http://ny.therealdeal.com/articles/manhattan-housing-prices-edge-up-but-sales-slow Apartment Sales Remain Vigorous in Manhattan Article Tools Sponsored By By JOSH BARBANEL Published: July 2, 2008 Despite slowing sales and continuing economic worries, market studies released yesterday showed that the Manhattan co-op and condominium market remained strong in the peak spring selling season, with... [more]
http://ny.therealdeal.com/articles/manhattan-housing-prices-edge-up-but-sales-slow
Apartment Sales Remain Vigorous in Manhattan
Article Tools Sponsored By
By JOSH BARBANEL
Published: July 2, 2008
Despite slowing sales and continuing economic worries, market studies released yesterday showed that the Manhattan co-op and condominium market remained strong in the peak spring selling season, with prices up 25 percent or more compared with a year ago, and overall prices roughly flat or just below record levels.
Average prices reached about $1.67 million for a Manhattan apartment in the second quarter, 1 percent to 3 percent below the record levels reported in the previous quarter, according to the series of competing market studies prepared by the major brokerage firms in New York City.
But these figures include a number of closings over the winter at two immensely expensive new condominium projects — the Plaza Hotel on Fifth Avenue and 15 Central Park West — that drove up average prices in the first quarter.
When these high-end sales were excluded for the second quarter, Gregory J. Heym, the chief economist of both Halstead Property and Brown Harris Stevens, said his figures still showed that average sales prices were actually up about 5 percent over the first quarter. “Prices are at incredibly high levels,” Mr. Heym said.
Yet Mr. Heym and other analysts said there was increasing concern that prices would remain flat or perhaps decline over the next year, especially if the economy continued to weaken. So far, he said, despite reports of recent and impending layoffs, the local economy has “yet to show any real weakness.”
While luxury sales remained very strong, the reports showed slowing sales and weakening prices for studios and one-bedroom apartments, where buyers are extremely sensitive to tighter lending requirements and larger down payments now being demanded by mortgage lenders.
The number of sales dropped sharply, by about 22 percent, compared with the second quarter of 2007, which was a record year for sales, according to an analysis released by Prudential Douglas Elliman. But at the same time, the number of sales was higher compared with the same period in 2006.
The inventory of unsold apartments rose to 9,968 in the second quarter, 21 percent higher than the year before, according to a tally by the Corcoran Group. But the total number of apartments listed for sale in June had fallen by 1.2 percent since April, and was reported to be below inventory levels of several years ago.
Strong luxury sales and faltering studio sales had the perverse effect of catapulting the median price — the price of the apartment exactly in the middle of all sale prices — to a record. It was close to or slightly above $1 million, depending on the report.
The report by Prudential Douglas Elliman found that average co-op prices fell by 8 percent compared with a year before, to $1.28 million, while the average condo price fell by 2.3 percent, to $1.94 million.
Pamela Liebman, the president and chief executive of the Corcoran Group, said there was “a lot of pressure on one-bedrooms and studios” but that “anyone who thinks price appreciation is over in this market is dreaming.”
The flat sales picture has led many brokers to look back on 2007 as the golden age of Manhattan real estate, when inventory was falling and prices were rising regularly to new records.
Ms. Liebman said that while “everything was perfect in 2007,” the party was far from over. “It is still a party,” she said. “We are just not serving Cristal.”
Jonathan J. Miller, the president of Miller Samuel Inc, an appraisal firm, who prepares the market report for Prudential Douglas Elliman, said that the decline in average prices was the first since the fall of 2006, and could augur a turning point in the market.
“We are looking at several years of lackluster performance at best,” Mr. Miller said.
Dorothy Herman, president and chief executive of Prudential Douglas Elliman, said that “obviously the frenzy mentality is gone,” and she predicted that the market would be flat or down slightly during the rest of the year.
She said buyers were cautious and price sensitive, and lenders were requiring a lot more cash down. Still, she said, “New York was different from the rest of the country,” and she said that bidding wars over well-priced apartments would continue. “I don’t think New York is going to collapse,” she said.
For the first time, the report by the Corcoran Group distinguished sales of new condo and co-op apartments from sales of existing apartments, which is similar to the way real estate sales data is collected across the country.
The report found that the average sales price of existing apartments rose 10 percent compared with a year ago, to $1.43 million, and fell 8 percent from the first quarter. But average sale prices at new developments rose to $2.2 million, a 61 percent increase from a year ago, and a 17 percent increase from the first quarter.
In Brooklyn, the report found that co-op and condo prices rose 5 percent in the first half of 2008 compared with a year earlier, to an average of $621,000. In Williamsburg, where the prices were highest, the average price fell by 26 percent. The average price of a single-family town house fell by 17 percent in Brooklyn, to $1.2 million.
Hall F. Willkie, the president of Brown Harris Stevens, said that the market reports reflected closed sales, based on contracts that were signed in the last 3 to 12 months. But based on contracts signed recently, he said that sales were off 16 percent this year, but the total value of sales was roughly equal to the total value of sales a year ago.
“If properties are priced within their value range, they sell and they sell well,” he said.
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Response by stevejhx
almost 18 years ago
Posts: 12656
Member since: Feb 2008
stevejhx: "I could go on and on and on and on. Yes, mschlee, you are technically correct: quantity demanded, not demand."
mschlee: "darn i thought we were so close to a breakthrough for old steve. but again he changes the subject. oh well i tried"
What is it that's not clear, mschlee? Though I maintain that what I said was perfectly comprehensible, you got your wish.
so it's your turn: "i agree the market is slightly overpriced, but not by much. my guess is rental prices will come up and make the purchase to rental ratio even better."
Care to admit you were wrong?
