1970s pricing in Brooklyn!

In the 1990s $120k would have probably gotten you that apartment. We looked, seriously, in the 1998-99 range, at Park Slope. I could cry when I think of the townhouse we turned down to stay in Manhattan.

so...out of morbid curiousity....that townhouse...what was it going for and what do you estimate it would have fetched at the peak?

I can't recall exactly, and it needed work (cosmetic only, probably could have done it nicely for $150k if I avoided the $800 faucets some are so fond of), but I'm fairly certain it was under $250K. I have only occasionally taken a look at the Park Slope current market (it kind of depresses me, the appreciation has been, to quote the other AR, fierce), but at the peak it would have been many, many multiples of that purchase price, even if renovations were included.

just trying to make my point from another thread about the enormous run-up in prices without a concurrent run up in the majority of incomes. thanks.

cc, I know. Here's one for you. In 1995 I bought a small two bedroom in the Gramercy area for $105k. Similar units in the building had been selling in the high $900s recently.

The run-up in prices wasn't evenly distributed. That's what the numbers don't show. Prices in the East 50s and non-prime UES and WEA may have more than slightly doubled, which seems about right to me, from 2000 to the peak ($450-500 psf for a cookie cutter co-op two bedroom to almost $1000). But they increased hugely from 1995 to 2000 as well, and in some areas (Harlem, Morningside Heights, Chelsea, Gramercy, LES, East Village, etc.) prices easily tripled or even quadrupled. In 1995 there was a fairly decent selection of two bedrooms available at less than $180k.

its actually kind of scary if you think of nyc real estate as any other asset that has experienced an irrational increase. scary, because past performance of all other assets that have gone through something like this says that value reverts to the starting point plus normal inflationary increases. so based on that, your 2 br should be around 200-250K. unthinkable says everyone but more and more it seems to me that the increase was the unthinkable part.

the run up in prices is SO out of whack with incomes that it is truly insane. no way it could have sustained. we all should have seen this coming. how long will it take to get back in order?

i posted this about 8 weeks ago:
http://www.streeteasy.com/nyc/talk/discussion/8572-krugman-minutes-ago

a long time, i suspect because of the stuborness, denial and reams of misinformation. i am convinced that the uncertainty is far worse than the pain of the decline. it freezes the market for everything because everyone is nervous, assumes that prices will be lower next week, overestimates the liklihood of their own financial demise, etc.

this of course becomes the argument for not propping up the banks but perhaps I am brainwashed but the thought of the major banks going under (and frankly I have no idea what that means) scares me to death.

NYC has such a small market. Think about it. In a normal year 5-6000 apartments trade hands. Now add 20,000 bankers to the population. You can see what happens, particularly if bankers as a class make close to double what the next highest class of wage earners (attorneys, traditionally) make.

In 1995 teachers could afford to buy an apartment if they had saved. Now those people may have to sell because they can't afford the increases in taxes and charges that have been inflated by the actions of the wealthy.

It's just a cluster any and every way you look at it.

I'm obviously quite negative, and over the last five years I've argued that prices need to revert (at first I was saying 2000 prices, then 2002 prices). Now I've got to think that we'll wind up at 1998 or even earlier. In 1995 I believe my loan had about an 8% interest rate, which obviously affected prices somewhat, but my maintenance was under $1000 and I got a loan with 10% down. I can't see Fannie/Freddie loosening the credit standards any time soon, and many people are being asked for 30% down by the banks, even for coops that only require 20%. This market is a killer.

cc, if done properly, the big banks going under is greatly the same as IndyMac going under. It will be more expensive, and painful, but it needs to be done. the powers that be WANT us to be afraid, and are keeping this option so tightly under wraps so that we can't think of it rationally. we take over banks all the time.

read the Stiglitz link I posted on the GS thread.

wish i could find a flaw in your logic, but I can't. i've lived my entire life in NYC and have finally made the tough decision to get out....wish i could figure out a way to make some of this better but i can't do that either. ah well.

