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September 22, 2008

What Lies Beneath?

jump-off-cliff-0908.jpg
Now that everyone's had the weekend to digest last week's insanity, how you feelin' about ye olde real estate market here in Brooklyn? It's been clear for a while that the some fringe areas are in for tough times, but how about the most blue chip ones like Brooklyn Heights and the choicest parts of Park Slope? How about some of those right in the middle like Clinton Hill? How far do you think they'll end up falling from their peaks when all's said and done?

Brooklyn Heights

Clinton Hill

Bed Stuy

Wall Street Reorg: Impact on Real Estate? [Brownstoner]
Photo by Gregory Taylor




Posted by Brownstoner at 9:01 AM | Comments (73)
Categories: Market, Neighborhoods

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Comments

This should be quite the thread.

Posted by: wasder at September 22, 2008 9:12 AM

It's hard to measure in real time, I know, but don't you think prices in the Heights are basically already down 10%?

Posted by: lowintheheights at September 22, 2008 9:15 AM

Generally the evidence points to things everywhere already off 10-12%, at least, from original asking prices. I think 10-20% everywhere is a safe bet. A typical nice $800k house in Bed Stuy is going to sell before it reaches $640k which would be -20%. With risk free Treasury rates having dropped so much, the yields are coming in to support prices on REALISTICALLY priced buildings.

Posted by: daveinbedstuy at September 22, 2008 9:21 AM

After the Treasury injects 1 trillion into the US mortgage market I would looke for a rebound in the next 8 months. With NYC Leading the way of stabalization.

Posted by: sebb at September 22, 2008 9:28 AM

Definitely feels like things in Clinton Hill are already off by 10-20% off peak. FWIW--I voted 10-20% percent for Slope, 20-30% for Clinton Hill, 30-40% for Bed Stuy.

Posted by: wasder at September 22, 2008 9:31 AM

This blog used to be such a informative and enlightening site when it first started. And now it is littered with blatant sensationalist posts like this one with the sole purpose to inflame. it's sad to see the original creators lose their way.

Posted by: leroyjenkins at September 22, 2008 9:41 AM

sebb, your views on economics mystify me. NYC has just suffered a massive loss of wealth and is in the process of suffering huge job losses. NYC still hasn't purged its real estate market and is about to do so.

I appreciate that you are probably a homeowner, but writing these sorts of things on this board isn't going to make it happen.

Posted by: lechacal at September 22, 2008 9:51 AM

Nothing is being sensationalized or flamed here leroy.

Posted by: daveinbedstuy at September 22, 2008 9:51 AM

I have no insight to add here on the markets or direction of prices. I'm just a homeowner who hopes people will still be able to buy into my neck of the woods and fix up some of the remaining old, neglected houses nearby. That said, I am struck by the juxtaposition of this thread against the ads for the Clocktower, whose graphic reminds me of the opening and closing screens of the old Looney Tunes cartoons. I half expect to see Porky Pig's face bust through the middle bleating "th-th-th-that's all folks" (sans lipstick, of course). Seems strangely appropriate for the world we're in this week.

Posted by: slopefarm at September 22, 2008 9:54 AM

Anyone who lacks direction on NYC housing prices has merely to study past bear markets, which have been reflected in RE prices. And this ain't your standard bear market. Oh, this time is different? Yes, exactly what causes every boom/bust in history. I agree we might have seen a 10% correction. I hope there's only another 20% to go.

Posted by: denton at September 22, 2008 10:11 AM

While everyone is sitting back waiting for prices to bottom is anyone considering how the interest rates on loans factor into the picture?

The interest rates are so low right now that I would think that by virtue of locking into a low rate you might fair better than in waiting for the pricing to do down further. Who really knows what the actual bottom would be. Is it enough to wait for higher interest rates?

I am no math scholar. Has anyone out there done a model calculation on this?

Posted by: TownhouseLady at September 22, 2008 10:22 AM

No one knows - but if I had to bet - I'd say allot closer to 40% than 10%.

Just like everyone was surprised how far "up" prices went - it is likely everyone will be surprised how far "down" prices go - it is a pendulum and it is swinging back fast and hard.

Posted by: fsrg at September 22, 2008 10:32 AM

MHO -

Govt bails out wall street to the tune of a trillion dollars by buying troubled mortgage backed securities. This does nothing to the common homeowner. Those securities will be held by the govt or subsequently sold.

But those securities are not real estate. It's an ownership stake in a pool of mortgages. There is still pressure on the servicer to foreclose rather than do a work out and they will still be foreclosed. The only way they could change that is if the govt tracks down every single note for a particular issue and buys it out. Not happening... There will be a lot of homes on the market cheap as a result of foreclosures and it will pull down home values.

