Stocks may be way down, but NY real estate prices are still way high

Sorry to disappoint you, but prices are not going to collapse. And praying will not change that.

They will just maybe not to the level of 1999. I think there will be 2br 2bths for 550K - not east of lex but who cares?

> Sorry to disappoint you, but prices are not going to collapse. And praying will not change that.

I heard that last year. Now we're down 20%. I'm sure we'll hear it at 30% down, too.

Prices are not down 20%. Maybe in Harlem, but not in prime Manhattan.

prices are definitely down 10-15% in prime manhattan. no doubt about it. as with national housing, it all comes down to months of inventory. given the sheer massive size of layoffs hitting nyc (lets say it's 250k all said and done), if only 5% of those people layed off own and will need to sell in the next year, that's 12,500 units to come online. given the 9200 already on the market and sales pace dropping to a trickle, i'd say you need at least price drops of 30-40% from peak to work that off.

prices are not really down 20% even in Harlem -- at least not for anything attractive
on the other hand I checked a few sales in UWS and the appreciation (annualized) from 2001 is only about 10% for the same apartment.
This is not at all impressive given this is acknowledged to be a bonanza period.
Of course these were coops, and may not be representative of the overall picture but even so I wonder if real estate is all it is cracked up to absent leverage and absent capital gains tax exclusion

Can you provide an example of ana apartment that sold for 20% less than it's original purchase price Steve?

My other concern is that if prices do drop so dramatically, will that come in tandem with a change in NY so dramatic that it will cease to be a fun place to live? I just don't know.

All in all, I still wish I bought in 1999. Thing is, back then, not many people were talking real estate. It was all stocks back then. Remember?

> Can you provide an example of ana apartment that sold for 20% less than it's original purchase price
> Steve?

We had a thread on this in October... it started with some examples noted in an article. This was right after the panic and first move of the dow under 8k.

I've seen a couple other examples sprinkled in... check the "price chops" thread.

> All in all, I still wish I bought in 1999. Thing is, back then, not many people were talking real
> estate. It was all stocks back then. Remember?

Absolutely... and thats how these things generally work... "everyone" always gets it wrong by definition.

NY real estate prices are still - the least - at 2004 prices and higher.

And when they get to 2003 prices - $800 psf - talk to me.

joedavis: Don't forget the timing delay. Things that are closing now are the things that went into contract a few months ago.

Remember, September is when the real bottom dropped out in U.S. economic sentiment. (As a reminder, that was when we had those horrendous couple of weeks where the bailout talk of $700 billion was first proposed to Congress, and the house/senate leadership all got on board, and then it got rejected by the House at the end of that first week, and all hell broke loose?)

To gauge where the market is, I think you have to look at transactions where the price was set AFTER that time. We're just starting to see what the reaction to that is.

Right, hrdnitlr. We don't have those #s yet.

Steve, $800/ft is 2003? For a condo? Nah that sounds high. For a coop it sounds very high.

Fall 2003 was around $750 per sf for a reasonably nice condo, but that represented a jump from around $625 in 2002, and was the beginning of the huge escalation. You could still find a cookie-cutter or 1100sf pre-war co-op for $600-650 per sf, fairly easily. I saw a three bedroom, very good size (post-war nicer red-brick mid-rise, 1450 sf), for $800K on the UES in fall 2003. Obviously, even then, there were far more expensive apartments available, but it wasn't difficult to find something decent in those price ranges.

If coop prices peaked around $1100/ft, condo prices around $1400/ft.... I think $600 coop/$750 condo is probably about right. Interest rates are still low, but that misses the fact loan to values are down and appraisals tougher, qualifications, stingier. Of course its wishful, but $600s seems the right price for a 2 bed... I feel like current conditions are tougher than 2002, but minds are anchored higher. I'd look for the 2002 price point...which I bet was also a healthy jump from 2001.

"Stocks may be way down, but NY real estate prices are still way high"

Of course NY real estate price are still way high. It was in the stratosphere to begin with- there's a lot of dropping to do before prices are not 'way high' anymore, and we just begun.

That is, unless you've convinced yourself that the greatest crisis since the Great Depression will not affect Manhattan, which is in fact the epicenter the global problem (thank you Wall St. and securitization/derivatives).

I don't think 2002 was a healthy jump from 2001 (9/11, recession, etc.), but it was a huge jump from 1999. I think 2003 prices are, absent another bubble, pretty much a certainy for anything but new construction (and God only knows what will happen there). 2002 prices would be nice, and are a possibility. We shall see.

I'm sorry....now that I think of it, it was 2001 that was a big jump from 2000. I found an old NYT article. I mean it's anyones guess and interest rates are a huge part of it. I started another post and people went berserk. This thread seems calmer! Honestly, I can't see anything less severe than a 40% drop...

http://query.nytimes.com/gst/fullpage.html?res=980DE3D61E3DF937A25757C0A9649C8B63

Remember when Steve was spewing that the S&P always out performed RE?

IS that the case over the past 6 months Steve?

