Layoffs Drain City's Economy

Remmeber everyone: These layoffs will have ABSOLUTELY NO AFFECT on Manhattan prices. 2009 will still see double digit appreciation because Dottie Herman said so.

"These layoffs will have ABSOLUTELY NO AFFECT on Manhattan prices"

You really think so?

I was being sarcastic.

And will they have an EFFECT on them? Yes.

If they make you cry.

Please post comments that add actual value to this board. Stating the obvious "the economy is in trouble" does not help anyone in the RE market nor does it make you appear brilliant.

I say that "oil is going to be expensive" - am i a genius or market contrarian

exactly petrfitz. rather are you an oil bull or bear to use the tired terminology of this site.

I know. I was too. Why are you replying to your own posts? And Petrfitz is right (much as it pains me), why do so many people here post obvious old news as if its somehow novel? Really, layoffs will hurt city economy?!! Are you sure?

I want to alert people here to a real problem I've heard about. I've heard it referred to as global warming I think. I'm not sure exactly what it is but its bad. Keep your ears open but write it down, you heard it here first.

Ok, so I've used that one before.

ccdevi - dont be so harsh. LAst year no one besides Steve and MMAfia could have predicted that after one of the greatest rises in home valuation since the great depression could we have a soft RE market.

Also ccdevi - commenting on global warming makes you sound like an Al Gore following liberal.

Is liberal an insult?

petrfitz doing monday football quarterbacking again.

how many times to i have to post the link from jan THIS YEAR with the headline of the thread calling us "idiots" for thinking that the market is in for a serious thrashing?

that was THIS YEAR, forget about LAST YEAR.

ok MMAfia - you are a genius. LAst year after 5 years of the greatest gains in homeownership value, historical lending rates, newly created exotic loans, surburabn homepwners becoming millionaires overnight - you and Steve where the ONLY ones who thought RE was going to be soft.

You are truly a contrarian genius. You must be a fortune. You are a mordern day Thales!

ccdevi, eah and JM ( and the rest of you know who you are ) make me laugh. For about a year you all have been saying that Manhattan is this magical island that never sees prices decrease. You have supported your arguments on the backs of foreigners and wall street employment. I even remember people comparing Miami to Manhattan and the whole group of you guys/gals jumping all over them. The argument was that Manhattan had wall street and Miami had nothing to support the increase in inventory. And of course foreigners were buying up both places.

OK so now what. Who is going to pick up the slack in NYC now that wall street is in shambles and the foreigners are facing hard times at home? You see you can't have it both ways. You can't say they were the reason Manhattan will never fall and when they go away say it will have no effect.

Oh, I almost forgot about the flippers. Miami had them and of course Manhattan doesn't. So you think.

"For about a year you all have been saying that Manhattan is this magical island that never sees prices decrease."

Please link the thread where I said this or anything like this. If you do I will pay you $100. When you can't, you pay me $100. That should be about 20 weeks of allowance for you.

See dco, you can't have it both ways, you can't make things up and expect not to be called on it.

ccdevi- Your funny. You claim to be both bear and bull. You are one confused person.

DCO - I will take you seriously when you learn how to use your and you're. we all make spelling/grammar errors. but you always make that error indicating you have zero clue.

For about a year you all have been saying that Manhattan is this magical island that never sees prices decrease

dco find me the post where i say that. you won't find one. i have said that we will see price decline and i intend to buy. in fact, look hard enough and you will see my "buy" price in the WV - which is much lower than the current price/sq. ft. i also said i found much of the island overpriced so went to washington heights to find value. and only recently have looked downtown again at strategic properties.

"newly created exotic loans"

They're called "exotic" for a reason.

ahh, petrfitz and friends out in force.. must be hard swallowing the daily news eh?

come on, rah-rah cheerleaders!!! fulfill your destiny as those of your kind on the other real-estate boards (RIP) in AZ, FL, CA and your forefathers from the DotBust days.

