Manhattan permits down 69% YoY

Of course, but there are still over 30k permits for Manhattan that were issued 2005-2007 (90k NYC total). What does this indicate, a development slowdown in 2011?

"The steepest drops were in Manhattan, which fell 69%, to 485 units."

Compare that article to one written in 1988 - the start of a 10-year slump - and tell me if you see the parallels.

http://query.nytimes.com/gst/fullpage.html?res=940DE5D6143FF930A35757C0A96E948260

Construction Of Apartments In Manhattan Falls Sharply
By ANTHONY DEPALMA
Published: April 3, 1988

But now that building boom - caused by a rush to qualify for expiring tax abatements - has all but ended and there is so little under construction that New York may soon have a shortage of new luxury apartments to add to its long-standing shortage of affordable units.

[...]

Real estate specialists are confident that residential construction in Manhattan, prodded by a strong underlying demand, will eventually regain its momentum. In the short run, however, they say a scarcity of sites, rising land and construction costs and more restrictive zoning rules will make apartment production too expensive even for the affluent people developers have been building for, almost exclusively, in the last few years.

It will take a significant rise in the prices developers think they can get for new units - well above current levels of roughly $400 a square foot, or $250,000 for a one-bedroom unit - or some unforeseen new stimulus to trigger a new wave of production. Some developers expect that as the apartments now nearing completion are absorbed by buyers and renters, the supply of new units will shrink far enough to move the market to a new price plateau and trigger a new cycle of construction.

''Anybody who can get in the ground by the beginning of next year should have no problem with sales because there won't be much else around,'' said Henry Robbins, the associate publisher of a comprehensive guide to construction activity in Manhattan.''

Is there an irony when the same people use an argument like "building permits down" as a sign of lower supply who previously used the argument "how would you know what will happen to the market? Are you a R/E professional? If it is going down, wouldn't the developers stop building?"

Perhaps the wiley developers know something we do not? Or maybe $0.75-1.00/ft/month really does make all that much of a difference in selling an apartment.

... Just sayin'...

Clearly many developers have said "oh shit" and are slamming on the brakes. But also keep in mind that 69% less than the greatest number of permits issued in 35 years is still a substantial number of permits, approx 10k citywide, with typically a third being in Manhattan.

More depressing news for our economy...

The U.S. economy is already in recession -- and may echo the 1930s, Nobel Laureate Joseph Stiglitz said Friday.

"The big question is: how will the government respond?" said Stiglitz, in an interview with CNBC. Stiglitz, a Columbia University professor and 2001 winner of the Nobel prize, detailed his bleak outlook for the American economy.

"This is going to be one of the worst economic downturns since the Great Depression," said Stiglitz.
http://biz.yahoo.com/cnbc/080425/24311464.html

Specifically, this year's article said there were 465 units permitted in Manhattan, down from 10,000 per year.

Quite a drop, n'est pas?

I tell you. It's nice to find out that I think like a Nobel Prize winner. Then again Al Gore won one as well. LOL

The housing downturn is an even worse economic factor than casual observers realized, Stiglitz said. He explained that during the real estate boom, Americans were able to withdraw billions of dollars from their home equity.

"[But] with housing prices coming down, it's going to be difficult to do that anymore," he said -- drying up a spending source. And within that problem, still another complication: people typically spent the money they drew off their home equity on consumption, rather than investment -- garnering no return on the spending.

"The savings rate as we go into the recession is zero. Which means [savings] will go up, " he said -- decreasing consumer spending and weakening retail further.

steve, I am still having trouble "seeing parallels" from 1988 when you yourself said:

"Ergo, the 1988 chart is completely unrelated to what is happening today: it happened 20 years ago, in an entirely different market for entirely different reasons."

I think you may be confusing yourself again.

you don't see the parallel, but do you understand real estate like most sectors is cyclical? And we are in downturn that will last for sometime?

Okay, JuiceMan, just to humor you: you don't see a fall in building permits at both times a "parallel"?

Fine.

You are trying to "catch" me in a "contradiction" when none exists, by quoting me out of context. The chart I was discussing - which you are aware of - was about housing inventory figures in 1988. The run-up in inventories at that time was due to a plethora of co-op conversions to escape rent stabilization, and new condo construction spurred on by the virtual elimination of the 421-A tax abatement below 96th Street. The run-up in inventories now is completely unrelated to that. That's what I said, and it is true.

So instead of trying to twist what I say, please explain how - over the long-term - you believe that housing prices can exceed 12x annual rents, when the 12x annual rent figure derives from the 40x monthly rent / 28% gross income market constraints on how much property anyone can afford.

Because you can't. So begone!

