point of inflection in nyc sales market

Ali ... Inonada ... other brokers on the board ... please weigh in on
what i have posted

Whats your point? That prices will "rocket" 40% in a year?

Not sure about 40% increase but anecdotal evidence of steep prices increase is strong.

http://streeteasy.com/nyc/sale/756980-condo-395-broadway-tribeca-new-york

Listed for 1.675mm. Sold for $2.016. Bad location on Broadway just one block below canal.

No idea whether we are at an inflection point. I'll believe it when I see the data. People here have been talking about the impending jump (and nosedive) since I started reading SE.

To me, it's all about the story in these rates:

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

From what I can gather on this board, the RE proponents on this board seem to be getting their fuel from low interest ARM. The story repeatedly seems to be "Well, I got this 2.x% ARM and now my monthlies are X".

The Fed's goal is 2% inflation. They have been remarkably on-target with their extreme policies, and much of the liquidity has been sopped up by people here. The Fed now holds 1/3rd of all treasury bonds beyond maturities of 3 years. They hold $1T of mortgage debt out of something like $8T total. I'm guessing that they've bought more mortgages than there have been new home mortgages in the past 4 years. All this, on top of 0% short-term rates.

Fed policy is working. People seem to be gorging on cheap money in a way that the Fed intended: like it's never going to end.

The problem is that it will likely eventually end. The Fed will not reverse in a panicky way. They will respond with sufficient tightening to maintain 2% inflation. With $3T of assets to sell or run off and 0% rates, they have a lot of firepower to keep inflation in check. Those "this rent vs buy looks acceptable with 2.5% ARMs" won't look so acceptable.

At the lowest end of Manhattan RE, we are seeing cap rates (net of monthlies) of 4%. At the highest end, 1%. Account for transaction costs, the range becomes 3% to 0%.

Question is, will this hold? In the long run, I don't think so. Even without drastic moves in interest rates, those cap rates are pissing against the wind. Rent inflation is one common argument, but I don't see it. The Fed's got too much firepower on a macro level. On a local level, Wall Street is getting squeezed. Many (from the sounds of this board) are at the edge of their finances.

Let me put it a different way.

Go look at the table on page 5:

http://www.google.com/url?sa=t&source=web&cd=2&ved=0CCUQFjAB&url=http%3A%2F%2Fwww.comptroller.nyc.gov%2Fbureaus%2Fcac%2Fpdf%2FNYC_IncomeInequality_v17.pdf&ei=jcodUZf9IpDY8gSgh4DIBg&usg=AFQjCNEHsRbt2DtFObJ1L4n-YGkgeKZVjg

Note how quickly the number of households with various incomes drops beyond $100K (the level of a minimally-qualified Manhattan studio renter).

Talking about 40% rises in prices is all good and fun. But where does it come from? Rent apt vs rent money doesn't do it. Dropping interest rates seems unlikely (given ARMs are priced off a 0% index currently). And 40% increases in rent don't seem likely -- how can the incomes support that?

Maybe I'm wrong, or maybe we'll bubble into it, but not something I'd bet on.

If you want to make your standard real estate bull view seem scientific, it is best if you do not show that you do not know the definition of stochastic.

Eric, I was thinking exactly the same thing.

Maybe there will be a stochastic jump in incomes and a stochastic decrease in taxes .

Lmfao

stochastic event--never been--are there tickets available?

i belong to the relative strength index gym--all i got is a roid rage.

manhattan's moving average is comprised of those who move from rent to ownership.

Does anyone have hard data one way or the other on short-term price movement? Also
on the frequency and strength of bidding wars, which foreshadow proce increases.

300 Mercer:

1. that 395 Broadway sale was 20% over list
2. any ideas why that was
3. was property underpriced to encourage bidding wars
4. what did pre-2013 comps look like

To nadas point it will be interesting to see what the data looks like. I was thinking that this "hot" market may just be in certain sub-markets, for particular homes, but our experience has been hot and heavy bidding across the board in all nabes on both sides of the river.

