Demonstrate with comps price-to-rent ratios are out of whack

We're talking about the same thing. Q3 over Q1, all 2008.

You switched it to Q2.

> Plus, if you put money in the market in the late 1990s, stocks are lower now.

Don't forget dividends...

thrinald: that's not true. A huge benefit to owning (which is priced in - at least at the "reasonable" levels below 1M, even 2M) is the tax benefit of the mortgage. Discounting that and assuming a 100% equity is a very biased comparison.

nyc: I claimed there was some seasonality, you claimed no seasonality. I don't need to prove that there's seasonality in both quarters - one quarter is sufficient to prove you wrong.

If you are talking about buying and renting a condo, the tax deduction is not relevant because its just a deduction against your rental income. Bottom line, if income returns suck, buying real estate is not a good long term investment at that time. To price an investment to a cash return under 4% is crazy.

> nyc: I claimed there was some seasonality, you claimed no seasonality. I don't need to prove that
> there's seasonality in both quarters - one quarter is sufficient to prove you wrong.

You have it backward. We had drops in two consecutive quarters.... meaning going from high to low season, but also one going from low to high season. Not to mention, the drop drom high season DEMOLISHED the drop in other years. And then, on top of that, volume has tanked.

So, I'm not quite sure what you proved "wrong", we've had the largest drop in quite some time AND, we had drops even when seasonality should have helped.

Sorry.

thrinald: "If you are talking about buying and renting a condo"

I'm glad we got that out of the way. No, I'm not a landlord, nor do I ever plan to be one. Stocks are a much better investment. Can we get back on topic now? Rent vs. buy for owner-occupied apartments.

nyc: Nothing you said contradicts my statement. Some of the drop is your prediction, not fact. Some is seasonality. Some is real, but the real drops so far are mild. Will they be severe soon? Who knows. But so far, they've been small. For me personally, quoting Q1 losses is meaningless since I didn't even make my first offer until mid Q2.

Tech_guy open your mind. Whether you plan to be a landlord or not, the cash returns of a purchase and rental is a valuable data point. The problem is all these posts is people who want to buy apartments will find every argument in the book to say that a purchase in 2007 or 2008 was a good investment. Time will prove that it was a horrible investment. They'll even say it was not an investment, even though every time you put money to work that is called an investment. The rent ratios were too high. Interest rates were too low, attracting incredible competition.

As far as mild drops, you are high. We don't know what the drops are because there have been no negotiations from September or October that have closed yet. TO SELL AN APARTMENT TODAY THAT YOU BOUGHT THIS YEAR OR LAST YOU ARE TAKING A 10-15% HIT EASY.

thrinald: why do you think its a correct comparison to completely discount all the (very lucrative) tax benefits that owner-occupied apartments afford their owner? Insisting that you have to look at it as a commercial investment without these perks is an incredibly unfair (and incorrect) comparison. If the only way you can prove your point is to put your head in the sand and ignore a very real benefit of the opposing side, it shows how much confidence you have in your own argument.

Its not the only piece of data, it's one piece of data. Ok, if I look at after tax cost of ownership adjusting for interest forgone (NOT STOCKS, MONEY MARKETS) on a down payment, buying has been a silly proposition for 3 years now, unless you were fast and smart enough to flip. And if you haven't yet its too late.

> Some of the drop is your prediction, not fact.

No, sorry, it is fact. Stop playing games, the market has declined 12%, median Manhattan. And that is just through September. No prediction, those are the actual numbers.

If you want a prediction, its another 7-10% in Q4, and 5-7% same for Q1 next year.

> For me personally, quoting Q1 losses is meaningless since I didn't even make my first offer until
> mid Q2

Congrats.. you win. its "only" down 9.4% through September.... and go knows what happened since the panic.

You can play these games all you want, but the decline is now here and pretty well documented. And "mild" is just plain wrong.

Maybe you and I are in different tax brackets then. Or maybe you're looking at more expensive properties than me, where the interest rate may be higher (Jumbo) or the tax benefit isn't fully there. For me, I use historical returns on a conservative stock/bond mix (8%) as the opportunity cost lost on the down payment, and I *do* find some properties where the cost of ownership is equal or even slightly lower than renting.

These are resale coops, not new construction condos. If that's what you're looking at (since you keep mentioning condos, renting them out, etc) then I agree - new construction condos have been very overpriced in a rent vs. buy situation for a long time now.

Yeah. I will agree with nyc10022...it was mild over the summer, but then the stock market went down another 25% and before that Lehman, AIG, Fannie Freddie. Its a dream that it isn't down 15% already and headed down another 15% at min.

