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March 9, 2009
Where and When Will The Market Bottom?
Most people interviewed in this weekend Times article about New York's real estate market finding its bottom seem to agree that prices so far have come down about 25 percent; how much further they have to fall is a matter of more varied opinion, though it sounds like 10 or 15 percent would be a consensus range. Which means we could be closer to the bottom than past cycles would suggest. “Even if the New York market were to end up being 35 to 45 percent down,” he said, “to the degree we’re seeing deals done at 30 to 32 percent down anyway, it’s not very far away.” What may happen, some speculate, is that the correction, however brutal, could be accelerated into a shorter time period that last go-round. “It’s possible that rather than seeing price declines spread out over a six-year period, this time it could be concentrated in a two-year period,” said Ingrid Gould Ellen, co-director of the Furman Center for Real Estate and Urban Policy at NYU's School of Law. That possibility, along with the fact that there are plenty of folks waiting in the wings wanting to buy, has the brokerage community cautiously optimistic that the real estate business may avoid having a lost decade. After all, what broker's need to get paid are transactions more than high prices.
Looking for Bottom in N.Y. Real Estate [NY Times]
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Comments
Let me take a stab at it..
We are going back to 1996 prices and tight bank lending. You fill in the dots, Dumbasses...
The What (Taste the rainbow)
Someday this war is gonna end...
Posted by: Return of The What at March 9, 2009 9:14 AM
Why 1996??
Posted by: daveinbedstuy at March 9, 2009 9:18 AM
Why 1996 well because Mother Teresa received the honorary U.S. citizenship in 1996
Posted by: dutchman at March 9, 2009 9:25 AM
"Why 1996??"
Because the market is at 12 year low Dave and God help us if we breach today. All gains made in the last 12 years will be vaporized! The collapse of the Mutant Asset Bubble is spewing radiation all over the financial landscape and life as we know it will not be able to sustain itself...
The What (Game over)
Someday this war is gonna end...
Posted by: Return of The What at March 9, 2009 9:26 AM
Ahhhhh, now its all beginning to make sense.
Posted by: daveinbedstuy at March 9, 2009 9:28 AM
The market will not bottom until the collapse of the FIRE economy is complete. Present prices and rents are entirely supported by an industry that subsisted entirely on economic rent. That is over.
In time, new industries will move to the city - but the employees will earn an income much more similar to the national average.
Now, it is entirely possible - although I consider it unlikely - that the federal government will inflate us out of this mess, so nominal prices and rents may stay the same. My point is that the days of a 120-year old wood-framed shack in Greenwood Heights selling for the price of a ranch house in Greenwich are over, forever.
Posted by: Polemicist at March 9, 2009 9:32 AM
Given that the prices have been supported by the same FIRE bubble, will we see the price of that theoretical Greenwich ranch house plummet as well?
Posted by: SnarkSlope at March 9, 2009 9:41 AM
I was thinking of getting a wood-framed summer home in Greenwood.
Posted by: dittoburg at March 9, 2009 9:51 AM
What,
12 year low for the stock market should not automatically equate to 12 year low for house prices. For one thing, one is looking at the equity component while the other is looking at enterprise values.
Before you come back with your hallmark insults, remember that I am on Team Bear and a card-carrying member of the rational thought brigade. Just pointing out the error in your argument.
Posted by: the chicken at March 9, 2009 10:00 AM
This article was all about condos and co-ops in Manhattan.
Obviously the brownstone townhouse market is linked in many ways to the Manhattan apartment market, but it's more complicated than just, "If a Park Avenue co-op falls 25%, so will a brownstone in Park Slope."
Posted by: NorthHeights at March 9, 2009 10:03 AM
550,000 dollar "Luxury Condos" will now have to go for no more more than 160-170,000 dollars. Maintance costs will have to go down to 20 or 30 dollars no more thousands of dollars to walk your dog nonsense. Rents are going to have to come down to affordable levels for working families. Considering the President is talking about a 31 gross income, then if a worker is making 30,000 dollars he should be paying no more than 800.00 dollars for a decent appartment. And I do mean decent no more 10 to an apartment. But to get to all of this we need to see many of the old real estate brokers who pumped up the market in the first place go out of business. They are feeling mighty stupid now. You still go into some real estate brokers and they still have the gaul to say real estate prices are not coming down. Okay! Just turn around and walk out
Posted by: hannible at March 9, 2009 10:03 AM
"12 year low for the stock market should not automatically equate to 12 year low for house prices. For one thing, one is looking at the equity component while the other is looking at enterprise values."
The "Make believe" price gains of the last 12 years are getting vaporized! It's happing right in front of your face. End of story...
The What
Someday this war is gonna end...
Posted by: Return of The What at March 9, 2009 10:13 AM
that's not my point. How do you know that houses aren't going to go back to 1980 levels?
Posted by: the chicken at March 9, 2009 10:16 AM
Maintenance charges coming down, hannible??? ROTFLMMFAO
Posted by: daveinbedstuy at March 9, 2009 10:19 AM
"that's not my point. How do you know that houses aren't going to go back to 1980 levels?"
You better pray that never happens. The Assheads will be Goose Stepping in the streets..
Chicken knock it off there will be a crash not annihilation....
The What
Someday this war is gonna end...
Posted by: Return of The What at March 9, 2009 10:21 AM
Hello folks;
I have a comment regarding the Times' article, and then a question for Team Bear, which I hope provokes a debate,rather than the usual mud-slinging.
First, I would like to know where the Times came up with the 25% figure. What is the basis? I see no evidence (yet) of a drop of this magnitude in the NY real estate market, in terms of average selling price (ASP). I am in the sales and marketing area (non-real estate) and in my mind, the only way to rationally track a market is in the average selling price, per appropriate market segement (condos,coops,towhnouses by Brooklyn, Manhattan,etc.). Discounts off the asking price are meaningless. The asking price only represents the wishes or delusions of the seller, but does not represent the actual market movements. Where is the report stating a 25% drop in ASP?
All I can say is that in the condo complex I live in in Park Slope, the drop in sales price has been on the order of 4%, so far.
If you agree to using ASP to track the market,then my question to Team Bear is this: Given that some of you have predicted declines of up to 50% in the NY market, what is the historical precedent for such a prediction? For instance, in the Great Depression, the stock market lost more than 90% of its value, yet from what I have read real estate dropped by about 25%. To take a personal example: I used to own a two family house in Brooklyn that was built in 1928 and sold for $16,000. At the end of the depression, it was selling for $12,000. In 1961, it sold for about the original sale price again.
I will state my position again, as a member of Team Bull. I know that the market will decline, for sure. My prediction is that the ASP will decline by about 20%, or slightly less. I make this prediction because the problem in NY is not one of oversupply, like we have seen in Arizona and other areas. At the peak, the rate of build in NYC was 30,000 units a year, 1% of the total hosuing stock. Rather, what we are seeing in NYC is a very bad economy in the FIRE sector. Contrary to what Polemecist states, I believe it will eventually rebound, though it may take more than a decade. THE FIRE sector is the heart of NYC's economy. It has been for decades, and will continue to be.
Again, I urge a debate, not derision or invective.
Posted by: benson at March 9, 2009 10:24 AM
"For instance, in the Great Depression, the stock market lost more than 90% of its value, yet from what I have read real estate dropped by about 25%."
Was there a corresponding run-up in prices before the Depression? I think one thing that will contribute to a rather large plummet in prices here is the unsustainable price hikes of the past few years that preceded this economic crash.
Posted by: SnarkSlope at March 9, 2009 10:27 AM
Hannible, if those luxury condos drop to a price where it doesn't make sense to build, there will be very little new construction. This could lead to a housing shortage which then could help prices. Though of course, this is also predicated on the fact that there are more people moving here for jobs, which may not be here. This also may cause NYC to be less wealthy and not attractive for new businesses and less tax dollars. Which then leads to us becoming no less attractive than (fill in the blank middle of the road metropolis, like Boston or Philly).
Wake up to the New America.
Posted by: NewYawker at March 9, 2009 10:30 AM
I love that elevator metaphor, brownie. Beautiful!
My take:
"Looking for Bottom in N.Y. Real Estate" - article
Looking for a bottom in a bottomless pit. Genious.
"Hall F. Willkie, the president of Brown Harris Stevens, said he, too, would be surprised by a decline that large [-40% from peak]. 'A lot of negative things would have to happen in the general economy,' he said." -article
Brain dead.
"Just how much further prices will dive may depend more on how soon and how generously banks resume lending than on the recovery of Wall Street or the end of the recession." -article
Brain dead. You can't jumpstart a collapsing Ponzi scheme. You gotta start a new one. Home prices won't recover until Wall Street recovers (the next Ponzi scheme or set therof). The recession has already ended. The depression has begun.
"When will we know when the market has reached the bottom?" - article
When the monthly NY Case-Shiller Home Price Index records zero change from the previous year of any given month, stupid.
" 'It’s [inventory] right now the highest since I started tracking in 1999,' Mr. Miller said." - article
But but but Team Bull says inventory is tight.
"Indeed, both Ms. Herman and Ms. Liebman note that this recession differs from previous ones in that there are buyers on the sidelines this time." -article
Lying sack of shit. Home ownership, inside and outside NYC, was at a record high. No one was turned down. Most people bought, taxi drivers and all. Most people are now underwater or foreclosed on (won't be buying for a while if at all). Very few are on the sidelines.
"Buyers are not hesitating to walk in and bid 40 percent off the price" - article
Oh shit! Getting awfully close to half.
"If per-capita incomes were to revert to twice the national average (versus more recent measures of three times the national average), condo prices would need to fall by 58 percent to match the price-to-income ratios of the late 1990s, before the run-up in the real estate market, according to the analysis." -article
Oh shit! That's over half! Payback (deleverage from overleverage) is a bitch. That's what happens when you fuck with the fundamentals.
"The leveling of the boom may strike condos and co-ops differently...Co-op boards, however, could damage themselves, he said, if they become too picky with buyers." - article
So, in other words, the catastrhophic price collapse ('lowering of the boom' my ass) may strike condos and co-ops ALL THE SAME.
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 10:30 AM
"You better pray that never happens. The Assheads will be Goose Stepping in the streets..
Chicken knock it off there will be a crash not annihilation....
The What
Someday this war is gonna end...
Posted by: Return of The What at March 9, 2009 10:21 AM"
Are you not guilty of what you accuse Team Bull of then? Calling it how you would like it to be, not what you think it will be.
It's not that I believe that is where prices are heading, I'm more interested in your thought process for where you think the bottom is.
