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February 26, 2009
She is sinking by the bow
"Median home price: $455,000
Median income: $63,000
Affordability score: 13.9%
In the nation's largest metropolis, New York, home prices took a steep dive during the quarter, to $455,000 from $500,000 three months earlier.
That was not enough to dislodge the city from its rank as the least affordable metro area in the land. Only 13.9% of the homes sold there during the quarter were affordable for median income families, who earned $63,000. That was still a major improvement from two years ago when only 5.1% of homes sold during the fourth quarter of 2006 were affordable.
The good news is that New York households have been barely brushed by the foreclosure crisis so far with only 0.71% receiving some kind of foreclosure filing during 2008.
Housing markets in the New York metro area had held up comparatively well, even after declines started to hit other boom markets hard, but with the financial services industry recording huge losses and shedding jobs, home prices may be in for some steep declines." Taken from a CNN webpage. Do we need anymore proof that home prices are falling in Brooklyn?
Comments
In a city where renters predominate homeowners, this is not significant news. Whether 5%, 13.9% or 20% of the homes are affordable by "median income families, who earned $63,000" is a ridiculous premise to begin a discussion.
Try again.
Posted by: daveinbedstuy at February 26, 2009 12:17 PM
What does the NY Metro area cover in this post? Just the five boroughs, parts of the tri-state area? Hard to know what these numbers actually mean in reality.
Posted by: 1842 at February 26, 2009 1:05 PM
we bought rowhouse (signed contract in august).
The house next to ours also was for sale and got in contract few weeks ago. They contract price actually is a bit higher then ours. So I do not see much "falling" so far.
Posted by: bobjohn at February 26, 2009 2:06 PM
Davinbedsty you never lose a minute to keep pumping up those real estate prices do you? You must be a real estate loser sitting at some desk all day waiting for a commision.
Posted by: hannible at February 26, 2009 2:42 PM
Agreed, Hannible. I don't know anyone on this site who disputes that prices in NYC are declining on average.
The Case Schiller index says they're off by about 15% since the peak of June 2006. (I forget the exact number.)
All anyone here is debating is how much historic townhouses in "prime" Brooklyn will decline vs. subprime Brooklyn vs. condos and for how long.
Specific information on specific markets within Brooklyn is hard to come by, but someone posted some credible numbers a few days ago saying that Clinton Hill townhouses were down about 10 or 15 percent (this is sale price, not ask price). I know from my looking around Bushwick that prices are down 40 percent from the high of 2006, no question. Again, this is actual sale price, not ask.
A number of people on here, including me, are betting that "prime" Brooklyn townhouses will decline about 20 percent from peak to low. I could see subprime Brooklyn declining by as much as 60 percent.
If you see a place you might like to buy, you can plug the address into Property Shark and see what it sold for in the past and what supposedly comparable properties nearby have also sold for.
Posted by: mopar at February 26, 2009 4:08 PM
Thank you Mopar but what I have a problem with is "comparable properties nearby have also sold for.". There are some places that were bought by some people ( I would like to call them stupid for lack of better words)for a million this or a million that but the price should have been no more than 300 to 400,000 dollars if interest rates were left at their acceptable levals and not 1 percent so the home price could go to the roof. Home price is one thing and home value is another. I think that you will agree that because of low interest rates the price of the homes in NYC has increased out of control while the home value has not changed since the early 1990's. Now when you tell someone that you want to buy that home at 1990's price they think you are crazy.
Posted by: hannible at February 26, 2009 5:54 PM
Your assumption is that there is zero inflation, which you do realize is incorrect. 1990 is roughly the bottom of the last real estate downturn.
On another level, you're saying that there is no increase in the value of living in New York over almost 20 years. That also seems incorrect, given crime rate changes and the entire gentrification movement, whether you like its results or not.
And a third point is the neighborhood differences in pricing. I once worked at a major RE brokerage (not in sales) and had access to their proprietary database of sales in Manhattan through the mid 80s. It was interesting. Certain neighborhoods weathered the last downturn by simply holding flat, even though peak to bottom the average price went down over 25%. Prime neighborhoods certainly could do the same this time.
Posted by: corolla at February 26, 2009 6:26 PM
Corolla Bingo! Considering that New York City and its suburbs are a place for the middle=class, please tell me how much have middle class wadges gone up, since the 1990's? Don't you think the New York City housing bubble followed the Wall Street Bubble? Think about it many stocks like General Electric, International Paper and many others were worth 40 some dollars a few months ago and now are worth less than 10 dollars. That is a 75% downturn. Do you think the houses in New York are going down by 75%? and if you think they are not going down that much do you think high rents are going to sustain that market?
Posted by: hannible at February 26, 2009 9:03 PM
Dude, you asked why sellers ignore you when you might offer them prices from 20 years ago. The Obama and Bush administrations have just printed trillions of dollars out of thin air. I wouldn't bet on 75% deflation.
Posted by: corolla at February 26, 2009 9:48 PM
Hannible - Be careful what you wish for...
Honestly, a situation where RE prices drop 75% or even 50%would only accompany a severe depression where you are unemployed, your money is worthless and starving desperate people roam the streets.
