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Any bears notice streeteasy condo index
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It keeps creeping up. Let us leave aside alternative investment return arguments for another thread. What do the potential buyers think?

1. Since 2009, or mid-2011 when you became a bull, it has only achieved inflation.

2. That amounts to 1-2% less annualized than bulls such as yourself have been predicting. Lever by 3-5x against expectations.

3. It is all the more abysmal in the face of mortgage rates that have dropped from 5.5% circa 2009 to 4.75% circa 2011 to 3.75% circa 2013.

4. The amount achieved by a 50/50 blend of SPY/TLT has been 16% annualized since 2009, 12% since mid-2009. This is far in excess of the 3-4% expected return on downpayment money bulls like yourself predicted.

5. The inability of RE bulls to even acknowledge above facts is fascinating. They tout what is no more than inflationary increases per #1, ignore the under-performance per #2, pretend NYC RE's underwhelming response to #3 is of no consequence, and then ask us to stop talking about #4 when that very through-the-roof performance has been the direct source of the treading-water performance found in #1.

Nada, try hard not to be a boring douche. Mercer was politely trying to avoid your predictable dribble. Any potential buyer with an opinion?

Yeah, as a generally bearish potential buyer I'd say the fact that inventory is low and prices climbing is inescapable. Condos are being bought up quickly and generally don't last long in the current market. This is coming from someone who has been looking consistently for the last six months and been out-bid on all cash offers above list. I wish it weren't true but it is. As to the advisability of the investment, it's always particular to a buyer's individual circumstance, but I've owned real estate in a similar market in San Francisco over the last fifteen years and at no point was it ever a 'disastrous' investment .. but I'm probably more bearish than the guy commenting above. If you're going to live in it, it's probably a better place to put your cash than most places right now.

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As a potential small investor I too am wondering. Went to an open house in Williamsburg this weekend. People were literally lined up around the block. The sight made me want to run...went in anyway...nice place, but nothing totally uniqu . When people are tripping over themselves for the "opportunity" to spend so much cash, it has to be a bubble, but certainly not disastorous if you plan to live there long term-ten years or more.

Agree with tpush. If you need to live somewhere the rates make it not a bad market. Have also been outbid; but nothing goes straight up forever. And if it does what can I say. Right now it is mania - a year ago there were deals

I have yet to see any so called real estate bull who claimed the real estate market as a whole would appreciate more than 10% a year. Most did say it had stablized and could see some appreciations. They rejected the predictions that the market would continue to slide. Definitely not to that average of $500/sqft. They might have argued that buying can be better than renting if you plan to hold on for a few years. That was what I have observed here.

>> I continue to fail to understand why to make your point, you have to revise or dismiss the actual state of a significant factor in the marketplace.

I am not revising or dismissing anything. I'm just stating that it is a sucky outcome relative to the expectations of bulls, and the suckiness is all the more sucky given the massive tailwinds provided by a 30% drop in interest rates.

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>> Nada, try hard not to be a boring douche. Mercer was politely trying to avoid your predictable dribble.

Ottawanyc, I'm sorry you feel so bitter about facts I state. As I've suggested before, gray me out. That way you won't see my responses to 300_mercer's sorry attempts to make the market seem to be doing more than it has. "Creeping up", please...

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>> The outcome is positive, but you turn it negative by doing some hocus pocus.

Doing inflation when your 3-5x levered investment / ownership math was based on a 1-2% out performance, that's a positive outcome???

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>> If rates didn't decline in connection with easy money, the SPY and TLT wouldn't have done very well. So if we play by your rules, you lose too.

Except they outperformed my expectations, which were 4% for TLT and 10% for SPY, by large margins. More relevantly, they massively outperformed the bulls' expectations which were typically 3-4%. All the while, RE underperformed their expectations by 1-2%, levered 3-5x.

