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

Are you tech_guy? Your argument seems to be 'no one knows'. That argument has no place on chat board. No one knows for sure, but this is the place for reasoned predictions. If what's happening now doesn't inform your understanding of the money wave that jump started real estate in 2001, then there is little more to discuss. I actually think if you paid attention, there have been some pretty solid arguments built that NYC real estate will be down between 50% and 70% from the top. And you have no counter, other than 'no one knows'. No one knows, but everyone needs to think about the decisions they make with their money. Its the biggest investment most people make in their lives, by far. Does this help?

"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. "

Yes, because a BUBBLE started. And, had anyone known in advance about the government doing all the things it did to build the bubble... and continue the bubble, it would have been fairly clear we'd have one.

And there is one certainty about bubbles... they pop. You don't always know how big they'll go first, but they ALWAYS pop.

Rhino, excellent points. A year or two ago, every bull knew everything with certainty. Now that the bubble has popped, its "nobody knows".

Well, we know who doesn't know...

I'll admit, I didn't know a year ago... I didn't know what could happen to the financial industry. But after September, there was little scope to argue in my view, and there is still very little.

nyc10022 - thanks for proving my point. Every bull knew with certainty and they were...WRONG. and now, every bear knows with certainty and they will be...

And your argument is that "how could we have known a bubble would start" - exactly - how could you. And most every one of those gov't policies were well in place before the bubble started - as a matter of fact, (and i don't intend to start a political argument) the Bush administration was trying hard to reign Fannie and Freddie in, so one could've reasonably predicted that had administration policy been effective, with the implicit subsidies gone, lending standards and spreads would have gone UP, thereby preventing a bubble from happening.
But, that's not what happened - private capital proved to dramatically less restrictive than politically skewed capital. Things have a funny way of working out.

and Rhino, my argument isn't "no one knows" - my argument is that when people are absolutely certain they know, based on extremely observable facts, they are almost invariably wrong.

Why use so many words to say "no one knows"? If no one knows, why debate? Even if I knew nothing, I know that bodies in motion tend to stay in motion. With that alone, I know something.

You have no basis for saying that when people are absolutely certain they know, they are invariably wrong. Lots of people have been sure and right about a lot of things. At -15% if it wasn't you, it was someone else saying the same things (tech_guy?) about people knowing...And people were right. We are down at least another 10%. What do you know?

"nyc10022 - thanks for proving my point. Every bull knew with certainty and they were...WRONG. and now, every bear knows with certainty and they will be..."

proven right... yes. Thanks for noticing.

Because most of the RE market is still not bear.

But, thanks for playing... try again another time!

Again, seriously... bubbles pop, thats always for certain. Your assuming we'll get another one is simply not based in facts or logic.

"You have no basis for saying that when people are absolutely certain they know, they are invariably wrong. Lots of people have been sure and right about a lot of things. At -15% if it wasn't you, it was someone else saying the same things (tech_guy?) about people knowing...And people were right. We are down at least another 10%. What do you know?"

Bingo, Rhino.

The same "logic" was used by brokers and other morons to tell us that 5% down was the buying opportunity of the century.

I know that people who parrot conventional wisdom never make money

You're on thin ground here to say the least.

1. Saying "if everyone else is saying something, the answer must be the opposite" is what you say when you have no substantive pro-arguments.

2. I don't think 98% think the market will fall. If anything, sentiment has been improving the last few weeks with falling prices attracting hesitants and lower rates on conforming loans helping affordability at the low-end. Brokers seems to be slightly more emboldened to come on this board to talk the market up, certainly helped by higher open house traffic. I just don't think these factors outweigh the 3x more negative trends outlined in many prior threads.

"I know that people who parrot conventional wisdom never make money"

That you think that the market will tank another 20% is "conventional wisdom" just shows how much wisdom you lack. Plenty of folks calling this the bottom, sharpie...

"Saying "if everyone else is saying something, the answer must be the opposite" is what you say when you have no substantive pro-arguments."

Bingo.

crescent, I beg to differ that I have no substantive arguments. Markets move on sentiment, and right now, based on what I'm reading on this board, the press, and the paucity of deals out there, mkt sentiment is overwhelmingly negative. It is a natural human reaction to predict that things in the future will be a continuation of the present. So when all the headlines are negative (positive), the conventional wisdom is that things will be continue to be be negative (positive) in the future. That's where bubbles come from - that is the very definition of "buy now (prices have been going up) or be priced out forever (b/c prices will continue to up)". Right now people on this board are falling folly to the same syptom (on the downside) that people did during the bubble (on the upside). Undoubtedly they will be right for a while, because mkts, especially real estate, don't change on a dime. But you'll all miss the turn, b/c once it starts, you won't believe it. and you'll be in the same place you are now - living in a renter-grade apartment, hoping that some day you'll be able to get the place you really want.
The brave few who are out there in the mkt buying now have tons of inventory to choose from, have lots of time to negotiate and make their decision, and can borrow money at all-time low interest rates. Maybe the mkt will go down more from here, but it will then stabilise and move back up, and in the meantime, they'll come home every day to a place they love, instead of trolling chatrooms looking for others to re-assure them that some day they too will have a home of their own

> mkt sentiment is overwhelmingly negative

Yeah, you 'aint seen NOTHING yet. Market sentiment is NOT overwhelmingly negative. Aint even close.
Still folks like you AND SteveF AND Alpine in denial, and thats just here... there are far more out there.

