Debt ceiling and NYC real estate?

A better question might be which real estate markets might go down if Washington is forced to curtail spending. Then the answer might be Virginia/Maryland area... Someone should write an EASY STREET ap that allows you to type in a phrase and have the ap add "What effect will this have on NYC real estate".

By the way , anyone have an opinion on how global warming impacts NYC real estate prices?

Aww - Riversider: are you being sarcastic with the global warming piece or serious?

If serious, I think it's an interesting question, actually ...

Back to the debt ceiling, though, you don't think that Washington's curtailed spending could also impact NYC, then?

What is EASY STREET? Is it part of your alternative-reality life?

It's interesting that people are worried about a ratings down grade from a company that can't figure out how to rate anything..

Goldman Sachs Group Inc. (GS) and Citigroup Inc. (C) scrapped a $1.5 billion commercial-mortgage bond sale after Standard & Poor’s said it wouldn’t rate the notes.

The banks had overhauled the transaction after investors demanded more protection from losses amid concern that ratings from S&P and Morningstar Inc. didn’t accurately reflect the risks, people familiar with the matter said last week. They placed the securities totaling $1.5 billion with investors last week, according to people familiar with the transaction.

The deal won’t close today as planned because S&P is reviewing its criteria for commercial mortgage-backed securities and can’t provide a rating, the banks said in a joint statement through Business Wire.

http://www.bloomberg.com/news/2011-07-28/goldman-sachs-citigroup-scrap-cmbs-that-s-p-won-t-rate-1-.html

I hear you, Riversider. And it's an excellent point, actually. Unfortunately, when 1 or 2 ratings agencies have a monopoly on ratings, and world-wide inverstors and firms use those ratings to define their investment mandates, they become incredibly powerful in shifting not only market sentiment but actual fund flows.

For as flawed as their methodologies may be, a downgrade of our debt would have very real consequences. Much like in the world of real estate, perception is often reality.

I love Chinese food.

so funny, ieb - we were thinking along the same lines LOL

see our "ugly" section in the good, bad and ugly of the potential impact of all this:
http://theapplepeeled.com/economics/the-debt-ceiling-and-nyc-real-estate-whats-to-come/

Oh, no, Honeycrisp ... and you were doing so well.

you've got to admit, Alanhart ... it IS pretty funny

youd been courteous and receeptive to courtesy...

There are proposals to eliminate deduction of state & local taxes from fed income taxes & mtg interest. That will impact those NYers who pay fed income tax.

'Is it coloring your decision to buy?'
Yes. The nation is in a fiscal mess. When the fed gov eliminates those deductions & then cuts subsidies to states & municipalities, NYS & NYC will increase taxes on "rich" NYers, many of whom will then, most likely, spend less on housing or decide not to buy at all or leave the state. The more the tax base is squeezed, the smaller the tax base becomes.

My preference is to reduce the size of fed, state & local gov so that they wouldn't be able to justify their ever growing need for ever increasing taxes, but, don't see that happening.

"This enormous debt has been driven up by the cost of our multiple wars, Bush’s tax cuts, and the cost of the bailout, among other factors."

I would add the ever increasing size of government.

Also missing is something that too few people view as a problem: less than 50% of the population pays fed income tax. Other than the very poor, we all should have skin in the game.

i sold a condo in a new building on riverside blvd 7 months ago and lost money everybody said i was crazy?????????? not one closing in 7 months, i guess i wasn't crazy!!

http://www.cnbc.com/id/43926826

Home Sales Contracts Rise, But Cancellations Run High

"higher cancellations recently are most definitely tied to the turmoil in Washington, D.C. over the debt ceiling . Already nervous buyers are suddenly changing course, unsure how the debt crisis will affect the overall economy, and more importantly, their own employment."

Yes, it's coloring my feelings about whether this is a good time to buy.

The markets seem to think the debt ceiling will get raised by the US Treasury will get downgraded anyway.

A downgrade will mean that Treasury yields go up, even if only a bit (and value goes down).

And all debt instruments that benchmark off of UST will change -- this includes home loans.

In other words, the interest rate on my home mortgage will go up. When the price of that debt goes up, housing values will go down.

So I think it's hard to know how to price real estate in New York -- and everywhere else in the US -- so long as the US Treasury value is uncertain.

I would prefer not to overpay.

