February 21st, 2015
Posted by Leonard Steinberg, President of COMPASS, on February 21st, 2014
Everyone should read this well written article by Stephen Smith that highlights the absurd obsession with the mega-wealthy who constitute a fraction of a percentage of all real estate transactions. All writers and editors should take note of this article to see how they have been lured into the tabloid-esque world we live in and in doing so are losing credibility as reporters of news that really matters.
Earlier this month, the New York Times published the results of its year-plus-long investigation into the buyers of condos at the Time Warner Center and other buildings around the bottom of Central Park. The city’s paper of record poured an enormous amount of resources into the piece – Louise Story hadn’t had a byline in the paper since August 2013, and Stephanie Saul since January 2013. Twenty other people contributed reporting, research, design, graphics, illustrations, and productions, not counting the editors involved.
What was revealed, though, was little more than high-brow tabloid reporting. There are a lot of wealthy people from all over the world living in the Time Warner Center, and as anyone with a passing familiarity with wealth in developing countries knows, it’s tough to amass a fortune in many parts of the world without attracting controversy of some sort or another.
What the authors could not do, despite the hundreds of thousands of dollars that was poured into the project, was put the story into any sort of context. The goings-on at the Time Warner Center and the buildings around Central Park are all well and good, but those are only a small handful of housing units in a city with more than 8.2 million people, that sits within a greater region of over 20 million. The authors quote James Parrott with the Fiscal Policy Institute as saying that these buyers are bidding up housing prices throughout the whole market – no doubt true, but to what extent? Impossible to say, given the lack of context.
Andrew Rice, who wrote a similar story for New York magazine last year, ran into the same problem. The only data point he found that could put the story into perspective was an estimate by PropertyShark of how many “condo sales in large-scale Manhattan developments” – already a big and somewhat ambiguous qualifier – “have been to purchasers who either listed an overseas address or bought through an entity like a limited-liability corporation.” The number was 30 percent, but even that obscures more than it clarifies – it includes plenty of domestic buyers, which Rice tried to downplay, though the city’s other real estate reporters weren’t buying it.
And the New York magazine piece wasn’t the only one that used shaky statistics to prove a point about ultra-luxury Manhattan real estate. A Times story on the city’s “emptiest co-ops and condos” lumped together all non-primary residences, whether they were truly empty pieds-à-terre, or merely condos that were rented out – a somewhat interesting phenomenon, but nowhere near as controversial as apartments that actually sit empty. (The distinction was lost on many, who, in their tweets and reblogging of the story, misinterpreted the “nearly one quarter of the apartments in New York City are not used as primary residences” line as “nearly one quarter of the apartments in New York City are pieds-à-terre.”)
And if there’s any real estate topic that attracts as much attention from the mainstream media as the uppermost tier of the luxury market, it’s gentrification. Gentrification is no doubt an important and often alarming phenomenon in New York City’s market, but the focus occasionally seems misplaced, and often crowds out reporting on everything else going on in the city’s property markets.
Case in point: another article in New York magazine by Andrew Rice, this time on East New York. Much of the discussion on gentrification focuses on the neighborhoods on the other side of the Broadway Junction, in Ocean Hill and eastern Bushwick. But the implication is clear: gentrification will eventually hop the firewall of Brownsville housing projects and the East New York Industrial Business Zone, and head into East New York proper.
But in focusing on gentrification, Rice missed the real source of demand bidding up rents in East New York: immigrants. With three-quarters of the housing units in East New York being rented out, it’s rental rates, not sales prices, that are the real cause of concern when it comes to rising housing costs. While sales prices may be bid up by speculators anticipating fixie-riding hipsters invading during the next market cycle, actual rents can only be affected by people currently renting in the neighborhood.
And for all the talk in the story of the gentrification that might come – “We don’t want to sell this as the place the hipsters should come to,” a local development corporation official tells Rice – East New York is losing what few non-Hispanic whites it had. From 2000 to 2010, their numbers in greater East New York – from Pennsylvania Avenue to City Line, Cypress Hills to Starrett City – were down 30 percent to just 6,250, while the total population grew by nearly 10,000 to 184,000.
