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February 19, 2007
City Real Estate Market Rebounds Sharply in January
The lower prices and negative psychology that dominated the New York City real estate market last year went "poof!" last month as the bonus-rich and others showed a renewed appetite for residential properties of all shapes and asking prices. Overall, both prices and the number of signed contracts rose more than 10% year-over-year in January. “[Buyers'] psychology has changed,” said Frederick W. Peters, the president of the Warburg Realty Partnership. “For almost two years, they’ve been scared that the market would plummet and they’d end up like fools who paid too much.” Steven L. James, director of Manhattan sales for Prudential Douglas Elliman, calls it a "cautious exuberance." One example: A park slope brownstone asking $2,475,000 that sold in a day. And in a further sign of strength, there is lots of demand for apartments and houses at all points in the price spectrum, not just the high end, according to Jonathan Miller of Miller Samuel.
Housing Market Heats Up Again in New York City [NY Times]
Photo by John Marshall Mantel for The New York Times
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Comments
That was so obvious, continue to sleep overnight about buying a property and then the day after here comes the wall street broker with his bonus that sweeps it away, my motto is always been,,,, don't talk to much about it, just do it!
Posted by: Anonymous at February 19, 2007 9:21 AM
Cat's still dead.
Posted by: Anonymous at February 19, 2007 9:21 AM
Very true I was looking at a home on 2nd place that had 30 people in the open house while I was there two sundays ago . Also a house on henry street in carroll gardens barely touched the market and was snatched up . looks like the slump is over .
Posted by: ron at February 19, 2007 10:09 AM
Look, the market will crash people -- just not when we think it will, or on our sched. Remember the late 90s when the NASDAQ kept going up up up and people marvelled and kept predicting the crash that never came? Well, it came, just a lot later than people predicted. The same thing will happen here: it's common sense. Probably some huge scandal or collapse will usher it in. My prediction? Post-Bloomberg, the sh-- will hit the fan.
Posted by: irrat exub redux at February 19, 2007 10:09 AM
irrat exub redux: Yes, I remember the NASDAQ crash. Yes, it it was a particular event that ushered it in (an earnings release from iVillage, if I remember correctly). But as has been pointed out numerouse times, a lot of those stocks had no underlying value - unlike real estate which provides a needed benefit: shelter. And you are also correct that eventually something will happen - the market is cyclical. But I think that 'crash' that you are prediciting has been avoided - at least here in NYC. And that all the people who have been praying for that crash, have lost out, again.
Posted by: cj at February 19, 2007 10:33 AM
the cat leaped out the body bag.
Posted by: jack slade at February 19, 2007 10:56 AM
cj: true. but it's also true that value of real estate is perceived and not inherent. Perceived value has to do with what else? supply and demand. So people who want a steal on a gorgeous brownstone won't get it regardless of the mkt unless they buy in Bed-Stuy where the housing stock is nice but overall demand low. Inherent value of brownstones is high. Other neighborhoods, forget it -- that moment has passed. Cheesy construction, on the other hand, will plummet in value.
The Starrett City bid, in my opinion, is a sign of continued bubble-- groups of investors bidding on what is of considerably less value due to housing stock and location. By the same measure, all these highrises flying up all over the place will plummet
Posted by: irrat exub redux at February 19, 2007 11:04 AM
so what
Posted by: putnam-denizen at February 19, 2007 11:09 AM
irrat exub redux: I agree with you for the most part. Crappy construction in marginal neighborhoods will continue to suffer. I don't think the highrises will plummet, though...although they may take a while to be absorbed...worst case is that they will go rental. And high prices do not necessarily indicate a bubble.
Posted by: cj at February 19, 2007 11:20 AM
its still gonna go down at some point.
Posted by: Anonymous at February 19, 2007 11:23 AM
The total fundamental value of real estate in the city is rougly the present value of 30-40% of the income of the city's population plus or minus.
Increased tax rates will lower this number.
Basically, the problem is that NYC is increasingly a company town. Only 260k people work in financial services (and another 20-30k in high-end law), and by and large, they dictate the tone of the market. If wall st has a downturn (this year isn't looking so hot) the real estate market will follow.
