New York prices to collapse?

"By the way, the 70s were a worse period than even the 90s for NYC co-ops."

is this.....because most co ops did not exist in the 70s?"

you're not really old! you're a faker! a fake old person!! SHENANIGANS!!!

Coop force filed on!!!!!! Coop force field on!!!!!!! Cap'n, itzz not working? ud said nyc is special! Wtf? Oldpenis would like his bubble profits as well as his social security... Why can't we all be billionaires? Why why why?

Julia,
1) wants large studio - but wants maintenance like a 200sq footer.
2) wants $250k cpw 67th studio w utilities included - but sutton place doesn't work.

Let's say you take average main of $1k for high end bldg. Take $100k savings and divide by $500/months. Don't forget you can get dividends on the $100k.... How many yrs bf your alcoholic boyfriend gets a job?

lucille: take a chill pill; and by the way, co-ops did exist in NYC in the 1970s. Research it, you'll see.

very cute. some co ops did indeed exist, but most did not.

wtf kind of old person says chill pill?

Why is it that old ppl feel like they deserve more cause they wrote the bubble rules and started a ponzi scheme? Wtf?

Why don't some old coop board ppl on this board volunteer to work at that japanese nuclear power plant? You are 80yo, lived in nyc when muggings were commonplace and rode the bubble up and collect ss, just stfu the bubble profits ain't profits till you sell. You can watch your qtrly stmts and cry yourself into marina del ray as a maid / cabana boy. It think 60 to 70 you are 'hot' and sexy in Florida.

"1) wants large studio - but wants maintenance like a 200sq footer."

w67th, don't get how you have such a big problem with >$500psf on price, but no problem whatsoever for $2psf on maintenance.

lucille: hummm. someone else with anger management issues? I'm old enough to have been in business in the 1970s; and cool enuf to kick it with my grandkids! Have a good day.

yeah, whatever. you too. hmmmmmmmm.

w67
I've had those same thoughts about Iraq and Afghanland.
Let's send old peeps.
They have lived long lives and rode the bubbles. Now it's time for a little payback.
1 week of basic training and it's off to some hostile fire base in the deep reaches of the middle east. You want surge??? we got surge! I'd flood the place. Jam it up with walkers and wheel chairs. Angry hungry inlisted elderly making unreasonible demands for early bird specials. Take you entitlements and stimulate the the region. Allow the greatest generation and their feed at the teet children to lead the way!

we are right behind you.

Bj? Do I bitch about the tax rate? Do I bitch about tolls? Do I bitch about cost of coffee? Do I bitch about diesel price for my boat? Do I bitch about euro xchange rate to go to Paris with my kids? Do I bitch about $5 gallon for my porsche?

I bitch about an unnatural bubble asset which one buys maybe 4x in their lives and at current prices have absofkinglutely zero basis with income.

And the fact you got oldpenis saying 'it's a great system!' drives me fking insane.

oldgreyhair -- I suspect there's a silent majority here who appreciate your comments/imput ;)

w67th, I hear you. In the end though, as a buyer, does it really matter that you're getting $500psf if the maintenance is nutty? They're all part of the same equation. To take it to the extreme, what if you were offered your classic 7 on West 67th for $1. Except maintenance+taxes are $20k/mo.

'cool enuf to kick it with my grandkids'
come on, how do you not love that.
brain cells......smoke'em if you got'em

w67thstreet....wow...feel the hate.

Did anyone see the basic analysis of the Alpha conference today. Every one of the big hotshots are calling for a recession. My favorite hedgie, Ray Dalio called for the recession in 18 months (but that call was made 2 months ago). So, the big money peeps that have been propping up the NY RE market believe the jig is up. So even if prices fall due to the coming layoffs, why would the big money peeps put their money into Manhattan property that will remain moribund for years instead of investing their bucks in distressed assets in Europe and elsewhere that has tremendous upside.

Every single hedgie, banker, economist, you name it, interviewed today believed Greece was going to default and they all agreed there is no end game. The London traders were hilarious. So a multi year, world wide recession. Why put your money in Manhattan RE when you can wait a couple of years and pick it up on the major cheep.

So catch this London trader at about 2:50 into the interview. She is hilarious.

http://video.cnbc.com/gallery/?video=3000045597#eyJ2aWQiOiIzMDAwMDQ1NTk3IiwiZW5jVmlkIjoiNVNoZ2lBOVRLckV0aGN4WlBPZTFJQT09IiwidlRhYiI6InRyYW5zY3JpcHQiLCJ2UGFnZSI6IiIsImdOYXYiOlsiwqBMYXRlc3QgVmlkZW8iXSwiZ1NlY3QiOiJBTEwiLCJnUGFnZSI6IjEiLCJzeW0iOiIiLCJzZWFyY2giOiIifQ==

PLEEZE, julia - w67 is petrzitz by another name. Of course as petrzitz he lived on the east side, now based on his new moniker he seems to live on the west side, seems to have dumped his trophy wife and replaced her with a Porsche - unless his wife is named Porsche, which is always possible.

