Inventory @ 10,800 so what?? what's your point?

"If you consider that prices since 1970 have returned 8.3% annualized."

LMAO.

Hey steveF, you have something for me to buy? Are you trying to unload some assets or something? Just curious what you have at stake here. :)

I expect by end of next week 11,000 - nice selection which will get cheaper and cheaper

steve i don't understand your point. there was no bubble because apartments have returned at an annualized rate of 8.3% over a given period of time. huh? why does that demonstrate that there was no bubble?

if you think prices were appropriate last summer then you must think they are insanely cheap now since they are off around 30%. i hope you are buying like crazy.

Talk about cherry-picking data to back into an incorrect, self-satisfying conclusion.

The real facts are black and white: It's macro-economically impossible for asset values to grow at a faster real rate than GDP over the long run, which basically means about 6-7% nominal rate. Based on that unarguable economic reality, and not the "emotional buyer" fantasy, prices would have to drop 42% using 2002 as the baseline from the peak to be at normalized levels. That's roughly $700 per sq ft according to Miller Samuels.

In addition to the actual numbers, there are MANY articles that basically all agree that Manhattan is likely to revert to 2000-2002 levels. So, once again, according to Miller Samuels, that equates to about $700 per sq ft on the UES for a 2BD, 2BA.

Upper East Side
Manhattan
Co-ops + Condos
Average Price Per Sq Ft
2000 - 2008
Studio 1-Bedroom 2-Bedroom Yr/Yr Growth % (average = 12%)
2008 941 1,048 1,389 11%
2007 872 946 1,250 7
2006 803 902 1,163 33
2004 577 662 874 17
2003 517 573 744 9
2002 498 513 683 -4
2001 437 497 708 8
2000 385 449 657

The average should be closer to 6%, which means the market should adjust 6% for each year to return to 2002 levels (7 * 6% = 42%).

...and I'm actually being conservative. Most 'experts" predict 50-60% declines.

Numbers aside, I wouldn't pay a penny over $750/ sq ft, but that's just me...I'm probably one of the few individuals who actually understand economic realities.

his statistic is wildly flawed because the real run-up was just over the last 5 years or so (+100/150%)
same in London RE

...even at 8.3% annualized return using steve's fuzzy data, the market would sill have to drop a minimum of 26% from the peak to normalize.

"emotional buyer" = "emotional seller" in my previous post. typo.

I'm beginning to think steveF is rufus, based not on content but illogic and obsession.

who cares - his argument is just wrong

If a building cost for the developer is 100 mn, how much would be the building cost ex land?

"Most 'experts" predict 50-60% declines."

People laughed when I said this last year.

"Numbers aside, I wouldn't pay a penny over $750/ sq ft, but that's just me"

No it's not - I've been saying it for a year.

"I'm probably one of the few individuals who actually understand economic realities."

Not really. There have been a few old-timers....

Good! Because the more educated, knowledgeable potential buyers there are out there, the better off we'll all be.

As an aside, I was out with a buddy last night who owns a Jr 4 on 74th & 3rd. He just put the place up for sale, and get this...NOT because he needs or wants to move, BUT because he thinks the market will decline another 30% and wants to unload and get a rental before that happens. He might be one of the few realistic buyers I've spoken with.

Just wondering... as I'm neither a doom and gloomer or a head buried in the sand broker...

Inventory levels have increased, true, but so has the overall number of units available for sale, with more condos and more conversions to condos there will naturally be more numbers. But has the percentage of available housing to purchase increased dramatically? I don't know what the numbers are, but am wondering.

Of course there is going to be more inventory for sale because there has been a creation of a lot of inventory. Over 10% of available purchasable housing units for sale at a given time is considered unhealthy.

What percentage (not just numbers) are we at now?

"He might be one of the few realistic buyers I've spoken with."

You mean "sellers"?

And yes, rents are plummeting. Look for 2-bedroom 2-bath luxury rentals in the $3,500 range by November. Inventory is skyrocketing, most currently in the $4,500 range.

At 12x annual rent that gives a purchase price of $500,000 for a 1200 square foot unit.

Which is about right, requiring an income of about $150,000 at 30% PITI.

yes, I meant "sellers". I guess I'll just continue to rent until the expected 22,000 new units (citywide) come on line in mid 2010.

King,

Available inventory is a small portion of the total housing stock in general... as only a small portion of homes are available for sale at a given time. The denominator is too big for meaningful analysis as it hides significant changes.