Unfortunately, you would be in the same boat or worse off, so wishing for dirt cheap real estate in prime areas is wishing for your own demise and the rest of this country along with it.
Posted by: newsouthsloper at February 26, 2009 10:03 PM
What makes you think I make offers to sellers? I can not and will not make offers to buy necause there is too much of a price difference between what they are asking and what I want and "can" pay. Newsouthsloper did most homeowners bother to look if their renters had enough money to put food on the table or was their main concern to raise rents to follow the "market"?
Posted by: hannible at February 26, 2009 10:12 PM
~Newsouthsloper did most homeowners bother to look if their renters had enough money to put food on the table or was their main concern to raise rents to follow the "market"?~
I wouldnt know since I rented most of my life and only bought my own place when I had saved enough to afford it.
Your anger at landlords is understandable, but life as not always as simple as you would like to make it out to be.
Posted by: newsouthsloper at February 26, 2009 10:19 PM
I was referring to the last sentence in your 5:54 post, where you claim people think you're crazy when you want to buy their house at 1990 prices.
Posted by: corolla at February 27, 2009 7:56 AM
Well think about it 500,000 dollars is doable for a 4 family brownstone considering what your income might be from the rents in optimal conditions but how do you make payments if the asking price for a condo in NYC is or was 550,000 dollars? With a 400,000 dollar morgatge and 500 dollar maintance fee you are looking at a monthly cost 4000 dollars. That means that anyone that is married and earns less than 80,000 dollars a year can not afford to live here. Rents are coming down to the 1000 dollars a month and I think there will be a big rush to rent and that the condo market will sink fast. I also see a big broblem with the local banks because it will mean that banks will have to take a 200-300,000 dollar writedown on every condo they financed. Don't you think condos should be priced at 200-250,000 dollars instead of 500-550,000? The sooner we get to those prices the quicker we get out of this mess.
Posted by: hannible at February 27, 2009 9:15 AM
You are basically assuming that NYC prices should be equal to the average price for the whole country, which doesn't make sense.
Posted by: corolla at February 27, 2009 10:38 AM
corolla is correct - trillions of dollars have been printed out recently. This will cause the value of the dollar to sink very fast. It will take about a year to hit, but soon we will see $10 for a gallon of milk, average new car will be $80,000, and a small studio co-op in park slope will run over a million.
Posted by: landlord at February 27, 2009 12:10 PM
What makes New York City real estate stand out from the rest of the United States? Is it Wall Street? What would happen to New York City if Wall Street were to tumble into a great depression? Would New York real estate follow? There is nothing else but the love of New Yorkers to keep the values of homes up and even that requires alot of work.
Posted by: hannible at February 27, 2009 12:25 PM
Hannible, I defer to you to tell us why New York real estate has suddenly become average priced. There are centuries of price history showing that New York real estate is more expensive than most other parts of the country.
Posted by: corolla at February 27, 2009 3:08 PM
Hannible- Your math is way off.
$400,000 loan amount @ 5% = $2147 + $500 = $2657
even @ 6% = $2,398 + $500 = $2,898
Those are very realistic numbers for a couple making 60k each, which is low for NYC income standards. My girlfriend is a NYC teacher in her twenties and she makes more than 60k.
Posted by: Adam Dahill at February 27, 2009 5:35 PM
Hannible, you are right that much of New York City real estate is not affordable for households making under $130,000. But you'd be surprised how many high earners there are in this city, especially compared to other areas. Also, there are tons of one bedrooms and studios in Queens and the Bronx that are very affordable by single people earning $50,000 to $80,000 a year.
I used to own a place in Jackson Heights. It was cheaper than renting in Carroll Gardens.
A lot of people buy a small place, a starter apartment, they can afford. Then five or ten years later they sell it and use the equity to buy a much nicer, family size apartment when they are older, married, and have kids. (Of course, they have to sell when the market is going up, obviously.) By that time, they're probably earning a higher income too.
The key is to live frugally, save your money, don't use credit cards. And it sounds like you're doing all that, so you should be fine.
Posted by: mopar at February 27, 2009 6:41 PM
One other thing to consider: I agree the price runups of the last few years were obviously related to the mortgage bubble, but nonetheless, the total cost of ownership in recent years, adjusted for inflation, has been very low because mortgage rates were so low.
Well, we're saying the same thing. In other words, prices may have been crazy high but mortgage rates were low, so the house was still cheaper to buy than if the reverse were the case.
Posted by: mopar at February 27, 2009 11:53 PM
I don't understand why many of you think interest rates are going to stay at 4% for the next 30 years? Assuming the Fed can no longer cut any more interest rates can only go up once we get out of this economic situation. My numbers are not that far off because it is not before long interest rates will have to come up to at least 7 percent. People are eventually going to have to get some interest for keeping money in a bank.
Posted by: hannible at February 28, 2009 2:08 AM
I absolutely do think interest rates will go up. In fact, that's why buying a house now is cheaper than waiting for price drops. Sad but true.
Posted by: mopar at February 28, 2009 9:30 AM
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