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June 18, 2009
Bank Predicts NYC Market to Fall Another 40 Percent
If a certain bank analyst is to be believed, New York real estate has a long way to go still before reaching bottom. A Time article earlier this week cites a Deutsche Bank report predicting that housing prices in the New York metropolitan area will fall 40 percent from their March levels. The major driver of the bank's estimate is an affordability index that shows New York is still relatively a very pricey place to shack up.
New York Home Prices Forecast to Drop 40% [Time]
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Comments
NYC will always command a premium. DB should stick to analyzing Berlin.
Posted by: denton at June 18, 2009 9:35 AM
At least it's almost summer. It can be quite refreshing to be underwater when the weather's hot!
Posted by: Beau Guest at June 18, 2009 9:36 AM
Err... at a 40% discount, NYC is STILL at a premium. Do you even realize how expensive this city is housing wise?
A $75,000 job here is $48,000 elsewhere for a REASON. It's not the price of coffee.
Posted by: tybur6 at June 18, 2009 9:40 AM
what a crap article. zero value added. how much did they make on advertising by getting people to click on that? it's outrageous what passes for news these days.
I'm going to try to find the real DB article and see if there's any substance to it. By the way, denton, DB has a very reputable research group & is a major presence in the US.
Posted by: joe_the_bummer at June 18, 2009 9:41 AM
It's great to look at affordability, but it ignores two of the major reasons why prices have not fallen as much in New York as the rest of the country: investment and condominium development. New York is one of the few places in the country where rentals are relatively safe long term investment. On top of that, the fact that such a large percentage of available properties are new condos essentially gives the banks control of prices for most of the city.
Posted by: levtoma at June 18, 2009 9:49 AM
This is such a joke. People need to use common sense. Home prices in Vegas and Phoenix can fall 50%+ because there is an ungodly amount of undeveloped land and no constrain on supply. Prices can fall to ridiculous levels in Detroit because no matter how cheap housing is people will not be running to move or invest there. Unless the 40% decline is from 20% inflated asking prices values will not fall that much here. This is one of the 5 best, brightest and most in demand cities in the world people! There are 8 million people here and even in this economic climate more people are arriving everyday. Not to mention people who would want to invest in NYC property. So if prices dropped 40% and a condo that went for $1m in '07 in was now $600k I am pretty sure there would be more than a few people who might be interested in that.
Can values fall that much in places like LIC, Harlem, Crown Heights or other "fringe areas" that were not traditionally strong but really ramped up in the last 5 years? Of course they can. But to have headlines predicting 40% declines in overall NYC housing is just foolish. If prices do fall that much I am becoming a real estate agent. Sure the checks will be smaller but I am sure volume will make up for it. Maybe I just believe in this great city a little too much, but you are not going to convince me otherwise.
Posted by: AndYouWillKnowUsbyTheTrailofRenters at June 18, 2009 9:51 AM
Here's the article on bberg relating to the research.
U.S. Home Prices to Fall 14% More, Deutsche Says (Update1)
2009-06-16 17:54:22.674 GMT
(Adds New York’s decline in fifth paragraph.)
By Brian Louis
June 16 (Bloomberg) -- U.S. home prices may fall another 14 percent, led by the New York and Orange County, California, metropolitan areas, before reaching a bottom as an increase in unemployment offsets lower prices, Deutsche Bank AG said.
“Affordability is no longer the driving issue in the housing market, and we believe prices still have a ways to fall in many areas before home prices reach their trough,” Deutsche Bank analysts led by Karen Weaver, wrote in a report yesterday.
“The bottom is getting closer, but we are not there yet.”
Home prices are forecast to fall 41.7 percent from their peak, Weaver said. That’s higher than a forecast she released in March and reflects “the actual declines to date and the expected future impact on home prices from rising foreclosure inventory and unemployment.”
In March, Deutsche Bank had forecast a 16.5 percent decline in “current-to-trough” prices. While today’s projection is less than that, many metropolitan areas will still see steep declines, the report said.
In the New York metropolitan area they may drop 40.6 percent from the first quarter to the bottom, the report said, less than Deutsche Bank’s March estimate of 47.4 percent.
Financial firms have cut more than 183,000 jobs in the Americas in the global credit crisis, driving down prices and rents in the New York area. In New York City, Manhattan co-op prices slid the most since 1995 in the first quarter, according to data from Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate.
Orange County Declines
The New York metropolitan area’s median home price peaked in the second quarter of 2007 at $552,000 and has since fallen to $446,000, the report said.
Home prices in Orange County, California, are forecast to fall another 19.1 percent, Deutsche Bank said. Prices in the Los Angeles-Long Beach-Glendale metropolitan area may fall another
11.3 percent from the first quarter to the bottom. In Riverside- San Bernardino-Ontario, they may fall 14.3 percent.
California leads the nation in foreclosures. U.S.
foreclosure filings surpassed 300,000 for the third straight month in May and may hit a record 1.8 million in the first half of the year, RealtyTrac Inc. said in a June 11 report.
The U.S. unemployment rate will likely exceed 10 percent by early next year, Deutsche Bank said.
For Related News and Information:
For U.S. housing and mortgage data: HSST For economic data: ECO Stories on mortgages: TNI US MOR Stories on the homebuilding industry: NI HOM Stories on the U.S. housing market: TNI US REL U.S. home foreclosures: HOMFCLOS GP U.S. economic forecasts: ECFC News on mortgage delinquencies: STNI MORDEL Most-read property stories: MNI REL
--Editors: Alan Mirabella, Sharon L. Lynch
To contact the reporter on this story:
Brian Louis in Chicago at +1-312-443-5920 or blouis1@bloomberg.net.
To contact the editor responsible for this story:
Alan Mirabella at 1-212-617-4149 or
amirabella@bloomberg.net.
Posted by: the chicken at June 18, 2009 9:53 AM
They are talking about a drop in the NY metropolitan area which includes NJ, Westchester, and, probably, Long Island. Yes, prices in subdivisions within a 2 hrs bus commute from New York City keep dropping. What's new?
Posted by: kensingtonka at June 18, 2009 9:54 AM
"I am pretty sure there would be more than a few people who might be interested in that."
Posted by: AndYouWillKnowUsbyTheTrailofRenters at June 18, 2009 9:51 AM
Sure - and they'll stay interested right up to the point where the banks won't lend them the money....
Posted by: the chicken at June 18, 2009 9:54 AM
if prices drop 40%, NYC residents (bull or bear) in big trouble. banks will be coughing blood, layoffs everyday, big tax hikes to plug growing NYC gov budget shortfalls,.....
was there a mention of how long they predict the 40% drop would occur?
Posted by: more4less at June 18, 2009 9:55 AM
levtoma put your helmet back on. how do you justify the tripling of prices in 10yrs? are rentals (I assume you mean buying for rental income) any better of an investment than they were in 1998? You sure aren't making triple the income on them. And what happens when the banks can't sell units at the prices they supposedly "control"? get ready for a flood of auctions when a few large banks capitulate.
Posted by: joe_the_bummer at June 18, 2009 9:57 AM
@ the chicken
With prices at those levels you are also talking about much less of a down payment, possibly a smaller loan amount, and less exposure for the bank.
As someone else mentioned unless rents also tank why would prices go down that much?
Posted by: AndYouWillKnowUsbyTheTrailofRenters at June 18, 2009 9:59 AM
joe, I'm very familiar with DB, was partially being facetious. Still, I'm sure that their respected research dept had all their clients in cash 10/10/2007, right? lol.
Also they weren't so bearish on NYC RE when they loaned Macklowe the money to buy seven office buildings, right?
Posted by: denton at June 18, 2009 10:01 AM
YouWithTheRidiculousLoginName:
same to you. If NYC is just so great that the prices can't drop, how do you justify that it got three times greater in the 10 years before 2008?
Posted by: joe_the_bummer at June 18, 2009 10:03 AM
"banks will be coughing blood, layoffs everyday, big tax hikes to plug growing NYC gov budget shortfalls"
Umm... have you been reading the news for the last year or so...
Banks have been coughing blood, there have been a ton of layoffs, and there has been a lot of activity going on on the tax hiking front (weren't they trying to tax iTunes purchases a few months ago??).
I'm not happy about it (despite being a renter), but I think there is a long way to the bottom.
LIC gets my vote for neighborhood where prices may come down the most, but the Financial District and DUMBO won't be far behind.
Once those neighborhoods start dropping down to where their new construction is priced competitively with older stuff in other neighborhoods, people will start buying the cheap new stuff. Then the second wave will be price reductions in the other neighborhoods.
I've been look at rentals on Craigslist for the first time since 2007, and I'm seeing a 15-30% reduction in rents across the board compared to two years ago. And a lot more listings.
Posted by: northsloperenter at June 18, 2009 10:03 AM
chicken, that's still not the article, it's about the article. So far the only substance is:
Financial firms have cut more than 183,000 jobs in the Americas in the global credit crisis, driving down prices and rents in the New York area.
Posted by: joe_the_bummer at June 18, 2009 10:06 AM
DB said something fairly similar a while back. They are talking about NYC metropolitan area though, which is huge and diverse in pricing.