Don't get me wrong. I'm glad the bailout is happening. It would be a blood bath otherwise, but it isn't a fix for everything and it isn't fair for the common guy to have to bail out the fat cats. The alternative is to die with the fat cats.

Posted by: Ozymandius at September 22, 2008 10:41 AM

Even in Chinese that sign is funny. It reads: Jump Cliff Place.

Looking for the right spot to jump off the cliff? That way, dude.

Posted by: WonTon at September 22, 2008 10:42 AM

Drop is mortgage rates is good but only if there is liquidity to back it up. If the financial institutions continue to hold on to cash for a rainy day, there isn't enough to lend out. Until we see differently, my bet is that it's gonna stay tough to get a mortgage. Also coop boards are fussier than ever about approvals. They want more money down and more cash in the bank after closing and more income in general.

Posted by: Ozymandius at September 22, 2008 10:45 AM

I chose the same -31 to -40 percent range (although my prediction has been and still is -25 to -50) for all hoods. The difference between fringe and blue chip hoods was already built in before the boom got started. Let everything fall evenly and that difference will still be accounted for. The blue chips can run but they can't hide.

I love Henry Paulson's high pressure sales tactics to push through this bailout bill and avoid the compensation cap and bankruptcy protection for the little guy.

Posted by: DOW8000SP800 at September 22, 2008 11:03 AM

I would not be surprised to see 30%+ price declines in some neighborhoods. I would be surprised to see less than 15% declines.

I think the loss of the big 5 investment banks in less than one year (Lehman dead, Bear and Merrill bought, Morgan and Goldman converted to regular banks) will have a long lasting effect on the local economy.

Things are moving so quickly now (e.g., Bear blows up in March then not much happens until the last 3 weeks when all hell breaks loose) that it really looks like the house of cards is tumbling down and people who know what's going on are SCARED. I *hope* a trillion dollars from the taxpayers will be sufficient to stop the bleeding...

I think the percentage of buyers with household incomes more than 200K per year will be going down substantially and prices will need to adjust accordingly.

Posted by: northsloperenter at September 22, 2008 11:05 AM

Nouriel Roubini the economist at Stern School of Business and one of the few talking heads to consistently get it right says he sees a light at the end of the tunnel. Unfortunately he thinks its the headlight from an oncoming train.

My paraphrase because i'm too lazy to track down the exact quote but the metaphor is his.

Posted by: Ozymandius at September 22, 2008 11:14 AM

Fringe area? The fringe areas of Midwood, Sheepshead Bay, etc... appear to be doing okay. Please correct me if I am wrong, but if most of the people who were buying in the Blue Chip areas worked in the finance industry, there won't be too many of them left to purchase homes after they get laid-off. Neighborhoods that attract immigrant families, many of whom put down huge down payments, if they don't just buy the house outright should fare better.

Posted by: Just Wondering at September 22, 2008 11:51 AM

Roubini also thinks hedge funds are next to suffer a run [on them], followed by LBO's. If he's right, NYC could be looking at 40-60% down says me.

p.s. I think he's right

Posted by: lalaland at September 22, 2008 11:54 AM

Many hedge funds have closed and many more will. You can't really have a "run" on a hedge fund. Funds that are down a lot will close up because its not profitable for them to try and manage the money back to what is referred to as the "high water mark." The funds that were using Lehman as prime broker have a whole other set of problems!!

Posted by: daveinbedstuy at September 22, 2008 11:59 AM

check out streeteasy.

theres a 2bed apartment in north park slope that dropped 100k a few days ago. I think its 650k down from 750k.

Posted by: Santa at September 22, 2008 12:01 PM

Burning the candle at both ends now.

We have pressure from the outer edges of the buros... you can see on hotpads.com how all the edges of NYC are foreclosure rich already (lots of sub primes, low income).

But now with the bank failures, and the huge loss of jobs in manhattan, your going to see the same happen dead center (starting in manhattan. It shouldnt be as sharp, simply because their properties should be more valuable... but with the world economy now catching the american flu, youll have less foreign buyers keeping the prop up.

Housing in the US was over-valued by 20-35% (bubble peak vs US average) when looked at as compared against GDP, NYC was the same (slightly higher). Most of the country has had a hard correction (drops up to 25% or so). NYC hasnt.

While NYC is more inured agaisnt drastic price changes (co-ops, income, foriegn investment).. the relative value simply cant stand out with the outer buros dropping, and with the dead center loosing nearly a trillion dollars (and countless attached jobs and income).


Long story short, i think NY is in for a short term correction (-15%), followed by a long slide (additional -15%)... the distribution should sandwich the blue chip areas.

