Interesting the last cycle coop studios peaked at 15x annual rent. Granted interest rates played into the high being higher this time. Trough...under 8x.
Also, interesting is that even with LICC math, $1900 pre-tax is no wheres near $1000 after tax deductions... $1400 x 40% = -$560 as a deduction against $1900 = $1350 vs $1000.
You know, out of ALL the information, predictions, arguments, etc. for housing in Manhattan, this pretty much says it all about where we are now and how far we could easily fall:
"For condominiums, prices fell 26.7 percent, to $252 a square foot, as of Aug. 31, from $344 a square foot for 1989, according to the Douglas Elliman report."
You can BS inflation, higher paying jobs, scarcer availability, etc. when it comes to price, but when you put it on square footage basis, we've gone to plaid with today's prices (even now).
Gee, what also started taking off in the mid-90s? Oh yeah, Wall Street. What's just about dead in the water these days? Wall Street.
We've got MUCH more pain to feel; economically as a whole, job loss-wise, and in the real estate world.
Sorry, investorman, Wall Street is not dead in the water. We actually had a meeting last week to rally the troops and talk about bonus outlook for this year. Wasn't too shabby.
I'll believe it when I see it, Carnegie; especially after second mortgage loan resets that are coming late this year through 2011.
This is the "maybe the worst has passed" lull between "we dropped so much, so fast" and "wow, things are REALLY bad," IMHO. Take a look at a chart of the Dow as the Depression begins, from The Crash, right on through to WWII. Mainly, I'm talking about how the market reacted from Nov '29-April '30; up almost 30%. How much are we up since March? Doesn't it seem like we can't push much higher? Isn't it about 5 months, just like the rebound was in late '29-early '30? Hmmm...
Notice how they stopped using the baseball "inning" analogies? I remember, quite awhile back, we were supposed to be in the 7th inning of this thing. Guess it's kinda hard to come back and say, "Whoops, we're only in the 3rd."
Back to the original topic, just compare sq. ft. prices in this article. We didn't have such a horrible economic situation in the early 90's and we still had the Wall Street engine. Seriously, they're thinking $344 a sq. ft. was high? What are we supposed to think of One Madison Square asking over $3,000 a sq. foot? Hell, NYC price/sq ft. has tripled from the "high" point in this article and quadrupled from the "current" (as of 8/93). And that's for condos...
Carnegie, I'm not hoping for doom and gloom. I'm just trying to read the writing on the wall. When NYC loses it's biggest driver for incomes and we've popped bubbles in profits, real estate, and oil, I don't see puppies and sunshine. I see the government fighting tooth and nail to keep the whole house of cards from collapsing.
I don't think they're gonna be successful, just as the New Deal really wasn't what pulled us out of the Depression.
Her building - Greenwich Court at 295 Greenwich Street has had studios selling in the last few years for about $500K.
A similar decrease in prices would bring it down to $257K.
The article said that at the time the rent for a similar apartment was $1000. That would put her peak purchase price at 14.5 times the yearly rent and the deflated price at 7.5 times rent.
Current rents for studios in Greenwich Court are about $2k. That would put current prices at 20.8 times rent. To get back to the historical deflated ratio, studios would need to come down to 180K.
The $180k has some appeal as a trough equaling the prior peak. That said, it might be tough to get 7.5x gross rent in a low interest rate environment. However, if the tax charges are now about $1000 combined, and the rental market is $2000.... Then $185k is only a 6.5% cap rate on $12,000 in net income for an investor. While 8x rent seems low compared to interest rates, the offset is maintenance has easily doubled since then and a 6.5% cap rate is only roughly equal to mortgage rates.
In order to think about the upcoming trough, what is wrong with me looking at the dynamics of the prior peak and prior trough? That's the kind of thing that logical people do. You should try it some time.
Finding an article from 1997 and saying 'look how things went up from there'...what does that add? Ok, so in 1997...
"TriBeCa has been in the vanguard of rising Manhattan real estate prices, with 3,000- and 4,000-square-foot condominium conversions selling for more than $1 million, 2- and 3-bedroom co-op resales into the high six figures and rents up to $3,000."
