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February 25, 2009

U.S. Housing Prices Down 18.5%, NYC Almost 10%

Property values in the 20 biggest U.S. cities fell an average of 18.5 percent in the year ended November 2008, bringing house prices down almost 30 percent and back to late-2003 levels. "This doesn't sound like good news, but it is," writes Henry Blodgett on the Business Insider. "Before house price declines can start decelerating, they have to stop accelerating, and it seems we're finally there." New York City prices declined 9.5 percent in the same one-year period, so either we're lagging and have further left to fall than other cities or we're not going to suffer as much. Or somewhere in between.
Rate Of House Price Collapse Finally Peaking [Business Insider via Curbed]

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Yesterday someone posted this great link to the graphical trend in house prices in major cities...

http://www.nytimes.com/interactive/2008/12/04/business/economy/HOUSING_PRICES_GRAPHIC.html

Posted by: daveinbedstuy at February 25, 2009 9:06 AM

I don't think we've hit terminal velocity in NYC yet. I'd say two more months till that. Team bear.

Posted by: dittoburg at February 25, 2009 9:06 AM

Sounds like the somewhere in between model is right for NYC. Most likely not to fall as far and yet still lagging so probably will fall for a longer period of time.

Posted by: wasder at February 25, 2009 9:09 AM

If the government comes out with a decent package that not only rewards people having trouble with their mortgages (for whatever the reason), but maybe a way to keep interest rates low (under 5%) and enable people to re-finance with less then 20% equity by waiving the PMI insurance requirement (basically the government would guarantee these mortgages). Cramer (who I think is somewhat of a knucklehead) came out with an idea that the goverment should start offering 40 year 4% mortgages to everyone (not only people having problems making payments). I think this is a great idea. You finally might see a floor under real estate, not to mention all the benefit to the economy, think of all the money it would put in people's pockets if they were able to re-finance at a rate that low.

Posted by: dosteov at February 25, 2009 9:21 AM

dosteov - Government (ie taxpayer) support for inflated real estate prices is a terrible idea. A price floor will develop. Let's not create an artificial one.

Posted by: lechacal at February 25, 2009 9:24 AM

lechacal. The fed is doing it already, they're purchasing MBS. I guess you think that's a bad idea as well? I don't pretend to be smart enough to know the solution honestly. I understand where you're coming from with your argument though(doesn't mean I agree with it). What's so bad about creating an artificial floor and let inflation catch up to prices? We're already artificially propping up banks, auto companies, etc..

Posted by: dosteov at February 25, 2009 9:36 AM

and if can't trust what henry blodgett says, who can you trust........why bother even quoting the crook

Posted by: jnjnjn2 at February 25, 2009 9:38 AM

This post should have a caveat. The index cited here is the Case-Shiller, which only tracks resales of single family homes in the entire metro area (which includes Long Island, Westchester, NJ, CT and even bits of PA). So it could be heavily influenced by weakening in the suburban areas while the City itself is not as bad. It also does not reflect what is happening in the Coop/Condo markets, though obviously there will be some correlation (though even within that group there's wide variation).

(btw - i'm not sure how they count the brownstones that have a rental unit - they are classed as 2 or 3 family homes by the tax class, but still grouped with 1 families. Anyone have any idea?)

more info on Case-Shiller: http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,2,1,0,0,0,0,0.html

Posted by: gomuppets at February 25, 2009 9:50 AM

I really think the best way out of this is to let the market fall as it will. I think part of the problem is people waiting day to day to hear what the Govt. is going to do and then reacting to announcements and the stock market.

I think the market will correct fine without kneejerk reaction from outside influences.

I look at this after living the dotcom life and death. We got no bailout and tons of people (including me, twice) lost jobs. Company value went south. The industry was left alone and by '02 it was pretty well shaken out and on it's way to recovery. And the tech sector is more reliable and much less volatile than it was in 2000, and has been for a few years.

I think the market needs to find it's bottom naturally, without Govt. involvement.

Posted by: christopher at February 25, 2009 9:51 AM

Wow. That's only through November.

Anyone wanna take a guess as to where they are now?

Seems like things definitely accelerated in the last few months.

