Manhattan Real Estate Chart Porn

Thanks Noah, Great stuff. Do you happen to have a 12-month inventory trend available? I think we'll get to 20,000 by the end of '09.

Hey HR - do I know you from SE?

Yes I do, but longer term data is likely going to be part of a new phase of development with UrbanDigs and perhaps UrbanDigs Realty.

for now, we only display past 6 months data. depending on how things go, if they dont go as planned, Ill put the entire data stream up there for free viewing. But as it looks now, it will be a service for buy side clients of a new type of brokerage model that I would like to introduce

Hi Noah - please tell us more about the new type of brokerage model you plan on introducing. That sounds terribly interesting ...

chris - sorry boss, gotta keep quiet for now. Nothing to crazy but something I would want to see & use if I were to transact in Manhattan re.

Noah is right about all he writes. We have massive excess from a huge bubble that must be squeezed out of the Manhattan residential market. The market, which the moron lying brokers chirped, would always only go up.

One thing that would help get this market moving would be for the legions of dishonest brokers to be required to bring a ready, willing and able buyer at the absurd prices they still quote sellers, simply to score a listing.

The bottom line remains, when prices drop 50%, you'll get a few brave buyers willing to make a few low ball offers. Until then, all the dishonest brokers should try and get work detailing cars or waitering or working in a delicatessen.

And of course when the massive wave of foreclosures hit from all the adjusting Alt A loans, that will help knock the crap out of the ridiculous prices.

I just got a lowball offer accepted & am in contract. Without getting too specific, my price is down about 35% from peak value and the place needs minor cosmetic repair. I am buying it to rent, maybe move into it in a few years.

Although I am an experienced RE investor in one of the other boroughs this is my first in Manhattan. Hope I didn't move too soon . . .

Rob,If you don't mind watching your new investment begin falling soon after you're in contract, and then continuing to fall thereafter, then you didn't move too soon. Besides, since it's your first investment in manhattan, you can always use that as an excuse while you are licking your wounds.

Hi Rob

Thanks for sharing. Do you think you are going to be cash flow neutral/positive on your rent - mortgage interest - maintenance? Do you mind sharing how much you paid per square foot?

Hi Rob, Good luck.

We need a bit more information to know how badly you got suckered.

If you bought from someone who bought at the height of the bubble, you still probably wildly overpaid.

A bubble 1BR condo, for example which some moron paid say $900,000 for a couple of years ago, would not be a good buy if the seller had it on the market at say $1.5. 35% off this ask would get you to $975,000, which is till way, way too high.

That 1BR condo is worth far less than the buyer paid. We're not seeing these bubble apartments come down to appropriate prices yet, because this would involve significnat losses to the morons who bought them, on the advice of dishonest brokers and Alt A loans.

So when the bubble apartment drop to around 60-50% of their original bubble purchase price, we'll start to see some buying. But of course this will involve big losses, and since real estate prices ONLY GO UP, sellers, will have to realize they were involved in the real estate equivalent of the MADOFF PONZI SCHEME.

Rob,

If you confirmed that you got 35% below peak levels for a comparable unit in same bldg, you did NOT get suckered, and in fact I think you priced in 10% downturn risk. I think deals are happening around 20-25% below peak now, if seller bites. Otherwise, seller is not interested and believes time will bring a better deal.

Anyway, so I guess you are confirming pretty much everything I discuss here then? Would you agree? Is the market illiquid?

The flaw in doing an investment deal in a manhattan apartment today is that there is no floor in the rental market. Rental prices are in a free fall and real estate taxes are rising so analyzing a deal as an investment (or even as an alternative to renting) is impossible right now. Hence the freeze in the market that can only thaw with the hot blast of a price collapse that will mitigate uncertainty.

Noah - I think the whole "Wall Street is gone" basis is a bit overused lately both by you and in the media at large. Obviously, the system is flushing out the excesses of the credit era and, granted, certain business were in exsistence soley because of this system. We all are seeing the carnage in the industry, some of us first hand, and are slowly realizing the impact in NYC RE.

