Open House Picks: Six Months Later
Comment: Gulp! Open House Picks 5/30/08 [Brownstoner] Previous Six Months Later Posts [Brownstoner]
Need a Hand?
Your Next Project Starts with Brownstoner Comment: Gulp! Open House Picks 5/30/08 [Brownstoner] Previous Six Months Later Posts [Brownstoner]
Need a Hand?
Your Next Project Starts with Brownstoner
Look I don’t really care what you believe, it’s not as though you or I can influence what happens next anyway. It’s just strange that you’re not happy that I say prices could conceivably drop by a substantial amount. You want me to also comfort you that all will be rosy, or not too bad, or something… if I don’t I’m “blind/delusional”.
What I am saying to you requires you to look beyond real estate. The circumstances that are causing the NYC market to look shakey can’t just affect NYC. As well as a financial crisis the real economy has been hit and that hit could feed back into the financial system in a death loop. Banks are insolvent, companies (not just financial companies) are laying people off in numbers we have not seen in a lifetime, detroit is broke, and the consumer has stopped spending. This is what is making NYC faulter and it will make things harder in the rest of the country as well. How is this going to be isolated to just NYC? I don’t believe NYC real estate can decline by itself in this environment. Your argument that NYC didn’t go down before so will go down now without other areas has no substance to it.
The biggest single issue in the whole mess is real estate price declines. They have to fix that first and fast without significant further declines occuring . You say they wont but everything will be fine but I just don’t see how that works.
It’s not a matter of people having bought their houses long ago so they still have a profit. Declining real estate means declining asset values for institutions and shrinking balance sheets for banks which leads to less ability to make loans leading to lower consumption, production and employment which leads to less liquidity which leads to defaults which leads to lower real estate prices… and the cycle starts again. The only effective way to break the cycle is to stop it where it started, with real estate, or to have the big KAR BOOM and start again.
We are skimming the edge of a catastrophic economic event. The chance of avoiding it declines along with property prices. The What would argue its going to happen anyway now. Brownstone Half Off appears to agree with him. Unfortunately I would say both of them understand the problem. I just think we can still avoid it but you think I’m delusional… that’s too bad really.
“…the idea that home prices can fall 50% without a parallel fall in living standards and personal safety seems far fetched.”
Who’s idea was that?
“No you’re not.”
Yes, I am. There is a longstanding pattern where things end up being far worse than what they seemed. We all need to be alarmists. It’s called prudence. It serves everyone’s purpose (a bottom, stability, a macroeconomic rebound). This is/was a home price economy.
***Bid half off twice the peak comps you can afford***
Muffett, you can’t argue with the blind/delusional/denial types. You just can’t. Its like trying to reason with the “real estate always goes up” crowd of the last few years. You just gotta let reality kick in. Give it a solid 6 months from now and lets see what types like Aussie has to say then…
Aussie – for someone who tries to appear so well-informed, you make a lot of incorrect assumptions. How on earth can you presume that my belief will end on the purchase of my property? I’ve said many times that I’m not trying to time the bottom of the market, so we fully aware that we may buy something before things bottom out, if we find something we love that we can afford. And you know what? We won’t agonize on a personal level that prices are going down further – that is, if we were to buy and the value of our place went down further, but we loved it, so be it. But that does not mean I won’t continue to follow the market. So if things look like they are still declining after we buy, it’s absurd to say that suddenly I will put blinders on and “end” the belief that they are going down some more. And what on earth do you mean that my view is “not authentic”?!?
I’m well aware of the mess we’re in, and know more than your condescending posts imply you believe.
I am completely confident that RE prices will fall *in NYC* by a significant amount (which thus far, has been a major anomaly in the US market) but I’m not so presumptuous as to attach a specific number since there are too many wild cards. I am not transferring out of the US (though I too, could do so) since I am firmly loyal to Brooklyn.
