What do you think of this forecast?

I think its quite possible that we will see a 17% decline in Manhattan. Perhaps not in each and every neighborhood, but most definitely in some. The fundamentals simply do not support the effort to keep this bubble from blowing (up).

Or continue selling at 25 times + rent roll too extreme in optimism?....hmmm

Don't get me wrong. I'd be more than happy if it declined that much.. but I don't want to be disappointed. Hard to believe, though, how the mighty manhattan RE can crumble so fast...

Unemployment and the rental market have to bring it down. Can't fight gravity.
Rental market has min 1 year leases, like a ball and chain. You can only carry the ball in your hand for so long.

"The fundamentals simply do not support the effort to keep this bubble from blowing (up)."

True, but that isn't really the point. The main issue with the forecast is time frame. It took the shock of the world nearly ending to knock prices down say 25% (some will say 5% either side of that) off a super-bubbly, loose credit peak over about 16 months. A shitty environment (weak employment, murky/non-cash Wall Street comp, price/rent way out of whack, etc., etc.) with no acute crisis isn't going to take it down another 17% from that lower base in only a year. There is too much volume getting done around today's levels to see price support collapse and another rapid leg down. Air coming out of a balloon or watching paint dry are better analogies. Do I think Manhattan real estate is at least 17% overpriced? Absolutely. Is that going to correct by year end (e.g., Miller Samuel 4Q 2009 report to 4Q 2010 report). No way. Agree with youngfamily - too extreme

We do have a couple of interesting things that will be happening early this year.

The Fed has announced that they will stop buying mortgages. Accordingly, mortgage rates should be going up. Probably significantly. Retail investors are already actively selling their mortgage mutual funds in anticipation.

Tax incentives for home purchase are due to expire.

The indicated 17% decline was the biggest of any city in the United States. Pretty interesting.

> Seems too extreme in pessimism? 17% decline in Manhattan is hard to believe in 2010... hmm

20% decline in Manhattan was also hard to believe in 2009.

Whoops.

youngfamily -- you seem to trying to justify a near-term purchase. If your bullish -- fine. But others are bearish -- and you are unlikely to see consensus.

Yeah, I think MF hit it. If you decided, and just want justification so you don't feel like you are making a mistake, this might not be the place anymore... maybe 6 months ago.

Curbed might be better for that...

"20% decline in Manhattan was also hard to believe in 2009.

Whoops."

Only if you fell asleep in mid-2007 and woke up in early 2009. If you were around in 2008, down 20% in 2009 was no surprise.

sls, yes, one really should have been able to see it in 2009. i can see some scenarios in which another 17% occurs this year. and i can see some in which it doesn't. i don't think it will be flat or up.

a lot of it depends on foreclosures, both on residential properties and on developments. some of the banks that gave construction loans may not be in the position to extend and pretend. and, of course, the employment situation. actually, it seems as though there is the potential for quite a few negatives to shock to the downside this year.

> sls, yes, one really should have been able to see it in 2009.

though, amazingly, few did.

So it goes to the point, just because its not expected doesn't mean its not happening. In fact, its the opposite. If it was already expected, it wouldn't have happened (because the decline would have come when it was first expected!).

"though, amazingly, few did"

Way to pat yourself on the back for having understood the obvious. The fantasy world inside your head in which you are both prescient and omniscient and everyone else is blind, deaf and ignorant must be an amazing place.

I think it was a no-brainer after lehman etc. and the market crash that nyc re would take a big hit. And it did, but prices are still kinda crazy, and for all the many reasons people argue on here, there seems to be assymetric risk, and a likelihhod of further decline but how knows how much. It is no longer the no-brainer it was, in my humble view.

Not to argue that there is any long term correlation of stock prices to nyc re, I think the 2009 stock market run=up helped stem the losses in nyc for psycological reasons if nothing else. I wonder what impact will be if the stock market is flat or continues to dip this year.

> Way to pat yourself on the back for having understood the obvious.

If it was so "obvious", then why did so few get it?

I figure if most of the world thinks you are crazy for saying something, its not "obvious". And if this board a couple years ago was any indication...

> I think it was a no-brainer after lehman etc. and the market crash that nyc re would take a big hit.

I agree, but tons still denied it afterward for quite some time. Up until the numbers came in. But not as many as pre-Lehman, of course.

> there seems to be assymetric risk

I think you hit it on the nose.

