The Real Deal

Anonymous

How far will prices for residential property fall in New York? Why not ask that question too.

Comment #1 Posted By: Anonymous 11/13/09

Anonymous

another 25%

Comment #2 Posted By: Anonymous 11/13/09

Anonymous

That is the BIG QUESTION

Comment #3 Posted By: Anonymous 11/13/09

Anonymous

No one has the answer. Most of the living have never seen a market with a convergence this big. We can only guess. This is not Florida but we still have a ways to go.

Comment #4 Posted By: Anonymous 11/13/09

Anonymous

real estate values historically kept pace with inflation and tracked the CPI, until about 2003 when they skewed higher. Depending on unknowables such as interest rates and governmental tinkering, prices may languish until the CPI catches up - otherwise 20-30% more down rather quickly.

Comment #5 Posted By: Anonymous 11/13/09

Anonymous

Valuation is dependent on the vacancy rate, rental rate and capitalization rate. Vacancy rates will edge up as the financial sector gets squeezed on volume and price. However vacancies will not be horrendous because there was not significant new construction. Rental rates will initially fall to 2002-2004 levels. Established landlords with old leases expiring will still pocket additional revenues. Landlords who bought or aggressively re-financed in the 2005-2007 period won't make their rental commitments. Most of the increase in valuation over the last decade came from lower capitalization rates. Economists suggest that the massive increase in the money supply will lead to inflation. In that scenario capitalization rates will increase faster than rent rolls and building values will further decline. I think this means a further downside risk of 20-25% from the current reduced values. However, in truth, no one will really know until the 2006-2007 mortgages start rolling over in 2011-2012.

Comment #6 Posted By: Anonymous 11/13/09

Anonymous

They are already down 60-70 percent, if you look at the limited number of deals that have happened

Comment #7 Posted By: Anonymous 11/13/09

Anonymous

The bottom is when Bill Rudin, Richard LeFrak and Silverstein go bankrupt !!!

Comment #8 Posted By: Anonymous 11/13/09

Anonymous

Residential is not going to fall any more. That's it. If you can get residential for 25 to 30% of its peak, you are in a good spot. I can't say the same about commercial. Until jobs are created there is no telling how far its going to drop for commercial. Remember in 1991? You couldn't give away your commercial properties.

Comment #9 Posted By: Anonymous 11/13/09

Anonymous

# 8 That guy with the "hair thing" what about him? 'ya know the beauty queen pimp!

Comment #10 Posted By: Anonymous 11/13/09

Anonymous

# 10 ok I throw in the Trumpster as well as his son-in law the Kursh !

Comment #11 Posted By: Anonymous 11/13/09

Anonymous

They will hit drop 65% from their 2007 prices based on rental rates, vacancy and cap rates - and thats assuming we aren't hit with large inflationary pressures already discussed above. There was not a lot of supply but there still are a couple million square feet office buildings that will be coming online over the next five years (ie. SJP bldg on 42nd, Freedom Tower, etc). Couple that with a jobless economic recovery and an overall growing trend of less square footage per employee, the occupancy pictures remains bleak for the foreseeable future. As for #8, the bottom is when Rudin and LeFrak start buying locally... they are generational with low leverage and strong equity positions, they are in a great position to deal with this crisis.

Comment #12 Posted By: Anonymous 11/13/09

Anonymous

Clearly , there is a a lot of new condo's sitting empty. IT is time for the developers to go public with this info , so that buyers have an idea of the real risk in purchasing if the buildings go bankrupt after a purchase. So maybe this is a good time to get a list of the newest fifty real estate condo's in the five boroughs and get an updated list of vacancies. If rental markets are weakening, the return for an investor in buying a condo and renting it out falls dramatically. So if a one bedroom condo sells for $!,000,000 and rents for 3500 , minus 1500 for maint, leaving a profit of 2,000 a month or 24,000 a year that equates to a 2.4% return. However if the renter now has to pay the broker fee, and give one month free rent, the return falls to approx 1%. Not a great return. Value for now 750 sq foot one bedrooms in NYC should be at 700,000, if economy stays as it is. that is a 30% decline about to happen. No one should buy a one bedroom for $ 1,000,000 unless they are bored.

Comment #13 Posted By: Anonymous 11/14/09

Real Estate Geek

Keep in mind that the economy as a whole has yet to stabilize. The real national unemployment rate is 17.5%. Inventory purchasing is down dramatically in manufacturing as well as by Retail stores. This Holiday season will be particularly difficult for retailers. Office Space is in for a huge collapse. Too much equity has been destroyed. Unless if the government backstops every owner and gives them the equivalent of an FHA loan for commercial no lender will underwrite. Someone will take the hit on this lost equity. Most likely the owners and a new set of owners will come in and rent at real market rents. I have watched prices collapse and many owners/managers refuse to get ahead of it. Their buildings are sitting empty. If they were dumb enough to buy 2005-2007 the deck is stacked against them. Good luck to all.

Comment #14 Posted By: Real Estate Geek 11/14/09

Anonymous

50%

Comment #15 Posted By: Anonymous 11/15/09