There's been a shift in tone here - decidedly more bearish

In a word, no - and I'm a big-time bear. I just think it's wayyyyyyy too early to declare ourselves vindicated.

The only thing that has fallen so far is asking prices, which had become ridiculous. I've seen a few listings drop perceptibly below the level of year-ago comps, but those are very much the exception.

The market is very slow, and it's no longer rising. That's as far as I'll go right now.

I am quite pleased with price drops in Chelsea/West Village. I've found a place on 19th St, an older art deco condo. Thinking there are some quite nice opportunities if you can be aggressive, yet patient with the seller.

So, not sure if that makes me bullish or bearish.

Both fair - W81, I think the worst is yet to come, we're just seeing the beginning, but just a few months ago people were all over me for daring to say that this market was out of balance.

eah, there are some opportunities that are even tempting to me. I still like Brazil better than buying, however, for the time being.

In the many months that I've participated on this board, I've never seen anyone that I'd classify as bullish (at least in the context of the short term). I'm also not sure that the tone has decidedly changed on this board. If you do a search of posts a year and a half ago, you will find the same posts about the changing/slowing market, price reductions, renting v. buying, etc. (ie.: http://www.streeteasy.com/nyc/talk/discussion/347-buyers-mkt-buy-now-or-wait).

The bears have been entrenched for a while now. It's only the extent of the fall that has been debated. Will we look back 10 years from now and say that 2008 was only the beginning of a precipitous fall, or will the trends show that it was the best time to take advantage of a soft market with lots of deals and motivated sellers?

Has anyone noticed that apartments are available at 1200 Fifth in pre-assigned finishes? Unless I am missing something, the apartment was already sold and the purchaser may have backed out since the finishes are typically chosen by the buyer. I think we may see more of this as people are waiting for condos to be finished at places like the Lucida.

granite countertops are so early 2000s

"I have detected a radical shift in tone..."

I think "radical" is too strong a word to describe the changes. But yes, it's a cooler market and discussions reflect this with greater caution being voiced buyers. I also find some sellers and more agents are recently open to discussing offers that would have been rejected out of hand last fall. I also haven't heard for months of any apartments in GV/Chelsea ($850K-$1.5MM) going into a bidding war above asking price. Yet, while the broad market indicators are not at all good in the near term in my view, clear trends are still achingly slow to emerge in the NYC RE markets.

I admit that I've been bearish for a long time & could not understand how the market continued to go up so high so fast, especially last year. This year it feels quite different - I was off by a year to 18 months, though I wish I weren't because then the fall wouldn't have to be quite so high.

Real life example: this is a place I looked at last year because it had very liberal renting rules:

http://www.streeteasy.com/nyc/sale/50236-coop-325-west-16th-street-chelsea-new-york

I was shocked it closed at 775k since I feel the sq footage was inflated. I would have probably purchased this place for about $690k.

Steve, what would you have done? Or what wold it have to drop to for you to have been interested?

I think talking in specifics nw is easier to clarify positions than to use bull/bear terms...

I think the tone has changed considerably. To put it simply, it used to be "Prices are going up" vs. "Prices are going down." Now it's (mostly) "Prices are going down a little" vs. "Prices are going down a lot."

To toss in an anecdote: That apartment I almost bought at the end of December in the EV for $700/sf just closed. I thought they'd never get another buyer bidding as aggressively low as me (-17%). I figured the seller would be happy I walked away in the end. It actually went for $5k less than my bid. Maybe I loosened the lid a bit.

One other observation: The initial asking prices on most new listings still appear stupidly high. To me, that suggests that psychology on the sell side hasn't changed all that much. Most sellers are still starting the process with high hopes (abetted, of course, by sweet-talking, listing-hungry brokers).

Those inflated prices serve no useful purpose I can see, except perhaps to help sell other apartments that are more reasonably priced - often after a series of reductions. But maybe there really are buyers out there whose attention is grabbed by the words "DRAMATICALLY REDUCED!!!" or "PRICE SLASHED!!!"

eah I can't answer your question because there's no floor plan so I can't estimate the square footage or see the layout. If you can give me an example with a floor plan and more information I'd be glad to answer.

However, as a general rule - borne out by tenemental - I'd stick with my gut feelings about what apartments are worth and not go over that. When I was in the WV I had the opportunity to buy a studio next to my 2-bedroom and combine them, but the owner would only sell it at twice the market price. I would have paid a premium, but not that premium. In hindsight I would have made a fortune, but there's no way to tell that in advance.

I repeat what happened to me in Miami: I sold an apartment for $1 million 2.5 years ago; the person in the apartment above mine - also for sale, and identical - wouldn't accept anything less than $1.1 million even though my buyer wanted that apartment b/c of a slightly larger terrace. Now it's for sale for $750k and still can't sell. And identical apartments in that line run from $750k to $995k, a.k.a. all over the place. Yet nothing sells.

DRAMATICALLY REDUCED!!! = VASTLY OVERPRICED.

And it probably still is.

We don't have to delve deep--though if you follow the link there is a floor plan on the original listing--it was basically an enormous room. My idea was to have a single tenant. I am curious about properties people are looking at, have looked at...what they would/will/did pay.

