Rising inventory

Not just the last few weeks. It's been climbing steadily since late 07. The total number is still historically low, but the trend has been steadily (and swiftly) up. I think you're right about activity levels - not nearly enough to keep up.

Brooklyn and Queens have really seen a surge w/ new construction, and much more in the pipeline.

According to StreetEasy, on Jan 1, 2008 there were 94 2-bedrooms priced under 1.5 million (excluding listings in contract and only including listings with an address) on the UWS and 778 in Manhattan.
Today, April 9, there are 163 on the UWS and 1061 in Manhattan.

I have no idea if it is true, but a broker told me yesterday that she has found some agents are holding back listings from Streeteasy for the first time in her experience because it provides too much info which is working against them in this market's current climate--that is, days on market, pricing history, comparables a click away, etc. Don't know what she based that on, but she offerred it when I said I was surprised how little has been getting listed under $1.5 in GV on streeteasy in the past 4-6 weeks. If she is correct, inventory numbers may be even higher than Streeteasy suggests.

I think inventory usually rises this time of the year. I imagine that other factors are in play as well, and given the state of the national economy, no doubt the housing market here is softer.

will, we are talking YoY increases in inventory which factors in seasonal/cyclical market behavior.

Kylewest wrote:
"...I have no idea if it is true, but a broker told me yesterday that she has found some agents are holding back listings from Streeteasy for the first time in her experience because it provides too much info which is working against them in this market's current climate..."

Somehow I think you know whether or not that's true. Based on the nature of your posts I'm guessing you're pretty well connected to the NY RE market.

God forbid that people should have access to the information that they need to make an educated decision.
I'm sure RE insiders would rather keep the general public in the dark so they can manipulate the situation to their favor.

This is a free society. Streeteasy has been a beacon of light for many people making the most important decisions of their lives.

IMHO the NY RE market is corrupt and cloaked in secrecy. Anything which increases transparency is a good thing. If streeteasy is compromised it would be a sad day.
But it would not surprise me.

kylewest - i would have to agree with you. Have noticed in the past several weeks I am not getting updates for my saved searches as much as I used to. I have also been finding many listing on NYTimes that are not on StreetEasy. THe other funny note, on two occasions, I went to oepn houses, told the brokers they were crazy for the asking, mentioned comps on streeteasy, it was like catching a kid with his hand in the cookie jar !
Times are a changing !!

7,169 listings in Manhattan, not in contract today. On March 24 the figure was 6,733. Listings are increasing at the rate of about 100 per week. Miller Samuel put the figure at 5,113 on December 31, and 6,194 at the end of 1Q08.

Manhattan can't take this inventory without seriously affecting prices. These were Manhattan sales according to Miller Samuel:

2007 - 13,430
2006 - 8,493
2005 - 7,780
2004 - 8,653
2003 - 8,802
2002 - 9,509
2001 - 8,198
2000 - 9,184
1999 - 9,522
1998 - 7,646

This gives an average of just over 9,000 sales per year, obviously skewed by last year's exorbitant number. If you take out 1998 and 2007, you get an average of 8,768 sales per year, very close to the mean of the entire range, 8,727, which has a very high standard deviation of 1,647. The standard deviation excluding 1998 and 2007 is 619, so it's fairly safe to say that that is an accurate picture of what sales have been like since 1997: about 8,768 per year, or 731 per month. If that is true - which it is - then 7,169 represents a 9.8 month supply of apartments on the market. Factor in unpublished listings, FSBE's, withheld new development inventory, and you have a GLUT of properties on the market.

Now, in 1997-2007 prices rose considerably, necessarily meaning that there were more sales than normal (otherwise, prices would have risen at their historic rate) or there was more demand than supply. Not only has the supply caught up, it has now exceeded demand, with hundreds if not thousands of new units coming on the market in the next year, at precisely the time that the engine that drove this "boom" - Wall Street - is grinding to a halt: no bonuses, massive layoffs. Not to mention the virtual nonexistence of credit.

I've made my case on the economics of renting vs. buying before, so I won't again. But rents are falling if you follow the market on nybits.com as I do. There is no money, and no appetite for overpriced real estate.

Anybody buying in this market would be crazy in my opinion. It will fall 50% - 25% this year, 25% next. It is the perfect storm.

The "sales figures" that MS posts are historical, for deals made 6-9 months ago, before the bottom fell out of the market.

Hi Steve,

Thanks for your post. Hope you've enjoyed your vacation.

Do you mind sharing where you are getting the inventory numbers from? I tried looking around the site and can't find it - or did you get it from some other source other than streeteasy?

Thaanks!!

Actually 500,000,000,000,000,000,000 new listings and growing.Inventory going through the roof. It was bound to happen each and every apt is now on the market for sale. Come on sellers there are people on this board who never owned , never will own never have any intention of owning too scared to own but want prices to go down just for the fun of it. I well I myself would like for anyone thinking on selling to drop prices below 1995 levels so I can buy at the cheap and flip for a nice tidy profit

Sadly, when I noticed some lagging listings in StreetEasy and then saw others posting about it, my first thought was "fucking brokers." I'm willing to put in the extra effort of finding a listing on the NY Times site and then researching the comps, etc., here (I do that anyway w/ FSBOs), but with the Times now a total dog, this attempt at market manipulation may blow up in their faces.

brokersSTINK, I had a similar experience. The broker literally started stuttering.

Anyone else notice the A.C. Lawrence East Village listing at $699 that's been pulled and relisted here 3 times in the past week w/ no changes?

I imagine that at some point when it's no longer just (mostly) outer borough price-chops and Manhattan softening, when they can't hide the downward trend any longer and activity is at a standstill, most brokers will want to maximize exposure for their listings, even at the risk of exposing them to negotiation-worthy information, just to get some transactions going.

I've mentioned it before, how long until broker babble switches to "It's a buyer's market! Now's a great time to buy!"

Vacation was wonderful, thanks! But I did miss the spunkster, thought of him as I was touring the Inland For-Sale Sign, or should I say the Inland Empire.

The sales data are from Miller Samuel, 1997-2007 historical report. It's on their website. The listing information is from streeteasy.com, searching on units listed not in contract: go to "advanced search," click on "listing status" and exclude listings in contract. I happened to write down the March 24 figure, which is why I know what it was.

