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March 31, 2009

Getting a Jump on the Q1 Post-Mortems

In a case of premature data ejaculation, appraisal firm HMS Associates has put out its first quarter numbers on the Brooklyn real estate market with the last two weeks of March still unreported. Nevertheless, the trends are obvious. Sales volume? Down. Average sales prices? Down too. “For two years, sales volume has dropped, but prices have not,” said Sam Heskel, executive vice president of HMS. “Now, as last, prices are falling into line with the reality of diminished sales volume.” Volume between January 1 and March 15 of this year was off 35 percent from the ~~first~~ fourth quarter of last year; average sales prices around the borough fell 12 percent. Versus the first quarter of last year, volume was down 65 percent and prices were off 8 percent. But not all neighborhoods felt the pain equally; nor do their diverging performances conform to any kind of logic. According to HMS, prices were actually up in Greenpoint, Carroll Gardens, and Sunset Park while they dropped dramatically in Brooklyn Heights, Sheepshead Bay, and Fort Greene. Rather than showing much about any particular market, these results simply underscore the shortcomings of using average, rather than median, prices to get a snapshot of trends. In case you were worried they'd end on a negative note, Heskel comes through with a drum-beating quotation: “If there is a silver lining at all, this is an excellent time to buy for those who are in a position to do so.”

BROOKLYN HOME PRICES PROJECTED

TO DROP BY EIGHT PERCENT IN FIRST QUARTER OF 2009

Sales Volume Expected to Plummet 65%

from First Quarter 2008, according to HMS Associates Report

New York, March 30, 2009….Brooklyn home sales are on track to continue their downward spiral in the first quarter of 2009, according to the latest report prepared by real estate appraisal firm HMS Associates.

HMS studied 15 neighborhoods between January 1, 2009 and March 15, 2009. The firm found that the average home price fell by eight percent from $641,464 in the first quarter of 2008 to $589,135 in the period between January 1, 2009 and March 15, 2009. The total number of sales dropped 65% from 1004 in the first quarter of 2008 to 347 between January 1, 2009 and March 15, 2009.

“These are not full quarter numbers,” cautioned Sam Heskel, executive vice president of HMS. “There is a percentage of sales out there that must still be recorded. However we suspect that the trend will not change much over the remaining two weeks.”

On a consecutive quarter basis, the average home price dropped 12% and sales volume fell 34.7% between the fourth quarter of 2008 and the period between January 1, 2009 and March 15, 2009, HMS said.

“For two years, sales volume has dropped, but prices have not,” said Heskel. “Now, as last, prices are falling into line with the reality of diminished sales volume.”

The average home price figures come from HMS’s comprehensive quarterly study of 15 representative neighborhoods in Brooklyn and include one-, two-, three-, and four-family homes, condos, and co-ops. The report includes neighborhoods that show both price increases and decreases and are deemed together a fair reflection of what is happening in Brooklyn as a whole, according to Heskel.

While the average price borough wide dropped eight percent so far this year, there were significant variations in different neighborhoods. Prices rose by double digits in Greenpoint, Carroll Gardens, and Sunset Park but fell by steep margins – 24 to 38 percent -- in Brooklyn Heights, Sheepshead Bay, and Fort Greene. The number of homes sold fell in all 15 neighborhoods, with the biggest drops in Williamsburg, Carroll Gardens, Boerum Hill/Cobble Hill, Clinton Hill, Fort Greene, and Bay Ridge.

“Because the volume of sales has dropped off so greatly it is difficult in some neighborhoods to get an accurate assessment of what is going on in the quarter,” Heskel said. “In some instances you have a huge price increase, but based on only one or two sales, so the increase is skewed. It’s more useful to look at broader trends, which show price gradually declining along with the slowdown in sales volume.”

The picture was much bleaker in some neighborhoods not included in the study, such as Bedford-Stuyvesant, East New York, Bushwick, and Brownsville. Foreclosures were still a problem in the four neighborhoods – of 58 Brooklyn foreclosures listed in the first quarter by PropertyShark, 30 were in these four areas. Heskel also noted that the level of foreclosures works out to one foreclosure for every six homes sold in Brooklyn.

“Here again,” says Heskel, “the trend that has been developing is still in play. The Brooklyn neighborhoods that are least able to weather an economic downturn are getting hit hardest.

“If there is a silver lining at all, this is an excellent time to buy for those who are in a position to do so,” said Heskel. “We are seeing more people taking advantage of these historical low rates and prices throughout the metropolitan area.”

About HMS Associates
HMS Associates is a full-service Brooklyn-based residential and commercial appraisal firm. Founded by Sam Heskel in 1998, the firm serves all of New York City
and its surrounding areas. Heskel, an associate member of The Appraisal Institute, is state certified in New York and New Jersey and is a member of The National Association of REALTORS®.
The firm is FHA-approved, and Heskel is a member of Multiple Listing Services for Brooklyn and Long Island (includes Queens), Putnam and Westchester counties, and the Greater Hudson Valley.

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Comments

Is there a link to the data available? I heard this reported last night on the news and they quoted a price decline of 8% for brooklyn.

Posted by: daveinbedstuy at March 31, 2009 9:10 AM

good catch, Dave. those headline numbers are versus Q4, not year over year. added in the Q1 stats as well.

Posted by: brownstoner at March 31, 2009 9:22 AM

The firm found that the average home price fell by eight percent from $641,464 in the first quarter of 2008 to $589,135 in the period between January 1, 2009 and March 15, 2009. The total number of sales dropped 65% from 1004 in the first quarter of 2008 to 347 between January 1, 2009 and March 15, 2009.

On a consecutive quarter basis, the average home price dropped 12% and sales volume fell 34.7% between the fourth quarter of 2008 and the period between January 1, 2009 and March 15, 2009, HMS said.

So the sales volume falloff has lessened from 65% to34.7%. That's a good sign.

