http://www.alleyinsider.com/2009/1/new-york-real-estate-outlook-mega-crash Goldman: "New York apartment prices are very high relative to the observable fundamentals. Using three alternative yardsticks—price/rent, price/income, and affordability—we find that prices would need to decline by 35%-44% to return to the valuation levels seen in the 1995-1999 period, before the start of the recent boom."... [more]
http://www.alleyinsider.com/2009/1/new-york-real-estate-outlook-mega-crash
Goldman: "New York apartment prices are very high relative to the observable fundamentals. Using three alternative yardsticks—price/rent, price/income, and affordability—we find that prices would need to decline by 35%-44% to return to the valuation levels seen in the 1995-1999 period, before the start of the recent boom."
Goldman: "Under the (admittedly unrealistic) assumption that prices decline by the same percentage in each market segment, this type of drop would imply that a 1-bedroom condo whose price currently averages roughly $800,000 would decline to $480,000; a 2-bedroom condo would decline from $1.7 million to $1 million; and a 3-bedroom condo would decline from $3 million to $1.8 million."
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Response by Rhino86
over 17 years ago
Posts: 4925
Member since: Sep 2006
Goldman: "It is instructive to consider the potential implications of a return of relative Manhattan incomes toward the national norm prevailing before the Wall Street boom of the past two decades, either because of pay cuts in the financial industry or because of a possible out-migration of affluent individuals. From 1969 to 1986, Manhattan per-capita income averaged 2 times the national average, with no clear trend. Over the next two decades, however, it grew to 3 times the national average. If incomes fell back to the pre-1986 level of 2 times the national average—and if national per capita income remained unchanged—prices would need to fall as much as 58% to return to the 1995-1999 price/income ratio.
Goldman: "In addition, it could be that societal and demographic changes will keep New York apartment valuations above the levels that prevailed in earlier periods. For example, one might argue that the memory of high crime rates was still fresh enough in 1995-1999 to make this period an excessively pessimistic benchmark. If crime stays low during the current economic downturn, perhaps Manhattan real estate will retain its higher valuation in coming years. Alternatively, one might argue that the aging of the baby boomers will continue to support the New York market as "empty nesters" want to live closer to the city's attractions. These types of arguments are difficult to quantify and are often heard just prior to the start of a real estate downturn, but they do underscore that our analysis of the observable data on prices, rents, incomes, and interest rates only provides a very partial view of the New York apartment market."
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Response by Rhino86
over 17 years ago
Posts: 4925
Member since: Sep 2006
Smartest guys on earth....We all agree :)
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Response by JuiceMan
over 17 years ago
Posts: 3578
Member since: Aug 2007
Old news Rhino, check this thread for the details:
So will the dismemberment of Citigroup, BofA seeking TARP relief for Merrill, the re-regulation of the financial sector, the worst recession since the 1930's, massive unemployment, deflation, and all the things that JuiceMan happily admitted were the cause of this unnatural spike in property prices but refuses to admit will lead to their collapse.
I don't see how Jonathan Miller dissected anything.
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Response by angler7
over 17 years ago
Posts: 193
Member since: Oct 2007
stevejhx - read it not as a point-for-point evisceration but a cutting down of a middling market observation, elevated only by the name on the cover.
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Response by stevejhx
over 17 years ago
Posts: 12656
Member since: Feb 2008
"Using three alternative yardsticks—price/rent, price/income, and affordability—we find that prices would need to decline by 35%-44% to return to the valuation levels seen in the 1995-1999 period, before the start of the recent boom."
That does not seem a very "middling market observation" - it seems quite specific.
And just because Jonathan Miller is an appraiser does not not make him an analyst. Appraisers analyze. The criticism is overly literal, methinks.
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Response by angler7
over 17 years ago
Posts: 193
Member since: Oct 2007
It's not about specificity but impact. You mean to tell me you think Goldman just figured out how to talk about what you've been saying for the past year. Puh-lease! It is middling because it does not meet the Goldman standard of incisive analysis ahead of the curve.
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Response by JuiceMan
over 17 years ago
Posts: 3578
Member since: Aug 2007
and the data used for the study isn't worth a hunk of three day old turd. methinks.
Goldman: "It is instructive to consider the potential implications of a return of relative Manhattan incomes toward the national norm prevailing before the Wall Street boom of the past two decades, either because of pay cuts in the financial industry or because of a possible out-migration of affluent individuals. From 1969 to 1986, Manhattan per-capita income averaged 2 times the national average, with no clear trend. Over the next two decades, however, it grew to 3 times the national average. If incomes fell back to the pre-1986 level of 2 times the national average—and if national per capita income remained unchanged—prices would need to fall as much as 58% to return to the 1995-1999 price/income ratio.
Goldman: "In addition, it could be that societal and demographic changes will keep New York apartment valuations above the levels that prevailed in earlier periods. For example, one might argue that the memory of high crime rates was still fresh enough in 1995-1999 to make this period an excessively pessimistic benchmark. If crime stays low during the current economic downturn, perhaps Manhattan real estate will retain its higher valuation in coming years. Alternatively, one might argue that the aging of the baby boomers will continue to support the New York market as "empty nesters" want to live closer to the city's attractions. These types of arguments are difficult to quantify and are often heard just prior to the start of a real estate downturn, but they do underscore that our analysis of the observable data on prices, rents, incomes, and interest rates only provides a very partial view of the New York apartment market."
Smartest guys on earth....We all agree :)
Old news Rhino, check this thread for the details:
http://www.streeteasy.com/nyc/talk/discussion/7464-gs-take-on-nyc-re
Is this the same Goldman that predicted $200 a barrel oil?
They seem to be arguing both sides of the coin, but the 44% is certainly realistic IMHO.
"but the 44% is certainly realistic IMHO"
sure, a condo crash in Union NJ will certainly help.
Jonathan Miller effectively disects the note as a gilded puff piece re Goldman's buy in of the Case Shiller Index:
http://matrix.millersamuel.com/?p=2950
"a condo crash in Union NJ will certainly help."
So will the dismemberment of Citigroup, BofA seeking TARP relief for Merrill, the re-regulation of the financial sector, the worst recession since the 1930's, massive unemployment, deflation, and all the things that JuiceMan happily admitted were the cause of this unnatural spike in property prices but refuses to admit will lead to their collapse.
I don't see how Jonathan Miller dissected anything.
stevejhx - read it not as a point-for-point evisceration but a cutting down of a middling market observation, elevated only by the name on the cover.
"Using three alternative yardsticks—price/rent, price/income, and affordability—we find that prices would need to decline by 35%-44% to return to the valuation levels seen in the 1995-1999 period, before the start of the recent boom."
That does not seem a very "middling market observation" - it seems quite specific.
And just because Jonathan Miller is an appraiser does not not make him an analyst. Appraisers analyze. The criticism is overly literal, methinks.
It's not about specificity but impact. You mean to tell me you think Goldman just figured out how to talk about what you've been saying for the past year. Puh-lease! It is middling because it does not meet the Goldman standard of incisive analysis ahead of the curve.
and the data used for the study isn't worth a hunk of three day old turd. methinks.