Do NOT be fooled!!!!!

Your word have been in the front news for the past year along with others on this board. Watch out the crash is coming

it would have sounded like you knew what you were talking about if you didn't have CAPITALS everywhere and didn't end the post with "MMAfia"

Haha, I'm a little far sighted and the text size is tiny for the resolution my monitor is set at... so my apologies for the typos.

Notwithstanding 'sounding' like I know what I'm talking about, do your own due diligence.

The carpet has been pulled out from underneath, and the first to go are those who got caught in the middle. Those who committed and signed, only to realize that the mortgage 'product' being offered has now been 'discontinued'.

MMAfia

Ha Ha HA....keep paying me rent! I love the people on here - the market is tanking - dont but dont buy....as an owner who has seen his little loft triple in value in ten years and now owns three properties where after last years increases are net income positive - i love RE.

Also, I HIGHLY recommend reading this exceptionally astute article written by PIMCO's Managing Director:

http://www.pimco.com/LeftNav/Featured+Market+Commentary/FF/2007/GCBF-+March+2007.htm

It talks about the Plankton theory. Yes, when the Plankton dies out, eventually the Sharks sitting on top of the food chain will suffer.

The Plankton, in this case, are the Sub-Prime and First-Time homebuyers. Once they go, a chain reaction will be put into motion and percolate up through the Real Estate chain.

MMAfia

Sorry, but for me, my home is a place to live in and not an Investment. Why? Well, because there are much better investments. Heck, even the 'beta-obsolete' S&P 500 does much better.

Oh yeah, and the market IS tanking. To 'tank' prices don't even have to go down. It just has to stop appreciating as people were relying on appreciation to refinance out of their crazy ARMs.

As we all know, housing is relatively illiquid, and thus unlike the stock market collapse, we will witness a molasses-style depreciation, with characteristic dead-cat bounces. We just saw Phase I of the effects embodied in the sub-prime meltdown. More to come. Stay tuned.

MMAfia

Bitter renters and other real estate geniuses have written in the past:

2004 "THE MARKET IS GOING DOWN 20%"

2005 "THE MARKET IS GOING DOWN 30%"

2006 "THE MARKET IS GOING DOWN 40%"

2007 "THE MARKET IS GOING DOWN 50%"

Christ, of course a stopped clock tells the time correctly twice a day. Eventually, one day, SOME day, MMAfia the market will go down, and then you'll run around with your underwear over your head crowing "I'm a genius, I predicted the market would drop, and now it's dropped!"

The problem is that your timing SUCKS. Which is EXACTLY why you didn't buy in 03', and then 04', and then 05', and then 06'....

And why you're STILL sitting on the sidelines. While I and others have made a bundle on real estate.

Now back to our regularly programmed show...

'THE BITTER RENTER THREAD' with your host, MMAfia

What I don't understand is why is it that during the past 50 years people have predicting a meltdown in the NYC real estate market

Obviously, you haven't seen Shiller's inflation-adjusted home price graph.

And like I said, real-estate is relatively illiquid as far as assets go. Unlike an agile destroyer, it behaves like an aircraft carrier. It takes years to make a turn, so the market's current lethargic behavior is actually quite consistent with expected inflection point patterns.

What you see as 'bitter renters' saying:
2004 "THE MARKET IS GOING DOWN 20%"
2005 "THE MARKET IS GOING DOWN 30%"
2006 "THE MARKET IS GOING DOWN 40%"
2007 "THE MARKET IS GOING DOWN 50%"

Is perfectly normal for real-estate inflection points. It really does take that long for market psychology to change.

The general trend of real-estate over the long-term is without a doubt, positive. It WILL appreciate over time.

However, just like any asset class, there are cycles and inflection points which result in 'ups and downs'. In this case, the cycles are protracted to the illiquid nature.

In the past history of the modern world, EVERY housing boom was followed by some form of a contraction, except when WWII ended and there was the Baby Boom (that was the only time in history there was actually a plateau, as evidenced by Shiller's graph).

Now, we didn't have WWII. But we did just witness the biggest housing runup every in history. So, what makes you think that the largest runup ever, will all of a sudden have the smallest downturn relative to the runup?

Quite doubtful. Chances are, the downturn from such an historic runup will likewise be 'historic' as there was no huge underlying sociological change like WWII and the baby boom this time around.

MMAfia

Gee, according to your logic MMAfia the market will be down 100% in 2012! And all NYC real estate will be worth absolutely nothing! Gosh, you're SO smart!

just a signed a contract for a 7M condo, FTW

I don't understand #14 - "...just a signed a contract for a 7M condo, FTW..." FTW - Feed the Wookies?

