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Thread: is NYC different - or is the bubble bursting here too?

  1. #1

    Default is NYC different - or is the bubble bursting here too?

    so what is going to happen in NY real estate sales this fall?

    - a slow deflation? will the market stagnate and come down over 6 months by 10%? 20% 30%?

    I still see properties opening on the market at prices that make your eyes water. You wonder if people are on crack when they price these things.

    is NY different - there's so much money here, and some foreign buyers, or is this realtor b/s? Buying to rent cant be driving the market up like it does in other cities - the maintenance charges are so high in NY that it doesnt make any sense (most of the rent is eaten by your monthlies, so the capital doesnt get repaid)

    I'm a potential buyer, but not sure how long to wait it out, assuming I can find an ok place to live meanwhile.

  2. #2

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    I many respects, NYC is different. If you look at recent sales posted in The NY Times and elsewhere, properties generally sell at or near the asking price. Admittedly, though, at this time two years ago, they often sold above the asking prices. Nonetheless, NYC has a severe housing shortage, and, unlike other cities, there is an international demand for properties here.

  3. #3

    Default Wealth and foreign demand

    There is so much wealth in this city that a large part of the buying community isn't sensitve to interest rate increases. There is also a ton of foreign demand from buyers who aren't using mortgages. I am sure there will be softness in parts of the market (certain sizes, locations, etc) but I doubt there will be this big collapse that the media talks about. Things seem to be a bit more normal these days...

    The other thing is that Manhattan is different than many parts of the city so when I speak about the wealth and foreign demand I am mostly talking about Manhattan and some of the high end neighborhoods in Brooklyn and the Bronx.

  4. #4
    Forum Veteran macreator's Avatar
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    Default

    The fact that New York City has a growing population and that demand for housing is still, and will continue to be, significantly higher than supply will keep NYC's real estate prices artificially safe from the bubble pops we've seen most noticeably in places like Las Vegas.

    In places like Vegas, the bubbles popped because the demand just wasn't there and people were buying into the hype more than concrete statistics.

    Meanwhile, in most of the rest of America, the bubble is now popping or deflating because of the higher interest rates we're seeing on mortgages which is curbing demand for real estate. The flipside is in mainstream America, folks who got in on variable (not fixed) interest rates for their mortgages that stayed low during the peak of the real estate boom are now seeing their rates go through the roof and many are being foreclosed or being forced to put their homes up for sale thereby adding to the glut of housing on the market.

    In NYC, the market may cool slightly in the coming year, but the demand in this market is real and so is the wealth that keeps quite a number of potential buyers insulated against traditional market forces like mortgage interest rates. Manhattan, as noted, also has the advantage of still being top on the list of places for foreigners to invest their money.

  5. #5

    Default doubt it

    I think there's no question that prices will eventually be effected if the global real estate market crashes. Demand for housing was real in the 1980s but housing slumped here just like it did in the rest of the US. We're not so special.

  6. #6
    Disgruntled Optimist lofter1's Avatar
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    Check out the graph below from this ARTICLE, and some info from same ...
    ... The doomsayers’ strongest argument may be that too few families can afford prices in some metropolitan areas. In Las Vegas, Los Angeles and Miami, prices have almost doubled since 2003, and they have risen about 50 percent in New York and San Francisco, the National Association of Realtors says.

    Jumps of this magnitude have little precedent ...

    ... In inflation-adjusted terms, prices in the New York and Washington areas did not return to their late-80’s peak until 2002 ...

    ... investors expect the median house price in Los Angeles, New York and some other regions to fall about 5 percent in the next year, which would be similar to the decline that started the 90’s slump ...

    ... the boom in house prices was largely a result of the appeal of “superstar cities” like New York and San Francisco that are unlikely to lose their allure.

  7. #7

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    Quote Originally Posted by londonlawyer View Post
    I many respects, NYC is different. If you look at recent sales posted in The NY Times and elsewhere, properties generally sell at or near the asking price. Admittedly, though, at this time two years ago, they often sold above the asking prices. Nonetheless, NYC has a severe housing shortage, and, unlike other cities, there is an international demand for properties here.
    I see one or two highlighted sales posted in NY Times, but not a full listing of all the sales vs asking prices vs time on market. is this available somewhere? am I missing a link in NYTimes?

    Otherwise, yes, there is an international dimension to NYC real estate that the rest of the US lacks, and as the dollar tanks, exchange rates tumble, and property here become more affordable to the international buyer. I sold in London recently, and am getting about 10% more dollars for my pound than I would have a year ago. that sounds good, but the apts I hope for are still 30% out of reach!

