What are sellers/brokers thinking? What am I missing?

Dusty Springfield explained this phenomenon best:

Wishin', and hopin', and thinkin', and prayin'

I'm also seeing it in small one bedrooms and studios. They're pricing studios at $495k. alanhart is right and we just have to wait it out.

Maybe they are planning a huge price chop to attract attention?

Agreed, they must be in denial or something. I'm waiting for a 1BR or studio, but I want the half price figure (500-600/s.f.).

So keep waiting. What do you care? You want something cheap, all you have to do is wait it out.
Let's say you wanted to buy Goldman Sachs at $88/share back in February. Because you knew that was where it was headed. The thing is, it was still trading at $200/share at the time. Just because you think you know where the market is heading doesn't mean you can control the market price if anything.
I'm a broker, and I agree - prices will correct. But that doesn't mean prices will drop overnight. Stay alert to new properties coming on the market at attractive prices. They are out there! Don't bash the ones you wouldn't buy anyway.

tina24hour, good post and I totally agree.

I don't see what the rush with some folks is either. If the economic picture is in a sad state of affairs (and it is), prices will fall regardless of the current listing prices. I suspect many of the aggressive listing prices have a lot of hot air underneath them.

Sit back, relax, drink a few cool ones and collect interest on the down payment. There is absolutely zero downside to this alternative, specially with rents on the decline. I suspect sellers are sweating a heck of a lot more than potential buyers.

Had anybody PROMISED you the prices you want?

serge07, rents are not falling. Not on anything nice. And the prices (on good apts.) are not crushing, either. On UWS, I saw 3 open houses that produced offers at asking prices.
The point is, there is not going to be a mattress-style sale event on RE.

inquirer, unless the articles I have read on the subject are incorrect, renters seem to be willing to negotiate for the first time in years. That's a far cry from the situation a couple of years ago.

It's impossible to predict prices but I do know the factors that generated the Manhattan RE bull market and I am also aware that those factors have totally reversed. As with all other investment classes, sooner or later they will reflect their underlying economic fundamentals. The commercial side certainly is & IMO, that's a fairly good indicator.

Wanna annoy them - and get things moving?

If more and more people make bids 25% below the asking price they will eventually get it!

Don't expect them to accept - but we can wear them down.

Correction: First sentence in my above post, "renters" should be "landlords".

Topper, let's see what happens during the next two spring selling seasons. I'm curiously waiting the results of the 2009, for starters. :)

I think we're headed for a Big Freeze.

Brokers hate that even more than you and me. They would actually welcome bids 25% below asking price. They are not really price sensitive - they just want turnover.

In fact, maybe we can get Uncle Steve to put in bids 50% (where he sees value) below current offerings which would make our 25% bids look mighty sweet! ;-)

Topper, I hope brokers don't totally hate us for stating the obvious. :)

If a close relative had listened to RE brokers instead of yours truly, they would be still holding a white elephant in Scottsdale, AZ. I took it upon myself to sell the property long distance during the 4Q, 2005 which was quite an undertaking. I use world stock markets, corporate bonds, currencies, commodities, Libor and such as my indicators for the economy (not Cramer). They are not exactly screaming, rush out and buy leveraged assets. You gotta call them the way one sees them.

Congrats, Mr. Serge, on your timing.

I doubt that the broker hated you - I expect he/she was delighted by yet another commission. The difference between a commission at 100% of asking or 75% of asking is really not such a big deal. It is so much better than NO COMMISSION!

Cha-CHING!

Thanks for the compliment!

Funny thing that even though the timing turned out to be quite good & the market was reportedly super hot, it was still a giant PIA to get a buyer to commit. All I can say is that it was not an easy project.

I was convinced at the time that giant economic storm clouds were gathering on the horizon and just couldn't take no for an answer. Unfortunately, most people aren't too interested in macro economic developments until it affects them or someone close to them directly.

Re: this thread's question ("What are they thinking?")

I think it's a matter of the time-delay it takes for awareness of the larger economic situation to penetrate the local consciousness. There are plenty of people who don't watch the economy or politics that closely (hard to believe, with the screaming headlines), and it's very possible to be in a bubble of one's busy life and routines, and not notice the signs of trouble. As bad as things are, I STILL don't know anyone personally, in my close circle, who has lost a job. If I weren't paying attention, I would just be puzzled about what all the fuss was about. I ran across an old acquiantaince of mine in May who had been laid off, but no one since. So, I'm just saying it's the time delay.

As another housing blog notes, Rudiger Dornbusch (an MIT Economist) said, "The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought."

