MANDATORY READING! Parallels to 1988!

Wrong again, JuiceMan. I said LISTEN TO THE HYPERBOLE. LISTEN TO THE CRAP. READ WHAT THEY WROTE IN 1988:

"Real estate specialists are confident that residential construction in Manhattan, prodded by a strong underlying demand, will eventually regain its momentum. In the short run, however, they say a scarcity of sites, rising land and construction costs and more restrictive zoning rules will make apartment production too expensive even for the affluent people developers have been building for, almost exclusively, in the last few years.

"It will take a significant rise in the prices developers think they can get for new units - well above current levels of roughly $400 a square foot, or $250,000 for a one-bedroom unit - or some unforeseen new stimulus to trigger a new wave of production. Some developers expect that as the apartments now nearing completion are absorbed by buyers and renters, the supply of new units will shrink far enough to move the market to a new price plateau and trigger a new cycle of construction.

"''Anybody who can get in the ground by the beginning of next year should have no problem with sales because there won't be much else around,'' said Henry Robbins, the associate publisher of a comprehensive guide to construction activity in Manhattan.''"

RIGHT AT THE START OF A 10-YEAR DEPRESSION.

The reasons why that depression occurred may be different, but the hype surrounding real estate is VERBATIM.

JuiceMan: "Back to your (40x / 28%) etc, etc."

Me: Real estate prices are constrained by incomes and leverage. 40x/28%. There is no way around it. Those ratios give you a p/e ratio on real estate of 12. There is no way around it.

JuiceMan thinks they're not. I made those ratios up. So be it.

Just in case you forgot, this is how you started this thread

"Tell me if you see the parallels, with these 1988 - the start of a 10-year bust - quotes:"

and then you said

"Ergo, the 1988 chart is completely unrelated to what is happening today: it happened 20 years ago, in an entirely different market for entirely different reasons."

So based on your logic, I will ignore all of the quotes you wanted us to look at because today is an entirely different market for entirely different reasons.

Ah, there you go again JuiceMan: I said the hype surrounding real estate in 1998 is the same as what you hear today; the "explanations" that agents gave as to why it wouldn't collapse are the same.

You switch it to say that I said that the root cause of the problem is the same. It's not.

This is an entirely different market with entirely different fundamentals driving it. It's still going to crash.

But they hype is still the same.

You can ignore anything you want.

Today, being 2008, I wish I bought real estate in 1988. I would have made a lot of money in total over these 20 years.

I just thought I'd bring this thread back for old time's sake - since there's another one similar to it right now.

Sorry stevejhx, should have searched harder for this thread.

Here's something i posted to another thread -- SteveF, explain this one away.

"At the Normandie Court at 225 East 95th Street, rents were $1,395 for a one-bedroom in 1992 and $1,465 in 1993, up 4.95 percent. For a two-bedroom, they were $1,840 in 1992 and $1,935 in 1993." NYTimes, 2003

Funny, 2 beds at the Normandie go for $3395 right now (March 2009 per a CL ad). Why, that's a 3.6% increase since 1992!

My point on comparing Normandie rental prices from 1992/1993 and today was to rebut the notion that
somehow real estate will appreciate at significantly more than 3 (or even 6) percent per annum.

* The Normandie is opened by a professional real estate firm. It's a standard, mid level rental building on the upper east side that for the last 20 years has catered to NYC new arrivals.
* Rents in the Normandie have grown by 3.7 annually. This is within what any research -- Case-Schiller, Fidelity, etc. predicts.
* The Normandie is in manhattan (where no more real estate can be built :). And it's in the "safe from depreciation" area known as the UES.

So, can someone explain to me how a professionally run, rental building appreciates 3.7% per year (and i'm not including renovation/maintence costs) and then explain how a condo on the UES would appreciate by 10% or 20% or 50% or 100% or 200% in the same time period?

Now, I'm being generous by using 1992-1993 as my base. if you look at the Times, it will say that Normandie rent prices were flat for 5 years between 1988 and 1993.

