NYC (Manhattan) Prices going forward

Those numbers are misleading and I dont know how they came up with them. One can easily find housing in Moscow and Sydney in excellent areas without being as rich (or spending as much) as you need to be to live in Manhattan in an equally nice areas. Same for London, unless you are handpicking the areas. I cannot speak to the cities in China. Hong Kong is limited to an island so that number is more consistent.

Thanks Catguy.

for rent, NYC is #3 in world..

http://www.cnbc.com/id/100414261

for 'global cities to invest, NYC is #1

http://www.cnbc.com/id/100357864

then again this is cnbc, so who knows

I believe it is "The horror. The horror." and not "Oh the horror!!" for those Conrad aficionados.

Thanks Catguy for clarifying.

And for undergraduate students matriculating with non-trade school majors, "Oh, the humanities!"

you said "matriculating"

how much do you own?

Ericho, The aol article does not cite the source of property price calculations. While I generally believe that manhattan real estate is cheaper than many other large cities but the article is more meant as entertainment.

ericho, pls entertain us with your get-rich-quick strategy involving studio ownership in upper yorkville.

perhaps you plan to set up a coffee cart for all the garbage truck drivers?

you could store all your supplies in your apt. Is it a walk-up, is it coop? youll need to factors these issues in.

http://realestate.aol.com/blog/2013/03/08/most-expensive-housing-markets/#photoID-5697092

Tokyo isn't even on the list anymore. Twenty years ago every Japanese person was bragging about how the land under the Imperial Palace was worth as much as all of California, or whatever it was. How the mighty have fallen.

I believe that $4000 - $5000 price in HK was for new developments. Previously owned apartments would sell for much less. Of course, that is relative. They are still much more expensive than NYC.

@ Alanhart .. you sure u didn't mean MASTURBATING ?

I have lived in HK and in London. NYC real estate is an heaven. There is still lots of room for price increases. Sorry.

Viran is correct.
Prime London sales of existing properties (ie not new) are about 35% more expensive per square foot in my mind than Manhattan prime.

Just wait until rates go up you idiots. Then the bloodbath begins. I don't know who in their right mind would think it's a good investment to buy an asset that is priced off of incomes and rates when incomes are stagnant to down in real terms and rates can only go in one direction - I'll let you guess which direction - it's the most obvious one way bet I've seen in a while.

When interest rates are bumped slightly higher, you are going to have the rush of buyers to buy before they go even higher. Just watch.

That may happen in short term as people who don't understand math worry that they're getting priced out but as soon as people realize that rates are moving back to normal (say 7-8%) or higher and that means prices have to go down by 50% (if mortgage rates go from 3.5% to 7%) then everyone will wait for the "bottom" again like they did during 2009-2010. The herd psychology will flip and rush in the opposite direction - but I admit it could easily take a year or so for that to happen as rates are moving up.

Problem is that people never know the bottom. It didn't go down 50% in 2009-2010 and most people didn't see it as a buying opportunity while it was happening. You aren't going to see a 50% drop even if rates double over a period of 3-5 years. It makes mathematical sense that it would be it won't happen.

Rates doubling does not have an inverse affect of RE dropping 50%; that logic makes no sense. Also, keep in mind that the cost of labor, materials, and [thus far] land keeps creeping up so the cost of putting up new buildings and the price needed to entice developers to build keeps creeping up as well. If RE falls by enough then developers stop building which then puts upward pressure on prices because you have supply constraints. There may be somewhat of an artificial floor to NY RE due to the high cost of bringing new buildings to market.

Dogg pound, can you multiply? If you buy a $1mm apt with a 3.5% mortgage, how much does the price of said apt have to go down in % terms for your monthly nut to be the same if the mortgage is 7% instead of 3.5%? In the end, people determine the price of the apt they can afford based on their monthly nut - the headline price is just the output based on their monthly income and mortgage rate.

What were prices the last time we saw 6-7% interest rates?

You are all arguing in a circle. You do realize that?

Tenout: "...as soon as people realize that rates are moving back to normal (say 7-8%) or higher and that means prices have to go down by 50%..." - that is not how home prices work. Otherwise, when interest rates dropped from 7% to 3.5% the corollary argument would be that prices have doubled - which is clearly not true - and not even close to it. VERY faulty logic.

For most of the period from 1979 through 1990, mortgage rates were above 10 percent and home prices were rising. The appreciation over this period averaged 4.8 percent per year(!) The key is to understand what factors would lead to such high mortgage rates; those factors were also good for home values. Of course I am not saying that prices will never go down - more likely - I’m saying if (when) they go down, it will be at the same time that interest rates decline, with common causality from weak economy. Or that strengthening economy will cause both interest rates and home prices to rise.

Higher interest rate is a counter measure for inflation. That will include the price of real estates. To predict the outcome of price, interest rate will only be one of the many factors. Depending on market condition, if a 7% mortgage rate is still not high enough to cool down the market, then interest rate will need to go even higher. So, a higher interest rate does not automatically translate to lower price. It only shows that the Fed want to use higher interest rate to tame the hot economy.

like 5 years olds arguing about mideast policy

all else equal, all components of carry, including finance cost, affect the principal value of any asset.

duh mj!