Begone? Look steve, I keep a list (for sport) of all of your contradictions, fallacies, and yarns - I'm up to 453. I have in fact proved your little theory as bull many times and have used real numbers as you often plead people to do. In fact, I used your own numbers. When I did, your best comeback in defending your precious theory was that:

“you have a higher probability of receiving an 11% (after tax) YOY return on the S&P than receiving a tax deduction if you own a house.” That is not out of context at all and it is hysterically funny.

steve, you may have a lot of energy and time to waste spinning your tales, but it doesn't make you any less full of shit.

Do it again, JuiceMan - show me your number because I don't recall them.

Yet again, I never made that claim that you put in quotes. I said that over time the real return on the S&P 500 was 12%. I said that taking a tax deduction on your home was not "risk-free"; rather, it depends on having income to deduct from, and no change in tax law.

I also SPECIFICALLY stated that the long-term distribution of probabilities is NOT the same as the short-term probability of something occurring.

So - put your numbers down again. I await them eagerly, as I await spunky's "proof" that he's made vast amounts of money in the past by buying overpriced apartments. The only way you can "prove" my "contradictions, fallacies, and yarns" is - as you have repeated done - by twisting what I say and taking it out of context.

Begone!

And btw, I meant "nominal return" on the S&P 500. The real return is about 8%.

See how easy it is for me to correct myself when I make a mistake?

Begone!

In case your forgot, here is what you said. Malarky. You Begone!

JuiceMan: "So your saying the risk of having zero income or having a change the tax laws = the risk of putting your nest egg in a high risk investment hoping for an 11% return? Is that what you are saying steve?"

Steve: Actually, yes. If I have zero income but liquid assets like stocks, I can sell them quickly. If I have zero income but one illiquid asset like a house, I'm screwed.

Talk about twisting context. By the way, I can sell my house and rent if I lost my job. Has nothing to do with the returns on the S&P.

seeing building permits down so much is a bearish sign, not bullish! While you look at supply demand, developers look at the business of selling a product. When demand is thought to be low, they dont plan/build! Its a glimpse into if money is being invested by the guys that develop, and clearly, they dont see the #'s adding up.

Economy's are forward looking. If developers were bullish on the future than they would be confident and building. Also important to point out is that this has nothing to do with the future demand. How about this? Is it possible that the developers can't get financing from banks due to the credit crunch? Your guess is as good as mine. I think either way its a bad sign.

Where are your numbers, JuiceMan?

I stand by that quotation. People are far more likely to lose their jobs than they are to be completely wiped out in the stock market. Infinitely more likely, I would say, since to be completely wiped out is a rare event, and, on the whole, stocks rebound, albeit it takes a long time.

Tax laws change all the time, as well. In the UK they got rid of the mortgage interest deduction years ago.

And yes, I'd rather have a liquid asset than an illiquid one, any time.

Your numbers, JuiceMan. You're good at finding what I wrote, but not at finding where you published your numbers.

Because you didn't.

"People are far more likely to lose their jobs than they are to be completely wiped out in the stock market."

I'll show you my numbers if you can explain to me how that sentance has anything to do with the stupid comparison you made above. What you said is that there is a higher probability of making an 11% (after tax) YOY return in the S&P than getting a tax deduction if you own a property. That is what you said steve. Getting wiped out in the stock market, losing your job, has nothing to do with anything. If you lose your job you would have to take your money out of the S&P. Stop being foolish.

If you own a property, the tax deduction is risk free. If you are doing a rent vs. buy analysis, you have to use a risk free rate of return on invested capital or the calculation is incorrect. Stop going round and round with the fact that real estate is not risk free. Has nothing to do with anything. Your wrong (again).

I don't knbow why I bother....weasel boy is such a good name for you.

"What you said is that there is a higher probability of making an 11% (after tax) YOY return in the S&P than getting a tax deduction if you own a property."

No I didn't say that, and if that's how you interpreted what I wrote, so be it. I specifically said to deucescracked that long-term random distributions have nothing to do with the probability of a random event occurring next.

What I said was that the tax deduction was not zero-risk, which is what you claimed. What I further stated was "If I have zero income but liquid assets like stocks, I can sell them quickly. If I have zero income but one illiquid asset like a house, I'm screwed."

So that's just it, JuiceMan, I can't explain what you want me to explain because I never said it.

"Stop going round and round with the fact that real estate is not risk free. Has nothing to do with anything."

It absolutely does because the CAPM analysis you did to "prove" your point that housing was a better investment than the S&P used a zero-risk interest rate for the opportunity cost of not investing your money elsewhere. But housing does not have zero risk.

In economics that is not the way to calculate opportunity cost. It's the way to calculate a risk premium. Opportunity cost need not even be counted in money.

"If you lose your job you would have to take your money out of the S&P."

Also not true. Just some of it, and its highly liquid. Your house is not, you can't use it to eat, you might not even be able to sell it or get a line of credit against it. Liquid instruments are more volatile, but also more flexible.

Now: show us your numbers using real, historical returns over long periods of time.