How can people afford to buy in Manhattan

In most places in the United States, an employed 29 year old can fairly easily afford to buy a one bedroom condo, but then there is New York City. You need to make pretty good money on your own or together as a couple or else you need to get some financial contributions from your family. The rule that I've always followed (and will be disagreed here I'm sure) is that you purchase at 2 1/2 times your gross income. Then you have extra income for renovations, unexpected assessments by the building and you can still go out to restaurants or whatever you like to do. Many people save for a long time to afford the down payment on a home. It's just too expensive for many people to live in Manhattan.

Very few 29 year old's are not buying in Manhattan unless either one or two things is true
1) Star lawyer, banker , trader or similar
2) Mom & Dad are helping or family business(which is much the same)

There are too many hurdles
1) Too few years in the job force to save up for the 20% down payment and still have a rainy day fund
2) Market uncertainty + the resultant high concentration of exposure to the apt can be daunting

However for those doing it an income of over 200k is probably the bar.

I'm not sure what a 4th year associate at a large law firm makes now, but it might not be $200,000 but if not, it's close. The 29 year olds who buy apartments (on their own) often seem to be in finance, family businesses or have family money, you're right.

I live in CA where RE is high but I am looking at one BR that is $700K -$800K plus over $1.5K in month maintenance.

Who's buying? You or your 29 year old son? Sounds to me like you are. AND, that is how these people buy apartments.

In addition to the "one person who makes $200K" case (which, in Manhattan includes a lot of non-lawyers and non-finance people -- an ace 29-year-old techie might make that, for instance) there is the "two people who make $100K each" case -- which gives you a fairly wide field of buyers for one-bedrooms.

ali r.
DG Neary Realty

My husband and I saved for over a decade before we could afford to buy our current apartment. That's how we did it.

"I am wondering who are these people who can afford to buy at these prices?"

They are called "the rich."

No one ever said BUYING in MANHATTAN is -- or even should be -- "affordable."

Your 29-year-old son apparently wants to swim in the big pond. Let him.

I think the problem with the picture is that he wants to be in Gramercy. This is an expensive area but far more affordable areas abound. Have him look in midtown...not as sexy but deals all over the place. We have friends looking at two different 2/bed 2/bath units which are priced at $675 and $760 respectively. There are one bedroom units for much less in those buildings which are both on E. 57th.
When we were looking 2 years ago, we also wanted Gramercy but the reality was we couldn't afford it and still have another life.

To expand on these responses, few first-time homebuyers can afford to purchase in the most expensive neighborhoods of any metropolitan area. Your son is being a bit unrealistic if he thinks that he "should" be able to afford to do so, in New York or anywhere else. He should do as most others do, start out where he can afford and move up if he still wants to and can afford it in the future.

"We have friends looking at two different 2/bed 2/bath units which are priced at $675 and $760 respectively."

where are these?

"We have friends looking at two different 2/bed 2/bath units which are priced at $675 and $760 respectively."

The places I've seen priced like that usually have exorbitantly high maintenance fees.

29yos who earn regular white collar 29yo wages do not buy in manhattan unless someone is buying for them. people save for a long time to buy and buy much later for the same reason people here get married and reproduce much later - because they can't afford to do at the same age as the rest of the country.

here get married and reproduce much later.....

or maybe they did not find the "right one' until later...

He can consider HDFC or income restricted apartments but he'll have to be flexible on location. For instance he could easily have purchased this http://streeteasy.com/nyc/sale/604069-condo-2098-8th-ave-central-harlem-new-york

"or maybe they did not find the "right one' until later..."

everyone gets married older here. it's statistically impossible that everyone keeps missing "the right one" and then miraculously finds them in their early to mid 30s.

The marriage age is HIGHEST in Manhattan of all the areas in the Greater Metro and indeed the entire US. After Manhattan not surprisingly comes other expensive cities like Boston and SF. So I am not sure what Jim's point is, exactly.

I should also add that its lowest in cheap places like Dallas. Education levels have something to do with that, but even with that factored in the expense of the area indeed is a huge factor - i.e. Austin people marry younger than Boston.

or Berkeley.

Any professional service here you can charge easily over $100/hr as a self employed. If you aren't, you're really underselling yourself. Everyday IT geeks with a few years experience do this, for example. So it's really not that difficult to make over $200K here, which will get you into that condo by age 29. Why do you assume someone in this position is not making their own money?

You're right.

All those unemployed professionals (at last count, more than 30,000 in New York City) are just losers who haven't figured out that they can just go into business for themselves and make $200K "easily."

What do you suppose is stopping them?

Could it be ... LACK OF DEMAND??

Could it be ... it's really not as "easy" as you're making it out to be?

Unless the son wants to stay in that apt for 5-7+ years, why buy? Sounds like renting may be better.

First or second marriages?

I have a hard time believing that marital age is directly related to cost of living. Being a hopeless romantic, I would have guessed that if there were a direct relationship, it would be inversely proportional - people would get married in NYC younger to save on housing costs.

