Historical fact or analogy based arguments why Manhattan real estate will hold better than -40% from peak value.

Just so you know, here is how it plays out. In real estate it takes time to face the music. What happens is Q4 data is going to look horrible (-15%). Asks will go down across the board, but buyers will still expect 15% concession from asking price....so by Q2 2009, the data will show 30% declines. By next summer, people will accept that real estate will be falling through the end of 2010, so asks will decline another 15%, and buyers will demand 20% concessions. Then in 2010, when applying to coop boards, people will have to show their sorry ass 2009 tax returns which will show zero bonus, essentially slashing their 2008 income in less than a quarter. Banks won't like that, neither will coop boards. So by spring of 2010, apartments will need to get cheap enough for someone other than a finance professional to be able to afford them (like prior to 2001)....which will basically mean 2001 type prices, before hedge funds did all that hiring in 2004-2006 and bank compensation exploded to retain personnel as private equity funds and hedge funds were stealing all their good people.

can I borrow that crystal ball when you're done using it?

Why are people so afraid to try to guess the future. That's what you should be doing every time you make an investment. Its not perfect, but its not futile either.

I'm not saying you're going to be wrong, you just reminded me a lot of Nostradamus.

That's why economists call it a 'base case'. If you start there, then you can poke holes and try it on for size. I think the bank and coop board problem looms large in 2010 because 2008 bonuses show up on 2009 tax returns.

One difference between me and urbandigs is that digs tends to represent buyers, so he has an interest in the bear case, which will make properties more affordable for his buyers.

I represent both buyers and sellers, so I don't care where prices go -- but I do have an interest in high transaction volume, which is exactly what ISN'T happening.

Q4 is going to be awful in terms of volume -- things are still moving but nowhere near the pace of a year ago.

ali r.
{downtown broker}

Ali it would be great if you could tell us when you can, where things are actually transacting when they do transact relative to peak. -Rhino86, Mather House, Class of 1995, AB in Economics

How can anyone take Rhino seriously, or expect him to have any objective view of the situation? He demands answers and numbers from bulls, then ignores the one who gave detailed numbers. He's clearly not looking for the truth - he's just looking for validation.

Tech_guy many people ignore you. There are a few people here engaging me in a real discussion. You are just a wishful dope.

thanks for reprinting my post Rhino. gave me a slight frisson of excitement in an otherwise quiet Monday. :)

Only 2 people ignore me. You and stevejhx. You're happy about that company?

"You don't think these people are going to start a new hedge fund, thereby resetting watermarks in a very roundabout fashion?"

Not in this market. Hedge fund redemptions are at an all time high. You think money-losing funds are going to be able to raise the same money they raised in 2005-2007? Or be able to open a fund at all? The hedge fund business was a bubble... and the bubble popped. Folks are now running for the exists.

The projections I've seen from folks I know who service the hedge funds at banks are 70% reduction in funds... AND, fewer $$$ to share with pressure on fees and all the losses... meaning a small fraction of folks working there compared to 2007.

> Q4 is going to be awful in terms of volume -- things are still moving but nowhere near the pace of a
> year ago.

The stats in for Nov already say 75% decline in sales... going in to slow season. And Q1, post bonus announcement, is not going to be a quick pick me up either.

these threads are bordering on hysterical now.

only if Rufus would chime in with one of his classics

I guess there is no good evidence that we're not heading toward 40% down...

Yeah exactly, but there is a lot of evidence that people don't believe we are already down 20%, which we are. HAHA.

As far as some details I'll try Rhino86 -- I was all set to tell some details of a downtown close and then urbandigs just got slammed today on another thread for telling a story about a closed apartment -- it's tough to find the balance between providing extremely helpful front-line market info and protecting the duty of confidentiality to everyone involved in the transaction.

and AB economics, that explains a lot --

ali r.
{downtown broker}

Yes, you like how I use the 'AB' for added proof. I proudly graduated at the top of the bottom 21% of the class too. I might have been the last of the 80% that received honors in 'general studies'.

Waverly,

Thanks for your concern but I will be the last guy out the door as it's my firm. Bad news for my investors is I am losing money this year. Good news for my investors is I am doing much better than the market and still haven't lost what they made last year. Bad news for me is I will basically work for free for my investors for a while (most of whom are sticking with me) but that seems fair to me, as they paid me 20% of the profits in the good years.

Many hedge funds who did not outperform in the last 5 years have now lost 3-4-5 years of profits and may have no choice about shutting down as investors leave. If I shut down it is because I want to retire before this friggin' market gives me a heart attack.

amen, modern, amen.

> I might have been the last of the 80% that received honors in 'general studies'.

Wow, we used to laugh when it was 70%....

Rhino86 congrats, you get the streeteasy donkey award for the week. It is coveted by the scared and moronic.

