2010: NY apartments lose another 40-50%

Hey Toto I guess we're not in Kansas anymore.... so true!

All true, but... how far?

A Manhattan real estate expert recently reminded me of an old rule of real estate. It's something we've forgotten over the last decade. For-sale prices are suppose to have a close relationship to rental prices. Here's the old rule. For sale housing should sell for 15 to 16 times the annual rent of a comparable rental apartment.

So if an apartment rents for $2,000, a comparable co-op or condo should sell for $360,000 to $384,000 in a normal market. Less than that in a housing crash.

But not that much less. There is still strong demand waiting for lower prices. I know many renters that wish they could buy. I'm one of them. Falling for-sale prices don't scare me much. I just wish I could stop the relentless procession of rent hikes that keep coming, good times and bad.
That's steeply below today's prices.

Yes, we're in stage 2 - but it's stage 2 out of 5 (or 10 maybe).

rents need to come down this year. I have a strong feeling that property owners are keeping units off the market to hold up rents. I think NYC is in for a large rent correction, especially when jobs are being lost at astounding rates.

"A Manhattan real estate expert recently reminded me of an old rule of real estate. It's something we've forgotten over the last decade. For-sale prices are suppose to have a close relationship to rental prices. Here's the old rule. For sale housing should sell for 15 to 16 times the annual rent of a comparable rental apartment."

Actually, over time, it's 12x in New York. 11.7x to be precise.

himwhoknows. what do u do (if I may ask). agree with tripolar world:how do u know

he who is curious is him who should not know. The only true wisdom is in knowing you know nothing.

on occassion i like to visit these boards as we go through the various chapters of this book. And in all honesty we are only finishing the 6th chapter of a book which doesn't end until the 10th.

Excellent post. Reality for sure. Market in the 7k range will mean RE values down 40% in 2009-2010.

HWK - love the character you are playing, but....

You don't know what you are talking about. There are 535,000 financial sector jobs in NYC. You are suggesting that NYC will lose almost 94% of the financial sector jobs by 2010....which means you know nothing about what you are talking about. Wisdom? Not so much.

@ Waverly, great luck will be held for those if thy declines are not grander than 40%. If NY is no longer thy financial capital, in a new multi-polar world then those jobs will be moved to new regions. Finance will not dissappear, just be re-arranged.

additionally, there are far more than 535K financial related jobs in NY, at least there were. I'd say 75-80% will be trimmed after the storm has passed. Massive consolidation in months ahead.

I was pretty sure waverly was right that there are about 500,000 financial services jobs in NYC. This was confirmed by a quick google search.

http://uk.reuters.com/article/bankingFinancial/idUKN1749282220080718

> But not that much less. There is still strong demand waiting for lower prices. I know many renters
> that wish they could buy. I'm one of them

thats not how markets work.

1) Prices are down, and sales are down even more. Doesn't look like those "waiting" are moving anytime soon.
2) Those "waiting" will be VASTLY outnumbered by those FLEEING. Once the panic sets in, you're talking about tons of folks leaving the market
3) Once the fleeing is seen, the waiters will likely continue to wait... and wait...

kspeak - this is just another example of people posting extreme predictions on SE without any real understanding of what they are talking about. For example, certain people have predicted NYC RE to fall 50% or 60% or even more, so everything they post is skewed to hammer home the narrative they want to tell, so they can be seen as "the one who called it".

Point of view tells a lot about what is being posted. Anyone smart can take a set of numbers and twist them to support whatever it is they want to push. Hopefully, with a lot of people contributing we can cut through the garbage and try to get a better sense of where we really are, where things are going and how we will be affected.

You don't need to lose 94% of finance jobs to see a 50% reduction in RE values (see 1989).

And, we didn't have nearly the same bubble in 1987 either...

I see a bid for apartments at a "rental value" which appears to be approximately $700 psf currently for generic below 96th St Manhattan.

In recent years, developers would say that they couldn't make new rental construction work, unless the cost of the land was below market (often because it was bought years earlier). The cost of new construction exceeded the rental value, but not the value at which condos could be sold, so condo development continued. Now that condos are not selling well, prices will need to revert to rental values. Landlords have capital discipline and insist on a risk adjusted return for their investment.

