Economic News

I think it is a conspiracy to get people jobs, stabilize the economy, and improve confidence.

Could it really all come down to a feeling?
We are in the greatest deleveraging period in recent history, the hightest unemployment in 61 years and, that's all there is? All finished? Grab you pocket book we're heading back to the Mall! Could that be all there is? All better, up goes the RE pricing. Explain this to me. How could this be? the credit markets are unfrozen but, who is getting the loans? Where is the demand coming from. What dynamic combination of forces or events will make Manhattan RE stabilize and rise? A Feeling?

i think many people think with their gut/emotions/feelings vs brain

You're quite a contradiction falco, despite all your protests above, you are looking to buy. Seems quite irrational, so you've proven Mhillqt's point of feelings vs. brain. You ask where the demand is coming from? It's coming from you and others like you. Do you really think you're the only one who wants to buy an apartment in manhattan?

I look at the economic news very skeptically. I hope it is improving, but my gut says this is just a slight uptick to be followed by a major downturn again in the fall. I hope I am wrong. The "positive" news has no bearing on Manhattan or NYC real estate. Prices will continue to fall in the next year regardless of how the economy turns.

"I hope I am wrong. The "positive" news has no bearing on Manhattan or NYC real estate. Prices will continue to fall in the next year regardless of how the economy turns."

Why are you so sure of that? You mean an uptick in job creation will have absolutely no affect on the RE market? I think that is a very bold statement to make that is not supported by any facts.

you remain a frigging idiot. what uptick in job creation are you talking about? you mean the downtick in job destruction, you moron.

Well at least Alpine's consistent. I say there are plenty of morons still out there looking to buy. They might keep this market afloat.

I was referring to t a hypothetical uptick in job creation dimwit.

You mean the hypothetical news of the hypothetical job creation? I think you should run for office.

already did and elected himself. president of the morons of new jersey association.

No reason to respond to President "Bush." He gone.

I've been saying "we will recover" since we started declining. The recession will eventually end, and, it will take some time, but things will get back to normal.

Of course, Manhattan RE - like RE in many/most cities - was a bubble.

And recovery from a bubble pop doesn't mean a reversion to bubble prices.

So, I think a lot of people are going to be very disappointed if they're using the economy/stock market as a gauge for what their RE value will do.

I've been saying "we will recover" since we started declining. The recession will eventually end, and, it will take some time, but things will get back to normal.

Of course, Manhattan RE - like RE in many/most cities - was a bubble.

And recovery from a bubble pop doesn't mean a reversion to bubble prices.

So, I think a lot of people are going to be very disappointed if they're using the economy/stock market as a gauge for what their RE value will do.

I've been saying "we will recover" since we started declining. The recession will eventually end, and, it will take some time, but things will get back to normal.

Of course, Manhattan RE - like RE in many/most cities - was a bubble.

And recovery from a bubble pop doesn't mean a reversion to bubble prices.

So, I think a lot of people are going to be very disappointed if they're using the economy/stock market as a gauge for what their RE value will do.

i love it - bears have gone from Manhattan RE will be down 50% and flatline there, to 'well, prices will rebound, but they won't go all the way back up' - nice.

psychology isnt going to keep manhattan RE up. Its the lack of funding thats keeping prices down. I dont see that changing anytime soon.

I dont think prices will rebound for several years. I think over the next couple months we're gonna see things move lower.

did price of tulips rebound? what about nasdaq stocks? why does everyone (yes even the bears) assume RE will 'rebound' in real terms in the next few years

i certainly never said prices would rebound. during price corrections in real estate you always hit certain points where prices firm or may even temporarily rise due to certain factors. i think prices will eventually return to 2001 or 1998 levels, adjusted for inflation.

nyc10022,

That was well put.

AR,

Why do you say that? "i think prices will eventually return to 2001 or 1998 levels, adjusted for inflation."

AR i didn't mean to just group you in the 'bears' category -- you are in a class by yourself ;)
what i meant was until bears are for real and not just closet dip buyers - no sustainable bottom will occur... most of the people who write desperate posts on here about fear of being left behind by this rebound are a sign that times they haven't changed

SE, you have to admit that there's a bit more necessity for housing than there is for tulips. You can live without pretty flowers, but you can't live without a roof over your head, and there's a lot more natural demand for the latter. The tulip craze was a particularly funny moment in history, but it's not always the best rhetorical card to play.

please, I didn't mean to start another rent v buy argument. bubbles are bubbles, doesn't matter what the asset class is

"i think prices will eventually return to 2001 or 1998 levels, adjusted for inflation."

Totally unrealistic expectations for a couple reasons:

1) Much higher salaries today; Wall Street's bonuses tripled since the late 90's and it looks like they are doing well again
2) Manhattan is A LOT nicer of a place to live than in the 90's
3) Constrained inventory

1998 prices would be nice..lets see how close we can get

I agree with Observer. I do think 2001-03 is realistic, however.

