House of the Day: 465 13th Street

NorthHeights - sure there are some buyers with "fat wallets" but there are fewer and fewer of them, and those wallets are getting thinner. I'm a case in point. I have cash but simply cannot spend as much of it on real estate now. My budget has simply changed since: 1) job security (both mine and my husband's) is a bigger question mark for everyone, and 2) other financial areas in my life portfolio (retirement, college savings) have taken a huge hit. I work for a nonprofit and we are seeing that the really hard year in terms of funding is not 2009, but 2010, when lots of cash will have dried up. Given the market conditions, all indicators point to buyers in NYC becoming more cautious (not less), and sellers more motivated. I suspect the "Biggest Sales" feature in the not-too-distant will start to reflect prices going down much further - though that said, that feature has always been by definition about outliers. Much more telling will be the Open House 6 months later feature, which as we have seen her, IS showing a clear market decline.

Posted by: Miss Muffett at March 23, 2009 3:33 PM

Mopar - sorry but I have to disagree with your analysis of NYC prices. Of course, NYC will always be expensive relative to other parts of the country. But there's a difference between paying 500K for a 2-3 BR apt (what you would pay a few short years ago) and 1 million, which is where things headed in the past few years. Outside of NYC, 500K is still a HELL of a lot of money (even for a whole house!), and still way more than NYC apartments cost in the bad old days. But the heights things reached, especially relative to stable metrics like Case-Shiller, clearly were out of whack, and THAT is why prices must go down (a lot) further. Prices will STILL be very expensive, *even* after big chops - just not absurd and gravity-defying, as they have been until recently.

Posted by: Miss Muffett at March 23, 2009 3:53 PM

Tyburg is right. And the "less prime" areas of other towns are correspondingly WAY lower than the "less prime" areas of NYC. Any way you slice it, NYC prices in the last few years got way out of whack but even if they go down a LOT (I'm talking 2002-2003 prices, and hence 50% declines) they will remain very expensive relative to the rest of the country and much of the world. And to pre-empt those who say NYC is so cheap compared to other "world-class" cities, please note that many of those cities are tanking too (see: London, for example) and there are many precedents for urban bubbles that collapsed precipitously (Hong Kong, etc.).

Posted by: Miss Muffett at March 23, 2009 5:00 PM

Mopar - where are you from, may I ask? I don't quite get your insistence that NY is so affordable. Again, other areas with decent job markets (Bay Area, Boston, etc.) have *much* more affordable housing once you get out of the "elite" areas (that is, the comparable areas you are referring to for NYC) so what you are saying still does not make sense. It's all relative, and NYC is relatively WAY more expensive than even other urban areas, whether in the elite or non-elite areas.

Posted by: Miss Muffett at March 23, 2009 5:21 PM

Sorry Mopar, have to disagree again. I have family in the Bay Area and I know for a fact that housing is much more reasonably priced in decent parts of Berkeley (which I think is fair to compare to Brooklyn) than in the more popular areas of Brooklyn (and I'm not even talking "prime" but more at the fringes i.e. south slope). And Oakland has great deals too. And prices have softened a lot more out there than here so far. For reasons I don't quite get, you seem to have a bee in your bonnet to insist that NYC is much more affordable than others say, but you are really a chorus of one, and frankly, I think you're just wrong.

Posted by: Miss Muffett at March 23, 2009 5:50 PM

Wait, isn't the BART used in both San Fran and Berkeley/Oakland? Of course, it's always hard to compare cities since the NYC borough system is quite different than the surrounding areas of other cities - but my point is that if Manhattan is the business core of NYC, and San Fran the core of Bay area, I do think it's fair to consider Oakland/Berkeley as analogous to NYC boroughs. It is very quick to get to San Fran from these surrounding areas. And the prices are just coming down a lot in Berkeley, that's for sure. Brooklyn is still more expensive but that is likely going to change!

Posted by: Miss Muffett at March 23, 2009 6:16 PM

Squaredrive - I agree that NY should be judged against other urban areas but the fact it is still expensive vs. many other urban areas. People in the boom years were fond of saying how NYC was actually not expensive compared to a few other major cities worldwide, but in this global crisis, many of those other cities are going bust too and along with them, their real estate markets.

And yes, the market does set prices, but the market is not some arbitrary force. It depends on things like salaries, job security, confidence, cash reserves, etc. All of those things are in dwindling supply now (whereas as they were overly abundant during the boom). There is a reason there are boom and bust cycles and we have all the ingredients now for a classic bust. It's one thing for RE prices (or anything in life) to be unfair, it's another for them to be totally irrational, and the kind of pricing that some sellers are still clinging too is totally disconnected from the new market forces, which demand a sharp correction.

Posted by: Miss Muffett at March 23, 2009 9:04 PM

Don't know when you left Berkeley Mopar, but good friends of mine bought a house there not long ago in the $300's. It too went way up in the last few years, but now has gone down a bit. It's probably valued in the 600's (maybe 700K tops) in today's market, for 1600sf+ plus garage, lovely garden, nice neighborhood, near BART, quick trip to San Fran for work, etc. I would love to have such a set up in as good an area of Brooklyn...

Posted by: Miss Muffett at March 23, 2009 9:40 PM