Try again, though.

you know, there were putzes who said the exact same thing about stocks after we went down 20%....

printer, keep fighting the good fight. i would much rather have a healthy economy than a cheap apartment (although i would greatly prefer a real estate market that wasn't overinflated by cheap money, staggeringly reckless underwriting standards and cash given to financial wizards by a process that diverted massive amounts of cash from the less wealthy). i could afford to buy if the market gently corrected, i would take job security, a higher quality of life, and less pain for all any day over a crashed real estate market.

but thems not the apples growing on the apple tree. they're rotten to the core, and they're all we have to pick. printer, unless they can find some temporarily sustainable bubble to blow up (and God help us, truly, if they can), I really don't see how you could possibly think this thing will take less time to play out than the late '80s-late '90s correction. we've only just begun.......

You cant always get what you want. This isn't about good fights and bad. And printer, I love the classic owner 'you're just jealous cause you don't own'. What a joke. You are right, I am jealous of people who bought in the 1990s. They bought right as saved gobs of money as rents rose. Your problem is ego. You think its tough and cool to be the lone bear. This is, you are not the lone bear. There are plenty of bears. Saying the market will eventually start moving up again is wasted space. Of course it will. They you say bears will miss the bottom, implies you are calling the bottom. If you are calling the bottom, call it like a man. Don't say its tough and cool to be out buying and you don't care if it goes down then up...and then chastise people for missing the bottom (you are likely three years ahead of time in your assertion). Simple fact, prices can't rise till inventories decline, so maybe you should save your tough guy quasi-contrarian BS for when prices drop low enough to stabilize inventory. Only then will you have a prayer of being close.

Correction - loan BULL... There are plenty of bulls and apologists.

some people never learn...

1 month T-bill rates are negative, 3, 6, and 12 are <50bps. I'd say sentiment is pretty negative. I listen to more bberg radio than I should admit, and I can't think of a single, non-NAR economist or strategist or fund manager who thinks that things have bottomed out. The NYC real-estate mkt has undergone an unbelievable correction - let's call it down 25% in the past 6 months - that's extraordinarily quick for a downmove in real estate. I think late-80s, 90's was a more typical of slow decline.
I think people are overstating the effect all of this will have on Wall Street. Wall Street wasn't invented in 2000. Its been through all kinds of bubbles and bursts - this is worse than others, yes. The leverage will (hopefully) never return to the levels it had gotten too, but with less capital, margins will be higher. And plenty of new firms are already cropping in to take over business that investment banks are too afraid (or too hamstrung by legacy assets) to pursue.

Printer draw a line in the sand or stop talking. You either think the market holds at 70c on dollar or not, or close enough not to worry. The problem with 'close enough' is you have no monthly savings vs. renting at these prices to cushion your risk...Every bottom affords buyers that cushion. Study history. If I was getting 10% annual yield on my all cash purchase at prevailing prices, I might not care if we had another 20% to go.... But until then, why consider? Because there is a lot of inventory? That's a terrible reason.

"1 month T-bill rates are negative, 3, 6, and 12 are t invented in 2000. Its been through all kinds of bubbles and bursts - this is worse than others, yes. The leverage will (hopefully) never return to the levels it had gotten too, but with less capital, margins will be higher. And plenty of new firms are already cropping in to take over business that investment banks are too afraid (or too hamstrung by legacy assets) to pursue."

Again, not exactly sure how recovery equates with return to bubble prices.

This is your fundamental mistake (well, that and completely missing actual sentiment out there).

With less capital and less leverage, margins will be higher? That actually makes no sense at all. With small equity and lots of leverage, that is what made return on small equity so big. I don't mind differences of opinion, but printer just throws a bunch of information into sentences and thinks it makes for an actual argument. Further, if Wall Street has been damned back to the 1990s, there's no reason that 2005 real estate prices are fundamentally cheap. None whatsoever. Rates may be artificially low but compare borrowing today to borrowing at any time in the last ten years. I mean the opinion is a joke.

> crescent, I beg to differ that I have no substantive arguments...

'everyone is negative' is not a substantive argument because a) it's not true, b) 60% of people being negative does not prove the upturn is at hand.

The rest of your argument is this anomalous "you don't know, maybe the market bottoms" and you'll benefit owning. This is appealing to the emotional element again as for most of the island, it remains disadvantageous cash flow wise to own vs renting.

The only argument you have is maybe rates go higher. That will only hurt those looking for high LTV ratios in their purchase. It might help those willing to put above-average percents down in driving the asset price lower.

I don't buy the argument that every place is disadvantageous cash flow wise renting v owning. I'm not actively looking to rent or buy right now, so I'll have to take other people's #s - I'll choose a property that's in my neighborhood, and on that the great Rhino himself chose in a different thread:
http://www.streeteasy.com/nyc/sale/364607-coop-151-east-83rd-st-upper-east-side-new-york
which he said would rent for around $4500. If you net out the shenanigans with the maintenance, its an offering price of $842k. Assume a 5% discount off that price, though I would imagine in this mkt you could do better. Put 25% down, and you're talking a conforming, 5.375% 0 pt mtge (according to Manhattan Mortgage's website). Mtge payment of $3360, $2700 of which is interest. deduct 45% of that, and your net cost is $1485 interest, $660 principal, and $2200 maintenance - so just under $4400/month. Rhino says that would cost $4500/month to rent.

