You are an idiot if you buy right now

I think $300-$400 a square foot is silly for one reason: that would make NYC comparable to boston prices, roughly. I don't think that is going to happen, this is a bigger city, more demand

> that would make NYC comparable to boston prices, roughly.

*Old* boston prices perhaps. Like the rest of the country, they are having their own issues as well...

NYC will be far lower than what Boston is currently by the time this is all over.

$800 psf for prime Manhattan. $300 would bring us to the 1988 levels, and that is not going to happen. $800 will bring us to 2003 levels, just before this unprecedented boom.

newbuyer - because it would mean that people like me would go from buying 1 brs to townhouses. I can dream that this will be the case, but doubt it will happen. I'm not saying that there is some downside, but come on, you really think prices will be down 70%?

also, those prices are closer to philly than boston

the only way $300-400 for prime manhattan would happen is if 3 dirty bombs went off across the city, the fed bailout gets derailed, ms/gs go bankrupt without a takeout and russia gets into another cold war with us. i agree w/ steve, probably around $800-850 for prime area, high quality apt and obviously lower for prime, low quality or non-prime areas.

"if" you owned a apartment in a prime area, how much would you (as a reasonable person) sell the apt for?

everybody is harping about selling at low prices, but realistically speaking, most people will not sell at a ridiculous loss (for the most part)

also, people keep using percentages or average psf numbers. again, concrete examples are much more useful. will I get my 2 br in 140 charles for $700k (50% down)? or even $880k ($800 psf)? I hope so, but doubt it.

no Special K - 300-400 is prime in most major cities, without banking Manhattan will EASILY fall into that category. Once people take into account the INCOME taxes it takes to live here, PLUS the INCREASED cost of FOOD, ENERGY, TRANSPORTATION and PROPERTY TAXES - honestly, the price should be LESS than $300/sq foot. Currently nobody could PAY me to take a piece of Manhattan RE. If a dirty bomb goes off, you're looking at paying people to take your expensive RE off your hands. THIS MARKET IS SERIOUSLY OVERPRICED AND IS GOING WAY DOWN.

thanks anon3. good to know who we are dealing with here.

anon3 - i get it, you're going for the biggest bear on streeteasy award. but do you have to capitalize everything? sort of gives the impression that you are yelling (which maybe you are)...

anon3, you're giving "bears" a bad name here. Still would love to see some quantified reasoning for your 70% drop prediction.

take any housing calculator, put in negative 10%/year appreciation and see what you should pay for your property (frankly it will be more like negative 20% for the next few years here so I'm being generous). Down 70% is about right. Plus it puts it in line with most other major cities (without billions paid out in baking bonuses). Listen if you want, don't if you don't want to, but in 5 years you'll wish you'd listened to me. Get out IF you can b/c there isn't that much dumb money left at this point.

Wake up call...you are nuts if you think prices are falling. 235 east 22nd street...studio with pullman kitchen sold a few months ago for $370k, fair price. Another studio just listed same layout listed for $475k. I love the bldg. but obviously something is wrong. Please clue me in...is it the brokers, the sellers or are prices just going to keep going up, up!!

LOL - Yes Julia - UP UP UP - I see YOU've jumped into the market! I think we both know what's up.....or should I say down!

anon3...i'm waiting for the super in my rental so i have time to be on streeteasy hoping i would get some wise and honest feedback but unfortunately i get you and others who, rather than help, would rather mock.

NYC will likely always cost more than other cities - it's just bigger, manhattan is so finite, and there is other money here besides wall street. Besides, not every wall street job will go away - although I think 50% might - you still have law, media, publishing, some pharmaceuticals, tourism, etc.

Steve: "800 psf for prime Manhattan"

So, why the prediction that RE is going down 50%? What precentage of the properties currently on the market are listed at over 1,600/SF? How many of those are ultra-luxury? Do you really think those, too, are going to $800/SF?

I mean, even the Chelsea Status, allegedly one of the most overpriced and most ridiculed (on Streeteasy) buildings, has an average list price of under 1,600... And that's new construction, not exactly a fair comp for the "general market."

Julia, I share your frustration with prices in Manhattan, but I really think you should wait a year or two to buy. The market of buyers and sellers who believe in the peak prices is getting thinner but it hasn't disappeared. It might take a while for the market to absorb the new reality, especially among sellers. I think patience is the key -- absolutely no one thinks apartments will get more expensive over the next three years. Sellers might be irrational or unrealistic, and this might prevent you from buying as soon as you would like, but I really think you must wait.