People may still bid higher prices for a home they love, but in a declining market, this will happen with less frequency.

NYC - I agree with you, but 94% of finance jobs is just lunacy.

Exactly. It's one thing when people get facts wrong because they didn't know or misread, but when they make up facts that reveal a complete misunderstanding of fundamentals (e.g., how many jobs are in financial services in the first place) or arguing that rents have "definitely" gone down since 2000 as another poster did (when I in fact showed proof that rents have increased approximately 25% since 2000), it dis-credits the rest of what they write. Even if most of what the poster writes makes sense and is intelligent, a few totally incorrect claims dilute otherwise good points.

""HWK - love the character you are playing, but.... You don't know what you are talking about.""

Waverly, if Him REALLY knew what he was talking about he'd know it should be 'HE Who Knows', not 'HIM Who Knows'. Guess Him actually doesn't know much...

Steve,

You quote 11.7 Price/Rent as the average price/rent ratio for Manhattan "historically."

Do you know what period that covers and what the long term "range" has been?

Thanks.

Topper - the one I have seen is a 15 year average (not sure when that 15-year period ended but safe to say in captured most of the 1990s). NY had a lot of problems in the early 1990s with crime, etc. so there is no guarantee that it will go back to that. As I have pointed out, that average is below other major cities, which doesn't make necessarily make sense and suggests that the 1990s was an anomly/apartment prices were undervalued. However, markets tend to over-correct the other way as well so prices could reach this level.

My personal view is that prices will over-correct the other way and could dip to 11.7x or lower, but also that over the next 30 years, New York's median price/rent ratio will be above 11.7x. My view is also that crime will increase slighty but not spike.

This means I don't think it's stupid to buy if it's really cheaper to buy than rent - which it is not right now as a general rule, and rents will likely fall as well - but you have to be a long-term holder (10+ years) and be the kind of person who won't kick themselves because they could have gotten a place that was 20% better if they'd waited anotheryear.

> As I have pointed out, that average is below other major cities, which doesn't make necessarily make
> sense and suggests that the 1990s was an anomly/apartment prices were undervalued.

Not sure if it is...
We also have 1) more renters than any other city and 2) aparments with maintenance high enough to rent nice apartments with...

None of that has really changed dramatically, so the expectation of a lower than US rate to hold is not crazy...

"if it's really cheaper to buy than rent"

I have seen a number of people posting this.

But, really, has it ever been cheaper to buy than rent? IMO, I think it is always more expensive to buy than rent for a variety of reasons, such as risk, reward, transaction costs.

So, I think if we take the identical unit & ask "is it cheaper to buy than rent?", 99% of the time, no matter the state of the market, the answer will be "no"; it is almost always cheaper to rent than buy.

Agree/disagree?

Thanks, kspeak and nyc10022 for weighing in.

"Do you know what period that covers and what the long term "range" has been?"

Yes, it's the 15-year average. Anything over 15x is well overpriced if just using a strict price-to-rent ratio. Different numbers will be obtained depending on the specific calculations used, but for just price-to-rent, 12x is the 15-year average.

"I think it is always more expensive to buy than rent for a variety of reasons, such as risk, reward, transaction costs."

Theoretically it should be cheaper to buy than to rent, since there's more risk involved.

waverly I agree totally with you on this. I have posted some very sarcastic remarks aimed at such people for that very reason. Making these "wet dream" predictions of a fall in values of 50% or more in the next year or so.
Posting that we have already fallen 20 to 30% while the only research to date has said nothing of the sort. Cherry picking postings from this web-site with extremely small numbers of price reductions from a exagerated data base of 9000 listings and using that as proof.
Comparing this contraction in the Manhattan RE to 1987, screams they don't have a clue about what is going on now or let alone what was going on in 1987.
As I stated before, this is for some, one big "circle jerk" playing off eachother's fantacies of getting property at rediculous prices based upon equally rediculous expectations.
If they only truly realized what the ramifications of a 50% fall would be like for "everyone" they might just realize the foolishness of their predictions.

