The Real Deal had an article up this week on the foreclosure of the WA Condominiums at 2201 ACP/7th Avenue and 130th Street. The developers borrowed, "$11.1 million in 2006 to build the 35-unit luxury boutique condo" which apparently has a rooftop swimming pool. The deadline to get the temporary certificate of occupancy was November 2009 and they seemed to not have sold enough units to do so. Prices were around the $1,000 per square foot range and the developers expected Europeans to buy into the new construction. The Central Harlem location directly faces a housing project super-block so we are kind of thinking that might have something to do with not being able to get prime lower Manhattan prices out of this development. What's the chances of this going rental? Read more in The Real Deal: LINK. Photo by Ulysses. www.WaCondominiums.com
Friday, July 23, 2010
☞ READ: WA Condominiums Face Foreclosure
The Real Deal had an article up this week on the foreclosure of the WA Condominiums at 2201 ACP/7th Avenue and 130th Street. The developers borrowed, "$11.1 million in 2006 to build the 35-unit luxury boutique condo" which apparently has a rooftop swimming pool. The deadline to get the temporary certificate of occupancy was November 2009 and they seemed to not have sold enough units to do so. Prices were around the $1,000 per square foot range and the developers expected Europeans to buy into the new construction. The Central Harlem location directly faces a housing project super-block so we are kind of thinking that might have something to do with not being able to get prime lower Manhattan prices out of this development. What's the chances of this going rental? Read more in The Real Deal: LINK. Photo by Ulysses. www.WaCondominiums.com
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Uh oh. I can only say that when I walk on ACP from 111th up to Shrine or Yatenga at 134th all I can think about is how far ACP has to go before it "turns around" as some say or "regains its former glory" in other parlance. I have always liked the avenue architecturally but would never want to live on it, at least not above 115th St.
ReplyDeleteAs we have discussed in previous posts, it seems mind boggling that developers thought they could just plop down anything anywhere and it would all sell. It exemplifies the short-sighted greed and stupidity of those years.
I need to adjust my screen - thought I saw $1,000 per sq foot. Excuse me while I figure this out...
ReplyDeleteThere is a lot of hostility on ACP, especially this area. It is not necessarily confined to the project complexes.
ReplyDeleteACP is definitely a little odd at times. It does have the potential to be great. Beautiful architecture and a couple of really nice little restaurants (Strictly Roots for one!). Definitely needs more market rate renters and some decent stores. Although, the SWING store on 118th & ACP is awesome.
ReplyDeleteI said it yesterday....these developers, this inventory, the mortgage markets, the Manhattan economy...there is nothing on the horizon to be bullish about. Quite the contrary, I am targeting buying within 5 blocks of Central Park @ $350-400 ppsf in 2011. It's at $500 now at 1400 5th. This thing is going down my friends. Anyone keep a list of the Harlem developments that have gone bankrupt betting on the come? The Lenox, The Lenox Grand, 5th on the Park, now these clowns. There is a reason Corcoran and Warburg closed their Harlem offices in early 2009, the biggest insiders in the game know there's no real money to be made for them in these parts going forward. Shall we start a pool on the next development to go belly up? Follow the money, and it ain't in Harlem....as Corcoran and Warburg know....
ReplyDelete"This thing is going down my friends." You are like a broken record. How many times do we have to hear from you about Corcoran and Walburg closing their offices? Prudential Elliman have two offices open in Harlem.
ReplyDeleteAlso, stop getting so excited about the prospect of the economy collapsing. It is pretty sad. There will be a lot more to worry about than prices per sq.ft and if it does get that bad it is pretty insulting to people who are struggling, under water or have lost their job recently b/c of the economy.
Trust me, if prices do go down to the level you are hoping for, the buildings that you are hoping to buy in will probably have maintenance at $1000+ per month b/c people who bought there at $700 sq. ft will probably just ditch their mortgage.
Chris, I suspect we will start seeing that, like in the suburbs, people walking away from their mortgages as a trend, they already here in Manhattan walk away from their down payments.
ReplyDeleteFurthermore right now today, UWS at under $500 ppsf! Condo, NOT CO-OP, HPD, or any nonsense!
http://corcoran.com/property/listing.aspx?Region=NYC&ListingID=1845351
$350-$400 ppsf between 110th & 116th will happen in 2011.