Posted by: the chicken at March 9, 2009 10:31 AM
Benson --In '29, there wasn't the toxic symbiosis between equity prices and housing prices that there is now. Housing was a key component in the Ponzi up this time; it seems likely it will have to crater in the painful adjustment down.
Posted by: Whuh at March 9, 2009 10:32 AM
Sociologically speaking, the tide seems to be turning. i went to a few open houses yesterday and they were PACKED. I saw tons of people walking around Windsor Terrace and Park Slope with those little real estate print-offs and folders. It was odd, felt like '05 or something. Granted, the nice weather had something to do with it, but I kept overhearing people discussing different apartments and there seemed to be a real sense that people were interested in buying again.
Posted by: WTbound at March 9, 2009 10:33 AM
What is this "FIRE" acronym please?
Benson, a couple of responses:
1. The comments about a 25% drop may be coming from realtors and others who have a good view on prices for properties that are going into contract now (rather than the relatively old data we usually chew over).
2. In the depression, the primary bubble was in stocks, not real estate. The bursting stock market bubble dragged down housing prices. This time it is the other way around, and the bursting of the real estate bubble is dragging down stocks. The performance of the housing market this time has already been worse than during the depression.
Posted by: lechacal at March 9, 2009 10:37 AM
benson...a one bedroom condo in the building I came from on the UES just sold at the same price as mine did when I sold it in August, 2007...and it didn't have a kitchen or bath as nice as mine. Anecdotal, yes.
Additionally, there are far fewer places for sale in Bed Stuy now than there were when I bought in early 2007.
Posted by: daveinbedstuy at March 9, 2009 10:37 AM
Polemicist,
I too think prices locally will tank, but I don't think NYC salaries and housing prices will ever come close to the national average. Most cities in this country are strip mall infested urban sprawl cultural wastelands. NYC will remain one of the top destinations for the brightest and most ambitious young people graduating from college. Try living in Miami after living in NYC and you'll be bored out of your mind, despite the nice weather and the beaches.
No doubt Wall Street is immensely important to our local economy, and it's collapse will structurally change real estate prices for years to come, but fortunately there are many many other benefits NYC lords over the rest of this country that will continue to thrive.
Posted by: IronBalls at March 9, 2009 10:38 AM
"Given that some of you have predicted declines of up to 50% in the NY market, what is the historical precedent for such a prediction?
Again, I urge a debate, not derision or invective.
Posted by: benson at March 9, 2009 10:24 AM"
Benson, part of the reason why what has happened over the last 2 years has caught so many people by surprise has been in part due to over-reliance on precedence.
When people say that the market is much more sophisticated and efficient today, they don't take into account that previous generations thought they were at the forefront of financial investments. Future generations will look back at us, shake their heads, and say "how sad that they thought they had mastered risk" - meanwhile creating their own traps to fall into.
Posted by: the chicken at March 9, 2009 10:38 AM
Polemecist - Cities have been a draw to the worlds best and brightest (in the non-ironic sense of the term) for centuries and there is no reason that this will change as a result of the economic depression; if anything societies ecological awareness as well as the threat of global warming should accelerate the trend here in the U.S. Therefore if demand for living in urban areas continues - cities (and NY as one of the most dynamic) will continue to demand a premium in terms of price per sq ft.
I also take exception with the notion that price declines in RE will happen quickly (if severe) and then reverse. A much more likely scenario is that prices will fall rapidly, then as the economy stabilizes so will RE prices - HOWEVER as the economy 'threatens' recovery the price for all these rescues will come due - Inflation - which the Govt will try to control with higher interest rates - which will raise the cost of borrowing and AGAIN lower the price of housing (in real terms);.....add in the demographic changes taking place (aging population) and it is easy to predict housing as a capital appreciation "investment" is DEAD for at least a generation (that is 20years - give or take)
Posted by: fsrg at March 9, 2009 10:38 AM
WTbound: I don't think prices have come down anywhere near enough to spark real buying interest in places like Park Slope. There might be plenty of lookers, but I would bet my reputation that actual sales volume and prices will keep falling for a while before there is any pickup. There is of course not much we can do other than offer our respective predictions. Time will be an impartial judge.
Posted by: lechacal at March 9, 2009 10:42 AM
Condo/Co-op prices might come down but I'd bet the monthly charges will never drop, they will only increase.
The carrying charges pay the real estate tax, common electric, heat, etc. Until those expenses drop the monthly charge wont drop.
I'd say you are more likely to get a $550,000 condo for $200,000 before you'd see a $1,200 a month charge cut to $600.
Common charges wont drop until building expenses drop. And expenses don't drop, ever, no matter what the economy is doing.
Posted by: christopher at March 9, 2009 10:44 AM
I went to an open house this weekend and it seemed a bit more lively than what I've seen lately.
But maybe those other folks were like me: Looking around and waiting for further price cuts (the apartment in question had been reduced once but was still, in my opinion, significantly overpriced based on comps in the same building).
Posted by: SnarkSlope at March 9, 2009 10:47 AM
christopher - maintenance charges may never drop - but expenses sure have - the increase in RE taxes is more then offset by this years plunge in Oil (heat) prices and the overall decline in Insurance prices (since a high point in about 05)
Posted by: fsrg at March 9, 2009 10:47 AM
Look Chicken If we go in to Annihilation, the Political landscape will be "Scorched Earth" with a Fascist State in place! Just take a look in History and everytime these events happened the people suffered very badly! Here take a look at this:
Weimar Republic
http://en.wikipedia.org/wiki/Weimar_Republic
The Weimar Republic ( Weimarer Republik was the democratic and republican period of Germany from 1919 to 1933. Following World War I, the republic emerged from the German Revolution in November 1918. In 1919 a national assembly convened in the city of Weimar, where a new constitution for the German Reich was written, to be adopted on 11 August. The attempt to re-establish Germany as a liberal democracy eventually failed 14 years later with the ascent of Adolf Hitler and the Nazi Party in 1933. Although technically the 1919 Weimar constitution was never officially invalidated, the legal measures taken by the Nazi government in February and March 1933, commonly known as Gleichschaltung, destroyed the mechanisms of democracy. Therefore 1933 is usually seen as the end of the Weimar Republic and as the beginning of Hitler's "Third Reich".
Those people had to carry a wheelbarrow of money to buy a loaf of bread! There are plenty of Dumbasses in America can and will start Sh*t like this if we have a all out crash! This is why I have changed my tune lately because I know if things get real bad the dumbasses will Goose Step in the streets and "House Prices" wont mean dick...
The What
Someday this war is gonna end..
Posted by: Return of The What at March 9, 2009 10:47 AM
This is an interesting resource if you want to see actual changes in sale prices in Manhattan. It takes a few minutes to learn how to navigate. Once you are able to find individual apartments that have sold recently you can see price history. There are some that are selling below the last sale price. http://manhattan.blockshopper.com/cities
Posted by: lechacal at March 9, 2009 10:48 AM
Even you don't believe that shit, What.
Posted by: daveinbedstuy at March 9, 2009 10:49 AM
Here is an example of a sale below last sale price. http://manhattan.blockshopper.com/property/1015131315/150_e_85th_street/
Note that many of the apartments don't have prior sale history.
Posted by: lechacal at March 9, 2009 10:50 AM
Godwin's Law is now in play.
Posted by: SnarkSlope at March 9, 2009 10:51 AM
Another one... http://manhattan.blockshopper.com/property/1015131141/171_e_84th_street/
Obviously some are selling above last sale price, some below.
Posted by: lechacal at March 9, 2009 10:53 AM
Benson,
I was speaking with an economist who was presenting a talk on social programs during the Depression who told me (or admitted - he was arguing that there was more leverage in the system then than today) that people regularly put down 50% downpayments on their homes in those days and had 5 year mortgages. That's why real estate didn't suffer too much - it wasn't overly leveraged.
Posted by: Brooklynnative at March 9, 2009 10:54 AM
The open house I went to was busy but it also featured a broker who insisted, repeatedly and audibly, that the sellers would "entertain all offers." The psychology has shifted...
Posted by: Whuh at March 9, 2009 10:56 AM
"For instance, in the Great Depression, the stock market lost more than 90% of its value, yet from what I have read real estate dropped by about 25%. To take a personal example: I used to own a two family house in Brooklyn that was built in 1928 and sold for $16,000. At the end of the depression, it was selling for $12,000. In 1961, it sold for about the original sale price again."
Please cite what you have read, Benson. I do not believe that NYC real estate fell only 25% from the peak after the Crash of '29. Your personal example lacks detail. Was the house sold immediately after it was built before the crash or maybe right after, like 1930? Where is your info coming from, propertyshark?
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 10:59 AM
"christopher - maintenance charges may never drop - but expenses sure have - the increase in RE taxes is more then offset by this years plunge in Oil (heat) prices and the overall decline in Insurance prices (since a high point in about 05)"
Posted by: fsrg at March 9, 2009 10:47 AM
Sure, oil prices have dropped, lately, but what about the times when they spike? How about replacing a roof, windows, or a facade? Condos/Co-ops keep cash reserves for such instances. Some years these expenses go down, some years they go up. Some years they spike (remember $5 a gallon gas?).
The maintenance charges won't go down because they are used not only for daily operating expenses but for cushion in anticipation in a rise in operating costs. Some years this creates a big reserve, other years the reserve gets depleted due to the higher expenses.
Posted by: christopher at March 9, 2009 11:00 AM
Ah yes, thanks for reminding me, Whuh. The broker told me, as I was on my way out, that the sellers were "motivated" and would consider "all offers."
Posted by: SnarkSlope at March 9, 2009 11:00 AM
Folks;
FIRE= Finance, Insurance and Real Estate.
Whuh and all: point taken that in our present day scenario it is real estate that is at the heart of the economic troubles. However, please consider that in the Great Depression the economic damage was much deeper: 25% unemployment, 1000's of bank failures and a near-total collapse of global trade. It just strikes me that the level of economic meltdown required to bring prices in NYC down by 50% is much higher than what we are witnessing.
Let's take another example: the collapse of Houston's RE market in the 80's, due to the precipitous collapse of oil prices back then. In the case of Houston, you are talking about a city that is much more a one-industry town: the energy industry. In that case, prices fell by about 25%. NYC has a much more diversified economy.
I agree with FSRQ in the way that this will play out. After the price collapse, real estate will essentially stay flat for at least a decade, if not more. As I mentioned in the case of the house I previously owned: after the depression, it did not climb back to its 1928 price level until 1961.
Posted by: benson at March 9, 2009 11:01 AM
"Even you don't believe that sh*t, What.
