I will buy a 1 BR doorman in Manhattan @ 250K

I'll see ya there. Just hoping the budget doesn't get trimmed too much for too long, as I am a lowly civil servant myself.

i probably would not want to live in NYC anymore if 1BR were only worth 250k haha.

Personally, I don't think it will hit as low as 250k because of supply and demand.

There are still plenty of folk making 6 figure salaries outside finance, at 250k it would bring that to 3x income which is affordable. I guess the ones at 250k would be the "crappiest" 1brs in manhattan.

If it got to the point of prime 1br reaching 250k then you may not have a job and severe crime has returned to to city.

Prices will fall from todays prices, but there will be a realistic floor based on supply/demand

bugelrex: I hear you about plenty of 6-figure salaries, but I'm concerned about the disappearing high-6- and 7-figure salaries disappearing -- and all the service jobs downstream of them that will disappear as well. Hard to know where that cascade ends.

I would be thrilled if I could pay $250k for an alcove studio..I don't think a one bedroom will get down to $250.

Washington Heights & Inwood may see $250 1 bedrooms.

bugelrex: there does not exist any six figure jobs in manhattan that are not dependent on finance in some way:

the doctors get their money from patients who can pay cash for plastic surgery, chemical peels, eye laser surgery etc.

advertisers and media get the majority of their money from the car companies, luxury good retailers, and wall street companies who waste money advertising how people should invest with them. That is gone

Law firms have frozen all associates base salaries and have also asked their partners to pony up money to pay off loans. that is because their biggest client wall street is dead.

I could go on but I think you get the idea....personal trainers, restaurantuers, nannies, drivers etc

think of wall street as you would the american consumer. The consumer cannot spend then China, Japan etc are also in a world of hurt hence the global recession.

EVERYONE is HURT ....Everyone will be hunkering down from entreprenuers on down

flmd: Most MDs won't really see a dramatic decline in income, unless they rely on elective procedures. In fact, my sister, an MD, says there are more people at her clinic now than ever before because people have more free time.

Also, flmd, tenured college professors? Government attorneys? ...just to name a few. These positions are ABSOLUTELY unaffected by the economy, their salary scheduled cannot be "negatively revised," and they cannot be fired. And many of them easily make $100k (sometimes only working 9 months out of a year).

vanderveen: so your sister will be purchasing all the overpriced condos we're saved....listen a few people here and there will never make up for the thousands that have been affected...

government attorneys and tenured college professors are not saving this market

Maybe the one-beds in Manhattan that are $250k won't be so great, but there will be decent 1-beds in Brooklyn at that price.

In the good brownstone neighborhoods of Brooklyn. Nice blocks, good apartments, decent maintenance for 1-beds. At an ask of between $225 and $300k -- I can easily see that happening, probably well within 12 mos.

six months ago large studio apts. at 235 east 22nd selling for $449k...current large studio listed at $405k, dropped to $395k..NOW...$365k

by the way vanderveen: govt jobs will also be affected...when tax revenues go down and contracts have to be renegotiated workers have to make concessions

$250K was the 1br level in 1998 - with doorman in a good neighborhood in good shape.

Vanderveen, tenured college professors who don't teach in law school, Med school or business, where the private sector could lure them with higher salaries, make 70K-90K a year. The State public sector is going to have a huge deficit and big problems to try and retain all its payroll, let alone create employment. Fed government may take up part of the slack. But to think that people with job security are going to account for all the people without who are going to lose their jobs so that we can hit the forecast 9-10% unemployment is ridiculous. Not to mention that Wall Street accounts for 6% of the NYC workforce but 25% of the wealth. If 2br/2bt in Yorkville go down to 550K, as they should, 1br may hit 300K.

This is not going to happen. There are so many people like you waiting to buy, they will jump in before.

i agree with you uppereast, thats some wishful thinking.

MD's usually have lots of university loans. by the time they are established (mid 30's) many are likely to be moving toward the family route (wife & kids) and opt for not an apartment but a home...

everything is tied to the world of finance. it's systemic. in order to understand a systemic crisis as such one only needs to play a game of dominos...knock one and the other others soon follow.

remove the financial industry, nationalize the banks, evaporate the bonuses and financiers (top performers) on the executive levels may bring in 250K a year at best....Most executive salaries likely to be 100-150K range + bonus. i'm not worried, gov't will work this out...