You should do some sleuthing and a report on 2280 FDB too. The developer is making some ridiculous novice errors as they try to begin closings. Meaning - they don't have a long laundry list of documents on hand or filed that they are supposed to. And the official window for closings sent by their lawyer to buyers has come and gone. They are inflating the % of units sold in marketing. They are rejecting offers at even 5% below asking even though they need to sell at least 10 more units in order to close loans with most banks. And more. Even though they put out a press release and had a party to announce closings were starting weeks ago, only 1 has closed. An all cash deal. And 1 other one (an affordable unit buyer) got to the closing table only to find out the developer hadn't filed the proper paperwork with HPD. Which takes a minimum 2-3 weeks to do.
ReplyDelete125, and the world could end on December 21st, 2012. In fact, let's all sit around and guess what the sq. ft will be in 2011. Silly games mate.
ReplyDeleteBTW...the place you linked to is in pretty awful condition and has maintenance close to $900 a month. If you are happy getting your pad for $400 sq.ft and paying $1,000 in maintenance a month, good luck to ya.
Waiting, I would love to see some actual sales numbers from these places. A ton of apartments are in contract, but not sure about actual sales. The web site claims 40%.
ReplyDeleteI agree with chris that is a poor example. If you take a look at what you posted it is a duplex 1st and ground floor in crappy shape. they hardly show any pictures because nothing to show. i assume if you throw $100k or more to renovate and make livable you are back up to $600 psf.
ReplyDeleteIf you look at 3C which sold in 2009 it sold at $639 psf.
All the new condos in the 110-116th FDB are doing decent sales and I can not see what is going to cause the developers who have sold 70% of inventory to slash down to $400 psf in 2011. most will have paid underlying mortgage and no benefit to giving away units at that point.
I agree on 2280. There is something wrong with that project and out of all the buildings i looked at was most unimpressed with that one. The prices are high for a property that only boasts a doorman and a roofdeck that no one will use.
Not to be snide but please 125, stop with the "this thing is going down my friends" jargon - it severely detracts from your credibility and any points you may be legitimately making.
ReplyDeleteMike, nothing has really sold. Making statements like 70 percent sold is misleading. The majority of the theoretical sold are in contract and have been for months and months. Repeating the marketing is not the right thing to do at this point.
ReplyDeleteWhat hostility is there on Adam Clayton above 115st? yeah there are some PJ’s but there are PJ’s everywhere. This area has some really beautiful well cared for homes. I live on 132nd between 7th and 8th and it has been nothing but nice. Because you have a couple of expensive restaurants you feel superior. We all have the same burnt out buildings and crime. Now to the point of this article. I checked out the pricing on available units. Million dollar studios. 2 million dollar 3 bedrooms . Seriously? You can get a beautiful fully renovated house for that price. Why is it that every time someone says this is to expensive people freak out? If Harlem is going to turn around it will be by filling vacant units not letting them sit on the market for years. Over the past year I have noticed allot more people moving to my neighborhood as prices have gotten cheaper. So yes I am hoping that condo prices come way down to something people can actually afford.
ReplyDeleteI am with Corey Scott. I wish people would drop prices so these things would FILL UP. I know a lot of people who would buy in Harlem if prices came down a bit more!! I don't care if somebody paid less than me ...
ReplyDeleteOver the longer-term ... more middle class people = more foot traffic = reduced crime and better schools and retail.
Anybody know what % of condo units in Harlem are vacant or still being built?
OK, I just can't take it anymore. 125, you are so misinformed about the market it's not even funny.
ReplyDeleteThat UWS Corcoran listing you posted appears so cheap on a $/sq ft basis because HALF OF THE SQUARE FOOTAGE IS IN THE BASEMENT...HELLO!? Did you even take a look at the floor plan? Did you notice the bars on the windows? Anybody that REALLY knows NYC real estate will tell you that basement square footage fetches a much lower price point than above ground living space. If you assume that the basement square footage is worth half of the above ground living space per square foot, the adjusted price above ground is $665 per sq ft! For a dark, modest and somewhat dinky apartment (formica countertops...yuck!) in a non-doorman building with no elevator, that is not such a bargain (but not terribly expensive either), and it definitely isn't a sign that the sky is falling.
One final point...WALL STREET IS HIRING PEOPLE! I have worked on Wall Street all of my professional career. What happened in 2008-2009 was the scariest period I've ever been through, but I can tell you that since the start of the year firms in general are adding headcount. In my department we have increased headcount by 5-10% since March. No, things are not back to normal, but things are getting better...very slowly (too slowly for those still looking for work), but surely.
