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January 9, 2009
Goldman: NYC Prices Have a Ways to Go
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Interesting analysis. How much do they have to decline to go back to 1910, 1920, 1930, 1940, 1950, 1960, 1970 or 1980 levels.
Posted by: daveinbedstuy at January 9, 2009 9:47 AM
There is a sensible quote.
I bet he's right.
Posted by: sam at January 9, 2009 9:48 AM
If this happens it will be very scarey. everyone will lose their investment $ because their return will now be less than their purchase and the theory of it being more expensive to live in the city and justifying higher salaries all go out the window. yikes
Posted by: oohlala at January 9, 2009 9:55 AM
Patient renters with cash will be rewarded.
Long-term buyers who don't need to sell in the next 15 years and can afford their payments will do just fine.
Anyone who bought in the past few years and may have to sell in the next 10 could be in a lot of trouble.
Current asking prices are irrelevant.
In a bear market, never buy on the first dip. And never think the first few signs of recovery are real (see yesterday's post from Brownstoner on biggest sales). If you are sitting on cash and waiting to buy, take a nice long vacation from the process and check back in 12-18 months from now.
Posted by: lechacal at January 9, 2009 9:57 AM
Miss Muffet roars back after yesterday's setback! Score one for Team Bear!!
Congratulations, Muffie!
Posted by: benson at January 9, 2009 9:59 AM
what about renters with no cash? how will they fare?
*rob*
Posted by: PitbullNYC at January 9, 2009 10:01 AM
DIBS: Probably about the same amount, inflation adjusted. Valuation levels -- prices relative to inflation -- are remarkably consistent over extremely long periods of time, as Prof. Shiller has shown.
NYC housing sold for between 10-12x annual rental value for most of the last century (not surprisingly, since at higher sales prices there is a tremendous economic incentive to convert rentals into sales).
Both rents and purchase prices went up pretty consistently at the same rate as income (not surprisingly, since if they went up faster, there quickly wouldn't be anyone able to pay them).
The last several years really were different. A dramatic change in the credit markets allowed people to borrow unprecedentedly large amounts relative to income while simultaneously giving people in the credit and related businesses unprecedentedly large incomes. That's over, at least for now.
Posted by: FinanceGuy at January 9, 2009 10:02 AM
Wow - 35% - 44% Drop
- HobokenRocks buys his 5-story dream home in Brooklyn Heights for 800k and a song.
- Miss Muffet still holding out, thinks prices will drop more.
- The What declares that we’re all Asshat Fucktards for allowing prices to drop too much.
- Benson sells his Antique Fedder collection and retires to Mill Basin
- DIBS sighted in gay bar on Atlantic crying, why did I buy in a ‘Fringe’ Area.
- Biff looses his bet on Remsen and BRG is disco dancing in the streets at his demise.
- IronBalls will upgrade his balls to platinum.
Bitter Renters remain Bitter Renters!
Posted by: bayridgegirl at January 9, 2009 10:07 AM
Goldman telling us how real estate is going to decline. I love it.
Next thing you know George Bush will publish a piece about the danger of invading other countries under false pretenses.
Or maybe a Dick Cheney gun saftey lecture?
Posted by: newsouthsloper at January 9, 2009 10:09 AM
It's worth following the link to curbed. Goldman hedges their entire analysis saying basically "there are a lot of other variables, including reductions in crime, etc, so who knows?" Brilliant.
Posted by: squaredrive at January 9, 2009 10:13 AM
Correction: I wrote "relative to inflation", but I meant valuation levels, meaning prices relative to fundamentals (rental value, buyer's income, reproduction costs) -- are remarkably consistent.
Although Shiller does also show that real estate prices in large important cities basically don't go up much more than inflation.
Posted by: FinanceGuy at January 9, 2009 10:15 AM
"Eagles Defense "Sachs" Manning"
"NY Fans Foresake City, Move To Midwest"
"Property Prices Plummet On Loss Of Giants Fans"
"World Ends"
Posted by: daveinbedstuy at January 9, 2009 10:18 AM
cw...where are you?? what's that link you used to compute inflation adjusted prices over very long periods of time????
Posted by: daveinbedstuy at January 9, 2009 10:19 AM
Also, folks, if you can tune in to Brian Lehrer right now (or check out the podcast later) which has a story on now about how NYC real estate market is hurting. Amazingly, there is a Corcoran broker on right now still trying to defend the recent crazy prices (reassuring a woman who just paid 2.5 mil for a condo that that is fine). It's this broker's stupefying defensiveness - especially in the face of the ever-mounting evidence of a massive correction such as that predicted by the illustrious Goldman Sachs - that drives my continuing posts. Lechacal is right that there is no reason to rush to buy now - every day, this is confirmed for us. Sure, we're actively looking, but would only buy at this point from a buyer willing to give us a major discount to reflect the new reality.
Posted by: Miss Muffett at January 9, 2009 10:21 AM
omg miss muffet, please give that dead horse a rest. please?
*rob*
Posted by: PitbullNYC at January 9, 2009 10:22 AM
BRG,
You left out me, Wasder, Mrs. Limestone, Denton et. al, just paying our mortgages, enjoying our homes, swearing occasionally at contractors, enjoying our lives and raising a glass every once in a while.
Oh, and Rob will still be yelling at annoying kids in the hall (or strapping on some roller blades, bringing out a boombox with some vintage Abba and joining them).
