Manhattan IS different - the good & the bad

"public transportation network (local & regional) vs. auto dependency"

As a dyed-in-the-wool New Yorker who practically lives on the subway and loves the freedom of being able to walk everywhere, I have to admit that every time I go back home, while it's a pain in the rear to need a car to do any little thing, it's quite refreshing not to have to allow an HOUR to get anywhere. Everything truly is, door-to-door, less than 30 minutes.

It's also quite refreshing to be in charge of my own vehicle. No worries about *just* having missed the train (add another 10 minutes). No worries about some damn thing breaking down on the tracks (stalled in the tunnel for another 15 minutes). No worries about that "sick passenger" (up to another 30 minutes and/or dashing out of the station and walking to another train line to wait ANOTHER 5-10 minutes for the new train).

Here's another difference: everything really does happen in Manhattan, to quote Rufus Wainwright http://www.google.com/search?client=safari&rls=en&q=rufus+wainwright+11.11&ie=UTF-8&oe=UTF-8

Manhattan itself is different. Could change, but even in the worst of times, it is different. Not many people don't grow up dreaming of moving to Vegas or Arizona. It is one of the world's epicenters of arts, fashion, finance, politics, culture... The "demand" for Manhattan is special. Yes, the 1970s, blah, blah. It was still special.

Impervious to what is happening elsewhere? Of course not. But to say Manhattan is no different seems simplistic and wrong.

> Here are a few areas I think are worth discussing:

Here is another.... Manhattan was already way, way, way, WAY more expensive than all the others. Every other "pro" factor can be true, yet not undo the fact that it might have been more overpriced than everywhere else.

The analysis needs to include that Manhattan was "hot" like no other city, and no other time in its own history, and prices might have been excessively inflated BEYOND the general real estate bubble.

Also, lets not forget that "Manhattan is different" was used to explain why we wouldn't have a major decline... and we've seen 20+% declines after all...

"Also, lets not forget that "Manhattan is different" was used to explain why we wouldn't have a major decline... and we've seen 20+% declines after all..."

It's amazing how "un-different" Manhattan is when 440,000 of its inhabitants lose their jobs and can't pay their rent or mortgages.

Manhattan has always been about high paying jobs across a bunch of industries. Only Wall Street continues to provide that. There is still a huge concentration of wealth but it is not flowing as widely as it used to. Will that revert back? I don't see how.

Here is another.... Manhattan follows its own real-estate price patterns, and takes much much longer to unwind from inflated prices, but then it does.

And no, a few buildings rushing to pour their foundations before tax breaks expire, in the midst of a major housing shortage, is not the explanation for that pattern, nor is a spike in homeless people or unswept sidewalks.

"Manhattan has always been about high paying jobs across a bunch of industries. Only Wall Street continues to provide that. There is still a huge concentration of wealth but it is not flowing as widely as it used to. Will that revert back? I don't see how."

Indeed.

Compensation in media has been stagnant for nearly a decade, and adjusted for inflation is paying LESS than it did in the late '90s.

NYCMatt, I'd think that living up in Washington Heights, it might actually be worth having access to a car. I don't use mine to drive to the more crowded areas of Manhattan, but otherwise it's really a great way to avoid some of the train issues you mention.

But to stay on topic, of course Manhattan is different. It's just way too simplistic to say every real estate market will follow the exact same patterns - the simple fact that the downturn hit different areas at different times (not to mention with variable impact) proves as much. That doesn't mean that some of the biggest factors (ie: those affecting the economy on the largest scale - jobs and income) don't have the same general effect of downward pressure on real estate pricing, but those factors don't entirely mitigate the influence of other, local factors either. To be fair, I don't think too many people think that everything will turn out exactly the same as everywhere else, but that's just my impression.

"NYCMatt, I'd think that living up in Washington Heights, it might actually be worth having access to a car. I don't use mine to drive to the more crowded areas of Manhattan, but otherwise it's really a great way to avoid some of the train issues you mention."

I have never found it convenient to DRIVE to any point inside Manhattan because of the insane gridlock and parking issues. No matter how unreliable the subway, inside Manhattan it's still preferable to driving to your destination.

swe - when you say Manhattan was way more expensive, are you talking on an absolute basis, or relative to rent, income, something else?