Yes we're heading into a recession - caused by QEII, which raised fuel and food prices enough to strangle the consumer and line the pockets of the Bankers. What a great idea it was....

>seems to have dumped his trophy wife and replaced her with a Porsche - unless his wife is named Porsche, which is always possible.

w67thstreet said - and this is verbatim - "of the thousands of people who touched my wife".

Streeteasy later deleted it.

>Do I bitch about euro xchange rate to go to Paris with my kids?

When you bring your kids to Europe, do you have to put them in one of those pet cages? Do you go in cargo with the larger animals?

apt23, no one cares about your Alpha conference. No one cares about a washed out paranoid woman who sits home all day and watches CNBC for the negative nuggets just to get on streeteasy and post them. Not even columbiacounty actually responds to your crap. Yes, not even columbiacounty responds to your crap.

>julia
about 3 hours ago
ignore this person
report abuse
w67thstreet....wow...feel the hate.

times have changed:
https://streeteasy.com/nyc/talk/discussion/17491

oldgreyhair >>>> Well you bot your apartment in 2/09' and FNNIE & Freddie just starting to enforce these guidlines a few years ago.. hmm......... is your maintenance going to go up? I am certain all coops in NY have enough reserves that they will be ok.. and your taxes won't go up either.. yes, the check's in the mail(eventhough the USPS is going at of business) and the poster named huntrberg i not gay. These are facts we all can be certain of-- Loan Arranger: Top Fed Guidelines Co-op / Condo Boards Need to Know

Those guidelines, known as " The Selling Guide," have been on the books for decades, says Griebel, senior manager with Czarnowski & Beer. But within the past few years, lenders have started to follow them more closely. And the guidelines themselves have become more rigorous. Each lender has to make sure your co-op or condo building meets the specifications in The Selling Guide at the same time that it scrutinizes the buyer's individual finances.

Reserve fund requirements. One standard, which frequently trips up condo and co-op loan-seekers, requires that a building set aside 10 percent of revenue for a reserve fund. If your building does not have this, it should set it up immediately.

http://www.habitatmag.com/Publication-Content/2011-June/Featured-Articles/fannie-mae-freddie-mac-co-op-condo-financing-guidelines

>>> not that there would be anything wrong with it if he were.

Brooks2: Happy to address your question. But first a question for you: do you have any anger management problems? And are you asking the question to learn something or to just be oppositional?

NYC real estate to drop another 20% in my opinion. Especially Manhattan. This is for two to three reasons:

1) A huge amount of buying in the last few years has been from European investors/tourists, taking advantage of the comparative strength of the Euro to the dollar. That phenomenon is DEAD and GONE. That drops prices at least 10% in my opinion. And that's assuming the Euro buyers don't turn into sellers, just that buying drops off. If those buyers turn into sellers then TIMBER!!!!!!!!!!!!!!!!!! It's a crash.

2) Taxes going up. Especially on Hedge Fund managers. It's called "carried interest." Look it up. Obama (rightfully) is going to kill this tax break. This will increase taxes on investment managers by 2.5x ---- Add this in with Wall Street layoffs and you've got a problem. No European investors and no Wall Street. I'm sorry but there aren't enough wealthy Chinese people to make up the difference, even though I wish there were. The buyers are gone.

*3) I put a asterisk next to this one because I'm not sure it will happen but it's always the elephant in the room. It's a little something called interest rates. At some point they're going up. I don't have a crystal ball so I can't say when. I'm not factoring this into my prediction of a 25% drop. If rates go up though, along with reasons 1 and 2 from above, then I think we're talking about a 25-30% drop. I don't think this a likely scenario unless the government defaults so I'm not making an assumption from it. I think we can count on reasons #1 and #2 above though.

oldgreyhair, NY's relative resilience has little to do with coop boards and everything to do with the wealth of the population IMO. Do you know any other area in the country with $1M+ avg home prices that crashed? I don't. People's sensitive natures get hurt if they sell for a loss, so people sit on their losses and bleed it out over many years through negative carry. As wealthy people, they have the means to do so. I.e., the "warehousing" that you are seeing. A person who bought for $2M, renovated for $400K, had $25K of negative carry for 10 years, paid $200K in transaction costs, and sold for $2.4M had a $400K "gain" in their minds, not the $450K loss.

inonada: I absolutely agree with you that wealth is a major factor; and also the boards accomodated the wealthy purchasers. In any event, your statement then proves the point: no distressed sellers in Manhattan (ie., wealthy people) and therefore no market crash. BTW: for a wealthy person, $25K negative carry (maybe $20K after-tax is chump change). If they wanted to visit NYC, a hotel would cost them $600 per night. So the breakeven is just 33 days visit days -- just 3 days per month.

