Manhattan Loft Guy

December 2006

Dec. 24, 2006 - happy condos to all, and to all a good night

Nice holiday greetings from Crazy Fingers (THX to Curbed for the head’s up and to Crazy Fingers for the photo), with the photo of (what looks like) the construction elevator at 14 Condos (133 W 14 St). That can’t be legal, riding up and down all day, but what the hay it’s the holidays.

So happy condos to all!

And to those of you of the other persuasion, happy coops as well. If you do not celebrate either condos or coops, then just a happy-happy to you!

And Merry Christmas to those who celebrate!

Comments (0) :: Post A Comment! :: Permanent Link
View more entries tagged with: Crazy Fingers, Curbed, 14 Lofts

Dec. 21, 2006 - REBNY vs. REBNY vs. REBNY / portal potties still percolating

REBNY portal wars get curiouser and curiouser (nastier and nastier?)

The much-discussed announcement by the Real Estate Board of New York to create an open web portal for members of the public to review all REBNY listings continues to generate criticism, commentary and controversy.

The December Real Deal REBNY’s portal plan stirs revolt by Jen Benepe gets into impressive detail, with many interesting quotes from a variety of sources. Some of the quotes throw more heat than light about what the fight is all about, but I’ve been trying to read between the lines.

The plain vanilla explanation for doing this is offered by REBNY president Steven Spinola (“SPIN”ola sometimes seems very appropriate):

"We wanted to provide an additional option to our brokers to get their listings to the public," he said, adding that opening up member firms' listings was a "great value of information to the consumer." The database would cover Manhattan properties and parts of Brooklyn, and would expand to other boroughs.

Proponents of the publicly accessible database said the now-private information it contains is a huge asset waiting to be exploited, and called it the next logical step into the future, in much the same way Google or Yahoo have capitalized on the breadth of data available on the Internet.

Forgive me for not having noticed any other efforts by REBNY to create structures or rules of"great value … to the consumer."

small vs. big, or a free-for-all?

Clearly, there is tremendous anger coming from the smaller firms (the so-called “independents”) about the process for this huge change in REBNY’s approach. They feel they got railroaded.

"A lot of smaller firms think they will go out of business and that's what this is about," remarked Klara Madlin, who owns her own firm, which bears her name. "The other reason people were so angry is that nobody was consulted, and nobody knows exactly what this portal is going to be," she added.

Carol Levy, president of Carol E. Levy Real Estate, said that up to now she had been very happy with how the RLS had helped her business. But after attending a REBNY meeting where the plan was unveiled, she found her reaction was similar to many other representatives of the 150 or so firms who attended: "It was a meeting full of anger and anxiety in the way we were treated in such a dictatorial way," she said.

The article says that reaction to the portal plan is “split sharply” between REBNY firms based on size, but I am not so sure that is true.

My earlier post included the Dottie Herman quote from the NY Sun (“Nobody has really agreed 100% to anything yet," Ms. Herman said. "There are some roadblocks that people haven't agreed to at this point."). The major firms have spent major bucks creating (what they view as) major web portals of their own. Corcoran, especially, brands Corcoran.com all over town (and all over the media).

even ridiculous stuff deserves consideration

Not sure how statesman-like SPINola sounds here:

Spinola said the costs of the system and how they would be assigned was under reconsideration, and he noted that all objections, "from the reasonable to the ridiculous," would be addressed.

(Actually, I am sure: not very statesman-like.)

Levy & Madlin get worried

I get it that smaller firms are upset about a fee structure that charges them $3,500 to participate and larger firms only $7,000, as I said before. I don’t get Carol Levy’s fear (also expressed by Klara Madlin in the article), expressed here:

Levy projected that her clients in buyer-broker deals would default to the listing broker "to shave off a percentage of the fee."

Levy, who specializes in $8-to $10-million properties, said she makes about 60 deals a year, 50 percent of which are buyer-broker deals, using the exclusive property listings available on RLS. She predicted that it would cause the demise of small brokers in much the same way many travel agents went out of business when American Airlines took over airline reservation systems.

I don’t know why she is worried that her buyers will cut her out of a transaction because they think they can get a better price by going directly to the listing agent. Apparently she is concerned that a listing agent may make a deal with a seller that the fee will be x% if split with a co-brokering firm but 1% less if no other firm is involved.

In that case, however, there is no benefit to the buyer from going direct, unless the seller wants to share that “savings” with the buyer. Second, if Levy feels that buyers won’t perceive that she adds value to the transaction she should not worry as much about her fee as about why buyers won’t feel she is “worth it”. Third, if she is concerned that internet-savvy consumers will find out enough information on the web to render her irrelevant to a transaction, she (a) needs to wake up and smell the coffee and (b) needs to re-think her business model.

She says she is afraid that this portal will put her out of business! But if she is worried that only the big firms will have the resources to exploit the dominating positions the web provides, she should welcome a REBNY portal that puts all member listings on the same (web) page, and treats all member listings the same. The scenario most likely to result in her being buried on the web is that no one can find her listings on the web, or has to know to go to her firm’s website.

The depth of enmity within REBNY is seen in the reaction to Spinola’s attempt to reach out to the smaller firms by including three designees to be more involved.

Spinola recently asked that the medium-sized and smaller firms elect three representatives to the technology task force that is working on the portal plans and reviewing requests for proposals that have been sent to six database designers.

According to Spinola, the representatives are Reba Miller, owner of RPMiller & Associates, Inc.; John N. Wollberg, executive vice president of ATCO Residential Group; and Michele Peters, chief executive officer of Weichert Realtors -- Peters Associates.

But soon after their appointment, the task force members were already being privately derided by broker critics, one of whom described them as "lambs" being "used" to push the organization's point of view.

Here is a (presently) far-fetched (potential) consequence of this war: REBNY never gets this idea off the ground because of (a) too much bad blood and (b) they find out their present technology platform can’t do (easily, cheaply) what they say they want, which leads the Big Girls and Boys who dominate the residential brokerage part of REBNY to cede much more power to the smaller firms. I don’t see REBNY’s residential division blowing up over this (though it may have earned that reward), but maybe MANAR recruits a ton of new members.

circling the wagons against the government?

