Reality, check…what will happen to NYC real estate.
Started by mikemargin
over 18 years ago
Posts: 6
Member since: Aug 2007
Discussion about
Reality, check…what will happen to NYC real estate. I have read numerous, posts on this website, talking about gloom and doom about NYC prices and the future of investment in NYC Real Estate. I am an active financial professional, I have recently gone to contract, have a locked Alt-a mortgage, and have many friends who work on mortgage desks. I have, also lived in NYC for 40 years, and have seen... [more]
Reality, check…what will happen to NYC real estate.
I have read numerous, posts on this website, talking about gloom and doom about NYC prices and the future of investment in NYC Real Estate.
I am an active financial professional, I have recently gone to contract, have a locked Alt-a mortgage, and have many friends who work on mortgage desks. I have, also lived in NYC for 40 years, and have seen booms and busts in NYC real estate. Here is my analysis of the current environment.
-The credit issues, occurring are very troubling. There are unprecedented problems in these markets. However, In NYC, I can still get a Jumbo alt-a loan at around 7%. It’s not easy but loans are getting done.
-Inventory In NYC are exceedingly tight, rents are skyrocketing. The loss, of ten’s of thousands of jobs will definitely create lower demand and higher inventories. However the credit crunch will also prevent new developments, and the ability for supply to get out of control.
-The financial industry makes up, 25% of NYC tax base. This is much lower then it was in late 80’s
-NYC, now is a destination point for retirees, foreigners and large families. This in stark difference to 80’s when families fled NYC, and retirees couldn’t walk the streets.
-Inflation is a friend to those who own RE in NYC. Inflation is probably running at 6% if you used correct metrics.
-we will most likely have a pretty nasty taste of stagflation, and recession next two years.
-The world economy will not go into recession, only USA will, this will buoy exporters.
-Stock markets bottom right before recessions, not after or during. The markets price’s in the future. We are now pricing in recession.
-We are not going into a depression….If we were commodities, farmland, and many other assets would have been declining precipitously. The depression was a result of bad economic policy, and not a stock market crash or credit crunch.
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Response by mikemargin
over 18 years ago
Posts: 6
Member since: Aug 2007
therfore if you are buying for the next 5 years or so forget the noise. If you can buy and rent for positive income dont sweat. If you are speculating, or building be worried.
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Response by nova77
over 18 years ago
Posts: 227
Member since: Jan 2007
#1 - When you speak about NYC - are you speaking about Manhattan? If so then i can agree - but not necessarily if you are speaking about the five boroughs.
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Response by markznyc
over 18 years ago
Posts: 277
Member since: Jan 2007
Another interesting factor in the overall scheme of things re: the difference between NYC today and yesterday (1987). Like it or not it is much more wealthy and suburban than it used to be, with people putting down roots to live here. Families aren't "flippers", and I also think that will be a factor in any market changes. People buying condos in Miami and Vegas weren't doing so to be able to walk to work rather than take Metro North . . . speculation has given way to foundation in NYC . . . hopefully all of these families will be able to pay thir mortgages!
" If you can buy and rent for positive income dont sweat."
Unfortunately there are exactly zero Manhattan properties you can buy and rent for positive income.
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Response by anon3
over 18 years ago
Posts: 309
Member since: Apr 2007
zizizi is correct, Manhattan real estate is severly overpriced (when looking at traditional rent/price ratios) - even a 50% drop really doesn't get you to a historical rent/purchase price ratio. This market will drop. Much better to rent for the next few years.
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Response by mikemargin
over 18 years ago
Posts: 6
Member since: Aug 2007
I am talking about manhatten....
zizizi the one thing you dont take into account is cost of credit and currency valuations. Even if your worst case scenario occurs(which is unrealistic IMHO)if the dollar drops 20-30% and rates go to 9% then the dollar you borrow today will be worth 50% less then it is tomorrow, plus your investement returns in debt will be higher then your interest. IE in real purchasing power terms even a 50% decline would be a 10-20% decline in regards to real cost in tomorrows dollars.
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Response by 5634zzi
over 18 years ago
Posts: 17
Member since: Jun 2007
so you are saying that if you have 2m to invest and choose to buy and rent 2 one bedroom apartments you don't have positive income? I don't understand, please explain.
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Response by cmtsuk
over 18 years ago
Posts: 100
Member since: Nov 2006
mikemargin - your argument makes no sense whatsoever. And you can't spell.
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Response by uptowngal
over 18 years ago
Posts: 631
Member since: Sep 2006
OP/mikemargin, interesting analysis and I agree with most if it.
It sounds like what you're saying is that it looks as if we're getting into a slowing economy/recession yet the Manhattan RE market won't - or shouldn't - be affected as much as it was in '87..true?
Interesting...
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Response by urbandirtbag
over 18 years ago
Posts: 19
Member since: Aug 2007
Uptowngal, are you a babe?
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Response by mikemargin
over 18 years ago
Posts: 6
Member since: Aug 2007
cmtsuk money borrowed today, will be worth less 5 years from now as currency declines and inflation accelerates. If you dont understand, then I am sorry. Also am aware I am bad at spelling(i am dyslexic).
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Response by anon3
over 18 years ago
Posts: 309
Member since: Apr 2007
mikemargin - you have no idea what you're talking about. Also, dyslexia should not make you a bad speller.
therfore if you are buying for the next 5 years or so forget the noise. If you can buy and rent for positive income dont sweat. If you are speculating, or building be worried.
#1 - When you speak about NYC - are you speaking about Manhattan? If so then i can agree - but not necessarily if you are speaking about the five boroughs.
Another interesting factor in the overall scheme of things re: the difference between NYC today and yesterday (1987). Like it or not it is much more wealthy and suburban than it used to be, with people putting down roots to live here. Families aren't "flippers", and I also think that will be a factor in any market changes. People buying condos in Miami and Vegas weren't doing so to be able to walk to work rather than take Metro North . . . speculation has given way to foundation in NYC . . . hopefully all of these families will be able to pay thir mortgages!
Good commentary in NYT about this phenomenon today:
http://cityroom.blogs.nytimes.com/
" If you can buy and rent for positive income dont sweat."
Unfortunately there are exactly zero Manhattan properties you can buy and rent for positive income.
zizizi is correct, Manhattan real estate is severly overpriced (when looking at traditional rent/price ratios) - even a 50% drop really doesn't get you to a historical rent/purchase price ratio. This market will drop. Much better to rent for the next few years.
I am talking about manhatten....
zizizi the one thing you dont take into account is cost of credit and currency valuations. Even if your worst case scenario occurs(which is unrealistic IMHO)if the dollar drops 20-30% and rates go to 9% then the dollar you borrow today will be worth 50% less then it is tomorrow, plus your investement returns in debt will be higher then your interest. IE in real purchasing power terms even a 50% decline would be a 10-20% decline in regards to real cost in tomorrows dollars.
so you are saying that if you have 2m to invest and choose to buy and rent 2 one bedroom apartments you don't have positive income? I don't understand, please explain.
mikemargin - your argument makes no sense whatsoever. And you can't spell.
OP/mikemargin, interesting analysis and I agree with most if it.
It sounds like what you're saying is that it looks as if we're getting into a slowing economy/recession yet the Manhattan RE market won't - or shouldn't - be affected as much as it was in '87..true?
Interesting...
Uptowngal, are you a babe?
cmtsuk money borrowed today, will be worth less 5 years from now as currency declines and inflation accelerates. If you dont understand, then I am sorry. Also am aware I am bad at spelling(i am dyslexic).
mikemargin - you have no idea what you're talking about. Also, dyslexia should not make you a bad speller.