Will NYC experience a double dip in 2010?

In terms of the overall US and NY economy, I think we're in an overall recovery mode. There might be some dips in there, but they'll be small and the trend will generally be upward. No recession in 2010. Perhaps the rate of increased growth will slow down and the bears will get louder, but no recession.

In terms of Manhattan real estate, it is interesting that inventory in Manhattan is back into the 7000s. http://www.urbandigs.com/

I imagine that prices will tick up slowly for a while, then level off later in 2010, and we'll likely see bigger increases in 2011 and 2012.

In any event, it will be interesting to see where we are in June of this year and in June of 2011.

No one knows. There is so little inventory on the market that it is anyone's guess as to pricing.

gvlifer - my take on the inventory right now is much like Noah's on UD: i.e. if I were advising sellers, I would tell them to take their apartments off the market for December through mid-Jan and bring them back on then, especially if they've been sitting for 3+ months. Shadow inventory I believe is quite high (which also speaks to will's point)

Will - I truly hope you are right - I wrote this NY specific piece on Urban Digs: http://www.urbandigs.com/2009/12/the_futures_so_bright_dont_bre.html
It generated some interesting comments about taxation in the city, the state government's fiscal health and overall demographics of residents and tourists, alike. What I do believe to be true is that, thankfully, NY is not a one trick pony and we have diversified our revenue base to beyond the financial sector. I do believe, however, that local taxes (property, income, etc) will have to go up to make up for budget shortfalls, along with cuts in government services, which we are just beginning to see. Hopefully the economy will pick up to carry some of this weight ...

Clearly not everyone is convinced of the existence or the extend of the shadow inventory. It's as if some people think it's an opinion instead of being a fact. Yes, no one can tell you the exact level of impact or the exact timing, but the sum of the facts clearly point to a specific direction. If it's not clear to you, perhaps you need to do more research and get a better understanding of what is a fact and what is an opinion.

I am on here looking for the bullish facts and opinions to contradict the bearish information I have gathered so far. Therefore, I actually look forward more to posts from bull's that actually provide some facts or thoughtful opinions that support their side. I have no grand illusion that my comments would change the opinion of the masses or effect the market in any meaningful way.

Happy Holidays!

what are the hard facts that support your view on shadow inventory?

Isn't it clear there the sum of listings and sold condos in new developments is far fewer than the number of total units in new developments? Isn't that a fact? Is that not factual shadow inventory?

Sunday - just want to confirm your position: you don't believe in the existence of shadow inventory (b/c you think it's an opinion rather than a fact) OR you too believe that there is a lot of shadow inventory as an intrinsic bear but are looking for bullish opinions to counter your own? Sorry - just wanted to clarify ...

Happy holidays :)

I rather not debate the existence of shadow inventory on this thread since I think there's enough discussion it already.

To the OP's question, I think NYC will under perform the national average based on my 'End of 2010 predictions.'

End of 2010 predictions:
Home buyer tax credit is no more.
People accepted that the refi program only delayed foreclosures.
Wall street spent their bonus much more conservatively than expected.
Interest rate will inch up a little or at least expected to quickly.
Unemployment is lower than 10%, BUT still over 9%
Taxes will be higher
Found that most of the city is still not owned by foreign investors.
Option ARMs will be in the headlines much more frequently.
'Everyone' finally acknowledge the existence of shadow inventory.

i like it :) honest, direct, simple ... not over the top ... nice!

Is it really a matter of debate that new condo developers keep units off the market?

and overall inventory keeps going down even though listings are higher than closings.

Sunday, add...

The max % deduction for mortgage interest is lower

Income taxes rise for NYC and NYS

Banks didnt hire new grads in 2008, so there is no one to buy one beds from people who hope to move up to two beds

Rhino, while i agree with most of what you wrote, considering that 65% of the housing market is made up of renters in Manhattan, you don't need new grads to buy the 1-beds (hiring was off 50-60% vs last summer) - just a small portion of renters to become first time home buyers ...

What you are saying doesn't make sense. A much higher percentage of a much smaller pool would need to buy in order to maintain the balance. Why should that happen?

It's a calculus issue. The buyer pool is growing much more slowly. The family exodus is likely to accelerate.

