real estate sales current status

bjw,

That's too simplistic. Sure, the broker wants volume because then they make more money, but they also want a high price because they make more money. The fundamental starting point must be that the broker is out to maximize his own profit, not to serve his client's best interests.

In a broker's ideal world, he would maximize both (a) price and (b) volume. And, in fact, that's just what brokers aim to do. Sure, when a broker sees price on a particular deal limiting his volume enough that it hurts his bottom line, he'll advise the client to drop the price.

But the fact remains that it's absolutely, undeniably in the broker's interest to puff the market in general. The broker has nothing to gain by publicly talking about a real estate crash or major price reductions, but they have an awful lot to gain from lying and artificially puffing the market. That's the problem. The more the broker puffs the market, the more he can maximize volume without having to sacrifice on price. And that is his main goal.

The broker system is completely at odds with the best interests of the client. It's exactly the same problem as Wall Street bonuses.

There are a number of possible paradigm shifting solutions to how this conflict of interests could be fixed, but brokers won't like any of them because they all add risk to the broker's end of the deal by aligning the brokers' interests with those of the real estate buyers.

The whole real estate broker industry is literally the definition of a racket. Archaic state licensing laws and all sorts of inside influence assure that the general public gets a raw deal and brokers make far more money than they should. The insane amount of state regulation distorts the free market and is economically inefficient, leading to undeserved profits for the insiders (i.e. the brokers) and unnecessary costs for the consumers.

I think real estate buyers & renters have every reason to be paranoid about brokers. In fact, I think too many people don't realize just how much they should be worried about what their broker tells them.

Oh yes Noah,

I remember when Baghdad Bob finally left the NAR and started telling the truth... I almost spat out my coffee when I saw the video interview.

And this guy was THE CHEERLEADER who authored those books.

That confirmed the lying sleaziness of the NAR. Everytime I see one of those stupid NAR commercials saying how now is a good time to buy with low home prices and interest rates, I think of David Lereah coming clean and how sleazy the NAR is.

what do you suggest then out side of flat fee services for buy side and sell side? Certainly the service provided by quality brokers is in some demand? So how should it be applied to be more efficient for the consumer?

I have been pleasantly overwhelmed by the passion shown by some of the comments made to my comments. The saying I make to all trainees that come to bellmarc is:"All people are perfect. No one ever makes a mistake only an information impoverished decision." Each of you is right in your own way. I am only presenting a point of view and there are very intelligent people who have portrayed their acumen that have shown the contrary perspective. It is all about weighing the information to make an informed decision. In terms of values, I don't wish to totally ignore this so I will explain my patented invention, Selection Portfolio. Bellmarc has graded every Manhattan property based on its location, building and view on a 1 to 10 scale (we haven't done outerboroughs yet). We have also identified the room dimensions in the living room, dining room and master bedroom dimensions (as compared to overall gross footage which is often wrong or at best a deceptive figure) as the "value rooms" in the apartment. Using these criteria we have written a computer program that permits an averaging of a population of apartments currently for sale in order to have a user make a clear evaluation of how each apartment compares to the average of a selected range.The net effect is that a buyer can choose an apartment based on evaluating a total range of alternatives and how they each compare to another. The underlying purpose which I tell my salespeople is that showing the right apartment to a customer is not sufficient to get them to buy. You must educate the customer why the apartment is the right apartment. I can only tell you that the system has had a huge impact on our way doing business. I believe a good buyer should never fully trust a broker and that the buyer should have a means to verify or confirm information in some manner external to the brokers statement. However, I can also say that the vast majortiy of salespeople I have met want to do a good job. They want to provide this education and they respect the importance this decision has to a buyer and seller. I also suggest that anyone thinking of buying should also get my book "The Ultimate Guide to Buying and Selling Coops and Condos in New York City." I know its a plug but I believe in the importance of the material contained in that book. Do I believe the market is getting better? Yes. Am I positive about my position that the worst is over? No. Am I convinced by the statements made by others that the market is a catastrophie? No, to me they tend to show more anger than insight.

I must confess that I greatly enjoyed Mr. Binder's last post. Until the last sentence. I am cautious, not angry. It was caution that kept me from buying in the 2005-2008 time frame, based on real information not supposition or fear, and it is caution that keeps me from considering the real estate market today, based on real information that is even more compelling. Until someone can present some credible evidence that the market is poised for a sudden upturn, which I think can not be presented, I feel quite safe waiting until the sales numbers determines who is right and who is wrong about which direction the market is going. Right now, time is on my side.

