Don't be so sure.

DOH!... and here we go! happy NY all!

Gufaw! Gufaw!..."refuse to sell at a loss" -come on are you serious? (Standing and screaming at the top of my voice with a tennis racquet)

mariachi players don't count as employed :)

That dark cloud coming towards you is not a cumulus cloud, it's like a gigantic asteroid smashing right into your net worth. LMAS... no sleep till $500psf...

hotproperty
34 minutes ago
ignore this person
report abuse Who really knows what will happen to prices?
People no longer trust the stock/bond markets and may want to put their money in RE.

Hot, what you miss is that most of the bubble happened because after 2000-2003, people didn't trust the stock market and thought property was the best alternative. I think now people trust neither.

hotproperty
34 minutes ago
ignore this person
report abuse Who really knows what will happen to prices?
People no longer trust the stock/bond markets and may want to put their money in RE.

Hot, what you miss is that most of the bubble happened because after 2000-2003, people didn't trust the stock market and thought property was the best alternative. I think now people trust neither.

people don't trust the stock market but DO trust real estate? is this a joke? the country is in the midst of the worst housing crisis since the great depression. how about some data-driven arguments, rather than this junk.

> There is still a strong desire to own and a belief that RE is a sound investment.

Yes, as evidenced by a national crash in RE, a number of markets where the majority of sales are foreclosures, and a 75% decline in sales in Manhattan (and 15-20% decline in prices).

Nothing says high demand like crashing prices!

(except for no one actually demanding to buy, that is)

;-)

I don't know- if a major terrorist attack on our FINANCIAL CENTER didn't tank manhattan RE for long, then maybe this financial crisis won't either. Joe Sixpack still has a strongly ingrained belief that Real Estate is a good long term investment. This may be a temporary setback. You can't live in a treasury bill.

Plus-don't forget there were many layoffs in the financial sector then too with the dot.com bust. Maybe it won't be as bad as you think. Can anybody see ANY upside at all?

We've already had a bigger and faster fall already, so the logic is bad. You are also leaving out that we didn't have bubble prices, and the biggest RE bubble ever was started by the government right after.

> Joe Sixpack still has a strongly ingrained belief that Real Estate is a good long term investment.

As demonstrated by the fact that Joe Sixpack has completely stopped investing in RE?

What exactly do you think happens to that believe when we have the largest RE decline since the Depression, anyway?

> You can't live in a treasury bill

But you also can't sell organs. Things you need to live don't necessarily make good investments.

Don't remember any water bubbles...

> Plus-don't forget there were many layoffs in the financial sector then too with the dot.com bust.

And we've already surpassed...

> Maybe it won't be as bad as you think.

How do you know how bad I think it will be?

> Can anybody see ANY upside at all?

Sure, long term stocks will absolutely recover. The city will get to a better place, albeit with less income but maybe more artists.

But RE is not going to come to 2007 highs in real terms probably for decades. That is not a good investment. Take a look at Japan if you want to see what that looks like.

But thats probably a good thing.... housing should be more affordable.

SO NYC RE is worthless?

Did I say that? No, of course I did not.

That is textbook example of a strawman argument.

If you have genuine questions, fine. But don't be dishonest. If you have ulterior motives, don't waste my time.

Most of the decline was in those insanely overpriced condos.

> Most of the decline was in those insanely overpriced condos.

Now you've moved on from strawman arguments to lying.

Enjoy arguing with yourself while the market keeps declining.

And the gov. will continue to prop up the RE market with the low rates.

wow, there goes the ignore button.

Who was it that said the bull trolls had left the board??

Why do you think stocks will recover but RE won't?

"Can anybody see ANY upside at all?"

Yes. The entire realtor profession will undergo profound change, commissions will be cut, people will do their own research on sites like this one, and the role of intermediaries will shrink to a few hours with a qualified professional, such as the buyers and sellers attorneys. Unknowledgeable Realt-whores such as yourself will no longer be able to make a living, and people like me who spend 7 figures on a purchase will no longer have to deal with such greedy and ridiculously stupid people.

Why do you think stocks will recover but RE won't.

The answer, dum-dum, is that both are mean-reverting markets (look it up).

For NYC real estate to revert to the mean, it will need to correct by about 50%.

After that, it will appreciate about 3.5% per yr.

There's only 100 yrs of history to suggest this is correct, so maybe as you realt-whores like to say "this time will be diff'ant!"

what? so we had a bubble and then that bubble will correct and then everything will be perfectly in line forever?

Admiral thats like saying there will be no wars.

NYC- You missed one:
I don't know- if a major terrorist attack on our FINANCIAL CENTER didn't tank manhattan RE for long, then maybe this financial crisis won't either.