Posted by: slopefarm at January 9, 2009 10:24 AM
From WSJ on Alex Rodriguez (AKA E-Rod in the playoffs):
Has cut the asking price of his Coral Gables, Fla., home to $12.3 million -- just above the $12 million he and his estranged wife, Cynthia, paid for it in 2004. The Yankees slugger first listed the house in the fall for $14.9 million.
The 33-year-old Yankee is also trying to sell a Manhattan apartment for $10 million, $4 million less than what he had originally been asking.
Maybe real estate is acting so "Local" after all.
Posted by: DeLepp at January 9, 2009 10:26 AM
Lechacal, you left out: Long-term owners who bought before the boom (and didn't use their home as an ATM) will still do just fine. It may not feel that way right now, but they will still likely make a huge profit. Even if prices drop 40% or more, remember that in many cases they went up 200-300% in the last 10 years.
Posted by: Miss Muffett at January 9, 2009 10:29 AM
The last time (which no one ever wants to hear about), the price per share in my building fell by more than 50% (granted, there were very few sales -- no one was buying --period) from 1993 to 1996. And did not return until 1998-99. Since 2002, our prices have gone up about 250-300%. So do the math...
Posted by: BH76 at January 9, 2009 10:34 AM
Two things:
1. I would not have wanted to live in many areas of Brooklyn in 1995, and I don't see what prices would revert back to those levels. Since that time, crime has plummeted, entire neighborhoods have been revitalized, and commercial areas reinvigorated. 5th Avenue in 1995 was a dump. Why would prices in 2009 revert to those levels?
2. If NYC is currently the 22nd most expensive city in the world and we fall back to 1995 prices, why would one of the world's best cities (still ranking as the #financial center in the world) be so cheap? If prices fell that much, we'd be on par to have prices similar to that of Panama City. I don't get it.
Posted by: 11217 at January 9, 2009 10:39 AM
All these impending bargains are giving me a wee bit of buyers remorse, as we bought our brownstone in Prospect Heights at the top of the market (closed in May '08) for almost 2million. Now I look around at these falling prices and see if we had just waited a bit we could have gotten a lot more house then we did for that price!! Is it too early to think about an upgrade? ;)
Posted by: bklynrosie at January 9, 2009 10:41 AM
Miss Muffett and BH76 basically reiterate my case for relative stability in brownstone prices. There are tens of thousands of Manhattan condo owners with HUGE gains. If they decide on a bit of a lifestyle change and start looking into a move to Brooklyn and a brownstone, they will be in awe of what they can buy to not only get so much more space and a deck and a yard but also to lower their monthly outlays with RE taxes being lower and condo charges disappearing. On top of that, if they so choose, there can be a tenant in one of the floors to cover a large portion of the mortgage.
It doesn't take a lot of people moving from Manhattan to sop up the market for brownstones in Brooklyn.
I'm in no way saying that many brownstones are not overpriced. I'm saying you have to look at it from this vantage point.
Posted by: daveinbedstuy at January 9, 2009 10:41 AM
Miss Muffet;
Please take a look at my post on the open thread. It will interest you.
Posted by: benson at January 9, 2009 10:41 AM
DIBS,
I'm not cw, but the inflation link I used for my Hancock thread post was: http://www.measuringworth.com/ppowerus/?redirurl=calculators/ppowerus/
Posted by: johnife at January 9, 2009 10:47 AM
I think what BH76 says is important-"granted, there were very few sales -- no one was buying --period". Thats what happens in bad housing market. And the few sales that do occur skew any real meaning.
Of course, the state of general USA ecomomy is going to be biggest factor on how long or deep our NYC housing market will go. If any of us could really predict that - and willing to put money where big mouth was - would be rich already.
On the plus side, the more prices fall the easier for 1st time buyers to enter market and easier for those people who have little mortgage but large equity to 'move up'. As in
instead of a $400K difference in price to move to something nicer - now only $300k.
Also be glad don't own in Florida. I have friend looking at townhouses in Ft. Lauderdale... where short-sale listings are for less than 1/2 of what people paid 2 years ago. One complex buyers paid between $700 and $800k not listed at $325k.
Posted by: Petebklyn at January 9, 2009 10:49 AM
There's also a big difference between today's mortgage rates of 5% and the mortgage rates of 10% + during periods in the 80's and 90's.
Prices might be up, but these are the lowest mortgage rates we've seen in decades.
Posted by: 11217 at January 9, 2009 10:50 AM
Thanks john...that's what I was looking for.
Posted by: daveinbedstuy at January 9, 2009 11:00 AM
But DIBS, many of those Manhattan condo owners may not "sop up" the market so quickly for various reasons: 1) they may be in debt if they Heloc'ed too much; 2) they may find it hard to sell their current place, even at a discount; 3) they may, like most buyers now, dig in their heels and demand lower prices. It really is amazing to me how some people continue to try to find reasons why this decline won't be as big as experts are predicting (interest rates are low, hoods have gentrified, blah blah).
Posted by: Miss Muffett at January 9, 2009 11:00 AM
"Long-term owners who bought before the boom (and didn't use their home as an ATM) will still do just fine."
Yep.
Posted by: East New York at January 9, 2009 11:08 AM
Miss Muffett...1. not everyone in the world Heloc'd. 2. You stated above that even with another 40-50% off, there are huge profits out there (which there are) and 3. I'm saying that the numbers are overwhelingly attractive at these prices. I know, I did this exact thing in 2007. I'd do it in 2008 and in 2009 at current prices.
