little black arrow point down

80s man - true, there are differences.
But I'm thinking of the layoffs in investment banks and
in law firms starting around '90 or '91, afer the M&A
frenzy had its last hurrah, attributed to the lower stock
prices after Black Monday ('87). I'm thinking of people
who felt lucky to have jobs at 1/3 their prior salaries.
I also remember long lines where people filed Unemployment
claims. The officially reported unemployment rate in NYC
was very high. This appears to be coming down the pike
again, so that's not going to be so new.

Yeah, the people who with 5 or 7 year ARMS aren't thinking
about living in their places for 20 years. In this way,
prime Manhattan could be poised for a situation exactly
like the notorious CA suburbs -- rate sets = defaults.

I actually don't understand these high-end buyers. I
should think if they were buying large apartments for
families, they would be looking at 15-year horizons or
so, and financing accordingly.

Mortgage rates are creeping up already, so when the
Fed raises rates things may get extremely ugly. If
people took out fixed-rates, it shouldn't matter.
Is it that you can't get fixed-rate jumbo loans and
never could?

lowery- This market is nothing like we have ever seen. There is no model to compare to this crisis. There are way to many problems all occurring at the same time. I can't see how anyone can say that this is just another economic cycle. I'm sorry but this is anything but normal and will take years to correct.

Normally when interest rates go up, more renters come into the market and rents increase. That's initially all the noise brokers were making a few months ago that rentals are strong. Look at it now, the real estate market is getting clobbered across the board, rents and prices declining 10% just in the last few months, and it looks like this is just the beginning. And all the foreign buyers that bought last year are already underwater because the dollar fell further and they are now faced with a double whammy as not only the rents are falling but the properties are also taking longer to rent.

dco is correct - nothing ever like this. Not even the 80's. The problem is not with the financial system; lots of these write-downs will soon be write-ups once there's a market for the debt. The problem is with the astronomical increase in housing prices, far outstripping income, as a result of negative real interest rates, lax underwriting standards, incompetent risk-rating, and exotic products that should have never been brought to the market. The result was excess money being pumped into one asset class, driving up prices.

There is nothing the government or anybody can do to stop housing prices from correcting, because once the liquidity dries up (as it has) to reduce risk, no one can afford these current prices. Which is why prices have 50% to fall in Manhattan, until they reach the levels of rent. It's simply a market phenomenon. Too high prices for all the foregoing reasons, and an artificial increase in income a la Wall Street bonuses, that are also drying up. No leverage + no income = deflation.

stevejhx dco = blah blah blah blah blah. steve, if you had said that the Manhattan housing market will fall 10% or so because of the slowing economy and difficult times for financial sector employees, I could understand and agree, but your commentary is a joke. Lax underwriting standards?? You really think that was widespread in Manhattan? Risk-rating and exotic products? Do you really think Manhattan co-op mortgages were backing subprime securitizations? Keep relying on your flawed rent ratio analysis. You really have no clue what you are talking about.

A lot of prime Manhattan is 5-7 year ARMS. The whole real estate market was pushed up from the bottom: in 2003 a person making $500K with a 30 year fixed would get outbid by someone making $150K with a 5 year I/O. So the $500K buyer goes and gets him/herself an I/O and off we go! The market entered a upwardly spiral of exotic products and loosening credit. Everybody was running around trying to get a property before the building was sold out, etc... It was good credit being chased by bad credit to the point where the good credit went bad. And...that's where we are today.

My story? I bought pre-construction pre-war conversion in Chelsea in 1998.

LICC: "Lax underwriting standards?? You really think that was widespread in Manhattan?"

Yes. 60% of recent mortgages are jumbo ARMS, due to reset in the next 5 years. Lots of 0% down, lots of 5% down, lots of 10% down in new dev.

"Risk-rating and exotic products?"

The risk rating relates to the ratings assigned to the securities that have exotic products as underlyings. Wall Street paid themselves handsomely for packaging those products, which are all being written off, leading to massive Wall Street layoffs.

"Do you really think Manhattan co-op mortgages were backing subprime securitizations?"

What? The question doesn't even make sense. Trying to glean a meaning out of it, however, I refer you to the aforesaid: "I think that Wall Street paid themselves handsomely for packaging those products, which are all being written off, leading to massive Wall Street layoffs."

I will further add that the credit crunch definitely DOES affect Manhattanites' ability to take out a mortgage, since lending standards have tightened significantly. Try to get a jumbo loan. Try to get an ARM. See what the rates are (8.5% at BofA and soon to be Countrywide) and what the LTB requirements are.

Banks are recapitalizing, and very risk averse.

