Still doing 1400+ deals a month..but for how long?

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
To what extent do you think the NYC RE “safety” play shores up the situation for now, as it did ~13 years ago? I’m not saying it’ll work out long-term term (or otherwise), but between recent losses in stocks, bonds, and inflation-adjusted cash, certain people may find allure in the promise of “Manhattan RE always goes up.”
And nyc didnt go parabolic like other markets + we are not yet at full capcity demand wise...so any corrective force likely will be muted vs other markets and likely more shallow
 

David Goldsmith

All Powerful Moderator
Staff member
To what extent do you think the NYC RE “safety” play shores up the situation for now, as it did ~13 years ago? I’m not saying it’ll work out long-term term (or otherwise), but between recent losses in stocks, bonds, and inflation-adjusted cash, certain people may find allure in the promise of “Manhattan RE always goes up.”
I'm hearing that a non-insignificant number of purchases are being financed not through mortgages, but on margin loans. If that's the case I would think both interest rates increasing and stocks significantly correcting would have a major impact on that kind of transaction structure.
 

inonada

Well-known member
I'm hearing that a non-insignificant number of purchases are being financed not through mortgages, but on margin loans. If that's the case I would think both interest rates increasing and stocks significantly correcting would have a major impact on that kind of transaction structure.
Is this before or after rates went up / stocks went down?
 

inonada

Well-known member
I’m trying to think of when that would be a reasonable thing to do. I suppose if (say):

1) You want to finance $5M of a purchase.
2) You have $25M in stock.
3) The stock is sitting on large capital gains.

Then the options are to:

1) Sell $8M of stock to net $5M after-tax, which reduced your stock exposure by a third.
2) Take out a mortgage on the $5M at 3-5%, costing $150-250K/yr post-tax (or double pre-tax).
3) Take a margin loan at 0-1%, costing $0-50K/yr post-tax.

I can see #3 looking attractive. As short-term rates approach 3%, and margin rates 3-4%, then perhaps not so much. Especially if the stock portfolio has been squeezed from $25M down to $20M.
 

David Goldsmith

All Powerful Moderator
Staff member
NB I AM NOT A TAX PROFESSIONAL
But as far as I know you can't use this scheme and deduct the interest payments as you can on a mortgage on your primary residence. I wonder if people are going to try anyway.
 

inonada

Well-known member
Probably not, but since you can only deduct interest on the first $750K, I don’t think there’s much difference to the people I imagine to be doing this.
 

David Goldsmith

All Powerful Moderator
Staff member

The housing market just slid into a full-blown correction, says top economist Mark Zandi​

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Moody's Analytics chief economist Mark Zandi is ready to call it. He tells Fortune that we've officially moved from a housing boom into a "housing correction."
The real estate data rolling in for April and May shows that the U.S. housing market is softening. New home sales fell 19% to their lowest level since April 2020. Redfin reports 19% of home listings cut their price over the past month. Inventory is rising fast, while mortgage applications and existing home sales are also falling.
This drop-off isn't a result of seasonality, or a soft month or two. Zandi says it's a trajectory flip: Demand is pulling back—fast—in the face of mortgage rates that have spiked dramatically.

"The housing market has peaked…everything points to a rolling over of the housing market," Zandi says. "In terms of home sales, they're falling sharply. Housing demand is coming down fast. Home price growth [will] go flat here pretty quickly; we will see [home] price declines in a significant number of markets."
Unlike a stock market correction, which means a greater than 10% drop in equities, Zandi says a "housing correction" means the end of the housing boom and the beginning of a period where home prices will fall in some regional markets. Over the coming 12 months, he expects year-over-year home price growth to be 0%. If that comes to fruition, it'd mark the worst 12-month stretch since 2012. It would also be whiplash for real estate agents and brokers who've watched home prices soar 19.8% over the past year.
This is all by design. The Federal Reserve has a dual mandate from Congress: Keep both unemployment and inflation low. Of course, with the jobless rate at 3.6% and the latest CPI reading at 8.3%, it's obvious which mandate the Fed has shifted its attention to: inflation. In the Fed's mind, if it can end the housing boom, it can slow down overall price growth. That's why the Fed hit the housing market with an economic shock of higher mortgage rates.