Some listing brokers are seemingly exploiting this activity by pricing low and creating chaos. Good for sellers, lousy for buyers. It's an inventory/cheap money story. What will cause owners to sell? Problem is if they sell where do they go. It's no longer a story of being underwater that's keeping them from selling; there's nothing to buy. During the bubble years sellers where trading up adding fuel to the fire.

Rising rates will certainly slow down the frenzied buyers, but will it cause owners to suddenly want to sell? If we don't see inventory levels rise, NYC will at least stay stable. What will be the tipping point to bring a flood of new inventory/crash in prices? A black swan event?

I'm not sure if there is currently an exponentially large number of buyers like in 2006-2008 or just a lack of quality apartments driving this bus. Me thinks it's the latter.

Keith Burkhardt
TBG

Keith:

1. the market surge isn't uniform or universal
2. it seems to be concentrated on hot markets

3. look at the Rego Park-Forest Hills studio listings on SE
4. excluding several recents posts, average days on market is over 200, with a bunch of 300+
5. prices are lower than in the last year or two and seem to be trending down

6. to a lesser extend that is true in Astoria too
7. a managing agent friend of mine just sold a 1-bd in an elevator Astoria Coop
8. he generated a bidding war but only clods of dirt: no knives, grenades or IEDS
9. based on 2011-2012 comps the selling price was higher, but only maybe 5-6%
10. by contrast according to Elliman north Bklyn condos rose 21% last year
11. and seem to have already risen a lot in 2013

Bottom Line:

12. the NYC market tends to move in spurts, not entirely linearly
13. if initial 2013 data are correct, prices for desirable properties are likely to
move up in double digitis this year, possibly over 20-25% or more

Arby, do the numbers correspond to the numbers on your original post or are they stochastic? I'm so confused.

Any waves to the upside, are all about inventory. There is no quality inventory in Manhattan at the moment that is reasonable. As one who would like to buy in Manhattan at a reasonable price, I have obviously been temporarily shut out. However, I took the money I would have invested in NYC RE and bought I luxury apt in Miami in 2008. After a volatile few years, Miami RE is on a tear and inventory on the beach (my market) is extremely low. Developers have moved in and are building like crazy. So I sold my apt this week after just two weeks on the market at a record price for the building.

So too will developers move into Manhattan to build out inventory. I will invest my money and rent in the meantime. When rates go up -- probably at the end of this year-- and if developers announce new buildings, I think prices will come down over the next few years. That will be a good time for cash buyers like myself to step in.

@rb345: that 395 Bway bidding war loft was NOT under-priced and comps 2010-2012 were fairly consistent at $1,000/ft (some with no view/low floor, some needing gut renovation; a high floor renovated unit sold at $1,137/ft). #14A had a terrific renovation and has views + great light ... sold at $1,680/ft, in my opinion WAY above comps.

I hit the sale and the comps in a long blog post today:

https://www.realtown.com/sandymattingly/blog/loft-neighborhoods-tribeca/about-that-bidding-war-for-not-that-well-dressed-395-broadway-loft/

This is an extreme case, but I am seeing lots of lofts downtown with reasonable or push asking prices going quickly at/above ask. (One is in that same building, right now.)

Keith says "I'm not sure if there is currently an exponentially large number of buyers like in 2006-2008 or just a lack of quality apartments driving this bus", but I am not sure how to tell difference. Transaction volume in 2012 says there were a lot of buyers, with low inventory the true buyers have very limited choices. 'Tis a puzzlement, indeed.

