NYC Housing Shortage

a housing shortage? Huh? The only housing shortage is housing that middle class workers can afford.

Undersupply is a persistent myth -- visit west Chelse, Hell's Kitchen, or Williamsburg. Or consider how many neighborhoods that were unlivable 20 years ago now have people living in them. There has been a tremendous increase in housing construction in NYC, walk around.

No, the vacancy rate in NYC is low versus any other of the largest 100 cities in America, and when compared to London, Paris, etc. Undeniable fact. Its HIGHER than NYC norms, but still low versus everyone else.

Not at all.

Wall Street (and the idea that bonuses would save us) delayed the crash, I don't think it tempered it. We've actually declined faster than anywhere else now, and co-ops figure says 28% down.

We started later, thats all. Last time around (87), that happened, too... and we got it worse than most places.

Doesn't look like anything has been tempered here. Even if we stop in the 20s, I think that puts us ahead of a lot of America... in a quarter of the time.

As for "well there is a shortage here", consider that was already factored into the prices, and is becoming less true (or at least staying flat). We're still SEVERAL TIMES more expensive than other cities. We didn't see the shortage become more severe.

If anything, we've DRAMATICALLY expanded the places white collar folks can live. It used to be UWS, UES, and E village. Now its anywhere south of 96th street (and not even). Used to be Brooklyn Heighs and Park Slope. Now that area has been expanded 5-10x

And wall street is no longer sending 10,000 new folks a year here. And media is cutting back. And so on.

But lets say everything resumes to "normal". Lets say we get the same shortage as before. It was ALREADY factored into prices... and, if anything, it was overfactored (because demand was expected to increase).

So, short story, we're already down severely, and it shows no signs of abating, or no logic there either.

House prices are crashing, but so is Wall Street, the financial sector, the public sector, the non-profit sector, etc. Is it a race to the bottom? Is this a race we want to be in?

"No, the vacancy rate in NYC is low versus any other of the largest 100 cities in America, and when compared to London, Paris, etc. Undeniable fact. Its HIGHER than NYC norms, but still low versus everyone else."

And London prices are crashing, and we're several times the cost of any other cities. Shortage should keep prices somewhat higher than other places, but given we're 5x or 10x in some cases, that doesn't mean much.

If we are twice as tight as everywhere else, but 10x the price, that still points at major declines.

"House prices are crashing, but so is Wall Street, the financial sector, the public sector, the non-profit sector, etc. Is it a race to the bottom? Is this a race we want to be in?"

Don't forget publishing! And the 25% of jobs in this city that are government/union....

I agree we're going to continue to decline over the next 2 years and stay pretty flat. I was hoping for more serious thought on how the housing shortage will impact a bottom. I was also hoping people would factor in the rental market to the consideration as well. Thanks.

And apline - most of the residents and workers in nyc ARE middle class and below. That's one of the reasons people have 4-5 roomates and live like they are in college dorms well into their 30s, while in the rest of the country people can buy their own house or condo when they are 25. I've lived here my whole life. I'm not blind to all of the building that has occured. But it's still not enough to satisfy the demand that had already existed and the demand from increased growth. Plus, NEARLY ALL of the new supply in housing has been luxury and unaffordable to the the vast majority of nyc citizens and workers, and has done almost nothing to put a dent in the housing shortage.

jmkeenan - Williamsburg is not considered as part of New York City.

There is a huge housing shortage. Its going to get worse in 2-3 years as nothing new is being built. There will be a hole in new units coming to the market. Rents will go up, housing prices will go up. NYC10022 will still be renting wishing that he bought. I will still be cashing his rent check each month with a smile on my face.

perfitz - as a fellow manhattan chauvanist, I admire your exclusion of Williamsburg from nyc. And while I do usually mean Manhattan when I say New York, I did mean the five burroughs when I said nyc in this conversation. However, I now think that's probably going to make this discussion too prone to caveats, since there are very cheap parts of "nyc" albeit those parts are very much unlike other parts (transportation, employment, location) to the extent that it would throw this discussion into turmoil (although this is SE, so that's inevitable!) But let's stick to New Yor, er... Manhattan.

"Williamsburg is not considered as part of New York City."

You still trolling this site petroputz? Wiat. Is that Marcus & Milicap calling trying to unload one of your buildings one me? I'll let it go to voicemail.

> There is a huge housing shortage. Its going to get worse in 2-3 years as nothing new is being built.
> There will be a hole in new units coming to the market. Rents will go up, housing prices will go up.