I am currently in the market as a buyer. I am looking for a 1 or 2 bedroom between $650,000-$850,000 in midtown east. I have attended 146 open houses over the past six months and prices are not going up. They are flat or down 5% depending on the area. I track apartments online from initial listing through reductions until final sale (when closed). Average decrease from listing to close is 12.5%. About 45% of the apartments I have seen have been pulled off the market after reductions. About 25% have gone to contract and closed. Open house attendance is excellent for about 50% of the units in the first few weeks only. I was surprised by the light attendance at many open houses. Today's NYTimes quoted brokers regarding 5900 apartments listed (average)in Manhattan in the first quarter of 2007, but Streeteasy indicates 11,000 in Manhattan. Again, the market is not crashing, nor is it decreasing much. However, it is definitely NOT increasing in my price range/location range.

The NYTimes has an agenda to keep people interested in RE and place ads. Brokers never admit to a soft or softening market. Do your homework and the truth be told.

The increase in average price in the article is due to numerous new condos closing (Element, 10WEA, CPW, Charleston, Link, etc). If they carved out new apartments the result would be different. That is why nationwide they have existing home versus new home sales/prices--BIG DIFFERENCE! To all potential buyers out there-keep looking for your dream place since prices are not going to move much in the next 12 months. In addition, mortgage rates are not moving either.

Just wanted to present a firsthand account of the reality in the market (price range and location range noted).

The bottom line with manhattan real estate is this - there are so many people with so much money in manhattan that even in a declining market these people will keep the market from tanking - there are tons of people who sit on the sidelines waiting for a modest decline and then buy for investment - then they are all fighting for the same properties and the market bounces back up. Manhattan properties will not appreciate as drastically as they have in the past 10 years but there will never be any real "fire sales" due to market conditions.

14 - where did you buy for $7mil? I am looking in a somewhat lower price range and can't seem to find a FULL 3 bedroom with good park views below 90th. I have a problem spending $5 dollars on a two bedroom.

None of the things the original poster wrote will make the RE market go down. The mortgage market explains why all buyers will require a mortgage contingency clause.

I do, however, agree the market will cool off because the RE increases have outpaced NYC salary increases. When the young lawyers and bankers working in NYC can no longer afford the apartments, then you have a problem. NYC is approaching that tipping point -- either continue to raise salaries or expect to see decreases in the RE market. If the stock market continues to falter, then there will be no money to perpetuate the RE boom.

Hey #17, where were this people in 1990-1991? Are you old enough (honest question) to remember what the real estate market in NYC was like then? Or is this "time going to be different"?

How many times has that simple quotation proven itself to be a false wish....

There are many people in new york with tons of money BUT that doesn't mean they aren't looking for deals just like everyone else.

As I mentioned, housing markets take a long time to change directions.

For example, take the most recent up/down cycle for Manhattan. The last time it happened here, the stock market had crashed in 1987. Housing prices flattened over the next two years, but didn't start to fall until mid-1989. The worst drop wasn't until 1990 and 1991, when economic recession set in.

Right now, there is still no recession. We are still *very* early in the current inflection point from boom to contraction. Most likely, we're in the 'flattening' stage as in the previous cycle, which lasted 2 whole years.

Many economists and analysts (both academic and wall street) think that a recession this year is possible- including Greenspan. Whether it happens this year, or next year, or the year after next- that is most likely when the large price declines will occur.

MMAfia

BTW- this time it IS different.

As Roubini points out:

"Normally when a sector like housing or real estate or tech goes into a boom and bust cycle, the “real cycle” precedes the “credit cycle”. In other terms we would have expected that weakness in housing would lead first to large job losses, lower income generation, higher unemployment first (the “real” cycle). Only when the “real” cycle is underway one would usually expect – as in the 1980s S&L fiasco – that a “credit” cycle would be triggered and emerge leading to further real and financial distress.

Instead the most surprising thing about this housing bust and subprime meltdown is how the “credit” cycle started much earlier than the “real” cycle and much more rapidly than anyone would have ever suspected. Now in an economy with still high growth, still high job creation, still very low unemployment rate, still high income generation we are already observing massive increases in subprime defaults and foreclosures, 20 subprime lenders going out of business in two months, the ABX going into free fall and the cost of insuring against the BBB- tranche of the ABX index going to a spread relative to LIBOR of over 1000bps. So, if all this happening in what the consensus terms as a “Goldilocks economy” what would happen if the economy – as likely – will start to slow down more in 2007? How much more carnage can we expect in many sectors and markets when the economy is weaker than in recent months?