In the initial comment, was absolute.

The point is, talking about "factors" is very incomplete when you aren't starting from one consistent starting point.

Just as one company doing better than another doesn't mean its stock will outperform... particularly when the first company is more expensive because of higher expectations.

ok, this isn't quite how I wanted this thread to go - I was thinking something like this:

Co-ops: Financing requirements are clearly limiting the number of foreclosures here vs. the rest of the country. Given that studies showing how important it is to have 'skin in the game', this is not surprising. On the downside, these limitations prevent Manhattan from benefiting from some of the things that have helped the rest of the country, namely low-down payment FHA loans. So on that factor alone, I would expect a shallower decline, but a longer recovery period.

Manhattan will always be more expensive. You think it should price like Washington Heights, Forest Hills or Hoboken?

Jobs.

That's all that matters.

In manhattan and the rest of the country.

Yes, the independently wealthy can go on without jobs but no one else can.

The rest is all window dressing.

One of the most major factors for any city's RE is it's local industry.
How do changes in the auto industry affect Detroit? How about steel with Pittsburg? Casino biz with Vegas?
NYC's foremost industry was probably the garment industry until that moved overseas.
Today most obviously the financial industry.

> ok, this isn't quite how I wanted this thread to go

Well, sometimes the facts stand in the way of what you want. ;-)

> So on that factor alone, I would expect a shallower decline, but a longer recovery period.

Again, I think there is a mistake doing this in the vacuum. We're not doing it from one starting point. We started much higher. So, even if we have factors that would "help us" more than other places, those things could have very well already been factored into price.

An oversimplifcation of the effect I'm talking about... assume for just a sec that all other factors are the same...

The parallel is:
'NYC is 25% more in demand than anywhere else, so it probably won't decline as much as anywhere else.'
except for the fact that NYC was priced 50% more expecting a 50% more demand than anywhere else.

As I noted, factors can't tell you the story if you don't know the starting point.

swe, this isn't meant to be another of the 1000s of discussions on whether or not, or how much Manhattan is overvalued. It is meant to dispel the myth that Manhattan isn't different - in ways that can have both negative and positive impacts on the market going forward, and to explore those factors. We all know you think Manhattan is egregiously expensive, and on track for another 20-30% wave down, point taken. Let's move on.

or, here is another... "Google has 10% more earnings potential than Yahoo! because of X and Y factors, therefor Google won't decline as much in a media decline". Except you can't leave out that folks were already pricing in phenomenal success for Google, and problems for Yahoo!... so Yahoo! might actually outperform.

"We all know you think Manhattan is egregiously expensive, and on track for another 20-30% wave down, point taken."

Apparently not - I didn't know that I thought that. Especially considering I've said otherwise.

"swe, this isn't meant to be another of the 1000s of discussions on whether or not, or how much Manhattan is overvalued."

And that's not what I'm doing. I'm specifically responding to your post... your words, first sentence... "will follow the same pattern seen in places like Las Vegas, Miami"

Again, the pattern discussion isn't useful without an understanding of the starting point.

> It is meant to dispel the myth that Manhattan isn't different - in ways that can have both negative and positive
> impacts on the market going forward, and to explore those factors.

Of course its different, every market is different, every market has things specific to it. Wall Street is one factor, housing type is another. But consider even just the % retiree factor, which can be HUGE for Miami, lets say.

And no two markets will fall exactly the same way, of course.

But it doesn't mean certain markets are immune to market forces (which was the inference of the original "Manhattan is different" claims back in the day). Yes, its different, everything is different, every block is different, every apartment is different. I think we can agree there. But the assertion that Manhattan is immune was proven false even as a lot of the supporting reasons were true.

And thats the point.... the supporting reasons don't mean a lot without understanding the starting point.

We can name the factors, sure.... but your original post was the one talking about its ability to affect the pattern of declines.

Another factor I don't know how to label.
Standard of living costs.
When things are good, things are extra good in NY, meaning, it would be easier to go from a 200K a year family income to 400K than it would anywhere else. Conversely, when things are bad, they can be extra bad. When Washington want to set a bar on who is considered "wealthy,"and going after familes making more that 300K a year,setting a nationwide "benchmark" like this is more detrimental to NYers.