Tenout is just repeating right-wing nonsense that treasuries are in a bubble and once the Fed stops buying 10 years, long-term rates will go up. Long-term rates will go up when there is inflation and inflation in the U.S. will occur when the economy stabilizes and unemployment goes down and incomes up. So when we see 6-7% mortgage rates, you will have a strong economy, rising incomes, and very low inventory of homes. You will not have a weak economy and high interest rates unless you buy into Stockman's incoherent rant in the NY Times.

theres already inflation in the economy. the fed is already hinting at an end to qe. its so cliche, but steveF may have been right....buy now or be priced out...or at the very least have to pay more if you want to own.

it didn't really seem like our friend tenout grasped that basic concept.

duh yikes!

Think tenout may be long bonds as a hedge to his equity portfolio.

Marco, where is the inflation? Home prices can be up because of inflation or because of supply/demand. For there to be inflation, you would see it in the TIPS market, you would see it in energy prices (especially natural gas), you would see it in wages, etc... None of those markets reflect any inflation, especially with the 10 year treasuries at sub 2%.

Also question to all the people predicting real estate decline due to rising rates: are you short bonds? Buying real estate with a long hold period and long dated mortgage is short bonds.

>Buying real estate with a long hold period and long dated mortgage is short bonds.

How so?

300 mercer is right. If you are buying a long dated mortgage it is generally because you think rates will rise and you want to take advantage of the rates now. If rates rise and 300's lender tries to securitize the mortgage and rates have risen, they will get less than par to reflect current yield compared to similar duration mortgages with similar credit worthiness. If 300's mortgage is at 3% rates and rates go to 6%, depending on maturity, 300 Mercer's mortgage will be priced at well below par to reflect 6% current yield, assuming no change in 300's creditworthiness.

" Home prices can be up because of inflation or because of supply/demand."

And you can get arrested for stealing or taking something from a store without paying

"For there to be inflation, you would see it in the TIPS market, you would see it in energy prices (especially natural gas), you would see it in wages, etc..."

One of these things is not like the others. (Hint: the one where the government is free to manipulate figures so as to hide reality.)

Everything else -- food in particular -- has gone steadily up in recent years. Can you still ride the subway for $2.25? Can you still employ someone for $6.50 an hour?

>If 300's mortgage is at 3% rates and rates go to 6%, depending on maturity, 300 Mercer's mortgage will be priced at well below par to reflect 6% current yield, assuming no change in 300's creditworthiness.

I would be careful here. Remember that mortgages have no or virtually no prepayment penalties. In simplistic terms: if rates go up prepayments go down. If rates go down prepayments skyrocket. I could go on but gets very complicated very quickly.

whah??
I buy mortgages when i like their yield relative to other FI instruments, when i think rates will be stable to lower, but not much lower---duh

chk adp challenger and claims--inflation?? job growth?? riiight

new lo rates for the year across entire tsry curve--today

QE 4 eva---haha

Stockman's rant? try this rant==>"If you are buying a long dated mortgage it is generally because you think rates will rise"--puuhhleeezze trade with me!

fact is the fed's pushing with a string and cant buy all our debt for much longer--if RE ramps and stox continue, what happens when both unbubble, and fed's played out it's ammo??

So cute to see people who learn their economics from CNN speak with such authority.

whayt have you learned from your cat?

do tell.

Hehe guy with cat.

I get my economics from a Bloomberg terminal. Have you ever seen a Bloomberg terminal CatGuy? As for opining on Moscow real estate, I am fairly certain you have never been out of your parent's basement.

i have an honest question about this...im getting quoted a rate of 3.6 and i thought that was high but i was never aware rates approach 7-8% or even 10%... how is it feasible to own when your paying so much for that...is it realistic to think rates will increase in the very near future or what is the times frame...sorry to interrupt the useless argument for an actual question

>I am fairly certain you have never been out of your parent's basement.

Guy with cat is, well, a guy with a cat, but do you really know enough to make the above statement? Did you learn that from a Bloomberg terminal?

I tend to disagree with Tenout and agree with st2c: "So when we see 6-7% mortgage rates, you will have a strong economy, rising incomes, and very low inventory of homes."

Would be nice to see GuywithCat contribute with something other than banal comments.

I don't live in the USA so can take a more global perspective.

Don't forget the US real estate market is one of the most stressed tested markets in the world. It has been to hell and back. It is much more resilient now. Property is in stronger hands. Those stronger hands who have either held on to or managed to buy when normal mortals couldn't get mortgages will be able to withstand higher rates.

Don't forget with inflation comes higher cost of living and higher rents. Higher rents will to some extent outweigh any increase in mortgage rates. Unlike many European markets, many US mortgage holders have long fixed mortgages so will be unaffected by rate rises, but will enjoy not having to pay higher rents if they rented.

As Warren Buffett says if you are likely to live in the same area for the next 15-20 years you will never get a better time to buy in your lifetime. Enjoy the ride!

I have a very special Bloomberg terminal. It's also telling me what you are doing right now and it isn't pretty. And you really should stop hanging out with CatGuy so much.

I have a bloomberg terminal with the monitor hotwired to CNN

Was just in HK, tons of apartments in the midlevels, extremely central, actually cheaper than the rental buildings my friends live in in Manhattan, which aren't particularly fancy.

Sydney data is wrong, too. You can buy decent 2 or 3 bedroom small houses in maybe the nicest beach community for 30% less than the average NYC apartment.