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

"Er, ok, whatever." Now you're just being a childish cunt.

very interesting. not something that would make me eager to buy.

"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." Yes, it will squeeze, especially the rolling off of tax abatements. We're nowhere near the point, though, where the only way a person could escape a crushing burden of back charges in a low-rent environment would be to sell their prime Manhattan coop for $1. Even today, if someone in one of those apartments were to list their property at 1/2 of peak price, how long would it take to sell? Now how about 45% of peak price? 40%? 35% 30%?

You (and others) brought up an interesting point with plummetting rents. My memory is not perfect, but I thought through all the recessions in NYC I've been caught up in the middle of and I still remember most rents steadily increasing. I was not here in the early '70s, but by '79 or so Manhattan rents were already on a steady climb. The difference is that rents were under $300 a month in the Village, and $190 a month got you a place with no heat in Hell's Kitchen, a new highrise on the UES cost $500. That was before the days when builders got tax breaks in exchange for keeping rents in new construction at artificially "low" rents like $2,000 a month.

Lowery - you are correct. And it wasn't just rents that were rising in the mid-late 70s. Co-op prices rose sharply as well. That's right - even w/urban flight, the city's fiscal crisis, the energy crisis and stagflation, co-op prices ROSE.

No one is arguing they won't rise again. The question is from what level. I mean to compare were we are in terms of valuation vs. the trough of the 1970s is silliness.

When did I say that valuations today are better than they were in the 70s? I know its easier to make false statements and then argue against them, but humor me and try to respond to the actual statements at hand.
This thread was started with people saying that with all the headwinds out there (economy, credit, job losses, rising taxes, etc.), prices couldn't possible rise over the next 12 months. And I'm pointing out that in a previous era, also with terrible macro trends, prices did in fact rise, so it is possible for that to happen now. Not such a complicated argument.

Your response reveals your lack of depth. In order for things to rise in the face of bad fundamentals, they need to already price the bad fundamentals. Actually they need to price worse, and then things need to turn out "less bad". You really don't get it, do you? 2004 price levels do not reflect current reality. That is why, oh thick one, the trajectory is down.

Seriously, do you not realize that in order to compare one period of time to another, you need to bring valuation into the argument somewhere....Or do you not understand that?

Bears, like you, by definition never think the fundamentals are priced into the market - that's why even if prices drop another 25, or 50 or 75%, or whatever amount you think they should to reflect 'fundamentals', you still won't buy - because to get to that the levels the fundamentals would have deteriorated further, and you'll move your goalposts. In simpler words, so you can understand, if prices ever hit your level you'll be pissing in your pants. Face it - you'll never buy, and that's ok. Just stop pretending.

This site has a ton of listings of 1BR's on the Upper East Side for less than 450K. In the not-to-distant future, I bet you will be able to get a nice 1BR in a good (but not the best) UES nabe for 375K. Hang in there, it's coming.

"That's right - even w/urban flight, the city's fiscal crisis, the energy crisis and stagflation, co-op prices ROSE"

Printer - you are being intellectually dishonest here. The only reason they rose in the 70s is b/c there was little new development and many existing buildings were razed to the ground - i.e., hundreds of thousands of units WERE TAKEN OFF OF THE MARKET, reducing available inventory. The EXACT OPPOSITE is occurring today - thousands of new units are coming online and inventory is skyrocketing. Try again.

printer i AM a buyer. prior to 2004, I owned for 14 out of the 15 preceding years. i've emotionally wanted to buy, quite desperately earlier but i've gotten over it and allowed the economist to rule over the potential homeowner.

do i think the downside is priced in? not on your life. i see some traders making some money on thin volume whenever the market can be goosed and whenever it thinks the government will allow the taxpayers to pay for the shit that we call banks. i see moody's downgrading (welcome to the party, ratings agencies) $1.7 trillion of corporate debt the first quarter. i see pension funds that have just been given a reprieve by the market but that will implode shortly. i see insurance companies other than aig who used cds as an alternative to reinsurance. i see credit card charge offs at over 8% and now projected to be over 10% within a year. mostly i see information that continues to surprise even me to the downside. so to answer your question, no i don't think the geniuses have priced all of this in.

