Housing Bust to Hit Manhattan, Hamptons
Manhattan has — so far — mostly escaped the housing bust.
Some of that is a function of the lack of honest real estate sales reporting in Manhattan, where MLS holds no sway, and the oligopoly of Real Estate agencies are notorious data shills (more on this at a later date).
And the second home market in the Hamptons is also showing signs of distress.
Will Wall Street’s epicenter get hit as badly as the “sand” states?
Reuters:
“New York City real estate prices are looking increasingly shaky as instability in two of the city’s sexier submarkets — second homes in the Hamptons, and new condos in Manhattan — register the latest signs of a housing downturn.
Property prices in the Hamptons, a fabled playground of the rich on nearby Long Island, rose steadily for almost two decades, but the prices on almost 1-in-3 of current listings have been cut an average 11 percent from the initial asking, said Sofia Kim of real estate website StreetEasy.com.
Back in town, the number of sales in new developments dropped a whopping 71 percent in April from a year earlier as condo developers enmeshed in complicated financing arrangements have been slow to slash prices even as the market corrected all around them, Kim said.
But if prices on these new condo towers do not fall to match the rest of the market and stay empty as a result, then it could eventually trigger foreclosures of entire properties, forcing much bigger price cuts as lenders seek to reduce their liability.”
During the boom, the Coop/Condo financial requirements avoided speculators excesses. Now, its the economy and the collapse of Wall Street threatening the RE market . . .
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Source:
Is the housing bust about to take Manhattan?
Helen Chernikoff
Reuters, Jun 14, 2009 3:34pm EDT
http://www.reuters.com/article/newsOne/idUSTRE55D1ON20090614
June 15th, 2009 at 10:11 am
Bring it on …. Bonfire of the Vanities, part deux!!
June 15th, 2009 at 10:15 am
The high end real estate market has yet to face the music yet (in many respects). I posted this over the weekend but there are several (I mean, SEVERAL) 7 figure homes languishing on the market on Lake Minnetonka, which is as prime a real estate that you’ll see here in Minny. Many make no bones about the fact that they’re bank-owned (and some brand new, haven’t even been lived in, I don’t think). Until this market corrects, this mess is far from over and the correction in housing prices at the lower end are not done going down because once the higher end corrects, the lower end prices will go down again as well.
June 15th, 2009 at 10:16 am
Looking forward to it. Can’t wait for some price chops in UWS.
June 15th, 2009 at 10:18 am
So if Obama wants to revive the housing market, he’d better stop trying to cap Wall St. pay cause those are the only guys who can play in that market…
June 15th, 2009 at 6:25 pm
Mr. C. Cheese, purely ad hominem remarks violate Barry’s TOS. (And yahoo-variety mud-slinging will bore/annoy this crowd.)
June 15th, 2009 at 9:44 pm
Your note on Manhattan real estate contains the answer to your question on real estate values-condo volumes are down 71%. I have lived in California for 40 years, and have witnessed (and profited from) multiple housing busts during that period. As volume dries up, the mantra is always the same-“the market may go down 30-40%, but our area is special, and should hold up. Maybe it will drop 15-20%.” When volume dries up it is the precursor to a waterfall in prices.
Is waterfront property different? Maybe. Manhattan property? Possibly. Residential property? No way. In the last cycle here (early 90’s) my new neighbor (the real estate speculator) who top ticked the market in 1990 told me our private, small beach community would never go down in price. I bought his house from him for 55% of what he paid for it five years later. Better still, I sold it for almost a three bagger in 2004.
When our markets have corrected, there has been two key indicators. The first has been the affordability index. When that gets to par (and sometimes better), housing is at or near the bottom. With the financial services industry getting whacked, this has to have an impact on Manhattan prices.
The second is rental rates. When rental rates finally start breaking, we have typically been close to the bottom. Rental rates always lag, and sometimes get a boost in the early part of the correction as people delay buying and/or are forced to move from owner occupied properties into cheaper rentals.
This cycle may be different (I hate that cliché) because personally I feel we are no longer in a downtrend for interest rates. The long downtrend saved a lot of us, however, given the recent debasing of the US dollar and the potential for serious damage to treasury yields over the next X number of years, my gut tells me that this real estate downturn may last much longer than those of the past, and could even be generational (which will be good for my kids).
Cheers