Benepe suggests I was not being paranoid in suggesting an early link between the (premature?) announcement and government investigations:

The suddenness of REBNY's announcement, made without widespread debate, led some members to speculate that the listings service may go public because of government scrutiny.

The New York Attorney General's Office has investigated REBNY's listing practices, and the group also faces scrutiny over alleged commission price-fixing.

REBNY not especially residential-friendly

The Residential Division of REBNY has long been the tail that does not walk the dog. Here is the description of REBNY’s members from its own website:

REBNY's membership consists of the major office and residential property owners and builders, brokers and managers; banks, financial service companies, utilities, attorneys, architects, contractors and other individuals and institutions professionally interested in Manhattan real estate.

Senior industry executives from these ranks lead REBNY committees dealing with such crucial matters as Tax Policy, City Planning and Zoning, District Rental Conditions, Land Use, Buildings Codes and Legislation. The committees' findings and recommendations shape Real Estate Board positions on major policy issues affecting REBNY members' businesses.

I count one residential member among the 17 officers (Elizabeth Stribling from the eponymous firm), three residential members from the 24 “member at large” of the Governors (Pam Liebman from Corcoran, Fred Peters from Warburg, and Diane Ramirez from Halstead), and two other residential members on the list of Governors (Dottie Herman from PruDE and Hall Willkie from Brown Harris)

This fight is along way from being over. It could even get uglier.

Comments (0) :: Post A Comment! :: Permanent Link
View more entries tagged with: Rebny, Web Listings, Real Deal, Benepe, Manar

Dec. 19, 2006 - a rumination on value, leading to taking stock(s) of analogies to apartments

one more try at getting Dave Leonhardt’s complaint about home sales data out of my craw, hoping something good may come of it

(The David Leonhardt Economix column in the NY Times business section two weeks ago by now, What Statistics On Home Sales Aren’t Saying, offered this criticism of past sales data: “thesestatistics have a number of flaws, perhaps the biggest being that they are based only on homes that have actually sold.“)

Yeah, I get it that past sales data have flaws, and do not provide a complete picture of the marketplace, and do not address inventory. But let’s at least start from that bit of hard data (questioning the sources and probing for reporting biases). Then layer in the “but”s.

so many “but”s, so little time (such as hypothetically)

But inventory is up 50% over last year.

But the local economy Is heading in to the tank so demand should weaken.

But x% of owners will have to refinance their mortgages this year and y% will have trouble doing so based on their reduced equity and/or changed personal financial profile.

But the apartments that managed to sell this quarter took 30% longer to sell than apartments that sold in the prior quarter.

Butwe have to look at the mix of apartments that sold this quarter compared to last, to see how that skews the data.

Whatever the “but”s may be, they are part of the discussion. Along with hard data about what actually did sell, I hope.

is FMV OK?

I picked on Leonhardt last week for using auction data, suggesting that the characteristics of the auction might have skewed the resulting prices below what the homes in Naples, Florida were actually “worth”. (Could the 500 or so bidders be expected to have the same kind of information that a well-informed single buyer might have? Did they even get inside the homes?? Dunno. But if not, those auction prices are not such good “comps”.)

It is hard to know the degree to which a particular seller has to sell (it should be impossible -- if the seller’s agent is doing the job right) and probably impossible to take that into account in reviewing sales data. Except that certain forms of sales should provide a clue that there was a lack of arms-length (as with intra-family sales) or undue compulsion (such as a foreclosure or another form of auction).

weakness of stock market analogies

Much of the language in the press and in common real estate discussions is based on stick market terms and concepts. “My home is my biggest investment.” Efforts by the Real Estate Industrial Complex to prime the market (rah-rah everyone should buy! this market has never gone down!) are among the causes.

But in the market that is more skewed towards buyers than sellers that we have, the cheerleading rings a little hollow, the analogies don’t serve as well as they did.

Repeat after me: every apartment is unique – or at least not identical to any other apartment (even cookie-cutters differ in location, condition, height, light, view). Many lofts are substantially different from their peer “comps”; some are even (literally) unique. But every 100 share lot of Microsoft common stock is exactly the same as every other 100 share lot, whether traded today or last year, whether traded on an exchange n New York or Chicago, whether received as a gift or stolen.

And enough of these lots change hands every day that the “market” is immediately discernible to anyone paying attention.

Homes, apartments, lofts are not like that at all (d’oh!). I often tell buyers that the only way for them to know the Fair Market Value of a loft is to let someone else buy it. Lacking that data, they have to make their best guess about value, factoring in their needs and resources. While it may be highly relevant to know that the last apartment that sold of this size in this building sold for $xxx last week, that does not establish that this apartment this week is worth some factor of $xxx.

So “the market” is made up of about ten thousand real sellers reaching agreement with about ten thousand real buyers in Manhattan in a given year about the value of about ten thousand specific more or less unique apartments.

Because the stock market is so much deeper, is much more transparent, and deals in unvarying fungible instruments, data is much easier to drill down through than data about home or apartment sales. The more granular (“local”) real estate data gets, the shallower it becomes, the more one is at risk of data bias skewing results in invisible ways.

So I want real estate data, the more the merrier. About what has sold, about what is for sale, about who is out there not yet having bought. And transparency about what actually happens in the market. I will not complain that specific data are limited, because I know that is the nature of data.

I will use data to determine directionality, particularly for hints about the effervescent buyer and seller psychology. But I will not attempt to construct a formula for determining “the value” of any apartment without applying judgment – and without explaining risk to my buyer-client or seller-client.

two useful analogies from the stock market

So much of press and blog commentary about the real estate market seems to be premised on overly general warnings or exhortations. “Now is a good time to buy because…” (meaning because prices will hold steady or values will increase) or “now Is not a good time to buy because …” (meaning prices may decline so don’t go there).

how bad is volatility?

But experienced stock market investors don’t act that way; unless they are day-traders or technical traders. “Value” investors buy a stock because fundamentally they expect it to appreciate over a reasonably long length of time and they understand that things could turn out differently.