SMattingly:

1. thank you for the link to 395 Broadway and its 2010-2012 comps
2. the increase in price/sq.ft. for 14-A is staggering no matter how you look at it

3. the moreso since the building is located in a very gritty area which lacks the
amenities of nicer areas such as Tribeca just south of Houston Street

4. more evidence of the theme of this thread: that the market seems to be reacting to
protracted scarcity of apts to buy with extreme upward price movement

or....

a couple of buyers who got caught up in an auction frenzy and frustration with finding a place significantly overpaid.

rb345, why would anyone ever think real estate moves in a linear fashion, especially over short periods? we've had a lot of people sitting on the sidelines. from 2008-2012, sellers refused to list at market clearing prices and take a loss. at the same time, buyers refused to pay a price that would make sellers whole on ill-timed, peak market purchases.

now that the economy has stabilized and the Fed keeps printing money, first time buyers who have been sitting on the sidelines are suddenly afraid a sustained real estate market recovery will price them out and are furiously bidding on the limited supply.

the only way to know whether more inventory will come online is to look at $ per sq ft where the current owners of 2BRs purchased. those people need to trade up or move out of the city with their kids so the 1BR owners can also move up and the market unlocks.

in my opinion, wall street banks are still cutting back and more than a few hedge funds and PE shops will be dying. so when the real estate market rebounds this year, it will not have the staying power as the previous boom, as there are fewer dollars in the system.

it is possible that this short term frenzy is nervous people bidding on limited supply and may not be sustainable longer term.

>>>>it is possible that this short term frenzy is nervous people bidding on limited supply and may not be sustainable longer term.

it is not sustainable by definition. developers will start building and added supply will contain prices.

What is the time period before the non-sustainability kicks in?

"now that the economy has stabilized and the Fed keeps printing money, first time buyers who have been sitting on the sidelines are suddenly afraid a sustained real estate market recovery will price them out and are furiously bidding on the limited supply."

This right here. Every day the Fed chips away at our savings and makes it a little less possible to buy. "Recovery"? No thanks.

skeptic:

1. I believe that the driver of this market is severe supply-demand imbalance
2. magnified by buyers fears that if they wait price and supply trends will move vs. them
3. and increasing loss of faith in financial instruments and stocks, bonds and REITs

4. Bernanke's policies have severely distorted the value of all American asset classes
5. with 30-day to 5-yr rates at effectively zero to under 2%, investors are starved for yield
6. in their quest for yield they have driven prices in all asset classses far higher than they should be
7. when lenders tire of Uncle Ben's vice interest rates will go up substantially
8. and prices in stocks, bonds and REITS will all fall, some very substantially
9. that prospect is already keeping a lot of money out of stocks, bonds and Reits
10. leaving real estate as a default investment

11. will the rapid price run-up I am forecasting come to an end: eventually, all such run-ups do
12. will it burn out earlier than other spikes: probably, since the internet accelerates all trends
13. will NYC real estate decline as much as other asset classes: not necessarily, because land ia finite
14. but for the short-term it appears that prices here are going to start spiking

I'm pretty sure you only need one number/bullet point per sentence. A well-written paragraph or two would work as well.

I'm not convinced prices are going down, but I AM convinced prices AREN'T going up.

Why?

1) Incomes continue to fall across the region, especially in the important financial services industry.
2) Recent strength in the market is driven solely by things like fear of fiscal cliff. This is a 1x event and does not suggest a real increase in demand.
3) Inventory is at record lows. As prices do start to move upwards, you'll see a glut of inventory on the market, depressing prices until the excess inventory is absorbed by the market.
4) the Dollar will climb against key currencies like the Euro, making NYC far more expensive for foreigners.
5) Rates have nowhere to go but UP UP UP and this will obviously pressure prices when it eventually happens. Can't keep 0% rates forever.

I'm convinced prices aren't going up. Convinced.

1. Is this a new trend
2. to put a number before every every
3. line and not even have
4. complete thoughts finished be-
5. fore you start a new line?
6. Or is this something that can possibly
7. be solved with medication?

oh stop being so stochastic.

haha!

