LuxuryBlurb
Archive for March, 2010
Monday, 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?
Thursday, 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.
Tuesday, 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!
Monday, 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?
Monday, 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?
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