Printer you don't determine what is priced in by the % move from the top, you define it by some metric relative to history...Like cash yield on a buy/rent scenario or price/rent on an owner occupied scenario. I don't see why I'd be pissing my pants. I look in the 1990s, I was just a kid with no mean. The city was great with low crime and the economy was strong. There was nothing to be pissing about other than saving hundreds of dollars off renting...PRE-tax and INCLUDING principal repay. You just don't get it...Still.

BS - if razing existing buildings and reducing available inventory caused an increase in co-op prices, then please explain why Detriot's housing market isn't skyrocketing as we speak?
It's not like they razed co-op's on Lexington and everyone moved west and bought on Park. They razed decrepit places in the outer boroughs - I hardly doubt those (subsidised) renters then moved on down to Manhattan and bought co-ops. Your argument is ridiculous - the facts are the facts, prices went up.

because jobs are leaving detroit, just as they're leaving manhattan.

"Your argument is ridiculous - the facts are the facts, prices went up."

Printer - I see you didn't major in economics in college, did you. The fact is that the ONLY thing that determines prices is supply and demand. If you reduce supply and demand remains constant, prices go up; if you reduce demand and supply remains constant, prices go down. See how it works? So, what is happening today? Demand is falling off a cliff and supply is rocketing upwards. What do you think that means for prices? What could possibly reverse this trend in the near term? Face the FACTS, printer - you are living in a dream world of your own creation.

Rhino - now I get it - you didn't pull the trigger in the 90s, have been paying rent all these years which could've been going to pay down your mtge, and now your praying that prices come back to those levels - I thought the BITTER RENTER was some mythological construct of petrfitz, but now I see you're the real thing.

There's nothing really bitter about graduating college and not having any money... then going back to business school out of town in 1999, coming out in 2001... But you have definitely touched all the hallow bull arguments...emotional purchasing, otherwise known as "I am wrong, I just don't care", renter jealousy, the old "phantom contrarian" - suggesting because prices fell 25% that now everyone in the world is bearish and therefore must be wrong.

What is your interest in being here? So you own, and you can make your payments, and hopefully its your final residence... Why do you care up or down? Is it an ego thing? Did you buy late in the cycle and need to cry "long term" to feel better about the buying opportunity - better by the minute - that you have to watch?

BS - absolutely I did not major economics - those that did are the most boring, uncreative, uninteresting people in the world. I don't know the technical term for this, so I'm sure I'm getting it wrong, but I think you need a closed system for the supply/demand to have to have that relationship. They could build 1mm houses in Atlanta and offer them for $100k - it'll have a microscopic effect on the Manhattan market. And in the 70s, destroying properties in the South Bronx certainly did not increase demand in Manhattan - its such a stupid argument you are trying to make, I don't why you are bothering.

At any rate, supply and demand don't necessarily have the relationship you say is the ONLY determinant in prices - go back to late 2005/2006 in Manhattan - inventory ROSE, yet prices ROSE as well. I'm sure you'll have some reason why that was exceptional - can't get those pesky little things called facts get in the way

Supply and demand aren't the only things that determine prices? WHAT?!?! Ok, I will go back to 2005/2006....supply rose and prices rose....Hmmmm, give me a second to look this up online. Maybe I can find the factor. This is tricky. DEMAND was RISING at A FASTER RATE. YOU ARE AN IDIOT.

"And in the 70s, destroying properties in the South Bronx certainly did not increase demand in Manhattan - its such a stupid argument you are trying to make, I don't why you are bothering"

Um, moron, did I say destroying properties increased demand??? No, I said it DECREASED SUPPLY - are you really as dumb as you appear? Jesus.