No offense, but if anyone read the non-real-estate news today, we just had the worst economic contraction in a generation in Q4, much worse than had been thought:

"A much sharper cutback in consumer spending -- which accounts for about 70 percent of economic activity -- along with a bigger drop in U.S. exports sales, and reductions in business spending and inventories all contributed to the largest revision on records dating to 1976.

Looking ahead, economists predict consumers and businesses will keep cutting back spending, making the first six months of this year especially rocky."

But New York real estate is going to defy all of this because it is special? I lived in Tokyo 20 years ago. Now that place was special...

urbandigs,

The general idea would be to better connect the broker's fee to the value of an apartment over time. It's very similar to what some people are proposing for Wall Street bonuses. For just one example, it could be done with an "earn out" type of provision for brokers fees.

In corporate deals, it's common to see "earn outs." What's an earnout? Basically, when Company A buys Company B, they both admit that it's really hard to accurately value a company, so they agree that if Company B ends up making more money or being worth more money in the next couple years, then maybe Company A underpaid and the sellers of Company B will receive an additional payment from Company A. That might sound a little complicated, but it's basically a mechanism that lets two parties adjust the price of a deal after the fact. Applied to real estate, you could have a provision that basically says that if I buy an apartment and the value goes down significantly over the next 3 to 5 years, then the broker's fee was too high and I should get some of that back. There are a bunch of other possible variations on this as well. Obviously, brokers would hate this, but it would align their interests with their clients' interests and remove the incentive to lie about the market (at least somewhat).

I've been trying to hold off on this... but WTF! Neil... you are a complete moron. If your mom asked you if she should buy in this market and leveraged herself by 15x, you'd tell her to wait, right? You do understand that there is nowhere to go for NYC RE to go but down.... that your mom would be better off renting to the next 2-5 years and if she bought in the last 3 yrs, she'd be eating cat food and living with you.

Don't be so myopic.... read what's happening outside of the RE market...bc ultimately no jobs, no income, higher taxes does not bode well for NYC RE.... but I'm sure you told people to buy 6 months ago... and if they took your advice.. .they'd be down 25% on a 15x leveraged asset that is probably the most expensive single item a family buys... Good luck with the jawboning!

Why do you assume most people have a 15x leverage. 80% of the housing stock is coops, no way they allow 15x leverage.

driggs,

I think you misread my point. I'm not saying volume is all that matters, but when it comes down to it, a broker would rather have deals done at lower prices rather than no deal at all. Sure, they want to maximize volume and pricing, but I think it's fair to say there's a hierarchy there. I think some of the good brokers posting here (front_porch, tina24hour, etc) would tell you as much.

"The broker has nothing to gain by publicly talking about a real estate crash or major price reductions, but they have an awful lot to gain from lying and artificially puffing the market."

I think this is a bit off-base too. urbandigs is the perfect example of someone doing the exact opposite of what you say. He has a lot to gain from it - buyer trust, which inevitably translates to more business. I think it's great and shows your reasoning to be too simplistic. Smart brokers (and yes, they are out there) can be quite helpful, and while I agree that everyone should be careful in selecting one, I don't think it's productive to just blindly treat all brokers as shameless and sleazy shills.

bjw,

I actually don't think most brokers are sleazy people. Rather, I think the broker system creates economic incentives for brokers that are not aligned with their clients' interests. Most brokers who appear sleazy are actually just stupid. They aren't able to process the longer term benefits of operating honestly because the system dangles these near-term economic benefits in front of their faces. They just do what they feel they have to do in order to compete in this system and make a living. I think they're driven by a desire to enrich themselves, rather than an affirmative desire to harm others. It's just that the misalignment of interests by the over-regulated system means that when a broker tries to benefit himself, he's often hurting the consumer.

I'd advocate for a systemic change, rather than punishing individual brokers.

I would add that it's very easy to fall for short-term gain, over long-term anything. Look at the Wall Street world where I think it's undeniable that the average banker has a higher IQ and a better education than the average real estate broker. These bankers couldn't see what they were doing. They just went for the biggest bonus they could get as soon as possible.

Brokers are faced with the same types of incentives and even less intellectual tools to figure them out (with exceptions, obviously).

maybe neilbinder is right..401 east 74th street alcove studio $479k...the agent told me they weren't accepting lower offers....well, it just went into contract...i don't understand it..

julia, patience is not your strong suit. one sale does not a market make. look at trends, real estate is sticky, up to a point. either way for you it only matters to a certain degree. you'll either find something suitable this fall, or you'll rent, which won't be so bad because the rental market is weak and buying opportunities should only get better.