Some people did see this coming. It wasn't a surprise to everyone. In New York it was a giant snake eating its own tail: bankers profiting off of real estate, buying real estate, etc. It actually makes me want to stick around this city even more, to think that I might finally be able to gain a toehold here. It's a strong city and many have proclaimed it dead before; they were wrong, and I think they'll be wrong again.

hope you're right. the getting there from here part is the problem. i, for one, cannot imagine how its gonna play out. take, for example, the MTA. basically, all fixed cost. yeah, they can shut down a few lines, run some fewer trains, but I would guess at least 90% is fixed.

so...absent state/city financing ( which i think is spoken for many times over), each percent drop in ridership (just from less employment for starters) represents a percent increase (or best case a nine tenths percent increase) in fare required. ridership goes down 10%---not unreasonable based on unemployment, prices go up 9%. but...most of the ridership is already stretched thin.

just the tip of the iceberg. all of the buildings in manhattan are subject to the famous union...are they gonna take decreases when property values go down? don't think so. so....

"NYC has such a small market. Think about it. In a normal year 5-6000 apartments trade hands. Now add 20,000 bankers to the population. You can see what happens, particularly if bankers as a class make close to double what the next highest class of wage earners (attorneys, traditionally) make."

Yes, and add many thousands of mid-range hedge fund analyst types, some barely three years out of college, making $400-800k/year in 2004-2007 like surgeons. Now realize half the hedge funds have closed, and 90% of the other half lost 15% or more last year....so they got no bonuses (bases $100k-200k) and will get none this year until the 15% is made back...Also mind that the average hedge fund is only up about 5% thru March even with this 25% rally in the stock market off the bottom.

I am calling the Rushmore right now and offering them $800k for their nicest $3mm floorplan. Wait a sec, I still don't think I want to live in a hood where the transformation has now been pushed out 20 years.

consider me just out from under a rock...what is the deal with rushmore?

whoops - wrong thread

there's alot of onjecture. but does anyone have hard data on the supposed nyc exodus since, say, lehman went under? and in particular data on the finance professionals leaving nyc? i wonder if the demise of wall street is overplayed.

I doubt finance people are leavng the city in masses. Besides, where are they goign to go? Iowa? What are they going to do there, sell corn backed securities?

I just can't figure out how every city and every suburban and every rural area all simultaneously claim to be losing population. The long-term trend has been people moving from rural areas to cities. That can mean smaller cities, or it can mean large cities. But the only convincing evidence I see is that of people leaving remote areas for more densely populated areas. Specific segments might leave en masse for for the short term, but alpine is right: where do they go? Cheaper cities, for a while - until they become more expensive. I think one of the best things that could happen to New York would be an increase in affordable housing, which at this point seems inevitable. If that happens, it would more than make up for even a significant higher transportation expense. So me, I'm staying. This is home.

Sorry. "significantLY higher transportation expense."

interesting point about the 70's pricing. what no one ever seems to talk about on any real estate sites is that it is always possible to find areas that are undervalued and have a huge upside if the neighborhood changes/becomes more desirable. i have bought housing in 3 places in brooklyn all increased dramatically and not just because everything went up. they went up more from a percentage perspective because i was an early buyer. it would be interesting to have a thread were hoods were discussed as having a big long term upside because they will change- probably gentrify. in my world, which is totally non-finance, no one, i mean no one is moving to the burbs when they have kids. there's been a gigantic uptick of children under the age of 5 in NYC. it's a phenomenon. i have zero worries about brooklyn because of this. brooklyn gentrification in recent years had nothing to do with the finance guys because the brooklyn buyer was never considering those types of neighborhoods in manhattan with really corporate inhabitants. i chose williamsburg in my last purchase because of convenience (i'm too old to do without a lot of amenities, and i want to be close to my job), but honestly, i think the best bet would have been kensington. excellent housing stock, safe and cheap.