What's the award for people who read a post they find uninteresting and spew off personal insults to the interruption of others? Real estate is falling shit for brains. If you don't like people who talk about real estate falling, if you take it personally, don't log in because falling prices will likely dominate banter in falling market. You are like a monkey screaming at CNBC for showing a chart of stock prices falling. Stock prices fell today asshole. If you happen to own stocks, its nothing personal. Real estate is falling. Talking about how low it might fall is not a personal affront to you. Why am I scared, because I don't think today is the day to buy an apartment? Go fuck yourself.

wow, rhino, and you think i am mentally unstable? and why are you scared...aren't you a renter? other than rent adjustments, little changes in a renters life so chill out. is there some X factor in your life making you so unstable?

Its one thing to lash out at someone logging in at the tail and and calling me a monkey... I think you still win the prize however, for calling me at out 12:30 on a Saturday night while your wife is nursing. I mean telling Juiceman to fuck himself is just fun. And that's the point isn't it, that there's nothing to fear as a renter today. And there really isn't anything to fear as an owner, if you bought right, or bought your lifetime apartment...If you did not, then you have sadly locked in a shitty return.

Not sure what you mean Donkey86, I'm not scared, screaming at CNBC, or spewing uncontrollably on streeteasy, but I sure get a kick out of people like you. I have a simple question for you Rhino86, even if the RE market DID fall 40%, could you afford to buy in Manhattan or did you lose all of your money in the stock market?

Nope sorry I didn't. Always been pretty light on stock because before recently, its not been cheap in a historical context, and my living is pretty correlated to it...and when the S&P was down 20% or so at 1250 I reasoned that this was a real recession and the market was not likely going to skate by with a 20% decline. I have about $1.6mm in cash and liquid securities. I'll buy an apartment when the value proposition is too great to ignore. For now, its pretty easy to ignore. But really why ask the question, if you are just going to crap from the mouth that I am lying...lying about what I make, what I have or where I went to school. Honestly why do you bother? Why can't dwell, front_porch, nyc10022, enjoy a simple conversation about where the downside support might be? I'm also handsome, and in pretty decent shape, played football and can probably kick your ass. What do you get out of this? Seriously.

"If you don't like people who talk about real estate falling, if you take it personally, don't log in because falling prices will likely dominate banter in falling market."

Bingo...

nyc10022...I enjoy telling people off as much as the next guy, but the more interesting half of this string by far has been the attacks. I don't enjoy other people losing money, but I guess I do enjoy the idea of buying a historically reasonably priced apartment....which has been unimaginable for a long while... Most of the time since I finished b school in 2001.

i see. your tantrum was different. :) that makes all the sense in the world. must you keep mentioning my wife nursing? it seems a bit crass on here. when i mentioned it i did so indirectly when you asked why i was not attending to my son.

and, tell me, who doesn't enjoy buying a reasonably priced apartment? we all do. i am buying a reasonably priced townhouse shell this year. you went to b school? and you rent? interesting. was it an online school, by chance?

Donkey86, what do I get out of this? Mostly entertainment. Morons entertain me and you are extraordinarily entertaining. It is always fun to see another flash-in-the-pan streeteasy poster come in with a bang, use a lot of four letter words, and then disappear without a trace. You will eventually get bored of beating your chest and trying to fight everyone, talking about how much money you have, your good looks, and how you graduated with honors, blah blah blah. You are no different than the 100 other fly-by-streeteasy posters that immediately earn the donkey label and are never heard from again. Enjoy your 5 minutes.

eah, congrats on the little one.

Rhino - I think you greatly overestimate how many people a)work in hedge funds; b)actually work in a revenue producing role or make a significant bonus at a hedge fund; c)live in NYC; and d)own an apartment in NYC.

The actaul number of people who make a ton of money in hedge funds and live in NYC and own their apartment in NYC is probably all of a few hundred. This is not a group of people that move the market by themselves either way.

Also, you are also way off on what coop boards look at for financial stability. They have always taken bonus money with a grain of salt. They put much more stock in base salary and cash reserves left after the transaction. So again, this is another couple of hundred people that are out of the game for a year or two.

"Nope sorry I didn't. Always been pretty light on stock because before recently, its not been cheap in a historical context, and my living is pretty correlated to it...and when the S&P was down 20% or so at 1250 I reasoned that this was a real recession and the market was not likely going to skate by with a 20% decline. I have about $1.6mm in cash and liquid securities."

JuiceMan, when I read that I thought exactly along the lines of what you wrote below. Isn't it wonderful how all these smart investors who predicted so much so well come out of the woodwork after the fact? Seriously though, Rhino86, I find some of the stuff you've posted in other threads to be informative, but this thread was started as an ego-driven challenge, and you've followed it up with some choice four-letter words and tirades. Let's see a little more civility around here, por favor. And eah, I second JuiceMan's congrats!

