As I was exiting Grand Central Terminal on my way to work, and Timeout New York was being passed out to commuters. Their now-free magazine cover caught my eye:
In this week’s issue of Time Out New York, we prove the Hamptons don’t have to be douchey.
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Tags: Timeout New York Magazine
When first moving to New York City in the mid-1980s I remember seeing this epic quote in New York Magazine:
“You know what this business is all about? Weenie-waving. Everyone does it. I do too.” -real estate developer Bruce Eichner
Fast forward to the latest copy of Wired Magazine with the theme “Sex in the Digital Age.” The real estate angle includes a mandatory SuperTall building graphic with the theme embedded subtitle.
Tags: Wired Magazine
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Charts
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Read my latest Bloomberg View column Living the High Life.
Please join the conversation over at Bloomberg View. Here’s an excerpt…
Never have so many residential buildings had such lofty aspirations. Based on the number of stories in buildings worldwide that are more than 650 feet (200 meters) high, we’re in the midst of an edifice eruption. An even bigger surge is forecast for next year. The interest in what might be called pinnaclenomics has been driven by capital seeking higher returns in hard assets like luxury real estate in the world’s financial centers — especially in developing nations….
Some other related content on the tall building phenomenon:
My Bloomberg View Column Directory
My Bloomberg View RSS feed.
Tags: Curbed NY, edifice eruption, pinnaclenomics, Prashant Gopal, Oshrat Carmiel, John Gittelsohn
Here’s a great conversation with the guest Paul Goldberger, Pulitzer Price winning architecture critic, former New York Times architecture critic and current Vanity Fair editor of his seminal piece on the Manhattan “Billionaires’ Row” phenomenon that is occurring around the world. His Vanity Fair piece provides a terrific visual summary and he provides a nice shout out to the “Bank Safety Deposit Box” analogy I like to use.
Tags: Podcast, WNYC, Vanity Fair, Paul Goldberger, Billionaires Row, Leonard Lopate Show
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Over my career, I’ve have observed a higher frequency of combination apartments (ie co-ops or condos) when inventory is tight. A combination apartment is simply the connecting of 2 or more adjacent apartments (to either side, above or below). It may be easier and/or less expensive to buy the apartment next door to create a larger space (even if you have to overpay for it) than to brave the tough market searching for a larger place to live.
A few years ago I started to track this during the preparation of the Elliman Report: Manhattan Sales. I looked at the actual apartment numbers and counted those that suggested they were combined. I am clearly omitting apartment nomenclature that is not so clear ie 7AB is renamed 7A, so my results are conservative. The above chart reflects the recent trend of more combinations being sold but doesn’t necessarily equate to more being created, so new combinations would only be considered a subset of this data.
I’ve dubbed the phenomenon “1 + 1 = 2.5” because there is a premium for larger contiguous space.
I’ve always thought co-op or condo building that allow combinations (nearly all do) as providing a potential way for shareholders to realize value upside, thereby enhancing the price structure of a building ie higher values rub off on other apartments in the same building.
Some top line ideas about combinations
Some other more granular thoughts
Some layouts don’t work
– Not all combo layouts make sense or provide value upside.
– Layouts tend to work better in pre-war and new developments than post-wars.
– 1980s condos often often the least combinable layouts – ie a side by side 1 bedrooms.
– Over the last decade, developers have kept this in mind during construction to give them more flexibility during the sales process.
Higher value per square foot
– Creating larger apartments creates value upside to existing space ie “1+1=2.5”
– Sometimes large combos can be oversized for the building and there is no ppsf premium for the larger space.
– When a an owner of a large unit buyers the adjacent unit, the mere fact that the same unit owner owns both usually results in a ppsf premium before renovations are made to connect.
– The upside in value for a smaller apartment, means that a buyer can overpay for the unit as an individual sale but the addition of the smaller unit to the large unit adds value to both units on a ppsf.
– The highest value is realized when the buyer can’t tell the layout was comprised of two different units. Simply creating a door between two apartments would realize the least upside.
That second kitchen
– The biggest “tell” on a combo is the existence of a second kitchen.
– They are often converted to a laundry room or bathroom, taking advantage of the utility connections.
– Buildings might object to the removal of the second kitchen because it may impact the building Certificate of Occupancy – I defer to lawyers on this point.
What do lenders think?
– Some banks are scared of combinations and others are not.
– In my experience banks require financing on the whole apartment – if they have a loan using collateral of one of the apartments, they will require that it be replaced with a new mortgage to cover both apartments.
