House of the Day: Stretching It in the Slope
Is it just us or does $1.8 million seem like a lot of dosh for a three-story house of nice, but certainly not extraordinary, quality? We’re sure the block is a good one as the ad says, but both the scale and finishes of the house look modest by Park Slope standards. Or maybe this…
Is it just us or does $1.8 million seem like a lot of dosh for a three-story house of nice, but certainly not extraordinary, quality? We’re sure the block is a good one as the ad says, but both the scale and finishes of the house look modest by Park Slope standards. Or maybe this is one of those cases where it would be worth it to hire one of those consultants to touch up the interiors–the Ikea furnishings certainly detract from the necessary gravitas needed to pull of this price (especially with the top two floors leased through the end of 2006!). Are you folks who know the Park Slope market with us on this one or is our lack of sleep starting to show?
10th Street [Corcoran]
I don’t have a crystal ball or high hopes – I am currently very happy with my home and do not intend to or need to buy any time in the near future. You, on the other hand, seem to have something invested in the prices rising for at least another year, which I don’t think you should bet on. As others have said, if you a buyer finds something they would truly be happy in for a number of years and can afford with a normal fixed rate mortgage, there is not reason not to buy. My whole point was that no one should make a decision banking on the market continuing to rise as it has over the past few years.
“Are you saying there will never be an end…” No. I’m saying that there is nothing in your comment that people weren’t saying — loudly, angrily — 2 or 3 years ago. Prices can’t keep appreciating 30% a year forever (short of a hyperinflation scenario). But that doesn’t mean they’ll drop, either — which is the implied argument when one says that everything is overpriced nowadays. It’s just as possible that prices will eventually plateau. And that that won’t happen for another year, before which there will be another year of rising prices. Under that scenario, it would be a good idea to buy now, rather than after prices have spiked again, then stabilized.
Shorter answer is: You don’t have a crystal ball, just high hopes.
Regarding the “bubble”, let’s not forget that NYC is a city of micro-markets. I agree that supply/demand drive the r.e. market – but that equation varies greatly depending on the borough, the nabe, the type of housing etc. For example, in Park Slope, the desirable housing is near the park. Within that realm, 1-2 family brownstones in mint/designer condition, these are the rarest of rare. These are going from $2MM upwards to $5MM for a mansion. These are wealthy buyers – they want what they want, they can’t get enough of it, and they have the cash. Is there a bubble there – doubtful – the characteristics driving the demand, and the financial flexibility of the buyers is not going to change much no matter the macro-econ environment (unless we’re talking Wall St recession). Conversely, we read about certain nabes where buyers are bidding up properties on speculation – either that they can flip these properties or real buyers buying on the hope that the population, amenities and infrastructure will change radically over the next few years. Is there a more significant risk? Absolutely, no doubt about it – but greater potential upside too. I don’t think anyone can deny there isn’t a high degree of short-term valuation risk in certain areas and types of housing. But, at the same time, intelligent buyers should be able to find homes they can afford and stick with through these frothy seas – albeit NYC r.e. has always about compromising on what you really want.
On “bad” vs. “crazy”: Those are two very different things, we’re learning. As some have suggested, the difference is between “expensive” and “unbuyable,” and salaries/personal wealth just aren’t rising at the rate real estate is. There will inevitably be a breaking point, unless millionaires the world over all decide to move to NYC at once. Oh wait, maybe that’s what’s happening? (Perhaps current home owners continue to turn over property again and again to upgrade to multi-million dollar homes? Eh, I doubt it.)
Personally, I’m holding my paltry $80K down payment, $110K salary, and zero debt and wondering if there’s any hope. Which is a laugh riot, when you think about it.
Question: Will the massive influx of new construction throw the supply/demand equation? I’m sure we all read the story about 130 buildings under construction in Wburg at this moment. Plus, what about some of this stuff around the Bowery? There are buildings that must have 100 units in them down there. These are in “desirable” places, and some suckers seem to like this ugly new construction. Will it free up the cool stuff, or at least make it buyable again?
Who cares about the Ikea furnishings. Its the house that’s for sale.
Are you saying you think there will never be an end to the 20-30% increases in real estate prices per 6 months we have been seeing lately? If things keep increasing like this, within the next 1-2 years, only people who make $600K a year minimum will be able to afford a house or apartment big enough for a family in any neighborhood in Manhattan, Brooklyn or Queens, decent or not. You truly believe this is sustainable? Mary Gallagher’s site has a listing for $2.2 million in Ditmas right now – Ditmas! Lets all step back and admit this is getting just a little out of line with reality – how many people can afford to pay $2.2 million and would choose to live in that neighborhood? Also – it is only in the last few years that people have been greatly over-leveraging with creative financing. Most of these financing vehicles were not readily available in the 80s and 90s and we have yet to see the effect they will have when the interest rates start increasing and the ARMS start coming due. Even the banks are getting nervous and revising their underwriting and PMI guidelines to take into account the approximately 30% of the population using these risky financing vehicles. I’m not sure if prices will fall heavily, but to bet on them continuing to increase like this, even with rising interest rates, by paying above market for a house right now is a big gamble.
“There is a difference between 2-3 years ago…”
The question is, were people saying exactly the same thing 2-3 years ago (that things were bad in 2000, but absoulutely CRAZY in 2002 or 2003)? As I recall — having shopped for a house then — they were.
There is a difference between 2-3 years ago when prices seemed expensive, but doable and now where many people (making 200K+ and with 300K of cash) cannot afford anything decent even with “creative” financing.
Jamzar, supply vs demand is definitely driving market prices. Let’s play a little econ 101.. Let hold supply constant and increase demand. What happens to price(P)? P increases. This is what has been happening over the last few years. What is driving increased demand? Is it simply a DESIRE to live in a certain neighborhood? Or is a function of ones financial ABILITY live in a certain desired location. Interest rates play a huge role on demand and rising rates affect the demand side of the equation. People will still DESIRE to live in certain areas, but will no longer be financially ABLE to. Rising rates will thin the pool of qualified buyers. What happens when there is diminishing demand driven by rising rates and increasing supply do the thousands of apartments coming online over the next few years. Falling demand and rising supply is never a good combination. I’m not calling for a dot.com melt down, but a 25% haircut over 3 or 4 years is not out of the question.