Buyer's Market

well mache..are you purchasing a 50 million condo? If you are then yes. If you are purchasing a 1M condo then no.

mache, You missed your chance in <$5mm (if priced under 1500-1800 per sq f finished. Summer last year was the time for a deal when every one was frozen due to the elections.

1500-1800 per sq ft for a condo. Coop lower.

Not yet, but not too far off.

30, Are you expecting Manhattan properties at all price points to come down not just the new development?

I wish. We love a buyers market as a group that exclusively reps buyers. There have been some nice windows of opportunity and distress. In come cases this micro-secular bear markets came out of thin air and buyers that were there did well. The market has been so strong, for so long that sellers, especially brokers panic when things ebb for a few months;panic sets in. Very interesting to be part of as big gun brokers start to track me down because my clients seemed very interested; this is not the present situation.

I am at loss to explain the current strength, the aggressive, manic bidding 'wars' for mediocre homes across a wide swath of neighborhoods (I could list half a dozen we've participated in over the last 10 days. Don't think that would be kosher). Not at all the way In visualized the start of 2017. Oh well, be patient my friends what goes up will eventually come down. In the meantime just be discerning, stick with the plan.

Keith Burkhardt
The Burkhardt Group

Keith - very interesting to hear. Any sense of who is participating in this market? Investors? Families (new entrants v. upgrades)?

Conventional wisdom was that there was going to be some downward pressure on prices (at least for luxury homes) due to the new supply coming online, and that prices would suffer. However, maybe there will be sufficient demand to gobble it up...

As far as I've heard from friends who are real estate agents, bidding wars "are very 2015"...

I don't think demand is crazy, though it certainly is strong, especially given that rents are soft (equities, notwithstanding today, have been performing well, and it's bonus time). It seems more, to me, that supply is restricted. UrbanDigs has supply down 10.7 from a year ago, and it wasn't all that good then.

Anything somewhat renovated comes along and buyers try to pounce because they remember they lost the last thing... and there just aren't a lot of things to look at. We're all running into each other at the same fifteen apartments.

Will supply jump as we head more into the traditional spring season? Dunno, but I'd say for now it's a good time to be a seller.

ali r. (broker who works both sides)

TeamM, I think Keith is not talking about new luxury condos. There is plenty of supply there. Prices have come down in this segment and have room to come down more depending on the development.

There is still significant political uncertainty now, the trump market bounce went back down and now we don't know if he is going to cause a recession by starting trade wars with mexico and china. As a would-be buyer I am not inclined to move right now and feel like I should wait it out a bit more.

@mache The bidding war phenomena peaked in 2014, 2015 was still hot, however considerably less so. I am referring to resales of both condos and co-ops below $3M. @TeamM Everyone. I personally have seen a drop off in foreign buyers, but I am hardly a barometer for that segment. That said I think if you look at our 'transactions' page on our site you will see quite a diversity of sales.

@300 there is very rarely 'bidding wars' on new condos for a number of reasons. However demand remains strong for some projects and sponsors are not giving stuff away.

Keith Burkhardt
TBG

Which market bounce went back down? The Dow, S&P500 and NASDAQ are at all-time highs and are up 10%+ since election day.

@300
Yes.

Here's another from a few minutes ago.....

"Hi Keith,

The owner appreciates the great offer you submitted on behalf of Xxxxx. Due to multiple offers received, we have set an offer deadline of this Friday, Feb. 10th, at 5PM. We ask everyone to put their best foot forward and submit their best and final offer.

Please let me know you have received this message and whether Xxxxx will be changing her offer or conditions.

Let us know if you have any questions!

Best,"

Chasing wamus, exactly my thought. That said, I increased my dry powder by selling equities to deploy in opportunistic real estate.

For all those people who were concerned about 10y treasury rate at 2.64% and rightly so, it is back down to 2.34%.