"The fantasy world inside your head in which you are both prescient and omniscient and everyone else is blind, deaf and ignorant must be an amazing place."

ah, streeteasy 2007....

;-)

"> I think it was a no-brainer after lehman etc. and the market crash that nyc re would take a big hit.

I agree, but tons still denied it afterward for quite some time. Up until the numbers came in. But not as many as pre-Lehman, of course."

Wow, more dispatches from fantasy land. If "tons" means real estate brokers whose vocabulary is limited to the phrase, "It's a great time to buy", plus LICC and Juiceman, then I guess you're right. Otherwise, no, people pretty much got the picture that real estate was going down post-Lehman. That piercing insight was not limited to you.

I think the best indicator of when "everyone" started seeing the market going down is when most of the permabulls disappeared from the site. If a single indicator is needed, I'll say it's the date of spunky's last post.

"Wow, more dispatches from fantasy land."

Well, given the handle name, what do you expect? (couldn't help myself)

Seriously though, I think it's somewhere in between. jim is spot-on I think in that it's just been murky since Lehman. For better or worse, people on this board are mostly self-selected real estate junkies, so there tends to be a degree of being ahead of the curve, for the most part (there's definitely a lot of proselytizing and bs as well). It's anecdotal, but in conversations outside this board, I've never heard opinions as strong in either direction. Just a lot more uncertainty.

So 4th '09 quarter miller samuels report after corrected for errors ended up at $1051 per sq ft for coops and condo average.

17% decline from 1051 would put it to an average of $872 per sq ft by 4th quarter '10. That's not a big reach. Third quarter '09 did hit $996.

http://www.millersamuel.com/reports/pdf-reports/MMO4Q09.pdf

"Wow, more dispatches from fantasy land. If "tons" means real estate brokers whose vocabulary is limited to the phrase, "It's a great time to buy", plus LICC and Juiceman, then I guess you're right. Otherwise, no, people pretty much got the picture that real estate was going down post-Lehman. That piercing insight was not limited to you."

Wow, I think I called this one, too.

You KNOW we've hit a new era when folks are trying to claim that everybody knew there was a bubble in 2007.

If you want to pretend its was only brokers, Juice, and LICC... WOW you have a short (or no memory). They and a couple others might have been the only to stick around.

But, WOW, you're off your rocker if you don't think it was most folks.

Remember, dco got RUN OFF THE BOARD for being a bull back then!

ha, sorry, bear.

"I think the best indicator of when "everyone" started seeing the market going down is when most of the permabulls disappeared from the site. If a single indicator is needed, I'll say it's the date of spunky's last post."

I think it's funny, but honestly not an indicator of anything. spunky was nuts. Sometimes funny, but nuts. And who knows if he's here under an alias or not.

Sorry, I didn't realize until now that Lehman actually went down in 2007. I was all confused and thought it was 2008. My bad. But thankfully you know everything and were on the board to straigthen me out. Lucky me.

"Remember, dco got RUN OFF THE BOARD for being a bull back then!"

Again, laughable. Are you arguing he was scared off by some anonymous internet bullies? He actually posted a bit not that long ago, but I suspect he stopped because he wasn't all that interested anymore or was too busy. These things happen you know.

sideline, it actually was 2008.

"Sorry, I didn't realize until now that Lehman actually went down in 2007. I was all confused and thought it was 2008."

Actually, you are confused now.

I gave 2007 as the time period pre-Lehman.

Hope that clears things up for you.

"I think it's funny, but honestly not an indicator of anything. spunky was nuts. Sometimes funny, but nuts. And who knows if he's here under an alias or not."

He probably is here, maybe comm1? My point being that even he could see the end in his nutty state, and not wishing to be involved in the year-long game of "told-you-so", he simply disappeared into the wind.

Or defaulted.

"sideline, it actually was 2008." Umm, yeah. Comment was addressed to somewherelse. And was sarcastic in intent...

"I think the best indicator of when "everyone" started seeing the market going down is when most of the permabulls disappeared from the site. If a single indicator is needed, I'll say it's the date of spunky's last post. "

SteveF only left 2 weeks ago, though...

Though methinks some folks need to read some of the older posts. Everbody knew... I'm still laughing about that one.

and techguy.... I miss that guy.

Not extreme at all, this is the new reality and it's about time.

And, for all those trying to claim "everybody knew" post lehman... again, nonsense.