Timglint - no, not saying their won't ever be dislocations in the market. Just saying that, on avg, residential real estate will grow at a few % a year. There may very well be dislocations in the market that create over-values (or under-valued) conditions, and these are of course opportunities to profit. The problem is, after a huge dislocation in any capital market, it seems to take about 17 yrs, on average, for the cycle to return. So, i think you are many yrs away from the next real estate bubble, and maybe 10-15 yrs from the next stock bubble. Same thing applies for commodities. We've had bubbles in nearly every asset class in the past few years, except bonds -- though Treasuries may be getting bubble-icious lately; time will tell.

hotproperty: you are absolutely right. Don't listen to these know-it-alls here. I recommend that you take ALL of your cash and BUY RIGHT NOW. Borrow from friends and family. SELL YOUR BLOOD to raise cash if you must. The home you buy today WILL be worth THREE TIMES as much in 12 months!!!

lol

no. I'm going to sell me apartment and live in a subway car since it's free.

hotproperty, belongs in Bellevue

Happy New Year nyc10022

Didn't hotproperty already do this post with 5 conjectures that he just repeated over and over again?

"But RE is not going to come to 2007 highs in real terms probably for decades. That is not a good investment. Take a look at Japan if you want to see what that looks like."

Real estate will never reach the 2007 highs in real terms again. To do so would mean we've created a larger bubble than the one that is popping now.

http://mysite.verizon.net/vodkajim/housingbubble/

Nominal prices will definitely not return for many decades absent a hyper-inflationary event. Which despite the arm-flailing by the uninformed like hotproperty, who look only at the Fed's balance sheet, will not happen anytime soon.

so none of you are going to buy ever?

Never ever ever. Ever.

Ever.

"so none of you are going to buy ever?"

I'll buy when prices stop falling like a rock. Prolly about 18 months from now. Prolly about 50% from now.

You all underestimate the ability of Wall Street to recover. The industry is made up of the top .0001% of the population. Our ability to make money and lots of it is unmatched. If any industry is going to recover, it will be ours. If you work in Wall Street, you know what I mean. We are some of the brightest, most innovative folks around. We will find a way to make money, even in a downturn.

Yes, one can argue that one of the reasons why we got here was the unabated greed that permeated Wall Street. But that simplistic explanation is an easy way out for the government and people. The problem all started with: a) the government's artificially low rates encouraging more aggressive lending and b) the government's push to increase home ownership with high minority and low income citizens. They did this by lowering Fannie/Freddie lending standards. And not to mention, the amount of money the Fannie and Freddie execs were giving to the politicans to sway lending policies.

Main street took advantage of this and ended up going overboard with mortgages. People who should have never been home owners became ones. We opened the gates for Main Street and they took advantage of it. Main Street is as much to blame as anyone - but no one wants to fault them.

But in the end, Wall Street will find a way to make money and lots of it. Please don't compare us to Japan or other industries. In no other industry will you have the talent we have.

I'm not saying this out of arrogance but rather out of experience.

Once Wall Street recovers, the NYC RE market will do likewise. My suggestion: don't expect prices to fall 50% in prime areas before you buy because it will never happen. I have many associates who are just waiting for prices to drop (in certain highly sought areas: Park Ave, CPW, Madison, etc.) by 20% and they will jump in quickly.

But with other less desirable areas (Harlem, Clinton, Midtown East, Williamsburg, etc.) who knows how much lower they will go. They should have never been trading at the same prices as prime areas to begin with. So corrections > 30 - 40% is not only plausible but more than likely.

But who knows? Nobody does.

If your friends are so smart, then why wouldn't they wait for more than a 20% correction after a 100% increase in prices since 2000? People that work on the street (like me) are going to wait for more than 20%. The apthorp at $3000 sq/ft? Please. We're not that dumb. Prices are already down 20% and no one gives a shit. It's going lower than you think. There is plenty of time to watch this clusterfuck fester......

Yes, prices are down 20% in specific areas and buildings. In certain areas, they are down even more.

Everything in the city is street and even building specific. My associates are not interested in the Apthrop. The buildings they are looking at have not dropped at all because not a lot of units have become available.

You cannot generalize NYC real estate market. Prices in the far West Side and Harlem may have already dropped much greater than > 20%.

Don't be so sure? Why?

Now is the time to buy in all of PRIME NYC.

Buy now in all of PRIME NYC or be priced out forever in all of PRIME NYC.

Interest rates are at historical all time low and availability are at historical all time high in all of PRIME NYC.

Go to any sales opps rent office in all of PRIME NYC and catch that falling knife they are selling opps renting.

Babies I'm back.

Most new developments are grossly overpriced. I agree with you on that. But most new developments are NOT in prime areas. The few that are in prime areas are still overpriced relative to its neighbors too though.

Drink the kool-aid much?

"The industry is made up of the top .0001% of the population."

So 300 people work on Wall Street? I really love when people just pull statistics out of their ass. I hope you aren't managing someone's finances with that math.

"Our ability to make money and lots of it is unmatched."

And evidently your ability to lose money is unmatched.

"If any industry is going to recover, it will be ours. If you work in Wall Street, you know what I mean. We are some of the brightest, most innovative folks around. We will find a way to make money, even in a downturn."