Also remember the typical one bed renter in Manhattan will never buy. Its only the one bed renters accumulating enough wealth over their living expenses who will ever consider buying a one bed or anything else for that matter.

Honeycrisp, that pool of 65% renters have been there forever. The were not buying when prices were low and rising, housing was being purported as a "sure bet", and credit was flowing down the streets of NYC like milk and honey. Now, prices are much higher relative to rents, have been falling, the bubble has popped with a preview provided by the rest of the country of things to come, and credit is tighter than a ... (let's not go there).

My point being that, sure, some fraction of renters will become buyers, but why would the dynamics change in favor of buying right now? You have noticed that the nationwide homeownership rates have been falling, not rising, even though housing has become cheaper over the past few years.

Ownership rates should fall, as borrowing has become more difficult...and now rates are beginning to rise to boot.

i think it's important to remember that while the fed's target rate certainly affects mortgage interest rates, the spread between the two is subject to many factors. the fed's rate can remain the same until the cows come home but that doesn't mean the mortgage rates will do so as well. i fear an overwhelming tsunami of mortgage failure next year as the recent FHA expansion bears fruit, rotten as it is likely to be.

locally, i can't help but think with the balance of wealth incoming declining against that outgoing, and with many boomers likely to need to sell, that beyond the recent spurt in the at least partially artificially induced first-time buying, there won't be that many more first-time buyers who are sitting on the cash necessary to make the purchase. that sentence is very poorly constructed, but i'm too lazy to edit. my point, it takes a lot of money to buy, and even more obviously if you want to purchase something substantial, with room for children. i think many of today's first-time buyers may get stuck down the road with too little space.

what are your credentials for making those statements? A BA in Psychology and a lot of time at home?

Rhino, I'm hoping the 'family exodus' will not accelerate and maybe even reverse course very soon (in a couple of years). It'll of course depend on how fast the housing price come down to within reasonable ratio to income levels. NYC is a great city to live and raise a family, as long as you can afford it.

"i think it's important to remember that while the fed's target rate certainly affects mortgage interest rates, the spread between the two is subject to many factors."

One of those factors being, of course, the fed buying mortgages like there's no tomorrow. Oh crap, there is, the Fed's going to stop their little buying spree soon. Wonder what that means? Hmm, whatever, I need to head out to some open houses to get me some apartment before that $8000 credit goes away...

inonada, yes, there is that. but of course they could always start up again. hard tea leaves to read. 2010 may be quite interesting. i personally am a bit tired of interesting, but we get what we're given.

keep looking, your dream home is just 4-10 property viewings away. unless, of course, you're picky.

Fortunately, I think the "picky" counter gets rest with the new year, it being the holidays and all.

Welcome back, BTW. It's been really uncomfortable here without you, hfscomm1 has been howling at the moon, we all painfully watching yet unable to explain to him/her that AR has gone away for just a little while to be with family, she'll be back for you to run around soon enough, no worries.

Say, hfscomm1, can you tell us whether you are male or female, or at least tell us how we should officially address this persona? I don't like calling you 'it' as some do, and he/she Is too painful to type all the time.

it is a woman aka riversider.

Rhino86 wrote: "Isn't it clear there the sum of listings and sold condos in new developments is far fewer than the number of total units in new developments? Isn't that a fact? Is that not factual shadow inventory?"

Exactly. What planet (thread) am I on when the new construction inventory is not the critical element of the discussion of the overall market, and the central focus on any inventory self-pleasuring conversation. How can someone quote the 7,000 figure as will did above, and not address what is going on with new construction.

I confess to not being an inventory expert but correct me if I'm wrong on this:

- the most important inventory number would seem to be new construction (either complete or near completion or at a stage where the project cannot be stopped) because this stuff MUST come to market in the short to short-medium term (or be converted to rental, which also indirectly effects the sale market) [in contrast, other sellers often do not have to sell]

- purportedly thousands of new condos (another thread quoted a figure of something like 22,0000 completed or near completion) are part of the true NYC inventory, and this market is material in terms of market impact (i.e., not small enough to be considered normal flow) so it should be the key focus of discussion

- the fact that developers/financers have not felt squeezed enough yet to have to clear inventory (uh....lower prices to sellable levels) does NOT mean that they will not be squeezed by financial reality ever, and in fact one more year would seem to be probably longer than developments can hold out (reasons to cause squeezing are obvious and all relate to someone somewhere financing an empty unit)

still away, inonada. the kids (we borrowed one for the holidays, thus the plural) are playing guitar hero, but soon we will be heading to that most american of inventions, the mall, to see what we might possibly not need but still feel compelled to purchase after our christmas for the ages.

