WSJ - From ordering Sreak and Lobster, to Serving It

And if anyone knows where I can get a tasty sreak, let me know! Hahhaahha

that sucks..i had a similar experience in the 2001-2002 bear market. except i dont have a wife and kids so not nearly as bad. I feel for him..thats a tough situation.

Hindsight 20/20 but 200k, 960k apt? And living for 2 years with negative cash flow?

I am not sure how many college dropouts were making $200k in NYC. Also, I don't care how many spreadsheets this guy made. A guy with a wife and 2 kids, who is making $200k a year, should not be buying a condo that gives him a mortgage of $768k. He made a lot of very bad mistakes and was in an unusual position of earning power for his education level, leaving him at risk in a downturn.

I don't think this exact situation is all that common in NYC. People in distress...yes. Numerous people in this guy's situation...not so much.

Waverly,
I work in finance as a broker. I see hundreds of financial situations. Many people are 6 months away from being out on the street. Not just my clients, but I've asked my coworkers as well. It's tough out there. MTV's cribs will be the death of us all.

Interesting and conflicting.
You know the American way, you got to take a chance, you have to go for it, fortune favors the brave!
Had Mr. Araya stayed in school he might have educated himself the realities of math and probability. He worked in the wise-guy hustle atmosphere of Wall Street where testastaron junkies made museles at each other as they flicked their cigar ashes on the the retirement hopes of at least one if not two generations. Now comes the medicine and it's not pretty. There is only really one way to view all stories of this ilk. In the words of R.S. Ingersol,

"In life their are neither rewards nor punishments, there are consequences"

table for two please.........

@Positivecarry - maybe while you're eating your stake you can trade him the vinegar dispenser for the oil one and say - Hey - just like the good old days - trading oil again! Ha!

> I am not sure how many college dropouts were making $200k in NYC

You'd be surprised. I knew 3-4 a few years ago. At some pretty standard jobs. LOTS in tech.

$200k before taxes...it's nuts to have a huge mortgage..

I am married with 1 kid, make close to 7 figure, and I would never spend $200 for a bottle of wine at our evening dinners.

Ezrenter,
This isn't a funny story. It's indicative of our nature to f it all up. This isn't going to turn out well for a lot of NY'ers....

Sure, everyone knows a few people without a college degree who made some big money for a couple of years, but that is not a significant piece of the NYC ownership landscape. Those people really are the exceptions to the rule. It is not surprising that they are struggling mightily in this enivronment. I also agree with you, p-c, that there are a number of families in bad spots. I just don;t think this particular example is proof of this being a common scenario.

Look, $200k is a lot for one person to earn without a college degree. Heck, I think $100k is a lot for somebody without a college degree to earn on a consistent basis. I am a recruiter and I can tell you that in every downturn these people get tossed to the curb and when you speak to them about their careers it happens every single downturn. They go for long stretches without work, then they consult, the market gets better and MAYBE they get lucky again and make what they were making before they were let go. It's one of the reasons I tell my brother to go back and get his degree. It may not mean much to some people, but this is the first group of people to get axed when things get ugly. If they didn't think it was going to happen sooner or later they were either naive or worse.

well said falcogold..... interesting and conflicting.... i feel for him b/c he has kids, OTOH $200K/yr => Cabos, $1MM Condo, 2 kids in NYC.... well... Suze Orman what's ur advice?

http://www.nytimes.com/2009/06/01/opinion/01krugman.html?_r=1&em

Krugster on American savings/consumption rate.... like my dad and mama showed me, work hard and live way below your means. I don't tell them about the 997T :) and I'm close to 40, hehehehehe (always the child), but they also think I should be saving 50% of my take home.....

Sounds very similar to Ericho75, no... only difference being battery vs. LIC?

I feel for this guy's family, such a hard situation.

I'm sure when he shopped around for mortgages, he got a lot of bad advice about how much he could afford. Big banks that are still in business today to the ones who are no longer around were offering to lend folks a lot of money. In my own experience, it was rather shocking the amount of money Chase was willing to lend to me.

The bit about the emergency fund sounds a bit murky and makes me wonder exactly how much they put away. They bought in 2005, saved for 5 years into an emergency fund, and now it is depleted?