I disagree on others arguments, 250K is fair level for 1 bedroom. 1998 levels are very likely as we have an over inflated bubble. and the law of supply and demand? yea sure foreigners may want to have a condo in the city, but this is a global crisis, a systemic crisis so I'm sure the "hot money" flows some realtors hope for is unlikely.

i have been studying the trade flows. especially China-U.S. As "hot money" inflows likely won't continue at the rapid rates from 02-07, as nations defecits increase due to global recession it's my conclusion that those who are patient will be rewarded.

to understand the current boom would needs to understand the "money flows" generated the past 10 years. Since this flows are likely to discontinue, so will our standard of living and the price level of NY apartments.

Thanks.

My first sale 1993? Studio at 96 Perry street: approx.$30,000.

prior to hot money flows, you could buy a 1 Bedroom in Soho for 150K....anyone notice all the liquidations and store closings in soho?

NY commercial real estate=BIG TROUBLE.

I lived in a [non-prime] GV doormanned 1BR in the early 1990s that the owner finally sold for $90K, and felt she was robbing the buyers blind.

3 BR, 86th & Madison: $50,000.

1976.

Beat that.

86th and Mad...nice! Wait I can beat that; father-in-law bought Chelsea brownstone in 1963 for $39,000. Nice piece of change back then though.

Wiseinvestor. I was working in Chelsea yesterday and was amazed at all the storefront vacancies along 8th ave and a few on 23rd street as well.

Steve and the $1 prime Park Avenue coop? Steve?

(I didn't snag the $50,000 3BR. 'Twas my parents.)

You never mentioned whether or not this $250K one-bedroom is going to be in a condo or cooperative. The price differential is substantial. Unless you can show liquid assets after you've put $50K down, you're not getting into a cooperative. Coops make up 75% of the reisdential properties. Condos can be purchased by foreign nationals and don't require a board package or interview, which is why they are the more sought after property. Supply and demand. Fewer condos, higher price, larger buying pool. You're not getting a 1BR for $250K unless it's in Inwood, Brooklyn or a dump in Harlem, but keep dreaming. Hope, it's what's in these days. Hee hee

theburkhardtgroup, perhaps your FiL overpaid! Chelsea then was very similar to the UWS. In the early 1970s, brownstones off of CPW in the W70s sold for around $15K, and my mother's building turned down the landlady's "offer to offer" their classic sixes on W. 86th for around $10K apiece.

You'll be able to get a 1 bd co-op in Washington Heights for 250k within six months, but not in a doorman building.

I have read a lot about New York’s loss of leadership in the financial services business and the resulting impact on the real estate market. It is true that current circumstances will cause problems and prices will go down. The person looking for a $250,000 doorman one bedroom however, better have an alternative plan.
Wall Street is made up of some very bright and hard working individuals. They went to the best schools, they worked for the best companies and they had the best of life. They will not suddenly move to Jersey and teach college.
Wall Street itself will not go away…it will transform itself. History endorses this argument. The world’s financial centers will still be New York and London. And these same people, the best and smartest of them, will have the new financial jobs that earn plenty of money. Some of the folks who are now on Wall Street can tell great stories about when the introduction of the fax machine made everybody talk about Fedx going out of business. Or the time when Motorola stock went down because cell phones gave you brain cancer. There are millions of these stories and Wall Street was the first to spread the word, just like everyone now is talking about the demise of New York. This recession is very serious…just be careful to use your common sense.

Matt, you make some good points, however, something to keep in mind is that, with your examples such as FedEx and Motorola, those were individual companies that faced odds and overcame them. However, in the current environment, the American economy is going under some pretty significant restructuring.

It will bounce back--at some point. No one can pretend to know if that will be next week or next decade. And, yes, some people will make a lot of money figuring out how to take advantage of some new regulation or some innovation in finance. But, because of the globalized nature of finance and the rise of cheap telephony, there is no guarantee that the future's booming markets will occur in Manhattan.

