The Elliman Report: Manhattan Rentals 3Q 2011 (renamed) was published today. It is part of a report series that we have authored for Douglas Elliman since 1994.
You can build your own custom data tables with the new data. I’m about to launch a site redesign and am rejiggering the way I handle charts (automatic) so I haven’t been very diligent in updating them on my site – sorry about that.
Here’s an excerpt from the report:
…The median rental price, without concessions, was essentially unchanged year-over-year at $2,995. However, median rent with concessions (net effective monthly median rent), increased 4.9% over the same period to $2,970 from $2,831. Approximately 8.6% of new leases had some form of landlord concession compared to 45% in the prior year quarter…The number of listings on the market declined 1.9% to 4,605 in the third quarter from 4,693 in the prior year quarter. Number of new rentals declined 6.9% to 7.998 from 8,593 in the same period last year as more tenants likely opted for renewals. The absorption rate for new rentals was 1.7 months, essentially unchanged from 1.6 month in the prior year quarter but down sharply from 7.7 months in the sameperiod two years ago…
Mortgage rates could be one percentage point higher and house prices 10% lower if the U.S. mortgage market were fully privatized, according to a paper to be released Tuesday by Mark Zandi, chief economist at Moody’s Analytics.
The calculations help build Mr. Zandi’s case for replacing Fannie Mae and Freddie Mac with new entities constituting a public-private hybrid system for financing home loans.
Wait, isn’t this a repeat of the past?
The problem before was that the GSEs served two masters: Taxpayer AND Shareholder. The shareholder enjoyed an unfair advantage since the taxpayer was the backstop that allowed higher risk taking that ultimately brought the GSEs down.
But Zandi contends that a completely private entity will not work because investors will assume that the government would step in if there was a problem. I agree with him. A purely private solution ignores this reality.
Solution?
MBICs (mortgage bond insurance companies) who would securitize packages of bank loans and sell them.
Posted by Jonathan J. Miller -Sunday, December 26, 2010, 3:36 PM Comments Off
I got to interview my namesake, Jonathan Miller who is the longtime author of the seminal publication Emerging Trends in Real Estate, the Urban Land Institute’s (ULI) annual commercial real estate industry forecast and speaks extensively on suburban and urban issues.
Our real estate lives have intersected for years. For example, I would get complimented for a presentation at the Waldorf Hotel (although he gave the speech) while he would get inquiries about the NYC co-op condo market (which I track).
He is the co-founder of Miller Ryan LLC, a firm that provides strategic marketing communications counsel to the financial services and real estate industries. He also writes over at GlobeSt.com on his Trend Czar blog.
The post-crash bounce in global
housing markets is set to slow
considerably in 2011. However, lower
price growth across the world masks
improving fortunes in Europe and
a more sustainable rate of market
performance in Asia.
Some of the issues many markets are facing include reduced government aid, increased government control, tight credit and high debt levels.
The acquisition market has been gathering steam in the second quarter, with cap rates declining nationally and the gap between buyers and sellers narrowing.
For the last two years, the typical sellers seemed to be only those who had to sell. And the perception that rents and values will escalate two years from now has kept many owners who bought at the height of the market from listing their properties.
But among longer-term holders, there’s been a shift in attitudes in the past 90 days. The bidding on high-quality assets has become so frenzied that owners are beginning to ask themselves if now really is such a bad time to sell.
We are already seeing this on an individual apartment and single family home basis, with investors comprising the lion’s share of the purchase activity for speculative purposes. Record low mortgage rates and a precipitous drop in housing prices made the purchase decision pretty easy.
Economically speaking, nothing has changed in a meaningful way in the short term, although the consensus seems to be that we are going in the right direction.
After raising fresh capital over the past 18 months from investors hungry to recoup their losses of the past few years, funds looking to invest in multi-family and distressed assets have been waiting on the sidelines afraid of their own shadow, looking for the right time to make a move. But the problem is, everyone seems to be doing it at the same time and they seem to be more concerned about what their colleagues are doing rather than the fundamentals.
That’s because investors want their money working for them and are tired of waiting for the fund managers to get in the game so to speak.
The surge in SFR and condo sales activity nationwide as a result of the tax credit, sharp declines in prices and rising foreclosures are bringing more affordability and falling borrowing costs to the housing market. It’s not clear whether this can be sustained. If this level of activity can be, I’m not sure how to do that math.
This “happy” real estate news for the past 6 months has played a role in the new unbridled optimism by fund managers looking to acquire multi-family and distressed assets and are under pressure from their investors and who don’t want to be left behind.
Our commercial group Miller Cicero is seeing this sentiment first hand when speaking with investors.
It feels like the beginning of a new asset bubble because the math simply isn’t there. There are a lot of smart analysts punching key strokes on their HP12c’s trying to do the math.
Of course they don’t seem to know how to do the math and in a bubble, that’s besides the point.
Posted by Jonathan Miller -Monday, January 18, 2010, 7:19 PM 1 Comment
[click to play]
Shazia Khan of NY1 does a nice local segment on foreign buyers (no pun intended). You can’t really tell, but due to tripod issues, the video camera is sitting on a pile of my books.
Admittedly, NYC always over hypes participation by foreign buyers (remember stories of Irish carpenters buying Manhattan condos?) but its worth paying attention to.
The dollar remains pretty weak compared to the Euro.
On Thursday (in about an hour) we are releasing our 3Q 2009 Manhattan Rental Market Overview. In the meantime, the REIS report is a wake up call to the economic realities of the apartment market in New York and the US.
