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The Real Deal

People Who Live In Glass Houses Don’t Have Bricks

March 7, 2006 | 12:01 am | |

The use of glass curtain walls in new condo developments have been gaining in popularity and will likely make their imprint as the design style of this era. In Living in glass houses, shunning stone [Real Deal] explores this phenomenon in New York.

The housing boom’s rising prices helped developers afford to build in the 25% increase in cost to the sales prices. Glass curtainwalls add more light to a unit, of primary importance in high density urban areas. Glass facades also seem to infer luxury and value, which has been the mantra of new development for the past 5 years.

Honestly, until Richard Meier started the trend with his 173/176 Charles development, I always viewed glass walls as an artificial skin to cover over a dated brick facade and therefore assumed them to be less expensive than brick. However, developers have consistently stated that it is more expensive [NYT] to build a curtainwall so I’ll defer to their expertise. Admittedly, after going in some of the raw units in the Meier building that were sold, it seems like the ONLY construction cost associated with the project was the glass curtainwall. The units in this building were simply concrete slabs with a minimal bathroom and kitchen – enough to qualify for the Certificate of Occupancy.

In fact, quite often these buildings are construction alongside historic districts or where the housing is much older and the contrast to local residents can stir ill will. In David Lombino’s article Showdown Today Over Construction Of 32-Unit Glass Building in Village [NYSun], housing activists fighting a proposed development would rather keep the parking lot on the site. …it is hard to see how the proposed design relates to the neighborhood’s traditional characteristics, which he said favored “quaint” designs built from more solid materials like brick and stone.

I can see it now – 20 years from now, you’ll be able to point to one of these new Manhattan buildings and guess their rough age of construction, just like you can guess those:

  • white brick wedding cake buildings of the 1960s

  • yellow set back vertical rectangles with balconies I called “plaza” buildings because of their set backs of the 1970s

  • bland generic brick with partial glass facades of the 1980s

  • distinctive brick facades of the 1990s

  • glass curtain wall buildings of the new millenium.



Real Estate Blogs [Part II]: Speaking To People We Don’t Know, For Reasons We Can’t Explain

March 6, 2006 | 12:02 am | | Public |

I love the Real Deal magazine – definitely filling a needed void in real estate coverage. Brownstoner wouldn’t divulge where he gets those cool masks from (see photo). However, after reading this article, I think that the real estate blog topic is now officially passe as a news feature (unless Matrix is featured).


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Shameless Self-promotion: Recent Media Clips On The Real Estate Market

January 18, 2006 | 8:37 am | | TV, Videos |

Here’s couple of media spots I did recently. The first is part of a series of podcasts that The Real Deal does with various leaders within New York real estate industry. They are the first to use this medium in New York and its a great way to distribute information. The other is an interview I had with PBS on understanding value in housing. This one is more national in relevance.

[I know, I know, I am just an appraiser and this is shameless self-promotion.]

Here’s the 2nd and latest podcast with The Real Deal. Its a different format, more of a casual recap of the quarter instead of an interview. I hope to provide these every quarter if there is enough interest in them.

The fourth quarter Manhattan housing market report from appraisal firm Miller Samuel showed a drop-off in sales activity of 21.2 percent and a slight rise in the average number of days properties are staying on the market. At the same time, both the average and the median sales prices for a Manhattan apartment increased – and the borough’s average sales price per square foot set a record.

So, what exactly is going on in the housing market? Miller Samuel CEO and president Jonathan Miller, in a special podcast for The Real Deal, breaks down his firm’s heavily watched report.

The conversation with Miller is part of The Real Deal’s regular podcast series. To listen to the entire interview, click one of the links below.

MP3 Version
Podcast (RSS) Version

Here’s the segment I did for American Media/ PBS on what to consider when buying a house. You need windows media player to watch it.