Julia, there will *always* be irrational sellers. In good times and in bad. When things are rolling, folks will expect to double their money. When things tank, folks will hold out to "break even" (a very important psychological barrier). But that isn't everyone... sales are down dramatically, but there are still sales. And the comps in many of those cases point distinctly lower.

Julia - I am not mocking you - think your decision to wait was quite wise. Look at the money you've already saved. Just saying you should wait a bit longer - seriously, run a housing calculator with increased property taxes (coming next year) and a decrease in prices of about 10-20%/year. You'll see prices are WAY overpriced. I just don't want you or anyone else to lose a million bucks. I'm on your side, not trying to mock and I hope it doesn't come across that way.

Be patient! Not all sellers can/will wait. This is what brokers always say "people just won't sell for losses."

First of all, there are a lot of people who didn't buy in 2004 or 2006, but who bought in 1995 and will make a killing even in prices fall 50%. This is to me is the single biggest thing brokers forget.

Second, the reality is people have all kinds of reasons for selling besides absolute financial necessity

1) moving
2) need more space
3) divorce

Thid, NYC is unusual in that there are almost always more people who MUST sell than MUST buy (not who want to buy or sell - this is a different story - obviously a lot of people always want to buy, but rarely do they need to). Unlike most places, there are a lot of attractive rental options (as somebody who moved a lot as a kid I can tell you that even wealthy suburbs have a dearth of nice places to rent). Second, unlike many places, growing families are much more like to run out of space. E.g., a family with 2-3 kids who bought a starter home outside of Boston or Philly may feel a bit cramped, but not as cramped as those sitting in a 2 br with 2-3 kids.

Steve: It seems like you're arguing that we're going to see a reversion to the mean and that if we go back to 2003 prices we'll be roughly where we are before prices started going crazy. That seems like reasonable logic, but if that's the approach, shouldn't we be using real dollars instead of nominal dollars? According to the inflation calculator at http://www.westegg.com/inflation/, $800 in 2003 dollars is $900 in 2007 dollars (the latest data they have available), so it would seem to make sense we'd end up somewhere between $900 - $1000 psf, given that inflation will continue and that it will take a while to stabilize at a sensible value.

I agree that we should be talking real dollars, but reversion to the mean doesn't mean "go back to 2003 prices", it means to historical returns... which I belive would get us significantly below 2003 prices...

Well, you need to figure out the last time you think the market was reflecting historical returns. I was willing to accept stevejhx's date for the sake of discussion, but if there's a better date that makes more sense that would be interesting to know about as well. Does anyone have a good data set to figure this out?

I am not at all predicting a 70% decline. Just saying it wouldn't be absurd if one happened.

Obviously, a lot of macro things would have to be pretty negative for that to happen. And in that (unlikely but possible) scenario, Boston, Philly and other places would of course fall a ton too.

Of course, nothing is average in Manhattan. Lots of "prime" properties, especially townhouses and such, are priced much higher than $1000-1200 psf, so 70% down wouldn't bring them down to $300-$400. For instance, I did a search for "downtown, midtown, UES, UWS townhouses over 3000SF, and most are over $5MM. So assuming they're impacted as much as the "average" by the 70% decline, they're still over $1.5MM. evillager, are you going to be buying those?

Plus, the same macro factors that would potentially lead to such a huge decline would cause income and savings to drop precipitously. That would make it pretty tough for you to buy townhouses, even at 70% off. In fact, the decline in your income, savings, ability to borrow, etc., would be precisely what would lead to the 70% decline. Of course, you may be the exception (buying all cash, in stable or contrarian industry, very conservatively invested, etc.), in which case, yes, a severe downturn would enable you to upgrade, perhaps significantly so. But in every market, there are winners and losers, and it's the balance of those that drives the market.

I will readily admit that I can't predict the Manhattan RE decline with anything resembling certainty. If I had to guess, I'd say around 30% from the peak, but that's a total guess. I would not be shocked if instead it kind of stagnated for a while. Nor would I be shocked if it went down 70% (very pleasantly surprised, but not shocked).

"So, why the prediction that RE is going down 50%? What precentage of the properties currently on the market are listed at over 1,600/SF? How many of those are ultra-luxury? Do you really think those, too, are going to $800/SF?"

"According to the inflation calculator at http://www.westegg.com/inflation/, $800 in 2003 dollars is $900 in 2007 dollars (the latest data they have available), so it would seem to make sense we'd end up somewhere between $900 - $1000 psf, given that inflation will continue and that it will take a while to stabilize at a sensible value."

