Babs Corcoran "Not Worried About Real Estate Prices"

What is so absurd about Babs saying prices are so low now, it's a great time to buy, etc. is that prices are NOT low - they are still shockingly high! Just look at a lot of the recent HOTDs - like that crazy house on 1st St in PS asking over 2mil ("charitably" reduced from 2.3). There are LOADS of overpriced properties on the market now that are just sitting, sitting, sitting, and only a few sellers are actually letting the new reality start to sink in. But really, the price cuts have barely begun. Once they have, THEN it will be a good time to buy - not before. Things need to come down a minimum of 25% more - even 50% - to make sense to buy...

Posted by: Miss Muffett at November 21, 2008 10:56 AM

Traditionamod - re: your argument about how a lot of people will sit tight - many, many people were not able to "sit tight" during the last market downturn (late 80s/early 90s) and financial conditions are arguably MUCH worse now than they were then. Many people can't just easily rent out a whole house if they are underwater and/or need money for their retirement since their 401K has vaporized. So I find this a specious argument. Also, I put little faith in the "experts" saying this will be a short-lived problem - where were these experts when the writing was on the wall? Cripes - was Enron not enough of a warning bell? Let's face it, we've lived through an unbelievable asset bubble and the correction will be long and painful - if anything, New Yorkers who bought real estate longer than 3-5 years ago are a bit cushioned since this is the last of the assets to be affected so can sustain a 50% fall and leave many people breaking even.

Posted by: Miss Muffett at November 21, 2008 3:10 PM

wine lover - you misunderstood me. I did not mean that the people who have lost their retirement savings are those who bought at the height. On the contrary, there are tons of people out there who bought a long time ago who are probably now retirees or close to it. People who bought a long time ago (more than 10 yrs) can still make a killing, even if prices come way down, since prices skyrocketed in last 10 years - all those folks who bought brownstones for less than 500K that shot up to 2-3million, and now, even if they go down to 1.5-1 million, it's still a lot. Even many people who bought as recently as 5 years would do fine even with a major correction. I'm not saying this downturn must last 10 years, but I also think it's possible it could. There are too many variables at stake for any of us to know the answer. How policy-makers react to this crisis will make a big difference. But many economists and financial experts recognize that this is a unique historical moment that followed a very long, sustained bubble. And, no matter what you or others say, some people always need to sell. Also, the population pressures you quote could also change in the years to come - it's happened before.

What galls me is the assertion that now is a great time to buy in NYC since there is a perception that prices have come down so much, but historically, they are still unbelievably high. The only difference is that they are now no longer going up, and more and more sellers are starting to crack and either start cutting prices, or in some cases, are starting to put things on the market at less aggressive prices. But they are in the minority. Eventually, others will join them. This is all classic bubble stuff since it takes a while for sellers to finally adjust to new price levels. But pretty much everyone on this blog, bulls included, have now conceded that prices will readjust - the only real debate is how much, how long.

Posted by: Miss Muffett at November 21, 2008 5:17 PM

wine lover - I would not call 500-600 psf for a brownstone in a prime part of Brooklyn that cheap. That's still 1.4-1.5 for, say a modest 3 story brownstone. And yet, sellers still have such properties on the market for over 2 million dollars which is insane. I agree that demand has increased in recent years, but I'm not so sure you can count on that to prop up prices forever, esp when NYC is facing an era of potentially higher taxes, service cuts, etc. Just look at every other sector of our economy right now. Demand has fallen off the cliff for just about everything else, so why would NYC real estate be the one sole exception to this? But yes, I agree that finding a place you like is hard - we have had the same experience in buying in the past. This is why we are actively looking all the time, and not trying to "wait" til market bottoms out per se -- but we are also not financially stupid, so will refuse to overpay even for a nice place we like - as we've also learned in the past, there's always another.

Posted by: Miss Muffett at November 22, 2008 12:22 AM

Traditionalmod - I'd be happy to get a 25-30% discount, and I'm not saying I WANT a 50% discount. Only saying that anything is possible in this market - the only thing that is sure is that some significant correction will occur. Again, exact number depends on many factors. Also, today's NYT reported the beginning of an increase of inventory - exactly what starts to happen at beginning of the end of a bubble. Will inventory shoot up sky high? Probably not (then again, did anyone expect to see what's going on in every other financial sector?). But really, I do not think expecting prices in the 500s psf on a modest house is so outrageous - in fact, it's a pretty healthy number! A lot of places were going for in the 300s as recently as 2001...And there are plenty of good schools (154, 10, 295, 39, 107 etc.) which are hardly in the "prime" areas of PS. As far as I'm concerned, a lot of places are still way overpriced, but we are starting (*just* starting) to see that change and can happily wait to find the right thing as this trend continues. As I've said repeatedly, we're not waiting for a market crash or bottom, just a return to rationality...

Posted by: Miss Muffett at November 22, 2008 2:41 PM

Traditionamod - we can go back and forth til we're blue in the face. Cleary we both are coming at this from different points of view. Just curious - what do you think will happen to the brownstone Bklyn market? If you see declines, what's your gut re: percentage drop?

Posted by: Miss Muffett at November 22, 2008 3:30 PM

Also mopar, please show stats to back up what you're saying about prices already being down by so much. Yes, they are starting to come down somewhat, but are still sky-high. And actually, the mid-90s was a great time for people of modest means to buy - I know tons of people who did so. You and the other bulls can say whatever you want, but it all sounds like denial to me. I'm not saying that things will crash (though I think a 50% decline, given the run-up, would not even constitute a "crash) but I am truly amazed by the degree of defensiveness and continuing attempts to explain why NYC will defy what is happening all around us everywhere. Again, I'm not denying that some of the factors cited make sense but they are already factored into prices that are extremely high and went up to clearly unsustainable levels - and even with large declines, would **still** be high by just about any measure.

Posted by: Miss Muffett at November 22, 2008 9:05 PM

One more thing, since I just can't let the distortions stand. TM, you write: "For people to willingly take a loss of several hundred thousand to a million dollars on a brownstone in your main targeted area of Park Slope, Miss Muffet, that would be a foreclosure and bankruptcy."

Let's do the math. Prime brownstones were going for around, even under, a million as recently as 2001 (we're talking 4 story 20 footers in PS for example). As of very recently, the asks on these were 2.5mil and up. So, let's say there's a major correction and that kind of property goes for 1.5, which of course is a steep decline. But, that price is still well above what many owners paid, so how is that taking a loss as you say?

I agree that those who purchased at the peak may indeed be forced to take a loss, and those are the people who will fight the hardest not to and do whatever they can but not all of them will be in a position to just rent it out easily to cover their bills anyway, since purchase prices went so far above rents.

I also realize that some people HELOC'ed their way into financial disaster, and that is truly tragic if they are now in over their heads but that's not quite the same thing as simply looking at the unprecedented rise in prices.

Posted by: Miss Muffett at November 22, 2008 11:30 PM