Reasons why Manhattan apartment activity is picking up..economy getting better.

what does that mean if we give it all up over the next few months ? all bear markets have rallies. lets see the job number that comes out friday morning. the market going up will do nothing for manhattan real estate in the short term. understand..there is NO money coming into manhattan until december. even then its goin to be minimal. regardless of what equities do.

how were the jobless claims numbers this morning? continuing claims made another record high. i guess you didnt read that one.

steveF, the market is not the economy.

The more important New Claims dropped.
Whatever, because employment is never an indicator of where the market is GOING. Most of the time unemployment stabilizes at the peak before recovering. Like Now.

steveF, the market is not the economy.

what?? I have no response.....can you believe it?..:)

Totally agree that the Equity Markets are just one small piece of the economy. The Fixed Income markets are far bigger and there are still lots of stresses and strains there but there does seem to be some significant easing of the liquidity issues.

However, I'm actually with Steve on this one. People, rightly or wrongly, take their cue on the economy from two measures. What the press talks about and equity markets. The Economist had an interesting chart on how many press pieces used the phrase "green shoots" and how it was increasing as 2009 continues.

Irrespective of whether we're at a bottom, close to a bottom or there's more pain to come, what can be said is that the collective mood is now far better than it was in November and December. That will certainly lead to the pace of decline decreasing. Whether the decline will actually stop in 2009 is, as yet, unclear.

I think the market has probably established a new price point perhasp 25% lower than mid-2007 but it will take a while for all the optimistically priced apartments to reprice and for the hidden inventory to slowly work it's way through the system.

smallmj, i agree with you. but optimism and the stock market are shaky grounds upon which to build a sustainable economic rally. the 1930s demonstrated that.

steveF, new claims are under their peak. what concerns me, however, is that i think that furloughs will exacerbate as employers look at inentory cycles that seem unsteady (which will affect the hours worked), employers are lowering wages (decreasing DPI) and that state and local governments' fiscal years are just about to begin with new budgets that call for huge reductions in employment. that could scuttle that improvement. also, the real indicator of a momentum change in unemployment is the 4-week average. The 4-week moving average needs to decline 20-40k from peak before economists will call a potential upturn, so far it's down slightly over 10k

new claims are statistically less significant than continuing. fact.

steve F..you are clearly uninformed on the actual math behind the numbers you read in the post everyday.

steveF, the market will be recovering when inventories start to fall. Not one minute before, and notwithstanding any of your novel economic theories. The stock market is uncorrelated to Manhattan real estate prices, or anything other than incomes and leverage, both of which are down significantly.

SteveF, you are must a broker trying to ignore reality, picking and choosing the facts to support what you want to believe. It's funny, you were the same guys saying it didn't matter when the market dropped 50%. Now it matters? Even if the equity markets were the most important indicator, up 10% doesn't mean anything when the market is still down 40% from the high in Fall 07. People feel better than they did, but that's like saying someone feels better after a car accident and they took some advil. They feel a little less pain, but still have a concussion and a broken arm. GDP was neg 6.1% in Q1, Jobless claims are just off the high, still at 630k.

If you want a micro indicator, take a look at the front page of this website and pull the dropdown. 14,204 listings in Manhattan. The number is over 40% higher than 2 years ago. And it creeps up every day. Yesterday it was 14,154.

sorry to burst your bubble but bear markets last 16 years, only 5 more to go!!!!

steveF is the "real estate is a Ponzi scheme" person - alas, he was the guy left standing when the music stopped.

And btw, I'm sorry, but this post is just stupid. First of all, best what?? Second, Dow Transports?? Do you think anyone out there looks at the Dow Transports, sees it is up for the month, and says "you know what, I think the NY real estate market is turning around. I think I'll go buy a place!"

Retarded.

Yesterday it was 14,154.

hahahahaha..exactly

amazing - wall street earnings much better than expected. non-financial earnings, in general, better than expected. numerous economic data points (durable goods, inventories, jobless claims, consumer confidence, retail sales, etc.) showing that the worst is behind us. all-time record low mtge rates. credit markets having a tremendous rally. equity markets 30% off the low over 7 weeks or so.

all of this, particularly the confidence #s, and yet you think it has no impact on the real estate market? not saying it means that properties are going to fly off the shelves, but it will have an impact. for many potential buyers their own worst-case scenario is clearly less bad than it was 6 months ago, which means they're more likely to pull the trigger. get your heads out of the sand

printer, get back to your CNBC writer's desk.

printer, you forgot the little inconvenience that NYC lags the rest of the country in downturns. Here it's only just begun.

