If it hasn't come down, what could possibly make it?!

Nothing.

Manhattan is different. It simply cannot possibly go down. Plus, don't forget about the foreigners.

"Unless homeowners have lost the means to maintain their mortgage payments, say through mass layoffs, or are forced to move due to some other circumstance, they typically have the option to withdraw their homes from the market—especially if they feel the price being offered by potential buyers is too low. Because prices are sticky downward, it will be necessary to define a price bust using a lower threshold and a longer time period, such as a real price decline of 15 percent or more in five years."

http://www.fdic.gov/bank/analytical/fyi/2005/021005fyi.html

So you may have to wait 5 years to see a bust. But this is based on historical data and was written in 05. The housing busts around the country seem to break the trend described in the paper. Only time will tell if it will happen in NYC. I think in real estate patience is measured in years, if not decades.

Who said it hasn't come down yet? Apples to apples, I think you can already pick up a bunch of stuff in this town for 10% less than you could have in 2007.

No way. You definitely cannot. Don't get me wrong. I thought prices would have come down by now. But they clearly haven't. I mean I could understand making the argument that the dollar will continue to strengthen, and then maybe demand from foreigners will weaken. I just don't see the buying halting to the point where these stubborn (as they should be) sellers lower their prices. There may just be too much money in the world, and manhattan may just be too desirable, even though I don't really get it. Please instead of being sarcastic, show me where I'm wrong. Hey, maybe if all the bears throw in the towel we may just see the turnaround we are looking for.

"Manhattan is different. It simply cannot possibly go down."

That's absolutely correct. Because in Manhattan, you can get financing for 40x your annual income.

It used to be 2x - 3x. But now, it's 40x.

Thank god for Jesus.

> I thought prices would have come down by now. But they clearly haven't.

What are you basing that on?

I've seen prices go down in buildings I am following.

Unless I am in a position where I MUST sell, then why would I put my apartment on the market now for a lower asking price than I think it is worth? The sellers have the same information that we do -- loans are harder to get, etc. Apartments that are priced well will sell. People who are desperate to sell because they have to get the hell out of the Big Apple will be more willing to entertain any offer they get, that's when you have to pounce and have no fear in the world of making a low ball offer. Just keep looking for the right apartment for you, and look at higher price ranges that your absolute max price because you just might find a desperate seller there.

just to support dmag and others who like me are actually looking hard to find deals
1) Yes asking prices have come down in the last several months by 10% or more
2) BUT these reductions are coming from 20% to 30% or more increases from the same time last year

So, if like me you were blown away from being barely able to afford something to nothing over the last year, they are still not back. AND interest rates and credit terms have become a lot worse. So effectively affordability is substantially worse than last year. This SHOULD be a recipe for a sttp decline, but almost every place that I was tracking that was decent, goes quickly after 1 or 2 price reductions at a affodability level worse than last year -- and a real price that is at least that from last year. Usually more. Of course this is UWS. Can't speak for other areas

I think that it boils down to our island of 1.6 million, and the inventory of 7300 (approx).

In terms of the impact of the overall economy, there already has been a change. I think we are in the land of flatness for a while. We are no longer seeing the rapid appreciation and it is a buyers market. But I think you have to get in there, find what you want, and negotiate. Listed prices may soften a bit, but once they do, inventory will drop and the cycle will continue. Could be some more softness at the end of the year, but there typically is. I really don't think that there will be big long term changes.

Seeing prices "decrease" from ridiculous asking prices where an owner is trying to get a 300% return in 3 years is not representative of an overall decline in NY real estate. Just because a unit decreases its ask from $3million to $2.75 does not mean a crash coming, especially when the seller bought it 14 months before for $1.75.

buy outside of the fashionable areas - wait for others to follow

I have seen a few bears making comments on these boards recently, gloating about how they were right and how no one listened to them and, see, now everything is horrible and everyone should have listened to them. The problem is, I'm not sure what they were right about. NYC prices haven't crashed. They keep gloating that all these owners have lost all this value on their properties, but it just hasn't happened. There is some softening and some flatness in the market, but sale prices haven't dropped substantially, if at all in many areas. Neither have rents. It's like some of these bears live in a different, bizarro world.

Worth saying again: In Japan the Nikkei peaked late-1989. Tokyo land prices peaked late-1991 (and then fell for 15 years). Real estate takes time to move. By the same token you could have bought in late-2003 when the stock market was clearly telling you the economy was going to rebound and made a very nice return - real estate just lags. Listen to financial markets - they move way faster than real estate. If the stock market were to increase 20-40% I'd revise my Manhattan forecast to flat.

LIC - I agree. I am currently in the market for 2 brownstones. One that I am considering was originally listed at $2.95, it is now listed at $2.6. Steve, MMAfia and the rest of the naysayer losers would call this a huge decline and that the seller was losing his shirt. Meanwhile, if you look at the history, the seller bought it 2004 for $1.4. He put in about $200K in rennovations and stands to make $1million in profit when he sells it. (there are 2 bids at $2.5 currently)

Owners are not losing money in NY, most are actually making unbelievable amounts of money. The only ones who are losing value are the owners who bought in the last year (at the peak) and have to sell now. A very small minority of owners.

Another fact is that renters are not making any money, they are throwing their entire rent away each month and have nothing to show for it.

