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October 7, 2008

Quote of the Day

For every person crying that the sky is falling I know of another person (you and myself included) sitting on a pile of cash. Ask yourself how many people you know who are hoping to purchase a distressed property in the next year or two. I don't understand why so many of you are so negative on NYC market when in reality I'm sure many of you also know people who have a lot of money right now they don't know what to do with. These people = demand. Nothing is trading right now because everyone is in wait and see mode, but don't confuse wait and see mode with the preamble to a cataclysmic decline in prices. It might not happen. I am much more bearish on the financial markets and the national real estate market than on NYC market.

— by setancre in Front Page Forum: Walk Away from Downpayment?

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"I am much more bearish on the financial markets and the national real estate market than on NYC market."

Thank heavens the NYC market is so completely decoupled from the financial markets and the national real estate market.

Posted by: SnarkSlope at October 7, 2008 3:39 PM

"I am much more bearish on the financial markets and the national real estate market than on NYC market."

Of course you are. You are human. You become bearish after a big drop in prices, which is the exact opposite of the right reaction. You will presumably be more bearish on NYC real estate than financial markets in a couple of years after the dow is back up and NYC real estate is in the crapper.

Some of my smartest friends have the same difficulty distinguishing hindsight from foresight.

Posted by: lechacal at October 7, 2008 3:47 PM

You gotta be kidding?

A very small percentage of New Yorkers have a "pile of cash".

It doesn't matter if 3% have big cash savings while the remaining 97% do not. Only idiots try to prove points by starting out "I have friends who. . ."

In the future, banks will loan only based on potential rental income, even for residential properties.

The "comparable properties latest sale method" for lending is largely what got this country into this economic mess in the first place.

In other words, folks would have to put down enormous cash downpayments (possibly around 60%) for prices to remain anywhere near where they are now.

It's not going to happen. Park Slope townhouses that recently sold for 3 million will sell for 1.5 million this time next year. The Party is over.

Posted by: IronBalls at October 7, 2008 3:47 PM

It's amazing how once sentence can completely contradict a baseless argument.

Posted by: Polemicist at October 7, 2008 3:50 PM

Polemicist: Huh?

Posted by: lechacal at October 7, 2008 3:52 PM

IronBalls said:

"In the future, banks will loan only based on potential rental income, even for residential properties."

I hope you're not referring to single family homes in the suburbs. Otherwise, that's crazy talk. In much of the country, there is no rental market or the rental market consists entirely of people receiving Section 8 vouchers or some kind of government assistance.

"In other words, folks would have to put down enormous cash downpayments (possibly around 60%) for prices to remain anywhere near where they are now."

One of the reasons houses for middle class folk in New York City used to be so nice is banks ONLY gave loans with 50% down or more, that way the bank would have a much lower chance of being "under water" on the loan. Because homeowners were spending such a large amount of their own personal cash, they had a lot more to say about the houses they were buying. Prices were also much lower.

Residential real estate is the classic example of how usury results in a lack of affordability as well as the destruction of aesthetic standards. So, if we return to the days of high down payment requirements - I will be pleased.

Posted by: Polemicist at October 7, 2008 3:57 PM

lechacal:

I was referring to SnarkSlope, who I think wins the brevity prize on this site.

Posted by: Polemicist at October 7, 2008 4:03 PM

you better have the "pile of cash" under your mattress because if you have it invested in securities, you're not as rich as you were two weeks ago.
If you keep your millions in a savings account, congratulations! this is your lucky year.

Posted by: sam at October 7, 2008 4:21 PM

I don't think I'm sitting on a pile of cash with our house, and don't think we will be until about 7-10 years from now. But yep, I decouple the national real estate market from the NYC market. Maybe you all don't know anybody trying to sell right now outside NYC in the rest of the country.
My parents had a gorgeous lakeside condo with a private beach, in a well established, upscale historic town in the Midwest within short commuting distance to a large city for sale this Summer and not one buyer came to look at it all Summer. Not one. Even though they had listed it well under comps to sell it quickly. My cousin has had a house for sale in Austin for two years with no offers. In contrast, Brooklyn houses get people looking and they're still selling, even if for less than ask and after several weeks. Which might scare people but it is way better than what's happening nationally.