Does any of this suggest that a 250K 1BR doorman apartment in Manhattan is possible? No, it doesn't. But it also doesn't prove that it is impossible.

550K for a 2br and 300K for a 1br were 2004 prices in Yorkville. As per the information provided by urbandigs and West81st, many classic 6 and 7 in the UWS are starting to approach 2004 prices, and we're not even halfway through the downturn. So what I'm waiting for is not only possible, but likely. It would be nice for a change that the people who are stating that a 40-50% drop from peak is not likely in Manhattan (Goldman Sachs recently predicted between 35 and 44) present some arguments.

1wiseinvestor, where are you finding a 5% annual yield on a CD? Would love to put money into that if you can point me in the right direction.

Can I buy three of them?

How do I get 1wiseinvestor to manage my money for me?

Does anyone have contact info?

Thanks!

Why is this such a bad time to buy ? Right now, sellers are really willing to negotiate because nearly all buyers are on the sidelines. You are bidding against noone, so just about any low offer will be taken seriously. Also, you are getting a historically low mortgage rate for a 30-year fixed loan.

A 250K 1BR doorman apartment in NYC would attract multiple cash bids of asking on day 1. It won't happen.

400k for a one bedroom (doorman) would still be terrific if it happened.

Don't remember exactly, but several weeks ago, many banks were offering 5yr CD's around 5%. It only last for about a week. All the big banks were there, JPM, BAC, WFC.

Why is it no one can look past the last 10 years? Look at some of those sales in the past (Perry St. studio for $30k, W70's brownstones for $15k, 3bd for $50k) and say it's not possible for NYC to see a slump of drastic proportions.

Now, before you blow up on me and say people made less, inflation, appreciation, and so on, why not look even further back. Do you think the people that originally populated the South Bronx and Harlem in the late 1800s-early 1900s thought their beautiful brownstone homes would be so "valuable" that owners torched them for arson; or the city sold them for $1 to get them off their books?

There seems to be a strong reluctance to admit that this financial center loss is absolutely devastating to NYC and, when coupled with a total RE meltdown, could very well swing NYC back to the 70's values. The city is already short 5k police officers and they've pared new classes drastically. Don't you think that, coupled with unemployment and slashed public programs, will bring about quite an uptick in crime?

As all of these commercial spaces (financial, real estate, retail, restaurants, etc.) go vacant, won't the building owners being feeling the pinch? What are they going to be filled with? What about all of the new building developments? While the building boom might not have been as drastic as the conversions in the 80s, it's still pretty huge. When they can't sell, they'll try to rent (they're doing this already). But, who is going to rent them and what are new rentals going to do to apartments in older buildings with less amenities?

I really am not trying to be doom and gloom, but I'm just having a hard time finding the bright sides. All I hear out of the positive people is a reluctance to believe the city could fall into a serious downturn like it did in the 70s, or multiple other times during it's storied history.

We've had 25 years of prosperity with, honestly, no real serious or prolonged downturn. It seems as though people forget a time when inflation, unemployment, and interest rates were in the double digits.

I'm pretty sure there were smart people who went to good schools living in NYC then...

Patient - they offer those huge interest rates because they need people to bring in deposits. It helps their reserve ratio. They lock you in for 5 years so they can ensure, should a panic arise, that you can't "run" on the bank to get your money and cripple them.

no point in really coming on this board to argue...seems as if the majority don't under the current macro-environment. furthermore not many understand the term systemic crisis, nor the term stag-deflation. Even more than (furthermore) a large portion of the audience does not interpret U.S.-China hot money flows or growing/shifting trade imbalances.

to understand the crisis, you should focus on the root. for those of you who uncover the root you'll largely agree we'll see 1 Bedroom, 750 Square feet, doorman, at 250K level.

for those of you who oppose this argument, speech is always freedom of expression. but just because General Electric is at trading down 75% does not mean it won't go lower, far lower. because manhattan real estate has great bargains now, even larger bargains will be found in 12 months. The crisis is spreading so quick, systemically that it's hard for most to grasp. feel free to ask questions, i'll try and analyze solutions.

"3 BR, 86th & Madison: $50,000.

1976.

Beat that."

