NY Times: A Bonus Bounce?
A: Now I am not one to start plugging the NY Times or other broker-influenced mass media outlets to re-inforce what I discuss here on UrbanDigs, but this article clearly provides real examples of what I have been saying for a while now: The Improvement Was Progressive in Nature. The main reason I do not like to plug these broker sourced reports is because a) I feel it is too salesy and gives the impression that you have an agenda outside of unbiased reporting on the Manhattan real estate markets, and b) because I really don't trust many other broker reports other than what I see out there and the contacts I know for many years whose trust was earned. But this story is just another example of what is happening out there. I do NOT think it is sustainable, and I see it maintaining itself for a few months more.
The NY Times reports on..."The Bonus Bounce":
Take the recent bidding on a one-bedroom condo with a terrace on East Ninth Street.How else do you explain this and the many examples I listed in my "Manhattan Markets: Things Just Keep Moving Along" five days ago? As I stated in that discussion:
The property was first listed in June 2009. “We were holding open houses diligently every other week,” said the broker, Tristan Harper, a senior vice president at Prudential Douglas Elliman. But the traffic was almost nonexistent. “Zero to five parties, max,” Mr. Harper said. The seller took the property off the market for the December holidays, then put it back on in early January in hopes of benefiting from a bonus bounce. At the first open house, 18 parties showed up, 30 to 40 percent of them from Wall Street. Mr. Harper was stunned.
Within a day he had an offer. It was under the asking price of $1.049 million, but the owner was able to negotiate for a little more.
While the place was in contract, the seller received a significantly better offer — above the asking price — from two men. One of them worked on Wall Street.
Then the original bidder matched that offer with all cash. In the meantime, a third offer came in, but the specter arose of all three bidders’ fleeing if a bidding war ensued, so the seller never really entertained it. The first bidder won, at a price slightly over asking.
"What is interesting is following listings that had a hard time selling even as sales surged in June, July and August of 2009 following the plunge in sales volume from the adjustment we had. The main reason is that bids did not improve as much back then as they did to today's marketplace following the March lows...This is why you are starting to see properties that have been on the market for 3+ months, start to go to contract. Some are cutting prices to get there, some aren't, and others are going over ask."How many examples and how many brokers need to tell the same story before people deny that this is actually happening out there? What people mis-interpret are my discussions on real time changes in the market with a future prediction of sustainable sales growth and price appreciation that I never even said! People read, see the reports, and interpret that I am jumping on the bandwagon even though I discuss my bigger picture macro concerns quite clearly and often here on this site. Let the other guys say things like, "It’s more the value now,” he said. “Real estate has bottomed out, and it’s time to step in.", as stated in the NY Times piece above.
Then you got those out there that rely solely on the quarterly reports that prove time and time again to be lagging and inconsistent across the brokerage firms. I addressed the lagging nature of these reports in the clearest way possible on Tuesday! They are a snapshot in time of deals closed and captured by public record that were signed into contract some 2-7 months earlier - sometimes more! But, if you want to see hard core evidence of the improvement on a quarter to quarter basis, something I don't put much weight into due the seasonality of this market, look no further than Streeteasy's Q4 2009 Market Report released 4 weeks ago:
Significant findings in Q4 2009I rather look at existing Co-op and Condo resales over New Dev sales for a better indication of this improvement. The average sales price data is clearly showing you the increase on a quarter to quarter basis - something worth discussing when explaining what is happening out in the Manhattan markets on relative basis! People want to know what is going on, where we came from 3 months ago, 6 months ago, 12 months ago and 2 years ago! Each of those increments would warrant a slightly different response from me in the short term and a more extreme answer for the longer term. On a year over year basis, YES prices are down! On a quarterly basis, prices seem to have been improving in terms of where bids are coming in right now! This improvement was progressive in nature over time starting with the height of fear in February & March of 2009. I can't explain it any other way and I hope by now you know that I am bearish when there is a reason to be bearish and will adapt when there is a reason to adapt! In the end, I refuse to deny the change that I see happening over time but will do my best to leave 'perma' out from in front of any bullish or bearish views.
CLOSING PRICES CONTINUE TO DECLINE FROM A YEAR AGO. Overall average and median prices, which include condo and co-op resales and new developments, have continued to decline from a year ago, about 7.8% and 10.0%, respectively. However, since last quarter, price gains were made in overall average and median prices, about 5.5% and 2.0%, respectively.
The overall average price was $1.327M while the overall median price was $765K.
Condo resale median prices decreased slightly by 0.4% since last quarter to $890K, and decreased by 3.5% since last year. Average price ($1.482M) is up 2.3% for the quarter but down 5.9% since last year.
Co-op resale median prices increased by 6.3% to $612K compared to last quarter but are down by 1.3% since last year. Average sales price ($954K) increased by 9.1% since last quarter but decreased by 12.3% since the prior year.
New Developments median sales price decreased by 6.1% since last quarter to $1.12M and by 4.6% since last year. Average sales price ($1.9M) increased by 6.4% since last quarter and by 10.5% since last year.