This is a good chart. Shows, the supply of condos on Manhattan was very high in summer 2016 (but still below 2011 and two years before) and now the situation is clearly better. Let us see what this chart continues to look like.
https://www.urbandigs.com/chart.php?type=ACTIVE&nbhoods%5B%5D=Manhattan&proptype%5B%5D=CONDO&price=all&bdrms=all

2-5mm 3 bedroom plus condos, which likely excludes most luxury new condos as a 3 bed room new development is likely to be priced higher than $5mm, tells a similar story.

https://www.urbandigs.com/chart.php?type=ACTIVE&nbhoods%5B%5D=Manhattan&proptype%5B%5D=CONDO&price=2m-5m&bdrms=3

Now bears both have anecdotes from Keith and real supply data. If bank stocks were not on fire, I would be neutral, but the supply for non new development is mildly bullish.

Here is a problem chart with >$5mm 3 bed room condos. Only so many openly available secrets Mercer can give away.

https://www.urbandigs.com/chart.php?type=ACTIVE&nbhoods%5B%5D=Manhattan&proptype%5B%5D=CONDO&price=5m-10m&bdrms=3

I started my search in September for a 2-3 bedroom in the 1.5 - 2.3 range in Manhattan. I was looking for a brownstone apartment. There was not much out there. I rant into a few stale properties (3 months plus on the market). Some of those properties are still on the market.

I felt like I was in a great position to bid. I bid on two properties and was the only bidder. In fact. 1 property kept negotiating with me for about 3 weeks. They lowered, I lowered, countered, etc. I ended up declining their last counter and going with another property that I got about 11% below asking.

On the other side, I was also selling my luxury condo midtown west home under 1.4 range. It went on the market in September. It sold in 65 days 5% below asking to an all cash buyer. I felt it was a seamless and easy transaction.

I do believe if I waited to sell my home it would have taken longer. I also feel that around October, I had luck looking for a new home which will close in 2 weeks.

Nice. Pre election was indeed a great time to buy.

@SE56479, what a difference a couple of months make. The last brownstone apartment I saw with buyers, a 2/2 listed at $1.6, got five bids on it.

@front_porch how large was the brownstone apt listed at $1.6m and do you know what it ended up going to contract for?

Cc, What do you think of the data I posted!

While supply is lower than it was mid-2016, it is still higher than for the same time period for the previous 4 years (and on an uptick, just like the past 3 years an we know where that went to).

2013 and 2014 never reached the current level, 2015 barely reached the current level at it's peak on November, and 2016 took until April and then kept rising.

30y, My take is that we saw strong price increases in 2013/14 (7-10% per year). Since the supply is higher that but below the recent peak when the prices stopped rising (yes , they did not go down in 2016 just flattish), the prices are not coming down in non new condo development any time soon.

300 your data is great for buyers in the $5m+ market. :) Unfortunately I am not that wealthy. I am still seeing condos in $1m-$3m range sitting on the market longer and taking price chops though could be sellers pricing at unrealistic levels.

So prices are coming down in new condo development?
I went to 2 presentations last month for new developments. One of them had just taken a $400k price chop for a 2 BR, but it was still priced a bit high for the space it offered IMO. The other was "reasonably" priced but the location not so great (in Manhattan but iffy location), but the agent at the presentation told me in not so many words that they were accepting offers below ask.

^^^assume I am talking below $3m new development. I know the uber luxury is def coming down.

Sure. I think I used >$5mm to filter out the new condos. In general, the same situation is true for other new development condos.

It think for a new condo in good location (excluding top 20% of locations like 21 East 12th) in Manhattan without view but good light, you can do $1800 per sq ft or perhaps a little lower. Naturally it depends on the layout, construction quality, ceiling heights, and how much common elements are included in the square footage.

CCL3 You should identify specific neighborhood locations where you are looking. Certainly not every listing in NYC is selling like hot cakes. When I speak it is mostly referring to resales in well established buildings/locations. Completely agree there are some discounts on new development sales across the city depending on where they initially priced, location , time on market. If you have a new development with 100+ homes to sell, that will take time and you won't see so called bidding wars as the agents want to sell out the building. Not focus on driving up the price of one unit (and possibly having to file an amendment). Also take with a grain of salt what a agent means by 'discount, negotiating'. They want to get the conversation started, the actually discount may be much less that you think.

