Is there "anyone" who is bullish on Manhattan residential real estate over the next 12 months?

Also, while you're at it, when will the asteroid obliterate the planet?

Oh no you di'int. You said "rise" - The Change in Price Whose Name Shall Not be Spoken? I hope you have a thick skin, because stevejhx and the boys are going to be on your case big time.

I am long term bullish & short term skittish. I think we have to see where the general economy is going. Right now, we're in a murky period where there's lots of confusion. I think the biggest prob is that our leaders are themselves confused & not in consensus on solutions. I can't say when prices will rise or fall w/in the next 12 mos, but in general, I'd keep my powder dry unless I found an amazing bargain that I'd want to keep for the next 10 years.

lol side is funny.

Yes, it is possible. Mortgage rates are low and some people know there compensation will be decreasing next year (work for an institution that received TARP $? If so, that is you), will have a much harder time getting approved for a mortgage and getting past coop boards going forward, so will buy before the end of the year.

Bullish - you must be kidding

The Fed and the Treasury are pulling out all the stops to bring mortgage rates down and it is not too hard at this point to see them falling to historic lows of 4.5% or perhaps even lower. Through the balance of the year, that rate relief should total $115 billion at an annual rate (even if we see the mortgage rate go down to 4.5% from around 5% right now, most of the decline from the 6.5% level that prevailed through most of last year is behind us). And starting April 1st, low- and
middle-income households will start to see withholding taxes coming off their paychecks, which we estimate will total around $35 billion at an annual rate. So, we estimate the tailwinds from monetary and fiscal policy, as far as the consumer is concerned, are a hefty $150 billion at an annual rate. The savings rate is on a visible uptrend and, by year-end, when we estimate it will
be closer to 7%, will likely have drained $175 billion out of spending. (Every one percentage point rise in the savings rate, it should be noted, as a static standalone development, is equivalent to 2.2 million jobs being lost in terms of GDP impact). On top of that, we have job losses totaling an estimated 2.2 million from now to the end of the year, and that comes at a cost of $110 billion to personal income (again, at an annual rate).

Based on our assumptions on asset values, we think the negative wealth effect could end up posing a drag on spending to the tune of $400 billion at an annual rate through year-end. These headwinds amount to an estimated $685 billion. On net, the $535 billion drag on consumer spending is equivalent to a 5% contraction, though we anticipate that there will be more offsets in the form of further fiscal stimulus and expansion of the central bank’s balance sheet.

David Rosenberg, formerly Chief Eco at ML

=================================================
simple leading indicator: watch the Savings Rate
=================================================

http://www.bea.gov/briefrm/saving.htm

The Commerce Department reported Friday that the personal savings rate stood at 4.2 percent in February, down just a bit from the January level of 4.4 percent. That marked the first time in more than a decade that the savings rate has been above 4 percent for two consecutive months.

Even more remarkable: The rate is up from readings at or near zero just a year ago.

Wow! People saving up to buy houses. America is wonderful!!!

No bulls at all?

With all due respect, if the Chief Econ at MERRILL was any good at his job ... he wouldn't be "Formerly Chief Eco" and Merrill would "formerly" be a bank.

Rosenberg was one of the earliest bears, so much so he was a bear when the bull market raged a couple of years longer. It's not so hard to understand he left Merrill for better pastures.

Village
your comment shows that you are not well informed

Anyhow, how about this latest news about raising NY State Tax slightly for the higher-income earners?

Currently, New York’s highest tax rate, 6.85 percent, kicks in for couples and joint filers making more than $40,000.

Under the plan, the highest bracket would start at $500,000 with a rate of 8.97 percent — the same as New Jersey’s current highest rate.

A lower rate of 7.85 percent would apply to incomes over $300,000.

I think Manhattan will recover MORE slowly than the other boroughs and cities like L.A., Las Vegas and Miami, because owners & developers here are less willing to accept the other solution is to slash prices to levels people can buy without ridiculously easy credit.

Even in those aforementioned cities, there's still a few "stragglers" with peak pricing, and guess what, their properties are languishing on the market. What's being snatched up like hotcakes right now are foreclosures or homes in which the seller has complete equity & so can set whatever price needed (typically 30% off peak).

Okay, I'll bite.

I am a very cautious bull -- on certain types of transactions only. And NOT over the next 12 months. I think there are some great deals out there on homes that will make owner-occupants happy over the long haul (5+ years).