Posted by: manofelt at February 25, 2009 9:52 AM

Dave, that is a great graphic. Thank you for posting it again. The NY Times is getting better and better at truly interactive graphics.

FWIW, Ditto I agree that real estate prices here will continue to decline for a while, but I also think that, in general, NYC prices will not far as fall as the average, and certainly not as far as, say, Phoenix or Miami. We still have an undersupply of housing, and our local economy has more going for it than most American cities. Of course, some areas here will get hit harder than others -- the poor always suffer more. And we are going to be staring at many half-built condos for a long time. Both market and government-sponsored solutions are going to take a while to work themselves through. And surviving lenders will be credit shy long after the worst of it is over.

Posted by: Brooklyn Chicken at February 25, 2009 9:56 AM

Exactly, manofelt. That's why the markets really don't react to Case Schiller numbers. Market only reacts to interesting leading indicator numbers and this is one of the most lagging. zzzzzzzzzzzzzzzzzz

Posted by: daveinbedstuy at February 25, 2009 9:56 AM

We still have an undersupply of housing, and our local economy has more going for it than most American cities..

Read this http://www.gothamgazette.com/article/issueoftheweek/20090223/200/2836

There may not be enough brownstones for everyone who may covet them, but there is a lot of emptt housing sitting on the market, with more to come. What the buisling boom neglected was affordable housing -- rather than $400K studios.

Posted by: BH76 at February 25, 2009 10:01 AM

For the record, I meant accelerated downward.

I'm going to guess that NYC is down at least another 5%.

Yeesh.

Posted by: manofelt at February 25, 2009 10:04 AM

We're done. The Chinese are here to save us. Hooray! Haven't you heard about all the condos they bought in the ORO & Toren.

Posted by: PropJoe at February 25, 2009 10:10 AM

dosteov: Acts of government support in the housing market create inflation in housing prices, with at least two consequences: a one-time wealth effect in favor of current owners, and stimulation of the creation of new housing stock. The best naked example I can think of is the mortgage interest deduction (creation of the GSEs is a bit more complicated but follows the same logic). The interest deduction makes ownership at any particular price point more "affordable", with the predictable result that all prices have increased to a point where gains in affordability are completely lost. The result is that (1) people who were owners during the period when prices were increasing as a result of the interest deduction benefited from a one-time gain, (2) with that one-time price adjustment now over, buyers effectively get no benefit whatsoever from the interest deduction (because without the interest deduction prices would be much lower) and (3) the resulting inflation in housing values spurred a lot of new development. Without going through all of the stages of this debate (which initially focus on things like whether it is fair to reward people who bought at high prices in the past few years, and other points that will be emotional for this crowd but will miss the bigger policy questions), I will skip to the end and say the following: Government support of housing prices is bad because it stimulates destructive and thoughtless development. The late 20th century policy of promotion of homeownership has been blind to the consequences (you can never really separate housing inflation from the rise of suburbia), and I don't think that an appropriate response to what is going on right now is to increase our support of that policy.

On a more self-interested note, I am a renter and want to buy cheap.

Posted by: lechacal at February 25, 2009 10:31 AM

BUY NOW OR BE PRICED OUT FOREVER

Posted by: cornerbodega at February 25, 2009 10:41 AM

Attendance at open houses is up significantly in recent weeks. I think we have already hit bottom here in Brooklyn.

Posted by: dt at February 25, 2009 10:48 AM

dt: I would imagine open house attendance and unemployment are correlated. In any event, I very seriously doubt that actual buying activity is up.

Posted by: lechacal at February 25, 2009 10:51 AM

dt don't speak anymore, its embarrassing

Posted by: cornerbodega at February 25, 2009 10:56 AM

Lethacal,
actually, two houses in my own neighborhood have gone into contract in the past few weeks.

Posted by: dt at February 25, 2009 11:00 AM

Wait, no it was three houses, not two. There may be more that I don't know about.

Posted by: dt at February 25, 2009 11:02 AM

"dt don't speak anymore, its embarrassing

Posted by: cornerbodega at February 25, 2009 10:56 AM

Pot = Kettle

Posted by: daveinbedstuy at February 25, 2009 11:05 AM

If you look at those graphs for the 20 cities they highlight, you can really sense a pattern in the shape of the curves.