The only saving grace would be for NY to take a medium hit now (say -20%), and remain stagnant for 8-10 years.

--Lionballs

Posted by: lionballs at September 22, 2008 12:09 PM

I am hoping to buy a 1-BR in Brookyln Heights soon...is the next 3-6 months the time to buy? Can prices in this nabe really drop much more?

Posted by: fishermb at September 22, 2008 12:15 PM

Ozymandius - you are kind of arguing both ends at the same time.

Banks/Fin Inst. will not issue new mortgages as long as they hold assets on their books that they are unable to value. The result of which is continued deterioration of housing.
So while the "bailout" plan wont directly impact housing, its effect most definitely will.

As to the bailout in general - it is a horror show but nothing like the horror that we are facing - by many accounts last week we were 48hrs away from - non-functioning credit cards & ATMS; Bank runs, panics and potentially riots and violence.

And while I am seriously in favor of higher taxes on ultra-high earners (since we are now seeing that 'rugged individualism' doesnt really exist - and those that benefit the most by "society" should pay the most to maintain it) BUT putting salary caps, demanding equity stakes in private companies and these other 'disincentives' will effectively destroy the potential of the Federal Govt from actually profiting in the long run on this plan. The quicker that Financial Inst. can get these toxic debts off their books and start making new $ (albeit at a much slower rate - since less leverage) - the better.
Additionally, you want these institutions to WANT to dump these assets at the cheapest possible price, and as quickly as possible - so that when the true value of these assets become clear (based on cash flow and collateral) - the Govt may sell at a profit. If the Govt makes Companies decide to try and "ride it out themselves" - then you are looking at prolonging the credit crunch AND increasing the cost to the Govt to buy the assets in the 1st place (why sell them cheap if the result is that I am going to hinder my earnings as well as that of my shareholders).

The smart move is fund the new RTC - buy cheap and tax high earners.

Posted by: fsrg at September 22, 2008 12:31 PM

Who would have thought that George Bush would responsible for socializing the entire financial system? Wow.

Even assuming that the "bailout" works, the NYC economy and RE market is in for a massive shock from loss of tax dolalrs and oncome. Even those companies that withstand the crisis will no longer be showering their employees in lavish bonuses and compensation. And that of course is what drove the market to such heights. No matter how you cut it, where in for some big declines. And in the end that iss probably the best thing that could happen to Brooklyn, since so many of the people who want to live here and contribute to the borough have been priced out.

Posted by: shillstoner at September 22, 2008 12:33 PM

shillstoner - I agree with your assessment until you allege that all this is good for Brooklyn.
I don't care who has been "priced out" - the loss of huge amounts of income, and asset values as well as increased unemployment has NEVER been a benefit to any community anywhere.

Posted by: fsrg at September 22, 2008 12:39 PM

fsrg, I'm surprised you could read my post with all of the typos.

Yes, in the short the loss of income, city and state funding, jobs, etc will be nothing but bad news for Brooklyn and the city in general. But in the long term, making Brooklyn once again affordable for the artists and creative professionals who have been the driving force of gentrification since the 1960's will be a good thing for Brooklyn. The financial debacle should slow down or stop the further mallification and suburbanification of the borough and should allow more people who love Brooklyn for what it is to live here.

Posted by: shillstoner at September 22, 2008 12:48 PM

Shillstoner--from your mouth to God's ears. I hope you are right about that. The neighborhoods of Brooklyn that I love are very dependent on the ability of people making a decent but not extravagant amount of money per year to afford a nice home so I will keep my fingers crossed on your prediction.

Posted by: wasder at September 22, 2008 12:55 PM

wasder...sorry i missed you saturday. I did meet aussie though.

Posted by: daveinbedstuy at September 22, 2008 1:07 PM

I dont know but in my experience many many of those artists and creative professionals who live in Brooklyn (and elsewhere in NYC) are one way or another tied to the overall city economy and a downturn will make Brooklyn just as unaffordable for them even if sale/rental prices come down.

Who buys the art produced by the artists, who employs these creative professionals? I think vast numbers of people coming under these titles either work directly for, or as independent contractors, for the companies and individuals who can be expected to be hurting over the next few years (at least).

Additionally - I am not so sure that your mallification argument holds up either - the boutiques, unique restaurants and specialty shops that we all love so much generally have (much) higher price points that your typical chain type store/restaurant - if people are hurting, Costco and Home Depot make very nice substitutes to the local (expensive) hardware store or specialty butcher.

It is always nice to try and find a silver lining (and cheaper RE is one) but I just dont see a widespread economic downturn benefiting anyone (long or short term).

