Housing Forecast: The Present is a Lagging Indicator, and Sometimes it Rhymes

Earlier this week I came across a brilliant tweet – that when applied in the context of housing, spoke for a lot of the gimmicky click-bait research that comprises a large swath of housing market news coverage.

 

While I plan to use that quote extensively, my favorite remains one by Mark Twain (supposedly). It is especially useful when making comparisons to the the boom, bubble, bust cycle of the prior decade.

History doesn’t repeat itself, but it does rhyme.

I prefer my adapted version:

History doesn’t repeat itself, but sometimes it rhymes.

So much of what we read or think about housing is backward looking or a provides a current view based on a prior event that had a completely different set of circumstance and worst of all, a lack of context. Sound bites relied on by market participants and media often have limited applicability to specific situations and perspectives.

Breaking Good (News)

I try to remember that no matter how fast a housing market is moving, it remains a slow moving asset class that strikes an emotional nerve within its consumers, often disabling their ability to think clearly. Perhaps that’s a bit of an exaggeration but here are a few examples of housing (or semi-related) articles that thankfully broke away from conventional wisdom this week:

Most Millionaires Think They Are Middle Class [CNBC] In a recent survey, 44% of millionaires see themselves as middle class and 5% of those worth $5M or more do as well. I think of myself as classless but that’s another discussion.

Priced Out of Brooklyn? Try Manhattan [NYT] Although Manhattan is one of the highest priced housing markets in the U.S. (except for a few areas in San Francisco), it’s being written off as too expensive by many who haven’t actually looked. While our research shows that the median sales price for Manhattan was 59% higher than Brooklyn in 1Q 2015, many buyers are being priced out of Brooklyn and are finding value in Manhattan. You gotta drill down and connect with an agent who knows the local market nuances.

Foreign lenders bankrolling NYC’s luxury condo boom [The Real Deal] Much has been made about tight mortgage lending standards for borrowers and the much overhyped foreign buyer participation in high end housing markets like Manhattan, Miami and Los Angeles. Yet U.S and locals provide a much larger overall share of demand than foreign nationals. Ironically foreign banks are providing the heavy lifting for construction financing, essentially waiting in line to get it to someone who wants to build a new project. U.S. commercial banks have remained largely on the sidelines, still burdened by the legacy of bad lending decisions back in the’aughts.’ Alternative financing is ruling the day.

And perhaps the most jarring example of the week…

Vornado Sells $1.1 Billion of Central Park South Condos [Bloomberg] One of the largest topics of conversion relating to the newly created super-luxury U.S. housing category is that demand seems to be cooling and the ‘sense of urgency” has left the market. It’s been largely chalked up to the strengthening U.S. Dollar and surging construction volume in markets like New York and Miami. Then all of a sudden…wham! Vornado sells one third of their new project at 220 Central Park South, Manhattan in the first 6 weeks it became available. Since Vornado is a publicly traded company, I assume these results to be accurate. Pent-up demand for the specific location and product was the driver. I’ve heard there were a number of sales with prices in the high eight-digit range. It suggests that some buildings will move quickly and others won’t. We can’t only lump all luxury property into one bucket.

The World Is Not Flat: North America Leads The Way for Luxury Real Estate

Knight Frank just released their Prime Cities Global Forecast for 1Q 2015. My firm provides the results for Manhattan, Miami and Los Angeles through the Douglas Elliman Report Series I author. Download the Knight Frank report. It covers 35 cities worldwide and North America is where the action is. Check out the Knight Frank graphic below.

Regional-disparities6-803x10241

And since we’re on a roll in the quote department, I’ll leave you with this one:

Roses are red, violets are blue. Some poems rhyme but this one doesn’t. – anon

See you next week.

Jonathan Miller, CRP, CRE

President/CEO

Miller Samuel Inc.

Real Estate Appraisers & Consultants

ps Please feel free to share.  If you get tired of all the charts, real estate commentary and articles presented in each weekly note, just opt out.  I always appreciate feedback so please email me.

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