Archive for October, 2011
Monday, October 24th, 2011
Posted on October 24th, 2011
President Obama proposed the concept of lowering the interest rates of mortgages for those under water through government aided re-financing to lwer rates. I think this is a smart idea and it amazes me that for the past 3 years banks have been so slow to consider this. Lets assume a $ 300k homeowner has a 30 year fixed rate mortgage at a rate of 6%, his monthly payment would be about $ 1,800/month. At a rate of 4%, this monthly payment would drop about $ 300.00. That’s pretty significant and could result in far fewer foreclosures, a procedure that is extremely expensive for the banks, state and federal governments. A foreclosure costs about $ 78,000.00.
Now imagine a foreclosed house results in a drop in value of 20 surrounding houses by about 5% (15k)….usually its much more than this…..that’s an additional cost of about $ 300k more…..then add in the loss of real estate tax revenues……and the spending of the homeowner in the community….not to mention the cost to the human dignity that takes a great deal of time and effort (and cost) to restore.
The mortgage assistance plan by the Federal Housing Finance Administration will help borrowers with little or no equity in their homes, many of whom are stuck with 6 or 7 percent mortgage rates, to seek refinancing and take advantage of lower rates. The FHFA plans to remove caps that had allowed homeowners to refinance only if they owed up to 25 percent more than their homes are worth.
Leonard Steinberg says: “It’s time for us to be practical, not political, and enact solutions to big problems that work. This is a solution worth considering.”
Thursday, October 20th, 2011
Posted on October 20th, 2011
Senators Charles Schumer of New York and Mike Lee of Utah are proposing a Bill that would provide foreign buyers a residence visa if they buy a US home worth $ 500,000.00 or more. Now that’s a REAL incentive for foreign buyers! I think this is a brilliant idea, and could be exceptionally valuable to the New York real estate market.
I also think anything to encourage foreign investment is a good thing, and this seems practical and good for all. For those who will gripe that this is unfair, allowing the wealthy an unfair advantage in the immigration game, they should consider the following:
1) Foreign buyers bringing foreign currency to the country helps the economy…that helps all.
2) Selling off real estate to new buyers promotes the need for more inventory……building….that fuels US construction jobs.
3) With New York’s average pricing above $ 500k and the City being the biggest draw for foreigners, we could benefit the most compard to other US cities. It will also help Miami considerably, and lets face it Florida’s housing market needs all th help it can get!
4) Every time a $ 500k real estate sale occurs in Manhattan, taxes of about $ 9,000.00 are collected for the City and State….that benefits all.
5) If the apartments require painting, renovation, management, etc…..that creates jobs too.
6) Foreign buyers buying property here will visit more frequently, spending on US soil at retail stores, restaurants, theatre, etc. The US economy suffers most from lack of demand right now. This can only help.
7) Wealthy buyers who can afford a property in a foreign country for over $ 500k may also want to invest more in the USA. And New York.
For foreigners, getting this VISA will mean an easier time with financing, as well as a good reason to bring their currencies to the US.
Now comes the bigger question: Is the USA still so highly desired by foreigners? The answer in my opinion is a resounding YES. I remember driving in a cab in London at the time the US invaded Iraq and the world fell seethed with anger towards us and the cab driver said that with all the anger towards the US, every day as he did his rounds, it was only the US embassy that had long lines outside with crowds waiting their turn to get into the Great American Dream. Right now we are being swayed by the political and media forces to believe its all gone and lost forever, but I believe they are simply wrong.
Monday, October 17th, 2011
Posted by Leonard Steinberg on October 17th, 2011
So OCCUPY WALL STREET keeps growing based on the masses’ fury at Wall Street’s corporate greed. The facts are simple: greed exists on Wall Street for sure. But greed exists in many other areas too:
1) Hollywood: Every time you see a Tom Cruise Movie, Tom’s $ 20million plus royalties translates to a median income earning family of four paying at least $ 40 to go to the movies, without popcorn…..Isn’t $ 20m just a wee bit greedy too? Try taking that family to a Madonna concert for under $ 400…..
2) Sports: That family of four will spend at least $ 200 to see a basketball game, and thats without parking or any food or drinks….all billed to pay those sports hero’s $10, 20, 30million salaries to throw a ball….
3) Fashion: That Louis Vuitton bag for $ 1,000 (made in China for $ 50?) seems a bit greedy too, no? I hear the $ 250 pair of sunglasses costs about $ 25 to make…..greedy? And what about those NIKE sneakers? Corporate greed yes, but not exclusively Wall Street.
4) UNIONS: Those dues are not cheap, and certainly pay for lots of ‘stuff’ that would appear greedy to some.
