A Pair of ProHi Price Cuts

I think many brokers/sellers need a history lesson. Last time the stock market tanked, so did the NYC real estate market. That said, there was a lag between the stick market plummet and the real estate market following suit. So, we may not see the full effects of this for a while - but I'm quite certain that 6 months from now, many sellers will be waking up and smelling the coffee if they haven't already. The smart sellers will sell sooner rather than later, at aggressively lower prices, unless they want the market to drag down the value of their properties more.

Posted by: Miss Muffett at October 13, 2008 10:35 AM

Ringo - the stock market hits of 1987 and 2001 were fundamentally different - 2001 was based on fear due to terrorist attack, not market fundamentals. Of course, there are differences between 1987 and now too, but what they have in common is each period was preceded an unsustainable run-up in NYC real estate, which pointed to inevitable declines, which we will now see.

Posted by: Miss Muffett at October 13, 2008 11:28 AM

I disagree - I hear your point about name-calling, but the fact is that some brokers/sellers are obstinate in the prices they seek, despite market evidence to the contrary and it would seem that obstinance can be related to greed. That is, they price high and then refuse to budge even when there are no bites. Really, they are only hurting themselves, instead of realizing that they would be better off, accepting, let's say, 2million today (for a property they're asking 2.5 for), instead of waiting for the market to deteriorate further when they will "only" be able to get 1.5 or so (for a property they purchased, say for 1million 8 years ago). In other words, they could be making 1million dollars in 8 short years, instead of 1.5, but no, that's not enough for them, so they hold out and then find that they can make even less. These numbers are obviously random, but not implausible if you look at history and where we're at right now.

Posted by: Miss Muffett at October 13, 2008 2:42 PM

z - actually, I'm still left cold by today's prices. Maybe in a few more months I'll warm to them. But I'm patient, and confident.

Posted by: Miss Muffett at October 13, 2008 2:46 PM

If the Brooklyn market were to tank a full 50%, it would still be a lot higher than it was in 2000. There's plenty of room for it to fall, and fall it will. Properties in NYC, like just about everything else in this asset bubble, have been over-valued and require a significant correction. Does that mean NYC will plummet? No, since a fall to, say, 2003 levels would still leave it very high, and over time, NYC will hold up and eventually take off again - though I suspect not for many years. I think many people are in denial about the long-term repercussions of what we're seeing now - despite a short-term rally in the markets, folks have to understand we're experiencing a watershed moment that will impact us for years to come.

Posted by: Miss Muffett at October 13, 2008 2:56 PM

Ringo - yes, we have seen a LOT of places, and actually, quite a few places did NOT sell, and were then just taken off the market. I suppose these were cases where the sellers clearly did not need to sell immediately, and hoped that by waiting it out, they would get a better price. Well, I think they will now have a lot longer to wait. For those places that did sell, I've been following the gap between ask and close carefully (by going on property shark to see the final closing prices), and what I've observed is that increasingly, there is a significant gap between ask and close. There are indeed exceptions, but that seems to be the trend, and of course I think that will only increase. Mind you, we were not trying to "time" the market in our search, and we have certainly bid on a few places - some of which we were narrowly outbid on (we're talking this past spring), some of which fell through for other reasons (two places were taken off market by sellers due to family reasons). But I now actually feel fortunate that we did not earlier get any of those other properties since I see now that we're in a much better position as buyers than we were just a few months ago. We're still aggressively looking and will buy the right thing at the right price when it comes along, but we are indeed choosy and patient - time and market forces on our side, as they are for other buyers in this climate who do not need huge mortgages.

Posted by: Miss Muffett at October 13, 2008 3:11 PM

I disagree - actually, my numbers are not as random as you think. They are based on examples I know (mine, friends of mine, brokers I know etc). I don't want to get too specific since I want to protect privacy so I am throwing the numbers more generally but I could, if I did not care about privacy, provide specific addresses, what was paid to buy, renovate and comps for the current value. There is only so much specificity I'm willing to offer on an anonymous blog but I can assure you that my analyses are based on fact, not on "craven motivation". I'm fine with you activating your miss-muffett-bot, but there are certainly many others on this blog who post just as much if not more. Sorry that you find my analyses irritating, but is it just because my views are different than yours?

