Predictions? Stock market and Manhattan prices

Stock market will correct and RE will increase

None of the Above: Equities will be flattish to up slightly on the year; prime Manhattan/Brooklyn real estate will be up on a PPSF basis.

ali r.
{downtown broker}

Stock Market will continue to rise. It's only up 17% from where it was 7 years ago. Doesn't seem like much of a bubble to me.

Luukhoi, I was very much in your position and a lot like you.
A great deal depends on what is your age.

Forget about "timing" the market.
Though it is somewhat easy to say for me as I timed it well and got lucky.

You have 2 things pulling at you in opposite directions if you are in your 20s/early 30s.
I can tell you this looking back now that Im in my mid 40s.

1) Changing tastes.
What you like today changes fairly quick in 2 to 3 years. Sometimes you think you like something and think you don't care about something else. After having rented around in different neighborhoods, different types of buildings, etc. , I eventually got a feel for what was really important to me. And buying and selling apartments every 2/3 years is just not practical.

2) Long term views
In your 40s, you find yourself saying "I should have..." a lot.
I should have bought an apartment 10 years earlier. I should have bought my office building 10 years earlier. I should have put more money in the S&P earlier and just left it alone for a while...

The market seems really expensive now.
As it seemed to me in 1996.

There's that push pull again.
Just saying...........

Luukhoi:

1. the stock market has a lot of problems and potential disrupters
2. prime real estate still has tremendous upward short-term price potential

3. I have been carefully following the Fort Greene Brooklyn market this
year, as well as the below 34th Street Manhattan markets

4. prices in Fort Greene are torching, up close to or over 50%/per sq.ft.
since January 1, 2013

5. I plan to sell in Fort Greene, and wouldnt be shocked if that market
climbs another 10-20% by the end of June

6. while it is somewhat of a unique market because of its small size and
current intense demand, it is something of a mine canary for property
located in all of NYC's most desired neighborhoods

7. having lost my bet that my girlfriend would come crawling back to me
on her knees and kiss my feet begging me to take her back I cannot claim
to be an infallible prognosticator, but viewed from a mean expected yield
basis I believe the odds are that highly desired NYC real estate will conti-
nue to go up for quite a while

8. altho the odds are lower, because of unique and evolving economic and
political reasons, prime NYC real estate might still be in the first lap of its
price appreciation

I thought 2 years ago, the re market in NYC is overvalued and was expecting slow down last year.

But I ended up completely wrong and paying a higher price. I am giving up on bearish prediction and under contract now.

I think the following factors make NYC RE slightly positive -
1. Foreign buyers.
2. At open houses, I noticed a lot of empty nesters which come with cash.
3. Young people/families don't want to commute. They rather live in LIC, Brooklyn, etc.
4. Public transport infrastructure is getting worse. Look at Metro-North commuting times (I used to live in Greenwich and new train schedules reflect 10 min extra commute each way). NJ Transit - same story.
5. Hudson Yards should bring in more jobs/housing but I have no idea how NJ Transit will handle increasing number of commuters?
6. Most new apartments are catered towards ultra wealthy (Manhattan), so you don't really see new coop coming up with apartments between 1-1.5 mm.

Downsides are regular hurricanes, crime, taxation (I would move back to Greenwich CT in a heartbeat if my job moves there).

I would pull trigger now although who knows the day I close, the market tanks? All I want over next 5-7 years is 2-3% annual apperciation.

Also, there is less leverage in the system (specific to NYC) compared to 2007.

Although a lot of people have financed ARM on real estate in LIC, Williamsburg, etc with tax abatement. Say rates are higher in 10 years and tax abatements expire and tax go up dramatically, it may end up in tears.

Hi,
You guys are totally awesome. Thanks for your input. But where are all the bears LOL?

Khoi

Y, is there is something that scares me in this market it's precisely lack of bears. A total bull consensus is often the clearest sign of a bubble )

Don't mean to be a bull but a comparable market is Toronto (not as cool as NYC). People had been bearish for eternity but the sucker refuses to go down.