It is more interesting to look at inventory absorption (inventory / annual sales). ie How long would it take to clear the inventory at the current sales rate? If you simplistically annualize the 510 contracts signed in the last month from the urbandigs website (noting that this is too high given that we are in the peak selling season), then you have ~6100 annual sales and, at best, ~1.8 years to work off the current inventory. Ugly situation for sellers (even if inventory was not rising)... given the implications for time to sell.

if you renters would look past the last say 9 years and look over a longer term you will see no price bubble. Remember due to the "INSANE" new units entering the market(see link) from 1989-1993, prices did not start recovering to '89 levels until 1999 so prices went nowhere from '89-99 (10 years). But efficient market says all things correct themselves and manhattan corrected to the upside from 1999-2009. The market(sellers/buyers) are waiting to see where the economy goes. It looks like the buyers are realizing things are getting better and want to own.
HT1 I own several studio condos as investments so my interests are for prices to move higher. In other words my bet is higher!

"you will see no price bubble."

LMAO.

"I own several studio condos as investments"

LMAO.

steveF, it's one thing to question about how fast and how much RE will fall. It's fair to question people saying 50% price drop. But to say that there is no bubble. That's insane. Real estate rapidly increased in value and has, by all practicle measures, decreased around 20%-28%. Even if that's as far as it continues to decrease, that is still a bubble.

You can continue to debate whether it will decrease peak to bottom 30%, 35%, 50%, etc...but to say no bubble? You are losing credibility on that one.

kingdeka..20-28% decrease?...who? where? when??? Show me the exchange traded condos please. Even the big three Prudential/Corcoran/forget the other one...can't even agree. Even if you could get a number what kind of number is that when transactions are off more than 50%?? There is not one big housing exchange....in down real estate markets, prices stay flat until the buyers come back. That's what's happening with my investments. Activity however is picking up. that's all I can ever say really.

"that's all I can ever say really"

That's all you ever do say, really, but it's not true. Otherwise, inventories would be falling, & they're not.

Inventory levels are at recent norms. Q4 2006 had similar numbers. With the doom headlines ceasing buyers have statrted to pick up the pace...crains...heddings. aka Goodfellas.."It's gonna be a good summer!"...:D

http://www.truegotham.com/

Steve, you realize the chart is WRONG right? That was a PREDICTION from years back.

Peak year for inventory additions to Manhattan housing market - 2008.
The close runner up - 2009.
(building trades council).

We just dropped 28% in coops. Not a bubble? What to you call it?

Wow, Steve, put your head back in the sand.

> kingdeka..20-28% decrease?...who? where? when???

Steve, seriously, your nonsense is getting a little old

"After all, co-op sales have dried up, and preliminary figures show that average co-op prices are off 28 percent so far this year from the record prices in the first quarter of 2008. "

-nytimes this week

"if you renters would look past the last say 9 years and look over a longer term you will see no price bubble."

Steve, tell me you are not this dumb...

http://www.ritholtz.com/blog/wp-content/uploads/2008/12/case-shiller-chart-updated.png

"HT1 I own several studio condos as investments so my interests are for prices to move higher. In other words my bet is higher!"

Ah, got it... you're not that dumb, you're just lying to protect your investments.

Makes complete sense now.

SteveF: Thanks for arguing in one post that prices are not down 20-28% and then linking IN YOUR VERY NEXT POST to a broker who says prices are down FOURTY PERCENT in some areas. Do you even read the stuff you cite?

> Do you even read the stuff you cite?

I'm assuming that was a rhetorical question...

'a buddy last night who owns a Jr 4 on 74th & 3rd. He just put the place up for sale, and get this...NOT because he needs or wants to move, BUT because he thinks the market will decline another 30% and wants to unload and get a rental before that happens'

My work puts me in contact with many people each day on the UES. I have herd this from as many as 6 different persons in the last 2 weeks. The idea is sell now of forever hold you piece. (piece of RE)
These people are under no obligation to sell based on personal finance. In fact they are some of the more financialy secure that I know. They will want to trade up and now might be the last second to cash out before we head for the abyss.

There comes a point that you don't need to be a RE professional or an economist. The hand writing is on the wall. As our leader fiddles away on his March madness picks...Rome burns. Sure, the market will stabilize the moment the dollar is the value of...squat. Big inventory plus limited pool of buyers equals decending prices. I do believe this is the law of supply and demand. Is their some other economic concept driving the market price? Please inform me, educate me, could it be anythig other that that? Where will the demand come from? Even those with bucks and credit will hesitate taking on big monthly expenses in an uncertian job market. Am I missing anything? RE values are going to be 1991 prices...mark my words.

Hey, kingdeka, just to hammer the point home -- inventory is being added to the market at about 4 times the rate it's being taken off. That's a fairly indisputable measure of both absolute numbers and trajectory.

See www.urbandigs.com

Permabulls (and perma-fools) will attempt to quibble with UD's methodology for gathering his inventory data. But that methodology has remained constant while inventory has shot through the roof.

No one can give you an exact number on available Manhattan inventory. Urbandigs' numbers, however, clearly show that -- at current price levels -- the Manhattan market has a lot more wannabe sellers than wannabe buyers.