Try this. Search "lehman" in the box. Find any of the posts talking about Lehman. See how "universal" this agreement is

Laughable.

I just found one where Noah(!) is getting pissed arguing with folks who think its no big deal.

Unfortunately too many gems are posted by "anonymous."

A RE expert I used to work with (he actually did commercial RE deals) told me back in 1997!! that the RE market was crazily, irrationally overpriced and I shouldn't buy anything. Sigh. And I saw 10 year straight annual increases. This jarred me.

BUT, I'm willing to sit on the sidelines and rent for a while if the overall feeling is bearish for another year or two at least... Assuming that I can't time the market and buy at the absolute bottom, isn't it safer to buy on its way up than going down if it's at similar level?

Just scared we're headed back to those nightmarish bidding wars.. ouch.

Oh, and another thing that I'm considering is the Tax increase that our POTUS has planned. I read from a political site that the tax hike won't have to go through congress (not sure how but the inside the beltway people are saying this, so who am I to argue?)... Tax hike on $250k+ will have a big impact on Manhattan RE and the income tax thing for the fund managers will have some impact, too... though I don't know how many people are fund managers in NYC.

Maybe it's safe to rent for a year or two...

> Unfortunately too many gems are posted by "anonymous."

true. Lets pretend its all the same guy, so folks can pretend there were only 2 bulls on the entire planet!

"A RE expert I used to work with (he actually did commercial RE deals) told me back in 1997!! that the RE market was crazily, irrationally overpriced and I shouldn't buy anything"

This is why its called a "bubble". Ever chew gum?

Just because it keeps getting bigger doesn't mean you can't be sure it will pop.

"Assuming that I can't time the market and buy at the absolute bottom, isn't it safer to buy on its way up than going down if it's at similar level?"

Yes. Because unlike stocks, RE takes way long to bottom and get any real increases back. I'd rather be a few months and 2-3% late than early and 10% off.

Yes, but popping and deflating are two very different things in practical terms. This deflation can certainly be manipulated (and it has been) so that prices don't get to where "they're supposed to be" until you're nearly ready to retire. Makes it twice as frustrating for many.

Yeah, but those who bought in 1997 and sold in 2007 did really, really well. Too bad that wasn't me.

And those who bought 5 years before the dotcom crash and sold right before the crash did well, too.
And folks who play Russian Roulette for money and live do great, too.

But thats ridiculous to look like. Of course returns will look great at the height of a bubble.
Problem is, the majority don't get out before the bubble pops (or it wouldn't be a bubble).

I know a lottery winner. Life is great for them.

Does that make the lottery a good investment strategy?

We went down 25% from Sep 08 to May 09. Is hard to believe we can go down 15% this year...why?

Sidelinesitter momentum is its own driver.

Even after Lehman failed, there were plenty of people on this board who argued 25-30% was too draconian. I am sure it will have been obvious in a year that 10-15% additional downside was clear, based on 2000 rents and prices = 2x 2000.

Why? because that would be too good to be true, but maybe it'll decline for a couple more years... I hope.

I don't know why a 40% decline is too good to be true when that's what we got last downcycle, from much less extreme valuations relative to rent.

We gapped down 25% in eight months on small volume, with inventory piling up. In the last nine months, it's more like sideways to somewhat down on big volume and with inventory declining. There are buyers at current levels. You can say they're all idiots and they're suckers, etc. and you might be right, but I just don't see the downward momentum that carries us to -17% in 2010.

I'm more in a 'falling prices in fits and starts for three more years while inflation makes the impact even greater in real terms' frame of mind. Illiquid asset and largely uninformed market participants - takes a long time to find fair value.

I would be interested to find out how all the regulatory oversight from the government and tax hikes for the rich will take effect in Manhattan RE.

Sidelines your stock market terms are misplaced. Those buyers who comprised the volume you speak of are no longer buyers unlike the stock market. The question is what buyers are left and at what price.

You don't see the downward momentum? We have momentum. I think you are not sure what momentum is. What was the momentum that took the stock market up another 25 percent when it was already up 25 percent. The momentum was momentum.