Keith Burkhardt

@ccl3, I don't know what it went to contract for because I didn't rep the winning buyer ... but even if I did know contract price I wouldn't disclose till closing, because I assume that's proprietary info of the seller. I also don't think in SF -- I think in room count --- but if I had to make up a number on the 2/2 I'm talking about, maybe 1300?

I do share your view that we are ready for a correction. I am generally quite bullish and for me to feel negative market sentiment it must run somewhat deep. Some of what seeped into my consciousness is Urban Digs' data that prices peaked summer '15, and some of it is that I am seeing non-renovated inventory -- let's call that a leading indicator -- sitting.

However however, I am generally a co-op broker and do not call the new dev market. (Not that I don't sell condos, but they're not my sweet spot). Also, even though my firm (Upstairs Realty) is a boutique broker that doesn't do big volume, I have a stack of double-income clients who would like to buy and are unlikely to lose their jobs, even in a recession. That makes me think that updated properties in the big 2-BR/conv-3 2-BA niche might stay relatively strong even if everything else dips.

ali r.

I think right now, the market is extremely bullish on tax cuts/infrastructure/stimulative spending. It's been discussed widely, including from Seth Klarman, a respected manager, that the market has not priced in any potential trade war. It seems to be assumed that the House will not let that happen.

That being said, if the tax cuts go through, there is no trade war, and the banks are deregulated (as well as other industries), we may have passed the lows going forward.

As far as interest rates, if they go up 1%, but people get significant tax breaks, it could be a wash, even conservatively.

For ex, $1m self-employed income tax rate at ~48% right now in NYC (effective), which could go to 35% (effective), and that extra 15% comes out to $150k, or $12k a month. On a $3m apt, with mortgage of about $13k, a 1% increase in rate may push mortgage up another $1-2k, still leaving buyer with $10k cash. Now, I don't know if any of these things will go through and pass, nor do I know that the rates have been decided on, however, good odds that the tax breaks will offset the interest rate increase.

The two new developments I saw--one was theater district/Hell's Kitchen and the other in "Manhattan Valley" (broker made up name?) Def not prime locations but that's what I can afford for new development. The theater district one was still overpriced IMO and the other location was inconvenient and unattractive.

CC, Despite you being very articulate about the reasons for you wanting new development only (not even a two year old condo), I still continue to be surprised when you say that you will live in a not so desirable but not buy a 10 year old condo for the same $ amount in a much better location.

Nyc1234, Do not think 15 percent cut is happening. $1mm may get 5 percent net as the deduction of state and city from federal is likely to get limited. You point is directionally valid though.

Not for $500K studios. Bidding wars there! Ughh

@300_mercer

There seems to be a very strong push by both the House and President to push for 25% and 15% business taxes, respectively, with recent reports suggesting a 20% compromise. What I am not hearing a lot about is the Senate. Also, I could see issues if Trump demands to tack a $1T infrastructure bill onto the tax cut bill and/or trade tariffs.

You are correct that the state/city/mortgage tax deductions may become less of an issue if they raise the standard deductions to $30k and, even more so, if they just ban those deductions altogether. That would be a great way of Trump shoving it to the coastal elites as well, but not sure how the House will react (it definitely hurts blue states more than red states, so possible). By the early March, I think we will have more info on this.

I know currently that in 2016, the effective rate on $1m income was about 45-48% (assuming little to no personal deductions).

If the business tax cuts to 25% and they ban state/city/mortgage, etc, that would still be about a 10% drop, conservatively. At $1m, that is still $100k per year; interest rates would have to rise tremendously for that to be a wash.

Of course, a lot of Wall Streeters/attorneys are W2 currently and that rate may only go to 33%. Although if there becomes a perverse differential btwn "self-employed" vs W2, many may convert their type of income.