In other words, volatility is an accepted experience with stocks but seems to be a feared experience with homes. I suspect – but do not know – that individual equities tend to be much more volatile than the housing market, but people accept that that is how the stock market works

a two-sided market

I am not sure why the press and commentators tend to look at the real estate market as a whole in determining if “now” is a good or bad time to buy or sell, or next year will be a good or bad time to buy or sell.

I don't just mean that real estate is local, and there are many niches and sub-markets in any local market. I mean that for some buyers today is a very good time to buy, while the exact same market conditions may make today a very good time for some sellers to sell.

People accept this about the stock market without question – which is one base for the liquidity of stocks. At any given time, there are always people willing to buy and people willing to sell the same stock at exactly the same price.

As I have said before, I think the Real Estate Industrial Complex makes a mistake when Dr. Pangloss writes its market “analysis” quarter after quarter, cycle after cycle. This Pollyanna approach (to mix literary metaphors) is not as credible as more “honest” brokering of information can be, and fails to help individual people make individual decisions about whether to buy or sell (or buy and sell) an apartment.

The National Association of Realtors® was pilloried in some precincts by its recent campaign to the effect of now-is-the-best-of-all-possible-times-to-buy-in-the-best-of-all-possible-worlds (including in this precinct). Securities brokerage firms are way ahead of the REIC in understanding that they make money when people are comfortable buying and other people are comfortable selling.

We in the REIC will make money helping people get as comfortable as they can be (which may not be very comfortable) with their individual decisions to buy or sell, then helping them to do it as quickly as they want on the best possible terms for them.

The rest of this stuff makes us look like idiots.

(Which sounds like a Concluding Line if ever I heard one, and brings me a long way from David Leonhardt’s Economix and the Naples, Florida auction. So I will declare victory and leave the field….)

Comments (0) :: Post A Comment! :: Permanent Link
View more entries tagged with: Economix, Leonhardt, Fair Market Value, Stock Market, Analogies

Dec. 19, 2006 - how I love ya, how I love ya, my dear old Meme-y

getting memed in the blogosphere brings us all together?

I have been memed by Maureen McCabe at Columbus Best Blog, which makes me a meme-in-law of Joseph at Sellsius.

As Joseph says:

A meme (rhymes with dream) is a catch phrase representing a contagious idea that spreads virally in a culture, like transparency, Web 2.0, Long Tail or maybe unzillowable. The word comes from the Greek meaning “mimic”. In the blogosphere, it’s a game of topic tag. You answer the topic question and pass it on to others to do the same. Either way, I’m game and thank you Jim for thinking of me. The meme is 5 Things You May Not Know About Me:

Here are my Five Things You Do NOT Know About Me

1. also the product of Catholic school education (Sisters of [no] Mercy) but I never got the penmanship thing. Handwriting has gotten worse and worse with all the keyboarding I do, and it was never pretty.

2. my Catholic school education was tempered at a Jesuit high school, Fordham Prep (honk if you know what I mean) followed by Oberlin College (I am all but certain that I am the only graduate of my HS founded in 1841 to attend my college founded in 1833, but if there is another one, pleaser call!).

3. I am not generally a snob but am proud to have a direct (patri-) lineal ancestor who arrived in Maryland in 1634.

4. OK, maybe I am a snob, but I am proud to be one of the few Manhattan real estate agents born in Manhattan (St Vincent’s in the Village, about a million years ago)

5. I bought the very first apartment to close in the first great Tribeca residential loft conversion, the American Thread Building at 260 West Broadway on December 31 in either 1980 or 1981 (the short-term memory ain’t so good sometimes, either). Guess I am a snob :-(

And I will meme Jonathan Miller at Matrix, Noah Rosenblatt at Urban Digs, new-kid-on-the-blog-block Stephanie in 11211 at New York City Housing Bubble, and across the river to Jon “Brownstoner” at Brownstoner. I hope they don’t get hurt -- but if anything bad happens, I am blaming Sellsius.

Comments (2) :: Post A Comment! :: Permanent Link
View more entries tagged with: Meme, Sellsius, Matrix, Columbus Best Blog, Urban Digs, Nyc Housing Bubble

Dec. 19, 2006 - �serious� seller hasn�t entertained much / serious pricing pain at 42 E 12 St

if you drop the price and no one is there, does it count?

The 2d fl at 42 E 12 St is a long-and-narrow full floor condo loft (90x25 ft, roughly; Property Shark shows sizes as 1,760 sq ft) that has been on the market ‘only’ since September, but what a price history there has been!

The early momentum was impressive: starting at $2.5mm on September 5, a quick drop to $2.3mm on September 13, then a busy October (at least for price changes): $2.1mm on Oct 2, $1,999,999 the next day, and $1.99mm the day after that (a series of miscommunications between seller and agent or between agent and listing data??).

The current price of $1.75mm has been in effect since November 27. Looks as though they had at least one offer as a contract went out last week, but it is “back on the market” as of yesterday at $1.75mm.

I am not sure I have ever seen a price history quite like this one.

funky condo building finances

It is set up as a 2 BR + 2 bath, with the classic high ceilings (11.5 ft), huge windows and open plan, in a building with new lobby, halls, elevator and roof deck that has some funky finances. Common charges are a hefty $2,415, though the agent notes (a) the CCs may come down in 2009 and (b) a portion “may” be deductible (never heard of that in a condo before).

But the most interesting numbers are the six price changes since September. The inter-firm listing data says (I will spare you the CAPS) “Serious seller – will entertain all offers!” The holidays are upon us, yet this seller has not had to do much entertaining so far…. Good luck, folks!

***

UPDATE 12.20.06: turns out they did not need my luck, as the listing data has been updated to reflect that they went into contract yesterday, off of the $1.75mm asking price.

Guess they will only be entertaining family and friends for a while (until they close). Congratulations to Paula Allan at Sotheby’s!

