Will we finally beat NY?
Curbed: We Read Goldman Sachs’ Mind-Numbing NYC Real Estate Report So You Don’t Have To (Kill Yourself)
Goldman: “New York apartment prices are very high relative to the observable fundamentals. Using three alternative yardsticks—price/rent, price/income, and affordability—we find that prices would need to decline by 35%-44% to return to the valuation levels seen in the 1995-1999 period, before the start of the recent boom.”
Translation: Think 15% down is bad? There’s another 30% to go. Wheee!Goldman: “Under the (admittedly unrealistic) assumption that prices decline by the same percentage in each market segment, this type of drop would imply that a 1-bedroom condo whose price currently averages roughly $800,000 would decline to $480,000; a 2-bedroom condo would decline from $1.7 million to $1 million; and a 3-bedroom condo would decline from $3 million to $1.8 million.”
Translation: Look! We can do math!Goldman: “It is instructive to consider the potential implications of a return of relative Manhattan incomes toward the national norm prevailing before the Wall Street boom of the past two decades, either because of pay cuts in the financial industry or because of a possible out-migration of affluent individuals. From 1969 to 1986, Manhattan per-capita income averaged 2 times the national average, with no clear trend. Over the next two decades, however, it grew to 3 times the national average. If incomes fell back to the pre-1986 level of 2 times the national average—and if national per capita income remained unchanged—prices would need to fall as much as 58% to return to the 1995-1999 price/income ratio.
Translation: 58%, people. Commence serious heavy breathing… now.
Wow. Look at those prices plunge. Will this finally be the opportunity that we’ve long waited for? Our opportunity to forge ahead and surpass NY in having the most expensive real estate?
Together, I know we can do it. Let’s go neg ams!
January 9th, 2009 at 8:32 am
NYC rents are much higher than elsewhere, thus prices aren’t necessarily out of whack with fundamentals.
Check out citi-habitats.com, and click on Featured Properties.
January 9th, 2009 at 8:34 am
BTW, this site doesn’t let me post the link directly.
As soon as I put www in front, it filters out the message.
January 9th, 2009 at 8:44 am
What a surprise. Job losses were ‘more than expected.’
Who knew?
Rents were pushed up when it was no longer ‘free money’ to ‘own’ a home.
They will start to decrease as the market starts stabalizing.
January 9th, 2009 at 8:54 am
I heard on NPR the other day that the number of broadway shows closing now will possibly reduce the amount of shows to that of the 70′s when NYC was a crime ridden hole. How fitting it would be if NYC returned to the good ole’ days. Why people like paying huge amounts of money to live there is beyond me anyway.
January 9th, 2009 at 9:05 am
RE- I love your baiting…it is so delicious!
January 9th, 2009 at 9:11 am
From AP:
The Labor Department said employers cut 524,000 jobs in December, a smaller decline than economists’ forecast for a loss of 550,000 jobs.
January 9th, 2009 at 9:13 am
SanMatean,
I assure you, there’s no baiting here. I just want to serve as a voice of reason amidst this environment of panic.
January 9th, 2009 at 9:24 am
From bloomberg:
“The Labor Department reported that the nation lost 2.589 million jobs in 2008, just shy of the 2.75 million decline at the end of World War II. The unemployment rate climbed more than economists forecast, to 7.2 percent in December, the highest level in almost 16 years.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=ayRiTqF7A5Ag&refer=home
No panic here. Just objectivity.
January 9th, 2009 at 9:30 am
Let’s see, unemployment rate at 7.2%. That means 92.8% of the people are employed. Is the glass half empty, or nearly full?
If you compare this figure to countries in Europe, India, or China, we’re still the envy of the world.
January 9th, 2009 at 9:34 am
No shit. Hopefully we don’t throw it all away because we can’t sustain our indulgences.
January 9th, 2009 at 9:37 am
NYC rents are much higher than elsewhere, thus prices aren’t necessarily out of whack with fundamentals.
What about that pesky “income” fundamental? Oh, that’s right, all of those smart bankers who’ve lost their jobs since October will have new ones in no time!