"come on, rah-rah cheerleaders!!! fulfill your destiny as those of your kind on the other real-estate boards (RIP) in AZ, FL, CA and your forefathers from the DotBust days."

Hey guy. Seriously. What do you do for a living? I was on here several months back and you were trolling back then. If you're some mega bucks guy, then fine, but kindly advise us that you are.

eah- "We" not we- You see it doesn't matter your still living in fantasy land with the belief that Manhattan RE will never decrease. It's funny how in the last several weeks some people are now saying that they are buying, but making offers much lower then the asking. Guys do yourself the favor and just wait. I don't care how good a deal you think you are getting, in 6 months it will be much cheaper. But it's clear to me that some people just like to waste money. So good luck.

MMAfia - I came out of the dot com times a multi millionaire. Whats your point? Its not hard at all following this market. I see lots of opportunity. I would find it hard to swallow writing a monthly rent check and seeing a good portion of my income going for naught.

All you do is naysay and attack. Can you point us to one post that offered any value?

your still living in fantasy land - and you're still an idiot.

again, dco, find me the post where i say manhattan will never decrease.

ahh, petrfitz and friends out in force.. must be hard swallowing the daily news eh?

why? i read the news daily. and plan. why would it be hard for me? is it hard for you? why does owning a lot of real estate imply that the news is hard to read? what is your underlying point?

"Is liberal an insult?"

It used to be. Now its a title.

you are so sad dco. you make an insulting post, where you say I make you laugh and accuse me of saying something or taking a certain position. I ask you to offer proof of that assertion (a reasonable request given that all my words are in effect archived right here on the website). So what do you do when you're exposed and caught out like this, apologize? No, of course not, you just make some snide stupid comment, and you make another false assertion. I never claimed to be a bull or a bear, although I suppose I could be termed a bear in that I do not think buying is a particularly good idea right now, although you all like to falsely label me a bull because I consistently point out when you make stuff up and generally talk out your ass.

man up, admit you lied or were just wrong, or go and do the work and show me where I said what you said I said.

"again, dco, find me the post where i say manhattan will never decrease"

never gonna happen, he just likes to make things up and when called on it, ignore it. I'm telling you this is a 15 year old kid.

true. i sense an "ignore this person" coming on.

That's a SMART 15 year old kid that's got all of you brilliant adults posting about him.

another MMAfia post that attacks and adds no value.

so, when you reference us by name - which you do all the time - that means you think we're SMART too?

good one mafia per usual. your contributions to this board couldn't be less valuable unless you actually were dco, or maybe cartman.

thanks for the encouragement guys!

"ccdevi, eah and JM ( and the rest of you know who you are ) make me laugh. For about a year you all have been saying that Manhattan is this magical island that never sees prices decrease. You have supported your arguments on the backs of foreigners and wall street employment."

dco, to add to ccdevi and eah's point, how about you find one post from ANYONE that has made this comment. The only people that have said Manhattan prices never decrease are you, steve, and MMAfia. Go ahead dco, look at spunky, malraux, petrfitz, myself. Just find one and you (may) be credible again. You won't because you can't. Now run along.

MMAfia - I've read some of your older posts and they were quite educated and well informed. Why the constant spew of endless garbage as of late? Does it make you feel better?

Hey Juice,

I'm respect that you took the time to read some of the older posts. Back in those days, this board was relatively "clean" and was actually thought provoking.

Not to say that it isn't like that today- it's just that a lot of vulgarity and personal attacks have been thrown into the mix, lowering the overall quality of the board. It hasn't gotten to the point of curbed.com *yet*, and I hope it doesn't, but therein lies my shift towards garbage lately.

Also, I don't have stevejhx's stamina and willpower.

Speaking of blast from the past, here's a link to an old thread where I was actually still trying to explain things and educate the readers here... this was back in I believe March 2007... still months before the Bear Stearn's Hedge Fund collapses and when the word sub-prime began to appear in non-financial syndication:

http://www.streeteasy.com/nyc/talk/discussion/1270-do-not-be-fooled

Some good snippets worth re-reading from the thread:

"Also, I HIGHLY recommend reading this exceptionally astute article written by PIMCO's Managing Director:

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

It talks about the Plankton theory. Yes, when the Plankton dies out, eventually the Sharks sitting on top of the food chain will suffer.