I meant "debt ceiling will get raised BUT US T will get downgraded anyway."

thx

all that matters are investors perceptions of faith and confidence in the us govt's ability to control the debt...thats all. If the AAA rating stays, but markets start to lose confidence, all bets are off and the fed will embark on a huge QE3 campaign to keep rates from rising in a feeble attempt to control the longer end of the curve. the short end sure, but the long end? dont think so.

if equities selloff, high yield sells off and there is an exodus in treasury markets sending rates higher, where do u think the money will go? why hello there mr. yellow metal

"There are proposals to eliminate deduction of state & local taxes from fed income taxes & mtg interest."

More proposals that will NEVER become reality. Republicans are too afraid to cross His Majesty Grover Norquist.

Yes Honeycrisp it has become an added weight on whether it's a good time to buy for us.

Worry worry worry.

Thank goodness we'll have a NFL season. Otherwise worry would become our new national sport. Debt ceiling? Who gives a crap.

thanks, everyone ... I'm reading, also, in TRD, that brokers are seeing lots of cancelled contracts suffering from this whole debt ceiling uncertainty.

in reading some investment analysis, however, i'm seeing many predict that rates will continue to go lower - which sounds counterintuitive b/c a lower debt rating would serve to push up rates. The argument goes that treasuries are still safest and will benefit from a flight to quality.

any opinions along these lines?

... am watching the news just now (yes, after midnight) ... if this situation continues, we will have much bigger issues than increasing interest rates ...

but doesn't the bond market know all...no serious signs yet that this is greece...

Let's hope we don't get there

just wrote some of my thoughts on urbandigs.com

http://www.urbandigs.com/2011/07/treasuries_signaling_economic_.html

Right now, to me us treasury market is signaling economic weakness, not a potential default. And did you guys see the Q2 gdp reading? And the huge downward revisions to GDP readings going back to 2007. Insane this world. Out of sight out of mind. Just print an inflated number, and 2-3 years later print the revised truth. Treasuries are signaling a high chance of a US economic recession in the near future. Only the short end of the curve saw US default like behavior with yields rising over the last week

Very interesting, Noah. How do you think this could effect on NYC RE?

Even if the debt ceiling is raised, the teabaggers are going to force a govt. shutdown on October 1 when FY 2012 starts. You can quote me.

well outside of seasonal slowdown relative to the last 3 months that is occurring right now, it all depends on how markets react and if there really is an upcoming recession in the cards. Right now markets are reacting to a debt deal that didnt pass yet and honestly, a deal that likely will not appease the ratings agencies. I always thought that when it comes to Manhattan real estate, the equity markets are the stars that lead the way. There may be structural problems hiding under the surface, but if equities behave or not selloff, we wont see that negative wealth effect or drop in confidence that usually hurts Manhattn RE at a lag. Think back to late 2007 with credit blowing out, secondary mortgage market shutting down, yet equities traded near record highs as if everything was fine and dandy. Manhattan held on until an event brought reality of the credit crisis to the surface, Lehmans failure in Sept 2008.

"One might think that the recent drama over the debt ceiling involves one side wanting to increase or maintain spending with the other side wanting to drastically cut spending, but that is far from the truth. In spite of the rhetoric being thrown around, the real debate is over how much government spending will increase.

No plan under serious consideration cuts spending in the way you and I think about it. Instead, the "cuts" being discussed are illusory, and are not cuts from current amounts being spent, but cuts in projected spending increases. This is akin to a family "saving" $100,000 in expenses by deciding not to buy a Lamborghini, and instead getting a fully loaded Mercedes, when really their budget dictates that they need to stick with their perfectly serviceable Honda. But this is the type of math Washington uses to mask the incriminating truth about their unrepentant plundering of the American people.

The truth is that frightening rhetoric about default and full faith and credit of the United States is being carelessly thrown around to ram through a bigger budget than ever, in spite of stagnant revenues. If your family's income did not change year over year, would it be wise financial management to accelerate spending so you would feel richer? That is what our government is doing, with one side merely suggesting a different list of purchases than the other.

In reality, bringing our fiscal house into order is not that complicated or excruciatingly painful at all. If we simply kept spending at current levels, by their definition of "cuts" that would save nearly $400 billion in the next few years, versus the $25 billion the Budget Control Act claims to "cut". It would only take us 5 years to "cut" $1 trillion, in Washington math, just by holding the line on spending. That is hardly austere or catastrophic.