There is no debate --- very wealthy people can afford to lose money. However, that doesn't mean that they like to or want to or want others to know that they have lost money. Not selling and pretending that an asset is worth more than it is doesn't change the reality of its actual worth. One possible explanation for the lack of "good inventory" in manhattan apartments is that those owners don't want to list at realistic prices.

The negative carry I'm talking about is relative to what it'd cost to rent the place for the whole year, not just maintenance (which I figure would be closer to $36K for such a place). The annual cost of $2.4M isn't exactly free.

>oh thats right-the "wealthly" buy everything with cash, pay there bills on time, and know nothing about finance, so they don't care if they lose $25k/month in carry because its so much easier than booking a $1000 hotel room when they are in town. and, they justify a $450k loss as cost of doing business. And all co-ops allow ped-a-terre, co-signers, renters 20% financing, wait %50-- oh- now I am confused, they pay cash.. how did they get wealthy anyway?

Inonada: the carry has to be stated in real economic terms. In this case, it is the after tax maintenance cost PLUS the opportunity cost of the amount invested. The opportunity cost today is zero or close to zero. The wealthy can and do make cash purchases. They leverage when the opportunity cost is high - today it is not. Look in ACRIS, research manhattan co-ops. There is relatively little leverage on the units: no distress. There is virtually no leverage at the park av @ 5th av buildings (ultra wealthy). The wealthy (who do not already live here) love visiting NYC. The hotel break-even is a real issue. Plus, nice to be able to throw a family member the keys; and say feel free to stay at my place for the weekend!

Inonada: the carry has to be stated in real economic terms. In this case, it is the after tax maintenance cost PLUS the opportunity cost of the amount invested. The opportunity cost today is zero or close to zero. The wealthy can and do make cash purchases. They leverage when the opportunity cost is high - today it is not. Look in ACRIS, research manhattan co-ops. There is relatively little leverage on the units: no distress. There is virtually no leverage at the park av @ 5th av buildings (ultra wealthy). The wealthy (who do not already live here) love visiting NYC. The hotel break-even is a real issue. Plus, nice to be able to throw a family member the keys; and say feel free to stay at my place for the weekend!

Apologies for double post

>Plus, nice to be able to throw a family member the keys; and say feel free to stay at my place for the weekend!

No no no, the wealthy are irrelevant. NYC focuses only on Wall Street layoffs and the fact that Irish carpenters can no longer afford condos. That's it. Oh, and Europe is a mess and a lot of the wealthy people originally came from Europe - another reason they don't count. Oh, and gold. Yes, gold is another reason to ignore the wealthy. Very shiny.

"The opportunity cost today is zero or close to zero."

Most recent buyers I know believe in that. I totally disagree with that statement, that's why I'm not upgrading yet. My measurement of opportunity cost includes the opportunity to buy RE and/or stocks at a lower cost within the next 1 to 18 months.

"The opportunity cost today is zero or close to zero."

LOL. If you want to borrow the money to buy such a place, you have to pay 4.5% after putting down 25-35% of higher-risk equity capital. Or if you have cash, you can just alternatively buy govt-guaranteed mortgages that yield 4%-ish with no equity risk. Or munis. Or ConEd yielding a 4.5% dividend. Or if you want to go all crazy, AT&T yielding over 6%.

Don't get me wrong. I like the fact that people translate 0% short rates into 0% rates on long-term risky assets, as they lend their apt to me at effectively 0% rates.

"Most recent buyers I know believe in that."

Ah yes, Bernanke's "greater fools."

Inonada: did you look at ACRIS? Short term rates? What is the 10 year at? Don't confuse the cost of financing with the opportunity cost. Economically, two different things! Opportunity cost is stll close to zero. This is all a subject of opinion.... But I do agree with your point that the resilience of manhattan has a lot to do with the wealth levels of owners purchasers.

Oldgreyhairs, you seem to miss the point that cost of financing and opportunity cost are the same thing. The equivalent of putting the last 65% into your mortgage is buying a mortgage, not sitting in cash at 0%. The equivalent of 35% in equity is something riskier.

As a guy who bought in Feb 2009, you are deluding yourself IMO if you think the opportunity cost of the money you put into a risky asset was 0%. In stocks, you would have been up 65% right now. I'm not saying that is the right number: it is a higher risk than unlevered RE, and it is an outcome rather than an expectation. But to say 0% is silly.

They are not the same thing, economically. In any event, I agree that there can be a difference in opinion on what that cost is. I was not smart enough to invest in stocks in Feb 2009. But I was also not dumb enough to sell the stocks I had already owned. If you feel better investing in the equity market at this point, you should!

>In stocks, you would have been up 65% right now. I'm not saying that is the right number: it is a higher risk than unlevered RE, and it is an outcome rather than an expectation. But to say 0% is silly.