January 9th, 2009 at 9:39 am
Bankers most likely already own their apartments, as well as other properties in the suburbs. At worst, they can just rent out the place. Vacancy rate in Manhatten is only around 2%.
January 9th, 2009 at 9:40 am
LOL! Yeah, right.
And BTW, please endeavor to spell Manhattan correctly.
January 9th, 2009 at 9:56 am
Basically, this is a country that is too spoiled. That’s why we panic about everything. We lost a few thousand people in 911, so we sent troops to fight 2 wars.
January 9th, 2009 at 10:01 am
RE,
Do you think I’m panicking? Hell no. This is the best thing to happen in a long time. People in this country lost their heads and forgot how money works. This little correction will whip them back into shape and reality. Reality meaning that if you make 100k a year, then you don’t go out and buy a 600k house.
January 9th, 2009 at 10:01 am
trollicious!
Hey, have you guys read about the TARP report?
http://www.reuters.com/article/vcCandidateFeed2/idUSTRE50818T20090109
Sure gives me warm fuzzies about the prospect of giving those idiots the other $350B. Then lumping on another “stimulus package.” Sheesh.
January 9th, 2009 at 10:03 am
bob, I can only reiterate what I stuck at the end of yesterday’s thread:
“From #93: People will slowly recognize that the personal financing methods they believed were stable during the bubble (interest-only and negative amortization loans at high DTIs) are not stable and should not be used.
Haha – I think that blogger is naive, or gives the general population too much credit. People are generally stupid and act in their own short-term self-interest to their own detriment. (Most, if not all, of the people on this blog are exceptions to this.) Just look at the fools who are underwater on their car loans, yet roll that debt into a new car loan. Why would any rational person do that?! Yet it continues; I see that as a small scale version of the same thing. People want instant gratification. Maybe a significant economic correction will educate the masses.”
Reality for the masses? Doubtful.
January 9th, 2009 at 10:03 am
Yeah, nice direct contradiction of the first line of the article, RE. It states that price/rent is too high in NYC. You say it’s not! Good point! Well done!
And unemployment at 7.2% is a good thing to you. It’s better than 10% – or 30%, amazing insight! Is it better then 5%…oops, I can’t hear you!
I just cling to my idea of you as angry Minnesota Trailer Park man – and I’m thinking now that you rent your trailer, rather than own it. And you made up the RE persona just to get us to go nuts when you post. It’s really very well done.
I’m tempted to try it myself for entertainment. To out-RE RE:
They’re not making anymore land! Only foreigners disagree with me, and they are not fully human!
Oooo…it makes me feel dirty….
P.S. Prices in Manhattan will fall, not rise, so nyah nyah.
January 9th, 2009 at 10:03 am
“We lost a few thousand people in 911, so we sent troops to fight 2 wars.”
So, this is no baiting?
Lots of folks would bite on this if you targeted something else than a real estate board. Oh wait, maybe you already did.
January 9th, 2009 at 10:03 am
“This is the best thing to happen in a long time.”
Yes
People in this country lost their heads and forgot how money works.
Correct.
“This little correction will whip them back into shape and reality.”
Hopefully – we’ll see.
“Reality meaning that if you make 100k a year, then you don’t go out and buy a 600k house.”
Or, if you make $14,000 a year, you don’t go out and buy a $750k home.
January 9th, 2009 at 10:16 am
haha, Lewis. That reminds me – I got a realtor newsletter in the mail last night that was touting the foreign investor angle. They said (locally) the number of transactions by foreigners has risen from 10% to 25% – but that was just some estimation they gave without any backup.
I thought that angle was just something RE made up since I hadn’t seen it anywhere else but this site.
January 9th, 2009 at 10:23 am
Similar example in Albany, CA – which has the best school district for a few miles around (especially b/c it has a good middle school and above average High school), and has had resilient pricing on small, pre-war homes:
http://sfbay.craigslist.org/eby/apa/984911722.html
Rent: $1,850, 978 sqft
Zestimate: $520k.