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Response by anon3
almost 18 years ago
Posts: 309
Member since: Apr 2007
JM - I am not LEVERAGED in the stock market - yes - losing a lot of money, well, quite frankly b/c I have a lot to lose, but not nearly the kind of money I would lose if I was LEVERAGING my money in the market - I am not using margin. If you buy RE you are losing money with LEVERAGE - meaning, for those of you who don't understand, which most Manhattan RE buyers do not, that you are borrowing money hoping your investment will go up - well, it was a great investment in the past, but not anymore. If things go up, leverage is GREAT - means you make lots of money - if things go down then leverage is terrible - means you lose more money than you put down.....yes I am losing lots in the stock market, but not more than I put down like I would in RE....for example, say I put down 1MM in RE and 1MM in the stock market.....If I bought a 5MM place (typical co op requires 20% down) and then RE went down by 20% (very conservative - I think it will go down 75% now) then guess what you lost all 1MM - if it goes down more then you owe even more than that to the bank.....on the other hand if you have 1MM in the stock market and are not using levrage and the market goes down 20% then you have only lost 200K....not exactly 1MM...so yes, I am losing a lot in the market now as is anyone who invested, but nothing compared to those who invested in RE (Manhattan or otherwise) over the past few years.....just telling people to think about what they are doing...brokers like JuiceMan and Spunky are not helping anyone....people THINK!!!!
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Response by JuiceMan
almost 18 years ago
Posts: 3578
Member since: Aug 2007
omg
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Response by mschlee
almost 18 years ago
Posts: 61
Member since: Jan 2008
my view is that prices will correct slightly (in the 15% range, not the 50% range as some here state) and the we will see that last for about 5 years or so. in the meantime rents will rise a bit. this will bring the price to rent ratio down. that is what i said and nothing to admit i was wrong about. it's my opinion, fine if you disagree.
i wasn't asking for you to say i was right, i was asking you to say you were wrong for attacking someone repeatedly for saying something that was correct. and maybe, just maybe, thinking twice before you go on a rampage and posting unreleated articles (your elasticity argument had nothing to do with what i was saying - related yes, counter evidence to my point no)
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Response by stevejhx
almost 18 years ago
Posts: 12656
Member since: Feb 2008
"but not by much" = 15%?
Can you at least admit that 15% is a lot?
I agreed that you were technically correct, but I won't "say you were wrong for attacking someone repeatedly for saying something that was correct" because what I was saying was perfectly understandable and I did, in fact, make the distinction between demand and the demand curve. It is common parlance.
You may be right, however, prices might only fall by 15%. Though I doubt it since they're still 50% above rents, which are falling. If they fall only by 15% they'll have to stay there mighty long for inflation to eat away at the gains.
In 1988 it lasted 10 years, and in 1998 nominal prices were still below the 1988 prices.
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Response by anon3
almost 18 years ago
Posts: 309
Member since: Apr 2007
Love that JM is speechless - Buyers - listen, LEVERAGE is different than a regular investment in the stock market. READ your contract, don't get suckered into buying more than you can afford and be prepared for the market value of your home to decline by about 75% - only THEN are you ready to buy a house...in Manhattan or, quite frankly, most parts of the country....brokers lie to you and you will do much better in the stock market (or most ANY other investment - but don't leveraged right now)....
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Response by JuiceMan
almost 18 years ago
Posts: 3578
Member since: Aug 2007
You are absolutely right anon3. I am speechless. You are either joking around or are quite possibly the most financially challenged individual in streeteasy history.
eah, did that satisfy your curiosity?
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Response by stevejhx
almost 18 years ago
Posts: 12656
Member since: Feb 2008
I beg to differ, anon. According to vverain, real estate is not a leveraged investment.
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Response by anon3
almost 18 years ago
Posts: 309
Member since: Apr 2007
LOL Steve - I think JuiceMan just proved my point.....JUST THINK BUYERS - RUN THE NUMBERS....
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Response by dco
almost 18 years ago
Posts: 1319
Member since: Mar 2008
I can't believe that people are actually arguing that the data is positive. Guys/Gals let it go already. Some people are so reluctant to see the problem that I'm truly embarrassed for them. The process has started and their is nothing anyone can do about it. We will not see increases or flat prices for the next 5 years at least. This time next year we will be at 13-15,000 on inventory and prices 25-35% lower and falling. Manhattan real estate relies so much on wall street that it's hard to even put a % on it. This is nothing like we have ever seen and yes this includes the great depression. We are talking about a global financial disaster. Every possible problem that can go wrong with an economy is happening and progressing worse on a daily basis. If I were a broker I would be looking for a new profession.
I laugh when people say that their industry is not tied to wall street profits and a recession or slowdown won't effect their job. Well lets just give a few examples Airlines, Auto industry, retail, real estate, govt, transportation, hospitals, Law Firms........ All are cutting people. This is directly tied to wall street. Wake-up people you may be next. Job in-security is just as devastating to real estate as job lose.
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Response by stevejhx
almost 18 years ago
Posts: 12656
Member since: Feb 2008
dco, I have to admit that at the beginning of the year I was having a boom in my business. It just died off last month, though I was fortunate I had a large project to work on.
What inventory does will depend on what prices do, but if you look at this:
it's gotta tell you something's awry. I'm sure glad I don't hold the contract on 34E, since I've never seen a $225,000 price premium for 1 floor higher with - at that height - the exact same view.
Imagine if they take $2.1 million, which they might. That's a $335,000 price differential for 1 floor.
mschlee, who thinks that prices will correct "in the 15% range": since that apartment's price was dropped 8%, and we're just beginning to see the correction, are you willing to hold to that "15% range" you touted?
The most telling indication of the state of the NYC real-estate market is the silence of those who formerly ridiculed me.
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Response by jsmith9005
almost 18 years ago
Posts: 360
Member since: Apr 2007
EddieWilson: "crime is up, particular in the "hot" gentrification areas.." and "I was including only actual facts."
I don't think 34E is necessarily in contract for 2.45. That was just the last price posted. So it may be that 34E went to contract for less. (or more for that matter)
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Response by stevejhx
almost 18 years ago
Posts: 12656
Member since: Feb 2008
Pez, possible. But the figures still don't auger well, do they?
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Response by EddieWilson
almost 18 years ago
Posts: 1112
Member since: Feb 2008
Murders up 8.2% YOY.
Rapes up 9.3%
Robbery up 4.4%.
What's your point again?
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Response by stevejhx
almost 18 years ago
Posts: 12656
Member since: Feb 2008
God, I want to be raped.
LMAO.
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Response by spunky
almost 18 years ago
Posts: 1627
Member since: Jan 2007
EddieWilson I think point he was making was that overall crime was down year to date at 3%. In other words overall crime has declined in 2008 compared to 2007. Take a look at the bottom line it's called total. Total is usually reflective of well total.Just a minor detail.