But. As a broker, I have never preached real estate as an investment in its own right. I believe some people are buyers, full stop. They take many forms - the serial renovators, the control freaks (people who, like my family, actually dig shoveling the snow and choosing the garbage cans), the parents who are buying for their children, certain empty nesters, certain pregnant couples. Ownership means something to them beyond its investment value. They aren't stupid, or ill-informed. They are simply "owners" the way some people are vegetarians, or Democrats. And yes, I believe there are good deals out there for them, in line with historical rent/own ratios, with decent long term upside (nothing crazy, just not-lose-your-shirt numbers).

I think prices overall will continue to decline, but for smart buyers there are good deals out there right now. There, I said it.

Tina
(Brooklyn broker)

Nobody with any brains is bullish. There will always be some dumb money out there, just hope it isn't you!

^^^ and in this market it is in every broker's interest to appeal to the emotional positive element of owning in potential buyers, tina.

When that is your only argument, when you can't give a substantive reason prices turn around soon, when you have to say you'll make money IN 5 YEARS, then we know what the answer to the original question is- no, bearish next 12 months

"They are simply "owners" the way some people are vegetarians, or Democrats."

So you are saying they don't care it they lose money on their investment (since it's not, to them, an investment). There's another word to describe such people - foolish - what happens if they lose their source of income after buying at peak prices???

"And yes, I believe there are good deals out there for them, in line with historical rent/own ratios, with decent long term upside (nothing crazy, just not-lose-your-shirt numbers)."

In Manhattan???? Where? Please post some examples, b/c I don't see it anywhere.

This about this objectively. Stock market is at 1997-98 levels. Unemployment is rising - highest in decades, particularly in NY area. NY State has a $10B budget deficit. NY MTA $1B+. Income taxes going up. Trillions in national deficits, with major inflation on the way. Real incomes plummeting. Worldwide - the facts are the same.

With that scenario, what makes one think that NY RE prices being at 2004 levels are reasonable? What about 2000, or 1999, or 1997? All those scenarios, even if not likely, are well within the realm of possibilities.

Now think of it this way. $1mm for a 1200 sq foot 2 bedroom apartment. In this world, is there any way that be a fair, realistic price?

No way. There is a long way to go down. Wait on the sidelines.

I've heard renters repeatedly called, "losers" by a number of vociferous, cocky SE posters.

But where are the bulls?

Is "anyone" bullish?

(The few " sorta positive" postings I've seen so far have surely been pretty "tepid" bullish - no?)

People in NYC want nice places to live and entertain in. Thus, there is an underlying solid demand for NYC apartments. The city is not just going to clear out. What other nearby city is as much fun? So even if prices come down - and I hope they do because I want to buy - NYC isn't going away like an internet company or bank.

I am a bitter renter and wish I had bought in the 90s for the record. Even with all the price declines, I don't see one bedrooms going for 200K. I hope they do, but I don't see it yet.

Hubby and I are buying. We just signed our contract and are waiting for the sellers to do the same.

We are upgrading because we need more space, and have for years, and feel that now:

1) we can cover the cost of more space even on our reduced recessionary incomes (I am both a real estate agent and a writer -- book at http://tinyurl.com/2ag28z -- and the publishing side is suffering quite badly).

and

2) 5% interest rates aren't necessarily permanent, and we'd like to lock in our money at this current low cost.

Overall I think prices are going to be flattish on slow volume for years, but I guess that outlook, plus the act of buying, makes me a bull.

ali r.
{downtown broker}

yep...as we have been saying in publishing for a while:

"the new up is flat."

'flattish' after they will have tanked a 2-digit percentage from current levels

too many details. flat, kind of

Bullish is extreme. I think if you need a place and find something you like, right now if a fine time to buy. I personally see stagnating prices for a while. The degree it goes up depends on whether our government officials start being more business friendly instead of taxing everyone out of the tri-state area.

I have been on the fence, since I expected a full-blown crash starting in about 2001 and was so totally wrong for so long that I couldn't possibly predict anything again. However, I think flat is the best possible scenario anyone could possibly hope for with the unemployment situation and that this best-case scenario of flat is not going to reverse course in 2009. Worst-case? Not as bad as some people who post here, but their reasoning is compelling. It's only a question of degrees. I don't think RE will rise for a few years, regardless of where the bottom is. We know now where top was; don't try to be perfect about the bottom.

lowery, you weren't wrong, really. you couldn't have predicted the post-2001 determination to create and nurture this bubble. they are still trying to aid and abet a smaller credit bubble, and who knows what the brilliant bulbs will come out with this time, but for a while I don't see much success.

and yes, bottoms and tops are generally elusive. but this bottom, probably not so much.

