Paterson and Bloomberg Warn of Huge Deficits

This article serves as a harbinger of the new era to come. We are entering an era where Manhattan will now begin a slow and steady decline in the quality of life. My sense is that it will still be a desirable place for singles, young childless couples, homosexuals,tourists, and maybe even a return of some artists. However, all of those families that have chosen to stay in Manhattan, particularly the ones that are cramped in small two and three bedrooms, will now realize that they want to get out. I think we could see, beginning in 09, and definitely into 2010, a lot of inventory being dumped onto the market by families that want to get out. There won't be enough buyers, and prices will come down. All the while, as demand for the suburbs increase, those areas will begin to recover, and eventually it will not be possible for people to cash in their 1500 square foot two bedroom on 76th and York for a nice house in Long Island or Westchester.
The real problems will start when we have a mayor that lacks Bloomberg's knowledge and ability to cut expenses, then we will see the real return of 70's like conditions.

mh23: What are you, like 90? Who says "homosexuals" anymore? And what is with "young childless couples?" Something about older couples without kids or with grown children are fleeing, too, under your scenario? What's wrong with you? Your little post is a mix of sophmoric and insipid.

Older couples with means will leave if they can. Those people, who bought to retire here because they like the theater, restaurants, whatever, will leave if crime spikes, graffiti comes back etc. The poor elderly will stay, but they were not the ones that drove up prices, unlike the wealthy retiring baby-boomers. As Manhattan becomes less desirable, more people will leave and others won't want to buy. Also, the word is sophomoric...it is inapplicable to my post, but at least I thought you should know how to spell it since you don't know what it means.

Lately, there have been tons of articles about a flight from the suburbs to the cities due to increase in gas prices.

There is some logic to this.

mh23, your thesis is very thin and your description of gays as homosexuals sounds very strange. Do you also call Afro-American's, negroes?

mh23 older couples have bought a pierdetere and spend the winter in Florida, your comment on homosexuals I will leave to Steve, it sounds condescending to me,there are plenty of artists here, I don't know where they went but music, theatre, and the arts belong to New York. Your post was very funny and very helpful to all the young childless parents of New York. What time do your meds arrive?????

mh23 - you mean people will leave the city where they have smnaller places and public transportation to go to suburbs and have larger homes that need to be heated and cooled, as well as, need cars to get around?

You are actually stating that people will leave the city to go to places where oil, gas, electricity now cost 400% more than they did 3 years ago?

People will not be fleeing cities they will be migrating to them.

I hate to do this, but I agree with petrfitz: expensive oil is here to stay; people will reverse-migrate back to the city. The suburbs and exurbs are a viable economic model only when gas and time are cheap.

I don't see the reverse migration back to the city to be as strong here as in many other places. Pretty much any of the "old" cities in this country, (NY, Boston, Chicago to a lesser extent) operate on a hub-and-spoke kind of model. If you live in most of the burbs (in NY) you can drive your car, take the bus or take the train. The places that will really see this push are the areas that have piss poor transit (most cities in the US really) where you have no choice but to drive. Heating prices certainly have an effect, but I don't think people are going to be selling their house in Greenwich, Scarsdale, Bergen Co etc. to save some money on heating bills. The exurbs and fringe areas (Pike Co, PA and Orange Co, NY come to mind) are likely to be screwed though.

I know people who live on Long Island whose home heating/cooling costs went from $300/month 3 years ago to $1200/month now. Also their gasoline expenditures have quadrupled, along with landscapers, school taxes etc. One friend estimates that his cost of living on his home has more than tripled in the past 4 years. He had to get rid of his landscaper, nanny and downgraded his car to an economy. He is still hurting.

Dont discount the NY suburban population migrating back to the city at all. Do you know the differences in taxes between suburban NJ and NY? A home in Montclair, NJ will cost about $20K year in taxes, a brownstone in Brooklyn of the same size taxes are about $4K per year.

petrfitz-

>>>"I know people who live on Long Island whose home heating/cooling costs went from $300/month 3 years ago to $1200/month now. Also their gasoline expenditures have quadrupled, along with landscapers, school taxes etc. One friend estimates that his cost of living on his home has more than tripled in the past 4 years. He had to get rid of his landscaper, nanny and downgraded his car to an economy. He is still hurting"

That's why renting is a better bargain for those who have not committed yet. It makes it an even stronger argument to rent and wait out the inevitable to occur. Saving $200,000 on a currently listed $1M unit/or home will pay your operating costs for the next 10-20 years.

mh23: "sophomoric: conceited and overconfident of knowledge but poorly informed and immature."