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Response by spunky
almost 18 years ago
Posts: 1627
Member since: Jan 2007
just for further clarification. Today a stock called EMC was up today, howver the overall market was down.
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Response by EddieWilson
almost 18 years ago
Posts: 1112
Member since: Feb 2008
yes, petty crime went down a bit, and the crime that sends yuppies screaming from "pre-gentrified" neighborhoods had cranked up pretty dramatically....
The best part is, you missed the point of post... you ignore all the parts that blew away your claims.
Here it is again:
"Lets see... the biggest driver of apartment money (33% of 2007 NYC income) is laying off almost 100,000 people (and reports of up to another 75k to come)... bonuses will be halved or quartered for the remaining folks... commercial real estate vacancies jumped 35% in a year... commercial bankruptcies in the city *tripled* ... crime is up, particular in the "hot" gentrification areas... manhattan co-op sales nearly HALVED (46% decline)... Manhattan inventory at an 8 year peak... Time on market up 15%.... 50% of new condos in Brooklyn built since 2005 are unsold... rental buildings in Manhattan are offering TWO free months PLUS broker fees PLUS no security deposit... and oh yeah, and we're in the worst economic crisis in decades.
Only a moron or a broker could call that a strong market."
Still want to call this one a "strong" market?
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Response by spunky
almost 18 years ago
Posts: 1627
Member since: Jan 2007
EddieWilson can you please let us know where you derived yur ther facts from as well. . A link or an article would be a good starting point.
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Response by VVerain
almost 18 years ago
Posts: 172
Member since: May 2008
mschlee just give up. It is hard to argue with a guy who is never wrong, except when someone else makes him wrong. It is hard to argue with someone who is absolutely right about 100% of the details, except if some of the important details are incorrect then those details are just irrelevant nuances.
More significantly, Mark Twain said that you should never pick a fight with people who buy ink by the barrel. While every one of us has access to this board and can post at will, none of us, with the exception of one, have the time and inclination to spend nearly every waking moment posting here for attention.
The only thing I've seen stop that one person, temporarily, was an extreme mental breakdown which many of us enjoyed a couple weeks ago until that person had Streeteasy remove it from the record.
EddieWilson you may have a point. I should have focused on the "hard crime" numbers, and ignore the total crime rate YTD, 2 yr, 7yr, and 15yr percentages.
I was saving up money for a down payment for the Manhattan 50% fire sale that is imminent, but instead I think I will spend it on bulletproof vests for my yuppie family, and stock up on canned food and bottled water for my bunker.
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Response by lowery
almost 18 years ago
Posts: 1415
Member since: Mar 2008
The 75% prediction by someone today was a joke, right?
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Response by stevejhx
almost 18 years ago
Posts: 12656
Member since: Feb 2008
vverain, real estate is not leveraged, right?
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Response by LICComment
almost 18 years ago
Posts: 3610
Member since: Dec 2007
steve - supply has no effect on price, right?
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Response by JuiceMan
almost 18 years ago
Posts: 3578
Member since: Aug 2007
lowery, the only thing that is decreasing by 75% is anon3's stock portfolio.
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Response by PHBuyer
almost 18 years ago
Posts: 292
Member since: Aug 2007
I actually hope the 75-80% prediction is correct...I'll be buying a brownstone next year!
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Response by lowery
almost 18 years ago
Posts: 1415
Member since: Mar 2008
evillager -- not me; I wanna condo in 15CSW!
this'll be great -- Manhattan real estate for everyone's budget!
better wake up and drink more coffee now..............
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Response by lowery
almost 18 years ago
Posts: 1415
Member since: Mar 2008
I mean CPW -- where's Starbuck's when you need 'em?
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Response by RClavi
almost 18 years ago
Posts: 69
Member since: Aug 2007
VVerain, well said. Too bad that magical post was taken down. I didn't even have the chance to reply, sigh. Sometimes it's just fun to poke the pig.
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Response by mschlee
almost 18 years ago
Posts: 61
Member since: Jan 2008
Thanks VVerian, point taken.
careful on reviewing the crime stats - it's difficult to draw any conclusion at least from the data provided. to say crime is up is true, but is it part of a trend or just normal variation e.g., violent crime was down about 4% in 2007 compared to 2006 for all of NY county so if crime jumps 4% this year it puts us back up to 2006 levels, does that really worry anyone? but again, hard to say without further info.
dco, i understand your point about wall street jobs connected to the broader economy, but i dont think the picture is as bleak as you paint it. as of now, the ny independent budget office is budgeting for a loss of about 33K financial sector jobs. that is less than the 40K seen in the years following the dot com bust. not sure that qualifies as the largest financial crisis in the history of finance.
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Response by VVerain
almost 18 years ago
Posts: 172
Member since: May 2008
stevejhx
about 4 hours ago
ignore this person
report abuse vverain, real estate is not leveraged, right?
Hey, how many of you guys bought a house or apartment and it came already with a mortgage? You didn't have to go to the bank to get one, it was just there.
How many of you have figured out this math too:
You bought your place for $500K, putting $100K down, and then sold it for $550K ... your real estate appreciated by 10%, but your equity increased by 50%? Any of you figured that out? I know one person who hasn't and uses the wrong one as a basis of comparison to "prove" his point. I'll give you a hint who that person is ... he's scared of heights, is likely drunk right now, has man breasts, bald, angry, thinks Wikipedia is the bible, educational highlight is a graduate certificate in creative writing although he'll tell you about that PhD program he didn't even go to, work highlight is that he charges by the minute, has serious mental breakdowns, and uses a lot of teenage abbreviations, boyfriends haven't returned his calls since the 1980s.
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Response by dco
almost 18 years ago
Posts: 1319
Member since: Mar 2008
mschlee- "dco, i understand your point about wall street jobs connected to the broader economy, but i dont think the picture is as bleak as you paint it. as of now, the NY independent budget office is budgeting for a loss of about 33K financial sector jobs. that is less than the 40K seen in the years following the dot com bust. not sure that qualifies as the largest financial crisis in the history of finance"
I had disputed those numbers in the past. In a nut shell it's all politics. There are several reasons to keep those numbers low. I wouldn't go over all of them so I'll give you the main reason. Its all about budgets. If you come to the conclusion that you may have less job which result in less taxes you have to adjust the budget accordingly. Which means you have to cut spending. But if you project a lower lose then you get to spend more money and just go further into debt. It's all a game. Now I know the title of the report is "independent budget office" I would certainly question their affiliations with the city. Also how can some reports be some different ranging from 175,000 to 35,000 jobs lost. We lost almost 10,000 alone at Bear. So I'm very skeptical and believe that the side effect spilling over to other sectors will actually result in more jobs lose then in financials.
