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« previous: What are the actual differences between townhouses, coops, condos and cond-ops?   |  next: New exclusive at the Cielo »

Thursday, September 25, 2008

Consumer sentiment poll

Q&AHere's an unscientific poll about how people might feel about the short term prospects of Manhattan real estate. I've fielded a lot of calls this week from clients and readers, fueled by the news environment. They are concerned about their property values, and most are evaluating the possibilities of both selling and buying. Yes, I said buying. There is significant interest in Manhattan homes, but some are sitting on the sidelines waiting to see what happens next. Who can blame them? A few may have been directly affected by the turmoil on Wall Street, but I'd characterize the mood as being one of intelligent fact finding as people consider their next move. Some will inevitably choose to wait and see, others will move because they need to, or recognize that this may be the best buying opportunity in years, with sellers entertaining offers, and real negotiating taking place.

We have had an exceptionally strong real estate market here for the several years, but we are not immune to market forces. As I write this, a bailout of Wall Street seems imminent, its success will be an open issue for some time to come. The conventional wisdom says that Wall Street earnings drive the Manhattan real estate market. So as that sector comes under pressure from earnings and a loss of jobs, so may our pricing. Real estate is not a short term or liquid investment. How do you think that Wall Street and Manhattan will be doing in 2 to 5 years? I'm basically an optimist about our city and believe that the crisis is one of momentary confidence, not of fundamentals. What do you think?

This poll was posted simultaneously here, at TrueGotham and UrbanDigs. Thanks to fellow NYC bloggers and co-brokers Doug Heddings and Noah Rosenblatt for your support!

updated 10.07.08


reader comments:

I disagree. This decline in real estate is all about fundamentals. We are now at the beginning of a perfect storm that will continue to erode prices for years to come. I-banks and their bonuses are gone forever, mortgages are expensive, hard to get, and require more money down. The local economy is in the beginning of a substantial downturn, and thousands of people have been laid off and will be forced to sell their units, thus increasing inventory and lowering prices. As we know, inventory has spiked dramatically over the past 30 days, only this time we are not dealing with sellers looking to test the market for a high price, but rather sellers who are desperate and need to sell. We are seeing a destruction in demand at the exact time that there will be an urgency to sell. Even those buyers that want to jump in will have a hard time if they don't have cash. Make no mistake, this is not a crisis of confidence, but rather a fundamental shift in the value and desirability of purchasing Manhattan real estate. There will be anywhere from a 35-50% drop in price from peak to trough.

 
 

We are at the start of a global asset devaluation. Deflation. Everywhere will be affected.

 
 

Thanks for your comment mh23. I agree that it is clear that we are moving in to more challenging economic times, but that "perfect storm" you describe looks like some big clouds on the horizon right now. We should keep our eye on it, but no one can really say for sure if we're in for some rain, or a Hurricane.

I haven't seen a wave of panic selling and it is really not unusual to see inventory go up in September. Many people wait to go to market until after the Summer vacation season is over. It is a bit of a stretch to say that they are selling because they are under duress; and overly dramatic to say that there is a "destruction in demand". Where's the evidence of that? Given the uncertainty in the credit markets I think that you will see buyers and sellers waiting for a moment, and taking a breath. As a mater of fact, it seems prudent. Sellers are going to need to be realistic about pricing, and good brokerage will be even more important for them to succeed. Yes, layoffs and some pressure on the local NYC economy are coming— we've been through that before. I don't know if another great depression is around the corner, but barring that, I'm highly doubtful that a million dollar apartment today will be bought for $500K next year. It may be a marketplace where buyer's can finally succeed in getting a bit of a deal.

I beg to differ about mortgage rates too, they are still near historic lows, about 6.5%. You're correct that they are harder to qualify for, but creditworthy people are getting them everyday. Keep in mind too that not everyone is trying to buy an apartment using 90% financing and no documentation loans. Most co-ops don't permit it, and despite the glamor of new developments the past few years, co-ops still represent about 75% to 80% of the housing inventory. Most of the buyers here do put down 20% or better to buy a property, and Corcoran's re-sale business is pretty consistently about 24% all cash deals.

 
 

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