Decades for home prices to recover

Key detail: "And these are nominal prices: Inflation-adjusted recovery will take even longer."

That's a remarkably gloomy forecast. Considering the role the rating agencies played in the meltdown, I wonder if their analysts might over-correct. I'm a bear, but ten years to reach peak NOMINAL prices? Yikes.

I don't see how any of these predictions are remotely reliable. When the DOW crashed to 6500 who in their wildest dreams would've predicted we'd be at 11,700 today. It does seem that cities like Fresno and San Bernadino have some serious damage to deal with, but making 2021 or 2025 predictions,,,,you might as well spin a chicken.

Hey, stocks are below their peak in 2000. This sort of stuff happens after bubbles.

I doubt their will be a big crack in Manhattan prices but rather a further slow deflation over a period of years.

Re: rating agencies over-correcting, this is possible. It is also possible that they are congenitally wrong and that we should simply ignore what they say (or bet against them)

Flmaozzzz. Has anyone studied history of bubbles besides little ole' me? Flmaoz..... $200k 2bdrms => $1.5mm 2bdrms bubbly, no? Today $1mm 2bdrms. Next yr? $800k? Every yr ppl who bought the yr before lose 100% of their equity. This continues till ppl stop caring about RE.

In 20 yrs ppl who bought for $1.5mm will sell for $1.5mm and they'll say 're always comes back!'

2007 buyers should be selling ASAP. Yet, it's those buyers who'll have the 20yrs ride to $1.5mm 2bdrms and $50 big macs. Flmaozzzzzz

Hey I got your Fking chkn right here. Choke it you little imbecile.

Rating agencies are fair game for charges of incompetence, but you should probably recognize that she works for the group that has nothing to do with ratings but is a forecasting team that was bought by Moody's in 2006 or so. So it might be prudent to do your diligence before betting against someone because of who their employer is. See, e.g. Phibro.

I wonder if anybody was predicting in 1990 that you could buy a building in ________ (insert favorite pre-gentrified neighborhood) and get a 15-30x return 17 years later.

In some ways, what the rating agencies do is impossible and therefore of no value. HPA assumtpions drive default rates which in turn drive performance. The rating agencies don't audit collateral, so fraud is not detected. Then add fraud and intentionally not updating their models and selling their models ot the underwriters who could game the algorithm to achieve the best ratings.

Maybe what the rating agencies do is of value in rating NYC or General Electric, but it does not work with actuarial assets, especially mortgages.

long live king idiot!

w67thstreet, the 10% inflation we will be going through in 2014 will drive prices higher. remember MS x Velocity = Inflation

big mac/ny re psf spread to trend to parity ove 20 yrs--

actually, very good (anal)ogy

re to deflate--cpi to inflate---mark them words

Wow. You even try to turn a thread focused acutely on real estate into one of your philosophical wanderings.

riverblatherers offal serves as borders between posts--

"Recover by 2021" - recover from what? Prices have not dropped. We're firmly lodged in bubble territory. Do they mean the prices will revert to mean ("crash" in some folks parlance) and then resume climbing to irrational levels, all in the next decade?

"Prices have not dropped."

pulaski, you're going to get murdered by the thought police on here for making comments like that. While I agree that many properties are overvalued right now, it's impossible to deny that prices haven't dropped from the peak of 07.

peak was in 07-we are currently well below peak by some arguable amt--article predicts a return to nominal peak in 20 years, doesnt predict interim performance--six seven predicts that we sniff around 500$ psf and lower along the way--others predict a largely flat performance for 20 years

others are bubble deniers--juicy, your property currently trades above 07 peak value, no?

"The rating agencies don't audit collateral...."

What type of collateral are you talking about Oh Riversider Master of the Mortgage-Back Securities Hedge? The underlyings, enhancements, what?

"so fraud is not detected."

First, even if they did "audit collateral" as you say, that is no guarantee that fraud would be detected. Second, if "collateral" is audited by an audit firm, they have access to that audit. Since it seems like you're talking about MBS's, there are appraisals of the value of the home and proof that it exists, and proof of income, which is all an audit would do, anyway. (Take it from a former bank auditor...me.) No auditor will ever go out and do his own estimate of the value of a property - he's not qualified.

Now then, "HPA assumptions drive default rates." That is the stupidest thing you've written in a long time, and that's saying a lot. Unemployment drives default rates, not "home price appreciation assumptions."

Your new theory is that if properties don't appreciate 20% a year then people will stop paying their mortgages?

GET REAL.

And - the most difficult thing to determine for mortgage-backed securities is not the default rate. That's pretty easy. It's the PREPAYMENT RATE that drives the traders batty.

