The New York Crash is coming?

fun!

I'm not sure this means a crash, but I think this is just one more of those reasons re crashes don't reverse themselves in a few months like owners all seem to want.

There is a reason the last one took half a decade to stop falling.

it has been a looong process but it would appear as if nothing is in place to reverse it or slow it down.

well, there is one thing to at least slow it down... its optimism.

Some of it might be insane, but it led some folks to buy in. Many are just happy at the 20% sale after not being able to afford for so long.

But one wonders if thats the crash just keeping the other fighter up for a few more rounds before he drops it...

true, that has slowed it down (along with gov't subsidies).

It's crazy how short people's memory is. They seem to avoid remembering that price for properties in NY increased 4oo% in 8 years and only remember the peak prices. Hence the illogical move to buy an apt discounted 20% from peak price and think they got a good deal. That is so funny, stupid and sad at the same time... I thought people who could afford a million $ apt were a little smarter than that...

I think you are right on.

But why be surprised that there are folks who might be making a mistake at 20% off... when TONS of folks spent millions WITHOUT the discount....

$ doesn't make you immune to herd/lemming mentality. Look at the Japanese spending $500 on a prada wallet while eating $.50 ramen noodles at home. Flmao.

Sledge,

I was thinking the same thing, but there is another way of thinking about it.

The article indirectly supports your view. BUT, I think articles like this also get people minds chruning thinking "Disaster Scenario". The biggest assumption with what you said is that a correction means a dip thats closer to pre-bullmarket prices rather than peak prices.

Manhattan is so hard to gauge. We all know that. How much of the bull ride can we quanitfy as hysteria? How much is accelerated appreciation for a logical reason. And, finally and most importantly, how much appreciation is tied to unforseen or underestimated increases in demand, lifestyle, need, etc.

While I certainly think -20% off peak prices may not be the deal of the century, can you actually say confidently now that you are waiting for the -50% dip.

Also let's not confuse out percentages and what they refer to:

--> If a house is 100k and goes up 800%, then it's now $900k. Saying you bout it at -20% seems miniscule, but it's really now -180k (aka prices at 720k). Is that so bad after 8-10 years? Maybe maybe not, but I can tell you waiting for it to dip 50% off (which means buying it at $450k seems like a dream of a lifetime. I don't see that happening either.

The final bottom will be much closer to the peak than the trough.

WTF did you just write?

Dow 9.6k yeah! Bullish for NYC re,no? 200 open houses down from 2.6k last week bullish, no? The oil hasn't wrapped around fl and hit the hamptons!, bullish for NYC re, no? Euros have not yet decides to sell their units, waiting to sell after parity, bullish for NYC re, no? WTF is so hard to see?

lol... ok

someone pls translate:
"The final bottom will be much closer to the peak than the trough."
your know what? dont bother

my specific call:

past:
spring 09 ny re trades 30% off peak
spring 10 ny re bounces to 20% off peak

future:
late summer/fall 10 ny re resumes price declines, ultimately making new lo off peak with further weakness to 40-50% off peak

quote me next spring please

erichooooooooooooooooooooooo

and lic will see a doubling in valuesbetween now and thanksgiving...a total layup...get some lic now

Well, it's only a disaster for the one who already owns, not for the one on the sideline... :-)
I don't feel sorry for anyone who behaved like a sheep and bit the bullet after 2004 knowing fully that these numbers didn't make sense but somehow thought it was their "last chance" to become an owner before being priced out ...

I stand by, as long as this economy is depressed RE will continue to decline. In 2011, we will see greater discounts.

Over due The Crash is.

Sledge,
Yep, I'm on the sidelines, so it would be great for me too.

WBottom,
I guess I'll take the other side of that "trade". I just don't think they will come down 50% on average compared to peak values. While I don't think a multimillion dollar place would necessarily go down 50%, I also think there would actually be small chance a studio would go down from, say, $350k down to $175k. That doesn't seem probable to me. Do I think it could go down to $250? Yea, possibly.

saiyar1,

This is all as we see it.

