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September 15, 2008

Wall Street Reorg: Impact on Real Estate?

After a weekend spent huddling together, Wall Street chieftains were unable (or, more precisely, unwilling) to come up with a plan to save faltering Lehman Brothers, which is now expected to file for bankruptcy. Merrill Lynch, which had seen its shares drop along with Lehman's in recent days, agreed to be acquired by Bank of America for close to $50 billion. Meanwhile, questions about giant insurer AIG's ability to weather its own set of mortgage-related problems continued to mount. “My goodness. I’ve been in the business 35 years, and these are the most extraordinary events I’ve ever seen,” said Peter G. Peterson, co-founder of the private equity firm the Blackstone Group, who was head of Lehman in the 1970s and a secretary of commerce in the Nixon administration. The big question is whether these moves will increase investor unease or, by removing a few of the major question marks, hasten its recovery. The same can be said for the local real estate market. While many of Merrill's remaining 60,000 employees will undoubtably be kept on, the same can't be said for Lehman's workforce of 25,000; on the other hand, market's hate uncertainty, and maybe this just helps ensure that New York market is on target to meet Jim Cramer's projected turnaround date of June 30, 2009.
Two Major Wall Street Banks Falter [NY Times]
Crisis on Wall Street [WSJ]
Photo by huachen

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Comments

Wait a minute, here he comes.....

Posted by: dittoburg at September 15, 2008 9:04 AM

As I hear any details from friends within Lehman, I will let you know.

However, if any of you are waiting to lock in a mortgage rate, interest rates took a real nosedive this morning as there was a flight to safety in treasuries.

Posted by: daveinbedstuy at September 15, 2008 9:07 AM

Dave, thanks for keeping us up to date. Its going to be a wild ride today.

Posted by: wasder at September 15, 2008 9:10 AM

Has anyone noticed a slew of houses that were off the market for a few months (I presumed sold) are now back on.

At the same price.

Is this a broker ploy, do they think there are new buyers, or old buyers with no short term memory.

Or did deals fall through because of
mortgage issues?

tia

Posted by: CobbleHilller at September 15, 2008 9:12 AM

Karma...

Posted by: Prodigal_Son at September 15, 2008 9:14 AM

where is he? Must have keeled over and is currently prone on his linoleum.

Posted by: dittoburg at September 15, 2008 9:17 AM

He's posting on his Forum Mutant Ass.... post.

Posted by: daveinbedstuy at September 15, 2008 9:26 AM

Just wait for it Ditto. It's coming.

On a side note: I'm laughing at myself because one of my first thoughts this morning was: "Oh, The What is going to have a feild day with this! "

I have to get a life.

Posted by: cobblehiller at September 15, 2008 9:30 AM

Got about 400 grand in the bank, you think I can finally get me that BROOLYN HEIGHTS TOWNHOUSE?

Posted by: HOBOKENROCKS at September 15, 2008 9:32 AM

"Wall Street Reorg: Impact on Real Estate?"

Absolutely no impact at all. This is a blog about crown moldings, wainscotting and the nabes they define. Why are we discussing this? All the turmoil is accross the river.

Posted by: DOW8000SP800 at September 15, 2008 9:32 AM

He's posting on the Forum and says his posts here are being blocked!!!!

Posted by: daveinbedstuy at September 15, 2008 9:33 AM

The What has been blocked?? You mean that now only those that want to engage him can while the rest of us can have reasonable discussions??

THANK YOU BROWNSTONER!!

Now that IS good news.

Posted by: TownhouseLady at September 15, 2008 9:38 AM

Even after the blood bath, there are plenty of people who can afford to buy high-end housing in Manhattan and Brooklyn. But you would be nuts to buy today.

Posted by: Suburbandude at September 15, 2008 9:39 AM

he can only post here if he manages to keep the curse word:liturgical ratio down at 10:1 or below.

Posted by: dittoburg at September 15, 2008 9:40 AM

Better make sure to get the $400k out of your bank, since the FDIC doesn't have enough in the insurance fund to cover prospective failures.

Posted by: Jane Jacobs at September 15, 2008 9:41 AM

Suburbandude, today might be a good day to take a low ball offer to any seller. They might be inclined to take at given the circumstances.

BTW the markets only down 270 because many stocks have not yet opened!!!

Posted by: daveinbedstuy at September 15, 2008 9:42 AM

suburbandude-

"But you would be nuts to buy today."

IF you have cash in the bank, a job and great credit, why would it be nuts to buy today? Should buyers wait for prices to fall or for the pending global depression 1st?

Posted by: Prodigal_Son at September 15, 2008 9:42 AM

This is likely to be ugly.

I guess having 6 months since Bear Sterns wasn't enough for the other investment banks to get their finances stabilized.

Bear, Lehman, and Merrill gone. Wonder if Goldman and Morgan Stanley can hang on as independents or not.

I feel sorry for the honest hard working people at those companies but don't have much sympathy for those who thought it would be a great idea to borrow $40 for every $1 they had and invest it in real estate derivatives (I'm mean, at least if they had invested it in real estate, they could give each employee a house as a severance package!).

I actually didn't think Merrill's situation would get resolved so soon. If Goldman and Morgan can either convince everyone they are OK or find partners quickly, that will probably get everything to the bottom faster, but I don't think there will be a strong "up" trend in the NY economy (or tax receipts or real estate) for a while.

