Gentrification: Too Much Of A Good Thing?

February 27, 2006 | 12:01 am | Public |

[The Stamford Review] makes the well-documented conclusion that New York City may face a total build-out crisis in seven to 10 years, reported in its most recent issue, all the more alarming.

Source: 70’s Alphabet City by FilthyMess.com

This press release provides an overview of the current issue [Stamford Review]. Stamford Review editor Larry Sicular states:

The city depends on housing construction to help support its economy, but by the time a child born here today reaches the fourth grade there may not be any vacant land left for development,” said Larry Sicular, publisher/editor of The Stamford Review. “Focused on following the strengthening or weakening real estate market, few people have stopped long enough to look forward to the very difficult planning decisions facing us.

I have known Larry for more than 20 years and I jumped at the opportunity to contribute two articles to the current issue:

Here are the portions of the press release that pertain to the Gentrification article:

  • As Manhattan has gentrified, pricing differentials among neighborhoods like Tribeca and the Upper West side have dramatically slimmed down, by 35% since 1989. (Miller, Miller Samuel Inc.)

  • High land prices are forcing developers to create bigger, more profitable units, but demand has shifted to mid-sized units. A growing supply of unsold, large, pricey units is the result. (Miller)

  • New developments in emerging New York City neighborhoods now cost almost as much for homebuyers as those in established markets. (Miller)

Here are the portions of the press release that pertain to the Media article:

  • In 2005, the media were so determined to find bad news about a housing bubble that they oversimplified and drew misleading conclusions about market statistics. (Miller)

  • Now, after two consecutive quarters of quiet markets, the media has adjusted its terminology from a “bubble ready to burst” to a “soft landing” or a more “normalized” market. (Miller)


Got Game? For Real Estate Investors With Virtually Too Much Time On Their Hands

February 27, 2006 | 12:01 am |

I was reading The Real Estate and got a chuckle over the The Virtual Mogul post about Atari’s new game Tycoon City: New York, where players will get the chance to carve their own empires out of the Big Apple from humble origins. (Well thats not reality since many New York developers are second and third generation).

Donald Trump seems to have the dominated board and video real estate games with his titles Donald Trump’s Real Estate Tycoon and Trump – The Game, both of which get pretty good reviews.

A couple of questions come to mind:

  • Do developers actually play real estate video games? (no way)
  • Has the recent housing boom transcended all age levels that kids would give up Grand Theft Auto: San Andreas and Madden NFL 2006? (no way)
  • Does Atari think that kids or teens will play real estate games or do they expect adults to? (no clue)

Wouldn’t Atari sell more copies if they re-named their new game:

The Real Estate Developer Wars: Assemble The Most Key Parcels Of Land With The Most FAR! ?


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And The Survey Said… Its Not How Much You Have, Its How Much You Can Borrow

February 24, 2006 | 12:03 am | |

In the Wall Street Journal today, they report the findings of the Federal Reserve in the article Typical U.S. Family’s Net Worth Edged Up Only 1.5% in ’01-’04 [WSJ].

Source: WSJ


Download the report [pdf]

A booming housing market boosted the typical American family’s wealth between 2001 and 2004, but stagnant stock prices and rising debt offset many of those gains.

The report, the most comprehensive survey of household wealth, also found a widening of the gap between households at the top and the bottom of the economic ladder. “While the typical American household basically ran in place, less affluent households actually lost ground,” said Stephen Brobeck, executive director of the Consumer Federation of America.

The net worth of the typical family in the richest 10% rose to $831,600, a 6.5% increase from 2001, adjusted for inflation. In contrast, the net worth of the typical family in the bottom 25% fell 1.5% to $13,300.

In CNN’s Fed wealth survey: How do you stack up? – Feb. 23, 2006 Americans’ net worth grew between 2001 and 2004, but not nearly as strongly as it did between 1998 and 2001, according to the Federal Reserve’s triennial Survey of Consumer Finances released Thursday.

All stats in the current study were based on the period 2001 to 2004

  • Net worth – up 1.5% versus 10.3% from 1998 to 2001. The increase in homeownership caused the current gains but much was offset by the increase in debt.

  • Income – wages fell 6.2% after adjusting for inflation.