Mortgage rates have only responded slightly to reductions in the prime rate, and have often recently acted entirely independent of prime, increasing as prime decreases. Even if the Fed has to raise interest rates to attract investors, it doesn't necessarily mean that mortgage rates would go up commensurately. Of course, that would assume that the credit markets thaw, which is a big if, but after this nasty season of corporate-bond refinancing, we may see improvement in the credit environment early next year. Underwriting and appraisal standards will remain extremely tight, but money itself should be more available.

At what terms? I think when finance types have to show their crappy 2008 bonuses to banks and coop boards after March 2009 or so look out below. Also there may be a lot of sellers still imagining that 'bonus time' in Q1 is when to put your place on the market. So as high as inventory is, it could get much higher. Add to that the Q4 data will be released in Jan. We are down 15-20% already, if we are down 30% by March of 2009 on the true leading edge, then -40% seems conservative for the whole peak to trough.

I agree -- there is no reason why Manhattan apartments (median) should be priced higher than $600-800 psf at this point. However, even in S. Harlem getting this price point for a nice apartment is not happening at this point -- I know we dont have data on closings for current transactions for another 3 months, but my experience is that the developers are not willing to cut more than 10% still, and the asking prices in many cases are clearly inconsistent with the value given the location. UWS is starting to see a few 3br creep into the $0.9 to 1k/psf range. However, the sellers are still rejecting my offers at the low end of this range if the apt is at all nice, and are not going below this number if renovation is needed. Exceptions are a handful of apts with anomalous maintenance costs, where they may be reasonably renovated but are still unwilling to go below $0.9k psf

The issue Joe is that sellers can reject offers today and then sell lower in March... The sellers are always behind, their property is always special (see tech_guy) and in down markets its too bad because what they should be doing is pricing aggressively low and taking the highest bid. Sellers current stubbornness leads to more inventory later... And later there will be fewer buyers because whatever remaining optimists will have already purchased apartments.

Rhino how do you calculate the effect of 2 plus years of side line sitters? Meaning there are a lot of apeople who can buy, want to buy, and need to buy but have been waiting until the market settles. There are a lot of them out there waiting to see a leveling off.

I think that once financing stabilizes you will see inventory drop quite a bit.

http://www.millersamuel.com/pdf-tank/1096034424rIMRe.pdf

manhattan real estate is not overvalued when you look at the longer term.

Its tough to calculate sidelines sitters....but as one of them, I can tell you the world changed severely in September and I went from looking/considering...to not at all...And its not unrelated to the fact that I work in finance and my 'normal' income is still a question mark... So I don't really know how much I should be comfortable spending. I have cash, but to me stocks look much cheaper...and if I change my mind I can sell them with a press of a button. The idea of buying and holding real estate after the first quarter report to show a year over year price decline in god knows how long...I couldn't dream of it. When momentum turns, the side line sitters continue to sit...it happens in stocks too. Its human nature.

Mortgage applications surge by record amount
Wednesday December 3, 7:13 am ET

NEW YORK (Reuters) - Mortgage applications surged by the largest amount on record last week as a new Federal Reserve program pushed interest rates down to their lowest level in more than 3 years, data from an industry group showed on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended November 28 soared a record 112.1 percent to 857.7, the highest reading since the week ended March 21 when it reached 965.9.

Potential borrowers were lured by enticing mortgage rates, which dropped dramatically after the Federal Reserve unveiled a plan last week to buy up to $500 billion of mortgage securities backed by government-sponsored enterprises, Fannie Mae (Pacific:FNM - News), Freddie Mac (Pacific:FRE - News), and Ginnie Mae. The program also entails buying up to $100 billion of debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

That's national, we are talking about Manhattan which lags, which had sicker heights, which has disproportionate dependence on the finance industry.

I don't dispute that NY real estate has soared to sick heights, or that it may be a "bubble" at the "epicenter of the global financial crisis."

It's just that so far I would have been a much, much happier man had I bought in 1999. I definitely would have had a better past decade.

except that mortgage rates for NYC coops and condos also just plummeted this week....

You are dead right anonymouss... but in 1999 the math was fantastic relative to rent. I looked at a $185k one bed that was say a $1500 rental...Thats 10x annual rent. The reality was I was 24 and simply didn't have the money. I agree, people with money who lived through the 1990s in Manhattan should have looked at the math. It was amazing...and in the late 1990s it was not as good as the early 1990s, but so what because the economy was ripping and crime was down.... 1998-1999 was a no brainer... But that doesn't mean 18x rent today is wise or attractive.

A couple comments:

Of course you wish you bought in 1999 anonymouss--you'd be crazy not to wish that. I graduated college in 2003, bought and owned until 2007, but if I had bought in 1999 I would have had an extra doubling or more. 1999 was a year of peak equities prices and very low real estate prices relative to their true value--prices were essentially the same as they had ben in the low 80s (just like stocks are now where they were in the late 90s). You say you didn't buy real estate because "everyone was talking about stocks." Let that be a lesson to you: whatever asset class "everyone is talking about," that is the asset class to avoid. The mass of investors follow the buy hight/sell low strategy.