Mr. and Mrs. Araya invested in a home and the worst case scenario is playing out before their eyes. It seems like refinancing their existing mortgage will not help them in the long-term, they'll have no discretionary income left over. You've got to be able to buy groceries, keep the lights on. I'm not even sure why they are even trying. Now seems like a good time to start tidying up the place and preparing for open houses.

why don't ya'all bail them out and bid for that apartment http://www.streeteasy.com/nyc/sale/410553-condo-30-west-street-battery-park-city-new-york

I'm not worried so much about people without degrees as I am people that traded mortgage bonds and now can't get another job. People with limited skills outside of a niche. Salesmen can always sell. Quant math geeks for example, that's another story.

Why are people telling these heartbreaking stories always making material omissions?

The property (on the market, BTW: http://www.streeteasy.com/nyc/sale/410553-condo-30-west-street-battery-park-city-new-york), according to ACRIS, has two mortgages on it: one for $754K and the other for $109K, totalling $863K. The apartment closed for $942.5K.

So much for the 20% down story. More like 8%.

In addition to the loan, the unit is saddled with monthlies of almost $2K thanks to a BPC ground lease.

I agree it's not a funny story, but this guy is reminiscent of the Edmund Andrews. I wish the media would profile somebody more sympathetic, who despite acting with the utmost of prudence (large downpayment, a mortage of no more than 2x annual income, regular savings) ended up in a bad predicament. But $200 bottles of wine and a mortgage of >4x annual income on a unit with a BPC ground lease are signs of extremely irrational exuberance.

there but for the grace of god we go...

And the lawyers that securitized the bonds. And the credit raters. And the tax advisors and the accountants...

Valldejuli - I have a family, too, so I do not like to hear from about people who may lose everything but there is no denying this couple used terrible judgement on several levels. My household brings in more than 200,000 but under 500,000. When we had our kids and did the math we moved uptown to 157th st. The truth was: we could not afford a downtown lifestyle in any comfortable way and refused to cram our children into a converted closet or take on a debt load that would collapse if one of us lost our job.

Reading this, it is a lot easier to take a few sneers about living in "Dominican land" than to possibly have my children rolling change to compensate for the irrational need to appear wealthy.

eliz181144, I am with you. The rent formulas used by landlords say I could live a a nice Lincoln Center doorman bldg or one of the new ones on sixth ave in Chelsea, but I chose to live in Harlem, and thus spend less than half what I could "afford" per the 40-50X income formulas for bigger places. Its possible some of the snarky folks on SE and Curbed who sh*t on Harlem, WH, LIC, Wburg etc are filthy rich...but its more likely that MOST of them are closer to the guy in this story, or are otherwise overextending themselves to live someplace they probably should not if economically rational.

eliz181144, the area where I live gets consistently bashed on this board, you know, whatever, at the end of the day it's my home, it works really well for me, it's not considered a prime area, it doesn't have river views, or is completely renovated, but I can afford it on less than a 6 figure salary and there are no trust funds here and I get to live, breathe, walk and ride through this beautiful city. The hell with the fact it is not a home for many who post here!

Some folks want to live large life, and the WSJ article is profiling such a family. I want to live a small life with my $35 bottles of delicious French champagne.

I'm not sure I'll ever understand people who endure the anxiety of massive debt and financial logistics just to say i live in: insert your neighborhood. When I opened this article I truly assumed I was going to read about some terrible X factor like the wife had cancer or they had to take in parent needing long term care. Def. give me the $35 dollar champagne and the "fringe" neighborhood until I am saved millions and my kids are safely on their way in life.

i live small also. but i don't think that's typical. and i don't think many people would write here about the terrible decisions they have made (except new development contracts, maybe).

the bottom line is that huge numbers of people assumed the good times would continue, they were assured the good times would continue, and they lived as though their incomes would catch up to their expenditures. lenders allowed people to stretch way too thin.

this guy was actually saving, although i'm not certain how. and as positivecarry points out, it's not just unemployment, it's that the jobs that are available for the vast majority of people will be a step down. those still employed will have lower bonuses, salaries, benefits will all be cut. no matter how unwise this guy was, or uneducated, he was making a decent living doing something he felt he did well and in an area he thought would have continued demand. he was wrong, but his assumptions at the time probably would have been upheld by the vast majority. no matter how you look at it, this is sad.

