NYT: real estate gloom

%u201CConsumer confidence is the killer,%u201D said Dottie Herman, president of the Prudential Douglas Elliman brokerage firm.
%u201CPeople are scared. They have never seen anything like this.%u201D

No you clueless twit, those Wall street jobs are gone forever as well as the loss of hundred of thousand of jobs in the broader tri-state economy.............no9t to mmention the destruction of wealth in the stock market

so let's see. according to the average price of pre-existing apartments is down 21%, and the number of sales is down 50%. correct me if i'm wrong, but that would mean that the overall value of pre-existing home sales in manhattan is off over 60%.

must all be consumer confidence as dottie says. nothing to do with the massive loss of jobs, wealth, and income.

We're still a long, long way from the bottom.

Where's spunky?

this is the first real sticker shock that many will experience, especially those that have been deluding themselves that manhattan will only fall 10-15% or is somehow different. Even 4Q08 reports showed more modest declines (obviously because of the lag factor). at any rate, one thing this report is biased by is that only smaller apartments are moving now, so there is a real mix issue. but to be fair, we had the same mix issue bias in the other direction on the way up.

Where's JuiceMan, who said that Manhattan prices CANNOT decline 50% from their peak? Who said that a 25% drop would be a siren call to jump in?

Nobody's jumping. This is JUST BEGINNING. We are a year behind the rest of the country in terms of correction. We will see a bottom when it is actually CHEAPER, on a cash-flow basis, to own than to rent. That likely won't happen for a year or two.

And I'm not counting the "tax benefit" in that: I look at it as a business: if you can buy an apartment and rent it out to an unrelated third party, and still at least break even on a cash-flow basis.

The condo data will remain tainted by pre-construction contracts for at least one more quarter, probably more. In our neighborhood, for example, the Harrison will dominate closings in mid-2009. (The most useful data point from that building might be the number of contracts that DON'T close.)

For statistical analysis, resales are the cleanest data, but volume is too low to support meaningful conclusions about price levels. It's obvious that prices are falling: inventory is spiking, transaction volume is low, the economic fundamentals point downward and the anecdotal evidence (see the IYCDMMWC threads) is persuasive. Everything we know about real estate markets suggests a stunning drop. I just don't think anyone can put a percentage on the declines yet, except at the granular level of individual listings, or maybe certain micromarkets. Ultimately, we'll know where we're going about six months after we get there. In the meantime, expect a lot of spin.

West - so we have two forces related to new devs to deal with in future:

1) removal of new dev closings that helped to upwardly skew median/avg price data, what goes in will eventually come out

2) new dev resales closings - especially the higher end ones.

170 EEA, look at a few of those on market now that are resales:

10CD - new dev sale for 7M, now asking 8.2M
12B - new dev sale for 5.525M, now asking 6.5M
5F - new dev sale for 3.4M, now asking 4.25M
4F - new dev sale for 3.5M, now asking 3.75M

Where's the bid?

ud, 170 eea is a freakshow to boot. common charges are racheting up. i walked by there the other day and the place looked like a mess, and when did they start closing?

who would pay to live like that?

UD: No clue about East End. On our side of town, the folks who have re-listed their recent purchases at Ariel, 200 WEA and Avonova are not attracting bids within 10% of their contract prices. These aren't flippers - just ordinary people who need or want to sell.

Got to go 20 percent lower or more if you want any chance of selling.

UD, thanks for your post this morning. Great summary. I forwarded it to my husband as it will most likely be the only article he reads about the Q1 reports. We're selling right now, so maybe it will knock some sense into his head and make him stop thinking he's going to sell for only 10% off peak prices.

your welcome Kas242. Nice to see a seller appreciate telling it like it is. Many blame me for 'wanting' the market to go down, rather than discussing the forces that were likely to affect our local market without a broker bias

UD, well spoken. Where are the people who accused us of "talking down the market," as if a website read by maybe a few thousand people could affect real estate prices in Manhattan (or anywhere else). The economic forces are inexorable - unemployment now is perhaps more key than bonuses. I predict it will be 10% in NYC by the end of the year.

Which will cause rents to collapse which will cause property prices to collapse even more.

stevejhx, you were right there with me trying to talk about why this crisis was more severe than anyone was willing to admit. Unfortunately for me, telling it like it is in my line of work is not a recipe for large #s of sales!

maybe I should start lying and take the Bracha or Dolly model of closing deals.

kas. LOL. I can't find it now (frustrating!) but within the last few days I'm sure there was a post on some thread along the lines of "once these quarterly reports come out in a few days, people who aren't following prices closely are going to read about it in the paper and wake up to the new reality." Good luck getting the rest of the kas team on the same page, and of course on the sale as well.

