The Buyer - Seller Disconnect
A: Okay, for readers of this site for the past few years the current environment in Manhattan real estate is no surprise. I've downplayed the weaker dollar / foreign demand trade that so many brokers used as a reason this market will forever flourish, I've discussed the decline in buyer confidence since AUG 2007, I tried to explain the severity of the credit crisis since the beginning, and I explained why 2009's bonus season was the one to worry about + discussing how the wall street business model was 'game over'. If you missed these, go back and read the discussions and put yourself back into time & place. We are at now now, the downturn has started, and the market is fairly illiquid at the moment as an end result to everything just mentioned. The reason lies in a lack of buyer confidence which leads to a disconnect between buyers & sellers.
So, why is the market illiquid? Two main reasons:
a) sellers are anchored to peak pricing; yet to realize the significant decline in buyer confidence OR that their property is likely worth 15-20% below peak levels
b) buyer confidence has not only declined, but has been shattered; as prices fall and fundamentals deteriorate, more buyers have rushed to the sidelines rather than jump into the market to take advantage of deals. The sideline money theory (the argument, mostly by brokers, that there will be a floor on prices because buyers will flock to pick up deals from the sidelines on even the most minuscule of price adjustments) was proven wrong once again
...the disconnect is making the market illiquid. Lets discuss each.
SELLERS: Some of you guys really have to sell your property! I sure hope that you did not decide to work with the broker that promised you an unrealistically high price simply on the premise that the way they do business is so far superior to every other broker out there. If you did fall for this broker trick, you probably find yourself behind-the-curve, watching the market deteriorate in front of you, playing catchup with your asking price to try and re-stimulate traffic. If you have to sell, stop anchoring your price expectations to peak levels and comparable units that sold when buyer confidence was significantly higher. If you do anchor your property near peak levels and find traffic very slow, your only shot is to hope that a greater fool will show up at the next open house, and offer a bid near ask. This is quickly becoming wishful thinking that will put you even further behind-the-curve. If you have to sell, adjust your price accordingly to more in line with where deals are actually happening at right now; and trust me, they are few and far between!
If you don't have to sell quickly, yet you would like to sell, you have some decisions to make. Seller psychology goes something like this:
SELLER SAYS: Well, if I don't price my property near the top sale in my building 10 months ago, I will never know if I can get a better price! So, I'd rather at least try and test the market first, and then I'll lower my price late if I get no bites.That's fine, its your place and you can do whatever you want! But the problem with this sell-side philosophy is when the seller gets a realistic bid in the first 1-2 months, as they are priced near peak levels! When this occurs, the seller usually gets greedy, either doesn't respond to the realistic bid or only responds with a modest counter offer. If the deal doesn't happen, they often find themselves regretting it later on. It wasn't the buyer that was unrealistic, it was the seller! So, my advice to sellers in this category, is strongly consider a low ball bid you may get if you are currently testing the market; it may be the best bid you get!!
BUYERS: Oh, the buyers. Oh how they have waited for this. In my 4 years of real estate, so many buyers watched the market rise 10%, then 20%, then 30%, then 40% since 2004's transaction levels. Towards the end of the boom (I would put the peak at contracts/deals signed in early-mid 2007), buyers found themselves wondering 'when will it end'? It's funny how psychology works. Buyers who did not pull the trigger yet, get MORE INTERESTED when the media reports rising prices and LESS INTERESTED when media reports pressure on prices. Isn't that amazing? Not really, it's human nature. Buyers like to think they are putting money to work in an environment where their newest asset is appreciating. Nobody likes a depreciating asset. But if you buy when the market is pressured, the price you are likely to pay should be more attractive then if you bought at the height of the boom with prices rising. Don't people want a better deal? Yes, they do but buy side psychology is too ingrained on the direction of the asset as opposed to the price of the asset!
This is the reason why even with the market down 18-20% or so from peak levels, as I believe deals are happening at now, the market is still illiquid! If anything, buyers who have been waiting patiently, are now rushing to the sidelines to wait even more for a better deal as the direction of the asset's trend becomes more clear. This phenomenon is why sales volume will be very poor for the next few quarters here in Manhattan; with the root causes of this lying in deteriorating macro fundamentals (job losses, nationwide recession, negative wealth effect, etc.) and a severe credit crisis. Hence the disconnect reveals itself.
The distance between buyers and sellers right now are contributing to this illiquid market and the cycle feeds on itself. I wouldn't be surprised to see sales volume down 40-50% in the 4th quarter. Some brokers find themselves in awe, or shock to see that even with massive reductions their property is still not getting many bids. Other brokers are still up to their old tricks, promising the world to sellers trying to get as many listings as possible. For me, I think its all about the buyers; always have! Until buyer confidence returns, this market will be illiquid and that means those sellers that are forced to sell, are revealed. The knee jerk correction from peak levels is in process and its time to see who is overexposed. Adapt accordingly or risk finding yourself in a fierce sell side competition with other sellers who have to sell too, at a time when strong, quality bids are more of a rarity.
