The Bull Case

i can make one. if everyone is not spending but saving---->and people usually actively save for a specific large purchase, most commonly a home------>everyone is saving for a house and will soon buy one. there, use that.

Im almost 2 years into ownership and love not worrying about a lease. Time flies and I like building equity on my 4% 30yr fixed. lets see how things are next year

how is the decline in value of your UES studio a bull case?

So far it has worked out pretty well for me.

"how is the decline in value of your UES studio a bull case?"

If the sum of the decline in value plus maintenance is still smaller than what you would have been paying in rent, you're still coming out ahead.

gloves are off

I refid a couple months ago and I appraised 9% higher than my purchase price. After taxes , I pay less than I would for rent.And we're still in just a recovering market. I think its more probable that Ill be deep in the money 5 years from now than out of the money. Either way I have a place to live that I can do whatever I want with.

Either way I have a place to live that I can do whatever I want with.

THis is what the stupid bears can't wrap their little heads around..l..

Thought Jim you were a renter with a special deal from one of your landlord clients.

fuuny how the messages are so mixed.
I was just thinking, It must be hibernation time for bears. The properties on my save list have mostly sold at modest discount with few exceptions. Properties are coming on the market with High asks reflecting the improvment in Manhattan sales coupled with depressed inventory. It's been lonely lately, stealing picnic baskets all by myself...Yawn...getting sleeply.

Doesnt mean i dont own propery cunterberg. I get an amazing deal on my primary residence.

43% higher since Dec. '09 purchase based on recent sale of identical unit one floor below AND appraisal. I pay less per month than equivalent rentals in my building without taking mortgage interest deduction into account. Building equity every month. So much for your bear case.

>Doesnt mean i dont own propery cunterberg. I get an amazing deal on my primary residence.

Well do own property? Somewhere in New Jersey maybe?

Also, you and columbiacounty are the only two who call me by that name.

Run to OBBP to scoop up those unsold units!

You think I care what cunty calls you?

You would have been wise to back in Dec '09 rather than slamming it at every opportunity Truth. But the "truth" is all you care about is your agenda.

Bull case: low inventory, summer month, NYC (foreign and domestic investments), rents going thru the roof, low interest rates

Bear case: at best stagnant income (including bonuses) for the majority of Wall Street, at best Wall Street will have a "small layoff" this year, at best global financial market can withstand the current deleveraging cycle, the US economy goes double dipping, taxes and condo and coop fees goes higher, building financials deteriorates, migration out of the city into the boroughs, migration out of the state of NY, still very stringent mortgage qualification, lots of investors piling into the market and we know what happens to investors sentiment.

With that said, I am still renting because the areas I are focusing on, I see price reductions of anywhere between 50K-75K at a pop. In other words, if the unit goes on the market and there are no takers, I see the unit reduced by 50K or 75K or sometimes even 100K. That type of price reduction can afford me to rent a $4K unit for a year or two-years and I am still ahead in terms of the price improvement I get at the end of the day.

For what it's worth, my believe is that NYC is not immune to the global deleveraging. No, because of all the wealth in this city and propensity for foreigners to "stash" their cash here, there is just a longer lag time. If things are on the up & up, you will not see price reductions in the 50K-75K range. Not in your dream buddy. This is NYC. Everything is more expensive. However, we are seeing these price reduction so there is a "sentiment" shift.

I don't slam OBBP at every opportunity, gator.

If I had bought there, in 2009, or before when the building's broker told me that the units were going fast, I would be stuck there. You may have 15 years to wait until you sell but I like to be able to sell when I want to. So it would not be wise for me.

I sold my condo in 2012 for a half million dollar profit. I could have sold it in 2009 for the same. Either way, v

ery wise for me. and I'm free to buy whatever I want when I want to buy.

anyway,that broker also told me that he would put me down for a 1 million$ one bedroom unit in one of the two highrises that were going to be built "next year".

Since things are picking up at OBBP, when do you think it will sell out, gator?
You've been claiming along the way that when it got to 50% sold, but that seems to have happened a while ago.

I don't want to be a prisoner to my RE. If it works for you and your agenda then that's good for you.

But shouldn't there be a bull run for those remaining units now? In your view will RAL continue raising prices so now would be the time to buy there or get priced out forever?

Not a "slam" just a question.

I'm doing the same as str33teasier and seeing the same. But it's also a nice vacation from owning. I can go travel for months at a time without even thinking about what's going on in my apt. or building. My landlord is there to take care of things.

If I had bought at OBBP, I would be sitting there wishing I bought at The Edge.
The pool alone is worth it.

I couldn't have said it better str33teasier. Well maybe, but some think I am you so I guess not

Any input from caonima?

Truth, why would you be stuck at OBBP now or for 15 years no less? Resales are already happening at good speed and strong pricing. I and others can sell when we want. I don't see any prisoners at OBBP.

As for when OBBP will sell out its hard to tell. The building could have been sold out already but the sponsor has held firm in his pricing strategy. He has forgone immediate sell through for higher prices. As time has passed it looks like he made an excellent decision as it appears that the price increases have exceeded the carry costs by a good margin. Sales have been really picked up in the past few months, nevertheless given the sponsor's pricing I would expect it will take about another to sell out but it could be more as those final units tend to take some time to move.

I think now is an excellent time to buy at OBBP because I do think, as you suggest, that the sponsor will continue to increase prices along the way which he has done consistently in the past. Indeed, the bull run looks to be in place as the sales pace has really picked up over the past few months.