Posted by: fsrg at September 22, 2008 1:29 PM

I think real estate will come down. No question.

But I think some people are overstating the affects of Wall Street on our lives. The affects on the NYC economy will be dramatic, surely but there is a lot still going on in NYC without Wall Street.

This is a chance to remake NYC into the place it used to be. Filled with more vibrancy and art and less money and greed.

Save some money every month and support your local shops and restaurants as much as you can. I have high hopes for the future of NYC with less of this enormous wealth floating around. It's a chance to all come together like we should have after 9/11, but seemed to put out of our minds so quickly.

Live every day to the fullest.

Posted by: 11217 at September 22, 2008 1:34 PM

Hey Dave--yeah the music was just too loud. Must have been tough working by that all day. I got close and my daughter started screaming so I bailed. Anyway, looks like its going to be great. I really enjoyed the whole event. Ended up having lunch at Peaches on the sidewalk and then strolled around and bought an antique child's chair to boot.

Posted by: wasder at September 22, 2008 1:36 PM

11217 - that is all a great sentiment and hopeful

but I can not think of a single industry except movie production that is not significantly tied to the overall NYC/US/Global economy genrally and "wall st" more specifically here in NYC (Movies seem to do well in economic downturns). Can you name some others?

As to making NYC into the place it "used to be" - NYC has been seriously tied to wall st's fortunes for the better part of a century and in fact the industries that used to diversify our employment picture, have been leaving NYC, the NE and the USA for decades.

Again, everyone wants things to 'work out' but we should at least be honest about the problems.

Posted by: fsrg at September 22, 2008 1:49 PM

as a person only making 30k I can only assume that a weakened real estate market will be a good thing for me.

if a person who makes 200k with a 50k bonus now makes 100k with a 25k bonus I dont see that has a destruction of life as we know it.

Posted by: Santa at September 22, 2008 1:59 PM

The Wall Street bust will primarily affect the Manhattan Real Estate market of 1-3 million dollar homes and apartments.

Of course there will be trickle down to this, but I doubt anyone on Wall Street ever had interest in my Park Slope studio.

Posted by: 11217 at September 22, 2008 2:04 PM

"It is always nice to try and find a silver lining (and cheaper RE is one) but I just dont see a widespread economic downturn benefiting anyone (long or short term)."

No pain, no gain. It's a means to an end. It's time to see the REAL intrinsic value in these homes and other assets. It's time to expose the REAL wealth (however far down there it is from where we are price-wise). It's time to PRODUCE something (renewable energy solutions?).

This downturn is scary but necessary.

Posted by: DOW8000SP800 at September 22, 2008 2:13 PM

Santa it might be - if you keep your job - do you work for the Government? - b/c tax revenues will be down ALOT and they will have to cutback; or Do you work for a retail store - sales will likely be down with same result;etc, etc, etc, etc

11217 - the 70K a year analyst on Wall Street might have been interested, or the 50K Graphic Artist who did alot of work in marketing (with budgets now down) might have been; or the chef (whose restaurant cant survive) might have been a buyer, or maybe the public defender whose (formerly rich) father might have spotted the downpayment in the past would be interested.

etc, etc, etc, etc

and Dow - economic activity/success is not weight-training - sure creative destruction can be a good thing in the long term - but long-term in this case could be several generations - are you prepared to wait for your Grandchildren to reap the benefits (its a possibility you have to acknowledge)

- renewable energy is all well and good but I doubt too many financiers. lawyers, accountants, (main intellectual capital in NYC right now) etc.... have much to contribute in terms of the engineering.
Those people (should be) good at steering investment into these hopefully lucrative (and beneficial) endeavors, and creating the laws and systems required to manage them. However, if there is no $ to invest, or if our financial infrastructure is so decimated, then this investment either wont happen, or wont happen here.

You want more renewable energy, or less wealth disparity, or less homogenization of neighborhoods - or whatever - policy changes can/could have brought that about but virtually all these goals are infinitly more difficult in periods of economic hardship.

So unless you are just so overjoyed by your schadenfreude, the current situation is bad all around and for virtually everyone in NYC.

Posted by: fsrg at September 22, 2008 2:43 PM

fsrq -

sorry for the slow response... meetings..

Actually I'm not arguing both sides. Federal bailout does create liquidity at the FIs but I don't think that they're going to be as willing to lend as before. Risk mgmt is back in vogue so their underwriting will be tighter and also the FIs will be concerned about the economic slowdown both domestically and abroad. Net net, some money is available to lend but they will chase superprime deals. Especially until the securitization market opens up so that they can offload some of these assets.