They say the deal happens when there is a 'meeting of the minds'. Well, in this market, it's the seller's mind that has to be more proactive to make the connection!
Posted by EFOB
Wed Dec 3rd, 2008 11:01 AM
WOW! That's some entry Noah. As a well qualified and somewhat active buyer, I could not agree more. I've only lived here for 2 years (renting), but what's intersting is those who have owned here 5 or more years have NEVER gone thru something like this. The presumption that NYC real estate never goes down is turning out to be a false assumption and as you pointed out, NOBODY likes to be wrong. Can I tell you how many people (brokers, friends, coworkers) told me NYC RE was bullet proof??
How soon before we start to see significant sell side competition? Q1?
Posted by Douglas Heddings
Wed Dec 3rd, 2008 11:45 AM
Hey Noah,
Great post as always. Having lived through and more importantly brokered through the painful market in the early 90's where homes took 2 or more years to sell and we discouraged sellers from given us exclusives, I would disagree on a couple of points:
1. Buyers with nerves of steel are getting some awesome deals right now and those who sit back and try to time the bottom of the market...well...good luck to them. I have signed contracts on 4 properties over the last 3 weeks. Asking price of $1.795M sold to my buyer for $1.3M. Asking price last year of almost $5M ($1M overpriced and should have sold last year for $3.7M) selling to my buyers for under $2.5M. One of my sellers who said he would never sell for less than $625K has a signed contract at $575K. Another seller is awaiting delivery of signed contract after a 3 week negotiation almost 20% below an already attractive ask. All of these deals are being partially financed (between 50 and 80% borrowed money) at very competitive rates from savings banks or portfolio lenders.
2. I think that a seller's agent who isn't drinking the kool aid and actually provides the service of pricing ahead of the downward curve is a HUGE asset in this market. Just received an email yesterday from a seller's agent informing me that her property has been reduced by 6%...I asked her what planet she was living on as the offer my buyer made 2 months ago at 20% below ask should have been countered and is no longer on the table. ALL bids must be analyzed and taken seriously if a seller really wants to sell. I have no desire to work with sellers who won't listen to current market conditions.
3. There will be a price point at which buyers come back to the market and the smart ones will do so before the lemmings. Credit will ease up eventually and with price depreciation of 40-50% from peak levels (IMHO), I don't think buyers will be able to resist (unless they don't have a job which is a very real possibility).
4. Totally agree that prices are down but I think it's more like 20-25% (not the 18-20% that you state) for deals that are actually getting done today.
All of that said, you are spot on regarding buyer anxiety (seller anxiety is peaking too) and I'm seeing buyers who receive accepted offers back out questioning if they should have offered less. It will take a strong constitution for brokers, sellers and buyers alike to get through this real estate battleground but I'm seeing (anecdotal of course) some amazing deals getting done. It is indeed funny that everyone wants to buy a home or a stock (they should not be compared IMHO) when the value is climbing but everyone runs as values dip to attractive buy levels.
Posted by Brian
Wed Dec 3rd, 2008 12:05 PM
Couldnt agree with you more. Well said. Although I would add 2008 bonuses, if you are lucky enough to still have a job, will be poor, in addition to 2009.
Posted by office-noah
Wed Dec 3rd, 2008 12:34 PM
Doug - I love your comments! Yea I think you are right that I need to adjust down a bit real time adjustment. Amazing how fast this is happening.
You have great clients. 80% of my buyers are still worried and are waiting a bit more. Its not to time the market, its just they dont know how bad it MAY get here with huge job losses coming. They want more clarity basically in addition to seeing that things are pressured and that if anything, the pressure is intensifying.
With that said:
1) 20% of my buyers, or about 1/5, are aggressively looking now to take advantage! So that is something. However, I have 0 deals in past 7 weeks, so great to see you are doing multiple deals! That is what comes with being a seasoned agent.
For seller agents, you are so right, pricing ahead of the curve is so important and even with that, its not such an easy sale. Because sellers assume that if they listen to you, and price ahead of the curve, that a sale should come in the first few weeks. I went on 3 pitches in past 3 weeks, and so far none listed with me. I dont see any of the units on the market yet, and I do know they were interviewing other brokers. Anyway, I tell it like it is and how I market my properties, so if I lose it because I dont promise high price, so be it.