As for the Edge, nice building no doubt but not for me. I enjoy going out in Williamsburg but its not where I want to live. Much better transportation options in BH among other things. I looked at it but OBBP was the right place for me.

Who's down with obbp?

that's funny!

Oh, I thought you once said you were in it for the long haul. I didn't know that resales are strong there now, but I would have been stuck there beyond the 2 years that I would have lived there had I bought at that time.
I like Williamsburg, not to live there but I would like the Edge.
Different strokes.
So: Run to OBBP to scoop up those unsold units. Still not a slam.

As far as my agenda, there is an entire town in Telluride that now believes the Truth.
Mountain Village ruined by RAL and Capella. That was true when I first predicted it. and it went bust before it could sell even one of the condos in the hotel. The hotel is a big failure and the town suffered because they believed it when their mayor proclaimed RAL to be a hero at the opening of the still unfinished hotel.

bears, Why is SE index not down despite poor wall street conditions and a bad bonus season for 2011. Have you considered how much real estate could be up if the bonuses are good?

I just refinanced and will be saving over $100 a month now that my interest rate will be 3.8%.

A show of hands: How amny renters here are getting a rent reduction? Yeah, that's what I thought...

Socialist, did you refinance with a private bank?

Shut the fuck up lucille.

I got a rent reduction! My landlord really likes me and my friend from Italy.
50 bucks less than lease.
We are great tenants.

It was funny, jim.

"bears, Why is SE index not down despite poor wall street conditions and a bad bonus season for 2011. Have you considered how much real estate could be up if the bonuses are good?"

SE index is up 1.73% over the last year, not even keeping up with inflation. Meanwhile, 30-year yields have dropped from 4.4% to 2.76% since July 1 of last year. That was an amount that produced 38% returns in a bond fund like TLT. You'd know this if you had any bond exposure. Have you considered what it means when an asset so intimately tied to interest rates cannot keep up with inflation despite a 40% drop in long-term rates?

Let's play scorecard between my LL and me. Rent per million in price was $30K, but $15K went straight to taxes & CCs. Appreciation was $17K, but amortize transaction costs & upkeep & renovation, and you're back down to $15K. A whopping return of 1.5% despite the gale-force tailwind of a 40% drop in long-term rates. Hmm, I wonder if inonada earned more or less than 1.5%...

Shut the fuck up lucille

http://www.fanpop.com/spots/arrested-development/images/21743891/title/lucille-judging-gif-fanart

>Hmm, I wonder if inonada earned more or less than 1.5%...

Did he invest in Sprint?

>Appreciation was $17K, but amortize transaction costs & upkeep & renovation

Was this amortization cost in cash?

From another thread on SE,

[New York’s biggest investment houses are shifting jobs out of the area and expanding in cheaper locales in the United States, threatening the vast middle tier of positions that form the backbone of employment on Wall Street.
...
“Some functions need to stay in the United States, but they don’t need to be in New York City or near the client,” Mr. Malick said. And with most investment giants facing anemic revenue and more stringent regulation that cuts into trading revenues, relocation is more tempting than it was before the financial crisis. ]

http://www.nytimes.com/2012/07/02/business/finance-jobs-leave-wall-street-as-firms-cut-costs.html?_r=1&hp

How many renters are watching the value of their apartments drop 100k/ yr?

[I just refinanced and will be saving over $100 a month now that my interest rate will be 3.8%.

A show of hands: How amny renters here are getting a rent reduction? Yeah, that's what I thought...]

Missing the forest for the single tree. $100/month = $1200/year. Let see, price reduction, as I mentioned previously, comes at $50K to $75K a pop. $50K/$1200 = 41.6 years!!!! It will take you 41.6 years of "reduce mortgage payment" to catch up to a price reduction of $50K a pop! On top of that, you lost equity as price reduction, i.e., comps, brings down the value around the 'hood. Lose-lose-lose because factor in the time value of money, ouch, 41.6 years ? Nice math Socialist.

Here are samples of price reduction across the city ranging from $25K to $50K reduction. Many more where these came from, "missing the forest for the single tree"

$50K: http://streeteasy.com/nyc/sale/681892-condo-80-john-street-financial-district-new-york
$50K: http://streeteasy.com/nyc/sale/679305-condo-60-west-13th-street-greenwich-village-new-york
$105K: http://streeteasy.com/nyc/sale/682368-condo-15-west-53rd-street-midtown-new-york

Of course RE is location, location, location. However, one thing is clear, rent vs buy question has never been more important and whether there is still a "bull case" to be made for NYC real estate.

Seems like RE longs (hence bulls) are type that keep cash in checking accounts unless it is invested in RE (hence earn zero on it) and they consider liquidity (ability to enter and exit an investment quickly and cheaply) a negative. How else do you explain the fact that they ignore potential return on cash invested in down payment (when comparing cost vs. rent), and their breakeven return iz 0% (hence 1.5% is great as they beat the benchmark). Also, to arguments that stocks/bonds returned more than RE, they counter that most people would have sold stocks/bonds earlier than they should have (just because they can).

So RE provides a place for people to invest their money and just not be able to do anything about it over short to medium term. My guess is that 75% of people are like this, ie. not really made to invest and actively manage their assets.

[How many renters are watching the value of their apartments drop 100k/ yr?]

