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April 9, 2009

Manhattan Housing Prices Take a Dive

740-Park-Avenue-0409.jpgTough times across the river. The grim first quarter stats—volume down 60 percent, average co-op prices down 24 percent—may only be the tip of the iceberg. Particularly hard hit is the high end of the market, where 350 listings clog the slow-moving pipeline of $10 million-plus properties. (Official condo sales price numbers held up, but that's only because of long-standing contracts finally closing; condos still on the market are at a virtual stand-still.) Those who need to sell are having to resort to massive discounts: One philanthropist recently had to cut the original asking price on her 17-room West End Avenue apartment of $13.5 million by 46 percent to get a deal done, and even then she had to chop the space up into two apartments to find buyers. Jonathan Miller points to the lack of available credit for big purchases—any loan above $729,750 is harder to get and more expensive than conforming loans. It certainly doesn't bode well for more expensive properties in Brooklyn, but at least we have more condos and co-ops that can be bought using conforming loans!
Housing Slump Hits Manhattan [NY Times]
Photo by yujie




Posted by Brownstoner at 9:29 AM | Comments (48)
Categories: Market

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Comments

I would not dispute housing prices weakening but I do find this NYTimes article very poor reporting.
As said yesterday, average sales price has little meaning...
want mean price and mean price per sq foot.
Also article begins by stating that Manhattan is beginning a long slump. That is stating as fact which only is conjecture and speculation.

And as usual NYTimes is so Manhattan focused and obsessed - how little they report on the rest (vast majority) of NYC or the metro area.

Posted by: Petebklyn at April 9, 2009 9:57 AM

729,750 is an odd number.
Where does that come from?
I know it come from Miller Samuels, but has that always
been the limit of a conforming loan?
If so, I have learned something this morning.


Posted by: sam at April 9, 2009 9:59 AM


wait... can you clear that up? I thought conforming was
$ 417,000 in NY.

Posted by: eastriver at April 9, 2009 10:01 AM

How many people are in the market for $10 million plus properties? And if you have that much money, is a mortgage going to be that hard to get, no matter the new restrictions?

The mind boggles.

Posted by: Montrose Morris at April 9, 2009 10:02 AM

729,750 is an even number.

Posted by: lechacal at April 9, 2009 10:03 AM

Its also a prime number.

Posted by: daveinbedstuy at April 9, 2009 10:05 AM

Sam, the former limit for a conforming loan (i.e., a loan that can be purchased by the government sponsored entities Fannie Mae and Freddie Mac) was $417k. It remains to this day $417k throughout most of the country but in certain, higher priced areas (mainly on the coasts) the limit was raised to $729,750 I believe around a year ago when the government started to take over these entities (though I could be wrong on timing). Don't know how they came up with that $729k figure, agreed its an odd number, but then I never could figure out why it used to be $417k either.

Posted by: bkhabitant at April 9, 2009 10:07 AM

Hey DIBS:
Apparently you cut elementary school one times too many.

Posted by: leftmanhattanneverlookedback at April 9, 2009 10:11 AM

Somebody needs a remedial math class.

Posted by: SnarkSlope at April 9, 2009 10:12 AM

Don't know if it's a prime number DIBS but it's certainly not a standard one.

Posted by: the chicken at April 9, 2009 10:13 AM

If it's an even number, then it is divisible by two and thus not a prime number.

Class dismissed.

Posted by: SnarkSlope at April 9, 2009 10:18 AM

thanks snark. guys, your middle school math teachers are throwing up in their mouths somewhere. and pete, you want median. mean is another word for average; it's skewed up by big tickets.

Posted by: joe_the_bummer at April 9, 2009 10:21 AM

Though I am no expert, as I understand it 729,750 is the number that represents the new maximum conforming loan before you hit jumbo. Loans under this will have a lower interest rate than those above that. Only a few banks are doing this, however.

Posted by: MR at April 9, 2009 10:26 AM

has anybody tried to get a jumbo loan? from what I understand you cant get a Jumbo for more then around 600,000 even though the gov says it is 730,00. Wont matter for most brownstones though. The spread s huge between conforming and non and I dont think that will chage much. Obama dont care about rich people or speculators.

