Calling all Sideliners!!

Show me a good west village apartment around 500k and I am sold.

if you paid for the entire apt in cash you would be correct. however, with a 80/20 LTV, a 105k drop in price would equate to a 75% loss on a MTM basis. This also doesn't include the maintenance of on avg 1k a month. In 1 yr's time, you'd still be ahead on the buy side, but 2 years and the value of the apt hasn't gone up, you'd be in the hole having paid 24k in maintenance and 35k in trans cost, and a 105k loss on the apt value.

Sorry, 1 bedroom and street view in a tree lined street. A real 1 bed. None of that Jr 1 BS.

What about this: the market goes down 35% (likely) and you lose over 250k? Facing the current level of uncertainty, why wold you like to gamble the possibility of owing more for your apt that you can sell it for? Unless you get a very good discount for your risk, I don´t see your point. I am only buying with a cut of at least 25,30% in this market, and only in a property I really like.

"Even if a $700,000 one bedroom declines in value by 15% over the next 3 years"

huh? $900,000 one BR have probably already declined 15% in the last 3 months alone! Incase you hadn't noticed, many high paying jobs in wallstreet have evaporated and may not come back any time soon!

But we're not talking about 15% drop, right? And when exactly will the prices start going up after the prices reach the bottom and then flatline? I think it's stupid to outbid yourself in this market...and that's how it feels like with a lot of these buildings and units sitting on the sidelines. I noticed that there's not really much action and there are barely any buyers signing new contracts since mid October. The real question is WHAT'S THE HURRY? Why would you wanna outbid yourself in this market esp if the sellers are still unrealistic?

mimi- you're saying that a $700,000 apt is likely to go down to $450,000?

How would you LOSE the money unless you SELL your dream apt?
This speculative mentality is what got us in a pickle in the first place. Everything is flippable, sellable, open for speculation. What a stupid approach.

hotproperty's dated broker shill almost has me feeling nostalgic. It's like a song from your childhood you didn't like, but it still makes you remember a bygone era...

tenemental, I'm trying to figure out how throwing away $43,000 a year on rent makes sense in ANY market.

The "throwing away money on rent" is a ridiculous argument early in a mortgage.

You hardly amortize ANY principal in your first 5 years of a 30 year mortgage. So if your mortgage costs, say, $50k per year, you are NOT paying down $50k off your loan balance. It's almost all interest.

If you buy a place for $700k, put 20% down, and get a mortgage on $560k (80%), after 5 years, you have only paid down $40k of your mortagage. Without appreciation, this gets eaten up in transaction costs.

Osiris IF you need to sell (divorce, relocation, etc) THEN you can be paying a mortgage that exceeds your apt value. You can run this risk, but you better be somewhat sheltered by asking for a big discount. Hot property, there are months of written stuff in Streeteasy about buy vs rent. Maybe you can take a look at these threads.

It you could guarantee ONLY a 15% drop (already surpassed that in median)
And that it would take 3 years (when it seems to have only taken 6 months)
And if the maintenance were free...
And there were no taxes.

If all the facts were not true, then you might have a case. Great argument.

But after the 5 years, you would have spent $216,000 in rent.

Oh, and I forgot... 0% mortgage.

hotproperty, what is the logic of purchasing an asset you feel will decline in value? What is the logic of borrowing money to purchase an asset you feel will decline in value? What is the logic of taking money out of a positive yield instrument (i.e. treasuries) and purchasing an asset you will will decline in value?

Over the past year people holding cash are up more than 50% vs. the stock market are probably beating real estate by more than 30%. I don't see how you can make an economic case for a $700K 1BR right now. Even if mortgage rates were 0% you're still out a couple hundred grand vs renting and keeping your money in treasuries.

ok, then, if you had signed a contract already, would you not close and walk away from your 10% deposit?

>>>> But after the 5 years, you would have spent $216,000 in rent.

