Done with being an owner

Matt, does the elevator always work in your current building?

"Wealthy owners are going to use their cash to buy a whole bunch of scattered apartments? Most of which are coops that require owner-occupancy ... ?"

PMG, on second thought this scenario is indeed plausible ... IF coops go bankrupt. That's exactly what happened to many prime built-as-coop buildings around the time of WWI (I forgot the exact years, but well before the Great Depression).

Matt is right about this: it's possible to live in Washington Heights inexpensively, and you can even own your own place.

PMG: I see the attraction of locking in your monthly payment, esp. at a historically low rate of interest forever, regardless of how the housing market does.

But. Few people can say with absolute certainty that they have a 30-yr horizon or that they never need to sell, no matter what. Few working people have jobs or family situations that are that stable (yes, I know G/L singles/couples childless forever are a sig. demographic in NYC). And therein lies the issue with the low interest rate. With very few historical exceptions (I am not sure there are any), you can pretty much bet your bottom dollar that rates will rise, and prices will fall sometime in that 30-year period, and if you HAVE to sell for whatever reason, can you be so remain so sanguine about buying today? You could lose your downpayment, you may need to bring $ to the sale, etc.

I'll just toss out a couple of scenarios - what if you or a member of your family falls ill and need your equity for healthcare costs? What if you have any kind of unexpected need? What if you lose your job or you need to relocate? What if you can't afford the monthly payment (regardless of the low interest rate) bcs of some unforeseen circumstance?

I would still advocate buying with a low interest rate if and only if the annualized rent/sales price ratio made sense. It doesn't, and I don't care how much money Matt saves on his apt. In my niche market (large apt, s. of 81st), if you can find the apple-apple apt, the cost to buy (yes, I include mtge interest and tax deductions) is far greater than the cost of renting. I am an owner, so don't accuse me of being biased. If I did not already own (and if I weren't so infernally lazy when it comes to cleaning), I would be renting right now.

PMG: I see the attraction of locking in your monthly payment, esp. at a historically low rate of interest forever, regardless of how the housing market does.

-----
No different than trading, you do your macro-analyisis, come up with a view of the world and make your bet Frankly borrowing for 30 years for under 4.5~% sounds intriguing considering that the market is not pricing any inflation premium into yields. Forwards on the 1 year Treasury are impliying over 2% in only two years and the curve steepens. If taxes go up the mortgage becomes even more attractive.

Good points nyc10023 You've made a good case that if sale prices rise and fall as interest rates rise and fall, the best time to buy is when rates are high. Over a period of time rates will rise and fall but you'll always be stuck with your high purchase price.

Suggests that interest rates are the only determinant of home prices which I do not buy into. There are other factors such as the general economic environment, a media effect and supply/demand to consider. This buying low in a high interest rate environment is too one dimensional for my taste.

Flmao. 'buy now bf the financing goes away!'. Last great words of a bubble!!!!

Buy the car now bf 'the 0 financing goes away after labor day!' flmao. Who thunks like that? Pmg?

The idea has merit, assuming one has the financial flexibility. If rates go up, you can invest new money in higher rates and benefit from borrowing at low rates. You can look forward to letters from your lender agreeing to reduce the balance owed should you pay off the loan early(assuming the loan is held by the bank)

Flmao. The same group trying to jump into re bf April 30th somehow are the same group doing it bc they are 'savvy'. One other thing tell me a bank that's giving 95% loan to value with a 30 yrs fixed rate loan that doesn't involve buying into the greatest deflating asset in the history of modern man. And in order to take advantage you'd have to take out a significant chunk of money compared to your income, ie you ARE taking huge bk risk. Flmao. Borrowed money ain't never free, most ppl don't assign the proper risk for signing the IOU.

and banks aren't just handing out 30 year mortgages these days at 5% like they are candy. if they can't be insured or sold the banks don't want them. doesn't do much for the buyer who is interested in a larger apartment in manhattan. (unless they want to tie up loads of cash).

haven't you been reading all the posts by buyers who are only being offered 5/25s? banks may be stupid but they're not dumb.

I would make two comments about interest rates rising and prices falling, and the price/rent ratio in Manhattan right now.

