Bidding wars in the suburbs (Part 2)

I do like the idea of vibrancy spreading to new parts of the country, and I can attest to being pleasantly surprised by Columbus. We bought in the Short North and love all the small indepdendent businesses, art galleries, bistros with a nice big park to boot.

Back country Greenwich, Vail/Beav, and Columbus all offer the opportunity to acquire a relatively large plot of land, or easy access to large open spaces, for under the cost of a 2BR condo on NYC. I see this as increasingly attractive especially if covid flares up again.

The losers are overseas locations ranging from the Caribbean to Paris to Tanzania. Even if overseas travel becomes possible again, the risks will be seen as much higher -- the risk of cancellation, the risk of getting stuck, the risk of getting sick in a place without familiar healthcare. (NYC will be a loser of overseas business but a winner for US business.) Thus the winners will be resort towns in the US where social distancing is somewhat possible, from Florida to Maine to the Rockies and Alaska.

The price gap between NYC and highly desirable areas in the rest of the country will thus narrow.

I think a lot of your assumptions depend on where we are a year from now with vaccines / therapeutics and the virus in general. If we do get a handle on this,I think all things will come back to prepandemic levels in due course and we may see just how short people's memories are.

Hopefully the moves people make based on pandemic 'think' hold up post pandemic.

Keith
TBG

If people actually move out of NYC and relocate to some other city, buy a house, etc do you think they will come back in a year if there's a vaccine?

This is more than temporary. The trends that have been extensively discussed on this forum started before covid and will continue after. Covid is accelerating and giving more reason. The biggest change in the past two years aside from covid is that we finally have a good videoconference software in Zoom and Teams. Until quite recently, teleconference was the norm, and it is far inferior.

The thought was will they be emotionally satisfied with a decision they potentially made in haste.

https://nypost.com/2020/08/05/cuomo-wealthy-residents-should-leave-hamptons-return-to-nyc

Re: international destinations... I spent about ten minutes in late February contemplating a place in Costa Rica. Had the developer been flexible on price, I might have bit, but they were standing firm. Wonder how they're feeling these days.

Very easy to buy in Costa Rica very difficult to sell....

https://therealdeal.com/2020/08/06/manhattans-cold-suburbs-and-brooklyn-are-hot-july-contracts/

“The pricing is so much higher in the city that its equivalent tends to be the upper ends of the suburban market, and they seem to be benefiting,” Miller said.

--

The last available detached single family under $2.5M in the community where I am and all of the bordering communities is now in contract. At the start of the summer, there were about a dozen. Within the past week, they've all gone. Even a tear-down on a tiny plot of land next to a highway that sat on the market for years - which I thought was overpriced by $1M - is in contract. Inventory in the $2.5M - $5M range is quite sparse too.

There's a property that closed in January for $1.4M. Around here that's not enough time to get any sort of renovation done due to the long planning approval processes. It's now listed for double, and the listing has 5000 views and 200 saves on Zillow.

Where the eff is “around here?!” Now I am guessing Park City. Price points and seasonality suggest to me ski town, but last I checked (long ago), not many had infrastructure (education and airport) to attract families other than Park City.

Re Costa Rica, did anyone else see that horrific Dateline ID from however many years ago about the rich couple that built their dream home in Costa Rica and then murdered on their utopian compound? Or maybe just one of them was and the other lived forever under a cloud of suspicion? I can’t remember, but I do recall thinking as I was watching it, “no thank you” to the idea of ever retreating to some paradise outside of the United States.

Curiosity got the best of me and I just googled it. Ann Bender forever under suspicion of killing husband John Bender on their Costa Rican compound.

I owned a few businesses in the DR but never considered relocating there.

Leave it to a real estate seller to explain why the statistics are bunk. Until brokers explain that price needs to be 10-20% down from earlier this year, properties aren't going to transact.

https://www.foxbusiness.com/real-estate/nyc-relocations-rise-substantial-rate

Another good indicator of where people are going is to look at one-way UHaul prices. For a 10' truck next week from Austin to NYC the price is $684. For NYC to Austin, the same truck is $2430.

https://www.ny1.com/nyc/all-boroughs/news/2020/08/07/exclusive--homeless-complaints-skyrocket-as-encampment-clean-ups-fall?cid=facebook_Spectrum_News_NY1

https://nypost.com/2020/08/08/nyc-moms-fleeing-upper-west-side-amid-crime-and-chaos/

A friend just moved from the UWS to Trump UN on the theory that all the diplomats in the area mean that the streets are swept better there.

