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September 18, 2009
NYC Unemployment Passes 10%
http://cityroom.blogs.nytimes.com/2009/09/17/city-unemployment-rate-exceeds-10/
I predict this news will be the catalyst that breaks our local real estate market.
Unfortunately, local real estate prices are about to plummet.
There's nothing but fluff holding them up right now. Wall Street jobs disappear, but lousy brownstones still worth millions?
Yeah, right. . . maybe there's gold in them old bricks. . .
Comments
The supply of houses in the brownstone areas has also jumped pretty dramatically over the past couple of weeks. Based on 15 minutes looking at a few web sites, all of the following seem like they are listings that are new over the past two weeks or so. I'm sure there are other new listings as well, and given the existing overhang (lots -- maybe most -- of the houses in that I looked at in these areas 6 months ago are still for sale), this is pretty scary stuff for a potential buyer.
Boerum Hill
208 Bergen Street (Brooklyn Bridge) -- $1.3
Brooklyn Heights
80 State Street (Corcoran) -- $3.9
Fort Greene
98 South Oxford Street (BHS) -- $2.0
33 Lafayette Avenue (Corcoran) -- $2.6
190 Clermont Avenue (BHS) -- $1.5
202 Clermont Avenue (Corcoran) -- $1.7
297 Vanderbilt Avenue (Douglas Elliman) -- $1.5
Park Slope
376 11th Street (Corcoran) -- $1.65
44 Prospect Place (BHS) -- $2.0
607 2nd Street (BHS) -- $2.8
591 2nd Street (BHS) -- $3.2
3rd Street btwn 7th and 8th (Douglas Elliman) -- $2.8
12th Street off 5th Ave (Douglas Elliman) -- $1.4
505 4th Street (Warren Lewis) -- $2.4
Prospect Heights
411 Park Place (Corcoran) -- $1.65
Posted by: aishling at September 18, 2009 1:13 AM
Wow, all these listings. Yup, sure feels like Miami and Las Vegas with a 'for sale' sign on most of the houses and whole nabes abandoned.
Posted by: denton at September 18, 2009 5:50 AM
Here's what's not allowed: Self-promotional posts by businesses of any kind, events postings, off-topic rants and cut-and-paste articles.
Yes, aishling....how does that number of listings compare to 6, 12, 18, 24 months ago???
And those price, Jeez Louise, it really looks like they're being dumped on the market.
Did you see the news yesterday about national wealth rising in 2Q...part of that was from rising home prices.
But both of you must run and tell the king.
Brownstone Brooklyn prices will bottom by December.
Posted by: daveinbedstuy at September 18, 2009 7:58 AM
And, Wall Street has actually started to rehire.
Posted by: daveinbedstuy at September 18, 2009 8:57 AM
Household net worth remains more than 12 percent below what it was a year ago, despite the increase from Q1 to Q2. While that increase confirmed that the economy cannot continue to contract forever, the overall picture reflected in the Fed's numbers is not very rosy. The credit crunch and deleveraging are highly visible in the report, and the net reduction in wealth from this episode is sobering.
OTOH, the financial sector is likely to be paying out bigger bonuses this year than people were previously thinking, which will give higher-end properties a sugar high this winter. But it won't be sustainable -- real estate lags in a downturn since it is illiquid. Charles Kindleberger has a nice treatment of this fact in Manias, Panics, and Crashes.
Posted by: Back40 at September 18, 2009 9:06 AM
daveinbedstuy --
I don't recall there being such a large influx of new brownstone listings in any two week period in the past year at least. And, I see little reason to suspect that these will move with that much speed. Financing remains tight, and the fear of continued price depreciation exceeds the fear of rapid price increases -- and that fear will only be compounded as new supply is introduced and sits. The low is at least 12 months away.
Posted by: aishling at September 18, 2009 9:19 AM
I belive DIBS to be correct. Wall street is beginning to rehire and bonuses, which drive a good portion of real estate activity are going to be robust to say the least, also any momentum to regulate seems to have abated(sadly). While banks are still cautious about lending (particularly jumbo loans), things are beginning to pick up. I think brownstones have held up better than condos because of less speculation and the fact that families are less transient than the younger demographic of apartment dwellers (particularly in areas like Williamsburg).