As always, in this complex world, because of these other variables, including trade issues, stock market strength, financial deregulation, etc, it is impossible for my tiny brain to fully comprehend the overall implications. There is (imo) a 1% chance that they could burn the entire economy to the ground, by accident, as well.

On a probabilistic basis though, I would give 2:1 odds that things will be better for most $1m+ earners when everything is said and done, especially those who do not sell at bottoms in a worse-case scenario.

Thanks. I was talking about W2 income. Business income is likely to be what you say.

Nyc1234, the 2017 tax tables indicate that the Federal taxes on $1mm married filing jointly would be approximately $341K, which is a 34 percent rate. State tax is going to get you 6.7% on top of that, and NYC tax isn't even 4% at that level. So you are under 45% at $1mm -- and again, I'm working with your assumption of no deductions for retirement savings or charitable donations, let alone housing.

I'm only "quibbling" because I read people's taxes all the time, and see how low people's effective tax rates are, which will be a factor in the economic effect of any tax cuts.

300, I would buy a 2 yr old condo. I don't see any in good areas for good prices though. Often the prices are worse than for new developments because sellers are starry eyed about what they think they can get.

Ali, plus Medicare and social security

@CCL3 Totally agree with you, I've also seen similar situations.

@300, but your FICA is credited in order to get to your AGI, so the $7,347 that an employee has paid in FICA is a deduction. medicare is a deeper bite, especially if you're making enough to pay hospital tax, but again, the $19K should be deductible. And realistically, anybody who is making that in wages is going to have other ways of sheltering income (health savings accounts come to mind) that will make some of their income tax-advantaged.

We have been in the UWS market (68th-89th) since September and initially looking at 2.5M and now 3-4M for the size. I've basically seen everything on the market and >3M is a buyer's market IMHO. Of the 20+ properties I've seen 6 are in contract or sold and all below $1400 psf. The other 2 were ~$1800 psf and one was on the park and the other under 2.4M. I think that tells the tale. No one is getting $2K psf or if they are then the buyers goofed or you are in the San Remo paying gobs of cash cause you can. I think the most downward pressure will be on the new construction that got part sold during the 2015 early 2016 top of the market and now are languishing because they are now way overpriced. YMMV, but I think that some sellers are still stuck in the hot market mentality while others are finally coming around and repricing for offers.

This is definitely a seller's market. Yes, some homes don't show well and/or are over priced. And some are unique and take a longer time to find the right buyer. But in general, homes priced correctly are selling quickly, and we are seeing a level of multiple offers similar to the peak of the seller's market last year (at least for the resale market). My theory is that the market took a bigger pause than usual this fall because of the unexpected election results, and now that the stock market has done well and bonuses are being paid, buyers are coming back with a vengeance. Low interest rates are also helping. But the slowdown we saw a few months ago is over, and based on the buyer demand and low inventory, I expect to see a continued seller's market this Spring and Summer season.

Doug Perlson
www.realdirect.com

uwsbuyerboy, Would love to see some examples of $3-4mm (non new development as we all agree on the story there) which are overpriced in your opinion. Thanks.

"As far as interest rates, if they go up 1%, but people get significant tax breaks, it could be a wash, even conservatively."

If interest rates go up 1% it represents a 13% increase in people's mortgage payment. Being that for a lot of people this is their single biggest expenditure it's going to take a lot of tax breaks to pay up for it. And don't think that the worst thing that can happen is that they only go up 1%.

Three questions if I may:

How does everyone think about the impact of increasing rental inventory the next few years and what that will do to cap rates? I've always struggled with the argument that low condo inventory over the last 6 years is bullish, and a similar macro argument about 800k single family homes which is lower than the 1.1-1.3+ historically. But how about all this rental inventory? Yes, it takes time for rental-to-condo building conversions down-the-line, but in the medium term if rental prices soften combined with stagnant or higher resale prices, then does it make sense to have a tightening cap rate in a high interest rate world?