The UWS really does have it worst. Blas has to suck up to Upper East Siders -- he recently said he talks to them all day long -- but the mass affluent of the UWS can f-off.

Why exactly does DeBlasio have to suck up to Upper East Siders?
He punched them hard a few years ago by moving the July 4th fireworks to the West Side.

George,
I expected a comment that both UWSers and Villagers want to be Liberals until it comes to dealing with the results on their own doorsteps.

Living in any building with Trump's name on it could get a little too interesting in a few months.

My bad, it's Cuomo who is in hock to the UES and talks to them all day long.

https://gothamist.com/news/after-talking-all-day-long-rich-new-yorkers-hamptons-cuomo-says-he-cant-raise-their-taxes

I am sad that I don't have $4mm to buy that artist's Astor Court apartment.

“The idea that they may shut down again really closes the door to rushing back to the city.”

https://therealdeal.com/2020/08/07/schools-back-on-will-the-nyc-resi-market-follow-suit/

There will be a real competition between NY schools and schools in suburbs and other parts of the country to see who reopens best. If NY goes back successfully, and I hope they do, and other places have a fiasco, it will encourage a return. But right now, a draw goes to the suburbs/rural/resort areas, where at least the kids have green space, yards, etc., and mom & dad can have their home office.

George, did you buy in long island or PA? I think the NYC schools are too crowded to maintain any social distancing.

https://www.nytimes.com/2020/08/11/nyregion/nyc-economy-chain-stores.html

From the article:

“There’s no reason to do business in New York. I can do the same volume in Florida in the same square feet as I would have in New York, with my expenses being much less. The idea was that branding and locations were important, but the expense of being in this city has overtaken the marketing group that says you have to be there.”

Even as the city has contained the virus and slowly reopens, there are ominous signs that some national brands are starting to abandon New York. The city is home to many flagship stores, chains and high-profile restaurants that tolerated astronomical rents and other costs because of New York’s global cachet and the reliable onslaught of tourists and commuters.

*****

The simple fact is that the rent is too damn high. If the rent is too high, the price of the asset is too high too. We should expect a period of deflation in NYC real asset prices that will only turn around when and if people return largely as they were, which I do think will take years. This isn't like September 12th.

Meanwhile, out in Nowhere USA, I went with 4 buddies for a pizza at 5.30 on Sunday and couldn't get into any restaurant - they were all solidly booked. Finally we got into a Mexican joint but were told we could only have the table for an hour. Business is alive and well. It's great that NYC has controlled the virus, but at what cost?

George, While commercial retail rents are going to go down due to a lack of tourists and have been going down pre-corona due to Amazon effect, what do you make of very few corona cases in NYC despite high level of testing and significant experience built up in NYC hospitals in treating serious cases of corona if there is spike? Would you be in FL or NYC?
https://www1.nyc.gov/site/doh/covid/covid-19-data.page

300: NYC's good numbers on COVID-19 might be due in part to some form of (hard earned) herd immunity. There's been emerging research that you can reach herd immunity with COVID-19 at much lower thresholds than the 60-70% number that was commonly bandied about.

And FL is now doing fine - they had a mini spike that's on the way down. I was tracking them fairly intensively based on all the media coverage, and all their key metrics have improved dramatically. They never ran out of hospital capacity nor saw the projected massive number of deaths. Now that things are getting better, it's funny that FL has completely disappeared from the headlines. And the entire state still has ~1/3 of the deaths of NYC alone.

To 300's question, considering the totality of the period March to August, I'd rather have been in Fla., for the reasons Thoth outlines. NYC got hit far harder than anywhere else and needed hospital ships, the Javits center, and refrigerated trucks for corpses. Few other places in the US have had the same problems. NYC has also stayed shut longer than other places, at a grave economic cost to its small businesses -- and apparently its large businesses too.

George, why are you so coy about where Nowhere USA is located, at least in broad terms?

In the end, NYC didn't need the hospital ship (singular) or the Javits Center, but those were put into play because we were dealing (front end/ front line) with a huge unknown and had no idea how to treat. (Even down to not understanding the rate of oxygen inflow of the ventilators.) Florida and Texas have had the advantage of getting to use all that NYC and frontline NJ hospitals learned on the fly. If only we had gotten hit later, had the advantage of other's hard-learned protocols--after others had learned the ropes and borne the burden of the initial influx--we would be doing as well, if not better.

