As usual, Noah has an excellent posting on the absorption rates for Manhattan condos and coops
http://www.urbandigs.com/2009/01/a_great_way_to_determine.html
It shows in essence that the high end is taking most of the hit while the low end continues to be relatively competitive.
Explains why most of the deals being posted are at the high end and the trickle down may occur as this phenomena progresses.
Probably, there is not a way to break this down by areas in Manhattan, but it would be instructive to apply the same analysis that way and thus answer who is likely to experience the big drop or is already.

ala dolly, julia > steve, search feature > "fundamentals" while discounting the play of perception

http://www.mtv.com/ontv/dyn/the-city/series.jhtml

gimme them bright lights!

Anyone seen a similar analysis for Brooklyn?

Very interesting indeed joedavis:

"The Declining Market scenario is not a crisis of Supply (i.e. Manhattan is not overbuilt with too many units and no market demand for those units). Rather, the negative development is largely on the Demand side. The rate of closings fell in most price segments 40-50% due to the extraordinarily negative events in financial markets in Sept/Oct. The market will move toward equilibrium when demand is restored. Even a restoration of 25% of lost demand will go a long way towards realizing equilibrium again."

Urbandigs: "Even a restoration of 25% of lost demand will go a long way towards realizing equilibrium again."

I'd argue that the demand seen from 2005 through early 2008 will not be seen again for a VERY long time. As a guy (Noah) who used to be a NASDAQ market maker, having seen the permanent reduction of tech stocks and the surrounding hype, I'm surprised he even hints that demand could recover. Those days are gone, if not forever, for a long time. Empirically he is correct however.

look, i think it is quite obvious that the high end is suffering most right now. this makes sense: it is the peak of the peak of the peak of the convergence of two huge bubbles: financial services and real estate. high end real estate in manhattan and associated markets (greenwich, east hampton) is just dead. doesn't mean the low end market is strong, but relatively speaking it has not suffered as much.

the demand for high end will be hurt. The demand for middle and lower end is and will be just fine. You may actually see an increase in demand for middle end 1 -2 bedrooms. There are many people who can afford this price range who need a place to live and whose living is not effected by the financial crisis. There may also be many finance people looking to downgrade from a $3 to 5 million apartment to a $1-2 million apartment.

People will still want to live in NY. Just because your earning potential may be decreased doesnt mean that you are going to move to Detroit or Debuke. So the middle end may be the hot market for the next few years.

"may even vindicate Julia " could you explain that?

julia has the perpetual whine that she is not finding a studio in the 400-500k range that excites her or looks appreciably better than what she sold some time back. She raises this often and gets castigated for it.
the data suggests that her market segment may be the most competetive of what is out there.

WLATERh7 - WHOA! Please be careful!

THAT WAS MICHAEL VARGAS'S STATEMENT IN HIS REPORT! Please read the post more carefully and you will see when I put 'NOAH HERE', with my thoughts after. I did not make that statement.

Isn't it possible that this actually does the opposite of the claim (vindicating julia).

Perhaps the reason for extra absorption on the bottom is that prices have already declined there....

Not sure why julia needs to be vindicated. All she has claimed is that her target market segment has not had as much price pressure. She is right by the way, so what vindication? Also, she is much more accurate in her statements than most of the bull posted on this board. If you are looking for folks that need vindication, julia would be one of the last on my list.

My own "empirical obs of trends on Streeteasy" have shown plenty of decline in the <$1MM market. Just off the top of my head: the 19% decline in the studio line at the A Building on E. 13th, a sale nearly 30% below comps in Petrfitz' backyard on Norfolk St., the Flatiron 1br listed at 27% below its 2005 purchase price, apt 3C at 88 Bleecker which has been sitting for months at $499k for 650sf, despite that building finally getting $1k/sf for closings last year... I get an email from SE each day containing numerous price-chops below $700k. Since Monday there were 21 just within the downtown neighborhoods in my search.

petrfitz what a silly statement. midrange two bedrooms have already been hit hard--just look at the bloodbath formerly known as yorkville. when you make statements in contravention of easily-obtained facts it kind of undermines your argument.

thank you, tenemental. there is a big, BIG difference between saying that the high end is being hurt worst and saying that the low end is strong.

Julia's looking for something eligible for a confoming loan. Major difference right now. If people need to move up and/or on in the future, and the influx of people looking to buy starter apartments sputters or dries up, things could change on that level as well.

