NYT article today on inventory

RIght now the market is hot and inventory is low. Have been looking two; but a second place for me. If I could predict the future I'd be really rich. The rental income/cost ratio keeps slipping a bit. Is it sustainable (the price?) beats me

If you have decided to buy after factoring in rent vs buy etc, you have to buy something you really like. Of course, you will have to pay up a bit. With Feds cheap money and minimal chance of recession in the next 2 years, prices are only going up.

minimal chance of recession in the next 2 years, prices are only going up.????

Agree with you notadmin; one never knows. Gov't is keeping interest rates falsely low to pro things up. We alsmost went over the fiscal cliff but didn't. Bottom line is no one can predict the future.

Scariest thing I read was that a big reason Post Office going under so badly is because they are the only gov't agency forced to full fun their retirement obligations in advance. What that tells me is the "fiscal cliff" still looms as everything is is underfunded.

That said if someone needs a place to live; overpays with interest rates low that probably gives them a 15-20% downside buffer. But again, who knows?

Renters do not want to hear it but prices are only going up in Manhattan in the next two years. If there is a chance of recession, fed dope will continue even longer. We are still early in the recovery and have ways to go before next major downturn. This means that equities will go up too but not necessarily in a straight line given the recent run up.

>> Renters do not want to hear it but prices are only going up in Manhattan in the next two years.

Why should renters care? Renters rent.

In any case, you were saying that 2 years ago. As were brokers, and the NYT. SE index up 4.7% per year over past 2 years. Stocks up 50.6%. Bonds up 42.3%. CPI up 5.3%.

It didn't even outpace inflation, think about it.

I can't understand people bragging about bonds. Bond's interest rate went from little to very little. To get the 42.3% gain, you need to employ sizable leverage.

CPI 5.3 per year?

Feb 10th 2011 spx 1321. 1517 now. 15 percent over two years. Real estate with 3 times leverage???

CPI was up 1.7% in 2012 and 3% in 2011. Compounded would be close to 5.3%, but not per year. Are you looking outside the US? If the SE index was up 4.7% per year, not clear how it failed to match CPI. And who cares that over a two year period home prices lagged something else - over the long term they deliver a zero real rate of return. Two years is nothing. It's been a great three years in the stock market, no doubt. With 10y CAPE over 22 versus 13 in early 2009, odds are you won't see the same returns in next couple of years (and forget bonds). Rent is a guaranteed loss and you must pay for somewhere to live, whether you rent or own. If you are paying comparable amounts for rent or mortgage, buying is a perfectly valid option for someone who has investments as well. Doesn't need to be an owner's entire net worth tied up in a home.

Tlt 88 to 117. 33 percent. Did not realize nada had math issues.

We are still early in the recovery?

Jamie Diamond: a bank disaster happens every five or so years. Ha. Ha. Ha.

FASB. Massive fed manipulation. Yes, everything's normal ,.

Aael921--it is far from hopeless. If you have reasonable expectations, alittle patience and a great broker --you will find an apartment that you can be happy with.

>Jamie Diamond: a bank disaster happens every five or so years. Ha. Ha. Ha.

How many banks are in the United States, that having 1 bank disaster every 5 years is a big deal. It's like saying we have a snow storm in the winter. Oh no! State of Emergency!

>Massive fed manipulation.

Black helicopters! Jackbooted thugs!

What is massive Fed manipulation? It's like saying that a chiropractor manipulates your spine ... that's their job.

>> In any case, you were saying that 2 years ago. As were brokers, and the NYT. SE index up 4.7% per year over past 2 years. Stocks up 50.6%. Bonds up 42.3%. CPI up 5.3%.

My bad, mixed up some stuff. Meant to say "in aggregate" rather than "per year", went 3 years back in stocks and bonds. Apologies.

Corrected, over past 2 years in aggregate:

SE index: Dec 2010 to Dec 2012 did 1898.38 => 1987.34. 4.7%.
SPY: Feb 10, 2011 to Feb 10, 2013 did 127.03 => 151.80. 19.7%
TLT: Feb 10, 2011 to Feb 10, 2013 did 83.09 => 117.12. 41.0%
CPI: Dec 2010 to Dec 2012 did 218.056 to 229.594. 5.3%.