"In the many months that I've participated on this board, I've never seen anyone that I'd classify as bullish (at least in the context of the short term). I'm also not sure that the tone has decidedly changed on this board."

Right on Joepa, its the point some of us have been making for some time, steve argues against this large group that only exists in his mind. This thread is I guess the logical conclusion to what he's been doing for months..."see I was right and my logic has convinced everyone"....

I would not pay that much money for a big giant room in a thousand year old building. Just me.

ccdevi, where are the happy threads about all the people showing up at open houses?

stevehx, I hate to break it to you but the overwhelming majority of New Yorkers have no idea about blogs like this. And when they do, happy folks just don't blog. They buy and sell regardless of others say, because they are not retarded and base their decisions on their own needs/means/opinions.
It is an interesting social experiment, though: all this saliva on the walls and chest bruised from beating on it.

steve, I don't understand your point, things have slowed, we all know that. the fact is people in general and people on this board generally have been wary of the real estate market for some time. Given everything that's gone on in the past 8 months how could you not be. you have continually argued against all the so called bulls, but where are they? or whats your definition? I know you consider me a bull because I do not believe ny real estate will drop 50%. Are there maybe a couple extremists on this board that would argue that NY real estate is going up up up, maybe, I haven't seen them but lets presume they are out there, is that who you've (and your less talented followers) been arguing against all this time? a couple outliers?

Tenemental said it best: "I think the tone has changed considerably. To put it simply, it used to be "Prices are going up" vs. "Prices are going down." Now it's (mostly) "Prices are going down a little" vs. "Prices are going down a lot."

That's what I mean about a change in attitude. There used to be a thread called the "idiot's thread," I believe, where the gist was that people who predicted the market would go down were likened to idiots. Let's bring that one back.

stakan, you are breaking no news to me.

I'd like to see that thread. Presumably you're not talking about the thread titled "This board is full of Idiots thinking they can tank the market with lies" which is 13 months old.

stevejhx: I'll bet that in 6-7 moths YOU'll be the one screaming BUY, BUY with the same, shall we say, agitation as you scream the opposite now. AND you'll still be renting. For obvious reasons.

No I'm talking about one that was up for months, through earlier this year, called (I think) the idiot's thread. It's point was that people who thought the market could sour were idiots, because it hadn't yet soured.

Speaking of sour, even JuiceMan earlier this week predicted this could be a banner year for sales because there were already 2,000 closed, 1,000 of which he claimed were for condos which, he claimed, close faster than co-ops and therefore represent sales booked last year but closing this, of course with no proof of that last statement.

Got the name wrong. Here it is:

http://www.streeteasy.com/nyc/talk/discussion/2651-where-are-all-the-idiots-who-made-the-2007-doomsday-predictions

Last posted to 6 weeks ago. Started by Mr. Bull himself, Mr. Malraux.

BULLISH - I am extremely bullish. To me this market is the most opportunity I have seen in NYC RE in 10 years. Soft pricing, people sitting on the sidelines, rezoning across Manhattan and the Brooklyn.

If you are paying attention the smart money is making more than in RE then they ever have before.

I have personally made millions in the past year while the Steve's of the world were pissing their pants saying no one can make money out of RE.

Its great. The Chumps are on the sidelines, the scared shitless are dumping properties for well under their value.

Keep up the naysaying - its making me rich!

See ccdevi?

"Well under their value," petrfitz. How, precisely, does one calculate that "value"?

Not going to clue you in Steve. Keep on obsessly plugging in numbers and using your insane OCD logic and keep coming up with the "logic" that renting is better than owning.

Keep on believing that common buyers calcuate every possible permutation of the numbers in their decision to buy. Dont factor in enjoymnet of living in a property, long term savings strategies, impulsiveness, buyers sitting on tons of 1031 cash, etc etc

You sat on the sidelines for the past year, the average apt in Manhattan increased 15%. You missed the opportunity. I had 2 properties that increased over 300% in the past year based upon rezoning, redevelopment etc.

That's what I thought, petrfitz.

Renting is not better than owning investment property - I never said that, it's a different proposition altogether. Investing in stocks is better than investing in residential real estate and it always has been and always will be. It makes no sense to buying residential property, however, if the price is greater than rent, since buying is nothing more than a capitalized expense, whereas renting is a current expense.

"enjoymnet of living in a property." Can one not "enjoy" living in a rental?

"You sat on the sidelines for the past year, the average apt in Manhattan increased 15%. You missed the opportunity."

Actually, no, I made 60% by investing in commodities and Brazil.

sure you did Steve. How much tax did you pay repatrioting those funds?

If you are so high on Brazilian commodities then why do hang out on a real estate board?

I made over 200% year on year investing in NYC properties and used 1031's to decrease my cap gains taxes.

You are completely incorrect in saying that "Investing in stocks is better than investing in residential real estate and it always has been and always will be" - there are people who gain and lose in both markets. Nothing in life is a certainty.

Just wait until the brazilian currency deflats again leaving you with 0.

actually, petrfitz, I did pay a lot of tax because I made a lot of gains, but nothing for repatriation since they're domiciled in the US.

Brazil's bonds were just upgraded to investment grade yesterday. You're thinking about the past.

