Wall street rise & fall! Welcome to reality 2012 !

jeez--hyphenate or not

"Expend your cash reserves and wait until it happens! If you already have $200K set aside today for a 20% downpayment. That same $200K will represent a 30% downpayment once the rates will have doubled and property prices adjusted accordingly. You'll be in a better position to pay off your loan quicker and refinance at a lower rate down the road!"

sledge, you're basically arguing for timing interest rates then? So in your mind they're the single biggest factor in pricing variance?

I didn't say that! However that will have a huge factor on the prolonged downward correction...

Well that's why it was a question. Just trying to gauge how impactful you truly believe rates will be and what your buying strategy is. It sure sounds like interest rate timing though. You do feel it's 100% certain that they'll shoot up?

what is the definition of shoot up?

Injecting copious amounts of heroin. Sorry, couldn't help it. I suppose "shoot up" in my mind means somewhere in the double-to-triple range within a couple months (ie: other factors don't really even have the time to change appreciably).

I could see interest rates to double by 2020/2015 and that's exactly why it's a bad idea to buy now. If rates were to double within a year or 2, anyone who would buy today would just walk away but once you've been paying your mortgage for 10/15 years already (and during that time mostly paid interests owned to your bank and very little on the principal), it's unlikely you walk away , you may just suck up the loss!

here are the historical rates.

http://www.freddiemac.com/pmms/pmms30.htm

average for 2008 was around 6%, roughly 50% more than january 2012. is a return to that level unthinkable or inevitable?

falco, no offense - that wasn't directed at you.....for the rest who are out there slaughtering the goose.

Interest rise, probably because the economy is performing better, meaning higher incomes, meaning increased rents and increased inputed rents. So while there is a negative impact of a greater cost of borrowing, there's also a positive impact of economic growth and rising incomes.

Real estate is not a fixed income bond investment.

why is bjw allowed to comment on threads that involve logic, numbers, economics, finance, accounting, money, or real estate?

This idiot though that someone would get a tax deduction for paying down principal on a mortgage. People who spout mis-information, be it intentional or because they are idiots, are dangerous.

Rates will go up.. it can't go down anymore....

truthsker10, my brother.... if you took 100 sailors in a marina and told them their "sailboats" were only worth 1/2 the price... would anarchy ensue.. would ppl steal each others bumpers, would the friday nite pot luck dinner not be made/eaten?

It IS NOT THAT I WISH RE TO GO DOWN, it is the FLUFF associated with having 100Ks of ppl earn a living sitting on their arses and the "income" growth of RE BORKERS.... it's as if private schools were stuffed with shoe salesman's kids, 1st class tkts were being bid up by shoe shine guys, porsches/ferarris being driven by school aids.... THERE IS A NATURAL ORDER IN $$$$$ CrAZED NYC... home squatting wasn't a major at my school.

OBTW, here is a $486psf listing... nope... no mass exodus on Midtown Tunnel with Ikea sofas lashed onto the Mercedes Benz SUV
http://streeteasy.com/nyc/sale/661383-coop-440-east-62nd-street-lenox-hill-new-york

http://streeteasy.com/nyc/sale/658049-coop-304-west-88th-street-upper-west-side-new-york
$436psf, west 88th

http://streeteasy.com/nyc/sale/654432-condo-403-east-62nd-street-lenox-hill-new-york

$480 psf, east 62 w/ views

http://streeteasy.com/nyc/sale/652555-condo-2-south-end-avenue-battery-park-city-new-york

$486 psf... 2000 YR price of (drum roll please )..... $486PSF... that douche is at 2000 prices... wanna bet it goes to 1998 prices?

http://streeteasy.com/nyc/sale/651053-coop-509-east-88th-street-yorkville-new-york

East 88th street.. $489psf...

At the batting cage wacking the low hanging fruit again?