Likewise, if, when bloomberg retires, the unions take an increasing share of taxes, it will kill the high end real estate market.
Posted by: Anonymous at February 19, 2007 12:01 PM
I think that when it comes to brownstones, the forces of supply and demand prevail. There are only so many brownstones in Brooklyn, and the demand keeps rising, particularly in the more desirable areas. The upshot of this is that it pushes people to consider looking in fringe neighborhoods. If there is any risk, it's for those persons pushing the boundaries and venturing into new areas with the hope that the upswing will continue.
Posted by: Anonymous at February 19, 2007 12:03 PM
I've been a big champion of the bust for years I was certain that rising morgage rates would be the nail in the coffin, but at this point I don't see it happening.
I bought my house 3 years ago expecting to lose my shirt at the top of the market. $300k for a single family in Crown Heights seemed insane!
There's always someone out there with more money than me. They have brokerage jobs or family money. There is a ton of cash flowing into NY real estate from overseas. People who have cash want to be in NY.
The bust in NYC may turn out to be wishful thinking and all my friends who have been waiting for things to become "more affordable" will keep waiting.
My new theory? The only thing that will bust the NY market is a serious recession or mortgage rates over 8%
My 2 cents...... feel free to ingore
Posted by: ImNotYourDaddy at February 19, 2007 12:03 PM
When the market cools it will not be noticed probably for a year until after it happens. These things do move in long term cycles. So let's say you decide to rent for the next 5 years and then things slow down and you can buy for 20% (?) less than you could today...would you still be ahead if you take in to account all that you've spent on rent and the loss of your tax benefits? I don't think so.
Posted by: Anonymous at February 19, 2007 12:29 PM
"But as has been pointed out numerouse times, a lot of those stocks had no underlying value - unlike real estate which provides a needed benefit: shelter." - 10:33
No one will argue that NYC real estate has zero intrinsic value. It's the "excess" value that's questioned. The only conceivable earning increase in residential R.E. was from resale prices and that came from cheap easy money. Any increase in rental income was negligible. Those betting on a crash are implying this "excess" value based on cheap, easy money (since about 2001) will be wiped out.
"the cat leaped out the body bag." - 10:56
No, that was the bear.
"The only thing that will bust the NY market is a serious recession or mortgage rates over 8%" - 12:03
And that is exactly what is likely to happen. Smart money is very patient.
Posted by: Anonymous at February 19, 2007 12:30 PM
Anon 12:01 (or anyone else) please explain the relationship between bloomberg leaving, unions, and the real estate market. thanks.
Posted by: Econ 101 drop-out at February 19, 2007 12:36 PM
subprime mortgage credit quality is a leading indicator. that area is just starting to plummet with much more pain to come (see hsbc and new century). another indicator will be when the manhattan luxury condos sold to out-of-towners market collapses (see wsj article from friday before last for more on this trend). despite wishful thinking by real estate sector, this is a temporary and seasonal boost. expect a return to "stabilization" soon. with so much inventory overhang and a slowing economy, the fundamentals just aren't there.
Posted by: gpt at February 19, 2007 12:45 PM
Do any of you REALLY know what you are talking about?
Just like the underlying venture type this website stems from...
Its ALL Speculation
Posted by: Anonymous at February 19, 2007 12:53 PM
I got a bonus once. It was a big bottle of Italian wine; somebody in advertising dept. got it from an agency and didn't want it. Oh, and I also got some weird Norwegian cheese, about a half-pound brick of it, from a Scandinavian tourism flack. Spouse got a bonus once: a spiral-sliced ham, from the manager of his little TV station in Oklahoma when he was 21.
I guess it's nice to work on Wall Street. Life-altering, market-altering bonuses (boni?)...how about that?
Posted by: Brenda from Flatbush at February 19, 2007 1:18 PM
the bear? I dont get it anon 12:30
it's so funny the amount of false assumptions on this thread based on speculations and forcasts... But the last time I checked God stopped making land a while ago and NYC is still the capital of the world.