Urbandigs/Noah...please accept my apology for not reading with sufficient care. I incorrectly attributed the quote to you and, as it turns out, this was not the case.

I'm relieved it was not you as you seem to be one of the most level-headed folks in the biz. And you past experience is supremely relevant (IMO) in this falling RE mkt.

Best to you. Please keep on posting interesting things.

looks like the original assumption was just wrong.... there is an entire thread now on how there are actually more price drops at the bottom end than the high end... (even proportionally speaking).

http://www.streeteasy.com/nyc/talk/discussion/7653-low-end-prices-not-holding-up

Sounds like the rest was just wishful thinking...

no prob!! will do! thanks

We should ban all posting except from Noah. Streeteasy should just outsource all commentary to Urban Digs

nyc10022, this thread had nothing to do with price drops. The focus was on absorption / inventory levels by price point. Low end prices may not be holding up, but the inventory is moving more rapidly. To be fair, I’m sure this statement is true in both bear and bull markets and to draw any reasonable conclusions we would need to compare the same chart during a peak period (say 7/1/07 – 12/31/07).

Now that I think about it, this chart tells us jack diddly. To conclude that the high end is suffering based on this chart alone is crap-o-la. Low end apartments will always turn more than high end, but are they turning proportionally more than peak is the real question.

ha! I love nyc10022!!

I love seeing my name in lights!!

> nyc10022, this thread had nothing to do with price drops

Nop. Read the original post. Seems pretty clearly about using the absorption data to infer price drops. If that 'aint clear enough for you, what do you think he's talking about with Julia? Julia is complaining about PRICES, not inventory. There is no way to name check Julia and be talking inventory numbers...

As for low end price drops, the data shows they are there... check the link.

UD, love you too, man!

Urbandigs rocks!

Urbandigs,

I went to take a look at a unit on 345 Riverside Drive #5E. Its listed as a 2 Bedroom but as happens in most NYC apts its a den or very small office at best. However, my question is the seller has it listed at $699K down from $749K. The building has no doorman, no window views in the apartment, maintenance around $1080 (which I thought was high for not having a doorman) and around 950sqft. When I told him I am conducting my search without a broker he kind of scuffs and says you absolutely need a broker especially in this market. I ask him why? His reply is that I am wasting my time you wont be able to get a price agreeable to the seller. He asked how much I would be willing to offer on the place and I lied by saying 20% off asking price. I reality would make an offer at 45% off asking price. I told him if I don't find a place willing to take the offer I am willing to make I will rent. My wife and I have the cash but we will not settle and we wont make an offer unless its way below asking to start negotiations. Which begs the question why move into such a old building and pay $699k for it? Granted the kitchen was renovated but nothing state of the art type appliances. I was a bit annoyed with him because I explained the markets are different now then they were in 2006. Even though mortgage rates are low standards of lending have drastically changed. Many people are cashed strapped especially with this bonus season being very light in the wallet. In the future how should I approach such a response?

Your help is always appreciated!

what did the sell reply to your 20% off asking price?

He said no way that the seller would go that low their limit is $679K and I told him well I move onto the next place then. In typical fashion he earlier said "at $699 I think its priced right?". Priced right for what? At $699K this apartment on 345 Riverside Drive on 107 st is way way over priced. Frankly, if I can not get the proper discount I am looking for I just wont buy at all. It has to be the right deal for me not the seller. I think many buyers feel the same way I do. The last 4 years have allowed inflated prices to price many buyers out. Now the tables have turned and it could spell great opportunity for many. If you have the cash of course..

I am bumping up this thread because I would love to get a response from gusantana's question of how he should respond to stubborn seller/ seller brokers.

I am in the same boat as gusantana. Looking at 700k-800k apartments in UWS/UES... expecting a 20-40% discount... also expecting poor responses like in gusantana's case from brokers/sellers, but would still like to work out a deal.

patience Danielsan...