I wonder if the marital age has anything to do with the options that exist in the city. For a myriad of reasons, it's a lot easier to meet someone new in cities like NYC or Boston, and the more options that exist, the harder it is to choose. Additionally, NYC is much more concentrated and entertaining than Dallas or Austin, and it is quite possible to lead a very fulfilling life as a single person.

If I were a betting man, I would suspect that the marital age would be higher than average in LA, SF, and DC...

"I wonder if the marital age has anything to do with the options that exist in the city"

no, because that wouldn't lead to a higher average age at 1st marriage but higher rate of divorce. also, contrary to popular belief, new york population being 8 million does not actually translate to 8 millions potential conquests for anyone who lives in new york. and anecdatally, based on what single YOUNG guys i've known in the past who have lived in other cities have told me, their options were more attractive and plentiful in other, financially less competitive locales.

based on what single YOUNG guys i've known in the past who have lived in other cities have told me, their options were more attractive and plentiful in other, financially less competitive locales.

Strongly disagree!

"and anecdatally, based on what single YOUNG guys i've known in the past who have lived in other cities have told me, their options were more attractive and plentiful in other, financially less competitive locales."

New York has the largest surplus of single women to single men in the nation. So, unless the average New Yorker is less attractive than the average person anywhere else (and, as far as I can tell, the opposite is true), options for men are almost certainly better here than in other places.

I would say that's actually the reason for the disparity--men have more power and are less focused on getting married, but SF has the opposite problem and also a high marriage age, so there's something else going on...

the surplus of single women here is not available to any single man. they're here, but that doesn't mean any single guy has his pick, unless said single guy makes a lot of money. an average person's actual legitimately attainable pool of potential dates is mostly limited to their mirco universe of people they know and people those people know. people don't get married for the simple reason that everyone is afraid of missing out the potential better deal. well, not everyone, but at least one person in every relationship which does not result in marriage.

i actually think that's another major reason, guys see models out and about and think, i can have that too. girls see very rich men out and about and think, i can have that too. and they proceed to do whatever everyone else is doing to attain that same goal.

I still disagree. Yes $ will help anold bald guy get babes or even a 90 ibs weakling like JJ, but a debonair 29 yr old will does not need cash to enjoy himself with the ladies in NYC or anywhere.

"no, because that wouldn't lead to a higher average age at 1st marriage but higher rate of divorce."

I disagree. Cities like NYC, LA, SF, Boston, DC are filled with more aspirational people than Dallas, Philly, Chicago. These are driven people who are trained to strive for better and who have a list of prerequisites that must be fulfilled before beginning a serious relationship - education, job, pedigree etc. NYC is a city of 7s looking for 9s. It takes awhile for people to find that 9, lower their expectations, or simply realize that partners are not luxury goods. Additionally, a happy and fulfilling single life tends to make people selfish and less willing to make the compromises necessary for a good long-term relationship. People are looking for more, willing to offer less, and so it takes them longer. Just a theory.

"options were more attractive and plentiful in other, financially less competitive locales"
I strongly disagree. NYC, LA, SF have very different but strict social standards when it comes to beauty - fashion, health, degree of fitness, personal presentation etc., and this pressures most to try harder. It's more socially acceptable to be overweight in Dallas than LA. It's less frowned upon to smoke in Philadelphia than San Francisco. It's more common to be slovenly in Chicago than NYC.

so to bring it back to my original point, men wait to start seriously looking for a wife until they are basically established or on their way because they think (well, they know, really) that they'll do better then. they don't not marry their girlfriend at 25 like in the rest of the country because they want to have options that are her equals, they're holding out for the better deal, which they know they'll get when they make more money. the end.

"but a debonair 29 yr old will does not need cash to enjoy himself with the ladies in NYC or anywhere."

you're talking about casual...relations, i am talking about serious relationships and marriage. like you said, a debonair 29yo who wants to enjoy the ladies will likely be able to enjoy the pretty much anywhere. a 29 regular guy who can talk to women can get laid every night if he wants, but can he get most or even any of those women to be serious about him? no, because they, too, are waiting for someone better than him.

@NYCMatt LOL LACK OF DEMAND..maybe you're not offering anything useful that people want to pay for (putting people down all day on message boards comes to mind).

"I disagree. Cities like NYC, LA, SF, Boston, DC are filled with more aspirational people than Dallas, Philly, Chicago. These are driven people who are trained to strive for better and who have a list of prerequisites that must be fulfilled before beginning a serious relationship - education, job, pedigree etc. NYC is a city of 7s looking for 9s. It takes awhile for people to find that 9, lower their expectations, or simply realize that partners are not luxury goods. Additionally, a happy and fulfilling single life tends to make people selfish and less willing to make the compromises necessary for a good long-term relationship. People are looking for more, willing to offer less, and so it takes them longer. Just a theory."

we're not disagreeing, we are in complete agreement.