KUng Fu must be learned first by eating chinese food... ease into it with Beef and Broccoli.... :)

w67thstreet thx for your astute comment.

every business man worth his weight in gold knows that the restaurant industry is for suckers or embezzling. perhaps if u stepped away from the "internets", out of your mom's basement, and graduate you could spend time reading and figure this out. here is a very quick start:

http://biz.yahoo.com/p/sum_qpmd.html

as u can see publicly owned restaurants which operate on scale can only generate 9.9% net profit. this is not a good example of a person who should be buying anything but rather an example of a sheeple. if mr.kim's $2 dumpling shop is ur idea of an entrepreneur, u r either a comedian or illiterate.

i am a renter and i don't see myself buying in nyc until i am about 50-60 yrs of age unless there is a 10:1 buy/rent ratio (i'm not holding my breath). i am 35 single male (but thx for the compliment about being a chic).

also perhaps i did not make it clear but i don't give 2 shits about a $1million studio nor a coop. if i wanted the financial opinion of a geriatric coop board member whose daddy gave him the money in the 1910s so i could buy a piece of crap parking lot, i would no doubt be in ur line of business. i am talking about the $3+ million apartments that are livable.

i am not sure why there is so much animosity on this board about buying vs renting. it seems to me that everyone here has had the kool-aid and be"lie"ves that u r supposed to take a good paying job, save ur 10-20%, put downpayment and buy house on 30 yr mortgage. this is what ur average american does. ask urself if most people are doing this could it even remotely make any sense? if ur income is not increasing at least 20% annually, get stoned and figure it out. during this recession, people are still making a shit TON of money. don't be foolish, close-minded or conservative in ur thought process. most definitely don't do what w67thst did here and lump all industries together.

rent vs buy should be at the BOTTOM of ur financial making process while u r young, what should be the focus is how to get from $10k per month to $100k, etc.

btw, i would love to see cheap as all hell manhattan apartments for $100/sq ft but i'm not holding my breath nor do i give a crap if i am "priced out", i'm fine renting. and if i decide to buy a house tomorrow i don't care if it goes to $0. ur house won't make u shit in life except if u plan to sell at the peak of a bubble and move to a craphole somewhere else at the bottom; this doesn't happen.

finally to the poster who said they only meet financial & law people downtown, uh yea. if u r in business & wealthy and u r out for the night ---> either u r closing a new deal, meeting new clients, or celebrating with ur clients/partners. u r most certainly not fuckin around the standard trying to pick up chics....with the right amount of money they will come to u anyways. discipline is a must

"I could see interest rates to double by 2020/2015 and that's exactly why it's a bad idea to buy now."

sledge, first of all, 3-8 years is quite the range you're giving yourself; second, what's the rationale for the doubling? And under your other scenario, if rates do double within 15 years, how much of a loss are you projecting? While I think smart and reasonable people can fairly project declines in RE value within the next few years, projecting out to 15 is (IMHO) a total crapshoot. Is that what you're really basing your judgment on?

"average for 2008 was around 6%, roughly 50% more than january 2012. is a return to that level unthinkable or inevitable?"

cc, that's some fudgy math, no? 3.92 (Jan 2012) is the absolute bottom here, and the 2008 average was indeed 6. 50% more would get you to 8%. We haven't seen those rates since 2000, not 2008. Of course there's nothing stopping up from eventually ending up there, but like I said, I'd be shocked to see that happen within a matter of months.

"Rates will go up.. it can't go down anymore...."

w67th, I've been hearing that since 2008 as well. I want to say I finally believe it, but would you really be surprised to see them held down some more?

hey buddy.

50% more than 4%=6%.

sorry.

http://streeteasy.com/nyc/sale/654432-condo-403-east-62nd-street-lenox-hill-new-york
http://streeteasy.com/nyc/sale/652555-condo-2-south-end-avenue-battery-park-city-new-york

w67th, these are my faves. Even if you pay all cash, you still have to shell out either $2,600/mo to live in a kinda horrible 1BR by the 59th St Bridge, OR $5,700/mo to live in BPC.

Whoops, sorry bout that - don't drink and SE. Still, my point holds - don't see us hitting the 6s that fast. Do you?

I also did say doubling, not increases of 50%.

here's exactly what you said:

"cc, that's some fudgy math, no? 3.92 (Jan 2012) is the absolute bottom here, and the 2008 average was indeed 6. 50% more would get you to 8%. "

Yes, sorry about that - now shall we dwell on my dumb mistake or actually try to intelligently discuss the possibility of doubling/tripling interest rates in a relatively short amount of time?

