Why Your Next Place May Cost More

Credit crisis started in July 07. These are the results. No one could build so no new inventory. I've been saying this for months. We're not talking brain surgery here. Where are all those shadow inventory experts. Please stand and be recognized for your huge mistake. Many people listened to you ahem J. Miller for one. The rest of you "experts" need to be exposed. Someone should do a search.

What an -in-your-face article from the NYTimes. If buyers read anything they should be reading this. Sellers too. Sellers if you want to really score the wait until 2012. Better yet hold until 2013. You'll be so happy you did.

The paragraph that resonated most (and the one permabears will inevitably latch onto here, if I had to guess):

"Mr. Heym said that since a permit doesn’t always translate into bricks and mortar, many permits from 2008, and even earlier, have yet to turn into buildings that can be sold and occupied. “There’s also the question of how many buildings that were stalled during the downturn are still out there and when they will hit the market,” he said. “So there are a lot of unknowns.”"

That is a huge unknown, as many sites are literally just sitting there. I've been pretty surprised how quickly some of the abandoned or bankrupt projects have been kickstarted in my neck of the woods (where there was certainly a lot of this), but don't know how it's gone elsewhere. But with all these projects now done or on their way to completion in the near-term, there will once again be a healthy burst of inventory out there. Much of it is rentals, but it will have an impact, no doubt. It's not clear if that'll be long-lasting however, given the apparent dearth of stuff in the pipeline behind it.

Yep SteveF, keep holding those studio condos. Maybe in 2013 they'll get back up to 80% of what you paid in '07. Then you'll be ab$e to start a new thread on Streeteasy called "I Finally Have Equity Again".

*were literally just sitting there* Still some of course, but much less that say 18-20 months ago.

beaterputz (classy name!), I don't agree with much of what steveF writes around here, but so far he seems to have been right in calling out those who put a lot of hype into the impact of "shadow inventory." That may change (and as I said above, I expect it to, especially in the rental market in my neighborhood), and I don't really care about "exposing" anyone, but the whole thing did seem a bit overblown to begin with.

bjw, i believe the city extended work permits for four years, so those empty lots have until 2013 to start up again. many of them already have foundations, and the land, demolition, and foundation work was likely paid for with loans that the banks have been extending.

i noticed new perimeter barriers (i'm sure there's another word that's not coming to me, the nouns are the first to go with age) around the massive solow site south of the UN. what makes this different than the early to mid-2000s is that there are a lot of plots ready to go. and i still see a number of corners around manhattan where the building at least appear empty, and waiting for demolition.

i've been amazed the last couple of months at how many developers seem ready to go ahead with large projects for 2013-15 delivery (hines has a big one in midtown, hudson yards may be going forward, extell's riverside plan, the drake site is showing new signs of development, etc.). so that's your pipeline behind it. developers build, and banks loan. that's what they do.

thanks for the recoginition bjw, this thread will be discussed all weekend as it should be. Simple stuff to understand and gold for those who listen to it.

bjw, you must be joking. recently i've been astonished at the number of buildings that i had assumed had sold out that now have sponsor units on the market. ones that started sales in 2005 or 2006. there's no way to quantify it, but steveF is simply not credible. there's no thought behind his cheerleading, it's simply cheerleading. no credit is due even if he somehow winds up being correct occasionally.

The basic premise here is sound: All else being equal, with less product in the pipeline, prices will tend to move up if they were previously at equilibrium. But up from where? Are current prices the clearing level for existing inventory? In other words, are we already at equilibrium, or do prices have to drop before current stock clears?

bjw2103: I'm not sure the building permit backlog addresses the shadow inventory issue. My understanding of shadow inventory is that it comprises apartments that are already built, but don't show up in inventory statistics because they aren't being actively marketed.

just another one of bj's many runins with many

and bj's just a cheerleader too--tries to be sneaky about it, but clearly just trying to convince herself that her condo aint going south

names: what's better about a bj than beatyerputz? to each their own

ar, which buildings are you seeing sponsor units back up in? I don't want to give steveF any real badge of credibility here - I know he's a cheerleader - so I'll phrase it differently. What really matters though is the discussion of shadow inventory - do you think that's still as much of a disaster-in-waiting as some have been saying for quite a while now?

no credit is due even if he somehow winds up being correct occasionally....oh man luv that line.

it's not cheerleading Aboutready. it's excitement!.....that I see the light! Do you see the light Aboutready? Do you see the light?!...."I see it SteveF, I see it!"....it's alot of fun seeing the light kid. Lotta fun.

