Quiet before the Storm

from my personal perspective: I had no idea of bulls v. bears before i started browsing and then posting here around 5-6 months ago. Roughly quoting AboutReady--my position is that I would like good, solid positiive ongoing economic news but unfortunately see no evidence of that. I have become convinced that the government is, if not lying, packaging economic info in a carefully measured attempt to bolster confidence for as long as possible.

I am at a loss as to why some posters here continue to protest (and with greater and greater vehemence recently) the clear indicators of severe price declines in manahattan real estate.

Buy now or be priced out forever!

falcogold1, I think you are right. The equity market rally off the lows have quited things down a bit. I am getting a bit anxious myself, as prices for well priced apartments seem to be getting snatched up at an all too optimistic pace. I think the skeleton in the closet is the recent run up in mortgage rates, and the risk to the market should that continue. I would imagine that the overwhelming majority of contract signed inventory is locked up with very rigid mortgage contingencies, where should factors change, the buyers could renegotiate or pull out.

The other concern is if the equity markets tank for some reason. I doubt we will see a return to the March lows anytime soon as the market is absorbing news, both good and bad, with an already baked in expectation. But I almost can't believe it, I mean here we are repaying back TARP already! I mean wasn't this supposed to be some sort of confidence measure? Are we really out of the woods. What should happen if jumbo prime, prime, credit cards, commercial mortgages, combined with double digit unemployment or inflation fears hit? I see a catalyst for some big downside on the financial sector, but I am not confident enough to get into the SKF's. Partly due to erosion.

Anyway I am off topic now...but the point is that after such market volatility, we should probably expect some more come August/September and should that be to the downside, brace for some more price reductions for single family homes in NY.

I think columbiacounty and ColumbiaCounty are too different people. Streeteasy - you gotta fix this.

as is the case with VV67thstreet and w67thstreet.

that is so f**** up.
Seriously, you guys take an identity and build it up and then someone manages to use technical trickery to steal it. Blogger fraud?

Seriously, this is probably why there is a lot less informative and good blogging recently.

Closed listings have been very slow to appear. Soon we should have significantly more info to dissect.

"I had no idea of bulls v. bears before i started browsing and then posting here around 5-6 months ago."

That's the thing - it's largely a construct of these online real estate message boards - it's a bit ridiculous to whittle people's thoughts/opinions/insights to "bear" or "bull." It's something that rarely happens in normal discourse, but runs rampant here, for whatever reason.

And as soon as the closed listings come in, I suspect with the info we'll start to see some sunlight in the marketplace. Overnight, and especially based on the recent tone of streeteasy, I have seriously been thinking about that this might be a good time to have some serious looks and potentially buy before year-end. We will likely not be renewing our lease.
I know this might disappoint some of my friends, VV67thstreet and ColumbiaCounty will still be with me, and the rest of you can piss off.

I've been using this site since January 2008 and, like some others, have been struck by the decline in the quality of the discussions. I don't know whether this has to do with the market "holding pattern" some have alluded to, or the growth in SE participation since the article of a couple of months back in the Times, but I've come to the conclusion that the current state of this site is a case of rapidly decreasing marginal returns. I get a lot more out of more closely monitored sites like baseline scenario, housing crash, calculated risk and naked capitalism. I'm outta here.

aboutready...i just noticed someone is trying to fool us with abotready...this is becoming annoying and a bore.

AR: In addition to the aggregate quarterly data, you will start to have more and more individual anecdotes (as are starting to appear on the comps threads) where people are realizing actual losses of over half a million dollars in a couple of years of ownership. The combination of down aggregate data with harrowing stories of personal losses will be pretty tough to spin into a positive outlook.

Question: How do people think the real estate complex will try to spin the Q2 data to make it positive? What headline will the Times run in July when the data comes out?

The level of panic and desperation is sad.

Carol, learn to speak English correctly before you post.

tell us...what is going on out there?

See what I mean?

