Thursday, July 9, 2009

Manhattan Housing Affordability Index

The National Association of Realtors publishes a monthly housing affordability index to give a sense of national housing prices vs median income. For example, an index of 150 means the median family income is 150% of the income needed to qualify for the median priced house.

The index was started in 1971 and at that time, it was around 150. In May 2009, it was 171, close to the high of 179 set in April 2009. This means that the median family income in the US is 171% of the amount needed to qualify for a mortgage at the median price. Yeah - sounds good right?!

The index does have flaws.
1. Real estate is local - this means we need a localized index.

2. It tracks median family income. More members of the family may be working now compared to back in the 1970s.

But this index does give a sense on the median house price in the US.

For Manhattan, I'm going to do a quickie calculation. Let's say the median income is $100,000 (the most recent data from is $64K back in 2007). The median price is $836K based on the latest 2Q'09 Miller Samuel report. From analysis, qualifying income is about 21 percent of the median home price which means the estimated qualifying income for Manhattan is $175,560. This leads to my estimate of housing affordability index for Manhattan of 56 (100,000/175,560 X 100) . The median income in Manhattan is only 56% of the income required to qualify for the median priced apartment.

Not even close to the national level of 171? Of course not. This is Manhattan.

Friday, July 3, 2009

New York Real Estate News

Manhattan apartment sales down 50%
CNN's report started by saying the real estate bust has finally "clobbered super-pricey Manhattan home prices." Second quarter market reports released by the city's major brokerages show sales volume declined 50% compared to a year ago. Miller Samuel reports average price per square foot at $1,056, representing a 16% decline compared to last year. The median price of an apartment is now $836,000. Upside is that sales activity increased compared to the first quarter. This is driven by sales of studio and one bedroom apartments, both of which gained market share. A higher conforming loan limit of $729,750 and historically low rates helped as well.

Luxury market dives
The luxury market in Manhattan, defined as the top 10 percent of apartment sales, slummed. Compared to last year, average price per square foot declined 19% while number of sales declined 50% . Median price of a luxury apartment is now $3.66 million, down from $6.59 million in the first quarter. Currently it takes half a year to sell a luxury apartment.

Renters getting scammed while seeking a deal
While renters are seeking better deals from this down market, scammers are stealing from them. One such scam is called cash-for-key where the scammer takes photos of a legitimate rental and reposts it at a much lower price. The scammer then requires cash from eager renters in exchange for application form or keys. Sometimes, the scammer just takes application fees from multiple potential renters, all too eager to get the non-existent two bedroom for $1500. Students and out of town renters are particularly vulnerable.

Manhattan Rents
Rents in May 2009 are now lower than they were in 2007. Here’s a snapshot of rents at doorman buildings in May 2009 as compiled by the Real Estate Group.
Studios $2,332
1 Bedroom $3,299
2 Bedroom $5,112