Matrix Blog

Historical, Landmark, Milestone

[Three Cents Worth DC #208] Keep Your Eye On The Numbers (For The Past Decade)

September 13, 2012 | 12:24 pm | | Articles |

It’s time to share my Three Cents Worth (3CW) on Curbed DC, at the intersection of neighborhood and real estate in the nation’s capitol. And I’m simply here to take measurements.

Read this week’s 3CW column on @CurbedDC:

…I thought it would be visually helpful to show the ebb of and flow of the DC Metro area’s housing market. And since I just learned how to rotate a GIF image, I’m making up for all the art classes I never took in high school (band). I trended a decade’s worth of the robust web data from the regional MLS (RBI, a division of MRIS)—monthly new pending home sales and median sales price in a two year moving window. I also inserted some commentary on the milestones during the decade (i.e. highest points for price and sales, lowest points for price and sales, Lehman/credit crunch, tax credit, etc). Hopefully it’s not too distracting…


[click to read column]

Curbed NY : Three Cents Worth Archive
Curbed DC : Three Cents Worth Archive
Curbed Miami : Three Cents Worth Archive

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Change is Constant: 100 Years of New York Real Estate

February 7, 2012 | 11:28 am | | Articles |

[click to expand]

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!).

Diane Cardwell of the New York Times in her “The Appraisal” (an incredible column name BTW) penned a great piece: In an Earlier Time of Boom and Bust, Rentals Also Gained Favor that originated from my article and zeroed in on the 1920s and 1930s to draw a comparison to the current market.

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]

Read More

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[Sideways] 4Q 2009 Manhattan Market Overview Available For Download

January 5, 2010 | 11:51 am | | Reports |

The 4Q 2009 Manhattan Market Overview , part of a report series that we have authored for Prudential Douglas Elliman since 1994, was released today.

Other reports we prepare can be found here.

The 4Q 2009 data(coming later today) and a series of charts (available now).

Press coverage can be found here once we get around to uploading it. In the meantime….

An excerpt

……There were 2,473 sales in the current quarter, up 8.4% from the 2,282 sales in the prior year quarter and up 10.9% from the prior quarter. This level of activity was more than twice the 1,195 sales seen in the first quarter of 2009, which had been lowest level of sales in nearly 15 years. The return to more normal historical levels of sales activity was also reflected in the decline in inventory levels. There were 6,851 active listings at the end of the quarter, a 24.6% decline from 9,081 listings in the same period a year ago, but down 18.3% from 8,389 listings in the prior quarter….The second half of the 2009 Manhattan housing market reflected a new era, marked by the milestone Lehman Brothers Bankruptcy tipping point of September 15, 2008. Buyers, sellers and real estate professionals have slowly adopted to changes including stringent, if not irrational mortgage underwriting, elevated unemployment and layoffs, lower compensation, a sharp price correction, shadow inventory, first time home buyers tax credit, rising foreclosures, declining appraisal quality, expanding marketing times and a host of other challenges. While the increased level of sales in the second half of 2009 was encouraging, a true housing recovery will be marked by a meaningful decline in unemployment and greater consumer access to credit…….

Download 4Q 2009 Manhattan Market Overview


TED’s Excellent Adventure

February 13, 2009 | 3:23 pm | |

Link to Bloomberg Chart

Ok, so this is my second Bill & Ted reference this week, but hey, Keanu Reeves starred, Matrix, etc.

I was having lunch with a good friend (other than the grief I regularly get about my bright shirt colors) the other day and he suggested I follow the TED spread more closely. While I have followed it, I’ve not been as fanatical about as many economists are. Perhaps I should be since, like the Fed’s Senior Loan Office survey, TED provides useful insight into the lending environment beyond mortgage rates.

I watched the CNBC special last night House of Cards, which was very good – not too much I hadn’t heard before but it did provide more clarity to the sequence of events and expanded my understanding of the roles Fannie/Freddie, Greenspan, CDOs and the rating agencies played in the risk/reward disconnect.