No wonder you're an Austrian - you have no CLUE what you're talking about.

Bj. I hope you can't read this, but Fking 300% up 20% down is still (here come the f bombs) Fking Fking Fking Fking Fking bubble!!!!! WTF is so hard to understand?????? WTF

You got w81 'surprised' 2bdrms that sold for $1.5mm in 2007 selling for $1.0mm (no Fking borker bias here, Flmaoz).. And Tis just the beginning. Flmaozzzzzzzzzzzzzzz

Yeh, what wbttm said! He said fk you too

snif sniff

gon get you a whiff

Lol

Ppl like riverfocker need to get their azz handed to them. I've often found the worst educators to be the ones that / make simple concepts harder to understand, the stupider the fktard the more acronyms, 'isms', 'biased data points' and just long winded never ending sentences are used.

I kept my classes and concepts simple. You don't understand, than it was my fault for not teaching you simply enough.

Bubble, not done deflating. Simple.

w67th, you're way too wrapped up in your rhetoric/doling out of insults to try to read/understand what others write sometimes. I've never "denied" the bubble. It was there; it was real; it's been deflating, with (IMHO) most of the deflating done. I don't have nearly the confidence you do in "$500/sqft" but I think you'd be hard pressed to find me advising RE investors to go out and buy right now or at least expect any significant appreciation anytime soon. I'm pretty sure you'll ignore this and go off again.

Riversider just bought a bunch of those $2 bills that they're selling on TV for $10 apiece, can't wait for them to appreciate to $11.

"I don't see how any of these predictions are remotely reliable. When the DOW crashed to 6500 who in their wildest dreams would've predicted we'd be at 11,700 today."

First, learn to speak about the S&P 500 when talking about the market. The DJIA is an inferior proxy to the market, somewhat due to its narrow base of stocks, but mainly due to its wacky weighting scheme.

Having said that, many people here (like me) moved their entire net worth into stocks after the crash when certain others (like you) were talking about how NYC RE was a great way to spend / invest money. S&P bottomed at 670-ish and is now at 1258. When I was investing, it was with the expectation that we'd be at 1100 +/- 300 after a couple of years, plus around 50 in dividends. While the results have outperformed my expectations, I would not classify it as "wildest dreams".

Now maybe I (and others here) had wrong expectations, and maybe we just got lucky. What about Buffett? He moved Bershire's $50B cash hoarde all-in after the crash, probably with S&P in the 900-1000 range on average. He also very publicly (NYT article) moved his personal not-donated-to-Gates-Foundation $1B cash pile from treasuries to the stocks right after the crash at a level of 900. He did so publicly. Now, do you think he did so with his "wildest dreams" being two years of 18.7% annualized returns? I'm pretty sure he attributed something like a 20-30% probability that we'd have such an outcome at such a level or better, like I did.

If I was benchmarking an equity portfolio of large caps I'd go out of my way to use the S&P over teh DOW. But for the purposes of this discussion talking about the price vs market cap structure of the indices is being overly pedantic.

If you were benchmarking anything, Riversider, I'd run away.

Take him to school inosomething.

Bj says 'bubble yes, 20% down it's all over.' excusafkingme? 20% up does not a bubble make. So one part of your stmt must be false, no?

So are you 100% sure we had bubble? Then your 'it's all over deflating' MUST be false. Let's start at the beginning. 3+4=7. As does 4+3= 7.

Next week I'll teach you about dinosaurs.

Stevehjx, that was Fking funny.

U too can buy a princess di knockoff for $100!!!!! it makes you a princess! And that fat shit u sleep with a 'prince'!!!!!!

West81st:
"Key detail: "And these are nominal prices: Inflation-adjusted recovery will take even longer."

That's a remarkably gloomy forecast. Considering the role the rating agencies played in the meltdown, I wonder if their analysts might over-correct. I'm a bear, but ten years to reach peak NOMINAL prices? Yikes.
"

First, the words "inflation-adjusted recovery" are the writer's words, not the analysts' (though I'm not sure where the analyst lies on this). That in itself is problematic, but what I find very informative is West81st's response here. We have a 140-year history that shows housing, including what many (like West81st) allege are still post-bubble over-valued prices, increased at 0.27% annually beyond inflation. Remove the past 10 years, and it's 0%.

If we're 20% below the peak right now, and it takes 10 years to return to nominal peak prices, that would be a return of 1.8% a year. TIPS vs. treasuries currently predict 10-year inflation at 1.8% a year. So, this analyst's prediction roughly amounts to saying that the next 10 years, NY RE will see inflationary returns, which is how history and economics should say RE prices should increase in general. Never mind the govt- and bubblehead-supported post-bubble valuations we currently see.