You asked what I defined as "shoot up"; I explained that mean 2-3x in a couple months' time; you then inexplicably went to 1.5x in 4 years' time. That's rather different, no?

here's what i said:

"average for 2008 was around 6%, roughly 50% more than january 2012. is a return to that level unthinkable or inevitable?"

still stands.

do you think a return to the average of 2008 would be surprising?

Within 4 years' time? No. Within 4 months? Yes. You?

i don't know what the timing will be. what's the difference? if you're long real estate and interest rates go up by 50%, what happens to the value of your property?

while, we're at it, how long can we have an economy with negative interest rates? what will that look like?

I tend to think there is a difference - even sledge alluded to one. If interest rates fluctuate wildly, other pricing/market factors have relatively less time to work, which is potentially devastating to the housing market. If it's drawn out over longer periods of time, the comparison/analysis becomes much less clear cut. Given the government's track record on this, I wouldn't exactly expect the former. On top of all this, if rates do spike up, yes values get hit (though how much is always up for debate I think) - but it's not just my property; it's all of them. In some ways that's a zero-sum game for owners.

sorry...don't follow that.

you would characterize interest rates returning to where they were in 2008 as fluctuating wildly?

if interest rates go up over time, it won't matter?

if interest rates go up, it will hurt all owners?

that one i can agree with.

as i asked above, what do you think will happen in our economy if savings interest rates remain negative for years?

"you would characterize interest rates returning to where they were in 2008 as fluctuating wildly?"

If it happens within a couple months, yes. Wild fluctuation implies short periods of time.

"if interest rates go up over time, it won't matter?"

Not quite saying that, but I don't foresee the catastrophe you do I guess.

"if interest rates go up, it will hurt all owners?"

It will hurt more than just owners.

"what do you think will happen in our economy if savings interest rates remain negative for years?"

Honestly, I don't know with any certainty. I'm guessing you think you do? People draw the Japan analogy all the time, and it's certainly possible, but it ain't exactly apples to apples. Personally, I'm hoping for a scenario where this rich-getting-richer trend reverses to a certain degree, but don't know what accomplishes that at this point.

If interest rates remain negative, most people who are basing their retirement on either a defined pension (public sector mainly) or 401k will either have to speculate wildly with predictable dire results or have no retirement.

Interest rates and property values have a relationship. Care to define the relationship?

"finally to the poster who said they only meet financial & law people downtown, uh yea. if u r in business & wealthy and u r out for the night ---> either u r closing a new deal, meeting new clients, or celebrating with ur clients/partners. u r most certainly not fuckin around the standard trying to pick up chics....with the right amount of money they will come to u anyways. discipline is a must"

Amusing but still trying to figure out what this means. In any event, it has nothing to do with me. Sadly the people I reference are generally encountered at playgrounds and kids' birthday parties. That is who actually lives in Tribeca and BPC these days, as opposed to those who come here from elsewhere to close deals and meet clients.

"Interest rates and property values have a relationship. Care to define the relationship?"

Would love to see someone try to quantify it.

"sledge, first of all, 3-8 years is quite the range you're giving yourself;"
That was a typo, you shoud read 2020/2025. Either way, nobody can't predict for sure when will rate doubles. As far as i know, the world could even fall apart by year end and nobody could know...
Howver my point is there is no point buying at inflated price with low mortgage rate. You should buy at deflated price with a healthy 8%/9% mortgage rate. When that happen, if you manage to make a couple of extera payment/year toward your principal, you'll pay your entire mortgage with 15 years. Even less if along the road rates drop again and aloow you to refinance. You wanna be the guy who bought in the mid 90's, you don't wanna be the sucker who bought last year! Te guy who bought in the 90's has probably finished paying his due by now!

I'll give it a try.... But let's not look at the entire mkt just one asset class and let's make it more personal, bc indeed the broader economy is nothing more than individual selfish acts.

Bjfrombillyburg volunteers. Let's take a sad columbia graduate with a low paying job in Brooklyn and give her $50k/yr in income. And let's give her a $1mm apt (in 2007, even though she paid only $500k in 2002). To help those with little brains, keep taxes zero, scenario holds for 30yrs and keep rents same for both scenario.

-Scenario 1(0 interest rate)
Earn $0 on (if sold at height) $1mm apt

- scenario 2 (10% interest rate)
Earn $100k on $1mm apt if sold at height.