"The question is what buyers are left and at what price" I'm with you brother. I've been asking myself that same question since last spring, and every time I do there is another month with 800 or even 1,000 signed contracts and I get more mystified. I'm not saying to makes sense to me, but I am observign that only a slight downward slope to prices has been enough to keep the lemmings running off the cliff. I've lost track of how many calls there have been on these boards since last spring declaring that all the suckers must be cleared out by now so there will be no bid and prices are going to plummet. I don't see any data that says that moment is suddenly now. I'm still going with slow bleed over a period of years absent some kind of Lehman II shock.

15 percent a year for two more years is slow relative to 25-30 percent in eight months.

sls, nothing would surprise me. which will probably lead you to claim that i'm taking a swe i'll win under any condition stance. but not true, i have and i always have had an end of the day ballpark figure for the downside. 1998 real prices. now i think it might be 1998 nominal. in 2010? not likely, but i wouldn't bet either way at this point. too many variables. but i think it's very safe to say that the gov't can't support housing forever. and the gov't's efforts have definitely affected NYC, if only in terms of confidence, loans for the lower-level market, supply of money and wall street bonuses.

the whole f'ng geopolitical thing is beginning to look a lot fugly. i have little confidence that we'll navigate this painlessly. it just doesn't seem possible. the potential shocks are huge.

youngfamily, too good to be true? kind of like the run-up between 1997 and 2007?

Yes. But for the last nine-ish months the decline has been nothing like 15% p.a. rate. I don't know what "the momentum was momentum" or "momentum is its own driver" even mean when there really isn't any.

"nothing would surprise me. which will probably lead you to claim that i'm taking a swe i'll win under any condition stance"

vs.

"in 2010? not likely, but i wouldn't bet either way at this point. too many variables"

Discuss

sls, these things have a pattern. particularly when they are supported by intervention. at some point something overcomes the confidence that intervention has provided.

with the tremendously easy credit that was provided here (in terms of percentage of the market it was rather late arriving, comparatively, because it takes longer to build here generally) in 2004ish-mid-2008, we should start seeing foreclosures shortly in the condo market. actually we've already been seeing them. we'll be seeing more. it takes a LONG time in manhattan, often close to three years, not accounting for banks lack of desire to foreclose, to get things through the system.

and actually, you're somewhat off. certain markets in the last nine months have seen huge movement. and it's a telling market. cheap apartments, conforming loans. your averages the last few months have been pushed up by a resurgence in the higher-end market. but for the first time i've been seeing the really cheaper units significantly decline in price, and in the small one bedroom market. and i've been seeing very little generally selling in the standard unit $1.2-2.00mm range, at least at a decent price. i'm also, for the first time, seeing quite a few units list at or below prior sales prices.

these things do take time. but to say that in 11 months 15% down isn't possible, i don't agree. isn't probable, i'd concur. but i certainly wouldn't say no 50-50 chance.

What's hard to believe?
RE has intrinsic value?
All things are relative.
If this economy remains stalled or the market takes a big dump we could see a drop like this with no problem. The market trend is just stalled. There's a lot of room for repricing.
Like everyone on this site has been saying...it just takes time.

AR: chill. Just pushing your buttons. Looks like it worked, too...

- Agree that condo foreclosures will go up but also agree that it take a long time. Between long time to play out and still small numbers relative to a large market (even if multiples of the historically tiny numbers), I see this a another element of slow bleed, not a shock to the system

- agree on recent price movement in low end. Dam seems to have broken in the $400k and down studio market. Not surprising that an overall stagnant market has strong and weak components masked by the average

- don't say down 17% isn't possible, I just say that I don't see current evidence that the market is headed there. Really no evidence that it's falling at that kind of rate, to be honest. This is where we differ. I am looking at current conditions and a set of uncertainties and taking a view, which may turn out to be wrong. You are looking at the same market conditions and taking the position that many things could happen, which is true by definition. I just prefer to have a view when I think there is the basis for one.

I think all markets have a pschological, emotional element, and in particular that is what can drive "momentum" and krazee prices. Unfortunately, NYC buyers seem stuck in a psychological state where the overhang of the bubble-up emotion is leading people to pay still stupid prices (based on fundamentals). Apparently, some people feel comfortable because prices are down 25%,even though that is not enough to return prices to sensible, non-bubble levels (e.g., rent/buy still out of whack, so I still think many segments of this market are trading at whacky basically bubble prices). It certainly doesn't seem like sellers are panicked or buyers are frightened to buy. I know a woman who just bought the studio next to her 2br in Lincoln Towers because she thinks it must be a great investment. People are rushing to buy in wmburg in buildings priced at 550-650 psf. Personally, I think the pullback from mayhem in the markets last year led people to assume things are generally returning to normal, when, based on fundamentals, the nyc re market isn't really in a normal state (nor is the nyc economy). I don't know what will turn this around, or if these pent up buyers are a fairly finite group and more discerning buyers will wait to buy at more sensible levels.