I also learned that the word Credit is derived from the Latin for Trust.

The TED spread (Treasury Eurodollar) for the uninitiated is the rate spread between treasury bills and and LIBOR.

Treasury bills are thought to represent risk free lending because there is the assumption that the US government will stand behind them. LIBOR represents the rate at which banks will lend to each other.

the difference in the two rates represents the “risk premium” of lending to a bank instead of to the U.S. government.

When the TED spread is low, banks are likely in good shape because banks feel nearly as confident lending to each other as if it were backed US government (The US has recently proved we’ll back pretty much back anything).

The spread is usually below 100 basis points (“1” on the chart). It reached a recent low of 20 basis points in early 2007, which in my view, shows a disconnect in the pricing risk since the subprime mortgage boom began to unravel in early 2006.

The spread spiked in in mid 2007 at the onset of the credit crunch (that was a summer to remember) and later spiked to 460 on October 10, 2008 as the wheels came off the financial system and became the new milestone or “tipping point” for the new housing market.

The spread has been contracting which is perhaps a sign that banks are starting to feel less panicked about each other. I think lending conditions will improve over the next few years, but there is a long way to go as measured by years rather than quarters.

Note: Another TED worth noting. A great resource for the intersection of Technology, Entertainment and Design.

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[In The Media] Theory Of Negative Milestones Means A New Beginning

November 9, 2008 | 8:30 pm | | Milestones |

I have long believed in what I call the “theory of negative milestones.” There are seminal events that mark new periods of real estate activity. (both map mashups courtesy of NYT)

This weekend’s New York Times real estate cover story was based on my firm’s ongoing research of the Manhattan housing market. The content in the article was thoroughly fleshed out by my friend Noah over at Urban Digs so I won’t elaborate.

In 2008, the influence of the credit crunch has been characterized by various levels of impact on segments and a lower level of activity. Everyone who lives in Manhattan can feel it, especially those in the real estate brokerage business. The events of the past two months have marked a new milestone with the bailout of Frannie, the $700B stimulus package, collapse of Lehman, the purchase of Merrill, the reclassification of Morgan and Goldman to commercial bank status, aggressive actions including cutting rates by the Fed, a culmination of 22 months of campaigning, a new party taking over the executive branch and gaining power in Congress. In other words, change.

The promise or anticipation of change makes people in real estate pause and reflect.

Still, there is real estate activity, albeit at a slower pace. Informed buyers are signing contracts. Many participants are optimistic about the new direction promised by the new administration, and in the short term, that may cause a slight bump up in activity. However, the credit crunch continues to overshadow housing markets in the US.

Stabilize credit, then and only then, can the housing improve.

Speaking of wolves at the door…

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[Banking On Recovery] Did The Glass-Steagall Repeal Cause Our Insecuritization?

September 29, 2008 | 12:15 am | |

There has been a lot of debate on whether the repeal of Glass-Steagall on November 13, 1999 via the Gramm-Leach-Bliley Financial Services Modernization Act was the beginning of the end of the separation of financial church and state. The Glass-Steagall Act, also known as the Banking Act of 1933 was created to prevent commercial banks from entering the investment bank business.

If you’ve been abducted by aliens for the past three weeks, here’s a great way to catch up on the bailout.

And when you are caught up (assuming the alien thing was accurate), here’s a once in a while requirement from Matrix. A required reading assignment: What’s Free About Free Enterprise?

The first is the risk of moral hazard within the bailout itself. That is, if government is going to make good so many losses throughout the system, why would anyone set limits on future risk-taking? The situation could turn into a free-for-all that makes the recent disregard of risk look like child’s play.

The second problem is more philosophical, involving what the bailout plan reveals about the functioning of the free enterprise system. This raises disturbing questions. Although I agree with President Bush’s observation that “the risk of not acting would be far higher,” we should be aware of the secondary effects of what we are getting into.

Analysis of an IMF study on bank failures shows that the average recovery rate in a banking crisis averaged just 18 percent of the gross costs. Barrons seems to think the taxpayer will come out ahead.