However, a self-professed bear views this as "remarkably gloomy". To me, this says how much the last 10 years have warped peoples' sense of reasonable.

Let me put this another way. West81st, you said "I'm a bear, but ten years to reach peak NOMINAL prices". If in 10 years we had reached peak prices in real terms, wouldn't that put us in a bubble just as big as the one we just left?

Note, I'm not trying to take you to the sheds here. And I've probably projected a lot onto the few words you spoke. However, I am truly curious to hear more from you on the issue.

"So one part of your stmt must be false, no?"

Only because you just can't read right. To use your "simple" speak, I said bubble yes, most deflating over. Most (at least according to Webster, et al) = at least 50.01%. Which means there might be more. I don't know how much. Could be marginal, could be significant. But my best guess is that most of the damage is done. You seem to know for sure what will happen. That's convenient. Can't wait for more of your lessons, bubba.

"If I was benchmarking an equity portfolio of large caps I'd go out of my way to use the S&P over teh DOW. But for the purposes of this discussion talking about the price vs market cap structure of the indices is being overly pedantic."

And yet the only thing you respond to in my long post is that little item.

When you say "most of the damage is done", bjw, do you mean in terms of nominal or real prices?

RS, just a couple of days ago you claimed that you bought Dow at 8000. This was the first time you ever made such a claim, with many calls of "liar", as you have never expressed any sort of bullish sentiment on stocks. The only time such an opportunity would have been available was early 2009. Can you please describe your expectations on 2-year returns when you made this investment? Or else if you made up the claim retroactively, can you retroactively make up what your expectations would have been? Would 11600 really have been "wildest dreams" two years out when you bought at 8000?

Yes, I bought a few shares of something, back when the market hit a bottom and sold some recently. You are correct if you perceive me as an equity bear. But back in 2008 I thought the bad news was reflectd in stocks so bught a few. It's also not all or none propisition, so you may want to consider these points in the context of an asset allocation philosophy, which is not now or has been majority equity.

inonada, obviously I understand inflation and interest rates could have a significant say in this, but predicting that is more or less a crapshoot. So nominally, I wouldn't hold my breath on a similarly significant leg down, compared to the pretty quick one we had in late 08-early 09. I'm just struck at how absolutely rigid and certain bubba is with his prognostications. In my experience, people who talk that much are wrong more often than not.

inonada: Very good points above. I hadn't worked the numbers in a rigorous way.

Anyway, I didn't mean to disagree with the forecast. It actually seems pretty reasonable to me, especially after reading your post and absorbing the math. I was just struck by the source.

One could say that the longer yoru time horizon the more likely the stock market reverts to a "normal" valuation. Markets can clearly stay elevated over the short to medium term, but are prone to correct the longer out you go.

@ Topper who wrote: "Hey, stocks are below their peak in 2000. This sort of stuff happens after bubbles."

I don't know what to make of this statement. Near as I can tell, stocks peaked in 2000 during the 3rd quarter at 11,215. http://stockcharts.com/charts/historical/djia2000.html Today DOW is 11, 600+. I'd say that is higher than 2000, so what do you mean stocks haven't recovered yet from 2000? Maybe I'm misunderstanding you. Or did you mean stocks are below their 2007 peak (ie 13,930)?

"I wonder if anybody was predicting in 1990 that you could buy a building in ________ (insert favorite pre-gentrified neighborhood) and get a 15-30x return 17 years later."

Of course not! If they did, they would have all retired by 35 and living along the waterfront in Florida right now.

> "Recover by 2021" - recover from what? Prices have not dropped

Hee hee.

I guess anything less than 30% declines is the new "has not dropped".

Overall median is don 17.6% off peak, and medians by size are each down 20%+ or more (Q4 data). But, hey, whatever floats your boat.

swe, based on some of pulaski's other posts, I don't think he meant it that way, but rather was lamenting that prices aren't nearly down enough. Despite the drop, I think many people who felt effectively "priced out" still feel like real estate is insanely expensive here.

Nothing here floats my boat. Quite the opposite. I think the boat is sinking. Like the Titanic. Except that was a ship. Comparatively, I think we're all still on deck, kicking around the ice chunks, enjoying the novelty of it, while in the bowls, water is getting in. Except W67, he's lowering the lifeboat. :)

Seventeen percent drop is still within bubble territory with the resulting prices still unaffordable for anyone who's middle class. Manhattan is going to be all super-rich folks with pockets of projects with super-poor for the foreseeable. Pity.

"Manhattan is going to be all super-rich folks with pockets of projects with super-poor for the foreseeable. Pity."