Wtf are you talking about. You aren't making money in a downturn. How many hundreds of billions have been written down? At the beginning of the year there was 5 US Investment banks, now there are zero. Oh you work for a hedge fund or private equity - yea that industry is significantly contracting.

"But in the end, Wall Street will find a way to make money and lots of it. Please don't compare us to Japan or other industries. In no other industry will you have the talent we have."

Yea those people who worked for banks in Japan in the late eighties were just morons! Give me a break. Your belief in your own infallibility is exactly what caused this mess. Anyways, keep believing it. If this is the prevailing attitude of your co-workers, we're in for a long ride down.

And whose comparing you to other industries?

"I'm not saying this out of arrogance but rather out of experience."

Or rather out of stupidity.

"Once Wall Street recovers, the NYC RE market will do likewise. My suggestion: don't expect prices to fall 50% in prime areas before you buy because it will never happen. I have many associates who are just waiting for prices to drop (in certain highly sought areas: Park Ave, CPW, Madison, etc.) by 20% and they will jump in quickly."

Well prices are down 20%. Where are the buyers? As positivecarry said, people aren't that dumb.

"But who knows? Nobody does."

You've certainly proven you do not.

JGR - Wall Street is made up of the top talent in the WORLD, not just the USA. People from all over the world work here you idiot.

I guess your the ignorant and stupid one. LOL.

When the world is deleveraging, the argument that money is going to from stocks into real estate is hollow. In 2002, stocks stunk but the money shower was just beginning. Wall Street is in a cyclical as well as secular decline... To defend NYC real estate levels after 2003 or so is just silliness. Also, when people act like condos and coops are isolated from one another, thats also crazy. Plenty of people would opt into a glass condo at the right price... they might even remember a condo is real property and a coop is not.

BigApple, people on the street have made money over the years. Just not nearly as much as the last few.

"JGR - Wall Street is made up of the top talent in the WORLD, not just the USA. People from all over the world work here you idiot.

I guess your the ignorant and stupid one. LOL."

So Wall Street is made up of 6,500 people? By the way, in case you are bad at math (as you've demonstrated). 6,500,000,000 * 0.000001 (0.0001%) = 6,500.

The continued demonstration of your incompetence is very enlightening.

I wonder who BigApple works for.

"Dude, we're smart right"

"Yea, top .0001%"

"Well, if I buy this stock, what's my chance of it losing money"

"Well, if we are making the trade - only .0001% chance of failure"

"Then lets buy it and leverage it up 40x. That will probably reduce risk right?

"Yea, 40x less risk"

"Dude, we so rock at math!"

BigApple,

I don't know what sort of job you have or what sort of firm you work for, but your comments are simplistic and ridiculous. i've worked at some of the best firms on wall street with some of the top people in finance, but to say that the street employs the "top talent in the WORLD," or the top ".0001% of the population" just shows that you don't know what you are talking about. Some portion of those top people aren't working in finance in London and Hong Kong? Or in technology in Palo Alto and Seattle? Or medical research in Maryland, Cleveland, and Heidelberg? Or philosophizing at Cambridge and Princeton? Or running multinational corporations? Or serving as Federal Judges? Or, for that matter, overseeing investment portfolios from Omaha, Nebraska (that would be Warren Buffett, who is famous for his low opinion of Wall Street).

What sort of myopic unworldliness does it take to think that the top people in the world are on wall street? Will finance recover? Sure, eventually, in some way or another. But will it be in a form similar to that of the last few years? I highly doubt it. The entire investment banking model has been fundamentally altered, margins will be far lower, hedge funds are falling apart.

And by the way, your argument that wall street is not to blame for this financial collapse is absurd. wall street has been bailed out by the government, AKA the taxpayers of main street, to the tune of nearly a trillion dollars. what, was wall street an innocent victim of greedy mortgage applicants? folks in finance are amply compensated to understand risk, and they clearly knew nothing about it. and if you are emblematic of the quality of people employed by major wall street firms that might explain why things went so badly.

finally, your arguments regarding NY real estate hold no water. the question is not whether your 'associates' want to buy on Park Avenue when the market declines 20%. the question is whether enough of them will be able to afford to buy with an additional 20% decline. moreover, since the market on park and fifth is already off, on average, 20%, an addition 20% would mean a total decline of nearly 40% from the peak--a major asset depreciation by any measure. personally, i expect it to get a lot worse than even that, perhaps as much as a 70% decline. for every 'associate' of yours salivating to buy on park avenue, there are three associates of mine expecting to lose their jobs, get no bonuses, or otherwise suffer financial reversal.

you need to get out of wall street for a while and see some of the world. you'll soon realize that these bankers and traders you think are the best and the brightest are mostly dime-a-dozen.

No asset class can outperform the market forever.

'Nuff said.

