Posted by Jonathan J. Miller -Wednesday, January 11, 2012, 6:00 AM 1 Comment
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Last fall Prudential Douglas Elliman turned 100 years old and they asked me to write an article for their Elliman magazine. If you’ve been living in a cave, I’ve been writing their housing market report series since 1994.
What started as a simple project morphed into a fun, albeit gigantic, research project. I learned a lot about the evolution of the Manhattan housing market, largely through the amazing incredible New York Times archives. This was right about the time of my web site revision and semi-necessary hiatus so I am cleaning out my desk of posts I have been itching to write so please indulge me.
The article I wrote for Douglas Elliman was beautifully presented by their marketing department and prominently inserted in their Elliman magazine (and iPad app!).
I have the feeling my project is going to morph into something bigger – it’s just too interesting (to me). A few things I learned about the Manhattan market over this period:
Douglas Elliman published the first market study in 1927 [heh, heh] not counting other marketing materials written before WWI)
Real estate media coverage in the first half of the century was social scene fodder (same as today) but with extensive and excessive personal details presented on tenants, buyers and sellers yet housing prices and rents were rarely presented in public.
Manhattan made a rapid transition from single family to luxury apartment rentals and eventually co-ops.
Housing prices and rents by mid century weren’t that much different than the beginning of the century.
Manhattan’s population peaked at 2.3M around WWI.
Wall Street in the 1920’s was seen as the driver of the real estate market.
Federal and state credit fixes in the late 1930’s help bail out the housing market.
• Change Is The Constant In A Century of New York City Real Estate – pdf [Miller Samuel]
• My Theory of Negative Milestones [Matrix]
They began to have trouble as the market dropped and we haven’t worked for them since the market correction. When I read yesterday’s OTS notice, I stumbled onto a familiar former client.
The “factual allegations” are fascinating.
III. FACTUAL ALLEGATIONS AND CHARGES
19. Without the knowledge or consent ofESSA, and contrary to the intention of ESSA, Respondent altered his Restated Guaranty so that instead ofrestating his personal guaranty ofthe Loans. the altered Restated Guaranty released Respondent from all personal liability for the Loans.
Respondent concealed the changes he made to his altered Restated Guaranty by having the changes typed in an identical type size and font as the original Restated Guaranty. In order to conceal the changes further. Respondent duplicated ESSA’s internal document management system authentication and identification mark in the original Restated Guaranty in Respondent’s retyped altered Restated Guaranty.
Respondent made the modifications to his Restated Guaranty without the knowledge, authorization, or approval of ESSA.
Respondent returned his altered Restated Ouaranty to ESSA without disclosing that he had made modifications to the document that materially changed the legal effeet ofhis Restated Guaranty.
With the belief that it had obtained unaltered executed Restated Guaranty documents from each of the members of Ivy Ridge, ESSA approved an extension on the maturity date ofthe Loans.
On or about August 7, 2008, Ivy Ridge defaulted on the Loans.
Personal guarantees are what join developers and construction lenders at the hip. Nothing is likely more sought after by developers than removing that guaranty from the books.
Now Mr. Roubini is trying to pull off his toughest feat yet. He is betting his business—Manhattan-based Roubini Global Economics—on the assumption that his clients will continue to pay him up to $100,000 a year for the intellectual rigor of his prognostications, not for his relentless negativity.
Note: My world is about to spin off its axis (and no, not because I bought a supercharged snow blower this weekend in 51 degree weather).
Posted by Jonathan Miller -Monday, April 26, 2010, 12:01 AM Comments Off
What’s cooler than watching TV on Friday night? Watching C-Span on Friday night, of course.
Whats been very surprising to me after the unfolding of the financial crisis in 2008, has been how little attention the rating agencies have attracted for their role in the systemic breakdown of the mortgage process.
There was no separation between (church) sales and (state) underwriting. Nothing has changed. Same goes for appraisers and the pressure still being applied by financial institutions.