Posted by: brickoven at April 9, 2009 10:27 AM

Sam;

The conforming loan limit is determined by Freddie Mac and Fannie Mae. Basically, it represents the biggest loan they will purchase in their role to create a secondary market for loan originations. How Fannie and Freddie determine this number is beyond me.

I agree with PeteBklyn that this is a poorly-written article.

I'll repeat my mantra: the only way to analyze a market is to look at average sales price (ASP) on a per-square-foot basis, for properties in the same class (example: Manhattan condos). Stories about folks lowering their asking price make for great reading, but does not indicate anything about the actual market. As a hypothetical example: if someone purchases a place for $1M in 2004, asks for $2.5M in 2009, and settles for $1.8M, the ASP has gone up, not down.

Posted by: benson at April 9, 2009 10:28 AM

benson, thanks.
I'm just suprised that the figure is such an odd (as in not rounded out) number. 729,750 is a pretty big mortgage though. I can see why banks would want to classify anything above this as a "jumbo".
I think the figure used to be a million, but I may be mis-remembering.
I have personally never borrowed more than $500,000 to buy anything.

Posted by: sam at April 9, 2009 10:37 AM

Someone took the bait, I see. Glad you remember your grade school math.

Posted by: daveinbedstuy at April 9, 2009 10:39 AM

Mistake to rely on anecdotal for evidence in residential: NYT says

One philanthropist recently had to cut the original asking price on her 17-room West End Avenue apartment of $13.5 million by 46 percent to get a deal done, and even then she had to chop the space up into two apartments to find

Betcha ask was out of line, combination not completed - just a wall down, size way usual for that area compared to CPW and apartment generally quirky.

Posted by: chrishavens at April 9, 2009 10:41 AM

bottom line: If you wish to buy real estate today you better have a lot of money saved up and sitting in a nice money market fund or boxspring mattress.


Posted by: sam at April 9, 2009 10:44 AM

Sam;

Actually,the conforming loan limit used to be lower. I don't remember the exact number, but it was something on the order of $500,000. It was only recently moved up to this limit. It was part of the stimulus plan. Maybe that explains the screwy number - probably derived by some Senate staffer at 11.30PM at night.

Your bottom line advice is correct.

Posted by: benson at April 9, 2009 10:53 AM

the old jumbo size was something in the 400s, and one of the early govt responses to the crisis was to get fannie and freddie to raise it. The reason it matters is that securities cut out of pools of loans that fannie and freddie buy ("conforming" loans) are guaranteed by the government. so investors accept very low interest on them, knowing that the risk of loss is the same as the risk of loss on treasury bonds. This savings gets passed through to homebuyers.

Jumbo loans are not "conforming". they are securitized by investment banks. the credit risk is mitigated by subordination instead of government guarantees: some investor takes the "first loss" from the pool (slight oversimplification) to make the remaining "second loss" less risky.

The two securitization processes are similar, but the former product is not considered a "credit" markets product, because there is no borrower-related credit risk in the payment of interest and principal.

In the latter, there is, and that makes it part of the "credit markets", which are frozen. That means investors require a huge interest rate to take the risk, and that COST is passed on to borrowers.

Expanding the conforming limit up into the 700s allows more borrowers to get the interest cost savings passed through to them, because more loans can qualify for the government guarantee.

This is actually a good thing for high-end homebuyers. But still, for mortgages in the millions, you're out in the cold.


Posted by: joe_the_bummer at April 9, 2009 10:59 AM

I saw your bait DIBS and raised it but sadly no-one took my bait :(

Posted by: the chicken at April 9, 2009 11:06 AM

Jumbo mortgages just set record defaults for March. Dave is that you?

Posted by: brickoven at April 9, 2009 11:08 AM

If one thinks about the situation rationally, one is left with the conclusion that current home prices in middle-class neighborhoods of Brooklyn are grossly inflated. Without 10% down deals, most new buyers will not be able to afford a house. Americans are notoriously bad at saving but brilliant at speculating and leveraging. Without the latter, it only leaves people like me in a position to buy, and frankly, the last thing I want to do right now is buy more real estate in NYC.