Agreed - very tough to give a flat figure like $800/sqft when there's obviously a significant gap even within prime neighborhoods, especially when new construction is involved. If Steve believes 50% off, that probably puts us down to $600-700/sqft for resales in prime areas. EddieWilson, I'm pretty sure Steve has repeatedly claimed we'd go back to 2004 prices. "Significantly below 2003 prices" hasn't really been discussed here, I think, except by some of the more dramatic posters.

would I buy a 3000 sq ft townhouse in a good area for $1.5 million? in a heartbeat! (seriously)

I get that is what Steve has claimed, but he laid his prediction out clearly, we don't need to calculate it. He said $800.

If its reversion to mean we are talking... we can go back a little farther.

A friend bought a 2 bedroom in 1998 and I remember the rule of thumb then being "2 bedrooms cost $500k". He paid right around there for something in the east 80s, pretty nice place. I remember that being a "middle" time for RE. No panic, but no crazy runup either.

I think that would be about a $600 psf. That would be $760 in today's dollars..

"take any housing calculator, put in negative 10%/year appreciation and see what you should pay for your property (frankly it will be more like negative 20% for the next few years here so I'm being generous). Down 70% is about right."

seriously are you going for the dumbest guy on streeteasy award? you're "proving" your prediction of a decrease in prices by saying take a housing calculator and put in a decrease in prices and you'll find that there will be a decrease in prices. solid stuff.

let's see, if I put all my money into the market, earn 20% a year, put that into my calculator, i should double my money in 4 years! hold on, gotta get into my ameritrade account to put my money to work now!

"A friend bought a 2 bedroom in 1998 and I remember the rule of thumb then being "2 bedrooms cost $500k". He paid right around there for something in the east 80s, pretty nice place. I remember that being a "middle" time for RE. No panic, but no crazy runup either.

I think that would be about a $600 psf."

So, your friend paid $600/SF for a 2-BR and and it came out to 500k? Means his place is a 833 SF? Must be a great two-bedroom apartment, very spacious...

Also, you think we are going back to 1998-prices? Yeah, I will hold my breath...

nyc10022 - In 1998 you could get a standard cookie cutter 2 bedroom on the east side for $300,000 - $350,000 easy.

""everybody is harping about selling at low prices, but realistically speaking, most people will not sell at a ridiculous loss (for the most part)""

Then they may have a long wait, especially if they purchased in the past three years.

"So, your friend paid $600/SF for a 2-BR and and it came out to 500k? Means his place is a 833 SF? Must be a great two-bedroom apartment, very spacious..."

In my head, 2 bedrooms are 800-900 psf. If its more, then perhaps the psfs were closer to $500.

"everybody is harping about selling at low prices, but realistically speaking, most people will not sell at a ridiculous loss (for the most part)"

Some people have to sell - job loss, they take a job out of the area, they get divorced, etc. And those sales set the market. On a relative value ratio, the other folks can't simply "hold out" for $1.5M if the last comp sold at $1.1M. If they do, they aren't able to be sellers for half a generation. So if living in your current place for 15-20 yrs is OK w you, you're right - you've got nothing to worry about.

These are some interesting pricing anecdotes, but is there good year-by-year price data somewhere? That would be useful in helping to figure out whether any given year seemed to be "normal" or not.

Don't forget folks trading up for more space or some other factor (maybe they actually made some money). If they can get the same or bigger "discount" on the more expensive place, they will hesitate less to sell the old one at the lower price. I remember a good amount of moves of that sort in the 80s.

You'll take $200k down on your apartment sale if you think you're getting the new one for $400k down.

Of course, this assumes you have enough equity in the apartment to take the hit.

plus not everybody bought in 2006. a lot of people are sitting on places they bought 5,10, 15 years ago. a lot of them still make money even if prices fall 25%

Remember, you have to beat inflation and the cost of the your mortgage over those 5-10-15 to "make money". Those factors can be harder to beat than the declines themselves...

"Remember, you have to beat inflation and the cost of the your mortgage over those 5-10-15 to "make money". Those factors can be harder to beat than the declines themselves..."

This makes no sense. Inflation actually makes buying better - rents appreciate, but your mortage stays flat. You also build up equity by paying down your mortgage. Let me demonstrate :

Say you bought a 2BR in 1998 for 500,000 with 20% down. At 7%, you are paying $2,661 a month in mortgage. Let's assume rents were significantly cheaper back then - say $2,000 for the same place (and rents weren't that cheap then), as we all know. If your tax rate is 25% (which is low for nyc), you get a tax break on the interest portion of that mortgage (about $2,300 a month, going down over time, of course, as you pay more principal and less interest the longer you own a place), or post-tax savings of $600 a month. Let's assume rents rise with inflation - after about 5 years, your after-tax cost of mortgage is cheaper than renting, assuming rents go up 3% per year. After 10 years, using the same 3% rent increase, you've saved yourself a total of $25k in monthly costs by buying, not renting. You've also built up $65k of equity by paying your mortgage.