"go back to late 2005/2006 in Manhattan - inventory ROSE, yet prices ROSE as well"

Dude, you are SO CLUELESS. Rhino86 supplied the answer, dunce. Seriously, if you are this much of a clueless fool, you have no business investing in anything. Goodbye and...goodbye.

BS some of the things coming out of printer's mouth are making me think that maybe he's baiting us for the sake of it. I am dumbfounded that someone could talk about supply and demand in one sentence and then one sentence later basically forget demand.

"BS some of the things coming out of printer's mouth are making me think that maybe he's baiting us for the sake of it"

Well, if so that's pretty sad - anyone who would do such a thing seriously needs to get a life. Whatever, I'm finished interacting w/ this person.

whoops, walked right into that one. but i still don't understand the argument that reducing supply in the south bronx affected the supply/demand equation in Manhattan - makes no sense.

That's funny, because I don't understand why falling incomes and employment in the financial industry as well as rising supply means Manhattan has a positive outlook from here just because values fell 25%.

When will the RE market in Manhattan and/or the rest of NYC reach bottom or near it?
Probably when all these new developments all over the city resort to auctions to sell the overhanging inventory and avoid bleeding carrying costs.
I think that happened in 1990-91 with auctions all over Manhattan.

http://www.condo-living-west.com/nyblog/2009/02/news-flash-new-york-condo-auctions-and.html

Yes of course I'm bullish.

The equity market behaving like it has in the past 18 months, real estate is now a solid alternative to stocks:
When economies teeter, investors often run to hard assets such as gold -- humankind's historic "store of value." Yet gold's value is measured not only in ounces but also in the intangible fear that surrounds its price spikes.
When it comes to hard assets, there's perhaps no greater shared sense of value from Mongolia to Montana than for land and a dwelling. And in U.S. history, there's never been such a fire sale on our housing stock.
The Great Depression exacted a heavy toll on home values, but there was nowhere near the inventory flooding the housing market as in the past year. The reason: A collapse in home prices, not stocks, triggered this meltdown.
Of course, some would say foreclosed-home buyers capitalize on others' misfortune. But the sooner we clear the massive, nationwide inventory of unsold homes -- which many economists argue is a key to recovery -- the better off we'll all be.

And another significant reason, when planning for long-term investment vs short term like watching stocks trade daily, real estate is an investment well-suited for long-term investors:
Even in the best of times, the stock market looks out six months to a year. Right now, even seasoned pros can't feel the bottom of the muck we're in.
Many retirement savers are uncomfortable with their nest egg tied up largely in stocks. That's just the direction where the system of IRAs and 401(k)s -- which also advances Wall Street's interests -- shepherds them.
Real-estate cycles generally run in decade-or-so swings and this one may not yet have neared its bottom. Housing values could drop another 10% to 20%, but the stock market also could drop further and take a decade to well surpass its previous highs.
Especially for those in or near retirement, buying a property that produces rental income that's likely to increase with inflation is as sound a long-term investment as any TV commentator or investing guru might offer.

No one denies real estate can be a great investment...How are you making the connection that right now Manhattan real estate is a great investment at the price sellers will currently accept? And stop talking about Manhattan coops like they are some holy store of value. I mean let rents bottom, let inventories peak and start rolling befor you talk like this. Let them be cheap by any historical measure. You bulls are all such dopes.

Additionally, right now by buying real estate, you'll be purchasing a significantly undervalued asset, especially for investors willing to hang on to a property for five years or more. Residential real estate today presents a tremendous opportunity to do just what investors ideally do -- buy low and sell high.