I think prices in Brooklyn had essentially stopped rising by the end of 2007 so if we use the data in the first paragraph as a rough approximation against that time period I'm surprised that prices are off ONLY 8% from 1Q 2008 to now.

This is especially surprising since it included condos as well as 1 & 2 family.

Posted by: daveinbedstuy at March 31, 2009 9:32 AM

Let me try to understand this. Prices have gone down 8 percent more or less and there is room for prices to go down alot more and now is the time to buy? Go right ahead but I smell a rat. Housing prices in Brooklyn have just started coming down they have a long way to go before they become affordable of the working middle-class.

Posted by: hannible at March 31, 2009 9:38 AM

"Housing prices in Brooklyn have just started coming down they have a long way to go before they become affordable of the working middle-class."

Why should they come down so much as to be affordable to the working middle-class. I apologize if I sound arrogant about that but why should they? Is there some new entitlement program that I missed???

Posted by: daveinbedstuy at March 31, 2009 9:45 AM

It's not about entitlement DIBS, it's about sustainability.

The bubble is a-bursting. You of all people should understand that.

Posted by: SnarkSlope at March 31, 2009 9:51 AM

These data confirm what I have been saying for some time (first volume is the story, then price). I do not believe it is a good time to buy. I am in a position to do so and would like to do so but will continue to wait. I believe prices still have a ways to come down. This isn't the stock market where there can be a short, sharp correction to a bottom. I think this is going to take a while.

I think we have all stated our respective positions on this subject ad nauseam in other threads.

Posted by: lechacal at March 31, 2009 9:51 AM

"Why should they come down so much as to be affordable to the working middle-class. I apologize if I sound arrogant about that but why should they? Is there some new entitlement program that I missed???"

There is one reason and one reason only:

The city is running out of rich people looking to buy property.

Posted by: northsloperenter at March 31, 2009 9:53 AM

I think prices have a ways to come down too. Yes, its a gradual process. But there's no reason to believe they'll come down by 50-70% like many people are projecting (hoping), especially if the rate of decline in volume lessens as it seems to be doing in this data. As volume dries up, prices will strengthen. Economics 101. Brooklyn is still better value than Manhattan for 1 & 2 family rowhouses.

Conspiracy theorists rarely let anything as inconvenient as evidence make them reconsider their bizarre views.

Posted by: daveinbedstuy at March 31, 2009 9:58 AM

Morning Assheads! Brownstoner is trying to front run things???

"In a case of premature data ejaculation, appraisal firm HMS Associates has put out its first quarter numbers on the Brooklyn real estate market with the last two weeks of March still unreported. "

Like we need these Assheads to tell us things are bad!! Here retards suck it down..

A Look at Case-Killa Numbers, by Metro Area (Sorry BHO I can't help it ; ^ ))

http://blogs.wsj.com/economics/2009/03/31/a-look-at-case-shiller-numbers-by-metro-area-7/

The full report!!
(Warning PDF!)

The What (To be continued)

Someday this war is gonna end...

http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_022445.pdf

Posted by: Return of The What at March 31, 2009 10:03 AM

dave-o -- I don't know how you get from A to B with those numbers.... they reported a 65% year-on-year change, and a 34.7% change in a short quarter, which was part of that year.

looking straight down at it, that's a huge accelleration, not a lessening in the fall-off. of course there's some seasonality effect in there, which is why they report both numbers, so you'd have to see the whole series to get scientific about it (and then you'd probabably be more scientific than they even were when they collected the data)

but still...that looks really bad to me. I don't know how you put a positive spin on those numbers...

Posted by: joe_the_bummer at March 31, 2009 10:05 AM

northsloperenter...I still believe my "relative value" argument that I've posited for so long is firmly intact. In case you missed it it goes something like this: There are thousands and thousands of Manhattan condo owners that still have very large gains in their condos. It only takes a small fraction of them to opt for the Brooklyn brownstone lifestyle to support prices (relatively speaking) for 1 & 2 family rowhouses in Brooklyn Anyone with a 1 or 2 bedroom condo in Manhattan that they bought before say, 2000, has enormous profits (yes, still) and can easily afford to buy a Brooklyn brownstone and get far more space, lower taxes, no CCs and a nice backyard. The economics are still VERY compelling.

Posted by: daveinbedstuy at March 31, 2009 10:06 AM

You know something? It just keeps getting better. I remember in the halcyon days of '05 the Retards was saying "Real Estate always goes up" and now they say "The Sheriff is on his way"!

Banks Starting to Walk Away on Foreclosures

http://www.nytimes.com/2009/03/30/us/30walkaway.html?_r=4

City officials and housing advocates here and in cities as varied as Buffalo, Kansas City, Mo., and Jacksonville, Fla., say they are seeing an unsettling development: Banks are quietly declining to take possession of properties at the end of the foreclosure process, most often because the cost of the ordeal — from legal fees to maintenance — exceeds the diminishing value of the real estate.

The so-called bank walkaways rarely mean relief for the property owners, caught unaware months after the fact, and often mean additional financial burdens and bureaucratic headaches. Technically, they still owe on the mortgage, but as a practicality, rarely would a mortgage holder receive any more payments on the loan. The way mortgages are bundled and resold, it can be enormously time-consuming just trying to determine what company holds the loan on a property thought to be in foreclosure.

Man this is going to be good...

The What

SOmeday this war is gonna end...

Posted by: Return of The What at March 31, 2009 10:08 AM

What...I posted about the "walk aways" a couple of months ago. The cities and towns are requiring burdensome upkeep by the banks so they are making the right decision to walk away. I'm not sure how these places "clear" the market and get sold though. The losers on this are the citries and towns that looked at the banks and saw a potential cash machine. Well, guess what, the banks are still smarter than the city & local beuracrats.

Posted by: daveinbedstuy at March 31, 2009 10:11 AM

dan humprey's dad on gossip girl last night has to sell his williamsburg loft to afford to send dan to yale. and they are supposed to be the "poor" family on the show. cry me a river.