The crash took longer than I had originally thought - I thought it would start last year - but now I think it's here to stay. There were permits for some 30,000 units to be built in Manhattan over the past 3 years. I don't have firm statistics, but just judging by the state of construction I'd say that only 10,000 of them are ready now, with 20,000 to go. (And no, JuiceMan, I can't back that up.) Not all will be sales but that doesn't matter: inventory is inventory, whether to buy or to rent.

Read some of the other threads: agents not willing to share listings anymore, listings suddenly becoming "no longer available" or not posted here. It's all evidence of a market grinding to a halt, with the inventory numbers to back it up. The 2Q08 MS sales report won't be that dire yet because it's historic data. Wait till 3Q08.

There's no way that you can have 30,000 units coming online, add that to natural turnover, the demise of Wall Street in the short- to medium-term, reassessment of credit risk and availability, without having a precipitous drop in prices. This is nothing like the 1987-1998 slow deflation of prices: now there is an abundance of condominiums, much of it new development where the developer can slash prices or convert to rentals, much of it (unlike co-ops) that can be sublet. There is also a surfeit of market-rate rental buildings, and rent control and stabilization have basically died a death and aren't coming back. So back in the olden days you had co-ops and rent control/stabilization putting an unnatural constraint on price drops. No more co-op boards refusing to approve sales because they don't like the price - people will migrate to condominiums. It's a totally different world out there.

Listen for the crash.

Certainly a part time comedian full time translator knows more about real estate trends in Manhattan than Manhattan developer that's been in business for a long time but I thought this was an interesting article of an interview nonetheless. I do beleive he gives a realistic perspective. Bullish and bearish. Like I said the part time comedian might know more than this developer but here it is.

Daren Hornig managing partner, SAXA

What is your outlook for residential development?

There are two sides of the coin in residential development. It's going to slow significantly [because of] the extreme credit crunch. And 421a is going to change. From a consumer perspective, [buyers] think prices are going to drop. However, I think the opposite is going to happen, and prices are going to rise due to supply and demand constraints and the weak dollar. Without the 421a tax incentive, the effective price is going to significantly go up. The established developers [will see] more opportunities. Everyone who became a developer in the last five years is going to fall by the wayside.

What is the most attractive area of residential development?

Rentals are like dinosaurs. Unless you own the land for a long time — anywhere from five to 20 years — with the changes made by this administration, we will not see rental construction again. That is extremely dangerous for the market.

How has the climate changed for starting up a new project?

[Compared to] before August, it is literally night and day. We were able to get 90 to 95 percent financing with two phone calls. Now, we are lucky to get 50 percent.

What is the most positive aspect of the new development market?

There's less competition, and that fares well for new development. The new condos coming to market will fall about 20 percent a year for the next five years, which will cause the prices to remain high.

Any notable deals you've seen recently that indicate where the market is at?

We are focusing on joint ventures where people acquired land or are in the development cycle where they thought they could get tremendous financing and are finding banks saying no. We are being approached by people for late-stage equity partnering.

What surprises you most about the new development market right now?

Everything coming up now is a '09 project. What I do like is [that] the quality for development has gone up significantly. On the down side, if you have a project on the table in late '07 to now, things are not going to get built. The banks are digging in their heels.

As far as sales go, what segments of new development are the most active now?

The high-end for sure. The rich are only richer over the last five years in this cycle. People are collecting apartments like they collect art. We are looking at product that is $2,000 to $6,000 a foot.

Looking outside of residential development, what sort of development is best overall?

There was a frenzy of hotel development over the last 18 months. Hotels at the high end and the low end will do fine, but the mid-level will ultimately get hit. Too many of them got built, so there is too much supply. New York is doing fine, but the second that it takes a step back, there will be less business travelers.

What are your overall plans if the economy gets worse?

We are going to buy as much as we can in the next two years and position ourselves. Classically, it is a cycle of approximately a two- to three-year downturn and seven years of boom. If [you] position well and don't get caught in a bad position with your product, you can really capitalize.

Stevejhx - just curious - are you being paid or do you get some sort of commission if your market projection comes to fruition? I can understand people being hopeful of a crash or correction, of people trying to provide others with statistics to make informed decision, and of people who debate what's going to happen - your posts go well beyond that, though. It is almost like you are trying to proselytize your philosophy, convert anyone and everyone who will listen, and quash any semblance of opinion that doesn't mesh with yours - all in a derogatory manner and ad naseum. My question - again - is why?

I asked him a similar question joepa and his answer was a tear jerker. If he can save "just one person" from buying at the time, then it has been worth it.

A true buyer's real estate market in Manhattan has never existed in tandem with the internet. This could get interesting!

he also still hasn't answered malraux's bet on the "how aggressive" thread...

Oh, spunkster: "Certainly a part time comedian full time translator knows more about real estate trends in Manhattan than Manhattan developer...."

You mean a "professional developer" like Hovnovian, Pulte, etc., etc., now losing money hand over foot?

"prices are going to rise due to supply and demand constraints and the weak dollar...."

Please! You mean like a 40% increase in supply since December, number of sales declining, average days on the market rising. This all bodes well, doesn't it.

Of course the real-estate market will pick up again. Just not for a long time.

joepa, as far as I can see, I'm the only one here - no, there are a few others - who back up what I say with real numbers. I give real inventory numbers, spunky says "500,000,000,000,000,000,000 new listings." I post advertised interest rates, ccdevi calls me a liar. I post actual sales figures from the past 10 years, actual number of building permits issued, and all the property bulls can come up with is an interview with a DEVELOPER - whose interest is not losing money - on what he thinks will happen to prices in the future when Wall Street - the engine of this boom - is slashing jobs, slashing bonuses.