Well, Wasder, when Aussie says it’s T H E E N D if there’s a 50% fall in NYC (which has barely seen cuts in some areas) then I’m sorry, he does seem to be stoking fears about price drops. But you’re right – no one know how big the price drops will be, and really, no one knows exactly what the effects of those drops will be, because the role of gov’t in this crisis is going to be huge. Honestly, I don’t think there will suddenly be garbage piling up, huge cuts in the police force, etc. just because of major real estate declines. Bloomberg will NOT let that happen. So I don’t see a retrenchment to price levels of merely a few short years ago to be “cripping” at all. For Pete’s sake, this city, and many communities of people, have been through all kinds of horrible things (which can make a real estate correction, or even collapse, look like a walk in the park), and I’m amazed at the resilience of people to weather crises pretty damn well.
You see Muffy, there is delusional and then there is just ignorant. I only half mean to insult you (oh, ok not at all-Wasder will get upset at me) , there is no reason why most people would know about the workings of the US or global economy.
We got ourselves into a really big mess. It started when inflated real estate price started to decline from their peak and it wont end until they level out. That is not to say that the problem is confined to real estate. This had its genesis in real estate but it moved way beyond that and it does threaten the entire financial system. Of course this is very old news, there are people on this site who have been surprisingly well informed from the beginning.
Institutions have absorbed all of the losses they can. Losses tied directly to the real estate market and magnified with derivatives. Your government has supported these institutions and absorbed all it can. Now it has started to print money to absorb more. As further losses occur on real estate more money will be printed. It astounds me that people think that this can just continue. If this were a viable proposition the government would just print money and none of us would have to work. We can’t have it both ways – substantial falls and a working economy.
I’m not trying to scare anyone. You would be scared however, if you both understood how the system works and held the believe real estate is going to fall substantially from here. I don’t think you’re too scared, because your belief that property is going to fall is not authentic. It will end on the purchase of your property. Your view is introverted and simplistic.
My belief will remain the same notwithstanding my position. I can accept that further big declines may occur. I also know what the consequences will be. I think we may avoid the bullet and I certainly wouldn’t be accepting your low ball offer, but someone might.
Obviously I’m not completely confident though. I’ve just accepted a transfer out of the US for a couple of years.
“There are so many truly terrible things that can happen – history and the world are full of examples – but a real estate correction is nowhere in that league.”
Well that is a good point Miss Muffett. The issue is just if this is a correction or a full blown depression type event. I would guess that prices falling by half would tend towards the latter and that would indeed be a big problem for all of us (understatement alert). If it is a 25% correction or something then its a big market correction but not something that will fundamentally change the way we live. Again, I think what Aussie is saying (not to put words in anybody’s mouth) is not that the fact of prices dropping is the issue in and of itself, but that the conditions that would lead to such a drop would be crippling. Who knows? Nobody. That is the point.
Aussie, you’ve accused me of peddling fear, but really, you are the one doing so. For much of the country, values have *already* fallen greatly, so the relate-estate-related damage to many businesses has already been done – hence this huge crisis we’re in. For complex reasons, NYC has been little touched thus far, but if NYC *does* fall as hard as the rest of the country, surely this will be just a relatively small addition to the overall problem, not suddenly the end of everything as you say. Don’t forget that RE values have more than doubled, indeed tripled in some cases, since 2000, so if they have risen 200-300% in that short time, a 50% fall does not seem that far-fetched, and would probably bring us to levels last seen around 2003. I’m not saying that will definitely happen, but I also don’t see why it would be so catastrophic since many people who bought in the last 5 years would try not to sell (unless they were trading up to a similarly discounted property), and I would venture that there are many, many people who own real estate in this city who have owned their property for more than 5 years. I’m not denying or downplaying that the city could suffer in some ways from that kind of drop but we have by now seen a huge willingness on the part of government to intervene to stave off the worst, and I truly do not think Bloomberg (who will likely remain mayor during the continuing unfolding of the crisis) will allow this city to sink no matter what happens to its real estate values – look at how well he handled the crisis of the scary post 9/11 period.
There are so many truly terrible things that can happen – history and the world are full of examples – but a real estate correction is nowhere in that league. You are really fear-mongering, and I wonder if it’s because you somehow want to scare prospective buyers away from low-balling by convincing them that it is somehow their patriotic duty to keep today’s irrational prices artificially inflated by the kind of fear you are peddling. People – the world will not end if NYC real estate values readjust to more normal levels. Yes, some people will suffer, but many, many others will be just fine, and first-time buyers will at last be able to buy in, something that was a pipe dream for many the last few years.