The fact that the downward “credit” cycle has emerged so fast and so sharply in a still “strong” economy is the most important signal that this sub-prime mess cannot be easily dismissed as a niche problem that will have no contagious effects on the rest of the economy and of financial markets."

MMAfia

Hey #16. You seem to be doing a thorough search for your place-good luck. I do agree that prices in many areas of the city are flat and the new condos skew the numbers. Your firsthand account is most welcome and a breath of fresh air here.

MMAfia, you have many good points, but I'd like to point out that there is a huge underlying demographic change supporting the boom in places like Manhattan: and the demographic change is multiplex.Just to highlight two components of this multiplex change:

1. You have the baby boomers in the prime earning years, with a certain segment of this age cohort buying not just vacation home in beach markets, but also condos and pied-a-terres in "yoghurt cities", aka cities with culture. This is a national cohort buying into a select handful of markets (I assume you read the recent NY Times article about all the new, empty, but sold, condo towers with out-of-town buyers from places like Kansas?). That's why the NAR data you quote also shows record levels of second or third+ home sales as a share of total volume.
2. Forex: Our twin deficits have resulted in a massive slide of the dollar vis a vis major global currencies. Manhattan real estate looks dirt cheap by the standards of the global cities - like the domestic boomers, these global buyers are focused on a handful of vacation and culture-city markets, hence the articles which show that foreign acquirers of condos have risen dramatically in recent years as a share of total deal flow. These foreign acquirers, unlike in the last boom-bust cycle in housing in Manhattan, are from a host of nations (not just Japan, as was in the 80s)

Those are two key changes, I could go on, but you see my point? Certain housing markets in the country are being supported by multiple factors. Markets which cannot rely on these varying sources of demand are going to fall when the major drive of the boom disappears. Manhattan certainly may experience a bust, but the bust will require (a) a job-loss recession (b) a GLOBAL housing slump (and price in the UK and Australia have not crashed, and they are ahead of us in their current residential real estate cycle) (c) a massive currency correction.

All of these things could happen, yes, but I'm betting that Manhattan will be somehwat insulated by the damage as compared with other markets.
That said, you are clearly a very smart person with a lot of interesting ideas. Don't let flamebaiters get you going!

Sincerely,
a real estate research economist (it's my JOB) who also owns Manhattan property.

whatever! I've been looking to buy a place since 2005. Prices have skyrocketed since 2005. There's open houses every weekend. The places that were reduced were initially overpriced for it's base value. About 60% of the apartments were LOSER apartments with no views, no light, etc. About 25% had defects that would costs at least $30K to fix. About 10% had asbestos according to my private inspector. Others had termites, flooring problems, and worst of all, rats.

If you look at the market, most of them were in the market for at least 6 months.

I've finally signed a contract last week and HAPPY! It's a brand new development and the price was right. I would rather pay 10% more for a new development than a refurbished or old one. Which one will have better value? The one completed in 2007 or 1960s? The one with a tax abatement for the next 10 years or the one with full tax? The one that'a appealing as you know you're the first to own it or the one that has been there for decades.

Show me proof that all of these so-called apartments reduced are of value to buy! They reduce the price because as I said... no one's interested.

"This time it will be different"

For #26. Prewar apartments have stood the test of time and exude character. Most of the new condos all look the same (especially kitchens/baths). The closet doors on the new units are cheap and the tax abatement will cause you sticker shock in a few years (see urbandigs article-excellent). Do note that new units are not immune to leaks, repairs, and other problems. I agree the buildings built between 1960-1970 (white brick ones often) are bland, cheap, and not worth it.

Give me a prewar with light/view anyday. Much better than the new crap.

The new condos will not hold their value as well as the prewars in desirable areas. History bears this out.

#16. I agree that prices are flat in your price range. WallStreet people bid up 1M+ ones and make the stats look good.

Hurray!!!!! The market is doing great. The Bubble is getting even bigger...... Yaaayy..... we have postponed one crash for an even bigger one down the road..... YIPPPEEEE!!!!!

At least it will be a different group of suckers left holding the bag.

How in the world do people have the nerve to predict with such authoruty that the market will crash or even go up. I realize you have a right to your opinion but if you were so smart to be able to predict the future you would be a zillionaire.

