2010 Market?

down---wait till all the failed condos become rentals...should be starting around then.

columbiacounty, you keeping throwing out these blanket statements. Take a look at UD. There is an article just about that.

unfortunately, it's not just me.

http://www.nytimes.com/2009/04/15/nyregion/15develop.html?hpw

Reading comprehension much? This is commercial property the article talks about. Can I ask you a question? In what line of business are you?

oh really...its commercial property? perhaps you would like to explain the difference to all of us? this is yet another example of more money being flushed away. appararently the port authority is on the hook for a substantial sum here....who do you think funds the port authority? santa claus?

so, now chrysler secured creditors and the gov't are trying to negotiate the write down of the secured creditors...can't remember the exact numbers but think the gov't is looking for a $6 billion haircut. Who do you think the secured creditors are? Our wonderful financial institutions. have they written this debt down already?

the problem is that it just doesn't stop. today, NYT reports that major newspapers across the country are anticipating 30% declines in ad revenue for the quarter over the py. 30%? we have never seen anything approaching this and certainly not across the board.

we all need to get in front of this and accept a new reality that i actually believe can be fine just different. that's why i still think that the people with the capped loss are way ahead of the game.

columbiacounty, do you have any idea over how many financial institutions Chrysler's debt is spread? Really, I feel you are scratching on the surface without a deeper understanding. I assume you are not in the finanical industry?

how many chrysler's are out there? how much debt is sitting out there on the last three years of insane PE deals? how much of that debt can be rolled over when the time comes? how tight were those deals in the first place; how many of them based their cash flow on declining sales (never mind 30%--how about 5%.) you and i both know the answer is zero.

could we present the question back to you, uppereast? In what line of business are you? You're sooo obviously a broker.

Just because I have a different opinion, it makes me a broker? I am in banking and know the auto industry well. Don't want to comment more.

Perhaps you are right, Uppereast. Unless you are a banker, you could not possible have any idea what would happen to the real estate rental market in 2010. Nobody else need weigh in on these sites. Wow. you are so lucky to be you. We kiss your feet.

manhattanfox, ???? Trompiloco asked in what line of business I am. Don't quite get your response.

Your posts are pretty hostile. e.g., Reading comprehension much? It is pretty snarky and not helpful to the original question. The tone could be softened, non?

"its commercial property? perhaps you would like to explain the difference to all of us?"

Wow. And people think that I'm the idiot on SE.

still would like to know your thoughts regarding my query from above:

"how many chrysler's are out there? how much debt is sitting out there on the last three years of insane PE deals? how much of that debt can be rolled over when the time comes? how tight were those deals in the first place; how many of them based their cash flow on declining sales (never mind 30%--how about 5%.) you and i both know the answer is zero."

Maybe true. I just don't like when people post all sorts of half truths they have heard somewhere. Also, columbiacounty makes these sweeping recommendations to everyone to walk away from deposits etc. A little bit grey and white in his/her analysis would go a long way.

ok...what's your advice? go through with the purchase? ask more questions on this board? saber rattle without a saber? endless comments about how developers are unrealistic? our collective financial situation is a mess. acknowledging the mess is the first step to moving on to whatever comes next. i'm still waiting for the answer on how many chrsyler's i.e. PE deals with ridiculous debt, are sitting out there in various stages of decomposition.

columbiacounty, it's not right for everyone to walk away from a purchase. There are PROS and CONS. My financial situation is not a mess. There you are generalizing again.

wait a second...if you have an option to buy an asset at a price that is 20-30% higher than the current market for that asset, the decision to not exercise is a function of value not your financial situation.

one of my favorite quotes, from herb stein: "If something can't go on forever, it won't."

the only reason to believe that prices will go up is because they once did....there are hundreds of reasons to believe that prices will continue to go down.

I don't know that specific building (not a fan of new construction) but (yet again) you are generalizing: Your 20-30% doesn't apply to every area/building. For example, an apartment in my building just sold for 10% less than a previous sale in 2008. So right there your theory doesn't make sense. My point is that I find you generalize a bit much.

but...this discussion began when i said that the market for rentals would be down because of failed new construction turning into rentals. so, its great that values are holding in your building (which of course we have no way to verify)but values are clearly cratering in new construction.

Look, the answer is: nobody really knows what the rental market will be like in 2010. However, if things keep worsening or stabilize but don't get better (I'm talking unemployment rate, financial jobs not coming back to the city, consumer confidence faltering, etc.) it is very likely that rents will continue to drop. At the end of the day, it's all supply and demand. Supply could continue to increase with failed condos becoming rentals, more people moving out of the city to seek employment elsewhere and leaving open apartments. Demand could decrease with fewer people moving to the city for jobs, etc. I would be very happy to see the current trends continue.

columbiacounty: you are encountering some hostility here in part because there is a big difference between commercial real estate and residential real estate.

