More Brexit and Even More Re-sale Inventory
For the last month I’ve been obsessing a bit about the impact of the Brexit on U.S. housing and specifically New York City. Of course during this process I never gave much consideration to the Brexit actually happening and the concept that culturally constructed ignorance would win the day. Last week’s Housing Notes were specific to the Brexit but with more time to process this, I thought I’d extend the topic another week and load you up with a lot of good reads at the bottom of the page.
Here’s another admission – I didn’t realize that Katy Perry has more Twitter followers than the populations of UK, Netherlands and Israel combined.
Katy Perry aside (no, I don’t follow her on Twitter), here are some interesting takes on the Brexit vote:
Peterson Institute for Economics: What it actually will mean to the U.K.?
David Rubenstein, co-chief executive officer at Carlyle Group thinks the U.K. will not exit the EU:
And most importantly, why are these people trying to crack the glass floor of a perfectly good bridge in China?
There are lots of links in this week’s recommended reads at the bottom of this page (concerning the Brexit vote, rather than breaking the glass bridge). A couple of thoughts for Brexit’s impact to the housing market:
- Mortgage rates aren’t going to rise as soon and as often as the Federal Reserve previously suggested it would.
- It’s a good time for us to visit the U.K. with the more favorable exchange rate but it is WAY to soon to think sellers will capitulate to the new market over there. In other words it will like take several years for sellers to adjust pricing, especially for new builds (if they are even able to), to the new market condition.
- Super luxury property across the U.S. has one less competitor in the world right now as London is currently off the table. It does not resolve the current problem with excess supply so I suspect there will be limited benefit during this current housing cycle.
- NYC will no longer have London as a significant competitor in the financial services industry so we may see a better employment outlook for the future.
- Since the financial crisis, about 75% of Wall Street bonus compensation is in deferred stock – many employed on Wall Street saw their compensation get chopped.
And if you want to see a super luxury tower being built but don’t want to watch a video that is 2.5 years long, I’ve provided the 30 second version.
For New Development, Timing is Everything
Two years ago, Anbang Insurance Group paid nearly $2B for the historic The Waldorf Astoria hotel. It’s where the president stays when in town. In fact there is a secret train track below it that presidents and other VIPs used to use when in town.
The owners just announced plans for a $1 billion conversion project to luxury condominiums. While this is a special property, the timing couldn’t be worse. Currently there is more than 5 years of excess Manhattan super luxury condominium inventory being built and this just adds more. The property doesn’t have views of Central Park nor does it have expansive city views throughout the project much as many midtown super talls do. The name alone has the potential to command a premium all other amenities being equal but pricing hasn’t been announced yet.
The historic Plaza Hotel did not see a premium during its conversion and has not seen the price growth that its competitor 15 Central Park West enjoyed over the same period.
One theory might be: are they building for the next cycle since they have already missed the current cycle?
Here’s a good rundown of the situation on CCTV America where I briefly share my views.
UPDATE – and here’s snippet of my interview with Reuters on Waldorf conversion.
Consider Wages as Baseline For Housing Market Potential
Here is an amazing chart from the Economic Policy Institute as part of a visualization of wage stagnation.
Manhattan Re-sale Market Finally Has More Supply
Since last fall, the recurring theme for the Manhattan housing market has been about record housing prices, largely caused by the combination of newly developed super luxury condominium closings with contract dates of 1-2 years ago and the chronic lack of re-sale inventory driving re-sale prices higher.
Well, the narrative has changed for the re-sale market. New development closings are continuing in heavy volume as much as they have since the third quarter of 2015 – and may continue until early 2017. But re-sale inventory growth is finally starting to accelerate. There was a year over year 25% increase in re-sale inventory, the largest jump since the first quarter of 2009 as the market stalled following the collapse of Lehman Brothers.
The former is driving prices higher due to older contracts in better market conditions and now construction is just being completed and closings are occurring while the latter was driving prices higher due to limited inventory.
Bloomberg creates a great chart with our numbers:
Today Douglas Elliman published the Manhattan Sales report for the second quarter of 2016 – that I’ve been authoring for about 22 years (gulp). Here are the key metrics to zero in on – all related to the re-sale market which comprised 81.5% of all closings in the quarter.
I’ve inserted some of my favorite charts for the quarter but you can view them all in the chart gallery on my web site.
