Real estate broker Jay Molishever took umbrage with our post, citing Deutsche Bank analysis, that the NYC real estate market could fall by 47%. His argument: You can’t conflate the NYC market with the surrounding area — they’re ‘apples and oranges’ he says. He gave us permission to reprint his whole letter to us, as well as his latest blast to clients.
Looking at the data table in the Deutcshe Bank report we see that the New York numbers actually refer to the New York metro region, from White Plains to Wayne, NJ, and I assume including all 5 boros. If I’m not mistaken that’s the same data set that the Case-Schiller index uses, also widely reported today, out of Chicago I believe. Both show ignorance of the reality that that is not New York City, which is a very different thing. The NY metro suburbs are subject to similar forces as every other part of the U.S. real estate landscape. The New York City market, though, which consists of Manhattan and a few parts of Brooklyn, is a very different thing – apples and oranges. It is one of 5 or 10 global hubs in the increasingly globalized world. Rather than being the “epicentre of the weakest industries in the world: Wall St., law and media” as you write, which is narrowly accurate but distortingly reductive — the equivalent of a 12-year-old’s rankout — New York is one the epicenters, if not the primary epicentre, of all global intercourse, certainly of everything going to and from the U.S. and the rest of the world, and of much going back and forth in the U.S. itself. Yes, that intercourse is all knotted up right now, and yes New York City buyers now have a generational opportunity, but to write in your headline and throughout your text that “New York City Real Estate Could Fall Another 47%” is sloppy, frightening and sensationalistic. For New York City real estate to fall to those levels, all that activity would have to be completely disintegrated and fragmented, to the level where the only way any of us would be eating or clothing ourselves would be with fishhooks and spears.
As a broker, I have no interest in maintaining prices anywhere above where they should be. My interest depends on buyers and sellers being on the same plane, so I should be doing nothing to discourage sellers from reading articles like yours and lowering their prices. (I also own my home in Carroll Gardens and an investment condo in Brooklyn Heights, but that’s still immaterial, since I’m a buy and hold person). But seeing buyers with an opportunity now to buy in to or trade up in the market that they previously thought they might not have for years, if ever, instead bypassing the huge discounts now available because of fears driven by such sensationalistic “reports” is distressing. I bought my condo in 1993 at the discounted prices during that downturn, leveraged by the 85% financing, and then took enough cash out in a refinancing with the upturned values in 1999 to buy my brownstone, and then watched both continue to ride up since. Buyers in this market have a similar opportunity, particularly with the benefit real property provides against the inflation we can anticipate in the next years considering the $trillions that have been suddenly added to circulation. Those who wait for the conventional wisdom your article represents to change direction will miss that.
Dear Friend and Friends of Friends –
I hope all is well, and would like to report that daffodils and crocuses are poking up throughout the city.
Here’s the situation I’m seeing now for real estate buyers and sellers in New York City. Buyers have more control and power than in a generation. Sellers who are realistic and need to sell recognise they’ve got to price or negotiate to near where the market bottom is likely to eventually wind up. Deals are happening at discounts of 15%, 20%, 25% or more off of real prices.
Open houses have been packed, PACKED, since the beginning of the year. Many buyers sense an opportunity to own a first home, or trade up, that they previously thought would not be available for many years, if ever, and they are out looking, looking, looking. Many of them are not ready to buy, yet. Conventional wisdom says it’s still too early.
Each of the buyers who has bought in the last few months probably did so because they got a great deal, unthinkable a year ago. And each of those recent buyers did so with every one of their friends, family and associates telling them they were nuts to buy now, but they did so anyway because they had done their research. If they could get the approximately 5% financing available now, and if they can get the $8,000 tax CREDIT the federal stimulus plan is giving first-time buyers this year, and if they can negotiate discounts at or close to where the bottom will eventually be, why should they wait?
Others are waiting because they don’t know what’s going to happen next, or how low prices will really go. Prices will continue low until conventional wisdom changes again and everyone says it’s time to buy. Then, with all those buyers who’ve been holding back ready to go forward, prices will start going up again, because sellers will again know time is on their side. Buyers want to act before that happens.
The NYC real estate seller’s market, which lasted for 15 years, and survived 9/11, and survived dire predictions and the rest of the country fizzling flat for three years, and still kept thriving and growing, turned on a dime in about 15 minutes last September and became an extreme buyer’s market. Literally overnight. Could conventional wisdom change to the upside again as quickly?
Those pent-up buyers are held back by one fear – that the bottom might go below the 15%-25% discounts some realistic sellers are already offering, down to the apocalyptic levels of 40% or so that a few prognosticators are talking about. There is perhaps some chance of that, but I personally think that a 40% bottom in New York could only happen if the international banking system became completely destroyed, came to complete halt, and no financing was being done anywhere in the world, no international trade was coming through or out of the NYC gateway between America and the world, and no trade was being done in America. New York City is not Florida with unlimited buildable land and endless speculation, and it isn’t Las Vegas with one extremely recession-sensitive industry. New York City is not turning to dust. It is still the place where the world seeks refuge.
There is one thing I do know for certain. At the end of March in three weeks the 1st Quarter 2009 NYC real estate sales numbers will be released by the big appraisal firms. A few days later they will be reported in big stories in all the media, as they always are. They will show that prices are down considerably. And they will show that the number of sales is up, considerably, from 4Q2008. I wonder if a lot of those buyers who have been waiting to take advantage of the current possibly near-bottom prices will see those reports as a sign that bargains are already happening, more people are buying, and conventional wisdom is changing.
If you or anyone you know ever needs any information, research, or assistance in buying, selling or renting a home or investment in New York City, please don’t hesitate to contact me at 917 538 4516. I understand and appreciate what a referral means, and always strive to make them thank you for referring them to me.