*rob*

Posted by: PitbullNYC at March 31, 2009 10:13 AM

I never saw any info as to legally who owns the property when the bank mortgagor walks away.

Posted by: daveinbedstuy at March 31, 2009 10:13 AM

Pay attention to the insanity boys and girls...

" Prices rose by double digits in Greenpoint, Carroll Gardens, and Sunset Park but fell by steep margins – 24 to 38 percent -- in Brooklyn Heights, Sheepshead Bay, and Fort Greene. The number of homes sold fell in all 15 neighborhoods, with the biggest drops in Williamsburg, Carroll Gardens, Boerum Hill/Cobble Hill, Clinton Hill, Fort Greene, and Bay Ridge."

And to support my argument..

"The picture was much bleaker in some neighborhoods not included in the study, such as Bedford-Stuyvesant, East New York, Bushwick, and Brownsville. Foreclosures were still a problem in the four neighborhoods – of 58 Brooklyn foreclosures listed in the first quarter by PropertyShark, 30 were in these four areas."

Now the Retard speaks..

"There are thousands and thousands of Manhattan condo owners that still have very large gains in their condos. It only takes a small fraction of them to opt for the Brooklyn brownstone lifestyle to support prices (relatively speaking) for 1 & 2 family rowhouses in Brooklyn Anyone with a 1 or 2 bedroom condo in Manhattan that they bought before say, 2000, has enormous profits (yes, still) and can easily afford to buy a Brooklyn brownstone and get far more space, lower taxes, no CCs and a nice backyard. "

Dave how long the "Manhattan condo owners" are going to support "Brooklyn Brownstone" prices?????? We are in a Global Economic Crash!!!

The What (Why?)

Someday this war is gonna end...

Posted by: Return of The What at March 31, 2009 10:13 AM

> "thousands and thousands of Manhattan condo owners"

DIBS - You keep presenting your personal story as if it were something more than anecdotal "evidence."

Posted by: SnarkSlope at March 31, 2009 10:15 AM

"Well, guess what, the banks are still smarter than the city & local beuracrats."

Yep until the get their Bank Charter yanked! And who pay for all the Toxic Paper connected to the foreclosed property? The Tax Slave..

The What

Someday this war is gonna end...

Posted by: Return of The What at March 31, 2009 10:18 AM

b-stoner what happened to my inciteful comment? it got "held" again...this happens to me a lot. this is still new to me. do I need to grease someone or what?

anyway, dave-o we had a 37% drop in volume in a short quarter that was PART of a year with a 65% drop. that's a massive accelleration, not a softening.

Posted by: joe_the_bummer at March 31, 2009 10:18 AM

joe the b -

I was noticing the same thing ... funny that dibs looked at a 37% quarterly drop and saw that as good news compared to 65% down year over year. Perhaps some remedial math is in order.

Posted by: Bklnite at March 31, 2009 10:28 AM

I usually stay out of these highly speculative discussions, but the latest C-S numbers are pretty grim...even the "expert" quoted in today's NYT article says he sees no light at end of tunnel. Prices off 50% in Phoenix, with 15% more to come? Yeesh. No way is Bklyn going to be spared at least a 40% decline from 2nd quarter 2007 (my own personal "high water mark." Doh!).

The saving grace in the NYC markets is co-ops. Not because they keep prices high but because they prevent massive, widespread foreclosures. Even if the mortgage lenders were rubber stamping applicants, co-op boards werent.

Posted by: Bolder at March 31, 2009 10:33 AM

Sell now or be locked in forever!

The irony....

Posted by: manofelt at March 31, 2009 10:34 AM

Bolder...I think the saving grace in NYC, and, more importantly brooklyn, is that the vast majority of homes (including condos) are primary residences, not some secondary vacation home/condo like in places like Phoenix, Florida, many places in NV and Ca, etc, etc, etc.

There was some data out a few wooeks ago that in 2008, more than 50% of foreclosures occured in 35 counties in 15 states.

Posted by: daveinbedstuy at March 31, 2009 10:37 AM

How many of those condo owners are interested in doing this and have not already done so?

I would suggest not as many as your theory needs. Upcoming slashes to subway service isn't going to help draw people out to Brooklyn either.

Also, if they put their Manhattan condos on the market they will just be driving down prices in Manhattan further, which will draw more buyers from Brooklyn to Manhattan.

I agree with lechacal that now is not the time to buy for me. Prices will either go down more or stay at this level for quite some time.

Also, I'm only in a position to buy assuming that my income remains secure, and while I don't work in the financial industry and my company is doing OK, I find it hard to feel secure enough about my job (or ability to find another one quickly if I got laid off) to consider taking on a mortgage now.

Posted by: northsloperenter at March 31, 2009 10:44 AM

24 posts; 8 by DIBS.

Posted by: Whuh at March 31, 2009 10:56 AM

Add something to the discussion Whuh or STFU and get back to stocking the shelves.

Posted by: daveinbedstuy at March 31, 2009 11:02 AM

DIBS,

how can you have any confidence that the Brooklyn real estate will not get really bad before it gets better when unemployment in NYC is over 8% with many predicting over 10% by next year ... it's just crazy to think people are willing to buy a place unless they're getting a great deal in this kind of economic enviroment!

Posted by: ZooLander at March 31, 2009 11:04 AM

And yet places continue to sell, Zoolander, at prices that many of you believe are objectionable, irrational, or just plain too high.

Posted by: daveinbedstuy at March 31, 2009 11:11 AM

DIBS, just because a few idiots buy overpriced places and are posted on blog doesn't mean prices are not going to drop...

Posted by: ZooLander at March 31, 2009 11:24 AM

they sure do dibs.... I just don't get it. It's like waiting for the terminator to die in "terminator". I mean, who has 2.5MM to just plunk down right now? everyone's seen their total assets get cut in half... anyone even near the financial industry wouldn't sign up for a big mortgage even if they could get one....but still it happens. there sure is a lot of money in this city.

