With A Flag, An I-Beam and a Christmas Tree, The Party Is Just Getting Started

February 27, 2006 | 12:06 am | | Milestones |

Ever since I was a kid, I remember seeing and reading about Christmas trees on top of buildings under construction but they were not quite finished. I also remember seeing an American flag and there was usually a ceremony of some kind that was covered in the newspapers.

There has been a tremendous amount of construction in recent years and I started thinking about topping out ceremonies:

What is this all about? Why a tree?, and Why was I looking up instead of watching where I was walking?

According to Modern Steel Construction / December 2000 [pdf]

When or how it started, but the tradition of ‘Topping Out’ has become a cherished custom of Ironworkers whenever the skeleton of a bridge or building is completed. Topping Out is a signal that the uppermost steel member is going into place, that the structure has reached its height. As that final beam is hoisted, an evergreen tree or a flag or both are attached to it as it ascends.

This tradition of ironworkers is most closely associated with the International Association of Bridge, Structural, and Ornamental Ironworkers union in Washington, DC.

“Topping out” is the term used by ironworkers to indicate that the final piece of steel is being hoisted into place on a building, bridge, or other large structure.

The project is not completed, but it has reached its maximum height. To commemorate this first milestone the final piece of iron is usually hoisted into place with a small evergreen tree (called a Christmas tree in the trade) and an American flag attached. The piece is usually painted white and signed by the ironworkers and visiting dignitaries (figure 1). If the project is important enough (and the largesse of the contractor great enough) the ceremony may culminate in a celebration known as a “topping out party” in which the construction crews are treated to food and drink.

For those who are into Scandavian mythology here is the History of the “Topping Out” Ceremony [Columbia University] via The Ironworker magazine.

Topping Out Bear Stearns NYC

Mohawk Indians are the most well-known ironworkers and are close associated with topping out buildings.

Here’s a sampling of local coverage for a typical event:

Topping Out at 7 World Trade Center
Topping Out At The Ukrainian Museum’s Top Project
Topping Out the Blanton: That tree on the roof? Means the new museum is A-OK.
Vought-Alenia plant to be topped out

but its not limited to the US…

New unit at Northwick Park Hospital finished [UK]
New home to help juveniles re-integrate [HK]

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[Getting Graphic] Genius On A Napkin: Housing Boom Phase Diagrams

February 27, 2006 | 12:05 am |

Getting Graphic is a semi-sort-of-irregular collection of our favorite BIG real estate-related graphic(s).

Click here for full post [Rutledge Blog]

Enlarge graphic

Source: Rutledge Blog

Although I consider myself geek-like, the chart Dr. Rutledge provides is a bit over my head but his explanation is clear. (make a mental note – consider changing this post to [Getting Text])

Dr. Rutledge’s post was written in the spring of 2005 and the comments he makes are very relevant today.

A drop in interest rates will make a permanent increase in housing prices but, over time, the growing housing stock will mitigate some of the price and construction pressure, which means the initial burst of activity, and possibly of price, are likely to moderate somewhat over time. To an information theorist, the initial spike in price is a way of amplifying the initial information signal that housing is now scarce in order to get everybody’s attention so they get out their hammers and build more houses.

So interest-rate induced housing inflation is largely a one-time event. It is not property inflation. It is not a housing bubble.

Housing inflation, as opposed to one-time increases in home prices, happens when there is a continuous increase in demand caused, for example, by systematically inflationary monetary policy. We do not have that today.

Housing bubbles pop when a sudden reversal of interest rates, or a sudden reduction in the availability of mortgage financing, causes a sudden, one-time, drop in demand. I don’t think that is going to happen either. Inflation today is likely to remain low for some time.


[Getting Graphic] Housing In The Circle Of Economics

February 27, 2006 | 12:03 am |

Getting Graphic is a semi-sort-of-irregular collection of our favorite BIG real estate-related chart(s). This week we have a two for one…

In this post from last summer The US Trade Deficit is Unsustainable [Axis of Logic] Bud Conrad shows how dependent the US housing market and US government deficit spending is on re-investment by foreigners. This is consistent with the negative savings rate. Americans are spending more than they make but this activity is expected to reverse as the housing market eases as consumers reign in spending and begin saving.

The following charts show the role of housing in the economic cycle.

A basic view of the economy as show by Axis of Logic: _Households earn the wages they spend on the goods and services from businesses._

Source: Axis of Logic

The next chart adds that _consumers spend a portion purchasing foreign goods. The foreigners then recycle the dollars they collect from this trade into the US government debt by buying Treasuries and into Agency debt of Government Sponsored Enterprises like Fannie Mae, which then provide money for housing._

Source: Axis of Logic

Albeit simplified, these charts help demonstrate that:

Foreigners have funded our housing boom and provided enough credit that the growing federal deficits have not driven interest rates up.


Not Everyone Is Ready For An Appraisal Of Reality

February 27, 2006 | 12:01 am | |

As comedian Robin Williams once said:

Reality, what a concept

Kenneth Harney writes that Appraisers supply a dose of reality [LA Times].

What will your home be worth if unsold inventories of houses turn into a glut and relistings with price reductions become routine?

For most consumers, the ultimate answer about value will come from the appraiser hired by the purchaser’s mortgage lender.

For consumers, he provided insight about appraisers from several appraisers he interviewed (sans moi!):

  • stay in touch with multiple sub-segments – markets behave differently

  • have a lot of input from [agents] – they are on the front lines

  • hire a licensed, long-established appraiser as a consultant for an hourly fee – sometimes input from a non-biased source can put a buyer or seller at ease without a full appraisal.

  • good appraisers ignore pressure and will only change values if provided with comps that were missed that are better than those already submitted – the pressure appraisers get from lenders, mortgage brokers and mortgage bankers is relentless – if you want an unbiased opinion, you might stay away from appraisers who do a high volume of work for mortgage brokers

  • for sellers and buyers in softening markets: “Just be realistic.” Don’t be greedy – its going to take a while for all the parties to adjust to the change in conditions

  • As a buyer, don’t expect sellers to bleed for you – there may be not as many competing buyers but you are not the only buyer

  • And sellers: Don’t blame the messengers — appraisers or realty agents – respect the pressure they are under

Conclusion — Take a deep breath and listen to the valuation expert if you want to know what a property is worth.

I look at a valuation expert as:

  • someone whose compensation is not determined by whether or not you buy the property
  • years of experience
  • access to comprehensive information

In the article Bogus appraisals stress housing market [Kansas City Star] the author states An independent and unbiased appraisal — once considered the bedrock of any home sale or loan — today is often built on shifting sands, according to concerned appraisers in Kansas and Missouri as well as nationwide.

Appraisal fraud is relatively easy to hide because most consumers have no idea how an appraisal works. Many consumers never see an appraisal — though they pay for them — unless they ask for one at closing. But while they may appear subjective, honest appraisals are supposed to adhere to well-defined principles.

As the housing market eases, the phrase rising waters float all boats won’t apply anymore as consumers, lenders and regulators will begin to get the message that something has to be done.

For more information on appraisal issues of the day, check out our blog [Soapbox], dedicated to appraisal issues of the day.


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! ?


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.


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]


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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