Matrix Blog


Gothamist: Larry Sicular and Jonathan Miller on the Stamford Review

March 10, 2006 | 12:46 pm | | Public |

A few weeks ago, I submitted a post about the release of Larry Sicular’s Stamford Review and the two articles I had contributed [Matrix]. The Gothamist posed a series of questions to us:

  1. New York is already Overcrowded– in this issue of the Stamford Review one of the authors writes that Flushing is more dense than San Francisco, and Staten Island is as dense as Seattle. What’s the most overcrowded part of the city?
  2. The article also says that developable land is running out. Since new building starts are accelerating, and new people are immigrating to the city every day, what happens when the land runs out?
  3. Rich people will obviously be able to afford apartments no matter how expensive they get– but where will all the poor people go? And should NYC be doing anything to protect them?
  4. What neighborhoods are going to be targets for this massive redevelopment?
  5. In many neighborhoods, like Red Hook, we’re seeing historic buildings get torn down and replaced by big box stores and ugly new residential developments. Is that an inevitable consequence of the city’s growth?
  6. What’s the deal with Governor’s Island? Should the city be using that for housing?
  7. People in their late 20s and early 30s are facing a pretty tough situation with very high housing prices– do they have a prayer of seeing things improve, or are we going to soon face a situation like Tokyo’s, where middle-class families of four live in 500 sqft or less?
  8. If you had to pick three neighborhoods that offered the best value for a new couple purchasing their first home, what would they be?
  9. What are the biggest misnomers and bad ideas about today’s housing market?

Here’s a brief overview, links and answers to these questions posed by the Gothamist.

Reconfiguring New York City [Matrix]
Download the report for free [Stamford Review]
On the Reconfiguration of New York City [Curbed]
That Toll Plaza Feeling at 109th and Broadway [Curbed]

Curbed: Three Cents Worth: The Supply-Demand Helix

March 9, 2006 | 12:01 am | | Charts |

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

Curbed: Three Cents Worth: The Supply-Demand Helix

An archive of previous posts can be found here.

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Curbed: Three Cents Worth: Bracket Creeps Us Out

March 1, 2006 | 2:44 pm | | Columns |

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

Curbed: Three Cents Worth: Bracket Creeps Us Out

An archive of previous posts can be found here.

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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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Curbed: Three Cents Worth: Manhattan Stands Tall

February 16, 2006 | 12:01 am | | Charts |

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

Curbed: Three Cents Worth: Manhattan Stands Tall

An archive of previous posts can be found here.

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Correlating Housing Prices With Consumer Spending: Home-Equity Lending Is The Key

January 23, 2006 | 12:09 am | |
Source: Michael Panzner, Rabo Securities

The Big Picture lays out a good analysis of how consumer spending correlates with housing prices

Historically, consumer credit has roughly tracked overall changes in house prices. In other words, the consumers’ ability to borrow — and then go out and spend — has been highly correlated to real estate changes (and hence, the importance of interest rates).

In a stimulus-driven environment like we’ve enjoyed for the past three years, instead of real wage growth, there’s been a lot of consumer borrowing propelling their spending. I expect as the borrowing slows down, so too will the consumer spending.

In Barron’s Up and Down Wall Street Column, Alan Abelson writes:

the trouble with fantasies is that no matter how pleasurable while they last, they leave a distinctly bitter aftertaste when they go “poof.” And last week they went “poof.” The economy obviously has been slowing, as will be evident when we get the first reading on GDP. Inflation may take an occasional breather, but it’s very much alive and malign. And is there any sentient — or should we say sober — soul who can’t hear the air finally oozing out of the housing bubble?

Source: MacroMavens

The chart shows that home-equity loans, which have been a catalyst for consumer spending, have fallen sharply.

“MacroMavens’ proprietor, Stephanie Pomboy, puts it, of the “marginal consumption buck” — are going south for the first time since the last recession in 2000.

The downturn in home-equity loans, she further notes, is part and parcel of the recent overall sharp retreat in consumer borrowing, which has suffered its first quarterly contraction since the recession of 1991. And credit, she notes, “has come to replace wages as the driver of consumption. Last year, the $375 billion gain in disposable income fell way short of the $500 billion increase in consumption.”

We have also tracked GDP [Miller Samuel] against local Manhattan indicators and found there to be a general correlation between the national GDP statistics and local housing prices. [Curbed].

The Conclusion?
The Fed’s “measured growth” policy of raising short term rates have hit critical mass in the home-equity market as most of this type of lending is based on adjustable rate financing instruments. Since consumer spending comprises 2/3 of the economy and consumer spending has been driven by borrowing through home-equity loans rather than wage increases, it seems plausible that they will stop raising rates fairly soon or housing and the economy will slip more than planned.

Shameless Self-promotion Redux: Blogging Hits Real Estate

January 20, 2006 | 12:06 pm | |

Les Christie talks about blogging in real estate in his article Blog if you love real estate: Bloggers are changing the equation when it comes to buying a house or condo [CNN]

Blogging has hit the real-estate industry…and it just may upend a marketplace known for inefficiency and restricted information.