"options were more attractive and plentiful in other, financially less competitive locales"
"I strongly disagree. NYC, LA, SF have very different but strict social standards when it comes to beauty - fashion, health, degree of fitness, personal presentation etc., and this pressures most to try harder. It's more socially acceptable to be overweight in Dallas than LA. It's less frowned upon to smoke in Philadelphia than San Francisco. It's more common to be slovenly in Chicago than NYC."

we're actually not disagreeing there either. but a fat guy in chicago will probably be more open to dating a fat girl. leading to a potential serious relationship of equals. a fat guy in new york will just work more and longer and hope to get a skinny girl later when he has more money. the fat girl is out of luck, romantically speaking, at time in her life. so what she does is devote herself to her career, starts making some serious money of her own and spending it on herself and then at like 43 she marries the fat guy whose future high earnings failed to materialize. they have some ivf babies and he becomes a stay at home dad. and that's the new New York love story.

Looks like my original theory was right. The larger the surplus of women, the higher the average age of marriage, and New York is merely reflecting that trend:

http://www.livescience.com/10103-shortage-single-ladies-drives-men-commit.html

How can people afford to buy in Manhattan?

During my years as a west coast porn star (circa 1979-87) the birth of VHS created a content vacume that I was more than ready to fill. The procedes of those early years were saved and invested. After retiring from show business I ventured to the east coast. All those years of mugging for the camera provided me with the money necessary to buy in NY.
The lesson, screw enough people (for or out of their money) and you could buy here too.
There's a million stories in this town.
Get busy.

brooks, you never finished this one up:

http://streeteasy.com/nyc/talk/discussion/27744-building-at-160-east-48th-street

sure i did. I stand by what I said. It is a dump. I stand by it. Did you finish H.S. Geometry?

OP here. Back to my original question, who are the people who can buy a 2BR 2 BA apt > $1.5M and can afford monthly mortgage of $9K? They have to have a high income just to qualify for the mortgage and the coop board. My S is single, 29 and yes, he is in finance. And yes, he makes well over $200K for several years now. I won't be helping him financing the condo, I will be helping him to look for one. However, I am still baffled that SO many people, mid 30's, with one or 2 children are able to buy these.
My S will have to find a mate who makes the same money as he (pretty difficult) to be able to afford a 2BR.

Your $200K+ son needs
1 - a roommate
2 - his mother to find an apartment

?

answer: people who come from money or work very hard to make it. sometimes there is overlap.

I will be helping him to look for one.

from Cali?

Good Luck

And let me get this straight... your son is 29 yrs old works in finance and has been making "well over $200k for several years now" needs mommy to help him find apartment?

Brooks didnt I already say something to that effect?

oh, yea... missed it... sorry

cbreeze: bubble.

Let's say your son makes $300K, so $180K after-tax. Can he afford a $9K monthly nut, $8K after-tax? Sure: still leaves $7K a month to piss away on other stuff. That's a lot of money.

But how do you justify spending $8K a month, tying up $300K, and paying $150K in transaction costs on a 2BR that you could rent for $5K. You assume it'll appreciate 1-2% beyond inflation for the next 10 years -- 4% a year. That's $5K a month that you think you are "saving", so your cost is only really $3K a month (never mind the transaction costs, the tying up of cash, upkeep). You'd be an idiot not to do it.

"people who come from money or work very hard to make it."

What about strippers?

http://www.nypost.com/p/news/local/manhattan/shaking_that_moneymaker_for_grand_dlpAy7TnSbcfag4SSunlRN/2

I post that mostly in jest, and I suspect that successful strippers probably work just as hard as successful people in many other businesses.

I do, however, quibble with the notion that everyone who earns a lot of money works really hard for it or with the implied corollary that people that don't make very much money must not be working that hard.

"OP here. Back to my original question, who are the people who can buy a 2BR 2 BA apt > $1.5M and can afford monthly mortgage of $9K? They have to have a high income just to qualify for the mortgage and the coop board. My S is single, 29 and yes, he is in finance. And yes, he makes well over $200K for several years now."

Obviously, people who are better off than your son, who's apparently making just an average income in a very expensive city.

Tell him to sit tight and deal with it.

Or figure out how to make more money.

Or, God forbid, maybe wait to grow up a little more.

"I suspect that successful strippers probably work just as hard as successful people in many other businesses."

they dance naked for money. overpaid wall street geeks at least crunch numbers or something and like write emails and read reports and talk in their special jargon tongue. not to say there is anything wrong with stripping, but it doesn't seem like hard work. the waitress running around the place are working hard.

"they dance naked for money. overpaid wall street geeks at least crunch numbers or something and like write emails and read reports and talk in their special jargon tongue. not to say there is anything wrong with stripping, but it doesn't seem like hard work. the waitress running around the place are working hard."