For Manhattan Residential Real Estate, I considered myself 'less bearish' since November 2008 when I started to see bids and contracts signed in this market start to reflect the uncertainties and harsh realities that the severe credit crisis brought upon us! On June 4th, 2009 I re-iterated these feelings based on the rising volume of contracts signed I started to see.
Posted by jason
Sat Feb 6th, 2010 11:27 AM
the broker, tristan harper, neglects to mention that he lowered the june price by 150,000 before he put it back on the market
Posted by jjfashion
Sat Feb 6th, 2010 11:51 AM
YOU ARE A BROKER!!!! What a joke, you have lost credibility...
"oh I hate to plug these broker pieces" but here I go plugging it...
You are now officially king of the say one thing as you are doing the opposite.
Example-You say you keep it real but only people who hype things say that!!!
If you really kept it real you won't need to keep protesting how you keep it real. We would just know.
This is hilarious spin from this article about a unproven bidding war.... "How else do you explain this"
How else can you explain it! Maybe the facts...
"01/06/2010 Price decreased by 4% to $1,049,000.
01/26/2010 Listing entered contract"
Wow amazing...dropped price 50k and accepted a bid...
You asked the question, how else to explain it, and I did.
"I can't explain it any other way"...
"hardcore evidence" That you mine to find what you want and it means nothing when the more trusted millersamuel report says the opposite
You cherry pick the streeteasy Q4 data rather then the mroe trusted MillerSamuel which shows DECREASE is quarter over quarter.
You referenced MillerSamuel Data many times before but now use Street Easy when it supports you.
Even if you take an avergae of all of 5 ofthe different Q4 reports you show a decrease in quarter ofver quarter.
SO does the disprove all your hype!
Comeback with more wishwas brokerese or just admit it...
you cant say you hate to plug fluff broker pieces and then do it. Do you not see you are like Bush thinking if you say a destructive environmental pience is a clean air act it will fool people
Posted by jjfashion
Sat Feb 6th, 2010 12:37 PM
To keep learning, go read the rest of the comments on your feb.1 piece
Posted by uwsider
Sat Feb 6th, 2010 12:46 PM
noah, why do you assume more contracts signed equals increase in prices.
As was the case with forclosures, increase in sales meant drastic decrease in prices.
Why don't you think the increase in contracts signed is a result of lower asking prices and lower accepted offers.
Just curious....
And like in retail service, when you only here if you are doing a bad job....dont you think you might hear much more from brokers the few examples when they got closer to ask than when they got below ask.
SO to rely on brokers for your information seems flawed. Not that they would lie about deals, but that they would tell you about the ones that help them. Similar to the this NYtimes piece by a broker. I mean is he going to write about the listing at 2007 level that he has that has been on the market for 9 months and no bids. WHy would a broker do that? And therefore, why would he write this piece.....million dollar question? 2 million dollar question.....why would you run with it....
Posted by bwnstner
Sat Feb 6th, 2010 12:52 PM
new to this:
i see all over streeteasy arguments from bears and bulls about which way the RE MARKET is going.
I saw you say "The Improvement Was Progressive in Nature"
What methodology do you use to determine improvements or worsenings in the market?
And can you reference when I can also see this data you use for my interest in the future.
THANK YOU,
New to this
Posted by Noah
Sat Feb 6th, 2010 12:58 PM
Jason - aha, thats why I dont listen to anybody but what I see out there and brokers/sales managers I have learned to trust and talk to often about state of the market
Do you have a SE link to the property so I can see history?
Posted by Noah
Sat Feb 6th, 2010 01:02 PM
jjfashion - your not worth the time. You asked for hard core evidence of qtr-qtr improvment in prices and I gave it to you. Then you ignore a major reason why quarterly reports are lagging in MS's Data Methodology on the nature of the data that makes up the report. Stupidity is not worth responding to.
And of course you ignore this statement I made in the FEB 1st discussion: "This is why you are starting to see properties that have been on the market for 3+ months, start to go to contract. Some are cutting prices to get there, some aren't, and others are going over ask."
Of course, ignore it if it helps you rant on!
complete asshat!
Posted by streeteesy
Sat Feb 6th, 2010 01:09 PM
How do you not see the flaw in using this data..... 1) these are not on record, so they might not even be true
2) EVEN IF true there is a strong chance they might not close and are hence meaningless
3) Regardless of all this, even if it's true it's these in contracts are by definition not representative of the market, or they would be a market report. They are by definition anecdotal, gossip.
By relying only on this, this is a gossip site
Posted by streeteesy
Sat Feb 6th, 2010 01:11 PM
Even broker's agree..
http://therealdeal.com/newyork/articles/sharing-signed-contract-info-subject-of-discussion-at-rebny-breakfast-with-talk-by-jacky-teplitzky
"It's common in the industry for agents to keep contract-signed numbers quiet, Kathy Braddock, a founding partner with real estate consultancy Braddock + Purcell and brokerage Charles Rutenberg Realty in New York, told The Real Deal by telephone.
"It's not something that people tend to disclose until [the closing,]" Braddock said.
The reason, she said, is because of the concern that a deal might fall apart.
"Most people are calling to find out where the benchmark is on price," she said. But "contract signed is not always the [best measure], because some of them don't close."