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It seems to me the argument has changed over the last 4-5 years. Initially it was that RE was doomed and $500 p/sf was coming across the board. Bulls, as they were called, argued against that. Then there were "Bulls" saying 2009 was a great buying opportunity. Slowly it has changed from RE being doomed, to down a little, to now not out performing other investments.

I've been here 4-5 years, my argument has not changed one iota. I've said that NYC RE is going to muddle along sideways for a long time while other investments (stocks in particular) would be going up. The reason I had said NYC RE would muddle along rather than drop is because it is an affluent market, and therefore the population has the means and a preference to stick their head in the sand w.r.t. negative carry rather than face reality directly with a nominal loss.

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1. if NATIONAL wages are cut, GLOBAL POWER CITIES perform better due to "C-exec rich get richer" where they live, and low-level employees flock to cities for jobs..

2. 2012 list of global cities, guess which city's at #1, ahead of london, tokyo, wayne, nj, etc...

http://www.google.com/imgres?um=1&hl=en&safe=off&sa=N&biw=1920&bih=936&tbm=isch&tbnid=PFJ70PkfATa-qM:&imgrefurl=http://www.theatlanticcities.com/jobs-and-economy/2012/04/which-cities-have-most-global-clout/1653/&docid=Ma3EW8nVcKVNhM&imgurl=http://cdn.theatlanticcities.com/img/upload/2012/04/02/Global-Cities-Index-bloomberg-infographic_.jpg&w=1040&h=1593&ei=XCouUdOzIIn20gHEmoCQDQ&zoom=1&ved=1t:3588,r:0,s:0,i:87&iact=rc&dur=341&sig=116532716915910696579&page=1&tbnh=186&tbnw=119&start=0&ndsp=33&tx=67&ty=39

4. if you wanna kill off lower belly fat/chubby cheeks so your bf will f*ck you missionary more and doggie less due to said chubby face, can you spot train your body or must you take a holistic approach?

can micro events move macro cultures? sure, short term..

..but who would've thunk sao paolo prefer ny hell's kitchen d*ck over rio c*ck? i am loving portugese butt along 9th lately..

2 for another rice n beans joint on w 46th post bottoming, -1.5 for questionable article source.. i made 50 cents today, can buy a cow in sao paooo, no just half given domestic qe but still..

http://www.nytimes.com/2012/02/19/realestate/big-deal-brazil-booms-and-brokers-smile.html?pagewanted=all&_r=0

No one is disputing that other investment tools has performed, or recovered better than Manhattan real estate in the last few years. Keep in mind that they were all in deep trouble a few years back. At least they all have done better than many had expected. The real estate bulls never made much prediction on the performances of other investment tools. There is no need for them to do so. inonada does not need to collectively take responsibilty for all other bears out there. They said what they said and we remembered. You said what you said and that is fine. The Op was not aiming at you. He was just trying to show that his believe wasn't as bad as other bears has predicted. At the same time, no bull has ever claimed that real estate is the best investment oppotunity around in the last few years. All they did was to reject or defend the very dooming predictions by other bears.

It is like everyone here know that their wife is not Miss Universe. There are always prettier woman out there. It just get very upset when someone else keep critizing on your choice, when it turns out to be a pretty decent one.

boy did my investment muddle along....i threw down $101,850 in fall 2008 (about 15 days after the collapse of lehman); paid 30K in expenses (CC's) since then, and after my RE investment closes, i will realize $392K from the sale. accounting for 6.5% inflation over that period, looks like i muddled up a 190% return (38% annualized)....

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yikes yer a twit. facts are facts. i'll show you where my in contract prop (or its comps) about as fast as you'll provide me a copy of your stock account(s) information.

also, let me get this straight....by your logic, i have to show that other properties faired as well my prop (a common experience) in order to prove that my RE investment bettered most if not all stock investment i could have made?

the fact is that in about a month or so, i will realize a return on an investment that CRUSHED any stock investment i could have made over the same period.