Based on some of your deals though, it seems what should have sold for 3.7Mln, selling for 2.5Mln is a 33% haircut from peak levels. That is what an illiquid market does! It makes the adjustment so fast. I wonder if a unit like that asking price would come down to say 2.6Mln to reflect where market is, that is yet to occur and these deals are occuring with huge gaps between asking and accepted offer. Makes me wonder why the seller wouldnt choose an aggressive cut first, say to 3Mln, and guage a response before just outright accepting the low bid. But who knows what position the seller may be in.
These are quite interesting times Doug!! Keep up with the comments and the deals! Love it.
Posted by brenda
Wed Dec 3rd, 2008 02:06 PM
OK, I'll say it. What in the hell is wrong with using available information to make a rational choice about when to enter a market, real estate or otherwise? Bill Gross just gave some heretical advice on equities, it will continue to be a great opportunity going forward as long as you buy at the RIGHT PRICE.
This really has no signs of being a v-shaped recesssion. The longest post-war recession was 16 months, we're already into month 13 and the next two quarters don't seem to be anything to cause any cheer, both locally and nationally. Waiting right now is not trying to "time the market." It's just a no-lose proposition (unless the powers that be manage to create another bubble, which I'll confess seemed impossible but they seem to be trying). Making decisions in real estate should be based both on a decision where to live, and also as part of a life-time financial strategy. Maybe then renting won't seem so second-class, but rather a prudent way to manage money and make investment decisions.
Posted by Brokerman
Wed Dec 3rd, 2008 02:22 PM
Noah and Doug, both great commentary. I often hear from sellers brokers that the offers my qualified clients made are not worth responding to because the last comparable sale in the building closed in June, July or August 08 and to be below that is out of the question. Talk about doing a diservice to the sellers and having your head in the sand! Those comps were likely in contract in the Spring of 08 and for anyone living in a realistic world, we know we are well below those levels for current contracts being signed. The ignorance is just overwhelming at times.
Posted by Anon
Wed Dec 3rd, 2008 02:42 PM
As a buyer, I have to agree with Brenda. I believe that there will not be v-shaped price adjustments for many years to come. I am not trying to time the bottom because I am confident that when it hits, the adjustments upwards will be so small that buying well after the bottom hits is a no-lose situation, while buying now, even at 33% below peak is a risky business.
Posted by Noah
Wed Dec 3rd, 2008 02:47 PM
And I have been and still do agree with Brenda. This wont be a V, this will be a sputtered L adjustment, as the new world wont allow for a V shaped recovery.
Most buyers I have are not trying to time this market, they simply are not confident right now buying even with a deal 20-25% below peak. Its all their confidence for them, none ever said to me they are waiting to time it, to get a better deal, they just want to see how things change in their industry, or how bad/good NYC weathers the coming wave of job losses that we know is ahead of us. We are in store to lose about 50,000 jobs on wall street, minimum, so that is what is making them wait.
Posted by brenda
Wed Dec 3rd, 2008 02:55 PM
Noah,
Sorry, just a venting moment.
Posted by Noah
Wed Dec 3rd, 2008 02:59 PM
dont be sorry Brenda!! not here. You are a great addition to this open forum. VENT AWAY!
Posted by Charles
Wed Dec 3rd, 2008 03:33 PM
Just my 2 cents as a recent buyer who almost entered into contract in the summer, pulled back from intuition about the market, and now won't go near until something like a bottom is reached - there's a crash happening, and a lot of us will wait until the dust settles, thank you very much.
Posted by Noah
Wed Dec 3rd, 2008 03:41 PM
Careful buyers, that light at the end of the tunnel your broker may be referring to is probably a MACK truck about to hit you!
nice move Charles!
Posted by Michael Oliver
Wed Dec 3rd, 2008 03:51 PM
Everything you say here is 1000% right on! Having seen this same exact thing play out in Tucson Arizona for the past 3 years it’s right on. As the market gets worse fewer buyers will want to buy almost regardless of price. People go straight to the sideline and sit there in Tucson deals obviously are still happening but its like "buying a home" is worse owning a home” is looked at like “you must have lost a ton.” and no one wants to get involved with losing money if they can help it....In Tucson as I am sure a lot of other areas the dust still isn’t 100% settled and with a weak economy I only see things getting worse. Interest rates diving down will help stoke demand but there is so little of it I’m not even sure that will help really…
Posted by James
Wed Dec 3rd, 2008 03:53 PM
Maybe its me, but I keep on seeing the same listings day after day with little or moderate price adjustments downward. I recently put an all cash offer for a place on the UWS that had been on the market for 4 months - the offer was 17% below asking and the seller didn't even bother making a counter offer. I spoke with a seller's broker today about a home in Cobble Hill which has been on the market for over 2 months without a reduction in price - and I was advised that I should really hurry up and see the place because it won't last! Are you kidding! It seems that many sellers and their brokers are still delusional.