Julia,
Well, this is purely anecdotal, but a place my wife and I had looked at online and thought was a good deal has also moved into contract. So, I think some people are pulling the trigger, when prices reach a certain level. I can already hear the screams of INVENTORY, so I'll leave it at that.

You should have quite a few choices, although alcove studios are kind of a funny beast, in between a studio and a one bedroom. I think my choices are somewhat more limited and there are other people looking for the same apartments.

Someone has to buy on the way down. It's typically the impatient.

mbz:
"Someone has to buy on the way down. It's typically the impatient."

as opposed to the ...patient09... been waiting for that one for a wee bit......I will be here all zeeweek!

Yes, there are idiots buying right now, but the rate of new listings hitting the market has been consistently double or triple the rate of sales for a very long while. The slight uptick in sales is no doubt due to 30% or more price reductions for decent properties and to the fact that some people still got paid bonuses this year. Since the government has just made all nyc real estate 5% cheaper, and since new york state taxes are going to be so murderous next year that anyone with an income will want out...

I think you'd really need to have something seriously wrong with you to be buying here at the moment.

"I know because at $600 per foot in the viable neighborhoods of Manhattan I have a dozen buyers who would buy the whole building without even looking at the apartments."

Sure, but they're not going to buy once they find out that the monthlies are more than what they can get in rent, and that, my friend, is where we're headed. Many of the new developments and quite a good portion of existing condos and coops aren't just overpriced per sqft, but because of how they were structured, their monthlies are going to be well under possible rents in 10 years or less, once the tax abatement expires.

any good examples of 30% price reductions (from reasonable comps not from inflated asking)?

If I provide an example, brokers will immediately claim it was overpriced to begin with :)

So let me rephrase - there are idiots buying because of a 30% reduction, and there are even bigger idiots buying because of smaller reductions. I'm sure there are even complete morons who are still buying $1800/sqft new developments.

zizizi, jealous much?

so...does that mean that you don't have any examples of 30% reductions from reasonable comps? I am (god forbid!) not a broker...just someone who is getting tired of everyone (including the esteemed stupid NY Times) wildly exaggerating and then generalizing.

Our economic situation is a mess...I don't see how it helps to make unsubstantiated statements.

Hopefully at least it makes you feel better.

cc: I am leaving soon, so I am going to post and run, won't reply to your response. BUT

Lets just say typical RE turnover in NYC is 7% per annum. That is one out of every 14 apts. Now, since the peak, transactions have cratered to about 40% of normal. Additionally, some would say 30% of those were new developments. So that means transaction volume with an eligible comp is only 28% of normal. That means only 1 out of 50 existing apts has traded since peak. What are the odds that 1 out of those 50 happens to also be one that traded at peak. VERY UNLIKELY. So, throw the board a bone, if they even come up with a couple, that would be relevant. Just give it some time lad, and you will get all the same apt comps you want. In the interim, it is fairly reasonable to accept same line comps.

ok...factual basis for 7%? My only data point is the building I have lived in for an embarassingly long time. 100 apts more or less...according to SE (and I can vouch for this) 10 apts changed hands since 2004...

i am not trying to be a @#$# (you fill in the blank). just suggesting that we all need to be careful in our exaggerations.

new developments are crazy, but I am far from sure that they move the market overall.

instead of stating opinions as facts, i think we would all be better served by being clear that we are offering our opinion.

one of the data points that i have actually been very curious about, is what is the real percentage of apartments that trade on average? everyone on this board is up in arms about inventory and dividing by average annual sales but, even if there is two years of supply based on prior years sales, what difference does that really make to the overall market if it is still a small percentage of total apartments?

uppereast.. sorry for not getting back sooner... but planning our daughters' 5th bday party... a man's gotta do, what a.......

I do 15x leverage b/c I can't count above that.... lets do an example to get his started.

An I-Banker buys a $4MM 3bdrm co-op with 50% down in Dec 2006... i.e. mortgage of $2MM, market drops by 40% in two years (the 3bdrm coop is now worth $2.4MM with a $2MM mortgage). Congratulations, this I-Banker now has a 5x leveraged asset... this with a 50% equity position. Now just try this math again with 25% equity in 2006, the leverage is thru the ROOF! So pls, you may think I'm being an a-hole for stating 15x leverage, but given the 25% drop in market prices in 1 yr, most people are currently (if you took your mortgage/ current market price minus debt) north of 20x leverage... IMHO. Like sunk cost, your in equity at purchase has nothing to do with current LEVERAGE everyone.... WAKE THE F' UP AND SMELL THE ESPRESSO!