Don't offer up one theory as you did at 10:29 and then use something opposite to it to tear apart another one that I put forth.
You're benched for the rest of the game.
Posted by: daveinbedstuy at January 9, 2009 11:09 AM
11217 is correct on all accounts.
Posted by: landlord at January 9, 2009 11:12 AM
"what about renters with no cash? how will they fare?"
http://en.wikipedia.org/wiki/Skid_Row
Posted by: East New York at January 9, 2009 11:15 AM
I also think it's interesting that you are using the words of a Goldman Sachs employee as gospel, Ms. Muffet. A company which was part of the reason things are going the way they are.
No one has idea what's going to happen. ALL of the predictions have been wrong thus far.
Curbed isn't really known for attracting the most insightful comments in the world. They are known for ridiculous comments used to attract website traffic. Especially during a faltering real estate market.
Please try to be a little less gullible and naive.
Posted by: 11217 at January 9, 2009 11:15 AM
Slopefarm--thanks for the shoutout to those of us who are no longer in the real estate rat race but are instead settling in for the long haul. I can't tell you how glad I am to be past the buying phase and into the "enjoying my domestic life" phase. I hope we get to raise a glass together some time.
Posted by: wasder at January 9, 2009 11:16 AM
11217, Goldman was one of the few companies to be in a less of a mess than the others. And please, it's not they are the only ones saying this - there is a veritable drumroll of the same kinds of predictions coming from sources across the spectrum. You yourself have conceded a major correction is in order.
Posted by: Miss Muffett at January 9, 2009 11:19 AM
People who bought for the FIRST TIME in 2005-on may have problems, but anyone else who bought was profiting from increases on the property they sold in or to buy the new one. These people will be fine as long as they put that profit into the new purchase.
Immigration has been doing just fine in NY. I went to a conference on this recently, and there has been no drop in the influx of people moving to NYC. In fact, NYC has been very solid in this regard. This need so be factored in.
Posted by: dt at January 9, 2009 11:23 AM
"People who bought for the FIRST TIME in 2005-on may have problems"
The only reason they'd have a problem is if they need to sell, which is probably a minute fraction of people.
Posted by: 11217 at January 9, 2009 11:29 AM
One factoid that I have wondered about in this whole mess is the yearly rent to purchase price ratio. The article says that historically speaking NYC housing has sold at 10-12 times the annual renting before spiking during the recent boom. Does anyone have any thoughts about whether this could be expected to return to previous levels? Working it out loosely for myself I have concluded that my purchase price for my house is about 15x annual rent so I guess I can do the math on devaluation if the old ratio returns.
Posted by: wasder at January 9, 2009 11:38 AM
Wasder,
Glad to know you are still out there. Yes, would love to raise a glass. I know you've got your hands full at the moment. Wish I could let go of this obsession a little more. Maybe once we close on our refi I'll calm down a bit.
Posted by: slopefarm at January 9, 2009 11:40 AM
slopefarm--i am around for sure, second baby proving so far to not be as challenging as expected. and yes I bet once your refi is done you will chill a bit. my most anxious and active days on brownstoner coincided with the deciding to buy period. now that I am in my house and set up the edge is gone and I can jump in and out of this crazy conversation without too much aggravation. hope your refi happens quickly and relatively painlessly. we should grab a beer some time.
Also, shocked SHOCKED that you could even conceive of me with multiple personalities!
Posted by: wasder at January 9, 2009 11:45 AM
It boggles my mind why people are still in disbelief that housing in NYC could fall up to 50%? First people denied that housing could fall at all in NYC due to land scarcity, foreign buyers, “it's a financial capital,” etc. Not that housing has fallen a bit, people now denying that housing can fall more than 15-20%.
A while back I showed a chart (it's posted on iTulip.com) illustrating how housing bubbles start in urban centers and spread outward to the suburbs and finally exurbs. Witness farmland going for record amounts just a short-time ago.
After the bubble burst, it then deflates in reverse. That means NYC is now just starting the housing correction that has been in progress going on 3-4 years in other areas. On the plus side this means prices will stabilize here first.
Fact is residential housing cost in NYC appreciated at a far greater pace than the media income in the area over the past decade. Relaxed credit standards, speculation as well as the common belief that housing was "smarter" than renting contributed to the outsized gains in residential housing.
Now with the credit being withdrawn, speculation absence, and the social mood reverting back to renting, housing will go down significantly. Unfortunately the increasing number of salary cuts and layoffs will only make the decrease more pronounced.
But this won't lead to a repeat of the 60s and 70s when the exodus to the suburbs caused a decrease in housing prices (which occurred mostly in urban centers). The decline happening now is for a totally different reason.
The social attitude towards suburbs is also vastly different today and price decreases in the suburbs will be just as severe if not worse. Back then the suburbs were viewed as the "safe" Promised Land. No more.
The upside is that lower NYC prices will allow families and first-time buyers to stay rather than flee to lower cost areas and continue to enjoy the benefits living in areas such as Brooklyn.
Posted by: cjmorris1201 at January 9, 2009 11:55 AM
wasder -- I don't harbor any such view of you. Just trying to bring that discussion to a head by eliminating from suspicion some who haven't been so active lately.
You benefit from having not had to do a major reno or from having had any other major shenanigans go on with your deal. I waded into a major swamp, first with some highly unethical sellers, and then with a difficult major reno. I am definitely carrying around more baggage. I thought I could purge a bit on this site, especially by giving advice in situations that are akin to some of those that I encountered. But this site may now be perpetuating the problem rather than helping me unload it.