  • Assets – increased 10.3%

  • Debt – increased 33.9%

In other words, the sharp rise in housing prices has done little to increase the net worth of individuals because the gains have been largely offset by the increase in debt. With incomes falling over this period, real estate price gains would be expected to be tempered. Going forward, this would be expected to limit further significant appreciation in the near term.



To Market, To Market: Real Estate Marketing Set To Maximum Distortion

February 24, 2006 | 12:01 am | |

To expand Lota da Povoa de Varzim em 1960 [Wikipedia]

Motoko Rich’s article Rocking the House to Sell Condos [NYT] explores marketing efforts by The Corcoran Group on behalf of Extell and The Shvo Group on behalf of Leviev Boymelgreen.

For the Avery “Extell is spending more than $500,000 to inaugurate the sale of apartments in the building, due to be completed in the fall of 2007, with a party next Thursday on a strip of grass next to its construction site. Seal will perform there under a tent designed to hold 800 people.”

Disclaimer: I don’t claim to know much about marketing real estate and I don’t do it for a living. I can only offer a layman’s everyday interpretation:

Some thoughts:

  • Lavish spending on an opening launch shows weakness.

  • Potential buyers might be thinking that they are paying for this.

  • It doesn’t attract buyers, just media coverage.

  • It smacks of investor speculation seen in other investor-heavy markets like Miami.

  • Seal? What about Led Zeppelin? 😉

For 20 Pine Street, Boymelgreen will about $200,000 on the part that is partly a benefit for the New York Academy of Art.

Some thoughts:

  • It will attract people that are interested in the arts but how does that translate into sales?

  • How is this a different approach than an open house?

  • How do I get invited? 😉

At the end of the day, I am sure these efforts will move units and generate interest, after all, these are significant marketing efforts and there is a lot of talent and experience found in these real estate consultant/broker firms.

I am only wary of the message it sends to the market: weakness…which is exactly what these efforts are intended to counteract.


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Getting Realogy To Move So They Don’t Cartus Away

February 24, 2006 | 12:01 am | |

Cendant Real Estate Services Announces New Company Name: Realogy Corporation [RISMedia]

We coined a new word for our new company [Realogy]. Realogy results from the fusion of “real estate” and “-logy,” the suffix meaning “the science or study of.” The company’s new logo includes a stylized “A,” representing the company’s position as the investor’s doorway to the real estate sector.

There’s a lot of name changing going on in real estate [Inman] these days. Perhaps its part of the New Year’s resolution process, changes occur as companies reorganize after the new year. Realogy seems too cute for a big real estate conglomerate, doesn’t it? Perhaps I just need to get used to it.

Here are two others:

Guy Kawasaki’s Blog calls this The Name Game and provides guidance to companies who re-name their company or product. Realogy doesn’t seem to follow his advice. He mentions this hysterical Salon.com post from a few years ago also called the name game.

Here’s a great post on how they named companies [day2day activities]. My favorites are: Apple, eBay, Mozilla Foundation, Nike, Pepsi, Sprint, Volvo and Yahoo!

So whats in a name? Apparently a lot.


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Thomas Jefferson: The Founding Father Of Sprawl?

February 23, 2006 | 12:26 am |

In this Planetizen post the author Leonardo Vazquez postulates:

He told James Madison: “I think our governments will remain virtuous for many centuries as long as they are chiefly agricultural; and this will be as long as there shall be vacant lands in any part of America. When they get plied upon one another in large cities, as in Europe, they will become corrupt as in Europe.”

As a writer, philosopher and leader, Jefferson was able to hard-wire an anti-urban bias into the culture of the United States. Consider the U.S. Constitution. What power does it give to cities and towns? None, nada, zip. In fact, the Constitution doesn’t even mention cities and towns. It does give a lot of power to states. And states get more power — through representatives — by increasing their population.

It’s a formula for urban sprawl and weak cities. States need to grow to get more representatives and more political power. State politicians could try getting more people into urban areas by encouraging compact development. But that would risk giving more electoral power to cities, which Jefferson and his friends and followers (the “Jeffersonians”) thought were corrupt. The result? Encourage people to scatter on large plots of land — of course after removing the Native Americans who happened to be living there at the time.

Its a good article. We have had recent posts on sprawl and new urbanism (bringing town centers to suburban areas). Here’s a good resource that covers sprawl [National Geographic].