The near term prospects for real estate look very good. All the rabble has been cleared out, mortgages being offered now are solid and less risky, home prices have softened which needed to be done from the historic rates of increase over the past years, and there are 2 years worth of buyers on the sidelines. These buyers will come back into the market in the next 12-24 months causing inventories to decrease, and prices to jump 10-15%.

petrfitz -- the rent I'm throwing away each month is less than the monthly carry cost on an equivalent condo, and it's capped at a 4% annual increase, unlike the condo fees... so if I'm not betting on prices going up, why should I buy?

zizizi - sure it is. No landlords in NY make any money they are all losing money. Also prices in NYC traditionally tend to go down year after year. I think that you are smart waiting to buy and renting. It is smart to spend $150K in rent over 3 years waiting for a $100K possible decrease in sales price.

You shouldnt buy. If you wait you will be able to buy a 5000 sq ft loft in Tribeca for $400K and you will laugh all the way to the bank.

Good for you!

I'm a real estate agent who believes we've seen a mostly flattish market with some inventory pile-up -- I was quoted in the WSJ about the slowness in one-bedrooms in April, a couple months before the Times noticed it.

However, I think the market will stay flattish going forward, which on these boards makes me a bull.

Let me try to turn my thinking upside-down and make the bear case:

Foreigners -- who are already starting to drive demand less as they realize they face 10% interest rates -- slow down their buying even more because they don't see an end to the dollar slide, so they don't want to hold dollar-denominated depreciating assets.

New York City job loss increases, probably spreading outward from Wall Street. I am not talking about bonuses drying up after a record year; I am talking about head count coming down still further.

Some number of those unemployed people realize they can't make payments on their apartments. (Another reason I'm picking on Wall Street is that people in that sector are not traditionally deep savers).

Condos purchased in 2005-2006, when lending terms were the most generous, get pushed onto the market. The owners can't sell at prices they want, they start renting out their units to cover their costs, and the ones at the very end of the line can't even do that, which triggers some amount of bank foreclosures.

Unlike original owners, who are trying to take prices down very slowly, the banks want out FAST and put properties on fire sale.

Since in big buildings much of the inventory is fungible, what starts to sell in those buildings are the units at fire-sale prices. This provides the 20% price cut that the vultures are all howling for.

The market registers that price drop, and panic spreads to not-yet-underwater co-op owners. They cut prices some -- maybe 10% -- and I think in this scenario need to encounter even more resistance from buyers -- which probably comes from buyers truly not having purchasing power, because interest rates have spiked.

Potential buyers now see declines in condo and co-op prices -- and a high cost of money -- and whoever can stay out stays out while the knife keeps falling for a couple of years.

I don't think it'll happen that way -- I think the cost of money will stay relatively low, and that will provide a crucial support that was missing in the late 80s and early 90s -- and that demand to live here will remain high, so rents won't fall that much, so option B won't look that good either --

but I think that's the bear script: continued weak dollar, rising unemployment, rising interest rates.

ali r.
{downtown broker}

hey, zizizi - you probably pay $0 to have your apartment painted, $0 for new appliacnes, $0 for window shades - when you do buy you get the privilege of renovating any old way you want. Get ready to pay LOTS of money too! It's something people don't often talk about when comparing renting/owning. Instead they talk about increasing value by renovating, which is not necessarily the case. If the next buyer doesn't like your taste, they have to factor in the cost of tearing out your renovations and redoing them.

front_porch - so wow, we MAY see whopping 20% price slashes on the downside - stop the presses! hahahaha

to others - about real estate following the financial markets..... the dotcom and Dow crashes of what? 2000 and 2001/2002? were not followed by declines in real estate prices. Unless we can call today the correction that followed them some 8 years later

The 1988 stock market crash was followed by a severe real estate crash. During the denial phase people who had bought real estate smugly toasted each other while asserting that "when stocks are down the investors pour all their money into real estate."

So I'm not sure there's any sure-thing correlation. This will just be about availability of funding, availability of ready cash, employment, and inventory.

porch, what about the current state/city budget crisis? How long will it be before basic services like transportation and safety are severely cut? Tax receipts from investment banks (approx 20% of city tax revenue) are down over 90% year on year. I can't imagine that a comeback in crime wouldn't have an effect on property prices.

Petrfitz: just wanted to address this "throwing many away" comment that often gets directed at renting (Google renting "throwing money away": 29,700 hits!). Certainly there are times when renters are throwing their money away if they can afford to buy and intend to be in the same place and family situation (spouse, number of kids, etc.) for five years or more. Why are they "throwing money away"? Because they can be building equity instead. But building equity and amortizing a loan are the same thing only when prices are at the very least staying flat. If prices are declining, *new buyers* are "throwing money away". Renting = throwing money away only when the market is flat or rising. So, for those who would like to buy, but think the market will fall over the next few years, why not wait? Renting costs money, but so does interest, real estate taxes, maintenance charges, etc., not to mention the loss of equity. I am not a shrill partisan doomsayer, but I think this "throwing money away" phrase is damaging to a productive discussion.