Studio. 81st and CPW. 1979. $35K

The first apartment I purchased in New York was in 1991 - I paid $130,000 for a 700 sq. ft.1 bedroom in the Carlton Regency, a doorman building in the mid 30's. Granted, it was Murray Hill, but nonetheless the Carlton Regency is a full service, luxury building with doorman and concierge. So I guess I am saying that I don't think it is too outlandish to say that we might see 1BR's going for $250,000 in "good" but not "prime" neighborhoods. Things somehow seem much worse to me now than they did in 1991.

If Dow falls below 5K i think 1wiseinvestor is being a little too optimistic!!!!

non- doorman, backyard garden- approx.250 sq.feet- upper east below 96th- 200k in 1999

oops..forgot...850 sq foot duplex

250k is hard to imagine but if i take a step back i see a record bust in the finance industry combined with a record supply of new housing combined with a synchronized global downturn. Seems like very, very bad news. Perhaps the risk is not being imaginative enough when considering how low prices could go. To make matters worse, the treasury bond market doesn't want to cooperate all of a sudden...say goodbye to record low rates.

a friend bought in early 90's a lovely small 1 bed off central park west..steps from natural museum of history for about 150k

It also had small outside space

rc6124 , Re: "A 250K 1BR doorman apartment in NYC would attract multiple cash bids of asking on day 1. It won't happen."

The very first $250k 1BR will be gone in a day. Second will be gone in two days. Third will be done in three days. Next forty seven will be gone in say a week. But the 51st appartment will sit there and the only buyers who want that apparment will be demanding a discount 10% off $250k comps.

Today's buyers will be tomorrow's sellers.

It WILL happen.

Stealth1 - 1991 was almost 20 years ago. I know it is hard for you to understand this. Ok lets put it in Grandpa perspective. Could you have gotten the same 1 bdrm in 1991 that you bought for $150k in 1971?

Yes you are older than you think. Time flies fast Stealth1....

Ok lets say we use Stealth1's 130k purchase in 1991 as a benchmark. Assuming an average appreciation of 6% (which is a very fair appreciation measure) after 20 years that would put the home value at $416,927.60. And NYC is a much different place then it was in the late 80s/early 90s.

You people are out of your mind if you think you can get a home for 250k in Manhattan.

No need to wait. There are some $250k 1 bedrooms in prime Manhattan RIGHT NOW in land lease buildings with astronomical maintenances.

1996, 950 sf Gramercy 2bd/1ba coop, $105K.

you're killing me with these prices...

Rented the apt. out for many years afer I moved to UES, but sold it in 2005 for $580,000.

Mike55 - no one is saying that we can get that today - but if things continue to deteriorate I am saying that it is not an outlandish thought. Anything can happen in this enviornment. Things are dire indeed.

Aboutready - I like that pull in Gramercy. Very nice, indeed. Gives this poor civil servant with spotless credit and some investment cash some hope.

people like mike s 55 make me laugh....you're the same person who if I told him that Merril Lynch, Bear Stearns and Lehman Brothers would be no more would respond with a bunch of historical anecdotes of how impossible it was. He now has the temerity to say that a $250,000 condo is impossible...

Mr Nassim Taleb wrote a book for people like you...you should read...your arrogance concerning what you think can't happen is scary

850 square feet - gramercy park - $45,000. There were a number of apartments for sale at the time. Could have gotten a 2 bedroom for $70,000.

THere will be 1 bedrooms for $250k in Manhattan. But it is not going to be the 1 bedroom you are thinking of. It will be north of 125th Street, need tons of work, have no elevator, and have a lousy view.

Sorry - forgot to add this was 1992

I agree with most of you, except for Matt.
Matt, wall street is an enterprising place and there will be people who make lots of money at some point.
the difference now is government oversight - the intrusion of government at every level of this industry will be unlike anything we have seen for decades. Couple that with the amazing job losses suffered with those to come, and you hae a recipe for a Wall Street that will not be the same for many many years. Every previous downturn the past 25 years was relatively brief.
This one wont be.

And let's not forget two things:

1. The fear factor. Once there's a substantial plunge in prices and cocktail parties are full of the horrors that follow, people will NOT be jumping out of the sidelines to plop their $250K down. Nobody wants to be cocktail party fodder.