It's likely new regulation will squeeze profit margins (and thus salaries and bonuses) for the Wall Street survivors.

Anyway, remind me not to look at my 401k for a while...

Posted by: northsloperenter at September 15, 2008 9:44 AM

Sorry, folks, but when he started in with the physical threats yesterday, enough was enough.

Posted by: brownstoner at September 15, 2008 9:44 AM

Ditto! Great to see you. We need some humor around here today.

Dave, why haven't some stocks opened yet? What's your guess on the total number of points the Dow will be down today?

Posted by: wasder at September 15, 2008 9:45 AM

I didn't see the physical threats postings. What was he saying???

Posted by: daveinbedstuy at September 15, 2008 9:53 AM

Physical threats? - jeeze louise. Of course he should be banned in that case. But on the eve of his affirmation! How ironic.

Posted by: dittoburg at September 15, 2008 9:55 AM

JANE JACOBS I HAVE THEM IN SEPARATE ACCOUNTS, ONE JUST OVER 100 GRAND AND THAT BANK IS DOING FINE. Surely, if these banks all go under than cash won't matter any more and in that case I am happy I own a home... and a rental since they won't be bothering me for rent. If this kind of thing happened it would be imperative to jump to precious metals cause the fed would just start prinTING...

Posted by: HOBOKENROCKS at September 15, 2008 9:55 AM

"But you would be nuts to buy today."

Not if the right deal lands in your lap. Lowball to where you think the price will be. You have absolutely nothing to lose. The feedback would likely suprise you.

Posted by: DOW8000SP800 at September 15, 2008 9:55 AM

I didn't see them either. But I think Brownstoner was well justified in banning here. There are many many ways to express yourself that are challenging, thought-provoking, even scary, that wouldn't justify banning. He had every last chance to behave like a human being and didn't take them.

Posted by: wasder at September 15, 2008 9:57 AM

Physical threats on Brownstoner?! Who knew people would get all gangsta over Brooklyn real estate. Although the What has a major case of crazy- his doom day scenarios is panning out.

Everyone is nervous! Here today, Gone tomorrow. Perhaps the banks, like the housing market needs some correction. I wouldn't buy anything right now, since there are still a few more bumps coming. AIG & WAMU are next.

Posted by: 7andfive at September 15, 2008 9:57 AM

I guess I'll just cut and paste part of my response to the forum post:

A lot of people who work (or used to work) in the finance industry are going to be selling. A lot. And not many people will be buying.

The impact of these events will disproportionately affect NYC. The combined loss of income and wealth in the City is staggering.

Apart from that, the world is not ending, and if you are not too leveraged (and if you don't work in finance) you will be fine. In the long run, NYC real estate will be fine. But can you survive to see the long run?

Posted by: lechacal at September 15, 2008 9:58 AM

Not to be a rabble rouser but just how do physical threats on the Internet amount to anything, except for scenario swhere people's addresses have been outed: Brownstoner, Barbara Corcoran and Sandra Oh.

If I told the What online that I was going to kick his ass, should he be afraid of me?

Posted by: Prodigal_Son at September 15, 2008 9:59 AM

Like Sullivan in the Staties, Goldman's got Hankie Paulie. They'll be fine, for now.

Posted by: DOW8000SP800 at September 15, 2008 9:59 AM

wasder...its a technical thing....happens all the time...the shares won't open until there are buyers at a certain price for everything thats for sale...more or less.

Posted by: daveinbedstuy at September 15, 2008 9:59 AM

Ditto! That's exactly what I was saying on his mutant asset thread in the forum. On this of all days he could afford to be a gracious "winner" (hilarious term for such a circumstance) but this just proves that his intentions from the start were rotten. Super ironical indeed.

Posted by: wasder at September 15, 2008 10:00 AM

This day may wind up being the new beginning our country needs. If all the crazies that have leveraged up on Wall Street get hit and their assets sold off us who have had the smarts to not over leverage our own balance sheets will be rewarded with that great broolyn heights townhouse we have always coveted...

Posted by: HOBOKENROCKS at September 15, 2008 10:01 AM

All Dow stocks open at the -330 level...so watch it from that level. The bond markets though are getting truly annihilated and will be the source of even further pain to institutions that own them

Posted by: daveinbedstuy at September 15, 2008 10:03 AM

Prodigal--while it is true that internet threats rarely can be physically dangerous, don't you think that this community like any other should have a code of decency that is at least moderately adhered to?

Posted by: wasder at September 15, 2008 10:04 AM

"remind me not to look at my 401k for a while"

What makes you think the taxes and penalties will be greater than even the pretax losses?

Posted by: DOW8000SP800 at September 15, 2008 10:05 AM

Can someone point me to the physical threats that What is said to have made? I've looked high and low, were they removed?

Ditto, ditto, 'his affirmation' - and a little early. Oct. 16 is weeks away. Unless there is something worse coming. Ugh.

I'm thinking Dow8000SP800 may not be too far off either.

Are we going down to 10,000 today? or worse. (She said reaching for the Xanax.)

Posted by: cobblehiller at September 15, 2008 10:05 AM

DOW---I have no idea what your last post was supposed to mean. Though truthfully I am glad to see you around. Would like to hear your thoughts on the day's events.