I'll throw in the wildcard for NY RE that I have for the past 10 years: you never know what's going to happen if we see big WS bonuses at the end of the year (NB the IF). This would be the second year of big bonuses in the face of other bad economic news which would probably be enough for those actually getting big bonuses anyway to start going out and overspending on RE again. i think the reason we didn't se it this year is a combination of the people getting them wondering if it's the last one they will ever get and the fear of some back lash about big spending when everyone else is relatively starving. But if it's 2 years in a row, most of those guys who I know won't be able to keep it in their pants (their wallets, that is, or their metaphorical *icks)

interesting.

We're seeing a little of that. It's hard to sit on a few million bucks and rent. Rental stock is relatively crappy in prime UWS as well.

AR: you've got mail. I am stunned.

What? AR, you can't be a buyer. Nope, can't wrap my head around that. Leave the worries of having a chunk of equity stuck in RE to me, so I can fret about it.

Phew, AR! I just realized that you have a clone too.

10023, you know me. i like to fret about maybe doing it, but won't. until and unless it's so compelling i do, and i'm a cheap one, so that would be ok for me, but if they grant RS status to this aprartment until 2017 i may buy but not in NYC. how GLORIOUSLY convoluted was that?

vacation can't come soon enough.

we were typing at the same time. yes, someone felt the need to send me bullish.

I'm just waiting for my impostor. Maybe I don't warrant one because I don't piss enough people off? Honestly, I think this is all Alpine/Der Furher's doing. The caricatures are pretty accurate in all cases so far. Streeteasy Gods, if you're listening, I wouldn't mind if you ban Alpine and all of his multiple personalities.

I want an impostor too. Come on, someone impersonate me. Come on nyc10022, you know you want to steal my identity.

it's not me evnyc. Seriosuly, if i was going to impersonate someone, it would be nyc10022. aboutready, w67thstreet and malthus are not worth my time.

Alpine - you suck.

you suck too

very snappy come back...how about "you suck more?"

FACT: you can't post anything about alpine without getting a response from him/her/it within 10 minutes.

ya know how when you were a kid and you had a lot of friends (not you alpine, but use your imagination) and there was one kid who you knew who you eventually realized thought of YOU as his best friend (maybe his only friend) but you felt kinda weird and sad because he was just some other kid to you? that is how i think the relationship is between SE and alpine

Dead on, Sniper. And the impersonations have that quality to them as well, which is why I stand by my assertion until proven otherwise.

SE, is there some way to track the IP addresses of posters?

got you! I'm responding to you sniper and it's been 25 minutes since your last post! RULE #1: NEVER PREDICT ALPINE'S NEXT MOVE.

Rule number one: The costumer is always right
Rule number two: In the event that the costumer is wrong, see rule number one

falco: I think you have it right, we are in the eye of the storm. I think the summer will only make it worse, very little of interest to blog about. My rants have died down considerably. I bet I log on about 20% as often as last fall and winter. Additionally, i am shutting my brain down for the summer, its just getting boring, hopefully spend more time with wifey and the kids. Have a nice summer all, I hope to come back tan, rested, and ready. Ready to fight with anyway.

> That's the thing - it's largely a construct of these online real estate message boards - it's a bit
> ridiculous to whittle people's thoughts/opinions/insights to "bear" or "bull." It's something that
> rarely happens in normal discourse, but runs rampant here, for whatever reason.

If you think this only happens here, its time to step out into the actual world. This is life, this is everywhere.

You don't think whittling folks down to one term exists off here? Seriously, go outside. This is what humans do.

"Liberal", "Right Wing", "Minority", pick your word.

"If you think this only happens here, its time to step out into the actual world. This is life, this is everywhere.
You don't think whittling folks down to one term exists off here? Seriously, go outside. This is what humans do.
"Liberal", "Right Wing", "Minority", pick your word."