I bought two years ago but still follow all my "searches", and from what I can see the market has two distict parts. Boring apartments in uninteresting or undesiable neighborhoods take a good while to sell and with price reductions. So, this is nothing new.

On the other hand, desirable stuff in sought after locations now carry a very nice premium and move rather quickly.

Maybe, I not saying anything new but buying quality in this market maybe means something smaller than you might want but as an investment, not bad.

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"no anecdotes that thoroughly disprove overgeneralized dribble allowed." I could provide 20 apts (whcih woudl be easy by the way) that have CRUSHED most equity blend BS you can think of and you'd still say 'too anecdotal'. what a tool.

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vic64 -- a balanced & thoughtful post. Some issues I'll disagree with.

First, if you set the goalpost of investment low enough, then there is nothing to discuss. If the RE bull's case is "As long as I don't lose money w/ a long enough horizon, I win", what do you say to that. An investment in SPY on Jan 1, 2000 would have returned 32% to date, in line with inflation. What would you say to someone who was touting their investment in Jan 1, 2000, and now comes says "Well, it wasn't the best investment but it was a good & fine investment"?

Second, you are right that not everyone is married to Miss Universe. And yes, some sensitive people might get their feelings hurt if you go up to them for no reason and tell them, "Dude, your wife is no Miss Universe." But what do you say to people who go around saying "Dude, my wife is so hot. She could've been Miss Universe. You should've married her sister like I told you. Her hotness keeps creeping up. How does that make you feel, knowing she's getting hotter by the moment, and that you missed out on all that hotness?"

"1. Since 2009, or mid-2011 when you became a bull, it has only achieved inflation."

2009 average: 1,857
Jun 2011: 1,906
Jan 2013: 1,994

The SE Condo Index is inflation adjusted as described in the methodology paper, so you are making an incorrect statement.

Case-in-point:

http://streeteasy.com/nyc/talk/discussion/34121-sale-at-225-east-73rd-street-3bc

We've got 300_mercer talking about how it's an apt worthy of the $1540 ppsf asking price, how there's nothing wrong with a $2.4M 2009 sale => $3.7M 2013 asking price, etc. Why yes, it'd be perfectly reasonable to plop down $3.3M of your hard-earned cash, plus $4.6K annualy in maintenance, for this beauty. You should have taken her while you had the chance, better do it now. Mind you, we're talking about a 3rd-floor ho-hum 2400 sq ft UES combo, east of Lex.

Meanwhile, there's this gorgeous slightly-larger, better-renovated, high-floor apt near Columbus Circle with 80 feet of windows directly overlooking Central Park. Keep your $3.3M invested elsewhere, it'll cover the $11-12K monthly difference:

http://streeteasy.com/nyc/rental/961239-condop-230-central-park-south-central-park-south-new-york

300_mercer's talking up Ugly Betty like she's Miss Universe, isn't she so pretty now that she got her braces removed, you should marry her. Dude, do you really want me to marry Ugly Betty & pretend she's Miss Universe when I can just date Miss Universe?

In an era of Q.E. and ZIRP those with money to invest see Condos as a safe place to park funds.. In addition the foreign investor worried about "back home" sees the NYC condo as a relatively safe investment to make.

>> The SE Condo Index is inflation adjusted as described in the methodology paper, so you are making an incorrect statement.

It is not inflation-adjusted. Here's what I've said on the topic before, which points to both circumstantial & direct evidence that is it is not inflation-adjusted. If you disagree, I am interested in hearing your explanation.

===========

I think you are misunderstanding the methodology. The methodology paper does not talk about inflation-adjustment at all, except in that section under "Variations of the StreetEasy CMI" stating "The StreetEasy CMI was manipulated a few additional ways for comparative analysis." They used to publish both non-inflation-adjusted and inflation-adjusted, but they stopped doing the latter.

