New York's luxury real-estate market is crashing

boing
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Jersey City != NYC. And whatever the median is in NYC as a whole, the fact remains that developers in desirable parts of the city are for the most part no longer building and converting new rental units intended for middle-class or working-class people like they still are across the Hudson.

If the new units are priced to the current market rate for similar existing ones it would be a simple issue of supply and demand, but from what I’ve seen the rental rates for new construction are much higher because “new and shiny.”

For example, here’s a large new construction 1-BR in Murray Hill: $4225/month. Existing 1-BRs in the same neighbourhood of about the same size with doormen go for around $3300/month according to a quick look on Craigslist. Here’s one of roughly the same size with similar amenities in a 1963 building: $2900/month.

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and once they are built, it’s not like they’ll ever be converted to more afforable units just because they don’t sell. so the prices are crashing, bfd, it doesn’t make life for us plebes and better. they need to not be built in the first place.

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So when all of these blue state urban millennials are driven out into the surrounding rural areas by real estate speculation, would they please register and vote, thereby preventing the next YUUUUGE electoral college victory? Thanks!!

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A limited number of neighborhoods. And often they aren’t exactly new per se. But expansions of old buildings, or nearly identical or slightly taller footprint replacements. With combined office space and residential space. Plus a little something happened about 17 years ago that led to a lot of necessary construction. Most of those towers were planned or approved a while ago.

Also remember Manhattan is the the smallest Borough. There’s not a lot of high rises going in anywhere besides Manhattan. Low-rises and row housing/pseudo-brownstones are a lot more common. In terms of the ratio of housing units added or, well, manipulated in the City; the number of high rises going in is apparently dwarfed by shorter construction.

Yeah in Jersey City. Which is not part of NYC. Or the state of NY.

When I left Brooklyn about 5 years ago I was spending $1850 a month for a studio in Bushwick (and Bushwick was really shitty at the time and not yet a trend). And that was cheap Today the average rent for that neighborhood is something like $2200. Think my old apartment rents for ~$2500. A friend who lives down the block from where I did currently pays $3200 a month for a 1 bedroom. And I haven’t seen anything to indicate rents are going down anywhere in the city.

Your link cited a 1.3% drop. That’s minuscule. The same metric fell more than twice that in 2008. It didn’t turn out to be a sustained trend, and the rent increases only accelerated during the prolonged recession. Rent and purchase prices aren’t going down in a real way in NYC, Manhattan especially, without some serious regulatory and urban planning changes.

And as a result Jersey City, Hoboken and the like are increasingly where the middle class people are moving to. Same developers building that stuff. Exact same company puts middle class condos in Hoboken and builds a super luxury coop across the water.

Not without another round of this:

The developers still want to see their investment back.

NY like a lot of large cities has population growth in excess of the number of housing units added. Property values and housing costs will continue to go up as long as that’s true. NY needs to be building a lot more housing. The fact that what units are added, are almost exclusively high value investment properties just exasperates it. Because you’re adding and updating units. But they’re functionally excluded from the housing pool. So you might as well be removing units. It does let DiBlasio brag about adding 50,000 units of housing though.

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JC is totally is part of the NYC housing economy, the NYTimes regularly features it in the RE section, there’s a forest of luxury towers on the waterfront. Believing otherwise is just snobbery. And while no private entity is building for the working class anywhere, there’s plenty of middle class construction from Brooklyn to Hudson County. It’s the NYC middle class with dual 6 figure incomes, but that’s the new normal.

Some of this is normal, Jane Jacobs wrote 60 years ago about how all new urban housing was built for the wealthy and middle class, trickling down to the working class as it became shabby. The evolution of Harlem is a perfect example. Postwar zoning and rent controls interrupted that process locking the upper classes into their homes and restricting new development so that structures were coop & condo converted, renovated and the middle and upper classes remained where they were, forcing the working class to also remain in increasingly dilapidated rent controlled housing.

White flight eased that problem for decades, but the return of the middle class to renovate and gentrify has exacerbated the lower class housing issues. But without this cycle entire neighborhoods would be pulled down as housing that had not been maintained because of low cashflow became unlivable with no economic reason to renovate.