5) HEALTHCARE: How much is a prescription of anti-biotics? Much more expensive than in Canada for certain.
6) _________: Fill out the blank….there are many!
My point is that there is greed everywhere. And directing anger purely at one industry seems hypocritical at best. Instead of blaming one or two sectors of our little planet, maybe its time for a South African-style truth and reconcilliation summit, whereby we identify ALL the sins of greed for ALL those that are greedy, not just a select few sininers, forgive everyone, and move forward with a new plan?
Saturday, October 15th, 2011
Posted by Leonard Steinberg on October 15th, 2011
With real unemployment soaring closer to 20%, unemployment has become the key problem in resolving our fiscal woes. Unemployed people cannot spend the way employed people do and the economy is suffering mostly from lack of demand. The saddest part of this story is that there are indeed hundreds of thousands of well paying jobs out there, but the workers applying for these jobs are simply not sufficiently skilled. Reuters reports that SIEMENS has over 3,000 vacancies waiting to be filled, but there are not enough skilled workers. Maths and science are ESSENTIAL in the new high tech world we have created, and until we invest the time, effort and money necessary to educate and re-educate, the unemployment figures will remain high. With housing generally down the toilet in most parts of the country, this source of jobs has dried up for the time being. I do however feel certain that a sizeable building boom is about to hit New York…..and that can be only good for employment figures. Till then, we should focus on training the unemployed the maths and science skills necessary to get those jobs that sit there waiting….
Saturday, October 15th, 2011
Posted by Leonard Steinberg on October 15th, 2011
As OCCUPY WALL STREET continues, I feel its connection to the real estate world and how location is everything. Do these demonstrators know nothing about how one block can make all the difference in New York? Firstly, the title is about as accurate as WOODSTOCK, the era-defining music festival that never really happened in the town of Woodstock at all, just close by. These demonstarations are somewhat mis-located: almost like buying an apartment in Gramercy Park, yet being unable to see a single leaf of the park. Or living in Tribeca, but living in a building East of Broadway?
I understand the average salary of all those working on Wall Street currently is around $ 70,000/year, certainly not the fortunes that qualify as the target audience. Of course abongst bankers, that average is closer to $ 340,000.00/year. Frankly, I always thought the real wealth of Manhattan was focused more in Mid-town? Scarier is the fact that this group has LOTS in common with the Tea Party movement, although I do think (joking aside) that many of this group’s grievances (which as yet are badly focused) are somewhat legitimate. Until this great country of ours acknowledges the huge disparity in incomes between the super-rich and everyone else, social unrest will continue. But it had better become intelligent soon. $250k/year in Manhattan is not rich. And if everyone who is rich is removed from Manhattan, the parks will wilt, the public services will be destroyed, and worse: large chunks of real estate transfer taxes will be removed from the State’s coffers, adding further pain to the already struggling state…..remember Manhattan supports the rest of New York State? We cannot forget that while certain super-rich individuals escape the Federal taxation the masses support, but no homeowner in New York escapes real estate taxes. About 30% of Manhattan is owned real estate, and those owners are paying LOTS in real estate taxes. LOTS. A typical 2,000sf apartment pays around $ 24,000 per year….. A 5,000sf apartment could pay 50k per year or more. Townhouses and some apartments do pay lots less (unfairly) which is a disgrace.
OCCUPY WALL STREET should clearly identify what they are for rather than what they are against. It’s easy to complain. It’s really tough to provide solutions. Realistic, workable solutions. Naive dreaming is the last thing we need right now. Maybe we are all learning to adjust to a new terrifying reality: Is man being replaced by machines en masse now? And are those who control the machines automatically reaping the biggest rewards, bigger than anything we have ever seen or known because no-one ever imagined the human consequences of an un-re-educated population in the MASS computer age?
Thursday, October 13th, 2011
Posted by Leonard Steinberg on October 12th, 2011
As the BLACKBERRY BLACKOUT continues, I as a real estate broker vow never to complain about my Tech ever again, even though at times it may be warranted. Life in real estate land in New York is simply HORRIBLE without a functioning Blackberry. I feel I have lost a part of my brain. It reminds me of the times we schlepped the streets of Manhattan with appointment books and just Cell phones. It’s not that doing business was impossible, but it was significantly slower, bound us more to an office environment, and in my opinion it was a lot less efficient. The stress of reading and responding to hundreds of e-mails a day while on the road has now been replaced by the stress of knowing you will have to address them once you get back to your desk. And while I do love my I-pad, it simply does not compare to that hand sized little wonder we have become so accustomed to.
