. These layoffs are centered on a few money banks that had brain dead underwriters approving loans that they know were ridiculous because they could be sold to unsuspecting pension plans and investors. The underlying demand for handling investment accounts, securitized lending, pensions, insurance, and hedge funds(yes even the evil one) is huge. This can't go away and it won't go away. The city tax revenue is going to take a big hit that's for sure because everyone is in red ink. But people have to live and they are still in New York City. My recommendations on what to buy center on Manhattan. Everyone wants to live in Manhattan, if they can't afford it they move to the outerboroughs or New Jersey. Now that prices are comming down in Manhattan the outerboroughs are strained because a portion of their buyer demand has decided to come back to this market. This has dramatically reduced the activity for buyers in the outerborough markets. I am a big fan for east side, west side and mid town. The prices in Greenwich village just dont' come down. Last recession they didn't and those crazy people still don't get it. They actually are happy they aren't going to sell. Greenwich Village people are a world to themselves. The financial district -- death.

Mr. Binder's (if the commentor is in fact Mr. Binder) comments are entirely anecdotal or conjectural and devoid of any supporting verified data or analysis. Why does he even bother? Everyone and his mother can now find data on inventory, sales, comparable pricing, employment and other relevant inputs and their current and historical ratios and trends. Are these to ignored in favor of blather from someone whose business is now dependent on denial?

Everyone wants to live in Manhattan, Neil? How provinical can you get. Personally, I prefer the solitude of Westchester, with only a 25-minute car ride to the Upper East Side.

I know that you think that I am writing in this blog because I have an agenda and that I want everyone to buy and that I am adversely affected by the current market and want to make more more money. That is absolutely correct! I am only giving you my side of the story and you can go to tons of people who can tell you that the world is going to end and a comet is going to fall on your head. That's your choice. You cannot get data because everything that is reported is historically based on transactions that occurred three months ago and are now closing. Three months ago was november's sales. Next month the reports will be even worse because December was one of the worst months ever. I propose that you wait. I suggest that you look at what is being reported in April, May and June. It won't be wonderous but it will be a significantly better market. However, once the market recognizes that "things are getting better" sellers will firm their prices in the expectation that the worst is over. To me a smart buyer buyer is someone who makes a deal when everyone has urgency to sell. Some of the newspapers have already reported that brokers are getting a better level of buyer activity and transaction activity. I love Westchester, especially the school taxes, the computation costs and the vibrant night life. I have friends who live there who are great golfers because they have nothing better to do than go to the club and party with the other members in order to fill their meal quotas. Westchester is another kind of life.

I think this really is Neil Binder of Bellmarc.

Thank you for posting here, Mr. Binder. I, personally, appreciate hearing your point of view & hope you will continue to post here.

Neilbinder, can you please post some actual, hard, data (with sources)?

Assuming this really is Neil Binder:

You say, "The facts are that the prices reflect earning power. People are earning enough to support mortgages that inflate prices." The problem with this statement is that every single study I've seen has shown that the prices have greatly outstripped earnings over the last 10 or so years. Prices have increased three- and four-fold. Salaries have not.

A similar disparity can be seen with the price-to-rent ratio. While rents have risen steadily (until recently), prices have increased by much greater amounts. On a purely mathematical level, it's impossible to justify buying over renting without unrealistically optimistic price appreciation.

as an additional point to the one ord was making, at the end of the day, what makes this market different from the one in 1998-2000? will there be more inventory? yes. will there be more income? not likely. will there be fewer high earners and will the high earners on average make the same or less as that time period? yes. are we seeing demographic changes/population creation anomolies that may affect our market for a good 5-10 years? yes.

Joedavis: Thanks. Nice work.

neilbinder-"I propose that in the long term people are not going to earn less."

after everything that's transpired in the last year- the fall of lehman, bear, and merrill, mass layoffs at citi, bofa, morgan, goldman, and hsbc, hedge funds going under left and right, a decimated stock market, yoy gdp contraction, etc....the notion that ny'ers are not going to earn less is astoundingly foolish and misleading.

"Everyone is talking about Wall Street creating a catatrosphie for real estate. I don't see it. There are layoffs of 5% or 10% of the total employee population in the City."

so in your opinion, the fortunes and multiplier effects of wall street don't affect nyc as a whole? I don't think there is an economist on the planet who would agree with that, so please elaborate.

How benevolent you must find the developers who are willing to auction off their unsold units at a 50% discount, when, as you state, there are "more than enough" buyers to "make the market happy" at a 20% discount.

what a load

"Everyone wants to live in Manhattan, Neil? How provinical can you get. Personally, I prefer the solitude of Westchester, with only a 25-minute car ride to the Upper East Side."