For folks like Petrfitz, real estate can be a steady income generator.
At a time when companies are slashing stock dividends at record rates, retirees can't be assured of that income source. And with government bonds paying a pittance in terms of yield, that fixed-income stream is running mighty shallow.
Income from a rental property bought with a self-directed IRA flows back into the retirement account. The IRA holds title to the property and the income it produces can be directed into all manner of investments typically held within an IRA, be it stocks, bonds, mutual funds or money market accounts.
On a percentage basis, that income can be two to three times higher than today's fixed-income offerings even after paying expenses such as property taxes and insurance. Meanwhile, the accountholder can eventually reap the potential appreciation of the underlying asset -- the property -- that the IRA owns.
For retirement savers needing to fund a child's college costs, a rental property held in an IRA also can be a valuable source of funds. While money taken out of a traditional IRA is subject to income taxes, it doesn't face early-withdrawal penalties if used for higher-education costs. And while financial advisers caution against using retirement funds to pay for college costs, the IRA owner still has upside potential on the property to count on and the income in years ahead.

Maybe so in other parts of the country. I am not sure how with rents falling you could call Manhattan undervalued. Is there an intelligent bull around with a decent argument?

And to be even, for the other side of the equation, major stock bulls like stevejhx who strongly encouraged people to buy stocks last year (remember: Real Estate is a Bad Investment: http://www.streeteasy.com/nyc/talk/discussion/3410-real-estate-is-a-bad-investment: The S&P 500 increases at a real rate of 8.0% per annum), there's something in it from your perspective too as real estate can be a safer means to play the stock market than losing 50% like stevejhx did or more like 95% because he used leverage.
For those who don't want to abandon potential stock-market returns, a rental home owned in an IRA still affords them the ability to invest in stocks.
Rental income funneled into stocks or stock mutual funds today will be buying shares at sharply reduced prices. Directing the proceeds of each monthly rent check into stocks or mutual-fund shares accomplishes the same "dollar-cost averaging" strategy that occurs when employees steer a fixed amount of every paycheck into their 401(k).
Over a 10- to 20-year period, the return that the rental income produces if plowed into stocks is rich icing on the cake, coming on top of the return provided by the rental income itself.

And ultimately, there's also the opportunity to be tax advantaged - whether you are counting on the marginal rate or the effective rate when doing your typical equations, you should also look at the ability to flip real estate with no tax bite. Proceeds from selling an IRA-owned home roll back into the IRA without facing capital-gains taxes. To the contrary, an investor who buys and resells a property within a year with nonretirement funds faces a capital-gains levy.

"No one denies real estate can be a great investment."

Rhino, there are people here who espouse that theory.

"No one denies real estate can be a great investment."

Huge difference between can be a great investment and is a great investment.

Baseball cards are a pretty lousy investment, cars are a pretty lousy investment, but if you pick the right ones they suddenly look like great "investments".

But, as a category, residential RE has proven to be fairly lousy investment over time. This was the focal point of Shiller's analysis, which debunked YEARS of old wives tales.

I'm pretty bearish on NYC real estate, but I don't actually believe it is sound to evaluate investments 'over time'. I may draw arrows for 'market timing', but I think you can buy valuation with a 10-year time horizon. Real estate was terrible from 1987 to 1998, and stocks were terrible from 1999 to 2008.

The thing real estate has over stocks if bought well is leverage and a lack of margin calls if you are making your payments. This has a flip side. All the genius of selling stock for your downpayment in time to avoid -50% on stocks and catch -200% if its a 10% downpayment on something down 20%...I think to call making money in real estate an old wives tale is not really sound. What we need are high interest rates to truly kill real estate in manhattan in an epic historical bottom type of way.

PS: Emerging markets stocks were very very expensive when Steve hyped them. So were stocks in general. But at the time Steve bought them, the money would be deep negative if buying an apartment was the alternative use.

rhino, you said it's easy to time real estate today - you're right - good bet buying RE in one year will cost less than it does today - I'm not so sure about the rents, though - there are good opportunities to rent right now - will be more in the near term - but eventually when rents do turn around, they are merciless

I agree. market timing on stocks, I'd tell most folks to avoid.