Posted by: traditionalmod at October 7, 2008 4:26 PM

I agree with this post 100% . Nyc the 22 most expensive place to live on Earth. Never a bad time to buy NYC real estate.

Posted by: sebb at October 7, 2008 4:27 PM

My quote of the day is from Ezra Pound,

"Usura slayeth the child in the womb
It stayeth the young man's courting
It hath brought palsey to bed, lyeth
between the young bride and her bridegroom

CONTRA NATURAM
They have brought whores for Eleusis
Corpses are set to banquet
at behest of usura. "

Posted by: Prodigal_Son at October 7, 2008 4:30 PM

"...SnarkSlope, who I think wins the brevity prize on this site."

What do I win? Please say "pile of cash," come on "pile of cash!"

Posted by: SnarkSlope at October 7, 2008 4:42 PM

Yeah, I'm curious, M. Jackal, how did your portfolio do this week? I hope it's all in cash a t-bills.

Posted by: FatLenny at October 7, 2008 4:45 PM

Ezra Pound was a real dingbat wasn't he?
The more one knows about him, the nuttier he seems.

Posted by: sam at October 7, 2008 4:46 PM

FatLenny: Overall (excluding the cash I have set aside for down payment) my equity portfolio is down about 10% in the past few trading days. It may go down more, which is fine. If it does, I will buy more.

My cash is sitting in CDs earning a boring 4% or so.

Bear in mind that my equity holdings are unlevered, so my 10% drop is equivalent to a 2% drop in real estate for someone who put 20% down. What happens when real estate goes down 10%? The levered buyer loses 50% of his equity. I sure as hell ain't down anywhere near 50%.

Posted by: lechacal at October 7, 2008 4:55 PM

I should add that of course I didn't lose a penny on the down payment money that I didn't cycle back into the market last year (which as I said is sitting in CDs).

Posted by: lechacal at October 7, 2008 4:56 PM

lethacal
I honestly do not think you have two quarters to rub together.
But if I am wrong, then this would be an excellent time for you to make a donation to a worthy charity.
Don't gloat. It's bad karma.

Posted by: sam at October 7, 2008 5:13 PM

I am intrigued by this "pile of cash" concept and would like to know how I get me one of them!

Posted by: cwbuecheler at October 7, 2008 5:15 PM

WATCH OUT BELOOOOOWWW

Posted by: HOBOKENROCKS at October 7, 2008 5:23 PM

cwbuecheler - might I interest you in my new, "can't lose" investment product? A little thing I call Mattress Backed Securities? Come, take a walk with me, and I can tell you how to get in on the ground floor...

Posted by: SnarkSlope at October 7, 2008 5:26 PM

SnarkSlope - somehow I feel I might never move out from the ground floor, on that plan!

Posted by: cwbuecheler at October 7, 2008 5:44 PM

Polemicist,

I am referring to all home loans, even those in the suburbs.

If it's impossible to rent homes in the "suburbs" as you claim, those homes are theoretically worthless, except as scrap and raw land. . . Rochester, NY comes to mind.

I disagree that homes in the suburbs can't be rented. But certainly they can only rent for a fraction of what their mortgage payments would have been in the last last several years -- hence the market implosion which we are not witnessing.

If banks had limited mortgages to equivalent hypothetical market rents, we would not be experiencing any of the bank failures and much of the economic turmoil we are today. If homeowners couldn't make their mortgage payments, banks could just repossess the homes, rent them out, and lose nothing.

Instead they loaned way too much on the pretense that the latest sales comparable reflected on the true worth of the underlying home, and look where we are now!

Posted by: IronBalls at October 7, 2008 5:45 PM

Prodigal Son and sam:

Neither of you are artists or even have the capacity to understand that passage. I'm sure for both of you, your understanding of sex is no different than a beast.

That is Pound's point in this particular passage. We live in a world where it is not just art and architecture that is soulless, but even the most intimate of acts is wholly separated from any notion of philosophical or aesthetic idealism. Hell, most humans today in the US look more like monsters than men.

Posted by: Polemicist at October 7, 2008 5:50 PM

I just want to know how to pronounce lechacal. Is that some type of mythological beast?

I'm not going to comment on these posts as they are WILDLY speculative, I chuckle to myself but I will not comment.

That said, I would like to know how to pronounce LECHACAL. Is it french ala le chacal or the jackal?