You just have to jump on anything I say, right? Of course this general phenomenon happens with other things (and that doesn't make them any less wrong), but the whole "bull or bear" extreme around real estate is a phenomenon primarily on these online boards.

bjw, as a long-time (since 2004) real estate bear, i can tell you that there wasn't a bull/bear divide primarily because bears didn't say anything. we were hibernating in a 95% bull world. as things adjust, more bears came out of the den, and the debate became much more vocal.

we are generally an optimistic people. and it's difficult as a bear, if you have an ounce of kindness, to mention your opinions regarding future price trends in a group of people where the odds are highly likely that at least a few have bought in the last two years. i'm not certain why i should feel such restraint, as people routinely told me i'd be priced out before, but i think it's different to tell someone who may be in financial difficulty that they were stupid, rather than telling someone who is cautious that they are being cowardly.

you were a bear since 2004? Wow, talk about being way too early to the party. I'm surpised to see you admit that you were wrong about real estate for 3 years in a row (05, 06, 07).

Eh? this isn't a stock trade you swap in and out of.

aboutready, I hear you. Part of my problem is, I don't even understand these terms or at least how useful they really are. For example, when I first started looking at listings, attending open houses, etc., I thought nearly everything was way overpriced. If interested, I'd make an offer - often way below ask, which upset a few brokers, but I politely reminded them this was business. Eventually, this approach worked. Would you call me a bull simply because I bought? Or a bear because I don't see any real appreciation in the vast majority of most property values in the near term? And doesn't your view naturally shift over time, as prices move? That's my real issue here - several people seem intent on setting themselves and others firmly in one camp versus the other. What's the benefit other than making it easier or more "acceptable" to go after someone? I'm amazed at the number of people who feel qualified to judge others' decisions (in either camp) based on anonymity and next to no real information. Such is the internet.

yes, the anonymity can engender some bad behavior, beyond mere sport. and it's not black and white, there are plenty of shades of grey. i will readily acknowledge that my particular bearishness is based on factors that may not be shared by others, a long-time involvement in the market, a huge level of cheapness, and the likelihood that we are only now able to buy our long-term apartment and we only have a 15 or so year hold period.

to me being a real estate bear is simply the belief that price appreciation was caused by something other than real asset value increase. withdraw that support, which has been partially done but the administration is still propping up property values, which is kind of a scary thought actually, and the correction will most likely overshoot. not guaranteed to, mind you, but would be surprising if it didn't.

alpine, unlike you i sold my property quickly and for a profit. i've paid far less to rent the last few years. and i'm flexible and lucky enough to be able to buy when and if circumstances change so that seems like the better option. i'm quite glad i didn't buy again in 2004, as i wouldn't have been able to afford something that i would have wanted to keep long term. if i had been able to do so, i still would have been a bear on real estate, and felt there was a bubble, but i might have gone ahead and bought.

bjw,
I'm a bear today but, I'm shopping hard for an apartment. It's my mind set. In fact if I see something I like and it's not priced to fly off the shelf I'll present it here so my SE buds can talk some sence into me. I promise you this has happened more than once. The bear thing really relates to the direction of the RE market as opposed to a behavior plan. What ever I buy will have to be priced extreamly well and there best be a little desperation on the side of the seller inorder to get that super-duper deal that will withstand further RE declines.
AR has advised me on more than one occassion that I should be out there searching for pressured sellers. I could not agree more. How do you know if the seller is pressured? I don't know the answer to this but, it will be uncovered during the bidding process. I am not a low baller. I wont bid on an apartment that I would not follow through and buy (assuming I get my price). I really like to make low realistic bids. That's a bid not so disparate from the ask that only someone trying to raise ransome money would jump at. I also don't want to be the one to educate a seller to the low value of their property. I'd rather someone else do it and I show up next to confirm the 'low' price. Oh, If only I lived in that beautiful fantacy world.

"You just have to jump on anything I say, right? Of course this general phenomenon happens with other things (and that doesn't make them any less wrong), but the whole "bull or bear" extreme around real estate is a phenomenon primarily on these online boards."

I "jump on" anything that isn't well thought out.

And the reason its confined somewhat to boards is, folks don't talk a tremendous amount of RE anywhere else. We don't watch RE debates on TV. Even articles talk about specifics - this market, this house - not perceptions and beliefs.

The majority of RE talk out there comes from brokers and shows on flipping. Problems is there is no honest debate out there.

So, it goes to places like this.

And, not saying it makes it right, but this is human nature, and this is where you get folks talking with feeling... as opposed to just pitches you get everywhere else.

