New Yorkers not underwater!

http://www.ritholtz.com/blog/wp-content/uploads/2009/07/ny-fed-negative-equity.jpg

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/10/AR2009071002114.html

Would you, under any circumstances, default on your home mortgage, even if you could afford to make the monthly payments?

The study found that 26 percent of the record numbers of home-mortgage defaults across the country are "strategic" -- that is, calculated economic decisions to bail out of loans by owners who actually have the money to make the payments but can't handle the negative equity they're carrying because of declining property values.

**********************************
ONE FACTOR THE STUDY DOES NOT SEEM TO HAVE ADDRESSED IS STATE LAWS. CALIFORNIA IS A PURE NON-RECOURSE STATE...

WHY NEW YORKERS DON'T DEFAULT MORE....

http://www.foreclosure.com/statelaw_NY.html

How are New York mortgages foreclosed?

In New York, thelenders go to court in what is known as ajudicial foreclosure proceeding where the court must issue a final judgment of foreclosure

Are deficiency judgments permitted in New York?

Yes. Adeficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount which the underlying mortgage secures. This means that the borrower still owes thelender for the difference between what the property sold for at auction and the amount of the original loan. The Plaintiff must file a motion within 90 days after the property sale auction to enforce this right.

http://www.nytimes.com/2009/08/30/realestate/30mort.html

So it looks the great collapse everyone is hoping for isn't going to happen.

i think businessweek just reported that in 2012 the area with the third largest losses in value, percentage-wise, would be this one. noted that we have staved off the expected unemployment (thanks Goldman, good to have you as a neighbor), but it would catch up.

but the efforts are intense to rebubble. so it may take yet more time. i just don't see how this can end well, and not just for NYC housing prices, but for the entire country, and our children's future. i'm often negative, but i feel realistic, this is just horrible.

Aren't you being a little over-dramatic?

Property prices could very well come down from here, but NY is not California. We will not have the foreclosures experience of California for two reasons(Most properties are not underwater(save new construction Condos) and for those that are in New York a court can sanction a deficiency judgment.

Prices may well come down(10-20% guess) but it won't be the massive foreclosure sales being talked about..

If there's a silver lining to this crisis, it is that banks are in no mood to excessive lending risks, so buyers once again need to pony up 25% down payment. This is a good thing in that it protects the other owners in a Condominium from the foreclosure risk of their neighbors.

nycgal1, no. but it's great that some news can make you happy. there's been far more happy news than bad news in the msm the last 9 years, and look at what has transpired.

riversider, we shall see. NYC certainly wasn't protected in the past.

and i don't think you can underestimate the effect of the condo market. it really, in its mania, swept things up. and it can really sweep things down. in a city (borough, actually) with around 10K sales annually during a good year, this inventory could be devastating. and it's a very different city, areas outside of prime manhattan gained a lot of steam. the fire sale condo prices in b'burg and other parts of brooklyn will definitely affect our prices. that's the thing about pricing out so many people, they start to think of alternatives. some will find manhattan irresistible at reduced prices, and some will be highly compelled by brooklyn at very reduced prices.

riversider, i couldn't disagree more. banks are very much in the mood for excessive risks, just ones guaranteed by the government. in nyc that limits the options, which is why we see all those sales below $1m.

I personally know 4 or 5 people who are underwater in prime NYC areas. 2 of them are at risk of losing work the next 6 months. You are delusional!

A.R.
You have a great deal of insight and experience, but as a renter and former owner is it possible you are hoping prices collapse so you can re-enter?
I know way too many pessimists who think of themselves as realists...Actually I don't know any pessimists who think they are pessimists..

"i'm often negative, but i feel realistic, this is just horrible."

Every bear and pessimist EVER has also claimed to be a "realist." There's nothing unique in that. It suggests bulls, or even those with moderate views are "unrealistic."

What I do not get in all this is what difference it makes to prudent, intelligent people. All markets go up and down. So what. RE went up and now down, and it'll go up again except that when it does there'll be endless posts that it will go down again.

So buy when you can reasonably afford to do so and it fits your life/goals/longterm needs. Sell when the timing is right for you but never out of necessity. And you know what happens? Voila, you have a great life and may make lots of money, too. I bought in 1989. People said, "oh no! RE is at a peak!." And within 3 years my coop was worth 33% less than I paid for it. Big deal. I was living in it--not trading and selling it like some stock in a day trade. I could comfortably afford it, I loved the place, had a long horizon. I eventually sold in 2007 because it seemed a good time given market levels and fit with my long term goals at the time. Then after renting for 1.5 years (which I hated, incidentally--for me renting even in a great lower 5th Ave pre-war never felt like I was "home") I bought again. Is the place worth less/more/same today as a year ago? WHO CARES? Am I under water? Making a profit? It is irrelevant. I'm living there. I love it. It's mine. It is tailored to my life and the quality of my life is enhanced. Again, it fits comfortably within my financial means. It is a prudent purchase. In 15 or 20 years I'll sell and it'll all be fine.