1) I do agree that conceptually higher rates should result in falling prices. However, high interest rates are accompanied by high inflation, meaning rents will also rise with inflation. This could change the math pretty quickly. I am not disputing it costs more to own than rent right now. However, I do not think this is on the magnitude that some posters think. Yes, you can find listings and try to prove me wrong, but I think for where deals are actually happening right now, it's not off by as much as people think. A few years of high inflation, rents could easily go up 25% or more ...

2) In a number of wealthy suburbds throughout the country, the cost to buy has always been greater than the cost to rent. Families and wealthy people like to own. Way more of these people in NYC now than 20 years ago. Now, this may change, but this is a fact.

http://money.cnn.com/magazines/fortune/price_rent_ratios/

This is an interesting chart. What's striking to me is not so much what the price/rent ratios are in any one place, but the variability in 15 year averages of different cities. People act like NYC will definitely revert back to its historic 12x ratio. I personally do not think this will happen. I actually see no reason why NYC, going forward, would have a lower price/rent ratio than the rest of the country. 20 years ago there were lots of reasons NYC would have a lower price/rent ratio.

I don't pretend to have a crystal ball but there is no reason NYC, going forward, could not have, say, a price/rent ratio more in line with Seattle or Portland's 15 year average. Certainly I don't see much upside in NYC real estate right now.

Let the flaming begin. Looking forward to being called an idiot and a lemmming!!!

kspeak, very good points. The opinion posters are not discerning betwen real and nominal rates.

"Let the flaming begin. Looking forward to being called an idiot and a lemmming!!!"

you do know how to ruin a good time, don't you?

so i decided to take a look at 1996, the year we bought our first apartment in NYC. cpi that year averaged less than 2% while the federal funds rate was about 5.5% and the 30-year fixed was around 8%.

http://1.bp.blogspot.com/_nSTO-vZpSgc/SRq6zpuWz6I/AAAAAAAADus/Hv1Lful-qdc/s1600-h/OER-CPI.png

CPI and fed funds rate are not always perfectly correlated, but tend to track eachother roughly. The early to mid 1990s happened to be an extremely low inflationary period. See above.

Kspeak;

1) Don't know enough about historical rents/inflation/interest rates to say. I also think that the macro economic situation has been different each time with high interest rates.

2) Well, yes. Remember what they said about the NASDAQ, pre-2000? This time, history doesn't matter, blablabla. As an owner, I hope that you are right, but I'm certainly not putting any more money into RE at the current price/rent rations.

It hurts so much to laugh this hard kspeak/river. It's like talking to 3rd graders. No money doesn't grow on trees!!!!! Flmao lemming Econ dropouts!

1) oil prices down
2) copper Down
3) housing prices down
4) 30mm ppl underemployed
5) fed funds at 0%, what potion of thta is real versus inflation nimrods?
6) global trade collApsing
m'okay flmao.

CPI and fed funds rate are not always perfectly correlated
Why would they be? CPI is a gov't approximation of inflation while the Fed Funds is a measurei of demand for money and is influenced by the Federal Reserve.

I'm not saying history doesn't matter. I'm saying history DOES matter!!

History DOES matter because rates and inflation are somewhat correlated ...

And history DOES matter in determining what the "right" price/rent ratio should be - but history shows that in many cities, the historical average price/rent ratio has been high prior to any housing bubble.

I'm never for the argument "it's different this time" - but I'm just saying it's a very fair assumption to say that price/rents in Manhattan should not be LOWER than the national historic average. History does indeed matter.

And was not in the nasdaq in 1999 or 2000. Or in stocks in 2007.

kspeak, first of all, you're an idiot and a lemming.

Now that we've gotten that out of the way, I'll be the first to argue that if inflation outpaces current inflation expectations, then the negative effects of higher interest rates will be neutralized by higher rent inflations.

However, let's look at how interest rates stack up. Right now, inflation expectations (from markets that trade billinons a day) anywhere from 1 to 30 years out are in the range of 2-3%. They've been at these levels for around 20 years, ever since Volcker put the lid on inflation. Real interest rates, as defined by TIPS, or the amount beyond inflation that the market expects are at pretty crazy-low levels. Real rates on short-term money is -2.25% or so because the Fed is trying very hard (successfully) to stop deflation. That was not enough, so they did more an more. Because of this continued support, the real yield 10-year money, it's 1.25%.