Waverly,

I don't know what Rhino was assuming on hedge fund workers, but limiting that pool to "hedge fund types" and not including PE or IBD or i-bank general or fund of fund or traders, or salesman or (insert any wildly overpaid, market leveraged finance professional) ignores all realities of this market. When those bonuses (and jobs) disappear, support for entire segments of the RE mkt disappear. I don't believe for a second that many co-op boards took bonus money with a "grain of salt." They saw purchase prices, and then looked at cash reserves (which were fine when bonuses were sick) and ignored the weighting of bonuses in that mix ..Those who could/can afford these apartments don't get
$1mm salaries..Of course their $ was coming from bonuses and now that the well is dry, the notion that there are plenty of others to step into the breach with millions to spend on real estate is outrageous. The game is up. Another year or two will NOT bring thousands of new buyers back into the market and recreate 07 cyclical highs..For those who believe in the "Shawshank" solution- "Hope is the only thing," I urge you to consider that is a path towards poor analysis, even poorer decision
making, and no doubt painful destruction of capital. I don't celebrate this, as so many others on this board do, as I am having a pretty s@#ty year and it's miserable watching this carnage day in, day out..But playing make- believe and trying to wish away what's here and now is just folly.

rhino86,

I think I agree with your view of the real estate market and would like further discussions on that subject. I use the ignore button to avoid wasting time reading and responding to posters who have nothing to add or whom I have judged incompetent. I started with some guy who talked about nothing but Chicago (I think that is a place somewhere in the midwest but who really cares?) and another named steve who, though proven wrong by me on a tax issue, seemed incapable of admitting it, and posted countless times arguing with other people who have proven him wrong on stuff too. I have added a few more over time (just got one from this thread). It makes reading this site MUCH better, and if everyone did the same and stopped responding to the trolls, the threads would be cleaner and we'd all feel better. Except those who are ignored by many but they are not my concern.

Modern, good point. I allow myself to get caught up in the silliness. I should have ignored eyh and the likes of him. I just did a quick scan and think I have eliminated the offensive ones and the ignorant ones. I am called to civility but any quick scan of this threat shows who went nasty first. As I see it I am left with you, nyc10022, front_porch, and waverly. In any event, I am a hedgie and it sounds like you have your own... So good company anyhow. Yeah so, I have to respectfully disagree with Waverly about the impact the explosion of hedge funds had on real estate and how this will play out in 2009, given the preponderance of high water marks that have little hope of being met...And how private equity and hedge fund 'lifestyle balance' forced i banks to overcompensate for that shitty life with bigger bonuses. Also simply, why should real estate be the only equity that doesn't get cut in half. It reached greater excess and uses higher leverage. It's doomed man doomed. Is that Merc option worth trading? Someone said it only prices a 20% decline looking ahead 12 months. I wonder from what base and how the index is calculated.

"By next summer, people will accept that real estate will be falling through the end of 2010, so asks will decline another 15%, and buyers will demand 20% concessions..........So by spring of 2010, apartments will need to get cheap enough for someone other than a finance professional to be able to afford them"
Agree

"Why are people so afraid to try to guess the future.......Its not perfect, but its not futile either."
Agree

I don't want to play Hall Monitor, but there's so many personal attacks & pissing matches on this board, that the substantive info is diluted. But, apparently, most people here would rather spew their bile & interpose irrelevant BS than argue facts & theories. So many here professing to be well off, educated professionals act like boobs.

rhino,

Manhattan has hundreds of hedge funds, maybe 1,000, so the downturn could be in the low thousands of jobs. Indirectly, there is also a whole support network for hedge funds that will take hits (prime brokers, lawyers, trading firms) that will also have decreased revenues and layoffs. Less catered food, no more personal trainers/chefs in the office, many service people will feel the hedge fund downturn too.

And for those who survive, incentive fees will be low, perhaps for years.

In addition, EVEN BIGGER than the hedge fund layoffs are that MOST OF THE RICH PEOPLE in Manhattan (say $5 million new worth on up) were invested in hedge funds. And with the average hedge fund down 20% or so, they are still doing better than the market, but they are not feeling ao RICH anymore. So they are not spending on fancier apartments either.

Reverse wealth effect in action.

I wish NetJets was a public company (Berkshire owns it) so I could short them, that is going to be a struggling business the next few years. I bet there were thousands of NYers who spent $250k per year or more on flying private. My guess is half will be back in line with the hoi polloi soon.

I think front_porch is right that the crystal ball is broken. If you look at the FDIC report in 2005 on historical booms and busts you'll realize that which is happening now breaks the rules.

http://www.fdic.gov/bank/analytical/fyi/2005/021005fyi.html

The historical models are breaking down, which I assume were the same models for mortgage backed securities. I was on the market, but now I'm holding back to see how the cookie crumbles.

The best you can do is to try to estimate the expected steady state equilibrium via gedanken type experiments. In the modeling I've realized that there is a big temporal component to pricing. In particular, when you sell vs the length of the mortgage. If you intend to sell relatively quickly, you will maximize the tax deduction. If you sell closer to the term of the mortgage, the tax deduction is less of a factor. If you sell much greater than the term of the mortgage, taxes and maintenance becomes more of a factor. So in summary, price to rent ratios are a convienient rule of thumb but may not be so useful in specific situations.

