Matrix Blog

Posts Tagged ‘Forbes’

More Songs Indexes About Buildings Housing And Food

September 26, 2006 | 11:57 am |

If you are a Talking Heads fan, you’ll get the title. If not, its a completely silly, but thats the idea when it comes to many indexes. It seems that there is an index for everything and everyone, but are they useful or merely headline grabbing public relations opportunitues? I am not sure I care.

Here are a few indexes I have been following, some more than others:

An Index To Aspire To

Forbes recently released its The Cost of Living Extremely Well Index which tracks the costs of luxury items that most Americans don’t buy (because they are not found at Wal-Mart or Target (pronounced “tar-JAY” for the social elite). The idea is to separate purchase costs of the wealthy as compared to the _paper-cup using, American Idol watching, blue jean wearing, mid-sized compact driving, gum chewing, Wonder Bread buying public like most of us are.

Of course, one of the biggest costs of living extremely well (or as I like to say: Extreme Living) that is missing from the index is housing. If you can buy an $11M helicopter, you can probably afford an expensive home. In most of the US, a luxury home is something over $1,000,000. In Manhattan, its something over $40,000,000 and its usually one of many homes that are owned.

I am not sure how Forbes would track this because there really isn’t a reliable national luxury housing index. Coldwell Banker has tried. The NAR might consider tracking an upper percent of home sales rather than setting some sort of artificial price threshold index.

An Index To Gain Weight With

The Economist introduced the Big Mac Index (subsc) about 20 years ago.

Burgernomics is based on the theory of purchasing-power parity, the notion that a dollar should buy the same amount in all countries. Thus in the long run, the exchange rate between two countries should move towards the rate that equalises the prices of an identical basket of goods and services in each country. Our “basket” is a McDonald’s Big Mac, which is produced in about 120 countries. The Big Mac PPP is the exchange rate that would mean hamburgers cost the same in America as abroad. Comparing actual exchange rates with PPPs indicates whether a currency is under- or overvalued.

An Index To Wake Up To

A few years ago, The Economist began the Tall Latte Index [ABC] which basically does the same thing as a Big Mac. I was thinking that a Venti Caramel Frappucino calorie or caffeine count may correlate better to the housing market than the cost.

An Index To Have With Your Lunch

While I am on the Economist bandwagon, lets not forget the Coca-Cola Map that correlates wealth with its consumption. The conclusion?

Coke consumption takes off at the upper end of the development scale. Finally, democracy goes better with Coke. Consumption rises with political freedom, as measured by Freedom House’s seven-point scale. Have a cola, North Korea.

Of course, here’s another map that breaks down the language of soft drinks. Click on the states for the actual numbers by county. Yet another map available on that was interactive a few years ago but now is only available as a pdf.

In my book, a Coke is a soda.

But I digress…

I will post about more serious subjects later today. Right now too I’m too busy gauging how hungry and thirsty I am.


The US Relieved That New Yorkers Can Breath Easier: London Is More Expensive

September 5, 2006 | 6:49 am | | Public |

A Bloomberg and AP story on London housing prices exemplifies how fascinated we are with rankings when it comes to housing no matter where we live. CBRE compared upper end London housing prices to my most recently completed Manhattan Market Overview in the 2Q and were found to about 20% more expensive (1,200 pounds vs. 1,000 pounds).

While thats interesting, its not the reason for this post.

Look at the extent of the coverage [Google].

As of this morning, the story was picked up by 147 newspapers. Except for markets like Shanghai, Taiwan, Canada, Australia and a few major US markets and national publications, the vast majority of the coverage was in mountain, midwestern or southern states. Most of these markets did not see appreciation rates as high as the US coasts did. These markets include locations such as Alabama, North Dakota, Arkansas, Wyoming, Montana, Nebraska and Wisconsin among others.

Apparently big numbers, either real estate prices or appreciation, still sell newspapers.

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[List-o-links] Housing: Tipping Point For Fed?

June 28, 2006 | 7:13 am | |

Here’s a list of articles discussing the Federal Reserve’s rate move tomorrow at the close of the 2-day Federal Open Market Committee meeting. Oil-based inflation concerns have kept the pressure on the FOMC to keep raising rates.


Swimwear on 9: Lord & Taylor Gets New Owner, Flagship To Go Condo?

June 23, 2006 | 12:01 am |

Actually, swimming in Fifth Avenue condo inventory…

In Peter Slatin’s column Lord & Taylor’s New Master [] he announces that new owners have purchased the shopping chain and speculates that they may have seen hidden value in their real estate holdings. The flagship store may be the source of speculation of future condos?

Although condo conversions have been spreading all along Fifth Avenue, from the Plaza Hotel at 59th Street to south of the Empire State Building at 34th Street, all indications point to a slowing market, and it will take the new owners some time to get plans in place to make significant changes in the property–if that’s what they seek to do.

“Our plan is to operate the company, review every store, understand which should be left alone and which should be modified,” said NRDC principal Richard Baker. “The flagship will be analyzed like everything else–does it need to be that large? Maybe it only needs to be half that large.