The only explanation for the continuously misleading and misinformed commentary from 125 is that he is short the real estate market. In other words, he wants the market to go lower so that he can put his capital to work buying distressed and undervalued properties. There are vultures (a.k.a. white knights) like this everywhere in this country looking for such opportunities. This blog and others like it on the internet (Curbed is a virtual breeding ground for these people) give the vultures a platform to circulate bad information in hopes of maniuplating the market. It's what traders call "talking your own book". Does it work? Probably not, but it certainly doesn't help. Do not be intiminated or misled by such nonsense.
@ Corey Jace. What’s a PJ?
ReplyDeleteWas wondering the same thing Sanou's Mum lol. Harlemfanatic...bloody hell somebody actually gets it. I can also confirm Wall St. is hiring. Good friend at Deutsche Bank has confirmed there is a lot of activity at the moment. Earnings forecasts are still high and UK economic growth jumped 1.1% - fastest quarterly expansion since 2006.
ReplyDelete@chris Gets what? Yes wall street has increased hiring, slightly. What is the direct effect that has on the reasons why apts in harlem are not selling or their relative market value. Over all unemployment in NYC is still quite large.
ReplyDeletePeter,
ReplyDeleteForgive me for going a bit off topic regarding Wall Street hiring. That was in reponse to an assertion by 125 in another thread that Wall Street is cutting jobs. It simply isn't true, but I should have taken that comment to the appropriate thread, rather than bundle my thoughts here. I am not a cheerleader for the market, but blatent misinformation bothers me and I felt compelled to present a factual rebuttal.
Peter, what harlemfanatic gets is a) there are people out there who's main objective is to short the real estate market. Much the same way that people short the stock market.
ReplyDeleteb) wall street has increased hiring. I don't think that really requires any explanation as to the positive impact it will have on NYC as a whole. Oh, OK then. Wall Street peeps spend money - restaurants, theater, bars and just about every other service based industry in NYC. Translation: more jobs and greater disposable income.
Solid earnings reports this quarter = companies like Hyatt who are more than likely monitoring current earnings to get a feeling for where the economy is right now. This sort of thing has a huge impact on whether they decide to move forward or not with specific projects.
Unemployment is still high, however, basic economics dictates that the market and earnings improve before any uptick in employment. It will come.
Also, I have said this a million times before as well. There is no crystal ball. I am just basing the above on where I think things are right now. Would I start putting money into my 401k (heck, I don't even have a 401k ;), probably not, but this has been a critical period for earnings that could easily have pushed the DOW into the low 9,000s if things went badly. Just my perspective. Have a great weekend all :)
ReplyDeleteYou never watched the PJ's. It slang for the projects
ReplyDeleteJust to show how truly uncool I am, what Is The PJs?
ReplyDeleteRegardless of the overall economic picture, Harlem prices are really based on two things - 1) What is overall Manhattan worth and 2) What is the right discount to so-called "prime" neighborhoods- we can debate whether this is 10% or 80%, but it deserves a discount.
ReplyDeleteOn #11 - Obviously the overall economic picture of course affects broader Manhattan prices. But even if we are on the road to economic recovery, Manhattan prices may continue to fall. Remember prices are still probably 2x what they were in 2000. It's my view that Manhattan was probably undervalued in 2000 - just like it was overvalued in 2007 (as the 20% falls showed). Whether the "right" pricing is current levels or closer to 2000 or something in between is up for debate. But I don't think housing prices are quite back to normal yet - it costs more to buy than to rent in Manhattan, broadly speaking. Historically, nationwide, they should be. Another way to say it is the "price/rent" in Manhattan is about 20 (although many sellers are asking for prices WAY higher). Nationwide historical average is more like 16-17. Which means we're still about 15% overvalued. Rising rents - which is likely to happen in an economic recovery - may of course bring the ratio back to normal without prices falling much more. But throughout history there has usually been more parity between buying and renting
2) What is the right discount to "normal" Manhattan. Who knows? My view is that it's 40% (and I could see an argument for less). Great parks, architecture, friendly culture, transportation, improving amenities - litter and poor schools and crime and still - not great amenities on the other hand. This can be debated of course - and it's set by the market anyway, but this does appear to be where pricing is now. What I do know is that this discount will probably shrink over time as Harlem improves - although there will likely always be some discount due to some of the structural things people bring up (the large concentration of public housing is likely to make schools worse and crime higher - but as always, how much is up for debate). And I do think that even through and economic downturn harlem will continue to improve - #1 gentrification, broadly speaking, has persisted through downturns in this country.#2 - think of all of the brownstones being spruced up right now, the vacant condos -this will bring more working people to Harlem which will improve retail and lower crime (yes, underlying social issues will be there but historically more money bring more cops and makes people feel less comfortable loitering/doing illegal activity). Schools may be a challenge but schools aren't great in the East Village or parts of the Upper West Side or Flatiron either.