2. High interest rates. Plug 17% into your mortgage calculator and see what your $4000/month will buy you.

InvestorMan, they even let me in with 10% down (and PMI, of course). Ah, those were the days.

But if I remember correctly in around 1991 a trader was making approx. $100k and a Lawyer $60k and this was considered pretty good bank...no? There were very little sales transactions happening below 23rd street. A duplex "one bedroom" at the Archive was $1295 owner paid me and gave the tenant a free month on a two year lease.

you are crazy at 250k! wishful thinking, but crazy :-)

1wiseinvestor, oh so wise ou are: New York looks as if it may lose it's status as financial capital. If the status leaves, the home prices drops. Money follows where money is. If New York City does not have revenue drivers from the world of finance, then what? Where will the incomes come to support current price levels. Furthermore, where will the budgets come to keep the city polished?

I love NY, regardless of the outcome I plan to buy an apartment. But anything over 250K for a 1 bedroom/doorman/etc is plain stupidity.

I'm following the money, patiently waking on the sideline with my 5% annual CD yield.

thanks.

ignore prior mis-post

1wiseinvestor, oh so wise ou are: New York looks as if it may lose it's status as financial capital.
I say, interesting, it will lose its status to what city?

>A 250K 1BR doorman apartment in NYC would attract multiple cash bids of asking on day 1. It won't happen. <

To quote a top executive from PIMCO, "in this economic environment, think the unthinkable."

I don't think anyone would have believed that shares of Citigroup would trade at $3 either. This places them in a mid to early 1990s valuation. BTW, the share price of Ctigroup has historically been a rather decent indicator of the direction for Manhattan RE. Perhaps this time it will be different.

lemme know when you find this! i'll take 3!

>lemme know when you find this! i'll take 3!<

I'm hanging loose until the second half of 2010 and more likely, 2011. By that time, the picture should be blatantly clear on much damage was done by this credit bubble bust disaster. BTW, $250K for a one bedroom pocket of air space doesn't seem all that cheap to me relative to the the mid to late 1990s valuations.

Never try to catch a falling knife......you will cut your hand.

To serge07... Hint: Inflation. $250k today isn't what it was in 1990. So, you need to DEDUCT whatever the inflation was for the last 20 years from $250k to get the "real" comparison, in order for you to appreciate how cheap it is.

Eighteen months ago, $250k was the opening bid for one of the diamond-encrusted Damien Hirst jockstraps or ball-gags that malraux salivated over. The $1.2m 1BR was table stakes. That this casual SE discussion is even taking place - that there is a crumb of reality to it in Jan 2009 and not huge bitter renter waves of vitriol - is incredible.

vanderveen, I agree however, the financial markets are clearly stating that there is a massive dose of deflation out there. One only needs to look at the collapse of global stock prices, fixed income securities, most major commodities and real estate. Commercial RE which doesn't get much press around here is also in a word of hurt.

I have no idea where prices will ultimately settle but there are very serious economic issues on a global scale which most of us have never witnessed. Just a hunch on my part, but I don't believe their ultimate impacts should be underestimated.

BTW, it's not 20 years. It would be 10 years if using the late 1990s as the point of reference.

Deflation most likely won't happen that easily or quickly here--especially if you are talking about a 10-year, not 20-year timeline. I think you get my point on inflation, but I am not really sure if I get the rest of your argument...

I was merely responding to your comment that $250k for a 1BR doesn't feel cheap based on the 1990s data. This perception is in fact due to inflation ($250k isn't worth as much as it did in the 1990s). Period. The rest? I don't really know.

vanderveen?
what planet are you on? deflation wont happen easily or quickly here? There is asset price deflation here everywhere you look. residential and commercial estate, gas prices, fine art, hotel room rates, food prices in some cases, mortgage rates, yields on TIPS spreads, etc etc etc etc etc

Great post here guys. reading through the post i have to confess 1wiseinvest has to be an insider of sorts.

the terms "hot money flows", "systemic risks" and "global imbalances" used by the original poster are not dictionary terms used by most of us including myself.

If 250K is a floor on 1 bedrooms I wonder when will get there and why? Most of us are curious.