Posted by: Jack Slade at February 19, 2007 1:21 PM
"NYC is still the capital of the world"
Quite an understatement--it's actually the center of the universe :-)
Posted by: Bob Marvin at February 19, 2007 1:58 PM
1:21,
http://en.wikipedia.org/wiki/Image:B%26B_at_FWB.jpg
http://www.investorwords.com/443/bear_market.html
Now do you get it? Did god also stop condo conversions and buildable FAR?
Posted by: Anonymous at February 19, 2007 2:01 PM
Right you are Bob, but I decided to humble myself and not piss off the sideliners who are saving thier money for new developments on Mars.
Posted by: jack slade at February 19, 2007 2:02 PM
" 'NYC is still the capital of the world'
Quite an understatement--it's actually the center of the universe :-)"
Absolutely. Even during the Great Depression.
Posted by: Anonymous at February 19, 2007 2:03 PM
"Do any of you REALLY know what you are talking about?
Just like the underlying venture type this website stems from...
Its ALL Speculation" - 10:53 Anonymous
Duh.... What's your point? That's what makes it sooooooo much fun! Nobody's changing the world here.
Posted by: ImNotYourDaddy at February 19, 2007 2:05 PM
"this is a temporary and seasonal boost"...?? Since when is the dead of winter classified as a seasonal boost? These normally occur in the spring, and after labor day. It seems those waiting are becoming more desperate, and the 'smart money' (those getting the bonuses), are buying.
Posted by: aflec at February 19, 2007 2:17 PM
2:01 I understand now "the bear" and the forecast calls for another great depresson.
Well can you look into your crystal ball and tell me if this new depression will last longer than my 30 yr mtg? The last one sure didnt.
Regarding God stopping "condo conversions and buildable FAR" no those are acts of man.
Posted by: jack slade at February 19, 2007 3:00 PM
That was funny, Brenda. Reminded me of the peach schnapps we used to get from one of the vendors at an old job of mine. Nobody wanted it, and it made the rounds of the company, from highest to lowest. When we moved from that location, bottles were found in the back of the sink.
I don't think there is any correlation between that and real estate, no matter how you stretch the metaphor.
Please continue speculations.
Posted by: Crown Heights Proud at February 19, 2007 3:59 PM
"Well can you look into your crystal ball and tell me if this new depression will last longer than my 30 yr mtg? The last one sure didnt."
No, J. Slade. Neither will your current job. But as long as you can hold on you have nothing to worry about. Unfortunately, as recent foreclosure trends indicate, not everyone can.
Posted by: Anonymous at February 19, 2007 4:13 PM
who cares about all of this stuff, lets talk about the houses. did anyone see the place in PS that sold for $2.5 ask in a day? was it nice, better than anything else ot there, etc? or was it a fluke?
Posted by: anon at February 19, 2007 4:28 PM
I was fascinated by this article. What happens to prices is basically immaterial to me, since I already own and have no intention to sell for many years. But I'm still waiting for someone to explain to me why the New York City real estate market should be entirely different from markets anywhere else in the entire United States, including other major urban areas.
Jack Slade -- yes, god isn't making any more real estate, but that doesn't mean it will always rise in value does it? God isn't making any more gold either, and I haven't noticed that that's followed an ever upward rise in price. And, in fact, thousands of new apartment buildings are going up as we tap away here on our keyboards. I can't imagine why that won't affect prices, but that just leads me back to my original question above.
Posted by: SPer at February 19, 2007 4:46 PM
Well stated Secular Progressive. Common sense like that deserves to be on the CW side.
Move on speculators...
Posted by: Anonymous at February 19, 2007 5:39 PM
SPer:
The NYC market is very different than the rest of the US, and it's well documented. Here are a few of the key reasons:
(1) Thousands of college graduates move to NYC every year to try life in the Big Apple.
(2) NYC is the center of numerous businesses including publishing, advertising, fashion not to mention finance. This creates jobs.
(3) Empty-nesters from the surrounding suburbs, sell their homes and want to be closer to the cultural mecca that is NYC.