Story remains the same, everything is up lots except for NYC RE. Didn't even outpace inflation.

Don't take my word for it, check it out yourself.

http://finance.yahoo.com/q/hp?s=SPY+Historical+Prices
http://finance.yahoo.com/q/hp?s=TLT+Historical+Prices

http://streeteasy.com/nyc/market/condo_index
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

>> I can't understand people bragging about bonds. Bond's interest rate went from little to very little. To get the 42.3% gain, you need to employ sizable leverage.

Nope, TLT is just long-dated (20+ yr) govt bonds.

It's pretty simple, when interest rates drop the value of your bond goes up. That's because back in 2011 you were holding a bond yielding 5%. Today, market is at 3%. Guess what, your bond is going to yield an extra 2% for the next 20-30 years. Hmm, that's an extra 40-60% money coming in. Discount for the time value of money for the cash flow, you're sitting pretty with a 41% return.

RE prices tend to go up as well when interest rates come down. Except when you have a bubble asset that doesn't yield diddly. Then, the heroic efforts of the Fed only manage to keep you flatline with inflation. Well, a little under, but you get the point.

Let's just quote the wall street journal, "Bond prices move inversely to their yields". So let's apply this to home prices... with low rates, home prices are up, with high rates, home prices are down. So, when the easing stops, home prices will drop.

>Let's just quote the wall street journal, "Bond prices move inversely to their yields". So let's apply this to home prices... with low rates, home prices are up, with high rates, home prices are down. So, when the easing stops, home prices will drop.

Yield on real estate = income generated / price. Income generated = rent, or owners equivalent rent.

Nada, please quit with the same boring repetition on stock performance. Most people buy or rent because they have to live somewhere. Maybe your investment savvy is best served on an investment forum?

streakeasy, I think the Fed seeks to carefully orchestrate rate rises w.r.t. housing. To do so, they will look at the national market, of course. Given the much-better fundamentals nationally w.r.t. prices vs. rents vs. yields, I think this is a long-term headwind for NYC. Not strong enough for a drop IMO, given wealth / distaste for nominal loss / ability to suck negative carry for long time, but a likely source of extended flat-lining.

Ottawanyc, please click on "ignore this person" if you are bored. The "invest in NYC RE by buying" vs. "rent NYC RE and invest elsewhere" is a topic that has long been discussed on this board, it is a topic that is of interest to many. The repeated posts back-and-forth on the subject should clue you in.

I don't care about renovation topics much, but you don't see me disrupting those conversations with "please go post on Better Homes & Garden" do you?

Uh oh

182K owner-occupied residences in Manhattan, 571K renter-occupied residences in Manhattan. The vast majority of the latter are held by investors of some sort. But talking about investment in Manhattan RE vs. alternatives somehow goes against Ottawan sensibilities.

uh oh inoitall

Ditto Ottawa . Nada is just a bore and fills up every other thread with same points.

"Nada is just a bore and fills up every other thread with same points."

I rather enjoy Nada's posts; they're very informative. You just have to take care not to let your skin turn green with jealousy over those insane returns that we hoi polloi can't always get.

We have a very good chance of a recession this year, which could put downward pressure on rents, so renting is a bet on the economy doing poorly.

As far as home prices, shadow inventory coming on line has been difficult to predict.

First , we already had some units sold in 2012 in advance of capital gains rates increasing. This is done.
Second banks with the help of our political leaders have slowed the foreclosure pipeline, but admittedly Manhattan foreclosures aren't a huge issue.

Second, rents have been steady to increasing a reason not to sell investment properties. Add to that home prices are not so high as to suggest a profit inducing reason to sell for those who bought the last several years. This restricts supply and means fewer apartments on the supply side.

>We have a very good chance of a recession this year,

What odds are you giving it?

>so renting is a bet on the economy doing poorly.

Isn't renting also a financial and personal/lifestyle choice?

>Add to that home prices are not so high as to suggest a profit inducing reason to sell for those who bought the last several years.

What percentage of homes that are owned for 3+/- years are sold to begin with?

What odds are you giving it?

>so renting is a bet on the economy doing poorly.

