Wall Street

carnegie, do we know each other?

Who knows. Have you experienced the same in your environment?

I thought you were talking about me

One of you may have to tip your hand a little bit more to see if you do, indeed, know each other.

Funny, because I have heard a few anecdotal stories myself. However, I think this is to be expected - those that profited during the boom, and didn't lose out (too much) during the past 24 months are begining to feel more comfortable. However:
1) It will take time for Wall Street bonuses to return to previous high levels. That doesn't mean one or two banks may not pay out very well - it means as a whole bonuses will be lower in 2009 then 2006 or 2007, and with more tied to stock
2) Most hedge funds - whose employees, (and service providers) account for a surprising amount of upper end new york real estate - will certainly be paying lower bonuses, based on the fact that most have yet to reach their high water mark.

All that said, I also think those in the position to buy, or upgrade will continue to be cautious. There is a lot of inventory, and a lot of would be inventory once properties really start selling.

Which one of the above would be you? Are you looking for $7+ apt? I thought you were more in the market for a classic 7/8/9?

I would guess that more than a few of the high level types have a lot more breathing room now since the stock prices of their employers have risen over the last few months. Many of them likely used shares as collateral to buy their second homes and were getting margin calls.

Certainly there is more optimism than in January. But I also wonder whether some of them have pulled Hamptons listings simply because nobody is buying (unlike NYC where there are buyers at some price).

the few buyers that are out there arent nearly close to the amount needed to stabilize manhattan re.

Buy now, or be priced out forever!

carn: I like the apts that at one point were actually >7, now simply aspirationally listed at those levels. Listing prices can't deter me.

My Wall Street friends are hardly feeling comfortable at the moment for what it's worth. The ones that have jobs don't seem ready to spend any kind of serious money and are just thankful to be employed.

stevejhx, your comment is pretty annoying. Does my post read that prices are going to shoot up? Why does every posting here have to result in a pissing match between bulls and bears?

carnegie go easy on stevejhx. he's a broker on bullish autopilot(are there any other types?). the dramatic fall in sales has hurt his income, badly. he's just posting the usual broker blandishments which are now falling on deaf ears.

Of course a 30% decline turns heads... Question is are there enough buyers at -30% to balance the sellers. Inventories suggests there are not. Also remember psychology...lower prices mean fewer buyers and more sellers, not vice versa. Its driven by fear and greed, not rational behavior.

cfranch, you apparently don't know me.

I agree that the dark cloud that was hanging over people's moods has started to clear. No one yet seems too optimistic about comp, but the fear of job loss seems to have diminished significantly in recent weeks. In terms of the Wall Street employment cycle, it feels as if we are about where we were in the 2nd or 3rd quarter of 2003, with the survivors having made it through multiple layoff rounds over 18 months+, the outlook for the business starting to look a bit better and confidence returning that while the improvement might be slow most of those currently employed will end up surviving. I have not yet seen the generally brighter mood translate into an increased appetite for real estate.

In my circle specifically, my example of a senior MD colleague is one who moved back to NY from overseas and chose to rent for now, despite owning in the Hamptons and previously having owned in the city. My younger colleagues are more in "how low can it go?" mode with an open mind to buying if prices become attractive enough, but no one feels that the window is going to snap shut on them. This is in a private equity firm where comp has been very stable. It is surprising to hear that the more junior crowd in banking, where comp and job security have been much worse, are looking to lever up to buy real estate. I'm not disputing it, just expressing my surprise.

Guys like stevejhx need to relax. We'll buy when we think it makes sense to buy and don't need your overeager broker babble

Non-sequitor: While considering a move to CT, I found a $5k rental in Rowayton that they are also willing to sell for $1.8mm. I guess no more logical up there.

Newbies Steve is a pretty big bear.

The answer to finance/history challenged baby bankers 'how low it can go' is - if interest rates move up to 8%-9% it can fall 65% peak to trough. That would be 50% down from here. When we are down 50%, they can say 'the worst it can do is fall 30%'.

Rhino86, I would be interested in that listing. We like the area for a summer house. $5K sounds appealing. Taxes are really high there so this sounds like a good deal. Could you please post listing? Thanks.

Steve ... broker? Nah
Recommend buying ...? Nah

You obviously don't know him.

This is where Steve stands, pretty clearly and convincingly:

http://www.streeteasy.com/nyc/talk/discussion/3410-real-estate-is-a-bad-investment
stevejhx
about 13 months ago
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No matter how you slice it, renting is ALWAYS financially more beneficial over time than owning.

Let's make some financial assumptions that are borne out by decades of empirical evidence:

1) Real property prices and rents increase at the rate of income, or 0.7% per year adjusted for inflation.

2) The S&P 500 increases at a real rate of 8.0% per annum.