I couldn't have said it any better Brooks2. The only thing not going for the renters at the moment is "rent through the roof" in many parts of the city. Other than that, it's a no-brainer.

>I couldn't have said it any better Brooks2.

What a surprise.

>Was this amortization cost in cash?

No, but neither was the 1.73% appreciation. The 1.73% appreciation in sales YoY involves apts that on average have had upkeep and -- strange as it might sound -- transaction costs. Shocking, I know...

One thing I find the bull vs bear debate interesting is how markedly the sentiments and arguments have shifted. During the bubble period, the bulls trotted out "real estate have never had a down year" Then when the bubble pop, the argument became "This is NYC. Everyone wants to be here." Then after seeing WS layoffs and Manhattan RE softening, the argument became "NYC is relatively stronger than everywhere else in the US." And now that it is pretty darn clear not only is Wall Street downsizing, but the entire globe is downsizing, I wonder what new "mantra" the bulls will trot out next ? They can't build more lands on this island or more foreigners are buying than ever before or rent will go up faster than RE prices will come down or this is the best inflation protection "asset" available ? Take all those "bullish mantras" and put it in a math equation and 1 + 1 can't equal 3.

Good observation, JButton.

My guess is that the attitudes of many of the RE bulls here are a reflection of an earlier set of actions. E.g., they were buying stocks during the tech bubble in 2000.

Price reductions don't mean losses. It is just a reduction from a price a seller would like to get and not all apartments are overpriced. All areas and apartments are not seeing your 50K-100K price reductions every month or so. If you bought an apartment that was way overpriced and were forced to sell, then it would make sense. But looking at apartments with price reductions and saying if I bought before the reduction, I would be down x% or 100K, doesn't really make sense.

I could say AAPL is down 9% or GOOG is down 12% since April. If you bought either of those at the beginning of April and were forced to sell now, you would be taking big losses after only 3 months. Price reductions all around!

JButton, I agree. I would say that 80% of people will lose money if they actively manage their money. By that, I mean make decisions as to when to buy and sell in the short term and take advantage of situations. Obviously, this board has the best and brightest of the investment world because everyone gets astronomical returns and always sells the top and buys the bottoms of all moves.

[Price reductions don't mean losses.]

I didn't say losses, I said "lost in equity." Any price reduction, if that price even clears the market, i.e., there is a willing buyer, then everyone in that 'hood lost equity! How ? Here are two examples and let's use the following premise

The unit just clear was sold for $500K, to make things easy, after a price reduction of say $50K.

1) Unit A, owner paid off the unit. Bought it at $200K, now appraised at $600K. $600K "equity", since the comps is now $500K, he just lost $100K. This make sense right ?

2) Unit B, owner still paying a mortgage and bought the unit at $550K. $50K down payment, to make the math easy and has a mortgage of $500K. His equity up to this point is $50K with the appraised value of $550K. With the new sale above, the comps is now $500K, he just lost all of his $50K in equity. Does this make sense ?

3) Unit C, owner still paying a mortgage and bought the unit at $400K say 7 years ago. Let's say he has $300K in his mortgage so his "equity" is $100K. With the comps at $500K, he "lost" equity because any "price appreciation" is his equity gain. Since the comps have come down, he didn't lose any money per your "precise" definition, he lost "equity." And should the price falls below his $400K purchase price, he will really lose equity.

[It is just a reduction from a price a seller would like to get and not all apartments are overpriced. All areas and apartments are not seeing your 50K-100K price reductions every month or so. If you bought an apartment that was way overpriced and were forced to sell, then it would make sense. But looking at apartments with price reductions and saying if I bought before the reduction, I would be down x% or 100K, doesn't really make sense.]

If you bought before the reduction, you are "losing equity" from example 3 above.

JButton & bob420, your estimates of 75-80% of people getting it wrong is silly. If any group of people were wrong this reliably, there'd be extremely easy money to be made doing the opposite. Such attitudes reflect over-attribution of significance to personal experience.

prepaid rent. Depending on your situation, the amt prepaid can get reimbursed to some degree while in some cases you don't get reimbursed at all with the sale of your home.

Ino, I said that 75% of people are not comfortable managing their assets actively, not that all of them would lose money if they chose to do so. But, in volitile market i would agree with bob420 that most people would lose money, ie. get out at the lows of 2009 type of situation.

bob: I am sooo not the best and brightest of the investment world.
That's why I don't actively manage my money but I pay the best and brightest to do it.

I didn't sell at the top when I was getting offers of 850-875k for my apt. that wasn't even on the market.
I sold for 100k less, after the downturn, when I felt that I had a better deal of a living arrangement living p.t. in Italy and swapping with a friend there who wanted to live in Brooklyn, not Manhattan. So I sold and rented a nice place in Brooklyn.

I also didn't believe that prices would be going up any time soon and possibly dropping. So I priced it right and by not being greedy, it sold quickly. No price drop. I don't think of my apt as an investment -- it just happened to be a good one. If I see prices going up there, I'm not going to kick myself for not waiting.
My attitude was that was then, this is now.

I do think that prices are going to drop some more and I'm not rushing to buy yet.

You guys are good at math early in the morning. It's afternoon here and I still can't follow your calculations.

These examples are way too simple and silly. You can't just say that because one apartment sold for 500K that it is now the comp for everything and that all similar units are worth 500K resulting in "loss of equity".

What happens if Unit A gets an appraisal after the sale and it is still 600K? Appraisals don't mean much and to calculate equity in a home on a sale by sale basis is a waste of time.