Arguing facts and logic with someone who picks a conclusion first, and then tries to find facts and logic to support is is usually a waste of time.

aboutready, "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."

Time is on your side. Quick answer to this thread's question is "no." Others on this thread, what is returning to historical levels? I have posted this question before on other threads. Bubble just burst? No argument. When did it start? What is the baseline of a normal asset appreciation rate over which this bubble represents the anomaly? And, finally, as someone else has pointed out, bubble corrections "over-correct," so even if one could nail down what the non-bubble past history of asset appreciations should have been, where is that bottom of the over-correct?

No question, there will be opportunities for the patient. Especially if they are buying only for investment, not for a place to live. I've already known of one excellent opportunity to pick up a coop at a bankruptcy-court-ordered auction (legal notice said it was not a foreclosure), and had to pass it buy because I hadn't the cash to go for it. There will be others. I'm not talking about the apartment of my dreams that suddenly came within my grasp because of lowering prices; I'm talking about an insolvent coop owner in a market with too many similar apartments for sale and no buyers, now being auctioned for 25% or less of the asking prices of comparable units. Smart vultures would swoop in, buy, sell again, swoop on others, etc. This can make people profits even though we're not at a bottom yet. People looking for a place to live and waiting for the perfect moment to buy, who knows?

I recommend checking out the charts posted on this page

http://www.vitaltrends.info/economy/ny-real-estate-market.html

We are going back to 2002 levels (if not early 1990s).

The data doesn't seem right... #1 shows 2002 prices being the peak...

maybe the dot com money bought right before the double-dip recession starts?

and also the number of sales only reflects the sales tracked by Trulia

There's still plenty of downside left...anything more than $750 (on the high side) psf for a 2BR, 2BA on the UES is lost money.

The real facts are black and white: It's macro-economically impossible for asset values to grow at a faster real rate than GDP over the long run, which basically means about 6-7% nominal rate. Based on that unarguable economic reality, and not the "emotional seller" fantasy, prices would have to drop 42% using 2002 as the baseline from the peak to be at normalized levels. That's roughly $700 per sq ft according to Miller Samuels.

In addition to the actual numbers, there are MANY articles that basically all agree that Manhattan is likely to revert to 2000-2002 levels. So, once again, according to Miller Samuels, that equates to about $700 per sq ft on the UES for a 2BD, 2BA.

Upper East Side
Manhattan
Co-ops Condos
Average Price Per Sq Ft
2000 - 2008
Yr Studio 1-Bedroom 2-Bedroom Yr/Yr Growth % (average = 12%)
2008 941 1,048 1,389 11%
2007 872 946 1,250 7
2006 803 902 1,163 33
2004 577 662 874 17
2003 517 573 744 9
2002 498 513 683 -4
2001 437 497 708 8
2000 385 449 657

The average should be closer to 6%, which means the market should adjust 6% for each year to return to 2002 levels (7 * 6% = 42%) and that doesn't even account for compounding.

...and I'm actually being conservative. Most 'experts" predict 50-60% declines.

So...is there any reason to bullish? NO! Even when the market stabilizes, it will not be "bouncing", "recovering", or any other term emotional owners want to use to make themselves feel better. Unfortunately, the best they can hope for is a subsiding in the downward spiral. After that, if history is any indicator, we'll likely flat line for quite a while. Combine that with drops in rent, and well, you get the picture.

well, printer, if you have to cherry-pick a listing where the ask is down 47% from last year and 34% from a post-Lehman October 2008, just to make a stretched own/rent parity argument (fully dependent on the interest deductibility which some people here decide not to use), you ought to know most of the ask market is not there yet.

Besides, you used a 5.375% rate on a super-conforming, which I do not think is reality. That manhattan mortgage you reference shows a 6.125% rate on a 30-yr fixed $631,000 mortgage, which raises the monthly payment $300.

I think that 151 E 83rd is a good price at $890,000, and so does the market if it's saved by over 80 users. If the liquid market for 2 bed/2 baths inside PS6 drops to $800 per square foot, it's a big win for buyers but it is not reality for many asks right now.

Something about that data looks wrong. Coops were like $500/ft in 2002, Condos were $700/ft. I need to find the article from the NYT. Or am I thinking 2001.

Cherry-pick a listing? I picked one that Rhino suggested. And when one buys a place, that's what you do - you aren't buying the market, you're cherry-picking the place you want to live. And that mtge rate IS reality, as is the cash you save by deducting the interest on your mortgage.
people who choose not to use interest-deductibility when comparing rent to owner-occupied housing are idiots. Unless they have some special arrangement with the IRS and only pay theoretical taxes. But as far as I'm aware, that's cash I pay to the IRS every other week.

I never said the market was cheap, and that everyone should be buying in Manhattan. All I ever said is that people on this sight seem to be completely unaware of the irony that their groupthink on the downside is exactly the same as the groupthink was on the upside. And just like they were right for a while before being spectacularly wrong, I think the same will happen here.

When anyone who says anything other than "the market is going to fall another 50% before its over" gets attacked, its a pretty decent contrarian indicator, that's all.

Do I think the mkt is at bottom? Probably not. But for purchasers with a long-term horizon now is a good time to buy - maybe for a single guy housing is a commodity, but for families its not - its an emotional purchase. And right now you have plenty of time to look around, investigate individual units and buildings and blocks to make sure that you're making the right purchase for your family over the long run. When the market turns, inventory will disappear, and decisions will have to made much more quickly - and decisions made in haste are often bad ones.