Its actually a scary since it’s not clear how we get investors back into the secondary mortgage market if they don’t trust the ratings that are issued. That would be an important step in helping ease investor concerns. Again same goes for appraisers operating in a neutral environment.
How can someone with their hand in the cookie jar be trusted with an independent rating system?
On Friday night I watched the following panel discussions of former, disaffected employees arguably thrown softballs by the panel. I found it to be riveting because the the agencies were primarily concerned about their market share, not the quality of their ratings and the dollars and ramification were massive. The rating agencies were “enablers” by rating everything “AAA” so countries like Iceland could go bankrupt. Just like appraisers were the “enablers” of mortgage fraud by mortgage brokers.
I remember having lunch with several guys at an investment bank back around ‘06-’07 who spoke with disdain, if not venom, at how the rating agencies didn’t understand the products they were rating. More as a respect issue, not for concern of the wrong rating.
There are two other panels for this hearing also worth listening too [Panel 2] [Panel 3]
How can anyone charged with neutral assessment of the value of an asset who is fearful of their ending their career or losing their job, do a proper assessment if they are too “low”? Or someone who can be “morally flexible” and therefore make millions personally.
Here’s a must-read article relating to trust and self-dealing by Michael Lewis:
Indeed, the social effects of the SEC’s action will almost certainly be greater than the narrow legal ones. Just as there was a time when people could smoke on airplanes, or drive drunk without guilt, there was a time when a Wall Street bond trader could work with a short seller to create a bond to fail, trick and bribe the ratings companies into blessing the bond, then sell the bond to a slow-witted German without having to worry if anyone would ever know, or care, what he’d just done.
Posted by Jonathan J. Miller -Monday, November 17, 2008, 12:21 AM 1 Comment
In many ways, the free market financial/mortgage system, without regulatory oversight could be described as Nasty, brutish and short:
Nasty, brutish and short aren’t a firm of particularly unpleasant lawyers but a quotation from Thomas Hobbes’ Leviathan, or the matter, forme, and power of a commonwealth, ecclesiasticall and civill, 1651. The fuller quotation of this phrase is even less appealing – “solitary, poor, nasty, brutish, and short”. Hobbes described the natural state of mankind (the state pertaining before a central government is formed) as a “warre of every man against every man”.
I was struck by a recent case of massive number numbness that was inflicted upon me when I saw the Fannie and Freddie losses for the 3rd quarter:
For perspective, Fannie Mae and Freddie Mac each averaged a $2B loss per quarter in the preceding three quarters. The GSEs were bailed out in early-September and represented the last 3 weeks of 3Q. I know the Freddie loss just reported included a $14B non-cash charge so it lost about $12B cash-wise.
The current administration is leaving still advocating free markets, which a disconnected concept when compared to the situation we find ourselves with – day late and a few trillion short. Dismal Scientist calls it right.
I remember when President Bush decided to call a summit 3 weeks ago, during a crisis which needed daily attention:
The first decision I had to make was who was coming to the meeting. And obviously I decided that we ought to have the G20 nations, as opposed to the G8 or the G13.
hmmm…what flavor of free market thinking will work going forward that didn’t work before?
One of the things we did, we spent time talking about the actions that we have taken. The United States has taken some extraordinary measures. Those of you who have followed my career know that Iâ€™m a free market person â€” until youâ€™re told that if you donâ€™t take decisive measures then itâ€™s conceivable that our country could go into a depression greater than the Great Depressions. So my administration has taken significant measures to deal with a credit crisis. And then we worked with Congress to deal with the credit crisis, as well.
Posted by Jonathan J. Miller -Wednesday, April 5, 2006, 12:01 AM Comments Off
Buy a house and get a free Ferrari. Its a compelling presentation and I don’t have enough time to dig further but it gives me the creeps. They list offering prices by the developer (I assume) but show no closing prices.
You know the old saying, if its too good to be true, then it usually is…
I’m not quite ready to use the word “haunted” in my housing language, but I had a nice chat with Brian Sullivan and Mandy Drury of CNBC TV’s ‘Street Signs’ – 30 Rock is always quick walk from my office... Read More