Painfully incorrect. 2008 is the biggest year even for apartments added to Manhattan market.
2009 will be a close second.
Data from building trades council.

Morons generally hear that PERMITS have slowed, but those are for apartments that might come to market 2-3 years from now.

We've still got waaaaaay too much inventory.

> NYC10022 will still be renting wishing that he bought

Yes, I wished that I had bought at peak like perfitz when prices went down 5%
Yes, I wished that I had bought at peak like perfitz when prices went down 10%
Yes, I wished that I had bought at peak like perfitz when prices went down 20%
Yes, I wished that I had bought at peak like perfitz now that prices are down 28%
And I'm sure going to wish that I had bought at peak when prices are down 40%

Yes, I wish oh I wished that I could lose money like perfitz!

and co-ops figure says 28% down = a fuzzy number no matter how may times you repeat it.

waverly, glad someone else sees through that game. Is the market down? Yes. But let's not get ahead of ourselves.

> and co-ops figure says 28% down = a fuzzy number no matter how may times you repeat it.

Accurate no matter how many times you deny it.

> waverly, glad someone else sees through that game.

Yes, you are in great company... you guys, Perfitz, and SteveF, all can see through the "game" of actual data. You guys get right to the truth, the "because you want it to be so" logic is completely unrefutable!

One of the biggest lies told by brokers to justify insane prices is that there's no place left to build in Manhattan. Oh really. What about the teardowns of parking garages, gas stations and tenement buildings or air rights? Seems to me in a vertical city there are plenty of places to build and the sky is the limit. We now have a housing surplus. Supply demand equation is always correct. Too little demand chasing bloated inventory equals lower prices.

And, lets also not forget the large number of apartments being taken from rent stablization rolls. Not all, but some of those represent folks who would not be in the city otherwise, so that definitely adds to effective inventory (or lowers demand, depending on how you calculate it).

Not to mention the fact that yuppies now buy on 99th street, and they wouldn't have touched 89th street just a few years back.

Or yuppies in Chinatown... Fort Green... Sunset Park.

The effective inventory is by far larger than its ever been.

Not to mention the record number of new construction added to the city in 2008 and 2009.

There only seems to be a surplus of luxury condos though. So, yes, those will crash. But can anyone make a serious argument that there is not a shortage fo housing for the whole population? I'd love to hear your thoughts 10022, because I think you have a great understanding of how the nyc RE market works.

Isolate the easy access to credit for a moment and just consider supply and demand: Doesn't it seem paradoxical to anyone that prices have skyrocketted over the past decade while simultaneously New York has seen a huge increase in the supply of housing? Are you saying that the easy credit masked the oversupply, and now sans that credit, the oversupply is becoming apparent? I don't totally disagree with that, but what do you think of this idea: Nearly all of the new housing supply (rental/owner) has been luxury and priced accordingly (don't get started on that 80/20 BS! it's insignificant). These new luxury rentals and condos set the market prices higher for units in buildings that were not even luxurty. Instead of new supply lowering prices, in new york, they had the paradoxical affect of driving them up. How is this going to play out going forward? I don't see how new supply helps alleviate a housing shortage if most people can't afford the new supply, but builders are only willing to build if they can sell/rent at luxury prices.

well, there is an industry that is in it's infancy that is almost entirely in Manhattan, and that's internet marketing. those firms are growing fast and once the recession ends, will have an under-employment problem. internet marketing will employ the creatives moved out from publishing, design and traditional advertising and the business/sales people. not to mention tons of computer programing jobs. i believe that americans like to work and work hard. people aren't going to just sit around cause they lost their job or their industry is decline, they will move to where there are new opportunities. also, as many know already, there is a life and lifestyle here, that will also be in demand regardless.

"Doesn't it seem paradoxical to anyone that prices have skyrocketted over the past decade while simultaneously New York has seen a huge increase in the supply of housing? "

EXACTLY nycjunior -- that's what a bubble is! And every developer saw Extell and Related making bank and jumped on the bandwagon.

So there is a lot of luxury buildings -- those prices go down and the people who thought they could only afford a Yorkville/Hell's Kitchen/East Village walk up now realize they can buy a brand new luxury condo. And those people who thought they could only afford a Park Slope/Clinton Hill/Ft. Green Parlor apartment now realize they can buy that Yorkville/HK/EVill walk up. And those people who thought they could only afford a one bedroom in astoria/jersey city find that now they can afford the place in Park Slope. Etc, etc.

Maybe I don't get what you mean by a shortage ...

> There only seems to be a surplus of luxury condos though. So, yes, those will crash.