If we listen to your ape friend, or the old coot from upstate, or the crazy lady in apartment 23, the figure is negative.

huntersburg...you're right..

Falco you tha man.

@oldpenis..... Using a $600/nite hotel room to justify his bubble profits. Hey why don't I use my $150/day Aspen hertz rental to justify my $275k F 599gtb?

Hilarious!

Btw. I think equity /euro buying opportunity of historical level will come way way way bf nyc re. 2009 was just a part of a severe downward trend w/ borkers falling over themselves to say 'you should has bought then!'. But then again borkers never tell ya it's not a good time to buy.

Oldpenis, Stfu and buy more nyc re..... Coop force field on

Julia when will your drunk boyfriend kick in for housing?

hehe, talking ape never fails to make me laugh

--or in contrast if you sold your stocks in 07-beg08'and put it in cash you would not have lost 23%..

Right after $h!t hit the fan in 2008, the same people who are promoting the doomsday theory ever-so-convincingly today insisted that:

* There will be a 40, 50, or even 80% drop in Manhattan real estate prices by 2010 to 2011; and

* Manhattan RE is no different from the rest of the nation, and Manhattan will be flooded with foreclosures by 2010 to 2011--when a bulk of the adjustable-rates mortgages get rate adjustments.

Neither has come true. I am not even going to mention that we just saw a noticeable price increase over the summer, especially for the resale of new/newer developments--because I don't want to be attacked.

Finally, inonada, you seem to be an intelligent person (based on how you write). So, you would know that consumer behavior does not correlate with projections we generate based on theoretical cost-benefit analyses. Most people buy what they buy, for reasons beyond numbers.

>>>There will be a 40, 50, or even 80% drop in Manhattan real estate prices by 2010 to 2011; and

really? i never heaerd that?

duvravcic, economists don't include human factors. Everything fits an Ivory Tower model. And if you differ from the Ivory Tower model, then that doesn't count.

>>There will be a 40, 50, or even 80% drop in Manhattan real estate prices by 2010 to 2011; and

>really? i never heaerd that?

Brooks2, were you on this board back then? If you look at the previous threads on this topic (and similar), you will see that most of these skeptists were predicting a major, major crash by 2010. The funny thing, though, is that they were as adamant about their doomsday views then as they are today!

I have no vested interest in this (as I am not buying, selling or renting anytime soon), but I have learned to take these extreme opinions with a grain of salt.

Brooks2 is "new".

There is a debate if Brooks2 is Aboutready or is MidtownerVirginEast.

Re: There will be a 40, 50, or even 80% drop in Manhattan real estate prices by 2010 to 2011

Yup, I said it. And lots of other here did too. And then Ben came along and dropped a trillion or two on NYC. Don't worry boys, keep everyone employed, no MBS/CDO market now? I'll fix that up real nice, and here's a carry trade to keep you warm at night too, crap assets lemme have 'em at par!, extend and pretend, it's all just a balance sheet entry anyway, happy days are here again..... Now who saw THAT coming?

> most of these skeptists were predicting a major, major crash by 2010

And we had two... biggest national crash since the great depression, and greater than 20% in Manhattan, the biggest one I can recall...

And then the mega stock market crash.

Btw, before it started, the vast majority of "skeptics" were predicting 15-25% on Manhattan RE. The crazy numbers came from a select few after things started falling.

>And we had two... biggest national crash since the great depression,
>and greater than 20% in Manhattan, the biggest one I can recall...

I am sure a reply isn't warranted here, but I was talking about people here who, back then, insisted that the "major" crash would entail price reductions of over 50%.

>duvravcic but, a professionaly from a legit organization never said that.. right?
imo we sill see further declines, we were in a RE bubble, yes in Manhattan too. but it will take time. 80%? sounds extreme, but 40% from the peak, I could see. CRE was way over levered via the CMBS market as well as CDOs and all the other acronyms olegrayhair will through out there to make him appear intelligent, but the bottom line is everyone got way over their Ski tips in the realestate market.... including the wealthy.. no doubt about it.. the bubble is deflating, but it will take time.. FN and freddic just decided to enforce their guidlines for co-ops and condos recently-- ie reserves 10% of revs, sponor ownership at a min, arrears resticitons(cant be deliq), and increasing ins premiums.. if buildings are not with in guidlines-- getting financing will be difficult or maintenance will go up-- thus prices down..

The game isn't over yet. If you think it is you're a complete fool. 50% peak to trough is completely within the realm of possibility over the next several years.

"If you look at the previous threads on this topic (and similar), you will see that most of these skeptists were predicting a major, major crash by 2010. The funny thing, though, is that they were as adamant about their doomsday views then as they are today!"

"The crazy numbers came from a select few after things started falling."

You can actually go back to pre-2007 and see people predicting that major, major crash before then too. That doesn't mean it won't happen, but it does become a bit tiresome to hear the ETA revised every couple months. A lot of the 50%+ crowd has disappeared, but stevejhx (moving to Florida) and w67th (still holding strong) are still quite convinced.