It’s not whites who are flocking to the neighborhood and bidding up rents, but immigrants – namely those from the Dominican Republic, South Asia (especially Bangladesh), Mexico, and Central and South America. (To say nothing of immigrants from the West Indies, most of whom are not counted due to the Census’s frustrating practice of lumping together all black ethnicities into one group, obscuring what are likely to be flows of African-Americans out of the neighborhood and West Indians in.)
And for the most part, the incoming immigrant groups don’t even seem to be displaced from other neighborhoods. The number of Dominicans, the ascendant East New York group (that we can count) with the longest history in the city, is rising much faster in Crown Heights, Bed-Stuy and Bushwick than it is falling in Williamsburg. Ditto with Mexicans and the other Latino groups who are growing in East New York. And Asians are on the rise nearly everywhere – their growth in East New York is entirely a story of immigration, not displacement.
But these are all trends that New York Magazine – and, for that matter, nearly every other publication writing about East New York – missed, with their obsessive focus on the white New Yorkers who might someday pour into the neighborhood.
And there are other trends that the real estate media is missing while they hyperventilate over oligarchs and gentrifiers. Non-luxury market-rate construction made up a pretty largely chunk of the city’s new construction during the early and mid-2000s, and all but evaporated as the recession took hold, with no sign of returning, even as the broader market has largely rebounded. Meanwhile, the South Bronx is attracting more market-rate construction than it’s seen since the 1920s.
Most of New York’s rental apartments are rent-regulated in some way, but the city and state keep little data on what the rents in these units are, and release none publicly on what they legally should be. To say nothing of the fascinating and dynamic markets in southern Brooklyn and eastern Queens, where the lack of white hipsters, yuppies, and gentrifiers means little in the way of coverage in the city’s mainstream real estate press.
Gentrification and the ultra-luxury market are increasingly important trends in New York City real estate, but they aren’t the only stories to be told. And if the media is as concerned about these phenomena as they claim, it’s just as important that they cover middle-class real estate topics, if only to understand what needs to happen to encourage more housing for the vast majority of New Yorkers who are neither rich enough to afford luxury new construction, nor lucky enough to win a housing lottery.
February 19th, 2015
Posted by Leonard Steinberg, President of COMPASS, on February 19th, 2015
Each morning I start the day by writing a letter to my company on a topic of interest. I thought I would share this morning’s, all about the emerging “Affordable Luxury” market that I feel should be termed ATTAINABLE LUXURY. After all, what is so affordable about any real estate in a large city?
In my books buying a home is a luxury for most people at every price-point, especially in a big city. Too many agents poo-poo the buyer who ONLY can spend $1 million on a home, when to that buyer a million dollars seems like a ridiculous fortune. Remember when you bought your first pair of real expensive shoes? That feeling of ‘wow, I am really going all out here’ pales in comparison to the magnitude of a home purchasing transaction. For the VAST majority of home-buyers buying is highly stressful, involves tremendous second-guessing and ranks up there with death and divorce o the stress-meter.
With many large city developers focusing almost exclusively on larger expensive apartments over the past few years, it comes as a relief that some are now as focused on what they call ‘AFFORDABLE luxury’. For most this is simply inaccurate: the vast majority of these buyers will not consider these apartments affordable…….most will still see them as a luxury that is attainable, but the word affordable may be a stretch. Affordable also diminishes the meaning of the word LUXURY and in my opinion should be avoided.
Condominium median pricing in New Developments trades at an approximate 35% premium: This pricing premium is magnified in the ultra-luxury area of the market. The pricing spread between new development and resales may not be sustainable over the longterm. While everyone focuses on price per square foot, at the end of the day it is the absolute price that matters most to the majority of buyers. If they can only afford $2 million to buy a home because that is what their assets, income and bankers will allow, attempting to buy a $2.5million property is pointless. The $2million property will probably deliver less than the more expensive one, so they may not be getting anything terribly affordable at all at the end of the day. More attainable properties that deliver the required room count will probably be less luxurious, in lesser locations and have shrunken dimensions.
