Altos Research Real Estate Insights - New York Real Estate

Lehman, BofA, Merril, AIG: What everyone really wants to know is...

nospam@example.com (Mike Simonsen) — Mon, 15 Sep 2008 10:11:44 -0700

...what's going to happen to condo prices in Manhattan?

We've noted elsewhere that New York city real estate has managed hold up reasonably well while Rome burns, though 2009 is looking a bit smoky for condos in the financial services capital of the world. On the horizon watch the three confluential variables:

The layoffs be a-comin'
Bonuses are heading down for those who remain
The dollar is strengthening

Here's what we know about the Manhattan condo market as of September 12, 2008.

Year over year, we see condo prices in Manhattan (all zips) basically flat at a median price right around $1.6 million.
That buys you on average, incidentally, a 1200 square foot, 2 bed, 1 bath place in a 64 year old building. Of course the "average" condo in Manhattan is as elusive as the "average" family in the country. Let me know when you meet one. By the way, we're talking condos specifically here. NYC's bizzarro-world co-op structure is examined in different data.
They've been on the market, on average, for over four months. My guess is that this number skews higher than it might feel like if you're actually shopping in Manhattan, because, more than anywhere else in the country, the best properties move with behind-the-scenes, my-broker-knows-someone kind of deals.
[self promotional aside: if you want to dig into all these details yourself, start on our free data for New York, and register. Subscribe to the Condos report for NYC and dive into the parts of town you care about. end promotion]

Where do we go from here?

Securities Industry employment fell by 11% in the last bubble burst. Bear Sterns, Lehman, Merrill, AIG: they're coming fast and furious this time too.
It's well known that bonuses drive much of the seasonal demand, on the Street in the
past couple years a very simple, very common trade has been to short the builders and go long commodities. The evaporated funds behind the long commodities positions alone are going to eat big chunks from the 2008 bonus pool.
Other things eating at this year's bonuses - M&A is way down, IPOs are non-existent. New product innovation ("Hey," says some underwriter at AIG, "let's insure these sub-prime loans against losses! We can't lose!") is crushed by internal or governmental forces. The liquidity that leveraged it all. Sheesh, I get
exhausted just listing the down forces.
International money (particularly Europe and Middle East) has been a prop for New York real estate for over a year now. For some in the world, Manhattan real estate hasn't been this cheap in a long time. Likely a small percentage of over all transactions, these push the margins enough to keep a floor on demand and therefore prices. But now: The last couple months have seen a dramatic turn in the dollar as the European economy weakens also.

Two year chart of the US Dollar versus the Euro.

So, look, the top-end of most regional markets has weathered the storm so far (see the discussion on my Fox TV interview). And Manhattan is notably the top-end for the region. But the fact is we're just starting this recession and this time around it's a financials-led recession. The few factors keeping Manhattan condos afloat into 2008 are evaporating in front of our eyes. My guess: Median price for Manhattan condo will down 20% in 2009. That part is just a guess. I'm simply finding it difficult to identify any factors to be sanguine about.

Oh No: New York's proposed foreclosure moratorium

nospam@example.com (Mike Simonsen) — Mon, 03 Mar 2008 08:37:11 -0800

The Times points out today that some New York lawmakers are proposing legislation to prohibit mortgage foreclosures for a year.

Portfolio Magazine's Felix Salmon describes it as "too early." I'll describe it as "insane."

Look, if I'm a lender, and I can't rely on my ability to collect the collateral against which the loans are made, do you really think I'll keep lending? Next thing you know the legislators will be trying to compel me to lend.

Look out below.

Felix pointed out the strength in the Altos Manhattan Condo Index. We haven't yet started publishing the New York real estate data on our free research page, so I'll have to dig in manually to get the goodies on the rest of the area.

[trivial aside: I was the anonymous source of the visual details of the U2 concert described in the first paragraph of this article in the inaugural Conde Nast Portfolio magazine last year.]

Psst... Wanna buy a slice of Manhattan Condos?

nospam@example.com (Mike Simonsen) — Sat, 01 Mar 2008 13:35:29 -0800

No, I'm not talking about buying into the Trump Tower. I'm referring to what the Wall Streeters call synthetic investment. Get exposure in your vast financial portfolio to profits in the Manhattan real estate market via a derivative contract. And you never have to worry about dealing with property taxes, garbage collection, cockroaches, or Donald Trump.

On Wednesday, real estate derivatives firm Radar Logic announced their Manhattan Condos Index. Radar publishes these indexes upon which the derivatives contracts are based. Go long and you make money when the New York Condo market is strong. Go short and you make money when the Condo market in Manhattan tanks.

This contract marks the first time a housing futures market has been local enough to accurately hedge against value declines in a specific property. If you already have your Manhattan pied-a-terre, you can lock in your gains.

This product is doubly sexy because most of the people likely to trade this index live in... you guessed it... Manhattan Condos. I'm really looking forward to seeing if they get some volume.

Altos Manhattan Condo Data

So how's the market? Since we publish data and reports for all the Radar Logic markets, on Thursday we released the Altos Manhattan Condos composite. Like all our real estate derivatives data, the Altos Manhattan Condo composite covers the same ground as the Radar Logic version, but watches the properties as they're on the market, so leads the index by several months. Here's what the Manhattan Condo market looks like:

Price per square foot for condos in Manhattan. Data does not include coops. Data as of February 28, 2008. The Radar Logic data is expressed as price per square foot and trades are paid on moves in price per square foot so that's what we're showing here.

Holding up nicely, eh? We'll see how this winter's credit carnage impacts the prices in Manhattan in the coming year. New York has an added dimension that most American cities do not: the cheap dollar means that rich Europeans are seeing bargains in NYC for the first time in a decade. That dynamic is adding to condo demand.

But even if you're not paid in euros, you can now get your slice of the action too. Rock on.

More details on our real estate derivatives products here.Â Contact us if you want to see some sample data.