Let's say you sell for $600k today - only $100k appreciation , or less than 2% per year and less quickly than rents have risen.

I've made: $100k off appreciation + $25k savings in renting the equivalent place + $65k equity buildup = $185k
I've lost: Transaction costs of about $50k (a total of 10% -this is aggressive) in transaction costs + $100k appreciation in my downpayment (assuming 7% after tax, which is aggressive) =$150k

So, I've STILL made $35k off this, with appreciation well below inflation. And since it's my primary residence, I don't pay capital gains on this. And I have been too conservative in my assumptions - I think we can all agree a 2BR wasn't $2k a month in 1998, most people have more than a 25% total tax rate in NYC, rents have appreciated faster than 3%, hard to make 7% after-tax on what I otherwise would have done with downpayment money.

These are the reasons people say you should always buy on a long-term hold. Now, I think people need to start thinking "long-term" is 10 years, not 5, but that's a whole new issue.

Here is my example...

You have $10 today. You use it for down payment, mortgage payments, all that. You go through 10 years of owning, tax deductions, all that, you have $11, which is now worth $9 in real dollars.

You didn't "make" money. "Equity" is misleading in this case. Your equity might increase, but you paid too much for it in this example.

Kspeak, you are forgetting maintenance and RE taxes, but that's beside the point (my point)...

What you should have done is let someone else buy it as an "investment", with carrying costs of $3,000/month, and then rented it from him at $2,000/month. Then you could have come to Streeteasy and laughed your ass off how the owner is losing his shirt (paying 3k/month but only receiving 2k/month) and how he doesn't know what he is doing...

Inflation helps mortgage holders (and all those in debt). Assuming fixed interest rates of course - ARMs are a whole different ballgame. Consider this:

I buy today for $10, with an $8 mortgage. My salary is $X. Hyper-inflation hits, doubling nominal values - my home is nominally worth $20 (assuming no appreciation or depreciation) but my mortgage is still $8. If I sell, I get $12 back. Of course, that $12 is really only worth $6 when I first made the down payment. But how much was that down payment? $2, yielding me a hefty profit, even in real terms.

"You have $10 today. You use it for down payment, mortgage payments, all that. You go through 10 years of owning, tax deductions, all that, you have $11, which is now worth $9 in real dollars.

You didn't "make" money. "Equity" is misleading in this case. Your equity might increase, but you paid too much for it in this example."

This is simply wrong or really just incomplete and irrelevant. For one thing you've lived somewhere for 10 years.

kspeak and techguy are correct, inflation makes fixed rate debt a better deal, whether it makes it a good deal is obviously a case by case thing.

"This is simply wrong or really just incomplete and irrelevant. For one thing you've lived somewhere for 10 years."

I'm not sure how that means you "made" money...

it doesn't, you need more information to know whether you made money (thats why I said it was incomplete), furthermore I recognize there is obviously a difference bw whether you made money and whether you made more or less money then you would have renting and investing your downpayment and principal amort payments.

regardless though inflation is helping you pay back the debt, you're paying it back with less valuable $.

> regardless though inflation is helping you pay back the debt

I don't disagree with that... just consider that inflation has *also* reduced the asset's value as well. The effect works both ways.

That is all I was noting. "Breaking even" over 10-15 years in nominal terms is likely a loss.

My analysis fully includes opportunity cost of the $100k dowpayment. The only thing it excludes is maintentence/RE taxes (which are one payment in a coop). However, my assumptions on one's ability to rent an apartment for $2k in 1998 more than make up for that - you couldn't rent a 2BR for 2K in 1998, no way - so I kept it out to simplify this.

This "you buy something for $10, sell it for $11, but it's worth 9 in today's dollars" assumes prices will not match inflation. It's a very reasonable starting point to assume that real estate prices will match inflation; in fact, historical data for "superstar cities" - not just over the past 10 years but over the past 100 years - indicates that in prime parts of large cities, real estate outpaces inflation due to simple supply/demand dynamics. Populations grow, economies expand, the demand to live in these places is high enough to sustain price growth beyond inflation.

The point was to demonstrate what a stupid argument it is that people who bought their aparments 10 years ago lost money. What I showed was that even if apartment prices appreciate SLOWER THAN RENT (e.g., below inflation, which rarely happens), you have still done better than you would have by renting the equivalent place AND investing your downpayment. That is what this shows; it's simple math,.