As the article points out, the successful strippers are the one that are good at relating with people, so the ones that earn a lot of money seem to be doing more than just dancing naked for money. This is a different skillset than bankers employ, certainly, and I agree that a lot of waitresses work hard as well. That's my whole point, though: there's tons of people who work very hard that will never earn $100K a year, much less enough to buy a fancy place in Manhattan. The notion that hard work is all it takes to get ahead is pretty silly (although it obviously helps).

"the successful strippers are the one that are good at relating with people"

that just means they know their marks and how to handle them. all hustlers have good people skills. hard work is important but i think a lot of it is also just being in the right place at the right time.

cbreeze, a 2-BR, 2-BA is a luxury, status apartment. I know lots of people who are married (and even have one or two kids) in one-bedrooms, Junior-4s (which is a one-bedroom where the dining alcove has been converted to be a second BR), or two-bedrooms with just one bath.

Alternatively, there are lots of New Yorkers who have 2-BRs, 2-BAs that don't live in Gramercy, just like not everyone in L.A. lives in Hancock Park.

ali r.
DG Neary Realty

http://www.slate.com/blogs/moneybox/2011/12/12/housing_costs_vs_wages.html

JAson-- obviously not relevant to Manhattan.

Cbreeze: Why don't you direct your son to other areas. Since he is young and no one's job is secure these days, maybe he would consider living in Brooklyn. There is a very young demographic there, it is a vibrant, growing area, prices are better and there are places like Northside Piers that have plenty of amenities, and most importantly, a 25 year tax abatement. That is not going to happen again. Plus there is easy access to the financial district. Your son could save a lot of money by not paying high monthly costs and he can eventually buy the apt of his dreams.

How will one get laid living in LIC? To OP, get him some date rape chloroform and an apt in Astoria.

But the kind of girl you can chloroform and have your way with has zero chance of making $300k/yr. just IMHO.

Yo apt23. Crazy azzed euro situation. Man to dream of a 3 bdrm pied a tere in Paris for $100k!!!!!! Hahahahaahahaaaaaaaaa.

'But the kind of girl you can chloroform and have your way with has zero chance of making $300k/yr. just IMHO'

The chick that gonna bring home 300K....
You wake up in a bathtub full of ice with a rupe-headache and a missing kidney.

"Why don't you direct your son to other areas."

I think the attitude of entitlement that comes through loud and clear in her posts answers that question.

Hey W67. Yup, Euro situation not nearly over. Only non violent way out is for Germany to put up some serious bailout dough --- and that is never gonna happen. As for your Paris pied a terre, I would get a list of the SocGen employees and their addresses. I think that will be the first bank that will either go bust or be nationalized. Clear opportunity to send out one of those real estate mass flyers with a set low ball offer. A mass low ball flyer -- the new marketing RE phenom.

"JAson-- obviously not relevant to Manhattan. "

I am sure you are being funny. It specifically talks about NYC for those who don't know he is joking.

The point MY makes is that for high-end wage earners, SF and NY are very affordable. For the median worker, they are not.

he should prepare for thunderdome.

ok. It says in NY, the income needed to afford a 2 bedroom rent is between $50,000 and $60,000! Explain to me how that is relevant in Manhattan. It may be relevant in Buffalo, NY, but not Manhattan. That's unless you can find a 2 bedroom rental for $1,500/m and you earn $60,000. (40x $1,500). Or, $3000 if you and your roommate both earn $60,000.

cbreeze, it is simple. Nice areas of Manhattan are only for rich unless you can find govt subsidized housing. It is very much the same in prime locations of all major cities. We are high income dual income couple and could only afford a nice apartment after working for 15 years. Why must your son buy at such a young age unless he is rich?
That said there are plenty of 2 bed room apartments on the non-prime upper east side for $1-1.2mm which are more affordable. Also $1.5mm 1250 sq ft 2 bedroom rents for $6K per month in prime locations. That is the tightest market in rentals as many people want and can afford that.

I would be mortified if my mother did this. I would probably move to California.

I would be mortified if my mother did this. I would probably move to California.

to get closer?

Brooks2, that was not the point at all. The numbers are irrelevant. And the numbers were for metro, not NYC, and not Manhattan. His actual POINT was spot-on, because he was discussing affordability in high-cost areas (SF, NY) versus low-cost areas (OK City.) So his point would be MAGNIFIED if you took JUST Manhattan. Especially if you subbed "Securities Industry" for "Computers." Actually read the text again and let it sink in.

JAson-- obviously not relevant to Manhattan. "

that is what I posted originally.

Then you just said this..

Brooks2, that was not the point at all. The numbers are irrelevant. And the numbers were for metro, not NYC, and not Manhattan.

are you talking in circles?

haha. 67. Keep waiting for the bottom to fall out while we enjoy our wonderful home - with floor colors, lighting and paint the way we like it rather than a rental. Incidentally, it is costing is far less than renting a comparable property. If you adjust for inflation at 2.5% per year, the prices are at 2003 level. The bubble was 2007 and still in some high end properties at 1500 per sq ft. We just paid a little over $1000 per real sq ft fully finished without even counting the nice storage room we have.