People will most certainly get it wrong. If they buy managed assets or funds or hold for the longer term, they are more likely to be correct. However, in the short term most moves are perceived as violent or trade bound. Both of these are killers for individual investors making day to day or week to week decisions.

And this kind of volitile stock market we had over the past 4 years drives people out of stocks into 'more stable' RE investments. It is emotioanly difficult to be able to MTM each day and live with sometimes high daily wealth creation or destruction.

[These examples are way too simple and silly.]

How is it silly ? B/c it is simple and gets right to the point w/out obfuscating and complicating matters ?

[You can't just say that because one apartment sold for 500K that it is now the comp for everything and that all similar units are worth 500K resulting in "loss of equity".]

I said "comps." What's the definition of comps! Comparable units. I didn't say "everything." I said everyone in the 'hood with units that are comparable to the one just sold. Of course you can't compare a 5M penthouse to a 1st level studio. I thought that was clear. I guess I gave you too much credit to think you know what "comps" mean.

[What happens if Unit A gets an appraisal after the sale and it is still 600K? Appraisals don't mean much and to calculate equity in a home on a sale by sale basis is a waste of time.]

Like you said, appraisal means nothing when the "comps" says lower price. You made my point. Thank you.

[If they buy managed assets or funds or hold for the longer term, they are more likely to be correct.]

I wonder if you have been asleep the last decade. SPX, that's S&P 500, have gone nowhere in the last 10 years!! "Buy and hold for the longer term, they are most likely to be correct ?" Are you kidding me ? Now I understand where you get your RE logic.

Folks, many for that matter, can't MTM their RE holding and face reality. They rather still believe that NYC RE is a never-lose situation. Therefore, many sellers are still living in Neverland of pricing their units as close to the bubble price as possible.

You still have an overpriced coupled with the "most volatile" buyers out there, the "investors." That's a recipe for some firework.

You said Unit A was appraised for 600K and then the "comp" sold for 500K. This was the basis for your 100K of lost equity.

I was talking about similar units. I wasn't talking about comparing a 5M apartment with a 500K one. Even similar units in the same building go for vastly different prices. You are using a comp for units in an entire neighborhood/area to calculate a point in time value for equity purposes. It's not that simple.

An apartment is appraised at 500K. A comp in the 'hood' sells for 600K. Wow! My equity just went up 100K. 2 weeks later an apartment in the building next door sells for 500K. Oh no. I just lost 100K of equity.

[You said Unit A was appraised for 600K and then the "comp" sold for 500K. This was the basis for your 100K of lost equity]

Exactly, that means at one point or another, unit A's comps was $600K. If you want to nick pick the details, i.e., appraise vs real value vs comps vs clearing price, etc, usually the case when someone can't find anything else to poke at, then find, nick pick appraisal value is not comps.

But going back to the example, so, yes, at one point unit A's appraised value or resale value or comps was at $600K, now, the comps is at $500K. Didn't the owner lose or gain equity from $600K to $500K? because had the comps or appraised value or resale value or clearing price gone from $600K to $700K, I am sure you'll be all over it like white on rice that the owner gain $100K in equity which in reality he/she did.

My realistic pricing wasn't difficult for me to do. I bought 13 years before. I checked out some comps on my block and in the neighborhood. Decided asking $775k would be a good start to end up with around 750K.
745k offered by the second person who saw it. Sold!

If not and I had to sell I would be realistic rather than try to ask a bubbly listing price and refuse to negotiate it to a sellable price.
Many sellers are not realistic and they end up with an unsold, sometimes empty apt while paying the carry for it.

Their original offer was 740k.

[You are using a comp for units in an entire neighborhood/area to calculate a point in time value for equity purposes. It's not that simple.]

How is it not that simple ? I didn't mention the utility factor, i.e., your love for that apartment, etc. I simply said "lost equity" and now, not surprisingly, you are trying to obfuscate and complicate the simple math by saying "IT ISN'T THAT SIMPLE."

[An apartment is appraised at 500K. A comp in the 'hood' sells for 600K. Wow! My equity just went up 100K. 2 weeks later an apartment in the building next door sells for 500K. Oh no. I just lost 100K of equity.]

Exactly! Anyone wanting to make it more complicated than that is just obfuscating and complicating the matter.

In your example, you are trying to ridicule that "any point" in time is irrelevant. True but the "trend" has been lower comps and price reduction for the last, at least, 2 years and going on 3. Anything else you like to throw at this argument besides the "a point in time ?"

Longer term is no longer 10 years. I am talking about months to many months. Bottom line is most people can't manage investments on a week to week or interim basis and if you aren't holding for bigger more sustanined moves, most likely will get shaken around. Too much emotion and bad timing. The average investor can't trade in and out in a volatile or range bound market. They can't pick individual stocks. It's a recipe for disaster. Everyone wants to be a trader until they get whipped around and lose money. Then the fright sets in and they miss moves.

All I am saying is that everyone keeps saying how they make this money in the market or make that etc. That people should have and could have made money in the market rather than putting money in RE. Reality is that most people won't make those returns and probably wouldn't have come close if they did put that RE money in the market.

I didn't mean to say most likely correct if they hold longer term. I meant more likely.