Hotels have gotten all the press lately about their conversion to condo. Could department stores be the next ones to go? Unlikely and there is no real pattern yet. Admittedly I am stretching here, but what about the former Gimbels on 86th and Lexington (a condo)? The former Alexanders on East 58th and Third Avenue (a condo) and a few others.

My angst about this potential conversion is this: My offices are around the corner…

Where am I going to go for that last minute gift?


[In The Media] Clip for 6-14-06

June 15, 2006 | 6:51 am | Public |

Here is a clip of my appearance on the Video Network yesterday (you can skip the commercial intro) in a segment called Building Balance. I spoke about the recent releases of weak home builders forecasts, investor activity and general trends. [about 4 minutes]

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List-o-Links: Debt, Costs and Prices

June 12, 2006 | 12:01 am | |

Here’s a mish-mash of articles that didn’t make it into Matrix as a post, but they are worth a look.

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Inflation Is As Inflation Does, But Housing Doesn’t

May 18, 2006 | 8:33 pm | |

Investors, real estate investors and consumers have all been scratching their heads lately. Everyone is looking at short-term inflation pressures and contradictions in data and wondering what affect that will have on the Fed’s next move.

Yesterday, the stock markets dropped sharply [NYT] in response to new concerns about inflation as consumer prices increased. Wholesale inflation rose at a brisk pace in April [DFP], pushed up by rising energy costs, as factory output rose and homebuilding slowed.

Just two days ago, a falling dollar and weakening housing market suggested the Fed might pause and not raise rates at the next FOMC meeting [Bloomberg] causing worries high commodity prices could slow the global economy. Oil prices have trended downward recently [Forbes]. Core inflation was tame, posting a 0.1% increase in April and lower than expected and housing starts dropped 7.4% last month and down 20% since January.

So which is it? Depending on the report you read, inflation is looming or it isn’t. The Fed will continue their policy of measured increases or they won’t.

The Fed has basically postioned itself to wait an see what the data tells them between now and the next FOMC meeting. So we get day to day changes in the interpretation of the state of inflation. The uncertainty of whether mortgage rates will continue to rise places further pressure on the housing market.

The mixed economic reports [AR] should give the Fed a lot to think about.

The stock market seemed to show belief that inflation was not built into pricing yet. Even the zen-god of the bond market, Bill Gross of PIMCO changed his forecast [Globe].

Bill Gross, the world’s most influential bond fund manager, raised his forecast for benchmark ten-year bond rates Wednesday, admitting he underestimated the strength of the global economy.

The takeaway from this economic stat chaos is that despite stronger consumer pricing, housing market participants are unsettled. It would seem to me that the impact of a weakening housing market has not impacted inflation data yet.

The economic repercussions of a weakening housing market is a significant economic unknown and additional rate increases will expose further weaknesses, compounding the problems. I remained concerned that inflation is more of a catalyst for a slowdown (in a weird twisted way) rather than a long term condition of an over heated economy.

Cart before the horse.


Coastal Prices Loft Zips

April 25, 2006 | 12:01 am | |

In Sara Clemence’s special report: The Most Expensive ZIP Codes [] she ranks the top 500 zip codes nationally, which is quite an undertaking. (ok – shameless plug: my firm provided the Manhattan stats)

Only 2 Manhattan zips made the cut, which was similar to last year. Whats so interesting to me is that the zips that you would think made the list, those that contained Fifth Avenue, Park Avenue and Central Park West, didn’t make the cut. California was most represented at the upper end of the list, and those are nearly all are adjacent to some waterway. Eastern Long Island did well, posting the highest zip code on the list, 11962 in Sagaponack, New York.

Only 10013 and 10007 made top 20 and these zips happen to be primarily loft areas in the neighborhood known as TriBeCa (acronym for triangle below Canal Street). In the mid-1990’s the downtown loft markets of SoHo (South of Houston Street) were discovered and became one of the most popular areas for new development, primarily through conversion of manufacturing buildings to residential condominiums. As the market matured, loft spaces were getting larger, especially as the dot com boom blossomed. From a practical nature, units tended to sell for more on a per square foot basis, so developers made them larger. From a physcial standpoint, subdividing loft space was tricky and with 4,000 square foot floor plates on many, it made sense to market 4,000 square foot units or 2,000 square foot units but not much in between. This market appealed to existing residents, but more importantly, they appealed to residents in more traditional residential neighborhoods like the Upper East Side and the Upper West Side.

The Most Expensive ZIP Codes []
Zip Zip Hooray for the Hamptons [NYP]
Forbes: Tribeca, Soho Go Zip Zip Zip [Curbed]
Forbes: Most Expensive Zip Codes [Gawker]

_Other Zip Studies_
Most expensive housing markets [CNN/Money]
Gulp! It’s $528K for Boulder home [RMN]


Throwing The Dice: Developers Worry About The Spread

January 17, 2006 | 12:01 am |

Rising construction and labor costs combined with moderating prices are squeezing developer profits and in some cases stopping projects from being built altogether. The Icon Las Vegas [REJ], has been the latest casualty.