300_mercer
about 3 hours ago
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cbreeze, it is simple. Nice areas of Manhattan are only for rich unless you can find govt subsidized housing. It is very much the same in prime locations of all major cities. We are high income dual income couple and could only afford a nice apartment after working for 15 years. Why must your son buy at such a young age unless he is rich?

there you go. a real live example.

But the Euro sounds so so badz. I even hear it is at an 11 month lowz. But I did notice that relative to the Dollarz, it is up more than 50% since October 2000zzz.

w67, glad you admire mine. The pain of zero rate is highly likely to be inflation. Bring it on. All the renters will be hurting. I am not talking about timing it perfectly. It is just that what we bought will be more expensive to rent at $4 per sq feet than the monthly i/o, maintenance, upkeep and insurance costs.

w67, If you really believe in bearish predictions, you can short Euro, short China, short bonds, short banks. Why play your broken record of Manhattan real estate is going down for the last 2 years (since 2009) while it has gone up? You would have been fired as a money manager many times over. Just posting this in good humor as I like 300_mercedes..funny comment.

Oh my. W67 must be ecstatic that I am actually reading his comments. Hard to be ignored.

oh oh 300. prepare for the blowback

300 Mercer,

I think w67's pt is that there are far worse consequences of the credit bubble than "inflation" - which most likely won't manifest itself via property/rent increases if things get ugly (if anything property prices and rents are more likely to fall if the macro picture turns dark).

Remember that NYC rents depend on inflated salaries/bonuses - most of which have been driven by bubble/Ponzi economics and the subsequent multi-trillion dollar US taxpayer bailout - none of which is sustainable. The "positive" side is that it might take several more years for the more serious negative events to unfold - so your purchase might be safe in the meanwhile - but realize that the end result of policies that have driven and maintained inflated asset prices worldwide for the past 15 years is more likely than not to be just housing/rental inflation.

The sad part is that when these events do happen, almost no one will look back and recognize that misguided and ignorant monetary/fiscal policy coupled with a near complete lack of regulation and prosecution of fraud helped set the scene for political/economic events that will make a simple "depression" look attractive.

Memito, As I said, there are plenty of other ways to express the bearish sentiment which are much cleaner that making a long connection to property prices. There are many people who are bearish on manhattan propery prices but are long stocks. To me if Manhattan property market is going down, it would not go down without the stock market going down.

Mercer, Look, this isn't about your apartment... if you like your apartment and can afford it - great. But to argue that buying NYC RE at these prices is a "sound" financial move either shows that you have a greater understanding of how contemporary economics/finance has changed (and you are thus correct) or demonstrates a potential forgetfulness of the historic and normal economic/financial consequences of the risky policies being toyed with nowadays.

As I suggested, Manhattan RE prices are a consequence of unorthodox and anti-"free-market" policies that have helped pump up economies with both quantitative easing thus maintaining investment asset values (which has saved many mismanaged Wall St/International banks that should have gone out of business) and what is essentially monetary printing which has primarily driven and helped keep commodity prices afloat (and promoted unsustainable growth in the Emerging Markets). Policy makers worldwide have taken what was an already twisted form of capitalism (that already was favoring the few over the many) and turned it into an all-out mechanism to preserve the wealth of the uber rich (who were going to be relatively screwed without bailouts - Joe American is screwed no matter what, by the way) all while claiming to be looking out for Average Joe's welfare. Most of this "free money" policy makers are giving away has found its way into the hands of the already connected and financially wealthy - who have celebrated by buying RE (and tons of other luxury goods) in high-end cities internationally - including NYC and DC. (Again, the Chinese and Russians are doing this b/c they need a place to hide after defrauding their countries to the tune of hundreds of billions. But I guess no one cares b/c they are "rich" and we admire rich people even if they stole most of their wealth while helping destabilize their homelands and create potential future foreign policy nightmares... all while a similar thieving process is taking place in the US as well...)

The problem is that the US and most of the rest of the world just can't keep this charade up for much longer. But the consequences of such crazy policies don't unfold all at once and hardly happen in a linear, logically progressive fashion - especially when governments seem determined to continue to apply the same mistaken policies to fix previous policy failures (read: dig deeper into debt and "kick the can down the road"). Clearly, just look at what is going on in Europe as a perfect example of governments trying to avoid reality and push of dealing with fraud and the unwinding of what clearly was a macro Ponzi scheme.

As long as world stock markets are convinced that governments will "save the day" with more printing and loss-socializing policies, NYC RE will probably hold its own. On that note, it is scaring me that so many investors openly accept that the world's central banks' new role is PRIMARLY to maintain asset prices - not promote full employment or control inflation. Traditional financial and economic logic has been turned upside down all in the name to save the worlds' rich, excuse me, I meant to say "the system". The end result of such policies is most likely going to be beyond just an economic/financial one - which scares me because it is clear that the extremely wealthy in the US/China/Russia all seem willing to throw conventional policies out of the window to save their spoiled asses.