If someone told you in 1996 that the World Trade Center will be destroyed on September 11, 2001, would you believe that??????!!! We are in some "Strange days" and the sad thing is everybody is still asleep... The US Government has gave away over 1.5 Trillion dollars of Taxpayer money and there is no bottom in sight. Why I'm shifting gears now because the Mutant Asset Bubble is worse than I expected...
The What(Taste the rainbow)
Someday this war is gonna end...
Posted by: Return of The What at March 9, 2009 11:02 AM
The problem with the What's assertion of the next "Great Depression" hinges on one important fact. For that to occur, the rest of the world would have to stop investing in the U.S. and there would have to be a flight AWAY from the dollar.
According to this, the exact opposite is happening...
http://www.nytimes.com/2009/03/09/business/09dollar.html?_r=1&hp
Posted by: 11217 at March 9, 2009 11:02 AM
Yes, look at the Euro, the Pound & the Yen.
Posted by: daveinbedstuy at March 9, 2009 11:04 AM
Price of a condo in Brooklyn Hieghts 150,000 dollars
Price of a 4 Family Brownstone in Carroll Gardens 500,000 dollars
Seeing greedy real estate brokers like Cocorean go out of business? Priceless
Posted by: hannible at March 9, 2009 11:04 AM
BTW, I also went to 3 open houses yesterday with friends who are looking to make the move from Manhattan to Brooklyn and I wouldn't say they were packed, but definitely bustling. I did see a lot of people walking around with those real estate flyers yesterday.
The sheer fact that people are looking means there is still money out there. By the way the doom and gloom people are talking on here, why would people even boerth to look if they were as broke as you make it seem?
Just because The What is broke doesn't mean we all are. I've saved more in the last 4 months that in any 4 month period IN MY LIFE!
Posted by: 11217 at March 9, 2009 11:04 AM
11217 you know not of what you speak. The US $ will go up, not down in a depression. Prices fall, $ rises, very simple. Fact that the US $ is going up supports the deflation argument.
Posted by: Brooklynnative at March 9, 2009 11:04 AM
Benson - not sure your numbers are accurate. Check out www.dqnews.com, which tracks real estate prices by zip code on a quarterly basis (y-o-y) numbers. According to that, Park slope is down 26% from Q4 2007 to Q4 2008.
Posted by: xanadu at March 9, 2009 11:04 AM
And this is NOT a Godwin Law analogy!!! You have nuts like Rush Limbaughh coming out of the woodwork now!!! Be careful..
The What
Someday this war is gonna end...
Posted by: Return of The What at March 9, 2009 11:05 AM
FSRQ,
"Maintenance charges may never drop - but expenses sure have - the increase in RE taxes is more then offset by this years plunge in Oil (heat) prices and the overall decline in Insurance prices (since a high point in about 05)".
Not according to my own personal experience operating apartment buildings locally:
1) The huge increase in RE taxes is absolutely NOT offset by any other savings whatsoever. My income has declined largely because of RE tax increases.
2) Building heating costs are the highest they've ever been this year despite oil prices on Wall Street.
3) Insurance prices have not decreased since 2005. They've increased steadily.
Where do you get your numbers from?
Posted by: IronBalls at March 9, 2009 11:06 AM
Brooklynnative, that was not my point. My point is that some on here have been saying that once China and the rest stop buying up U.S. debt, etc, we are f*cked.
That does not appear to be happening. Despite everything that's happened, the dollar is still attractive.
The end of the world is not near.
Posted by: 11217 at March 9, 2009 11:08 AM
"The problem with the What's assertion of the next "Great Depression" hinges on one important fact. For that to occur, the rest of the world would have to stop investing in the U.S. and there would have to be a flight AWAY from the dollar."
That's right Dumbass and guess what??? There will be a crash in the Bond market very soon, that's when the Greater Depression gets underway! The same thing happen in 1931..
The What
Someday this war is gonna end..
Posted by: Return of The What at March 9, 2009 11:10 AM
You made reference to the "Great Depression." The argument you must meant was hyper-inflation. Two very different scenarios, mutually exclusive. Rising $ supports deflationary argument which the Fed is a hell of a lot more scarred of than inflation. Maybe the What fears inflation, but the powers that be are scarred shitless about deflation.
Posted by: Brooklynnative at March 9, 2009 11:12 AM
this is an interesting read:
http://www.huppi.com/kangaroo/Timeline.htm
At the end of 1930, unemployment went from 3.2% to 8.7%.
At the end of 1931, it rose to 15.9%.
At the end of 1932, it rose to 23.6%.
Using the U6 definition of unemployment, which is more comparable to the definition used back then, the US is currently at 16% unemployment - and over a similar timeframe.
I'm not suggesting this is where unemployment will get to but it is interesting that the country is on the same trajectory.
Posted by: the chicken at March 9, 2009 11:12 AM
What, the Treasury bond market will not crash. Yes, prices are going to fall for two reasons: Selling treasuries to get back into riskier assets (stocks) and, eventually, inflation will rise. But the bond market will not crash.
Posted by: daveinbedstuy at March 9, 2009 11:13 AM
Here's the link to make it easy. Tracks median price changes & sales volume by zip code. Notice that East New York and Sunset Park have already hit 45% -- and that is based on last quarter of 2008, which should be sales that happened before the market crashed.
http://www.dqnews.com/Charts/Quarterly-Charts/NYC-Charts/ZIPNY.aspx
Posted by: xanadu at March 9, 2009 11:13 AM
Xanadu;
I wouldn't put too much stock in these statistics. Tracking on a quarterly basis is treacherous in these times, given the low volume of sales. For instance, notice that in one Park Slope zip code (11215) it is showing a 25% decline in median sales price, whereas in 11217 it showed a gain of about 3%. I think it is best to compare prices on a yarly basis, so that the statistics can be based on a larger sample size.
The numbers I cited above are those in my own 46 unit condo complex. In my mind, this is a more controlled experiment in that all the units are the same (3 bedrooms) and so you are making an apple-to-apple comparison. The peak price fetched was $1.06M in late 2007. The last sale, 2 months ago, was aboout $1.02M.
Posted by: benson at March 9, 2009 11:18 AM
Thanks for that link xanadu. Very interesting.
11217 has dropped 2.8%.
Posted by: 11217 at March 9, 2009 11:20 AM
Oh sorry...I see it went up 2.8%. Nevermind.
The market is tanking.
Posted by: 11217 at March 9, 2009 11:21 AM
Iron Balls -
Heating Oil is down approx 30% year over year (true not as much as spot prices) and since in most buildings this is the largest expense its decline offsets RE tax increases (albeit this year and oil may yet rise again)
see :http://www.nyserda.org/Energy_Information/nyepd.asp
and Insurance (overall inc Liability) is DOWN - almost 40% - it was running close to $500 a rm in a decent outerboro building (inc lead paint) and is now closer to $300 a rm. If you arent benefiting you should shop around.
Posted by: fsrg at March 9, 2009 11:23 AM
The other very interesting thing to note is that 11215 sales volume INCREASED 5% while prices dropped 26%.
Meanwhile in 11217, Sales volume decreased 29% while prices rose 2.8%.
Obviously these quarterly numbers (as Benson said) are not reflective of the big picture, but I find them interesting nonetheless.
Posted by: 11217 at March 9, 2009 11:26 AM
The thing that our bull vs bear arguments always skirts around is the larger implications for our society if the crash is as pronounced as it seems it might be. If it is possible for prices to decline by half without a breakdown of our financial, political and social systems and if such a crash makes it possible for other young families to buy houses then the crash doesn't look so scary. If for this to happen a NYC in the 70's type scenario comes to pass then buying a brownstone at "half off" will be a massively pyrrhic victory.
I truly hope for the first of these situations but I am uncertain of how such an important commodity as housing can fall so far without a concurrent fall in other standard of living indices. Anyone have a theory for how this could happen?
Posted by: wasder at March 9, 2009 11:26 AM
As a current seller with a property in Park Slope -I took the price I would have gotten let's say a year ago and lopped off 50K from that for my Asking Price. I also used some current comps and some comps that were roughly a year old to come up with my asp.
but I also looked around at the properties selling within a 5 block radius and realized many were insanely overpriced.
We had an open house yesterday that had a good turnout according to our brokers.
Posted by: gemini10 at March 9, 2009 11:27 AM
Benson - annual numbers would be great - if broken down by zip code. Do you have a link to that info? The trouble with city-wide or even borough-wide statistics is that obviously there is a huge difference neighborhood by neighborhood in nyc. www.therealdeal.com had some interesting statistics for manhattan (diff between ask & sales price, etc.) but I can't find better numbers for brooklyn by 'hood. even if there is an issue with quarterly numbers, I think it is interesting to see the trends by neighborhood - which after all make a lot of sense (ie, not surprising that East New York and Sunset Park crashed first b/c that's where the bulk of foreclosures happened last year). The dqnews info also has median price per square foot...so that's helpful.
Obviously, to do the real analysis you have to get very granular. Personally, I have been looking to buy for years, so when I look at comparables on propertyshark, or the nyc finance dept for the Heights and Cobble Hill (where I'm looking), I have sadly seen most of the listings in person.
In a way, I almost don't want to buy, because then my whole real estate hobby will end. It's so much better than sports.
Also, I am love love loving the way brokers treat me now (and that is as good an indicator as comps). That IS priceless, as hannible notes.
Posted by: xanadu at March 9, 2009 11:30 AM
oh just noticed that it looks like you can buy the annualized data from dqnews & order other custom reports by zip code (archived quarterly numbers etc). that's pretty interesting, but I am not quite willing to fork over $100 for it...maybe after first quarter 2008 comes in.
Posted by: xanadu at March 9, 2009 11:36 AM
FSRQ,
I do shop around. Your numbers don't reflect reality for multi-family apartment buildings. True, insurance costs haven't increased dramatically in the last few years, but aside from dropping a little after having sky rocketed immediately post 9/11, they keep going up, not going down. The prices I get are the same that most landlords get.
Your point, I believe, was that fuel and insurance costs have offset the increases in RE taxes, and that just simply isn't accurate.
The city is currently taking about 33% of gross income in real estate taxes. It's an absurdly high amount and even if there were slight savings in fuel or insurance, which there isn't, it wouldn't dent the nut the city is pillaging pre-income tax from NYC landlords.
Posted by: IronBalls at March 9, 2009 11:48 AM
"there are buyers on the sidelines this time."
http://www.nytimes.com/2009/03/09/nyregion/09foreclosure.html?ref=nyregion
Posted by: East New York at March 9, 2009 11:54 AM
"If for this to happen a NYC in the 70's type scenario comes to pass then buying a brownstone at "half off" will be a massively pyrrhic victory."