Not everyone thinks the bailout is a great idea.

I should add, though, that I don’t think the people spearheading the bailout have a clear idea about what they’re doing either. They remind me of the old saying: “Something must be done. This is something. Therefore this must be done.” I’m a former student of Chairman Ben Bernanke and his behavior during this mess has been a big disappointment.

Robert Shiller writes an opinion piece in the Washington Post this weekend telling everyone to calm down – government intervention is not unusual and not a bad thing. Everybody Calm Down. A Government Hand In the Economy Is as Old as the Republic. He makes the argument that capitalism evolves and is not etched in stone. He makes a compelling argument.

Megan McArdle in The Atlantic says its not about the Glass-Steagall repeal at all because securitization has been around for a while and Gramm Leach didn’t impact lending standards at commercial banks, among other items.

But Dan Gross at Slate and Newsweek says that the repeal is the end of an era and perhaps infers, that it caused the situation we are in today.

The policy response was to erect a wall between investment banking and commercial banking. It outlasted the Berlin Wall by a few decades. In the 1990s, as another bull market took hold, momentum built to overturn Glass-Steagall. Commercial banks were eager to get into high-margin businesses like underwriting hot tech stocks. Brokerage firms saw commercial banks, with their massive customer bases, as great distribution channels for stocks, mutual funds, and other financial products that they created. Generally speaking, the investment banks were the aggressors.

While I don’t blame the credit carnage all on the repeal of Glass-Steagall, it sure is a compelling milestone and played a role. Banks and investment banks had blurred lines of distinction and regulators were no match for the investment banks. Of course, JPMorgan Chase, who seems to be coming up roses with recent mopup efforts, was the merger of an investment bank and a commercial bank.

The mindset was free markets need to be free because market forces were self-regulating. Of course, that purist view may very well have caused one of the most constraining regulatory environments in the modern era going forward.

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52-Card Pickup, Or How Steroids Impacted The Housing Market, Sort Of

July 10, 2007 | 11:59 pm |

Credit Suisse analysts have come up with a startling number:


That’s 52 followed by 9 zeros and inserting 3 commas (I am fond of commas).

$52,000,000,000 in subprime CDO’s at risk.

The losses are projected to have a ratio of about 80%/20% hedge funds/banks. This is not bigger than the Savings & Loan FDIC bailout amount of $125 billion about 15 years ago whose costs were born by the taxpayers through the massive sell off of assets through the sub-agency Resolution Trust Corporation, lovingly known by appraisers as the RTC. It was nirvana for appraisers, because we got to estimate values for complex foreclosed assets of defunct S&L’s, including hair-brained development deals and oddball asset classes conjured up by people who had no business doing what they did.

Major League Baseball’s All-Star game is going on right now and the Tour de France bicycle race (my favorite, second only to March Madness) began last Saturday. Baseball and professional bicycling have been plagued by scandals including steroids, human growth hormones, blood doping and others. I am big fans of both sports, but they have been tainted for many years with this form of cheating, whether or not the drugs were legal at the time.

Did it make me write off these sports as a fan? No.

Does it taint the records and perceptions of the players and does it place the sports at risk in the long term? Yes, perhaps.

When things are going well, its often easier to look the other way.

These professional athletes may have achieved milestone records, won championships and received big contracts in exchange for perhaps, a shorter life expectancy. Perhaps they suffered from a limiting understanding or an obscured appreciation of their own health risk.

Institutional investors and investment bankers also suffered from a lack of understanding of the real risks and what these subprime mortgages really represented. Like professional sports, there is nothing inherently wrong with subprime lending as long as ethics are adhered to and guidelines or standards are followed. While subprime loan applicants typically have a much higher credit risk, it was the issuers of these loans that were the parties that should have scrutinized by investors. The subprime mortgage market may not have melted down if basic lending standards were applied in the subprime lending process.

