Posted by Jonathan J. Miller -Tuesday, February 14, 2012, 9:26 AM
Remember that 1970s epic min-series?
A lot has been made about the “class warfare” sniping between presidential hopefuls in the current campaign. It’s unfortunate, but as it relates to housing, the disparity is somewhat alarming.
For this week’s New York Times real estate cover story, For Sellers, High End Is Hot, I was asked to back up my statement:
“There is a greater disconnect between the very top of the market and everything else than I have ever seen in my 25 years in the business,” said Jonathan J. Miller, the president of the appraisal firm Miller Samuel.
I sliced up the Manhattan apartment market in 20 (5%) equal segments for 1991, 2001 and 2011 by median sales price and compared the top 5% with the bottom 5% after adjusting for inflation.
And guess what? The spread between the top 5% and the bottom 5% is getting wider, a lot wider:
- 10 years (2001-2011) +12.5%
10 years (1991-2011) +66.2%
20 years (1991-2011) +87%
The data shows that the gap expanded more significantly during the Dotcom-related housing boom of the late 1990s and then continued in the aughts (00’s) with the credit boom. In many metro area markets and affluent suburban towns across the US, this same phenomena can be seen.
An advertisement for Powerball “Yeah, That Kind of Rich” on a phone booth (now that’s a weird contradiction) that I photographed (to the right) says it all. At least we can all aspire to own a Porsche Panamera – by itself in left lane – love that car!).
After the collapse of Lehman in 2008 and the collapse of the secondary mortgage market for jumbo (non-conforming) loans, there was great concern over the health of the high end of the market. Less access to financing or more difficult mortgage underwriting for jumbo mortgages became the norm because jumbo lenders had to hold these loans in their own portfolio instead of offloading them to investors representing the Icelandic banking system or Wisconsin school districts.
And there should have been concern. The credit crunch has adversely impacted the high end luxury market.
However I am not talking about the high end or luxury market in this analysis. I am speaking to the market that is above it.
I am really talking about the “super” or “luxe” or “ultra” (or insert your own hyperbole) high end market and the top few percentage points of markets they represent. Trophy properties are in demand right now. The buyers are paying cash and demand is high.
Meanwhile the balance of the housing market is mundane, sliding or stabilizing, grappling with bad lending decisions during a period where everyone lost their rationale mind.
Right now is an exciting time to be “trophy-hunting”, housing-wise.