Publishing only an inflation-adjusted index is extremely weird. However, the definitive evidence that the CMI index currently being published is not inflation-adjusted is the graph on page 7 comparing to Case-Shiller. On its description, it says "Since the CSI is not adjusted for inflation, we removed our
inflation adjustment so that we could compare 'like-to-like.'" You can note that the CMI shown there (scaled by 10 to undo the CSI-comparable re-scaling) is indexed to 1000 in Jan 2000, first breaks 2000 in late 2005, and double-peaks in late 2007 / early 2008 at 2200. That matches the currently-published data exactly. CPI was up 25% between Jan 2000 and Jan 2008, so the inflation-adjusted difference would have been 1.76x instead of 2.2x during that period for inflation-adjusted CMI.

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When I was looking at apts in 2009-2010 all the usual suspects here said "don't buy, real estate is headed down another 40%". (They did not say don't buy because you can invest in stocks)> My real estate has not been muddling. A refinance of the apt below me had an appraisal of 20% more than the 2010 selling price. Comps to my apt are 30% higher. Just muddling, muddling. And who started that thread for people to guess when the SE condo index would hit 1700? I guess we now need a thread on when will it hit 2000 thread. Oh and yes those Wall Street bonuses are lower.
As for the OP question, its tough. I don't see prices coming down in this market with short supply. And yes a trip over the fiscal cliff could crush the stock market and later real estate. I guess I'd let one of my qualifying kids buy an HDFC.

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OLY CRAP, have times changed. The new bull case "BUY NOW AND DON'T LOSE PRINCIPAL!"

No, but safer than keeping money in stocks or in Greece , Italy or china.
You also ignore that it's harder to go after money tied up in real estate as opposed to money sitting in a bank account.

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> The bull case has been reduced from "BUY NOW OR BE PRICED OUT FOREVER" to "AFTER THE BIGGEST CRASH IN HISTORY, IT IS CREEPING UP LESS THAN INFLATION, SO TAKE THAT!"
> my, my, my, have times changed...

so true! like Shiller keeps on saying, the psychology totally changed. good returns are not in RE but in liquid investable assets

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inonada is correct. The number we publish is not adjusted for inflation. Couple of reasons:
- the number provided by CaseShiller to the media is a nominal value. We wanted to users to be able to compare like-to-like.
- there is a 6-week lag in computing the inflation rate. Our index is delayed by 1 month. Case Shiller's index lags by 2 months. To provide an inflation adjusted number would delay our index by another 6 weeks.

If there is significant interest in having an inflation adjusted number, let us know. We can definitely try to put up a second number. And if you have any further questions, feel free to contact Sofia at ss@streeteasy.com.

>> The SE Condo Index is inflation adjusted as described in the methodology paper, so you are making an incorrect statement.

It is not inflation-adjusted. Here's what I've said on the topic before, which points to both circumstantial & direct evidence that is it is not inflation-adjusted. If you disagree, I am interested in hearing your explanation.

===========

I think you are misunderstanding the methodology. The methodology paper does not talk about inflation-adjustment at all, except in that section under "Variations of the StreetEasy CMI" stating "The StreetEasy CMI was manipulated a few additional ways for comparative analysis." They used to publish both non-inflation-adjusted and inflation-adjusted, but they stopped doing the latter.

Publishing only an inflation-adjusted index is extremely weird. However, the definitive evidence that the CMI index currently being published is not inflation-adjusted is the graph on page 7 comparing to Case-Shiller. On its description, it says "Since the CSI is not adjusted for inflation, we removed our
inflation adjustment so that we could compare 'like-to-like.'" You can note that the CMI shown there (scaled by 10 to undo the CSI-comparable re-scaling) is indexed to 1000 in Jan 2000, first breaks 2000 in late 2005, and double-peaks in late 2007 / early 2008 at 2200. That matches the currently-published data exactly. CPI was up 25% between Jan 2000 and Jan 2008, so the inflation-adjusted difference would have been 1.76x instead of 2.2x during that period for inflation-adjusted CMI.

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