Jobs Up, Jobs Down, Confusion All Around

July 10, 2006 | 8:52 am | | Milestones |

Real estate market watchers last week were thrashed by conflicting jobs reports. ADP released a payroll report on Wednesday as people were back from an extended 4th of July weekend. The survey showed a whopping net gain of 368,000 jobs, the largest increase in five years.

The implications with this report that were created are that the economy was moving along at a brisk pace and the Fed would likely raise rates at their next meeting in August and beyond. A gloomy scenario for the housing market as mortgage rates would follow suit, further choking off demand.

But alas, the government reported two days later that employers actually only added 121,000 in June [pdf], less than one third the amount touted in the ADP release two days before, painting a much weaker picture.

The irony here is that a number of economists revised their projections upward on Wednesday in response to ADP so when the government stats were released two days later, they were now below analysts forecasts giving the impression the economy was in worse shape than pessimists thought it was.

However, government data also shows that hourly wages are rising at their fastest pace [NYT] in five years, indicating that the labor market is still relatively tight and making the scenario of the Fed taking a break on their 18th consecutive rate increase next month less likely than many people would hope far.

Aside from mortgage rates, jobs data is the bellwether of housing related data because without jobs, no matter how low rates are, people don’t buy homes. There is not a uniform agreement on what condition the economy is currently in but everyone seems to agree that housing has already cooled.

The Fed could thus leave interest rates at 5.25 percent at its next meeting in August, rather than raise them by another quarter of a percentage point. “I think the Fed’s going to pause,” said Scott Anderson, senior economist at Wells Fargo in Minneapolis.

or

“For me, it is not clear-cut that the labor market has downshifted,” said John Ryding, chief economist at Bear Stearns. “Rather than there is lack of demand from employers, it may be that low unemployment has left fewer people to hire, so instead employers are paying their existing workers more and are working their work force for longer hours.”

For housing market watchers, a unifying understanding of the economy in the near term was not established last week and the uncertainty with will continue to chip away at housing consumer confidence, whether its justified or not.


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With A Flag, An I-Beam and a Christmas Tree, The Party Is Just Getting Started

February 27, 2006 | 12:06 am | | Milestones |

Ever since I was a kid, I remember seeing and reading about Christmas trees on top of buildings under construction but they were not quite finished. I also remember seeing an American flag and there was usually a ceremony of some kind that was covered in the newspapers.

There has been a tremendous amount of construction in recent years and I started thinking about topping out ceremonies:

What is this all about? Why a tree?, and Why was I looking up instead of watching where I was walking?

According to Modern Steel Construction / December 2000 [pdf]

When or how it started, but the tradition of ‘Topping Out’ has become a cherished custom of Ironworkers whenever the skeleton of a bridge or building is completed. Topping Out is a signal that the uppermost steel member is going into place, that the structure has reached its height. As that final beam is hoisted, an evergreen tree or a flag or both are attached to it as it ascends.

This tradition of ironworkers is most closely associated with the International Association of Bridge, Structural, and Ornamental Ironworkers union in Washington, DC.

“Topping out” is the term used by ironworkers to indicate that the final piece of steel is being hoisted into place on a building, bridge, or other large structure.

The project is not completed, but it has reached its maximum height. To commemorate this first milestone the final piece of iron is usually hoisted into place with a small evergreen tree (called a Christmas tree in the trade) and an American flag attached. The piece is usually painted white and signed by the ironworkers and visiting dignitaries (figure 1). If the project is important enough (and the largesse of the contractor great enough) the ceremony may culminate in a celebration known as a “topping out party” in which the construction crews are treated to food and drink.

For those who are into Scandavian mythology here is the History of the “Topping Out” Ceremony [Columbia University] via The Ironworker magazine.

Topping Out Bear Stearns NYC

Mohawk Indians are the most well-known ironworkers and are close associated with topping out buildings.





Here’s a sampling of local coverage for a typical event:

Topping Out at 7 World Trade Center
Topping Out At The Ukrainian Museum’s Top Project
Topping Out the Blanton: That tree on the roof? Means the new museum is A-OK.
Vought-Alenia plant to be topped out

but its not limited to the US…

New unit at Northwick Park Hospital finished [UK]
New home to help juveniles re-integrate [HK]
TIOGA DOWNS PLANS MAY OPENING [NZ]


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In Good Times and Bad, Negative Milestones Often Define The Real Estate Market

January 11, 2006 | 9:48 am | | Milestones |

I was writing another post about the housing situation in New Orleans and I kept coming across the phrase “post-Katrina” as in “post-Katrina policy landscape” [NYT] and it struck me how much negative economic or natural disasters help define a new period for the real estate market.