However, the fundamentals of wall street (pre-bubble) - investment banking, m&a, trading, advisory - still must exist in a free market (or whatever socialist hybrid we end up with). Also let's not forget, great minds will typically reinvent products in a different shiny package. While we will doubtlessly not see a CLO collateralized with subprime mortgages, to think we will not see asset securitization in various new forms once risk is once again taken, is naive I feel.

Cheers - keep up the great writing.

well I said the GAME WAS OVER for wall street revenues way back on JAN 2nd...

The securitization model is broken, and with that brings the disappearance of tons of revenues. This is not coming back anytime soon because there will be regulations coming. Now, we are in crisis mode to save the system and prevent a deflationary spiral from hurting the economy. After, they will come in and regulate. After that, the minds on wall street will innovate a new product around the new regulations, like they always do, but this is a good 7-10 years out in my opinion. The damage done (excessive credit, ez money, trillions in losses in shadow banking system worldwide via derivatives held when music stopped) by this model will take years to unwind and play out.

We are yet to really see the real side effects of these events on Manhattan real estate. What we got used to as far as a bonus season here, that is gone for at least the next 5 years. Sure, there will be bonuses handed out, but not nearly the way it was from the months of JAN-APRIL of 2003-2008.

For now, M&A, LBOs, etc will be very light as this crisis pans out. In fact, Im more worried about deals falling apart in the next year or so as a result of this mess. For securitization, there will be risk taking as the fed is setting the system up for private sector to come in and buy toxic assets for dirt cheap. Questions remain, does the industry want this, will price discovery rush in mark to market losses for existing held assets, etc..Right now Im hearing NO BIDS for tons of CDOs that are trying to be sold for prices that are not too realistic. There is a a gap between any bid and most of the asks, and the holders dont want to sell where bids are. This is from corporate HY debt trader I know on trading floor at major firm who talks to structured finance traders that still are working.

Naive, yes, if we say it will never ever come back. Naive, no, if its used in the context that this game is very far from what we got used to over the past 4-5 years, that helped to BOOM the local housing market here. Its real bad out there Bryan, and some people who I consider to be very very smart, liken the Manhattan re market to the dot com bust..I dont think its that bad, but they do.

I don't totally disagree with you Noah I just see the terms thrown around and think "sensationalism".

You're correct on the "no bids" for many illiquid securities out there / huge spreads / if you can't sell it, you can't price it, etc. I'm there with you.

I also do not discount the fact that we are now, basically, in an illiquid Manhattan RE market. In my condo alone there are listings decreasing then being pulled. I would be naive to think that the "fair value" of my apartment is at a comparable's listing price.

I hope your "very very smart" people are wrong but we should all know what's out there. We each know people impacted this year and from what I gather, bonuses are down 25 - 50%. That's IF they still had a job. If your job forecasts are correct, and that's as good a guess as any, then bonus money may be down an additional 10-20% next year before any flattening. This obviously drives Manhattan RE and I don't want to sound like a "Bull".

But, is it the "end of days?" I don't think so - and I hope not.

Bryan - you are right that there is a certain sensational spin in the media and blogs but not without reason. a good parallel would be the S&L debacle giving birth to the CMBS market, ten years later and with a much greater focus on regulation and underwriting. resi is so much harder because it is so central to all housing liquidity and more importantly is mainly a credit instrument versus a combo cash flow / income + credit instrument. what one cannot refute is the fact that there are no buyers for non-agency structured RMBS, CDO or CLO instruments - and no one can say when they will re-emerge. it really could be ten years but I think at least five, which is a long long time for 2006/2007 prices to simply wait around. lenders cannot and will not wait that long to monetize. they will drive regression to the mean which is probably in the $400k to $500k range for Manhattan. the real risk for owners in Manhattan is that prices outside of the city are adjusting rapidly and each click down increases the availability of affordable housing - it reduces buyer demand. NYC is a great place but it's just not worth it if all value is chucked out the window. to boot, we are going to start experiencing the usual increase in crime, crappy public transportation, begging and graffiti that always accompanies economic down cycles.