When fear and credit freeze ease some, we will have a better picture of where RE stands in NYC

That said, tech_guy / LICC / JuiceMan and others have argued that current price levels in Manhattan are justified because of the "joy of owning," to paraphrase. Their argument is that the wealthiest people in the world - ostensibly the world of finance, Masters of the Universe - would actually pay a premium to purchase rather than rent. But as they are wealthy their costs should be lower - they are a lower credit risk - and because they're buying rather than renting, they should be paying less.

So, their argument goes, the most creditworthy people in the world will knowingly pay a higher price to take on a greater risk. It makes no sense whatsoever.

> But, really, has it ever been cheaper to buy than rent?

Yes.

> IMO, I think it is always more expensive to buy than rent for a variety of reasons, such as risk,
> reward, transaction costs

Not true. Those are all factors, but prices change.

> So, I think if we take the identical unit & ask "is it cheaper to buy than rent?", 99% of the time,
> no matter the state of the market, the answer will be "no"; it is almost always cheaper to rent than
> buy.
> Agree/disagree?

Completely disagree.

There have been times where it is cheaper to buy, plain and simple.

> Comparing this contraction in the Manhattan RE to 1987, screams they don't have a clue about what is
> going on now or let alone what was going on in 1987.

I agree. This time its worse....

> If they only truly realized what the ramifications of a 50% fall would be like for "everyone" they
> might just realize the foolishness of their predictions.

You mean like corporate bankrupcties left and right, municipalities heading toward bankruptcies, record unemployment...

Oh wait, we have that.

Throughout the country, it has definitely historically often been cheaper to buy than to rent, or at least equivalent (comparing monthly costs, that is). Transaction costs are an argument that it should be cheaper to buy than to rent. Risk/reward arguably cancel eachother out, but some would say the risk outweighs the reward for one simple reason: even if you THINK you are a long-term buyer and can ride out market fluctuations, you may have to sell earlier than you think for an unforseen reason (loss of job, relocation of job, divorce or marriage, more kids, etc.). Whereas the "reward" is arguably not a real reward - you will always need somewhere to live, so even if your home appreciates in value, you'd need somewhere else to live if you sold it, and unless you go somewhere smaller/cheaper, it doesn't matter. Also, on the whole, the long-term return on real estate across the whole country has been basically inflation, unless you are lucky enough to pick the next hot spot.

NYC 10022 - Interesting point about maintence costs, which are higher here than other cities and adds additional monthly costs on top of your mortgage and therefore put downward pressure on prices. There also are more rental options than most places. Even still ... I think NY is a fundamentally more desirable place than it was in the 1990s and I believe there has been a "paradigm shift" and the desire to live in cities again is real. I still think the 1990s was somewhat of an anomoly, and not representative of what the real average should be. Maybe we'll end up with a P/E lower than the rest of the country but 4x (e.g., 12x for NY vs. 16x for other cities) seems to overstate this ... just my opinion

hwk uses bad grammar, more than likely lives in a lousy rental (anyone cheering on RE declines in this environment does), and demonstrates a poor grasp of history.

so why are we all responding to him?

during the great depression, WWII, NYC's financial crisis in the 70s, and most recently 9/11 people like hwk come to the fore and spew their rhetoric of fear and despair. we need to change the tone of our predictions of the future so people like him fail as miserably as they have done in the past. i am certain of one thing - the future is up to us. harken back to the those darker moments in nyc's history and you'll realize one common trend - nyc emerges stronger and better after each dark hour, each trauma and each moment engulfed in tragedy. why? its people! diverse, hard-working, ambitious and rugged individuals who find a way not only to survive but eventually to thrive. no doubt this downturn will be severe and the correction in asset prices will be deep. but i assure you that nyc will emerge at some point in the near future wiser, better and stronger.

i hope there are more of you who agree with me.

"during the great depression"

Missed it.

"WWII."

Ditto.

"NYC's financial crisis in the 70s"

Was a kid.

"and most recently 9/11"

Witnessed it.