And as I noted in a previous post - and still have to read it stated in an unprovoked manner - NYC RE has been primarily bolstered and maintained by US taxpayer dollars; yet all of these "free market" capitalists (read: Manhattan welfare mothers) just can't seem to admit that they are the main beneficiaries of what is basically a Federal Reserve welfare system for asset holders. And the silence will probably continue as egos are far too big to admit that they have *outrageously* benefited from future generation's increased indebtedness (which is a nationwide problem as well, but hasn't created as many welfare millionaires as here in NYC).

The fact is that we had a near 10-year worldwide asset-inflation orgy (with a slight pause in 2008/early 2009) and the worlds' policy makers are too afraid to accept the inevitable and natural deleveraging/deflationary aftermath. The big question is how long can they keep playing the delaying game and will that policy just make things worse in ways we don't want to imagine?

hey west67, how about that 500 per sq foot pricing? are we there yet? no? and a 100k 3 bed in paris? maybe inthe 19th arrondissement (thats french for the bronx).

at least inonadas message is "dont buy this when you can rent that for less" you keep waiting for the sjy to fall and it hasnt.

"Why play your broken record of Manhattan real estate is going down for the last 2 years (since 2009) while it has gone up?"

His broken record has been playing for longer than that. Since the cherry-picked bottom of 2009, prices are up 5%, merely keeping up with inflation. Since his broken record started, they are down 15% nominally and closer to 25% inflation-adjusted.

That 5% is the saddest of all gains in the world, BTW. Every other asset has soared. It's an asset where the cost of borrowing plays a major role, and money used to be 33% more expensive yet this has only translated into a 5% inflationary increase. Yep, the sign of a very healthy market.

The bottom has still yet to be defined and it surely is not 2009'... please

Re Memito: What a funny mix of macro-economic nonsense with bits of insight. Rescuing bankers, sure. Inflation - not likely. The problem is lack of demand. There isn't enough demand because there aren't enough middle class jobs (and the middle class can no longer make up for flat wages by spending bubble wealth it no longer has). There aren't enough middle class jobs because we spent a generation destroying the rules that created them. Also because the private sector reacts to low demand by firing people. In response, governments are firing more people (while changing still more rules to funnel still more to the rich). Surprisingly, contractionary policies cause more contraction, not inflation.

--

Bubbles don't result from bad policy except in the sense that crime results from bad policing: bubbles are generated by private market actors pursuing their self-interest when regulators don't stop them. We had the largest real estate bubble in memory, on at least three continents, because the finance markets are intertwined so the bubble could spread from one to the next, and the regulators had been anesthetized by neo-liberal Reagan/Thatcherism all over.

In the absence of regulators, bubbles end by the market forces that create them: eventually supply catches up with even bubble-created demand. When prices are high relative to costs and rents, builders and renovators and contractors convert and build. When enough new/converted product appears, prices stop going up. Then demand begins to shrink as investor/speculators/Irish-Chinese carpenters give up on the idea that capital prices can 1-2% over inflation just because it would be nice for rentiers if they did.

Crisis can speed things up. But there is no need for Lehman, financial collapse, inflation, foreclosures, etc. for the bubble to end, just as there was no need for FannieMae to get it started in Spain.

It ends as slowly as supply increases or demand decreases. Supply growth was slowed by the credit crunch caused by the first stage of the end of the bubble. Demand drop requires Riversider and 300_Mercer and their cohort to reassess pricing models which use future price increases to justify paying more now. That learning process can be slower than the builders.

NYC's RE demand is fed by the finance industry, who have done relatively well by government policies designed to protect them, and by trade-up buyers who are relatively willing to spend bubble money on bubble products.

But in the end, bubbles are brought down by SUPPLY not demand: in the short run, supply can't keep up with bubble demand, but in the long run, the market will keep producing supply until prices drop to the cost of production. Which in NYC is the least of the cost of building, renovation or conversion of rentals -- each of which is still well below current sale prices.

If you are buying for the short run, worry about the headlines. If the Austerity and Reverse Robin Hood crowd continues to win the political struggle, the middle class is in deep trouble; if they lose, finance will have to shrink. Either way NYC has some economic pain ahead.

If you are buying for the long run, all you really need to know is that it doesn't cost $1000 psf to take a rental unit and sell it to an owner-occupant. Either rents will go up dramatically -- which is unlikely while unemployment stays high -- or rentals will be converted and the market-rate sales stock will slowly increase. You need to budget assuming you'll sell at significantly lower real prices, whatever happens to the Euro.

Wow, I actually read all the FG and agree...

Financeguy, While I am pretty good at writing nonsense, I don't think I suggested that inflation was going to warm up in the short-term. Even though we are seeing oil at $100, as I stated above, I think there are many potential events that could drive demand down more than up in the near term.

As for the NYC RE bubble, you are right, it is about a lack of supply - partly due to the fact that many owners that would have been forced to sell were able to hold on to their bubble priced apartments. Additionally, the bailout policies have given some enough confidence to venture back into the apt market - even while it is just 10-20% below highs (and in some special cases, above highs).