Don’t mean to pontificate, but its that lack of an appreciation of risk, and the disconnect with asset values that is something I deal with every day as an appraiser. Plus, its an easy way to speak about what’s on my mind in one post: MLB, The Maillot Jaune and a changing real estate market.

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Days On Market: Time Is Always Running Out

April 2, 2007 | 6:58 am |

I got a call from an agent last week who asked me if the days on market (dom) figures in my market studies were based on the original list date or last list date (the last time the price was changed). It was something she wanted to have a better feel in advance before advising her clients on one of her listings. I directed her to my methodology page and had a pleasant discussion about the differences between the original and last listing dates in calculating days on market.

Ten years ago, this discussion would not have been part of the real estate conversation.

In the late 1990’s, I started tracking listing inventory and the time it took to market a property in Manhattan on a macro level. I had been kicking around the idea since the early 1990’s but couldn’t figure out how to capture the information in a more granular way.

This sounds fairly straightforward but this ability generally doesn’t exist in any listing database systems I have seen or read about.

The problem with listing related information, unlike sales information, is that it is very difficult to capture this information in its aggregate form. Why?

Looking at sales data for answers

If a property closed for $1,000,000 today, I will capture the sales data and keep it in my database in perpetuity. A few years from now, I could look back at my database and see all the sales that closed for about this price on or near this date.

But what about listings?

When I review active listings in a particular market, I look at the days on market before I consider finer property nuances like condition, layout, room count and so on. It provides clues to the upper limit to value, helping define the possible value range of a property whose value we are estimating. The same goes with sales that closed. I want to understand how the property was accepted.

If that same property was listed for $1,000,000 today, the price might be reduced, raised, get taken off the market, re-listed with another agent, etc. Listing systems generally don’t have the ability to capture the snapshot of the market at a previous point in time, other than today. In other words, I can’t query the state of listing activity as of a prior date.

One property could have a half dozen prices associated with it and various dates. The list price tomorrow, if unchanged, would remain the same, however, a simple query on tomorrow’s date wouldn’t show the listing because the listing date is simply the milestone where the current price started. The search would need to encompass what properties were listed on that day by looking at the listings with the same date and then looking back at each record to see if when the last price change was made.

This information gives you a sense of how well the property was absorbed by the market. If it was initially overpriced with many price deductions, it could even suggest that the sales price was somewhat below market levels rather than if the property was listed close to market and sold more quickly, it can often be infer a price more consistent with market. A decade ago, these patterns might have suggested just the opposite but you have to have the information first before you can grapple with this indicator.

I find it humorous when a property is languishing on the market, presumably because it is overpriced, that the owner will resort to raising the listing price when the real estate news reported begins to describe an uptick. This is common and explains why there will always be over priced listings in any type of market.

Listing history of the immediate market ie, price reductions or increases, and their associated date, was something competent appraisers and agents should always consider when valuing a property.

Here are the formulas I use. Days on market is usually split into two different categories:

  • DOM From Original List Date – Measured from the date the listing was first placed on the market. The calculation is: Original List Date – Contract Date. This is often the easiest to measure but is less useful. For example, with that $1,000,000 property I mentioned earlier – what if the property was listed at $2,000,000 yet worth $1,000,000. Is it a competing listing to other $1M properties? Is it actually in the market? No it isn’t.

  • DOM From Last List Date – Measured from the last time the list price was changed, if ever. The calculation is: Last List Date Change – Contract Date. This is the more useful of the two methods because it shows the market’s ability to absorb a property once it actually enters the market. Essentially, its the list price of the property just before it goes to contract. In other words, its the list price that brought the property into the correct market segment and attracted buyers.

Trulia Trends Report/National Heat Maps Launched Today: What Are Consumers Looking For?

January 9, 2007 | 6:37 pm | | Public |

January 2007 Trulia Trends Report

After joining the real estate party a little over a year ago, Trulia has made great strides establishing their role as a leader in the listing search business, working with Realtors rather than against them. Trulia has working agreements with 90 of the top 100 real estate brokerage firms with more on the way. (disclosure: I am a member of Trulia’s advisory board.)