"people like hwk come to the fore and spew their rhetoric of fear and despair."

I don't think anyone did any of those things - if something is wrong, you work to fix it. You can't work to fix it until you admit that it's wrong. Right now things are wrong. Better to be honest about it.

ruff, predicting that prices will fall substantially does not imply you are a buyer of property at lower prices. I don't understand why negative predictions are "foolishness". If analytical minds truly prevailed, Wall Street never would have created subprime loans as "AAA". Wall Street did create a mess, so we will be living through the consequences.

Thanks, Steve.

"You don't need to lose 94% of finance jobs to see a 50% reduction in RE values (see 1989).

And, we didn't have nearly the same bubble in 1987 either..."

But that also doesn't mean that this will happen now. It might, but there are also a lot of differences in NYC today compared to 1989. The only thing certain is that the economy is in shambles and will get a bit worse before it stabilizes and only then will it get better. How RE in NYC is affected with any certainty is just a guess right now. It will go down, but how much and for how long...no one has a crystal ball, but an awful lot of people have theories that they are pretty confident in.

"Even still ... I think NY is a fundamentally more desirable place than it was in the 1990s and I believe there has been a "paradigm shift" and the desire to live in cities again is real."

This is flawed logic to me. I get that these bits are true, though I'm not sure why you think it would affect long term equilibrium. These factors would raise both prices AND rents.

What moves the ratio of each (among other things) is usually anticipation of growth. People buy for prices higher than the cost of renting because they think they'll see appreciation. People bought at crazy prices because they thought they'd see even crazier prices.

Now that those days seem to be gone (no one seems to be calling for an increase in prices), then that would actually push the ratio lower than historical. When folks expect losses, they have less reason to pay more to buy, and might actually prefer to rent.

> I still think the 1990s was somewhat of an anomoly, and not representative of what the real average
> should be.

The average should be near breakeven. Expecting more is what led to the bubble.

> Maybe we'll end up with a P/E lower than the rest of the country but 4x (e.g., 12x for NY vs. 16x
> for other cities) seems to overstate this ... just my opinion

25% less in a VERY pro-renting city vs. total. Doesn't sound that crazy to me.

That being said, you really think we'll stick at 16x nationwide when folks are running from buying? Maybe the whole country goes to 12x or lower.

There goes steve with his incorrect data and mistaken ratio analysis. In reality, taking into account tax deductions and other factors that steve likes to ignore, the price/rent ratio in NYC is more like 18-20x. 12x is just ludicrous. Thorough, objective analysis is not one of steve's strong points.

Thanks everyone.

In the last 10 years, I, personally, have never seen an instance where, on a cash flow basis, it was cheaper to buy than rent in Manhattan. Mtg + cc/maintc were always higher than rent.

My grandparents told me they could have bought an apt at 40 E. 88th St in the 1960s for $40K, but that was too much for them, so they rented because it was cheaper.

nyc10022 Every time someone like yourself post, you just make my point more on.

PMG When you predict something based upon what you think rather then what the information, research, and data suggest at the moment is not being analytical, it is just being opinionated.
They are just like A'holes, everyone has one!

dwell, thanks for more real-world evidence that steve was wrong about his claim of 0% real long-term growth in prices of NYC residential real estate.

ruff, saying that apartments are worth what the "comps" are is not appropriate when there is a shock to the economy and jobs are being lost in large numbers. Then, what people "think" about value becomes important. Opinions become important. Analyze the downturn in the late 80s / early 90s. Prices declined substantially and quickly during that time period, then drifted negatively for at least four years.

Ignoring comment by LICComment.

Maybe the whole country goes to 12x or lower.

Not necessarily. It depends on the relative costs of renting and buying, that is, some places have a huge stock of rental apartments and others have a huge stock of properties to purchase. That mix is important. Also the market constraints are different - in New York, standard to rent is 40x monthly rent in income, which tends to hold rental prices down as fewer people can afford more expensive properties. Other locations have a 30x ratio - meaning you can make less and still pay the same rent.

If anyone doesn't believe the historic rent ratios, go here:

http://money.cnn.com/magazines/fortune/price_rent_ratios/

And press the p/r tab.