This is a long-winded way of saying. Yes, I do think prices will clear around $500 psf - which is lower than today - but I also think people who bought for more shouldn't sweat it; over the longer-team you'll do fine, and by this I mean 7-10 years. In the meantime, enjoy your home and neighborhood.
Regardless of the overall economic picture, Harlem prices are really based on two things - 1) What is overall Manhattan worth and 2) What is the right discount to so-called "prime" neighborhoods- we can debate whether this is 10% or 80%, but it deserves a discount.
ReplyDeleteOn #11 - Obviously the overall economic picture of course affects broader Manhattan prices. But even if we are on the road to economic recovery, Manhattan prices may continue to fall. Remember prices are still probably 2x what they were in 2000. It's my view that Manhattan was probably undervalued in 2000 - just like it was overvalued in 2007 (as the 20% falls showed). Whether the "right" pricing is current levels or closer to 2000 or something in between is up for debate. But I don't think housing prices are quite back to normal yet - it costs more to buy than to rent in Manhattan, broadly speaking. Historically, nationwide, they should be. Another way to say it is the "price/rent" in Manhattan is about 20 (although many sellers are asking for prices WAY higher). Nationwide historical average is more like 16-17. Which means we're still about 15% overvalued. Rising rents - which is likely to happen in an economic recovery - may of course bring the ratio back to normal without prices falling much more. But throughout history there has usually been more parity between buying and renting
2) What is the right discount to "normal" Manhattan. Who knows? My view is that it's 40% (and I could see an argument for less). Great parks, architecture, friendly culture, transportation, improving amenities - litter and poor schools and crime and still - not great amenities on the other hand. This can be debated of course - and it's set by the market anyway, but this does appear to be where pricing is now. What I do know is that this discount will probably shrink over time as Harlem improves - although there will likely always be some discount due to some of the structural things people bring up (the large concentration of public housing is likely to make schools worse and crime higher - but as always, how much is up for debate). And I do think that even through and economic downturn harlem will continue to improve - #1 gentrification, broadly speaking, has persisted through downturns in this country.#2 - think of all of the brownstones being spruced up right now, the vacant condos -this will bring more working people to Harlem which will improve retail and lower crime (yes, underlying social issues will be there but historically more money bring more cops and makes people feel less comfortable loitering/doing illegal activity). Schools may be a challenge but schools aren't great in the East Village or parts of the Upper West Side or Flatiron either.
This is a long-winded way of saying. Yes, I do think prices will clear around $500 psf - which is lower than today - but I also think people who bought for more shouldn't sweat it; over the longer-team you'll do fine, and by this I mean 7-10 years. In the meantime, enjoy your home and neighborhood.
"but I also think people who bought for more shouldn't sweat it; over the longer-team you'll do fine, and by this I mean 7-10 years".
ReplyDelete-
You don't know that and your crystal ball is nor more accurate than mine. That main flaw in your thinking GreenGirl is your failure to recognize, appreciate, and factor in that UNLIKE lower Manhattan, there are lots of....well "lots", tons of empty space in Harlem. The same can't be said for the UWS or lower Manhattan. Beyond the amenities and location separating Harlem from other lower Manhattan markets, Harlem has ample room for continued expansion, not so for lower Manhattan.
You've failed to recognize how "scarcity" appreciates lower Manhattan properties and how that dimension is not at play in the apt sector, it is in the bstone/thouse sector in harlem though.
Quite the contrary. All this unsold sitting inventory in Harlem? Well there is plenty of room to double it, triple and quadruple it and after you did that, there would still be lots of space and lots below 145th St. There's plenty of places to build another SOHA118, you can build another Dwyer, etc.
Scarcity is in the equation of value in lower Manhattan, not so in Harlem (in apartments). Even if they were selling like hotcakes, they, the inventory, can be reproduced.
This will always deny the kind of appreciation lower Manhattan enjoys. This is why the Harlem apt market is an entity of it's own, and you can't speak of "Manhattan" and include Harlem, as if the same metrics and drivers are in play in Harlem as they are in lower Manhattan. THEY ARE NOT!
The fact that there's ample room to quadruple the current inventory suggest to me these entry points of $700+ ?....I can't see a reason why in even 10+ years they can expect to see appreciation, unless development (supply) stops in its tracks.
