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Manhattan Loft Guy

Sep. 18, 2010 - laughing at economists / a Saturday diversion


the nation's only stand-up economist
A tip of the Manhattan Loft Guy cap to The Miller, for
a Wednesday link to a video deconstructing Ten Principles of Economics, providing some levity for a Black 15th Anniversary. I especially like the distinction between micro- and macro-economists. Enjoy!


© Sandy Mattingly 2010

 

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Dec. 31, 2007 - holy coop Batman! 80/20 hurdle falls down


why isn’t this big news?
Props to Noah Rosenblatt over at UrbanDigs.com for highlighting on Wednesday a law firm PR release about a provision in theMortgage Forgiveness Debt Relief Act of 2007 of huge importance to that small number of Manhattan coops that have the potential for huge commercial rental income. 80/20 Rule Expanded: Co-ops Should Thank Bush.

[I have had a draft of this post since Friday, without getting around to polishing and posting it. Reader Tariq gave me a nudge on Sunday, pointing put that Jay Romano did a piece on it in the Sunday Real Estate Section of the NY Times, Coops Get a Break on Revenue Rules (thx for that nudge, Tariq).]

I doubt very much that Bush is responsible for this (take a bow Charlie Rangel??) and I am amazed not to have seen something big about this in the Times before Sunday], Post or Sun, or from REBNY for that matter (take a bow REBNY??).

My take on this is that the number of
Manhattan coops with continuing problems from potentially having too much rental income will shrink from a few hundred to just a handful. And many of the coops that are on the border of compliance with the new tests may be able to jigger their space or their books to reach compliance.

remember what is at stake
As I have highlighted before (in the January 16, 2007
IRS rules for coops / beware the 80/20 rule), coop compliance with the rules gives shareholders personal income tax benefits, described by Romano as “deductions for property taxes and mortgage interest, and the shielding of up to $500,000 from capital-gains taxes when the co-op is sold”. Indeed, careful banks should not be providing residential mortgages into buildings that don’t qualify as “cooperative housing corporations”.

Curiously enough, I think the coops that will benefit first (and probably most) are those that have not been in compliance with the 80/20 rule, while those that will have to wait to benefit have been straining to comply with that test. (Life is … unfair, no?)

new text adds 2 tests
I get the text of the bill as reported out of the House and Senate conference from the official
US government website, nicknamed Thomas. As you see, the old 80/20 test (the Income test) is now one of three tests that a coop can meet; the second test (the Square Footage test) should bail out any 5-story coop with only ground floor retail, or any 10-story coop with ground floor and basement retail; the third test (the Expenditures test) should bail out everybody else if they pay out 90% of their expenditures for the residential part of the building.

 (a) In General- Subparagraph (D) of section 216(b)(1) of the Internal Revenue Code of 1986 (defining cooperative housing corporation) is amended to read as follows:

`(D) meeting 1 or more of the following requirements for the taxable year in which the taxes and interest described in subsection (a) are paid or incurred:

`(i) 80 percent or more of the corporation's gross income for such taxable year is derived from tenant-stockholders.

`(ii) At all times during such taxable year, 80 percent or more of the total square footage of the corporation's property is used or available for use by the tenant-stockholders for residential purposes or purposes ancillary to such residential use.

`(iii) 90 percent or more of the expenditures of the corporation paid or incurred during such taxable year are paid or incurred for the acquisition, construction, management, maintenance, or care of the corporation's property for the benefit of the tenant-stockholders.'.

(b) Effective Date- The amendment made by this section shall apply to taxable years ending after the date of the enactment of this Act.

fewer coops will need clever lawyers; some need a ruler
As I said, I think nearly every coop that has either already exceeded the old Income test (like the SoHo coops with very valuable retail space, such as 55 Greene Street, which has no maintenance) or has been artificially reducing the rental income below market should be able to satisfy the Square Footage test. The coops that will be borderline on this test will be very small (4-stories, max) or will have multi-floor commercial space. These coops will retain architects or engineers to do the precise measurements, and possibly reallocate space in their leases to take some away from the commercial space that can be characterized as “ancillary” to residential use.