But when talking about buying your house - which I say is not an investment - timing of market makes sense... especially when you can weigh cost/benefits clearly, and renting can often be cheaper (and buying has been at times). So, maybe that isn't "timing" per se, but you are able to make smarter decisions based on factors.

Then, on top of that, I think you CAN time RE. Not perfectly, but you can pick up on bubbles... many did. And you can wait until they deflate.

Unlike stocks, which take info into consideration fairly quickly (if not always correctly), real estate is slow, not liquid, and prone to inertia.

The same mechanism that allowed the bubble to get SO big is what will allow folks running the numbers right to buy at an effective discount if they choose (AND have cheaper carrying costs while renting and waiting).

Stocks (for the long term) and not that hard to time. Switch the auto-invest feature off when they are trading above 15x EPS and switch it back on when they are below. Equities don't provide equity-like returns if you buy the stock market over 20x. Lesson learned the hard way twice in the last decade.

Lowery, I am not sure when rents will turn up....But you dont really time rents do you? Its just the default position if you dont own.

market timing on stocks

It's easy.

Don't buy when P/E is above 15, P/E of 10 should be a winner long term. One can discuss about trailing/forward looking E of P but more important is not to buy now LOL

Same situation is with RE.
- Transaction cost is MUCH higher, so take that into consideration.
+ huge leverage like trading the ES futures :-) cam ruin one, so low entry price is most important

Otherwise play for Momentum
go long RE when there is clearly a strong upmove - don't see that happening for next 5 or so years

I'm bullsh*t-ish on RE in the next 12 months.

"market timing on stocks
It's easy.
Don't buy when P/E is above 15, P/E of 10 should be a winner long term. One can discuss about trailing/forward looking E of P but more important is not to buy now LOL"

Doing this consistently, you would have lost a LOT of money several times.

I agree is is doable, but not for the majority of folks.... and CERTAINLY not anywhere near the ease of doing it with real estate.

I don't think we're saying buy stocks all at once at a point in time. Sure buying at 10x sucked in 1981 because they went to 6x! Although on a 5-year look it was probably still good given the rally that followed. I don't think there is anything easy about real estate other than that you don't have to look the value in the fact every day. I guess the easy part is you shouldn't buy it unless your unlevered cash return vs. renting should be reasonable. I guess what reasonable is can be tricky.

I guess if my $5k 2-bed was offered to me (with a maintenance of about $1900) for like $600-650k, I'd have to consider it because it would be a 6% after-tax return (pre-tax 10%-ish). That would probably be 60% off peak for a comparable coop.

There are some interesting studies out comparing purchase of stocks vs. buying bonds.
Surpriose, surprise
bonds beat stocks

I will try to find link

http://www.investorsinsight.com/blogs/thoughts_from_the_frontline/archive/2009/03/28/why-bother-with-bonds.aspx

this is a momentum market

On the East Side prices for all sizes of apartments were substantially higher than the second
quarter of 2003. Three-bedroom units posted the largest increase, rising 35% in price over
the past twelve months. Apartments located between Fifth and Lexington Avenue from 59th
to 79th Street were particularly strong, rising 50% in median price to $1,250,000.

If we're comparing to 2003, how is that momentum?

I don't doubt that at all. The windows of time / valuation where stocks outpeform bonds are probably much more rare then people appreciate. I read the commentary on Hussmanfunds.com - it's pretty good. The problem is the equity industry couldn't exist if it admitted there are probably 2-3 good years out of ten where your 401k should be averaging contributions into stocks, 2-3 where you should be selling, and for the rest of the time not be involved. Ed Easterling wrote a good book called 'Understanding Secular Stock Market Cycles'. He looked at returns over rolling 20-year periods.... lo and behold only 1/4th of the time would there be a reasonable expectation of stocks returning 10%+ or something close.