Posted by: Adam Dahill at October 7, 2008 5:55 PM

Polemicist,

" Neither of you are artists"

Really? And what makes you say that? You wouldn't be making such a bold opinion that one needs to be an artist to understand Pound, would you? Because thats just ~embarrassing~ and juvenile.

" or even have the capacity to understand that passage."
I've read my fair share of Pound, so again, fill me in. Have you met me? Seen my library?

" I'm sure for both of you, your understanding of sex is no different than a beast."
Again, have we met?

" That is Pound's point in this particular passage. We live in a world where it is not just art and architecture that is soulless, but even the most intimate of acts is wholly separated from any notion of philosophical or aesthetic idealism. Hell, most humans today in the US look more like monsters than men."

An interesting take on Canto LXV. Interesting, and innacurate. At least Rudge, Kenner and Moody would think so.

Ah, Brooklyn. Home of the overeducated and underpaid.

Posted by: Prodigal_Son at October 7, 2008 6:02 PM

Yes Adam, French as in le chacal.

Sam, there was absolutely no gloating in my post (maybe you think I was gloating about comparative returns, but that's like saying "you should have seen the other guy"). FatLenny asked, I answered. I am pointing out that I am willing to stand by my views as to the long-term prospects of the equity markets vs. NYC real estate. Clearly I have losses in equities. I was just pointing out that an unlevered equity portfolio is less risky than real estate ownership in the current market.

Posted by: lechacal at October 7, 2008 6:02 PM

Wow, ok did not expect that to get quote of the day.

So I think I might have been overstating my point a bit on the original thread, but really I was attempting to make a point about demand. Nearly every last person I have talked to about NYC real estate declining (for what that is worth) in the last 6 months has made the same remark "Maybe now I can finally afford to buy something here." The difference between NYC of the last real estate decline (late 80s and early 90s) and NYC of today is 180 degrees. Back then (which was when I was growing up here) people actually wanted to leave. Kids got jumped every single day on the way to and from school, their bookbags, jackets and shoes got stolen. It didn't make the news or police blotters the way a bunch of kids harrassing someone at Barnes and Noble does now, because it was such a part of the culture. There was crime, a crack problem throughout much of the city, and many families thought there were better options for them in suburbia. Demand for housing in the city went down. Similar crisis during "white flight" of the 70s.

Right now, the demand is really not going anywhere. Everyone still wants to live here, and as inflated as prices seem, they are not above the incomes of most residents (as evidenced by co-op purchases requiring documentation and 20% down, and general paucity of foreclosures). Suburbs bring their own additional expenses in energy costs, crazy-high real estate taxes, car payments, insurance, etc. Personally I would love to see prices go down here, it would be to my benefit as I am looking to buy in the next 2 years, but I realize that I am one of many, many people hoping for the same thing.

Until demand to live in NYC heads downward I don't see prices declining anywhere near to what they have in the rest of the country. There really aren't all that many better options out there for people to move to.

Posted by: setancre at October 7, 2008 6:08 PM

there used to be a diet drink named lechacal. my first wife used to keep it in the fridge,

Posted by: sam at October 7, 2008 6:09 PM

The fridge isn't where your first wife kept me.

Posted by: lechacal at October 7, 2008 6:15 PM

Setancre:

The NYC real estate market will plummet, and tightened lending will make it harder to purchase a home despite general demand to live in NYC staying high.

Rents on the other hand, which have only risen modestly in the last decade by comparison to sales prices, will increase substantially, as sales slow.

Posted by: IronBalls at October 7, 2008 6:20 PM

maybe it was lethacal. anyway if you see my first wife remind her that she owes me a pile of cash.

Posted by: sam at October 7, 2008 6:30 PM

Sure. I'll check under the mattress.

Posted by: lechacal at October 7, 2008 6:34 PM

Ha! My first wife would not fit under the mattress, if you catch my drift.....

Posted by: sam at October 7, 2008 6:40 PM

really, the correct thing to do is buy when prices are down and sell when they are high. most people do the opposite. real estate is also a decision made regardless to price because of a particular person's need at the time, so there will always be some buyers and some sellers regardless.

on the whole, the population will only increase and the demand for housing will follow.

if you can ride this thing out, condos that can't sell will fill the market and development will slow, so the existing owned properties will become more valuable as supply of properties to sell will eventually be less than demand.

in 1996 when i was shopping for a townhouse in brooklyn the broker told me that he had lots of "me's" but not lots to sell. we will return to this time. when, dunno... but we will eventually.

new york is special and the demand to buy here will come back strong. just not tomorrow.