One way Manhattan is different from the other metro areas you noted . . . is that Manhattan is a small segment of a much larger metro area, and prime Manhattan is a far smaller segment still. This could make Manhattan pricing either more stable or more volatile in certain situations, depending on the reasons for a broader economic downturn (in particular, how proportionately hard it hits the relatively affluent). We have to remember when we're talking about Manhattan that we're generally talking about the place where about 10-15% of the broader metro area lives, which makes it harder to analogize directly to data about other entire metro areas.

interesting point, truth

I'll also add:

expensive side...
Building costs
Zoning Restrictions
Popularity (although it can't really increase any more, could turn into a downside)
Willingness of folks to live in crappy places for big money

cheaper side...
Footprint / Island - Used to be a pro, Manhattan as island, but there has actually been an effective expansion of the "places yuppies can live". Manhattan didn't grow, but besides the extra construction, the footprint of where an ivy grad (as one example) might live has gone up several times over in the last few years. The kids 15 years behind me go to neighborhoods we would never have considered. Great for values in those neighborhoods, but not the Manhattan neighborhoods they're competing with.

demographics / age / death
retirement suitability
cold / warm weather

access to illegal immigrants for cheap services

NY is as unique as every city. But it is unique in any way that is relevant to the bubble? NYC presumably will go up or down relative to other cities depending on fashion, jobs, etc. But those effects are tiny relative to the bubble.

Bubbles usually end because when prices exceed costs, investors create more supply. Is NY uniquely exempt from this process? Is it unprofitable to build, renovate, or evict tenants at current prices? 2001 prices? 1995 prices? Do we expect supply to drop because of rapid depreciation of new buildings or collapse of the new neighborhoods?

Bubbles create increased demand, because buyers are willing to pay now for future appreciation. When prices stop going up, that source of demand also gradually disappears as buyers change their assumptions. Is there something in NYC's uniqueness that makes its buyers particularly likely to retain the bubble assumption that prices always go up (or "recover")? Are we so uniquely committed to the self-fulfilling bubble myth that we will be able to self-levitate?

Is there some reason why reduced demand won't reduce prices? Is there a new source of demand that didn't exist during the bubble that is going to appear now? Foreign money newly afraid or newly in love with NY alone? Population increase in the over-$250k/year crowd?

Or is there some reason why supply and demand are irrelevant in NY?

great post, fg.

FG
Straight to the heart of it, you thread killa you.

FG, we've heard your screed multiple times before (btw, do you re-write it each time, or do you have a library you cut & paste from?). Please stick to the topic at hand - pick one of the factors, and analyze how you think it will positively or negatively effect Manhattan relative to the other markets.

Since you think that access to financing wasn't a meaningful factor in the nationwide housing bubble, and the subsequent foreclosures haven't impacted the burst, while we haven't seen that to anywhere near the same extent in Manhattan, please tell us why that is.

Best case scenarios for prices staying high in NYC. These stories respect the basic rules of supply and demand. Counterfactuals are usually better for understanding than just-so stories.

I. Bubble:
Highly paid sophisticated NY financial market participants fail to understand the importance of fundamental or trend analysis and conclude that NYC prices are going to rise, just because. Fearing regulation by the radical center, they decide to take their Wall Street winnings and spend them on highly publicized purchases of overpriced housing, driving prices up and vindicating their belief in the eternal bubble. This time really is different.

II. Collapse:
-new condos turn out to be very bad quality, quickly degenerating.
-crime increases in new neighborhoods, as unemployed former yuppies turn to gang warfare.
-in response, affluent buyers pull back to the old UES of the '70s, abandoning the rest of Manhattan and BK to the gangs, and rapidly shrinking the realistically available supply of luxury housing.
-continuing financial distress elsewhere leads the international elite to seek a refuge. NY, despite the dangers of ex-yuppie muggers, looks relatively attractive.

