Price increased $1million+ in 10 years

Actually, many apartments would have shown a 350%(or more) increase in that time period. The increase in absolute dollars alone is definitely not the main story.

Keep in mind that $1.8 is the asking price not the selling price. Also it looks like they put in a new kitchen, bath, new floors, probably invested over $100k 10 years ago. So they really paid $800k and will probably end up selling it for twice that 10 years later, give or take 100k. Don't forget they will have to pay the broker, lawyer, movers, etc. and then taxes on profits over $500k.

Of course they will have to pay 2011 prices on the property they buy. If they relocate out of the tri-state area, great, but if they say in the area, the profits aren't much at all.

They will do well, but not as well as you think.

Doubling in 10 years is a CAGR or 7.18%. For a cherry-picked non-diversified example, that's actually not very high. Even $700k to $1.7MM is a little over 9%. And we're not including what the person actually paid in interest, taxes, etc...

dwell, excellent example and let's also highlight:
the tax benefits against ordinary income for those past 10 years,
plus the principal(loan) paydown(equity buildup),
plus the joy of living in it,
plus not watching that stock ticker price going up and down making you insane,
plus all this money made during the lost decade for stocks,
plus the capital gains exclusion,

this guy probably paid off a third of that 677k loan after 10 years so let's not compare 677k minus 1.8m...let's do 500k minus 1.8 million for a 360% gain over those 10 years. Awesome!

and those tax benefits...i can't even go there I'm going to explode!!!!

"Doubling in 10 years is a CAGR or 7.18%. For a cherry-picked non-diversified example, that's actually not very high."

hmmm, seems like wacky math to me. Why don't you calculate the CAGR on the equity investment? Did you forget this apartment was most likely leveraged? CAGR of 24% is more likely. Not to mention that you ignore the CAGR on the alternative (renting) which, last I checked, wasn't very good.

To me, this type of pricing screams bubble, not as big as a few yrs ago, but, still bubbly. If we hadn't had a crash a few yrs ago, I bet Seller would have added $2mm to orig purchase price.

ph41, I agree with what you're saying, but I think 350% increase over 10 years is bubbly, no?

Yes, apt was improved, there's inflation, sure, price should increase over 10 years. But, I think this example shows prices are increasing due to lack of product &/or delusional expectations but not based on value.

Yes dwell, it's bubbly. That is not new news. So what really was your point? Annoyance that someone made some money over a 10 year period? Or possibly that an apartment you might like to purchase now is at too high a price point. But then again, that migt also have been the case 10 years ago.

My points are that I want to avoid buying into a bubble & that much Manhattan property is still at highly inflated prices. Prices may remain inflated, but, nonetheless, they are still inflated.

With income producing RE, prices/values are based largely on rent roll (income), so there is an objective measurement of value. But, prices/values for residential user property (home/apt) are more dependent on comps, so when comps are high, prices are high, but, problem is when the entire market is in a bubble.

If an entire market is in a bubble & the main way to set values are comps, then over priced property can appear to be reasonably priced. In such a situation, it's important to look at prior sales when evaluating a current price. Thus, $677,500 in 3-2001 vs. ask of $1,800,000 3-2011.

It's not a question of the Seller making $, it's a question of whether this apt is over valued based on comps in a bubbly market.

Am I hearing that we are going to see a triple dip?

has manhattan had a double dip yet?

"has manhattan had a double dip yet?"

Yes, stevejhx and w67th. Both dips and in Manhattan. Add swe, and you got your triple dip.

I might be the fourth dip

dwell, on the surface I a inclined to agree on your bubbly observations.
What I don't see is an end to it.
That's the issue...get your timing right or be priced out forever.

that which cannot go on forever, stops. at some point.

What I don't see is an end to it.
That's the issue...get your timing right or be priced out forever.

Agreed, falco

Not a chance falco, no dip for you

"hmmm, seems like wacky math to me."

I think all math seems wacky to you. ;-) But it is correct.

"Why don't you calculate the CAGR on the equity investment? Did you forget this apartment was most likely leveraged? CAGR of 24% is more likely."

Agreed, likely, but there are so many scenarios to project. Better to look at the raw value first, then conjecture. But keep in mind you can also leverage stock investments, so best to look apples to apples to start.

But, in short, wasn't a very big jump.

> Not to mention that you ignore the CAGR on the alternative (renting) which, last I checked, wasn't very good.

Now that is wacky math. The alternative isn't renting, the alternative is spending less renting and putting those dollars and a potential down payment elsewhere. Renting is an expenditure, just like taxes and maintenance would be for owning.

> dwell, excellent example and let's also highlight:
> the tax benefits against ordinary income for those past 10 years,
> plus the principal(loan) paydown(equity buildup),
> plus the joy of living in it,
> plus not watching that stock ticker price going up and down making you insane,
> plus all this money made during the lost decade for stocks,
> plus the capital gains exclusion,

of course, after the mediocre return on the cherry-picked example, SteveF STILL can't get the math right...

minus the taxes
minus the maintenance
minus the interest
etc...

About as wacky as it can get when one brags about tax benefits from an expenditure while IGNORING THE EXPENDITURE.

This is pretty much as stupid as SteveF saying "I'd like to make less so I can pay less taxes".

> > plus the principal(loan) paydown(equity buildup),

And now Steve is double counting.

Wait, let me get this straight.... I can claim extra benefit from a stock purchase when they actually take my money to clear the sale?

Awesome!

Man, SteveF, you are stretching.

> plus not watching that stock ticker price going up and down making you insane,

Of course, watching RE tank certainly did make SteveF insane.

timing bubbles requires that one be nimble and lucky--real estate is an awful item to try to trade in a bubble--it's illiquid and very expensive to transact--never buy into a bubble, knowing it's a bubble, just because you have no idea when it will end--

i got flat ny real estate in summer 07

steviepompoms got long in 08

who's the dip?

Agreed, very hard. Which also makes the cherrypicking attempts even more moronic.

As you noted, let's look at the ACTUAL pick. Steve is the dip in all cases.

Had that person sold in 2007, their gain would've been even higher.

It takes a special market sense to sell at the very tip top of the market, though.

And as SteveF demonstrates, it takes a phenomenal lack of sense to BUY at the tippy-top.

> Had that person sold in 2007, their gain would've been even higher.

Absolutely. Latest data seems to say 24% drop since then.

Why thank you, Juicy! I've been busy working, so I haven't had a lot of time to read your drivel. It's nice to be back.

If you want to pay $1.8 million for a 1 bedroom apartment with lots of wasted hall space, GO FOR IT. Call me a "dip" for not, too. GO FOR IT!

Housing prices ALWAYS revert to the mean. Sometimes it takes a while, but they do.

And are, and will. Free money ain't lasting forever, you know.

" the alternative is spending less renting and putting those dollars and a potential down payment elsewhere"

Agreed, so do that calc rather than claim 7% "isn't very good".

Steve is back!

> Agreed, so do that calc rather than claim 7% "isn't very good".

Sure... you could have bought a CD that paid 7% in 2000!