There are hundreds, perhaps thousands, of blogs covering real estate and they shine unfiltered lights on their subjects, reporting market gossip, innuendo, facts, opinion, virtually anything.

Brad Inman perhaps says it best: “Blogs are telling it like it is at the street level,” said Brad Inman of Inman News, a large real-estate news service. Inman said real-estate blogging began in the Bay area, took hold in New York and has now spread nationally.

Among the sites CNN singles out are Gothamist, Curbed and yours truly Matrix.

If you are not sure what web snark is, check out the Curbed link to the CNN story. I love Curbed’s in your face approach (and of course the Gothamist for the depth of its content).

“It’s not just local real-estate or neighborhood conditions that the bloggosphere highlights. Some, like real-estate research provider Jonathan Miller’s take on different national issues.

“I come across information every day about the industry and my blog site is an opportunity to get my take out there,” said Miller, who offers practical advice and info for readers on subjects such as how real-estate deals are made, changes in government backed loan programs, and the direction of mortgage rates, to mention a few.””

Whole Foods Becomes A Must Have For Emerging Neighborhoods To Be On The Map

January 17, 2006 | 12:01 am | |

Lisa Chamberlain, in her article A Destination for Serious Eating [NYT] expounds “Although it has always had a few well-known specialty stores, downtown Manhattan has seemingly overnight become a mecca for food shopping.” There are a variety of specialty food stores, a niche seemingly ignored by the chain supermarkets, that have been moving into metropolitan markets, namely the emerging downtown areas.

Four years after entering Manhattan, Whole Foods, the Austin based specialty food chain, has become the stamp of authenticity, a happening, a sign that a residential neighborhood or new development “has arrived” [REJ]. Stores in Chelsea and Union Square made that statement. The new Time Warner development at Columbus Circle gave credibility to one of the few “malls” in the borough as an anchor tenant. Rumors of new locations provoke speculation [Curbed].

The same sort of public interest is seen in Miami, Seattle, San Francisco, Los Angeles, Chicago, Washington DC [DC Bubble] and others. In fact, its become part of the grocer vocabulary [Centerstage] implying a category or type of foods.


Over the past 7 years, the housing boom and aging baby boomers have helped revitalize many downtown urban areas [Matrix] throughout the US. Many US retailers have stayed away from these markets because the required space was large and not especially cost effective. However, now that the demographics and economics are changing, grocery chains are starting to get the importance of this phenomenon and are following suit.

[Webmaster’s note: No, I don’t own stock in Whole Foods, but I have purchased dried figs on occasion.]

Tech Wreck And The Bigger Bubble Trouble (Rated G)

January 6, 2006 | 12:01 am | |
Source: CBS News

In Michael Mandel’s article Bigger than the Tech Bubble [BW], he indicates that the tech bubble was not as big as the real estate bubble.

Let’s look at his argument:

Fact #1: The housing bubble is now officially bigger than the tech bubble ever was. At the peak of the frenzy in 2000, consumer and business spending on tech software and hardware absorbed 6% of economic output. Today, residential construction takes 6.1% of output — that’s the biggest share of the economy devoted to housing since 1955. And remember, that was smack-dab in the middle of the postwar baby boom.

3 Comments on the Businessweek post were very interesting.

“You cannot compare technology with real estate. You can always do without technology, but, you can never get away from the fact that you have to live in some sort of shelter…

In addition, technology is a business of commoditization whereas real estate always has some kind of intrinsic value.”

“Plus, since most people put only 10-20% down on a home, housing only has to fall 10-20% for some people to lose 100% of their equity. Imagine what happens when a person’s entire net worth is merely the 20% of their house that they own. It is true that housing never drops 100% like stocks, but it does not have to to wipe people out.

Lastly, housing can certainly fall at the same rate it has risen. When the Nasdaq crashed from 5000 to 1500, it really only retraced back to the levels of early 1998, or 2 years before the peak. So what if it was a 70% drop, it was still just a 2-year retracement.”

“Is there any correlation between housing prices and rates of residential investment?

And also, is new home purchase (ie. investment) significant? It seems to me to be quite different from residential investment (upgrading existing homes). Upgrades added to new homes would seem to be more more significant as a measure of investment as it would be a comparison of apples to apples. Just some thoughts. It seems to me that average new home construction could be greatly skewed by the type of homes being built, thereby driving up the residential investment number but reflecting no real increase in residential investment, just a change in preference on the type of new homes being purchased. To elaborate, lets say in the mid-1990s, when home investment was a little over 4% of GDP, that homebuilders targeted the entry-level housing market. Homes were located in cheap, outlying areas and were generally smaller. By 2002, due to demand, executive type homes were being built, and infill luxury condos began to skew the average investment up. Entry-level demand was rerouted to condo conversions or older homes as preferences or price points shifted. We would see an increase in residential investment without any corresponding change in the underlying activity. Its just that in one instance its reported and in the other its not. “

Webmaster’s note: From personal experience, I have never been able to find a meaningful correlation between stock market indexes and real estate markets. They are different asset classes, and react differently to various stimulus. I think the real correlation, especially in New York, is the amount of employment and personal income that is impacted locally by the activities in the financial sector. That goes for the tech bubble which burst in 2000. It had partly been responsible for the rise in housing in New York in Silicon Alley in the late 1990’s but the real estate market kept rising after the dotcom bust. Two ships passing in the night, so to speak.