Built in 1922, assessed at at $142k last year, so they probably bought it 10+ years ago for about $100k.
Notice the Coldwell banker sign in the rental listing pic! Oops!
I didn’t bother to see if it’s for sale somewhere, but what would you pay for it? I’d pay $300k, which is a huge amount of money, but I love the town and the school district so I’ll pay a big premium for this dump. It’s probably ‘worth’ $200k, just b/c of the dirt it’s built on (all 4,000sqft of it).
$520k is insane and represents the bubble.
And you used to have to pay $2200 to rent a place like this in Albany, the few times you could find a SFH like this for rent there. I like the 15% drop in rent…
January 9th, 2009 at 10:36 am
DreamT says,
>>So, this is no baiting?
Lots of folks would bite on this if you targeted something else than a real estate board.
Those are the same folks who support going into Iraq. Is that your view?
Those people don’t realize the deaths we are causing in those other countries. Easily they lose a few thousand people on a regular basis. The double standard can only be explained by the fact that we are too spoiled. Just go south of the border, and watch how those people live. They don’t cry about an economic crisis, even though many don’t have enough food to eat, and live on a few dollars a day. It’s all about perspective. Ask any of those less fortunate people whether they’d like to live in one of the “featured” Bay Area properties on Burbed, and they’ll think they died and went to heaven.
January 9th, 2009 at 10:59 am
Ask them if they’d spend 10x what they can afford and ruin their families futures to live there – and they’d say, um – I’ll find a nice place elsewhere in San Jose, Fremont, whatever…
They understand value – and $500/sqft for mediocre SFH is not value!
January 9th, 2009 at 11:04 am
Yeah.
Tell them that they should pay $500,000 for what would cost $10,000 in Mexico.
They’ll look at you like you’re an idiot (which you are) and think they’ve gone to hell.
January 9th, 2009 at 11:09 am
I used to work with 2 guys from Mexico City, and one from Jalisco. They along with several of their friends were here long enough to save up and leave. They thought Californians were nuts.
January 9th, 2009 at 11:13 am
Anyone who either
1) has a sense of what ‘value’ means
2) or isn’t blinded by the idea of ‘free money’
would think this behavior crazy.
And they’d be right.
January 9th, 2009 at 12:04 pm
Poor Chuckie. Nobody wants to play with him anymore. Better trolls, please.
January 9th, 2009 at 12:06 pm
bob, I mentioned Broadway shows closing in a thread a day or two ago. I do remember NYC in the 1970s, since I lived right over the bridge in NJ. Yes, it was crime-ridden, dangerous, and anyone buying real estate there was taking a serious risk.
I was just on the Upper East Side this Monday and had lunch with a friend at the peak of the noon rush. Not a single place was full. All that “hemorrhaging money” that Tom Wolfe talked about in Bonfire of the Vanities has the spigot shut off.
January 9th, 2009 at 12:10 pm
Yeah, I agree, it was no big deal that 3,000 people got killed on 9/11. We shouldn’t have gone off to war over that.
If the terrorists want to blow up a couple of airliners or buildings, what’s the big deal? There are 300,000,000 people in this country. Surely losing .001% of the population to a couple of unfortunate events shouldn’t matter too much.
In fact, AIDS is also a problem that isn’t a problem. AIDS isn’t even one of the top 10 killers in this country anymore. I don’t know why we’re wasting so much money on something that causes so few deaths. Besides, if you aren’t infected right now, you can virtually guarantee that you’ll never ever come down will AIDS or become infected with HIV.
The world should just not worry about a few people with box cutters. The fact that innocent Palestinians are being murdered by Israel is far more important than a few fringe terrorists who happen to be Muslim.
The real problem in the world is America’s support for the bigoted Israelis. We should pull all of our support from Israel and give back the land to the rightful owners–the Palestinians. America should pull all of our troops out of the Middle East and this would bring peace to the region.
If Iran gets the bomb and uses it against America via a few terrorists, we’re just getting what we deserved. America slaughtered hundreds of thousands of innocent Germans and Japanese. We’re the only country that used the Atom Bomb and we bombed civilian cities like Dresden and Berlin.