Moderation prudence long time horizon = success in the long term.

Nycgal. Are you delusional? At one point Arizona owners had 40% equity and we know how that played out. And if you don't follow that logic let me help you by pointing out at the height in 2007 or thereabouts nycers had 80% equity. Lmao lmao. How many times do I have to repeat, I seek the FUTURE!

I personally know 4 or 5 people who are underwater in prime NYC areas. 2 of them are at risk of losing work the next 6 months. You are delusional!

SamAdams I'm sure there are more than 4 or 5 foreclosures in the next six months. What I'm saying is that the uptick New York City has won't compare to California and that additional factors are necessary here for the foreclosure to happen. They basically have to be out of work or facing financial difficulty. If they can cover their mortgage they probably will, because unlike California if you have assets the banks can go after you for the excess of mortgage balance over property value.

riversider, no i don't think so. i really don't want to own in nyc. a part of me would like to buy for our daughter, but if i do so i still have two more purchases, one for her and one for our retirement. and right now i'm looking at the latter.

kw, i often say that people should buy based on more than just economic concerns, if they so desire. this was in response to the "there will be no more downturn" comment. "who cares" is a lovely cavalier attitude, but it's not appropriate for the majority.

riversider if nyc goes down 40 percent from here like DB and GS are calling for nyc will be more underwater then Atlantis

and i think i'm a pessimist, sort of. my daughter keeps telling me i'm a realist. she says she's a pessimist. and my husband is an incorribible optimist. which is why him telling me today that he couldn't think of one thing that obama (the man he used to think of as the second coming) had done well chilled me to the bone.

The country has nothing to gain from Obama failing. That said he his not living living up to what I would've hoped. I think he has ADD as he is all over the place with his plans... It defies common sense to tell the Country that they will face higher taxes and expect them to spend more.

samadams,
In a logical fallacy to take a specific (I know 4-5 people...) statement to make a general statement.
I know how it 'feels' but, there a hugh difference in feelings and logical conclusions despite the obvious emotions yeilded by such a crisis. It's the stats that must be evaluated to draw such conclusions. All that being said...I don't look so good.

As for 'over dramatic', that's the way things are done in these parts...partner.
Now, giddy-up and practice roping that logic.

aboutready, you just seem to be extremist with some of the way you put things. I agree with kylewest - moderation seems to be the right way to approach things.

"I bought in 1989. People said, "oh no! RE is at a peak!." And within 3 years my coop was worth 33% less than I paid for it. Big deal. I was living in it--not trading and selling it like some stock in a day trade. I could comfortably afford it, I loved the place, had a long horizon. I eventually sold in 2007 because it seemed a good time given market levels and fit with my long term goals at the time. "

Great, but at these prices, who can buy with a 20 year horizon. The problem is all the people who bought with a 7 year horizon in 2004-2007 and are now stuck. Its easy to be easy about losing 33% if its followed by a five bagger...and even then, mostly after the fact than during. It was wrong what the government did to the value of real estate. It was a classic pump and dump. And if people are stuck with payments higher than rents in places that won't suit them for the long term, it sucks. Yet another commerical for honest, full costed buy/rent math. It works, just not after 2003.

http://www.investopedia.com/terms/m/meanreversion.asp

I submit that the most likely path after a sharp move is a partial retracement. In statistics this is know as mean reversion. At least this is one explanation of the stock market bouncing back from the March lows....

Mean Reversion

A theory suggesting that prices and returns eventually move back towards the mean or average. This mean or average can be the historical average of the price or return or another relevant average such as the growth in the economy or the average return of an industry.

This theory has led to many investing strategies involving the purchase or sale of stocks or other securities whose recent performance has greatly differed from their historical averages. However, a change in returns could be a sign that the company no longer has the same prospects it once did, in which case it is less likely that mean reversion will occur. Percent returns and prices are not the only measures seen as mean reverting; interest rates or even the price-earnings ratio of a company can be subject to this phenomenon.

Reversion to the mean, also called regression to the mean, is the statistical phenomenon stating that the greater the deviation of a random variate from its mean, the greater the probability that the next measured variate will deviate less far. In other words, an extreme event is likely to be followed by a less extreme event.