But if you correctly wish you had bought in 1999, you should also wish you had sold in 2006/2007. We are in for an epic real estate meltdown in this city, and some idea that "sideline sitters" are going to save it is just pie in the sky fantasy. Foreign buyers have more or less disappeared due to the strength of the dollar and the weakness of the global economy. Finance industry buyers, obviously. Rents are already very attractive relative to sales prices, and yet rents are coming down and vacancy going up.

Finally, those of you who don't see major declines from peak asking prices in prime Manhattan just haven't been looking. I see them all over the place. There are all kinds of threads on comps and price chops, so I won't repeat it all here, but just yesterday we were treated to:
http://www.streeteasy.com/nyc/sale/233174-coop-320-central-park-west-upper-west-side-new-york

A large Classic 6 with open views and beautiful terraces in the Ardsley now on the market for 1.995 million, down from an asking price of 3 million, which was not off the mark for the peak of the market. You could not get an apartment like this for this price at any time since at least 2004. And let's see if even this aggressive pricing gets it sold.

Nice post and nice find. $3mm may have been high...but even still...It's not hard to imagine it at $1.5mm...or frankly at its 2002 price of $1.1mm or $1.2mm. I am tempted to call the broker and offer $1.5mm and see what the counter is.

Happyrenter did you play football at Harvard?

Happyrenter - isn't the maintenance on that one really high?

Rhino,

I think the 2002 price on that apartment may have been significantly higher than $1.1 million--not sure, but I have a feeling. Those terraces are very unusual for a high quality prewar building like the Ardsley.

I did not play football at Harvard. How many football players you knew graduated summa in philosophy? :). I was a rower.

Yeah good point... I barely knew any summas. You have to write a thesis for that right? Haha. I spaced on the terraces. The prospect of that clearing the market for $1.5mm in the not too distant future is pretty intriguing. That is good living.

"We are in for an epic real estate meltdown in this city, and some idea that "sideline sitters" are going to save it is just pie in the sky fantasy. Foreign buyers have more or less disappeared due to the strength of the dollar and the weakness of the global economy."

happyrenter, I strongly agree with the first point. The sideline sitter myth doesn't make much sense when you think about it. There is no floodgate opening/telltale sign that it's time to buy - if anything, buyers will trickle in as the water gets a bit more comfortable, so to speak. Think of that "early adopters" graph. About the foreign buyers, I'm less certain. I've never thought they were or would prop up our housing market to begin with, but I think they're still out there, just not in droves like some of the media wanted us to believe not so long ago. NYC is still very attractive to outsiders, and I don't see that changing. Volume drops will make it seem that way, but I'm not convinced yet that they've "disappeared."

"It's just that so far I would have been a much, much happier man had I bought in 1999. I definitely would have had a better past decade."

Key words: "...so far..."

We've just *barely* finished the appetizer here people. We still got the main course coming up. This is not even anything near what is about to come- hint: $50 trillion derivative market that is being kept secret by the Fed/Treasury and Wall St. honchos. Just wait until that is delivered to our table for us to feast upon.

Heck, they won't even tell us where all the money is going to, even with Bloomberg (and others) filing lawsuits against the gov't under the Freedom of Information act to disclose where all the bailout money is going to (google: "suit bailout freedom of information" for more info).

The Fed is getting ready to buy Treasuries (a.k.a detonate the printing press nuke)- they can smell the main course already.. it's been cooking for a while and is getting ready to be served. Try as they might, they can't just make it 'disappear'. It is, $50 Trillion after all.

I would make this statement with absolute confidence: if you bought in 1999, you are absolutely fine, for many reasons.

1) Prices then were 1/3 of what they are today. That requires a 66% fall, which is pretty dramatic. I doubt prices would go below this - this means Manhattan real estate would be at 1988 levels approximately.

2) After having a mortgage for 10 years, you're at the point now where a significant amount of your monthly check is paying down principal instead of interest. This means you're actually building equity now with every payment. The common myth is that you're building equity with every check of course, but for the first 5 year of a mortgage, you're paying almost entirely interest.

3) Your monthly cost if you bought in 1999 is WAY lower than renting the equivalent place - the math worked then and rents have gone up since then.

No matter how bad things get, I can't imagine a scenario where somebody who bought in 1999 would be kicking themselves. Even if prices fall to that level, you still basically locked in cheap rent on your place for the pat 10 years. Not bad. Sure, maybe one should have cashed out in 2007, but if it's your home and you never forsee upgrading, why?

Kspeak - dead on.

I wish I had bought in 1999 - it would have been the one action that would have positively impacted my life for the next decade, and I admit it. I did not even know at the time what a coop was! I probably thought it was a supermarket or something.

joedavis,

also, there are 3brs in UWS starting to crack 800 psf, actually. If you remember a thread started about 4 ms ago and kind of abandoned 3 weeks ago, it was "Where's my 3br/2bt in UWS for 1.49 to 1.15 million?" or something like that. Of course, the original poster meant it as a dare, like, you won't find any, hahaha. The thread was abandoned because many of the listing were starting to fall below 1.05 million. I'm pretty sure that if you go back and look at those apts. now, you'll find a few under 1M. We're talking 1200 sqft plus apts.

