March 29, 2006
Real Estate Bubble Reaches $1m Crackhouse Phase
A couple of years from now, after the American real estate market has utterly collapsed, we may well look back at this day as a kind of high-water mark, the spot where the insanity peaked and then rolled back. Curbed broke the story yesterday-- a crackhouse in South Williamsburg that has been flipped twice in the last six months, and is now being sold for about a million dollars. First, read the description from the broker's site:
This Williamsburg fixer-upper, built in 1910, is the perfect opportunity to tailor-design your own home; it’s also ideal for an investor (can covert into condominiums or rentals). It’s located on a great tree-lined street, one-block to the East River Waterfront in the fashionable Southside. Great shopping, bars, dining, and nightlife are within steps.
Then read the description of an in-person visit by blogger Red Sauce:
Speaking of real estate, I gathered Judy and made her go look at this building in Williamsburg. It was described as a "shell of a building" by what turned out to be a tall Big Gulp type woman who may have been a member of the Swedish Volleyball team. She slithered out of a red Volvo and grinned as she should. We shook her hand as we should.We proceeded past the bacon on the stairs and checked out the place that was going for nearly $900,000. It was filled with dead pigeon parts and was covered about two feet high with rotting mattresses, broken pieces of wood and parts of the roof were strewn about.
Then read the Daily News' investigation into the recent flips:
Falling debris, broken windows and graffiti have all left a mark, said one neighbor who charged that concrete from a sidewall crumbled onto her driveway as recently as three years ago."To me, I think they should knock it down and build it back up again," said the woman, whose home abuts the building.
In October, a developer bought the property for $235,000 from Alizabeth Arroyo, a Connecticut woman, records show.
Four months later, the developer resold the property - with no apparent major repairs - for a cool $680,000, according to property records.
Now, does anyone else think is just redonkulously insane? How can anyone look at evidence like this and NOT conclude that a full fledged real estate mania is currently in swing and approaching its peak? How can anyone expect to buy this place, put in $1m worth of renovation, and make a profit? How can someone sell this building at this price with anything approaching a straight face? GAAAAAAAAAAAAAAAAAH!
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lol Well done on that post Jake
I'm completely with you Jake old boy. But thinking about some of the deals I passed up about 10-15 years ago, I'm starting to get scared that maybe these fools buying garbage plots in Brooklyn aren't stupid. Presently, the only remotely attainable "property" in Manhattan are apartments (and smalls ones at that). If you want actual land, the outer boroughs are the only thing still low enough. And as a Manhattan addict, even I know that if you must do an outer borough, it's best that it be Brooklyn. In 10 years, if there is no Brooklyn property left to buy, we might long for these crazy days. Damn!
"We proceeded past the bacon on the stairs ... "
Ha! That's soooo Williamsburg. I can't tell you how many times I've come across raw meat strewn about Williamsburg. In abandoned buildings, on the sidewalk ... once a pork chop stayed in the middle of Keap Street for 3 days.
INSANITY. REVOLT!
The insanity will be if/when someone ponies up $1m to buy the place. That will mean that a succession of people (buyer, bankers, insurance folks, etc.) thought it was a good idea.
There was an $8M townhouse for sale on the Promenade, they pulled back. There was an $800K ground-level 3 room 1BR 1BTH for sale in the Heights and they pulled back. We'll see if this place is one of the rare pockets of sanity.
the insanity will not end until the entire city has been gentrified and the only people living within manhattan and the accessible areas of the boroughs are at least multi-millionaires.
that or a horribly prolonged recession/depression that makes the city go bankrupt and the richies emmigrate back to the suburbs like they did in the late 60's and 70's. leaving the city to rot and fall apart for the blacks, hispanics, and working class whites to enjoy. They'll wait for the artists and socialists to make things fun and pretty again then they'll move back with their big bucks. It's almost like a karmic cycle.
Here's the scenario:
A. Oil hits $100 a barrel (Pick your reason - Osama, Bush starts a war with Iran, people finally realize peak oil theory is NOW, etc...)
B. Then Stockmarket plummets / major layoffs / no bonuses for the brokers
C. Co-ops start collapsing in default as too many people can't make their payments.
D. NYC taxe base plummets - hey the 1970s will really come back !!! Corrupt police and inept politicians rule the day. ABBA comeback album!
Or we could just start readjusting to less fossil fuels now while we still have the money...
Full of himself, Mongo furiously scribbled:
"I aree with Kojak..... Great post Jake. It's much nicer when Jen isnt around to destroy the english language."
How many mistakes can you find in that comment? I count at least 3. -People who live in glass houses shouldn't throw stones.-
Also, crackhouse is two words (crack house), not one word.
i forgot to mention that there was a lovely backyard filled with god knows what, about five feet high. but since then the windows have been replaced.
i also neglected to mention that judy and i noticed there was probably a ghost in the crack den as the door kept opening and shutting mysteriously.
that's nothing. there was a brownstone a block away from our current apartment, right around the corner from the 2/3 Bergen St. stop in Prospect Heights, in comperable condition, across the street from a police station, that was listed for 1.37 million i believe. i'm not sure what it sold for, but it went pretty soon after we inquired. granted, the neighboorhood might be better overall, but it was quite the shocker. the current owners are completely renovating everything inside right now.
I'll take it!
Come on, don't you watch the Sopranos? It's the mafia's fault!
(heh heh...just kidding, LCN members who read Gothamist...)