Not just the tech bubble, comparing real estate with stocks is misleading. Stocks are traded efficiently and inexpensively. Real estate as an asset class, tends to be very expensive with a longer holding periods.

UPDATE: Apparently, I mis-pasted (sp?) portions of the text when I spell-checked and didn’t notice the duplicate comments when I posted. All is well now. Phew!

Central Park: No Price Can Be Attached To The Center Of The Universe

December 20, 2005 | 12:01 am | |

Courtesy of Satellite Imaging/New York Magazine

One of the reasons to love Manhattan is clearly Central Park. New York Magazine asked us to venture a wild guess as to what Central Park was worth in the article Reasons to Love New York: Because We Wouldn’t Trade a Patch of Grass for $528,783,552,000.

So there is no confusion, this is a purely hypothetical, far-fetched, non-scientific wild guess based on so many caveats (and done in about 3 minutes) that reality doesn’t enter into the equation so we are not violating any licensing requirements…got it?

After the dust settled, here’s the math used.

Webmaster’s Note: Its quite possible, and highly likely, that the net value of all of Manhattan would be less after Central Park was developed. A very high level of inventory that might take decades to absorb would be created, but assuming instant absorption, units facing the park would lose their views, proximity to the park would not matter anymore and a cultural and recreational resource would be lost to all homes in Manhattan. In other words, it would likely be bleak on the real estate front.

Imagine Central Park on the real estate market [The Real Deal]
Appraised value of Central Park: $528,783,552,000. Sell! [Curbed]

Central Park: $528.8 Billion [The Walk-Through]


Media Critique: To Be Able To Say “I Told You So” By Telling Us With So-So Information

December 19, 2005 | 12:01 am | |

In Seth Jayson’s Motley Fool column: Housing: Solid or Soft? [Motley Fool] he discusses signs of a housing correction. And with’s thorough policies on disclosure, he indicates he is biased and he “remains a happy renter, because he knows there’s a difference between price and value.” He has been predicting a crash for some time now.

I am not advocating that there aren’t serious issues with the housing market at all, but its troublesome when articles like this are sensational and based on anecdotal indicators like a link to a few broker comments and list prices. We all know that examples can be pulled out of any data set that fit our argument.

The problem with predicting housing declines using list prices can be illustrated in my Three Cents Worth post on Curbed called Seller Reality Distortion. The drop in list prices in a cooling market can be exagerated when the property is significantly overpriced to begin with. Even though the market could be rising at a modest pace, the list price has to be cut significantly for the property to sell.

The link to the ForeclosuresMass stats is particularly interesting. It seems like they have been issuing a lot of press releases lately giving the impression that huge numbers of Massachusetts housing units are going to foreclosure. While there is certainly an uptick in foreclosures based on their data and it seems to be in lower income demographics, I got the impression that the article pulled out the towns at the high end of the range and ignored the lower end of the range. I’ll also bet that many of the towns at the high end of the range of foreclosure increases are based on relatively small data sets judging from the total number of statistics presented for the whole state.

This has been my beef with the media housing coverage over the past 9 months. Sensationalism in the guise of being informative has got everyone’s head spinning. Its simply the other end of the spectrum from the churn presented by housing advocates like NAR. Maybe there’s not a better way to cover the market, but this type of coverage is really starting to bug me.

Real Estate Spin: Its All Good (If We Knew What It Meant)[Matrix]

Corcoran Trumps, Show Her The Money

December 15, 2005 | 12:01 am | |

Donald Trump is being sued by 3 real estate brokers [BusinessWeek] for $1.3M because he “failed to pay them in full after the profitable sale of land and apartments he owned on the former West Side Manhattan rail yards.”

“The lawsuit centers on the billionaire developer’s sale of 77 acres of riverfront and three buildings to the Extell Development Corp. and Carlyle Group for $1.8 billion. Parties to the October deal said it was the biggest residential sale in the city’s history.”

One of the brokers is Barbara Corcoran. The inference in most of the media coverage is that she is doing it one behalf of her namesake company the Corcoran Group, when in fact, she resigned last month after several years as essentially a figurehead after being bought out by NRT. It is not clear whether she shares this commission with her former firm or not. Even Trump doesn’t seem clear on what Corcoran does these days saying he will never do business with her again – that won’t be difficult since she runs a television production company, not a real estate brokerage firm.

Trump says that he hasn’t been paid yet and the brokers say he already reinvested the money to avoid capital gains. Trump has already sued his partners in the sale to Extell/Carlylse claiming they sold below market as evidenced by the purchasers quick plans to flip the property.

BREAKING: Corcoran v. Trump, for Control of Western Civilization as We Know It [Curbed]

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