What WIll NYC Look Like If Prices Fall 50%???

Just because the "experts" predict something does not mean it will happen. I wonder whatever happened to all of the analysts who predicted $200 a barrel oil...

http://www.nytimes.com/2008/05/21/business/21oil.html

ok alpine, let's agree to revisit the issue next spring, shall we?

gs was doing their majic with oil.

oh and alpine, that first 20 or so percent, it's already happened. we don't need any experts to tell us so, it's just numbers.

Alpine the ridiculous thing is that you deny the possibility prices will be cut in half when they are already down 25%+ since September. Its not clear at all why you care so much. I am more interested in the oil analysts who said that it would hold at $75... You are one of those.

"Prices are not going to fall 50%. I don't even get why everyone is throwing this number around. Where did it come from? Stevejhx's ass? Buyers are not going to get 50% discounts and you can take that to the bank (just as soon as it passes the stress test)."

"Alpine, you are out of your fucking mind."

Aboutready, don't get yourself worked up.... this is the same alpine who denied there was a decline AT ALL just a few months back.

Of course he won't believe 50%, he didn't believe 25% either.

Not worth it...

I know, I try not to get riled up to the point of invective. Insults aren't productive. But, OMG, alpine can try a girl's patience.

Well in a world where nothing is known and everything has fallen more than many expected, Alpine's declaration really isn't worth getting riled about for sure. I mean to decline -50% impossible when NYC real estate is at the center of the crisis of i-banks, real estate lending at the same time supply is coming on and valuations are still higher that any prior high... Nah we can't go down another 30% on already 30% down...nah no way. Banks will allow condos to sit empty for ten years.

sniper / Rhino86 - back to the topic, I think Rhino86 is on to something on publicity. I don't agree that "almost everyone else" is on the same page about a steep downturn and that only sellers don't get it. Rather, I think that those of us who live in SE land, think about this all the time, watch comps and other data, etc. have a much more current market view than most people, perhaps even than truly interested parties such as active sellers, who may rely (God forbid) on their brokers for market color and pricing advice. People must know that the market is weak, but beyond that they may have little data or specific view of value on their own. If this theory is correct, then media coverage and broker quarterly reports become an important mechanism by which word gets around over a period of quarters.

The drip, drip of actual trades is also important because it is so real. When your building, or your line, finally has its first post-Lehman trade close and it's a 2006 or earlier price, then a bunch of people who don't read SE see a data point that they can relate to. Same thing when your friend/relative/colleague takes a lowball bid and loses a bunch of equity. People notice that. However, all of this is slow to develop, especially with so few transactions happening. Which brings me back to my point about time being the key ingredient.

In terms of further a catalyst, a.k.a adding more ingredients to the pot that sniper writes about, I would have to think that further cuts on Wall Street (broadly defined - banks, hedge funds, Biglaw, etc.) are a good candidate. Until UBS's announcement last week, things had been eerily quiet since maybe February. We're getting on toward mid-year and most banking businesses are showing weak volume(high grade debt is an exception, but it is also the lowest margin major product). Management has to be looking at the pipeline and their headcount and wondering if they are still overstaffed. I see reports here and there that hedge funds are still seeing withdrawals, for example as gates put up late last year are taken down, as well as a few cases of funds shutting down entirely. If the odd report is making the press, I would bet that there is a lot more going on below the radar. It just seems that the pressure on headcount remains more down than up. An alternative would be to maintain more heads and pay everyone less. This would not have been the likely path historically, but it would fit today's political climate. Either way, fewer Wall Street jobs/dollars could be a catalyst.

Sidelinesitter, yes. All you need is this 25% to get backed into asking prices universally...and now buyers will still be looking for 10-20% off....which they will get in many cases. Also families move out just as a matter of course, meanwhile the incoming class of finance employees will not be large enough to offset them. From 2000-2007, they were much more than enough to offset.

I think 2 beds rents are a huge pivot point here. I am living, and have heard, the whole debate about 'why should I pay $4000+ when I can buy a house'...as that $4000+ falls, the rent/buy math gets hurt. We will find out where the levels are for people. I know around $600k for 1200/ft if interest rates were still low, I'd have to buy something because that is a nice 6% 'after tax' yield on my money. However, "that apartment" is still asking around $1-1.1mm.

sidelinesitter, rogoff/rheinhart in their recent study of financial crises found that housing typical continues to fall for 6 years, while equities take a bit more than 3 years. Real estate is indeed stickier, partly because of the lagging nature of information as you indicate, partly due to emotional reasons, and partly due to the illiquid nature of the holding. i wonder if this time might be a bit speedier, however, because information is more readily available, if still not anywhere near real time?

your last point strikes me as very important. i think we will see wage reductions on a scale that would have been unfathomable earlier, and employees will just have to take it. i'm reading more and more about wage cuts.