2) What is the next catalyst for us to move higher? Certainly not foreign buyers, some new entrants but pricing is so out of reach in all places. The sudden melt-up is correlated to the stock market but the rally has been based on policies that are far from being done. Wall St bonuses will likely be okay but probably nothing spectacular, and the buyside HFs are still reeling from closures and AUM outflows.

3) What type of deals are people seeing where they think they can be opportunistic in? How do define attractive? 50 to 100bps above fair market value?

Thanks.

clarification: "50 to 100bps above fair market value cap rate" thanks.

NYC,

1. You can not think in terms of cap rates for properties where rich people live. Just like rich are more likely to pay for designer clothing and custom suit (think condo/luxury coop) even though they certainly buy reasonable quality at half the price (think rental). Rich have a desire to own, customize and not be at the whims of the landlord to move. That is the reason buy vs rent in NYC/San Fran generally looks in favor of renting unless you assume home price appreciation in the buying equating.

2. If job growth in Manhattan continues to be strong, non new development condos will continue to be stable and up.

3. High-end Rentals will get absorbed in the next year or so and renters will feel the pinch again as the suddenly the 1 month free rent is not there and the base rent rate is high.

Overall healthy market. New developments still need to come down in price to move the inventory.

4. Many rich people from other countries need to park their money somewhere. New condos have made that possible. In the past, with high-end properties mostly coops, it was more difficult to impossible. I continue to read stories about Chinese billionaires disappearing.

@front_porch

If you simply go to paycheckcity or another payroll calculator and punch in $1m, married, NYC resident, it shows a net of $560k. I can tell you from personal experience this is right on the money.

$338k federal
$8k SS
$22k Medicare
$73k NY

As far as mortgages, $3m, 4% interest rate at 30 yrs = $14,322

At 5% = $16,105

That is an increase of 12% as you stated @30 yrs

However, if you are netting $47k currently and rates change to even 40% effective, you now net $50k. That is $3k extra when mortgages are up $2k. At about 5.5% interest rates, you get to break-even. Btw, this is assuming everyone takes a mortgage, which is not the case in this price range. It also doesn't account for any potential change in real estate prices due to increased rates. It also doesn't account for a strengthening dollar, which could also impact real estate prices for foreign buyers.

I was discussing business rates, I should have made that clearer. In that world, I think we will see rates down to 35% effective (including everything). If that happens, monthly net is $54k or a $7k difference. This breakeven is at about a 7.5% interest rate.

I could obviously be wrong. I have created a spreadsheet to model all of this stuff but ultimately in 3-4 weeks I think they intend to release numbers. We shall see what happens. However, without doing any math, as a general rule, Republicans are pro-business and pro-rich, in terms of tax cuts. Maybe it was all for show and now they will help the common man and stiff the rich (you never know).

I should also add that a $3m mortgage on $1m income may be pushing it anyways, so those numbers might actually be worst case scenarios.

nyc1234, You numbers are correct. Some deductions for real estate taxes and mortgages will lower it a touch to 42% for W2 but not much. Rates going up will be more than offset by tax cuts but neither of them is permanent. I am not in the camp of 10y rates going up more than 1% in the next year unless we have strong economic growth of >3% in which case, incomes will rise as well. 1% factors in gradual QE reduction and 75 bps fed rate increase etc.

Another wild card is what they will do to 1-standard deductions (talking about increasing it to $30k), 2-state/city deductions (talk about disallowing it as a deduction on federal tax returns), 3-mortgage interest deductions (multiple statements have discussed getting rid of it altogether). Similarly, there is talk about gutting business interest payments as an expense, in return for full depreciation in the 1st year and reduced tax rates. I don't know that any of these will go through, but they are all on the table, so, ultimately, there could be a lot of changes and it will likely be very individual specific.

It will be interesting to see how all of the 2nd and 3rd derivative effects, such as any changes in RE prices due to rate increases as well as due to change in the value of the dollar also play out. It could favor US citizens at the expense of foreign investment, for example, and also act as gravity on current prices.

