real estate short squeeze in nyc

I see you are no longer talking about stochastic changes in the market.

https://streeteasy.com/nyc/talk/discussion/34027-point-of-inflection-in-nyc-sales-market?page=1

point of inflection in nyc sales market
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rb345
about 8 weeks ago
Posts: 862
Member since: Jun 2009
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1. in statistical terms, a point of inflection is the
point where a trend changes direction

2. stochastic events are those where markets cease to
move linearal and re-set markedly higher or lower

3. at least the better parts of the NYC real estate market
seem to be experiencing stochastic price movements which
are foreshadowing very sharp short-term price increases,
i.e., anywhere from 10-40%

4. in my experience, that is often how the NYC sales market
works: wandering listlessly for years and then rocketing
in massive price swings to new highs or lows

A. Evidence:

1. the Real Deal reported the other day that some developers
of new Manhattan condos have begun to raise prices 1-2x/month

2. that is an extraodinary event, particularly given the large
reductions in Wall Street bonuses, and one which to my recall
has only occurred in markets which have suddenly begun to zoom

3. second item of evidence is Fort Greene, Brooklyn
4. Elliman's site shows all of its Ft Greene lisings in contract
5. with the exception of a 920 ft Sth Portland coop asking $1100/ft
6. which is almost 2x the pre-2013 price average for the area
7. Ft Greene now has a massive supply-demand imbalance
8. like much of the most desirable parts of Manhattan

rb345
about 8 weeks ago
Posts: 862
Member since: Jun 2009
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Ali ... Inonada ... other brokers on the board ... please weigh in on
what i have posted

greensdale
about 8 weeks ago
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Member since: Sep 2012
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Whats your point? That prices will "rocket" 40% in a year?

"Short squeeze" might be a false analogy. The only people in a true short squeeze are those who are already on the "sell" side of a transaction (e.g. the owner who has contracted to sell; the tenant whose lease is expiring; the employee or student who has committed to relocate to NY), and who have not yet covered that "short" position by securing a new residence.

I agree that those people are currently being squeezed by low supply and high demand. I'm just not sure there are enough of them to amplify market movement significantly.

Arby talks about a short squeeze, another frequent poster talked about a "Gap Up".

greensdale said "stochastic"!

West81st:

1. I used the term "short sale" figuratively, not literally
2. but the analogy works

3. you are correct that most prospective buyers are not legally required to buy now

4. but fear of being shut out or incurring much higher interest costs if they continue
to wait on the sidelines is causing many to jump into the market with the same sense
of urgency and determination as a stock exchange short seller

5. often that results in very sharp very quick price spikes
6. I posted this thread so SE-ers could discuss that possibility
7. and share their direct experiences concerning it

no need to discuss this as long as the fucking obama and fucking benanke keep printing money and debt like crazy

rb345: If you want to spark a discussion of the current supply-demand imbalance, and its impact on prices or buyer behavior, why cloud the issue with an analogy that has absolutely no bearing on the topic? This market is not driven by buyers who MUST buy. It is driven by buyers who WANT to buy. There's no short squeeze. There's just a lot of money chasing too few apartments.

As for your contention that buyers feel compelled to buy now because of low interest rates, I think that's nonsense. In market segments where interest rates are a significant factor, most buyers understand that if rates go up, prices will come down. In segments driven by cash buyers (and you might be surprised by the size of the cash-buyer pool in some hot segments), interest rates are largely irrelevant.

rb345 tends to use words and concepts that he doesn't understand.

West81st:

1. you might be correct
2. but I believe there are a lot of buyers who "must buy" for different personal reasons

3. and that the imbalance betweem supply and the number of must buyers has the potential to
stoke very sharp short-term price increases

>2. but I believe there are a lot of buyers who "must buy" for different personal reasons

Such as if their below market rent goes up a couple of percent? http://streeteasy.com/nyc/talk/discussion/34760-some-renters-will-buy-if-rent-goes-up-only-2-5

4. Arby
V. Are you still looking to sell your dump?

Brooks2:

1. why do you ask?
2. are you into brown showers?