So, places like this were one of the few outlets for bears for some time.

And thank the F god for it, even if it only helped one person not buy into the NAR lies...

"bjw, as a long-time (since 2004) real estate bear, i can tell you that there wasn't a bull/bear divide primarily because bears didn't say anything. we were hibernating in a 95% bull world. as things adjust, more bears came out of the den, and the debate became much more vocal.

we are generally an optimistic people. and it's difficult as a bear, if you have an ounce of kindness, to mention your opinions regarding future price trends in a group of people where the odds are highly likely that at least a few have bought in the last two years. i'm not certain why i should feel such restraint, as people routinely told me i'd be priced out before, but i think it's different to tell someone who may be in financial difficulty that they were stupid, rather than telling someone who is cautious that they are being cowardly."

AR -

VER well said.

sorry, VERY well said.

aboutready... absofureakinglutely..... you don't know How many times I've had to bite my tongue.... and when I didn't, it was like Peter Schiff getting drowned out by that Wonder Years guy turned ALL KNOWING ECONOMIST! Dipshit.... oh... I gotta clean up my language... dippoop!

"AR has advised me on more than one occassion that I should be out there searching for pressured sellers. I could not agree more. How do you know if the seller is pressured? I don't know the answer to this but, it will be uncovered during the bidding process. I am not a low baller. I wont bid on an apartment that I would not follow through and buy (assuming I get my price). I really like to make low realistic bids."

falco, agree 100%. In my experience, that's the way to do it. I've said it before, but I'm amazed by the number of people who claim they will buy when the price is right, yet do next to nothing to educate themselves in the meantime, sort of expecting deals to eventually fall in their lap. Sure, you might get lucky, but you're definitely not improving your odds by not going out to open houses and seeing things for yourself.

"to me being a real estate bear is simply the belief that price appreciation was caused by something other than real asset value increase."

aboutready, that's something I certainly agree with. And it's obviously still true for most places on the market. But my interpretation of what it means to be bearish or bullish is based on whatever your near-term outlook for values is. And that can change; hence, my issue with applying such hard labels.

I have to agree with bjw2103 - How can people expect to buy when they don't keep looking at things / researching? Even with sidelining, I think you need to keep your eyes open.

also agree with lr10021 - in that I would think (hope) that most deals currently leading up to closing have very good mortgage contingencies in their contracts.

With the neighborhoods we're looking in I have noticed many new properties being listed, and also many properties that were taken off the market sometime late last summer or fall that are back on the market.

As for sellers who need to sell... I think the advent of internet listings that show the date of a new listing to be most helpful. If the price hasn't changed in 200 days and it's still there... makes me wonder I admit.

AR - I'll put my optimism against yours any day ; )

I'm in the camp that believes there is never a perfect time to buy. My scenario is of a collective agreement among experts (that's all you bears) that a bottomish period is upon us only to be mixed with wild interest rate spikes, freer lending, economy looking positive, lurking armageddon in 2012, endless condo development litigation, and whatever else we can dream up that might or might not impact prices. It used to be that you just bought a house you could afford and got busy with more important things. The endless analysis reminds me of a batter watching that perfect pitch, following it all the way into the catchers mitt like he was waiting for the ball the scream out "PLEASE HIT ME.... NOW!"

Don't feel sorry for the people who bought at the peak unless they need to lock in their losses by selling. Do they grumble that they paid too much, hell ya, but to most life has not changed. They probably even got a mortgage they wouldn't have gotten had they waited. The ones who have to sell at a big loss deserve our compassion and not ridicule, so good on ya bears who are able to draw the line.

how do you feel about the people who have bought in the last three months and in the next 6-9? more specifically, do you want to pick up any portion of their potential losses?

cc, I don't disagree, just wish I had more confidence in my crystal ball.

> It used to be that you just bought a house you could afford and got busy with more important things

True... but thats before the RE bubble when prices got out of whack... and when only people who could afford mortgages could get them... and before houses started being called "investements".

When prices were in line, yes, set it and forget it. If it goes up or goes down, it didn't matter.