Or didn't you hear: Bear Stearns went under. Merrill Lynch is firing 10% of all non-broker employees. M&A fees have fallen 75% due to a lack of credit. Bonuses have been slashed. Mortgages are very hard to get. Yet the spunk puts up this brilliant quote: "Without the 421a tax incentive, the effective price is going to significantly go up. "

Actually, no. That would cause prices to fall because the 421a tax incentive is baked into the price, and it helps only developers, not buyers. Take a building with a 421 tax incentive and one without, and the 421 building can charge higher prices because of lower property taxes. Not only is that common sense, it's Econ 101: take away a subsidy, and prices fall. That's what a subsidy does: it subsidizes prices.

joepa, now I do it because I'm enjoying myself. I like to rub it in. I like to see what insults the property bulls can hurl at me as they're spouting more bullsh*t about the vastly positive environment we're in, without even putting forth one bit of data. Instead, they quote developers, who are lying through their teeth because if a developer doesn't know that prices fall when you take away a subsidy, then they're in the wrong business.

You can have your opinion. Back it up with facts. I say prices are going to fall 50%, back to 2004 levels. I'm betting millions on it.

Actually, we hurl insults because it is fun. We agree on quite a bit but I still find it fun to insult you.

"I'm betting millions on it."

hilarious steve!

Long winded answer. "Because I relish in insulting people's opinions that differ with mine" would have sufficed. Thanks.

Yeah, eah, it is kind of fun.

joepa: if you provide me with data that contradict what I say, I will stand corrected. Otherwise, without backup, what people are saying is just nonsense.

steve- the doctors are going to take away your internet privileges AGAIN.

Okay. FWIW... I've been speaking with many people directly involved in forging the NYS budget. Much of it is essentially settled. Their universal verdict: things are bad. Very bad. What the state is looking at in terms of revenue shortfalls is much worse than 2002. And it is going to hurt a lot more they all say--without exception. One more not good sign for at least the year ahead. I know some are saying Bear Stearns represented the "bottom" and that we are in the process of turning the corner. I'd like to believe it. I just see no objective signs that that's true. Every day seems to just have more bits or chunks of bad news.

Oh, god, we will tell our grandkids about this time. But the rougher the better. Bleed out so we can recover. But, I still don't think there needs to be hysteria about RE. That's just one slice. People will be F-ed on so many levels hoping for RE to crash is just a bit silly. Things will eventually improve and we'll do it again in say 10 years. For the "bears" go ahead and dry your net and for the bulls who think we are near the bottom or will soon be near the bottom, cast your net. You really only ever get a good deal in hindsight.

These are the statistics regarding building permits:

http://www.nyc.gov/html/hpd/html/pr2008/pr-03-03-08.shtml

Over 30,000 in Manhattan over the last 3 years, over 90,000 in NYC. The DHPD's press release also states that it was the Bloomberg administration's intention to increase inventory to ease pricing.

The question, of course, is how many of these actually get built, but with over 90k issued permits, we're looking at A LOT of inventory citywide.

Spunky, I would respectfully submit that when a developer with extreme self-interest gives an interview, the issue of objectivity weighs heavier than that of experience.

The 421A was huge to developers. I can't see how prices won't have to come down to compensate for higher carrying costs. Many new dev buyers will get bitten by their tax abatements when they try to sell in 5 years and the buyer is facing much higher carrying costs than the original purchaser.

kylewest, the last NYC gov't chart I saw on the subject had an expectation of real estate prices declining through 2010. Do you know if that projection has worsened?

kylewest, thanks for the great post. BSC I think was the bottom of the stock market, not the property market. The bottom of the financial-services crisis will be in a few months, and over time, as the situation becomes clearer, a lot of these write-downs will be write-ups. It will be huge for profits.

eah - I agree. We just have to suffer through it. The problem is so huge that not even the federal government can prevent it. They can make it go more slowly or ameliorate the effects, but they can't stop it.

tenemental - to the rescue again! I don't make up my statistics. We don't know how many will be built, but judging by the construction I see, lots. And once you start building you can't just stop. If you bought a parking garage or lot for a huge amount of money to develop and took out a building loan, you basically have to build something on it to generate cash flow. Ditto with ground leases.

What has worsened is multiple revenue streams looking bad--not just RE-related $. Many aspects of the budget this year are actually not that contentious because there is simply no money to fight over--there just isn't money.

On the 421A issue: I find that buyers/owners often intellectually understand it completely, but until those abatements actually begin to phase out and the monthly costs of carrying an apartment hit, the vast majority of people don't fully appreciate the impact. Many people start off thinking they'll sell before an abatement ends or don't factor in just how negatively higher monthlies impact the value of the apartment. Couple an abatement phase out with rising fuel and labor costs resulting in maintenance increases and the monthlies can really grow enough to seriously impact one's budget and drive down the value of the unit. I just wonder what will happen to all the value of new condo units that have abatements if as the abatements phase out the RE market stays relatively flat or just bumps along for a while. It's like novacaine wearing off--it all feels fine at first but soon enough....

kylewest is spot-on about the 421A issue. Sort of like the ARM issue: it's great up front, but most people (even those who consider themselves sophisticated) don't realize exactly what the risk is that they're getting themselves into.

"Spunky, I would respectfully submit that when a developer with extreme self-interest gives an interview, the issue of objectivity weighs heavier than that of experience."
Tenemetal in all due respect that should apply to you as well. This is in no way an insult. Keep in mind you probably did not buy in 2002 because prices were to high you also didn't buy in 2003 for the same reason that probably goes for 2004 and in 2005 you were also waiting for prices to go down. The same holds for 2007. Are you ready to buy in 2008. I highly doubt it because you feel your mother ship of price discounts is coming in but hasn't landed just yet. I doubt you'll buy in 2009 as well because even if prices go down you'll wait a little more. Than when prices go up again you'll wait till they go down again and start this cycle over again. I would suspect that most on this board that are forecasting price declines in the Market like our friend MMafia and Eric-cart really have and never had any intention of buying anyway and are just pissed off that prices are still high in Manhattan. I don't fault them in fact they have a right to be angry and letting out their frustrations on this board is therapeutic for them.

Spunky, wrong about me. the first time i considered buying seriously was last year, and decided not to coz the rent/buy ratio (P/E of real estate) was way out of whack, and i realized I had to assume a 7% property price appreciation for steady 30 years to break even -- BREAK EVEN -- with renting. if it grows less than 7%, i would lose money. I figured it was overpriced and decided not to buy. Turns out, spunkster, I was right.

what's your story? how long has your overpriced apt been sitting on the market?

wow cartman those numbers are so fabricated its scary, absolutely scary.

eric_cartman, I did the same thing in 2005 when there were people lined up around the block for open houses, and open outcry auctions for properties. The only time I'd ever seen something like that was at a foreclosure sale.