Wall Street workers are not much smarter than workers in any other industry. I've worked at banks, my family and friends work on wall st, and I can tell you that all that means is that they are good at math and motivated, ambitios, and sometimes ethically relaxed (and that's people in my own family who I love.) Traditionally, and even today, many of the people on wall st only needed a high school education and to be quick with numbers.

I'm not saying that nobody there is smart, or extremely smart. But most are average and rather limited in there creative abilities. Pretty much like in every other industry.

BigApple... there's a difference between your and you are...

agree with nycjunior1... there a bell curve in every industry... BigApple is like 3std dev from (below) the mean... go ahead I'll wait till you crack open your statistics book Bigapple....

Still waiting..

Hurry it up Bigapple.... Agentrachel and I have some mariachi lesson in an hour.

Gotta go walk the three legged dog... just look for my sombrero on west 67th.. :)

Bigapple, just in case you are having trouble with the std dev calculation, it still makes you smarter than the bottom 0.0001% of the population.

> JGR - Wall Street is made up of the top talent in the WORLD, not just the USA.

This if far from true.

The top folks at the top universities are less likely to go to Wall Street than grad school, even in the Wall Street boom years. And lets not forget all the years the top folks interested in business wanted consulting over wall street, wanted dot com over Wall Street. Even in peak years, most folks don't want investment banks.

HBS incoming students, for instance, pale in comparison to the folks entering Harvard or Yale law, or their med schools (by HUGE amounts). You get an average GPA of something like 3.4, with tons of state schools and 2nd and third tier schools. You're talking about kids who never had a shot of making the top universities undergrad.

And add that to the smartest folks at investment banks often leave...

Yes, Wall Street will bounce back in some ways, but the model is now different. This isn't a "this sector is dead, they'll find another" kind of thing, like the dot com bust. This is, the government has stepped in and changed everything. This is investment banks are dead, everyone is a commercial bank now.

Yes, folks will make money in the future. But the era of glorified middle managers making $1 mil 4 years out of undergrad.... yeah, I don't think we'll be seeing that this century.

"HBS incoming students, for instance, pale in comparison to the folks entering Harvard or Yale law, or their med schools (by HUGE amounts). You get an average GPA of something like 3.4, with tons of state schools and 2nd and third tier schools. You're talking about kids who never had a shot of making the top universities undergrad."

Spoken like a true doctor or lawyer. I actually went to Harvard ugrad and Wharton business. There are plenty of ivy ugrads at HBS and Wharton grad. The average GPA is lower than for law, but that is probably because most law students have less work experience, so the only way to sort them out is undergrad GPA and test scores. Declaring Wall Street dead is premature...and even when earning normalize it would have a way to go to close the gap with doctors and lawyers. Making brash declarations about what to expect in the balance of this century... That's pretty funny. How many demises of Wall Street have we witness over the last century?

You have to be a lawyer. Your view of the world is two dimensional. You have that characteristic bitterness of a guy who got great undergrad grades, and is bitter than the world short changed him and rewarded lesser students with more money and prestige. You hope that finance types are brought back in to line, such that your own shitty decision to become a lawyer is less painful.

rhino,

i'm a hedge fund manager and went to harvard undergrad and i can tell you straight that very, very few of the smartest or most talented people i went to school with ended up at business school or on wall street. and very few of the smartest and most talented people i know now are in finance or went to business school. i agree with you about lawyers--that's not where most of the most talented people wind up either. many became professors, some entrepreneurs, some doctors and medical researchers, and a few went to wall street or law school. the idea that most of the top people are on wall street is absurd.

i'll also add that even if we limit ourselves to the business world most of the top people in business are not on wall street. go talk with some really talented entrepreneurs and corporate managers and you will quickly realize that nearly everyone on wall street pales in comparison. then go meet with some physicists, philosophers, federal judges, artists, conductors, chamber musicians, architects, and engineers, and you'll cure your smugness very quick.

there you go rhino. Anyway, it is impossible to give a subjective conclusion by way of being part of the darn whole :)

"Spoken like a true doctor or lawyer. "
"You have to be a lawyer. Your view of the world is two dimensional. You have that characteristic bitterness of a guy who got great undergrad grades, and is bitter than the world short changed him and rewarded lesser students with more money and prestige. You hope that finance types are brought back in to line, such that your own shitty decision to become a lawyer is less painful."

Rhino... I'll just leave it at... your grasp of people isn't so good...

"Declaring Wall Street dead is premature...and even when earning normalize it would have a way to go to close the gap with doctors and lawyers."

I only mean dead in the sense that investment banking has become commercial banking. The era of independent investment banks (which is what I've always thought of as "wall street") is dead. The bulge bracket made a big deal with the foreign banks and citi and such got involved.... so, I've always drawn a line there.

You missed where I said Wall Street will be back... just saying it will be a different Wall Street.

"i'm a hedge fund manager and went to harvard undergrad and i can tell you straight that very, very few of the smartest or most talented people i went to school with ended up at business school or on wall street. and very few of the smartest and most talented people i know now are in finance or went to business school. "

Thats basically what I'm talking about. Of my college network, its generally the folks in the "middle" in terms of talent/brains who ended up on wall street. I knew a bunch of kids who couldn't get jobs right out of undergrad, ended up at smaller shops, then into the bulge bracket after a few years.