Flattish on low volume for years? You can't have flat on low volume with the number of condo units coming on line. If by flattish you mean flat over ten years if purchased today at 70c of the peak dollar than maybe. The problem with the current 70c is -60% from $1.00 = -40% from 70c.

Momentum is law. Why touch this until it starts rising? Better to buy in 1998 than 1992. If you couldn't buy something and rent it out and make a decent return, how could that be a good investment (even if you don't intend to rent it)?

front_porch:"Hubby and I are buying. We just signed our contract and are waiting for the sellers to do the same."

Ali, bless you!!! This is the best thing I've heard all day!!!

"even on our reduced recessionary incomes"

CORRECTION: The best thing I've heard all month!!

Ali...Why do you think now is a good time to buy? It's like one against the multitudes. interesting

Ali, as a broker saying you "guess" you are a bull seems like you aren't convinced. Why buy now? What is the price you are paying vs. peak? (roughly..in percent terms). Apparently you think prices will not fall further or that a transitory opportunity to get cheap mortgage rates will insulate you against further declines in asset value.

I'm very bullish having seen contracts signed at 35-40% off the peak all across Manhattan. Sellers are doing deals well below asking prices. I think it is excellent time to buy, I don't see prices falling 60 percent in Manhattan. Owning a hard asset will be a safe bet against the hyper inflation we will see in 3 years, as a result of the Fed churning out new dollars.

*chuckle*

real estate inflated by a financial bubble is not a "hard asset".

well of course your bullish avandermije. you're a broker, you have to be.

avandermije what's so bullish about a free fall from -15% or -20% to -30% and now -35%-40%? of course its impossible to know for sure, but there is no data or reasoned argument that says -60% is not possible. its really just a retracement to 2002 prices. on a price to rent ratio, it would still be much higher than prior lows in the 1990s.

jim, the latter. I think if there are declines in asset values over the next few years, they will be in the range of 2-3% a year (at least for the class of property that hubby and I are buying) while I think it's entirely possible that a 1 point pop in rates takes our financing costs up 20%.

Besides, unlike so many of you who I think are first-time buyers, I've never thought of myself as a market-timer. I stuck this year's retirement contribution into stocks this spring and watched it erode nearly immediately, but my philosophy on stocks is that if you keep investing regularly, the highs and lows will average out.

I don't even think of real estate as investing -- I think of it as consumption -- but this isn't the first property that I've ever bought, and it won't be the last. If I'm wrong about real estate prices and they drop, what, 20% more? then in five years we'll sell it and we'll use the fact that prices are lower to buy something even bigger.

But I'm not staying in my current place for the next five years, and I don't like what we can rent for our money -- especially because I'm a freelancer so my taxes are higher than those of a salaried person. I need the mortgage tax deduction.

ali r.
{downtown broker}

Ali if real estate is consumption, are you saying you simply can't find comparable rental property? Also, I am not sure what you mean about higher taxes as a freelancer. There isn't a different set of tax brackets for self employed people.

Ali, there is good stuff on the website hussmanfunds.com that you should read. Money should only be put into the stock market when valuations suggest a reasonable holding period return. It doesn't average out.

"I've never thought of myself as a market-timer"

What does paying a reasonable price (i.e., in line with historical norms) have to do w/ market timing? If prices aren't reasonable, you shouldn't buy (assuming you can rent for a reasonable [i.e., lower] amount). When they return to reasonable levels, which they inevitably will, you buy - has nothing to do with trying to "time" the market.

"I don't even think of real estate as investing -- I think of it as consumption"

Putting a large chunk of your cash down to acquire an asset is investing, whether you think about it as such or not. Attitudes like this lead to people losing their hard earned savings. When you use 4-1 or 9-1 leverage (as with RE), it becomes even more risky (and therefore should be viewed EVEN MORE from the investment perspective), b/c small declines in the value of the asset wipe out your equity. Ask Lehman Bros about that one.

"If I'm wrong about real estate prices and they drop, what, 20% more? then in five years we'll sell it and we'll use the fact that prices are lower to buy something even bigger"

Wouldn't a 20% price decline wipe out your equity? I'm assuming a 20% downpayment. Why would this enable you to "buy something even bigger"? It seems to me you would be "stuck" where you are if your equity gets wiped out.