Interest rates will have an effect on that ratio, as will whether local banks use a PITI of 28% or 32%. Every market is slightly different.

"I, personally, have never seen an instance where, on a cash flow basis, it was cheaper to buy than rent in Manhattan. Mtg + cc/maintc were always higher than rent."

Exactly why real estate is overpriced. Though I would say that is true only for the past 5 years; things were about the same from 1998-2003, and the ten years prior it was cheaper to buy than to rent.

That chart, Steve, is for the New York "metro" area. You have been quick to note that Case-Shiller numbers have not been particularly valid for Manhattan.

Any sense as to the degree to which Manhattan is different from the Metro area in terms of Price/Rent ratios?

"I get that these bits are true, though I'm not sure why you think it would affect long term equilibrium....People buy for prices higher than the cost of renting because they think they'll see appreciation."

That is one of the reasons why people buy, but for you it is the only reason that YOU would buy so you then put that on everyone else as THEIR standard for buying. Of course no one wants to buy something that they believe is going to immediately lose value right? Well, have you or anyone you know ever bought a car? That loses valkue the moment you drive it off the lot. People buy for many reasons. Some make more sense than others, but just becasue they aren't your reasons doesn;t mean that no one is going to buy in NYC at 16x or 18x rent. You cannot ignore this aspect when analyzing this or you are not including important pieces of information in your analysis.

You don't think this is right? Let's say you are the Yankees and you are considering whether or not to off CC Sabathia a 6 year / $140 million contract. His stats are great, so it seems like a no-brainer, but you are kidding yourself if you don't think that they are looking at intangibles (does he want to pitch in NYC / can he handle the media and crazy lifestyle / how will he be on the East Coast far from his family).

My point is that the numbers tell us a lot, but they don;t tell us everything. The desirability of NYC is a real consideration for people. WANTING to live in NYC in an apartment that you own is a real issue for people. Not having to haggle over rent increases every year is a real issue for people. The belief that NYC is a great city and will continue to be is a real issue for people.

PMG Look, you posting are naive at best. They are not based in fact, or reality.
As for NYC in 80's, at this moment in time, there is no comparison. Supply in the 80's totally, in an extreme way outwayed demand. (Not seen here in lastes data) Mostly because of co-op conversion glut. And if you had ever lived here during that time you would also see obvious differences in quality of life. This is not the same city as in the 80's and because of gentification will not return to such a state.

>>> "This is flawed logic to me. I get that these bits are true, though I'm not sure why you think it would affect long term equilibrium. These factors would raise both prices AND rents."

If people decide they want to stay in a place longer - e.g., so many families wanting to stay in NY with kids - transaction costs become less of a factor. The shorter somebody's time frame, the more they think about transaction costs in the rent/buy equation. For this reason, smaller units should always have a lower "P/E" than bigger units. I would argue the reason NY used to have a lower "P/E" is because it was more transient: people with kids used to leave the city with kids, so most people's time frame was shorter, making the inflation hedge not important.

You can argue that this dynamic will change (people will flee to the burbs) or rents will go down making he inflationary pressure not a concern (and I agree with this but don't think they are going to go down 30%) but the logic is not flawed.

>>> 25% less in a VERY pro-renting city vs. total.

Again I think we are less "pro-renting" than before, since more people want to stay here with kids. I grant we will always have more renters than other cities, but I am arguing that we are less pro-renting than 20 years ago.

>>> That being said, you really think we'll stick at 16x nationwide when folks are running from buying? Maybe the whole country goes to 12x or lower.

In the short-term it probably will. But I don't claim to have a crystal ball. Markets usually over-react in the short-term. Between 2009-2015 it may well dip below 12.0x. So might the rest of the country. I am arguing that between 2009-2039 New York city is not going to have a P/E of 12.0x for all the reasons I have suggested. This is classic value investing - buying things when they are cheap (cheaper to buy than to rent) rather than pretending one can forsee the exact bottom of the market. To me, it comes down to where do rents go over the next 5 years.