Anyway, to contribute to the main line of this thread more directly, I think the catalyst for clearly dropping prices will be lower bonuses (and more layoffs) in Q1/Q2 2009, as described in a great post by UrbanDigs:

http://www.urbandigs.com/2008/01/bonuses_its_2009_that_will_hur.html

Junkman_r_u_serious

NYC becoming a less desirable place to live would certainly have an effect on property prices. But it seems to me as a long-term resident (20 years) that it would take a few years of severe service cutbacks before that got reflected.

And remember property taxes in the city are ridiculously low -- Michael Bloomberg sent me a few hundred dollars this year to thank me for living in a half-million dollar apartment. I would think step one towards budget reconciliation would be to sunset that rebate. 421(a) collections will also rise over time, probably not enough to completely offset the declining take from Wall Street, but that will be something.

ali r.
{downtown broker}

lowery, the current problem is a tad different from the dot com bust which did have a significant impact on the technology economy and the northern California real estate market. It was a financial event and not a credit disaster.

Presently, we have a historic credit crisis (very similar to the late 1980s-early 90s) which is leading to a massive de-leveraging by financial institutions and individuals. This in turn is putting downward pressure on leveraged assets & the related debt, real estate being #1. The current escalating mortgage rates and the lock up of the credit markets further places pressure on leveraged asset values. I don't recall the dot com bust having much effect on the willingness of banks to underwrite residential loans but then values were much lower then.

Where all this leads us in the next year, two or three, who knows. I don't know of anyone with an accurate crystal ball & I certainly don't have one. :)

You bring up an observation that I always found interesting. As you mentioned, post the crash of 10/87, Manhattan RE prices continued their escalation into 1988. Those last buyers must have been some serious hardcore optimists. However, 1988 peak prices were not seen again for a decade.

dmag, what is keeping you from buying today? Is it more a question of prices dropping to an affordable level for you or do you feel the market will fall and want to get the best price possible?

serge, I may have stated my '87/'87 comment too ambiguously
What I meant to say was that if we try to correlate the real estate downturns to "Wall Street," then we will see the '87 stock market crash followed by a real estate downturn. We had a significant stockmarket downturn after the dotcom bust and 9/11/01. It was followed by a massive R/E runup.

So, as you point out, it is the liquidity/credit situation you have to look to for a correlation, not the equities markets.

But, on the other hand, who knows? I think one needs to be careful in trying to map out the future by looking at past cycles. I'm reminded of a phenomenon some here may not know, the "Depression Baby."

The "Depression Baby" grew up during the Great Depression and never got over the trauma of having their standard of living wrenched out from under them while the were in their formative years, so that when they had only "water soup" for lunch, they knew that it was not a good thing, because a few years before Mommy was making them tomato soup or bean soup. My father was a classic case... he never stopped predicting a return of the dire situation he experienced as a preteen and teenager. Now he's 88. He'll die before his predictions come true.

Know what I mean?

front_porch - can't blame you for being an optimist, if i was a broker, maybe i'd be the same way. after all, you are very levered to real estate - both in your home and your career. but in the "downside scenario" you paint above, manhattan real estate falls a lot more than 10%, more like 25%-30%. Check out the last time we had a mini-bubble in nyc, manhattan prices fell 18% in NOMINAL terms on a normalized per sq ft basis in the early 90s. Assuming a 4-5% nyc inflation rate, it was close to 40% in real terms. And the preceding runup in the late 80s pales in comparison, by any metric you choose, to the one we've seen in the first half of this decade in manhattan.

If we've learned anything from the stagflation of the 70s, S&L crisis of the late 80s, asian crisis of late 90s, dot com bubble, and the current credit crisis it's this: when fundamentals get way out of whack, they come back with a vengeance. Fundamentals have gotten way out of whack here - and for years all the naysayers got smoked as they got even further out of whack. I'll be the first to admit not buying in 01, 02 etc was a mistake. And if you will live in your apartment for at least 5-7 years from now, maybe you don't care so much about the mark to market if you have a manageable mortgage. But I do care about the mark to market because I think its real money left on the table (as a seller).

I agree dmag and joedavis, we really haven't seen significant declines in price yet. And any declines in asking price are probably off of ridiculous leves to begin with. But remember a few things:
1) Foreign buyers. They have increasingly high financing costs if they can get mortgages at all. Dollar has been falling over the past few years which has probably more than offset and gains on real estate, particularly in the last couple of years - so anyone who bought is now down in their local currency. Finally, global equity/housing markets are in contraction. Its not like the EU is growing GDP at 5%. Eurozone grew 0.7% 1Q08. That's anemic- you think people come flocking to buy real estate in a foreign market when things are bad at home?
2) Local economy. Wall street layoffs just started happening in earnest (30% of demand). Some have referred to a 2-3x impact on local non-wall street jobs. But many of these people have saved up money in the bull run and even if not, they got severance which should be enough to weather the storm until at least year-end. But add up the tens of thousands of layoffs and potentially hundreds of thousands of layoffs in nyc overall and its hard to argue demand will not go down significantly. question is how soon.
3) financing is more difficult and more expensive.
4) what appears like flat/up pricing is somewhat misleading because of mix,etc. and most new construction was probably signed a ways back, when things were perceived to be great
5) worsening perception. as we've seen in every popped real estate bubble market (miami, LA, vegas, etc), when people realize prices are not going to be flat to slightly up, but instead are going down, sellers get out of denial and that's when you will really start to see big inventory growth and rapid price declines.
6) expiration of rebates will only exacerbate the all-in monthly cost and work to lower prices as buyers can't afford the same apartment without a rebate.