Increased demand for a limited supply of UES units and refusal to consider alternatives leads to a dramatic price rise.
Existing UES owners cash in and buy up the surrounding neighborhoods, driving prices up as they move outward. Ordinarily, this would make those neighborhoods more attractive, thus increasing supply and bringing prices down again. However, the affluent buyers fail to see this as a sign that the surrounding neighborhoods are safe or improving, so effective supply does not increase and prices continue to rise.

III. Argentina:
-Republicans win in midterm elections. Realizing that they have no plan to increase employment and therefore will lose next election, they decide on a major-league blowout of give-aways to their supporters and donors. Democrats, fearing being swamped in fundraising, compete to give-away more. Libertarians/Tea Partiers/Reaganauts/Marxists, seeing the imminent withering away of the state, cheer as scams are legalized and profits are untaxed.

-Wall St, unregulated and supported by an explicit government guarantee that losses will always be the fault of the Fed, profits will always be the result of private entrepreneurial risk taking, and bonuses will always be high and stock-based, leverages up to hitherto unheard of heights, making the brokers/traders extraordinarily rich.

-Vast quantities of financial wealth slosh around the world looking for places to invest. No real investments look profitable because ordinary consumers continue to be unable to consume due to lack of income. Government bond supply begins to dry up due to political pressures to reduce deficits; low supply means high prices/low interest, while fiscal cutbacks mean vast swathes of the middle class lose their government jobs, further reducing consumer demand and leading to more private sector cut-backs. So the only investment option is private financial instruments. High demand leads to high prices, low expected returns/interest rates, and higher profits for traders/brokers.

- Noticing that the financial bubble is growing and highly likely to collapse in a larger crisis and recession, and faced with low expected returns/high risk in all available investments, Wall St insiders decide to speculate in NY real estate instead, driving prices up and further reducing the ability of middle class consumers to consume.

-As wealth in increasingly concentrated in a small handful of financial operators, the rest of the population cheers, thinking they'll make up their lost income and wealth in higher sales prices for their real estate. So the rich feel no need to retreat to gated communities and instead bid up Manhattan prices.

Oh, and

IV: Printer.
It turns out that contrary to the conventional wisdom and available statistics, NYC buyers were not using liar's loans, were not borrowing at unusually high LTV ratios, had no second mortgages, and were not using downpayments acquired by selling to people who were benefiting from the loose finance and bubble economy in the rest of the country. So loose finance in the rest of the country had no impact on NYC prices on the way up and will have none on the way down.

There was no bubble. The sudden rise in NYC prices (but not rents) after 1998 reflects the sudden increase in quality of life for owners (but not renters) during that period, as NYC bars and Broadway shows began to demand proof of mortgage for admission. The gap between NY prices and any known fundamental analysis reflects the failure of the standard fundamental analysis, a failure that is predictable since financial analysis was invented by smart people at elite institutions who read books but do not all share the true faith that the Bible has decreed that NYC real estate shall always rise in the long run.

FG..your buyer assumptions are way off. No one gives a sh-t about rent ratios, bubbles, supply/demand theories like u do. They buy b/c their peers are buying and they don't want to be the only shmucks in their group that still rent. Sorry renters but as you hit a certain age you look like the old guy in the club. They buy b/c their life tells them it's time. Their main concern is their job. Good job and they're off! Simple stuff. Forget all your Keynesian economic theories although it does sound great.

One thing I've noticed more and more in my little manhattan real estate world is increasing foreign influence. I have had contact with the following foreignors as a manhattan investor: Brazilians, Italians, Spanish, Russians, Israelis, Eastern block countries, Chinese, Argentinians, English, Irish and Middle Eastern. I'm sure I forgot some others and these foreignors have ALOT of cash. It is what it is and it's increasing. Euro up/down, doesn't matter they're here.

so, you're agreeing that its all about jobs.

seems like there are three groups out there in the job market:

those who have lost their jobs
those who are in fear of losing their jobs or seeing their income reduced
those who are in denial

Finance guy, real estate prices tend to correlate with employment and wages. Manhattan prices went down 20 percent from peak (roughly down 25-30%, but then we caught a spring bounce) instead of 50 percent as in some parts of the country because our employment and wages didn't get hit in the same way.

