Vadim Fuchs

Repost from www.nakedrealestate.com

For the last year we have been tracking inventory above $1,000,000 along with signed contracts in the market downtown. There are a lot of stories we will be reading about real estate going forward but the big one will be about inventory.

So what have we found out and how do we think it will affect the market? Inventory has been on the rise all year previously peaking in May, but since the financial crisis hit Wall Street it is starting to climb at a much brisker pace. At the same time the number of signed contracts is in decline.

We believe that even though prices will decline across the market that values in different locations and property types will start to deviate. In other words we will be in a segmented market.

From the graph you can see that over all inventory is up 88% since the same time last year, however almost all this increase has been in the condominium market where inventory downtown is up 121%. At the same time we see co-op up only 42%.

This tells me that we will see greater price drops in the condo market. Banks are now asking for a minimum of 20-30% down and two years liquidity and a credit score over 740. That is the perfect description a co-op buyer. If you are looking to buy co-ops offer better value at price per square foot and will continue to draw buyers. This is coroborated by the increase in co-op contracts signed as opposed to the decline in signed condo contracts.

We think this City is immune to what's happening in the rest of the country. Let's not kid ourselves. We thought we wouldn't see many foreclosures and now we are told come January foreclosures are going up in the city, partly because the 90 day moratorium is expiring and partly because of job losses. Yes, job losses and falling real estate prices will cause foreclosures. What we haven't heard much of is Short Sales. This is now the norm in many parts of the nation. Short sales in short are sales where the seller sells the property, the bank takes less than the loan amount, the seller gets no cash and the seller need not be in default of the loan. The caveat is that the outstanding loan amount needs to be higher than the market value and the owner has no more equity in the property for the lender to consider a short sale. There are of course a slue of requirements and conditions before the bank agrees to a short sale.

When I learnt about short sales, like every jaded New Yorker, I thought that's impossible here because we put down 20 to 30% on co-op purchases and often 20% on new developments. So we cannot have zero equity and the market has not dropped where now loans are more than market value. The reality is that buyers did refinance, took their equity out and spent it. And now with prices falling, we can expect to see short sales coming our way.

Taken from www.nakedrealestate.com