1. l
2. m
3. a
4. o

Tom:

1. I disagree with all five of your numbered premises

2. first, at least some of the demand for NYC real estate is fear capital, domestic and foreign,
driven by a desire for asset preservation and not capital gain. Much of it also reflects a
shift in investment preference towards hard as opposed to paper assets, on the theory that
hard assets wont lose 100% of their value, unlike say some junk bonds and the common stock
of many NYSE and Amex companies

3. second, a lot of purchases here are all cash, which makes them immune to interest rates

4. third, people buying in the high end NYC market are wealthy, and less affected by declining
real income and increasing real inflation in the actual American economy. And with the emer-
gence of NYC into a world city, there are plenty of rich people to go around

5. fourth, interest rate changes wont deter most fear capital investors or super-zillionaires;
to the contrary, fears of stagnant or collapsing local economic, e.g., Europe and China, could
spur investment in NYC real estate, as it has for years in that uniquely American Ponzi "asset"
known as United States Government Treasuries

6. fifth, as to inventory, what if increasing amounts of prime NYC real estate is now owned by
people who simply want to live or sublet here and have no interest in selling

7. a phenomenon of that sort is now occurring in premium American coins according to Laura Sperber,
who paid over $10,000,000 a couple of weeks ago for a 1794 silver dollar - and said afterwards
that she would have paid $15,000,000 to get it - probably 10-40x what that same coin would have
sold for 10 years ago

8. prices for premium US rare coins have been skyrocketing almost continually since Lehman because
they are being bought by very deep-pocketed investors and because more and more of them are being
held by wealthy owners with no interest in selling: creating a severe supply-demand imbalance

>hard assets wont lose 100% of their value, unlike say some junk bonds and the common stock
of many NYSE and Amex companies

Oh, yes, those sketchy companies traded at the Curb.

dmag:

1. if that is the best you can do
2. go back to posting on the Sesame Street "junior intellectual" website
3. where the two year olds can continue to enjoy your stupendous cleverness

1. wait - Even though we are numbering each point, we can ALSO use subordinating conjunctions like
2. First?
3. Second, I am starting to get confused why we number everything
4. and third, shouldn't first be at the number 1. spot?

>8. prices for premium US rare coins have been skyrocketing almost continually since Lehman because
they are being bought by very deep-pocketed investors and because more and more of them are being
held by wealthy owners with no interest in selling: creating a severe supply-demand imbalance

And yet gold has been weak lately.

Greensdale:

1. gold is a generic hedge whose price is also influenced by new supply and destroyed
demand, such as the shrinkage in Indian demand for gold use in jewelry because of
its rise in price, as well as by investor sentiment

2. generic US gold coins have declined with the spot price of gold
3. numismatic US gold coins have continued to skyrocket

4. years ago when I first developed an interest in buying a 1790's US gold coin some
were being sold on eBay for only $5,000

5. today those same coins would cost multiples of that amount; some would cost more than
a new Manhattan condo

Dmag2020,
1. You said,
2. First and
3. Second, then
4. Third, so I am
5. Confused.

1. Do you pay property' tax on a coin?
2. How much does it cost to carry?
3. When you pass it down from on generation to the next, do you pay tax? Get the point.
4. How much does it cost to maintain
5. This thread is very funny.
6. Are coins stochastic?
7. How do you spell stochastic?
8. Did anyone read 7?
9. Can I get to 10
10. Yes!

1. Are you supposed to use question marks if you start with a number... .. ? Oh shoot!

Brooks2:

1. there is an actual or implied costof funds to owming a $10,000,000 coin
2. also, possibly insurance
3. its value is also subject to estate and capital gains taxes

1. 2.3. Easily avoided and easily transferable and transportable

If u are do concerned about the value of the $. Precious metals is a better bet than a depreciating, taxable, illiquid asset with high transactions costs

2. Brooks:

A. this thread is about whether NYC real estate is going to spike in value
B. not about the reletive investment merit of NYC real estate v. precious metals
C. please troll elswwhere

You responded to a troll twice. Don't like someone disagreeing with you or being wrong? Which one?