These being true, it is ALWAYS better to rent property than to buy, if you invest the down payment in the S&P 500. Watch:

Say you make $100,000. This implies that you can spend up to $2,333.33 per month in total housing expenses (28%).

An 80/20, 30-year fixed $375,000 mortgage at 6% gives you monthly mortgage payments of $2,248.31.

Assume that taxes and common charges amount to a VERY CONSERVATIVE 10% of total mortgage payments, or $224.83 per month.

A $375,000 mortgage implies a purchase price of $468,750, and a down payment of $93,750.

If rented an apartment for the amount of the mortgage payment, you will have paid $903,455.33 in rent over 30 years if it increases 0.7% per year.

If you invest the down payment in the S&P 500 for 30 years, $943,374.08 at the end of 30 years, for a total net profit of
$39,918.75. To that, however, add your yearly maintenance and tax payments $2,697.96, increasing 0.7% per year and accruing 8.0% per year over 30 years, and you will have earned an additional $330,084.36, making your total profit $370,003.11.

Now do the same thing for your house. If your $468,750 home appreciates at a real annual rate of 0.7%, at the end of 30 years you will have a home worth $577,863.68, for a profit of $109,113.68. Add to that the original loan of $375,000 - the rest of the equity you will have built - and you get a gross profit of $484,113.68. But you would have paid $434,393.21 in interest, so your real profit is $49,720.47. In addition, you will have spent $90,343.15 in tax and maintenance, making your GRAND TOTAL PROFIT a whopping NEGATIVE $40,622.68.

That's right! You rent for the amount of your mortgage, all values go up linearly in line with historic data over time, and you will wind up with a total profit of $370,003.11. Whereas if you buy a home you will wind up with a loss of $40,622.68.

This of course excludes special assessments and all the transaction costs associated with owning real estate: brokers' fees, conveyance tax, etc. It also ignores the tax effect on dividends. But dividends and capital gains tax rates are currently the same (and can't be predicted in the future). The only further benefit from owning is the $250,000/$500,000 tax exemption. But it is doubtful that $410,625.79, which is the absolute value of the difference between the owner's loss and the renter's gain.

Guys, it's indisputable: renting is FAR better in the long-term than buying. All the figures and assumptions I used are real and verifiable. Do your own calculations: rent for the price of your mortgage payment, invest the down payment and maintenance and property taxes in the S&P 500 at the real rate of increase of 8.0%, increase your property value, rent, taxes and maintenance payments at the real rate of 0.7%, deduct the mortgage interest paid, and you will see IT IS ALWAYS MORE BENEFICIAL TO RENT.

Do your own calcs, or criticize the model. I'm waiting....

Steve, did you change careers on us...haha.

Carnegie: http://www.coldwellbankermoves.com/Property/PropertyDetails.aspx?PropertyID=1330030

Vwear, I am as big a bear as the next. However, your calcs are bullshit. If you buy a home at a low end price to rent multiple, you crush stocks. You can't generalize about stock market rates of returns. They are entry-point dependent. In the 1990s at a single digit price to rent real estate is a fantastic investment. Leverage and the lack of margin calls create returns impossible with stocks (at greater risk, mind you...but risk is a function of entry point as well..mitigated if low enough). Clearly stocks are better than Manhattan real estate right now... Clearly they were not in 1997-1999.

Hmmm. I don't feel the optimism at all. At a dinner party on Sunday night, the following people were present (not telling which one I am!): Private Wealth professional, corporate lawyer, FoF/ Family Office investor, HF strategist, PE professional, MBA candidate. Despite all being gainfully employed (MBA has an internship) ... no one was planning on doing anything but renting for another year or two. General consensus was that prices were still coming down and no one was expecting much of a bonus.

Buy cheap, period. Stocks are cheap under 15x trendline EPS... Real estate is cheap with a single digit price to gross rent... Very simplified.

Manhattan housing is like a basket of apples. You can wait until prices come down as the apples age, but what you will be left with are the ones you might not enjoy. If you don't need to consume a fresh and juicy apple, then wait....but be warned that the longer you wait, the greater the chance of you being stuck with something you don't like even if the price is right.

Live a little...

So he's not a broker, just sarcastic. I get it.

I presume the long calculation post was also sarcastic.

Anyway, starting to look to buy, probably within the next 6-9 months if I find what is good for me and my fiance. Some really good deals out there even though rents are going down. Anyone have any thoughts on areas that will be good deals? I'm seeing financial district, Chelsea, and Grammercy and Midtown West although that's not my preference.

Ericho, you promised to leave. You are a 20-something dope. Buying here is like buying SPX 1200 on the way down in 1999-2000.... You are locking in shit returns.

"Live a little..."

Sounds like it could have been a Countrywide add from 2005...

I don't care about return. I plan to live in this new place for a minimum of 10-15 years.
My carrying cost is equivalent to my rent.

