Shiller: Housing Slump May Exceed Depression

I didn't publish that. The figures you are looking for are on an existing thread steve, I don't remember which one. If you really want to see them, you can find it yourself. It was something about using your monthly rent vs. buy numbers to come up with a 10% correction instead of a 50% one, and the one that lead you to saying the S&P was less risky than a tax deduction.

Well you can find my stuff very easily, why can't you find yours?

You did say that - you used a 0-risk interest for an "alternative investment," and something like a 10% annual increase in property prices. Sure that'll give you your answer, but it's not grounded in reality.

40x/28%.

stevejhx let me get this straight you believe rents are actually decreasing in Manhattan??? I was wondering if those whose lease are expiring in the upcoming months can confirm this reduction in their rent payments. Also curious about those that are looking for an apt to rent can confirm stevejhx statement as well.

I've heard that rentals for 1 bdrms are down about $200/mth.

spunky, read JuiceMan's post.

And how he can claim that nybits.com is a lousy source of information on rentals is beyond me. There is no better one for no-fee rentals that I am aware of.

No steve, I actually used an after tax 5% rate of return for "alternative investments" and an assumption of 0% apreciation and 0% rent increases. It was quite compelling, which is exactly why you spit the dummy when you read it.

Also, I already told you, I can find your stuff easily because I keep a list. That was number 323 out of 463.

nybits.com looks like a 4th grader built it for his science fair. Most properties don't have floor plans, no information on buildings, all text, little statistics, etc. It is like searching those old card catalogs in the library.

dmag2020, typically what i have seen with rents in NYC, rents go down from nov to april and then back up again may throught oct. this is just based on whenever we have personally been looking for apts.

stevejhx..since u have a very strong opnion about realestae, stocks etc..do you factor in people with families oposed to single people etc.. just curiuos are your figures based on a single income ? it seems you never factor stablity in home life when you make all these comments about buying vs renting

Then print it again, because it's impossible to have 0% appreciation and 0% rent increases. I calculated them in at the historical rate of real 0.7% per annum, and the historical rate of increase of the S&P 500 with dividends reinvested of 8%.

Those are real figures, documented.

If you have a 5% rate of return on "alternative investments," as you claim, and 0% appreciation and 0% rent increases, then your "alternative investments" will by definition always perform better. Who are you kidding?

nybits does the same as streeteasy - it aggregates other information. There are no floor plans on streeteasy for the most part, very little information on buildings, but a few pictures. If the building's management doesn't publish information on the building, then there won't be any. Just like there isn't on streeteasy for rentals, either.

You seem not to want people to use it: just go right here http://www.nybits.com/search/

and you will see a search tool just as good as the one here.

You keep a list of what I say? Wow! I'm flattered! (Though it is a bit creepy.)

sfo, I don't make a distinction between the different externalities involved in renting / buying, because they can't be quantified. As many people like the freedom of renting as like the permanence of owning, I assume. If there is a premium for owning - which let's assume there is - my only point is what size premium? Right now it's 2:1, and that seems excessive.

If you have a family, which would you prefer: the "permanence" of owning, versus having twice as much money at the end of the day? I daresay at these price levels "permanence" is rather expensive.

stevejhx..i have to congratualte you as i have never in my entire life formed an opnion about someone i dont know or never met and againest my beleives and up bringing, i have formed a stong opnion about you and your thought process....good luck to you sir.

Urban I agree with you and all your negativity and posting about the future of our economy.
I just want you to look at the following statement by this crack pot that was on CNBC Friday.What a joke.

"I think that we've got a lot of strength that's going to come out of the export sector, the technology sector. We've seen good earnings reports from some of them. They're thriving on this weak dollar. It's giving them a chance to sell goods all over the world. And I think that's going to probably pull us out."

- Robert Engle, Nobel Laureate Economist winner 2003 and New York University professor

Yup, spunk, you're right as usual.

Payrolls Probably Shrank, Growth Slowed: U.S. Economy Preview

By Courtney Schlisserman

April 27 (Bloomberg) -- The U.S. probably lost jobs for a fourth month as the collapse in construction and a slowdown in consumer spending almost stalled growth, economists said before reports this week.

