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May 27, 2009

Case-Shiller: Record Drops in NY and Nationwide

down%20arrow.jpg The latest Standard & Poor’s Case-Shiller Home Price Index stats are once again grim: Prices in 20 major metropolitan areas dropped in March by 18.7 percent from March 2008, about the same level of decline as has been documented over the past few months. Here in the New York region, home prices fell 2.5 percent between February and March of this year—a record drop, according to the Real Deal—and 11.8 percent year-over-year. As TRD notes, the index does not include condos or co-ops. The Times makes the point that New York is far less screwed than other places, at least so far: "New York and Detroit, while both reporting large monthly declines in March, show the different legacies of the boom. New York is still up 73.4 percent from January 2000, while in Detroit prices are 29 percent lower. A Detroit house costs about the same today as it did 14 years ago." The national Case Shiller index for the first quarter, meanwhile, showed a 19.1 percent decline compared with the first quarter of 2008, the biggest drop in the index’s 21-year history.
Home Prices Decline Again in March [NY Times]
Home Prices Fall By Record Amount in 1Q [The Real Deal]

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Comments

House prices in New York up 73% since 2000? Not too hard to link that to the exorbitant pay scale on Wall Street during this decade. Wall Street isn't returning to that irrational pay scale anytime soon, and New York housing prices therefore must return to rational pricing as well.

Posted by: bkhabitant at May 27, 2009 9:44 AM

Who's to define what is rational???

Posted by: daveinbedstuy at May 27, 2009 9:48 AM

"Who's to define what is rational???"

Each individual. Collectively known as "The Market".

Posted by: northsloperenter at May 27, 2009 9:51 AM

The people making 100s of millions of dollars did not drive up housing prices as much as the new MBAs making $175K+ bonus and buying $500K one bedrooms and their bosses making $500K plus and buying $2MM condos or houses. There may be fewer of them but they are still there. Not enough for the thousaands of new condos out there but enough to keep BOH from getting his brownstone ...

Posted by: BH76 at May 27, 2009 9:53 AM

Why'd you leave out New York's drop from the peak? It's -19% and accelerating into a tailspin. The rate of change, rolling monthly year-over-year, is still dropping for the SEVENTH CONSECUTIVE MONTH!!! The perfect storm is coming.

"the index does not include condos or co-ops"

Doesn't include 2+ family brownstones neither. But that doesn't make it irrelevant. Everything up +200%, everything down half off or worse.

"New York is far less screwed than other places, at least so far"

'at least so far' - priceless!

"New York is still up 73.4 percent from January 2000"

ROTFLMMFAO! New York is still up from the 70's. Spin spin spin...

***Bid half off peak comps***

Posted by: Brownstones Half Off at May 27, 2009 9:59 AM

Yes, and the market is not saying prices are anywhere near going to be "Half Off peak Comps" in brownstone Brooklyn. CA, Fl & NV are much different animals.

I'm back all rested from vacation and here to add a reality check to the bearishness of BHO and the others who will wait and wait and wait and wind up missing the bottom.

Posted by: daveinbedstuy at May 27, 2009 10:00 AM

nsr -- your definition is circular and actually undermines bkh's point. If the market is always rational, it was rational in 2007 and is rational now, and will be rational in 2011, whether prices fall or rise. The pay scales were rational in 2007, too, because that's what the market bore at the time. If, at any time, you think -- as bkh does -- that housing prices and executive pay were irrational, then rationality is determined by some other means than the market.

Posted by: slopefarm at May 27, 2009 10:01 AM

This is only the begining for price adjusting in Brooklyn and Queens. There has to be at least another 40-50% drop in order for the numbers to make sense for a buyer. Until then we will just wait on the fences.

Posted by: hannible at May 27, 2009 10:02 AM

"Who's to define what is rational???"

Andrew Cuomo.

***Bid half off peak comps***

Posted by: Brownstones Half Off at May 27, 2009 10:04 AM

"There has to be at least another 40-50% drop in order for the numbers to make sense for a buyer."

ROTFLMMFAO.....and the places changing hands right now make no sense just because you can't afford them?????

As slopefarm said it quite well, the market determines prices and is doing so righ now, in a rational manner.

Posted by: daveinbedstuy at May 27, 2009 10:06 AM

Bank of America has raised $26B since its stress test results. The market has spoken. The stock is up 376% from its low.

PULL YOUR HEADS OUT OF THE SAND PEOPLE. The market has begun to discount the recovery. It's leaving you behind in your dirtnap.

Posted by: daveinbedstuy at May 27, 2009 10:09 AM

"the market is not saying prices are anywhere near going to be 'Half Off peak Comps'"

-19% is well on the way my friend. Last bottom lasted 5 years. How the hell can you miss that?

"I'm back all rested from vacation..."

You're back from Cuomo's office. No more pension money for you to Ponzi away.

***Bid half off peak comps***

Posted by: Brownstones Half Off at May 27, 2009 10:10 AM

There's no such thing as market rationality. It oscillates between fear and greed.