#25- finally! took some time before a response with well-thought out analysis emerged. thanks for your valid points. I do agree with them, especially the first point with regards to the retiring baby boomers.

That could offset some of the depreciation forces, but in my humble opinion, won't be enough to offset all of it.

Your second point is an interesting one... Forex (thank you yen-franc carry trade) does distort pricing, and you are correct in stating the relatively advanced state of the London, Aussie, Canadian et al (RIP Shanghai) real estate markets.

Looks like you have good financial and business acumen/experience, so perhaps you have read the Economist's global housing bubble piece from a couple of years ago? The bottom line is... the US consumer is driving much of the World Economy at this point (at over 70% of being the growth driver of the largest economy int he world).

The entire World is praying that the US consumer, who as we know spends more than he/she makes (negative savings ratio, which never happened since the Great Depression) can stay resilient and continue to borrow.

Again, in my humble opinion, the Great Credit Boom will (and is) turning into the Great Credit Crunch, and that will eventually affect US consumption of goods and services.

I could also go on and on, especially about the Fiat Dollar Hegemony (thank you Nixon), the house-of-cards Derivatives markets (bye-bye CDOs)... but the bottom line is this:

1.
Housing Market psychology has finally shifted.

2.
Housing Markets take a long time to change course.

3.
We are still at the beginning phase of a long-winding downturn.

This is consistent with what all the major home developers have re-iterated in their latest conference calls with wall street analysts. It is also consistent with history.

While I am not a real-estate research economist, I am employed at a 'Hedge Fund of Hedge Funds' (as opposed to Fund of Funds) where real-estate and real-estate related securities/derivatives make up some of the portfolios' exposure, including private equity.

Cheers,

MMAfia

Oh my goodness. I think we should head for the hills. All the experts are saying housing market crash will be slow and deadly. Get out while you can. Nobody should be buying everyone shoud be selling.
The forex bond ratio is telling us the currency is in a high short sell ratio which means one thing and one thing only. NYC housing prices will drop. Anyone who doubts these financial experts are complete 100% idots.

None of this matters if you're not flipping, and buying for a 10+, 15+, or longer year time horizon. Nobody, and I mean NOBODY, can predict where the economy and housing market will be in FIVE years, yet alone 10 or more.

If you find a place that you really love, that you've exhaustively and qualitatively researched, that you can afford and isn't unduly leveraging you, and that will be your home, BUY IT.

If not, keep waiting.

Sitting on the sideline, trying to 'time' the market, is pure schadenfreude. Of course, as poster #10 said, "a stopped clock tells the time correctly twice a day." At SOME point, there will be a correction, big or small, or another terrorist attack, or something. And then another boom, eventually.

I bought my place in 1988 (Manhattan co-op Village apartment on lower Fifth). Cost me alot at the time. Market promptly went down by about 20% (more overall in the city on average, but that was the benefit of buying a prime unit in a prime building in a prime location - the drop in value for me was much less compared to the average). Have put since then about $250K into it. It's now worth about 3X - 4X what I paid for it (including reno). And maybe MMAfia, in a few years, it will be worth 20% less again. But do I really care? No. I own a great home, and haven't one whit of a second thought since I purchaased it.

If you're happy living in your home through all that, if you haven't leveraged yourself uncomfortably, and if your time horizon is a long one, you'll be in a good state of mind through all the inevitable the ups and downs that all you geniuses predict. And not much else matters.

Now the theory is a slow market decline. In other words over the next 10 yaers market goes up followed by a decline for the following two. Or, over next 5 years market goes up, then stays flat then goes up again only to be followed by market going down. Or, market stays flat, goes down comes back up then goes down followed by it coming down again, then flat then up and then down.

#36...could not have said it better...if you're happy where you are living or thinking about buying a place to live go for it...real estate always goes up and down.

Here's a perfect example of spin-city mainstream media content... we've seen this article before... the headline reads (on bloomberg): Manhattan Apartment Prices Increase at Slower Pace

First paragraph reads:
Manhattan's median apartment price rose 1.2 percent in the first quarter from a year earlier, the smallest quarterly gain in five years, appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said.

Then, the second to last paragraph reads:
Overall, the median price of studio and one-bedroom apartments fell 2.3 percent to $390,000 and $635,000, respectively, while the price of two-bedroom units fell 2.8 percent to $1.3 million and three bedrooms declined 1.2 percent to $3.1 million, Miller Samuel said.

Don't be fooled.