Wasder;
Excellent point,and one that I think Miss Muffett misses. I can assure you,as someone who came of age in NYC in the 70's, that the last thing people were thinking is "This is a great time to buy", just as there are few takers in the stock market right now. If indeed the largest city in the United States and one of the major centers of finance and arts in the world is seeing a 50% reduction in the price of homes, we will be in a new world indeed, one where the price of a brownstone will be of trivial importance. If indeed this comes to pass, all bets are off as to what would subsequently happen.
Posted by: benson at March 9, 2009 12:11 PM
Wasder, I have been discussing these same points for a few months now. Having been a life long New Yorker, I have seen some good and bad times. If prices drop back to a more 'affordable' level, the consequences will be less taxes and may be less resources and amenities.
I saw a white flight happen when I was a child. My immigrant family was too poor to move to the suburbs. Unfortunately, crime increased ( I was mugged several times as a kid). Though fortunately, I was able to get a good education through the more 'affordable' catholic school system. but I am unsure if my kids will be able to get a good education in NYC.
I now have a young family and wonder if my kids can get a good education in the public school system, if there are not incredibly bright. And I can't afford private schools.
It is a tough dilemma. I saw NYC turn around and become not a place you wanted to move away from (and I didn't). But now I wonder if I will need to if things become more affordable and therefore less desirable.
Posted by: NewYawker at March 9, 2009 12:12 PM
Benson -
I don't know much about Houston inthe 80's, but I would guess the floor of the drop being around 25% had more to do with the assymetric nature of housing prices than anything else. We are probably much further along the hockey stick today in NY than Houston was in that time. As many often point out, you have to live soemwhere so a certain base of wealth is always going to be spent on housing. I'm guessing that both Houston and NY in the depression had big cut in the amount of wealth, but little change to the % of wealth spent on housing (Again, I admit this my impressions and I have no real hard facts backing this up.) Today in NY we have the double barrel of people realizing they spent way too much of their wealth on housing and having that collective wealth cut significantly.
Posted by: Ledbury at March 9, 2009 12:17 PM
Sorry Iron Balls - my numbers are accurate and up to date, I write the checks and negotiate the price - I know what I pay. Are you really going to argue that Heating Oil hasnt fallen by at least 1/3 this heating season????? (granted it has been a bit colder this year) - and in ANY multifamily building a 30% decline in Oil is no "slight savings"
I am not arguing that RE taxes are low - I am arguing that expenses can and do fall (and with deflation in the construction trade that new roof, Local Law 11 work, etc.... that Christopher referenced will likely fall as well). So while your Condo/Coop maintenance bill may not decline - if the current trends continue (lower oil, lower Ins and lower construction costs) then you should protest because the difference is likely just being taken as a 'vig' by your management company.
Posted by: fsrg at March 9, 2009 12:20 PM
frsq,
The financing goes both ways, with mutli-family brownstone types and condo/co-ops alike. There are years where the income is well beyond the expenses, but then there are stretches where the income might fall short of the expenses.
Regardless of what oil is today there is no guarantee it will be that in 6, 12, 24 months, etc. Contractors might be dropping rates now, but a year ago you had to pay out the nose because they had tons of options (I don't need a roof now, if I did I might get it at a huge savings. I might need a new roof in 5-7 years. What will it cost then? Could be less than now, could be double).
What about vacancy rates? If a landlord has a vacant apartment his income might be coming up short on expenses. If a certain % of condo/coops are vacant and no one is paying the carrying charges (absentee/foreclosure/new construct never sold/etc) it causes a loss to the owner/developer/manager. Expenses are a lot more than just RE tax, oil/gas, and insurance. Water? Electric?
The occasional drop in building expenses rarely off set the long term rise in overall operational costs.
Posted by: christopher at March 9, 2009 12:29 PM
Christopher - "The occasional drop in building expenses rarely off set the long term rise in overall operational costs."
That is true - because generally our economy has some long-term inflation - but if your Coop/Condo Board & Management Co raised your fees in the last 3-5 years due to the unusual (hyper) inflation in Fuel, Insurance and trades (likely) then within the next 12mo if the prices remain where they are residents should be demanding a reduction (not withstanding the increase in property taxes)- trust me - if the management co sees extra $ lying around - they will find a way to spend it (and get their piece) - one way or another.
Posted by: fsrg at March 9, 2009 12:39 PM
fsrq,
If I was a condo/co-op owner I might ask for a reduction. But at the same time I'd want to know my building had a solid reserve to weather any trouble. Co-ops, well run ones at least, generally have tens, if not hundreds of thousands in reserve. That is not "extra" lying around to be spent, but rather cushion for an unforeseen expense or a spike in costs.
I would definitely say that if expenses remain flat so should monthly fees, but I would also argue (admittedly with no personal NYC condo/co-op experience) that as an owner I'd want my building to have cash on hand and I'd vote to fire a management company that felt it needed to spend every penny before I'd vote for a reduction in monthly fees.
Monthly maintenance charges aren't fun, but a bankrupt building is worse.
imho...
Posted by: christopher at March 9, 2009 12:45 PM
I closed on my house in 11215 on Friday, half block from the park. Both attorneys, had 2 closings in Brooklyn every day last week. Things are selling. Think this will be my last Brownstoner post as I find it really depressing. The amount of negative energy and lack of civic discourse is sad. There's a lot of good that could be done with the energy that would make Brooklyn a better place. What a goal, root for housing to go down so you can get a better price. Let's root for more people to die at home so the Emergency Room won't be busy if you neeed it. It's that attitude of being deaf to others suffering that enabled all the sub-prime mess to take place. Lend money and not care who borrows, because you're going to pass it on to someone else to deal with. Get outside and sweep the sidewalk in front of where you live, water a tree, do something.
Posted by: Jebby at March 9, 2009 1:11 PM
"Think this will be my last Brownstoner post as I find it really depressing."
jebby--all the more reason to stay around and pitch in on Team Reasonable, of which I am a founding member. There are actually plenty of nice and reasonable people here but we do tend to get drowned out by the blowhards. Please stick around and represent for the reasonable folks!
Posted by: wasder at March 9, 2009 1:19 PM
Congrats, Jebby. Your point about the tone of economic debate here is well-taken and has been made by many regulars. Not a good source of thougtfulness or insight.
Are you doing any renovating? If so, don't ignore this site's forum just because of the nastiness on the homepages. Still a good source of advice.
Posted by: slopefarm at March 9, 2009 1:22 PM
I hope Jebby's becomes our Quote of the Day, because it's really important for everyone to read what he/she wrote and let it sink in.
Thanks and welcome to the neighborhood. You've picked a fantastic spot!
Posted by: 11217 at March 9, 2009 1:25 PM
Wasder, Thank you. I read this whole thread and couldn't believe this was going on while the world is on edge. We all need to get real in all areas of our lives and this was getting me bummed. Thanks again.
Posted by: Jebby at March 9, 2009 1:26 PM
"Think this will be my last Brownstoner post as I find it really depressing."
I don't blame you. I'd feel the same way if I just paid close to ask near the market peak in the face of a massive price collapse, "La la la...I'm not listening..."
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 1:26 PM
BHO, This is the market peak????? You have no idea what I paid.
Posted by: Jebby at March 9, 2009 1:29 PM
Congratulations, jebby. Pay no attention to the loons. They can't afford anything anyway.
Posted by: daveinbedstuy at March 9, 2009 1:31 PM
It's SO obvious BHO's comments come from pure jealousy.
Don't take them seriously, Jebby. He's in the same category as The What, Hannible and Cornerbodega.
If you skip their posts, you'll be just fine.
And no, not because they are doom and gloom only, but because the way they bring the "information" to us, you'd guess they are missing a chromosome.
Posted by: 11217 at March 9, 2009 1:32 PM
"Get outside and sweep the sidewalk in front of where you live, water a tree, do something."
HEY! I SWEPT my sidewalk this morning!! Get off my case!
Kidding. Congratulations on the new place. Don't go away from here thinking everyone is on the ledge waiting for the end. Not nearly the case.
Posted by: East New York at March 9, 2009 1:36 PM
Jebby congrats!
wish you much luck with your new purchase! People ARE out there buying and selling - maybe not at the frantic pace of a year or so ago - but people are getting deals done and hopefully both sides feel they are coming out of it a winner - that's what you want in a real estate deal. Am sure Jebby feels he got a bargain and I hope the seller does too
it's karma people - karma.
Agreed, go sweep your stoop!
Posted by: gemini10 at March 9, 2009 1:39 PM
Jebby,
You will also notice from the data someone linked above that 11215 saw an UPTICK in sales volume in the last Quarter of 2008. This is good news and goes against every single thing the "bears" talk about here.
All one has to do is go to streeteasy.com and plug in 11215 and see that sales are happening all the time.
Posted by: 11217 at March 9, 2009 1:43 PM
Yes jebby. Leave it to BHO to take your good news and twist it into something hurtful. Best to leave that alone. I closed on a house the week that Lehman crashed and it was nerve-wracking but I haven't looked back. I get nervous as we all do about the larger implications of our financial/economic crisis, but the "value" of the house is only a small factor in a sea of many other more important things. Congrats again and do stick around as we need more folks who are able to be human to each other as opposed to the ones who try to inflict pain for fun.
Posted by: wasder at March 9, 2009 1:46 PM
"I closed on my house in 11215 on Friday, half block from the park. Both attorneys, had 2 closings in Brooklyn every day last week. "
Lies and more lies. I know the seller was happy to get a sucker eh, buyer for that property.
Things are selling.
There sure are just not as many "Things".
Think this will be my last Brownstoner post as I find it really depressing. The amount of negative energy and lack of civic discourse is sad.
Oh just because we are not smoking crack the whole world must agree with you?? Grow a pair!!
There's a lot of good that could be done with the energy that would make Brooklyn a better place.
Brooklyn was allraedy a better place before the Asshead moved in, jacking up the prices!
What a goal, root for housing to go down so you can get a better price.
Yep that's the plan stupid...
Let's root for more people to die at home so the Emergency Room won't be busy if you neeed it.
Let's start with you, you whinniny POS!
It's that attitude of being deaf to others suffering that enabled all the sub-prime mess to take place. Lend money and not care who borrows, because you're going to pass it on to someone else to deal with.
That's what Wall Street has done Dumbass!
Get outside and sweep the sidewalk in front of where you live, water a tree, do something."
I'll take a leak in front of your house or steal your gates, post the address...
Wa Wa Wa Wa stop crying and "enjoy" your house while you still "own" it..
The What (Jebby tasted the rainbow)
Someday this crying is gonna end...