BTW, I saw a stat once... the biggest number of HBS grads going to investment banking were... Andersen Consulting (now accenture) former employees. A good program, but we're not talking about the pick of the litter. Just a lot of goolg, solid (and midwestern-heavy) kids...

Lets also not forget... we just went through probably the biggest boom in Wall Street history. Wall Street has been hot as an employer the last few years... so maybe the kids who just graduated are better than traditional... but there are a lot more non-boom years, and WS is still hiring somebody...

I remember the years where nobody wanted to touch a WS unless they had no other choice.

I'm glad you keep getting mileage out of my thread. Can we at least agree that the lower interest rates will bolster the LOWER end of the market?

"i'll also add that even if we limit ourselves to the business world most of the top people in business are not on wall street. go talk with some really talented entrepreneurs and corporate managers and you will quickly realize that nearly everyone on wall street pales in comparison. then go meet with some physicists, philosophers, federal judges, artists, conductors, chamber musicians, architects, and engineers, and you'll cure your smugness very quick"

lets get something straight. i dont think wall st people are all that. i was not supporting that persons post. i think nyc's idea that law and med grads are better is incorrect, and likely relates to his law degree. i totally agree with your list there at the end - those people are the truly talented. and i am smug only toward nyc for spouting on wall street from the outside of it with very basic misconceptions. also because he refuses to tell us what he does; just burps out his barrons cocktail party blurbs about efficient markets from some princeton prof.

ps: in my experience people at corporations are the least talented. entreprenuers, hat off to them.

"your" thread?

Is this another alias?

And, no, I can't agree with that. Few people can qualify for these mortgages.... a lower rate but down payment requirements going from 0 to 20% + higher standards is going to reduce the number of buyers, not increase.

The key in real estate is that the cost of your primary residence should be below your means and the mortgage should be paid off asap, then, all of your extra money can be invested in real opportunities, whether they be businesses you believe in, real estate you believe in, or stocks/bonds/money funds.

This is how personal wealth is created in the U.S., not living the most opulent life you can barely afford, and spending money you don't have like a drunken sailor.

Too bad the real estate brokers don't tell you that.

To hotproperty - I know you're hoping against hope, but when Wall St has lost $1 TRILLION in a single year (not to mention the downfall of Bear Stearns, Lehman Bros, Merrill Lynch, WAMU, Fannie/Freddie, elimination of all investment banks, auto industry knocked out, steel industry down, etc etc etc) then I think to even try to compare the recession/depression now to 9/11 is a joke. The money just isn't there to sustain the bubble of the last 8 years, which is why people expect prices to revert to 2003 - i.e., normal non-bubble prices.

Does anyone know what the 1992-1993 trough corresponded to on the way up in the 1980s? If the peak was 1987, was 1992=1983? Wondering if its the save 5 yrs prior to peak that 2003 represents now.

Amity, prices in 2003 were roughly 20% higher than 2000. I'm not sure even that was normal.

2000 prices were defensible in the sense that 1998 prices were = 1988 prices, so a couple of years of high-ish appreciated after 10 years of nothing was easy to stomach, especially in light of how much higher rents were in 2000 than they were in 1990.

rhino, hard to compare the last peak to trough with the one we're going through now because mortgage rates spiked, real estate crashed, and then mortgage rates slid.

"prices in 2003 were roughly 20% higher than 2000. I'm not sure even that was normal."

I think it's worth looking back further than 2000 to determine whether 2000 or 2003 were "normal." Compared to what?

Although I have not agreed 100% with stevehjx's rent-to-buy ratios as a be-all/end-all measurement, I agree with him much more than my arguments with him let on. You can't really compare nominal purchase prices at time points without factoring in the higher/lower mortgage rates. Rents have also changed dramatically. I saw a large one-bedroom apartment in Times Square area with large private terrace, indoor parking, brand new building, in 1993 or so for $1,700. Even today that apartment would fetch around twice that much.

In 2000, you could just about come out whole by reselling your coop or condo in most areas of the city if you had bought at the peak of the '80s. If that was a return to the mean from the trough, then a reversion from 2009 back to 2000 would not be reverting to the mean; it would be a big step backwards.

I keep mentioning Proust's "A la recherche de temps perdu" for a reason. Our perceptions of what the past is are very fluid, and they color our expectations of the future. Moving targets.

Rents will probably erased the 2004 to 2007 surge (30% or so?...$2,700 one beds seemed to have gone to $3,600 or so)... So rents -25%, multiples -25%, values -45%... it seems so easy that I am trying to find the catch...and I haven't so far been able.

"My associates are not interested in the Apthrop. The buildings they are looking at have not dropped at all because not a lot of units have become available."