All 6 of these point to lower prices. it's not some far reaching, worst case scenario - and all 6 of these are CURRENTLY happening

lowerey, I fully understand that having a constant doom & gloom attitude over everything and anything doesn't accomplish much & is vastly counterproductive. I tend to be an optimist for the most part but not blindly so.

My preference is to understand the macro economic picture and make financial decisions based on as much factual data as I can get my hands on. Undertaking large financial commitments takes quite a bit of guts and the least we can do is to be as informed as much as possible before taking the leap. As one of the greatest investors (Warren Buffet) once said, "you make your profit the day you buy not the day you sell." I always found that quote to be an eye opener as most people do not think in those terms.

I am a tad concerned over the larger economic picture of our financial economy/institutions and their longer term impacts on the broader economy, which are not fully known at this time. I'm not into the predicting game but some clarity would go a long way to turning my view back into the more optimistic column.

serge, you're right - and this is what people are trying to say about don't pay these high prices - think first and make your profit at the front end; don't expect to make it all down the road - I think having a constant pollyana attitude and rose tinted glasses is just as bad as being all gloom & doom. One reason I could not jump into the market in 2002/2003 was that there was no time for reflection/due diligence. I had to say..... no, this is not the environment to be making such big decisions in. ;)

"Who said it hasn't come down yet? Apples to apples, I think you can already pick up a bunch of stuff in this town for 10% less than you could have in 2007."

I amnot sure about 10%, but I do think prices are down apples to apples. However, If your sitting on you computer all day long reading data from the NY Times, The Real Deal, Miller Samuel, etc. then you will not see any declines since the data shows that the market is skyrocketing with 21% annual appreciation.

"Foreigners -- who are already starting to drive demand less as they realize they face 10% interest rates"

Interest rates are 10%??? Did I miss something? Is the 10% interest rate from a bank or the loan shark in Jersey who breaks your legs when you default?

alpine, we are seeing Foreign Nationals who do not want to pay all cash have a very limited menu of jumbo mortgage options -- 10% was the rate I was quoted when I had lunch with a mortgage broker friend last week. He mentioned that only two banks were lending, Emigrant Savings, and I forget the other -- mortgage brokers feel free to chime in here . . .

ali r.
{downtown broker}

Special K-- your post is so spot on I cannot even retort. Seriously. I would say though that foreigners are not only buying as investment but also as a cheap NYC apartment so there's that.

front_porch - I'm curious.... can Foreign Nationsl finance purchases of American real estate abroad at their banks in other countries? If so, a Japanese investor could use Japanese mortgage money at low, low, low, low rates. I want one of those. Or is this not possible legally? thx

lowery -- obviously you haven't done business in Japan. That's a pretty laughable proposition for many many reasons.

I don't see why it wouldn't be possible for a foreign national to get a mortgage issued in their home country -- but I've never had a client in this position before.

Am now working with relos from Scandanavia who may try it, will come back on the boards and let you know if it worked.

ali r.
{downtown broker}

Middle Eastern buyers have the best deal. Buyers from Saudi Arabis or Kuwait don't have to pay any interest when they brrow money from a bank in their native country since it is against Islamic law to charge interest.

How many Middle Eastern buyers need a loan?

zizizi - I figured it's impossible, because otherwise everyone buying here would be looking for a Japanese mortgage - this idea was actually suggested to me by a Korean/American who claimed that Korean banks can lend mortgages to people buying property here, but couldn't actually cite any examples or say how to do it

This is not easily done, if done at all. Most lenders will not lend in one region against foreign assets. Lenders need to be close to and comfortable with the collateral and knowledgeable of the local property and bankruptcy laws. That's why you rarely see debt (corporate or personal) issued in one jurisdiction secured by property in another jurisdiction.

The cost of capital in any country reflects the default risk of the assets in that country (currency/inflation risk as well - cf interest rate parity). So you won't find lenders willing to offer a low cost of capital to an issuer secured by assets in another currency/jurisdiction.

Hi - Australians can't obtain a mortgage on NY re. The mainstream banks will lend the money but the security has to be against Australian security. Went through the exercise a few years ago. American finance institutions would lend the money but at a premium rate even for a gilt edged borrower. The Australian bank I tried even owned a US bank at the time but still no go.

thanks, all - I was pretty sure that was the answer, but it was gnawing at me, and so I had to ask ;)

lowery -- There may be more leeway in Korea, but I can easily imagine the following transaction, the only one really possible under the Japanese system:

Kumimoto: "Bank-Manager-Sensei, a mortgage is necessary for purchase of a small studio apartment in New York, please thank you very much"

Bank Manager: "Kumimoto-san, Contract needs to be made in Japanese according to Japanese law, signed with registered Hanko. Loan officer must visit apartment to measure tatami. Maybe instead you bring in cash hidden in futon to deposit with us?"

zizizi, tatami, I forgot about how they measure the size of an apartment in Japan based on the number of tatami mats one can fit into the apartment. Naji des 'ka!