So in 1997, 4000 sqft could be had for $1 million. If anything, this tells me, given that Wall Street had just enjoyed a record year in 1997, and lofts traded at $250-300/ft...the downside here is considerable.
What have we (and hopefully you) learned? By one example, the prior peak 'peaked' at 15x annual rent, troughed at 7.5x. Eight years later in 1997, prices for Tribeca loft space were still lower than the average condo price in 1989...And in between they got cut in half.
Now its time for you to say you just beat me in an argument.
Where did it say that 4000sf sold for $1million? The example was a 3000sf condo that sold for $1.6 million. It said that 3000 and 4000sf condo conversions were selling for MORE THAN $1 million.
rhino you can win an argument if you make up facts, but let's stick to reality please.
The only argument won or lost here is this. Even after a 30% decline, we remain well above the prior cycle peak price/rent ratio. Listen you can nose in on this conversation all you want. Maybe you'll learn something about history, but probably not. Thank you for the info on 1997. Not sure what your point about it is, but is anyone ever sure what your point is?
Thanks for making it clear that you fail to understand the value of examining the prior peak and prior trough in thinking intelligently about how this current cycle will play out. Congrats DUMMY!
Thanks for running the numbers, Rhino and ChasingWamus.
The quote about "Those who cannot learn from history are doomed to repeat it" comes to mind.
If you guys really think in a crisis that has shown itself, before even being "over," to be the worst one since the Depression that things could not return to as they were 16 years ago, let alone get much worse, you really should start sharing what you're smoking.
Many people seem to refuse to even accept the POSSIBILITY that could/are going to be as bad, or much worse, than anything we've been alive to experience thus far.
NYC just had it's prize industry gutted. Look around at the vacancies around the city; both commercial and residential. Look around at the sheer number of projects that are not even completed yet; both commercial or residential. Who is going to come swooping in to buy these places, or rent these spaces? What are the ramifications of the developers going bargain basement on them going to be on existing stock?
Hey, things could turn rosy in a year; or they could not. Which side would you rather be prepared for; missing out on another, likely unsustainable, increase, or having your home and retirement drop like a lead balloon?
In a world of diminished credit, rising unemployment, and falling prices, which near future appears more likely?
You obviously know where I stand and what my view is. If I'm wrong, well, I miss out on another boom and live to fight another day. If I'm right and prices decline to 1993 levels (or lower), I promise to sell you a condo for $500/sq. ft. That would be a steal to you now, right?
To be devil's advocate, the bull case is that the seriousness of what we are experiencing now has been completely overblown. I am not taking that view, but there it is. That said, I am more in the camp of 1994-2008 appreciation in NYC real estate (include the Hamptons!) was so abnormal...that it doesn't take the Great Depression part deux to knock it down huge. Normalcy alone - requiring reasonable down payments, conservative appraisals on the financing side... Banks running on historically standard leverage and the implications on compensation...fewer hedge funds. When you trade to 25x price/rent, you don't need a calamity - other than in peoples minds - to correct to 10-12x.
wow, very interesting read. The major take-away I got from this is the time it took everything to play out. I was too young to remember much about that period but can anyone opine about how the bubble proceeding that compared to the one we just came out of other than the rent/own ratios.
Interest rates were much higher then. Coops were a much bigger factor than condos. This recession is arguable much more serious than the one in the 1990s and the high we achieved on the upside much more epic...more historically significant. All in all, 50% down then could arguably be 60%-65% this time is my takeaway. A lot depends on interest rates.
rhino pontificates when he didn't even live here in the early 90s. You cannot compare NYC back then to NYC now. The incredibly high levels of crime in the early 90s combined with the ineffectiveness of city government made this city a painful place to live, and those factors were substantial causes of the decline in real estate back then. There are not indications that the current environment will devolve to that again. Of course, rhino conveniently ignores these major social factors and just keeps repeating wrong information about rent ratios.