But when housing prices went up by MULTIPLES and incomes didn't, suddenly its a much bigger purchase to most people. Way too much income got tied up in these things, and they were loaded time bombs to many folks.

The set it and forget it era ended. Even if its what you wanted, the market changed that reality.

agreed. you bought with the assumption that if and when you wanted/needed to sell, that you could get roughly what you put in...almost like a 4% passbook savings account. very steady, very conservative, very boring. now the reality is that you could easily lose 5-10 yrs of disposable income.

hey, whaddya know? all that talk about miserable, bickering, nonsense postings lately and then this gem slips by the bouncer. could we have hit a bottom in the low quality posting? some great discussion going on here. these last 10 to 20 posts have been the great quality insight and opinion that i came to this party for.

You mean unrealized losses don't you cc?

"agreed. you bought with the assumption that if and when you wanted/needed to sell, that you could get roughly what you put in...almost like a 4% passbook savings account. very steady, very conservative, very boring. now the reality is that you could easily lose 5-10 yrs of disposable income."

Right, and the up and down swings themselves (even if they net out ok) make the investment from a portfolio view worth less. You need to be rewarded for higher risk with higher returns...

spinnaker1, great points. Because so many factors are involved, many of them personal, there's never really a "perfect" time to buy. I do think you can read the general direction of the market and make an educated guess as to how things will turn out, and that's a perfectly sound way to go. But if you're serious about buying, yeah, you have to be out there looking and learning as much as your time permits. As with anything, preparation leads to success. That alone will weed out the "real estate is a great and easy investment" mentality that so many seem to have bought into the past few years. I'm curious as to the average search time for the flippers out there.

so, what will it take for sellers to think about their homes the way a lot of them had to adjust to their stock portfolios? at some point people realized "okay, GE (or any stock) was $40 but now it is $12, they cut the dividend and it probably won't be $40 again for quite a while."

why is it so much more difficult for people to apply that possibility to their house that was worth $1M at peak and really could be headed to a value of $650K and not be coming back for a long time?

1. because they already took it in the shorts on their stock portfolio.
2. because we have all been busy convincing each other (particularly in nyc) that real estate was safe. i.e. yep...i lost my ass in the market but i always have my apartment to fall back on---not that i will or want to...but its always there.

you can't live in a stock...
The emotional attachment and feelings of value are far different when it comes to the tangible.
What does it take you ask? 'Time'
The RE market is a glacier. It moves a little, melts a little hard to tell what it's doing most of the time. Think about it. Want to sell a stock? Click, click, click...all done. Want to sell a house...call the sign painter and order a 'for sale' sign for the front yard then...get my meaning? So the answer is time, which is always poorly prescieved by the one waiting.

> there's never really a "perfect" time to buy

True... but that doesn't make the converse true. There are often some perfect times not to buy.... like September 2008.

Also, to paraphrase Obama - don't let perfection become the enemy of the good.

You may not be able to time things perfectly, but that doesn't mean one shouldn't apply intelligence, research, and logic to picking BETTER times to buy.

Odds are, few will get it perfect. But ignoring that there are better and worse times is a horrible conclusion to make from that.

yes, maybe i was thinking a little too simplistically

"there's never really a "perfect" time to buy."

the other way to think about it is that when it is the perfect time to buy, you will never know it until you look back in retrospect. and usually, the perfect time to buy feels like the worst time to buy. but the way to tell nyc has more to come is that there simply has not been that capitulation yet and the fundamentals continue to deteriorate

"why is it so much more difficult for people to apply that possibility to their house that was worth $1M at peak and really could be headed to a value of $650K and not be coming back for a long time?"

Falco had some good thoughts on this.

I'll add....

Stocks, we've all heard about crashes, and you get debate on both side.

RE, these folks have been hearing "it only goes up" (which was actually true on a national level) for SO long and "its an investment" for SO long, and basically illogical advice from suspect sources like sales people and flip shows.

People have been given poor information on housing, and the information got backed up by bubble pricing.

There simply hasn't been honest debate out there. There is no CNBC of real estate, only infomercials.

Its tough to go against everything you've been told.

10022, very well put.

