Matrix Blog

New York City

“Kleptocracy Initiative” to Stop Money Laundering in Real Estate up for Renewal

January 23, 2017 | 9:03 am | Infographics |

Almost two years ago the real estate new development world was rocked by the New York Times epic page one story by Louise Story and Stephanie Saul about foreign investment in U.S. real estate. The vehicle for “Towers of Secrecy” purchases was the ubiquitous LLC shell corporation. While I’m no advocate of illegal activity for the sake of preserving the health of a real estate market, I was very skeptical and outspoken about the challenge of measuring the impact of this new rule. Especially since the new development market had already started to show signs of over supply by mid 2014 in both Manhattan above $3M and Miami above $1M. It also seemed to single out wealthy buyers who did not want to get a mortgage. How could the effectiveness of this six month rule be measured reliably enough to be extended or made permanent when the market was already falling?

Since these series of articles came out, I have learned a lot more about the scale of kleptocracy around the world and more appreciative of what the rule attempted to accomplish.

MHjmkleptocracycallout

Fast forward to 2017 and the super lux (≥$5M) new development condo market cooled sharply. The rule has been extended but is now up for renewal in a month. It is not clear whether the new administration will renew it. Nicholas Nehamas of the Miami Herald penned are great recap of the rule status. To make it even better, he included a YouTube video of bulldozers playing chicken in the piece.

I have to say I admire the messaging that came out of Homeland Security to justify the rule’s impact. Whether or not the following is an exageration, the mere existance of the rule is probably an effective deterent.

“We don’t come across [money laundering in real estate] once every 10 or 12 cases,” said John Tobon, U.S. Homeland Security Investigations Deputy Special Agent in Charge for South Florida. “We come across real estate being purchased with illicit funds once every other case.”

Here are the areas current covered by the Treasury rule.

MHfingencoverage

Using the parameters of the rule, the Miami Herald asked that I analyze sales in the five boroughs of NYC since enactment.  I stuck with condos and 1-3 families since co-ops tend not be a preferred property type of foreign buyers. I found that sales dropped 6% year over year for the aggregate of Manhattan sales over $3M and the outer borough sales of $1.5M. This included legacy contracts that closed during the rule enactment period but went to contract before it started. Those sales likely softened the actual decline in sales.

MHsalessinceFinGen

While it appears reasonable that the rule had some drag on demand, a possible repeal in February won’t likely have much of an impact on the oversupply that currently exists.

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The Relationship Between Commute Time and Housing Prices

October 28, 2016 | 3:48 pm | | Infographics |

Back in the mid 1990s after my wife and I moved to Fairfield County, Connecticut from Manhattan, I noticed the decline in housing prices further from the first express stop in Stamford, CT.

I worked on an updated version of the concept for this weekend’s New York Times Real Estate section: What’s Your Commute Time Worth? They did an amazing job on the graphic.

nytimesmetro-northcommute3q16

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NYT v. WSJ Smogdown: Status of Chinese Investment in U.S. Real Estate

December 1, 2015 | 11:39 am | | Favorites |

lianyungangchinaSmogYahoo
[Source: Yahoo News]

Last weekend I read two terrific articles on Chinese real estate investment in the U.S. but they seemed seemed to conflict – check out the headlines:

New York Times Chinese Cash Floods U.S. Real Estate Market

Wall Street Journal Chinese Pull Back From U.S. Property Investments The subtitle says it all – The nation’s economic and stock-market slump puts buyers on the sidelines

Are the Chinese flooding the U.S. market now or are they pulling back? Which is it? Or is it both?

In my recent trip to Shanghai, I spoke to and interviewed many, many real estate investors at The Real Deal Forum. I got the impression that investment has pulled back a bit in 2015 but expectations were high that investment would expand again, although not to the level of the past 5 years. Of course I was doing this in a biased environment – at in investor conference. I was consistently told that government efforts to prop up the stock market spooked much of the smart money out of the market since the actions were taken to calm everyday investors.

The New York Times piece seemed prompted by a P.R. pitch from the Chinese developer for their Dallas suburb project enticed with a suburban angle. It was a refreshing angle since Chinese real estate investment in the U.S. has been an urban narrative and specifically focused on the high end. The article illustrated just how massive the investment patterns have been. To date the narrative has been focused on super luxury condos in expensive metropolitan areas, while the suburbs got limited attention.

NAR2015internationalCHINESEnyt

The WSJ article is more orientated towards the past few weeks while the NYT article is a longer term view. Both publications place emphasis on NAR’s Profile of International Home Buying Activity whose results emphasized the Chinese investment surge of the previous year. The survey results only reflect the market through last March, so it is 9 months behind the current market. The Chinese investment numbers are staggering, and they are probably understated. Since the NAR report is simply a survey of it’s members and NAR has limited exposure to New York City, especially Manhattan – a hotbed of Chinese real estate investment activity.

NAR2015internationalCHINESEwsj

Incidentally, do the above 2 charts look similar? They both relied on the NAR report.

The NYT piece set the table on the entire multi-year phenomenon using a ton of cool charts while the WSJ attempted to illustrate the change in recent weeks Both outlets were forced to rely on a lot of anecdotal to make their case. Both articles are consistent with my views as each provided a different context.

