LuxuryBlurb
March 10th, 2010
The millionaires’ club in the United States grew by 16 percent in 2009, following a 27 percent decline in 2008. Families with a net worth of at least $1 million, excluding primary residences, rose to 7.8 million in 2009, an increase from 6.7 million a year earlier, according to a survey of high-net-worth U.S. households conducted by Spectrem Group. The Standard & Poor’s 500 Index increased 24 percent in 2009 and has risen 68 percent over the past 12 months.
Affluent households, which the survey defined as those with net assets of $500,000 or more, increased 12 percent to 12.7 million, the Chicago-based consulting firm said in a statement Tuesday. The number of households with a net worth of more than $5 million rose 17 percent to 980,000.
The average age of a so-called affluent investor is 58, compared with 62 for a millionaire and 67 for an investor with more than $5 million. Survey respondents in all three categories said they were most concerned about the impact of a prolonged economic decline on their financial well-being, according to Spectrem. The highest number of affluent and millionaire investors said they were likely to invest in cash, which includes certificates of deposit, over the next 12 months, followed by stocks and then bonds, said Spectrem.
The biggest number of ultra-high-net-worth investors said they were likely to invest in equities, followed by cash and international investments. The fewest wealthy investors said they were likely to invest in alternative investments such as hedge funds and investment real estate, Spectrem said.
The increase in the number of millionaires is still being held back by residential and investment real estate, which hasn’t bounced back, Walper said. The S&P/Case-Shiller index of home prices in 20 major cities was down 29 percent in December from its July 2006 peak.
This may further explain the renewed strength of the Manhattan luxury real estate market.
March 9th, 2010
Jean-Georges Vongerichten’s newest venture is ABC KITCHEN, a roughly 150-seat café inside ABC Carpet & Home that will serve breakfast, lunch and dinner and fresh juices at a juice bar with a ‘from farm-to-kitchen’ mindset. Located steps off Union Square in the Flatiron District, Vongerichten worked with ABC CEO Paulette Cole on the design, sourcing as locally as possible; that includes plates from Bella Porcelain, made by Cole’s childhood friend Jan Burtz. The result is gorgeous: a room that mixes Downtown loft-style cool with a Tuscan/Provencal twist that actually is authentic Hudson Valley at its best. Svelte Lois Freedman, the diva behind Jean Georges, introduced us last night to the menu and it is wonderful: all ingredients come from within 100 miles of the store and are all organic. Standouts include the crab toast, the carrot and avocado salad and a divine Sea Bass item. Dishes are dead simple, mostly ones Vongerichten makes for his own family. “We want to do what Alice Waters did in the 1970s,” he says. “Handwritten menus, changing daily, seasonal food.” Chef de cuisine Dan Kluger won’t churn his own butter, but he will make his own yogurt….and mixed in with the beets we can attest that its amazing! All the restaurant waste will be re-cycled into compost. What a great addition to the City and neighborhood.
35 East 18th Street Tel: (212) 475-5829.
March 9th, 2010
 Neiman Marcus Group Inc. swung to a fiscal second-quarter profit on steep write-downs a year earlier, as the luxury retailer posted higher revenue and lower expenses. The Dallas-based retailer is also owner of BERGDORF GOODMAN. Neiman’s is probably the most important barometer of the Luxury market, and this certainly is a good indicator of the luxury market in general. The key message appears to be that through cost-cutting measures along with improved sales, profits have improved too. The trend to profitability seems consistent: lay-offs. The harch bottom line is that lower income earners suffer at the expense of the top income earners who live for profit. This fuels a stronger luxury market, but reduces the spending power of the lower earners. Hopefully with this rebound the employment market will improve too as the need for additional help registers without impacting profits. All good for the luxury real estate market in New York.
March 8th, 2010
 On Monday, AIG announced that it would sell foreign life insurance business Alico to MetLife (MET, Fortune 500) for $15.5 billion. Last week, AIG said it reached an agreement to sell Asian life insurance giant AIA for $35.5 billion.