I was told by a Birit that England allows it's citizens to purchase U.S. property into their (equivalent of a) 401(k) retirement plan. Not sure if they can mortgage but they get to buy with pre-tax pounds if this is in fact the case. Might just be Urban British Legend..

zizizi - thanks for the best laugh I've had in a long time! When the person told me the Korean bank idea I said to him, well, if that were possible don't you think all the American mortgagre brokers would be steering American borrowers to those Asian banks and brokering deals to stimulate sales? He said no, they don't know what they're doing. He is a licensed real estate broker, by the way. LOL

Take a look at the EURO...if this keeps up the Europeans are going to start heading for the fire-exit "all at the same time"..

Look at the Pound also!

When their own economy isn't doing well, they sure are not willing to take a double hit on currency depreciation and real estate depreciation

exactly bugel, the dollar going up will create a great selling opportunity for Europeans, suddenly they'll be able to get their money back on those overpriced condos, and they won't have to pay the ever increasing (in euro) cost of carry on them.

"zizizi - sure it is. No landlords in NY make any money they are all losing money. Also prices in NYC traditionally tend to go down year after year. I think that you are smart waiting to buy and renting. It is smart to spend $150K in rent over 3 years waiting for a $100K possible decrease in sales price."

If only sarcasm were truth...

Take a look at the EURO...if this keeps up the Europeans are going to start heading for the fire-exit "all at the same time"..

Good point, bugelrex!

It's about frickin' time! :) I suspect that if the Euro were to trade below the US 150 level for a few days, the flood of selling it will not be small. With the more expensive international air fares and a loss of buying power, I wonder what that will do to the NYC foreign tourist traffic? Not to mention that RE is becoming less of a bargain proposition.

I do think prices have come down but only on pure crap.
zizizi either your full of crap or you got one of those hard to find crystal balls.

Unfortunately, prices haven't come down on any decent apt with a good location and with nice views.Oh dam I forgot prices have already and will continue to come down after all stevjhx and EddieWilson say so. Now who can argue with these geniuses.

Two big things still yet to hit

1) Wall Street bonus numbers to come in
2) The median number to turn down

Once every single measure says things are down (even if just a bit) and there can't be any more denial, then I think the panic starts to set in among the masses.

I know folks want to believe that folks will see price declines as bargains, and there is a ton of money waiting to scoop it up, but once the masses start turning, it is hard to turn that around.

Even 5% decline will make more folks worry about the next 5%, and so on. Thats how it goes with markets.

EddieWilson,

In my personal experience, its been very interesting observing people I know deal with loosing money.

Some deal with it well, they knew the risks and willing to ride it any losses.

BUT many more FREAK out when even losing ANY amount, they don't seem to deal with any amount of loss (no matter how small) and panic and worry.. loosing sleep etc. They will do anything to stem to loss NOW

It would be interesting if there has been any studies on this behavior and what % of people act this way.

there are numerous studies on it.... the field of behavioral economics is almost focused on it.

There is a book called Your Money and Your Brain, which I haven't read yet, but I've seen some of the supporting studies on.

Some very interesting stuff on how folks react to losses, and the risk of loss. Short story is, they're pretty stupid.

the industry maxim about buyer psychology is this:

"Real Estate is this only thing that people don't want to buy when it's on sale."

ali r.
{downtown broker}

Eddie, the real estate market is 90% psychological. Sure, housing is a physical good paid for in currency but the lack of transparency, the lack of any objective standard to value property, the inability to hedge your purchase, or non-purchase, the addition of new, unexpected housing units, etc.., etc... There is no way to quantitatively analyze housing. Urbandigs and John Miller and Case/Shiller all try but there are too many hidden variables and they are changing too frequently. You might be able to pick up some interesting factoids from Case/Shiller or glean some insight on long-run trends but day to day, year to year, all you have is psychology. Which is why people like to post on blogs. They think their reasoning can affect the market because that's all the market is, the sum of people's reasonings. Unfortunately, it is hard for one person to influence many. Without a really big stick.

Note that all other traded commodities are held to an objective standard: wheat, brent crude, bonds, S&P 500. What's the objective standard for housing? That's why housing futures are a bust. That's why there are no options on housing. That's why Wall Street needed to get into the mortgage markets to make money on housing.

"I do think prices have come down but only on pure crap."

When a market declines, the first thing that goes down in value is the garbage. Then the mediocre stuff. And then the nice stuff.

"When a market declines, the first thing that goes down in value is the garbage. Then the mediocre stuff. And then the nice stuff."

Yup that sure makes a lot of sense to me. Unfortunately most of the crap in Manhattan that is available today was also available at negotiable prices in 2003, 2004,2005,2006 and 2007.

Juiceman, I can afford, I just don't want to pay that much money for the apartment that it buys. I am a cash buyer and would rather have the $1 million in the bank than the apartment that it buys.

80sMan, I actually agree with you. Psychology plays a HUGE part. Which is why there is so much intertia in real estate prices. But it works both ways. So, when that tide does turn (and we're getting awful close) and the mood changes - it might take just a couple more stats to do that - we could see things move downward awfully fast.

One of the interesting things about residential real estate prices is the degree of "serial correlation" of monthly, quarterly, and annual returns. Non-statistically speaking, unlike stocks, residential real estate "trends." S&P Case-Shiller 10-City Average bottomed out in '92 and then flatlined through '97. It "gradually" accelerated and then consistently boomed before "gradually" topping out in '06. Thereafter, the declines "gradually" picked up steam.