[Longer term is no longer 10 years. I am talking about months to many months. Bottom line is most people can't manage investments on a week to week or interim basis and if you aren't holding for bigger more sustanined moves, most likely will get shaken around. Too much emotion and bad timing. The average investor can't trade in and out in a volatile or range bound market. They can't pick individual stocks. It's a recipe for disaster. Everyone wants to be a trader until they get whipped around and lose money. Then the fright sets in and they miss moves.

All I am saying is that everyone keeps saying how they make this money in the market or make that etc. That people should have and could have made money in the market rather than putting money in RE. Reality is that most people won't make those returns and probably wouldn't have come close if they did put that RE money in the market.

I didn't mean to say most likely correct if they hold longer term. I meant more likely. ]

You market sense is much better than you RE sense, that much I am sure of bob :)

str33, your example provides a comp not comps (plural). One comp is arbitrary which is why several are used. Comps are then adjusted to account for differences between the units. So while your example is technically accurrate it is far too simple as it assumes that one sale changes the equity for all other similar units which is just not the case.

Also, using price reductions from an arbitary sales price is a poor barometer for the market or a purchase decision. First, it assumes that the sales price was reasonably set in the first instance. Plenty of homes are still being priced unreasonably high to gauge the market, etc. Any reduction in the sales price is not a reduction in equity. There are too many variables that go into setting a sales price.

And yes much of this discourse is too simple and far too broad. As usual the bears and the bulls tend to line up in their absolute positions. Fact is that in any market bear or bull there are good buys and bad buys. Bears tend to think that every buy is a bad one and bulls that every buy is a good one. We need to lose the absolutes and deal with specifics.

[str33, your example provides a comp not comps (plural). One comp is arbitrary which is why several are used. Comps are then adjusted to account for differences between the units. So while your example is technically accurrate it is far too simple as it assumes that one sale changes the equity for all other similar units which is just not the case.]

Fine, I'm quilty in my example of using one comp but the trend for have been price reductions and lower comps. If someone said otherwise, than we've an argument.

[First, it assumes that the sales price was reasonably set in the first instance. Plenty of homes are still being priced unreasonably high to gauge the market, etc.]

Agree, the examples were in response to Socialist's post, [I just refinanced and will be saving over $100 a month now that my interest rate will be 3.8%.

A show of hands: How amny renters here are getting a rent reduction? Yeah, that's what I thought]

And the price reductions were used to show how his example of savings from a refy is missing the forest for the single tree because a price reduction of $50K would be 41.6 years ahead of his $1200 saving from the refy per year.

[Any reduction in the sales price is not a reduction in equity.]

It's a reduction in equity. Very simple, if comps are going up, aren't comparable units' value going up ? If so, aren't the owners gaining equity ? So, if comps are going down, aren't comparable units' value going down ? If so, aren't the owner losing equity ? The "equity" can be realize or unrealized losses but it doesn't matter.

[There are too many variables that go into setting a sales price.]

It was a very simple example to show equity gain/lose. Then you and bob simply want to complicate matters because it doesn't confirm to your bias. :)

I understand equity/gain loss.

gator said it better and more to the point than I did.

Be something other than a bear or a bull.
Just don't be an ostrich or a turtle.
I like to think that I'm a bird, free to fly from one tree to another and fly south for the winter when I want. That's wise like an owl.

[There are too many variables that go into setting a sales price.]

BTW, in reality, you will NEVER be able to use comps if you really take into account all the many variables. In reality, these variables matters very little. What matter is what price the transaction clear, i.e., the comps. Is the true or not ?

If so, then none of the complication you and bob brought up matters. 8) Please don't obfuscate and complicate the very simple question:

If comps are going down, aren't the equity of comparable units going down ? It's a very simple question. Comps is the clearing price which is the only thing that matters.

[gator said it better and more to the point than I did. ]

gator said nothing differently than what you said and all the "complications" and "many variables" that you brought up matters one iota, zilch.

What matters is the comps and the simple question I asked was

If comps are going down, is comparable units gaining or losing equity ? Simply answer that question! It can't get any more simple than that bob and gator.

you can never lose when you buy. house prices don't go down. if you put in 200k in renovations or additions it will be worth that much more..

oh... wrong thread this one should be on stupid things brokers say

[you can never lose when you buy. house prices don't go down. if you put in 200k in renovations or additions it will be worth that much more..]

BINGO Brooks2 ... folks who don't want to see reality is hoping against hope ... I don't wish anything financially bad on anyone but reality is reality folks .. just like folks who bought Facebook at $42 aren't likely going to see their "investment" break even.

[oh... wrong thread this one should be on stupid things brokers say]

Reminds me of the scene in Wanderlust. So aniston & paul rudd were in an RE broker's office deciding on whether they should buy the place. Rudd said it's a studio. The broker said "It's a MICRO-LOFT" Rudd said, "Call it what it is, it's a studio." Broker said "It's a MICRO-LOFT" Fast forward sometime later when Aniston & Rudd needed to sell the place, you know how the conversation is going to be right ? Replace Rudd in place of the broker & vice versa! Hahahahaha.

http://www.imdb.com/title/tt1655460/

Wanderlust

http://www.markreviewsmovies.com/reviews/W/wanderlust.htm

Read 4th and 5th paragraph. It's a funny movie.

str33, you misunderstood my use of "sales price" or I may have been unclear. I did not mean sales price as in the price that a unit actually sold for. Rather, I meant sales price as in the listing price set by the seller/broker from you are are calculating the loss in equity for a reduction in the listing price. A reduction from a listing price is not a reduction in equity.

