Things getting better?

Excellent point. But what is this thread really about? It seems to me that people are not arguing that the bubble will reflate, but whether it's possible that the deflation has run its course or is slowing down.

precisely...and i, for one, see nothing that leads me to believe that we are close to a bottom except phoney bank earnings.

rising unemployment will cause more and more trouble in RE country

http://bloomberg.com/apps/news?pid=20601109&sid=a0nJKlCkI47U&refer=home

maybe all these highly paid investment bankers/traders in Londown will come (back) to NYC ? LOL
http://bloomberg.com/apps/news?pid=20601109&sid=aKCdIuHonoTM&refer=home

another stake in the heart:

"In the plans announced on Monday, G.M. wants to persuade 2,641 of its 6,246 independently owned dealerships — 500 more than it previously announced — to close four years sooner than it had intended. The closures would represent more than one out of every 10 car dealerships in the United States."

10% of the car dealerships? not suggesting that there is any other choice but think about it rippling across the country.

I'm still curious where the bulls think this massive expansion is coming from. Will the US auto companies (if they even stick around) sell as many cars in a year, 3 - 5 years from now, as they did 3 years ago? Where is all this money coming from to pump into WS? Oh, right, from all the innovative new products and services coming out of the US (let alone the rest of the world.)

No one answered a question, at least a week ago (that includes you printer), Cisco traded at around 75 - 80 during the tech bubble. Now it's $18...10 years later. So, should I buy it now? I mean, the internet certainly has brought a shitpile of innovation, new services, etc. And Cisco has continued to come out with new products...so I should buy that stock, right?

What will replace US Auto companies (job wise)...just out of curiosity. How can NY real estate not drop more? You really think it's that isolated? I think some people are kidding themselves, but hey, too each their own.

"rising unemployment will cause more and more trouble in RE country"

right on target HT1, for RE and all things discretionary. but it's not only the high level, but how persistent is going to proof to be. most of job growth during the last decade came from bubbly sectors. which sector is going to generate growth going forward to compensate for those jobs lost? the growth generated by health care and educ are mostly low paid jobs, not RE nor finance 6 figures type of salaries.

"nyc10022 - where did I ever say that recovery means the return of all things illogical?"

Uh, in the next sentence...

"My well-laid out thesis (stated here - http://www.streeteasy.com/nyc/talk/discussion/10062-where-were-going-from-here-the-bullish-argument), wouldn't have peak prices returning till about 2019 - so 12 yrs from the peak."

You didn't read the article, did you...?

Thats the first point mentioned as illogical!

upperwestrenter... I remember doing a case study on CISCO and presenting it to a "equity research" guy that later was found to be in CISCO's pockets as were all the "analysts" in the early 2000's.... I couldn't understand the valuation back then and I also had that gut check w/ NYC RE for the last 5 years....

don't forget inflation in the last 9 years.... it's worse than that $18 number :)

what about cisco now?

and more 'good' news

Plummeting revenues from ridership, tolls and taxes mean that even after it raises fares by up to 30 percent and slashes service, the MTA faces a $621 million deficit this year, officials reported on Monday, as they presented a revised budget forecast. According to the new forecast, next year’s deficit will be more than $1 billion.

The authority’s financial outlook has become worse as the regional economy sinks deeper into an economic slump.

The authority has been hoping that the Legislature in Albany would pass a rescue package to help it balance the books this year and next year and provide long-term funding for its crucial capital program, which pays for the purchase of new buses and train cars and critical maintenance and modernization of the transit system.

on http://bloomberg.com/apps/news?pid=20601109&sid=a0nJKlCkI47U&refer=home

"One of the few risks he takes with money these days is at the poker table. "

what's up with that? my nanny same thing, now puts her faith on lottery tickets and poker. next thing the Russian roulette?

exactly w67...with inflation it's less.
So I would love if printer could answer me, using his wonderful dialogue and vocabulary that I clearly lack, cause I'm a doofus, with how the RE bubble does not mimic this, if even slightly.

"The authority has been hoping that the Legislature in Albany would pass a rescue package to help it balance the books this year and next year and provide long-term funding for its crucial capital program, which pays for the purchase of new buses and train cars and critical maintenance and modernization of the transit system."

layoffs and lower benefits ahead for the MTA?

somehow they and EVERYBODY has to align expenses to income

w67/upperwestrenter:
So your point is that the NYC real estate bubble of ?-2007 is an analog of the tech bubble of 9?-2000? This is what you want me to argue against?

can we not agree that a bubble is a bubble? From wikipedia: "An economic bubble (sometimes referred to as a speculative bubble, a market bubble, a price bubble, a financial bubble, or a speculative mania) is “trade in high volumes at prices that are considerably at variance with intrinsic values”." isn't that precisely what happened with real estate and the dot coms?