1WISEINVEST,

can you help answer your thoughts in more detail? i capitalized my questions for a follow up.

"everything is tied to the world of finance. it's systemic. in order to understand a systemic crisis as such one only needs to play a game of dominos...knock one and the other others soon follow."

"remove the financial industry, nationalize the banks, evaporate the bonuses and financiers (top performers) on the executive levels may bring in 250K a year at best....Most executive salaries likely to be 100-150K range + bonus. i'm not worried, gov't will work this out..."

-WHAT ARE CHANCES OF FULL SCALE NATIONALIZATION????

"I disagree on others arguments, 250K is fair level for 1 bedroom. 1998 levels are very likely as we have an over inflated bubble. and the law of supply and demand? yea sure foreigners may want to have a condo in the city, but this is a global crisis, a systemic crisis so I'm sure the "hot money" flows some realtors hope for is unlikely."

-ANY REGIONS OF THE WORLD NOT SYSTEMIC?

"i have been studying the trade flows. especially China-U.S. As "hot money" inflows likely won't continue at the rapid rates from 02-07, as nations defecits increase due to global recession it's my conclusion that those who are patient will be rewarded."

-WHAT ARE HOT MONEY FLOWS????

to understand the current boom would needs to understand the "money flows" generated the past 10 years. Since this flows are likely to discontinue, so will our standard of living and the price level of NY apartments.

I doubt $250 for a one bedroom but sellers will come back to reality and start pricing or accepting offers from '03 prices.

>I was merely responding to your comment that $250k for a 1BR doesn't feel cheap based on the 1990s data. This perception is in fact due to inflation ($250k isn't worth as much as it did in the 1990s). Period. The rest? I don't really know.<

First of all, inflation for the past 10 years more accurately averaged 3%-3.5% and not the 6% you stated. Big difference in a compounding calculation over a decade.

I'm stating that there are massive deflationary pressures in the world economy which shocking as it may seem, also includes Manhattan. In deflationary environments (specially those of this magnitude), the value of leveraged assets, specially real estate, fall and fall hard. If one feels the need to justify values based on historical inflation trends, then deflation must also be taken into account.

I'm concentrating on the future as what's behind me is not important. Given the magnitude of this financial credit bust fiasco & it's downward pressures on asset values, cash is king. Its purchasing power has increased significantly over the past 12 months and fully expect this trend to continue. RE is not a good place to hide & market pressures will let us all know in good time where they decide to settle.

Bob Johhnson:

Some answers to your questions.

Any regions of the world not systemic? The short answer is no; the globalization of finance over the past twenty or so years means that events in one country can have an unintentional effect in another. Example: I believe some German pension funds lost money by investing in CDOs tied to subprime mortgages in the US. See also the run on Iceland's currency. See the Asian contagion of 1997-98, etc.

What are hot money flows? My guess is this is a phrase that means "the money that is chasing the best returns." If, say, Japanese corporate bonds were suddenly yielding more than other similar assets elsewhere, people with excess cash to invest would jump in (and, of course, drive down yields thereby). By which time, money managers would have turned their attention to another outperforming asset. Of course, the problem with this is that over the past several months all asset classes in all countries have declined in unison.

6% is way too high

Hey guys, all of you who argue that inflation is going to make such a big difference to the prognostications of 250K 1br (I expect 350K BTW), just get a few 2000 prices and churn them through an inflation calculator (there's plenty of them on the web) and you'll get an inflation-adjusted 2000 price for 2009. Hint: if the 2000 price was 250K the inflation-adjusted one for 2009 won't be 450K.

bfgross: Before attacking others' well-informed perspectives, please have the courtesy to look up the definition for "deflation." I am glad some items around you are getting cheaper of late, but deflation deals w/ the VALUE of a currency--and US$ ain't doing badly.

wishhouse: serge07 misquoted me. I never cited any specific number--6%, 4%, or even 1%. I don't know why serge07 thinks he makes sense when he really doesn't--even w/ those made-up quotes.