One thing is for sure, it is not an easy/simple analysis.

@300 here are a few:

155 West 70th Street #6D <--- Was 2.8M for about 1300 sf, just dropped 100K still too pricey. It literally has no place for a dining table.

12 West 72nd Street #22A <--- 3.975M holding firm, 2100 sf but an odd layout that would need a reno, 6.3K in maintenance or freaking $3.12 sf!, view or no view it's still way overpriced. The maintenance alone should crush this pricing down.

101 West 79th Street #16CD <--- was $4M laughable, just cut $250K and still way overpriced as it is a combo reno and only 1347 sf.

101 West 79th Street #16CD <--- 4.2M for 1900 sf, the best of this bunch, but still over priced.

Just sayin'

You guys are mostly in the biz so perhaps you have a better bigger picture, but at least where I stand it seems like the sellers are having a harder time of it.

If you want a correctly priced one, here:

411 West End Avenue #6DE <--- overpriced at 2.8 and languished, multiple offers at 2.6 on first showing of reprice.

1234, I am not a tax pro, and I am not pretending to be. (If I were, I would clearly stop being a freelancer to get away from paying double FICA). I just see the taxes of others -- and, in addition to the mortgage interest deduction, I often see charitable deductions, deductions for state and local taxes paid, investment interest, etc. If you want to meet my friend Michael (who is a tax pro, and who will tell you immediately to move to Florida) I'm happy to make the intro.

FWIW, in NYC, I think that the incremental increases in net cash for folks from tax changes will have pretty minimal impact on real estate prices / purchasing power unless people believe that those tax changes are long term. I think that the bigger factors will be broader economic confidence, stock market performance, etc.

@front_porch

Fair points. I own 7 companies so I have a pretty solid set of attorneys and corporate tax lawyers. I'm not winging this, I spend a good 100 hrs a year on tax considerations and my team runs various modeling scenarios throughout the year to determine how and when to make capital asset allocations (yet that doesn't mean I get it right everytime). Much of my discussion comes from a combination of 2 things: 1-discussions with my tax team & Excel modeling, 2-dinners with other entrepreneurs/investors throughout the country as to how they are making decisions. As far as all of those other deductions are concerned, those are all assumed in my calculations, I am assuming charitable deductions are taken off the top before that (because there is no other way to normalize this). The NYS/C are calculated in the calculator. Investment interest is taxed, so it just increases your taxes. Moving to Florida would be great, but it turns out that is much more difficult than people realize & completely dependant on the time of business you operate (in my case, it doesn't work).

@TeamM

You make good points, particularly the stock market performance may create a bigger effect than anything.

Btw I'm not sure why my anonbk is showing up instead of nyc1234 - same poster but on a different computer, years ago I set up two by mistake. Sorry for the confusion.

@300 sorry i think the filter didn't like me calling out places there were 3 good ones in there.

TeamM,
I agree, but I think people are downplaying the role of interest rates.

300 - you would know better than I would, but that's logical to me. I would think that the impact of interest rates would vary based upon the types of properties (e.g., coops that allow little or no financing seems like they wouldn't be impacted as much, other than insofar as the increased interest rates impact the broader economy).

I remember a convo back in 2004-5 about property prices and interest rates with a friend before we both owned. We both agreed that the prices will surely come down as Fed raised rates. The rest is history. No one can guarantee the future.

Neither can you look at residential property prices with interest rate higher and nothing else changing. A big chunk of residential property price is based on need, supply, and affordability. Affordability depends on both income, interest rates. The higher the price, affordability and rates become less of a factor. It is all about supply and demand in >$4-5mm / super luxury segment.

I am hearing that reasonable size 2500+ sq ft, 4 bed room, 3 bath apts are undersupplied in $5mm+/- range fully-finished. Many people with 2 kids want 4 bedroom with extra bedroom as home office or guest room. Would love to see example of properties to the contrary. Thank you.

