Posted by Jonathan J. Miller -Wednesday, January 4, 2012, 6:00 AM
[click for interactive chart]
A few months ago I wrote about the strengthening USD and it’s potential to limit real estate demand from foreign buyers, an important component of the Manhattan housing market, especially for new development and also re-sale condos and single family properties.
NYC tourism is at record levels as international consumers continue to take advantage of the favorable exchange rate, however a record pace will be hard to sustain. Brazillians are a growing force, accounting for a half million visitors annually, but that pales in comparison to the overall annual total of 50M.
After the S&P downgrade of US debt last summer, foreign investors flooded to US treasuries as a “flight to safety”. Well the same goes for real estate and there had been a significant surge in Manhattan condo sales in the third quarter of 2011.
Tourism won’t rescue NYC again [Crain's NY]
European Central Bank [Euro Exchange Rates to USD]
Posted by Jonathan J. Miller -Tuesday, November 1, 2011, 6:30 AM
Knight Frank released its Global Cities Index that compares the high end market across the planet. I contributed the New York metrics from the Elliman Report series I author.
Weakening consumer confidence from the European debt crisis and US economic problems are taking their toll.
Prime property in the world’s global cities has been tagged a ‘safe haven’ investment by savvy minded investors for the past three years….
The report shows that the rate of growth is cooling after 3 years of robust gains.
There are now clear signs however that luxury property prices around the world are collectively softening for the first time since the global recession hit in 2008/09. Fears concerning unresolved sovereign debt issues both in the eurozone and US look to be having an impact on buyer confidence.
The big demand drivers from foreign investors in the US seem to be the weak US Dollar and global instability in the financial markets.
3Q 2011 Prime Global Cities Index [Knight Frank]
3Q 2011 Prime Global Cities Index Press Release [Knight Frank]
Posted by Jonathan J. Miller -Monday, October 31, 2011, 12:27 PM
[click to open index]
The USD Index tracks a basket of currencies measured against the US Dollar. The USD Index includes the currency of our trading partners including the Euro, Japanese Yen, British Pound, Canadian Dollar, Swiss Franc and Swedish Krona.
This past summer, the participation of foreign buyers seemed unusually strong. However the USD Index spiked in September and then weakened again but not to the summer lows. This may take some of the wind out of the “sales” (sorry) for foreign buyers in Q4.
There was a nice summary of the foreign buyer phenomenon last Friday in US News and World Report by Meg Handley:
Internationally oriented sales amounted to $82 billion for the year ending in March, according to the most recent data from the National Association of Realtors, about 8 percent of total U.S. sales and $16 billion more than the same period last year.
In fact, US Senator Chuck Schumer introduced a bill to incentivize foreign buyers to buy residential real estate. What I like most about the bill, is the $500k threshold since there are higher housing prices along the US coastline and FHFA reduced the conforming mortgage limits to high priced housing markets on October 1, 2011 – which are mainly on the east and west coasts.
The bill, if passed, as well as the weak US Dollar, are not the ultimate answer to the housing mess but clearly the solution is going to be comprised of many items, rather than one big idea.
Posted by Jonathan J. Miller -Wednesday, August 24, 2011, 8:38 AM
Now that we are past the earthquake thing, here are a couple of aftershock observations I’ve made (that were released more or less during the 20 second tremor) that I’d like to share:
The first piece is something I wrote for Knight Frank, a property consultant based in London who provides extensive global insight to their clients and has some of the best research I’ve ever seen. My piece sits restlessly on their Global Briefing blog where there is a lot of cool research to look at. I’ll be writing for them periodically.
They dubbed my post:
Letter from America – The state of the US housing market
The second piece is from The Real Deal South Florida. I did a Q & A with their editor on the Miami housing market. My research comes from the report I write for Douglas Elliman Florida. It’s amazing how misunderstood and misrepresented the Miami housing market is. I thought this piece provides a reasonable take on the state of the Miami housing market.
The interview was titled:
Q & A with Jonathan Miller.
Posted by Jonathan J. Miller -Saturday, August 20, 2011, 11:15 AM
A primary news service in Brazil, Jornal da Globo, interviewed me on the housing market and I did a quick overview of the 2008 and laid out the US part of the story. If you blink you might miss me but its a balanced story and it seems to me like Brazil is in year 2006 of our cycle.
