Shadow Inventory growing

Geithner is a landlord...renting his Larchmont tutor at a loss.

geithner is keeping his place until he returns to his job at goldman

I 'believe' shadow demand is growing too.

ericho75 - I think you allude to the most important question - are more and more potential buyers sitting and waiting on the sidelines or are some of the previously potential buyers saying "You know what, maybe owning is not the answer and I'll stay a renter for years and years." Or are potential owners losing their jobs and being forced to be renters. Or could potential buyers say, "Hey with rental rates so low I'm loving renting, no need to buy." Or with banks tightening their underwriting standards could potential buyers come to the realization that even if they found the right place the banks just wouldn't lend to them.

Could it be that the actual number of potential buyers is shrinking.

Certainly some of my points above are true to some degree. The question is to what extent. Is the real demand for homes pent up and growing or is the demand diminishing????? Who really knows.

We are working through the buyer pool (mainly created from 2004 to 2008), and the rate of wealth accumulation is not high enough to create new buyers quickly enough to clear this inventory at the current price. End of story.

In other words, shadow demand growth has slowed to a crawl.

Who knows what evil lurks in the heart of NY Real Estate?

..................The Shadow knows

How can shadow demand grow when hedge funds have not made their watermark from 2008 back yet, there are many fewer banks, fewer employed here and fewer still getting paid well...and fewer still of that subset who didn't already buy an apartment in the last four years...

"Geithner is a landlord...renting his Larchmont tutor at a loss."

Yeah, but he is making up for the loss by living in a friend's house in D.C. for FREE:

Geithner's been living rent-free in DC, In a home owned by a top banker

http://forums.wallstreetexaminer.com/index.php?showtopic=834351

HELLO, Government Accountability Office, where the hell are you? Anyone home? KNOCK KNOCK...

More inventory?!?! YES!!

I would not count on there being more inventory in Manhattan. Let's not forget that most co-ops hae strict rules about renting so the number of accidental landlords here are far smaller than in the rest of the country.

of hedge funds way below hiwatermark, many have closed or seen their managers leave--who wants to run a below watermark fund when one can simply close and open a new fund with no watermark issues, or join an existing fund without watermark issues?

ouch to those left licking their wounds with no hope of recouping, while the manager sashays off to another fresh 2 and 20 deal

anyone care to guess what geithner's deal will be once he joins the private sector?

"HELLO, Government Accountability Office, where the hell are you? Anyone home? KNOCK KNOCK..."

Its the Interamerican Development Bank for f's sake. What he is going to do, push through a sweetheart loan to Belize?

Ubottom - which hedge funds are hiring people leaving poor performing funds? Which fund managers who are below their high-watermark are able to raise new capital. The answer is very few on both accounts.

Jazzman -- I would like to see the investment officer at X pension fund explaining that one to the Board of Directors. Yes, yes I knew he blew up his fund last year and left all his investors in the lurch, but this guy is a winner.

sac just hired my friend who lost 55% from his hi--bright guy, got stupid, got caught--betcha he makes good dough now that he's left the wet blankie for his prior investors

old wall st adage: the more you lose the better the deal cut for the next job

the perception is that, free of losses to recoup, many of those who lost big will be the most capable to pick the carcass when it's puked up the last bit of bile

most carcasses still have a bit more bile to puke up imho, incl ny re

alumnus...alumnae
carcass...carcae

those PE guys are anticipating the opportunity to further own the world, however. great, let the companies fail.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aZaXc0DeZAFU

Carcae? I hope you're joking.

"old wall st adage: the more you lose the better the deal cut for the next job"

Stop jock sniffing. This is very few people. If you are a big enough prior stud to blow up and re-land this quickly, then you already own your three homes. This is not the stuff that drives Manhattan real estate. You are talking about four guys.

Even SAC is cutting its fees and offering concessions to investors. It will be interesting to see how they and Citadel do in the future using the "no-huddle" offense.