***Bid half off peak comps***

Posted by: Brownstones Half Off at May 27, 2009 10:13 AM

Perhaps, BHO. And we would now be coming out of the "fear" cycle which is where the most money is made.

Posted by: daveinbedstuy at May 27, 2009 10:16 AM

Hiya Assholes! I see the denial is still in full effect! Team Bear I suggest you buy radiation suits and re-harden you bunkers it's going to get real bad!

Lookie here!

10-YEAR TREASURY NOTE (^TNX)

http://tinyurl.com/qfpqmz

The mutant Asset Bubble is leaking massive amounts of radiation! The US Government is holding auctions for treasuries this week (5 & 7 year). The long end (10 & 30 year) is getting smashed! The inflation genie is out of the bottle (Inflation Expectations) and it's going to get "interesting" very soon! Buh bye Retards thanks for all the "good times"...

The What

Someday this war is gonna end...

Posted by: Return of The What at May 27, 2009 10:16 AM

Hiya Assholes! I see the denial is still in full effect! Team Bear I suggest you buy radiation suits and re-harden you bunkers it's going to get real bad!

Lookie here!

10-YEAR TREASURY NOTE (^TNX)

http://tinyurl.com/qfpqmz

The What

Someday this war is gonna end...

Posted by: Return of The What at May 27, 2009 10:16 AM

"The market has spoken."

The crack and koolaid martini has been drunken.

***Bid half off peak comps***

Posted by: Brownstones Half Off at May 27, 2009 10:18 AM

DIBS, I didn't quite say that. I was making more of a logic point -- my point was, you can't take credit for the wisdom of the market only some of the time, i.e., when you think it is siding with your own view. Either you believe the market is always rational or you concede it isn't, but you can't say the market is rational when it's down and wrong when it is up (or vice versa). My own view is that I don't believe in absolutes on the rationality of the market. I also generally hesitate here to predict where I think the market (any market) is going. Not my bailiwick, but I always find your views on this well-informed.

Posted by: slopefarm at May 27, 2009 10:19 AM

slopefarm,

I wasn't really agreeing or disagreeing with bkh's assertion of rationality v. irrationality.

I think each individual can decide for themselves and their collective judgment will become apparent in time.

The thing is, the "market" is only as rational as the most desperate buyer when it is going up and only as ration as the most desperate seller when it is going down.

Was it rational when oil was >$150/barrel? Was it rational when oil was <$40/barrel?

Do those questions even have meaning? Not in a financial sense. The prices are what they are.

It is only the individuals who agree to buy/sell at those prices who are being rational or irrational, and you need to make those judgments on a case-by-case basis, which most people could only do for themselves and close friends and family.

Posted by: northsloperenter at May 27, 2009 10:19 AM

Sorry slope...I knew what you were saying and it was logical. Wasn't trying to put words in your mouth, just extrapolating.

Posted by: daveinbedstuy at May 27, 2009 10:22 AM

"Bank of America has raised $26B since its stress test results. The market has spoken. The stock is up 376% from its low."

Dave right now we don't care about the equity market! We all know the ramp job by Goldman Sachs and other "Primary Dealers". The trading volume is very low because no one want to get caught in a "Suckers Rally".

The big problem is borrowing costs for everyone! Just look at the long end of the Bond Market.

"There's no such thing as market rationality. It oscillates between fear and greed."

Amen..

The What

Someday this war is gonna end...

Posted by: Return of The What at May 27, 2009 10:23 AM

"coming out of the 'fear' cycle"

Case-Shiller YOY dropping deeper and deeper into the red

You're dislexing in/out, DIBS. Keep sipping those martinis. Rehab is for quitters.

***Bid half off peak comps***

Posted by: Brownstones Half Off at May 27, 2009 10:23 AM

BHO.....put your money where your mouth is and move to Detroit.

Posted by: daveinbedstuy at May 27, 2009 10:26 AM

Wow Dave is the Last Asshead standing! Dave you realize the other retards got smoked on the collapse??? I think you are totally gone....

The What

SOmeday this war is gonna end..

Posted by: Return of The What at May 27, 2009 10:31 AM

"dave is the last asshead standing!"

haha I wonder if the what talks like this in real life.

Posted by: Santa at May 27, 2009 10:38 AM

I got lots of equity, What. I'm standing for the long haul long 4 residences and not flinching. Total LTV about 20%.

There are real interesting deals showing up now.

Posted by: daveinbedstuy at May 27, 2009 10:41 AM

DIBS - isn't it getting a bit lonely doing all that cheerleading? Let's face it - given how little things have fallen thus far in NYC, it has a lot further to go. Peddling fear of "missing the bottom" is just absurd. Trust me, the bottom is not here, and it will not re-ignite so quickly that buyers will "miss it".

Posted by: Miss Muffett at May 27, 2009 10:51 AM

Actually, there is now a real risk that house prices will go up in nominal terms...