So let's look at what is unusual with our current interest rates. The inflation expectations are pretty tame. The 3.5% spread between short-term money and 10-year money is not particularly unusual. However, the -2.25% real yield on short-term money is pretty out there. The Fed has been quite clear that the reason for this is to soften the deflationary blow, which was not enough, so the goventment has taken many historically unprecedented actions to specifically target housing.

What do you think is the desired path of return to normalcy that the Fed will work extremely hard to engineer? To keep nominal short rates at 0% while inflation expectations spike to 5%? Or to keep inflation expectations at 2-3% while taking nominal short rates up to 2-3% so that real yields will stay at 0%, pushing longer-term yields up a percent or two?

Maybe they won't be able to pull it off, but given their performance over the last two years in terms of neutralizing a deflationary death spiral, I wouldn't bet against them.

>>> It hurts so much to laugh this hard kspeak/river. It's like talking to 3rd graders. No money doesn't grow on trees!!!!! Flmao lemming Econ dropouts!

Ok, now, we are not currently in an inflationary environment. Clearly.

But LOTS of sophsiticated economists - many of who predicted the economic collapse - see inflation on the horizon in the future.

http://economictimes.indiatimes.com/articleshow/5874886.cms

Here is one. Roubini The federal government has two options: default or inflate the hell out of everything.

What do you think they are going to chose? What, in fact, have we been doing.

I'm not arguing what is happening is good or fair or just. It cheats people who saved and didn't borrow excessively out of their hard earned money by devaluing their dollars.

We are printing money? What happens when you print money. Inflation!

It's not right. But we're going to in fact keep printing money until we get inflation.

Economists are terrible at predicting things. How many Economists predicted the Subprime bubble(certainly none that worked at the Fed), how many predicteed Euro collapse, Russia default in 2000... I could go on.. What Economists can do is help build models that allow one to speculate on outcomes given a certain set of facts and inputs. They just aren't good at deciding what scenarios to feed into the model. Economists are also terrible at deciding probabilities.

Roubini - who said we either get inflation or default - predicted the housing bubble. I generally agree that economists are terrible at predicting collapses, but in this case, not true.

The US and European governments will keep printing money until they inflate their way out of this mess. It's either that, or default. Pretty obvious what will happen. It's not a good thing, but a likely scenario.

so RS we can ignore all of your links to economists predicting inflation?

kspeak, we've got a lot of competition in the devaluation arena.

Euro collapse will certainly be positive on the inflation front. Products imported from Europe just became a bunch cheaper. Of course we'll give some of that back in terms of chinese imports.

We're not too far behind Greece in terms of debt levels. If the gov't doesn't reduce spending we could easily see a big fight out of the dollar in a few years, the gov't printing it's way out of debt and borrowing rates that reflect this scenario.

I agree that we have competition in the devaluation area. But the government (EU and US) are desperate to avoid it. They'll won't stop printing money until they do. There will be more stimulus packages, incentives, etc.

It may, unfortunately, be the best of a bunch of bad solutions.

and china?

"so RS we can ignore all of your links to economists predicting inflation?"

No, we can ignore all claims that rent regulations cause high housing prices.

Anyway, high mortgage rates will be great for housing prices, because then there'll be EVEN MORE mortgage interest tax deductions!!! Free money!

They'll won't stop printing money until they do. There will be more stimulus packages, incentives, etc.

I agree, because politicians don't govern when they aren't spending money.

Increasing mortgage rates will push more people toward renting. More reasons not to be short rent risk. Rents will go up.

Will inflation go up?

You know that's my viewpoint.

Inflation will inflate itself.

Ca-ching ... I hear the government printing more money ....

Doesn't inflation raise operating expenses of buildings?
Doesn't inflation cause higher unemployment?
Doesn't higher unemployment cause lower rents?
Doesn't higher operating expenses x lower rents make for very sad landlords?

:(

Introducing, Dueling Riversiders:

"Increasing mortgage rates will push more people toward renting. More reasons not to be short rent risk. Rents will go up."