re: Noah's new model. it would be great to see brokers morph into merchant bankers of a sort. their fees would be rolled into the equity and if a property holds its value over a certain period of time, they'd benefit. you could also meaningfully tie performance to execution price when contracting the seller's rep by establishing floors or create a system where sellers hire two or more competing brokers. the real game changer of course would be to create a true market exchange for resi in Manhattan; transparency, regulation, pure process, leave the shenanigans behind. i'd work on that one with you Noah. siemprefue@yahoo.com

Bryan - "I hope your "very very smart" people are wrong..."

Oh me too my friend!! Me too!

Its not that its the end of days, its more like its the end of days as we knew it.

Let me say this. 2002-2007, those 5 years saw an amazing thing happen. If you were dead, you could get a loan. Money was easy, cheap, and handed out on a silver platter, for 5 years and 2004-2007 saw tons of it, before grounding to a halt by mid 2007.

Lets just be open here. If it started mid 2002, and lasted until mid 2007, 5 years, what if it takes the same time period to unwind?

So, we are 1 1/2 years into the unwind, the damage is clear, the banks are hurtin bad, money is being hoarded for recapitalization needs, defaults are rising, prices are plunging, and those that need a loan are finding it difficult. What if this environment lasts another 3 1/2 years, or until mid 2012?

This is what the people who I consider to be 'very smart' think. That this adjustment from craziness process will last years. Maybe the most of damage was done already, but just lagging around here until 2012 sounds doomy enough to me.

Thing is, they are looking at such different markets, different bids, different supplies of asks, that they came to that feeling. Now I look at stocks, the lowest of the todem pole of asset classes, and wonder if they are right, and hope they are not.

It's Rob Again.

I'm paying about $700 per sq ft. It is in midtown west on one of the avenues. I will be cash positive because I am moving $ from a non-productive securities investment into this.
My cash flow return, based on a conservative rent analysis, will be about 3.2%. I did not factor in any appreciation.

I financed it without a mtg contingency and
was able to make a persuasive offer because
of this.
I have found that sellers' were anxious for
cash offers because many deals have fallen through because mtgs are not getting approved.

Market IS illiquid right now. Rob.

It caught my attention that price reductions are down sharply this month, but I don't understand why- is there a known reason for this? I could see it happening just because its the holidays and people are probably not focusing too much on selling their home during this period, but if this is not a seasonal thing, what could explain it- perhaps people are holding out for a bonus season that isn't going to materialize?

I work on Wall St, and I will tell you this- it appears it is the end of days for the massive lifestyle and life changing bonuses. I was never fortunate enough to be in the big hitter crowd but I have been getting in the mid 5 figures each year, and I expect that to be down by at least half in the future (due to me moving companies and getting a guarantee, I am safe this year). I believe Manhattan is going to be in for a rough year- the price differential between Hoboken/Jersey City and Manhattan is extreme right now- you can get a large 2 BR luxury condo just across the river or live in a small 1 BR in a marginal neighborhood without any ammenities for the same price.

Noah- I assume you are thinking of doing some kind of premium/charge service to offer extended data. I understand your perspective and the want of a consistent revenue stream, but I think you will draw tons more eyeballs (and hence revenue) if you offer the data for free. I started reading this and other real estate blogs because I was sick of the watered down half picture the major outlets like the NY Times were giving- I go to blogs because they have much more in depth data and coverage.

Kevin - I think its a seasonal thing.

No, wasnt planning on that. Was going to make that part of a new buy side service I plan to introduce. Flat fee model property consulting for buyers, removes the buyer broker from the equation.

Where do I begin...?

Noah, as you know, I completely respect your insight and influence. However, I need put in my 2 cents because you briefly touched upon a HUGE hot button of mine “Manhattan has no standardized public MLS system...”