I don't see how the family exodus is going to do anything but accelerate. My wife is hearing tunes change daily frm people we thought were dad to rights city lifers. Realism is on the rise bigtime. A two million dollar home and two private tuitions. It's just dumb unless you make seven figs consistently. Even then, why not a beautiful house.

agreed....

but it will take time...time to sell existing apartment...more time still if kids are in high school. we're one year into this with at least 4-5 to go.

you'll see it first with those with younger children, particularly those who rent.

I didn't even know Riversider was a she, CC. SE needs a float-over tool on names so this info can be at hand.

AR, like pets, other people's kids are best. All the fun, none of the hassle. Run around with them, get them all riled up & excited, send them to mom & pop when they start whining, pooping, or barking.

On the developers not feeling the squeeze, the banks can extend that for a mighty long time.

Some developer of high-end homes in another part of the country was relating this story to me. He found a piece of land to develop because he's going nuts in his retirement, would be happy to do it even to simply break even just to keep sane. He negotiates, puts down deposit withfinancing contingency, goes to the bank he's been doing business with for the past 20 years. Now they guy's pretty conservative as far as developers go: usually borrows only 50% on a project, plops his own cash for the rest. Bank tells him that they'd love to do the loan, but the cash is all tied up. Other funded projects are not selling, so they just keep extending the loans because they don't want to realize a loss. With low interest rates, the developers can keep paying the interest.

Inonada, I guess you're right that the sqeeze may not be felt for a while. Despite that, it still seems surreal to me to discuss "inventory" without attempting to fully account for what is in the pipeline.

you're right in theory but forgetting our all too human desire to avoid thinking about that which causes us grief. and, don't forget all the inventory that was removed by individual sellers over the last six months. some percentage of them were serious about selling so they'll be back.

ionanda and rhino86, not saying that the overall dynamic will shift in the ratio of buyers/renters - rather that it doesn't take a new class of recruits at financial firms to make or break a market, that's all

what's funny is that i am hearing lots of people who previously thought it was a no brainer to rent now reconsidering and thinking there's a small window of opportunity in which to act before rates increase, etc etc ... i disagree with them (as i don't see any v-shaped recovery in NYC anytime soon) but the psychology is noteworthy nonetheless - not because it's correct, but because it's more pervasive than you might think considering that it's precisely that kind of trading mentality that got us into this mess in the first place

The shadow inventory is large because owners (developers, individuals, and banks) don't want to take a loss and will do anything to avoid it for another day. If you had a bullish view before, you look at the current situation as temporary, draw parallels to a recovered stock market, etc. You bleed your monthly nut as long as you can afford it, and you forget your bled losses once you sell. As CC says, this is how the grief is being dealt with.

Add to that a government policy that encourages this behavior because it is best for our economy in terms of how these losses can be realized, I don't really see a big push towards another sudden move in terms of prices dropping. I kinda feel bad for people with the mentality of "I'll just wait until 2012 when prices will surely have come down". It might take a lot longer, and delaying life in anticipation doesn't seem fun.

Honeycrisp, maybe it's the environment I grew up in, but ever since I was a child, a home was not a place to live, it was an investment. In my limited life experience, the golden period of "a home is not an investment but rather just a place to live" never existed.

On the lemmings taking the bait to buy, just demonstrates that the government policies are working. Along with this comes the belief to keep bleeding on the monthly nut rather than strategically default, which is probably even more important.

Is there any evidence of a family exodus? I thought the number of children in NYC was at a modern high mark, and the public schools are overcrowded and turning kids away.

The exodus is prospective. It takes time. Lifestyle decisions don't happen overnight.

Yes it does take big new financial classes to support prices at these levels. And big law classes. Most certainly.