Although this phenomenon appears to violate the definition of independent events, it simply reflects the fact that the probability density function P(x) of any random variable x, by definition, is nonnegative over every interval and integrates to one over the interval (-infty,infty). Thus, as you move away from the mean, the proportion of the distribution that lies closer to the mean than you do increases continuously. Formally,

I do not mean to be cavalier in my above post. I mean to convey that unless you have a reasonably long term horizon, the financial wherewithal to weather a job loss of a year (or ideally two) without losing your home, and unless your plans allow for some flexibility in case you can't sell when you want to, then you really have no business buying real estate on margin. To buy RE without financial reserves to deal with being out of work for a year, with a short horizon, etc...THAT is cavalier. It is reckless. It is not smart. Rent. Save. One day buy. But too many people buy without the financial foundation to deal with dips and downturns in life and markets. Financial planning isn't magic. How do people buy into the largest purchase of their lives without consulting independent financial advisors first? I have no idea. But then they wonder, too often, "how did I get into this mess? what was I thinking? I'm so unlucky." It ain't bad luck. It's bad judgment and a disregard of risk that ought to have been considered.

Mean reversion trading on wall street, also known as "statistical arbitrage" was a good strategy 95-2005. Since then its been losing money for firms all over the street. Seems that too many people have been running the same strategy. All the juice is gone. If real estate behaves like mean reversion you can expect more pain.

Since then its been losing money for firms all over the street.

How so? Until this crises volatility was at an all time low. Too low. After two/three years of back to back declines it is only then that the idea holds value.

http://www.urbandigs.com/case-shiller-condo-prices.jpg
Noticed prices flattened in NY starting around 2005. Could be a reason so many got suckered into buying units that are only now coming on line. Implied vol. was quite low prior to the decline in Manhattan real estate. Same thing happened in the bond market before it tanked.

There is something wrong with this data because condo prices certainly didn't flatter in 2005. I have a friend who bought pre-contruction for $1000/ft in 2005 for 2006 completion. Units sold at highs around $1400/ft and now would be lucky to get that $1000 back.

Riversider, for all of its simple theory and complex implementation (inverting matricies, principal components analysis, etc...) mean reversion strategies made money by market making, providing liquidity. When the average joe/jane was pumping cash into funds there was good money to be had providing liquidity. Like most wall street strategies it is designed to take the customers money. When 75% of trades are made by various wall street computers they do not do so well. Like experienced poker players they need fresh blood.

I wonder what happens to real estate if new money is not introduced. But how do you add money in 2009 when you just finished flooding the country with money 2001-2007?

Rhino. My personal experience matches the graph. I saw the highest price appreciation in Manhattan between the years 1999-2005. Fortunately after my last purchase the affordability factor and fear of heights stopped me from trading up a second time.

80's man.
Mean Reversion is just an idea I'm throwing out. I believe it needs to be considered along with other metrics.

80sMan, the chinese? or not. that's the question.

i read that they are ready to invest $200 billion in MBS. the idiots who were reporting this claimed it was because they felt a recovery is at hand.

no. they don't have a rats ass clue where to put their money, and sadly they don't feel like investing in their own personal consumption machine. at least our MBS has fallen, is inevitably backstopped by the taxpayers, and has a physical asset underlying the toxins, unlike the treasuries which just now are representing some very burdened taxpayers. this is probably one of the worst signs one could imagine, but it will be spun into gold. so to speak.

A.R. The Chinese could very well put that money to work as they are currently getting that money back due to prepays from Refinancing....But the MBS pool market looks very shaky and is basIcally supported by U.S. Gov't purchases. They ARE probably just reinvesting their principal.

i assume you were kidding about 200 billion and meant a large number..

kw, i doubt we disagree THAT much. but i was an optimist for YEARS. really. and it wasn't my increasing awareness of events that turned my opinion, it was my increasing ability to get by. it didn't make sense, and that to me was realism. later i found the charts substantiating my intuition, but it all just started with a feeling that things were becoming well and truly f'd up here. and then being the narrow creature that i am, it took me a while to hear of the problems elsewhere. and then i thought of buying again and found out both the prices and the mortgage products available. they seemed to correlate (really, really, correlate). so i thought bubble, and started looking into it because i love real estate as an intellectual concept as well as a place to live and maybe a decent investment.

and i looked into it, and some more. and i can read, and i know statistics, and i am a student of psychology. and this just looked rotten. historically, sociologically, psychologicaly, economically, politically. and it still does. and that's not pessimism, that's realism. although i'll admit that at least temporarily they'll be able to fake something, and maybe or probably they should. given the path they've taken i don't know that now they have any options. which is probably why i've now morphed into pessimism.

but damn i'd be happy if they could prove me wrong. and foster an economy with growth for many, not just a very few. i'm still waiting. but i'm also still looking. i haven't given up yet.

In another sign that the world markets
are not completely spooked by the real estate market in the United States, the China Investment Corp. is planning on buying 2 billion dollars worth of mortgage backed securities. This indicates to me that US real estate even in a weak place is still one of the better investments internationally.