Bjw - SteveF "so far has been right" about one thing: that he didn't sell in 09 the condos he bought in 07. I love SteveF. He makes the rest of us look smart. Plus, I'm guessing he'll be on the Streeteasy boards for a good long time (i.e., until he finally bites the bullet and sells). He's a poor man's petrfitz!

Wbottom, you never responded in the other thread, so I have to ask again, what gives with the aggression? And how am I a cheerleader? Sneaky? You just seem to be an instigator around these parts.

If this is such a hard and fast NYC rule (and why would i doubt Corcoran Sunshine on this issue?) - then why did permit issuance drip along at just above zero between 1990-95 and yet Manhattan prices didn't bottom until 96-97? there was enough unsold inventory from late-80's buildings?

"names: what's better about a bj than beatyerputz? to each their own"

I always prefer teamwork over going it solo, but you're right - to each their own.

your excitement knows no bounds Steve. absolutely fantastic that you can be so excited under any circumstance.

gotta go. hang in there bjw. speak the truth and get hammered. peace.

people you're making this thread about me. it's not about SteveF. it's about no inventory. You're missing it again bears, see the light. Read the f'n article. For the love of God!

I can't say I'm not a little disappointed.
I like my cheerleaders in short skirts, tight budging sweaters and, flailing pom-poms.
Some how I don't picture steveF answering to that exact description. Maybe the tight sweater.

details, details....

"The range at Gramercy 19 starts at $440,000, for a one-bedroom, and reaches $2.65 million for a three-bedroom."

However, at least this web site says that one-bedrooms start at $819K, for 561 sq ft:

http://newconstructionmanhattan.com/nyc-condos-for-sale/gramercy-park/gramercy-19-%E2%80%93-148-east-19th-nyc-condos-for-sale-gramercy-park

The article is describing the cycle perfectly, but it's all in the future, and none of us know how long what it describes will come to pass. Maybe new construction will remain stalled for years, and maybe that's because building won't make sense for a few more years. No one knows what 2012 will bring.

"but steveF is simply not credible. there's no thought behind his cheerleading, it's simply cheerleading."

Yeah, its 2011 for the rebound now. Remember Steve said it was happening in 2010, 2009, and 2008. That worked out well.

A guy can pray, can't he?

"and bj's just a cheerleader too--tries to be sneaky about it, but clearly just trying to convince herself that her condo aint going south"

Bingo.

Fka' me. Could it be possible the bubble caused alot alot alot more units to be built than necessary?

Are we assuming that interest rates will remain at multi-generational lows? Hmmm...

Did any hear that two large firms Bear and Lehman do not exist wiping out at least 30-40% of the jobs of these firms assuming the remaining people got reemployed by Barclays, Nomura or others? Financial service employment is lower. Bonuses are not only lower but also deferred. Hedge funds are not making the money they used to after being above their watermark last year - which means no accumulation of wealth for 2008-2009.

"Could it be possible the bubble caused alot alot alot more units to be built than necessary? "

Hmm..Yes, certainly, in the basket case markets like Miami. It seems in NYC that the unsold new development inventory isn't enough to spook the market or overwhelm it with with price slashing developments.

Obviously there are some troubled developments. Some have sold very slowly and clearly not priced to sell. Buying in them is perhaps the riskiest purchase one could make in this market. But there just don't seem to be enough of them to tank the market........

I can already hear the clanging in the gray basement.....

By the way, in markets where new developments weigh heavily on the market it's not even up for debate.

Finally, the poster child of overdevelopment, Williamsburg, hasn't even tanked.

I'm not a bull....would love to see a crash...but new dev inventory per se doesn't seem like it would be the factor to cause it.

oh...the necessary caveat to the strawman argument that is often given: yes, of course prices did fall say 20-25%..i am referring to further falls...

"I always prefer teamwork over going it solo, but you're right - to each their own."

Good funny, bjw.

I think Stephen Roach of Morgan Stanley said it best --- The Fed has engineered a false prosperity.

agreed...does that mean new dev condos in manhattan per se represent an ominous factor in the market?....

no it doesn't.....

Is there an analysis out there that calculates the price of all the inventory out there? Most of these are new luxury developments with numerous apts available. It seems like bankers are staying far away from RE the past few years. Where is all that money going to come from?