1031's don't decrease capital gains; they defer them.

200% per year in real estate? Can you give me the addresses of the properties so I can look them up in ACRIS?

Please.

i will not give you the addresses as that will identify my holding company and could therefore identify me personnally.

But to clarify there were/are numerous rezoning efforts going on through the boroughs. Aspects of that rezoning increased sometimes doubling or tripling the buildable FAR of properties in those zones.

I purchased several properties in these areas that received a rezoning increasing buildable FAR. Developers came in and waved the incentives offered by the city and bought my properties for 2 and 3 times what I paid for them. :)

There are 3 to 4 more rezoning initiatives currently active in the City. Most property owners are unaware of the rezoning implications and were happy to accept my asking price or slightly above asking price.

"i will not give you the addresses as that will identify my holding company and could therefore identify me personnally."

Actually, no. Not if it's a NYS or Delaware business entity, wherein the principals are not identified. So you have nothing to fear.

But I thought you wouldn't identify them.

Steve,

It doesn't really matter. Petrfitz's comments don't really pertain to a person buying/selling a primary home, which is what this board is really about.

Steve - can you idenitfy the vehicles the you invested in Brazilian commodities with? Please post this info on the internet like you are asking me to do.

KISS - so this board is only about "a person buying/selling a primary home?"

So then why the RENTALS tab? Why the charts with commerical and residnetial per sq ft data? Why if it is about "a person buying/selling a primary home" then why should Steve be posting not to buy RE?

I think KISS is short for Kiss Ass to Steve.

First of all calm down. Nobody can hear you scream in cyberspace and you only aggravate yourself.

My point is that many of the posts on this board are related to the discussion of primary homeownership, including this thread. Your responses, while they may be perfectly valid for your situation, is really an apples to oranges comparison to those folks I am referring to.

Glad you asked petrfitz: DXZLX.

Your turn.

You're right, KISS: this thread is about a different animal. Investment properties have a different set of economics to them, though if I thought the price of a capital asset were going to fall, I certainly wouldn't invest in it.

Your prior post, petrfitz:

Renting is always a better investment than buying except for:

1 - if you are the landlord
2 - if you bought anytime over the last 10 years
3 - if you bought anytime over the past 40 years in ares like coastal north east, any major urban area, most prime suburbs, etc
4 - if you dont calculate the $250/500K exemption
5 - etc, etc, etc, etc

Renting is not the path to wealth, it is not even the path to a good credit score.

My answer:

petrfitz, read the orange example. It's all factored in.

1 - what?
2 - true for the last 10 years, but not the 10 years prior to that, and not compared to the S&P500
3 - not remotely true: Dallas, Houston, Denver, New Haven, etc.
4 - it's factored into rents: read the orange example
5 - stocks have historically always been a better "investment" than owner-occupied real estate.

To buy owner-occupied real estate is to capitalize an expense. You are extrapolating from a short-term past without looking at current market conditions.

Your answer:

As opposed to your "its always a good time to buy stock????"

1 - being a landlord is always better than being a renter.
2 - BS
3 - BS
4 - BS
5 - BS

Steve - Stupid is as Stupid does.

Enough said about your moronic position.

I coined Little Black Arrows many moons ago and was slammed for it (that and the great war I had over Damien Hirst and art prices...that was a classic). I called the cooling early, also, but I am loving seeing the Sutton Place joint I backed out of drop...drop...drop...along with so many others I wasa interested in, at a fair(er) price. Little Black Arrows are massing like in a Philip K. Dick story -- and they are gonna skewer some pigs big time.

Steve please post the account that you actually bought the brazilian commodites through. Just posting a listing name doesnt prove anything.

Please name an example any example of a person who made a fortune and attributed the wealth to renting. Any example.

Droppin' turds on stevejhx

Steve - would it have been better to 1 - buy a manhattan residential property in January or 2 - put all your savings into Bear Sterns stock?

Steve - please cite 1 major Financial Advisor who publicly supports renting over owning residential property.

Just one and supply a link to that persons quote or web site.

So I ask you for public information and you want me to give you my social security number?

clever ploy, petrfitz - I don't believe you have such properties, since just giving the address will not reveal who you are, especially if you own it through a corporation. What we have access to on this website won't even give you the corporation's name.

But if you need to know these are dividend-adjusted yields for the fund in question. If you don't believe me just check out the historical price data and do the math. (You'll find a higher yield since these prices have been adjusted.) Unless you think I did it in 10 minutes.

Date Acquired Gain/Loss Holding Period
02/26/2007 59.10% Long
04/13/2007 44.62% Long
05/24/2007 31.47% Short
06/14/2007 15.10% Short
12/17/2007 29.32% Short
12/17/2007 29.32% Short

"any example of a person who made a fortune and attributed the wealth to renting."

That's a silly question. If they rent they would attribute it to investing in other asset classes. I don't know who buys or rents, and neither do you.

The question is, since buying a residential property is capitalizing an expense, why would you want to pay more for it than you would for a current expense.

Jerkstore, you're absolutely correct: I wish I knew the ascii code for a down arrow.

spunky! you're back!

No! It's cranky!