LOL. You sound like a 20-something Wall Streeter, but not one who has earned a CFA or MBA. If you did, you somehow slept through Capital Markets class, particularly the section about how markets revert to historical mean levels of appreciation. You also seem to have not learned any sort of "relative value" analysis - the bldgs "your associates" are looking at will decline in value even if no sale occurs.

lowery, I understand that folks always underestimate their downside case....so many examples this year. I just think taking prices to 2000 levels as you say is like taking them to 1988 levels... Wiping 20 years (nominal, real = more) of values, hell maybe we can... Thats Japan lost decade type of scenario. 2000... I mean that's basically taking a $3mm 7-room apartment and marking it down to $1mm? I dunno what the opposite of sticker shock is called, but I have to think around $1.5mm it would get some interest. Question is, will enough people have the dough. Tough to know till we know. I mean I guess -50%; but I can't argue that it won't be -65%, other than with a reverse sticker shock argument...

Lowery, sorry, I just realize we are saying the same thing.

"Question is, will enough people have the dough."

That's going to be what would make this a severe crash if it turns out to be one.

I must confess that I have vacillated back and forth on where this is headed. I was so affected by the '87 crash and aftermath that as soon as the dotcom crash occurred I was convinced that real estate would track it, etc., so it is precisely while the R/E market boomed that I was a crash-predictor. Now I am not sure of anything, other than the importance of being open minded.

I have no economics training. I think what the finest heads out might want to do to study this question would be to look at more than one metric: market rents, purchase prices, mortgage rates, property taxes. The psychological factor is very, very real. I can attest to the fact that some people will not believe that it's the right time to buy even though every objective standard proves that it is. We may go into a period where people wil shun real estate long past the point where it makes sense to. Personally, I want to invest in stocks now.

Yes, will they have the dough...and the will. The way I see it is, there are many many professional couples (outside finance) for whom a three bed apartment became impossible somewhere in the 2003-2007 horizon. What is the price that prices them back into the market? We can't know...because we don't know how many of them are savers. I think once the $2.7mm 3-bed is $1.6mm, we might find that the combined income of $400-500k couple, who could not afford (or were scared by) a $3mm 3-bed, maybe they stop moving to Garden City or Westport at the margin...but if crime in NYC has kicked up by then, maybe they still do. Really though I think the bottom has been boxed somewhere in 2002-2003 time frame, because we are already at 2005 (maybe even 2004???), and 2000-2001 is probably too dire for reason of that being below 1988 in real terms. I mean just taking myself, I dont even know how to conceive my life choices if a 7-room apartment falls to $1.4 from $3.0mm... But say I had already left the city, its not like I'd move back....

Rhino, I've never been in a position to consider the 3-br apts, so I haven't followed that market, but my hunch is that the single person looking for a one-brm in Manhattan would be sorely tempted to beg, borrow and/or steal to grab something at $300,000, possibly $350,000. That would be about the past timeframe you're referring to. But we are both boxed into analyzing the near-past to see the near-future, which is dangerous.

1 beds are different in the sense that the time horizon is so short. Yes, I actually have a good friend. Single guy. He looks at $800k one bed condos....He would clearly buy one in the $400s... vs. $300-350k coop that is basically the same. I think we're looking at the last 25 years essentially. Not terrible. To me its kinda simple in the sense that every asset has retraced to between 2002 (US stock market) - 2005 (emerging markets) level... So as a highly levered asset, I would say NYC real estate should as well, and toward the earlier side of 2002-2003. Anyone know what London has done? I saw an article that says affordability in London is now back to 2003 levels.

"To me its kinda simple in the sense that every asset has retraced to between 2002 (US stock market) - 2005 (emerging markets) level... So as a highly levered asset, I would say NYC real estate should as well, and toward the earlier side of 2002-2003"

What kind of pitifully simplistic analysis is this? By that logic we could be headed toward 1998 levels in housing because thats the Dow was also 9,000 then. You and BigApple are the most laughably incompetent Wall Streeters on this board (if that's not just your pretend online persona...)

I hope for your sake this is your pretend personality too.

11:30am on a Saturday = attack mode. There are some drugs on the market for this.

This from the guy who says "I'd f your dissatisfied wife" (Which got deleted by moderators). Get help.

Oh that was your wife? How is she feeling?

Ah, yes. Very witty. Well, at least now we know we're dealing with someone with the maturity of a 10 year old. Come on Rhino, why don't you do some more (embarrassing) financial analysis for us.

Why don't you do any? I get you and nyc10022 mixed up. I do recall that both of you are on the outside of finance looking in and have a lot of basic misconceptions. However, I can understand in the sense that its complex, and you are not in the industry so it can be expected of you. You were the guys regurgitating efficient markets theory (as non-professionals) and harping on spelling, that's right.

LOL more egotistical nonsense that is embarrassing in the context of your posts. Where's my misunderstandings, son? "Tutor" me a little...

