exuberant bubble or fundamentally sound where are real estate prices going? the metro ny chapter...
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““Exuberant Bubble” or Exuberant Bubble” or “Fundamentally Sound”“Fundamentally Sound”
Where are Real Estate Prices Going?Where are Real Estate Prices Going?
The Metro NY ChapterThe Metro NY ChapterAppraisal Institute Appraisal Institute Mark Pomykacz, MAIMark Pomykacz, MAIPresidentPresident
With Guest Speakers:With Guest Speakers: Peter F. Korpacz, MAIPeter F. Korpacz, MAI
Robert A. Knakal Robert A. Knakal Frank Nothaft, Ph.D.Frank Nothaft, Ph.D.
Friday, September 30, 2005Friday, September 30, 2005
Steven L. Newman InstituteSteven L. Newman InstituteBaruch CollegeBaruch CollegeBarry Hersh, AICPBarry Hersh, AICPAssociate DirectorAssociate Director
Presented Jointly by:Presented Jointly by:
The Panelists Peter F. Korpacz, MAI,
Director of the Global Strategic Real Estate Research Group of PricewaterhouseCoopers (PwC),
Robert A. Knakal Founding Partner of Massey Knakal Realty Services.
Frank E. Nothaft Chief Economist for Freddie Mac
““Exuberant BubbleExuberant Bubble” ”
Background
““Fundamentally Sound” Fundamentally Sound”
PRECEPTION vs REALITY
Just the facts, Ma’am Talking about it,
can make it happen
"That greater tendency toward self-correction has made the cyclical stability of the economy less dependent on the actions of macroeconomic policymakers, whose responses often have come too late or have been misguided,“ the Man, Tuesday, Sept 27, 2005
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The Annual High Month
New York Times vs. Wall Street Journal
Appraisers in Action
Survey of Members of the
Metropolitan Chapter of the
Appraisal Institute
How confident are you that prices in the NYC residential real estate market are over valued?
13
35
17
0
1
0 5 10 15 20 25 30 35 40
Very confident prices are too high
Modestly confident prices are too high
Unsure
Confident prices are too low
Very confident prices are too low
Housing Bubble Survey – Chart 1
How much evidence have you seen of excessive market euphoria or that a bubble exists in the residential real estate market?
23
35
10
0 5 10 15 20 25 30 35 40
Strong and substantial evidence
Only moderate evidence
No such evidence
Housing Bubble Survey – Chart 2
Housing Bubble Survey – Chart 3
How much is the market for NYC residential property over-priced?
16
35
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0
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0 5 10 15 20 25 30 35 40
Over-priced by more than 20%
Over-priced by 5% to 20%
Priced about right, between -5% to +5%
Under-priced by 5% to 20%
Under-priced by more than 20%
Housing Bubble Survey – Chart 4In the last 12 months, how much has the NYC
residential market prices appreciated in value?
1
12
32
15
5
0
0
0 5 10 15 20 25 30 35
More than 35%
Between 25 and 35%
Between 15 and 25%
Between 10 and 15%
Between 5 and 10%
Between 0 and 5%
The market is declining
Housing Bubble Survey – Chart 5
In the next 12 months, how much will the NYC residential market price appreciate in value?
0
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26
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3
6
2
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0
0 5 10 15 20 25 30
Appreciate by 15% or more
Appreciate by 10 to 15%
Appreciate by 5 to 10%
Appreciate by 0 to 5%
No change in the market
Depreciate by 0 to 5%
Depreciate by 5 to 10%
Depreciate by 10 to 15%
Depreciate by more than 15%
Housing Bubble Survey – Chart 6 Is the NYC commercial market similarly over priced?
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26
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0 5 10 15 20 25 30 35
Over priced by more than 20%
Over priced by 5 to 20%
Priced about right from -5% to +5%
Under priced by 5 to 20%
Under priced by more than 20%
NCREIF vs. CPI – Chart 1Quarterly Value and Cost Changes
NCREIF vs CPI
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
2nd Q
tr, 1
995
4th
Qtr,
1995
2nd Q
tr, 1
996
4th
Qtr,
1996
2nd Q
tr, 1
997
4th
Qtr,
1997
2nd Q
tr, 1
998
4th
Qtr,
1998
2nd Q
tr, 1
999
4th
Qtr,
1999
2nd Q
tr, 2
000
4th
Qtr,
2000
2nd Q
tr, 2
001
4th
Qtr,
2001
2nd Q
tr, 2
002
4th
Qtr,
2002
2nd Q
tr, 2
003
4th
Qtr,
2003
2nd Q
tr, 2
004
4th
Qtr,
2004
2nd Q
tr, 2
005
NCREIF Property Index CPI, All Urban Consumers
NCREIF vs. CPI – Chart 2Quarterly Value and Cost Changes
NCREIF vs CPI
0.00
50.00
100.00
150.00
200.00
250.00
NCREIF Property Index
CPI, All Urban Consumers
Both Indices set at 100 in 1st Quarter 1998.
Are we in a bubble?
“History cautions that extended periodsof low concern about credit risk have invariably been followed by reversal”
Are we in a bubble?
Translation –
“What! Where yous been livin?In a bubble!
And
Don’t touch my hair”
I got a bridge to sell