A historically 'overvalued' housing market​

The Fed won't be appeased with simply slowing home sales, Zandi says. It will also want home construction to slow. Elevated home construction, which this year hit its highest level since 2006, has put upward pressure on everything from lumber to steel to kitchen tables. If the housing market heats back up before inflation has been tamed, Zandi says, the Fed would simply push mortgage rates even higher. Already, over the past five months the average 30-year fixed mortgage rate has spiked from 3.11% to 5.1%.
To be clear, Zandi doesn't see a 2008-style housing bust or foreclosure crisis. While the spike in mortgage rates has pushed the housing market into the upper bounds of affordability, we don't have the credit issues that plagued us last time. Homeowners are financially better off than they were in the lead-up to the 2008 financial crisis. This time around, Zandi says, we also don't have widespread subprime mortgages. Also, if nationwide home prices do begin to plummet, he says, the Fed could always ease up on mortgage rates.
That said, Zandi says some regional housing markets have become historically "overvalued" and could see home prices decline 5% to 10% over the coming year. If a recession does come, Zandi says price drops in those markets could grow to between 10% to 20%.

Among the nation's largest 392 housing markets, 96% have home prices that are "overvalued" relative to what local incomes can support. That's the finding from Moody's proprietary analysis of U.S. housing markets. Among those 392 markets, 149 are overvalued by at least 25%. That includes Boise, where home prices are 73% above what Moody's says economic fundamentals support.
Zandi says the extremely "overvalued" housing markets like Boise and Phoenix are at the highest risk of falling home prices over the coming year. So are numerous markets throughout the Mountain West, Southwest, old South, Carolinas, Florida, and Texas.
While Zandi said he doesn't think nationwide home prices will drop, he says they're likely to see "real" home price declines. That's economic speak for inflation growing faster than U.S. home prices.
"Inflation will still be positive. If inflation is at 8% and home prices go nowhere, then home prices decline 8% in real terms," Zandi says. Now that home prices have become "overvalued" we're set to enter into a period where both income growth and inflation outpace home price growth, he say. For home shoppers who've been priced out by the pandemic's housing boom—which saw U.S. home prices soar 34.4% since February 2020—that's not exactly bad news.
The housing market is shifting—fast.
 

David Goldsmith

All Powerful Moderator
Staff member
Is the housing boom about to bust? Sellers are slashing prices at levels not seen since before the pandemic amid rapidly cooling market as hedge fund manager of The Big Short fame warns 'It's like watching a plane crash'
More than 20% of homes for sale in Philadelphia, Boise, New Orleans and Sacramento had their prices reduced in April
Michael Burry, of 'The Big Short' fame, compared the slowing housing market to 2008 saying it's like 'watching a plane crash'
This week mortgage rates reached a 13-year high of more than 5%
One economist said that house prices could drop as much as 40% during the summer of 2022

America's red hot housing market is cooling down fast sparking fears of a housing bust and crippling recession as nearly half of home sale prices are slashed in some areas.

After two years of buyers battling paying tens of thousands - or sometimes hundreds of thousands - over asking price to secure homes as millions fled the cities in favor of the suburbs during the pandemic, it appears the boom in over.
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An increase in mortgage rates, rising house prices and uncertainty around Joe Biden's economy as inflation soars, are contributing factors to the slowdown, according to experts.

Weighing in on the market trends, former hedge fund manager Michael Burry of 'The Big Short' fame, said in a now-deleted tweet on May 24, that the falling stocks and slowing home sales, remind him of 2008.

Burry tweeted: 'As I said about 2008, it's like watching a plane crash.'
City's across the country have seen homeowners slash prices in a desperate attempt to sell

In a statement, the chief economist with real estate giant Redfin Daryl Fairweather said: 'The picture of a softening housing market is becoming more clear, especially to home sellers who are increasingly turning to price drops as buyers become more cost-conscious under higher mortgage rates.'


The report says that one in five homes on the market across the country are seeing their prices lowered by owners.

Boise, Idaho, which saw an influx of out-of-state migrants during the Covid-19 pandemic, was the worst hit as 40% of homes on the market there saw a price drop in April 2022.
Cape Coral, Florida, was one of the most popular destinations for those who left the US's bigger cities during the Covid-19 pandemic
More than 40% of homes on the market in Boise, Idaho, saw their prices cut by owners in April 2022

Cities such as Cape Coral, Florida, New Orleans, Baton Rouge, have seen more than 30% of homes on their respective markets see their prices lowered.

A previous Redfin study found that Cape Coral was one of the most popular destinations for those who moved during the pandemic.

The city's population has risen nearly 10% in 2021 and 2022 with the majority of migrants coming from Chicago.

San Francisco that lost the most residents of any city during the pandemic, according to the study. The majority of those who left the city stayed in California, settling in the Sacramento-area.

While Los Angeles lost more than 50,000 residents, with the majority relocating to San Diego.

New York City lost 80,000 residents with the most settling in Miami.