So please, all Manhattan land is not equal even beyond the amenities. Lower Manhattan has the driver/factor of scarcity (of land, expansion, reproducting the inventory, etc.), Harlem does not. Yes, I completely believe in 2010 new Harlem Condo Inventory will be on the market at $700ppsf. Don't you all know people with upstate weekend homes? I know people that bought homes on the Hudson Valley 10 years ago, and sold them for basically the same price they bought them for. different drivers sure, but the notion of seeing no appreciation in a decade is not unusual at all, especially when you have plenty of space to reproduce the inventory, as you do in Harlem
correction, meant to say i expect to see new inventory in harlem @ $700ppsf in 10 years, 2020.
ReplyDeleteAlso, this past week the WSJ reported on the city, the reporter Joseph De Avila reported, "Wall Street cut more jobs in June(1,700 jobs), but New York City's unemployed found one sweet spot: Cupcake shops are hiring. One segment of the industry that seems to be adding the most outlets is cupcake cafes. END.
Point being the flight of well paying jobs continues, the jobs that drive Manhattan real estate are exiting, and the new jobs are in cupcake making.
We all know financial service professionals that are out of work, I've never seen it like this....and most of these jobs are not coming back.
'we all know financial service professionals that [sic] are out of work'. I don't know ANY financial service professionals. Well, except my guy at the bank.
ReplyDeleteDaBear -
ReplyDeleteFirst of all, you're not making sense. I say people who bought will do "fine" in 7-10 years, and you tell me I'm being seing the world through rose-colored glasses. Then you say prices wil be $700psf in 2020. That's more or less my point. So which is it? Never did I say people would double their money - I'm just saying they'll break even, and to relax and enjoy their homes in the meantime!
Second, on land scarcity - I'm not very familiar with the situation farther north, but there really aren't massive vacant lots left South of 125th btween Mornginside Park - 5th avenue. There are quite a few modest sized lots but you really need a good-sized footprint to build a SoHa 118 or Fifth on the Park. Prior to the real estate boom, lower Manhattan had lots of those too (hence the hundreds of new condo developments). And it had conversions. So, no, there's not unlimited room to build, at least in the area I am talking about. Oh - AND - there are also height restrictions in much of Harlem, far more so than in FiDi or Chelsea. So you have a bunch of small lots that you'd can't build too much higher. Lastly, you do realize the cost to build in Manhattan in general - it's not just land availability.
PS - I am married to a real estate developer (who agrees with this assesment of South Harlem - note this is not a dig on Upper Harlem it's just something we looked at) - and I work on Wall Street so pretty familiar with what is going on. Anyway - my firm has generally been hiring. Sooo ...
PS 2 - Lastly, I have always said to people, enjoy your homes - you should have bought a HOME not an INVESMENT - you'll do fine over a long enough time. In Manhattan, prices have always recovered within 10 years - when they started falling in 1988 they recovered by 1998. We're now 3 years into prices falling, so add 7 years and that's a decade. Again, I'm saying people will do FINE not "get rich quick." Buying a home is not a strategy to get rich quick!!
My last point is that I'd like to see prices in Manhattan come down more - I'd like Harlem to be somewhat affordable. That's not a bad thing. I say that even though I have a vested interest - as a brownstone owner - in seeing higher prices. We bought with our eyes open - a home for our young family that we could afford in a neighborhood we like - and agreed not to worry where prices go in the near-term. Life really is too short; it's just a shame to see vacant condos and brownstone shells when Manhattan is so expensive!
ReplyDeleteGreengirl--with you 100%.
ReplyDeleteGreenGirl said...- I'd like Harlem to be somewhat affordable.
ReplyDelete--
Why that's noble of you. What does this exactly precisely mean? What's the difference between affordable and somewhat affordable? And to whom?
SidelineSally -
ReplyDeletePerhaps I should have said "more affordable" - rather than "somewhat affordable." The reality of NYC is no matter what price you pick - it will always be unaffordable to some if not most. I have friends in other cities that rented 2-3 bedrooms for $1k / month not too long ago. My first year in NYC - more than a decade ago - I shared a basement 3 bedroom in Manhattan with 2 friends for 3/k a month. Again - basement apartment. Even in far parts of Brooklyn and Queens - and I don't mean Park Slope or Forest Hills - it's hard to get a real 1br for $1k/month
So - it's hard for me to pinpoint affordable. It's just sad to see people I know - sucessful people who are educated and respected in their professions - be forced to leave. I realize that "affordable" is always in the eyes of the beholder.
Something I always like to remind Americans of is this. The average high school grad in the U.S. earns $30k / year - enough to provide more than adequate shelter and food and healthcare - not necessarily in whatever neighborhood you want to live in though. And public education is free. Yes, wealth is not distributed equally - but compared to historical standards or worlwide standards. My father is an immigrant so this is not lost on me.
i take issue with anyone saying that Harlem is different then other areas in manhattan. Sure it has a stigma, but so did union square, and even times square before the big disneyfication.