I'm going to pose a view contrary to Petrifitz, just thinking aloud here and pls let me know what you think:

As the upper end of the market gets compressed, those classic 6's that used to go for ~$2 M are now going for, let's just say $1 M (i'm not here to debate the % drop). This will of course affect the prices on 1BRs, which in turn puts downward pressure on Studios. It is a question of time before the lower end of the market gets hit as well. As folks have said here on SE, $250k was the going rate for a studio back in the 1990s.

the lower end of the market has been hit. studios did not rise as much as large apartments, and they are unlikely to fall as much as large apartments, but they have been hit and they will be hit. any idea that studios are trading at the same prices they did a year ago is off-base.

the only way to respond to a stubborn seller is to move on. no reason to get annoyed, and quite frankly, you have no right to be annoyed. the seller does not owe you the price you feel is appropriate for the apartment, just as you don't owe the seller the price he or she wants for the apartment. each is entitled to her or his own view of the situation. just stick to your guns and move on to the next apartment.

Happyrenter,

You do make a very good point.

I agree with happyrenter...i strongly believe that studios (alcove) will go back down to the $300k-$350k range depending on the seller..they've already moved out, divorce, marriage, etc.

"how he should respond to stubborn seller/ seller brokers."

maybe you should raise your bid

"expecting a 20-40% discount..."

why, because you read on streeeasy that it should be so?

"also expecting poor responses like in gusantana's case from brokers/sellers, but would still like to work out a deal."

Why are you whining about a poor response? You are expecting a 20-40% discount. There may be people out there that have to sell now and will take what they can get. Most sellers have some time and will wait to get a decent price or take it off the market. Do you "deserve" a 20-40% discount because of what the newspapers are saying? I suggest you get thicker skin.

juiceman,

why should he raise his bid to a price that's more than he wants to pay? that's very poor advice. i agree (and stated above) that no one is entitled to the price he determines for a given apartment. but seller's aren't entitled to their asking prices either. if you can't get the apartment for a price you are comfortable with, the only thing to do is move on.

Gusantana - Well you can work on your own if you want and I dont see why that should affect any deal from possibly happening. Its especially surprising that a sell side broker would say this to you, as usually they go out of their way to get a direct deal done where they are likely compensated more at closing.

Anyway, if you submit a written bid with your offer, your atty info, lender info, about your job positions/salary and brief fin statement showing assets/liabilities/salary, they MUST forward to seller.

If you get no response, so be it! Seems like the product doesnt have unique sell side features, so I dont see any reason why you would need a buyer broker just to get you to up your bid. Bid based on your own confidence in the market, your situation, and the product. Nothing more. The only reason to bring in a buy side broker is if they understand how to value a property given todays uncertainties and a thorough comps analysis, property valuation.

Anyway, good luck!

$699k for 950 sq ft on riverside drive -- compared to a year ago, this is a good deal
of course this apt itself may be yucky, but it has a renovated kitchen even
of course we want this at $500k, and so it is not a good deal.
given the description, i suspect that either most of the sq ft are in a useless hallway or it is not 950 sq ft
it will get down to a more realistic level, but t some point you have to also see what the price is relative to its comps -- cant get 20-40% off irrespective

just saw w81st's posting on 260 riverside 850 sq ft for $569k on a high floor 1 bedroom
withdraw my last remark -- you should take that to the realtor as a possible comp and offer correspondingly lower
i applaud th eprice cuts
bring them on!!

"why should he raise his bid to a price that's more than he wants to pay?"

He shouldn't, but he shouldn't whine about it either. I love all of the threads complaining about "stubborn sellers". What about unrealistic buyers? I'm all for trying to get a 20-40% discount but just because you read it here on streeteasy, doesn't make it true. Getting a deal (even in this market) requires hard work, good negotiation ability, and lots of luck. People talk 20-40% discounts as if it were their given right and I find it hysterical. Regardless, most of the folks on this board looking for a 30% discount would probably shit their pants and kill the deal if someone actually agreed to that price anyway.

"the only thing to do is move on."

I agree unless you want to raise your bid.

I agree...sellers can ask whatever they want...I sold my house in florida in '05..I paid $210 and sold for over $500k...my neighbor put his house on the market at the same time and just sold it at the end of '08 for $400k...My point is it took him three years to finally admit he wasn't going to get the same price as I did...Unfortunately for him he bought it for $395 and renovated so he took a hit.

juiceman,

he already said he doesn't want to raise his bid, so that's a moot point. no one should be complaining about buyers or sellers. as long as people act ethically they are entitled to ask whatever they want and to bid whatever they want. to advise someone to raise his bid simply because the sellers don't accept it is not good advice.

"as long as people act ethically they are entitled to ask whatever they want and to bid whatever they want."

