Since the New York State Comptroller announced official Wall Street 2011 compensation numbers today (to be distributed in 2012), I thought I’d compare Wall Street compensation per person against Manhattan sales by year. As an industry, real estate seems to think it lives and dies by Wall Street compensation. No argument that it’s important to the NYC economy, accounting for 25 percent of NYC private sector wages but only 5 percent of private sector jobs…
From my perspective, the $26B was a nominal rounding error despite the trillions in mortgage related fraud that occurred during the credit/housing boom. For essential context and the stunning lack of fairness to “Main Street” the agreement speaks volumes about why we can’t fight our way out of a paper bag (housing crisis).
Posted by Jonathan J. Miller -Wednesday, February 29, 2012, 12:38 PM Comments Off
[click for video]
The Caroline Hepker of the BBC reports on the uptick in short sales on the East End. There are more and the number of high end listings are rising. I’m not clear of the reference for the following statement but she cites that:
For the first time, America’s wealthiest families are now losing their homes at a faster rate than any other group.
For my part, I was asked to discuss the state of national housing market for context. Short sales were not held back by the robo-signing scandal that had the effect of providing a temporary reprieve from foreclosures entering many housing markets across the country.
Short sales are a fact of life everywhere and don’t generally depress housing prices in and of themselves since lenders won’t accept offers that are significantly below current market levels.
House hunting in Hamptons as US market remains depressed [BBC News]
If savvy analysts can accurately predict the index in the coming months, then how does this encourage investors to get on both sides of the trade. Call me crazy but if I knew what the index results would be in the coming months, that would mean that most market players would know and then it’s not possible to beat the market (sorry traders, but this is my weak attempt to talk like a trader).
The S&P/Case Shiller Home Price Price Index’s reason for being, as well as other competing indices were intended to be a benchmark for Wall Street to hedge housing using options (derivatives). This would have served a very logical and useful purpose to be sure but it has been a dismal failure. In one of the most volatile housing markets in history, trading volume has been anemic or non-existent, or at a fraction of the volumes needed to be an efficient market. Still, S&P/CS has become the consumer benchmark as the media grapples with how to characterize the market. The data problems and years of messaging bias over at NAR Research have enabled alternatives like S&P/Case Shiller and Corelogic.
The S&P/Case Shiller December report published today, (2 months after the close of the period, reflecting October-November-December closed sales, reflecting August-Spetember-October contracts) reflects a continuing malaise in US housing even though the 2011 housing market got a reprieve thanks to the robo-signing scandal at the end of 2010 and the anticipated settlement agreement between the major services and the 50 US state attorney generals.
Data through December 2011, released today by S&P Indices for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, showed that all three headline composites ended 2011 at new index lows. The national composite fell by 3.8% during the fourth quarter of 2011 and was down 4.0% versus the fourth quarter of 2010. Both the 10- and 20-City Composites fell by 1.1`% in December over November, and posted annual returns of -3.9% and -4.0% versus December 2010, respectively. These are worse than the -3.8% respective annual rates both reported for November. With these latest data, all three composites are at their lowest levels since the housing crisis began in mid-2006.
What’s interesting is how many don’t seem to understand what the index represents. Here’s a not uncommon interpretation via AP:
The declines partly reflect the typical slowdown that comes in the fall and winter.
No they don’t – the indices effectively washes out seasonality, both through the seasonal adjustments made to the index and the methodology itself. The non-seasonal adjusted results are virtually the same – and the methodology doesn’t reflect certain truisms like the surge that occurs in nearly every spring market since the dawn of time (or at least since cable tv was invented).
December 2011 S&P/Case-Shiller Home Price Indices [Standard and Poors
Survey: Prices declined in 18 of 20 cities in final months of 2011 [AP/WaPo]
What is interesting about this research is the idea that not only did the economy get crushed by the housing crisis, but the fact that the recovery is being delayed because of the legacy of bad lending decisions that created the run-up in housing prices.
Low interest rates just aren’t cutting it anymore – in order to gain traction with the consumer, the study indicates that rates would have to be inverted – that lenders would need to pay borrowers. Crazy.
The pace of recovery since the financial crisis has been less than half as fast as after the last two major recessions, which ended in 1975 and 1982. In first 10 quarters after those recessions, the economy grew by 13.4 percent; in the wake of this recession, the economy grew by only 6.2 percent.
And, the paper says, “more than half the underperformance in this recovery is associated with housing-related sectors.”
No shortage of charts in the paper – here’s a couple that jumped out at me:
Posted by Jonathan J. Miller -Monday, February 27, 2012, 9:45 AM Comments Off
[Interview starts at about the 31:30 mark.]
Had a nice interview about new and existing US home sales with Michelle Makori in the NASDAQ Marketsites studio on the street level at Times Square. She’s the anchor of the Friday evening broadcast of Biz Asia America, a show on the English-language channel of China Central Television (CCTV), China’s largest national broadcasting network. It is a 24-hour international news channel, which can currently be viewed in more than 120 countries and regions. They are making a big push in the US expanding operations in DC and NYC.