Posted by: dittoburg at June 18, 2009 10:06 AM
This report ranks right up there with the NYT's "Trustafarian" article in terms of substance.
Posted by: collin85 at June 18, 2009 10:08 AM
The interesting thing is that DB is revising UPWARDS for NYC:
"In the New York metropolitan area they may drop 40.6 percent from the first quarter to the bottom, the report said, less than Deutsche Bank’s March estimate of 47.4 percent."
Even then, that's the AREA not prime NYC.
Posted by: denton at June 18, 2009 10:11 AM
"Even then, that's the AREA not prime NYC."
A sinking time tide drops all ships.
Brooklyn Heights will still have a premium over Red Hook or Prospect Heights, and it may even be a higher % difference than in 2005/2006, but the actual numbers will still drop.
Maybe prospect heights drops 42% and brooklyn heights drops 36%.
But with FiDi crashing just across the river, I think brooklyn heights will come under pressure from there too...
Posted by: northsloperenter at June 18, 2009 10:22 AM
northsloperenter,
my point is banks hurting big would continue - far far diff spin out in mkt now of green shoots, stabilizing, blah blah. if the 40% is to happen in a 2 yr span, I would worry about my job over where's a cheap house to buy
Posted by: more4less at June 18, 2009 10:23 AM
The source:
New York is least affordable of the Top 10 In New York, prices still have to drop an additional 32.0% from Q1 2009 levels just to restore
affordability to its historic high (1998), as has already occurred in
74 of the top 100 markets. But including model risk factors beyond just affordability, we are projecting a 40.6% decline, from Q1 2009. This is, however, improvement from the projected decline that we published in March (47.4%). The improvement is due simply to the fact that recent price declines have brought New York closer to the trough. Somewhat confusingly, actual home price declines
can impact our analytical framework in competing ways. First, all else
equal, if prices have declined, then the MSA should be that much closer to its bottom for
prices. However, because our model also includes a risk factor score for negative home
price momentum, dramatic price declines can also have at least a partially offsetting
negative effect. The peak for home prices in the New York MSA was in Q2 2007, when the median home price hit $552k. As of Q1 2009, the median home price had dropped to $446k, down 19% from the peak. While this is painful, it pales in comparison to what
has already been experienced in many other regions of the country, particularly in
parts of California, Florida, Arizona and Nevada. Many MSAs in those states peaked earlier than New York and prices have been falling in those areas for longer. Our total, peak-to-trough forecasted decline in New York is 52.1%
Posted by: Kannerr at June 18, 2009 10:26 AM
the truth hurts. It makes alot of the flipper speculators and real estate agents look and feel like losers. There goes that million dollar over infalted value in you wooden shack.
Posted by: hannible at June 18, 2009 10:28 AM
There has been research reports coming out like this coming out for the past 4 months. It is just now getting ionto the mainstream media. The DB report is very good and thorough and if you are about to buy a place in NYC i suggest you buy the report i think it will cost you 70 bucks. Goldman Sachs also had a great report and said similiar price drops as the DB report. Goldman said prices could drop 55 percent. Smart people have known about this for some time which is why nothing is selling in Manhattan over 5 million. Just sit back and watch from the beuty of youre rental as the trapdoor opens on all the suckers who overpaid. This will be ugly
Posted by: brickoven at June 18, 2009 10:28 AM
"my point is banks hurting big would continue "
I think they are going to be in for another round of pain :(.
Commercial real estate is next, with credit card debt defaults and "prime" mortgage defaults coming from all of the unemployment.
I'm not happy about it, but that's what I see.
Oh, and I'm getting a 0% raise this year. And my bonus will be about 1/5th or 1/6th of last years. And I don't work in Finance. And I'm getting a lot of pressure from senior management to outsource more and eliminate staff positions...
Posted by: northsloperenter at June 18, 2009 10:29 AM
Guys it's ALL going to get smashed! Why is it thinks this area or that area is special??!!
They had a meltdown on Wall Street, the Newspaper is going thru hard time and the rest is fucked! Here dumbasses suck this down. The retards tried to Gentrify Harlem but that not working out now...
Manhattan: Small Businesses In Harlem Take A Big Hit
http://www.ny1.com/content/top_stories/100784/-em-manhattan--em---small-businesses-in-harlem-take-a-big-hit/Default.aspx
To many, talk of the recession might just mean a bunch of numbers, percentages or falling stock prices, but in the neighborhoods of New York City, its effects are very real. NY1's Rebecca Spitz filed the following report on how the recession is hitting home in Harlem.
One shuttered store after another along 125th Street means only one thing: Harlem is being hit hard by the recession.
Many businesses have packed up for good, others moved to more viable locations.
While there are stores still open for business, those merchants say things are very slow.
"I've been here 25 years, but nothing's worse than now," said Lisa Min of Harlem Star Gift.
Watch the report and get back to me...
The What
Someday this war is gonna end..
Posted by: Return of The What at June 18, 2009 10:31 AM
more4less... while the suffering will be substantial (and I mean the working class, not having to move out of your doorman building)... perhaps this is the sort of wake-up call the buyer side of the equation needs to have!
i.e., you should not pay $1.5 million for a house that sold for $750,000 a few years earlier. You shouldn't be surprised if the value of your purchase PLUMMETS.
Posted by: tybur6 at June 18, 2009 10:34 AM
thanks kannerr -- a "risk factor score for negative home
price momentum" makes me wonder if their model is a little over-engineered, and then calibrated to goldman's back-of-the-envelope result (based on price/income, price/rent etc).
Not fair since I haven't actually read it.
But as long as it generates a lot of delusional cheerleading on brownstoner, it's no less fun.
Posted by: joe_the_bummer at June 18, 2009 10:37 AM
Oh... and I may add... the BANKS will certainly stop offering to finance your retarded purchases.
Posted by: tybur6 at June 18, 2009 10:38 AM
ty they are giving people hell trying to refi or canceling HELOC. They dont want to get burned again. Has anybody in here tryed to refi in Brooklyn the past 2 months?
Posted by: brickoven at June 18, 2009 10:43 AM
so - just to confirm what they're actually analyzing - it's the % drop from Q1 09 to bottom in the median home price for the NY MSA? for another ~40% to a total 51% drop? now, as for the NY MSA includes, wikipedia says: "The 23-county metropolitan area includes ten counties in New York State (those coinciding with the five boroughs of New York City, the two counties of Long Island, and three counties in the lower Hudson Valley); twelve counties in Northern and Central New Jersey; and one county in northeastern Pennsylvania." Counties listed here: http://en.wikipedia.org/wiki/New_York_metropolitan_area
is this the area they're analyzing?
Posted by: i disagree at June 18, 2009 10:44 AM
Tybur6, think you got me confused for someone else. I open my own doors, lug my own groceries,.... I want to see a correction cause I can't afford or want to pay these current prices and hence why I post often promoting rent now buy later. would love to see a 40% drop happen over a span of 5 or more yrs. but if it drops that much in a span of 2 or less yrs, all will get spank hard. Hard enough for me to think I, along with alot of people, will be unemployed (btw, I have a regular and regular paying job)
Posted by: more4less at June 18, 2009 10:44 AM
"@ the chicken
With prices at those levels you are also talking about much less of a down payment, possibly a smaller loan amount, and less exposure for the bank.
Posted by: AndYouWillKnowUsbyTheTrailofRenters at June 18, 2009 9:59 AM"
AFFORDABILITY.....$1m apartment, 20% downpayment, 80% mortgage.
Firstly, $200,000 downpayment required. Are there enough people out there with this?
Secondly, $800,000 mortgage at responsible multiples requires at least $230k annual income. As has been discussed on Brownstoner many times, median income in Brooklyn is $55k.
Thirdly, $800,000 mortgage over 30 years @ 6.5% interest = monthly payments of $5,105. Interest only is $4,333/month. Consider the income that you need to afford that and still eat and live the life that you have become accustomed to.
"As someone else mentioned unless rents also tank why would prices go down that much?
Posted by: AndYouWillKnowUsbyTheTrailofRenters at June 18, 2009 9:59 AM"
Rents have fallen. In a normal environment, Renting SHOULD cost more than owning but it doesn't. Can you name any other business where it costs you LESS to rent than to buy? No, me neither.
Posted by: the chicken at June 18, 2009 10:45 AM
From the article:
"...That's the forecast of an extensive new report on residential real estate by Deutsche Bank, which calls for home prices in metropolitan New York City (which includes Westchester, northern New Jersey and other nearby areas) to fall 40.6% from the prices that prevailed in March..."
So the over-supply of subdivisions located in the suburban sprawl of NJ are lumped in with Tribeca, West Village, Brooklyn Heights and Park Slope and Deutsche considers such calculations accurate for specific neighborhoods in NYC?
Whatever. Next.
Posted by: traditionalmod at June 18, 2009 10:47 AM
"One shuttered store after another along 125th Street means only one thing: Harlem is being hit hard by the recession."
What, you can do better than this. Let's try:
All the Asshats and Hipsters who thought Harlem was cool have moved the f*ck out and gone back to Ohio. Therefore the Assraping landlords who thought they could charge 5th Avenue rents in the 'hood so Starbucks and Ben & Jerry's could make the Hipsters feel at home are f*cked! 125th Street will revert to the old days! The young 'uns are coming!
