BiPolar Manhattan MArket

Everyone is not saying that. Brokers and recent buyers with vested interests are saying that...Just like sideline sitters are saying wait, everything is overpriced. Everyone has an agenda...including me, I am a sideline sitter for full disclosure. And I do believe that people are tieing NYC real estate to close to the stock market...it historically has a huge lag and prices are still at inflated levels due to loose lending practices and Wall Street excess over the past 5 years.

i just wrote a piece on this exact topic. Fact is, stocks are going nutz and that is causing many buyers to be confused. Sellers, homeowners, and brokers that called for the bottom to be in with the wave down we had, are now calling for higher prices - to compliment stock performance that recovery is imminent. Buyers are left scratching their heads and this may lead to a disconnect in our market.

it takes two to tango, and if sell side psychology is affected by this 'reflation' trade and stock market surge, they may get less motivated to hit a bid that otherwise depicts where our market is. Unless buyers step up and get on board, we could have a disconnect.

b/c Q3 is forecast for 3% and this recession is DONE.

The thing that strikes me in my interaction with other licensees these days - whether the context is an actual negotiation or just a casual open house visit - is how scripted and robotic the lines seem. "We've had a TON of interest." "We already have a cash offer close to full ask." "We're seeing bidding wars again." "Don't even think about lowballing this one."

Maybe it's all true, and maybe I'm just too biased and cynical to see a market turning before my eyes. But the overall impression when I hear the same thing over and over - in the same words - isn't a meaningful consensus of professionals, but rather an overprogrammed sales force talking their book. Personally, I'll wait until closed sales tell me that prices have found support above 2003-2004 levels, and I'll recommend that clients do the same. If that means missing the absolute bottom, I can live with that, and I think most buyers can.

we know the recession is done, and it was the worst since TGD as prior estimates once again proved to be way too optimistic when first released only to be revised downward much later on. but that doesnt mean we fly back to peak levels

Property prices are not correlated to the stock market. They are correlated to rents, which are correlated to incomes. Purchasing is a function of incomes + credit (price & availability). At 9.5% employment and rising, it is unlikely that prices have anywhere to go but down.

"If that means missing the absolute bottom, I can live with that, and I think most buyers can."

my clients say the same thing. they dont care about hitting the exact bottom and prefer clarity, confidence. its just so funny to hear steveF and ericho go crazy with this 'you missed the bottom' crap when nobody even cares.

exactly stevejhx - thats why its funny to hear some of the arguments out there because stocks are flying.

hey, did you ever get a chance to reply to my question to you about the fed's printing?

The people telling me to BUY NOW are not brokers....friends, family and colleagues....

In some ways.....I feel cheated...waited all this time to see manhattan tumble and we only got 7 months and it was over....if indeed it is over...who knows.....just wished it i had more clarity!!!!!!!!!

West81st - great post, even by the high standards that we have all come to expect from you. Concise, insightful, sensible and practical.

"At 9.5% employment and rising, it is unlikely that prices have anywhere to go but down."

Disagree steve, as much as you would like to see that happen, there is a better possiblity that prices do nothing. Based on this statement, I assume that when employment turns you will become bullish?

"but that doesnt mean we fly back to peak levels"

Agreed.

the buyers who seem to be so nervous, from what i can tell, are the younger, first time buyers who have been looking for a few years and thought buying would be forever out of reach. or those who chose to wait or were just unable to buy in the late '90s and are becoming tired to death of waiting and now can see something within grasp. many of these individuals are also affected by the fear of rising interest rates, the attraction of the expanded conforming limit, and the belief that this reduction in prices may be a blip caused by this downturn. while i doubt these fears are justified or even rational, i understand how they could be quite compelling.

i don't see a huge rush to buy more expensive units. some are selling, but not that many that quickly.

ar - agree. great insight.

our media really isn't into negativity. it likes positive spin, and only descends into the darkness when it makes for a good read, and seems to wish to ascend as quickly as possible. if you think of how long this debacle has been occurring, and you studied the amount of negative coverage vs. positive, it would probably make for an amazing data analysis.