Perhaps George doesn’t want people weighing in on the wisdom/folly of buying a fairly distant second home /rental property that another prospective purchaser considered suitable to be torn down

https://www.grubstreet.com/2020/08/nyc-restaurant-industry-complete-collapse.html

I agree with RE10023. NYC got hit first and the virus was circulating for several weeks before we knew what was happening. In addition, NY/NJ had issues with nursing homes due to inexperience in dealing with it. Fortunately, doctors/nursing homes in other states have learnt from what we painfully learnt in NY/NJ.

300 & RE: That's the common narrative, but it doesn't quite hold up when you look at the data.

1. DeSantis shut down nursing homes in March while Cuomo was forcing nursing homes to take back COVID19 positive patients. Both men had access to all the same research at the same point in time, and made diametrically opposed decisions. If anything, NY learned from other states what not to do. At least 20% of all NY deaths are from nursing homes, but no one even knows what the true number is because NY has strangely decided to report nursing homes deaths differently than almost every other state in the country:
https://apnews.com/212ccd87924b6906053703a00514647f

2. You have to be a little careful comparing across countries (and even states, really) due to potential data issues, but other countries were hit harder even earlier (remember Italy and South Korea?), but still had much better death rates / MM than NY and NJ. If NY and NJ were their own countries, they would be the worst in the world by far. They are currently at 1,689/MM and 1,798/MM, respectively. The worst country right now is Belgium at 852/MM (ignoring San Marino and their 34k people as a country - apologies to any Sammarinese in the forum). Italy is at 583/MM. FL is at 398/MM. The US as a whole is at 506/MM. South Korea is somehow at 6/MM!

thoth, since you are more informed than my Facebook friends, I'm curious; what do you think about the idea of opening public schools in NYC for kids to go in-building two days a week?

thoth, all interesting points. I would say that Florida did not have the degree of influx and spread of the disease as early as we did. They also don't have mass transit, so while they might have experienced some cases, they did not have the flood we had with super spreaders/ing. I think if we were hit hard now it would be a very different outcome. (Hindsight is always 20/20!)

That said, CA certainly was an entry point, but people were willing to shut down and weren't as dependent on mass transit.

Now, however, both FL and CA have surpassed our numbers. Yes, their death rates are far lower, but again, I contend that we all have learned a great deal about how to mitigate and manage the symptoms for better outcomes.

All that said, I don't understand why we aren't taking the lessons learned in FL and TX regarding opening up (I'm on the fence re: what is going on in CA) and open up more.

Additionally, I am also curious re: your thoughts on opening public schools in NYC.

The question in my mind isn't whether buying a rehab property it is a bad investment per se. Plenty of real estate professionals buy "value add" properties every day. And indeed you can buy almost any property in a rapidly-rising market and make money.

You could buy the best property in a down market and you'll probably lose money, which is my view of NYC for as long as Blas is mayor. If you disagree, plonk down a few million to buy a place in his city instead of renting and being able to vote with your feet.

A virus is usually more lethal at its early stage, that might explain why NY/NJ was hit hard.

Thoth,

Good points on death rate. Mistakes were clearly made in handling of nursing home in NY/NJ (people want to politicize it but I think we had a very difficult situation at our hands and mistakes are inevitable). Vs Italy, I think NY/NJ were worse as the lock downs here were not as strict - partly as Americans do not want to follow instructions which impinge on their freedom even if it is for a good cause. I am no medical expert and wait for
eventual publication of medical research on the reasons of high death rate in NY/NJ in lower income and specific religious communities. From what I have seen in news so far, public transit does not seem to be the main reason for spread. Otherwise there wouldn't be big differences in zip code by zip code largely based on income.

Just heard that my neighbor will be sending his kids to school in the district of their summer place on Long Island. One step closer to making my combination dreams come true!

Sorry for further thread drift, but I read an interesting scientific article that like many viruses, COVID19 is evolving as it passes through human populations to become less lethal. The reason is that viruses that don't kill their hosts are more likely to be transmitted widely. The specific change is enrichment of the nucleotide uracil at the expense of cytosine, which has been occurring progressively from the initial viral sequence determined in Wuhan vs more recent isolates. So mistakes were made in NY for sure, but the virus currently spreading through the South and West is also probably less virulent.

Thanks doc. Good to hear that virus may be getting less deadly.