Someday Starbucks is over!
Posted by: denton at June 18, 2009 10:55 AM
nsrenter, I feel your pain. the number to watch is not the unemployment rate, it's the total income in NYC.
Posted by: joe_the_bummer at June 18, 2009 10:56 AM
There's far less speculation (flippers) in the NTC market and even less so in Brooklyn townhouses. It's not like NV & FL where 40% of the market was econd and third homes.
Posted by: daveinbedstuy at June 18, 2009 10:58 AM
Denton, that's good. real good
Posted by: more4less at June 18, 2009 10:59 AM
"Whatever. Next."
I think you underestimate the number of people who will say "WTF! Why should I pay $850K for a 2 bedroom condo in NYC when I can get a 3 bedroom house with a yard and garage for $400K 45 minutes from the city by NJ Transit?".
Or, frankly, they could just look at Hoboken or Jersey City. Closer to the financial district than most of Brooklyn and the bottom has fallen out of prices there and new condos are still coming on the market.
Posted by: northsloperenter at June 18, 2009 11:00 AM
more4less... sorry, I was actually trying to agree with you/emphasize what you were saying. But I see that I was really unclear with my use of "you" and "your" -- that was meant to be a generalized you, not a you you.
My job ain't recession / collapse proof -- but I have a job that's a little less vulnerable.
I have to say an additional 40% reduction would be great. But I think it would have to be quicker and more painful for the message to even resonate with the flippers and prospectors AND banks that give out the loans. It's just unfortunate that the working class that keeps this city running will be the ones that get spanked the hardest.
I don't have much sympathy for "investors" and the generally well-to-do that see their money dry up because they've overextended themselves. It's analogous to the $5 million a year football star that finds himself broke when he retires... spending all as he goes and being surprised that he has no skills to do anything else.
Posted by: tybur6 at June 18, 2009 11:05 AM
"There's far less speculation (flippers) in the NTC market and even less so in Brooklyn townhouses. It's not like NV & FL where 40% of the market was econd and third homes."
by daveinbedstuy
Dave Brownstones going up 400 percent in ten years is not speculation? Are you sure? Dont get caught on the wrong side of the trade Dave.
Posted by: brickoven at June 18, 2009 11:05 AM
N'slope, Jersey City has not tanked yet. it's dropped good amount and will continue to drop more but it hasn't reach "bottom-like" prices yet - at least not those listings I'm tracking
Posted by: more4less at June 18, 2009 11:06 AM
THis is Goldman from late January:
We use the recently introduced S&P/Case-Shiller index for
condominium prices to assess the valuation of the New York apartment
market. Although housing market valuation typically has little
predictive value for the near term, it is useful for anticipating
longer-term moves, especially when prices are far away from
equilibrium.
· Indeed, New York apartment prices are very high relative to
the observable fundamentals. Using three alternative
yardsticks—price/rent, price/income, and affordability —we find that
prices would need to decline by 35%-44% to return to the valuation
levels seen in the 1995-1999 period, before the start of the recent
boom.
· The uncertainty is substantial. On the one hand, the picture
would worsen further if per-capita incomes in Manhattan returned from
their current level of 3 times the national norm toward the pre-1990s
average of 2 times the national norm. On the other hand, it would
brighten somewhat if jumbo mortgage rates converged toward conforming
rates, perhaps because of a broadening of the Fed's support measures.
In addition, societal and demographic changes could also help, though
these types of arguments are difficult to quantify and are often heard
just prior to a real estate market downturn.
Following a decade-long boom, activity in the New York City apartment
market is now slowing sharply. The sales reports for the fourth
quarter of 2008 released on Monday by two of the largest New York real
estate brokers—the Corcoran Group and Prudential Douglas
Elliman—suggest that sales dropped by 25%-30% from the fourth quarter
of 2007 (see "Striking Declines Seen in Manhattan Real Estate Market,"
New York Times, January 6, 2009, page A20). Although the prices of
closed sales were little changed from a year earlier, one analyst
estimated that the prices of apartments that were under contract but
had not yet closed fell by 20% from August to December. Moreover, it
is well known that prices lag sales activity in the housing market, so
most observers agree that both contract and closing prices are likely
to decline in the near term.
Information on sales and price momentum is very helpful for predicting
near-term moves in the real estate market. But in order to gauge the
longer-term outlook, it is better to look at fundamental valuation
indicators, such as the level of prices relative to rents or incomes,
either directly or adjusted by mortgage interest rates. These types
of variables don't have much predictive power over the near term, but
they start to become much more powerful at horizons longer than 1-2
years.
Until recently, a fundamental analysis of the New York apartment
market was hampered by the lack of high-quality price data. The
various brokerage firms publish mean and median prices for both co-ops
and condos on a quarterly basis, but these are difficult to interpret
due to significant changes over time in the size and quality of
apartments being sold. In addition, research firm Radar Logic, Inc.,
publishes a "price per square foot" series for the New York condo
market. However, there is only a year's worth of history, and changes
in the average quality of homes sold can still distort the data even
though the Radar Logic approach does control for variations in size.
But the data situation has improved dramatically with the recent
broadening of the S&P/Case-Shiller (CS) repeat sales home price index
to cover five of the nation's largest condominium markets, including
New York. These indexes stretch back to 1995—not as far as we would
like but much better than what is available currently—and they adjust
for changes in both size and quality of the condos by using only
matched price observations involving successive transactions in the
same condominium for estimating the overall change in prices.
Admittedly, a repeat sales index does not perfectly adjust for quality
changes. In theory, the bias could work in either direction. On the
one hand, wear and tear will reduce the value of a given condominium
over time if the owner does not look after the property well. On the
other hand, upgrades such as new flooring or a nicer kitchen may raise
the value. While the CS index seeks to eliminate the influence of
these factors by downweighting price change observations that are far
out of line with local comparables, this is unlikely to eliminate all
sources of bias. Still, we believe that a repeat sales index is far
superior to the available alternatives for the purpose of measures
changes in underlying real estate prices.
In analyzing the data, it is useful to look first at the raw numbers
for New York condo prices. As shown in the table below, nominal
prices tripled from 1995 to 2006, went essentially sideways in 2007,
and have declined by about 3% in 2008. The stability since 2005 is
somewhat at odds with reports from the New York real estate brokers
that still show meaningful gains in mean and median prices over this
period. However, we suspect that the apparent contrast is resolved by
a shift in transactions toward larger and higher-quality apartments
over this period, which would increase the mean and median price
figures but leave the CS index unaffected.
Index
(Jan 2000=100)
Oct-95
75.3
Oct-96
75.4
Oct-97
80.6
Oct-98
89.2
Oct-99
97.5
Oct-00
111.3
Oct-01
126.7
Oct-02
144.3
Oct-03
161.2
Oct-04
188.8
Oct-05
222.6
Oct-06
227.4
Oct-07
226.7
Oct-08
221.1
Source: Standard and Poor's.
But are the price gains sustainable? To assess this, we focus on
three primary valuation measures:
1. Price/rent ratio. We divide the CS index by the Bureau of Labor
Statistics' index of owners' equivalent rent for the New York
metropolitan area, and index the resulting ratio to 100 for the
average of the 1995-1999 period. We choose this base period because
it mostly precedes the recent boom but covers a period when the
quality of life in Manhattan had already improved significantly from
the 1980s and early 1990s. Hence, a return to the average 1995-1999
valuation level might seem like a fairly neutral assumption.
2. Price/income ratio. We divide the CS index by the Bureau of
Economic Analysis' measure of personal income per capita, and again
index the resulting ratio to 100 for 1995-1999. Although the condo
price index covers the entire New York metro area, we use an income
series for the County of New York (i.e., Manhattan) rather than the
entire metro area. The New York condo market is quite concentrated in
Manhattan; this concentration is particularly pronounced in the CS
index because it is weighted by value rather than units and therefore
typically assigns a much greater weight to condo sales on Fifth Avenue
than in Queens. (Note that New York County income is only available
through 2006; we somewhat optimistically assume that it has grown at
the average national rate since then.)
3. Affordability. Using a standard mortgage
Posted by: Kannerr at June 18, 2009 11:08 AM
brickoven, do you understand what the term "speculation" means?? It looks like you don't.
Posted by: daveinbedstuy at June 18, 2009 11:09 AM
"All the Asshats and Hipsters who thought Harlem was cool have moved the f*ck out and gone back to Ohio. Therefore the Assraping landlords who thought they could charge 5th Avenue rents in the 'hood so Starbucks and Ben & Jerry's could make the Hipsters feel at home are f*cked! 125th Street will revert to the old days! The young 'uns are coming!"
Not bad Denton welcome to the Dark Side. Kill Luke Skywalker...
The What
Someday this war is gonna end...
Posted by: Return of The What at June 18, 2009 11:10 AM
denton, so this is good, right? I don't understand why it's bad when the white people move in, but also bad when they move out.