It’s time for the chickens to come home to roost! Reverend Wright had it RIGHT.
Hopefully Obama will dismantle our pro-Zionist and military industrial complex since there is no War on Terror. We should put all of our money into fighting poverty here in America. Look at what we’ve done right here in the Bay Area to places like Oakland and Richmond.
January 9th, 2009 at 12:26 pm
At the end of the day, when we’re short on resources, it becomes ever more important to re-check our priorities.
Isreal is occupying way too much of our airwaves. Why do we focus so much on a country that doesn’t even export much oil? Is Isreal of strategic interest to us other than being a democratic country?
January 9th, 2009 at 12:45 pm
“Those are the same folks who support going into Iraq. Is that your view?”
I don’t use burbed to voice my political opinions. I’m cynical enough to see through your cynicism, if that makes sense. But I can expand on the 911. I initially had the same reaction as you posted, coming from a country where children are taught that XX century war casualties number in the millions. However I know better than to use this knee-jerk reaction as a basis for any rational argument, unlike what you are doing here.
In fact I’m a bit curious why burbed is so lenient with your baiting about opinions on current wars. It’s obviously not the right place to discuss it and others refrain from doing so.
January 9th, 2009 at 1:09 pm
That said, reading in Chronicle comments how folks are unfazed about daily stabbings in Richmond or daily shootings in Oakland does put things in perspective. Killings in the east bay are now so frequent that it’s now a frenzy on how’ll make the best joke about them
January 9th, 2009 at 1:10 pm
DreamT says,
>>why burbed is so lenient with your baiting about opinions on current wars. It’s obviously not the right place to discuss it and others refrain from doing so.
You’re ignoring the context, which was about how we’re a spoiled country that panics about an economic recession. I wasn’t talking about those wars for wars sake.
Among the chatters here, I can say outright that I bring forward more relevant and substantive issues than anybody. Why don’t you ask howcome Burbed let’s Pralay be here? He’s here for only one purpose: to bullshit. He offers absolutely no value, and has wasted much of my time. Yet, you stroke him from time to time because you prefer his agenda. What a hypocrite! (Yup, I’m calling you a hypocrite, in case you missed the point again)
January 9th, 2009 at 1:16 pm
>>That said, reading in Chronicle comments how folks are unfazed about daily stabbings in Richmond or daily shootings in Oakland does put things in perspective.
That’s one reason you should be glad prices are still relatively high where you are. If prices fell as much as in the East Bay, those guys would be moving in, like many of them did to Antioch.
January 9th, 2009 at 1:17 pm
DreamT, if you’re concerned about some of the posts here, your best strategy is to treat them with the reaction they deserve. I for one sure enjoy the give and take on this board, although some of the participants are a little weak in one direction.
January 9th, 2009 at 1:18 pm
Everyone needs to lighten up a bit. If there are wars and terrorism, the solution is more security. Check out the reviews for this security product.
January 9th, 2009 at 1:22 pm
Hm, this thread seems to have gone in an unexpected direction.
This site is generally pretty free and easy flowing, just like the super smart area in California known as the Bay Area. Without the ever present 2nd hand pot smoke.
(As an aside: I went to a performance of in once. I was truly amazed at how I didn’t smell any pot.)
That said, let’s try to reduce the temperature here and kindly step away from AIDS, 9/11, Iraq, Afghanistan, genocides, the History of Chocolate, or any other largely excessively controversial topics.
Prop 13 is still allowed.
Thank you!
January 9th, 2009 at 1:25 pm
And no discussion about Playmobil or guitars.
January 9th, 2009 at 1:27 pm
No, those are allowed.
January 9th, 2009 at 1:36 pm
OK. I think Playmobil toys are overpriced. Inventory is building up in Palo Alto toy stores. Prices will drop any minute now. Hopefully, the Obama stimulus plan will allow people to borrow more money to buy Playmobil toys. Since I don’t like to be in debt, I’m selling my Guitar and Fender amp.