Posted by: wasder at September 15, 2008 10:06 AM

wasder-

"Prodigal--while it is true that internet threats rarely can be physically dangerous, don't you think that this community like any other should have a code of decency that is at least moderately adhered to?"

Yes, 100% agreed.

I just see slippery slopes.

Posted by: Prodigal_Son at September 15, 2008 10:06 AM

This may not have a huge impact on Brooklyn real estate- but what do you think the impact will be on the Manhattan, and subsequently, the brooklyn rental market? There's going to be an awful lot of unemployed people in the financial service industries, and not everyone who worked @ Lehman, Merrill etc were millionaires.

Posted by: A Guest at September 15, 2008 10:07 AM

They were removed.

Posted by: brownstoner at September 15, 2008 10:11 AM

In my humble opinion:

1. He who lowers price first will sell first. He who lowers price second will sell at a lower price than the first person. And so on.

2. The real estate market will get worst before it gets better.

3. So if you are a seller, chop your asking price if you want to sell this year. Otherwise wait until next year and chop even more.

4. If you are a real estate agent, you should advise your clients accordingly.

Posted by: lechacal at September 15, 2008 10:11 AM

Guest: The comparative affordability of Manhattan prices has a huge impact on Brooklyn prices.

Posted by: lechacal at September 15, 2008 10:15 AM

In the force towards equilibrium of rental prices, Manhattan will be falling. Will Brooklyn continue to rise?? I think so.

Posted by: daveinbedstuy at September 15, 2008 10:15 AM

Lechacal: what the Heck are you talking about? I do not Think that The Large Percent of people who live in Cobble Hill, Carroll Gardens, Park Slope and The Heights care about any of this. They have owned there homes for many years some handed down from family members. Others that have bought more recently put down large down payments and care less what happenes.

Posted by: sebb at September 15, 2008 10:16 AM

A bad day no doubt. And I feel for the poor souls at these firms that didn't make the bad decisions and didn't get paid millions of dollars to make them.

Should be noted though that oil is down $5 and interest rates are also down. It's a bad day, not the end of the world. The economy is still growing, albeit slowly, and the What is still an idiot.

Posted by: Johnny at September 15, 2008 10:18 AM

"DOW---I have no idea what your last post was supposed to mean."

"...notorious Irish Mob boss Francis "Frank" Costello (Nicholson) plants his protégé Colin Sullivan (Damon) as an informant within the Massachusetts State Police."

"Henry Merritt "Hank" Paulson Jr. (born March 28, 1946) is the United States Treasury Secretary and member of the International Monetary Fund Board of Governors. He previously served as the Chairman and Chief Executive Officer of Goldman Sachs."

Just entertaining a theory.

Posted by: DOW8000SP800 at September 15, 2008 10:19 AM

Prodigal--I hear you, though I think the What treaded way over the slippery line. But agreed, hard to say what constitutes over the line lots of times.

Posted by: wasder at September 15, 2008 10:22 AM

DOW...if you don't think all of these guys talk to each other on a daily basis anyway you're out of touch. No conspiracy theory here.

Posted by: daveinbedstuy at September 15, 2008 10:22 AM

sebb - we're discussing the rental market. A good deal of renters who live in Brooklyn do it because it is comparatively affordable to manhattan (not myself, i prefer brooklyn, but still)

If prices in manhattan become more affordable, do you think this will spell trouble for new brooklyn brownstone owners, since alot rely on rental income to make their mortgage payments?

Posted by: A Guest at September 15, 2008 10:25 AM

Lechacal--while I agree that it seems inevitable that housing prices will continue to drop for the forseeable future, why should the cycle be as extreme as you describe? Why wouldn't many sellers just hold out for a while and have inventory dwindle? I certainly don't have any info better than yours and I am not questioning the validity of what you are saying. Just asking for clarification.

Dow--right on. that went over my head.

Posted by: wasder at September 15, 2008 10:25 AM

Wasder, did you see the comments?

Posted by: cobblehiller at September 15, 2008 10:25 AM

"...but what do you think the impact will be on the Manhattan, and subsequently, the brooklyn rental market?"

History says rents will be down too. They're already down in the Financial District because of ongoing weakness in the financial sector. Today's event doesn't help. It is my theory that rents are still stubbornly high in Brooklyn because less people are buying and they have to live somewhere. But when all these condos (many of them not even ready yet) get converted to rentals, supply will do it's magic.

Posted by: DOW8000SP800 at September 15, 2008 10:25 AM

cobblehiller--I don't think I did. I certainly didn't see physically threatening ones. Brownstoner must have removed them quickly.

Posted by: wasder at September 15, 2008 10:27 AM

Sebb, I think what you are trying to say is that so many owners in these areas have the ability to ride out the storm that there will be no selling pressure to drive down prices. I disagree. There is an awful lot of units (particularly in new condos and various recent condo conversions) occupied by relatively recent and highly leveraged buyers. Many of these people rely on the finance industry to make their mortgage payments.

I am not feeling schadenfreude. Some of these recent buyers are my friends. Some of them are going to be devastated, which is heartbreaking to watch. Not that I didn't loudly voice my opinion that they should wait before buying, but they had many arguments (like you) for why the market was going to be just fine.