I agree

"to advise someone to raise his bid simply because the sellers don't accept it is not good advice."

Really? What if the apartment is worth more? What if the apartment is a really good deal and if you offered $15k more you could get it? How the hell do you know if it is bad or good advice? You know just as much as I do about the situation. Do you realize that telling someone to walk away could be really bad advice?

JuiceMan, thank you for your input on bidding higher, but I will action that advice when the first bid is rejected .

Based on the responses so far, there really isn't a way around this when emotions get in the way. Seems like a buy broker shouldn't be necessary.

juiceman,

notice what i wrote: "to advice someone to raise his bid SIMPLY BECAUSE THE SELLERS DON"T ACCEPT is bad advice." and indeed, you acknowledge as much by adding in a totally different reason to raise his bid: because the apartment is worth more. sure, if the apartment is worth more he should raise his bid. he should NOT raise his bid, again "simply because the sellers don't accept."

I read this report the same day Noah had posted it on his website. I wasn't going to post anything about it since it just reafirms what I believe. But then I was kind of surprised by the lack of pick up of it on this website. Was most surprised (not really) that stevejhx and his bottom boy nyc10020 had not so much as comment, NOTHING! until today.
Why? Because it blows all their theories totally out of the water. Steve, 2 year supply????? Think again. Invertory at all time high????? don't think so. Inventory during the eighties had nothing to do with price drops?????? Opps wrong again!!

Anyway, Noah, I applaude your open mindedness. I just have a question about your statement on using your data sourse. Did you mean by the below quote that you are now switching data companies or did you mean just for the sake of this article?

My point for writing this is that I am so sick and tried bysmall amount of people who post the most incredable amount of threads containing nothing but bullshit facts and figures and then the idiots (gusantana ) who pick up on it and then wonder why they can't "find" an apartment. (run on sentence)
Then again F it. I'm done.

~~~Inventory at the worst point of the last buyers market (1988-1993) was measured at 4 years!! as opposed to the current 12 month supply of housing

~~~The Declining Market scenario is not a crisis of Supply (i.e. Manhattan is not overbuilt with too many units and no market demand for those units). Rather, the negative development is largely on the Demand side
The rate of closings fell in most price segments 40-50% due to the extraordinarily negative events in financial markets in Sept/Oct. The market will move toward equilibrium when demand is restored. Even a restoration of 25% of lost demand will go a long way towards realizing equilibrium again.

Noah;
I'm leaning towards using Michael's data where the number of properties sold for the entire month of December was used for the analysis. That gives us about 12-13 Months Absorption Rate for Manhattan. Either way, volume is way down the past month or so leaving us to wonder whether this anomaly remains just that, an anomaly, or if this is how the Manhattan slowdown will look like in its initial phases

Ruff - Not switching data companies, its just I use REALPLUS from Halstead and I have an account with OLR. I prefer to have access to two systems for my seller services and for my own research, instead of just one.

DEC had 688 sold properties. I think its pretty clear though that sales volume going forward will be light, and I wonder if Manhattan can sustain close to 700-800 closings a month going forward. I doubt it, but we'll see. I can say with confidence that this market is very illiquid, deals are hard to get done, people are walking from contracts - I know because I get the calls (4 last month alone from buyers using other brokers), and that there is a disconnect between what bids are coming in at and what sellers feel their property is currently worth. As long as this continues, I expect absorption rate to rise steadily over the course of 2009.

I think this is the new world for the next year or two, minimum. I HOPE IM WRONG. I just dont see any fundamentals that would have me believe mass buyers will jump in. In fact, I think the opposite and I worry about 2009 from a jobs standpoint in Manhattan. I think it will be ugly. Again, I HOPE IM WRONG.

Noah, I agree with most of what you just said but for different reasons. In my parents time they had an FDR, we have Bush and Paulson who went of TV and told us that the world is coming to an end. I believe that nothing is moving in Manhattan and that there is a disconnnect. But it is mostly based on "FEAR". When and if that abates we can then see where the market moves.

Ruff, bitter much?

Did you just lose your shirt on your outer borough apartment?

We have a 20% decline in prices, and you're still talking about inventory as a leading factor?

Put your had back in the sand..

we have a 20% decline in prices on the high end only...mid and low end not going to happen now because those sellers aren't making the profit that high end sellers will make and a 20-30% decline will be huge in that maket. I agree with urbandigs that it might happen later but not now.

