Where and When Will The Market Bottom?
Most people interviewed in this weekend Times article about New York’s real estate market finding its bottom seem to agree that prices so far have come down about 25 percent; how much further they have to fall is a matter of more varied opinion, though it sounds like 10 or 15 percent would be a…
Most people interviewed in this weekend Times article about New York’s real estate market finding its bottom seem to agree that prices so far have come down about 25 percent; how much further they have to fall is a matter of more varied opinion, though it sounds like 10 or 15 percent would be a consensus range. Which means we could be closer to the bottom than past cycles would suggest. Even if the New York market were to end up being 35 to 45 percent down, he said, to the degree we’re seeing deals done at 30 to 32 percent down anyway, it’s not very far away. What may happen, some speculate, is that the correction, however brutal, could be accelerated into a shorter time period that last go-round. It’s possible that rather than seeing price declines spread out over a six-year period, this time it could be concentrated in a two-year period, said Ingrid Gould Ellen, co-director of the Furman Center for Real Estate and Urban Policy at NYU’s School of Law. That possibility, along with the fact that there are plenty of folks waiting in the wings wanting to buy, has the brokerage community cautiously optimistic that the real estate business may avoid having a lost decade. After all, what broker’s need to get paid are transactions more than high prices.
Looking for Bottom in N.Y. Real Estate [NY Times]
Photo by simplerich
benson…a one bedroom condo in the building I came from on the UES just sold at the same price as mine did when I sold it in August, 2007…and it didn’t have a kitchen or bath as nice as mine. Anecdotal, yes.
Additionally, there are far fewer places for sale in Bed Stuy now than there were when I bought in early 2007.
What is this “FIRE” acronym please?
Benson, a couple of responses:
1. The comments about a 25% drop may be coming from realtors and others who have a good view on prices for properties that are going into contract now (rather than the relatively old data we usually chew over).
2. In the depression, the primary bubble was in stocks, not real estate. The bursting stock market bubble dragged down housing prices. This time it is the other way around, and the bursting of the real estate bubble is dragging down stocks. The performance of the housing market this time has already been worse than during the depression.
Sociologically speaking, the tide seems to be turning. i went to a few open houses yesterday and they were PACKED. I saw tons of people walking around Windsor Terrace and Park Slope with those little real estate print-offs and folders. It was odd, felt like ’05 or something. Granted, the nice weather had something to do with it, but I kept overhearing people discussing different apartments and there seemed to be a real sense that people were interested in buying again.
Benson –In ’29, there wasn’t the toxic symbiosis between equity prices and housing prices that there is now. Housing was a key component in the Ponzi up this time; it seems likely it will have to crater in the painful adjustment down.
“You better pray that never happens. The Assheads will be Goose Stepping in the streets..
Chicken knock it off there will be a crash not annihilation….
The What
Someday this war is gonna end…
Posted by: Return of The What at March 9, 2009 10:21 AM”
Are you not guilty of what you accuse Team Bull of then? Calling it how you would like it to be, not what you think it will be.
It’s not that I believe that is where prices are heading, I’m more interested in your thought process for where you think the bottom is.
I love that elevator metaphor, brownie. Beautiful!
My take:
“Looking for Bottom in N.Y. Real Estate” – article
Looking for a bottom in a bottomless pit. Genious.
“Hall F. Willkie, the president of Brown Harris Stevens, said he, too, would be surprised by a decline that large [-40% from peak]. ‘A lot of negative things would have to happen in the general economy,’ he said.” -article
Brain dead.
“Just how much further prices will dive may depend more on how soon and how generously banks resume lending than on the recovery of Wall Street or the end of the recession.” -article
Brain dead. You can’t jumpstart a collapsing Ponzi scheme. You gotta start a new one. Home prices won’t recover until Wall Street recovers (the next Ponzi scheme or set therof). The recession has already ended. The depression has begun.
“When will we know when the market has reached the bottom?” – article
When the monthly NY Case-Shiller Home Price Index records zero change from the previous year of any given month, stupid.
