Matrix Blog

Backyard BBQ Talk

My New Book “Flash Appraisals” Just Passed Michael Lewis

April 1, 2014 | 2:38 pm | bloomberglogo |

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Coverage of my new book “Flash Appraisals” just passed Michael Lewis’ “Flash Boys” as “Most Read” on Bloomberg Worldwide.

Ok, ok, admittedly a lame attempt at April Fools’ Day humor….but if I wrote a book…

More importantly, Bloomberg News coverage of our recently released Manhattan market report for Douglas Elliman jumped into 4th place and passed the coverage of Michael Lewis’ new book (8th place) – I’m halfway through his book and it’s a fantastic read – so is Oshrat Carmiel’s article.

The market report article has been the number 1 most emailed article all day. Apparently real estate remains the backyard bbq conversation not unlike rigged high speed trading on Wall Street.

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Price per Square Inch for Pizza, Slices for Real Estate Market

March 3, 2014 | 5:58 pm |

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Now that the Oscars are behind us and the “next big snowstorm” just missed NYC, I thought I would finally talk about pizza. But because of why you are here – I’ll make price per inch and price per square foot interchangeable.

One of my favorite podcasts, NPR Planet Money had a great segment called “74,476 Reasons You Should Always Get The Bigger Pizza

The math of why bigger pizzas are such a good deal is simple: A pizza is a circle, and the area of a circle increases with the square of the radius. So, for example, a 16-inch pizza is actually four times as big as an 8-inch pizza. And when you look at thousands of pizza prices from around the U.S., you see that you almost always get a much, much better deal when you buy a bigger pizza.

Explanation of above math: 200.1 inches of pizza surface versus 50.2 inches of pizza surface (pi*r squared=surface area of a circle) And here’s an easy way to calculate the volume of a pizza if you can’t help get enough pizza geometry.

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Here’s the (pizza) logic
The premise of the piece is that it is much cheaper to buy a large pie than a small pie on a price per inch basis. Pricing for a large pie doesn’t expand as much as the surface area does so the price per inch drops precipitously. In the example above, the 16″ pizza wouldn’t be priced 4x as much as the 8″ pizza – probably more like 2x. Apparently pizza makers don’t take geometry seriously.

Buy the large and throw the unused portion in the fridge. Perhaps that is why people buy homes somewhat larger than what they actually need – they will grow into it.

Suburbs
In suburban real estate, after a certain point, larger the home is, generally the lower the price per square foot. There is a point of diminishing return on excess square footage. The total dollar price is higher, obviously, but the cost of additional space is usually less on a per square foot basis. Hence the pizza analogy applies.

Queen of Versailles, Florida
A well known example of diminishing return is the home featured in the documentary, Queen of Versailles. The 90,000 square foot home is so oversized for the Windmere, South Florida housing market that the vast majority of the living area likely has no value as a single family – other than to the current owners, of course.

Manhattan
In a market with one of the highest per capita population density for a US city, there is a premium for larger contiguous space so perhaps that is why we have so many pizza joints. Here is an price per square foot table by apartment size – you can see how ppsf expands with apartment size consistently over the decade (actually it has shown this pattern for the past 25 years). It’s expensive to get more living area in Manhattan.

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Manhattan Price Records from 1982 to 2013 (Will Soon Be Broken)

January 31, 2014 | 10:21 pm | nytlogo | Charts |

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[click to expand]

What I love about this chart is how Manhattan co-ops dominated the record books through the late 1990s Dot.com boom until condos started to take over. Until then, condos were seen as more utilitarian and less about luxury. Over the past decade, Manhattan condos have generally eclipsed co-ops in the record books.

As a stagnant form of Manhattan housing stock, they ain’t building luxury co-ops like that any more (actually they’re not building them anymore).

I’ve updated this chart through the end of 2013, but it’ll be obsolete fairly quickly with records expected to fall in 2014. At a minimum, anticipated record closings include a few condos and a townhouse.


[Promoting The Homeownership Cycle] Obsessive Housing Disorder

May 17, 2009 | 11:06 pm | nytlogo |

The City Journal, a quarterly must-read urban affairs journal published a terrific article on the cycle of Washington’s efforts to encourage homeownership called Obsessive Housing Disorder by Steven Malanga.

The author suggests our troubles began in the 1922 with Herbert Hoover’s Own Your Own Home Campaign and was seen in nearly all of the following decades.

The author suggests it’s based on an unsubstantiated political premise without empirical data – a “cliche of political discourse” that:

Homeowners make better citizens.

As a result, homeownership continues to be pushed and the view is myopic:

In December, the New York Times published a 5,100-word article charging that the Bush administration’s housing policies had “stoked” the foreclosure crisis—and thus the financial meltdown. By pushing for lax lending standards, encouraging government enterprises to make mortgages more available, and leaning on private lenders to come up with innovative ways to lend to ever more Americans—using “the mighty muscle of the federal government,” as the president himself put it—Bush had lured millions of people into bad mortgages that they ultimately couldn’t afford, the Times said.

When I think back to our recent housing boom and the mantra of Fannie Mae and the former administration, we paid a significant price for a 5% boost in homeownership from 64% to 69% in a decade. The resulting economic damage render moot the effort – we got the ownership numbers boosted through artificial financial means.

Although I tend to believe that owner occupied housing is better cared for by its occupants (speaking as a former renter), I had never considered the idea of history repeating itself in this economic sector, in such a specific way.

A good read.

UPDATE: Another excellent article in the same publication: Spendthrift Sunbelt States
Arizona, Florida, and Nevada have run through the riches of their boom and are starting to look more like cash-strapped New York.