I wonder if a roof deck qualifies within “total square footage”, so that a 3-story coop with ground floor retail can creep over the 80% test by adding a roof deck “available” to shareholders, even if no one uses it.

... some need to count beans
The Expenditures test should provide a safe harbor for all but the smallest coops that cannot meet the Square Footage test, though the smart CPAs may be required to find the margins. The typical Big Ticket expenditures for a coop include some that are allocated evenly over the entire building (including commercial space), such as real estate taxes and insurance, but others should be allocable only to the residential portion, such as utilities and payroll. Maybe some small buildings will take this opportunity to hire some (or more) staff to soak up some ‘excess’ income.

I wonder if creating (or increasing) a coop’s reserve fund will qualify as an “expenditure” for the “management” or “care” of the building for the benefit of shareholders. If so, that is an account into which ‘excess’ income can be stashed, at least until the scale of a reserve fund gets ridiculous.

effective immediately, but benefits delayed for most
Since the bill was signed on December 20 and is effective in the current tax year, the only coops that will benefit immediately are those that have not been in compliance with the 80/20 Income test. All of a sudden, they get the benefits of pass-through deductions and non-recognition of gains (to $250k or $500k) if they meet the Square Footage or Expenditures tests.

Funny thing is, the coops that have been straining successfully to meet the Income test by capping their rental income below market will have to wait to get the full benefit of this change. For most of these coops, the additional income available from market rate rents will have to wait until the current leases expire.

some need those pesky lawyers to parse magic clauses
Some ofthe coops that have been straining to meet the Income test by capping their rental income may have magic clauses in their commercial leases that can provide immediate benefits. I know some coops have clauses that essentially escalate rental payments to the 80/20 cap. If those clauses are specific to the Income test, then they will likely not provide a way to raise rents to market rates until the leases expire, but if the clauses are written more broadly to measure against Section 216 standards, these coops may be able to go right to market rents (without passing Go but collecting the metaphoric $200).

Check the fine print.


Charlie, not REBNY
The Times article identifies Charlie Rangel as a prime sponsor of the bill, so Charlie gets the credit. One, two, three … THANKS CHARLIE.


© Sandy Mattingly 2007



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Jan. 16, 2007 - IRS rules for coops beware the 80/20 rule

 
what does happen if a “coop” has too much income?
I did a post in early December about pricing at 55 Greene St that got picked up on Curbed.com (On the Proper Pricing of Manhattan Apartments) along with a similar posting by Urban Digs about 70 E 96 St. I noted in passing that 55 Greene has zero “maintenance” as the “coop” has a very high-paying commercial tenant.
 
I was intrigued by the fact that several Curbed commentators fastened on the low (no) maintenance in commenting on the post and I resolved to offer a post about that issue. 2007 is here, so I can cross one resolution off the list.
 
IRS rules permit “pass through” benefits to coop shareholders
In brief (and in a non-lawyerly way), coop shareholders get certain benefits that shareholders in other kinds of entities don’t get. Microsoft shareholders don’t get to deduct from their own income taxes the real estate taxes that Microsoft pays, but coop shareholders do. Coop shareholders get to take a pro rata share of the coop’s expenses for real estate taxes and on an underlying mortgage, as if they were making the expenditures directly. But they only get the benefits if the coop is correctly organized and if certain rules are met.
 
The pertinent IRS rules require that at least 80% of the income of the coop be from shareholders as opposed to being from outsiders, such as commercial tenants or garage licensees. If that test is not met in any year, the shareholders are not entitled to the pass-through deductions they would otherwise be entitled to.
 
As a result of this test, some coops charge below market rents to their tenants because the 80/20 benefits to shareholders are deemed to be more valuable than the additional rent that could be charged. Other coops spend a fortune on lawyers and accountants to figure out ways to deal with the “problem” of having “too much income”.
 
put condops out of our mind for today
(Some day I will talk about true “condops”, which are not really “coops with condo rules”, as many people say. True “condops” are two-unit condominiums, where one condo unit is the ground floor commercial tenant paying a huge portion of common charges and the second condo unit is a full multi-unit residential coop. But that complicated story is for another day.)
 