Another important factor in this ‘attainable luxury’ market are real estate taxes and monthly carrying costs that keep rising each year. Most cities are subject to rising costs, much of them attributed to labor and unions, not to mention inefficient governments. Unfortunately governments do not make any allowance for cost-of-living in the tax structures: someone earning $500k annually in Memphis would need to earn approximately $826k in Washington DC to live a similar quality of life….about 65% more!
So while the world tries to push the word AFFORDABLE, remember for most this word is inaccurate and simply insulting.
February 17th, 2015
Posted by Leonard Steinberg of COMPASS on February 17th, 2015
Property price escalations have soared over the past few years in cities such as London, Miami, Aspen, Beverly Hills and New York, in some areas coming off lows caused by the GREAT RECESSION: Many of the super-wealthy are now asking whether its realistic that pricing escalation can continue at this pace, or if the ‘real-estate-luxury-super-yacht’ has already sailed.
Some very wealthy clients of mine told me a story about their search for an apartment and how they (mistakenly) tried to time the markets…..and lost. Several years ago at a similar time when many were wondering whether the pricing escalation of that time could continue, they decided to put their apartment search on hold, instead deciding to rent till things cooled off and they could buy into the market at reduced pricing. They learned a painful lesson once the recession hit. Firstly, the majority of the best properties were removed from the market as those wealthy owners could weather storms and hold on till the markets recovered. Secondly, when construction ground to a halt, the inventory of great properties started to shrink. Thirdly, obtaining financing was impossibly difficult, even with superb credit and assets. Fourthly, they had wasted substantial time and effort: their kids had grown up in a less stable home environment than one achieved through home ownership. They were running out of space. They had worked hard and were not enjoying their wealth in a way only an owned home can deliver joy, and time was their worst enemy.
Ultimately they resumed their search, found an amazing property, and spent slightly more than had they bought at the ‘peak’ of the market that halted their search. Will the same be true for this market? Its almost a certainty that at some point sales and pricing escalation will slow. This may not be good for speculators, but will it stop home buyers? I doubt it.
February 13th, 2015
Posted by Leonard Steinberg of COMPASS on February 13th, 2015
Elon Musk, the James-Bond-sized leader (and fellow South African)behind TESLA, announced that he will be introducing a HOME BATTERY to the market in the next few months, a devise we assume will be akin to a home generator. While Tesla is a car manufacturer, it is a company that is also focused on the ENERGY market. Will the TESLA HOME BATTERY be the next ‘Manhattan-must-have’ just the way a Sub-Zero fridge has been for decades? I want one!
February 8th, 2015
Posted by Leonard Steinberg of URBAN COMPASS on February 8th, 2015
The New York Times has written a feature story on how shell companies front some dubious buyers of super-luxury New York apartments. The article is very detailed and thorough, yet there are a few things that amaze me: 1) What about all the US owners of New York real estate with dubious pasts and a history of jail-time? Why only focus on the foreigners? 2) Why the excessive focus on this tiny fraction of the market that seems to gravitate to small handful of buildings? 3) Why should people who don’t use their property all year round pay more taxes? Should our mayor pay more taxes for the Park Slope townhouse he doesn’t use?
February 7th, 2015
Posted by Leonard Steinberg on February 7th, 2015
Since joining URBAN COMPASS 8 months ago, we have developed a marketing language that has become contagious: It has spread like wildfire throughout the real estate industry here and everywhere and it is something I am most proud of. People are talking in New York, Miami, Los Angeles and everywhere between. We were spoken about rather extensively at Davos Switzerland…..WOW! I hear it in Capri, London, Cape Town, Detroit…..globally. Our exceptional marketing team has shaken the industry in ways we could never have imagined.
Leafing through publications where real estate firms advertise the evidence is abundantly clear. And its wonderful. It was high time for our industry to awaken to a changing world and boy has our industry awoken! So much of the advertising and marketing language, both visually and content-wise, looks eerily similar now to what we are doing…..as we all know there is no greater form of flattery that copying. Many have called me or spoken to me about how astounded they are that much of this copying is so blatantly obvious: to this I simply have to smile. There is no greater achievement than when you hear your brand being used as an adjective in boardrooms, marketing meetings, executive suites and local, domestic and international chatter. “Give me more of that Compass feel and look!” Only highly established super-brands have achieved this adjective-status before.