I know there's been a lot of anecdotal reports regarding the flood of buyers into the suburbs. However once things settle down, I wonder what the actual numbers will look like? This report from Zillow May provide some insight into that. However I have not actually read the report of course I realize these things can sometimes be skewed one way or the other;

Forbes: A New Housing Market Report Disputes Trendy Pandemic Narratives.
https://www.forbes.com/sites/dimawilliams/2020/08/14/a-new-housing-market-report-disputes-trendy-pandemic-narratives/

The problem with that Zillow report is that it doesn't consider Manhattan and SF separately. Those two markets are the worst in the country.

https://www.wsj.com/articles/suburban-home-prices-are-rising-but-so-are-most-urban-home-prices-11597331394

George, It does not seems that the public school situation in CT and NJ is any better than NYC. CT and NJ also seem to be going for hybrid model of in person and remote teaching. And many parents actually prefer that their kids do not attend school in person - I am not one of them.

I also believe I read something earlier this morning, noting that sales in Colorado were up 21% year-over-year. That said sales have been strong in Colorado for a number of years as people flee California. Though Colorado seems to be a tale of two cities when it comes to their economy.

Regarding NY performance: people are bringing up many factors that try to explain why it was hit harder than other areas to explain its performance. These may all be true, but all of these factors also existed in other geos as well (being hit early, dependence on public transportation, population density, the lack of lockdowns, etc.). I would suggest reviewing the actual data and then using that to determine the level of success, not starting with a POV that NY was successful, then trying to explain why they have the 2nd worst death rate in the world.

To the question about schools: the answer is "it depends". First, the strange thing about the reopening of schools is that it's presented as an "all or nothing" decision. This makes no sense to me. You don't have to open or close every school in the US or NY at once. Why not set some clear guidelines that allow different regions to adjust their choices based on what the conditions are for each area? Second, keeping schools closed is not costless. There is a wealth of evidence that remote learning simply doesn't work for younger children, and the negative impacts are worse for children that come from disadvantaged backgrounds. The impact of lost educational attainment can be just as lifelong and damaging as any disease. Then you add the lack of social interaction which can lead to mental health problems for students and the burden on working parents, particularly those that can't afford additional childcare. Based on the above, it should be clear that this isn't a simple or straightforward decision. I would be cautious when people claim to have a simple answer, and I would very much ask them to "show their work".

With that said, the research to date strongly suggests the following:

1. Unlike many other diseases, children seem to be more resistant to infection by COVID-19
2. If they are infected, they tend to have milder symptoms
3. They don't seem particularly contagious if they do catch the disease (with the possible exception of kids 10-19 years old, based on some new data from South Korea)

Based on this, and presuming the metrics in the community are promising (like what we have in NYC now):
I'd fully open up schools from PK-5th. Because of the latest SK data, I'd start 6th grade and up on remote, but plan for a transition to in-person in the Spring semester if all goes well in the Fall with the PK-4th group and NYC conditions continue to look good. I'd also extend the school year for everyone by another month to help make up for the lack of learning from the last school year, but good luck getting the teachers union to agree to that.

One exception to what I wrote above: I would not allow any child or teacher with known high risk factors for COVID (certain underlying medical conditions and/or advanced age) or that have high risk family members to attend school in-person. The data is clear that the risk of severe illness from COVID increases fairly dramatically.

https://gothamist.com/news/49-people-shot-72-hours-wave-gun-violence-continues-nyc

Here's the case for staying in the city, from a radical leftist who basically argues that suburbs are bad because they once engaged in redlining (a practice that originated in cities) and are bad for the environment (oh well).

https://www.nytimes.com/2020/08/17/opinion/coronavirus-cities-suburbs.html

thoth -- I've seen some NYC suburbs doing exactly what you suggest: opening up K-5 in person and starting 6+ remote. I'm not an educator, just a parent, but that makes a ton of sense to me. The push back I've received is that there aren't enough K-5 teachers available when you break up classrooms into smaller sizes. My response is to get creative; there are therapists and counselors and librarians and art teachers in these schools, and any of them would be a far better educator than a laptop.

I'm incredibly annoyed at the e-mail I got from the PTA at my son's school over the weekend, which asked everybody to switch to remote learning. From the e-mail: "The fact is, there’s a lot of confusing and contradictory information out there, and a lot of coded language from the DOE. They’re not making it easy."

The pissing matches are getting really old. I've historically been a firm believer in public schools but it's becoming clear that absolutely nobody really cares about educating these kids. Compare this to my daughter's nursery school, which obviously has a lot fewer students but runs on a shoestring budget and been gaming out re-opening strategies since March.