Ah the misspelling again. You have no points so you just harp. As I recall, as a duo, the two of you were denying that Stevie Cohen and Tudor were outstanding trader/investors, and that technicals have any merit. Then one or both of you were arguing at -13% for SAC in 2008 was an awful performance. Someone even went as far as to say SAC was a purely fundamental shop and Steve Cohen himself Then one or both of you were arguing that a long/short hedge fund strategy carries more risk than a mutual fund. Also, neither of you admitted that you were cocktail party investors with a bone to pick. You know, the I believe what the NYT writes on finance types.

rhino, the stock markets took a tumble in 2000/2001, but NYC real estate did not track stocks then

I'm aware how different to today is from then, because of the Fed's hyperactivity in lowering interest rates to prevent a post-1987 style recession. I only mention this as an example of how one must be careful to predict future trends based on, "X always does Y when Z happens."

However, I can't argue against any of your hunches, as shocking as they are. It was not so long ago I was looking at one-brm condos for $500-550K.

rhino, the stock markets took a tumble in 2000/2001, but NYC real estate did not track stocks then

I'm aware how different today is from then, what with the Fed's 2000-02 hyperactivity in lowering interest rates to prevent a post-1987 style recession, the fact that '08 was a chainsaw on all asset classes, we're already at low interest rates, etc. I only mention this as an example of how one must be wary of predicting future trends based on, "X always does Y when Z happens."

However, I can't argue against any of your hunches, as shocking as they are. It was not so long ago I was looking at one-brm condos for $500-550K in Midtown East in good buildings.

As a duo...what are you a moron? I said nothing of the sort that technicals have merit or not or that Cohen did fundamentals.

-13% is an awful performance. You said it was in top 5-10% which I showed wasn't even close. Another case of pulling statistics out of your ass because you have no concept of reality.

I said that an index fund has a different risk profile - not that it was less risky.

You seem to have trouble with reading comprehension and simple statistics. You sure you work in finance? My niece is more knowledgeable than you on this subject. You sound like an unemployed loser hanging onto that couple years when you rubbed elbows with the BSDs.

jgr if you think -13% is an awful performance this year i'd love to know what you've been investing in. capital preservation is just as important as capital growth, and when equities, real estate, commodities, and alternatives are all down 30% or more all over the world, being down 13% is fantastic. certainly there are some folks who through luck or prescience cashed out and moved completely into government securities last spring and ended up even or up a bit, but that is exceptionally rare.

Not only is -13% not "awful", as someone who manages money for a living and knows quite well the performance of others in the business, it would put you significantly above the mean, although most assuredly, not in the top 5-10%. Whether that is good enough to stay in the game depends entirely on your investor base. As most know, many of those who were UP this year have had assets pulled so the forced liquidations have torched EVERY asset class, save fear (aka-treasuries and gold). And while many hedge funds/investment funds are hardly worthy of their riches or esteem, I would argue that the tragic miss in people's excoriation of hedge funds is not the hedge fund community at all, but the shameful performance of the mutual fund industry. While it's always "sexier" to talk about hedge fund performance (whatever that means as there are so many differences across specialties, no different then doctors) mutual funds seem to escape the scathing indictments of incompetence and irresponsibility directed at funds all the time, whether on CNBC or streeteasy. So tell me- would you rather pay 2% and lose a NET 13% like SAC this year, or pay just basis points for an index fund or 50 bps to let Fidelity run your assets down 38%. It's an absurd inference, and despite the headlines, I would argue that for many of those funds, those risk profiles are significantly better than playing the beta of the markets as a whole.

My sense on NYC RE is that prices stayed buoyant in 2001-2003 b/c they hadn't inflated in the past 5 years in any significant way like they have recently. Affordability ratios were in-line, and participation in the market was available to a wider audience- doctors, lawyers, media, etc...Income disparities weren't nearly as wide as they got in the last 2 years, when outsize wealth inequalities (fncl types) were building in the city the same way they were building all over the country. Interestingly, the last time income inequality was this high (and it was almost exact) was 1929- And after 30-40% declines in most asset classes, those who were asset-light (or owned nothing) and still have their jobs, have actually closed that gap substantially, although NYC RE is still late to accept that reality, it most assuredly will

Since you asked...

Since March (BSC collapse) I've been operating under the theory that we are headed toward a "lost decade" with a multiple years of deflation. I've written about that recently on quite a few threads. The only winners in deflation are cash and Government securities and potentially gold. I don't really know enough about gold so I have 50% in a money market fund and 50% in a treasury mutual fund and some laddered CDs that I've always maintained. Outside of that I had some small-money gambles in buying puts in September and October, mostly just piggy-backing on financials. 5.25% gain for the year - I'll take it.

Cohen is someone that prides himself on always being ahead of the tape and is known for his quick moves in and out of the market. So yea, I think -13% is a pretty poor performance for his flagship fund that did just fine in the last bust. What exactly are investors paying 2% (and 50% when there is a profit) for?

