Robert Toll: NYC market "dead"

this is what starts the herd like mentality leading to disappearance of buyers and deals getting done at ugly levels. the 'sideline money' theory is going to be used plenty soon!

Subsidize inflated home prices to save construction jobs?! Ridiculous.

Subsidize inflated home prices to save construction jobs?! Ridiculous.

> Mr. Toll was asked in the call if any members of Congress were on board to back his plea to
> subsidize home prices.

We already do subsidize home prices... to levels above anything except maybe corn...

He said that one condo project that his company is building in the Williamsburg section of Brooklyn was now being marketed as “rent-to-own.”

That's how I stole my one bedroom doorman condo in Astoria for 60% off in 1992 after the 87 stock crash. This time around it's a horror show with the overbuilding and job losses.

Care to elaborate on your 1992 experience? Any familiar patterns shaping up this time around?

"As to why the government should be subsidizing home builders when there is an oversupply of houses, he said the country needed the construction jobs."

Hilarious. Construction jobs to build what? Cars that nobody wants, too?

1987 Stock Market crashed, 1989 Housing Market Crashed..... my Condo was finished in 1989 over 100 units finished with about 20 units pre-sold. The rest sat empty for two years and in 1991 they went rental with an option to buy. My unit was listed at about $235,000 plus an additional $17,000 indoor parking spot. They reduced them them 20% then 10% more when most units still sat empty. I offered $75,000 and eventually agreed at $95,000 then I told them to throw an indoor garage spot. They balked but two weeks later they agreed. I guess this is more than 60% off :)
This time around there are massive job losses, not only on Wall Street but the rest of the New York City economy with a massive oversupply of condos coming on line within the next 12-18 months.
Same pattern but this economy will be approaching depression like times so tread carefully because you don't want to end up in a building that can go to a firesale or with undesirable renters especially with units in the outer boroughs.

I bought my first Manhattan property for $218,000 in 1998 - cheaper nominally than the person who had bought at conversion in 1988. I sold in 2003 for $675,000 - an enormous profit in 5 years. The one below mine - which sold for the same price as mine in 2003 - is now for sale at $1.149 million.

Less than a lesser apartment on a lower floor sold for in 2007 - $1.3 million.

So the trend is down, and it will be significantly down. Look for that $1.149 apartment to go for $700,000 in 18 months.

In other words, right back to 2003 prices.

Oh geez, so you think we still have to weit 18 more months to see these prices to dramatically drop, stevejhx? I was hoping earlier than that, like sometime in the summer 2009.

The unit above me just sold for $375,000 two months ago. This is Astoria but only 5-10 mins from the city by car or train.We also have a full time 24/7 hour doormen.

What is the "sideline money" theory???

Julia - the theory that brokers tell buyers that goes like this. "Manhattan is the best city in the world and real estate here is protected for many reasons. If real estate goes down 5-7%, there are many buyers on the sideline waiting to swoop in and buy! This is why Manhattan real estate will never go down that much"

The theory that there is money on the sideline waiting to be put to work putting a wishful floor on the price adjustment. Works in stocks too. Usually is a hopeful argument by bulls in a bearish environment

I think there is sideline money, people who have been priced out for years. The question is where they'll fell comfortable, given the fear, or able, given the credit scenario, to enter the buying market. Markets usually overcorrect, even absent such a restrictive credit environment.

sideline money = Dow 14,000.

Broke = Dow 8,400.

Aboutready is right, there is that sideline money (I'm a prime example). But the people holding that sideline money generally don't have the income or the desire to pay 1000 per sqft for a luxury condo in LIC or Harlem, or UES for that matter.

There is no such thing as sideline cash. If I buy a house from you for $1M with my "cash on the sideline" the $1M I give to you is now your "cash on the sideline". How this "sideline cash" supports prices in a zero sum game is a mystery to me.

Here's an article from 2006 which discusses the concept of sideline cash in the stock market.

http://www.hussman.net/wmc/wmc060710.htm

you miss the point aboutready...the sideline money theory is used to rationalize a purchase NOW, because there is supposedly sideline money that is going to pour into the market, putting a floor on how low prices can go. Its just a silly rationalization.

When DOW was at 12,500 and down from highs at 14,000, everyone talked about SIDELINE MONEY and SOVEREIGN WEALTH FUNDS! Look at us now. This is such a great example of the silliness of sideline money theory. The theory was used by the bulls to rationalize buying stocks at 12,500, close to the bottom so they thought because of the money on the sidelines. Like I said, its an argument made by the bulls in a bearish environment.

Noah, we don't disagree. I'm saying the sideline money theory as it's being used is ludicrous. Those with money who are waiting to purchase aren't, in this environment, going to be impressed with 5-7%. What I'm talking about I guess could be termed the pent-up demand of the less-then-rich masses. There is some, but as I was saying (perhaps not clearly) it's going to take a lot to compel these people to enter the market. I'm on record with the opinion that we'll get to 2001 prices, and I've been thinking we may even overcorrect beyond that.

As you pointed out, the crash can come much faster than many would expect. And much deeper.

It's also worth noting that people with cash now have a wide assortment of reasonably valued investment alternatives. For example, BAA (investment grade) corporate bonds yield 9.5%. My guess is that "good investments" are being created far more quickly than "sideline cash" can be put to work. I would think NYC real estate would be last (well, maybe before modern art) on a very long list of what to buy when you want to put your cash to work.

mbz - can you give examples of investment-grade bonds yielding 9.5%? That sounds pretty compelling to me, assuming the rating is worth anything (which is a different question, but I can do my own research on the borrower). Thanks.

agreed newbuyer99 - mbz, more details?