It gives people the ability to sweep away everything that occurred prior to the event and see things in the current market with a little more clarity. At that moment, history plays a lesser roll in defining how the current market is behaving.

It can also be a stressful period because, like most markets, buyers don’t like the unknown. When economic parameters change or are likely to change because of an event, its takes a while for participants to get used to the new rules. Its a delicate moment in time when buyer/seller psychology is at its weakest or most raw and the potential for misinformation is most high.

I find this whole concept this akin not to asking when it comes to real estate, “what were you doing when Neil Armstrong stepped on the moon?” but rather “where were you when the plane hit the north tower on 9/11?”

The irony is that the whole idea of real estate exudes optimism, hope, success, growth, shelter, safety and opportunity, but the events that define it are most often negative.

Here’s a list that help define my interpretation of the real estate market after 20 years in the business. Some are more specific to New York City because that is where I work and there are certainly other milestones to consider. It also seems to me that the milestones are getting closer together, but that might just be only because they are more fresh in my thinking.

Milestones:

  • October 19, 1987 stock market crash
  • 1990-1991 recession
  • August 1998 stock market correction
  • February – March 2000 NASDAQ correction
  • June 2001 entering the recession
  • 9/11
  • March 2003 – start of the Iraq War
  • June 2004 – Fed starts raising federal funds rate
  • August – September 2005 – Hurricane Katrina and Rita


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Manhattan After The Hoopla Over A 12.7% Drop: What Really Happened In 3Q 05?

October 9, 2005 | 9:05 am | | Milestones |

After the release of our 3rd quarter Prudential Douglas Elliman Manhattan Market Overview last Tuesday to the media and the frenzy of coverage during the week as a result, the New York Times ran an excellent overview of the market story this weekend called A Mixed Message [NYT].

Since then, I have received many inquiries about the state of the market over the week from real estate brokers, wall street firms and lenders to interpret the statistics in the report that were played over and over in the media firestorm. Whats been fascinating about this whole experience is how much coverage was given to the average sales price statistic, which could not stand on its own without explanation. Hopefully I don’t sound too cynical but this stat was likely used because it showed the most negative result.

Here’s a quick list of the highlights of the current market that are most useful:

  • The average price per square foot set an all-time record reaching $984 per square foot and rising 1.4% from the prior quarter. This is the telling statistic. The overall market increased this quarter, but not at the same torrid pace as before. The rate of appreciation has eased. In fact, since larger apartments generally sell for more on a per square foot basis than smaller apartments, one could make the argument that the shift in unit mix also tempered this indicator as well.
  • There was a significant shift in the mix of apartments that were sold. The average sales price dropped 12.7% because the market share of entry-level apartments (studio and 1-bedrooms) spiked 5% and activity at the upper end dropped off.
  • Entry-level sales surged because of concerns over modest increases in mortgage rates are expected. Of course, this has been the speculation since mid 2003 but this time, with rising fuel prices, comments from the Federal Reserve about housing, mortgage rates may actually rise.
  • High end sales activity eased rather than prices dropped. The luxury market average sales price dropped 26% from last quarter because fewer sales at the upper end occurred. There were 17 sales at or above $10M in the 2nd quarter and only 4 sales at or above $10M tracked in the 3rd quarter. In fact, a high end broker contacted me to say there were 5 such sales this quarter, but didn’t realize that one of them closed in the prior quarter. Nevertheless, whether 4 or 5, the sales activity was well below 17 sales. This doesn’t indicate that prices collapsed, but that a shift in the mix of apartments that sold in the upper 10% of the market.
  • Inventory did increase this quarter and was more heavily weighted with condos than co-ops. Since inventory came on at generally the same pace as the number of sales eased, inventory built up. This was attributable to seasonal considerations (thats a stretch) and bad economic news, rising gasoline prices, over saturation of bubble speak for the past 6 months and negative economic news relating to the 2 hurricanes.
  • There are expectations of record Wall Street bonuses at yearend due to the solid year seen by investment bankers and a number of other sectors in the financial district. Historically, Wall Street bonus income has flowed through the real estate economy after the New Year.

Here are a handful of all the interviews I did which basically re-iterate most of these points.


[Focus on Business (Canada)]


[Bloomberg Television]


[WCBS Channel 2]


[WNYC Radio (Brian Leher Show)]


[WNYC Radio]


[Bloomberg Radio]


[WCBS Radio]


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