for a couple of years the majority of the pundits and the powers that be said that everything was just fine, nothing to see, if something to see all contained, etc., etc. and if your friends and family are telling you the decline is over, i have to wonder if they already own property. it's stunning, to this day i have numerous friends who bought 2003 forward who tell me their property is still worth something approaching 2006 prices. if you're not obsessing on a board like this, and just reading the feel-good reports without any in-depth analysis, mhillfqt, it would be surprising if you didn't conclude that housing prices had bottomed. but you would be wrong, just as you would have been wrong if you'd believed the reports in 2005 that prices were going to continue to rise indefinitely.

yeah west81, i noticed that too. I went to couple of open houses and the brokers act like there is vast interest in the property, for some they mention existing offers. but for most units, I'm receiving follow up calls, and most of them have not gone into contract.. where did the previous offers go to? Can brokers lie about existence of offers?

"did you ever get a chance to reply to my question to you about the fed's printing"

I didn't see it. Can you repost?

"Disagree steve, as much as you would like to see that happen, there is a better possiblity that prices do nothing."

In which case inventories will rise, making the situation worse long-term.

"Based on this statement, I assume that when employment turns you will become bullish?"

I'm never "bullish" on real estate - it's not an asset to be traded. It is capitalized rent. Therefore, when the capitalized rent payments are less than market rents, it will be about time to buy.

I do recall, Juicy, that you stated that property prices were unlikely to fall more than 10%. You were wrong about that, too. You said it would be the "all in" signal. The "all in" signal would be when you can buy a property and rent it out to an unrelated third party and make money or break even from the get-go. That is the historic norm. We are still a long way from there.

brokers can lie about what day of the week it is, if they choose to.

gotta feel sorry in some way--prospective seller is reading about how everything is getting better, calling broker and saying what the !@$%#$%? where are my offers? what's happening?

would agree with AR post above--once you get into middle of market, action seems slower and lower.

"The people telling me to BUY NOW are not brokers....friends, family and colleagues...."

Sadly, even though these folks want the best for you, they often don't know anything other than what they've heard on CNBC. They're buying into the green shoots/recovery propaganda, and when you try explaining any of the actual intricacies of rent vs. buy or discuss some of the economic issues that aren't getting much mainstream press, you quickly realize they're just going on headlines.

I remember talking to a good friend with much more money than me a few years back, expressing my concern that buying something only a little better than my rental would cost a lot more each month. His response was "but when you write your check..." and signed a check in the air and put it in his pocket. It was a very compelling image, but didn't take into account mortgage interest, maintenance, transaction fees, time horizon... He was simply wrong, and in 08 he made a disasterous new construction purchase (I promised I wouldn't discuss his building on the board). Just one example of the many times people who both cared for me and seemingly had more experience/resources than I do gave me terrible advice on RE, and part of why I started doing so much damn research on my own.

I'm a sideline sitter and Mhillqt is a realtor, for full disclosure. He has started about 10 threads in the last 2 weeks full of capitals with the unsubtle message: BUY NOW or be priced out foreeever!! And he says he wants to buy. Poor Mhillqt!

is he really? i'm so gullible.

tenemental, i know people who bought in 2007 who told me with all sincerity that if they didn't buy then they'd never be able to buy. and they stretched. sad.

stevejhx - http://www.streeteasy.com/nyc/talk/discussion/13222-what-did-i-tell-you

STEVEJHX - my dear friend, please interpret this statement from the NY Fed regarding their quantitative easing policy and buying GSE agency debt from primary dealers and money center banks on account with NY Fed and tell me what it means:

http://www.newyorkfed.org/markets/gses_faq.html

Q: Are these operations reserve neutral?

A: No, these operations are financed through the creation of additional bank reserves.

"creation of additional bank reserves." - that is the fed's way of electronically printing money

aboutready, when I think of the compromises I almost made and then think of all the people who made them and worse... I can't imagine what I would feel like waking up in the morning in some of those places paying what I would have been paying.

IM NOT A BROKER....Im one of those people who didnt buy in 1996 ....etc.....was sidelined for many years due to illness and now back and waiting.....i work in marketing ....PLEASE......dont spread lies about me......

I think I did answer that, UD. The difference is that the bank reserves are created by buying assets, rather than merely "printing money." Liquidity is added to the system, but no new "money," strictu sensu, is added.

If the Fed were merely to deposit money in banks without an offsetting entry (a la Latin America), that is "printing money." If it buys assets in exchange for the deposits, it is monetizing those assets.