In my city, the predominant zoning is decidedly in favor of reducing density rather than enabling more housing, restricting a 25 x 100 lot to 2 huge apartments in a 3 floor house, where legacy lots often have up to 10 units in a 5 floor walkup. If a builder wanted to create a “prewar” style low rise apartment building with dozens of homes in a “nonluxury” neighborhood, they cannot without variances.

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And they also build a lot of new construction rental units in NJ, enough that they can do they kind of volume business with cheaper or at-par rental rates on their new construction that they can’t or won’t in NYC (because there are a lot more people making under upper-middle-class wages). Which means the NJ landlords of buildings serving the merely middle class have to lower their rental rates while their counterparts in Manhattan get to raise them.

If I were one of those NJ landlords I’d be annoyed at the larger situation, but I’ve found that the vision of most landlords doesn’t extend far past their neighbourhood or small city.

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You keep saying NYC rents keep going up but that appears not to be true. I keep posting links otherwise but you keep saying it like it’s fact.

In Manhattan, the median rental price fell 2.9 percent from last year

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Yes, but it still isn’t NYC. You’re going to pay a lot less for an apartment in a Hoboken tower than you are in a comparable one in Manhattan.

That’s not middle-class, even by NYC standards. That’s upper-middle-class.

Jane Jacobs’ NYC wasn’t actively squeezing out middle-class people. She’d be aghast at the city becoming a playground for the wealthy at the expense of everyone else.

If some modern-day Robert Moses tried to build the Mid-Manhattan Expressway today a new Jane Jacobs wouldn’t be needed to stop it. Instead of activists from all classes begging the city to tell him no it would be a bunch of wealthy people demanding it (with much more certainty of outcome than Jacobs and her comrades enjoyed during their struggle).

The middle class never returned. The wealthy did, whether it was highly-paid techies, trustafarians, Wall Street brokers and executives, established higher-ups in the media-industrial complex, winners in the creative class economy, celebrities, and foreign oligarchs.

I’m saying that the rents on new construction units are significantly higher than those on comparable existing units, and that in the context of Manhattan and Brooklyn this has the potential to increase rents across the board despite increased supply in a way it doesn’t in Hoboken or Jersey City.

It’s not a simple case of supply and demand because developers in Manhattan and parts of Brooklyn are deliberately excluding anyone who’s making less than an upper middle class salary, while units added in NJ are not.

And, again, that’s the median – the rental rates on new construction are higher. Also, there are fewer new leases being signed because there are fewer people who can afford to live in NYC. The “slow grind” only indicates that the landlords, hungry for all those upper-middle-class+ tenants, haven’t cottoned onto the fact that there aren’t enough of them.

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What does it mean that 1 in 10 units currently on the market are sold? Sold in what period of time? Without stating that, this seems like a useless measure… in my market I’m sure none of the currently available 1000+ properties are going to sell in the next 10-minute window. But I’d bet over 90% will sell in the next 12 months. Choose some intermediate time frame and you can cite any value you want between 0% and 90% for this statistic.

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It looks like year-on-year, Sept 2017-Sept 2018.

The point is that there are only so many buyers for $10-million condos in NYC (or really anywhere) over the next 48 months, but the developers keep putting up these ultra-luxury towers with units that start at $4-million (not a lot of people can afford those, either).

It’s a high-end microcosm of the larger problem with real estate in Manhattan, Brooklyn and parts of Queens, which is now focused on building a lot of pricey rental and condo units for a dwindling number of potential renters and tenants who can afford them.

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For a grand total difference of around $120. Off a $4100 mean rent. That’s not a material difference at those rates. And its not a move towards more affordable rents. But again. We saw bigger drops during the early years of the ecconocolypse. They reversed themselves shortly. And in real effects most residents continued to see their rent go up year to year. So practically speaking it didn’t have an impact. And this won’t. Show me evidence of that being sustained long term, or of much bigger drops.

