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
To respond to fsrq:
“Why?”
Because I doubt prices 10 years from now will have recovered to anywhere near the peak of the past few years. That’s why.
“So when you are talking about 8 years down the road you would have paid off a decent slice of the principal”
Many people will not have paid back much if any principal in 10 years. For some reason people have recently become convinced that interest only mortgages are a good idea. Ask Adam Dahill why.
“since your next home will also be that much cheaper … it really shouldnt “hurt” all that much.”
You can’t trade into a cheaper home with negative equity.
Does anyone have a link to the full Goldman Sachs report?
I don’t claim to be an expert on Goldman Sachs, but I do seem to recall these same people 2 years ago saying that we were in for a “soft landing”
So I’m not really sure why you think that they are all the sudden now such experts.
Lechacal you said “Anyone who bought in the past few years and may have to sell in the next 10 could be in a lot of trouble.”
Why? even if housing declines by 50% over the next 2-3 years presumably (if the world doesnt come to an end) prices will begin to rise again (prices usually overshoot on the way down too).
So when you are talking about 8 years down the road you would have paid off a decent slice of the principal (on a 30yr fixed probably about 12-15%) and prices will likely be well off their negative 50% lows.
So at that point if you sell you likely arent going to be able to report any real cap gains – but since your next home will also be that much cheaper (you do have to live somewhere unless you die) – it really shouldnt “hurt” all that much.
Now if you were one of those silly people who thought of your home as an “investment” you will likely be upset – but if you looked at your home as a place to live – with a 10yr horizon (and no stupid borrowing) it likely wont matter.
11217: 1% of the population — fine. But think about a 100 unit condo where 90% are young singles or couples. You do not need many to split up or have to move for a job before you have multple units on the market at what can quickly turn into distress sales. This is where the price drops really happen. SF homes are safer from that.
11217 and others have demonstrated a pretty limited understanding of GS’s current situation. That’s all I will offer on that subject.
This debate will of course not influence prices one bit. The Sebbs can overpower the Muffets and get them to cry uncle, or vice versa, and it won’t make a bit of difference.
the people writing research on NY housing at GS are NOT the same people who are running the firm or writing about $200 oil. do any of you actually understand this? anyway, go on patting yourselves on the back and living in denial about what RE will do. best of luck with that.
“After the dust settles, literally, to have friends and family enjoy the place. That is what this is about. That is what is important and why I (we) are not in the jump in front of the train set.”
This should be QOTD. Certainly fits my situation and my attitude about Brownstone living. The amount of enjoyment I have already gotten out of entertaining friends in my house has made everything worthwhile.
Donatella,
Sorry to exclude you earlier from the enjoying our homes and lifting our glasses list near the top of the thread. You were there in spirit and clearly belong. And it was good to read the other day about you entertaining and enjoying your house. That’s why I get impatient with posters who reduce homeownership to an investment calculation.