[click to see video]
The reporter told me that their economists and regulators say they are not in a bubble. However consumers have easy access to credit and there has been double digit multi-year housing growth far outpacing rental prices. That’s a housing bubble, no?
Incidentally, the day before this interview I was interviewed by a Chinese Television station with a similar story but less optimistic about the state of their market – saw it as a bubble.
Here’s a good Financial Times article on the Brazil housing market from last spring: Housing boom raises fears of Brazil bubble [subscription]
Entenda as causas do crescimento nos preços dos imóveis no Brasil [Jornal da Globo]
Understand the causes of growth in property prices in Brazil [English Translation]
Posted by Jonathan J. Miller -Wednesday, March 2, 2011, 7:00 PM
[click to open report]
Lots of concern over the past few decades about foreign ownership of real estate property. Everytime the US Dollar weakens, there are a flood of news stories in markets like Manhattan and DC about foreigners taking the market by storm.
Well, this chart isn’t that, but ownership of financial assets like US Treasures exceed what foreign assets Americans own.
Yes the US is a global economy.
Posted by Jonathan J. Miller -Wednesday, February 2, 2011, 8:27 AM
Borrowing costs (10-year bond yield spreads over benchmark German bonds)
[Source: WaPo - click to expand]
The Washington Post shows its graphics prowess with this interactive chart on loans extended between EU countries. While I continue to hear about European buyers entering the NYC housing market, the phenomenon appears to be greatly exaggerated. Irish carpenters are fixing their own roof (with a lot of help).
[Source: WaPo - click to see interactive version]
Posted by Jonathan J. Miller -Sunday, January 2, 2011, 4:42 PM
I sit down with my friend John Mehigan, an associate broker at Gumley Haft Kleier who, when he is not selling real estate, is in the cast of HGTV’s number one show Selling New York (new season on HGTV premieres at 9pm EST). We talk about his perspective on the Irish economy/Mahattan housing market and what I dubbed the “Irish Carpenter Syndrome” a few years ago as the Celtic Tiger was at full strength.
When he’s not selling on “the island” he’s selling an island in his first episode on January 13th on HGTV at 9pm. It promises to be fun (like the conversation on this podcast).
Check out the podcast.
The Housing Helix Podcast Interview List
You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.
Posted by Jonathan J. Miller -Tuesday, November 16, 2010, 10:00 AM
Point2 is a marketing service for real estate agents – they survey their real estate professional members across North America to get a sense of how they feel about their current and future market conditions.
[click to expand]
Several months ago I commented how both the US and Canadian real estate brokerage community seemed to take a very gloomy outlook for the housing market once the contract expiration date of the US federal tax credit for housing was reached. Now that the closing date for the tax credit of September has passed there was an increase in confidence.
Was this change in direction because of a perception that the housing stimulus is over? Or just a one month blip? Who knows.
I realize this is an exercise in correlation, not causation.
Posted by Jonathan J. Miller -Thursday, October 28, 2010, 1:53 PM
We all understand that when one has “skin in the game”, they are incentivized to minimize or control exposure or risk. Stories of no money down borrowers walking away from homes as strategic defaulters are common fodder in today’s news cycle.
However, in Spain, mortgage defaulters remain on the hook for their obligations yet that didn’t prevent them from getting swept up in the euphoria of the credit boom in In Spain, Homes Are Taken but Debt Stays [NYT]
So the argument that homeowners without “skin in the game” were morally bankrupt is a one dimensional viewpoint since Spain had the same shoddy lending practices we did. In other words, the fact that people would have to pay the loans back didn’t dampen the credit frenzy of the times. Moral hazard, the idea that someone will help you if you get into trouble without significant penalty, is the default explanation for a lot of the credit mess.
In the US, lenders AND borrowers AND TAXPAYERS are paying for the error of their ways but in Spain, the borrower seems to have much more of the burden. In theory that makes perfect sense – they borrowed money and can’t pay it back. However the big question is whether or not deceptive or predatory lending practices were commonplace in Spain during the boom like in the US.
The point in my ramblings dialog here is that even with an embedded payback requirement in the mindset of the spanish borrowers, they still took risks that they didn’t comprehend. This therefore suggests a larger structure economic phenomenon that drove so many people to make poor credit decisions.
Moral hazard isn’t the easy explanation many seem to think it is.
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