SteveF suffers from a crippling case of confirmation bias!

http://en.wikipedia.org/wiki/Confirmation_bias

and who's saying things are so lovely nationally? look at the following charts. make sure you scroll down. and today's PCE and DPI numbers indicate that the one bright spot other than inventories (which despite huge declines still haven't fallen enough) wasn't quite accurate and will most likely be revised downward. durable goods were better than expected, except in absolute terms they were worse because the revisions downward to the previous month were rather extreme. The consumer confidence number stayed steady for current conditions. Going forward they have hope, the poor bastards. Earnings were better than expected because more jobs were cut than expected. the all-time low mortgage rates haven't created an increase in new mortgage applications, which doesn't bode well for next months sales numbers. this weeks re-fis were down 22%this week, credit card companies are screwing customers left and right. who knows what the u6 will be. whose head is in the sand?

http://zerohedge.blogspot.com/2009/04/late-day-chartology.html

You nailed it Buster

yes, in terms of time we lagged the rest of the country. but the speed of our descent has been much greater than in the rest of the country. this has and will continue to play out differently in different areas.
i can logically argue that since NYC is much more exposed (both incomes and assets) to the financial system and financial markets, and since those sectors need to rebound before the rest of the economy does, that our market will be the 1st to recover.

All I know is that when things are bad and everyone thinks they will worse, they usually get better and vice versa.

nyc is also the most dependent on the jumbo mortgage market. you think the fed and the gov't will intervene to ensure that high-income individuals find it easier to purchase property? that would be politically quite messy.

bob420, everyone thought things were great and it took years for that to be proven false.

about - check your history - they've already done that - the conforming loan limits were raised to be reflective of regional differences in median prices vs. national.

Yes but everyone thought it was great at the time after huge runs and then everything fell apart. Now everyone expects doomsday outcomes after things have been terrible. Not expecting an immediate turn around and it could take years but I think the worst is behind.

printer, that's great for the under $1m market, but i'm sure you know that's not what i was talking about.

bob420, you may be right (and i hope that you are). but you do realize that the gov't has commited over $10 trillion to this? and the majority of it to banks? I hope there are no long-term ramifications, but I'm worried about a second downturn.

Oh, poor SteveF...still emotional I see...and not just about real-estate anymore. Now it's the market too.

- This is a bear rally, and will likely retrace
- Even if it doesn't, the real-estate market in NYC will continue to decline and not "bounce" back, but simply stabilize (30% down from current levels).
- The rare contracts that are being signed are being done at 25%-30% off list, and yet inventory continues to build
- We're still shedding over 600k jobs per month, but hey, it's a slowing pace (640k to 600k). Are you kidding me?

*****
Finally, you can scrap all of the above, which I'll concede is no different than SteveF's baseless "Confirmation bias" (love that one, by the way) in lieu of a real fact:

My landlord just offered to renew my lease on 76th & 3rd with a REDUCTION in rent. Why would I move even if I can???

Sorry, Steve, but I am completely and utterly representative of the market demand in NYC. Mid 30's, plenty of cash in the bank, and in no rush whatsoever.

I'll tell you what, when prices reach $700/ sq ft ASKING on the UES for 2BR, 2BA, I'll start to seriously look. Until then, you're SOL.

about - don't believe the SE hype - its not that difficult to get $1mm+ mortgages. You can get a 7yr ARM w/no points for 5% - hardly usurious. Yes, you have to put down 30% or more, but most people in that category do - in fact, many if no most co-ops would require it. after all the tax benefits don't extend above a $1mm mortgage, so the real cost of those borrowings has always been quite high.

aboutready - did you get to go to the gym today?