Posted by: joe_the_bummer at March 31, 2009 11:25 AM

Contrary to DIBS's version of "Econ 101", no economic theory suggests that a decline in sales volume due to sellers asking bubble prices will lead to prices "strengthening".

The end game in bubbles is a pop. We aren't there yet.

Real estate prices reach equilibrium when investors -- not homeowners -- are indifferent between buying to hold-and-rent or selling to homeowners (rental values equal ownership price). Brooklyn prices are still far above anything a rational buy-and-hold rental investor would be willing to pay. Even if rents don't drop further -- which seems highly unlikely -- sales prices need to drop 1/3 to 1/2 in most neighborhoods to reach equilibrium. (More in Brooklyn Heights if yesterday's house of the day reflects the current sale market.)

But bubbles don't often end at equilibrium. The manic going up is replaced by depressive going down. Prices typically drop until buy-and-hold rental investors see screaming buys, so dramatic that they are willing to take the risk of still more price drops.

And this bubble is likely to be worse than average for Brooklyn. On top of the usual debt-fueled speculation and speculation-fueled faith that prices will always go up that characterizes every bubble, we had an enormous growth in Wall Street related money that is now going into reverse.

Wall Street/finance firms accounted for less than 10% of corporate profits a decade ago and 40% at the peak. Our crony capitalists will fight hard for government welfare to keep on going, but in the end even the US Treasury won't be big enough to fund them. Wall Street is going to shrink back to 10% or, if the politicians can buck their masters before we are all pulled into a major collapse, even less.

And so NY real estate needs to adjust not only to the collapse of the real estate bubble, but also to the collapse of the industry that supplied whatever real money and real demand underpinned it. That's why rents are dropping -- real demand is dropping even as real supply keeps increasing (due to new construction, conversions from stabilization to market, renovations, expansions of the areas middle class people will live in, etc).

Demand is down. Supply is up. Inventory has doubled in Manhattan, but the shadow inventory is up far more. Tax collection is dropping and will drop far more next year as bonuses dry up and the real estate transfer tax fades away -- so the City is going to have to cut services and, therefore, quality of life. Salaries and rents are dropping as the highest-paid sectors shrink, in the case of Wall St perhaps for a long time. Construction costs will drop as the economy slows. Case-Shiller, out today, shows NY metro area one-families accelerating in price decline and still wildly too high. All the trend lines are heading in the same direction with no inflection points visible.

Expect further price declines. Expect declines to make further declines more likely. Don't expect any reversal of direction in NYC until it is clear what form the financial industries will take after recovery and whether the new institutions will be in NY.

Expect a bottom at rational pricing: when you can buy a house for cash, rent it out, and earn significantly more from rents (after deducting all costs, including your own labor and real maintenance/repair costs, and assuming that the price of land remains stable) than the bank expects to make on a mortgage where it -- not the government -- is taking the risk of default (look at the rates they charge for unsecuritized jumbos, not the rate for FNMA loans). The homeowner's risk is higher than the bank's and homeowners aren't going to be bailed out, so in rational markets, homeowners should earn more than the bank. If that price is higher than the cost of renovation, new construction or evicting rent stabilized tenants, assume that the market will stabilize at the lowest number (and that land prices will drop as much as necessary).

But don't count on rational pricing: there is no guarantee prices won't go lower still, especially if investors are worried about future rent decreases, slower subways, Wall Street's short-termers overpowering Washington, or other investors losing heart.

Posted by: FinanceGuy at March 31, 2009 11:30 AM

Hey, Dave --I have enough cash on hand to buy a brownstone outright, so I'm not sure why you insist on pretending I'm a stock boy at Target. But the panic is really palpable in your posting voice. Sorry the data is going against you.

Posted by: Whuh at March 31, 2009 11:32 AM

Posted by: joe_the_bummer at March 31, 2009 11:38 AM

"'If there is a silver lining at all, this is an excellent time to buy for those who are in a position to do so.'"

Speaking of premature ejaculation...

***Bid half off peak comps***

Posted by: Brownstones Half Off at March 31, 2009 11:42 AM

Where's the Case-Killa thread? New numbers out today.

Yeah baby!!!

***Bid half off peak comps***

Posted by: Brownstones Half Off at March 31, 2009 11:45 AM

Dave,

As a hedge fund guy with multiple properties, if YOU can't afford to buy a house outright in one of the more prime areas of Brooklyn, who can these days...?

I'm not saying that to be snarky, but you clearly make a good living and I don't see you stepping up to buy one of these nice 2 and 3 million dollar properties on the market...

Posted by: 11217 at March 31, 2009 11:47 AM

I see the bottom in real estate coming soon -- foreclosure prices in Bushwick, Bed Stuy, East New York, etc. are in the 300s and inventory is clearing out.

Meanwhile, prices in Carroll Gardens (what about Park Slope???) and other areas still *increasing.*

I would say that prices will stay flat for a while and Miss Muffet, BHO, Hannible, Corner et al will not get their big bargains.

However, true economic collapse and inflation could be looming around the corner because our government is deep in debt and printing money. I don't know what will happen then. Maybe the looting in the streets The What desires. Maybe the rich will move to Switzerland and leave us Carroll Gardens. (Kidding.)

Check out the excellent -- and really scary -- article in The Atlantic by a former exec at the IMF about how our country is just like a corrupt banana republic and in just as much trouble.

Also check out the NYT article The What pasted about banks screwing up everything by not taking care of its houses and then leaving the already screwed-over owners to pick up the pieces.

We're living in dramatic times.

Posted by: mopar at March 31, 2009 11:48 AM

hey finance guy -- agree with everything. care to put a number on it? I think peak to trough 50% (I've supported it before on one of these threads), and I think it's a up to 10 years before a turnaround. any finance guy on TV always has to throw out a number....

