2010: The Year of the Renter?

Really? I have no stories with my toilet plunger. I haven't revealed the medical and sexual history of my children. I haven't revealed my spouse's old tax problems. I haven't blamed others for my mother's death or illnesses of my children. I haven't blamed my neighbors because I don't want to have carpeting.

oooh. someone's sensitive.

I haven't told people I weight 230 pounds.

I haven't admitted a McDonald's addiction.

You fluctuate depending on the weather?

Monday will have a high of 54 degrees and rainy, will you be balooning in size or shrinking? What about your sense of entitlement? What about your ability to flush?

By the way, I searched this thread for the word whore, and the only person to use it was ... you. Something on your mind?

size 22? how did that happen? due mainly to good luck i've never went more than size 4 which i have to say, it's a total pain in the ass when you are looking for cloth in the midwest. the smallest size i've found there was 8.

oh hfs, you're so droll. of course your 'WHORE' comments are no longer searchable. they've been removed. you can't recall writing them? sad.

ok I'm droll. Now back to you fluctuating with the weather.

hfs, carry on. i just don't care. but you certainly shouldn't think that you're morally superior. in the slightest.

HFS the thing is...why are you here, other than for human contact, even contentious human contact, you sad sad troll?

trying to get back on topic:

"I make of that the seeds of the next upcycle....but only after we make a real bottom."

In your opinion Rhino, would it ever be rational to act in advance of the bottom? Certainly this strategy would make sense in the stock market, which is undeniably a faster and more efficient discounting mechanism for pricing in longer-term expectations. In real estate the moves must be slower -- but how does one know how to act in response? On the way down, or to wait until the next cycle up, some [x] number of years from now?

That's an interesting question. In my opinion it would only make sense to act in advance of the bottom in the face of compelling cheapness. Given that price to rent is as high as ever, and cap rates are as low as ever (given that rents have fallen similar amounts to values)...this isn't one of those time. On a normal downpayment, its still clear that renting is cheaper than buying...if buying were cheaper than renting (with a fair accounting of transaction costs and opportunity costs on the down payment), you could argue that buying ahead of a bottom is okay...as you would amortize the 'early purchase' with a cheaper monthly payment vs. renting over time. It doesnt seem to me we are there yet. I know you didnt ask that question, but that seems to be the question behind your question. If you know you are going to be in a place for a while, you dont need to worry about buying early, if you know month by month, you are saving vs renting and amortizating away the risk. Does that make sense?

"amoritizating'?

Yes, that does make sense.

thanks seg and Rhino (good analysis!) for get us back on topic

"you sad sad troll?"

very interesting style of writing you've adapted.

But you call me a troll? You have but one point ever, and the rest of your posts are to attack people, threaten violence, or shout epithets.

adopted

See someone thanking me above. You are a sad troll because you have no point other than to antagonize.

Ph41 thanks for the spellcheck.

the next uptick implies an increase in demand. without an increase in supply. we are an aging society. i strongly suspect that, like japan, we will soon be decreasing in terms of population. the question is whether people will concentrate in cities. and, of course, whether incomes can and will increase. there are empty and prepped lots all over this city. a typical year sees 12,000 rental vacancies and 8,000 sales, roughly. hudson yards and the solow lots could provide half of that if developed.

the thing i didn't quite get about this article is that it focused so heavily on developments that had already started leasing. for manhattan at least the author implied that 3500 units IN ADDITION to the ones that had been released in 2009 were coming online. silver towers rented 400 out of 1000 in the last 8 months of 2009. and now there's another 3500? i did a quick search and there are almost 3000 condo units listed as available for rent. granted many are on the for sale market as well. but just think of the numbers. they're huge.

oh, and for brooklyn the vacant for rent number in 2008 was in the 9000s. so there the 3500 rental units plus condos seems even more stark.

Given how well the baby boomers have managed their finances, I somehow doubt the outcome is they will sell their depressed underwater house and plow into Manhattan from the surrounding burbs en masse.

Whoever said the nice doorman two bed two bath is headed to $3500-4000...that person has it right.

I think it's headed lower. And even I am surprised. There were only roughly 90,000 occupied condos in NYC total, as of 2008. just think about it. another 25000-30000 available from 2009-2010. another 10,000 or so (probably higher) rentals added (i'm counting brooklyn. i don't see how anyone can argue that brooklyn new luxury development doesn't affect, at least somewhat, manhattan prices). in 2008 there were 12000ish vacant manhattan rental units. the math is mind-boggling. and there's been significant job loss and much less hiring of new bodies in the higher-paying professions. unless there's a really quick turnaround, i see rents continuing to decline rather steeply.