BSexposer: what would I consider a good deal? I can give you some Brooklyn examples, as well as one in Manhattan. (Streeteasy won't let me include any more links - thinks I'm spamming):

Some recently closed sales:

Prospect Heights studio, sold for $185K - with 20% down and 6% financing, mortgage payment is $1222/mo - just about what it would cost to rent, if not lower:
http://www.streeteasy.com/nyc/sale/314791-coop-83-underhill-avenue-prospect-heights-brooklyn

Carroll Gardens brownstone floor-through 2 bedroom, discussed in other threads here. Sold for $410K - with 20% down and 6% financing, mortgage payment is $2687/mo, cheaper than renting:
http://www.streeteasy.com/nyc/sale/356464-coop-588-henry-street-carroll-gardens-brooklyn

In contract in Manhattan:
Not sure what the sale price will be, but the last listing price was $745/sf. The 36 previous sales listings: $1,563 per ft² (avg):
http://www.streeteasy.com/nyc/sale/383744-coop-2-horatio-street-west-village-new-york

Will prices fall further from here? Probably. But I don't think the buyers of these places are gonna be kicking themselves. Keep in mind that all of these are well within conforming loan limits, and the 6% rate I quote for the mortgage is actually at the high end of what one might pay. And this is before you calculate mortgage/maint tax deductions.

Tina
(Brooklyn broker)

"Momentum is law. Why touch this until it starts rising? Better to buy in 1998 than 1992."

I think you're right about momentum, but we're looking at it purely from an investment perspective. If you'd bought in 92, you'd have lived in your home an additional 6 years. That is not a meaningless thing to a lot of people.

T - I'm sure you can find some "decent" deals if you are willing to do the legwork. But if you factor in the closing costs, moving costs, etc., they are not quite plentiful enough or juicy enough to get my attention yet. Maybe by the end of the year, but not now. To each his own - personally I want not just a "good deal", I want a phenomenal no-brainer DUH! deal - until I see it, I'm waiting.

BTW, I would hate it if I jumped in now, bought one of the few reasonably priced properties available today and then, come 2010 or 2011, see a much larger selection of better properties become available at better prices points. In addition, I don't believe there is any job security in this economic climate (unless you have a govt job), so I am waiting to how see things turn out w/r/t the economy.

This correction isn't over by a long shot until people get out of the mindset that risking their money is worthwhile to simply generate an equivalent rental cost. Its clear Tina you have not put into your analysis an alternative use of the downpayment. You may argue that investing a downpayment is risky and you are right...and so is buying an apartment.

Buying a studio to get a pretax payment = rent is a particularly risky and unattractive investment here.

In time everyone will think like BS....and then it will be time to buy. Like when you can buy for cash and the difference between rent and maintenance is a 10%+ return on your investment. That is a long way away.

Not to mention rental prices are falling and will fall even faster than sales prices - all these empty new developments will have to rent out their unsold units and all the flippers and speculators who got caught holding apts when the music stopped will have to rent them out. If anything I will upgrade to a better rental for a year or two.

> Some recently closed sales:

> Prospect Heights studio, sold for $185K - with 20% down and 6% financing, mortgage payment is $1222/mo - just about what it would cost to rent, if not lower:

So they put down $37,000 for the privilege of putting out 25-30% more cash than they would have if they rented? Are potential buyers supposed to ignore maintenance costs?

Nice catch... Tina you are in the penalty box... To slip that in excluding maintenance is a criminal party foul. What a joke. Yes, until an apartment is a liability rather than a privilege to own, they will continue to go down.

Sorry crescent - don't understand your argument. The cost quoted above includes maintenance.

Withdrawn. Your writing said mortgage payment.

aboutready - "you weren't wrong, really. you couldn't have predicted the post-2001 determination to create and nurture this bubble."

I was wrong in the important way it matters, my own pockets - had I bought in 2001 or 2002 I could be selling now for a big profit merely by underpricing my neighbors to look like I'm a bargain.

I agree that a deliberate bubble was created in order to avert the inevitable post-stock-market-crash recession, and even more frantically the post-9/11/01 frenzy of rate-cutting. But it happened, and that's what I was wrong about. Lesson here for everyone is don't assume you can always predict the near future based on repeating past periods being exactly duplicated.

" they are still trying to aid and abet a smaller credit bubble, and who knows what the brilliant bulbs will come out with this time, but for a while I don't see much success."

I think at this point it's too late to "stimulate the economy" with lowering interest rates. They can't be lowered any further than they are now, and it isn't having much effect, unless we can say that some buyers are being drawn out by historically low mortgage rates despite all the downward indicators out there, so without those low rates things would be worse.

Some naysayers during the last bubble predicted that we would have hell to pay when that cycle ended, because we'd have to pay for having magically wished away prior downturns by waving the lower-interest-rates magic wand.