"Steve - please cite 1 major Financial Advisor who publicly supports renting over owning residential property."

Suze Orman. At these prices.

Steve - I knew you couldnt supply 1 name of a credible finacial advisor or wealthly individual who supports your claim of renting over buying. NOT 1.

So either you are a contrarian genius who can see "logic" that the rest of the world cannot, or you are a total F'ing lunatic who is obsessed with proving an erroneous theory.

I believe that it is the later.

Steve - please supply a link to Suze Orman article, website,statement that supports your premise.

Suze Orman "Now that I have walked you through all the issues to consider, I want to put everything in perspective: homeownership is a great achievement and a terrific investment. My message is simply to make sure you can afford it before you take the plunge"

http://biz.yahoo.com/pfg/e10buyrent/

Suze Orman isn't credible? Watch her show - she recommends at these prices to rent.

Wealthy people rent all the time: in the Hamptons, Aspen, Vale, you name it. Why don't they buy where they stay, if it's such a good idea?

There's nothing wrong with buying residential real estate, provided it isn't vastly overpriced.

Steve - Suze Orman is quoted every day in articles on the web. Please supply a link to ONE where she says that.

You're EXACTLY right, petrfitz: "make sure you can afford it before you take the plunge."

Here's what her article says:

So I can imagine that those of you who are still renting might be mentally kicking yourself right about now. I am willing to bet all you can think about is how much money you would have made if you had already purchased a home. I have to tell you that sort of thinking sounds dangerously like the investors in 2000 who thought they were losers if they hadn't jumped on the technology stock craze. And we all know how that story ended.

Feeding the housing craze right now is the panic over higher interest rates. With the rumor that rates have bottomed out and will be heading higher in the next few months, there is this rush to "get into" a house before rates rise. But before you rush to beat a rate increase, you need to understand the true cost of buying versus owning. If you can't afford the true cost of homeownership - no matter how low rates are - you better not make the purchase.

Without getting into stevejhx's debate of renting versus buying or engaging in a debate about whether the sky is falling I do believe we are heading into a declining RE market in Manhattan.

Question of how deep, and how long, cannot be answered and is merely speculation.

During the next two years there will be a ton of units introduced into the market (a good portion presold) through the many developments in Manhattan.

Speculating myself, unlike the rest of the nation, the high cost of entry for Manhattan real estate and strict Coop rules has nearly zeroed out flippers and other speculative buyers who have magnified the real estate melt down. I see Manhattan experiencing a softer decline then the rest of the nation.

petrfitz, nobody said it wasn't a good idea to purchase - what they say is that NOT AT ANY PRICE.

I have owned property and I do own property; just not when it's overpriced.

Steve - you said "RENTING IS ALWAYS BETTER THAN BUYING"

you have not proved that premise, you have not proved that Suze Orman supports that practice, you cite very narrow examples and claim that applies to all stock and all residential ownership. You speak in absolute terms is support of your premise, speaking in absolute terms is the sign of a fool. Always.....everytime.... in all cases....

Did you read, "RENTING IS ALWAYS BETTER THAN BUYING"?

It does not relate to investment real estate - it relates to considering residential real estate an investment that will return a yield, which it does not. Investment real estate does. Owner-occupied real estate is a capitalized expense. "Rich Dad Poor Dad" - as bad a book as it is - explains that nicely.

The data are there: over long periods of time residential real estate increases at a real rate of 0.7% (since the end of WWII); the S&P500 increases at a real rate of 8% (since the end of WWII). Those are not "narrow examples," those are proven facts. Long-term, not short-.

But this thread is about something else: it's about the tone of the other threads. You're the only one who so far has spoken out about real estate ALWAYS being a good investment.

I have never said RE is ALWAYS better than the stock market. I am not such a fool to speak in absolutes. You are and you are still doing it. There are so many possible scenarios in both cases that NO ONE who is NOT A FOOL should be saying that RENTING IS ALWAYS BETTER THAN RESIDENTIAL BUYING"

You are a fool who speaks in absolutes.

I invested an $80K downpayment in 2003 on a $425K property. That is now worth $1.5 million. If I invested that $80K in the market in 2003 how would that now be worth more than $1.5 million (because i would have to pay more taxes on stock sales than I would RE sales)?

I have never said RE is ALWAYS better than the stock market. I am not such a fool to speak in absolutes. You are and you are still doing it. There are so many possible scenarios in both cases that NO ONE who is NOT A FOOL should be saying that RENTING IS ALWAYS BETTER THAN RESIDENTIAL BUYING"

You are a fool who speaks in absolutes.

I invested an $80K downpayment in 2003 on a $425K property. That is now worth $1.5 million. If I invested that $80K in the market in 2003 how would that now be worth more than $1.5 million (because i would have to pay more taxes on stock sales than I would RE sales)?

steve, please realize that you post 75% of this site’s volume which is bound to tilt the average sentiment to "extreme bear". I think the majority of the people on this board are cautious and approach each situation with controlled emotions, research, and most of all, common sense. Noting that there is opportunity in every market does not equate to "bull". You’re so amped up about being right all the time you don’t realize that people aren't really arguing with your points, but just the garbage you (sometimes) use to try to back them up.