Back to my rant, I do stand behind the views that:

- Gov't policies have been promoting non-competitive, opportunity killing ends that are helping the elite financial status quo and are being paid by the rest of America that actually needs assistance.

- While emerging mkts have taken advantage of the self-fueling low-interest rate (thanks to the FED)/higher demand/rising commodity price trend during the past 10 years, it is clear that the main player China has also been running a Ponzi scheme combo of near unlimited credit (most of which is non-recoverable) and extreme levels of fraud/gov't theft. Just as people never thought that housing prices could go down, most think that China will never slowdown significantly. The fact is that no amount of hard currency reserves can cure a record asset bubble in China. It surprises me that stability-focused Chinese rulers have let RE prices and income disparity get so far out of hand. It worries me that they are over-confident in their abilities to maintain longer-term economic stability while running "everyone should be rich" policies that really "helped" corrupt and thieving Communist Party members. (Note that the tens of millions that have been pulled out of poverty are soon going to face challenges that could pull them back down.)

- The policies being played out in the US and Europe are delay tactics that are pinned on the hope of future increased growth. Instead of biting the bullet and letting the economy restructure (which will be very painful) we are pretending that our finance/debt based economy just needs to be revived; when the reality is that we need to stop playing financial make-believe and actually produce things.

- The Fed's main policy goal is to maintain asset prices; it is not taking sincere steps to help unemployment and could care less able inflation (if anything it wants it). It is a perverse and twisted monetary policy. The other disturbing element of low interest rates is that it has allowed our Federal government to go on a crazy borrowing spree that will do far more long-term damage than good.

- NYC RE owners have been and still are the greatest beneficiaries of Federal Reserve asset-inflating welfare. $1,000-1,500/sq ft is being maintained by US taxpayer support but people like to pretend otherwise.

- I stand behind my belief that present economic/monetary policies continue to promote moral hazard, fraud and poor risk decision making because everyone is depending on Fed policy and bailouts to protect asset markets. While most are focused on the financial consequences of such buffoonery, I am far more worried about the longer-term political/economic changes that could take place that could make what we are going thru now seem like a picnic.

By the way, unfortunately it is hard to talk about "regulation" as it has been captured by powerful special interests and will only be employed in an anti-competitive, self-serving manner. I can't foresee significant and sincere reform and regulation unless we restructure and become far less dependent on finance (which is going to be tough without real regulation). Just as narco gangs run the Mexican border, the ever-so more powerful financial firms will continue to call the regulation/enforcement shots.

My spouse and I make just above $200K/year and are about to close on a 2 bedroom coop (knock wood) in a couple of weeks. We both just turned 30 and did not have enough savings of our own for the down payment or liquidity requirements. My parents gave us the cash we needed, without that we would be renting for about another 10 years.

The only other people I know who own in this city either own a small studio on $100K + salary or make investment banking income.

Where? How much did you pay?

"The only other people I know who own in this city either own a small studio on $100K + salary or make investment banking income."

Wow. You must not know that many people.

You realize that there are entire segments of the NYC economy where people make in excess of $200K in industries that have nothing to do with finance?

"bubbles are generated by private market actors pursuing their self-interest when regulators don't stop them"

fg - you sound like you work in a backoffice of some latin america subsidiary of a retail fund compensating for your lack of bulge bracket exp by posting crap on se....

governments, not private market, create bubbles... look at the education bubble.. all the "financial aid" help created the adverse effect of driving up tuition costs to absurd levels so professors can continue to keep their 7 figure salaries at the expense of students, thanks to govt's subsidizing hand...

ho14 - Bubbles are an inherent property of capital markets. You can generate them with a computer model of ant-like simplicity. No government required. Didn't you notice that this bubble spread across jurisdictions?

No one buys education because they think that other people buying education is going to drive the value up, so can be no education bubble in any normal sense of the word. Perhaps you are referring to the combination of costs increasing while tax support has been cut, that has left our higher education system unaffordable for the middle class? That's not a bubble. It is the inevitable result of political decisions to fund jails instead of state universities and wars instead of research. It is a product of government, in the sense that no country has ever succeeded in using markets to provide mass higher education, and we don't look likely to change the record.

Memito: As I said, it's a funny combination you have there. Moral hazard from rescuing incompetent lenders? Absolutely. Short sighted elites that are more interested in their right to loot than the future of the system? Yup.

But a dangerous government borrowing spree? I don't think so. The US Federal government has expanded less than the states have shrunk, even leaving aside the massive contraction in the private sector. It hasn't come close to making up for the failures in the private sector. We need MORE government investment and more government borrowing, not less. Without building up our infrastructure and increasing demand, we will be stuck in recession indefinitely.

I will repeat - "Brooks2, that was not the point at all. The numbers are irrelevant....His actual POINT was spot-on, because he was discussing affordability in high-cost areas (SF, NY) versus low-cost areas (OK City.)