"Keep relying on your flawed rent ratio analysis. You really have no clue what you are talking about."

I think that it is you who don't know what you're talking about, LICC. See above.

80's man is correct: there is a significant subprime problem in the outer boroughs, which pushed prices up from the bottom just as Wall Street bonuses pulled prices up from the top. Bed-Sty goes up, Red Hook goes up, Middle Slope goes up, Prime Slope goes up, Brooklyn Heights goes up, Manhattan goes up.

Just like it happened in the Inland Empire.

80sMan,

Well said- similar to the "Plankton Theory meets Minksy" analysis:

http://www.pimco.com/LeftNav/Featured+Market+Commentary/FF/2007/GCBF-+March+2007.htm

An excellent read.

stevejhx, don't forget the real estate brokers who were making good commission money. They were buying as well. A lot of them were buying. I went to look at a place on Attorney street in 2006 and the on-site brokers were too busy flipping places, for $40K almost overnight, to talk to me. That's about when I realized things had gotten out of hand.

Take away the Wall Street bonus crowd, take away the brokers making hundreds of thousands a year, take away the exotic structures and free loans, you got the same class of buyers as 1993: people with lots of cash, good credit and stable employment. Probably 10% of the population.

MMAfia, does the pimco chart actually show that REAL ESTATE HAS FALLEN IN VALUE in certain periods.

That CAN'T be right. Liar, liar, pants on fire!

Yes 80sMan, that's true, and there are flippers aplenty out there right now: just look at recent closing at new developments and current listings for sale and/or rent. Unfortunately, they won't be able to get enough rent to cover their expenses, and will suffer long-term losses which might lead them just to walk away.

Especially if they're Wall Streeters who lost their jobs.

80sman - I agree about the craziness of the flipping. I also think of steve's anecdote of the Chelsea open house where they almost had an auction right on the spot. I'm still not going to make any bets on the future. I think the gloom and doom goes too far. Yeah, this is ugly, and too much appreciation too quickly for too long. I have some horror stories too of looking at Manhattan apts and saying, whoah, wait a minute here! Also conversations with mortgage brokers saying "$XXX,000? No problem." We shall see.... the bldg I lived in that had to lower their rents and pay brokers' fees got rid of all their vacancies. Not bad for 3 months' time. People are still buying. Banks are still lending. Still no foreclosure activity in prime areas. And official unemployment still not bad at all. I wish I could buy again in 2010 or so, but like many people, I've been feeling the pinch(es) very badly.

Foreclosure in NY takes minimum of one year. The carnage started in December. The resets are 5 years in the offing. This is going to get fugly.

Inventory will be between 13,000-15,000 this time next year. Prices reductions will begin to accelerate with job lose. Also one doesn't need to actually lose their job to effect their decision to buy. If someone is uncertain about their employment then they are highly unlikely to purchase in this market. Job security is just as important to sales as any other factor. For every 1 job lost, 5 will worry if they are next.

Wow this board is absurd. Who are you people?

I can't tell if these negative sentiments are based on fact, emotion, or a need for attention and self-righteous desires.

ootin- New inventory coming on the market at the same time nothing is selling. No bonus selling season in 2008 and 2009. Which is the season that moves thousands of units. Tighter credit, inflation and rents being cheaper are also factors that will drive inventory up to those levels. Now factor in massive job lose/security and an incredible amount to wealth lost in the last 6 months. I truly believe these to be realistic numbers give the problems. There is no reason to think that with these problem (many of which were considered reason that the NYC market flourished in the first place) won't have the reverse effect on the RE market today. Please someone give me some reasons to think other wise. Please I just don't see it getting better anytime soon.

So what then dco? Jump off a bridge? Swallow your tongue? Go to Union Square and pass out flyers? Enlist in the Army?

What the hell is the point of all of these negative posts over and over and over and over and over and over again?

ootin=late for tanning salon appointment and/or Lexus lease payment

ootin- Now how's being dramatic. Did I say that. I never equated the collapse of the NYCF real estate market with the end of the world, perhaps it means that to you. I'm giving you my opinion based on the state of the market. I also asked for someone to convince me other wise. Please I'll say it again give me a reason(s) to think other wise. Who are you to question someones opinion? If you have an opinion give it and I'll listen. If you can provide an argument to buy now then go ahead and speak. I'm listening.

ok dco, you gave your opinion. Then you repeated your opinion, and gave your opinion again. Then you gave your opinion one more time, and then another time, and once more again. Then the clock struct Noon, and the cycle continued.

ootin's a broker, has nothing to sell or rent right now so he's posting on streeteasy, trying to convince the world that Manhattan real estate prices never fall, and that buyers' "brokers" have buyers interest in mind, when they have an incurable conflict of interest: the lower the selling price, the more the buyer saves, the less the broker makes.

ootin, what should we do? How about people buying/renting places they can afford? How about people accumulating long term savings rather than amassing a pile of debt they hope will mature into an asset 5 years from now? How about personal financial planning that isn't based on 20% year-over-year price increases?

ok dco, how about all that. Now what?

and stevejhx, seems to know my career. He is pretty good at making conclusions with no evidence.

dco -> 80sMan

Ootin. I'd like to think that my ideas are my own. Even if they do overlap with those of other people.