I am arguing with both his point and the garbage that he tries to back it up with.

I have Millions of reasons in the bank as proof otherwise.

petrfitz, I said over the long-term, and I stick with it. The data are proved.

JuiceMan, this was to gauge the sentiment of people - I don't post on most threads, and certainly wouldn't if I weren't so bored with the work I'm doing (administrative procedures to buy x-ray container scanners in Brazil).

Where's spunky?

So Steve is it now "Over the long-term, renting is ALWAYS better than owning?"

Please clarify your position because it seems to change on every post always, everytime.

petrfitz, I've never changed my position. You merely don't understand it.

Over the long-term, stocks always appreciate in value more than home prices, though they are more volatile. Therefore, owner-occupied residential real estate - taken from the point-of-view of an INVESTMENT, by definition is worse than stocks. Even if stocks and residential real estate appreciated at the same rate - which is not true - most stocks pay dividends, so therefore they would still be a better investment.

That is not necessarily the case for properties held as investments, rented to third parties, which produce income.

When you buy owner-occupied real estate, you are effectively capitalizing an expense. If the amortization of that capitalized expense is below the value of market rents, then it's a good idea to buy owner-occupied real estate and live in it. If the opposite is true - the amortization of the capitalized expense is greater than market rents - then it is a bad idea to buy owner-occupied real estate and live in it.

Right now the second of those propositions is true.

Steve, the Dow reached 13,000. Prices are coming down. It's time for you to buy. As CNBC says, "don't wait."

http://www.cnbc.com/id/24405986

"Don't wait" hoping that mortgage rates will go down.

The higher they are, the lower property prices become.

you guys are all silly. no point in talking about which option produces better returns because you're all talking about REALIZED returns -- it's easy to point out examples of which market beat which market AFTER it's happened. and even when you do point out that one investment vehicle did better than another, if you don't factor in the risk involved, then it's all pointless talk. you all need to be talking about EXPECTED returns -- and in particular RISK-ADJUSTED EXPECTED returns. AND, you're not allowed to cherry-pick whichever decade you wanna think about. silly silly.

paul10003, you're right: my data are rolling averages since the end of WWII. You can't get better data than that.

The common mistake people make here is to assume that real estate is 0 risk. In fact, it's quite risky because it's cyclical, and illiquid.

Real estate increases in value with household incomes and leverage. Stocks increase in value with corporate earnings. Corporate earnings increase faster than household incomes. Therefore, stocks always perform better.

Steve - we are still waiting for you to post 1 link to Suze Orman or any credible financial advisor who supports your claim???

which claim?

that renting is always better than owning

we want just 1 credible financial advisor that supports steves claim

Stevejhx, i would back away from that one. :)

he has backed away. he has not been able to provide one credible source to back up his adamant claim

Given the Dow 13000 plus, the drop in the unemployment rate to 5%, the unexpected low loss in payroll jobs, and continued good (albeit mixed) corporate earnings reports, I don't think things look so bad. See NYTimes report on Wall Street below. I agree that we may see minimal appreciation in Manhattan RE prices overall the next year, and perhaps some price drops, but no severe changes (though possibly some more notable changes for a quarter or two). It should be a good market for buyers, though, and probably will remain so for the next year.

http://www.nytimes.com/2008/05/02/business/02econ-web.html?_r=1&hp&oref=slogin

http://www.nytimes.com/2008/05/02/business/02markets.html?hp

petrifitz, you're a true moron.

http://www.forbes.com/2005/05/27/cx_sc_0527home.html

I invite you to read it and click on the little button that shows how the S&P 500 has outperformed median sale prices for New York real estate since 1980. I quote some of the article below, so stop the nonsense.

Just FYI, stocks ALWAYS outperform real estate for a simple reason: stock prices are tied to forward p/e ratios for corporations, which create wealth by increasing productivity, reducing costs, devising new products and technology. Owner-occupied residential real estate - which is what we're discussing here - does none of those things. It is merely a capitalized expense strictly comparable to market rents, which are DIRECTLY tied to household income, which does not rise as fast as corporate earnings.

Not only are the data consistent over hundreds of years, the theory is infallible: you can't pay more for rent than you make in salary.

Read again what I wrote about when it's better to BUY OWNER-OCCUPIED REAL ESTATE, which is what we're discussing (not investment real estate).

"When you buy owner-occupied real estate, you are effectively capitalizing an expense. If the amortization of that capitalized expense is below the value of market rents, then it's a good idea to buy owner-occupied real estate and live in it. If the opposite is true - the amortization of the capitalized expense is greater than market rents - then it is a bad idea to buy owner-occupied real estate and live in it."

Now read the article below, and then go to:

http://en.wikipedia.org/wiki/United_States_housing_bubble

which nicely explains Robert Shiller's research. Then, leave me alone and invest in overpriced apartments in the sky.

Home Improvement
Real Estate Vs. Stocks
Sara Clemence

NEW YORK - Where's a better place to put your money: the stock market or real estate? These days the accepted wisdom (at least at cocktail parties) says to pick real estate. But is the accepted wisdom right?