Once you say emotion you lose the debate. I mean if we wanted to price emotion on this thread, it would be Oprahs site. Yes, I found the best priced 2-bed in Carnegie Hill. And if I call the principal repay my monthly savings, its still a paltry 3.5% return on my downpayment. That sucks given the downside risk to that downpayment as an equity investment. Printer, stop throwing around terms like "contrarian" and "group think". You don't know how to use them. Contrarian isn't being one of 3 bulls out of 8 or so posters. Contrarian is buying a coop on Central Park West in the 1970s when the city is going bankrupt. Stop flattering yourself. Group think is actually what drives momentum, its what supports a continued slide in prices. Do you know of any real estate downturn that lasted one quarter? This has all happened since October for effs sake. Its a terrible time to buy because there is nothing but a misuse of the term 'contrarian' to support the argument.

> people who choose not to use interest-deductibility when comparing rent to owner-occupied housing are idiots. Unless they have some special arrangement with the IRS and only pay theoretical taxes.

That special arrangement might be keeping your job so you can deduct the taxes.

> When the market turns, inventory will disappear, and decisions will have to made much more quickly - and decisions made in haste are often bad ones.

I don't think so. I think the experience in 18-24 months or longer will be just like California right now. Sales volume rises a lot but prices continue falling. Shadow inventory and discouraged sellers who pulled listings or kept them off the first place come to meet the higher demand.

> But for purchasers with a long-term horizon now is a good time to buy - maybe for a single guy housing is a commodity, but for families its not - its an emotional purchase.

Appealing to long-term horizons is what sellers do when they have no short-term arguments. And I will leave the emotional purchasing to the idiots as will many on this board.

lowery, once again I agree with your post. I would generally be somewhere in between the "desire to buy" and the "desire to make a very good investment." I'm only falling into the latter category because I've seen what this has done to the older boomers, and as a younger boomer, I'd rather rent (because I don't plan on staying in NYC post-retirement), than take the risk. If I find a really cheap two bedroom condo I probably will buy it intending to gift it over time to my daughter.

But, having said that, I'm fairly certain that if you're savvy and you've done your research (and clearly I have WAY too much time), you can do well in a couple of years both from an investment perspective and from the this could be my home for 25 years perspective (or for me, the 15-year mortgage, conforming, perspective). That's what's been missing these last 10 or so years. Everyone keeps berating people for not buying long term, but many people couldn't. Should they have rented? Probably, but almost anyone will tell you that NYC's rental market sucks (but getting better by the day!!) Choices.

aboutready - Manhattan's rental market is harder to figure out than the sales market - with free rent and broker fees paid by owners, it's sometimes possible for landlords to disguise the real situation - nevertheless, does anyone seriously believe prime Manhattan doorman buildings will see rents half what they were in 2007? I for one do not. But I have always argued that rent-to-buy calculations get rigidly dogmatic when people bang too hard on them - after all, why shouldn't sale prices decline to the point where it's cheaper to buy with 20% down and a conforming mortgage than it would be to rent? That would evidence a "buyer" sentiment overly negative, just as people paying a million for a mediocre one-brm condo that would rent for under $4,000/mo. evidence buyer sentiment that's overly optimistic. People will step in and rent that vacant apartment in a white glove building for 25% under peak 2007 price before they'll buy a similar condo for 25% under peak 2007 price, IMO

lowery, 99.9% of the time I'd agree with you about the your view that there is no extreme downside to the rental market. Today I don't. That's why I think this market is going to sink harder than someone with cement shoes being thrown into the Hudson.

aboutready- thank you for that post... it made my nite...

> after all, why shouldn't sale prices decline to the point where it's cheaper to buy with 20% down and a conforming mortgage than it would be to rent? That would evidence a "buyer" sentiment overly negative just as people paying a million for a mediocre one-brm condo that would rent for under $4,000/mo

I don't think you're being symmetrical here. Buyers pushed up prices well beyond equivalent rental * P/E ratios because of easy financing and what sentiment can do with momentum to prices. The bottom of prices is not rental equivalence but some point well below equivalence, especially in a credit-constrained environment. When there is an expectation of further price declines, banks have even less incentive to write a fixed mortgage amount to a contemporary potential buyer.

A deflationary period (which we are definitely in right now statistically since rents are ~30% of the CPI calculation) is even worse for real estate prices since rents are falling and the value of the mortgage interest tax deduction is lower. The last thing one wants in an extended deflationary period is a fixed-dollar mortgage (banks and owners).

One could argue that real interest rates have actually risen in the past 2 quarters.

w67th, the number of times I have been truly amused by your posts is .. well... more than a few times. thank you for your fabulous spirit, and your knowledge.

"why shouldn't sale prices decline to the point where it's cheaper to buy with 20% down and a conforming mortgage than it would be to rent? That would evidence a "buyer" sentiment overly negative, just as people paying a million for a mediocre one-brm condo that would rent for under $4,000/mo. evidence buyer sentiment that's overly optimistic"

Yes yes yes. And meaningfully cheaper, yes. Like the 1990s. Rents can't collapse like values because values are simply way ahead of rents. Rents somewhat kept pace with incomes while values outpaced them by a factor of three. People can't get loans...especially all the people who can only put 10% down who pushed the condo market so high.

