what catalyst moves prices significantly down

Sniff this. It's all nyc re needs to hit $500psf. Flmaoz.

Huntersburg=buyerbuyer. Flmaoz. Trying so so hard to hold onto two legitimate handles. Omfg.

RS: congrats on your stock purchases.  This is the first I had heard of them; in fact, I remember you being cautious on stocks for quite some time, but perhaps I have the wrong impression.  In any case, 2009/2010 must have been quite a couple of years for you, between all the stock you bought in the short sub-8000 window, and the fact that you paid your mortgage.  Where was all this cash previously, and why hadn't you paid off the mortgage earlier?

Riversider: "Big part of stock market return has traditionally been in the form of dividends. S&P yields under 1.8%. Prior to the mid 90's the yield was roughly 4.1%. Assuming that dividends grow at past rates, roughly 6% and the market reverts to it's mean(something that has been argued is happening to real estate..so why not stocks too) then one is looking at making no money in stocks for at least ten years."

Where exactly do you think this long-running discrepancy between earnings yield and dividend yield is going?  Down some accounting black hole of funny money that no regulator has caught wind of yet?

You and the "gurus" you follow seem ignorant of stock buybacks.  Look at Exhibit 3 of this file that shows stock buybacks being just 1/20th of dividends in 1977 to being dollar-for-dollar by 2004:

http://www.lmcm.com/pdf/clearthinkingaboutsharerepurchase.pdf

Note the words about the effect of Congress enacting rule 10b-18 in 1982, which led to buybacks taking off.

Since 2004, buybacks have been averaged _double_ the size of dividends, as evidenced by the chart on page 2 here:

http://www2.standardandpoors.com/spf/pdf/index/20090915_500-Buyback-PR.pdf

Dividends are but one way of returning money to investors.  Some investors (like me) actually prefer stock buybacks: I'd simply prefer to have compounding taxable consequences be chosen by me, not the board.

Where did you think the earnings were going?

"huntersburg
about 3 hours ago
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Two words: Wayne, NJ.

NYC = Wayne, NJ?"

Has the Wayne, NJ "product" vastly improved in the past 20 years? Have foreign investors been begging to get a piece of the Wayne, NJ action? Nope. Yet the Case-Shiller NY metro index, which includes everyone's beloved Wayne, NJ while excluding Manhattan, is up 120%, very similar to Manhattan. How can this be???

inonada ..I have no idea where wayne NJ is but if you mean to ridicule the idea that manhattan and the "cool" hoods nearby are not way better "product" vs. 20 years ago, you're way overstating your case. They are, I think most people would agree. Even if you disagree ridiculing the idea strikes me as way over-certain.

And if you mean to support the idea put forth by 67 that there will be a price implosion in nyc (to 500psf nominal), fine, but I seriously doubt it.

By the way, I don't see any chance of a bounce up in prices; it just seems (absent a shock..or interest rate rises to a significant degree that few are predicting that i've seen) that nominally flattish prices seems to be how this is playing out. If you disagree, fine; but to characterize that view as some absurd "borker" BS thing is illogical certainty.

[meant to say "very little" chance of bounce up in prices]

I agree with many points put forth by w67, such as those about your identity. I do not, however, see avg ppsf at $500 nominal. You will likely bleed it out slowly, as engineered by the Fed. A sudden drop would cost you much less, as you'd simply walk away. But Uncle Ben is counting on you to keep paying through negative carry and stuffing equity slowly into a slowly-falling asset to keep your skin flat in the game.

A shock to the system isn't out of the question, though. As to the potential sources, who knows, who cares? You're flicking matches at a leaking gas can. Will it burn slowly, or will it explode? Will it be the match from Chili's, or TGI Friday's, that triggers the explosion? Will the fireball be white if it comes, or blue?

Who the hell cares??? It's a burning gas can, get the hell out of there.

Stock buy-backs tend to be mis-understood. All too often they are simply counteracting stock options and other compensations that increase total float. And stock buy-backs are already factored in the s&p 500 earnings and dividend projections so counting them as a separate source of return is mistaken.

The big mistake I see in the bullish stock market argument is valuation. If one starts at high valuation then it makes future returns all the harder to come by. If one believes as I that the stock market is at best good for mid-single digit gains over ten years, but add to that the high valuation starting point then one must be prepared for 10-20% decline some time in the next one,two or three years, which makes high quality short duration bonds look much more attractive(avoid treasuries though!)