Yes, but your motgage costs money and you don't pay much of it down
Here is the math assuming this place costs $700k and mortgage at 6% w/ 20% down

+ Total saving in rent cost (@ $3600 / month) = $216k
- Total mortgage cost (560k mortgage @ 6%) = $201K
- 5 years of maintence @ 1k per month = $60k
- downpayment @ 4% annual appreciation = $30k
+ tax savings on interest portion of mortgage (assuming 35% tax rate)=$58k
- selling agent commission when you sell in 5 year = $42k (assuming 6% commission and sale at same price)
+ amount of mortgage amortized = $40k of balance paid down

If the apartment holds flat, I have lost $20k and this isn't counting closing costs, legal fees, loan origination fees.

Wait until stevejhx discovers this thread. He can go on for hours when it comes to buy vs. rent. In fact, if you guys want to save some time, instead of having this discussion, just dig up some of his old posts.

Here's an example: take two people, each has $500K cash. They do different things. Let's see what happens in 3 years given the "hotproperty" advice

Renter invests all $500K at 5% return. Pays $3K a month in rent. After 3 years renter's net worth approx $450K.

Buyer puts $140K down on a $700K property. Pays $35K closing costs. Invests remaining $325K at 5%. Pays $5K month (mort, cc, maint). If home declines 15% after 3 years buyer's net worth = $175K.

If you are a cash rich sideliner what would you do?

yes, but steve likes to post nonsensical garbage such as "buying a home is always a bad investment" and the "mortgage interest deduction doesn't really exist." his posts are also 10 pages long ...

Honestly, the worst thing would be to buy an apartment and throw away interest payments to the bank every month, not to mention throwing away the monthly maintenance as well as throwing away a ton of money on the buying fees, mortage fees, etc.

Do you realize if you buy a place for $500K, you have to lock up $100K that you can't even touch and then you end up paying, at a 6% mortgage on a 30 year, more in interest than the amount you borrow? Just throwing away $460K which is ridiculous.

I'm a sideliner with a good amount of cash. I don't mind spending some money on rent (way less than mortgage and maintenance) knowing that in a year or 2 I'll be able to get an much better apartment then I can afford today. The apartment asking 1.5M right now I'll be able to get for under 1M. If I buy it today I'm scrapping together every last penny I have and become cash poor for a while. If I wait, I get that same apartment and have a nice amount of savings left over.

Yes, but you assume that your home will appreciate over time at a number equal to or greater than 6%, in which case you would get back all of that money (and then some).

Yes but sitting in cash is not going to pay out 5% a year, and where is this $3000 apt? More like $4000. Are closing costs for a co-op really $35K? Did you factor in the tax deduction? I'm not giving advice-I'm trying to learn here.

No need for steve to post in this thread. lintintin is doing a good job filling in for him.

"Honestly, the worst thing would be to buy an apartment and throw away interest payments to the bank every month, not to mention throwing away the monthly maintenance as well as throwing away a ton of money on the buying fees, mortage fees, etc."

So basically your saying that it is ALWAYS a bad time to buy?

Agrees with UES_Buyer.

UES Buyer, you'd better have that guarantee in writing: someone must guarantee that you'll be buying for what you plan to spend.

Also, I don't want the renters discouraged. The renters on my 2 apts keep making me a lot of money.

Just think its obvious that prices are going to keep coming down for the next year or so. No, I don't have a guarantee. I guess its just a risk I'm willing to take. I've been looking for a while and am seeing tons of evidence that prices are falling a lot. Check out the price reductions. No idea what I'll be able to buy and at what price, but I'm super confident that it will be well under 1.5.