Las Vegas, Phoenix, Los Angeles, Miami, etc all had INCREDIBLE peaks on those graphs.

Despite NYC's high prices, the graph for here did not spike like that. It was relatively gradual.

I don't know what that means exactly, but NYC'S graph looks MUCH more similar to that of Atlanta's than it does to Los Angeles.

Posted by: 11217 at February 25, 2009 11:09 AM

"New York City prices declined 9.5 percent in the same one-year period, so either we're lagging and have further left to fall than other cities or we're not going to suffer as much. Or somewhere in between."

Choice A. The rolling "same one-year period", aka YOY, is consistently falling more and more away from zero. We can't even talk about a rebound until it changes direction back towards zero. And even then, we have to wait until it actually crosses zero, from the "red" back into the "green", before we call bottom.

But, damn. Post meltdown contracts, on average, won't start closing until March. The two-month lag in the index won't show the effect of the global market collapse until May. The wild card will be dealt this summer.

Team Bear We Go Hard...Team Bear We Go Hard...

***Bid half off peak comps***

Posted by: Brownstones Half Off at February 25, 2009 11:17 AM

cornerbodega, you're embarassed because people are coming out again to open houses? Then don't make stupid comments that come back to haunt you.

Posted by: dt at February 25, 2009 11:18 AM

> "Attendance at open houses is up significantly in recent weeks."

No, not much at all from what I've seen, which is bad considering a few weeks ago we were in the holiday "recess."

And as far as Brooklyn having already hit bottom, that's comedy gold.

Posted by: SnarkSlope at February 25, 2009 11:19 AM

> "Despite NYC's high prices, the graph for here did not spike like that. It was relatively gradual."

Gonna have to disagree with you there. I've been looking at apartments in Brooklyn, and many of them are asking twice what they last sold for 3-5 years ago.

Sounds like the same sort of unsustainable bubble to me.

Posted by: SnarkSlope at February 25, 2009 11:22 AM

Brooklyn has hit the Scarano mezzanine. There's a whole floor below.

Posted by: dittoburg at February 25, 2009 11:27 AM

Snark,

It seems to me that prices increased most in fringe areas because of the speculation of future gentrification. As I've said before here, I don't think Clinton Hill is a 1.5 - 2 million dollar a house neighborhood as we were seeing quite often last year. It was if you thought it was going to resemble the more prime area of Ft. Greene in 2 years, but with the economic recession, things are now at a halt.

Of course prices still went up significantly...I'm just commenting that according to the data on the graphs, we did not see a huge spike in the cities which are now seeing huge busts. It would stand to reason then, that our deflating of the bubble would happen more slowly.

Posted by: 11217 at February 25, 2009 11:33 AM

And please don't get me wrong. I'm fully expecting 30-40% drops in Brooklyn.

Posted by: 11217 at February 25, 2009 11:40 AM

you can go to S&P's web site and get the whole data set to reproduce those graphs. I actually do that at work to entertain myself. the interesting thing the Times did was to re-scale the chart to put the axis at 2006 (and oddly, 2007 for some cities). the published data is scaled to 2000=100.

just drop the data directly in a spreadsheet, highlight all but the top row, and bang out a line chart (you will get all 20 cities on the same chart). you get very different looking curves when you look at it in its original published form -- much more historical context. one thing you can see clearly is the flat return on housing in the 80s, and how totally out of context the recent boom was.

here's the link:
http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/2,3,4,0,0,0,0,0,0,0,0,0,0,0,0,0.html

Posted by: joe_the_bummer at February 25, 2009 11:43 AM

"The wild card will be dealt this summer."

Talk about moving the goalposts. First October is supposed to be armageddon, then January. Now summer is the point of no return. I hope I get a nice tan before the crash.

Posted by: wasder at February 25, 2009 11:45 AM

"dt: I would imagine open house attendance and unemployment are correlated. "

Why would unemplolyed people be looking to buy a home? I'm just asking.