DIBS, as an Asian specialist you must follow Marc Faber? I think he's one of the best commentators out there. His prognosis - “I am 100 percent sure that the U.S. will go into hyperinflation,”

http://bloomberg.com/apps/news?pid=20601087&sid=aIeLg1djbBps&refer=home

Thoughts?

Posted by: the chicken at May 27, 2009 10:52 AM

Dave --are you calling a bottom in Brooklyn housing?

Posted by: Whuh at May 27, 2009 10:52 AM

"There are real interesting deals showing up now."

Dave, tell me about it! I was looking at some really nice townhouses in Rittenhouse Square and Center city recently.

Posted by: Kensingtonian at May 27, 2009 10:53 AM

" Let's face it - given how little things have fallen thus far in NYC, it has a lot further to go. "

Posted by Miss Muffett

Or, they just aren't going to fall like the rest of the country where there was far more speculation. That's what the numbers are telling us right now yet you refuse to see the data realistically.

Posted by: daveinbedstuy at May 27, 2009 10:54 AM

chicken, if we go into hyperinflation, isn't it more of a reason to jump on real estate because money will not be worth anything.

During hyperinflation in Germany, people would buy anything possible because money was loosing value hourly. At some point, workers demanded to get paid twice a day and hand over money to wife and kids during lunchtime so they can go and buy anything they could find, didn't matter what, just so they may be able to trade it in the future for something else.

Posted by: Kensingtonian at May 27, 2009 10:56 AM

chicken...I know Marc and his wife quite well. He makes his reputation on being sensational. He (and I) make money on his stock picks.

Kens...Philly is very, very cheap and still an excellent value. The market has not come off in Center City much at all. There have been a few high end Rittenhouse places dumped on the market but the market as a whole is still quite firm relative not only to the rest of the US but also to brownstone Brooklyn as well.

There are very few condos in Philly which is one of the big reasons.

Posted by: daveinbedstuy at May 27, 2009 10:57 AM

Guys leave Dave alone. He's clearly delusional and tweaking!

The What

Someday this war is gonna end..

Posted by: Return of The What at May 27, 2009 10:59 AM

What...pass me some of your meds.

Posted by: daveinbedstuy at May 27, 2009 11:01 AM

What...pass me some of your meds.

Posted by: daveinbedstuy at May 27, 2009 11:01 AM

Dave you are a Retarded Asshole and will lose all of your wealth very soon. You arrogance will hurt you! Just get ready to live in the Ghetto during a Depression....

The What

Someday this war is gonna end...

Posted by: Return of The What at May 27, 2009 11:04 AM

DIBS, my cousin (who lives in Philly) who does commercial real estate mortgages and some real estate sales as well told me the same thing. He is very successful and also owns loads of properties, eventhough he is 27. He lives in one of those luxury condos that were built in Penns Landing. He is urging me to just buy a nice townhouse in Philly and come work for him :o).

Posted by: Kensingtonian at May 27, 2009 11:05 AM

chicken, if we go into hyperinflation, isn't it more of a reason to jump on real estate because money will not be worth anything.

Posted by: Kensingtonian at May 27, 2009 10:56 AM

Yes. I don't know if "more of a reason" is more appropriate than "a reason" though.

The funny thing is that the Zimbabwean Stock Market was far and away the best performing market in 2007 (and probably for several decades) in nominal terms. Equities and hard assets are the winners in a hyperinflationary environment, cash/bonds and personal income are the losers.

DIBS, fancy a trip out to Thailand to see him?

Posted by: the chicken at May 27, 2009 11:07 AM

From here on Sri Lanka will be one of the best markets. The civil war is over and it is an idyllic resort country to visit. It has British legal system and very good companies.

Almost impossible for retail investors to touch though.

Posted by: daveinbedstuy at May 27, 2009 11:12 AM

What...I wasn't able to accumulate 4 homes and very little debt by being retarded. An asshole, maybe. How will I lose all of my wealth??? Will these properties and my securities go to zero?? I think you're looking more like the retarded Asshole now. Wise up.

Posted by: daveinbedstuy at May 27, 2009 11:13 AM

Chicken, what odds do you place on hyper or even big inflation hitting the US within the next 2 yrs? If it comes, I'll be in trouble - dont have any debt to take advantage of the big inflation

Posted by: more4less at May 27, 2009 11:14 AM

I don't recall DIBS calling the bottom of the Brooklyn RE market. He may have implicitly called a bottom in the stock market by pointing to the sharp increase in stock prices over the last two months. I think that's what MM meant by "cheerleading' but she seemed to imply DIBS was talking Brooklyn RE. That's how I read the debate here, anyway.

The B.5/what/mm/hannible position seems to be that CS results prove that much more of the same is in store for the forseeable future.

DIBS's view on BK housing market seems to be that stock market's upward trend suggests that housing price declines will level off a lot sooner than the above think will be the case.

Posted by: slopefarm at May 27, 2009 11:17 AM

Somewhat, slope. But the market here was also far less speculative in its nature and did not represent second and third homes which is what is killing places like CA, FL and NV where the worst of the price declines CONTINUE. Detroit is its own story and always will be.