Also on the bright side, as an architect doing large multifamily development our phone is beginning to ring again mostly from developers looking to capitalize on others mistakes. We're looking toward an improved but not bright first quarter of 2010 with the rest of 2009 flat.
Posted by: HDL at September 18, 2009 9:24 AM
The first week of September is histoically on of the hottest listing periods. People are back from their summers out of town and it early enough to be clear of the interruptions and distraction of holidays.
Posted by: HDL at September 18, 2009 9:27 AM
HDL -- you are living in lala land if you think there won't be additional regulation. You are right that momentum for fundamental reform has abated (and, I agree, sadly), but new regulation at the agency level is a given. See, for example, A1 of today's WSJ -- "Bankers face sweeping curbs on pay." The service sector that revolves around financial services (lawyers) also face significant downward fee pressures (see the recently leaked O'Melveny memo). Bankers and lawyers (perhaps sadly, but I won't get into that) drive a good deal of the sales activity in brownstones, and with these trends on their income -- and with the reasonable expectation that the marginal income tax rates at the national, state and city level are all headed upwards -- it is hard to see what would cause a quick turnaround.
Posted by: aishling at September 18, 2009 9:47 AM
Question relative to NYC employment: Did wall street jobs really disappear in droves in the past year? I kept reading predictions of it, but the wall street people I know are all employed and there is talk of larger bonuses this year.
Posted by: squaredrive at September 18, 2009 9:51 AM
Squaredrive: The securities industry has lost 31,000 jobs since January 2008, and the much broader "financial activites" sector has lost about 44,000, according to data from the NYS department of labor.
Posted by: Back40 at September 18, 2009 9:57 AM
Aishling - I didn't say there would be no regulation, just that the momentum has abated resulting in what I think and you seem to agree will be a lack of fundamental reform.
I also said that the rest of 09 will be flat with an "improved but not bright first quarter" which also seems to agree with you that there will be no quick turnaround. On the bright side I just don't see things getting worse.
Posted by: HDL at September 18, 2009 10:05 AM
HDL...I was out on Cape Cod in provincetown for two weeks and just got back. I spoke with a friend there who owns one of the larger RE agancies and he sadi that Oct-May was dead, the worst he's ever seen. Now they have 12 listings under contract, a near record for any month. Houses out there, for the most part, are totally discretionary second homes.
Back 40, that's what happened, yes. That's history. There is new hiring going on. Look forward, not backward.
Posted by: daveinbedstuy at September 18, 2009 10:05 AM
DIBS, I'm not arguing that the downturn will never end, so of course there will be new hiring. But in fact, the level of employment on Wall Street in NYC is at the lowest it has been since before the run-up in the 1990s.
Posted by: Back40 at September 18, 2009 10:23 AM
My hunch is the latest spike in NYC may be old fires coming off their severances. That would square the increased UE rate with recent hiring and talk of bonuses for those who remain.
Posted by: slopefarm at September 18, 2009 10:36 AM
the biggest problem is that all the people who have gotten fired from wall street have not left the city yet. They are sitting at home trying to find work and typing on blogs all day.
Posted by: brickoven at September 18, 2009 10:36 AM
not to quote myself, but here is the actual movement of noteworthy brownstones listed in April 2009, arguably the worst moment of the worst period in the post depression era. Since I posted this one further property has moved from contract to sale: 213 Berkeley Pl (HOTD 4/1/09) sold for $2.2 mio, 11% off ask and 11% above widget. Nice symmetry.
"We now have the first set of data coming from some of the darkest days of the downturn…
With the closing of 216 Maple St (HOTD 4/30/09) at 10% over widget (7% off ask for those interested)…
And the closing of 743 Eastern Parkway (HOTD 4/20/09) at 12% over widget (6% off ask)…
We now have 9 closings since the widget was begat. (Side note, to those who claim property is sitting: that is 9 out of 20 from April 1- May 4, with another in contract, 7 others have been pulled, one perhaps rented. Still offered: grand total of 3, including the grossly overpriced 65 Prospect Park West.) (Side side note: this group includes properties in all price ranges, including 3 over 2mio and 5 over 1.5 mio.)
In aggregate, that is nine properties that have sold for $11.4 mio versus a collective widget price of $9.9 mio, or 15% above widget; not a single sale price less than 10% above the widget. The collective ask was $12.2 mio, so average sale price was 6.5% off ask.