Redfin also says that other factors that go into determining just how hot the housing market is, including the time a home spends on the market.

The company also said that home tour requests are down 8% this month compared against May 2021.

Speaking to CBS News, Realtor's Chief Economist Danielle Hale said that the rate for a fixed 30-year home loan reached 13-year high of 5.3%.

Hale said: 'At the end of the day, some buyers are taking a step back and reassessing their options because the costs are just too much.'
According to Redfin, home tour requests are down significantly across the country

She added: 'The housing market is adjusting and it's adjusting in a big way.'

In 2020, mortgage rates hit a low of 3.4%.

Amidst the current increase, that number is still lower than at all but one month between the 1990s and The Great Recession of 2008.

Economist Bill McBride told The Atlantic that the situation in the market today more closely resembles 1980s housing market crash.

That was caused, McBride said, as the Federal Reserve raised interest rates to combat inflation in 1979.

That led to inflation reaching 20%.

This led to a housing market stall that didn't end until 1982. In 1981, unemployment in the US soared to 11%.

Redfin CEO Daryl Fairweather said that home sellers are increasingly dropping prices as the market turns cold

Despite sellers lowering prices across the country, the average house price in the United States in April was $425,000, up more than 30% from 2020, according to Realtor.com.

Florida saw the most dramatic house price increases in 2022, especially in cities such as Tampa, Orlando and Miami.

In February 2022, Realtor.com said that those three cities had the fastest rising rents in the country.

Moody's Analytics chief economist Mark Zandi told Fortune Magazine that the public shouldn't panic about a 2008-style housing bubble.

Zandi said that a number of factors are in play in making this drop in sales different to 14 years ago. These include the absence of sub-prime mortgages in market and lack of a credit crunch.

However, Zandi did warn that if a recession did come, regional housing prices could drop by as much as 20%.

Nest Seekers International economist Erin Sykes told CBS News that the she felt as though house prices could drop by as much as 40% during the summer of 2022.

A Moody's study found that in 392 of the largest housing markets in the US, over 95% have house prices that are overvalued against local incomes.

The study highlighted Boise, Idaho, where house prices are a whopping 73% above what Moody's say they should be.

The rise in prices comes as demand continues to outstrip supply as construction stalled due to the Covid-19 pandemic.

The National Association of Realtors said that house sales fell again in April 2022 for the third straight month.

Mortgage applications are down 12% in the last two weeks.

Pending home sales were down nearly 10% in April 2022 compared against the sane time period last year, the National Association of Realtors said.

According to Census info, home sales were under 20% in April and May, the lowest level seen since April 2020.

Los Angeles based real estate agent Lindsay Katz told CNBC : 'We used to get 10 to 15 offers on most houses. Now I’m seeing between two and six offers on a house, a good house.'
Share or comment on this article: Sellers are slashing prices at levels not seen since before the pandemic as market rapidly cools
 

inonada

Well-known member
I'm hearing that a non-insignificant number of purchases are being financed not through mortgages, but on margin loans. If that's the case I would think both interest rates increasing and stocks significantly correcting would have a major impact on that kind of transaction structure.

An all-cash offer might be the most effective strategy in this hot market, but that isn’t an option for many home buyers. Those who have brokerage accounts with large balances can use a margin loan to borrow against those assets without realizing capital gains, said Jim Miller, a financial planner in Chapel Hill, N.C.

The strategy isn’t for everyone and can be risky, especially as the stock market declines and volatility increases.

In general, you are able to take a margin loan of up to 50% of your brokerage-account value. Mr. Miller advises clients to borrow far less than their maximum allowed amount so they have enough room in their budget should a margin call occur. This is triggered by a drop in the price of the assets.

A margin loan allows buyers to compete with cash offers and obtain quick, short-term financing. They often then take out a mortgage after the deal closes to repay the margin loan immediately, said Mr. Miller.

With some margin-loan interest rates of around 2% to 3%, compared with a 30-year mortgage rate of more than 5%, these loans are appealing, he said.

Eric Walters, a financial planner in Greenwood Village, Colo., said several of his clients have used securities-based lines of credit as temporary bridge loans to win the bid. This loan is similar to a margin loan but can’t be used to buy securities and typically requires more paperwork.
 

David Goldsmith

All Powerful Moderator
Staff member

Manhattan luxury market slumps back toward normal​

Last week’s 23 signed contracts lowest since first week of January​

Following a year of record-setting luxury home sales, homes entering into contract priced at $4 million and above dwindled last week.
A total of 23 contracts were signed between May 16 and 22, according to a weekly report by Olshan Realty. That’s the lowest since the first week of January 2022, when 21 contracts were signed.

