Open House Picks

How can 147 St. James possibly ask that much? Especially when mentioned here right next the superior-in-every-way 31 So. Oxford? Crazy.

Strong dollar + rapid inflation + bankrupt banks (shouldn't that be an oxymoron?) + et cetera = this market is going nowhere. But, the people buying houses still have cash to burn.

So. Oxford will go for $1.8M
St. James for $1.55M

Posted by: sdrubbins at August 15, 2008 2:50 PM

DIBS: in the long term that's correct. As a property owner I love inflation - it makes my mortgage go away! But in the short term, I think that 1) a strong dollar means fewer European buyers of NYC properties; and 2) inflation means somewhat less disposable income for Americans who are shopping for real estate. Both of which reduce upward price pressure.

I'm not in The What's camp, claiming the apocalypse is coming. But I think prices went up more than they should have - the rent/own ratio got a little out of whack, and (this is really my pet peeve) people have assumed price appreciation based on misreading reports of average or median sales data. In other words, as more high-priced condos etc. came on the market, the average sale price went up, reflecting an increase in the average *quality* of homes on the market. However, brokers and sellers like to look at these figures in a vaccuum and assume that *individual* prices are increasing even when the quality of those individual homes remains the same. The upward pressure this puts on prices is artificial, and cannot continue forever.

I like to use my own building as a case in point. It's in one of the popular gentrifying neighborhoods that Brownstoner likes to focus on. It has lots of small, generally identical units and has seen lots of turnover in the past ten years, so it is very easy to find comps. Here's what I've seen (dislcaimer: it's anecdotal evidence from a particular building in a particular neiughborhood at a particular time, blah blah blah): from 1998 to 2004, prices skyrocketed. The value of my apartment more than quadrupled over that period. From 2004-2008, there's basically been no change whatsoever.

Not only have we hit a plateau, but we actually hit it a long time ago. And yet people have spent that time talking about how great the market is doing, how prices are still rising. I find that misperception to be somewhat worrying, and I suspect it will be corrected by the market.

(Then again I also understand that it's perilous to predict efficient outcomes in such a horrendously inefficient market.)

Posted by: sdrubbins at August 15, 2008 3:36 PM

DIBS, I'll be the first to concede that different neighborhoods (and blocks, and buildings, etc) hit the plateau at different times. Bed Stuy and (somehow) Carroll Gardens continued to appreciate past 2004... other neighborhoods did not.

In fact the reason I noticed this is that by 2005 or so the value of my apartment had just about tripled, and I started to think about cashing in and moving to Carroll Gardens. But as I thought about it, and continued to think about it (it's not a decision I can make quickly), I became completely priced out of Carroll Gardens, while comps in my building did not move an inch (seriously).

Now I have no idea what do do. I might still cash out, to get peak price. Then maybe look in PLG or Kensington or somewhere. Or maybe rent for a while.

(Nothing wrong with buying at peak, by the way - as long as you can afford a place, and you love it, and you stay for a while, that's just fine.)

Posted by: sdrubbins at August 18, 2008 6:46 PM