But don't forget that "luxury" is relative. The more luxurious stuff is built, the less luxurious what used to be sorta luxurious looks. And things date and get old. Yes, tons of stuff with wood floors and big windows and white walls got built... but most of it isn't actually high end. More inventory is simply more inventory. And, hell, we're talking about little boxes that would not be called luxury anywhere else. So a crash in the high end is not an isolated event.

And remember, the median condo was OVER A MILLION DOLLARS. Luxury is average here.

> But can anyone make a serious argument that there is not a shortage fo housing for the whole
> population? I'd love to hear your thoughts 10022, because I think you have a great understanding of
> how the nyc RE market works.

No more so than before the bubble (and in fact less so). Shortage before, shortage (but a little less) now.

Problem is peak prices factored in a shortage AND growing demand AND growing income AND a healthy economy AND a strong Wall Street. Problem is, we lost all of those except possibly one.

Remember, for something overpriced to return to "normal" state doesn't mean ALL the positive have to go away.

> Isolate the easy access to credit for a moment and just consider supply and demand: Doesn't it seem
> paradoxical to anyone that prices have skyrocketted over the past decade while simultaneously New
> York has seen a huge increase in the supply of housing?

Yup, bubbles generally are pretty paradoxical.

> Are you saying that the easy credit masked the oversupply, and now sans that credit, the oversupply
> is becoming apparent?

Never really thought there was oversupply, but the oversupply is less. We have more supply than eve, and weakening demand.

> Nearly all of the new housing supply (rental/owner) has been luxury and priced accordingly (don't
> get started on that 80/20 BS! it's insignificant). These new luxury rentals and condos set the
> market prices higher for units in buildings that were not even luxurty. Instead of new supply
> lowering prices, in new york, they had the paradoxical affect of driving them up.

I don't think this is true or logical. New supply can move the medians. But, in fact, I think the new supply raised the bar, and a lot of ok apartments now look less than ok relatively speaking.

In the end, we have more supply and a lot less income and demand.

> I don't see how new supply helps alleviate a housing shortage if most people can't afford the new
> supply, but builders are only willing to build if they can sell/rent at luxury prices.

Prices adapt to meet the demand. If noone can afford the supply, the prices go down in the short term.

Yes, builders will adjust, but it takes them years to adjust. That permits slowed a couple months ago means there will be an effect 2-3 years from now. But 2008 and 2009 see HUGE increases in inventory.

What do people mean by oversupply and undersupply??? IF inventory is not selling, in my book that is oversupply.

The 5 boroughs are the city, maybe we could exclude Staten Island if you really try hard enough.

In Manhattan, the over supply is at the "high end" (depending on what we're calling the high end. Is a $2,500,000 apartment the high end now? or are we talking the $30,000,000 high roller's units?). And with tons of high end people losing their jobs, their equity, etc. demand for the high end will decrease at the same time. I looked today and saw 182 apartments for rent for $20,000 or more on the market. How many people making over $800,000 a year are looking to rent in Manhattan right now? Does anyone have a good source for the current economic demographics?

One thing to remember: those people living in rent controlled 8 room apartments on West End Ave: how many of those were built expecting that tenancy? Crashes create more affordable housing than building it that way from scratch. Unfortunately, so do things like a higher violent crime rate, etc.

petrfitz: "Williamsburg is not considered as part of New York City."

What map are you looking at?

The map on which people live in the neighborhoods that their immigrant great-grandparents struggled to get out of, because it's a filthy pitt.

Like the Lower East Side?

Williamsburg was actually a neighborhood for the rich over a hundred years ago (which is why there is some very nice housing stock). What brought poverty there was the Williamsburg Bridge... all the lower class from the LES went over the bridge.

NYC10022 - Look, the 28% down number on co-ops is a fuzzy number because of how you are interpreting the data. When brokers were saying that the average price of NYC apartments was rising in the the 4th quarter of 2008 they were guilty of taking the numbers and misinterpreting them. The transaction volume dried up and you had a number of very, very expensive apartments close. This skewed the numbers so much that they were not useful. For brokers to use it to supoort their pov was disengenuous and made them look bad (rightfully so).

You are doing the exact same thing (on the other side of the argument) with the 28% down median number for co-ops. The data is skewed because the volume is down so much on the high-end that the numbers are off. When you insist on repeating the number in every post (just like the brokers chanted on about the 4th quarter numbers) you lose credibility for the other good points that you make. This is just not helpful to discussion and gives people bogus information.

A little too late to start complaining, waverly.