Posted by: joe_the_bummer at June 18, 2009 11:10 AM
M4L -- I'm a little more aware of the Hoboken market than Jersey City (know some people who own a condo and tried to sell and ended up renting it out after multiple price cuts failed to sell it).
Not sure what the bottom is. Hoboken just raised property taxes too.
An interesting blog (done by a realtor):
http://hobokenrealestatenews.com/
I find her weekly summaries interesting:
-------------
* 578 active Hoboken condo units today - 590 last week.
* 36 price reductions vs. 55 a week ago
* 18 dabos (under contract) vs. 8 last week
* 7 sold vs. 9 last week.
* 27 new listings vs. 43 last week
* 3 expired listings vs. 6 last week
* None withdrawn vs. none last week
---------------
578 on the market, 7 sales, 29 new listings, 36 price cuts
Posted by: northsloperenter at June 18, 2009 11:11 AM
The process of thinking or meditating on a subject; A judgment or conclusion reached by speculating; An investment involving higher than normal risk in order to obtain a higher than normal return
en.wiktionary.org/wiki/speculation
Do you know what speculation means Dave? Brownstones up 400 percent in ten years Dave. This would not meet the def. dave? Must not have done well on the English part of youre SAT Dave?
Posted by: brickoven at June 18, 2009 11:15 AM
It should be noted that the GS study only speaks of _apartments_. No question there is an oversupply of new condos. Not too many 1-3 family houses built in this boom tho.
Posted by: denton at June 18, 2009 11:15 AM
A further 40% drop in prices is a conservative estimate.
Rents are nearly back to where they were ten years ago.
Prices will keep falling until there's some rational balance between rents and mortgage payments.
Everything else is hogwash . . .
Posted by: IronBalls at June 18, 2009 11:19 AM
Jackass.
Within the context of real estate it means that you're investing in the property solely for the purpose of investment return and not as a primary residence.
The movement in prices has nothing to do with the definition of speculation.
Posted by: daveinbedstuy at June 18, 2009 11:20 AM
kannerr now that's a real article. enjoyed reading that again.
brownstoner can we post a permanent link to that so we don't have to repeat the argument every time someone says that prices will stay up because everyone loves NYC?
Posted by: joe_the_bummer at June 18, 2009 11:23 AM
I bet you did not break 500 on the English part of the SAT dave.
Posted by: brickoven at June 18, 2009 11:24 AM
You shouldn't be posting on a thread about real estate if you don't understand the differences between home ownership, investment purchase and speculation. There is also spec construction, which is different. Get them sorted out, brickoven.
Posted by: daveinbedstuy at June 18, 2009 11:26 AM
Buying anything that appreciates 400 percent in 10 years is by definittion specualtion.
Posted by: brickoven at June 18, 2009 11:34 AM
brickover, your definition is incorrect.
Posted by: northsloperenter at June 18, 2009 11:37 AM
I give up. You're just too thick headed to understand. The past price performance has nothing to do with speculation.
Posted by: daveinbedstuy at June 18, 2009 11:37 AM
"The past price performance has nothing to do with speculation."
Wow.... You're a fucking Retard!
The What (Oh man..)
Someday this war is gonna end...
Posted by: Return of The What at June 18, 2009 11:41 AM
The process of thinking or meditating on a subject; A judgment or conclusion reached by speculating; An investment involving higher than normal risk in order to obtain a higher than normal return
en.wiktionary.org/wiki/speculation
Posted by: brickoven at June 18, 2009 11:41 AM
I see several post commenting on the tripling of prices over 10 years. While price/rent ratio, price/income ratio and affordability are certainly key metrics to evaluate how much prices will decline(and I am in the camp that believes prices will continue to decline), I don't think you can leave out other factors like quality of life that determine buyers and sellers choices. I moved to Brooklyn in 1982 and have lived in several neighborhoods (Boerum Hill, Prospect Heights, Park Slope, Brooklyn Heights, Carroll Gardens + back to Boerum Hill). The change in some of these, and other Brownstone Brooklyn neigborhoods, has been remarkable in terms if added amenities (restaurants + entertainment options) and reduced crime. That is clearly a factor in the price increases over the past 10 years.
Posted by: Boerum Hill at June 18, 2009 11:50 AM
WOW, two people tell you you are wrong yet you continue to define speculation out of context. Really, really dumb.
What, only a jackass (like brickoven) would make a speculative bet on property based on the past performance of the price.
You know better.
Posted by: daveinbedstuy at June 18, 2009 11:51 AM
Too many of these posters don't understand that, Boerum Hill.
Posted by: daveinbedstuy at June 18, 2009 11:52 AM
How are you guys able to engage brickover? It's like trying to talk quantum physics with Corky from Life Goes on.
Posted by: 11217 at June 18, 2009 11:53 AM
Or worse, 11217. brickoven is obviously cornerbodega's mentally challenged brother.
Posted by: daveinbedstuy at June 18, 2009 11:56 AM
Well, he has successfully killed this thread. Perhaps that was his goal.
Posted by: northsloperenter at June 18, 2009 11:58 AM
And hannible's creepy uncle.
Posted by: 11217 at June 18, 2009 11:58 AM
I'd like to see rebuttal of Boerum Hill's observations.
Posted by: daveinbedstuy at June 18, 2009 12:00 PM
I make money from people involved in things they dont understand all day long. You go drink youre kool aid and I am going to have my turkey club
Posted by: brickoven at June 18, 2009 12:01 PM
Jeez life goes on! those were the days!!
and that's all i have to contribute to this conversation
oh - and Deutsche Bank employees oodles of hot british women. lots of eye candy coming in and out of 60 wall.
Posted by: dirty_hipster at June 18, 2009 12:04 PM
Property price fluctuations in New York metro area shouldn't be compared to U.S. prices, but to other international cities.
New York's real estate market should be looked at alongside its true twin cities like London and Hong Kong. Actually, Hong Kong's property market pretty closely tracks New York's and vice versa. Their movements since the Lehman collapse have been more or less the same--a 15-20% drop at the end of 2008, followed by slight uptick and stronger sales in spring 2009.
Posted by: WonTon at June 18, 2009 12:04 PM
What about Tokyo Wonton?
Posted by: brickoven at June 18, 2009 12:06 PM
LOL, plenty of panic posts by the bulls. Hey whatever helps you get by ;) Hey DB go back to Germany! Coincidentally, this is almost identical to reports by GS, T2 et al... Always a small handful of fools all the way to the end
Posted by: cornerbodega at June 18, 2009 12:10 PM
"I'd like to see rebuttal of Boerum Hill's observations."
Dave -- no rebuttal because he is right.
The question is, how much of that improvement will be lost in the next few years?
Not all of it. Probably not even 25% of it. But some of it.
Time will tell. Maybe there will be no losses and things will continue to improve. That would make me happy, but cutbacks in mass transit and police are bad signs.
Posted by: northsloperenter at June 18, 2009 12:11 PM
I make money from people involved in things they dont understand all day long. You go drink youre kool aid and I am going to have my turkey club
Posted by: brickoven at June 18, 2009 12:01 PM
If you made so much money you wouldn't be having a turkey club. ROTFLMMFAO.
Do you have any clue what prices are psf in either Tokyo or Hong Kong? I bet not. Have you ever even been out of the country???
Posted by: daveinbedstuy at June 18, 2009 12:11 PM
I was in Tokyo 6 weeks ago the prices there are still 70 percent of the highs of the 80's. Did you know that?
Posted by: brickoven at June 18, 2009 12:14 PM
Tokyo prices peaked in the early nineties, my friend. Try to at least get historical factual data correct.
Posted by: daveinbedstuy at June 18, 2009 12:16 PM
peaked in 1990
Posted by: brickoven at June 18, 2009 12:19 PM
the point is that it is still off 70 percent!
Posted by: brickoven at June 18, 2009 12:20 PM
For Brickover:
****
World's priciest cities to own a home in
Chavon Sutton, Forbes | February 10, 2009
Those living in Monte Carlo may enjoy the Cote d'Azur's beaches, glamorous nightlife and status as a tax haven, but they pay for it.
For the second consecutive year, the resort area tops a list of the world's most expensive housing markets, boasting average prices of $4,420 per square foot.
"Monte Carlo is a city of the rich, small and concentrated," says Matthew Montagu-Pollock, publisher of Globalpropertyguide.com, the online real estate research firm that released the report Monday. "The primary reasons for such high prices are related to a shortage of space and tax havens."
Moscow ($1,937 per square foot) and London ($1,928 per square foot) ranked second and third. Moscow's one-spot jump to the top three was propelled by strong economic growth, partly a result of recent high oil prices, and a rise in residential real estate prices in the first three quarters of the year. Last year, the country experienced gross domestic product growth of 6 per cent, according to the CIA's World Factbook.
A surprising turn was New York's drop to No. 6, from No. 2, as growth in Asian markets pushed Hong Kong and Tokyo to the top five. Residential apartment prices in Hong Kong and Tokyo were as high as $1,373 and $1,103 per square foot, respectively, in last year's survey. In New York, the average price per square foot was $1,384.1.
Mumbai, India, rounds out the top 10, with prices averaging $851 per square feet.