Actually, I disagree that the NYC residential property runup (as distinct from the bubbles in Inland Empire CA, AZ, LV, etc., and the NYC commercial market) was a classic price bubble. Certain properties, particularly new development condos, did exhibit the telltale characteristics of a bubble. But co-ops didn't. Most co-ops have maintained their debt service/income and liquidity ratios for a long time - if anything, many tightened those ratios in the 2000s. The tech bubble, or say the NYC Commercial real estate bubble, was based off of unrealistic expectations of future income growth (i.e. high levels of growth in perpetuity). Co-op transactions weren't based off of that - they were based on current incomes, and were valued reasonable given those current incomes.
What we did have in NYC was more of an income bubble - that is to say we had incomes that were based off of underlying assets (securitized mtge loans, LBO securities) which were in a bubble.

ok...let me try to see if i understand. its not that real estate prices are too high...its that incomes that drove these prices were too high? so, can we agree that in the aggregate these incomes are no longer there?

printer, how many people who bought coops went off and later bought a place in the Hamptons? what happens when they are unemployed? and do you think coop prices aren't affected? that's what is going to contract right now, not new development units. that's where we are seeing the price cuts already. this hasn't even started yet.

modeling, for Manhattan as well as everywhere else, assumed around a 4.5% unemployment rate and continually rising prices.

oh Sh-T! it's a pile on printer... hey give him some space... he's gonna suffocate!

is printer a trader? :)

printer.. .to say 100% of the NYC Re bubble was due to bubble income is to miss the fact the entire nation was infatuated w/ RE... RE porn, RE Cars, RE Jobs, RE Forums, RE Workers, RE. RE. RE... everyf'n person I know, whether a doorman, my dentist, my wife's best friend..... blah blah blah RE! i couldn't take a piss in Central park w/o hitting a RE broker or "investor." DUDE... it's gonna tank, NYCRE and tank big... not small... BIG!

w67th, you're just feeling sympathy because of the appalling lack of cronyism you're sensing on the Rushmore thread. Did you read his comment about how Wall Street will always be able to separate money from the people?

printer, have you watched that speech, yet?

So printer, what do you say about those coops that lost, 15, 20, 25% (or more) in the last year? Wouldn't that mean that those condo's (of which there are many) will be down even more than coops? How can you know coops have hit bottom? I'm basing it on the fact that more layoffs are coming in NYC (as well as the rest of the country.)

About makes a great point as well...people are people, regardless of what they bought...and it seems the manic action of "BUY BUY BUY, it will ALWAYS GO UP" is the problem, especially when people were counting on that as their nestegg, and over extended (coop, condo, whatever.)

It's not a matter of me running around saying the sky is falling, simply saying the sky isn't as high as we all collectively thought, and now its time to pay the price.
Change is ultimately good though, as who wants to live in fantasy land?

And how can you make the point that co-op transactions were based on current invomes? Don't you think they were also based on the idea that you could keep your CURRENT job, which isn't the case for many people?

You are assuming that WS is back to "normal" how soon, out of curiosity? And what will BOA be trading at, at that "normal" time? Cause it's at 8 now, and ML was at 90 18 months ago. Should I buy BOA with expectations that it will hit 90, in, 12/24/36 mos?

And you never told me, why was Cisco a bad analogy? Irrational valuation seems like the problem on both sides (valuation with no merit, or "top" in sight...)

And finally, I couldn't disagree more with your OPINION that WS will always be able to separate money. GM always was around, until it wasn't...things change, including careers my friend.

Yes, aggregate incomes are no longer there - who claimed they were? And who claimed that co-op prices haven't been affected? They're off, I believe, about 20-30% from peak levels. This isn't about whether prices have plummeted or not - they have. Its about where they go from here.
My point is that valuations for Manhattan co-ops were broadly reasonable given income levels. Income levels have come down, and so have valuations. I just don't believe that we are heading towards 50% down. I think Wall Street and the broader US economy are nearer to the bottom than we are from the top. I think that Wall Street earnings this quarter, while perhaps unsustainable, were very strong, and thus incomes will be substantially better than people had expected a couple of months ago. And as difficult as it is for some people to handle, NYC will make a bunch from the restructurings we are going through - take a look at the law firm that's working on the Lehman situation, or at Blackrock managing some of the assets the FED has taken on, or who underwrites the various Treasury-backed financings.