SAC is cutting to what, normal hedge fund fees? Citadel is becoming a bank and is getting too big to manage and generate returns. SAC and Millenium will be fine. They are run by traders, not egotistical investors. Their PMs stop losses, and if they don't Steve and Izzy stop the PMs out the door. It old school and it works.

By Oshrat Carmiel
Sept. 3 (Bloomberg) -- Cheryl MacCluskey broke ground on a
five-bedroom luxury home in Greenwich, Connecticut, last year,
hoping it would sell by June. Then reality set in.
After cutting the price 13 percent to $4.4 million failed
to lure buyers, she rented it this week for $13,000 a month.
***********************************************************************
Assuming 7% rate this backs into a present value over 30 years of under $2,000,0000
and we haven't factored in any other costs such as r.e. tax. Hard to make the case for purchse with those numbers.

We haven't had a 7% cap rate since the 1990s. And you make the case well why Manhattan needs to fall more. Real estate hasn't been priced as a rent alternative in years. A house like that has all kinds of maintenance that falls to the owner on top of the property tax. Geither is renting his house in Larchmont for $7500 and asking $1.575mm. It sounds like this Greenwich house would be lucky to get $2.2mm. The problem with your annuity though is if you value it that way, you'd have to build some nominal rate of inflation in there. Maybe it should be discounted at 8% minus 2% inflation...but you'd have to deduct the taxes from the $13000 and whatever else is covered by the owner. Without any of that info, Geithner is renting for 18x his gross asking price, and not getting his asking price. It sounds like this poor Greenwich woman should be asking around $2.8mm...and might be lucky to get $2.3mm.

$1300 discounted over 30 years , 360 payments. That's what a mortgage is... This was a table napkin analyses, feel free to offer your own.

rental market is very weak also. when people start walking from prime manhattan after not being able to pay the overhead realty will set in. 30-40 percent down from here and then it will make sense to own again. Its been so out of whack for about 4 years now. You would think that in a city that is the capital of finance people would understand the math makes no sense to own

No criticism here. I think the discount rate should be at least as high as a mortgage rate. The market has been higher for a decade... And your logic is most of the reason why I think Manhattan has a way down to go. Apparently the suburbs do as well.

My analysis would be that its worth no more than 15x gross rent. If I new the taxes, I'd subtract them from the rent, along with the gardner and whoever else, and discount it back at 6%.

Rhino unless purchase option becomes negative, $2.2mm is this lady's wet dream. Good luck w/ the sale.

Rhino, What I did was pretend the rent was a mortgage payment, I assumed a mortgage that high would carry a cost of 7%. The balance was the result. I came at this totally different than you.

The shadow inventory may be pushing rents down more than house prices. Since owners are renting rather than selling, the immediate effect is more rental supply and lower rental prices... Just an ad-hoc theory.

http://www.bloomberg.com/apps/news?pid=20603037&sid=a_xD5LU.fl2M
Annual taxes on a home with a $4 million market value could run as much as $24,500, said Roland Gieger, Greenwich’s budget director.

Single-family sales in Greenwich declined 48 percent to 167 this year through July, according to Shore & Country. That puts the town on course for its worst sales decline since records began in 1977.

The number of homes for sale climbed 24 percent from a year ago to 692 as of Aug. 31, and the median price dropped 21 percent in the 12 months through July to $1.55 million, according to John Cooke, a broker who compiles data for Prudential.

relax rhino (i sniff panties, not jocks, not that there's anything wrong with that) i wasnt implying that the hedge fund industry will carry ny re back to glory--in fact i may be more bearish ny re than you--and those who worked at hedge funds that had any reasonable success over the last several years are in no serious personal duress--they wont be paying up for more luxurious re--but they wont be puking any up either

cap rate is key--no more assumed appreciation to cover the ludicrous math we all subscribed to for so long

I'm a big fan of cap-rate, if I was buying as an investment, but if this was for primary residence, don't think so.. present value of rent vs borrowed balance(throw in r.e. tax if you like..)