– Banks often get confused on the value of a combo asking the appraiser to provide a value for each of the separate apartments before they are combined. The problem with that position is that the combination is usually worth more as one apartment (even before considering improvements) – in other words, the sum of the parts is less than the whole and the bank will incorrectly assume the collateral is inadequate.
Maintenance fees
– Many agents tell me it is assumed that maintenance charges are skewed higher for combos. I can’t prove this, all other things being equal. When it occurs, it’s probably for reasons other than simply combining the units.
– A combo in a small building, ie a 4-unit brownstone co-op, raises the risk to the remaining shareholders if the combo shareholder stops paying their maintenance charges. Risk exposure to a mid to large sized building should be nominal.
Common Area
– Quite often hallways are purchased and incorporated into a combo layout for a better result.
– The co-op wins by getting a cash infusion for the purchase and income in perpetuity for the additional share allocation from the common area purchase.
Tags: combination, combos, combined, 1+1=2.5, Co-ops, Condos
[Source: Quartz]
Rob Ferdman over at Quartz writes a great breakdown of the narrowing rental spread between Manhattan and Brooklyn using the data I crunch for The Elliman Report: Manhattan & Brooklyn Rentals. Here’s my version of the chart.
After I designated last week’s Bloomberg story headline “Brooklyn’s Hipster Economy Challenges Manhattan Supremacy” as my favorite new phrase, specifically:
Brooklyn’s Hipster Economy
Quartz has given me a new favorite phrase (see under original chart):
Coolness doesn’t come free
.
Tags: Affordability, Quartz, Qz, Roberto A. Ferdman
Every so often I hear this particular word used in real estate and I cringe. It is both awful and heartbreaking because it instills fear in the hearts of buyers in a market devoid of adequate listing inventory but yet is equally annoying.
when a seller (especially of property) accepts an oral offer of the asking price from one potential buyer, but then accepts a higher offer from someone else. It can also refer to the seller raising the asking price at the last minute, after previously orally agreeing to a lower one. In either case, the original buyer is left in the lurch, and either has to offer a higher price or lose the purchase.
It’s widely used in the UK and Australia but not that popular in the US. There is “Ghost Gazumping” in the UK and “anti-gazumping” laws in Australia.
However given NYC’s global connections, I hear it used more than I’d care to and find it absolutely annoying. We need a replacement word or phrase as soon as possible (aside from “the seller screwed us despite accepting our offer and went with a higher one.”)
Tags: Australia, Gazumping, UK
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Back in mid 1980’s the front door of a new condo conversion at One Tompkins Square Park was spray painted with words “Die Yuppie Scum” and it became the battle cry for protests against gentrification of the East Village. With the eastward push of new residential development in the 1980s from the West and Central Village, residents and local businesses worried about being priced out and losing the intangibles that made the neighborhood unique – and that they would disappear along with it.
I remember appraising apartments to the east of Tompkins Square Park, seeing squatters inhabit derelict buildings, observing a burned out school bus on blocks in front of a newly converted walk-up and the self-described “Anarchists” in the park. All that is gone.
Recent discussions about gentrification have been more visible of late – and so have the discussions of the benefits of gentrification.
Merriam-Webster defines gentrification as:
the process of renewal and rebuilding accompanying the influx of middle-class or affluent people into deteriorating areas that often displaces poorer residents
Philadelphia is one of the first cities to tackle the issue in an attempt to keep the long time residents there and in doing so, helping to minimize the loss of the character of the neighborhood. It is fascinating and encouraging to see city governments be proactive on the issue since it costs money in the short term.
The initiatives, planned or underway in Boston, Philadelphia, Washington, Pittsburgh and other cities, are centered on reducing or freezing property taxes for such homeowners in an effort to promote neighborhood stability, preserve character and provide a dividend of sorts to those who have stayed through years of high crime, population loss and declining property values, officials say.
Tags: Gentrification, East Village, Tompkins Square Park, One Tompkins Square, Die Yuppie Scum, Spike Lee, Merriam-Webster
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Jed Kolko does a nice job summarizing what the general housing market may look like in 2014 after the new home sales report came out today.
My big takeaway was that any housing market improvement will be more affected by local job and income growth rather than the “rebound effect.” This phenomena occurred in markets that were hit hardest by the downturn, yet saw the largest price increases.
I’ve added “rebound effect” to my 2014 phrase list, right after “polar vortex.”