I'll give you that you sound old, but your reasoning is undisciplined and uninformed as one would expect from someone who is immature. All-in-all, I'll stick with the word choice (granted, with the spelling correction).

For folks with kids, it's all about the schools. If the city can provide great public schools than everyone and their mother will want into NYC. However, if parents will need to pay for private school to get a their kids a decent education, than they'll probably stay in the burbs where they can get the benefit of 'scale' on their property tax $$'s. For example, if they are paying 20K in property taxes and have 3 kids than they're 'paying' @6K per kid for school. If they move to city and have to now shell out 28K * 3 kids (84K) that's a lot of dough. To most parents the comparison is not 20K to 4K, it's 20K to84K. I've simplified this but you get the point.

So here's a question: How will Bloomberg be able to spend enough on schools to make them better for the current students while attracting those burb parents? In a projected 3 year fiscal deficit??

"How will Bloomberg be able to spend enough on schools to make them better for the current students while attracting those burb parents?"

He doesn't have to spend a penny, and should actually reduce spending. NYC spends more per pupil than just about anywhere in the country - most of it is administrative expenses. Teachers top out at like $120k a year for 8 months' work, get a retirement package after 20 years worth about $3 million each, and healthcare for life. That's a sweet deal.

What there needs to be is accountability. Right now, thanks to the teachers union, there is none.

"mh23, your thesis is very thin and your description of gays as homosexuals sounds very strange. Do you also call Afro-American's, negroes?"

You attack the guy because he refers to gays as homosexuals? Thats a rather thin argument. I generally agree that if this town elects a Dinkins-esque Mayor, a decline will follow same as it did in 1989. Only difference is back then unemployment was higher as were interest rates. The economy today is much more globally connected but just as manhattan is not immune to real estate declines, its also not immune to economic downturns. People just may start to flee back to the burbs or to some other area. This thing is a pendulum. People loved NY, then they hated it then they loved it again. They might very well hate it soon if you get a Mark Green type running the City (not that Mark Green could ever win).

Grunty - dont know if you have been following the massive baby boom in NYC and how that has driven up competition and performance of public schools in NYC but the city schools both public and private are amazing now. The schooling available in NYC dwarfs the quality available in the suburbs and the taxes are a fraction of the costs.

I have children and I am dreading the process and competition of getting my kids in a top public or private school. It is actually similar getting into Havard as it is getting your kid into a good public NYC kindergarten.

"A home in Montclair, NJ will cost about $20K year in taxes, a brownstone in Brooklyn of the same size taxes are about $4K per year."

20K annual taxes in Montclair gets you a relatively sizeable home, on a lot larger than the average BK Brownstone. I know you know everything, but you don't know this.

"Dont discount the NY suburban population migrating back to the city at all. Do you know the differences in taxes between suburban NJ and NY? A home in Montclair, NJ will cost about $20K year in taxes, a brownstone in Brooklyn of the same size taxes are about $4K per year."

If you can "afford" a house in Montclair or another fairly tony 'burb I'm not so sure a few extra hundred a month is going to break the bank. It might change your priorities, although from the amount of Lexus SUV's and the like I saw heading back into NY on Sunday it doesn't appear everyone is cutting their losses to move into the city just yet.

My argument is very simple. Over the past 10 years or so, the quality of life in Manhattan has improved dramatically. One of the consequences of this improvement is that many groups who would otherwise not have bought or stayed in Manhattan have chosen to do so; e.g. families with children, retiring baby boomers. There have been numerous articles written on this subject, so I doubt that it comes as a shock.
Now that we are about to embark on an era where we will begin to see an erosion in quality of life, coupled with what will surely be poorer leadership in the Mayor's office, it stands to reason that that will impact the demand being generated by the aforementioned groups.
The impact will be that families will not want to stay here with their kids, and older people of means will not want to own in Manhattan. Those who do, and want to leave, will have to sell. This will drive up supply and drive down prices. I hear the argument regarding the suburbs, and it has some merit, but I still believe that families who have an income will not want to raise their kids in the Manhattan of the Dinkins era when they were planning on the Bloomberg era of Manhattan to continue.
I was bullish on Manhattan real estate for many years when people on this board were bearish. I sold just before prices began to decline because I could see clearly that the fundamentals had changed. Now I see a shift back to the suburbs, and a lack of interest in boomers retiring to Manhattan.