Posted by: Return of The What at March 9, 2009 1:46 PM
There's a reason so many houses have the original detail we all love. For decades, they were places to live, not showpieces or investment vehicles. A return to that philosophy is not a bad thing, although it may be quite painful for some.
Posted by: Heather at March 9, 2009 1:49 PM
Hannible, maintenance includes a building's underlying mortgage as well as other things mentioned above, such as heat, taxes, insurance, and repairs. They are partly tax deductible. Some of the cheapest I have seen are in Jackson Heights on coops that formed in the 1920s and paid off their mortgages long ago. They run about $300 to $500 a month, depending on the size of the apartment. If you own your own brownstone in Brooklyn, you will also pay for these things, in addition to your mortgage. The cost is very similar if you compare it on a per-square-foot basis.
Posted by: mopar at March 9, 2009 1:52 PM
"BHO, This is the market peak????? You have no idea what I paid."
Yoooooouuuuuuu saaaaaaaaiiiiiiiid "this will be my last Brownstoner post".
"What a goal, root for housing to go down so you can get a better price. Let's root for more people to die at home so the Emergency Room won't be busy if you neeed it."
Now now, Jebby. Don't go over the top. That was a baaaaad anology. Lower prices are good for Brooklyn. You go at us, we'll go at you.
Team Bear...We Go Hard We Go Hard...
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 1:56 PM
Since Benson invoked me, let me say that I do understand the implications the current market crash has on broader issues - believe me, I am feeling those as my extended family is personally suffering major reversal of fortunes due to stock market losses. Also, my older child is in public school and the threat of budget cuts are scary in a very real way. Believe me, I get it. That said, since the NYC RE market shot up 300% in 10 years, it also seems very plausible that it can decline 50% in the next few, and still leave us at price levels which historically would have been more "normal" - that is, for example, a Bklyn brownstone that sold for $1million in 1999, then shot up to $3million in 2008, could sell for $1.5million and still represent a healthy appreciation for the original buyer. I'm not saying that this is exactly what will happen - no one knows - but the fear tactics of Team Bull are just as objectionable to me as the callous glee of some members of Team Bear. What does seem very clear to me is that many, many sellers/brokers are still putting extremely unrealistic asking prices out there, and the full impact of this crisis is going to take a while to really show in the RE market as the drying up of cash will really start to happen this year (last year, remember, many people still got decent bonuses, which most likely will not be the case for most this year...)
Posted by: Miss Muffett at March 9, 2009 1:58 PM
"Now now, Jebby. Don't go over the top. That was a baaaaad anology. Lower prices are good for Brooklyn. You go at us, we'll go at you."
Damn BHO when I was gonna chill this Asshead Jebby got me all cranked up again!!
Hey Jebby tell us what the Rainbow taste like, ROTFLMMFAO!!!!!!!
***Bid half off peak comps of Jebby house***
Posted by: Return of The What at March 9, 2009 2:01 PM
"the fear tactics of Team Bull are just as objectionable to me as the callous glee of some members of Team Bear"
I know...I know. Sometimes my glee gets the best of me. I should be more empathetic but it's hard.
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 2:07 PM
" but the fear tactics of Team Bull are just as objectionable to me as the callous glee of some members of Team Bear. "
Whoa whoa whoa... I'm sooooooo sorry that I'm not feeling magnanimous toward the Assheads, Asshats and dumbasses who got caught up in the Kool-Aid of the Mutant Asset Bubble! hey you know what, I had to head that crap for years (RE never goes down) and other nonsense! Now you want me to feel *COUGH* sorry for those retards???
I say Feck 'em let them all lose everything so we can get back to normal business environments....
The What (Taste the rainbow)
Someday this war is gonna end..
Posted by: Return of The What at March 9, 2009 2:12 PM
I didn't buy anything. I don't know if I was too smart or seeing the bailout for loosers that are homeowners I sort of think I was stupid. I am waiting for home prices to go down another 60-70 percent and then start to think about it. I would like to buy but you still see the same faces in the real estate business. Not only banks are suppose to go bankrupt but also real estate agents. It was their sweet talk that started the market ninja bubble.
Posted by: hannible at March 9, 2009 2:22 PM
Now now, don't confuse whiney and whinny.
Posted by: dittoburg at March 9, 2009 2:27 PM
Here's a question to those of you "waiting to buy until the prices fall 50%+"
,
What happens if the prices don't ever fall 50,60, or 70%?
Are those of you waiting for those price drops just never going to buy?
And if you truly want to buy and are willing to adjust your metric, at what point is that? If they drop 30% but then start climbing again are you willing to buy 25% off becuase you waited to long for 30%?
Or are you going to not buy just because it didn't hit 50% off?
And what if it does it 50%? Will you really buy or will you decide to wait until 60%?
Posted by: christopher at March 9, 2009 2:35 PM
Don't expect an intelligent answer to that one, christopher.
Posted by: daveinbedstuy at March 9, 2009 2:40 PM
Miss Muffet;
I'm sorry to hear about your extended family's losses, and wish you the best.
I think one thing you should take into consideration is that home prices in NYC were essentially flat from 1991 to about 2001. Moreover, in the period of 1988 to 1991, home prices declined by about 20%. So, while I agree that the price escalation from 2002 to 2008 was quite high and overdone, it may not be as accelerated as you present in the 10-year snapshot.
You are a good sport,and I wish you and your family only the best in your quest.
Jebby;
Congratulatons on your purchase. Welcome to the neighborhood, and enjoy your new home. Don't let anyone get you down. Please stick around!
Posted by: benson at March 9, 2009 2:49 PM
All of a sudden I'm getting a warm feeling deep inside from WHAT and BOH. I the Asshat moved into Brooklyn in 1954 and haven't lived anywhere else. Is it true that WHAT lives in Lodi, NJ?
Posted by: Jebby at March 9, 2009 2:51 PM
Just figure'd I'd toss it out there DIBS...
... I'm of the "when you are ready to buy, want to buy, and you find a place you love and can afford, you buy, regardless of the market" school of thought.
Just curious about the "waiting for the bottom" people and their view of what they'll do if they miss the bottom, or it never hits their idea of bottom.
Posted by: christopher at March 9, 2009 2:52 PM
I totally agree with you on that school of thought, christopher. I didn't "have to" move to Brooklyn. I actually did it quite impulsively. I had only been to Brooklyn once before that in 1995!!!! I said it was time fopr a change, I want a big house and a big yard and I had coincidentally gone to a baptism at the church at the top of Throop and I realized that Bed Stuy was no longer what I thought it may have been. Bought a place a month later!!!!
Posted by: daveinbedstuy at March 9, 2009 2:58 PM
Christopher: If the market goes up, then I will have bet wrong and will end up worse off than if I bet the other way. And I will be poorer as a result. It's a pretty simple answer, really. Obviously, I am hoping I am right. This isn't the sort of bet that one can efficiently hedge.
That being said, I'm pretty confident in my choice.
Legitimate question though.
Posted by: lechacal at March 9, 2009 3:01 PM
Lechacal,
Thanks for the answer, I get you are hoping for a drop. What I'm really curious about is will you look to buy if the market appears to stabilize at 25% off, let say, Dec 07 prices?
What is your metric? What are you basing "25% off" on?
People keep saying 25%, 50%, etc...
50% off what? Today's price? 2007 price?
I'm honestly curious.
Posted by: christopher at March 9, 2009 3:08 PM
DIBS, Exactly as it should be. People have fallen for Brooklyn and moved in from all over the world for 200 years. Real Estate is not the stock market, it's where you live. There should be no Bear or Bull in real estate. It should be as you and Christopher have stated.
Posted by: Jebby at March 9, 2009 3:09 PM
Christopher/Lechacal: One of the distinguishing characteristics of housing market is its relatively slow speed so I think a major shift will be relatively easy to spot with some leeway. The writing has been on the wall for a long time now about the imminent decline and I think signs of a turnaround (which is almost universally agreed to be far away in NYC, given that the declines have barely begun) would probably be evident to anyone following market closely. So, while I'm not trying to "time the bottom", I also think that missing out is the least of my worries right now. It's not as if suddenly, prices are going to start galloping upwards anytime soon at all. So my strategy is to just wait and wait until we find something we love at a price we can REALLY afford, given that now, as a result of other financial losses, the pot of $ we had put aside for a house will probably also need to be re-allocated in part towards college & retirement savings...
Posted by: Miss Muffett at March 9, 2009 3:09 PM
Christopher: My view of the market is somewhat fuzzy, or put another way there have to be very strong indicators in a particular direction for me to predict movement in that direction. And on top of that, there is a generally inflationary bias, so the default if I am unclear is "buy" rather than "sell/not buy". Right now, based on a large number of factors, I am highly confident in my "sell/not buy" view. At some point I expect to reach "unclear," at which point I will probably buy (again, the default is to buy when uncertain because of the underlying inflationary bias). I just can't tell you when I will get to that point, but as noted all that will be required is the absence of very strong sell signals, so the bar is frankly not all that high.
Posted by: lechacal at March 9, 2009 3:15 PM
Christopher, most of the 50 percent off crowd aren't serious about buying. They don't know anything about real estate and are obsessed with prices. They're the types who buy cheap crap they don't need because some ad in the back of a magazine or late-night infomercial claims it's a steal at six monthly installments of $12.99 and would normally go for $500.
Posted by: mopar at March 9, 2009 3:16 PM
Miss Muffett, as I have said many times, your patience will be rewarded.
Posted by: lechacal at March 9, 2009 3:16 PM
So Christopher, to be a bit more clear, I cannot possibly give you a quantified answer, because that's not how my thinking works. Or in the words of justice Potter Stewart, I will know it when I see it.
Posted by: lechacal at March 9, 2009 3:18 PM
mopar: You are quite wrong, at least with respect to me, although I would not place myself in this mythical "50 percent off crowd".
Posted by: lechacal at March 9, 2009 3:20 PM
Lechacal, Muffett,
Rational responses. Thank you. I hope you guys find the places you want at the prices you want.
And mopar, I agree with you. I posed the question interested in the responses. Lechacal and Muffett's responses make sense. To an extent it's what I did, I waited for a place I really wanted to come along at a price I felt was reasonable based on my own experience, expectations, and comps.
Not hearing from the more hardcore "40-70% off" people confirms for me they are probably not seriously interested in buying. Ever.
Posted by: christopher at March 9, 2009 3:24 PM
mopar, the more I read your post the more absurd it seems. Is a seller who refuses to lower his price "obsessed with prices"? Does that seller "not know anything about real estate"? What a ridiculous position to take that someone who is waiting to buy something for less is to be sneered at for not understanding the game. Pricing is a zero sum game between buyers and sellers, and a buyer who recognizes this in a falling market has simply demonstrated that he is not brain dead. Really, your post makes you sound like a realtor who tries to make buyers feel insecure and unworthy by subtly mocking their desire for thrift.