IMO, that's indisputable.

Seriously, SteveF is so 2008, let's ignore him for now on ... I find the inflation argument more compelling -- at least there is an argument to be made as to if/when inflation will hit and if/any effect on real estate it will have. there are plenty on here -- uppereast, HimWhoKnows, etc. making interesting (not that I agree with) arguments on the effect of inflation. SteveF is just a tired retread, let's put him on the Rufus list -- agreed?

anyone who wants to chas out before prices decline has already missed the boat. When you factor in 10% for transaction costs, they will break even at the end of the day. Your friend says that prices are going to decline 30%, but prices are already down 15% for the low end, so after transaction costs, he will only save 5%.

and to see 1991 prices, that will require a decline of about 75%, a littl bit absurd and unlikely if you ask me.

"and to see 1991 prices, that will require a decline of about 75%, a littl bit absurd and unlikely if you ask me."

Dow 7000 was absurd two years ago. Most of the major investment banks blowing up was absurd, as was the Fed dumping more than 3 trillion USD into the system and the treasury bailing our some of the biggest banks and automakers in the US (the ones that didn't go belly up). Manhattan RE, relatively speaking, hasn't been hit.

Yet.

It just hit 10,900 today. Start a new blog!

"to see 1991 prices, that will require a decline of about 75%"

I don't think we'll see 1991 prices, but 1991 prices were above 1998 prices, and 1998 was the nadir of the Manhattan real estate market. We will see 2003 prices again, however, which represent a 50% decline from the peak, or about $750 psf for prime Manhattan.

Here's why:

http://www.streeteasy.com/nyc/sale/361150-condo-125-west-21st-street-chelsea-new-york

StreetEasy History

10/30/2008 Listed in StreetEasy by Alchemy Properties at $1,410,000.
03/19/2009 Price decreased by 18% to $1,156,000.

Already down about 20% from the peak asking price. Alas:

Down Payment $231,200
Mortgage Amount $924,800
Mortgage Payment $6,466
Total Monthly Payment $7,529

Then add the tax abatement back in and you have monthly carrying costs of about $10,000.

You can rent a virtually identical apartment (with a better view - this one looks directly onto another building 10 feet away) for $3,800 a month.

Why, why, why buy? The price would have to fall another 50% to equal what it costs to rent.

"a little bit absurd and unlikely if you ask me."

Not when you look at the math.

"As an aside, I was out with a buddy last night who owns a Jr 4 on 74th & 3rd. He just put the place up for sale, and get this...NOT because he needs or wants to move, BUT because he thinks the market will decline another 30% and wants to unload and get a rental before that happens. He might be one of the few realistic buyers I've spoken with."

Sell now or be priced out forever!

The same people who say a rising inventory doesn't matter as the same people who say an inverted yield curve is OK, and not a sign of a oncoming recession. Some people won't see it until it smacks them in the face, like when their stock portfolio crashed in the fall. You can lead a horse to water...

steveF - "prices did not start recovering to '89 levels until 1999 so prices went nowhere from '89-99 (10 years)."

So do you believe the price movements since a 1999 base level represent an efficient market? Why wouldn't you project out a modest straight line from a 1999 base and then disregard the anomalous deviations from that line? You don't see a bubble somewhere between 1999 and 2009? Not even for a three-year period somewhere in there?

Just image Dow at 5000 (if we are lucky) - how much do you think Manhattan RE will be down by then?

> anyone who wants to chas out before prices decline has already missed the boat.

ROTFL!

This is the SAME GUY who said there was NO DECLINE just a month or two ago.

Now its too late, you already missed it!

OH MY LORD!

Why is it the folks who had NO IDEA that the crash was coming are suddenly experts on when it ends?

stevef,

your logic is just so strange. if prices didn't move up between 89 and 99 you assume that after that the market had to spike to make up for it. maybe. but the other explanation is that there was....wait for it....a BUBBLE in 1989 and the market needed 10 years to recover after the bubble burst. the truth is a combination of the two: there was a bubble in the late 80s, it burst, and then real estate over-corrected.

why is it that you think that won't happen again?

happyrenter, that is exactly what happened 1989-1999.

Still curious to see how economists would measure beginning and end of this recent bubble. How do you define the "normal" trend one would expect beginning in 1999? Would the bursting bubble then revert to where that upward trend would have taken us beginning in 1999? Or would it overshoot it on the way down? Or go all the way back to 1999 level? This all happened much too quickly, and think of it - it was precisely after stock market crashes, beginning with the dotcom fiasco, that real estate juiced up.

> why is it that you think that won't happen again?

Because its what he wants to happen.

