NYC: real estate to plummet another 47%

what is April 6th?

Does anyone have a link to the original Deutsche Bank report that is referenced?

manhattan real estate brokers, in large, and unfortunately like the homesellers themselves completely delusional with the current econ-situation.

My prediction is Manhattan real estate drops another 65% from current levels as major corporations downsize manhattan presence and NYC taxes increase year over year.

Another 65% drop from current levels, thoughts?

I am loathe to make predictions as to how far RE prices go but clearly the path is down. I want to buy but need signs of a bottom:

A big surge in listings in a short period

Some notable bankrupcies of developers and RE firms

Extremely bearish articles in real estate boosting publications like the NY Times

Heads of RE firms throwing in the towel and finally saying "maybe this isn't a good time to buy, but a great time to rent"

first RE auction in Manhattan
that will set new price levels

what projects will be on auction? where will it be? inquiring minds are dying to know.

Manhattan: 100-140K studio, 160-250K 1 bedroom/doorman, 300-500K 2 bedroom/doorman.

"a big surge in listings in a short period"

with listings at around 11,000 now and the RE market in a buyer/seller stand-off would the "big surge" basically be from desperation sellers?

likely see inventory at the 30-50K level in next 12-18months.

"likely see inventory at the 30-50K level in next 12-18months"

HAHAHAHAHAHAHAHA......so funny. I think inventory will go to 1 million. HWK = Him Who Likes To Shoot His Mouth Off And Predict Things With No Evidence To Support Him...or HWLTSHMOAPTWNETSH.

Isn't it possible that with shadow inventory and all the held back units in the condos that are in various stages of being built we are already well over 20,000. Is 30K so impossible to believe. It does sound unlikely though.

Realistically, I think prices will go down another 30 - 40% in the next 6 months. Who can say after that?

I say this b/c
1. the recession is now world-wide, so foreign buyers aren't jumping at condos here anymore.
2. pay is way down, not just in law, publishing, and finance, but all over. Retailers are also desperate. NYC is not even training new police recruits - they cancelled this year's January incoming class.
3. pay will not recover on Wall St. this year, even though banks will produce greatly improved earnings. my bonus was down 80% and many i know were laid off or got nothing. these ppl are facing selling their second homes and dumping their cars just to pay their income tax bill from last year. wall street salaries are very middle class by manhattan standards - a lot of managing directors top out at 200k. with no bonus, 2 kids in private school, a stay at home wife.... well, it doesn't go very far in this city.
4. there are a lot of apts on streeteasy that have already had the prices cut 30%, but they are still above $900 - $1000 sq/ft in 30 year old co-ops. C'mon. Get that down to $500-600 /sq ft with maintenace not over $1.50 per sq ft and I am ready to buy.

exactly sniper. owners panic and start dumping. i break current owners into 3 categories:

New: bought within last 3-4 years and are severely underwater. if their asset falls 50% it has to rise 100% to get to break even. best to cut and run especially if you're older than 45.

Old: hey your asset has increased in value but it is eroding fast. your stock portfolio and 401K are in the toilet. not your only performing asset is threatening to go negative. might as well sell with a smaller profit.

Foreign: you bought when dollar was weak. not that it is stronger your asset has increased in value that much more. but with the dollar again weakening and RE prices falling you sell to preserve your gain.

consdierign that most co-ops require downpayments of 20-25%, I think the number of underwater owners is quite small. In fact, NY has the smallest percentage of underwater homeowners in the nation.

yes but every new building that has gone up has been condo

Oh, sure, alpine. During the orgy of this past decade there weren't any coop owners who lived beyond their means, were there? Bought the coop in 2000, bought the place in the Hamptons in 2006, bonus cut in half, can't sell the place in the Hamptons ......

buying a house in the Hamptons does not make you upside down on your co-op.

I agree with alpine on underwater numbers. There are some, but less in NYC than most posters predict. If things get a lot worse, of course, more people will be affected.

jasonkyle - I agree with you that inventory is rising, is slightly higher than advertised and will continue to rise. However, saying 50k inventory in 12 months just takes away from a very useful and productive discussion and moves into the realm of ridiculously extreme predictions with no evidence, and that is less than helpful.

no, but if enough people are forced to sell, it lowers the prices and you just might wind up underwater. if you bought 2007 or later, you probably are underwater with few exceptions if you put down 20-25%. As not that many coops sell in any given year, from a mathematical standpoint waverly is right. but as not that many coops sell in any given year, the addition of a small number of distressed buyers in a highly illiquid environment can crush prices.