They crossed the million listing milestone last year. While impressive on that point, I think its more important to note that these are clean listings, not simply raw feeds rife with errors, duplicates, stale product or junk.

I had spoken with Trulia shortly after their initial launch with the idea of developing a market report, since I found their approach to the listing process so refreshing. The finished version now being released reflects market conditions and includes consumer search behavior.

We decided wanted to break out the market by major cities rather than as a national statistic since both Trulia and myself have serious issues with the accuracy in this type of approach, despite the fact that Trulia covers all 50 states. The list of major markets will expand and so will the metrics covered, as their service is able to build more historical content with the passing of time.

Thus the Trulia Trends Report became a reality today at 9am. Its a first step with more content and analysis to come as a collaberation between Trulia and Miller Samuel.

Download the Trulia Trends Report [PDF] here.

Download the Trulia Trends Report press release [PDF] here.

Here’s Trulia’s post about the new report.

My personal favorite section of the report is the…ahem…Matrix table on the third page. Especially the favorite neighborhoods and cities columns. Manhattan, Chicago, Philadelphia, San Francisco and Boston had favorite cities in different sections of the country and were most heavily concentrated on the east and west coasts. The searches originating from the remaining cities stayed within the same state or adjacent state.

Trulia National Heat Maps

This is a dynamic resource that breaks the US up by state, county, neighborhood and zip code. Consumers can see what markets got the most traffic. This is a live resource that is continually updated.

Here’s Trulia’s post about expanded Heat Maps.

Another important announcement today (to me that is): Apple developed an iPhone product to be released in June. Thank goodness, I am about to throw my Treo out the window (and I am on a high floor).

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The Onus of The Wall Street Bonus

December 15, 2006 | 9:56 am | |

Over the past few weeks, discussion of the impact of the Wall Street bonus has increased as rapidly as the housing prices did in 2004. Its a big economic event in the New York region and provides a significant impact on the local economy.

Bonuses been get a lot of coverage with more to come:

Huge Profit at Goldman Brings Big Bonuses [NYT]
Brokerages report record profits [AP]
Unbelieva-bull spending spree [NYDN]
Downtown realtors ready for bonus time [Metro]
Jaw-Dropping Bonuses on Wall Street [US News]

However, I don’t think that bonuses are the only reason why 2007 looks more promising today than it did 6 months ago. While bonus income seems to have more impact on pricing than the number of sales, the consensus is that a wider market strata will be affected this time.

Last year, the bonus income had more of an impact on the upper 2% of the market, for properties priced above $5 million dollars. This year however, as the saying goes, its different. But no real reason has been given as to why things are different this year other than bonuses, it just feels different. For example, its my impression that there have been more bidding wars in the last month and a half than in the early part of the year.

Here are some thoughts on why the outlook for 2007 could be better than last year in New York real estate:

  • Bonus income is higher than last year and its no surprise. Each quarter, news coverage of the pace of bonus money tracking has remained on target. The news gradually built expectations over the year.
  • Bonus income has seen 4 successive years of gains (assuming this year is), which provides a cumulative effect. Bonus payouts don’t necessarily go into the housing market in the first year of payout. Activity today may originate from payouts made a few years ago.
  • Mortgage rates have been generally in decline or flat for the past 6 months. Mortgage applications are rising including refi activity which adds to the churn. The Fed is largely expected to cut the federal funds rate in mid-2007 because of a cooling economy. However, the NYC economy is expected to be fairly solid so the market benefits from weaker conditions in other parts of the country through tapping into lower mortgage rates.
  • International buyers have been coming to the market in increasing numbers, (but less than I would have thought by this point). Favorable exchange rates due to the weakening dollar makes NYC properties increasingly affordable to foreign buyers.
  • Lending (underwriting) standards continue to erode making it easier to get deals done.
  • Some developers are starting to get the message that its all about accurate pricing and that marketing alone doesn’t move units. We are hearing that some stalled projects are being re-priced and then see units started to move. Placing ego aside is a huge step int he right direction.
  • Overpriced listings from non-serious sellers started to expire and not be renewed last spring, reducing the clutter and frustration for buyers. Inventory levels in the region have remained level for more than 6 months, after seeing substantial gains for the prior 18 months. There is some evidence of inventory bottoming out nationally after several months of gains but the jury is still out.
  • Rental rates spiked this year as a result of people moving into rentals for safety and lower cost. They became disillusioned after seeing bidding wars and 20 to 25% rent hikes in the luxury sector.
  • The local economy is on solid footing and the city is projecting a surplus.
  • The recent national election brought significant change to the Congress, implying some sort of changes in the future.