Yeah, I can tell you as someone who ramped income in finance very quickly from 2004-2007...the whole idea of compensation needs to be reviewed in light of what we now know 2004-2007 was as a period in history. Similarly, what a condo in Manhattan is worth, in absolute terms, and relative to other major cities, needs to be reassessed painfully to some.

ALPINE WROTE: Prices are not going to fall 50%. I don't even get why everyone is throwing this number around. Where did it come from?

I love that.
Given that 50% was mentioned in the title of the thread he created, isn't that just frigging insane (yes, I am agreeing with Jason on this).

I think it was a bad attempt at sarcasm. I think his point is that the only thing that knocks us down 50% from the top (30% from here) is some kind of Mad Max type scenario. He is poking fun at the possibility. To me, the opportunity to poke fun at the -50% scenario passed when we fell 25-30% in six months. I am still not sure what is interest is. Its like a nervous, jittery laugh and poking fun...kind of deranged. When you fall this much, this fast...before numbers are actually printed in reports and mentioned in newspapers....I am not sure how you make fun of any scenario. This after he participates in a threat about a giant condo on the West Side Highway (Rushmore) where basically 10 units are sold, and all 10 are fighting about re-negotiating price or walking away. Very strange indeed.

Then he makes bad analogies about Detroit, where you can buy a house for $300...in order to support Manhattan where he claims $1700/ft condos can't fall to $850/ft. Its genius.

I will put some credence in those saying the market cannot fall say another 1/3 when 1) a substantial number of sellers are pricing listings near levels where you can actually sell, and 2) new developments are in general clearing, ie, occupied by buyers or renters. Before that, it seems the potential for total chaos is huge and it seems pointless to discuss any normal market dynamics. ..But this is just speculation, so who knows

I think you are exactly right... These condos need to start moving inventory at lower prices...then coops will need to price down from the new marks set by condos. Then we will find out how many buyers are or or not left in the marketplace and where their levels are. Like any market though, every sale made at any price is one less buyer left in a market with a bad bearish tone and the remainder of buyers will always lie at a lower price. I honestly think condos are going to need to be priced for investors' cash flow investment...and at these rents, and the maintenance+cc, that is a low level indeed. That's about 1/2 from here, not 1/2 from the top. The $1.7mm 2bed condo that can rent for $5k with $1800 in total monthlies is under $700k if priced to just a 6% cash yield. Ahhh ooooh ga.

I think everyone needs to take a step back here. Whats really going on is that ALPINE292 IS THE NEW RUFUS. I dont mean literally, however he is the same kind of a person. Lets examine the facts shall we?

1) Alpine had been posting here for months that PRICES ARE GOING UP
2) After being laughed at time and time again, he still tried to slide in a 'prices are going up' comment here and there even though the facts proved him wrong
3) Although he wont say it, he has truly realized that prices are going down. This began his spiral of sorrow
4) Alpine spent his life wanting to live the 'big city lifestyle', so he (attempted to) sell his home in NJ but wasnt able to
5) He landed a job here in the city about 1.5 years ago, however he was recently fired
6) Now that his dreams of living in the city have been crushed, he wants to run off to 'greener pastures' with his tail between his legs (DC et al)
7) As a final attack against the city that rejected him, he is now making it his life (again, since he is unemployed) to bad mouth the NYC out of spite

Its really quite a sad state of affairs, and is an insighful look into the mind of someone who has turned against what they once yearned for.........

Remember, many of these buyers are simply folks who bought into the hype. We're talking about folks who often risked more than their life savings on a single "investment". So, a lot of thought probably went into it... of course, with bad information.

Not surprising to see that they don't immediately get the realities of the market... just as they never graped reality in the first place.

In short, I don't really find this surprising. And this is why RE markets can take YEARS to bottom.

When a stock is cut and half, tough to argue with that. When you can rationalize "his house across the street is down, but not mine, because mine has a white fence" and such, it takes a LONG time to sort things out.