Part of me agrees with you, but I also think it's an opportunity for other neighborhoods to improve themselves, while the super-rich turn their neighborhoods into boring, staid areas. There are definitely parts of Manhattan that are not at all appealing to these folks, not to mention a good chunk of Brooklyn and parts of Queens. I'm not ignoring the various ills of gentrification, but at the same time, change is what this city's about, and if culture and non-exclusive lifestyles move to non-traditional neighborhoods, I don't that as being as tragic as some.

kylewest wrote:

I don't know what to make of this statement. Near as I can tell, stocks peaked in 2000 during the 3rd quarter at 11,215. http://stockcharts.com/charts/historical/djia2000.html Today DOW is 11, 600+. I'd say that is higher than 2000, so what do you mean stocks haven't recovered yet from 2000? Maybe I'm misunderstanding you. Or did you mean stocks are below their 2007 peak (ie 13,930)?

Got to be careful with your stats, kylewest. Your chart is based upon month end prices rather than daily prices. The Dow Jones Industrials peaked on 1/14/00 at 11,773. They closed yesterday, 1/6/11, at 11,697.

That said, the Dow Jones Industrial Average is a very poor representation of what is actually happening to the U.S. stock market. The S&P 500, while not perfect, is considerably better. (One is of 30 "industrials" one is of 500 industrials, utilities, transports. The Dow is price weighted...bizarre...but made sense when the original Dow was created. The S&P is market cap-weighted. So a large company's move is more significant than that of a tiny company.)

The S&P 500 peaked on 3/24/00 at 1527. It closed yesterday, 1/6/11, at 1274, down almost 17% from its 2000 high.

BTW, your thread on negotiating was excellent.

Thank you, Topper, for the explanation. I am far out of my element when it comes to the stock market.

Fun fact (unless you're Japanese):

The Japanese stock market (Nikkei 225) peaked on the last trading day of 1989 at 38,915.87. It closed today, 1/7/11, at 10,541.04. Down almost 73% over about 20 years.

The aftermath of bubbles can be nasty - and unpredictable. Real estate in Japan, of course, has also been awful during this same period.

One learns humility. (A very common trait on this discussion board.) And one learns to diversify.

One should also learn not to buy up all the real estate possible in a foreign country just because you can. When the Japanese purchased Rockefeller Center all was lost--it was a matter of time for them...a sign of the coming apocalypse...it was all that was wrong wrapped into a telling misstep.

Nice one!!!! For you bubble deniers and/or 'bubble yes!, but it's all clearzers. '

Let's start simple.
1+1= 2
1-1=0 oh fk. Too soon to introduce zero.

our very own stock market took until the early 50's to reattain price levels of the 1929 high

therein lies the fallacy of the 7% per year avg stock return over the long haul concept--and of the "balanced" portfolio

dont try to pick bottoms and tops in anay investment you make, but try (much easier) to buy somewhere in the trough and lighten up as it bubbles

NY RE down 25% with a 5% bounce is still well into bubble territory

i will be much happier uninvested if NY RE somehow rallies from here, than i will be if invested for round 2 of it deflating, as in the right side of the W

Yes. 1954 in the case of the Dow Jones Industrials. But it's also important to remember that you received dividends in each year from 1929 to 1954. If you had invested in the S&P at the end of August, 1929 (the top) and "reinvested all dividends" you would have actually broken even in May/June, 1943! Dividends can be very, very important.

I should also add that for Manhattan real estate owners it is not just all about "price." You also get implicit free rent if you own outright. My concern today, though, is that the "net" effective yield on Manhattan real estate today is very low.

All bubbles occur with wildly exagerrated valuation levels whether very high PE ratios for stocks or very high price-to-rent ratios for real estate. Apologists justify valuations with words like, "The new Internet changes everything! Japan is different. It is an island so real estate prices must be high because there is only so much land...sound familiar?)

Man's folly.

West81st: "inonada: Very good points above. I hadn't worked the numbers in a rigorous way. Anyway, I didn't mean to disagree with the forecast. It actually seems pretty reasonable to me, especially after reading your post and absorbing the math. I was just struck by the source."

I think your reaction is very illustrative of the effects of the bubble. Don't get me wrong, when I read the prediction, my instant reaction was "hmm, a bearish but reasonable forecast": I had to think for a moment to realize that it wasn't really bearish at all. Here you are, who I consider a very reasonable guy, with a gut reaction that is "man, pretty bearish, maybe overly so". Here I am with an instant reaction of "bearish but reasonable". But the reality is the prediction is actually neither bearish nor bullish: just flat inflation-adjusted from what you and I perceive to be frothy prices.