Don't forget hedge funds. You really need to understand how we got here to realize we can't hold here.

inonada - you make a very good point - in many ways, investing in housing over the last few decades has been investing in a government policy that subsidizes home ownership through multiple venues ... continuing to do so would substantiate the belief that the government will continue to do so despite the current "lessons" learned ... an interesting bet, to be sure, if one takes the "home is an investment" philosophy. my husband and i both having foreign roots (albeit from different countries) we're more used to the home is for living view ...

it would be a damn interesting thing to see what would happen if tax deductability would disappear for home owners ... (though, arguably, the very nature of government in terms of economics and social welfare is to subsidize the "good" and tax the "bad")

inonada - one question ... when you write: "I kinda feel bad for people with the mentality of "I'll just wait until 2012 when prices will surely have come down". It might take a lot longer, and delaying life in anticipation doesn't seem fun." ... this seems to contradict a bit of your view that current buyers out there are just lemmings ... did i miss your point?

Ino...I fear you are right which sucks, as you say, for those who might want to buy. But...what is making nyc unfold differently than other over-hyped markets that had bigger legs down initially, and then continued to go down, and may be going down even more now...miami, naples fla, phoenix...or whatever.

took longer to start....its taking longer to unfold. tremendous amount of wealth, relatively small number of speculators compared to other markets.

What makes you say other places had bigger initial down legs. We were down 25 or 30 percent from sep 08 to june 09.

At least vs miami, I also think a factor is that new development construction is a much smaller percent of the market (my impression), so developers/financers couldn't plausibly keep holding out so long as they seem to still be doing in nyc.

Rhino, i guess the 25% number is right per threads on comps, but on the other hand there is lots of inventory here not priced to reflect that.

but obviously the market is about whats closing, not whats listed.

Asks are meaningless. And I bet our first drop was among the largest and fastest.

ChasingWamus, while there are many who are leaving NYC, there are also people coming in (especially immigrants) and yes, I think there's a baby boom too. You can even end up with a net positive in term of population. However, the key is the difference between the average income of the ones coming in vs. the one leaving. I think the ones coming in makes about $20K less.

I believe the migration rate of middle and upper middle class young families out of the city will slow as the housing prices become more affordable. Depending on how affordable it gets, I can imagine the trend reversing. With unemployment being so high all over the country, it'll also discourage such migrations for now. It's important to note that the main reason for the young families moving out is not because they don't like NYC, it's because they can't afford it.

However, I am curious to see if the senior population will want to leave more so than usual. I think they want to stay, but it'll also come down to whether they can afford to stay when they retire.

Ok I withdraw the point about this being lower leg down first.

I know asks are meaningless in terms of reflecting where sales are actually closing, but I;m not sure they are totally meaningless. No one in Miami is asking pre-crash prices but for some weird reason it seems lots of listings in NYC are, not to mention the new developments that are not pricing at market clearing prices. Maybe these people are holding out for a turnaround. To me it is a strong signal not to buy (I'd feel better about buying if developments were selling, if listings were say within ten percent of closing prices). Maybe what I'm saying doesn't make sense..further thought required.

i think it does make sense. the market does not appear to be functioning in that large segments remain priced way too high. this is not a sign of stability---feels like another shoe has to drop (pun intended). not clear whether these unrealistic sellers will just pull their listings, or sit tight and not sell or....start to move lower. and, of course, if (and who knows?) its #3, seems like this could provide strong downside push.

I agree with Rhino on our first drop being fastest & biggest. The 30% drop seemed to happen overnight, really didn't see that in any other market.

Honeycrisp, I guess I think there are a few viewpoints. One is the "this is just a temporary blip on the way to ever-increasing prices, fundamentals be damned, that which once went up must always go up". Let's call them the suckers. Then there is the "prices have come down a bunch, low interest rates are going away, tax credit is going away, I got my 3% down payment with nothing more to my name, economy has turned the corner so shouldn't housing, my wife is nesting, who knows, let's just do it" crowd. The lemmings. Then you got the "what do I care if it drops a million, that's what I make in 3 months" crowd. Call them the rich-and-willing-to-burn. Then there is the "prices are unreasonable, so they gotta gotta come down, I told my wife we would when they do, it's been 3 years now, oh please please let them come down soon 'cause I can only hold her off for so long, and I don't want to be stuck in a junior 4 with two kids" crowd. Call them the torn, the object of my sympathy. Then there is the "the market will do what the market will do, and when it's ready and ripe for the pickin', I will be there; until then, I'll rent fancy "investments" on the cheap, change when it loses its gleam, and my wife's on board 'cause she can do the math as I didn't marry no dummy" crowd. That's the enlightened.