From what I see and hear, the only people buying are people that absolutely need to buy now. Much more desperate sellers than desperate buyers.

come on people. 3 years? seriously? if you are really buying a home then 3 years is not a normal time frame. What every happened to buying a home and living in it (or at least holding it) for 10 years. I've bought and sold and rented-out apartments. when prices are down or flat you can rent it for 15 years and someone else can pay you mortgage for you. As long as you don't get in over your head and you can afford to rent it out...

some people have been watching too much flip this house with all of your absurd calculations. As much as you like to bash the people that created the bubble, you are just as bad. You are angry at the people that inflated the bubble but trying to time it coming down is just as bad. You buy real estate as a place to live, not as an investment. Don't buy something that you can't afford and don't expect to sell it for a profit...it's nice when you do make a profit but it should not be your sole reason for buying. anyhow, if you have the resources to look at the longer term and have no problem renting your property out, then in my opinion it can make sense to buy. Yes, you are throwing money away on rent if you do plan to buy over the long term. At least when you hold on to a home you will be able to keep plenty of the money that you are putting in (and it's tax deductible for many of the years). With rent you will never see a penny of the money again ... ohhhh, sorry, maybe you'll get your security deposit back if you don't trash the place too much (plus .03% interest).

unless, of course, you are a landlord/developer - then you may want to look at it as an investment, in which case, I would hope that you wouldn't need to turn to us for advice.

p.s., don't get me wrong. I don't think that you need to be in a hurry to buy. Find something that's right for you - prices will not be going up for a very long time. But I also don't buy-in to the whole 50% crash thing. I realize that it is my opinion, as is what everyone else is stating on this board.

>Aren't you throwing money away on rent every month? Even if a $700,000 one bedroom declines in value by 15% over the next 3 years, and you loose $105,000, isn't that still less than the money you would have lost on rent- approx $133,000??<

Not at all.

First, the savings earmarked for RE are currently earning 5% in ultra safe Treasury securities which easily pays for whatever rent I currently incur. A sizeable down payment means I loose the 5% risk free earnings power. Secondly, your assumption of a 15% decline over the next 3 years may prove too optimistic given the size of this RE bubble & the adverse economic conditions. Thirdly, it sure feels comfortable having a tidy sum saved with zero debt during this economic environment. Piece of mind is priceless. Fourth, rent is no different in my book than throwing money out the door paying interest plus maintenance plus taxes plus repairs plus all the darn closing costs.

I'll step into the market at some point (2 years are the earliest) but there needs to be an economic reason to do so and not just sliding prices.

hotproperty, Fidelity Long Term Treasury fund is up nearly 20% this year. Historical average for long dated treasuries is around 5%. We're in a treasury bubble so expect a reversion to the historical 5% return when things settle down. As for a 3K apartment, Streeteasy lists 256
$3,000 1BR apartments. I'm not going to check them all. I assume at least one is decent.

osiris, you can make a lot of money by renting if your cost base is low at the same time the renter can save a lot of money by not buying while the cost base is high. Happy owner. Happy renter. It happens.

"Yes but sitting in cash is not going to pay out 5% a year, and where is this $3000 apt? More like $4000. Are closing costs for a co-op really $35K? Did you factor in the tax deduction? I'm not giving advice-I'm trying to learn here."

4k rentals can't be purchased for 700k - that's a 14.5x multiple, and if you can find that, you absolutely should buy. Its just not available in Manhattan right now - prices aren't that far down. Not even close. Closing costs for a coop are a bit lower - half that, but that's not going to make or break the math. As for the tax deduction, the others didn't include that.

So many math errors on both sides of this thread that I don't know where to begin. If the transaction was all cash (as was hinted at) you're missing such a huge opportunity cost. If it was mortgage, you do need to count the after-tax-benefit interest as a sunk cost, no different from rent. On the flip side, same for maintenance - the whole thing isn't a sunk cost. Just the parts of it after any tax deductions.

tech_guy the "math errors" aren't going to make up for the massive capital loss we're seeing right now due to asset price depreciation, stock market and hedge fund crashes. The only "sideline buyers" left are the ultra-conservative cash(treasury) holders and the ultra-bear short sellers. The conservatives think prices are still too high. The bears think prices will go lower.

I don't know what you think will happen when the "math errors" are sorted out. I still see no point in purchasing a depreciating asset either with cash or with borrowed money.