The Metropolitan Opera, one of the world's greatest has severe financial difficulties and has canceled several preformances this year as a result.
But no matter, RE here will thrive.
I mean people aren't attracted to NYC for the culture or anything.

47% More Pain For NY Real Estate?

3/30

Interesting report out of Deutsche Bank over the weekend, presenting hypothetical upcoming current-to-trough declines in real estate prices, based on DB's proprietary Home Price Appreciation (HPA) model outlook for the top 100 Metropolitan Statistical Areas (MSAs). While the full report should be read in its entirety, a good summary is the chart which demonstrates (in the right most column) the worst-case modelled downside to home prices in the 20 worst U.S. MSAs.

The top 5 MSAs where the pain will be most acute? (no real surprise there):

1. New York-White Plains-Wayne
2. West Palm Beach-Boca Raton-Boynton Beach
3. Miami-Miami Beach-Kendall
4. Fort Lauderdale-Pompano Beach-Deerfield Beach
5. Long Island Nassau-Suffolk

In summary: be very weary of snake oil salesmen telling you home prices have bottomed...

It seems beyond dispute that NYC real estate is in flux, with a mega move toward the downside a real possibility, ...but...can they be serious that Miami is still one of the most vulnerable. I'm NOT disputing that, because I don't know that market really, but I do knoow prices there have already taken a hit way way worse than NYC has seen yet, so if Miami is going further down that is amazing. Big Government DC might end up as the best RE market inthis country.

is the db report available for free on some weblink?

email crescent22 at ymail.com if interested in discussing a certain report

"Today I don't. That's why I think this market is going to sink harder than someone with cement shoes being thrown into the Hudson."

- sardonic snicker - your comment has the ring of truth................

You know, after reading this thread, without the usual diversions into computations of rent-v-buy of similarones, I came full circle to a feeling I long ago had - that 2002 prices for coops and condos in Manhattan were quite high, and pushing the outer limits of the 2002 economic reality..................

http://1.bp.blogspot.com/_pMscxxELHEg/SdIf4PVkCmI/AAAAAAAAE7w/BVqGq9PtDQk/s1600-h/CSselectedCitiesJan2009.jpg

http://2.bp.blogspot.com/_pMscxxELHEg/SdIgq-mi2xI/AAAAAAAAE74/wBebPtODZK0/s1600-h/CSPriceRentJan2009.jpg

Notice that NYC has only just now retreated past the prior peak price to rent/ratio from 1987.

yes, very easy to see, but in 87 mortgages were very different, and a few years after that peak the Fed cut mortgage rates, making it easier to afford to buy, at the same time that prices had already fallen - I appreciate what you're saying, but the most significant factors today are availability of units for sale and changes in employment - it's a bit like a tsunami, and altho one could argue the unemployment is (very) indirectly related to imbalances in rent-to-buy ratios, we're looking at sudden area job losses in fields that are not strictly mortgage-related - so what does this price/rent ratio help us in understanding? That all prices will reset to an equilibrium point? It's still a moving target - where will mortgage rates be? Could go higher than they are now? Where will rents be? Either in the bottom of the Hudson River or a little lower than now.

Things are going to get bad (50% off peak) or worse if interest rates rise (70-75% off peak?). They are raising taxes in the city too. Its just not a friendly world for people who make over $300k...and those are the people who have driven prices up for the last 15 years. Its not all doom and gloom. NYC can be more diverse and affordable at $300-400/sqft. There's nothing here contradicting $500/ft as the base case and $300 as the downside case. Another round of layoffs is coming to Wall Street. Most hedge funds are fighting a high water mark. The city wasn't a hell hole in the 1990s, it was just a place where hairdressers were buying one beds for $150k and friends of mine were buying studios for $60k.

"There's nothing here contradicting $500/ft as the base case and $300 as the downside case."

IOW, $350,000 for a smallish one-brm. Interesting figure, because I have always thought $350,000 is a vast sum to pay for a smallish one-brm, but it would be considered cheap today. I can't counter you with any argument. I'm still keeping an open mind, though. I still don't have a clue as to how many of the new construction condos of the past 5 years have been 10% or 5% down and questionable loans to people being too optimistic. We hear about condos being snapped up by foreign investors who pay cash. We hear about strict financial screening by co-op boards on the co-op side of things. Now the income class of $160,000-$500,000 jobs in "Big Law" and "Wall Street" takes a beating. We shall see how it shakes out. Whether it will be like subprime exurbs in California or whether the formerly priced-out lucky survivors of the meltdown come in and set a bottom or whether catastrophe never happens because Manhattan buyers really could afford these prices...... questions of the hour.

Well I mean you hit the two main demand issues. One is, how many people are not making money any more, either zero bonus for the near term or unemployed. Second is, if a bank will no longer give a 90% loan for a condo, you eliminate a huge population of buyers who had been feeding the condo market. Condo market falls, coops driven down. Yes, I mean $350k for a 600 sqft one bed in absolute terms is not a small sum.

Rhino makes a great point. You dont have to go back to the Ford to city drop dead days to get to 500 psf, only to the mid-1990's.
The city certainly wasnt a hell hole then. It was just more affordable.

$500 is 2002. $300 is the 1990s.

I think prices will rise between Q1 2009 and Q1 2010, co-op median per f2, as per all major brokerage houses.

There is only one New York.

Thanks for playing!!

Congrats to all buyers and those who are going to buy over the next year!!

