Market

July 1, 2009

Case-Shiller: Beware the Head Fake

There was some reason to take comfort about yesterday's data from the Case-Shiller Index—the rate of price declines slowed for the third straight month nationally. But before you break out the champagne and check books, get a dose of what the Wall Street Journal had to say yesterday:

The bloodletting may not be over. Here’s why: If price declines accelerate for the mid-to-upper end of the housing market, then that could generate enough large declines in values—even among a small segment of the overall housing market—to push the index lower still.

Meanwhile, here in New York (where there's plenty of "mid-to-upper" properties) housing prices ticked down another 1.6 percent in April for a total of 21 percent off the June 2008 high, as the chart above shows.

June 26, 2009

Rising Inventory Bad News for Burg

With over 5,000 new apartments (condos and rentals) expected to hit the Williamsburg market this year and next (combined), it doesn't take an Economics PhD to predict what the impact on pricing is likely to be or what it could mean for the number of foreclosures in the area. There are over 1,800 new condos coming online this year and another 1,200 or so scheduled for 2010, according to The Real Deal. A bigger problem than pricing or over-supply, though, is lack of financing. Very few lenders (if any) are willing to finance condo purchases in buildings that don't already have the large majority of their units in contract. "The pace of activity [in Williamsburg] is well off from last year," said Miller Samuels' Jonathan Miller, "not because of lack of demand, but because buyers are having a very difficult time getting financing for projects that aren't 70 to 75 percent sold already." Unless that changes, developers have few options other than to go rental (which their financing partners don't always want to do) or lose their properties. In fact, banks have already begun foreclosure proceedings at the Factory Lofts at 66 North 1st Street, Warehouse 11 at 214 North 11th Street and the Metropolitan at 349 Metropolitan (above). "It used to be enjoyable, exciting to open a new building," said David Maundrell, president of Aptsandlofts.com, who provided the inventory predictions aboe. "Now it's nerve-wracking." Indeed.
More Foreclosures Likely as W'burg Inventory Grows [TRD]

June 23, 2009

Harvard's State of the Housing Market Report

"From their quarterly peaks during the housing boom to the last quarter of 2008, real home equity was down 41 percent, existing median home prices 27 percent (and at least 40 percent in 26 metropolitan areas), new home sales 70 percent, and existing home sales 33 percent. Homeowners also pulled back on home improvement projects, with spending off 13 percent in real terms in 2008 and even larger declines expected in 2009. The cutbacks in home building and remodeling shaved a full percentage point off economic growth in 2007 and nearly another point in 2008." — The State of the Nation's Housing via Matrix

June 18, 2009

Corco: Signed Contracts Up, Inventory Down

"Condominiums and cooperatives continue to experience increases in the number of signed contracts per month, due in large part to sellers adjusting their pricing downward. The typical seasonality in the marketplace is likely also to be a factor. The availably inventory appears to have peaked, and is slowly retreating. However, it will take several more months to confirm the trend, as it may be due to other factors." — Corcoran Manhattan Monthly Market Snapshot

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]
Photo by tomodea

June 4, 2009

Developers, Banks Doing to Renegotiation Dance

If you've been wondering why many condo developments have been slow to make broad price cuts in the face of overwhelming evidence of a weakening market, this month's issue of The Real Deal has your answer for you: Banks. "What incredulous buyers often don't realize is that across-the-board price cuts have not been easy for most developers to make, because price reductions must be cleared with lenders," the article says. A few of the major development marketing groups like Corcoran and The Developers Group report that the debt holders are starting to play ball, but they are exacting tougher terms out of developers in return for lowering what's referred to as the "release price" for a new unit. Desperate at this point, developers are increasingly biting the bullet. "In September, [developers] weren't willing to see there was going to be this type of negotiation," said Jacqueline Urgo, president of the Marketing Directors. "They are much more open now." The article doesn't name any Brooklyn names but it's probably a good bet that developers of projects like One Brooklyn Bridge and Oro that were highlighted in another Real Deal article this month as only being about 1/5 sold have had some intimate conversations with their lenders in recent months.

May 18, 2009

Will Everyone Go Running Back to Manhattan?