The next quarter's reports should be amazing. I've heard that the deals that are getting done are frequently 30-40% below asking, and that's with already reduced prices.

UD, lol on the Bracha/Dolly reference. Pam seems to be a bit more rational, though, for one of the biggies.

well I shouldnt say lying, they dont lie. I should say 'entice by ignorance of world around us'

UD, it's always better to deal with clients honestly. Despite a very good first quarter, the last two weeks for me have been slow, but I just turned down 2 jobs that I felt I wasn't qualified to do.

Know what? The clients appreciate my honesty, and next time they have work I'll be the first one they call.

I admit at first I missed the severity of the downturn b/c I wasn't feeling it in my job, and I wasn't alive in 1933. Next time I'll know. But I've seen multiple real estate cycles, and this bubble was more glaring than every last one I had ever seen, here and in Miami, London, and Madrid. Rent = owner's carrying cost = 12x annual rent = 30% PITI. The equations are inescapable.

"For statistical analysis, resales are the cleanest data, but volume is too low to support meaningful conclusions about price levels. It's obvious that prices are falling: inventory is spiking, transaction volume is low, the economic fundamentals point downward and the anecdotal evidence (see the IYCDMMWC threads) is persuasive. Everything we know about real estate markets suggests a stunning drop. I just don't think anyone can put a percentage on the declines yet, except at the granular level of individual listings, or maybe certain micromarkets. Ultimately, we'll know where we're going about six months after we get there. In the meantime, expect a lot of spin."

Really well said. I think anyone serious about buying has to look at these market reports in conjunction with the IYCDMMWC threads before making any real moves. There's solid information there now that just can't be refuted.

"maybe I should start lying and take the Bracha or Dolly model of closing deals."

urbandigs, don't you dare!

bjw2103 - don't worry. I dont have that in me.

I'm not sure where to put this, as it hasn't been chopped and i don't have comps. check out yesterday's listing, Teplitzky's i believe, 301 e. 63rd, 925sf (no floorplan) jr.4 for $399k/$1385 maintenance.

bjw...I think a lot of buyers (legit buyers, not the sunny day open house lookers) are waiting it out. I just re-signed my lease, since I just can't get on board with $900 psf for a mid-century, average co-op that needs updating. I sold last Summer, did really well, now the money is hanging in a low-risk account. The stand-off will continue, but I think a lot of buyers are going to be lease tied for a while at this rate.

urbandigs - it seems you are one of the EXTREMELY RARE brokers out there who are actually (*gasp*) honest. I'm sure that this (A) allows you to sleep well at night and (B) will pay off for you professionally in the long run. As the saying goes, "Honesty is the best policy". If and when I decide to buy a property, I will look for somebody like you to assist me. Kudos to you.

"Where's JuiceMan, who said that Manhattan prices CANNOT decline 50% from their peak? Who said that a 25% drop would be a siren call to jump in?"

Wow, how about that spin. All the bears are jumping on median prices. Didn't you all dismiss median prices months ago? Prices are not down 50% nor are they down 25%, median price per square foot is down 2-6% YOY. All of the folks that have been saying prices are down 30% (and there are many) are completely full of shit. Stop the spin boys and girls, it is way too obvious. See article below.

"The price per square foot, however, declined by 2.3% for all apartments to $1,289, compared with a year ago, according to Elliman. Corcoran reported it dropped 6% to $1,158."

http://money.cnn.com/2009/04/02/real_estate/Manhattan_market_prices/index.htm?postversion=2009040207

aboutready - The building has a land lease (I believe) and the maintenance is $3385 (not $1385).

Stay away from this building!

"Large, luxurious apartments on Fifth Avenue, Park Avenue and Central Park West, and new condominiums with many unsold apartments, have been particularly hard hit."

There goes the "large apartments are going to be unaffected because all those Connecticut families are moving back to the City to raise their kids" meme. BARF.

waverly, well that does change things a bit, now doesn't it. thanks for the info, the listing just caught my eye. my husband's in law, so he's considered self-employed, and 80% of his income comes in quarterly draws. we don't have the wherewithal right now to get a bank to offer us a mortgage on the type of property that we would like to buy.

ironically, i could have bought quite easily in 2007 but decided not to. oh well, the credit market will likely save me from jumping in too soon.

JM, prices of properties CURRENTLY going to contract.