So his point would be MAGNIFIED if you took JUST Manhattan. Especially if you subbed "Securities Industry" for "Computers." Actually read the text again and let it sink in."

Dig deep, it will sink in. The point is the WORSE the rich-poor divide, the more of bifurcated housing market you have. Duh.

Hey Genius Incomes are down in Manhattan not up. As a matter of fact(the 2010 census) incomes are down 10% in Manhattan, 5% in NYC. So to me that says the only thing that is MAGNIFIED are the RE prices in MANHATTAN!

oh and your illusion of your intellectual superiority. That is definitely magnified. Do you have trouble pulling yourself away from the mirror too.

FG - I like your posts. I really do. Your biggest weakness though is that too often your theories are apt, at a point, to fail when hit by the realities of humans acting as opposed to economic theories and principals playing out as if humans were rational.

I am prone to agree with Keynesian economics in theory. The problem is we don't get to act in theoretical environments but in real ones with real, and flawed, human actors and systems. So while Keynesian economics in theory can work, in practice they will be implemented by a political and bureaucratic apparatus that have priorities and incentives that aren't just not in line with a proper keynsian stimulus but might be completely counter to it. So you end up greater in debt with little if anything to show for it.

It is like the trap built by the PIIGS. Austerity is probably the wrong recipe for them today. What they need is greater spending with later decreasing of deficits in a slow and responsible manner. But since they got here by spending irresponsibly no one trusts them to do it (regardless of how many "trust us"s they hear) so they won't lend the necessary money without the austerity that proves to future lenders that they can be trusted. So you have a catch-22. They can't do what is necessary not because it isn't right but because the actors are all human.

Has anyone had any experience as a buyer or seller (FSBO) where seller points to recent appraisal value (from refi and post market selloff) and offers to split saved broker economics? Property is an oversized (900+ sf) 1BR co-op on high floor in Gramercy (S: 14th; N: 23rd; E: 3rd Ave; W: Irving) with balcony, doormen, super, etc. Building offers what may be bang-for-buck in quadrant listed above (sub ~$950/sf). Any thoughts or wisdom from SE community would be much appreciated.

Thought I would bring this full circle since original post inquired about Gramercy...

never

"Hey Genius Incomes are down in Manhattan not up. As a matter of fact(the 2010 census) incomes are down 10% in Manhattan, 5% in NYC. So to me that says the only thing that is MAGNIFIED are the RE prices in MANHATTAN!"

Average incomes, or median incomes, or incomes for the top 1% or 10%? Because again his point is that in SF and NYC there are two markets, and what is affordable to the MEDIAN person is a whole other market from what is affordable to the well-off.

Here is how the top 1% and 10% make in Manhattan, BTW:

http://www.huffingtonpost.com/2011/12/13/new-york-citys-1-percent-_n_1146148.html?ref=new-york#access_token=AAAAACuIpepUBAMrvaaImiZApqxceFBEckWIYGwziOgBXKYYVBY92v3ZChuTP46S71l84IoNC7vCmamhdqVYxaWg8egH659PBoJVsIkyqfUsbmWfKjB&expires_in=4372

So if incomes are down 10%(and income from investments are down over 30%) this is only going to effect the 28.8% of Manhattanites that are not in the top 10%? And Manhattan RE will continue to go up? Give me a fuckin break your logic is flawed

From your link," The top 10% of city taxpayers (about 345,169 payers) accounts for 71.2% of the city personal income tax. The top 1%, or about 34,598 people, pays 43.2% of the total burden."

>financeguy
about 5 hours ago
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No one buys education because they think that other people buying education is going to drive the value up, so can be no education bubble in any normal sense of the word. Perhaps you are referring to the combination of costs increasing while tax support has been cut, that has left our higher education system unaffordable for the middle class? That's not a bubble. It is the inevitable result of political decisions to fund jails instead of state universities and wars instead of research. It is a product of government, in the sense that no country has ever succeeded in using markets to provide mass higher education, and we don't look likely to change the record.

Really? education is not excessively inflated? Costs have risen in excess of the rate of inflation for decades. The number of institutions has skyrocketed including crappy local government-owned colleges, for profit private institutions, and online education. A large percentage of the internet has been driven by higher educational institutions paying to find customers. And so the number of people attending has skyrocketed, but most can't afford these prices, so we have to offer low cost financing for all these people to go, and with what outcome?

That's not a bubble? So the several decade long growth in excess of just about every sector of the economy with the possible exception of heathcare is normal? Financeguy?

>AvUWS
about 3 hours ago
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...I am prone to agree with Keynesian economics in theory. The problem is we don't get to act in theoretical environments but in real ones with real, and flawed, human actors and systems. So while Keynesian economics in theory can work, in practice they will be implemented by a political and bureaucratic apparatus that have priorities and incentives that aren't just not in line with a proper keynsian stimulus but might be completely counter to it. So you end up greater in debt with little if anything to show for it.

well said