Posted by: daveinbedstuy at May 27, 2009 11:19 AM

"What...I wasn't able to accumulate 4 homes and very little debt by being retarded. An asshole, maybe. How will I lose all of my wealth??? Will these properties and my securities go to zero?? I think you're looking more like the retarded Asshole now. Wise up."

Let me tell you a quick story! A friend of mine thought he was the next "Donald Trump" so he suck and flip the equity from his 2 houses (owned free and clear). His "investor" buds was telling him to this and that and now he is in financial ruin. Remember if it can happen to Bear Sterns, Lehman and Merrill Lynch, it can happen to you too.

The What (5 months)

Someday this war is gonna end

Posted by: Return of The What at May 27, 2009 11:23 AM

as I asked yesterday in biggest sale thread (where a J condo unit sold for $200+ more than 2007) -
please post any recent condo resales which give evidence that prices have gone down. These should be easiest to document and so far I have not been able to see convincing evidence in brownstone brooklyn nighborhoods.

Posted by: Petebklyn at May 27, 2009 11:26 AM

Apparently you know less about investing and flipping than you led us to believe. If he owned them free and clear then he still does. If he was using equity in one to buy others he deserved what he got. Big difference. You apparently don't know the difference.

Posted by: daveinbedstuy at May 27, 2009 11:28 AM

until jobs stabilize in the area, have to assume prices will continue to drip (slowly & surely).

Reading, hearing, seeing,... people continue to get fired, still unemployed,.... has to dampen people's fortitude to buy and to pay a huge price. I view banks not lending secondary to this - ie I think demand (at current prices) is very very weak. Bursting of the myth that real estate is a sure-fire appreciating asset likely leading to a pretty permanent hair cut to prices

Posted by: more4less at May 27, 2009 11:29 AM

Hyperinflation buoys up things that people NEED (food, clothing, energy and RENTED shelter). People DO NOT NEED to OWN shelter and will certainly not do so at anything near peak comps (REAL TERMS). And even then, an inflationary but depressionary environment will not save home prices from crashing to half off or worse (REAL TERMS). If Park Slope brownstones go for $10M in five years but it costs you $50/gal for milk, that would still be far worse than half off in REAL TERMS. In nominal terms it would be +300%. But only idiots think exclusively in nominal terms. You brownstoners are smarter than that, right?

***Bid half off peak comps***

Posted by: Brownstones Half Off at May 27, 2009 11:57 AM

Here is a story and chart from NYTimes about rent ratios. NYC metro area is down to 22 from a peak of 27. The writer states that 20 is bubble territory for national market. Does anyone have data on histroical rent ratios for NY metro area, that will give a clue as to how far we have to go or not.

http://www.nytimes.com/2008/05/28/business/28leonhardt.html?pagewanted=2&_r=1&sq=rent%20ratio&st=cse&scp=3

Posted by: DeLepp at May 27, 2009 12:00 PM

"Chicken, what odds do you place on hyper or even big inflation hitting the US within the next 2 yrs? If it comes, I'll be in trouble - dont have any debt to take advantage of the big inflation

Posted by: more4less at May 27, 2009 11:14 AM"

I think big inflation within the next two years is inevitable. Hyperinflation is (to me) a possibility but not a likelihood. I know Faber has a tendency to sensationalise and I posted the link to his comment for the same reason.

This is only my opinion as I interpret the world around me and my expectations for the future. I correctly predicted the tech, houses and oil bubbles bursting in a relatively timely fashion (and a couple of others that didn't come to pass) so my track record is good but I'm like Cassandra - no-one ever believes me until after the fact...

Posted by: the chicken at May 27, 2009 12:03 PM

I think the point The What was making was that his friend DID own two houses free and clear, and decided to release the equity to make down payments on a much larger property portfolio.

At least he achieved his goal. He really is the next Donald Trump - broke again!

Posted by: the chicken at May 27, 2009 12:08 PM

chicken you right, all the technicals stats predicted the tech bubble in 1999, the air didn't start hissing till March 2000 and hissed all the way to October 02 if I recall? One thing NYC housing has going for it is it's still about 85% coops, where there isn't speculating allowed. I'm not saying crazy condos prices didn't inflate coop prices, but the run up was dampened by regs.

Posted by: DeLepp at May 27, 2009 12:12 PM

"He really is the next Donald Trump - broke again!"

LOL. Mark Faber is sensational but these are sensational times. Banruptcies everywhere (GM next).

***Bid half off peak comps***

Posted by: Brownstones Half Off at May 27, 2009 12:16 PM

"85% coops, where there isn't speculating allowed"

Not true. The majority of them do not have price ceilings. Co-ops regulate financing but cash down came from speculation elsewhere (Wall St getting fat from subprime securitzation originating in CA et el). It was a home price economy.

***Bid half off peak comps***

Posted by: Brownstones Half Off at May 27, 2009 12:21 PM

"Bank of America has raised $26B since its stress test results. The market has spoken. The stock is up 376% from its low.