Oy. I bought in the 1990's. So, not that bad for me, but...oy.

"Over due The Crash is."

When Yoda starts calling the market down, you know there is trouble coming.

May the schwartz be with you.

Its simple finance -- with mortgage rates this low, it ain't gonna crash..... http://www.mortgage-x.com/trends.htm

> with mortgage rates this low, it ain't gonna crash

Except it already did... so there goes that logic.

Oy, oy, oy!

little teddy makes a pretty good point. with record low rates the housing market "ain't gonna crash." in fact, they must be setting all kinds of records!

1.
"Pending homes sales plunge 30% in May. The sharp drop in pending home sales mirrors the 33% drop in sales of new homes in May, which are also recorded at the time of the sales contract."

2.
"In May 2010, 28 thousand new homes were sold (NSA). This is a new record low."

3.
"Home foreclosures set a record for the second straight month in May, with increases in every state, as lenders stepped up property seizures, RealtyTrac said earlier this month."

4.
"Bank repossessions climbed 44 percent from a year earlier and will probably set a record in the second quarter, the company said."

If were talking NY don't see it at all, at most modest decline. If we're talking California, I can see a retrenchment to the lows from all the REO inventory out there. The posters looking for a Manhattan crash are not realistic and are just acting out of Schadenfreude.

define modest.

around 5%

Is this anecdotal? Or fact based?

is what anecdotal or fact based?

Riversiders prognostication.

"When Yoda starts calling the market down, you know there is trouble coming."

When you can't offer logic, facts or reasoning, try an insult and you failed at that.

Riversider - there are potential defaults galore in NYC on the developer level even if they are not currently manifesting significantly on an individual homeowner level - at least that is my take given the Bed Sty default and endless discussions on shadow inventory. How long will the lenders let them coast - its conceptually the same question. I posit that the developers have more leverage than the individual homeowners tho in dealings with lenders.

....whoops meant to reference Sty Town instead of Bed Sty

"little teddy makes a pretty good point. with record low rates the housing market "ain't gonna crash." in fact, they must be setting all kinds of records!"

lol

Oy, Oy, Oy, Oy, Oy...

This is a really poorly-written article, and I think the author is totally blowing smoke.

Business Insider's articles are all over the place. And yes I agree evnyc

Thanks,evnyc and Riversider. I feel a bit better now.

Are coops more resistant to massive price swings? Little or no speculative investors. Careful financial scrutiny w/ bigger cash down payments (25% and higher). Less turnover. Does the hign % of coops in NYC as well as rentals (rents may be down in NYC, but are still quite high relative to the rest of the U.S.) make this "crash" scenario less likely. As for one and two family houses, I think you might be surprised at the high percentage of homes without a mortgage. Not trying to be bullish, but a tad more realistic.

what about co op boards stopping lower priced sales? how long can that keep up?

Look at the bears making muscles.
Wishing the market into the dirt!
Wish hard for $500 a square foot my little droogies.
All we need is mortage rates at 18% crime in the streets and epic unemployment...
I'm wishing for something else...
Lotto, watermelon and a 13 inch ......

...the only 13-incher in the falco household is his wife's...television set!

oh, snap!

Aren't soft things more likely to bend than snap?

Owwwwwwwwch!!!!!!!!!!!!!

here is one take on record low interest rates:

Mortgage Rates Scream DO NOT BUY
By Patrick Saturday, 3 Jul 2010 6:20 pm
Mortgage rates are at record lows, making this a terrible time to buy a house, but realtors count on the fact that most people don%u2019t understand the relation between interest rates and asset values.

Short answer: when money is cheap, assets are overpriced.