Real new development inventory is coming on line at a greatly reduced rate. The question is how much shadow inventory comes back on-line any time the market is perceived to be improving. I noticed the article came out of the NY Times Real Estate section and once again highlights Extell(paid advertising?), so naturally the Rushmore & Aldyn comes to mind.

Rushmore still has not sold out and while it undoubtedly will sell out the time required is already past original expectations. I'm thinking minimum one to two more years. Then we have Aldyn which is renting out the lower floors(this cannot be the original plan) and has many units going for several million dollars in a building that shares its amenities with a rental and has a decidedly mid-market lobby feel.

Barnett clearly feels if you build it they will come, but it feels like this guy is taking chances, has adopted a fair degree of leverage in pursuit of his Pollyanna-like goals.

We're in the eye of the storm and it's hilarious to me how many people can't see that. All we've done is plug the leaks (by pumping liquidity and driving rates down), we haven't fixed the fundamental problems. Rates can't stay where they are forever and as they go back to normal, which I expect to happen over the next 3-4 years, prices will continue their "correction". I expect another 20-35% drop in manhattan prices over the next 4-5 years.

Comments are great!
They provide a great forum to demonstrate one's own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. And building a straw man is the best way to prove one's point.

I keep hearing about this 30% NY drop even though for quite some time the market is not doing anything remotely close to that. I guess make that prediction long enough at some point it may occur even if it takes another 20 years. And yes, building a straw man is the best way to prove one's point.

It doesn't matter how much data you or I have today to prove one's point, we're never going to agree. All that matters is what the price data says in 4-5 years, just like it's a fact that prices have dropped 15-25% depending on the area over the last 2-3 years. Here's a tricky riddle - try to figure out what has to happen to prices when mortgage rates go from 4% (most people I know who've bought recently took down 7/1 or 10/1) to 7% - I'll give you a hint - it's down and it's down more than 1-2%.

Could someone explain the economic model that drives this article's headline?

Bubbles create enormous excess demand -- speculators buying to flip, occupants buying more than they want because it'll only make them money, mover-uppers able to buy beyond their means because their existing place went up, borrowers able to borrow more because lending in a rising market seems risk free. When the bubble ends, that demand slowly shrinks.

The article says that supply is rising less quickly than it was but is going to be flat to up for the next few years.

Demand down, supply up.

To make this translate into higher prices, something else needs to be added. Is it just SteveF's faith in the Heavenly salvation that will come to those who see the light? Or is there another factor here that the author is assuming but didn't bother to mention?

NYC - If you are holding off buying in order to score an apartment at 50% off peak in 4 or 5 years, I'm afraid that's a pretty wobbly hook upon which to hang your hat. Here's a thought: if apartments were flying out the door 4 years ago at a 20% premium to todays prices (coupled with 6 - 7% interest rates), how is it you arrive at the conclusion that a re-heating economy and a few ticks in the lending rate will have the effect you are expecting?

Spin: Market prices tend towards the marginal cost of production. Cheapest cost of production now seems to be converting a currently rented condo to owner-occupancy, which almost doubles its value.

There are only two ways for prices to stay above equilibrium indefinitely. One is SteveF's American exceptionalism -- a God-given suspension of the workings of capitalist markets in order to benefit His much beloved coop/condo-owning classes.

The other is for demand to increase faster than investors can increase supply (as happens during a bubble, where rising prices create rising demand in an ever accelerating cycle).

Where is that rapidly rising demand coming from now? Why won't investors be able to meet it?

Are you predicting a huge sudden increase in the NYC job market, a revival of bubble-induced demand rising so fast that construction/conversion can't keep up, a massive jump in building/conversion costs, or a new form of rent regulation that bars condo investors from converting rentals to owner-occupancy?

To each his own. I have my own view on where the following are heading:

Economy
Mortgage rates
Inflation / deflation
Incomes
Unemployment
Fed, state and local spending / budgets / employment
Foreclosures
Prices vs rents

among other things that leads me to believe there's another 20-35% leg down in manhattan prices so I'm sitting tight for several years and renting a nice apt for half of what it would cost me to buy it today.

"Cheapest cost of production now seems to be converting a currently rented condo to owner-occupancy, which almost doubles its value. "

fguy always writes that, and it sounds wonderful in theory he but produces no systematic evidence to prove it is happening in nyc; indeed, most discussion of troubled buildings usually turns to speculation that they may go rental....