PULL YOUR HEADS OUT OF THE SAND PEOPLE. The market has begun to discount the recovery. It's leaving you behind in your dirtnap"

Dave - either you are a realtor or a developer, or just really need to sell. Either way you are WRONG. The decline has just begun. You think NYC is different than the rest of the world? Tell me why? Only thing stopping people from selling their over-leveraged properties is because they having nothing to make up the difference with. Oh, and apparently NYC historically lags US RE market declines by approx. 18+/- months... which... is about this summer/fall.

http://online.wsj.com/article/SB124342915291758463.html#mod=testMod

BoA should be called "Bank of other countries than America". Oh, 376% up from low and still 400% off of its average price a year + ago! Nice.

Posted by: goodoleboy at May 27, 2009 12:23 PM

BHO, none of them had price ceilings. But you still needed at least 20% down, sometimes 50%,with a year's worth of maintenance in the bank. Not everyone works on Wall Street with fat bonuses.

Posted by: DeLepp at May 27, 2009 12:25 PM

I am neither a realtor, a developer and do not need to sell. Please try to keep up.

Posted by: daveinbedstuy at May 27, 2009 12:34 PM

BoA should be called "Bank of other countries than America". Oh, 376% up from low and still 400% off of its average price a year + ago! Nice.

Posted by: goodoleboy at May 27, 2009 12:23 PM

With that kind of mindset you'll never make any money.

Posted by: daveinbedstuy at May 27, 2009 12:41 PM

"Only thing stopping people from selling their over-leveraged properties is because they having nothing to make up the difference with."

Ha ha. Underwater - bloop bloop bloop. Or they eat the sheepfeed that 'a recovery is around the corner'. Just like they ate 'no housing bubble', 'RE only goes up' and 'it's just a subprime problem'.

"BHO, none of them had price ceilings."

Effectively, some did in the form of income limits. My brother had to fudge down his income (partial tax year) to buy his co-op. Not everyone works on Wall St but you forget that Wall St money perculates through the NYC economy. Those 20% to 50% cash downs had speculative blood all over them.

***Bid half off peak comps***

Posted by: Brownstones Half Off at May 27, 2009 12:46 PM

-19% since peak two years ago is totally underwhelming. All it means is that New York has held up surprisingly well so far. What happens next depends on jobs, interest rates, etc. All unpredictable. To conclude, as Miss Muffet and BHO have, that because New York has not fallen yet therefore it must soon is illogical, wishful, and circular thinking.

Posted by: mopar at May 27, 2009 12:50 PM

What / BHO - Your IR commentary is not correct. This weeks treasury auctions have been remarkably well recieved. Given the sums of US treasuries 30 yr rates at 4.4% are incredible and extremely low from a historic perspective. Early 1980s trasury's were yielding 13%+ we are not even close to that. Just as the fed has expanded the money supply it can be quickly contracted.

Understand team bear are feeling good right now and happy to sit on the sidelines but how are you going to save enough to retire without the benefit of long term tax advantaged real estate investments ? Cd's paying 1% ?

What - by the time you retire your SS check will likely only pay for your bus ride to coney island. Guess you can cash in all that gold you've been hoarding or your other amazing hindsight strategies.

DIBs is right, when everyone else is walking away is when the best deals can be made. All dependent on risk tolerance but I believe it's a mistake to ignore any asset class outright.

Posted by: 10thStreetReno at May 27, 2009 12:53 PM

I think in addition to the Open Thread, there needs to be a daily "What DIBS and BHO thread" where those 2 or 3 guys can spit at each other all day.

Posted by: northsloperenter at May 27, 2009 1:00 PM

"Understand team bear are feeling good right now and happy to sit on the sidelines but how are you going to save enough to retire without the benefit of long term tax advantaged real estate investments ? Cd's paying 1% ?
...
All dependent on risk tolerance but I believe it's a mistake to ignore any asset class outright.

Posted by: 10thStreetReno at May 27, 2009 12:53 PM"

See my post yesterday re 15 year mortgages. Save a decent proportion of your income (and have it be reasonably protected against inflation) and live within your means.

The problem with relying on speculative gains for your retirement is that, by definition, not everyone will be able to be a winner.

You're right about not ignoring any asset classes outright. Someone created a third Team a few months back, Team Reasonable, of which I am a card-carrying member. Unfortunately, I consider current prices to still be Unreasonable so I'll continue to side with the Bears.

Posted by: the chicken at May 27, 2009 1:05 PM

The appearance that the recession is over is based upon the same policies that gave us the bubble in the first place. The Obama admin is only kicking the depression can down the street. The systemic problems have not been addressed as of yet. Things appear to be stabilizing a bit, but this is only because of outrageous changes to accounting rules and the influx of reams of government money, and is supported by the same kinds of policies that created the problem in the first place. That is, give the bankers free rein (and now all of the country's coffers) and let the people pay the bill and suffer. Most people cannot afford to buy a property in most areas of NYC. This has been the case for the past eight years, but ridiculous lending practices clouded this fact because idiots were taking out mortgages for 500-600,000 on an 80,000 salary (or less). Until there is some rationality brought to bear on the banking and credit industries, we will not know the true state of our economic affairs.