We were looking at a $1.1mm 2 bed that would likely rent around $5k. It was going to cost us $4k a month to live in after taxes excluding 5% interest say on a $400k down payment. So it would basically have cost us $600-700 a month more to buy than rent. And before things blew up, that was the state of the market. How is that a good investment? Only if it goes up is that a good investment. Now we know it's not going up any time soon, so its a terrible investment. And we know rents will likely fall. The debate was reasonable over the summer. Recent events have made the rent/buy argument insane. And if one was disciplined, I mean it really didn't make sense to buy after like 2004. In 2004 rents were very low. Long term or short term is not important, its all about entry points.

To make it plainly clear, this is what we were responding to:

"I think mild declines, mostly in real terms (inflation eating value while nominal prices stay steady) are the most likely case."

You can talk about seasonality or other rationalizations up the wazoo, but the "nominal prices stay steady" needs to be thrown out the window. Anything said to the contrary is just running in circles.

The decline is in, and its already way past "mild"... and we'll just have to see how bad it gets...

nyc: the funny thing about me telling you you're biggest problem is stating guesses as fact, is that the more and harder you insist that these REALLY ARE facts (instead of linking data), the more you prove me right :)

The fact that you didn't ask when my offer was accepted or when I closed (hint: not Q2) - you instead went off what I clearly said was "first offer" - shows that you're more interested in proving a loss than discovering the truth.

Tech_guy everybody thinks they got a below market deal. Reality is your place is 10-15% in the hole and will likely bottom at least 30% in the hole. Everyone wants to see links but what don't you understand about September negotiations not showing up in closings until Q4?

> nyc: the funny thing about me telling you you're biggest problem is stating guesses as fact, is that
> the more and harder you insist that these REALLY ARE facts (instead of linking data), the more you
> prove me right :)

Are you really now just flaunting your ignorance?

Just because you can't read a post doesn't make you right, just ignorant. I told you where the data was, and all you do is keep posting and changing your story. "MY APARTMENT WENT UP BECAUSE I CAN'T READ THE RESEARCH REPORTS!". Now *that* is a winning attitude. You'll make MILLIONS that way I'm sure.

Here, I grabbed the link just for you...

http://www.crainsnewyork.com/apps/pbcs.dll/article?AID=/20081003/FREE/810029964/1072

And, because you seem to have trouble with links, we'll even read it to you

"The median sales price for Manhattan apartments fell to $928,263, down 9.4% from the second quarter, according to a Prudential Douglas Elliman report prepared by Jonathan Miller, chief executive of real estate appraisal firm Miller Samuel Inc. "

So, if your whole game is just being childish and ignorant, please just stop it now. Its getting old.

The market is in decline, the numbers all show that, and claiming anything else is just a waste of time.

"I think mild declines, mostly in real terms (inflation eating value while nominal prices stay steady) are the most likely case."

You are going to stand by this statement now?

I never said my apartment went up. Not once. Talk about flaunting ignorance!

Yep, I stand by that statement. Will it be true each and every quarter? No. Will it be true over 3 years? Probably, but unlike you, I don't pretend to see the future (though I won't sell that quickly - just giving you a reference for my prediction). Could I have gotten a slightly better deal by market-timing a particular panic-stricken quarter? Probably, but I didn't want to move twice in <3 years.

That same article quotes YoY prices having gone *up*, FYI. But that was average, which I put much less stock in. They didn't mention YoY medians.

Curbed ate the bottom half of my post...

...didn't want to move twice in <3 years.

The article also mentions YoY *increase* in average price. It doesn't mention YoY median which I'd trust more. Point is, you're still counting the seasonality component as a true decline.

It ate 2 posts now... suspicious. I don't know if either of you can see this, but I'll use this bug as a cue for me to be done with both of you. I'm here to learn about current conditions. You 2 both have an extremely strong agenda and you'll push it no matter what, facts be damned. I bet if I told you I bought a 15 CPW penthouse for a thousand dollars even, you'll be telling me its really worth $700 tops.

> I'm here to learn about current conditions.

Apparently not. We've pointed out reputable sources noting a SIGNIFICANT decline in the market, and yo are going on and on about how there is no nominal decline.

Your quote was shown to be plainly wrong.

> Yep, I stand by that statement. Will it be true each and every quarter? No. Will it be true over 3
> years? Probably,

Actually, wrong on both counts. You were wrong two quarters in a row, and over three years, even if it bounces up, a 15% decline and then a rise is certainly not "flat".

You are just making things up now. You aren't looking for info, you are shilling.