Perhaps Brickoven has ridden off into the sun already? I look forward to hearing the cacophony about how stupid buyers are, it’s just a matter of time, headwinds/tailwinds, can’t catch a falling knife, etcetera…
Posted by: antidope at September 15, 2009 11:38 AM in response to Last Week's Biggest Sales"
Posted by: antidope at September 18, 2009 10:36 AM
antidope I see you still did not find work?
Posted by: brickoven at September 18, 2009 10:44 AM
An increase in the number of listings (if, indeed, there is one) may also be due to people who had put off listing their homes in the past, fearing the market, now having more confidence that buyers are out there and can get financing.
Posted by: BH76 at September 18, 2009 10:49 AM
wall street is losing jobs not gaining. Right antidope?
Posted by: brickoven at September 18, 2009 10:52 AM
brickoven: you're burnt toast. and you've lost a bet. not one single sale came within 10% of the widget price, forget on aggregate. shall we agree on your new handle? i've got a couple ideas.
bye-bye brickoven.
Posted by: antidope at September 18, 2009 10:55 AM
antidope are you sure about that? Are you sure you sure you are not just looking at the properties posted here?
Posted by: brickoven at September 18, 2009 11:00 AM
antidope what are you talking about choose my handle? Did we not agree on the Loser handle for the loser? Are you trying to change the bet?
Posted by: brickoven at September 18, 2009 11:11 AM
Loser works for you, that's for sure.
why would i want to change a bet i've won?
u make no cents, that's my $0.02.
Posted by: antidope at September 18, 2009 11:15 AM
how have you won? Maybe you should read the bet over. You did not even remember that loser was the handle? Now I see what is wrong with yu
Posted by: brickoven at September 18, 2009 11:18 AM
i would cry uncle if i were you.
have you not been following along?
i will post a nice big list for everyone to consume on the OT if that's what you want.
it will show 10 sales.
each and every one of them more than 10% of the widget guess. (and i threw in the 10% even though everyone knows 5% is considered "material" because i knew you were gonna lose, got it?)
Posted by: antidope at September 18, 2009 11:25 AM
antidope do you have the bet link?
Posted by: brickoven at September 18, 2009 11:45 AM
I'm with antidope on this. Many people think I'm a dope but the facts are what they are.
Posted by: daveinbedstuy at September 18, 2009 11:53 AM
The Fed has been trying to stabilize the stock market and housing prices for two years....
Here's a tip, don't fight the Fed. Trust me.
Posted by: moreteasir at September 18, 2009 12:03 PM
moreteaser they are only creating more problems in the future. There is a reason the free markets used to work the best. You know we will all be paying for this for many years?
Posted by: brickoven at September 18, 2009 12:07 PM
Brickoven you're probably right but that's a different issue....
With the Fed on your side, speculators with cheap access to credit will make money on the flip.....Homeowners looking to settle down for 5-7 years will benefit due to inflation. With the Fed's backing, the market can remain irrational far longer than we think.
The systemic issues you're referring to-I agree-will be an issue further down the line.....and they'll address them then. Just like they're addressing different ones now.
Don't fight the undertow.
Posted by: moreteasir at September 18, 2009 12:24 PM
anyway we are all f%*& now
http://online.wsj.com/article/SB125324292666522101.html#mod=WSJ_hps_LEADNewsCollection
Posted by: brickoven at September 18, 2009 12:26 PM
Yeah I saw that.....don't be too worried, the industry is excessive and needs to be reigned in a bit, plus bankers can be unbelievably creative when it comes to making money and collecting compensation...I wouldn't bet against them.
Having said that, the "real" money is in hedge funds.....and won't be affected.
Posted by: moreteasir at September 18, 2009 12:40 PM
Antidope, why you say "Brickoven, missed you while you were on Vac (ie no suitable sparring partner) so welcome back. That said, back to normal programming - you %@(&%)"
Posted by: more4less at September 18, 2009 12:40 PM
correction on 12:40pm post - meant to say "why don't you say"
Posted by: more4less at September 18, 2009 12:50 PM
I know more4less no respect this dope has. In my Dojo we are taught to respect the enemy
Posted by: brickoven at September 18, 2009 12:50 PM
Hello Loser or Not Brickovern Anymore:
i am antidope.
that makes you a dope.
also, you lost the bet. change your handle.