Riversider, why did you assume zero down? I mean you can frame it however you want. I am just saying your way isn't a way I have ever heard about. I know cap rate (net of all the expenses) and a simple gross rent to price ratio (commonly assumed to long-run average around 15x). Assuming a zero down mortgage and forgetting about real estate taxes... it just happens to be 12-13x rent, which is not a crazy multiple in its own right.

if they only pay 24,000 in taxes on a 4 million place that would be a sweet deal. should be around 60,000

Isn't the big question whether its a $2mm place or a $4mm place... CT taxes are lower than Westchester, but that still seems low for something that was ever dreamt of as a $4mm place.

the quote was from Greenwich's budget director, and referred to any home valued at $4 mil by whatever their standards are, i'd guess.

must say, wouldn't move to greenwich under any circumstances, but you can get quite a bit out there these days. probably not the "right" addresses, but i don't know enough to tell.

The market is so inefficient out there it seems. I think you'd have to offer $1.5mm on like fifteen $3mm homes to see what the real market is.

i'd so some searching if i were you. quite amazed, myself. seems like a fair amount of stress. having said that, i confess i know nothing about greenwich, where these are located, etc. but it surprised me. i shall have to have a look at the Pelham and Bronxville listings, as I looked in those towns, to see what's going on up north (where the taxes ARE much higher).

I am shocked that taxes in Grenwich are that low.

brings up the larger topic of property taxes in general and how price decreases will filter through.

Aboutready, my wife and I have a loose understanding that Baby One in first grade is the first logical point in time to evaluate a move out of Manhattan. I hate to keep renting, but I might forego any appreciation (say from 2010/11 trough to 2014) we might see in order to avoid transaction costs...and then be a taker of the CT market in 2014.

cc, i think it depends on the city/town. makes our upstate look kind of frightening, no? i always found it hysterical that taxachussetts berkshires property taxes were 2/3s less than the new york side.

rhino, it's always good to have a plan. just stay aware, and be flexible (assuming you're in the position to be).

i found that first $105k coop at a time when we really didn't think we could buy, just by looking. it was early, but it was right. early isn't always right, and it's hard to keep emotion out of it, but sometimes you really do get lucky (if constant vigilance can be called luck). do avoid transaction costs, absolutely.

Well the good thing is that 4 years gives enough time for whatever is going to happen down here, to happen. Maybe at the right price, we buy and commit to a PS through 5th grade. And in ten years, I could be a pauper or a king who the eff knows.

Riversider, why did you assume zero down?

Table Napkin, Extremely simplistic. If it was close, I could have done something more complex....

Fair enough. My napkin of choice is 10-15x gross rent, depending on how pessimistic I want to be that day and where interest rates are. With low interest rates and a bad attitude, 12x is a fair number. I don't know what someone does when they realize the home they spend $4mm might not fetch even $2.5mm in a pinch.

LOL Rhino. in table napkin world I was going to blow up the house at the end of 30 years.

Its good enough. Everything I can throw at this wall points to $2-2.5mm of value for this house. Sucks to be this person. 25x rent was not unheard of at all at the heights of this bubble. 8x is not unheard of at bottoms either.

ar: would be embarrassed to tell you how much we pay in taxes. and the disparity is also shocking. fyi...from what i've seen going over the border to MA is more like 1/2 or less. totally unrelated but amusing: last fall as you drove from NY to MA, the mccain signs instantly were replaced by obama.

i knew the O-man had a good shot when most of the signs in Chatham were pro-Obama. stunning.

when i was looking i was looking at fairly low prices. and the locations in New York weren't top, so i think what happened is that the multiplier wound up being much higher for same-priced homes as the communities had very good school districts. does that make sense?

my taxes have remained the same, although my assessed value has gone up over 25%, implying that now our multiplier must be less. bigger pot, less bigger needs. but yes, those taxes are shocking compared to value. for another school district i don't use. foolish.