Posted by: sam at April 9, 2009 11:11 AM

if easy real estate profits via Manhattan ppties are drying up, so too will high end ppty sales in BK. Easy to rollover profits from Man ppty sale into expensive BK ppty but quite different if source of down paymt, etc. is via paychk savings.

but come 2 think of it, how many of these super hi-end sellers would even consider moving to BK? Not saying none but have 2 assume only a very small # right?

Am more concerned, BK ppty price wise, with studio to 2-bdrm units in Man not selling or selling with huge discount. Would expect more probable that this set of folks consider rolling over profits to buy in BK

Posted by: more4less at April 9, 2009 11:16 AM

fyi, the calculation is by county, not city. For high cost areas, the maximum for a single family is $729.75K. For a for family, it is almost double that.

The CY2009 basic standard mortgage limits for FHA insured loans from Fannie/Freddie are:

One-family Two-family Three-family Four-family
$417,000.00 $533,850.00 $645,300.00 $801,950.00

High cost area limits are subject to a ceiling based on a percent of the Freddie Mac Loan limits The ceilings for CY2009 are:
One-family Two-family Three-family Four-family
$729,750.00 $934,200.00 $1,129,250.00 $1,403,400.00

see: https://entp.hud.gov/idapp/html/hicost1.cfm

Posted by: Stuart at April 9, 2009 11:26 AM

brickoven...some of us can put more than 20% down.

Posted by: daveinbedstuy at April 9, 2009 11:28 AM

I have a feeling many who are selling their high-end apartments in manhattan are looking either to move back in with their parents or to rent at the Y.

Posted by: sam at April 9, 2009 11:30 AM

Sam,

that could be probable if their parents own a CASTLE somewhere (ie parents worth gazillions still)

Posted by: more4less at April 9, 2009 11:33 AM

sam - zing!

Posted by: SnarkSlope at April 9, 2009 11:33 AM

more4less...i agree with you on who the BK buyers will be. Suffice it to say that there are still thousands of manhattan 1 & 2 bedroom condo owners with huge profits even at reduced prices.

Posted by: daveinbedstuy at April 9, 2009 11:33 AM

It's fun to stay at the Y.....M......C..A !!!

Posted by: benson at April 9, 2009 11:39 AM

dave,
very few folks in Manhattan will sell right now unles they absolutely HAVE to sell, ie: they are in over their heads and will not make anything on the sale. It is wishful thinking to think someone sitting on a lot of equity in a Manhattan co-op or house will sell at the low-point of the market so as to fulfill their lifelong dream of moving to Brooklyn. Am I being too cynical? Where are these golden people? Most people with tons of equity in Manhattan are old-timers most of whom still think that Brooklyn is quite a few rungs beneath them socially and economically.

Posted by: sam at April 9, 2009 11:41 AM

benson, do you really know what that song is about???

Posted by: daveinbedstuy at April 9, 2009 11:41 AM

DIBS;

Yup!

Posted by: benson at April 9, 2009 11:43 AM

I'm banking on those Man condo profits to cash me out of my place when I sell. I've been dying to sell since last June but had a huge obstacle - ie the WIFE is not on-board with my sell, rent, buy later plan. Should've asked for veto power when I gave her da rock

Posted by: more4less at April 9, 2009 11:43 AM

dave,
tell us what that song is all about.
I assumed it was about a police officer, construction worker and indian chief seeking safe, economical acommodation at the Young Mens' Christian Association.


Posted by: sam at April 9, 2009 11:54 AM

> "benson, do you really know what that song is about???"

Yes, it amuses and confuses me that straight people insist on playing this song at wedding receptions, etc.

Posted by: SnarkSlope at April 9, 2009 11:54 AM

Let's take it to the OT

Posted by: daveinbedstuy at April 9, 2009 11:54 AM

Chris Havens:

The West End number was not a sloppy combo with just a wall down. Its original owner was Harry Belafonte!

I remember the place as a kid. It was the biggest apartment I'd ever seen! The grandest fun house on the planet! And right inside the door was a life-size, full-figure oil portrait of the Great One in a Calypso outfit! Sure, I had friends on Central Park West, but this apartment put their places in the shade!

Belafonte, an acquaintance of my parents, bought the ENTIRE building back in the 50's because no high-end rental in Manhattan would lease to blacks. And over the years he sold the apartments one by one for a fortune.