Thursday, October 6th, 2011
Posted by Leonard Steinberg on October 6, 2011
With Steve Job’s passing, certainly one of the greatest losses of 2011, it may be a good time to look at his company as a case study for the future of other companies in the USA. I write this on a MAC, own an I-pad, I-pod and love them all. These inventions have revolutionized our lives and have especially made life as a real estate broker better. Does the answer to the USA’s horrible unemployment rate lie in the name Steve Jobs?
Lets be blunt about Apple’s success, a huge success, and one of America’s greatest: Genius product is designed in the United States….The company employs about 35,000 people in the USA. Most of its products are manufactured (cheaply) in China. About 300,000 jobs are in China. Yes, 35,000 in the USA, 300,000 in China. The super-low cost of production translates to a super-profitable company. Apple sits on $ 76 billion in cash reserves. The questions we should be asking now are:
1) If Apple manufactured its products in the USA, would it be the success it is to-day?
2) If Apple had half its cash reserves because it sacrificed some of its profits to produce some of its goods domestically would these employed Americans have the capacity to consume more (thereby creating more consumers for Apple products….and real estate!) and maybe lifting Apple’s sales (and profits) pretty close to where they are to-day?
3)Would Apple be the success it is to-day if its profits were lower? Would Wall Street have abandoned the company?
4) Why does Apple not pay a dividend to its shareholders?
5) $ 76 billion would pay for over 300,000 US jobs paying $ 50,000/year for five years. Those 300,000 jobs in China do not result in many Apple product consumers as they are mostly low paying jobs. Which jobs would serve Apple AND the USA best?
My big picture question about Apple is the same question I ask about many other highly successful US companies that manufacture most of their goods in China: Had we kept most of these jobs in the USA, would the additional manufacturing costs with reduced profits have produced less of a return than a much lower unemployment rate with a much healthier and stronger (consuming) middle class that may indeed have compensated for the loss in profits by being in a position to spend more?
The lesson from Apple is that it, like many other companies, have indeed been creating hundreds of thousands of jobs, but not in the USA. These jobs were shipped off to China to boost profits. It has worked. The only problem is it has left some companies super-profitable, and their owners super-rich, but it has left the US economy in deep trouble. What has happened is the same as what happened to the small retailer: Large retailers with huge buying power buying directly from manufactures, could cut pricing dramatically while retaining profitability…..thereby driving small retailers out of business. Think of the middle class as a small retailer. The sooner we resolve the unemployment crisis, the sooner foreclosure sales will slow and Americans will be in a better position to own a home…..and start consuming without government assistance. The more people are earning, the more taxes are collected…..is it time for some trickle up economics?
There has to be a happy compromise somewhere. But it will require some honesty.
Sunday, October 2nd, 2011
Posted by Leonard Steinberg on October 2nd, 2011
Yesterday while most of Wall Street was away enjoying the first weekend of Fall 2011 in the Hampton’s, 700 Protesters were arrested for blocking the Brooklyn Bridge, protesting all sorts of things especially Wall Street GREED. Isn’t this a bit old-fashioned in the age of Twitter-heads and Facebookers? I thought all outrage was posted on line these days? Maybe it is, and its proving to be ineffective? This protest certainly caught the attention of the world. Maybe old-fashioned methods to garner attention are new again?
While I contemplate all these pressing questions, I also ask how many besides Wall Streeters have demonstared greed? Was the banker who encouraged the un-qualified buyer to buy a house with a huge adjustable rate mortgage greedy? Of course he was. Was that same banker greedy when he sold those mortgages knowing they were in the hands of people who would more than likely default? Yes! Was the un-qualified buyer greedy for wanting to buy a house they couldn’t afford? Definitely! Was Charlie Rangel (who joined the protest) greedy for keeping FOUR rent-stabilized apartments, thereby paying half the market rent (while earning over $ 165k/year) being greedy? Is it greedy to fire hundreds of employees yet still draw a large salary and bonus? Is it greedy to draw unemployment while receiving income off the books? Is it greedy of some public employees to boost their retirement payments by working artificial overtime hours while others lose their jobs because of budget cuts? Is it greedy of a teacher who is mediocre to earn more than a great teacher just because they have been at the job longer? Is it greedy of a rock star who preaches democracy and fairness to charge $ 200 for a concert ticket?
Greed is everwhere, and while many on Wall Street are certainly guilty of excessive greed, picking Wall Street as the sole perpetrator seems a bit hypocritical to me. This protest does certainly warrant attention: A small group of angry people can cause a lot of harm to a City like New York. And Mayor Bloomberg has highlighted the potential plight of a new, young, educated but unemployed generation. But their voices should not be silenced and their grievances should be debated as we are a democracy after all: surely there is some way to debate everything without causing mysery for those who least deserve it?