Posted by: East New York at February 25, 2009 11:47 AM

I'll try that again (in case there are geeks out there like me who will actally do it!)

http://www2.standardandpoors.com
/portal/site/sp/en/us/page.topic/
indices_csmahp/2,3,4,0,0,0,0,0,0,
0,0,0,0,0,0,0.html

Posted by: joe_the_bummer at February 25, 2009 11:50 AM

"Lethacal,
actually, two houses in my own neighborhood have gone into contract in the past few weeks.
Posted by: dt at February 25, 2009 11:00 AM
...
Wait, no it was three houses, not two. There may be more that I don't know about.
Posted by: dt at February 25, 2009 11:02 AM"

There you have it. dt has provided definitive data showing a 50% increase of sales volume in the space of 2 minutes.

Posted by: Bklnite at February 25, 2009 11:51 AM

"On a more self-interested note, I am a renter and want to buy cheap."

Fair enough Lechacal. A reasonable position for sure. There are a few other people on here with this same goal, though some of them (BHO) can't seem to be able to bring themselves to admit this without insulting and denigrating others.

Posted by: wasder at February 25, 2009 11:53 AM

Yes wasder, there are people on both sides of the price debate who don't understand that the outcome will not be affected one tiny little bit by our discussions on this website. The object should be to understand the outcome, not to attempt to influence it (which is tilting at windmills).

Posted by: lechacal at February 25, 2009 12:35 PM

You are right that there are people on both sides of this debate with their heads firmly in their asses. It seems that the outcome is determined (crash) except in degree.

Posted by: wasder at February 25, 2009 12:37 PM

The reasons unemployed people would go to an open house include:

1) To dream
2) To spend some time without spending money
3) For the free snacks
4) To wonder if they will ever be able to sell their house
5) Just to look at a nice house

I used to live across from Sotheby's and went in often to look at the art, but not to buy. Kinda like a free museum.

Posted by: Iknow at February 25, 2009 12:45 PM

Hi folks;

I'm off today, but just wanted to make a few comments:

-lechacal: I fully agree with you about the need to phase out the mortgage interest deduction, even though, on a self-interest note, I'm a homeowner. I am opposed to this policy because it is a subsidy to consumption, and is in-line with the general approach of our national government since WWII: again, subsidizing consumption. In my mind, it is no accident that we've gone from a nation of thrift/production to one of consumption/debt. Although I'm not a fan of Obama, I agree with him on this point (though I think he's mostly talk on this point, so far). I really hope that one benefit of this crisis is that we will once again return to the values of thrift.

-As usual, I agree with Christopher. Let the chips fall where they may. I too was directly involved in the collapse of the IT industry in the 2000-2001 timeframe. I saw alot of my industry colleagues go through alot of pain. Note that there was no government intervention in this bubble collapse, and the industry and folks adjusted. All of my colleagues eventually found employment elsewhere, and moved on.

-I also agree that this is just a debate on the price of a commodity. I'm on Team Bull, because we don't have an oversupply situation in NYC, just a bad economy. I've said it before, that I think the ASP will drop by 20% or less. Let's see how the market falls - I enjoy this debate. If I'm wrong - I'll have learned something.

-As Wasder already stated, I have no problem with seeing folks benefit from the drop in the price of a commodity, even though I'm a homeowner. I DO have a problem with a couple of folks on this site who want to take it a step further, who delight in the pain that a severe economic contraction would inflict on folks, be they poor or well-off.

Posted by: benson at February 25, 2009 12:58 PM

"-As usual, I agree with Christopher. Let the chips fall where they may. I too was directly involved in the collapse of the IT industry in the 2000-2001 timeframe. I saw alot of my industry colleagues go through alot of pain. Note that there was no government intervention in this bubble collapse, and the industry and folks adjusted. All of my colleagues eventually found employment elsewhere, and moved on." ~benson

So basically, your colleagues moved on from one bubble to the next. Ummm, if you STILL don't know that greenspan et al drove the tech burst into the housing disaster then you have serious intelligence issues.

Posted by: cornerbodega at February 25, 2009 1:19 PM

Cornerbodega;

I didn't realize that my colleagues went from designing fiber-optic transmission systems to building homes in Phoenix. Thanks for the insight, and for keeping invective out of the debate.