Posted by: orestes at May 27, 2009 1:06 PM

I'm glad you're here as moderator, northsloperenter.

Posted by: daveinbedstuy at May 27, 2009 1:14 PM

Orestes, very true. But what would you have the government change now? Break up banks, outlaw ARMs, cap lending rates?

Posted by: mopar at May 27, 2009 1:20 PM

Oh. Increase interest rates. Yeah.

Posted by: mopar at May 27, 2009 1:20 PM

orestes, I'm not sure exactly what the hell you're talking about but I guess I agree with what you're getting at. Real estate prices inflated because of too much debt, and now private sector deleveraging has basically just been replaced with a massive ramp up in leverage in the public sector. That's just a stop-gap; the economy eventually needs to just delever altogether.

W/r/to NYC, what worries me even here is how many people put 10% down and how many people tapped out a lot of their equity they did have with a HELOC or something. Have been surprised how prevalent this looks (altho that's just an anecdotal observation, wd defer to anyone who had some hard data)

Posted by: woodys at May 27, 2009 1:34 PM

" Most people cannot afford to buy a property in most areas of NYC. This has been the case for the past eight years, " - this has always been true not just 8 years. This is a city of renters...and a very high percent of low income people.
The only time when more people can afford property is when nobody finds it desirable (a.k.a. Buffalo).

"what worries me even here is how many people put 10% down and how many people tapped out a lot of their equity they did have with a HELOC or something." - you have stats for NYC at 10% down compared to rest of USA or just blowing hot air?

I'm still asking/waiting for resale data on recent condos sales to verify that/how much prices have gone down. Come up with the evidence already.

Posted by: Petebklyn at May 27, 2009 2:02 PM

Petebklyn I think I said pretty clearly that was just anecdotal, but then you could read that in my post, if you had taken the time to do so.

Posted by: woodys at May 27, 2009 2:27 PM

"What / BHO - Your IR commentary is not correct. This weeks treasury auctions have been remarkably well recieved. "

Yep short term debt stupid! The long end of the curve is getting smashed! The Bond Market is going to put Housing market to sleep, dirt nap style.

"Given the sums of US treasuries 30 yr rates at 4.4% are incredible and extremely low from a historic perspective."

You're right however, the Bond Market is smelling Inflation right now! The profligate spending US Government is about over.

"Early 1980s trasury's were yielding 13%+ we are not even close to that. Just as the fed has expanded the money supply it can be quickly contracted."

The contraction is well underway! Lookie here...

Today's 10-YEAR TREASURY NOTE (^TNX)

http://tinyurl.com/pg573c

Noticed the hard spike up? Well here ya go Assholes...

Treasuries Fall on Concern Record Sales Will Overwhelm Demand

http://www.bloomberg.com/apps/news?pid=20601087&sid=a45Qh5jy68zU&refer=home

I skipped thru everything to bring out this point!

"Ten-year Treasury fell the most last week since June 2008 as investors speculated a record supply of Treasuries to pay for a mounting budget deficit may jeopardize the U.S.’s AAA credit rating."

The credit rating of the United States of America is called into question????????!!!!!! Are you fucking kidding me!!!!!!!! If America loses it's ability to borrow money, every asset class is fucking finished.

I really don't want to argue. If you believe everything is OK then go right ahead...

The What

Someday this war is gonna end...

Posted by: Return of The What at May 27, 2009 2:29 PM

"The credit rating of the United States of America is called into question????????!!!!!! Are you fucking kidding me!!!!!!!! If America loses it's ability to borrow money, every asset class is fucking finished."

True!

But what is this about inflation? I thought yesterday you were predicting deflation. (Serious question -- I'm confused.)

Posted by: mopar at May 27, 2009 2:35 PM

I'm confused. If Dave isn't calling a bottom in Brooklyn RE now, how is it I'll be left behind, napping, if I don't buy a home here now? Also --what do Roubini, Soros, various bloggers like Calculated Risk, all have in common? They all called the housing blow off and the recession. And they all think Dave's "recovery" is driven by quantitative easing, and is a charade. But I'll take Dave's advice any day of the week, over those chicken littles. Right, Dave?

Posted by: Whuh at May 27, 2009 2:38 PM

It is nice to see people like Daveinbed... not even faulter in the face of reality. They remind me of the music band that played till the end on the sinking Titanic. I have and had the money to buy years ago I just thought that it would have been very stupid of me to pay a million for a brownstone when I could buy it at 200,000 dollars. The 800,000 is all toxic asset. Dave enjoy your toxic assets.

Posted by: hannible at May 27, 2009 2:42 PM

Mopar - my thinking is not illogical - it's based on proven metrics such as the Case-Shiller, the one that is driving this whole thread. Costs to rent vs. own are still way out of whack, and there were unsustainable gains over last 10 years. Further declines are inevitable.