"and yes, bottoms and tops are generally elusive. but this bottom, probably not so much."

I'd be careful of trying to time this one exactly. Keep an open mind. After past boom/bust cycles the lucky/savvy buyer could jump in at the bottom and watch their investment zoom up in value. I'm not so sure that's going to happen again. Opportunities here will be foreclosures and Bankruptcy-Court-ordered sales. Who's to say the person who buys right before values begin to creep up will make bigger profits than savvy buyers who take advantage of panic and foreclosures and court orders long before the creep-up begins?

I think there will be some long-term opportunities in certain markets.

Manhattan is not one of them.

Lowery, agreed, the money being pumped in is just filling holes, and will at best (or worst, depending on your perspective) delay the inevitable. I too timed things less than brilliantly, selling in 2004, so I hear what you're saying.

I don't think we need to time this bottom, really, would have been a better way to express my thoughts. I think that for a number of years there will be opportunity. I have three times bought properties from distressed sellers (deal fell through and had bridge loan for other purchase, widow sale in building with issues (that luckily didn't affect me in the end), and someone holding two mortgages needing to unload one). The fourth property I bought under duress (needed a place and hadn't discovered the joys of renting yet), so I paid market (but below asking).

We're not that far from retirement. I don't need to make a ton of money from the next purchase, but I certainly wouldn't want to lose much either, which is why I'll look for some added value caused by circumstance. I just think that the environment will remain such that one, with diligence, will be able to find a good deal for a while. Do I think that some very good deals might be available shortly, before a "bottom," yes. But I've become very patient, so unless something slaps me in the face, I won't feel compelled to go forward. I remember prices in 1995, and I have the time and inclination to watch and see what happens for awhile.

Aboutready, how would you think of value too great to pass up? I myself am not sure, so soliciting opinions. I am sure however, that -30% is not compelling value as of yet in light of the run-up and the trajectory of rents.

Rhino86,

When I do the analysis, I tend to be extra conservative on rents and only count 11 months. If I can make 15%+ vs carrying costs right away, that's a pretty compelling buy scenario, though it is an exceedingly rare one. I would stress that this is purely for investment properties though. There are also cases where I've looked at brownstones with 2-4 units and done the math assuming I'd be occupying one of the units - if you can turn a profit there, that's maybe even more compelling.

If I could answer that, Rhino, I would be looking a lot more seriously. I think that there are different historical price points that you can look at, and try to determine if there was any fundamental economic reason for change plus or minus from that point, to try to get a feel for where prices might end up. Highly imperfect, but interesting just as an exercise.

Earlier I had thought that the market would correct to either 2000 or 2002 prices, but I'm becoming more convinced daily that we'll get back to late, or even early-mid, 1990s pricing. I have been seeing a couple of remarkable drops, one two bed/two bath condo on W. 126th just was relisted at $499K, or less than $500 psf, from around $900K last year. And that's a developer sale in a small building. And, still, I think it's overpriced, not necessarily for today's market, but probably for sometime in the future.

I'm just really glad I decided that renting wasn't so bad.

"I am sure however, that -30% is not compelling value as of yet in light of the run-up and the trajectory of rents."

Agreed... but I think there is a bigger point.

There will be "below market" deals from time to time... the opportunity to buy for 40% off peak when the median is down 30% or so.

But, here is the thing... why are folks assuming that those crazy deals won't be there at bottom? If anything, I think there will be MORE opportunity to find distress situations when the market is looking bleakest.

If anything, I think we'll see more of these after the bottom than before... especially given the capitulation factor.

Me too. I looked pretty seriously at buying pre-Lehman. The nesting instinct can be strong. 2002 pricing seems to be the highest defensible floor. 1990s I think would require much higher interest rates. If you start running analysis for owner-occupied and assume a discount to rent % needed to make it attractive, its very sensitive to rate as you could imagine. So if you see 8% mortgage rates like the 1990s you can really crush values.

You do you realise that all the comments here on the order of "only an idiot would buy now b/c its clear that prices will be lower in the future", are the exact inverse of the "buy now and be priced out forever" comments of the bubble era that are (correctly) mocked. The fact is, there is A TON of terrible factors now, (atrocious employment picture on Wall Street, rising taxes, difficult credit environment, new development coming on line, etc.)and they are being priced in - its not like the buyers think that we are operating in a rosy environment. All of the factors now are pretty much as bad as they can be, or easily foreseen (i.e. bankruptcy of some of the new developments), with the exception of interest rates, which could easily move higher. The bears, which on this site seem to be 98% of people right now, are operating in the same type of feedback loop that led the bulls to make such crazy actions during the bubble.
The short of it is, that NOBODY can predict the future, so when 98% of the people think they can with 100% certainty, watch out.

nyc10022, that's one of the many reasons I'm waiting. sure there will be decent deals, but there's no hurry. there will be a long, flat bottom here. who can tell exactly when it starts, but the first sign will be a flattening of the downward price trend, and not just one quarter. then you can have some fun.