Such high property values are surprising during this global economic crisis, but they are a sign of historically high real wealth and global growth.
"Even in these trying economic times, there is still tremendous wealth out there," says Nikki Field, senior vice president of Sotheby's International in New York. What drove down New York's rank was, in part, a "hesitancy for conspicuous consumption. The need and ability still exists to buy at the upper tier, but people are scared to publicly spend."
Posted by: 11217 at June 18, 2009 12:26 PM
Serious panic on the virtual streets of Brownstowner ;)
Posted by: cornerbodega at June 18, 2009 12:29 PM
I have one chart here in front of me right now...Tokyo Office rents...certainly representative of the market. I will look for a few more.
Rents were Y22,000 per tsubo in 1986 and dropped to Y17,500 in 2005. They went up to Y23,000 in 2008 and are now back at Y22,000.
I will continue to educate you at your peril.
Posted by: daveinbedstuy at June 18, 2009 12:33 PM
11217 what is the relevance?
Posted by: brickoven at June 18, 2009 12:34 PM
Don't worry 11217, your hole in the wall might still be worth $125K when its all said and done...
Posted by: cornerbodega at June 18, 2009 12:35 PM
11217...I lived in Hong Kong from 1991 to 1994 and remember that property boom. Prices there were just going over $1,000 psf and then came down in the mid 90s. They are back above those high levels now, as you point out.
brickoven doesn't know what he's talking about.
Posted by: daveinbedstuy at June 18, 2009 12:35 PM
Hey elstupido dave here is a link
http://www.japaninc.com/files/images/mgz-77_subprime_real-estate-values.jpg
Posted by: brickoven at June 18, 2009 12:36 PM
Lets see minus 40-50% for nyc. Whats that say for the ghetto speculative properties which will take the biggest hit? 75%? Looking good over there Dibs! ;)
Posted by: cornerbodega at June 18, 2009 12:38 PM
The relevance is that Tokyo remains one of the most expensive cities in the world.
I also hear some of you morons stating that NYC home prices are going to drop below 600/700 psf, and I find the idea that NYC homes prices will drop to below that of Mumbai, India (at $851 psf) to be asinine.
Posted by: 11217 at June 18, 2009 12:38 PM
dave how is that peril?
Posted by: brickoven at June 18, 2009 12:39 PM
Dave I dub you Elstupido from here on
Posted by: brickoven at June 18, 2009 12:40 PM
It may not have been textbook speculation, but it was speculation. Anyone who took out too big a loan on the premise the house price would go up, and thus cover their overlevered ass, was speculating; anyone who was given cheap credit on a liar loan was enabled by speculation by the bank, which thought they could bundle and trade the asset-backed security. The idea that speculation had nothing to do with the run up in Brooklyn housing prices is juvenile.
Granted Brooklyn is a different borough than in '82. But we're talking about a price spike that is, in its bulk, only a few years old. Is Cobble Hill four times nicer than it was in 1999? Three times nice than it was in '02?
Posted by: Whuh at June 18, 2009 12:46 PM
Whuh, you are correct. But oven head believes that most homes in NYC were bought AS specualtion, whether or not the leverage was too high.
cornerbodega will forever be a renter.
Posted by: daveinbedstuy at June 18, 2009 12:52 PM
Brickover rents too.
And you own how many homes, Dave? 4?
I think that speaks for itself.
Posted by: 11217 at June 18, 2009 12:54 PM
el stupido I even posted a colored chart for you so that you did not have to read. Next time I will try to get more colors in the picture for you
Posted by: brickoven at June 18, 2009 12:54 PM
brickoven...you know nothing about the Japanese market if you believe that the LAND prices reflect what happened to PROPERTY (developed building) prices. Condominium prices did not follow that patttern.
Posted by: daveinbedstuy at June 18, 2009 12:55 PM
Yes, 4. Two mortgages at <50% LTV. All purchased before 2000 except the ghetto brownstone which was bought with ill-gotten mutant bubble gains from the Manhattan condo.
Posted by: daveinbedstuy at June 18, 2009 1:00 PM
11217, wwhat these numbskulls fail to understand is that you really do yourself an economic disservice if you rent your whole life. You especiially will wind up in a sad state in yoiur retirement years unles you've got at least $3MM to live off of at 5%. Rents pretty much always rise. Yes, they are coming off right now but that is temporary.
Posted by: daveinbedstuy at June 18, 2009 1:03 PM
Phoenix leads the US in home price declines down about 50% from the peak. These forecasts for the NY MSA are down 40% from 1Q2009. Am I wrong to be assuming that the peak was not 1Q2009 but more like 2Q2008 (ir earlier?). If that is is the case then we would also be looking at 50%+ declines in value from the peak.
There are many fundamental reasons why prime neighborhoods of Manhattan and Brooklyn would not decline by as much as boom areas like Phoenix.
Also who actually knows a renter who has moved to a comparable space in a comparable neighborhood for 20-30% less rent?? Don't give me some bs like that NYT article about some guy moving from a 1 bedroom in Park Slope to a shoebox in the East village for $150 less per month.
Posted by: AndYouWillKnowUsbyTheTrailofRenters at June 18, 2009 1:05 PM
El stupido keep talking at youre own peril
http://www.japaninc.com/files/images/mgz-77_subprime_real-estate-values.jpg
Posted by: brickoven at June 18, 2009 1:05 PM
http://cache.wists.com/thumbnails/f/fd/ffd0cfc4169661d7a829f39427c9f631-orig
Posted by: brickoven at June 18, 2009 1:07 PM
"I have one chart here in front of me right now...Tokyo Office rents...certainly representative of the market. I will look for a few more.
Rents were Y22,000 per tsubo in 1986 and dropped to Y17,500 in 2005. They went up to Y23,000 in 2008 and are now back at Y22,000.
I will continue to educate you at your peril."
How are them there charts el stupido
Posted by: brickoven at June 18, 2009 1:10 PM
Prices were highest in Tokyo's Ginza district in 1989, with choice properties fetching over 100 million yen (approximately $1 million US dollars) per square meter ($93,000 per square foot). Prices were only marginally less in other large business districts of Tokyo. By 2004, prime "A" property in Tokyo's financial districts had slumped to less than 1 percent of its peak, and Tokyo's residential homes were less than a tenth of their peak, but still managed to be listed as the most expensive in the world until being surpassed in the late 2000s by Moscow and other upstarts.
Posted by: AndYouWillKnowUsbyTheTrailofRenters at June 18, 2009 1:14 PM
ROTFLMMFAO brickoven. That chart stops at 2005 so you don't get the runup in prices from 2005 to 2008. Just like here. Also, try and learn some Spanish. it'll help you at the bodega when you're buying your 40s.
Posted by: daveinbedstuy at June 18, 2009 1:14 PM
El Stupido you having a hard time over there?
http://www.japaninc.com/files/images/mgz-77_subprime_real-estate-values.jpg
Posted by: brickoven at June 18, 2009 1:19 PM
Looks like we're down to 11217 and dibs in the denial camp. The resident brownstowner "nyc transplants but claims to know everything nyc" tycoons. The former owns a hole in the wall, the other is a "Money Manager" who needs to sweep his ghetto property for his bitter renters.
Posted by: cornerbodega at June 18, 2009 1:19 PM
Shh... corner
Dave is going to be the next Donald Trump, he read his book last year and now he can be a mogel too
Posted by: brickoven at June 18, 2009 1:23 PM
It is not a question of being surprised if the value of your home goes down by 50 percent. It is a question of how stupid a person feels for thinking that home prices could continue growing 10 percent a year forever!. You speculators were just so smart and the renters just so stupid!
Posted by: hannible at June 18, 2009 1:24 PM
At least he can spell mogul....
Posted by: AndYouWillKnowUsbyTheTrailofRenters at June 18, 2009 1:26 PM
we dont call him el stupido for nothing
Posted by: brickoven at June 18, 2009 1:26 PM
Ladies and gents, the tale of the tape!
GS: 40-58% down
T2: 45% down
DB: 40%+ down
11217: Everythings ok because he owns a hole in the wall
Dibs: Sweeps ghetto floor for bitter renters
Whats your prediction(s)?
Posted by: cornerbodega at June 18, 2009 1:27 PM
11217...he just goes on and on with the same chart. He visits Japan once and thinks he's got a grip on the property market.
hannible...I know what my living expenses will be in 5, 10, 15, 20 years. You and the renters don't. If you think Social Security will cover it you're in for a rude surprise.
Posted by: daveinbedstuy at June 18, 2009 1:29 PM
corner, when everyone says the same thing, especially the geniuses that brought us the crisis that we are in today, chances are excellent that you would benefit by doing the opposite.
Like I said earlier, did all these guys get their clients in cash 10/10/2007? You do know the significance of that date, right?
Posted by: denton at June 18, 2009 1:33 PM
Ladies and gents, the tale of the tape!
GS: 40-58% down
T2: 45% down
DB: 40%+ down
11217: Everythings ok because he owns a hole in the wall
Dibs: Sweeps ghetto floor for bitter renters
Whats your prediction(s)?
Posted by: cornerbodega at June 18, 2009 1:27 PM
bodega, stick to stocking the shelves. Like brickoven and his definition of speculation, you don't know what the "Tale of the tape" means.