Posted by: wine lover at October 7, 2008 7:25 PM

I'm dying to buy a place and have the money in a savings account to do so, having sold an apt in January of this year. However, I cannot find a place worth buying. They are all so wrecked. The economic situation is very grim, I am sure the layoffs will be many and house prices will continue to decline or be flat for five years or more in New York City. I don't care; the places I am looking at cost no more than renting for double the space. I just want to buy NOW while I still have a job and interest rates are still low and the money in my savings account isn't worthless.

Posted by: mopar at October 7, 2008 7:43 PM

Wine Lover,

You might have to wait seventy years for prices to rebound to the price levels they reached in real terms during the recent run up.

I'll be dead by then myself, so "waiting" isn't an option for me.

Also, the population increases will do nothing to raise housing prices if the economy is shot and folks are out of work.

If Obama gets elected, I predict the stock market falls a thousand points the next day.

His socialist agenda coupled with help from the Democrat majority congress will do their best to make our economy resemble that of France's or Spain's.

Jobs will be nearly impossible to come by and the smart money will flee to parts of the world where capitalism still exists.

Posted by: IronBalls at October 7, 2008 7:46 PM

ironballs, you and polemicist are the two posters who i think are the least knowledgable on this site. polemicist is a flake who thinks he is the new salvador dali, you seem just pretty clueless. both france and spain have thriving economies, what are you talking about? the current crisis is just the latest in a long series of crisis experienced by capital markets during the last 150 years. markets go up and they go down, that is just the way it is. what is happening today you can read about in edith wharton novels like the age of innocence. it is nothing new.

Posted by: sam at October 7, 2008 8:05 PM

Sam,

We're on the verge of the Great Depression II and your response is that it's a normal part of the business cycle?

Have you ever lived or worked in Europe?

Don't you have any idea why so many Europeans move to the US to start businesses?

US unemployment will rise to unprecedented levels if Obama puts restrictions on US corporations sending jobs overseas as he claims he's going to do.

Corporations will simply move their entire operations to more business friendly countries and millions of US jobs will be lost, lock, stock, and smoking barrel.

Obama will go down as the worst president in US history, but it won't matter since the US will have become just another part of the European Community, no longer the greatest free market democracy on the face of the earth.

Posted by: IronBalls at October 7, 2008 8:44 PM

IronBalls, please spare us the political commentary. Good for you for resisting the urge towards statism in times of crisis. Now all you need is some experience and wisdom to back up your views.

Posted by: lechacal at October 7, 2008 8:59 PM

"Obama will go down as the worst president in US history"

I think our current president already has that one locked up.

And I see zero difference between he and McCain. And if he croaks (there is a one in 3 chance with his health issues) we would be left with not only the worst president in the history of America, but the most ignorant, most closed-minded and most incompetent president on the face of the planet. Scary stuff for most of us out here with half a brain...

Posted by: 11217 at October 7, 2008 9:00 PM

11217, please, at least have the courage to defend a real viewpoint. Don't do the "conservatives are stupid" routine. It makes you sound, well, unintelligent.

I guess it's now even worth trying to stem the inevitable tide on this thread now. Why doesn't everyone go ahead and watch the debate and come back and post your uninformed drivel. I'll be here at work actually doing something about the financial crisis.

Posted by: lechacal at October 7, 2008 9:06 PM

"Why doesn't everyone go ahead and watch the debate and come back and post your uninformed drivel. I'll be here at work actually doing something about the financial crisis." - lecacal 9:06pm

Can this be tomorrow's quote of the day?

Posted by: setancre at October 7, 2008 9:42 PM

"it won't matter since the US will have become just another part of the European Community, no longer the greatest free market democracy on the face of the earth."

Right........except for the fact that we're nationalizing companies right and left -- AIG and warrants in companies the gov't purchases mortgage backed securities from -- during this administration.