The U.S. vacancy rate reached 7.8%, a 23-year high, according to Reis Inc., a New York real-estate research firm that tracks vacancies and rents in the top 79 U.S. markets. The rate is expected to climb further in the fall and winter, when rental demand is weaker, pushing vacancies to the highest levels since Reis began its count in 1980.
This is the seventh straight quarter where less space has been rented. Net effective rents (face rent less concessions like free rent and payment of commissions) has fallen sharply since the Lehman bankruptcy. REIS sees vacancy rates peaking in a year and rents declining through 2011.
Why? Rising unemployment and 7.2M jobs lost in the recession so far.
New York vacancies jumped to 11.4 percent in the third quarter from 6.6 percent a year earlier, and the city’s effective rents tumbled 18.5 percent, Reis said.
The drop in rents is about twice the decline New York experienced in 2002, following the Sept. 11, 2001, terrorist attacks. Rents fell 9.3 percent that year, Calanog said.
That’s why landlords are aggressively focused on tenant retention. The New York balcony BBQ conversation is dominated by “how much the landlord knocked off the rent to get me to renew.”
Posted by Jonathan J. Miller -Tuesday, October 6, 2009, 12:20 AM Comments Off
There was a recent article in Fortune that outlined the bias of the FDIC against private equity (hat tip: Bank Lawyer’s Blog), to the point where a foreign bank beat out a consortium of U.S. investors including Blackstone Group and TPG.
The common perception is the private equity always behaves like this fascinating article about the fall of Simmons called “Profits for Buyout Firms as Company Debt Soared” subtitled: Flipped – how private equity dealmakers can win while there companies lose.
I highly recommend the above NYT article, and the video series, although anti-private equity.
Like homeowners under water with their mortgages, corporations can also be in the same predicament. And like the mortgage lenders who pushed bad mortgages, private equity also burdened perfectly good companies with excess debt.
Just as with the housing market, the good times ended when the economy fell into recession and the credit markets froze. Simmons is now groaning under a huge amount of debt at a time when its sales are slowing. And this time there is no escaping by finding yet another buyer willing to shoulder its entire burden.
Whatever the approach, high leverage is vulnerable economic swings. Private equity serves a role just like mortgage lending does. We are currently in vilify everyone mode.
However, I’m not sure that the FDIC is being prudent for good reason. Perhaps they are hoping to find money under the (Simmons) mattress.
Moody’s Investors Service threw cold water on optimistic projections of a V-shaped recovery in the battered U.S. housing market, predicting it could take more than 10 years to get back to boom-level prices.
They define “Recovery” as getting back the 40% peak to trough decline of the past several years.
MY KEY POINT – Their 10 year recovery benchmark is predicated on returning to credit-on-steroid-fueled-housing-levels which I believe most people now realize was not actually real. Therefore, the 10 year projection is based on a false premise and unfairly negative. For example, if housing prices remain flat for the next 5 years, don’t you think most will feel like housing has recovered (even if flat doesn’t = recovery by definition)?
It is strange to see Moody’s so ultra negative on a market aftermath that they help create since everything was AAA a few years ago. (Sorry, but I am annoyed).
Their key points:
It will take ten years to get back the 40% peak to trough that was lost
The downturn will over correct, meaning a longer time to get back.
Foreclosures and oversupply
Hard hit states will be the last to recover
While we are being dire – here’s a nice global recession map.
Click to expand
And map the US recovery – which states are recovering (after all, like real estate, all recessions are local).
One thing you learn from booms and busts is the importance of gatekeepers — those professionals who are supposed to safeguard the system and keep markets honest. When gatekeepers are compromised or fall down on the job, confidence evaporates and markets collapse.
And its been wrong for a while…
starting in the mid-1970s, following a number of high-profile bankruptcies, people decided it was important to make credit ratings publicly available to all investors. Companies that issued bonds began paying for the ratings themselves, and it didn’t take long before agencies figured out that it was better for business if their ratings were a bit higher and their analysts were a bit slower to issue downgrades
the SEC rolled out a bunch of new rules and proposals meant to purge conflict of interest and ineptitude from the credit-ratings agencies—that group of companies whose greatest hits include considering Enron investment-grade until four days before it went bankrupt and, most recently, the “AAA-rated” CDO.
In 2005, I had lunch with a bunch of investment bankers and they spent most of the meal ripping the incompetence of the rating agencies – how they couldn’t keep up with the new financial products and the disrespect for their “hand in the cookie jar” arrangement.
As it stands now, you can’t really build investor confidence in the secondary mortgage market until you (substantially) remove self-dealing. Rating agencies were paid by the banks whose paper they rated. Crazy.
The Commission approved a series of proposals designed to strengthen its oversight of credit ratings agencies, enhance disclosure and improve the quality of credit ratings. The proposals would improve the quality of ratings by requiring greater disclosure, fostering competition, helping to address conflicts of interest, shedding light on rating shopping, and promoting accountability.
The three top agencies — McGraw-Hill’s (MHP, Fortune 500) Standard & Poor’s, Moody’s (MCO) Investors Service and the Fitch unit of France’s Fimalac — raked in huge fees in exchange for assigning high ratings to “complicated financial instruments, including securities backed by subprime mortgages, making them appear as safe as government-issued Treasury bonds,” Brown’s office said in a statement Thursday morning.
Had a fun interview with Tom and Sara this morning on the always MUST watch/listen Bloomberg Surveillance. We talked housing, rentals, vacancy and inventory. An added bonus was the addition of Adam Davidson – co-founder and co-host of Planet Money... Read More