They are two different markets, with different kinds of entities who are the sellers, and different buyers, and different rules for financing, and different methods of investing.

It is sort of like trying to compare....I dunno, maybe organic farming with big factory farming. The people who own small organic farms are very different from the kinds of owners upi find in the big factory farms -- those owners are institutions, with big capital reserves and also big capital needs.

And the products they produce are different -- they grow arugula on little organic farms but on the big factory farms they produce basic commodities.

I don't want to push this comparison too far because it won't hold up if you look at it too hard, but I am just trying to make a point.

In the world of commercial real estate, the owners are mostly institutions, like pension funds and insurance companies. And the properties are income-producing, and are measured by how much cash flow they generate, and they are financed very differently from they way you a house.

All of this makes commercial real estate a completely different industry from residential real estate. Really, I'm not trying to argue with you, I'm just telling you that they bear no resemblance to each other, and nobody who works in real estate -- in any part of real estate -- ever considers them to be comparable.

Take care.

i'm also in the financial industry and uppereast, i've got no idea where you work, but where I am there is a fucking panic over the entire situation with the exception of some guys in forex and options. anyone who buys an apartment right now for anything less than half of its asking price is insane.

to gg:

believe it or not, i completely understand the difference between commerical and residential. my point was that the port authority appears to be on the hook for a considerable sum of money related to their commercial real estate interests and that ultimately that money (like it would seem virtually everything else) has to come from the taxpayers.

furthermore, commercial real estate is a business like all other businesses and to the extent that it is in trouble, the people who work in that business will either lose their jobs or receive less compensation therefore making it more difficult if not impossible for them to bid larger amounts for either rentals or purchases.

it is pretty clear to me that for whatever reason uppereast above is in complete denial--I am afraid that mr. youngbuck tends to represent the collective opinion of everyone with whom I speak.

i'm truly shocked at how fast and deep rental prices have come down...I thought LLs would wait it out with empty apts except for small LLs..The Helena is a green bldg., doorman, health club, etc. on west 57th street.. asking price for an alcove studio was $2300, now $1800 and there are many others just like it, large doorman bldgs.

Another, Stuyvesant Town one bedroom, no doorman, no health club asking price was $3100 now $2388.

youngbuck: Where do you work? Both my spouse and I are in banking (different institutions) and there is no panic. Moreover, I have lots of friends in banking and there is no panic either. Of course, if you work for UBS, that's different.

julia -- interesting that on the Helena's website, they only have 3 apartments listed, but on CL, there are many, many more!

why the shock at the rapid decreases? not to beat a dead horse, but:

car sales are down 50%
newspaper revenues down 30%

and on and on.

how can apartment rents and prices be immune from this larger picture? to me the shock is the overall collapse...on the other hand, when you think about what kept the ball rolling for the last few years, it actually makes sense.

jmkeenan...i saw that also, not sure.

"And people think that I'm the idiot on SE."

Don't be so hard on yourself, Alpine...i don't think you are "the" idiot on Streeteasy. You are one of many, many idiots...

CC: "If something can't go on forever, it won't."

Doesn't this apply to the downturn as well? I am pleased at how quickly the rental market has responded to this crisis. It has helped sellers become more realistic in their initial asking prices. That's one reason we're seeing more volume right now, especially on the lower end.

One troubling aspect of a real estate downturn is its tendency to lag behind other economic indicators. But the swift response of the rental market may help speed the correction. I agree that we have further to fall, but I hope that real estate can join the eventual recovery at a faster pace than it did in '87-94. Not to return to bubble numbers, mind you. Just enough to shorten the tail on that "L" shape.

Tina
(Brooklyn broker)

people's ability to delude themselves never ceases to amaze me. our economy has lost millions and millions of jobs---I believe 660,000 last month alone. this is no longer a real estate down turn. i've said it in numerous posts: "auto sales are down 50%. 50%!" pull your head out of the sand and start to consider what that means. Newspaper ad revenue down 30% for the first quarter. Step outside of the affluence in the northeast corner of the US and take a look at what's going on. Michigan and Ohio are virtually dead. NYC made little sense when times were booming; under these circumstances, we're screwed.

The incomes that supported our absurd prices are gone. If people haven't lost their job, their shaking in their boots waiting for it. And in the meantime almost all businesses are cutting hours and cutting pay. I don't know about you, but I have never experienced an economy with widespread pay cuts.