    Against this NY has its crazy maintenance charges to cope with that are way above anywhere else in the world, (or elsewhere in the US) so thats a drag on affordability of places here.

  8. #8

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    I should also point out that no city has been immune from property downturns. London has had its crashes, and its gentle declines of 20% too. it had a mini upbump this last year, but otherwise has been flat for 3 years. Oh and London has way more foreign buyers and investors than NY ever will.
    Tokyo? dont even ask.

    There really is no reason why NYC cant be viewed as the same. It got overheated in the past two years, and peaked about 12-18 months ago. the best a seller could hope for is an orderly managed cooling off period.

    The problem is a lot of owners saw $$$ signs in their eyes back then, and dont accept that they can really only get $$ now. Still a tidy profit, but its less than their wildest dreams.

  9. #9

    Default we shall see...

    I don't think anyone would argue that the real estate market in nyc over the next few years will be different from what it has been over the last 6 years. It is already different today. You can actually spend a week thinking about whether or not you like a place before having to go to contract. Sellers will actually negotiate. The "sealed bid" process is a lot less frequent. That being said, people are still buying and are buying at close to asking prices. I hear stories all of the time about people putting in bids at 15% below ask and never getting a call back.

    Here is the key: there is still a lot of wealth in this city. Wall Street is having another record year so we are looking at a 3rd straight year of strong bonuses for all of the bankers and traders. That alone will keep this market from the collapse that some talk about.

    The other factor that is weighing in now is the rental market. It is on fire so the breakeven between renting/buying is starting to be an issue again. For years it was a lot cheaper to rent but that is not necessarily the case (especially in the studio/1 br market).

    One last thing - mortgage rates have actually started to go down again. Not by a lot but it is looking like we won't reach the 8-12% (depending on product/credit type) rates that we saw in the early 90s.

  10. #10

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    Quote Originally Posted by bigkdc View Post
    I don't think anyone would argue that the real estate market in nyc over the next few years will be different from what it has been over the last 6 years. It is already different today. You can actually spend a week thinking about whether or not you like a place before having to go to contract. Sellers will actually negotiate. .
    thanks for the thoughts,
    but - well, you can spend a lot longer than a week thinking about things - three properties I believe are quite ok are still sitting there a month later, and they are not overpriced crap like the other 95% of what I've seen.

    It's definitely stagnant right now, though it has been summer.
    some people are still on Crack when they price places, and ask these crazy dream prices that are unrealistic in late 2006. see how it changes in the coming season. when Fall doesn't fly, prices will have to come down if people really must sell.

    (London has strong rental, and a huge finance center with big bonus'. It still slumps every few years. nothing is immune from market corrections)

  11. #11
    The Dude Abides
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    On that note:

    http://www.forbes.com/entrepreneurs/...ap2990692.html

    London Luxury Home Prices Hit New Highs

    By JANE WARDELL , 09.03.2006, 04:56 PM

    London's luxury homes are now the most expensive in the world, experts say, with foreign buyers, salary bonuses and steady interest rates driving prices up in the capital's overheated property market.

    Prime residential property in London now costs around 1,200 pounds ($2,300) per square foot, compared to 1,000 pounds ($1,900) in New York, according to CB Richard Ellis Hamptons International.

    And the so-called "super prime properties" in London are going for up to 3,000 pounds ($5,715) per square foot, compared with 2,700 pounds ($5,100) per square foot in New York.

    "In terms of time zones and location, London is the most attractive place to be," said Liam Bailey, head of residential research at the Knight Frank real estate agency.

    Prices for central London homes worth more than 1.5 million pounds ($2.9 million) climbed 21 percent for the year ended Aug. 31, according to Knight Frank.

    Foreign buyers own 51 percent of the 2 million-pound-plus ($3.8 million) market in London, Knight Frank research shows, compared to 34 percent of the equivalent market in New York and 27 percent in Paris.

    The most expensive homes sold this year - a 33 million-pound ($62.8 million) house in Belgrave Square and a former office block on Park Lane - were sold by the Savills real estate agency to buyers from the Middle East.

    But even those are dwarfed by the world record 70 million pounds ($133.2 million) paid by Indian-born steel tycoon Lakshmi Mittal for his home at Kensington Palace Gardens in April 2004.

    In comparison, in New York's Manhattan, home to the most expensive real estate in the United States, the average price of a luxury apartment - calculated from the top 10 percent of all transactions - was $5 million in the second quarter, down from 3 percent a year earlier when prices hit a record $5.2 million, according to Miller Samuel.

    The U.S. market boom is ending following 17 interest rate increases by the Federal Reserve.

    In Britain, interest rates held steady for a year until a surprise hike last month.