>The article says that supply is rising less quickly than it was but is going to be flat to up for the next few years.
>Demand down, supply up.
>To make this translate into higher prices, something else needs to be added. Is it just SteveF's faith in the Heavenly salvation that will come to those who see the light? Or is there another factor here that the author is assuming but didn't bother to mention?

Aren't you the one who said that higher demand = lower prices?

Yes he was.

BB: It isn't happening yet. Like your belief that short term trends can be extrapolated indefinitely, or SteveF's faith that God wants condo owners to make money, this a key bit of evidence that the bubble is not over yet.

Why should condo owners sell at current prices? The condo owners on this board, and I assume the ones off it, and the large builders quoted in the article, uniformly believe that prices can stay above equilibrium indefinitely. Look at the rent/buy threads: the owners nearly all include future capital gains as a component in their expected gains that justify the future capital gains. The bubble lives.

But the bubble-induced demand is no longer expanding, while supply continues to increase. It doesn't take a lot of backward looking data to imagine that this is not likely to continue in the future.

you said before that increased demand = lower prices.

Now you are saying that demand is no longer expanding (I read that as decreasing, but let me know if you mean something else) and supply is increasing. Given your statement that increased demand = higher prices, what happens in the conditions you say are occurring now?

HB: Is asking rhetorical questions that show that you didn't pay attention the best you can do? Or do you still not believe in mass production?

fguy - I'm not making any predictions, except to say the predictions of a return to some form of sanity or "equilibrium" are no more out there in a world ruled by more by chaos, than predictions of a return to soaring prices.

Stock Market has been over-valued for years. We might get a 20% correction but more than that is probably not in the cards anytime soon. Now substitute the word real estate.

My view is that it seems mostly likely, absent a macro shock (euro crisis, waves of muni defaults, sharp int rate rises), that the market will meander along roughly nominally flat, and that the bubble will deflate over a few years. Of course, a sustained crisis could occur, and have a huge negative impact, but worrying about that risk is different from pointing to NYC re factors, such as inventory, and saying that alone will lead to nominal price declines. I don't believe what I just wrote is idiotically assuming st trends continue forever, but if you do, fine.

are you predicting nominal price declines?

>Or do you still not believe in mass production?

Real estate = widgets?

http://www.youtube.com/watch?v=YlVDGmjz7eM

This was about stocks, but again it could just have easily been about real estate...

I doubt that we will clear this condition through a retreat large enough to remove the market's overvaluation, so it is likely that we will clear it instead by removing at least one of the other components of this syndrome: overbought, overbullish or rising yields. At that point, provided that market internals do not break down decisively (which would probably only occur on a decline below about 1120 on the S&P 500), our present set of Market Climates would allow, and even prescribe, a greater exposure to market fluctuations. I would expect this to be on the order of 20-40% of market fluctuations (leaving a significant portion of our assets fully hedged), and maintaining at least a line of put option defense around that 1120 area to limit any persistent loss should market internals break down decisively.

http://www.hussmanfunds.com/wmc/wmc110110.htm

""and bj's just a cheerleader too--tries to be sneaky about it, but clearly just trying to convince herself that her condo aint going south"

Bingo."

Right, swe chiming in - tell me how I'm a bull again. You're both full of it.

Spinnaker: Chaos is a serious consideration barely accounted for in my simplistic models. But if you are asserting that gravity is likely to be overcome by chaos, don't you need some story about the chaotic force that will prevail?

We have a good story about how the bubble overcame equilibrium: rising prices created rising demand, and that cycle increased demand faster than investors could increase supply to match. But today that same story suggests that prices are going to go down significantly as supply continues to increase and the end of rapidly rising prices makes bubble demand slowly fade away.

Chaos makes the story worse. When I read bulls saying that we should invest in RE because the market is unpredictable, my reaction is the same as when SteveF tells me that faith in the Light will keep prices up. These are not stories likely to generate enough new demand to replace discouraged flippers, priced out borrowers or mover-uppers with diminished equity, even if no new supply appears at all.

Equilibrium theory only predicts that prices drop to marginal cost of production, which seems to be around half current prices. Chaos suggests they could go much lower. As more people accept your chaos theory that prices are highly unpredictable, they'll make prices less predictable. The result is likely to be that people will become less, not more, willing to pay large sums to put their financial futures at risk. Gambling on unpredictable risks is fun, but not with numbers this large.

