Posted by Jonathan J. Miller -Thursday, October 28, 2010, 11:58 PM Comments Off
I finally got to meet and have a conversation with Florence Quinn, Founder and President of Quinn & Co., a leading public relations firm specializing in food, wine + spirits, real estate and travel. Her practice continues to grow, providing services for both national and international clients.
Florence built a highly respected and successful practice with a wide array of expertise from her team who seems to be everywhere these days. She has always been on my radar – many thanks to Lara Berdine for getting us together.
Posted by Jonathan J. Miller -Thursday, October 28, 2010, 1:53 PM 6 Comments
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.
I have been compiling a collection of charts for the Bronx (ok, The Bronx) and Staten Island but not ready for posting yet. Break outs by property type, quintiles, etc. coming. We’ve got aggregate data for all five boroughs and New York City already available online. The Manhattan numbers are a little different than the other reports on the borough since it is the combination of co-ops, condos and 1-3 families which is not previous reported in the existing reports unlike Brooklyn and Queens.
Posted by Jonathan J. Miller -Thursday, October 28, 2010, 10:34 AM Comments Off
A few months ago, I did an analysis by floor level of Manhattan co-ops and condos, which illustrated the market phenomenon of the missing 13th floor in Manhattan. Superstition played a strong a role in floor level delineation but that trend is fading. Older buildings are more likely to be missing the 13th floor than new ones.
In the very interesting Department of Economics, University of British Columbia October 2010 research paper “Superstition in the Housing Market” by Nicole M. Fortin, Andrew Hill and Jeff Huang, the impact of superstition was measured by the the last number of the street number in a property address.
When the Beijing Summer Olympics opened at 08:08:08 pm on the 8th day of the 8th month of
2008, it was shown to the world that the Chinese take the auspiciousness of the number “8”
seriously. In Las Vegas, where superstitious beliefs are rampant, many large casino-hotels (such
as MGM, Wynn and Palms Place) omit floor numbers 4, 14, 24, 34 and 40 to 49 because the
number “4” is considered unlucky in the Chinese tradition. This tetraphobia comes from the
fact that the pronunciation of the word for four is very similar to the word for death in Mandarin, Cantonese, and several Chinese dialects. On the other hand, the word for eight is phonetically similar to the word for prosperity or wealth.
Think “8″ not “4″.
Apparently my batting average is not very good in my own residences, but then again, I don’t believe that each housing market I have lived in since college has been composed of at least 18% Chinese buyers as defined in this research.
Roughly every other residence we’ve had since college suggests death. I’m glad my lucky number has always been “7.”
38 (wealth – we rented when first moved from NYC to CT, ironically owner was foreclosed and we had to move)
The paper is simply presented and clear. I especially love the the academic formula variable for “Chineseness” census tract variable denoted as “Ec” and the use of the word “tetraphobia”.
Here are some results:
We find that in neighborhoods where the percentage of Chinese residents exceeds the Greater
Vancouver average of 18 percent, houses with street numbers ending in “4” are sold at a 2.2
percent discount and those ending in “8” are sold with a 2.5 percent premium in comparison to
houses with street numbers ending in any other digits.
And several footnotes are especially interesting including:
David Phillips, George Liu, Kennon Kwok, Jason Jarvinen, Wei Zhang, and Ian Abramson ( 2001)
find that for Chinese Americans and Japanese Americans, the peak of mortality among chronic cardiac patients
occurs on the 4th of the month, a striking pattern not found among White Americans.
It sounds like one should never under estimate the power of superstition. After all, a key component of value is the perception of future worth as defined by market participants. After reading this paper, I now get the Feng Shui consultant marketing thing as a phenomenon — for non-believers, in a market with more buyers guided by a form of superstition, the goal for a seller should be to reduce purchaser obstacles in order to expand marketing exposure to get the highest price for their investment.
I still think “7″ is a pretty lucky but for some reason I’ve never lived in a house including my childhood that ended in “7″ that I recall. Maybe that’s why it’s my lucky number.
Posted by Jonathan J. Miller -Wednesday, October 27, 2010, 2:34 PM Comments Off
It’s time to share my Three Cents Worth on Curbed, at the intersection of neighborhood and real estate.
…Now that the individual quarter results for the boroughs have been posted, I took a look at the market share for each of the five boroughs based on the number of sales and total dollar volume of sales by quarter. I began tracking Staten Island and The Bronx last year and built their historical data back to 2003 with the intention of trending the city each quarter and supplementing the three boroughs already covered. The intention is to weigh whether we are too Manhattan-centric as a proxy for the health of the city housing market as a whole…
Posted by Jonathan J. Miller -Wednesday, October 27, 2010, 1:15 PM 1 Comment
Source: New York Federal Reserve [click to expand]
At least once a week I am asked about the breakout of the housing stock in Manhattan. My latest research/estimate has been 75% rental/25% owned for the borough and of the 25% owned, co-ops out number condos 3:1 or 75% to 25%. If you throw in townhouses, thats about 1% out of the 75%/25% co-op/condo relationship.
Ok, so apparently I wasn’t making this up. Here’s the New York Fed’s housing profile based on Census and the Housing and Vacancy survey. Phew! A great reference point for not only Manhattan, but all 5 NYC boroughs.
Existing Home Sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, jumped 10.0 percent to a seasonally adjusted annual rate of 4.53 million in September from a downwardly revised 4.12 million in August, but remain 19.1 percent below the 5.60 million-unit pace in September 2009 when first-time buyers were ramping up in advance of the initial deadline for the tax credit last November.
However, it is disingenuous to pronounce that a sales recovery has begun since this 10% jump is merely a statistical oddity. In other words, anything NAR adjusts for seasonality over the next year will be skewed by the 2009-2010 tax credit roller coaster which is baked into the adjustments.
Seriously, let’s get real
I prefer to remove seasonal adjustments from any housing analysis (Case Shiller is de-emphasizing them because of the “roller coaster”) since it is a “black box” mystery adjustment. You can see how the actual swing in sales activity was much more dramatic than the adjusted sales over the past year.
Unadjusted sales fell 8.5% from last month which reflects what actually happened.
Actually the year over year figure adjusted and unadjusted was -19.1% and -19.5% before the tax credit expiration of April 2010 that ramped up the activity. Another argument to remove seasonal adjustments.
Posted by Jonathan J. Miller -Tuesday, October 26, 2010, 11:32 AM Comments Off
[click to expand]
This past weekend, Sarah Kershaw wrote a piece for her Big Deal column called “Demand Rising for Rentals Among the Ultrarich“, a phenomenon that a number of real estate agents have been talking about lately. So much attention has been paid to high end sales while the high end renter seems to be where the action is now.
Here is the table of data I crunched for the article:
[click to expand]
Posted by Jonathan J. Miller -Monday, October 25, 2010, 12:36 PM 3 Comments
This video has got to be the most accurate interpretation of the way we all walk around these days – who would have thought a 1960’s Donovan song could be so applicable? I doubt I would buy one of these phones (think Zune) but I did buy Donovan’s greatest hits.
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