That’s $51 billion that AIG said will eventually be used to pay down its debt to the government. The two sales mark the most significant progress that AIG has made to-date in its efforts to repay its bailout, which is worth up to $182 billion.
Taxpayers won’t get their money back overnight. The sales still need to be completed, and AIG has said that more than $19 billion will come over time from proceeds generated by sales of securities.
So far, the government has given AIG $136.5 billion, of which the insurer owes $102 billion. But AIG’s debt total will be cut in half after the insurer turns over the $51 billion it secured from the Alico and AIA sales.
So if all these TARP funds are being re-paid, why is everyone so focused on this part of the ‘big government bail-out’? Surely everyone should be more concerned about the big government bail outs that will never be re-paid?
Surely this is good news for everyone including the housing markets?
March 4th, 2010
This morning’s Wall Street Journal reports that one year removed from the trough of the recession, American corporations continue to hoard more cash than ever. There are now tentative signs that they are finally comfortable using the money to do some shopping.
The 382 nonfinancial firms in the Standard & Poor’s 500 that have reported results for the fourth quarter of 2009 are now holding $932 billion in cash and short-term investments, according to a Wall Street Journal analysis of data from Capital IQ. That sum is up 8% from the third quarter and up 31% from a year ago. And why? Cash is very cheap these days. With all this cash around, it is not surprising that the high end real estate market in Manhattan is so very active right now……with lots of all cash or mostly-cash buyers. The savings rates have also climbed dramatically.
An argument could be made that these corporations have hoarded all this cash at the expense of jobs, the one issue all politicians are blaming unanimously for the tepid economic recovery. But all this cash held in both corporations and privately will be let loose into the economy….its happening already as part of the economic cycle. This will affect inventory levels accross the board. And when inventories need to be beefed up. jobs are created. Slow, painful, and mostly it affects the lowest wage earners. I guess the politicians don’t want to say all of this out loud: its the system.
March 2nd, 2010
Rupert Murdoch made official on Tuesday what has been widely reported for the past few months: The Wall Street Journal will be launching a New York section in April. Speaking at a midtown gathering of the Real Estate Board of New York, the News Corp. chairman lauded the real estate industry—a likely source of advertising revenue for the section—and lobbed a grenade at the Journal’s rival, The New York Times.
“We believe that in its pursuit of journalism prizes and a national reputation, a certain other New York daily has essentially stopped covering the city the way it once did,” he said in prepared remarks. “In so doing, they have mistakenly overlooked the most fascinating city in the world—and left the interests and concerns of people like you far behind them. I promise you this: The Wall Street Journal will not make that mistake.”
So who exactly from the Real Estate Board of New York was invited to this event? The brokers who pay for the organization to exist? Or was it another closed-country-club-style gathering for a select few? We hear that Josh Barbanel from the New York Times has been hired away already: who will follow?
I guess the only way to judge the WSJ section will be to actually see it: their recent real estate supplement was just ok in our opinion. If this section becomes one big advetorial, controlled by those with the biggest budgets and the most influence it could de-legitimize the section and indeed the entire Journal.
But the Wall Street Journal does indeed have a huge opportunity to address the luxury real estate market, something the New York Times often dilutes with it’s emphasis on affordable housing. The big question will be if the focus is placed entirely on celebrity gossip, are there enought celebrity transactions to feed the Post, the NYT and the WSJ with enough exclusive material? Or will the New York real estate sections all start looking like the magazines at the grocery store checkout? Some real, thoughtful, clever real estate reporting would be most welcomed!
March 1st, 2010
In this month’s LUXURYLETTER ( see www.luxuryletter.com) the reports indicate a moderately healthy market, with strong activity on the higher end of the Manhattan Downtown luxury market.
Signed contract and closing activity levels are healthy, and pricing for the most part is stable, although drops have been seen in some areas: this does not necessarily indicate a trend as this is a month-by-month report and overall pricing is stable when compared to 6 months ago.