Posted by chris
Wed Dec 3rd, 2008 03:59 PM
Thanks for a very intersting discussion. My question is: how have coop boards reacted to all of this, so far? Allowing a transaction to through at a price discount of say 20-30% below that 'comp' of the summer of 2008 sort of impacts the ability of the other shareholders to sell their property at what they may - for all the wrong reasons - perceive to be the 'right' price. Have such deals been blocked by coop boards?
Posted by Noah
Wed Dec 3rd, 2008 03:59 PM
James - anchored! Sellers are still anchored, that is the disconnect and why the market is illiquid.
Posted by Noah
Wed Dec 3rd, 2008 04:07 PM
Chris - Im sure we will hear stories about this in the coming quarters, but I dont think legally the board can reject a qualified buyer because of price alone. They have to give a valid reason for rejection that is non discriminatory, but not sure on price alone. Great question.
Posted by Sean
Wed Dec 3rd, 2008 04:12 PM
Noah, been reading your stuff for a while now, very insightful. My wife and I backed out of buying a JR 4 on the UWS in late 2007 as we got the jitters given the worsening conditions in the financial markets. We just signed a lease (18 months although we have the option to break it at 14 with no penalty), so we are out of the market for now (would be anyway with all that is going on). Given that we will be actively looking to buy (depending on the market conditions) in early 2010, what kind of market do you think awaits us?
Posted by Kurt
Wed Dec 3rd, 2008 04:56 PM
Noah - When its time to sell my property I'll be calling you....its refreshing to have a broker with intelligence.
Posted by october
Wed Dec 3rd, 2008 05:18 PM
Noah - thanks again for the wonderful commentary. You were the only voice of reason and ahead of the curve. One other issue on the buy side is that some buyers without sterling credit and 20%+ to put down are now really barred from the game even if they wanted in (which further shrinks the buyer numbers).
It will be interesting to see how is recession plays out in different areas - even on the UWS I can see parents thinking about the burbs when the local public schools start to lose some of their funding and the private school race becomes even more over the top.
I renewed my lease in Aug. - so I'll see how things are looking in the Spring - but I just have this feeling that this could be a longer recession with a capital L.
Posted by Donald
Wed Dec 3rd, 2008 05:23 PM
One bad thing about prices falling too much is that it will most lilkely result in a significant delcine in the quality of life in NYC, such as higher crime, severely over-crowded schools, crummy mass transit service, etc. So buyers might be happy to buy at 50% off the peak, but if that indeed happened, I think the city would be completely different for the worse. California just declared a "fiscal emergency" and New York could very well be next. SO I think it's to everyone's advantge, icnlsuing buyers, that prices don't fall more than 30% because nobody wants to live in an east coast version of Detroit.
Posted by Anon
Wed Dec 3rd, 2008 05:24 PM
Noah,
I thought that coop boards in NYC do not have to give any reason/justification for the rejection. Is there a certain code provision and/or case that you can refer me to that says coop boards have to give a reason?
Thanks.
Posted by Noah
Wed Dec 3rd, 2008 05:35 PM
Kurt - Ill be here!! Thanks.
Posted by Noah
Wed Dec 3rd, 2008 05:37 PM
Donald - THAT IS MY WORST FEAR! A rise in crime, homelessness, a decline in quality of life, etc..
http://www.gothamgazette.com/article/issueoftheweek/20081004/200/2668
OCT 4th - 4. What is your biggest fear regarding the turmoil on Wall Street?
My biggest fear is seeing a change in crime, cleanliness, drugs, homelessness, etc. to this great city. Everything that Rudy Giuliani did to clean this city up, I fear may be undone by this Wall Street centered crisis. The worst-case scenario for Manhattan is if crime increases and quality of life deteriorates as the local economy and individuals hurt from this deep slowdown. If the perception of Manhattan as a "great place to live" is psychologically altered, that combined with the negative macroeconomic forces can put downward pressure on real estate values for many years to come. This will likely not be a V shaped cycle, instead, it is more likely that any correction in real estate prices will resemble an L shape, with prices reverting back to their historic means where incomes and affordability get back in line.
Posted by Noah
Wed Dec 3rd, 2008 05:40 PM
Anon - they put in a new rule that coop rejections have to provide a valid reason now. This was in past year or so. Ill look for it.
http://www.antibiaslaw.com/coopdisclosure.html
I thought this passed???
Anyone else know if it did or if it didnt?
Posted by N_R
Wed Dec 3rd, 2008 06:57 PM
I feel like, for purposes of furthering discussion, there always seem to be some basic factors that people leave out, probably just to keep the number of variables to consider down.