In order to price an apartment, Braddock said she uses "the next best thing" -- a recent closed sale --- and estimates what the price should be from there.
Garfinkel the attorney explained that disclosing contract information could hurt a seller's negotiating power if the deal doesn't go through -- a particularly likely occurrence in the current market.
"It's like knowing where the seller was living in terms of negotiating," he explained.
Once a listing has closed, however, it becomes public information, he said. "
Posted by Noah
Sat Feb 6th, 2010 01:23 PM
uwsider - Let me answer your first question to start out.
Idiots like JJfashion, forget what I wrote back when this improvement started. Take the JUNE 4th discussion as an example and what I clearly said and bolded to make it stand out in regards to the improvement in sales volume I was noticing for about 6-7 weeks or so:
JUNE 4th - "And the most important thing people need to realize, is that deals are happening in the range that I discussed previously! It's not like you are seeing a sudden surge in the aggressiveness of bids with deals happening closer to peak levels."
Picture a broker that focuses his business on the buy side, with anywhere between 15-20 or so active buyers in all price points across Manhattan. Im seeing places daily, Im submitting bids - some we are far away, some we get close to, some we get and proceed with attorneys. I talk to brokers all day long, most of whom I dont know. When you submit these bids on a consistent basis like I do with clients, I talk to the listing broker and usually I get some good intel on where the seller is, past bids submitted, etc..Now, you have to be careful to filter out what might be BS and what might be truth, of course. Then you got properties that agents wont even show because offers are accepted and contracts out waiting to be signed, yet I tried to set up an appt.
My point, you see things when you are actively out there everyday! If your not, you dont, and rely on your own perception of whats happening out there, and other stars to guide the way: maybe quarterly reports maybe the equity markets, etc..everyone is different. But I have seen the improvement over time. As sales volume first started to surge from the dumps after the plunge, bids really DID not improve - this is around May, June, early July...as I clearly stated in my JUNE discussion. Then as it sustained itself, and the reflation trade continued, bids started to improve. As if fear was being PRICED OUT after being PRICED IN earlier in the year. It started in lower end first, then trickled to higher price points with time - my new system sees this broken down in the data!
As we got to Sept, Oct, Nov, Dec, Jan, I noticed this gradual improvement with time in my clients willingeness to submit slightly more aggressive bids and I noticed that we were losing places to higher offers that ultimately went to contract. Then I saw where my deals were done -- 8.6m in signed deals in last 4 months, 2.165m of which closed 3 weeks ago. I currently have two buyers actively bidding and negotiating right now, and 2 others about to bid. So my point is I am very active, have been, and see these things on a daily basis and I know where we came from and how the market has changed since both to negative and slight improvement. But some people cant take it, JJFASHION is one. Others mis-interpret what I say with these reports to mean I am now bullish and this market is on a sustainable path to peak level prices again - I never said such things. But people think I did after reading.
You say - "Why don't you think the increase in contracts signed is a result of lower asking prices and lower accepted offers."
100% AGREED and I said this so many times! You just need to have been reading all along. Ill give you 4 clear examples from 2009!
1. http://www.urbandigs.com/2009/09/watch_for_a_seasonal_uptick_in.html
"The surge in activity was a function of lower prices and higher confidence in the asset class. The slight rebound in prices was a function of removing Armageddon and Fear trades from the table that saw our market naturally overshoot to the downside in February & March. "
2. http://www.urbandigs.com/2009/02/inventory_closes_in_on_10000.html
this one has it all right there....
"Right now, prices are on the way down and guess what, there ARE BUYERS! For now, as prices reach a certain level, there will be renewed signs of interest; and this market is seeing that right now."
3. http://www.urbandigs.com/2009/09/looking_at_todays_manhattan_ma.html
"This varies depending on price point and right now the lower end (studios, 1BRs), especially under 1M, is very active. This is mostly a function of lower prices, higher buy side confidence and more liquidity in the mortgage markets."
4. http://www.urbandigs.com/2009/08/quick_manhattan_update.html
"The market is still considerably more active than it usually is for this time of year yet, it doesn't seem as crazy as it was during the months of May & June. My thoughts on that are a combination of the timing of sharply lower prices, buyer control during negotiations, reflation trade mentality, and a confidence boost that the deep recession is nearing an end as stocks surge and price in recovery. "
Relying on brokers is always tough. We are talking about a fast paced, important real estate market with little transparency and proven and clear lag between contracts signed and released reports. I simply try to close the gap with in the field reporting and discussion. Its up to you whether you believe me. I feel I have been unbiased and timely for years, both before this crisis started, during the crisis before Manhattan adjusted, during the adjustment, and after. Whether you now trust me more, less, or the same, is up to you. Clearly JJ doesn't trust me and I lost all credibility. I dont care about that at all. His/Her choice.
Posted by Noah
Sat Feb 6th, 2010 01:28 PM
Streeteasy - first I never disagreed with the anecdotal nature of my discussions. I never claimed to have hard facts on contract signed deals (outside of my deals and those of my close colleagues that talk to me), without dispute to provide to you for real time analysis. I never made these claims. Come on now!
