I have spilled alot of pixels detailing the weakening Housing market, and its potential impact on the economy.
But not all is woe in the Real Estate market: In select locations, things aren’t so bad.
Indeed, in one very specific area, and in a rather particular slice of Housing, things are actually pretty rosy: The very very high end of Manhattan. The upper tier of homes in NY County — the top 3% — are still seeing robust sales, and actually enjoying price gains.
The New York Times detailed this yesterday in $6 Million for the Co-op, Then Start to Renovate:
"While the general housing market is cooling off in much
of the country, brokers in New York say that the demand at the high end
still resembles a luxury- home arms race. Manhattan residents in the
third quarter of this year paid 19 percent more than they did a year
earlier for co-ops with four bedrooms or more, compared with an 11
percent gain for the average one-bedroom apartment, according to data
tracked by the brokerage firm Brown Harris Stevens.So far this year, 324 buyers purchased Manhattan apartments worth
more than $5 million; of those 16 buyers closed on homes that cost more
than $20 million, according to the research firm PropertyShark.com. Another 45 homes are on the market with asking prices of more than $20 million."
The secret? Wealthy purchasers who do not require mortgages! The credit crunch has had zero impact on this market segment:
"Even after paying top dollar for a luxury apartment, most buyers see
the need for more work . . . often embarking on costly and lengthy
renovations intended to reflect not only their own taste but also their
ambitions to find a perch in the social and economic swirl of today’s
Gilded Age. These newly wealthy are crowding into the market not just
to buy the city’s most expensive homes, but to hire its most coveted
decorators, surround themselves with dozens of remodeling specialists,
and ultimately invite friends and colleagues to see their urban
palaces.
I do enjoy the accompanying chart:
graphic courtesy of NYT
Source:
Age of Riches: $6 Million for the Co-op, Then Start to Renovate
CHRISTINE HAUGHNEY
NYT, October 6, 2007
http://www.nytimes.com/2007/10/06/business/06renovate.html
Converting their bonuses into something of value?
The Austin, TX market is similar. We have been hit with a slowdown in subprime and Alt-A buyers, but people with cash are keeping the luxury real estate market healthy. Funny thing though, in Austin you can get an 8,000 foot house with an awesome pool on 8 acres for $4 million. That is just a tad different than what you get in NYC.
sam… over here in birmingham,AL. you can get a 5-6 bedroom mansion on a 10 acre with a private pond.
…often embarking on costly and lengthy renovations intended to reflect not only their own taste but also their ambitions to find a perch in the social and economic swirl of today’s Gilded Age.
I agree completely. They will be judged on their taste, ambition and proper place in society.
Yea, isn’t it sad that people fall for that shit! I mean I like the Piccaso, Pollack, Miro, as much as the next guy, but to do it in the name of, “urban arms race.” Guess I’m just a Warren Buffet/Jimmy Buffet type.
It would be interesting to know if there is data to support the idea that housing prices in relatively international cities, such as New York and San Francisco, are behind held up by the weak dollar.
Anecdotal evidence supports this idea … along with every other idea.
pete-
i would say that those areas have higher prices because they are financial centers; so as a by product they attract int’l money.
i think that since there is a greater quantity of money in those locales, things are more expensive.
it’s an extension of prices vs. money supply.
by contrast, rural areas, which have a lower supply of money, are less expensive.
I worked construction for a long time. Earlier this year I helped renovate a 1 bedroom apartment on 63rd and Park. Who would have thought that $2m could that that disappointing?
It really feels like people just blow these huge sums of money for the status of saying where they live. $2m could purchase you a brown stone in Park Slope, but this man chose a 1 bedroom apartment.
Yes that’s your Bush tax cuts at work. Feel the goodness trickling down everyone?
Along Pete’s line, it’s odd that the article fails to make a single reference to the influence of foreign buyers on the NYC property market.
Barry would like to see this chart again in 6 months noting where we are in this Ponzi Cycle. Run the market-up to cash-in on year end bonuses; where profits from the NYC R.E. bubble goes is anyone’s guess. However aside from the necklaces that adorn the W.S. pimps, perhaps Gold/Silver would be a better hedge against the all-pathetic dollar noting we are still 30-50% over-valued accross the board!
The high end here in L.A. is I believe similarly immune, and for the same reasons: celebs don’t need mortgages, but they need to live here. At least some of the time. The West side is safe for now.
I suspect that Manhattan apartment prices are supported more than a little by the regulations restricting new inventory. While demand may do what it does, a tightly restricted supply will help keep prices up. Throw rent control and rent stabilization into the mix and the number of units truly in play is reduced further.
Actually, I beg to differ with the conclusion of the article. I am a NYer, and very familiar with the RE here. The market, yes even the higher end, has been weakening since ’05. It takes time for this to manifest itself in the actual transaction figures, since most of the weakness comes through as lengthening marketing time, seller concessions, antiques and valuables thrown into the deal, etc. Things that you cannot ascertain by looking at transaction prices.
I have firm numbers on this, showing weakening by as much as 70%. You can see it here: http://reggiemiddleton.typepad.com/reggie_middletons_perpetu/2007/10/manhattan-real-.html
There is a supply constraint in NY, but it was circumvented by simply turning anything that was already standing into a condo. Notice the extreme change in the ratio of coops to condos in NY?
For those that are interested, I think that many of the condo developers are going to have a very bad year in ’08. I know Toll is trying some development in the NY metro condo market, and it is a very crowded market.
The homebuilders in general,are in much worse trouble than analysts and media are letting on to. See http://reggiemiddleton.typepad.com/reggie_middletons_perpetu/2007/10/there-is-this-s.html for more on the topic.
Has any one heard of write downs at life insurance companies for commercial property lease bonds? Some of these bonds were insured by Royal Insurance which is now in run off. Has regulatory agencies investigated these bonds? I heard that there are billions of these bonds. It looks like more land mines!