As far as home prices, I don't consider myself a Bull by any measure, unless it's a relative one. Nation wide we should see home prices decline over the next two years due to the foreclosure inventory. But the extreme bearish scenario fails to consider new household formation and some additional factors benefiting Manhattan.
1) Many owners are becoming landlords rather than sell. This limits new housing stock from coming on line.
2) New construction has greatly slowed
3) While the country as a whole is not doing great, we are seeing a subset of the population doing well and
it's a population that looks to Manhattan real estate. Add to that, foreign buying in my opinion will be
stable(Example Chinese money looking to diversify out of their country)
4) Manhattan income is holding up better than the nation as a whole
I see Manhattan Condo prices staying flat with worst case down low single digits and best case up 1,2%. The financial motivation to purchase will be reduced outlays on a month to month basis if you make a sizable down payment. As long as cash returns so little this will continue to be the case. The non-financial motivation will be the same as its always been, that some people prefer a more permanent arrangement , the greater control being an owner represents, etc.

What could go wrong in Manhattan that makes the bear's case? In my view the jobs and income picture would have to worsen.

http://online.wsj.com/article/SB10001424052970203513204576048251198965310.html?mod=WSJ_hpp_sections_personalfinance

The stock market has gained about 10% this quarter. That's the best fourth-quarter performance since 2003 and the seventh-best in thirty years. Wall Street is cheering. The shops had a good Christmas. The economy may be perking up. Investors are feeling cheerful again, and strategists are predicting a happy new year for equities.

Two words: Bah, humbug.

1. Shares may be more expensive than they're telling you. Wall Street says the market is still reasonably priced, at about 14 times forecast earnings. But two other measures tell a different story. The "Cyclically-Adjusted Price-to-Earnings Ratio" compares share prices to average earnings for the last ten years, not just for one year. And a measure called "Tobin's q" compares share prices to the cost of replacing company assets. These may seem off-the-wall measures, but for more than a century they have proven very good guides for long-term investors. Right now both say the market is about 75% above its average value: Not a bubble, but expensive. These don't mean the market will tank. But they do suggest your long-term returns from here may be modest.

4. The dividend yield is dismal. As the market has rallied, the yield has tumbled. Today it's just 1.7%, very low indeed by historic standards. David Rosenberg at Gluskin Sheff says the long-term average has been about 4.4%. Of course, dividends aren't the only way for investors to make money: Stock buybacks and growth can also generate returns. But dividends have historically been a key driver of investment profits, and the current level is paltry.

5. Corporate debts are far larger than people realize. Wall Street is selling a story that corporate balance sheets are in great shape and U.S. companies are simply awash with spare money. It's misleading. Some companies, naturally, are fine. But overall, corporate debts have been rising, not falling. Federal Reserve data show non-financial corporations owed $7.4 trillion at the end of the third quarter - an increase of $250 billion in a year, and a new record. As recently as 2005 the figure was just $5.5 trillion. The Fed says nonfinancial corporations now have debts equal to 58% of their net worth - compared to just 41% five years ago. And when you add these debts to the value of equities, the so-called "enterprise value" of public companies is now about 2.2 times annual sales, according to FactSet. That's an extreme level - far higher than in 2006 or 2007, and exceeded only by the madness of 1999-2000.

So NYC is after all Wayne, NJ. Interesting. Does Wayne have a Chilis and TGI Fridays?

Selecting 10023 on the West side and 10022 on the East Side I see the following
Median Home Values are not even close.
Salary and Wages not even close
Real Estate Taxes not even close.

Other than average age or break-down of male to female, this is one of the worst comparisons I've ever seen.

I can' see how anyone could compare Manhattan to Wayne.

Right-o. Yet Wayne saw a 2.2x increase in same-home sales, much like Manhattan. What a puzzle!

"Stock buy-backs tend to be mis-understood. All too often they are simply counteracting stock options and other compensations that increase total float. And stock buy-backs are already factored in the s&p 500 earnings and dividend projections so counting them as a separate source of return is mistaken."

