Goldman: NYC Prices Have a Ways to Go
“New York apartment prices are very high relative to the observable fundamentals. Using three alternative yardsticks—price/rent, price/income, and affordability—we find that prices would need to decline by 35%-44% to return to the valuation levels seen in the 1995-1999 period, before the start of the recent boom.” — Goldman Sachs via Curbed
Goldman telling us how real estate is going to decline. I love it.
Next thing you know George Bush will publish a piece about the danger of invading other countries under false pretenses.
Or maybe a Dick Cheney gun saftey lecture?
Wow – 35% – 44% Drop
– HobokenRocks buys his 5-story dream home in Brooklyn Heights for 800k and a song.
– Miss Muffet still holding out, thinks prices will drop more.
– The What declares that we’re all Asshat Fucktards for allowing prices to drop too much.
– Benson sells his Antique Fedder collection and retires to Mill Basin
– DIBS sighted in gay bar on Atlantic crying, why did I buy in a ‘Fringe’ Area.
– Biff looses his bet on Remsen and BRG is disco dancing in the streets at his demise.
– IronBalls will upgrade his balls to platinum.
Bitter Renters remain Bitter Renters!
DIBS: Probably about the same amount, inflation adjusted. Valuation levels — prices relative to inflation — are remarkably consistent over extremely long periods of time, as Prof. Shiller has shown.
NYC housing sold for between 10-12x annual rental value for most of the last century (not surprisingly, since at higher sales prices there is a tremendous economic incentive to convert rentals into sales).
Both rents and purchase prices went up pretty consistently at the same rate as income (not surprisingly, since if they went up faster, there quickly wouldn’t be anyone able to pay them).
The last several years really were different. A dramatic change in the credit markets allowed people to borrow unprecedentedly large amounts relative to income while simultaneously giving people in the credit and related businesses unprecedentedly large incomes. That’s over, at least for now.
what about renters with no cash? how will they fare?
*rob*
Miss Muffet roars back after yesterday’s setback! Score one for Team Bear!!
Congratulations, Muffie!
Patient renters with cash will be rewarded.
Long-term buyers who don’t need to sell in the next 15 years and can afford their payments will do just fine.
Anyone who bought in the past few years and may have to sell in the next 10 could be in a lot of trouble.
Current asking prices are irrelevant.
In a bear market, never buy on the first dip. And never think the first few signs of recovery are real (see yesterday’s post from Brownstoner on biggest sales). If you are sitting on cash and waiting to buy, take a nice long vacation from the process and check back in 12-18 months from now.
If this happens it will be very scarey. everyone will lose their investment $ because their return will now be less than their purchase and the theory of it being more expensive to live in the city and justifying higher salaries all go out the window. yikes
There is a sensible quote.
I bet he’s right.
Interesting analysis. How much do they have to decline to go back to 1910, 1920, 1930, 1940, 1950, 1960, 1970 or 1980 levels.