Hsw, you are above my head. Simple rules frame the process for me. For example, I looked at small one beds and studios in 1999 before I went to business school. The value proposition was great. Wall Street was booming. Interest rates were not double digits. I could save hundreds a month BEFORE tax benefits on comparable rentals. And the market was not even falling anymore...it had begun to rise slowly. Why on earth should we imagine this won't happen again? Price to rent isn't perfect, but a 2 bed that rents for $5000, selling for $600,000, it would actually be affordable. Another thought exercise is this. What made NYC different from Boston. Investment banks and hedge funds. Of course its also the capital of the world, and Boston is just a regional city... But even if we saw $600/ft on condo space, NYC would still be one of the most expensive places on earth to live.

This cuts are huge....and if people don't thing these people drove the markets, then I respectfully disagree. On top, the CDO/CLO/CDS industries which were created out of air and are disappearing. The way to frame this seems to be in time. Feels like 2001 levels are in order...which is -55% or so. Nothing is better today than 2001...Not crime, not the economy, not interest rates, not banking comp, not the hedge funds (nascent vs. dead on feet), not the private equity shops. "Real" NYers bought apartments before 2001...not that finance people aren't real..But you need value players from other industries...Your Italian uncle from Queens with cash in his mattress needs to see condos as a good investment...And he will look directly at rental value.

Commodity Pay Falls Faster Than Oil as Goldman Cuts (Update1)
Email | Print | A A A

By Lars Paulsson and Chanyaporn Chanjaroen

Dec. 2 (Bloomberg) -- Investment banks may reduce compensation for commodity traders as much as 75 percent as prices of oil and copper fall the most in at least two decades.

The best paid metals and energy traders may earn $1 million to $1.5 million in salary, bonus and related pay this year, down from $5 million to $8 million in 2007, according to estimates by London-based recruitment company Kennedy Associates. Bonuses at Goldman Sachs Group Inc. and Morgan Stanley, the biggest oil- trading banks on Wall Street, may fall 60 percent, according to Armstrong International, another London-based recruiter.

Anyone who says that a $5000 rental is equivalent to a $600,000 purchase price just doesn't understand the numbers.

A few thoughts:

LICComment, I rent an apartment for $5,500 a month a close comp for which is currently on the market for $1.9 million (Reduced from around $2.2). Crunch those numbers and then tell me that I should buy. Moreover, I spoke with my landlady yesterday and told her that is she didn't reduce my rent by 5% next year I was moving--and she agreed.

Rhino, I agree with a lot of what you have said, but I think you are slightly off on the value of making specific predictions about the future. When you invest you should project the future, not try to predict it. That is, you should use data to project possible scenarios and attempt to attach rough probabilities to those scenarios. Personally, I think the situation is simpler than you do: the supply/demand curves have shifted dramatically, and the supply of cash and credit has dwindled. So prices will go down. My best projection (and this isn't very good) is that there is at least a 90% likelihood prices decline by 25% from peak (we are already almost there), a 75% likelihood they decline at least 40%, a 60% likelihood they decline at least 50%, and a 25% likelihood they decline at least 70%. If I had to peg a percentage decline I would say 63% :). But then, why listen to me, I just have an AB in philosophy 2003, Winthrop house, although I did manage to scrape by with a Summa.

Finally, I can very well understand why the owners on this board are so scared and miserable. I was an owner until 2007. I loved owning, I had a great place, and then then market took off in a totally irrational manner and I could not live with myself if I didn't sell. Now I rent, as I said, and my monthly costs for a significantly larger, nicer apartment in the same neighborhood are around half what the poor guy who bought my old apartment is paying. Meanwhile, the value of his home has declined precipitously, and my rent is going down.

Happy renter well played and well said. Selling an apartment to rent is a tough decision, but clearly it was the right one. So basically you are coming up with 60%. I threw out 40% on this post so people wouldn't shoot me...apparently it was to much. My truly best guess is 50% just because its the round number...and it matches the thus-far peak to trough in US equities. Its likely going too easy because leverage is a bigger factor in the real estate run up than equities. Also, the 2007 peak only matched the 2000 peak, whereas real estate had a monster run up from 2000 to 2007. If the city sees crime, then -70% is probably the right one....Which takes us I believe to 2000 price levels.

Moderator - you need to fix the email updates. It misses the purpose if I am going to get email updates with the comments of the people I wish to ignore.

happyrenter - With $5,500 in rent as the comparable, a reasonable price to purchase an identical apartment would be in the $1mil-$1.2mil range, depending on the circumstances. However, I've said before that this ratio is not a projection, it is a snapshot of current factors. If you think rents or prices will go down then you expect the analysis to change.

"LICComment, I rent an apartment for $5,500 a month a close comp for which is currently on the market for $1.9 million (Reduced from around $2.2). Crunch those numbers and then tell me that I should buy."