If everything is going down and sales comps are going down, then yes if you are calculating equity, it would be going down. But that doesn't mean a price reduction is indicative of actual sales comps going down. I could try to sell a 1BR for 1 million. That doesn't mean it is worth anywhere near that and I could cut prices down to 700K and it doesn't mean anything.

I think it's disingenous to point out random price reductions and use that in an argument about how much money you would have lost and how long it would take to make it back if you bought an apartment.

[listing price set by the seller/broker from you are are calculating the loss in equity for a reduction in the listing price. A reduction from a listing price is not a reduction in equity.]

Never said a reduction in the listing price = lost of equity .. go back to my post!

the premise of my examples was

***** The unit just clear was sold for $500K, to make things easy, after a price reduction of say $50K. ****

The unit was sold for $500K, the comps. All the example referenced the $500K, nothing about the $50K in reduction

[If everything is going down and sales comps are going down, then yes if you are calculating equity, it would be going down. But that doesn't mean a price reduction is indicative of actual sales comps going down. I could try to sell a 1BR for 1 million. That doesn't mean it is worth anywhere near that and I could cut prices down to 700K and it doesn't mean anything. ]

Why are you and gator sounding alike ? You both mentioned price reduction = lost equity. I never said that!!! Go back to my post or the post right above this one.

[I think it's disingenous to point out random price reductions and use that in an argument about how much money you would have lost and how long it would take to make it back if you bought an apartment.]

Oh boy, I definitely gave you more credits than you deserve. Now you're calling me a LIAR when the FACTS don't support your "BULLISH" thesis ? Who's disingenous here ?

You never answered my question:

If comps are going down, is comparable units gaining or losing equity ? Simply answer that question! It can't get any more simple than that bob.

It's called value investing str33. I bought my apartment as comps were coming down because in my view my unit went below market value and presented an excellent buy. Was there a chance of further price declines? Of course; I estimated approximately 10% in the short term, but it never materialized and if I waited I wouldn't have gotten my unit because I got one of the last units in my line.

It's stating the obvious but real estate cannot be compared to a stock because of the difference in liquidity. If you wait until you see comps rising across the board to make a purchase you will have missed your best opportunity to purchase. As Warren Buffet said:

"Be fearful when others are greedy and be greedy only when others are fearful."

"Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well."

The same rationale pertains to real estate (again as pure investment and not the quasi-investment it is for a primary residence).

It was all based on price reductions which you then switched to sales comps at the lower price:

Missing the forest for the single tree. $100/month = $1200/year. Let see, price reduction, as I mentioned previously, comes at $50K to $75K a pop. $50K/$1200 = 41.6 years!!!! It will take you 41.6 years of "reduce mortgage payment" to catch up to a price reduction of $50K a pop! On top of that, you lost equity as price reduction, i.e., comps, brings down the value around the 'hood. Lose-lose-lose because factor in the time value of money, ouch, 41.6 years ? Nice math Socialist.

Followed up with this:

I didn't say losses, I said "lost in equity." Any price reduction, if that price even clears the market, i.e., there is a willing buyer, then everyone in that 'hood lost equity! How ? Here are two examples and let's use the following premise

I initially said price reductions don't mean losses and they don't mean loss in equity. You then switched to examples of a lower comp sale.

I think we all agree that declining sales prices in comparable apartments will cause paper loss in equity. But random price cuts don't mean anything and that is where this all started.

[On top of that, you lost equity as price reduction, i.e., comps, brings down the value around the 'hood. ]

Didn't I say comps ?

str33, this is what you said:

"With that said, I am still renting because the areas I are focusing on, I see price reductions of anywhere between 50K-75K at a pop. In other words, if the unit goes on the market and there are no takers, I see the unit reduced by 50K or 75K or sometimes even 100K. That type of price reduction can afford me to rent a $4K unit for a year or two-years and I am still ahead in terms of the price improvement I get at the end of the day."

"Missing the forest for the single tree. $100/month = $1200/year. Let see, price reduction, as I mentioned previously, comes at $50K to $75K a pop. $50K/$1200 = 41.6 years!!!! It will take you 41.6 years of "reduce mortgage payment" to catch up to a price reduction of $50K a pop! On top of that, you lost equity as price reduction, i.e., comps, brings down the value around the 'hood. Lose-lose-lose because factor in the time value of money, ouch, 41.6 years ? Nice math Socialist.

Here are samples of price reduction across the city ranging from $25K to $50K reduction. Many more where these came from, "missing the forest for the single tree""

You keep talking about price reductions, which are from an arbitrary listing price and equate that to a loss of equity.

[It's called value investing str33. I bought my apartment as comps were coming down because in my view my unit went below market value and presented an excellent buy. Was there a chance of further price declines? Of course; I estimated approximately 10% in the short term, but it never materialized and if I waited I wouldn't have gotten my unit because I got one of the last units in my line.]

Now you're generalizing with you single example just like you accused me of using 1 comp. Fine, have it your way.

["Be fearful when others are greedy and be greedy only when others are fearful."]

Hahaha, but they never tell you when the fear ends! it could be another 10%, 20% or even 50% below where the "fear" was impallatable.