January 9th, 2009 at 1:36 pm
LOL
Real estater said someone wastes his time.
Does that imply that it had some sort of value to begin with?
January 9th, 2009 at 1:39 pm
Yes these are allowed.
January 9th, 2009 at 1:52 pm
madhaus,
Have you driven by Sunnyvale Town Center lately? Are you still arguing that there’s no construction there?
January 9th, 2009 at 2:03 pm
madhaus, DOUBLE TOY SCORE!
January 9th, 2009 at 2:06 pm
“Yet, you stroke him from time to time because you prefer his agenda. What a hypocrite!”
What a whiner! Grow up. Stop the name calling.
January 9th, 2009 at 2:56 pm
Awww, everybody here needs a big hug.
But not from me. I’m playing my Strat and messing with the Playmobil.
January 9th, 2009 at 3:06 pm
Madhaus is all quiet about the Sunnyvale Town Center, because she was 100% wrong. Tons of structures have been put up since she claimed 3 months ago that the project has been stopped. Santa Row 2.0 is coming soon!
January 9th, 2009 at 3:19 pm
Sad, RE, so sad.
January 9th, 2009 at 3:21 pm
Once in a while, we need to revisit old topics to see who was right. People here make irresponsible claims and predictions. Showing them the facts will instill some accountability.
January 9th, 2009 at 3:31 pm
#50 – hahahahahahaHAHAHAHAHAHAHAHHA (ROTFLMAO)
Thanks for the huge laugher on that one, RE. Way to go and nail Madhause on the Sunnyvale Town Center. I love the idea of you being interested (and willing) to go in detail on when you were right or wrong about anything you’ve said in the past on this blog.
Every time I’ve seen someone get into with you, you always end up avoiding the truth in the end and never admitting anything you ever said was proved wrong. You’re very consistent about it, so thanks for the persona.
Onto more important topics:
I have always thought Playmobil was 2nd class to Lego blocks. I’m a Lego lover, and my kids are Lego devotees now, too. The Playmobil bubble must burst! They are overpriced (so are Lego) but Lego is better and maybe worth it as a luxury gift. I look for Lego on sale.
I’m waiting to afford the Lego Death Star – but maybe only RBA homeowners can afford such things:
http://starwars.lego.com/en-us/products/exclusive/10188.aspx
Only $400! Smart Realtors would include free Lego Star Wars sets with purchase of any RBA home.
January 9th, 2009 at 3:32 pm
Sorry about the misspelling Madhaus (Not Madhause).
I’m off to NYC to visit family this weekend – we’ll discuss housing the entire time, so I’ll try to report back next week.
January 9th, 2009 at 4:06 pm
A Lewis: Having just returned from NYC, I do want to remind you that the East Coast sucks.
January 9th, 2009 at 5:15 pm
I haven’t gotten out of BA that much, does the people elsewhere dislike us as much? When I was in east coast California was a wonderful place. Then Texans here like sg (former BAer) seems to hate us.
January 9th, 2009 at 5:55 pm
bob just the fact that anyone thinks NYC could ever go back to the mindset of the 70s in the near term is just naive. You obviously aren’t old enough to remember the 70s. Not only was NY in decline the entire country was in decline- MAJOR decline. I believe the problem was that the US had lost manufacturing to Japan but we didn’t know it yet.
January 9th, 2009 at 6:04 pm
A lewis, on that Albany property – please can we get real? Houses in Albany were NOT selling for 148K 10 years ago. Try TWENTY FIVE years ago, at 12% rates. sheesh.
January 9th, 2009 at 8:59 pm
Lego Technic all the way here! I never liked Playmobil.
January 9th, 2009 at 11:52 pm
Playmobil is Lego’s equivalent for the folks who lack a left brain.
January 10th, 2009 at 12:00 am
From Whiny #35, an interesting quote:
“Tensions like those afflicting Antioch have drawn scholars and law enforcement officials to debate whether crime follows subsidized renters out of the tenements to the suburbs.