Posted by: benson at February 25, 2009 1:34 PM

benson you are on fire these days. did you see the kyoto photos I wanted to show you?

Posted by: wasder at February 25, 2009 1:36 PM

"Brooklyn has hit the Scarano mezzanine. There's a whole floor below."

It's in China.

***Bid half off peak comps***

Posted by: Brownstones Half Off at February 25, 2009 2:12 PM

"Talk about moving the goalposts. First October is supposed to be armageddon..."

October was for financial markets (I never set that timeline anyway, that was What). I'm talking about Case-Killa.

***Bid half off peak comps***

Posted by: Brownstones Half Off at February 25, 2009 2:16 PM

"...(BHO) can't seem to be able to bring themselves to admit this without insulting and denigrating others."

Grow skin. I'm a messenger (I think it's my login and tagline that insult you guys).

I gotta go.

***Bid half off peak comps***

Posted by: Brownstones Half Off at February 25, 2009 2:21 PM

Wasder;

Unfortunately not. I'm not registered on facebook (there are still a few of us). Everytime I try to click on someone's facebook link, it asks me for my account info, and at this point in time I'm not registering for another on-line account. I've already got 10 gazillion!!

Do you have them on flickr?

Posted by: benson at February 25, 2009 2:25 PM

"I didn't realize that my colleagues went from designing fiber-optic transmission systems to building homes in Phoenix. Thanks for the insight, and for keeping invective out of the debate."

ok, so you're admitting that the tech bust and housing boom has nothing to do with each other?

Posted by: cornerbodega at February 25, 2009 2:28 PM

"Do you have them on flickr?"

I should do that. And I will let you know when I do.

Posted by: wasder at February 25, 2009 2:37 PM

"Grow skin. I'm a messenger (I think it's my login and tagline that insult you guys)."

Grow some integrity. Your tagline is silly (or at least the idea that you think it will have some effect on the market is silly) but not offensive. What is offensive is how you pretend to be something and somebody you are not.

Posted by: wasder at February 25, 2009 2:40 PM

If the presence of both potential buyers hoping for price drops and owners hoping for appreciation affects the comments on this board, what is a decent Brooklyn reference for an unbiased opinion?

Posted by: calibrook at February 25, 2009 3:50 PM

Many of us don't really care that much how volatile our property prices are in the short term. BHO just missed out. cornerbodega missed out when they passed out the brains.

Posted by: daveinbedstuy at February 25, 2009 4:05 PM

CornerBodega;

I think what you are trying to get at is that the housing bubble was induced by Greenspan's keeping interest rates artificially low after the tech bust, in order to mitigate its effects. If that is what you are trying to get at, there is no disagreement on this point.

Posted by: benson at February 25, 2009 4:39 PM

I don't understand the article. How do they know prices have "stabilized"? How do they know prices are "headed" toward a total decline of 40 percent? And aren't those two statements mutually exclusive?

Posted by: mopar at February 25, 2009 4:45 PM

dibs, citing your ghetto property I would think most people would care if they dropped 920K and then have it wittle down to 400K or less. If this doesn't bother you then you're an idiot of epic proportions. Wait a second, you are an idiot of epic proportions...

Posted by: cornerbodega at February 25, 2009 4:46 PM

Corner, it's a theoretical loss.

Posted by: mopar at February 25, 2009 5:44 PM

mopar - without going back and looking at the article I think the point is that the rate of change has reached an inflection point (remember derivatives back in calculus?) and the rate of decrease will thus decelerate. The inflection points is very important in this kind of market analysis.

Posted by: lechacal at February 25, 2009 6:00 PM

The first derivative is the speed the second derivative is the acceleration...

Beyond the Zero

Nature does not know extinction; all it knows is transformation..
-Wernher von Braun

Posted by: Legion at February 25, 2009 7:12 PM

Sure, but it's an inflection point on the first derivative that we're concerned with here. On the second derivative we would be concerned with whether it is positive or negative.

Posted by: lechacal at February 25, 2009 8:08 PM

Man I glad I stayed out of this one LMMFAO. This post had Herpes written all over it! I wonder if that retard Brownstoner would've had the balls to post this crap? I guees because all of the "Luxury" Condo ads are gone and now he's selling houses in upstate New York or "Renting out" those "Luxury" condos now.