ReplyDeleteThe thing to realize is that over time as one area of manhattan got overcrowded the next area got built up. Did anyone expect the meatpacking district to be built up and become a hotspot?
I agree with greengirl with regard to how much could be built. You are basically limited by height and judging from the projects it seems to be about 12 stories or so, so even if you have a large footprint it is hard to build a large building. Look at some of the projects, the douglass was 38 units, parc standard 28, livmor 73.
What i find funny with our whole society is the need for the home that you live in to be treated as an investment. My wife is from Taiwan and can not understand the concern here of what the value will be the day after you buy. We are buying an apartment in one of the new buildings that we plan on living in until it makes no sense and that could be forever. So if the $630 psf i am paying goes down, it does not matter. I am looking to make this my home and change whatever i want without concern someone else has a say.
i believe the lower corridor of harlem at least will continue to see growth. When I first was living in the city you were not supposed to live above 96th street on the west side because of the projects, now there is a new whole foods and a large rental development going up through 100th. people will continue to move uptown as it is less expensive and still accessible to downtown without adding to much time to a commute.
Greengirl, in all due respect, your wrong, very wrong. A home is an Investment and only the wealthy have the luxury to think otherwise. For example a home that is owned by the occupant, even if it never appreciates in value can be an income-producing investment.
ReplyDeleteThere are senior citizens, retired and on fixed incomes who bought homes that have gone up in value 10x and 20x and more. The downside is they can no longer afford the property taxes and are forced to move from their lifelong neighborhood. This is common. Thanks to "Reverse Mortgages" they can live out their days in their homes, pay the property taxes and have money to improve their quality of life in all sorts of ways including keeping up with the cost of their personal health care. I myself helped 3 different longtime Black Harlem home owners from having to move from their lifelong neighborhood by getting them into reverse mortgages (i'm not a fan of rev mortg but it was their only option and did accomplish their goals).
Lots of Baby Boomers have just had to push back their retirement 10+ years, their savings devastated by the decline in the stock market, 401Ks turned into 201Ks (bad joke, 401Ks cut in half!). This is not uncommon at all. As millions of people have seen a sharp decline in the value of their retirement account, their home is often their financial life raft. And we've seen when that life raft purchase was made irresponsibly and not mindful of the financial aspects, the financial risks surrounding it....you can be financially devastated by your home.
Mike, you say, "So if the $630 psf i am paying goes down, it does not matter.". It might, some condo boards in the city have begun adopting more co-op-like rules and regulations in an attempt to exert more control over their building communities. This is especially true in these Harlem 'condos' that have sprung up that are more like 'condo-ops'. The greater point is co-op buyers had your exact posture, and when it came time to move (sell), a board rejected the sale of their unit, not satisfied with the ppsf.
Real Estate selling is like most selling and they try and evoke and conjure "emotion". Like how "diamonds" are sold. When you make an emotional decision, it's usually not a fiscally prudent one. Everyone in the equation views the matter, the sale, as an investment; the developer, the financing bank to the developer, the buyer's mortgage source, the selling agency, as should YOU, the buyer. Ever remodel a kitchen or a bathroom....and when you see the price tag is $50K or $100K, what does the home remodeler sales person say to get you to sign and have the work done?..., "....well...it's an investment". The whole real estate industry applies metrics of appreciation (value) on every penny you put into your home.
People's lives don't stay perfect, they are not savvy to Wall St, their retirement savings, in life all sorts of unplanned unideal circumstances befall us. I know people that bought in Manhattan in '07, then got divorced, lost their jobs and unemployed 18+ months, have had serious health problems (battling cancer), lost more than 50% of their retirement, etc. Very very few people can purchase a home free from being very mindful of the financial investment aspects of it.
I suppose if you're wealthy, unconcerned about your retirement, at no risk to any future health calamity, your small toddlers will surely get full scholarships to Columbia or Yale, you'll never be divorced, never lose your job, know you'll always be able to pay your property taxes, none fiscally draining or adverse will ever happen to you, well then sure, you can afford to not see your house as an investment.
A lot of great input here. As with any sort of investment, it is so difficult to know where to put your money. Stocks? As SidelineSally said, 401ks became 201ks almost over night. Unless you are some sort of power day-trader, I think stocks are the riskiest long term bet of all. You could take your down payment money and stick it under the mattress. Problem is, 10 years from now inflation will cut the real value in half.