Savvy johngalt - so let's see, you're salivating over the prospect of buying at $650/sq foot - basically 2003/4 prices? but you're in you mid 30s, with 'lots of cash' which means you're in a high-paying field, which means you could have afforded to buy then, but apparently weren't savvy, or ballsy enough to do it. in the meantime, you've been paying ever-higher rents, which even after this reduction are STILL higher than your net monthlies for your mortgage & maintenance. plus don't forget that you could be refi'ing your mtge right now and bringing that down as well (and locking it in - not at the mercy of your landlord or the rental mkt) probably as much as your rent has gone down. plus you've been living in someone else's place for those past 5 yrs, instead of enjoying the comforts of owning your own place. not to mention that you would have paid down about 7% of your loan balance by now.
Good job - keep slapping yourself on the back for that one

printer, as soon as you can buy an apartment and rent it out at market rates to an unrelated third party without losing money, then the market will be in equilibrium. Just look at all the threads that plainly show it is still 100% more expensive to buy than to rent the same unit, meaning that prices have to fall another 50% for equilibrium to be reached.

Apt_Boy. Haven't been so active on the threads today. Not only did I get to the gym, I cleaned the bathrooms and the kitchen, paid the bills, and got some reading done. Met a friend for an hour.

100% more to buy than to rent?

printer - thanks for not only counting my money, but also speculating about when it was earned. I actually am not a "Wall Streeter", and made my money creating something that didn't take off until 2005, which means payday came later.

However, I thought prices in 2005 were also ridiculous, so wouldn't buy then even if I could. You should also check your facts...650/ sq ft for UES 2BR 2BA is more like 2000, not 2005; according to Miller Samuel.

As for slapping myself, I suppose I would be banging my head against a concrete wall if I purchased at any time after 2003 - and especially after 2007 - and still hadn't sold.

...and my rent (1BR apt), with the reduction, is about what I would be paying in maintenance alone for a 2BR 2BA, so no equity loss there. Perhaps less space, but perfectly comfortable.

P.S. Try sheet rock instead of concrete...I suspect it hurts less.

One thing I've noticed is that very few posters seem to be able to have a reasonable discussion about what they think will happen without flinging ad hominem attacks at someone else who happens to disagree or have a different perspective. Grow up, people.

Galt raises an interesting point that I don't think gets addressed often enough - some people (including myself) have very different criteria as to what they are 'willing to live with' on the rental side vs the buy side, obscuring a significant proportion of the "renters are idiots" and "buyers are morons" threads...

14,282 today

lol..its like the old flinstones vitamin commercial..14,282 and growwwwwwing

It's definitely not 100% more to buy than to rent, not even close. Maybe in some crazy isolated instances, but not in general.

certainly 50% more and that assumes no loss of capital when it comes time to resell.

Can you give examples of where it is 50-100% more to buy than to rent? I don't understand how you can calculate in guestimates of loss of capital at some point in the future. Are you taking into consideration the possibility that the value may be more in 5 years than purchase price today?

I doubt that columbiacounty. Pick one or two buildings with good numbers of both sales and rental listings as examples and let's review it.

check it out:

6C rented for $5,950 http://www.streeteasy.com/nyc/rental/389216-condo-200-west-end-avenue-lincoln-square-new-york

7C for sale at $1,625,000 http://www.streeteasy.com/nyc/sale/377503-condo-200-west-end-ave-lincoln-square-new-york

with $325 K down--monthly is $9,150. that's 54% more...not including tax savings on buy side or opportunity cost of down payment. and...no consideration of significant risk of loss of capital when it comes time to sell.

Your after-tax monthly will be more like $7000. And this is just based on asking price, not what you could actually negotiate. Still nowhere near 50% higher than to rent.

We did a lot of work on this on the rent/buy the same unit thread. LICC, you have no idea what you could negotiate, maybe a reduction, maybe not, maybe the listing will rot for 500 days. Many sellers think their prices are firm these days.

no opportunity cost for $325 K down? and...to the extent that you can negotiate purchase price, why isn't the same true for the rent? plus, as tax abatements expire, monthlies will go up faster than rent. and if you buy for $1.5 million and market falls a mere 10%--that's 150K to be amortized over call it 48 months---another $3 K. and, finally, the in and out transaction cost can easily eat up another 10%.

"Your after-tax monthly will be more like $7000." Assuming you aren't swallowed up by the ever-expanding AMT.

If you want to take into account opportunity costs, you have to consider the potential long-term price appreciation. You also have to take into account long-term rent increases.
If you believe the price will drop in the near future, you shouldn't buy and you should wait for the price to drop, regardless of current rent ratios. That wasn't the issue that was raised. The rent-buy analysis is based on a current moment, not on future projections. The question is whether, right now based on today's prices and rents, does it cost 50% or 100% more in monthly costs to buy than to rent (assuming a 20% down payment). I asked for an example, and in the example you chose, the answer is that no, the cost is not even close to 50% more.