As for unloading the mortgage backed securities, the FIs don't like the current prices. There is plenty of money available to buy them but no one wants to sell to the bottom feeders because they have to mark down all their other securities to "market value". I don't have a feel for the pricing and the terms that the govt will get on this.

I would love for the govt to do as you suggest. Buy cheap and sell high so us poor slobs don't get stuck with the bill. Would be nice if they manage to get it done without socializing the entire financial and insurance sectors.

Posted by: Ozymandius at September 22, 2008 2:50 PM

A hearty "hear, hear!" to fsrq's comments to dow. No one is going to like what's about to happen. You laissez faire guys are right that the market corrects itself when there are excesses and corrections keep the system honest. Problem is that there is too much f***ing collateral damage.

There has got to be reasonable oversight of the system. We found that out in 1929 and put safeguards on the commercial banks and trading of equities. We haven't put in the necessary ones for investment banks, hedge funds, etc. So we pay the piper and hope it doesn't get as bad as it did back then.

Posted by: Ozymandius at September 22, 2008 3:06 PM

fsrg...

although I agree with you that everything is connected to the wall st wealth I see the lowering of "wealth" a good thing. I work at an indie record label which is in an already tanking market. I dont see the wall st mess affecting my job any more than the death of cds and online downloading is. But if incomes decrease and people lose their jobs than rental and sale prices will have to come down. If no one rents out an apartment owned by a person who needs the income what will they do?

plenty of cities in the USA survive with studios renting for less than 1500 bucks a month. NYC was one of them until recently.

Posted by: Santa at September 22, 2008 3:23 PM

But where are all of the Homeowners? So if you people (renters) think RE will fall 40% In a Place called NYC. What does that do to the rest of the United States? I guess Real estate Prices in Places like New Jersey , Long Island , Florida, and Idaho become Worthless . Basically you are talking nonsense. People need places to live. I Don't see anyone panicking in any of the Blue chip nabes in Brooklyn. With 93 Foreclosures in Manhattan compared to 4 million in the rest of The USA you wont catch any Homeowners jumping out the windows. Plus you people keep missing a major point.
Countries like ABU DUBAI and DUBAI will scoop up real estate in NYC . They already bought the Chrysler Building and they were talking today of buying more Real estate in The US They are not talking of buying in the Suburbs.

Posted by: sebb at September 22, 2008 3:26 PM

sebb im sorry but NYC is not the center on the universe.

my parents house in Charlotte, NC will most likely go up because of all of this and they have no connection with wall st or banking other than living in Charlotte.

If that 3 mil park slope brownstone goes for 1.5 mil in a year I dont see that causing total destruction of the Idaho and Florida housing markets.

oh and I rent and im under 30.

Posted by: Santa at September 22, 2008 3:42 PM

11217 - New York city only has artists and ad agencies and design firms and publishing because it has Wall Street.

Without funding, there isn't commercial or fine art income for creative folks. In a bad economy, marketing and advertising that utilizes creative content is the first thing eliminated from a companies budget. The fine art world is a total game that that pretty much relies on run-ups from collectors based on a variety of highly subjective factors. With incomes down, there will be less individual purchases and also, if donations are down, less institutional purchases from museums. Forget corporations that are struggling - they will not be dropping big dimes on art work in this environment.

I work directly with artists - and the commercial work is way way down. With a diminished income, buying will become harder, not easier for artists - especially since there are more stringent requirements for them to get a mortgage (state income/no payroll stubs, etc...).

Posted by: wine lover at September 22, 2008 3:43 PM

sebb -- real estate in the rest of the US has already gone down significantly more than in NYC. And, if you look, you will see that there are already places in the US where real estate has already become nearly worthless.

NYC real estate is hovering over the edge of the pit like Wily Coyote -- temporarily defying gravity through force of collective denial. But the 1-2 punch of Wall Street layoffs and tighter lending standards will change that soon enough.

The foreign buyers will not do anything except become a talking point for real estate agents. I really don't think too many oil barons will be buying up property in the north slope.

Oh, as for homeowners -- anyone who is happy where they are living has nothing to worry about. Anyone who really wants to move will get less for their current home but also pay less for their next one. Again, nothing really to worry about.

The only people who have to worry are those who bought something they couldn't afford or bought as an investment at the top of a housing bubble.

Posted by: northsloperenter at September 22, 2008 3:45 PM

Santa You parents live in NC thats fine for them but there is not much to do in NC . Most people that live in NYC would never think of living in the Suburbs. Plus the fact that Crime is Sky high in Charlotte who would really want to move to the South. The prices are so low in places like NC is exactly my point where else will the go? to ZERO

Posted by: sebb at September 22, 2008 4:02 PM

"I work directly with artists - and the commercial work is way way down"


I work directly with performing artists, and we are having our best year since I started working here 10 years ago.