SteveF will think what he wants to think, stats or logic be damned!

happy, you don't start a debate with your logic is so strange...you start by saying I am somewhat confused can you please explain further...okay...if you look over the long term say since 1970. In 1970 avg sq ft prices for coops condos was $53. In 2007 according to Miller it is 1,120. That is an annual increase of 8.6%. Looking long term sya 37 years should iron out the spikes in either direction. I will find that link for the $53 bucks as you asked last time.....:)

1970 53
1989 332
1999 400
2001 650
2007 1,120

happy, you don't start a debate with your logic is so strange...you start by saying I am somewhat confused can you please explain further...okay...if you look over the long term say since 1970. In 1970 avg sq ft prices for coops condos was $53. In 2007 according to Miller it is 1,120. That is an annual increase of 8.6%. Looking long term sya 37 years should iron out the spikes in either direction. I will find that link for the $53 bucks as you asked last time.....:)

1970 53
1989 332
1999 400
2001 650
2007 1,120

37 years might be enough to iron out the spikes in a normal period, but not after a bubble. Using the same data, if you assume the 1970-1999 period is "normal", there was an average annual increase of 7.2% over the 29 years (from $53 to $400). If prices had continued to increase at that 7.2% rate from 1999-2007, the 2007 price would have been $697, indicating that the actual price of $1,120 is over 60% higher than the "correct" level.

And, we're talking about an asset class that traditionally has a 2% or so return (just beating inflation)....

So, that once again debunks SteveF "theory".

"you start by saying I am somewhat confused"

Yes, Steve, you are confused. We agree there.

happy click on my link from above. Look at the inventory in 86-90 coming to market! plus recession, plus terrible living conditions 2200 murders, now 500. The market needed 8 years to absorb that tsunami(i like that) of inventory. What is 11k compared to 20k entering those 4 yrs. stevejhx will talk about non eviction conversions but eventually they can be evicted i think 3 years or soomething so then the units are available.

nyc10022..get lost beavis

Dude, I know you lost your shirt in your condo "investments" but don't lash out at the people who tried to give you advice you should have (but didn't) take.

You lost tons of money, and you screwed anyone who listened to your "advice". (good thing nobody took you seriously).

But now you're telling OTHERS to get lost.

Dude, the world would have been a much better place if you had never opened your mouth.

Sorry we keep proving you wrong, but that means YOU should be the one keeping your mouth closed.

"happy click on my link from above. Look at the inventory in 86-90 coming to market! plus recession, plus terrible living conditions 2200 murders, now 500. The market needed 8 years to absorb that tsunami(i like that) of inventory. What is 11k compared to 20k entering those 4 yrs. stevejhx will talk about non eviction conversions but eventually they can be evicted i think 3 years or soomething so then the units are available."

Oh my lord, putz is pulling out the same incorrect stat. That was a PROJECTION from YEARS AGO... and it was WRONG. OH MY LORD IS THIS ALL YOU HAVE LEFT????

2008 is the peak year EVER for new units to market. 2009 is a close second.

And, yes, murders were higher then, but prices were MUCH, MUCH higher in 2008.

And incomes are returning to 90s levels.

Listen, I'm sorry you made HORRIBLE, HORRIBLE calls in real estate, but resorting to lying isn't going to fix the problem.

Manhattan RE is TANKING and there is nothing you can do to stop it.

> plus recession

Yes, good thing we don't have anything like that now.

> What is 11k compared to 20k entering those 4 yrs

30k. Remember that number.

Thats how many entered in 2008.

Steve, the more you shout, the dumber you sound!

You have to be very careful when looking at any of the "data" you see from most of these sources. Most of the data isn't "hard", it's estimates based on guesses of what was going on, and it's usually vastly skewed to the vantage point of whomever is presenting it. I remember looking at a "Corcoran Mid-Year Report" back in 1997 and seeing their chart for the prices of studios in Chelsea (I loved this so much I saved it and I'm looking at it now). It lists the average price of a studio in Chelse in 1992 as $89,000; in 1996 as $90,000 and in 1997 as $89,000. So prices went unchanged from 1992 to 1997? By my recollection (and having sold half a dozen bank owned studios in a single building in the first half of 1992), prices had more like tripled. So what happened? Corcoran was geared much more to only "luxury" properties in Cheslea in 1992 and by 1997 had come to compete with the rest of us low-lives.

My favorite professor of all time at Cornell was my post-graduate statistics prof - great guy. He gave the ultimate final: "Here's your set of data and here is your thesis/premise. Using different methodologies, both prove and disprove the thesis/premise".

We are nowhere near the bottom. The "doom and gloomers" are going to look like optimists before this is over. We haven't even seen the tip of the iceberg in Manhattan foreclosures (I follow them daily) and we're on the Titanic.

"We haven't even seen the tip of the iceberg in Manhattan foreclosures (I follow them daily) and we're on the Titanic."

What do you see going on there? Are there delinquences bubbling under the radar waiting to become foreclosures in Manhattan? How many? How are you following that?