Posted by Jonathan J. Miller -Thursday, February 16, 2012, 12:18 PM
I was originally going to call this post: When Pundits Have No Idea What They Are Talking About but changed it to be more direct.
I have been a long time reader of City Journal and have been a fan of Nicole Gelinas’ writing. That’s why I was surprised to read a slanted rant-fest in the Winter 2012 edition called: The Rental Mania That Wasn’t. It’s inaccurate real estate stereotyping at its worst.
She writes a cynical critique of last weekend’s New York Times real estate story by Vivian Toy, a solid veteran reporter and friend of mine.
Gelinas demonstrates a lack of understanding with the Manhattan rental market, inconsistent with her long established writing credentials. She pontificates that the article was hyperbole and concludes the housing (rental) market has peaked because the New York Times said there was plenty of room to go:
If the Times thinks there’s no ceiling in sight, you can almost bet that the ceiling has already been reached. The paper of record has a track record on this. In 2005, the Times Sunday magazine ran a nearly 9,000-word story on the nation’s real-estate boom.
Remember the Time Magazine cover on housing?
Well the rental market still has plenty of wiggle room if we are talking peak. We are currently 27% below the inflation adjusted rental peak reached at the end of 2006. In other words we are not in uncharted territory as a rental market.
The Manhattan sales market didn’t peak until mid-2008. And the reference to Bob Toll confuses the national housing market with Manhattan market. The national market peaked in mid-2006, 2 years before Manhattan did.
The rental market is up 9.5% year over year and continues to rise. Why? Because credit remains tight and likely will remain tight for the next several years driving many people to rent rather than purchase.
And then there is the issue of “froth”:
Toy further notes that “to compete for top rents, some landlords are undertaking expensive apartment renovations in older rental buildings. Even 10-year-old properties are being subjected to face-lifts.” That points to landlord worry, not complacency. You don’t plunk down tens of thousands of dollars in free cash flow to overhaul an apartment unless you’re nervous that newly built apartments are going to pose a threat. In a sizzling rental market, nobody insists on a washing machine or a hardwood floor.
This logic also shows a lack of understanding with the current dynamics of the market. The renovations are being done because the cost of renovations are far less than the resulting increase in achievable rent. There is a premium on upgraded space. You can see it in the market.
And the closing snipe is hypocritical since Ms. Gelinas is held to the same standard as Ms. Toy.
Neither Toy nor the Times editors did their job here—unless their job is to sell real-estate advertising.
My recommendation to Ms. Gelinas is to be more responsible with your platform and actually understand the issue you are writing about. I live and breath housing metrics every day and was offended by the inaccuracy and mischaracterization of your writing.