I think Manhattan is just running about two years behind much of the rest of the country. It has just started to "gradually" decline but that decline will slowly pick-up over the next couple of years. Manhattan has historically been a "high beta" (exagerates the moves of national residential real estate) market so the moves will likely be increasingly dramatic.

Manhattan booms and busts have historically played out over many, many years. The five most dangerous words in the investment world remain: "Things are different this time."

As Winston Churchill said, "The farther back you can look, the farther forward you are likely to see."

Things are different this time.

What can I say? I love danger.

Just curious, what is your definition of "crap." Everyone has a different definition of the word. What is crap to one person is a palace to another. Right now, prices are declining for 1 bedroom apartments since there is a glut of them. And nice 1 bedroom apartments too. Check out Trump Place on Riverside Blvd.... tons of inventory and even a few foreclosures.

Well said, Topper. RE has never been much of an efficient market, and thats what makes for such high highs and low lows. And for even bigger potential mistakes from the folks who don't know history...

EddieWilson -- I called Dow at 11,000. I called a rally when it reached that level seeing the fed's tortuous intervention, the Euro started going down the day after I predicted it's on its way back to 1.25-1.35. All documented on this board. If I pay less in rent than I would pay in taxes condo fees for the same size/location condo, then I'm not spending any money on rent, am I?

I suggest you stop getting your education from pulp economic books.

zizizi - what's your prediction on NYC R/E?

Will, I may disagree with you on NYC RE, but you can be really funny (that's sincere). Your joke about your hypertension meds a few months back is a StreetEasy classic.

alpine292, amen. My market segment has already come down, with no signs that it is changing course and every indication it will continue to decline.

> I suggest you stop getting your education from pulp economic books.

Thats what you're calling Ivy League economics textbooks?
Interesting....

whats an Ivy League economic textbook? Do they make special textbooks only for the Ivy League?

I sold my studio because everyone said prices are falling and I better put it on the market. Well I did and it sold quickly and now I cannot find a one bedroom because no one is willing to reduce their price so I'm going to have to move into a one bedroom rental, not what I wanted. Everyone talks about prices falling well they are not!!!

"I sold my studio because everyone said prices are falling"

julia, looks like you are a victim of the horrible and inaccurate information provided on this board by people like steve, dco, and EddieWilson. Maybe they will realize that their constant 40% correction bullshit has an impact on people and the irresponsibility of their behavior.

> whats an Ivy League economic textbook? Do they make special textbooks only for the Ivy League?

Yup, they actually do....

And, Juiceman, you are an idiot. I never said anything like 40%...
Check your facts.

I feel so bad for that poor woman julia, but when you take advice from fools . . .

The pendulum always swings too far. Both ways.

As Howard Marks has said, "There's always a period - sometimes a long one - when those who follow the crowd look smart and the abstainers look dumb."

What could make things change? First, the growing supply of new construction. Seen any cranes lately? At current prices it remains very attractive to continue to put up new buildings. And Manhattan appears to be one of the last places in America where it is still attractive to build - so build they do. For now. But buyers are increasingly on strike.

In addition, international buyers may be starting to back away from Manhattan real estate. The British pound peaked out at almost $2.12 late last year but closed at $1.92 last week. The Euro peaked out recently at $1.60 before backing down to $1.50 last week. Wouldn't be surprised to see further declines in European currencies as they are just way over what's called their Purchasing Power Parities (PPP). In a somewhat whimsical - but serious - look at PPPs around the world, The Economist compiles the prices of Big Macs around the world based upon prevailing exchange rates. While the average price of a U.S. Big Mac was $3.57, the average price in the Euro area was $5.34 suggesting a very overvalued currency. (BTW, the average price in Switzerland was $6.36!)

In addition, the Dow Jones Euro Stoxx 50 index is down 22.5% while the UK FTSE is down 15.0% year-to-date in local currency.

International buying power may be waning. "Irrational exuberance" may be fading - worldwide.

> I feel so bad for that poor woman julia, but when you take advice from fools . . .

...you apparently buy in Long Island City.

OUCH, you really walked in to that one...

EW, you are calling me an idiot? You're the guy that posted about the Quinnipiac University Polling Institute results that will impart taxes on the rich. After that post, you have lifetime streeteasy jackass status. Nothing can help you now. Everytime you post a donkey flashes next to your name. You can't see it, but all of us can.

> EW, you are calling me an idiot?

Yes, you are an idiot. You are still making things up.
You've now lied about me on two different threads.

Egotism is the anesthetic that dulls the pain of stupidity.

"julia, looks like you are a victim of the horrible and inaccurate information provided on this board by people like steve, dco, and EddieWilson. Maybe they will realize that their constant 40% correction bullshit has an impact on people and the irresponsibility of their behavior. "

Why is it the biggest complainers are generally the biggest hypocrites?

This guy can't get one fact straight...

> Egotism is the anesthetic that dulls the pain of stupidity.

You can say that again.

Your previous post was well said. The Howard Marks quote is right on...

There were lots of "geniuses" in 1999. I remember reading an interview with the guitarist from like Big Bad Voodoo Daddy or something, and he was giving investment advice. All tech stocks, of course...