sls, just a friendly exchange. i don't think buttons are pushed between us except for the nyc qol issues.

and i do look at something over 500 recorded sales records most months. in depth. sick, i know.

btw, you do realize that 58% of all sales in 2006 were condos? and as my real estate broker once said to me, that market wouldn't have existed but for the 10% down and 10% HELOC at closing development?

well, we're 3-4 years out from those sales. hang on.

"except for the nyc qol issues" I don't even remember that. I do remember a thread about Miller Samuel reports and the definition of inventory. That one got a bit testy.

I guess I'm slow..so the point is that rather than being predominantly conservative coops the market came to be composed of more condos which are more likely to have more underwater owners because of low downpayment (way underwater if they bought 2006 to 2007), and being underwater has to be more destabilizing to a market, lead to foreclosures (or short sales)etc...

can't speak for AR, but that sounds like the general idea. To which I would add that many in 2006-07 stretched to buy and planned their finances around growing into the large mortgage and monthly nut given confidence that their income was going to double or triple in a few years. Because of course that's how it always works, don't you know? Now fast forward to 2008-09 when income for the lucky ones is down and the unlucky ones are unemployed...

you got fairly pissed off at me for refusing to take a definitive stand on the potential level of crime issue. i don't remember the miller samuel one, so we're even.

i have no crystal ball. but i'm seeing some interesting stuff. who knows where it will go and how fast? i just am getting a sense that things may be speeding up a bit. we're really giving our gov't way too much credit to think they can avoid price correction in such a deflationary environment for that long. they are doing their best, and still, prices are falling here and barely hanging on elsewhere. they can't prevent it forever. they just don't have the means. the printing press will be needed to fill additional gaps.

but not to worry, because the great thing about a condo vs a coop is that you can rent it out to cover your costs. How's that workin' out these days?

No wonder I forgot the crime one. If I got pissed off at every aboutready "it could be this but then it could be that and who really knows anyway" stance on an issue, I'd be a very angry person.

yes, jim, that's but one of the many issues that will force our market movement soon. my guess is this year. our unemployed condo owners also tend to receive much more generous severance packages than the homeowner in the inland empire in california. and we have one of the slower foreclosure processes, particularly if bankruptcy is involved, which often makes sense here, not just walking away.

it takes quite a long time.

im still waiting to here some stories of people actually walking from deposits in new developments; lots of chatter about that from time to time but little action (other than the AG suits,which is a different matter)....

jim, you need to really follow the market to see that. it's happening all over. but it takes a lot of effort to see it.

sls, funny you weren't pissy about what i was saying here until i mentioned the crime thread. i've been very consistent. who the hell knows exactly when something will happen, especially given gov't measures? am i a palm reader? i underestimated the power of gov't support for the market both on the way up and the way down. so sue me.

but i'm hoping that was a bit tongue in cheek. as my response was intended to be.

aboutready
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...sls, funny you weren't pissy about what i was saying

What the heck is with you and toilets and bodily functions?

more than a bit tongue in cheek, actually. I thought it was a pretty good line, though.

now while we're on the crime question, did you happen to see the 2009 murder stats...

what effect do you think the foreclosure rate might have on pricing this year, rhinoready1?

sls, very good line.

That's a pretty broad question. Don't you know, real estate is local? Just like politics. See Tip O'Neill.

actually, i was referring to local foreclosures. read the thread, try to keep up. any thoughts?

Well, all foreclosures are local. In fact, most (about 100%) are limited to a specific property.

> If I got pissed off at every aboutready "it could be this but then it could be that and who really
> knows anyway" stance on an issue, I'd be a very angry person.

But you are a very angry person.

;-)

"Even after Lehman failed, there were plenty of people on this board who argued 25-30% was too draconian. "

Bingo

A few other people have referenced this site/survey elsewhere. A web site like this that has google ads and says things like "Today Housing Predictor is consulted by thousands of the nation's foremost investment houses, mortgage companies, real estate firms..." but provides no individual that are cited or specific methodologies is something I wouldn't burn too many calories over.