In the article High Costs Cool Vegas Condo Boom [], “Related Las Vegas, canceled groundbreaking and announced plans to return deposits to hundreds of investors in two residential high-rise towers just off the Strip. Related’s reasoning: Construction costs have rocketed since it presold the units, eliminating its profit.” This is a significant event for investors since Related has a reputation for completing their projects [Miami Herald].

Buyers are getting their deposits returned for their purchases within these two 48 story 500 unit towers [Las Vegas Review-Journal] that would have been completed in 2008 but are upset because they won’t be able to flip for a profit. The concern in markets like Las Vegas and Miami is that speculators are fueling the demand, not future occupants. Supposedly the first tower was fully reserved within 48 hours after opening the sales office [Las Vegas Review-Journal].

There are more than 100 condo developments in the pipeline in Las Vegas.

Concern with smaller developers
Rising materials and labor costs would seem to be of special concern to first time developers, especially those that are building smaller 1-4 family properties. They generally do not have deep pockets and are banking on construction costs to move with inflation as well as the continued double digit growth in property values in order to realize a profit. However, with construction costs rising rapidly and housing price appreciation easing, there is not a lot of wiggle room to make a profit, icon or not.


A Few Less Really, Really, Really Overpriced Housing Markets

December 12, 2005 | 12:01 am |

A new study, House Prices in America: Valuation Methodology & Findings analyzes 299 metropolitan areas each quarter as a joint effort between National City and Global Insight.

The factors considered in this analysis are “population density, relative income levels, interest rates, and historically observed market premiums or discounts. Markets with valuation premiums above 30 percent were deemed at risk for price corrections based on the typical degree of overvaluation that preceded the 63 known local market price declines observed since 1985.”

The report shows that 65 of these areas or 38% of the US housing market are extremely overvalued. This is down from 67 markets in the prior quarter.

“The slower pace of price appreciation, in combination with more recent evidence since the third quarter, suggests that a return to normal valuations lies ahead,” stated Philip Hopkins, managing director of U.S. Regional Services at Global Insight.

This is yet another housing market price index. Since it is based on observed market declines since 1985, I wonder if the unprecedented phenomenon of low mortgage rates this time around would skew or affect the observations?

Download the full report [pdf]

Study: More housing markets called overvalued [USA Today]
U.S. Housing Still Overvalued []
Fewer extremely overvalued US homes–study [Reuters]


New Housing Data: Is The Glass Half Empty Or Half Full?

November 30, 2005 | 12:02 am | |

It depends on who you listen to…

Today the US government reported a record number of new-home sales [MarketWatch] which seemingly contradicted yesterday’s release of existing home sales [WSJ] by NAR.

This has brought further debate to the housing market interpretation. The media seems to be betting on a burst of the bubble [MarketWatch] while the NAR seems confident in a soft landing next year.

The MarketWatch article suggests three paths are possible:

  1. “any further acceleration in housing could fuel a spurt in consumer spending, but at the risk of forcing the Federal Reserve to continue raising interest rates beyond what’s now expected.”

  2. “a collapse in housing, if it were to happen, could slow job growth, shatter consumer confidence and lead to a significant retrenching in their spending.”

  3. “a gradual decline in housing would likely keep the U.S. economy growing at a slower but healthier pace, allowing the Fed to conclude its rate hikes. Most economists expect this third option to come to pass.

“Being the first to call the end of the housing boom has become a favorite parlor game for economy watchers. As evidence, they’ve gleefully pointed to the reduction in mortgage applications, to an increase in unsold homes on the market, to a slowing in home price appreciation and to a drop in home-builders’ confidence.”

This is interesting because the existing home report and the new-home report are based on a different data set and mean very different things in a changing market [Matrix].

Existing home sales lag the market by 30 to 60 days or more because they reflect closed sales. New home sale stats are based on contracts.

So if there is a change in the market, new home sales would be considered the leading indicator. However, its reliability should be tempered by the fact that new home sales represent about 10% of existing home sales.

In other economic stats released today:

At the same time, consumer confidence spiked [] reversing a 2-month slide.

US Factory orders rose 3.4% and durable goods orders posted strong gains as well. [ABCNews]

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The Numbers Are In: Advisors More Confident Than Consumers

August 29, 2005 | 8:18 pm |


For the fourth month in a row, the Advisors Confidence Index (ACI) showed an improved outlook. The ACI provides a measurement of the US economy and the stock markets. The Advisor Confidence Index is based on a survey of 150 independent registered investment advisors.

The quotes from the advisors provide interesting insight. They touched on the main factors that will provide the most impact on the direction of the markets and the economy: Oil & Housing. The next 6-months appear to look better than the following 6-months.

However, this conflicts with consumers perceptions of the state of the economy. The University of Michigan Consumer Confidence Index fell sharply in August, further than analysts projections, the second drop in the past two months.

Apparently investor advisors are more optomistic about the future than consumers are.