Corco's 3Q Data Reassuring
If it’s felt like the real estate market’s been doing better recently, that’s because it has, judging by the numbers in Corcoran’s Third Quarter Market Report. (And Elliman’s too.) Here’s how the brokerage’s scribes summed it up: Brooklyn residential real estate prices remained stable from a year ago but improved from last quarter. The median…
If it’s felt like the real estate market’s been doing better recently, that’s because it has, judging by the numbers in Corcoran’s Third Quarter Market Report. (And Elliman’s too.) Here’s how the brokerage’s scribes summed it up:
Brooklyn residential real estate prices remained stable from a year ago but improved from last quarter. The median price of a Brooklyn apartment during Third Quarter 2010 was $472,000 and an average $564 per square foot, an increase of 12% and 3%, respectively, over Second Quarter 2010. Resale transactions gained back market share this quarter that they had lost to the new development sector. Resale price metrics increased from last quarter and were relatively even from a year ago. New development sales accounted for 32% of all apartment transactions this quarter, on par with a year ago but down from 37% in Second Quarter 2010. Single-family townhouse median price declined 44% from last quarter and 53% from Third Quarter 2009. Multi-family townhouses, however, held even with a year ago but increased 26% from Second Quarter 2010.
Odd discrepancy between single- and multi-family townhouses. Must be a sample-size issue…
Why would I believe a self-serving report by Corcoran?
You are absolutely wrong, novanglus. A significant drop in values is a very strong argument and all I need to worry about.
1) Higher rates are a seller’s problem, not a buyer’s. The affordability scale is fixed to income, not the home price. The home price is fixed to mortgage rates. It gets better, one who is able to rent and save can put more money down on a cheaper house resulting in a mortgage payment the same or less as before with the lower rate but higher price.
2) You’re very wrong here. Mortgages/home prices WERE the inflation. Hyperinflation. +200% (triple) over only 15 years and +100% (double) over only 5 years. Now it’s deflating all over the country and will resume so here. Real estate cannot be a hedge against itself. The problem now is deflation. It’s all over Ben Bernanke’s latest remarks. It’s the basis for QE2. Even still, hyperinflation/curency debasement will not buoy real estate, just food and energy. In an event like that, homeowners would line up (massive supply, little demand) to sell their property in desperation to keep up with food, gas and mass transit prices.
3) That premium was already built into pre-bubble prices. Manhattan and brownstone Brooklyn were already expensive compared to the rest of the nation. Prices hyperinflated because of nobody-turned-down mortgages and the local economic effects of Wall Street profits from fee gouging off volume, not some all of a sudden revelation about New York City’s special appeal. If this massive mortgage securitization fruad (you’ll get more and more coverage in the main stream media soon) never happened, we wouldn’t have $3M Park Slope brownstones versus $1.5M back in 2001 (and even that was allowed due to the dot com boom and similar Wall St fee gouging). But this so-called attraction would still be here and for prices much more in line with historic fundamentals like 3x income and 10x rent.
Everything has “upside” with gentrifcation but still downside in price due to the necessary evil of bank credit which is now contracting. There’s no free lunch for the massive amount of debt out there and thus peak comps. The piper saying f*** you pay me in the form of deleverage.
The overall credit of mortgage interest rate deduction (common bait by brokers) will get anhilated by depreciation.
***Bid half off peak comps***
Oh, and don’t forget the generous subsidy that the federal government provides via the mortgage interest tax deduction. It makes a 5% interest rate on the books effectively a 3% interest rate. And, of course, what you don’t spend on interest directly increases your net worth.
BHO:
Your biggest analytical weakness is that the only risk you worry about is drops in property values. This is errant for a number of reasons.
1) Regardless of whether prices can go lower, interest rates can’t. They can–and will–go up. That is a risk that any potential buyer needs to address. On a $5-600K mortgage, the difference between mid-4’s and mid 6% interest rates is a difference of $1000/month.
2) Mortgages are a great hedge against the risk of inflation. In a deflationary or stagnant environment, sure the appeal of owning is reduced. However, if/when the economy does recover, inflation becomes an issue. Rents go up faster, your savings lose value. (And interest rates will go up too!) The mortgage freezes your housing payment in place regardless of inflation–unlike rent. And, of course, inflation means bigger property value increases.
3) Not a risk, but your analysis fails to address the fact that certain locations in New York City attract a premium in value beyond what the underlying macro conditions would dictate. And the list of locations that earn that kind of premium is growing as neighborhoods like Prospect Heights, Bed Stuy, Clinton Hill gradually revert back to their previous status as homes for the upper middle class. Brooklyn, especially Brownstone areas, benefits from both the spillover effect from Manhattan (people wanting a lot more for their money) and its own inherent appeal.
If you’re really averse to taking a huge risk, buy one of the beautiful houses in Crown Heights or PLG. They don’t have very far to drop, and they are all upside in terms of possible gentrification.
Wife scared straight about further collapsing prices and quite comfortable in the rental. Plan to be in market for a brownstone, not apartment, when we believe that the market has bottomed, half off or not. Re: Park Slope up 10-15%; That’s what double dips do, bounce and than dip again. Let me know when the government stops borrowing and spending 10% of GDP and Fannie/Freddie stop propping up the mortgage market. Let me know when mortgage originators or their acquiring banks find their titles.
Enjoy the rest of your afternoon, 11217.
***Bid half off peak comps***
And the reason you’re not smart is that you constantly whine about how you want to buy (or that the wife is down your ass about it) but you can’t seem to locate an apartment which is cheaper than renting of which there are many to choose from.
Instead you sit and wait for a further 37% drop even though the numbers have once again started going into positive territory.
So like I asked you the other day…Park Slope prices are UP about 10-15% from the collapse. Does that mean that you will be updating us soon that you aren’t buying until another 47-52% drop?
“I’m so depressed about not being smart enough to make money in RE like you have. Please be gentle.”
I’m refinancing my place right now and just had it appraised for 65K more than I bought it for in 2006.
I’m still not selling.
“I did not buy an apartment because I was concerned about what it would sell for. I bought it…because I wanted to know that each year I wasn’t subject to higher rents and the whims of a landlord.”
Contradiction, 11217!
I’m so depressed about not being smart enough to make money in RE like you have. Please be gentle.
***Bid half off peak comps***
Yes 11217, You should sell because your apartment is already 37% less than it was last year!