Are buyers in a sweet spot?

unemployment is declining?

10.2% to 10%, october vs november.

hilarious. how many people are out of work? and, how many jobs have been added in the last ten years?

net we've had no job creation in 10 years. but the jobs that were created pay more than those that were lost. we've also seen an enormous increase of the self-employed i.e. small businesses. you can selectively read the employment data but i suggest you broaden your scope to get a more accurate picture.

You do understand 2 parts to ratio. Thru the magic of 'i give up for now' it went to 10%. The key is 'now'.

So wannabuy, what fraction of your net worth did you put in stocks last year? How did you do w.r.t. timing and getting in March '09, and how did you decide when was the right time to pull the trigger?

wannabuy, do you think their was a bubble in nyc re prices (ie something out of whack with fundamentals such as rent vs buy, affordability)?

i thought the incredibly slight decline was pretty much due to seasonal retail employees. and those people are back to being unemployed now.

That is what I said on SE on the very same day the Nov. numbers came out in Dec. During November, retail stores hired 350,000 seasonal employees, which exceeded the number they hired in 08. The number is even greater if you count the seasonal empliyees hired by non-retail companies, liek Fed Ex, UPS, etc.

a bargain about to become a bigger bargain is no bargain at all. Yes, buyers might be in a good position now, but it could possibly be a better position in a year. Fact is, things are still very expensive relative to income and rental costs.

Remember, folks said parallel things about buying stocks when the declined from 14k to 12k... and to 10k... and to 8.

Not saying it won't shoot straight up from here, or won't stay flat for 20 years, noone knows for sure.

But just because an opportunity is better than last year, doesn't mean its a good opportunity.

inon: i use technical analysis to trade. if you look at a monthly chart of the SPY you see that march was a climactic bottom with increased volume. in fact it had the highest volume of the year. also the bull/bear ratio was at an extremely bearish level, which is bullish. there are other indicators i use but price/volume and sentiment are my primary tools. i use SSO as my trading vehicle and i went all in with my IRA and 70% in my cash account. market still looks higher to me but i expect we will have some scary drops along the way.

somewhere: i agree catching a falling knife is dangerous yet sentiment is so bearish on RE and we have had a nice correction off the bubble highs. volume is picking up as well. yes every bear sights the macroeconomic issues as headwinds. i don't disagree. look the housing bubble, like any bubble, has no fundamental basis. it is all emotion. crashes are the same. greed and fear respectively. however we are at a place where sellers are far less greedy and buyers far less fearful. we've already had the panic selling, albeit mild. i mean RE is not the most liquid asset. we are at equilibrium. i have bought in the face of all these economic headwinds and will watch RE climb the wall of worry. i don't expect a V-shaped recovery but a recovery nonetheless.

Yes, there was a big stock panic last year, sentiment was way down, but at the same time fundamentals were great. In NYC RE, fundamentals suck. What is your hope here? That fundamentals keep getting ignored indefinitely? The way I see it, you need 3-4% annual gains for a decade just to break even compared to renting. Sentiment may be what it is, but it's not like you can turn on a dime and sell without incurring a 10% loss.

we've had a 20% decline and precipitous drop in sales volume. how can you say fundamentals have been ignored?you obviously think the decline should have been greater but what formula are you using to determine that? i agree fundamentals suck but i believe the NYC RE market functions much like the stock market as a discounting mechanism and is predictive of where the economy goes. so i buy at maximum bearishness when things look the bleakest fundamentally yet markets seem to be ignoring the "bad" news. most people want to buy or sell when everyone else is doing the same. that is a sure bet to poor returns. i do not trade stocks based on fundamentals but use technical analysis. do you remember the internet stock market bubble? companies came public with no earnings nor any reasonable prospect for earnings yet saw their share prices soar. was that based on fundamentals? hardly is was pure emotion-greed and when fear stepped in we had quite the ride down.

On the 20% (or more) drop, I personally think that was panic, not fundamentals. Irrespective, there was also a 20% drop in rents, so it's not like fundamentals changed much. The way I see it, gross rents are 4% of purchase price, and tax / maint / insurance / upkeep eat 2% of that, so you got a net yield of 2%, and this net yield grows at 2-3% anually because of inflation. The cost of financing the asset is 5-7%, depending on how you count things, so you're looking at a negative or at best zero growth-adjusted yield on a risky asset. Then add 10% transaction costs. That's crappy fundamentals on an asset that has traditionally had a couple- or few-percent positive yield.

No doubt markets can ignore fundamentals for very long times, and that long-term fundamentals investing is but one way to be in the market. However, with an illiquid asset whose current yield is -2% annually and 10% transaction costs, what do you expect here? What is your horizon, and in what way do you see the future playing out that will yield you a profitable "trade"?

BTW, I am very much liking this conversation and hope to understand your mentality on this.

"traditionally had a couple- or few-percent positive yield."

I meant to say "growth-adjusted yield".

Guys "wannabuy" is obviously a RE broker. Or someone who just bought in a bad time.
Well either way he/she needs to wait a looong time.
Whatever those people do can not change the reality. RE market is bad for a loong time.