If you and I are having those type of reactions, it tells me that even us bears haven't quite internalized the effects of the bubble. If we're here, imagine where the non-bears must be. Ten years is a long time. I remember having an SE conversation with some guy a few weeks back who's outgrown his apt, is going to stick it out a short while longer, and then sell if the market has come back or rent if it hasn't. He said he thought it'd come back, I asked him how many years he'd stick it out if it didn't before giving up. The answer was "a few".

"Seventeen percent drop is still within bubble territory with the resulting prices still unaffordable for anyone who's middle class"

"NY RE down 25% with a 5% bounce is still well into bubble territory"

Agreed on both... which is why we might have some ways to go. For me, I think its more about a long period of no appreciation giving a real $$$ loss.

"If you and I are having those type of reactions, it tells me that even us bears haven't quite internalized the effects of the bubble."

inonada, I don't know. I think some of this is how the article (and the thread title) was framed. "Recovery" implies a return to the natural order of things. Bubble prices, I think you'd agree, were and are anything but. Talking about it in those terms really skews the conversation, no? I do agree that there's a lot of difficulty internalizing something that's taken place over such a protracted period of time though, so maybe it's some of both.

"Yes. 1954 in the case of the Dow Jones Industrials. But it's also important to remember that you received dividends in each year from 1929 to 1954. If you had invested in the S&P at the end of August, 1929 (the top) and "reinvested all dividends" you would have actually broken even in May/June, 1943! Dividends can be very, very important."

The other think here is the effects of inflation, or in this case, deflation. If you had invested at the top in 1929, you would have been back to flat by the end of 1936 (cash under the mattress would have done better: up 23% inflation-adjusted). Of course, the market fizzled back down afterwards and didn't hit flat again until 1945.

Those damn market timers who hit the bottom in 1932 were sitting on 2x returns by 1933.

I can't say it represents my entire portfolio, but the SSOs I bought within a few days/weeks of the bottom.... +237.34% Most of the others I got in the low triple digits.

SWE, you are a no-good market timer, and you will be held accountable at the pearly gates of "valuations don't matter, it'll always eventually go up".

Seriously tough, what fraction of your net worth was in the market in 2009/2010/present? Count things like SSO as 1.66x given the higher leverage.

"inonada, I don't know. I think some of this is how the article (and the thread title) was framed. "Recovery" implies a return to the natural order of things. Bubble prices, I think you'd agree, were and are anything but. Talking about it in those terms really skews the conversation, no? I do agree that there's a lot of difficulty internalizing something that's taken place over such a protracted period of time though, so maybe it's some of both."

I bet if you ask the average bubble-buyer, they would consider a return to peak prices a recovery. "Prices got back to where I bought, so I didn't lose money."

Most people who bought near the peak didn't think they were buying into the top of a bubble. They believed it was a sound purchase, and investment in their future, etc. I bet if you ask the majority of these people, they STILL don't think they bought into a bubble whether it was before, during, or after a 10-20% drop from the peak. Sure, you have an easy time calling it a bubble because you have little invested (financially or emotionally) in it not having been a bubble. Those who bought at peak prices or within 10-20%, not so much.

I'm curious as to whether you think we're still in a bubble in NYC RE. You seem to think there was a bubble, and SE's data shows that we're 15% below the peak. Do you think the bubble vs. non-bubble boundary lies in the narrow range between peak and peak-15%? Note that I'm not asking whether prices will have a sudden leg down. I personally thing a long fizz down is most likely, with inflation taking up the majority of the slack, but it doesn't mean we're not at bubble prices.

..written by.. Les Christie, STAFF WRITER...

didn't CNNMoney predict the Dow at 4,000 by Q2 2010 when we were hovering at around 8k ???

what happened slow day with Lindsy Lohan news?

"I bet if you ask the average bubble-buyer, they would consider a return to peak prices a recovery. "Prices got back to where I bought, so I didn't lose money.""

Oh, I definitely agree. I tend to think of this board as a bit smarter-than-average when it comes to this stuff, you obviously included.

"I'm curious as to whether you think we're still in a bubble in NYC RE. You seem to think there was a bubble, and SE's data shows that we're 15% below the peak. Do you think the bubble vs. non-bubble boundary lies in the narrow range between peak and peak-15%?"

I absolutely think a lot of properties are overpriced, and as I've said before, there's serious downside risk remaining. But you're also phrasing the question as if there is some known price level that would be "right" right now. I think it's more relevant to look at historical price-to-rent ratios, but it's much tougher to pin down what prices AND rents "should be" than some on here might be willing to admit - there are just too many variables to cover. So to answer your question, I don't think the bubble vs non-bubble boundary has anything to do with peak to peak-15%, and while there's still bubble pricing out there, I don't claim to know whether nominal prices will drop to $500/sqft or some other similarly certain forecast that would be a disservice to the integrity of any "real" discussion on RE here.

your answer makes you sound like you're running for office.

no yes.

no no.