If you need something rock solid in your life (particularly on Friday afternoons), sign up for my Housing Note here. And be sure to share with a friend or colleague. They’ll feel better than glass, you’ll feel better than road flares on a concrete birthday cake and I’ll be become “Pip Helix.”
See you next week.
Jonathan Miller, CRP, CRE
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Reads, Listens and Viewings I Enjoyed
- There’s a Secret Train Track Hidden in the Depths of Grand Central Terminal [6sqft]
- Big techs pitch up in Sun Valley [FT]
- Wage Stagnation in Nine Charts [Economic Policy Institute]
- A dog brought this multimillionaire and a homeless woman together [NY Post]
- Brexit Sets Dangerous Precedent [Peterson Institute]
- How Housing’s New Players Spiraled Into Banks’ Old Mistakes [NY Times]
- Brexit threatens Wall Street bonuses [Crains New York]
- New York is more expensive than San Francisco in at least one way [Curbed NY]
- Watch a NYC skyscraper rise 937 feet in 40 seconds [Curbed NY]
- How to Furnish Your Terrace or Backyard [NY Times]
- The New Narrative For Earnings: Blame Brexit [Zero Hedge]
- The Rock Star of Cycling [WSJ]
- The economics of a post-Brexit country house [Curbed]
- Rubenstein: Unlikely That Britain Will Actually Exit [Bloomberg]
- Eight of Connecticut’s Thimble Islands List for $78 Million [WSJ]
- New York Banking Regulator to Publish New Rules to Fight Money Laundering [WSJ]
- B.C. to end self regulation of real estate industry [Globe and Mail]
- Prime Real Estate: Amazon Has Swallowed Downtown Seattle [Bloomberg]
- The Evanston house from Sixteen Candles is for sale [Curbed Chicago]
- Brexit could be great for the US [MarketWatch]
- The Brexit vote wasnt democratic at all [MarketWatch]
- Business Leaders Have Abandoned the Middle Class [HBR]
- ‘Brexit’ Is Locking In the Forces That Already Haunt the Global Economy [NY Times]
- After Brexit, the Tyranny of the “Exit” Suffix Looms! [Vanity Fair]
- Stonewall Inn Is Officially Dedicated As a National Monument [NY Mag]
- Brexit effect casts pall over estate agents [FT]
- The Baccarat’s Luxe Crown Jewel Penthouse Has Sold for $42.55M [Observer]
- ‘Brexit’ in America: A Warning Shot Against Globalization [NY Times]
- The Housing Market: No Bubble, No Bust [Barrons]
- Brexit solidifies New York City’s standing as global financial capital [Crains New York]
My New Content, Research and Mentions
- VIDEO: Waldorf Astoria turning into condos [Reuters]
- Manhattan sees record pricing during second quarter of 2016, but there’s actually some relief for buyers [Brick Underground]
- Manhattan’s price per square foot has never been higher [Curbed NY]
- ELLIMAN REPORT: Manhattan Sales 2Q 2016 [Douglas Elliman]
- London’s Brexit pains could mean gains for American luxury real estate [Yahoo! Finance]
- Brexit Impact on Luxury Housing Will Be Felt Throughout U.K. [Mansion Global]
- ‘Currency Play’ Works for Some Luxury Investors, Not All [Mansion Global]
- VIDEO: Waldorf Astoria’s condo conversion raises concerns [CCTV America]
- Fewer Apartments Being Sold at Asking Price, Report Says [DNAinfo]
- The Strangest, and Loveliest, Views in New York [NY Magazine]
- Drop in Manhattan Home Sales Indicates a Market Cool-Down [NY Times]
- Manhattan Homebuyers Have More Choices as Resale Supply Jumps [Bloomberg]
- Resale market’s day in the sun? Listings spike 25 percent in Q2: Elliman [The Real Deal]
- Manhattan prices get an artificial boost from sales at new condo developments [Crains New York]
- CHARTS: Manhattan Co-op/Condo Sales LIBRARY [Miller Samuel]
- ELLIMAN REPORT: Manhattan Sales 2Q 2016 [Miller Samuel]
- New Manhattan condos break price records, for now [CNBC]
- As international billionaires get nervous, sales in L.A.’s ultra-luxury housing market slow [LA Times]
- Reports: Manhattan sales prices sky high [amNY]
- New York City Building Boom Fuels Job Growth [WSJ]
- NYC Rent Board Is Poised to Pass Freeze for Second Straight Year [WSJ]