Two examples I can think of are, 1) the fact that there is an inventory of newly constructed units still coming online. It's fine to say that we'll have a U-shaped recovery, thus one shouldn't try to time the market, but I think you can only argue the new inventory doesn't matter much only if you figure that the projects in the pipeline (including some within, say, 6 months of occupancy) aren't going to actually be completed. I think new inventory will be a HUGE factor, sucking up some of the earliest wave (well, ripples) of hardy qualified buyers in any given neighborhood.
Otherwise, to just focus on price cuts in current listings, and resale prices vs the last transaction, and not focus hard on the new inventory, is like betting that winter coats at Macy's won't go on a further markdown because it's already cold, so they must have reached the correct price. You can't ignore the fact that they've got 100 more coats in the stockroom that aren't even on the floor yet!
2) It's not just a matter of price and affordability. Bank stinginess in lending means that even buyers who are comfortable taking the risk of entering the market right now cannot actually consummate transactions they would be comfortable doing -- it's like they're being shut out from acting on their own best judgment. So it's not just buyer reluctance or anxiety -- it's the lack of enabling capital that would help people pull the trigger and buy.
I don't mean that these factors are never mentioned -- of course they are, sometimes. I just mean that the simple supply/demand, seller/buyer, peak price/trough price discussion, although valid, tends to omit the ways that this time around, there are things that are structurally different.
And what makes things scary is that these are the differences that take longer to resolve -- a price cut can't by itself enlarge the general pool of buyers -- only fresh lending can. To put this in perspective, it's as if we're headed to a place where the government itself will have to be the biggest direct lender for mortgages, and if that's what it'll take to solve the mortgage crisis, it'll take a long time to actually implement -- and that's after the amount of time it would take to achieve consensus that such action as needed.
Along the same lines, if, say for example, some sector like healthcare turns out to be about the only industry that enjoys any sort of employment stability during this downturn, it seems to me you'd have to wait for some major new national healthcare employers to move to NYC (and there's always corporate headquarters that would love to do that) and bring jobs here -- in order to soak up some of the job losses and vacant commercial space that have emerged with the downsizing of financial services here. Re: the worry that NYC will become the next Detroit, I don't think that'll happen -- I have every confidence that new industries will happily relocate here -- but it's a 2+ year lead time, minimum, for that to unfold in my opinion, which doesn't help address the upcoming year's potential problems. But for the long term, make no mistake, there will be new corporate jobs coming here eventually, which is a hopeful thing to keep in mind for the long term buyers, and people who don't have to sell soon.
Anyway .... I guess I'm saying that the general discussion must keep "thinking bigger" in order to get us near what may turn out to be the new reality of the local market. It's just not a matter of getting to that equilibrium number at which a (hypothetical) transaction will occur.
Oh, and also let me acknowledge that I think Noah does do a service in his post by bringing front-and-center the notion of "seller wars" in which the compartively few qualified buyers get fought over by sellers looking aggressively to lower their price to where the buyer will back away from a competing deal currently in front of them. That sure does sound alien to mid/late-2000s sensibilities, but it's a natural result of the combination of too much inventory and too little credit.
Posted by Douglas Heddings
Wed Dec 3rd, 2008 08:40 PM
I don't disagree with brenda either. Doesn't seem likely that this will be a V shaped curve but the announcement this afternoon that Paulson wants to lower mortgage rates through Fan and Fred to 4.5% sure seems like they want to control a market that needs to "do its thing." Controlling market dynamics through artificial means is precisely what got us inot this mess.
Noah, brenda and the rest...where do you live? Are you renting? Do you have families? Will you need to upsize, downsize or leave the city within the near future? I'm just trying to understand from where any future motivation to move may come. There are NOT enough rentals to house the cities population so what will people do who need a "different" roof over their heads? These are the people that have signed contracts with me over the past few weeks. They need a new home because they are relocating here, starting a family, want a NYC pied a terre, or are leaving the city (seller). One of the buyers is a very successful hedgefund guy who said to me just yesterday that he isn't confident that his money is any safer in any other investment vehicle and he needs a place to raise his family. he also pointed out that even if prices are down 40% since peak they is almost exactly inline with most people's stock portfolios or retirement accounts. He views a home as just that...a home...and not so much a piece of his portfolio. I just wonder what others are thinking.
I love this post and the commentary that has come from it. You have some very bright readers!
Posted by Anon
Wed Dec 3rd, 2008 10:28 PM
Noah,
As far as I know, the proposed rule on coop rejections didn't pass.
Posted by joenyc
Thu Dec 4th, 2008 09:47 AM
I had asked the same question Douglass did a couple of weeks ago and wonder the same thing: whether people have been laid off or not, they need to live somewhere. If Manhattan has been a banker/lawyer/advertiser's stomping grounds for the past 20 years, where is the "somewhere" to move to now? Do they go to retire in their 2nd home in LI or new Jersey just because the market has changed? Sell their pad and buy a house in the burbs- where they have less opportunities to continue a career?