Thanks cc. Your posts are entirely trollish. Sorry if you want black-and-white answers to everything. Many things aren't so simple unfortunately. Do you think I'm Riversider, et al too?

That's nice. Anything with which you disagree label a troll.

Nothing wrong with nuance but what is your conclusion?

cc, I think your posts are trollish because the vast majority of what you write about is Riversider and all the other aliases you think he posts under - it was old months ago; now just irritating. Nothing to do with disagreeing (I disagree with stevejhx on more than a few things, but would never call him a troll, for example). My conclusions are right up there; not sure what else you would have me say.

Absolutely nothing.

You said it all.

Bj. I just can't help people who are not willing to listen. You are like a creationist. Speaking in a level and thoughtful tone has nothing with being correct, right or even smart.

"Also, what is your breast size or penis length?"

I didn't ask his penis length, slick. I asked whether he was just dipping the tip or going the whole way. Get your analogies straight.

w67th, spare me the condescending bs. I'm willing to listen, but when all you do is shout "you fing idiotz, it's all going to $500, let me learn you thatz 1+1=2," etc. over and over again, there's nothing there of actual substance to listen to.

Yeah, get your analogies right u Fking troll!!!!

Obtw. Did I read the op incorrectly. Is it supposed to say 'decades for penises to recover?'

"Seventeen percent drop is still within bubble territory with the resulting prices still unaffordable for anyone who's middle class"

Manhattan has never been "affordable" for middle class. In Manhattan we consider those who makes less than $100k - 1$75k to be middle class, but in 99% of America, that is not middle class.

bjw, it seems to me that you think we are still at bubbly prices, but for some reason you don't want to admit it. I also think your comment about "what prices AND rents should be" is a canard. I don't think anyone is calling bubble based on both of them going up. If rents had shot up as well, then I'd be right there with you. Had it happened nationwide, there'd be this little issue of the Fed, but no matter. The point is that calls of the bubble are about the price of an asset relative to the income it is expected to produce, nothing more, nothing less.

"bjw, it seems to me that you think we are still at bubbly prices, but for some reason you don't want to admit it."

inonada, sorry, what part of "a lot of properties are overpriced" or "the bubble has been deflating" indicates that I don't want to admit it? It sounds that, like w67th, you want me to say something else that I don't quite agree with at this point.

"I also think your comment about "what prices AND rents should be" is a canard. I don't think anyone is calling bubble based on both of them going up. If rents had shot up as well, then I'd be right there with you. Had it happened nationwide, there'd be this little issue of the Fed, but no matter. The point is that calls of the bubble are about the price of an asset relative to the income it is expected to produce, nothing more, nothing less."

Here's the thing - in my neighborhood, which I recognize is not representative of NYC as a whole (but frankly, what neighborhood is?), rents have shot up. I have no real explanation for it; if anything, I've been shocked. Nonetheless, the income a property is expected to produce (if you're treating as an investment - ie: renting it out) is the rent, no? I don't see how that's a canard?

Bjw. If you knew how smart, successful and handsome I am. You wouldn't think I was condescending at all.

Inonada, let's talk about how crazy Bjw iz.

w67th, I am nuts. So nuts, that my schizophrenia causes me to use multiple screennames on an anonymous internet message board. It's true, just ask cc.

Bananas are 'overpriced'. Flmaoz. U may wanna work on the english.

Rents r up? Really. how many apts do u personally rent?

Yeah, up. Are you really suggesting that I need to personally rent multiple apts to have any idea of what direction rents have gone in? Fl my aoz.

I just want to say, we're in general agreement with bj.

67.....at some point you need to recognize that actual market conditions are relevant, not just your firm views on what ought to happen....

"Here's the thing - in my neighborhood, which I recognize is not representative of NYC as a whole (but frankly, what neighborhood is?), rents have shot up. I have no real explanation for it; if anything, I've been shocked. Nonetheless, the income a property is expected to produce (if you're treating as an investment - ie: renting it out) is the rent, no? I don't see how that's a canard?"

Ah, the old "my neighborhood" thing. OK, let's put your neighborhood aside and talk about NYC in aggregate. Use JM's data or whatever you think is representative. How have rents vs. prices tracked over the past 10-20 years?

JM doesn't track rents for all of NYC. If we look at just Manhattan, going back as far as his data will allow for proper comparison, rents have more than doubled, while sales prices have more than tripled. These are medians and unfortunately cannot account for shifts in mix, and the start date is rather arbitrary but unfortunate (1991) but let's take them on. To me, as I've been saying, that's all indicative of a bubble. And again, seems like you want me to say something else.