Posted by: slopefarm at January 9, 2009 11:57 AM
cjmorris--you have (I hope) hit the nail on the head with your last line. I sincerely hope that this is a prediction that proves accurate. It would certainly make "worthwhile" the expected price drops if it meant that more families could afford to stay in Brooklyn.
Posted by: wasder at January 9, 2009 11:59 AM
slopefarm---don't let this site get you down. I would agree with you that it is probably aggravating the problem rather than helping you at this point, which means that you either have to 1) stop posting (which I hope you don't do) or 2) adjust your outlook on why you post here and take everyone else's negativity and madness for what it is---insanity that has no bearing on your life.
In the mean time, do you have an email that you can divulge without revealing your identity on line? I would give you mine but posting it here would basically be like shouting out my name and address.
Posted by: wasder at January 9, 2009 12:06 PM
Oh yeah, and I meant to say slope that you are totally correct that I lucked out in not having to do a major reno right off the bat. We simply did not have the time or the capital to consider buying a place that needed major overhauling, so we had to wait until a livable house that we could afford fell into our price range.
Posted by: wasder at January 9, 2009 12:08 PM
Wheres Sebb when you need him for some comic relief?
Posted by: cornerbodega at January 9, 2009 12:10 PM
When I broght my apt in CH in 2005 I prepared myself that prices could drop 20% because the market was acting like the dot.com/tech bubble of 1999. When everyone is yacking about an asset, expect a downfall. Some may recall that the nasdaq hit 5000 in March 2000, today it's 1583. The tech bubble didn't burst, it let out air almost every week between march 2000 and october 2002. I know that homes are more 'sticky' price wise vs stocks but that is because people had invested money in them. 2005 was the era of no money down, pay no pricipal,so no reason to stick around. The COOP market, with its rules will save some pain, but all new construction have been condo and they had no rules.
People are scarred for their jobs no matter what industry they are in, the only safe ones are city employees and I doubt they can afford your 2 million house in fringy CH. I love my apt/hood in CH and wouldn't trade my decision but many didn't think the possibility thru, just listened to the chatter.
Posted by: DeLepp at January 9, 2009 12:14 PM
"People who bought for the FIRST TIME in 2005-on may have problems"
The only reason they'd have a problem is if they need to sell, which is probably a minute fraction of people.
----- wow, nyc is still immune from the rest of the country! Now we can all breathe a sigh of relief!!!!
Posted by: cornerbodega at January 9, 2009 12:15 PM
I have the same problem wasder. Both my home and work emails advertise too much.
This site doesn't get me down and I don't mind the banter. It's more that, rather than purging my nightmare, some forum queries bring it all back. (See the attorney conflict thread and Denton's posts on the reno pages as but two examples).
Posted by: slopefarm at January 9, 2009 12:16 PM
wasder, your experience is exactly why I argue that I always prefer to buy a home in move-in condition and then consider making changes down the road. Probably due to the fact I have no skills/interest in taking on big projects, but also to avoid the headache of major renovations. Having said that, there are many out there much better equipped than me to do so and I've seen miraculous renovation jobs completed by those with the time and skill (and money of course). slopefarm, I too would hate to see you leave this site as you're such a valuable contributor. I know you'll eventually turn your place into exactly what you want...the frustation you're experiencing is certainly understandable and likely similar to what many other's have gone through. Hopefully you can find some comfort here in reading about similar experiences that started rough but turned out well in the end.
slopefarm, if you want, I can be the intermediary. I have wasder's email and can send it on to you if you email me at biffchampion@yahoo.com. I would love to join you guys for a drink too if it's ok.
Posted by: Biff Champion at January 9, 2009 12:19 PM
Muffet is corret about Goldman Sachs. It is one of the very few big investment banks that is A-OK right now. They managed to steer clear of the subprime mess, so now, if they are saying r.e. prices will go down precipitously in NYC in the coming year, I think we should take it seriously. These people are the survivors. Besides, it just makes common sense that when prices go in one direction and incomes in another, a crash of some kind is likely.
Posted by: sam at January 9, 2009 12:19 PM
If I'm not mistaken, Goldman Sachs is no longer an investment bank because of this, and is now a holding which now accepts deposits from everyday customers.
I'd say that's a pretty big change from what they once were, and shows they weren't as good at "investing" as they thought they were.
Posted by: 11217 at January 9, 2009 12:26 PM
11217 is right, GS is now a new york bank holding company looking for deposits, which I'm sure they'll be very adept at doing.
Posted by: DeLepp at January 9, 2009 12:29 PM
Goldman also predicted $200 per barrel of oil
http://barelkarsan.com/2008/12/goldman-sachs-wonky-oil-predictions.html
Posted by: Biff Champion at January 9, 2009 12:29 PM
December 8, 2008
NEW YORK: Goldman Sachs's long run of profitable quarters came to an end on Tuesday as the bank announced a loss of $2.12 billion, driven by big markdowns on its large portfolio of proprietary investments in everything from Japanese golf courses to Chinese banks.
Posted by: 11217 at January 9, 2009 12:31 PM
Thanks Biff,
We're not still in the midst of it and we are done with contractors and the like. Just a few unhappy little items remain, and we wish we hadn't spent so much (but we are nowhere near upside down). I am also not planning to leave the site. I just need to curb the addiction a bit.