How exactly are they factored into earnings and dividends? Employee share issuances are counted against earnings, but buybacks have no effect. And dividends are completely separate from buybacks: that's the whole point. Your mystery was the drop in historical dividend yields, I explained the cause of this drop along with where the money ended up instead, and you talk gibberish.

Manhattan is Wayne, NJ.

Its called "earnings per share" for a reason. And when a company announces a stock repurchase analysts take that into account when producing their per-share estimates, taking total earnings and dividing it by an estimate for the number of shares they expect. This is correct and reasonable. What is wrong is to factor it in again as a sort of dividend.

-----------
Now from Hussman
Suppose that the total market capitalization of the S&P 500 is $12,000 (billion), and that the index divisor is 8 (billion). Then the S&P 500 Index would be $12,000 / 8 = 1500. Now suppose that companies in aggregate reduce their shares outstanding by 5%. Assuming (only for simplicity) no immediate price impact, both the market cap and the divisor would be reduced by 5%, producing an index value of $11,400 / 7.6 = 1500. The index is the same because we assumed no price impact. Had prices increased or declined, the market cap would have changed by more or less than the 10% change in the divisor, producing a change in the index.

Now consider dividends and earnings. Suppose that total dividends for companies in the index were $200 (billion) and earnings were $650 (billion). Given the original index divisor of 8, the “index” dividends would be 200/8 = $25 and the “index” earnings would be 650/8 = $81.25. Regardless of whether we used total dollar values or index values, the dividend yield would be 200/12,000 = 25/1500 = 1.67%, and the P/E would be 12,000/650 = 1500/81.25 = 18.46.

Following the repurchase of 5% of all shares outstanding, the divisor drops to 7.6, but unlike market cap, which is reduced by the repurchases, total dividends and earnings on the index remain the same. So per-share dividends and earnings rise.

In this case, the $200 billion in total company dividends now represent an “index” dividend of 200/7.6 = $26.32, while the $650 billion in company earnings now represent “index” earnings of 650/7.6 = $85.53. As a result of the repurchases, per-share dividends and earnings have increased by 5.26%.

Notice that the calculation of the S&P 500 already fully reflects the impact of the repurchase on both the level and the growth of per-share earnings and dividends. Investors are emphatically mistaken if they double-count repurchases as a separate or additional “distribution” to shareholders.

Unfortunately, investors are currently engaged in wild-eyed double counting, imagining that higher per-share earnings figures and higher repurchases are separate effects, when they are one in the same. The truth is that a significant portion of the higher per-share figures is the result of repurchases, and the higher repurchases are the result of a paucity of alternative uses for the cash.

http://www.hussmanfunds.com/wmc/wmc070430.htm

Why is it so hard for people to understand inonada's point about Wayne, NJ?

Let me channel w67 for a second and explain it this way. A $500 and a $5,00 hooker can both catch the same STD's and they both do eventually, even if you think the latter looks better and is more careful.

Sunday, there's only one person who doesn't understand the point. Or at least pretends to not understand it.

one person with a whole lot of names.

Not such a fan of stock buy backs. At best they increase earnings per share by reducing float. Usually they just offset stock options exercised by insiders. And if the company's stock trades above book then they are dilutive to that metric. Buy back does not equal dividend. The effect is reduce total shares which assuming all else being equal means higher earnings per share, but you seem to want to double-count.

I do place more weight on dividends than earnings. Earnings can be very contrived, but dividends are paid out of cash. And money paid to me buy the company I invest in feels much more tangible and real. The Financial World is littered with companies that had great earnings and then crashed and burned(Enron, Citi, Lehman..) There are so many accounting tricks/adjustments that can make earnings look better, and I can't recall how many firms decided to buy-back stock trading at all time highs. What a great use of corporate cash!

could you imagine being stuck on a desert island with this fool?

I see the point as I wrote when it was posted, but it looks like a slow bleed deflation of the bubble in real terms (not so much in nominal terms). How far back will that dial prices in real terms? I don't know. I seriously doubt if it would go back anywhere near 1995 (which was mentioned) because the world is a more global place now, and there is just too much money that would be interested in buying in Manh. before you would have that kind of price collapse. Again, you can disagree but I think many people would agree with that point; it's tedious when people are so doctrinaire on what is obviously an uncertain situation.