Since the “maintenance” at 55 Greene Street is zero, that “coop” is probably not a qualifying cooperative housing corporation for IRS purposes since the shareholder income (zero) cannot be 80% of the total income of the building. (Even if there is no underlying mortgage, they pay something in real estate taxes, and something to keep the lights on and the building clean.) So unless there is something specific and technical about 55 Greene St that I am missing, the shareholders there should not be entitled to pass-through deductions under the IRS rules.
 
why should AMT burdened shareholders care?
It may not matter much to shareholders if they can’t deduct building mortgage and real estate taxes on their personal tax returns, especially if their income puts them into the Alternative Minimum Tax level – at which all deductions are heavily discounted in value. For these folks, the balance between high rental income and not-so-meaningful pass-through deductions may fall overwhelmingly on the side of the high rental income. But there is more to consider.
 
without 80/20, no home mortgage deduction (and maybe no home mortgage)
When I contributed to the Curbed commentary I suggested that the 80/20 issue would not impact a shareholder’s ability to deduct interest on their own individual mortgage or to benefit from the $250k / $500k non-recognition of gain enjoyed by American “home” owners.
 
on further review … oops
I am pretty sure I was wrong about that. (Consult your tax adviser.)
 
After thinking about it some more, talking to some bright lawyers, and reading a NY Times Q+A column that touched on this, I can see that all the IRS benefits to coop shareholders (the analogy of coop shareholders to homeowners) depend on the 80/20 rule.
 
So the mortgage deduction will not be available. And when the “coop” shares are sold, all the gain should be recognized and taxed at normal rates, without the seller being able to get the benefit of “non-recognition” of $250,000 or $500,000 of the gain.
 
And I have been told by one mortgage broker that banks won’t offer “coop mortgages” to shareholders that cannot meet the 80/20 test. If they can be financed at all, the shares would get a commercial loan (usually at higher rates and with higher down payments). If they can be financed at all.
 
more a problem than a quirk
I have not yet had a buyer interested in one of these “coops”, so I have not had to think about this issue until noting (in passing) 55 Greene (and a few other buildings) as low-or-no maintenance “coops”.
 
I have not noticed in the marketing of “coops” in these buildings any special caution about this topic, but maybe I haven’t been paying attention, or maybe I have not been close enough to get the “special” disclosures.
 
I like to think that I am as sophisticated about lofts as any Manhattan agent. I wonder if I have been alone in my ignorance up to now, or if I still have the company of many agents who work with buyers and sellers of lofts.
 
I think I have a lot of company on this.
 
a loft problem
Curiously, this issue is not likely to be relevant to “apartments” as opposed to lofts, and then only to a specific and narrow sub-set of loft buildings.
 
Coops in traditionally residential neighborhoods were likely to have addressed these issues when they were formed, even with the coops on commercial streets such as on the avenues with enough foot traffic to attract high-paying tenants. (Or the original sponsors sold the commercial space separately from the residential coop portion.)
 
But smaller coops (like 12-unit loft buildings) don’t have a lot of flexibility financially, like 200 unit coops may have.
 
more a SoHo loft problem
And the coops with the greatest likelihood of attracting AAA commercial tenants these days are in and near SoHo, where it is not only conceivable but do-able to have a commercial tenant pay so much rent as to carry the entire building’s expenses (as at 55 Greene St) or nearly so, as in other buildings nearby.
 
Newer conversions or constructions were probably done as condos (no 80/20 issue with condos), but lofts that were legitimized as residential spaces in the early waves of the late 1970s and early 1980s were probably formed as coops. ‘Back in the day’ the last thing those coops worried about was “too much income”, but times have changed.
 
I don’t know enough specifics about the finances to say that any of these buildings *has* this problem, but I have seen listings lately for lofts with low-or-no maintenance at several buildings in or near SoHo.
 
Unit 2 at 652 Broadway is for sale for $2.75mm for 3,300 sq ft with maintenance of $548/mo. I don’t see anything in the listing that specifies that none of the maintenance is deductible, or that there may be an 80/20 issue.
 