Posted by: joe_the_bummer at March 31, 2009 11:52 AM

It's pretty clear DIBS is living where he wants to live because he likes the area, and the house is easy on his wallet What's not to like about that?

Posted by: mopar at March 31, 2009 11:52 AM

mopar: Prices in Park Slope are decreasing.

Posted by: lechacal at March 31, 2009 11:54 AM

"Prices typically drop until buy-and-hold rental investors see screaming buys, so dramatic that they are willing to take the risk of still more price drops."

This is happening right now in those aforementioned foreclosure areas. You can buy a two-family in the $300s -- rents exceed costs -- and they are going fast.

Posted by: mopar at March 31, 2009 11:55 AM

Cool, Lechecal. The report didn't include Park Slope prices, right? Any idea how much they are decreasing by?

Note the report said prices increased by double digits in some neighborhoods, decreased in others, overall down 8 percent. I thought that was interesting. In fact, it's what I've been noticing all along.

Brooklyn -- and NYC -- is a big, heterogeneous place.

Posted by: mopar at March 31, 2009 11:58 AM

"Maybe the looting in the streets The What desires."

Mopar I very upset that you did not include me with the looters! Free Flat Screens!

"Check out the excellent -- and really scary -- article in The Atlantic by a former exec at the IMF about how our country is just like a corrupt banana republic and in just as much trouble."

I read that article a could of days ago and that's why everything is Jacked Up! The Plutocracy (Big Boys) has Hijacked the financial system and until you get rid of the Criminal Class everything is going to be bad.

Mopar I crown thee; Mopar the Savior! Now ride down Asshat Hill naked on a horse!

The What (Whips out his camera)

Someday this war is gonna end..

Posted by: Return of The What at March 31, 2009 12:01 PM

I couldn't put a figure on it. All I can say is I feel pretty certain prices are down from 2007. I would guess that a place I would have had to spend $1.2 million for in 2007 I could get for maybe $1 million. Median price data for closed sales would be a better guide, but that of course is a lagging indicator (it reflects trasnsactions that went into contract months ago rather than what you could go into contract for today).

Posted by: lechacal at March 31, 2009 12:04 PM

You need to read this if you think we're close to the bottom:

Mopar, I don't understand how you can say in one breath that we are near the bottom, and then in the next say that America is bankrupt. Do you not see how the two might be correlated? We are indeed living in dramatic times...most of which has been spun out from the housing market, which according to most show no signs of a bottom.

http://www.nytimes.com/2009/04/01/business/economy/01econ.html?hp

Posted by: 11217 at March 31, 2009 12:06 PM

From what I can tell, Park Slope prices are at around 2005/06 levels. There are special properties that are selling (I've even seen a couple on Streeteasy going for above ask) but PS prices have definitely eased significantly.

Posted by: 11217 at March 31, 2009 12:08 PM

Yes, some special properties in the slope are definitely still selling for very high prices. A nice limestone on a park block isn't going to take the same hit as a coop on a non-park block or a unit in the Ansonia condos.

Posted by: lechacal at March 31, 2009 12:15 PM

Lechacal,

The way I see it, things have gone back to a more "normal" market. Some properties sit, some still sell in 2 weeks. It's gone back to the principles of location, location, location and then finding that special property that stands out from the rest.

Just an aside though...I've seen a couple Ansonia apartments sell lately (on Streeteasy) for very large prices. Don't underestimate that place. It's a bit of a community within a community, and the units there usually sell to a friend of a friend of someone who already lives there. The Ansonia is a pretty hot ticket for small families, even though it doesn't sound like you love them.

Posted by: 11217 at March 31, 2009 12:20 PM

Flat screen TVs need to be free.

11217, I read that. So?

Posted by: mopar at March 31, 2009 12:24 PM

OK let me put it another way.

I would not be surprised if prices stop falling sometime around Q1 2010.

I would also not be surprised if the US defaults at the same time and throws everything into total chaos and disaster for the next decade.

Stay tuned.

Posted by: mopar at March 31, 2009 12:26 PM

This happened also in the Great Depression. Shock in 1929, things got better, shock again in I forget 1933 or so, then things got better, shock again....etc. Until WWII.

Posted by: mopar at March 31, 2009 12:27 PM

I have to admit I've never understood the appeal of the Ansonia, but maybe it's all about the community. There something very industrial about the place (particularly the ground floor units with the steel grating on the windows). I looked at a 3 br in the Ansonia recently and thought the asking price was a double serving of wishful thinking. Here is the link: http://corcoran.com/property/listing.aspx?Region=NYC&ListingID=1487709 If someone else is willing to pay anything near this asking price...well, more power to them and I'm happy to be wrong on this.

I also recently looked at this unit, which is actually quite nice and I think will sell for a good price: http://corcoran.com/property/listing.aspx?Region=NYC&ListingID=1516732 This is the kind of place that I would very seriously consider if I didn't see continued risk of broad price declines.

Posted by: lechacal at March 31, 2009 12:28 PM

So I just think you're being a tad overly optimistic.

Just because prices have dropped precipitously in Bushwick and Brownsville already, does not mean that the more "prime" areas aren't going to see these same significant drops in the coming months.

There still isn't really all that much good news out there to base a recovery on.

I guess I don't see how you can say that prices will "probably stay flat for a while" and "true economic collapse and inflation could be looming around the corner" in the same paragraph.

I hope the former is true also, but I see absolutely no signs that Brooklyn home prices are going to "stay flat for a while." Perhaps after they take a 30% hit, yes. But now...no way.

Posted by: 11217 at March 31, 2009 12:29 PM

I really like the second place you linked, Lechacal.

Reasonable maintenance too for that large a space.

Posted by: 11217 at March 31, 2009 12:32 PM

Sweet looking pad on 8th Ave, lechacal. The square footage on the Ansonia unit seems to have the usual Corcoran inflation applied.

