This time it's different

if you look at the last time the RE prices came down, late 80's early 90's, you will see that NY area always takes longer to "deflate." with coops requiring 20%+ down and the wealthier people in the area in general, it just takes longer. the russians, chinese, brazilians and irish/english are keeping the condo market propped up. they are gambling more on the USD getting stronger rather then the price going up. consider if the USD will go down to where it was 6/7 yrs ago (1 USD = 1 EURO). all of the foreigners just made 30/40% on investment. they can easily sell for 10% less then purchase price and still walk away with a positive return.

Eh....I agree/disagree. I agree that finance drives prices for the 1M or so and up range. But there are other major NYC industries that are doing very well again. BigLaw, BigAccounting come to mind. Young single professionals will always be coming to Manhattan, and will buy studios/one bedrooms. They can afford it - look at rental prices in prime NYC. I think rents are about $200 more per month than last year. You also have to remember that Manhattan now isn't Manhattan in the 80s - quality of life was very different then, the city was less attractive period (although I still thought it was very exciting!) I can't speak to non-prime areas, but I really do not see prime NYC going back down absent Lehman 2.

technologic makes a couple of good points, though let's bear in mind that not all Wall Streeters make the big bucks. Therefore, these prospective purchasers under $1M also are affected by the finance industry's condition. Further, I believe higher rents merely reflect the higher demand pushed up by folks who won't or can't buy these days. I posted my concern today that the numbers suggest a freeze in Manhattan's housing market: http://malcolmcarter.wordpress.com/2011/08/15/wall-street-sneezed-now-what/ It's hard to contend now that the prevailing assessment of late -- "stability" -- still holds true.

"That said, what's happening right now does feel like a sea change. Russian moguls and Brazilian heiresses notwithstanding, i-banks and i-bankers are what drive Manhattan prices. And unless Wall Street completely misunderstands its own business, the glory days are over, my friends. GS and MS aren't that far from their '08 lows. Capital levels are way up, and ROE is way down. Comp and workforces are going to have to come down too -- not 5% or 10%, but 25% or more. No way can the NYC RE market handle that without a real adjustment. Not a crash, but maybe a slow fall towards the '09 lows -- which would still be a doubling since '01."

You are right, but its this time its not different. What you are describing is a return to the mean from the Wall Street bubble. The only thing that is different and not likely to change, is hedge funds. They did create a new class of buyer that isn't going away. Even if big banks retrace to a trendline growth trend and work off the 2004-2007 bubble, you still have the hedgies which basically didn't exist in the 1990s.

This Time is Different
has officially become a cliche

Rsider... agreed..

I remember hearing the mantra when dow was at 8k... the system wouldn't just drop it would no longer exist.. that's when I foolishly loaded up on cash (and to a much lesser extent gold)...

re: West Street running the city blah blah blah, half of downtown (or more) are new formatted media firms..

im not saying tech/media whether it be the likes of Google or self-starting entrepreneurs will be the savior but to peg WS industry as THE variable in RE in NYC is quite naive and archaic, this town has diversified itself over the decade (thanks in part to hollywood tax credits, and geeks who prefer Chelsea c*ck as opposed to San Jo, et al)...

Its all about leverage. Banks cant use as much, therefore they can't pay people as much. Hedge funds cant use as much. The fund of funds can't use as much.... Neither can the individuals. Purchasing power is way down and who knows how low NYC real estate can go. Its a sticky market and the economy is recovering tepidly. The bottom line is there is no upside and carrying costs are still higher than renting (if you do the math in an honest way)....so why buy. 1993 was six years after 1987.... so buy the burbs in 2012 or Manhattan in 2014. If prices are still flat in 2014 from 2005 the way they are now, then at least you are buying 15-20% below peak, at 9-year-old prices.

"im not saying tech/media whether it be the likes of Google or self-starting entrepreneurs will be the savior but to peg WS industry as THE variable in RE in NYC is quite naive and archaic, this town has diversified itself over the decade (thanks in part to hollywood tax credits, and geeks who prefer Chelsea c*ck as opposed to San Jo, et al)..."

This time its different. Bah. Its just not the same as huge incoming classes of bankers traders and salespeople fat with sign on bonuses and $125k base salaries. The upward pressure of upward rising stars is just not going to be there to offset the people leaving the city.

Hol4 - you made my point better than I could, i.e., Wall St is not the be all end all. If you are looking at the tippy top segment, yes, its probably either going to be family $ (old or new) or finance. Or I guess foreign money too (dont know too much about that group, admittedly). But there is much more to Manhattan - doctors, lawyers, media/PR, fashion, art, food/drink are the other major industries that come to mind. Those people have $ too and buy apartments.

"Since the summer of '09 prices have risen 20-25% and are back to close to peak"

Sorry, its hard to take the rest of the post seriously after that. Where exactly are you getting that from?