Very few expect the downturn in the United States to be a permanent fixture, but the confidence in other economies is severely lacking. So as we watch our real estate markets with fearful eyes locally, on an international scale US real estate is still considered a worthy investment.

China Investment Corp. (CIC) plans to invest soon in U.S. taxpayer subsidized investment funds of toxic mortgage-backed securities, which it sees as a safer bet than buying into the Federal Reserve’s Term Asset-Backed Securities Loan Facility (TALF).

Under the Public-Private Investment Plan (PPIP) launched earlier this year, the U.S. government plans to seed a number of public-private investment funds that would combine taxpayer money with private capital to buy as much as $40 billion in toxic securities from banks.

Compared with TALF, the new and smaller PPIP program focuses on safer toxic securities, which must have triple-A ratings from at least two agencies, and are debts guaranteed by the Federal Deposit Insurance Corporation (FDIC), sources explained. via CNN.

http://dealbook.blogs.nytimes.com/2009/08/17/chinas-sovereign-fund-said-to-eye-us-mortgages/

pennies

China’s $200 billion sovereign wealth fund, which has suffered big losses on paper on stakes in Morgan Stanley and the Blackstone Group, is set to invest up to $2 billion in United States mortgages as it anticipates a property market recovery, Reuters reported Monday, citing two people with direct knowledge of the matter.

Everyone loves to go global macro. Bottom line is financial professionals in NYC are making less and unemployed en masse. Its much harder to get a loan. This is just as condos are being completed. Forget it. There is no upside, only downside for the foreseeable future. If the carrying costs represented huge savings vs. renting, there would be a reason to tough it out and collect that monthly savings.... But they dont.

Rhino.
We're arguing about 10-20% down vs 40-50% down. Nobody is suggesting we are going up.
My only point is that NYC will not match the foreclosure experience of Southern California for the reasons discussed

actually, according to the Macro Markets thing set up by Shiller, the market is predicting that home prices will be 6% higer 5 years from now.

You mean 10-20% down from here? We are 25-30% down already. We don't need foreclosures. Wealth accumulation is down tremendously in finance either by pay cut or unemployment. The condos still sit there. Even if they were to hold here by some miracle, they are not going up. At this rent/carry cost relationship, you'd be better off renting for four years. At least then rents might catch to the point where its compelling.

riversider, the much more apt comparison, as i'm sure you're aware, would be to northern california. which is going down...down...down... although it started later.

no it won't match the foreclosure experience of CA. couldn't. not possible. but it might match the short sale experience, if you look at things a bit differently.

keeping things out of foreclosure is like not dealing with the excessive leverage at big banks. it pushes things down the road, but unless there's a miraculous turnaround it only serves to fuck you up worse down the road.

Yes. from here another 10%. 20% worst case. The market is pricing in about that much and then a modest increase. A number of posts are expressing another 40% drop from here. I do not see it.

And if someone was viewing their Condo as a source of wealth, it was either an investment property or a HELOC(I mean piggy bank) source.

Another way to look at it, if you have a one or two bedroom and prices go down, it will be cheaper to upgrade to a three bedroom when you need it....You have to live some where.

If you bought conservatively your cost of ownership is less than Rent. I know it is for me.

A.R.
California is a disaster. Makes NY Seem like Economic Utopia. For me southern California will always be synonymous with subprime. All the worst offenders were based there...the biggest of course being Countrywide.

sure it is. for many people. for what time periods.

five years later and my rent is still less than my after tax costs for my similar condo. and i bought conservatively. and that's not counting increased taxes and cc's. and that's my 2000-01 cost. not counting the few hundred thousands someone would have paid for the unit between now and then.

and the cost to rent was less than half in 2004 when i sold to rent. it's still less, and given that those ownership costs are probably going up, and rents are going down, well.

once again, riversider, i said look at northern CA, not southern.

and who now owns counrtywide? and should ostensibly one day post those losses? and where is that source of wealth concentrated?

lord i don't know. china? you? me? the fed? the treasury? all of the sideways?

all of the, bingo.

http://data.newyorkfed.org/creditconditions/

Looks like Southern California delinquencies are pretty bad here. On average higher than the North.

OF COURSE. THAT'S WHY I WAS COMPARING US TO NORTHERN CALIFORNIA. the problems in california are not only california based. it depends on the target buyer, etc.

once again, i can't emphasize enough that different markets had different issues. but not in the ways that some believe.

Too lazy to pull Case Shiller into Excel and compare North vs South. But this is interesting using the "less detailed OFHEO data which goes back further in time. Look at NY vs California.