” ‘It’s [inventory] right now the highest since I started tracking in 1999,’ Mr. Miller said.” – article
But but but Team Bull says inventory is tight.
“Indeed, both Ms. Herman and Ms. Liebman note that this recession differs from previous ones in that there are buyers on the sidelines this time.” -article
Lying sack of shit. Home ownership, inside and outside NYC, was at a record high. No one was turned down. Most people bought, taxi drivers and all. Most people are now underwater or foreclosed on (won’t be buying for a while if at all). Very few are on the sidelines.
“Buyers are not hesitating to walk in and bid 40 percent off the price” – article
Oh shit! Getting awfully close to half.
“If per-capita incomes were to revert to twice the national average (versus more recent measures of three times the national average), condo prices would need to fall by 58 percent to match the price-to-income ratios of the late 1990s, before the run-up in the real estate market, according to the analysis.” -article
Oh shit! That’s over half! Payback (deleverage from overleverage) is a bitch. That’s what happens when you fuck with the fundamentals.
“The leveling of the boom may strike condos and co-ops differently…Co-op boards, however, could damage themselves, he said, if they become too picky with buyers.” – article
So, in other words, the catastrhophic price collapse (‘lowering of the boom’ my ass) may strike condos and co-ops ALL THE SAME.
***Bid half off peak comps***
Hannible, if those luxury condos drop to a price where it doesn’t make sense to build, there will be very little new construction. This could lead to a housing shortage which then could help prices. Though of course, this is also predicated on the fact that there are more people moving here for jobs, which may not be here. This also may cause NYC to be less wealthy and not attractive for new businesses and less tax dollars. Which then leads to us becoming no less attractive than (fill in the blank middle of the road metropolis, like Boston or Philly).
Wake up to the New America.
“For instance, in the Great Depression, the stock market lost more than 90% of its value, yet from what I have read real estate dropped by about 25%.”
Was there a corresponding run-up in prices before the Depression? I think one thing that will contribute to a rather large plummet in prices here is the unsustainable price hikes of the past few years that preceded this economic crash.
Hello folks;
I have a comment regarding the Times’ article, and then a question for Team Bear, which I hope provokes a debate,rather than the usual mud-slinging.
First, I would like to know where the Times came up with the 25% figure. What is the basis? I see no evidence (yet) of a drop of this magnitude in the NY real estate market, in terms of average selling price (ASP). I am in the sales and marketing area (non-real estate) and in my mind, the only way to rationally track a market is in the average selling price, per appropriate market segement (condos,coops,towhnouses by Brooklyn, Manhattan,etc.). Discounts off the asking price are meaningless. The asking price only represents the wishes or delusions of the seller, but does not represent the actual market movements. Where is the report stating a 25% drop in ASP?
All I can say is that in the condo complex I live in in Park Slope, the drop in sales price has been on the order of 4%, so far.
If you agree to using ASP to track the market,then my question to Team Bear is this: Given that some of you have predicted declines of up to 50% in the NY market, what is the historical precedent for such a prediction? For instance, in the Great Depression, the stock market lost more than 90% of its value, yet from what I have read real estate dropped by about 25%. To take a personal example: I used to own a two family house in Brooklyn that was built in 1928 and sold for $16,000. At the end of the depression, it was selling for $12,000. In 1961, it sold for about the original sale price again.
I will state my position again, as a member of Team Bull. I know that the market will decline, for sure. My prediction is that the ASP will decline by about 20%, or slightly less. I make this prediction because the problem in NY is not one of oversupply, like we have seen in Arizona and other areas. At the peak, the rate of build in NYC was 30,000 units a year, 1% of the total hosuing stock. Rather, what we are seeing in NYC is a very bad economy in the FIRE sector. Contrary to what Polemecist states, I believe it will eventually rebound, though it may take more than a decade. THE FIRE sector is the heart of NYC’s economy. It has been for decades, and will continue to be.
Again, I urge a debate, not derision or invective.