"Suggests that interest rates are the only determinant of [rents/housing prices] which I do not buy into. There are other factors such as the general economic environment, a media effect and supply/demand to consider."

that's funny!

Inflation and unemployment are actually historically thought to be negatively correlated. This is a basic enonomic principle known as the Philips curve. This has of course been notably NOT true at times - periods of stagflation - but there is somewhat thought to be of a correlation today.

http://en.wikipedia.org/wiki/Phillips_curve

And, I agree, that operating expenses go up in inflationary periods too. However, operating expenses are a small fraction of the "cost" of owning a building (the chief cost is the debt service). This is like the right wing republican argument that raising minimum wages causes inflation; it assumes that 100% of the cost of making a product is employee wages, so that a 2% increase in employee wages must cause a lockstep 2% increase in prices, when it's probably more like 0.5%, because the guys making the wigets are a fraction of the cost of making the product. Same thing for operating expenses.

But we're not talking about commercial real estate - we're talking about why somebody might buy a primary residence if they have a long-term price horizon.

The long-term unemployment of uneducated men continues to be problematic. But this is a demographic that has not had much purchasing power for a long time - really since the heydey of the blue collar factory worker. I think this is more of a social problem than an economic one. Having large numbers of men unemployed is likely to lead to a spike in crime; in that sense one wishes more women were unemployed then men. But I see this as less a problem in cities, which have such demand for low-skilled workers in retail and service jobs, than in sprawling suburbs ...

So dumb people have trouble getting jobs.. I'll buy that.

give malthus a prize.

Interesting, kspeak. So does that make me a Friedmanman?

Friedmaniac?

http://www.youtube.com/watch?v=R10VjJgx1dU
maybe?

maybe a friedmadam or a friedmcmuffin?

A Friedman supporter? Nay, a Friedmanzier.

"Wrong! In a condo you call the repair company or the engineer in your building and it gets done."

Really? The appliance you bought breaks and they fix it? I haven't heard that one yet.

"Total b.s response if you think in a rental a broken appliance is fixed in a few hours. Never happens."

Now you just don't know what you're talking about. Last 2 rental apartments...

icemaker broke, got new fridge within 12 hours. Dishwasher went, they were there within an hour (turns out something was just disconnected). AC unit, about 4 hours (same unit that the building manager puts in the condos across the street). And I've never had to push, as I'm usually not home when they fix it.

Maybes its just a good rental vs. crappy rental thing. But, when its cheaper to rent, you can spend the money on a better building.

"A comparison between renting and owning should compare rent with combined mortgage and maintenance AND allow for the substantial tax deduction."

Nope.

You can't ignore the down payment. If you have to put a few hundred thousand down to set up the payments as you like them, ignoring the cost of that money (or using a risk-free rate to determine the cost) is disingenuous.

"If you're paying $2,000 in rent versus $2,000 for mortgage/maintenance, there is no money "left over" for the renter to invest in munis (although, as I explained, as an OWNER there is a substantial tax refund)."

Of course, when its $3k in mortgage/maintenance vs. $2k in rent... PLUS all the money left over from not having to make a down payment, thats a TON of money left over.

and when its $700 in rent (gotta love rent stabilization), its an absolute pile left over. And before anyone yells "thats not fair, you're compring rent stabilized", its an equally fair comparison to decisions make when buying prices weren't the same, either.

> It's worth noting that 2006 is not in the last three years.

Matt is not so much with the math...

Then again, most people underwater don't think they're underwater...

"PMG: I see the attraction of locking in your monthly payment, esp. at a historically low rate of interest forever, regardless of how the housing market does."

Of course, those who thought they were locking in payments were in for a surprise.. maintenance costs have been shotting up for some time. Darn taxes.

The market rent on my condo has risen about $900/mo in 12 years (at the peak the rent was $1300/mo more). Those costs I'm saving. In that time the common charges and taxes have risen by approximately $400/mo due mostly to an expiring tax abatement. As an owner, so far, I'd say I'm way ahead of the game. If you look at the last few years or maybe the next couple, you might reach a different conclusion. But long term ownership will be justified if rental growth keeps pace with with taxes and operating expenses, just like most of economic history.

