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August 20, 2007
Manhattan Real Estate In a World of Its Own
The cover story in yesterday’s real estate section of The Times looks at the “astonishing gulf” that has formed between Manhattan (along with parts of Brooklyn!) and most of the rest of the country in terms of home sales, inventory and prices. Simply put, Manhattan’s residential market continues to be red hot while the majority of the U.S. struggles with plunging home sales and excess inventory. The article gives plenty of possible reasons for Manhattan’s resilience, including the island’s dearth of subprime loans, greater demand for large apartments, record Wall Street bonuses, increased demand from foreign buyers, a tight rental market leading people to buy, and the city’s job and population growth. The story doesn’t really examine the state of Brooklyn’s market—there’s an aside in one sentence lumping “sought-after pockets of Brooklyn” with Manhattan—and it’s difficult to assess whether Brooklyn is faring as well as Manhattan. It certainly remains to be seen whether problems with the credit market, rising rates on jumbo loans and diminished Wall Street bonuses will signal an end to the good times in Manhattan (and across the East River). Given the uptick in foreclosure rates in some areas of Brooklyn, it'll be interesting to see if Brooklyn and Manhattan fortunes continue to be aligned.
The City of Gold [NY Times]
Brooklyn Nowhere Near Top of Foreclosure List [Brownstoner]
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Comments
its not all "red hot"
"Housing woes hit high end"
http://money.cnn.com/2007/08/19/real_estate/mortgage_luxury.fortune/index.htm
Posted by: guest at August 20, 2007 9:29 AM
It would be difficult to know what "faring well" means in this real estate market. Many middle income people, such as teachers, simply cannot afford a place. I question whether we can say our community is faring well in any sense when so many are closed out of home ownership or even studio ownership. This link is to an article at Forbes.com about affordability of regional housing markets - you can guess that New York is considered pretty unaffordable based on the relationship of median price to median income. (You have to click on the pictures link to see the list.) http://www.forbes.com/home/media/2007/07/20/unaffordable-housing-property-forbeslife-cx_mw_0723realestate.html
Posted by: guest at August 20, 2007 9:30 AM
wow that's great you guys must be doing well to afford the rights to run that drawing.
Posted by: guest at August 20, 2007 9:32 AM
(I question whether we can say our community is faring well in any sense when so many are closed out of home ownership or even studio ownership)
I agree. Why is a housing bubble "good?" It is only good for those who cash out and move away. And a crash will only be bad for those who miss an opportunity to do so.
Posted by: guest at August 20, 2007 10:27 AM
I think Brooklyn is a tale of two cities. But speaking only about the area this blog covers, I have to think that it is different in a couple of key respects.
1. Not the same level of foreign buyers (by a factor of.. I don't know, a lot).
2. People come to Brooklyn seeking more space, but they don't have the regulations of a co-op board. So I'm not sure how many $2mm+ brownstones were 100% financed with adjusting mortgages, but I'm sure some have.
I think that co-ops are what keep the NYC market secure. They acted like banks to qualify buyers long after banks stopped acting like banks.
Posted by: guest at August 20, 2007 10:50 AM
Property is a ladder, the support cannot be pulled out from the buyers on the lower rungs (and it has..) without a knock-on effect. For every large apartment bought a smaller apartment was sold for a fat profit. Without the barriers now erected over the 417k conforming loan limit, it will be very hard for the wealthy to make a pile just by trading up homes.
No argument that there are plenty of wealthy buyers in new york but the rise in values has also created a vast amount of paper wealth as well. I can't guess what the ratios are but if 30% of the cash floating around new york being spent on high class apartments was created out of thin air by fast appreciation of properties all down the ladder, then we're in trouble. Without the first rungs of the ladder shooting up (500k for a starter studio?) the rich end is going to stop getting funded by dumb appreciation as well.
On top of that we have a doubtful bonus season now as hedge fundies and IBs recalculate their books and put money away for surprises, rather than doling it out to top producers.
This game is far from over! If it was, the market would be shooting up today on a track to resume its month on month rises - because there isn't any fresh bad news, the fed is dropping money from helicopters, so why not? but as I look all I see is headlines saying there is 'uncertainty'. Indeed.
The other shoe has yet to drop, and I think many people don't even realize that going to sleep above us isn't a guy with two shoes, it's imelda marcos, and boy is she pissed!
