Most Post-2006 Condo Buyers Are Underwater?
In an article describing how co-ops are much better positioned for the downturn because, unlike condos, their position in foreclosure proceedings is senior to the bank, comes this doozy of a quote from the president of a property management company in Manhattan: I think it’s safe to say that the value of any apartment purchased…
In an article describing how co-ops are much better positioned for the downturn because, unlike condos, their position in foreclosure proceedings is senior to the bank, comes this doozy of a quote from the president of a property management company in Manhattan:
I think it’s safe to say that the value of any apartment purchased in the last two years is less than its purchase price. The simple calculation is that if you bought an apartment a year ago and financed 90 percent of the purchase price, as many did, and now it’s worth 20 percent less, you’re upside-down as an owner.
That’s another reason why co-ops are in better shape: Most owners had to put down a minimum of 20 percent when they bought.
The Downside for Condos in a Downturn [NY Times]
I don’t think anyone is arguing that NYC real estate will continue to demand a premium over other parts of the US. The question is how much of a premium. As US population has shifted south and west over the last decade, it’s not ridiculous that NYC might demand less of a premium going forward. Some have argued that we didn’t see the same kind of speculative silliness that happened in sunnier climes, which is probably true. My biggest concern is that the landscape of the New York economy has been radically altered by the collapse of the finance industry.
And while NYC has had population increase during my adult life, 11217 data shows that is by no means a mortal lock. The biggest mistakes are made when we think we “know” beyond a shadow of a doubt that something is true, when in reality it is only the case that it has been true for awhile.
I think everyone is rightly re-examining their assumptions and trying to figure out what information now matters to our financial decision making. For my part, there’s too much noise and uncertainty for anything to be clear and that in itself means something. As I try to figure out what is happening, the unemployment % is my key indicator. I don’t see how we can expect a stabilization or even a shallowing of the real estate market until job losses decelerate. If NYC job losses continue the disturbing trend from the beginning of this year of outpacing the national percentage, then you may very well see a net loss of population. I agree that we may not have “white” flight, but we could see some kind of “white collar” drought.
I think they say they “can” overshoot — they hate unambiguous comments. of course if you want to call an overshoot you have to first agree on what the right price should have been. a quick rebound would require a whole lot of new credit or new capital. the thing is, ALL kinds of assets have lost value, and lenders look at their former lending practices as huge mistakes. what do you sell if you want to invest? not your stocks… someone pointed out (Dave?) that a lot of money is parked in US treasurys, but that’s mainly institutional, and mostly buy-and-hold. when buying time starts for companies, depressed RE will compete with dozens of cheap asset classes for attention. And then, the way they would naturally invest is through structured funds like REITS and CDOs, which are politically toxic. It’s hard to see everyone jumping back in like they sometimes do after a stock market crash.
11217 – Yes.
Don’t economists usually say that just as prices overshoot at the top, they also overshoot at the bottom as well?
The fact that there is a limited housing supply in NYC is not particularly relevant to the future of prices. Static supply means that prices will be higher than somewhere with increasing supply. It absolutely does NOT provide insurance against price decreases. When prices have finished falling in NYC, they will level out somewhere that is still much higher than most of the rest of the world. Consider a priceless work of art – there may be only one in the world, but that doens’t mean the price won’t go down (see what is happening in the art world right now for example).
I don’t know the answer to that one, Joe.
But NYC has always been expensive compared to the rest of the U.S. And it’s still not one of the most expensive cities in the world.
I think prices will come down, but I also believe that our economy will continue to diversify and come back.
Greed is one of the seven deadly sins. People will find a way to act upon that sooner rather than later.
I dont think there was such a phrase back in the 1700s, 1800s, and most of the early 1900s as “high rise.”
sorry, I can’t spell or subtract. comparable, and 11 years.
yes but how much WORSE is the shortage than it was ten years ago in 1998? does it justify a 3X price increase?