Inonada, I know from personal experience (looking at specific buildings I lived in) that some rents are in some cases hardly higher today than literally ten years ago (within ten percent or so). Obviously, in economic terms that seems bizarre given that prices are still almost double.

But, on the other hand, I've also sort of been following williamsburg and the rental market seems to have been what most people would call surprisingly robust, and certainly not indicative of a market teetering on the edge of another down gap. Given that bears on SE have asserted that peripheral areas should show should be weaker than manhattan, it's a factor to think about at least . I see slow sales at some large projects in williamsburg but the rental market seems to indicate that we're simply not in a precarious market position where prices could gap down again. I don't think you can dismiss that as irrelevant one neighborhood data,,,it probably wouldn't be the case if the whole rental market was very weak.

In other words, this is a market where data is pointing in different directions -- buildings renting out fast in williamsburg at surprisingly high rents -- while a major project nearby sells very slowly apparently due to too high prices. Acting like all data is indicative of a bear thesis to me is just simplistic at this point.

Is it official, we have a housing surplus?

it is valuable only as an indicator of present-day psychology - today people feel the future stretches before them in a vast, bleak desert - the numbers are just puff

or maybe the puff is just puff

bjw2103
about 12 hours ago
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"Yeah, up. Are you really suggesting that I need to personally rent multiple apts to have any idea of what direction rents have gone in? Fl my aoz"

Yet herez u iz, multiply telling people after a 15-20% decline from an epic nyc RE bubble that the "majority" of the decline has passed and your "sources" tell you that RENTs are up in your nabe, and therefore there is risk in "not owning." Lots of disclaimers etc etc etc, yet I should listen to you? TELL ME ONE FKING prediction or stmt that you've made that I've been wowed by. ZIP nada... sorry. You aren't one of the cool ones on SE.

You wanna pretend to be stupid. Here are the facts:
1) 0% policy for 18 months is EPIC... IT IS NOT NORMAL
2) We had an EPIC credit bubble that misallocated capital/human capital (1998-2007) -note the HIGH UNEMPLOYMENT #, high "Discouraged WORKER" stats => result of too many ppl suckling at the Credit TROUGHs, you know $100K hair cutters, $80K dog walkers, $300K RE BORKERS, $200K contractors, $100K bathroom remodels. THEY ain't EVER gonna see incomes like that in their lifetimes
3) % of financials in GDP is completely out of whack by historical measures
4) $500K bankers bonuses is history. Sorry when I was growing up, a good doctor's salary mostly kept up with MDs, now you have to be Oz to keep up with a junior banker at Goldman..... we will revert to a healthier ratio of incomes / production in society

Yeah, but we've had a little downturn, so allz healthy in the NYC, F L M A O

You fking little stay at home imbecile who's got ZERO understanding of ECON/FINANCE and the telltales of bubbles..... yeah the SE reader should listen to you.... m'okay. I hope that sand you stick your head in is nice and warm.

HERE BE A BUBBLE EXAMPLE. $1.1MM to $4.8MM in 15 yrs. FLMAOzzzzz... When there ARE NO more listings like this, I'd say we are closer to a "safe" home purchase.

THIS PROPERTY
145 West 87th Street
New York, NY 10024

STREETEASY HISTORY
06/14/1996
Previous Sale recorded for $1,137,000.
10/10/2009
Previously Listed by Prudential Elliman at $4,750,000.
05/10/2010
Prudential Elliman Listing is no longer available.
01/07/2011
Listed by Prudential Elliman at $4,750,000.

67..plenty of "bears" apparently feel that the bubble will erode through inflation not a big gap down in nominal prices?...since you apparently feel that is also an idiotic view, and that indeed we will see some big nominal declines: if the market is that weak why aren't we seeing these nominal declineses, fear in the market, rent declines, foreclosures, defaults, and the kind of chaos that has happened in say miami?..your argument seems wrapped up in interest rate rises, but when will that happen and how much?...yeah, if rates go to 7.5% then there may be a huge problem for nyc re, but what if rates don't go that high?..

I'd love to see a return to sanity in NYC...and in London...and in Le Marais (on the assumption it would push down euro rents for visits). A lot has happened since 96 in NYC and globally and a return to even real 96 prices seems pretty farfetched.

As usual...always a treat. Nothing like preaching to the choir.