If you find a property that you love, at a price you are comfortable with, you should buy and not wait. That being said, I would, knowing that the odds of anyone bidding against you are probably nil, make a lowball offer. The seller can wait it out for a couple of years or at least come back with a counter offer that might work for you.

Printer you are wrong by a mile. How is it as bad as it can be when condo developers have barely budged? Nothing has stabilized and apparently you don't believe in momentum and you have the textbook delusion that markets instantly price information... Particularly the definitionally slowest market. Prices ratcheted down in the 1990s for years. You have jumped on the contrarian delusion. Everyone is not bearish here. Ally, a Harvard grad, just reasoned her way into buying an apartment.

printer/bxboy.... get off this board and go buy something... it's a grt time... no seriously, go buy something! LMAO.... NYC RE is VERY VERY illiquid... do you understand that? IT's also VERY VERY EMOTIONAL for most people... now put those 2 things together... slosh in your head and GO BUY NOW!

"The short of it is, that NOBODY can predict the future, so when 98% of the people think they can with 100% certainty, watch out"

I disagree. You can predict with a high degree of certainty that prices will fall back to historical levels - what you can't predict is WHEN EXACTLY it will happen - could be a year from now, could be three years out. BUT IT WILL HAPPEN - there is literally nothing that can keep this market propped up at historically absurd levels forever - just will not happen.

The funny part about the 98% quoted is that if you count the posters here its what about 60%/40% bears/bulls. I mean its a joke to call this a consensus... Its a further joke to ignore how long a consensus can drive prices up or down. Also the problem is with every passing day a bull buys an apartment, leaving the sellers with a more bearish pool of potential buyers with lower ideas of value.

Let's see - minimum 20% downpayments now required (instead of 5% or 10%), no more teaser rates offered to entice buyers / speculators, income verification and higher FICOs required, massive Wall St layoffs, entire investment banks gone forever, vanishing bonuses, rent prices plummeting, stronger dollar discouraging potential foreign buyers, declining sale prices causing buyers to step back even more, etc etc etc. Yep, it's pretty hard to predict what's going to happen to Manhattan RE prices! LMAO.

Sorry, forgot to add all the inventory that will be dumped on the market by all of the new developments which are coming online this year 1/2 full with buyers desparately trying to get out of their contracts.

So, basically, prices will go up over the next few years so long as the rules of supply and demand don't apply to Manhattan RE - we'll see how well that idea works out.

There's supposedly an auction coming up by a firm called accelerated marketing. Buyers dont need to try that desperately, they can just walk away from their deposits, which in most cases were 10% and are a no brainer to give up here.

BS - That's precisely my point - all the factors (except conforming mtge rates), are pointed downward - unless you think that the world is ending, they will all stabilize and then recover. Not today or tomorrow, but at some point they will - and the market is not pricing in a recovery at all. People think that Wall St, which has been around (metaphorically) since the beginning of time, will disappear - its my favorite quote "Wall Steet is dead, its never coming back" - right, b/c greed has vanished from the world forever...As long as there are people, there will be greed, and as long as there is greed, there will be bankers ready to step in and provide a way for people to lose their money.
Bonsuses and employment will stabilize and recover. Credit conditions will ease. The existing new development will be absorbed, and it will take years for more new development to occur.

"the market is not pricing in a recovery at all."

On what basis do you make this statement? Its a puzzling statement to me. I am not sure how -30% captures the worst case scenario? You make that statement in a vacuum based on nothing. By any metric, we are not even at the bottom half of historical ranges. What the eff are you talking about?

"You do you realise that all the comments here on the order of "only an idiot would buy now b/c its clear that prices will be lower in the future", are the exact inverse of the "buy now and be priced out forever" comments of the bubble era that are (correctly) mocked."

Not really.

The huge difference is that the latter was said during and AFTER the peak... and tons of folks at that point DID see the crash coming.

We're not at the flip point now... the decline is only beginning. The fairer comparison would be someone saying "buy now or be priced out forever" in 2002... and they would have been right for at least 6 years...