The NYT piece provided the long term historical view and the WSJ was a short term snapshot.

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Chartist: New York Post, Grant’s Interest Rate Observer

November 19, 2015 | 11:56 am | Charts |

If this market report slash appraisal thing doesn’t work out, I’ll go into graphic design with a focus on charts.

The New York Post asked me to whip up a chart for them. They change the fonts to make it theirs but hey, it’s fun. Oh yeah, the article was about living rent-free in NYC (but there’s a catch). Jim Grant of Grant’s Interest Rate Observer wrote a cover piece in his widely followed twice monthly newsletter subscription called “Too close to the sun” about the super luxury housing peak using my insights and a chart.

Ok, admittedly there is no real point to this post. I’m trying to convince myself to get back in the blogging groove, in addition to my weekly Housing Note.


New York Post version
nypost11-19-15

My original version
NYPdraftmedianrent
[click to expand]


Grant’s IRO version
grantschart11-13-15

My original version
msforgrantchart11-13-15
[click to expand]

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Podcast: My Port Authority of NY & NJ Interview on Regional Housing Market

September 24, 2015 | 12:16 pm | Podcasts |

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A few days ago I was interviewed by Christopher Eshleman at the Port Authority of New York & New Jersey. He works for Alexander Heil who is the chief economist and publishes a lot of great regional economic insights. Although this is a new effort, this was their first podcast conducted outside of the institution so I am deeply appreciative of the opportunity to share my views.

Christopher is a sharp guy and kept the conversation interesting (I even inserted a Jerry Seinfeld joke). It’s about a half an hour.

Check it out.

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Top 10 Manhattan Apartment Super Talls, 2 are in Hudson Yards

August 23, 2015 | 7:45 pm | |

Crain’s 2015 annual analysis of a wide range of NYC data is worth a look. Get to know the biggest city in the U.S.

Top 10 Manhattan Residential Tallest Towers

manhattantop10sCNY

Affordable Housing Units Built

DeBlasio administrations meets it’s annual goal of building 8,000 annual affordable housing units – the highest total ever tracked (began in 2008).

affordableCrains8-2015

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Most NYC building permits since ’63 – Brooklyn nearly equals rest of city

July 30, 2015 | 10:20 am | |

WSJnycpermits7-30
Source: WSJ

Yesterday evening Josh Barbanel at WSJ posted a milestone piece on the current building boom: Construction in New York City Goes Through The Roof: New residential permits surge as developers rush to qualify for tax break

There has been an incredible surge in NYC residential building permits, the most in more than 50 years. It’s amazing to see the Brooklyn permit total nearly reach the total of remainder of the city tallied together.

New York City is entering what could be the biggest building boom in a generation, census figures show, as work gets under way on hundreds of residential projects in neighborhoods across the city. In the first six months of the year, developers received new residential building permits for 42,088 apartments and houses in the city, according to the U.S. Census Bureau, already more than in any full year since 1963, when nearly 50,000 permits were issued.

While permit numbers don’t translate directly to what will actually get built, it is clearly a sign of a significant pipeline in the making.

Reasons?

  • Expiring tax abatement program encouraged developers rush in and start foundation work by June 15
  • Alternative financing around the globe chasing higher returns that low rates can’t deliver
  • Little regulatory oversight because of Dodd-Frank bogging down traditional commercial lenders
  • Significant pent-up demand from 2008-2012 unleashed on the market
  • Improving economy with near record employment growth

UPDATE – I neglected to be more clear and say that this surge will likely collapse in the near future, since the jump in permits is likely to be wildly exaggerated as a result of the first reason above.

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[Video] Ladies and Gentlemen, We Apologize For The Unavoidable Delay…

July 19, 2015 | 11:56 am |

I’ve been interviewed by Charlie Pellet of Bloomberg Radio a few times and have thought to myself, “His voice sounds really familiar.” Here’s this short video from The New Yorker that shows why.

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NYT Mag: Love That ‘Old New York” Neighborhood

May 26, 2015 | 1:38 pm | | Favorites |

Saw this is in the most recent edition of New York Times Magazine. Brilliant

nytmaggentricartoon

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Brick Underground: Timeline For Selling A NYC Apartment

February 9, 2015 | 8:44 am | |

Leigh Kamping-Carder over at Brick Underground put together a pretty cool infographic that covers the sales process of a NYC apartment.

brickclosingtimeline

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NYC Economy is Expanding Rapidly

January 30, 2015 | 11:05 am | |

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According the Federal Reserve Bank of New York, the NYC economy is crushing it, growing far faster than the states of New York and New Jersey.

They are using an Index of Coincident Economic Indicators:

A coincident index is a single summary statistic that tracks the current state of the economy. The index is computed from a number of data series that move systematically with overall economic conditions.

VIDEO: Fox Business Risk & Reward w/ Deirdre Bolton 12-11-14

December 26, 2014 | 2:31 pm | | TV, Videos |

Was nice to join Deirdre again to talk housing, specifically why rents are rising and buyers are falling.

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