I was on Wall Street in 1988, and I remember that crash, and this one was softer because the city got buckets and buckets of TARP money.

I think we're looking at flattish pricing over the next few years, but I don't see why we'd take another leg down while people in this city have money in their pockets, even if the psychology is currently against them spending it.

ali r.
DG Neary Realty

I blame Carlos Slim.

it's all about perception.
Liitle side note: The majority of the unemploymet rate is made up of the junior financial analyst 25 yo old worker who still lives home with mom and dad. They are an unemployemt statistic for sure but their effect on real estate supplly is zero. The big O.

meant "demand" kids..."demand" people, not supply "demand"...got that "demand"...one more time.."demand"

I have been living in 'prime Manhattan' from 1988 and was an owner from 1995 to 2009. I don't have data for this, maybe someone else does, but one thing that I think makes Manhattan different is that the influence of foreign money seems to be greater now than it ever has been. As much as I would like prices to fall, and I would like to see that so I could buy again, it seems that comparing Manhattan to other 'great cities' in the world makes it look less expensive. I would like to just compare it to Miami and say it is clearly going to fall a lot, but there is an international element that does make it different. Again, I hope I am wrong and prices correct a lot more.

ummm .... Miami had a HUGE foreign element in its bid-up. Basically all of South America and much of the rest of Latin America.

Ali/stevef f'king nimrods who's either too dumb to understand NYC re is toast or so vested in the bubble they fed their babies to the bubble

A young man walks into bar. Sees a hot 21yo. They go home. The girl puts out ALL the time, she goes out and brings home $300k/yr, she makez you dinner, buys you flowers and gets u up to do it again.

A year later, she gets fat, is unemployed, doesn't make you dinner, stops having sex with you and finally stops bringing you flowers. Time for a divorce.

Good point, bad choice of city by me.

FG, you might want to get some more oxygen in your cave. or perhaps some of the cans of beans you are warehousing for the apocalypse have botulism - you should check that out.

i'll try and help you along with something constructive:
since your main premise above was that burgeoning supply meets or outstrips the accelerated demand, leading to the collapse, then how will the differences in product and development affect the trajectory of Manhattan on a relative basis? Let's compare the differences between building an 80 unit building in Manhattan and a 150 acre 80 lot development in exurban Las Vegas. There are substantial zoning, planning, and financing differences. There are substantial differences regarding the ability, or lack thereof, to mothball the developments that have already begun. There are substantial differences in the timeline of developing new projects when the time comes that the economics favor it. How do you think these differences will affect the trajectories on a relative basis?

Bubba, are you saying my apartment will stop bringing me flowers?

jack, you must have made a nice chunk of change....1995-2009. damn that's alot o' money.

in climates of housing opps, people from 2nd tier towns (LA/SF/DC/BOS/CHI) tend to "upgrade" from their cheesy locals to 1st tier places ala NYC

"FG..your buyer assumptions are way off. No one gives a sh-t about rent ratios, bubbles, supply/demand theories like u do."

Except the people who were buying BECAUSE of the bubble, of course. Like a HUGE chunk of America.
WHo bought simply because they saw values go up, not because it was smart.

"They buy b/c their peers are buying and they don't want to be the only shmucks in their group that still rent."

Of course, when they see their peers losing their houses, it changes their mindset as well.

> Sorry renters but as you hit a certain age you look like the old guy in the club.

Actually, we're the young people with changing lives. When I think of ownership, I think of my parents!
The old folk who aren't even in the club.

> They buy b/c their life tells them it's time.

That would be a good idea. Unfortunately, the bubble came from buyers who made the mistake of thinking its an "investment".
That idea now going away means... price declines.

> Their main concern is their job.

And when they don't have one, they probably aren't buying.

> Good job and they're off! Simple stuff.

Bad jobs, no jobs, and what happens?

Oh yeah, biggest RE crash since the great depression!

> Forget all your Keynesian economic theories although it does sound great.

SteveF, you're making fun of economic theory, yet you just made the point about... uh... jobs.

You think economic theory is unrelated to jobs? Really?

> it's all about perception.

