A Little Bit of History – Gross Rent Multipliers in New York City over Time

Great article! Dedicated to the bulls who think we bottomed.... ;-)

That's interesting, but things are different now. Italicize "different". This is the New Economy.

And add a few exclamation points after the first sentence, so people who just don't get it will get it anyway!!!!!

Fascinating article. Thanks.

I'm a bit bewildered, though, as it seems most residential properties today seem to be in the 20 area, even after the recent "correction."

Are things that out of whack?

Alan, shall i replace your word "different" by "worth"?
Remind me the deficit of our gvt for this year? The unempolyment rate? The % of mortgage under foreclosure? The debt of Fannymay/Freddy Mac?
What's the New Economy? The Chinese buying us out?

Topper... pay no attention to data.. what you should be focusing on is the forced savings portion of your mortgage...

hee, hee

Great piece.

Like we have been saying...takes a long time to turn a battle ship around.

Prehaps our skipper hates the water.

Its an old RE adage, you buy based on the multipliers, not expectations of capital gains (those are just a bonus if they happen). Had that lesson been followed, there would have been a lot fewer RE investors in the toilet...

You are 1000% correct, Somewhereelse!
Juiceman will probably deny it and bring back that eternal argument with Steve on the table... :-)

I like this:
http://visulate.com/cgi-bin/invest.cgi

Alan Thanks for the link. Pretty cool.

Not disputing that price/rent is out of whack, but the author of the article is a total idiot for not mentioning that interest rates are near historic lows. That's pretty fundamental ... it doesn't justify the 2006-2007 valuations but does make the author look pretty stupid.

Alan: "That's interesting, but things are different now. Italicize "different". This is the New Economy."

"Our immersion in the details of crises that have arisen over the past eight centuries and in data on them has led us to conclude that the most commonly repeated and most expensive investment advice ever given in the boom just before a financial crisis stems from the perception that 'this time is different.'

"That advice, that the old rules of valuation no longer apply, is usually followed up with vigor. Financial professionals and, all too often, government leaders explain that we are doing things better than before, we are smarter, and we have learned from past mistakes. Each time, society convinces itself that the current boom, unlike the many booms that preceded catastrophic collapses in the past, is built on sound fundamentals, structural reforms, technological innovation, and good policy."

http://www.businessinsider.com/we-are-so-screwed-2010-1

But for the past eight centuries they didn't have a global economy with China lending us unlimited amounts of money for free. They only had those crazy Medici, and that Holy Roman Empire postal family, I forgot their name, and that wine-making Jewish family in France and England.

They didn't have China. Chinet, maybe, but we're even fancier than that today.

There is always a good excuse for why its different, even though it really isn't. There is often something that is new, and that will change things, but it goes too far and folks expect EVERY rule to be rewritten.

Dotcom... yes, there was a new paradigm, absolutely. But the amount of change relative to the amount of anticipated change (like multiple not mattering) was relatively tiny, and took years.

Thats the problem, it is always a little different, maybe just different clothes, and this gives enough license for folks to believe the snake oil salesmen.

I'm laughing because clearly people are not getting alanhart's sarcasm. They are actually responding seriously. Ha! idiots.

yeah I was one such idiot on the chicago thread...and I know better

Oh, Alan, you rapscallion.

*wipes egg off face*

Where is LICC to deny that price to rent was different today vs 2000.

good article nonetheless and good point from kspeak about low interest rates which skews prices too.

Actully pulaski has a point - and its not just lower interest rates (which make ALL asset classes more valuable using a DCF model - basic finance) but also expected price appreciation (both in terms of rents and re-sale values.)

This is pretty basic stuff, people. In 1890-1892, their had been over decade of DEFLATION in the US, so of course expected price appreciation was lower in that era. I did not check interest rates and price appreciation for each of the periods mentioned, but you can't simply cite such financial ratios in a vacuum.

of course, the fact that less people will actually qualify for those rates will skew too. And when/if rates go up.... (which you figure is imminent given they're artificially low right now)

Rates may be low today - but they have also been low many other times during the course of this study. They were certainly low during the forties. Government bonds were in the 2% to 3% range. In the fifties government bonds were in the 3% to 4% range. But price-to-rent ratios were much lower back then.

We have seen a huge "re-pricing" of real estate. That happens in free markets. We had stocks re-priced in the late-nineties also.

As Shakespeare said, "The past is prologue."

Its both rates and lending standards...which we have every reason to believe will trend back to normal...and therefore since the only difference between owning and renting is the cost of money, we should see more normal price to rent ratios. The sick thing is we are still above the previous cycles high ratio, which was around 15x.

Rhino, I know that trying to understand more than two factors at the same time is too difficult for you, but I have already showed that you are wrong.

Why don't pull out that chart again? (chuckle)

Do you recognize at any level why if there is an epic liquidity bubble that the price/rent ratio will blow out in favor of price? The chuckle is one of strange, deep denial of historical fact. You got taken man, you bought badly...deal with it. It shouldn't toss you into this strange state. You probably saw confirmation that rents are 2000 level. We're not 2000 level on price. Given this, how can a sane person claim price/rent is the same as then. Chuckle....chuckle. Apparently Long Island City = Shutter Island.

What's actually funny is that the Massey-Knackle study that you are referring to is referenced in the article that sledgehammer posted. Ho hoo hoo hee hee hee.

well, you've got to give it to LIC at least for his stamina

;-)

Multiple professional analyses are wrong, but you are right? On this topic, you literally fit the definition of a mental patient. This denial should be worked out with a therapist. This is some wild shit.

I showed actual prices, rents and interest rate data for the times in question, and you showed a chart from the 1990s with a deficient number of factors to make the analysis.

How has renting for 10 years been working out for you? (chuckle)

renting has been working really well for me. i've been saving about 1/3 to 1/2 of my prior payments for just about the same space, and this is renovated, my last space needed work.

i wonder how LIC will work out for those who need to sell in the next couple of years.

I live in a shithole neighborhood where I paid peak price (chuckle). My anecdotes are better than the studies of industry practitioners (chuckle). Pass the dribble glass (chuckle).

aboutready, you either don't have good math skills or you are being disingenous with your comparison, which is not surprising coming from you.

Keep renting for the next ten years Rhino (chuckle)

aboutready
about 3 weeks ago
ignore this person
report abuse It's nice that he thinks that some cum sucking whores aren't the slummy kind. Enlightened. Here's to the working girls.

oops wrong post

aboutready
about 2 hours ago
ignore this person
report abuse renting has been working really well for me. i've been saving about 1/3 to 1/2 of my prior payments for just about the same space, and this is renovated, my last space needed work.

how was the toilet seat in your old place?

LICC you're stuck in a shithole. If owning is the high road, why am I in Carnegie Hill sitting on a heap of cash and you are in Long Island watching your equity evaporate. We'll be at 2002 price soon enough...quite happy to be renting. Didn't really have the option to buy while I was in college.

Again, all this aside, would you say its megalomania to think the example off the top of your head overrides annotated data from real estate industry experts? If rents are 2000 levels and prices are double, please tell me again how price/rent is kinda just about the same.

[Chuckle] Your shit hole is going to be worth half what you paid in 18 months. That's gotta feel good. Compromise your way into LIC only to get completely run over. You do realize, that may never be a real neighborhood, right? It may turn out to be a figment of the bubble's imagination.

Now Rhino is imagining fiction to support his arguments. Don't look at the actual data rhino, it will upset your fantasies.

Why is it that 90% of the people on this board consider you a crude loudmouth who is wrong with more than half the things he says?

Keep on with that renting! (chuckle)