The Possibility That Landing Is Hard, Not Soft
This chart puts the real estate run-up of recent years in some historical perspective at a time when market news continues to disappoint. (The black line starts at a baseline value of 100 back in 1890 and is inflation-adjusted over time.) Rising inventory, falling building permits, fewer sales. And while homeowners, especially those of us…
This chart puts the real estate run-up of recent years in some historical perspective at a time when market news continues to disappoint. (The black line starts at a baseline value of 100 back in 1890 and is inflation-adjusted over time.) Rising inventory, falling building permits, fewer sales. And while homeowners, especially those of us who purchase in the last two or three years, are watching closely to see the impact on their own financial status, economists are thinking more and more about how a weakening real estate market could impact the broader economy, as lower levels of equity materially and psychologically impacts consumer behavior. The Times lists the three possible outcomes: Soft landing, prolonged slump and full-on crash. Which do you think is most likely?
Reading Between the For-Sale Signs [NY Times]
I am a homeowner — my $0.02 is as follows:
I don’t subscribe to the “house is more than a financial asset, because you live in it, yada yada” stuff. The reality is that about 90% of people will HAVE to sell their house at some point, and need to take that into account when buying any house. The “we will just hold if the market goes down is great” except that (a) your family may grow and you will need an extra bedroom, (b) you may get old/sick/tired and be unable to climb the steps (c) you may lose your job, be asked to relocate, move to pursue a better job etc, and (d) (e) (f) this list goes on forever. Historically and typically people in those situations can not afford the luxury of riding out the downmarket. Therefore, resale value is important even to an owner.
do any homeowners belong to this forum? I think not given so many respondee’s that want or predict a hard landing. Maybe I live in a bubble, but I haven’t come across anyone to date that’s foreclosed, in financial turmoil, or complaining about the state of the market, rates, etc. Of course this is no indication of the broader market, but I kinda think either I or someone I know would have felt somethng by now given all the BS that’s been said about the RE market. geez
Rasing rents are not a clear indicator that the housing market is still experiencing high demand. In fact, a simple review of the asking rents for a duplex in a brownstone versus a mortgage in that same type of apartment shows, renting at the moment might be a sounder investment. AS such, the increase in rentals is not necessarily an inidcation that additional people are entering the housing market in NYC, but rather the people within the housing market are changing their position from a buyer to a renter. Further, the NYC market is somewhat dependant on the surrounding areas, namely Nassau, Westchester and NJ, as these markets continue to drop, they further increase the likelihood that buyers will look for bargains outside of NYC. It is naive to believe that the recent run-up in housing costs, which is not supported by any other economic indicators, is nothing more than a overbalued market in need of a correction. Will a brooklyn brownstone reduce by 50%, no way, I could never see that happening. However, a 20-30% increase is a real possibility, and with the asking prices now, that is $280000-$420000 decrease in a house currently on the market for $1.4 million. I think a 20% is more likely for a house in that price range, but for teh houses with a higher asking price, I definitely can see 30%. Essentially, when all is said and done, houses going for around $2million will be reduced to $1.5-$1.7; houses going for 1.8 will be around $1.4-1.5; houses for 1.5 million will be 1.2-1.3, and houses for 1.3 will be 1.0-1.1. This correction is necessary and actually healthy, the asking prices now can not be supported by the current economy and raising interest rates. In fact, home owners should hope for such a correction, and hope it occurs quickly, because if the corection does not occur, and prices continue to remain at the current asking prices, a larger and much harsher correction will occur in 5-7 years from now.
Scarano’s an architect and Ratner’s a developer. There’s nothing wrong with either of them. You may not like one of their projects, but that doesn’t make them bad people.
There’s nothing wrong with pushing the envelope. It’s the only way big deals get done, especially in today’s hyper-competitive environment.
“Wrong, real estate developers and investors are good for a community. They create and rehab housing which is very very important to folks who need a place to live.”
there are good developers and bad developers, good rehabs and slop jobs. really think that sacarano guy who markowitz praised the day after he had his permits revoked, is ‘good’ for the community? or Ratner? yeah there’s plenty of good guys but the current administration(s) reward the bad guys.
NY Commercial market is in “stupid” shape due to the massive amounts of money chasing investment opportunities – with a 4.79% 10-year Treasury investors continue to buy up higher yielding commercial properties. Vacancies are at lows and the economic outlook is good – so great office building are trading at 5-6% yields. Retail properties too are in great shape with some of my broker friends telling me that bidding wars are breaking out over good leases.
11:52, it was only a question. I hardly think 99.9% of the country is that obsessed with moving real estate around like a hot stock. I think it’s a relatively small percentage of investors and speculators that keeps that end of the home buying market moving, as anon 12:03 said. The majority of people who own homes stay put for a number of years. My question was more to address the impact these people, who are a numerical majority of homeowners, keep RE a viable investment. Don’t they profit in the long run, and provide some stability to the overall market?
Wrong, real estate developers and investors are good for a community. They create and rehab housing which is very very important to folks who need a place to live.
Anon 11:35 am
>>you were implying this was purely free supply and demand market, clearly, it is not. ‘our market’ does exist as a separate entity, the nation wide real estate boom has, for example, caused foreign speculators (who, according the Christian science monitor, make up as much as 30% of real estate buyers in NYC) to, well >>speculate.
Ummm…yes I said it was a free market and you disagreed…then you go and give an example of how free a market it is by commenting on free capital flows across borders…of course European investors have been “speculating” the Euro has gone from $0.82 to $1.30 in 5-years