Thank you, EddieWilson.

Guess it comes from what's becoming criticized as an "Ivory League" education.

"Contributing to...euphoria are two further factors little noted in our time or in past times. The first is the extreme brevity of the financial memory....There can be few fields of human endeavor in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present."

John Kenneth Galbraith

> Guess it comes from what's becoming criticized as an "Ivory League" education.

Absolutely... with the special textbooks and everything...
;-)

I don't like to burst anyone's ego but when I said "everyone" I meant my friends, family, etc.

"Seen any cranes lately?"

Yes, I have. Especially when they come crashing down and crush everyone and everything in their path.

Yes, I agree. Julia is a victim of the miserable bears on the Stree Easy forum. Poor Julia for making the biggest financial decision of her life based on what anonymous people online told her.

Hey Julia, I don't have any specifics, but I think some of the new developments may have "rent with option to buy" situations available. Usually they do it if they want to get to full occupancy more quickly. Again, no specifics or terms, but I have heard people talk about it.

Also, given the reported glut of one bedrooms, things will probably soften up there before the end of the year. Balancing that out, however, will be the end of the 729,000 conventional loan. So don't expect much of a drop, but I would imagine a small one could come, but probably go pretty quickly as inventory gets run down again.

I tend to be a centrist bull, but is the attached blog entry somewhat counterintuitive? It says a stronger dollar will be good for Manhattan real estate, if I am reading correctly.

http://afinecompany.blogspot.com/2008/08/will-dollar-rally-boost-manhattan-real.html

How can a stronger dollar be good for Manhattan RE? Just last year, all the realtors were saying that a WEAK dollar was good for Manhattan RE!!!

2007: A weak dollar will strengthen the housing market

2008: A strong dollar will strengthen the housing market

Tenemental - Thanks for the compliment. I am really just in it for the laughs. StreetEasy's a lot funnier than Daily Kos.

alpine, thanks for agreeing that people shouldn't listen to the miserable streeteasy bears.

Wait a minute, if anyone's responsible for their destructive influence, it's the brokers and hyper-bulls who have been chanting "buy now or be priced out forever" until recently. They might be the ones who encouraged Julia to buy a studio apartment that she never really wanted in the first place. (she's said as much, here)

And how can anyone expect to sell without taking a big hit in a reasonably stable market (Julia only purchased the unit recently), and then turn around and buy right away in a dramatically down market? These things don't happen in a few months. Of course there will be a rental in between. Someone, I forget who, recently thanked Steve for influencing him to sell. He feels he's now sitting on a pile cash from a good sale sale price that will go a lot further in the near future.

But that's not really the point. Julia, no offense and nothing personal. There has always been a ton of hyper-bullish posting here. Obviously there's less now, and there's a ton of hyper-bearish posting. There's also plenty of more moderate stuff in between. There's sizable amount of information here all over the spectrum. Everyone's responsible for his/her own decision.

hey, tenemental, how's everything?
you were combing the 1-brm market recently, I think?
anything interesting going on?

I went for a nice walk through Central and West Harlem yesterday, not to shop, but for the exercise and fresh air, and I must say.... the entire Harlem swath of Manhattan already looks and feels drastically different from even, say, 5 years ago. The entire skyline has changed. People were eating designer salads in sidewalk seating at an Italianish cafe/restaurant on Lenox or Malcom X Blvd, 110th Street looked just shy of swank, the greenery was beautiful, and I was struck with the beautiful layout of the boulevards and the historic architecture, row houses on side streets, large apartment houses on the avenues. It was much nicer than the West 70s and 80s a couple of decades ago.

Looking at the big picture from a viewpoint on Morningside Drive across M.Park, I kind of forgot about markets going down, when or by how much.

Hey, lowery. I thought of you a couple times recently. Once was while biking around Roosevelt Island. I came across the dilapidated smallpox hospital. Not exactly an unknown find, but what a beauty. Too bad that fence wraps all around it. The other time was in the wee hours (3-4 am?) recently. I got on a B train instead of the F and wound up at the Grand St stop on Forsyth St. The smell was awful, but it was urban decay paradise. DeNiro could have come around the corner driving a checkered cab and sporting a mohawk and it would have fit right in. Someone had told me about shady ongoings in Sarah D. Roosevelt Park recently, so I wondered if it really might be a bit dangerous (no, folks, that wouldn’t be a good thing). Then three SATC girls walked by and broke the spell. When I got to Delancey there was a new tower under construction and it was all over, but for a brief moment it was time-travel.

Funny, I had the polar opposite Harlem experience recently. I was with friends on a bike ride to City Island last weekend. We stayed on the west side of Manhattan all the way up, but tried a different bridge on the way back and wound up in Central Harlem. Not knowing our way around too well, we wound up walking our bikes through the very large courtyard/playground of some huge projects on a Saturday night. It would have been perfect for an episode of my Urban X-Games show that JuiceMan is sponsoring. One friend couldn't stop commenting on how the projects seemed to be everywhere as we were riding. Then we went through East Harlem, and it felt waaaay sketchy. Maybe not as bad as I remember it in the early 90s, but bad. I will say we got to enjoy some evangelical singing when we took refuge from a downpour under the scaffolding of a building next to the church, and we made our way to a path along the Harlem River that was absolutely gorgeous.

