Can't speak for Manhattan as I know nothing about that market but around the country there is a glut of single family homes that are vacant and for sale by speculators. My guess is eventually many will pull them off the market and list to rent, which should saturate the rental market and prices will probably fall. This runs counter to what many believe in that with high cost of purchase, many are renting which is pushing up rents. I believe that phenomenom is only temporary.
I've been a bear on real estate for a few years but I'm not expecting a doomsday scenario. Absent an uptick in mortgage rates to 8% or a massive recession displacing millions of middle income workers, I don't see values as ridiculously stretched. In fact I'd say half the excess has already come out. With rare exceptions, real estate prices are NOT the Nasdaq of the late 90's. Rather real estate prices have acted like the Dow. While there's always going to be examples of the million dollar rowhouse in a gentrified yuppie neighborhood that was $35k in the 70's when the area was a ghetto or of the HUGE runups throughout the Sun-Belt, by and large MUCH of America has seen MODEST gains in the past 25 years. I'd say that in the north's "hot" markets, i.e. Boston, NYC and Chicago, suburban prices have tripled to quadrupled in the past quarter century. Not bad. But where was the Dow and the S&P 500 in the mid 80's? Just so the young guys don't need to look up their charts, those indices were 10% of todays values. Hence that elusive estate in Greenwich has done a hell of a lot worse than WMT. Score one for Arkansas. The stereotypical new home is a $300,000 4bd/3bth Georgian outside Charlotte. As you can see, compared to the old 1950's ranch house, this thing is a freakin' MANSION. (http://realtor.com/FindHome/HomeLis...=1070162179&fh=on&lnksrc=feathome&poe=realtor) Assuming there's a $250,000 mortgage, the payments are around $1500 a month. Throw in property taxes but then also factor in the mortgage deduction and you're still around $1500 all in. Not exactly a crushing blow to the typical guy working for BellSouth. Let's face facts. There's people living in San Diego, L.A. and Manhattan who are FREAKING OUT over the cost of homes. And those same folks often BALK at the prospect of living inland or in Astoria. Yet those people must realize that their income makes them economically undeserving to live in some areas. Do Mexicans WANT to live in the barrios of East L.A? Hell no. They come here for JOBS. Men have migrated from NYC in 1780, 1880 and 1980 because they couldn't afford to live in socialite splendor. They then discovered places where they COULD live opulently for less. Californians have found relative affordability in Vegas, Seattle and Phoenix. Now that those places have re-priced perhaps it's time for trickle down in Boise and Albuquerque.
It seems a little irrational to think you will pick up real estate at 75% discounts. I think 50% is even dreaming on prime beach front land. There is a bubble but I donât see that type of pop. I would not be shocked to see big discounts in non prime areas but 75% might be pushing it a lot. I think a rational view would be a 25% discount. If you see 75% pack your bags because everybody lost there jobs and are now homeless.
Interesting I too don't know much about Manhattan Real Estate. I would think if speculators rented their properties out many would have huge negative cash flow and would rather sell. But if it turns out the sales price is less than the mortgage amount I guess they wouldn't sell. I guess a lot depends on how many people bought near the top. Did a search on EBAY for apartment buildings. Pretty amazing 5 unit apartment building in Flint Michigan $15,000 I wouldn't consider buying anything further away than 1/2 hour drive.
anyone who tells you that things have bottomed is either lying to you or severely improperly educated. i am 40 yrs old and have seen this repeated 3 times. besides my trading, my family business of 35 years in the cabinet industry has taught me how to identify what is happening. i am certain that what you have said above is exactly correct. i knew it topped when a few of my retarded buddies were buying four families for 975k with reverse amortization loans and planning to flip it for 1.3m. i can go on and on. needless to say, that one in particular is sucking major wind. he wanted me to go partners with him in the frenzy, now i may end up owning it for much ,much less. now, how to play this downturn? as a residential and commercial property owner (all bought on each downturn), my only answer is to do as quoted from TheDudeofLife; i will add, you must "steal" one good piece, and expect to sit on it for 5 to 10 years before you really see a score. i plan on doing that. i have been saving for this since the last one.