Agreed. And the perception has changed DRAMATICALLY from a Manhattan that never goes up to a Manhattan where nobody is certainly about stability anymore, and we've seen huge declines.

w67 -- what bar?

ali

> since your main premise above was that burgeoning supply meets or outstrips the accelerated demand

It doesn't need to meet or outstrip demand... it just needs to meet or outstrip it LESS SO than was anticipated.

A company can increase earnings and go down. It can decrease earnings and go up.

Without understanding what factors were already priced in, you can't really anticipate what changes in the factors will do.

"There are substantial zoning, planning, and financing differences. There are substantial differences regarding the ability, or lack thereof, to mothball the developments that have already begun. There are substantial differences in the timeline of developing new projects when the time comes that the economics favor it. How do you think these differences will affect the trajectories on a relative basis?"

Again, it all depends on what was priced in to begin with!

hey there IT is....swe. I was getting a little worried. Thought you might have choked on your own foam.

swe are you the old guy in the club?

"it's all about perception.
Liitle side note: The majority of the unemploymet rate is made up of the junior financial analyst 25 yo old worker who still lives home with mom and dad. They are an unemployemt statistic for sure but their effect on real estate supplly is zero. The big O."

Always good to get some of SteveF's hardcore statistical analysis and insight.

swe, FG can speak well enough for himself. please, for once, stop sucking all the oxygen out of the room.

somewhereelse the biggest doomer of all the doomsayers that ever existed on SE. How wrong she was. Prices dropped for a frozen period of time, quickly rebounded and are about 10% away from peak prices and currently pushing higher with inventory going down down down. Guess what swe? There has been no new development in 3 years. 3 years! That is unheard of. The impact is just starting to be felt now. Wait till next year when inventory drops to sub 7k.

Interesting... you're now for letting people speak for themselves, yet just earlier in the thread you apparently read my mind and said it for me.

You made a long post, and it happened to be based on a faulty premise, and I said something.

Also, you need a new line besides the oxygen one. You used it, what, 5 seconds before that?

Ali -- great post!!!

> somewhereelse the biggest doomer of all the doomsayers that ever existed on SE.

nope, try again. I wasn't. Hell, I'm not even a bear according to some people.

> How wrong she was.

Nope. I was right on RE. I was right on stocks, too!

(you were wrong on both)

> quickly rebounded and are about 10% away from peak prices

nope again! incorrect. not even the overall median says that... AND the category medians note its actually DOUBLE that.

entire thread on it:
http://streeteasy.com/nyc/talk/discussion/21856-data-causing-the-screams-declines-by-category

Sorry, steveF, you're wrong again!

> Guess what swe? There has been no new development in 3 years. 3 years! That is unheard of.

Agreed, its unheard of. Even now. Because its... UNTRUE.

wrong again, steve!

(on the last point, 2009 was the PEAK YEAR ALL TIME of new units entering NYC market, by NYC building congress stats. Second highest year ever... 2010!)

sorry, steve.

swe sub 7k inventory, then 6k, then 5k.....tick tick tick :) I luv messing with you...

Steve, I can't tell you how much enjoyment I get from slam dunking on your head. You make it so easy, and I feel a little guilty, but its still fun.

tick, tick, tick..... :)))))))))

yes, 5 minutes and counting since you got schooled... and you still haven't addressed the mistakes I pointed out.

Guess you know I was right.

Thanks for making it so easy, Steve! Kaboom!

Yes, ali r. knows how to have a laugh with w67th. ali is cool.

O.K., back to somewhereelse. He admits that he enjoys it. So, that's cool too.

SWE, please let steveF post without getting into a back-and-forth bickering with you. I find his views enlightening as to the thought processes of a NYC RE bull.

Printer, I think the main "unique" factor of NYC is the relative wealth. The trajectory has been no different, really, than any other affluent sub-market. Go look at the Case-Shiller tiered indices (MacroMarkets website) and note the differences between the bottom, middle, and top tiers in each market. Although none of the top tiers are as high as the average for NYc, it'll paint thepicture for you.

Do you actually follow any affluent sub-markets outside of NYC? The few I know followed the same exact timing and pattern as NYC. The wealthy have higher wealth relative to income and can collective withstand economic adversity better. This means that in all likelihood, they'll collectively bleed it out rather than puke it out. Not enough of them will need to cry uncle simultaneously.