The real downturn hasn't even begun. Wait till the severance ups, then wait for the unemployment to end...then what?

I've got to agree with columbiacounty on a lot of this stuff. People are severely deluded in this city. They think we will rocket back up like a "V" in terms of employment, manufacturing, auto sales, real estate prices. I'm sorry to say it, but I feel that Nouriel Roubini's predictions ring more true each day. People, we will not make a "V" recovery. We probbaly won't even make a "U" recovery. If we're lucky, we'll see an "L" with a little ramp up in the distant future. We will be going sideways for a while to come.

Why? Because we (america) have nothing to drive a recovery. We have lost our manufacturing base and the rest of the world is hurting as bad as we are so external demand for our goods isn't going to save us. Wall street will be very tightly regulated for the forseeable future so there won't be any more easy money schemes like the subprime stuff that gave us explosive growth over the past decade. So no big growth there. And let's face it, how much can our consumer-driven economy recover based on our own internal demand when a skyrocketting % of us are umemployed and the rest of us who are employed are quaking in our boots hoping not to get the ax? Most of us don't have huge savings to continue to spend even in a time of great deals. So we won't be able to spend ourselves out of this.

Put simply, we are in a bad way that will go on for some time.

uppereast: I work for a large domestic firm and quite frankly I'm pretty surprised at your experience. From what I've seen, virtually every firm has had not only serious losses but also a precipitous decline in their stock price - which, as I am sure you know, makes up a considerable size of the bonus at any firm. I'm a third generation banker, and from the many bankers I've known growing up in this city I can't say that I know of one who is as optimistic about the market as you are. I only wish I knew where you worked so that I could feel the same way about the present state of the economy and I don't mean that in any facetious or sarcastic manner. Regardless, I'm just surprised that someone would close on an apartment for only 10% less than the 2008 sale price given the blatant over-inflation present in much of Manhattan.

he's a retired postal worker sitting in his robe...the jokes on us!

I hope people close for more than 10% less. We are indeed getting lots of job application since no bailout... I am not that optimistic about economy but I do feel that we turned a corner. Yes, my stocks declined a lot but I have many years in front of me and get now also new stocks at these low levels. In my neighborhood that is full of bankers people are holding on OK. Not many kids pulled out of private school, not many apartments that need to be sold.

you're starting to make me sick...so you and your cronies are AOK....great. what about the 6 million people who are out of work? how soon are you going to put gates around your enclave to make sure none of them get near you?

Oh yeah, I'm totally with you there though I'm probably a little more bullish. I'd say we're going to keep going on a decline until 2012 after which point we're going to begin a slow and bumpy trend upwards. Obviously a lot of bankers who kept their heads - especially the old timers - won't be really shocked economically, although everyone who I've spoken to has in essence lost virtually all of their income made from 2005 to present. I'd include four or five guys who I know who work for firms without TARP in that category as well. Simply put, no one's getting out of this unscathed.

However, I think a lot of people are going to begin to sell their apartments for a variety of reasons. The first reason is that I think that even though apartments are being offered at approximately a 2006 level, the market is insanely overinflated and this will be the market high for at least the next decade. In addition to that, several men and women did loose their ass and are going to be forced to sell since they purchased an apartment with the thought that they would be able to afford the mortgage given their income over the past five years which has now evaporated. A lot of brokers seem to think that bankers are going to swoop down like vultures and pick up whatever they desire at a 10-15% discount and throw caution to the wind. However, I don't know of one banker who would so arrogantly throw his money around in this market, even if he did have the billions to finance anything piece of property that he liked in cash. Whenever I go to an open house with my fiance, I've started to just say I'm in "sales" as the word "banker" seems to automatically imply that I'm willing to put up with their bullshit.

I've walked away from five deals in the past month, all of which were due to the fact that the broker kept insisting that she had another buyer (or three) who were dying to pick up the place for more than the purchase price. In each case, I've had a broker call back within 72 hours to say that their substitute buyers have miraculously evaporated and that the seller would be willing to entertain a bid. No one intelligent is presently snapping things up in Manhattan, as its just going to keep declining. I don't see why bankers - even those amongst the billionaire class - would throw away their cash reserves given the state that this market is in.

People who can afford the high-end market are always going to pay for private school, nice vacations, new cars, etc. However, these are staples of the rich everywhere. I can't see why someone with any good business sense would plunk down several million dollars on a dead asset which is going to keep declining even if they could afford it. These men are not stupid, and at the end of the day a ten or fifteen million dollar apartment is still not a drop in the bucket - even if you're Sandy Weill himself.