Halstead TV: Behind The Numbers
A: This is my company's new Market Report narrated by Halstead Chief Economist Greg Heym. Greg is very real, very in tune with the current situation, spoke to agents about a year ago about the challenges we face, and tells it like it is. Very refreshing I must say. Anyway, just wanted to pass this along, as I know they are working on enhancing this quarterly video report as we enter 2009. Enjoy.
Few tidbits:
While Greg discussed the raw data, it is important to understand that we are at now now. Greg mentioned the challenges NYC faces, and acknowledges the credit crisis that began just over a year ago. Its true that 'so far the data remains positive', but that is to be expected from lagging data. My own opinions on where we are now and likely trends looking ahead include:
There is nothing wrong with openly discussing what is going on in our market! Manhattan historically lags in recessions and leads in recoveries. Arguably, the national housing slowdown is in its 3rd year now and we are probably 8-12 months into our downturn with the severe knee-jerk adjustment lower occurring mostly in the past 8 weeks. Why? Buyers simply backed off. Local real estate is all about the buyers and Manhattan is no different. If a deal needs to get done, the seller has few options and time against them. Now is not the time for sellers to be anchored to peak prices!
This might surprise many, but I am a bit less bearish than I was 12 months ago when we were near peak levels and apartment sales were yet to catch up to deteriorating macro fundamentals. I know the worst is still to come for Manhattan, and I am still bearish, but when an illiquid housing market rolls over the initial adjustment is fast. Today, a noticeable adjustment has occurred and the pendulum has clearly swung in favor of buyers.
But who is buying? This is why I am still bearish. Consider me less bearish than I was 12 months ago, now that the downturn begun and prices are starting to correct; but still bearish for the next 3-4 quarters as job losses mount, distress rises, and negative wealth effect hits home. If it were a baseball game, I would say we are in the 2nd or 3rd inning; better than the pregame warmups right! The good news, we have to go through this. The bad news, we have to go through this. There is nothing I can do to stop it, so lets adapt to the changing world and act accordingly.
Comments (7)
You are dead on when it comes to buyers - I think even "hungry" buyers with sterling credit might decide to wait it out of another 12 months. The R-word is rattling a lot of folks - and most people will want to hold onto that cash until things clear up a bit. Personally - I'm waiting to see how badly the NYC budget gets hit - and how bad the service cuts and tax increases will be. (I'm thinking that we will not see a replay of 70's - "Ford to City: Drop Dead", but I'm not about to plunk down $200k just to be proven wrong.)
Posted by october | November 11, 2008 5:58 PM
the sideline money theory by brokers was that if Manhattan dropped 5-7%, buyers would swoop in and pick up that discount putting a floor on prices.
I think that theory has been proven wrong already, although I bet brokers still pitch that angle.
Hungry buyers will have their eyes light up at some point, but that is still yet to come. That light at the end of the tunnel, for now, is likely a mack truck heading our way! But at least the process started.
In regards to city budgets, who knows how bad it will get or what will happen. This is the big unknown!! Thanks for comment
Posted by Noah | November 11, 2008 6:07 PM
Before the downturn began, there probably was a lot of sideline money waiting for a 5 - 7% drop. But that's always the case in a thriving market. The reasons the market is falling, however, are the same reasons why there is no sideline money right now. People have either lost their jobs, fear losing their jobs and expect lower bonuses, have lost 30% of their net worth or can't get nearly as much credit as they could have 18 months ago. Even financially healthy potential buyers are reluctant to buy for fear of purchasing a depreciating asset. The notion that sideline money exists independent of macroeconomic conditions is silly.
Posted by billshiers | November 11, 2008 6:35 PM
totally agreed billshiers
Posted by Noah | November 11, 2008 6:41 PM
Noah,
As usual, I agree with you. The truly ugly question is whether we're going to go to extra innings.
Posted by brenda | November 12, 2008 6:11 AM
So is this average price quality controlled in any sense (like the Case-Shiller Index) or is it just the raw average of sale prices during the quarter?
I just can't help but believe that this increase is due to a few sales in the very high end of the market and a dearth of activity at every other price point. Maybe I'm wrong, but who can tell? It's the brokers job to choose the number that works for them and there's no publicly available quality controlled data at anything less than the MSA level to counter their massaged numbers.
As we're currently renters with a pile of cash waiting to buy, we've been watching a dozen or more listings over the past six months on a consistent basis in Brooklyn Heights and Cobble Hill. Guess what? Stuff isn't selling and asking prices are dropping at a pretty good clip. According to a simple buy v. lease spreadsheet I set up, another 10 or 15% drop gets back to "equilibrium." If the rental market starts to soften, as it will, then add another 5 to 10% to that.
Comments?
Posted by framed | November 12, 2008 2:31 PM
"Manhattan lags in recessions and leads in recoveries." Wrong.
Manhattan prices bottomed in '93, well after houses in the rest of the country were moving back up (I exclude other bubble-popped areas such as Boston and LA).
In the mid 1970's Manhattan was destroyed- with co-ops free to those who would take them over, as we remember- when such bargains were unheard of outside the city. And for those who were not willing to pay co-op fees there were of course squats in Harlem and Alphabet City.
Does anyone on this site think that Manhattan is a low cost provider of anything? In a recession cost wins. Manhattan is a good place to structure CDO's, market CDO's and sell art to people who structure and market CDO's. It is relatively weak in other categories.
Manhattan will be hit harder than the nation as a whole and will take longer to recover than the nation as a whole, because our current recession is credit driven and Manhattan is the vortex of the credit whirlpool.
Let's just hope that crime doesn't get out of control and the top three floors of 740 Park sell for $250,000 like they did in 1974.
Posted by john haskell | November 12, 2008 4:49 PM