Decades for home prices to recover

Wbottom - always bitter, never smooth.

[bjw...any chance you would do a wmburg roundup list..its changed a lot, with some new stuff, since the old list was done]

buyer, it's time consuming, but I'll try to crank one out at some point. From afar, I don't think much has changed at the Edge; NSP2 seems to have a bit better; 80/58 Met seems stuck in the mud, but somehow not bothered by that fact; and several smaller developments that had listings lingering have moved along. And a lot of stuff has gone rental, which ultimately makes sense (this is mostly a city of renters, after all).

yeah...agreed. there are sort of two classes -- priced to sell and sold (more or less) and stuck to semi-stuck (80 met/58...sort of the edge). But still those stalled projects like urban green, that thing across from the waterpark (111 kent?),. I was intrigued to see that the not very attractive 29 s 3rd has sold some.

Yeah, no idea what's going on with Urban Green (which has been around since 2007!) or 111 Kent. 29 South 3rd is amazing (not in a good way) - the location in and of itself would be ok, but toss in that giant vacant lot in front of it and the expected Domino construction for 10+ years, and it becomes a very hard sell.

And at 29 s 3rd the sliding door metal frame was already rusting when I was there. And they have no idea, they say, what happens to that building across from Dominos (next door to 29 s 3rd) which could block views potentially unless somehow protected. And the parking lot at the back of it is just hideous....So I was amazed to see they have a few sales. What is that big building at like berry/n4th or whatever...rental?

Just a little math I was playing with.

After a 20% decline... even with a generous 5% increase in prices every year, if you assume historical 2% inflation, you'll need a decade to revert to peak prices. 4%/2%, it is 14 years.

real prices, obviously...

exactly--14 years of unlikely performance required to break even with 2007--

more complex math to play with:

how to acct for the accumulated monthly loss vs renting the owner experiences?--do you compound? and what of the 9.5% RE tax increase about to be served up at the very beginning of the lovely, scenic 14 year horizon? and increasing monthlies based on higher energy costs at least? do you fold those in now, adjust the breakeven horizon out, and assume increases going forward in line with inflation? even tho taxes are going up at a rate insanely beyond that of inflation..this is turning into a whole lotta years!!

"how to acct for the accumulated monthly loss vs renting the owner experiences?"

W, it's a good question, but what's the percentage of current owners (not just recent buyers) who are subject to this? You seem to imply that it's all of them, which is definitely not true. The projected increases in taxes and maintenance have the same likely outcome: either these costs get mostly passed down to renters, or they push a chunk of owners to sell and rent instead, which further tightens rental demand, and likely pushes rents up. These increases eventually hit everyone's wallets.

"more complex math to play with:"

Totally, Wbottom, I was just trying to keep it to a big picture view without having to make too many assumptions.

But, absolutely, breaking even after 15 years can actually cost one a lot, particularly with the buy/rent ratio so out of whack, as it has been for such a while.

> The projected increases in taxes and maintenance have the same likely outcome: either these costs get mostly passed down to renters, or they push a chunk of owners to sell and rent instead, which further tightens rental demand, and likely pushes rents up. These increases eventually hit everyone's wallets.

this would be true in the ideal world of $0 transaction costs. no mkt has transaction costs as high as RE, hence timing it like this in general is not possible for the common homeowner, it is for the minority of the owners that are financially literate (what is that, 5% or 10%?). rockefeller timed it this way during the 30s, but he knew that renting would be cheaper during many years, how many people feel comfortable with this type of projections?

so imho the likely outcome is "either these costs get mostly passed down to renters or not". the higher the unemployment and vacancy rates, the likelier the NOT is. that's it. landlords aren't entitled to break even each single year.

>exactly--14 years of unlikely performance required to break even with 2007--

Great, but this is 2011.

somewhereelse: At 5%/2%, I think the lines cross after a little less than eight years:
100.00 102.00 104.04 106.12 108.24 110.41 112.62 114.87 117.17
80.00 . 84.00 . 88.20 . 92.61 . 97.24 102.10 107.21 112.57 118.20

At 4%/2%, I think it's about eleven and a half years.
100.00 102.00 104.04 106.12 108.24 110.41 112.62 114.87 117.17 119.51 121.90 124.34 126.82
80.00 . 83.20 . 86.53 . 89.99 . 93.59 . 97.33 101.23 105.27 109.49 113.86 118.42 123.16 128.08

Not that it really matters.

spinnaker1: "If I'm about to die of cancer because I bought an apartment, does that mean I can start smoking again?"

