RE will fall 38% in 2 yrs....

great article. but 38% in two years sounds excessive. prices went up so fast because of a historic anomaly in credit markets. i have a feeling prices might be stickier going down. but i agree they will go down in spite of a recovering economy.

W67,
I luv when you make crap up. Do you think the 38% decline is for all classes of RE: coops/condos, rentals & comershial? danke

w67: How do you reconcile this with http://streeteasy.com/nyc/talk/discussion/19865-homebuyers-scramble-as-mortgage-rates-jump? Or is the reason you never responded was that..........

30yrs, do not challenge w67 or columbia. They are always right.

oh, and apt23 filed a false report with the NYPD: http://streeteasy.com/nyc/talk/discussion/19929-request-regarding-the-comm-messages

The diff between this post by W67 and 98% of other posts on SE is that he admitted he just made it up...

Oh please, w67th, like that's going to make any difference. We're currently at a negative 3% carry in NYC RE. You think the specter of a negative 4% or 5% carry is going to make a difference to then person that has convinced themselves that a negative carry is perfectly fine? I can see a person carrying a million-dollar home and subsequent lemmings each negative-carrying the $30K a year for a long time, who cares if it one day becomes $40K or even $50K. It's a home, not an investment. And it's safe because people want to be in NYC. And prices will always go up eventually. Blah, blah. Meanwhile a decade passes, and they're out $600K or whatever between the negative carry and the ability to invest it in something reasonable, and inflation has caught up to make the original purchase price work. They say to themselves, "Not bad, I got what I paid in and didn't flush my money down the toilet by renting!". And you know what? God bless them.

I am disappointed in you, really, to think that a percent or two can shake a man from his dreams.

Since when is a 6% mortgage expensive? We've become spoiled.

Inonada, you're onto something. Economics is the dismal science because it first posits economic actors are rational.

"but 100bps increase =19% down"

who did that math? take a half a million home (or a $1 million, the price doesn't really matter) and start at 5%, add 100 bps till 7% or 8% and the home price will have to decline 10% (versus 19%) for each 100bps in order to keep mtg monthlies constant.

"w67: How do you reconcile this with http://streeteasy.com/nyc/talk/discussion/19865-homebuyers-scramble-as-mortgage-rates-jump? Or is the reason you never responded was that.........."

Sounds perfectly reconciled to me... the fact that folks are freaking out to catch low rates is a pretty clear indicator of what happens if they *don't* have low rates...

if RE would go down 20% i would be soooo happy.

it already did...

"the fact that folks are freaking out to catch low rates is a pretty clear indicator of what happens if they *don't* have low rates..."

it's a measure of how gullible homebuyers can be. it takes me forever to explain to friends with enough cash that they will benefit with higher rates. it's not that the realtors are genius, people's math & logic skills are incredibly low.

If RE prices declined 20% from an artificially inflated 100% (or some other bizarre number), then a 20% decline is useless.

the drop has to be big enough to make those morons that bought during the bubble walk away from their negative equity. this reinforcing mechanism and high mtg rates could do the trick. persistent high unemployment can help too.

"it's a measure of how gullible homebuyers can be. it takes me forever to explain to friends with enough cash that they will benefit with higher rates. it's not that the realtors are genius, people's math & logic skills are incredibly low."

I agree that there isn't always much logic, but if the players do something for a stupid reason, it still effects the market.

"if RE prices declined 20% from an artificially inflated 100% (or some other bizarre number), then a 20% decline is useless."

not to folks who paid (or almost paid) the crazy numbers.

Typical W64thStreet.

I love all these bearish folks. The truth is, they can't see past their research from what's happening in the real world (reality).

RE has dropped 20% only on the high end, one bedrooms and studios are still over the top...I looked at what that realtor said was a one bedroom but was an alcove studio with a wall up and the price was $565k.

notadmin. I'll have to ask Chris Mayer at the next RE gig, but I would assume he held % of income to housing constant, put in total home cost as interest income lost on downpayment, fixed CapEx cost, fixed RE tax cost, and then bumped mortgage rate 100bps.... and held demand constant (i.e. decrease in affordability 100 allocated to seller). -shrug- just a hunch.

dwell@ across the board... weird things start to happen when you can get a gov't bond at 7%, i.e. a tax favored muni bond becomes like 12% pre-tax... .yeah then hard assets become totally azz and stock prices have to decrease in order to beat i.r. I mean how can a "riskless" asset pay 12% and stock pay 5%=> stocks gotta decrease or gotta generate tons of cash (IMHO, not a likely scenario).

yo julia enjoying the savings? :)

30yrs.. .I misread your "intention" w/ that graph... yep been there at 15% car loans.. ain't pretty. danke nyc10022

didn't forget you ericho.. turn down the lights, pop the shiraz, get the baby-sitter for the nite... I think you're gonna get some tonite w your wife. 2yrs a long wait for Dow 11K... .but you may wanna rub one out bf you get your hands on "real" boobs tonite....