[perhaps se could tag subscribing members so certain people could stop wasting time fantasizing about sleeper posters; persumably, at least, it would be assumed that no one would create a new credit card identity for the sake of posting on se !]

The world is a more global place, but we only need to look to Wayne, NJ to know what is driving Manhattan.

You asking a relative for use of their credit card for playing the idiot, fooling only yourself into thinking you've fooled others? Never...

Who cares. You're delusional (not to mention compulsively pedantic).

The insanity on this board is amazing -- bears screaming down anyone who says anything that doesn't follow the party line to the nth degree; irrelevant discourses on stocks; paranoid fantasies about sleeper cells....it's nuts.

RS, you misunderstand Hussman. I can explain it to you if you want, at the risk of being pedantic.

"The insanity on this board is amazing -- bears screaming down anyone who says anything that doesn't follow the party line to the nth degree; irrelevant discourses on stocks; paranoid fantasies about sleeper cells....it's nuts."

I guess you haven't been keeping up the past 2 years.
The bears here were crying bubble since 2002, 2003, 2004 (aboutready sold), 2005, 2006, 2007.
We finally got the move down in 08 & 09 and the bears want MORE. They want another 20-60% down.

What's the difference between the bears today that's screaming for another 20-40% down compared to the 2006 Bulls screaming for another 20-40% up?

Delusionist.

What's the difference between the bears today that's screaming for another 20-40% down compared to the 2006 Bulls screaming for another 20-40% up?

in 2006 that's exactly what the bulls got.
Why would the bears expect different?

You are right about the bears calling bubble since 2002 b/c that's what it was.
It's the size, time frame and insane gov. and fed policy that confounded the time line, and the bears.
That's part of the reason that one intrinsically expects the bubble to deflate more.
Which it most certainly will.
I'm just out of the time line business.
Ask the Japanese how they feel about their time line to recovery.

That's funny, I'm a bull on Japan stocks. They are under-owned.

In Tokyo, Japan, the real estate there is extremely expensive. I liken it to Wayne, NJ.

I think what has held NY real estate from a full-on slide is the enormous amount of support the Feds have given to the banks. The tax credit and the stimulus helped the nation at large, but no area benefitted as much as NYC, where most banks are headquartered. I expect that the catalyst for the next leg down is the withdrawal of that support, which could happen sooner than we think. The GOP may only control the House, but it is sufficient to bring gridlock, especially since the mood is anti-elite, anti-fat cats, anti-government.
Take away or even cut down Fannie and Freddie, let a bank or two fail, or stop supporting the economy, and our fragile recovery will go poof. I think the pro-business Republicans have taken a backseat to the angry populists, and it's not farfetched to imagine that the conflation of ignorance, stupidity and political ambitions (for 2012) would lead to a second recession.

You may be right that New York would have been different if it were not for Fed action, but there are no do-overs and there's no way to prove the argument.

Manhattan is also aided by the usually causious considerations of Coop boards.
Houses and condo don't have that layer in critical financial inspection.
If this island was 100% condo the situation might be worse.
Remember...the forth biggest lie.
Manhattan RE is different than the rest of the country
(anyone remember the first three?)

How about demographics. Manhattan has far more wealth concentration than other areas of the country and also serves as an international hub. Manhattan is not a microcosm for the country as a whole, with all due respect to Wayne N.J.

Economy of scale.

The two bedroom Apartments in Allentown never reached a sale price of 2.2MM.
They had a different start point yet the graphs have the same curve.

I've been to Wayne and it's lovely.

RS, my argument is not for a do-over or a what-might-have-happened. I'm talking about the future, no the past.

New York State, in large part due to its finance industry, is a net payer to the federal government.

Flmaozz. Yep, we are a net contributor to social security, until we are not. Flmaozzzzzzz.

Yo Falco, a little lime Please.

Riverbuycunt. Flmaozzzzzzz. Such a tool.

Flmaozzzzzz.

Bank's were earning their margin, but someone forgot to tell them....... It ain't about the 3yrs or margin. It's about the Fking principal.

NYS ain't a net contributor to Feds anymorez. Flmaoz.

Flmaozzzz. Lic ph buyer = delusionist.

Fkatardo. We are arguing degrees that THIS bubble will deflate TO.