The article shows that substantial numbers of lenders and builders still believe that prices can stay high above equilibrium indefinitely (or that they can make money even if prices drop), which suggests that bubble psychology is still keeping prices up and investors are still overproducing supply relative to probable base-line (post-bubble) demand. So the headline is reversed: it should have been "Why you should worry about prices dropping below anything you've imagined yet before this is all over."

Do you have a better story?

HB: Yes, I start by assuming that mass production and technical improvements tend to make building cheaper over time. Prefab aluminum studs are cheaper than hand-hewn oak beams; wallboard is cheaper than hand plastering. That is what simplistic theory and limited data suggest; it could be wrong. Do you have some reason, theory or data to suggest that it is?

>HB: Yes, I start by assuming that mass production and technical improvements tend to make building cheaper over time. Prefab aluminum studs are cheaper than hand-hewn oak beams; wallboard is cheaper than hand plastering. That is what simplistic theory and limited data suggest; it could be wrong. Do you have some reason, theory or data to suggest that it is?

Is this in fantasyland? http://www.youtube.com/watch?v=YlVDGmjz7eM

the grey dog barked...surprise...nothing coherent though ....he predicted nominal declines in 2010...didn't happen..why not?...when will nominal prices decline?...i dont care, but 67 seems alone in predicting nominal declines anytime soon..where are the bears who share his view?

Fguy: Wont inflation raise the marginal cost of production? Of course, inflation would also affect the buyers ability to purchase. How would that wash regarding price?

To me, the biggest issue-- that is not being covered in this puff piece that characterizes the ridiculous reporting of the NYTimes Real Esate section -- is demand. It seems to me that the high end will continue to do well for a while because they all just made a killing in equity markets. You literally could not lose money in the past few months.

But young upcoming professionals, the middle and upper middle classes (by NY standards) and older, near retirees know they cannot make money in their RE investments for years. Jobs and incomes no longer support young families in NY that know they are not going to see their $1-2mm family apts appreciate. Plus, because the savings rate increased and stock market volume decreased, you can assume these groups did not make huge money in the last market upturn. The smaller retail investor was not in the market.

In addition to the groups that fguy lists, (flippers, etc) you can see in the $1-2mm condo market that the 07/08 buyers that are now selling, recently had aspirational prices. Now they put apts on the market for purchase price + transactional costs and end up lowering to purchase price. If they sell now, they can still delude themselves that they got out whole because they get purchase price. But as the market deteriorates (stock and RE markets) and the years creep closer to end of tax abatements, the losses will fuel a spiral of downward demand.

Interesting that the Times pointed out that developers are closing 5 - 10 apts a month now rather than the hundreds of past years, yet they failed to mention that their interview subject Barnett, has two big developments that haven't closed one apt in 30 days - Rushmore and Aldyn. Great reporting.

You are right and their are absolutely grounds for stagnation of the market with a negative bias against inflation.

I'm not sure though what is going to push prices materially lower though. Your assessment of owners and future families is on target, but not something that will create a real slide in the market.

Apt23 - demand comes where it always has come from, in this case the 30k/yr kindergarten class of 1990.

Bubba - even though you are now officially an asshole, try to keep from flailing around so much.

demand comes where is has always come from?

kind of like....

everything stays the same forever?

really?

>Apt23 - demand comes where it always has come from, in this case the 30k/yr kindergarten class of 1990.

No no no! Today is unprecedented. Present times are unlike all of history, and never in history were things ever before unprecedented.

What r u drinking too much?

Chaos is how your special 2008/2009 purchase will be above water, but I'm the azzhole! Ha! Man you a funny dude.

$500psf. My call. Day one. Never wavered. If anything I am more convinced of the inevitability. Watch and learn.

Columbiacounty sold in 2008 with 95% of his bubble profit intact. My money is on columbia doing better than anyone who bought 2002-2014.

And if the realthwhores and 'owners' think nyc re is poised to take off=> stfu and buy some more. Double down. Triple down. Lend money to your dog walkers. Bust open your 401ks, sell all your gold, sell your children. Hawk your wife's rings. Ballz deep in re, excuse me. Nyc re! Let me stand aside for the stampede.

Bubba, the problem with your theory is that it's based upon a world populated by batman pajamas wannabes like yourself. I dearly wish you well but you're like a willow in the wind. In 2008 you were all about 2010, in 2009 it was 2011. Now you're onto 2014. By then you will have burned through what, $1M in rent? You are now the official SE hero of squandered opportunity who has morphed into the cringeworthy jedi master of all genitalia. Keep up the good work.