SE, I'm not one who cares much about the rent vs. buy issue. And the asset class does matter. There's a difference between making an argument about a fundamentally trite "asset" such as tulip bulbs vs. fundamentally necessary assets like real estate. Yes, people thought a lot of silly things during the bubble, but there was some basis in reality for it. The real estate bubble was so much more damaging than, say, a Beanie Baby bubble because you could easily just sit out a trite bubble of that sort. No one, even renters, had the option of sitting out a real estate bubble.

You probably have a lot to say, and if you take more care with your examples people are more likely to listen.

To me, the increasing population trend towards cities is what will eventually support real estate prices. Analysts differ as to timeline (what else is new?) but in the long term, cities are where people are going:

http://www.calculatedriskblog.com/2009/08/research-on-homeownership-rate-through.html

evnyc, demographics are one of the main reasons developers decided to forge ahead. but what did they build? they built "luxury" developments, heavy on amenities and common charges, either too small for the average person or too large.

i agree that long-term demographics would indicate a future market for rentals, followed by a healthier market for home ownership. but that depends on many factors, including whether the younger people being forced into retirement can maintain their homes, household creation rates (which i fear will be depressed for years to come), immigration which has slowed to a trickle, the mobility of the young, etc. and those markets, even if the stars align properly, are still to my mind at least 5-7 years away, despite the huge numbers of new graduates this year and the next few. particularly for NYC. i firmly believe that some of the smaller cities are going to be the recipients of good fortune due to this crisis. affordable rentals combined with a reasonably vibrant lifestyles (most likely college cities) will lure those who finally have enough cash to leave mom and dad's pull-out couch.

observer, NYC was really no less nice in 1998. nicer in some ways, didn't have all the construction, and people weren't as frantic. wall street bonuses are high, but only for a few firms, and the total number of those employed declined and probably will continue to do so once certain cyclical needs for their services have ended. the banks can't possibly expect to continue to get free money forever. and their balance sheets still suck. and despite what some might think, the market is not solely driven by wall street money. doctors, accountants, advertising execs, the much ballyhooed foreigners, attorneys, hell even teachers, have been scraping enough together to buy, even during the bubblicious times.

constrained inventory? now that's funny.

ev, I really don't want to offend anyone, but whether 'people' listen or don't to what I have to say is irrelevant. bubbles share certain characteristics that's what makes people be able to identify them as such (usually in hindsight)
one such characteristic is that they always deflate, tulips, japanese assets or otherwise

Well, AR, you know I disagree with the idea that college towns are going to be the primary beneficiaries of the recession, AR. More often than not college towns are one-trick ponies with little to offer in the way of employment. There's a few exceptions, but most are colleges plopped into a cornfield on the edge of some rinky-dink town that would have shriveled up and died long ago had it not been for the college. There's a reason college kids head to bigger towns: there's a better chance of getting a job there. Some were hoping to rebrand themselves to appeal to retiring boomers, but I think that idea has mostly bit the dust. And there's no reason to think that current household formation and immigration rates will remain the same. Like a number of other things, they're artificially depressed right now, but they are going to come back. I don't make guesses as to time frame. But long term, to me this suggests that NYC will bottom out and eventually begin to rise again. That might take two years, it might take a decade. My crystal ball is just as fuzzy as everyone else's.

And who's to say that these condos and/or rentals can't or won't be reconfigured into family-friendly housing? Some halfway intelligent developer will eventually realize that there's a need for them.

Hey, SE, if you don't care whether people listen to your ideas, no skin off my nose, but why bother posting at all then?

evnyc, i ask you, if you were graduating today, or in the next few years, where would you head? why on earth would you commit to this kind of rental market, diminished as it may now be, when job prospects are this bad? generally i would agree, but these are not usual times. i think that so many people, due to bad credit, bankruptcy, foreclosure, will be unable to buy over the next few years that it has the possibility of altering patterns for quite some time. and with employment predicted to be subpar for the next few years, baring some miracle, i don't see a reversal in immigration or household creation rates to the positive. but we shall see.

the existing condo/rental mess will overhang for years, seeping onto the market, and i predict it will get worse as the problems deepen and banks adjust their underwriting standards and appraisals start coming in lower. the NYC development track record, in particular, leaves much to be desired in terms of adapting to the needs/wants of the purchasers. i fully expect that some, possibly a significant amount, of the developments in emerging markets may be adapted for use as lower to middle-class housing. for most of manhattan i wouldn't hold my breath.

ev, what I meant is that sometimes it's amusing to reply to some near religious assumptions thrown around here. As in my original statement that contrary to what even bears (AR excluded) believe prices do not have to 'rebound' in any reasonable timeframe. I do not care if anyone agrees with it or not, in fact it would be strange if they did given that they believe the exact opposite. What might've been of interest is if someone pointed out to me why in fact prices 'have' to rebound. I'm afraid 'it's an island', 'RE is a fundamentally different asset class' and 'all bubbles are different' did not convince me.

se - b/c most people here believe that there is a relationship between apt prices and incomes (albeit strong disagreement on what that exact relationship should be). so for prices not to ever rebound at all once they bottom out would imply that incomes will never grow from that point.