It's a very fundamental difference. The former ALWAYS causes inflation because it debases the currency, the latter does only if velocity increases along with the supply of money.

i understand that but I thought because the operations are not reserve neutral, that is tantamount to buying assets without an offsetting entry, no?

"In which case inventories will rise, making the situation worse long-term."

or inventories will stagnate and prices will do nothing

"I do recall, Juicy, that you stated that property prices were unlikely to fall more than 10%. You were wrong about that, too."

Since that prediction was 9-12 months pre-Lehman, yes I was wrong. Prices went up.

"You said it would be the "all in" signal. The "all in" signal would be when you can buy a property and rent it out to an unrelated third party and make money or break even from the get-go. "

I have never said such a thing

in other words, where is the fed getting the money to buy these assets? where is the exchange for deposits?

Ive been told directly by a senior strategist / cnbc guest that printing money and monetizing bonds are the same thing. for what its worth

"steve, in Manhattan a 12x p/e would be a risk free investment with way above a risk free return - assuming you rent it out, immediate upside would include, principal paid on the mortgage, appreciation, and future rent increases. Investors would buy the crap out of real estate at these levels driving prices upwards. 12x is not a possible scenario. If you want to argue that some places have included too much appreciation in their list price, I'm with ya. But this example is loco."

http://www.streeteasy.com/nyc/talk/discussion/3171-caveat-emptor-manhattan-still-way-overpriced?page=5

Unfortunately, JuiceMan, the 12x ratio is EXACTLY where it costs the same to buy and to rent, as it's the same as 40x monthly rent and 30% PITI, as demonstrated many times.

Your past comes back to haunt you.

UD - there is no question that the FED's balance sheet increases, but the balance sheet of the recipient institution does not. That's the difference.

The Fed can increase its balance sheet forever.

--I'll wait until closed sales tell me that prices have found support above 2003-2004 levels, and I'll recommend that clients do the same. If that means missing the absolute bottom, I can live with that,--

Exactly W81. If the economy is stabilizing that will certainly engender a national sigh of relief. However, there has been a shift in the national psyche that will not be altered by better stock prices. When the doctor announces a life threatening illness, your lifestyle habits improve and that does not change when the illness goes into remission. So too, we have all realized that our collective economic habits are unsustainable and while an end of the recession will be good news, it will not alter a new perspective. Perfect evidence of this is hyper inflated prices of the real estate market. The price /wage disconnect fueled by fraudulent credit will go down in history along side of tulipmania and dot.com bubble. Even though your rising stock portfolio might tempt you to take on more debt, any modicum of analysis allows you the insight that at the current, still-inflated prices, you would simply be buying someone else's tulips. History demands that the market adjust, not just the economy.

AR, while pent up demand of first time buyers may play out for a while, even my young investment banker relatives have changed their ways. Though they feel secure again in their jobs and their prospects, they have curbed their profligate spending. No more $1000 bottles of vodka at the clubs. They are buying modest bottles of wine to share with their friends at home. It is time for a more sober outlook for all of us. I am on the sidelines with W81 with no regrets if I miss the bottom.

The only ones I know who are saying "Buy Now" are brokers or those related to the real estate industry. Don't believe the hype. New York City real estate has not reached bottom yet and probably won't for at least another year, maybe two. That being said, if you find something you like at a price you can live with, then certainly, "buy now." Other than that, you have absolutely nothing to lose by waiting.

"UD - there is no question that the FED's balance sheet increases, but the balance sheet of the recipient institution does not. That's the difference."

No I dont think that is. The difference is whether or not the fed is selling one thing to raise the funds to finance the purchase of those assets OR if they simply print money via a mouseclick to buy those assets from the primary dealers and money center banks on account with NY Fed. Thats the difference. The feds balance sheet grows because they are not offsetting the purchase by selling anything or using something tangible to finance the purchase.

respectfully, i disagree and think the fed is printing money to buy these assets from primary dealers via OMO at NY Fed.

"Your past comes back to haunt you."

I'm not connecting the dots steve. I was arguing your 12x ratio in the post above which is a far cry from whatever you are trying to manipulate here:

"You said it would be the "all in" signal. The "all in" signal would be when you can buy a property and rent it out to an unrelated third party and make money or break even from the get-go."