This is not taking into consideration the fact that nobody who bought in 1998 is selling their 2BR without significant price deflation, greater than 50%.

Sorry -last sentence, I meant to say, nobody is selling their 2BR (assuming it's a real 2BR in good location) for $500 or $600k without a lot of price deflation, in the range of 50%+.

"This "you buy something for $10, sell it for $11, but it's worth 9 in today's dollars" assumes prices will not match inflation."

Right, exactly. Thats what I said. That is what you responded to... "Remember, you have to beat inflation and the cost of the your mortgage over those 5-10-15 to "make money". Those factors can be harder to beat than the declines themselves..."

So I'm not quite sure why you were arguing this. If you beat inflation, great. I'm just noting that you have to to make money. Not saying it would happen one way or the other. Thats all....

"It's a very reasonable starting point to assume that real estate prices will match inflation; in fact, historical data for "superstar cities" - not just over the past 10 years but over the past 100 years - indicates that in prime parts of large cities, real estate outpaces inflation due to simple supply/demand dynamics. "

Well, ok, now you lost me here. We're in a bubble pop. Superstar cities have all lost 10% on Case Shiller, some more. I think assuming that RE will match inflation going forward is going to put you in the minority.

Don't think prices will match inflation in the near-term, no, they are overvalued now, but as a general rule, if you pick a random starting point, prices generally will beat inflation slightly.

The original point of this whole discussion was my counterpoint to RE agents who said "people won't sell for a loss, they'll just wait." My point was people who bought years ago will make money even if prices fall 30%-50%. Somebody said "not when you factor in the cost of the mortgage, etc." My point was you can even slightly underbeat inflation and still breakeven, opportunity costs included.

I think we agree... that is absolutely possible.

The probable is just where we might differ. Random point, yes, I think you beat inflation. Any time in the last few years, I think we're talking a different story.

The owners of the apt I want to buy made more than 300% in 5 years. They have been showing it for 5 months. They lowered the price about 1.5%. They said they can wait, they will not accept a lowball offer, they think it's a fair price. Damn. We'll both lose, them and me.

"Damn. We'll both lose, them and me."

If they're unwilling to consider selling their place without a huge profit, but do sellers really only sell in order to cash in investment returns? Or do they sell because they're moving? If they need to sell, they'll be sorry in a few months, and even more sorry in six months, etc., but hey, maybe they couldn't care less and aren't losing a thing.

> The owners of the apt I want to buy made more than 300% in 5 years.

They didn't make anything until they sell it...

I wonder what they are waiting for. If they wait 10 years for nominal prices to be where they at now, will that be a "victory" for them?

"I wonder what they are waiting for. If they wait 10 years for nominal prices to be where they at now, will that be a "victory" for them?"

Remember last time RE popped in Manhattan? People rued the day they had turned down offers six months earlier that were either the last offers they had gotten or were head and shoulders above the only other offers since. My hunch is the same thing is happening now: "Let's just wait until the right buyer comes up to our price."

mimi - that had been our experience too for most of 2008. The message you are getting from the sellers is almost verbatim the message we were getting. Many of those sellers are now lowering prices and/or having their brokers bug us. In other words, I think they're already regretting their inflexibility a few months ago. Obviously, every situation is different, but perhaps it's the start of a trend...

It's just that in this slow kind of market, to have open houses and appointments (which means cleaning up, leaving everything nice, etc) and strangers opening your closets when the reality is shouting at u that if you want to sell you have to lower the price looks masochistic...

"You also completely missed my overall point. Though I suppose you're sort of right - if you're not reading this carefully enough to get my point, you're not serious/prepared enough, and so you should certainly be renting."

LOL. I sold at the peak while folks like you were still banging on about how real estate "would just keep going up and up forever". Take your smart ass insults and stuff them you know where.

p.s. Your wikipedia citation of Shiller is interesting, but I'll rely on my MBA and CFA data instead, m'kay?

Tech Guy: "This is the first year I could have bought comfortably".

But you shouldn't have. You just took that 20% down and flushed it down the toilet. What is that, $300K or so? Your life savings? On top of that, if (as I and others have been predicting for about 3 yrs) real estate declines 30-40%, you'll be working another decade just to break even. On a tech guy salary.

AND YOU ARE INSULTING PEOPLE ON THIS BOARD?????? Take my advice: there is only one way out for you. You know what it is. The japanese consider it very honorable...

admiral you are a very bad person, please leave

"You are a bad man, Jerry, a very very bad man" - babu

Very appropriate for this thread:
http://www.albinoblacksheep.com/flash/youare

YESTERDAY I PROMISED TO LET YOU KNOW HOW IT ALL TURNED OUT. I reduced my offer by 20% and the buyer's broker told mine that "the sellers had no interest in a lower price". I asked my attorney to send back the contract with a polite letter. Within an hour, my broker sent us to see a much nicer apartment that is listed at a higher price. Here's where I think we are. I AM NO EXPERT........BUT.......and I just posted this in response to another discussion.