It is--in the short term. U.S. real estate sale prices increased more than 56% from the beginning of 1999 to the end of 2004, as tracked by the Office of Federal Housing Enterprise Oversight, part of the U.S. Department of Housing and Urban Development. The S&P 500 index dipped nearly 6% during that same period.

But if you take a longer view--say 25 years--you'll find that the S&P 500 has actually stomped the real estate market, from Boston to Detroit to Dallas. From the start of 1980 to the end of 2004, home sale prices increased 247%. A pretty sweet deal, it would seem. Over the same period, however, the S&P 500 shot up more than 1,000%.

To see a comparison of how the S&P 500 outperformed the real estate market in the ten largest metropolitan areas in the U.S. since 1980, click here.

Steve - so your credible financial advisor is Sara Clemence?

"Sara Clemence joins Portfolio.com from Forbes.com, where as lifestyle editor she oversaw that site's coverage of topics including cars, real estate, and travel. "

Also non of your other sources cite that Renting is Always better than Buying. They speak to a current bubble or a specific time.

You stillhave not come up with one credible Financial Advisor who supports your claim that "RENTING IS ALWAYS BETTER THAN BUYING"

We are still waiting Steve.

Petrfitz: Begone! No matter how much research I show you, you will stick to your position. Does it matter if the author is Sara Clemence or Becky Quick? I don't think so - she uses real data, which you blithely ignore. Every single source - S&P, FDIC, OFSHME (or whatever it's called), Case & Shiller - all say the same thing.

So just begone. You don't understand what I'm saying. You don't know what imputed rent is. You don't even know what you don't know.

I don't know any CREDIBLE FINANCIAL ADVISORS. Financial Advisors, if you didn't know, are SALES PEOPLE. They get paid to sell you things. They charge a commission. If you think they're looking out for your best interest, you're crazy. They're looking to maximize their income.

How do I know? As part of compliance and litigation I translate their emails for a living. I know what they are after, and it's not their clients' benefit. It's whatever they think they can sell them.

I've more than proven my case a million times. I will not answer you regarding this again. You are a moron.

Steve - then Why is RENTING THE AMERICAN DREAM?

sTEVE - ALSO YOUR RESEARCH DOES NOT SUPPORT YOUR CLAIMS.

petrfitz...ssssh!

Who said anything about THE AMERICAN DREAM? I said that when renting's cheaper, it's better to rent. When buying's cheaper, it's better to buy. For owner-occupied real estate which, economically, is valued at as imputed rent = market rents.

Does that logic confound you?

You would think that someone who claims to be a landlord as you do would be ENCOURAGING people to rent, wouldn't you?

It's not "my" research, petrfitz: it's EVERYONE's research.

Now ssshhh!

No Steve - you said that "RENTING IS ALWAYS BETTER THAN OWNING"

You have said it over and over again on many different threads.

What comfounds me is your constantly changing logic and caveat's (like unless you bought in the last 10 years) yet you continue tohold onto you premise.

You havent been able to produce 1 financial advisor that says its always better to rent, you constantly change your caveat's, and your "proof" is narrowly constructed models that don't hold to changing of the variables.

Give up and admit that you were wrong and official change your premise.

petrfitz is just another overleveraged homedebtor or ramen eating realtor pounding. Let him/her/it be. No need to discuss logic with those types. You'll be about as successful as trying to pound logic into Spunky Brewester's head.

they are the 'lost' ones. juiceman and others are worth the time. not petrfitz, unless you're getting a laugh out of it, just like i do with Spunky Brewster =D

Hmm - Raman eating? I made several million dollars in 2007 and have a net worth of over $10 million.

How about you MMafia?

petrfitz, why do I engage you when you're so dumb?

Over long periods of time the S&P 500 increases at a real rate of about 8%, 11% nominal, reinvesting dividends. Look it up, tell me where it says that that isn't true.

Over long periods of time home prices increase at a real rate of 0.7%, 3.7% nominal. There are no dividends to invest.

11% > 3.7%.

Case closed.

Documentation: In Robert Shiller's plot of U.S. home prices, population, building costs, and bond yields, from Irrational Exuberance, 2d ed. Shiller shows that inflation adjusted U.S. home prices increased 0.4% per year from 1890–2004, and 0.7% per year from 1940–2004.

That is the most in-depth research ever performed on home prices, and it was performed based on transactions using the same properties over time. Those are not "median" prices or "mean" prices: those are multiple prices for the same property.

In the short-term home prices seem less volatile than stocks because they're less liquid, but they're not in the long-term. They always fall back to equilibrium. Read Irrational Exuberance.

Read very carefully - when you learn how to read - what I said I was discussing. I was discussing owner-occupied real estate conceived of as a "good investment." It is not. Investment real estate - which I was not talking about - may be a good investment; the economics are different.

What is unclear about that?

Owner-occupied residential real estate is a capitalized expense. When the amortization of that capitalized expense is below market rents, then it's a GOOD IDEA to buy residential real estate....

...but not as an INVESTMENT. As a way to reduce your rent, which is an expense. It is NOT a good investment.

However, when the amortization of the capitalized expense is above market rents - as it currently is, by a factor of 2 - then it is a BAD IDEA to buy residential real estate, because you're paying twice as much to obtain the same benefit: shelter.