"current yield is -2% annually and 10% transaction costs"

Mistakes abound, make that a -3% or -4% anually.

me a broker? lol. i have been insulted on these boards but never have i taken such a hit.

inon: i think you're being generous with price to rents ratio. it has always been lousy in nyc. i expect to own this property for a minimum of 10 years. i think w'burg has enormous potential. this asset is also part of larger portfolio including stocks and miami RE. frankly i just don't crunch the numbers and care little for fundamentals. i prefer sentiment indicators and price/volume. not that my way is better than yours, it is just there are as many ways to trade as there are traders. i find economists and other market mavens to be nothing more than crystal ball gazers. i have no idea what my condo will be worth in 10 years only that i think we have hit a generational low both in the stock and RE markets. that tells me to buy.

wannabuy...youre surely not referring to a generational low in the ny re markets?..which tells you to buy...

also, you cited bearish sentiment on se as a reason...geez, surely the handful of posters on here are not indicative of anything

Fair enough, wannabuy: you think playing sentiment on a 10+ year asset is a good idea, and you don't care about fundamentals. To do it as a part of a larger portfolio is clearly a wise move, and you've put yourself behind a neighborhood that you think will outperform.

While I agree that we did hit a generational low in stocks, I think your statements that "we've hit a generational low in NYC RE" and "price-to-rent ratios have always been lousy in NYC" are wrong. Compared to a decade ago, prices are still double-ish while rents have barely higher. Why do you think that we are at some special generational low in NYC RE? Even your favorite indicator of market sentiment was arguably much lower in the early 1990's.

I'm sure some tulip buyer bought early enough sold early diversified into roses, daises, sunflower seeds. His handle was wannabuytulip.

Perhaps, w67th, but the real money was in opium poppies. All I'm saying is that it's not as nutty as the guy who put his entire life savings and down payment money in the leveraged REIT ETF last year.

I agree with Inonada.
I've dabbled in commercial real estate for 15 years, I remember the mid to late 90's quite vividly, getting setups for manhattan(10 to 20 unit buildings) at 17/18 times rent roll which put you at a negative cash flow banking on rent rises and ending up in positive flow maybe 4/5 years later.
Passing on those options for 10/12 times rent roll positive cash flow in the outer boros and long island.
Granted anyone did well buying a building in say 1995 and selling in 2005, for those who had that crystal ball.

And even now as I look for an apartment for myself,(not really an investment) I would pay 17/18 times rent roll, but the market has not adjusted. I'm seeing 2 million dollar apartments offered for rent for $7500. And the rental market still isn't stable.

And I can't do it for a variety of reasons but I will say Williamsburg IS in my humble opinion a healthy bet or opportunity TODAY if your looking ten years out.

w'burg has enormous potential for gang wars, toxic waste contamination and loads of unbuilt capacity. if you buy in w burg now and want to sell in 10 years you will be selling a 10 year old property at the same time loads of brand new units will be hitting the market. You wont see your money back...

w67th i was waiting for your comments. you get the award for the pithiest and funniest comments on SE. i prefer daffodils.

check out this chart:

http://www.millersamuel.com/charts/gallery-view.php?ViewNode=1168397199eIXkM&Record=8

from Q1 2007 ti Q4 2007 we had a mega sales but no increase in prices. not what one would expect and a warning sign getting toppy as the smart money exited early. then inventory spikes Q1 2008 thru Q2 2009 where we get a spike down in prices(dumb money selling at bottom). Q3 09 sees prices rise and inventory fall, a more normal pattern. Q4 09 sees sellers hitting the bid and i think that is seasonal. end of the year and they want out. Q1 10 should be interesting.
many other great charts on this site too.

wannabuy, so the mood on the street is now extraordinarily bullish, quite the ratio. bearish indicator?

thxs.... It's hard in sing sing... not many compliments that I would welcome.

As my stats prof would say, nice graph. But the story behind it is more telling.
1) crazy lending (NINJA hahahahahahahaaaa);
2) Phantom housing formations (how many ppl like you that "own" multiple homes? heh?
3) Conversion of US production to consumption model (1990-2008, you may say housing is production, but then I would say so is Prada bags);
4) Negative savings rate due to "phantom" equity - i.e. w/o home equity bubble, not only did you lose leveraged equity, but almost ALL americans had retirement money socked away in RE, whether they knew it or not;
5) Finally, 1/3 Americans work in or around RE... I'm just kidding, 1/4... oh my wife (the Doc is getting her RE license, she is sick and tired of treating all these "ladies who lunch" who write as a profession "RE broker." She thinks it'll be funny when she says "me too, I'm a RE borker right bf she puts them under." FLMAO.

So, wannabuyretirement..... triple down in Wburg, Hamburg, Slumburg, Cumburg, Gagburg, DPburg, TeaBagBurg,.... if you know what I am typing.... just look at yourself in the mirror.

I'm sorry Wanna. I wanna agree, and if you had bought anything other than new dev I would have. But at this point jumping into the new development arena seems a little reckless given the data. Just look at the SE report from yesterday and see how new dev fares. There is still a glaring disconnect there that developers and buyers have yet to work out IMO.

w67:
1.crazy lending didn't happen in nyc
2. i doubt there are many 2 or 3 homeowners in the USA
3.agree but a non sequitur
4. savings rates have risen quite sharply. most homeowners under water are less than 40 y/o and have plenty of time to recoup losses. older folk still sitting on big gains
5. i seriously doubt this stat. i think you're casting a wide net here

keep it coming. you are the wittiest one on these boards. so glad to have finally gotten your attention.

spinn: i hear you but not all new devs are the same. i think there has been movement towards reality and it is not yet reflected in these backward looking numbers

1) you'd be wrong....
2) you''d be wrong....
3) i don't speak german...
4) 1yr of savings does not make up for decades of spending evaporated "home" equity....
5) hmmmmm...... speak to more ppl...... you'd be amazed at all the little mini-Trumps running around nyc and environs....

the idea of mini trumps running around is revolting and that was latin not german.
gotta like the widening yield curve indicating a strong recovery. this is text book-first the stock market rises then we get the bond market confirming the recovery. next up: unemployment continues to tumble, housing prices rise.