There is a Covid thread:

https://streeteasy.com/talk/discussion/45734-covid-19

This is as negative a piece as I've seen. From the owner of a comedy club, though it's not as funny as you'd expect.

NYC IS DEAD FOREVER. HERE'S WHY
https://www.linkedin.com/pulse/nyc-dead-forever-heres-why-james-altucher

I had already seen that one. I'd certainly like evidence to back up that claim of sales prices being down by 30%-50%, because I would like a bigger apartment.

I agree Ali, my dreams of owning a brownstone in Brooklyn are not any closer today than they were 10 months ago....

Things are absolutely terrible right now, not just in New York but throughout the world. Having the vision to understand where we'll be in a year or two, now that's a gift. My two cents, probably worth as little as the comedy club owners opinion, we will be in much better shape. This is not the end of New York, or San Francisco or Hong Kong or Singapore or Berlin or London...doing my best not to make long-term plans based on a short-term catastrophic event.

Keith Burkhardt
TBG

Apparently Amazon still likes New York:

https://www.wsj.com/articles/amazon-bets-on-office-based-work-with-expansion-in-major-cities-11597741203?mod=hp_lead_pos2

I really wish all those who dream of suburban paradise would just go already and leave NY to those who want to invest in it. My money remains on NY.

On separate but related note, this Trump/Carson piece from WSJ makes it seem like Dems want to outlaw single family homes; not even close to an honest interpretation of the higher density housing initiatives, but I can't fault them for their tactics; their followers are quite susceptible to shiny talk tracks. https://www.wsj.com/articles/well-protect-americas-suburbs-11597608133?mod=searchresults&page=1&pos=1

That Trump/Carson piece was ridiculous even by the standards of Trump and Carson. The suburbs have always been about racial exclusion, and the enormous subsidies the US gives to housing were designed to benefit white people. This is why the US should get out of the business of guaranteeing Fan/Fred and eliminate the mortgage tax deduction.

An awful lot of the things I thought were "great" in NYC over the last 60 years were born of abandoned or at least cheap Real Estate. Now a lot of things which I think are terrible (like $20 Instagramable milkshakes largely consumed by people I find loathsome) are born of overpriced Real Estate.

A Real Estate crash won't kill NYC, it will just drive people like that writer back to where they belong (i.e. out of my city). As much as I am against unmasked, non-socially distanced raves during a pandemic, you can see where they are happening: in vacant warehouses in Sunset Park. https://nypost.com/2020/08/16/two-raves-busted-in-sunset-park-where-de-blasio-warned-of-covid-19-uptick/
It's going to take a while to reach equilibrium because currently retail landlords are generally in denial about where the market is ("Few have managed to renegotiate leases or relief from their landlords. Seventy-one percent of landlords would not waive portions of rent, 61 percent would not defer rent payments and 90 percent would not formally renegotiate leases."
https://therealdeal.com/2020/08/03/outdoor-dining-to-return-next-summer-for-restaurants-that-survive/ ) but it will happen. And maybe we'll get back places like Little India on East 6th St, a viable Flower District, performance art venues, etc when they are no longer priced out.

I think we are going to see tons of retail go out of business and this will further the flight of residential. And it's a shame because I think a lot could be saved I they weren't rent overburdened. So it will probably take a turnover in ownership before we get to the right place.

MCR,
Who do you think wrote that WSJ piece?

PS to the post before the last one:
We are already seeing something typical of when restaurants/bars are acknowledging that they are "done" and willing to engage in activities which put their liquor licenses at risk.
https://www.boweryboogie.com/2020/08/topless-lap-dancing-leads-to-shinsen-bust-on-the-bowery/

@30yrs - Re writer of Trump/Carson piece, they have countless staffers devoted to exactly this type of nonsense, but if I had to guess, I would say someone who ultimately reports to Stephen Miller.

I agree with MCR - those who want to be in the suburbs just go - leave the city to us who want to be here and will stay .
We won’t miss you

https://www.cnbc.com/2020/08/20/wealthy-new-yorkers-plan-to-commute-by-private-chopper-from-the-hamptons-this-fall.html

Jerry strikes back.

https://www.nytimes.com/2020/08/24/opinion/jerry-seinfeld-new-york-coronavirus.html

You're the best Jerry, you're the best!

Boom!!

The appropriate response would be, "That's gold, Jerry! Gold!"