> As an owner, so far, I'd say I'm way ahead of the game

Well, if you bought in 1998, of course so.

The problem is using the example of folks who bought before a bubble as evidence that a certain decision continued to make sense.

At the top of ANY bubble, any purchase looks like a smart idea. Like pets.com in 2000.

But thats bad logic for justifying a purchase now, or making general statements like your last one.

Btw, the last set of stats showed rents basically hovering in the flat area for almost 8 years now....

PMG, it's unlikely that a 1998 purchase will ever see red. For our edification, can you translate that $400 drop into percentage terms?

Really? The appliance you bought breaks and they fix it? I haven't heard that one yet.
Actually, That does happen, but only for minor repairs, such as a gasket that needs resealing on the dishwasher.

When the stock market broke in 1987, was it a good time to sell? no. In 2000 was it a good time to move to bonds? As it turns out, yes. So far things seem to be working out for me. Thanks everyone for your help. My point is that buying when everyone is in a mania is not a good idea. Selling when everyone is throwing up at the idea, when it is a home and you need shelter is also not necessarily a good idea. Some people like AR got carried away with a Chelsea condo they probably couldn't afford and screwed up their ownership opportunities. Life is a series of decisions, and yes trade-offs. There are today economic possibilities where buying NYC property today will pay off. Example, currency devaluation. Nominally, you'd be better off owning real property than a demand deposit at Chase. However, that is not to say buying property today is easy for someone without the means or spare capital.

Reminds me of the consensus opinion on Gold back when it was $350. Fortunately I did not listen..

"Really? The appliance you bought breaks and they fix it? I haven't heard that one yet.
Actually, That does happen, but only for minor repairs, such as a gasket that needs resealing on the dishwasher."

Ok, so owners are covered on minor. I like being covered on major, too. Most of all, I like just not dealing with dealing. I put the request in via the online system, and they get to it within a few hours.

> Reminds me of the consensus opinion on Gold back when it was $350. Fortunately I did not listen..

Reminds me of the concensus opinion on dotcom stocks.
;-)

Also, gold in real terms has performed pretty poorly...

pmg, sanctimonious much? I could afford it. I didn't want to do so as a reduction on income made it a stretch. staying on the cheap coop would have constituted an excessive lifestyle compromise as it was way too small so I needed to move. home prices in 2000 were roughly in line with rents so I bought.

when I sold the Chelsea apartment it wasn't my forever apartment, it was horribly inconvenient to our daughters school (which we selected after buying) and as I have said I felt it was a stretch, even though it was still only 2.5 times income after the pay reduction, amdthe rent/buy had become a no-brainer.

You really are something with your presumptions. we were ableto purchase the gramercy coop within a year of my husband graduating from law school without any assistance. if we'd had another $50k yes I could have bought my forever apartment then. but frankly I don't really give a shit asy quality of life suits me quite nicely

Ok, so owners are covered on minor. I like being covered on major, too. Most of all, I like just not dealing with dealing. I put the request in via the online system, and they get to it within a few hours.

You are high maintenance. Think about it like owning a house with the convenience of 24 hour handymen available. Nobody is going to replace a burned out appliance motor @ 2a.m. in the morning.

> Reminds me of the consensus opinion on Gold back when it was $350. Fortunately I did not listen..

Reminds me of the concensus opinion on dotcom stocks.
;-)

Also, gold in real terms has performed pretty poorly...

Actually stocks have done pretty badly last ten years. Gold much better, it was $350 it's now $1200 :)

> When the stock market broke in 1987, was it a good time to sell? no.

When dotcom stocks busted in '99, was it a good time to buy? After they kept busting?

How about those tulips?

> Thanks everyone for your help. My point is that buying when everyone is in a mania is not a good
> idea.

Agreed. Of course, we might still be in housing mania. Not as much as peak, but we're still way ahead of where we've been and where the ratios point. See what happens with another year or two without recovery there. Just because things are a bit less crazy doesn't mean they're not still crazy.

> Selling when everyone is throwing up at the idea, when it is a home and you need shelter is also not
> necessarily a good idea.