Crain's recycles the question (asked by The Times a week earlier) that seems to be on everyone's mind these days: Do falling Manhattan rents spell the end of Brooklyn? We don't think so. Clearly some people who work in Midtown and were living in Brooklyn based on price alone ("If it's as expensive in Brooklyn as Manhattan, I'd rather just be in the real thing,” says one publicist) will return to Manhattan but, we'd bet, most of the creative professionals who've put down roots in the County of Kings are here to stay. Real housewife Alex McCord summed up how we—and, if this poll is to be believed, many others—feel when she told the paper, “Even if we had Warren Buffett money, we would never leave.”
Can Brooklyn Keep Its Mojo? [Crain's]
Brooklynites Jumping Ship to Manhattan? [Brownstoner]
Photo by cornell100

May 11, 2009

REBNY Panel Reality Check

Last Thursday night, the Real Estate Board of New York held a panel discussion about the impact that the bear market in real estate is having on the brokerage industry. Here are some choice quotes courtesy of The Real Deal.

"You can't get financing for anything that isn't 50 percent sold, and in some cases, 70 percent." — Hal Wilkie, Brown Harris Stevens

"Development is going to be very quiet if not non-existent for the next three years." — Diane Ramirez, Halstead

"[The current market] forces you to focus like a fat man who got a heart attack, then started to exercise." — Barak Dunayer, Barak Realty

"[Agents should] figure it out, because there's always opportunity." — Dottie Herman, Douglas Elliman

Corcoran chief Pam Liebman's comment from last week fits right in to this context: "A lot of brokers won't survive this."
Real Estate Firms and Brokers Need to Think Thin [TRD]

Brooklynites Jumping Ship to Manhattan?

Could it be that many self-proclaimed Brooklyn loyalists are ready to trade it all in at the first sign of a recession? Was the borough's surging popularity in recent years merely a function of Manhattan becoming unaffordable? Or is Brooklyn still a first choice for many? The Real Estate section cover story from yesterday's New York Times certainly tries to create the impression that, given the chance, a number of folks who professed to like Brooklyn in recent years are finding the lure of affordable rents and proximity to work just too much to resists. Take Andrew Baisley, who describes himself as a "cheerleader for Brooklyn." The Bushwick resident, though, just last month jumped at the chance to rent a $2,100-a-month one-bedroom in Chelsea. “When you go to Manhattan, there’s an air of selling out,” he says. “I’ve accepted that.” Let's try to get a sense of how many fair-weather Brooklynites there really are out there:

Manhattan Calling [NY Times]

May 7, 2009

Pam Liebman: Brooklyn Doing Better Than the Rest

Consoling words from Corcoran CEO Pam Liebman at the Brooklyn Real Estate Roundtable on Tuesday: "Brooklyn on a performance basis is holding up better than any of our other markets. Price and volume drops have been less than Manhattan...Brooklyn caters more to value buyers...It's not a second choice anymore." Another gem from the same session: "Anything marketed on bells and whistles is not doing well."

April 29, 2009

Case Shiller Index: Negative Numbers Across the Board

Home prices in the New York City area in February fell 1.6 percent from January and about 10 percent from a year before, according to new numbers from the Case-Shiller Index. Those drops were relatively benign compared to some parts of the country: Las Vegas and San Francisco all experienced year-over-year declines of over 30 percent while Phoenix achieved the distinction of being the first city to have its real estate values fall more than 50 percent from the 2006 peak. Some of the hardest hit regions have begun to show signs of stabilizing, as low prices, the proliferation of foreclosure sales and low interest rates have lured some buyers back to the table. Still, predictions for future declines across the country from so-called experts range from just 5 percent to as much as 33 percent. A chart from the Wall Street Journal of percentage changes in the nation's 20 largest cities is on the jump.
Phoenix Leads the Way Down in Home Prices [NY Times]
City Lags As Nation Hits Home Runs [NY Post]
A Look at Case-Shiller Numbers [WSJ]
NYC Price graph from The New York Times

Continue reading "Case Shiller Index: Negative Numbers Across the Board"

April 28, 2009

Mortgage Losses Won't Peak 'Til 2012?