Tireless bulls, no one is claiming finance people are moving away in mass. The issue is that many of them on the margin are unemployed or earning a fraction of what they had been making. Why the tireless defenses? Der, der, derd you study calculus in skewl? No one is claiming mass exodus. At the margin, der, der, if finance pursuns are not making the money they used two, then ovur the next fewe yurs, teh will move out of New York. Therefure, there will be muni fewur people to buy $1700/ft condos...In this whea, supply > demand = lower prices. How low noone noes. Interest rates ur alsow a factur.

great rhino. so what gives you this knowledge? your six articles a day from the times, curbed, and real deal? three affirmations from david rosenberg quotes? taleb? so. what. what the hell do you know?

look i'm a renter/future buyer waiting on the sidelines. i sold in 05. i feel lucky not arrogant because i got out in time. and the more i know about the market, any market, the more i understand how little one can understand. douchebags like you are certain to be bulls the instant you get your greedy little offer accepted.

rhino's the kind of imbecile who, at volume 11, blowing wind 24/7, will never understand that the audience's silence translates to: 'jesus. what an imbecile.'

now here's rigor. who talks with this kind of certainty over and over again:

Yes, and add many thousands of mid-range hedge fund analyst types, some barely three years out of college, making $400-800k/year in 2004-2007 like surgeons. Now realize half the hedge funds have closed, and 90% of the other half lost 15% or more last year....so they got no bonuses (bases $100k-200k) and will get none this year until the 15% is made back...Also mind that the average hedge fund is only up about 5% thru March even with this 25% rally in the stock market off the bottom.

der, demographic changes can be quick, but quick is a couple of years. it is an additive process. first you have far fewer people moving in (summer programs, new september hires, retirees who are skeptical about qol issues, foreigners who won't touch this market). then you have roommates who would like to decouple but don't because of reduced income. then you have divorces occurring with less income, so they can't afford manhattan any longer. then you have the effect of school overcrowding, which is happening despite the economic carnage in a perfect storm moment. then you have the early severance packages running out and any replacement income being much lower. then you have the hedgies and other financial types making less and when they decide to procreate determining that the real estate taxes in Westchester are worth it for two or three free public school spots. i could go on for quite some time, but i'll spare everyone. each of these (and other) factors is meaningful, together it things don't turn around and quickly they could pack a real wallop.

cc, keep hope alive. different isn't necessarily worse, in the long term. i'd love a new alternative music movement, myself. i would sacrifice it for lower crime, but if that isn't an option i'll enjoy the music and become more careful, like i was in the 80s. alot of vitality can arise from adversity.

also, people have one or two year leases if they rent, and homes that are hard to sell if they own. it takes time.

hey rhino, i don't think you're an idiot.

Der, I think rhino's comment about HF's dillema is right (and I say that from HFRI results, not just speculation; probably rhino's basing his comments on the same).

But turn this around. 15% is not that much to recover and some may have bagged 10% by the end of this month. Conceivably, bonus's could be back next January. We're talking about the marginal impact here. GS and JPM escape TARP, HF start compensating again... we could see some support to ease falling prices.

And I say this as a potential buyer, so this is not an owner's wishful thinking.

Harlem, the hedgies largely sat this rally out. JPM admitted that the first quarter results weren't likely to be repeated. Volume is pitiful. Retail investors are going to get reamed.

Did you see the chart of Citi's credit losses? Horrific trend line.

Haha. Thanks aboutready. I did not take to heart being called an idiot by a guy who doesn't seem to understand the concept of 'net outflow', but rather thinks in terms of bankers marching over the triborough bridge in unison.

Harlem, point taken...nonetheless, unless they were at a big fund with an excess management fee, they received zero bonus in 2008...and with luck they will be earning again from zero say by June 1.... And then its a stock market call because most hedge funds are long biased. My main point is a huge pool of potential buyers (I was one), is not there vs. 2004-2007. Also remember many of the best of those were sucked into buying...So we are talking about a subset of a subset when we talk about buyer support in the coming months.

March was a weak month for HFs (relative to S&P) and I've heard that April started very badly. So I'm just trying to imagine a scenario how the "1970's prices" might not work out.

Rhino, interesting point on HFers already locked in at the top. Sounds likely. But, on the other hand, some of the distressed selling could be mitigated by stabilization of comp.