Long answer: assets like housing and stock are often purchased with borrowed money. The cheaper the borrowed money (the lower the interest rate) the more people borrow, and the higher they drive the asset prices with this borrowed money. The underlying true asset value is no higher, but because people can borrow more, they pay more. The monthly interest payment is the same, but the total debt is higher because the interest rate is lower. This is not a problem until interest rates rise.

When interest rates rise, people can borrow less, so they can pay less for assets, so prices fall. Those who already borrowed at lower rates lose as their assets fall in price.

So if you buy a house now at a time of low interest rates, you%u2019re just setting yourself up to lose massive amounts of money when interest rates rise.

It is, on the other hand, a wonderful time to RE-finance if you happen to already have debt at higher interest rates. If you can pay off higher-interest loans by borrowing at a lower interest rate, you win. But refinancing is very different from jumping into the housing market when record low rates are screaming for you to stay away.

The way to win the housing game is to pay all cash or mostly cash when interest rates are very high and prices are very low because people cannot borrow much. We%u2019re not there yet. In fact, we%u2019re about as far as possible away from that point.

The way to win the housing game is to pay all cash or mostly cash when interest rates are very high and prices are very low because people cannot borrow much. We%u2019re not there yet. In fact, we%u2019re about as far as possible away from that point.

Rates are at historic lows. One can buy now, keep cash in the bank, borrow at 4%(less if you consider the mortgage tax deduction/subsidy) and invest spare cash at those high rates you are anticipating.

Sniper: this isn't a realistic housing model for most people. Even if prices crash drastically, people don't have the cash to buy a house outright or close to it. Of course, one could argue that people shouldn't buy unless they had cash to buy outright and just rent...

true...but the price increases of the last decade weren't very realistic either...were they?
take a look at housing, interest rates, mortgages, etc.,...reality has been absent from it all for a very long time.

i know that most people won't/can't pay cash for their homes. i just threw it up there to counter the point above about low mortgage rates. here are a few others poo-pooing low interest rates being any help for this collapse:

http://news.yahoo.com/s/ap/us_mortgage_lending_where_s_the_boom?source=patrick.net

http://www.marketwatch.com/story/record-low-mortgage-rates-who-cares-2010-07-01?source=patrick.net

http://www.marketwatch.com/story/record-low-mortgage-rates-who-cares-2010-07-01?source=patrick.net

No, they weren't realistic. But people have to live their lives somehow - for the last 15 years, housing has recouped its post 87 losses and then some. It is not feasible for many to have spent that entire time in rentals waiting for the market to regain "normalcy".

I know people who bought at the peak places that 1) were a stretch financially and 2) not perfect in terms of size or location because to wait would have meant a fruitless search for comparable rentals. For some families that is just not feasible (not talking about NYC metro here). So what would you have advised them to do? Short of cramming themselves in their parents' basements and waiting until their 40s to have kids...

agreed. everyone has to do what works for them...but people get very dogmatic about real estate these days and when someone says something like "Its simple finance -- with mortgage rates this low, it ain't gonna crash" i think it needs to be de-bunked.

Yes, and the average person will always try to paper over own ignorance by repeating something they think they've seen in the news - "oh rates are low, it's a good time to buy". I don't know that it makes any difference if rates are low or high for the majority of people. It boils down to 1) need and 2) affordability. If they can half-way afford the payments for X amount of time (after which they are counting on a raise or something to happen), they'll buy. If they were scared sh*tless (as many on this board are, but not the average person) by macro-economics, globalization, blablabla, then no, they wouldn't buy until they had 3X the purchase price in cash and had their kids' college tuitions fully funded. But humans are optimists and Americans are even more so. Heck, if you can't stop people in Haiti from having kids...

It's long been axiomatic that many home buyers look at mortgage payments perhaps weighting the affordability of the payment more than the total principle involved. A 3% interest rate applied ot tha $3000 monthly payment will get you a 950k mortgage, but at a 7% rate the present value drops to 600k. Very powerful math that should support real estate values here.