The Plankton, in this case, are the Sub-Prime and First-Time homebuyers. Once they go, a chain reaction will be put into motion and percolate up through the Real Estate chain."

and...

"Obviously, you haven't seen Shiller's inflation-adjusted home price graph.

And like I said, real-estate is relatively illiquid as far as assets go. Unlike an agile destroyer, it behaves like an aircraft carrier. It takes years to make a turn, so the market's current lethargic behavior is actually quite consistent with expected inflection point patterns.

What you see as 'bitter renters' saying:
2004 "THE MARKET IS GOING DOWN 20%"
2005 "THE MARKET IS GOING DOWN 30%"
2006 "THE MARKET IS GOING DOWN 40%"
2007 "THE MARKET IS GOING DOWN 50%"

Is perfectly normal for real-estate inflection points. It really does take that long for market psychology to change.

The general trend of real-estate over the long-term is without a doubt, positive. It WILL appreciate over time.

However, just like any asset class, there are cycles and inflection points which result in 'ups and downs'. In this case, the cycles are protracted to the illiquid nature.

In the past history of the modern world, EVERY housing boom was followed by some form of a contraction, except when WWII ended and there was the Baby Boom (that was the only time in history there was actually a plateau, as evidenced by Shiller's graph).

Now, we didn't have WWII. But we did just witness the biggest housing runup every in history. So, what makes you think that the largest runup ever, will all of a sudden have the smallest downturn relative to the runup?

Quite doubtful. Chances are, the downturn from such an historic runup will likewise be 'historic' as there was no huge underlying sociological change like WWII and the baby boom this time around."

also...

"For example, take the most recent up/down cycle for Manhattan. The last time it happened here, the stock market had crashed in 1987. Housing prices flattened over the next two years, but didn't start to fall until mid-1989. The worst drop wasn't until 1990 and 1991, when economic recession set in.

Right now, there is still no recession. We are still *very* early in the current inflection point from boom to contraction. Most likely, we're in the 'flattening' stage as in the previous cycle, which lasted 2 whole years.

Many economists and analysts (both academic and wall street) think that a recession this year is possible- including Greenspan. Whether it happens this year, or next year, or the year after next- that is most likely when the large price declines will occur."

and this...

"BTW- this time it IS different.

As Roubini points out:

"Normally when a sector like housing or real estate or tech goes into a boom and bust cycle, the “real cycle” precedes the “credit cycle”. In other terms we would have expected that weakness in housing would lead first to large job losses, lower income generation, higher unemployment first (the “real” cycle). Only when the “real” cycle is underway one would usually expect – as in the 1980s S&L fiasco – that a “credit” cycle would be triggered and emerge leading to further real and financial distress.

Instead the most surprising thing about this housing bust and subprime meltdown is how the “credit” cycle started much earlier than the “real” cycle and much more rapidly than anyone would have ever suspected. Now in an economy with still high growth, still high job creation, still very low unemployment rate, still high income generation we are already observing massive increases in subprime defaults and foreclosures, 20 subprime lenders going out of business in two months, the ABX going into free fall and the cost of insuring against the BBB- tranche of the ABX index going to a spread relative to LIBOR of over 1000bps. So, if all this happening in what the consensus terms as a “Goldilocks economy” what would happen if the economy – as likely – will start to slow down more in 2007? How much more carnage can we expect in many sectors and markets when the economy is weaker than in recent months?

The fact that the downward “credit” cycle has emerged so fast and so sharply in a still “strong” economy is the most important signal that this sub-prime mess cannot be easily dismissed as a niche problem that will have no contagious effects on the rest of the economy and of financial markets."

and I think I was replying to you in this one Juice:

"#25- finally! took some time before a response with well-thought out analysis emerged. thanks for your valid points. I do agree with them, especially the first point with regards to the retiring baby boomers.