Sure, everyone knows a few people without a college degree who made some big money for a couple of years, but that is not a significant piece of the NYC ownership landscape. Those people really are the exceptions to the rule. It is not surprising that they are struggling mightily in this enivronment. I also agree with you, p-c, that there are a number of families in bad spots. I just don;t think this particular example is proof of this being a common scenario."

My point is that it is more common than you seem to thing. I don't know if anyone is going to have those stats, but I know a lot of tech guys that made over that for years. I also know smaller shop brokers who did the same (or more) for years as well.

And, of course... drumroll..

real estate!

A good sum of brokers out there without college.

And these are just the spaces I know about, I'm sure there are more.

Neither of us is going to have the stats, but I'm just saying there is a good bunch of it out there.

And, yes, the ones I've talked to recently, many are in that exact kind of pinch.

my brother-in-law is in his early 50's works on wall street for about 30 years, never went to college and has always been very successful...he used to tell me the best brokers were the ones that came from "the streets"

The larger point here is not the individual stories of people living beyond their means in the past...but that NYC prime area (rapidly enlarging) became a place that only the super rich or people living beyond their means could live. Flashfoward 3 years from now, and I envision it will again be a place where someone who makes $200,000 per year can live comfortably. Couple decreasing Wall Street jobs and salaries with a revamped lending system (from more stringent lenders to more fiscally responsible buyers), and housing prices come down to reasonable 6 or 7 years ago levels.

Pretty sure Jimmy Cayne never went to college.

nor did dave komansky

I'm not sure why everybody is so focused on his education level. Do you think that all the people who went to college were sage enough to avoid this predicament? Do you really think the "prices will always go up" bs didn't trap the highly educated into buying beyond their means? My experience tells me this story is fairly common, which is why PC posted it in the first place.

He was cutting very close to the edge at 200k gross (that's what, 11ish k net/month). 6200 monthly.

actually, i'd think that he'd not exceed a 25% total tax burden, unless self employed, at $200k. so $12,500ish. but yes he was stretched, although he managed to save money. he didn't have any room for error, but very few people had any concept of the magnitude of room they might have needed. it's not just that people are losing jobs, they aren't finding any real replacements. and wage deflation is truly here. 25% of Americans are one paycheck away from disaster. i don't think that our local population would necessarily track that figure that closely, but i doubt we divert from it as much as people think.

http://www.dailyfinance.com/2009/06/02/pay-freezes-and-pay-cuts-have-doubled-since-january/

10023...he also had a wife that didn't work, two children, etc. etc...i agree $200k was very close to the edge..it was the apartment that pushed him over the edge.

yeah suze orman's 3x month.. is out the door in this recession/depression.....

Prehaps we are being too kind. This jamoke got in way over his head and only an act of divinity would have ultimatly saved this sorry situation. He put his family at risk by not living beneith his means. Battery Park is a beautiful place to raise a family if you make enough money. As for the lobster and $200 bottles of wine, I simply hope that was included for dramatic licience. A family of 4 living on that kind of pre-tax income and those fixed expences...maybe Red Lobster on you birthday, that's as close as you get to the word lobster. This is the work of a selfish myopic indulgent 'boy-man' that failed to consider the potential consequences of his actions. Now multiply this flounder by some gigantic number and that should give you an idea of just how many flounder dead beats their are out there that put their desires ahead of their brains. It's not over. Don't feel too bad for the schlameil. His personal over indulgences along with all the other bobos on the ship of fools are going to cost you and me a bloody fortune! Think about that as you sip wine from a carton.

but Falco, until he lost his job, purportedly he was able to save. he wasn't slipping monthly behind. if you wish to vilify him, i think the vilification is going to have to spread far and wide.

and i haven't gone the way of the carton wine yet, just the south american reds.

i suspect the lobster and the wine is indeed a journalistic device. he couldn't have saved doing so, he probably mentioned a birthday meal or an important anniversary dinner and that got spun. but you're right, it's widespread, but don't just call them those who put their desires ahead of their brains. they were being american. and out current administration would like some more people to be american.