I have another point. And, by the way, you all have made good arguments here. One would think that people act on what they believe. If investors believe the market will go down, they sell their stocks. Buyers believe this real estate market will get worse, correct? Therefore they have acted on their belief. No one is buying. And sellers, unless they need to sell, will “wait it out”. When the majority opinion is that the market will go down…it might BE down. To think otherwise supposes that there is another whole group of people who haven’t yet figured this out. I think we are all making guesses about how bad the economy can get and where prices will end up. I never had much success picking a bottom, but I have made money finding good values. I think they are starting to show up.

Matt-

good value ? based on what analysis? you must be buying on hope that that the u.s. exits recession after q2...

we're in a period of "forced liquidation"....Sellers won't just hold onto a falling asset as jobs start being lost, loans need to repaid and they realize that new york city won't be new york city of 2007 for a significant time.

if wall street is "closed", how in the world is going to want to touch NY Real Estate?

1wiseinvest-

i am with you. i'm waiting for the 150-200K 1 bedroom. In florida i have friends who purchased a 3 M dollar home in early 2007. they just put it on the market and got a bid at 885,000. The guy lost his job, bank called in the loan and he was forced to liquidate.

Wall Street wont be "closed" or anything close to it. See my previous post. Value exists when the world is thinking of nothing but downside and prices reflect everyone's despair. It might be worth going back to the heyday of this recent price rise and find the blogs and posts about why the market will keep going up. I'm not saying its time to buy, just offering some perspective. These are cycles. For those who think its only starting, its best to stay put. Maybe you're right.

matt, you seem to be confusing "value" in highly liquid equity markets with the same thing in the slow-moving, emotion-driven housing market. Scars will be deep and long from this housing downturn.

matt, these are small cycles until you hit the big cycle. buying on dips has worked fairly well since the 1940s and very well since the 1970s. however, i'm sure there will come a day when buying the dip is disastrous. not saying i know if that is the case but it is worth acknowledging what a short piece of history we are using when we say that buying on dips has "always" worked.

25 years of credit expansion won't be solved in only 1-2 years of credit contraction. as mbz states, the cycle we're in this time is different. this cycle will change our standard of living, appetite for risk and bring back price levels sustained under 'norm circumstances'.

Previous cycles were not systemic, at least not a global basis we are witnessing today. once you discover the root of the crisis i'm sure you'll observe and understand why prices will go lower, alot lower.

thanks.

The main reason prices won't drop down to $250K for a 1BR is because co-ops never approved people who were risky purchasers. THe co-op boards did the jobs the banks failed to around the rest of the country. The vast majority of co-op owners can afford to continue making payments for a year or two even if they are unemployed. They would not have been approved if they did not have cash reserves. Also, what is discouraging to me as a buyer is that many sellers are seeing that their apartments are on the market for well over 150-200 days and are not selling or even getting many offers, and these sellers are not realistic about the price so they don't lower it, and now what is happening is they are taking the apts off the market and either sitting with it or attempting to rent it for a year or two (which is usually the max a co-op allows.) They are trying to wait out the market.

The reality of prices in this market is that they are down drastically, but know one really knows where they should be because there is no market. You have to have transactions for there to be a market. There are no transactions, there is no market. Oy vey.

i know people who went from 300M net worth to net worth in the single M-digits...

co-op boards will have tenants who also will see troubles. maybe co-op boards will start to judge more on individuals with good 'value n moral'...instead of judging individuals by size of his/her assets.

the world is changing. Rapidly!

not quite. Just the opposite. More than ever co-op boards are becoming more (and unreasonably) financially stringent. You will get rejected if you cannot show at least two years carrying costs in cash reserves and near six figure salary. I'm not speculating here. It's happening.

nycjunior1, that may be but in the 90s recession, co-op values were decimated along with everything else. To add to the co-op risk, buildings that have to refinance their mortgages during a credit crunch, may have a hell of a time doing so on attractive terms.

Buy a co-op because you enjoy it not because they can somehow magically survive an economic downturn unscathed. They don't.

1wiseinvestor

"i know people who went from 300M net worth to net worth in the single M-digits..."

Ok so there are 38,400 people in North America that have a net worth of $30 million or more. You happen to know people(s) that went fron $300M to single digit millions. OK um sure gotchya....

http://en.wikipedia.org/wiki/Millionaire

Last summer, I atteneded a fundraiser with that billionaire guy who owns Gristedes (forgot his name). So I guess I too know people who are worth more than $30 million.