And to answer someone's earlier question - is CSCO a buy at $18? I'm no equity analyst, and I have no idea what that has to do w/NYC residential real estate, but I do think its a pretty decent value here, yes. Does that mean its going back to $80 next year? I doubt it.

Printer, what have you done for me lately?

http://www.nytimes.com/2009/04/27/opinion/27krugman.html

From Krugman's piece:

First, there’s no longer any reason to believe that the wizards of Wall Street actually contribute anything positive to society, let alone enough to justify those humongous paychecks.

Remember that the gilded Wall Street of 2007 was a fairly new phenomenon. From the 1930s until around 1980 banking was a staid, rather boring business that paid no better, on average, than other industries, yet kept the economy’s wheels turning.

So why did some bankers suddenly begin making vast fortunes? It was, we were told, a reward for their creativity — for financial innovation. At this point, however, it’s hard to think of any major recent financial innovations that actually aided society, as opposed to being new, improved ways to blow bubbles, evade regulations and implement de facto Ponzi schemes.

Consider a recent speech by Ben Bernanke, the Federal Reserve chairman, in which he tried to defend financial innovation. His examples of “good” financial innovations were (1) credit cards — not exactly a new idea; (2) overdraft protection; and (3) subprime mortgages. (I am not making this up.) These were the things for which bankers got paid the big bucks?

Sorry w67th st., No space at all. None-- the argument is simply too flimsy. Everything rides on the qualifier "classic," which is a meaningless term. One can acknowledge regional differences and variations without falling into the trap (as Printer would have us do) of NYC exceptionalism-- based on the coop market, which was the least dynamic segment of the market. This was not just a matter of income. I bought an apartment in 1995 for under 250K that I sold in the fall of 2008 for more than 6x what I paid for it-- to Europeans. That's a bubble-- I don't care whether you call it "classic" or not. The income bubble was of a piece with the larger economic trend of price and income/wealth inflation. The two can't be disaggregated.

I didnt ask if it was a buy, I wanted to know if it's going back up to bubble levels, you said no, so can I assume RE prices won't go back there? I'm sure not, but how can a handful of banks making money this quarter, mean the entire year will be a positive? I must have missed when banks announced bonuses were based on the first quarter.

Bankers were the bubble perhaps, in which case NYC RE is in trouble, cause there aren't enough movie stars/sports stars/music stars/etc to buy overpriced places.

I'm not even saying we're going down another 50% (this was started I thought when CC said we COULD go down 50% more, which is possible...more possible than going up 50% any time soon I would say.)
I think more likely is we don't go back up, that's the point.

The Cisco point, if you read it and paid attention (although it's clear you aren't) is the price RIGHTED itself, it didn't then go screaming back up.

That was the point...I'll make sure to use all caps next time for the questions in my posts.

upperwest - no, I would not recommend that you buy BAC with the expectation that it will hit 90 w/in 36 months.

But its important to realise that bank stocks tend to trade around a multiple (or fraction) of book value, more so than earnings. income can recover, but book value has been greatly impaired. and of course there is the dilution that has occurred due to the horrific Countrywide and MER acquisitions. So income for MER employees can get back to previous levels without it being entirely reflected in the stock price of BAC.

where will the money come from to pay mer employees at there previous levels? how about: "i have no idea...but wall street is good at separating people from their money?"

upperwest, your logic is impeccable - yes CSCO is the gold standard for NYC residential real estate. Actually, no, let's make it AAPL, which is now about 4X higher than its 2000 high - so actually I think that Manhattan real estate will be 4x above 2007 levels a few years from now. No, no - make that AMZN - it dropped like 90% from the peak, but is now maybe 30% below - that is the path I expect NYC real estate to take.

too much wine with dinner, perhaps?

Income bubble?
Maybe that's true for the employees in the Financial Sector plus their lawyers etc.

A lot of Americans (and why not New Yorkers,too) used their RE as an ATM, rising values were monetarized via several refinancings and CONSUMED, not only for education expenses but new cars, top of the line kitchens, travelling - you name it.
The expectation and for some time the reality of ever rising house/aptm prices created the bubble.

Now the piper is calling and needs to be paid - one way or the other.