"nyc10022, that's one of the many reasons I'm waiting. sure there will be decent deals, but there's no hurry. there will be a long, flat bottom here. who can tell exactly when it starts, but the first sign will be a flattening of the downward price trend, and not just one quarter. then you can have some fun"

AR, I am in complete agreement here...

Rhino, keep an eye on the rental market this year and particularly next, if you have that long-term patience. Historically large numbers of apartments turn over summer/early fall. I'm betting that alot more will be vacating than moving in.

printer, real estate cycles are much, much longer, say 20 years-ish. And this is THE mother of all financial corrections. You'd expect the mother of all real estate corrections also. There shouldn't be a recovery priced in anytime soon. west67th's point about illiquidity.

Bankers have always been around. Standard 2/2's have not always been over $1m. And bankers salaries historically have trended at about 120% above mean, not by the huge amounts that began in the '80s and just ran into an f'ng brick wall.

"BS - That's precisely my point - all the factors (except conforming mtge rates), are pointed downward - unless you think that the world is ending, they will all stabilize and then recover. Not today or tomorrow, but at some point they will - and the market is not pricing in a recovery at all."

Baloney. Not pricing in a recovery would put us at 90% off peak, not 20-30% off peak.

Yes, Manhattan will recover. Factors will improve. The world won't explode.

But assuming that bubble prices will come back is still insane. The return to "normal" will happen, but normal might be prices at 50% below peak.

We recovered from the dotcom bubble... sure... but those stocks have not returned to their highs. Assuming Manhattan RE will is just another mistake.

Byron Wien made a good point.... In the 60s and 70s a banker or research analyst got paid like a lawyer and doctor. That inflected up in the early 1980s and never stopped...until now. Why can't NY be repriced to Boston levels... -30% being solid is such a joke.

i know, i know.

Why do folks assume that return to "normal" means getting bubble prices back?

I think the issue is they don't know or are denying that -30% is still inside the pricing period that was the bubble... I mean through 2002 levels then you could start making that claim. Not 2005 where we are.

Anybody who believes this downturn will end quickly and relatively painlessly should look at what happened in the late 80s and early 90s. Manhattan RE took 5-6 years to bottom then (no bottom until the mid 90s), and this time we had a MUCH LARGER bubble in prices and a MUCH LARGER economic disaster - thus the correction in prices will be MUCH LARGER as well. Again, it's not a matter of if (b/c that's already been settled), it's a matter of when and how bad. People can jump in today and try to "catch the falling knife" if they wish, but I won't be joining them. When everybody collectively gives up hope of a recovery in prices, then I will be looking to buy - we are not even REMOTELY CLOSE to that point yet.

True, BS, and the only thing that brought the prices back up in the late 90's was Greenspan's easy money game. That was the start.

Wait for crime to pick up and interest rates to spike. Banking is not dead, but it may be normalized...normalized secularly to what it was in the 60s and 70s.... To say no scope of recovery is priced, we'd need to be trading at 1995 levels, which is what, about -70%? $700k 1 bed down to $200k. That is what prices a dead city, not $800/ft down from $1200/ft.

Fast moving board -- just two comments. One is yes, we are putting more than 20% down.

the other is *of course* freelancers face tax penalties that salaried people don't. The easiest one to explain is on the Federal level, where Social Security taxes are paid in two halves, employer and employee. Salaried people see the "employee" half withheld from their paychecks --- I not only have to pay that half, I have to pay the "employer" half too, which is an extra hit of about 7.6% on the first $100K of income.

ali r.
[downtown broker]

"That is what prices a dead city, not $800/ft down from $1200/ft"

Agreed - $1200/ft was utterly absurd, $800/ft is still inflated, $500/ft would be fair and $350/ft would be downright juicy. I'll wait for downright juicy to arrive.

$350 would be say 9x rent...1200 sqft rental for $4500. The 'real estate' between $500 and $350 is going to be a function of interest rates. Hope for back-breakingly high interest rates.

We are not going back to $350 per square foot. I think a nice (but not the nicest) 650-square-foot 1-bedroom in a nice (but not the nicest) neighborhood will fall to about $350,000, which I think is what it was in 2002. That's just over $500 a foot. Think how insane it was to pay $550,000 for this apartment.

"$350 would be say 9x rent..."

I believe that somebody posted on another thread that by 1995 prices had fallen to about 6X rents - so 9X is not out of the realm of possibility.

"We are not going back to $350 per square foot"

We shall see. Nobody thought that the price of oil would go from $150 to $30 in 8 months. Nobody thought the NASDAQ would go from 5000 to 1150 after the tech bubble. Weird stuff happens when a bubble pops.