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Response by EddieWilson
almost 18 years ago
Posts: 1112
Member since: Feb 2008
> EddieWilson can you please let us know where you derived yur ther facts from as well. . A link or an
> article would be a good starting point.
"Lets see... the biggest driver of apartment money (33% of 2007 NYC income) is laying off almost 100,000 people (and reports of up to another 75k to come)... "
Tons of sources, but just check out the bloomberg article quoted yesterday. This is fairly out there stuff.
> bonuses will be halved or quartered for the remaining folks...
Check earnings reports from Goldman, Morgan, Lehman, UBS, etc.... they work off a pretty clear formula
> commercial real estate vacancies jumped 35% in a year...
Crains front page, current issue
> commercial bankruptcies in the city *tripled* ...
Crain's front page, issue from 2 weeks ago
> manhattan co-op sales nearly HALVED (46% decline)...
REBNY report - as noted by the broker running urbandigs.com. The updated state of the market report has 38% overall, meaning co-ops dropped even further.
> Manhattan inventory at an 8 year peak... Time on market up 15%....
I literally pulled that off the article posted earlier
> 50% of new condos in Brooklyn built since 2005 are unsold...
Downtown Brooklyn partnership... as reported in Crain's about 6 months ago. Its posted on curbed for those who want to dig.
> rental buildings in Manhattan are offering TWO free months PLUS broker fees PLUS no security
> deposit...
New York Times RE section cover story, last Saturday
> and oh yeah, and we're in the worst economic crisis in decades.
Any national newspaper, magazine, or news program
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Response by mschlee
almost 18 years ago
Posts: 61
Member since: Jan 2008
dco - i figured the data was skewed, was just trying to put perspective on the magnitude. but thanks for pointing it out.
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Response by EddieWilson
almost 18 years ago
Posts: 1112
Member since: Feb 2008
BTW, the new streeteasy state of market is out...
Closings down 44% YOY
Average price down 10% compared to last quarter
Average price down 11% YOY
Median price down 10% compared to last quarter...
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Response by 80sMan
almost 18 years ago
Posts: 633
Member since: Jun 2008
VVerain says: "You bought your place for $500K, putting $100K down, and then sold it for $550K"
A loss of 5% on initial capital. That's on a straight flip. It gets worse if the buyer holds the units for any period time because of interest cost and common charges.
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Response by mschlee
almost 18 years ago
Posts: 61
Member since: Jan 2008
i think vvarian was using net numbers to make a point
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Response by 80sMan
almost 18 years ago
Posts: 633
Member since: Jun 2008
mschlee, I'm saying that your equity increases but it's an unrealized gain. It's a mirage. Common sense accounting is that if you have sunk costs (closing fees) and future unavoidable costs (brokerage fees and taxes) you have to subtract them from your expected profit. Otherwise you are in for a nasty surprise when you go to realize your gains.
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Response by MMAfia
almost 18 years ago
Posts: 1071
Member since: Feb 2007
"the ny independent budget office is budgeting for a loss of about 33K financial sector jobs"
mschlee, that is in my opinion, a highly conservative figure, and as dco mentioned, entangled in politics to some degree. there is a very high probability that 33K will be exceeded given the layoff plan announcements that occurred *after* that estimate was generated.
"bought your place for $500K, putting $100K down, and then sold it for $550K ... your real estate appreciated by 10%, but your equity increased by 50%?"
VVerain, stevejhx is making a very valid point that here- it is also a very well understood and documented point in the world of finance. If you understand the difference between Notional/Nominal values as well as their implications with leverage, performance and risk, then this should not be hard to accept.
In fact, rules and regulations have been passed regarding this in particular. For example, the CFTC passed regulations that allows all CTAs to provide full disclose to their clients on how partial funding affects rates of return both negatively and positively so that clients can better assess risk exposure. Clearly, this is a result of the NFA requiring performance to be calculated using nominal values as the denominator as part of rule 2-34 which became problematic when dealing with certain types of Investments such as partially funded Funds.
Here's an example matrix that the CTAs provide to their clients:
Actual Rate Rates of Return Based on
Various Funding Levels
While I am not an accountant, I work with many of them, particularly in the world of Fund Accounting and Performance Reporting. As such, I'm trying to share my knowledge in order to clear up some confusion on this board.
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Response by EddieWilson
almost 18 years ago
Posts: 1112
Member since: Feb 2008
If you put down $100k on a $500k apartment and the apartment goes down 20%, you lost 100% of your equity.
Leverage cuts both ways...
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Response by VVerain
almost 18 years ago
Posts: 172
Member since: May 2008
MMAfia: VVerain, stevejhx is making a very valid point that here
What is the point he is trying to make and/or you think he is trying to make?
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Response by MMAfia
almost 18 years ago
Posts: 1071
Member since: Feb 2007
The "math" that you yourself posted:
"You bought your place for $500K, putting $100K down, and then sold it for $550K ... your real estate appreciated by 10%, but your equity increased by 50%?"
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Response by spunky
almost 18 years ago
Posts: 1627
Member since: Jan 2007
Aren't you building up additional equity as you pay each monthly payment?
MMAfia do still feel gold is going to appreciate. Looks like inflation and the stagflation is starting to affect Europe. Won't that make the dollar stronger and depreciate the shiny yellow metal?
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Response by MMAfia
almost 18 years ago
Posts: 1071
Member since: Feb 2007
spunky, you are correct- there is increasing equity with each monthly payment, albeit incremental and not as much in the beginning as compared to the end of the payment schedule.
This is a similar analysis to what LICComment posted in another thread:
"European economic decline leads the ECB to lower rates, which strengthens the dollar, which lowers oil and commodities prices, which takes pressure off the U.S. economy and shortens our recovery period."
which is a very legitimate analysis, albeit one that I disagree with, and here's why:
"The part that I don't agree with is: "leads the ECB to lower rates, which strengthens the dollar".