For my part, I remain convinced that without serious efforts at foreclosure abatement (ideally via property appreciation rights), mortgage losses will begin to creep higher later this year, surging in mid-2010, remaining high through 2011, and peaking in early 2012. To believe that we are through with this crisis or the associated losses is to completely ignore the overhang of mortgage resets that still remain from the final years of the housing bubble.
— John Hussman on Seeking Alpha

April 23, 2009

Lessons From the Foreclosure Front Lines

A recently transplanted New Yorker named Michael Houtkin won the bidding on a one-bedroom condominium on the outskirts of Boca Raton, a few blocks from three golf courses, for the incredible price of $30,000. “Things were almost being given away,” he said later...The glut of foreclosed homes creates a self-reinforcing cycle. Falling prices lead to more foreclosures. Foreclosures lead to an excess supply of homes for sale. The excess supply then leads to further price declines. Jan Hatzius, the chief economist at Goldman Sachs, says that the “massive amount of excess supply” means that home prices nationwide will probably fall an additional 15 percent. — David Leonhardt in The New York Times

April 20, 2009

Real Estate: The New Obscenity?

The lead article in the real estate section of The New York Times this weekend attempts to make the case that real estate has gone from Topic No. 1 to Topic Non Grata in the last six months. “Nobody wants to talk about it," The Times quotes one hedge fund manager as saying. We're not so sure that's the case. People may be acting more discreetly when they bring it up, but, in our experience, it's still just as much on everyone's minds as before, although now, instead of being obsesses with how much the value of their house has gone up, it's all about how far the value has fallen. Have you noticed a decrease in the amount people are talking about real estate or just a different tone?
Don’t Even Say the Words [NY Times]
Photo by solupine

April 16, 2009

Douglas Elliman Q1 Report: Down and Downer

Not surprisingly, prices and volume in Brooklyn were both down in the first quarter of 2009 versus both the Q4 and Q1 2008, according to the latest market report from Douglas Elliman. The median sales price fell to $474,600 from $490,000 in the prior quarter and $527,000 a year earlier. Likewise, the number of transactions was 1,186, down from 1,846 in the fourth quarter and 2,761 in the first quarter of 2008. The median price declines were consistent across all property types: Condos (-8.6%), Co-ops (-11.4%), 1-3 Family (-10.6%), Luxury (-9.2%). East Brooklyn was by far the hardest hit, with median prices plummeting 25% year-over-year. Townhouses in Northwest Brooklyn fared pretty badly, too, with median prices falling to $1,087,500 from $1,287,500 in the fourth quarter and $1,200,000 a year earlier.
Market Reports [Douglas Elliman]

April 13, 2009

Babs: 'Don't Ever Underestimate' New York

In her Daily News column on Friday, Barbara Corcoran busted out some major league cheerleading for the New York real estate market that was surprising even for her given the state of the economy and the downward momentum of apartment prices in the city:

All the financial mess here in New York City is really just a speed bump on the way to future riches. I’ve lived through real-estate markets a lot more hopeless than this one, and every time the city turned around and bounced back, taking real-estate values up with it. In 1974, I listed a 14-room, park-view apartment in the famous Dakota on Central Park West. The price the seller set was absolutely nothing! Zero! The owner was willing to literally give it away if I could only find some sucker to take over his monthly maintenance. I couldn’t find the sucker. That same apartment was sold five years ago for $18 million. New York City is a boom-bust-boom town, especially when it comes to real estate. Don’t ever underestimate its power to bounce back with bigger and better values.

Go, go, go!
Ask Barbara [NY Daily News via Curbed]

April 9, 2009

Manhattan Housing Prices Take a Dive

Tough 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

April 8, 2009

REBNY Report Reveals Big Drop in Volume

While Manhattan saw a 63% decline in condo sales in the first three months of 2009 from the year-earlier period, Brooklyn wasn’t far behind, with a 61% drop in sales volume. Meantime, sales in Queens and the Bronx were down 58% and 50%, respectively...Brooklyn neighborhoods Park Slope and Greenpoint recorded increases in average sale prices for condos for the period studied. Condo prices in Greenpoint were up 7% year-over-year in the first quarter, to $543,000, while prices in Park Slope were up 6%, to $698,000. “Park Slope has been an established neighborhood for some time now,” said Michael Slattery, senior vice president at REBNY, noting that new developments did not skew results in these two Brooklyn areas. “There will be continued interest in these neighborhoods.” — Crain's

April 3, 2009

Brooklyn Foreclosures Drop Dramatically in First Quarter

While foreclosures city-wide were down slightly in the first quarter versus a year ago, they were down significantly in Brooklyn. According to PropertyShark, there were only 37 foreclosures in Brooklyn over the last three months, versus 140 in the first quarter of 2008 and 83 in the fourth quarter of 2008; Manhattan also saw a marked decline. You can check out a dynamic map of the Brooklyn properties here. If the same thing were happening in the Bronx and Queens, we might chalk it up to the government and bank programs, but that doesn't appear to be the case. So any ideas what could explain this trend in Brooklyn?