@mcr a funny little anecdote regarding the creation of The Burkhardt Group. I had just spent six weeks surfing throughout Costa Rica, came back to my humble abode in fort Greene Brooklyn. Feeling just a little bit dissatisfied with my career in real estate, I was watching a Seinfeld rerun to cheer myself up.

The episode was the one that George does the opposite of everything and is met by great success at every turn. This was 2007, and the New York City real estate market was insane, I had recently discovered streeteasy, and with that, the extremely high level of dissatisfaction people had with real estate brokers. I thought to myself, what if I did the opposite of what I had been told to do in my training as a broker?

The Burkhardt group was born. And 12 years later I'm happy to say it's been a great success and I've never been happier! Thanks West67th Street for showing me the way ; )

Keith Burkhardt
TBG

@Keith - I’ve often wondered why more brokers have not followed your model. I have watched your business grow over 10 years and have read all the consistently positive feedback on Streeteasy over that time, and it leaves me scratching my head as to why the whole industry did not follow suit. It is another conundrum of the unique economic forces at play in NY. Again, the best warning anyone ever gave me when we were heading to NY was “you might think you know real estate, but NY is different.”

The point being - good for you for swimming upstream! It seems so obvious, but everyone else is still not doing it. It’s like w67th used to say “you can lead the horse to water, but . . .”

The clapback to Jerry's clapback.

https://nypost.com/2020/08/24/sorry-seinfeld-your-love-of-nyc-wont-change-the-facts-about-its-crisis/

A guy I know who has run after hours in NYC for decades is reopening at the end of this month and also taking over a couple of legitimate bars which have gone under.

Amazon isn’t leaving, neither Facebook or Google, AIG and many others. They know the importance of in your face communication with people. This makes innovation and ideas happen. Cities are crucibles of knowledge.
This doesn’t happen in a suburban home working from the basement in isolation.

But the city needs to be rescued Felix Rohatyn style.

Although I'm a fan and I like what Jerry had to say, let's keep some perspective here. I don't think a comedian and a comedy club owner are the most reliable sources regarding the fate of New York City.

But I like Jerry's chutzpah and positive attitude about things. I'm still betting on New York and all the other major cities of the world. And I think this work-from-home thing is going to get tired fast for a lot of people. It's certainly convenient to do under the circumstances, but I think eventually people are going to want to get back into the city, into their office.

This pandemic is not going to last forever at this pace or this intensity. look at how exponentially better things are already in New York City and many other places including Italy.

How are "things" better in NYC? Maybe better than the disaster that the clowns Blas and Cuomo produced in March, when NY would have been a laughingstock had it not been a giant tragedy.

Out here in Nowhere, we have indoor dining, school in session every day, no quarantines, no checkpoints, gyms and pools open, bars open, and a record amount of activity at the private jet terminal, with a case rate the last two weeks per 100,000 of 0.8 per day, compared to ~3 in NYC.

If you really think it's better in NYC, you need to get out of the city, like Seinfeld has done.

Speaking of pools......

Bidding wars in Tahoe:

https://www.wsj.com/articles/lake-tahoe-vail-arent-just-for-vacation-anymore-as-homebound-families-move-in-11598434201

@George - Can you pass the phone to Mrs. George? I suspect she would be more fun to talk to.

Serious question: Were Mrs. George not in the picture, would you be returning to the city at all? My father had to be in NYC before any of his children were born, but he decamped to the suburbs after a few years (1965 I believe) and never looked back for all the reasons you discuss.

Even when NYC was at its recent relative height, he blasted it for all the reasons you do. NY just isn’t the right call for those with a certain preference structure. Did you ever love the city?

You should certainly live somewhere that brings you the most happiness. There's no right place to live it's completely subjective, whether there are bidding wars or not. Ideally I prefer to buy in markets where the opposite of bidding wars is taking place.

Recently the traffic in city is as bad as pre Trump Virus days

We both enjoyed NYC but it has become apparent that the improvents under Giuliani and Bloomy were not permanent and indeed the city could quickly revert under the wrong mayor and schools chief.

NYC in 2005 was great. Housing prices were much lower, the subway was less crowded, taxis were cheaper and moved faster (as did most traffic), there was still some authentic grit, crime was going down, the smoking ban had just come into effect, Daniel Boulud was on GMA for selling a $30 hamburger (now everyone does, to pay the rent), people were coming rather than going.

But since we lost Bloomy, the city that doesn't work like it used to. And Mrs George might not anymore be much more positive than I am.