To expound on the last thought, the real estate market is often defined by negative milestones, ironic for such an upbeat industry. One of those milestones could be the recent national election.

With the president’s approval rating at record lows for his tenure and the situation in Iraq deteriorating, I thought that a change in control of the Congress could be one of those milestones. The looming election had turned the focus away from the housing market. While the change in power may or may not impact housing, it was a change and seemed to precipated a change in perception.

The latest wrinkle is the sudden illness of Democatic Senator Tim Johnson, who, if unable to continue in office, would be replaced by someone appointed by the Governor, a Republican by presumeably, a Republican. This would move the Senate to 50/50 representation by both parties just after the newly majority that the Democrats earned last month. However, I suspect that this is a non-event for housing. The momentum has already been initiated by the election.

Sure, the bonus money is an important, and perhaps primary component of the recent surge in activity in Manhattan, but it can’t claim all the credit.

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[List-o-links] From The Tank: Bears, Goldilocks And GDP

November 6, 2006 | 12:01 am | |

A lot of economic negativity this week – didn’t get time to expand on them – so I put treads on the tank and dragged ’em off the beach.


With A Flag, An I-Beam and a Christmas Tree, The Party Is Just Getting Started

February 27, 2006 | 12:06 am | | Milestones |

Ever since I was a kid, I remember seeing and reading about Christmas trees on top of buildings under construction but they were not quite finished. I also remember seeing an American flag and there was usually a ceremony of some kind that was covered in the newspapers.

There has been a tremendous amount of construction in recent years and I started thinking about topping out ceremonies:

What is this all about? Why a tree?, and Why was I looking up instead of watching where I was walking?

According to Modern Steel Construction / December 2000 [pdf]

When or how it started, but the tradition of ‘Topping Out’ has become a cherished custom of Ironworkers whenever the skeleton of a bridge or building is completed. Topping Out is a signal that the uppermost steel member is going into place, that the structure has reached its height. As that final beam is hoisted, an evergreen tree or a flag or both are attached to it as it ascends.

This tradition of ironworkers is most closely associated with the International Association of Bridge, Structural, and Ornamental Ironworkers union in Washington, DC.

“Topping out” is the term used by ironworkers to indicate that the final piece of steel is being hoisted into place on a building, bridge, or other large structure.

The project is not completed, but it has reached its maximum height. To commemorate this first milestone the final piece of iron is usually hoisted into place with a small evergreen tree (called a Christmas tree in the trade) and an American flag attached. The piece is usually painted white and signed by the ironworkers and visiting dignitaries (figure 1). If the project is important enough (and the largesse of the contractor great enough) the ceremony may culminate in a celebration known as a “topping out party” in which the construction crews are treated to food and drink.

For those who are into Scandavian mythology here is the History of the “Topping Out” Ceremony [Columbia University] via The Ironworker magazine.

Topping Out Bear Stearns NYC

Mohawk Indians are the most well-known ironworkers and are close associated with topping out buildings.

Here’s a sampling of local coverage for a typical event:

Topping Out at 7 World Trade Center
Topping Out At The Ukrainian Museum’s Top Project
Topping Out the Blanton: That tree on the roof? Means the new museum is A-OK.
Vought-Alenia plant to be topped out

but its not limited to the US…

New unit at Northwick Park Hospital finished [UK]
New home to help juveniles re-integrate [HK]

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