Open House Picks: Six Months Later
Comment: Nice job on St. Marks Place; keep dreaming on Putnam. Open House Picks 5/09/08 [Brownstoner] Previous Six Months Later Posts [Brownstoner]
Comment: Nice job on St. Marks Place; keep dreaming on Putnam.
Open House Picks 5/09/08 [Brownstoner]
Previous Six Months Later Posts [Brownstoner]
“Don’t you mean to say that they may drop up to 50% over the short run and then go up but never up to the 2008 real dollar equivalent?”
No, not never, BrooklynGreene. Just not before we die.
“But it seems to me looking at the graphs comparing Brooklyn to other areas of the country, we simply did not have as much of an increase in prices so we should see less of a collapse, no? I’d love your take, Dow.”
Yes, I definitely expect less of a collapse for the reason you state. I was in Northern California recently and someone told me of 70% nominal decreases in some of the outlying areas. Even in L.A. they’re seeing 40% nominal drops. Yet still, no bottom in sight. For Brooklyn and all of NYC, I expect only a 25 to 50 percent nominal hit.
But BG, we’re flirting with an economic depression. Home prices can drop so low that they become irrelevant because canned food becomes more important. The 60’s, 70’s and 80’s offer no insight. I don’t think the consensus realizes how bad it is out there. I don’t think I realize it.
“The value of rare property…will not simply oscillate on either side of its historic inflation adjusted mean.”
Why not, Aussie? The following graph “based on sale prices of standard existing houses, not new construction” shows just that.
http://tinyurl.com/g9vf4
That graph undoubtably includes rare property. Brownstones increased in value at the same rate as everything else. So, yes, you pay a premium for an antique. But that was already priced in before the bubble was blown.
“Over time there are more people with money and less rare properties and the curve is a steady rise.”
I agree with that because just like the Mona Lisa, an original Picasso or an original Keith Herring, brownstones will become more and more rare over time. But not fast enough for us to see 2007 prices in 2007 dollars before we check out. It’ll take a lot more time before they become Picassos. All the brownstones in Bed Stuy would have to be renovated before that happens. We saw 200% nominal increases because of cheap/easy credit, not rarity. Whatever rarity existed was already priced in before the boom.
“Look at West Village brownstones. In 1995 they were worth more than their inflation adjusted value in 1975 and in 1975 worth more than in 1955. They became progressively more desirable and rarer.”
Those real increases paled in comparison to those of the recent past which were driven by cheap/easy credit unprecedented since the roaring 20’s. When will we see this funny money again? 2090?
BrooklynGreene – “it seems to me looking at the graphs comparing Brooklyn to other areas of the country, we simply did not have as much of an increase in prices so we should see less of a collapse, no?”
Are you serious? Prices in prime Brooklyn more than doubled in some cases in just 4 years! Is that less of any increase than other parts of the country? I think the price explosion in Brooklyn has been absolutely shocking, so I think we are quite vulnerable to a significant correction if not an outright collapse.
Sam, we know you’re on the younger side but I do not agree that “collecting antique furniture” is passe’. In fact, having visited some friends recently who went mod and had kitchen, baths and their TV room done in the fairly recent mod style, I have to admit it already looks dated or, at least, doomed to look dated very soon and worn out very shortly. These mod look doesn’t stand up to kids and teens very easily.
Still Dow (are you related to the Dows of the Scrubbing Bubbles Dows?), yes, prices will drop but I do not think that in certain areas they will drop to 50% and stay there forever even in “real†dollars… Don’t you mean to say that they may drop up to 50% over the short run and then go up but never up to the 2008 real dollar equivalent? Are you saying they will stay at 50% of their current dollar value forever? Though, there are those who paid 2-and-a-half million and 3 million dollars for houses in the better (non-Brooklyn Heights) areas of brownstone Brooklyn last year which was probably kind of crazy, one has to admit that much of these areas may have been undervalued not that long ago.
In fact, I think the prices in Fort Greene were ridiculously too low for many reasons I won’t go into. They were lower than they should have been compared to other places in NYC even in the doldrums of the early 90’s when everything was low. Of course, yes, maybe prices have been too high the last couple of years! I admit it and do feel badly for all the people who got caught up in the frenzy.
But it seems to me looking at the graphs comparing Brooklyn to other areas of the country, we simply did not have as much of an increase in prices so we should see less of a collapse, no? I’d love your take, Dow.