True... but we're nowhere near everyone throwing up with housing. I'm totally into the contrarian strategy, but if you think the masses are all anti-real estate, think again.

> There are today economic possibilities where buying NYC property today will pay off.

And there are possibilities where its just a majorly leveraged asset that slowly loses a lot of folks a lot of money.

A bargain about to become a bigger bargain is no bargain at all.

Assuming that because something came down, its undervalued or out of favor is just not logical.

pmg, sanctimonious much

ok, now we are talking like Yoda, what gives?

pmg your posts just highlight the enormity of the bubble. it was a now you can afford it now you can't process that occurred at warp speed. many of the people posting here were far less lucky than I and never had a hope of affording something decent and being able to afford it.

kspeak it's not just rent to buy nbers that are out of whack. income to sales price as well

Somewhere,
This is what I've learned ..sort of. Numbers lie or at least analysis can be misleading.
The worst investments may outperform going forward and vice versa. Commodities had a bad decade? Buy metals! Oil stocks are left for dead, go with best of breed Schlumberger. You see a book saying DOW is going to 36000. SEll!

History doesn't repeat but it sure rhymes. Everyone invests with a rear view mirror, it pays to be skeptical or a contrarian.

sorry and being able to save enough for it.

"Somewhere,
This is what I've learned ..sort of. Numbers lie or at least analysis can be misleading.
The worst investments may outperform going forward and vice versa. Commodities had a bad decade? Buy metals! Oil stocks are left for dead, go with best of breed Schlumberger. You see a book saying DOW is going to 36000. SEll!

Yes, I've been spewing it since high school... "past performance is a poor indicator of future performance". And I generally believe it signifies the opposite.

That being said, there are long term growth patterns one can follow. Stocks grow in value because of the growth of the underlying companies, and the data backs that up over hundreds of years. Housing, historically, barely beats inflation. Bonds are a little better. These are the fundamentals.

"History doesn't repeat but it sure rhymes. Everyone invests with a rear view mirror, it pays to be skeptical or a contrarian."

Of course, which is why the smart money was a housing contrarian... and, based on historical patterns, it still likely pays to do so.

Stocks grow in value because of the growth of the underlying companies,

-Made that mistake with AIG, Bought it post 87. It seemed to be growing, none of the analyts saw a warning. It was too complex. Only toward the end was it obvious what was going on. Widely held and praised stocks are just an accident waiting to happen. Or so I've learned.

Its just easier to be right when the majority thinks otherwise. Its not going against the crowd, but going against the crowd, buying cheap and doing your homework. If you are right, then that's where the biggest returns are. At least this is my own personal experience.

You ever read Graham and Dodd? There's something to be said for looking at average earnings per share over the last several years and looking at cycles. Prevents you from thnking this time is different. You give up the home runs, but are around to hit singles, doubles and a few occasional triples.

That said, but gut tells me the best investments going forward will be some combination of ultra safe short duration fixed income and commodities. I own a few stocks but buy them more on dividend discount model than anything else..

"Made that mistake with AIG, Bought it post 87. It seemed to be growing, none of the analyts saw a warning. It was too complex. Only toward the end was it obvious what was going on. Widely held and praised stocks are just an accident waiting to happen. Or so I've learned."

The mistake wasn't in the truth, its that there wasn't real growth in the underlying company, it was leverage.

And the mistake was also in trying to stock pick.

"Its just easier to be right when the majority thinks otherwise. Its not going against the crowd, but going against the crowd, buying cheap and doing your homework. If you are right, then that's where the biggest returns are. At least this is my own personal experience. "

I agree. I just don't believe that "the majority thinks otherwise" when it comes to RE. The majority is still relatively bullish. Nowhere near the kind of capitulation we saw with stocks a few months back.

"You ever read Graham and Dodd?"
A few times.

"There's something to be said for looking at average earnings per share over the last several years and looking at cycles."

Yes, I posted the shiller long term analysis 5 days before the market bottom. Thank god for that man.
And he's still bearish on RE.

> Prevents you from thnking this time is different.

I don't think this time is different.

I think the folks who are still RE bearish do.

If its not different, then signs point down.

> You give up the home runs, but are around to hit singles, doubles and a few occasional triples.