Thsese are predictions from analysts at best. Most have been wrong for the past 8 years...on the upside as well as the downside.
Remember when Goldman was predicting $200 oil when it ws $140???
Apply a little analysis and thought instead of just cutting and pasting like your uncle.
Posted by: daveinbedstuy at June 18, 2009 1:36 PM
I can't even comment about this anymore, it's so silly. You own 4 properties, I own 2 (and am in my early 30's) and these guys think they have all the answers even though between the two of them they own zero property.
It's clear they are very unhappy and jealous people, which is the saddest part of all. It makes them sick that I actually LOVE my "hole in the wall." (Which coincidentally was featured in a book on well planned interior spaces a few years back).
Posted by: 11217 at June 18, 2009 1:37 PM
denton, when the fundamentals are in your face like price/income, in this case I'll side with the big boys and not some 2bit ghetto dwellers like dibs...
Posted by: cornerbodega at June 18, 2009 1:38 PM
Dave the mere fact that you own 4 homes makes you a speculator. You can only live in one at a time. At any given time the other 3 are investment/speculative properties. What kinda Cash Return on Rent are you seeing on those?
Posted by: Colonel Steve Austin at June 18, 2009 1:38 PM
11217, reality check, safe to say I don't think ANYBODY (bear or bull) is envious of your hole in the wall.
"It's clear they are very unhappy and jealous people, which is the saddest part of all. It makes them sick that I actually LOVE my "hole in the wall."" 11217
Posted by: cornerbodega at June 18, 2009 1:44 PM
11217 I choose not to own proprty. Hell i dont even want to any the notes that idiots like you are on the other side of. If you are wondering why the gov has to bail everybody out just look at el stupido and then take a look at yourself in the mirror. You are the problem and you have ruined the free markets with youre liar loans.
Posted by: brickoven at June 18, 2009 1:45 PM
Colonel...I don't rent any of them out (except for the garden apt. here in brooklyn) I don't care to because they are filled with my furniture and my clothes, etc. I don't need the money. They are not for "speculation." I will retire among three of them at various times of the year.
Posted by: daveinbedstuy at June 18, 2009 1:45 PM
That's good, cause I'm not sellin'.
Posted by: 11217 at June 18, 2009 1:45 PM
Thats right everybody dont listen to GS or DB listen to el stupido who can not even read a chart.
Posted by: brickoven at June 18, 2009 1:47 PM
Or better yet, listen to a total fool who can't even form sentences.
Posted by: 11217 at June 18, 2009 1:47 PM
Something tells me if DB came out with a report predicting an imminent market turnaround, the bulls would not be scoffing so much...
Posted by: Miss Muffett at June 18, 2009 1:48 PM
You people really are not very educated. In order for him to be a speculator he would have to had purchased them with the expectation that they would greatly appreciate in value and or lever them up big time. He just stated that he only has 2 mortgages and both are less than 50% LTV. My grandparents happen to own three homes and they are by no means speculators. They are just people who bought a house in Long Island 60 years ago for $20k and bought a small house in the Hamptons 20 years ago (they inherited the other one).
Posted by: AndYouWillKnowUsbyTheTrailofRenters at June 18, 2009 1:48 PM
"Colonel...I don't rent any of them out (except for the garden apt. here in brooklyn) I don't care to because they are filled with my furniture and my clothes, etc. I don't need the money. They are not for "speculation." I will retire among three of them at various times of the year."
by Daveinbed
Elstupido you sound like a really smart "money manager"
Posted by: brickoven at June 18, 2009 1:50 PM
It makes no difference if a house is being purchased to live in or to rent out. If it's cheaper to rent, the majority will rent. If it's cheaper to buy, those with the means will buy.
Fundamental economics folks . . .
Posted by: IronBalls at June 18, 2009 1:52 PM
BO, you have horrible grammar, you attempt to appear knowledgeable with little to back it up, you accuse DIBS and 11217 of having liar loans when everything they present about themselves speaks to the contrary. You do realize that not everyone who owns a home purchased in the last 5 years, over leveraged themselves, or took a fraudulent or risky loan, right??
Posted by: AndYouWillKnowUsbyTheTrailofRenters at June 18, 2009 1:53 PM
OK Dave lets exclude your 3 timeshares. What's your Cash Return on Rent for your BK prop. I know money doesn't matter an all. But market to market, what your return?
Posted by: Colonel Steve Austin at June 18, 2009 1:53 PM
Midtown Manhattan Office Rents Near Low, CB Richard Ellis Says
June 18 (Bloomberg) -- Midtown Manhattan office rents have almost reached bottom, with prices reset on almost half of the region’s available space since September, according to a report by real-estate brokerage CB Richard Ellis Group Inc.
Rents have been reset on about 16 million square feet (1.49 million square meters) out of the 34 million available, Los Angeles-based CB Richard Ellis said today in a statement. The average reduction in asking rents was 16 percent, the brokerage said. As of June 1, asking rents in the area averaged $65.13 a square foot for direct space and $56.83 for sublet space.
Posted by: daveinbedstuy at June 18, 2009 1:55 PM
Good god - everyone is out in full force today
**sits back in desk chair with popcorn**
Posted by: dirty_hipster at June 18, 2009 1:56 PM
"Colonel...I don't rent any of them out (except for the garden apt. here in brooklyn) I don't care to because they are filled with my furniture and my clothes, etc. I don't need the money. They are not for "speculation." I will retire among three of them at various times of the year."
by Daveinbed
Elstupido you sound like a really smart "money manager"
Posted by: brickoven at June 18, 2009 1:50 PM
Not so stupid if I don't have to rent them because i have more than enough money already!!!!
Posted by: daveinbedstuy at June 18, 2009 1:56 PM
Easily the worst thread of the year here at Brownstoner...
Posted by: wasder at June 18, 2009 1:56 PM
Actually 11217 & YouWillKnow....the purchase of the Bed Stuy home was a bit of speculating. I'm betting that Bed Stuy is coming off such a low base that over the next 5-10 years it will actually appreciate more than other parts of Brooklyn. That said, it serves as my primary residence during that time period.
I could have bought in other parts of brooklyn but after the runup of the Manhattan property I really didn't want all that money tied up in a more expensive property. I knew in 2006 that my Manhattan condo had increased to a ridiculous price level.
I'm tempted by some prices in Ft. Greene now for an even nicer place. This one has such huge potential on the corner of Adelphi & Lafayette.
http://www.brownharrisstevens.com/detail.aspx?id=1016904
Posted by: daveinbedstuy at June 18, 2009 2:02 PM
Colonel Austin...I sold a 775 sq ft Manhattan condo where I had a $2,500 mortgage and paid $5,000 in taxes and $7,200 in CCs. I now have a house that's 2,560 sq ft and I live in 1,700 sq ft with a deck and a yard. I have an identical $2,500 mortgage, pay $2,000 in taxes, an extra $1,700 for gas and I bring in $14,400 in rent. So I go from shelling out $42,200 (mortgage, taxes & CCs) to shelling out only $19,300 for more than twice the space.
Posted by: daveinbedstuy at June 18, 2009 2:13 PM
I love that house Dave. I walk by it often. What a beauty it would be fixed up.
Posted by: 11217 at June 18, 2009 2:13 PM
El Stupido its in Bed Stuy though no? you sound like you are single and you live in bed stuy? Not too easy to bring the ladies home from the bars there no?
Posted by: brickoven at June 18, 2009 2:18 PM
Yea DIBS - you must be real bummed about not being able to bring the ladies back
Posted by: dittoburg at June 18, 2009 2:19 PM
Sweet house, and a loo on the parlor floor! Don't think I would have the fortitude for the restoration it needs even if I had the cash.
Posted by: DeLepp at June 18, 2009 2:19 PM
So for you renter's that's be $1,600 a month for 1,700 sq. ft with a basement, a yard and a deck in a really beautiful place with tons of architectural detail, two baths (one giant one ensuite with the master bedroom).
Thats's a better value than most any apartment anywhere.
Plus the house will probably begin to increase in value above what I paid in 3-4 years.
Talk amongst yourselves.
Posted by: daveinbedstuy at June 18, 2009 2:20 PM
I have been in similar wood frame houses on that block of Adelphi and that would be a great house fixed up. Would be a crazy expensive project to renovate that house though. Ask way to high for the level of work needed.
Posted by: wasder at June 18, 2009 2:25 PM
yeah, ditto, its been a long dry spell with the ladies...the last one I was in was the Statue of Liberty.
Now I know how clueless brickoven really is!!!!
Posted by: daveinbedstuy at June 18, 2009 2:41 PM
"you sound like you are single and you live in bed stuy? Not too easy to bring the ladies home from the bars there no? "
Yup, pretty much summed up the thread.
Posted by: 11217 at June 18, 2009 2:45 PM
So if you are gay why not live in Chelsea?
Posted by: brickoven at June 18, 2009 2:47 PM
I'm sure it could be renovated and well done for under $500k. I'd add a second bath on the second floor and a bath on the top floor if the ceiling height permits.