"SHOCK & DENIAL".....that's the first stage and that's where we are here in mid-September, 2008. Everyone knows that illiquid assets that aren't spectacular have already lost value. Auction prices for the best material (art) are going for record prices as the flight to quality has begun. I presume the same is true with real estate. Things that are average just aren't selling at all.

"REALITY" should set in by the end of the year when bonuses don't happen and layoffs become real. It's one thing to know it in your head and it's quite another to feel it in your checking account.

SO MY SENSE is that there will be a certain amount of paralysis between now and the start of the new year but with the television pounding home the point that the world is falling, people are starting to try to make liquid anything they own that's illiquid............and Cramer is yelling "gold".

Between FEBRUARY AND MARCH should be the time when the esteemed Manhattan real estate market will become flooded with product and sellers will be talking about TAKING ANY DEAL THEY CAN GET that they can swallow..........ESPECIALLY CO-OP SELLERS who have to be concerned about Board Approvals.

I am a buyer who just walked away from a better than average 2 bedroom apartment in the Lenox Hill area because the seller wouldn't renegotiate the price to which we'd agreed at all after the world changed last week. I don't need an apartment. It's a luxury and, frankly, now it's an investment. I have to believe that I'm not the only person in this position out there so, in the words of the 80's, there will be a PREDATOR'S BALL to which people with good balance sheets will be invited. My invitation is date the AIDES OF MARCH, 2009.

THOUGHTS???

ONE LAST THOUGHT ON HOW THIS TIME IS DIFFERENT FROM PAST TIMES..............24 hour a day television and the Internet. In an effort to keep viewers eyes on the screen there is a "panic scenario" blasting all the time. In some areas it will be a self-fulfilling promise.

dca1125 - very interesting - you point out something I've missed all along - since coop boards are scarey, coop sellers may get panicky about "at least this buyer will pass board muster"

about the flight to the art market - I think (not sure) that the art market took a hammering in the '89+ crash, rather than being where smart money flocked to, but my sense of the timing is fuzzy - about internet/tv bombardment: yes, but people don't sell any faster or slower because of it - there will always be time for a panicky seller to reflect

Lowery, about the art market I am sure. Just was at an auction for Contemporary Chinese Art at Sotheby's (we've been collecting in this area for 7 years.....since before the herd got there) and found that iconic pictures by the best artists sold at wild premiums (ie. we bought a photograph 7 years ago for $15k and it just sold for $400k). Mid-range and unknown stuff was sold on the cheap or not sold because reserves weren't met.

I have to believe that the occasional $25 million apartment in "the right building" will still sell to "the right buyer" and that the $100 million property on the ocean in Palm Beach will sell. But if you're thinking about selling a 1,500 sq. ft. standard issue apartment facing the ocean between Miami and Palm Beach where there are at least 100 for each buyer, that's another story.

Admiral: "LOL. I sold at the peak while folks like you were still banging on about how real estate "would just keep going up and up forever""

I never once said that.

"p.s. Your wikipedia citation of Shiller is interesting, but I'll rely on my MBA and CFA data instead, m'kay?"

If you trust degrees over cited data, you've just discounted all of your credibility. Besides, claimed degrees in a liar's medium like this mean nothing. Lastly, and this is most hilarious to me (though due to the previous comment, you won't appreciate the humor), your degrees don't stand up to mine :) But I won't hold that against you - like I said, cited data is king.

"But you shouldn't have. You just took that 20% down and flushed it down the toilet. What is that, $300K or so? Your life savings? On top of that, if (as I and others have been predicting for about 3 yrs) real estate declines 30-40%, you'll be working another decade just to break even. On a tech guy salary.

AND YOU ARE INSULTING PEOPLE ON THIS BOARD?????? Take my advice: there is only one way out for you. You know what it is. The japanese consider it very honorable..."

3 years you've been predicting a 30% decline? You saw almost a 30% runup in those 3 years - you need your decline to happen just to break even! I wouldn't be so fast to judge others on their financial decisions if I were you.

As for my "tech guy salary", it let me comfortably get a mortgage and pass a coop interview with flying colors, despite the credit crunch. Where's all this extreme, uncalled for anger out of you coming anyway? Jealousy? Normal, well-adjusted people don't wish death on others so easily. You might want to see somebody about that.