A balanced budget is similarly simple and within reach if Washington had just a tiny amount of fiscal common sense. Our revenues currently stand at approximately $2.2 trillion a year and are likely to remain stagnant as the recession continues. Our outlays are $3.7 trillion and projected to grow every year. Yet we only have to go back to 2004 for federal outlays of $2.2 trillion, and the government was far from small that year. If we simply returned to that year's spending levels, which would hardly be austere, we would have a balanced budget right now. If we held the line on spending, and the economy actually did grow as estimated, the budget would balance on its own by 2015 with no cuts whatsoever.

We pay 35 percent more for our military today than we did 10 years ago, for the exact same capabilities. The same could be said for the rest of the government. Why has our budget doubled in 10 years? This country doesn't have double the population, or double the land area, or double anything that would require the federal government to grow by such an obscene amount.

In Washington terms, a simple freeze in spending would be a much bigger "cut" than any plan being discussed. If politicians simply cannot bear to implement actual cuts to actual spending, just freezing the budget would give the economy the best chance to catch its breath, recover and grow."

I'm not sure if the debt ceiling issue itself will materalized a direct issue, but I'd add it to the list of "we're stuck in the mud" news with Europe, Japan, the economy slowing, bla bla. Tough even for a broker to sell the next manhattan bubble right now.

Noah - I may be wrong but do I sense a bit of panic creeping into your narrative?

well, those that have been long time readers will certainly be able to tell from the tone of recent writings when my near term opinions on macro economy turn negative...to me, bond markets are trying to signal something other than a US debt default with accompanying surging rates. I think perceptions are changing in anticipation of a upcoming rough patch. I just really wonder if US treasuries will be the sustained safe haven as we go through any slowdown, OR, if confidence in that asset class changes which will change the whole dynamic of the whatever slowdown we have to something far worse

ps: your not wrong

very interesting on the treasury front, Noah

also interesting is a discussion I had with a bond expert friend of mine; he was saying that china has already offloaded 20% of its treasury holdings in just one year's time

he mentioned Japan and Europe being stuck in the same BS political maneuvering that we're facing right now. basically, nations have plenty of opportunities to get their house in order and politics get in the way, dooming the nations to decades of sh**

it seems to me as if, whether the debt ceiling is properly dealt with or not, the "character" of our nation is headed down the wrong path and we are very much at risk of squandering our opportunities

I think this debacle is pointing to the will of our government (or lack thereof) in dealing with the real issues we face. This is very much coming on the heels, as you mention Noah, of significant downward revisions on the GDP front across the board.

Does anyone have handy an updated historical composite graph of past bubbles??

Honeycrisp: The great Crash of 1929 didn't bottom until late 1932. There are many charts. I like this one that charts the upbeat comments about the market. http://www.gold-eagle.com/editorials_01/seymour062001.html. Right up until Roosevelt took back gold from individual bank security boxes.

Can Streeteasy just delete these troll accounts once and for all? They greying out helps, but when it gets this bad, it's a huge deterrent to the actual thread.

"I think this debacle is pointing to the will of our government (or lack thereof) in dealing with the real issues we face."

IMHO, it's the extreme factions of either party that really hamper and progress. The centrists who actually want to deal with this head on are being constantly frustrated. It ain't good for anyone in the long run.

Yeah but the tea party kooks are the only reason the "centrists" actually started to do something. Obama didn't even have the guts to use the cover of the commission report earlier this year to go for spending reductions, etc. Left to their own devices, the "centrists" in both parties are basically afraid to rock the boat -- how else have farm subsidies survived, for example. So, I don't like a lot of things about the tea party but their obstinance seems to be forcing the centrists to do something.

I see apt23 chimes in with a great depression era analogy. Screaming the sky is falling over and over again contributes nothing to a rational debate.

By the way, on the global warning point someone mentioned. When honeycrisp says he views that as a serious issue is that because of some indirect overall economic impact , or the more tangible direct issue of the flood plain in NY. What would happen in nyc with a very serious flood/storm is hard to imagine -- but the monetary damages could be huge (and how many people are properly insured for their own fixtures and furnishings), and I'm not sure how many buildings are adequately prepared to prevent mold issues from developing, which can be extremely expensive to rectify.

"I see apt23 chimes in with a great depression era analogy. Screaming the sky is falling over and over again contributes nothing to a rational debate."

buyer - certainly agree, but you actually might have posted on the wrong thread. chickenlittle23's real tour de force yesterday was actually this:
http://streeteasy.com/nyc/talk/discussion/27717-signs-of-a-double-dip-have-emerged

"apt23
about 12 hours ago
ignore this person
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steve: You failed to mention that Italy was down 4% today!!!!! Even the Dax was down big. Italy will need bailout and so will Spain. But that is not possible because the Euro banks are not solvent due to too much sovereign debt. The ECB can't carry any more and the IMF can't come up with enough to do it. Uh Oh. Europe is toast. The Europeans probably will not be buying any NYC pied a terres any time soon. Plus China is slowing down. Emerging Markets aren't looking too good especially if rates rise. The only country with great growth was Turkey -- right up until the military stepped down over the actions of the Islam-leaning leader. No. Not pretty at all."