Payrolls fell by 78,000 in April, based on the median forecast in a Bloomberg News survey before the Labor Department's May 2 report. Figures two days earlier may show the economy expanded at a 0.4 percent annual pace from January through March, the smallest gain in five years.

Stevejhx unemployment rate still at historic lows.

No question about that, spunkster - I never said we were in a recession, and I don't think we are. Housing, however, is.

Yes and I agree we are in a national housing recession but I would like to know why you feel we are not in a recession.

Because I've never in 15 years had this much work at this time of the year - just Friday I got 100,000 words to be translated from Brazil within 7 days. I've made more money so far this year than I did in the first 7 months of last, and last year was a record year for me.

All of my clients - who span the globe from Germany to London to New York to Washington to San Diego to San Francisco - report the same thing: they've never been busier.

That said, I work in an international field, but always in the past when there was a recession - 2001, for instance - I felt it in the form of unemployment.

Some areas are hurting: my mother reports that temporary work has dried up in her part of Florida, which is more dependent on the housing market than most places.

But I don't think farmers are hurting and I don't think manufacturing is hurting. Housing, construction, and finance are hurting.

stevejhx interesting not sure if your line of work is an accurate barometer of the economy but it does show that there are some very strong segments of this economy other than housing and Wall Street that are remarkably strong. Just out of curiosity in 2001 were you in the same or similar line of work.

I have been in the same line of work since 1993, and some of my clients I've been working with since that time. It has been a very accurate barometer in the past since it's very expensive (25 cents per translated word and up, of which I get half), so people do away with it first.

My points in all my postings are the same, my numbers are the same:

1) Residential real estate must be viewed as a capitalized expense that provides the same output as rental real estate: shelter. Providing the same output means it should cost the same.

2) Currently it is provable that real estate costs twice as much to own as it does to rent in Manhattan, which is a situation that has not occurred at least in my memory, and it started in about 2004.

3) The price of real estate - any form - is directly tied to incomes, and in the case of properties to buy, to leverage.

4) Leverage is very expensive right now, and difficult to get at the prices levels needed to buy Manhattan property.

5) Unlike investment property, owner-occupied real estate is historically a very bad investment; only in recent years has there been the perception that it greatly appreciates in value when it can't, since it doesn't produce income (like stocks), but rather consumes it.

6) As prices soared in Manhattan, people correctly attributed it to Wall Street bonuses (near perfect correlation).

7) Now that Wall Street is in a funk, those same people are incorrectly arguing that it won't have effect on property prices.

8) Depreciating property prices is not a horrible thing; it only affects people who recently purchased (since 2004) and only if they need to sell. It does have a "wealth effect," but that is very difficult to quantify, if even at all.

If any of this is wrong, I'm sure you'll let me know.

"If you have a 5% rate of return on "alternative investments," as you claim, and 0% appreciation and 0% rent increases, then your "alternative investments" will by definition always perform better. Who are you kidding?"

This was just for a monthy cost comparison steve, you are correct in the long term. It was a pretty good model, you should find it. Oh, and comparing nybits to streeteasy is like comparing Natalie Portman to Chewbacca. Give me a break.

"This was just for a monthy cost comparison steve, you are correct in the long term."

What? I'm correct in the short-, medium-, and long-term, in fact. How short-term depends on how often you compound.

And that wasn't what you said.

"comparing Natalie Portman to Chewbacca."

Neither do anything for me.

streeteasy does not have a comprehensive list of no-fee apartments. It is for a different purpose.

Sorry, like comparing Brad Pitt to Chewbacca.

Do you have a relationship, financial or otherwise, to nybits?

Much better.

No, no relationship, it just offers transparent information on a market segment not well served by streeteasy or nytimes.com. Lots of agents just leave their rental listings online to try to induce people to come to their office and bait and switch. nybits for the most part doesn't do that, and they maintain historical listing information.

yeah, good point. I just took another run through it and it isn't that bad. I was probably a bit harsh with my original criticisms. However, it would be nice to have more information on the buildings, floor plans, etc.

some buildings do provide that if you click on the link to the management company.