The same thing happened in the late 1980s. Prices were off the charts relative to income, and everyone was telling my wife and I to buy something before it is too late.
Anyone remember what happened next? We bought for a fair price in 1994. I thought that kind of insanity would never happen again.
Larry is completely correct. If you purchased at the market peak which was late 1988 I believe, it would have taken you a decade to break even on the property value. When everyone starts frantically telling you to buy before it's too late, remember the saying about how misery loves company.
Sounds like a lot of sour grapes by a bunch of biatches that got priced out of buying. Renting is for chumps, kiddies.
This is the ultimate sign that property flipping has reached a zenith:
http://tlc.discovery.com/fansites/propertyladder/about.html
Reminds me of this Onion article from long ago...
http://www.theonion.com/content/node/33874
Seriously Lew, Give it up. No one is impressed.
You all should do the arithmetic on something like this.
If you can put down 20% on it, and get a 30yr fixed at 6.25%, your monthly payments are around 4600.00+195.00(taxes)=4800.00.
Add in a 100,000 line of home equity to fix it up real nice, you're looking at maybe another 800.00 per month.
Okay, you're at 5600.00 a month for a 3 family building fixed up to rentable conditions. Think you can rent out each apartment for 2000.00 a month? Good, then you're profitable.
Maybe you need to add in more money for the fix up, but 100,000 will go you a long way -- unless the foundation's cracked, or the electric is completely shot, etc.
You should think about the value of things, instead of simply having an anxiety attack over sticker prices....
Get a grip, Stump. What a travesty it would be if theres no place left in brooklyn. Then you wouldnt have your car violated every other day, crackheads on your front stoop, the highest insurance rates in the country, shitty schools, and a nice piece of North Brooklyn with a stinking oil spill larger than the exxon valdez floating under it. Look - just do what over 40% of all home buyers did last year - get a bullshit mortgage with no money down. Cant wait for this government-induced bubble to pop. Wonder what they can finagle when this one goes...tech stocks again? Nah - we're on to them with that. And Lew...you're just the fuckin' man.
Yeah - Learn the value of things!!!!! 100K - a bathroom costs 20K in NYC!
You suckers
umm...something's obviously afoot here with regard to the seeling and buying of this particular property. It's inconcievable, even taking into account the white hot real estate market, that everything is on the up and up here. First of all, $235,000 is a number that seems to be artificially low. Had that not been the original selling price six months ago, this series of sales would seem more appropiate, even though one million seems to be above market by a lot.
But again, $235,000?! Something ain't right here.
Long-term demographics for NYC don't look promising for any real creation of wealth outside of the banking/finance sector. Even then, how long will it be before the banks drive most of the key processes/operations to lower cost destinations - leaving only the relationship managers to reap the shrinking benefits?
I'd bet on property in Bulgaria first.
in this bubble, renters win big time. Lew, what an ass.
Brilliant! Scary thing is that there is probably some idiot out there who thinks they'd be getting a good deal at that price.
http://globalhouseprices.blogspot.com/
You mean a million's not a good deal? Huh.
But seriously, I'm out here in not-so-sunny northern California, where real estate is insane, and the end is near, I fear. My husband and I are selling our house, not really for a profit, but because we just don't want to live this way anymore. We made a lot of money last year, but we're barely squeaking by in a two-bedroom house on a small lot. It's just not worth it. To be honest, if a genie popped out of a bottle or something and offered me two choices: (a) housing prices will go up steeply and hold for a decade, and you will profit nicely, or (b) housing prices will go down so that ordinary people can once again afford to live in modest homes that they own, I'd choose option B unless it would truly destroy my family. It pains me to see that home ownership in my area of the country is out of reach for hardworking people. I'm also seeing families destroyed by too-large mortgages.
Research Florida land rush in the 1920's. Research california in 1837 and again in 1880's. I sold my first home in the RE business when I was 19 years old and I saw the last bubble come and go. This one is ridiculous. The idiots say that LA, for example, will get 100,000 new families every year. Net I am assuming. If that is true then why are all the empty apartments for rent we looked at 3 months ago, still empty? Think supply and demand. Now look at the new supply of condo's in LA being built now and over the last 3 years. Whilshire blvd alone will have something like 10,000 units more soon. Every block there is on average 10 new condos unit coming. Study the past or be doomed to repeat it. We had to rent our condo's in 1991-3 to section 8 and other near homeless status people. Real estate can and has dropped from 30-80% over a six year period. Parts of the us 60-70%, Parts of Japan 80%!!! That means a 1 million dollar house sold for $200,000! (maybe 80% only for ultra mansions but you get the point.) Ask Greenspan and read between the lines of what he can and cannot say due to fear of instigating the downcycle.
I live on Miami Beach, and here too there seems to be a bubble. It amuses me to hear everyone say that real estate can never go down in value. I purchased my first condo in 1992 for $35K from a teacher who purchased it for $55K. I purchased my second condo in 1994 for $45K from a psychologist who purchased it for $80K. I purchased my third condo in 1996 on Miami Beach for $105K from a Venezuelan couple who purchased it for $169K (and they were thrilled to get it off their hands). Today, those same condos are valued at $169K, $230K and $465K, respectively. I feel bad for anyone who would dare to purchase any of these three condos at today's valuations. Whenever I tell people of my personal experiences, I just get blank stares. This real estate frenzy appears to be a massive herd mentality.