Posted by: lechacal at March 9, 2009 3:25 PM
There are sellers who don't really want to sell, and buyers who don't really want to buy. I sold my Brownstone in Cobble Hill last year and once I had the first offer, folks who didn't want it started to bid. I made a all cash offer on a house in Park Slope that the seller passed on. When I pulled out they called and knocked 200K off, but I was already on the way to purchasing another house. The deals that happen are due to both parties being into what they are doing and being reasonable. The rest is all games.
Posted by: Jebby at March 9, 2009 3:35 PM
Lechacal, where I am buying real estate is already damn cheap. No need to wait around for further reductions, especially considering how fantastically low interest rates are right now. I wouldn't know about places like Brooklyn Heights or Park Slope because I can't afford them. What makes me different from the 50 percent off crowd is that I don't go around thinking I should be able to afford a $5 million brownstone just because they're located in the same borough or same city as I am. I understand the people who live there are rich and I am not.
Posted by: mopar at March 9, 2009 3:37 PM
" I had coincidentally gone to a baptism at the church at the top of Throop and I realized that Bed Stuy was no longer what I thought it may have been. "
Dave having people peeing on you is not a "baptism".
"All of a sudden I'm getting a warm feeling deep inside from WHAT"
No that "Warn Feeling" is from the Piper digging up your ass for that mortgage payment on a depreciating asset!
"Not hearing from the more hardcore "40-70% off" people confirms for me they are probably not seriously interested in buying. "
Here dumbass here is Warren Buffett who got a Flagpole shoved up his ass last year and if it can happen to him, well.. you know the rest...
Warren Buffett Says Economy Has ‘Fallen Off a Cliff’ (Update4)
http://www.bloomberg.com/apps/news?pid=20601087&sid=a7Osj04vDEK8&refer=home
March 9 (Bloomberg) -- Billionaire Warren Buffett, whose Berkshire Hathaway Inc. posted its worst results ever in 2008, said the economy “has fallen off a cliff” and that efforts to stimulate recovery may lead to inflation higher than the 1970s.
Americans are fearful, confused and changing their buying habits, which is showing up at Berkshire’s operating units, Buffett said during an appearance on the CNBC television network today. While the recession will end and future generations will live better than their parents, the economy “can’t turn around on a dime,” Buffett said, adding that some inflation is appropriate right now.
Wait until the Bond market get a whiff of inflation.....
The What (Taste the rainbow)
Someday this war is gonna end..
Posted by: Return of The What at March 9, 2009 3:51 PM
Yes, exactly What, and that is why real estate in certain areas of Brooklyn is a better buy now than later.
Posted by: mopar at March 9, 2009 3:57 PM
Did you really do that skittles rainbow thing once, What? Was it a guy or a girl???
Posted by: daveinbedstuy at March 9, 2009 4:01 PM
Brownstoner:
Prices are tumbling in Manhattan.
At the high end, Mrs. Astor's and Sting's apartments have been reduced 30% and 20%, respectively, and I don't think a buyer's been found for William Buckley's Park Avenue spread.
In my building (a solid but not vaunted address) the asking price of an available unit has come down 25% while another -- one of the best in the building (floor-through; skyline views, etc.) -- has been pulled off the market, as have a couple of apartments at 740 Park, "the world's most exclusive address" (if you believe the book written about it), where owners with reduced fortunes are anxious to "de-accession."
There's talk of the market going below 5,000 -- and soon. Today's graphs of stocks and unemployment correlate with those from the Great Depression (believe it or not, back then there were upticks in the market even though the trend went down over several years [and those double-digit unemployment rates took years to develop]). Even the "best" co-ops went rental in the 30s as their owners walked away and they were chopped up into (relatively) affordable units. (Why do so many pre-war buildings have odd plans? Because formerly grand apartments were turned into warrens of small units.)
My own building -- Emery Roth, marble and bronze to the gills -- creaked along until the early 70s, when the last of a long line of owners turned it into a co-op. Entry price? Twenty-five thousand bucks! (Still not as good a deal as the Dakota, where my parents passed on three bedrooms for about same price in the 1960s because the West Side was unsafe!)
Can things go so low again -- and take as long to recover? When Greenspan and Buffett respectively confess to their faulty theories and investments, who knows?
If you're looking to buy, wait a (good long) while. If you have a place you like and can afford, sit back and try to relax.
And there's no shame in renting. At a time like this it allows you to roll up your carpets and go where there's opportunity.
Nostalgic on Park Avenue
Posted by: NOP at March 9, 2009 4:01 PM
NOP, thank you for a dose of sanity.
Posted by: Whuh at March 9, 2009 4:12 PM
Whuh and all;
Actually, I have to say that I don't appreciate NOP's post, for several reasons:
a) we've been having a fairly civil discussion on today's thread. I appreciate that most folks have addressed each other by name, and responded to their points. I do not appreciate that NOP addresses his post to "Brownstoner", as if any particular post on the opposite side is not worth addressing.
b) we can all throw anecdotal information back and forth. This does not make for a debate. Can we present some data, be it historical and/or of the present market, as I requested way up at the beginning of this thread?
Posted by: benson at March 9, 2009 4:23 PM
Benson --I think everyone has the freedom to post according to their own lights --unless this somehow became a thread defined by only your parameters. NOP is the voice of reason and calm; I knew someone would find a way to disparage him, because he is counseling prudence.
Posted by: Whuh at March 9, 2009 4:27 PM
"Nostalgic on Park Avenue"
NOP NOOOOOOOOOOOOOOOOOOOOOOOOOOOOO!!!!!!!!!!!!!
You don't know what your talking about!!! Real Estate always goes up!!!!!
My friend Dave move from the UES and brought a Brownstone in Bedford Stuvesant in 2006! It's worth double the price he paid and it will be worth 8.9 million in 2011.
NOP you are jealous of us and you are a hater, right Dave! We show him!
The Insanity
Someday the meds are gonna end...
Posted by: Return of The What at March 9, 2009 4:27 PM
Take my have my mother, a 62 year old former NYC public school teacher who owns her own condo in Long Island who will sell it for a solid profit from when she bought in 1988 and is looking to buy a condo or 1 family here in Brooklyn to be closer to me. We went to an open house for a 1 family in Windsor Terrace 2 weeks ago where this un-renovated 2 BR shack deep into WT is being offered at the insane price of $695K. We pull up, view the place(nothing special) and she astounds me with - "Should I offer my bid today to the broker"?
HUH - what? - um No ma - let me do the talking and please no offering anything
my point is - there are loads of people not tied to the finance world who beleive now is the time to buy because the rates are low and there is perception you are getting a bargain because you can offer less than the asking.
My mom bought when her mortage rate was 13.5% in 1988. She bought then becuase she beleived her condo would appreciate in time and she was right, yes she had to buy at a time where the rates were astronimical, but prices were lower. Am sure people back then were screaming - don't buy don't buy
Posted by: gemini10 at March 9, 2009 4:29 PM
"I do not appreciate that NOP addresses his post to "Brownstoner", as if any particular post on the opposite side is not worth addressing."
Hey Benson If I call you Asstard will you respond to me????
The What (Oh Brother..)
Someday Benson is gonna end...
Posted by: Return of The What at March 9, 2009 4:30 PM
If anyone reads the below posts and thinks that the two posters involved are not one and the same person let me know. I say this not to disparage anyone as many people have multiple logins it would appear. And I appreciate that the BHO persona acknowledged his lack of empathy, but I think that I owe it to the community to point out that there are far too many similarities between the POV, the location (Clinton Hill) and the goals of these two to discount the notion that they are the same person.
"the fear tactics of Team Bull are just as objectionable to me as the callous glee of some members of Team Bear"
I know...I know. Sometimes my glee gets the best of me. I should be more empathetic but it's hard.
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 2:07 PM
" but the fear tactics of Team Bull are just as objectionable to me as the callous glee of some members of Team Bear. "
Whoa whoa whoa... I'm sooooooo sorry that I'm not feeling magnanimous toward the Assheads, Asshats and dumbasses who got caught up in the Kool-Aid of the Mutant Asset Bubble! hey you know what, I had to head that crap for years (RE never goes down) and other nonsense! Now you want me to feel *COUGH* sorry for those retards???
I say Feck 'em let them all lose everything so we can get back to normal business environments....
The What (Taste the rainbow)
Someday this war is gonna end..
Posted by: Return of The What at March 9, 2009 2:12 PM
Posted by: wasder at March 9, 2009 4:31 PM
Whuh;
I am not trying to disparage NOP, nor did I say that his counsel is imprudent. What I did say is that I don't appreciate that he chooses not to take part in the debate that multiple parties - not just I - were engaged in, in a civil manner.
Posted by: benson at March 9, 2009 4:34 PM
Wasder, I think you're onto something. I addressed one of my posts to the two of them a while up the thread because I thought they were saying the exact same thing, but didn't do the math you did.
Posted by: Jebby at March 9, 2009 4:36 PM
"did say is that I don't appreciate that he chooses not to take part in the debate that multiple parties - not just I - were engaged in, in a civil manner."
WWWHHAATTT?????? NOP is one of the sweetest guys on Brownstoner. He states his opinion and leaves..
Benson you just a old bag of wind and I see why you don't want to engage me, just pick on the other kids huh?. Asshead!
"If anyone reads the below posts and thinks that the two posters involved are not one and the same person let me know."
Wasder give it a rest!!!! BHO and The What are two different people! Go shovel the snow or paint your house or something...
The What (Benson tasted the rainbow)
Someday this war is gonna end...
Posted by: Return of The What at March 9, 2009 4:42 PM
Jebby--this has been a long research project for me that comes and goes with how much I care day to day. In this particular case "they" were a little sloppier than normal in pretending to be different entities.
But really, the point is you made a choice, as did I, to buy a house in an uncertain financial climate. I am assuming you did so with a similar level of soul searching and consideration of the larger picture (both financial and lifestyle). If so, nobody can tell you that you made a bad choice because you made the choice that made sense for you. All of this macro-financial bickering is valid of course but never takes into consideration the individual circumstances of the buyer. So chin up and try to let the peanut gallery slide. best of luck to you and congrats again.
Posted by: wasder at March 9, 2009 4:49 PM
yeah you two(Wasder/Jebby) - read my little antecdote about my mom above.
Posted by: gemini10 at March 9, 2009 4:52 PM
"Wasder give it a rest!!!!"