    Market activity, mortgage lending and house prices all remain strong in London, said Jenny Siebrits, head of residential research at CBRE. "With continued strength in the London market, we expect this trend to continue," she said.

    Foreign buyers like London because of its position as the emerging global financial center and a strong tradition of ease of access and open communications, Bailey said.

    "Over the past five or 10 years, London has gained a larger share of international financial activity," he said. "And, unlike other European financial centers like Frankfurt, buyers are attracted by all the other things the city has to offer."

    Russians, other Europeans and Americans already are a strong presence in the London market, and Asian buyers are taking an increasing slice: The volume of Asian purchasers has grown 60 percent over the past five years, Bailey said.

    However, he said strict currency transfer rules are holding back investment from China and India. The firm expects to see a significant increase in Indian buyers in 2007 when changes to the rules governing the export of capital are introduced.

    The high prices demanded for prime residences also have been underpinned locally by the 7.5 billion pound in bonuses paid this year to around 330,000 workers at financial firms in the British capital.

    Another reason for the continuing high prices is the relatively small number of residences available to buy in the center of London, many of which are only available as leasehold properties.

    A leasehold property means that buyers can only purchase the right to live in the building for a set number of years - the number that the lease has to run - and at the end of the lease, ownership reverts to the freeholder. To live there, you pay the landlord a ground rent as well as a service charge to manage any communal areas inside and outside the building.

    In most cases, leaseholds run for more than 100 years.

    One man happy with the soaring property market in central London would be the Duke of Westminster. He inherited 300 acres of land - in two of the city's most desirable neighborhoods, upmarket Mayfair and Belgravia.

    Copyright 2006 Associated Press.

  12. #12

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    yep, that's London.

    NY is an amazing place, but has a way to go in catching up globally.

    (people also have a hard time believing that the restaurants are better in London too)

  13. #13
    http://tinyurl.com/2ag28z Front_Porch's Avatar
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    Default Seeing a split market . . .

    [Disclosure: I'm a realtor.]

    Things that are easy to move, move ... what do I mean by that? I'm working with a buyer looking at 1-BR condos -- we passed on 296 E. 2nd and 199 Bowery (nice building, thanks to everyone on the boards for their help about that 'hood) -- but other people didn't.

    Another first-time buyer wanted a roomy studio -- everything we saw in Midtown in July that we didn't buy, went.

    On the other hand, we're hawking a fine co-op studio in Chelsea -- but we keep having to turn away interested buyers because the board won't allow pieds-a-terre.

    And my 2-BR buyer clients are gonna keep sitting on their hands till there's some wiggle in these crazy prices, thank you very much.

    So my read is two segments: one is a condo/pied-a-terre market, where things are cooking just fine, partly because $400K -$750K isn't a huge amount of money to a surgeon from Westchester whose kids are grown, or to a foreigner whose money is unstable in his or her home currency.

    The other is a co-op/primary home condo market, where buyers don't feel as rich, because they get just one home, and they're uncertain, and they're waiting to pull the trigger. I am starting to see some "circling" here, people coming to visit properties for a second and third time.

    ali r.

  14. #14

    Default waiting game

    Yep. Everybody is waiting for the big price drops. The only problem is, they have been waiting too long. In the meantime, prices in Manhattan have steadily kept pace with inflation and keeps creeping up with the advent of developing neighborhoods.

    If you are waiting to get a good deal in Midtown, East or West side, and downtown (including the Financial District). Keep waiting. Just make sure you get in before the WTC project in fully developed (approx. 15 to 20 years).

    If you can't wait... then there is always Harlem, South Bronx, Some parts of Queens incl. Jamaica and Elmhurst, and Inner Brooklyn.

  15. #15

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    Quote Originally Posted by Front_Porch View Post
    The other is a co-op/primary home condo market, where buyers don't feel as rich, because they get just one home, and they're uncertain, and they're waiting to pull the trigger. I am starting to see some "circling" here, people coming to visit properties for a second and third time.

    ali r.
    Circling comes after a month or two of inaction and frustration, but I wouldnt read too much into it. I'm looking at one or two properties a second time to check I'm not missing something, and of course you get the hope that a 15% discount offer might work.

    I've seen some great places for other people - one with a full top level chef's kitchen with everything you could ever want but never afford, and an incredible bathroom, jacuzzi, two person shower, etc. the guy must have spent over $250,000, and I'm not talking about the walls or floors.
    (sadly, I dont cook)

    Other places are a joke. are people on crack when they price these things?
    I swear one was $350,000 over what it should be, and my realtor agreed. Others, like the Broadway/Astor place loft has been with multiple agents at 1.225 for many months with no movement at all. why dont these people cut their price and maybe get some action?

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