But how do you explain the SE Q4 report on CLOSED DEALS showing the improvement in AVG SALE PRICE from Q3 to Q4? That supports the anecdotal reporting I have done for many months now!
I know once a listing closes, its public record and just did an entire discussion explaining the whole process. Whats the point? That this is a gossip site? Fine. Its conjecture. or gossip, or the best info we can get given the lag for hard data. or whatever you want to call it. Either you trust my reports or you dont. If you dont, fine. But if you have been reading this site for years now, I have a feeling your trust level is higher than if you started reading 3 months ago.
Posted by Noah
Sat Feb 6th, 2010 01:34 PM
Bwnstner - My real time reports are from my observations in the field on daily basis and talks with colleagues who happen to be top producers at their firms and who I trust from the years, and sales managers I talk to and have known. Also from the data I have and about to launch on the inventory side. Not to say this the wrong way, its my business to make sure the people I talk to are trustworthy to confirm or disprove trends that I see out there.
As for the data, you can never get contract signed data on a mass basis - only those privy to the transaction know that. However, the next best thing is way more data on listing side of this market. And that is what I am building new tools around and spent the last 8 months now working on. I can tell you 7 of those months were on data accuracy, and adjusting for 100s of situations where the listing history may be interpreted incorrectly which would affect metrics we wish to capture and calculate. The new site will launch in 6-8 weeks. I see it now on the backend in development, but I cant release that. Still cleaning the data and fixing some last issues we discover.
It will never be 100% perfect. The hope is to get it as close to possible and right now its very close to that goal and very worthy of building analytics around with the hope of identifying trend changes over time.
Posted by Noah
Sat Feb 6th, 2010 01:46 PM
JJFASHION - if you read the MS Q4 report you would notice that he did catch an improvement of AVG PRICE PER SQUARE FOOT of 5.5% from Q3 to Q4.
http://millersamuel.com/reports/pdf-reports/MMO4Q09.pdf
"Price per square foot was $1,051 in the fourth quarter, down 11.2% from the prior year quarter result of $1,183 but up 5.5% from the prior quarter result of $996"
Clearly you are seeing signs of both the rise in sales volume and improvement in bids in some way shape or form in most of these quarterly reports. My guess is it will reveal itself further in Q1s report, released in April
Posted by Anon
Sat Feb 6th, 2010 02:29 PM
JJFashion lives with his parents in the basement and should be ignored...has no clue about the real estate market...
Posted by John
Sat Feb 6th, 2010 02:51 PM
This site has become soooo depressing and the reason is that it is now full of bears...
If a report or an article comes out showing an increase in confidence or price per sq ft, everybody attacks the media people as being biased....
Since when do we want the destruction of the market?
I know where it comes from: all of those bears commenting feel agitated, frustrated and confused because they feel they missed the chance to buy a piece of NY real estate on the cheap - they were expecting the market to completely tank and they thought that they will someday get the chance to buy a brownstone on the UWS for $100K....Now, they see that it is not happening and they begin to realize that it will never happen...EVER...
The market dynamics are still there and the market will continue to evolve, always going up in the long run.....
It is just sad to read those people anymore.... yawn...
Posted by Noah
Sat Feb 6th, 2010 03:27 PM
John - I definitely do think there are PERMAbears out there, I know one in particular who I no longer talk to, who were adamant about this market tanking to 1998 levels, or the equivalent of 60-70% off peak. When it didnt happen at the height of fear (lets face it, fear levels were at insane levels at the height of this crisis and we were in unchartered territory for a while), they simply said: THE MANHATTAN MARKET IS WRONG!
You know who you are if you read this. That person specifically told me 300 CPW, 8A, was worth $2.1m MAX! The dream home to this wall street insider. I told them the place would probably trade at 2.6m-2.7m and NOT go below that - needless to say a big fight ensued and I was called a stupid nobody that is not at their level of knowledge, experience, and understanding.
Of course, 8A ultimately sold and closed for $2,825,000, going into contract in early July!
http://streeteasy.com/nyc/sale/373252-coop-300-central-park-west-upper-west-side-new-york
As right as they were about the crisis and the severity of it, they were dead wrong about the market in Manhattan, and got emotional over it. When you believe so deeply in something, nothing can change your mind and you will never listen to anyone but yourself. You start coming up with excuses, denying whats happening, and attacking anything that may disprove your beliefs. No matter what.
Now, I do NOT believe in the foundation of this reflation, as readers know. I do have macro concerns, and I do question this carry trade and stimulus driven reflation rally. Its weak foundation. Ultimately market forces will react, started already with carry trade unwind as discussed, and I worry over unintended consequences from policy actions taken to stem this crisis. That is why bigger picture macro concerns sometimes dont jive with real time discussions and reports I give of whats happening out there in Manhattan real estate. As I said before, some people cant take it if it doesn't fit into their beliefs on where this market should trade.
Posted by Anonymous-to-psychos
Sat Feb 6th, 2010 05:03 PM
I think rootless cosmopolitan must have changed names to jjfashion. Maybe I'm wrong - but sounds similar.