Agreed. The "buy if you see this multiple" is absolutely crap if you're in a market crash.... unless the multiple is 5.

tech_guy: "4k rentals can't be purchased for 700k - that's a 14.5x multiple, and if you can find that, you absolutely should buy."

Okay - at a 14.5x multiple people should buy? With 20% down or all cash? Just curious - we're beginning to see these multiples in Brooklyn, and if the bears believe that's a buy, I imagine we brokers can follow suit.

Sergeo7 I agree with you about renting vs. buying at this time. I'm also in short-term treasuries but they are earning far less than your stated 5% return. I would love to know what treasury securities are earning 5%. Thank you for your info.

Seriously, 5% is much more than you can get in treasuries right now.

Fidelity Government Income Fund (FGOVX)
YTD Performance as of 12/05/2008 8.54%
1 Year* 7.78%
3 Year* 6.63%
5 Year* 5.18%
10 Year* 5.46%
Life* 8.29%
* Performance as of 11/30/2008 | All performance data above is not load-adjusted.

If you can't find 5% return maybe you should stop getting your investment advice from stock brokers. And while you're at it, stop getting your real estate advice from real estate brokers.

Answer (to OP): no. Would rather have the $1 million in the bank than the shoddy apartment it buys.

and now we have a treasury bubble.

> Seriously, 5% is much more than you can get in treasuries right now.

But you can get that in munis.

If they default, guess what happens with Manhattan RE...

stantzi, I purchased the 5 year Treasury notes in late 2006 after selling my apt. I didn't think it was much of a return at the time but it turned out to be a decent move. :)

No where else in the financial world can you leverage yourself up 10x except in RE (or more in the last few years)... so if you have no assets and no cash flow it feels good telling yourself that you own something that is $400K when in reality you own 10% of it. I'm with UES_Buyer, I'll wait for the 3bdrm for $1MM in two or three years... it's like getting a $200K/year bonus for renting :)

Oh yes, I know there were a ton of NYCers that made more on their capital appreciation of their 1bdrm in NYC over 2001-2007 (annually) then they made in actual W-2 income. Hmmmm I wonder how long that can last?

Excellent points, W67. Definitely makes you think when you step back and consider...

But, as soon as "everyone is making money", anyone with a brain had to know it was a bubble...

So what happens once the dollar collapses? Are you going to live in your $1 million bank account?

As always, everything is relative... the dollar collapsing isn't such a bad thing it means we pay back the chinese and europeans in worthless dollars and my family doesn't go to Europe for a few years. But as long as I live in NYC and all the other costs go down (like I give $5 for X-mas bonus to doorman and they are happy), including the 2007 P911 Turbo, 42 ft Beneteau and my 3bdrm in CPW, I will e much better off.

Bernanke will devalue the $... it's just that we r dragging down all of China and Europe with us that relatively our $ has strengthened... it's insane.... that's why I believe this recession/depression will be on par with 1929. I don't think we'll be starving and all of us will be moving in our Escalades west... short of that the "wealth" effect will work backwards for a long time.

On an optimistic note, when people have mortgages that they can "afford" through no magical finance tricks and rents hover around historical norms i.e. I am indifferent rent vs. own then RE will bottom. Then all the dinners out, vacations, bar mitzvahs, weddings and general need to show off/enjoy our wealth that was pent up will be released into an orgy of Don Jonson suits, ferarris and boob implants the likes of which NYC has not seen since the late 80's... go Depeche MODE!

In crises, folks generally run to the dollar.

You think that the rest of the world doesn't have stimulus packages and similar monetary policy? A few more countries announced theirs today...

BTW, if the dollar collapses, how much value do you think Manhattan RE is going to have anyway?

>So what happens once the dollar collapses?<

Where do these sort of scenarios come from? What currency would offer an alternative the the USD that has its liquidity.