If he was indeed able to keep up - it was foolhardy to hold on to the unit once he lost his job. They closed in '07, and they should have put the unit on the market FSBO right away. Nuts to pay 6200 in BPC, 3br rentals could be had for that.

Good for him.

If his family wanted to live such a lifestyle, his wife should have been working at that construction shop before they bought the apartment.

10023, yes that is a very valid point. homeownership doesn't always, or even often, lead to rational thought.

How many people on here would tell their story to a WSJ reporter, knowing full well that all of your friends will read about your situation?

westsidehighway, jerkish. when they bought the apartment they were still net saving.

positivecarry, almost none. the ones who were closer to OK are generally totally stunned by their condition. the ones who lost due to the sudden illness that some were looking for may even be homeless at this point. those who are looking down into the abyss have concerns other than talking to reporters.

not regional, but a typical story.

http://www.nytimes.com/2009/06/03/business/03mortgage.html?_r=1&hp

who is to blame?

I assume there must have been additional bonus income. I don't think you can carry that kind of mortgage on 200K with two kids and save, unless you are living on sandwiches.

that lady from nytimes is another Hall of Shame.
Modest living? How the hell did she end up with 90k debt (principle HEL)?
She was living well beyond her mean when she saw her property value go up during the RE Boom.
She got what she deserved..stop bitching around.

"Few US Employers See Hiring Recovery in '09"

http://www.reuters.com/article/domesticNews/idUSTRE55154O20090602

U.S. employers and recruiters have largely given up expectations for an increase in hiring this year, and more are cutting starting salaries, according to a semi-annual survey by Dice Holdings Inc.

Dice's survey found 10 percent of employers expect a hiring recovery in the second half of this year, down from 33 percent who said so in November. Thirty-one percent said layoffs were likely over the next six months, down only slightly from 34 percent six months ago.

Carlos Araya used to order lobster, filet mignon and $200 bottles of red wine at the Palm Restaurant in midtown Manhattan.

Back when the investment banks were making more money, I would get wined and dined on a regular basis by them. As time went by, the head of the desk routinely didn't go, but would hand the Amex to the junior guys right out of school who would order Caymus, Pride, Colgin, etc and get rip roaring drunk.

Of course the last guy to show up at work the next day was required to buy his co-workers breakfast.

I've long since grown disgusted over the behavior...

As Riversider points out, it was likely not his money he was spending on $200 bottles of wine, so I wouldn't assume he was throwing his cash out the window (not at dinner anyway).

riversider, that was dense of me not to pick up on that. my husband has had and still has an enviable dining schedule (although relatively diminished these days). the places he gets to dine at make me sick with envy sometimes, although lawyers are a far tamer group than those you are depicting. even though those around him are not getting rip roaring drunk, he's tired of the scene. i'm still jealous.

Don't be. An expensive dinner with bad company is not a perk. Wears thin. And these $200 Californai fruit bombs are over-rated... and over-priced.

Funny thing is that I was in Luger's last week and these guys are still "going at it". You would have thought the market had recovred 100% of its losses.

The good times will be back sooner than all you idiots think.

It's UP UP and AWAY!!!

Really, the feeling I get from company dinners/"entertainment" is that a lot more extravagance goes on simply because the poor schmucks couldn't ever afford to do it on their own tab. Nothing to be jealous of.

boo, my husband actually has some pretty great clients, particularly in London. i wouldn't care to do it often, but he's been to Nobu London and I haven't. And he didn't suffer greatly as a result.

but you're right, for many it's a way to live the life, if only until midnight or so, when your taxi turns back into a pumpkin.

it gets old fast....

perhaps a cliche, but far more important is who you're with rather than where and what you're eating and drinking. having to be on all the time is not fun.

"when your taxi turns back into a pumpkin."

hahaha so true. But at least half of life has to be living. I say go to Nobu London and hang the expense for a night.

aboutready
about 13 months ago
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i live small also.

how many vacations have you taken this year?