HO, as per all major brokerage houses? which ones? the GS report, or DB? while i have mentioned having fun in this market, that would be in a couple of years, assuming the family still has gainful employment. i'm not playing, this is no game.

***We interrupt this discussion for a message from a deranged owner***

you didn't mean corcoran, et al., and this was a joke? not in line, though, with your usual posting.

The juiciest part of not owning here is the late 1990s... Wall Street was moving and grooving for three years (1996-1999), and real estate did not even begin to get frenzied until 2004. This idea that the current malaise makes a V and gets away, leaving buyers remorseful for missing it... Its just not how real estate works. Even if finance incomes are permanently lower, a more diverse, livable and affordable city is going to be great... Unless you're a forced seller with a permanent capital loss or haunted by the regret of a high monthly payment locked for thirty years.

rhino86, can you let people have their opinions? As soon as someone posts beliefs that are vaguely optimistic, you guys start attacking. People have a right to their opinion.

Rhino, largely you're correct. But there was a pretty big bump from around 1999-2000, although not comparable to later increases obviously. I remember my RE broker telling me that things had gotten fairly pricey recently in 2000, and indeed they had compared to 1996. It was slowed by the tech bubble burst, but then the Greenspan machine threw more coal on the engines and off we WENTTTTTTTTT.

uppereast, who said that HO can't have his opinions? what, we can't find them implausible? as someone who spent years being torn apart for saying that I thought there was far less real wealth in NYC than was meeting the eye, I can tell you that you can support a contrarian opinion or you can get out of the kitchen.

the latter is more appropriate for me, however. i am allowing myself just a spot of bitterness at the ugly comments aimed at my intelligence level because i was a woman and a former legal assistant. and one can't offer any "proof" to the contrary (intelligence, obviously, not gender), 'cuz that's not cool.

Uppereast, its not the opinion that is the problem, its the fact it is baseless and/or comes from an ignorance of history. Or its a shallow, hollow statement like yours.

Aboutready, I admit I don't have all the data... My main point was Wall Street and the economy was pretty strong from 1996 to 1998 before real estate 'got away'. I guess the other thing to ponder is without Greenspan would it have peaked in 2001. I don't know how we avoid high single digit returns for the condo investment buyer... Which is your condo one-bed 700 ft, renting for $3500 (minus $1300 in charges) for like $400k. Cash flow investors....not investors who bought condos to make 2% a year cash return and expected double digit appreciation forever.

Pardon my math...its more like $340k to earn an 8% return on cash. Assuming 1 beds still command $3500 and assuming 100% occupancy. Christ this city is toast.

Rhino, your point is still extremely valid, it's just a question of slight timing. It was ALL goosed by Greenspan, which makes it even more interesting, because the economy was relatively vibrant in the mid to late 90s, which would imply that the bubble of the late 80s was far worse, and would have had far more overhang, than we could possibly have anticipated. Or, it would have been normal for it to take a bit longer to recover given the fall.

when everyone discusses the percentages, no one discusses that price declines are not uniform. nor are price advances. prices generally don't, as a mean, overshoot. but individual apartments do, and often dramatically. we nattering nabobs (at least this one) are not necessarily saying that you'll be able to get all apartments for a certain price, just many of them that need to be on the market.

You think there are really people who think any of us are saying all apartments at a certain price? There's no way to talk about a market other than to talk about averages. Beyond that, I mean yes, marginal neighborhoods should fall more (unless they underwent real transformation, which means in some cases they will fall less)....Condos should def fall more, as they were the leveraged play (5-10% down) and there are also more empty, with developers possessing less scope and inclination to decide not to sell. We probably see rental conversions en masse driving rents back to 2003ish levels. Also as banks hire less and natural outflow of families happens... I mean its really interesting. Yes, there is only one New York, but at what premium to other cities can it trade. The "spread" data might inform the guess. Back when Wall Street was just another career path for education (and some uneducated) people....where did NY trade relative to Boston, Chicago, LA, etc.

Rhino, no, but many people seem to think that the price bands are much tighter than they really are. And there ARE many posters who don't think that distressed sellers will make a huge difference in this market, so I guess on some level yes.

At some point being NYC can be a negative. Let's hope that doesn't happen again.

BTW, I think your rents analysis is quite optimistic. Developers went ahead with overpriced rental buildings on the anticipation of a demographic need that would have existed but for this downturn. Plus, a tremendous amount of extra space, hotel, commercial and residential, will have to become something. Who knows what it will be when the banks decide that 50% of something is better than nothing. You're right, it's downright fascinating, kind of like watching the movie Brazil.

Also, Rhino, what I was trying to say not so cogently (damn that wine with dinner), is just because the market might eventually be 45% off, doesn't mean that at or near the trough you can't get something for 65% off, and not necessarily a short sale or bank-owned property.

My rent analysis is optimistic or my rent levels are optimistic? I mean maybe 2002 rent levels are optimistic.... Its just if I start using 2002 rents and reasonable ratios... I mean maybe if decent two beds can go from $1.3mm to $850k in 4 months then they can go to $400k...9-10x a rent that goes from $5000 to $3500. We really don't know where the demand from people in industries who years ago were priced out of the market of raising a family here sets in. When 2beds went over $800k people couldn't think hard about it a lot of times... If they cross below $600k then where do those folks choose to live. Will depend on crime!