That is assuming that the US economy doesn't sink any further, because if it does, the Fed will have to lower rates in tandem which means that the ECB lowering rates does not necessarily translate into a strengthening dollar.
Moreover, since Tricky Trichet just raised rates, switching bias to a dovish stance is probably not going to happen soon."
We just hit the *start* of an official bear market as far as the equities markets go. There is a lot more downside coming our way, and the probability that the US remains even keel while Europe goes down is low in my opinion.
Additionally, other commodities that DO have industrial uses such as copper, etc could depreciate along with slowing global demand. This could *potentially* include oil, although that is another debate altogether. Gold on the other hand, doesn't have much demand from economic activity as we know and has not appreciated as much as other commodities to date.
MMAfia this Marc Faber is a very very entertaining man to listen too.
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Response by MMAfia
almost 18 years ago
Posts: 1071
Member since: Feb 2007
Yes, I love his accent and the tone of voice he has... he really dislikes Bernanke and Greenspan and their inflationary Fed policies. "funny money".
Interesting that while many dismiss his "gloom doom and boom" perspective, he still gets primetime video exposure online, at both CNBC and Bloomberg home pages. I know that many Fund Managers subscribe to his newsletter. They may poke fun at him, but in the end, they always respect him.
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Response by spunky
almost 18 years ago
Posts: 1627
Member since: Jan 2007
He is very articulate and I love his analogies. I also did notice that he gets many interviews as well. Although he comes across very rough on the US government he does bring up some very valid points. He does appear to be very similar in his views as Jim Rogers but he's got Rogers beat on the entertainment value.
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Response by MMAfia
almost 18 years ago
Posts: 1071
Member since: Feb 2007
"He does appear to be very similar in his views as Jim Rogers but he's got Rogers beat on the entertainment value."
Couldn't have said it better myself!
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Response by VVerain
almost 18 years ago
Posts: 172
Member since: May 2008
I'm sorry MMAfia, what is the point Steve is trying to make?
VVerain
about 3 hours ago
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report abuse MMAfia: VVerain, stevejhx is making a very valid point that here
What is the point he is trying to make and/or you think he is trying to make?
MMAfia
about 2 hours ago
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report abuse The "math" that you yourself posted:
"You bought your place for $500K, putting $100K down, and then sold it for $550K ... your real estate appreciated by 10%, but your equity increased by 50%?"
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Response by VVerain
almost 18 years ago
Posts: 172
Member since: May 2008
80sMan
1 day ago
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report abuse VVerain says: "You bought your place for $500K, putting $100K down, and then sold it for $550K"
A loss of 5% on initial capital. That's on a straight flip. It gets worse if the buyer holds the units for any period time because of interest cost and common charges.
80s man ... yes, with those transaction costs built in, that person will lose money. And, the new buyer will be paying more for the place than the first buyer.
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Response by lol
about 17 years ago
Posts: 25
Member since: May 2009
Ohe thing is for sure SPUNKY ... people are still in Manhattan. lol
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Response by nyc10022
about 17 years ago
Posts: 9868
Member since: Aug 2008
Where is dear 'ol spunky, anyway?
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Response by aboutready
about 17 years ago
Posts: 16354
Member since: Oct 2007
Rufus wasn't enough for you? Trying to channel the spunkmeister as well?
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Response by sidelinesitter
about 17 years ago
Posts: 1596
Member since: Mar 2009
The Pam Liebman quote in the article that started off this thread is just priceless in hindsight:
"Pamela Liebman, the president and chief executive of the Corcoran Group, said there was “a lot of pressure on one-bedrooms and studios” but that “anyone who thinks price appreciation is over in this market is dreaming.”"
As it turns out, the only segment where there is any sign of resilience at all (and even there we could get a good debate going) is in the studios and one beds. Family size places are getting smoked.
I'm not so good with math, so maybe someone could answer this for me: Is it actually possible to be more than 100% wrong?
stevejhx: "I could go on and on and on and on. Yes, mschlee, you are technically correct: quantity demanded, not demand."
mschlee: "darn i thought we were so close to a breakthrough for old steve. but again he changes the subject. oh well i tried"
What is it that's not clear, mschlee? Though I maintain that what I said was perfectly comprehensible, you got your wish.
so it's your turn: "i agree the market is slightly overpriced, but not by much. my guess is rental prices will come up and make the purchase to rental ratio even better."
Care to admit you were wrong?
JM - I am not LEVERAGED in the stock market - yes - losing a lot of money, well, quite frankly b/c I have a lot to lose, but not nearly the kind of money I would lose if I was LEVERAGING my money in the market - I am not using margin. If you buy RE you are losing money with LEVERAGE - meaning, for those of you who don't understand, which most Manhattan RE buyers do not, that you are borrowing money hoping your investment will go up - well, it was a great investment in the past, but not anymore. If things go up, leverage is GREAT - means you make lots of money - if things go down then leverage is terrible - means you lose more money than you put down.....yes I am losing lots in the stock market, but not more than I put down like I would in RE....for example, say I put down 1MM in RE and 1MM in the stock market.....If I bought a 5MM place (typical co op requires 20% down) and then RE went down by 20% (very conservative - I think it will go down 75% now) then guess what you lost all 1MM - if it goes down more then you owe even more than that to the bank.....on the other hand if you have 1MM in the stock market and are not using levrage and the market goes down 20% then you have only lost 200K....not exactly 1MM...so yes, I am losing a lot in the market now as is anyone who invested, but nothing compared to those who invested in RE (Manhattan or otherwise) over the past few years.....just telling people to think about what they are doing...brokers like JuiceMan and Spunky are not helping anyone....people THINK!!!!
omg
my view is that prices will correct slightly (in the 15% range, not the 50% range as some here state) and the we will see that last for about 5 years or so. in the meantime rents will rise a bit. this will bring the price to rent ratio down. that is what i said and nothing to admit i was wrong about. it's my opinion, fine if you disagree.
i wasn't asking for you to say i was right, i was asking you to say you were wrong for attacking someone repeatedly for saying something that was correct. and maybe, just maybe, thinking twice before you go on a rampage and posting unreleated articles (your elasticity argument had nothing to do with what i was saying - related yes, counter evidence to my point no)
"but not by much" = 15%?