Sprawled In The Suburbs, There Is Hope For The New-Urbanist [Matrix]
Creative Brain Drain Weakens Long Term Urban Revitalization [Matrix]
Development Is Goin’ Down…town [Matrix]


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Judging A Book By Its Cover: David Lereah Changes Titles

February 23, 2006 | 12:06 am | | Public |

According to Bubblemeter, David Lereah, the Chief Economist for the National Association of Realtors (NAR) is changing the title of his real estate book (as seen on Amazon) from:

Are You Missing the Real Estate Boom? to _Why the Real Estate Boom Will Not Bust._

Notice how the word BOOM is the same size and the graphics are identical? The Walk-through’s Old Fish In A New Wrapper says the content is the same – Damon Darlin’s post provided a pretty good chuckle.

I had the chance to meet David Lereah in the green room before the taping of CNBC’s Town Hall: Real Estate Boom last year. It was me, Suze Orman, Robert Shiller and David Lereah. Surreal to say the least. All very nice I might add. I only had a small appearance – these people were the main characters in this production.

Mr. Lereah has provided a tremendous amount of fodder for the blogosphere, myself included. Up until now, its been the use of language which would seem to be misleading. Now its book titles. This sort of stuff might have worked 5 years ago but not today. People have access to information almost immediately.


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Reconfiguring New York City: A Series Of Articles In The Journal The Stamford Review

February 22, 2006 | 10:37 pm | |

The Stamford Review, Spring/Summer 2006 is the third issue and was just released. It can be downloaded for free on their web site after a simple registration or hard copies can be purchased for a nominal fee. The intention of the publication was to bring together a diverse group of writers who are passionate about their topics to write about issues that affect New York City real estate, land use, architecture, and urban affairs.

See full post for more information [Matrix]


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Reconfiguring New York City: A Series Of Articles In The Journal The Stamford Review

February 22, 2006 | 10:25 pm | | Public |

The Stamford Review, Spring/Summer 2006 is the third issue and was just released. It can be downloaded for free on their web site after a simple registration or hard copies can be purchased for a nominal fee. The intention of the publication was to bring together a diverse group of writers who are passionate about their topics to write about issues that affect New York City real estate, land use, architecture, and urban affairs.

See the author list below.

Shameless plug: I wrote two articles for this publication The Gentrification of Manhattan and Manhattan’s Housing Market and the Media

I hope you enjoy them.

Larry Sicular is the editor and has been a professional colleague of mine for 20 years. The journal, which is a labor of love for him, takes a monumental effort to coordinate, edit and publish and I truly appreciated the opportunity to be in it.

In the introduction of the publication, Larry describes the current issue as being:

…about the reconfiguration of New York City, a physical transformation that has been fueled by a mixture of population growth, increased affluence, and an unusually strong housing market. What is happening here is mirrored to varying degrees in successful cities elsewhere in this nation and across the globe.

Here, nine experts praise and critique city government’s efforts to guide this transformation, to meet and balance growing demands for market housing, affordable housing, open space, industrial space, and historic preservation. Even as the housing market softens, these policies will have long-term effects and will continue to be debated.

In recent years it has been easy to forget Jonathan Miller’s reminder that twenty years ago Manhattan’s housing market relied on government tax policy to stimulate demand. Julia Vitullo-Martin applauds the results of public and institutional investment in the Bronx, but she notes that destructive government policies helped depress the borough in the first place.

Much of our attention is drawn to the city’s extensive rezoning of former industrial areas on the Brooklyn waterfront and the west side of Manhattan. Frank Braconi questions whether these initiatives are sufficient to meet the needs of our growing population, while Kimberly Miller and Mark Alexander address what will be required to make the rezonings a success. Peter Beck shows us that limited public resources, directed to these areas for affordable housing, could perhaps be more effectively spent, while Lisa Kersavage shows us how rezoning need not have cost us valuable historic resources. Pamela Hannigan praises the city policy that is creating new industrial business zones in order to preserve and stimulate the valuable manufacturing resources that remain.

And then there is Governors Island. Is there a greater possibility for adding a jewel in our crown than the history and open spaces that this island offers and represents? Our third issue is dedicated to the possibilities of Governors Island.



Curbed: Three Cents Worth: Listing Inventory Gets In The Red Zone

February 22, 2006 | 1:16 pm | | Charts |

Here is my Wednesday post for Curbed, the mother and father of all real estate web logs.