Susan Popkin, a researcher at the nonprofit Urban Institute, said she does not believe that is the case. But the tensions, she said, are real.”
I found it interesting that someone paid to actually research the issue ended up expressing her opinion as an article of faith.
I’d rather have read some honest opinion along the lines of “ANTIOCH IS FULL OF NIMBYs!”
January 10th, 2009 at 1:26 am
Looks like all the softies have gone to bed!
January 12th, 2009 at 3:10 pm
In this Forbes article on America’s weakest housing markets, here’s what it says about Manhattan:
There is another region where the worst may be to come: New York City-area metros. Housing values in Newark, N.J., could fall 26%.
Likewise, Edison, N.J., is also among the mid-sized metro areas expected to see the steepest drops this year. But the worst could be over by the end of 2009 for New York’s satellite cities.
Manhattan, now at the epicenter of the financial crisis, is noticeably absent from the top 25 weakest markets list. So far, the city has been isolated from the popping bubbles in the rest of the country.
Property prices were rising in Manhattan until early last year. Zandi believes Manhattan could be spared a steep drop. He expects a fall of around 20%. Even if big bankers lose their bonuses, “Manhattan is still supported by international demand,” he says.
This pattern is very similar to the Bay Area, where the surrounding areas are dropping, but the core areas will not be affected much.
January 12th, 2009 at 3:50 pm
Again, the local areas were always more expensive and they didn’t see anywhere near the appreciation the skirts did. They certainly don’t double every 10 years.
Just like the rest of the United States, when all is said and done, they will likely be roughly in line with a 4-5% annual appreciation.
Just as they have for decades.
January 12th, 2009 at 5:09 pm
So are you predicting a fall of around 20% for the RBA like Manhattan, RE?
January 12th, 2009 at 5:22 pm
That sounds reasonable to me.
Certainly not what Mr. “I think I’m RBA” has said before.
Don’t worry, R – he won’t respond.
January 12th, 2009 at 5:28 pm
It’s funny he made that post above. Just a few days ago, he said a 10% drop in Manhattan was ridiculous.
Convenient amnesia I guess. Or – could it be??? – he’s willing to reconsider his position?
January 12th, 2009 at 5:32 pm
There’s no scientific way to predict a 20% fall in the RBA. What I can say is that any decline in the RBA will be modest compared to non-RBA areas. You will not see the “spreading” affect predicted by some people here. The RBA market is different from the outskirt areas, just as the Manhattan market is different from areas that surround it. My feeling is that RBA is already at the bottom right now, as it has been flat in 2008.
From what I can see in the new listing prices in 2009 so far, there is nothing to suggest dramatic declines in the RBA, and based on touring open houses last weekend, I believe the demand is still there.
January 12th, 2009 at 5:34 pm
nomadic,
That’s a distortion if not a lie. What I said is that one cannot easily detect a 10% drop over the holidays.
January 12th, 2009 at 6:07 pm
I also disagree with the assertion that RBA is shrinking and will disappear. I believe what will happen is an even sharper distinction between RBA and non-RBA areas, just as there’s a sharp distinction between Manhattan and non-Manhattan. It’ll be a continuation of the tale of 2 markets.
Finally, I just want to comment that Manhattan is the epicenter of the financial meltdown. Bay Area is not. If Manhattan eventually drops 20% from peak to trough, it would not affect the Bay Area market.
January 12th, 2009 at 6:37 pm
” It’ll be a continuation of the tale of 2 markets.”
Wait, how about the Grey Area? Does it cease to exist with “the sharper distinction” happening across delimited streets? Or you’re just dumbing it down to the point where it hass become nonsense?
January 12th, 2009 at 6:58 pm
I think it’s interesting that Roger keeps alluding to these open houses he went to, but won’t give any information on which ones or whether they were priced appropriately. Makes me wonder if Roger is funning us about buying investment property in the RBA after all.
And as to that 20% decline? I’d say 30% in Manhattan and 20-25% in the RBA. Roger? You still have the opportunity to share your address with burbed and have a value comparison between June 30th ’08 and ’09.