Posted by: guest at August 20, 2007 11:42 AM
Wall Street bonuses will be higher this year than last. These firms project their financials two-three years out and bonuses will not be affected till 2009 at the earliest.
Bonuses this year will be the highest we've seen.
To 10:50. Brooklyn has a HUGE amount of co-ops.
Posted by: guest at August 20, 2007 11:54 AM
"These firms project their financials two-three years out"
I've worked for "these firms", and they can project all they like, but NO BONUS is for sure until the scramble around november when anxious traders get to talk to their managers and find out how much is in the kitty for their group, and for them. Nearly all of these figures are drastically curtailed in the event that bank management decides that there is new current, or new predicted future trouble.
If you think bonuses are now fixed for this year and next then you clearly don't know much about investment banking pay packets.
Posted by: guest at August 20, 2007 12:33 PM
"But the fiscal year is far enough along that financial services workers can expect gains of 10 to 15 percent when bonus season rolls around later this year, said Alan Johnson, the managing director of Johnson Associates, a Wall Street compensation consultant. The real pain, if there is any to be felt, would come in the 2008-09 bonus season, he said, and a year or two later for private equity firms, which typically make their profits several years after a takeover."
Posted by: guest at August 20, 2007 12:41 PM
You must know better than a Wall Street compensation consulant, right 12:33?
It doesn't count that when you worked for "these firms" it was before the advent of computers.
They are able to do wonders with these things now, you know...
Posted by: guest at August 20, 2007 1:08 PM
A lot of people "expected" a lot of things two months ago, however the current liquidity mess is unprecedented. There are a lot of slips betwixt August and December.
Any "financial services worker" that pulls down more than 100k in a bonus & is spending money they haven't yet been paid is a fool.
Mind you, risk-blind fools are how we got into this mess in the first place.
Posted by: guest at August 20, 2007 1:11 PM
12:33 is right on. I work for one of those firms right now and can tell you without a doubt that "up 10-15%" is a wild ass guess at this point, looking less and less realistic the longer this downturn lasts. I dont care whose number it is. Wall Street firms most DEFINITELY do not project their financials two three years out, it's hard to tell a lot of times what a given firm will earn in the next quarter! I dont see how you can have compensation up 10-15% when business in the back half is looking awful and you're comparing against a pretty damn good year for 2006.
Posted by: guest at August 20, 2007 1:50 PM
ok.
so bonuses will be 5 million intead of 10 million.
let's get out the violins.
Posted by: guest at August 20, 2007 2:02 PM
There's no publication more inclined to shill for the Real Estate industry than the Times RE section.
This article was in direct contradiction to at least five other stories in Sunday's paper. And it didn't even deliver on it's headline. A pure BJ for advertisers.
Posted by: guest at August 20, 2007 2:05 PM
you had me at bj
Posted by: guest at August 20, 2007 2:12 PM
getting back to the subject about the stability of Brooklyn real estate, if you look at prime Brooklyn brownstones, they are a relative good value compared to Manhattan real estate. For those in that price range, it's really a case of making the decision to go over the bridge vs. finding (and getting approved for) a scarce classic 6 or 7 in a co-op.
I don't think the condo developers -- especially in fringe areas -- will fare as well.
Posted by: guest at August 20, 2007 4:23 PM
Once you leave Manhattan cheri, it's all Cleveland.
Posted by: guest at August 20, 2007 10:05 PM
So please, 10:05, never, ever leave Manhattan. TIA.
Posted by: guest at August 20, 2007 10:35 PM
Since last week all jumbo mortages (loans over 417K which is most of NY home purchases) have gone up at least 1,5%. My mortage broker says he's never seen anything like it in 20 years. Buyers are priced out of their range that way or they are getting turned down altogether, while must affect prices at some point.
Posted by: guest at August 21, 2007 10:24 AM
that's weird.
my mortgage broker said he's seen little to no decrease in people looking for and obtaining jumbo mortgages.
guess you live in a poor area.
Posted by: guest at August 21, 2007 10:54 AM
To 1:08pm and the other brokers propping up their commissions and calling me an idiot: screw you, I was right.
http://www.bloomberg.com/apps/news?pid=20601103&sid=a4qWlWyw2C0I&refer=news
bonus punch bowl drained by sub-prime fiasco.
Posted by: guest at August 22, 2007 2:12 AM
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