Let’s not hijack this thread steve, my intention wasn’t to have a “who is right” conversation.

Steve and UD agree on "Property prices are not correlated to the stock market. They are correlated to rents, which are correlated to incomes"

This is the most myopic and incorrect statement I have ever heard. A large percentage of buyers, over 99% or more never do or think about rental prices to sales price/monthly payment correlations. This is not a factor in most buyers decisions to buy. Stating that it is even considered by most buyers is just pure ignorance.

apt23- i don't think it's the finance types who are the ones i'm talking about. people in finance may be spending less, but they often view that as a "choice" if they are still employed and doing OK. i'm talking about the people like the OP, if not a broker, who's in marketing and didn't feel purchasing would ever be possible.

and i never said they'd keep the market afloat indefinitely, or cause an increase in prices. i think they were partially, even largely, responsible for the couple of thousand contracts we saw signed the last few months. i agree with you that that is a selective market as well, and a good deal of pent-up demand is gone. but there are others still, and we see them here, who COULD buy now but who would do so much better if prices were to lower further. and they're nervous.

i agree with steve that prices are not correlated with stock market. I also agree with steve that prices are more closely associated with:

1) jobs market
2) incomes
3) availability of credit

I would even add:

1) lending rates, affordability
2) strength of consumer balance sheet - individual confidence
3) confidence in asset class - rent ratios can affect this as it did in peak times when property values far exceeded the norms in terms of equivalent price/rent analysis

rent ratios have absolutely zero effect on over 99% of purchases. I bet you that over 99% of buyers expect to pay significantly more to buy then they do to rent. A lot of people are then pleasantly surprised that their overall cash flow increases nicely over renting.

Also all your points above are not just 1 way direct influences - meaning they dont only affect markets the way you believe. ie. poor job markets may also bring a lot of speculators to the market that wouldnt buy in a hot market, incomes - when some peoples incomes are down, others people are way up, etc.

No, UD - Bernake said it himself. They are monetizing assets, not printing money. It does increase the money supply insofar as the money supply is defined as the sum total of cash and deposits. Deposits to banks are liabilities, loans and leases are assets. What the Fed is doing is taking bank assets (CDO's, for instance) and giving the banks cash in exchange. It's a repo - the bank agrees to buy the asset back at a later date. It is fundamentally different from the Fed just depositing the money with nothing to back it up.

"that is tantamount to buying assets without an offsetting entry, no?"

In this particular case the Fed is getting the money from the Treasury, which is selling bonds to the Chinese.

petrzitz, you'd better start looking for your source data that the stock market and home prices are correlated, because the data don't exist. Ergo, it's going to be a long search.

JuiceMan, it's the exact same thing. Under normal price and credit circumstances, you can break even renting to an unrelated third party at 12x annual rent. Your argument is the figure is 20x or something like that. You can't make money at those levels. Plain as day - it's the same thing.

Sorry, but a 10% drop in prices was not enough to get to that level.

"It's a repo - the bank agrees to buy the asset back at a later date"

Interesting, so then when the repo is complete, the bank will have the dodgy CDO back at what valuation or hit to their balance sheet?

"Your argument is the figure is 20x or something like that."

No it is not

"Sorry, but a 10% drop in prices was not enough to get to that level."

Never said that.

It would be nice of you didn't invent arguments out of thin air steve, you seem more confused than normal today.

ar: never thought you inferred "they'd keep the market afloat indefinitely, or cause an increase in prices" btw, do you think any of the couple of thousand contracts signed in last few months motivated by first time buyer tax credit?

only at the lowest prices, apt23. which may explain why those studio prices are so stubborn. the price differential between straight studios, alcove studios, and small one bedrooms is narrowing greatly, with small real one bedrooms frequently just about the same price as alcove studios. this price range in manhattan is virtually limited to coops, so you go beyond the lowest segment of the market and people would likely not qualify for both the tax credit and board acceptance.

""Your argument is the figure is 20x or something like that."