We never intended to take on a major reno. Our seller was supposed to complete his reno before we closed (we saw the house as the reno was supposedly nearing its end). As the reno proceeded, we uncovered massive illegalities and fraud in the work. As we negotiated, then litigated, we uncovered more unsavory things. We got a hefty price reduction, but ended up ripping out a lot of the faulty work and rectifying problems that had been covered over by sheetrock and the like. So we were already worn out when we started an extensive reno. Not an ideal situation.
I think if you have the stomach for it, you can achieve great things by buying a fixer-upper and renovating. But it is not for everyone. Now I am stuck with all this house stuff in my head, which is why I started hanging out here.
Posted by: slopefarm at January 9, 2009 12:33 PM
"Miss Muffett and BH76 basically reiterate my case for relative stability in brownstone prices. There are tens of thousands of Manhattan condo owners with HUGE gains. If they decide on a bit of a lifestyle change and start looking into a move to Brooklyn and a brownstone, they will be in awe of what they can buy to not only get so much more space and a deck and a yard but also to lower their monthly outlays with RE taxes being lower and condo charges disappearing. On top of that, if they so choose, there can be a tenant in one of the floors to cover a large portion of the mortgage.
It doesn't take a lot of people moving from Manhattan to sop up the market for brownstones in Brooklyn.
I'm in no way saying that many brownstones are not overpriced. I'm saying you have to look at it from this vantage point."
Obvious Dibs doesn't know too many Manhattanites. Your "theories" are teenage adolescence caliber.
Posted by: cornerbodega at January 9, 2009 12:34 PM
New Brownstoner business model: post one quote each day about housing prices and let the comments fly.
Posted by: FatLenny at January 9, 2009 12:34 PM
However you dice it, Goldman Sachs is still around while Lehman, Merril Lynch and many others have gone bye-bye, or would have without big welfare checks from Washington.
Posted by: sam at January 9, 2009 12:36 PM
Goldman Sachs may be right on this one, but then again they were also predicting oil prices going to $150-200/barrel "in the near future."
Posted by: SnarkSlope at January 9, 2009 12:40 PM
slopefarm, sorry for misunderstanding your situation. It sounds like you've been to hell and back and had no idea / couldn't have predicted what you were getting into. Sounds like most of it's behind you now. All you can do is try not to dwell on the past nightmares and move forward. I know that's far easier said than done.
Posted by: Biff Champion at January 9, 2009 12:41 PM
Ahhh, I see Biff beat me to the punch.
Posted by: SnarkSlope at January 9, 2009 12:42 PM
Goldman also said Oil would be at $150 right now. I like Goldman but with so many Coops in Nyc i do not see to much risk.
Posted by: sebb at January 9, 2009 12:43 PM
There is no doubt that the right person with the right set of skills and capacities can achieve great things with a fixer-upper but it sucks that you had to do it involuntarily slopefarm. May bad karma rain down on your seller and may forum posts never dampen your day ever again.
Posted by: wasder at January 9, 2009 12:44 PM
"Ahhh, I see Biff beat me to the punch."
I hope it was spiked with Pyrat XO Reserve Rum!
Posted by: Biff Champion at January 9, 2009 12:49 PM
You guys are listening to GOLDMAN SACHS, the once mightly investment bank, erstwhile blueblood, white shoe firm, intrepid explorer into structured mortgage transactions, now 92 pound weakling commercial bank? Here's my life in brownstone America.... Work my butt off in day job (except for occasional breaks on brownstoner), try to keep the house together, tenants warm and happy (enough), beg tradespeople to meet me when I am not working at said day job, beg said tradespeople not to soak me (it works, I have good relationships, finally, in this department) and keep laughing. AND YES, Slopefarm, lifting a glass is important. This freaking brownstone experiment is about sharing, too. After the dust settles, literally, to have friends and family enjoy the place. That is what this is about. That is what is important and why I (we) are not in the jump in front of the train set. And yes, Snark Slope, GS predicted 200, revised to 100, now looking at 75 last I heard, but all banks (and real analysts looking lower for next year 45). Ah, screw it all, I think I going to have a drink now....
Posted by: donatella at January 9, 2009 12:52 PM
cornerbodega... I came over here from manhattan, shit for brains.. How can you be so stupid day-in-and-day-out???
Keep stacking that detergent in front of those windows!!!
Posted by: daveinbedstuy at January 9, 2009 12:55 PM
The properties that will get hit the hardest, and those who will lose the most, are the studios and one-bedrooms purchased from 2005 or so forward. Simple, those are generally the properties with the most necessary turnover as people get married, have children, move for career purposes etc, and need to sell. I have a friend in his mid 30s - single guy but decidedly resolved to getting married and starting a family - who closed on a one-bedroom on the UWS for around $675,000 in September. We implored with him not to - as that is the worst situation to be in; he will probably be looking to sell in three years.
Posted by: saminthehood at January 9, 2009 12:55 PM
I think that some of you are missing two things: people who have owned their homes/coops/condos for years may big gains but many were thinking they were sitting on retirement nest eggs that have deflated along with their 401Ks. They can afford to stay put, but not sell and move elsewhere so easily. And for those who are younger, a 50% divorce rate means that couples split and neither can afford the house/coop/condo on his own nor can he afford to buy out a spouse/partner for what is owed. This led to foreclosures last time around and will this time too I expect. It is not a pretty picture.
Posted by: BH76 at January 9, 2009 1:00 PM
BH76...there was a story here a few weeks ago about divorces being put on hold because if they sold and split the house neither one of them could afford anything!!