Read the Jade thread: rent/buy is 28x, with an outhouse plopped square in the middle of your apartment.

History tells us 12x rent is the right number, which is where things were in 1998. We only have 50% down to go.

Sorry Spunkster: it can happen. Miami is already down 30% and nothing is selling yet. San Diego and Las Vegas are worse. New York is next. Tee-hee-hee.

oh, ccdevi, any time you don't like a number you call it "fabricated," whether it be advertised interest rates or the p/e of renting vs. buying.

Maybe you can give me the name of someone I can call to find out what the "real" number is.

Actually, Spunky, you are 100% wrong amount me, and I've discussed my situation on this board quite a bit.

Here's the (somewhat) abbreviated version:

-I started looking in late 05, but had little money saved and no clue about real estate, especially in NYC. The one unit I might have bought was dirt cheap in an HDFC building w/ an income restriction and only a 10% down payment requirement, which I could have borrowed from the folks and paid back quickly. I made too much money, but the restriction was supposed to be increased enough to include me at the "next board meeting." Thankfully, it took many months before the change happened and I realized I wanted, and could afford, better.

-In 06 I had 10% saved and a little extra. I looked at sponsor units and low requirement co-ops, but obviously there aren't many of those. I came close with one, but it would have been too much of a compromise (higher floor walkup than I’m willing to accept, one room w/ street view, two rooms w/ airshaft view), so I refused to increase my bid. I considered new dev briefly for the low-down-payment factor, but the huge transaction costs and product uncertainty are not for me. Not to mention I could only afford it in a neighborhood I really didn't want to live in.

-In early 07 I was still looking for that 10% down diamond-in-the-rough and thought I found it, but the building had just changed their policy to 20%. Low-and-behold, the folks would float me a "gift" I would repay to make up the difference (I probably had 15% at this point with something left over). Around this time I discovered Street Easy and the comps and - bless its little heart - realized this apartment was way overpriced. I backed out, a sucker bought at full asking, and the next comp to arrive was 20% lower.

-In late 07, 20%+ at the ready, I had a contract in hand but was concerned about the 18th century building, which wasn't looking too healthy. The very thorough home inspector I brought in gave me a laundry list of serious problems that would cost the building a ton of money and impact my apartment specifically. Had the building/unit passed inspection, I'd be an owner right now.

So I was never one of those people refusing to buy in 02, 03, 04, etc., though I envy those who did. But I was caught up in the frenzy in 06 and some of 07 and believed the hype way too much. Some sensible part of me refused to accept an apartment I didn't really want, or to stretch myself too thin, and now, hey, things are looking much better for me.

As I've said a number of times recently (I think you were away), I don’t expect to pick the perfect bottom quarter, but when the trends are so firmly in my favor and my rental situation is stable, I feel no urgency and look forward to buying at a better price than I could have in 06 or 07.

Shit, tonyb is me. I forgot I had switched over to my original, "pre-posting" Insider account to check a comp. I really need to move all my saved stuff to tenemental.

what a surprise the master of made up numbers....regardless, please tell me the rent/buy numbers where it takes 30 years to get even with 7% appreciation, have fun with that...

Can someone please tell me who is tonyb ????? Maybe Juiceman or Kylewest may know
Anyway I off for the next few weeks just came on to say hi! Tootaloo

Spunky, see above.

Without being bias and just being honest, I am actually more annoyed reading the responses by some of the bulls posters than the bears posters. There's not really much content or substance for some of the post from the bulls posters but there's definitely plenty of personal attacks and name calling. I'd rather see that if someone throws you with stats, you counter and refute with your own stats and logical arguments and not just discrediting the other poster's arguments by name calling. Otherwise, it's not just a productive argument, and it's a total waste of time. Looking at the stats that get thrown around, you can make your own conclusion and probably predictions, you don't have to follow someone else's conclusion and predictions but unfortunately, I really have not gotten anything out of some of these bulls posters. I don't even know what their position is or what their predictions in the next year or so. So what exactly do you think is gonna happen? I don't want to read "your predictions are ridiculous", I want to know your own predictions and if they are that logical.

Two days ago I stopped caring what anyone called themselves on here so long as no one referred to himself in the third person.

ccdevi, really? can you do the math and show me what is the implied appreciation assumption to break even?

judging by your posts I'm sure you're not biased at all

what bulls? how many bulls on this board are there? you guys consider anyone who isn't ready to assume 25% decreases to be a bull. i wouldn't buy right now at current prices and yet i'm sure the doom and gloomers would consider me a bull.

i just like pointing out the lies the doom and gloomers are spreading just to scare. 7% annual appreciation to break even over 30 years, you do the math, I'm not going to waste my time. assurances that you can't borrow money right now under 9% notwithstanding that a banker from chase called me today offering 5.625 (just one of many examples). its a joke.

and your take on it is ridiculous, how can you possibly tell me steve and his ilk are posting in good faith. "tee hee hee" what the heck is that? these people actually WANT the market to tank and they're shocked that they're unpopular?

cleanslate, welcome to the land of bullshit: the bulls throw out shit because that's all they have. There is no analysis anywhere on the face of the earth to refute what we gleeful bears are saying, that's why they don't provide any. The gist of their argument is that "Manhattan is special" and real estate here never falls in value. Although in the past when Manhattan had avoided the decimation occurring throughout the country they said it was because of Wall Street bonuses, now they blithely ignore Wall Street's demise and claim it's foreigners, or "something."

Well, if you can count the number of foreigners who want to buy an apartment in New York that they'll never use, please do and tell me how many are lining up to buy. Because I don't know of any way to do that. mh23 said it was going to be Ralph Lauren's daughter who was going to buy them all up because she was opening up a trendy chocolate shop in Tribeca. Bet RL's out spawning right now, creating new daughters to mop up the excess inventory of luxury apartments.