Related has just started to use this website, as well, for its buildings.

nybits has improved tons recently, and it keeps on getting better.

stevejhx not sure if I agree with your translation service having a direct correlation with the state of the economy but one should not disregard it. In fact it would be nice if urban would speak with people such as yourself and other small business owners before copying and pasting any negative economic view points he gets his hands on. I think he goes out of his way to avoid the sentiments of economists who feel otherwise. I respect the use of charts and statistics but it wouldn't be a bad idea if some of these economists would actually speak with various business owners before making such dismal forecasts.

Rose, Rockrose and Glenwood also post vacancies on their Web sites.

WSJ: Panic on WS is fading...

http://online.wsj.com/article/SB120933383716148033.html?mod=hps_us_whats_news

spunky- I never said we will be in a recession for 5 years. I did say that it will be longer and deeper than a "traditional recession". I do however think that NYC real estate will see a 20-30% decline over the next 12-18 months. I think that it will take 3 years from now for property to get to the levels we are at today after the decline. The only hope we have for the recession to be less than a year is if the international markets holdup. The problem is that European economies are just starting to feel the same problems. My guess is that they are about 6-8 month's behind. I have been paying some attention to Ireland. They have had tremendous growth, but much of it is also contributed to the housing boom. It was even more common to borrow 90-110%. People over there would buy a house and get a home equity at the same closing. Ireland is beginning to feel the effects of the credit crunch.

spunkey and juiceman- I hear your concerns and ponder your view. I have said that if I'm right things are going to be bad. I would love to tell you guys next year that you were right and I was wrong. If this was just a subprime problem I would be much more optimistic. This has nothing to do with unqualified buyers. That notion is just fluff by the media. When all of this is over you will see that just as many non-subprime borrowers lost their homes. It's the revolving debt that has kept this cycle going as long as it did. The HELOC's and credit cards the owner's were using to pay their mortgage are gone. And now you have nothing left to borrow. The consumer is tapped out.

will - in my opinion, we can say risk aversion is history when 3-MTH LIBOR gets within 15 basis points of fed funds rate and holds. We are at 66 bps or so now of a spread, hinting at continued risk aversion amongst banks.

Interesting report on impact on September 11...to me, this was a much bigger challenge than what we are now facing... (Steve, this is just my opinion so no need for a vitriolic, ad hominum attack in response)..

http://www.ny.frb.org/research/epr/02v08n2/0211rapa.pdf

spunky, when it costs you 25 cents plus per word, or $75 plus per double-spaced page, believe me, they cut you out fast. In two ways: first, most of my end clients are law firms: they have in-house staffs such as paralegals whose can, to some degree, do what I do. Not as well b/c I have a lot more experience and understand not only the law but the subjects I translate (finance, accounting, banking, etc.) so I make as much as the lawyers, but they can get a general idea of what a document says.

Second, since I work exclusively as a subcontractor to larger agencies - I don't take private clients b/c, although the pay is higher, it's not worth the default risk & most private clients want translations of report cards, which I don't do - some of them hire in-house staffs to do the grunt work. In-house is cheaper - yet right now I'm overwhelmed and have been for months.

I can't say if THIS TIME it's a barometer; I only know afterwards. But always in the past it has been.

I am almost a Larry Kudlow Goldilocks investor (though I'm not a Republican or a supply-sider): I think investments are always going to go up in the long-term. But as I say above:

1) Owner-occupied real estate is not an investment; it's a capitalized expense. It consumes income rather than generating it, so it does not appreciate more than incomes in the long-term.

2) Since it's a capitalized expense, it should not cost more than an equivalent current expense, which is market rentals. Right now, the cost differential is twice. It makes no sense.

What happens in the stock market it immaterial to what happens in the real-estate market. Stocks are priced based on expectations of future earnings; residential real estate is priced as a percentage of household income.

What happens in the credit markets is to some degree relevant: it determines how much liquidity there will be at what cost. But even if securitizations return to where they were, no bank will ever lend this much money out for real estate again, with no possibility of repayment. Non-financial companies issuing mortgages are going to be regulated, since in the end the government needs to bail them out if they fail.