That could offset some of the depreciation forces, but in my humble opinion, won't be enough to offset all of it.

Your second point is an interesting one... Forex (thank you yen-franc carry trade) does distort pricing, and you are correct in stating the relatively advanced state of the London, Aussie, Canadian et al (RIP Shanghai) real estate markets.

Looks like you have good financial and business acumen/experience, so perhaps you have read the Economist's global housing bubble piece from a couple of years ago? The bottom line is... the US consumer is driving much of the World Economy at this point (at over 70% of being the growth driver of the largest economy int he world).

The entire World is praying that the US consumer, who as we know spends more than he/she makes (negative savings ratio, which never happened since the Great Depression) can stay resilient and continue to borrow.

Again, in my humble opinion, the Great Credit Boom will (and is) turning into the Great Credit Crunch, and that will eventually affect US consumption of goods and services.

I could also go on and on, especially about the Fiat Dollar Hegemony (thank you Nixon), the house-of-cards Derivatives markets (bye-bye CDOs)... but the bottom line is this:

1.
Housing Market psychology has finally shifted.

2.
Housing Markets take a long time to change course.

3.
We are still at the beginning phase of a long-winding downturn.

This is consistent with what all the major home developers have re-iterated in their latest conference calls with wall street analysts. It is also consistent with history.

While I am not a real-estate research economist, I am employed at a 'Hedge Fund of Hedge Funds' (as opposed to Fund of Funds) where real-estate and real-estate related securities/derivatives make up some of the portfolios' exposure, including private equity."

So how's that for some "worthwhile" content?

=]

I don't think anyone has stevejhx's stamina. The guy is a freak of nature. FWIW, I still think this board can be thought provoking but we all have to do our part to bring it back. I'm just as guilty as the next guy and trying to temper my insults. I think you add a lot, it would be good to have you back.

"Oh, I almost forgot about the flippers. Miami had them and of course Manhattan doesn't."

Are you sure about that? I think you might be surprised.

That was a steve-like post MMAfia. Roubini? Now that's something we can debate about. I met him a few weeks ago and he makes you and steve look like a bull. As you an imagine, we got along swimmingly.

Roubini is awesome! I had him in my first year of business school (NYU) for Macroeconomics back in 1997 (before his stint as White House economic counsel). You may argue that his views are too dire, but there is no questioning his authority on economic principles. Spend a semester with him lecturing 1 1/2 hours 2x a week and you quickly come to appreciate how incredibly smart he is.

LOL- I hear you Juice. In all seriousness, I'll follow your lead back into the righteous path of trying to keep this board worthy. As you correctly point out, we're all guilty here to an extent.

You actually met Roubini? That must have given you ulcers. I've never had the change to meet, although some colleagues of mine worked with him at DC together before moving on. He's pretty pessimistic, but his point about the "credit cycle" preceding the "real cycle" is quite an interesting observation.

I understand that there have been times in our past where "doomsday" thoughts were rampant and the "we've never been in THIS mess of a situation before!!" mantra fueled the gloom. Think about WWII (atom bomb) and the '87 crash... and well, there are many. So even though today's situation seems quite dire, I look back to our past and understand that we've been through rough, perhaps even rougher times before.

MMAfia- Now your scaring me. You are being brain washed. Come back to the dark side MMafia, don't let them fool you.

Haha don't worry dco- nobody is fooling me.

=D

hey mmafia, care to answer my question in another thread?
do you want to own in nyc? If so when are you expecting to buy?
Stevhjx is waiting for 2003 prices although he said that tribeca was in equilibrium in 2004 when I gave him solid rental and purchase prices from that period.
Or re you waiting for a certain percentage decline?