A few months back Noah you came at me with oh, bonuses aren't going to be cash and now you're like bonus bounce? So to jjfashion, in Noah's defense - a few months back he was singing a different tune.
Also in Noah's defense, this is a blog and I don't think he has the capacity to give you specific research. That takes alot of people and dollars. There's no need to bash him, cause if you had any brains you'd not bother with going for his jugular and you'd focus on what you need to do in particular to your situation. There's smack all around you, SO WHAT? That's not going to stop and the real estate market here changes fast. Money and I mean CASH is back on the street - the train has already left the station so no point crying over spilled MILK.
Posted by Noah
Sat Feb 6th, 2010 05:12 PM
Anon-to-Psycho - good to see you back! Yes I do recall that thread, and if I remember correctly the argument was over the nature of bonuses; specifically, the cash component?
Is this correct? I do get into debates and conversations with many people, including old trader buddies of mine, so sometimes I confuse one with another. But if I recall, it was the LESS STOCK and MORE CASH component of the bonsues that we disagreed with?
I must admit, bonuses are coming in this year but I still here for those over the cash cap, it is a higher percentage of restricted stock and less cash than say in 2006 and 2007. But still, as you say there definitely IS money out there. Cant deny that!
As for the data, unfortunately this market is lacking in transparency. I tried to change it years ago, couldnt get the data. Tried in 2008, denied again. Tried mid 2009, and got it with specific use restrictions! So I left halstead, got signed up with REBNY, and started my prohect that I always wanted to start. Im in for around 40-45K or so right now, my own cash. Very happy so far with progress, and was very skeptical at first with how messed up data was if we could get it to high enough quality to even warrant building the platform that I envisioned. But to see how far we come and how much better the data we have is now, Im so excited with this new platform.
Hopefully you appreciate it too. Scary thing is, I enjoy having a guy like JJ here to stir things up. No fun having us all agree all the time. Lets spice it up and Ill defend my opinions and past discussions and statements and vision for the future, and he can defend his thoughts. All are always welcome! ALWAYS!
Posted by Noah
Sat Feb 6th, 2010 05:24 PM
PS: I will stick to my guns and say again as noted above:
"I do NOT think it is sustainable, and I see it maintaining itself for a few months more."
Now, if I was wrong on anything in the last few years, it was the sustainability of this reflation trade in equities and in this real estate market soonafter the height of fear last year. I just didnt see it lasting this long and I called it a "countertrend surge of activity embedded in a longer term correction", but you know what, it has so far...that is not to say deals are happening at peak levels, stop right there if you want to argue with me on this one. All I said is bids improved a bit and that improvement was progressive in nature over time from say 11 months ago.
But I do not see this reflation trade, or improvement, or whatever you want to call it, sustain itself for longer than say a few more months. I want to believe, I really do, but my bigger picture concerns have been discussed very often here and they havent gone away. With that said, Ill report on the market as I see it. If it does sustain itself, Ill happily report on it.
Posted by bear
Sat Feb 6th, 2010 05:53 PM
Noah,
The NYTimes article fails to mention that at least 2/3rds of the bonus is in STOCK that vest over 3 years. So while we may see a bonus bounce, as undoubtedly we see every year, it is going to be less this year because it is paid in stock. This means that more wall street buyers will have to finance, in a tax enviroment where they can't write off most of the interest ($1 mm cap, AMT, and now over $250K reduction to 28%.) So I ask you, what bank is going to take as collateral unvested stock. I would say that they can't do this as it is risky and invites a capital charge or haircut.
So I ask you, in 2008 how many people at Goldman Sachs received a cash bonus of more than $1 mm to pay cash for their apartment, vs. 2010. I bet the number is less and the amount of cash is much less.
So we have a situation where in 2010 there is simply less buying power from the bonus. This is something that the permabull brokers in the NYTimes failed to mention. They need to move product to get a commission. So they talk up their winners.
Sure you see more foot traffic. You also see more foreclosures on Realtytrak.
Lastly, for those who get paid in stock at GS, they have just seen their bonus cut a further 8% as the stock fell from the award price of $160 per share to $150 per share.
Bear
Posted by neitherherenorthere
Sat Feb 6th, 2010 06:35 PM
I disagree with it not being sustainable. I look forward to hearing why you were wrong this summer.
Posted by Noah
Sat Feb 6th, 2010 07:08 PM
thats fine! but one thing is for sure, if the quarterly reports really are lagging, Q2 and Q3 will only show what the market has done some 3-7 months earlier at a lag. im sure when those future reports are released, the same interpretations for the market at that time of release will be made. all i know is, the reports will improve at a lag reflecting what I have been saying here the past few months. so even if I do change my real time feelings in 2,5,8 months ahead, im sure these reports will only continue to improve
but as you say, lets see! I want to be wrong!!
Posted by foodforthought
Sun Feb 7th, 2010 12:31 AM
Noah,
I agree that there was an uplift in sales end of last year. It's debatable if prices went up, e.g. average prices could go up if fewer lower priced apartments are selling. On Streeteasy, you certainly get a lot of prices decreases and almost no price increases (admittedly also an imperfect metric).