Comments (1) :: Post A Comment! :: Permanent Link
View more entries tagged with: 42 E 12 St, Price Changes, Property Shark

Dec. 18, 2006 - Old Grey Lady lets her hair down in obits

unusual “also surviving…” sentence

You can learn a lot reading the NY Times obituaries. About inventors and discoverers, Medal of Honor winners and Holocaust survivors, artists and (even) agents. Sometimes the best stuff comes at the end, rewarding the patient reader.

Sunday’s obits featured one for Ruth Webb, a Talent Agent Who Revived Flagging Careers. It was interesting to read that Ms. Webb did her telephone business “in a cloud of white satin bedsheets” on a bed with feather boas hanging from the bedposts, surrounded by raccoon plush toys. But the weird detail for me (did they fact-check??) was in the (usually) throw-away line for obits, the “also surviving“ sentence:

Also surviving are Ms. Webb’s companion of 35 years, Jamie Stellos, and Mr. Stellos’s wife, Nancy.

Now that is an interesting household constellation!

Comments (0) :: Post A Comment! :: Permanent Link
View more entries tagged with: Ny Times, Obituaries

Dec. 13, 2006 - selling West 17th St / 3 very different lofts almost on top of each other

huge range of (truly) special options west of Fifth on 17 St

I have seen three very different lofts almost on top of each other in three very different buildings on 17^th St b/w Fifth and Sixth in the last two weeks.

one little area on West 17 St is for sale

The original owners of 12 West 17 St #5 made an unusual choice. It appears that when the building was converted to coop (early 1980s?) the walls and ceiling had various stains, were peeling, and otherwise showed their age and commercial usage (it was built in 1925). Instead of totally cleaning and repainting (or covering the ‘weathered’ surfaces), the original owner cleaned enough to put a poly finish on the walls and ceilings, preserving the look without endangering anyone’s health or having paint chips peel away.

patina is in the eye of the beholder

The result is the “patina’ described in the agent’s description and in the photographs that do not do justice to how nice this looks. Clearly, it is not for everyone but it is an interesting look (a bit dark, but pleasing to this eye).

Subsequent owners have respected this choice, so that original look appeals to this day. Otherwise, this is a long-and-narrow floor-through loft (with windows along one long wall) that is pretty dated – not that there’s anything wrong with that. If you like the look, you like the look.

This is a pretty “classic” loft, in other words. They say it is 2,400 sq ft, asking $2.7mm for the last 18 months.

you like nice + new + clean + done?

Across the street at 15 W 17 St, the owners of a former factory building that was converted into rentals about six years ago are now converting floors 2 – 11 into floor-through lofts. The footprint is very similar to 12 W 17 St across the street (long-and-narrow) but the lower floors have windows only front and back, as the side windows begin at the 6^th floor.

One interesting developer’s choice here is that the built-out layouts are a little different from floor to floor. Each floor is said to be 2,221 sq ft and prices range from $2.425mm to $2.975mm. Click here for the 2d floor info and here for the 9^th floor. The units are finished with the standard-for-the-price ‘high end’ appliances and finishes.

This is a pretty standard “new” loft in an old building, in other words.

or do you want to start from before scratch?

Next door is 17 W 17^th St where the 3rd floor is for sale. This is a completely different loft property at a similar price point ($2.9mm). This is 4,600 sq ft of “pre-raw” space, as it is currently a working tool-and-die business that will be sold and relocated. So it is set up with two small offices, one bathroom and all the indicia of the current use for a tool-and-die firm.

This is a total gut renovation with four plumbing risers in the floor plan with the major limitation that the light is very good in the front and very bad in the rear. At $2.9mm for 4,600 sq ft it is rather a ‘special’ opportunity. It is marketed as though conversion to a legal residence is a simple process.

This is a pretty standard gut renovation job, in other words.

it’s a wonderful world

This is a terrific microcosm of the Manhattan loft world, which you can tour within a very small distance. Fascinating (to me; maybe to you). 'Course it ain't cheap....

Comments (2) :: Post A Comment! :: Permanent Link
View more entries tagged with: 12 W 17, 15 W 17, 17 W 17, Patina, Floorthrough, Raw

Dec. 12, 2006 - value, prices & data / theory, flaws & spin in Manhattan apartment prices

bothered by smart guys

The David Leonhardt Economix column in last week’s NY Times business section, What Statistics On Home Sales Aren’t Saying, has been bothering me. I blogged about it last week, with a link to the Matrix helpful discussion about the sources and flaws in the various bits of market data that is reported, Home Prices: To Tell The Truth, The Whole Truth And Nothing But the Truth (Sort Of).

predicting the present is not easy

That Economix brought to mind a bit of insight about economists: how can we expect them to predict the future when they have so much trouble predicting the present? (Source unknown, but I read a variation on this recently [in the NY Times??].)

Leonhardt and Miller both address the difficulty in applying the data available about home prices to the immediate question “where is the real estate market right now?”

Seems to me that Leonhardt took two truisms (all data is limited + all data requires some interpretation to be useful) and turned them into something more nefarious (all data is bad + all interpretation is worthless spin).

The hook that he used to set up his piece and his analysis -- auction data from Naples, Florida – is a particularly strange choice for a discussion of ‘market’ data.

FMV revisited

Let’s go back to Econ 101 and the definition of Fair Market Value:

start with an informed seller who actually intends to sell
add an informed and willing buyer
provide enough time for reasonable exposure to the relevant market for buyers
and – the kicker for this discussion – assume that neither party is “compelled” to act (i.e., that neither buyer nor seller faces “undue pressure”)

I understand that in the real world lots of homes are sold by people who have to sell at that moment and that this results in a low comp being out there. I suspect that at least some of the prices reached at that Saturday morning at “the Naples Beach Hotel and Golf Club, [when] a few dozen houses went on the block in front of about 500 bidders” would not meet this definition of Fair Market Value.

In a down market (as everyone but OFHEO seems to agree is happening in Naples, based on Leonhardt's sources), I would think that the auction process is best suited for people who have to sell at that moment. They have either tried to go the traditional route through a real estate agent for a while without success, or they have decided they cannot wait for that process to occur.

do auctions qualify as ‘fair’ in that way?