TA - i have posted comps in Montclair before so you are wrong in your attack.

I will do so again now - based upon price point

Here is a home in Montclair that you could buy for $2.5 million
http://www.burgdorff.com/Property/propertydetails.aspx?SearchID=586439&PropertyID=131986621&RowNum=1
Yearly taxes are $53,627

Here is a brownstone that you can buy in Brooklyn for $2.5 million
http://corcoran.com/property/listing.aspx?Region=NYC&ListingID=1233817
Yearly taxes are $4750

I will expect your apology.

So the "comp" for the NJ house is an unrenovated brownstone half the size?

Petrfitz, are we really talking an apples to apples comparision here? I grew up in suburbs with nearly an acre of land- which is similiar to your listing in Montclair, and while it was beautiful, I knew I was always going to wind up a city boy- even in the bad old days of the city during the 1980's. I would prefer a brownstone in Brooklyn over the house in Montclair any day of the week...the question remains...am I a typical demographic of who you are trying to target in your comparision? I believe it's not a question of expenses at that price point- it's lifestye and preferences.

I guess crack wars are coming back too if the "Dinkins era" is what we are heading for. Perhaps nothing ever drove a crime rate up more than the introduction of crack did in the 1980s (perhaps bootlegging, but on that I demure to those posters over 90). So far, downturn/recession/slowing, whatever you call it, hasn't caused a crime spike of any significance. Many crimes continue to decrease. So long as crime stays low-ish, the doomsday scenarios here are ridiculous; the 1980s analogy doesn't work because it wasn't the economy then--it was a violent crime ridden city that drove people away. And if the worst happens (like a depression), there will be no where to run--including the burbs.

"I will expect your apology."

Sneaky, you forgot that NYC has an income tax in lieu of property tax, so someone who can afford a place that expensive will likely be paying just as much in total tax.

And co-ops are taxed at a much higher rate than single-family homes, and condos even higher than that. In all, the tax burden in NYC is higher.

I wish there was a way to make my argument simple enough for kylewest to understand it...Let me give it one last try.

When the following factors were in play, Manhattan real estate went up.

1) Record bonuses year in and year out from 2004-2007.
2) Strong local economy.
3) Low inventory
4) Multiple streams of demand (e.g. foreigners, retiring baby boomers, people buying apartments for their children couples with families buying bigger places.
5) Low mortgage rates that were easy to get.
6) Budget surpluses in the city translating into a high quality of life.
7) Exceptional leadership in the Mayor's office for 16 consecutive years.

Now, let's look at each factor, and see if they have gotten better or worse. If you think they have gotten better, then it would stand to reason that real estate prices will go up. If they have not, one would assume that they would go down. No one is predicting a Depression, just a return to a poorer quality of life, and therefor less demand.

you guys are complete morons. The comps are just that comps. A buyer has a certain amount of money to buy a place. If you compare any sales price in brownstone brroklyn to any similar priced house in Montclair there will be a tremendous tax difference - most likely 10 fold.

I've been in Manhattan my entire life. I now have a young family here and we're fine in our apartment. I won't mention size because it's just not relevant and I don't need any ego-stroking. I plan on staying here for quite a while. Maybe it's because I've low standards but I'm quite happy with Manhattan both before and now. I've had the opportunity to move to other parts of the country and internationally because of my career but have opted not to. Even when I vacation, I know that there's nothing that beats the food, shopping, and culture here. Love this place, even with all of the tourists and people that love to slam it.

> That's why renting is a better bargain for those who have not committed yet.

Awesome point. Landlords are eating a ton of that.

> city schools both public and private are amazing now.

City schools are better than they were, but they are NOWHERE NEAR "amazing". You have some gifted programs (which are oversubscribed), but the majority of kids, even in Manhattan, aren't getting what they need.