The real estate business world wide exploded a decade ago. And while foreclosures hit an all time high, and home values cratered. NYC property values and rents largely continued to go up. And the terms haven’t changed for NYC real estate. The tax structure, regulations, urban planning and population growth are still pretty much exactly the same as they’ve been since the 90’s. Short of a population exodus like the one seen in the 50’s and 60’s housing costs aren’t going to go down in a material way with the current approach.

I’ve run across some news stories and op eds indicating that developers and land lords might be sitting on vacant stock rather than renting it during these brief soft periods. Essentially they can afford to not bring any income in off a certain number (sometimes all!) of their units for up to a year as they wait for rents and sale prices to come back up. Why rent at $2700 in July. That just locks that rate in for at least a year, and caps raises there after. Wait till January and you can rent at $3200. Why sell in May at $2m if you can wait till August and sell at $2.4. Spread across thousands of units its apparently a good way to do business. There’s some speculation that that sort of withholding behavior might exaggerate some of the numbers with regards rents and values. Soft periods look softer because there are fewer transactions.

They know the demand is there, and that some one will pay what they’re looking for. Eventually. And they’ve got the resources to wait. These units aren’t built or owned by small local concerns or independent land lords. The middle and working class rent small spaces in crappy worn out buildings owned by small operators. Your landlord is a person you have met, who is very excited about this frost free refrigerator. The “luxury” units (which would often qualify as normal housing elsewhere save for the price. Buddy of mine lives in one of those buildings) are built, owned, rented and sold by big development companies. Your Landlord is an LLC.

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Since this isn’t true, we cannot discuss this issue as we have different fact sets.

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Well, you’re operating on a fact set that sees Manhattan rental rates as being similar to Jersey City rates since they’re all part of one big regional market. I see them as being very different markets within the region, now serving very different economic classes in a way that they didn’t before the mid-1990s.

There was a time when Manhattan strove to be as economically diverse as Hoboken, so the people who made the city run could afford to live there. At that time yes, they might have been considered one large market with some slight internal variations. That time is decades past.

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No, I said NYC. I guess to some people Manhattan and NYC are synonymous, but that is not true either. If you think Hoboken is economically diverse, you are in the last century. Think Park Slope, but with luxury hi rises.

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Manhattan is part of the NYC market, as are the other four boroughs. You’re claiming Hoboken and Jersey are, too. In a regional sense I’d agree that they are, but Manhattan, Brooklyn, and now parts of Queens are very different markets than others within the region.

It’s great that you’re a landlord in Jersey City, but that’s not the same thing as being one in Manhattan any more than it is being one in Scarsdale or Mineola, even if you’re all in the same regional housing market with the same basic housing stock. Simple supply and demand may work perfectly well where you are, but last I heard Jersey City isn’t vying to be a Disneyland for the wealthy.

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If they’re anything like greedy commercial landlords who kick out established tenants, they might be taking advantage of tax breaks while they wait and the premises sit empty, too.

Exactly. And when fewer people can afford to buy or rent because the prices increasingly exclude them, of course you’ll see fewer transactions.

This is where I think they’re miscalculating, especially in the $4-million+ true luxury segment. “Eventually” may be a decade there.

It gets a bit better in the next segment down, starting at $700k purchase prices, but it’s still excluding enough economic classes that their “eventually” also might take longer than the developer planned.

Completely different game there than with the big LLCs. If that kind of landlord isn’t greedy or stupid he doesn’t have to be a genius to have a nice little business that can chug along through multiple generations (as long as the city where his property is doesn’t completely implode economically).

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Trust fund babies are crashing out in Williamsburg, Brooklyn, these days.

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A bunch of cities around the world are trying something similar out. Where I’m at, in Vancouver, an empty homes tax came into affect almost a year ago. The goal isn’t to explicitly bring down property values, but rather to help out with rental prices and cost of living in general. It seems like it’s working.

Anecdotally, I have some friends who are now renting previously empty luxurious home near the beach with a pool and a three car garage for less money than their previous digs. They certainly lucked out, but apparently, this tax is bringing more rentals to market and bringing down costs.

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About goddamn time!

That entire market was kept afloat by foreign money laundering and destroying neighborhoods.

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