"As I point out over and over, the long-run, 20-year returns you will get on your stock portfolios are VERY highly correlated with the valuations of the stock market at the time you invest. That is one reason why I contend that you can roughly time the stock market."....This dude is dead right. Does he say anywhere at what valuation level is equity generally a better bet than bonds?

Interestingly enough, Shiller did the long term PE analysis and found that stocks were cheap at 6500... of course, straight PE measures said they were expensive.

Shiller does a trailing 10-year earnings adjusted for inflation, I think. And I am not sure if he says its cheap under 10x or under 12x that number. I mean conceptually I don't think there was anything wrong with flipping the auto-invest on at 900 on the S&P. Obv its disappointing not to get all your money in at 670 on the dime (or another future low), but on the trendline EPS bases people use its not bad in this neighborhood. Question for someone smarter than me is are bonds still better?

As of the end of February we calculated the Shiller 10-Year Real Average PE to be 12.77. That puts it in the second quintile of historical level. (Which is to say there has also been a PE quintile lower than the current quintile.) So valuations are, indeed, moderately below long term historic levels - but not screaming cheap.

All in all, a decent time to be fully invested at an appropriate stock/bond asset allocation.

(The lower the PE quintile, the higher the subsequent three, five, and ten-year returns from stocks have been historically. And the r-squareds on this particular signal are quite good.)

"Lowery, I am not sure when rents will turn up....But you dont really time rents do you? Its just the default position if you dont own."

You know what you're doing, but I'm just stating that I don't agree with your (or was it someone else) forecast that rents will sink to the bottom of the Hudson and not come back up. I am very interested by all these rent-v-buy discussions (except when people get nasty and personal). I was motivated to buy the first time not because it was cheaper to buy than to rent (it was a little more expensive to buy, even after tax savings), but because rents had always gone up since I graduated college, and I wanted to pin down my costs. Later I found myself in the position of envying the renters, because at one time I owned a property under water and was ready to move up to a better apartment but didn't want to subsidize a subtenant, a situation that people have been warned via SE by other posters. I think it is the perception change in rents, and in what direction (major duh) that makes renters want to buy, not the precise rent-v-buy calculation. Given that.... today fewer will want to buy than perhaps ever before. But then buyers have never been logical. When it was cheaper to buy than to rent, most people rented. When it made no sense to buy, lots of people bought - with little or no money down, for too much money.

I don't believe the RE market is ever going to function rationally. I do believe that rents in Manhattan will continue to be much higher than they were 15-20 years ago, and they will not stay flat. I suspect they won't plummet at a quick enough rate to make it worthwhile for renters to break one lease and risk being chased down for the balance of their lease term because they can get more space for so much less per month that they still come out ahead. Condos, I think there may be some cases of people walking away. Coops, I'm not so sure. If rents steadily decline, lessees are screwed. When rents creep up again, buying will be a good idea. I'm sure you'll do the right thing.

Topper, if there is a whole nuther quintile below us, then why be fully invested? What is the return predicted on the stock market if we start from quintile two? We're a bit higher now.

Lowery, I don't think I was the one who said rents will fall through the floor. "When it was cheaper to buy than to rent, most people rented." Isn't that what made it a good time to buy? "When it made no sense to buy, lots of people bought - with little or no money down, for too much money." So that was the bad time to buy.

I never thought about using rents as a signal to buy, rather I have only thought about judging buying relative to prevailing rents. Buying was actually more tempting when rents exploded in 2006... But I guess that would have been the false signal to take. Rents and values became unsustainable at the same time.

lowery, that was me. but riddle me this. what's going to happen to all the extra commercial/hotel space as well? both new construction and old. for how long are we going to need ANY warehouse space in Chelsea/Koreatown? hotels have been grossly overbuilt, revpar is WAY down and product is continuing to enter the market.

so you signed a 10-year lease in 1999, with an option to take on another half floor in 2004. Things were looking good, so you decided to leave some room for expansion, but not too much because that option is there. you start shipping the back office out to a former British colony, but in 2005 you're just about full up so you exercise your option for additional space, now you are at 75% capacity. you grow a bit more, but ship some more tasks overseas. then this hits, you fire 10% and are at 65% capacity with no immediate plans for growth. the landlords will let you write your ticket, you figure with a little bit of work and a little bit less sf per employee you'll need less than 60% of your old space and you'll get it for much less, with options for additional space still available. what do you do? it will happen all over, and that building may remain commercial, but another one or a newly constructed one may not.