MMAfia

As a buyer, I can tell you fer sure: In the under-$400,000 market in Manhattan, (yes there is one, convenient nice places not uptown or UWS), if you show an interest in a place you will have brokers all over you. I've been actively shopping for 2-3 weeks but I started studying the market last fall. Buyers, when you make offers, it's just like buying a new car. Don't go down from the selling price, go up from the invoice price. The invoice price in this case is the square foot price of recently sold units in that building. Remember you can always offer more but you can't offer less.

Yeah MMafia - DON'T BE FOOLED:

"...None of this matters if you're not flipping, and buying for a 10+, 15+, or longer year time horizon. Nobody, and I mean NOBODY, can predict where the economy and housing market will be in FIVE years, yet alone 10 or more.

If you find a place that you really love, that you've exhaustively and qualitatively researched, that you can afford and isn't unduly leveraging you, and that will be your home, BUY IT.

If not, keep waiting.

Sitting on the sideline, trying to 'time' the market, is pure schadenfreude. Of course, as poster #10 said, "a stopped clock tells the time correctly twice a day." At SOME point, there will be a correction, big or small, or another terrorist attack, or something. And then another boom, eventually.

I bought my place in 1988 (Manhattan co-op Village apartment on lower Fifth). Cost me alot at the time. Market promptly went down by about 20% (more overall in the city on average, but that was the benefit of buying a prime unit in a prime building in a prime location - the drop in value for me was much less compared to the average). Have put since then about $250K into it. It's now worth about 3X - 4X what I paid for it (including reno). And maybe MMAfia, in a few years, it will be worth 20% less again. But do I really care? No. I own a great home, and haven't one whit of a second thought since I purchaased it.

If you're happy living in your home through all that, if you haven't leveraged yourself uncomfortably, and if your time horizon is a long one, you'll be in a good state of mind through all the inevitable the ups and downs that all you geniuses predict. And not much else matters."

Now THAT'S a post that actually says something worthwhile.

MMAfia is probably heavily short housing stocks or something. Do you have to disclaimer that?

I think a lot of money was made short selling housing stocks but short selling them now can be quite risky. If feel you can make money short selling housing stocks while at the same time bloging a housing crash --Good luck

thus the bottom line is that if the dollar rises appreciably against foreign currencies and/or the administration of the city hits the shitter and.or unpleasant economic stimulus, nyc r.e. values will hit the skids. Due to the fact that IMHO, foreign buyers account for a higher percentage of buyers in this market than in years past, the correction in this case would be more problematic than in the early 90s. Still, the quantity of new condo product in this City is tantalizing thus I for one am pleased as punch at the run up in values.

If the sun gets any hotter it can cause weather conditons that will flood the streets of NYC and that too will have an affect on housing prices.

It's funny how so many people are sitting by the sidelines waiting to see how the market does before deciding to by. Then all this pent-up demend will pour out into the market and drive priced back up again, and these same folks will be kicking themselves for not buying in 2007.

While all the chicken littles around here are certain that the sky is falling on the real estate market, what is the smart money doing? Here's some interesting excerpts from an article in the 4/5/07 Wall Street Journal about what Carl Icahn, one of the country's most successful investors, is doing in Florida, the scariest real estate market of them all:

Amid softening home prices, rising foreclosures and turmoil in the mortgage industry, billionaire financier Carl Icahn is making a contrarian bet on a troubled pocket of the U.S. housing market: high-end Florida condominiums.

Mr. Icahn's pursuit of WCI has puzzled many on Wall Street who believe the Bonita Springs, Fla., company is highly exposed to the swelling glut of condos dotting Florida beaches and golf courses. In the fourth quarter, WCI, which has a market value of about $909 million, had more defaults on condos and cancellations of typical single-family homes, which it also builds, than it received orders for new homes.

Mr. Icahn appears to be counting on Florida real estate to make a comeback. "My investment philosophy, generally, with exceptions, is to buy something when no one wants it," he said yesterday. "We made a fairly large investment and took control of several energy companies seven or eight years ago when they were way down. Housing is somewhat analogous."

Please people listen to me the real estate market in NYC is going down and will continue to go down. Get out while you. Put your properties up for sale now and get out while you can. It's going down. Read the papers, listen to what everbody is saying. Sell while you can because the housing market in Manhattan is crashing.

>Please people listen to me the real estate market in NYC is going down and will continue to go down. Get out while you. Put your properties up for sale now and get out while you can. It's going down. Read the papers, listen to what everbody is saying. Sell while you can because the housing market in Manhattan is crashing.

How have things worked out for those who sold in 2007?