ReplyDeletePersonally, I think buying in Harlem is a safer investment. Yes, it is an investment (SidelineSally, I think GreenGirl was probably talking more about people who want to flip in a year or two and make a quick buck), but it is also a home and if you plan on living here for the next 5-10 years then I agree with GreenGirl, I think you will be fine. As with day trading, if you are looking to make a quick buck and flip, then Harlem probably isn't the place for you.
Also, people who talk about Harlem being this unique entity where rules that pertain to other neighborhoods do not apply, that is absolute nonsense. Real estate values on the UES were ripped apart this year, more so that in Harlem or just about every other neighborhood in the city (Battery Park also fared pretty badly). Additionally, Harlem is one of the last bastions of NYC that has retained some of the old-school, traditional vibe that made NY what it is today. That is a huge attraction and not to be underestimated.
Harlem will continue to improve and gems like Mount Morris Park will become genuine, legitimate venues for concerts and events moving forward. Not to sugar coat things, there is a lot of work to be done to get to that point.
Just to add, it is pretty funny watching the lengths that Bloomberg is going to in order to get a few 'Dumpster Pools' in the city, when up here, Mount Morris Park has an amazing pool of it's own (just get there early in the morning :)
BTW...the inflation comment was a slight exaggeration :)
ReplyDeleteI am not "wrong" that homes are not really an investment - people should not be buying, as Chris said, for a quick flip.
ReplyDeleteFirst, real estate prices over the long-term rarely outperform inflation. Obviously this has not been true in Manhattan but nationwide, this is true.
I do agree that people can have unforseen circumstances that can make them sell. But I don't think everybody who bought in 2007 who is sweating where home prices are "has" to sell right now. So this is the exception not the rule - even if somebody loses their job, they shouldn't have bought a place without significant liquid savings (and emergency savings funds shouldn't be in the stock market in the first place). This is how people thought 15 years ago. I feel sorry for your friends who got divorced or got sick - you can't predict or prepare for these things. But this is not "most" people.
But that's the whole point - people need to stop assuming home ownership always makes sense for them. It doesn't.
So, homes are not a great 'investment' as a general role because unless you stay there for at least 5 years it's hard to make your money back because of the transaction costs. And you really pay very little principal down in the early years of a mortgage.
Your thinking is actually flawed - home ownership is a BETTER investment for the wealthy than the lower middle-class as a rule. This is for all of the reasons you just said - they are less likely to have to sell for reasons of job loss (they generally have more savings) or divorce (the divorce rate for college graduates in this country is less than 20% - the divorce rate for high school dropouts is something like 70%).
I do feel sincerely for those who are underwater and need to sell. But this cultural obsession with home ownership - the assumption that home ownership is always more prudent than renting - is fundamentally flawed. It's the reason homes got too expensive in the first place. People thought prices would keep going up and bought without thinking it through. Your home doesn't owe you wealth creation ..
PS I agree it's a travesty that people are forced from homes they bought decades ago because property taxes are too high.
Sally i have to say i stick with what i said and also what greengirl said, a home is not an investment.
ReplyDeletePlease my parents bought a home to live in. they did not sit around and say oh i hope this goes up in value so i can retire on this investment.
As for harlem condos. the one i am buying is has condo rules and hopefully stays that way. i would assume any change would have to be approved by all the owners anyway in order to chnage and amend the bylaws. this is why i am buying condo and not a coop again.
and last i checked the only control a condo board had was right of first refusal. so unless you have wealthy people who want to fund apartment buying, that is just a joke.
So i will say again apartment buying as an investment is an awful idea. As a place to live if the price is right is an excellent idea.
I agree totally with Mike. There is a lot of unnecessary lecturing going on here. I own and do not give it a second thought. I bought because I liked the place and it was within my budget. I wager that is what most people do. They do not obsessively ponder ppsf and other real estate minutiae.
ReplyDeleteMike Said, "So i will say again apartment buying as an investment is an awful idea."
ReplyDelete-
The Real Deal, "As home prices and sales continue to slide in New York, condominiums are getting cheaper by the dozen. "Brokers are targeting American and foreign investors who would buy the apartments and then rent them out, with the potential to get a 4 to 7 percent return on their purchase" - Stephen Kliegerman, Executive Director of Development Marketing at Halstead [Harlem's Savoy West & The Kalahari are marketed like this by Halstead, according to Halstead].