One listing does not make a market. That's the problem with all the happy renters here - showing one overpriced comp is hardly interesting. In every market, even the booming market of 3-6 years ago, there are always irrationally overpriced units. What's so news-worthy?

$5,500 * 12 * 12 = $792,000.

That's the proper purchase price. Not a penny more.

"The actaul number of people who make a ton of money in hedge funds and live in NYC and own their apartment in NYC is probably all of a few hundred. This is not a group of people that move the market by themselves either way."

Although I'm not sure the premise is true - there are thousands of hedge funds... I guess it depends on how you define "ton".

But Wall Street ibanks employ hundreds of thousands of folks, and they do move the market... they represent 30% of Manhattan sales per the last round of articles (linked to from here).

Hedge funds might be a red herring, but what actually drove the market is no longer there.

steve, thanks for showing everyone again how ridiculous your numbers are. You just keep sinking more and more.

80% * $792,000 = $633,600 @ 7.5% over 30 years = $4,430.22 + $1,000 common charges + $1,000 tax = $6,430.22 per month.

Come to think of it - $792,000 is too expensive in today's market. $700,000 would give mortgage payments of $3,915.

If you couldn't rent it out to someone else and make money, why would you rent it out to yourself?

I KNOW! THE "TAX BENEFIT"!

Which doesn't exist as it's offset by the opportunity cost, and in this case the likely scenario of losing $1.2 million in principal.

I also find it funny that Rhino is complaining again and again how awful it is that others are taking market-decline news so personally... Reading this thread, you're taking things MUCH more personally than anyone else.

steve has really become a special kind of foolish. The opportunity cost offsets the tax benefit??? Does he think anyone with any level of intelligence would believe that?

steve, your reputation is in tatters. Give it up already.

thank you guys, if i could post pictures, I would. you lucked out on that one.

I can't believe that we managed to turn yet another post into a deductability of mortgage interest thread...

So tech_guy, unfounded opinions are more valuable than data points? Of course an individual unit does not make a market--the market is made up of many individual units. If you are so convinced that buying currently represents such a great value relative to renting, please, by all means show us some examples of this. Dismissing the evidence provided because it isn't broad enough to represent the whole market is just burying your head in the sand and wishing the bad news would disappear.

I've been offline this AM and on reflection have a few thoughts. (1) Why can't bulls simply go away and allow folks to just chat and compare notes? This is warped. (2) Why don't bulls understand that "tax benefits" come at the cost of making a levered equity investment that can go down 500% (and will for condo purchasers in the 1400/ft range), unlike any stock, (3) Why is Steve hated so much. I mean he can be a little haughty. He loves emerging market stocks. But as far as real estate goes all he has really said is 12x annual rent is the price he needs for the risk as he sees it. Honestly, what the hell? I have tech_guy LICC and eah still blocked...but I see all these 'ignored' posts even still. Even better, is the scolding I get when all you have to do is look at the first few posts to see eah and others got nasty with me first. Oh yeah and juiceman, who is pretty much unintelligible and then sees fit to call me "fly by night" as if being a Streeteasy regular is some kind of badge of honor, rather than a simple diversion. This is pretty insane... And there is still no reason to buy over 12x annual [falling] rents.

"(1) Why can't bulls simply go away and allow folks to just chat and compare notes? This is warped."

What fun would that be? There's a few people left on this board that actually look at things in a balanced manner (in your terms "bull"). Without them, this board becomes just another one-sided, exaggerated, pile of shit.

"(2) Why don't bulls understand that "tax benefits" come at the cost of making a levered equity investment that can go down 500% (and will for condo purchasers in the 1400/ft range)"

Like I have asked the rest of the folks on this board that blow things out of proportion, please provide one post from a "bull" that says it is time to buy now, that 1400/ft for a new dev in a fringe area is a good buy, or anything remotely similar to what you are insinuating above. You won't, because you can't.

"3) Why is Steve hated so much. I mean he can be a little haughty."

I don't think steve is hated, people just get a kick out of proving him wrong. It is pretty easy to do because he is very liberal with his "facts"

"I have tech_guy LICC and eah still blocked"

Certainly your prerogative but that just shows that you only want to hear what you want to hear. LICC and tech_guy have never posted anything but an opinion and they are both fairly balanced individuals. Neither has been offensive in my point of view. eah can be a bit ruff around the edges, but his points are generally very sound. What are you afraid of Rhino86, that someone will have an opinion different than yours? If you only want one side of the story, just watch CNN.

"Oh yeah and juiceman, who is pretty much unintelligible and then sees fit to call me "fly by night" as if being a Streeteasy regular is some kind of badge of honor"

Badge of honor? Not sure about that, however I have seen many people come and go on this site and you sure do fit a profile. Maybe you have been here before under a different alias?

"That's the proper purchase price. Not a penny more."

Oh, it must be true because you said so? I know you have touted your sample-size of 1 previously, but perhaps.....just perhaps, you are not 100% correct on this point which you have dug your heels in on. I don't think an estimate of 15-18X rent is outrageous (24x rent is).