Yes, I like that idea.

I think you're just making a mistake associating that with RE.

malthus GOOD ONE ON RIVERSIDER.

PMG, you rode the bubble up and are happy to be at the beginning of it.. BIG Fning DEAL.

Riversider, you see all the gov't did to pump and continue to pump bubble.. but your co-op and Soc Sec chks are just dandy... fing hippocrite

kspeak... takes nano seconds to get into inflation fighting instruments when it rears its head and NYC RE ain't it.

YOU three nimnrods are so high on NYC RE, well why don't you exchange phone numbers and buy some Rushmore Condos.... i hear "financing" is drying up... FLMAO. Go youz... !!!

I think you're just making a mistake associating that with RE.

Actually , my assumption is that real estate plods along. Days of double digit returns are over. I just don't see another crash.
--------------------------------------------------------------

Riversider, you see all the gov't did to pump and continue to pump bubble.. but your co-op and Soc Sec chks are just dandy... fing hippocrite

Again, I think we were down 20% and now we'll plodd along. I see the bigger risk in seeing rents rise. Everone's renting, Why follow the crowd?

how many fking times do I have to tell youz.... itz housing formations.... it was way way out of whack and current excess rental/sales inventory pricing levels CANNOT be supported...

hey dumass, noone jumped out of the Empire State Building this month... jump out buddy, why follow the non-jumping crowd.

w67, You add no value, consider yourself ignored. have a nice day.

How do these investments "fight" inflation. That's amazing! I wasn't aware that investments could fight inflation singlehandedly. That's extraordinary ... if only these instruments existed in the late 1970s we may have avoided so many economic problems.

Anyway, I am not saying there is more upside in NYC real estate. I see more downside than upside, but I don't see the sky falling, so I don't think it's crazy to buy if you have some liquidity and a 10 year horizon.

But keep waiting for that $500 psf.

how do yo do it?

"i see more downside"

"I don't think it's crazy to buy if you have some liquidity and a 10 year horizon"

So wouldn't that mean buy in the next 2 to 3 yrs and then have a 10yr horizon?

"waiting on $500psf"...... you mean like this guy?
http://streeteasy.com/nyc/talk/discussion/20664-distressed-seller-principals-only

kpseak... when inflation is at 10% and real interest rate is at 4%, what must a bond return to an investor to clear the market? FLMAO.. yeh, that kinda inflation fighting instrument... FLMAO

Everybody and their f'ng brother wants to debase their currency (preferably without negative consequences, of course).

where's the fire people? pmg do you really think a 6 or 7 percent 30 year fixed rate is abnormal? buy if you want, but I get really irritated when I hear bubble talk, opportunity of a lifetime crap.

Buying is not purely a financial investment. We're 20% off peak already ... I don't see more than another 20% down. It could take years of a slow trickle down to get there ... or it could be flat .... but life is short ...

nonetheless, the bond does not fight inflation. it protects you from it.

so you have your inflation "fighting" instrument - although one has to buy the bond at just the right time because the value of that bond will fall in the market as interest rates rise. so, you better buy it at just the right time, otherwise you'll be underwater shoud you suddenly need to liquidate that bond. wait, but that's your argument againt home ownership ...

kspeak, I agree. which is why it has stunned me over the years how much people have been willing to pay to buy crappy apartments.

Oh I don't agree with everything. I think we have very little idea where things will be in 2012.

Talk to me when there's some, any, real sign of inflation. zirp, a global infusion of at least six trillion, and we cant even muster up some decent CPI numbers.

Life is short, absolutely... . I can't wait till i have sex, eat some food and travel.. things I can only do as a "homeowner"

"does not fight inflation"... ever hear of laddering up as inflation expectation increases? don't go ballz deep with 100% of your cash into a 5yr CD when inflation hits 2%?.... WE ALL KNOW that inflation is the yin to our depression, i wasn't a lemming in 2007-2010 and I doubt I'll miss the tell tale signs of inflation being jacked....

so the question is, do you want to be liquid/cash or with RE in your thong to drag you down when inflation rears its head? pls, don't tell me inflation is gonna hit RE... flmao... thatz where the bubble was, remember?