"I have no vested interest in this (as I am not buying, selling or renting anytime soon), but I have learned to take these extreme opinions with a grain of salt."

Btw, where are you living if not owning or renting?

blaaaaaather on plowjop

i am in your camp w34--time will tell whether benny will prove to have ultimately made things worse--my sense is things will be worse than they might have been had he let markets clear on their own--i see another down leg in stox and RE, and maybe commodities too--and twist will not have the effect that qe1 and 2 did--twist provides no new dollars to pump assets with--it will change the yield curve which will do nothing

no more asset prop trickle up--it's over--now the shit has to stand on its own--seems real weak-kneed to me

Twist is ridiculous - didn't do anything in the '60's, ain't doing nothing now.

More like Limbo: Let'em bottom out. Benny Boy did a job reflating what had to deflate, but he reflated the wrong thing: food and energy which, well...

...let's just say they don't count.

The extreme volatility in the market - yesterday there was a 3% swing peak to trough, today a Greek Relief Rally on the worst economic news in months - is a bearish sign. Very bearish. Same things happened in 2007 - 2008 on the way down as things got progressively worse.

Corporate profits are starting to get hit, unemployment is going up, economic activity is at a standstill and/or falling. Yet oil remains at $90 a barrel, corn at an all-time high. Any more "stimulus" will cause those prices to go up even more, when what they have to do is fall...

...so people can start affording things again.

If it means anything, the last time there was such a violent consolidation pattern like the one we're seeing today - with such massive up and down moves interday and intraday - was the few weeks around the Lehman collapse. This has only happened a few times in history.

It does not bode well, for anything.

Getting back to 05 'levels.

september 07, 2005 Unit 3F 2 BD / 2 BA
-- Sq. Ft. Co-op $840,000s

04/19/2011
Listed by A & I Broadway at $915,000.

ttp://streeteasy.com/nyc/sale/601284-coop-400-east-59th-street-sutton-place-new-york

"I have no vested interest in this"

i spy

with my little eye

a big fat lie

Thanks for bringing us to kindergarten level.

don't mention it, it's my pleasure

Lucille, Steve,

I think you might be missing us "owners" on one point. You seem to always assume we want to portray our RE purchases as some type of golden goose. So you point out these dreadful economic possibilities to "prove us wrong" as though we believe there is some immunity we feel because we're owners. I will be the first to say that if there is a prolonged financial apocalypse that my family will feel it - in a big way. However, we'd feel it whether renters or owners. I've been both in NYC and see the merits of each approach depending on where you are in life. For us - buying made absolute sense since we have a growing family. We married and both owned apartments. We sold mine, kept his as a rental, and purchased our home uptown. Which we chose because we essentially own it outright - something only possible because we sold a downtown apartment. But, of course if my husband lost his job and I couldn't find work after a few years we'd be in a panic. Not sure why you think renters would be in better shape? If you're broke, you're broke? I see you're hoping for prices to drop but I am not sure why you're cheering for circumstances that would mean the 10% who will ever buy in NYC might be able to and the other 90% of NYers will simply put - be fucked?

eliz181144, not sure why you are addressing this to me, i have never "cheered" the bad economic news. my only issue on this thread was the continuous insistence that the co op system will save property values, because they only admit really good candidates who will never run out of money. i'm not a part of team bear, though i'm certainly not a part of team bull. i'm a free agent, really. but i don't "cheer" bad unemployment news, bad layoff news, bad any news, i know there is a person behind every one of those numbers, and probably a family dependent on them. so don't stick me with those chumps. lucille stands alone.

lucilleisajerk

>>>"lucille stands alone."

Right on!!!

Brooks2, how is that "smallish 1 bedroom apartment"?

OK--I'll back off because I enjoy this board a lot and don't have the time/energy to debate. You're all far more savvy in terms of markets and trends. I addressed it to you mostly because I see coops (like oldgreyhair) as having behaved far more judiciously than banks and for the most part they tend to go with people who have quite a lot of cushion. That is not to say there aren't renters without a huge pile of cash to ride out the storm with. I think the overall point from the "coop side" is that 1) yes, we're all in a totally screwed up and scary financial situation 2) everyone but the uber wealthy or career agile are facing some potential level of jeopardy and 3) anything prolonged will just crush the city, period. So the owner vs renter debate is just essentially rearranging the proverbial deckchairs. That said - I do think well off renters and the well established co ops will fare best. Condos seem to have taken quite the hit and marginal renters are always iffy. It just seems renters will never give owners an inch - like a reverse snobbery that seems odd. After all, 99.9% of us who live here now were probably renters for quite some time.

Re: I see you're hoping for prices to drop but I am not sure why you're cheering

Please STOP equating predicting with cheering!

Just because I think the sun will rise tomorrow doesn't make me a cult of Apollo follower.

