Is waterfront property different? Maybe. Manhattan property? Possibly. Residential property? No way. In the last cycle here (early 90’s) my new neighbor (the real estate speculator) who top ticked the market in 1990 told me our private, small beach community would never go down in price. I bought his house from him for 55% of what he paid for it five years later. Better still, I sold it for almost a three bagger in 2004.

When our markets have corrected, there has been two key indicators. The first has been the affordability index. When that gets to par (and sometimes better), housing is at or near the bottom. With the financial services industry getting whacked, this has to have an impact on Manhattan prices.

The second is rental rates. When rental rates finally start breaking, we have typically been close to the bottom. Rental rates always lag, and sometimes get a boost in the early part of the correction as people delay buying and/or are forced to move from owner occupied properties into cheaper rentals.

This cycle may be different (I hate that cliché) because personally I feel we are no longer in a downtrend for interest rates. The long downtrend saved a lot of us, however, given the recent debasing of the US dollar and the potential for serious damage to treasury yields over the next X number of years, my gut tells me that this real estate downturn may last much longer than those of the past, and could even be generational (which will be good for my kids).

Cheers