Posted by: lechacal at September 15, 2008 10:27 AM

Wasder, to address the two sides of the market:

1. Supply has already dwindled. I think there are a lot of natural sellers who are waiting for things to get better. Some of them are actually able to wait out the next 5 or 10 years, but most sellers probably are not. A fairly predictable pattern in any bubble burst is that the top of the market is characterized by decreased supply and decreased transaction volume before prices decline. Then prices start going down, and one by one the weakest sellers have their hands forced and have to sell. Supply increases, volume increases, and prices decrease. There is lots of financial history to back this up.

2. Demand will sharply decrease. Probably already has.'

3. In my view, the combined effect will be as I previously noted.

Posted by: lechacal at September 15, 2008 10:33 AM

"Are we going down to 10,000 today?"

Naw, just like 1929 (Rockefeller, etc.), the powers that be (President's Working Group on Financial Markets) have plenty of safety nets in place to manipulate the fundamentals and delay the inevitable. The republicans are still in office and are not going to continue to give Obama the fuel. 2009 might be the year where central bankers "let the chips fall where they may". But not today and not this year.

Posted by: DOW8000SP800 at September 15, 2008 10:33 AM

Yesterday was one of the few days I was glad to live in Williamsburg - no one had any idea what was going on, let alone what Lehman Brothers and Merrill Lynch were. Must be nice to live in your own little world.

Posted by: A Guest at September 15, 2008 10:39 AM

Hmm, thanks wasder, just curious. I briefly peeked at the posts yesterday, but didn't notice anything (more)outrageous.

Hmm, good points, thanks DOW.

Posted by: cobblehiller at September 15, 2008 10:43 AM

" And I feel for the poor souls at these firms that didn't make the bad decisions and didn't get paid millions of dollars to make them."

I don't. Their high salaries (receptionists too) compensate for the risks that come with the territory. It's not like they haven't been warned for the last 365 days about the possible fate of their sector. I feel more sorry for us taxpayers (Fan/Fred, Stearns, etc.)

Posted by: DOW8000SP800 at September 15, 2008 10:43 AM

"Must be nice to live in your own little world"

I think you have it the wrong way around. The majority real-life people really don't pay attention to the markets, and this news very little to them.

Posted by: dittoburg at September 15, 2008 10:45 AM

sad but true dittoburg.

they won't care until gas prices go up and it costs 300 bucks to fill up their ford f350

Posted by: A Guest at September 15, 2008 10:48 AM

Lechacal--I hear you. Thanks for the response. It certainly seems like supply has dwindled in the brownstone market at least (as opposed to the condo market). And yes prices do seem to be on their way down, though they have been coming down all year as I see it. So what is your benchmark for when that process is well and truly underway? Also, I see your point about the weakest buyers being forced to sell. I am hopeful that my next ten years will be spent in my new house.

Posted by: wasder at September 15, 2008 10:51 AM

"Some of them are actually able to wait out the next 5 or 10 years"

I agree with lechacal @ 10:33. Just because you're able doesn't mean it is wise to do so. I don't agree with the "long haul" arguement. It hinges on 2006 prices to return within one's lifetime. If you're fooled by nominal prices changes and don't appreciate the time-value of money, then I guess the "long haul" has a placebo effect. I believe that most homeowners, at least the ones who are still ahead, count their equity as their wealth and will want to REALIZE it (i.e. take profits and cash out) before it's too late.

Posted by: DOW8000SP800 at September 15, 2008 10:57 AM

Wasder, I would guess the process (that being real price declines) will be underway quite shortly, if it is not already. Of course I have no idea where the bottom will ultimately be. My investing philosophy, which has served me well, can be summed up as: "I can call a top. I can't call a bottom. Long-term price trend will be up." So just for example I liquidated everthing into cash in January-May 2007, and started slowly putting it back in the market over the past few months. I just dropped another $10k into the market on Friday afternoon (in hindsight it would have been nice to wait until today, but whatever).

Posted by: lechacal at September 15, 2008 10:59 AM

If any of you have a profit from a real estate sale, today would be a good day to realize some stock losses to mark against the profit for tax purposes. With the number of ETFs and everything, you can buy something similar back right away.

Posted by: daveinbedstuy at September 15, 2008 11:00 AM

Whoa Dave, careful: make sure you talk to a tax advisor before trying to do something that sounds like a wash sale (sell and buy at same time just to lock in tax loss without changing economic position).

Posted by: lechacal at September 15, 2008 11:03 AM

thats what i was talking about...use another instrument and its not a wash sale.

Posted by: daveinbedstuy at September 15, 2008 11:05 AM

"I have no idea where the bottom will ultimately be"

What better baramoter than the change in the NY Metro S&P Case-Shiller Index approaching zero on a year-over-year basis? It would have worked last bottom. It moved in the direction of zero (slower price drop) after the last reading. Rhetorical question: What will it do for the rest of the year?

Posted by: DOW8000SP800 at September 15, 2008 11:07 AM

So far we really seem to be holding on pretty well. It's 11AM and the Dow is down less than 2% (and off its lows for the morning). Not that I'm wishing for it, but where is the real capitulation? If this is the worst of it, I'd say we all got very lucky. What am I missing?

Posted by: MacD at September 15, 2008 11:08 AM

"today would be a good day to realize some stock losses"

dave -- seriously, wait til an up day. Don't realize losses on a panic day unless you think this marks the beginning of a serious downtrend. There is plenty of time between now and Dec. for a tax sale.

"What am I missing?"