I think this has been discussed a few months ago -- but I definitely remember their being somewhat of a perceptual shift in RE ownership mindset beginning around 1999. It might be helpful to remember some of these events as you think about people that bought/didn't buy in the boom. I think of three key points in the last 10 years of so that put in place the basis for this current mania that's winding down.

In the late-90s, we were at the tail end of a boom that had caused a lot of people a lot of stress. There were a lot of dot-commers that were struggling for "work/life" balance. Do you remember Faith Popcorn going on and on about Cocooning? People were going to spend more time at home -- and they wanted to cook and do "chores". Martha Stewart's IPO came out in the mid-30s. This was a trend. So, we had the first leg of the RE ownership mania in place: spending more time at home.

Then, we took the dive in the Nasdaq in 1999. We had a lot of people lose a lot of wealth in the market around then -- both from their options as well as putting their nest egg in the "market". I remember a lot of talk about shifting your investing strategy from stocks -- "which you can't pick" -- to real estate. I know of one CEO that took his IPO proceeds and had the "sense" to put them in real estate and other CEOs that kept their money in the market. This was the second leg of real estate mania: real estate is a safe investment. This is when these phrases entered the vernacular: "You can't lose on real estate the way you can on stocks." "At least you can live in your real estate -- unlike your YHOO."

Then, and I'm sorry to bring this up but, we had 9/11. Do you remember the stories at the time about people quitting their jobs and moving to the Hamptons? Or about people who didn't want to spend all their time commuting and never see their kids? And I think what sparked it more than anything else was how quickly the housing market rebounded after that brief dip post-9/11. I'd consider this the third leg in the RE mania that gave this bubble some real legs: real estate is even disaster-proof.

And from there, we had a very friendly monetary environment that just fed off this secular demand -- and here we are.

10022 - I doubt people with enough cash and income to play in this market are going into it from a point of ignorance. At the end of the day, if you can afford it and compelling personal factors outweigh risk, then you just do it. Don't misinterpret people making a choice to buy as being ignorant of the market conditions and direction. There are still many people out there thinking they can outsmart everyone else because from a distance everyone looks misinformed for buying now. Its not a you lose, I win argument.

skinny, yes it was a very multi-layered thing.

spin, i think you underestimate the psychology. many people pull the trigger for horrendous reasons, most are not so savvy. but you're right, it's not as simple as a you lose, i win argument.

winners and losers, which one will i be today?

interesting inventory bump today. haven't looked deeper yet, but 300 in 2 days on a Friday is unusual. particularly as it was at about 170 for two days this morning. and the total listings also increased by a couple of hundred on SE.

here's a quote from NYT article on retailing:

"Economists and analysts forecast that it will take up to 10 years to return to 2007 levels of consumer spending — which makes now a good time for retailers to re-imagine the future."

and owners of real estate.

AR - are you quoting social distortion?

Yes, couldn't help myself. Was my favorite song for awhile.

skinny, very well put. I was part of a development group in the process of building a new condo in Chelsea on 9/11. I was pretty sure my keester was cooked. But when the building was completed a year or so later, it sold out. I couldn't believe it-I still can't believe it. Yes, it appeared re was bomb-proof and I agree this gave the market more legs (with a huge assist from moron Greenspan).

And I agree with comment that whether bull or bear, you have to be out in the market looking to understand the market, its delta and to find a good long term deal.

Skinny, thanks for the analysis, that was really helpful. I was in my late teens in the late nineties and for all of my adult life, have absorbed the lesson: invest in stocks, starting early, and start saving to buy a home as soon as you can. Sometimes I wish I had stuffed my money into a mattress instead. The one couple I knew who bought a home during those years is now - you guessed it - so far underwater that they'll either be locked in for the next decade or contributing to jingle mail if they need to move for any reason. For people my age, it's a head spin to try and adjust to this.