However, while with increased bonuses more sellers were coming off the fence (although a lot of the bonus is in restricted stock), the key question is:
With the recent significant change in political climate (after Scott Brown's victory in Mass)what is going to happen with financial reform and taxes?
Obama - if he wants to win any future elections - needs to step up and do something about too big to fail and Wall Street bonuses. Tax increases on incomes over 250 k USD are almost certain and two congress members just introduced a 50% tax on Wall Street bonuses.
Even if not all of these things happen, it should have an impact on the psychology of bankers in New York. Since this is a fairly recent development it would be interesting to read your views, perhaps in a separate blog entry!
Foodforthought
PS: It's refreshing to see that someone else thinks that the NYTimes RE section is broker sourced and highly biased.
Posted by heny
Sun Feb 7th, 2010 12:57 AM
Noah,
Further to your answer about about shadow inventory a while back, I came across the following piece: http://www.westwoodcapital.com/opinion/images/stories/in-print-docs/foreclosuresfishfoodandthefinalfallinhomeprices.pdf
It includes the following quote near the end: "Some markets continue to astound us with regard to excess inventory. Our home market of New York is one of them. As with southern coastal Florida and several other major urban areas throughout the United States, the New York metropolitan area saw an enormous wave of mostly high-rise condominium construction and sales. When the music came to a stop in New York (far later than when the game of musical housing sales stopped elsewhere), there were about 22,500 vacant, newly constructed or converted condominiums that have been overhanging the market ever since (nearly 30,000 in the entire metropolitan area). In the nation’s most highly priced residential location, Manhattan, there are presently about 8,500 vacant units. To put this into perspective, this amounts to nearly 100% of all existing, plus new, residences of any type (condominium, co-op or townhouse) sold in a typical year (2006 = 9,000 units total) in Manhattan. MillerSamuel, a leading residential appraisal firm in New York, estimates that at the current sales pace for vacant new construction or conversions in Manhattan, absorption of excess new units could take six to seven years. Of course, such lengthy absorption periods are out of the question, given carrying costs. Lenders will ultimately either fire-sale units or sell them to rental-apartment operators, with both options depressing prices throughout the market."
Posted by Noah
Sun Feb 7th, 2010 09:44 AM
food for thought - thx for the comment! YES, I do think the NY Times is broker sourced and highly biased! I never refer to NY Times articles, maybe once or twice a year. That is not much.
I find the broker PR staffers and brokerage firms get their top producers more exposure via ny times and when a ny times journalist has a story, they will have the sales managers mass email all brokers to see who may be able to participate and support the angle! Ive seen the way these things work on the inside.
As to your point, yes there def was a resurgence in sales volume..I mean, sales basically plunged to decade lows between SET 2008 and MARCH 2009. The real fear was in early 2009, Jan, Feb, March and into April where real systemic risk was still on the table and out there as a possibility.
The best way I can explain the improvement is from the trader in me! This market priced IN fear for those months mentioned, and ultimately, over time and slowly priced OUT that fear. When I look back, I see an adjustment that overshot to the downside, saw some crazy prints, and then naturally rebounded slightly over time as the reflation rally took hold. Started in lower priced points first, trickled to higher price points as time went on. My sales data proves this in my new system as I break down sales by price point and I see it.
As for higher reg and higher taxes, oh yes its coming. And those are part of my fears in what I call unintended consequences of policy actions taken to stem this crisis. I think the impact will be more drawn out over time - not a fierce fast and furious adjustment to the new norm like we saw after Lehman! That was like the smoke monster in lost - a quick course correction! I dont see a sudden jolt like that again to that extent seeing 20-35% drops in various price points in a matter of months!
Posted by Fred
Sun Feb 7th, 2010 08:17 PM
Noah - I have to pay closer attention to what you say because this is the first time I have seen you emphasize that you don't see this as sustainable. That, in effect, is the real issue with buying today, not so much whether the QoQ are same, better or worse. It's the what-is-this-market without securitizable jumbos and increasing employment in financial services?
I have noticed that inventory is again on the rise, yes, it is seasonal, but it's the wrong direction for a recovery. We finally signed a new lease in a 2/2 over by Trump on the west side and while I don't think it was a steal, it was 20%+ less than what they were getting in 2008. Based on similar SF, loc and quality, our monthly cost to own would be at least $2,000 more / month (adjusting for interest deduction) on $400k in equity - or an implied negative carry of 6% before we would get to find out what happens with real estate values.
At some point this little burst of low end activity last year will hit a wall because demand is simply not that deep. I imagine we'll see it in inventory first, then in pricing, but there's just no fundamental support for current prices in Manhattan, much less higher prices.
Posted by government bids
Mon Feb 8th, 2010 03:56 AM
Nice blog. I am really glad to read all the comments here. Thanks.
