Prices plummet dramatically
Discounts at 15 to 20 percent as 'holy crap' pricing takes effect December 31, 2008 02:55PM By Candace Taylor
December brought proof that real estate prices are plummeting dramatically as New York City anticipates months of recession and job losses ahead.
According to the Federal Reserve Board's "Beige Book," which came out in December, prices of Manhattan co-ops and condos are reported to have fallen by 15 to 20 percent since mid-summer, confirming months of anecdotal evidence that sales prices had plunged.
Meanwhile, the discounts buyers expect are even larger, according to Paul Purcell, cofounder of Charles Rutenberg Realty.
"Buyers are looking for, in some cases, 30 to 40 percent off of what the price would have been a year ago for an apartment," he said. "They want real estate to mirror the loss in the Dow."
Sales volume, meanwhile, has continued to slow.
"The sales market is off tremendously compared to past years," Purcell said. "I would say overall in New York City, it has to be off by 75 to 80 percent." He also estimated that the number of rental transactions has fallen by 40 percent.
And, in another crushing blow to residential real estate, Fannie Mae informed the banking industry in December that it would raise the nationwide presale requirements for new co-op and condo buildings to 70 percent starting March 1, The Real Deal reported late last month.
The new 70 percent presale requirement is much higher than the current 51 percent, which will make it even more difficult for buyers to get mortgages, and spell certain doom for some new developments that have recently begun sales.
The move would "utterly destroy [the] New York [real estate market], and Brooklyn, for that matter, in the next six months," said Ross Weinstein, a managing partner at Union Square Mortgage Group.
In the face of these obstacles, pricing has taken on new significance, becoming the single most important factor in real estate transactions.
"Buyers are no longer willing to agree to the prices developers or sellers are asking," said Frances Katzen, a senior vice president at Prudential Douglas Elliman.
Purcell said even with properties that have reduced prices, they want to negotiate further. "They want to know they have hedged the price against future price declines," he said.
As a result, it's become crucially important for brokers to price properties according to what will sell.
"Some sellers still maintain their 'wish prices,' and some buyers think they can lowball anything," said Barak Dunayer, president of Barak Realty. "These gaps in expectations are now what brokers are paid to bridge, while before, brokers got paid for simply opening the door."
Max Dobens, an associate broker at Prudential Douglas Elliman, has termed his strategy "holy crap pricing."
"We are pricing apartments now where we expect them to be in February," he said. "The buyer then walks into the apartment and says, 'Holy crap, that's a great price,' and hopefully, they make an offer."
Buyers' perceptions that they're getting a deal is often more important than the price itself, said Dunayer, who recently listed a two-bedroom penthouse in Trump Place at 120 Riverside Boulevard for $995,000.
"We expect a deal to reach $1.6 to $1.7 million through multiple bids," he said. "There are already dozens of people calling during the first two days, and there is no way we would have gotten nearly as much traffic had we listed it closer to the actual market price."
Brokers said they're seeing a slight uptick in interest from potential buyers now that the initial shock of the Wall Street meltdown has worn off, but contract signings are virtually nonexistent.
"Every one of my buyers is on a 'wait and see' basis," said Ray Asis, an associate broker at City Connections Realty. "Those who actually view apartments in person respond by saying, 'I really like it, but let's wait and see what the market will be like in the next month or so."
With transactions so few and far between, inventory of available listings continued to grow steadily, jumping 4.4 percent from 9,494 in October to 9,916 in November, a 37 percent leap over the number of listings in November 2007, according to Jonathan Miller, the president of appraisal firm Miller Samuel.
In the face of the sales slowdown, many brokers are focusing on rentals, one area of the market that continued to show some activity as sales slow.
"Our rental business has been extremely busy," said Michael Signet, director of sales at Bond New York. "Tenants are either downsizing, or taking advantage of falling rental prices and upgrading. Either way, it translates into a lot of rental transactions."
Rents, however, have fallen a great deal. "Rents have gone down," said Adina Azarian, CEO of Adina Equities, "as much as 20 percent from last year, in some listings."