How many balloons do you think we should get with 25 adults and 19 kids?

22-25 balloons should do it nicely.

not sure i follow the rest...if prices drop by 50% from when i bought, I'm screwed? i see that, what is the rest of this about?

If prices drop 50% from when you bought you're not screwed unless you have to sell. It is impossible to tell how long it will take for prices to stabilize, much less begin to climb again.

ok...you're correct...much better situation if you don't need to sell.

but, give me a break....people in the apartment above you in roughly the same condition as your place, sell for 50% of what you paid (or even 75%!) and you don't reach for the bourbon?

Well, I go for the single malts myself, but I see your point.

We went out to dinner tonight to a lovely little Italian place in the East Village, the table next to us (quite close) had four people, probably mid to late-50s. Their conversation: we have no housing value left, no stock value, possibly poor job situations, etc. (BTW the restaurant is quite inexpensive and they seemed to know the owners who I overheard comped them for a couple of things). They weren't despondent, but not happy either.

columbia, all I can say is this sucks. it sucked on the (bloated) way up, and it sucks on this roller-coaster of a ride down. although I welcome price correction because I think it is necessary (and, OK, I have been sitting out the ride in a Peter Cooper rental that I like but I would LOVE to leave), I don't for a second think it's pleasant, or fair, or even beneficial in the short term. If you can sit tight, try to keep the bourbon to a reasonable amount, and take prilosec (my husband, who is a managing partner at a law firm, swears by it, the stress was turning this marshmallow of a man into something demented, and acidic).

Since no single broker can "puff" the market in any significant way, wouldn't the optimal strategy of a broker be to build credibility with the client, not puff too much, make the client feel comfortable. I'm just saying it is silly to say that a single broker's incentive is to "puff" the market, rather any single broker wants credibility with his/her clients.

Lots of good stuff here on this site. I know a bit of the pain many are feeling lately. We lost a good portion of our portfolio and my sister was let go in November from a company that%u2019s been in the news frequently. She%u2019s a tax manager and she had served her company well. Her big mistake was not having any seniority and being so good at what she does that she was the highest paid person in her division. She%u2019s managing ok now.

Maybe change Grey%u2019s Anatomy dialogue to: I believe that it's been a hell of a year and will possibly continue into the next year, and I believe that in the face of overwhelming evidence to the contrary, we'll all be okay.

I think Neil Binder%u2019s decision to post here is a good one. I hope to see him post when times are good and when things are back to normal.

If you%u2019re a fan of Manhattan and enjoy living here, you%u2019re someone who refuses to settle for an ordinary life. Fitzgerald had it right when he said Manhattan is a golden city. He also had it right when he said it had limitations.

I look forward to the day the war in the Middle East ends and our country puts its energy and resources into reinventing itself. We have many challenges ahead of us and we know there will be blood. It%u2019s unfortunate that so many of our systems need to be overhauled at the same time. But I do believe that our best is still ahead of us. And at whatever level prices stabilize, the best %u201Cseats%u201D in the %u201Ctheater%u201D will always cost the most.

Apologize for this messy post. I'm not sure why the apostrophes are being replaced by %u2019.

Julia: Thank you for your kind words. Best non-advice I can give you is, always protect yourself. If you want to buy an apartment, plan on holding it for the long term. And fully understand and accept any incident risk you could incur. Make sure you have enough reserves in case your income drops. Think about the less-than-desirable possible outcome.

Get the comparables for the apartment you are interested and put your offer together. Have a template set up on your computer so you can get one out in a timely manner. I know some brokers will ask you for a verbal offer. I myself love paper. But email seems to be the way most go today. In any case, put it in writing. This way your offer, with all the supporting reasons stating why it is a good offer, can be read, and reread.

Whether you buy now, soon, or in October, how can you minimize the risk? Unless you can see a universe in a grain of sand (Blake), or have access to this crystal ball I hear about, and unless you know a certain fringe neighborhood will be a good investment, stick with the ones that have held their value best in the past. These are the neighborhoods with good schools; the least amount of crime; good amenities; accessibility to transportation, walking distance to stores and work, etc.