A million?

Exaggerate much?

spin: when the kindergarten class of 1990 fully realizes how they were thoroughly screwed by the preceding generations, they will seek revenge at the polls. Rounds of golf, club and gym memberships and dinners at restaurants rated over one star will be taxed excessively. Charity contributions will not be deductible so dowagers will cease to have a social life, nor will the gay community that serviced the charity balls -- and the dowagers. Pied a terres will be banned. Luxury and property taxes on private spaces of more than 400 sq ft per person will go through the roof and the rich will flee from the city.

The class of 1990, who will not get pension benefits at all and not get ss benefits until they are 80, will live in manhattan in communal apts so they can walk to work. They will live longer as fat and sugar will be taxed beyond all reasonable means of consumption. The government, in an effort to make amends for the lower rates of consumerism in the next generations will engineer society so that workers continue to produce well into their 90's or death, whichever comes first.

Wow, I can't wait until Chapter 2! What a fascinating imagination! That's real talent to be able to think that all up and put pen to paper.

Why is w67 so angry? Did he lose a bunch of money in real estate?

Relax and go bang your wife.

spin: regarding W67 extending the apocalypse..... who could have predicted that the govt. would underwrite this entire mess for so many years. As I quoted above: The Fed has engineered a false prosperity.

The great depression may be expressed through images of the bread lines but the symbol of this disaster will be Hank Paulson on his knees begging Nancy Pelosi for her vote. Nothing could so adequately signify that the banks were complete toast. I hope the govt gets us out of this mess but I believe it will be at the expense of it's citizens. The Feds allegiance is to support the banks and the currency not the citizens. If the banks go down, FIDI-which is financed by the banks-- does not have the means to take care of it's depositors. It is in the best interest of the Fed for everyone to think everything is just fine -- hence artificially supporting the stock market. Talk about the rich getting richer.

And btw, I sold in 2005 at 330% profit and in 2007 at 380% profit. A conservative investment of the profit has meant that I have lived essentially rent free for 6 years and counting. ( and that includes a big stock loss in 2008). I am appalled at how much the banks and the rich have made in the past few years -- and especially the past few months --at the expense of so many. The govt has bailed out the rich in their efforts to save the US govt. . If W67's rants reach anyone and keeps them from losing money, I'm all for it.

As I told my niece who is now underwater because she bought a house to get the $8000 tax credit: Remember. Your government is just not that into you.

>who could have predicted that the govt. would underwrite this entire mess for so many years. As I quoted above: The Fed has engineered a false prosperity.

translate: if the circumstances that made the opposite of what I expected would happen - didn't occur in the first place, then I would have been right.

>And btw, I sold in 2005 at 330% profit and in 2007 at 380% profit. A conservative investment of the profit has meant that I have lived essentially rent free for 6 years and counting. ( and that includes a big stock loss in 2008). I am appalled at how much the banks and the rich have made in the past few years -- and especially the past few months --at the expense of so many.

translate: It was great that I made a lot of money, but not great that other people are making money

No asshole. plenty of others made money -- the rich. It is not great that others who have less means and opportunity are losing money and will never have the chance that I had to take advantage of a completely govt manufactured financial episode-- the re bubble and the support of the economy in the aftermath of the bubble.

I was right and never have to be right again in my lifetime. Others, merely by virtue of the year they were born or the circumstances of the parents were not so lucky. It is unacceptable that our govt treats us all like consumer fodder to support their bigger picture. everyone should be very careful about spending their nest eggs until we are sure about the outcome of our govt's big financial experiment. Save your money.

>No asshole. plenty of others made money -- the rich. It is not great that others who have less means and opportunity are losing money and will never have the chance that I had to take advantage of a completely govt manufactured financial episode-- the re bubble and the support of the economy in the aftermath of the bubble.

translate: No asshole. I made enough money that now I can feel "guilty" and therefore superior. But I'm not going to help anyone else out, other than posting and calling disagreers "assholes" on a message board.

>I was right and never have to be right again in my lifetime. Others, merely by virtue of the year they were born or the circumstances of the parents were not so lucky.
translate: I'm in my [30, 40, 50, 60]s and JUST figured out that life is not fair. I'm sending my 50c per day to Alyssa Milano's UNICEF because I just also learned that there are poor children without medicine in other countries.