No it is not"

What is it, then?

tnx ar. i thought there was a disconnect between income compliance for tax rebate and ability to buy in NY but wondered if i missed something.

the relationship of price to rents is similar to the relationship between stock prices and earnings in a sense. there is not a 'fixed' relationship that ought to prevail, as steve believes (12x). it can vary widely, depending on several well-established factors. a very interesting thing that has happened in this correction is that, contrary to what steve and his sycophants believed, that ratio hasn't collapsed. most of the decline in prices has been the result not of a collapse in the price/rent ratio, but rather a decline in rents.

what steve fails to understand is that while for him, and people in his social/family position, purchasing is akin to capitalizing rents, that is not the case for everyone. i am not disagreeing that for steve himself it may only make sense to buy when the two hit a certain ratio, but others, who place a premium on ownership, that relationship is different.

and for the past 10 yrs, including through this correction, the vast majority of the buyers are not in steve's position, so until or unless that changes, we won't see the 12x rent ratio that has been seen in the past.

Printer, that's because today's buyers are financially illiterate. They have been brainwashed for the last 10 years that real estate only goes up in value which is obviously wrong. The 12x annual rent/housing price ratio has been the norm for more than 100Years. This ratio has only changed since we had the bubble forming. Ask your parents, ask your Grand Parents if the bought at the time. Unbelievable the amount of bullshits the bulls/brokers/underwater sellers are dropping on this board. Americans are also known for their mobility. Now, how flexible is it to own a place in one town, find a job in another, then realizing that if you want to rent your apt to cover your mortgage you have to complement 40% xtra from your own pocket because the rental money you getting isn't enough?

"Printer, that's because today's buyers are financially illiterate."

sledgehammer, if you are basing your Manhattan rent vs. buy decision on a 12x ratio, then you should be questioning your own financial literacy, not others.

sledgehammer
Agreed the brainwashing allowed for properties going at 16 to 20 times rent roll.
12 times approaches the break even between positive and negative cash flow properties.
And right now the sales market has not caught up (or down) to the rent market.
Properties have asks of 20 times plus.

Only reason Im looking in Manhattan is thats where I live and rent. Would like to own. The next two years looks like a possibility. If not, I have no problem renting. The mortgage deduction does not compensate the difference in opportunity costs for me.

"12x annual rent/housing price ratio has been the norm for more than 100Years."

Just because of was done this way, does it mean it HAS to be this way going forward?
What are the rent/housing price ratio in other parts of the world?

ericho75

Nothing HAS to be anything going forward but some things are MOST LIKELY.
It's just when you exceed 12 times rent roll you MOST definitely paying more a month in expenses than income receiving on that property.
Given the status of economies and banks, it's only viable if the wolrd actually ends dec.21st 2012.

sledgehammer
Remember ads that said "taxpayer?" :)

sledge - could you please link to the report showing historical 12x ratio? I'm not doubting its existence, I would just like to understand the methodology. thanks

"In some ways.....I feel cheated...waited all this time to see manhattan tumble and we only got 7 months and it was over....if indeed it is over...who knows.....just wished it i had more clarity!!!!!!!!!"

Except its not true. The Q3 numbers in already are already lower than Q2. We've got another quarter of declines....

so nyc - you think you can buy your generic post-war 2 bed/2bath UES place for less now than you could have in April? How much less?

Overheard at EVERY open house " Sweetheart I love this home. It will be so amazing living in this 2 bedroom with you and our child that is due to arrive soon. But if only the rent to owning ratio was 12:1 instead of 20:1. Lets not buy a home before our child arrives, lets stay in the rental studio and invest the "savings" into the stock market and wait 5 years to buy a home that fits our family and our targeted Rent to Owning ratio."

how about this:

"Sweetheart, I can't stand the idea of losing all the money that we have worked so hard to save up. So, since times are unbelievably uncertain, why don't we get a nice 2 br rental using some of the investment income from our nest egg to in effect pay the rent, and see what happens in two years.

All in all, lets be happy together, happy about our large nest egg and happy if things get better.

Overheard at every mortgage request;

Buyer; "I really love this apartment and I understand what you mean by the banks risk? I have a job.
They can't fire me because I voted for hope.
What do you mean 40% down payment? You mean if I default you will have trouble recovering 70% back from the property on a short sale or foreclosure?
This is NYC! Nobody leaves NYC. SO what if more and more people don't have to go to a physical office every day to work. This is NYC!
The Euros can't get enough of our pied a terres. Europe is so boring."

i would like to meet the couple who doesnt own a home and has a signifcant income from their investments in the stock market over the last 2 years. Most investments are still down 30% and people dont see any current upside as "income" they see it as getting back the capital they lost.....

and yeah it is so easy telling your pregnant wife to ignore her nesting instincts and that renting a crap hole you cant improve and customize yourself is a smart move......