Can you at least admit that 15% is a lot?
I agreed that you were technically correct, but I won't "say you were wrong for attacking someone repeatedly for saying something that was correct" because what I was saying was perfectly understandable and I did, in fact, make the distinction between demand and the demand curve. It is common parlance.
You may be right, however, prices might only fall by 15%. Though I doubt it since they're still 50% above rents, which are falling. If they fall only by 15% they'll have to stay there mighty long for inflation to eat away at the gains.
In 1988 it lasted 10 years, and in 1998 nominal prices were still below the 1988 prices.
Love that JM is speechless - Buyers - listen, LEVERAGE is different than a regular investment in the stock market. READ your contract, don't get suckered into buying more than you can afford and be prepared for the market value of your home to decline by about 75% - only THEN are you ready to buy a house...in Manhattan or, quite frankly, most parts of the country....brokers lie to you and you will do much better in the stock market (or most ANY other investment - but don't leveraged right now)....
You are absolutely right anon3. I am speechless. You are either joking around or are quite possibly the most financially challenged individual in streeteasy history.
eah, did that satisfy your curiosity?
I beg to differ, anon. According to vverain, real estate is not a leveraged investment.
LOL Steve - I think JuiceMan just proved my point.....JUST THINK BUYERS - RUN THE NUMBERS....
I can't believe that people are actually arguing that the data is positive. Guys/Gals let it go already. Some people are so reluctant to see the problem that I'm truly embarrassed for them. The process has started and their is nothing anyone can do about it. We will not see increases or flat prices for the next 5 years at least. This time next year we will be at 13-15,000 on inventory and prices 25-35% lower and falling. Manhattan real estate relies so much on wall street that it's hard to even put a % on it. This is nothing like we have ever seen and yes this includes the great depression. We are talking about a global financial disaster. Every possible problem that can go wrong with an economy is happening and progressing worse on a daily basis. If I were a broker I would be looking for a new profession.
I laugh when people say that their industry is not tied to wall street profits and a recession or slowdown won't effect their job. Well lets just give a few examples Airlines, Auto industry, retail, real estate, govt, transportation, hospitals, Law Firms........ All are cutting people. This is directly tied to wall street. Wake-up people you may be next. Job in-security is just as devastating to real estate as job lose.
dco, I have to admit that at the beginning of the year I was having a boom in my business. It just died off last month, though I was fortunate I had a large project to work on.
What inventory does will depend on what prices do, but if you look at this:
http://www.streeteasy.com/nyc/sale/128817-condo-101-west-24th-street-chelsea-new-york
and see that 33E just decreased its price $200,000 to $2.2 million, when 34E is in contract for $2.45 million:
http://www.streeteasy.com/nyc/sale/217393-condo-101-west-24th-street-chelsea-manhattan
it's gotta tell you something's awry. I'm sure glad I don't hold the contract on 34E, since I've never seen a $225,000 price premium for 1 floor higher with - at that height - the exact same view.
Imagine if they take $2.1 million, which they might. That's a $335,000 price differential for 1 floor.
mschlee, who thinks that prices will correct "in the 15% range": since that apartment's price was dropped 8%, and we're just beginning to see the correction, are you willing to hold to that "15% range" you touted?
The most telling indication of the state of the NYC real-estate market is the silence of those who formerly ridiculed me.
EddieWilson: "crime is up, particular in the "hot" gentrification areas.." and "I was including only actual facts."
Here are the facts: http://www.nyc.gov/html/nypd/downloads/pdf/crime_statistics/cscity.pdf
But at least I feel safe in my bunker.
Steve,
I don't think 34E is necessarily in contract for 2.45. That was just the last price posted. So it may be that 34E went to contract for less. (or more for that matter)
Pez, possible. But the figures still don't auger well, do they?
Murders up 8.2% YOY.
Rapes up 9.3%
Robbery up 4.4%.
What's your point again?
God, I want to be raped.
LMAO.
EddieWilson I think point he was making was that overall crime was down year to date at 3%. In other words overall crime has declined in 2008 compared to 2007. Take a look at the bottom line it's called total. Total is usually reflective of well total.Just a minor detail.
just for further clarification. Today a stock called EMC was up today, howver the overall market was down.
yes, petty crime went down a bit, and the crime that sends yuppies screaming from "pre-gentrified" neighborhoods had cranked up pretty dramatically....
The best part is, you missed the point of post... you ignore all the parts that blew away your claims.
Here it is again:
"Lets see... the biggest driver of apartment money (33% of 2007 NYC income) is laying off almost 100,000 people (and reports of up to another 75k to come)... bonuses will be halved or quartered for the remaining folks... commercial real estate vacancies jumped 35% in a year... commercial bankruptcies in the city *tripled* ... crime is up, particular in the "hot" gentrification areas... manhattan co-op sales nearly HALVED (46% decline)... Manhattan inventory at an 8 year peak... Time on market up 15%.... 50% of new condos in Brooklyn built since 2005 are unsold... rental buildings in Manhattan are offering TWO free months PLUS broker fees PLUS no security deposit... and oh yeah, and we're in the worst economic crisis in decades.
Only a moron or a broker could call that a strong market."
Still want to call this one a "strong" market?
EddieWilson can you please let us know where you derived yur ther facts from as well. . A link or an article would be a good starting point.
mschlee just give up. It is hard to argue with a guy who is never wrong, except when someone else makes him wrong. It is hard to argue with someone who is absolutely right about 100% of the details, except if some of the important details are incorrect then those details are just irrelevant nuances.
More significantly, Mark Twain said that you should never pick a fight with people who buy ink by the barrel. While every one of us has access to this board and can post at will, none of us, with the exception of one, have the time and inclination to spend nearly every waking moment posting here for attention.
The only thing I've seen stop that one person, temporarily, was an extreme mental breakdown which many of us enjoyed a couple weeks ago until that person had Streeteasy remove it from the record.
But just for fun, remember this:
http://www.streeteasy.com/nyc/talk/discussion/3410-real-estate-is-a-bad-investment?page=1
EddieWilson you may have a point. I should have focused on the "hard crime" numbers, and ignore the total crime rate YTD, 2 yr, 7yr, and 15yr percentages.