Rental vacancy continued its upward trend to 2.04 percent in November from 1.71 in October, according to Citi Habitats, while average rents fell from last month — in every category.
Here's a sample of what real estate professionals had to say about market conditions in response to The Real Deal's monthly Manhattan residential survey.
"Business in December is better than November. I think January may be better than we think." Deanna Kory, senior vice president and head of the Deanna Kory Team at the Corcoran Group
"I think the biggest change ... is that those people that are still in the market and still actively viewing homes are very serious, while we see very few window shoppers." Jeffrey Carlson, director of leasing, Platinum Properties
"Everyone is waiting for the prices to reset and people to get back in the game. But for now, enjoy your holidays, volunteer, be grateful for what you have (hopefully some money is left over from deals you did in the good old days) — and tell your sellers the bad news sooner rather than later." Gil Neary, president, DG Neary Realty
"The word on the street is that people are actually out there looking for a great deal. It's the best time to buy in 25 years. Prices are lower, selection is higher, interest rates are lower." John Reinhardt, president and CEO, Fillmore Real Estate
"There are so many buyers waiting and waiting. This demand has been building up since September. We expect first quarter '09 to be busy and very telling." Darren Sukenik, executive vice president, Prudential Douglas Elliman
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Comments
Anonymous
Deanna Kory, get a life. You are an idiot, do you know Corcoran is close to bankruptcy? Darren, you too. You'll be busy when asking prices drop 50% and you get some offers at 20% under the ask. You brokers are so pathetic. Do you read anything? Do you know there was a bubble? Do you know what will happen when the Alt A loans adjust? Do you even know what an Alt A loan is? Do you know no one has any money any longer?
Comment #1 Posted By: Anonymous 01/01/09
Frank
Does part of getting a real estate license in New York require weekly hypnotism sessions? When are these money-hungry Kool-Aid drinkers going to get it? The market is not turning around any time soon. Prices went up too much in too short of a period. Who is going to pay half a million dollars for a two-bedroom condo in the ghetto? Nobody. And the inventory will get worse when New Yorkers who've owned their homes for 30 years start to think about retiring and leaving town. They'll set a price and let their houses sit. Some will make HUGE profits and accept 30 percent off the asking price set by their "expert" Realtor. Others won't. And those who bought within the past five years who thought they could flip at a nice profit? Well... Welcome to Thunderdome, folks. It's going to get a whole lot nastier out there for ya.
Comment #2 Posted By: Frank 01/02/09
Anonymous
The brokers want you to believe all this pent up demand is going to miraculously cause prices to rise. These brokers are such losers, I think they're as stupid as Sarah Palin. Do any of them read anything? Do they have a clue about the macro economy? I guess not or they wouldn't be brokers.
Comment #3 Posted By: Anonymous 01/02/09
Anonymous
It's unfathomable that brokers would still make such idiotic statements publicly.
Comment #4 Posted By: Anonymous 01/02/09
Anonymous
How do you know when a NY real estate broker isnt lying ? A when they stop talking. prices are down with much reduced activity. forget this "Dec was better than Nov " junk
Comment #5 Posted By: Anonymous 01/02/09
Anonymous
They must think they are smart and we are the dumb ones --- their purpose for saying these things is to affect the market. They are soooo SARAH PALIN stupid. HHEELLOOOOO ---- everyone knows your game dear brokers -- you are LIARS -- give it up, take a reality pill and learn to deal HONESTLY with the public. I hope this market experience results in brokers becoming EXTINCT. People, lets learn how to shop for our own apartments, shall we? And leave all the negotiating (the part brokers think they deserve to get paid big bucks for) to real estate lawyers. Bottom line, a lawyer will cost you MUCH less than a broker's damn oversized commission. Soooo glad to see the brokers finally getting fu**ed. You've got it coming, with your 40 hour course training and big egos for nothing.
Comment #6 Posted By: Anonymous 01/02/09
Anonymous
I soooooo agree with #6. But I think a very few honest brokers might survive. They'd also need to read a bit, understand economics 101, and occasionally read, Krugman, Robert Schiller, Stephen Roach, etc. Now most brokers will say, "who"? That's the problem, as a group they are so damn stupid. They just blather meaningless garbage. "What bubble? This is Manhattan, we don't have bubbles in Manhattan." And the best one, "Manhattan is different!"