Hmmm spike.... A stochastic spike you mean? Lmfao

Brooks2:

1. Please confine your posts to the requirements of rb345's threads
2. Threads by rb345 must reflect huge confounding mysteries or global dire pessimism
3. Such as this thread http://streeteasy.com/nyc/talk/discussion/14069-state-and-operation-of-the-rental-market
4. Or statements like "my projections were intended to underscore the magnitude of the problems facing US and world civilization "
5. Or this "7. Mars is also undergoing warming right now "

Well
1. We did have a near miss with an asteroid yesterday.

A. Do you like using letters
2. Or numbers better.
III. ?

Brooks2/Greensdale:

Guess yiu guys never heard the old saying "better to be thought a fool
than to open your mouth and remove all doubt"

When you guys become mentally mature enough to enter kindergarden please
share your good fortune with the rest of us here in Streeteasy-land.

Until then just STFU and stop harassing those of us like Inonada that are
tryng to have discussions with people whose IQs are higher than a snail's.

rb345, can you fix the typo in your post, and also reorder numerically. We wouldn't want anyone to think you are a fool.

greensdale:

Honestly, just take an early withdrawl from your IRA so you can afford to
wash your rubber doll and start having a sex life again

1. LOL, two funny post from Arby
2. You should do it more often
3. I'll make a donation for the washing
4. I like numbered postings
5. Succinct and to the point

just like plugging into the spreadsheet

rb345, the Martians are coming for you.

Yo Greensdale:

If Inonada and I agree to split the cost of buying you an organ and a monkey, so
that you can pursue the career you seem most qualified for, will you agree to stop
haunting us like a lobotomized drug-addled shadow?

You have easy access to monkeys?

Greensdale:

I would go to Africa and carry a monkey on my back returning here if
it meant helping to set you up in the only career that you appear fit for.

Alright, we have a deal. Please go to Africa, feel free to notify me right after you clear immigration at JFK or Newark with the monkey.

1. Nada's post I value.
B. But global warming on Mars or stochastic price jumps

Is worthless.

Maybe you do need a high IQ to see it. But you don't Arbry

>> If Inonada and I agree to split the cost of buying you an organ and a monkey

Count me out, I don't want to support an unhappy work environment. No one likes working for a boss that is dumber than them.

>Count me out,

Too clever

greensdale:

Time to go to bed and play with your teddy bear ... or would that just be a teddy. We
adults want to have an adult discussion.

rb345, I admire your versatility - you switch easily between children's talk, and using big words (yet improperly)

Greensdale:

I think I know why you're so bitter: your rubber doll cheated on you with
another asshole.

So you've seen this doll?

Greensdale:

If wit were money you would be in debtor's prison serving a
sentence of like without the possibility of parole

This conversation could really use Truth, who uses neither bullet points nor succinct, cogent paragraphs.

rb, how Dickensian.

More stochasm?

you have soured this place. success for you.

Don't fret, real estate in Columbia County will also be up 40% because of stochastic events.

^^ It's been almost 2 weeks since I posted a comment on streeteasy. Yet, she can't stop thinking about me and writing comments referring to me.

While she's been doing nothing of interest, I've been living my life.
I won't lose any work or friends because of her comment.
She doesn't have any work or friends to lose.

She's a bored, unemployable housewife on Saturday night patrol (7:30pm E.S.T.) for arguments here on se.
Very "succinct and cogent."

Greensdale:

You're forcing me to look for my garlic, wooden stake, and mallet/

Look near the doll and monkey

So boring. So, so boring.

Do you search daily for "truth" references? I think you must. How sad.

^^Back again, still trolling for a fight.^^ 9pm, EST, Saturday night.

Searching daily for arguments.
Must be so exciting for her. How exciting.

Greensdale:

It's easy to see why your mother traded you for a tire rim, but you need to get over it
and to stop being so bitter ... better yet, why dont you rim of one your neighbor's dogs
just after it has been walked ... before you get too tired.