As far as the art market goes, and that Hirst "successful" auction I saw a report that said a healthy chunk of the buyers/bidders were dealers who already own a HUGE chunk of Hirst. They made something like 20% of purchases and bid on 50% of items. They had a VERY vested interest in keeping prices high...

Every other report I've seen from dealers has said that their volume is off dramatically.

BTW, techguy, a 30% increase met by a 30% decrease is a 10% decline...

nyc10022, what's the point in discussing 10% here and there with someone who advises suicide? Yes you're right that 30% up and 30% down is 9% down net. Might that happen to Manhattan? Maybe. Will I be disappointed if it does? A little, but I knew there was both upside and downside risk when I bought. I knew I could handle the downside easily, and that the expected value was positive (mathematical definition of "expected value")

"3 years you've been predicting a 30% decline? You saw almost a 30% runup in those 3 years "

Not in the bubble markets of Miami, Las Vegas, Phoenix, So Cal etc. They started a cliff dive in mid 2006. They are not up at all over those three yrs. Manhattan is, but Manhattan (like the others) will still end up at 2001 or 2002 prices, 2003 at best.

I'll ignore all your other insults etc and bundle it into one reply: Coming on here telling us "this is the first year i could buy comfortably" and then mocking others is a bit laughable; many here were where you just got to now many many years ago. We're not really inclined to take advice from some new money wannabe who just flushed his wad down the toilet in the worst financial/real crisis in 80 years and then tries to convince lifelong investors, capital markets professionals etc it was a good idea!

> nyc10022, what's the point in discussing 10% here and there with someone who advises suicide?

Because its not 10%, I think we're talking more. I was just responding to your particularly point.

> I knew I could handle the downside easily, and that the expected value was positive (mathematical
> definition of "expected value")

But I think the latter has changed. Even without a major fall, buying in the last year or so now looks like a negative over 5-10 years, based on the expectations of folks overall now.

Worse than a 10% immediate decline is a 0% return while inflation goes up 20% or more over 10 years...

"Coming on here telling us "this is the first year i could buy comfortably" and then mocking others is a bit laughable; many here were where you just got to now many many years ago"

Many many years ago I was in high school :-) Or maybe even junior high - I'm a lot younger than you think. I appreciate the compliment though!

"We're not really inclined to take advice from some new money wannabe"

I quote actual data - you rely solely on unprovable degrees and titles. To any objective audience, there's a clear winner. And if you're now resorting to arguments of the form "my daddy is richer than your daddy", your own sense of self-worth is pretty pathetic.

"Worse than a 10% immediate decline is a 0% return while inflation goes up 20% or more over 10 years..."

First, I bought at about 10% below last year's values. Second, 0% real returns while there's 20% inflation would be wonderful for me. Inflation helps those in debt. I ran all the scenarios on housemath.us - the only one that worries me is nominal decline with little or no inflation. Sure, that may happen, but its a risk I was willing to accept for the upside provided by the various other scenarios, and the likelihood of each happening.

At no time did I ever say I have a 100% chance of coming out ahead by buying, or even a 90% chance. I'd ballpark it in the 2/3 to 3/4 range, which is fine by me.

NYC10022 - You are arguing w/ someone who has bought recently and who has (or ought to have) TREMENDOUS buyers remorse. Arguing logically isn't going to get you anywhere since this person has to shield their psyche from the consequences of their action. To acknowledge "I recently made a horrendously foolish mistake in judgment that will likely cost me my life savings" isn't something the human brain can admit w/out some transition period (denial, grief, anger all come before acceptance in the grieving process). Pretty normal human response when you think about it.

"To acknowledge "I recently made a horrendously foolish mistake in judgment that will likely cost me my life savings""

It took me 3 years to save up the downpayment. I have significant liquid assets besides. I bought well below my max. The apartment could literally disappear, and I'd be sad, but still do very well for myself. When discussing it as an investment, I'm as detached from it as I am to my S&P 500 index fund.

You, on the other hand, seem to be taking this *extremely* personally. Why do you have such a large axe to grind?

"You, on the other hand, seem to be taking this *extremely* personally. Why do you have such a large axe to grind?"

Because I find the all-too-common blend of smugness and a mediocre intellect to be repulsive. Loathsome. Appalling...

You need to get laid! Someone else's outlook on life really shouldn't have such a huge effect on your mood and state of mind. Who cares what happens to Manhattan real estate if you die of a stroke or heart attack at age 50? Relax!

tech guy, why are you talking to this idiot, he advised suicide because of a bad purchase, and the quote above, well there are no words, he's an incurable asshole, ignore him.