(4) When the US economy is weak, and the dollar weakens, the slack is taken up by foreign investors. (In fact, this happens even when the dollar is not weak). This is because NYC in the only global city in the US. Extremely wealthy (and just very wealthy) people like to have second homes here. Also, compared to market like London, $1000/ft is actually considered a bargain.
I could continue.....
Posted by: cj at February 19, 2007 6:02 PM
1) the college students don't buy in (park slope) townhouses
2) the influence of publishing is actually waning, everything except high end fashion/textile is going to asia
3) empty nesters probably don't buy townhouses in park slope, more one or two bedrooms in manhattan
4) so far I haven't seen the extremely wealthy buying a brooklyn place as 2nd or 3rd home....
I fully agree though that the townhouse marked in park slope is highly depending on wall st.
Posted by: Anonymous at February 19, 2007 6:48 PM
12:01 coming back at ya:
Look back to the 70s. If we have a democratic mayor with a democratic council, major unions (police, fire, teachers, garbage, transit) get monster wage increases (outpacing inflation.
Result is either
a) taxes go up
b) services go down
This slows growth in the city, which slows real-estate appreciation.
Posted by: Anonymous at February 19, 2007 7:48 PM
Sper- you’re saying home prices will go down because thousands of new apts are going up?
Interesting point of view.....
I would think that fact alone would drive the prices of these townhouses upwards. People are a lot smarter and people want ownership and you can’t really add a backyard to an apt on the 15th floor.
Are you seriously comparing the gold market to land?
Posted by: jack slade at February 19, 2007 9:11 PM
re: SPer - would refer you to the arguments of Ed Glaeser of Harvard who expounds prolifically on the points you bring up. NY is indeed a different beast - a global luxury good more in competition with London than with Boston. NY has adapted in ways that Phila, Boston, LA and Chicago have not - reinventing itself numerous times to (nearly - see 1970's-thru-mid-80's) continuosly position itself as the nexus of the global economy and a magnet for talent and ambition. There are only so many slivers of the rock. Buy and Hold.
Posted by: lalaedb at February 19, 2007 9:24 PM
This debate is a bit tired. Everyone who bought before the boom seems to want prices to stay up. Everyone who didn't seems to be waiting for the market to bust.
Posted by: Ed at February 20, 2007 12:30 AM
Re: is the NYC real estate market different from every other market in the entire United States --
1. The college student and empty nester argument -- Is NYC gaining population at a significantly greater rate than any other urban area?
2. The jobs argument -- Is NYC gaining high income jobs at a higher rate than any other urban area?
3. The international wealth argument -- what is the percentage of residential real estate that is sold to foreign investors?
I mean all these questions seriously -- and I wish articles in the NYTimes, like the one at the top of the thread, would address them, rather than filling column inches with the blather of real estate agents.
4. Jack Slade -- I didn't say anything about the prices of townhouses versus apartments, but you seem to have a weird idea of how people buy homes. Do you actually believe that people looking for a home don't contemplate whether it's a better value to buy an apartment vs. buy a house? And are YOU seriously saying that because "god isn't making any more real estate", that real estate prices will always rise?
As for those of us who bought before the boom wanting prices to stay up -- for most of us existing owners, the only way that rising prices benefit us is if we want to sell out in NYC and move to a very different market. Otherwise, in terms of trading up, while rising prices will mean we get more when we sell, it also means we pay more when we buy. For me, the fact that my apartment is worth 10 times what I paid for it only makes me rich on paper.
Posted by: SPer at February 20, 2007 9:51 AM
Last year but --- NYC is nto a growth area compared with the rest of the country.
Census Shows Sunbelt Grows More Than City
BY RUSSELL BERMAN - Staff Reporter of the Sun
March 16, 2006
URL: http://www.nysun.com/article/29235
The city's population is growing at a slower rate than that of urban centers in the nation's booming Sunbelt, but the Big Apple is outpacing its historical rivals in the Northeast and Midwest, data released yesterday by the Census Bureau show.