State HPI Comparisons
Four-Quarter Percent Change in FHFA State-Level House Price Indexes (Seasonally Adjusted, Purchase-Only Index, 2009Q2)
Year Quarter California New York
2009 2 -15.38 -4.02
2009 1 -22.09 -3.52
2008 4 -25.62 -3.15
2008 3 -26.49 -1.43
2008 2 -25.37 -1.09
2008 1 -20.48 0.36
2007 4 -13.96 1.48
2007 3 -9.02 1.64
2007 2 -6.36 1.72
2007 1 -4.46 1.57
2006 4 -2.73 2.24
2006 3 1.19 3.31
2006 2 7.80 6.79
2006 1 13.21 7.70
2005 4 17.72 8.37
2005 3 20.17 10.27
2005 2 22.75 8.74
2005 1 24.06 10.00
2004 4 23.99 10.83
2004 3 24.61 11.18
2004 2 21.94 12.34
2004 1 19.25 11.21
2003 4 17.89 12.70
2003 3 16.16 11.45
2003 2 16.54 11.71
2003 1 17.31 12.99
2002 4 16.80 11.85
2002 3 15.43 12.26
2002 2 12.94 11.79
2002 1 11.51 11.44
2001 4 11.54 10.58
2001 3 12.88 10.43
2001 2 14.10 10.48
2001 1 14.12 9.79
2000 4 13.64 9.91
2000 3 12.54 9.46
2000 2 11.38 8.83
2000 1 10.84 9.65
1999 4 10.27 8.94
1999 3 9.79 8.17
1999 2 9.67 7.83
1999 1 10.28 7.01
1998 4 10.11 5.92
1998 3 9.32 5.05
1998 2 8.34 3.69
1998 1 7.09 2.71
1997 4 4.20 2.50
1997 3 3.00 1.76
1997 2 1.92 1.55
1997 1 -0.39 -0.21
1996 4 0.21 1.08
1996 3 -0.89 0.52
1996 2 -1.16 0.30
1996 1 -1.38 1.20
1995 4 -2.09 -0.58
1995 3 -2.42 -0.68
1995 2 -2.96 -1.10
1995 1 -3.02 -1.25
1994 4 -3.68 -1.36
1994 3 -3.61 -0.96
1994 2 -4.86 -1.40
1994 1 -5.12 -0.63
1993 4 -5.77 -1.73
1993 3 -6.36 -0.03
1993 2 -5.05 1.13
1993 1 -5.45 -0.76
1992 4 -3.66 2.14
1992 3 -1.80 1.26
1992 2 -1.67 1.02
1992 1 -0.96 0.99

Riversider the sooner you cuts the losses you have the better off will you be. Just cut and run before you are very underwater

Please. Worst case in manhattan is 70 percent down.

http://www.housingbubblebust.com/OFHEO/Major/SoCal.html

http://www.housingbubblebust.com/OFHEO/Major/NorCal.html

Those are HPA data. We really need foreclosure data. The 90 day delinquency works reasonably well for that.

http://www.foreclosure.com/state/CA.html

riversider, personally do you wish for prices in manhattan to fall or to rise. and why? and where do you think they'll land? and you can't use any source, this needs to be an independent project.

and i mean you, yours, and if you have young, a longer perspective would be loved.

Personally, I believe they may fall about 10%. 20% Worst case. I am a little indifferent. If prices were to fall more than 20% I would consider a small investment property and/or upgrade to a two bedroom unit(The former a better business decision).

My feeling is we went through a period of speculation and there will be some pain, but this will mostly be felt in New Construction Condominiums that went up post 2004.

I assume things will get tight economically in the City. We get a disproportionate amount of our revenue either directly or indirectly from Banking and Financial institutions, but do believe the worst of the shock has passed and now we're dealing with the after-shocks.

Probably five years from now the majority of NYC R.E. will be within 10% of where it is now. Where my opinion is more negative is in the ultra high end, where I see more damage. I can't see the three million dollar plus properties supported at all. But this is typical. The higher you go, the less people are around who can afford to buy it.

http://4.bp.blogspot.com/_pMscxxELHEg/SpqRF1l8joI/AAAAAAAAGQA/hAjQqozd_Bg/s1600-h/BanruptcyDeliquencyStateQ2009.jpg

Interesting graph. Calculated Risk maintains a very good site. The worst states are pretty much what one would expect.. I think

about - prices in San Francisco, which while not a perfect comparison to NYC, is probably the closest comparison from an socio-economic/political basis, have been flat to up sequentially for the past few months, even in what Case-Shiller deems the high end, with corresponding decreases in inventory. Not sure where you are getting your data that things there are down down down.

actually printer i stand corrected. on the economics news thread otto posted an analysis of markets, although they are only based on current rent-buy ratios. it noted that san francisco was near stabilization for these conditions and rents.

i know the foreclosure ability speeds things up, and i must have misread something recently, because i didn't realize san francisco was that far through the process. you'd think i'd have a better grasp, as it is one of the two US markets i'm thinking of, but...