Comment #7 Posted By: Anonymous 01/03/09
Hkman
I think saying that rentals are busy but rents are down 20% is a little conflicted. The hype that rentals are busy so you better move fast might work for a recently arrived kid but the reality is rentals are very slow right now. I doubt the big luxury buildings giving as much as 2 months free and an OP out of the kindness of theirs hearts more like necessity. All the hype about NYC real estate market being recession proof is just that hype. Might open up my own office and call it Make An Offer Realty.
Comment #8 Posted By: Hkman 01/04/09
seriously sober
the brokers @these new properties all feel their projects are immune to the downturn in the market. How will they feel when their clients are unable to close on apartments they put down payments on 6-12 months ago?
Comment #9 Posted By: seriously sober 01/04/09
Anonymous
This guy , Barak, is the most inteligent of them all. No bullshit, just facts and figures. I bet many firms are going belly up next year but his will make it. He's one of the only smart people around.
Comment #10 Posted By: Anonymous 01/05/09
30 year Broker
My advise "Buy low Sell high!" You can argue all you want! The market goes up and the market goes down, that is life! Speaking of life their is more to life than Real Estate, get off your comp. and find one!
Comment #11 Posted By: 30 year Broker 01/05/09
Anonymous
Is Jacky Teplitzky going to spank her husband Max Dobens for his stupid comment about "holy crap pricing"? I guess Jacky went to the ladies room when that press call came in. Somebody's in trouble.
Comment #12 Posted By: Anonymous 01/05/09
Anonymous
Isn't it Steve Guttenberg Realty? Charles Ruttenberg? Is that where Purcell ended up? Wow, I'm impressed. Such an expert.
Comment #13 Posted By: Anonymous 01/05/09
Anonymous
All of you who have left such idiotic comments, please find something to do with your lives. The market is going to slowly make a rebound. with interest rates at an all time low, and inventory at an all time high... prices starting to level... buyers will jump in to the game. STOP BEING SO NEGATIVE PEOPLE.. AND GET A LIFE!!
Comment #14 Posted By: Anonymous 01/06/09
Anonymous
Low interest rates are only available to a select few. People still need jobs to buy, and banks still need to be willing to lend. Oh, and people will still need to be willing to buy. Remember all those baby boomers supporting the real estate market. They're not moving to New York, but out. New York is a great city, but only true arrogance or ignorance would proclaim it the best city in the world.
Comment #15 Posted By: Anonymous 01/06/09
Anonymous
Come on how can people still dare to say we have reached the bottom!!! The reality is inventories are extremely high, the whole Manhattan island is way overbuilt with projects they all call luxury to justify their crazy prices, people don't accept anymore to pay a BIG premium just for a developer or an architecht, the coming months are going to be very hard... so how can one decide to buy something? The answer is when prices become reasonable and brokers can say whatever they want : a property is only worth what buyers are willing to pay, that's it. If inventories are rising, it's just that there is no more Ponzi scheme victim willing to pay for overpriced properties. So the current asking prices do not reflect the REALITY. Wake up brokers you have earned so much money now time has come to go back to reality. And sellers don't be so stubborn: if you want to sell, price your unit properly otherwise turn it into rental and be prepared to have a small rental income cause you will not be the only one doing so, greedy people who did not want to sell either will be aboard with you...
Comment #16 Posted By: Anonymous 01/07/09
Anonymous
I wouldn't expect brokers to have studied microeconomics - that is why they are RE brokers. There is no demand because the price is too high relative to where buyers expect it to be when the market stops falling. You want holy crap pricing? Take the $/sq ft price in 1999 and compound it at 3% until today. Then drop it 5% to account for an overshoot. In other words, drop it 40% from where it is today. Oh wait, that isn't holy crap, that is reality. Do brokers think buyers paying $1 million + are stupid?