I would also be curious to know what the impact of gentrification is on price/rent ratio trends. The City has changed considerably over the last 15 years, after all.

ruff, call me naive, but I have lived in NYC for 25 years, and have owned for the past 20 years, so I know that downturn firsthand. Further, I have managed to minimize my portfolio losses this year to under 5%, because I used my head rather than applying commonly held wisdom about investing. how are you doing?

PMG We are not talking about "mine" or your portfolio. We are discussing your naive, fantacized view of what is going on right now.
If you truly new the downturn then and truly understood what went on then you would not make such "stupid" statements. Which leads me to feel you were not around then. I can say that with conviction, I also own, have lived here during the 70's, late 80's till present. For anyone to suggest there is a comparison of NYC then to now, other then a stock crash does not know what they are talking about. And with that I dismiss you, rejoin your circle.
There is no doubth, that what is happening is scary and does not forebode well for at least the short term. But, as has been said to you before, analytical data does not support you or someothers posting, thougths, or desires.
Will Q4 data show much more? Probably not, more like Q1 we will know where we stand and possibly going.

Topper, sorry, there are no more accurate data than that, that I am aware of.

"Supply in the 80's totally, in an extreme way outwayed demand."

Beyond spelling, that's not true. In the 80's much of the "supply" was for non-eviction co-op conversions, meaning that only 15% of the units "for sale" actually had to be sold for the plan to take effect. So up to 85% of the inventory figures were fake.

ruff, so you have been in nyc longer than I. you still appear to have brokerage notions, rather than capital market notions of value. I never claimed that nyc was going to return to the 70s, though that is a real possibility. How is the city's budget going to be in a few years? The one thing that will potentially "save" real property value is the prospect of the federal reserve holding interest rates near zero for an extended period. Dollar denominated values for homes may hold up or even appreciate under that scenario, but the value of the dollar will inflate away.

stevejhx Your figures, absolutely untrue.

Here is just one article explaining what went on, but there tons of others.

http://query.nytimes.com/gst/fullpage.html?res=9C0CEEDA163EF937A15755C0A966958260&sec=&spon=&pagewanted=all

Here is another, about the third or forth para answer you in a nutshell, during the 80's 35,000 units a year were coming onto market.

join the circle

ruff, I don't see how your first article proves your point - it discusses co-op conversions, principally, which is my point.

I don't see your second post.

But here is the truth:

Is the Manhattan Co-op An Endangered Species?

The state has approved only 12 buildings for residential co-op conversion so far this decade—and just two last year

Once all the rage, the conversion of Manhattan buildings into residential co-ops has thinned to a trickle this decade. In the last seven and a half years, the state has approved the co-op conversions of just 12 Manhattan buildings.

In the three years from 1987 through 1989, the state approved 461 co-op conversions—or about 71 percent of the conversions approved in the last 20 years. Over the 10 years of the 90’s, the state granted 170. (The State Attorney General’s office must approve co-op conversions in either commercial or rental buildings.)

http://www.observer.com/2007/manhattan-co-op-endangered-species/

Boom looms for co-op conversion
Real Estate Weekly, Feb 11, 1998 by Lois Weiss

[...]

Since the late 1980's, the number of conversions has been minimal. In 1987, during the heyday of the last cycle, the New York State Attorney General's office accepted 1,361 plans statewide. In 1997, they accepted 154.

In Manhattan, the only county for which a breakout was available, 50 plans were accepted in 1987. Last year, only eight plans were accepted - and they were all condominiums.

http://findarticles.com/p/articles/mi_m3601/is_/ai_20476366

Hmm, more incorrect information from steve. Interesting . . .

"In the last 10 years, I, personally, have never seen an instance where, on a cash flow basis, it was cheaper to buy than rent in Manhattan. Mtg + cc/maintc were always higher than rent."

Thats the last 10 years, when you're talking about unprecedented price growth.

I have, and it was more than 10 years ago.

> PMG Look, you posting are naive at best. They are not based in fact, or reality.

Look int he mirror.