1.Hmm
b. Brown showers for Mars?

Brooks2:

1. seems that you are into brown showers
2. maybe that explains why you have trouble getting dates
3. especially if you go out on them after showering

1. I don't have trouble getting dates
B. I am happily married
iii. You freak!

Brooks2:

1. I feel genuinely sorry for you

2. I can only imagine how tough life is when the only way you have to
generate income is to sell your toenail clippings

Easier than trying to pump an dump my apartments on streeteasy

Brooks2:

1. I dont have anything for sale here on SE
2. not even that brown shower you inquired about
3. which as a gesture of my respect for you I'll let you have for free

1. A short squeeze requires a short
2. Shorts lose money as prices go up
3. They have to post margin on their losses
4. They do not want to or cannot
5. So they buy instead to cover their short
6. Pushing prices up
7. Adding squeezing pressure

How that relates to RE, where there are no shorts, I have no idea.

rb345 tends to use words and concepts that he doesn't understand.

Inonada:

1. you and West81st are both literally correct
2. people that want to buy are not legally compelled to do so right now
3. and dont stand to suffer an actual immediate loss from failing to buy now

4. but in substantive economic terms, those buyers are in the exact same position as short sellers
5. if they dont buy now, prices stand to rise substantially and quickly
6. which will cause them to suffer large opportunity cost losses
7. i.e., losses stemming from passing up the opportunity to buy when prices were lower

8. such losses are the reverse mirror image of losses short sellers suffer when they
refrain from covering in a rising market, and as a result have to cover at a higher price

9. so the analogy is appropriate, and in my opinion fits quite well

10. buyers who dont buy now are taking the risk of having to pay a lot more soon for
an otherwise identicial apartment - the same risk non-covering short sellers take

11. and the financial and psychological stresses and incentives are identical for both
squeezed short sellers and squeezed-out-in-bidding-wars wannabe buyers

12. so the real question, which my thread sought poster responses to, is whether the NYC
real estate market will now act like and mimic stocks that are the subject of short squeeze

I think nada made it pretty clear RE will not behave like stocks for good reasons.

nada, she did not

In case any one missed this.
http://nymag.com/news/intelligencer/real-estate-boom-2013-4/?mid=streeteasy

1. Short squeezes are a result of short-term market dynamics.
2. Not of long-term fundamentals.
3. When squeeze is triggered by non-fundamentals, squeeze reverts.
4. Last big squeeze we saw was in VW.
5. Cause by Porsche buying VW options on swap in an attempt to financially engineer a takeover of VW.
6. And denying this they were building a VW position.
7. Until they had eventually virtually bought every share.
8. And then they announced it.
9. Causing a massive short squeeze.
10. Price shot up from 200-ish to 1000-ish.
11. But within a year it was trading below 100.
12. Causing Porsche to nearly go bankrupt.
13. Until VW stepped in and took over Porsche instead.

1. I know that you all find numbering each sentence irritating.
2. And I can appreciate the urge to mimic it in the hopes of highlighting this behavior.
3. But I am not sure it will have that effect on the desired target.

(Methinks someone has spent too much time trying to make their points using powerpoint.)

AvUWS:

1. imitation is the sincerest form of flattery
2. thank you for adopting my style of posting

Inonada:

1. NYC real estate is now in a short sqeezze in fundamental econocmic supply-demand terms
2. because of all the prospective buyers who feel a need to buy now, i.e., to cover
3. either to trade up, to avoid being shut out, or for investment or other reasons

4. NYC's current short squueze will eventually correct and culminate in a more balanced market
5. virtually all short squeezes do
6. although not because VW ends up owning all of the real estate in NYC

7. prices will rise as they have for many stocks and REITS bought within the last 4 years
8. until their yields are so pitifully low that investors are loath to buy them
9. or until buyers back off because of financial incapacity or fear of buying at a top

10. but that levelling point might not happen until desirable apts have surged 50% or
more from prices prevailing on October 1, 2012

11. conceivably a lot more then 505: closer to 100%
12. and that surge is likely to be fueled by the media
13. such as the article linked by 300 Mercer
14. because of media spin that the surge is not a bubble, but rather an adjustment to a new reality

15. the media said the same thing about the NASSAQ after it broke 5000
16. and about the demand for tulips in Holland back in the 1600's, where SPY-Tulip soared over 2000%
17. NYC real estate is beginning to acquire a tulip-mania like quality
18. but whether it eventually crashes or not, in the near term it will soar because of a short squeeze

Apartments = Tulips

So not the Martians?

