A Very Pleasant "Hissing" Sound!

Sometimes bubbles go "pop!" Remember April 2000? But they often deflate slowly like a tire with a small leak. If you listen carefully, you can hear a hissing sound.

Well, I am delighted finally to see some evidence of hissing. No, I'm not referring to the rapidly inflating Web 2.0 bubble (see David Cowan's comments on this week's Web 2.0 Conference here). I'm referring to the bubble that just refuses to pop even after 12 years of near-constant inflation. I mean the Manhattan real estate bubble.

For almost 18 months now, there have been articles every day in all the major newspapers describing an ever intensifying real estate run-up. Finally, this weekend, the first major cracks appeared. And for someone who has been (foolishly?) sitting out of the real estate market for 10 years now, it's an enormous relief.

I hope the articles like this one from Sunday's New York Times continue. The article quoted a report by Miller Samuel, one of New York's most reputable appraisal firms, and by Douglas Elliman, one of the region's top real estate brokers, claiming average sale prices declined 13% in Q3 from Q2. The same report said that median prices fell 3.2% (to what remains a whopping $750,000). Of course that means the high end of the market is collapsing the fastest, and I hope that's a strong indicator of additional compression to come.

As Rob Stavis put it to me recently, "Not owning any real estate is effectively equivalent to being short a unit." He argued that since we all need a place to live, not owning any property is like being short relative to one's long-term real estate needs.

Well, I'm anxious to cover the short, and I hope the market finally cooperates.