> As for NYC in 80's, at this moment in time, there is no comparison. Supply in the 80's totally, in
> an extreme way outwayed demand. (Not seen here in lastes data) Mostly because of co-op conversion
> glut.

You are simply reading the data wrong. The conversions didn't generally change supply. Renters became owners... they didn't leave the market. There was some addition, but a huge chunk was just a shift.

Claiming that 35k were "coming onto the market" just wasn't accurate. That being said, the building trades said 30k+ apartments being built this year, and only slightly less this year.

> And if you had ever lived here during that time you would also see obvious differences in quality of
> life. This is not the same city as in the 80's and because of gentification will not return to
> such a state.

Absolutely. But, when I did live here then, I also noticed that prices were a SMALL fraction of what they are now. This seems to be the biggest misuse of logic I've seen folks make on this board. Saying everything is different, except they miss the biggest "difference" of all... the biggest RE bubble in history.

In short, you don't need to get back to 1980 to get to 2002 prices...

"In the last 10 years, I, personally, have never seen an instance where, on a cash flow basis, it was cheaper to buy than rent in Manhattan. Mtg + cc/maintc were always higher than rent."

Thats the last 10 years, when you're talking about unprecedented price growth.

I have, and it was more than 10 years ago.

> PMG Look, you posting are naive at best. They are not based in fact, or reality.

Look int he mirror.

> As for NYC in 80's, at this moment in time, there is no comparison. Supply in the 80's totally, in
> an extreme way outwayed demand. (Not seen here in lastes data) Mostly because of co-op conversion
> glut.

You are simply reading the data wrong. The conversions didn't generally change supply. Renters became owners... they didn't leave the market. There was some addition, but a huge chunk was just a shift.

Claiming that 35k were "coming onto the market" just wasn't accurate. That being said, the building trades said 30k+ apartments being built this year, and only slightly less this year.

> And if you had ever lived here during that time you would also see obvious differences in quality of
> life. This is not the same city as in the 80's and because of gentification will not return to
> such a state.

Absolutely. But, when I did live here then, I also noticed that prices were a SMALL fraction of what they are now. This seems to be the biggest misuse of logic I've seen folks make on this board. Saying everything is different, except they miss the biggest "difference" of all... the biggest RE bubble in history.

In short, you don't need to get back to 1980 to get to 2002 prices...

stevejhx sorry for the omission on last article

http://ny.therealdeal.com/articles/conversion-a-puzzle-at-505-court

or this, midway down

http://ny.therealdeal.com/articles/conversion-a-puzzle-at-505-court

You seem to want to equate the late eighties bust to the buliding boom of early to middle. No can do.
But I can see why you would like to. You are still wrong and I have noticed that you post things with this type of information.
I think you should chair the circle.

Just to add to your knowledge of EXACTLY what happened in the 1980's:

[...]

Landlords in a non-evict plan were required to convince at least 15 percent of the existing tenants to purchase as "insiders."

[...]

"From 1985 to 1990, our firm, Miller Samuel Inc., tracked 119,319 units added to the condominium and cooperative stock in Manhattan. Of this total, 72 percent were within co-op conversions. The totals include tenant-occupied units that had the potential to convert to individually owned units.

http://www.millersamuel.com/pdf-tank/1140660983gyzNW.pdf

So there you have it: from 1985 to 1990, nearly 86,000 units were converted to co-ops, of which only about 13,000 actually had to buy.

That is pretty convincing evidence of where the supply came from in the 1980's, and why it was "fake."

Ruff, I don't know why you think you're posting means what you think it does:

"Just as during the mad co-op conversion spree of the 1980s, when some 35,000 rental units a year were turned into co-ops or condos, "everyone knows their roles," she says."

That is EXACTLY what I said - they were "converted," that is, they came available to be sold, but as Miller Samuel - whence the data come - says, the figure includes "units that had the potential to convert," not ones that actually did convert.

Sorry dude, you're clearly wrong.

No takers on the real statistics, ruff?

It comes from the horse's mouth - Jonathan Miller. You have the link, you have the quotation. The "available for sale" figure in the 1980's - as reported by the only source from then, Miller Samuel - included co-op and condo conversions that were not really "available."