"I find his views enlightening as to the thought processes of a NYC RE bull."

I do agree... it is helpful to see what the uninformed say, as they are part of the market.

Nada... "bleed it out rather than puke it out" Both images are ugly and inevitable.

nada - so how do you think that plays out going forward? will dependence on wealthier folks be a good or bad thing on a relative basis? and on a side note, why do think it is that NYC has such a low homeownership rate vs. other top-tier cities, and the nation as a whole?

Same outcome as everywhere else, just takes longer.

Better than both at the same time, Dreamer ;).

Printer, I think it's a net positive for net sellers and net negative for net buyers in the short term (next several years). For others, it doesn't matter much, I guess.

On the low ownership rate, it's the same story as the low vacancy rate: public housing, rent contol, rent stabilization. I can't pull up the handy 2008 NYC housing data from the census, but only something like a third of the rental stock is free market. The vacancy rate promoted by the real estate industrial complex conveniently includes all subsidized / regulated housing in the denominator. Hardly of significance in the actual marketplace.

I bet if you looked up the 2008 census and limited yourself to free market rentals vs. owner-occupied units, you'd see a much more normal picture compared to the rest of the nation.

"On the low ownership rate, it's the same story as the low vacancy rate: public housing, rent contol, rent stabilization"

Definitely agree with that, and just overall amount of poverty in past years.

But I also think you have to figure what NYC is demographically.

You have to figure few cities have as many high-paying jobs for 25 year olds, and the types of jobs that require short stints (not as much as DC perhaps, but think of all the analyst-type roles). Or the bankers that do their hong-kong stints. Or folks who want to live in NYC, but only when they're young. We get huge influx of renter-types every year, and less of the organic growth that might lead to ownership....and I think that would be the case even without the factors you listed.

So...

For NYC, 2M rental units, of which 800K are free-market, against 1M owner-occupied.

For Manhattan, 578k rental units, of which 187K are free market, against 183K owner-occupied.

interesting.

I thought of something else. You have to figure that the fact that most housing is apartments (vs. traditional houses) will keep the rate low. The drive to own has often been connected to... land.

I think what drives folks to own traditionally (outside of appreciation bubbles) is connected to your plot of land and doing what you want. You don't get the land or the same amount of control in a co-op, for instance.

I wonder how we stack up in terms of ownership of apartments specifically vs. other cities?

For vacant housing in Manhattan, 16K units for rent, of which 12K are free market.

Loads of data here if you're interested:

http://www.census.gov/hhes/www/housing/nychvs/2008/userinfo.html

Didn't Manhattan also benefit from the huge increase in percent of GDP of finance sector also? That percentage will hopefully go down but I don't see that changing too fast. For whatever we say about Wall Street going forward, they aren't giving their earnings back anytime soon. I don't see what makes them forced sellers either. But just to keep with spirit of OP, doesn't it make Manhattan different, even if only on the margin (as I know folks will say they are not majority of property owners).

I agree, SWE. I gotta imagine that urban population and renting go hand I hand. I can't imagine too many farmers out in Iowa renting their home...

And I am not pretending to know which way market is headed. I am hoping it gets cheaper and think there are reasons it should, but do not claim to have a working crystal ball.

weird - i was looking at this report, http://www.nyc.gov/html/hpd/downloads/pdf/Selected-Findings-tables-2008-HVS.pdf, which is the same data, and it had 834k total units in Manhattan, 184k of which were owner-occ, which would leave about 650k rental, yet the census data which comes from the same survey only lists 578k renter-occupied units and another 16k vacant for a total of 594k. Seems odd.

Anyway, if we use just the census data, that's about a 50% owner-occ/(owner-occ + free mkt rental). which is still much lower than the national average, and lower than cities like San Francisco which I would also propose have similar demographics. Plus, in non-prime neighborhoods, rent stab rates are not that different than free mkt, and other cities have public housing and other subsidized programs as well.

but it is interesting, overall, that you and swe are pointing out the many ways (housing stock, rent-stab, demographics) that do make Manhattan 'different'.

It would only be surprising if you haven't been reading what we've been saying for quite some time.