Buy now or be priced out forever!

There seems to be a real persistent myth out there that not only did prices not fall as much as the did...but that they've already recovered. There have always been doctors and lawyers but prices didnt go vertical until leverage went vertical. Circa 2001.

"From Wien’s point of view, the transition affords him the opportunity to continue doing what he loves. And, like so many others, he has followed the money. His move also reflects a fairly negative view about the outlook for Street research.

“In the 1980s and 1990s, research compensation began to soar,” says Wien. “Of course that was partly due to the role of investment banking. All of a sudden analysts were making much more than other professionals like doctors or lawyers. Now the Spitzer rules separating investment banking from research have driven analyst compensation down. I think research is in a secular decline, and going lower.” -May 2010

As for this time, it is different. This time it has a sushi smell.

No sex, no drugs, no wine, no women
No fun, no sin, no you, no wonder it's dark
Everyone around me is a total stranger
Everyone avoids me like a psyched lone-ranger
Everyone

That's why I'm turning Japanese
I think I'm turning Japanese
I really think so
Turning Japanese
I think I'm turning Japanese
I really think so
I'm turning Japanese
I think I'm turning Japanese
I really think so
Turning Japanese
I think I'm turning Japanese
I really think so...

Can you say, "ZOMBIE"

I'm not sure what the very latest numbers are, but Wall Street was calculated to have made up 23 percent of Manhattan's (or was it the city's?) earned income.

Many good comments here for the near-term. For fun I will offer a different long-term take.

Keep in mind "non-linear results." This is where you have, say, a gradual increase in the amount of CO2 being released into the atmosphere, but instead of a corresponding gradual change in climate, you have a very big, sharp ("non-linear") change: massive droughts in the southwestern US and the horn of Africa, for instance, and big increases in rainfall in the NE.

I think this is what is happening to our global economy: the natural resources that underpin our economic systems -- surviveable climate, drinkable water, biodiversity of food-plants and animals -- all these things are undergoing a "non-linear" response to environmental degradations.

In other words, we're continuing to beat up the planet, just a little worse than we were before, but we've hit a point where the global life support systems can't take any more beating, and the results are dramatic. A lot of the biosphere is starting to slip over the edge of the cliff -- the oceans, for instance. In a few more years, there won't be any more tuna. Period.

The markets are starting to adjust to all this, just a little, but until we come up with some kind of stabilization plan for environmental resources, the markets are probably not going to settle down a whole lot.

We absolutely can come up with such a plan, and must come up with such a plan -- the only question is when. The minute we do, things will start to get better.

As for real estate in New York, it's probably going to be all over the place. Price increases on high-end properties, price decreases on lower-end properties, and who knows what in the middle.

Like Bette Davis says in All About Eve, "fasten your seat belts, it's going to be a bumpy ride."

This Time is Different has officially become a cliche

Yup. So has -

Prime/good Manhattan real estate will be $500/sf!

"I'm not sure what the very latest numbers are, but Wall Street was calculated to have made up 23 percent of Manhattan's (or was it the city's?) earned income."

And a much higher percentage of excess income that gets saved to make down payments.

Rhino 86, I'd love to see the source of that "much higher percentage" saved.

Malthus, moron is not a term I use lightly, but it's appropriate here. You are a moron - or more accurately an ostrich. Pretending that the market hasn't recovered is just silly. You want comps? Okay, here's some comps:

1 Morton Square -- 6CE $1.91MM closed 1/10 $2.34MM 2/11 (the 9DW vs. 11DW trade is even more stunning)
99 Jane -- 5K $1.92MM closed 12/09 6K $2.3MM 12/10 5G $1.7 12/09 6G $2.35 (above ask) 6/11

There's plenty more but I can't be bothered. Shall I do the math, or can you? Use your fingers and toes if you must.

You're not arguing with me. You're arguing with reality.

Well, if you have 2 examples they must be representative of the entire market. Imbecile.

Why don't you try providing actual data instead of anecdotes? Maybe because it might prove your wrong?

Try for instance, Miller Samuel, which says that average price per square foot is barely up from 2009 for downtown: $1079 to $1090 from 2Q 2009 to 2Q 2011. http://aggregate-data.millersamuel.com/ Go ahead, it will only take you a minute to educate yourself. But no, you can't be bothered to do that.

By the way, it was a simple request for you to support what you said in a forum that has multiple posts hashing this over for the last year. The name calling in your response is pretty indicative of your confidence in your position.

I'm thoroughly sick of people who refuse to recognize reality. In war, in politics, in Manhattan real estate -- wanting doesn't make it so. The market fell. It rose again. Now it looks like it might be stalled and sliding again. I'd like some thoughtful analysis of where we are, not wishful thinking.

And this was your initial comment. 'scuse me if I failed to see it as polite. "Sorry, its hard to take the rest of the post seriously after that..."