>It is unacceptable that our govt treats us all like consumer fodder to support their bigger picture. everyone should be very careful about spending their nest eggs until we are sure about the outcome of our govt's big financial experiment. Save your money.

translate: the bigger picture isn't acceptable unless it is the view of the bigger picture that I'm interested in supporting. See before when I issued my Amber Alert and scolded someone in my position as Thought Police for unacceptably suggesting that prices might not go down.

as a troll how do you decide which persona to use?

Excuse me?

That's where I disagree with you, apt23. This financial episode was created by you and a hundred million others like you. You were chasing / riding a bubble, just like everyone else, which is what created the bubble. You just happened to get out before the music stopped. Sure, the govt didn't do anything to stop it, but that's because the govt IS the people. How do you think the people would have felt about a politician running on a platform of deflating home prices?

It's not like the bubble mentality is over, either. This board provides ample evidence of that.

translate: apt23 is talking her book. She was part of creating the bubble, then sold and is now talking down real estate in hopes of doing it again.

Shameful really.

Ino: yes I chased the housing bubble just like I am chasing a govt manufactured bubble in the stock market now. so in that strict interpretation, i was complicit in feeding the bubble. but i voted for regulation, spoke with my congressmen, complained to my senator about mortgage fraud in 2006, blogged endlessly and warned my family and friends. I continue to do so on this site.

but as citizens/consumers we are 70% of the economy. the govt needs to keep that consumerism fueled to survive so the fed manipulated credit so we could all leverage up and continue to spend. our banks, our government, our investment analysts ( with vested interests) and our bankers all counseled us to take on credit and enabled us to do so. there is plenty of blame to go around.

yes i got out because i made sure i was informed. it may be too late for many across the country but I still don't think it is too late to get out of NYC RE. It is remarkable how resilient this market is - in large part due to the current stock market frenzy. But that could change and be disastrous for many.

People are people. Question is why the real estate bubble occurred when it did, and what caused us as a Society to misallocate so much capital.
Couple of points
1) Fed keeping short term rates low(2000), which caused investors to reach for yield buying mispriced mortgage debt, and forced long rates down when institutions borrowed short and locked in rates further down
the yield curve creating a false sense of calm(low interest rate volatility)
2) Regulatory environment assigned zero risk based weighting to AAA mortgage debt
3) Fed takes no steps to curtail risky origination standards, despite recognizing it, especially the very
toxic 80/20 loan which makes a first lien that looks deceivingly conservative
4) Fed continues to promote the "wealth effect" from rising asset prices
5) Gov' makes mortgage debt ridiculously cheap via GSE's by assuming the credit risk associated with mbs
6) Tax Relief act of 1997- 250k/500k capital gains exclusion which promoted flipping
7) Gov't failure to fight financial fraud with respect to s&p/Moody's which rated mortgage debt.

and don't forget mortgage debt is tax deductible

Of course individual responsibility is important and everyone needs to be aware of what they can afford to buy and understand the terms and conditions and understand what risks they assume when they turn their homes into piggy banks, but government policies certainly played a role.

Could people stick to general discussion of issues (you know, the general hysteria). No one cares about the personal stock portfolio history of posters, and it's weird (insecure much?) to repeatedly post about it. For those handful of posters who apparently can't stop posting about their stock portfolio, think what this board would look like if everyone did the same.

>but as citizens/consumers we are 70% of the economy. the govt needs to keep that consumerism fueled to survive so the fed manipulated credit so we could all leverage up and continue to spend. our banks, our government, our investment analysts ( with vested interests) and our bankers all counseled us to take on credit and enabled us to do so. there is plenty of blame to go around.

translation: everyone else is to blame.

>Ino: yes I chased the housing bubble just like I am chasing a govt manufactured bubble in the stock market now. so in that strict interpretation, i was complicit in feeding the bubble.

translation: oops, I am the problem

ah, the answer is to use all your personas

apt23 -- Once again you are implicitly or explicitly calling people who disagree with anything you write a troll or insulting them (as you have done with sidelinesitter, hoodia, frontporch, and numerous others). Actually, that tactic makes you a troll.

There's a general air of hysteria to everything you write -- and you have this absurd view that you're absolutely correct and warning the ignorant against folly. That's fine, you're entitled to your view, but, believe it or not, some might reasonably believe that there is a chance things may muddle through without chaos and nominal price implosions. Maybe the nyc re bubble will just deflate away in real terms. Maybe not. But thinking there is only one possible outcome is ludicrous certainty in the face of uncertainty.