It's shingle, not clapboard. The shingles were all actually in decent shape and with a powerwash and good stain will probably last another 10 yeaars. Foundation was brick (what I could see and nice and straight.
I'm going to look at it next week.
Posted by: daveinbedstuy at June 18, 2009 2:49 PM
Peak minus nineteen percent (latest NY Case-Shiller reading) minus another forty percent (above prediction) equals negative forty-nine percent. Wait a minute! That's almost half off!
I was about to sue these deutchbags.
***Bid half off peak comps***
Posted by: Brownstones Half Off at June 18, 2009 2:50 PM
Who the hell wants to live in Chelsea?? Now you're being absolutely ridiculous brickoven. :)
I haven't gone to a bar to pick someone up in over three years. There's a plentiful supply of great guys online and I don't mean craigslist. I've got more than I can handle and that doesn't include the ones I pay.
BTW, I don't pay for sex. I pay for them to leave when I want them to leave. Paraphrased from Charlie Sheen.
Posted by: daveinbedstuy at June 18, 2009 2:54 PM
"Plus the house will probably begin to increase in value above what I paid in 3-4 years."
...THIS IS YOUR BRAIN ON DRUGS.
***Bid half off peak comps***
Posted by: Brownstones Half Off at June 18, 2009 2:54 PM
Chelsea is the last neighborhood I would want to live in in New York.
It's dreadful.
But way to play up the stereotype, BO!
Posted by: 11217 at June 18, 2009 2:56 PM
"Easily the worst thread of the year here at Brownstoner..."
Now THAT'S saying something. At least I had nothing to do with this one...
Posted by: Biff Champion at June 18, 2009 2:57 PM
Exactly, this is why we know for a fact dibs is an idiot. Buy Now or be priced out forever! He's still using this line LOL!!!!
"Plus the house will probably begin to increase in value above what I paid in 3-4 years."
...THIS IS YOUR BRAIN ON DRUGS.
***Bid half off peak comps***
Posted by: cornerbodega at June 18, 2009 2:58 PM
brickoven...if you're login has anything to do with liking pizza you better get your sorry ass over to Saraghina at the corner of Lewis & Halsey in Bed Stuy. One of the best pizzas in all of Brooklyn. It's a real brickoven and it's fired with oak, not gas. Opened two weeks ago.
He won't sell takeout because he believes the customer won't be as satisfied with the crust after he gets it home as opposed to when it comes right out of the brick oven. He's probably right.
Posted by: daveinbedstuy at June 18, 2009 3:00 PM
You're rent will certainly be up higher in 3-4 years, bodega. What are you going to do if they replace you with an illegal immigrant???
Posted by: daveinbedstuy at June 18, 2009 3:05 PM
I love sarahsvagina i may as well try here pizza, thanks
Posted by: brickoven at June 18, 2009 3:07 PM
I see I'm not the only one with a sub 500 English score.
Posted by: daveinbedstuy at June 18, 2009 3:10 PM
DIBS -- you seriously think your bed stuy brownstone is going to be worth more than you paid for it in 5-10 years? Really? Didn't you buy at the peak of the market? And you're expecting bed stuy real estate to regain all it's current and anticipated losses and outperform 2007 within 10 years? Sorry, but that is just delusional.
Posted by: southbrooklyn at June 18, 2009 3:24 PM
Yanno Dave, it would be nice if you could drop the sneering derision you have for "you renters" and focus it instead on the ones that attack you personally.
Some of us young'uns here are working quite hard to get the nest egg together to buy, and don't plan on renting forever unless the RE bubble reinflates itself and we are quite simply priced out of the market as housing has gone up so much faster than salaries for us plebes.
Not everyone bought their first home in the 80s or works in finance, or has the disposable income of a single person. I don't know if you do it intentionally, but your self entitlement sometimes rubs the wrong way. :|
Posted by: ennuiater at June 18, 2009 3:30 PM
"Some of us young'uns here are working quite hard to get the nest egg together to buy, and don't plan on renting forever unless the RE bubble reinflates itself and we are quite simply priced out of the market as housing has gone up so much faster than salaries for us plebes. "
Amen. Someone get ennuiater some skittles.
Posted by: dirty_hipster at June 18, 2009 3:37 PM
OK folks - your drivel is all very entertaining. But here are some facts. Karen Weaver who wrote the piece at DB is probably one of the most respected authorities on the US mortgage market. You can listen to twits like DIBS or 11217 or you listen to a professional who's report is only based on facts. Don't believe me? Read a real journalist (Michael Lewis) who chronicles Deutsche's key role in identifying the over-cooked mortgage market.
http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom
Well guess who did the work and made the bank a fortune? The reason she is so respected is that she has a propensity to be right.
Historically peak-to-trough housing cycles last 4 to 4.5 years, so in places like Vegas where there has been a 60% correction since it peaked in 2006, there is value emerging. Unlike Vegas, NY prices only peaked 18 months ago, so we have another 3 years to go. So the 42% drop is based over 3 years, which is only about -12% per annum. Not quite as dramtic, huh?
Well get this -I said her report is only based on fact. The MSA data was from the end of March, so the model used prevailing mortgage rates of 5% and an unemployment rate of 8.5%. Now they are 5.7% and 9.4%. What do you think that does for affordability?
THERE IS A LOT MORE DOWNSIDE TO COME. BE VERY CAREFUL.
Posted by: realitycheque at June 18, 2009 3:40 PM
ennuator...it was only meant for those above^^^^^^ Didn't mean to offend anyone else. Some of my best friends are renters and I'd never kick one out of bed.
I know it rubs the wrong way but again it was only meant to be rubbed in those faces who attack. I'm 53 so yes, I started a long time ago. Because of that i think I have a lot more experience. I've bought and sold close to 20 places and done many total gut renovations. I've only lost money on one back in the early 90s and lost about $10k after a big renovation. You're right, my only children are my houses.
I'm the last one to believe anyone is entitled to anything. Sorry if I sometimes come off as an asshole but I think most people know its only aimed at the few others here that act like assholes. :)
Posted by: daveinbedstuy at June 18, 2009 3:44 PM
Wow, realitycheque, and you created a username just to post this one time!
How convenient!
Posted by: 11217 at June 18, 2009 3:44 PM
realitycheque... Eurotrash.
Posted by: daveinbedstuy at June 18, 2009 3:49 PM
Pizza sounds damn good right now. . . what a shitty day. . .
Posted by: IronBalls at June 18, 2009 4:01 PM
I would assume there's more downside to come because there just aren't that many New Yorkers that make more than $300K a year and I'm not sure who else can afford this market. (Aside from people trading up, of course.) And yeah sure, I realize many people make a lot of money in this town. Just... a lot of those folk? Notsomuch. Recently.
There is a LOT of luxury, or marketed-as-luxury housing out there right now. Like, a lot. Maybe the correct model for Brooklyn in 19th-century Harlem? Overbuilt by speculators, and then un-gentrified by renters.
Posted by: Heather at June 18, 2009 4:05 PM
"un-gentrified by renters."
ennuiator...you better be all over her for that one. Heather, let me hold your baby before she gets hit with everything thrown at you!!!!! :)
Posted by: daveinbedstuy at June 18, 2009 4:13 PM
Heather, what you write is true for the condo market.
But they're not making any more brownstones.
Posted by: NorthHeights at June 18, 2009 4:23 PM
Is this thread not dead yet? Here's something new:
June 18 (Bloomberg) -- New York City’s unemployment rose a full percentage point to 9 percent last month, the second- biggest jump in the past 33 years after February’s record, according to state Labor Department data.
The jobless rate in the most populous U.S. city reached the highest since October 1997, while unemployment in New York state overall rose to a 16-year high of 8.2 percent in May, the department said today. Both were still below the national average of 9.4 percent last month.
“The city’s job market is still weak and the weakest areas, financial activities and professional and business
services, will not resume growth until after the national
economy improves,” James Brown, principal economist at the New York State Department of Labor, said in an e-mailed release.
The city’s unemployment rate was 5.1 percent a year ago.
Posted by: joe_the_bummer at June 18, 2009 4:33 PM
Many people like to treat the brownstone/house market as if it's totally separate from the apartment market. While I'm sure there are some cash-flush people out there who can buy without selling an apartment, historically many brownstone/house buyers financed their purchase by selling their apartment. It defies logic to completely divorce the markets - one impacts the other. And while limited supply is a constant argument made by bulls, that only goes so far, as lingering overpriced townhouses even in prime hoods show.
Posted by: Miss Muffett at June 18, 2009 4:36 PM
Heather...that phenomenon can continue. there are tens of thousands of manhattan condo owners that still, even at these prices, have huge gains and huge amount of equity. I think one of the primary reasons that the Brooklyn condo market is doing so poorly is that these people are generally savvy buyers and know not to touch any new development. The risk of things going wrong in 2-3 years is very, very high.
There's a much smaller inventory of brownstones than there is condos.
Posted by: daveinbedstuy at June 18, 2009 4:42 PM
But you've all heard me say that before!!! :)
Posted by: daveinbedstuy at June 18, 2009 4:51 PM
miss muffet -- I like that one. "cash-flush people".