You are free to live where you like. I have seen quite a few interested buyers from Long Island and the other surrounding suburbs show up at my open house. The scenario is that Mom and Dad have launched the kids into the world and they're tired of their long commutes into the city. A 25 minute walk is vastly superior to a 25 minute car ride. The walk improves your health.

With these suburban buyers, many of them admit that they can't sell their house at the moment but they are still interested in purchasing a place in the city. My guess is that they have paid off their houses a long time ago and have low carrying costs. The city provides a different lifestyle. One couple was going to be two blocks from their daughter, they would have been able to see their daughter's building from my window. I am afraid that that fact might have nixed the deal because the daughter probably did not want to live two blocks from her parents. ;-)

The last 5+ years of of dramatic price increases has been fueled by a small increase in demand. As home prices around the country skyrocketed, it gave people the means for a down payment large enough to afford NYC. As this accelerated, many people shuffled from one soaring apartment to another with minimal requirements for extra salary since mortgage rates had dropped.

That added demand is now reduced, gone or negative and lower demand has resulted in lower prices. Supply continues to increase. I wouldn't be surprised to see a deceleration in the rate of price drops over the next few months but I can't see that they will stop or reverse any time soon.

I miss those large commission checks, now I need to do 5 rentals to equal one sale. I'm lucky in that I can do rentals many sales brokers can't/won't.

Empirical evidence regarding the melting down of the world financial markets trumps anecdotal waxing poetic. I agree buying when the storm is at it's darkest can reap vast rewards for the brave and intelligent with a good sense of timing. But IMHO this storm is only halfway over and I don't need an economics degree to figure that one out.

I hope Neil is correct I'm not a doom $ gloomer by nature but the numbers tell no lies.

I have met several wealthy foreign buyers recently(one just yesterday) there first question to me is "How can I get out of my contract?".

wow

I want to say thank you to the realtors posting on streeteasy...your insight whether biased or not does help me as I move forward on renting or buying.

urbandigs.....im glad you joined this discussion......would love to hear your point of view on this...

i need to verify if this is in fact Mr. Binder first.

Might just be an avid reader of the Bellmarc Blog:
http://bellmarc.wordpress.com/

I have been asked repeatedly what a buyer should do if they want a good deal in the current market. I propose that the key is to focus on an honest evaluation of what you want and how much you want to pay. Then put out a lot of bids. Low bids create anger in a lot of sellers however some sellers are willing to talk becuase they have greater ugency. You don't find great deals, you make great deals. I have patented a technique called Selection Portfolio that you can print out from bellmarc.com. Take a look at the strategy and apply it to your own efforts.

Ok, verified that it IS in fact Mr. Binder. Good to see an exec talking here. Clearly my view is different and I am a trader who views the world as a trade, so Im sure that will make some wary about my views.

Mr. Binder, like most brokerage exec's in Manhattan, see the world differently. When you have a vested interest in sales volume, deals, rising confidence, rising prices, etc.., it may change how you view the world. I think his statement:

"I know that you think that I am writing in this blog because I have an agenda and that I want everyone to buy and that I am adversely affected by the current market and want to make more more money. That is absolutely correct!"

...shows that he acknowledges this. Is it wrong? Of course not. Does it affect how I interpret his views? yes.

This situation that we are dealing with is a once in a lifetime process, and many people still dont 'get it'. They may say they understand, or that they get it, but most really dont. This is a deflationary spiral and deleveraging process resulting from an unsustainable parabolic credit boom powered by deregulation, excess leverage, micromanaging of interest rates, fractional reserve lending, flawed ratings model system and vested interest of agencies, and fee based securitization model that rewarded quantity of transactions and not quality of product.

The whole in the shadow banking system is ginormous, and its taking down our biggest banks and already took down all of the investment giants. Wall street is forever changed. This really is a high end recession and you will see the high end get killed here.

The problem with discussing sunny days, bottoms, or recoveries, is that those calling for them never really saw this mess coming in the first place, or at least never publicly acknowledged them. Im sure everybody will say they saw it coming now to make them look smart/savvy, but 12 months ago trust me, nobody publicly stated it! So for me, that means they didnt see it coming.

The ripple effect this will have on local economy is negative and unpredictable at best. There is no way anyone can say we will see jobs strength in the next two years. No way.