Posted by: 11217 at September 22, 2008 4:02 PM

But again I ask the Same question. Where are the comments by the homeowners? The renters rule this board I am confused on why a renter is even reading brownstoner. I guess if the Renters bash the market Long enough they might make a difference. I don't think so.

Posted by: sebb at September 22, 2008 4:04 PM

I just would love to hear from people who Own homes and Live in Nabes like Cobble Hill, Carroll Gardens , Park slope or Bklyn Heights. Tell me do any of you guys hear or see any problem with the RE market? because i really do not.

Posted by: sebb at September 22, 2008 4:07 PM

whats your point sebb?

houses are cheap in NC.

houses used to be cheap in NYC.


this is a real estate website for brooklyn. Not a home owners website for brooklyn. I still live here and find this website interesting.

also 99% of artists recieve little to no income from their work.

Posted by: Santa at September 22, 2008 4:12 PM

Sebb is right.

Prices will remain high in NYC, despite prices falling everywhere else on the planet.

We'll all get a free pony, too!

Posted by: SnarkSlope at September 22, 2008 4:17 PM

sebb, this isn't a cheerleading contest. This is a place where people can come debate the ins and outs and what-have-yous of Brooklyn real estate. Just because someone is a owner doesn't mean they believe the market will go up. Even owner in Brooklyn could get on this site and cheerlead and it won't make a lick of difference. Why don't you tell us what you really think about the market rather than being worried about who is cheerleading for what. You're an owner. OK. Are you worried? Are you feeling trapped by the market? Let it out. You're among complete strangers.

Posted by: lechacal at September 22, 2008 4:19 PM

All of this is depressing for someone like me, a potential first time homebuyer. Sure, prices will fall but not enough for someone under 30 who makes btw 50 and 100k to save enough to buy anything (except maybe a spot in that fedders building in sunset park **crosses fingers***)

Posted by: A Guest at September 22, 2008 4:25 PM

"I am confused on why a renter is even reading brownstoner."

The blog covers a lot of local news and goings on (Quality of Life, Restaurants, Flea Markets, etc.) that are of interest to people no matter how they pay for their living space.

But I read Brownstoner mostly because I plan to buy a place in 2009 or 2010.

Frankly, after I buy, I'm not sure I'd be as interested in reading. I mean, if I owned a place and planned to live there for 10-40 years, I really wouldn't be very interested in current real estate trends.

Posted by: northsloperenter at September 22, 2008 4:33 PM

True Northsloperenter - I find as someone who will be looking to buy in the near future, by reading brownstoner I have become a little more savvy with regards to the real estate market in NYC as a whole. Much moreso then, say, a person with mommy and daddy's down payment check burning a whole in their pocket, who go and overpay for a property without checking the comps.

Posted by: A Guest at September 22, 2008 4:37 PM

I am a Home owner I am not worried at all about the price dropping. Why? because i put down a Large downpayment. Do I want prices to drop NO. But I really do not care. All I am trying to say here is i do not see prices dropping and the folks have been talking about this for 3 years now. Enough already. If you want to see price drops go to www.Miamiherald.com

Posted by: sebb at September 22, 2008 4:51 PM

It's funny how this site has changed so much that someone can actually ask why homeowners bother to read it. Early on, it was largely a homeowners' site -- much more about us homeowners fixing up our houses and keeping an eye on our neighborhoods, including home values. Brokers and the other RE pros in the neighborhoods also chimed in. We homeowners would all be agog at some wacko flipper job, ooh and aahh at some great brownstone restoration before and after photos, wake up with night sweats and bad flashbacks after reading descriptions of someone else's botched interior demo job, and snarl at the likes of Scarano. The pros would take issue with us and debate would ensue. Now it's much more about markets, values, and predictions. There's less for a mere homeowner to comment on when it's all about guessing where values will be generally in B'stone Brooklyn. We still hang out on the forum pages, looking for a good selection of light fixtures, honest contractors and the right way to paint a heat riser (DIBS, it was nice to see you go all Brownstoner old school about marble countertops re HOTD this morning).

So Sebb, don't look to me and my ilk for any market wisdom. I'll tell you how my block is doing (still on the upswing with renos, but nothing's for sale) but I'm not going to cheerlead the market for you, nor predict its demise.

NSR, once you buy, we'll see you on the forum pages. You'll be on your own with those damn roof leaks and no landlord, so I don't expect you to disappear from this site. Your going to need us homeowners for the stuff we really know, and bad.