Washington Mutual, AIG, Morgan Stanley, Goldman Sachs, Wachovia, hedge fund collapses, regional bank failures, finding out if the FDIC really has enough funds on hand to cover all the insured depositors.

Posted by: northsloperenter at September 15, 2008 11:17 AM

Nice, discussion, everyone. Any of you have any real insight as to where treasuries and/or mortgage rates end up, and whether and how much further lenders will tighten up on credit requirements or loan to value? Will rate drops make financing/refinancing more attractive, or will credit tighten up so much that low rates will be irrelevant as a practical matter?

Posted by: slopefarm at September 15, 2008 11:20 AM

MacD: What you are missing is that this board is about NYC real estate, which will be much more heavily influenced by the layoffs at Bear, Lehman, etc. etc. and the decline in share price of financial institutions than the performance of the broader stock market. The S&P could end 2008 with a gain and I think it would change very little when it comes to NYC real estate.

Posted by: lechacal at September 15, 2008 11:26 AM

Yeah MacD stick to the real estate topic and that alone!!!

Where's Biff? Did he get blocked too??

Posted by: daveinbedstuy at September 15, 2008 11:35 AM

Dow---are you suggesting that house prices will never reach 2006 levels in our lifetimes?

Posted by: wasder at September 15, 2008 11:35 AM

Very dark day. I tripped over the financial paparazzi in front of the Lehman office on my way to work this morning. There are going to be a lot more failures to come. It's a terrible time to buy or sell anything unless you really know what you're doing.

Posted by: FatLenny at September 15, 2008 12:08 PM

MacD - we are very close to breaking the 30-year low trend line. I'm sure the government is working feverishly to keep the DOW from dropping below the high 10,000s. If that happens, it's going to be exceptionally rough.

wasder: it's best to look at this in terms of inflation adjusted prices. The DOW would have to reach 15,000 tomorrow to reach the peak value form March of 2000. While you rarely hear this discussed, the performance of the DOW has actually been very similar to the Great Depression. Slight deflation during the 1930s however masks this a bit if you just look at the nominal values. In any event, it's been almost 10 years, and things keep going down.

Posted by: Polemicist at September 15, 2008 12:10 PM

I'll ask again.

I am in the market to buy. I have plenty of cash and excellent credit. I have a job, not in the financial services area.

Why ~not~ buy?

Should I wait for prices to drop? Or will money, credit and job standings not make a difference to any lender right now?

Posted by: Prodigal_Son at September 15, 2008 12:12 PM

Prodigal Son, are you actually asking us why you should not buy when prices are falling and will continue to do so? I want to make sure you are actually asking this question before I neglect to answer it.

Posted by: lechacal at September 15, 2008 12:15 PM

PS you need to get with a lender to solidify the terms of what you are able to borrow before you start looking. No guarantees that prices will drop fast for the type of property you may be interested in and the neighborhood where you'd like to be.

Posted by: daveinbedstuy at September 15, 2008 12:15 PM

Dave, thanks for worrying! No, not blocked. I'm here, just very busy today given all that's going on (although I did post to Montrose quite early this morning on an old thread). It's nice to see posters pretty much banding together here and being supportive, even those who have traditionally disagreed in the past.

Posted by: Biff Champion at September 15, 2008 12:16 PM

Prodigal-Son

The issue is whether or not you need a mortgage. If we enter a period of significant asset price deflation, which seems increasingly likely, you could potentially end up under water.

If you own your property free and clear however, you have nothing to worry about. Even if the value of your house declines, you'll still have a roof over your head.

Posted by: Polemicist at September 15, 2008 12:22 PM

Brooklyn real estate is going to go down but there is still alot of money on the sidelines. There are alot of people myself included that saved and went to alot of cash when we started seeing what was happening last year. I will be ready to buy assets at distressed prices but certain parts of broolyn will be fine. The lower level and mid level markets are going to go down the most...

Posted by: HOBOKENROCKS at September 15, 2008 12:29 PM

Even though there are questions about how the stock market and lay-off's are going to impact RE in the near future, there does seem to be continued commercial growth in previously underserved areas of Brooklyn. Anyone know anything about Butternut Market, for example? Not to get off topic (financial crisis and RE), but this seems like that would be right up your alley, DIBS. Know anything about it?

Posted by: MacD at September 15, 2008 12:29 PM

It is me MacD

Posted by: daveinbedstuy at September 15, 2008 12:31 PM

I thought so, that's great! I'll try to dig up your e-mail address and send you my wish list.

Posted by: MacD at September 15, 2008 12:35 PM

I'll probably ask Mr. B to put up a photo of the location with our "Coming soon..." banner up and ask people what they want us to carry.

Getting off topic here!!!

Posted by: daveinbedstuy at September 15, 2008 12:39 PM

Prodigal Son, if I were on the sidelines, I would wait until you hear a stream of good news coming out of the housing sector (probably a few years from now). The best way to find a bottom is to see it behind you. As bad as things are, they are likely to get worse. From a purely financial perspective, you would be crazy to buy with this much uncertainty in the market.

Posted by: FatLenny at September 15, 2008 12:45 PM

Meredith Whitney STILL states that the housing price will fall another 33-40% from here. She estimates/predicts that credit card companies will retract $2Tril worth of consumer credits from the market in '09. I believe 2-3 years from now many of us will look back on this board and realize how F*&ing naive & bunch of clowns we are. I am sorry to say but I believe this IS the proverbial "once in a generation" financial Tsunami hitting America today.