What about cost of living ratios?
Back in the day there was a loose rule of thumb for NYC. Your rent should not exceed 25% of you take home pay. The goal being that the cost of your rent would eventually become a smaller and smaller percentage. To this day, even in the case of ownership your monthly costs (cc+ mortgage + insurance) should exceed 25% of you gross pay. Does anyone else remember this? How did this go out of style? Once you exceed that ratio it become impossible to do other practicalities like retirement investment, education costs, life's little entertainments and surprises. The RE industry or perhaps society has convinced us that we should be slaves to the walls that house us. Even if the windows don't have bars it can easily become a prison. I actually think that might be the reason behind the popularity of striped shirts.

lose

Bubba, you act like one of those Cuban refugees who missed the converted '57 Bell Air to Miami. And besides, that listing is quintessential.

"Yet herez u iz, multiply telling people after a 15-20% decline from an epic nyc RE bubble that the "majority" of the decline has passed and your "sources" tell you that RENTs are up in your nabe, and therefore there is risk in "not owning." "

w67th, keep your panties on. I love how you distort what I say - I don't know what you mean by "sources" but it doesn't take much work to find out what rents are in your neighborhood. For the umpteenth time, I'm not telling anyone to go out and buy real estate right now. Of course there is risk in "not owning." There's plenty of risk in owning as well. There's risk in everything, you "financial ninny." In your case (classic 6 on the UWS, right?) I'd almost certainly rent right now, but I'd at least keep my eyes peeled.

"Lots of disclaimers etc etc etc, yet I should listen to you? TELL ME ONE FKING prediction or stmt that you've made that I've been wowed by. ZIP nada... sorry."

You don't have to listen to me - I'm not mandating anything of the sort. I don't give two craps if you've been "wowed" by anything I've said - if you don't value anything I post, don't read it, but get off your high horse and give us a break with the condescension. And if you're curious, none of your statements have wowed me. A different kind of wow perhaps.

"You aren't one of the cool ones on SE."

No, not a member of the thought police. But only turds counter with the kind of comment you just made. Good one!

"Yeah, but we've had a little downturn, so allz healthy in the NYC"

More than a "little" one, I'd say, and again, you're twisting my words. Never said "allz healthy." Solid work, again.

"You fking little stay at home imbecile who's got ZERO understanding of ECON/FINANCE and the telltales of bubbles..... yeah the SE reader should listen to you.... m'okay. I hope that sand you stick your head in is nice and warm."

Wtf? This is the kind of crap you resort to? No wonder you're greyed out. SE pegged you right.

Bjw. It was a test. U failed miserably. If you were so much better than me, just reply to the meat of the argument why nyc re is still a bubble.

"even in the case of ownership your monthly costs (cc+ mortgage + insurance) should exceed 25% of you gross pay. Does anyone else remember this?"

I remember it very well, and having a Queens landlord say to me, "Oh, I'm sorry, but I just don't see how you could possibly afford this $500 rent when you only make $30,000."

What do people who make $30,000 a year pay today? That 25% is a very good rule of thumb.

"Bjw. It was a test. U failed miserably. If you were so much better than me, just reply to the meat of the argument why nyc re is still a bubble."

Thanks, Yoda. Seriously though, how are you still under the impression that I'm denying the existence of a bubble? Or do you just want me to pat you on the head and tell you how smart you are? Ok, here's an e-pat, you ninny.

as you said:

"w67th, you're way too wrapped up in your rhetoric/doling out of insults to try to read/understand what others write sometimes. I've never "denied" the bubble. It was there; it was real; it's been deflating, with (IMHO) most of the deflating done."

was there is past tense.

was real is past tense.

cc, "has been" is present perfect tense. Nice try though.

so, when you say that most of the deflating is done, that doesn't mean that most of the deflating is done? help me to understand what that means.

lowery, the big landlords stick to the 25% even today. (Gross has to be 48x rent.) I guess experience has taught them that's the best way to help avoid the trouble and expense of tenants getting overextended.

The NYU RE site has yearly stats on what they call "rent burden". Staggering numbers. The census bureau tracks it too.

"so, when you say that most of the deflating is done, that doesn't mean that most of the deflating is done? help me to understand what that means."

cc, it's my opinion that most of the deflating is done. As in, it's not done yet, but I'd bet the majority of the damage is done. Has that really been unclear to you? Could I be wrong? Of course. But shame on me for expressing a different opinion from w67th, I know. I just hope the thought police doesn't know where I live.

there is no thought police here.

everyone is entitled to their opinion.

you seem to want it both ways.

yes, there has been a downturn but maybe it has ended but maybe it hasn't.

w67 calls bullshit on you for that.

for me, i am of the opinion that we haven't seen anything yet. i have voted with my feet and my wallet.

bjw
some know all, see all.
Big brother has his eye on you.

'I just hope the thought police doesn't know where I live.'

Oh, they know,they know.
you have been warned.