Posted by: SnarkSlope at March 31, 2009 12:36 PM

yeah, it's a really decent location and the coop appears to be stable and have good finances. I wouldn't pay their asking price, but I would pay, say, $950k. I haven't made an offer because I expect someone else will pay more and I don't want to go through the hassle. I say $950k because that is my best guess as to where this unit would trade a year or two from now. In the meantime someone else will be willing to step up and catch the falling knife. Thus I wait.

Posted by: lechacal at March 31, 2009 12:38 PM

I've been sitting on the sidelines following the commenting pages for months but today I feel the tug to post. I recently read in Money magazine that the housing market in NYC metro area will not hit bottom until 2011 1Q, something to think about.

My husband and I were considering buying right before market took a dive last fall. I'm glad that we are sitting and waiting because he just lost his high paying job. Who knows how long until he finds a new job. If we had a mortgage now . . . I don't even know. We have a young child which changes everything. A whole department at my law firm got laid off (securities) including the partners. I'm nervous as hell. I have many friends/colleagues in the same boat. Even my wealthy friends are bleeding 100m+ net worth chopped in half over a few months! They are still rich, but their loss of wealth is affecting numerous people dependent on them (workers, etc.).

Posted by: LP at March 31, 2009 12:40 PM

what is the profile of a 3MM limestone buyer? other than rich. is there any pattern? are they Americans? wall streeters? old money? investors calling a bottom? does anyone know?

Posted by: joe_the_bummer at March 31, 2009 12:40 PM

Hey Lechacal:

What about this place...?

http://www.bhsbrooklyn.com/detail.asp?id=963167

Posted by: 11217 at March 31, 2009 12:41 PM

"Just because prices have dropped precipitously in Bushwick and Brownsville already, does not mean that the more "prime" areas aren't going to see these same significant drops in the coming months."

Very true. But the reverse could also be true.

The subprime areas fell apart for many reasons, including ARMs resetting and people being forced to sell in a declining market. Those same forces haven't been present in such a mass in the "prime" areas. But of course now the fallout from the mortgage bubble has reached the prime areas and people are losing jobs, which forces sales. Though another mitigating factor in the prime areas is that many people there have more of a financial cushion so fewer will be forced into sales.

Posted by: mopar at March 31, 2009 12:42 PM

LP: CWT?

Posted by: lechacal at March 31, 2009 12:44 PM

"I'm glad that we are sitting and waiting because he just lost his high paying job."

I'm sorry to hear that, LP. Good post.

Oh, and that reminds me: Something else has changed. A much greater number of the employed no longer have job security. (Exceptions would be health care and teaching.) That's a huge factor. It makes it really hard to buy.

Now instead of finding a place you can carry with your present job and rental income, you have to find a place you can carry if one or both of you loses their job and you can't find a renter. The what-if scenerios are much more dire.

Posted by: mopar at March 31, 2009 12:46 PM

Very odd layout 11217, but maybe it works. I would have to see it (in fact I would like to). I'm surprised I didn't already know about that place.

Posted by: lechacal at March 31, 2009 12:46 PM

Lechacal--no Haynes Boone (Texas based firm). It's getting rough at all the law firms. Only litigation and bankruptcy depts are doing well.

Posted by: LP at March 31, 2009 12:47 PM

It is a slightly wacky layout on paper, but it just might work in "real life"

I don't know if you have kids or not, but I really like how the two bedrooms are on the other end of the apartment from the master. Seems to be ideal for privacy.

Who knows...price and location seem more than decent.

Posted by: 11217 at March 31, 2009 12:49 PM

Thanks mopar--even my landlord lost her job and she has to pay her mortgage. Living in a parkslope browntone--tenant and landlord unemployed! I have to laugh at our current situation to keep from getting depressed or anxious.

Posted by: LP at March 31, 2009 12:50 PM

LP: I do securities/M&A/finance/corporate at one of the top NY firms (say, in the top 3). I have not been affected but the possibility is very much in my mind at all times. I hope things turn out well for you and your family.

Posted by: lechacal at March 31, 2009 12:52 PM

"Thanks mopar--even my landlord lost her job and she has to pay her mortgage. Living in a parkslope browntone--tenant and landlord unemployed! I have to laugh at our current situation to keep from getting depressed or anxious."

Hey Retards!! Over here!! This is the reality not the Happy Happy Joy Joy Crack smoke Bullsh*t! This is real life and I hope that you understand the dynamics of now!

The What

Someday this war is gonna end...

Posted by: Return of The What at March 31, 2009 12:54 PM

http://www.businessinsider.com/nyc-real-estate-could-fall-another-47-2009-3

Posted by: 11217 at March 31, 2009 12:56 PM

mopar,
"US defaults"? LOL. Runaway inflation maybe, but a country cannot default on debt repayable in a currency they control.

Posted by: lincolnlimestone at March 31, 2009 1:03 PM

Thanks lechacal--I hope it works out for you too. We saved money, paid off most of our debt (beside student loans) and my husband has a good severance package so I think our family will be ok in the long run.

On another note: to some of the people on this blog who seem to want everything to crash and burn to justify their ideological beliefs and buy cheap real estate--this is not a game. Real people are involved! Rich, middle, working, poor--we are all connected.

Posted by: LP at March 31, 2009 1:07 PM

I can't believe how people can claim that bottom is near. We have not seen the PANIC SELL that usually accompanies bubble bursts. For the moment, sellers are sticking to their prices and people post funny comments in blogs such as this. How people can be so clueless?