Julia, you are right.

Here's a for-instance: I looked at a one-bed listing in Bklyn Heights the other day. At the asking price, the monthly carry would be $3900 per month.

But it just so happened that a same-sized one bedroom was also for rent in the very same building!

The asking price on the rental was $2400 per month.

That is a doozy of a difference. The monthly cost to own (at the asking price) is 38% higher than the cost to rent.

This was a great example because the apartment for sale and the apartment for rent were in the very same building. As true a comp as you are ever likely to find.

Now I know there's a tax incentive, but nobody gets to deduct 38% of their monthly housing expense.

And there's the "you're not building equity" argument, but really, we're talking about a very big difference in monthly carry. Who pays $3900 a month for a one bedroom apartment in Brooklyn??

I'm sure there are people who do, but it's pretty crazy. Normal people with middle class incomes don't do that. That's nearly $50k a year JUST IN HOUSING COST. For a one-bedroom.

I do not believe that one-bedroom is going to hold its value.

> I'll have to ask Chris Mayer at the next RE gig, but I would assume he held % of income to housing constant, put in total home cost as interest income lost on downpayment, fixed CapEx cost, fixed RE tax cost, and then bumped mortgage rate 100bps.... and held demand constant (i.e. decrease in affordability 100 allocated to seller). -shrug- just a hunch.

Chris Mayer at columbia? nice guy, not very bright though. if you add costs to the math that are held constant when rates rise, then housing costs are impacted even less than the 10% given a 100 bsp rise.

julia, if you think the lower end hasn't been falling you haven't been paying attention. brooklyn hasn't been falling, but that's about it right now.

you really can't go by asking prices. at all. you need to follow closing prices. and while it's not consistent, i've been posting declines in the lower-priced markets for months now.

Guys... do the math on the 19% figure. Assuming interest rate goes from 5 to 6%, that's 20% a year in additional cost you pay the bank. Total price will have to drop 15% - 20% to compensate.

How come the brokers are doing so much better now? I see listing in good areas sell within 2 -3 months, from listing to sell.

commoner: because the stock market is up. because opinions as diverse as larry kudlow and the NYtimes are saying the economy is strong. because new yorkers have a sense of entitlement second to none. people feel comfortable and give in to that pent up demand that has been simmering ever since Dad (Paulson) said things were dire.

If any of those buyers listened to W67 or Inonada on this post alone, they would balk. No matter what the math disputed on this thread, the manhattan re market is going down because of macro circumstances. if we as a nation spent more on education, these buying bozos would at least be apprised of the risk. but they are Acluistic -- without a clue in the world.

Given the diversity in the market it is a simple process to cherry pick examples to support any position. The spectrum of opinions on this board are borne from this. You see what you see and arrive at conclusion x, I see what I see and arrive at conclusion y. Both conclusions are correct -or wrong. Then you have those who are looking at the same thing and arrive at two different conclusions. Its a little like two eye witnesses to a crime where witness A claims the perpetrator had on a blue sweater and witness B says the sweater was red. Both witnesses successfully pass a polygraph and then cops discover a previously unknown store video, which shows the perp had on a grey jacket. SE is kinda like that.

Don't tar all buyers with the same brush. Rental inventory isn't all that.

Acluistic...good word!

235 east 22nd street...one of my favorite bldgs. studios have not fallen even 1%....360 east 72nd street, that's where the studio was $565k but even smaller studios are over $400k and they are not accepting lower offers...the list goes on...i'm sure there are exceptions but I'm not finding larger sized studios dropping. I was going to up my budget to $500k for a one-bedroom but again cannot find anything close to a real one bedroom at that price. My lease isn't up until Feb. and my LL is in court fighting a lawsuit that may force him to go back to rent stablized aparts. so who knows but I hate the neighborhood.

