New York is "Special"

From the New York Sun: Condo Fee Defaults Surge in Manhattan.

A precipitous rise in the number of condominium owners who are defaulting on their common payments, an important indicator of future foreclosures, is being reported.

Much has been said about Manhattan's perceived real estate invincibility in the aftermath of the subprime meltdown, but lawyers representing dozens of condominium boards in some of the city's wealthiest neighborhoods say they are seeing these default cases increase as much as 25% this year.

Let's review the situation one more time.

While the desire to live in Manhattan/San Francisco/Paris/Rome is infinite, the means to do so are decidedly not.

Are we clear on this concept?

And just for those who think everyone in Manhattan is "rich", the median income is $50K. Just Manhattan, not the five boroughs; just the frakkin' island; and that's familial income, not individual income.

There seems to be one more argument made. The Europeans/Arabs/Chinese will buy the property now that the dollar is sinking.

It doesn't matter.

What matters is whether or not the local incomes support the rent. If they don't, it doesn't matter what you paid for the condo. You won't be able to rent it out for anywhere near the carrying costs, and if you can't rent it out for the carrying costs, you overpaid. The END.

This actually brings us to an old joke of how "economists know the price of everything but the value of nothing".

This is an argument about valuation not price, and the valuation depends on rent, and rents depend on local incomes. The price may appear cheap denominated in euros/dinar/remnimbi but the value, alas, is quite decidedly not.

Then there's the "they'll just raise the rent" or the "rents just go up" argument.

The landlords can "demand" any rent they like but the question is how are they going to get it if the local economy doesn't support it? It's like the scene in Austin Powers where she states her name as "Ivana Hump-a-lot", and he replies, "and I wanna toilet made out of solid gold, babeee, but it's just not in the cards, now is it?"

Are we really clear about this concept as well?

At this point in time, usually, there is a final fallback argument. It's a hedge against inflation. Fine, but why would you buy a depreciating asset as a hedge? Just buy gold/oil/non-agricultural commodities if you're so worried.

Why is this absurdly simple argument so hard for people to understand?