Posted by jeff
Mon Feb 8th, 2010 10:39 AM
I'm very excited to start seeing the new data that Noah has been working on. I can tell you from talking frequently with Noah about the work he has been doing and challenges he has come across, that to date much of the data being aggregated, produced and commented on in the news media on the New York City market has been of low quality and that a lot of work and thousands of dollars have gone into creating a system for tracking, cleaning and delivering this data to you Mr. or Mrs. interested New Yorker. In my book Noah has done a great job up to this point at synthesizing the incomplete data available with anecdotal evidence he gathers from being in the trenches to get to actionable intelligence for readers. I mean by that, Urban Digs is providing a view on the market that should have been helpful to people in deciding how aggressively to be in their bidding strategies at a given point in time (presuming that for whatever personal reason, they have decided that buying a property is their choice). Since the decision to buy residential real estate is in part a rent vs. own, in part investment/tax and in part utility/enjoyment driven no advice will ever suit everyone equally. Urban Digs tries to give a picture of the current state of affairs for tactical (bidding) reasons in the market and an informed persepective on the likely direction of long-term values. That's why we look at macro markets, commercial real estate/land prices and business trends in New York and even touch on crime, schools and city services (which we wish we could do more of....any volunteer writers with expertise here?)
For my part I am in pretty good agreement with Noah that there are still great long-term concerns about the economy, Wall Street and the New York City market in particular and I believe we are in for a 3 to 5 year period of moribund prices overall with more pricing downside for the $3 - $5 millon market segment (particularly luxury condos) than other segments. However, I have been relatively more bullish on the stock market, economy and New York City real estate since mid year last year. Despite calling for a Q1 stock market correction which we are in the middle of I still see some legs left in this economic rebound. As such I believe that despite lower cash components of bonuses we will see a reasonable spring selling season in New York City. Thereafter my radar gets a bit foggy, we will either see a path to future prosperity (and rate hikes) that can overcome the many headwinds in the world by Q3 of this year (as we did in 1994 and 2004) or we will see the next round of gathering storm clouds RE forced debt deleveraging which will cause a double dip in the economy and real estate prices. If I knew the answer to that question....well you know.
Posted by Fred
Mon Feb 8th, 2010 11:31 AM
Yes, big hat tip to Noah for a great blog! And pay no heed to jjfashionista.....he a donk.
Posted by rootless cosmopolitan
Mon Feb 8th, 2010 11:43 AM
@Anonymous-to-psychos:
FYI: You think wrong. rootless cosmopolitan and jjfashion are two different people. And they aren't even located in the same head. And if you think jjfashion sounds like me, then it's just your perception that makes you believe this. It's not real.
I am very optimistic about the real estate market in NYC and suburbs, though. I do think prices will come down further over the next years, so that people like me who don't make big bucks and don't get big bonuses, but have just an average salary, will be able to afford real estate property again w/o over-stretching their finances. I consider a reversal to historically normal price/income and price/rent ratios, i.e., an additional retreat of these ratios by about 30 to 50% from here, as likely, even in Manhattan, since the economic environment has substantially changed compared to the time before the recession. There is a good chance that the debt bubble, on which the US-economy has been based for the last decades has burst for good, and it will be deflating, and the US-economy will go a way similar to Japan, a modern day depression with a deflationary environment, which isn't a good environment for inflating or even maintaining asset bubbles, whether it's in the stock market, debt market, or in the real estate market.
This is all good news.
rc
Posted by Robert
Mon Feb 8th, 2010 12:49 PM
Noah: Don't argue with idiots. They'll drag you down to their level and beat you with experience. Your comments are always welcome. As buyers we have definitely seen a firming of prices. However, I do note that streeteasy shows a sudden "realtime?"
increase in inventory. Perhaps sideline sellers want to get out before the next possible drop
Posted by puhleazzzzz
Mon Feb 8th, 2010 01:07 PM
so rootless cosmopolitan shows up to defend jjfashion - one in the same.
Posted by rootless cosmopolitan
Mon Feb 8th, 2010 02:18 PM
@puhleazzzzz:
By denying to be identical with someone else I defend the other one and so I just confirm I am identical with the other one? Wow. Now, that is some impressive logic. I guess, I don't stand any chance against this kind of reasoning where everything and its opposite are equally interpreted as confirmation for an assertion or believe.
rc
Posted by jason
Tue Feb 9th, 2010 12:48 AM
hey noah it was this apt
http://streeteasy.com/nyc/sale/418120-coop-40-east-9th-street-greenwich-village-new-york
01/17/2007
Previous Sale recorded for $925,000.
06/04/2009
Listed by Prudential Elliman at $1,195,000.
07/25/2009
Price decreased by 8% to $1,095,000.
12/01/2009
Listing is no longer available.
12/30/2009
Re-listed by Prudential Elliman.
01/06/2010
Price decreased by 4% to $1,049,000.
01/26/2010
Listing entered contract.
Posted by Noah
Tue Feb 9th, 2010 05:54 AM
Thank you Jason!!!! Yes, that should have been mentioned in the both articles, ny times and mine...sorry I missed it.
Still, close to 2007 price? I wonder how close?
Posted by joenyc
Tue Feb 9th, 2010 09:50 AM
Actually, I think it's more likely that jjfashion=streeteesy, same ranting style.
As an reader here for almost two years now, I am often amused at how bears supported their arguments a year ago vs now. I remember the increasing SE inventory count and at-the-moment SE PSF calculations were proof that the RE market was going to tank down to mid 90s prices- but now that we're in an uptick the same data is considered by them to be lagging, unreliable and anecdotal. A word of advice: you cannot will the market to go where you want, so why do you try? Either make your move on the product you can afford now- or just rent or live someplace else.
