How big was the boom? One building's figures, 1991-2009

NWT, interesting data. What does that work out to, 9-10% annualized?

Source?

I get 10.9%.

Pre-ACRIS figures are from offering plan, broker gossip, board indiscretion, and what I'll call "personal knowledge."

On a leveraged basis it is about 20% annualized with 20% down and 24.9% with 10% down

Were none of the sales after 1991 insiders? My mothers' house originally went coop in the late 80s but I was able to purchase her apartment at an "insider" (albeit higher than original) price many years later. Also during the downturn in the 1990s people who had passed on the original offering were able to buy their units for pricing below original offer because the sponsor was in financial difficulty.

If insider prices are included in this analysis beyond initial offer it will depress the overall annualized rate but magnify the "bubble" effect of recent years.

it seems to me that this is something of a nominal return rate, because money today is definitely cheaper (if you look at mortgage interest rates as the "cost" of money) than it was in 1991.

ali r.
[downtown broker}

lizyank, there were very few insiders who ended up buying later, and they paid market. I suspect quite a few of the insiders bought below my 1991=100 benchmark, but I don't have the numbers.

Ali, you'd think I'd remember my first mortage rate, but it's gone. I'm thinking 8%, but too lazy to dig it up.

Wait, that made no sense, because my 1991=100 benchmark was halfway between insider and outsider prices, so of course insiders paid less.

In '96 I paid 8%. Your rate in '91 was somewhere between 8% and 12%, but I'm too lazy to look it up too . . .

ali r.
{downtown broker}

If you remove the insider prices wouldn't you get a more realistic view of the bubble? The insiders benefits weren't the result of bubble mentality, they were just lucky enough to live in the building when the sponsor decided to go co-op.

thats a wonderful set of data NWT. it's particularly interesting because from 1991-2007 peak the DJIA had an almost identical return--approximately 530%, even with the relatively flat market between 1999 and 2007. assuming that the dow bottomed out at around 6500, that would mean it bottomed out down out around 57% off the peak.

In general, real estate moves in manhattan mirror moves in equity markets, but delayed by around two years--for those of you who are familiar with music, it's basically a cannon form with the Dow as the lead voice and the manhattan real estate market as the echo. the stock market crashed in 87, nyc real estate tanked several years later. equities started an epic run in the early/mid 90s, real estate in the mid/late 90s.

there is little reason to suppose that this pattern won't repeat itself now.

> On a leveraged basis it is about 20% annualized with 20% down and 24.9% with 10% down

See how that leverage works on a 25% decline....

qqq, the issue I had was what $-per-share to use as a start point.

The insider number wouldn't reflect the market at the time. It was more a result of intense negotiation between the tenants' association and the sponsor. Not much interested in how much better an insider did vs. an outsider over time, anyway, though I guess I could figure out how many shares went to insiders.

The outsider offering-plan number was no good, either, as nobody paid that much.

The halfway-point between insider and outsider numbers turned out best, since the initial clump of outsider buyers paid right around that amount per share. I think that's a good indicator for the 1991 market for that time/building/neighborhood (all FWIW) and so the best start-point.

Thanks, happyrenter. It'd be interesting to see it for an older-established building, from say 1980 until now. I guess it'd be possible for a condo, but that'd be too many deeds to look at.

Here are historical rates for 30-year fixed from 1971 on. Bottom of page for other products and (if your into that sort of thing) Excel format.

http://www.freddiemac.com/pmms/pmms30.htm

Whee! 18.45% in 1981....

> On a leveraged basis it is about 20% annualized with 20% down and 24.9% with 10% down

>See how that leverage works on a 25% decline....

nyc,
Even if the prices drop by 50% the return will be 16% annualized with 20% down and 20% annualized with 10% down.
Not too shabby.

Only if you don't know math.

If the 550% increase (we'll assume its correct for a second) - but keep in mind some parts of the UWS went from eh to "prime" particularly above the Museum) is applied to $100k, thats $650k.

Half that, you are at $325k.

CAGR is 6.07%.

Sure, you could leverage that.... but you're also getting close to mortgage rates.
And, oh yeah, inflation. That isn't much of a return.

And, if you use the 200% growth I've actually heard used most often over the period...

A 400% increase then a 50% decline - CAGR 4.69%
A 300% increase then a 50% decline - CAGR 3.53%
A 200% increase then a 50% decline - CAGR 2.05%

People seem to be ignoring the fact that an apartment also provides implicit rental income. Think of this as the yield. This rental income contributes enormously to the "total return." Who cares what the "price-only return" is?

Imagine buying a bond at 100% and it matures in 10 years at 100%. Would you say its return was 0%? Of course not!

We might've done better if the co-op conversion had failed, in which case there'd have been the stabilized lease. Assuming, of course, that we'd have done something useful with the money and didn't get creamed later. I've decided to stay blissfully ignorant and pretend the paper profit isn't just what it is.

="People seem to be ignoring the fact that an apartment also provides implicit rental income. Think of this as the yield. This rental income contributes enormously to the "total return." Who cares what the "price-only return" is? Imagine buying a bond at 100% and it matures in 10 years at 100%. Would you say its return was 0%? Of course not!"

Sure, but you can't apply that inconsistently.

On the flip side, folks talking about returns also seem to ignore the carrying costs.... which have been *higher* than rents. None of these returns originally noted included interest or tax payments.

So, its not quite accurate to note the value of living without including associated costs.

In addition, your bond analogy falls short given that most bonds aren't bought onb5 to 1 or 10 to 1 leverage.