Rhino, I know it's tough to extrapolate, so let me just direct you to a web site that may give you some idea (it's not the best, btw, lawshucks probably is and there is another site just started that lays it all out on a grid but it's very incomplete at this point). Go to www.abovethelaw.com and check out what's happening to this year's starting (or non-starting) class. And the summer class. And next year's class. This is but one example, but it has been a very highly paid example for youngsters in the past 10 years, Numerous law firms are paying (some not) to have their associates not arrive this year (although the pay is for finding a not-for-profit job and the pay is less than half of a regular salary and you don't get advancement credit for the year). Others are just deferring start dates until late 2090, or 2010.

I don't know what the figures are for the banks, in terms of next year's and this summer's hiring, but it can't be good. Then there's media, advertising, etc. etc. etc.

Rhino, I haven't read every detail of this thread but I don't get your view that NY re didn't take off until after like 2004. I have been in and out of NYC several times while working overseas. When I was transferred back to NYC in early 2000,I rented a 640 sf apt at 270 w 17th apt 12E for 2900$ per month , but the owner offered to sell at 380,000$. I rented. All my friends said it was a nutty price to pay. The owner sold for over 700,000 in 2007 or 2008. My point is that people percieved the market as very hyped even in 2000. And actually I think it was...returning to NOMINAL prices of 2000 strikes me as reasonable (because it would be below real prices of that year).

You are making my point... price relative to rent didn't inflect upward until 2004 or so. The 11x rent he offered you was pretty reasonable. If I guess that the maintenance was $1000 or so, a cash buyer could have earned 6% on their money. To earn 6% on their money today at $3500 and prob a maintenance of $1200, the value would have to sink to back down to about $460k.

Now do you get my view? My view is that relative to rent (and in some sense in absolute terms), real estate didn't get nuts until 2004, which was eight years into a Wall Street upswing.... As such, this idea of 'missing the bottom' in real estate by being as pessimistic as I am (and others are) is a bunch of bullshit.

Take your point. That apartment I had is an EGREGIous example of the rent/price out of wack in that apartments of that size were listed for somewhere between 3200-3500 last fall, up roughly 15% or 20% max in eight years ,,,while apartment prices asked had doubled. It's a mediocre building and is my sanity check on NYC. I think that apartment should sell for 380K now...time will tell.

One cannot even begin to talk about a bottom in this sticky market until the avalanche of bad events/news has filtered into it.

Since you are discussing rent as a reference point for determining prices, what if rents decline in real terms due to reduced economic activity, greater geographic area (supply) deemed manhattttan-equivalent (ten years ago Wmburg wasnt on the map in any significant way), and greater supply within each geographic area. Would that make prices go even lower than back to the pre-wacko ratio.

about: you didn't mean corcoran, et al.,

Yes, the objective measure should be Corcoran, BHS, Elliman Q1 2009 median price per f2 compared to median ppf2 Q1 2010. Co-ops only, below 96th street. Real apartments real people buy. You heard it here first.

Bigger apartments should start to trade, for one reason. Tons of cash lying around. Once people realize the world isn't ending and a meteor isn't going to strike the earth, I say prices go higher.

Remember, fat tails happen in both directions and optimists are always right eventually. :)

And yes, there is only one New York. The new One World Trade Center is going up, have you heard? Not gonna keep us down forever.

C'mon, its spring. What's with all the Debbie Downers here?

optimists are always right eventually? yes: until the pessimists are right. what an absurd argument.

I think prices were already out of whack to purchase prices as early as 2000 or 2001. In that period, the frenzy of buying with easy mortgage money had already begun. It might be interesting to look at what going rents were at around 2000. My hunch is they were MUCH lower than today, even after rents have retreated a bit in the past 12 months.

Layoffs at Big Law are not only of lawyers. Support staff are getting whacked too. This is why I kind of rub my eyes and scratch my head when people express a sentiment about, well, the big-bucks jobs are going to evaporate, but real estate prices will come back to normal for artists and creative types and NYC will be a really cool place. I prefer to hear optimism of any sort, but that particular scenario doesn't gibe with my memory of past downturns. The lower-incomed New Yorkers don't start moving into Classic 6s, or even back into low-rent cold-water flats in Hell's Kitchen, when the economy goes south. They get hit even harder.

But no question - I am "bullish" on New York as being the most dynamic, most diverse, and largest city in the US, and I am confident it will regroup and reinvent itself. Unlike other posters here, I also think "Wall Street" will regroup and re-emerge, that it's fantasy to presume that big salaries and big deals and convoluted ways of generating paper profits are a thing of the past.

Going rents in 2000 were actually not much lower than today. They were much lower than say pre-Leh 2008. A lux one-bed was $3300 in 2000, it went to $4000 in 2007 and now its $3500. And maybe in between say 2002 you could get it for $2700. 2002 was strange because money was so easy that buying was stealing all the demand from renting even tho the economy was crappy. $3300 was a big enough number that with cheap money it was worth buying for $400k. Then it went to $700k by 2006 and the rent only went to $3800.

Rhino, there are two numbers you need to look at for our real estate market. One is, obviously, rent to buy comparisons, which most admit became increasingly crazy. The other is the affordability factor. Both rents and owning became prohibitively expensive. The bubble affected both parts of the market, just more so for owning. There may be a certain ceiling to rent prices, above which few people will choose to rent, but that is just conjecture on my part.

Rents correct much faster than sales. Leases run one to two years, very liquid.

hr: optimists are always right eventually? yes: until the pessimists are right. what an absurd argument.