So I don’t know that it is fair and balanced to start an analysis of real estate data compared to what is really going on in the market with such a flawed fact set.

There is a wealth of data out there about gross market conditions and direction (no pun intended). All of it is limited (and – therefore – perhaps flawed) but not necessarily bad. Take the various data sets comparing some category of recent sales to a similar category of past sales.

Leonhardt (who is otherwise a data-guy) offers a peculiarly damning criticism: “the statistics have a number of flaws, perhaps the biggest being that they are based only on homes that have actually sold”. He goes on to say that unsold inventory can be a useful thing to know in assessing the market. While I agree that “unsolds” are (a) interesting and (b) relevant, they are very hard to measure effectively. Indeed, they are impossible to measure by counting and measuring “solds”. Does that mean we should not count “solds”? Of course not. So why does Leonhardt lob this criticism at that data?

if that is the point, were is the data?

To continue to pick on Leonhardt for a minute, he ends with a great newspaper conclusion: “We may now be living on both borrowed money and borrowed time”. He gets there by talking about the seriously troubling “fact” that “growing numbers of these families are falling behind on their mortgage payments, and they won’t be able to bail themselves out by refinancing or selling their homes”. This “fact” seems to be true (it is consistent with lots of reports I have seen), but he does not spend any time proving it.

But that is a very different point than saying the data overlook a problem, then ‘proving’ it by talking about auction sales.

If growing numbers of people are falling behind on mortgage payments and their homes are no longer worth what they paid for them, and (therefore) growing numbers of people will begin to default because they cannot refinance their mortgages that will be a big problem.

But if that is the point, talk about negative equity (not just equity declines) and at least mention that standard mortgage rates have hardly increased year-over-year.

If you are going to talk about a housing mortgage crisis, find the people who (1) cannot carry their mortgage, (2) cannot refinance into a better rate, and (3) have little or no equity. Because someone in a home that has declined to 90% of its purchase price will not have a problem carrying their mortgage unless the rate re-sets to an uncomfortable level or their personal income suffers materially. That group may be a “growing number” but Leonhardt has not established that. (I am not saying it is not true, I am just throwing data darts at a data guy.)

serving fudge every three or four years?

One final numbers gripe at Leonhardt before moving on to Miller (I will be less cranky there). Leonhardt’s dramatic closing line quoted above (“We may now be living on both borrowed money and borrowed time”) is preceded by an ominous reference to ticking clocks: “[o]ver the last few decades, the world’s financial system has endured a crisis roughly once every three or four years”.

The problem with this drama is that it tastes great but is less filling: the support for “every three or four years” over “the last few decades” is awfully vague about timing. He cites “the stock market crash of 1987, the Asian and Mexican meltdowns in the 1990s, the dot-com implosion of 2000 and, most recently, the aftermath of Sept. 11, 2001”. When did the Asian and Mexican market problems happen? Was it three years after 1987 and then three years after that? When he says “the aftermath of Sept 11, 2001” is he talking about immediately (which would be the one year after the dot-com implosion of 2000) or did that aftermath happen in 2003? If it happened in 2003, then we in 2006 might have some bad clocks ticking, but then maybe he is fudging his numbers….

At an elemental level, Leonhardt is bothered because the stats he see do not mesh with the credible opinions he comes across (his four or five talking heads) and some very specific data points (such as they Naples, Florida auction results).

Miller steps back

Miller looks at the same mess of data and offers more insight (your mileage may vary):

“Its very difficult for most consumers, government officials, academia and real estate professionals to get a real world gauge on how a real estate market is actually doing. Tried and true methods all seem to have some sort of flaw and when a market is in transition, the changes become even more pronounced. And then throw in the source of the information, with the presence of spin, makes the effort even more daunting. Those covering the market, whether it be Big Media and the blogosphere tend to gravitate towards whatever is released that day.”

That is a pretty straightforward analysis of why it is hard to get good (comprehensive) data and why The Talk focuses on the most recent umbers – whatever they happened to be.

The two data camps that Miller sees are index-based and price reports. Both have problems.

You’ve got producers of indexes telling you that prices are less meaningful, yet users of the indexes often view them as a “black box” and don’t grasp how the information was calculated (do we hear “seasonally adjusted?”) Indexes tend to be created for macro markets because the data set needs to be large. Cycnicism has been a detriment to reliance on indexes.

It takes an academic like Shiller with a big data set, lots of processing power, and the confidence to publish the results of a logarithm and expect to be accepted.

But reliance on published price data is also fraught:

Those that rely on housing prices tout that they are the real thing yet most resources for housing prices tend to be non-economist types, trade groups and real estate firms, because they tend to be easier to generate and report than an index. There are a growing number of market studies put out in the public domain by local real estate brokers and agents (and of course, appraisers) to try to bridge the gap between the national stats and local markets. However these reports are often limited by the size of the data, limited understanding of what the data really means and are clouded by their intentions.

…and nails a 3

Miller hits an important nail here. Anyone trying to offer useful insight about The Real Estate Market needs to use some data as a base. The “best” data (meaning, deepest and historical) is usually national data.

Everyone repeat after me: “all real estate is local”. So useful commentators must apply national data to each unique market. This is not easy, even out there in America, where (I imagine) local data are much better (more complete, more historical) than Manhattan data.

Any discussion about local markets will inevitably break down to opinions about what local trends match (perceived) national trends and what local trends diverge from national trends and – of course – why.

This has gone on too long for a blog. So I will stop after one more paragraphs.

this is way too long, so…

In the current environment, I hold these truths to be self-evident (if they do not seem so to you, write your own commentary!):

each data set is limited to what it is (a Rumsfeldian doctrine)
more data are better than less data
applying national data to any local market is never simple (especially one as ‘special’ as Manhattan)
in order to be useful, data require principled and honest commentary (sometimes known as spin), but too much spin without data is propaganda while too much data without commentary is indigestible regurgitation

(I may regret this in the morning.)