Posted by: Miss Muffett at May 27, 2009 2:45 PM

There was too much swearing and use of foul language today. Can everyone take it a little easy with the efword?
Thanks

Posted by: BrooklynGreene at May 27, 2009 3:03 PM

"There was too much swearing and use of foul language today. Can everyone take it a little easy with the efword?"

Naw fuck that!!! You need to hear it loud and clear! The economic system is going down the drain because of greed and fucking delusion! So fuck Team Bullshit and fuck you too!!

The What

Someday this war is gonna end...

Posted by: Return of The What at May 27, 2009 3:06 PM

Miss Muffet, you said

" Let's face it - given how little things have fallen thus far in NYC, it has a lot further to go."

This presupposes New York has further to fall.

There may be other reasons you think New York will fall, but the fact that it isn't down very far yet is not a good reason.

Other areas of the country are down even less. For example, Dallas is down 11 percent. Does this mean they will fall even further?

Posted by: mopar at May 27, 2009 3:23 PM

What's the CS index say in Dallas? The amount an area will fall has a lot to do with how much/quickly/unsustainably it rose in the first place. Some areas did not see the meteoric rises of NYC and thus will not fall as much.

Posted by: Miss Muffett at May 27, 2009 3:44 PM

Miss Muffet, Dallas did not have a very big run up at all. Neither did New York. In fact, all the cities that have fallen the least also rose the least during '05 and '06.

You can check it out in the interactive graphic on the linked NYT story.

Posted by: mopar at May 27, 2009 5:11 PM

Hey Brooklyn RE bulls, yes follow DIBS! Yes, the same DIBS who spuculated not only in peak price BK RE but the GHETTO!!!! The worst of the worst "investment" you can make in a lifetime. FOLLOW HIM! Hes like the guy who gets the crap beat out of him in the park but hes so stupid he comes back for more beatings. Dibs has no shame LOL. I love this guy!!!!!

Posted by: cornerbodega at May 27, 2009 5:15 PM

Mopar, what don't you understand about the CS index for NY?

Posted by: cornerbodega at May 27, 2009 5:16 PM

Mopar - not sure how you can say NYC did NOT have a big run-up. As pretty much everyone concedes, NYC had a HUGE run-up in prices 1998-2008. Hence, further falls are inevitable.

Posted by: Miss Muffett at May 27, 2009 5:23 PM

Corner, read the chart.

Posted by: mopar at May 27, 2009 5:26 PM

The chart starts in 2001. New York prices held more or less steady until the recent decline. They did not suddenly surge in 2005 and 2006 as did Pheonix, Las Vegas, and Miami.

Posted by: mopar at May 27, 2009 5:46 PM

The Case Shiller composite index for cities rose after 1991 and fell at the end of 2004. So if you want to go strictly by the Case Shiller index, Miss Muffet, you might note that the last down period (89 to 91) lasted only two years, and now we've already been down for four. (According to the composite index.) So by that measure, we are overdue to go up.

http://www.socketsite.com/archives/2009/02/december_spcaseshiller_san_francisco_msa_ends_year_down.html

Posted by: mopar at May 27, 2009 6:19 PM

http://online.wsj.com/article/SB124336746233955539.html

Posted by: goodoleboy at May 27, 2009 7:05 PM

a reminder for idiots like mopar, courtesy of your friends at goldman sachs. Yes, the same guys whos hyping this bear rally. If even these guys are bearish (35-58% down)on ny RE watch out! From Q1 2009:

Goldman: "New York prices are very high relative to the observable fundamentals. Using three alternative yardsticks—price/rent, price/income, and affordability—we find that prices would need to decline by 35%-44% to return to the valuation levels seen in the 1995-1999 period, before the start of the recent boom."

Goldman: "It is instructive to consider the potential implications of a return of relative Manhattan incomes toward the national norm prevailing before the Wall Street boom of the past two decades, either because of pay cuts in the financial industry or because of a possible out-migration of affluent individuals. From 1969 to 1986, Manhattan per-capita income averaged 2 times the national average, with no clear trend. Over the next two decades, however, it grew to 3 times the national average. If incomes fell back to the pre-1986 level of 2 times the national average—and if national per capita income remained unchanged—prices would need to fall as much as 58% to return to the 1995-1999 price/income ratio.

Posted by: cornerbodega at May 27, 2009 7:21 PM

Look -- subprime areas of New York are down so much that flippers are buying them at 2003 prices -- and reselling them to buyers at 2006 prices. What kind of crazy world are we living in?

I see prices in subprime Brooklyn leveling off in the 300s or so in the next year.

I don't know what that bodes for prime Brooklyn, areas such as Park Slope and Brooklyn Heights. I would guess prices will decrease over the next year, then flatten for a few years, maybe three.

However -- if interest rates go up, which they surely will, expect prices to fall. And if the US can't borrow -- expect apocalypse.