Actually, I change my answer. Ootin, talk to petrfitz. He's always in the mood to buy.

No evidence?

"

ootin: "by the way totallyanonymous, maybe that couple came to NYC and didn't have much time to find a place, so the broker found them the building they didn't otherwise know about, confirmed an apartment of the right size, specs were available, made an appointment at a convenient time for both the building and them, guided them through the paperwork, etc....

"maybe those services are worth more to some than others. Maybe those services weren't even worth that much to them and the services were expensive no matter how you cut it. But there are costs to information, and obviously that couple didn't have the information they needed to rent in nyc without paying a fee."

Position contrary to stevejhx = automatic real estate broker

80sMan - meant to attribute a comment earlier to you, not dco. was my comment dco -> 80sMan

"dco -> 80sMan"

Just an observation, but it's quite interesting how this behavior of "xxx -> yyy" repeats itself with new posters. From the old days of spunky, to the latest entrant, ootin.

MMAfia, there's a chance that ootin is spunky spelled backwards.

huh?

I think anyone who has taken a high school math class knows what -> means.

ootin "ok dco, how about all that. Now what? and stevejhx, seems to know my career. He is pretty good at making conclusions with no evidence"

Now I repeat myself until everyone understands that this market is DOA and to buy now is foolish. So ootin just block me so you don't have to listen to the truth. I still have had no takers, can anyone provide data that would change my mind. Where have all of the buyers gone? My guess is they are looking for a place to rent.

ootin->petrfitz

-->' is the symbol for 'implies' in propositional logic. You normally don't learn that in High School math. Most High School students only go as far as introductory calculus, which, technically, is not math. Math starts with algebra which is not the same as the pre-algebra you learned in High School. Forgive my pedantry. I went to Columbia Engineering. I'm still in recovery. Anywho... A-> B mean A implies B as in there are no clouds in the sky implies it is not raining. Except for those damn sun-showers. I'm sorry. I know this has nothing to do with real estate.

I propose the following:

1) -> can mean different things in different contexts. For example, in some computer programming languages it can be used to access a particular data element or class within an object. "Dr. Math" provides another usage in the context of math:

http://mathforum.org/library/drmath/view/52308.html

2) High school math is, in fact, math. If it makes you better to feel better that your math is so powerful and advanced that all other forms of math do not qualify, that's fine I suppose, but don't delude yourself into thinking that your definition of math aligns with the common understanding of the term nor the English language definition as codified in reasonable dictionaries.

3) I find the use of the arrow symbols here pretty clear in context (and fairly juvenile).

dco, you are correct, no one is buying anything. Not a single real estate purchase and sale is occuring at all.

Oddly however, even though all people are on the sidelines and there are no transactions, you keep saying the same thing, just to make sure.

Good for you.

jordyn, the mapping function means a surjection. A one to one mapping. Did you learn that in High School? If you know the correct answer you are eligible to apply for a risk management position at a prominent bank. Must relocate.

Why would I want a risk management position at a prominent bank? Boring.

I did learn a lot of things in high school, though; including the value of context in the determining meaning and that it's possible to make discrete arguments about related subjects (although apparently many people will insist on conflating them).

"Oddly however, even though all people are on the sidelines and there are no transactions, you keep saying the same thing, just to make sure."

The sidelines. How horrible. They were auctioning really bad apartments 3 years ago, & I was on the sidelines.

Hell, I hope they got an 80/20.

stevejhx you say some really odd, out of context things.

Steve says "They were auctioning really bad apartments 3 years ago, & I was on the sidelines." hmm yeah in the last 3 years an average apartment has appreciated 150%. Wow Steve you are so smart for sitting it out.

hmm in th elast 3 years Steve you have spent over $100K in rent. I bet your landlord loves you.

"hmm yeah in the last 3 years an average apartment has appreciated 150%."

My point exactly.

The Badge building in LIC just had a $1.9 million sale, according to Curbed. Seems like quite a few recent sales haven't made their way onto streeteasy yet. dco's head must be spinning.