Consider this example:

You bought a co-op in 2005 and got it at a reasonable price (all jokes aside for a moment) with 20% down. It increased in value from 2005 (certainly has decreased lately) and you paid off 4 years of principle which probably equals about another 5% or so of the mortgage. It is tough to get this person underwater today. I am not suggesting that it couldn't happen, just that it is not a given and that NYC is not rife with underwater apartments.

70% of NYC are co-ops. Many of them are more than 20% down buildings. Many were purchased prior to 2007. Many of these were priced far more reasonably than condos.

hey, HimWhoKnows, just out of curiosity, do you know what an fmno is?

=D

waverly not doubting your numbers but your are viewing RE as apart from people's other assets. the example you cite has the co-op as a performing asset albeit losing profitability as we speak, with no bottom in sight. in the meatime jobs are less secure, taxes and common charges rising and 401K's and other stock holdings in the toilet. the temptation to sell is great.

cfranch - I totally agree with you that some of these co-op owners (and perhaps co-ops, although I think this will be extremely rare) could be in trouble now or soon enough based on jobs, bonuses, debt, illnesses, bad decisions, etc. The situation can, and likely will, get worse before it gets better. I just wanted to point out that I didn't think NYC was uniformly underwater and that the discussion seemed to indicate that (or at least give the impression).

cfranch,

You think all owners should sell, basically? I have a hard time buying that.

" if you bought 2007 or later, you probably are underwater with few exceptions if you put down 20-25%."

At what point do we implement more of a cut-off date here? I mean, if the market is down 25%, you can't really lump people buying now in with those who bought in 2007 (peak), can you?

cfrench,
Included are also the ReFi group. They bought low and ReFi high, in a sense they re-bought at the top of the market. This is a large group!

bjw, being underwater is just like having a bad asset on your books. It doesn't matter until you need it to do something. For most people being underwater will cause them to hold on tight and batten down the hatches. So you can't lump people at all, really. But, of course, there are those for whom it does matter and then...

You can't set a firm cut-off date because it's a moving target, and quite possibly a quickly moving one. This quarter's figures are always based on contracts signed in the past. An honest broker can tell you what things are actually going to contract for today, but that info is pretty hard to get. I have some info, but I don't feel comfortable sharing it.

I think there are 2 factors in deciding whether to buy, sell or hold. One is looking at hard numbers and figuring out what to do in one's particular situation. Unfortunately emotions play a large role in money decisions. The emotional landscape these decisions are being made in is at best, uncertain but really quite bleak. Fear and greed rule markets of any asset class. Greed got us ridiculous RE prices, fear will bring us down. We overshot to the upside and I expect we will overshoot to the downside as people panic. The same thing plays out in the stock market with the internet stock bubble a prime example.

BJ:you're right I probably shouldn't have lumped in people who bought recently at 15-25% off peak but they still have to be worried that they got in too soon. I see no signs of a bottom.

aboutready, I agree. Everyone's situation is tied to so many variables that it's not easy to speak in generalities. People that need to sell right now though are looking at tough times. I'm not sure that anyone who doesn't need to sell in the next 5+ years should feel the need to unload so quickly though.

Totally agree that good, current contract price data is very tough to get. I think we'll get there eventually, but for now we'll have to live with the lagging quarterly figures. Jonathan Miller wrote a good piece about this: http://matrix.millersamuel.com/?p=3043

cfranch, I agree, no concrete signs of a bottom here, though I think people who are buying now are aware they're not getting the optimal price, but are content getting the home they want now for less than they would have paid 18 months ago.

Goldman Sachs predicts another 44% decline and now Deutsche Bank is out with a note suggesting a whopping 47% decline from today's level in the cards.

Still HimWhoKnows re-int a 65% drop from current levels. a 18% higher level than executives at DB.

George Soros is also out a very cautious note on commercial real estate...