To the tune of 75,000 units.

Hmm, more correct information from steve. Interesting . . .

stevejhx Once again, you have cherry picked you info and spun it to try and prove your point.
The 72% mentioned in the article would later potentialize into sales.
If I were to buy into your delusion, for every 100 units in a co-op building only about 15 would have been owner/occupied? I can tell you from personal experience, never happened. The supply was anything but fake.

You retain your title.

Hmm, more cherry picking and misleading analysis from steve. Interesting . . .

Oh ruff, ruff, ruff.

"The 72% mentioned in the article would later potentialize into sales."

a) 30 years later and there are still rent-stabilized tenants in those buildings.

b) then you are seeking to count them twice - once when they initially weren't sold, and again when they were sold by the sponsor years later.

An apartment can only be sold the first time once. The fact is, of those figures only 15% of owners needed to agree to buy their units for the non-eviction plan to get approved.

That's b). Then there's a:

c) even if what you were saying were true, prices would not have been affected as they were offered to "insiders" at considerable discounts. It would make no sense for an insider to buy, flip, and then buy another unit.

"If I were to buy into your delusion, for every 100 units in a co-op building only about 15 would have been owner/occupied? I can tell you from personal experience, never happened."

Show me your source - I showed you mine, Miller Samuel.

"The supply was anything but fake."

In fact, according to Jonathan Miller it was - it includes units "potentially for sale," not necessarily units that are for sale.

You retain your title.

You retain your title.

stevejhx c) even if what you were saying were true, prices would not have been affected as they were offered to "insiders" at considerable discounts. It would make no sense for an insider to buy, flip, and then buy another unit.

That is exactly what was going on. That is why there is no comparison of now to then.
People would buy on insiders, flip to someone else and buy or "move up" or move on. Then you could front people money to buy at insider price then have them flip at closing to you. It went on all the time. Why? There was so much supply available.

Find me a co-op building (and not mitchell lama) where the renters outnumber owners. I have been on the UWS most of my life and it does not exist.

And I don't remember the word "fake" being used in Miller Samuel, but I do remember you are a stanch SE believer and aren't you the one who says that Miller Samuel is the paid sponser of a RE company?

Not going to waste anymore time with you buddy

"It would make no sense for an insider to buy, flip, and then buy another unit."

"That is exactly what was going on."

Prove it. In the building where I lived, about 16% of unit owners bought. Everybody else was stabilized - why buy? Still 25% of the units are stabilized, and it's 25 years later. I even know a woman with a rent-controlled apartment. (No, she won't marry me - I asked last night.)

"That is why there is no comparison of now to then."

That makes no sense.

"People would buy on insiders, flip to someone else and buy or "move up" or move on. Then you could front people money to buy at insider price then have them flip at closing to you. It went on all the time. Why? There was so much supply available."

There was some flipping unquestionably, but if you did that you were stuck - you'd have to find another stabilized apartment, or buy someplace at market prices.

"you are a stanch SE believer and aren't you the one who says that Miller Samuel is the paid sponser of a RE company?"

I don't know what an "SE believer" is.

I said that Miller Samuel is the source of the data you provide, and the only source for any data from that time period. Unfortunately, I looked for Miller Samuel sales data from the 80's, but it's not broken down anywhere I can find.

Unless folks got up and left the city (and few did), the co-op conversion "inventory" was basically meaningless. Whatever price it transacted at, if the same person lived in it before and after, or they traded it for their neighbor's, or they painted it purple, it didn't increase inventory in the supply/demand sense.

That's my point nyc10022. The effect wasn't naught, but it was negligible, and certainly the inventory figures do not represent anything near what people were selling, or what people were buying. It was a change in form of tenancy, not a change in tenancy.

yes, I'm agreeing with you.... or you are agreeing with me. We posted our original points on this right at about the same time...

i think himwhoknows has a flat argument. NY apartments are usually in line with the performance of the Dow/S&P/Nasdaq, which is down 40-50% as we note.

i would not be surprised if new york real estate suffered larger declines. 60-70% from current levels is not unimaginable.