>> NYC in 2005 was great. Housing prices were much lower

That has me scratching my head. On listings I look at, sales prices seem to be at 2005-ish levels. Rents seem to be consistently lower. All despite ~30% inflation, sounds great! But I say to myself that’s perhaps because I’m looking at the decimated top end, perhaps it’s different elsewhere in the market.

But then there are the listings MCR discusses from her beloved Beekman neighborhood. At the higher end (few $M), it seems like apts can perhaps fetch their 2005-ish prices if a renovation is thrown in for free. And maybe at the lower end ($1M?), I think you don’t have to throw in a renovation for free but 2005-ish prices nevertheless? MCR, you tell us.

But then it might be that you’ll poo-poo such a uncool/old neighborhood, it’s not your beloved UWS, the hotbed of vibrancy/youth it represents. So I looked up the UWS building where I was living in 2005, looking at a lower-end line where the market is “strong”. Prices essentially the same as 2005, rents essentially the same.

Perhaps it’s not that prices of the homes were much lower in 2005, but rather that the level of the homes beyond your reach were much lower?

Putting aside my anecdotal data, I looked up some data. Mid-2005 to mid-2020, CPI rose 33%. The StreetEasy Price Index, which uses same home resales, rose 18%. That overstates the situation because it’s trailing (3-month average of closings, not current contracts), and because new renovations are done at higher quality than the previous ones (deterioration aside). And 30-year mortgage rate is at 3.0% rather than 5.7%.

So:

- Money is worth 33% less than it used to be.
- You can borrow money for nearly half the rate it used to be.
- The asset costs the same.

Here’s what I think happened:

1) In 2005, you were eating $4 hamburgers at the local diner. $4.65 if you wanted cheese.

2) Then someone took you to DB Bistro and you said “What the fuck, $29? You don’t even get cheese with that!” Nevertheless, you had the burger because of FOMO.

3) After that, you’d get your diner burger, but it just couldn’t compare. You blamed the diner cooks. After all, a burger is a burger. DB Bistro just over-charges for the schtick and the white tablecloths. It’s just beef, all those words on the menu are just there for pretense, maybe it costs $1 more at best. And schlopping together any burger and paying the attention to cook it right doesn’t take any more of the cook’s time, and a cook’s a cook, why should any of them get paid different?

4) Everyone else started stepping up their burger game. This just meant they used words like “wagyu” or “dry-aged” for their frozen patties coming from the same feedlot as McDonalds. But they do taste good, you don’t even remember your diner burger anymore, but at least at DB Bistro they’d give you a white tablecloth!

5) Meanwhile, DB Bistro upped their charge to $35! Can you believe the gall! That’s a 20% increase. CPI, schmi-pee-ayy! I remember when a candy bar cost a nickel!

6) Screw them all, the cooks, the waiters, Boloud, and DeBlasio especially: the nerve they have for charging me $35 for what used to cost $4! I’m done with this BS. In fact as I’m writing this, I’m enjoying a $13.69 Philly cheesesteak burger INDOORS at TGI Fridays in my newly beloved hometown of Nowhere, U.S.A.

I do love it when Inonada gets going (as long as I am not the target).

Thanks for the real life chuckle, Ionada.

I don’t think I’ve ever heard anyone associate Bloomberg’s mayorship with “authentic grit.”

With the upcoming cuts to the city budget get ready for what's left of "cash businesses" in NYC to be operating under a whole different set of rules.

I'm glad it's still possible to debate Daniel's burger. Really warms my cold heart.

As for the core problem, asset prices being out of reach of even mass affluent New Yorkers who haven't raided the treasury of a small country, remember that back in 2005, a condo selling at $1000/sf was priced fairly aggressively. Today the average is closer to $2000. Is that because the Miele dishwasher is really worth so much more than whatever dishwasher people suffered with in 2005? I think not. It's just inflation exceeding the growth in wages, i.e. growing unaffordability. Yes, interest rates are lower, but not everyone wants to leverage themselves to the max to afford one.

Real estate taxes and common charges have increased dramatically too. Remember that in '05, $1/ft was about normal in a doorman condo. Now this too has often doubled. And you know the costs are going only one direction.

Meanwhile y'all in NYC still can't eat indoors when we can here in Nowhere, and restauranteurs are moving this way too. Besides actually being open, it helps that in Nowhere, restaurant rents are a fraction of what they are in NY. So far here in Nowhere Town, not a single restaurant has permanently closed.