'never' is an absolute term. why do incomes have to rebound in any forseeable future?

real estate prices rose far, far faster than incomes, which in real terms were absolutely stagnant during the housing bubble, so there goes that theory. even if incomes returned to 2007 levels, 2007 real estate prices reflected a credit bubble and would have far further to decline. one can (although in real terms i doubt incomes will in the near to medium-term or possibly even long-term except temporarily in finance) increase at this point while the other continues to decrease quite easily. and that's not even accounting for the destruction of other forms of credit, increased savings rates, debt accrued during unemployment periods, reduced population, increased taxes, etc. and the removal of a pervasive misconception that "manhattan is different" and "manhattan real estate only goes up."

"i think prices will eventually return to 2001 or 1998 levels, adjusted for inflation."

Totally unrealistic expectations for a couple reasons:

1) Much higher salaries today; Wall Street's bonuses tripled since the late 90's and it looks like they are doing well again
2) Manhattan is A LOT nicer of a place to live than in the 90's
3) Constrained inventory"

I think the response is equally unrealistic.

3) We had constrained inventory well before 2001. In fact, we've got a lot more mid-high inventory than ever

2) Yes, but '98 pricing already had that factored in, as well as continued "improvement". And not only has the improvement ended, we might be receding (city/state budget cuts). So, in terms of prices, this one is backward.

1) Remains to be seen... we had 90's level bonuses last year, and some firms are doing worse. Even Morgan Stanley paid out pretty much ALL their money for bonuses, and its still pacing for 14% below last year.

and, it gets even more unrealistic when it ignored...

1) higher taxes
2) higher common charges
3) lower salaries outside of wall street
4) general uncertainty
5) 2001 rent prices
etc...

Good morning nyc10022,

Your conclusion is? Thanks for your addition.

10022, so let me get this straight. you think my conclusion is as unrealistic as nycobserver's? don't care either way, just curious.

I think the logic is unrealistic, less the conclusion.

interesting, as i listed a number of the same factors as you did.

Ability to borrow (and therefore income) is a cap on how high prices can go -- eventually a bubble has to pop when it hits that ceiling.

But the bubble has popped; presumably most people no longer believe that real estate comes with a guarantee of perpetually rising real prices.

Absent bubbles, if incomes go up, wouldn't the newly rich be more inclined to spend/invest their wealth on something real instead of overpaying for commodity apartments that are likely to lose value as supply increases? The price of used cars doesn't go up when bankers get big bonuses. Why shouldn't higher incomes mean bigger or newer apartments or fancier vacations and smaller teacher-student ratios in the private schools, instead of higher prices for the same old stuff?

financeguy: my original post was precisely because i think most people still believe that the bubble will be reinflated. of course they would not admit to it, but the assumption that prices will 'rebound' in 2-5 years is the implicit confirmation

they ARE reinflating the bubble. that's what i find so fascinating, prices continue to drop as they frantically try to reinflate. of course in Manhattan it only affects directly a certain smaller segment of the market, the less expensive apartments, but still the mentality is reinflate. they're shooting their reinflation wad as we write, virtually no room (fiscal or monetary) left for juicing later on down the road, hoping that momentum will keep this sucker afloat, ignoring, prolonging or papering over fundamental balance sheet issues. may you NOT live in interesting economic times.

“If money isn’t loosened up, this sucker could go down,” President Bush declared Thursday as he watched the $700 billion bailout package fall apart before his eyes, according to one person in the room. 9/2008
looks like we need trillions to keep 'sucker' up, any predictions on when quadrillion makes it's appearance?

Regarding prices going back to 1998 levels...UES was $319/sq ft for a 1 bedroom (in '99). That would be about $255k for a 800 sq ft apartment. Would anyone here not buy at that price?

"they ARE reinflating the bubble"
yes they do http://money.cnn.com/2009/08/11/news/economy/bubbly.fortune

"$255k for a 800 sq ft apartment. Would anyone here not buy at that price?" -- many would which is why they're not there, but why extrapolate today's individual circumstance (income, credit availability) into the future?

aboutready
about 12 hours ago
ignore this person
report abuse interesting, as i listed a number of the same factors as you did.

Aboutready, my bad. It was observer's response to your post I was disagreeing with, with the bad logic.

I agree with your points, I was just adding some more.

10022, no problem. i was just curious as i didn't see much difference.

regarding attempts at reinflation and excess liquidity:

http://www.telegraph.co.uk/finance/breakingviewscom/5982796/Excess-liquidity-thesis-gains-traction-as-financial-markets-soar.html

nyc_observer, you're sort of making my point here. why did prices go from $319 psf to $900ish in 9 years? with a recession during that time period? and why were they $319 in 1998, because we were all so poor and living in a time lacking in prosperity? real incomes were rising, the city was in very good shape, schools were less crowded, things weren't worse, they were better. if your answer is Wall Street, well then, what fueled Wall Street's growth and income? And that would be an even shorter time period, post-recession. If your answer is interest rates were higher, well they ought to be. The recent interest rate levels are NOT normal, and they've been proven to be unhealthy.