The baby boomer comment is interesting. They will have major market impact. Some ideas.

1) Their discretionary spending is boosted by inheritance from their parents who did not
spend nearly as conspicuously
2) They are net sellers of stock
3) They take out Reverse Mortgages
4) Primary residence of choice is condo not house and probably two bedroom

I can't see this set being "voluntary" renters. If they have the resources they own to avoid the hassle of moving when leases expire. Aging baby boomers will be a positive on the Manhattan Condo market. They are also relatively immune to the bad economic climate.

I think you are smoking dope if you think inheritors are a big demo. Yes, they will be net sellers of stock...probably at lows. I think if anything these baby boomers are going to sell their Manhattan places in higher numbers then they would have in the past. I know my father in law pays a big maintenance monthly even tho there is no mortgage. These people are going to move to lower cost areas. I highly doubt Manhattan becomes some retirement destination spot. We are not talking about people who can afford to stay here in retirement... We are talking about potential inflows to offset the job losses and slower hiring.

My answer is there are more than a few people of means downsizing from homes in affluent sections of Long Island and New Jersey. More than foreigners these are a significant source of support for the NYC luxury condo market.

Do you honestly think those people move into Manhattan generally? Those are the people that move into condos near to the center of the town that they have spent the previous 30 years. Maybe there rare adventuresome retired couple moves into Manhattan. Riversider you seem like you are reaching to counter the bear case...but it is helpful for me to listen to the best you can come up with.

Rhino86
about 2 hours ago
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See someone thanking me above. You are a sad troll because you have no point other than to antagonize.
Ph41 thanks for the spellcheck.

Did you want a cookie?

By the way, don't you have a young child? What are you doing ignoring her on a Sunday morning? Did you learn your parenting from your own parents?

Do you want to punch me or someone else now?

I started a thread about this a few months ago. There were some usual joker comments, but some interesting views on both side as well:

http://streeteasy.com/nyc/talk/discussion/15467-retiring-to-lower-cost-locations

Wherever they go, it makes little sense for them to gravitate to the highest cost island in the country.

and it makes sense that many of those here will cash out and gravitate toward cheaper options, which are now plentiful.

retirees are going to be a net negative factor, just about everywhere.

Not saying it will change the long term picture but whoever thinks this isn't a great retirement option isn't thinking through.

Older have most assets in bonds, minis are tax free
NYC has all of the cultural options
Being in NYC means easy access, with senior discounts no less, and plenty of time to see them if you are retired and can go during nonpeak times.
Great restaurant options
With Target and CostCo in town, goods are as inexpensive as anywhere else
Walk to parks
Access to hospitals and medical care better than anywhere else in the country
No need for a car and car expense
Doorman security
No need to shovel snow
More flights to Florida than from anywhere else

Is money ever an issue in your world? Can you imagine that it is for most people?

Ah, the eternal questions about the baby boomer retiree generation:

1) Will they have enough $ to retire?
2) How will cashing out their equity in various sectors affect prices?
3) Will they bankrupt SS/Medicare/other pension schemes?

We are about to see the rising of this leviathan.

I wonder what is going to happen to the values of all these 2 bed/2 baths with $2200 maintenances when doorman rents continue to fall. What is something that you can rent for $4000 worth when it comes with a $2200 maintenance. http://streeteasy.com/nyc/sale/464283-coop-23-west-73rd-street-upper-west-side-new-york

The demographics speak to terrible stock market appreciation from here...not as bad as Manhattan real estate...but something skimpy like 6% nominal.

Yeah, Pig & Python book addresses some of these issues and speculates on what will happen.

I know one thing to be true: medical tourism & cosmetic procedures will do quite well.

"Two questions - maybe Rhino knows.

1) When owners give 2 months free and the year is over, are they sticking to the full rent? Are they not adjusting downward because the market is dipping?

2) Why are owners keeping units empty or de-listing them instead of renting at lower prices?

Someone explained to me that the values are based off of cashflows so owners don't want to reduce the value of their property by reducing monthly rent, instead they give free rent. And I'm assuming there are debt covenants that could be triggered if rents drop below a certain value? But this all seems really ass backwards to me. Values have surely dropped and if you de-list an apartment you have zero cashflow."

Owners have to weigh the decision to sit empty vs. locking in a lower rent. They also consider how many unit of a certain type they have available. When they give free rent, in my view they are trying to get someone in and have a built in effective rent increase the following year.

My guess is you sit in cash and wait for baby boomers to create opportunities vis a vis their gradual liquidations.