See urbandigs.com today -- he strongly disagrees that the sideliners will prop up the market.

Petrfitz, I believe a large percentage of the mortgage applications were for refi. One wonders how the properties will appraise.

Regarding the sideliners, you also have a lot of sideline sellers, including baby boomers, nearing retirement. You also have a perfect storm in the rental market, new developments throughout the city, condos going nondo, units that can't be sold by individuals being rented, and somewhere between 3-5% (around 3% now, increasing over the next couple of years) of the rent-stabalized units exiting the system. I don't know how many apartments are rent stabalized, I think it's somewhere around a million, at 3% that's 30,000 new market rate apartments a year.

I have always believed in owning as a forced form of savings, but I am close to embracing the concept of renting indefinitely, given my age, circumstances, and where I see the all the variables headed. Show me a nice 1400 sf for $800k with reasonable ccs and I might change my mind.

"No matter how bad things get, I can't imagine a scenario where somebody who bought in 1999 would be kicking themselves."

Really? Then try to imagine what happens when the entire $1.4 QUADRILLION ticking time-bomb we are sitting on top of detonates.

Surprised? What? $1.4 QUADRILLION (yes, that's 1,000 Trillion) dollars? Who? How? Haha, exactly. Stupid digital money that made many people very rich.

The Bank of International Settlements, which seems to be the only institution that tracks the derivatives market, has recently reported that global outstanding derivatives have reached 1.14 quadrillion dollars: $548 Trillion in listed credit derivatives plus $596 trillion in notional/OTC derivatives. Google it.

This is why AIG, a freakin insurance company, couldn't go down. But wait, the time-bomb... it's still TICKING!!! tick.. tock.. tick..

kspeak,

No one will disagree with you that buying an apartment in NYC in 1999 worked out to be a great investment. But even to the peak of the market, buying in NYC in 1988 was a crappy investment. I would guess that 2007 will turn out to be significantly worse than 1988 as a year to buy an apartment in New York.

The number of units pouring on to the market as we speak, at a time of year when inventory usually declines and people decide to wait for Spring to list, is just shocking. This is a bloodbath.

What are we gonna do? Where are we gonna go? How are we gonna just... make... this damn... $1.4 QUADRILLION just.. go away!!!!!! argghhhh!!!!

Who owns this stuff? How can it be so large? Is there even that much money in the entire world (answer: no there is not).

Stupid digital money. It's coming home to roost soon. Be ready, be prepared. It's not just going to 'go away'.

>>> No one will disagree with you that buying an apartment in NYC in 1999 worked out to be a great investment.

Actually, some people do disagree. See Mmafia above

>>> But even to the peak of the market, buying in NYC in 1988 was a crappy investment. I would guess that 2007 will turn out to be significantly worse than 1988 as a year to buy an apartment in New York.

I don't disagree. What is the point?

>>> Really? Then try to imagine what happens when the entire $1.4 QUADRILLION ticking time-bomb we are sitting on top of detonates.

Mmafia- let's just look at costs.

I could have bought a nice 3 BR in 1999 for $800k which is about right. Say I put $200k down. Mortgage cost $4k per month. Let's say it costed $5k to rent a 3BR then, and that rents grew 4% per year to about $7,100 by 2007 - that is 12,000 annual savings in the first year and $36k by 2007. For simplicity purposes let's assume maintence and mortgage interest deduction net out. That means I saved $240k by buying not renting.

This means the price of the 3 bedroom would have to decline to $560k for me not to break even. And that's not counting on two other things 1) that my monthly cost of owning is still cheaper than rentning the equivalent place, meaning I save money each year - even if rents do plummet, this will take a while and 2) not counting the equity I have built.

Sure, there is opportunity cost on that $200k, but if you'd put it in the stock market, it would be worth less ...

Manhattan real estate is not always a bad investment. It just is now. It was not in the late 1990s.

Sideline money is almost always a myth. For one, sideline money doesn't exist independent of the macroeconomic climate. The same forces that caused the economic meltdown also wiped out most of the sideline money. I know a number of people who were looking to buy in 2007 who have lost their jobs and thus, are no longer looking to buy. Their sideline money is gone. With over a hundred thousand people laid off on Wall Street, that story can be told one thousand times over. Those of us on Wall Street who are left expect significantly lower compensation, so we have less sideline money than we thought, and are worried about being wiped away by the meltdown ourselves, so we're a lot more guarded with our sideline money than we may have been 18 months ago. And anybody with limited cognitive function can see that the NYC real estate market isn't in a good place right now, so they keep their money on the sideline until NYC real estate seems like a better investment. There just aren't thousands of potential buyers who live in an economic and information bumble who are completely insulated from the world around them and are ready to jump in and buy up all available NYC real estate at the slightest hint of a 5% drop.

completely agree, billshiers. not to mention the fact that many "sideline buyers" are also worried about what happens to manhattan's livability (crime, cleanliness, quality of schools) in a severe economic downturn.

