Want to Know What Drove Real Estate Prices Higher?

Yep. Never. Just like after the 2000 bubble Internet companies will never come back. Or after the 1970's manufacturing collapse US efficiency will never come back. Or even Wall Street after the junk bond fueled crashes in the 1980s. This country's economy constantly finds a way to reinvent itself.

To paraphrase a cohort from your generation (Prince) "Never is a mightly long time".

Silly comment, even from you.

Well Steve, thats good for me. I just went into contract on a 1 bedroom condo amazing building pool, track, health club, roof deck where I will watch the 4th of July fireworks with a river view for 645,000. I can't believe it myself, patience is a virtue and you know what since I will rent it out for the next 5-7 years I am willing to watch New York crumble, just pay me my 3200-3500 per month to watch the water taxi go by on the east river.I will laugh all the way to the bank and no, renting is not better than buying, but thanks to all the renters that have and will continue to make me wealthy.

If anyone cares, what drove up prices were:

1) Low fixed rate jumbo mortgages (jumbo mortgage risk premium over 10 year treasuries at all time high)
2) 10 Year treasury after inflation return of near zero (Treasuries have begun their rate increases)
3) Bush tax cuts (will be changed once Obama elected)
4) Average securities industry compensation hitting unsustainable levels
5) Required return on capital declined (function of risk free rates)

markznyc: "Just like after the 2000 bubble Internet companies will never come back."

Have you ever looked at a price chart for Microsoft or Yahoo?

"Or after the 1970's manufacturing collapse US efficiency will never come back."

What does the manufacturing collapse have to do with efficiency? (Nothing.) Nonetheless, have you seen where manufacturing is compared to the 1970's?

"Wall Street after the junk bond fueled crashes in the 1980s."

Have you seen them selling many junk bonds recently?

You just proved my point. There will never be another Tulip Panic, either.

zorter, if you paid that amount of money and can only get that rent and took out a conventional mortgage, you'll be losing money to the tune of about $1,500 a month.

How in the world do you know what kind of down payment I will make.

hOW DO YOU MAKE A STATEMENT LIKE THAT WITHOUT KNOWING TAXES AND COMMON

Because that would be approximately the mortgage payment, so taxes and common charges are in addition. Taxes on that price - if unabated - would run around $500 - $700 a month, ditto the common charges.

If you make a down payment larger than 20% just to get the mortgage payment down to something that's manageable, then you have the added opportunity cost of not investing it elsewhere. Bank of America's common stock currently pays an 8.5% dividend.

steve -- again you pick apart a statement and get it all wrong. The concept I was positing that "never" is business should "never" be said. As you regularly scoff at people who say "real estate in manhattan will NEVER go down". We know that is not true in the same manner that you know that Wall Street will reinvent itself. Your bitterness has really clouded any judgement you may think you have.

What is google worth today and what is IBM worth?

Efficiency of American companies surpasses that of 99% of the world.

After junk bonds Wall Street found another cash cow to milk.

Sorry, steve, you proved my point for me.

Steve, I already own 2 apartments and had I invested that maoney in Bank of America for the last 6 years I am sure I would not have generated the returns I have gotten off of the real estate.You also do not take into effect rent increases which have been very steady over the years. Thanks but no thanks, I will take my chances with a proven track record and since I can hold the real estate long term I know it will be another prudent investment, Have a ball with Bank of America I'll take the rent.

Steve, bye the way in 2003 BAC was 39.51 it closed today at 30.32 Another great return. My apartments gained 80-100% even in a down market. Wait let me think I'll take the stock.

markznyc, I have no bitterness. My point was twofold: first, we will never see another property bubble like this again. The bubbles don't repeat themselves. Second, after BSC Wall Street is soon coming under the aegis of regulation by the Federal Reserve. Their 100x leverage is no more. Read the article; it's what it says.

Will there be another bubble in the future? Of course there will be - just not this one.

I don't own BofA stock. In fact I don't own any US stocks. But if you want a good yield, that's one.

I did sell Merrill Lynch for $75 or so.

Financial stocks are cyclical. Very easy to make money in them if you know the cycles.

"You also do not take into effect rent increases which have been very steady over the years."

Not in Manhattan. Market rents are virtually unchanged since 2003.

"What is google worth today and what is IBM worth?"

Google was not around in 2000, and they're worth so much money because they're a virtual monopoly in a growing business. IBM today is worth about what it was in 2000: $120 a share.

"had I invested that maoney in Bank of America for the last 6 years I am sure I would not have generated the returns I have gotten off of the real estate"

You're assuming that you will hold onto those returns. I'm not sure that's a safe assumption.

Steve, THOSE WHO CAN'T DO TEACH!!!!!!!!

Markznyc, don't you know that the safest investment is in Brazil. If you are a middle-class American, rent and send your down payment to Brazil. You can make 60% returns every year (while your meds are working however).