great song

You may recall back to last fall, when then Secretary of the Treasury Hank Paulsen got Congress to pass his $800 billion TARP (Troubled Asset Recovery Program) proposal, almost overnight. The idea was this: Banks have huge volumes of mortgage-backed securities in their portfolios. These securities are CDOs (collateralized debt obligations), CDOs-squared (CDOs of CDOs), CDSs (credit default swaps), and numerous other highly leveraged structured securities designed by brilliant financial engineers just a few years ago. These securities are now being called "toxic assets" or "toxic waste," because they're worth a lot less than thought. There's no market for these securities any more, and when forced to sell via a "fire sale," banks are getting 20 or 30 cents on the dollar. If banks are forced by "mark to market" rules to mark down the values of these assets to 20-30 cents on the dollar, then many banks immediately become essentially bankrupt, for all practical purposes. So the TARP program was supposed to purchase the toxic assets at something like 60-80 cents on the dollar, so that banks can get them off their balance sheets, and still survive. Paulsen got his $800 billion, but unfortunately he never got around to buying up all those toxic waste securities. For some strange reason, he just never got around to it. I guess he must have spending too much time working out at the gym, or something. Anyway, early in February, President Obama gave a press conference at which he announced that the shiny, brand new Secretary of the Treasury, Timothy Geithner, would announce the details for how the banks would be saved. The next day came and and Geithner gave his own press conference but, for some strange reason, he provided absolutely no details whatsoever. I guess he must have spending too much time celebrating the inauguration, or something. I've said repeatedly what the problem is. The problem is that there are many tens of trillions of dollars worth (nominal value) of this toxic waste, perhaps over a hundred trillion, and there isn't enough money in the world the buy them all. That's the ice water reality that keeps striking these government officials. People keep saying, "Why doesn't the government just buy these things up?" Or, "Why doesn't the government just nationalize the banks?" Or, "Why don't we just let these banks fail, and the market will dispose of the toxic waste?" The problem is that none of these "solutions" has any chance of working. When you're talking about many tens of trillions of dollars of toxic waste, there's literally no way to deal with it, without massive and widespread homelessness, bankruptcies, poverty, and starvation. The dot-com, real estate, credit and stock market bubbles took almost 15 years to grow. By using leverage, and leverage on leverage, and leverage on leverage on leverage, there are now well over $1 quadrillion worth of structured securities in the world. All those bubbles have to deflate before things can return to normal. And it can't be done overnight. If it took almost 15 years for the bubbles to expand, then it will take a similar period of time for the bubbles to deflate. This crisis has barely begun. So finally, Tim Geithner had to do SOMETHING. The investors were demanding it. The Congress was demanding it. The public was demanding it. The President was demanding it. So he came up with a "public-private partnership" that tries to use allow the market to dissolve the toxic waste. The Treasury won't buy the toxic waste from banks, as it would have with the TARP plan. Instead, a bank can sell the toxic waste to certain third party investors, and the Treasury will put up 86% of the purchase price. The purchaser need put up only 14% of the purchase price, providing 6 to 1 leverage. But by another arrangement, the FDIC will put up half of the remaining price. So the investors only puts up 93% of the purchase price, providing 13 to 1 leverage. It wouldn't be a straight sale. Instead, several of these investors would bid on the toxic waste at an auction. That way (it is hoped), a realistic market value for the toxic assets will be established. If the value of the toxic waste assets goes up, then the investors will make money. If the value goes down, then the investors lose less than they would have otherwise. This doesn't solve the size problem in any way that I can see. There are still many tens of trillions of dollars worth of these things, and now the US government only has to pay 93% instead of 100%. That isn't going to make any difference. Until we work off this toxic waste and bring back real jobs instead of Ponzi scheme financial engineering we will remain in this phony economy for at least n10 more year and real estate will tank much further especially with all the rising property taxes, water bills and wait when interest rates spike up to 7,8,9 and 10 % coming soon.

great album - top to bottom (and no one does better covers of "ring of fire" and "under my thumb")

CDS arent mbs by definition..they can be used to hedge MBS, but they arent an actual "toxic asset". a cds has contract has 2 sides..a winner and a loser. CDS are a legitimate trading product which are here to stay. Its some of the people that use CDS that dont know what they are doing. ie AIG.

the album's title also seems appropriate here, "Somewhere between Heaven and Hell"

evnyc, it's not just people in your age group. i've always been taught to buy, and i've owned most of my adult life. it's been a tough adjustment for me.