I was saving up money for a down payment for the Manhattan 50% fire sale that is imminent, but instead I think I will spend it on bulletproof vests for my yuppie family, and stock up on canned food and bottled water for my bunker.
The 75% prediction by someone today was a joke, right?
vverain, real estate is not leveraged, right?
steve - supply has no effect on price, right?
lowery, the only thing that is decreasing by 75% is anon3's stock portfolio.
I actually hope the 75-80% prediction is correct...I'll be buying a brownstone next year!
evillager -- not me; I wanna condo in 15CSW!
this'll be great -- Manhattan real estate for everyone's budget!
better wake up and drink more coffee now..............
I mean CPW -- where's Starbuck's when you need 'em?
VVerain, well said. Too bad that magical post was taken down. I didn't even have the chance to reply, sigh. Sometimes it's just fun to poke the pig.
Thanks VVerian, point taken.
careful on reviewing the crime stats - it's difficult to draw any conclusion at least from the data provided. to say crime is up is true, but is it part of a trend or just normal variation e.g., violent crime was down about 4% in 2007 compared to 2006 for all of NY county so if crime jumps 4% this year it puts us back up to 2006 levels, does that really worry anyone? but again, hard to say without further info.
dco, i understand your point about wall street jobs connected to the broader economy, but i dont think the picture is as bleak as you paint it. as of now, the ny independent budget office is budgeting for a loss of about 33K financial sector jobs. that is less than the 40K seen in the years following the dot com bust. not sure that qualifies as the largest financial crisis in the history of finance.
stevejhx
about 4 hours ago
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report abuse vverain, real estate is not leveraged, right?
Hey, how many of you guys bought a house or apartment and it came already with a mortgage? You didn't have to go to the bank to get one, it was just there.
How many of you have figured out this math too:
You bought your place for $500K, putting $100K down, and then sold it for $550K ... your real estate appreciated by 10%, but your equity increased by 50%? Any of you figured that out? I know one person who hasn't and uses the wrong one as a basis of comparison to "prove" his point. I'll give you a hint who that person is ... he's scared of heights, is likely drunk right now, has man breasts, bald, angry, thinks Wikipedia is the bible, educational highlight is a graduate certificate in creative writing although he'll tell you about that PhD program he didn't even go to, work highlight is that he charges by the minute, has serious mental breakdowns, and uses a lot of teenage abbreviations, boyfriends haven't returned his calls since the 1980s.
mschlee- "dco, i understand your point about wall street jobs connected to the broader economy, but i dont think the picture is as bleak as you paint it. as of now, the NY independent budget office is budgeting for a loss of about 33K financial sector jobs. that is less than the 40K seen in the years following the dot com bust. not sure that qualifies as the largest financial crisis in the history of finance"
I had disputed those numbers in the past. In a nut shell it's all politics. There are several reasons to keep those numbers low. I wouldn't go over all of them so I'll give you the main reason. Its all about budgets. If you come to the conclusion that you may have less job which result in less taxes you have to adjust the budget accordingly. Which means you have to cut spending. But if you project a lower lose then you get to spend more money and just go further into debt. It's all a game. Now I know the title of the report is "independent budget office" I would certainly question their affiliations with the city. Also how can some reports be some different ranging from 175,000 to 35,000 jobs lost. We lost almost 10,000 alone at Bear. So I'm very skeptical and believe that the side effect spilling over to other sectors will actually result in more jobs lose then in financials.
> EddieWilson can you please let us know where you derived yur ther facts from as well. . A link or an
> article would be a good starting point.
"Lets see... the biggest driver of apartment money (33% of 2007 NYC income) is laying off almost 100,000 people (and reports of up to another 75k to come)... "
Tons of sources, but just check out the bloomberg article quoted yesterday. This is fairly out there stuff.
> bonuses will be halved or quartered for the remaining folks...
Check earnings reports from Goldman, Morgan, Lehman, UBS, etc.... they work off a pretty clear formula
> commercial real estate vacancies jumped 35% in a year...
Crains front page, current issue
> commercial bankruptcies in the city *tripled* ...
Crain's front page, issue from 2 weeks ago
> manhattan co-op sales nearly HALVED (46% decline)...
REBNY report - as noted by the broker running urbandigs.com. The updated state of the market report has 38% overall, meaning co-ops dropped even further.
> Manhattan inventory at an 8 year peak... Time on market up 15%....
I literally pulled that off the article posted earlier
> 50% of new condos in Brooklyn built since 2005 are unsold...
Downtown Brooklyn partnership... as reported in Crain's about 6 months ago. Its posted on curbed for those who want to dig.
> rental buildings in Manhattan are offering TWO free months PLUS broker fees PLUS no security
> deposit...
New York Times RE section cover story, last Saturday
> and oh yeah, and we're in the worst economic crisis in decades.
Any national newspaper, magazine, or news program
dco - i figured the data was skewed, was just trying to put perspective on the magnitude. but thanks for pointing it out.
BTW, the new streeteasy state of market is out...
Closings down 44% YOY
Average price down 10% compared to last quarter
Average price down 11% YOY
Median price down 10% compared to last quarter...
VVerain says: "You bought your place for $500K, putting $100K down, and then sold it for $550K"
In this example the buyer loses money:
Buy: Closing Costs = $500,000 * .05 = $25,000
Sell: Broker Fee = $550,000 * .06 = $30,000
Gross Profit $50,000
Total expenses $55,000
Net Profit/Loss -$5,000
A loss of 5% on initial capital. That's on a straight flip. It gets worse if the buyer holds the units for any period time because of interest cost and common charges.
i think vvarian was using net numbers to make a point
mschlee, I'm saying that your equity increases but it's an unrealized gain. It's a mirage. Common sense accounting is that if you have sunk costs (closing fees) and future unavoidable costs (brokerage fees and taxes) you have to subtract them from your expected profit. Otherwise you are in for a nasty surprise when you go to realize your gains.
"the ny independent budget office is budgeting for a loss of about 33K financial sector jobs"
mschlee, that is in my opinion, a highly conservative figure, and as dco mentioned, entangled in politics to some degree. there is a very high probability that 33K will be exceeded given the layoff plan announcements that occurred *after* that estimate was generated.