Who says housing is at 1,200 in relations to SPX? YOU? LOL!!!
How do you know it's not SPX 666 back in March?

NO ONE KNOWS!
EVERYONE IS ASSUMING!

Sorry..back to work. I know there are tons of questions for me, but i'm a bit 'tied' up these days.

If you don't care about return, and want people to 'live a little' you don't belong on the board. The valuation of real estate in Manhattan remains historically high relative to rents (which are falling).

I like the YOU? in caps. Chances are I have more money, experience, and clearly more respect on this board than you.

AT 650, the S&P was trading at 11x normalized EPS, vs a historical average of 15x. At present Manhattan is probably in the high teens gross rent to value vs. a historical average around 12x. That's how I know. Read a fucking book once in a while.

Sorry, i already waited 4 years to buy and prices are exactly where i want it to be.
Not saying it's wrong to wait.....

Everyone's different. My shit can smell like roses to me but a rotten dead cat to you.

Everyone I know in that industry is still wearing 'adult' diapers to work.
I suspect you keep better more knowlegable company than myself.
The ressions over?
Horray!

"i'm a bit 'tied' up these days"

Are you into S&M?

I guess the difference is I am laying out why I am waiting... and you have no economic basis for buying. Happy to hear why this was your magic level.

"I like the YOU? in caps. Chances are I have more money, experience, and clearly more respect on this board than you. "

THIS IS HILARIOUS!!! And if you are so knowledgeable, did you short the housing market? Did you buy when SPX hit 666? Those numbers mean nothing. I can throw so much stuff at you, you won't even have time to google it.

And in regards to respect and money.....How do you know how much i have? Or what i do for a living? I must have some respect from you, if not then why are you constantly reading my post and replying to it? There's always someone with more money and respect than you...RHINO 'I HAVE IT ALL' 86.

Ericho, you're making progress in separating reality from your "reality":
"My shit can smell like roses to me" ... at least you realize that shit is shit.

Now transfer that understanding to Manhattan residential real estate, 2009 version.

"no economic basis for buying"

Sorry, unlike you i don't give financial advices to people. Over the past month, i have put up numerous indicators on why the economy is turning. Well, i was right as recent data have shown....

You? Still sucking on your mommy's nibbles and trying to understand what's happening.

Sorry, Ericho, I have a perverse need to try to educate you...or get you to put numbers around your idea of value. Predictions aside, when I call something attractive value, I have a basis. Clearly you don't, or you'd have shared it by now. You can throw your usual green shoots bullshit at me, but you have nothing to show real estate is yet cheap by any objective measure. Its surely as cheap as its been since the bubble began, but not sure that says much.

Rhino thinks he has any respect on this board? Compared to ericho? I know Rhino is delusional with his data but he really is delusional with everything.

Alanhart,
How it smell to you? Roses or dead cat?

Hey, maybe you can lean a bit closer...

...closer...

..

..

...

BOOYAH!

Others have backed up my data, neither of you have showed any. LICC, Alpine and Ericho, you are clearly the pinatas of this board.

What is happening is some people think this recession will end soon, and bottoms have been seen in stocks. They may be right or wrong. What this has to do with a condo in LICC is the delusion you two share.

"Sorry, Ericho, I have a perverse need to try to educate you...or get you to put numbers around your idea of value. Predictions aside, when I call something attractive value, I have a basis. Clearly you don't, or you'd have shared it by now. You can throw your usual green shoots bullshit at me, but you have nothing to show real estate is yet cheap by any objective measure. Its surely as cheap as its been since the bubble began, but not sure that says much."

Back and forth..
First it's S&P...then it's housing...no, it's S&P...then it's housing....no..it's the market..then it's NYC realestate..then it's S&P...then you get closer to take a sniff of my shit.

Lord...get a hold of yourself. Are you reading this? You sound retarded.

People have laughed at Rhino's data and his incorrect assumptions of historical real estate ratios. I proved him wrong with actual sourced rent and home price data and he can't handle it.

Yet again, what made your LICC shithole cheap? It matches falling rent after taxes? Ha. The quote up there makes perfect sense.

It's just nuts how the BEST economist in the world can't time tops and bottoms, but yet you bears here claim to have it all down to a science.

Here is your malfunction. Its not calling tops and bottoms to have a historical perspective on what is cheap and what is not cheap.

"Yet again, what made your LICC shithole cheap? It matches falling rent after taxes? Ha. The quote up there makes perfect sense."

Never said it was cheap.
Again, you don't understand how everyone values 'a dollar' differently. One man's trash is another man's treasure. Do you understand that?

Rhino...do you own a TV?

Please..DO YOU OWN A TV?

Now..DO YOU!!!!

"bottoms to have a historical perspective on what is cheap and what is not cheap. "

If that's the case, i'm assuming you miss the entire bull market from 1992 to 2007. On a historical perspective it got more and more expensive. Your argument is mute.

