Maybe we do get back to the 1990s valuations

Rhino: i think there is an even larger macro effect than strict demographics. Credit Score in getting a mortgage will really count for the first time in 2 decades. Add the dissolution of the 10% down payment, a return to the more normal 20 -30% and you realize the baby busters will have to stop spending if they are ever to buy housing. (Have you seen those endless lines at Abercrombie and Fitch on 5th? Jeesh!) If credit score becomes the mantra of the young, excessive spending will come to a halt. If consumer spending slows, so will the stock market. And that will in turn affect the housing decisions of the aged 50+ buyers.

Endless cycle but all signs point to a continued slow down.

apt23 - all logical in the abstract, but I think your logic runs into the brick wall of the reality of American consumer culture. In the competiton for dominant mantra, belief in the inalienable right to consume is going to kick credit score worship's butt. At most, we're looking at a turning-the- battleship kind of phenomenon here, and even then it's probably by pushing with a rowboat rather than a tugboat. I just don't see a large enough and immediate enough shift to move the needle on the theoretical knock-on effects (stock market, housing decisions of an older generation, etc.) Not that anyone can really know, but that's how I see it.

Rhino86 - welcome back. I hope you are going to be active again. The boards could use the injection of intellect.

when was the last time that so many people in the united states were unemployed for this long? when was the last time in the united states that all of the states and a large number of municipalities all had no money at the same time? how much of the stimulus money went to the states and what will happen to the states if they don't receive some or all of that money again?

Maybe housing muddles thru as rents rise at a higher than typical rate. My landlord just raised me (back to the prior level that I was able to get reduced for the 2009 term). So I'm still flat to fall 2008 level. Which seemed a bit lower than pre lehman 2008 market. There is also a secular pivot in finance to be discussed in context of the appropriate size of the manhattan premium. I think we are in ct fall 2012.

the question that i find interesting is if you do move to connecticut and that you are representative of a group that choses to move to seek more reasonable value, who is coming along to replace you and others in your group?

Another enemy of consumer culture is that people wont be able pay for thier new kitches, SUVs, vacations and iPhones with biyearly HELOCs anymore. More of their stagnant salaries will be going to taxes food and energy.

sls: I understand/agree with the entitlement issue of the consumer. I am equally appalled at the $150,000 wage earners buying $1.5mm + apts as I am by their $300 kicks. (or worse, young women with $2000 pocketbooks)

But something has to give. With lower wages, higher unemployment, tighter credit, these entitled kids are going to have to rent because they will not be able to buy if they don't stop spending. And, rhino is pointing out. If new household formation turns to renting, housing prices will be soft. I think it will happen faster than you think though your point is well made.

CC I dont know.... But at a price I dont move to CT at all. I think we eventually get back to a price that makes people like me stay. Or the city fights to keep us with a decent high school or two...or maybe a decent middle school as a start. If I call my home $1.5mm...its just not nice enough what that buys in Manhattan. It may never be as affordable as the 1990s because it doesnt seem like the finance industry is ever going to shrink back to that size. Finance employment didnt even pierce the 2003 lows. Also things like the second ave subway serve to keep some tax base in the city...despite what my Park Ave mother in law thinks about it. "well I walk everywhere"...Yeah because you barely work.

Another headwind for buyers: the assistance is over. forever. The recent tax credits were not created to help consumers to buy housing, They were a hail mary pass to keep the economy from falling off an immediate looming cliff. Also to kick the can down the road on behalf of the stock market. When those buyers realize next year that their home prices have fallen more than the value of the tax credit, the govt won't be able to stimulate the housing market again even if they had the political will to do so.

But there is not a politician alive who will continue to champion home ownership. Dems and republicans are trying to disown the issue. And as the Fannie/Freddie debacle looms, those orgs will be forced to clean up. Meaning much much tighter standards. Fewer loans. So if you dream of having a back yard for the kids and a picket fence, teens will have to start saving now for that perfect credit score. Goodbye Abercrombie, hello walmart.

Assistance from baby boomer parents is over too...or on the sharp decline. This really does shape up with some investment opportunity in real estate and stocks as this shitbag generation disgorges its wealth.

i see this as a headwind for owners and sellers, not buyers. i am not personally knowledgable about the connecticut suburbs other than anecdotally from a few friends at widely different price points. bottom line from them is that if you really want to sell, you have to drop your price to what they consider ridiculous, particularly at the higher end.

Rhino, unlikely that rents rise faster than the normal rate. It's a third of CPI, and the fed keeps a tight eye on that.

If as a nation, RE stays flat for a decade and rents rise 2-3% annually, we'll be back at 90's valuations. A likely endpoint, but an unlikely path...

CC: When your CT friends get to the point that they have to sell, they might find that there is no demographic to support the RE market in their price range. If RE gets squeezed at both ends -- the baby busters who rent rather than buy and the boomers who suddenly realize social security benefit age has risen to 67 and the stock market hasn't delivered the 7% they were counting on--prices will continue to go down. At least there is a market right now if they sell. And it is not really that bad right now. Each year that goes by, the number of boomers wanting to downsize increases.

I have been following demos since college. I have been warning my husband for 25 years that we cannot depend on social security. I just don't think the hard working immigrant families that will be supporting SS in the next 3 decades will really want to pay for my husband to golf all day. When the baby busters realize how seriously they have been shafted by entitlements and the insane deficit, they will vote in radicals that will make John Boehner (sp?) look like Abbie Hoffman.

Barron's record is almost as good as Moodys and S&P at forecasting real estate prices ...or anything. I sure miss Alan Abelson...