Sweet revenge. (And the kind of real-estate acumen Brownstoners can only fantasize about!)

Nostalgic on Park Avenue

Posted by: NOP at April 9, 2009 8:39 PM

Got here late today.

Stuart has the correct information. The new 2009 limits aka 729k won't start until May 1st. FHA loans have those limits now but you will have to wait until May 1st for the Fannie/Freddie product which is a better product and cheaper as well.

These are called conforming jumbo loans. They carry a slightly higher interest rate than TRUE conforming loans aka 417k for 1 units, etc.. for 2, 3 and 4.

adahill@approvedfunding.com

Happy Easter and Passover... I'm heading to Florida to catch some rays.

Posted by: Adam Dahill at April 9, 2009 8:52 PM

"...at least we have more condos and co-ops that can be bought using conforming loans!"

Glass 1% full.

***Bid half off peak comps***

Posted by: Brownstones Half Off at April 9, 2009 9:49 PM

"Manhattan was spared some of the housing problems the rest of the country faced during this downturn. The mortgage foreclosure rate in Manhattan remains low even today."

Use the same speedy foreclosure process as in other states and the rate in Manhattan would spike overnight. Severely flawed comparison. NYC foreclosure process is notoriously slow.


"While thousands of condos were built here, most were bought by homeowners, not speculators, as was common in Miami and other oversaturated markets."

Yeah rrrrrrriiiiiggghhhht. Homeowners speculated that RE only went up and that they could refinance or sell if cash dried up. It was always touted as an "investment".


"But Manhattan housing prices were driven higher by record earnings and bonuses on Wall Street, and they fell hard when the music stopped last fall."

And what was this if not speculation (on Main St to afford pre-war on Park Ave)?


"Condominiums under construction have been hit particularly hard, especially because new mortgage rules have made it difficult for buyers to get conventional loans unless 70 percent of the apartments in a building are in contract."

70%? Damn! Talk about musical chairs.


"...buyers were offered a chance to 'rent to own,' and a promise that Rockrose would buy back an apartment after five years at 110 percent of the purchase price."

110 percent? Yeah rrrrriiiiiiggghhhht. Rockrose will be bankrupt by then. Empty ass promise.

***Bid half off peak comps***

Posted by: Brownstones Half Off at April 9, 2009 10:32 PM

"I'll repeat my mantra: the only way to analyze a market is to look at average sales price (ASP) on a per-square-foot basis, for properties in the same class (example: Manhattan condos)."

Why do all that work? Just follow NY S&P Case-Shiller Index. Although it only calculates resale prices of SFH's, it shadows the percent changes of the rest of NYC and brownstone Brooklyn prices to a 'T'. Everything up about +200% (3-fold), just like the index. Market bottoms when the YOY price comparison gets its positive sign back. Piece of cake.


"the old jumbo size was something in the 400s, and one of the early govt responses to the crisis was to get fannie and freddie to raise it"

It's called price-fixing. It's supposed to be illegal.


"but come 2 think of it, how many of these super hi-end sellers would even consider moving to BK? Not saying none but have 2 assume only a very small # right?"

Right, more4less. In their eyes, Brooklyn is even more fringe since the collapse.


"the WIFE is not on-board with my sell, rent, buy later plan"

Estrogen rules.

***Bid half off peak comps***

Posted by: Brownstones Half Off at April 9, 2009 11:22 PM

"Tough times across the river."

You're not looking across the river. You're looking into a mirror.

***Bid half off peak comps***

Posted by: Brownstones Half Off at April 9, 2009 11:24 PM

Real Estate has always been a long wait, unless you have to sell. Tough times not just across the river, but everywhere including Brooklyn too. I just can't understand how people can spent $2 million to live near the projects, low income or near a prison. Perhaps I must be to conservative.

Posted by: CECILIA at April 10, 2009 12:19 AM

"Perhaps I must be to conservative."

No, you're too sane. You need to drink some koolaid.

***Bid half off peak comps***

Posted by: Brownstones Half Off at April 10, 2009 10:43 AM

Hurray 1500 dollars for a two bedroom in Carroll Gardens! Who would have ever thought. I am still waiting to see 1100. I will let you know when we are there.

Posted by: hannible at April 10, 2009 9:46 PM

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