Now,

[On top of that, you lost equity as price reduction, i.e., comps, brings down the value around the 'hood. ]

the obvious conclusion, which you didn't leap to and now I understand why because I need to lay it out. Had that "price reduction" induced a buyer to buy. Then that "price reduction" did indeed turn into a lost equity because it's now a comps, isn't it ? :)

So, not matter how you like to nit pick my arguments because you can't find any other holes, at the end of the day, when the trend is down, you are losing equity bob. Face reality and admit that! You'll feel better. If you can't stomach the lost, and I am sorry, then just sell and take that "lost equity", sorry, I mean realized loss .. 8)

gator, like I said, you are starting to sound exactly like bob. Anyway, just don't confuse who said what OK ? I will play along.

[You keep talking about price reductions, which are from an arbitrary listing price and equate that to a loss of equity.]

Price reduction, especially with when a trend is established, will eventually find a buyer at some point. At that point, isn't that a comp ?

Simply answer that question, will it be a comp at that point when the price reduction enticed a buyer to step up and buy ? If you said yes, which is the correct answer, then doesn't that clearing price cause a LOST IN EQUITY for all the comparable units ? Does it or doesn't it ?

You and bob and both nit picking when the price reduction actually turns into a sale. Your argument is that if the price reduction doesn't turn into a sale, then no equity lost. The trend is down. Price reduction don't suddenly reverse into price appreciation overnight. Your arguments are extremely asinine and bordering on comedic.

no str33, I don't want it my way. I want the discussion to be more worthwhile and useful that these silly bull and bear positions. I agree with you that in today's market that there are many purchases that would not make sense. But there are many purchases that do make sense.

And yes I used a single example but it is a good example of the market in Brooklyn Heights, Cobble Hill, Downtown Brooklyn, and the surrounding area over the past two years.

[no str33, I don't want it my way. I want the discussion to be more worthwhile and useful that these silly bull and bear positions. I agree with you that in today's market that there are many purchases that would not make sense. But there are many purchases that do make sense.

And yes I used a single example but it is a good example of the market in Brooklyn Heights, Cobble Hill, Downtown Brooklyn, and the surrounding area over the past two years. ]

terrific, now we are talking like adults.

I will not dispute that Re is location, location, locaton. However, looking at all the factors, you can't say price reduction, espeically when a trend is established, that it doesn't equate to lost in equity. It certainly does.

I'm trying to follow along just to learn something but now I have a headache.

This is why I always pay cash.

Price reduction from listing prices? No that does not equate to a loss in equity. Plenty of listings are being priced above (and even well above) market. If someone listed a unit for $3 million that after numerous price reductions sells/clears for $1.75 million is that a $1.25 million loss of equity? Of course not because the listing price was never anything close to realistic to begin with. Many listing prices are set with full knowledge of an anticipated reduction as the final sales price. So that reduction is not a loss of equity either.

I also disagree that a price reduction trend has been established both Streeteasy's and urbardigs indices indicate otherwise.

But I certainly will agree that a downtrend in actual sales prices equates to a loss in equity. We've seen that happen recently. But whether that means one should sell, or not buy, depends on one's time horizon, the value of the actual property in question (as opposed to the general market), the ability to spot the swing back to the upside, etc. You only look at one discreet issue, i.e., there is a decline in real estate prices which is continuing. While no right minded person can dispute that real estate prices can decline (and indeed they have), it can be disputed whether the decline is continuing or will continue.

"Simply answer that question, will it be a comp at that point when the price reduction enticed a buyer to step up and buy ? If you said yes, which is the correct answer, then doesn't that clearing price cause a LOST IN EQUITY for all the comparable units ? Does it or doesn't it ?"

Not if the price reduction still results in a sales price that is higher than the appraised or perceived value of the apartment you are comparing it to. If I properly valued my apartment and purchased it, does it matter if someone else overvalues their comparable apt and tries to sell it for an inflated price and then proceeds to cut the price? Does it affect my equity in the way you are calculating it? Not unless that price ultimately ends up less than the most recent valuation of my apartment.

If I own an apartment that is appraised at 600K. Someone lists a comparable apartment for 1 million and proceeds to cut all the way down to 700K. Are all those cuts hurting the value of the my apartment or making me lose equity? No.

Just listing price cuts and commenting on how much money you are saving by not buying doesn't really make much sense.

I'm out! Have a nice discussion, gentlemen.

[Price reduction from listing prices? No that does not equate to a loss in equity. Plenty of listings are being priced above (and even well above) market. If someone listed a unit for $3 million that after numerous price reductions sells/clears for $1.75 million is that a $1.25 million loss of equity?]

You are using a realistic example here. 1st, the comps for the other units wouldn't be at 3M, it would be close to 2 or 1.75. If this inflated unit owners want to high-ball the list and see the price collapse back to reality, by all means, have fun. However, no one would be basing the comps of the 1.75M unit with those of the 3M. Does that make sense or not ? If it does, your example doesn't make sense then. Right, you can't, using your example, price something at say 10M, and then when it finally clears at 1M, then you are using it to say "see, can't say someone has lost $9M in equity." Yes, you can't because in reality it shouldn't have been a 10M listing to begin with. It was probably a 1.5M or 1.2M listing. Now, we can say this comps have "cause" other comparable units in to lose 500K or 200K in equity. Just as also you can't say because the 10M original listing finally cleared at 1M that those unit owners of the TRUE 10M units have lost $9M in equity. That's what you are trying to pin this on your argument and it's completely asinine. You are not comparing apples to apples using an unrealistic example. besides, the example you used, even if it did occur in real life, will most likely be a one-off.