A NEW TREND: We have seen several suburban buyers enter the market looking for a City residence to buy that they will use full time in about 3-5 years. BUT, they want to buy now at current pricing levels fearing that prices will rise significantly in a few years. Is this a real trend?
March 1st, 2010
 Billionaire Warren Buffett said the U.S. residential real estate slump will end by about 2011, predicting that’s how long it will take demand for homes to catch up with the supply.
“Within a year or so, residential housing problems should largely be behind us,” Buffett wrote Feb. 27 in his annual letter to shareholders of his Berkshire Hathaway Inc. “Prices will remain far below ‘bubble’ levels, of course, but for every seller or lender hurt by this there will be a buyer who benefits.”
We see this trend happening already in Manhattan whereby the best properties at the ‘2009 prices’ are slowly but surely dissapearing, leaving very few good options behind. With unemployment of the wealthy around 3-4%, and the Manhattan market catering to predominantly wealthy people, the absorption rate of the best could happen quicker here than other parts of the country.
What do you think?
February 22nd, 2010
There seems to be growing consensus that the US real estate market has indeed bottomed out. Reuters reports today that the number of transactions, pricing and general mood indicate stabilization. Price increases are unlikely this year, but are expected next year. In Manhattan we are not seeing pricing rise, but we are seeing offers off asking eased upwards, closer to asking. The number of contracts signed at or over asking has increased dramatically over the past 6 weeks, but mostly on well priced properties.
The first time/trade-up home buyer tax credit will expire soon: Qualified borrowers need to sign contracts by April 30 and close loans by June 30 to get the $8,000 first-time buyer credit or $6,500 move-up credit. How will this combined with the Fed ending its mortgage securities buy-back program affect our market? Probably not at all in Manhattan. With income earners above $ 150k experiencing 3% unemployment, the ails of Manhattan are very different to the rest of the USA.
What do you think?
February 19th, 2010
 Under pressure to do more for troubled homeowners, President Obama is expected to announce to-day a $1.5 billion program to help borrowers in the five states hit hardest by the housing crisis. The initiative calls for pumping money into state housing agencies in California, Arizona, Nevada, Florida and Michigan to fund programs to prevent foreclosure for people who are unemployed or who owe more than their homes are worth. Also, the agencies can assist homeowners having trouble securing loan modifications because of second liens, as well as promote affordable housing opportunities.
Obama is scheduled to unveil the initiative, which will be funded with money from the TARP bank bailout, at events in Nevada, which has the highest number of underwater homeowners at 65% and the nation’s second-highest unemployment rate at 13%. The president will be joined by Senate Majority Leader Harry Reid, D-Nev., who is facing a tough relection campaign…..maybe this is all designed to help Mr. Reid’s re-election efforts?
The funds will be allocated based on a formula that takes into account home price declines and unemployment. The agencies’ programs must be approved by the Treasury Department. The move is the administration’s latest attempt to fix its signature foreclosure-prevention effort, the Home Affordable Modification Program, which has been widely panned for not doing enough.
The year-old initiative, which lowers qualified borrowers’ monthly payments to no more than 31% of pre-tax income, has placed more than one million people in trial modifications. But it has given lasting help to only 116,000 homeowners, mainly by lowering their interest rates. Consumer advocates and housing experts for months have called on Obama to expand the program to help the jobless and those suffering steep declines in their home value, two sectors that have received relatively little assistance from the modification effort. Administration officials repeated as recently as Wednesday that they were working on the problem, but that it was a complex issue.
None of this affects the luxury market in New York, except to possibly add further debt to all taxpayers. It also highlights one of the biggest failures of the entire process: the unwillingness of banks and governments to re-value properties based on market realities. This ostrich-head-in-the-sand mentality is infuriating. But it is good for elections, although that remains to be seen.
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lola gardner 
Mmmmm compost. *drool*