
New York’s Wealthiest Cut Losses as Manhattan Real Estate Falters - jseliger
https://www.wsj.com/articles/new-yorks-wealthiest-cut-losses-as-manhattan-real-estate-falters-1543508960
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projectramo
As far as I can remember -- my entire adult life -- I've heard about this
great real estate bubble in the big cities. Every year I hear NYC and SF are
about to crash because the growth is not sustainable.

I assume this myth has been around much longer. Perhaps people know what was
being said or written in 90s, 80s, 70s and 60s.

But in spite of all this, in spite of temporary slow downs and slight blips,
the broader market just becomes more and more expensive. Numbers that seem to
make no sense, or seemed absurd even 5 years ago get blown past.

I don't know what the reason is, but I would love to read a truly satisfactory
explanation for this.

~~~
victor106
Texas does not have state income tax but has high property tax (rightly in my
opinion)[1]. 1.973% in Austin,TX

California has high state income tax but low property taxes.[2]. 0.625% in SF

The worst is New York. NY has high state income tax and high property
taxes[3]. 1.925% in nyc. That is insane. I just don’t get how people put up
with this and where all that money is going to

[1] [https://smartasset.com/taxes/texas-property-tax-
calculator#I...](https://smartasset.com/taxes/texas-property-tax-
calculator#IZMmjqscrb) [2] [https://smartasset.com/taxes/california-property-
tax-calcula...](https://smartasset.com/taxes/california-property-tax-
calculator) [3] [https://smartasset.com/taxes/new-york-property-tax-
calculato...](https://smartasset.com/taxes/new-york-property-tax-calculator)

~~~
jdhn
>I just don’t get how people put up with this

They don't. In the past couple of years staples of the Northeast such as Wawa
and Yuengling can be found in places as far away as Florida. The reason for
this is because of the number of people leaving the Northeast due to the
fiscal pressures that you describe.

Also, NJ is just as bad as NY when it comes to taxes. My parents live in
Central Jersey, and their property taxes are insane.

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neom
I moved to Manhattan 10 years ago and it's been really sad to watch the
decline, both in commercial and residential, more and more full city blocks of
store fronts sit empty, and friends who have bought homes are experiencing a
depreciation in their investments. Wealthy folks from outside the US have or
had a "cottage" in Manhattan, but people are trying to sell their 2nd or 3rd
houses, and people are not buying a 2rd or 3rd house. My biggest concern,
however, is if the changes in weather and environment are going to impact this
Island.

~~~
addicted
NYC landlords need to stop waiting for the big pay day and start dropping
prices.

And that appears to be what’s happening. Commercial landlords apparently are
still waiting, hence the empty storefronts, but it seems the residential
landlords have finally realized the market needs to correct.

~~~
neom
I was speaking to the owner of the building I work in (335 Madison) about
this, he said because so much is owned by families and paid off, (his
included) they can afford to leave them empty vs lower the rent, therefore
lowering the property values that are leveraged.

~~~
dmoy
Curious - what's the property tax rate? Is there a tax if it's not occupied?

~~~
sethhochberg
We do not have a vacancy tax, no. There is lots of discussion locally about
adding one in some form, for both residential and commercial properties.

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code4tee
The high end of the NYC real estate market was always just effectively made up
big numbers. $15 million home, $25 million home. It’s hard to objectively
assign real values to such places. Frankly though if you can’t afford to blow
a few million on the speculative ultra high end market then you have no
business owning such properties.

While all NYC area real estate is pricy, outside the ultra high end stuff the
market isn’t seeing such fluctuations.

~~~
ChuckMcM
Except that in the article it said that even the sub-million dollar homes were
being pushed down by the same forces.

Tax law changes, higher interest rates, and currency controls on foreign
buyers means it costs more in real wealth to buy a home, so the prices shrink
to match. (or they don't shrink and the houses just stay on the market)

~~~
projectramo
I thought the article said the sub-million market was pushed down by different
forces.

Below million market was pushed down by interest rates.

The over million market was pushed down by capital controls on foreign buyers
and tax law changes.

This seems to support what the OP was saying.