imo, the sign of an impending market top (all other fundamentals aside-which are also pointing towards a market top), was when CNBC interviewed two vegas strippers making a killing in real estate speculation this is similar imo to when a famous investor in 1929, decided to bail out of stocks prior to the crash because he was on an elevator and the elevator operator was bragging about making a killing in stocks. and don't even get me started on tulips. i also know 2 firefighters who are now real estate speculators. one owns 5 homes. it's ridiculous. one told me that real estate is "GUARANTEED A MINIMUM OF 12 % A YEAR" I'm not saying it's gonna crash, at least in my market, which is not vegas or san fran, or one of the really overextended markets - but going LONG here would be insane. I own two homes, and am selling one this january. i'm up about 80% profit in that one, and its time to take it. but if you want to profit from real estate death spiral (if that's what you predict), simply go short real estate futures in the most overblown markets. they exist. or u can go short to hedge a property you own, which can keep you locked in at your current price.
imo, the sign of an impending market top (all other fundamentals aside-which are also pointing towards a market top), was when CNBC interviewed two vegas strippers making a killing in real estate speculation this is similar imo to when a famous investor in 1929, decided to bail out of stocks prior to the crash because he was on an elevator and the elevator operator was bragging about making a killing in stocks. and don't even get me started on tulips. i also know 2 firefighters who are now real estate speculators. one owns 5 homes. it's ridiculous. one told me that real estate is "GUARANTEED A MINIMUM OF 12 % A YEAR" I'm not saying it's gonna crash, at least in my market, which is not vegas or san fran, or one of the really overextended markets - but going LONG here would be insane. I own two homes, and am selling one this january. i'm up about 80% profit in that one, and its time to take it. but if you want to profit from real estate death spiral (if that's what you predict), simply go short real estate futures in the most overblown markets. they exist. or u can go short to hedge a property you own, which can keep you locked in at your current price.
GAO Chief Warns Economic Disaster Looms AUSTIN, Texas (AP) - David M. Walker sure talks like he's running for office. "This is about the future of our country, our kids and grandkids," the comptroller general of the United States warns a packed hall at Austin's historic Driskill Hotel. "We the people have to rise up to make sure things get changed." But Walker doesn't want, or need, your vote this November. He already has a job as head of the Government Accountability Office, an investigative arm of Congress that audits and evaluates the performance of the federal government. Basically, that makes Walker the nation's accountant-in-chief. And the accountant-in-chief's professional opinion is that the American public needs to tell Washington it's time to steer the nation off the path to financial ruin. From the hustings and the airwaves this campaign season, America's political class can be heard debating Capitol Hill sex scandals, the wisdom of the war in Iraq and which party is tougher on terror. Democrats and Republicans talk of cutting taxes to make life easier for the American people. What they don't talk about is a dirty little secret everyone in Washington knows, or at least should. The vast majority of economists and budget analysts agree: The ship of state is on a disastrous course, and will founder on the reefs of economic disaster if nothing is done to correct it. There's a good reason politicians don't like to talk about the nation's long-term fiscal prospects. The subject is short on political theatrics and long on complicated economics, scary graphs and very big numbers. It reveals serious problems and offers no easy solutions. Anybody who wanted to deal with it seriously would have to talk about raising taxes and cutting benefits, nasty nostrums that might doom any candidate who prescribed them. "There's no sexiness to it," laments Leita Hart-Fanta, an accountant who has just heard Walker's pitch. She suggests recruiting a trusted celebrity - maybe Oprah - to sell fiscal responsibility to the American people. Walker doesn't want to make balancing the federal government's books sexy - he just wants to make it politically palatable. He has committed to touring the nation through the 2008 elections, talking to anybody who will listen about the fiscal black hole Washington has dug itself, the "demographic tsunami" that will come when the baby boom generation begins retiring and the recklessness of borrowing money from foreign lenders to pay for the operation of the U.S. government. "He can speak forthrightly and independently because his job is not in jeopardy if he tells the truth," said Isabel V. Sawhill, a senior fellow in economic studies at the Brookings Institution. Walker can talk in public about the nation's impending fiscal crisis because he has one of the most secure jobs in Washington. As comptroller general of the United States - basically, the government's chief accountant - he is serving a 15-year term that runs through 2013. This year Walker has spoken to the Union League Club of Chicago and the Rotary Club of Atlanta, the Sons of the American Revolution and the World Future Society. But the backbone of his campaign has been the Fiscal Wake-up Tour, a traveling roadshow of economists and budget analysts who share Walker's concern for the nation's budgetary future. "You can't solve a problem until the majority of the people believe you have a problem that needs to be solved," Walker says. Polls suggest that