Matrix Blog

Junk Statistical Analysis, Luck, Superstition and Coincidence

Stories on Chinese Overtaking Russian Home Buyers in Manhattan is Purely Anecdotal

May 4, 2014 | 4:21 pm |

russiavschina

I’m not saying the US isn’t seeing an uptick in buyers from China, especially housing markets such as Manhattan. After all, there is a global trend where money is chasing stability and safety. US real estate has been a key beneficiary of this trend.

However it is important to realize that there is no US data from independent sources that links overseas nationalities with residential real estate purchases. Why?…because of long time concerns in the US about fair housing laws and by extension, the gray area of tracking nationalities to housing purchases although it is the norm outside the US.

When any housing trend is discussed, it is important to understand where the source of the trend came from. I’d really like housing market followers to appreciate that the trend analysis on the foreign buyer subject bantered in the media as of late is literally based on nothing. There has been an outpouring of coverage of the topic over the past few months, but the sourcing is only from real estate brokerage anecdotes because that is all there is for reporters to work with. I was interviewed for some of the following articles but disagreed with the general story premise, and I assume that is why my view wasn’t inserted.

Whichever stance you take on this particular trend – that Russians used to dominate the Manhattan housing market and how the Chinese have taken their place at the top – there really is no wrong answer, because there are no facts. All sourcing on the topic to make that point are from real estate agents referring to their opinion, often based on their past few transactions.

Russia
I first noticed this new new storyline when Russia invaded Crimea. Would the Russian position as the number 1 foreign buyer of real estate in Manhattan now go away? The brokerage community, or at least a couple of real estate agents claimed this to be the case.

I have no evidence to the contrary even though there are huge capital outflows from Russia that began with the Russian invasion of Crimea. In my view, the real estate agents were confused by the high profile sales by Russian buyers (think of Russian Oligarch buying 15 Central Park west for $88M) and perhaps has some direct feedback in some of their own transactions. However I don’t think Russians were ever the top homebuyers in Manhattan, just the highest profile.

If we have learned anything from the current Manhattan new development boom, it is the fact that high profile, high end transactions are not a proxy for the balance of the market much like a handful of high profile Russian purchases are not a proxy for some sort of Russian real estate dominance.

Manhattan Real Estate Feels a Russian Chill [NYTimes]

China
Now that the Russians are “out” (see previous) of the top spot, that must mean that the Chinese are “in.” Check out the headlines to this storyline although much of these articles build on the Reuters piece (linked below) which is based on real estate agent anecdotes. A slew of brokerage PR driven stories on the Chinese are now dominating the real estate headlines in New York City.

Perhaps this uptick as something to do with recent closings at well published Chinese buyer favorites like One57 and perhaps the fact that China is poised to become the world’s number 1 economy.

NY real estate firms woo Chinese buyers [China Daily] The Chinese take Manhattan: replace Russians as top apartment buyers [Reuters]

U.S.CHINA’S RICH BECOME BIGGEST FOREIGN APARTMENT-BUYERS IN MANHATTAN [Al Jazeera]

Who are the dominating the foreign buyers of Manhattan real estate?
Anecdotally I think it remains Canadians but is dominated by Europe (UK, France, Germany, Italy, Spain, Ireland, etc combined) because they are still the largest tourism group. Brazil doesn’t get enough respect since they are the 3rd highest source of tourism to NYC. This list is 2 years old but I doubt China has passed Europe or even come close but this is, shall I say, “anecdotal.”

From NYC & CO., here are New York City’s top international sources (2012 figures):

  1. Canada 1,063,000
  2. United Kingdom 1,033,000
  3. Brazil 806,000
  4. France 667,000
  5. Germany 605,000
  6. Australia 595,000
  7. PR China (excl. Hong Kong) 541,000
  8. All Middle East (incl. Israel) 478,000
  9. Italy 449,000
  10. Mexico 387,000
  11. Eastern Europe 384,0000
  12. Spain 380,000
  13. Japan 328,000
  14. South Korea 281,000
  15. Argentina 272,000
  16. Ireland 224,000
  17. India 215,000
  18. Israel 203,000
  19. Netherlands 203,000
  20. Sweden 190,000

Tags: , , ,


Canadian Housing Prices Now Pushed Up Same Way as US

May 4, 2014 | 1:28 pm |

gandmUSvCanadaprices

I was reading Tara Perkin’s piece in The Globe and Mail about the record price spread between the US and Canadian housing markets and saw one of the most startling housing charts of late (above). To be clear, this chart doesn’t adjust for the exchange rate but the article says the Canadian/US existing home price spread would be large – closer to 50% than 66% – still huge.