Curbed: Three Cents Worth: Listing Inventory Gets In The Red Zone

An archive of previous posts can be found here.

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Getting In Touch With Our Feelings: Three Gauges Show Weakness

February 22, 2006 | 12:04 am |

The Consumer Confidence Index, the Consumer Sentiment Index and Remodeling Market Index all showed weaknesses in recently released reports. This would seem to suggests a weakening economy is developing which influences the housing market.

Weak economy = modest sales activity propeled by low mortgage rates.

For the record – and because I can’t tell my sentiment from my confidence from my urge to remodel…

Consumer confidence and consumer sentiment are two ways of talking about consumer attitudes. Among economic reports, consumer sentiment refers to the Michigan survey while consumer confidence refers to The Conference Board’s survey. [NASDAQ] The RMI measures remodeler perceptions of market demand for current and future residential remodeling projects. [NAHB]

Here are the results:

  • ABC/WashPost U.S. consumer confidence falls [Reuters] U.S. consumer confidence fell in the latest week, ABC News and the Washington Post said on Tuesday, with respondents concerned about making purchases due to persistently high gasoline prices and inflation.

  • Consumer sentiment fades in Feb.: University of Michigan gauge drops to 87.4 [MW] U.S. consumer sentiment eased in early February as gasoline prices rose, according to media reports Friday of proprietary research from the University of Michigan. The UMich sentiment index fell to 87.4 in February from 91.2 in January, reports said. Economists were expecting a flat reading of around 91.1, according to a survey conducted by MarketWatch.

  • Remodeling Slows In Fourth Quarter [NAHB] Remodeling activity slowed in the fourth quarter of 2005, according to the National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI). However, current market conditions, as well as future expectations of the RMI, were still in the positive range for 2005 as a whole, though slightly below the 2004 average.


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State Legislatures to Supreme Court: Don’t Tread on Me

February 22, 2006 | 12:01 am | |

The front page, above the fold, article States Curbing Right to Seize Private Homes [NYT] talks about the national backlash to the Supreme Court findings in KELO et al. v. CITY OF NEW LONDON et al..

In a rare display of unanimity that cuts across partisan and geographic lines, lawmakers in virtually every statehouse across the country are advancing bills and constitutional amendments to limit use of the government’s power of eminent domain to seize private property for economic development purposes.

Rarely has a Supreme Court ruling created such a universal reaction that was not made up along party lines. The idea that the loss of private property to private development seems to have struck a cord with state and local legislatures and they are passing laws that would disallow many situations that would involve emminent domain. In fact, one of the justices seemed to apologize after the 4-3 decision and said that “We emphasize that nothing in our opinion precludes any state from placing further restrictions on its exercise of the takings power.”

“It’s open season on eminent domain,” said Larry Morandi, a land-use specialist at the National Conference of State Legislatures. “Bills are being pushed by Democrats and Republicans, liberals and conservatives, and they’re passing by huge margins.” Americans see property ownership, and the rights associated with them, as a right of citizenship. This ruling seemed to bypass American sentiment.

Like everything to do with real estate, Americans tend to go from one extreme to the other. More neutral observers expressed concern that state officials, in their zeal to protect homeowners and small businesses, would handcuff local governments that are trying to revitalize dying cities and fill in blighted areas with projects that produce tax revenues and jobs. Many emminent domain situations need to be judged on a case-by-case basis.

USA Today provided a list of strategies that legislatures are taking:

  • Explicit bans. Some bills would ban the use of eminent domain for economic development. Others would do so indirectly by stating when it can be used and leaving commercial development off the list.

  • Narrower rules. Many states are considering making it harder for cities to declare a neighborhood “blighted” just for economic development.

  • Economic penalties. New York and Indiana are among states considering making eminent domain more expensive. The government would have to pay 25% or 50% above market value when it confiscates a property for commercial development.

_Here’s a sample of the action that is taking place to limit takings:_
Eminent-domain bills given a hearing [Baltimore Sun]
Limiting eminent domain [Journal-Advocate – CO]
Rethinking eminent domain: Lawmakers want to curtail the power of local governments [Bradenton Herald – FL]

_Prior Posts In Matrix_
The Kelo Backlash: Now Many Are Rethinking Eminent Domain [Matrix]
Wrecking Ball: Taking Eminent Domain Private [Matrix]

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