These points were specifically brought up months ago, but bull(ish) folks argued that it was the best measure. Because of that, it was accepted as the model to look at. Look at all the market prediction threads, its all based on medians.

So, no, its not a perfect measure, but, hey, its the one folks chose to look at. You didn't call it bogus then.

And, now its crumbling. A little late to start complaining about its accuracy now that it doesn't say what you want it to say anymore.

So, no hypocrisy, thats the measure folks wanted to use on the way up, its now the one they'll use on the way down.

But its a little hypocritical to try and change the rules this late in the game.

I am not changing any "game" with you at all. The best measurement has always been ppsf and Juiceman said this much to you. It is worth bringing up now, since now is when you are regurgitating a fuzzy number. It was wrong when the brokers did it in the 4th quarter of '08 and it is wrong when you do it now.

There is no hypocrisy here. You gave Steve a lot of trouble when he was wrong about something and you are clearly not right on this point. You should just say, "Hey, I stepped back and thought about the points and I was wrong to use the 28% number." It's simple and not a big deal. People on both sides of a discussion should be held accountable for the numbers they throw around and the numbers should be accurate and interpretted properly. I have called a number of people who have inflated their data as well, so I am being consistent on this point.

"It was wrong when the brokers did it in the 4th quarter of '08 and it is wrong when you do it now."

Then it was wrong when 99% of the world, and this board used it... and you said nothing.

I'm sure there were isolated examples of disagreement, but the HUGE majority of the board focused on median.

A little late in the game to be complaining about the rules....

And I do remember someone suggesting median psf - which I'm not against - but the person was quickly shot down on this board.

That was the measure folks chose to look at, and its hypocritical to only NOW say its problematic, when it shows a clear decline after months of increases.

Spin it however you want, you are changing the rules of the game when they suddenly don't work in your favor.

It's not spin. I have no axe to grind either way. I have been pretty middle-of-the-road, despite what you may think. You can continue to use incorrect numbers all you want. It just dilutes what you are trying to communicate and gives some people a reason to chip away at you for no good reason (especially when you know it's not an accurate interpretation of the number).

waverly, totally sensible reasoning. The point here is to get the best data we can, not just to be consistent for consistency's sake. I don't know how someone can see that as trying to work numbers in one's favor, especially when it's coming from people with middle-of-the-road viewpoints, but I'm not going to waste my time trying to convince someone who's not taking the blinders off.

ROTF. The amusing part is, bjw is the one who complained when anyone tried to use anything other than the median! Thats the number he keeps going back to!

He complains any time somebody uses any number BUT the median!

> You can continue to use incorrect numbers all you want.

You can call it "incorrect" all you want, but it just comes off as complete petty. You don't like the result, so suddenly the measure is "incorrect".

Thats slant.

You can close your eyes all you want, but it won't change what is happening.

> It just dilutes what you are trying to communicate

I'm always up front about specifically what it is. If folks don't understand what the number means, then they don't deserve the time anyway.

> (especially when you know it's not an accurate interpretation of the number).

Its not an "interpretation", it is what it is. I've never said that its anything other than median, and I've always noted basket of goods is an issue.

> and gives some people a reason to chip away at you for no good reason

Then let 'em.

They'll sound petty and I'll call 'em out for what they are.

Hypocrites.

Slant it all you want, but thats you...

"NYC10022 will still be renting wishing that he bought. I will still be cashing his rent check each month with a smile on my face."

I did not know nyc10022 is renting in Williamsburg. LOL!

"He complains any time somebody uses any number BUT the median!"

Not true; I complain when the data are bad. I have no problem with median ppsf, so long as we're using a good source and actual sales prices.

"You can call it "incorrect" all you want, but it just comes off as complete petty. You don't like the result, so suddenly the measure is "incorrect". Thats slant."

I don't like or dislike any number. The data is either interpretted correctly and becomes useful or it is misinterpretted and becomes useless. You have chosen to take data, misinterpret it for your own narrative and then proceed to tell anyone who calls you out for it that they are trying to slant the numbers....classic!

Take a step back and you will see that what I am saying is correct. Just because somebody else used data ass-backwards doesn't mean the process cannot be corrected for better analysis and evaluation of the information that we do have.

There is a shortage of AFFORDABLE housing - problem is that all the new construction was luxury and priced that way - now most of those buyers are gone. the only affordable housing is HFDC which you can get a 3 bed for $400K although someone needs to explain to me how, with an income limit for one person around $85K they could afford a $400K apartment. Everyone else - screwed as they priced the majority of buyers out of the market. now we're just waiting....