Posted by: newbie12222 at September 15, 2008 12:52 PM

"Feds Right to Let Lehman Fail, But It's a 'Dangerous, Risky' Path, Roubini Says" - http://tinyurl.com/67kx97

Haven't checked to see if this has been posted yet but the headline is a little misleading. Roubini is not saying the path of letting these firms fail is risky but rather that the policies leading up to these events is a risky PATH that has ALREADY been NAVIGATED by the FED/SEC. So it's like a poisonous snake bite. Not a long read but I thought it was interesting.

Posted by: DOW8000SP800 at September 15, 2008 12:52 PM

"Will rate drops make financing/refinancing more attractive, or will credit tighten up so much that low rates will be irrelevant as a practical matter?"

I'd say the latter at best. At worst...(you don't want to know and I couldn't tell you if you did).

Posted by: DOW8000SP800 at September 15, 2008 12:56 PM

"If this is the worst of it, I'd say we all got very lucky. What am I missing?"

Whatever the insiders are not. Hidden losses.

Posted by: DOW8000SP800 at September 15, 2008 1:01 PM

Lechecal, 12:15
Why so snide? I've never been uncivil with you...

Thanks to those that actually answered my question. Yes I know that TODAY or even next month are not the times to buy. And yes, OF COURSE I know that prices will continue to drop. I'm more trying to figure what the general horizon might look like (1-3 years) and what the bottoming out scenario might be.

Posted by: Prodigal_Son at September 15, 2008 1:22 PM

PS---Ultimately, no matter how much everybody wants to sound prescient and smarter than everybody else about the economy, there is never going to be one single time that is the right time to buy. You have to know what you want, what you can afford and do your best to make a good decision based on those factors. Listening to everyone else pontificate about the economy, while useful to an extent, can drive you crazy.

Posted by: wasder at September 15, 2008 1:26 PM

PSS...no one knows. I don't mean that to sound dire and catastrophic. Buying a home is a different set of economic and lifestyle decisions than buying an investment property. Its not only the numbers. But once the numbers make sense (after-tax) from a rent/own decision then its time to pull the trigger.

Posted by: daveinbedstuy at September 15, 2008 1:27 PM

"Dow---are you suggesting that house prices will never reach 2006 levels [real terms, inflation-adjusted] in our lifetimes?"

Yes, that is my expectation. You've seen this graph before ( http://tinyurl.com/g9vf4 ). Those that died before 2006 have never even seen those prices. This was the biggest boom ever (once in a lifetime as Alan Greenspan was recently rumored to have said) and there will be no "free lunch".

Nominally, of course you'll see them again. That's what inflation does. It fools you into thinking that you took no loss in a RE trade (and that's before you deduct interest, maintenance, fees, etc.). How many people brag about their property being worth 3 times what they've paid for it without taking these things into account? But as long as you FEEL like you've gained more than you REALLY have, or FEEL like you haven't lost as much as you REALLY have, then it doesn't REALLY matter to you. Instead, you'll just by mystified about why so much of your RE "gain" has to go towards the higher costs of everything else. The time-value of money is very deceptive.

But before nominal 2006 prices return, I think there will be significant nominal losses.

Posted by: DOW8000SP800 at September 15, 2008 1:33 PM

PSSS---

Dave my PS stood for Prodigal Son, not Postscript. But your point does make sense as a PSS after mine. How's your day going by the way?

Posted by: wasder at September 15, 2008 1:33 PM

Dow--thanks for inserting the "real terms, inflation adjusted" into my question and making me sound more financially savvy than I am. Obviously I understand the concept of nominal versus inflation adjusted prices and there seems to be little doubting that the current bubble was an anomaly historically. However I do wonder what the Schiller chart would look like now, given that the one you posted is two years old. Anecdotally it feels to me that prices have decreased fairly significantly over the last year. Have you seen an updated chart?

Posted by: wasder at September 15, 2008 1:44 PM

"Even if the value of your house declines, you'll still have a roof over your head." - Polemicist at September 15, 2008 12:22 PM

Renting, waiting and then bottom-feeding is a lot cheaper. Buying now without a significant chop off comps is pure luxury. I don't think that's a preference for most of us.

Posted by: DOW8000SP800 at September 15, 2008 1:44 PM

Yes, it wasn't a postscript...Sorry PS...Didn't mean to add an extra S!!!

Going OK here...we don't make big bets and put on crazy trades. We're still up for the year and buying today.

Posted by: daveinbedstuy at September 15, 2008 1:44 PM

Dave--glad to hear it. Keep on keeping on my cyber friend.

Posted by: wasder at September 15, 2008 1:47 PM

"Have you seen an updated chart?"

No, but I've seen the updated Case-Shiller Index that this graph is based on. Not good. From that, you can infer that we are down from 2006.

Posted by: DOW8000SP800 at September 15, 2008 1:49 PM

"Renting, waiting and then bottom-feeding..."

I'm contradicting myself. Don't wait. Bottom-feed now. Lowball now. You may not score but you'll develop relationships with brokers (assuming good credit, cash and solvency) who will eventually steer you to distressed sellers as time passes and things get "worse".

Posted by: DOW8000SP800 at September 15, 2008 1:54 PM

The CRB (Commodities Research Bureau) Index today has now gone down to a point where it is now DOWN for the year; meaning that Y-T-D commodities prices are now down.