The Euro, Sterling, Swiss Frank, Brazilian Real, Russian Ruble, Canadian or Australian dollar or perhaps the Saudi Riyal? I have research on my desk that would beg to differ with the vast majority of these alternatives. Gold? Well, who knows what large holders are out there may need to dump to get liquidity.

opps I should censor myself.... but I miss the NYC in the 80's when there were cool people and not just these robotic I-bankers walking around... and you actually had a decent chance of being mugged after 9p.m. in Central Park... ahhhh the good old days :)

w67 the 80's were a product of the economic crises of the 70's. Back then it was the manufacturing jobs that went away. Today it's the finance and real estate jobs bye-bye bankers and brokers). We'll see the same result. People will be forced to move out of the city. Who do you think has a better chance of being in NYC a year from now, the guy with $1,000,000 invested at 5% or the guy with the $700K 1BR?

I think loosing 15% in 3 years is optimistic. e.g. 2250 Broadway #3F asking $725k. Next door unit #3G with a mirror image floor plan closed 06/13/2008 $885,000. This is at least 18% loss in under 6 months.
http://www.streeteasy.com/nyc/sale/318533-condo-2250-broadway-upper-west-side-new-york

If you want to see even more hemorrhage, see my posts on the 220 RSB thread.
http://www.streeteasy.com/nyc/talk/discussion/4683-at-trump-place-220-220-rsb-some-lines-appear-to-be-nearing-2004-2005-price-levels

Hah...hotproperty: overly-tanned, Lexus-leasing broker, opens up can of whoopass on self. That's gotta hurt!

The dollar is NOT going to collapse! You guys read way too much Peter Schiff.

If anything, we're going to see some continued dollar strength as other currencies have major challenges. Ruble, anyone?

no -- because owners still pay maint. and taxes and the assuption of a 15% decline is on the optimistic side....

Hello,

I am new to the streeteasy boards and I am basically seeking advice about Manhattan real estate wherever I can find it. I understand that NYC RE value is on the decline over the next year if not for longer, but am I completely off in thinking that if I can negotiate the price of a relatively spacious Village/Noho 2br apt (I occupy one bedroom and rent out the other)from around $1.7 to $1.5 million, paying all cash with plans to hold on to it for a minimum of 10 years, that this could be a decent time to do so?

I am just having trouble with the idea of renting for a few years waiting for prices to hit rock bottom when I could be living in an apartment that I own the whole time.

I am absolutely not trying to argue with any of the previous comments made about buying v. renting. I am just curious what people on this thread have to say about my scenario. It would be an investment for me but it is not all about flipping the property a few years down the road.

Hi Java,
I don't think you are silly for trying to negotiate the price of this place. Cash is king with the mortgage restraints these days. How long has this property been on the market? I absolutely believe that if you are planning to hold long-term (5+ years) Manhattan real estate is a sound investment.

java, in this environment you should probably be negotiating more aggressively. Without knowing more about the particular apartment/situation, it's hard to say for sure, but there may be more the $200K of negotiating room there.

re: rent as "throwing money away," when you own, as others have pointed out, you're paying (without building wealth) some combination of interest paid on a mortgage and forgone interest on your equity portion. This amount (adjusted for tax deduction on mortgage interest/hypothetical tax on foregone interest) plus maintenance/property tax and any other expenses of ownership (e.g., increased cost of insurance) is a rent equivalent - amounts paid that are a cost of living in the apartment and don't go to increase your equity.

Why not pay $1.7MM and be done with it if it doesn't matter? It's only a couple of hundred dollars more per month... not being a d--k, just making a point :)

W67th, that kind of thought is the reason why we are facing this horrendous economic situation.