That way you will have what by your standards is a pleasant memory that you can savor when
you wake u in the morning.

Greensdale:

Just noticed that you've decided to go "gray"hound.

This is just ridiculous

Agree
rb345=Riccardo65's crazier cousin

oh where is stevehjx when u need him?

Ah to rent or to Buy? Classic question for someone like me, working at a bank and getting that big year end bonus. In the end I rented. No regrets.

1) I just rented a 3br on the USW
2) I put my bonus into the US equity market (primarily) and manage my own investments
3) I am content to ride out the rental market, so i can adapt to unforeseen events (layoffs, huge rise in rates, huge fall in prices)
4) Well if the housing market gets red hot, I'll have missed the boat,
5) I think that kind of situation is very unlikely to happen.
6) I'm taking my chances, and I made the correct decision...to rent.

11 windows, landmarked, tree lined block, view of central park from window in living room. and even a room where I can lock the inlaws when they come to visit the new baby. If there was a unit like this for sale, I'd have loved to see it (doesn't exist due to low inventory.

12. this list went to 11, but then it went to 12. so sorry if I just blew up anybody's ear drums.

^^ I wasn't talking TO her. I wasn't talking ABOUT her.

XIII. My sentiments exactly Tom
N. and similar circumstance.

1) can haiku
2) be adapted to
3) the art of bullet-pointing
4) posts?

@Tom, what is your rent for that? There's low rental inventory right now too, but maybe better stuff in the summer.

1) I just rented a 3br on the USW
2) I put my bonus into the US equity market (primarily) and manage my own investments

Interesting and when the market was crashing very few on this board would say they put their bonus money into US equities market. Now why is that?

Tomnevers, Congratulations on your new rental. From your post, it looks like the bonuses were not as bad as you feared in your earlier posts (if I remember correctly). Appreciate providing insight into the reasons (flexibility) rather than simply saying too expensive to buy. In my opinion, at these prices manhattan high end condos (not coops), spx and bonds are all risky. Would you mind posting your buy vs rent if you were to buy a similar coop?

300 Mercer:

1. I have recently spent a lot of time studying yields on REITs
and real estate NNN leases and tenant-in-common properties

2. what strikes me after closely looking at hundreds of offerings,
and at stock and bond prices, is:

A. all large US asset classes are in bubbles that will burst with large
capital losses, with the possible exception of unuusally desirable
real estate like the Manhattan-Brooklyn properties this thread concerns

B. yields on all asset classes have been driven artificially and unsustainably low
by Bernanke, with the result that investors in those asset classes will suffer
catastrophic losses when those classes adjust to higher interest rates

C. innumerable asset prices demonstrate a complete obliviousness to risk, even obvious
risk, e.g., many of the real estate REITs whose prices have skyrockered within the
last 2-3 years because of investors chasing yield

D. asset prices dont seem to be pricing in foreseeable contingent risk, e.g., the water
shortages and water wars that might stunt growth of businesses and residential devel-
opment in the Colorado and Oglalla aquifer fed parts of the country, or sustained
drought which shuts the Mississippi River, which carries about 8% of US GDP, as a
shipping channel, and/or the Great Lakes as well

E. there are no safe harbors left in the US economy where money can be invested without
constant monitoring for the need to quickly sell off

3. unlike bonds, many stocks and many retailers, real estate owners will directly and substan-
tially benefit from the ballooning inflation that Bernanke's policies are likely to create,
in particular people who finance their purchases with low interest/high loan:value loans

4. recognition or belief that point #3 is true might explain some of the frenzied purchase of
real estate, particularly in the more desirable neighborhoods of NYC

5. in the case of NYC and Manhattan and Brownstone Brooklyn in parricular, the economy is
also gradually separating from the US ecomony and becoming part of a trans-national
elite economy where demand and prices are driven by the fortunes and desires of the
world's elites and not domestic economic conditions

Hmm so we go E to 3 now . X you can never lose money in NY city RE because of the coming water wars Arby you can't be serious

Hi rb,

sorry I didn't weigh in on this thread earlier, but the last couple of times I looked at it, it seemed to have taken a sideways turn.