How can someone who denied this bubble now ask us prescient callers to task? It's like a Nazi symphatizer wanting to serve on the Gehring's jury?

"How can someone who denied this bubble now ask us prescient callers to task? It's like a Nazi symphatizer wanting to serve on the Gehring's jury?"

I'm particularly entertained by the bubblistas now claiming that they were buying stocks March 2009. I'll leave it to you to make the appropriate analogy.

The word bubble has been over-used. No bubbles today. We do have over-valuation which is not the same thing.

300% up, 20% down. No bubble? Dude I'd double chk that hole u stick your penis in. Your eyesight ain't no good.

Pls tell us how you switched from RE to stks in 2009!!!!!! Damn. I'm sure when the bubble is done deflating, you'll tell us how you sold in 2007.

Inonada. The key is winner's selection and loss denial. It is so so so rampant and so well documented by riverbuycunt's incessant denial. It's hilarious.

W67: For my personal finances and investing, RS has been an invaluable tool. This is why I continue to engage his otherwise one-person threads.

One can read about how the masses can act irrationally, you can talk to get a glimpse of it from acquaintances, but rarely do you get a full and candid look at the mind of the masses, how perceptions change over time, how beliefs and actions behave contradictorily, and how heads are stuck in the sand when confronted with facts and logic contradictory to positions and viewpoints.

While your posts are an invaluable source of entertainment for me, the true education lies in RS.

Can't go wrong going left when rent stabilizer calls for right.

Oh, I wouldn't go that far. In the short term, the masses run the game. Many a penny has been made by people who ride the herd with the ability to jump off before the cliff.

See Soros and his calling of gold as "the ultimate bubble" while holding sizable long positions.

LOL,
I suspect the rise in gold has the potential to end in bubble. While the rise in Gold has some legitimate reasons, I suspect it's facilitated by central bank keeping real rates in negative territory. If rates rise, Gold will probably come down a bit, before beginning act II.

What a wild thread - not sure where to start:

Riversider:
one million can't even buy a really top end one bedroom, but is this is true in any top end city. Just check out Vancouver.

All this comparison to Vancouver does is show that a bubble valuation is comparable to other cities which are also in a bubble. Vancouver is in a huge bubble. 50%-70% of income goes to housing costs in Vancouver. Check out minute 15-17 in this interview of Nicole Foss by Max Keiser. If you have the stomach for it, she is also suggesting drops of up to 90% of RE around minute 19 when the SHTF (hey W67, she makes you look bullish! < giggle >)

http://theautomaticearth.blogspot.com/2010/12/december-21-2010-stoneleigh-and-max.html

Regarding the original topic, like W34 and W67, I find it hard to believe that the OP can not fathom what could cause prices to tumble (even in NYC - gasp!). It does seem disingenuous. Anyway, I'll present this additional one item regarding the vast foreclosure fraud going on around us (not to substitue any reasons or arguments previously made on this thread, but just to show even more dimensions to the risk) - essentially it argues that the banks MBS are not really technically backed by valid instruments and once it is revealed as such, it will destroy the banks (and high paid bankers invovled in these occupations):

http://www.huffingtonpost.com/l-randall-wray/why-mortgagebacked-securi_b_802600.html

Excerpt from the article:
"What does all this mean? In plain simple language, the banks are royally screwed. They cannot foreclose on the properties. Holders of the "mortgage-backed" securities can turn them back to the banks because they are actually unsecured debt. In previous pieces I have also explained why MERS's recommended practice also violates US tax code -- so back taxes are owed. And we know that the mortgages stuffed into the securities did not meet the "reps" of the PSAs.

So, in short, banks have got to take the whole lot of toxic waste securities back. Trillions of dollars worth. The banks are toast. There is no cooking of the books that will turn this blackened toast back to bread."

...So if this unfolds even remotely as dire as the article suggests, what do you think it means for NYC RE?

Also - inonada definitely gets the nod for best zinger on this "other wise one-person" thread (you know how to push someone's buttons - hee hee!)

Nobody was able to cite when Chase was bankrupt. Anyone?

Once again..

You've forgotten the basic rule.

" I find it hard to believe that the OP can not fathom what could cause prices to tumble (even in NYC - gasp!). It does seem disingenuous."

What a ridiculous reading of the OP. The point was that ABSENT A SHOCK (which could happen, but might not) it seems most likely that the bubble will deflate through a slow bleed.