Bottom Boy you are such an easy get that is what the article is all about. Analyze inventory and determine absorption rates and you can figure out where prices are going. Maybe you should "BONE" up on your reading comprehension.

As for me? UWS prime, WEA, pre-war, all detail, two fireplaces, 1100sqf, bought........fall 1996

Now put your head back into steve's,,,,,,,,

ruff - I, too believe very little is moving in Manhattan, and there is a disconnect.

The fact that it is based on FEAR, doesn't illegitimize (spelling?) it though. In fact, I am a strong believer in the psychology of asset cycles (I did study and get my degree in Psychology after all) and the FEAR stage that generally comes right after denial on the sell side. On the buy side, it is mainly media/wealth effect driven amongst a host of other factors too.

But its very real. And it tells me that we are in the part of the cycle where bids just disappear, the tide goes out, and we see who is swimming naked. We are yet to see desperation, panic and ultimately depression. I see no reason for it not to take this path.

You mention when and if it abates. The hope for this scares me enough to adapt my own personal lifestyle. I think this will be long, deep, annoying, depressing, and at times scary and that it will last years. Once we stabilize, I think we muddle for another set of years. At this time, the asset itself will be viewed much differently than it is today, and was 12 months ago. Its already happening at very fast speeds. I just hope that the city comes out of this slowdown with minimal service cuts, minimal increase in crime, minimal increase in UE, minimal increase in taxes, minimal increase in any change as to the perception of quality of life here.

urbandigs...what a sad analysis of life in manhattan for years to come. As a potential buyer i'm happy but as a new yorker it's terrible, if true.

like I said, I HOPE I am wrong. I just dont want to dis respect this economic crisis from a traders point of view. You must understand, I view the world as a trade. I'm stupid like that.

"I did study and get my degree in Psychology after all"

Wonderful. A banker, shrink, blogger, and real estate agent all rolled into one. You must be a real hoot at cocktail parties.

not as much of a hoot as a proctologist would be

hey ruff that means you paid about $300psf back then ($330K)... so you paid off your mortgage of did you HELOC out the wazoo? Inquiring minds want to know.... you and oldbuyers should be friends. Dude $330K wouldn't even cover my three car loans... LMAO.

I'm glad you thinkz you a player with your 1100 sq ft apt in WEA when in 1996 I'd have my porsche broken into all the time with the crack zombies coming downtown to get a car radio... so you must remember when we had those f'n pull outs we used to carry around... F'n good timez.

one other thing... if one is to study history of RE... one would see the same analysis you are doing... in Texas, Houston, NYC (80's) and Tokyo... and you'd get your ass handed to you... absorption rate means nothing when inventory becomes a torrent. None of the above two items are static.

So you think you got "paid" to live in WEA for 12 years... let's see you thought you owned RE worth $1.6MM (at $1,500psf at height in 2007) or about $100k/yr on top of whatever you made... mmmm let's see what else... you never married or did and have one kid in your smallish 2bdrm....

pssss... I'll tell you a secret if you promise to keep it a secret.... m'okay... we're headed back to $300psf... so you just had a nice round-trip to financial independence to having to save for retirement.... :)

Dude, allow me to let you in on a secret. I bought for less then 330K. I have paid off me mortgage and never had a HELOC. Do I think I'm a player? No, I just worked for a living, we have always lived within our means.
I have studied RE and no matter if real estate is 1500sqf or 100sqf, I will still live here. Well with the exception of weekends and summmers. That is when we are living on our North Shore waterfront house.
You will know it, it is the one without the three cars or a porsche out front.

Throw ruff a bone. Ruff: I own, just like you. It's not too late - you bought at '96 prices. You can easily sell for 800k. Pocket it, rent for a while and buy back your apt for 300k :)

Urbandigs,

Thanks for the info. For now I have been scheduling appointments but I haven't made an offer since August of last year. That deal fell apart because I lowered my offer price by $15K. I am happy the deal did fall apart because the apartment was on 157st near riverside (washington heights) drive where I do think NYC RE should fall precipitously.

I thin every buyer right now wants a great deal but not at the expense of a rise in crime in NYC. FYI, you are doing a great job on the blog keep up the good work!!

thanks!! good luck to you.

> Bottom Boy you are such

Homophbia much?

Wow, talk about bitter.... I guess the losses are getting to him.