Same old argument...Manhattan could go up when the rest of the country was going down...but of course it can't continue to fall while the rest of the country is stabilizing or ticking up. Please.

Who has decided that in order to fall more than 25 or 30% there need to be foreclosures. That makes no sense. Incomes are down, therefore demand is down, wealth creation in the financial sector has slowed tremendously...and its harder to get a loan.

Are you bears that ignorant that you can't see an elephant next to a herd of sheep?
About 3-4 months ago, many of you expected sales, property prices to plunge another 20-50% more. Some of you were even naive enough to believe that we are in a depression environment (ahem...Urbandigs..*cough* *cough*).
Fast forward 4 months, property prices have firmed in many areas in NYC, sales volume stay strong in the usual slow summer months. Economic recovery is in the horizon and you guys continues to latch on to the 'end of the world' idea? Wake the FOCK up people.

"wealth creation in the financial sector has slowed tremendously"
Record bonuses in a number of BIG financial firms has been confirmed this year. Pay raises are up across the board. If you look at it, purchasing power for those who are still employed are UP because property prices are down 15-30%. What is it not to like about this situation?

Not sure who you are preaching to, Rhino. I am looking at SF as a point of interest b/c California obviously popped before NYC, so it is interesting to see how it plays out there, and SF is, in my mind, the most analogous area to NY, for multiple reasons. never claimed we will move in lockstep, obviously we haven't in the past. but all the things you mention - falling incomes through unemployment and decreased wages/bonuses, loss of wealth through plummeting of equity and real estate mkts, have occurred there as well. and of course prices here have fallen 20-40%, so its not like prices here haven't reacted at all. 20-40% moves over basically a 12-18month horizon are massive for residential real estate.

"Please. Worst case in manhattan is 70 percent down. "

This will never happen.
We are in uncharted territory in regards to money creation in this world. If there isn't already, a floor will be put in on property prices in NYC.

rhino, i agree. and CR notes (about that chart) that it is greatly influenced by how foreclosures are processed in a given state. if you have a much higher rate, correction will happen faster. that also doesn't mean SF is not going to fall more.

ericho75
Thanks for the heads up. Let me get my checkbook. Was that an elephant? Looks like an aardvark to me.

Um whatever value you want to assign to the foreclosure rate, I don't think it compares to the effects the rental market will/is have/having on property values. Let's see how the commercial mess further exacerbates the residential market. Q3 will give us a widescreen lens view.

truthkr, I think that the commercia RE bust, the depressed rental prices, and the foreclosures will all help lowering RE prices, but we will see it after Q3. Maybe Q1 or Q2, 2010.

CME Futures contract has NY rebounding and ending lower in Nov 2013(down 5%), Nationally they have it rebounding more and finishing higher up 3% in Nov 13. Here are the contract details.
http://www.cmegroup.com/trading/real-estate/files/RE-106_housingFCround2.pdf

If people are that barish there are plenty of people in Chicago who will take the other side of that bet...

Winning the argument that foreclosures may not be severe in NYC is not making a bull case. How many straw men need to die before the bears will at least focus on the important issues. I'll defer to more experienced persons, but isn't commericial supposed to be a leading indicator of residential? How miserable is the Manhattan commerical real estate market? Maybe I should buy Manhattan office REITS as a hedge against the popular bear-shit that this is the "Greatest SuperCity in the World" so 3% cap rates are cool because of the tax deduction, appreciation potential and cause stocks suck.

The Street easy bears should start an investment club and short shiller housing futures.

mimi

I am no maven and like you, this slower pace than expected decline over the last 6 months pressures me to believe that the same speed will continue throughout.
But as the commercial market dwarves the residential market, there is no fighting gravity.
What kind of Tarp package can save or hoax the public into saving the commercial nut?

Until rental markets STABILIZE. The sales market CANNOT STABILIZE.
All those novice developers and lenders are gone. Still smarting from the last year. Just trying to stay afloat. Who's buying properties at $1000 per air right foot anymore? (or for the next 4 years for that matter).
Momentum is still down, and if retail suffers this christmas, forget it. Yes Q1 2010 will actually be worse. We will nickname new yorks's second worst disaster 10-11(as in chapter).

Maybe they add a betting section to Streeteasy with some trusted indices as reference points...make a two sided market for smack.

actually, i wonder what the trading volume is for longer-term housing futures?

Who has decided that in order to fall more than 25 or 30% there need to be foreclosures
Doesn't have to be, but foreclosures can act as wonderful catalysts.