There is also a little thing called principal payment which cc has neglected to include.

fair enough...that's why i didn't include tax benefits or opportunity cost in the first place. straight up, checks being written each month, cost is 53% greater. everything else is speculative....yes there will be some tax benefit but that is (as last poster pointed out) subject to change beyond our control and of course assumes that one's income continues in perpetuity. seems to me that you're choosing which elements to count and which not.

malthus - you can still deduct mtge interest on your primary home (up to $1mm of mtge) even with AMT. not true for property tax component of maintenance, however - that would likely not be deductible were you subject to AMT.

and columbia, anyone can cherry pick a listing - particularly new development where some flipper is holding out for a ridiculous price, a price that no one would ever pay. You have to look at ACTUAL prices being paid (for both rent and purchase), and then you'll find no where near the difference - in many cases, now, when adjusted for tax deductions, rents are even to or slightly higher than purchase

I'm choosing the elements that affect the actual money out of your pocket. You can't just ignore the benefit you get from the tax deduction. It puts more money in your paycheck than you otherwise wouldn't have.

but lets cut to the chase using this example. can we agree that it will cost more on a monthly basis to purchase 7C than rent 6c? can we agree that they are essentially the same unit, with the same up to date fixtures and amenities? so...for an individual who finds these apartments desirable, why would you chose to buy instead of rent? only if you believed that there was a significant liklihood of the market moving up from where it currently is. isn't that the real point rather than nitpicking about what to include or not include?

"isn't that the real point rather than nitpicking about what to include or not include?"

Probably, but for some reason people like to post on this board that it is 50% or 100% more expensive to buy than to rent and, most of the time, the statement is completely false. I don't think anyone would dispute that the apartment you posted above is more expensive to buy than to rent but if you are more realistic about the amount, we can all learn something worthwhile. Also, timeframe has a lot to do with the question you are asking which is not considered in a spot rent/buy calc.

cc, like I said, if you think the price will drop, you shouldn't buy. If you think it will be stable or increase in the future, I think some type of premium to buy is logical. You are locking in your costs and most people who buy enjoy intangible benefits that they are willing to pay for. The original point made, which I dispute, is that prices are too high because they are out of equilibrium with rents, and that prices must come down to meet rents. I disagree. I think both prices and rents may decline further based on economic conditions, but if the economy and job market stabilize and rents stay where they are, prices do not necessarily need to come down significantly, if at all, for there to be equilibrium.

"prices do not necessarily need to come down significantly, if at all, for there to be equilibrium."

Agree, it is simple cash in cash out math and if calculated objectively with current rates and a reasonable discount to ask, you can find examples close to "equilibrium".

Clearly if you believe the rent to price ratio is not out of equilibrium, then you will not see prices coming down in proportion to rents. But most of the studies done in this area by economists argue that they were strongly out of equilibrium and are in the process of adjustment back to that equilibrium. Many in fact make the argument that prices will overshoot the equilibrium in the other direction, making it much cheaper to own than it has historically been. In some places this may already be the case. But not here.

As someone who wants to buy in a 12-18 month time frame I welcome seller/owner/broker delusion at this point in the price decline. The longer they hold onto their collective fantasy of ever rising RE prices the harder the fall will be. Same thing happens in the stock market. This is and will continue to be a spectacular bear market rally, probably going until the seasonally deadly time of August/September. When this wobbly leg gets kicked out from under the RE bears, along with a dismal spring sales season, we may get the capitulation needed to get an RE market bottom. That is what is happening in Miami, California, and Vegas and will be no different here. In the mean time I rent in a condo gone rental for just over half of what it would cost me to buy. Rather have my 20% deposit in the stock market anyway and with free parking and gym it seems like a no-brainer.

"You are locking in your costs and most people who buy enjoy intangible benefits that they are willing to pay for."

how so? back to 200 WEA....maintenance will go up as amenities age, already discussed abatements as well as the unknown of property taxes in general. and more to the point, what benefit is there to owning the exact same unit that you can rent? many have made the point that rentals are not as nice as purchased places but when it comes to the large and growing amount of brand new construction, that makes no sense. to the extent that there is value in being the first to live in a place why not do that as a rental tenant and let the owner get hit with the initial depreciation? it would be the same if you could lease a car for less than purchasing all in.