I lived here on the date the Times article was published. New York did not have incredibly high levels of crime then. New York was not a painful place to live back then, it was great. If anything, it is worse now because its' differences from everywhere else have been reduced.
From LICC: "The incredibly high levels of crime in the early 90s combined with the ineffectiveness of city government made this city a painful place to live, and those factors were substantial causes of the decline in real estate back then."
Well, I dunno if you've been paying attention to the clownshoes up in Albany, or saw today that the Mayor has canceled the next Police Academy, but we're rollin down the river to higher crime, more inept government, and greatly reduced services.
Here's what was cut today out of future plans:
150 Firefighters
151 Traffic Agents
34 Emergency 911 Operators
175 School Safety Agents
150 School Crossing Guards
90 Emergency Medical Technicians
20 3-1-1 Operators
The PD is already short thousands of officers and isn't going to have much luck hiring good new ones if they keep cutting their standards and cutting their benefits. School safety might reduce quality of life in and around schools. Having fewer EMTs doesn't help morale of current EMTs as they become more overworked and puts larger gaps in coverage. Even something as simple as 311 operators reduces the services of the city to its residents.
This was actually a pretty good discussion...before tweedle dee and tweedle dumber showed up. Riddle me this...shouldn't rents reflect desirability? All we've done here is talk about rents vs. home values. So if I say its possible to decline to the same ratios, I'm still saying we decline to double the previous trough... Sorry its too hard for you two to read through that rents already capture the attractiveness of the city. The problem other problems with these two is they don't understand the impact of the credit markets on purchasing power and financial industry incomes. In fairness, I actually keep repeating correct information about rent ratios. Its also humorous that LICC is so ignorant of history, and then presumes I can't understand it without living here at the time. You two are so sad, and so dumb. And it shows, because one of you dumb shits bought LICC at the peak and the other is sitting on some dumpy Jersey pad she can't unload.
Wamus, if you lived here in the early 90s and that is what you think, then you didn't get out much. The city had over 2000 murders a year. 2000. I think we had under 500 last year. All crime categories are at enormously decreased levels from back then. There are lots of factors that contributed to the decline in crime beyone the number of police officers. A focus on lower level crimes, better use of technology, better coordination among agencies, more aggressive prosecutions, and the decline in the crack epidemic all contributed. It is amazing how much false information gets put on these boards.
rhino, your rent ratio analysis has been shown to be flawed. You keep repeating that you have posted correct information and I have consistently poked holes in it with actual data and supportable information. We keep going back and forth and you have yet to prove anything. You had said that the current downturn in NYC is worse than the one in the early 90s. I pointed out the ignorance of that statement due to your failure to account for the social ills that existed then that do not exist now. You can try to spin it all you want, but your argument isn't any better if you just reference your chart again.
although the chart only goes up until 2002, it is evident that crime was much higher in the 1990s, especially the early 1990s. There is no need to debate this.
I'm surprised the stats are so high for 1993. All I can say is that it didn't feel dangerous then. I didn't spend much time in Flatbush or East New York though. Also, from the other graphs it looks like it wasn't any worse relative to other big cities.
Still not sure how any of the crime is relevant if its embedded in rents, and the main lens we are viewing this through is the ratio of renting to owning.
this is a really excellent point actually. When comparing buy to rent ratios, any "social ills" are going to be baked into the rent numbers as well. It is like dropping the "X" from each side of an equation as they cancel each other out.
In the late 80s and early 90s, people who came to NYC to start careers fled to the suburbs when the time came to buy, especially when they started families. That demographic gradually shifted, and now a much higher percentage decide to stay in NYC when buying. Try to put some thought into this please.
Try to understand that the most important factor in this is the credit bubble. Unwinding that, and its impact on incomes and borrowing power is most of what matters. The rest of this is bullshit.
I always thought prices in 1998 had recaptured 1989 highs. Maybe not in all cases. Goes to emphasize that purchased at a bad valuation, real estate can be a terrible investments and terrible alternative to renting. If you can't count on something being worth more in 10 years...yeesh.