Just in case you have not seen it yet, visit UrbanDigs post on making an offer:

http://www.urbandigs.com/2006/08/the_art_of_the.html

Also, I know you have heard it but definitely always ask whomever is showing the apartment if you should take your shoes off. Most times you will not have to. All other things being equal, it will count for something if you want to stand out,

If there is more than one person making an offer on an apartment and the finances are pretty much the same, they might lean toward working with you. In a close race, it is difficult not to follow the heart.

Although the apartment usually goes to the person with the best qualifications making the highest offer, there are exceptions. For example, the person with similar qualifications and a similar offer who was considerate enough to ask about removing her shoes.

Always keep the lines of communication open and keep your negotiations principled, keep them fair. Why shouldnt everyone get what they want? Why does one side have to do better than the other side? If you go positional and take a hard line in such a big transaction, you might turn off the owner. And walk away if it is not good for you.

When you submit your offer, it is not unreasonable to expect a reply anywhere from 6 to 24 hours. If it goes beyond that and you still have not heard any news, then you have think about what kind of deadline to set for your offer. Try not to fall in love with just any one apartment. No problem here, we are always rational, right?

One time we made an offer on a place that was perfect. We did the research, we had the comparables to back up our offer. The owner, who worked in the financial industry and we assumed would consider the numbers, was not interested in what the paper said. He wanted what he wanted and said if no one met his price, he would wait. We did not get that one.

As many on this post have agreed, consider renting until you have a little more faith in the housing market. The best time for you to buy, unless you have access to information that no one else does (see reference to sand and crystal ball), is when your unique circumstances warrant it.

If you are patient; if you are educated about what is going on in the market; if you are ready to move forward when you find an apartment you like and if you remain rational and are reasonable in your negotiations, you should get an apartment you like. And once it is yours, then it should be ok for you to fall in love with it.

Neil - Thx for posts.

Yes and thanks for not losing the opportunity to advertise your book
I actually bought it and learned much, much less than by reading this forum
I would not recommend it to anyone, and yes you are articulate and probably smart, but your role in society fits more the scavenger profile than the leader.
there is no anger, but for you to come here, bloviate and shill away like that...
commiseration maybe would be more appropriate

Neil Binder: please ignore Eurocash's posting.

I really enjoyed reading your post and the intelligent discussions that resulted from it. We may not all agree with you but it has been thought provoking. We are, after all, in America and all thoughts are welcomed, something Eurocash doesn't quite get about this country.

"We are, after all, in America and all thoughts are welcomed"

Except Eurocash's, right Hello1? Hello1, what's it like to be a hypocrite AND a sycophant?

I like the idea that this guy binder put together an excel spreadsheet that ranks apartments. I've done something similar, so I don't need a broker to do it for me (nor do I need to read the book they shamelessly plug on an anonymous messageboard). That said, setting up such a "patented" [audience laughter] database/spreadsheet is far more work than your typical zero-value broker is willing to do, so kudos.

RobertLC321
about 18 hours ago

I look forward to the day the war in the Middle East ends and our country puts its energy and resources into reinventing itself.

Are you being serious.........or are you in Disney World? Wait till Pakistan tries to hold the world hostage and/or the Islamic extremists launch a nuclear warhead! The Middle East will be the least of our problems!

Hey, McHale, thank you for reading my post.

I strongly agree with you that Pakistan poses a major threat to the U.S. - - to the world. When you have the intelligence community saying Pakistan is the hub of all terrorist acitivity and you add nuclear weapons to their already vicious arsenal, yes, it is a big problem.

But, I'll still look forward to the day when there aren't any wars. It may never happen, but I still hope for it. I'm in no way a Pangloss. I can be very pessimistic.

Thanks for your response.

Bye for now.

Hello1 if you know what a minus habens is, you are one, otherwise Google it: I was born in NYC.

All thoughts are welcome AND if you are a shill, I have the freedom to call you one.
A forum is a forum, you express your thoughts, likes and dislikes, and expose yourself to criticism. Don't be silly.

Always good to see non-bears post on this site otherwise the bears on this blog end up preaching to each other. However, when Neil Binder posts that the Dow seems to have gained traction in the 8,000 range in his February blog http://bellmarc.wordpress.com/ then, well, his forecasts seem less credible given we are now under 7,000.
I just don't see how it is in an agent's interest to ever be bearish on RE and the original post is symptomatic of this.

I really had a broker this weekend tell me "now is the time to buy." I just shrugged.

Aboutready: I had EXACTLY the same thing. And you know, we are not dumb and have been living in a hole .....
It is time to by in Feb 2009 because the market has "declined". It was time to by in Feb 2008 because if you don't buy now you will be priced out forever. It is ever not the time to buy, according to agents?