What nobody wants to discuss is that savings rate is rising and household deleveraging has yet to occur. Whatever pickup in activity we see now, I doubt is sustainable. Nothing goes in straight line forever. We are in early stages of local slowdown here, and commercial is getting murdered right now and we are yet to see the ripple effect that has on our banking system. Let us not forget that it was not only subprime that caused this, but all debts that were securitized and resold on the secondary market; alt-a, prime, jumbo, lbos, credit cards, auto loans, cmbs, helocs, cosi/cofi, option arms, etc..Its a overall debt problem, NOT a subprime problem.

Ive been screaming this for 18 months now, and everybody argued with me back then that Manhattan has no subprime exposure, so we are fine. That is a great example of someone who doesnt 'get it'. Its not fun to tell it like it is when reality is negative, but Id rather do that than keep my head in the sand. Hope and denial are the stages of asset cycles that get people hurt and I know many stories of sellers who were anchored to peak pricing last year, and dissed a bid that they would LOVE to get today; yet they cant. Especially the HIGH END! The nature of this slowdown will linger for a while, and we are yet to even discuss the unintended consequences that will come down the road from policy actions, and the nature of this slowdown. How will it further affect the cycle when those hit in 1-2 years?

Real estate doesnt turn on a dime, its more like a big tanker. Prices totally disconnected from incomes, and yet everybody rationalized it and defended why it would never stop. Insane and reflects ignorance of the dynamics at play. In my humble opinion, buyers are being cautious because every sign out there is telling them to be cautious. Its the same reasons banks are NOT lending. Congress/Fed/Media are yelling at banks to lend TARP money, but WHY? So we can re-start this entire mess over again OR prolong the pain for another 3-5 years? Its so damn stupid and makes no sense. We have become a culture addicted to bull markets, credit, ez money. banks should NOT lend when unemployment is rising, credit quality is deteriorating, and future losses will destroy capital ratios.

The market will do what the market wants to, in the end; its just that some view the process as a short cycle, and others view it as a longer cycle, and plan accordingly. Me? I look at fundamentals and how the core of the system may allow for or not allow for financing. The future will be a much different, less sexy normal. Think of how regulation will impact banking for the next decade.

In the end, buyers make this market. Prices NEVER should have appreciated so much, so fast, given no comparable rise in incomes. The price/rent ratio disconnected big time, and reversion to the mean was inevitable. Except right now, the entire core that powered the boom has been disrupted.

Noah: Great post.

Mr. Binder: Welcome to Streeteasy, and thank you for sharing your perspective.

UD, Please stop being so self righteous. I do give you credit that you forecasted the downturn but please stop posting it over and over again.

forget that. I got so much trash from so many when I argued my views, and now here we are. We are all facing this together and people still dont get it, so we have to rinse, lather, and repeat.

This goes for our leaders that are making decisions that will hurt us all. If we stop it, they will never get it. We need more Dear Mr. Obama, Dear Mr. Bernanke, and dear Mr. Geithner messages to keep on coming!

http://globaleconomicanalysis.blogspot.com/2009/02/dear-mr-president-with-all-due-respect.html

"UD, Please stop being so self righteous. I do give you credit that you forecasted the downturn but please stop posting it over and over again. "

Then stop denying it over and over again.

"People are earning enough to support mortgages that inflate prices."

Except they aren't anymore. Incomes just tanked, mortgages are harder to get... and, oh yeah, they're killing the mortgage deduction.

UD, Don't buy into your logic. I am fine that you keep posting that prices are going to come down ("rinse, lather and repeat"). That doesn't mean you need to repeat over and over again that it is you who predicted this correctly.

"The problem with discussing sunny days, bottoms, or recoveries, is that those calling for them never really saw this mess coming in the first place, or at least never publicly acknowledged them."

BINGO. Well said, UD... great post overall.

great link above...wouldn't it be remarkable and refreshing if the president would respond to these points?

uppereast - that mentality is what is leading the taxpayers to invest 45BLN into Citigroup, when the market cap is $13BLN right now. Add on that we, the taxpayers, guaranteed against 90% of future losses via a backstop of $300BLN in toxic assets.

WHEN DOES IT END! Citigroup is insolvent, the market knows it, the investors know it, and yet they continue to do these actions! DO you get it? Do you see what I mean here?