> First, I bought at about 10% below last year's values

Which would be breakeven though August, and loss now...

> Second, 0% real returns while there's 20% inflation would be wonderful for me. Inflation helps those
> in debt

But not if the debt is used to buy a declining asset. Whatever you "make" in the reduced value of the payments is more than offset by the declining real value of the underlying asset, which is leveraged.

What you are paying back might be less, but your pile of money to pay back with is burning at a faster rate...

nyc10022: Describing a possible but unlikely disaster scenario doesn't scare me much, when I already said I accept that there's a 25 to 33% chance I'll lose money on this choice :)

"a possible but unlikely disaster scenario"

LOL. Yeah, it's not like the newspapers have headlines about this countries major financial institutions failing because of the declining value of mortgages and the property underlying them.

"I already said I accept that there's a 25 to 33% chance I'll lose money on this choice :) "

I'm happy you lost money too, but even happier I was smart enough to sell and rent before I did :)

Come to think of it, your math is wrong: It's not a 25-35% chance you'll lose money, it's a 90% chance you'll lose 25-35% of the value of the home (i.e., all your equity).

Correct.

Whatever the specifics are, if there is an x% chance you lose money, and the remaining y% is the chance of just breaking even, that is not generally a risk you want to take....

Its like playing roulette where if you hit, you get your money back.

I wouldn't worry too much about it, NYC10022. The only way the smart money can generate alpha (i.e, excess return) is if a certain number of people (the not-so-smart money) are on the wrong side of the trade.

Except the remaining y% is me making money. My monthly cashflow is lower after buying, compared to purchasing. Things have to go pretty bad to offset that. Stagnation means I'm on the correct side of the trade.

But you 2 already have a conclusion. You're not looking to discuss issues rationally - you're just desperately looking for validation in your own choices.

In case you were wondering, most people like me don't take the advice of those who have an obvious, transparent personal agenda. I listen to those who understand that maybe its right to buy, maybe it isn't, every situation is different, and nobody can predict the future of the market. I don't listen to those who already have a conclusion and just spout baseless rhetoric to support it.

"My monthly cashflow is lower after buying, compared to purchasing. Things have to go pretty bad to offset that. Stagnation means I'm on the correct side of the trade."

Ummmm....NO! It means no such thing. Let's say your after-tax outflow from buying is $8K a month and from renting it was $9K a month. But with renting, that's it - he has no additional downside exposure to this dreadful market. You, on the other hand, will watch a place you just paid $1.5M for (for example) decline to $900K before it is all over. Not to mention the opportunity cost of tieing up half a million in capital that earns ZERO under your stagflation example but could earn much more invested in the right way.

Oh, and if you're going to next pull out the old chestnut "Well, it doesn't matter for me because I plan to live in the place a long time blah blah so over the long run it will all even out blah blah blah", let me say this: You're absolutely right, in the long run buying is better than owning. But only a fool would have jumped in at the absolute peak of the market; in two years you could have done the EXACT SAME PURCHASE and been $500K ahead.

You are the guy Don Rickles used to refer to as "Dummy".

"But you 2 already have a conclusion"

Yes, that's right, there are only 2 of us. That's why every other thread is titled "NYC Real Estate Crashing", "You're an Idiot if you buy right now", etc. The 2 of us have registered several hundred different names on StreetEasy; the rest of the city is buying this year, like you. You Dummy...

Obviously I don't think you're the only 2. If now you're resorting to straw man arguments, I think you've exhausted every cheap and transparent trick there is.

"I think you've exhausted every cheap and transparent trick there is."

You know what I haven't exhausted? My capital reserves, because I wasn't stupid enough to buy a Manhattan condo in 2008. Dummy.

"Except the remaining y% is me making money. My monthly cashflow is lower after buying, compared to purchasing. "

Just because a loss is cash flow positive doesn't make it any less a loss...

"Just because a loss is cash flow positive doesn't make it any less a loss..."

Circular logic: you can't assume the loss when proving to me that a loss exists!

You're not reading what I said. That wasn't me "proving" there was a loss, just noting that the logic you gave was bad.

If you think the value might go up, you might be deluded, but your logic would be ok.

But if the tradeoff you think you have is between break even and loss, that is not a risk worth taking... like betting on roulette where winners only get their money back.

"you might be deluded"

MIGHT be deluded? The guy bought Manhattan R.E. just before Wall St. imploded but says it's an OK trade. And you think he MIGHT be deluded??

Cash flow positive means the break-even point is positive. That means a small decline in real values (which I think is probable) may still mean I made the right decision - its a matter of weighing the amount of the decline with my extra monthly cash flow.

Good prediction...