Re: 301 E 63rd? Why is the maintenance so high? The sponsor is alos trying to dump "with tentant" apartments. I know the sponsor is trying to unload at 370 E 76th, but there the maintenance is a good deal. Any insights?

JM, HA-HA-HA!

"All the bears are jumping on median prices. Didn't you all dismiss median prices months ago?"

I fully agree that median prices are not the best way to measure property prices. Glad you're on board with that one! But as you said, "It's what we have."

"Prices are not down 50% nor are they down 25%"

Oh yes they are - down 27%. Read the co-op prices, which are more current than new dev condo prices, as is CLEARLY stated in the article:

"Co-op prices were off 27 percent, to $975,000, and condominium prices down by 4 percent. but were up from the last quarter, as buyers continued to close on new condominiums for which contracts were signed many months ago."

"He said a more significant figure was the sale price of existing co-op and condominium apartments, which was down 20.9 percent, to $732,000, since the first quarter of last year."

What part of that don't you get?

"All of the folks that have been saying prices are down 30% (and there are many) are completely full of shit."

You're right. Not 30%. 27%.

As you say: "Stop the spin boys and girls, it is way too obvious. See article [above]."

LMAO!

JM - I agree with (and always have) that ppsf is the most accurate judge. It is falling too, but because the vloume of sales is so depressed it is skewing the median price (danger of small sample sizes).

It happened on the way up, too, with the CPW apartments closing when volume was falling and that gave the impression that prices were increasing in the 4th quarter of '08....again danger of small sample size. The ppsf, while not perfect, does seem more accurate as a data point.

ppsf, as you state, waverly, does not correct for sample. The only accurate measure is the way Case-Shiller does it, but we don't have those data for Manhattan, except insofar as declines in asking prices on resales, back to 2005-2006 levels, as has been documented elsewhere.

This is just the beginning. Wait till 2Q2009 and beyond, once the new dev signed in the past has closed. Even real estate agents are warning what is yet to come.

Corcoran report has average price/sq foot falling 6% overall. 13% on coops and 8% on all resales. Which obviously means new construction condo propped things up a bit. but as we all know, the real picture is worse than this because only better quality apartments will sell in a down market. so on a like for like basis, i believe its down much further.

Corcowhores should go to jail for making a statement about avg price per sq ft changes. They are the first ones to tell you they don't know how to measure! That is why they have a firm policy to just guess and then make sure it's a really highly inflated number. Just ask anyone of them, they will confirm this with you.

Good point, patient!

JuiceMan - comments?

JuiceMan, I'd probably agree that median ppsf is the better measure, but I don't really have a problem with median price, as long as people understand its drawbacks.

To clarify, the Miller Samuel report lists median re-sale price (therefore excluding new dev closings that lag) is down 21% YOY (presumably more or less peak pricing) and 8% for the quarter. To cite the 27% is a bit dishonest, as it excludes condo re-sales completely. Either way, I think the direction is clear, and there's hard data to show it. As West81st said, there's going to be lots of spin here (on both sides), and the truth is probably somewhere in the middle.

This is funny:

Opportunity knocks

The Manhattan market's recovery will be driven by first-time buyers and low- to mid-level buyers, those paying $1.5 million or less, according to Diane Ramirez, president of Halstead Property.

"There are a lot of buyers [in that range] who had been priced out of the market and who are making sure they get in this time," she said.

[...]

The lower prices are giving aspiring New Yorkers reason to hope, according to Corcoran Group's Liebman.

"The silver lining is that people can move to Manhattan again," she said.

http://money.cnn.com/2009/04/02/real_estate/Manhattan_market_prices/index.htm?postversion=2009040207

Yup. $1.5 million for a 1-bedroom that costs you $4,000 a month to rent.

BUY NOW BEFORE PRICES START TO RISE AGAIN!

I'm surprised the Corkies don't INFLATE sq ft when marketing, but DEFLATE when reporting their fake sales.

I am not one to predict bottom of this market, but there are couple of interesting points about this NYC r/e cycle. Wall Street bonuses were still the 4th highest on record and tend to be a good predictor of NYC r/e conditions. However, bonus cash compensation was lower in comparison to stock awards. That being said, we need at least to begin to factor in next year's bonus numbers to determine where this is going. So, it would be silly to call bottom early until we get through another bonus cycle. Deal flow is down significantly on the Street so far this year, which you got to assume will result in a realignment of bonus pay to true market conditions. As such, i would be interested at around November, December of 2009 to determine r/e market sentiment.

"the Corkies"

Haha...nice one!