"In the late 80s and early 90s, people who came to NYC to start careers fled to the suburbs when the time came to buy, especially when they started families. That demographic gradually shifted, and now a much higher percentage decide to stay in NYC when buying. Try to put some thought into this please."
We are not actually talking about what happened in the 80s and 90s...We are ultimately talking about the price movement that occurred from 2000 to 2008 and how much of it was 'real' in light of the credit bubble that has now burst. Once again, YOU JUST DON'T GET IT.
I am not sure its fair to say things had gotten crazy by 2000. It seems the relationship of owning to renting was pretty normal in 2000. It seems to me appreciation then was being driven by a rising rental market, which is a more healthy reason than easing credit. I think 'crazy' is directly linked to Greenspan in 2001-2002 and the securitization boom. Crazy was really 2004-2008 when we shot through previous highs in the rent/buy relationship and kept going.
Yeah I guess by 2000, people had seen it do nothing but go up since 1992-1993. I am calling craziness in terms of something unnatural in the relationship between owning and renting... Craziness personified by LICC - denying decades of history to justify current pricing - that type of craziness.
"In the late 80s and early 90s, people who came to NYC to start careers fled to the suburbs when the time came to buy, especially when they started families. That demographic gradually shifted, and now a much higher percentage decide to stay in NYC when buying. Try to put some thought into this please."
What do you think drove those people away? High crime, crappy public education, and weak city services were likely the main culprits.
What do you think being short cops, short teachers and school safety, and other services (like the MTA) cutting services like Jack the Ripper are going to do to the desirability of staying in the city?
What happens when 311 starts to fold and all of those "quality of life" calls that are made to them start to go unanswered?
You're looking at things as they are RIGHT NOW and saying that there's no way we could return to 1993 prices. Look a little beyond the turn and you'll start to see the signs; they're not good.
Conversely, based on valuation alone and the contraction of credit, we can go down 60%. A return to 1993 prices would be 80-85% down... People started staying in the city because they started earning more in finance and the associated industries that were fed by it. As well, they could get bigger loans then they could ever get before.
"rhino pontificates when he didn't even live here in the early 90s. You cannot compare NYC back then to NYC now. The incredibly high levels of crime in the early 90s combined with the ineffectiveness of city government made this city a painful place to live, and those factors were substantial causes of the decline in real estate back then. There are not indications that the current environment will devolve to that again."
It doesn't have to.
Prices are multiples of what they were. The improvements are already priced in.
OVERpriced in.
This is simply incorrect.
92, things were not great, but they were certainly better than the 80s and 70s. The declines did not come from ineffective government and crime, because they were still decreases
Yes, and the late 1990s were in fact, great...and prices were still a fraction of what they are now. This really boils down to an understanding of the role of credit in the matter....something that is admittedly not simple...especially for idiots.
http://www.nytimes.com/1993/11/21/realestate/studio-owners-struggle-to-find-buyers.html?pagewanted=1
yep yep
Interesting the last cycle coop studios peaked at 15x annual rent. Granted interest rates played into the high being higher this time. Trough...under 8x.
Also, interesting is that even with LICC math, $1900 pre-tax is no wheres near $1000 after tax deductions... $1400 x 40% = -$560 as a deduction against $1900 = $1350 vs $1000.
You know, out of ALL the information, predictions, arguments, etc. for housing in Manhattan, this pretty much says it all about where we are now and how far we could easily fall:
"For condominiums, prices fell 26.7 percent, to $252 a square foot, as of Aug. 31, from $344 a square foot for 1989, according to the Douglas Elliman report."
You can BS inflation, higher paying jobs, scarcer availability, etc. when it comes to price, but when you put it on square footage basis, we've gone to plaid with today's prices (even now).
Gee, what also started taking off in the mid-90s? Oh yeah, Wall Street. What's just about dead in the water these days? Wall Street.
We've got MUCH more pain to feel; economically as a whole, job loss-wise, and in the real estate world.
Sorry, investorman, Wall Street is not dead in the water. We actually had a meeting last week to rally the troops and talk about bonus outlook for this year. Wasn't too shabby.
