NY Housing Article: Any thoughts? (New York, Nassau: for sale, real estate market, 2011)

[glags11]

New York Home Prices Forecast to Drop 40% - TIME

[dman72]

I can't believe it will get that bad, but then again, I hear from people in RE that it is getting really difficult to get people mortgages..even people with good incomes and money to put down. Just hearsay of course.

[I_Love_LI_but]

This is a very short and not very comprehensive nor well defined article based only on opinions of one group of investment banking analysts at one investment bank (Deutsche Bank). Their definition of "metropolitan New York City (which includes Westchester, northern New Jersey and other nearby areas)" is overly broad. I also cannot fathom why a home for sale in Atlantic City, NJ was depicted in the article, as surely everyone knows Atlantic City, NJ is not considered part of the NYC metro area. But I will give them a pass on that. However, I cannot give them a pass on claiming that real estate in the extremely diverse submarkets (Manhattan, Brooklyn, the Bronx, Queens, Staten Island, Bergen and other counties in NJ, Westchester, and, although they didn't mention them specifically, Nassau and Suffolk, etc.) and the subneighborhoods of those submarkets of the NYC metro area will uniformly fall that much. You cannot lump them all in together like this, as each submarket and the specific neighborhoods within those submarkets are very individual in terms of their local real estate markets.

I think DB's analysts are betting on it falling this much because of one thing almost all of these markets do have in common, which is the lack of affordability, which drove the large bubble burst in California. They are betting that we will follow what happened in California, where a million dollar home can end up sold at auction for $300,000, due to the lack of affordability. I agree that homes in our general area are not priced affordably for the typical salary range here, so I can see that if people can't afford the homes, the homes won't sell until they are more affordable. I think the only thing that could drive our market to go down so much as California's did would be for a revamping of foreclosure. It takes much less time to foreclose in California and that contributed to their bubble burst also, as homeowners had a lot less time to try and get out from under. In the current economic climate, I do not see any changes that would hurry NY's foreclosure process from the typical 9-18 months (and sometimes as long as 3 years) to how it is in California and many other places (3-6 months to foreclosure).

[propain]

No real facts on how they got to a 40% loss. I think its way high of a loss for most areas. Some city apartments ect might see that drop, but suburban homes will not drop 40% on LI. No way. If that happens the last of the banks will go out of business. I know I would stop paying my mortgage if I had a 500K mortgage and they suddenly decided my house was only worth 200K.

You will not see houses selling for 1,000,000 on LI selling for 600,000.
You will not see houses selling for 350,000 selling for 140,000
You will not see a 40% loss.

[Elke Mariotti]

Originally Posted by I_Love_LI_but

This is a very short and not very comprehensive nor well defined article based only on opinions of one group of investment banking analysts at one investment bank (Deutsche Bank). Their definition of "metropolitan New York City (which includes Westchester, northern New Jersey and other nearby areas)" is overly broad. I also cannot fathom why a home for sale in Atlantic City, NJ was depicted in the article, as surely everyone knows Atlantic City, NJ is not considered part of the NYC metro area. But I will give them a pass on that. However, I cannot give them a pass on claiming that real estate in the extremely diverse submarkets (Manhattan, Brooklyn, the Bronx, Queens, Staten Island, Bergen and other counties in NJ, Westchester, and, although they didn't mention them specifically, Nassau and Suffolk, etc.) and the subneighborhoods of those submarkets of the NYC metro area will uniformly fall that much. You cannot lump them all in together like this, as each submarket and the specific neighborhoods within those submarkets are very individual in terms of their local real estate markets.

I think DB's analysts are betting on it falling this much because of one thing almost all of these markets do have in common, which is the lack of affordability, which drove the large bubble burst in California. They are betting that we will follow what happened in California, where a million dollar home can end up sold at auction for $300,000, due to the lack of affordability. I agree that homes in our general area are not priced affordably for the typical salary range here, so I can see that if people can't afford the homes, the homes won't sell until they are more affordable. I think the only thing that could drive our market to go down so much as California's did would be for a revamping of foreclosure. It takes much less time to foreclose in California and that contributed to their bubble burst also, as homeowners had a lot less time to try and get out from under. In the current economic climate, I do not see any changes that would hurry NY's foreclosure process from the typical 9-18 months (and sometimes as long as 3 years) to how it is in California and many other places (3-6 months to foreclosure).

Excellent comment/points!

[twingles]

Originally Posted by propain

You will not see houses selling for 1,000,000 on LI selling for 600,000.
You will not see houses selling for 350,000 selling for 140,000
You will not see a 40% loss.

Agreed. I don't know anyone who would sell their house for 40% less than it's worth right now, unless they absolutely, positively HAD to sell, and I don't know anyone who's in that position. Plus that would take me, for instance, to right back to close to what I paid for it, and I'm not letting it go for that price - not after 12 years worth of paying mortgage interest and property taxes on it. Those are the intangibles that no one considers!

[raiser]

Originally Posted by twingles

Agreed. I don't know anyone who would sell their house for 40% less than it's worth right now, unless they absolutely, positively HAD to sell, and I don't know anyone who's in that position. Plus that would take me, for instance, to right back to close to what I paid for it, and I'm not letting it go for that price - not after 12 years worth of paying mortgage interest and property taxes on it. Those are the intangibles that no one considers!

Thats fine but for the people who leveraged themselves to buy houses in 2005-2006 with arms and alt-a's may be struggling to keep afloat on mortgage payments. If they are already upside down on the morgage or do not have a loan with freddy or fanny they may not be able to refinance.

This also does not include the people who have gotten layed off from their city jobs or the increased train prices or gas prices that are almost back at $3 a gallon. NY State taking away the star program for taxes.

The Obama $8000 tax credit may stimulate the market up but with interest rates going back up to 6%+ something has got to give. I personally think LI wont hit the bottom until 2011.

[propain]

Originally Posted by raiser

Thats fine but for the people who leveraged themselves to buy houses in 2005-2006 with arms and alt-a's may be struggling to keep afloat on mortgage payments. If they are already upside down on the morgage or do not have a loan with freddy or fanny they may not be able to refinance.

This also does not include the people who have gotten layed off from their city jobs or the increased train prices or gas prices that are almost back at $3 a gallon. NY State taking away the star program for taxes.

The Obama $8000 tax credit may stimulate the market up but with interest rates going back up to 6%+ something has got to give. I personally think LI wont hit the bottom until 2011.

Never doubt stubbornness of LIers. They would rather you pry their home deed from their cold dead fingers than take a 40% loss. They will simply take their home off the market and make it work somehow.

Of course the desperate will need to get out fast so you will see cases of big drops in houses as their situation becomes more desperate. The only time you will see 40% loss is on short sales or forclosures.

If I were to go fully under and then realize my home was only worth a fraction of what the bank gave me a mortgage for you know what im going to do right? Im going to stop paying my mortgage and go into foreclosure. Id rather the bank take my home from me 6-10 months later than short sale my home for a loss to some lucky buyer. I will squat in the home as long as possible and save every penny I have until that happens.

The bank will then take my home and sell it. A home flipper will buy it most likely and relist it for a much higher price. The buy still wont see the 40%. It just wont happen.

[raiser]

Originally Posted by propain

The bank will then take my home and sell it. A home flipper will buy it most likely and relist it for a much higher price. The buy still wont see the 40%. It just wont happen.

If enough houses foreclose the market will get saturated with homes for sale and the prices will have to drop. The banks will list the house for market value not what they think its worth because they are too stubborn to sell it,

[BigMike50]

40% is a bit high but I believe 20-25% is more realistic. Thank goodness I sold last year