Maybe you see them in condos. However, the line of discussion misses the crux in my view...as do most lines of discussion. The single biggest story of 2002-2008 appreciation in Manhattan is extraordinary wealth creation in the financial sector...both in numbers of persons and income per person. The whole hedge fund industry exploded. It was a cottage industry in the 1990s. Now we are looking at two years without performance fees on average, and much reduced employment, comp and new hiring in the finance industry. This market doesn't need desperate sellers to fall a ton more. It just needs a dearth of buyers against normal frictional selling of coops, empty condos, and more normal financing conditions. 10% or 20% down from here as a worst case misses the boat in my view.

Rhino86

Agree with all you are saying but so hard to pin down. One can go even further and say 9/11 combined with all the poaching Dubai did from NY's financial sector in the last decade may have have actually softened the blow to NY.

How does poaching high-earning professionals soften the downturn? Not following. 9/11 drove interest rates down, prices up. Financial industry correction was basically only 2002.

So the bears amongst you think a condo that goes for $1,000,000 will soon go for #300,00?
Sure glad NYC has those child safety locks...

NYC RE is killing foreign markets now as well. Look at what happened in to the Tel Aviv exchange last night with that news from Africa Isreal about there NYC properties. There is no near term bottom! 11 Times Square has not leased out 1 floor and the building is almost done. You guys know whats going to happen between now and next summer? People are going to lose fortunes in NYC RE

I said -70% was the worst case. Its not a prediction. Do I think $1mm one bed condos from the peak could be $500k in fall 2010? You bet. Can $2.1mm classic sixes from peak that are now selling at $1.6mm go down to $1.1mm by summer 2011. Ditto.

If interest rates go back to 8%, and the stock market retests the lows and hang there too long....Can that $1mm one bed condo go to $350k? Yes. It would still be double what it would have cost in 1998. Don't kid yourself about worst cases.

ask Tishman Speyers how underwater they are on there 5.5 billion purchase of PCV ST complex! They would be lucky to get 3 billion for it but you bulls just keep telling yourself that NYers are not underwater. Anybody who is leveraged in NYC RE will be buried this year. There is a buyers strike and you have no bid to sell into!

Interesting. I don't claim to have more clairvoyance than the next, but struck that the Easy Street consensus and that of actual buyers and sellers in either the current market or futures markets are miles apart...And this is just Resi. CMBS has larger issues. The two markets are not perfectly correlated.

"the Easy Street consensus and that of actual buyers and sellers in either the current market or futures markets are miles apart..."

In English? There is no futures market for Manhattan, and typical corrections here take three years. Are you saying if we were going to go down more we already would have? That makes no sense. No correction has been one year.

this is my favorite quote in almost forever.

"CIC posted a negative 2.1 percent return on its global investment portfolio last year as the value of stakes such as those in Wall Street bank Morgan Stanley (MS.N) and private equity giant Blackstone Group (BX.N) slumped.

But Lou said 2009 was shaping up better.

"It will not be too bad this year. Both China and America are addressing bubbles by creating more bubbles and we're just taking advantage of that. So we can't lose," he said."

http://www.reuters.com/article/ousiv/idUSTRE57S0D420090829

Riversider CMBS and res are no longer even markets. Only thing holding them up is the gov. we have gone to a command economy and we will be paying for it the rest of our lives.

ok gotta go.
leave you with this http://www.offthemarkcartoons.com/cartoons/2006-08-24.gif

so so underwater... .it's like the roadrunner, right b/f he looks down....

I have read a theory on the "rising" Case Schiller index. The theory breaks out the current sales into those that are "underwater" (post 2004 or whatever the appropriate breakpoint) and those "in the money" that were purchased well before that point in time. The theory asserts that for those underwater, human nature prevents many of these owners from selling. Ergo, most non-distressed sales are from homes that were previously bought in the earlier part of this decade (if not earlier) which can still be sold for profit despite current falling prices.

Now if the index for a point in time is weighted predominantly with sales "in the money" and disproportionate number of sales "underwater" (skewing the prior current / old mix) it is possible to generate an increase in the index (despite the checks and balances they purport to have which are designed to prevent these types of current / old biases in mix of sales).

I have no idea how the author of the theory supports it from the data, but it certainly could be possible. I can follow the logic, but not exactly sure how to say definitively if it is actually underlying the trend - we would need to ask Schiller perhaps...

lecker, your comments are relevant, but not to what was being discussed here regarding schiller. this was the CSI futures market. i had heard that it was fairly flawed and thinly traded ages ago, but i can't find much recent info on it now. i think that's because schiller designed it probably 2005, i think it was rolled out 2006 or 07?

futures don't work well for backward looking markets. and they don't work that well for illiquid markets. this is an epic event, it's difficult to use past loss histories to predict future prices. and globalisation really adds a cluster to long-term predictive models. actually everything adds a cluster to long-term predictive models at this point.