"truthskr10" was that English?

And incidentally, my best friend is married with child with another due in a couple months.
Got a great big apartment in soho with 2 months free rent because the market has not adjusted yet.
And yeah it's a hastle and his wife as he wants a home but they recognize where the market is going.
I'm sure they are not alone in their situation.

"Most investments are still down 30% and people dont see any current upside as "income" they see it as getting back the capital they lost"

How is this different than most of America that lost 20% on their RE "investments".... and, uh, leveraged.

Not to mention, most folks owning stock got dividends through it, folks who owned homes through the crash had to pay to keep them.

> "truthskr10" was that English?

Did perfitz really just try and call someone out for the english skills?

ROTFL!

wow you have a friend who is married with a kid? dude then you totally know the situation. I have a friend who is black and bye your logic I am Martin Luther King....

"and yeah it is so easy telling your pregnant wife to ignore her nesting instincts and that renting a crap hole you cant improve and customize yourself is a smart move......"

And since when has listening to your wife's whining ever proven to be an impetus for good investment?

oh jesus, perfitz, you don't even know how dumb you are.

Um NO,it's not english or any discernable language as is true with most post attempting poor analogies. :)

Here is another example of NYC10022 totally lying and misquoting facts: "most folks owning stock got dividends through it, folks who owned homes through the crash had to pay to keep them."

Here he says that during the past 2 years most people who owned stocks got paid dividends and made money, even though we know the past 2 years was the worst stock market performance since the Great Depression. Then he goes on to say homeowners who didnt sell their homes, saw their mortgage payments go down, "had to pay cash to keep them" Completely moronic. completely lying and an example that he has no idea of finance or home owning....

"Then he goes on to say homeowners who didnt sell their homes, saw their mortgage payments go down, "had to pay cash to keep them""

Uh, genius.... are you suggesting that they DIDN'T have to pay their mortgage payments.

Wow, perfitz, I've really never met anyone as stupid as you!!

"completely lying and an example that he has no idea of finance or home owning...."

Perfitz, you could not have described yourself any more perfectly!

Well just relaying an actual real life situation for a scenario you poorly tried to paint.
Sorry if you didn't like the reality of it.
Yes it's only one real story, but one more real one than yours.

Perfitz, your stupid hypothetical scenarios demonstrates you believe the Generation X is less smart than the Baby boomers and that they let the emotional impulsion take over their decision toward a financial investment. No matter how you look at it, a real estate purchase is a financial investment. Baby boomers know it too well as they cashed out on it rather well over the last 10 years. Why do you think the generation X , who is most likely the people buying real estate these days, are not gonna think rationally toward their real estate purchase? Over paying a property when you know it gains a 10% equity/year doesn't matter, but when the trend is going the opposite direction, what should push them into buying? Petrfitz saying so?

so your friends story of renting an apartment when his wife was pregnant is more real than my personal story of actually buying a property when my wife was pregnant with our first child, and more real than the story of buying another property when my wife was pregnant with our second child?

I guess your buddy gave you some really good details of his rental story........

No wonder perfitz is the world's worst investor.

He uses "stories", not data.

First guy whose investor guide is a coloring book!

moron.

NYC was just caught lying again trying to say that "most" people made money in stocks (notice he is sayng that he didnt mean that last 2 years but every other time he says you cant compare RE purchased before 2004)

So NYC10022 are you saying that it was better to invest in stocks than owning a home in what years? The last 2? how about from 2001 - 2004? please explain your brilliance.

So JuiceMan, you forgot to put down what you think the correct price to rent ratio should be.

Well...!?

petrfitz, this is what you'll hear at an open house: "Damn this place costs too much."

Steve after hearing that you then hear "I dont care what it costs, if you ever want sex again let alone another child you will buy me this house"

Ha, yet another perfitz lie! Guy is so dumb, its all he got!