Tags: Jed Kolko, Commerce Dept, New Home Sales, Census, Polar Vortex, Rebound Effect, Sarah Portlock, Jonathan House
Here’s an excerpt from a recent lawsuit for a NYC property that struck me as high art (modified to keep parties private).
…During the same timeframe in which the Sponsor insisted it was unable to restore service to the Condominium, it was somehow possible to locate and rescue 33 trapped miners in a remote region of Chile.
Tags: Contracts
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I was speaking at the New York Real Estate Bar Camp recently and asked the audience what to call the state of housing market right now, since I objected to the use of the word “recovery” and “a period of better stats without underlying fundamentals” wasn’t catchy. Philip Faranda came up (more like shouted out) a brilliant suggestion. We’re in a “Pre-Covery!” I loved it and it stuck.
I thought about the new word when I read a great Robert Shiller piece in the New York Times this weekend called: A New Housing Boom? Don’t Count on It.
Shiller questions the substance of the happy housing news we’ve all been reading about:
It’s hard to pin down, because nothing drastically different occurred in the economy from March to September. Yes, there was economic improvement: the unemployment rate, for example, dropped to 7.8 percent from 8.2 percent. But that extended a trend in place since 2009. There was also a decline in foreclosure activity, but for the most part that is also a continuing trend, as reported by RealtyTrac.
What’s missing from all the metrics being tracked and discussed is sharply falling inventory – that’s what is driving prices higher even though little else has changed.
The reason for falling inventory? Sellers, when they sell, become buyers (or renters) and with >40% of mortgage holders having low or negative equity, they don’t qualify for the trade up. We have been so focused on negative equity that we’ve paid short shrift to the impact of low equity.
Not only don’t many sellers qualify – they simply aren’t under duress i.e. they haven’t lost their job, don’t need to move, etc. so what will they do when they realize they don’t qualify?
Nothing.
They expect/hope hope the market improves eventually.
This has created yet another form of “shadow inventory.”
Although I certainly agree that the long term trend of mortgage rates doesn’t really correlate with housing prices since rates have been falling for years, weak employment and personal income are not justifying the last 6 months of housing market improvement.
I see falling mortgage rates as simply keeping demand steady (but rates can’t fall much further) and falling inventory is either pressing prices higher or to stabilization depending on the market.
Here is a simplistic generic but typical scenario in most of the markets I follow over a 2 year window:
In this scenario the rise in sales is NOT working off inventory – the math doesn’t work so something else is in play – low or negative equity is choking off new listings entering the market against steady demand caused by falling rates.
Since low inventory is not a local market phenomenon but is happening in nearly every housing market I can think of (sales rising modestly and listing inventory falling sharply) it makes this a credit phenomenon. I like to say “housing is local but credit is national.”
To make this discussion really crazy we could even say that tight credit conditions are actually prompting the pre-recovery something that on the surface is very counterintuitive. But in reality, tight credit is choking off supply and low rates are keeping demand constant. Then prices rise.
Tags: Case-Shiller, Robert Shiller
American Banker has a great slideshow on catchphrases that evolved during the financial crisis. Check it out. Some of my favorites are:
Structured By Cows – “We rate every deal. It could be structured by cows and we would rate it,” said an S&P analyst discussing a questionable securitization that a colleague called “ridiculous.”
High Speed Swim Lane, or HSSL Countrywide’s way of describing the way they stripped QC of loans going to Fannie Mae and Freddie Mac.
Friends of Angelo Named for Countrywide’s CEO Angelo Mozilo in which government officials like Chris Dodd (ie Dodd-Frank) got better mortgage terms than they should have.
Close More University Subprime lender New Century (out of business) brought together mortgage brokers to encourage them to throw away any standards to bring more volume.
Jingle Mail When borrowers mailed their keys to the bank if they were hopelessly underwater.
Liar’s Loans Standard mortgage industry practice that encouraged borrowers to exaggerate their qualifications in order to get the loan.
Incredible and hard to conceive of now but this was common practice only a mere 5 years ago.
Tags: American Banker, Fannie Mae, Sub-Prime, Freddie Mac
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Jonathan Miller is President and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm he co-founded in 1986. He is a state-certified real estate appraiser in New York and Connecticut, performing court testimony as an expert witness in various local, state and federal courts. He holds the Counselors of Real Estate (CRE) and Certified Relocation Professional (CRP) designations. He is an Appraiser “A” Member of the Real Estate Board of New York and a member of Relocation Appraisers and Consultants, Inc.
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