You know it's serious when it takes five !!!!!s to show just how hard the sky is falling. I don't know about you, but I'm going out today (excuse me, make that TODAY!!!!!) to stock up on canned goods and ammo.

Lol, sls.

apt23 --

1) pointing to one day's stock market activity as some great insight into anything is kind of silly. If the market rises , say, on Wednesday are you going to come back with exclamation marks and say "all is Ok." No, you won't.

2) Europe may well be in trouble. How do you reconcile that with your view that the US dollar will collapse? In other words, given your view that the US dollar will collapse, how's that going to work vis a vis the Euro, which, one might think, will get weaker vs. the dollar if Europe is in the chaos your foresee?.

My guess is that apt23 isn't trying to reconcile any of her views. Her MO is simply to scan the days headlines for whatever the worst news is and then represent that as if it is a great insight into world affairs that confirms her unwavering view that the sky is falling in manhattan.

can someone please explain, but nicely, why it's so absurd to make analogies to the great depsression in this country and make possible connection to the catastrophic events in europe in the first half of this century? i really don't understand. was the global situation back then that much more dire? were the people who ended up causing and actively and enthusiatically participating in the war that much less civilized and more bloodthirsty than we are, a few decades later? i don't understand why, if you can make clear parallels to the economic situation, it is so insane and ridiculous to suggest the parallels might not end there. this is a serious question for which i cannot find an answer that is not either mockery or way too earnest abd excited agreement, usually by people who welcome violence and unrest to "set things right" probably because they are very stupid and don't grasp that their own lives would be devastated by said violence. columbiacounty, before you even think about responding, please reconsider and go f*ck yourself. thank you very much.

"were the people who ended up causing and actively and enthusiatically participating in the war that much less civilized and more bloodthirsty than we are, a few decades later? "

lucille, who is "we" in that sentence? who are you referring to as "causing and enthusiastically participating" in the war? [are you conflating the US and nazi germany and japan?, which is sort of what it looks like]

sls and buyerbuyer,

I think this illustrates the very real difference between being realistic about/wanting to deal head on with the problems in the global economy and (apparently) perversely reveling in them. The nutty thing is I think those in the latter camp have no idea that's what they're doing. Or are in complete denial. To borrow from Rick James, schadenfreude is a hell of a drug.

"My guess is that apt23 isn't trying to reconcile any of her views. Her MO is simply to scan the days headlines for whatever the worst news is and then represent that as if it is a great insight into world affairs that confirms her unwavering view that the sky is falling in manhattan."

Excellent summary

"are you conflating the US and nazi germany and japan?"

i am not conflating them, i am using them as examples. but yes, so what if that's what i'm doing? why is that so outlandish? do you believe that everything is brand new and there is nothing to be learned from the past? you guys spend a lot of time and energy arguing about the econoimc discourse of the world, understandable, but none of you seem to grasp that economic discourse often goes hand in hand with MILITARY discourse. is it that you just don't have a very good understanding of military history and how important war and violence have always been our (the human race) development? let me ask you, why do you think it's so wrong to compare usa to germany? people say nazi germany as if that makes them like a different country or something. but no, they're the same germans we know today. the japanese today are the same japanese who waged a horrific war against china, who now themselves are the scary global bag guys. why do you refuse to draw analogies and seek answers from the past?

^^bad guys! dammit

Lucille, your post has the historical insight, coherence, and relevance of a Glen Beck diatribe, which is to say none.

I really have no idea what you're saying -- who is getting ready to go to war against whom? (i.e., who are the nazis today, in your mind?)

excuse me, it seems i have overestimated you once again.

Lucille, seriously, your post seems to say, correct me if I am misreading it (but it's a tad hard to decipher) that war is on the horizon, somehow related to the economic situation, and that the usa may be like nazi germany. Some people might find all that kooky, just sayin.

true, some people would certainly find that kooky. i tend to think those people just don't understand history. i don't doubt they studied it, but they didn't really grasp it. i also tend not to get into any serious discussions with them because they have nothing to teach me as they often lack both a broad purely factual knowledge of the past as well as an abstract curiousity for the world and our (that would be both the human race again as well as our individual selves) place in it. unfortunately for me, people who do posses those qualities are few and far between.