And lechacal, since I'm among total strangers, I will confide that I'm not selling anytime soon, but I am still looking for one more decent tick further down in rates to make a refi worthwhile, and hope the credit requirements won't be ratcheted up so high that I won't qualify. I also hope the appraisers aren't too freaked out -- I want my LTV.

Posted by: slopefarm at September 22, 2008 4:56 PM

Lechacal=the most sensible poster on this site, regardless of the fact that he he sees the glass 24/25ths empty! (Just kidding Lech). You always have a way of distilling the issues down to their basics which I really appreciate.

Posted by: wasder at September 22, 2008 4:57 PM

Slopefarm--great post. There is so much more to talk about than property values. I hope we can get back to talking about the ups and downs of ownership and neighborhoods here...

Posted by: wasder at September 22, 2008 5:05 PM

i think one of the reasons the site has changed is that very few can afford to buy brownstones in bad shape for 1.5 mil and put 500k to fix them in 2008, where as in 2004 this was still a possiblity.

Posted by: Santa at September 22, 2008 5:22 PM

Thanks wasder. Nice to have a fan.

Posted by: lechacal at September 22, 2008 5:38 PM

I am a homeowner (well an apartment owner) in Park Slope and I do think house prices will come down substantially, but I am not in the least bit worried.

I knew when I bought it that house prices go up and down over time. If you did not or do not know that, you really shouldn't be investing in much other than slinky's.

I bought my place because I could afford it, I love it and I plan to stay in NYC for the foreseeable future and am not someone who liked the idea of renting any longer.

I am 100% satisfied with my purchase at the price I bought it for or for 30% less. If I want to upgrade (which quite frankly I thought might be impossible when I bought in 2006 on my salary), my next place will be that much cheaper.

If not, my little place is heaven and it's home.

Posted by: 11217 at September 22, 2008 5:44 PM

I will also say, however that in my neck of the woods, things do still seem ok. I keep up a bit, and I'm still seeing things selling at large prices. I have to assume that most of these people are not tied to finance or they'd be too nervous to buy.

I saw that a huge listing at the Vermeil went into contract recently, as did one or two places at the new 153 Lincoln (former brothel). The brownstones all seem to go pretty fast unless they are REALLY overpriced or just tired.

There are a lot of brownstone facades being replaced on my block (I think 3 right now, in fact and that ain't cheap) and unfortunately a couple people have moved out in the last week due to rising rent (with those places already rented for the new higher asking prices...one in only one day). I know because I wanted a friend to move in to a nearby building, but the place had 40 people show for the craigslist post and it was gone in an hour.

I know it's going to hit, but seems like we've been waiting for 2 years. I guess if there is a time it will hit, it will unfold in the not too distant future.

Posted by: 11217 at September 22, 2008 5:50 PM

"You'll be on your own with those damn roof leaks and no landlord"

Oy, that's something I won't look forward to...

I can barely manage hanging a shelf (how the heck do you get stuff to not fall down when your wall is 1/2 inch wallboard over 90 year old brick!?).

But, yeah, after getting priced out of my Manhattan rental, I've had my fill of renting. I moved to Brooklyn with the intention of getting to know the neighborhoods and figuring out where I'd like to settle down.

I admit I'd be happy to see property costs come down so I can afford a nice place in the city to raise my kid and don't have to look in the 'burbs, and I think we are, sadly, in for some very tough economic times. If my wife and I don't lose our jobs in the upcoming recession, we could be in a good position to buy.

But, were it up to me, I'd rather see the city and country avoid what is to come (even if it meant I was priced out of everywhere I'd really like to live), but I don't think we will be avoiding what is to come.

Even if the government saves the stock market, it will greatly increase regulations (i.e., loans will be harder to get) and greatly increase our national debt -- which, no matter what politicians say, we eventually have to pay off with taxes.

Posted by: northsloperenter at September 22, 2008 6:21 PM

In my view there is an approximately 40% of widespread civil unrest in the next two weeks.

Posted by: lechacal at September 22, 2008 8:37 PM

I take that back. 25% chance, not 40%. Like the housing crash, it would not start in New York but it would eventually find its way here.

To be clear, I do not think this is likely. 25% means 3 to 1 odds of it not happening.