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Manhattan 4Q 2005 Chain Links

January 5, 2006 | 12:01 am | |

We released the data for the Manhattan Market Overview I author for Prudential Douglas Elliman for the 4th Quarter 2005. Here’s a summary of the media coverage. Otherwise, here’s a list of the articles that covered the study. It provides an interesting perspective on how each media outlet covers the same story:

[NY Times]
[WSJ]
[CNN/Money]
[Int’l Herald Tribune]
[Reuters]
[NY Daily News]
[NY Sun]
[The Real Deal]
[Inman News]
[NY Observer]
[Crains NY]
[NY Newsday]
[TheStreet.com]
[Honolulu Star-Bulletin]
[NY Post]

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The Price A Buyer Is Willing To Pay Is Not Always Market Value

December 27, 2005 | 12:01 am | |
Source: Source: St. Petersburg Times

I have always found it interesting that many real estate professionals define market value as the price someone is willing to pay for a property. However this assumption can often be far from reality and is why real estate brokers and real estate appraisers can be at odds on some transactions.

The real estate broker’s job is to get the highest price for the listing they represent, while the real estate appraiser (abridged version) has the responsibility of estimating the reasonable value that a fully informed buyer and a fully informed seller would likely agree on.

What happens when the seller is located on a parcel of land that is of key importance to a larger adjacent development? Thats where reality leaves the picture.

Take this example, which occured recently in St. Petersburg Florida [St. Pertersburg Times]. A modest house was purchased for $76,000 in 1992 and underwent little improvements. The property just recently sold for $1M after being appraised for $141,200. Its a small house on 1/10 of an acre.

The property was a key parcel in a larger development plan and the seller was willing to pay significantly more for the property. A typical mortgage lender would never provide financing on this house for this value because the price paid reflects the investment value to the buyer, not market value to the typical buyer.


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]

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


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Too Many Brokers Chasing That Elusive Listing

November 28, 2005 | 9:25 am | |

In the article this weekend So Few Properties, So Many Brokers [NYT] Nadine Broznan paints an accurate but bleek picture from real estate brokers entering the profession today. After several years of boom times, the future is less certain.

The Real Deal did one of its usual exhaustive surveys on brokers and agents [pdf] finding that in the top Manhattan ten real estate firms, 30% to 63% of their brokers had no listings.

For the most part, people entering the brokerage profession have missed the boom [Propery Grunt], no matter what happens to housing prices. There simply appears to be an oversupply of agents [Matrix].

For brokerage firms, it provides an opportunity to upgrade existing staff since every new agent creates additional overhead costs that has to be accounted for somewhere.

Out of Commission [Matrix]
Its More Than Shelter: Nearly 1 Out Of 10 Jobs Related To Real Estate [Matrix]



Repeat After Me: Solid Foundation, Strong Fundamentals

September 15, 2005 | 9:55 pm | |

It seems that whenever pundits, experts or commentators are asked about whether there is a housing bubble, the answer is given short shrift and invariably contains one of two phrases:

The housing market has a solid foundation

[RISMedia]
[The Real Deal]
[Newswire]
[Vermont Guardian]
cynderblocks1

The housing market has a stong fundamentals

[Bloomberg]
[Originator Times]
[Pittsburgh Tribune-Review]
cynderblocks2

These or similar phrases are taken at face value, yet little discussion time is spent on what actually constitutes a solid foundation or strong fundamentals for the housing market. Maybe its really not that complicated after all.


The Real Deal – The Real Deal Weekly Interview

August 1, 2005 | 10:09 pm | | Podcasts |

The Real Deal – The Real Deal Weekly Interview

I suggested to Amir Korangy of the Real Deal that he begin Podcasting since his publication would be a perfect candidate for it. The Real Deal has access to many interesting people and their content is always changing.