I'll believe it when I see it, Carnegie; especially after second mortgage loan resets that are coming late this year through 2011.
This is the "maybe the worst has passed" lull between "we dropped so much, so fast" and "wow, things are REALLY bad," IMHO. Take a look at a chart of the Dow as the Depression begins, from The Crash, right on through to WWII. Mainly, I'm talking about how the market reacted from Nov '29-April '30; up almost 30%. How much are we up since March? Doesn't it seem like we can't push much higher? Isn't it about 5 months, just like the rebound was in late '29-early '30? Hmmm...
Notice how they stopped using the baseball "inning" analogies? I remember, quite awhile back, we were supposed to be in the 7th inning of this thing. Guess it's kinda hard to come back and say, "Whoops, we're only in the 3rd."
Back to the original topic, just compare sq. ft. prices in this article. We didn't have such a horrible economic situation in the early 90's and we still had the Wall Street engine. Seriously, they're thinking $344 a sq. ft. was high? What are we supposed to think of One Madison Square asking over $3,000 a sq. foot? Hell, NYC price/sq ft. has tripled from the "high" point in this article and quadrupled from the "current" (as of 8/93). And that's for condos...
Carnegie, I'm not hoping for doom and gloom. I'm just trying to read the writing on the wall. When NYC loses it's biggest driver for incomes and we've popped bubbles in profits, real estate, and oil, I don't see puppies and sunshine. I see the government fighting tooth and nail to keep the whole house of cards from collapsing.
I don't think they're gonna be successful, just as the New Deal really wasn't what pulled us out of the Depression.
"we've gone to plaid"
lol
100k studios sound about right.
Her studio cost $175,000. It's now worth about $90,000
So, how much was it at the recent peak?
How much is it today?
And what will its low be?
IM... I see dead puppies....
Her building - Greenwich Court at 295 Greenwich Street has had studios selling in the last few years for about $500K.
A similar decrease in prices would bring it down to $257K.
The article said that at the time the rent for a similar apartment was $1000. That would put her peak purchase price at 14.5 times the yearly rent and the deflated price at 7.5 times rent.
Current rents for studios in Greenwich Court are about $2k. That would put current prices at 20.8 times rent. To get back to the historical deflated ratio, studios would need to come down to 180K.
The $180k has some appeal as a trough equaling the prior peak. That said, it might be tough to get 7.5x gross rent in a low interest rate environment. However, if the tax charges are now about $1000 combined, and the rental market is $2000.... Then $185k is only a 6.5% cap rate on $12,000 in net income for an investor. While 8x rent seems low compared to interest rates, the offset is maintenance has easily doubled since then and a 6.5% cap rate is only roughly equal to mortgage rates.
w67thstreet
1 day ago
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yep yep
another "yep yep" by our resident toy dog
rhino picks the best period in 30 years to buy as the time to compare. Like that was normal. Just look how things changed in just 4 years:
http://www.nytimes.com/1997/11/02/realestate/if-you-re-thinking-living-tribeca-quiet-desolate-streets-high-priced.html?scp=16&sq=residential%20resales%20studio%201996&st=cse&pagewanted=1
In order to think about the upcoming trough, what is wrong with me looking at the dynamics of the prior peak and prior trough? That's the kind of thing that logical people do. You should try it some time.
Finding an article from 1997 and saying 'look how things went up from there'...what does that add? Ok, so in 1997...
"TriBeCa has been in the vanguard of rising Manhattan real estate prices, with 3,000- and 4,000-square-foot condominium conversions selling for more than $1 million, 2- and 3-bedroom co-op resales into the high six figures and rents up to $3,000."
So in 1997, 4000 sqft could be had for $1 million. If anything, this tells me, given that Wall Street had just enjoyed a record year in 1997, and lofts traded at $250-300/ft...the downside here is considerable.
What have we (and hopefully you) learned? By one example, the prior peak 'peaked' at 15x annual rent, troughed at 7.5x. Eight years later in 1997, prices for Tribeca loft space were still lower than the average condo price in 1989...And in between they got cut in half.