This will factor into inflation & interest rates. We will get a Fed cut soon. Those looks very good for inflation expectaions and interest rates looking forward.

That's a pretty picture given today's gloom & doom

Posted by: daveinbedstuy at September 15, 2008 1:58 PM

We must be down from 2006. I just wonder how much of that huge upswing on the graph has now gone back down? Would love to see that info.

Posted by: wasder at September 15, 2008 2:01 PM

DOW:

that is very good advice re: distressed sellers. Bad markets make great brokers - even today, the best I know really got into their game during the early '90s.

Posted by: Polemicist at September 15, 2008 2:01 PM

dave:

you think an interest rate cut would look good for inflation? I'm assuming you mean for existing debtors, right?

Posted by: Polemicist at September 15, 2008 2:02 PM

Yes DOW...bad markets do make great brokers...in the stock market too.

Polemicist.....barring this financial crisis as a reason to cut rates, its usually the opposite...inflation is what drives the rate cuts, both up and down.

Posted by: daveinbedstuy at September 15, 2008 2:10 PM

Is there any way to find out who these "distressed sellers" are besides becoming chummy with brokers? Once a home goes into foreclosure, isn't a large amount of cash needed to purchase it?

Posted by: A Guest at September 15, 2008 2:18 PM

Prodigal Son, I've been bearish for quite some time and work on Wall St, so my advice has it's own bias. But the old adage on trading desks is when everyone is buying it's time to sell and vice versa. When every single person you know is telling you it would be insanity to buy (or are short-selling), you've probably found the bottom of the market. Unfortunately if Great Aunt Sara has caught up with the financial news and *knows* the market is hopeless, the tide has already started turning. Put it this way, I've got a nice chunk of cash saved as well, and I'm looking forward to buying a house in the next year or two and am happy to scoop up something cheap.

Also, I'm not quite as bearish on NYC real estate market as most, largely because I think unless crime starts going crazy again, we won't see a return to the early 90s/late 80s housing climate again. There is a different sort of "national" pride in the city now than there was before, partially still a post-9/11 thing, and partially because there really just aren't that many thriving cities in the country right now, so young people will continue to flock here. High gas prices and low real estate taxes also help NYC vs suburbs (for example), and everyone at the end of the day needs a place to live. Also, while some of NYC properties are speculatively bought and sold, a lot of people here genuinely still have the cash needed to buy at the current prices. Where they get this money from I really have no idea but I can't pretend it doesn't exist. An older house-painter gentlemen is buying a studio unit in my co-op for cash. Managed to save twice his annual gross income in cash, no mortgage necessary. Not all of Brooklyn is financially out of reach, and certainly not to those who are prudent with their money (regardless of their income). The fact that lending standards have been always been stricter in NYC due to the prevalence of co-ops stabilizes our housing somewhat as well.

Posted by: setancre at September 15, 2008 2:40 PM

It's not just pre-foreclosed sellers that are distressed. Some will protect their credit by all means before it gets to that stage.

The brokers will usually giveaway the distress status of their clients. It's actually a selling point. I always ask, "why are they selling?". Whether it's my business or not will be evident in the answer. The brokers just want to get a deal done and move on.

Also, counter-offers to your low bids can speak volumes. And the more distressed situations are reflected in the conditions of the properties.

Posted by: DOW8000SP800 at September 15, 2008 2:58 PM

Sounds like a poker match DOW - kinda sad that we're dealing with peoples' homes here.

Posted by: A Guest at September 15, 2008 3:59 PM

"Sounds like a poker match DOW"

Yup. Sometimes life is a poker match. You play the card you're dealt.

"kinda sad that we're dealing with peoples' homes here"

I don't see it that way.

Posted by: DOW8000SP800 at September 15, 2008 5:16 PM

How come there is so many negative comments? would any Home owners put these thoughts out like this? I don't think so.

Posted by: sebb at September 15, 2008 5:32 PM

114 posts and not one by the 'What'.

Wasn't such a bad day after all :)

Posted by: bayridgegirl at September 15, 2008 6:27 PM

Dow--How do you see it if not as people's homes? That sounds cold though I am sure you have a reasonable explanation.

Bayridge--second that. "What" a difference it makes!

Posted by: wasder at September 15, 2008 6:55 PM

yeah z, I'm up on this. The problem is that we heard this with the JPM takeover of BS, then we heard this with the guvment takeover of FNM et al, and now we hear this with LEH and MER. In the next few days we can hear this with AIG. So three times, potentially four, we've heard that this is the bottom, and yet it hasn't been. Tricky thing, this selling everything, then shorting, then buying at the bottom. When you know what the bottom is, pls let me know :-)

Posted by: denton at September 15, 2008 7:06 PM

Any advice for someone who owns a co-op in Manhattan and wants to sell it and buy another in Brooklyn? (or more likely a condo)? Should we sell now and wait for the bottom to put in an offer? Or just sit tight & wait for the whole thing to blow over?

Posted by: mothra at September 15, 2008 9:58 PM

Take a breather silly rabbits the sky is far from falling.

first off; anyone who has spent more than two decades on this planet has seen this pattern before. In fact we have seen it as recently as the late nineties tech bubble.
Huge amounts of politically motivated newspaper ink and sweaty palmed doomsday scenarios will abound. How much is hyperbole and how much is sanity will only be discerned by those with more than half their brain functioning and the capacity to discern historical precedent and facts from the bottom feeding tendencies of schaudenfraude infused rants.