Comment #17 Posted By: Anonymous 01/08/09
Anonymous
What's with all the anger? This is a buyers market and will be for some time. Same with stocks. For those with some cash, and the guts to make wise investments in the next year or two, 10 years from now the payoff will be a windfall.
Comment #18 Posted By: Anonymous 01/09/09
Wall Street
You are all Toast. SIZE. 10 cent bid on all your junk
Comment #19 Posted By: Wall Street 01/09/09
Buyer
No reason to be so angry here. Of course this article is from a broker's perspective. That's who this site is written by and for. For all the people that like NY for what it is and will continue to love the city regardless of what happens to the economy, the next few years *could* be a great time to buy. But this is dependent on the nation's economy, so I am certainly not rushing to buy anything until the NYC housing market demonstrates that it is not subject to the panic and pessimism sweeping America's and the world's economies. This may take some time indeed...
Comment #20 Posted By: Buyer 01/09/09
FG
There are many agents (please do not misuse to term broker to describe everybody out there selling real estate) that could probably use a lesson in economics, there are also some of us that are trained to understand the economy and try to do a good job for our customers and clients. Money has gotten very tight for some people, but not for everybody. The very wealthy will survive nicely (unless they placed their money with Madoff). They are still buying, but now they are doing at much more reasonable prices. I even know people that are making money in the stock market. All things are possible. Interest rates are down and a credit score of 680 will get you a great mortgage. Have patience and work with a good agent. Some of us are really in this for the long haul and have our customers' best interest at heart. We want them to remember us favorably and to recommend us. We earn our commissions through hard work.
Comment #21 Posted By: FG 01/10/09
Anonymous
fg, money has gotten tight. i have been sitting on the sidelines for years waiting for the insanity to end. what you don't get is that the 40% drop in the stock market has decimated many down-payments or security blankets that would make people feel like buying real estate was a sound investment. even with several million in cash and a credit score of 780, i don't plan to buy anything in the near future. imho, even though the case-shiller has dropped about 18%, the reality is that the largest drops have occurred in the CA., AZ., FL., & NV. markets. the NE, SE, NW and MW are next...as the financial and automotive layoffs hit. real estate is illiquid. period. it will take years for it to rebound, and that is in a normal period. the credit crunch and rising unemployment will extend this period. if u r a broker (or agent), i would encourage you to find another vocation. good luck
Comment #22 Posted By: Anonymous 01/12/09
Anonymous
The market is headed down another 30% or until prices equate to the implied rental value. Apartments are commodities, especially in Mahattan, and should trade like a corporate bond. Prices will not stop falling until investor can earn a cash on cash return of 10% after all retal and carrying costs. Wake up and smell the Starbucks, its going to be much worse than early 1990s, a tough period but one in which most people who claim to know NY real estate were not in the business. Time to flush the toilet, set the rodent traps, and brace yourself for a new york real estate night mare that will not begin to end until 2012.
Comment #23 Posted By: Anonymous 01/14/09
GreedNOT
Obama or not Obama... can't change the perception people around the world have about America... From a consumptiom society to a beggar's nation status the fate of the overly greedy
Comment #24 Posted By: GreedNOT 01/15/09
Chronos
There are no fundamentals supporting the idea that now is a good time to buy. The latest estimates are about 275k people will lose jobs in the city over the next two years. Many businesses are closing. No one should have confidence in their own security or the economy now or for a few years. Prices have to come down 40% minimum so income and costs/debts are once again in line with historically sustainable norms. It's all in the math and based on common sense. Don't buy unless you can get close to 35-40% off peak prices, and your holding long term.
Comment #25 Posted By: Chronos 01/18/09
Anonymous
Bitter, ignorant, hate spewing, revisionist, priced out, uneducated and just plain DUMB ASS commentators take note: Go to Craiglist. Go play in the sand box over there. Leave this board to the professionals. Yes, many agents are as stupid as you...and you are the dumb money that they take advantage of when times are good. Times are bad now and smart money knows what to do in such an environment. Not one of the BLOW HARDS above has any clue. Go to Craigslist already you bleeting little sheep. You are all trying to actually effect the market with your endless blathering...it's not going to work...because there are still New Yorkers with good jobs and job security...who buy with long term objectives. GET A LIFE and go to craigslist where you losers belong! JOE Q BROKER
Comment #26 Posted By: Anonymous 01/20/09
Anti-broker
My buddy use to tell me currency brokers are next to dogs on the evolutionary scale. Well real-estate brokers like Deanna Kory are next to currency brokers. Hey, all you need is a dollar and a dream.