The article cites Bank of Montreal’s chief economist Doug Porter as saying:

“The main takeaway is that, contrary to all expectations, the Canadian housing market has just kept on rolling in 2014 even as the U.S. housing market has paused for breath (after a steep climb out of the dungeon),” he writes in a research note. “Put it this way, how many pundits a year ago were calling for Canadian home prices to rise faster than their U.S. counterparts in any single measure?”

Yes, true, but this is probably another good reason not to rely on anything published by a lender’s “chief economist” title due to their inherent bias toward the interests of their employer. What I find fascinating about the Canadian housing market is the proliferation of the false rationale that prices are being used as a measure of housing health. For the US counterpart, think Miami and Las Vegas circa 2005 when prices were skyrocketing and sales were falling.

The Canadian government tightened credit conditions a year ago and sales fell sharply:

This time last year it was far from clear when and if the Canadian housing market would emerge from the sales slump that ensued after former Finance Minister Jim Flaherty tightened the country’s mortgage insurance rules.

Focus on March 2014 v. March 2012 in the following chart:
canadahomesales3-2014

With Canadian home buyer’s access to credit now reigned in, sales fell sharply yet housing prices continued to rise. But Canadian housing prices are rising now much like they are in the US, based on restricted access to credit that keeps inventory off the market. And we’re not talking about household debt.

New housing inventory entering the market in Canada is now falling which is continuing to goose (sorry, Canadian geese pun) prices higher.

canadahomelistings3-2014

The Greater Fool Theory Applies to the Canadian Housing Market

A theory that states it is possible to make money by buying securities, whether overvalued or not, and later selling them at a profit because there will always be someone (a bigger or greater fool) who is willing to pay the higher price.

Of course from our past experience in the US, it’s not surprising to see every outpouring of Canadian housing market bubble concern met with an equal outpouring of Canadian housing bubble denial.

Please stop using housing prices as a measure of housing health. It was obviously flawed logic when applied in the US during 2003-2006 and now it has become apparent it was flawed during the 2012 to 2013 US run up.

Housing price growth doesn’t reflect good housing market health in Canada either.

Tags: , ,


It’s St. Joseph’s Day – What Does It Tell Us About Housing Trends?

March 19, 2014 | 11:16 am | |

wsj3-14stjoseph
[Source: WSJ]

Last week I can across Sanette Tanaka’s WSJ column “Spreadsheet” titled “Bless Our Happy Home Sale” that talked about the tradition regarding St. Joseph. I waited to blog about it until today since March 19th is actually St. Joseph’s Day (BTW: who is getting any work done this week with 3/17 St Patrick’s, 3/18 March Madness brackets and now this?).

I love the phrase within the WSJ graphic: “Faith in Action.”

I previously wrote about this here in September 2005 and in October 2007.

Traditionally, Joseph, the husband of Mary, is hailed as the patron saint of home and family. Some believe that burying a statue of St. Joseph in the yard helps sell a house.

Here’s how it the process works when selling your home:

  1. Bury the St. Joseph statue upside-down in your yard, facing toward the house listed for sale.

  2. Sell the house.

  3. The Seller digs up the statue and puts it in the new home in a special place.

The last 4 years of statue sales show a pattern consistent with NAR’s existing home sale pattern with the housing market rebound beginning in 2011.

Who says housing trend analysis is devoid of emotion. Got it?

Tags: , ,

Get Weekly Insights and Research

Housing Notes by Jonathan Miller

Receive Jonathan Miller's 'Housing Notes' and get regular market insights, the market report series for Douglas Elliman Real Estate as well as interviews, columns, blog posts and other content.

Follow Jonathan on Twitter

#Housing analyst, #realestate, #appraiser, podcaster/blogger, non-economist, Miller Samuel CEO, family man, maker of snow and lobster fisherman (order varies)
NYC CT Hamptons DC Miami LA Aspen
millersamuel.com/housing-notes
Joined October 2007