2009 Will Be A Tough Year for NYC Real Estate Market

First, a look at the national scene to set the stage: New Home Sales Hit A Record Low.

While prices have fallen precipitously in some bubble markets (e.g. Miami, Phoenix, Las Vegas, Los Angeles, San Diego) NYC has held up relatively well. However, we are merely behind the curve here; as I've posted before NYC is subject to the same factors behind those declines.

A figurative crack in the dyke appeared in an article in the New York Times today:

Given the current sales drought, even a handful of auctions could reset prices for new condominiums citywide, said Jonathan J. Miller, the president of Miller Samuel, a Manhattan research and appraisal company. He said he expects the auctioned properties to sell for 40 to 45 percent below the asking prices of the first quarter of 2008, when the market peaked.

. . . .

There are 8,000 new condos on the market in New York City, and 22,000 more are scheduled to go on the market by the end of next year.

And from Clusterstock there is this on Manhattan inventory:

1. inventory now at 11,000 listed homes, condos and coops in manhattan which is almost 3x normal
2. inventory actually grew 1200 units over the last 30-days (the attached stats are a couple of weeks old and the listing velocity INCREASED the last 2 weeks)

I would expect to see some striking declines in apartment prices and to a lesser extent in rents over the next two quarters.

Something to think about for policy makers, as this will not be a blip, but a reversion to historical valuations based on fundamentals (price/rent and price/income ratios).

Graph taken from the Calculated Risk post linked above.

Fresh Air Fund Looking for Host Families

Let it never be said that Sara from the Fresh Air Fund is not persistent!

In all sincerity, the Fresh Air Fund is a great organization - please take a moment to check them out and make a contribution or volunteer to help low income city kids take in a bit of the countryside this summer. Just click on the image above top go to their website.

Wikipedia on Fresh Air Fund

Culver Viaduct Contract Awarded: Service Disruptions Ahead

A frequent question I get is whether the Culver Viaduct rehab will be cancelled or delayed due to the finance crisis. The answer is no; the Viaduct work is a critical project that must be done, and is still on schedule.

The latest from the Daily News:

The MTA board Wednesday is expected to award a $179 million contract to rebuild the Culver Viaduct, a crumbling concrete and steel structure above local streets and the Gowanus Canal in Brooklyn's Carroll Gardens.
The F line is the third busiest in the system with more than 575,000 daily riders. The viaduct has two stations: Smith-9th Sts. and 4th Ave.-9th St. . . . .Depending on the phase, some riders will have to take shuttle buses or double-back and take a train south to another station and catch a northbound ride.
The first impact, Cafiero said, would be a benefit. Starting in the fall, the G train's route will be extended deeper into Brooklyn to Church Ave.
In a much needed glimmer of good news for the MTA, the contract to be approved by board Wednesday is $62.5 million less than originally estimated.

It is nice to see some good news in the mire. The other good news is that, once this project is completed in 2012 or 2013, the only thing necessary to restore express and local service on the Culver Line is political willpower.

The stations affected by closures will be Smith - Ninth and 4th Avenue.

ESTA Unveils New Ad, Website Calling For Reliable Transit Funding

The Empire State Transportation Alliance and campaign for new York's future rolled out a new ad campaign and website to support reliable, adequate funding for NYC's transit system. Take a minute to visit the website, Keep New York Moving, and tell your elected officials that NYC needs reliable transit, and we can't balance the budget on the backs of riders.

Tolls Bros. Price Chopping: Bigger Than We Thought

Brownstoner makes a catch that Curbed missed yesterday: penthouse units at Northside Piers have been chopped 35-37%!

Again: what does this bode for the Toll Bros. Gowanus project?

It looks more and more likely that Toll will get its approvals for the site (outside of the overall rezoning of the Gowanus, where it should have been included) and either sit on or sell off it's newly acquired approvals.

The approval process has been an absolute disgrace. This rezoning should never have been reviewed outside of the greater Gowanus rezoning. It's not too late for the City agencies to do the right thing and roll this parcel into the broader Gowanus rezoning, but given the current administration, I am not holding my breath.

Toll Bros Chopping Prices At Northside Piers

Per Curbed, Toll Bros. is slashing prices at its Northside Piers project in Williamsburg. They are currently building an entire second tower to add to that development.

While the penthouses and most-expensive units at One Northside Piers were left unharmed, a large crop—over 30 units—are a bloody mess. A quick scan of StreetEasy to survey the wreckage shows reductions up to 25 percent in some cases, including this 11th-floor 3BR unit, marked down to $894,990 from an ask of over $1.2 million.

Critical thinking exercise: what do you think this means for the Toll bros. Gowanus project?

Assembly Introduces Package of Tenant Protections

And this time, with a Democratic Senate, some will pass. Tenant protections were gutted in the 1990s and again in 2003. It's about time the pendulum swung back in the other direction. But no article would be complete without a few red herrings and demagoguery from the (intentionally misleadingly named) Rent Stabilization Association:

“You will see increased foreclosures on multiple dwellings,” said Joseph Strasburg, president of the Rent Stabilization Association, a powerful landlord group. “You have total chaos in this city when you have large complexes being foreclosed on.”

News flash: There is going to be a wave of foreclosures regardless. Over the past 8 years credit standards were abandoned, prices were inflated far beyond fundamentals, and speculators bought properties based on pie-in-the-sky pro forma financials. Before I went to law school I was a financial analyst and a lender for a large regional bank (until 2002). The decline in credit standards from 2002 - 2007 was nothing short of breathtaking. It was also the logical outgrowth of Bush administration policy: open the credit spigot, abandon regulatory practices and let the good times roll.

This is the reason for the current economic crisis. It was always unsustainable, and while the adjustment back to valuations based on fundamentals (price/rent ratios, debt service/income ratios) will be painful for many, it is also unavoidable.

Of course the big landlords are going to fight it tooth and nail. But don't rely on them to argue honestly.