And this:
https://nypost.com/2020/08/26/suffolk-county-wants-to-keep-nyc-residents-in-their-summer-homes/

Although I've been a boring vegetarian since 1982, I remember all my friends raving about the burger at Corner Bistro. I believe could be had for about 10 or 11 bucks? I did like the fries there though...

There’s a mismatch between your perceptions & reality, George. Take a look at my building from 2005: 200 Riverside Blvd. I’m looking at the 812 sq ft B line.

You can see in 2005, a couple of units (7B & 20B) sold for around $750K / ~$1000 ppsf. You can see that in 2019-2020 pre-Covid, 6B failed to sell at $800K. You can see it’s monthlies at $1650 are a 23% increase relative to the 2009 monthlies at $1340 in that line, tracking inflation. Look at the rents, and you’ll see they are flat, with asks ranging $3000-$3500 very consistently over the years.

So what are you talking about? Go get your 2005 condo at the 2005 price.

Funny you mention 200 Riverside Drive. Had a conversation with a very nice owner, unfortunately he feels the property is worth significantly more than I do, so we declined to list. We are working with him on the buy side.

Here's the actual data. Median condo price per square foot in Manhattan crossed the $1000 threshold in 2005, the year I moved to NYC. Now it's around $2000.

https://www.castle-avenue.com/manhattan-condo-historical-price-trend.html

As for maintenance fees, the chart here shows that they were basically flat for a decade at $1/sf until the early 2000s. Then they began taking off.

https://www.nytimes.com/2008/02/24/realestate/24cov.html

In 2018, the average maintenance fee was indeed about $2 per square foot in condos:

Since inflation only went up 18%, maintenance fees grew at ~quadruple the rate of inflation.

I suspect that nobody cared about the maintenance fee when the value of their apartment also doubled. Everyone got rich - owners, building workers, and the city (via much higher property taxes per square foot).

But now that the music has stopped, the maintenance suddenly becomes a big issue keeping buyers away. I know that it's a reason that I was in the NYC townhouse market rather than condos/coops. I'll be my own doorman, thank you.

Regarding property taxes, we know they are only going in one direction when the city and state both have massive budget gaps.

So the overall picture of affordability is extremely negative. The only things that can improve it are a boom in employment in NYC (hi, Amazon!), lower interest rates (not likely, and not really helpful in coops), lower costs (good luck), lower taxes (ha!), or dramatically lower prices.

Link to the source for $2/sf maintenance charges in condos:

https://www.millersamuel.com/charts/manhattan-hoa-monthly-cost-per-sq-ft-based-on-sales-during-each-quarter/

As for the plight of the mass affluent, I think all the data & research shows this group (90-99th percentile) has done fine during the past couple of decades. Real income growth in the range of 15% over the past 15 years, meaning 2020 nominal income is now 1.5x 2005 nominal income. Meanwhile, nominal prices on same-apt sales w/o renovations seem flat.

Of course, the first 90th percentile has had less income growth while the last percentile has had more (with increasing growth within that percentile). It might be that you are just attuned to what has been happening in that last percentile, which is where all new development was focused, and think the main difference between 200 RSB and 432 Park is the Meile dishwasher. If that’s the case, I recommend you buy one of the many unrenovated 200 RSB apartments at the 2005 price, replace the dishwasher, and live like a king.

George, Condo cc+taxes have gone up more than coops due to the new development effect. Coop Data provides a better View. RE taxes have indeed gone up more than inflation but it is more than offset by lower mortgage cost.

Nada, You make some very good points especially about how much more income top 1 percent is making and if I may add there are increasing number of two high income earning families. Let us ignore global top 0.1 percent or perhaps 0.01 percent who are the targets of overbuilt high end new developments.

Circa 2005, soon after my arrival to NYC and huddled with the affluent masses who were yearning to breathe free in the seat of a leased Range Rover, I had a conversation with a visiting friend from Somewhere, U.S.A. that went something like this.

Friend: Don’t all these buildings around you bother you?

Me: What do you mean? I think they look rather nice.

Friend: Well, they are full of fancy apts owned by rich people.

Me: Right..., so?

Friend: Well, much nicer than yours...

Me: Sure. But no, it doesn’t bother me. Does it bother you that in the town next to Somewhere, U.S.A. there are a bunch of rich people in homes much nicer than yours?

Friend: Maybe, but it’s different.

Me: How so?

Friend: Over there, it’s in the next town. Here, it’s in your face.