Printer: where is the Nasdaq compared to the tech bubble levels?
I'm not trying to compare stocks to RE, I'm comparing bubble to bubble...mentality is mentality.
But it's ok, you'll never make the bonus you did last year, and I'm willing to bet on it, and so are you clearly, by sticking around in that industry (but then again, what other choice do you have.)

Enjoy your wine, you bore me

aboutready

Printer, what have you done for me lately?

http://www.nytimes.com/2009/04/27/opinion/27krugman.html
_____________________

Thanks for this Krugman piece. It summarizes my perspective on the whole wall street bank bailout nicely, but in a much more fluid and eloquent way!

Printer - why even try?

There are many people on this board who are beyond stubborn. It's just not worth it.

Anyone dare to make a simple assertion - such as I did when I wrote that more contracts and offers are being signed for properties under a $1m in the last few weeks - are attacked and accused of being a real estate broker.

What gives? An observation I made and is supported by many in real estate as an obvious truth which can easily be credited to the recent price reductions, low rates and additional tax benefits is lambasted.

These bears are so blinded by their stubborness that they cannot even acknowledge an improvement in this price category. Who knows if this will last, but let's at least acknowledge this is happening.

And for people who say it's a seasonal uptick, please do your real estate research. Manhattan's typical truly busy period is, for as long as I can remember, January, Feb and March. There is a trail off in April and even more pronounced in May. (Makes sense because of the year end bonus cycle.)

What we are seeing here is real improvement. Again, could it be a slight uptick only to be followed by another low? Could be but since this uptick is happening in April, it's tougher to gauge. If was in Jan/Feb/Mar I would think moreso it was temporary.

Many of the people purchasing in the < $1m price range right now are not Wall Streeters thus I'm not sure why we are focusing solely on that sector. Yes, there is trickle down effect and such but those directly linked to Wall Street aren't probably buying anyway.

I suspect many people here are looking into the >$1m category which I have clearly excluded. That market has been and is still inactive, probably because those were the target properties of many Wall Streeters.

lay off da crack, or crank... Look at Hudson Hill!! that "next 25 buyers" thing, just told me to wait wait wait.. Also the large dump off on to the market of 390 west end... a simply unending list of unbought

market glut
http://www.thefreedictionary.com/To+glut+the+market

This year's "seasonality" may have been affected by sellers not liking the school situation so much (which, in case you haven't been following it, sucks, both private and public). The difference of a few hundred people who really want to sell could easily explain April, which is only an aberration compared to the last few years. Traditionally the spring season went through April. Go away in May.

Also, the under $1m is seeing a large (relative to the last six month) increase in volume, along with a large decrease in prices. Many people can make these purchases conforming, and the banks are happy to give loans if they can receive guarantees that they'll be repaid. Is that really such an improvement in the market overall? Or even in that portion of the market?

printer writes: Actually, I disagree that the NYC residential property runup was a classic price bubble. Certain properties, particularly new development condos, did exhibit the telltale characteristics of a bubble. But co-ops didn't. Most co-ops have maintained their debt service/income and liquidity ratios for a long time - if anything, many tightened those ratios in the 2000s.

This is just plain wrong. And there's data all over the place to dispute it. Here's a handy quote:

“When we look at New York City, we look at a price-income ratio that historically has been four times income, versus three times nationwide,” says Zelman, who now runs her own firm. At 7.7 today, that ratio is “significantly higher than normal” because prices have only started falling. “If you want simply to get back to the median, it would be a 46% correction,” says Zelman.

But you want better data, right? (not what some market analyst thinks!), soooo, how about the Harvard Housing Affordability Study:

New York-Northern New Jersey-Long Island, NY-NJ-PA MSA

Median House Price/Median Household Income Ratio

1980 3.1
1981 3.1
1982 3.0
1983 3.2
1984 3.4
1985 3.7
1986 4.4
1987 5.0
1988 4.9
1989 4.4
1990 4.2
1991 4.0
1992 4.2
1993 4.1
1994 4.0
1995 3.8
1996 3.7
1997 3.7
1998 3.8
1999 3.9
2000 4.2
2001 4.6
2002 5.2
2003 5.6
2004 6.4
2005 6.8
2006 7.1

Now if that aint a friggin PRICE BUBBLE, what is? And it doesnt matter if actual average income went to a million bucks a person, if the multiple is that out of whack, it's an UNSUSTAINABLE BUBBLE that WILL revert to historical norms, probably after an OVERCORRECTION on the downside.

That means -50% MINIMUM!

