Depends What Lens You Look Through
This month’s newsletter crept up on me, certainly a bit delayed by all manner of excuses.
Perhaps one of them was caught by a 2-hr procrastination watching “American Treasure” on TBS, who runs this movie opposite “Real Housewives of Rural Oklahoma,” or whatever exurb that the series hasn’t yet discovered.
I bring up “American Treasure,”
since the world seems to have decided the New York City housing market is worthy of some investment as of late, whether in commercial real estate or residential units.
The townhouse market and multi-family market is incredibly hot.
Value seems really to be in the eye of the beholder, and depending on which lens you put on your eye (see photo to the right), you’ll see different elements of the market.
We’ll talk about:
- 3rd Quarter Results
- Foreign Money
- Looking Ahead
We’re coming off a rollicking 3rd Quarter.
Five (count ’em, 5) sales on the East Side of over $20mm.
The average price of condos 3bedrooms and larger was up 17% year over year.
I had a chance to sit down today with BHS Chief Economist Greg Heym, who is not the doom and gloom guy you may sit next to at your office.
He feels that any job losses we may see coming down the pike will be less than
predicted.
He also doesn’t believe the talk of double-dip put forth by Black Swan prognosticator Nouriel Roubini.
Further, he discusses the fears of a poor 2011 bonus season by predicting as follows- a bad season is still $20 BILLION dollars.
As the high end of the market continues to perform, one must ask:
What’s driving the prices?
Foreign buyers may be purchasing condominiums, but can often be kept out of cooperative purchases.
Since so much of the housing (outside of 15 Central Park West and the Laureate Condominium), especially on the East Side, is cooperative- it
is
New York-based,
primary users who are snapping up these large, prime apartments.
The Occupy Wall Street movement will have many more apartments to protest in front of, based on the performance of the housing market at the high end.
Foreign Money
Happy Jack
I heard a story once about Jack Nicholson.
A young woman walked up to him at a club and said, “Would you like to dance?”
His response was, “Wrong verb.”
I thought of this when looking for the right verb to describe the foreign money in the market.
Is it “propping up” the market?
Is foreign money “driving up” the market?
Is foreign money replacing demand from Americans in past years?
Over time, money comes in from different places.
Europeans do not seem to be today’s buyers, largely.
It is currently Asia, South America, the Middle East, and a little Russia.
Perhaps it will be Europe once things settle down, but this is right now.
The market still appears stable, and on sale for foreign buyers.
Whether that stability is clear to American buyers is a different story.
Surely, some definitive policy out of Washington DC and fiscal policy by the Fed will go a long way to show a clearer course for many buyers.
The uncertainty of Health Insurance costs has been the excuse for a lack of hiring by large corporations.
I can understand the excuse- I hope that things get resolved enough soon to encourage more broad hiring across the US.
Not just here in NYC.
With mortgage rates almost certainly staying low, many buyers can tell themselves that they will hold out until Winter/Spring to see what bonus season holds, and then jump into a sales search.
For others, and what I’m seeing, is a surge in Brooklyn buying activity under $1mm, and really a stunning lack of inventory under $1mm Downtown and on the Upper West Side.
Midtown and the Upper East Side is a bit oversupplied at the low end, though we are beginning to see signs of movement in that part of the market, too.
The average sale price may dip a touch in the 4th quarter due specifically to this lower-priced sales activity.
Looking Ahead
Far be it for me to be a soothsayer, but I will say that I’ve been waiting for one-bedrooms to start selling- and I believe that for the next few quarters, we will begin to see a thawing out of this market.
Prime locations, in nice buildings with fair monthly charges.
Some of this will be due to lenders and tight restrictions- these will be sub-$625,000 loans.
However, I also see cash on the sidelines out of the stock market- and with such volatility, investment in a hard asset other than gold, such as NYC real estate, may be an easier, more tangible asset to own- and enjoy.
That’s all for now.
Have a great week.