Brooks2:

Since your such a committed philisopher, why dont you follow the example of your
predecessor Socrates and eat a large portion of hemlock right after reading this.

There is a distinction between imitation and parody. Lucky for your self-esteem you don't recognize it.

There is actually one rarely used transaction in real estate that almost work like a short cover. It is called a "Liked kind" exchange or 1031 exchange. Most typically, one would sell investment property(ies) first. Within 45 days, they need to identify replacement property candidates. They need to buy back their replacement property(ies) within 180 days to avoid capital gain taxes on the sold property(ies). Investor in this case would be under the pressure of time and may be willing to buy the replacement property at a slightly higher price to avoid paying the gain tax. As I said, it is not happening a lot and should not be producing the effect that the Op is describing.

Unless of course, you have the capital to do a reverse 1031 exchange.

And rare maybe in residential homes but too strong a word to use for commercial.

yes another identical thread started by desperate rb345: http://streeteasy.com/nyc/talk/discussion/34888-nyc-re-is-now-in-a-manic-panic-market

desperate?

I agree with you c0lumbiac0unty.

why?

c0lumbiac0unty, you are preaching to the choir. Amen C0C0.

is that a metaphor?

truthskr10 and vic64:

1. you are referring to Starker and reverse Starker IRC section 1031 like-kind exchanges
2. you can learn all you want about them by googling the last 10 words of the above sentence

3. reverse Starkers are more expensive and time-consuming but offer owners greater flexibility

Thx rb

rb345,

Bringing up the 1031 exchange issue was meant to find the nearest comparison of a real estate transaction that is comparable to a short squeeze as in stock trades. Don't understand your motive of asking me to study it further online. I have already gone through exchanging my investment properties with the 1031 exchange process in real life. Do I need to follow your instruction to study further online? I will do that when the law changes.

BTW, doing a reverse exchange have no resemblance to a short squeeze at all, as the purchase was done before the selling. Don't get confused.

vic64:

Wasnt sure what you knew. Just trying to be helpful, as I am now doing 1031 exchanges/

rb345, our experience in Fort Greene Brooklyn and environs certainly confirms your perceptions. I've written about this on other threads.

The thing I want to add is that this will Not last. It can't. Nobody has repealed the law of supply and demand. Listings are low, they can't stay there.

During the last bubble I heard somebody on NPR argue that the business cycle is obsolete, the only future is up up up. I burst out laughing. It wasn't true then, it's not true now.

The rental market in these same hoods, however, is Not on fire, at least not in the $4000 - $6000/month range. A fact I find a little hard to explain, but it's clearly true. It's what I would consider to be normal. Lots to look at, days to make your decision, room to negotiate with landlords.

The stock markets are going up too fast for my taste, people with money to invest do not have obvious excellent options of where to put it. As I recall this situation contributed to the real estate bubble we went through a few years ago.

Anecdotes are nice, they are not data...but 6 weeks ago we literally stood in line to get into open houses. This is for 2 bedrooms in Brooklyn with humble construction. It was hard to see anything in some cases, the apts were so mobbed. So we gave up.

I'm looking forward to actual data based on recorded sales for this period, but of course we have a wait a bit.

Is it possible that there is a demand for 2 bedrooms that is not being met and this is what is causing the frenzy? Seems like people ignore the shift in preference to stay in/near the city vs the suburbs because of commute time. It certainly seems that commute time is so much more important now than it has ever been.