"Where are all the bears":

Stroking ... in more ways than one

I had been looking for a whole year before picking out a place late last year and have witnessed how much prices have gone up. I constantly have the feeling that I'm buying into a bubble. New developments seem to be priced very high, and I noticed their sq ftage often seem inflated, which makes the pricing more ridiculous. It just feels to me it's a momentum trade for investors and I don't have the stomach nor financial ability to play in that market.

I think it still makes sense to buy in older buildings in prime areas. After doing all the math of buying vs renting, to me it's a solid investment - For my one-bedroom apartment I project around 6% yield in the form of net saved rent, after tax and transaction costs. With limited new supply in non-luxury units I can see home prices in that segment holding up pretty well.

@feelhong

care to explain how u came up with 6%? are you counting co-op fees as well in that equation? when i account for co-op fees/taxes + transactional fees, i see something closer to 0-1% and often negative in terms of yields...or are you doing a DCF for the long-run and assuming appreciation to continue at the same rate as it has in 2012-2013?

it's interesting how many people are pro-buying now...i actually think it's an overinflated investment and that one could prob generate better returns elsewhere.

Nasdaq already did correct 10%. I think market goes sideways for most of year. Stocks are in general not overvalued, but Fed getting out is scaring a lot of people, so money moving elsewhere for a while (which is not bad for RE). And a lot of tech was trading a bit silly, until earnings come out (witness NFLX today).

RE, thing is that the current move upward seems to defy logic. Has to go down at some point? But then it doesn't. Yet with lack of inventory and the desirability of NYC, it will keep going up, as it is still affordable for lots of people. Until renting becomes a no-brainer prices will continue to edge up. Still lots of room. Too much money floating around, as evident by number of all cash purchases.

There is no way the yield on a one-bedroom in Manhattan is 6%, after-tax or before-tax. You must be dividing by the down payment, not the asset price.

More families are choosing to stay in NYC and more ferners are buying here. It's really not that difficult. All of the people looking for $500 psf were looking at Manhattan as if it were Wayne, New Jersey.

crescent22, you're right, 6% doesn't jibe.

I'm getting just that, albeit tax-free, figuring twice the nominal 1991 price as principal and twice the maintenance as what I'd be paying in rent.

Nobody's mentioned monthly maintenance (co-op) or common charges (condo).

If you can get low monthlies and can hold the apartment for at least, say, 7 years, it's likely buying real estate will pay off better than the market.

But if not, or you need to sell in 2-3 years, you need spectacular appreciation to make money.

Trulia has the best rent v buy calculator I've seen, why not run the numbers? We did, which is why ended up buying.

http://www.trulia.com/rent_vs_buy/

Also---there is so much pent-up demand to purchase that is invisible right now, it's amazing. We know several couples who want to buy, who are qualified to buy, but who can't find inventory. They are like the discouraged unemployed, they are invisible. As soon as conditions improve, they will be in the market.

I am dividing by down payment, so yes it's a levered yield. I'm measuring how much I'm getting back vs how much I'm putting in. Even if I run it at all cash, I'm still seeing 3+%. And I don't think my assumptions are that aggressive. Please let me know if I'm missing anything major coz that would mean my whole premise is wrong.

Back of the envelope calculation using these assumptions:
- 5-yr holding period
- 700k purchase, 3% appreciation/yr --> 811k in 5 yrs, minus 10% transaction cost, 730k net --> 30k gain, discount at 3% to get 26.2k
- 7/1 ARM at 3% rate --> pmt of 2210
- 25% down = 175k, plus avg amort principal 970*60, total 233k principal
- avg rent 3260/mo (starting at 3000, 4% increase/yr)
- avg maintenance 1300/mo
- avg interest expense 1240 pretax, 870 after tax
- net monthly cash inflow (saved rent) = 1090 --> discount at 3% gets you npv of 60.7k
- so in 5 yrs you're netting close to 87k (26.2k cap gain + 60.7k saved rent) on 233k principal, which is around 37%, at over 6% a yr

rb345, welcome back. where are the bears?

To answer the original question, real estate up another 5-7 percent. SE condo index 2400+ for Dec 14. SPX 1775-1975 range this year. In short, risk assets will maintain a bid barring significant Russia or China issue.

300_mercer:
That equation sounds right to me.