And MANY of us predicting further price drops OWN our apartments. Outright you mother;#*>•¥%ers. So there.

Oldgreyhair: "They are not the same thing, economically. In any event, I agree that there can be a difference in opinion on what that cost is. I was not smart enough to invest in stocks in Feb 2009. But I was also not dumb enough to sell the stocks I had already owned. If you feel better investing in the equity market at this point, you should!"

That "difference in opinion" makes the world go 'round. Back in the late 90's there was a "difference in opinion" as to whether stocks with earnings yields at 2.5% with 30yr yields at 6.5% made sense. We saw how that turned out. Now there's a "difference in opinion" on whether real estate yielding 1.5% on cash before transaction costs & upkeep, so really 0-0.5%, makes any sense just because short rates are at 0-0.5%. We shall see, but my guess is that in 10 years this "difference in opinion" will seem just as silly.

So sure, let's put the opportunity cost of capital at 0% for RE and see how things work out. I'm not a crashista. I just think that you'll get what you bargained for after 10 years: no return on your capital compared to renting.

inonada - invest in stocks

w67thstreet, columbiacounty, apt23 - don't invest in stocks

inonada: I'm not against renting. In fact, I rented for over 25 years. That's why I know what a PAR is relation to an MCI. What has been the return on capital on the S&P 500 over the last ten years? $1.00 invested in the S&P500 on 01/01/2000 grew to how much by 12/31/2010?* (I'll let you exclude the YTD broad market sell off). As I have said all along, it's what makes a market. You and I have no disagreement. We just have different sides of the trade.

ANSWER: $1.04

liz---broke is broke---but out of work with all net worth in tough-to-sell real estate is very different than out of work with net worth in liquid fincial assets and/or cash

"I am sure a reply isn't warranted here, but I was talking about people here who, back then, insisted that the "major" crash would entail price reductions of over 50%."

Yes, there were a couple of those...

Your mistake was applying the view that most didn't hold to "most of these skeptists [sic]".

It is like saying "most of the bears on this board called for a 50% increase" just because SteveF did.

"If it means anything, the last time there was such a violent consolidation pattern like the one we're seeing today - with such massive up and down moves interday and intraday - was the few weeks around the Lehman collapse. This has only happened a few times in history."

Translation - Steve was wrong again, the Dow has shot up 500 points since he came on with his crash notes (just like went it went to 12,500 after he started screaming at 10,300... but he's always good with another excuse why.

Those 10,300 hurt, don't they...

I'm taking some profit today on what I bought when Dow went under 11k. See Steve, that is how that works... buy lower, sell higher.

" I addressed it to you mostly because I see coops (like oldgreyhair) as having behaved far more judiciously than banks and for the most part they tend to go with people who have quite a lot of cushion. That is not to say there aren't renters without a huge pile of cash to ride out the storm with."

http://www.youtube.com/watch?v=pjvQFtlNQ-M

"1) yes, we're all in a totally screwed up and scary financial situation 2) everyone but the uber wealthy or career agile are facing some potential level of jeopardy and 3) anything prolonged will just crush the city, period. So the owner vs renter debate is just essentially rearranging the proverbial deckchairs."

http://www.youtube.com/watch?v=_BQcFjA2sDA&NR=1

ok, i'll go away for the rest of the day now. bye guys!

What will happen to NY Real Estate if the the high unemployment rate sparks rioting?

http://www.myfoxphoenix.com/dpps/news/nyc-mayor-bloomberg-warns-high-unemployment-could-spark-rioting-dpgonc-20110916-to-_15059858

couple of things i noted

1- it's a little striking there are still manhattanites who are still not completely aware of what a massive shitstorm we are in. we r in the eye of the storm right now. it will take a long time for this crisis to spiral to the terminal point which is $. the authorities are doing their "best" to deal with this via keynesian policy. time will tell if this will work. most business owners know intuitively it will not because at the end of the day a country is no different than a business, financially. ability to print currency or change the rules will never stop market forces in the long run. the timing can be difficult to predict b/c as a human 3-5 yrs seems like a long time, but in overall societal age, it is a blip.

2- i keep reading all these stock trading references on streeteasy but people keep talking about dow this or dow that????!!!? sorry i've traded for a long time, never met a trader who trades dow, people trade spy or /es or rut, etc. dow is used as a proxy for people's investments & to explain market to lay public but not really a common trading vehicle. i may be wrong & maybe the poster is being genuine but it raises a red flag....(full disclosure, delta neutral, long vega over wknd)

"it's a little striking there are still manhattanites who are still not completely aware of what a massive shitstorm we are in."

Totally agreed....

"i keep reading all these stock trading references on streeteasy but people keep talking about dow this or dow that"

Yeah... I haven't bought dow anything in a long time... but it is still the one I can remember in history, so it is why I reference it. SPY/IVV for index generally, sometimes VTI. Sometimes pulling in some wilshire stuff. SSO when things were bad.