I don't really thing of distressed selling as the factor. I think of it as just frictional. People move. There will always be people selling. Developers especially will need to cut bait here. Meanwhile, the demand side...both in income sizes and the numbers of unemployed, is just abominable. And of course to beat a dead horse, the ratios to rent are still very very high and rents are falling. The only bull factor is interest rates, but they are mitigated by bank requirements getting tougher.

Rhino, i got a 5.75% mortgage in 2004. Rates are low, but the difference is huge. Some people may be out of fear that they may rise, but that's a small subset, wouldn't you think? And people have been fretting about a possible rate increase for awhile.

The government is well and truly screwed. If they increase interest rates all of the debts with variable rates will reset, and default rates will soar. I could be wrong, but I just can't see how they can increase interest rates until employment turns positive, which could be three or more years out.

Once again my inner cynic is rearing her ugly head, leading me to believe that our leaders are frantically busy trying to find suckers to buy Treasuries, and when that dries up, they just start printing (or changing the numbers in the computer system, the modern printing equivalent). It is overwhelmingly amazing that deflation is occurring still in the face of a $4 trillion government infusion. Holy shit, Batman.

I meant the difference is NOT huge.

My point is can we expect 1990s price to rent ratios, given rates were like 8% back then and 5% now.... Not sure if 5% applies to jumbos. I look at what I'd pay for my rental in cash in order to get say a 6% cash return on my money....That is 10.7x annual. If I required 8%, its 8x rent. Both those figures are way below what the offer would be if it went coop tomorrow. I pay $5k/month and they'd probably ask $1.2mm for this thing, which is like 18x rent.

Throw in the possibility that deductibility of mortgage interest has been brought into question. For NY, this would not be good, even if it just stays at the level of a serious proposal.

PS: I guess at what the maintenance would be.

net outflow! rhino86 you're a genuine brainiac aren't you? who could get their head around such a multivalent, difficult concept as....net outflow. the conceptual derring do! a real life present day david hume you are. you must be a real powerbroker at goldman sachs. or the macarthur foundation. or starbucks.

(tard)

this is how some people bring out the worst in others.

Der = "but does anyone have hard data on the supposed nyc exodus since, say, lehman went under? and in particular data on the finance professionals leaving nyc?"

You are the one who is looking for proof of a point in time exodus shit for brains. No bears are saying people are leaving the city in droves right now. They are saying fewer employed by finance at lower pay levels equals more decisions over time to leave the higher cost of living here behind. You are a fucking idiot. Stop denying that you completely missed the point.

there's no point to miss.

it's a simple proposition rhino: there's relatively uncontroversial data on the totla number of job losses in finance since lehman went under. a percentage of this total lived in nyc before lehman went under and a percentage did not. that's data that has not been parsed, or if it has, it's not readily available. so that's step one. step two is simply to see how many of those who were nyc residents have (so far) remained. presumably a good chunk of them have found other jobs - in other banks, burger king, hedge funds, mta, construction, whatever.

i know there's a culture of provocation in se forums. i apologize for getting nasty in context. the only reason i did so is because i asked a very simple, value neutral question about simple empirical support for what seems to be anecdotally true: a current and future exodus of people in a particular inudstry. the rate of this exodus will likely vary. might increase, might decrease.

my question remains, does anyone have access to this data. and what is it?

my personal agenda for the real estate market are simple, uninteresting, and align completely with yours. my naiive wish here is not to join in with the se communal catharsis, but to just try to get information.

you're welcome to hurl more invective but if you do, please try to be informative at the same time. i'm too old to be entertained by pissing matches.

I think the point you are missing is that the number let go isn't as important as the fact that it's a multiple of the inventory of unsold condos that was planned to be marketed to them. It's less important than the fact the rest of the finance industry expects lower incomes, and saw their bonuses down 40-50% or more in 2008. Sooner or later we will find out what the marginal buyers can afford given what their bankers will lend to them. The late 1990s, before finance went vertical, but after the city became relatively sage, is the only frame of reference. The main issue there is that interest rates were higher.

"I doubt finance people are leavng the city in masses. Besides, where are they goign to go? Iowa? What are they going to do there, sell corn backed securities? "

Who says they'll still be in finance?