I suspect many sideline sitters didn't buy during the bubble because they felt the price increases were unjustified and unsustainable. Now you expect these same sideline sitters to come and bailout the crazed buyers/developers of 03-07? If someone is sitting on cash right now, they probably don't see the housing market as a parallel stock market where you buy low and sell high. They probably care about long term affordability, value, construction quality, location, etc... And they almost certainly aren't looking to be someone's cash-out point. When it's all said in done, sellers are going to have to beg people to buy their apartments. Give it 1.5 years.

"not to mention the fact that many "sideline buyers" are also worried about what happens to manhattan's livability (crime, cleanliness, quality of schools) in a severe economic downturn."

All of those problems would affect renters just as much. And its a very real problem, but if severe crime returns (like there was in 1988, even before real estate tanked), nobody will be happy. Personally, I don't think that's very likely (which is also why I doubt this downturn will be anything like 1988).

Now, I was quite young in 1988, but from what I've read - crime was pretty terrible before the stock market crash, before the real estate downturn, right?

You should read this, tech_guy. This is the best reality you will find, because we're clearly beyond you accepting my point of view.

http://www.urbandigs.com/2008/12/the_buyer_seller_disconnect.html

Tech Guy - the fax machine is still out of toner.

Please stop pretending to be a real estate investor and change the god damn toner.........

livibility issues will most definitely NOT "affect renters just as much." why? because renters have not put their capital at risk, and renters can move.

>>> All of those problems would affect renters just as much.

Not really. Renters definitely care, but less so than buyers. Renters are more likely to say "it's a little dangerous, but I'll move out when I have a family/my kids are older/whatever." Not so with buyers, who need to think long-term and are obsessed with trends. A renter might say "crime is up 10% year over year, but that's not that big of a deal, it's still pretty safe" while a buyer might say "what if this is a trend and it increases 10% per year for the next 5 years - what happens to my property values?"

I agree, though, generally - I actually don't forsee crime reverting to early 1990s levels, though it may go up a bit.

Rhino: I read it. What does that have to do with crime in 1988?

petrfitz: You do more pretending than everybody else on this board combined.

But the point is, even if crime goes up a little bit but not severely, people will panic and wonder if it is the beginning of a trend. Perception is 9/10 of reality. It's just like if a company misses it's earnings by 5% - the price falls by more than 5% usually ...

"livibility issues will most definitely NOT "affect renters just as much." why? because renters have not put their capital at risk, and renters can move."

I'm putting down roots, establishing long term friends, dating, looking to marry in the next few years. Call it an overinflated sense of self worth if you will, but if I find myself a distressed seller moving out to Silicon Valley because NYC is too dangerous long term, what I'll regret most is the last few years wasted here. The lost money in real estate will be an extremely distant 2nd, quickly made up for by the fact that I can buy a much better place in California with the liquid assets (and earnings power) I still have.

>>> I'm putting down roots, establishing long term friends, dating, looking to marry in the next few years. Call it an overinflated sense of self worth if you will, but if I find myself a distressed seller moving out to Silicon Valley because NYC is too dangerous long term, what I'll regret most is the last few years wasted here. The lost money in real estate will be an extremely distant 2nd, quickly made up for by the fact that I can buy a much better place in California with the liquid assets (and earnings power) I still have

What if you owe the bank money? And Silicon Valley ain't so cheap either.

I don't disagree with the idea that one has more at stake than just their apartment money, but it doesn't change the fundamental point. Plus, I find it's much easier to take difficult transitions when you are better off financially. The people I know who got fired from Wall Street jobs and who saved a lot of $$$ are like "well, maybe I wasted a few years, but at least I came away with a million bucks in the bank." The people who spent what they earned AND got fired are like "I wasted all that time, worked that hard, and I don't even have liquidity."

"Call it an overinflated sense of self worth". I will. Whether you are distressed or not, you bought a one bed near the top of the market and if you choose or are forced to move any time in the next 5 years you will likely take a big hit. Again and again, people remind you that prices were low in the 1990s and NY was not dangerous. You bought at the end of a credit bubble and related financial industry bubble. No one is going to buy your place for the same monthly cost as rent and rent is falling. Plan to live there with your imagined wife for a while.

kspeak: Except I am liquid. And am in no danger of being fired - if I change jobs and move, it'll be because NYC went to hell, not because I'm forced to.

Rhino, you can repeat your dribble 100 times if you want. I know its "again and again" - I already answered that point and you had no response for me. Repetition does not create accuracy.

techguy - by definition you will be less liquid if your apartment is worth less than you paid because you won't get your downpayment back. you could even owe the bank money.

Tech_guy you're really are funny little boy. People like you make me want to leave Manhattan. You guarantee stock market moves and claim you can never be fired...also that you have the only one bed on the island that hasn't falling since the summer. You keep topping yourself.

I don't consider my home part of my liquid assets. Am I less liquid now than I was before I bought? Of course, but I'm still pretty liquid. I'm also *more* liquid than I would be if I didn't buy at all. I was 100% S&P 500 before I decided to buy. By luck (not skill, I'm not a market timer) I sold within 5% of the all time highs to put my down payment in cash, and 50% of what's left in short term bonds.