What, love you babe, I really do. But either he is a parasite sucking off your persona (which should piss you off but doesn't seem to) or a variation for you to be able to speak with somewhat more grammatical appropriateness.
Posted by: wasder at March 9, 2009 4:53 PM
Mr. NOP:
With all due respect, do you REALLY believe that these apartments you speak of in Manhattan (Sting, Astor, 15 CPW, etc) are significant in terms of the broader market when we're talking about a 40 million dollar house now being re-isted for 35?
You don't think that perhaps they picked a number out of the sky, didn't get it and then reduced it?
Or do you REALLY believe that apartments at that end of the market actual are based in situations you can graph like the rest of the housing market?
What about the 15 CPW apartment which was bought for $20 million last year and relisted for $80 million a year later?
It now stands at around $40 million after a price chop.
Does that mean the Upper West Side market is down 50%???
The reason they leave out sales at some of these stupidly expensive places is because they defy reason. Using them as an example for the broader doesn't really make much sense to me.
Posted by: 11217 at March 9, 2009 4:56 PM
No one has ever been more consistently civil on here than NOP. By claiming his post was anecdotal, you disparaged it. Remember, that even if prices are only going down for "psychological" reasons --even if the bust is collective hysteria --it does not make you smart to buy a house for $3 million that'll sell for $2.5 in nine months; and for who knows what in five years. You have to get a feel for whether air is entering or exiting the balloon; you have to have lived in this city since before '92, or even '82, to know what its cycles can wreak. In that way, a sense of historical perspective is every bit as helpful as "data," which is only a window into what has already happened --and anyone can tell you that.
Posted by: Whuh at March 9, 2009 4:57 PM
Wasder, Thanks for your thoughtful post. I was not discouraged because I was worried that I had just bought a house. I sold my Cobble Hill house, rented for a year and have now bought. I actually bought as a way to support Brooklyn,Obama and America in my small way. And as an example of how these kind of moves help the economy, on Sunday I had a wonderful stone man looking to redo my facade and two of my new neighbors have now hired him to do theirs. He's got a year's worth of work and my block has new investment in it. To say nothing of the tens of thousands of dollars in taxes the city and state got in the transaction. If you care about where you live you should want this to be happening. I was discouraged at the stupidity and ugliness of people in the thread. I'm really impressed with your research as I thought they were the same in my sub-conscious.
Posted by: Jebby at March 9, 2009 4:59 PM
"What, love you babe, I really do. But either he is a parasite sucking off your persona (which should piss you off but doesn't seem to) or a variation for you to be able to speak with somewhat more grammatical appropriateness."
BHO is the Medicated and Educated version of "The What"....
The What (Iz gotz me teeeth to eatz my skilttles...)
Someday this war is gonna end...
Posted by: Return of The What at March 9, 2009 5:00 PM
"Wasder, Thanks for your thoughtful post."
Translation: "Wasder, Thanks for the hand job."
sold my Cobble Hill house, rented for a year and have now bought. I actually bought as a way to support Brooklyn,Obama and America in my small way.
Translation: I'm just as delusional as everyone else...
"To say nothing of the tens of thousands of dollars in taxes the city and state got in the transaction."
ROTFLMMFAO!!!! Yo stop hogging the joint!
"I'm really impressed with your research as I thought they were the same in my sub-conscious"
Translation: Wasder thanks for shoving that gerbil up my ass, I feel better now...
The What (Damn look at the "Taste the rainbow" line)
Someday this war is gonna end...
Posted by: Return of The What at March 9, 2009 5:06 PM
"BHO is the Medicated and Educated version of "The What"...."
Thanks What. I appreciate the acknowledgement.
Jebby--I hear you about investing in the community where you buy. Similarly I employed a bunch of different tradespeople on my house (facade etc) and felt good about contributing my little part to a larger society. The only thing I will add is that the internet is a really tough place to be a sincere individual. You will get shit for it, no doubt, as many people will not want to hear that you bought your house in part as a means of investing in the greater good. Certainly I believe you but I would feel remiss if I did not warn you of how negatively some people will look on that notion, for reasons that I can't really articulate. I hope you persist in this attitude about life because I am with you, but just be thick skinned as the arrows fly.
Posted by: wasder at March 9, 2009 5:09 PM
"Here's a question to those of you "waiting to buy until the prices fall 50%+"
,
What happens if the prices don't ever fall 50,60, or 70%?
Are those of you waiting for those price drops just never going to buy?
And if you truly want to buy and are willing to adjust your metric, at what point is that? If they drop 30% but then start climbing again are you willing to buy 25% off becuase you waited to long for 30%?
Or are you going to not buy just because it didn't hit 50% off?
And what if it does it 50%? Will you really buy or will you decide to wait until 60%?"
Posted by: christopher at March 9, 2009 2:35 PM
I will be ready to sign a contract no later than the next time the monthly NY Case-Shiller Home Price Index records zero change from the previous year (regardless of half off or not). Very simple. You can't time the market to a 'T' in advance but you can call the bottom when you see it. The data goes back to the late 80's. Test my theory for yourself.
I might overpay sooner because I have a wife to compromise with. But investment properties will be had after the above criteria is met. Or I may optimize my purchase sooner if my bid of half off peak comps gets accepted.
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 5:10 PM
"I might overpay sooner because I have a wife to compromise with."
Last time we had this discussion it was your wife's idea not to buy. Your world sure is topsy turvy.
Posted by: wasder at March 9, 2009 5:14 PM
Wasder, As my grandmother used to say, "don't go looking for oranges in a hardware store". Still got that 60's change the world thing in my blood. Should know at my age that I'm not going to change anyone. Thanks for the web view. This is the only place I have posted as I love Brooklyn and real estate, but it is what it is. Cheers
Posted by: Jebby at March 9, 2009 5:15 PM
I don't know about anyone else, but I've come to skip every single post by BHO and the What.
Too long, too many cut and pasted items. It's not friendly to the eye.
Nor much else.
Posted by: 11217 at March 9, 2009 5:17 PM
"I might overpay sooner because I have a wife to compromise with."
BHO you might have to break out the duck tape for wifey. I know she wants more kids but don't go into the poorhouse...
""BHO is the Medicated and Educated version of "The What"...."
Thanks What. I appreciate the acknowledgement.'
Wasder put the Jack Daniels and Oxycontin down! BHO and I are two different people Dumbass!
The Wasder
Someday this war is gonna end..
Posted by: Return of The What at March 9, 2009 5:18 PM
"Last time we had this discussion it was your wife's idea not to buy."
That can change at the drop of a hat. That's why I said "might".
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 5:21 PM
What---your wife may not appreciate the duct tape reference.
Jebby--do stick around. This is my web home as well and I try to look after those folks who tend towards the Team Reasonable view of the world.
Posted by: wasder at March 9, 2009 5:23 PM
Have fun with it, What. Like "Lodi's Finest". It'll be less frustrating than trying to convince wasder otherwise. He's hopeless. He's the only one on here consistently trying to link us as one. Jebby's suspicion will soon subside. She just needs an outlet right now.
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 5:26 PM
I'll let that back and forth speak for itself and hope other people take notice. Although again, you "two" are not the only ones with multiple login names.
Posted by: wasder at March 9, 2009 5:30 PM
Do people not attribute some of the run-up in housing prices over the last decade in our area due to the fact that we are surrounded by falling down and sometimes decrepit brownstones, which have been slowly undergoing a massive scale renovation sweeping Brownstone Brooklyn?
Wouldn't we expect that homes with new insides and facades would be worth more?
Posted by: 11217 at March 9, 2009 5:31 PM
"I don't know about anyone else, but I've come to skip every single post by BHO and the What."
No, it's not everyone else. It's just you recent buyers. We have nothing positive to say in support of your sky-high but falling appraisal. But you don't REALLY skip - you tend to respond.
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 5:32 PM
"Wouldn't we expect that homes with new insides and facades would be worth more?"
Why do brand new cars depreciate as soon as they are driven off the lot? They become used, pre-owned.
The Ponzi scheme is over.
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 5:36 PM
As much as I respect your financial knowledge BHO I don't think the car analogy is going to get you very far. That being said, the ponzi scheme is indeed over.
Posted by: wasder at March 9, 2009 5:42 PM
11217 --Why would a reno that, however nice, represents a fraction of the overall value of a house increase its worth by 300%? 400%? Leverage was what drove prices, not Wolf ranges.
Posted by: Whuh at March 9, 2009 5:42 PM
I don't think that the average NYC home price went up 400% in 10 years. I think that is more anecdotal than it is a reflection of the market at large.
As I've said before, Park Slope townhouses were selling for a million dollars in 1999. Now they're around 2 million. And the area around 5th Avenue is about 200% nicer than it was in 1999. With FAR less crime, more services and shops, top notch dining and one of the best schools in the city.
I think you like to make generalizations.
Posted by: 11217 at March 9, 2009 5:51 PM
11217:
I qualified my remarks be saying "at the high end of the market."
Scanning the New York Times, it's clear that from Harlem to Long Island, the residential real estate market is tanking. Condos turning rental. People walking away from their deposits. Projects deferred indefinitely. Rising inventories. Foreclosures. All this in the mid to upper-middle market.
I, as did a lot of other people, thought my current apartment's value immune, especially given its location and provenance. Boy, was I wrong!
And my belief flew in the face of my own experience!
Before taking my parents' place, I'd competitively bid for and purchased (for cash) a co-op on a "name" street at the top of the market in 1987. I then saw its value drop 50% in 12 months! And it took a decade for its value to climb back.
The building had great financials and was located in a town house in the heart of an established landmarked district (nothing "up and coming" about it -- it had arrived decades before). And in the mid-90s, when I considered selling, realtors described my apartment as "triple mint."
There wasn't a single taker at that tremendous mark-down!
Luckily, I enjoyed having a place in town and sold it years later for a reasonable profit (blown, together with my original principal, by the market's current down turn!).
So, having lived through the bubbles of 1987, 2000, and today's, you'd think I'd have learned a lesson, i.e., that real estate is as much an emotional as rational decision. But, no! I'm shocked -- shocked! -- by my Manhattan cooperative's decline in value!
Fool me once, shame on you. Fool me twice, shame on me. Fool me three times and it's time to kick back, relax, and take pleasure in a place to live rather than speculate.
NOP
Posted by: NOP at March 9, 2009 6:11 PM
No one was talking about average prices. I'm referring to a decrepit brownstone in Cobble Hill, bought for $900,000 in the nineties, nicely renovated, now asking more than $4 million. This house is not selling for more than 300% more because of the nice renovation.