So just consider "dow" shorthand...

wow west 34, that was awfully hostile. If I were still in my first trimester I might have cried. At least Lucille posted funny clips to make her point. Anyway, this is one of the silliest statements I have read:

Re: I see you're hoping for prices to drop but I am not sure why you're cheering

Please STOP equating predicting with cheering!

Just because I think the sun will rise tomorrow doesn't make me a cult of Apollo follower.

How did you draw a line between something that has happened every day of your life to something that most of you have been predicting will happen for years?

"I'm not against renting. In fact, I rented for over 25 years. That's why I know what a PAR is relation to an MCI. What has been the return on capital on the S&P 500 over the last ten years? $1.00 invested in the S&P500 on 01/01/2000 grew to how much by 12/31/2010?* (I'll let you exclude the YTD broad market sell off). As I have said all along, it's what makes a market. You and I have no disagreement. We just have different sides of the trade."

Who said anything about buying in stocks on 1/1/2000? It might be all the same to you, buying stocks in 2000 vs. 2009, but it sure isn't to me. I'm not saying your opportunity cost on RE is 30% annually because that's how much stocks went up during that time. Just that your 0% opportunity cost is wrong IMO. With an opportunity cost of 0%, that idiot buyer/holder of stocks circa 2000 has done perfectly well through 2010. Does that sound right to you?

In any case, that is the negative carry I'm talking about. The cash buyer with "0% opportunity cost" lending out their apt at 0% for 10 years, when a lower-risk investment in a mortgage would have yielded them 50% in aggregate, but never acknowledging the issue.

Isn't it hilarious to hear people crowing about buying Manhattan real estate today at "2004 prices"; but when they look at today's equity market which is now at 2000 prices there's too much risk. I'm starting to get the picture that maybe some of the "astute" investors on this board do not have two nickels to rub together and that they are living in the basement of their parents' home. There is very little intellectual dialogue going on on this thread especially when a basic concept of opportunity cost is not understood. Beam me up Scotty!

OK, let's say I don't have any money to my name, I don't live in a very nice place, I don't have any investment knowledge or track record, and my understanding of opportunity cost is zilch. I would like to be educated by you.

Here's what I found on Wikipedia as the definition of opportunity cost: "Opportunity cost is the cost of any activity measured in terms of the value of the best alternative that is not chosen (that is foregone)."

You say that the opportunity cost of money used to buy RE is more or less zero nowadays. Was it the same in Feb 2009 when you bought? What exactly was the best alternative that you saw at the time / that you currently see that leads you to a zero-ish opportunity cost?

i think it's been established oldgreyhair is full of it....

Inonada: when I purchased in 2009, I did not factor in opportunity cost. I bought because I found a super home that would greatly enhance my quality of life -- an objective that was accomplished. Since there were no other bidders at the time, my bid WAS the market. Your extreme efforts to quantify things is commendable, but as other posters (eliz) have noted, there are sometimes non economic reasons for owning.

PS: I have said all along opportunity cost can be subjective. You were the one that used equities (At&t stock etc) as the alternative opportunity. I put opportunity cost as the 10 year t-note to 10 year corporate. Which personally gets me to the 2 percent to 4 percent range (pre-tax). Others can disagree.

Oldgreyhair, we just bought with a very similar view to yours - opportunity cost being zero, considering market cost of renting a similar apartment, joy of living in place which is to your taste and not having to move/worry about increase in rent. I was a renter for 16 years. What tipped the balance was low rates and getting comfortable that in prime manahattan areas, the downside is limited after 15-20% decline (inflation adjusted 25-30%). We also saw 28 East 10th street selling at $1500 a sq feet at the peak of the recession in 2009. Nice renovation but besides that a standard pre-war.
Nada and I differ for two main reasons - Opportunity cost (near zero for me for downpayment as we have plenty of leverage to financial markets via our jobs vs 7-8% for Nada) and Nada being able to rent at 20% discount to the market price potentially due to willing to wait till last few weeks to rent and having a flexible budget of ($7-10K).

That said, I recognize that it is a bearish board with little appetite for bullish comments. Some people like Nada at least justify their rent decision, most others just say real estate is going down and tend to forget to adjust for the difference between better quality of apt stock for sale vs stock for rent.

We stayed away from 10 year tax abated condos as once the tax abatement goes away, taxes are crazy. Someone on this board made a point about these condos value going down when the abatement expires. I agree with that. In general taxes going up is the biggest bearish point which most bears on this board are not making. Posting it to show I understand and appreciate the bearish argument. However, most bears on this board fail to appreciate bullish argument.

"I put opportunity cost as the 10 year t-note to 10 year corporate. Which personally gets me to the 2 percent to 4 percent range (pre-tax)."