Posted by: joe_the_bummer at June 18, 2009 4:53 PM
Ah haha Dave, I would never. I'm sorry to call you out, I must be feeling cranky today. Something northsloperenter? I think it was? said above rang a bell with me.
I too got a 0% raise this year and a tiny bonus. I work in apparel, and just read today Rheul is to be shuttered by A&F- and Eddie Bauer filed for Ch.11 yesterday... retailers are taking a beating and it means a lot of folks out of jobs.
While it would be nice if the market dropped a teeny bit for affordability, I sure hope I still have a damn job when the dust settles and I can buy that 2bed coop I want. Hopefully before I'm 50!
Posted by: ennuiater at June 18, 2009 4:54 PM
dibs -- I think I'm a good example of why your inventory argument doesn't work. I eventually need 3 bedrooms, and I don't really care what kind of building it's in. I might buy a brownstone and rent out a floor, and I might buy a condo in a hi-rise. I'm hetero and all of this period-detail crap that everyone rants about means nothing to me. If one or the other looks like a much better deal, I'm getting it. To me, it's all one inventory. So if there are a lot of people like me, a reduction in the price of one kind of place is going to pull buyers away from the other one, and they all eventually move up and down together.
Posted by: joe_the_bummer at June 18, 2009 5:03 PM
"I'm hetero and all of this period-detail crap that everyone rants about means nothing to me."
Blasphemy.
Posted by: daveinbedstuy at June 18, 2009 5:09 PM
ennuiater, that's exactly what some bears not fully internalizing. if this add'l 40% drop comes in a short time frame, a bunch of us looking to buy will face huge risk that we're unemployed. if unemployed in this econ, who the heck is thinking about buying a place - ie busy counting to see if have enough $$$ to survive day to day. So I'm praying this 40% drop comes slowly over 5 yrs or so
Posted by: more4less at June 18, 2009 5:13 PM
Townhouses are lingering in prime neighborhoods because most banks are being overly conservative when it comes to making jumbo loans these days, even to applicants with great credit and assets. Most people don't want to (or can't) pay all/mostly cash for a house, so they're on the sidelines today in Brownstoner land. The houses are "overpriced" if by that you mean they're priced above 80% LTV at the conforming limit. At some point the opportunities for making a profit off of solid borrowers will convince more banks to get back into the market and accurately assess the LTV risk, instead of arbitrarily shutting off the spigot at the conforming limit.
Posted by: NorthHeights at June 18, 2009 5:13 PM
So late to this party, so much work to do.
Whatever the merits of this report for the large suburban area it covers, it has zero to do with Brooklyn. Subprime areas are already 50% off, prices are already equal to or less than the cost of renting, and investors are already moving in.
Whatever happens in prime Brooklyn, prices can't fall much below $1.3 million for a four-story where each floor rents for $2,000. But they may not fall much at all, given how concerned parents seem to be about getting their kids into these school zones.
BHO, you have won. Your prize is waiting for you in East New York.
Posted by: mopar at June 18, 2009 5:14 PM
I see a missed an entire day of poo flinging. What a shame.
I expect that:
1. Prices will decline significantly in new and recent condos, particularly those in fringe areas.
2. Prices will decline an additional moderate amount in prime coops and condos and most single owner properties.
3. Prices will hold up well in the most prime blocks of the best Brooklyn neighborhoods.
4. Inventory, which is currently low, will increase meaningfully in the coming months.
I have put my money where my mouth is.
Posted by: lechacal at June 18, 2009 6:38 PM
Lechacal, I agree with all your points, except maybe No. 4.
Posted by: mopar at June 18, 2009 6:49 PM
The Almighty has spoken- "Whatever happens in prime Brooklyn, prices can't fall much below $1.3 million for a four-story where each floor rents for $2,000. But they may not fall much at all, given how concerned parents seem to be about getting their kids into these school zones." It is not enough to tell this person to visit Craigs list and notice that rents are well belew 1400 dollars a month and still going down. All those nachos and Skittles must have gone to his head.
Posted by: hannible at June 18, 2009 6:58 PM
wow - even more hatin' than usual in this thread...
Posted by: the chicken at June 18, 2009 7:27 PM
Ladies and gents, the tale of the tape! (part2)
In this corner we have the big boys (notice that they're both bulls and bears on the economy),
GS: 40-58% down
T2: 45% down
DB: 40%+ down
Schiller: "US Home Prices May Fall for Years"
MWhitney:"Prime Loan Defaults Have Only Begun"
In this corner we have
11217: Everythings ok because he owns a hole in the wall
Dibs: Money manager who sweeps his ghetto floor for bitter renters.
Mopar: This report "has zero to do with Brooklyn"
Hahahhaha, where would you put your money?
Posted by: cornerbodega at June 18, 2009 7:48 PM
Hannible, I would like you to know that I am a woman and I eat only whole grains.
Posted by: mopar at June 18, 2009 8:13 PM
Oh, and 11217, I think I have that book!!!
Posted by: mopar at June 18, 2009 8:14 PM
all those whole grains have made you constipated mopar.
Posted by: hannible at June 18, 2009 8:24 PM
Hey, DIBS, I'm a renter. More price declines don't scare me -- they make me much, much better about not buying for $250K in BedStuy in 2000 when I had the chance... okay, true, I'm still not sure if I want the curly-haired moppet to go to school there.
But I also agree with the folk that say you can't separate the condo/co-op market from the brownstone one... to some extent. The thing is, brownstones in "fringe" neighborhoods have fallen too far and they're still falling. Wasn't mopar looking at that place in Ocean Hill that was once 600K that is now 300k? (And which, by the way, I love... except for the Ocean Hill thing.)How much of a premium is a prime neighborhood worth? And then, once you figure that, how much are apartments going for in Manhattan again? $500K for 2 bedrooms? Lower? If your choice (again) becomes a palace in Manhattan for that million or a Brooklyn brownstone in Clinton Hill... well, me, I'd buy something for half that and stick the rest in an interest-bearing account, but for those that Want to spend that much... I think there's more correction to come.
Posted by: Heather at June 18, 2009 8:58 PM
You can buy a 2 bedroom apt in Manhattan for $500,000? Really?
Hannible, if a four-floor townhouse renting for $2,000 per floor sells for less than $1.3 million, absentee landlord investors will swoop in and buy the place because they can make a profit renting.
Floor-throughs do rent for $1700 to $3500 in the "prime" areas of Brooklyn. I'm not advocating it, I'm just making a factual statement.
Where you and I live, the rents have fallen to $1400 or less, yes.
Posted by: mopar at June 18, 2009 11:47 PM
'You can buy a 2 bedroom apt in Manhattan for $500,000? Really?'
according to streeteasy, the answer is, even below 125th st, technically, yes - although most (if not all) carry a big asterisk of some kind. (of course, since Manhattan includes a hundred blocks north of 125th, if you take into account the entire island you can find plenty of stuff - but that's no surprise to anyone, I would imagine)
just considering things below the upper east/west side - here's one. not great, but not bad at 420K, right? still, considering the size, not sure it's a 'true' 2bdr:
http://www.prudentialelliman.com/listings.ASpx?listingid=1089790&utm_source=Streeteasy&utm_campaign=corporate&utm_medium=listings
this one even has (grim) outdoor space and a working fireplace:
http://www.prudentialelliman.com/listings.ASpx?listingid=1115755&utm_source=Streeteasy&utm_campaign=corporate&utm_medium=listings
(BTW, this is not meant as a bull or bear comment - I was just curious to see what the answer to the above question is - and thought I'd share what I found)
Posted by: perhaps at June 19, 2009 12:51 AM
Mopar please tell me again who is going to swoop in and buy like crazy when the fed starts raising rates to 4-5 percent? That will mean loans will have to be paid ay almost a 10 percent premium! Wait until this coming tuesday and watch if interest rates don't start skyrocketing soon.
Posted by: hannible at June 19, 2009 5:56 AM
Perhaps, interesting. That second one has a good floor plan and could be cute if details such as trim and a more attractive door were added. Only trouble is the lack of space for both eating and sitting limit its usefulness as a family apartment. Though you could spend all summer eating outdoors if you redid the steps.
Hannible, yes, higher interest rates should mean lower housing prices.
Posted by: mopar at June 21, 2009 6:07 PM
Latest Restaurant Additions
-
Le Barricou
added November 20, 2009 12:00 PM in Williamsburg -
Der Schwarze Kölner
added November 19, 2009 12:00 PM in Fort Greene -
Oak Wine Bar & Café
added November 18, 2009 12:00 PM in Williamsburg -
Mr. Wonton
added November 17, 2009 12:00 PM in Park Slope -
Casa Rosa
added November 16, 2009 12:00 PM in Carroll Gardens -
Cousin John's Café & Bakery
added November 13, 2009 12:00 PM in Park Slope -
Elote
added November 12, 2009 12:00 PM in Williamsburg -
Miracle Grill
added November 11, 2009 12:00 PM in Park Slope -
Phoebe's Cafe
added November 10, 2009 12:00 PM in Williamsburg -
Ruthie's
added November 9, 2009 12:00 PM in Clinton Hill, Downtown Brooklyn
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