Rhino: My guarantee was that the stock market would rebound before real estate. I know 100% you agree with me. Taking that statement out of context as you did says a ton about your character.

My character? Jeez lighten up. Go find that wife of yours and get laid. You sold stocks well but your down payment is now a negative balance. And for sure the stock market will lead the real estate market....because it will lead Wall Street employment, bonuses, and ultimately buying power and comfort for the purchasers. Again....we keep getting back to 1998 by analogy. 1996-1999 = perfect examples of stocks leading real estate. So what does this tell you on the DOWNSIDE my man? Come on, I know you can do it... Get the joke, please... If I could teach you this it would make my day.

Please don't forget the enormous loss of personal wealth that has occurred this year. IRAs, 401ks, 529s, and just plain old stock accounts are down 40 to 50%. Even people who want to buy, who had money set aside, do not have as much of it as they did before. Then there's the whole employment factor...

kspeak,

First of all:

"Sure, there is opportunity cost on that $200k, but if you'd put it in the stock market, it would be worth less ..."

Well, I would have never done that, nor would I recommend doing that. In fact, as you know, I would have put that $200k in Gold back in 1999 when it was only $300 and would have more than doubled to make a profit of easily over $400k in gains before taxes if I were to sell that Gold today (which would be a foolish move to do).

but alas, that's not even my point- today, we are only in the 3rd, perhaps 4th inning at best.

"This means the price of the 3 bedroom would have to decline to $560k"

Exactly my point- that seems impossible to you and many people here. Just how what is happening today seemed impossible just 12 months ago. Today, people throw around the "depression" word- last year, you would have been ridiculed, just like how people will now ridicule such a dramatic price drop.

Now, I'm not saying that prices for a 3 bed will decline to $560k for a fact- I don't have that crystal ball.

But, what I do know for a fact is that time after time, the impossibility people has been giving way to reality, a.k.a Taleb's "Black Swan".

With over $1.2 Quadrillion floating around in secrecy under the cloak of an unregulated derivatives market, the "Black Swan" is peaking its head out, and when it emerges, people will understand that the current crisis is not the "Black Swan" event- it was but a mere appetizer.

Its more than just your character. If you're going to twist my statement about stocks leading real estate (which you clearly agree with) as "guarantee stock market moves", and then twist "no danger of being fired" as "can never be fired", it says a lot about how you interpret facts. You're not about objective analysis - you're about a conclusion you want, and twisting every fact to suit your needs.

waverly is an example of someone who's very bearish, but who's opinion I highly value. He approaches facts very intelligently and objectively. You could learn a thing or two from him. As for you teaching me, nothing personal, but I pride myself in being nothing like your type. If people like me make people like you really want to leave the island like you "threatened", awesome!

Actually tech guy, I lived in Manhattan in the late '80s. I love New York, but by 1990 even I couldn't take it and left for 4 years. Crime, homelessness, etc. did definitely get worse after the 1987 crash. Was it correlative or causative? I don't know, but it was freakin' ugly. I will say that I did witness a significant increase in drug use from 1985-1990, which often accompanies economic downturns (I'm talking crack in this particular instance). Anyone who rode the subways during that time can attest to how uncomfortable the car would become as the riders realized someone high on crack was their co-passenger.

Only time will tell, there is obvious short term weakness.

But I think people seriously underestimate the amount of wealth there is in Manhattan. I've seen plenty of old ladies on buses reviewing mortgage documents that have 7 figures of assets in them... and they totally don't look like they are rich.

Personally, I'm banking on the philosophy that the rich get richer and the poor get poorer. Even if all the doom and gloom scenarios being thrown out here come to fruition, our way out of this mess is to inflate the hell out of currency. Which means there's more money around to chase the dollars... which helps hard assets (like gold, real estate) to hold their value better or eventually catch back up.

Mmafia - I don't disagree that there is a severe economic crisis happening. I don't have a crystal ball either, but my point is that i think if you bought in 1999 you are reasonably safe. In fact, mortgages are non-recourse, so you've already made your downpayment ($200k) back on rent saved ($240k), so it's hard not to see how you could not be okay if you'd bought in 1999. To me, nothing that is happening right now seemed impossible 12 months ago - that's why I have been out of the stock market for over a year.

As for buying gold with that money, all I can say is, if I had bought in 1999, even today, I could probably firesale my apartment at 2002/2003 prices (some deals are still happenning) I could probably get 1.5x what I paid in 1999, which is a $600k profit, and more than you would have made in gold.

Notwithstanding the fact that gold prices, like all commodities, have gone up in the past few years, I don't REALLY see any instrinsic value in gold. It's rare, sure. But what practical utility does it have? Isn't it just worth what somebody is willing to pay - this is true for everything, of course, but some investments (even real estate and stocks) and least theoretically throw off cash flows. I don't think gold is necessarily "safe" either.

err more money around to chase goods

aifamm - but is there really that much more wealth (real wealth, not bubble created and currently being destroyed) now, as compared to 2002 or 3? That's really the question. If there isn't, then given increases in supply, why are prices for real estate so much higher? There are a number of reasons (emotion one of them) but I don't think they hold up under any real scrutiny. And the poor may be getting poorer, but so have been the upper middle and middle classes.