Actual Quote: "most folks owning stock got dividends through it,"
Perfiz LIE: "NYC was just caught lying again trying to say that "most" people made money in stocks"

Perfitz, you can repeat your lie as much as you want, but...

you're still a liar!

and

you're still a moron!

"So NYC10022 are you saying that it was better to invest in stocks than owning a home in what years? The last 2?"

And, yes, stocks, even with a 35% decline beat a home with a typical mortage in the last two years that declined 20% and were leveraged 5 to 1 or 3 to 1 or even 2 to 1.

(but, of course you wouldn't understand that either)

Dude are you 'tarded?

you posted this...Overheard at EVERY open house " Sweetheart I love this home. It will be so amazing living in this 2 bedroom with you and our child that is due to arrive soon. But if only the rent to owning ratio was 12:1 instead of 20:1. Lets not buy a home before our child arrives, lets stay in the rental studio and invest the "savings" into the stock market and wait 5 years to buy a home that fits our family and our targeted Rent to Owning ratio."

And I posted something just as nonsensical.
Overheard at every mortgage request;

Buyer; "I really love this apartment and I understand what you mean by the banks risk? I have a job.
They can't fire me because I voted for hope.
What do you mean 40% down payment? You mean if I default you will have trouble recovering 70% back from the property on a short sale or foreclosure?
This is NYC! Nobody leaves NYC. SO what if more and more people don't have to go to a physical office every day to work. This is NYC!
The Euros can't get enough of our pied a terres. Europe is so boring."

And since you used the married couple with rugrats scenario I gave a real life situation afterwards.

And then you didn't like that story so you decided on another poor approach to just say..."that's just one story man."

All I've got left to say to you is "Drink Brondo, coz it's got electrolytes!"

Printer, about the rental income/price ratio, i just last the 15 Years average for New York, that should do:
http://money.cnn.com/magazines/fortune/price_rent_ratios/

> Dude are you 'tarded?

Yes, perfitz is retarded. That was confirmed some time ago.

nyc10022 you again show your ignorance - the stock market crashed over the past 2 years, people lost money across the board.

Owners who owned and home and didnt sell it saw no loss. many had signifcant tax advantages over the last 2 years and many saw their payments go down - meaning they were paying less for the same housing. So homeowners who didnt sell did not see a loss at all. You are a liar

We will know its the bottom when every believes it's going to take 10 years for them to get their principle back. When that happens, prices will start to rise very slowly, possibly slower than inflation, that will be the safe time buy, after 12 months of rising prices. until then every bottom is a mind-f... for the over eager.

I didn't sell any stock over the last two years, so I guess I didn't lose any money. Who knew? What a relief. I just pity the poor suckers who sold; if they had just held on while the Dow went from 14,000 to 9,000 (via 6,500) they wouldn't have lost a penny. Thank God for petrfitz economics.

sledge - thanks, but it would be very interesting to know why the numbers for New York - both at the peak and 15yr average, are much lower than for other wealthy areas and more comparable to places like Oklahoma City. Those numbers don't pass the smell test. I'm sure it'll be hard to get very good numbers - the Manhattan market is so different in its composition (%owners vs. renters, rent stabilization, primary vs. vacation, co-ops vs. condos/single-family, maintenance charges vs. property tax/insurance), that any comparison based on widely-available statistics is bound to be very mis-representative.

I'm not disputing that P/R ratios were sharply lower in the mid-90s. but then P/E's for stocks were much lower in the early 80s, but I'm not holding my breath for stocks to be 8x again either.

really really, celinelover? tell that to the MILLIONS who have lost their jobs and homes, that they are indeed doing just dandy! Do you even know what you are writing?

sidelinesitter - what amount in tax incentives did you receive for owning those stocks you didnt not sell? Wjat kind of credit history did you create owning those stocks? how much rent did you earn for allowing people to live in those stocks?

w67th whats your point? where did i ever mention people who lost their jobs? Oh i didnt.

myheartwillgoonlover, thatz my f'n point.. you didn't....

funny you'd know that celinelover referred to you :)

OH shit... I just made myself LOL. As a professional/minor league comedian.. .that is a NO NO is my biz...

Great thread...
looks like all it took was a rainy Sunday to bring everyone home.

printer -- It isn't that hard to get both good aggregate data as well as anecdotal confirmatory data. I'm not sure why you suggest differences in composition of the market would affect the methodology.