TEAM BEAR I'm very proud of you and do you know why? Now Team BullSt*t now say "You are gleeful about having a depression" and I say "Suck the nut sack"!

Let me show you something! The American Banking System is INSOLVENT and those in power Bush, Obama, Bernanke and others have been lying to you... Remember when that retard Bernanke said two years ago that "subprime is contained". Well he was right, contained to this planet. I think we are "Turning Japanese" , jerking everything in sight.

You see Team Bear the Assnuts are trying to preserve housing prices and are scared to death of DEPRESSION. Keep up the good work. The What out!

The What (Obama pixie dust has worn off...)

Someday this war is gonna end...

Legion Mother Blows Horses..

Posted by: Return of The What at February 25, 2009 10:47 PM

The whachamacallit,

Please do not disturb me at work. I'm on the computer going through my usual blogs.

You don't see me going over to your place of employment, slapping the schlong from out your mouth? do you?

Now go to sleep you little assclown.

Posted by: Legion at February 25, 2009 11:09 PM

I didn't take calculus. I guess you're saying the rate of decrease is slowing. I didn't see that on the chart, but that makes sense.

It lines up pretty well with my gut feel. We're already down 40 percent in subprime Brooklyn. This would suggest declines of 60 percent or more. Possible. Meanwhile, back in the land of Miss Muffet and BHO, prime Brooklyn, prices have if anything fallen only 15 percent. Maybe not even that.

I think Lechecal, I, and others have already predicted it: 20 percent down in prime. Here's more: 60 percent in subprime. 40 percent of in Stuyvesant Heights. 35 percent off in Clinton Hill.

Course, the housing market isn't the same as the overall economy. I think that could keep going up and for the next few years, with the overall direction down for some time. Just like in the Depression.

When is the government and business going to figure out we need to get off the credit-consumer-bubble policy and create a self-sustaining economy? If Obama cuts corporate tax for companies that manufacture here and taxes companies that produce off shore, that could encourage manufacturing. There's already a niche movement of made-in-the-USA such as Steven Alan (similar to organic produce), it could help.

Posted by: mopar at February 25, 2009 11:52 PM

"Please do not disturb me at work. I'm on the computer going through my usual blogs.

Man on man??? Munch a Dildo?? Or Dave's Favorite "Guess what this is"...

"You don't see me going over to your place of employment, slapping the schlong from out your mouth? do you?"

The PLLLAAANNEEE Boss, The PPPLLLAAANNNEEEEEEE.....

Wow Legion, I think you've a little late to the party and BTW I agree about your view on Health care (No BS). This LAST THING you want to see is Socialized Medicine.

Did you know there are only 4 MRI machines in Canada (No BS)!!! It takes 4-8 months to get a appointment!!! US Health care will make you broke but you will live to pay the bill..

My friend is a X-Ray Tech and he told me this woman went to see 5 Doctors in Canada because he stomach was hurting. The doctor told he she was fine. She came to NY to see a Doctor and was diagnosed with Cancer and they operated the next morning (true story). I hope Obama keep things the way they are...

The What

Someday this war is gonna end...

Posted by: Return of The What at February 26, 2009 1:41 AM

Team Bulls*it. I like that.

"the rate of change has reached an inflection point"

No, it hasn't (at least not the NY index). The rate of change is the rolling YOY. Its negative value is getting larger and larger. And as I said above, the full effect of the global market meltdown is not even factored in yet. When it does get factored in, f''(x) will be even larger. No bottom in sight.

Case-Killa - I know what you're going to do this summer.

"When is the government and business going to figure out we need to get off the credit-consumer-bubble policy and create a self-sustaining economy? If Obama cuts corporate tax for companies that manufacture here and taxes companies that produce off shore, that could encourage manufacturing. There's already a niche movement of made-in-the-USA such as Steven Alan (similar to organic produce), it could help."

Yes sir/madame.

***Bid half off peak comps***

Posted by: Brownstones Half Off at February 26, 2009 8:11 AM

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February 25, 2009

U.S. Housing Prices Down 18.5%, NYC Almost 10%

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