The five counties that comprise New York City grew by about 1.65% between 2000 and 2005 and stand at about 8.16 million people, according to the bureau's estimates. While New York beat out counties serving cities such as Philadelphia and Chicago, which showed declines, the five boroughs lagged well behind hot spots in the South and West, including Los Angeles, Phoenix, Houston, and Miami.
The data further show that New York's population declined slightly between 2004 and 2005 and that immigration was lower than the five-year average, a drop-off the city is disputing.
Analysts point to a variety of factors to explain the city's growth rate. A steady flow of immigrants has kept New York ahead of other Northeast cities, while steep housing costs may keep the city from further growth.
New York has long relied on an influx of foreign immigrants to replenish losses caused by the departure of native-born residents. Long-range population trends are notoriously difficult to predict, but signs that immigration to the city may be slowing are a concern for future growth, urban studies and population scholars said.
"The trend is definitely slowing down and possibly plateauing, but where it is going it's too early to say," a senior fellow at the Manhattan Institute, E.J. McMahon, said of the city's population. "The thing that's pulling it down is a slowdown in immigration, as well as real estate and housing costs."
A fellow at the Center for an Urban Future, Joel Kotkin, said immigration patterns are becoming more dispersed across America. "What I do sense is that immigrants are getting smart about America and are realizing that there are a lot of other places to go besides Los Angeles and New York," he said.
Any drop in the city's population would appear to cast doubt on the city's preparations for a major population boom in the coming decades. Over the last several years, the Census Bureau's release of a county-by-county population estimate has prompted an annual clash between the federal agency and administration officials who argue that the bureau consistently shortchanges the city's population. The city contends that the bureau's methodology does not take into account new housing construction, which is the basis for the administration's calculations.
The bureau acknowledges that its methodology may not work for counties like New York's. "It is something that we're looking at, but we don't have a definite plan as of yet to incorporate the housing data," a demographer with the bureau's population division, Gregory Harper, said. In the meantime, "we have to have a methodology that we can use for all counties," he said.
The city successfully challenged the bureau's estimates last year, resulting in a bump of more than 64,000 people in the revised figures. It plans to do so again this year, the director of the population division at the Department of City Planning, Joseph Salvo, said. He said the city believes its population is about 8.2 million people, which would mark an increase of less than 1% from last year's revised estimates.
"We are in growth mode," Mr. Salvo said. "We are planning for growth."
Mayor Bloomberg has made preparing for significant population growth a major theme of his second term. The city expects the population to reach 9 million by 2020, and Mr. Bloomberg said in his State of the City address in January that he plans to lay out a strategic plan this spring to cope with the anticipated boom.
An economist and the co-founder of Urbanomics, Regina Armstrong, said she expects the city's population to continue to grow. The demographics of that growth also puts the city in a solid economic position, she said. While the rates of increase in places like Phoenix and Scottsdale, Ariz., dwarf those of New York, they draw many retirees who do not contribute to the labor force. New York, on the other hand, "is attracting a lot of younger people, which keeps the city vibrant," Ms. Armstrong said.
Analysts agreed that the city's high cost of living, heightened by rising real estate prices, was a top challenge for maintaining population growth in the future. "Even though New York has done a great job with crime, and it's more pleasant, it's just too expensive," Mr. Kotkin said. "There are a group of people who are locked out of the market permanently."
Among the five boroughs, Staten Island (Richmond County) experienced the greatest increase since 2000, at 4.7%. Manhattan (New York County) grew by 3.6%. The Bronx, Brooklyn (Kings County), and Queens all showed increases of less than 2%
Posted by: Anonymous at February 20, 2007 10:51 AM
I am not going to comment on the bubble/no bubble, but I did find it interesting that the articles relies almost exclusively on quotes from sales brokers about whats happening in the market. It cites a grand total of one example in Brooklyn (house on Montgomery Place) as indicative of the market.
A trend based on one example?
Posted by: bored at work at February 20, 2007 11:06 AM
bored at work: Since signed contracts are not part of the public record, and since any signed contracts signed in jan/feb won't close until march/april, anecdotal evidence is all there is to go on. This article is just trying to report on the most up to date info available. You can obviously choose not to beleive it, but since the NYTimes has been reporting possible bubble conditions for some time, you would be choosing selectively.