We need debt restructuring, and write downs to occur, bad models to fail, and they are not allowing the process to play out this way. Debt service payments MUST come down OR incomes must rise; which do you think is more likely? Bankruptcies must occur. Defaults must occur. Common/Preferred must get wiped out. Bond holders need to get haircuts. And this is very deflationary and will contract money supply and credit as it happens. Fed will print to try to fill gap in meantime, but that money is being hoarded in excess reserves to protect for this coming storm. Loans must be written down and we need to see fire sales of assets. LET IT HAPPEN AND STOP THE DENIAL THAT IS CAUSING BAD POLICY DECISIONS TO TRY TO INFLATE OURSELF OUT OF THIS MESS THAT WILL PUT US BACK EVEN MORE LATER ON!

We are way beyond self righteous right now upper east. I hope you know that.

I am not one who looks at past mistakes and beats myself on the back though I will take a moment and give a bit of another perspective which I wrote in my bellmarc.com blog. The impetus of this calamity was due to an accounting change. Historically banks would purchase mortgage for their own account and set up a 3% default reserve against each loan and then an additional 2% reserve against the entire portfolio. Thus, when a loan went into default there was not effect on earnings, it was merely an adjustment to the reserve account. With the invention of securitization, investors became concerned with the value of the loan as a tradeable commodity at any given point in time so reserves were thrown out and the new rule: mark to market, required that the loan continually be evaluated based on supply and demand. Once there was a blip in defaults, the entire market responded by declining the value of these securitized loan. That created a bandwagon effect that only built up the level of uncertainty. The actual amount of loans that are in default as a function of the nations total mortgage indebtedness is still less than 5%. Thus, if the accounting rules had not change banks would be portraying huge paper losses. That is also why many regional banks, who did not participate in securitization programs are doing fine. It is interesting to note, that many of these toxic mortgages are still paying their monthly debt service. It is the fear that they won't that is freaking out the market. So what do we do?
For those who have studied Milton Friedman and the monetarist school the answer is to aggressively expand the money supply so that the infusion of money will create an offsetting inflationary condition against the deflationary pressures in the economy. That is exactly what wasn't done in the 1930's and is held as a primary reason for the contraction. So far, the Fed has infused $2.5 Trillion into the capital markets and most experts see that another $1.5 trillion will be required in the near term. This is printing press money and isn't even on the radar as far as Congress is concerned. In addition to the monetarist policy of expansion of the money supply, there is also the Keynesian view of dramatic expansion in government expenditures. President Obama will be all to happy to turn that faucet as much as he can. Banks are going to get enormous infusions of cash. They have to steady their reserves which they will doe and they have to find borrowers who are credit worthy which they will have a harder time doing but never the less will do--particularly with mortgages where the collateral is leveraged only 70%. If the loan is Fannie Mae qualifying which now is $729,750, there is no problem since the loan is being sold. If the loan is a jumbo, the money is there but you have to look very pretty. I do not believe that everything will be fine. I do feel that there will be ups and downs over the next few years however, I believe that given what I am currently seeing in buyer demand and seller acquiesence to lowering their prices that it is an opportunity for smart buyers. In fact I even believe that there are smart sellers. Yes, they are selling at a lowered price than their original expectations however, when they buy the economic opportunity usually more than offsets the loss on the sale. We say to sellers, who cares what you sell it for if you are able to find that dream home you couldn't have afforded before. Now is your chance!

UD, Did you read my post? I never said that prices are not coming down. What I said is that I find it too much that you keep posting that it was YOU who forecasted it.

well said urban digs....

Mr. Binder I agree that Manhattan prices are affected by earnings. While many high earners remain in the city, you have to agree that purchasing power has diminished greatly. With major institutions like Merrill, Lehman, Bear, etc going out of business, being bought over, or now regulated by the gov't bonuses, tax revenue and demand for expensive housing drops. With leverage diminished so is profitability and in turn earnings.

From a personal prospective, I do not know anyone who is currently looking to buy. Many high earning friends in the financial world have been layed off, or seen their bonuses dropped. If your company or investment bank is having periodic layoffs every quarter, I think the last thought on your mind is to buy a million dollar apt. I believe that the financial sector is poised for thousands of layoffs through 2009, and it will have a direct impact on the manhattan market. Also, i don't buy the idea of the irish and israelis buying up manhattan. As far as the russians are concerned, thier economy is worse than ours now with the price of oil plummeting....

Also we do need to account for rent/purchase ratios. And given that they have been at a historicly high level, there's a large amount of room for a correction. Not to mention that rents are also coming down and still provide an affordable alternative to buying (espically considering the crazy maintenance costs in the city).

a_g, I am looking to buy and I am a banker. I feel that I have the field wide open to myself and that gives me a lot of leverage. Once everyone comes back in (i.e., when bonuses pick up), it will be too late already.