Thanks in advance

divvie,

i am looking to own in nyc. "when" is a very difficult question to answer. clearly my opinion is that we are at an inflection point (going down) as far Manhattan real estate goes. however, inflection points for illiquid assets take some time to manifest. in the case of real estate, we are talking +/- 1 to 2 years, based on historical real estate cycles.

timing market peaks and bottoms is not something I am good at, and it is a recipe for me to go to the poor house very quickly. my risk appetite is not large enough in that sense.

i do not have a "target" statistic or time on when i will purchase. rather, i will start *considering* to purchase when:

1. rents somewhat reach an equilibrium with monthly carrying costs of owning and both stabilize and go up for at least 2 or more quarters using YoY data (i.e. if rent is similar to carrying costs, but both are going down in tandem, then it's still too early)

2. local employment stabilizes with at least two or more quarters of job growth

3. case-shiller index for NYC stabilizes with at least two or more quarters of appreciation (yes, we all recognize that this index has serious issues with Manhattan, but it is nevertheless a gauge of the general "psychology" of the city for me)

4. mortgage rate premium disconnects from the bond market come back down (after an initial spike due to knee-jerk reaction as too much risk is priced in) - key here is i'm watching the disconnect, not the actual rate

I'd rather miss the "bottom," but catch the cycle on its way up. Real estate is a *relatively* long-term investment for my portfolio, so my patience is high for this asset class.

drg, couldn't agree more. As much as I disagree with him, you have to appreciate the intellect. The fact that you had him as a macro professor, how friggan cool is that?

MMAfia, yes I met him briefly after a speech he gave at an economic forum. We didn't share a beer or anything but, you are correct, the speech gave me ulcers. I'm sure he stands firm behind his views, but I can't help but feel that there is some hidden motive. One thing is for sure, he is not for the meek. A few minutes of Roubini can drive even the most grounded to selling all possessions and moving to the Outback.

"One thing is for sure, he is not for the meek. A few minutes of Roubini can drive even the most grounded to selling all possessions and moving to the Outback.'

I agree- just reading his blog gives me the shivers because sometimes, it just makes so much darned sense!

divvie,

I'd like to add another facet that will make me *consider* purchasing:

5. Futures contracts on the CME for NY housing prices showing positive gains

Again, volume is low so this is not an end-all-be-all statistics, but just another component that can confirm a change in trend.

Thanks mmafia for responding.

No problem divvie.

"Stevhjx is waiting for 2003 prices although he said that tribeca was in equilibrium in 2004 when I gave him solid rental and purchase prices from that period."

No I didn't. I don't know anything about tribeca and wouldn't want to live there.

MMAfia - good criteria for purchasing, though most cycles are more than 1-2 years.

I have a feeling that in Manhattan prices will come down much faster than elsewhere in the country: too many lost jobs means income is falling at precisely the time leverage is drying up, rents are falling and new devs are coming on the market at a breakneck pace, along with the much-maligned flippers.

JuiceMan posted that prices are already down 10% from the peak. Inventories are steady at about the 8,000 level and 25% of listings show price decreases in the past 60 days.

Ergo, nobody's buying squat.

Inventory will be between 13,000-15,000 this time next year. I also agree that 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.

Regrettably it is inevtiable because once these laid off investment bankers and attorneys are retooled and sent off to relocated lives in flyover land, the ones who had apartments will have to sell them and quick. Unless of course they find European suckers to unload their pads on before the Eurozone tanks.

Starbucks is cutting 12,000 jobs. I wonder how many baristas own condos? I actually know a barista who bought a condo. Sometimes all you can do is laugh.

"I actually know a barista who bought a condo. Sometimes all you can do is laugh."

I remember something similar to that... I remember my barber buying loads of AKAMAI stock back in the DotBust days and preaching the gospel of the "new economy" to me and how classic economic principles don't apply anymore.

dco: paradigm shift! Are you with me or against me?

I meant MMafia.

The New Economy. Remember the New Economy. It meant that you could earn $1 and have a p/e ratio of 10,000.

The New Economy. I laughed at the time.

Where are JuiceMan, Spunkster, ccdevi, vverain, evillager, and all the rest, now that prices R FALLING?