Facts are facts: there's almost a 10-month supply of apartments on the market right now based on historical figures, and the number rises daily. Rents are falling because incomes are falling, and no one will rent you an apartment for less than 40x the monthly rent in income. Rental prices are historically almost 100% correlated to purchase prices, and historically that figure is 12x annual rent as the purchase price.

In Manhattan, the rental price / purchase price ratio is now 24x annual rent, so it costs twice as much to buy as it does to rent. And it does. That is unsustainable over time. If someone can tell me how the unsustainable can be sustained, please let me know. JuiceMan says that rents are going to go up. Yes indeed, right when the engine that drives NYC's economy has stalled. That's what's going to happen: landlords are going to raise their rents.

Or perhaps we're all going to move into Jade at 28x rent, and spend our days staring at the crapper parked in the middle of your living room, disguised as a Formica "pod."

Please. Stop the nonsense.

Jerkstore agrees, kylewest.

cleanslate - reading these posts, I'm actually seeing very few people that I'd classify as bullish. Most opinions seem to fall into: somewhat bearish with cautious optomism, bearish, and fascist bearism.

well of course there isn't one implied appreciation assumption, rent/buy ratios can vary, but I do know that if I put 20% down and have 7% annual appreciation and pay roughly 6% interest, you could charge me zero rent no matter how much the place is and I'd be ok.

actually, ccdevi, I'm vastly popular.

So somebody from chase just called you offering you 5.625%? They called you? Wow! How did they happen to know that you're looking for a mortgage?

Here's what I just put into Chase:

$1 million loan
$1.25 million property
NY
condominium
primary residence
documented income
excellent credit.

It returned 6.75% with 1 point, an APR of 6.855%. So you must be extra special.

If anybody wants to try it for themselves, they can go to:

http://mortgage.chase.com/pages/purchase/crq_p_landing.jsp

You can't even get a conforming mortgage at the rate you quote. So again, stop the bullshit, stop the "phone calls." There's the link. Show me how you got your number.

Or should I say, "Somebody called and offered to sell me the Brooklyn Bridge." How do you know if it's true or not?

Look at the below link...this was 1985-1991 inventory coming to market and yes that is 25,000!!! per year. Combine that with the 1990-1992 cold war ending recession and the high crime for NYC. Those astonishing, mind boggling, inventory dropped prices only 30%. But once the inventroy was absorbed prices moved up nicely from their lows and have been moving up ever since. I hope this gives me the link when I upload message, if not how do I get the link to paste? Anyone? It's Miller Samuel/Charts/specialty 2005-06/condo-coop units entering the market--you have to see it!!!!!!!!!

http://www.millersamuel.com/charts/gallery-view.php?ViewNode=1132752161iuzhS&Record=6

steve you're talking about bulls that don't exist, joepa's post is correct. that said, what I'm most interested in is why would the bears be "gleeful"

I don't know if your 12x number is historically accurate or not but it seems awfully cheap when 6% financing is available.

oh while the jade rental/buy numbers may be out of whack, your 28x is once again completely off.

"They called you? Wow! How did they happen to know that you're looking for a mortgage?"

I'm not sure what you mean by that, its a guy I know and sure I had called him. I wasn't trying to imply he had cold called me, who cold calls mortgages?

the rate I quoted was for a 5 arm and I'm not interested, I can do better, you never responded to the link to Astoria I posted listing rates in the 5's, why not? Regardless, wait 6.855 apr is available? what happened to 9+% from eloan that you've been throwing around?

Cleanslate stated " I'd rather see that if someone throws you with stats, you counter and refute with your own stats and logical arguments and not just discrediting the other poster's arguments by name calling"

It's a fact that statistics can prove anyone's point 90% of the time and 50% of the time most statistics are inaccurate. Therefore most of Stevejhx statistical information that he bases his conclusions on is totally useless and inaccurate.

Poor steveF: don't you realize that the numbers from 1985 were almost exclusively non-eviction co-op conversions purchased by the people already living in the apartments? There was no gigantic increase in the number of units available to flood the markets; apartments were simply converted and sold to their owners. There was very little new building at that time. It's completely unlike what we're seeing today.

Moreover, those figures are for all of NYC, not Manhattan. If you would read carefully, 30,000 units were permitted in Manhattan, 60,000 throughout the city. Those are BUILDING PERMITS, meaning NEW INVENTORY, not conversions, which added nothing to the supply.

ccdevi, the bulls do exist. The historical 12x number was calculated by Fortune Magazine, not me, and 6% financing has nothing to do with that ratio per se. Prices of real estate increased because of not only cheap financing, but excess leverage as well (10% down instead of 20% down, representing 9x leverage versus 4x), and excess risk through ARM's, and extremely high incomes from Wall Street bonuses from originating and packaging all these junk mortgages that are now worth nothing, and from M&A based on virtually free money.

There were historical constraints on the market in the past due to rent control / stabilization, and the prevalence of co-ops, which prevented subletting and could control prices to some degree. They no longer exist: there are now more condos listed than co-ops, and fewer and fewer apartment subject to rent stabilization. Most rent-controlled tenants have died. The point being, rents were regulated and kept low in New York, and renting was difficult. Now there are market-rental buildings all over the place, plus investment condo owners. It's a vastly different market.

But anyway, back to the 12x number: it's that way by definition because - as discussed before - market rents compete directly with sales, sales are limited to 28% of income in total housing costs, rentals minimum 40x rent in income. If you do the math and calculate ALL the costs involved, including tax savings and expenses, expected appreciation, opportunity costs, transaction costs, etc., that 28% is almost exactly equal to 40x rent in income. That keeps the 12x number constant over time.

What happened is that through clever financing, some people were able to get a deal on property. However, only the very first people who took out this clever financing got any benefit from it, because over time housing prices rose to offset the clever financing. In fact, they overshot because of an expectation of future price increases. Then the bubble burst.

And it's bursting now.

Eventually, we revert to the mean. A historical fact: people are not willing to pay significantly more to own than to rent, for good reason: the only thing owning buys you is the right not to rent.

cleanslate, as stevejhx said, welcome to land of bola.

ccdevil, "phone calls" ? - give me a break. SHOW ME THE LINK!

spunky:

"It's a fact that statistics can prove anyone's point 90% of the time and 50% of the time most statistics are inaccurate."