Plus, there have been social, commercial and perceptional changes for areas like Fort Greene, a neighborhood which almost no Manhattanite even knew about in the 80’s well into the 90’s. I’d get blank stares at cocktail parties when talking about our neighborhood…basically all of Brooklyn seemed like a land somewhere far away to many Manhattanites (including me at one time!!!).
Boy! That has changed! Now it is really on the map in NYC, the US and internationally. I have to admit, I’m even flabbergasted at Brooklyn’s renown and cache with friends who come over with their kids from Switzerland, Germany and France. Sure, they spend a lot of time in Manhattan, but areas in Brooklyn are major destinations…Really astounding. It’s as if someone dumped 150 million dollars into a Brooklyn PR and ad campaign!
Not that the changes in FG are immutable and cannot evaporate, that many restaurants and such that give the guise of a trendy neighborhood will not close up shop, but the change in *perception* of Brooklyn and neighborhoods such as Fort Greene has changed and is unlikely to simply evaporate if some of the trappings are reduced.
Also, there are people who live in Brownstone Brooklyn who are such strong adherents and proselytizer, in numbers greater than before. There is an inherent self-propelling PR machine. I keep thinking that those who paid 2 and 3 million the last couple of years to own a brownstone will be even more virulently proselytizing.
I guess we’ll have to see…time will tell. I do wonder if the cost of housing will go down so much and be a much lower percentage of income in the future in NYC. I know it has gotten out of control the last 10 years but the cost of housing in NYC has been a large percent of income for many, many decades. Living here has not been cheap for before I can remember though in the heyday of 1968 into the 70’s there certainly were cheaper situations one could find. It was more livable for young people then in relation to their incomes.
Plus, we have the flea market now!!! 🙂 Even though it’s geared to the younger set, that is just as well. Just being there, getting press coverage, being talked about, etc. is a plus. Yes, I know the fact that the flea market is there will not float recent Fort Greene brownstone prices all on its own! Anyway, there’s not much for me there. Funny that I have bought a good number of things but mostly from the oldest vendor! You’ll see. It’s kind of amusing when you find yourself gravitating toward “old people” and then look in the mirror the and the answer is staring back at you…and every time you run into friends everyone “looks fabulous!!!” “You look GREAT!” “No, YOU look great!!!”
Have a good weekend.
I am with DOW in two respects. Kudos on the handle by the way I can recall thinking 8000 and 800 were unlikely but I agree with you that we could easily be looking at more declines. But I also agree
1. with your Case Schiller test (which is actually less of a test and more a picture of the bottom). Its not what I would called a leading indicator but good for a conservative buyer.
2. I think there is more pain to come in real estate.
I disagree that we won’t see the prices that we saw in 2007 again in our lifetimes with respect to Brownstone Brooklyn. The reason is exactly the one given by jurist. The value of rare property, whether because of its proximity to something, being bounded by water, being historic or whatever, will not simply oscillate on either side of its historic inflation adjusted mean. Over time there are more people with money and less rare properties and the curve is a steady rise. Do some research and you will find that I am correct. I am not saying that brownstones are not going to drop, they will. But unless something occurs to make them undesirable or less rare they will in 10 years be worth more than they are today in inflation adjusted terms. Look at West Village brownstones. In 1995 they were worth more than their inflation adjusted value in 1975 and in 1975 worth more than in 1955. They became progressively more desirable and rarer.
I agree with Sam. New York City is fly by night and there is evidence that over time people will want to live and work here.
No way my screen name affects the stock market, FLH. It’s simply a derivation of the understanding that the economy was driven by home price appreciation which was fueled by cheap easy credit that started in 2003 when the DJIA was at 8,000 and the S&P 500 at almost 800.
Yeah, I cheered yesterday. I’m all bear. The lower the DOW goes, the more my prediction about home prices will hit bullseye or better (for us if my wife and I stay employed). I have no idea where it’ll go from here and I’m not gonna even try to call it.
Good luck.
Well, we’ll see. I’ve got no regrets, and no plans to move any time soon. And I’m not under the illusion that anonymously shilling for my own neighborhood will keep property values afloat, any more than your screen name is going to affect the stock market. Hope you were cheered yesterday around noon though, when the DOW hit 7900. Maybe you should change it to DOW80, stay ahead of the curve.
Just a typo, FLH. Point remains.