"bought your place for $500K, putting $100K down, and then sold it for $550K ... your real estate appreciated by 10%, but your equity increased by 50%?"
VVerain, stevejhx is making a very valid point that here- it is also a very well understood and documented point in the world of finance. If you understand the difference between Notional/Nominal values as well as their implications with leverage, performance and risk, then this should not be hard to accept.
In fact, rules and regulations have been passed regarding this in particular. For example, the CFTC passed regulations that allows all CTAs to provide full disclose to their clients on how partial funding affects rates of return both negatively and positively so that clients can better assess risk exposure. Clearly, this is a result of the NFA requiring performance to be calculated using nominal values as the denominator as part of rule 2-34 which became problematic when dealing with certain types of Investments such as partially funded Funds.
Here's an example matrix that the CTAs provide to their clients:
Actual Rate Rates of Return Based on
Various Funding Levels
30% 30% 60% 75% 100%
20% 20% 40% 50% 67%
10% 10% 20% 25% 33%
0% 0% 0% 0% 0%
-10% -10% -20% -25% 33%
-15% -15% 30% 37.5% 50%
Level of funding 100% 50% 40% 30%
While I am not an accountant, I work with many of them, particularly in the world of Fund Accounting and Performance Reporting. As such, I'm trying to share my knowledge in order to clear up some confusion on this board.
If you put down $100k on a $500k apartment and the apartment goes down 20%, you lost 100% of your equity.
Leverage cuts both ways...
MMAfia: VVerain, stevejhx is making a very valid point that here
What is the point he is trying to make and/or you think he is trying to make?
The "math" that you yourself posted:
"You bought your place for $500K, putting $100K down, and then sold it for $550K ... your real estate appreciated by 10%, but your equity increased by 50%?"
Aren't you building up additional equity as you pay each monthly payment?
MMAfia do still feel gold is going to appreciate. Looks like inflation and the stagflation is starting to affect Europe. Won't that make the dollar stronger and depreciate the shiny yellow metal?
spunky, you are correct- there is increasing equity with each monthly payment, albeit incremental and not as much in the beginning as compared to the end of the payment schedule.
This is a similar analysis to what LICComment posted in another thread:
"European economic decline leads the ECB to lower rates, which strengthens the dollar, which lowers oil and commodities prices, which takes pressure off the U.S. economy and shortens our recovery period."
which is a very legitimate analysis, albeit one that I disagree with, and here's why:
"The part that I don't agree with is: "leads the ECB to lower rates, which strengthens the dollar".
That is assuming that the US economy doesn't sink any further, because if it does, the Fed will have to lower rates in tandem which means that the ECB lowering rates does not necessarily translate into a strengthening dollar.
Moreover, since Tricky Trichet just raised rates, switching bias to a dovish stance is probably not going to happen soon."
We just hit the *start* of an official bear market as far as the equities markets go. There is a lot more downside coming our way, and the probability that the US remains even keel while Europe goes down is low in my opinion.
Additionally, other commodities that DO have industrial uses such as copper, etc could depreciate along with slowing global demand. This could *potentially* include oil, although that is another debate altogether. Gold on the other hand, doesn't have much demand from economic activity as we know and has not appreciated as much as other commodities to date.
Here, watch Mark Faber's interview from today:
http://video.google.com/videoplay?docid=5059137429165602472&q=marc+faber&ei=IGhuSKHHCJ2mrAKuzc2pDw&hl=en
If you can, watch Marc Faber's
Thanks
Thanks
MMAfia this Marc Faber is a very very entertaining man to listen too.
Yes, I love his accent and the tone of voice he has... he really dislikes Bernanke and Greenspan and their inflationary Fed policies. "funny money".
Interesting that while many dismiss his "gloom doom and boom" perspective, he still gets primetime video exposure online, at both CNBC and Bloomberg home pages. I know that many Fund Managers subscribe to his newsletter. They may poke fun at him, but in the end, they always respect him.
He is very articulate and I love his analogies. I also did notice that he gets many interviews as well. Although he comes across very rough on the US government he does bring up some very valid points. He does appear to be very similar in his views as Jim Rogers but he's got Rogers beat on the entertainment value.
"He does appear to be very similar in his views as Jim Rogers but he's got Rogers beat on the entertainment value."
Couldn't have said it better myself!
I'm sorry MMAfia, what is the point Steve is trying to make?
VVerain
about 3 hours ago
ignore this person
report abuse MMAfia: VVerain, stevejhx is making a very valid point that here
What is the point he is trying to make and/or you think he is trying to make?
MMAfia
about 2 hours ago
ignore this person
report abuse The "math" that you yourself posted:
"You bought your place for $500K, putting $100K down, and then sold it for $550K ... your real estate appreciated by 10%, but your equity increased by 50%?"
80sMan
1 day ago
ignore this person
report abuse VVerain says: "You bought your place for $500K, putting $100K down, and then sold it for $550K"
In this example the buyer loses money:
Buy: Closing Costs = $500,000 * .05 = $25,000
Sell: Broker Fee = $550,000 * .06 = $30,000
Gross Profit $50,000
Total expenses $55,000
Net Profit/Loss -$5,000
A loss of 5% on initial capital. That's on a straight flip. It gets worse if the buyer holds the units for any period time because of interest cost and common charges.
80s man ... yes, with those transaction costs built in, that person will lose money. And, the new buyer will be paying more for the place than the first buyer.
Ohe thing is for sure SPUNKY ... people are still in Manhattan. lol
Where is dear 'ol spunky, anyway?
Rufus wasn't enough for you? Trying to channel the spunkmeister as well?
The Pam Liebman quote in the article that started off this thread is just priceless in hindsight:
"Pamela Liebman, the president and chief executive of the Corcoran Group, said there was “a lot of pressure on one-bedrooms and studios” but that “anyone who thinks price appreciation is over in this market is dreaming.”"
As it turns out, the only segment where there is any sign of resilience at all (and even there we could get a good debate going) is in the studios and one beds. Family size places are getting smoked.
I'm not so good with math, so maybe someone could answer this for me: Is it actually possible to be more than 100% wrong?
lol, apparently yes
sidelinesitter, i think she was 100% wrong twice.