Now its time for you to say you just beat me in an argument.
Where did it say that 4000sf sold for $1million? The example was a 3000sf condo that sold for $1.6 million. It said that 3000 and 4000sf condo conversions were selling for MORE THAN $1 million.
rhino you can win an argument if you make up facts, but let's stick to reality please.
The only argument won or lost here is this. Even after a 30% decline, we remain well above the prior cycle peak price/rent ratio. Listen you can nose in on this conversation all you want. Maybe you'll learn something about history, but probably not. Thank you for the info on 1997. Not sure what your point about it is, but is anyone ever sure what your point is?
This from a guy who just posted an article from 1993.
Thanks for making it clear that you fail to understand the value of examining the prior peak and prior trough in thinking intelligently about how this current cycle will play out. Congrats DUMMY!
When you posted your article, LICC, it was already clear that you had failed to grasp the central elements of the discussion. Way to be you!
Thanks for running the numbers, Rhino and ChasingWamus.
The quote about "Those who cannot learn from history are doomed to repeat it" comes to mind.
If you guys really think in a crisis that has shown itself, before even being "over," to be the worst one since the Depression that things could not return to as they were 16 years ago, let alone get much worse, you really should start sharing what you're smoking.
Many people seem to refuse to even accept the POSSIBILITY that could/are going to be as bad, or much worse, than anything we've been alive to experience thus far.
NYC just had it's prize industry gutted. Look around at the vacancies around the city; both commercial and residential. Look around at the sheer number of projects that are not even completed yet; both commercial or residential. Who is going to come swooping in to buy these places, or rent these spaces? What are the ramifications of the developers going bargain basement on them going to be on existing stock?
Hey, things could turn rosy in a year; or they could not. Which side would you rather be prepared for; missing out on another, likely unsustainable, increase, or having your home and retirement drop like a lead balloon?
In a world of diminished credit, rising unemployment, and falling prices, which near future appears more likely?
You obviously know where I stand and what my view is. If I'm wrong, well, I miss out on another boom and live to fight another day. If I'm right and prices decline to 1993 levels (or lower), I promise to sell you a condo for $500/sq. ft. That would be a steal to you now, right?
To be devil's advocate, the bull case is that the seriousness of what we are experiencing now has been completely overblown. I am not taking that view, but there it is. That said, I am more in the camp of 1994-2008 appreciation in NYC real estate (include the Hamptons!) was so abnormal...that it doesn't take the Great Depression part deux to knock it down huge. Normalcy alone - requiring reasonable down payments, conservative appraisals on the financing side... Banks running on historically standard leverage and the implications on compensation...fewer hedge funds. When you trade to 25x price/rent, you don't need a calamity - other than in peoples minds - to correct to 10-12x.
wow, very interesting read. The major take-away I got from this is the time it took everything to play out. I was too young to remember much about that period but can anyone opine about how the bubble proceeding that compared to the one we just came out of other than the rent/own ratios.
Interest rates were much higher then. Coops were a much bigger factor than condos. This recession is arguable much more serious than the one in the 1990s and the high we achieved on the upside much more epic...more historically significant. All in all, 50% down then could arguably be 60%-65% this time is my takeaway. A lot depends on interest rates.
rhino pontificates when he didn't even live here in the early 90s. You cannot compare NYC back then to NYC now. The incredibly high levels of crime in the early 90s combined with the ineffectiveness of city government made this city a painful place to live, and those factors were substantial causes of the decline in real estate back then. There are not indications that the current environment will devolve to that again. Of course, rhino conveniently ignores these major social factors and just keeps repeating wrong information about rent ratios.
How is that chart rhino?
watch out LICC. Rhino is going to curse you out now with his housing project profanity.
fuck you...you dumb shit...its about money...always has been...always will be. fuck crime.
Did cc just do his rhino impression?
I lived here on the date the Times article was published. New York did not have incredibly high levels of crime then. New York was not a painful place to live back then, it was great. If anything, it is worse now because its' differences from everywhere else have been reduced.
me too... this is such a bunch of crap.