>>> our way out of this mess is to inflate the hell out of currency

That is ultimately what is going to happen. This will be bad for the dollar, but not sure we have a choice.That's why I am in the process of figuring out how to put money (I am completely liquid right now) into foreign currencies (going to avoid the Euro and Pound because I think they are in trouble too).

This board can be frustrating because anytime you make a statement that suggests ANY form of moderation (e.g., "we are in for a severe downturn but I don't see us returning to 1999 prices") to bearishness you get a lecture about how you don't "understand" what is going on and how "nobody knew this was going to happen, and nobody knows what is going to happen." While of course none of us have a crystal ball, expressing a moderate view doesn't make you ignorant or unaware. It's even funnier when you DID see this coming and people are telling you you don't understand. I don't claim to have a crystal ball either, but life goes on. It did even during the Great Depression ...

"our way out of this mess is to inflate the hell out of currency"

Having a very large mortgage at a very low fixed rate is an amazing hedge against inflation.

"I don't REALLY see any instrinsic value in gold"

Bingo. You, me, and Warren Buffett agree. Biggest bubble of all time.

Tech_guy you are going to come here and add to your hubris by comparing yourself to Buffett. Honestly get lost you little 24-26 yr old piece of shit.

rhino, you need to CALM DOWN. what is your problem? relax, chill out. he isn't comparing himself to warren buffett--he is stating that he and buffett happen to agree about something. i agree with them on this as well; investing in gold can make you some cash in the short run but it does not create long-term value.

Your ego is really so fragile that you can't even stand to listen to those with opposing viewpoints? Seriously, grow a back bone.

"Mmafia - I don't disagree that there is a severe economic crisis happening. I don't have a crystal ball either, but my point is that i think if you bought in 1999 you are reasonably safe."

Again, that is true TODAY- you are reasonably safe NOW. I don't disagree there. If you are able to find a buyer today (good luck) and get the hell out NOW, then yes, we are in agreement.

Mad rush to the fire exit, but only one person out at a time please.

With respect to Gold, again- there are those who understand why it is what it is, and then, there are those who don't understand. History is an excellent teacher of how humans repeat the same mistake, over and over again when it comes to 'money'.

Money is:

1. Means of transaction (better than barter)
2. Store of value

In human history, there has never been a successful fiat 'money'. EVER. Human nature is too powerful- we cannot resist the temptation to inflate and create more of it. And when we create too much, as is always the case, the fiat system collapses, we always revert back to the same thing- over and over and over again. So, what do we always revert back to and why? Therein lies the answer.

>>> Having a very large mortgage at a very low fixed rate is an amazing hedge against inflation.

I am not sure we are going to see runaway inflation as a result of this - not in the near-term anyway. I think we're just trying to prevent deflation at this point. And I think in NY at least the unfavorably buy/rent math (techguy, I know you insist otherwise, and maybe your place was an exception, but it generally costs more to buy than to rent, although I don't think it costs 2x either as a general rule either at this specific moment) combined with higher-long term interest rates (an invetible result of all of this) and lower incomes in Manhattan, will put tremendous downward pressure on prices no matter how much money they pump in ....

There's never been a successful Internet before either, but I don't see that disappearing anytime soon. Some things are cyclical, some aren't. Even your "cyclical" examples of the gold standard disappearing and coming back never includes a disappearance longer than 10 years, nevermind 50 years. How long will it take before you realize we're not cycling back to the gold standard anytime soon?

kspeak,

correct. people get way too fancy about investing. something like real estate can be understood with reference to a very few factors: incomes, wealth and supply and demand. you don't need some sophisticated macro prediction of global inflation to see that demand has significantly slackened, supply continues to go up, and incomes and wealth have declined.

Mmafia - you still have not explained why gold is worth anything. I agree money can be printed and gold can't. But still, gold has no yield and little practical utility. I am with Warren Buffet here - gold is a bubble. I'd rather buy foreign currencies ...

Can we get back to the original thread: I was just looking for people to commiserate with. Misery loves company you know.

"And I think in NY at least the unfavorably buy/rent math (techguy, I know you insist otherwise, and maybe your place was an exception, but it generally costs more to buy than to rent, although I don't think it costs 2x either as a general rule either at this specific moment) combined with higher-long term interest rates (an invetible result of all of this) and lower incomes in Manhattan, will put tremendous downward pressure on prices no matter how much money they pump in ...."

Lets put it this way - I agree that many properties on the market (mostly condos) are overpriced by rent vs. buy math. Good deals can be had though which justify it. Clearly the former will go down quite a bit more than the latter (the former also shot up higher than the latter over the past decade).

As for interest rates going up in the future, that will absolutely, 100%, lower real estate prices. It all goes back to rent vs. buy.