I agree with your point E about asset classes and there seeming to be no "safe harbors." Like Keith, I'm seeing a high-demand spring in downtown Manhattan and brownstone Brooklyn, and I do think that one factor driving those potential buyers (not that I am not saying anything about what drives non-buyer-posters on this board) is a perception that they have to take risk wherever they choose to deploy their money.

Where I differ in my pricing forecasts, I think, is that I see rents going up this year instead of staying flat, and that being another driver of the sales market. It's lonely out here on this limb, but this feels a lot like the mid-1990s all over again to me.

Realize that my perception is shaped by my client base; about half the people I work with are first-time buyers (for whom rising rents are definitely a goad), but for the other half this is a second, third (or in one case, a fourth) property. I wholeheartedly agree with your point 5 -- and I'm reading "Plutocrats" now, which I recommend if you haven't yet read it.

ali r.
DG Neary Realty

I feel NY RE will have a stochastic price increase when the Martians start buying after fleeing Mars because if global warming on Mars.

rb, Thanks for the thoughtful post. 5 probably is the best explanation of high-end condo prices at well over $2000 per sq ft level.

I think equities/real estate will be ok as long as rates are not going up more than 2% at 10y point (4% level; 2-2.5% inflation, 150-200bps long-term average risk premium). The rates going up is highly likely to be combined with stronger economic growth and some inflation. I also believe that we are very much in the middle of an economic up cycle with at least 2-3years to go before a mild recession.

a. Equities will be ok (not great) as corporate earnings will be held back by higher rates. At the current prices, equities valuations are pretty full but look juicy for a trade on 3-5% pull-back.

b. Inflation is good for real estate (ex high-end condos due to crazy valuations) as rents tend to go up with inflation as well. The real estate buyer has locked up a part of the inflation related increase in rent. Point 3 in your post. At higher rates mortgage spreads come in, softening the impact on mortgage rates.

c. Bonds will suffer the most. Hence, I do not hold any bond in the portfolio. All I have done is taken the tradition bond allocation and put into real estate by buying a fairly valued coop (think $1000-1200 per sq ft in a prime area). Long term Real estate prices are some combination of equities, TIPS, bonds and desirability of location. In a way, I am short a 5y bond by locking in 5 year arm making my apt purchase some combination of equity+TIPS investment. If I wanted to keep a mortgage longer than that, I would have locked in longer term rates which would give me far more inflation protection than any renter or any one who is long bonds in their portfolio does. Most people on this board who are calling for real estate crash due to rates going up probably own some bonds.

Bills. Notes, Bonds. There is a difference. Can't lump them all into one.
And there are many kinds of noted and bonds

E. there are no safe harbors left in the US economy where money can be invested without
constant monitoring for the need to quickly sell off"

So is this because it will hold is value with the up coming water wars, from Martian investment or that eal estate is very illiquid asset and transferring ownership involves very high transaction costs? Not to mention the believe by owners that the value of their real estate is substantially different than the the reality if what their resale state is actually worth. Earthling reality, not Martian reality.

Ali/300:

1. I think that at some point Bernanke will lose control over interest rates
and at least medium to long 5-30 year rates will be dictated by the demands
of bond investors, who will demand yield increases of far more than 2%.

If you value US bonds like normal bonds rather than as a reserve currency,
yields of 8-14% or more would better reflect current default/debasement risk
rather than 0-2, which by coincidence is Brooks2's mental age range

2. but the US economy faces three much greater problems than interest rate risk
and the destruction rising rates will wreak on non-real estate asset classes,
including stocks

3. the first is technology. Technological advances are destroying innumerable jobs
and demand for goods and services, and stand to do a lot worse in the near-term
future, undermining the fundamentals of numerous investments and securities.