The projected line in the graph is just hysterical and contradicts every implied HPA forecast the market is making.

Is Barron's the new contrarian indicator?

RS: do you challenge the demographics in this article? Particularly the ones cited by American Demographic Magazine, the economist at the Minneapolis Federal Reserve and the Census Bureau?

SLS/apt23: consumer patterns are different among the young of today. When I was a tween, we bought pricier clothes (I remember when Esprit tops were $50+, Polo shirts $100+). I don't know that per capita if the $ amount has gone up, but they're into cheaper stuff now, in greater quantities.

APT23. I challenge anyone to accurately project anything out to 2015, especially the price of real estate. Too many unknown factors. You just need go back over the last 20 years and look at all the other unrealized projections that have been made. For every convincing bear market today, there was just as many convincing bull market arguments five years ago.

Apt23: yes, interesting times. The baby-buster members of my family are doing okay, thanks to transfer payments from mom and dad. As for housing formations, the dear old sweeties are gonna do everything they can to provide a substantial dp, even if it means that they sell their place, eat ramen every day. Anecdata, but still.

So, once again, you didn't read the article. You are ridiculous. They are talking about known demographics and their impact. Just keep beating the drum.

nyc10023 % of home owners will depend on the strength of the economy and future home values. Two very big variables that nobody can predict with any degree of certainty.

Riversider its cool that you'd rather go after Barrons record that actually address their arguments...and beyond that, you just say 'oh well its unpredictable'. You're of no value to the conversation...and what's more I don't think you realize it.

But the strength of the economy and future home sales will largely (though not exclusively) depend on demographics which can be quantified.

I'm fine with population change arguments over the next five years. That does make sense.

This isnt an economy call....this is just the unwind of a very exceptional period of real estate history....with a specific emphasis on the financial capital of the world, which was impacted dually but the same bubble...in terms of local incomes and the availability of financing.

The article bases its projections in part on the economy. There are a great many suppositions that while reasonable become more uncertain each year out. This is true with any projection.

Do you realize you're on a discussion forum and you're only point is things are unpredictable?

And if so, do you understand the problem with that?

Rhino. Dude, no worries. I definitely see 50% down from peak, but it is indeed a slow slog as was 1989. How's about a nice $6k rental in ct, with a 2 yr plus 2 one yr renewal option? Then buy your 3bdrm 5th ave for $1.2mm and pick up ct house for $600k in 2 yrs or sooner.

Ain't the time to fold cause you did the reup at 2008 rents. The ll played hard you lost, big deal. Next go around hammer them back. Rents ain't going anywhere.

I would've been happier if the writer just said we're above trend in home ownership and we're more likely in the future reverting to the mean. I'd buy that.

I re-upped at 2008 fall rent level...got 10% off on the Sept 2009 renewal and now 10% back up this year to the $5500 I was originally in at in Sep 2008...There are no listings in the neighborhood to suggest that I'm higher than market.

Oh yeah riversider, I predicted 50% down from day one. We r down 20% wo even trying. Wait till the foreclosures start to really percolate.

Fwiw, I hear BofA is finally started to get some balls in terms of clearing out some of the country wide liar loans. These loans are 50% underwater and sit on their books at par, yes at par. Man I can't wait to cherry pick a liar loan from BofA. Sweeet justice, a tax refund if you will. Flmaozzzz

Riversider what you need to understand is that no one is here to prove to you that reversion to the mean should happen... If you want to explain why this time its different and real estate should stay this unaffordable forever in NYC, then by all means add value.

w67. I think there is more to it. They own an insurance company they are now planning to sell. They may have been milking the loans for basis premiums.

Rhino: Is there any particular reason why you are doing one year leases? 10% up seems steep even if you got 10% down in 2009. Though tough to call LL's bluff if there is nothing else in the neighborhood to comp. I just moved and realized I am just too old to do so. But I did get a 2 yr with option for 1 more.

Isnt it tough to say such a thing without reference to price? Search 2/2s in PS 6 and tell me how 5500 is an unreasonable price....just because its a round trip from Sep 2008. This lease actually has a 2nd year option for same.

Fuck. Who gives a shit? It's a pile of manhattan. That's our topic no?

Then will come insider dealings and fraud, then media then wholesale loan to vultures then the real 'mkt' will magically appear with my ancient foretold prophecy of flying unicorns.

Kick back and have a beer, or in your case have the nurse pretend it's beer as she hands you the diabetic soda.

Actually, I think $5500 is very, very reasonable for a 2/2 in that nabe. I'm just amazed LL had the balls to ask for 10% raise. Though it is obviously an indication of the rental market. I signed a lease in March 2010 and was finding deals/ concessions everywhere. The market is clearly changing at a rapid pace.

Actually the first offer was $5700...and I got to $5500 with a 60-day no penalty out after 10 mos on a 2 yr lease. Yes they were bold.

Chicken, meet egg.

That the baby boom would have huge repercussions on the economy - predictable.
What those effects were, in broad strokes - predictable.
Which stocks to go long/short, what housing markets to invest in/dump - unpredictable.

Replace baby boom with baby bust.

I think PS 6 buildings have a little bit of a countercyclical hedge...People are more public school minded in a recession...so its a little bit of a safety trade!

We are getting deflation, and we will not be getting increased employment because of the increase in taxes and mandatory costs to employers.

"But there is not a politician alive who will continue to champion home ownership. Dems and republicans are trying to disown the issue. And as the Fannie/Freddie debacle looms, those orgs will be forced to clean up. Meaning much much tighter standards. Fewer loans."

great points. Not only the appetite for buying is down, the appetite for helping will also be down.