Posted by: daveinbedstuy at January 9, 2009 1:03 PM
BH76,
Taking Dave's comment aside, only 33% or so of New Yorker's own their own homes. The rest rent.
In looking at data for my own zip code, it looks as though about 45% or so are married.
I believe the divorce rate has dropped significantly in the past few years, but even taking your 50% number we are talking 50% of the 45% who are married amongst the only 33% who own.
Once you factor in Dave's comment, I think we're really talking about 1% of the population here.
Posted by: 11217 at January 9, 2009 1:11 PM
Donatella,
Sorry to exclude you earlier from the enjoying our homes and lifting our glasses list near the top of the thread. You were there in spirit and clearly belong. And it was good to read the other day about you entertaining and enjoying your house. That's why I get impatient with posters who reduce homeownership to an investment calculation.
Posted by: slopefarm at January 9, 2009 1:11 PM
"After the dust settles, literally, to have friends and family enjoy the place. That is what this is about. That is what is important and why I (we) are not in the jump in front of the train set."
This should be QOTD. Certainly fits my situation and my attitude about Brownstone living. The amount of enjoyment I have already gotten out of entertaining friends in my house has made everything worthwhile.
Posted by: wasder at January 9, 2009 1:19 PM
the people writing research on NY housing at GS are NOT the same people who are running the firm or writing about $200 oil. do any of you actually understand this? anyway, go on patting yourselves on the back and living in denial about what RE will do. best of luck with that.
Posted by: jingle mail at January 9, 2009 1:20 PM
11217 and others have demonstrated a pretty limited understanding of GS's current situation. That's all I will offer on that subject.
This debate will of course not influence prices one bit. The Sebbs can overpower the Muffets and get them to cry uncle, or vice versa, and it won't make a bit of difference.
Posted by: lechacal at January 9, 2009 1:24 PM
11217: 1% of the population -- fine. But think about a 100 unit condo where 90% are young singles or couples. You do not need many to split up or have to move for a job before you have multple units on the market at what can quickly turn into distress sales. This is where the price drops really happen. SF homes are safer from that.
Posted by: BH76 at January 9, 2009 1:52 PM
Lechacal you said "Anyone who bought in the past few years and may have to sell in the next 10 could be in a lot of trouble."
Why? even if housing declines by 50% over the next 2-3 years presumably (if the world doesnt come to an end) prices will begin to rise again (prices usually overshoot on the way down too).
So when you are talking about 8 years down the road you would have paid off a decent slice of the principal (on a 30yr fixed probably about 12-15%) and prices will likely be well off their negative 50% lows.
So at that point if you sell you likely arent going to be able to report any real cap gains - but since your next home will also be that much cheaper (you do have to live somewhere unless you die) - it really shouldnt "hurt" all that much.
Now if you were one of those silly people who thought of your home as an "investment" you will likely be upset - but if you looked at your home as a place to live - with a 10yr horizon (and no stupid borrowing) it likely wont matter.
Posted by: fsrg at January 9, 2009 1:55 PM
I don't claim to be an expert on Goldman Sachs, but I do seem to recall these same people 2 years ago saying that we were in for a "soft landing"
So I'm not really sure why you think that they are all the sudden now such experts.
Posted by: 11217 at January 9, 2009 1:59 PM
Does anyone have a link to the full Goldman Sachs report?
Posted by: matt in greenpoint at January 9, 2009 2:12 PM
To respond to fsrq:
"Why?"
Because I doubt prices 10 years from now will have recovered to anywhere near the peak of the past few years. That's why.
"So when you are talking about 8 years down the road you would have paid off a decent slice of the principal"
Many people will not have paid back much if any principal in 10 years. For some reason people have recently become convinced that interest only mortgages are a good idea. Ask Adam Dahill why.
"since your next home will also be that much cheaper ... it really shouldnt "hurt" all that much."
You can't trade into a cheaper home with negative equity.
Posted by: lechacal at January 9, 2009 2:21 PM
Yea baby I will be getting my bh heights home for 1 million dollarsssss... I am ready for I am sleeping in nowadays and there is no more fun in trading. I would like to start my reno blog as soon as possible.
Posted by: HOBOKENROCKS at January 9, 2009 2:32 PM
HOBOKENROCKS, it's gone from $600K to $800K to $1MM. At this rate, your fantasy will actually meet reality some day!
Posted by: Biff Champion at January 9, 2009 2:35 PM
So if Nyc the financial capital of the world is going to fall this much how much will the rest of country fall? So a place like New jersey or say Virginia will fall what say 99%
Posted by: sebb at January 9, 2009 2:35 PM
Sebb, your premise makes my head hurt. Not even worth direct engagement.
Posted by: lechacal at January 9, 2009 2:37 PM
Too bad people can't make up the shortfall if they sell, so they won't, b/c they don't have to. Joe Shmo doesn't have to mark his home to market like Goldman does so this is all about trees falling in the forest w/o observers.
Posted by: BrooklynLove at January 9, 2009 2:41 PM
Sebb, the problem with your thinking is that NYC will still be the financial capital of the world. And even if that remains whether or not that will still be as important. I think NYC will still be important but just less so and with less hedge fund managers and executives cashing in stolen bonuses the prices of homes will come down. Most of Manhattan prices are trading at way over 20 times their rentals. This my friend will correct and when it does it will overcorrect as it overinflated on the way up. A bull and bear usually last longer than they should but both offer oppurtunities. I will be waiting for such opps.