Posted by: mopar at May 27, 2009 10:19 PM

if I am uneducated, have no savings, a low credit score and real long-term prospects for a full-time job that helps me to save any money, will I every buy anything? If not, should I even be worried about this index?

Posted by: ghettoazzpnkbtch at May 28, 2009 1:16 AM

I don't see real estate going up in nominal terms and I don't see high or hyper-inflation, but instead continued credit and asset price deflation for the next few years. Zimbabwe or Weimar style inflation is what happens when your debt isn't denominated in your own currency. It cannot happen here because our debt is denominated in USD. Under normal circumstances we would be headed for deflation, but QE is the joker in the deck. The question is whether or not the easing ends up with more money in the system than credit and wealth are being destroyed. It also depends on whether you can get money in the hands of ordinary people or the banks. Right now there is no wage pressure and with continued mass layoffs there is continuing downward pressure on wages. The only way that I can see any inflation would be a currency crisis, but the effect would be bifurcated (imports versus domestic products) and somewhat tempered by demand destruction, even though oil would go up.

The problem with a USD crisis is that we aren't on a gold standard, the USD is now and for the foreseeable future the world's reserve currency and the closest competitors are in even more trouble than the USA at the moment.

I don't see the trouble in the bond market as a sign of inflation, but a lack of demand on the part of outsiders to finance our debt with too little yield given the risk. We need to sell trillions of USD worth of bonds to finance our deficit and every year that we continue a deficit. Bernanke can't be the only "bid" at the long end unless he wants a currency crisis ending up in destruction worse than just letting the bonds be subscribed by natural buyers. For this reason, I think that we see yields (and therefore consumer borrowing costs) ramping. This will cause RE prices to continue to go down, defaults to go up, etc. It really is that bad, in my opinion.

My forecast - we have not yet broken the stock market lows, unemployment highs, real estate price lows, etc. Brooklyn will go back to pre-bubble prices. Stocks to new lows by fall. The "green shoots" are nonsense. Even the effect of spending trillions will see a double dip recession and another leg down - as someone mentioned "kicking the can" previously. Brooklyn residential RE has a long way down, folks.

Posted by: provocateur at May 28, 2009 6:01 AM

"Right now there is no wage pressure and with continued mass layoffs there is continuing downward pressure on wages.

Posted by: provocateur at May 28, 2009 6:01 AM"

All good points provocateur - straight out of the textbooks.
Note that wage deflation = real world inflation. If all prices remained static but your wages went down 10% then your purchasing power just went down 10% as well. At least under this scenario responsible savers are not punished!

Posted by: the chicken at May 28, 2009 9:59 AM

Excellent post, provocateur. What's your number (predicted price drop percentage from peak in brownstone Brooklyn)? If you're not sure, gimme your gut.

***Bid half off peak comps***

Posted by: Brownstones Half Off at May 28, 2009 3:30 PM

I would think that wage deflation is normally accompanied by price deflation due to demand destruction and vice versa (which is why re-inflationary policies can't work in a scenario where the banks get transfer payments from taxpayers). I think that this scenario will happen (deflation in the foreseeable future), but certainly not to help the responsible. If the Fed continues down the current path and provides the only bid, it will be catastrophic. They will do everything that they can without doing the right thing - until they are forced to (absence of natural buyers), which will be the interest rate rises that the bond market controls, but which the Fed manipulates. I don't think that they have a choice, but they do a great job in obfuscating that idea. I think that there's a lot of talking heads saying that inflation is around the bend, which is exactly what government and banks want people to think. I don't want to get tin-foily, but I think they want people to think that their purchasing power will be eroded so that they spend now - I'm not talking about housing in particular here, but other asset classes. This sort of propaganda was trotted out in the 30s and we all know that didn't result in inflation.

I mentioned to my wife recently that a co-op that we purchased in Manhattan in 2000 at 600K, sold for 925K, was bought by the previous owner for 450K (1 year owned) and was sold for 60K at the time the building went co-op in the early 80s - we have already had the inflation and nobody cared because we were all doing so well, at least in nominal terms. We lived through considerable asset inflation and most of us (if not all) weren't even aware of it at the time.

As far as predictions go, we need to see all metro-NYC real estate prices within 3-4 times income. I'm not sure what Brooklyn is now or was at peak, but incomes were also distorted with the boom and prices should overshoot to the downside (with some govt programs perhaps mitigating). My guess is somewhere around the 50% range and probably higher. And the idea of missing the bottom is overstated. The recovery will be L-shaped. I was frightened to see yesterday that NY was still 73% up from 2000. That says to me that there is a considerable amount of downside and commensurate damage to the financial system.

Disclaimer: My interest in the housing market (at least in Brooklyn and Manhattan) is purely intellectual curiosity. I packed my bags and left the country last summer for a lifestyle change.

Posted by: provocateur at May 28, 2009 7:00 PM

« Open Thread MAS Continues to Push for Admiral's Row Preservation »

May 27, 2009

Case-Shiller: Record Drops in NY and Nationwide

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