Julia - A friend is about to list her alcove studio for under $400K. It's 301 East 63rd if that neighborhood appeals to you and I have some pictures.

Thanks, everybody. I certainly do not expect listings to start coming on today at a stark drop from comparables, but my surprise was at major price escalation in a couple listings posted yesterday. I am just a buyer, not a pro, and all I have to go on is what I have learned in two years of very active shopping and from reading everything I can find. I love this site because of the great perspectives, and I appreciate all of your reasonable hypotheses for what I observed. Sellers may be plannning for a big dramatic price cut, may be putting their heads in the sand, may just be clueless. Or the effect may just not have hit home yet,and sellers and brokers think that a price 25% higher than a comparable sold in June makes sense. I am more than willing to wait at this point or to make those low offers, but, while I wait, I appreciate the insights into the psychology driving the sellers.

I've been watching those Sunday morning broker shows... NY Residental and Open House. On both of 'em, they got the brokers to say "tough market" My, have things changed..

cliff702, your friend is in a landlease building (see all relevant Streeteasy threads on landleases). Caveat emptor.

The apartments are now many people's biggest asset. Portfolios are down. Why sell and park the money in equities that are falling? And where would owners go? People still love New York, and it's still the best place to be when everyone figures out how to take the downturn and start making money. Fact is that while companies and stocks come and go, real estate is not traded quickly, and people do not give away their homes in a panic. Manhattan is almost entirely owner-occupied co-ops. The families are growing. Nobody has any interest in leaving. This is why many of you are surprised and will be for another year or two -- sellers of prime properties simply aren't going to lower prices. New developments will, but those were overpriced to begin with, especially compared to pre-war, etc.

Yog, I think you're missing the point. Yes, plenty of people are happy in New York and no one is suggesting that owners sell their apartments just because. We're talking about apartments that ARE on the market, for whatever reason. Those apartments are out there because their owners want or need to sell them. Which is why many of us are surprised that they still haven't realized that it's not going to happen at these prices.

The future is upon us:

"Britain Props Up Banks as Fed Leads Funding Effort

Announcing limits on bonuses and dividends at the banks in which the government will have a stake, Mr. Brown said: “The guiding idea is fair rewards for hard work, effort and enterprise, not incentives for irresponsibility or excessive risk-taking for which the rest of us have paid,” he said."

http://www.nytimes.com/2008/10/14/business/14crisis.html?hp

This is the new normal. Never again will we see the risk or the greed that led us here. There are now 3 national banks: Wells Fargo, Bank of America, JPMorgan Chase. They control over 30% of the market, they control the largest broker-dealers, the largest investment advisors, the largest everything. They will be regulated like there's no tomorrow.

Given that, who is going to be able to afford this:

Sales in Manhattan
We found 8,617 listings
Median price: $1,200,000 Median size: 1,145 ft² Median price per ft²: $1,151

No one.

I will say, however, that the median price per square foot HAS been falling, and now is down to 2006 levels. More to come.

After this unnecessary rout in the stock market (and is Paul Krugman's Nobel Prize in Economics a mistake? - he is a fierce critic of Bush's policies) it's capital rebuild time. Time to head to the local Coin Star, cash in your quarters.

And to add fuel to the no-more-bonuses fire, the TARP program contains a similar provision limiting executive compensation.

Which will also likely be limited by the Obama Administration and the new filibuster-proof Democratic Congress. Judging by the polls, it seems that Obama will win by a landslide. He's bringing over lots of heretofore doubters, including me.

CELIII - Thanks for the reminder about the land lease. She bought the apartment about five years ago and her lawyer didn't like that at all, but she persisted. There is supposed to be another 50 years before renegotiation.

Is there an online site that identifies land lease buildings? Any standard, customary arrangement for this kind of thing? Anyway to find out the terms for a specific building? Are they always co-ops or can a condo do this?

I must admit that an affinity for this kind of building - like the Excelsior at 303 East 57. The somewhat lower price vis a vis the somewhat higher maintenance is a clue, but I only find out for sure when a Streeteasy poster identifies the property as land lease.

Don't forget this one: many brokers bullshit potential clients regarding the amount of money they can get for the apartment, just to beat out other brokers that are pitching and secure the exclusive listing. After an offer-less month or so they can go back to the seller w/ some excuse about the market and start cutting the price closer to what's appropriate, but they're still locked in. Both Noah/UrbanDigs and Doug Heddings/True Gotham have discussed this. The bottom line is, the listings may come on strong, but it doesn't necessarily mean the broker is (or even thinks he/she is) anywhere in the ballpark.