As an owner, you have more flexibility with what to do with the space and what changes you can make to it, which is a pretty big deal for some people. Over time, rents rise more than maintenance charges on a dollar basis.

So if I understand what I am reading, JuiceMan and LICComment, viewed not so long ago as the poster children for downturn-denying perma-bulls, now seem to hold the balanced views and the perma-bear thought police are busy ignoring and denying away any evidence, however slight, on this thread and several others that either the overall economy or the Manhattan housing market might be starting to decline at a slower pace (which eventually it must - my apologies to the thought police for being the one to break that sad news), let alone bottom out.

For example, this post from JuiceMan is unarguably reasonable (and incidentally seems to reflect a definitive victory in the debate with cc since s/he has not managed a response).
"Probably, but for some reason people like to post on this board that it is 50% or 100% more expensive to buy than to rent and, most of the time, the statement is completely false. I don't think anyone would dispute that the apartment you posted above is more expensive to buy than to rent but if you are more realistic about the amount, we can all learn something worthwhile. Also, timeframe has a lot to do with the question you are asking which is not considered in a spot rent/buy calc."

Similarly, LICComment doesn't sound like the psycho that everyone loved to hate in this comment:
"cc, like I said, if you think the price will drop, you shouldn't buy. If you think it will be stable or increase in the future, I think some type of premium to buy is logical...I think both prices and rents may decline further based on economic conditions, but if the economy and job market stabilize and rents stay where they are, prices do not necessarily need to come down significantly, if at all, for there to be equilibrium."

Fascinating role reversal, no?

I did the math early last year. Decided to hell with it, put about $12k into my rental. Will probably be here at least five years, including the year that has gone by. That's about $200 a month for a 36" Jenn-Aire french door refrig., Kraftmaid cherry pan drawers, pull-out pantry, and broom/linen closet (along with some other cabinets that weren't as exciting and the costs to paint, and to upgrade some fixtures, switchplates, etc.) I guess theoretically my landlord could kick me out at any time at the end of a lease period, but then I'd just be out whatever portion of the $200 per month I hadn't enjoyed, not a down payment and closing costs.

sidelinesitter, of course it has to bottom. but where. and how many times.

good question. right now anyone who proposes a theory in which "where" is anything better than down 50% from today gets shouted down as being a downturn denier. that doesn't strike me as a constructive way to address the question

good point, sideline. I try to refrain from giving specific numbers. But I do think that both rents and sales prices have to eventually fall in line with incomes, and as long as we're shedding jobs like my cat sheds hair, I do think that we have a ways to go.

"So if I understand what I am reading, JuiceMan and LICComment, viewed not so long ago as the poster children for downturn-denying perma-bulls, now seem to hold the balanced views"

sidelinesitter, if you take a look at my posts (and LICC's) over the last two years regarding this topic, you would see that the posts in this thread are 100% consistent with what we have always said. So if you believe that this POV is “balanced” then it would be impossible to say we were not balanced in the past, we have never changed our stance on this topic. The only difference is that in the past, both of us were labeled “bulls” because we refused to accept shoddy math and idiotic formulas as law.

“right now anyone who proposes a theory in which "where" is anything better than down 50% from today gets shouted down as being a downturn denier. that doesn't strike me as a constructive way to address the question”

you are absolutely correct

I'll also point out that columbiacounty was able to have a normal, insult-free, intelligent back and forth about this issue, whereas in the past the people that JuiceMan and I would debate on this blog would always get overly defensive, petty, and nasty and every discussion would just devolve to where it was worthless to try to discuss things rationally.

not sure where the discussion was in the past but...

as i have noted before, i really don't consider myself either a bull or a bear. for what its worth, i'm calling it as i see it and trying to understand how what i view as our current financial collapse might have a relatively happy ending. i also think that its all about jobs and income and i cannot see where they're going to come from.

Same old discussion, same old non-economists commenting.

In cc's example, it costs 54% more to buy than to rent the same unit. That doesn't include what will happen to your charges as the tax abatement amortizes. Monthly taxes for an apartment like that would be about $1,500. $1,500 + $9,150 = $10,650.