The combination of cloud storage of documents and increased laptop power have
tremendous negative implications for the office sector, paper, publishing industry
and ducment delivery businesses, among others. The ability to store documents in the
cloud means that records intensive industries like law and accounting need far less
on-site storage space. The fact that the libraries they depend upon can also be
stored in the cloud means the same thing and is also a severe threat to the revenue
streams of trade publications, like West Publishing. The ability of employees of law
firms and accounting firms to bring their offices anywhere on earth in their laptops
is and will continue to destroy demand for office space. That destruction has serious
negative implications for office space demand, pricing, debt and even employment.

Bigger threats are now emerging in robot forklifts, equipment which retrofits farm
machinery into robors, and the ability to replace all 2,600,000 of America;s truck dri-
vers with robots. In Australia's mining industry robot vehicles use 50% less fuel. A
robot truck fleet would not only displace many or all of its drivers, but because robors
can drive 24/7 unlike humans, who by law cant drive more than a certain # of hours/day,
it would also reduce nationwide aggregate fleet requirements by somewhere between 10 and
20%, with splill-over reductions in demand for new vehicles, tires and repairs

Robot operation of trucks, trains and planes seems inevitable as governents and private
companies. hemmed in by limited or no ability to increase revenue, try to maintain solvency
and profitability by reducing labor costs.

4. the second is resource depletion, worsened by possibly permanent climate change, especially
fresh water. Water scarcity is going to exert increasingly serious constraints upon economic
growth and business formation and operation in the US. The recent drought is exacerbating that
scarcity but it would exist even without a drought. The quality of US farmland has also been
degrading over time, partially from excessive use of now depleted groundwater. In addition, many
of the resources which were cheap in the 70's and 80's are now a lot more expensive because of
depletion of cheap reserves, e.g., most basic industrial metals. All of those conditions are
headwinds for current and future economic development.

5. third, the welfare state adopted by Japan, Europe and the US has created artificial but unsus-
tainable demand for goods and services by taxing or borrowing money that is then spent on free
goods and services. None of those economies can be restored to health until that process is
reversed. Either the bond markets or economic collapse will inevitably lead to shrinkage of the
welfare state. However, its shrinkage would cause US GDP to contract by 5-10% or more, and will
destroy or damage millions of jobs and tens of thousands of businesses.

@ FP: I'm reading 'Plutocrats' as well. Fun book. I recommend as well.

So third or five will be good for NY RE hmmmm makes sense to a 3 year old. But this 5 year old thinks Martian investment holds more water. Wow maybe they can solve the up predicted water wars too

Brooks2:

Why dont you stick your head up your ass and have a
meal on me

Uwsbeagle, book club!

ali

So, FP and 300, you said rb345/Riccardo65's crazy cousin had a good post, and see what you got in reply? Robots, forklifts, cloud storage, water wars will all negatively impact real estate (just like the elevator impacted real estate, all of a sudden we no longer had to be limited to 4-7 stories in a walkup building or loft, so real estate plummeted with all that extra supply brought on by technology, is that how it happened?).
That plus water wars, Bernanke is going to unexpectedly lose control of interest rates, the proper interest rate for the U.S. is 8-14% (because he said so), and the best insult of all times, my mother traded me in for a tire rim! But if the two of you weren't sure about his intellect before and ability to misuse big words and concepts, just reread Post #1 - Points #2-3. Uh oh Ali, this is taking a turn for the worse. But inoitall likes him, so it's ok.

I am no fan of nasty comments and prefer not to engage in such circumstances. But long post, where some comments are unrelated to real estate or general economic/stock market chatter (just my opinion), are completely fine. People can always ignore the crazy posters or choose not to read selected comments.

300:

1. brooks2 is a troll
2. he/she/it posts here just to annoy people
3. its been stalking me on this thread and I'm really fed up with that
4. this site is for adults to discuss the economy and real estate
5. not for infants who are throwing tantrums because rhey cant find a table to crawl under