Anon10: how many of those <$1M were >$1M ? Do you know? Cause, that's kinda vital, you know?
Or do you figure, hey, at least apartments are being bought!

No one said deals aren't happening...just that they are happening at lower and lower prices.

Is it me, or do people not read all the way through posts.
Come on, if you're that busy at work, just wait until you get home and can relax.

"The tech bubble, or say the NYC Commercial real estate bubble, was based off of unrealistic expectations of future income growth (i.e. high levels of growth in perpetuity). Co-op transactions weren't based off of that"

I call BS on that one...

If you like Manhattan and plan to live her for more than five years and have the funds, now is clearly better than any time in the last few years. Case Schiller data points to another 20% decline, but there's plenty of product out in the market place some heavily discounted. There are some good deals.

nyc10022 - you 'call BS on that'? So you think that co-ops approved people whose current income was insufficient to comfortably cover their mtge & maintenance, on the expectation that their future income growth would allow them to comfortably cover those expenditures?

b/c THAT is what happened during the tech bubble and more recently in NYC in the commercial real estate market.

Co-ops don't do that - they approve based on current circumstances and their belief that those current circumstances will continue (or improve), with the backstop of large amounts of liquidity in case those circumstances change. That is a HUGE difference, and if you don't understand that, I can't help you.

but turnover in co-ops is relatively low...yes? so, perhaps 80% of co-op owners have not had their finances revealed for many, many years. how many of those long term holders have suffered financial declines over the last three years? 100%. of that group, how many have suffered crippling declines? unknown, but likely significant. yep, they're current on their monthly obligations, but for how long?

I know a number of middle class people who bought coops 10-15 years ago who are barely getting by. A job loss would kill them. They may have had $20k in reserves when they bought their $200k apartment, but that may not matter much now.

yes...they are sitting on a large paper profit but...how many cash out re-fi's have occurred over the years? and, even if they have paid down the mortgage, they still need to come up with the monthly cash; wonder what happens if too many of them have to sell at the same time?

columbia, you are really stretching now. Co-op rules differ, but for most to do a cash-out WOULD require the board to look at their financials. And while monthlies have gone up (duh - its called inflation), so have incomes over that time - more importantly, rents have gone up as well - much more so than the combined mtge & maintenance of someone who bought years ago (as a matter of fact, their mtge has most likely gone down as they have had several opportunities to re-fi at lower rates, so the net outlay has gone up by less than the increase in maintenance). To suggest that a couple of bad years economically will force massive #s of people to not even be able to afford their monthlies is ridiculous. Get a grip.

And remember that most people who bought 10-15 years ago and are still in the apt are most likely NOT in finance - and are much less affected by the job losses.

ok...lets take a hypothetical...been in the apartment 15 yrs...huge paper gain...cash out refi'd 7 years ago taking out a significant part of my 8 year gain. finances were ok then so board says sure. now, college expenses, lost 40% in stock market and other investment lousy expenses. apartment is now significantly greater part of net worth. oh, and retirement funds have taken it in the shorts also.

yeah...not in finance but lets see, advertising? media? law? all experiencing large layoffs and for those left reductions in pay.

also, who sad massive? suppose "only" 10,000 families are in some form of the situation i have described. what does that do in a market like manhattan?

cc, a little over 600 apts have gone to contract in the last 30 days. around 10,500 haven't sold, more if you count those removed and not yet returned tothe market. this is being hailed by some as "improvement." You don't need 10,000, 500 in a fairly short period of time in a slow selling season could make an enormous difference.

"nyc10022 - you 'call BS on that'? So you think that co-ops approved people whose current income was insufficient to comfortably cover their mtge & maintenance, on the expectation that their future income growth would allow them to comfortably cover those expenditures?

b/c THAT is what happened during the tech bubble and more recently in NYC in the commercial real estate market.

Co-ops don't do that - they approve based on current circumstances and their belief that those current circumstances will continue (or improve), with the backstop of large amounts of liquidity in case those circumstances change. That is a HUGE difference, and if you don't understand that, I can't help you."

Dude, you need the help. You are utterly confused here.

Lets say I can afford to buy the co-op at 500k according to their standards. I'm also ok to buy it at 1 mil, or 3 mil, because I'm loaded. I can afford it at any level.

But the market frenzy has me and buyers like me buying at 2 when it really should be just one.

That you think the co-ops standards somehow undo the frenzy effect...
means you are simply delusional.

You can set up strawman arguments all you want, but if you think co-op rules meant you couldn't overpay, thats just moronic.