That particular apartment is about 80% more expensive to buy than to rent. That does not include:

1) The current downward cycle in property prices;
2) Exacerbated by the fact that as the property tax rises, the price of the property will fall.

The day you can rent that apartment to someone willing to pay $11,000 for it is the day it will be properly priced. You'll then be making money, taking into account the "tax benefit" on all payments except the principal, which is not tax deductible.

"because we refused to accept shoddy math and idiotic formulas as law"

Where are the "shoddy math and idiotic formulas" in that analysis, JuiceMan?

"I think some type of premium to buy is logical"

You would, LICC, because that makes no sense. Buying is riskier than renting. Therefore, it should be less expensive.

Unless you think it should be more expensive to incur a greater risk, which you likely do.

Here's what my "shoddy math" has been based on:

1) You can't buy an apartment and rent it out to an unrelated third party without losing your shirt.

2) Historically the buy-to-rent ratio has been 12x annual rent = purchase price. It's now about twice that.

3) That ratio DOES NOT include the tax benefit. The ratios that include the tax benefit are imputed rent and owners' equivalent rent, where the figure is about 18x. However, those formulas also take into account expected price increases / decreases, and when one expects a decrease in prices, according to the theories, no one will buy.

4) If you need financing, PITI does not take into account the "tax benefit." Therefore, out-of-pocket expenses are what you need to use. That is what is used by banks (30% PITI) and landlords (40x monthly rent) - those formulas are equivalent.

5) If you choose to include the "tax benefit," you need to include the fully levered opportunity cost of investing elsewhere, as well, and they tend to offset each other.

6) The "tax benefit," depending on market conditions, is to a greater or lesser degree factored into the price of the property, through higher prices.

7) Property prices are 100% correlated to incomes and leverage. Incomes have collapsed in NYC; leverage has dried up.

Of course if you redefine opportunity cost to suit your needs, or only look at one side of the equation, or fail to take into account market constraints vis-a-vis income, you will happily come to the conclusion that real estate in Manhattan is properly priced today. People were saying that exact same thing 18 months ago when I started posting; prices are down 30% since then, inventories have doubled and are on their way to tripling with no end in sight, and even Jonathan Miller estimates that the "shadow inventory" of new development is at least 50% of the reported inventory, large numbers of units are still coming online. Real estate tax revenues have collapsed in the city necessitating a bailout of the MTA and stark cuts in the city's budget, unemployment is way up and rising, Wall Street is in crisis, bonuses are shrinking along with the workforce, real estate is illiquid and runs in long cycles, prices are down 50% overall in all other places in the country that saw a boom, the only boom similar to what we have seen in Manhattan is Tokyo where prices are down 50% from 10 years ago and have still not risen, the last boom and bust cycle in Manhattan lasted 14 years.

I could go on. But I won't. NOTHING supports property prices at these astronomical levels. They will fall a further 50%.

"in the past the people that JuiceMan and I would debate on this blog would always get overly defensive, petty, and nasty and every discussion would just devolve to where it was worthless to try to discuss things rationally."

That's really funny.

funny, but not in a ha ha ha sort of way.

For over a year now, steve would put forth his rent ratio analysis (saying it is not his but is the analysis used by economists, which is not true because he misapplies the analysis), and I and many others would set forth very clearly all of his mistakes and inaccuracies. Whenever we would use real world examples and go through actual numbers, he would try to distort and twist the discussion as best he could so that he wouldn't have to admit he is entirely wrong. This would include him propounding ridiculous, fundamentally incorrect assertions regarding applying tax benefits, marginal v. effective tax rates, and defining opportunity costs. He would then whine and rant about how he is never wrong and everyone else in the world who disagree with him are idiots. After time, most everyone realized that steve just is not a reliable source for information or analysis in this area.

steve really knows how banks operate and he is very good at reading and analyzing financial statements. I assume he is very good at his translation business and it seems like he is very thorough with it. But he does not have good grasps of economic theories and he lacks the skills to intelligently and dispassionately apply economic analyses to the real world.

LICC, i was going back further in time with my remark.