My prediction was forward looking, not past looking. I meant it from when I bought (and you still couldn't possibly care less about when that was, despite somehow knowing for a fact that I'm 15% in the hole already). I also plan to use YoY numbers to see if its true or not, to discount the seasonality.

But please, continue to tell me my situation is wrong without *any* regards to the facts about my situation. I find it highly amusing.

But really, I'm going much more into fact than you'd imagine: I made a spreadsheet for myself - takes every housing payment I make (including down payment, closing costs, etc), and considers the equivalent of putting that into the Vanguard S&P 500 index fund. Yes, it takes dividends and capital gains distributions into account. When I sell, that spreadsheet will tell me *to the penny* how much the equivalent rent + savings in stock market would have been.

Though I'm sure you'll still insist I booked a loss, despite what those numbers show.

> My prediction was forward looking, not past looking

Jesus, cut the rationalizations already. You didn't know about the 12% decline and you thought we were flat, so now you are just being disingenuous.

As for predictions, just bought right before the biggest Wall Street crisis since the great depression... if its forward looking you want, I think that one pretty much speaks for itself.

> But please, continue to tell me my situation is wrong

I didn't say your situation was wrong... just your facts and analysis.

> Though I'm sure you'll still insist I booked a loss, despite what those numbers show.

If your house halves in value, and the stock market went down 90%, that doesn't mean you didn't have a loss.

A loss is a loss. Pointing out other losses you didn't have doesn't change that.

nyc10022, where are you getting this 12% figure from?

"I didn't say your situation was wrong... just your facts and analysis."

Now my facts are wrong? Why don't you tell me my closing date, since you continue to not care when I think it was (and in fact, think I'm wrong about that fact!)

"If your house halves in value, and the stock market went down 90%, that doesn't mean you didn't have a loss. A loss is a loss. Pointing out other losses you didn't have doesn't change that."

Its what I would do with my money if not buy an apartment. That makes the comparison very valid and real. For me at least - you'd do something different, so your rent vs. buy analysis should use your favorite alternative in mind.

Of course you'll tell me I'm wrong again. Typical fashion, you ignoring facts and cherrypicking whatever works best for you, while I look at real facts.

thrinald - if you chose to rent that apartment, you would have had a loss of $60k the first year alone in rent money that you threw away. Even if the apartment goes down in value for a year or two before going back up, you are losing money every year in the $5k/month rent.

Don't tell me you will make more money in the stock market, becasue you cannot assume the market will increase if you are not assuming that RE values won't go up in the future either.

> nyc10022, where are you getting this 12% figure from?

All the brokerage reports had the 9.4% Q3 over Q2, crain's covered that pretty well (link about). And, if you go through the actual reports, they noted the 2-3% decline Q2 over Q1 as well.

> Its what I would do with my money if not buy an apartment. That makes the comparison very valid and
> real.

Bad choice vs. worse choice. OK, all the power to you then. But I'm talking about buying vs. waiting it out... in an intelligent manner. I've said it a lot, you DO NOT PUT DOWN PAYMENT MONEY IN THE STOCK MARKET.

> Of course you'll tell me I'm wrong again

Sure, you are wrong. You missed that there was a decline. Call it cherrypicking all you want, there was a substantial decline and you missed it. That isn't cherrypicking, thats the whole big tree landing on you.

waverly: the post-tax-benefit interest on your mortgage is sunk cost too. thrinald's looking at a 700M mortgage at roughly 7%. Guessing 40% marginal tax bracket (28 federal, 6 state, 6 city) his annual sunk cost due to interest would be $30k. The down payment in a 12 month CD at 4% is another $16k.

Claiming that rent is money thrown down the drain is a common misconception. Or rather, its 100% valid, but the implication is wrong: down payments and mortgages also involve money thrown down the drain. To only count the former but not the latter is a common misconception.

"Call it cherrypicking all you want, there was a substantial decline and you missed it. That isn't cherrypicking, thats the whole big tree landing on you."

Its cherrypicking because you don't know (and don't care) when I bought, yet still claim to know I missed the decline.

"All the brokerage reports had the 9.4% Q3 over Q2, crain's covered that pretty well (link about). And, if you go through the actual reports, they noted the 2-3% decline Q2 over Q1 as well."

I don't recall the other reports, but the StreetEasy 3Q report has median sales price down 5.5% QoQ and up 7.9% YoY (and the 2Q report had up 8.1% QoQ and up 17.4% YoY), so I would be careful about citing that 12% as fact.

> Its cherrypicking because you don't know (and don't care) when I bought

Yes, I don't care when you bought. That would just be anecdotal data.

> yet still claim to know I missed the decline.

