Tuesday, January 06, 2009

Manhattan Exceptionalism draws to a close

link
In Manhattan, the inventory of apartments listed for sale rose almost 40 percent from a year ago to 9,081 units. Apartments sat on the market for an average 159 days before selling in the fourth quarter, up 21 percent from a year earlier, Miller Samuel and Prudential said.
...
Almost no new contracts were signed on condominiums in the quarter, said Miller.
...
New Yorkers paid less for smaller apartments. The median price of a studio fell 8.5 percent to $420,000, according to Miller Samuel. One bedroom prices were $715,000, down 4.5 percent.

Prices rose 9.1 percent for two-bedroom apartments to a median of $1.62 million. Three bedroom apartments slid 6.4 percent to $4.05 million, Miller Samuel said.
...
In the luxury market, defined as the top 10 percent of sales by price, the median fell to $4.13 million in the fourth quarter from $4.3 million in the fourth quarter of 2007. Inventory rose 26 percent to 1,730 apartments. Luxury units stayed on the market 169 days, 52 more days than the same period a year earlier.
...
“Foreign investors are having a real tough time getting mortgage money, and a lot of those young affluent buyers aren’t so affluent any more,” [Pam] Liebman, [chief executive officer of Corcoran in Manhattan] said.

Still, if you can borrow at 5.1 % ... say prices deflate 2%/year over the next two years before 20% inflation hangs around for another eight years. Prices will have gone up (.98)^2(1.2)^8 - 1 = 313%. If the real value of your house is half what it is now, the nominal value will still have more than doubled, or gone up 7.2 % a year. So, you're borrowing at 5.1% to get a 7.2% return. That's like free money.

Sticking with our assumption that the next two years will have 2 % deflation and ten years from now your house will have half its real value, you'd break even if years three through ten were at 16.6 %. If you expand the time horizon to 15 years (and your house will probably hang steady at half it's Q109 real value), you could let years three through fifteen be at 12 % inflation. You've got to agree that a twelve per cent inflation rate from 2011 to 2024 is a pretty conservative estimate. Paying off a 5.1% fixed interest loan on a depreciating asset will feel airy and light!

8 comments:

nephos said...

So are you buying a two bedroom or three bedroom then?

malechem said...

A Two-Bedroom Coop in Brooklyn Heights.

mark said...

Sorry, but I'm off on a wide tangent.... was looking for a relevant post to reply to, but no such luck.....

Anywho, do you think that Israelis are bitter desert-dwellers who cling to their guns and religion?

malechem said...

If you want to Jew-bait, you're going to have to find a Jew.

mark said...

Rionn, say it ain't so! I'm not baiting anyone - just trying to get your opinion on this - and it pains to have you ascribe such a base motivation to me. Surely you're not saying that only Jews are qualified to speak on the situation in the Gaza Strip, are you? Try this from Matthew 22:38: And the second commandment is like it: You shall love your neighbor as yourself.

malechem said...

Barack Obama, April 6th, 2008
[E]ach successive administration has said that somehow these communities are gonna regenerate and they have not. And it's not surprising then they get bitter, they cling to guns or religion or antipathy to people who aren't like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations.
These remarks the President-Elect referred to as 'bone headed.'
There are a number of reasons this doesn't map to the conflict in Palestine, but 'desert dwellers' is your own Jew-baiting injection.

mark said...

"Jew" doesn't refer to Israeli, although Israeli is a type of Jew. - it's not baiting, my friend, it's a parallel. (I know plenty of small town communities that are not bitter, and plenty of urban communities that are.) And you're making this a discussion about race when all I did was ask about the situation in Gaza. I still have not heard a bleep from you.

malechem said...

I would like further aid to Israel dependent on their behaving well. My feeling generally is that Israel should retreat to its 1948 borders and sop oppressing the Palestinians, but it's not a particularly insightful viewpoint. It's an important topic that impacts many people's lives, but it's one I don't think about all that much.

I want to clarify that I have apparently been using 'jew-bait' wrong. I thought it meant taunt, specifically around Jewish issues like Israel, the Holocaust and so forth. 'Jew-baiter' is apparently a synonym for 'anti-semite', so I want to apologize and retract.