To make your points do you really need to describe at length your personal situation so often?

I've read enough about apt23. Apt23 abused the system and was greedy. When it was convenient, selling enabled both self-righteousness, a seeming preference to abusively lecture others, and the motive to talk the market down in order to further the money gains and greed.

The post on one of the threads had the most extreme example of being thought police ever seen. (http://streeteasy.com/nyc/talk/discussion/24568-decades-for-home-prices-to-recover?page=2) It would be one thing if apt23 didn't make all of the money possible in real estate and had never been part of the rapid rise. It would be on thing if apt23 were never an owner. Instead, it's the worst of the worst: take advantage first, then try to manipulate others to be in a position to take advantage again.

As previously posted by apt23: "Ino: Yeah, I'm with you on "follow the money". I did, and on the other side I found you. ;)
Yes. absolutely. guilty as charged and proud of it. "

delete the word 'both'

i am one of many posters that recognize that huntersburg/buyerbuyer is the same poster and is the hsf troll in a new toned down mode. Therefore I will not engage him.

apt23...get a grip on reality....you're having delusions

Apt23 abused the system and was greedy.

Now apt wants prices lower in order to repeat this.

apt23 wants prices lower in order to repeat this.

> west81: The basic premise here is sound: All else being equal, with less product in the pipeline, prices will tend to move up if they were previously at equilibrium.

well, not really. the article assumes there's no shadow supply. if there is (which is the case imho) then the current equilibrium was a phony one where pricing was settled by naive buyers that didn't know better. also note how the article restricts itself to Manhattan not-uptown. no numbers are provided of the excess supply coming from uptown nor boros nor new jersey (yes, those mkts compete with Manhattan for buyers), the fringe areas with the biggest excesses.

the bearish reading of the same data will tell the opposite story: developers exceeded themselves during the bubble (as always), want to keep on developing cause that's the only thing they know how to do (as always) but there's no financing cause those taking the risk finally saw the writing on the wall.

i would have liked a graph breaking up the source of supply pre-bubble and after-bubble. how much of that supply was coming from big developments, how many from tiny ones, and also by area. AR mentions Hudson Yards and Extell's, those are total game changers in terms of supply, bringing 5k and 2,5k units resp. How many of those huge projects had been done during hte bubble? how good was the absorption?

too lazy to write but alas apt23 has spoken for me, and written well--thank you

Have you also taken advantage of others and hope to do so again?

Notadmin: We agree. Maybe I should have stressed the qualifiers more heavily. There are many reasons to believe that all else will NOT be equal (e.g. interest rates), and that the current level does NOT represent equilibrium, especially for new construction.

The low number of building permits is an interesting data point - one among many, and one that is open to varying interpretations. To draw a straight line between that one data point and high prices, as the Times headline and the OP do, is reading a great deal into very little.

notadmin: I agree with your point about naive buyers influencing price. Nevertheless, the comp is altered. Resale prices in the Harrison have gone up. Coincidentally, it seems to have happened shortly after the Laureate (across the street) announced very high price points. No one knows what the prices at the Laureate will close at but that does not seem to matter.

Another reason you can expect to pay more in the future the cost of construction and raw materials is almost certainly set to rise. Energy used in construction, steel, wood, fancy stones(marble,granite,etc) are far more likely to be higher rather than lower in the future.

Notadmin - you have picked up on the most confounding term I have ever heard in reference to real estate. Fguy tosses it around like it's the inevitable final result to our excesses. What the hell does equilibrium look like anyway? School me please.

ap23,
The Laureate will be a beautiful building. The location is a good one. That said, the high price point has me scratching my head.

The article in NYT referenced earlier is a one of the most blatant examples of advertorial that the new york times published in a while. It quotes the Gary Barnett -- one of the most disreputable and most sued developers around. Clearly he will say anything to serve his interest. The article did not address at all that the massive build-up of inventory currently in place needs to be cleaned up, that interest rates are likely to rise and that Wall Street whose earnings used to fuel the real estate market, now pays lower as well partly deferred bonuses (although this is somewhat countrbalanced by higher base salaries). The article smells like a miserable attempt to generate ad dollars for the Times rather than anything remotely reminiscent of decent journalism. It is hard to see how anyone with can take it for more than what it is -- garbage.