Three Cents Worth: Feeling Bloated About Skyrocketing

1.

An overlooked aspect of the NYC market is how little new construction there is for a metro area of 20 million. Unlike other markets, there is never a threat of overbuilding.

2.

Glad that someone is finally reporting that prices are not really moving.

3.

For perspective, I started appraising in Manhattan in 1986 and after the 87 market crash and there was a 7 year overhang of inventory. I think its a common misconception that our market is never at risk to overbuilding. We happen to be fortunate that demand is currently at high levels.

4.

would like to see this table disaggregated a little more - studio,1,2,3,-bedrooms and coop/condo breakouts. Another observations - the uptown, midtown, downtown difference seems to be less important nowadays - without getting to specific the size and type (coop/condo) seems to make a bigger difference

5.

Can we take the reported sales data at face value at this point? (Number of transactions, I mean.)

The MS data is 10,912 transactions for 9 months of 2007, compared to 8,493 in 2006 (12 months) and the highest year you've recorded, 9,522 in 1999 (12 months). WOW

None of this is related to the coop sales data coming on-line by now, is it?

High demand + low supply = flat prices ... interesting.

6.

As Jonathan states: We happen to be fortunate that demand is currently at high levels.

ITS ALL ABOUT BUYER DEMAND! Right now, I see buyer confidence slipping! That means lower sales volume that wont be reported on until a few months from now, invnetory build, and the snowball effect either starts or stops depending on how buyer demand goes from here.

The buyers make the market!

7.

buyers might make the market, but sellers will determine any price declines. If there are simply no buyers to meet a price acceptable, the number of sales will decrease, the time a place is on the market will increase, and the market prices may not move.
Maybe that will make people improve their apartments/buildings if they want to sell for a gain.

8.

Anyone got any idea how many "shadow" apartments there are. For instance - if a new development has only "released" 50 of their 350 units does Millar report 350 units available or 50?
I wonder if developers are just being more careful and trying to hide the real amount of available units.

Also of note is the fall of the dollar. If you're pay check is in Euros then NYC real estate has gotten much cheaper over the last year. Considering our target market includes much of the world, the world sees our apartments as getting cheaper even if prices aren't falling.

9.

i work for a european company. Do you think its likely that they'd pay my salary in the going conversion. I'd switch now and take the risk that i'd be making more or less, but if the dollar tanks, i'd be in pretty good shape... or about to get fired because i cost too much.

10.

Anon 4 - maybe some day. Its a massive undertaking just to get all coop and condo listing counts. I also agree with your comment about the regional difference. One other thought is that there is a homogenization (a word?) of location to the point that down, east and west are running at a similar ppsf.

5. Sandy - yes a huge jump. Nope, coop data came in during 3q 06 so its apples and apples. Yeah its weird. high demand, low supply but its been transition period. Inventory was bloated a year ago so the elevated demand worked down excess inventory. Without the credit crunch, we might have moved into a housing boom next year.

6. Noah - congrats on your Inman award for Urbandigs. But what does confidence "slipping mean?" Compared to last time at this year? September demand usually dips. So does this confidence drop reflect a seasonal change? Interesting.

7. Anon - I agree - many sellers would simply wait and pull off the market. It takes 2 sides to make a market.

8 - I don't have that - we have always tracked listings so units not offered. I see that as a constant so I am more interested in trends (we can't get the shadow count in a consistent manner).

11.

Everybody overlooks the fact that people who bought in Manhattan recently are pretty darn happy about their purchase because they are paying a low interest rate, New York City is a good place to live, some of them are raising families here, etc. Hence shrinking supply: nobody wants to leave, and a lot of people want to come in. If prices drop, where are the current residents going to go? Buy a larger apartment? Perhaps, but that doesn't reduce overall demand. Move to the suburbs? Maybe, if prices outside the city keep falling and the city become undesirable or if many jobs are lost.

12.

#1: better recheck your figures. New construction over the past 5 years is up 47%. Take a ride up and down almost every street and avenue in Manhattan and you'll see reality. Brooklyn is a whole other story. New construction is off the hook.

13.

Mort - what's the 47% based on? Permits? Units, # of projects. Very interesting.

14.

You won't see prices drop with current seller profiles. Foreign institutional investors have been (and have ALWAYS been) one of the most important driving forces in keeping Manhattan immune to housing corrections long after the rest of the country goes south. These same investors are facing a massive - MASSIVE - shortfall in credit financing. As the next waves of the credit crunch hit, they will be looking to sell assets, first the more liquid stuff like equities and debt, then assets like real estate.

Their funding issues will catch up with their long-term real estate investments right when Wall Street will most likely be getting hit with serious layoffs. Watch out below if this comes to pass.

A lot of current sellers are developers with deep pockets and long-term holders calling a top (sell it now, buy it after the crash). The former are always around. The latter is a lot of old-school money with generations of NY real estate experience. These are the people who bought the $1 burnt brownstone tax-lien husks in places like Harlem back in the 1970s and 1980s. They know the game. They ARE the game, we are all just tourists. They are selling inventory - individual buildings or massive lots of thousands of apartments - knowing very well that they will be buying it back in a few years at a fraction of the cost, most likely via bankruptcy proceedings or city tax-lien auctions.

Neither of these two categories of sellers has any cashflow pressure to sell - no debt related to the properties being sold. So they'll hold their price until they find the greater fool. We could be stuck in this holding pattern for another year.

Good times!