Posted by: parrotgirl at October 7, 2008 10:06 PM

"your name was Beaufort when your husband covered you with jewels and your name is Beaufort now that he has covered you in shame"
Spoken by the wealthy Mrs Mignot to her relation, Mrs Beaufort, when the latter visits the old lady under cover of darkness to request a bailout for her husband, who is at the center of a Wall Street panic in 1875.

from "The Age of Innocence"
by Edith Wharton

Posted by: Inigo at October 7, 2008 10:58 PM

I watched the debate and agree McCain performed poorly while Obama seemed composed and more thoughtful. I'm also no fan of Sarah Palin, but McCain's mother is 96, so I'll wager McCain lives another 20 years due to his good genes.

But it's a big mistake to vote for a president just because he's more polished, and promises us all kinds of incredible changes. Does anybody really believe, for example, Obama's promise to create hundreds of thousands of union jobs in alternative energy? When you really think about what he's promising, it's insane.

Also, McCain deserves credit for being the only candidate to stress that stabilizing the housing market is the only way this economic crisis will end. I hate the idea of bailing out home buyers, but his 300 billion proposal of buying up bad mortgages and giving homeowners new mortgages they can afford, based on the new lower market values, could help end this recession.

It's better than any alternative I've heard Obama suggest.

Posted by: IronBalls at October 8, 2008 8:52 AM

Polemicist,

For someone who calls himself Polemicist, you are surprisingly silent in rebutting my Pound response.

Posted by: Prodigal_Son at October 8, 2008 9:10 AM

Prodigal Son

"Really? And what makes you say that? You wouldn't be making such a bold opinion that one needs to be an artist to understand Pound, would you? Because thats just ~embarrassing~ and juvenile."

The only thing that is juvenile is butchering one of the greatest poems ever written simply to use potty humor to incite giggles.

The poem obviously doesn't speak to you, otherwise you would not have attempted to obscure the meaning to the readers of this site. Pound believed the artist to be a promethean bringer of culture and ideas to the masses of aimless rabble. The Cantos was written for those people, not for academics looking for a puzzle.

"An interesting take on Canto LXV. Interesting, and innacurate. At least Rudge, Kenner and Moody would think so.

Ah, Brooklyn. Home of the overeducated and underpaid."

As for my interpretation of the sexualized lines you parsed together in your previous post, I stand by it. That you don't understand the relationship between procreation, productive work, and artistic creation simply highlights your own lack of imagination and understanding of human nature. Given you mock Pound's claim that usury is inherently against nature, this shouldn't surprise me. You really have no idea how the fruits of civilization come forth from the earth, just as the banker can scarcely fathom from where his interest payments come.

Two of the authors you cite provide relatively little insight into the meaning of the Cantos, and more than anything else - they shy away from his economic theories and don't even mention his non-poetic writings that would provide more explanation for those ignorant of them such as yourself. As for his violinist mistress, I would LOVE to hear what you have to say about her. Considering she never wrote anything and the only published work citing her personal writings was literally HORRIBLE, I can't imagine how you could describe her personal views.

Finally, I find it so very comical you have cited a particular song that describes the collapse of our present system of society even when it is happening before your very eyes.

Posted by: Polemicist at October 8, 2008 10:28 AM

"It's better than any alternative I've heard Obama suggest."

Hillary Clinton was the person to introduce the idea to renegotiate mortgages. This idea has been floating around for months, and IS supported by Obama, but he hopes that the 700 billion has this factored it (it might not).

To suggest that McCain just thought up this idea is absurd.

Oh and how about we all default on our mortgages, so we can then start paying the lower principles when home values here tank?

I'm totally a liberal and even I think this idea kinda sucks.

Posted by: 11217 at October 8, 2008 10:43 AM

Pole-

My original post was a quotation of the last few lines of Canto LXV.
Nothing more and nothing less. The subject is usury.

"you mock Pound's claim that usury is inherently against nature, this shouldn't surprise me."
When did I do that? I agree with you, Pole.

"You really have no idea how the fruits of civilization come forth from the earth, just as the banker can scarcely fathom from where his interest payments come."

And you're a commercial broker? Damn, Pole...arent you a part of the problem we're discussing here?

"Finally, I find it so very comical you have cited a particular song that describes the collapse of our present system of society even when it is happening before your very eyes."How is that comical? We're in agreement Pole.

Except I'd say you are one of those academics looking for a puzzle.

Posted by: Prodigal_Son at October 8, 2008 12:03 PM

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