I just saw that one of the townhouses we’ve been through is having an open house - 42 Hamilton Terrace. After everything we’ve seen I can honestly say that owner (or broker) is absolutely crazy for the price they’re asking - $995K (it was up at $1.1M when we saw it earlier this year). Let me explain why that’s a crazy price…

To be fair the upside to the property is that it’s a decent width and on a great block - Hamilton Terrace. It also has some incredible original details in it - mostly the fireplaces and baseboards on the ground floor. But there’s so much wrong with the place it’s not even funny - at least when you consider they’re asking a million dollars for it.

The big issue is that it’s falling down. Literally. The extension in the rear where the kitchen used to be is just walls - the floor in the extension has fallen into the floor below. The rest of the building is falling down as well. When we went through it was raining inside the building because snow was melting on the roof. If you know anything about buildings you know the building goes downhill very quickly if the roof is no good. I was literally scared to walk through the building. They have plywood down in some areas ’cause they’re worried people will fall through those parts of the floor. Personally I don’t think it’s safe to go inside that building. If anyone gets hurt I’ll feel really guilty ’cause I was tempted to call 311 and report it as unsafe (but I didn’t).

It’s not the first Harlem townhouse that’s fallen down and it won’t be the last. But right now, in this market, you just don’t pay a million dollars for something that’s falling down.

• 48 Hamilton Terrace a few doors down needs some work, but it’s completely livable and mortgageable and it’s going for $1.25M.
• There’s a place on Stiver’s Row (236 W 139th) that apparently sold for around $425K a few months ago and now they’re trying to flip and asking $699K. Someone started a renovation and didn’t finish, but it’s completely solid and it’s on Striver’s Row.
• Then there’s 506 West 142nd Street, which is a fully renovated, income producing property in move-in condition and it’s asking the same price as 42 Hamilton - $995K. Mind you, the renovation is soulless, the back yard is dark and small, and the block isn’t nearly as good, but compared to one that’s about to fall down on a better block it’s price to sell and 42 Hamilton clearly isn’t.
• And 470 West 148th was just reduced to $999K - it’s perfectly nice 12′ wide townhouse that’s move-in ready, but will need renovation in the not-too-distant future.

Personally I think 42 Hamilton should have a price drop of about a third - to $699K. With a $500K renovation that would put the total cost around $1.2M and it would be in better condition than 48 Hamilton which would compensate the buyer for the hassle of the renovation.

The other townhouse where people seem like they’re stuck two years back in a time warp is 532 West 148th Street. The pictures are amazing, but when you go through the house you realize how little substantive renovation has been done. It’s “shabby chic” in the ’80s sense of the word (before the term referred to a store) when people didn’t have money for renovations so they just make things that were falling apart look pretty. The floors aren’t redone - they’re just whitewashed and varnished. The ceilings aren’t redone - they’re ripped out and there’s exposed beams. Same with the walls - ripped out. What you have left is a shabby chic 3 story loft that’s one big open space plus a work space in the basement - a total bachelor pad. There are almost no walls, no privacy - some of the bathrooms are literally in the middle of the floor with no walls around them. It would have been hot 20 years ago, but now people are looking for genuine renovations - skim coated walls, recessed lighting, floors that are in good condition. The other thing about that property is that it’s 1/2 block off Broadway - not on a prime block.

All of that would be fine if they weren’t asking nearly $2M for the place ($1.895M to be precise). I think the comp for it is 48 Hamilton Terrace @ $1.25M - so they need to drop the price by a third to be in line with their competition. Both 48 Hamilton and 532 W 148 are in similar condition in terms of infrastructure. 48 Hamilton is on a MUCH better block and is landmarked. 532 W 148 has better interior design, but you’re buying the building, not the furnishings. Plus 48 Hamilton has walls and rooms, which most townhouse buyers want, so it’s more desirable.

I did like going through the place though - it showed how much you can do to a townhouse at a reasonable price. If you really don’t want to do expensive structural changes, you can still have a place that’s stylish (though to me shabby chic is pretty dated).