The self-styled funny and self-styled finance-whiz ninnies fondling each other and bashing RS make it clear what a waste any thread can become on SE.

You are a disgrace

i have a retail broker friend who says he long ago gave up on trying to tailgate good clients, as a way to add to his income. he says he has, however, found clients who trade badly, nearly perfectly, so that he has made significant, consistent money fading them

well...we have our redbaiter...

Let me bring it back to the original premise, buyerbuyer.

An economic trigger is the disappearance of negative real rates. It should be obvious it's coming: the market is pricing short-term rates to go "normal" (i.e., 4%-ish) by 2015. Yet people go into 5-year ARMs thinking they're saving something over 7-year ARMs. Despite the logic that led them to the much-lower 5-year rate (sharp expected increase in rates over the next few years), they will be surprised when they are hit with higher rates. Hell, you even have hardcore inflationistas like RS effectively buying 30-year debt at 4-ish percent, with the logic being it beats short-term negative yields. His words (inflation) and action (buy long-term debt) indicate that the near-term negative rates are just too hard for some to look past. When they come to an end, it'll be a surprise to many even though in hindsight it will be obvious to them. Many, in fact, will claim they knew it all was coming but will find something else to blame.

The momentum tide has already shifted. A few years back, the most ardent of bulls were making cases of 3% annual gains worst-case, double-digit best-case. Can't lose. Now, it's flattish best-case. The greater fool theory is dead, so the herd is gone. All that's left is a holding of the floodgates of economics.

All that's left now is a non-trigger for idiots to latch onto as the trigger of the second leg. Maybe it comes, maybe it doesn't. What triggered the 2000 stock market crash? What triggered the 2007-2008 RE market crash? Nothing other than the weight of a bubble.

As inonada correctly points out, no "catalyst" is needed for the bubble to continue to deflate, quickly or slowly. Bubble prices stay up by their own momentum; when that fuel begins to dry up, prices drop because there is nothing to keep them up, not because something is pushing them down. Usually, post-bubble adjustment is slow, mostly by nominal prices staying flat until rents and construction costs catch up. But a sharp drop (by RE standards) is entirely possible without any "catalyst": all it takes is for enough nervous people to start to worry that other nervous people might decide to sell first, and we'll get a slow motion equivalent of a run on an insolvent bank.

However, Cuomo's proposed budget cuts and the Congressional Republicans' new version of the Contract on America could actually be the entirely superfluous catalyst. NYC is even more dependent on effective government than most of the US: a week of sanitation slowdown and the place is uninhabitable; cut the police too much and the wealthy may decide that economic integration is too dangerous; defer MTA maintenance and jobs will migrate fast. Follow the old Soviet system and you'll get the old Soviet results: "they pretend to pay us and we pretend to work" -- refuse to pay a fair wage or renege on pension promises, and employees will figure out how to refuse to work. Not to mention that Wall Street, our major economic engine, has made it perfectly clear that it will self-destruct if the regulators give it half a chance; the moment that investors get the idea that the regulators are going to allow the financiers to steal from them and not just pension funds and employees, the game is up.

If the "Government is evil" and Sheriff of Nottingham redistribution crowds win a few more victories, we are likely to see a noticeable decline in quality of NYC life.

The bubble is going to deflate anyway. But if we make NYC a less attractive place to live, the bottom will be far lower than if not.

It's hard to argue the last three years has been a period of "over-speculation" in Manhattan real estate. Therefore...."NO BUBBLE". You're confusing valuation with excess speculation.

You are joking, right? You are still denying the existence of a bubble even now?

Rents and construction costs seem roughly the same as in 2000. They aren't going up in the predictable future. If innonada is right about RS reflecting the common wisdom, the way down is going to be long, slow and painful. Maybe it takes until 2020 to reach 2000 prices before a decade of overshooting, by the end of which RS will be telling us that real estate never goes up or NYC is different because it can't survive.

Our bubble popped, we weren't inflated in the same way that places like Nevada,Florida & California were/are.