Posted by: lechacal at September 22, 2008 8:51 PM

boy oh boy,
with this many people on one side of the issue, I have got to take the contrarian position.
1. Despite all the breathless pronouncements of doom, what we are talking about is a widespread panic over a 2% stake in the overall mortgage market. A mortgage market that makes up a small percentage of the overall economy.95% of mortgage holders are paying their mortgages dutifully.
2. This is not to say that the market wasn't overextended and underregulated. It is to say that these giant companies are falling because of irrational fear. Fear that is clearly evident on this thread. And that is forcing institutional investors to make a run to the banks and investment houses, much like that scene in It's a Wonderful Life where all the townsfolk bum rush the Bailey Savings and Loan. But times a billion.
3. The world will go on.
4. Credit will tighten.
5. Oil will decrease in value. Leading to increased corporate profits due to decreased transportation and fuel costs.
6. Large scale economizing will take root and companies and families will begin to see profits again. As they did in the past.
7. The concept of capitalism is not dead, simply under re-examination.
8. Even a taxpayer backed bail out of a Trillion dollars is a fraction of the overall US Gross Domestic Product.
9. Lose your illusion of money as anything more than an intangible promise backed by the strength of the nation whose name is printed on it. In other words a transformative event like an invasion or a pandemic could make 10 trillion dollars worthless in a week. What good is money when there is no nation behind it. A billion Sadam Hussein dollars is worth less than monopoly money right about now.
10. We have other industries in this country in case you folks haven't noticed, such as, tech, pharm, energy, aviation, farming, armaments, health, media, food service/restaurant, mining, etc., etc.
11. real estate pullback yes, great depression....ain't gonna happen.

Posted by: Legion at September 22, 2008 9:01 PM

Wow Lechacal. What is the basis for your guesstimate about the possibility of civil unrest? Frustration of the lower middle class exploding against the elite political/economic class for having to bail them out of their own mess? Something like that?

Posted by: wasder at September 22, 2008 9:52 PM

Legion--a brave post no doubt. Hope you are right about some or all of that, but god knows I am not about to make any grand prognostication at this point. Thanks for your thoughts though. Clearly there is an irrational level to the market's behavior these last few weeks but it is unclear whether the bail out will succeed in restoring order. Also, yes we have other industries and some of them (films and television seem to do OK in recessions) will not be directly affected by the crisis, but alot of spheres of modern life are tangled up in Wall Street somehow or another. Definitely some kind of re-organization/restructuring is taking place in our finance industry, unlike anything we have seen before, and it remains to be seen how effective it will be and how long it will take before we see the results.

Posted by: wasder at September 22, 2008 9:59 PM

The financial industries are not being brought down by "irrational" panic, but by their own terrible investments, which have left them insolvent.

If you lend money to people who have no reasonable expectation of paying it back except by selling overpriced real estate to other people for even higher prices, and then take the loans and shuffle them around to investors who don't understand what stands behind them, sooner or later there is going to be a problem.

Our bad luck is that it was later, so the problem is quite large. Someone, presumably US taxpayers or our lenders (i.e., the Chinese), is going to have to pay $1-3 trillion to repair the damage they've done.

NY incomes are going to drop faster than in the rest of the country, since more of them are directly or indirectly tied to the recently deceased business model. In a rational market, which this has not been for the last 6-8 years, that would lead to a sharp and dramatic real estate price drop, even if prices were not bubble-inflated to begin with.

If I remember correctly, in Tokyo's bubble bursting, real estate values dropped 85%. Our bubble is by most measures no smaller.

Posted by: FinanceGuy at September 22, 2008 11:29 PM

No wasder, nothing that principled. Large groups of people aren't really capable of principled thought.

From where I sit (currently, in my office near Wall Street, where I have been almost nonstop for the past week, right smack dab in the middle of all of this), I can offer my belief that the general public, and even the vast majority of those who consider themselves informed, have no idea how quickly the current financial situation could turn into a panic. Or it could boil away like it never happened. I have never seen a situation so volatile on such a large scale. But volatility works both ways. This could get very bad very quickly, or it could go away very quickly.

And if this gets very bad quickly, God help us all.

Posted by: lechacal at September 23, 2008 12:21 AM

Lechacal--please keep us posted as to how its going (haha). All kidding aside, I have no idea exactly what you do but since you are right there in the thick of it I sure hope you continue to post on what's going on. I can see how it could turn into a panic I think. The whole thing is built on perception more than any real structure so when the perception is the foundation is shaky it must be a very disconcerting feeling for any big investors.

God help us? That sounds bad.

Posted by: wasder at September 23, 2008 8:23 AM

I think lechacal is a bit panicky, but on the right track. What makes this crisis unique is it's based on the fact that none of these junk loans have any money backing them. It's all gone. It's not magically going to get balanced.

So the question is how long this will last, and my feeling is that this will last for years. And frankly, if property values are down and you're in it for the long haul, this is no big deal. Flippers need to be concerned. Also, I'd dare say expect lots of small boutiques and restaurants shutting down. This is not the economy or market for stuff that has a flaky business plan.

Posted by: Jack at September 23, 2008 11:23 AM

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