Lucille, thanks for answering. I really don't see any parallels between the usa today, and nazi germany, so I don't follow your argument. I'm not being difficult, and maybe you think it makes me stupid, but I don't get your point. Maybe others see this and could help me out.

bb you know i don't think you're stupid. do you really see not even any abstract parallels between the dawes plan and the subsequent young plan and the way our national debt is structured now? maybe there aren't any! maybe *i* just don't understand any of it and am being hysterical. but that's why i hang out here, where lots of people know things i don't understand. by the way, in lucille's version of things, we are germany, china is usa, and i'm not sure our hitler has shown himself yet. the "nazis" though, that i know. it's our own government armed forces, which will be allowed all sorts of unconstitutional freedoms to protect us from the dangerous muslim, sorry, tea party, terrorists. somehow the tea party terrorists turned out to be more viable, go figure. the thing about "nazi" germany is that is didn't turn nazi overnight. their rise was gradual and completely legal. is it that insane to think usa becomes a thug for hire for the nations that hold out debt? i'm not being difficult either, just posing what i think is a legitimate question.

maybe my mind doesn't work so good, but it seems to me that china is playing every step from the usa playbook. except the obvious difference in the reasons for america's and post ww1 germany's debt. is that crazy?

Urban, I think you are definitely on to something.
During the whole debt ceiling negotiation the Treasury Market held strong. If the fear was a downgrade treasuries would've been dumped. Two factors at work here, first the United States is still the least dirty hamper(unless you ignore countries like Switzerland) and second the debt markets unlike the stock market (which always gets it wrong) is pricing in slower and slower growth. Either the bond market is worng or the stock market is. If the bond market is right about growht expect a huge fall in stock prices at some point

"is it that insane to think usa becomes a thug for hire for the nations that hold out debt?"

Are we still on the nazi germany comparison at this point, or have we moved on to a new theory? I just ask because germany did not become a thug for hire for holders of its post-ww1 debt/reparations liabilities. Quite the opposite, it fought wwii against those creditors. germany as 'thug for hire' for france, britain and the usa in the 1930s and 40s? Bizarre concept

hhmm, i can elaborate at later time when i'm not busy, but do you really have such a limited understanding of what happened then that you can't move past thne word "nazi"? i'll make it easier for you, concentrate on the debt part.

sls, whether or not you believe the actions and business dealings of certain prominent american nationals in germany prior to ww2 to be personal choices or part of an intentional national agenda is up to you. the fact that they took place is indisputable. american actions with regard to japan which led to their invasion of china are also indisputable. american prosperity as a result of european and japanese post war recovery are also indisputable. the only issue up for debate is whether all these things were part of a massive consipracy. i don't believe they were, i believe it was mostly luck. but i DO believe that series of events worked so well to lift the us into world leadership that another powerful rising nation is making a conscious effort to emulate them. that i do believe. now please, just comment on the debt stuff! nevermind that lucille might be crazy and paranoid, comment on the history!

i'm not going to tell you what to think, you should consume information and make up your own mind.

ok so ... a bit back to the thread topic :)
things are, indeed, looking worse every day

Noah's analysis of what the Treasury markets are telling us is ... concerning, let's say
Bank stocks throughout Europe are down 40%+ YTD
All GDP revisions are down, with manufacturing down, confidence shot, etc.

I don't know guys ... the only shot we seem to have now is being a one-eyed man in the land of the blind

Geez, the issue of the exposure of European banks to sovereign debt has been discussed in zillions of articles over the last couple years. It's absurd to act like it was some uncovered secret. Do you, for example, read The Economist?

apt23, you might want to reconsider in this particular instance. buyerbuyer is right about the Economist.

bjw Yes I read the Economist. There was a thread that Graffiti and I were posting on a couple of months ago. Unlike the troll, i don't have time to find it. Everyone knew about the sovereign debt exposure of the Euro banks but US media was not reporting that the Euro banks were essentially insolvent because of it until Sean Egan interview in Barrons. Then it was on CNBC and everywhere else. But Der Spiegel and the Irish papers were reporting on the actual numbers months before US media. They also gave numbers on Spain exposure to the cajas. In essence the US media was reporting that Greece had a gdp/debt problem and the banks had exposure. The markets rallied everytime the ECB announced a fix because it was assumed the banks could manage. If the Economist explained that the Euro banks couldn't cover the extent of their exposure before April, then I missed it.