Americans have only a vague sense of their government's long-term fiscal prospects. When pollsters ask Americans to name the most important problem facing America today - as a CBS News/New York Times poll of 1,131 Americans did in September - issues such as the war in Iraq, terrorism, jobs and the economy are most frequently mentioned. The deficit doesn't even crack the top 10. Yet on the rare occasions that pollsters ask directly about the deficit, at least some people appear to recognize it as a problem. In a survey of 807 Americans last year by the Pew Center for the People and the Press, 42 percent of respondents said reducing the deficit should be a top priority; another 38 percent said it was important but a lower priority. So the majority of the public appears to agree with Walker that the deficit is a serious problem, but only when they're made to think about it. Walker's challenge is to get people not just to think about it, but to pressure politicians to make the hard choices that are needed to keep the situation from spiraling out of control. To show that the looming fiscal crisis is not a partisan issue, he brings along economists and budget analysts from across the political spectrum. In Austin, he's accompanied by Diane Lim Rogers, a liberal economist from the Brookings Institution, and Alison Acosta Fraser, director of the Roe Institute for Economic Policy Studies at the Heritage Foundation, a conservative think tank. "We all agree on what the choices are and what the numbers are," Fraser says. Their basic message is this: If the United States government conducts business as usual over the next few decades, a national debt that is already $8.5 trillion could reach $46 trillion or more, adjusted for inflation. That's almost as much as the total net worth of every person in America - Bill Gates, Warren Buffett and those Google guys included. A hole that big could paralyze the U.S. economy; according to some projections, just the interest payments on a debt that big would be as much as all the taxes the government collects today. And every year that nothing is done about it, Walker says, the problem grows by $2 trillion to $3 trillion. People who remember Ross Perot's rants in the 1992 presidential election may think of the federal debt as a problem of the past. But it never really went away after Perot made it an issue, it only took a breather. The federal government actually produced a surplus for a few years during the 1990s, thanks to a booming economy and fiscal restraint imposed by laws that were passed early in the decade. And though the federal debt has grown in dollar terms since 2001, it hasn't grown dramatically relative to the size of the economy. But that's about to change, thanks to the country's three big entitlement programs - Social Security, Medicaid and especially Medicare. Medicaid and Medicare have grown progressively more expensive as the cost of health care has dramatically outpaced inflation over the past 30 years, a trend that is expected to continue for at least another decade or two. And with the first baby boomers becoming eligible for Social Security in 2008 and for Medicare in 2011, the expenses of those two programs are about to increase dramatically due to demographic pressures. People are also living longer, which makes any program that provides benefits to retirees more expensive. Medicare already costs four times as much as it did in 1970, measured as a percentage of the nation's gross domestic product. It currently comprises 13 percent of federal spending; by 2030, the Congressional Budget Office projects it will consume nearly a quarter of the budget. Economists Jagadeesh Gokhale of the American Enterprise Institute and Kent Smetters of the University of Pennsylvania have an even scarier way of looking at Medicare. Their method calculates the program's long-term fiscal shortfall - the annual difference between its dedicated revenues and costs - over time. By 2030 they calculate Medicare will be about $5 trillion in the hole, measured in 2004 dollars. By 2080, the fiscal imbalance will have risen to $25 trillion. And when you project the gap out to an infinite time horizon, it reaches $60 trillion. Medicare so dominates the nation's fiscal future that some economists believe health care reform, rather than budget measures, is the best way to attack the problem. "Obviously health care is a mess," says Dean Baker, a liberal economist at the Center for Economic and Policy Research, a Washington think tank. "No one's been willing to touch it, but that's what I see as front and center." Social Security is a much less serious problem. The program currently pays for itself with a 12.4 percent payroll tax, and even produces a surplus that the government raids every year to pay other bills. But Social Security will begin to run deficits during the next century, and ultimately would need an infusion of $8 trillion if the government planned to keep its promises to every beneficiary. Calculations by Boston University economist Lawrence Kotlikoff indicate that closing those gaps - $8 trillion for Social Security, many times that for Medicare - and paying off the existing deficit would require either an immediate doubling of personal and corporate income taxes, a two-thirds cut in Social Security and Medicare benefits, or some combination of the two. Why is America so fiscally unprepared for the next century? Like many of its citizens, the United States has spent the last few years racking up debt instead of saving for the future. Foreign lenders - primarily the central banks of China, Japan and other big U.S. trading partners - have been eager to lend the government money at low interest rates, making the current $8.5-trillion deficit about as painful as a big balance on a zero-percent credit card.