The week marked a tip back down toward what the report calls the “golden years of new development” — a period between 2013 and 2015 that recorded a weekly average of 26 contracts. The market has grown rockier in recent years, with 2020 counting only 12 contracts a week before 2021’s record weekly average of 36 contracts.
The priciest home to enter into contract last week was 16ABC at 25 North Moore Street, which was listed in the beginning of April asking $22 million.

The seller purchased the full-floor condo for $15.3 million. The unit has over 7,000 square feet, including five bedrooms, five and a half bathrooms and 45 windows that offer north, south, east and west views of the Hudson River. A living room, dining room and kitchen span 65 feet.

Coming in second was 2W at 1030 Fifth Avenue, which was listed at the end of March and asked $13.25 million.

The prewar co-op has four bedrooms, four and a half bathrooms, two fireplaces and 10-foot ceilings. The unit’s living room, formal dining room and library face Central Park.
Fourteen of the 23 contracts signed were for condos, six were for co-ops and three were for townhouses. Combined, their asking prices totaled $195.6 million. The average home spent 412 days on the market and was discounted 1 percent from its initial ask.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member

Manhattan luxury market slumps back toward normal​

Last week’s 23 signed contracts lowest since first week of January​

Following a year of record-setting luxury home sales, homes entering into contract priced at $4 million and above dwindled last week.
A total of 23 contracts were signed between May 16 and 22, according to a weekly report by Olshan Realty. That’s the lowest since the first week of January 2022, when 21 contracts were signed.

The week marked a tip back down toward what the report calls the “golden years of new development” — a period between 2013 and 2015 that recorded a weekly average of 26 contracts. The market has grown rockier in recent years, with 2020 counting only 12 contracts a week before 2021’s record weekly average of 36 contracts.
The priciest home to enter into contract last week was 16ABC at 25 North Moore Street, which was listed in the beginning of April asking $22 million.

The seller purchased the full-floor condo for $15.3 million. The unit has over 7,000 square feet, including five bedrooms, five and a half bathrooms and 45 windows that offer north, south, east and west views of the Hudson River. A living room, dining room and kitchen span 65 feet.

Coming in second was 2W at 1030 Fifth Avenue, which was listed at the end of March and asked $13.25 million.

The prewar co-op has four bedrooms, four and a half bathrooms, two fireplaces and 10-foot ceilings. The unit’s living room, formal dining room and library face Central Park.
Fourteen of the 23 contracts signed were for condos, six were for co-ops and three were for townhouses. Combined, their asking prices totaled $195.6 million. The average home spent 412 days on the market and was discounted 1 percent from its initial ask.
Yeah we are slowwwwwwing. Holiday doesnt help. Equity volatilty doesnt help. Rates reset doesnt help. Summer coming doesnt help. Wealth destruction doesnt help. We had a great run, time for a breather. Other vertical markets will get hit 2-3x Manhattan will
 

David Goldsmith

All Powerful Moderator
Staff member
New York market normalizes, new listings flood in
Buyers in Manhattan and Brooklyn pulled away from the market last month, allowing for a much-needed increase in new inventory.

After months of healthy increases in contract signings in Manhattan, they declined 7 percent for co-ops and increased just 2 percent for condos from May 2021, according to a report by Douglas Elliman compiled by Miller Samuel.

Not all contracts lead to sales, but they indicate where sales numbers will go in the coming months.

Deals for one- to two-family homes surged 59 percent, but the sample size is too small to call that significant: Twenty-seven homes entered into contract in May 2022 as opposed to 17 in the same month last year.

Despite cash buyers accounting for about half of Manhattan home sales, rising mortgage rates have slowed buying, according to Jonathan Miller, the author of the report.

“Consumers ratcheted down their enthusiasm a notch as a result of jumping rates,” Miller said.

New listings in the wealthiest borough grew by 18 percent for condos and 80 percent for one- to three-family homes. Co-ops remained an outlier with new listings increasing by just 0.5 percent.

Brooklyn also faced a cooling market. New signed contracts fell 6 percent for co-ops, 6 percent for condos and 13 percent for one- to three-family homes.

New listings were somewhat lackluster for co-ops, increasing by 2 percent. However, they jumped 12 percent for condos and 35 percent for one-to-three family homes.

The past year has been defined by bidding wars and homes being scooped up without lingering on the market. The report indicates that stabilization may be underway.

“This has been one of the most intense housing booms in history over the last year and a half or so,” Miller said. “The market appears to be beginning to normalize and that is allowing inventory growth to occur.”
 
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