That's what Steve would pay, nothing more nothing less. What is the point of pointing out that his opinion is his opinion? We know the market is moving down, but we also pretty well know its still above 12x.... The problem Waverly is the market may be around 15-16x and all signs point down, so why would you want to pay 15x... You might in a rising market to flip at 20x, but in a falling market what is the plan then? My rental is $5,500...Would I buy it for $1mm right now? Probably not. It may have peaked at $1.4mm conceptually but I know its falling and I know markets take time to flip...So why would I do it? WHY WHY WHY? Now if it were $800k.... the math would be different. It would be a big pre and post tax payment...Unless of course I can get the landlord to lower the rent to $5,000. Isn't it clear the market is chasing its ass down?

JuiceMan, Rhino is an idiot. Irony, joking, sarcasm are all lost on him. I admit to being obnoxious. It amuses me and makes conference calls fly by but blocking someone is just silly. It's a blog! Personally I think Steve and Rhino are the same being.

"Why can't the bulls simply go away and allow folks to just chat and compare notes?"

Wow. Start a thread so that the "bulls" can "have at it." Complain when nobody responds within a few hours... When they eventually respond, procede to call said bulls "shit-for-brains" and "imbeciles," among many other things... Then tell them to go f..k themselves... Then put them on ignore... Then ask them to "just go away" so that you can chat with other people...

Mission accomplished. Thread deemed useful and informative. I love it.

Is it ego that forces people to participate in a blog whose premise they find so uncomfortable they need to lash out? Do any of the non-sensitive bulls or bear know of a site where I could pose a bearish premise for discussion and not have some fool heckle me at midnight on a Saturday while his baby is sucking on his wife's teet in the other room?

what is going on here? all of you, seriously. there are literally hundreds of price cuts from the past week, very interesting things happening all across NYC real estate. why not take a minute to look at and discuss actual facts instead of just berating each other?

I haven't been following this lately but Rhino...you seriously just asked the "bulls to go away"???
You do realize the very first sentence of this thread that you started is:

Rhino86
2 days ago
ignore this person
report abuse
Let's hear the best from the bulls

I can't help it happyrenter. I blocked these people but I still get email after email update today... The actual facts are clear: many unsold apartments, many 15% cuts, and still no takers. Ergo, 20% off peak pricing to sell something today is an easy guess at where the market is...and it still may be generous. I didn't start the post to talk about where the market is. I hoped to sponsor some debate of where it could go. Maybe that's a pointless debate. However, for those who think so, I guess they could have ignored the post. They attacked me. I attacked them. Some intermittent data and discussion, and the rest is history. The market is down 20% and its going down at least 40%, with sound arguments as to why it might go down 50% or 60%. Nothing really compelling to say it can hold at -20%.

I asked for comments from bulls as to why the market can hold here at -20%. I can't even get the -20% to be accepted. Total joke.

so Streeteasy must be relatively new to you eh?

rhino,

you seem offended by the mere fact that people disagree with you. even if they are ignoring the facts, so what? it doesn't hurt you. i find it frustrating as well, since i come here to try to get some information on the state of the market, when people seem delusional. but that's life. if you don't want to hear from people who disagree with you, you probably should not be reading anonymous blogs.

Happyrenter... I see your point. Take a second to read eyh's first post on this string, come back and tell me what you think. Apropos of nothing, eyh basically called me a loser for asking the question. It doesn't hurt per se it just clutters the string. Maybe blogging serves as nothing...I can't discount that idea. I've looked at enough data to see what is happening. Maybe it is pointless.

Whether it's been civil or not, the only thing I've gotten from this post is that for right now, most owners think their apartments have held 85% or more of their peak value, this is why nothing is selling because buyers clearly disagree and buyers turn the key on this car.

RHINO, STOP BRINGING UP MY WIFE, BABY, AND HER BREASTFEEDING SCHEDULE. It's disgusting to see it over and over again. The other thing you're doing that is very annoying is calling people who are not shitting their pants over price declines "bulls"...why not call us stable individuals? I lashed out on your that evening because your looking for a fight, not a discussion. NO ONE is going to come on here and claim prices are going up. Anyone who is devestated by that reality probably has long since left the board. Anyone remaining on here is either: delighted at job losses/price declines, renters/people on the sidelines waiting to dive in, investors tracking ho wlong things are going, and so on. So, who exactly do you expect to fight with? At this point we're a fairly self selected group who WANT prices to fall or have long since made peace witht he fact that the party is over.

I'm sorry your wife is having a hard time with the breastfeeding. Things are tough all over I hear. I still don't see why you characterize it as shitting pants. That is what your baby is doing. You also have the typical tough guy attitude that "buying is cool man. it's the thing to do for the long term". "Oh tough business school dudes are supposed to own". What frat were you in? Nothing has been a smart long term buy for years in NYC real estate. There was not supposed to be fight picking. There was supposed to be bulls saying, here is why we should hold at X%...and there's been none of it. And you are so convinced you are right you are about to try to go bankrupt yourself with a brownstone shell to be cool. Have fun with that.

happyrenter: "If you are so convinced that buying currently represents such a great value relative to renting, please, by all means show us some examples of this."