If the trend instead is to sell your pad and rent, then shouldn't we expect a surge in rent prices throughout the city?
Posted by Noah
Thu Dec 4th, 2008 10:30 AM
Doug - you raise a good question but I just don't look at it that way because of what happens at the tail end of a severe downturn.
Here are the things I mean:
1) job losses are going to accelerate here, FAST. As deals close, job cuts get executed. We likely have 50,000 wall street jobs about to be executed in next 6 months. As the slowdown in our local economy expands, and frugality sets in, it will lead into the main economy with job losses and store closures
2) budget deficits will lead to either higher taxes, or service cuts. Both are bad and something is going to happen, trust me. If its property tax hikes, that will lead to more unaffordability of homes at a harsh time. If its budget/service cuts, quality of life, cleanliness, crime, etc..will likely rise over the next 5 years. The latter takes time but is an end result of an economy in trouble with declining revenue collections by treasury, and we have big time declines with wall street dead. People dont get this, or the severity of this. This scares me.
3) Frugality is going to set in. yes people need to move, but many people I know are seriously considering moving outside Manhattan. This is clearly becoming a growing trend. I hate to say it, but its happening and will continue to happen as long as we deal with this wall street credit crisis in a wall street city.
4) deleveraging is going to occur for those that took too much risk or bought too much home in past few years. At a time when buyer demand is down, and lagging news reflects this and gets in the media, those that HAVE TO sell come out. It happened in every market except ours, until now. To think its almost over is silly. With all job losses coming, its just getting started. Thats all. Its sad but it has to happen because there were many buyers that bought very expensive units on the way up to the peak.
For me, I am renting. I pay 3300 for a 900 sft JR4. I am staying put based on how bad things get here. I dont see myself doing as many deals as I did in 2007-2007, in 2009.
Ys there are buyers, sales volume is not 0, but its way way way down. Your a seasoned veteran with a good business. Most agents are not. So your little world is not reflective of what is really going on out there. You will survive, I say 50% of agents dont. Brokers tend to not want to get a full time job unless they have to, and always get teased by a new deal coming in soon. Think of all the agents that will give it 3 more months, 6 more months, 12 more months, and then give up because volume is still slow and the experienced, established agents are getting most of the business, not the 2yr and under crowd.
As for viewing the home as a home, my clients do too, they just want to wait a bit longer (again, not to time the market but until they have more confidence...nothing wrong with that)..personally, I dont blame them. The market is on a strong trend down now, nothing wrong with buying on the way down, but nothing wrong with waiting a bit until they feel more confident.
Anyway, these guys strongly believe there will be no V recovery, so any bottom is likely to only be a stabalization of the down move, and hence, have plenty of opportunities to buy without 'missing it'
Posted by Brokerman
Thu Dec 4th, 2008 01:49 PM
Noah, you are way off base on co-ops having to give a reaon for a rejection. They do not, the proposed law made some headlines but never got anywhere.
Posted by Noah
Thu Dec 4th, 2008 02:34 PM
brokerman - way off base? I said I wasnt sure if the bill passed and asked readers if they knew?
Whats WAY off base with that? It wasnt even mentioned in the article?
Posted by Nick
Thu Dec 4th, 2008 04:25 PM
To the comment that NY could become like Detroit.
Obviously your comment is hyperbole, but I don't think it would be all bad if NYC was no longer as desirable to the well to do (of which I'm one). Certainly there were many serious problems in early 1980s NYC, but at least the middle class could afford to live in Manhattan.
Boom and bust cycles are the life blood of great cities. For one thing, it is how the housing stocks get refreshed.
In the long run, Manhattan would have lost its vitality if real estate had kept going the way it was. It would have just been professionals, chain stores, and mega corporations. This down turn will be bitter medicine, but the city will be better off in the end.
Posted by Buyer
Thu Dec 4th, 2008 08:22 PM
Doug: One of the buyers is a very successful hedgefund guy who said to me just yesterday that he isn't confident that his money is any safer in any other investment vehicle and he needs a place to raise his family. he also pointed out that even if prices are down 40% since peak they is almost exactly inline with most people's stock portfolios or retirement accounts. He views a home as just that...a home...and not so much a piece of his portfolio.
Word up, dude. Hedgie is a smart guy used to making financial decisions.
I suspect all the "wise" renting market timers will remain bitter renters and miss whatever low point prices may temporarily reach.
I am encouraging and helping some family members with lower paying jobs to finally own a decent place. Market won't stay frozen for long.
Posted by hsw9001
Thu Dec 4th, 2008 08:52 PM
I do think that buying a house is an expense, not an investment. Currently the math is simple, renting is cheaper than owning.