If home values decline by 10% and rates go up 400 basis points the purchasing power is better now.

sniper, what needs to be de-bunked is the relationship of interest rates to house prices. When interest rates rise, demand for housing may slow but so could supply. You are just as likely to have flat or increasing prices as decreasing ones. The "when interest rates will rise prices will come down" argument is overly simplistic and historically speaking, inaccurate.

If you are locking in a monthly payment structure that would save considerable dollars vs rent over 30 years and don't have a crystal ball that predicts home prices, the purchase to live in decision should be considered.

Statistically, in most markets, people DON'T stay in their place 30 years. They don't. They really, really don't. So yeah, lock in low payments and just try to sell in a time of high rates, low prices.

And if homes decline the home you sell and the home you buy both went down. Hopefully the one you want to purhcse declines more.

RSer: hopefully you have equity left. Which you won't. It's a dangerous game we are playing. Better off renting.

JuiceMan, tell that to the early 1980s.

I would be glad too alanhart but I would be required to bring back my mullet, earring, and parachute pants first

When NYC's biggest brokerages are owned by over-leveraged companies 50% and 100% controlled by Bennett LeBow and Leon Black, respectively, Wall Street's masters of bad credit, the future for Manhattan property cannot be too bright.

Break it down.
Stop!
Hammer time!!!

ahahaha - great blast from the past juice!!

condos fell another 6.9% psf. its on the other thread.

you must be reading that wrong. it is mathematically impossible for price per square foot to fall when interest rates are at record lows!!!! isn't it?

well, lots of folks have changed the meaning of standard phrases like "yes", "no", "up", "down", "top", and "bottom"... so why not rewrite some economics rules as well.

"When I use a word," Humpty Dumpty said in rather a scornful tone, "it means just what I choose it to mean -- neither more nor less."
"The question is," said Alice, "whether you can make words mean so many different things."
"The question is," said Humpty Dumpty, "which is to be master - - that's all."

Riversider: Nice quotes!

Thanks! and by the way, "thanks" still means "thanks" or at least I think it still does..

well done.

"I'm not sure you can even call this a double-dip, because I'm not sure we ever got out of the first dip," says Radar Logic Chief Executive Michael Feder. "Last year I think buyers moved in because prices were so low, but we've seen such a massive inflow of supply because of foreclosures and the big inventory of foreclosures to come. It's really affecting the comfort that buyers have in the prices they're paying."

Scary

So which asset class has outperformed?

Ha! Glad I bought in the middle of 2010 when this thread was hot.

There was an entire cohort on here for years going on and on about a crash. A few sober less hysterical people repeatedly said it is a bad idea to market-time your life when it comes to real estate if you have reasonably long time horizon you plan to spend in the property, if purchasing fit and did not otherwise compromise your long term financial plans, and if purchasing was within your current budget. For those who purchased, even at peak prices in 2007-08 (pre-Lehman) and who still own the property, they may well have done very nicely for themselves already. In Greenwich Village, for example, prices are about 50% higher now than they were 7 years ago. Purchasing at a peak in the market obviously didn't hurt them at all so long as they had a 5-10 year time horizon.

There were also some here who shouted from the forum's metaphoric rooftops about a coming 50% price correction that was all but guaranteed based on indisputable historical data and current metrics. Well, obviously, despite the idiot wind they blew for a few years, a 50% downward "correction" never occurred.

Now, are we due for another "correction"? Do we have another overheated market? Have we entered a bubble? I still say the questions are silly. Every market goes up and down and RE is no different. Sure sooner or later there will be a downturn. And after the downturn there will be an upturn. Reasonable time horizons for holding a property were, are, and will be the key to good purchasing decisions.

Have to live somewhere at some point. The reality is work-life balance has gotten pretty bad for a lot of people in NYC. So the commute is king now...whether its living in Manhattan or prime commuting burbs or borough neighborhoods.