Mike & Greengirl, your assertions that apts are not investments counters the facts on the ground, the behavior and actions of the real estate industry, and overall real life. Who's got a better and more accurate read on this, you Mike or you Greengirl or Halstead? Isn't it a bit silly for you two to insist an opinion that counters the FACTS of Halstead?
Since the facts are clear that everybody in the equation treats them as investments, it's only prudent and responsible that a potential buyer be mindful of the same.
http://therealdeal.com/newyork/articles/halstead-selling-condos-by-the-bundle
Now please, ESPECIALLY in HARLEM, a FRINGE MARKET at best...a potential buyer must run any potential property purchase through the "investment ringer".
Wow, Sally, we don't all subscribe to "The World According to Halstead." In fact, they are part of the problem. Again, stop with your unnecessary lecturing - you are not really listening to Mike and Green Girl anyway, just using them as a springoard for your (newly?) acquired playbook learning.
ReplyDeleteEverything you say about home vs investment us true. But in Harlem, the quantity and density of the public housing is so great and entrenched that you cannot just call it another gentrifying neighborhood. Those who use other neighborhoods as an example and justification that Harlem will just gentrifying in 10 years are flat wrong. Until a large portion of the subsidized housing in many of it forms are turned market rate Harlem is crippled for real growth. I am not saying many of the projects cannot stay to allow this, but the subsidized housing history is so unique and, again, entrenched, that the ratio of market rates to subsidized will never be like the other gentrified neighborhoods in manhattan. That has a reall effect on the value of property in Harlem, now, and in the future.
ReplyDeleteI agree with Harlemite, and can add that for me, the "investment" question here is a fundamentally connected to improvement on the quality-of-life issues. If investments were to increase in value, it would necessarily mean that quality of life had improved. Moreover, I think it is important to consider the "unique history" factors, not just when evaluating investment potential, but when simply considering, Do I want to live there ?
ReplyDelete"Investment" can be meaningful in different ways. Many people buy into modest or developing areas, and/or purchase a small-ish places, intending to build careers and save and then move to better places ... and so on. This is still the case for many people, and for them, "investment," or potential re-sale value, should be something taken into consideration - whether it would be possible to sell the "starter place" and buy something better, however that might be defined: bigger, nicer neighborhood, whatever. It is not always a matter of buyers "flipping" properties.
Housing Project conversations have been moved over to today's Last Week's Most Talked About Posts open thread.
ReplyDeleteI have to say, brokers are the reason people are in trouble. got in an argument with a broker/personal finance guy on streeteasy because he said it is normal to buy a home for 3-5 years. well that is crap the only people who make out are the brokers who fix a 6% fee which is not based on anything. I truly hope the model gets fixed to an hourly or contracted rate and not a percentage. where is congress to come after an industry that is fixed.
ReplyDeletehousing projects are all over the city and I find it crazy to argue about it. I have many clients building 80/20 buildings all over the place. So does that mean that the 20% that goes to people under a certain income level makes the area less deseriable? well then avoid UWS, UES, Midtown, etc.
Sally you are taking an article about a broker targeting investors. Where does it talk about people who actually want to live somewhere. it talks to brokers who of course want money, targeting people and telling them to invest to rent out.
We are talking about buying to live.
To go back to that. I feel todays PSF dollar amoutn is a reasonable amount to spend for the space adn an up and coming area such as central harlem right above Central Park. Once again i will state many areas have changed over the years with people screaming at the top of their lungs that you are making a mistake. This is why i am actually comfortable with the money i am spending because of all the doomsday people.
the issue here is it seems more about race then anything else. Who are these people you are afraid of? I have to say my experiences aroudn the neighborhood as i was deciding my comfort were positive. People were more friendly and more apt to just say hi then anywhere else, where everyone is in a rush and feels superior to each other.
Lets focus on what is really going on and that is people like me are more then willing to live in harlem now. Take a look at who is buying, i did that in the building i am going into adn googled and there are so many professionals who are buying and not because it is cheap. It is the space you get for the money.
I will continue to say buyign a home for yourself is not an investment. the only thing that would change that is if you are planning on moving after a certain time and will then rent. that is not my motivation.
Sally one last thing, read what you quoted..."targeting"
ReplyDeleteWho wants to be a target?
They are convincing people to buy something to try and make money, which as we just saw, wiped out a lot of people. We are not talking just individuals, but people who buy buildings both commercial and rental. thing stuyvesentant town and PCV.
You really do not understand the fundemental difference between buying a home and an investment. I could also buy a REIT or a real estate mutual fund if i wanted to invest in real estate.
the point is i want a home. if it increases in value great, if it stays the same, great. As i plan to live in this new apartment for at least 15 years or more.