Posted by: MaplewoodGuy at March 31, 2009 1:16 PM

agreed the US is not going to default, it's more likely they would inflate their way out of it. notice that as the world collapses, our borrowing cost actually goes down.

anyway, check out this interesting washington post article that describes how we bait-and-switched during the great depression.

http://www.washingtonpost.com/
wp-dyn/content/article/2009/
01/09/AR2009010902325.html

Posted by: joe_the_bummer at March 31, 2009 1:18 PM

"to some of the people on this blog who seem to want everything to crash and burn to justify their ideological beliefs and buy cheap real estate--this is not a game"

consider the alternative: people priced out from over leveraged buyers. We were all connected during the bubble as well! Before we had bitter renters we now have bitter sellers.

Posted by: MaplewoodGuy at March 31, 2009 1:18 PM

Point taken MaplewoodGuy. I'm just generally frustrated with people not looking at the big picture, promoting class warfare etc.

Posted by: LP at March 31, 2009 1:24 PM

11217 @ 11;47...its the multiple properties that keep me from doing it. No mortgages on them, otherwise I would have. Besides, i see more upside potential in bed Stuy from a lower base. And I don't want to ever have to take the F train!!! :)

Posted by: daveinbedstuy at March 31, 2009 1:38 PM

""US defaults"? LOL. Runaway inflation maybe, but a country cannot default on debt repayable in a currency they control."

Don't laugh! We are in Strange Days and things that was unthinkable a few years ago is reality now!

"On another note: to some of the people on this blog who seem to want everything to crash and burn to justify their ideological beliefs and buy cheap real estate--this is not a game. Real people are involved! Rich, middle, working, poor--we are all connected."

No we are not "Connected"! The Assheads are connected to the Mutant Asset Bubble! The Psychology of the MAB is crashing the Knucklehead belief system! There are no more Lithium Crystals to power the Reality Distortion Field.

"agreed the US is not going to default, it's more likely they would inflate their way out of it. notice that as the world collapses, our borrowing cost actually goes down."

This quote is from a idiot! When everyone (China, Japan and OPEC) stops buying US Debt we will have to A) Cut benefits B) Default or C) War! Game over...

"Before we had bitter renters we now have bitter sellers."

Boy alot has change, LMMFAO!

The What

Someday this war is gonna end...

Posted by: Return of The What at March 31, 2009 1:41 PM

I hear that Dave.

As much as I love some of the F train locales, I don't want to live along that line, either. Did it once for a while when I first moved to NYC and hated being a slave to that god awful train.

Posted by: 11217 at March 31, 2009 1:44 PM

What--what will happen to you when all comes crashing down? How are we all not connected?

Posted by: LP at March 31, 2009 2:01 PM

Lechacal - do you really practice in all of those areas? Just curious, because in this age of hyper-specialization I haven't come across many big firm corporate generalists.

Posted by: brooklynguy at March 31, 2009 2:03 PM

Do you think the U.S. Dollar would be so strong if there were systemic risk in its government bonds?

Posted by: daveinbedstuy at March 31, 2009 2:03 PM

brooklynguy: Yes, I do. My employer generally seeks to train its lawyers to become true corporate generalists.

Posted by: lechacal at March 31, 2009 2:16 PM

What, you've been watching too much TV. There is more demand for US debt than there was before the crisis, which is reflected in the rate that the treasury has to pay on new issues. In other words, it's worth MORE to investors, because it is even more clear now that it is the safest place to park your money.

There's over 10Tr of debt and China owns 200Bn of it. 75%of our debt is owned by persons IN the US. If you are so worried that there will be no demand for US debt, why hasn't its price reflected your fears?

Someone made the point that we control our own currency, so (they meant) we don't HAVE to default on it. we can print money. obviously that has negative effects, but we can. Incidently, lots of countries have defaulted on debt in their own currency, but they are countries that had a lot of debt in OTHER currencies, which bankrupted them when their own currency devalued. we're not in that position. take a class in economics before you go calling people idiots.

Posted by: joe_the_bummer at March 31, 2009 2:27 PM

I agree totally with lechacal and think we're in a similar position. We sold earlier, are renting now, could buy now if we wanted, but are waiting patiently for better prices we're convinced will come along (and more choice, since inventory is at last starting to go up). There is no way we're close to the bottom since 1Q is the first one that really shows the beginnings of a decline. Sellers are still largely in denial though I think that is starting to change. Case in point: I went to an open house in prime Brownstone bklyn this weekend for a beautiful townhouse that was in my opinion very expensive. There was no one there. I told the broker it was out of my price range (I was curious to see the layout) and she basically begged me to make an offer, stating point blank the sellers would definitely accept at least 20% off. That said, even at that price, it would be too much for us since we've reduced our budget. I don't think we're even going to get close to a bottom til 2010 at the earliest.

Posted by: Miss Muffett at March 31, 2009 2:28 PM

HEY, BHO...WHERE THE HELL ARE YOU??? YOU MISSED YOUR OPPORTUNITY.....

March 31 (Bloomberg) -- Boston’s John Hancock Tower, New
England’s tallest skyscraper, was sold at auction to Normandy Real Estate Partners and Five Mile Capital Partners LLC for $661 million, about half of what it traded for just three years ago.

Posted by: daveinbedstuy at March 31, 2009 2:43 PM

Not so sure Lechacal would go so far as to agree with Miss Muffet and predict 50 percent off in prime Brooklyn. Would you, Lechacal?

In the past, he has said:

"Single family and multi-family properties in prime areas will have a softer landing than other property classes."

"Those who think the brownstone market will collapse and we will end up back in the 1970s are simply mistaken."

Posted by: mopar at March 31, 2009 2:58 PM

Ditto to Miss Muffett and lechacal (with whom, it seems, I share a similar professional situation as well as a similar real estate situation (and outlook)). I am currently capable of buying and would like to do so but am holding off because of the possibility/likelihood of further price declines.

Posted by: brooklynguy at March 31, 2009 3:01 PM

"What--what will happen to you when all comes crashing down? How are we all not connected?"

I will live on..

"What, you've been watching too much TV. There is more demand for US debt than there was before the crisis, which is reflected in the rate that the treasury has to pay on new issues."

Joe pay attention!