From LICC: "The incredibly high levels of crime in the early 90s combined with the ineffectiveness of city government made this city a painful place to live, and those factors were substantial causes of the decline in real estate back then."
Well, I dunno if you've been paying attention to the clownshoes up in Albany, or saw today that the Mayor has canceled the next Police Academy, but we're rollin down the river to higher crime, more inept government, and greatly reduced services.
Here's what was cut today out of future plans:
150 Firefighters
151 Traffic Agents
34 Emergency 911 Operators
175 School Safety Agents
150 School Crossing Guards
90 Emergency Medical Technicians
20 3-1-1 Operators
The PD is already short thousands of officers and isn't going to have much luck hiring good new ones if they keep cutting their standards and cutting their benefits. School safety might reduce quality of life in and around schools. Having fewer EMTs doesn't help morale of current EMTs as they become more overworked and puts larger gaps in coverage. Even something as simple as 311 operators reduces the services of the city to its residents.
This isn't a step in the right direction.
This was actually a pretty good discussion...before tweedle dee and tweedle dumber showed up. Riddle me this...shouldn't rents reflect desirability? All we've done here is talk about rents vs. home values. So if I say its possible to decline to the same ratios, I'm still saying we decline to double the previous trough... Sorry its too hard for you two to read through that rents already capture the attractiveness of the city. The problem other problems with these two is they don't understand the impact of the credit markets on purchasing power and financial industry incomes. In fairness, I actually keep repeating correct information about rent ratios. Its also humorous that LICC is so ignorant of history, and then presumes I can't understand it without living here at the time. You two are so sad, and so dumb. And it shows, because one of you dumb shits bought LICC at the peak and the other is sitting on some dumpy Jersey pad she can't unload.
InvestorMan, please don't entertain their premise about crime that isn't even true.
yes, as I said before, if prices fall the 50% + you want them to, it will be accompied by a significant increase in crime.
Wamus, if you lived here in the early 90s and that is what you think, then you didn't get out much. The city had over 2000 murders a year. 2000. I think we had under 500 last year. All crime categories are at enormously decreased levels from back then. There are lots of factors that contributed to the decline in crime beyone the number of police officers. A focus on lower level crimes, better use of technology, better coordination among agencies, more aggressive prosecutions, and the decline in the crack epidemic all contributed. It is amazing how much false information gets put on these boards.
rhino, your rent ratio analysis has been shown to be flawed. You keep repeating that you have posted correct information and I have consistently poked holes in it with actual data and supportable information. We keep going back and forth and you have yet to prove anything. You had said that the current downturn in NYC is worse than the one in the early 90s. I pointed out the ignorance of that statement due to your failure to account for the social ills that existed then that do not exist now. You can try to spin it all you want, but your argument isn't any better if you just reference your chart again.
NYC murder rate:
http://upload.wikimedia.org/wikipedia/en/b/b5/Giuliani_crime_rate.gif
correction: the chart above tracks overall crime. The one below specifically tracks murder. NYC is Green:
http://qrc.depaul.edu/djabon/images/murderrates.jpg
although the chart only goes up until 2002, it is evident that crime was much higher in the 1990s, especially the early 1990s. There is no need to debate this.
There's no debating the crime stats. The debate is over whether we're going BACK to there due to a serious downturn.
It won't happen overnight; none of it will.
I'm surprised the stats are so high for 1993. All I can say is that it didn't feel dangerous then. I didn't spend much time in Flatbush or East New York though. Also, from the other graphs it looks like it wasn't any worse relative to other big cities.
Still not sure how any of the crime is relevant if its embedded in rents, and the main lens we are viewing this through is the ratio of renting to owning.
this is a really excellent point actually. When comparing buy to rent ratios, any "social ills" are going to be baked into the rent numbers as well. It is like dropping the "X" from each side of an equation as they cancel each other out.
You just lost LICC and Alpo.