SteveF, no need to mention the case-shiller index; i guess that would be a little too much reality for you to handle.

take a look at the Chelsea Mercantile. Good building to consider as conversion/closings occurred early in this cycle, 2000 I believe, so while it appealed to finance money, it wasn't likely to have been as affected.

there are currently 15 apartments in the building for sale. during the entire year, 2008, there were 20 closings, with 5 or 6 occurring in the spring.

252 Seventh Avenue

Printer said "numerous economic data points (... jobless claims...tc.) showing that the worst is behind us."

LOL. Where does it show that? Initial claims are still over 600,000! That's amazingly high. Anything over 450,000 or so implies economic weakness.

What do you print - joke books?

"I'll also point out that columbiacounty was able to have a normal, insult-free, intelligent back and forth about this issue"

That sounds very boring. Now go take your viagra, floppy...

I don't know about everyone's "fancy" math, but I'm in a similar place as johngalt above and I'll be looking to buy in the 12-18 month range. I don't see how Manhattan can bottom any time before then. It is a fact that NY lags the overall economy. The financial sector which dominates the city's economy is still downsizing (we had layoffs again last week) and the easy money will not be made again. Folks laid off from the industry are trying to hang in here but what happens when that severance runs out and there's still no jobs? Taxes and all other manner of cost of living comps are going up especially for those who could afford the real estate we're discussing here.

I think that SEaddict is right to just follow the available listings. My view is to wait for the stabilization in the RE market rather than be a part of its creation.

Good post Steve. And you're spot on about the fact that the people who are least proficient in finance and economics demonstrate the most certitude about their projections (which, since they aren't based on any underlying empirical evidence or premise, are not forecasts so much as "wish lists"). There are some blogs i've dropped off of because of that audience. If I want to debate regression to the mean in capital markets with house wives and unemployed 24 yr old boys living in basements, i'll just go talk out loud in Union Square.

"It is a fact that NY lags the overall economy."

Can someone substantiate that somehow? I've heard it before on this board but it sounds like people are simply extrapolating the fact that THIS time, NYC has lagged in the cycle. But in the real estate downturn in the early 90's, NY was one of the FIRST to decline.

Admiral -

Damn I hate when I use absolutes inadvertently. However, it is better to say that New York typically lags the overall economy in a downturn. Here's one story referencing it: http://finance.yahoo.com/real-estate/article/105253/Signs-of-Softness-Appear-in-Manhattan-Real-Estate

Obviously, anyone can find facts to support their view, however my view is that THIS time, yes, New York is clearly lagging. This recession in particular strikes directly at the heart of Wall Street and the Manhattan economy.

While you rightly disagree with my prior comment, I take it that you agree this time we're in BIG trouble at the very least?

Sterling - agree, big trouble indeed. it's a foregone conclusion. Phoenix is down 50%, Miami and San Fran and LA about 40% each ---and all are still falling. Meanwhile, we in the Northeast are down about 10%! YES, I realize that we didn't have the sunbelt building boom those cities had, blah blah blah, but even the most provincial real estate neophyte or the most self-interested realt-whore could assert that New York is so "special and different" that we won't be down at least HALF as much as those cities. Even if we are down half as much as the cities hit the hardest, we still have another 10-15% down to go! I beleive it will be much more - i think we'll be down 75% or so of the leading cities on the list, and those cities haven't stopped falling! Phoniex and Vegas and Miami may be down 70% when it's all over; NYC may be down "only" 50%. That's still 5X the decline we've experienced to date.

So, I'll get to spend the next 12-18 months telling the bubble deniers "bend over -- here it comes again!"

You all are very informed. Obviously half of you are right and the other half wrong. If only I knew which was which!

I started another thread on condo auctions but would love to hear from the posters on this thread who have not posted on mine. When will they happen in Manhattan? Impact - will that be when we finally see the floor? Any thoughts?

Also, what do you think the bottom will be for apartments on the UWS? For a nice 2 or 3 bedroom: $500 psf, $700, $800?

Thank you for any thoughts you care to share.