Comments (0) :: Post A Comment! :: Permanent Link
View more entries tagged with: Leonhardt, Economix, Ny Times, Miller, Matrix, Ofheo

Dec. 11, 2006 - a year of pricing dangerously / 140 Thompson loft in contract

a long time to find the right price

Unit 6C at 140 Thompson St looks like a pretty nice loft: 2,228 sq ft set up as a duplex 2 BR + 2 (“stunning”) baths, with big windows showing lots of sky, on a “most charming and convenient Soho street”, with reasonable maintenance of a buck a foot.

The good news is that it went into contract last week, off an asking price of $1.995mm. The bad news (for the sellers) is that it had been on the market since February and suffered mightily through someone’s unrealistic expectations about value.

Who to blame? Maybe the sellers, of course – as it is their responsibility and duty to select a price. But since sellers do that with the guidance and data supplied by agents, share some of the blame with Brown Harris and some with PruDE.

riding the down escalator

Check out this price history:

2/3/2006: $2,700,000. Initial Price. Exclusive with Brown Harris Stevens

4/5/2006: $2,600,000. Price Drop.

5/22/2006: $2,500,000. Price Drop. (at this price point, dropping $100k is a form of death-by-small-increments)

(Summer doldrums ensue….)

8/2/2006: $2,495,000. Initial Price. Exclusive with Prudential Douglas Elliman. (a price drop in only the technical sense)

8/22/2006: $2,224,000. Price Drop. (I wasn’t there, but this looks like an agent taking a listing at “too high” a price with a built-in agreement to reduce in a few weeks)

11/1/2006: $1,995,000. Price Drop. (but that price didn’t work either until…)

12/7/2006: $1,995,000. Contract Signed.

Nirvana!

I have not seen the loft and certainly have no information about the conversations between sellers and Brown Harris, then sellers and PruDE. But it is clear that the unit was priced way above where it could command the best price available in the market.

Without seeing strong comps from February for similar lofts selling above $2.5mm, I would not use this as an example of the market dropping, but as an example of overly aggressive pricing.

what did they know and when did they know it?

Unit 6F was marketed by other PruDEs, using less aggressive pricing and achieving a better result: another duplex (this one 1,700 sq ft) brought to market at $1.695mm after Labor Day and in contract at Thanksgiving. See the pretty pictures and floor plan here.

In the same building, Unit 2E (1,800 sq ft) was marketed a year ago by Halstead with data that must have had some relevance to the 6C owners and agents. They started just under $1,000 per foot at $1.75mm, dropped to $1.65mm in February this year (when 6C first came to market) and went into contract in April (the closing price was $1.575mm in June – another pretty relevant number to anyone selling in the building).

maybe 6C had a lot more value than 6F and 2E

One could argue, of course, that 6C had a lot of things going for it that 2E did not (height and views, at the least) and perhaps a few things that 6F did not.

but I don’t think so

Turns out the market did not agree. Turns out that 2E and 6F started and sold below $1,000 a foot. Turns out that 6C started at $1,200/ft and sold (probably) for a similar price per foot.

Sometimes it is hard to assess the market…

Comments (0) :: Post A Comment! :: Permanent Link
View more entries tagged with: 140 Thompson, Duplex Loft

Dec. 8, 2006 - ask Vanna for a �D� / Open House tour at 55 Hudson

Go back to my post two weeks ago Tribeca trifecta on the market / if you need a "D", 55 Hudson is for sale for a description of 1, 2 and 3 BR layouts in the same “D” line at 55 Hudson. The Sunday open house schedule is

6D 11 - 1

7D 12 - 2

8D 12 - 2

Comments (0) :: Post A Comment! :: Permanent Link
View more entries tagged with: 55 Hudson

Dec. 8, 2006 - Open House tour when 1,700 sq ft is just right / 3 under $2m

For those for whom 1,700 sounds like the perfect number for a loft, here are three open houses on Sunday to check out:

11:30 – 1	133 Mercer #6 $1.95m $1,750/mo	13’ ceilings and four exposures, though not many windows (Chrysler + Woolworth views); not just “chef’s kitchen” but a “floating chef’s kitchen”; set up as 3 BR + 1 bath (2d can be added)
12:30 - 2	652 Broadway #6F $1.825m $310/mo	long + narrow with windows at one end, overlooking Broadway (“can add windows” on one long wall; railroad layout makes more than 1 BR a challenge; chef’s kitchen; low maintenance due to high commercial rent (80/20 test not satisfied?)
12 - 2	12 W 18 St #9W $1.989m $1,468/mo	penthouse condo set up as 2 BR + 2 baths with private roof deck; chef’s kitchen; 3 exposures; only 9’ ceilings

Actually, I cheated – 12 W 18 St is described as 1,750 sq ft.

Comments (0) :: Post A Comment! :: Permanent Link
View more entries tagged with: 133 Mercer, 12 West 18, 652 Broadway

Dec. 8, 2006 - data are limited (point taken), but what next / NY Times column about the flaws in reported housing data

Economix mixes data and opinion to complain about data

David Leonhardt’s thoughtful “Economix” column this week in the NY Times highlights the conundrum of home price statistics, What Statistics On Home Sales Aren’t Saying.

His general point is easily stated:

The truth is that the official numbers on house prices — the last refuge of soothing information about the real estate market on the coasts — are deeply misleading.

Leonhardt starts his piece with the drama of an auction about a month ago in Naples, Florida at which “a few dozen houses went on the block in front of about 500 bidders”. He quotes one analyst as saying the houses sold at auction lost about 25% of their 2005 value, and contrasts this with the official federal government housing index that showed that the average Naples home appreciated 20% year over year.

the data are what the data are (as Rumsfeld might have said)

Clearly, there is a disconnect between the auction results and the OFHEO index, but Leonhardt takes a curious turn in criticizing the OFHEO data:

But the statistics have a number of flaws, perhaps the biggest being that they are based only on homes that have actually sold. The numbers overlook all those homes that have been languishing on the market for months, getting only offers that their owners have not been willing to accept.

I agree with his general analysis of the weakness in the various statistics commonly reported, but I think he went pretty far overboard in making his point.

The “biggest flaw” in a statistic measuring sales is that it is based only on homes that have actually sold?? What else could that stat be based on?