Quantitative easing

http://en.wikipedia.org/wiki/Quantitative_easing

The term quantitative easing refers to the creation of a pre-determined quantity of new money 'out of thin air'[1] through open market operations by a central bank as the start of a process to increase the money supply. It can, more simply, be understood as an indirect method of printing money. This new money is injected into the private banking system when the accounts of the vendors of the securities purchased by the central bank through the open market operations are credited.

Japan and China has been SELLING long Dated Bonds this year, not buying them! The next explosion is the BOND MARKET Joe!

"There's over 10Tr of debt and China owns 200Bn of it. 75%of our debt is owned by persons IN the US. If you are so worried that there will be no demand for US debt, why hasn't its price reflected your fears?"

And they will start to buy assets around the world and feed their own Citizens! Look at the Bond Auctions and that will tell the story. The FED had to put a floor under the Bond market because they don't want a failed auction!

"Incidently, lots of countries have defaulted on debt in their own currency, but they are countries that had a lot of debt in OTHER currencies, which bankrupted them when their own currency devalued. we're not in that position. "

Oh no??? Remember one thing Joe plenty of "Shot Callers" got shot with their own statements! Don't be one of them...

The What

Someday this war is gonna end..

Posted by: Return of The What at March 31, 2009 3:13 PM

mopar, I try to avoid putting my name behind predictions of specific price levels. You will see most of my views are directional rather than target-based. I think Muffett and I largely agree. She has been vilified by a lot of the regular users for reasons that escape me. Maybe she was rude or nasty when I wasn't looking, but to me her views always seem considered and reasonable. It may be that I expect less of a decline in prime properties than she does, but directionally we are in the same camp.

Posted by: lechacal at March 31, 2009 3:17 PM

What doesn't understand that Japan, and to a greater extent China, are engaged in their own massive quantitative easing.

Posted by: daveinbedstuy at March 31, 2009 3:46 PM

Well, we all agree prices are declining.

Posted by: mopar at March 31, 2009 4:18 PM

Group hug!

Posted by: SnarkSlope at March 31, 2009 4:24 PM

"Maybe the rich will move to Switzerland..."

You didn't hear? They're cracking down on havens.

***Bid half off peak comps***

Posted by: Brownstones Half Off at March 31, 2009 4:47 PM

"Is there some new entitlement program that I missed???"

Yeah, it's called full doc.

***Bid half off peak comps***

Posted by: Brownstones Half Off at March 31, 2009 4:49 PM

Hey Lechacal:

What about this one...?

http://www.streeteasy.com/nyc/sale/396259-multi-135-berkeley-place-park-slope-brooklyn

Posted by: 11217 at March 31, 2009 4:54 PM

"The Sheriff is on his way"

ROTFLMMFAO

***Bid half off peak comps***

Posted by: Brownstones Half Off at March 31, 2009 5:00 PM

It says the listing has been pulled - can't seem to get the info. That's my block as you know.

Posted by: lechacal at March 31, 2009 5:16 PM

Oh, you're right about it being pulled. That's odd...it was just listed yesterday.

I do recall that it's your block....I wonder what happened to it...

Posted by: 11217 at March 31, 2009 5:27 PM

Nothing You missed nothing. They should have never went up in the first place because of that jerk of Greenspan that kept interest rates close to zero for so long. I don't get any interst on my CD just so sleezball homeowners can call themselves homeowners? You want to be a homeowner then you have to own your house non of this zero percent down nonsense. Work for your money and then buy a home. And if you want to rent rent decent places out not garbage. Stop begging for your 400 dollar rebate checks and stop crying that property taxes are going up and you can't raise rents! Remember when you were kicking out seniors and children because of the market demanding higher rents well the suckeling has stopped no more brest feeding for you greedy homeowners.

Posted by: hannible at March 31, 2009 5:36 PM

Lechacal – I was not rude/nasty when you weren’t looking. I think the earlier vilification of me was due to my early stance about imminent declines (I was vocal about this long before the crash). Some evidently found it obnoxious that I sold at what I considered the peak (and now, in retrospect, was) and was predicting price declines. I never claimed to be smarter, just lucky, and frankly, the writing has been on the wall for a long time (really since the sub-prime crisis began) for anyone who has followed NYC RE closely, as I have.

I also agree with your approach focused on direction rather than specific % of decline. I have no idea what the final percentage will be and it’s not as if I “want” NYC RE to crash for all of the other complex reasons discussed here, that is, what it means for the city as a whole – I live this daily since so much of what’s happening in the economy is interrelated, so while RE is getting cheaper, so too is the budget of my kids’ public school at risk (this very school being the reason we sold our previous place, to rent in our school zone of choice).

As I’ve also stated here, given the 300% increases of the last 10 years in NY RE, I do think the market could withstand a 50% decrease that would primarily hurt those who bought in last few years who now have to sell, and that many longtime homeowners would not necessarily suffer a huge loss compared to their initial purchase (if they’ve owned for longer than 5-7 years). And I do think the declines will be substantial, and they’ve barely begun. But I realize that the way a 50%+ decline would affect the city is very complicated, and as LP poignantly points out, there are real human beings behind all of this. And I, like most people I think, feel this crisis in a very personal way. Although I thank my lucky stars to have cashed out at a good time, many people close to me are suffering, including my immediate family. As we have seen our other assets shrink enormously, and we cling to our jobs with hope and nervousness, we have become much more conservative in our financial planning, with the biggest ticket item being our next home. For me, this is a time for great caution, not gloating.

Posted by: Miss Muffett at March 31, 2009 7:49 PM

"I do think the market could withstand a 50% decrease that would primarily hurt those who bought in last few years"

You assume an insignificant proportion of HELOC's. But to the contrary, examples abound. This was not just a home price boom but a refi boom as well. -50% will smash many.

***Bid half off peak comps***

Posted by: Brownstones Half Off at April 1, 2009 8:35 AM

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