So you bought something you don't think is attractively valued? I don't get my opinions from CNBC. Clearly you are a parrot muppet who does.

Let me answer that for you.
Yes, you own a TV.

But why? You know full well it will be cheaper in 6 months!!! WHY? Explain...WHY DID YOU BUY THAT TV WHEN YOU KNOW IT'LL BE CHEAPER IN 6 MONTHS?????? WHYYYYYYYYYYYYYYYYYYYY!

I'm done with you now.

Of course you're done....but i'm not.

The point is, buying a home is a decision that should be made by the buyer. They should decide what's expensive and what's not. Who doesn't know prices will stay soft in NYC? It doesn't take a rocket scientist to figure that out. I myself have said that. The problem is, you are making the assumption that prices are SOOO expensive that no one should even take a sniff at it. You're also assuming that NO ONE can afford it, when the problem is that YOU CAN'T AFFORD IT. Sorry, but not everyone is in your shoes.

Okay...now, i'm done with you.

Rhino - my advice, don't waste your time responding to ericho. He's like the "finance/history challenged baby bankers" you referred to above. What can you do? Just ignore him; life's too short.

"It's nuts how the best economist in the world can't time tops and bottoms"...............uh he did. And his name is Shiller.

If you've got a net worth North of $40M and are planning on staying in the unit for a fairly indefinite amount of time (and if you're spending $7M, I think it's a lot easier to do that than at lower numbers. i.e. unless you're paying the REALLY high end for whatever type of unit you're talking about - like a $7M PH 1 BR - odds are you won't "need" to move, as opposed to maybe "wanting" a nicer apartment), we are at the point where you very well may be able to find a unit which has already dropped substantially enough in THAT price range, with a desperate seller, to get a good enough deal where the downside long term risk is sufficiently low enough that you don't have to be overly concerned with the potential "life damage" any more short term price decreases could inflict upon you.

Having enough money not to care that your purchase is a bad one isn't technically a reason to buy.

This is really funny:

LICComment: "People have laughed at Rhino's data and his incorrect assumptions of historical real estate ratios. I proved him wrong with actual sourced rent and home price data and he can't handle it."

One New York Times article discussing the early 2000's which LICC attributed to the 1980's (and didn't provide the link - I did), and the Miller Samuel data that have been revised so materially this year that it renders all prior reports from them meaningless.

steve, you are getting very weird. The article cited data from 1994-2000. The Miller Samuel reports showed the average and median prices in 1999 and 2000. Why do you insist on continuing to make a fool of yourself with these ridiculous comments of yours?

"Of course a 30% decline turns heads"

Reminds me of Sept '08...lots of otherwise smart ppl said "Lehman Bond are selling at 60?? They're a STEAL!!". That's because they had never seen Lehman bonds at 60.

More experienced sorts reminded them that every bond that ever went to zero, stopped at 60 along the way.

NYC real estate is 30% down? Yawn. Wake me when they're down 45%.

enricho, what's up with the tv crap---aren't you the asshole with the 52 inch set hanging out of his ass?

"i'm a bit 'tied' up these days"
I didn't get this, but it did make me think of a blog I like :
http://quotation-marks.blogspot.com/
(really sarcastic about negative statements)

"enricho, what's up with the tv crap---aren't you the asshole with the 52 inch set hanging out of his ass?"

what's the deal with the personal attacks?

ask ericho.

I'm going to suggest moving ericho, Rhino, LICComment, aboutready, columbiacounty and apline292 also move here http://www.streeteasy.com/nyc/talk/discussion/11716-all-fights-between-nyc10022-and-someone-else-should-just-be-here

Yes, LICC, "The article cited data from 1994-2000."

Here is the article:

http://www.nytimes.com/2000/11/10/nyregion/residential-real-estate-manhattan-rents-go-ever-upward.html?sec

And here's what it says:

"Two factors spurred the shift. ''First, we ran out of land in Manhattan,'' Ms. Packes said. ''Second, a tax incentive program was devised to revitalize the Wall Street area. This potent combination spread to the development of residential buildings in these nonresidential areas, like the Eighth Avenue Corridor and along 42nd Street; and it is about to be felt in the Penn Station area.''"

Yup. WE RAN OUT OF LAND IN MANHATTAN!

And double-yup, the Wall Street area is BURNING HOT right now.

And triple-yup, the Penn Station area is THE desirable place to live.

Get real.

And about Miller Samuel - look at all the reports from this year on inventory levels; they are up about 30% when they refer to prior inventory levels and you compare them to what was reported at the time, all with no explanation.

Completely unreliable. Jonathan Miller was taken to task for it in a thread last week.

In essence, your argument is comparing false median purchase prices to rental prices reported by an agency who thinks that Manhattan ran out of land.

No wonder you bought in Long Island City!