In the late 80s and early 90s, people who came to NYC to start careers fled to the suburbs when the time came to buy, especially when they started families. That demographic gradually shifted, and now a much higher percentage decide to stay in NYC when buying. Try to put some thought into this please.
Try to understand that the most important factor in this is the credit bubble. Unwinding that, and its impact on incomes and borrowing power is most of what matters. The rest of this is bullshit.
Some sale prices on the lead-off studio in the 1993 NYT article:
Block 137, lot 1061, #5PN
1989: $179K (story says $175K)
1998: $145K -19% (Ms. Koch had moved to Philadelphia)
2003: $410K +283% (contract 12/2002)
2008: $550K +34% (#6PN, bought by #5PN's owners)
I always thought prices in 1998 had recaptured 1989 highs. Maybe not in all cases. Goes to emphasize that purchased at a bad valuation, real estate can be a terrible investments and terrible alternative to renting. If you can't count on something being worth more in 10 years...yeesh.
"In the late 80s and early 90s, people who came to NYC to start careers fled to the suburbs when the time came to buy, especially when they started families. That demographic gradually shifted, and now a much higher percentage decide to stay in NYC when buying. Try to put some thought into this please."
We are not actually talking about what happened in the 80s and 90s...We are ultimately talking about the price movement that occurred from 2000 to 2008 and how much of it was 'real' in light of the credit bubble that has now burst. Once again, YOU JUST DON'T GET IT.
It'd be interesting to take a condo like 295 Greenwich, call it typical, and plot $-per-PCI for all sales from 1980's construction to now.
I've done it for my own (co-op) building, but am missing sales from 1996-1999. By 2000 the craziness had taken effect.
I am not sure its fair to say things had gotten crazy by 2000. It seems the relationship of owning to renting was pretty normal in 2000. It seems to me appreciation then was being driven by a rising rental market, which is a more healthy reason than easing credit. I think 'crazy' is directly linked to Greenspan in 2001-2002 and the securitization boom. Crazy was really 2004-2008 when we shot through previous highs in the rent/buy relationship and kept going.
By "craziness" I meant the idea taking hold that things could only go up. They'd only begun to go up, looked at in retrospect.
Yeah I guess by 2000, people had seen it do nothing but go up since 1992-1993. I am calling craziness in terms of something unnatural in the relationship between owning and renting... Craziness personified by LICC - denying decades of history to justify current pricing - that type of craziness.
"In the late 80s and early 90s, people who came to NYC to start careers fled to the suburbs when the time came to buy, especially when they started families. That demographic gradually shifted, and now a much higher percentage decide to stay in NYC when buying. Try to put some thought into this please."
What do you think drove those people away? High crime, crappy public education, and weak city services were likely the main culprits.
What do you think being short cops, short teachers and school safety, and other services (like the MTA) cutting services like Jack the Ripper are going to do to the desirability of staying in the city?
What happens when 311 starts to fold and all of those "quality of life" calls that are made to them start to go unanswered?
You're looking at things as they are RIGHT NOW and saying that there's no way we could return to 1993 prices. Look a little beyond the turn and you'll start to see the signs; they're not good.
Conversely, based on valuation alone and the contraction of credit, we can go down 60%. A return to 1993 prices would be 80-85% down... People started staying in the city because they started earning more in finance and the associated industries that were fed by it. As well, they could get bigger loans then they could ever get before.
"rhino pontificates when he didn't even live here in the early 90s. You cannot compare NYC back then to NYC now. The incredibly high levels of crime in the early 90s combined with the ineffectiveness of city government made this city a painful place to live, and those factors were substantial causes of the decline in real estate back then. There are not indications that the current environment will devolve to that again."
It doesn't have to.
Prices are multiples of what they were. The improvements are already priced in.
OVERpriced in.
This is simply incorrect.
92, things were not great, but they were certainly better than the 80s and 70s. The declines did not come from ineffective government and crime, because they were still decreases
Yes, and the late 1990s were in fact, great...and prices were still a fraction of what they are now. This really boils down to an understanding of the role of credit in the matter....something that is admittedly not simple...especially for idiots.