Fancy words apt. As diverse as our market is, the people who consider a rental over a purchase, or vise vera, are infinitely more diverse. Your statement is ignorant.

julia, 235 east 22nd has only had one non-sponsor studio sales recently. there aren't any comps for the building, not useful for comparison purpose. i've posted plenty of large studios and small one bedrooms on the comps pages that meet your requirements, although i still think you'd be wise to continue renting.

you CAN'T go by asking prices.

"Guys... do the math on the 19% figure. Assuming interest rate goes from 5 to 6%, that's 20% a year in additional cost you pay the bank. Total price will have to drop 15% - 20% to compensate."

so by this logic prices were climbing as rates dropped right?? Wow this whole figuring out price direction is simple just follow interest rates..f'ing hilarious

spin: i'm not saying there are not reasons to buy now - baby on the way, not willing to go through the absolute hell i personally just went through to move from a rental to a rental. I'm just saying there is risk. are you saying that you don't think rates are going up or that prices won't come down as they do?

Too many forces at play with rate increases to assume it automatically translates into lower re prices. I think you'll have a hard time finding historical correlation. If I remember there was a good discussion on this a while ago. Inflation is typically associated with rising rates, in which case hard assets also rise. But is there a correlation with rising rates and rising re prices? Don't think so. I think you have to assume rates play a role but its more likely outweighed by other economic factors to have much of a direct and predictable influence.

spin: here is an example of what i am talking about. here is someone who bought an alcove studio (#1806) for $726,000 at the Caledonia in 12/08 --after lehman fell, after bear stearns, after months and months of news reports on a RE bubble. Almost $2000 psf because it is near the MEAT MARKET!!. In a building that is a huge, huge hike from public trans-- and you have to walk by one of the poorest projects in the city which is right next door and it is directly in the middle of a night club scene that draws trouble, noise, complaints and police on a regular basis.

Then the buyer puts the 520 PSF ALCOVE STUDIO on the market 14 months later for A MILLLION DOLLARS!!! Because obviously a 37% rate of return over 14 months is a standard appreciation in NY RE. Plus there must be a premium for an apt near the MEAT MARKET!!- where you can get laid so certainly that should be reflected in the price. The sad thing is that someone will overpay for this dog of an apt and the cycle will start again till someone loses big. Multiply this example by hundreds and you have a little snapshot of NY RE.

And you think I am ignorant for calling out buyers like this? Exactly who is Acluistic?

12/01/2008
Previous Sale recorded for $725,961.
02/19/2010
Listed by Mercedes Berk at $995,000.
02/22/2010
Price decreased by 7% to $925,000.
04/13/2010
Price decreased by 3% to $895,000

oh so that's the buying bozo you were talking about. Perhaps if you could correlate the going rate of a meat market tranny hooker to the price of this studio you might be on to something. My wife and I sold a reno'd Bank St alcove in 06 with 9 large windows and an Empire State Bldg view for 150k less than what Matt and Liz paid post Lehman. But then ours didn't have a rooftop tiki bar or wall of fire in the lobby. Maybe they did a gut reno and replaced the metal studs with real wood. Maybe it's a particularly rare strain of brazilian cherry on the floor. Door knobs could be Marc Jacobs, etc., so I wouldn't be so quick to knock it.

That is a great price for 06. You and Mrs. Spin must have loved that cap gains deduction. Hubby and I partook of our full measure of that deduct twice and each time it made us question our Democrat souls. And, btw, the politically correct term for tranny hookers is now bottle girls --$3000 per Veuve.

Didn't see that Liz herself is selling her apt. So the million $ price must have been a very informed and educated price point. Pardonez moi. I come across these kind of listings every day. As someone looking to buy, it pisses me off that rational minds have very little hope. I bet everyone of those tiki bar habituees are leveraged to the max. I saw a girl there in her bikini wearing Louboutins. I saw that and thought I will never get an apt as long as I'm competing with buyers/owners who have no sense financial restraint. Unless she was a tranny hooker.... in which case there is hope for me--as a apt buyer, I mean. btw, in above post an error. $2000 psf for ask price

Ever hear of a shotgun wedding? Ours was decidedly lower caliber; we had a capgun wedding ; )

apt23, why should an anonymous board be considered such a well of wisdom? Am I supposed to take, say, w67street's word over my own information, opinion, situation and desires? Who are these people who call buyers bozos? I'd understand the discussion around a table but anonymously attacking and dismissing people who decided to go a different way?

