Questions About Realestate Crash Of New York-1987
I was hoping all Veteran investors could tell me about real-estate crash in New York. Or Even point me to some resources books, media, etc? I hear stories about Donald Trump buying a building Slum for 50 million and rehabbing it and selling for 170 mil years later during this crash. I know many other people made small Fortunes.
The reason I'm asking is because I think that California real-estate may be heading this way. I've been investing in Vegas, just waiting for Cali to Crash, so I can move in and start buying. But Gosh DaRn it, it stays strong. Even with the budget Crises, and the .dot com melt down, Manufacturing meltdown, the high foreclosure rate, crazy appriecaition, etc, etc. This market seems like it’s bullet proof.
So the question is:
Can you give us any life experiences during the New York real-estate crash? If so that would be great.
I don't know as it was really a real estate crash as much as a stock market crash which effected various parts of the country.
CA and TX seem to go thorough up turns and down turns every 15 to 20 years.
Lucius would deffinitely be one to talk to about this since he has had quite a bit of experience in CA investing for many years.
As far as trying to hit a crash or not you have to wait for one to happen. In the mean time perhaps you could just pick which type of investing you want to do.
When and IF there is another crash you will know the market and be able to act.
Michael
scr2001,
Before you can understand the New York real estate "crash" of 1987, you have to appreciate the underpinnings of some of the forces that supported the crash.
Remember that Ronald Regan was President of the United States, but both houses of Congress were controlled by the Democrats. While President Regan was successful in forging a reduction in the income tax rate, the Congress failed to check spending. This forced the government into increasingly higher deficit budgets.
Forced to find opportunities to increase revenues, Congress turned to the tax code. 1986 tax code changes gave us, most notably, the alternative minimum income tax,
elimination of abusive tax shelters that forced many REITs out of existence,
elimination of a reduced capital gains tax rate on investment property which stifled capital asset acquisition,
limitations on the amount of passive losses that could be taken against other incomeSuperimpose this "negative" investment environment with the beginning of the end of the cold war, a reduction in defense spending, and military base closures along with a downsizing of the military -- all of which fueled an increase in the unemployment rate.
Now couple all this domestic activity with the beginnings of recessions in the global markets where we saw Japan's Nikkei suffer the first of several corrections, and Japanese investors beginning to dump their US real estate holdings to hedge against currency devaluations. Similarly, in West Germany we also saw the beginning of an economic downturn that would eventually engulf western Europe in a recession.
With all these forces in play late in 1987, the stock market experienced the largest single day drop in the Dow average since the crash of 1929. Is it any wonder amidst all this doom and gloom that the real estate market in New York also declined sharply?
If you are looking for a book to give you guideposts to entering and exiting certain real estate markets, I suggest Robert Campbell's Timing The Real Estate Market. It may be available on Amazon.
Dave T.
Quick now can any body guess what political party our Dave is a member of?
My Grandfather was a partner with Bernard Baruch. They were having their shoes shined at a shoe shine stall just down the street from the New York Stock Exchange.
The shoeshine boy while working away is giving them a running comment on his stock portfolio, he is short here he is long there. A Straddle on the Utilities and a Butterfly on his Long Bond Position. Bernard looks at Sam my sainted grandfather, they both nod their heads. They rush to the office. They have just had the final confirmation as to what they think the market is going to do. They take every dime they have, that they can borrow and they set up a super short position in the market to start in three days.
Three days after, the crash of 1929 began. My Grandfather and Baruch they hit it just right, they were super wealthy. They quit. one went to Washington and played advisor to presidents. My grandfather came out to California to live near his daughter my mother. He really never worked again he and Bernard said it was all pushed by listening to that shoeshine boy. My grandfather licensed to practice in four different countries, spoke about 10 languages just traveled and enjoyed his remaining years. Oh a little law now and then but he had it made.
When an economy reaches a position that everyone is involved in one single and gigantic undertaking. Then the prudent and reasonable man takes the divergent path. For it must follow as night follows day. the masses are always wrong.
In California there was a time that the Japanese came in and bought almost every major commercial building in the City of Los Angeles. It was so outrageous that the common joke in Real Estate was that they were going to change the name of Wilshire Blvd to Ginza Blvd. They were advised by a few Japanese speaking Brokers who were hired to advise, not to pay the prices they were paying as high as 22 times the gross. These advisors were told very politely by the Japanese Corporate Buyers that they did not understand the path that History was taking and within a few short years we the advisor Brokers would realize how right the Japanese Bankers and Corporate Buyers were.
Well it crashed and in recent years those properties have been repurchased by American REIT's and others for just about one half of the original purchase price. Some really sweetheart deals. Lots of long term paper at very low rates of interest.
Your thinking is probably correct, the stock market has very little connection with reality it is all psy driven and that is not a very good thing.
However fear not undaunted investors in Real Estate, we make it up or down as we are the happy little people in the middle. If things are sliding we are at the front of the slide. If they start up again we are the pushers just behind the top.
It is not really necessary to take hard positions, it is better to stay at point of transaction and lean in the opposite direction of the wind.
Enjoy the weather Lucius
This is great info. Thanks TCI