If this graph of NY Condo prices had been rendered from 1900 it would show that the growth in prices since the turn of the century would pale in comparison to the exponential growth displayed by this market over the last 10 years.
This growth has eclipsed most other asset classes. To put in perspective, consider that NY condo prices have ballooned 107% compared to the S&P 500 and DJIA which have been more volatile and declined 45.6% and 30% respectively since Jan 2000.
The perception that deals abound in the condo market is suspect by historical standards. The NY residential real estate market has been astoundingly resilient despite the most catastrophic economic crisis to hit Wall Street since the Great Depression. Case-Shiller condos are only 11% off their highs vs. the S&P and DJIA which are 45% and 48% off their respective highs.
It is very possible that the real estate market is experiencing a permanent re-pricing which would preclude a reversion to the mean. With tighter underwriting standards, rising mortgage rates, and more modest consumer habits thanks to economic uncertainty, it would be difficult to experience a repeat of 2003-2007 in the short to medium term.
A case could be made for stagnation in the long term as well, as long term residential real estate prices are tied to wages. What makes the NY real estate market a curious one is its current resilience in the face of disproportionate wage cuts and job losses vs ROW. If it’s safe to assume that the NY real estate bubble was created by an explosion in wall street wages and loose lending standards [with time I can perform an econometric study regressing the effect on real estate prices through wages and residential lending] then a permanent decrease in wages-- both in individuals employed and wage/individual--due to a suffering banking system and sustained populist outcry against excessive bonuses for wall street bankers coupled with tighter lending standards should lead to a permanent decrease in prices for this market.
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