In fact, its worse than a few years ago.. .there is too much competition for the small number of good slots, and more and more families in the city aren't getting them Meaning its either private school time, or head out of the city time...

> The schooling available in NYC dwarfs the quality available in the suburbs
> and the taxes are a fraction of the costs.

Wow, you REALLY don't know anything. This is so far wrong, its not even funny. Long Island schools blow away NYC, with the couple thousand that can make stuy/laguardia being the notable exception.

The majority of kids, even in Manhattan, are at schools far inferior to most of those in Nassau County or Westchester.

"If you compare any sales price in brownstone brroklyn to any similar priced house in Montclair there will be a tremendous tax difference - most likely 10 fold."

That's true, but not for co-ops or condos, and not when you include NYC income tax.

"The comps are just that comps."

No they aren't. Do you need to someone to explain what the term "comparable" means?

"We are entering an era where Manhattan will now begin a slow and steady decline in the quality of life. My sense is that it will still be a desirable place for singles, young childless couples, homosexuals,tourists, and maybe even a return of some artists." mh3

Now that's classic. Certainly old school mentality. Just love the way you threw in homosexuals. Why didn't you include American Indians and Orientals.

I have to admit, "homosexuals" is very quaint, and caused a giggle.

Well said, mh23....

Have you seen what schools outside of the city have with regards to programs, equipment, etc? I have in both Marlboro and Livingston, NJ. Now I am not saying I would choose to live there, but they blew away what we had when I went to a PRIVATE school on the Upper East Side! That being said I would not choose to live there. But then I don't have any kids in school either. (By the way, my high school today charges 25k and I heard they are going up to 30k soon.)

I love Manhattan. But I can understand those who want to live in the burbs and I know they can get a lot more for their money for a place out there. As to those who spoke of the costs of a house... I guess it all depends on what they have in that house. My parents have a 2500 sq ft. home and spend about 150/mnth to heat/cool. Does your friend have a pool? Keep the A/C blasting in summer? Insulate? We all make choices.

As to changes in safety in the city... I don't think the objective #'s matter as much as the trajectory. In the early 70s it was much worse than in '91, but the trajectory in the 80's was down, so we felt things were getting better. When they took a turn for the worse durting Dinkins' years it hurt the impression. People were worried, the NYPD was demoralized, etc. Things have been pretty heady. EVERYTHING worked in favor of higher prices. The problem is what happens if things are priced for perfection and times are no longer perfect?

Totall, AVUWS.

A lot of the Nassau high schools are like that as well. And, I've heard that statistically, the Scarsdale school district beats 'em all.

BTW, if services do get cut all over the place, the city starts looking a lot worse. If New Jersey has fiscal problems, and you're mowing your own lawn and driving to work, you might not notice (outside of your tax bills). But guess what happens when crime goes up or subways don't work as well or garbage pickup gets cut back on... these are all things that hit the city harder than suburbs in bad times - particularly if we're talking about effect on the upper/middle class... mainly because the city is more integrated (as in poor living closer to not-poor).

I remember the Dinkins era, and it was NOT pretty. Suburbs has their problems, too, but I think its human nature to "retreat" in these situations, making you own 1/4 acre or whatever look a lot better...

"I will expect your apology."

First of all, guy, you said 20,000 in taxes, that thing is 50K in taxes, secondly check the lot sizes. slight difference. I will expect you to cease posting.

Whats the deal. You got a small dick or something?

"Sneaky, you forgot that NYC has an income tax in lieu of property tax,"

Bingo, and whats the nyc income tax, like another 1.5%.

"The schooling available in NYC dwarfs the quality available in the suburbs and the taxes are a fraction of the costs."

Another instance of your ignorance. Unless you are talking the absolute top private school in Manhattan (which by the way there are at least comparable private schools in New Jersey) you clearly have no idea what you are talking about. Clearly, Stuyvesant high school and Bronx Science are great public schools assuming you're kid is bright enough to get in but the in affluent suburbs the schools are hands down better than NYC public schools. Hands down. I know, I went to NYC public school.

Totally is right on with public schools. But, then again, when has anything SneayPutz said NOT been completely wrong?