The Harlem real estate market has always been pretty speculative, but luckily much of the market is pretty realistic about how prices are dropping. There are some incredible bargains out there and a lot of people are quite flexible. We saw one property where the broker (whom we really liked) told us they were about to drop another 17% - and that’s after a price reduction not all that long ago.

But some people are afraid to be realistic. There are a few that are dropping the prices too far ’cause they’re desperate to sell in a bad market. But the problem is that when you drop really low people start thinking that’s what all the prices should be and then prices  really tumble. Hell, we’re sorta playing that game - hoping we can sell our place before that mentality takes hold in our neighborhood and after it takes hold in Harlem.

I’m not saying that most of the places that are livable and mortgageable should drop that much further, but the reality is construction loans are hard to get these days and people who buy places that need construction loans (like 42 Hamilton) should get rock bottom prices to compensate them for doing something that’s pretty risky in a falling market… At least we’re hoping a seller will see it that way when we go to buy a place. I’ve got my eye on a place and as far as I can tell it’s practically a shell. It also needs a one-third price reduction… Hopefully we’ll be able to sell our place and hopefully the seller will be flexible by then… We’ll see. First step is to sell our place…

In defense of the people who’ve over-priced is the fact that the market is rapidly changing and there’s not a lot of data to make informed decisions on. Things were dropping before the stock market went down in September, then only 2 townhouses had deals in Q4 of 2008. That didn’t give people a good idea of what they should be doing. In Q1 they say 10 townhouses have closed, but even that data isn’t all in yet. But the issue is how far do you have to drop in order to be “priced to sell” when almost nothing is selling?

Somewhat thankfully New York has been spared from much of falling home prices that have been affecting other parts of the nation. The value of our apartment has been flat for 2-3 years now, which is much better than the 30%/year declines in other places. With the crisis on Wall Street, who knows how long that will continue, but it’s shocking to see videos like the one below about how bad things have gotten in California…

What’s amazing is how much of people’s lives are being thrown in landfills - how they walk away from just about everything - even huge flat screen TVs. It’s sad that the charities don’t have their act together to take advantage of the opportunity and fill their warehouses with the household goods and clothing that people are going to start to need in an economy like this.

The country desperately needs a change in leadership. Let’s hope the leaders we elect in a month are up to the task.

I’m not quite sure what to think about the $700B bailout failing yesterday in Congress and the huge drop on the stock market. Who knows what should have happened yesterday. I know I don’t.

One thing I do know is that the baby boomers have been spending spending spending thinking nothing of passing debt onto those of us who are younger and expecting us to pay for it. The generation below me, and to an extent my generation, doesn’t expect Social Security to be there for them when they retire. Why? Because the system has been mismanaged by the generation just older than mine - the baby boomers.

And that’s true of the economy in general. With the exception of Clinton who managed to balance the budget, baby boomers have been on a spending spree for decades. And even with Clinton the seeds of the dot com bust were sown during his administration.

I’m not saying my generation isn’t just as bad - hell, look at the excesses of the dot com era which were completely the responsibility of my generation and the generation below me. But the really big stuff is the fault of the baby boomers by and large - they were the ones who were driving the biggest institutions. The mess they’ve created is going to make the dot com bust look like child’s play.

While I feel for the baby boomers who have been responsible and have favored a more fiscally responsible government (not ones that supported starting wars that cost $10B/month, and were OK with playing fast and loose with mortgages people couldn’t afford long term), I think it’s completely fair that this economic downturn is going to hit baby boomers the hardest. Baby boomers are close to retirement age and their primary assets - their stock portfolios and homes - are dropping in value quickly. Their retirement prospects are looking pretty bleak right now.

Now, the more conservative of them will have conservative investments as well - I mean you’re completely irresponsible if you’re investing aggressively close to retirement age. So in a way this downturn is going to hit the people who were the most careless the hardest - which is completely fair IMHO.

