Tuesday, November 22, 2005

Slump in New York Tri-State Area

The New York Post reports on the slowdown in Manhattan and the outlying areas:

"The chill in the Manhattan residential real-estate market is blowing across the city's suburbs and outer boroughs.

From Westchester County to Fairfield, Conn., to Bergen, N.J., the tri-state area is seeing prices and numbers of sales stalling or dropping, while inventories of properties are starting to pile up.

. . .

Economists point to higher mortgage rates as the culprit, making home construction more expensive after four straight years of record sales.

In Brooklyn, residential prices went up more than 40 percent between June 2004 and June 2005. But they dropped 10 percent between this past July and the end of September.

On Staten Island, prices also are cooling down, with brokers noting longer sales times and homes more often selling below the asking prices.

Queens prices had a small decrease from July, while properties on the market increased substantially from the third quarter of last year.

. . .

Meanwhile, in leafy Westchester County, monthly numbers posted by the New York State Association of Realtors (NYSAR) show a 6.8 percent fall in median price, from $730,000 to $680,500, just from August to the end of September.

And the sales numbers are even worse, with a whopping 36.3 percent drop, from 842 to 536, for single-family homes.

. . .

The Westchester-Putnam Multiple Listing Service's third-quarter sales report showed a 12.7 percent drop in the number of single-family home sales, from 6,700 to 5,850 in the last quarter.

. . .

A Post survey of northern New Jersey brokers showed similar dismal results, with prices ranging from flat in working-class areas to dropping nearly 10 percent in more affluent communities.

In Connecticut, the latest market report by Prudential shows single-family homes to be down 4 percent from last year's figures.

. . .

[A]dding more fuel to a downswing is President Bush's Advisory Panel on Federal Tax Reform, which is recommending that the administration do away with mortgage-interest deductions.

According to the National Association of Realtors, housing prices could decline 15 percent if the Bush administration agrees with the panel."

I just want to go on record here that the tax advisory panel recommendation on eliminating certain mortgage interesdt deductions will be absolutely dead on arrival. I am not saying it doesn't have merit (as it applies to second homes, etc.); just that this particular sacred cow will not be touched.


Seller's Slump in Tri-State

Back From A Long Absence

I have been gone for a while but will now try to keep this blog current with the latest New York housing bubble news.

Tuesday, October 04, 2005

The Slowdown May Be Under Way

The New York Times brings us this report on third-quarter housing numbers, which showed a decline in median price as well as a buildup in inventory, even in seemingly ever-hot markets like New York.

"A real estate slowdown that began in a handful of cities this summer has spread to almost every hot housing market in the country, including New York.

. . .

In Manhattan, the average sales price fell almost 13 percent in the third quarter from the second quarter, according to a widely followed report to be released today by Miller Samuel, an appraisal firm, and Prudential Douglas Elliman, a real estate firm. The amount of time it took to sell a home was also up 30.4 percent over the same period.

. . .

In Manhattan, the average sales price of co-op and condominium apartments fell 12.7 percent, to $1.15 million, in the three months that ended on Sept. 30 compared with the second quarter, according to the Prudential Douglas Elliman report. The median sales price - which means half of homes sold for more and half for less - fell 3.2 percent, to $750,000.

. . .

What is more, some mortgage lenders have started to tighten credit standards, making it harder for buyers to get loans.

'Low interest rates and easy credit standards are just about over,' said Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley."


Slowing is Seen in Housing Prices in Hot Markets

Monday, October 03, 2005

Better to Rent Now Than to Buy

Last week, The New York Times did an analysis of renting versus buying a similar apartment or house in various metroplitan markets. With respect to New York City, it seems like it is clearly better to rent unless either (a) you are very bullish on continued price appreciation or (b) plan on staying in the purchased unit for a long time.

"After five years in which rents have barely budged while house prices in New York, Washington, Los Angeles and elsewhere have doubled, renting has become a surprisingly smart option for many people who never would have considered it before.

. . .

[O]wning a home today is more expensive than renting in much of the Northeast, Florida and California. Only if prices rise well above their already lofty levels will home ownership turn out to be the good deal that it is widely assumed to be.

In Manhattan, 1,000-square-foot, two-bedroom apartments on the Upper East Side now rent for about $3,700 a month. Buying a similar apartment costs around $1.1 million, which can translate into monthly payments of $6,000 or so.

. . .

[W]hen owning is more expensive every month, buyers are betting entirely on price appreciation.

For new home buyers, prices in New York would need to rise roughly another 13 percent over the next five years for the average buyer to do better than the average renter over that span. . . . Over the next decade, the break-even increase is about 25 percent in New York . . . ."


Is It Better to Rent or Buy

Friday, September 23, 2005

More News from the Open House Front

More slow open houses as reported by the Property Grunt:

"Turnout at the Grunt’s open houses has been lower than turn out at a Pro FEMA rally in New Orleans. Ok. That was bad. But you get my drift.

. . .