Yes, it's commercial, but space is space. after the fires burn down whoever is holding the asset is going to do their damndest to do something with it. which is why i don't think rentals have a snowball's chance in hell of recovering, for a good long time.

Lowery, though point taken... Like when two bed rents ramped I had to look at buying. Part of it was the ratio, but the other part was that watching rents rise can make it tempting to accept an expensive ratio. I guess where the ratio is now, and the clear downward direction of rents is what makes it hard to understand a bull. I think eventually rents will stabilize and values/ratios will be much lower, then you have a clear buy signal....but we might have to wait three years for it...My thinking is like 1996-style. Economy is good, rents are rising, but buyers still fresh off a horrifying collapse in values, so the chase to buy has not yet set in. 1996 a decent studio was over $1000/mo but you could buy it for under $100k. What would making buying even more attractive would be if rates ramped (again like the late 1990s), putting mortgage rates at like 8% (circa 2000) would keep values down even as the economy was recovering.

Update:

I just got the 3/31/09 10-year real PE and it has risen to 13.8 (due to good March returns) which puts it still in the second quintile. (To be precise at the 37th percentile.) The long term median PE for this series is about 16. We were in the fifth quintile up until late last year!

If I were a 60/40 sort of investor over the long term I would want to be fully invested at this risk level today. "If" valuations shifted to the first quintile I might do something "wild & crazy" and go to a 75/25 stock/bond asset allocation.

I'm reasonably humble and cautious when it comes to making "market-timing" calls. I also want a well diversified portfolio in general.

"Historically," when valuations have been in the second quintile, the subsequent stock "excess return over T-bills" has been 10.9% annualized over the next 10 years. Not too bad.

I also don't know if stocks will get back to the first quintile. The last time this ocurred was during the period 1974 to 1985.

Did you really mean to say 10.9% 'excess' or 10.9% return for stocks. If you mean excess that doesn't sound right. I don't think 13.8x is even consistent with 11% annual returns. I've read on the Hussman site - he's a disciple of this way of thinking - that this valuation is consistent with 7-8% stock returns over 20+ years. 11% sounds too high, as an excess return or even a return.

I just found this random piece of info - "A more cautionary observation is that every time the P/E10 has fallen from the first to the forth quintile, it has ultimately declined to the fifth quintile and bottomed in single digits. Based on the latest 10-year earnings average, to reach a P/E10 in the high single digits would require an S&P 500 price decline below 600." http://dshort.com/articles/2009/SP-Composite-pe-ratios.html

I wouldnt doubt we need another lower low.... But strangely the market seems technically like it may want to make a run at a higher level before it falls on its ass...call it like 950-1000.

Great chart - www.ritholtz.com/blog/2009/04/sp500-percentage-swings

Fun visual.

There are different conventions as to nomenclature. Some consider the fifth quintile the low PE one. Others consider the first quintile the high one.

Interesting comment related to tendency to fall all the way to the the lowest PE quintile. That said, history doesn't necessarily always repeat itself - even if it does rhyme.

We always calculate subsequent returns as "excess returns" over T-bills. We have had 10% T-bills in the past so getting a stock return of 10% in that environment is nothing to brag about. So our world is "excess" world.

Where is the data from that this valuation on stocks equates to 11% excess return? Is that data from your own firm's calculations or Schiller or the like?