Posted by Thisson
Tue Feb 9th, 2010 04:32 PM
Noah,
Quantitatively, NYC real estate prices are disproportionately high compared to median incomes. That's not emotion.
In a neighborhood like Sutton place, where median income is somewhere in 100-150k range, a 2 bedroom apartment is about 8x income. That's ridiculously overpriced.
This market will correct. But we are in a deflationary spiral, and deflation takes a long time to work it's way through the system.
What's supporting the market now? Stimulus money and Wall Street bonuses. Both of those sources of revenue are vulnerable to significant pullbacks.
I will continue to stack cash and wait for the real opportunities that will come when the debt default tsunami wipes out much of the capital base of the baby boomers, in the expectation that phenomenal returns will await those who still have capital to invest when the crisis passes.
I think everyone is severely misunderestimating the amount of pain our society will have to go through as entitlements are cut and income becomes more scarce.
Posted by fancynancy
Tue Feb 9th, 2010 06:24 PM
Thisson,
Where did you get the stats that median income in Sutton Place is 100-150k? I find that hard to believe unless it came from a census.
It doesn't make sense that stimulus money and wall street bonuses could support a market. What about tech which really helped create a whole new economy.
There is a tremendous amount of industry still that you haven't even touched upon. Your view is limited and you will stack cash and WAIT - and then you'll find you're in a new bubble with lots of cash.
Your views are forceful but inaccurate definitely and limited to a pessimistic view versus the big picture.
Posted by anonymous
Wed Feb 10th, 2010 10:25 AM
- stimulus money has been buying mortgage related assets and letting Gov. sponsored institutions push interest rates low. Low interest rates can support a market. The big questions is what the housing market, stock market, bond markets, etc. will do when interest rates rise.
- I can't remember who published it, but an article on The Real Deal referenced an interactive map of Manhattan neighborhoods and median incomes, etc. They were drawing upon tax return info if I am remembering correctly. The numbers seem to make sense as I rememgber the UWS, which was among the highest income neighborhoods, had a median family income of 160k.
Posted by Allison Bell
Wed Feb 10th, 2010 03:30 PM
Statistically speaking there's no way other than the census to get somewhat an accurate picture of median income. If that was a true median than most of manhattan would be under water already financially and they aren't. I think median's in manhattan are much higher. If they lump together boroughs and manhattan then that median makes sense, if they don't, then the statistics are absolutely wrong because there's no way that median income could live in Manhattan and OWN. I believe this blog is mostly about ownership isn't it - and not rentership. So I think the median income issue goes out the window since what we need to focus on is the median income OWNING.
Posted by rootless cosmopolitan
Wed Feb 10th, 2010 06:52 PM
@Allison Bell:
I can give you the census data for New York County:
Median household income for year 2007 and 2008 was $63,704 and $68,402, respectively. Assuming the same rate of increase, it would be about $74,500 and $78,900 in 2009 and 2010, respectively.
The other counties in 2008:
Bronx County: $35,108
Kings County: $43,172
Queens County: $55,599
Richmond County: $72,557
http://www.census.gov/did/www/saipe/data/index.html
The median home price/median household income-ratio for Manhattan was about 6 to 8 in the 1990ies. Nowadays, it's about 11 to 13. I call this disproportionate and bubble territory. The US-economy has been fueled with an increasing mountain of debt, mostly private debt, for the last decades. And so has New York City. If the debt bubble has burst, the bubble prices can't be sustained and it's not unreasonable to expect that the price/income-ratio will revert to its historically normal levels over the next years, but not to the national average of 3 to 4, rather to 6 to 8, instead. That is, the price/income-ratio will come down another 30 to 50% from here, through price decrease, income increase, or a combination of both.
This is all good news.
rc
Posted by anonymous
Thu Feb 11th, 2010 09:37 AM
I agree that the income of the top decile or quartile should be looked at because the skew of higher incomes has probably increased since the 90's. However, I do think that in the long-term the skewness will probably return to historical norms, and the median income may provide a good indicator in the future.
Posted by Allison Bell
Thu Feb 11th, 2010 03:26 PM
@rc - not sure why this is a good thing.
Posted by Thisson
Wed Feb 17th, 2010 04:43 PM
Allison,
Prices falling is a good thing because it makes it more affordable to live here.
Posted by aaaaaaBBBBBcccc
Thu Feb 18th, 2010 03:42 PM
No Thisson, prices falling means a decline across the board, incomes declining, job losses etc.. It doesn't make food cost less or maintenance go down or health insurance costs go down. I beg to differ, it's not a good thing at all.
Posted by coach handbags
Thu Aug 12th, 2010 09:52 PM
For Manhattan Residential Real Estate, I considered myself 'less bearish' since November 2008 when I started to see bids and contracts signed in this market start to reflect the uncertainties and harsh realities that the severe credit crisis brought upon us! On June 4th, 2009 I re-iterated these feelings based on the rising volume of contracts signed I started to see.