This is week two of the open house drought and in a previous entry I stated my concern and hoped that this was fluke but it doesn’t look like it. I have heard from one broker who was previewing the open houses in that area that turnout has been low. One of the few buyers who came by made the observation from looking at the major real estate brokerages that there has been more inventory and prices have not risen."

Property Grunt Status Report

Has the Housing Bubble Been Good to Us?

The New York Times questions whether the housing bubble has really been all that good even for those who bought before the explosion in prices:

"Now that home prices in some markets are showing signs of moderating, lamentations are rising from all sides about the many bad things that may happen as a result. . . .

Unfortunately, all of this hand-wringing tends to distract from the essential truth about soaring home prices, which is that they are a bad thing. . . .

What's so bad about skyrocketing home prices? Almost everything. First, they make life awfully difficult for people who aren't already homeowners and do little for people who are, because selling one inflated house only to buy another affords little profit.

It's true that mounting home equity makes for a nice piggy bank, but it probably also suppresses other kinds of saving and encourages excessive debt. . . .

Sky-high home prices also divert too much capital into home building from potentially more productive uses. And these prices fuel risky, not especially useful speculation in residential real estate. . . .

Finally, wouldn't it be better for society, and safer for our financial system, if people could buy a home without resorting to the kinds of loans - with deferred amortization, for example, or scant down payments - that are risky for borrowers and lenders alike? . . .

My sense, though, is that home prices appear determined to fall, at least where they are most inflated. And having them fall sooner imposes lower costs than having them fall later, while delivering immediate benefits."

Pop Goes The Bubble

Sorry for the Absence

It's been a busy week.

I will try to catch up on soem recent news with some posting today.

Thanks for reading.


Wednesday, September 14, 2005

More Anecdotal Evidence of a Manhattan Slowdown

The Property Grunt (NY broker/blogger) on this past weekend's open houses:

"Last Sunday’s open houses were abysmal. Barely anyone showed up. Those that did showed little to no interest in the apartments. And don't bother asking about offers.

The anxiety that has racked buyers and tightened their chests everytime they look at the New York Times real estate section has now been replaced with a cold steely intensity of awareness that the market is slowly turning in their favor with more inventory being put on the market and with the current state of interest rates.
. . .
This seller's market has forced buyers to experience the phenomenon known as BOHICA.(Bend Over Here It Comes Again)which comes in the form of overpriced apartments and bidding wars. A year or two ago it was not uncommon for sellers to raise their prices during a bidding to see who would be the last buyer standing. And some buyers would accept the new price changes. If a seller were to do try that now, a buyer would respond by putting their foot up the seller's ass since buyers are more likely to avoid BOHICA."

Status Report from the Open House Front

Views on Manhattan Prices

Curbed recently had some responses from its readers on whether or not you should buy a Manhattan apartment now, or wait on the sidelines in anticipation of a market correction. Here are samples from both sides.

The bear case:

". . .any rational person knows instinctively that, right now, the market is stretching toward its topside and the growth curves will average themselves out to something rational.

Extraordinary value growth cannot be sustained, especially not in the local market where luxury condos are the new tulip bulbs.
. . .
Luxury condos, meanwhile, will start ending up on the foreclosure market; luxury rentals will find themselves hitting lean times. They either must lower their prices (which is about to start happening) or risk the loss of the entire investment through bankruptcy or foreclosure. Since a lot of people will have no room to adjust their price expectations, they will perish in the market. Blood in the streets. You can then start the newest iteration of Curbed, called FuckedProperty.com."

The bull case:

"The benefit of owning your home is its an asset you can live in it, both in up or down markets; better yet, when times are good, you can borrow against it. As long as you have the personal discipline to manage your finances, the cycles of the market are completely irrelevant to a home owner. . . .

So while you've been waiting to time the market and guess the right entry point, I've been building equity in my homes and increasing my equity base. . . .But let's say your pessimism holds true, . . .then supply may indeed catch up to demand with buyers caught off guard (although you weren't), resulting in declining value of owners' home equity values today. But then it's safe for me to assume that the market, in general, has become cheaper, and I'm in a position to replace my assets and reshuffle my portfolio (replace my cheaper home with a significantly larger also cheaper home, or downsize my exposure and replace my home with a smaller place, or just refinance my mortgages), to take advantage of the next market cycle."

And this from the Proerty Grunt:

"I am already meeting buyers who are taking the I will look but in no rush stance. On my end there have couple of price reductions on some listings and I am noticing overall that the market is starting to slow down.

However this could all be premature since the fed hasn't made a move since Katrina. But until Greenspan takes some type of action I would not be surprised if more buyers become gun shy."

Staying on the Sidelines

Please feel free to (in fact you are encouraged to) leave your own thoughts in the comments section here.

Friday, September 09, 2005

Manhattan Apartment Prices Drop

I saw the following update on the market for New York apratments yesterday from Halstead(the real estate broker) by way of Curbed.com. Curbed paraphrases this report:

"Key findings: apartments in Manhattan sold for an average of $1.145 million, 14% higher than a year ago, while median prices jumped 12% to $725,000. And loft prices set a new record in August, hitting $966 per square foot, 25% above a year ago."