Now for the tough part, can you guess which is me?

I bet there were peak asks in Miami when they were only 14 mos into their decline like we are.

Above the key issue was identified. At what price will exodus slow. I am willing to bet it's no less than 50 percent off peak price.

inonada: *lol* well captured
i would venture to say you're the last ... being as i'm probably one of the newer SE talk members, i definitely don't know you as well as others likely do :)

Inonada, excellent description of personalities of buyers. How do you factor in this -- what if someone is deeply skeptical about the market but thinking of buying cash and cannot , while waiting for the market to crash, invest the cash for anywhere near enough income to pay rent (without taking imprudent duration risk in fixed income, or overallocating to volatile equities).

This is a subset of the screwed up situation of zippo interest rates while the government borrows bazillions, and expands entitlements, and tries to reflate re.　Ｗｏｎｄｅｒｆｕｌ．

If you don't think you can make four percent in new York munis without inordinate risk the last thing you should do is buy an apartment in ny.

Buy mortgages.

inonada: torn?

Rhino, I don't follow munis but, apart from the NY credit risk, presumably if you believe, as I do, that any bond with duration out more than a couple years is not a prudent risk to take given govt policies (if treasury rates rise won't munis get hurt too), so I don't think resolves the issue.

I'd have to think about mortgages. Buy what would you recommend?

but mortgage bonds also carry the rising interest rates risk that concerns me

I will admit if you afford your forever apartment and you are okay with private school after grade five... Then I guess you look at your four percent cap rate as a muni bond. However, circumstances can change unexpectedly and unloading that in a six percent cap rate market is not a fun possibility. And six percent is not a high number in and of itself.

Ok so if rate risk concerns you that tempts you to buy real estate? The rate risk is every bit as bad. A short term bond fund yields 3 percent. That matches your cap rate. What's your concern there?

Honeycrisp & Sunday: enlightened. I thought my naming would give it away, kinda like the statistic that 90% of people think they are above-average drivers.

Jim, you're trying to crack a tough nut: you want to equate a risk-free asset with a risky one. RE is overpriced, but not quite to that extent, but almost. The rental yield of an apartment is about 4% if you try hard on finding a good deal. The maintenance, insurance, after-deduction taxes, upkeep of an apartment are in the range of 2%. So you're really talking about trying to get 2% on your cash, not 4%. You can't quite do 2% risk-free, you gotta go with a 5 or 10-yr treas or short-term muni to get to 2% after-tax. Utilities were yielding 6-7% diva several months back when I bought one, maybe they're 5% or so today, 3-4% after-tax?

I would have guessed enlightened if you didn't say it would be tough to figure out.

No an apartment is really four percent yield net of those things already.

A ten year muni is four and it's still much less risky then a manhattan coop.

i am in contract to buy a 1br in williamsburg(i know that sets me up for lots of negative "your an idiot comments") but....i can give a concrete example of "shadow inventory"..if you look at new developments in manhattan and brooklyn one of the tricks employed by brokers is releasing these listings in stages and not all at once...even though in the examples i"m referencing none are complete and ready to occupy they(brokers) choose to release them in small batches..2 specific examples are 2101 eighth ave(parc standard) and the allan building (70 berry) in Wburg. in both cases you will notice neither building is close to completion and only part of the units are listed for sale..in parc standard it is a 28 unit condo and it shows 8 listngs for sale and 1 in contract. why are the other 19 units not listed? is this not the definition of shadow inventory? this seems to be a common technique in new devs to what end? is this an attempt to supress the amount of units that appear to be available in the open market?

moxieland - yes, that technique is used by pretty much every developer (particularly when it comes to large buildings)

this is for numerous reasons:
1) the more choice that exists, the less likely a decision will be made (scientifically proven, actually)- so by limiting the choices that people have, developers are increasing their chances of a sale (much easier to choose between 3 options than 33);
2) creates a sense of urgency (albeit a false one) that only 2-3 apartments in your line or for your taste is available;
3) creates a price floor (i.e. interested parties then bid for a smaller number of apartments, thereby limiting the discounts needed to provide) AND it allows for 2nd and 3rd batch releases to take place at higher prices (or lower if needed) without hurting the entire inventory;
4) allows developers to tell buyers they're 70% sold (70% of released units, often times) and
5) creates a scarcity effect and an opacity towards the rest of the world as not all listings hit the market all at once - smoke and mirrors, if you will
bottom line - DEFINITELY shadow inventory

inonada - glad i got it right :)

Sunday, sorry my sarcasm threw you off.