javachip87 - you are not off in your thinking. the problem is that the seller may be reluctant because they are in denial, think they can get higher than $1.5 legitimately, etc. whatever the reason, the greatest tool you have on your side is to wait as the market continues to definitively continue downward and then the seller will definitely come around. But in the meantime, you have to be willing to take the chance the place may be gone. But people that talk about their dream apartment that they "simply must have" is just silly to me. There are so many apts out there, more coming online every day, that i am sure you will find others you like just as much if not better in 6-8 months and you'll get them at a much cheaper price. I saw a 2bd in union square i really liked in june. It went into contract at ask price then (around $1050/sq ft). I didn't put in an offer out of principal, thinking the mkt will continue to go down - even though i thought the place ideal. For whatever reason, buyer backed out, thing got relisted in october and with a recent price drop, it's now asking 20% less than the contract price this past summer! think about it this way, if you can get a 20% price decrease on that place by say, next summer, that's like someone paying you $340k to rent for 6-8 months!!

sorry, i meant "out of principle"

mimi, I think W67 was being ironic. In my case, I'm deeply suspicious of people who state to be new to the board but also ready to jump the gun on 1M plus properties without seeming to have read a lot about RE or even be following the papers in general. People who seem very nonchalant about 200K more or less. I tend to think they may be realtors in disguise. On the other hand, I guess they are the guys who overpaid like crazy in 2006-07 and got us here, so maybe they are real.

hsw9001 -That place was never worth $885,000. If you could get it for $650,000 now, would you buy it?

hotproperty, I was using the next door unit closing @ $885k over the summer as a comparable. They were both on the market the same time and someone thought that the mirror image sister apartment was worth $885k.

Well of course the price dr0pped fron 885k. That's an insane price for a 700 ft 1 bd in that building. But what if you could buy it for a realistic price - $600,000? these deals are happening now. Then a 15% price drop from 600,000 is not overly optimistic. correct?

600k for a 1bdrm condo in a good area that you like is a fair deal. I just don't think the market will be trading there for quite a bit. BTW I am talking about UWS condos. The lower end of the UWS coop market is around 600k or less but usually have very high underlying mortgages and hence high carrying costs. And in the case of coops with high carrying costs, 600k isn't a good deal.

What about $650,000 for a jr. 4 on the UES with $1100 maintenance?

I'm seeing lots of coops on the UES (and even some condos) well under $1000/sf. For coops, I think $750/sf is "market" right now in UES (east of Lex).

javachip87 says "if I can negotiate the price of a relatively spacious Village/Noho 2br apt (I occupy one bedroom and rent out the other)from around $1.7 to $1.5 million," but I really don't understand the psychology of being able to buy a $1.5 million apt and being willing to take in a roommate. Why not buy something you can afford to live in by yourself? I can't imagine bringing a woman to dinner at my expensive home and explaining that you still have a roommate. How embarrassing.

Sorry, I don't know enough about the UES market to comment. I don't even know where the subway stops on the UES. A great swath of impenetrable wasteland prevents me from venturing that far east. ;)

Lucid, there is a psychology for single people buying a brownstone and renting out some rooms, say the top floor, so they're not totally alone. I know several older perma-single people who have done this. As for trying this with a 2BR, that doesn't sound so good.

Java, if you were a real person my advice would be to negotiate down to $1.5 and give the extra $200K to charity. You don't need it. Other people do.

W67thstreet - I find your comments to be very interesting.

I think many of the comments on this board are focused on whether prices will come down, by how much and when. I think that the situation is more complex than that. I believe that the zeitgeist of America is changing which will impact lifestyles we will want (and expect) for ourselves. What was "in" just 6 months ago, could be "out" just 6 months from now. Will families still want over-the-top luxury when their net worth drops 40% and their annual compensation drops 50%-100%? I highly doubt it! So, what happens to the $7.5M apartment with $5,000/month maintenance with 4 BRs, a wine cellar, state of the art kitchen, doorman, concierge, gym, playroom, pool, staff quarters, etc. that's been sitting on the market since March? Fire-sale?

Conversely, what happens to the 2Br/2Ba, low maintenance apartment with good light, near the subway and zoned in a good public school district, that's offering an affordable price where no one is taking a loss and a good broker can brand it as a decent value? A multiple bidding war?

Given that those apartments were selling for $1.5 million to start, not sure who will be left to afford those levels. Even if they come down a third...