Posted by: HOBOKENROCKS at January 9, 2009 2:45 PM
Biff it actually went from 400k which was a joke to 1 million which is what I truly think I will pay for a bh townhouse at one point... Stop laughing
Posted by: HOBOKENROCKS at January 9, 2009 2:49 PM
HOBOKENROCKS, keep dreaming on the $1MM for a full BH brownstone! But, if it happens, as I've said before, I'll welcome you to the neighborhood with open arms and buy you a drink at the Henry Street Ale House.
Posted by: Biff Champion at January 9, 2009 2:54 PM
Slopefarm, just lifted a glass to you. OK, it was a diet coke, but later, a glass of vino. Glad you feel the same, wasder, I will lift the glass to you too. From the start, I tried to figure out every possible scenario financially, and I figured that as a housing solution, (i.e. my HOME) it would work, as long as I had a house full of happy tenants.
So it works for me and that is why all the discussion of rents fit into that as well -- i.e. I am looking for PEACE on EARTH, if only in my universe as far as it stretches. .
Posted by: donatella at January 9, 2009 2:55 PM
Okay Biff and I will take you up on that offer. I will need a drink if I am going to start one of those crazy reno jobs I have seen on brownstoner.
Posted by: HOBOKENROCKS at January 9, 2009 2:58 PM
Hey HOBO, unless I'm the one having to sell the brownstone to you, in which case I think you'll need to buy me a drink!
Posted by: Biff Champion at January 9, 2009 3:03 PM
I ll send you off with a box of vino if you sell me your place now for 1 million. JUST KIDDING.
Posted by: HOBOKENROCKS at January 9, 2009 3:07 PM
HOBOKENROCKS : So where will all the Jobs go? The jobs will come back to NYC in time. This will remain the Financial capital of the World and if not the World then at least the United States. Have you been to LA or Miami, do you think they are the next financial hubs? Or maybe you think Jersey city is where it's at.
Posted by: sebb at January 9, 2009 3:12 PM
Never mind GS, here's Roubini take:
"(MarketWatch) -- The U.S. recession will last two full years, with gross domestic product falling a cumulative 5%, said Nouriel Roubini, chairman of RGE Monitor. Roubini was one of the first economists to predict the recession and the credit crunch stemming from the housing bubble. For 2009, Roubini predicts GDP will fall 3.4%, with declines in every quarter of the year. The unemployment rate should peak at about 9% in early 2010, he said. Consumer prices will fall about 2% in 2009. Housing prices will probably overshoot, dropping 44% from the peak through mid-2010."
Posted by: SnarkSlope at January 9, 2009 3:15 PM
I didn't realize HOBOKEN was looking for a fixer upper (see reno blog comment). Kind of softens his position a bit. Add at least half a mil to his BH tab. More if he's going to preserve it right.
Posted by: slopefarm at January 9, 2009 3:16 PM
OK Sebb, I'll bite. I'll just explain it without being demeaning.
NYC may very well continue to be the financial capital of the world. But being special doesn't mean that prices will not go down. It just means that they should be higher than non-special places. Even after prices go down in NYC, they will be much higher than non-special parts of the country. There are lots of very special markets where prices are going down. NYC is one of them.
Posted by: lechacal at January 9, 2009 3:24 PM
Sebb if the financial industry is regulated correctly you will lose alot of jobs. Especially the ones selling worthless securities to other dumb firms who then sell them to other dumb firms. Think about all the dumb firms who won't be able to hire those salespeople. But I think at one point you may be right , wall street always finds ways to sell something worthless to investors. So we may get some jobs back but it may take some time. MAYBE 20 YEARS , NO one knows....
Posted by: HOBOKENROCKS at January 9, 2009 3:27 PM
First off, who has any faith in anything that someone from Goldman Sachs, Shearson Lehman, Bear Stearns, Smith Barney or Barney Rubble has to say at this point. I think most people can now understand that "analysts" are those people who have duped enough other people into believing that they know something about the future that others don't. Despite ample evidence that we live in a probabalistic universe as opposed to a deterministic. In other words, scientists can't even predict the weather more than 5 days out let alone economics which has much to do with the additional complexity of human interactions.
What we can say is that things go up and down, back and fourth. so while assclowns on this site get celebrated by obsequious sycophants for somehow "predicting" a downturn, serious individuals understand that markets are cyclical and that analysts are nothing more than snake oil salesmen with degrees from Yale or Columbia or whatever ivy league college is deemed the price of admission to this circus. That includes politics as well.
that being said, maybe prices will come down more. so what. what's with the constant undertone of doom in here. did someone see an asteroid headed this way or something, let's at least wait till 2012, at least you will have Nostradamus and the Mayans backing your predictions.
Perhaps if we all join in the tone of doom and gloom along with Governor Patterson and President Elect Obama we can all give ourselves a collective Oprah moment by 2011 and cry over tea with Doctor Phil like the skirt wearing cupcakes most here aspire to be.
Posted by: Legion at January 9, 2009 3:48 PM
Legion, you just lowered the average I.Q. on this board with your cocktail of irrelevant quasi-folksy rubbish and awkward hyperbole. Please don't post again.
Posted by: lechacal at January 9, 2009 3:57 PM
leCher,
just because you don't understand the statement does not negate the truth behind it. or perhaps I offended your politically correct sensibilities?
oh my. me thinks he doth protest too much.
Posted by: Legion at January 9, 2009 4:36 PM
There was no statement. I can't even tell what you are trying to say. Your post consisted of a bunch of populist ramblings. There is nothing coherent enough for me to disagree with.