Comment #27 Posted By: Anti-broker 01/24/09
Anonymous
Joe Q Broker - anyone who buys in today's market better have very very long term objectives. Because they'll be lucky to get back to what they pay for a house at today's price for twenty years.
Comment #28 Posted By: Anonymous 01/24/09
DO
The anger towards brokers has to do with their attitudes and behavior over the past decade. Anyone who's been marched around by a pushy broker, yakking at them like a psy-war blackjack dealer in a cheap casino, knows exactly what I'm talking about. How I recall those sighs of irritation and contemptuous glances after five hours of showings without an offer. 350-sq. ft. studios for $450,000, and the broker is ranting, "You'll never find another deal like this one!!" The sense is that most brokers have been fundamentally dishonest, and have marched in lock-step to fulfill the super-richie dream of permanently removing the working- and middle-classes from Manhattan. The evidence of this deal with the devil is all around us. Few understand the power of words more than hyper-ambitious Manhattanites, many of whom, lacking any truly socially-contributory competency, have made repetitive chants the foundation of their success. So we can see why they're still running their materialistic mantras. Stop being positive you'll get flushed down the toilet with those "lower life forms" that you've helped to summarily dismiss from Manhattan -- a fate worse than death. So let them have their mantras. It's all they got right now.
Comment #29 Posted By: DO 01/26/09
Anonymous
I did real estate in the city for a while, and boy did I not last. I worked at Triumph Property Group, Best Apartments, and City Connections, and I gotta tell ya - they are ALL the same. City Connections touts their so-called uniqueness, but they're crooks like the rest. And Adam Disick and the rest at Triumph can kiss my arse as well. Oh, and Howard Feingold of Best Apartments is a crook. And I do wish brokers nothing but ultimate hell. This downtrodden economy sucks, but I hope all you greedy, corrupt, egomaniac brokers go broke SOON. I will laugh when I hear you suckers close your doors. You are all crooks, so good luck. Hardy har har @ those who somehow thought Manhattan was invincible.
Comment #30 Posted By: Anonymous 01/28/09
Anonymous
It is a little hateful to call all brokers crooks just because you weren't good enough to make it. It is more fair to say there are too many brokers because it is too easy to become one (no barriers to entry) and very few leave (because they aren't capable of doing much else - what does that say about you?). I think the thing about the broker profession that most of us abhor is they add very little value in many cases, and certainly nothing approximating the average fee charged. The average broker does very little analysis (other than running "comps", which in many cases aren't) and is too one sided in their view of the market. One of the best things to come out of this crisis would be a shrinking of the broker population, though with the structural reasons stated above, that is unlikely to happen to the degree it needs to.
Comment #31 Posted By: Anonymous 01/29/09
Anonymous
Broakers make their living bassed upon the Purchase Price. It is in their best interest to inflate the real facts.Anyone who believes them is Kidding themselves.
Comment #32 Posted By: Anonymous 01/29/09
Anonymous
You can't generalize!!! Not all brokers are stupid! Broker have to be positive even during the most difficult time. We did notice increase in demanding in the past 3 months. Buyers are out there b/c it's a good time to buy. If you read as we do, you will understand what I am saying. Prices have come down 10-20% and some sellers out there are even more negotiable. Therefore it's a good time for buyers who has safed money to buy their first home, to buy. What we know is that buyers can call the shots right now (so take advantage of that) and sellers must be able to reduce their prices.... For those who are expecting prices to drop 70 to 80% please give me a break! If that happens most of you will never had a chance to purchase anything, because there will be tons of intl investors, wealthy buyers purchasing units all over the city, etc... You won't have a chance to get a classic 6 on Park Ave for $800K ! I will probably be there before you.
Comment #33 Posted By: Anonymous 02/13/09