West81st:

"Noah: Great post.
Mr. Binder: Welcome to Streeteasy, and thank you for sharing your perspective."

Neil, I think what she meant to say is "Welcome to the jungle"

true, but Neil's point was that we are past the trough, I don't agree. And I doubt that bankers will be getting the same bonuses as before, look what's going on with Merrill execs that got bonuses in Dec.

uppereast - you are wrong. I never flat out forecasted a 25% decline in Manhattan, nor did I forecast a level where prices would bottom. All I did was focus on macro at the onset of the problem, and discuss WHY it would ultimately affect Manhattan. The closest I got was discussing the lagging nature of price reports, and that ultimately it would come out around the 1Q of 2009.

Show me one post of mine, where I said 'manhattan will go down 30% by 2009 and 50% peak to trough'?

Every discussion was based on actual data, actual events, and actual circumstances which I followed up with comments of my own. Thats it. It just so happens, the questions and the markets I focused on were the right ones and the slowdown was as severe as I worried it may be.

As for Manhattan, I do my best to keep reports as real time as possible knowing full well what I see may not generally be what the whole market is doing, at any given point in time. Im just one guy.

uppereast, they're not coming back in. that's the point. not for quite awhile, at the very least.

the only part of that piece that I thought you were claiming I was being self righteous was when I said:

"Let us not forget that it was not only subprime that caused this, but all debts that were securitized and resold on the secondary market; alt-a, prime, jumbo, lbos, credit cards, auto loans, cmbs, helocs, cosi/cofi, option arms, etc..Its a overall debt problem, NOT a subprime problem.

Ive been screaming this for 18 months now, and everybody argued with me back then that Manhattan has no subprime exposure, so we are fine"

And the point of that is to explain that this is NOT a subprime problem, it is a overall debt problem, and that is why Manhattan will be affected. How many brokers argued against this a year ago?

UD, quote "Ive been screaming this for 18 months now". This is what I mean. This or similar stuff shows up in every one of your comments...

aboutready, yes, they will come back. Bankers are a creative bunch!

Oh, and did you read the article yesterday that talked about all the fees being made with a potential GM/Chrysler bk?

exactly - that is a statement regarding MACRO element of this crisis, NOT that I have predicting a 30% decline in Manhattan for 18 months. You failed to see the context in which that statement was made.

And its true! Brokers argued, NO SUBPRIME FOR MANHATTAN AND THIS IS A SUBPRIME PROBLEM.

They did NOT GET IT!

Neil,

How did you do from 1988 to 1992? You've been in the market a long time, right? How were those years for your firm? How about your peers in the industry?

Looking back, would you be happy if you told "smart buyers" to buy in 1988? Obviously, you've acknowledged your bias - brokers can't encourage people to "wait and see" because then you don't get paid. But if you told a client to wait a couple years in 1988, would they have been better off or worse off?

no one's mentioned the obvious - that stocks are down 50% from their highs a year and half ago. That must have a major impact on housing prices in the near term as well. Dow is at 7100 now, this affects savings, retirement horizons and expendible income.

Neil: I appreciate your input and you probably know much about NY real estate, but I also have to say your view is restricted by overreliance on real estate alone. To say that this crisis was caused by an accounting change to real estate securitization is just plain wrong. I don't even think most people would say it is one of the biggest causes. If you don't recognize the macro causes of the current crisis, I don't expect you will be able to offer any kind of accurate judgment as to when and if NY real estate will turn around.

As for bonuses coming back, if you really work on wall street you should know that a good part of the income made by investment banks over the last 6 years came from leveraged trading strategies. Quite simply, the levels of leverage needed to produce those profits are not coming back any time soon.

can someone give me the bottom line...will I be able to buy an alcove studio (doorman, or non-doorman) elevator bldg in Manhattan in October for under $350k..your answer Neil, UD, Burkhardt, etc will let me know if I should start looking in the summer or look for a rental.

malthus, fees on some other plain-vanilla products are much higher (as discussed in the media). In my group, volume is down but revenues are way up, simply because we can charge more.

Julia, you're asking a bunch of real estate brokers if you should buy an apartment! Really, what do you think they're going to say? You should rent right now. Prices are going to keep going down for a couple years. Best case scenario is that they will plateau. There's really no reason to rush into buying. The only people advocating that are brokers and people who already bought and don't want the market to crash.

"The only people advocating buying", is what I meant in that last sentence.

Julia - I think you can today.