On page 1 of this thread, I showed that 18x annual rent is a sustainable price, given rent vs. buy math. 18x is easily attainable in this market. Sure, so is 24x, but I don't care about 24x - that's overpriced.

Rhino: "Why can't bulls simply go away and allow folks to just chat and compare notes?"

Talk about holding your head in the sand! You created this thread, and you created it with a question for the bulls. You're just kicking yourself because you expected it to be unanswerable, but some people actually had justifiable answers.

No you really haven't that's what's funny. 18x is a high multiple.

umm, tech_guy, a couple things.

first, please show me the 18x. second, aren't you the guy who criticized me for using selective information? why do only care about the "good" deals that you claim justify your theory, and not the "bad" deals that don't? that would be like me insisting that asking prices have already decreased 40% from peak comps across the board because some asking prices have decreased 40% from peak comps. if your argument is that current prices are sustainable relative to current rents, you can't the selectively choose to ignore the cases in which current prices are **not** sustainable relative to current rents, even using your extremely generous valuation equation.

rhino--i thought you were ignoring me?

I thought you were ignoring me? :) The *exact* numbers are on the previous page - tell me exactly what part of my math was wrong.

I'm not ignoring anyone, for the record.

The problem is 18x is not the historical average. The average is lower. And it down markets, or financial conditions liked to a depression or at least the recession of 1981-82, investors talk about historical lows, not historical averages. Really the case for holding the average is weak, and then on top of it you quote the average as 18x instead of the 15x or lower that is the average. Understand now? Why do you care? You bought whenever you bought 'for the long run' and 'it is a place to live not an investment'. So solider on and think that way...others do not.

happyrenter: Click back one page, on this same thread, and you'll see it.

As for selectively choosing, granted, I have been playing a somewhat selective game - but admit it, so have you :) At the end of the day, we're talking past each other. If you show me a 24x property, I'll tell you its 25% overpriced. If you show me that a lot of what changed hands last year was 24x, I'll agree that statistics will show that this year had a price drop.

That said, there are also 18x properties that changed hands last year and this year. Those properties will hold up quite well. And of course, full disclosure: I bought one such 18x property a few months ago. I'm still confident I could sell it for my purchase price today if I needed to (thankfully, I don't need to).

Ah see that is the problem...You bought over the summer. Now all is clear. I guess whatever happens you found the property that can shrug off Lehman, AIG, -25% more in the S&P... Tech_guy are you for real? The rent equivalent fell 10% and the value fell 20% vs. what you paid. Period full stop. You are hilarious. After all this shit we find out where your 18x comes from what a joke. Only an idiot would be confident that he could sell a property at all in this market.

To repeat from my post earlier:

I ran the numbers on another thread. Take any price point from $600k to $1.4 million, take 80%, use a current interest rate to calculate your monthly mortgage payment, add monthly common charges and taxes, reduce the monthly cost by your tax savings from your deduction benefits, and see what comes out. 12x is ridiculously low. 18x-20x is what works.
You can't look at historical ratios out of context. The ratio is affected by interest and tax rates. What were rates in the 80s and early 90s? I guess that is too hard for you to understand.

Rhino: I'm still waiting on you to tell me what part of my math was wrong. I'll give you a hint to help you correlate it with historical numbers: if interest rates go up, the multiple goes down. If interest rates double, the multiple comes down by almost half. The times you talk about had such high interest rates.

happyrenter: The ignore comment wasn't directed at you - it was directed at Rhino.

You're math is fine. All you did was tell me how you calculated the 18x on the price you paid. I guess summer 2008 is the historical average price to rent ratio...surely by all means. You are the only person on this blog who would claim to have bought this summer and not be out of the money today... I mean its beyond debate, beyond ridiculous. I didn't think people like you existed.

"-25% more in the S&P"

First of all, its quite a bit more than 25%! Second, I assure you the stock market will recover incredibly fast (relative to housing), while you'll still be holding your head in the sand calling for decreases so you can finally afford something. If you won't use the stock market as a positive when it recovers (and I know you won't), you can't use it as a negative to support the decrease.

"After all this shit we find out where your 18x comes from"

You're missing cause and effect. I started knowing 18x was sustainable, more was not (at current mortgage rates). I was looking for weeks before I found a place with both a good ratio, and with qualities I personally enjoy. I didn't derive a mathematical formula to support what I bought at - I bought only because the math first showed it sustainable.