I also enjoyed a long walk through Central Park yesterday. Never saw Cleopatra's obelisk or Pinetun before. Beautiful stuff.

I'm keeping an eye on 1brs in my neighborhoods, comfortably in wait-and-see mode. Things continue to move in my direction, and I enjoy the money I save in my rental, so I'm feeling no pressure.

well, I set out to walk to City Island a few weekends ago, but when I got to Pelham Bay Park, I wasn't sure which pathway to walk on to get to the causeway (no maps - GRRR) and ended up in the Throg's Neck area instead.

ah, yes..... those wonderful projects.... they look better during the day, and on a nice weekend afternoon when you're not walking through the middles of them, but up and down the big avenues, it changes in perspective

hurry up and bike around Bruckner Avenue in the Bronx, around the Third Avenue Bridge, and explore the depths of Canal Place, before this last vestige of ugliness turns completely arts-fartsy! I laugh when I think of the famous scene from "Bonfire of the Vanities" taking place probably right the Bruckner Grill is, and that great flower/plant store.

Thanks for the tip. Sorry I can't suggest a good route to CI. I actually have a terrible sense of direction, in case my tendency to wind up in the projects unexpectedly didn't make that obvious. We had a friend who went to Fordham with us on that ride and he knew a lot of the area. If you ride, the biking paths in the Bronx are wonderfully unpolished. One of my group called it "urban mountain biking." The ride around Roosevelt Island, BTW, mostly blows. Almost all slow, shared paths.

As soon as JuiceMan cuts the check for my helmet-mounted HDDV cam I'm off to Canal Place to tape the first episode. Any projects in the area you can recommend?

I really think a reality show would kick ass. To make it more interesting maybe we can tape 20 dollar bills to your body and force a flat tire where you need to knock on doors and ask for help.

Well, you could do a tour of all the car-wash/flat-tire-change joints in the area around E.138th St. Be sure to knock on the door at the Clock Tower artist lofts to ask for help (or ring people's bells), and then cruise up and down Bruckner Avenue with those $20 bill taped to your body, and stop by the projects on the east side of where Third and Morris Avenues merge. Work your way back west to Rider Avenue and Canal Place and ride up and down those lovely memory lanes, almost as ugly as Hunters Point/29th Street in Long Island City (but not quite), and then back east a bit and up to St. Mary's Park and see if you can't get yourself invited to a neighborhood bar-b-q. If you prefer cucumber and yogurt soup and cappuccino, just stop into the Bruckner Grill (or Cafe?) right under both the Third Ave. Bridge and Major Deegan overpasses (Bruckner Blvd. & Third Ave), which I believe is the precise locale of the infamous hit and run incident in Tom Wolfe's screed. Don't forget to pick up some pansies at the flower store on the other side of the Third Avenue Bridge overpass. If that's too boring you, I can direct you to where you can buy live poultry (or rabbits) nearby, perhaps a "restaurant" where they roast stuff right on the sidewalk, and some of the most run down houses I've seen in NYC - Morris Avenue across the street from some more nice projects. If you're a fan of '60s urban renewal architecture, be sure to get a load of the Daniel Webster Houses further up the center of the Bronx, for an exercise in monumentalism. If you're worried about safety, just do what I always do, smile and say hello to everybody.

Hmmm, I think letting the forces of nature play out is actually more interesting. $20 bills would be like hanging raw meat off the rabbit in a National Geographic show on cougars. We did iPhone our way out of a flat recently in Jamaica Bay, somewhere between Canarsie and Mill Basin. Needed a tube; turned out there was a bike shop about 10 blocks away. Maybe we can get Apple to pay for some product placements?

"I can direct you to where you can buy live poultry (or rabbits) nearby, perhaps a "restaurant" where they roast stuff right on the sidewalk"

This would be better than Anothony Bourdain's No Reservations. Wouldn't even need to leave the city.

Consider this: there was a townhouse in Crown Heights Brooklyn where the seller just lowered his price by $400k in one move.

This house was listed on streeteasy about a week ago on the "most recent price changes" tab.

The original ask, which I think was in June, was $1.3mm, then he dropped it to $900k.

Now that's a big price move, esp all at once. (he didn't incrementally lower it by 27 percent, he did it all at once.)

It was a pretty house, a two family I think, not far from Eastern Pkway (south of Eastern). It was on one of those edgy streets in Crown Heights that seem sorta okay by day and pretty scary by night.

So prices are definitely dropping in edgey neighborhoods. I think things are coming down in Clinton Hill, too, altho it's going to drop less there because parts of Clinton Hill have been mixed for some time now.

It used to be that you couldn't find a standalone house for less than $600k in any halfway habitable neighborhood of the city, that had subway service. That was the bottom -- $600. But now you can see all sorts of standalone houses in Blyn and Qns being offered on Streeteasy for $500k or even $450k.

I don't watch the prices very carefully in areas that I'll never be able to afford. But I do watch them in areas where I might want to buy, and for property types that I might want to buy, and they have unquestionably come down in many neighborhoods.

Why does the poster think they haven't? Maybe he is looking at more high end stuff than me. But down here in middle-class land, New York pricesare falling.