Personally, I’d like to see the retirement age for Social Security be raised immediately - at least for white collar workers (I get the fact that blue collar workers in demanding jobs need a lower retirement age). Why do the people who screwed up the system get to benefit from it by retiring earlier than the generations after them who will have to deal with the mess they created?

You just can’t pass your debt on to other people indefinitely and expect to get away with it. Because the economy the baby boomers created wasn’t based on solid principles and assets with genuine value, their personal assets (stock portfolios and real estate) were unrealistically valued as well. Now we’re seeing a correction and IMO it’s good that the people who created this fake economy are suddenly confronted with the reality that what they created was largely smoke and mirrors.

I’m 40. I’ve got 30 years before I retire. Even if my assets are completely wiped out (which I doubt), I’m at a point in my life where I can completely recover financially before retirement. I’m sure I’ll be negatively affected by all of this, but I’m not going to be wiped out. I’m not wondering if I’ll be eating cat food at the age of 80.

But there are lessons to be learned here for my generation and the generations that follow… The primary one being to always carry a really good bullshit dectector. I mean with home prices rising way over median incomes, what did we expect? With 2-5 year adjustable mortgages that would likely go up to the point where people couldn’t afford them, what did we expect? And with deregulating money-hungry, do anything to get rich, Wall Street, what did we expect?

When 9/11 happened I was shocked that Americans didn’t understand that we sorta asked for it. You can’t bully other nations, disrespect their cultures, play a heavy hand in their internal politics and economies, and expect to get away with it. Well, we handled our own economy with the same recklessness, and this time we’ve clearly got no one but ourselves to blame for it…

What’s really sad is how we’ve coddled the extremely rich. The other day I saw Robert Reich mention that in 1980 the top 1% took home 8% of the nation’s income. Today they take home 20%. So all those billionaires who created this mess will most likely still be billionaires even if they have to sell a mansion or two. But when you have an election where it’s made clear that one candidate will cut taxes for the super rich and the other one will increase taxes on the super rich and the guy who will cut taxes on the super rich wins… Well, that means people sorta asked for it to be this way.

In the end I hope we get real with our economy. I understand that the entreprenurial, try anything approach has been the key to our success, but it needs to be tempered with realism. When other countries loan us money it has to be because our economy is solid, not just solid-looking. It’s time now to build back our economy - only on solid foundations this time. Let’s hope our leaders make the right decisions….

UPDATE:

Well, my post was timely… It’s a few days later now and what do you know but Robert Reich (of all people) just did a blog post about how the downturn is affecting “early boomers” like himself. He talks about how people close to retirement are the first to get cut in a downturn ’cause they have high salaries. And he also mentions how their investments just took a huge nose dive. Curiously, he’s glad Social Security is there to help them.

The latest rage in rebates seems to be gift cards (credit cards with small balances on them). Thing is, they come with strings - lots of strings and they’re completely inconvenient.

When we renewed our contract with Cingular we got two $50 gift cards and one $25 gift card. I knew when I received them that they expired pretty quickly - but they expired after like 60 or 90 days. We had been busy and since you can’t use them for online transactions (since you have to pay on a single card and nothing costs exactly what your card is worth), and they’re a bit embarrassing to use in public ’cause they’re a real hassle for the person ringing up the sale, the bottom line was we never got around to using the two $50 gift cards. A couple weeks after they expired we realized we’d just lost out on $100.

We’ve been doing some technology/web planning work with Animal Haven - a no-kill animal shelter here in NY (hopefully they’ll get a grant and we’ll get to do a complete overhaul of their web site - it’s too much work for just pro bono).

One day when I was thinking about the shopping cart they use for donations I realized charities are perfect for all those pesky gift cards. You’re going to give to charity anyway, and a charity won’t care of you have a transaction for every gift card - they’re just happy for the money…

So when we got another gift card today from Symantec we just straight away gave it to Animal Haven via their web site.

Symantec’s gift card looked better - didn’t expire for a year, but in the fine print it said that after 6 months they deduct $3/month in “maintenance fees”.

So when you get a gift card - don’t view it as a hassle, see it as a charitable contribution.