So nyc10022, your saying there will be no one left in the city?

nyc10022, boy you really want to live in Manhattan don't you. You will wish for anything negative to make that happen. It's just all about you and your envy, isn't it? Nice life.

this site is so strange now. i think i may check back in a few months and see what's up.

> So nyc10022, your saying there will be no one left in the city?

No, just that prices will have to come down significantly to meet the new equilibrium.

I don't expect mass migration out (some, perhaps, but not that much), but I do expect a new reality in pricing.

> nyc10022, boy you really want to live in Manhattan don't you.

Yes, I do... which is why I do.

> You will wish for anything negative to make that happen. It's just all about you and your envy,
> isn't it? Nice life.

Hypocritical statement of the day...

As long as NYC stays safe, it will be an expensive city to live in. Lets not forget that as expensive as NYC got, it was still cheaper than London, Paris and Hong Kong.

Only because of 1) currency fluctuations... and now the dollar is stronger and gaining strength.
and 2) they were inflated, too.

London RE is falling worse than ours is....

NYC will be expensive, sure, but even a 50% cut will keep it expensive. And much of the expense might come from taxes as well.... not prices.

Currency fluctuations is only a recent reason. London, Paris and HK have been higher than NYC for a long time.

And a 50% cut doesn't exactly make things expensive in what is the most desireable city to live in in the US. At $500/sf, you would be able to get a 1500 sf 3br/2.5bth for $750k. To me, that is extremely cheap.

Regarding taxes, we have no idea where they will go. Yes, they will probably go up in the short term, but taxes here are still much lower than in London and Paris.

> London, Paris and HK have been higher than NYC for a long time.

And they're declining faster than we are. London RE market is in shambles...

> Regarding taxes, we have no idea where they will go. Yes, they will probably go up in the short term,

And the long term....

> At $500/sf, you would be able to get a 1500 sf 3br/2.5bth for $750k. To me, that is extremely cheap.

Thats more than a 50% cut... and its all relative... That was extremely expensive just a few years back. When things were better than they are now.

Disagree with all your points, but no reason to argue.

I'm back what'd I miss... thank you MRSBLOGS. Let's get back on topic, NYC RE. Currency smerency ... everyone is hunkering down... the Germans, Londoners, French, Chinese and Japanese.. it's almost as if we are in a synchronized depression. :) Good going Mr. Greenspan and the I-Bankers who forgot rule #1 in credit (who is my counterparty?). Before walking away from NYC RE deals in 2001, I did several condo flips on 83rd B-way and 40th and 2nd ave from 1995 to 2001 where my "in" price was $300-$500psf (these were "Prime Condos,"). When it got past $700psf, it just didn't compute.... I had a deal for penthouses in the Highpoint for $1MM (2400sqft)... but at the time I couldn't make it work on a cash flow basis.. it only worked if I believed I'd be able to flip it in 1 year... to me "banking" on appreciation on anything is a bad move.

UES-Buyer I understand if you are younger and have not seen NYC in the 80's, haven't seen a Porsche for less than $100K and Lobster Bisque for less than $20/lb, but let me just say all prices are relative and ratios. For example, if one pays $600/month for garage then a $2,000/month car lease payment seems "right." If one owns a property valued at $1MM then a $100K Porsche is justifiable to the wife. And if one expects $500K in bonus every year than a $2MM 3 bdrm seems alright.... sadly I think (except Doctors in specialities- thank goodness my wife is one "Honey I'll make dinner on your call nite :) ) the I-Bankers will earn 1/10 the bonuses they made in the past for 2008. 2009, 2010 and even when it starts going up again, they'll think twice about "banking" on the bonus. So long story short, if you take away the I-Bankers in NYC there are very few other professionals that can match their earning power and if your biggest opponent no longer exist why would anyone try harder (i.e. bid more than they need to)?