"While it's always "sexier" to talk about hedge fund performance (whatever that means as there are so many differences across specialties, no different then doctors) mutual funds seem to escape the scathing indictments of incompetence and irresponsibility directed at funds all the time, whether on CNBC or streeteasy"

I don't think you'll find many arguments with this. Most mutual fund managers are incompetents and with fees up to 1.5% on the "actively" managed funds - it will eat up your long-term returns on an already sub-standard performance.

Rhino, I may be more conservative than you and would think a couple making 400-$500 would have to stretch to buy the $1.6MM apartment, whereas few will want to stretch in uncertain times and with falling markets. That said, I agree with your general analysis. My wife and I are a perfect example of the couple that's been priced out of true family apartments despite having very good incomes. But we want to own, we want to stay in Manhattan, we have a long-term time horizon, and renting a family apartment for 10+ years is a pretty crappy alternative for a variety of reasons. So if/when prices fall to the point that we can comfortably afford what we want, we will buy. If we're too early, so be it.

Funny that happyrenter, aj202, and myself - all people who manage money for a living - realize that in context and given the strategy, that -13% is a good to great 2008 performance. Yes, maybe I was off thinking it was top 10%, but its definitely above average. I think guessing is fine on a chat board and my guess was off. We still haven't figured out exactly where it falls...

Funny the one here who is not a professional is putting up a stink and quoting his PA performance... Hilarious. What you don't understand is that when you run a long/short portfolio, you don't have the luxury of standing aside in a money market fund and then acting like a genius for making 5%.... Funny the same asshole who said I couldn't compare long/short to a mutual fund... is comparing himself stuffing money under the mattress after Bear to an actively traded long/short hedge fund with years of double digit returns under its belt...with a BILLIONAIRE FOUNDER. And this is the same person who says I need a reality check?!? And tries to put me down by comparison to his niece? Also an odd use. Then moves on to bash the mutual fund industry... Such wasted talent. He's better than the mutual fund industry and better than Stevie Cohen....what a shame! You are clearly a young shit outside of finance looking in, sadly.

Jgr, for someone so sure...shorted nothing. Yet you can bash professionals who short stocks for a living. That's called having no balls. That's called being a know-it-all cocktail investor/lawyer who never had the guts to actually see if he could make a living doing what he seems to think he can do better than the great ones.

newbuyer99..as a frame of reference, how much would you and your wife be able to spend? far from scientific, it might be some insight into where prices need to fall to pull back buyers outside of the finance industry.

"Jgr, for someone so sure...shorted nothing"

But I did say I bet against the market. If you read carefully I said I bought puts... But I'm guessing you don't know what a put is. Keep pretending Rhino you are in the finance industry.

You got some anger issues buddy. Probably because you are called on your bullshit and now you are nothing special.

-13% for this part year would certainly be in the top 5-10% of returns for certain kinds of funds. but i do agree with jgr when he asks what clients are paying 2 and 20 or 2 and 30 for if their funds are not even making positive returns. you can't judge based on one year is the obvious answer. but the truth is, they aren't getting much. 2 and 20 is a horribly high fee to pay.

let's put it this way: there is a reason that the hedge fund managers, rather than the hedge fund investors, own all those penthouses at 15 CPW (how many penthouses can one building have?). as warren buffet says, take a look at wall street: all those office buildings, high-paid traders with houses in hamptons, mutual fund advertisements on TV, etc. etc. wall street is the difference between corporate earnings and investor returns. when wall street gets bigger, investors earn less. hedge funds made wall street a LOT bigger by more than doubling the fee for investment management. great for managers, awful for clients.

I understand what a put is...clearly you didn't do it in any size because your return was still 5%. Now I am nothing special? I never claimed to be something special. I just claim to be someone with some experience in the hedge fund industry, which distinguishes me in this matter from you. You, who still will not admit that he has a sad mundane job. I claim to be someone who understands that -13% aint bad from a risk taking long/short equity fund with a history of great returns run by one of the greatest traders to every walk the earth.

Happyrenter...2 and 20 is high for sure, but returns are net and the industry as a whole, on a risk/reward proposition still crushes the tired ass autopilot mutual fund industry. Maybe a hybrid model will emerge with more modest fees, and less mutual fund mopes who simply defer the decision by mandate on how long to be. One thing is for certain, no one every turned down a pay day, including Buffett - who inherited a bunch of money himself.

did you just say that warren buffett inherited a bunch of money? what are you talking about? warren buffett started out in life with $5000 he saved up from summer and after-school jobs.

as for turning down a pay day, i don't really see who you are arguing with. clearly i don't expect managers to turn down the fees they are paid--like everyone else they will get paid as much as they can. i charge as much as i can for my fund. my point is that the model works well for managers, not for clients. it made some sense when there were a handful of hedge funds pursuing exotic strategies with the possibility to make outsized returns. with hundreds of billions in assets and thousands of funds, it's just a joke. the returns just aren't there.

i am no fan of the mutual fund model, but it's not as if mutual funds and hedge funds are the only investment vehicles out there.