Again missed the point.

IBM=pre bubble. Google = post bubble.

There is always an innovator to fill the gap and develop a new way to make $$. Yep, this round on Wall Street is done, but there will be another. There ALWAYS is . . . ;)

There ALWAYS is . . .

I fully agree. Just not this one again. Current one is commodities.

"Steve, THOSE WHO CAN'T DO TEACH!!!!!!!!"

¿?

Zorter, you paid about 15X-17X annual rent. I understand that's pretty good in NYC. Are you sure you can get that rental amount?

"Zorter, you paid about 15X-17X annual rent. I understand that's pretty good in NYC."

Historically it's 12x in NYC. Not such a good thing.

Steve: I stand corrected as per Manhattan market rental report a one bedroom condo doorman midtown east, don't forget river view and full amenities is renting for 3700.00. I always like to be conservative, please revise my loses down and call me in 7 years when BAC is at 30.33. Once again thank you renters.

Zorter:

How big is this place you are talking about - I am quite familiar with the mid-town east area - nearly bought in the HighPoint (luxury doorman pool, the works) sometime ago, with a terrace on a high floor. Thank God for the fact that I was outbid by an all cash buyer who paid nearly the asking price. Good condos but over-priced for the neighborhood. I can;t imagine someone paying $3,700 pm in rent for something under 700 sq ft. (is that the size of your condo?)l If you get your asking - good for you mate. Just surprised that's what people are willing to pay. Also, I assume on the east river means a hike from the subway. But then again, someone paying $3.7K in rent does not need to be close to the subway.

I don't expect to get 3700 thats what Manhattan rental report says. My expectations are 3300-3600. Square footage is 675 but a killer view. I like the area because of the solow redevelopment of 39-43 streets, 5 acres of park 4-5 buildings, whole foods market, school and don't forget for me I can wait the 7 years for the 2nd ave subway, which is a reality, may be a long time coming but it is coming. Look I still believe in resale condos in prime Manhattan locations. I do not believe in paying 1300 a square foor for new construction, that is something I would never do or have done.My apartments are all around the UN which makes for reliable good tennants and once in a while you get an international company to rent from you and thats a real bonus.

That certain person does NOT turn every thread into a "RE=bad investment" argument. He either posts new topics to that effect, and those same six people choose to participate in every one of those threads; or he comments to that effect when others (usually OPs) ask a question that leads naturally to a discussion of long- and short-term prospects for Manhattan & nearby residential real estate. Those who have a wholesale desire to shut him up are simply censors, or worse. It's sad.

e.g. if renovation advice is sought, he doesn't pipe in about RE being a bad investment

Is "Midtown East" a neighborhood?

Here's your NO FEE competition:

$2,900 1-Bedroom at Ambassador East
$3,050 1-Bedroom at Park 54
$3,100 1-Bedroom at Ambassador East
$3,100 1-Bedroom at Ambassador East
$3,100 1-Bedroom at Ambassador East
$3,350 1-Bedroom at River Tower
$3,395 1-Bedroom at The Metropolis
$3,675 1-Bedroom at The Metropolis
$3,800 1-Bedroom at The Beaux Arts
$4,275 1-Bedroom at The Metropolis
$4,375 1-Bedroom at The Metropolis
$4,550 1-Bedroom at Le Triomphe

You seem to be on the high side of your expectations, especially with that square footage. FYI renters will pay for room, but rarely for views or amenities like marble toilets.

I noticed in Goldman's press release that their accrual for compensation expense was only 7.4% lower than last year (hardly tanking)...my guess is you'll see the same for Morgan Stanley tomorrow. Not a huge decline. Obviously busines is off broadly, but generally at 2005/2006 levels, and other sectors of the business are on fire (investment grade debt issuance, for example). So the heydey is over, of course, but Wall Street will be just fine.

Potential growth is always wallstreets biggest determining factor. I guess the crisis is over. Well done GS.

What crisis on Wall Street? There is no crisis on Wall Street.

Here we go again.

Really- there is NO crisis on Wall Street. Stop the silly nonsense already. Anyway, what on earth does Wall St have anything to do with Manhattan real estate? silly goose.

Fortunately I've blocked all comments by eah. All I can see is "Ignoring comment by eah. Click here to reveal it."

Nope.

Wonder why you even felt the need to stay that. Interesting.

I'm not even tempted.

markznyc - my sentiment exactly. wall st. is already working on how to fill this gap.

I tried to use the ignore button once and I shut it off as soon as that person posted. It was like having a voicemail and not being able to listen to it. Damn little red light just stays on. Drives me crazy. Knowing steve's personality I'm sure he has already clicked on eah's comments. There is no way in hell steve has the self control to not click on those posts.

Why the drama? One bad thread that got out of hand? Who cares...shake it off and back to the market.

Wrong-o JuiceMan.

Not even tempted.