Posted by: Anonymous at February 20, 2007 12:01 PM
These back and forths are really wack Sper and all because you can’t handle the truth.
"Do you actually believe that people looking for a home don't contemplate whether it's a better value to buy an apartment vs. buy a house?”
Never said that dumb comment. It seems like you a have a complex with your apt. Did I trigger this complex by mentioning "back yard"? My bad.
"And are YOU seriously saying that because "god isn't making any more real estate", that real estate prices will always rise?"
HELLS YEAH!!!!!
Posted by: Jack Slade has left the building at February 20, 2007 1:10 PM
Thanks for the explanation, Anon, 12:01 & 7:48.
Posted by: Econ 101 Drop Out at February 20, 2007 1:57 PM
So, can you buy a condo right now in NYC, Washington, Miami or San Diego and rent it for enough to cover your nut?
If you can't flip it, why would an investor invest? If there were no investors, where do prices go?
So, a few folks got excited about a 10% drop. The numbers still don't add up. Stay tuned.
Posted by: Anonymous at February 20, 2007 4:56 PM
SPer makes some good points. I actually wrote a research report on urban demographics in December as part of my day job and can provide some insights.
One big problem is that census data is only provided every 10 years and population shift estimates, etc. in the interim are much less concrete. Even census data has some holes when looking at populations for NYC, which probably includes a fair number of illegal immigrants and people who move around a lot (young people/students, foreign workers, students, etc.). People with second homes in the city probably also would not be counted. Needless to say, this helps explain the dearth of data in many of the articles you read.
That being said, here's a quick data dump:
-From 2000-2005, the NY metro population grew by 1.6% to 8.14 million - more than Detroit, which shrank, but way less than the 6-10% increases seen in Sunbelt cities like Phoenix and Jacksonville, and way less than increases in the US population overall.
-Income levels are surprisingly low for NYC given the cost of living: Median is $43,400, below the US median of $46,300. This is partially due to much higher poverty levels in NYC (and other major cities) than the norm. NY does have more high-income people as well (4.6% make $200K or more per year as compared to 3% for the US overall).
-I tried and tried to substantiate the "empty nesters are coming back" or even the "more families are staying in cities" arguments (admittedly looking at urban areas overall, not just NY) and was unable to find any hard data EITHER way. NY does have the second-highest median age amongst the 15 largest U.S. cities though, which may also be due to smaller family sizes and more childless/single people living in the city.
Hope this is helpful, I worked so hard on the report it is nice to be able to share the info ;-).
Overall I do think NY is a bit different than other cities, due to the tight clustering of jobs on an island and the transportation infrastructure - in other cities like LA or Phoenix, everyone owns a car and is resigned to a commute, whereas you can really save both money and time if you live within subway/bus distance of your job in NYC.
The issue of wealthy second homeowners can't be counted out either, this same factor also helps drive up housing prices in resort areas like Miami. But that certainly doesn't mean NY is immune from the same market forces as the rest of the country, and I do think we're still in for a market correction; how bad remains to be seen.
Posted by: eeeck at February 20, 2007 5:16 PM
One thing missed here I think is the difference in townhouses vs condos. The supply of the former is fixed (almost apart from 14townhouses how many new ones have been built in the last 5 years?). On the other hand the supply of condos seems to be growing - so with an increasing supply of condos if there are going to be price drops you might expect to see them in condo market first. On the other hand if wall street tanks it would hit high end market first.
Posted by: NewBuyer at February 20, 2007 9:13 PM
All I can say is that NY is in many way different. I for example cam to this country with $500 and a suitcase. Now I make more than 500K on WALL STREET!! I bought in brooklyn and my in-laws which have been living in setauket for the lasdt 30 years are retiring in NYC and so are many of their friends. NYC today is more than just a city for new immigrants like me but also for overseas investors and empty nesters looking for some exitement in their retirement.
Posted by: TONINO at February 21, 2007 10:33 PM
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