Its actually not more than 25% since SEPTEMBER. Get hooked on phonics. Why is 18x sustainable other than that you paid 18x. Where do the 1990s come in? And I full well understand the role of interest rates in this matter. Adjusting for interest rates, owning became not EQUIVALENT to renting on a PRETAX basis in the 1990s. It become MUCH MUCH CHEAPER. Even adjusting for INTEREST RATES. WHAT ARE YOU TALKING ABOUT? THERE IS NOTHING SUPPORTING 18x. YOU DO NOT HAVE TO BE A GENIUS TO REALIZE THAT SUMMER 2008 DID NOT REFLECT A HISTORICALLY MEDIAN VALUATION FOR NEW YORK REAL ESTATE. IT IS SELF EV-I-DENT.

You mention September for the first time now (my browser has a search functionality - does yours?) - nice one.

18x is sustainable from the math I quoted, which you said was fine. I never claimed this year was average - quite the opposite. We have historically low interest rates, which leads to higher than average multiples. If rates go up, prices will certainly go down. If I could predict the future of the interest rate market, I'd have so much money that I wouldn't really care what happened to the real estate market anymore.

Sorry was this not clear from context that I meant the events that happened after you bought your apartment. These things happened after August. "I guess whatever happens you found the property that can shrug off Lehman, AIG, -25% more in the S&P.." If you think that interest rates are the only factor jeopardizing your investment well then... I mean before I begin, do you really believe that? Really? Why do you continue to ignore the history of real estate? Purchases fall below after tax rental equivalence in down markets. I'm sorry you purchased at a bad time. It could have been me. It could have been me but it wasn't. I knew that I should always be compensated more than rental equivalence, because when you are not, the investment is usually poor vis a vis appreciation from that point.

tech_guy,

now you can "assure" me that the equity market is going to recover quickly? on what basis do you make that assurance? how long did it take the market to recover after 1929? how long did it take the nasdaq to recover after 1999-2001 (answer: it still hasn't--and won't for many, many years). there is a lot we don't know about what's going to happen with the economy. add to that market irrationality and i don't see how you can make that assurance.

you want to justify your purchase. what you don't realize is that the proof will be in the pudding, not on the message boards.

Listen his 18x purchase is "sustainable". Whatever. If you sell that place in the next 5 years you are going to lose money. Unless you bought it for life you basically made a mistake. Live with it. The statements on equities are even more silly.

EV-I-DENT sounds like some sort of old person denture glue.

If rents go down, prices will go down. The financial services collapse does have me worried about the rental market - but so far, its barely budged (5% is a number I hear - big deal). Honestly, a down market would be great for me. I'm young and single in a 1 bedroom - I expect to trade up in 5-7 years or so. If I can trade up even bigger due to a depressed market, awesome.

As for history, people who know it better than me (remember, I'm younger than you think) tell me the city was a pretty shitty place in the 80's and early 90's. It takes a while for real estate to recover from that. Of course property prices would be much lower then. That's not true now, so why should the results from then be true now?

Sorry school is over for you. Back in the hole.

Why would I think you were old. You come out with some of the most ridiculous shit and you have no historical perspective at all. I mean you basically say we need crime to see cheaper real estate. I mean its a joke. Take a look at 1998-2000...Where was the crime? Where was the unemployment?

happyrenter: You ask for the math, then ignore it? Tell me what part of the math was wrong.

Forget the equities comment. Its much too tangential and I don't feel like defending it. If you don't see how the current crash is different from 1929 or the Nasdaq, it'll take too long to explain anyway (hint: look at the runup the 2-3 years before those crashes, compare to this crash)

"Take a look at 1998-2000...Where was the crime? Where was the unemployment?"

Like I said: "It takes a while for real estate to recover from that." I think a large portion of the runup over the last decade was a slow-to-respond market finally accounting for better conditions. Rents are up faster than inflation since 1998, which is unsustainable historically. Yet, if that's attributed to a change in fundamentals, its here to stay. Which do you think it is? Will rents shoot down to be more in line with historical values, or are rents going to stay mostly stable?

wow, when *I* can't take the arguing anymore, you know we've gone off a cliff...

I still think you are missing the point.... The point isn't about rents. The point is 18x is very high. I mean if you want, since you are the one who owns, go back....find rents, purchase prices, and interest rates at various points in time. You will find that summer 2008 was expensive in any historical context you want to frame. You can use quality of life in Manhattan as an argument for a higher low multiple, but you can't use it as an argument for why we can hold 18x. It be silly.

> If you don't see how the current crash is different from 1929 or the Nasdaq, it'll take too long to
> explain anyway (hint: look at the runup the 2-3 years before those crashes, compare to this crash)

Absolutely for stocks. Problem is what happens if you try and do that analysis with RE.... ouch.

Take a look at Japan's Re bubble...

I kinda feel bad, nyc10022, that tech_guy is a young kid and really thinks the price he paid this summer made sense and can hold. Now he is breaking down and starting to ask questions. Its clear he didn't understand the investment he made.

Rhino: You can say its silly until you're blue in the face. The fact is I gave both mathematical and historical reasons to support it, and you haven't even attempted to refute either.