By what metric is an area "200 % nicer?" Will it be 200% nicer if restaurants and wine bars close? Of course, now that I point out a very possible scenario, which any reasonable purchaser should consider, I'll be called a nattering nabob, who is rooting for the decline of Brooklyn.
Let's face it, the power has shifted to people with good credit, incomes and a downpayment, away from sellers and brokers. You can post on here until the sky turns green, but waiting gets you a cheaper house, and everyone knows it. Only an absolute madman would buy now because someone on here said it was the patriotic thing to do.
Posted by: Whuh at March 9, 2009 6:13 PM
NOP, thank you for the informative and interesting post. I wasn't in NYC in 1987 and did not realize prices on the UES tanked 50 percent in one year. That's amazing. To what do you attribute the quick decline: Financial people losing money in the stock market, lots of coops coming on the market, fill in blank....?
Posted by: mopar at March 9, 2009 6:39 PM
NOP, I have the opposite experience. Same crash you mention, prices went down in the Bay Area but rents did not, dot-com crash, no one employed, thousands of people moving out of SF, housing and rental prices stay high.
Posted by: mopar at March 9, 2009 6:41 PM
Whuh people that buy homes are good savers and the best way to save is not going out to eat. I cook at home and save. I might be cheap but I know how to cook. You want to go out every night and pay the restarants bills go right ahead. I don't care if they all close. I am not spending 20 dollard to eat spagetti with ketcup on it.
Posted by: hannible at March 9, 2009 6:59 PM
Mopar:
Both. People losing money and jobs. Too much inventory. (Mostly co-ops back then; less glamorous but less shakey financially -- with their purchase requirements -- than condos.)
And I don't know what New York's rental market was in the late 80's - early 90's. As a co-op, my building didn't allow rentals, so I couldn't even think of trying it, even though I lived in the city only sporadically. (Once a friend stayed in the place while it was empty. Within three days I got a long-distance call from management!)
That's interesting about San Francisco. But then it continues to be among the most expensive cities in the world.
Chicago, on the other hand, isn't bad. A couple of years ago (in the boom), it was possible to buy a Lake Shore Drive one-bedroom in the famous Mies van der Rohe apartments for $180,000! (Less than half the price of a former maid's room in Manhattan.)
I've started to think about Chicago as a default position. Good food. Good music. Dramatic waterfront. And much cheaper than Manhattan, brownstone Brooklyn, or San Francisco.
NOP
Posted by: NOP at March 9, 2009 7:06 PM
to revisit the posts about the world coming to an end if prices come down 50%, I strongly disagree with this statement.
The world was okay with these prices on the way up, it will be okay with them on the way down.
Accomodation costs take up a huge proportion of the average take-home pay. If that comes down, it leaves that much more disposable income to spend on other goods and services - stimulating the economy that way.
So who actually gets hurt by falling prices? Only those that have viewed houses as investment vehicles.
Posted by: the chicken at March 9, 2009 7:27 PM
"As much as I respect your financial knowledge BHO I don't think the car analogy is going to get you very far."
Why?
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 9:33 PM
As far as I know, a car immediately, without question depreciates the moment it leaves the lot as you say. Say what you will about the current state of the housing market (ie--we are in agreement that housing is a currently depreciating asset), but this is not always the case. There are times where it goes up precipitously, as we have seen, times when it edges up slowly over time in harmony with other asset classes and times when it goes down slowly. But it is not hard and fast like a car. A house is more like a vintage guitar or some other commodity that has the potential to appreciate as it ages, unlike a car which never does so under any circumstances unless it is never used and housed in a museum.
Posted by: wasder at March 9, 2009 9:46 PM
"Fool me three times and it's time to kick back, relax, and take pleasure in a place to live rather than speculate."
I love it NOP! Spot on.
Posted by: wasder at March 9, 2009 9:46 PM
"Is it true that WHAT lives in Lodi, NJ?"
Not true. And in fact not helpful to the cause at hand. What is my neighbor in Clinton Hill near the border of Bed Stuy. BHO similarly lives, one of the many many points of interest that have led me to my conclusion. The Lodi thing is an elaborate joke that deflects attention from the issues at hand.
Posted by: wasder at March 9, 2009 9:49 PM
Meant to say BHO similarly lives in the neighborhood...
Posted by: wasder at March 9, 2009 9:54 PM
FSRQ,
Many buildings in NYC, mine included have gas boilers, not oil. We switched years ago. Con Ed gas prices have gone up, not down. I should have mentioned that fact earlier.
Posted by: IronBalls at March 9, 2009 10:10 PM
NOP and Whuh;
I have to say that I am really taken aback by some of the statements that are being made here.
Whuh, for your information, I was born in this city in 1957, and bought my first house in 1988. I've seen this city go through a few cycles.
Now, let me address some of the statements that is being spread around here:
-the real estate market in NYC did NOT collapse in 1987, at the time of stock market correction. It corrected at the end of 1988, right after I purchased my house. Here is an article that states the same thing:
http://www.tregny.com/content/press_archives/2008/02/04/new-york-residential-real-estate-echoes-1980s-boom-and-bust/
Google "1980's NY real estate bubble" and you will find a whole host of articles that says the same thing. Note also the level of that correction. In may particular case, my house went down 20% in a year, and stayed that way for about 5 years. Basically, if I had decided to sell within those 5 years, my 20% down payment would have been wiped out.
-the real estate collapse of 1988 had nothing to do with the stock market correction of 1987. The stock market correction of 1987 was short-lived. By the end of 1988 the stock market had recovered all of its losses, and was soon to go on to greater gains. Again, I ask all to look at the stock market charts to verify my statements.
-the economy was also fine in 1988. The next recession was in 1991-1992, and it was this recession which brought down the BushI presidency.
-the main reason that real estate corrected in 1988 was the implementation of the new tax laws, which had eradicated the use of passive losses as a shelter against earned income. In the 1980's, many properties were purchased solely for their use as a tax shelter, not based upon their value as an income-producing property. This fed a speculative bubble which collapsed in 1988.
Whuh, I agree on the value of a historical view. In doing so, let's get the facts straight.
Posted by: benson at March 9, 2009 10:23 PM
I meant the renovation of homes, wasder. The original claim by 11217 was...
"Wouldn't we expect that homes with new insides and facades would be worth more?"
Whuh nailed it...
"11217 --Why would a reno that, however nice, represents a fraction of the overall value of a house increase its worth by 300%? 400%? Leverage was what drove prices, not Wolf ranges."
Kitchen renovations were pumped and dumped because in reality they depreciate in value the minute they're used.
I'm tired, I'm probably not making any sense. Zzzzzzz....
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 10:27 PM
Benson:
I don't necessarily see contradictions in your experience and my own. Whether it was 12 months or 15 months after the '87 "crash," we both lost considerable equity for a time.
For my building -- which wasn't purchased by absentee landlords looking for write-offs (that simply wasn't allowed) -- the glut of cooperative apartments (and conversions) at the time helped depress sales. And because virtually all the owners in my building worked on the Street, the '87 collapse segued without interruption into the '91 recession in terms of sales, freezing apartments for the decade, unless owners were willing to take a big bath (which some did).
Because I'd paid cash for the apartment and could ride things out, I wasn't badly affected. But others were (those with mortgages, especially). I stepped out years later with a profit, but as I mentioned, lost everything, both gain and principal, in the current stock market plunge (regardless of my trust officers' "conservative" approach!).
Again, I can afford to ride things out (and through other forms of asset accumulation am well ahead of where I was in the 80's). But every dime from that particular real-estate adventure evaporated.
New York real estate is cyclical. When, where, and in what form people step on and off can create big differences in their gains and losses, even in the same block or building. (My parents had my New York apartment for years before leaving it to me. My situation is entirely different from the Wall Street hotshot who bought 18 months ago.)
My advice is what my grandfather told me when I graduated college: "Look for a place to live and live in it." Decades later, I fully appreciate the old man's words.
NOP
Posted by: NOP at March 9, 2009 11:23 PM
"Look for a place to live and live in it."
But optimize your purchase. We wait for everything else to go on sale. Why not houses?
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 10, 2009 10:07 AM
"We wait for everything else to go on sale. Why not houses?"
Because sometimes that means waiting a matter of years and some people are not as obsessed with the bottom line as you to put their lives on hold while waiting for the optimal deal. Its a matter of priorities. Your main priority is money, mine is comfort.
Posted by: wasder at March 10, 2009 10:39 AM
"the main reason that real estate corrected in 1988 was the implementation of the new tax laws, which had eradicated the use of passive losses as a shelter against earned income. In the 1980's, many properties were purchased solely for their use as a tax shelter, not based upon their value as an income-producing property. This fed a speculative bubble which collapsed in 1988."
Benson, that whole post was marvelous. Thank you. Now that you mention this change in the real estate law, I do remember. Your statement that that is what fueled the crash makes perfect sense.
Also, anyone notice that the change in the capital gains tax (elimination of the one-time life exclusion and no tax if you live in the place and own it for two years) preceeded this most recent bubble? Plus low interest rates of course. And the mortgage bubble.
Posted by: mopar at March 10, 2009 5:14 PM
I'm just looking at this thread two days later and am sure no one will look back at it now, but I just wanted to said "Thank you!" to Jebby, Benson, Nostalgic on Park (I thought you were going to come back to Brooklyn? Come on already!) and the younger set, Wasder, mopar and even the often rude Lechacal and Miss Muffet.
I don't have a lot of time or energy to always pop out one of my long, long, long entries so I mostly read the conversations of others...skipping quite a bit when certain people post endless repartee I don't find adds much of anything positive...or, considering the generation gap, I actually don't follow (!!!).
I have to say I get a kick reading comments and feel a lot of warmth for all the young people who comment on this blog, the one's who feel everything is out of reach, other's who quite fortunate and officious, those who have recently bought a first home...even though the commentors are obviously a self-selected group, they do seem to cut across the population and generation lines.
I find it fascinating to "listen to the conversation", especially because in person, the different people (separated by age, income, "class", etc.) might be very reluctant to converse in the same manner we see on these pages.
Hats off!
Posted by: BrooklynGreene at March 12, 2009 7:27 PM
...although I do have to point out...the commenter pool seems to speak with a rather lower voice than higher one.
Come on, Gals! Don't let the guys dominate the conversation so much!...or maybe it's the guys who have more goof off time all day long at their jobs to post comments.
Where's BayridgeGirl? Luckily, it seems pretty busy! I'm glad.
Posted by: BrooklynGreene at March 12, 2009 7:31 PM
Latest Restaurant Additions
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Park Cafe
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Bahia
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Aqualis Grill
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Wombat
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Organic Heights
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Giardini Pizza
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Rye
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