Wednesday, September 03, 2008
Only A Moron Couldn't See It Coming
Manhattan Shows First Cracks
As the US housing slump deepened over the past three years, Manhattan’s real estate market seemed immune. Instead of crumbling with the rest of the nation, prices continued to rocket. Sales surged and new condominiums found multiple bidders. For a long while, Manhattan property was in an orbit all of its own.
But there are growing signs that this last bastion may be giving way. New York City, the seemingly indestructible foundation of the nation’s luxury property market, has this year begun to shown signs of strain. In the second quarter, traditionally the hottest property season, sales slumped 38 per cent to a five-year low, according to the Corcoran Group, the city’s largest residential real estate group.
According to Miller Samuel, a New York residential real estate appraisal company, some 6,869 apartments were for sale in Manhattan in the second quarter. That is 11 per cent more than the first quarter – and a full 31 per cent more than the second quarter of last year.
What's really amazed me is how few people, pundits, analysts, et al. have talked during the past few years about the gigantic real estate bubble in New York City. It seems present-tensers have been indoctrinated with the notion that NYC will always be insanely expensive, that its real estate will never *go down*.
BUT, there were at least two, perhaps three real estate busts in New York in just the 1970s. The culprit back then was a fiscal budgetary crisis. Fast forward to today, what the bleep do you think this portends - Wall Street Tax Revenue Down 97% ???
My prediction all along has been that homes will, broadly speaking, bottom out at 1998 prices. If that's true then Manhattanites will suffer a 50% haircut on their condos and co-ops from today's nosebleed levels.
Think I am crazy?
Well, I've already seen comps in Naples, FL selling at below 2000 prices. Just wait until mortgage rates hit 7% and 8%...
Lastly, I'll mention it again. That 1998 national housing price point coincides with the 1988 peak from the last housing bubble. So not only did it take a full 10 years for shelter to re-start appreciating, if my prediction of 1998 levels comes true, then Americans won't have enjoyed any net housing appreciation for about 22 years.