Aboutready - I should have directed that to Printer. I think he was the one who referenced a rising case schiller

sorry, i have printer on ignore. once in awhile i take a look, and actually i'll probably reverse that. it's helpful sometimes but i only like to use it if absolutely necessary because, as you see, it causes huge confusion.

About - no biggie - by the way, I like the links you have in the other thread (they are good reads)

lecker, for awhile it was my pet project. and then things seemed sort of thin for awhile. i'd post some in general threads, and didn't have much left over. i don't care that much for the "this month we're up" or "this month we're down" stuff. maybe everyone was on vacation, or mental holiday, because the last few days i've noticed some great stuff, analytical, not just spewing facts.

thanks. many people don't really respond to the news thread, and i quite understand why. it's always nice to hear someone likes and reads it.

lecker, now you are really stretching. is case shiller perfect? of course not - there is no such thing. but it is pretty good, and its not like the thing was thrown together by a bunch of amaateurs who have no idea what they are doing. tell me, are these apparent inconsistencies only prevalent in months when the index shows growth, but not when it goes down? Shiller constructed this at the same time he was notably calling out the bubble - in fact the idea was to create the index upon which futures were traded so that people could hedge out the mkt risk of owning a home. All of this is to say that he is anything but unbiased, and I would suspect that if his model is biased, it would be to the downside. That said, I don't think his index is inherently biased. It has flaws, but I think it captures things (not manhattan, obviously), quite well.
Just b/c things didn't go exactly as you thought doesn't mean you have to torture the numbers to prove yourself right. The housing mkt in many parts of the country has clearly bounced since late spring. may be temporary, may not be, only time will tell. but those are the facts.

Rhino
"How does poaching high-earning professionals soften the downturn? Not following. 9/11 drove interest rates down, prices up. Financial industry correction was basically only 2002. "

All I'm saying is (and very unscientifically) there were many work visa and green card euros working in NYC until 9/11 and the emergence of Dubai. Many workers with many apartments in NYC particularly in the financial sector. If they were all still here during this crash, it's quite possible that their lack of bonuses together with a mass exodus over the last 6 months may have made NY's real estate decline over the last 6 months that much worse as they would be apartment dumpers.
I had a good dozen friends that left nyc's finacial sector to move to Dubai, London, and Hong Kong in 02/03.

Case Shiller publishes a Condominium Value Index for NY with data going back to 1995. The latest data set came out on Aug 25.

The latest data set shows a decline in condo values in June '09. The index is down 15% from its maximum value (Feb '06).

Highlights:
a) CS NY Condo index covers NY Condos
b) CS NY Condo index has been lower each month for 11 straight months
c) CS NY Condo index suggests that the average condo purchased after Aug 2005 is underwater. The current index level is down 10% since Aug 2005.
d) CS NY Condo index data suggests that the average condo purchase after Dec 2003 is putatively underwater. If I deduct a 15% round trip transaction cost from the current index value when estimating the profit on sale of a home, the average purchaser post '03 has will not make any money if the property is sold at the current index level.

Why is Case Shiller touted as having bullish data? Everything I see in tne NY Condo Index is bad and getting worse.

printer

lecker, now you are really stretching. is case shiller perfect? of course not - there is no such thing. but it is pretty good, and its not like the thing was thrown together by a bunch of amaateurs who have no idea what they are doing. tell me, are these apparent inconsistencies only prevalent in months when the index shows growth, but not when it goes down? Shiller constructed this at the same time he was notably calling out the bubble - in fact the idea was to create the index upon which futures were traded so that people could hedge out the mkt risk of owning a home. All of this is to say that he is anything but unbiased, and I would suspect that if his model is biased, it would be to the downside. That said, I don't think his index is inherently biased. It has flaws, but I think it captures things (not manhattan, obviously), quite well.
Just b/c things didn't go exactly as you thought doesn't mean you have to torture the numbers to prove yourself right. The housing mkt in many parts of the country has clearly bounced since late spring. may be temporary, may not be, only time will tell. but those are the facts.
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Printer - we actually agree that case schiller is about the best there is for most measures. Being often bearish on these threads, I understand why you might assume that I (personally) have "tortured the numbers", but I have tried hard to present the theory as someone elses product and not my own - the only goal is to raise the issue and debate if it has merit.

On the question of one way bias "are these apparent inconsistencies only prevalent in months when the index shows growth, but not when it goes down? ", (I think) this is in fact one way bias, given the way the theory is constructed.

I would like to know if there is any way to demonstrate one way or the other if this does hold any water. Although I am generally bearish, I don't think I have totally bought into it - that is why I am looking for some more facts.