Man, don't you just love this guy.
38%!!!!!
even 20% seems unimaginable.
We do have some serious over supply
We do have some spectacular interest rate hikes on the horizon
We do have a shrinking community of serious income producers
F'in A!!!
38% it is!
Call the WSJ....Mr. W67 has set the drop
I'll be living large, smoking fatties and sipp'in Crystal with my SE buddies on the terrace of my Penthouse.
Changing my name to Rufus T. Firefly

"Tell them Mr Valentine has set the price".....

I'm not going to be able to get my kid the GI Joe with the kung foo grip....38% shit!!

"love all these bearish folks. The truth is, they can't see past their research from what's happening in the real world (reality)."

I love the bizzaro world of the bulls. Stats/data are for suckers, one anecdote is "reality".

At least they admit that the data looks bad for them.

Though not as funny as the "Target Buyers Will Save Us"....

spin, I love the idea of Marc Jacobs doorknobs, you made my day!

ali r.

I'd take Chris over Lynn sagalyn.

mr. Valentine has just finished his joint in the bathroom. He over heard some lehman bankers talking. Apparently since2003 they have used a 'third' party finance company to gloss over their overleveraged position. Apparently wamu had over 60% of mortgages w fraud involved since 2003, the top mgmt knew about it, Greenspan freely admits he didn't know there was a bubble but freely admits it now. There are horror stories of brokers buying multiple condo units and using their over inflated purchases as comps for the follow on sale => and ppl want think 20% is just dandy. Fwiw, I think 20% can be allocated just to the creation of the piggyback 15% 2nd loan. So how much further for rise in interest rate? How much further for elmination of no income doc loans? How much further for structural change away from all the home depots, re borkers, contractors caused by the bubble? Flmao. Plow ahead, just don't wonder why you test positive for aids 3 yrs down.

Remember 'there is a penalty for early withdrawals.'

>> There are horror stories of brokers buying multiple condo units and using their over inflated purchases as comps for the follow on sale

Do tell, please. I had a suspicion that was going on, but I never saw any data for it.

nyc10023: "Don't tar all buyers with the same brush. Rental inventory isn't all that."

Don't tar all rentals with the same brush.

In my experience, the rental inventory is very nice. Show me a closed or current listing, and I'll show you something vastly better that rents at the same annual "cost" of 6-7% of purchase price. What are you looking at, $3M? I'm already salivating over those $15-$17.5K apartments. Yeah, maybe the marble won't be the exact right shade to match my armoire, but I'm willing to live with that.

Inonada: if you are willing to be a little bit flexible with location & layout, then yes, rental inventory is very nice. But I've been through this exercise more than once, and, it's not that easy to find an open-ended rental with my specs on the UWS. If you are lucky, you will find an (individual) owner who has what you need and can rent out, but then you have to deal with the vagaries of a shortish term rental.

Owning is so 20th Century, I agree.

I understand. I have a friend who has convinced himself that the only possible place to live in the whole tristate area is inside a particular square mile of a particular suburb, and he's not willing to "overpay". Compared to that, your search isn't narrow at all.

Inonada: I just did a 3br rental inventory search on SE. Nothing satisfactory. To my regret, I passed up on a rental 5 years ago (quibbling on price) - ideal layout, good condition, but 10% more than I wanted to pay. That apt hasn't come on the open market for rent or changed ownership (in the last 5 years) and neither has any other apt in that line for the same period of time (renting or owning).

Not quite accurate - an apt in that line came on the market 3 years ago at a bubble price, and sold quickly (approx. 100% premium to own). Obviously I wasn't go to go for that!

Out of curiousity, how many places came up in your rental search in total? I'm curious how wide a net you cast as compared to me.

10023 - also curious, what building/line was it which would have tempted you?

Inonada: I cast a wider net than usual in this hypothetical search. No geographical limits except for "UWS". 3br (with DR, LR).

What I found: the usual Trump-y listings + a wacky layout at the Pythian + unspecified WEA C7s (probably upper stretches) + a couple of not-so-well-laid out 3/4brs in townhouses.

I know of a couple of buildings that do not advertise on SE that have similar apts at much better price points (but tradeoffs would be not-so-well-maintained, etc.)

201W72 (A-line, below 16th & below).