What we're seeing in housing now is as serious as 1929 was for the stock market. The regulatory environment is going to change drastically just as it did during the Depression - the Securities Act, the Securities Exchange Act, Glass-Steagal - because public funds are on the line. The Fed is going to take over regulation of investment banks, S&L's (Washington Mutual, for example), non- and quasi-financial companies. We're in for change like we haven't seen in 50 years.

We're not going to go back to the olden days pre-repeal of Glass Steagal, but we're not going back to the past 5-10 years either.

I do not see how, if rentals cost half as much as purchases on a cash-flow basis, that this situation can long remain. I do not see how, if Wall Street income is collapsing and median property prices are nearly directly correlated to Wall Street bonuses, that this situation can long remain.

I don't see it. Nobody has shown it to me. I am not a pessimist in general, but as Suze Orman says, "Show me the money." It's not possible, because the numbers don't exist.

stevejhx- Don't you find it funny that when the market was booming it was because the big wallstreet bonuses. Now the same people would like us to believe that Manhattan real estate has nothing to do with wall street bonuses. Just makes me laugh at the brokers. This is exactly why many people on this site just ignore economic fundamentals. They have a vested interest talking the market up.

dco you keep stating the consumer is tapped out. You may in some degree be right but also keep in mind that 100% of all consumers are not unemployed.Take stevejhx he's making more money than he has in the past. Once again the unemployment rate is at historic lows. The Job market at present is very strong. There are segments of the economy that are doing quite well. Your forecasting a depression not a recession. I too hope your wrong.

"I do however think that NYC real estate will see a 20-30% decline over the next 12-18 months. I think that it will take 3 years from now for property to get to the levels we are at today after the decline"--dco

dco now to me that sounds quite optimistic. First your forecasting a 20-30 decline in the next 12-18 months than your forecasting prices to pop back up 20-30% 18 months later. Now even stevjhx has to scratch his head on that one.

stevejhx --I think everyone is convinced that you believe owner occupied house is a bad investment. I find your views on the economy a bit more refreshing.

dco, re: "I think that it will take 3 years from now for property to get to the levels we are at today after the decline."

I'm bearish, though not as bearish as you or stevejhx, but that timeline (3 yrs back to today's prices) seems short to me. I know I've quoted this before, and I'm sure I'll quote him again, but using malraux's gut-instinct "West Village down 8% in calendar year 2008, down another 8% in calendar year 2009. Then stable 3%+/- until the inevitable upturn occurs," we wouldn't start climbing up for at least 3 years. My own thoughts regarding the lack of a bonus bounce again in 09 are consistent with this: down this year and next, flat at best for ??? How long would it take to come back 13-16%? Not to mention that he's talking about one of the most desirable neighborhoods in NYC, and my own gut and experience tell me we're seeing the spread return regarding desirability in both neighborhoods and properties, so much of NYC will be hit harder.

Beyond two people’s feelings, S&P/Case Shiller and the Bloomberg and former Spitzer administrations have NYC (yes, not just Manhattan) bottoming in 2010. Again, how long to get back up? I know 5 years is often cited as a safe time horizon, but if renting would have been cheaper in those 5 years, just getting back to your purchase price means you lost money. The folks buying tax-abated new construction are going to need especially long time horizons, given the high transaction costs and greater expense to the resale buyer.

Dudes, this is not a "feeling." These are numbers.

Malraux - though I hate to admit it - is right about INVESTMENT REAL ESTATE. There's money to be made.

But owner-occupier: not.

28%/40x. Defeat the proposition.

stevejhx, just to be clear, my post was to discuss timeline. The purpose of quoting malraux was to point out that even someone with a much more conservative expectation of depreciation than you or DCO has a longer expectation of time-to-recover than DCO expressed.

WOW- I have never had so much of my words anaylized. It's kind of funny. Perhaps it does a person good to see how people react to his opinions. I'm sorry for any confusion. I'm not forcasting a depression. I'm forcasting very tough times ahead. My feeling is that it will take about 3 years for the economy to start moving an exceptable pace. I sould also clear up that I consider a flat economy as a bad one. Perhaps that's where I go wrong with my expections. Frankley I see the economy contracting in the next 12-18 months and remaining flat for a couple of years. I think that it's important to seperate wallstreet and NYC real estate. I think the they will recover at different times.

Heaven help us all.