Off the top of my head, I can think of several reasons why the ratio might be lower for NY:
1. Lots of transients
2. High quality rental stock -- good luck finding luxury rental stock in Oklahoma City
3. High quality commuter transit
4. $1M phase out of tax deduction skews the market
5. Conforming limits skew the market

skinny - and i can think of several reasons why it might be higher:

1) much more cash down than the rest of the country means prices aren't as constrained by lending limits
2) rent stabilization laws artificially skew 'equivalent rental price' too low
3) much lower property taxes than the rest of the country, so cost of carry not that affected by larger purchase price

and I'm not really sure what commuter transit has to do with it. if anything, i would think that paying $200/month for 2 people to commute vs. $1000 for 2 cars, insurance, etc. would mean more $$ for housing, but that would be reflected in both renting and buying

But aggregrate data is extremely difficult to get b/c of the fact that co-ops have been 90+ % of the market, and we only have per-unit data going back 5 yrs or so. There is a reason why Case-Shiller doesn't include Manhattan, and that is a large reason why.

"There is a reason why Case-Shiller doesn't include Manhattan, and that is a large reason why."

There is, but that's not it. Case-Shiller only includes single-family homes, of which there are very few in Manhattan.

printer: I agree. We can argue about what the data should be, but the data is what it is. You originally said that the data doesn't pass the smell test. Without developing an epistemological treatise, I'd say as long as there is a plausible explanation for the data (and I think we demonstrated that there is), then it passes the smell test. Triggering a smell test has a low threshold with a concomitantly low evidentiary standard. If you'd like to subject the data to higher standards, you probably need a more significant objection to the data.

If you are saying coop data skews this, that's a different argument. Do you know that the coop data is excluded or that we only have per unit data going back five years? I believe that people like Jonathan Miller had access to the trading prices because of the appraisal business -- and that's why he was uniquely suited to compile the data.

so: latest from NYT

"The recession is starving the government of tax revenue, just as the president and Congress are piling a major expansion of health care and other programs on the nation's plate and struggling to find money to pay the tab.

The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion.

Other figures in an Associated Press analysis underscore the recession's impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever.

The last time the government's revenues were this bleak, the year was 1932 in the midst of the Depression."

and the recession is over? interesting......

urbandigs:"we know the recession is done,"

Sometimes it's hard to tell if people are serious or joking on these message boards. Is this what you really think?

Sarcasm. Cc. Nooooooooooooooooooooooooooooooooooooooo! Geitner can lend us some of his home equity to tide us over.

Love the 3gs. I can text in between daughter's piano lessons. I can fill my wasteful time with more wasteful postigs! Huuuurah!

In response of those waiting to see prices stronger before buying, I can't help but think of Warren Buffet's quote: "If you wait until you see the robin, spring will already be over..." Clearly that is referring to the economy vs. the stock market, but I think there is some wisdom there that crosses over to real estate. When it turns, it turns quickly. As someone who was on here arguing for a bear market 2 years ago with Spunky and Juiceman, and calling for a 50% decrease, and getting laughed at (ok, I was wrong about the decline here in ny, but early and right about the direction), I can't help but think that now that broker friends of mine who never believed the market could come down are now calling for lower prices, the market is near a bottom. Once the brokers (when they aren't selling) start becoming bearish, we are probably in for an increase. The real estate market always trails the stock market by about a year, so we aren't going to shoot up, but you have to be early, because, as a I said 2 years ago, the penalty for being let is EXPENSIVE.

"the penalty for being late.."

30yrs - yea that was me. yes, I think the NBER will wind up officially declaring this recession over sometime around now, give or take a few months. Maybe its SEP 2009, maybe OCT, but right around here I think will mark the end to this first wave. That would make this recession duration around 18-20 months or so, starting from DEC 2007, deeper than the early 70s and early 80s recessions.

However, I am of the camp that we will have a double dip or multiple shallower recessions over the course of the next 5-7 years for reasons stated on UD many times, 2nd wave. Too tired to get into those thoughts now.

oops sorry, meant 20-22 months or so if NBER declares recession over around now, give or take a few months. longer than early 70s and early 80s recessions that were 16 months each in duration.