Not only did he look into this technology right away, but he asked me to be the guninea pig…errr…the first interviewee. 😉

From The Real Deal’s Web Site…

Jonathan Miller at The Real Deal Magazine’s first Podcast on July 15, 2005

In The Real Deal’s inaugural interview in its new weekly audiocast series, we sat down with appraiser Jonathan Miller, president of Miller Samuel Real Estate Appraisers and Consultants. Miller’s reports on the Manhattan apartment market are the most widely cited in the industry, and he has been featured in The New York Times, the New York Post and countless other publications including The Real Deal.

With reports showing apartment prices hitting new peaks each quarter but often differing significantly in their findings we asked Miller how he collects his data, and his thoughts on the existence of a real estate bubble. To listen to the entire interview, click one of the links below.

MP3 Version

Podcast (RSS) Version

excerpt…

THE REAL DEAL: Is there a housing bubble in New York?

MILLER: It’s interesting about the whole bubble psychology the boom and bust orientation in the real estate discussions that have been going on for the last three or four months. Especially because Manhattan is closely tied with the financial markets.

A lot of us remember what happened in ’87 with the stock market crash and subsequent real estate correction that we saw from about the end of ’89 to early ’95. So it is something that is fresh in everybody’s minds, and everybody is trying to relate that to the current experience that we are having now.

When I look at what happened then versus now, it’s apples and oranges, a very different experience. Back then we had a tax incentive-based supply-creation syndrome I made that up, but the idea is that housing came on in large quantities in the mid ’80s because of tax incentives. The 421a abatements gave the incentives to developers to throw foundations in the ground without even plans for what they were going to build just to get the tax credits.

Then all of a sudden in ’86 we had the change in the federal tax laws that eliminated the whole incentive for investors to buy individual units that created a lot of supply. And then we had the co-op conversion frenzy, in which seemingly every rental building that could have been converted was converted. I think the conversion pace today not including 2005, but up through the end of 2004 is something like 10 percent of what it was back then, but that’s largely inclusive of, say, lofts being gut renovated to condo as opposed to existing rental buildings.

As far as today, the situation is we have record low mortgage rates, which are really fueling a lot of the demand and we have an improving but very tepid economy. And we now have supply that is gaining momentum. Your magazine did a great study on the condo inventory that is coming online [in July 2005 issue].

TRD: Thank you.

MILLER: And it’s gaining speed. But it’s still about 3,000 units, give or take, and we have a condo universe of somewhere in the neighborhood of 65,000 to 85,000, depending on who you talk to. So it’s still relatively small. In prior years we were talking about 1,500 units coming online. So the pace is increasing but it’s another 1,500 units a year.

I think the two variables on whether we are going to go into a bubble real estate environment is going to be supply or mortgage rates. There are a lot of other things to look at, but those are two main things. Mortgage rates have been forecasted to increase since the end of 2003, and, generally speaking, they’ve been falling. So, in the equation of supply and demand, it has become a constant.

TRD: Brooklyn has become such a great place for developers to go to because there are so many available lots.

MILLER: For those new developments to come in and be viable they are getting $700 a foot. In Manhattan now, the threshold seems to be you have to be at least at 1,000, and more likely on the new developments you’re talking $1,500.

TRD: If you saw a new development at $1,000 per square foot, would you jump on that and say, “Hey, that’s a bargain?”

MILLER: I guess it’s personal preference. You have to decide whether you like the neighborhood. I’ve always felt the reason why [a neighborhood is] cheaper than a Soho and Tribeca is because it’s not proven as yet for that price structure. So you are going to see more price volatility if you have some sort of market downturn meaning that there is a lot of upside and there’s potential downside.

However, the thing about housing which is very different than stocks, is that, for example, the FDIC defines a housing boom as three years and 30 percent appreciation, and a bust is five years and 15 percent depreciation.

TRD: And how does that compare to our market now?

MILLER: On the upside, we’re about double what their boom figure is. But it’s sort of that idea that on a down cycle, prices tend to be sticky on the downside, that it’s still an asset that’s useable. Real estate is a cyclical thing.

We’ve just seen a lot of the upside over the last five to seven years.

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