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cultus
This is good news for the vast majority of people in NYC. The same thing is
happening in Seattle where I live, and I'm thrilled.

~~~
jonknee
It's a poor headline as it's not just the wealthiest:

> But agents said the slowdown extends beyond new condos, hitting every
> segment of the market. While the cooling is more significant at the high-
> end, smaller units also are affected. In the third quarter, the median price
> for a one-bedroom Manhattan home was $815,000, down 4% from the same period
> in 2017. The volume of sales fell 12.7%.

> “What’s most significant about 2018 is that even the sub-$1 million market
> is slowing because of rising mortgage rates,” said appraiser Jonathan
> Miller. Rates for a 30-year mortgage averaged 4.81% in late November, up
> nearly a full percentage point from the beginning of the year, according to
> Fannie Mae and Freddie Mac.

Higher interest rates and lack of SALT deduction are a big double whammy for
the non uber-wealthy (who can afford to move to optimize taxes).

~~~
gist
Being able to pay (or be qualified to get a mortgage to pay) $815k for a home
kind of makes you 'wealthy', no?

~~~
jonknee
It probably would in Buffalo, but not in Manhattan. The median home price in
Manhattan is nearly $1.3m:

[https://www.zillow.com/manhattan-new-york-ny/home-
values/](https://www.zillow.com/manhattan-new-york-ny/home-values/)

~~~
gammateam
Fortunately there is an endless supply of dreamers from bumbaf*ck that will be
impressed by your modicum of six-figure stability in Manhattan. At least a few
weeks after they've realized the hopelessness of Carrie Bradshaw fantasy and
understand the value of a 400 sq. ft. walkup.

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baybal2
I think Manhattan real estate is overpriced. The price should be lowered.

And about "high-end dominated markets." I think it's true that there is simply
not enough of billionaires and Saudi sheikhs to fill 10 million bucks
apartment buildings, and there are simply too many places in the world
competing for billionaire level clientele. People developing such projects are
too optimistic, and omit that they will never make money on them because there
are too many ifs in their plans. Simple demand/supply math is not on their
side, and they lack any unique advantages to lure away wealthy buyers from
other places.

From all above, I conclude that high-end real estate is a very, very, very
risky business.

News coverage, and popular public stereotypes also play a role there. In case
of Shenzhen for example, the press is happy to report that average price
continues its surreal non-stop growth, while completely forgetting to mention
that the _median_ price was going down for at least 5 years. The high-end of
the market is being dominated by big name speculators, and low-end with "moms
and pops investors."

~~~
CydeWeys
> I think Manhattan real estate is overpriced. The price should be lowered.

NYC isn't a centrally managed economy. Things are worth precisely what people
are willing to pay for them. There's no way to force prices down.

And you thinking it's overpriced doesn't matter when others are willing to pay
those prices. Clearly that means that price is accurate, you're just not
willing to pay it.

~~~
defterGoose
I think you may be confusing what people are "willing" to pay and what people
are "forced" to pay. We do not operate in "free market"

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ep103
There's been a predicted glut of luxury apartment condos for years now, as all
the new luxury buildings on the 50s start coming online.

Add in increased Chinese export vigilence, tariff wars, slowing economy, and
the tax overhaul that targeted blue states, and of course the multi-multi-
millionaire apartments and condos are taking a hit.

The thing is, and this article leaves out, is that that luxury apartment glut
was originally expected to last 3-5 years. Then rising population rates and
etc were supposed to take over again.

So your sub-million dollar condos might take a hit for the next few years, but
barring another economic recession or crash, its probably just temporary
(read, possibly a good time to buy).

For truly high $ places, where all the other things on the list of causes
above will have much more effect, it might be worth sitting out for a while.

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JimboOmega
I don't know about NYC, but in SF, $1M is a very reasonable price for a condo
for a non-1%er. If you and your partner are both in tech and want to get a two
bedroom, for instance.

I definitely wouldn't put the threshold for uber-rich money parking or buying
a pied a terre at $1M

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neonate
[https://outline.com/v4EbyE](https://outline.com/v4EbyE)

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NTDF9
I don't see why this is not obvious to most people.

The rich get outsized benefit of compounding, outsized benefit of money
managers saving their losses in every bust, outsized benefit of buying assets
at rock bottom prices and then outsized benefit of compounding again.

Every single cycle, the rich get richer because of their resources.

How is this not obvious? The problem is not wages. The problem is richness
from speculation.

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ummonk
Any way to get around the paywall?

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badrequest
Paying.

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hasperdi
Or not paying... [https://outline.com/v4EbyE](https://outline.com/v4EbyE)