Rhino, I am saying 4% gross, 2% net is hard to find but can be done. 6% gross, 4% net is a pretty bad rental deal IMO.

honeycrisp: Since it is pretty transparent if you ask a few questions to figure out that the "released" units are not the only unsold ones, I think your analysis overstates the impact of this on a particular building --unless people are even dumber than I assume. Of course it's shadow inventory, but anyone who got fooled by that ought to have a court appointed guardian.

yo Jim..your infinite wisdom is not shared by all..but seeing your denigrating others maybe you could just rattle off the number of units in brooklyn and manhattan that are for sale but not released?..in new developments alone what would that number be?..what is the approximate shadow inventory in new devs that's not listed as available?..those of us who are fools(and w/o our guardians) would love to know?

I meant my reference to be to units in a particular building, and to me her comments seemed to be discussing a particular building. I said she was overstating her point, which I think is hardly denigrating her. I stand by what I said -- if you were to be fooled into misunderstanding fundamentally the number of unsold units in a particular building just by looking at released that would be ridiculous, hence the guardian comment. What I said certainly wasn't meant to denigrate you -- it seems pretty clear that you perfectly well understood the real situation at 70 berry, and in my experience there they were absolutely transparent about it (they said the penthouses were not released because glass not in yet but would be happy to show any and all units).

I have no idea about total shadow in the market, but I do think it is very important. It is one of the main reasons to be cautious about this market.

Jim: "...anyone who got fooled by that ought to have a court appointed guardian."

Wouldn't that just end up with the blind leading the blind, leading the blind.

Don't under estimate people's ability to surprise you, in either direction.

inonada, sarcasm is so much harder to get when it's in writing. I guess that's why I'm warned every year by the company to avoid it in email communications.

Sunday -- perhaps my faith in court appointed guardians is excessive. Point taken.

Understand your point Jim and that point is taken..as for sarcasm being hard to understand in writing i agree and it reminds me of something i was told by lady in Utah..being a typical new yorker i made some sarcstic remark and she looked at me cross eyed i then said "you understand i was being sarcastic right?"..she says in response (and i shit u not).."do you know what sarcasm is?"..i said umm yeah..she says "its angers younger brother"...lets just say i couldn't get on a plane back to our great city fast enough

Yes, sarcasm is very difficult in email, and its downright unprofessional in any case. That's why I love it so. They should make one of these ":)" symbols thingies for eyes rolling. You hear that Silicon Valley, get on it!

In 1998, the Monday after Russia defaulted, I sent an email to Moscow saying "Mr X, why didn't you tell us this was going to happen so we could do blah blah blah." It was a joke, but the responder , a very formal Turkish guy (part of the reason I used to send him sarcastic emails) sent a serious response. All this was the basis for a long wound up gotcha question to me under cross-examination in litigation two years ago, to which I responded "it was a joke". The judge instantly accepted that.

Jim - I understand your point - was just trying to answer Moxie's question on whether it is common for new developments to limit the number of released units and why they would do that (at least that's what i understood his question to be); was trying to say that yes, it's quite common, with a good bit of reason and a whole lot of shadow :)

There is no such thing as shadow inventory, at least with regards to new development and to any buyer with half a brain. Before you all reach for you keyboards let me explain. With the tools available to buyers(SE) one can easily see what the unreleased or shadow inventory is. I myself am in contract in a new development. When I viewed the building I asked to see an apt that was not released. It turned out to be the one I am in contract on. I think most people searching for apts in NYC are pretty damn smart-minus those who bought at the top. Greed and fear tend to create bad investment decisions. Let's be real here folks, all units in a new development-released or not-are for sale the day the building opens. Hence the only true shadow inventory is individual owners who need/want to sell but are waiting for better pricing. I doubt that adds up to much.
And about the economy. Well every 2009 prediction about the stock market, RE, TARP, interest rates and commodities has been spectacularly wrong. Economists and market mavens are nothing more than crystal ball gazers and most repeat what others say. My bet is that the 2010 predictions about employment are going to turn out to be wrong as well as we will see a sharp decrease in unemployment next year. And I've put my money where my mouth is. I went heavily long stocks in february and have just closed on a miami beach condo. yes mark zandi is calling for another 30% leg down in miami. i just don't see it. what i did see in miami was capitulation. people want out at any price. that's a bottom. we had a mini-version of that here in new york earlier this year. i too was hoping for even lower prices but one cannot allow what one wishes for to color their view of actual market movement.