Unit 11F at 476 Broadway is for sale for $2.995mm for 2,250 sq ft; not only is there no maintenance, “even Cable T.V. is paid for”.
 
did smart lawyers find a way at 458 Broadway?
Maybe there is a clever way around this, as the 7th floor at 458 Broadway sold two months ago (the listing is still available on the web) off an asking price of $2.65mm for 2,500 sq ft with a maintenance of $3,000 per month but there is “quarterly income from the retail ground floor store”. (Our building notes say the monthly maintenance is “almost completely offset” by the rental income.) Maybe they pay monthly maintenance out of one pocket and receive quarterly rental income in another pocket in some way that washes (do not say “launders”) this money.
 
there is nothing wrong with this, of course, if…
… everyone who is supposed to know about this knows about it when they are supposed to know about it. Maybe they do.
 
But maybe not. Did I mention you should consult your own tax adviser?
 
© Sandy Mattingly 2007
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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….)
 
© Sandy Mattingly 2006
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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.)
 
© Sandy Mattingly 2006
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Sandy Mattingly is Manhattan Loft Guy; now with The Corcoran Group (http://corcoran.com/ ; but see the disclaimer at the bottom of the page), he can be reached most easily at Sandy@ManhattanLoftGuy.com or 917.902.2491, and followed on Twitter @ManhattnLoftGuy (note "mis-spelling"). After 7+ years, the blog has moved. Links here on RealTown will work for the foreseeable future, but new posts (and all the old content) has migrated to ManhattanLoftGuy.com.

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ch ch ch changes September 30, 2013
diversion is more of a (small) rant about Manhattan real estate "penthouses"
50 West 29 Street build-out loft sale not as simple as it looks
28 Laight Street 1-day loft sale looks like a whisper listing
room or light? Tribeca or Chelsea? 2 lofts sold above ask at $2.645 million have different charms


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Categories

apartment types
bubble talk
caution: no real estate content
change is a constant
economic "analysis"
general weird stuff
In the news (me)
loft features / amenities
loft features / kitchens
loft features / outdoor space
loft features / "space"
loft features / views
lofts in 'other' neighborhoods
Loft neighborhoods / Chelsea
Loft neighborhoods/ East Village
Loft neighborhoods / Flatiron
loft neighborhoods / NoHo
Loft neighborhoods / SoHo
Loft neighborhoods / Tribeca
loft neighborhoods / West 30s
lofts outside New York??
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Manhattan real estate business
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Psychology of the market
public art in Manhattan
schools
truth IS stranger...
what makes a loft a "loft"
internet and blogosphere
renovation opportunities + rewards
One Bed Wonders
new this week


Favorite Links

Manhattan Users Guide (be sure to search the archives)
The Gotham Center for NYC History
Matrix the Real Estate Economy
Hopstop (door-to-door subway instructions)
MTA subway site, including maps + schedules
NYC Dept of Education site
NY State Assn of Independent Schools (find private schools)
cul-cha!
the local TriBeCa newspaper
"the weekly newspaper of lower Manhattan"
Brooklyn, but a great blog
Patell & Waterman's History of New York
The Soho Memory Project by a long-time resident
Tribeca Commons, an economist considers history, development + more
NYC Past photo tumblr
Manhattan Loft Guy Facebook page (use dropdown menu for Timeline)
the MLG Master List of loft sales, to Nov 2008
Tribeca Citizen
Malcolm Carter
Brick Underground, "vertical living demystified"
Daytonian In Manhattan a tourist's wonder with a local's eye
Urban Digs (numbers, graphs & charts, oh my)
True Gotham (very) occasional front-line dispatches
DNA Info, local news via the inter-tubes
The Real Deal, our industry rag
Coop and Condo (a lawyer writes with a funny pen)
Crain's New York real estate
Tom Fletcher’s NYC Architecture
Jeremiah’s Vanishing New York
Architakes, one guy's take
Scouting New York (location guy with camera)
Forgotten NY
Soho Alliance
Soho Journal
Chelsea Now (area news)
the essential. if ephemeral, New York
The Broadsheet Daily (especially for BPC, FiDi and Tribeca residents)
The Atlantic Cities

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