Posted by Noah
Fri Dec 5th, 2008 09:04 AM
Buyer - I disagree completely but thats why we have this forum. I think the next 6-12 months will be very pressured on sellers as they realize about 50,000 more wall street jobs are lost and tens of thousands retail/other jobs are lost as a side effect of a fast slowing NYC economy. Not an environment for a V shaped housing rebound.
But do what you gotta do.
Posted by Buyer
Fri Dec 5th, 2008 09:35 AM
Noah - I think the next 6-12 months will be very pressured on sellers as they realize about 50,000 more wall street jobs are lost and tens of thousands retail/other jobs are lost as a side effect of a fast slowing NYC economy.
I'll do you one better. It might be 2-3 years for housing. I'd still take the NYC economy/lifestyle over Arizona or suburbia. With 5 percent mortgages and some (note: I said "some") pressured sellers, nice time to get a decent place to live. Most rentals are depressing. One bedrooms are in great supply. Besides, if it wasn't for positive thinking optimistic people like me, who would anyone sell too? :)
As Doug's hedgie noted, except for cash and Treasuries, NYC real estate has done better so far than almost any other risk asset class. Cash feels great now, but is a sure loser longer term.
Posted by Nick
Fri Dec 5th, 2008 10:47 AM
Buyer's point of view strikes me a sign that we are still far from a bottom.
Posted by Noah
Fri Dec 5th, 2008 01:12 PM
cash has been pretty strong the past 4-5 months. I just think the fierce adjustment period will last 12-24 months in Manhattan before its all set and done. So we are probably 10-11 months in already.
By early 2011, most of the adjustment will have occurred, clearer picture on damages to economy, and we will likely muddle around with low sales volume for a while after that as regulation crimps everything and after effects of stimulus start to be seen in the negative ways. There are no free lunches and there are neg aspects to stimulating that will come later on down the road. For now its about stopping a deflationary spiral at any and all costs
Posted by Buyer
Fri Dec 5th, 2008 02:42 PM
I am shocked that all the wise market timers on here do not own their own private Carribean islands. Surely that level of market knowledge should have made the other posters rich.
Posted by 07 buyer
Fri Dec 5th, 2008 03:05 PM
humor me here. I bought a 1 BR Carroll Gardens condo in 07, comps say i could rent it out for $2850, but I'd have to eat $500/mo if i made that move, but is my optimism blind when i say there is opportunity to be had in the next 12-24 months to upgrade into a 2 BR on the cheap? Won't more people in my shoes (young, recently married, stable dual income, no kids (yet!)) consider this?
The NYC RE market cannot be generalized since my neighborhood is notorious for low inventory and high living desirability with strong public school, proximity to the city, etc.
While I'm not in financials and do not completely grasp all of the complexities of our collapse, where is the optimism for a reverse J, instead of a long L?
Posted by looking over the fence
Fri Dec 5th, 2008 03:19 PM
humor me here. I bought a 1 BR Carroll Gardens condo in 07, comps say i could rent it out for $2850, but I'd have to eat $500/mo if i made that move, but is my optimism blind when i say there is opportunity to be had in the next 12-24 months to upgrade into a 2 BR on the cheap? Won't more people in my shoes (young, recently married, stable dual income, no kids (yet!)) consider this?
The NYC RE market cannot be generalized since my neighborhood is notorious for low inventory and high living desirability with strong public school, proximity to the city, etc.
While I'm not in financials and do not completely grasp all of the complexities of our collapse, where is the optimism for a reverse J, instead of a long L?
Posted by Noah
Fri Dec 5th, 2008 03:23 PM
Hey we might get a reverse J, sure that is likely. Im planning on buying if opp arises in next 12-24 months. The point was more that it wont be a V, meaning you will so called, 'miss it', if you dont buy right now.
Posted by Gerry
Fri Dec 5th, 2008 08:22 PM
I work on Wall Street. I really don't think anyone in the real estate market seems to get it. Prices in NYC / Hamptons have not even begun to fall. The S&P 500 recently hit levels not seen since 1998 - that's right 1998! Think about NYC real estate prices at 1998 levels. You probably can't even imagine that but real estate prices are so outrageously overvalued by any measure that I think we all need to consider much lower levels.
Posted by Nick
Fri Dec 5th, 2008 08:31 PM
Buyer - Sharp words, but it seems to me you have your head in the sand. Look at just a few facts: 1.8 million jobs lost in the last 12 months, vast losses in investments portfolios of individuals and corporations, the rising possibility of deflation, major corporations at risk, and even the remote possibility of serious problems for the dollar. I know one can't time the bottom, but few respected economists seem to think we are anywhere near a recovery. Urging people to buy now is either misguided or the self-interested advice of a shady broker.