Malthas - exactly! I would put more important causes at:

1) deregulation, glass steagal
2) use of leverage to 40:1, 50:1, and higher
3) flawed ratings model and structure of rating agencies business model
4) securitization model that rewards transactions, quantity - makes banks more willing to buy shoddy loans, if they know they can package/slice/resell on secondary market and make money on that transaction
5) fractional reserve lending system
6) micromanaging of interest rates

ahead of an accounting change.

"The only people advocating that are brokers and people who already bought and don't want the market to crash."

There's never a reason to rush into buying. Period. But while I agree with your statement, there are plenty of people advocating renting right now because they want to buy but really want the market to crash. The best you can do is inform yourself as best you can and make your own call on when/if you want to buy - everyone's situation is different, and offering blind do-or-don't advice to someone on a message board about this kind of thing is not really helpful.

I have no doubt that some areas will make money. It was heightened competition in part that drove ibanks to make the leveraged bets in the first place. If you are saying the shake out will allow surviving banks to extract higher fees, I believe that could be true but it won't get them back to the revenue streams they enjoyed this decade. And that was one of the key contributors to the NYC real estate bubble.

Let's see, Malthus. I don't think things are as bleak as people make them look. I have to admit my darkest hours were last Summer and then in November again but it is starting to look better. True, not as good as it used to be but halfway decent.

Urbandigs, great post!
Please ignore uppereast though. This board is full of posters who try to annoy the hell out of you.
It's good to be reminded of your reasoning every once in a while, even if we've heard it before. I appreciate your comments so keep posting!

Glad to hear that uppereast. Yes, we will see. Would you give anything away by telling what area you are in?

julia,
http://www.streeteasy.com/nyc/sale/360021-coop-360-east-72nd-street-lenox-hill-new-york
just went to contract, likely for less than list of $399k and <$500/mo maint. I don't think there's much question that you'll be able to get what you want by Oct.

2 articles from the times regarding NYC real estate... one from the 25th and one from today. haven't read them yet, but based on the title it might make interesting reading for people on this chat.

http://www.nytimes.com/2009/02/26/realestate/26condo.html?em

http://www.nytimes.com/2009/03/01/realestate/01walk.html?ref=realestate

"walked away from a $780,000 deposit."

OMG! that's a big one, somebody could live (modestly, but still) on the returns of that portfolio. how on earth the buyer was willing to put so much $ when the writing was on the wall. a trust fund baby that doesn't have a clue of finance?

ok, so the realistic seller that's going to offer his pen house in an auction is Stephon Marbury

"Marbury will make $20.1 million this season and $21.9M in his final year." so not so bad for him. it's mind blowing how much society is willing to pay it's entertainers (movie stars, pop singers and sports).

this was interesting...

There are 8,000 new condos on the market in New York City, and 22,000 more are scheduled to go on the market by the end of next year. “You’ve got all this inventory that’s been based on this young financial buyer and international buyers,” Mr. Gollinger said, but those buyers have been hard hit by Wall Street’s collapse.

While many developers resist auctions, investors are pushing for quicker sales. “Auctions will hit New York City because of pressure from the underlying lender,” said John Di Fiore, the senior vice president at Real Estate Capital Partners, which runs a fund that invested in two Manhattan condo developments.

looking2return...thank you..just looked at your listing, didn't know about that bldg. it looks terrific.. i'm not ready until the summer but i'm saving that bldg.

Neil Binder - Chinese, Russian and Irish buyers??? First the Chinese always look for a bargain - they're not into overpricing and are fierce negotiators. You act like there are 1000's of chinese decending on the US looking to buy property - numbers are more in the 100's and they look all over the US not just Manhattan There swooping into the US market looking for deals. Russia's economy is in really bad shape and Ireland has over 20% unemployment.

The large Wall Street bonuses are not coming back there are no investment banks anymore and there really aren't super large bonus' in commercial banking.

Urban Digs - excellent comments

"can someone give me the bottom line...will I be able to buy an alcove studio (doorman, or non-doorman) elevator bldg in Manhattan in October for under $350k..your answer Neil, UD, Burkhardt, etc will let me know if I should start looking in the summer or look for a rental"

You know what you want, you know what you want to pay, looking and checking is a click away. Why would you not be looking now? If you have the time for the chat board you also must have set a search criteria, correct? Search daily for both. Check everything that gets caught in the net. Is not your time investment here an attempt to become a better fisherman? fisherwoman...what ever. You know your price point. Asking RE guys for the bottom...oh, that was 6 months ago! (no disrespect intended)

neilbinder, I believe you are wrong on many levels, but I admire your courage in posting your thoughts.