Well, duh. Did anyone doubt we would see a year-over-year price increase. Butoff the top of my head those numbers seemed to show a downward trend. Before I could start tracking the past quarters myself the New York Post beat me to it. The Post writes:

"The average price of a Manhattan apartment has dropped from $1.332 million in June to $1.145 million by the end of August — more than 14 percent, according to the latest monthly report by the Halstead real-estate company.

Likewise, the median price of the Big Apple's condos and co-ops has dipped from a high of $831,250 in June to $725,000 in August, a 12 percent drop.

While the summer months have traditionally been a slow time for real estate, this year's numbers have taken an exceptionally heavy nosedive.

. . .

In June, when the average sale price for a Manhattan apartment hit $1.3 million, it was a 30 percent increase over the previous year. But the August average price of $1.145 million is less than half the yearly upswing — about 14 percent — from $1.001 million in August 2004."

A broker says: "'At this point, I'm telling them not to panic. But it's getting close to the point where I'm telling them they have to be flexible,' a term that sellers across the country have not had to focus on too seriously.

But things are changing in Manhattan, as inventory of available property continues to creep higher."


Condo Uh-Oh

Wednesday, August 31, 2005

Calling the Top

A couple of astute market observers are suggesting that the top may, in fact, be in for the housing market. This from Bill Fleckenstein:

"Last Tuesday saw the release of July existing-home sales that were slightly below expectations. For the housing market, one piece of data in the National Association of Realtors report portends the end of ever-higher prices: The supply of homes on the market now stands at 2.75 million -- the highest since May 1988.

. . .

Given all the multiple-property buying that's occurred, the accounts in the media . . . and what readers of this column have observed with their own eyes, this news is somewhat surprising. However, it was inevitable that inventory would start piling up at some point. The time, as it turns out, is now.

That excess inventory, together with the further supply now in various stages of coming on stream, makes me feel more strongly than ever that this summer will be seen, with benefit of hindsight, to have been the top. In essence, Time Magazine's cover early last June -- "Home $weet Home: Why We're Going Gaga Over Real Estate" -- will more or less have marked the peak."


It's RIP for the Housing Boom

And this (admittedly more hysterical take) from Theodore Mantle of The Wall Street Examiner:

"The biggest financial disaster in history is unfolding in real time right before our eyes. Due to the lingering effects of mass hysteria, denial remains widespread. But the numbers don't lie.

The U.S. Commerce Department announced Wednesday that sales of homes increased 6.5 percent in the last month, while median prices fell 7.2 percent, down three months in a row and falling below year-ago levels.

Increased volume selling into a falling market looks to me like the beginning of a good old-fashioned collapse.

The current inventory of houses waiting for buyers is 460,000 -- an all-time record."


Panic Selling as Home Bubble Bursts

Greenspan Warns About Dangers of Overheated Housing Market

"Easy Al" Greenspan made another warning abut the state of the housing market. This was made in couched terms, as usual, but the fact that he feels the need to keep making pronouncements on the matter should be telling. This one was made last Friday at an economic conference,

"Federal Reserve Chairman Alan Greenspan on Friday cautioned Americans against thinking the value of their homes and other investments will only go higher, saying 'history has not dealt kindly' with such optimism.

. . . .

Rising house and stock prices have made many people feel more wealthy and have helped to support consumer spending, a key ingredient of the economy's good health.

Greenspan, however, said people shouldn't count on that paper wealth, which can evaporate if economic conditions deteriorate rapidly.

'What they perceive as newly abundant liquidity can readily disappear,' he said. 'Any onset of increased investor caution' could cause home and stock prices to drop, he said.

A long spell of low interest rates and low risks for investors has especially encouraged investment in homes. Greenspan worried about what would happen if that climate were to change.

'History has not dealt kindly with the aftermath of protracted periods of low-risk premiums,' he said."

Greenspan Sends Up a "Yellow Flag"

Are Increasing Rents a Sign of a Housing Slowdown?

This New York Times piece from last week saw evidence of a slowdown in the housing market in rising rental prices:

"Rents are rising again across the country, squeezing tenants who are already coping with high gasoline prices and improving returns to landlords after a deep five-year slump.

The turnaround appears to be another sign that the boom in house prices and sales is finally slowing, as homes have become so expensive in many metropolitan areas that some people have decided to rent instead."


Rent Heads Up as Home Prices Put Off Buyers

In fairness to housing bulls, one of the arguments in favor of a bubble is that home prices are completely out-of-whack with rental prices for equivalent properties on a historical basis. Those that argue we are in a bubble say that this disconnect cannot continue and that housing prices need to fall in relation to rents. The other way that this imbalance can get corrected, of course, is for rents to rise. Thus, rising rental prices could be seen as justification for today's extravagant sales prices. That being said, the fledgling price increases reported by the Times does not come close to bringing buy-to-rent ratios back to historical averages.