EV: yes, I feel that your gen. got shafted a little as you didn't get to see a bust before the boom. I remember the '87 crash & the fallout clearly - had a global impact on property. It made me cynical the 2nd time around in my 20s with the dot com boom and the spike in prop. values. As a young adult in my early 20s, prop. prices were still depressed and people weren't exactly jumping in to buy.

McHale,
If I understand you corectly you are suggesting that we convert all liquid assets to rice and beans and moore them off shore and prepare ourselves for the great barter economy. Just a little joke. What can U say, you speak the truth. We as a contry have been engaged in wishing it away. We wished it away with a new President and we are wishing it away with spectacular government spending which carries with unimaginable unintended consequences. The ones I can imagine are horrendous. The RE bottom is far away. Do we get there quick or slow?

but the game's not over...patience. as many have noted, it may be possible for the first time in years to find reasonable housing in nyc. not yet, i know...but its still real early in the process.

Best place to hide out now (not saying one exists) if you have substantial savings:
1) Good social cohesion
2) Self-sufficient in food & H20
3) Good gov't or cheap healthcare
4) Well-defended borders

10023 - Canada sounds pretty close. It basically has 1 through 3 and the borders are oceans on three sides and a southern border that is not defensible but faces a well defended friendly superpower that(so far) limits its military adventurism to overseas dictatorships and failed states, not to neighboring democracies. Australia another candidate.

McHale: I follow your arguments and agree with what you have to say, but I am a little skeptical over one point in particular: How do you know there are 10's of trillions of dollars in toxic assets out there? Where are you getting these numbers? I had thought, via the media, that it was something like 1-2 trillion dollars. Am I wrong?

ok...he clearly exaggerated. but...lets cut to the chase---what has been done in the last 6 months to actually address this problem?

it has gone away. i am not certain but i am pretty sure that when you ignore a problem it goes away!
can anyone verify this for me?

damn...i forgot about that. of course. buy, hey---the question is moot or mute? (p.s. that was a great clip.)

Sideline: exactly. Aus. has environmental issues, but great mineral wealth and of course, superb natural defenses.
I suppose that hundreds of thousands of people from PNG and surrounding isles could raft over and get in unnoticed on the vast northern shoreline...

EV: if you're interested in the LT/PT neck of the woods, then I would think a Lincoln Tower 2br with dining alcove (available in all LT buildings) is interchangeable and maybe even more desirable than 315W70. Mtce is a touch lower and sometimes (always?) includes electric. Price points are getting close to the ask at 315 as well.

EV, there have only been 20 recorded sales in BH in the last 60 days. that's a small, tight market. have patience.

Thanks again to everyone for the tips. I'll put LT on my watch list.

AR, thanks, it is a comfort. I still have my doubts about that particular market, but I don't have to have Brooklyn Heights (actually, I have a lot of trouble getting my S.O. to consider Brooklyn - it makes him seriously grumpy). I think maybe I'm just stressing myself out too much fretting over the divide between my actual resources and prices. On a side note, my S.O. wears a Social D. t-shirt from that album to the gym all the time. It's full of holes but he just can't let go! Great album.

It's good to know that it's not just my generation that got hit with this mess.

my hubby can't get rid of a single ratty t-shirt. he's gifted a couple to the daughter, who now walks around sporting some early Green Day, Sonic Youth and Elvis Costello t-shirts, as well as a great Hendrix one he stole from his older brother.

the prices will most likely come down to meet your resources. if they don't, it means the powers that be have created another bubble, and you don't want even to be tempted to go there.

downtown or bust. bust and downtown.

hah! Downtown would make us both very, very happy. Is the t-shirt issue a man thing? I can't get him to toss ANYTHING with a band on it.

i am packing up my apartment and you would be shocked at some of the hole-y messes of t-shirts that still escape the garbage. i just can't let them go. some seriously have the thin layer of crew neck barely still attached to the rest of the shirt. god, i love those shirts!

Sniper, at some point you just have to do the eighties thing and rip the crew neck part off. Or maybe that's just what girls do with their "holey" band t-shirts.