History Always Repeats Itself

First let's look at close to the end of a somewhat bullish timeframe for Manhattan real estate in January 1987 (ofcourse before the stock market crash): http://www.nytimes.com/1987/01/04/realestate/a-steady-sales-pace-in-manhattan.html?sec=&spon=&scp=17&sq=decline%20in%20manhattan%20apartment%20prices&st=cse An article outlining the fear that hit the market in March '88 following... [more]

First let's look at close to the end of a somewhat bullish timeframe for Manhattan real estate in January 1987 (ofcourse before the stock market crash): http://www.nytimes.com/1987/01/04/realestate/a-steady-sales-pace-in-manhattan.html?sec=&spon=&scp=17&sq=decline%20in%20manhattan%20apartment%20prices&st=cse An article outlining the fear that hit the market in March '88 following the crash of October '87 http://www.nytimes.com/1988/03/13/realestate/new-data-show-sharp-impact-of-crash.html?scp=32&sq=decline%20in%20manhattan%20apartment%20prices&st=cse In May of '91, they bring in the auctioneers to get rid of the excess new construction http://www.nytimes.com/1988/03/13/realestate/new-data-show-sharp-impact-of-crash.html?scp=32&sq=decline%20in%20manhattan%20apartment%20prices&st=cse Later in 1991 you can read about the reality of 'degentrification' in undesirable areas in Manhattan. Some quotes may seem alarmingly familiar. http://www.nytimes.com/1991/09/29/realestate/prices-decline-as-gentrification-ebbs.html?sec=&spon=&&scp=63&sq=real%20estate%20price%20declines&st=cse The recession of the early '90s ended in '94, but led to a macro like flat line effect of real estate prices until the boom we are unwinding that started in the late '90's http://www.nytimes.com/1996/03/17/realestate/in-the-region-strengths-amid-softness.html?scp=150&sq=real%20estate%20price%20declines&st=cse While there were so many differences between the markets of then vs. now, there are a couple of assumptions that can be made using historical patterns as a basis: 1. Sales will remain slow for a while as people stay where they are instead of taking a loss. 2. Newly gentrified (or regentrified) areas will always get hit harder than prime areas 3. Late to the game speculators get crushed, especially on new construction where auctions are practically inevitable. 4. There will be no V shape turnaround. The situation we are in currently is far more bleak from a macroeconomic perspective than the one we faced in the timeframe I capture above. That lasted about 6 years with an additional 4 more years of sideways fluctuations. We have not seen a bottom in Manhattan real estate. 5. Being a renter or squatter is the best thing to do for the next 3-5 years as rental inventories increase and buyers/sellers begin to find the appropriate market for the available product. 6. Long term, Manhattan is a great investment and will be okay if your time horizon is longer than 15 years. This doesn't mean you can't wait it out a bit on the short term to find the perfect place at the right price. [less]