Frankly , I think the equity and treasury market is more over-priced and ripe for a fall.

a riverblather beauty:

"equity and treasury market is more over-priced"

nice.....as though the equity and treasury markets are, in riverdope's world, one and the same

blather on!!!!

our bubble popped?...RS..while it's true that nyc did not see the massive new inventory that exacerbated the price collapse in fla and vegas, your confidence that the "real" price correction in nyc is over is pretty amazing. Rents flat (certainly flat in real terms, in some cases almost in nominal terms), prices double...then correct 20%,,and all is fine.

Not fine, just not a market ready to go down another 20%...

I kind of wish that Riversider is right.
That would lead to the continued fiscal health of this city on which my income depends.
Let's consider that a best case scenario.
All the stars line up and it's roses and chocolate for everyone.

What if that's not the case?
What if it's business as usual...FUBAR
Then what? I'll tell you what...It leads to a market correction.
Markets., like water, need to seek their own level. Preventing this with financial, accounting, fed tricks only add pressure. You think the dam broke?
Think of me like the little Dutch boy. I've got my finger in this dyke and she doesn't look like she's going to tolerate me for long.

RUN

Of course nobody really knows if they'll be proven right until afterwards. I just don't see another major decline unless the local jobs picture falls apart.

but do you see prices roughly nominally flat?....if so, then that will be more bubble deflating...

I do see flat prices. I think you need a medium to long term horizon to think price appreciation will be 1-2% above inflation.

Do long time horizons really fix all investment problems?

http://www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-graphic.html

I'd say not really.

I'd really like to see this graphic done up for NY RE, but I'm kind of lazy about something like that.

With real estate the answer is a definitive "YES", due to new house-hold formation, a new source of demand.

What is the solution to you?

"With real estate the answer is a definitive "YES", due to new house-hold formation, a new source of demand."

Let's see. Since 1890, the US population has gone up by a factor of 5 from 63 million to 310 million. The number of households has gone up by something lie a factor of 8 due to shrinking household size. If we look at Shiller's graph of inflation-adjusted home prices:

http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html

We can extrapolate, based on the Case-Shiller index and CPI, a current level of 137.3 vs. 100 in 1890. That includes the recent period of your non-bubble. A 37.3% increase over 120 years after adjusting for inflation. That works out to a 0.265% annual rate of increase, excluding taxes and transaction costs. Throw those in, and you'll have negative rates of return. All over a period where households increased by 8x, or 1.75% a year. Households are now forming at half that historical rate: 0.8% a year (averaged 2000-2010).

Yet you say a definitive "YES".

And, it's not like global population and demand isn't increasing -- which should be the long-term catalyst to S&P growth.

Since you only understand YouTube, here's the rollercoaster tycoon version of the graph:

http://www.youtube.com/watch?v=jzaRznPSENk

Note how we are not at a level 3x higher than the 2006 peak, as would be implied by 1.5% annual after-inflation growth.

Now you're being an ass, for 3 reasons
pedantic stats...maybe glib is the better word here
building a straw man argument
posting bad videos

The thread is about NYC real real estate(Manhattan). Manhattan is an island with limited space.
You're quoting national data and ignore an "all things being equal argument". It's absurd to argue that new household formation is not a positive with regards to new demand formation. We can argue as to the strength of this effect, but just the strength, adding households adds to demand.

OK, fine. You meant NYC. You do realize that Manhattan's population is smaller than it was in 1900, right?

1900 2,337,952 62.2%
1910 2,478,449 6.0%
1920 2,744,183 10.7%
1930 2,509,941 −8.5%
1940 2,117,832 −15.6%
1950 1,985,107 −6.3%
1960 1,690,002 −14.9%
1970 1,539,233 −8.9%
1980 1,428,285 −7.2%
1990 1,504,481 5.3%
2000 1,549,522 3.0%
2008* 1,697,954 9.6%

Let us replay the sequence:

SkinnyNsweet: Do long time horizons really fix all investment problems?

Riversider: With _NYC_ real estate the answer is a definitive "YES", due to new house-hold formation, a new source of demand.

Inonada: Err, what the hell are you talking about "due to new house-hold formation"? Between 1920 and 1980, the population of Manhattan was cut in half. SkinnyNsweet was talking about replicating the historical graph for RE.

Yea, and in 1920, we had five families sharing an apartment. You really like to abuse data.

Citation?