The current failure of these banks and financial institutions is due to overexposure to the risks of poorly conceived mortgage loans. This risk exposure has been amplified by an all too willing liberal media and about 50 million whiny fellow americans looking to see their vision of economic doom finally come to fruition. Everyone who works the market knows that perception is half the battle. Thus, even though 95% of homeowners are paying their mortgages dutifully and mortgage banking makes up a small percentage of our overall economy, the only story you hear is that Wall Street is melting. (nevermind the strengths of the healthcare, tech, commodities, durable goods sectors, etc, etc ) All you will hear is how we are doomed. Especially from the likes of the NYTimes.

so what have we seen in the past?
we have seen major companies fail in good markets and bad. Companies like Drexel Burnham, Pan Am, US Steel.
and yet, curiously enough,we are still here.
how could that be? when judging by the surrounding hysteria of the time, one would have believed it to be the end of times.
and yet, markets recovered.
they recovered after the Depression, after WWII, after the Korean war, after Vietnam, after a decade long 70's recession, after the 80's crash, after the tech bubble burst and guess what?
they will recover after this mortgage problem.
companies will fail, others will take up their assets, the government and tax payers will absorb much of it, other companies will thrive, wealth will be created again because that is our capitalist system. like it or not.
hey, you could always move to Putin's Russia and try your hand at the new totalitarianism, or perhaps Iran and a rabid Theocracy, or maybe Venezuela and a good ol strong man populism (look how well it turned out for Mugabi). How about good old Europe and their pseudo socialism, just don't mind the growing resentment towards foreigners and the huge amounts of young men without employment.
perhaps Brownstoner should have let the local assclown post today and have his moment of bliss. but then again, all that silly ranting would only distract folks from a real opportunity to witness the ups and downs of our system in a way that may actually educate some for the future.

yawn, wake me when there is a real problem on the horizon, like a black hole accidently being created at the Hadron collider.

Posted by: Legion at September 15, 2008 10:38 PM

wow, turns out the anti-What is just as annoying and hyperbolic as the What.

Posted by: y00phemism at September 15, 2008 11:06 PM

Legion, the topic is "Wall Street's effect on the real estate market" and, since that market is taking a huge shit right now, you can most likely expect the sectors of business peripherally or heirarchically related to it to follow suit.

The real estate market (and many other markets too -- fine dining, upmarket retail, etc) are based upon "extra money" - luxury spending. Wall Street was providing New Yorkers with much of their "extra money". When it dries up, so too will the market for $650 bottles of Belvedere and $1m studio apartments..

I think that's all that's at issue here..

Posted by: oneonetwotwoone at September 16, 2008 11:06 AM

"wow, turns out the anti-What is just as annoying and hyperbolic as the What."

At least What was funny. What should have been allowed his day in the sun. What difference would it have made to wait one more day.

Posted by: cobblehiller at September 16, 2008 3:47 PM

wasder -

"Bayridge--second that. "What" a difference it makes!"

oh really? then why did you seek him out on the forums?

Posted by: Pastabatman at September 20, 2008 11:39 AM

Watching real estate types talk about finance is like watching children talk about foreign policy.

Finance people buy things with bonus, and leverage the shit out of themselves because that is how they generally do business. Hate to break it to you (and them), but there aren't going to be bonuses this year. That is, if you are not one of the 50-70K that are out of work. Many of the Bear Stearns employees we were offered to stay on for a number of months to "transition" with transition dates ending about now. Those layoffs have yet to hit the numbers. Also, hiring freezes, stepped up performance firings, and other lagging layoffs have yet to hit the numbers, if they ever will.

No more Merrill Lynch MDs (Managing Directors) buying a six pack of condos for his NYU freshman daughter. This is a long way from over. Those that still have jobs in finance will start to think about how long it takes to make a million dollars before they sign on the dotted line for a 2br in bed-sty.

As to the poker aspect of buying and selling homes: this is not the homestead that you made from sod on the wild prairie. Most of the owners on this board bought with investment in mind. The market is going against them and now they want to pretend that is all about their "home." It can't be a casino when you are up and a homestead when you are down. I'll exact as much pain in purchasing on a seller as possible, because they would have done the same to me two years ago. The champagne is warm, the coffee is cold, and the real estate party is over.

Posted by: actually works in finance at September 21, 2008 9:44 AM

"oh really? then why did you seek him out on the forums?"

Because instead of making his predictions on the economy and letting other people editorialize he chose to use his data to attack with a comically broad brush anyone who was interested in buying a house in Brooklyn. Now that he is gone, it is much easier to discuss sensitive topics that require thoughtful responses.

Posted by: wasder at September 22, 2008 9:24 AM

Actually---lovely sentiments there. Who doesn't purchase something like a home without any thought to its future value? Very few I would think. And yet I think you overstate the importance people place on this. A home is still a home--unlike other "investments" you actually derive benefit from it regardless of its nominal value. You, along with several others on this thread, seem to be enjoying in a particularly acute way, the downturn in the market and the pain, financial and otherwise, that this situation is creating. Why the perverse glee?

Posted by: wasder at September 22, 2008 9:29 AM

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September 15, 2008

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