I don't know how to make that any clearer. I also don't know how to make it any clearer than by saying don't count as part of your "income" any unrealized gains on real estate. You don't know what your real estate is worth until you sell it.

And regarding financial advisors, I have spoken my bit. If you have one you're a fool. All you need is a good lawyer to structure your assets, and a good accountant, and a little bit of business savvy. I have consistently outperformed almost every hedge fund in America, sometimes investing in US stocks, sometimes investing in real estate, sometimes investing in foreign stocks, sometimes holding cash. Why do you need to pay someone 2%+ of your profit when all that person is doing is trying to sell you whatever he thinks you'll buy?

Now ssshhh!

The case is CLOSED.

MMAfia, did you get out of gold and into steel as I suggested a few weeks ago?

I have a feeling MMAfia is not worth much in assets but is certainly full of himself.

Steve - you miss use data. You state "Over long periods of time home prices increase at a real rate of 0.7%, 3.7% nominal. There are no dividends to invest."

People do not buy an index of homes. They buy individual homes in different locations. You major ERROR is that you purposely misuse the average of home prices to prove your point. What is the buyer bought waterfront Jersey shore? Waterfront Hamptons? Manhattan? Brooklyn Prime? All cases those homes would have easily out performed the S&P.

You are pulling a Bush Administration by Cheery Picking your "evidence" to erroroneously "prove" your point.

It is very easy to see through you Steve. Keep calling people dumb and keep posting volumes of misused and misinterpretted data. People see through you easily.

Oh yeah - Steve you also dont calculate in all the tax deductions and exemptions given to a homeowner. They are massive and in and of themselves could easily tilt your model the other way. You just dismiss them as "facttored into rent" or some such other thing. Another great example of your Cherry Picking of data.

Steve and Dick Cheney are like pees and carrots.

petrfitz, why do I engage you?

I did not interpolate the entire housing market to one particular market. In fact, I have repeatedly said that that could not be done. Nor do I use a figure other than the average return for the S&P 500, but if someone had invested in Berkshire Hathaway in 1965, they'd be sitting quite pretty right now.

I am just discussing the average returns. That is the only way to discuss the subject at the macro level. There are always mispriced assets in any market, and some market segments go up faster than others. I'm discussing asset classes.

There is no ERROR, to use your CAPITALS.

Median home prices in NYC have NOT outpaced the S&P 500 since 1980. Forbes Magazine published the chart. Read it.

And regarding "pees and carrots," I've already - multiple times - explained the economic concept of "imputed rent." Since you claim such vast holdings of Manhattan real estate I'm sure you know that your property tax is calculated based on "imputed rent."

You have 5 minutes to explain it, because if you do, you will see why "all the tax deductions and exemptions given to a homeowner" are already included in market rents.

You are truly, truly ignorant.

You don't even know how your property tax is calculated!

LOL.

So Steve - you are saying my property tax is calculated on my specific tax exemptions and deductions and the property tax then zero's out any gain? Arent property taxes themselves deductible?????

Also you state "Median home prices in NYC have NOT outpaced the S&P 500 since 1980" Right there you are disproven - "the Media is the number separating the higher half of a sample, a population, or a probability distribution, from the lower half"

Therefore, you disregard the higher half and only base your premise on the average and the lower half.

You are also erroroneously comparing an index of a stock market to a non indexed home purchase. You said "renting is ALWAYS better" The S&P has not ALWAYS outperformed individual properties, it may in certain times outperform an index of housing but then your error is equating a prime manhattan property as the same value of a property in Detriot.

You cherry pick and misuse data and then draw ABSOLUTE conclusions on them.

And you are wrong.

Your 5 minutes are up 15 minutes ago. You don't know what imputed rent is, you don't know how your property tax is calculated, and you don't know what you're talking about.

Otherwise, everything's perfect!

Steve - you again are cherry picking data points - imputed rent in no way cancels out the effect of tax emptions and deductions that a home owner has.

You are like an autistic who clings onto some theory and tries to apply it to solve every equation. Its truly disturbing. And wrong - everytime. Absolutely.

petrfitz, you are so ignorant!

www2.gsb.columbia.edu/faculty/cmayer/Papers/Assessing_High_House_Prices.pdf

The User Cost of Housing

by Charles Himmelberg, Christopher Mayer and Todd Sinai

The key mistake committed by the conventional measures of overheating in housing markets is that they erroneously treat the purchase price of a house as if it were the same as the annual cost of owning. But consider purchasing a house for $1 million. The cost of living in that house for one year is not $1 million. Nor is the financial return on the house equal to just the capital gain or loss on that property. A correct calculation of the financial return associated with an owner-occupied property compares the value of living in that property for a year—the “imputed rent,” or what it would have cost to rent an equivalent property—with the lost income that one would have received if the owner had invested the capital in an alternative investment—the “opportunity cost of capital.” This comparison should take into account differences in risk, tax benefits from owner-occupancy, property taxes, maintenance expenses and any anticipated capital gains from owning the home.

