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

Tech_guy I am sorry you overpaid. I understand your math. What I am telling you is rental equivalent after tax carrying cost is not support for value on the downside. On the downside, buyers demand pre-tax equivalence if not pre-tax savings vs. rental cost. And rents are falling. I mean take this math. You are paying rental price to live there after taxes....And by Q1 you will have clearly lost 25% of your total investment, which likely means 100% or more of your down payment. You illustrate the risk of owning, and the consequences of a poor margin of safety.

And just why do you say my property will be worth 25% less come Q1?

Because I am convinced, by my discussions with brokers and perusal of this site...that the market is already down 20%. But prognostications aside, you are simply unaware of the historical fact that there is no support for real estate on the downside by after tax cost of carry...None at all my man. It's just not so. And it's not about crime or interest rates because if you get those, we are talking about 6-8x like 1994. I am granting you 10-12x...even 15x. Any way you slice it, it was just bad luck when you bought. You could have been more cautious, and you caught the wrong end of the cycle...the stock market cycle, the financial industry cycle, the condo building cycle... I'm going to guess someone handed you the money for the down payment. That is how many bad investment are made, because the lucky spoiled brad rarely goes through the appropriate analysis.

"I'm not ignoring anyone, for the record."

I have never used the ignore feature but I would love to ignore every thread and every post that mentions the word Chicago. I would rather read pages of steve's miscalculations, paragraphs of Rhino's whining, or a dissertation on the economic impact of the vinchucas on Boliva than read another fucking word about Chicago.

Rhino: I'm glad you're convinced. I'm not. You can't support your side, I can't support mine, so we'll see where I stand in 5 years.

"I'm going to guess someone handed you the money for the down payment. That is how many bad investment are made, because the lucky spoiled brad rarely goes through the appropriate analysis."

No, I graduated with over 50k in student loans and I earned the down payment myself. I also bought below my means. Thanks for, uh, looking out for me though. As for appropriate analysis, I've proven on this thread that my financial/mathematical skills are a whole league above yours. On to your other point:

"You could have been more cautious, and you caught the wrong end of the cycle...the stock market cycle, the financial industry cycle, the condo building cycle"

Actually, I sold stocks at an all time high in preparation to buy. Even with your 25% decline, I'm still ahead based on the (luck, not skill) decision to sell stocks when I did. I didn't buy a condo at all so I don't care about that market.

Tech_guy you think you've proven your math skills are better than mine? That's silly. Your demonstration is little more than, 'I paid 18x, therefore 18x is sustainable'. The funny thing is the stock you sold...yes you avoided 25% of additional downside. However, your equity is down 100% or more and falling. Please don't ask for clarification of this. The coop market is not isolated from condo fundamentals. Also, 1 beds will fall the second most, to studios. So really, quite frankly, every time you open your mouth you illustrate something new that you don't understand.

I gave math. Not my fault you can't understand it. I gave historical reasons for the difference. Your response is simply that you're convinced differently. Given your inability to understand simple math, you bragging that you were in the bottom 20% of your class, and your clear personal bias (so sorry that you can't afford it), I'm inclined to not trust what you think.

I'm done with this thread - have fun praying for the downturn that will never be nearly enough for you to afford!

In the Harvard class...where did you go? And it really didn't hold me back. You keep insisting your math is hard...and that your shitty little $600-800k 1 bed coop is something to brag about. I have plenty of money in the bank to afford something quite nice but buying something overpriced and falling is really not my cup of tea. You'll have to admit what your investment is worth when you have to sell it and until then just know that you bought poorly.

A lot of very stupid people go to Harvard! I've met a lot of them already, and count one more from this thread. I know my apartment isn't much to brag about, but for someone without any financial help at my age, I'm doing pretty damn good. Finances aside, I'm 10x smarter than you, and no market conditions will ever change that - that's the asset I'm most proud of.

I wonder if my real estate losses will ever match the amount of money you wasted on an education that gave you nothing. On a school that essentially failed you out, but because they care more about money than academics, doesn't actually fail anyone.

Jeeee-sussss,

"Finances aside, I'm 10x smarter than you"....

I mean..Really? How bad is it for you man that this Rhino gets your s@# out of whack? How does a thread started on arguments about the depth of NYC price declines devolve into this puerile garbage? This site's blogs are quickly losing all semblance of value as personal attacks and ridiculous banter seem to find their way into every thread, and it's the same idiots every time..Get some friends, get a life, get a girl..just get off the damned site

I've got all 3. He didn't get anything of mine out of whack - its just my guilty pleasure ridiculing these idiots... but at least nothing I've said has been so full of hilarious hypocrisy as your brilliant addition!

Not sure what's hypocritical about wishing away your "guilty pleasure" but your "ridiculing these idiots" seems to expose you as the lesser of wits here.

Tech_guy how smart can you be, you bought a one bed at 18x rent and you're down 25% in 3 months. It doesn't get much worse. 25% down on the whole and 100% down on a presumed 25% down payment. You are pretty much a prodigy. Yes they failed me out... And it has been a noose ever since. I had to go to Wharton for business school. You are celebrating a purchase when it might have been wiser to walk away from the deposit by the time you closed. HAHAHAHAHAHA. 10x smarter = -100% ROE. Dope.