Interesting piece by someone inside the financial world. I would usually post this in the economic links thread, but it seems very on point here (although it only addresses the economy portion, not NYC real estate).

http://1-2knockout.typepad.com/12_knockout/2009/05/im-scared-hold-me.html

This was posted today on a traders board. No one knows if it%u2019s %u2018true%u2019 but Turner Radio isn%u2019t a bit player. If it%u2019s only half true %u2026 %u201D The Turner Radio Network has obtained %u201Cstress test%u201D results for the top 19 Banks in the USA. The stress tests were conducted to determine how well, if at all, the top 19 banks in the USA could withstand further or future economic hardship. When the tests were completed, regulators within the Treasury and inside the Federal Reserve began bickering with each other as to whether or not the test results should be made public. That bickering continues to this very day. The Turner Radio Network has obtained the stress test results. They are very bad. The most salient points from the stress tests appear below. 1) Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent. 2) Of the 16 banks that are already technically insolvent, not even one can withstand any disruption of cash flow at all or any further deterioration in non-paying loans. 3) If any two of the 16 insolvent banks go under, they will totally wipe out all remaining FDIC insurance funding. 4) Of the top 19 banks in the nation, the top five (5) largest banks are under capitalized so dangerously, there is serious doubt about their ability to continue as ongoing businesses. 5) Five large U.S. banks have credit exposure related to their derivatives trading that exceeds their capital, with four in particular - JPMorgan Chase, Goldman Sachs, HSBC Bank America and Citibank - taking especially large risks. 6) Bank of America`s total credit exposure to derivatives was 179 percent of its risk-based capital; Citibank`s was 278 percent; JPMorgan Chase`s, 382 percent; and HSBC America`s, 550 percent. It gets even worse: Goldman Sachs began reporting as a commercial bank, revealing an alarming total credit exposure of 1,056 percent, or more than ten times its capital! 7) Not only are there serious questions about whether or not JPMorgan Chase, Goldman Sachs,Citibank, Wells Fargo, Sun Trust Bank, HSBC Bank USA, can continue in business, more than 1,800 regional and smaller institutions are at risk of failure despite government bailouts! The debt crisis is much greater than the government has reported. The FDIC`s %u201CProblem List%u201D of troubled banks includes 252 institutions with assets of $159 billion. 1,816 banks and thrifts are at risk of failure, with total assets of $4.67 trillion, compared to 1,568 institutions, with $2.32 trillion in total assets in prior quarter. Put bluntly, the entire US Banking System is in complete and total failure.%u201D%u201D

so that would mean that this is a crock of shit:

http://www.nytimes.com/2009/05/04/us/politics/04stress.html?hp

That Turner Radio website is probably full of horse shit. It is much more likely that the NY Times article is correct. There's probably gonna be a few banks with less than stellar report cards (the obama administration will make sure they look as good as they can). These banks will probably we sold off, but the rest of the banking industry will look pretty good and will rally. People should get a boost of confidence overall and the market should shoot up a few hundred more points, especially if friday's unemployment numbers don't look too bad.

On the other hand.....if all of these banks have such great balance sheets, how come nobody's lending?

interesting media situation...the times articles is pretty damn clear and obviously leaked by the administration. interesting to see them back pedal on this if necessary.

The IMF says banks still have trillions of $$ of losses in the pipelines. I'd guess each trillion is 10% lower from here in Manhattan RE...

That Turner report came out a week ago, if not 2.

Turner should be considered "media" only in the general sense that anyone with a blog is "media". As far as credibility he only has it with the aryan nation and anti-semitic conspiracy theorists. A leak implies that someone inside wanted to get this information to the public. Do you think they would give it to that guy?

"steveF, the market is not the economy.

what?? I have no response.....can you believe it?..:)"

I could have told you that a year ago.

Actually, I did.

Remember, this is the same SteveF who said the market was bouncing a YEAR AGO!

I guess he thinks if he said it often enough, someone will buy his condo before he goes bankrupt.

Stevejhx:

5) If you choose to include the "tax benefit," you need to include the fully levered opportunity cost of investing elsewhere, as well, and they tend to offset each other.

Thanks for this post. For a while I have heard you discussing the relative costs and benefits of renting v buying and have always been dismissive of the tax benefit. Quite frankly, I never fully understood why you would chose to ignore the tax benefit in various other posts. (My guess is that you are sick and tired of regurjitating all the details of your position in every post confronting the "bulls", and I can understand that.)

Still, I personally think for a buy or rent decision you need to account for all cash flows and know at what point you "break even". Now reading your extended post I see that your view and my view are not contradictory, given this expanded treatment of the tax benefit (my spreadsheet includes opportunity cost and appreciation assumptions as well as tax assumptions.

Thanks again for elaborating with this expanded post.