I use to love that roller coaster analogy.
Now it's tired.
Keep in mind that the graph is inflation adjusted.
If RE prices are flat in an inflationary market their relative value diminishes.
That's what would probably happen if we could keep interest rates constant for an indefinite period of time. The problem is that the fed is beginning to vacuum some of that liquidity up with that pesky interest rate Dyson type vacuum that never loses suction. The confluence of low demand and rising interest rates and the inflation that comes with it will pressure prices in a significant downward direction. I'm a RE owner. The last thing I want is the value of my asset to diminish but to bury your head in the sand in the face of such obvious reality is a fools behavior.
The problem is that Americans hate taking the medicine almost as much as they hate paying for it.
People over 65 have written themselves the deal of the all human existence and pulled up the latter behind them.
It's an I got mine and my kids can go f themselves.

Solution: Every able bodied person over 65 should be serving in Iraq or Afghanistan.
It's hot. Old people love dry heat.
They're old so that makes them brave with less to lose
Old people are a pain in the ass. The people of Iraq and Afghanistan will do anything to get rid of them including behaving. My mother could nag anyone into submission.

"You really like to abuse data."

Hah. hah. hah. Coming from the expert at source and data manipulation, that is SO crushing.

RS, are you suddenly an expert on new household creation? demographics are now one of your areas of knowledge as well? "definitive" my ass.

Market timing liquid equities is no easy feat. Why do people think they can market time real estate? If those calling for lower and lower prices are so right, does their track record also support selling at the top?

Falco good points. but is it that Americans hate medicine or the Politicians. Maybe a little of both...
Average Politician does not understand finance or the economy, panics and wants to get re-elected--Very bad mixture.

what are you talking about? you don't have to sell at the top to make the right real estate decision. so simplistic.

real estate is a hybrid, both an investment and a place to live. mobility matters, stability matters, schools matter, etc. aubergine walls matter to some, who feel they can't occur in a rental for some bizarre reason.

i sold at the top of the stock market, but certainly not the top of the real estate market. having said that, my real estate returns were probably greater during my hold and sell periods than my equity returns, but i find it much easier to locate the bottoms than the tops in real estate, and have done so twice. selling at the top is only a portion of the equation. very few people could have foreseen how desperately intent the gov't and the fed would be to prop up house prices (and just as the effects were beginning to be felt in NYC, btw, many other areas crashed and burned before the foreclosure moratoriums, stimulus in many forms, QE, etc.).

do i think those efforts will be successful indefinitely? no. and there are signs that lending is becoming available again for large development here. i believe bloomberg extended the work permits for four years. there are a huge number of lots already prepped for development. the developers likely have loans for purchase, demolition and foundation. you can't extend and pretend forever on an empty lot.

When were the two bottoms that you found in real estate?

This is hfscomm1.

One was in another city, not relevant here. NYC, 1996.

To clarify, in 1996 you assessed the NYC market and determined that we were at or near a bottom and made your decision to buy based on that assessment?

Beware.

It is hfscomm1

Actually, yes, I looked from 1994 to 1996 and spoke to more people than i can recall about the market and where it was compared to the past. I bought a 950 sf two bedroom in a condop that had historically required 20% down with only 10% down. $105,000. recently trading around $900k, I sold long before the top in that building to move up to a larger space (where I did not buy at a bottom, but i did buy at a lull).

so what's your story? how many years have you been involved in buying and selling in real estate?

to clarify, of course.

Alright then, good for you.

My story, I also bought at the bottom and sold at the top. In both real estate, gold, and the stock market. Three times. Naturally.

To clarify, in all three of real estate, gold, and the stock market.

cc, i don't really care if huntersburg or buyerbuyer or anyone else is hfscomm1. to the extent that they might be they've essentially been castrated so what does it matter?

?

"also"?

i never said i bought at the bottom and sold at the top. reading comprehension? i luckily sold before both of the last two stock crashes (the first was truly luck, needed to be in cash for a specific reason, the second was reading the tea leaves correctly).

have never sold at the top in real estate, although have always made a very good return (the upstate house may be the exception, although thus far it's holding its value--2004 purchase--very well, but with gov't falling apart that may change).

have never bought gold.

So to be clear, sometimes, but not always, you pick the bottom in real estate. And more often than not, you don't sell at the top, often selling too soon or holding on too long.

Sounds about normal.