That sentence pretty much sums up EXACTLY what cleanslate is saying. LMAO what kind of oxymoronic statement is that?

Really? It is a FACT that stats can prove 90% and but 50% it's inaccurate? PLEASE SHOW HOW THIS "FACT" is substantiated! Where's the data showing that purported FACT???!?!? Where did you pull that 90% and 50% "FACT" data from? somewhere stinky spunky?

Stop the BS. Stop the "phone call" bullcrap. Show me the Data. Show me the links. Show me your calculations.

Then, maybe THEN you may start to build some credibility.

Oh, and thanks for the fascist comment. See what I mean about the quality of some of this debate?

ccdevi, I don't recall your Astoria link, but I was away last week if you posted it then. If you're talking about Astoria Federal Savings, they don't post rates for nonconforming 30-year fixed mortgages. Their conforming rate is 5.875%.

http://www.astoriafederal.com/cgi-bin/nymort.pl

The rates I posted a few weeks back were from e-loan. Published. They have come down to somewhere in the 8% range, I published them yesterday on a different thread. They change daily.

Also, the e-loan rates I had posted were the actual interest rates on 0 point (or close) jumbo mortgages in New York. I didn't publish the APR's, because APR's for adjustables is pretty meaningless. And the only way to see what long-term money is going to cost you is by using the long-term rate, which is why I use the 30-year mortgage.

jesus steve...you do standup..the fascist comment was funny. i would think your humour would be much sharper since you're apparently on the cusp of millions.

I didn't say I took offense at it, just that it adds nothing to the quality of the debate.

If someone's numbers are not fabricated or totally made up and came from a reliable source, then you can make your own conclusions and predictions. You can discredit the stats, but don't discredit the person. You don't have to necessarily agree with the other person's conclusions, you can arrive at your own, or even refute them with your own. My point really is that if someone is throwing you stats and sticking to his/her arguments, don't discredit the argument by a personal put down because you are not necessarily discrediting the argument, you are discrediting the person and that has nothing to do with his argument. And obviously, once someone starts crap in the thread, then it just goes out of control. And I honestly, have seen enough.

Anyway, it seems to have gotten better once I pointed things out. Just keep it up.

i did, though..it added dimension. i bet everyone can now visualise the personalities he portrayed. quite creative, really. don't be so snippy because someone was funnier than you.

urbandigs was the funniest guy I ever read on this thread.

a thread, not this thread. Ooops!

Oh MMafia go get you checkbook out and write out the next 35 years worth of rent checks to your landlord because that's how long you'll be living in that six family rat hole you call home.

Woah! 35 years now, eh Spunk Brewster? And now, it's a six family rat hole?

Gee, thanks. =D

Im still here Steve. Perhaps you could comment on my post regarding Citi today, in response to the commenter who said Citi has bottomed, written down loans to zero, and has 22Bil in upside write-ups on the way?

http://www.urbandigs.com/2008/04/inside_the_citigroup_leveraged.html

comment #3. Im curious to hear your thoughts on what he said? I responded already with what I know. maybe Im wrong.

urbandigs, I posted my comment as requested. Citi is in serious trouble, incompetently mismanaged for years, and there will be massive layoffs and sold assets. In the 80's there was an article on the at-the-time failing BofA, where I worked, called, "The Incredible Shrinking Bank."

That's what Citi is about to do. It will fall to #3 behind BofA and JPMorgan by the end of the year, and it may never recover its lost status. They have a lot to do, and not a lot of time to do it in: they have no strategy except to do everything, which is highly inefficient.

i agree 100% and my sources confirm what you are saying. Citi has a lot of work to do.

stevejhx...you are the spin doctor...TV evangalist..3 card monty guy all rolled up into one. Summary... I don't know what the **** you are talking about. You have a spin on everything and evryone who doesn't agree with you. PEOPLE..THIS GUY IS NOT A GUY YOU WANT TO LISTEN TOO. Look, his ranting alone should cause you to get a little nervous and not ever want to be around the guy.

Urbanbandigs I like the way you put Roubini in the same class as Buffet and Soros. Where the hell was Roubini in 2005 with his forecasts. In fact I'd love to hear some of Roubini's forecasts in 2004 and 2005. BTW why write all that info on your blog isn't it easier just to copy and paste all of Roubini's viewpoints on the economy.

steveF, arent you the guy who confessed on a different thread that you were "talking up" real estate so that those who have bought will benefit through new buyers coming into the market - "sort of like in a pyramid"?

you are Mr Ponzi - talk about pot calling the kettle ..

eric-cartman give us all a break and why don't you run over to the local HURRY UP AND WAIT real estate office and tell em about your 7% break even analysis as well your ponzi conspiacy beliefs. No wonder RE agents have a bad reputation they have to deal with dipsh*its like eric-cartman pretending that he's interested in buying an apt.

ahh, good old Spunky! As always you are 100% correct! 100% of my content is Roubini written and copied onto urbandigs. Thats the secret!

Just kidding Urbandigs but every time I read a Roubini doom and gloom forecast I have to put him in the same Johnny come lately after the fact camp as Stevejhx. Putting him the same sentence as Buffet and Soros is just plain silly.

steve, thats the link I posted. its simply not fair to go by 30 years rates only, 15, 10 and even 7 year loans are very reasonable financial products. if you're going to just keep pounding the drum that rates are at 9, now 8, now 6.8, when people can get good solid financing (albeit not fixed for 30 years) at under 6, I don't know what to say. Its just not reasonable.

mafia, I hope that link works for you, if not let me know. what a joke, something doesn't exist unless you can link to it on the internet. you again must be one of those who pays full price at best buy, good luck with that.

steve, as to the 12x, I'm not sure how you can say cheep financing has nothing to do with it. people can pay more when they can borrow money cheaper, that effects the ratio. the absurd example, buy to rent could be 50X but if i can borrow enough money cheap enough it might make buy a better deal. and of course saying that its 12x "by definition" is nonsense.

hey cartman, you haven't replied, to busy backing up your buddy steve, what about the 7% break even analysis, we're all waiting for it

steveF, you're exactly right, I'll leave it at that.

steveF, really. You're beyond!