I have a lot of respect for my broker, who is always ahead of the curve and telling me to be patient.
It takes a special one to do that, i appreciate that.

Bearish in RE to me means that I have always bought low and built on my deafness to idiots and fishmongers alike. Neil and all his sad replicants belong to the latter group; way to sharp to be delusional, they are always looking for some cow to milk. With the lions roaming the prairies, it takes a dumb cow to sit there and take it.

If some of you think that RE will recoup just because you focus on positive thinking, you are way too dangerous for your own net worth.

For columbiacounty... been crazy with "real" life... the example I was giving was in regards to creeping leverage on a depreciating asset.

Two methods to evaluate leverage. 1) based on income, debt/income and 2) based on market value (debt/(market value-debt)). Market value - debt = equity.

In the example above the $4MM co-op with a $2MM debt load would be 1x levered (on an asset basis). If market drops by $1MM or 25%, your leverage goes to 3x ($3MM/($3MM-$2MM)). In the example above, I projected a 40% or $1.6MM decline meaning your leverage goes to 6x ($2.4/($2.4-$2MM)). Now if you keep your job and all is well, then your debt/income ratio is not affected and you close your eyes and carry the monthlies.... but if your income drops to 0, then all you are looking at is a 6x leveraged asset... :)

In summary, in this market most people's asset leverage it through the roof IMHO... that's why a little additional decline in market value will just completely ingest your equity and people will just walk away, yes even in NYC. No doubt in my mind.

w67, I think you meant "based on market value (market value/(market value-debt))", otherwise your numbers don't make sense.

Boss77 u r correct.. :)

Peole will walk away because of market value based leverage... interesting...

Say you paid $2mm for an apartment you liked and owe %1.5mm in mortgage. You can comforatbly afford the monthly payments but your cash level is below $500k. You wake up in the morning and find out the same unit 1 floor up is being sold for $1.2mm. Do you immediately gather your stuff and walk away from your place? How do you take advantage of this 40% down market and $300k potential saving if you will never be able to get a mortgage for the next decade?

The people in that situation will be stuck in their apt until they have to move. That's what happened in the early 90s, and it will happen again.

I agree. I don't see them walking away if they don't have to.

Even though someone may have come in with 50% cash, what you should look at is what is the marginal hit to your equity given an additional 1% drop in market price of your apartment... so if you took another 1% drop (after the 40% decline) in your market price of your unit $4MM ex. above, your equity takes 6% hit.

If you look at the opportunity cost of just renting the $4MM apt over the last 2 years, you'd be able to buy an apartment that was worth $7MM in 2006 for $4MM currently, or alternatively buy your rental unit for $2.4MM, or increased your yearly income by $800K/yr (2 yrs), or you could just carry a $400K mortgage... anyway you slice it, if you bought above $1MM unit in the last 3-4 years, you are taking it in the chin, then the groin, and your boobs (if u r a lady)...

Haven't seen many $4mm apts for $2.4mm yet.

I'd have to ask West81, he's the resident expert... but they are coming to a brokerage house NEAR YOU! :)

NeilBinder: you neglect to compare rent to price ratios, i.e. cap rates (after adjusting for the fixed cc/tax annual expense).

The NYC residential apartment cap rate is 2.7%, but the market cap rate is 9.5% for comparable commercial properties and the freely traded apartment REITs.

So how exactly do you reconcile that this is a good time to buy?

No, its a good time to SELL! The apartments are overvalued by three times (using pre tax measures, 2 times using after tax measures). Anyone who invests for a business can use the pre-tax comp rate. Retail investors without fat IRAs are stuck with the two times measure. Either way, buying is just a waste of money right now and has been so for the past 6 years. The last time the NYC apartment cap rate made sense was in 2001.

We have a long retrenchment ahead, and there is nothing that Obama, Geitner, or Bernanke can do short of bankrupting our future economy by printing Wiemar Germany wheelbarrels of money to correct the price imbalance. Even this they cannot do without causing a run on the dollar, so, their hands are tied, and you are going to have to accept a 50% lower clearance price on the two year supply overhang of NYC apartments to clear the inventory.

Your apartment pricing will take its normal 20% per 6 months to adjust, but it will get there. No jawboning or talking your book will prevent the market from readjusting to an equilibrium that is much closer to economic fair value.

Anything else is the equivalent of alchemy where gold is created from lead.

Anyhow Neil, that is my view. Thanks for your contribution to our conversation.