Posted by: antidope at September 18, 2009 2:09 PM
mmm... Desperate posts about negative trends.
Usually this is a sign, that the mrket will go up.
Posted by: bobjohn at September 18, 2009 2:38 PM
I didn't think I ever agreed with moreteasir in the past.
Posted by: daveinbedstuy at September 18, 2009 3:00 PM
Sky high unemployment doesn't matter?
Wall Street to the rescue?
Now I've heard everything.
Posted by: IronBalls at September 18, 2009 3:56 PM
"There is a reason the free markets used to work the best. "
Used to is the operative word.
Anyway, can I remind y'all of one lil' fact, please? The housing market has crashed in many places due to over-development. That is, way too many houses were built. Empty tracts of land in SoCal, FL, AZ, etc, were filled with tens of thousands of homes.
Plenty of condos have been built in NYC. Hence an over-supply as well (altho nowhere near what we are seeing elsewhere).
How many 1-2-3 family homes were built in the last five years in what we call Brownstone Brooklyn, i.e., where most of the readers of this blog are interested? Twenty? Fifty? I'd be surprised if building exceeded destroyed. And how many of those were full of historic detail? None, I imagine.
So, while we still have the economic mess that is half the reason for slow sales and falling prices, we don't have the other half, i.e., an over-supply of the types of properties featured aishling's early post.
Therefore, imo, it is quite possible we are at or close to the bottom of prime Brooklyn home pricing. You will never get that brownstone at half off peak comps.
Don't fight the Fed is a valid point.
Posted by: denton at September 18, 2009 5:05 PM
and another fact:
of the original aishling listing of "new properties",2 of the 5 in fort greene (the only nabe i'm looking in) are NOT new at all only relisted with a new broker (202 clermont) and with an ad that for 113 days has said BRAND NEW LISTING (190 clermont)....others that have changed brokers or gone from fsbo to broker and claim to be new listings: 112 vanderbilt, 226 cumberland and 180 adelphi, 398 vanderbilt...inventory is VERY LOW and the brownstone market will always be somewhat impervious to the world market for this reason....so all the speculating can only apply minimally to this special part of the world we love and call home...
Posted by: jdlcnm at September 18, 2009 10:44 PM
"There is a reason the free markets used to work the best."
Clearly, you have never studied economic history. The unsustainable booms, panics and depressions that characterized our free markets from the late 1800's through the Great Depression were frequent and horrific. The post-WWII period was unquestionably a time of much tighter markets, exceptional capital stability, and strong, sustainable economic growth.
Markets are good. But they need to be regulated. And, in fact, markets are PART an economy, not all of it. There are all kinds of vital investments that private markets cannot make and will never make.
Seriously, how can anyone defend free market fundamentalism after what we have just seen? That's not rational. We literally reached a point where we were placing massively leveraged bets that people who couldn't afford their mortgages either wouldn't default, or would default and it would be profitable (or, at least not costly). That's tulip bulb thinking. It's clear evidence our markets aren't allocating private capital efficiently and need massive re-structuring.
Not to mention that while this mania was happening, our nation's public infrastructure was literally crumbling. A bridge fell down in freaking Minnesota! There is a strong case to be made that not only are our public markets allocating private capital poorly, but that we have also allowed far too much of our nation's productive capital to be dedicated to private sector investment. I'm sorry Wall Street hasn't figured out how to make a fortune off universal literacy, good roads, clean water or affordable healthcare, but these things are, in fact, as necessary to our economy as CDOs. Arguably, more so.
Ah, but it occurs to me that I might be suggesting that Wall Street bazillionaires might be a bunch of poseurs who will not ever usher in a free market paradise. That they are, in fact, a bunch of guys who have figured out how to make a ginormous pile of money and who have bought into a bunch of total nonsense to justify the current system. Sure, it doesn't really work that great for our country or for the majority of people in it, but it has made them quite comfortable.
By all means, let's pretend the free market used to work better than a regulated one. While we're at it, I'd like to go back to the days when government worked better because God appointed the king. Oh, and when we could guarantee a good harvest if we all prayed very hard to Demeter.
Posted by: bkrules at September 19, 2009 4:09 PM
Rent market in New York is holding pretty well? If only the government would stop prolonging the number of weeks unemployment benefits were granted you would see renters leaving the city by the busload.
Posted by: hannible at September 20, 2009 6:35 AM
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