This math is cool Steve, but if you buy stocks expensively (for example in 2000), you may never average out to 8% after losing 50% over 8 years. If you buy them toward the bottom of the ranges of valuation, you can do better than 8%. Conversely, if you buy real estate cheaply and levered 10 to 1, there is no way the stock market can match potential return on equity (albeit with more risk). I dunno if you are talking about my Wharton education...not sure there is anything we have disagreed on. Cycle in and cycle out real estate can be much more attractive than stocks (1998-2000) or much less (now)...but the ratios do go some guidance... I mean in 2000 comparing 40 P/E to 10x rent ratios....or current 18x purchase multiples to 13x 2009 / 9x 2008 P/Es. Long term averages are probable similar for each around 14-15x.

You can make money buying anything when credit is dear.

This hypothetical petri dish logic gives me a headache. Pull your head out of your ass Steve.

Anyone who thinks he is automatically smarter than others because he went to Harvard is a moron.

steve, thanks for summarizing all of your incorrect, misleading, out-of-context BS in one post. It is a terrific recap of ignorance.

"If you were to go all the way back to 1928 and dissect the S&P 500 into rolling twenty-year periods,"

The S&P 500 did not exist before 1957.

Any one who posts something that long is a total a**hole. What a total D*CK. And to top it all off he got Spunky kicked off here, before the market started coming down! I summon Stevejhx to blog H*LL! By the way, where's Juiceman?

By the way, you people are over thinking this whole thing. An asset is worth what someone is willing and able to pay for it. And, soon, no is going to be both willing and able to pay $1,000,000 for a 1 bedroom apartment anywhere in this whole wide world, be it New York City, Mars, or the top of the Taj Majal. Period. End of story. GAME OVER. It doesn't matter what rent is or implied this or multiple that.

If renting is more expensive than buying, people will buy. People like saving money. They'll pay for such an asset.

"The S&P500 increases at a real rate of 8.0% per annum"

I just had a brilliant idea. I will buy $100,000-worth of SSO tomorrow. It's 2X the S&P500, so it should increase at a real rate of 16% per annum. I assume a 3% inflation on average over the next 30 years, so that means SSO will go up about 22% in nominal terms in an average year. So guess what, you home-owners... In 30 years, that $100,000 will turn into... wait for it... about $39,000,000. It's simple math.

Why is ANYONE worried about a slowing economy or retirement or anything like that? Just buy SSO, and you will be fine. Spending 250k to go to med school? You are crazy! Put that money in SSO, you will be worth well over 100MM before you are 55, without lifting a finger. Thinking about putting the 100k toward the downpayment on a home? Your shitty 500,000-dollar 1-BR will be worth a paltry 1.49MM in 30 years, so the joke is on you.

By the way, Steve, sell your Lexus tomorrow and buy SSO with the proceeds. The opportunity cost of owning that (not-so-great, soon-to-be-next-to-worthless) car is... You guessed it... About 11.7MM in retirement money. It's just that I don't want you to go out, making financial decisions which are not supported by sound economic theory, that's all.

Stock market is the way to go, because it only goes up.

Yes, that $200 a month offset your $200,000 loss. Nice. And rents are falling. Buying gets much much much less expensive than renting in down markets. People are afraid of losing 25-50% on their investment. The reality is in an upmarket people will pay for the privilege of owning because the imagine the appreciation on a levered basis more than compensates them for a few extra hundred bucks a month cost (yes after tax). In a downmarket the converse holds, buyers want to be compensated for downside in a much much much lower monthly payment.

You're essentially arguing that the market will go down for no rational reason. That it is in equilibrium now, but it will go down anyway, just because. From your horrible misunderstanding of simple math, I'll take a pass on your analysis (not to mention reading comprehension skills - I can't believe you didn't realize the math on the previous page involved rent, when the first and last words were "rent")

Its rational in a falling market for purchase prices to fall low enough for monthly carrying costs to fall below rental values. Its rational because it has happened many times in history. Again, try to understand the 1990s.

> That it is in equilibrium now, but it will go down anyway, just because

But I don't think its in equilibrium now, not even close.

But lets even say technically prices got in line. You think the market will stop right there? Markets OVERcorrect after big moves.

Has Rhino86's prediction come true?

It seems pretty self-evident that it never went south by 40%. And by now the dip as recovered more or less below 96th...

BGaria's model proved well and exceeded, SSO went from $35 to $93 dollars, nearly 3x original investment in 4 years. :)

Buying SSO should in theory be equivalent to buy SPY on 2X margin... This makes sense with the 3X original given how low the interest rate has been. Sadly, that 100k is only 200k at the end of 4 years...

People have done this stuff...modern portfolio theory and all. If there's free lunch everyone would jump on it.

>Buying SSO should in theory be equivalent to buy SPY on 2X margin..

What do you mean in theory? Read the damn prospectus to figure it out.