[Not if the price reduction still results in a sales price that is higher than the appraised or perceived value of the apartment you are comparing it to. If I properly valued my apartment and purchased it, does it matter if someone else overvalues their comparable apt and tries to sell it for an inflated price and then proceeds to cut the price? Does it affect my equity in the way you are calculating it? Not unless that price ultimately ends up less than the most recent valuation of my apartment.]

You are pointing to example #3, go back to my post and look at example #3. Forgot it, here it's

[3) Unit C, owner still paying a mortgage and bought the unit at $400K say 7 years ago. Let's say he has $300K in his mortgage so his "equity" is $100K. With the comps at $500K, he "lost" equity because any "price appreciation" is his equity gain. Since the comps have come down, he didn't lose any money per your "precise" definition, he lost "equity." And should the price falls below his $400K purchase price, he will really lose equity.]

You are back to nit picking realized and unrealized loss. You lost equity b/c if the recent comps were going up, you it certainly will add to you equity now would it if you decide to sell ? So, if it adds to your equity when prices appreciates, how come it doesn't subtract from your equity when prices come down. I didn't say whether you will sell it or not, I simply said "lost equity", realized or unrealized is beyond this discussion b/c bringing that into the discussion is completely asinine. Who knows when you'll sell or not ?

[If I own an apartment that is appraised at 600K. Someone lists a comparable apartment for 1 million and proceeds to cut all the way down to 700K. Are all those cuts hurting the value of the my apartment or making me lose equity? No.]

No, what if it did clear at 1M and you decide to sell and your unit clears at 1M ? Did you gain $400K ? Yes or no ? If no, I have a PO Box that you can send that proceed to and I will be more than happy to collect that $400K for you :) You can't have it both ways.

Correction,

[No, what if it did clear at 1M and you decide to sell and your unit clears at 1M ?]

should say

[No ? What if it did clear at 1M and you decide to sell and your unit clears at 1M ?]

> The 1.73% appreciation in sales YoY involves apts that on average have had upkeep and -- strange as it might sound -- transaction costs. Shocking, I know...

So you calculated appreciation assuming new transaction costs that came into play during the measurement period?

bob and gator or one in the same, doesn't matter. Let me make it easy and help out in your arguments since you are both, interestingly enough, going in circle.

The centerpiece of your argument is that price reduction can't affect equity. Let me be precise and say define "equity" as "potential" equity for prices above your price paid and "realized" equity for prices below your price paid.

So, for example #3, which is identical to bob's argument, unit C owner, since he paid $400K and now the comps is at $500K after coming down from $550K per the $50K reduction, lost $50K in "potential equity." Did he lose equity ? Yes, he did. Did he lose "realized equity ?" No, not yet.

Now, on the flip side, if the comps were at, say $600K instead of $550K, unit C owner certainly gain $200K in "potential equity" because if he decides to sell and list it at $600K and it clears, he certainly realized $200K in equity now didn't he ? Sales = $600K, paid = $400K, gain = $200K.

See, again, what both of you are nit picking is whether the price reduction eventually turn into a sale. When prices come down, it will eventual entice someone to buy. Whether it's today or tomorrow doesn't matter, all that time, there is the potential for it to turn into a comps. All that time, you have "lost" equity, potential or realized. At the end of the day, when prices come down, you are losing equity as I stated originally.

If you guys don't agree, then I don't have anything else to add b/c you two keep going in circles.

>Seems like RE longs (hence bulls) are type that keep cash in checking accounts unless it is invested in RE (hence earn zero on it) and they consider liquidity (ability to enter and exit an investment quickly and cheaply) a negative. How else do you explain the fact that they ignore potential return on cash invested in down payment (when comparing cost vs. rent), and their breakeven return iz 0% (hence 1.5% is great as they beat the benchmark). Also, to arguments that stocks/bonds returned more than RE, they counter that most people would have sold stocks/bonds earlier than they should have (just because they can).

inododo isnt even touting stocks anymore, he's on to bond appreciation only, citing their rise due to decreasing rates. I can't wait for the next thread where we talk about how low rates means the likelihood of increasing rates.

> One thing I find the bull vs bear debate interesting is how markedly the sentiments and arguments have shifted. During the bubble period, the bulls trotted out "real estate have never had a down year" Then when the bubble pop, the argument became "This is NYC. Everyone wants to be here."

Your postulation is that during the bubble, people didn't care that this was Manhattan?

By the way, are they building more land in Manhattan? Have foreigners stopped buying? Have rents been increasing?

> bob and gator or one in the same, doesn't matter.

64 posts "new" to SE but you already have your theories on the duplicates.

in some cases number of posts is inversely correlated to quality of posts

[in some cases number of posts is inversely correlated to quality of posts]

highly inversely correlated ...

I don't know how much I will get back for the renovation I put into my houses. I just know that most of the money that my wife put into fashion will only get us back a reciept for charitable donation deductions.

Inonada said, "SE index is up 1.73% over the last year, not even keeping up with inflation. Meanwhile, 30-year yields have dropped from 4.4% to 2.76% since July 1 of last year. That was an amount that produced 38% returns in a bond fund like TLT"

Isn't that 4.4% 30 yr fixed and 2.76% 5 yrs ARM? I have not yet seen 30 yrs fixed gone down to 2.76%.
Most people would call this comparing apples with oranges for the sake of....

Or, don't just read the head line on a google search and believe it and write up about it. Read the fine prints