Some boards were starting to toughen up last summer. My customer was the high bidder on a coop on West 10th street. I-banker with an 8 year track record of rising income with the most recent return showing $900k+ with a healthy liquid portfolio($800k+) to boot. The board would not consider bonus money, never heard that from a village board before. I suspect someone there had some insight to the storm that was brewing.

"I have read a lot about New York’s loss of leadership in the financial services business and the resulting impact on the real estate market. It is true that current circumstances will cause problems and prices will go down. The person looking for a $250,000 doorman one bedroom however, better have an alternative plan.
Wall Street is made up of some very bright and hard working individuals. They went to the best schools, they worked for the best companies and they had the best of life. They will not suddenly move to Jersey and teach college.
Wall Street itself will not go away…it will transform itself. History endorses this argument. The world’s financial centers will still be New York and London. And these same people, the best and smartest of them, will have the new financial jobs that earn plenty of money. Some of the folks who are now on Wall Street can tell great stories about when the introduction of the fax machine made everybody talk about Fedx going out of business. Or the time when Motorola stock went down because cell phones gave you brain cancer. There are millions of these stories and Wall Street was the first to spread the word, just like everyone now is talking about the demise of New York. This recession is very serious…just be careful to use your common sense. "

Apparently, this guy didn't realy the article in the Times noting that historically, this is actually untrue.... Wall Street goes through unprecedented peaks, and they generally don't return....

http://www.streeteasy.com/nyc/talk/discussion/8096-ny-times-wall-street-pay-differential-to-disappear

"Why is it no one can look past the last 10 years? Look at some of those sales in the past (Perry St. studio for $30k, W70's brownstones for $15k, 3bd for $50k) and say it's not possible for NYC to see a slump of drastic proportions.

Now, before you blow up on me and say people made less, inflation, appreciation, and so on, why not look even further back. Do you think the people that originally populated the South Bronx and Harlem in the late 1800s-early 1900s thought their beautiful brownstone homes would be so "valuable" that owners torched them for arson; or the city sold them for $1 to get them off their books?

There seems to be a strong reluctance to admit that this financial center loss is absolutely devastating to NYC and, when coupled with a total RE meltdown, could very well swing NYC back to the 70's values. The city is already short 5k police officers and they've pared new classes drastically. Don't you think that, coupled with unemployment and slashed public programs, will bring about quite an uptick in crime?

As all of these commercial spaces (financial, real estate, retail, restaurants, etc.) go vacant, won't the building owners being feeling the pinch? What are they going to be filled with? What about all of the new building developments? While the building boom might not have been as drastic as the conversions in the 80s, it's still pretty huge. When they can't sell, they'll try to rent (they're doing this already). But, who is going to rent them and what are new rentals going to do to apartments in older buildings with less amenities?

I really am not trying to be doom and gloom, but I'm just having a hard time finding the bright sides. All I hear out of the positive people is a reluctance to believe the city could fall into a serious downturn like it did in the 70s, or multiple other times during it's storied history.

We've had 25 years of prosperity with, honestly, no real serious or prolonged downturn. It seems as though people forget a time when inflation, unemployment, and interest rates were in the double digits.

I'm pretty sure there were smart people who went to good schools living in NYC then..."

Extremely well put, investor man.

It doesn't have to be the end of the world here. But just a return to a historical norm - hell, to just the 75th percentile of what this city has been, instead of 99th in its own category - will be a serious decline. Yes, NY goes through cycles, and it will return, but peaks are still peaks and bubbles are still bubbles.

NYC and Wall Street have reinvented themselves many times over the years, sure, but we are talking about unprecendented wealth. And even a return to "high" over "crazy high" - lets say 1995 - could mean some SUBSTANTIAL changes all around.

nyc10022

This is what Tomkins Park in the east village looked like 20 years ago.

Do you really see it getting back to that. If it does then you are probably right real estate values can fall back to their 70's/80's past. But honestly do you really think this will happen?

http://www.papermag.com/blogs/2008/08/tomkins_square_park_by_q_sakam.php?gallery1920Pic=1#gallery-1920