1. I absolutely agree with you regarding data sources here in NYC. However, it is not the systems that need adjusted, but the processes. The integrity of data is amiss here in Manhattan (yes, mainly due to brokers). I am witness to the poor data displayed by StreetEasy, OLR, the NY Dept of Finance. There is just too much to write of all the errors that I have found....which may start another thread!

2. Regarding MLS: I believe strongly in it’s purpose and so desperately would LOVE to bring this to the NYC market. However, I disagree charging a fee to the public.
Information should be open to the public and not proprietary. The biggest obstacle standing in the way is that our BIG firms are not willing to step up. The BIG firms in town do market to the public that they have the BEST listing data base (and it is profitable for them), but we also need to consider that they do not want to tackle the obstacle of a true MLS steering on the edge of the federal and NY antitrust laws. Additionally, I think there is an “old school” mindset that remembers the 1970’s case of the United States vs, LIBOR and they just think “oh well - what a mess that was”. It is going to take someone of extreme power, conviction and creativity to execute a truly functioning MLS here in Manhattan. But, before this road can be paved, the Department of Finance needs to completely reinvent their process for closed properties in the county...just too many errors and lack of data.

In closing, I also have so much to say in support and in challenge of what Fred and Kevin wrote, but, time is running out for my “voice” to continue this evening.

Here is to a transforming 2009...-H

Rob,
I'm a bit perplexed. You bought an illiquid high-risk asset (Manhattan real estate) for a 3.2% yield when investment grade (BAA) corporate bonds yield 8.4%. If you look just a bit harder you can find assets safer than Manhattan real estate that yield 10-15%. I hope you were VERY conservative in your rent and property tax assumptions.

MBZ - you hit the nail on the head. as long as spreads remain wide no one in their right mind would lock into real estate, unless it's a screaming deal. hell you can buy the PFF at a 30% discount and get a 12% yield payable monthly - the risk of default is so thin at this point it's not even funny. been looking at Miami just for kicks and prices are hovering around $200 PSF which i think still needs to fall another 25% or more but at least it reflects reality somewhat. Manhattan trades at like 10x the median income level for the area - how the bleep can anyone think this is a bottom shocks me but then again so did $50b Bernies....

mbz,

A few things I didn't mention:

- My family does construction contracting, my costs for renovation are very low.
- The place needs a minor (labor-based) renovation, I can create additional equity quickly.
- I want to move back into Manhattan when I retire, this investment can satisfy that desire, an intangible that is hard to value.
- Asset allocation had gotten out of balance and this transaction will help restore it.

Lastly, my background is in real estate, there is a comfort zone, and I am not familiar enough with the type of investments you mention to be comfortable with them. Can you suggest a good book or internet resource that can help me learn a little? I am open to any good investment.

P.S. I just read a Forbes article naming NYC as the 5th best place in the U.S. for long-term real estate investing.

mbz,

A few things I didn't mention:

- My family does construction contracting, my costs for renovation are very low.
- The place needs a minor (labor-based) renovation, I can create additional equity quickly.
- I want to move back into Manhattan when I retire, this investment can satisfy that desire, an intangible that is hard to value.
- Asset allocation had gotten out of balance and this transaction will help restore it.

Lastly, my background is in real estate, there is a comfort zone, and I am not familiar enough with the type of investments you mention to be comfortable with them. Can you suggest a good book or internet resource that can help me learn a little? I am open to any good investment.

P.S. I just read a Forbes article naming NYC as the 5th best place in the U.S. for long-term real estate investing.

Rob,

The reported inventory numbers are concentrated in new condo buildings that are in big trouble. Developers in these properties cannot withdraw these units for sale.

My guess is that about 10% of the 9,000 units for sale in Manhattan are concentrated in just 4 developments -- the Sheffield, Manhattan House, 20 Pine, and the Apthorp.

Before you pull the trigger, imagine what kind of discount, and the amount of time it will take, to get these units sold.

Thank for good information.