Interest rates rise when the economy is running on full steam and incomes are rising with it. The rising incomes and productivity more than offset the interest related mortgage payment increases.

Not to call 30 a graybeard, but ... I agree with the general sentiment that rates don't really matter now, and I don't think they would matter much even they rose and stayed, say, sub-6. But if they climbed to 8 (around where they were when I first bought) or higher to the double-digits that 30 remembers, then I think it's a different story. That changes the environment even for people with plenty of cash (which, honestly, is the profile of many of the participants in the market today). I don't think we'll see 8 for a while, but I didn't see this low-interest rate environment lasting this long either. It's tough to have a crystal ball on this aspect of the market.

In 2004-05, the US was considered one of the most politically stable places to buy assets. That is definitely what draws the Chinese, Arabs, Russians, S/C Americans, etc. If our country becomes perceived as a place where immigrant money is not wanted, it could place a damper on that outside source of investment. China is currently down to $3T and could be out of money to defend it's currency by the end of this year and is starting to place capital controls on movement of money.

300_mercer, I think you are correct ultimately, though, this will be a supply/demand issue like it always is, and, as there are so many variables in the limited prime Manhattan/Bk market, it is not really predictable.

One thing you have to remember is that interest rates do not only affect mortgages. One of the reasons people are putting down more money / making all cash purchases is that the alternative uses of the money (outside of equities) yield almost zero return. As interest rates rise they will not only affect mortgage rates, but also bond rates, money market, savings, etc. The reason people are willing to tolerate Real Estate investments with almost no current returns is because the alternatives yield no returns as well (everything is appreciation based returns as opposed to income). We are seeing buildings in Park Slope which used to trade at 4 times Rent Roll trading at 22 times Rent Roll - so it's not just prices going up based on higher rents, it's hugely increased multipliers. As interest rates rise and people have alternatives to place their money which actually do yield a cash-on-cash return, there will be more incentive to put less cash into Real Estate transactions and leverage more . This will also amke people look at the returns from buying property and renting it out differently - now if someone buys a condo and rents it out for almost no return they don't care that much because the alternative of bonds, savings, etc. is close to nothing (and they don't want to be 100% in equities). Once there are alternative investments which provide a return, the pressure will be on to buy Real Estate at prices which show an equivalent return.

30, Your point is a good one but you are mixing commercial and residential for own use. Commercial real estate will certainly come down but not sure people view owning a place to live vs investment alternatives. It is human need as every one is born short a home.

How much of the current market is investment properties for condos in NY? For new developments it's over 50% (not sure overall). If 50% of the market goes away, you can be sure that prices will plummet. Just because it is being used "commercially" doesn't really make it a "commercial property" - residential condo sales are all one market no matter if the purchaser is moving in themselves or renting it out. If half that market goes away it doesn't get made up for by the other half.

If interest rates go up we can argue about how much of the "owning a place to live" market is going to go away, but I think we can agree it isn't going to increase. We also agree that the investor market is going to go down in meaningful numbers. So if one half is going down by some amount (even if a small amount) and the other half is going down a serious amount, the overall decrease in demand will lead to one thing only.

To update the subtopic of this thread that is a discussion of effective tax rates, we now have an (admittedly old) 1040 that shows one wealthy businessman paying Federal tax at an effective rate of 25%. Throw in another 10% for state and city (we don't have the actuals of that return), and you have a 35% tax rate on a nine-figure income.

Believe he took very large deductions from his NJ golf course. Most people do not have that size of deductions and end up paying more than AMT if you make over $1mm.

https://www.forbes.com/sites/ashleaebeling/2016/06/15/trumps-golf-course-tax-shelter-likely-target-in-irs-audit/#3ad5506234f9

Don't forget that if you are not in the business of Real Estate you can't deduct "passive losses" from real Estate against your income.

>Don't forget that if you are not in the business of Real Estate you can't deduct "passive losses" from real Estate against your income.

There must be an exception for kylewest and his friends. Right?