Blah blah blah. Its shadow in the simple sense that its not in the inventory figures that people quote and throw around as a means to make arguments that this market is bottoming. Most people are not smart. Most people are lemmings. Miami sounds like a good investment. A new dev NYC condo does not. Don't try to apply technicals to residential real estate. Its too slow. Downcycles don't play out in one year. Miami makes sense because that's been getting killed for several years now and has a high cap rate in place.

cfranch - I hear you but I do believe there are still some stormy waters ahead for new condos, given the number of units and the relatively inflated prices developers continue to demand. If you have half a dozen identical units for sale in the same building, it stands to reason that the prices will continue to feel some pressure. I agree its less mysterious than many people think though.

On another point, when scanning recorded sales, there are a number of sales that have no associated listing. Granted many are the result of creative listing strategies that seem to have fooled the SE machine, but there are others that are clearly private, inside deals. That's a shadow market we can see, albeit only after a deal is done.

I would have to agree with cfranch, where the desire to see lower prices has to be mitigated by the reality of a relative dearth of options in certain markets. Whether this is strategical or circumstantial, i am not sure, but in manhattan there is very little selling and less coming onto the market.. shadow inventory, until it is released can only cause concerns, not major price changes.

having said that, i don't see prices going up.. rentals will keep dragging down the p/r ratio..

There appear to be a lot of options here. Brooklyn, Queens and condos all over Manhattan are sucking wind. Some will need to sell. Its interesting to me that after 14 mos so many people are willing to call bottom, when there has not been one metro market that has bottomed in 14 mos, in the United States in this downturn...and never in any downcycle in Manhattan specifically, has the market bottomed that quickly.

Plus, if its not going up anytime soon, and the carry cost is barely = to rent...that is what is called a free option to wait.

I could understand buying here a lot better if the cash yield of ownership weren't so piss poor at 4% or less.

what is the insistence some of u folks have on calling others stupid(or half brained)..cfranch i am soon to be living nxt door to u in that new dev(actually one door down) in a unit that is also unlisted..the point is what rhino said these units are not reflected in the current inventory of available apartments. Does this game, trick,deception have an actual effect on prices? As far as doubting that it "adds up to much"? Do some simple math. I gave 2 examples in this thread that show more than half the unbought places not listed.

At 6%, I'd know it could conceivably go to 8%, but at least 6% would be a decent number.

cfranch - you are right that many got the reflation wrong, including me. I admit that. I didnt buy into it for at least the first 3-4 months of it. And lost good coin shorting around the 900-950 level a few times before backig out. But to hear someone say they went all in february and bought miami condos at the exact bottom, without saying anything about what kind of pain you may have felt prior, is a bit tough to swallow.

So are you saying you were a renter for the housing bubble and avoided that? if so, excellent. Also, are you saying you didnt own any stocks in mid/late 2007 when the destruction happened? If so excellent, but I heard this story before. Everyone gets out at the top and gets in at the bottom. And of course, everyone saw this coming from before it happened. Funny how that works in hindsight

cfranch: "..most people searching for apts in NYC are pretty damn smart-minus those who bought at the top. Greed and fear tend to create bad investment decisions."

What pill did New Yorkers take this year that made them a whole lot more smarter, less greedy and fearful all of a sudden? Where can I get that pill???

Congrats on your early 2009 stock bet. How did you do in 2008?

ps: where is spunky. where are the original guys on SE back in October, November of 2007, over 2 years ago, adamantly fighting and arguing that there was not credit crisis and how Manhattan would never get affected at all..this argument went on for month after month after month. Does anyone even remember these?

Now, everyone was bearish before the fall and bullish in february. amazing

Lets also not forget that whether or not someone got the stock market right - top and bottom - really says nothing about whether or not this is the bottom for Manhattan real estate.