Posted by: lechacal at January 9, 2009 4:46 PM
"...35%-44...%"
OUT IN THE STREET THEY CALL IT...
***Bid half off peak comps***
Posted by: Brownstones Half Off at January 9, 2009 4:55 PM
lestat,
try a reading comprehension course. it worked wonders for me in the 3rd grade.
Posted by: Legion at January 9, 2009 4:59 PM
"what about renters with no cash? how will they fare?"
The will fare well if they trade down to a different pad (or negotiate in place) and not up to a nicer one. Rents are dropping too.
(Member Team Bear)
***Bid half off peak comps***
Posted by: Brownstones Half Off at January 9, 2009 5:02 PM
Piece of puzzle that is still missing is why people would sell for deep discount if they don't have to. This is the same discussion following 1980s condo run in Manhattan. Developers will hold and rent out. Occupants will stay put. Investors will rent out (many weren't intending to sell anytime soon anyway). Many will refi along the way. Rental mkt bears the brunt while economy sags, and then catches back up in time for the next down cycle. buy/sell lead in and back out.
The only segment this mkt materially helps is a buyer who is looking to get a 30 mill place for 25 mill.
Remember when the market crashed in 1987 and Wall Sreet was over? Problem with this blog is that most commenters started paying attention 3 years ago.
Posted by: BrooklynLove at January 9, 2009 5:16 PM
No one should write off GS now or ever. They are the best of the best. A lot of what happened was based on panic selling of their stock. They are still around unlike many banks and investment houses. They called the sub-prime crisis and if it hadn't been so bad they would have been laughing all the way to the bank.
While you can laugh at the $200 a barrel prediction, you should recall they also (same analyst, btw) predicted $100 barrel oil when it was $30.
The guys who really called the NYC real estate mess were the big insurers. The guys who have been around for generations and plan to stay that way. MetLife unloaded almost all their commercial real estate holdings at the top of the market, and were quite open about saying they believed the market had peaked. TIAA/CREF sold a lot of buildings as well. They must be happy campers right now.
Posted by: denton at January 9, 2009 5:54 PM
Prices in New York City are falling. I don't see the actual surprise here. We ARE in a recession in one of the worst economic periods of most of our lives. The outrageous assumption that prices are going to dive down into the ground by 44% seems a bit outlandish to me. The number one rule in real estate has always been location, and New York City has IT. Real estate prices will fall lower, but the unique location of being in New York City is still going to have prices above what they would be in Kansas or another market. New York is New York, it's different here.
http://www.nestseekers.com/Company/Agent/809
Posted by: boombam at January 9, 2009 6:26 PM
oh god
Posted by: cornerbodega at January 9, 2009 6:53 PM
denton - i can name many institutions that bet against real estate earlier than goldman AND didn't end up getting stuck in it as well. read goldman's q4 results for more.
Posted by: BrooklynLove at January 9, 2009 8:14 PM
Dibs, Manhattanites don't move to bedstuy
Posted by: cornerbodega at January 10, 2009 3:14 AM
"So if Nyc the financial capital of the world is going to fall this much how much will the rest of country fall? So a place like New jersey or say Virginia will fall what say 99%"
LOL How do you even respond to this? This statement pretty much sums up the extreme level of ineptitude that is Sebb "the moneymaker"...
Posted by: cornerbodega at January 10, 2009 5:40 AM
Legion, if you don't like reality why don't ya watch another episode of Sex and the City. Then hit up the MePa district for some celebratory nightlife. Congrats on wasting an hour of your life with your post...
Posted by: cornerbodega at January 10, 2009 5:52 AM
I hate to point out the obvious, cornerbodega, but you are criticizing Legion for "wasting an hour of his life with his post" and meanwhile you are talking to yourself and making posts at 3:14, 5:40 and 5:52am on a Friday night...
Posted by: 11217 at January 10, 2009 11:26 AM
11217,
lol , you read my mind. by the by, cornerbodega, who said I didn't like reality? I'm simply pointing out how myopic so many posters on brownstoner are. I learned my lessons from the 90's tech bubble meltdown and the last crop of wall street crooks and ponzi scheme artists. I should have learned from the 80's junk bond meltdown, but I wasn't an investor at that time.
bottom line, markets will go up and come down again, new scam artists will arise with new "financial products" that are sure to produce profits like a magician waving his wand over a top hat.
by all means invest in real estate and stocks and bonds. just don't expect to get a nobel prize for pointing out that the sun also rises.
Posted by: Legion at January 10, 2009 12:46 PM
thanks Legion, everybody lets go celebrate because its all just a blip! Lost your job? Net worth falling off a clif? No worries! Go buy that Chanel bag for your girl because whatever you lost will be back in your account in the near future.
Posted by: cornerbodega at January 10, 2009 3:47 PM
Genius really really pure geniuses. How did they get to to that conclusion? I get it they had a meeting with Standard and Poors who is good at downgrading stocks after they go bankrupt. Greed ruined this country
Posted by: hannible at January 11, 2009 7:00 PM
Latest Restaurant Additions
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Le Barricou
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Oak Wine Bar & Café
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Mr. Wonton
added November 17, 2009 12:00 PM in Park Slope -
Casa Rosa
added November 16, 2009 12:00 PM in Carroll Gardens -
Cousin John's Café & Bakery
added November 13, 2009 12:00 PM in Park Slope -
Elote
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Miracle Grill
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Phoebe's Cafe
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Ruthie's
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