To say that “sales” data “overlooks” homes that have not sold is really beside the point. To say that you don’t get a complete sense of the market if you only look at “sales data” is a truism – which Leonhardt demonstrates nicely in a journalistic way by using the Naples auction data.

are opinions (guesses) better than data? (not so much)

But I thought it was weird that Leonhardt was so critical about the kind of actual data that is available and supported his argument by quoting one “expert” after another for their “opinions” about what the market is “really doing”. Especially because he didn’t need to do that to support his general point about the limitations in the data.

I find Leonhardt’s Economix column usually interesting because he starts with a fact or some data, then explores what the fact or data means (or, as in this case, does not mean). With so much to talk about, I guess it just bothered me that he “wasted” space by buttressing his point with the opinions of Talking Heads.

Not to mention that he slid a personal opinion about our local Manhattan market in without any visible support:

In New York City, where co-op boards generally bar the door to absentee speculators and creative mortgages, prices seem to have slid a bit in the last few months, but only to roughly their 2005 levels

Given his focus on the utility of data, I wonder what he is relying on for that statement, especially with the NY Post article I quoted yesterday reporting median sales price increases year-over-year of 6.7% or 12.7%. (Yes, there are limitations and flaws in those numbers, but I would expect some discussion – rather than just an un-sourced opinion.)

The oft-quoted Jonathan Miller rode to the rescue with a discussion about the sources and limitations of the data that Leonhardt addressed in his Economix column. He did so much more concisely and comprehensively than I could and – to me – in a much more straightforward way than Leonhardt did. So if you have gotten this far with me, read Home Prices: To Tell The Truth, The Whole Truth And Nothing But the Truth (Sort Of) on Matrix.

Comments (0) :: Post A Comment! :: Permanent Link
View more entries tagged with: Economix, Ny Times, Leonhradt, Ofheo, Miller, Matrix, Sales Data

Dec. 8, 2006 - sorry, wrong number (but still ironic) / Miller corrects the record

year-over-year number different than quarterly decline

Jonathan Miller points out on his Matrix that the NY Post article I quoted yesterday (Manhattan Bumps Real-Estate Slump) used the wrong median sale price number in comparing his report for PruDE with REBNY’s. REBNY reported a 6.7% increase for the Third Quarter, compared to a year ago, while the Post (incorrectly) compared that to the 4% decrease in median sale price that Mille Samuel reported for the Third Quarter compared to the Second Quarter; in fact, the Miller Samuel number for year-over-year change was a 12.7% increase.

That’s what I get for not going to the source (the Miller Samuel report) but relying on the press.

But the gentle irony I pointed out is the same: Dottie Herman’s quote about not seeing any slump is hard to reconcile with her own commissioned report showing a quarter-to-quarter reduction in median sales price.

I am sure she was not aware of the juxtaposition. I am also sure she does not care what I think.

Comments (2) :: Post A Comment! :: Permanent Link
View more entries tagged with: Dottie Herman, Ny Post, Matrix, Median Sale Price, Jonathan Miller

Dec. 7, 2006 - irony can be delicious / juxtaposition of PruDE quote and data in NY Post worth a smile

pumping the market, no matter the cost

Today’s brief item in the NY Post Manhattan Bumps Real-Estate Slump from Bloomberg is amusing for at least one reason.

The context:

The Real Estate Board of New York’s Q3 data shows that median prices for Manhattan apartments were up 6% for the quarter.

The quote:

"I haven't seen any slump, I've seen the opposite," said Dottie Herman, CEO of Manhattan brokerage Prudential Douglas Elliman Real Estate.

Ms. Herman, meet Mr. Miller

It has long been a problem that different firms and different sources report different data about the Manhattan market that purports to describe the same stuff. The REBNY data is a little different from other reports, as the Post notes today:

The new New York figures contradict an October report by Miller Samuel Inc., the borough's largest appraiser. Its data showed median prices fell 4 percent to $845,147 for the quarter.

One could argue that a 4% drop in median prices was a sign of a “slump”, though not to Ms. Herman, apparently.

The irony:

The report of a 4% drop in median Manhattan apartment prices in the last quarter is prepared by Miller Samuel for – and extensively branded and publicized by – Prudential Douglas Elliman.

You can’t make this stuff up.

Comments (0) :: Post A Comment! :: Permanent Link
View more entries tagged with: Miller Samuel, Prude, Ny Post, Median Price

Dec. 6, 2006 - heady pricing at The Lion�s Head / what is the Empire State Building worth?

Sunday’s NY Times “On The Market” feature included Unit 10G at The Lion’s Head, 121 West 19 St. offered by Fredrik Eklund at Core Group for $2.4mm:

PROS: This spacious loft in a doorman building has open city views, tons of closet space and expensive finishes throughout.

CONS: Configuring furniture in the smallest bedroom could be a challenge; it's a bit on the narrow side

I saw this apartment a couple of weeks ago; “open city views” is rather an understatement. The unit looks north at the Empire State Building, with as dramatic mid-island tenth floor north views as you are likely to get. (Eklund claims #10G is “the first 3 BR clearing everything” in the building. Great views!

loft windows, loft height, but not so loft-y

This 3 BR line feels to me a bit small for a Manhattan loft (said to be 1,920 sq ft). I find the layout to be more "conventional apartment" than “loft”, with the run of 3 BRs along the north wall and a combined foyer/dining area/living room being not especially spacious.

But Lion’s Head buyers are likely to be more about the finishes and (at this height) the views than about being in a “loft”.

There are two other 3 BR layouts for sale at the Lion’s Head $200k and at least 7 floors lower, #2C and #3A.

recent comps suggest a quick sale

#10G has been on the market for five weeks. Given that Unit 7G just signed a contract this week off an asking price of $2.375mm (on the market since May), #10G should not last long. #9B (2,000 sq ft with a 2 BR + office layout) also signed a contract this week, after being marketed at $2.35mm since June. (Both #7G and #9B were offered by Benjamin James, but I could not find the listings on their site, in a quick search.)