Lets stop and establish some simple facts (1) Manhattan real estate can and has in the past moved counter to the stock market, sometimes for years, (2) A 4% cap rate is very low, and was never seen before the housing bubble, (3) the last downturn took three years to play out, with double digit declines in each of those three years.

In this context, can a purchase really be supported here as an investment? Maybe as a preference for someone who doesnt plan to sell, perhaps ever, or doesnt give a shit.

rhino - its a good point. In terms of real estate, the only role stock markets play is when there is a significant move in either direction ----> may lead to a tweaking of buy side confidence and sell side optimism/desperation

If stocks fall 20% in a 4 week period, trust me, buyers will get cautious and sellers will get nervous

If stocks rise 20% in a 4 week period, trust me, buyers will feel wealthier and more confident and sellers will get a bit more optimistic

Thats really the only link I use for stock markets and this housing market.

Sure, okay. But from 1991-1994 the stock market rose as the real estate market fell. In 2009, the stock market rose generally as the real estate market fell (March to June)...then apparently it stabilized from June to present. There is no way to prove it, but I still say the current buyers are playing with 'boom' cash. The pace of wealth creation will be much slower for a while, and the outflow of families will not generally be matched by inflow of financial and finance-ancillary professionals. Maybe the market just vexes bears and bulls and sits here for ten years. Something does have to correct this mismatch in rent to buy ratios. This said, I don't see how the secular outlook for Manhattan rents can be positive from this point in time looking out over ten years. This city was built for finance. Not 1990s finance, not 1970s finance, 2004-2007 finance.

I"'m also looking at renting in some of the new condos but I really want to be able to customize things, not necessarily meaning anything extensive but set up a entertainment system, paint, window treatments (caution, a lot of these don't have!), shelves and whatever. So assuming the owner is ok with that, these are still time consuming and expensive. And then my real point is that you need a long term lease for it to make sense, definitely 2 years and possibly the possibility for more years after that. Otherwise might as well do a rental building but those definitely aren't as nice.

My opinion on the market, looking casually for a bit (and this site is great I just found it), is that I don't know if we will see more downward pressure across the board BUT definitely no upward pressure on prices for while.

Oh, dope!, my real point is that on the one hand you want to customize and a longer term lease and the other hand that there are a reasonable number of places that are cheap monthly compared to what the buyer paid for it so they get a bad return on investment and the renter benefits from it. So anyway if you are the renter it is good for you and even if prices might not go down further you still benefit for several years as the renter. Again I'm talking about the condos. SOmehow I think that the rental building owners are doing ok even if they built recently they seem smarter going from location selection through development and leasing than a condo owner who paid high prices to a developer.

damn i step away from the computer to eat b'fast:

okay here is my recent RE and stock history:

I owned a home in miami that i purchased in spring '05 and sold in fall '07. it had a full time renter to whom i sold the property. i have been renting in nyc since 2004. i had sold my london terrace coop and a weekend home in sullivan county in '03. owned both for 7 and 10 years respectively. moved to nyack where i purchased a renovated victorian. hated the burbs and sold after one year and have been renting in nyc since. did i time the exact tops or bottoms? no but am still happy with my history, all of which was circumstantial and not due to any great RE market insight.

as for the stock market. i got burned badly after the 2000 crash. i decided to study technical analysis and managed to trade my way out of a deep hole. i got a sell signal(failed pattern) in november 07 which i stupidly ignored. i eventually went to all cash in march 08. i should have gone short but did not. i traded positions around in '08 but the excessively volatility whipped me out of them. i ended '08 with a 27% loss. i also made some stupid mistakes i thought i had purged from my trading. the high degree of bearishness earlier this year coupled with the crescendo selling signaled a bottom to me. i think we still have plenty of room to go higher with little resistance. market sentiment may be bullish now but many fear this market and are still under-invested. calling tops is harder than calling bottoms(at least for me)but i still check on market sentiment and price to tell me when to exit. i tend to take profits on the way up(or down for shorts) and stop loss remaining positions to break even or at points of support or resistance.

Who cares? What is your supportable bull case for a Manhattan condo?

Nice victory lap after getting smoked in 2000 and 2007.

Nov 2007 to date, how much are you up in your investments or are you?