Lower incomes may put downward pressure on rentals, which in turn, affect real estate. I've said time and time again that I'm worried about the rental market, but haven't seen significant moves yet.

I'm not bullish on Manhattan real estate by any means, even though I answer to that name. I'm just not as bearish as many others on these boards. "Cautious" perhaps?

"There's never been a successful Internet before either, but I don't see that disappearing anytime soon."

LMAO- the Internet never 'failed'- in fact, it succeeded in its creation tech_guy. When did the Internet ever 'fail' after its creation?

Contrast that to fiat money, which has never succeeded after its creation, and has always failed after so many attempts that I can't even count anymore.

While that was an amusing analogy, it is nothing more than that- amusing.

kspeak: He's hinting that we'll go back to the gold standard. And full disclosure that he won't give you - his politics (at least financially) are extreme conservative. Ron Paul conservative. He wants the gold standard, politically.

If we do go back, gold will certainly be worth money. A level that the government decrees... which, well, kinda defeats the purpose of taking the government out of the mix, no?

kspeak, just search through the old threads here- noah and I have explained this many, many times already.

MMAfia: I'm glad that you responded to the part of my post that was meant as a joke, but not the actual substance right after. Care to go back and try a little harder?

Listen gold is a trading vehicle like many things. Due respect to Buffett, but gold was a standard of value before Buffett, before Manhattan, before paper that represented a share in a public company. Governments all over the world may be forced to print money, and whether its intrinsically worthless or not, gold will be where it is at for a time.

Gold was a standard of value before Buffett. If you invent a time machine, you can get back to a time and place where gold has intrinsic value. You'll probably get stoned for believing the Earth is round and revolves around the Sun, however - that was also a standard before Buffett. People evolve, standards change, and gold is dead and gone.

>> Listen gold is a trading vehicle like many things. Due respect to Buffett, but gold was a standard of value before Buffett, before Manhattan, before paper that represented a share in a public company. Governments all over the world may be forced to print money, and whether its intrinsically worthless or not, gold will be where it is at for a time

Yes, but again, no real value. We can agree to disagree and I have heard all these arguments before. I am not saying the value of gold is going to go to zero. I am just saying it's already gone up a bunch and I am not sure this "flight to gold" will really happen given where gold prices already are. At the end of the day, gold is really just a form of currency too that people created and have historically flocked to - there is no guarantee we'll go back to that and I think the world has changed so fundamentally one can poke holes in looking back to ancient times. This is not a uninformed view - neither is your view either - it is just a different view, and a legitmately different view.

gold is a "standard of value" which means that its value is determined by some form of acclimation and has no relationship with productivity. gold is, in fact, NO DIFFERENT from printed money in that sense. it is worth what people say it is. the only difference is that we can't make more of it. but that's not such a relevant difference given that it has no productive value. there are plenty of things we can't make more of without great difficulty--say, petrified wood. doesn't make it particularly valuable unless people decide for some reason that they want it. there are plenty of scarce materials out there.

Its dead and gone, but if I had an ounce of it in my hand I could sell it for more than $700 bucks. How is that dead and gone?

I am not saying gold is going up or going down, but if you can sell it for $700+ an ounce, of what informative value is calling it worthless or of zero intrinsic value?

Its a bubble. Keep holding it though - when it crashes, it'll crash far harder than your Manhattan predictions. Its sold at more than 10x what the intrinsic value warrants (jewelry demand, minor industrial uses).

aboutready: either you are rich or you are not rich.

tech_guy:
>> Having a very large mortgage at a very low fixed rate is an amazing hedge against inflation.
I actually agree. What I think will happen is: Gov & Fed will keep pumping currency until they overpump. Excess of currency chases good. Inflation & Interest rates will skyrocket making those who waited on the sidelines in a position where its not so easy to buy again even though they have plenty of money. (10%+ mortgage rates sound fun?)

"With respect to Gold, again- there are those who understand why it is what it is, and then, there are those who don't understand."

End of story. Pointless arguing that any further.

"People evolve, standards change, and gold is dead and gone."

As far as dismissing history because we have 'evolved'.

You will be surprised at how we are still very much the same when it comes to our basic human nature. The temptations are still all there. Greed is still here to stay, and with greed comes the temptation to inflate.

btw- brilliant attempt to dismiss your incorrect analogy as a joke. quite a slithery little fella you are.

Aifamm, 10%+ mortgage rates actually sound fantastic. That might drive the real estate market down 70% instead of 50%. That's locking in your monthly payment in at a massive discount to rental cost.

I don't hold gold, I trade it.... And I don't own any right now, nor do I have a strong view. Made a decent 10% or so trade in it a week or two ago.

"Its a bubble. Keep holding it though - when it crashes, it'll crash far harder than your Manhattan predictions. Its sold at more than 10x what the intrinsic value warrants (jewelry demand, minor industrial uses)."

Probably the most incorrect statement I've read here. Perhaps about as incorrect as those who think Manhattan real estate is not going to tank hardcore.

tech_guy, i hope you will be around in the next 2-3 yrs on this forum and don't do a disappearing act like spunky when you have been disproven.