Now remember you earn $50k/yr, so $100k is like 2x fking times your 40hr work week as a dog walker.

Does that quantify interest rate and asset prices for a columbia flunkie?

Now punk, do you think when interest rate is at 10% you could sell your studio for $1mm (at height) or do you think all dog walkers with $1mm studio will think alike. I mean they took the same career path after an ivy education. Logic would dictate y'all have the same IQ as the borkers that run their mouths on SE.

I love how bjw confuses principal and interest and doesn't know the difference between up 50% and doubling. What an imbecile.

This may be a dumb question, but not every employee is subject to a cap? I can't imagine the investment bankers being subjected to that. Here is a good follow up to the article:
http://www.rollingstone.com/politics/blogs/taibblog/why-wall-street-should-stop-whining-20120208

I don't think the article at all says what Matt says it says. It does not BLAME Obama, or for that matter, the banks themselves. It just non-politically talks about the new, lower normal. Matt is not happy unless we literally heap shit upon all bankers.

"That was a typo, you shoud read 2020/2025"

That's somehow worse - same range, further out.

"Howver my point is there is no point buying at inflated price with low mortgage rate. You should buy at deflated price with a healthy 8%/9% mortgage rate. When that happen, if you manage to make a couple of extera payment/year toward your principal, you'll pay your entire mortgage with 15 years."

Unfortunately, few people plan this way. Most try to buy the biggest/nicest they can afford, and that usually means looking at covering your monthly payments comfortably, but not exactly doubling them.

"Even less if along the road rates drop again and aloow you to refinance."

If 8-9% is "healthy," wouldn't it take some unusual event(s) to get us back down to 4-5%? Tough to bank on something that's so totally out of your control.

w67th, sorry, my CU degree wasn't up to snuff I guess - your "scenarios" did little for me. Break it down for me further - for every 100bps of interest rate movement, how much does property value fluctuate by, AOTBE?

And even if we win, if we win, HAH! Even if we win! Even if we play so far above our heads that our noses bleed for a week to ten days; even if God in Heaven above comes down and points his hand at our side of the field; even if every man woman and child held hands together and prayed for us to win, it just wouldn't matter because all the really good looking girls would still go out with the guys from Wall Street because they've still got all the money! It just doesn't matter if we win or we lose. IT JUST DOESN'T MATTER!

>w67th, sorry, my CU degree wasn't up to snuff I guess - your "scenarios" did little for me. Break it down for me further - for every 100bps of interest rate movement, how much does property value fluctuate by, AOTBE?

If w67 was able to answer that question, what would you do with the information? Do you even know what the term "interest rate" means? Have you recently been trying to lower your 100bps by going on a low fat, low salt diet and doing yoga?

"Wall Street and the banks have always gone through these cycles, what "newbies" don't quite get is that cycle doesn't mean 3 years but can mean longer, as in look how long it took for Wall Street to really take off after peaking in the 60's and troughing in the early 70's."

What this COMPLETELY misses is that it wasn't like this until relatively recently. Before the 80s, the money wasn't that big (which is why the good ivy students went to law and medicine, and the bad ones went to finance)... and even in the 80s, it wasn't this big.

Talks a bit of ignorance of history to think that the bubble peak was the norm, and everything else is just a temporary dip. Even if we just revert to the average salaries of the last 40 years in real terms.... and average apartment prices in real terms of the last 40 years... even that would be a shock to lots of folks.

"Without Wall Street, New York becomes Philadelphia”

Not really. Have you ever lived in, or spent much time in, Philadelphia? It's not the architecture (lovely!), history (incomparable), or art museums (more Monet's and Renoir's than in Paris) that make it an unbearable, provincial city. IT'S THE PEOPLE! In New York (and D.C., and L.A., and Miami, etc) everyone is from somewhere else. They come because they want to be part of a city full of dynamic, vibrant people. But in Philly, EVERYONE (except college students) is from there, and has lived there for 5 generations. They are the descendants of the quarkers. And it makes for the dullest, most provincial, more BORING group of homogenous people on earth.

Manhattan will never be Philly.

quakers.

"of jobs in NYC, whatever percentage is finance related, what percentage of earned income is finance-related??"

City hall was saying 30% of city income at peak directly (and you have to figure indirectly, way more... lawyers, suit makers, real estate...)