I just mean that you didn't notice and it had already happened... "Missed" as in the bus went buy and you didn't get on it.

> I don't recall the other reports, but the StreetEasy 3Q report has median sales price down 5.5%

Miller Samuel... 9.4% Q on Q. Link above through Crains...

Thanks nyc10022, but looking at other reports you get a different story. As I said, the StreetEasy report has median price UP over the last two quarters. The Corcoran report has median price unchanged from last quarter and up 10% YoY (a bit unclear as to the figure over the past two quarters). Again, let's not be too quick to cite certain numbers from select places as fact. It's evident there's some conflicting evidence here.

nyc: I made a *forward* looking prediction (what other kinds of predictions are there, anyway?). You're using data published before I *made* that prediction to prove me wrong.

Its ok - I now know your game. I know you're not actually so stupid as to think historical data can disprove forward looking predictions. As you said on another thread, you believe a few crazies on Streeteasy can affect the market. I also know you want to buy in the near future. Clearly you're not interested in the truth - just getting a better price for yourself through spreading FUD.

I just wish you weren't so stupid as to think a few crazies on Streeteasy could actually affect the market! Keep trying to decrease the water level of the ocean, one teaspoon at a time.

tech - I'm sorry but you're in denial if you think median prices are not going to fall precipitously over the next 1-2 years. With Wall St decimated and European buyers disappearing b/c of their own problems, there's no other outcome possible. You may sell your place for close to what you paid (if you're lucky), but there's NO CHANCE median prices will not be WAY DOWN in the next couple of years. Sorry.

waverly
about 21 hours ago
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thrinald - if you chose to rent that apartment, you would have had a loss of $60k the first year alone in rent money that you threw away. Even if the apartment goes down in value for a year or two before going back up, you are losing money every year in the $5k/month rent.

waverly, waverly, waverly, you silly silly man (or woman)
if you borrow the money from the bank to make the purchase, you have to pay the bank interest. You are "throwing away" your interest to the bank.

Responding to the disputed price declines in Q3, if you dig into both the Miller Samuel - Prudential and Corcoran reports, the data within looks worse than the supposedly all-encompassing median figures say.

Corcoran sez median price unchanged Q2 to Q3, but if you break down into co-op vs condo and size, the individual categories are almost all down:

Total: Studio 0%, 1BR -3%, 2BR -4%, 3BR -9%, All 0%, per sf -6%
Coop: Studio -3%, 1BR -6%, 2BR -5%, 3BR -24%, All -2%, per sf -2%
Condo: Studio -1%, 1BR -2%, 2BR -13%, 3BR -3%, All 2%, per sf 3%

The only way this data can have integrity is if there was a significant mix shift toward condos from coops and toward larger apartments in the mix from smaller ones. There is no way for the total median to be flat when all categories fell unless the median size moved up.

There is a similar issue in the Miller Samuel data

Coop: Studio -8%, 1BR -17%, 2BR -18%, 3BR -21%, 4BR 24%
Condo: Studio -6%, 1BR -11%, 2BR -27%, 3BR -14%, 4BR 1%
If you weight these figures by their % of sales mix disclosed in the reports, you get a weight average of -16.25%

> I just wish you weren't so stupid as to think a few crazies on Streeteasy could actually affect the
> market!

Tech, we get it. You bought at the top of the bubble, and you are trying to insult others to make yourself feel better about it. Don't look at the data ever again, and I'm sure you'll be fine. ESPECIALLY the Q4 data.

I'm not going to play that game with you. You started the insults, I'm hitting the ignore button.

> You are "throwing away" your interest to the bank

You are also "throwing away" your maintenance costs.

> the data within looks worse than the supposedly all-encompassing median figures say

Thanks for the dig, crescent...

The bigger point is that we don't even have any panic months in these. I am awful curious to see what Q4 looks like...

4Q numbers will no doubt be a disaster. Banks aren't lending, potential buyers have had 30% of their net worth wiped out in the stock market, the Europeans are worse off than we are. Do the math, people...

What does math have to do with real estate?

"I'm not going to play that game with you. You started the insults, I'm hitting the ignore button."

Wow, I seem to have struck a nerve! Going back (search for "ignorance") and you'll see who started with the insults. You just don't want to play anymore because I figured out your game - try and influence prices here to get yourself a better price when you buy later. Such a stupid concept, its actually quite hilarious.

I can handle the possibility that my property goes down more than I expected. I didn't buy at the top, but I knew I was risking buying closer to the top than the bottom. Can *you* handle the possibility that real estate won't drop the 40% you expect, and therefore you'll *never* be able to afford to buy?