From the New York Times:

The Anatomy of a Co-op Conversion

By IVER PETERSON
Published: March 27, 1988

"Co-op conversions began in New York City in the 1920's, and in the last 10 years alone, a period of intense activity, more than 3,000 rental buildings containing 242,000 apartments have become cooperatives."

Note the date: 1988. Note the number of converted units: 242,000. Divide that by ten years. You get 24,200 per year on average.

What did you say the availability was? Let me quote:

"Look at the below link...this was 1985-1991 inventory coming to market and yes that is 25,000!!!"

The co-op conversions were well-known back then.

And this from the Manhattan Institute:

"By the late 1990s, responding to market pressures, developers began building housing in record numbers. Annual building-permit authorizations in Manhattan rose dramatically, from about 500 in 1992 to more than 6,000 by 2001."

http://www.manhattan-institute.org/html/rdr_02.htm

There was virtually no building in New York City in the 80's. The inventory figure is from co-op conversions. Co-ops were converted because it got the owners out of rent stabilization, which after the inflation of the 70's - if you don't recall was when the Bronx was burning - made owning apartment buildings unprofitable.

ccdevi, go to housemath.us, plug in your numbers and let me know what you get.. i did for the apts i was considering, and the number i got was 7%.

spunky - ehh, just messing with ya! look below and read the context of the sentence, as it was in regards to credit default swaps and counterparty risk. It is this that scares these minds; not a comparison of smarts or past calls:

"The counterparty risk that CDS brings to the structure of our financial system is huge. This is one reason why Bear was not allowed to go bankrupt, who would be on the hook for 10's of Billions owed to holders of CDS for Bear?

Everything is inter-related in this system. This is what scares Soros, Buffet, and scholars like Roubini, and many others. Honestly, no one knows how this will ultimately play out."

okay eric-cartman we'll do that along with incorporating with with th Ponzi scheme.

OKay this articles proves without a reason of doubt that the Manhattan RE market is plunging. Don't tell these buyers about the 30 years and 7% appreciation per year just to break even otherwise they would run not walk away.

Local buyers might be nervous about the New York City housing market, but foreigners are still taking advantage of the weak dollar and are snatching up high-end apartments, at least at Andre Balazs' William Beaver House.

Over the last month, several buyers from Spanish-speaking countries have plunked down as much as $3.2 million for condos at the new Financial District tower, the project's spokesman said. Eight out of the last 10 buyers were foreigners, including six Mexican buyers.

Most recently on Sunday a buyer from Mexico bought a 698-square-foot studio on the 32nd floor for $1.2 million, or $1,705 a square foot. The same day, another Mexican buyer paid $1,691 per square foot for a studio of the same size one floor down.

Sale prices were lower a month ago at the 320-unit building on the corner of William and Beaver streets.

In March, a Mexican buyer snapped up a 12th-floor studio for $975,000 or $1,397 per square foot.

Another Mexican buyer paid $3.2 million or an average of $1,533 per square foot for two 26th-floor units to combine into a three-bedroom pad with 2,116 square feet.

On March 7, a Venezuelan bought a 960-square-foot 44th-floor one-bedroom apartment for $2.2 million or $2,292 a foot.

Since sales officially began January 2007, 60 percent of the units have reportedly been sold, but none of the sales have closed yet.

The off-site sales office has been closed for three weeks while the on-site sales office has been built out. It will open this weekend along with two fully furnished model apartments at an open house this Sunday.

ccdevi, you never finance an long-term asset with a short-term note, because it entails risk. Just using the short-term rate doesn't let you calculate that into the equation.

Or do you deny that adjustable-rate mortgages are risker than fixed-rate ones? If so, why do proposed regulations state that you need to be able to pay the highest reset at the time you take the loan at, to be eligible for it?

Because they're risky.

I didn't say "financing has nothing to do with it." I said that 6% per se is not enough, that the leverage issue was much larger, and much riskier.

You forget: rents and sales compete with each other. There has never been a long-term dissociation between the two. Ever. Anywhere in the world. They exist in the short-term, but not in the long-term. There is no such thing as a long-term "rent bubble," either, because rents are tied to income; there is no leverage.

Since rentals and sales compete directly with each other, they are substitute goods. If prices get out of line - assuming sufficient supply - then people will switch from one to the other. In the past in Manhattan there was an insufficient supply of rentals because of the prevalence of rent control/stabilization and co-ops, which do not for the most part allow sublets. That has completely changed, and there is now a large supply of market-rate rentals out there, either in rental buildings, or renting from a condo owner.

If there were 0 places to rent - you could only buy - prices would still be limited by income, unless you add a new factor, such as leverage. But leverage only works in the short-term because prices will climb to make them in balance with incomes again - 40x monthly rent, 28% total housing costs (same thing) - and you can't keep on increasing leverage forever. It becomes a Ponzi scheme; things can expand only so fast because eventually, like a balloon, they pop.

Or should I say bubble?

cartman, that site doesn't work for me, I press analyze and nothing happens. could i ask what the price/rent numbers were?

Urbandigs I have to agree with you some of these instruments coupled with corruption (insider trading payoffs that some Hedge funds are probably involved in) can and will continue to cause havoc.

urbandigs, do you really expect spunky to understand this:

"The counterparty risk that CDS brings to the structure of our financial system is huge."

Really?

He's publishing what Mexican and Venezuelan buyers are paying for apartments in New York, and extrapolating it to the entire market.

Let's say foreigners do buy all these apartments. Then what? They'll suddenly become affordable to Americans, who earn, say, dollars, not pesos or bolivars? They'll suck up the excess inventory, but who's going to come in next? Because if no one is buying, prices will fall.

BTW Venezuelans did the same thing in Miami in the 80's, the last oil boom. They even built a mall for them - International Mall - right next to the airport so they could fly up and shop in the US because their currency was overvalued compared to the dollar. As it is today.

spunky's alright..ok, im off to drink, smoke, and eat. is that wrong?

stevejhx just because your house value on Fire Island has depreciated more than BSC doesn't mean that it's true for Manhattan RE as well. Look you made a stupid real estate investment on Fire Island. I realize there's a glut of homes for sale on Fire Island as well as several foreclose in certain sections.
Deal with it. I just hope it doesn't drain all your saving in costly repairs. I heard the sea winds and flooding in certain areas can cause problems to the pocketbook.