I think S&P provides monthly data points on their web site. We use the Ibbotson/Morningstar data base.

Yes, I am bullish now.

lol!

So, fast forward 1 mayoral election cycle, and what's the take on Rhino's statements:

Rhino86
about 4 years ago
Posts: 4916
Member since: Sep 2006
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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

"...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..."

BWahahahahahahahahahahahahahahahahaha..........!!!!!!

Oh, Rhino86, you DO amuse!.....

I think Rhino86 is actually brooks2

>I think Rhino86 is actually brooks2

Very different personalities

So much wrong, it actually felt right reading thru this thread. So many folks have got sand (news) in their head they couldn't think properly.

If there was one surprise in this "Great Recession" or whatever you want to call it, it was the skyrocketing of NYC real estate prices and rents. To be fair, the original poster did specify "over the next 12 months."

http://streeteasy.com/nyc/talk/discussion/13786-michael-vick-is-back-concurrent-with-the-increase-in-the-market

http://therealdeal.com/blog/2013/09/12/rebnys-spinola-not-worried-about-de-blasios-success/

NYC govt spending increased significantly faster than the rate of inflation under Bloomberg. One can expect that to continue or accelerate under de Blasio. Note that the NYC council also plays a role in the budgetary process (47 Democrats and 4 Republicans). The broader issue is: is it even possible for a government to get spending under control? Not too many historical instances of that happening. The best we can hope for is a decrease in the rate of increase unless voting patterns change significantly.

Minions..

funny w67

yes falco :)

the minions are at it again... funny to watch from up here.

http://overnewyork.blogspot.com/2013/09/the-manhattan-inventory-report-for.html

Interesting read...

With DeBlasio as next mayor of NYC , I am no longer bullish .
His policy papers are insane , a real tax and spender of the highest order ... like Obama

1st it's not useful to look at the Manhattan market as a whole. The wide range of price points and neighborhoods here make generalizing useless. There is one segment of the market that shows strength now but is still very much at the start of what it will grow into shortly.

"If there was one surprise in this "Great Recession" or whatever you want to call it, it was the skyrocketing of NYC real estate prices and rents."

So, we've lowered expectations so much that "still down" is the new "skyrocketing"? I've seen some rents below decade-old prices... in *nominal* terms...

>So, we've lowered expectations so much that "still down" is the new "skyrocketing"? I've seen some rents below decade-old prices... in *nominal* terms...

Can you say something new? Something, anything, just don't keep saying the same thing over and over and over and over and over and over again. And again. Please? Not the same thing as every other of your posts. And to clarify, it doesn't count if you reorder the words and use synonyms.

are you kidding?

when was the last time you said anything new?

here's one

huntersburg
4 days ago
Posts: 11037
Member since: Nov 2010
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Burp

and another

fieldschester
1 day ago
Posts: 396
Member since: Jul 2013
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>Ottawanyc
about 11 hours ago
Posts: 682
Member since: Aug 2011
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Hb, every one is clearly not as brilliant as you are or spend every waking moment of their lives on a RE forum. So while you think it might be superfluous it does no harm and may give someone sufficient motive to pick up the phone.

Ottawa, you sound like a sore loser embarrassed by his own stupid suggestion. I thought Canadians were more, well, what's the appropriate word for you Canadians?

here's yet another

greensdale
about 4 months ago
Posts: 3812
Member since: Sep 2012
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I'm sorry but the last 6 posts provided no tie to NYC real estate and had no analysis. Not great. Not meaningful.

Hi C0C0, I love when y0u quote me.

The Best 0f!

is that a new thought?

Hold on, let me l00k.

is that even a thought?

No, that was a request that you wait until I can l00k.

is that new?

You are very impatient C0C0.

fuck you

That typically comes from bad parenting.

is that new?

Just to clarify, I'm not saying you are a bad parent, I'm saying that your parents were bad parents.

is that new?