Well, 2-4% on (say) $2.4M is $4K to $8K a month. Not exactly zero in my book. Personally, I find the use of liquid risk-free treasuries as the equivalent for RE to be wrong, seeing as how mortgage investors can command a 2% premium for mortgage debt with a 25-35% equity buffer, but OK. Corporate yields are better IMO. I think circa Feb 2009, Aaa was yielding 5.3% while Baa was yielding 8.1%. So $10K to $16K a month on $2.4M in cash.

I get that there are other reasons to owning. But if you look back, this discussion started with me saying that wealthy people absolutely abhor taking a RE loss in one way (nominal price) but feel OK by taking it in other ways that can be rationalized away. Given they have the financial means to do so, that's what they do. Hence, no crash -- just a slow bleed they do not understand or pretend does not exist.

>I think circa Feb 2009, Aaa was yielding 5.3%

And about this time, how did people feel about AAA? How did people feel about the quality of the rating agencies' highest ratings? What did people think of high quality companies like General Electric who needed infusions from Warren Buffett? How did people think about American stalwarts like General Motors and Chrysler?

Nada, but the yield in your $2.4mm cash buyer is ability to live in it with upkeep, maintenance and tax payments. Also, partial inflation protection has value.

Ibonada: yields today can not be compared to 2009. You very well know that. And again, i told you opp cost was not a factor for me in 2009. We can agree to disagree on the opportunity cost today. I just got 30 year fixed financing on non- NYC property at 4.125 p/c. Granted non-jumbo. There has to be an investor on the other side of that! (prob Fnma). For me to "invest" in 30 year mortgage paper at 4.124 pre-tax, I'd need to make some heroic assumptions. I'll be happy to be a borrower at that rate; as I am expecting a real uptick in inflation in 2014 and beyond. Again, that's my side of the trade. If you prefer to stay in your rental and sell me your funds at that rate, I'll be a taker.

>Ibonada

um, its inododo

Inonada knows a lot, as usual.

Contra Eliz (and others) the reason to expect NY RE prices to decline is NOT apocalypse -- that NY is Detroit or that white flight is about to resume or that the economy is in free fall or that mysterious forces are going to generate Zimbabwe-style inflation because we have a president with a Swahili middle name. We don't need apocalypse to have RE price drops.

NYC real estate, like real estate all over the US and Europe, went through a decade long bubble. Bubbles end. They end because bubbles depend on their own growth to exist, and like anything that can exist only if it grows exponentially, must end.

Once the bubble is no longer growing, it must shrink, because the bubble itself created much of the demand that sustained it. Without new bubble growth, past flipping profits dry up and banks won't lend based on future ones, so bubble generated demand slowly evaporates.

Contrary to the "bubble" metaphor, however, real estate bubbles rarely "pop". Instead, especially in affluent areas with solid employment, they deflate very slowly. Demand drops, since fewer people will imagine that they'll make up for overpaying now by selling at a higher price later -- but it may not drop rapidly if lots of people are still sitting on bubble gains and are willing to trade one overpriced apartment for another. (All those all-cash purchases probably include a lot of this "gambling with house money"). Supply continues to rise, especially if, as in NYC, prices are so high that developers expect to make money even if prices drop significantly. But as Inonada points out, inventory may drop even more rapidly, as sellers attempt to avoid realizing their losses.

So RE bubbles usually deflate by long periods of flat (nominal) prices until inflation brings rents and construction costs up to a level that fits with sale prices. For example, that's what happened in NYC and CA after the last '80s RE bubble. And it seems to be part of what is happening here now.

However, rents and construction costs aren't going up perceptibly now. And neither is likely to do so in the near future: rents (unlike prices) are closely tied to wages, and construction costs are not going up while unemployment is high.

That puts us in somewhat uncharted territory. Will the wealthy and those with choices continue to act as Inonada describes and Eliz and Mercer and SteveF exemplify? Or will enough apt owners be forced to sell for reasons of health, employment or age, or choose to sell to take advantage of lower prices elsewhere or to cut their losses and move on to something else, like Petrfitz? If the former, we face flat prices as far as the predictor can predict. If the latter, prices could drop dramatically. Neither scenario requires "apocalypse" or even recession as a trigger.

---

Finally, lower RE prices will make NYC a much BETTER place to live, not a worse one. To be sure, dropping RE prices will be very unpleasant for anyone who has built their life on the assumption that RE prices don't do that. But that's a tiny minority in a city of renters and long term owners where very few people actually paid bubble prices.

Our bubble RE prices suck up capital that could be better used for productive purposes, increase costs for startups and young families, drive productive and creative people to find easier places to live, and generally inhibit economic growth and quality of life. The sooner they come down the better for all.

Oldgreyhair:

If you aren't willing to invest in a mortgage at 4%, why are you willing to invest in the equity interest junior to that mortgage at 0%? Isn't the equity interest necessarily more risky?

Or is inflation the only risk you perceive?