Nah, pessimists get heart attacks too soon and never live long enough to enjoy it. :)

It's abundantly clear that the only ones having heart attacks now are homeowners.

Has anyone read Taleb? Pessimists make better risk analyzers.

in general,over the last few decades ,participants in manhattan real estate have done great,while renters 'MISSED THE BOAT'.today, there's some giveback.trying to time this market is smart,but a gamble.the dilema now is what's the "best",risk/reward thing to do today with your capital,over an investment period of say,6 years.my answer is A HOME PURCHASE TO LIVE IN.[doom and gloom onslaughts,notwithstanding}!

...everyone was looking for the golden goose...instead they got the black swan...

Uppereast: you're a broker. You're not someone looking to buy.

The chances of NYC RE going up in the short term are as much as Dubya getting re-elected in 2012.

Over the last few decades, people who bought when it saved them money vs. renting did well. Those who paid for the priviledge of owning did very poorly. I mean saying 'generally over the last few decades' is asinine on the face. How did people generally do buying stocks? Honestly stop making it so emotional, and sanity check purchases with the idea of buying a place and renting it out... If you can make a good return its worth it, and this is whether you plan to live in the place or not. Its just not a good return today. And at the peak, it was barely a return at all.

Rhino - I'm still waiting for confirmation of your claim that 5th avenue co-ops traded for $1 in the 70s. It smells of Urban Legend to me, but I stand ready to be corrected. And I know YOU would never post baseless facts.

Was that Rhino? I thought it was 10022. I too have heard the story. I think some owners may have sold apartments for $1, but the buyer had to pay all the back-owed monies. But that's just what I had heard over the years, I don't have a source.

Apologies to Rhino - he and 10022 seem very much on the same page, I get them mixed up. $1 + the assumption of liabilities is believable, but is significantly different than $1 outright story that people have spread on this board.

I know I posted this before, but since people keep talking about the '70s and prime Manhattan coops selling for $1, it bears repeating:

http://www.mcny.org/exhibitions/current/photographs-of-the-South-Bronx.html

We are not back there again yet.

I think one of the core problems with the bulls/apologists, is you are not viewing the market in the context of the current and peak valuation. Given the peak, you don't need this 1970s style crime ridden Manhattan to see a much deeper correction that 30%. The level of unaffordability, low cash returns, and high price/rent ratios of this peak cannot truly be compared to any other point in history. Neither can we compare the easiness of money that drove it. Its a lot like the way the stock market traded at 40x EPS in 2000, crashed, retested the same levels, and crashed. It could take us 10 years to get back to 1500 on the S&P 500.... That would give you 20 years of zero returns beginning at the 1999 peak. I honestly think the bulls on NYC need to really consider 2007 NYC real estate in that context. 35x price to rent ratios are like the 40 P/Es of 1999. To say that kind of investment is going to 'work out long term'.... its like saying buying stock in 1999 is going to work out long term. Its just not. It could be a zero return.... Maybe that is ok for people if their after tax monthly payment is 'around' what rent woulf have been. But if that's ok then you shouldn't be engaged in a blog designed to talk about real estate in an investment context.

Stock market is starting up, and soon real estate will follow.

Bears get to have their silly fun for a few months.

So many people on this thread clearly want to buy, or are having their Significant Other pushing them to buy, and they are doing all the math they can to resist.

Gonna be a lot of buyers soon, from this thread alone!!!

Anyone one want dibs on Rhino being the first one?? :)

I bet he has a kid soon, and buys!

I do get your point, Rhino. I don't think that will translate into $1 Fifth Avenue coops, though. And the talk of the '70s that keeps surfacing seems to be predictions of a flight out of the city, a return of high crime and chaos, deteriorating quality of life. To get back to the '70s is a much bigger change from the present than people realize. Prices.. I have to agree with you that it's hard to see what would make them go up. We compressed decades of price appreciation into less than one decade.

Happyowner its a good thing to be an optimist from a personal perspective, but without backup it just doesn't really have a place in this conversation. I'm not sure what's silly about -30% and falling. Its as though a bunch of people are talking about a market...And you are talking about 'market', your friend from childhood. I suppose its been silly fun while the stock market plunged 60% too. I'll admit I have looked to buy all along, especially before the world imploded. Now that it has, it seems silly to call a bottom in five months with things dropping so quickly, especially with the knowledge of how cheap things can get in a historical context. I'll look when we're down another 30% on the 70c = 50% off the top. At that level, with low interest rates, the arguments about 'the long term' might actually hold up.

Lowery, I am not sure who predicted $1 coops on Park this time around. But as rents falls and tax abatements roll off (or people at least price as though they will), the charges and taxes on some of these condos is really going to squeeze.

R86: Happyowner its a good thing to be an optimist from a personal perspective, but without backup it just doesn't really have a place in this conversation. I'm not sure what's silly about -30% and falling. Its as though a bunch of people are talking about a market...And you are talking about 'market', your friend from childhood. I suppose its been silly fun while the stock market plunged 60% too. I'll admit I have looked to buy all along, especially before the world imploded. Now that it has, it seems silly to call a bottom in five months with things dropping so quickly, especially with the knowledge of how cheap things can get in a historical context. I'll look when we're down another 30% on the 70c = 50% off the top. At that level, with low interest rates, the arguments about 'the long term' might actually hold up.

Er, ok, whatever.

Betcha you buy before 2009 closes out the year.