Holy shit, you ARE going to get cancer because of the fireplace in the apartment you bought:

http://www.nytimes.com/2011/01/20/garden/20fire.html
"Wood smoke contains some of the same particulates as cigarette smoke, said Dr. Norman H. Edelman, the chief medical officer for the American Lung Association, as well as known carcinogens like aldehydes; it has also been linked to respiratory problems in young children."

> At 4%/2%, I think it's about eleven and a half years

Check again. You left off the last number in the sequence.... it ends with 124.3% 126.8% 129.4%

128.08 is still lower, so you need to keep going. It takes until the year after (the 14th year) to cross

West 81st, forgive my ignorance, but can you explain this to me? (I'm not being snarky, I truly don't understand). Thank you

somewhereelse: At 5%/2%, I think the lines cross after a little less than eight years:
100.00 102.00 104.04 106.12 108.24 110.41 112.62 114.87 117.17
80.00 . 84.00 . 88.20 . 92.61 . 97.24 102.10 107.21 112.57 118.20

At 4%/2%, I think it's about eleven and a half years.
100.00 102.00 104.04 106.12 108.24 110.41 112.62 114.87 117.17 119.51 121.90 124.34 126.82
80.00 . 83.20 . 86.53 . 89.99 . 93.59 . 97.33 101.23 105.27 109.49 113.86 118.42 123.16 128.08

Not that it really matters.

We're just calculating the "break even" point if inflation runs at 2%, and housing recovers at 4% or 5% per year.

Thank you. I did understand that, I just wasn't sure what the specific numbers represented (100.00 102.00 104.04). Again, apologies if this is something everyone but me knows, just trying to learn.

Ah, no worries... those numbers are just the "index" of prices.

100% is the starting point. 80% is where housing prices are after a 20% decline.
We then took the 100% base and grew it at 2% to show what just inflation would do.
Then we took the 80% and grew it at 4-5% a year.

To see where it crossed, as the "break-even" point.

emma63: Sorry I missed your question. I think somewhereelse explained the calculation pretty well. I should have explained the starting points (100 and 80 respectively) when I posted the numbers.

somewhereelse: I think you're comparing numbers from different years. I'm not sure, and again, it doesn't really matter. The takeaway message is the same either way.

W 81, I figured out the difference between our numbers. We both did same math, only difference is I have inflation in the period apartments drop by 20%. You assume that inflation only begins after the drop. The inflation didn't go away just because the apartment price went down. Given that actually took more like 2 years, maybe I should be adding two years of it.

That puts the breakeven at 15-16 years at 4%, 11-12 at 5%

But, I agree with you, it is not that big a difference, and the point is made either way.

And today paper talks about people who are getting past the statute of limitations and may get their home free and clear despite not making payments for 5 years.

I haven't been on here in years. I only came back because I was stunned to hear that my condo is up like 50%. It's quite amusing to see the same doom and gloomers spreading the same fear for years. A friend of mine sold her place for a loss after Lehman (due to fear). She was shocked to know that if she held it until now, she would have made at least 500k. Think for yourself, buy smart and ignore the noise.

aifamm...wow bringing back memories. A bunch of us tried to reassure those who's fear took over. That now is the time to buy not sell. However the vast majority of people let fear take hold and it was every man for himself. The smart level headed courageous ones then were offered the opportunity of a lifetime and swooped in to take the rewards. But It's been that way since the dawn of time and will never change......But anyhow, thanks for the memories, enjoy your gains and good luck!

Thanks steveF! Hopefully, you also took advantage and made a similar killing. I'm pondering my next upgrade. It was definitely a trip down memory lane, browsing some of the old threads that have continued for years... haha. I don't understand how the bears are still around, having been SO wrong. All you have to do is look at West81st thread on comps to see just how many zeroes they were wrong by. =P

>Thanks steveF! Hopefully, you also took advantage and made a similar killing.

Why? How do you know you really like SteveF and wish him well? This is New York City, statistically there are people who agree with you on any given issue that you otherwise despise.