2021 The Year To Get Out

David Goldsmith

All Powerful Moderator
Staff member
If you're in your forever home you can skip this, but if you're thinking of selling within the next few years pay attention. Most of the finance people I respect are expecting inflation and other factors to lead to higher mortgage rates. If rates go up there is going to be big trouble for real estate. We are already seeing a big affordability issue. Despite what the DeBlasio administration, Real Estate Taxes are almost assuredly going up. If monthlies skyrocket because mortgage rates and taxes both go up it will put a bunch of downward pressure on prices. So if you are one the fence because you hear the market is coming back you might want to consider getting out while we're having this spurt of buying going on.
 

John Walkup

Talking Manhattan on UrbanDigs.com
A contrary opinion is that inflation boosts prices for real assets. It’s also supposed to boost rental yields as well, but yeah. The concern to me is 70s style stagflation, which is the worst of both worlds.
 

David Goldsmith

All Powerful Moderator
Staff member
"Aggregate market value for properties in fiscal 2022 — determined this year — will rise 0.9 percent, the smallest increase in a decade, the watchdog estimated. Still, the assessed value for tax purposes is forecast to grow by 4.1 percent."
NYC will take 3 years to come back: watchdog
Independent Budget Office predicts slump in real estate, other taxes into 2023

New York’s Independent Budget Office thinks a slump in tax revenue will last until 2023 (iStock)
If you’re waiting for New York City to get back to its old self, don’t hold your breath.
The Independent Budget Office predicted Wednesday that the city’s economic recovery will be a drawn-out affair, affecting employment and real estate sales through mid-2023. The watchdog expects an $11.3 billion drop in tax revenue over that period, according to the Wall Street Journal.

In the property market, IBO anticipates taxable sales in 2020 will pencil out at about $59 billion, down from about $100 billion the year prior and the lowest amount since 2010. A modest revival is predicted in 2021: about $80 billion in taxable sales.

Aggregate market value for properties in fiscal 2022 — determined this year — will rise 0.9 percent, the smallest increase in a decade, the watchdog estimated. Still, the assessed value for tax purposes is forecast to grow by 4.1 percent.

There are other pain points. IBO does not see a federal bailout patching up budget holes before next year, something Mayor Bill de Blasio has long said is needed (an expects soon, as a result of Democrats winning Georgia’s two Senate seats Tuesday, he said yesterday).
IBO also reported sales tax collections had fallen 5.6 percent, or $438 million. Next year, it anticipates a $367 million drop.

On the employment front, the agency said it would take more than three years for all the jobs to come back. After 878,000 were lost in the second quarter of 2020, about 20 percent returned in the third.
“But this optimism is tempered by the knowledge that the city and the world are still treading in unknown waters, with much about the coming months to be determined by the course of the pandemic,” the report said.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
If you're in your forever home you can skip this, but if you're thinking of selling within the next few years pay attention. Most of the finance people I respect are expecting inflation and other factors to lead to higher mortgage rates. If rates go up there is going to be big trouble for real estate. We are already seeing a big affordability issue. Despite what the DeBlasio administration, Real Estate Taxes are almost assuredly going up. If monthlies skyrocket because mortgage rates and taxes both go up it will put a bunch of downward pressure on prices. So if you are one the fence because you hear the market is coming back you might want to consider getting out while we're having this spurt of buying going on.
ok this is a deep and extremely important macro force, Thanks for bringing up the discussion. I think what happens is that as the bond markets selloff due to lack of demand to finance unsustainable debt increases, yields will rise. One can argue this has already started a few weeks ago with the 10yr yield surgng 20bps in a short period of time, dollar bouncing as well (chart below)

So the issue is clear and the fed will have two choices. If/When rates rise, what will happen?

1. The everything bubble will collapse and bring with it massive asset deflation. All businesses will be affected. There will be few places to hide outside of US dollars and maybe metals if real yields start surging. The economy will go into a severe recession, potentially mini depression. One can argue the seeds were sown for this since 2008.

2. The Fed will introduce YCC - yield curve control, like in wartime periods. They will buy US Treasury issuance to fund govt + relief packages. They will do everything in their power to cap rates to keep #1 for playing out

I think #2 is a matter of time

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Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
"Aggregate market value for properties in fiscal 2022 — determined this year — will rise 0.9 percent, the smallest increase in a decade, the watchdog estimated. Still, the assessed value for tax purposes is forecast to grow by 4.1 percent."
NYC will take 3 years to come back: watchdog
Independent Budget Office predicts slump in real estate, other taxes into 2023

New York’s Independent Budget Office thinks a slump in tax revenue will last until 2023 (iStock)
If you’re waiting for New York City to get back to its old self, don’t hold your breath.
The Independent Budget Office predicted Wednesday that the city’s economic recovery will be a drawn-out affair, affecting employment and real estate sales through mid-2023. The watchdog expects an $11.3 billion drop in tax revenue over that period, according to the Wall Street Journal.

In the property market, IBO anticipates taxable sales in 2020 will pencil out at about $59 billion, down from about $100 billion the year prior and the lowest amount since 2010. A modest revival is predicted in 2021: about $80 billion in taxable sales.

Aggregate market value for properties in fiscal 2022 — determined this year — will rise 0.9 percent, the smallest increase in a decade, the watchdog estimated. Still, the assessed value for tax purposes is forecast to grow by 4.1 percent.