Buyers seem willing to pay a premium for height, light and views at the Lion’s Head.

Comments (0) :: Post A Comment! :: Permanent Link
View more entries tagged with: Lions Head, Empire State Building, Core Group

- the website is coming, the website is coming (so is Christmas)

I have been “working on” the content for my website ManhattanLoftGuy.com for months and months, having missed many self-imposed deadlines for handing off the content to my wonderful design team at Nunet.

Just missed another deadline, but my new deadline is ~~January~~ ~~February 15 [sigh].~~ [March 7: my “new deadline” is streeeeetching, as my “wonderful design team at Nunet" is gone! My good friend and long-time next door loft neighbor Dietmar sold the company, and I am in website-design limbo once again. So let’s say that my new deadline is] sooner or later. arggghhh

In the meantime, as of today [that "today" was Dec 6] that URL is pointing to this blog site. (Big shout out to Ian Parker at Internet Crusade for taking care of that quickly.) So if you started there and ended up here, that’s why.

My blog readers will be among the very first to know when I finally birth that website baby!

Comments (2) :: Post A Comment! :: Permanent Link
View more entries tagged with: None

Dec. 5, 2006 - more non-news: well-priced lofts sell quickly at 55 Greene + 55 E 11

if you price it, they will come

I did this three weeks ago (news alert! well-priced lofts sell (sometimes quickly) … d’oh! / a tale of 2 lofts at 22 W 26), but it bears repeating: lofts that are well-priced sell in the current market, others languish.

Two examples that flew in with today’s news as contracts just signed, after coming to market in October.

driving 55

The 4^th fl at 55 Greene St, the Gunther Building, marketed by Karen Fromer at Barkin Associates was offered at $2.699mm for 2,300 sq ft set up with 1 bedroom and 1.5 baths. (Not a lot of info on that website.) Interesting here that the commercial tenant pays for the building’s maintenance, so the “maintenance” for this unit is zero. This one took a little while to find the right price, even since October, as it started at $2.8mm before bumping up to $2/875mm before settling into the selling zone at $2.699mm.

pushing the price envelope worked here

Can’t tell at this point what the contract price is, of course, but the unit was sold in April 2005 for $2.4mm off an ask of $2.5mm so they tried this year a little aggressively I would say. But it worked.

Meanwhile, the Smiling Blumsteins at Corcoran are in contract as of today at the Penguin House, 55 E 11 St, 3^rd fl. This is a similar size at 2,325 sq ft, also 1.5 baths but 2 bedrooms. The ask was $1.95mm for an “excellent opportunity to create [your] own space”. As they said, “opportunity knocks!” but in this caser it didn’t knock for long.

conservative pricing worked here

The Blumsteins know the market for this building, having sold the fifth floor for $1.91mm (above the $1.9mm ask). So the 3^rd floor owner priced it essentially flat from that sale. (curious discrepancy on that sale between Property Shark which shows a January 2005 closing, and the inter-firm database, which shows January 206 for the 5^th floor closing.) Regardless of whether it was one year or two, this pricing strategy worked, too.

As I said in my Nov 15 post:

Buyers definitely have more power than they had in 2005 but well-priced lofts still attract strong interest from well-qualified buyers. The stuff that has been on the market for a while (and which may be suffering death-by-small-increments, like #8A at 4 W 16 St, which is still on the market at $1.225mm) give buyers relatively more power. But if a loft is well-priced they should expect competition.

BTW, #8A at 4 W 16 St is still on the market at $1.225mm; it has now been out there for 8 months.

Of course, neither 55 Greene nor 55 E 11 St has a doorman.

Comments (1) :: Post A Comment! :: Permanent Link
View more entries tagged with: 55 Greene St, 55 East 11 St, 4 West 16 St

Dec. 4, 2006 - smackdown at 3,000+ sq ft + $2.7mm / 118 E 25 vs. 116 W 29

one of these things is not like the other (agent prose and listing pix aside)

I visited these two lofts within a few days of each other. On the surface, they look pretty similar: both are rather large full-floor lofts in 12 story coops that were likely built as industrial spaces 80+ years ago, both are “wonderful” for entertaining, both accommodate “live/work”, both have direct passenger and freight elevator access, both claim four exposures and four bedrooms, both have laundry rooms, both are just outside “real” neighborhoods on somewhat tacky blocks nearby nicer blocks. They are essentially the same price and maintenance. Both appear to be inhabited by owners in the art world.

The 8^th floor at 116 West 29 Street, offered by Lori McNichol at PruDE, is said to be 3,000 sq ft of a “magnificent” floor through loft with 26 “tremendous” windows. Asking $2.7mm with $2,491 in maintenance.

The 3^rd floor at 118 East 25 Street, offered by Richard Healy at Halstead, is said to be 3,500 sq ft of a “magnificent” floor through loft. Asking $2.695mm and $2,464 in maintenance.

however

They could hardly be more different. (“Magnificent” has its limits.)

truly tremendous light in a classic artist loft

116 W 29 St does have tremendous light, with large windows that capture open city views that include the EmpireStateBuilding. That aside, this unit is primitive where the other is polished. It gives the impression of having been renovated 25 years ago to suit the living and work needs of someone in the arts world, and has hardly been touched since then.

The (original?) kitchen – on a (rough plywood?) platform raised for gas and plumbing lines to pass under -- is workman-like, at best. At this price, the kitchen is a gut renovation project for most buyers. Some storage has rough curtains rather than doors. Some design elements are rough wood, such as that curved thing on the floor plan. One bathroom is beautiful and modern, and stands out in the unit as a result. The pictures do not give a true sense of the ‘feel’ of this loft; nor does the agent’s prose.

Having said all that, it is a large amount of space with great light and views that could be a “magnificent” loft. It may have served its owner very well for many, many years, but it does not compare to other lofts that could be described as “magnificent”. It can be great space for the buyer who wants space at the right price. Hard to say this is the right price.

tough block, in between

The location – on a very busy commercial street directly behind The Cass Gilbert – provides fair access to services (which will improve with the monster rental towers along 6^th Avenue nearby) but will be