Okay, I am not of the mindset that RE is going to fall 50%+ in NYC. I believe that it will be more like 25-30% and then add 5% for the overcorrection. That said, I would like to call out a few of the "facts" that Neil is using to support his case that are just not accurate.

1. Foreign buyers - not going to happen. The European markets are in the process of their own recession that will likely be worse than what we are experiencing. The numbers indicate this, not some sales pitch.

2. Earning power is not going to disappear in NYC - while I agree with this principle, it would be unfair to overlook some grave facts that the top-20 earners at firms that received TARP money are going to directly have their income capped; the financial services industry is going to have a much worse 2009 than 2008 (at least 1/2 of '08 was productive) so bonuses will not be meaningful until Q1 of 2011 at the absolute earliest; the credit markets are still frozen which is crippling the lending for mortgages, but more importantly it is killing businesses and this leads to a cycle of increased unemployment (like Bellmarc closing sales offices); the loss of wealth from Lehman, Madoff and Stanford Partners is billions of dollars just suddenly gone and not ever coming back; the wildly over-priced properties just don't have the universe of buyers available right now. Could they come back? Sure, but not quickly; the cap of mortgage interest deduction will compress prices a bit as well; add to that increased costs of living, higher taxes, more job losses and it is a difficult economic picture that does not lend itsel to people going out to spend $1500 sf on a condo in a couple of months.

3. The cause of these problems is not just a change in an accounting rule. That is not only disengenuous, it is somewhat insulting. It is a combination of many factors including overleveraged banks, complete lack of oversight and inadequate risk management functions, greedy appraisors, mortgage brokers real estate brokers and people who bought over their heads just to name a few. This is not just an "acounting rule change" problem....please!

Neil, you are certainly a bright and tremendously successful guy, but you and your industry have a good amount of blood on your hands in this mess, too. The lack of transparency is disturbing, at best. I respect you for posting here and I always welcome different viewpoints. My suggestion to you, however, would be to try to use less spin and more honesty. If you cannot see that people are clamoring for honesty now more than ever, you may end up having to close more Bellmarc sales offices as the year limps along. No spin...no bs....just the truth. I think you'll be surprised by what you'd get out of it.

neilbinder - good luck to you. I believe you need a ton of it...or you'll just need to find buyers that are uninformed lazy fools.
There is no doubt that pricing will have a major drop right after the first quarter results come out.
We all know that the real estate market is 4-6 months behind the current economic status.
Given that state of the economy - especially in the nyc financial sector - one would be EXTREMELY FOOLISH to think the real estate market is steady.
We will clearly see at least another 10-15% drop in the next 4-6 months.
The sincere sellers are going to need to wake up and smell the coffee!
Reality can suck...if you are a seller.

waverly, they can't stop spinning because if they stop spinning they won't make money. The flaw with the real estate market is exactly the same flaw that people now acknowledge with the investment banking world: these people get a bonus when they make a deal happen. It doesn't matter whether the deal goes bad next year, it doesn't matter whether the parties in the deal get screwed down the line. Nothing matters except that deals go through: the higher the value of the deal, the more money the broker/agent/banker gets.

There's just no getting around it. The brokers will argue about their reputations and maintaining good relationships with clients, etc. But that's what the bankers said too. And then they kept pushing terrible deals. People need to remember that ultimately these guys are hustlers (just like any dealmakers are) and, just like everybody else, they have their best interests at heart, not yours.

The incentives offered to brokers/agents in the real estate industry cause the insiders to distort information. This information distortion disrupts the market dynamic and causes wacky non-market based results. That's what the brokers on this board are aiming to do: the covert posters and the open ones, like Neil.

So long as a real estate agent gets paid when you make a deal, this will all continue.

Well said.

Mr.Binder while I appreciate your post, we really need to think of your position and agenda, especially when you write things like this......."The prices in Greenwich village just dont' come down. Last recession they didn't and those crazy people still don't get it. They actually are happy they aren't going to sell. Greenwich Village people are a world to themselves. The financial district -- death."

I did a quick search on streeteasy in the village (excluding east village) and I see a lot of arrows pointed down, I don't think that means its the "trough" I searched 2 bedrooms (which hold thier value more than studios, and 1 bdrms) between $0.5 mill and $1 mill. see link...

Very interesting post, reminds me of court. You have expert witnesses on both sides giving their expert testimony. I remember a judge from the Southern District federal courthouse saying in his summation: “Ladies and gentleman of the jury, we are not here today to find out the truth. We are here to reach a decision.”

