Reply With QuoteWill this effect the lower end of the apt. market? I mean a few hundred grand to one of Corcoran's clients is chump change. A few hundred less a month would be very meaningful to the rest of us!
When does the Real Estate Bubble Burst?
FINANCIAL TIMES
Manhattan property bubble set to burst
By Alison Beard in New York
Published: October 14 2002 19:33 | Last Updated: October 14 2002 19:33
Two months ago, Benjamin Swinburne decided to get serious about buying his first Manhattan apartment. The research analyst went to several open houses and made an offer on a one-bedroom in the West Village.
Now his enthusiasm is fading. The shaky economy - and a dismal earnings outlook on Wall Street - have made large property purchases look risky.
"At a time when everyone's net worth is going down, it's a big investment . . . particularly since real estate - Manhattan real estate - is the only thing that hasn't," Mr Swinburne said.
His own industry could soon provide the catalyst for just such a dive, however. Wall Street firms have cut more than 60,000 jobs since the start of last year and are likely to slash bonuses significantly this year, according to recruiters.
That has translated into thousands more square feet of office space available to sublet, as well as a fall in demand for townhouses, co-ops and apartments. During this year investors have been supporting property values in Manhattan by shifting their money from stocks to hard assets. But Wall Street downsizing is taking a toll.
"Over the last decade or so we've talked about the diversified tenant base in Manhattan - the entertainment companies, the law firms. The reality, however, is that the financial services sector is really the key component," said Josh Kuriloff, executive vice-president of Cushman & Wakefield, the property services firm.
Office vacancy rates have held at 11 to 12 per cent, outperforming many other urban markets, but sublease space now accounts for more than 40 per cent of the inventory, he said.
Commercial rents have dropped from 10 to 15 per cent across the board. And building sales have slowed because buyers and sellers are finding it difficult to agree a price.
"I'm not painting a bleak picture," Mr Kuriloff said. "New York is poised to be an extremely healthy market in the next 24 months as the economy recovers because we've had no significant new construction."
Residential brokers say the same is true of their market. But they acknowledge significant softening over the last few months. Rental rates are down about 20 per cent overall, in part because of increased homebuying but also because the junior-level bankers who boost the numbers of available tenants were some of the first to be made redundant.
It is rare for homeowners to sell their main residences after losing jobs, but they may "get rid of the excess", selling vacation homes or downsizing to smaller condominiums, said Peter Marra, of William B May, a Manhattan brokerage.
Pamela Liebman of the Corcoran Group knows of two new listings from people who have lost jobs and of one potential buyer who was forced to drop out. "But it's not something that happens every day," she said.
Still, the prospect of slashed bonuses is deterring new buyers from accepting bull market asking prices. One client, who finally had his $900,000 (£576,000, €912,000) offer accepted for a one-bedroom apartment listed at $1.1m, decided to push for $850,000 instead. "He would have taken it three weeks ago, but now things are different," Mr Marra said.
The best performing segments of the residential market are the bottom and top tiers. Falling mortgage rates continue to draw first-time buyers to apartments priced below $750,000. And apartments worth $5m or more are selling well because the very wealthy are more insulated from economic and stock market swings.
But "we've seen a slowdown in the $1m-$3m market", Ms Liebman said. "People are waiting to see what will happen."
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Manhattan property bubble set to burst
Will this effect the lower end of the apt. market? I mean a few hundred grand to one of Corcoran's clients is chump change. A few hundred less a month would be very meaningful to the rest of us!
When will the real estate buble burst
I heard Ben Stein saying that the NYC real estate bubble will burst soon. What do you guys thinks
God, I hope so. I'm looking to buy in the next 2 - 3 years and I want options!
I hope so too, or else I'll have to live with my parents after I graduate college.
It is a natural part of the real estate economic cycle for a drop. However the drop we will soon encounter will only last so long. You may want to look at some studies on NYC over the past 100 years; the appreciation in prices follows a very consistent curve. Figuring out that line is the key to purchasing here (or anywhere). Manhattan is unique in that it is a tiny island so land will always be at a premium. John Jacob Astor in an interview before he died on the Titanic was asked if he had to do it all over again, what would he do differently. His response was that he would invest every dollar into the Manhattan real estate market. To date he has yet to be proven wrong.
I'm looking to buy in a few years also. So I hope it cools down soon.
I wouldn't look for more than 10-15%, solely b/c of interest rate hikes, not b/c of the city.
What real estate bubble? Ask Californians on Skyscraperpage.com for NY real estate options, and they'll find you millions of houses in Nassau and Bergen Counties and Brooklyn and Queens for $250,000. Housing in New York is really affordable!!!!
:wink: :wink: :wink: :wink: :wink: :wink: :wink: :wink: :wink: :wink:
When does the Bubble Burst?
Real Estate prices are insane. They keep going up. They have gone up for years. Mortgage rates are rising. When does this real estate rally end? It can't go up in a straight line forever.
The tide is turning
Last edited by sfenn1117; August 4th, 2006 at 04:50 PM.
When the downturn occurs will the quality of design and new construction go down with it?
The dollar is tanking. It is valued nearly 40% lower than in 2001. 60% of US currency is held by foreign governments - especially the Chinese with whom we have a tense and, at times adversarial relationship. If those governments decide to divest of their dollars, the real estate market will not burst - it will come crashing down. Hurting primarily small investors, who will no longer be able to rent or lease space and units at a price that covers cost, let alone makes profit.
There was a great article in Newsweek on this most probable scenario.
On the contrary, the real estate market has been a better investment over the course of time than even the S&P 500. A correction definitely should be expected in the short term, but if history repeats itself again, we'll look back 10 years from now and still see a net increase in value. All it will really mean is that people who buy places to sell them for a profit will have to hold onto their properties for a little longer.
I'd expect to see people buying their neighbors' apartments and knocking down the walls more (or expanding their houses) when the correction does occur. This will be less expensive than moving and help in the long run by hedging their total investment.
Definetly.Originally Posted by Derek2k3
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