Posted by: Miss Muffett at October 13, 2008 3:20 PM

Ringo - I just answered your question about whether places sold, on the thread about the Prospect Heights price cuts. For those who aren't reading that thread - the answer to your question is: actually, no, not all the properties did sell - quite a few were simply taken off the market since I suppose the sellers were hoping things would get better soon. A lot of other properties we've been watching only sold after deep price cuts, or wound up accepting offers well below ask. And all of this was *before* the current crisis.

Posted by: Miss Muffett at October 13, 2008 3:28 PM

Oh man, I've gotta get off Brownstoner - I just got my threads confused - so Ringo, I just realized I posted answers to your questions twice here. OK, I'm going to do something else now!

Posted by: Miss Muffett at October 13, 2008 3:30 PM

OK, I disagree, I will just respond to your one last post. I am making a statement about high prices in general right now, based on *facts* that I know about what the purchase prices, renovation prices, and recent comps are for similar properties. I am also NOT calling people I know greedy or foolish, just using what I know about their properties as the basis for facts (that is, comps). That is, for example I know of specific people whose properties have nearly tripled in value during the last 10 years and while they have no intention of selling, so these were paper gains only, by the same token, the loss of value they may now suffer would be on paper only and would not matter to them. Of course, I cannot make assumptions about THESE sellers specifically since I don't know them personally.

Posted by: Miss Muffett at October 13, 2008 3:38 PM

Traditionalmod - You seem to misunderstand me. Of course, I'm not saying the gains of past 10yrs were paper gains only since obviously many people cashed out so their gains are real. I'm just saying that UNTIL one cashes out, the gains are on paper. I'm also not saying that the Bklyn of today shouldn't be worth a lot more than the Bklyn of 1987. Obviously, you could buy Bklyn real estate for way way less then, even at what was at the time the peak of the market. Even if things crashed now, they would be far above the last peak. All I'm saying is that the rate of price increases over the last decade or so was unprecedented (and unsustainable), and there is plenty of room now for a correction which I do, yes, think is inevitable. My willingness to buy a house in Bklyn for what is still a lot of money (let's say 1.5 million) is not in any way inconsistent with what I'm saying since that sum is significantly less than the prices currently on the market (without getting into the specifics of what we're looking for) but far more than prices have been historically, up until very, very recently.

Posted by: Miss Muffett at October 13, 2008 7:15 PM

Oh, and "I disagree" - my examples of properties that have more than doubled, and in some cases nearly tripled in value in the last 10 years is hardly hyperbolic - ask anyone who has been closely following the market, or spend a few hours on PropertyShark and you'll see that this is true of many properties. What is "bizarre" is that what you are calling a few "hyperbolic," "anecdotal" examples ARE actually representative of what's happened to real estate prices in prime Brooklyn neighborhoods nearly across the board. And THAT is why I think the Brooklyn market is ripe for a correction, and also why I think that, even if it falls as much as 50%, it will be still be at vastly higher price levels than it's been in a long, long time (save the last 4-5 yrs).

Posted by: Miss Muffett at October 13, 2008 9:00 PM

All I can say is, the market has really changed - take a look at the July commentary about re: 210 Prospect Place - all those people proclaiming it would surely get its 2.5 mil price, if not over ask. I, on the other hand, pointed out it probably would not. I was right.

Posted by: Miss Muffett at October 13, 2008 10:59 PM

I Disagree on 210 Prospect Place in July (when it was priced at $2.495mil):

"it's lovely, if not that inspired. not that everything needs to be inspired or inspiring - i prefer to add my personal touches through decor rather than architecture and i bet a lot of buyers do, too. i would prefer the kitchen and dining on the parlor level, but reasonable minds can differ on that. i think they'll have no problem getting their price and then some. it seems fairly priced, in line with the comps and taking into consideration reno costs.

Posted by: i disagree at July 24, 2008 2:36 PM

Miss Muffett on 210 Prospect Place in July:

I'm surprised some people are saying this house will get over ask - this seems like a very rare phenomenon these days unless something is *really* underpriced/cheap, which does not seem to the case with this house. It looks like it's well staged, but that can be a hindrance sometimes if a buyer thinks it won't look as good without that exact same furniture there. This house is definitely a candidate for a revisit a few months from now, since there are such divergent opinions here about the price it will get.

Posted by: Miss Muffett at July 25, 2008 9:55 PM

Posted by: Miss Muffett at October 13, 2008 11:02 PM