April 2, 2009

Manhattan Market Frozen

The news from across the East River ain't good: Prices and sales volume are both down, and it's taking a lot longer for apartments to sell; inventory is up 34 percent over last year. That's the bottom line of the First Quarter Report from Douglas Elliman and Halstead released this morning. The number of co-op and condo closings fell 58 percent year-over-year and prices dropped 11 percent. (Co-op prices fared worse than condos, though that was likely skewed by fewer eight-figure co-op deals; in fact, the number of $10 million deals fell 87 percent.) “Consumer confidence is the killer,” said Dottie Herman, president of the Prudential Douglas Elliman brokerage firm. “People are scared. They have never seen anything like this.” Corcoran head Pam Liebman predicted that prices will fall further as sales volume picks up, which is good—it's the only way for the market to find its bottom. How do you think the Brooklyn market is faring compared to this?
Apartments Sell for Less if They Are Sold at All [NY Times]
Crisis Hits Home: Manhattan Massacre [NY Post]
Photo by Rob Young

April 1, 2009

Case-Shiller Continues to Tank

Housing prices in the country's 20 largest cities fell 19 percent between January 2008 and January 2009, according to the Case-Shiller index; New York City fell almost 10 percent in this same period. “There’s no daylight that I can see in this report,” said David Blitzer, chairman of S.& P.’s index committee. “It is unlikely that we are anywhere near a bottom in nationwide home prices,” said Joshua Shapiro, chief United States economist for MFR Inc. The only ray of light: In a few cities like Charlotte, Minneapolis, and New York, the rate of decline in January was slightly lower than the rate of decline in December.
Record Drop in Index of Home Prices [NY Times]
Graph from Seeking Alpha

March 31, 2009

Getting a Jump on the Q1 Post-Mortems

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

Continue reading "Getting a Jump on the Q1 Post-Mortems"

March 30, 2009

It's Good To Be A Renter Right Now

Psssst. Have you heard? Rents are dropping. Take the case of the Pettyjohn sisters, who, out of desperation, rented a crappy, inconvenient two-bedroom in Bushwick last year for $1,700. Just recently, they were able to upgrade to a larger, more attractive place two stops closer to Manhattan on the L train for the same price. In Sunday's Real Estate section, The Times chronicles this story and others like it while pointing out that the number landlords now willing to pay a broker to rent their apartments has gone up almost four-fold in the last year. Where will it stop? Anybody's guess, though the chief economist for Halstead and Brown Harris Stevens says it's unlikely the price trend will reverse until the city stops losing jobs.
Why Are These Renters Smiling? [NY Times]
Photo by mesmart

March 23, 2009

That's Me In The Corner, Losing My Deposit

While there have been a few tales of people voluntarily walking away from their down payments because their equity was already annihilated before it was time to close, there's another side to the coin: Those people who are involuntarily losing their deposits because the declining market is causing banks to require buyers put up more than their original 10 percent. And in many cases, the buyers can't come up with the extra cash so they are losing what they already put down. In these cases, the developer gets to keep the cash, but has to go out and try to resell the apartment at much lower prices. The poster children for this phenomenon are the Pham family, who scraped together every last penny they had to put down $93,199 on a two-bedroom condo in Hoboken in 2005; when it came time to finally close last fall the they found they were going to need to put up another $150,000 or so. “It would take us another 15 years to save that money again,” Ms. Pham said. End of story: The Phams remain in their old apartment and Toll Brothers keeps the dough. Another buyer had a slightly better ending: They were able to end up buying a smaller unit than the one they were originally in contract for from the same developer. Anyone know instances of this type of thing happening in Brooklyn?
Up in Smoke: The Deposit Vanishes [NY Times]