Have you recently sat down in front of the TV and tried to find national and international news? Aside from the inconvenient timing of network news, its nearly impossible and frustrating. Remember CNN Headline News? Now its HLN/Nancy Grace. CNN International is basically the same content as the US version. Bloomberg TV is one of the only US (real) news channels out there today other than when Anderson Cooper is on the scene at a disaster.
Like Al-Jazeera English and France 24, CCTV is filling the English speaking news void created by traditional US cable news outlets like CNN, Fox, MSNBC and others who focus on celebrities, tabloid style news and gossip. Let’s raise the bar people.
Posted by Jonathan J. Miller -Monday, February 27, 2012, 8:50 AM 1 Comment
Absorption defined for the purposes of this chart is: Number of months to sell all listing inventory at the annual pace of sales activity. (The definition of absorption in my market report series reflects the quarterly pace – nearly the same)
I started this analysis in August 2009 so I am able to show side-by side year-over-year comparisons. The blue line showing the 10-year quarterly average travels up and down because of the change in scale caused by some of the significant volatility seen at the upper end of the market.
Side by Side Manhattan regional comparison:
January 2011 v. January 2012
[click images to expand]
Manhattan All price segments below $3M were faster than the 10 year absorption rate. Segments above $3M showed signs of cooling, specifically in the $3M-$5M and $10M+ range.
East Side Co-op absorption showed an across-the-board slow down with all segments remaining higher than the 10-year overall average rate. Conversely, the rate for condos accelerated for all segments but the $2M and $10M+.
West Side All absorption price segments generally accelerated with the exception of $10M+ that slowed sharply.
Downtown The rates by segment generally accelerated below $5M and $10M+. The $5 to $10M segment slowed.
Note: This chart series does not include shadow inventory (properties ready for market but not yet listed for sale) so this anlaysis understates the rate of condo absorption. The Uptown (Northern Manhattan) data set is too thin for a reliable presentation.
Posted by Jonathan J. Miller -Friday, February 24, 2012, 12:40 PM Comments Off
The following was shared by an appraiser colleague in the Midwest as told to him by a loan officer:
“You want to talk welcome to America. I am doing a loan for [redact] and they [the borrowers] are not US citizens. He did not work all of last year and she made approx. $21,000. And, their tax refund is $9200!!! ….”
“….How is that even possible? I knew you would enjoy this as much as I did, except I had them in front of me and my head was going only in America!“
Posted by Jonathan J. Miller -Thursday, February 23, 2012, 5:49 PM 1 Comment
In one of the greatest column names ever devised during the illustrious history of the New York Times known as “The Appraisal” [wink], Elizabeth Harris, pens “Amid a Subway Project’s Dust and Noise, No Complaints About the Rent” about the war zone that is Second Avenue on the Upper East Side of Manhattan. I was on vacation when this was published earlier this week and I was forbidden to bring my laptop.
I was approached to try to take a stab at measuring the impact of the Second Avenue subway construction on the local housing market. Listen to the blasting.
Sales transactions move too slowly to capture the neighborhood impact since this is a relatively recent event of the past few years. So I looked at rents since they are smaller and more nimble.
I divided a portion of the Upper East Side neighborhood into three zones (East 64th Street to East 96th Street) as follows:
The blocks to the east and west of Second Avenue (Third Avenue to First Avenue)
The blocks to the west of Third Avenue (to Fifth Avenue)
The blocks to the east of First Avenue (to East River)
I analyzed all the properties collected during our production of the The Elliman Report: Manhattan Rentals that actually rented in 2010 and 2011 and compared them. In a rental housing market that is seeing sharp gains in rents in the past year, I thought it would be interesting to see if there was a material difference in direction between the subway “zone” and everywhere else. I was only looking at “face” rents (the rent paid before deducting concessions) because I have more of that data.
And there was a difference.
In fact, the subway zone showed a 1.7% decline in median rent year-over-year, a 3.2% increase to the west and a 2% increase to the east. And the number of rentals in the subway zone increased 9% while the areas to the west and east fell 5.1% and increased 2% respectively over the same period suggesting that increased affordability may be attracting tenants.
Construction was supposed to be completed by 2016, but now it looks like 2018 or longer.
A gigundo transfer station…
…and trucks carrying explosives [Turn your head to left when viewing photo]…
While I was on vacation, I was contacted by Eyewitness News to discuss my numbers on camera but that wasn’t possible – although the online story includes no mention of the source of the results, the video did provide proper credit.
As time moves closer to completion some buyers may benefit from upside given how unpleasant some blocks are right now. The construction will likely provide downward pressure on housing prices in the near term but those along the zone will likely catch-up and perhaps even benefit from the transportation upgrade.
As a general rule, neighborhood property values tend to be higher in the west and lower in the east. It’s also possible that the price midpoint may shift further to the east than it is now once construction is completed.
Location specifics aside, additional subway access to and from the neighborhood should prove to be a tremendous asset to property owners in that area over the long run.
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