We don't know kspeak's situation. It may make sense for her to buy.

PMG: you got very lucky. I didn't think RE was $$$ in '95, thought it was pretty good value actually. Just finished college, and no downpayment in hand.

W67: yeah, everything in moderation. If someone is determined to go all in or even more than 50% of liquid for downpayment, what can I say?

I don't know where prices will be in 2012 either ... I do think inflation is the other side of this money printing, not seeing it yet obviously. Inflation won't make RE prices rise as much as prevent them from falling. So you can wait and wait and wait ... meanwhile your rents are creeping up and somebody else has locked in a 30 year mortgage at 5% so they are paying significantly less than you in 5 years. You can jump in then, and maybe prices are 10% -20% cheaper, but your rates are higher, and you have 5 less years to amortize that mortgage down before retirement ..

i just locked in 30 yr fixed at 4.875 %

kspeak your huge assumption is that rents are increasing. I have a couple of very close friends who live in Tokyo. don't presume.

"I have a couple of very close friends who live in Tokyo. "

great point AR! rents went down in Tokyo faster than home prices? guess that maintenance costs and taxes did not go down though, but i have no idea really.

http://www.youtube.comwatch?v=gEmJ-VWPDM4

http://www.youtube.com/watch?v=gEmJ-VWPDM4

The Vapors "I think I'm turning Japanese, I really think so"

W67 - here is a story I saw regarding housing formations that I posted in teh V shape recovery thread a few weeks back. Down 1.2M households in 2008 and who knows how many in 2009.

http://www.msnbc.msn.com/id/36231884/ns/business-eye_on_the_economy/

Until unemployment starts moving down, I just can't see inflation as a threat. Don't think of demand as what people want, think of it as what people can pay for - its a not so subtle distinction for millions of Americans out of work for over a year.

>>> kspeak your huge assumption is that rents are increasing. I have a couple of very close friends who live in Tokyo. don't presume.

Japanese fiscal policy - or, more correctely, lack thereof - created massive deflation. The Japanese financial system was virtually shut down from 1997-2002. You can criticize the administration's reaction to the crisis - and there is much to criticize - but the financial system appears to be working again.

Now, I don't think the risk of deflation is entirely gone - yet. But unemployment numbers appear to be turning the corner and various surveys, conferences, and conversations with CEOs show most intend to do significant hiring this year. I still think the risk of significant inflation in 2-3 years is greater than the risk of deflation. You can disagree with me if you want, but this is not an uninformed view.

"I still think the risk of significant inflation in 2-3 years is greater than the risk of deflation."

Well, duh. That's like saying that the risk of a significant drop in the S&P is greater than the risk of a significant rise. It's an asymmetric risk. Almost like saying "I think the risk of losing your shirt by selling options is much greater than the risk of losing your shirt by buying options".

The question, however, is whether you have enough conviction to actually trade on it. The market is pricing inflation at around 2.0-2.5% over the next 5-10 years. About 0.5% is the premium the market has typically had over what actually realized on CPI: i.e., the market is probably saying that inflation will end up at 1.5-2.0% and asking for a 0.5% premium to be compensated for the asymmetric risk.

Are you willing to pay that 0.5%? BTW, your risk will even be limited on the downside. Because of the way TIPS are structured, they don't lose value if CPI goes negative. You in?

Yes, I am willing to trade on it - that's the point. I was being lectured how rents don't always go up and that there is a risk of deflation. I think inflation will be higher than 2-2.5% as well.

I'm not even a huge NYC real estate bull either - I think we're looking at a long period of sideways to down a bit. But, my point is, if your view is real estate will be sideways to down a bit over the next 5 years AND you see inflation on the horizon (accompanied by rising rents), buying is not as stupid as people here want to make it out to be.

Why don't you trade on it in a pure fashion? As things stand, you are hitched to it in a very uncertain manner.

To put some perspective on the matter, the theory is that home prices and rents should go up with inflation. Yet since 2000, home prices have doubled (according to millersamuel.com), rents have remained flat (according to millersamuel.com), and CPI is up 27%.

Clearly, NYC RE buy vs. rent is a pretty bad proxy for CPI, so why do you inflation trade there?