So to all of those who are emulating us, copying us, being inspired by what we are saying and doing, I say a huge THANK YOU! And I truly mean it. Thank you for your support and for further fueling the world’s confidence in what we are doing.
January 24th, 2015
Posted by Leonard Steinberg, President of URBAN COMPASS, on January 24th, 2015
As the price of oil dips, word is out that some are hoarding large supplies of oil in anticipation of rising prices in the future. Recently I hear of chatter amongst the very wealthy how they are hoarding (very cheap) cash in anticipation of a market correction. The volume of these hoarders leads me to believe that if a correction were to take place, it could be cleaned up rather quickly.
January 18th, 2015
Posted by Leonard Steinberg of URBAN COMPASS on January 18th, 2015
Land is now selling for above $ 1,000/sf on a regular basis in Manhattan, a historic moment in our City’s history. When a developer buys land at these prices, its almost a certainty that he or she will have to sell the apartments built on this land for around $3,000/sf to make a profit. Anyone questioning why AFFORDABLE HOUSING is a scarcity needs to look at these soaring land costs, combined with the soaring costs of labor, combined with the soaring costs of materials. The combination can be deadly. Is the $1,000+/sf cost for land sustainable when this is a figure that has virtually doubled in the past 2 years? Is this a sign of hyper-inflation? A prime piece of land just sold in West Chelsea on the West Side Highway at 17th Street to HFZ Capital who plan to build a Hotel/condo on the site, about 17.5% higher than the price Victor Homes paid for a non-waterfront site located 10th Avenue and 24th Street: everyone was aghast over that price, and that was rather recent. How deep is the market for $3,000+/sf apartments in non-prime settings? Only time will tell.
With the US economy surging, New York continually improving, neighborhoods gentrifying, limited prime sites available, I think there is definitely a place for these high priced buildings……BUT: I do fear for those less-than-stellar sites with excess ambition. We are now in the pick-and-choose phase of the market for the very rich where at last they have some great choices in certain parts of the City. Irrational expectations need to be tempered by those with lesser sites in areas that have vast swaths of inventory in the works. Over the longterm all of this new inventory will be absorbed, but the pace at which this happens will slow.
January 17th, 2015
Posted by Leonard Steinberg, President of URBAN COMPASS on January 17th, 2015
A historic moment has arrived in NEW YORK CITY: The city’s first $100 million apartment has just sold, a duplex at One57 (157 West 57th Street). We at Urban Compass are extremely proud of our very own ROY KIM, head of Urban Compass New Developments, who was an integral part of creating and designing this iconic tower while he was Senior Vice President at Extell Development Company. For the past decade, Roy has worked on over $10 billion worth of luxury new developments in Manhattan, including such high profile projects as One57, the Carlton House, One Riverside Park, the Aldyn, the Lucida, 995 Fifth Avenue, the Park Hyatt and the International Gem Tower, to name a few. Roy also helped inaugurate the predevelopment group at Corcoran Sunshine.
January 16th, 2015
Posted by Leonard Steinberg of Urban Compass on January 16th, 2015
As New York City tax coffers swell to record-level surpluses, it was announced that real estate taxes are about to rise dramatically……of course with a characteristically un-American sense of un-equalness that has become the hallmark of our messed up New York real estate tax structure. A hot real estate market has resulted in a 9% hike on assessed property values, which will likely raise real estate taxes for many.
- The average property-tax increase for single-family homeowners could be $228
- The average co-op property-tax bill could go up by $448.
- The average Condo owners tax bill could shoot up by an average of $838….almost DOUBLE that of co-ops!
- Co-op tax bills could go up by an average of $817
- Condo owners could get an average $1,150 increase.
- Single-family townhouses could see the biggest hike: $2,131.
New York City was ending the fiscal year 2014 with a $744 million surplus, about $639 million more than de Blasio initially predicted.
Mayor DeBlasio promised us over a year ago to address the gross disparity in real estate tax collection in New York, best highlighted by his own Brooklyn townhouse that has a real estate tax bill about a third of the size of similarly valued condominium apartments in Manhattan.
It is time for the citizens of New York to make their voice heard: this madness must end! its time for the city to fully re-evaluate its entire real estate tax system without further delay.