^^10:09, no content^^

Feelhong, do not forget insurance and routine repairs and periodic updates to maintain the same quality. That will be another $400-500 per month. 10 y holding period will get you to your original number.

Neither the stock market nor RE will go down significantly. Those of us with cash in the bank will, as always, be left holding the bag.

5 year holding with negative cash flow. Rent will be less than (mortgage +taxes+ ins + Common charges). 2% holding cost/yr

Net gain = (Buying cost 7% ) + (5 yr holding costs 10% ) + (Selling costs 8%) + (capital gains 20% of
diff))
minus
Selling price must be 25% more than purchase price to break even.
At 5% per year increase.

Bottom line
Flipping is not feasible in Manhattan CONDO real estate. You make money only in the long haul.

The bull run is over for both stocks and RE. RE will hold up better as inventory is still very limited (especially once you exclude all of the above market offers).

Pixel, where do you get 7 percent buying cost? For a coop, with rebate from Keith Burkhardt it can be negative. All you need to pay is 1 percent mansion tax plus few small items less rebate. For condo after rebate, it is 1 percent.

here you go:

Buying cost:
Between 1 to 2%
Attorney fees+Bank Fees: $350-$750+Application Fee: $350+Processing Fee: $330+Appraisal Fee: $300-$1,500 (depending on sales price)+Credit Report Fee: $10.10 single/$15.20 joint+Bank Attorney: $650-$750+Tax Escrows: 2 to 6 months+Recording Fees: $250-$750

About 5%
Fee Title Insurance: Approx. $450 per $100,000 of sales price under 1M, +15% on $1M or more
Mortgage Title Insurance: Approx. $130 per $100,000 of mortgage amount
Municipal Search: $350-$500
Mansion Tax: 1% of entire purchase where price is $1,000,000 or more.
NYC Mortgage Tax (paid by borrower):
a. Mortgage less than $500,000 = 1.80%
b. Mortgage $500,000+ on 1-3 family residential dwelling = 1.925%
c. Mortgage on all other property over $500,000.00 = 2.80%

For a $$2mm apt, first paragraph is no more than 5k. 25bps. Tax escrows are not cost. They are still yours. That is 25 bps.

Mansion tax 1 percent
Title insurance 60 bps
70 ltv, 2 percent of purchase price.
Total 3.85 percent
Rebate 2 percent
Total 1.85 percent.
Lower if you do not borrow as much.
No mortgage tax if you buy coop. Believe title insurance may not be needed either.

70 ltv, mortgage tax 2 percent of purchase price

Actually mortgage tax on condos is only 1.925 percent. 70 ltv mortgage will be 1.4 percent.

Total condo after rebate 1.25 percent.

Where's NYCMatt's opinion on this? He would have the most accurate prediction. Brilliant guy.

More families staying, more empty nesters returning or staying. Prices will be firm.
Interesting this is hurting anything but the nearer suburbs. Suffolk, Rockland, outside Bergen county, suburbs further away. few want to live there like 2+ decades ago. Property taxes supporting inefficiency and legacy graft don't help.

I don't mean to kill the party but you will not get any reasonable answer to your question. There are many market participants and they have already set prices based upon "predictions" of the future. If anyone did know which way the market would go (legally or illegally), they won't be posting that answer here.

Of course, if you rephrase the question to say "where do you think the stock market and/or housing markets will be 10-20 yrs from now", then I think you could make some reasonable estimates based upon past valuations.

"The future is unwritten." (Joe Strummer, of "The Clash"; over a decade ago.)

morethanenoughtruth

I smell a lazy, unemployable pig in this vicinity.
The pig is unable to ignore me, as I ignore the pig.
The pig has nothing better to do and still needs to try to force a connection with me.
The pig can't stop trolling me.
Rolling in the mud; looking for a fight on various streeteasy discussion threads, because there is nothing better for the pig to do with its time.

Don't feed the pig.

Más caca de vaca

The combination of Federal Reserve easy money policy, NYC population growth, public policies that reduce the supply of available housing, and minimal amount of new construction will all continue to drive NYC real estate higher over the next 5 years. The only thing that could cause it to go down is if we have another crime wave that causes people to leave the city.

>The only thing that could cause it to go down is if we have another crime wave that causes people to leave the city.

What about an increase in taxes?