I wonder what is going to happen to the values of all these 2 bed/2 baths with $2200 maintenances when doorman rents continue to fall.

Rhino -- agree with the general point. As rents go down and maintenance goes up, it starts to get pretty scary for an owner. Even without a mortgage, the value of your equity looks dubious as the maintenance liability increases.

All that said, do you really think that sale at the Park Royal would be a $4,000 rental, or even getting anywhere close (yet)?

I'm not quite sure how to comp it because rentals in pre-war coops in that part of UWS are not too common. However here are a couple recent (and smaller) 2/2's that went for significantly more than $4,000. (Perhaps these did not rent at exactly the listing price, but there are other similar units in those buildings to compare as well.)

http://streeteasy.com/nyc/rental/569942-condo-201-west-72nd-street-upper-west-side-new-york

http://streeteasy.com/nyc/rental/501589-rental-27-west-72nd-street-upper-west-side-new-york

No, I dont think they are there yet.... I am just saying if they are renting at $5000 against a $2000 maintenance.... you can argue that if rents drop by $1000 to $4000, you are eroding 1/3rd of the value of owning it...which is pretty scary for sellers.

That Alcott price is a joke. Everyone who overpaid for these condos thinks the rental market cares what their cost basis is. Over near us, we have seen some movement on Brompton rentals.

Can't wait to see Mark Chapman's and Tiny Tim's apartments come up for re-sale

In October 1980 Mark David Chapman stayed at the Waldorf Astoria, the YMCA, and the Olcott Hotel before he assassinated John Lennon. In the mid 80's cult icon Tiny Tim and then manager Rick Hendrix lived at the Olcott Hotel for a short period of time. The latter residence was just a block away from the Dakota apartments.[11]

3) They take out Reverse Mortgages

this is being done by the parents of the baby boomers... the inheritances the baby boomers took for granted (if they did) are not gonna be there after nursing home is paid imho.

The baby boomers are fucked.

My inheritance was lost in the stock market. Plan B is a mortgage free home in Playa Hermosa/Jaco, Costa Rica. Any fellow boomers interested in CR, let me know? I love the place and would be happy to share my 8 years worth of visits with you! No I'm not selling RE down there, just love it!

http://nycrentrant.blogspot.com/

"The baby boomers are fucked."

100% agree. and imho the silent are semi-fucked. generation x always knew it was fucked, that's the only difference. i'm somehow glad we are all in the same boat now, but there might be a lot of bitterness around (unfulfilled high expectations).

If we are careful, we can pick up shit on the cheap from the baby boomers, but
you are right there is no avoiding their debt.

keith, wonderful plan B. people in costa rica are the happiest. although they don't have a whole lot, they are not materialistic. which is great during the next lost decade. you don't have to hear horror stories about the retirement that wasn't.

great landscape, they care for their environment, nice food! i'd love to live in a mango (my favorite fruit) farm close to the beach. it's also my plan B of sorts.

"My guess is you sit in cash and wait for baby boomers to create opportunities vis a vis their gradual liquidations. "

agree. a baby boomer dies each 40 seconds. maybe... i'll try to hit estate sales around the city.
http://www.boomerdeathcounter.com/

"If we are careful, we can pick up shit on the cheap from the baby boomers, but
you are right there is no avoiding their debt. "

no avoiding their debt? what do you mean?

Government debt.

i'm not so sure of that. the ability to pay is not there imho (when you add to the official debt the entitlements and the unfunded pensions). so something will have to be done about that.

in my group of friends, we are most of us considering going abroad if the opportunity shows up. higher taxes will help to make the decision easier. even if they raise taxes, i'm not sure revenue will go up. imho the only thing that will go up for sure is leisure time and the shadow economy.

Its probably already to the point where the higher tax burden in some pleasant
European nations is more than made up for by the health care and secondary
education that you get for free.

add to that decent maternity leave, subsidize childcare, decent vacations. less stress, better food (less obesity). lifestyle wise it's not really clear USA is the place to be for young families. the gov might end up doing genx a favor by pushing us out imho. thanks to UK the USA is not the worse developed country for kids.

i do personally need an incentive to go through the headache of moving out even though i know that it's likely a win in terms of quality of life.

All I'd need is the right job.

yep. or a job that allows you to live wherever you want to.

marco_m
1 day ago
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report abuse jimhones??

marco, i have a life. a real one. with work, family etc. that being said, i think that the title of this article should have been "the year of the renter who wants to live in brooklyn or west of 10th ave, near the lincoln tunnel entrance"