There are other pain points. IBO does not see a federal bailout patching up budget holes before next year, something Mayor Bill de Blasio has long said is needed (an expects soon, as a result of Democrats winning Georgia’s two Senate seats Tuesday, he said yesterday).
IBO also reported sales tax collections had fallen 5.6 percent, or $438 million. Next year, it anticipates a $367 million drop.

On the employment front, the agency said it would take more than three years for all the jobs to come back. After 878,000 were lost in the second quarter of 2020, about 20 percent returned in the third.
“But this optimism is tempered by the knowledge that the city and the world are still treading in unknown waters, with much about the coming months to be determined by the course of the pandemic,” the report said.
from an economic impact pov, sounds about right
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
You know, its crazy...I was thinking the other day if its possible that at some point they monetize consumer behavior for taking out debt in some way + negative yielding bonds all over the globe would = a day when the banks pay you to take a mortgage

damn, this is like a glimpse of it happening in real time
 

MCR

Active member
Thank you for the preface: "If you are in a forever home, you can skip this . . ."

That is the only way way I could imagine buying an apartment in NY in the last 10 years (the only 10 years I've been paying somewhat attention) unless you just don't care about money or love gambling.

It will be interesting to see how the next few years pan out. I suspect that with all the volatility there will be some big winners and big losers. Here is to hoping those finance-types who are in my building are big winners - right now they are way too tense and worried about margin calls to be the type of neighbor I want.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
Thank you for the preface: "If you are in a forever home, you can skip this . . ."

That is the only way way I could imagine buying an apartment in NY in the last 10 years (the only 10 years I've been paying somewhat attention) unless you just don't care about money or love gambling.

It will be interesting to see how the next few years pan out. I suspect that with all the volatility there will be some big winners and big losers. Here is to hoping those finance-types who are in my building are big winners - right now they are way too tense and worried about margin calls to be the type of neighbor I want.
I think this is a great entry point for quality NYC residential real estate. Commercial got some time. Between the 2015-2019 slow drawdown + the 2020 pandemic discount (whatever that is), buyers get more value today than in the past 8-9 years. Looking 10yrs down the road, inflation is going to be a thing again. I do think 2021 will have its "bust" moment and it will get ugly stock market wise..so lets see how that impacts NYC markets, its possible the effect can be muted if the suburban to urban reversal trade plays out as the pandemic-era deflationary forces fade over next year or two
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
Depends upon whom is talking. Perhaps look to China for what they are saying or Bill Gates and the World Economic Forum or Martin Armstrong. Some have put forth a conversion to crypto occurring in the next 12 months, one that is trackable and traceable for taxes....
Hmm, I always thought govts would hate crypto if it got big enough. Too much of a threat that would need to be regulated. Thats the one big thing I cant seem to wrap my head arounf on how it will play out. Reserve currency requires so many prerequisites, I dont think anyone can check all the boxes and beat the US
 
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John Walkup

Talking Manhattan on UrbanDigs.com
I tend to think crypto has legs. Who knows what it will look like in 5 or 10 years, only that it was obvious in hindsight.
 

MCR

Active member
I know many who are investing in crypto and one who is active in the product/technology side itself. These are all old colleagues who were part of the tech revolution in the 90’s. They are unanimous in their consensus that (1) blockchain technology underlying cryptocurrency the wave of the future; and (2) the winners and losers in the technology won’t be decided for at least X years (with the range of estimated X varying wildly, but with a minimum of 5 years). My personal opinion is that cryptocurrency is the trendiest application of blockchain, and that no coin has any chance of gaining the necessary network effect to replace USD as reserve currency. I don’t get the technology, but right now it appears there are too many competitors/too few barriers to entry.
 

David Goldsmith

All Powerful Moderator
Staff member
I think currently the price is too easily manipulated since apparently 95% of all coins are held by a few large players. Also I'm not sure how it works with the cap of 21 million Bitcoin ever to be mined.

 

David Goldsmith

All Powerful Moderator
Staff member
People also don't talk about how horrible Bitcoin (and all crypto) is for the environment.

I also wonder what is going to happen to transaction fees after the 21 million ceiling is reached and "miners" will have to make all their money verifying because mining new coins will be depleted.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
I know many who are investing in crypto and one who is active in the product/technology side itself. These are all old colleagues who were part of the tech revolution in the 90’s. They are unanimous in their consensus that (1) blockchain technology underlying cryptocurrency the wave of the future; and (2) the winners and losers in the technology won’t be decided for at least X years (with the range of estimated X varying wildly, but with a minimum of 5 years). My personal opinion is that cryptocurrency is the trendiest application of blockchain, and that no coin has any chance of gaining the necessary network effect to replace USD as reserve currency. I don’t get the technology, but right now it appears there are too many competitors/too few barriers to entry.
Completely agree with this. I was trading at Tradescape in 1998-2002, it has a similar feeling. If it plays out similarly, 2021-2022 could be horrow show for some of these assets. I remember all the dot com obituaries well. ivillage? pets.com? jds uniphase, oh jdsu...so many of them. The fed is enabling this beast. I expect a bust this year similar to tech unwind in 2000. Fast and hard and painful. But looking ahead a decade, I see vast potential for the space similar to the dot coms and how that ultimately played out. Innovation and disruption via blockchain and crypto will be very interesting to watch, and how govts react as well. They dont like people not using their printed dollars after all
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
People also don't talk about how horrible Bitcoin (and all crypto) is for the environment.

I also wonder what is going to happen to transaction fees after the 21 million ceiling is reached and "miners" will have to make all their money verifying because mining new coins will be depleted.
There are/will be tools that take this to 0
 
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