Well, where will rents bottom? I'd be willing to bet that the 1200 sf rental won't be anywhere near $4500.

Its like the opposite of supersizing. Honestly, this could be a city where normal people can live again in no time. It was priced to finance. Maybe you get 1200 for $3500 and put a 10x multiple on it to get to $420k. Honestly I think a 1/2 off sale would attract buyers...assuming there are still people with money around...which is a big assumption. Knock on wood, if I have money and.... Wait I'll stop there. It really all depends on where rents are and where interest rates are.

10022, you bring up a good point - Tech:Silicon Valley = Finance/New York. While there have always been great fortunes made from start-ups, there was an uber-bubble in the late 90s. Now we're more back to the norm. Last I checked, SV real-estate didn't crash post-tech bubble, though certainly vast (paper) fortunes went up in smoke, and not just the founders of these companies (analagous to Hedge Fund Managers) got killed, but so did tens of thousands of mid-level workers (i.e. analysts). Employment dried up and compensation (salaries & options) was decimated. Why should NY be any different now that the securitization and LBO bubbles of the mid 2000s has crashed?

"I'd be willing to bet that the 1200 sf rental won't be anywhere near $4500."

Even if it bottoms at $3500, at 9X it would sell for $378,000. My guess is that we will overcorrect on the downside to around 9X or a bit lower.

BSexposer - "downright juicy" just might happen. Loan defaults from real estate developments gone bust are coming very soon.

"Last I checked, SV real-estate didn't crash post-tech bubble"

Um, that's b/c the tech bubble was immediately followed by THE NATIONWIDE HOUSING BUBBLE!!!!!! C'mon Printer, I mean, really...get a clue.

Ok so when the $1.2mm kind of 2-bed is $600k I should resist because its going to $400k... maybe.

Everyone assumes that sales prices will correct to rental rates, but in a recovery, it may be the asking rents that correct back...

Printer your depth here is childlike.

Real estate didn't crash post-tech because interest rates went to zero and underwriting standards were destroyed. The real estate and securitization bubbles promptly reinflated the ranks and salaries of the employees in the financial industries.

Rhino, and the magic third component, cash. I was renting a 900 sf 2 bedroom in 1994 for $1500. I bought a small 2 bedroom in 1995 for $105K, in a better neighborhood. Did well by your 10X calculation.

"Loan defaults from real estate developments gone bust are coming very soon"

Yes, just wait until all the new development BKs start rolling in and all their inventory starts getting auctioned off.

G-condo you expert rents to rise soon? What? Do you realize that rents have everything to do with bank hiring? Do you realize that condo developments are going to flood the market with rentals? Like Saturday Night Live Weekend Update -> REALLY? REALLY? YOU THINK RENTS WILL SWING UP?

You are right they will....think 1996... long long after purchasing was in the shitter for years, rents lead the way one.... Long long way away.

> Why should NY be any different now that the securitization and LBO bubbles of the mid 2000s has crashed?

1. Silicon Valley unemployment peaked at 9% but spent most of a year around 8.5%. Do you think it's going to stop in New York City at the current 8.1%?

2. There wasn't a credit crunch, general rollback of creditworthiness 10 years ago.

3. The overseas savings glut that supported the mortgage market for so long was just getting started in 2003; that is if anything a headwind now given dollar/inflation fears.

If I had told you on 1/1/2000 that the NASDAQ would crash 80%, that unemployment in the Sil Valley area would skyrocket, you would NEVER have predicted that Real Estate in the ensuing years would do just fine. If I had told you on 1/1/2001 that terrorists would demolish the WTC, that wall street employment would plummet, that investor confident would be at historic lows b/c of WCOM, ENE, etc., you would NEVER have predicted that NYC real estate would flourish. You would all be on here citing the litany of woes and predicting disaster, just as you are now.
The point, again, is that no one knows the future, and even if you did, you wouldn't necessarily be able to predict asset prices with that knowledge. You are all citing the sames facts that everyone knows and that are well appreciated by most every buyer and seller out there. One by one those headwinds will ameliorate, and the market will recover. And never, anywhere, did I state that we will be back to the levels of mid 2007. Some of the gentrifying areas that hadn't yet reached a tipping point of safety and amenities may never get back to those levels again. Ditto the new developments at the edge of otherwise developed neighborhoods. But I will guarantee you that when 98% of the people here cite the same well-known list of negative factors as the reason why the market will continue to drop precipitously, then it won't do what they think.

printer, I'm sorry but you are beyond clueless about what's about to happen to Manhattan RE - you will learn the hard way, my friend.