"6% financing has nothing to do with that ratio per se"

"I didn't say "financing has nothing to do with it." I said that 6% per se is not enough"

enuff about that

"you never finance an long-term asset with a short-term note"

another classic stevehx statement, first of all who never does? are you just advising? 2nd, 7, 10 and 15 years, even 5 years, are not short term vis a vis the holding periods of many house buyers. who decided that 30 years is the correct length of time to more or less eliminate risk?

yes I am aware that arms have an element of risk, thanks for pointing that out. thats another tired and true technique of yours, you argue against a position (or in this case ask an absurd question) that nobody or only the extreme takes. Arms have risk, so what? That does not eliminate them from being a perfectly reasonable financing tool for a home. A tool I'll choose everytime, if someone wants to give me a point or more lower on a 10 year mortgage versus a 30 year, I'll save that 10% + or - and worry about getting caught 10 years from now. The ARM scare is not based on these loans, its based on these very short term loan, often 1 year, where people's payment were doubling almost before thy had unpacked. You tell me who's gotten stung on a 7 or 10 year arm. In fact, the people who got stung aren't even using "normal" financing. Rates are very low right now, anyone resetting now is probably doing fine, the people who are getting junked are generally poor people, who signed up for these hocus pocus, your monthly payment is 1000 for the first 12 months and then its 2300. Rates simply haven't moved that much even from the lowest of the lows back in 03 I think it was when i got 4.25.

I'm tired of this. I don't disagree that to a large extent prices and rents are related and that prices got artificially high because of cheap financing, that does not mean that the market has to revert back to 12x.

We've been through this, Spunkster. I agree with you. I made "a stupid real estate investment on Fire Island."

To enjoy, not to flip or rent out.

Stevejhx in other word your enjoying your stupid mistake. That makes sense to me. Gee happy investing --I guess.

That "developer" interview posted was mind-boggling. It is no wonder that developers are going bust - they deserve to be parted with their money. Love this quote...

"Classically, it is a cycle of approximately a two- to three-year downturn and seven years of boom. If [you] position well and don't get caught in a bad position with your product, you can really capitalize."

Isn't investing easy: 1) find hottest asset class of last 10 years, 2) unlearn everything you know about return on investment and cash flow, 3) wait for prices to show the first sign of softness, 4) buy more, 5) get rich.

That is exactly why a real estate bubble is so dangerous. When a stock goes up 50% you look at the chart and it feels dangerous and you are well aware it can go right back down. When a home goes up 50% you feel smart and make up every reason under the sun as to why it was justified. Therefore you add more leverage and keep doing it. Then things unwind so slowly (unlike stocks) that you remain in denial the entire way down (which is very unpleasant with leverage).

I feel like this is pretty simple. The price/rent ratio is silly and will come back to normal now that credit has returned to normal. No assets (except perhaps rare collectibles) trade at astronomical price/cash flow ratios for very long periods of time. Real estate is no exception, regardless of where it is located.

ccdevi, I actually have an ARM for the very reason you state. However, I can pay off the full principal value if need be, so there is no risk.

I don't disagree that subprime is a major issue. We just don't know the effects of prime ARM's in the future because NYC is behind the curve.

The mean has always been 12x, and that's what we fluctuate around. Sometimes it's more, sometimes it's less, but over the long-term, it's 12x.

It's not enough to say, "that does not mean that the market has to revert back to 12x."

Why doesn't it if it always has? I say it will because rentals and purchases are viewed by most people as virtually equivalent products, and this is corroborated empirically because their prices are correlated almost 100% over time. This is because 28% total housing expense = 40x monthly rent as income, so rental and sale prices are 100% correlated to income. In fact, "imputed rent" - what economists use to calculate inflation - is defined as the market rent for a property that is owner-occupied. Property prices are not because they are assets, not expenses. By definition real-estate owned is worth exactly what it would cost you to rent it out, not how much you actually pay for it. That's how it works. It's not arguable: it's a definition.

In the case of increased leverage, housing prices will rise to reach that 28%/40x ratio taking the leverage into account. In the specific case of NYC, incomes rose drastically thanks to Wall Street, which is now cutting back. As incomes fall and leverage falls, housing prices will have to fall with them else no one will be able to afford a place to live.

There's my argument. What part of it is wrong, and what's your argument?

mbz, the last bust lasted 10 years: 1988-1998. The last boom lasted 10 years: 1998-2008. The next bust will last 10 years if things deflate slowly, 2 years if it crashes (which seems to be where we're headed). There is no denying the historical facts.

Unless you're spunky or ccdevi.

you said before that 28% and 40x basically result in 12x over th long haul, is 28% and 40x unique to the NY market? my guess is no, i doubt banks and landlords use wildly different formulas around the country. 12x is the historical norm in nyc but thats actually very very low for the U.S., why can't nyc adjust? what about nyc keeps it so low?

So much happier when Spunky and Steve were off on their vacation together.

12x is the historical norm in nyc but thats actually very very low for the U.S.

You made that up. In fact, 12x is the historical norm for the entire country.

28%/40x is not unique to NYC, and it does vary slightly from place to place and based on individual circumstances. But the ratio between the two remains the same, as proved by the long-term correlation between rents and purchase prices.

You still haven't told me what part of my theory is wrong. It's actually not "my" theory, however; it's published all over the place.

digs, didn't your streeteasy inventory thingy say over 7000 a couple days ago? If you look at the trend over the past two weeks it doesn't seem to get much higher than 6500. I may have seen the 7000 number somewhere else but I thought it was on your site.

7,165 according to streeteasy, not in contract, as of today.

Updated On 04/10/08 at 11:20AM
Midtown South condos see brisk sales

133 W. 22nd St.

Several high-end condo developments that hit the market in Midtown South last year have shown a quick sales pace:

Spunky, what are you talking about?

sorry stevejhx here is the link to yet another development that has brisk sales.

http://ny.therealdeal.com/articles/midtown-south-condos-see-brisk-sales