? Sneaky, you forgot that NYC has an income tax in lieu of property tax,"

Make that ON TOP OF. And property tax is about to go up some more, the temporary 7% decrease will go away very soon... and there might be a raise on top of that.

hmmm how much do you need to earn for a 2% income tax to account for a $45K difference in property tax?

You guys are funny arguing that two properties priced the same are not comps.

Also - its funny that you guys say that "i went to NYC public schools" and act like they havent changed in 20 years. Guess what NYC public schools are completely different now than they were 3 years ago. The NYC school system both public and private crushes anything you will see in suburbia. I bet all of you stating differently do not have kids and have not even looked at the acceptance process today.

a bunch of renter morons.

"March 14 (Bloomberg) -- Manhattan toddlers have a harder time winning acceptance to a private preschool than students who apply to Harvard University.
An average of 15 applicants vied for every spot in about 200 preschools in the borough of Manhattan, said consultant Amanda Uhry, founder of Manhattan Private School Advisors. Cambridge, Massachusetts-based Harvard had 11 students competing for each of its approximately 2,030 slots. Thousands of New York parents received notice last week that their children were rejected or put on a waiting list for preschool.
``It is a very punitive process,'' said Roxandra Antoniadis, director of admissions at St. Hilda's & St. Hugh's on the Upper West Side. ``Think of how educated New York City parents are, how sophisticated, how accomplished their children are. When they don't get in, it is horrible for them.''

and also

http://nymag.com/nymetro/urban/education/features/15141/

"hmmm how much do you need to earn for a 2% income tax to account for a $45K difference in property tax?"

The top bracket is actually 3.648% so roughly 1.2MM.

"You guys are funny arguing that two properties priced the same are not comps."
They aren't. Buy a dictionary and use it. You will be amazed at how much smarter people might think you are when you know what you are talking about.

"Guess what NYC public schools are completely different now than they were 3 years ago." Got some stats to back that up?

The Fed - answer this you are a buyer moving to the NY metro area. You have $2.5 million budget to spend and you ask a broker to show you what you can buy for that money. Does the broker show you a city property and a suburban property of the same size? or do they show properties based on price point?

Your logic would lead that broker to showing you a 4000 sq ft house in mont clair for $2.5 million and a 4000 sq ft brownstone in NY for $10 million.

"Also - its funny that you guys say that "i went to NYC public schools" and act like they havent changed in 20 years. Guess what NYC public schools are completely different now than they were 3 years ago. The NYC school system both public and private crushes anything you will see in suburbia. I bet all of you stating differently do not have kids and have not even looked at the acceptance process today."

Once again, you know shit SneakyPutz. Check the overall stats. And I GUARANTEE you I know more about this than you do... (yes, I'm baiting you).

Stuyvesant had a 1 in 15 acceptance rate TWENTY YEARS AGO. It didn't mean that the system overall didn't suck, and it didn't mean that most rich kids were still being sent to private schools.

In fact, the parents are applying so hard for those spots because there are SO FEW. That parents have to go nutty to get one of the few "special" spots just shows HOW LOUSY THE REGULAR ONES ARE.

Check the freaking reading and writing scores... Long Island DESTROYS them.

Once again, you know shit Pete.

Fuck, you don't even live here, so shut the fuck up.

> a bunch of renter morons.

If thats what you call folks much more successful than you who DIDN'T miss the crash coming, then, hey, I'm happy to take the compliment.

"answer this you are a buyer moving to the NY metro area. You have $2.5 million budget to spend and you ask a broker to show you what you can buy for that money. Does the broker show you a city property and a suburban property of the same size? or do they show properties based on price point?"

Why would a RE broker be showing you a house in the burbs and a brownstone in Brooklyn? They aren't comparable areas.

EddieWilson, are you really more successful than Petrfitz? I do doubt it.

That said, Petrfitz is one of the most arrogant people here ... how do you hate the people who rent from you?

But I guess it is a toss-up. Arrogant asshole vs. loud dimwit.

> EddieWilson, are you really more successful than Petrfitz? I do doubt it.

Only because you pretty consistently get things wrong. Even if you take his latest, most inflated estimate, SneakyPutz is behing me...

> Arrogant asshole vs. loud dimwit.

Hey, you should be nicer to your parents.