So here are some comps from my neighborhood: 101 Warren 2430 went for about 5% up from a November 2009 comp and up less than 2% from a March 2009 comp.

There's plenty more but I can't be bothered. Shall I do the math, or can you? Use your fingers and toes if you must.

You're not arguing with me. You're arguing with reality.

For clarity, I never denied it rose from its lows, I just challenge your 20-25% up assertion.

wow downtownrenter - take it from someone who has attached a poster or two on occasion ... but your response to malthus seems disproportionate.

Re: peak-to-trough-to-current price changes, the SE condo index is one measure. It hovered around its peak in the first half of 2008, was down about 18% at its post 2005 lows in the last half of 2009 and has since risen about 6%, bouncing around generally flat-ish in recent months.

http://streeteasy.com/nyc/market/condo_index

I don't see how a downturn in wall street, smaller bonuses and lower stock returns can not have a negative effect on manhattan housing. Fear of the future, uncertainty about future earnings and the economy will also have a negative effect on housing.

>I don't see how a downturn in wall street, smaller bonuses and lower stock returns can not have a negative effect on manhattan housing. Fear of the future, uncertainty about future earnings and the economy will also have a negative effect on housing.

What about the positive opportunity you haven't thought about in your narrow negative mind? What about the strength of our country and our citizens who have a history of nearly 250 years of overcoming adversity and growing?

I will just add that whoever said that big law is doing well is dead wrong. I know partners at these firms afraid of losing their jobs. They can't bill enough hours. New lawyers can't get jobs. When did this industry turn around?

downtownrenter: sorry about the tone of my original response. its easy to get caught up here. I should appreciate it more when someone actually talks about real estate.

In any event, I view the changes as more consistent with what sidelinesitter states. Could be that the West Village is an outlier for larger units due to the relative scarcity, which is one of the reasons I moved further downtown.

Apologies? Civil discourse? What is happening to SE here???

Downtownrenter, I think you are overestimating the general size of the dip / rebound. Look at the SE index: they have literally used every same-sales condo data in the city.

I have resolved to TRY to reserve my vitriol and sarcasm for the willfully ignorant, misleading and perpetually off topic. As you can see results are mixed.

agree with charley that big law is shrinking, as is accting, consulting, advertising, media etc--dont know where technologic gets info that these non-wallst industries are thriving--and many of these are closely linked to wall st: big law and accting suck when trading and deal flow are down and staying down as in now--and roadshows support much peripheral event planning media etc--wall st is certainly a key dreiver to manhattan which trickles through just about any business--even dentistry---juicy's probably doing less cosmetic work in here

Juiceman's really a dentist? Didn't know...

Malthus - Apology accepted. I also apologize - you're obviously not a moron. I guess we'll have to agree to disagree about the size of the market bounce. Maybe the truth is somewhere in the middle, in the teens. I will say that there are clear mistakes in the SE figures.

In its Q2 2010 report, SE said overall median prices were up 4.1% y-o-y and the overall median was $800K. In its Q2 2011 report, it said overall median prices were up 7.8% y-o-y. That's about a 12% bump in two years.

But in the 2011 report, SE also restated the Q2 2010 median to $751K, so the Q2 2011 median was $810K. So what was the actual median price in Q2 2010? $751 or $800? And did it actually rise 1% or 8% y-o-y?

"I will say that there are clear mistakes in the SE figures."

Ummm, no. SE, like all the other providers of market reports, publishes their report in the first couple of days after the end of the quarter in question. Given the lag in reporting transactions in ACRIS (which feeds the SE database), the number of data points continues to grow for weeks and even months after the end of the quarter, as more closings that happened during the quarter in question appear in ACRIS. In your example, the Q2 2010 report reflects a partial set of Q2 2010 data and the Q2 2011 reflects an essentially complete one. So the answer to your question is 8%.

Also, their index methodology depends on same unit resales (similar to Case Shilller), not on the shifting target that is the "median" sale. Details below. Anyone is free to agree or disagree with the approach, or to note the limted scope of a condo-only measure given the prevalence of co-ops in the Manhattan market, but the data as presented are what they are.

http://docs.streeteasy.com/research/SECMI_Methodology.pdf

"I will say that there are clear mistakes in the SE figures."

Well, the reports do have lots of problems like all those based on median and average prices, ppsf, etc. do. I think they publish them to keep up with the Joneses at PDE, etc.

The "proper" figures are in the SE index. Basically, it stitches together same-unit sales over time. Effectively what you did with the comps you posted, but across every single condo unit sold across the city. It's the best methodology out there, and it's proven quite accurate on spot-checks I've done with comps back to the index. Most interesting are the comps that involve, say, 2005 which is where prices today are supposed to be these days. People have little memory of what 2005 encompases: there was a 20% rise in that year alone...