FYI:

Charles Himmelberg is Senior Economist, Federal Reserve Bank of New York, New York, New York. Christopher Mayer is Paul Milstein Professor, Finance and Economics, Columbia Business School, Columbia University, New York, New York. Todd Sinai is Associate Professor of Real Estate, Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania. Mayer is also Research Associate, and is a Sinai Faculty Research Fellow, National Bureau of Economic Research, Cambridge, Massachusetts.

"you again are cherry picking data points"

Moving averages since 1945. That BY DEFINITION cannot be "cherry-picking."

You're the one who's "cherry picking" by saying that you made x amount of money since y date.

And in the article - moron - read: "This comparison should take into account differences in risk, tax benefits from owner-occupancy, property taxes, maintenance expenses and any anticipated capital gains from owning the home."

pipe down there petrfitz, you just had your ass royally spanked

Stevejhx - how was your date? Did you bore her with all your stats?

So Steve - you are stating that your data treats a prime Manhattan property the same as a shack in Detriot. Explain how your calcs do not?

also Steve your copy and paste job above "This comparison should take into account differences in risk, tax benefits from owner-occupancy, property taxes, maintenance expenses and any anticipated capital gains from owning the home. " does not in any prove your erroneous point that imputed rent concept means that tax advantages and exemptions from owning are zeroed out. It says the opposite that you SHOULD take into account the differnces. Your point ignores the differences.

You really dont understand what you read - you just apply concepts totally incorrectly.

petrfitz, you're invested in an asset class that you don't know how it works. I advise getting out.

Owner-occupied residential real estate is a capitalized expense: you are capitalizing a future stream of rental payments, which is what you would have to pay if you didn't buy a house. You then amortize that expense over a set number of years, usually 30 since that is the depreciation period for real estate (actually 27.5 years, but you can't depreciate the land portion). IF and ONLY IF - in logic terms IFF - current rents exceed the amortized cost of owning property - including all the (significant) costs and benefits of owning property not involved in renting - then you're better off buying for OWNER-OCCUPIED purposes. If the opposite is true - as it now is by a factor of 2 - then you're better of renting.

This is not the exact same equation as for investment property, where the general rule is to break even on a cash-flow basis in the first year. That is, if in the first year you rent it out for what it costs you to hold the property on a cash-flow basis, you should make money in the long-term.

Of course that's exceedingly difficult in today's market, but not impossible.

So, petrfitz, if imputed rent = market rents, there MUST be a correlation between housing costs and incomes, and there is. The market rule is 40x monthly rent is the maximum anyone will let you rent an apartment for; its correlate is 28% of total income can be spent on total housing costs to qualify for a mortgage. They are virtually the same ratio, and as you will see elsewhere if you search the threads, they equate to housing prices = 12x annual rent.

Right now housing prices in Manhattan are approximately 24x annual rent. Search here and on nybits.com, compare owners' carrying costs on the Chelsea Stratus vs. rental costs at a virtually identical Archstone building across the street. I did the same thing on another thread, and did it for THE SAME apartments that was both for rent and for sale, and the ratio was always the same: 2x more expensive to buy as it is to rent.

I've done the math multiple times; I've cited multiple sources. You choose to ignore them at your own peril. Read the article from those esteemed economists, and you will see that they did not think Manhattan properties were overpriced in 2004. Neither do I. However, using the Case-Shiller method of following the price of a single apartment since then, I have demonstrated that property prices - not medians, the price of the same or identical units over time - have doubled since 2004.

Unfortunately, incomes have not. Therefore, this situation is unsustainable in the long-term.

My advice petrfitz is to learn about an asset class before you buy into it, because as the dot.com people learned in 2001, everything has a fundamental p/e ratio, and that ratio is constant over time. In residential real estate that ratio is 12x, and the reason why is the 40x monthly rent = 28% total housing expense equation.

Ignore it at your risk.

93rd, it was a he.

petrfitz, you're amazing! You are reading the gloss of the essay that states how to calculate imputed rent. That's how they calculated it: by including all those factors and comparing them to market rents, to determine whether housing was overpriced.

You are really, truly dumb.

"you are stating that your data treats a prime Manhattan property the same as a shack in Detriot."

It makes no difference - some areas go up faster than others and fall faster than others, and the opposite occurs. My great-great-grandparents were extremely wealthy (I didn't get any). They lived in a brownstone in Stuyvesant Heights in Brooklyn, down the road from F.W. Woolworth. That neighborhood is now Bedford-Stuyvesant.

My grandmother (other side) grew up in Chelsea. It was an Italian slum. Now it's one of the wealthiest neighborhoods in the city.

You're taking Detroit today and extrapolating it to Detroit forever. Once upon a time it was a very wealthy place. Once upon a time Argentina was the wealthiest country in the world. Things change. I am discussing what happens in the long-run.

Or perhaps you forget Manhattan real estate in the 70's, when you could buy a brownstone for $40,000 in Hells Kitchen.

I can't argue with you anymore. What sets the price of real estate is this equation: 12x annual rent = cost of housing, it is derived from the 40x/28% ratio. Right now there ain't much income in Detroit; prices sink. In the past there was lots of income in Manhattan; prices rose. Now Wall Street is in triage, BSC is gone, Countrywide was just downgraded to junk.

Get your head out of the sand, read the article, understand imputed rent = market rent BY DEFINITION.