"Of course its different, every market is different, every market has things specific to it. Wall Street is one factor, housing type is another. But consider even just the % retiree factor, which can be HUGE for Miami, lets say.
...
And no two markets will fall exactly the same way, of course.
...
But it doesn't mean certain markets are immune to market forces (which was the inference of the original "Manhattan is different" claims back in the day). Yes, its different, everything is different, every block is different, every apartment is different. I think we can agree there. But the assertion that Manhattan is immune was proven false even as a lot of the supporting reasons were true."

Manhattan is different. EVERYWHERE is different from everywhere else. But that wasn't the original assertion that got this whole debate started.... it was the idea that Manhattan would be immune from market forces because of its specifics.

swe- 'it was the idea that Manhattan would be immune from market forces because of its specifics'

yes that was the point of this thread - if you re-read the original post, it is to point out that it is indeed different, but what are the effects of that, positive AND negative. I distinctly repudiated the 'Manhattan can only go up' argument.

but i don't understand your argument - you are saying that Manhattan was way(x3) overpriced on an absolute basis, which is a pretty meaningless statistic. sort of like saying that exxon's mkt cap is way bigger than motorola's so therefore it doesn't matter if their earnings are better going forward, it will still fall.

you are also vehemently denying that you think prices will fall another 20-30% (which would put us down 35-40% from the peak), which would still be less than the 45% peak-trough move in San Francisco, yet Manhattan was even MORE overpriced than San Francisco according to your argument? So all I can infer from that is that you think Manhattan will continue to remain well overvalued on a relative basis?

One thing that is different -- given that the housing stock is mostly not houses, but apartments -- is the fungibility of the housing stock. That is, you can take 1 beds, put them together and make two beds. Or you can take apartments and break them apart.

You can even take commercial space and turn it residential -- or vice versa. One guy was talking about an apartment that was turned into a dentist office when the market for residential started to turn.

While theoretically possible, you really can't do this kind of thing with single family housing. This probably cuts into the limited supply argument -- because people only "need" a unit of housing, their demand for particular types may shift with respect to price.

"I distinctly repudiated the 'Manhattan can only go up' argument."

I know, you didn't say that, but note that the "manhattan is different" argument you are working against was specifically about that argument... so tough to separate it.

"but i don't understand your argument - you are saying that Manhattan was way(x3) overpriced on an absolute basis, which is a pretty meaningless statistic. sort of like saying that exxon's mkt cap is way bigger than motorola's so therefore it doesn't matter if their earnings are better going forward, it will still fall."

No, its not. Its the opposite.

Its saying that if exxon has a better quarter than Motorola, that DOESN'T mean exxon's stock has to do better, it could do worse. And thats what anyone ignoring what was already priced in is doing.

Because, as I said, it depends what was priced in.

You could have every factor in the world saying Google is a better company, or Manhattan is a "better" market (from all your differences list), but at some price, it will be overpriced.

So looking at market movements but ignoring the *starting point* is just an exercise that gets you nowhere.

"you are also vehemently denying that you think prices will fall another 20-30% (which would put us down 35-40% from the peak)"

vehemently denying? not quite. Just didn't like someone claiming I said what I didn't say. I simply didn't say it.

" which would still be less than the 45% peak-trough move in San Francisco, yet Manhattan was even MORE overpriced than San Francisco according to your argument? So all I can infer from that is that you think Manhattan will continue to remain well overvalued on a relative basis?"

Show me where I said Manhattan was more overpriced than SF? I don't think I even referenced SF.

wait, I think I see your mistake:

"you are saying that Manhattan was way(x3) overpriced on an absolute basis"

No, I didn't.

Read the quote again:

"Manhattan was already way, way, way, WAY more expensive than all the others"

more expensive is not the same as overpriced. It being more expensive comes from two potential factors... being worth more, and then a potential overpricing factor.

And thats sort of the point... you're looking at the value factor, and leaving out the potential overpricing factor...

great one, skinny.

Manhattan RE will continue to fall. Buy in 3 years. Peace.

Manhattan (or NYC) is the billionaire capital of the world.

A lot of rich people (like me) to prop it up.