And so, we decide how to proceed based on the information that is presented to us.

Nobody is going to convince someone to buy a home, it’s too big of a purchase. We decide for ourselves based on the information available to us.

A pretty smart man told me that we all make the right decisions because we are basing it on the information we have at the time. If it’s a bad decision it’s because we weren’t properly informed.

Sometimes the market comes back a little too quick and we miss. At that point you find an apartment you like and 3 more people like it, too.

A friend of mine was interested in an apartment a little over a year ago. He did all the due dilligence, comps, etc. Felt good that he negotiated a decent price. Then got a call from the owner - - someone came along and made a higher offer. Needless to say, he was unnerved. After all his work and having his offer accepted.

He called me and said, “Well, my wife is not happy.” He increased his offer and because his finances were stronger than the second couple, he did get apartment.

History (sorry to say again, History has taught us…) shows that when empires become too powerful, at some point, they fall. But they do come back. So will this one.

I know this is serious stuff we’re in. I get it, I really do. I know what doom and gloom feels like. On some of my better days, people tell me I have the personality of an undertaker.

Gaining back trust is a lot harder than trusting for the first time. I heard Axel Merk of Merk Mutual Funds say what we need more importantly than money and gold, is confidence. We have the tangibles. What we lack, what we need, is confidence. We need confidence in banks. Banks need confidence in us. Confidence is what will free up credit and allow business to expand.

If I use a broker, I want to trust they are representing my best interests.

Maybe someday the Company will take over the real estate industry and we’ll have government issued agents. No, that’s not a good idea.

We need jobs and sales. Can’t just have one. They’re mutually exclusive. Except of course if you’re receiving social security.

My retired mom wants to know how come the media are not reporting on how seniors will keep this economy from going under because they will still spend their social security income and stimulate the economy if no one else does. I told her they’re thinking of using all the social security funds to make the banks solvent. So far, I still haven’t been invited for Sunday dinner.

I like visiting this site because I learn. I pick up info and ideas from everyone. Thank you to everyone who contributes. I benefit from your thoughtful posts and appreciate it. It gets divisive at times but that’s good because then someone else has to come back with a rebuttal. We didn’t have this internet when I was in college.

Julia wrote: will I be able to buy an alcove studio (doorman, or non-doorman) elevator bldg in Manhattan in October for under $350k

Maybe, if there’s one you like come October. Why not look now? You don’t have to buy now. You never know what the tide may bring in.

Also, whenever you decide to go after what you want, if it appears to be a good deal, I think it’s pretty safe to plan on other people thinking it’s a good deal, too. So, just you be the best candidate. Have all you ducks in row.

I think Mr. Binder knows that Manhattan real estate is in for some troubling times in the days ahead, at least on some level. It may not even be a conscious realization, cognitive dissonance can be very powerful. Why would he bother posting on an internet forum if he really believed the current state of affairs is a blip and the market will shortly return to an upward trajectory? If that were true, he would be focusing on his business.

I, and others also, have asked him to justify the current valuation of Manhattan apartments. But he hasn't responded to those requests, instead, he's presenting us with a bunch of platitudes about foreign buyers, the city's long-term financial health, etc. Deep down, I believe he knows (or he's starting to realize) that these current price levels aren't sustainable and we are headed for a big correction.

Robert...love your posting, especially your opening re. the judge...please post again, we need your insight and wit and I have been going to open houses but agents aren't budging from $450-$475 alcove studios. Keeping my fingers crossed and I hope your mother invites your to dinner.

I just want to say that I do agree with neil on one point; that inflation is the way out of this mess.

"Nothing matters except that deals go through: the higher the value of the deal, the more money the broker/agent/banker gets."

driggs,

I think you're a little off on this - brokers don't really care about the value of the deal as much. They care about volume, and therefore, getting a deal done at a price amenable to all parties. I think skepticism is healthy, but some people have a bit of an excessive case of broker paranoia in my opinion, and find it easy to blame too much on them.

Turned into a good thread. Yes, nobody is denying Mr. Binder's business vision or success, clearly he has both.

but when it comes to this, I recall what David Lereah said when he left the NAR, and was finally able to say what he really thought in May 2008 after speaking bullish on the market for the trade assocation:

"We're not at the bottom," he says. "[People] want it to be near the bottom, but we're not there yet. The leading indicators are still very bad. Pending home sales are still in bad shape. Mortgage applications are low … There's still supply out there in abundance … This thing is going to get worse before it gets better."

I just wonder if those with a vested interest in sales volume would alter statements if they were in a different line of work?