If we're talking "bet" it's what drives rental prices up or down.

i much prefer nada's analyses to the--"hey dude, youve got to live somewhere" or "my apt is my home, it's not an investment"

those are the posts which belong elsewhere--perhaps threads like "reasons i love my home and dont care about it's relative investment performance",or "i like my neighborhood. it's where my home is. I dont care that the city is building a grabage transfer facility nearby, which will depress values." woulld provide good receptacles for the RE issues Ottawannians like to post/read.

>i much prefer nada's analyses to the--"hey dude, youve got to live somewhere" or "my apt is my home, it's not an investment"

I'm sure if you ask nicely, you could get a copy of his calculation tempate, then just run them all day long. Williamsburg vs SSO. Long Island City vs Sprint. Sutton Place vs TLT.

Two brokers contacted me in the past week to see if I would put my apartment back on the market. (I took it off the market last year because I was competing with some foreclosures in the building, people who maxed out their mortgages during their easy credit times and then were hit by the reduced job market.) One of the brokers offered to cut his fee from 6% to 3%. Both said the inventory is so low that there are bidding wars on some properties. Sounds great, but I'll be in the thick of trying to find a new place.

One more time... NYTimes RE section is an ADVERTISING section. There is a reason that it is a separate part of the index next to AUTOS and CLASSIFIEDS. The editor has admitted in interviews that it is not journalism, and not held to those stanfards.

How much of what is propping up the RE market today is still the foreign investors looking for a safe place to park their cash?

We all know it used to be the Chinese and Russians. How many of them are still out there buying? Add to that Europeans still worried about their own wealth. My friend's in-laws (Catalonian Spaniards) have asked him to look into Manhattan RE, more as a safe harbor than as an investment.

Without inventory it wouldn't take a whole lot of foreign purchases to prop up the market prices.

add to those foreigners the Brazilians and Argentinians, and you have low inventory. i'm waiting for the $ to prop up against those currencies and see what will transpire then. dollar goes up by 30%, to bring it back to normality, they see a 30% profit on same $ amount. most of the foreigners, including many us buyers, are still clueless when it comes to the tax abatement.

I don't think my friend's in-laws care about currency fluctuations so much as they care about their nest-egg. When politicians run out of income to tax they start looking to wealth. Rational ideas don't come into it. Wwen they have to find grain for the masses who put them in power, any silo will do. It is already happening in Argentina, is destroying Venezuela, and has completely laid waste to Zimbabwe.

>We all know it used to be the Chinese and Russians. How many of them are still out there buying?
Without inventory it wouldn't take a whole lot of foreign purchases to prop up the market prices

Given the averages for condos right now @ $1300 per sq ft and co-ops @ $950 in manhattan, I think its quite clear this is the case.

Not necessarily. The demand might be from resident NY workers. Rumours, particularly ones with a what might be a nefarious twist (foreigners buying up property, governments seizing wealth, etc.), always abound in markets. They aren't always right or wrong, but what is the truth to them? Certainly there are fewer now than there were in the RE boom, but if even if they are now half what they were, so are the sales figures as compared to 2007.

We can't know that that is the case from market activity. But surely someone here has a better feel for that.

Well, today's NYT article said 40% of the buyers in the Touraine were foreigners....

Sales Prices In Manhattan Are Lowest Since 2004 AfterAdjusting For Inflation. Google the WSJ article.

Given the low inventory, basic supply & demand would lead one to believe prime Manhattan sale prices will / are increasing due to low inventory combined with the desire to act while interest rates are still so low. Sellers will begin to see higher sale prices for similar units and begin to list now that they can finally break-even (after transaction costs)or perhaps even make a profit. I see it happening at the micro-level (yes anecdotal) in my coop.

> Sales Prices In Manhattan Are Lowest Since 2004 AfterAdjusting For Inflation

No inventory because folks don't want to sell at low prices... if prices go up a little, more inventory opens up, making it hard for any sustained growth.

Agree with SWE. As I have posted a few times on here, I decided to sublet my coop because prices just haven't recovered enough. When and if I can break even, then I will consider selling. But not until then.

I remember a Zillow study saying 1/3 of folks nationwide would sell if prices went up.

Not to mention the WSJ article noting that we are at 2004 prices in real terms.