As an aside, since I love Porsches chk out 2007 911 Turbo - it was the "toy for bankers" - and cost $120-$150K, it's going at auction for $75K... Lots of wives/partners telling their banking/RE Broker better half to unload toys... any it's getting time to upgrade to a real yacht :)

SteveF... what's the dealio? Why smack on nyc10022? I don't think NYC10022 is wishing anything bad to happen, in a sense he is just pointing out that the emperor has no g-string on. The bears, including myself, have laid out facts and opinions as to why we believe that NYC RE will crater to pre-2001 levels (I may be speaking for myself there).

Funny you should mention envy, cause whether you admit to it or not, we are NYers bc we believe that this is the best city to live in... I for one went to the "BEST" specialized HS in NY, and I believe my wife is one of the best physicians in the country. We have the best restaurants, the best park, and services (sucks for cars though). So in a sense, NYers live and breathe envy that's what makes us NYers... True story, I had a nanny from the mid-west who didn't like South Park and couldn't get what was funny about Seinfeld... needless to say we got rid of her :) ... we have more frienemies than true friends.. .all of us got caught up in "how much is your apartment worth" to the detriment of society. How many more RE brokers and I-Bankers do we need? Woludn't society be better off with more teachers, nurses and doctors? SteveF, if you can afford your unit in Manhattan (on a Cash flow basis) enjoy the city (ice skate in wolman rink, get some dim sum in Chinatown, get a massage in Koreatown :), shop in 5th Avenue and play frisbee in sheep's meadows) and don't worry about the market value of your unit.

> Disagree with all your points, but no reason to argue.

I'm glad you disagree with the London price decline... I'm sure that will stop it (and the NYC one, too).

Disagree that the London price decline will result in prices below NY.

After the deflation ends, wouldn't purchasing RE be a good hedge against the inflation that will be coming?

hotproperty: yes, absolutely. But AFTER RE prices come down, not before.

hotproperty... a best hedge against inflation is to produce goods and services so valuable to society that one can continually charge more :)

Let's get something straight, the mortgage deduction and gov't desire to create stable "neighborhoods" is the most regressive tax and free market meddling there is. There are plenty of jobs in North Dakota... and plenty of unemployed people in Michigan... why can't people take a 2 hour flight to get a job... b/c they are completely under water on their home and must decide on declaring bankruptcy and ruining their credit or getting a job that'll put food on the table. Unless you are a home builder, RE broker, commercial RE side or make your living blogging about RE ... RE should be just considered a dwelling until you need to go to an old age home. :)

hotproperty: yes, absolutely, and the thing to do will be to make an all cash purchase. No mortgage. Buyers won't need brokers to find property. And the properties won't be hot. They'll be as cold as ice.

"Not the seller, but the buyer determines the price." - Thomas Hobbes

> Disagree that the London price decline will result in prices below NY.

So the only part you disagree with is the part I didn't say.. .interesting...

;-)

> After the deflation ends, wouldn't purchasing RE be a good hedge against the inflation that will be
> coming?

Problem is, most of the deflation will be IN re. I believe it is 60% of the CPI.

And, there are better hedges against inflation. Try TIPS. Or the stock market. RE has an inflation hedge component combined with a lot of other components, which might not be good. If it comes down enough, maybe. But if it comes down only 25%, I'd consider it a very poor inflation hedge.

>I'm with UES_Buyer, I'll wait for the 3bdrm for $1MM in two or three years... it's like getting a $200K/year bonus for renting :)

Did you find it yet?

A lot of people scream very loudly that NY (esp. Manhattan) real estate is a bad investment. In the end I've observed that they often don't have the downpayment or liquidity to buy. It's a psychological defense mechanism of sour graping. Given there's such a huge range of properties out there in the city, a blanket statement that supposedly describes an entire market is practically meaningless. Sometimes a property is a good investment. Sometimes not. People need to really be a bit more sophisticated than this.

@fc - w67th does seem relatively innocent, rational and coherent on this thread. Ultimately wrong about where bottom would be. Nice job in thread pulling.

Thanks NYCNovice, I'm good at pulling people's threads.