Posted by Buyer
Fri Dec 5th, 2008 08:48 PM
Nick -Buyer - Sharp words, but it seems to me you have your head in the sand. Look at just a few facts: 1.8 million jobs lost in the last 12 months, vast losses in investments portfolios of individuals and corporations, the rising possibility of deflation, major corporations at risk, and even the remote possibility of serious problems for the dollar. I know one can't time the bottom, but few respected economists seem to think we are anywhere near a recovery. Urging people to buy now is either misguided or the self-interested advice of a shady broker.
Thx for feedback. You forgot terrorism and crime and school overcrowding. As a potential buyer, it is good to know that there is little competition and most people are scared witless. Cheers. :)
Posted by Nick
Sat Dec 6th, 2008 01:11 AM
No point arguing. Time will tell. Good luck to you.
Posted by Ray
Sat Dec 6th, 2008 07:17 AM
V or L. It doesn't matter if you plan to live here for while. There's something missing from this conversation. Interest rates. Pay attention to them.
The crisis is creating an artificially low window - one that maybe will last for six months or if Obama works some magic with the Chinese to recapitalize America (unlikely) - a year.
The Fed and Treasury are going to struggle to keep interest rates low for as long as possible. But they won't be able to do it for long as the shine is off and amount of debt we're taking on to "save" and "stimulate" is overwhelming. It's simple economics - I'm told.
Its very feasible that interest rates will climb - SUBSTANTIALLY once the artificial inputs are removed. Since 05 fixed rate mortgages have been vacillated between 6% and 7% (nationally) - they are now below that thanks to the Treasury. Couple that with the risen ceiling for conforming loans. I'd hate to think of what this market would look like without all this help.
In 1984 fixed rate mortgages climbed to over 14% (for a conforming loan!). If you're in your 40's you'll remember that in the 80's even Federally underwritten student loans were north of 9%!
So, fish for the VERY bottom all you want - watch prices sure - negotiate a hard deal - YES! but consider that it might be worth balancing the potential for a temporary loss in value vs. paying insane interest to a bank for five or so years. My guess is some may be sitting on the sidelines for a lot longer than you think.
Posted by Brokerman
Mon Dec 8th, 2008 11:33 AM
Noah, sorry about the accusation of you being way off base about the co-op rejection disclosure issue. I misread your post.
Posted by Noah
Mon Dec 8th, 2008 01:18 PM
no worries, thought I mis typed something for a moment
Posted by Mr Mogul
Sun Dec 21st, 2008 12:23 AM
I agree with the comments on the market. Homes now take over 8 months to sell, and many have been discounted 10K to 40K to get there.
A word about the company bonus - when will companies figure out that the incentive bonus is a great reason to keep employees interested....that is, if the same company hasn't already told you that "today is your last day."
Posted by joe hampton
Sat Jan 24th, 2009 03:08 AM
Let me make this simple to you "Noah It all" and the rest of you vultures, I own three homes in the Hampton's one in South and two in East. That said... FYI I have enough $ to sit on the 3 homes for 20 years and will give them to my grand children before I sell them for any lower than 2006 pricing.So enjoy paying your rent!
Posted by Noah
Sat Jan 24th, 2009 10:38 AM
Joe Hampton - so your point is your rich! very constructive and great addition to this topic.
The Hamptons is plunging whether you like it or not Joe Hampton. You bought a while ago, great, you have lots of equity left and hopefully you wont need to sell. But that wont stop the market from doing what it is going to do. There will be those that do have to sell, and they will find out for themselves what it is worth and I promise you it will be below 2006 pricing!
You dont have to sell, congratulations! Go be happy, enjoy your life, and give it all to your kids. I can care less!
Posted by MaryAnn
Thu Jan 29th, 2009 03:42 PM
Ray, thank you for that historical reminder! I do remember those 1980s interest rates. My husband and I are timing the Manhattan market, but that's because we are more modest buyers: we're looking for a place to live in long term, something we never thought would be possible given the recent bubble. We're not looking for the Deal of the Century, just a reasonable home that we'll be able to pay for even if we lose our jobs and have to freelance. Right now Manhattan is still a bit of a stretch for us, but a further slide in prices of 20% would work for us. (And Hamptons Guy: I don't think wanting to buy an affordable, non-luxury home in the city we plan to grow old in makes us vultures.)
Posted by Mbt
Wed Jun 2nd, 2010 11:35 PM
I think another reason fees are not being paid and free months not offered is that prices have come down. Apartments are moving but part of the reason is that prices came down to a point at which they will move.
Posted by Homes North Bay Village for Sale
Fri Jun 4th, 2010 02:57 AM
Very nice real estate stuff I ever seen! Thanks for the info.