Sorry, the article was from the NYTImes in 1993, not 2003

This is a great SE thread!

We had Juiceman drop the 1988 billboard hits on us. Kylewest makes a reference to being a bear (and shudders). Steve follows up with a reference to being a cub and then Manhattanguy gets so scared that he makes sure to post that he is a market bear (just in case Kyle or Steve were overly curious).

The Knitting factory and Maxwell Smart’s shoe phone got dropped and it included these random ditties:

I am the guy with the little, white dog who refuses to be on a leash.

I'll still fiddle your diddly.

No one can pick a bottom or a top (unless you have gaydar).

Posters named Spunky and pez in the same discussion.

And of course, Steve got to argue his 12X Rent / no tax benefit to owning theory for the 1000th time.

Today is turning out to be a pretty good day after all!

wile 1988 was not the time to buy -- 1994 was. While 2009 is not the ideal time to sell, 2007 was. Ebb....flow....ebb...flow

buy low -- sell high....

Good luck to all.

Something to consider... Normandie in 1992 was considered "fringe". New construction, but that was VERY far north. That has to be taken into consideration. I don't think it represent the "average".

In '94 I remember they could only get new grads to live there, folks who didn't know you didn't go up there. They had relaxed regulations specifically for the kiddies - you could combine incomes to meet the requirements, and they almost put up share walls for you. Nobody else in town did this. I knew an analyst class at a smaller shop where about 1/3 (not an exaggeration) lived there.

There was also a joke about the one couple with a baby living there... don't remember what it was, but there was literally like 1.

My firm had a RE consultant who basically said "go to Normandie" as the answer to every question when all the new analysts came down before the summer for an orientation.

Their rents were also known for being below anywhere else south of 96th. I remember when studios were $1200 then went to $1300 (my best friend moved into one) at a time where many brokers said ANYTHING south of 96th street was $1500 or more.

Now, not saying Normandie is great now, but they have yuppies living on 97th now. The border has shifted.

So, while rents might have gone up at Normandie, much of that has to be attributed to its relative change in status. It is not IMHO a good model for rents overall.

"I just thought I'd bring this thread back for old time's sake - since there's another one similar to it right now."

Thanks - very amusing to see what the uberbulls were saying a year ago. BTW, I remember Spunky from back then - so friggin' smug and so condescending to the "bitter renters" - now where is she/he/it?????

I miss spunky! Ask waverly.

HOLY SHIT. I am reading these threads. Steve STILL needs to label people bulls or bears? He seems smart but just can't get past the fact that some posters have real estate as a home and that their purchase is actually a very small portion of their overall portfolio. others, like me, have invested in real estate for decades and also invested in the market and also own a home. How can he still label people as "A" or "B"...that's as ridiculous as the buyers who use the term bitter renters or call renters losers.

myc10022 -- i think they can still only get new grads to live there. But if the Normandie circa 1992 was considered "fringe" then it even further reinforces my point -- the neighborhood has improved and they still have only seen a 3.7% return!

I wish I had bought a $250,000 condo in 1988 at the peak of the market. It sounds like a great price today. In answer to whether it sounds familiar, yes, with a few differences - mortgage rates spiked after 1988. In this cycle they haven't spiked. Not yet anyway............

nyc10022 so in other words, not much has changed...

"I miss spunky! Ask waverly."

Haha...yes, it's true.

Brave spunky/waverly - and honest too.

Why are all the new buildings lacking in decent closets. Depth and number. And those horrible accordion doors.

kylewest: I agree with malraux: if I found the perfect place right now that I can see living in for the next 20 years, I would buy it--not withstanding the market and the fact that in a few days I'll likely have signed a one year lease to rent while things settle down. Shy of being perfect and seeing myself there for a long time, nothing a broker says could get me to buy at these prices in this climate. So what does that make me? Bear? Bull? Rational?

Did you buy the following year after your lease?

was that you too?