Of Things To Come.

Very shortly it will be next year and I would like to take this moment to reflect and to see what awaits all of us in 2007 in the real estate world.

Home Sales

Obviously on people's minds is the recent report that housing sales have jumped up.

The report showed that sales of new single-family homes rose 3.4 percent in November, seasonally adjusted, to an annual rate of 1.05 million. That followed a 3.8 percent decline in October. The news helped propel stocks on Wall Street to another record high — its 22nd so far this year — with the Dow Jones industrial average rising more than 100 points to finish the day above 12,500 for the first time.

Of course there are others who think it is still premature to think that the worst is over.

Despite the November advance, sales of new homes are off 15.3 percent compared with a year earlier.
“Although the rebound in sales is consistent with the housing slowdown bottoming out, it seems too early to rejoice,” said Dimitry Fleming, an economist with ING Financial Markets. “Supply is still high.”

Let's not forget that perhaps this jump in sales is due to price reductions.


Housing and the Economy

The term "Goldilocks" is being bandied about as economists are trying to determine whether the economy is too cold or hot.

The economy looks very different depending on whether you are inside or outside the housing market. Consider Andrew Palau, who runs Premier Homes and Additions of River Edge, N.J. Business has dried up as the collapse of the housing market has slashed demand for new master bathrooms and refurbished kitchens across Bergen County in the northeast corner of the state.
“Homeowners don’t have a clear view in front of them so they are not investing because they want to hold on to the money,” Mr. Palau said.
He managed to hold on to his staff of 10 this year, but thinks he is probably going to have to let people go next year. “Everything is telling me that next year will be worse,” he said. “I don’t see how I can keep everyone.”

So one guy looks as if he is about to lose his shirt.

“Our market is as close to capacity as you can get,” said Michael D. Bolen, chairman and chief executive of McCarthy Building Companies in St. Louis, a commercial builder of everything from schools and hospitals to casinos and parking lots.
To hear Mr. Bolen speak, the job market has the go-go feel of the Internet-driven boom of the late 1990s. “It’s as goofy as it’s ever been,” he said. “We’re offering signing bonuses and guaranteed locations to people coming straight out of school.”

And there is another guy who doesn’t have enough warm bodies to give shirts out to. Confused? Don't worry. It gets better.

Economists were taken by surprise by the speed at which the housing market morphed from a surging bubble to a sinking stone. Today, there are some signs that the worst has passed: mortgage applications seem to be bottoming out, for instance.
But the number of permits issued to build new houses fell for the 10th straight month in November, and they are down about a third since November of last year. Residential investment plummeted in the second and third quarters of the year.
Employment in construction has fallen; so has the production of construction materials and other items related to housing. In the third quarter, the slowdown in homebuilding subtracted more than one percentage point from economic growth.
But for all the damage done by the deflating housing balloon, it has so far been narrowly circumscribed.

Today, virtually every economist agrees that the housing recession is likely to continue weighing on economic growth. But the consensus breaks up over how bad that damage will be.

The most important disagreement is over how intensely the housing recession will ricochet through the rest of the economy and how it will affect consumer spending, which accounts for more than 70 percent of the nation’s economic activity.
“I find it very hard to believe that what started in housing ends in housing,” said Jan Hatzius, chief United States economist at Goldman Sachs. “That you are not going to get any spillovers from a major recession in a sector that accounts for 6 percent of the economy.”

Many economists argue that the decline in housing prices experienced so far must inevitably deliver a big blow to consumer spending. Bluntly put, Americans who spent more than they earned as the price of homes soared cannot possibly go on spending as avidly now that the value of homes is tumbling. And if consumers spend less, businesses will stop investing.

Homeowners are certainly extracting less money from their homes to spend. Mortgage equity withdrawals, net of commissions and taxes, fell in the third quarter for the fourth time in a row, to about $380 billion at an annual rate, the lowest level in almost three years.

So it appears they are all in agreement that there will be a housing recession. Question is that how painful will it be for the rest of the economy? But are there degrees of pain when it comes to recessions? As far as I am concerned all recessions suck ass.

Bonus time

Then we have the Wall Street Bonuses which have brokers creaming in their jeans as they envision the obscene amounts of money that seem to be drenching in every corner of Wall Street.

At this point the impact of bonus season is speculation at best. As I stated before in previous entries Wall Street people are not stupid. They are not like lottery winners who blow their first million as soon as they get it. Those who are granted bonus status are going to pay for the operating costs of life, e.g school loans or into an asset class that will give them more bang for their buck. If they decide to buy, they will be looking for the best deal they can get. Even if they are willing to pay top dollar for a home, they will demand and expect their requirements be fulfilled for the premium they are paying.

Of course my brethern beg to differ

“Almost all of us make more money when they make more money,” said Jeffrey Appell, a senior vice president at the Preferred Empire Mortgage Company, who moderated the panel, to laughter and applause.

Brokers are, by nature or training, cheerful and optimistic, and in a show of hands, most brokers in the room indicated that the market had picked up steam last month. Many of the speakers attributed this to the trickle-down influence of the expected supersize bonuses on Wall Street this season and their effect on the rest of the market. (Of course, a 10 percent rise in the Dow Jones industrial average since August may have provided a little juice to the real estate market, too.)

“Bonuses have a psychological effect; there is a very good vibe in the market,” said Jacky Teplitzky, a vice president at Prudential Douglas Elliman. Or as Ernie Goldberg, a vice president at the Corcoran Group, put it, the bonus buyers are getting other buyers to “step up to the plate.”

They further enforce the perception that buyers are now freaking out that they could be priced out with the onslaught of barbarians from Wall Street armed with their enormous checks.

Many brokers noticed not just the bonus effect, but the bonus-anticipation effect. Buyers who sat on the sidelines in 2006, waiting for real estate prices to come down, saw news of outsized bonuses and started signing deals to pre-empt any price increase driven by new Wall Street payouts.

“Part of our recent increase in sales activity has been buyers not in financial services trying to beat the bonus rush,” said James Lansill, senior managing director at the Corcoran Sunshine Marketing Group.

However from the perspective of some wall street tribe members, things are not so rosy.

Not everyone on Wall Street is getting multimillion-dollar bonuses. The average managing director — who stands at the top of Wall Street’s hierarchical food chain, but far from rock-star status — will be getting $1 million to $3 million, which will likely be stashed in savings as memories of the 2001 bear market remain fresh.

“I’m putting it in the bank because I know next year I could be out of a job,” said one managing director at a leading bank.

For hedge fund traders and managers, markets were rough in the spring and summer, and some did not make gains until stocks rallied this fall.

“It was a terrible year,” said one young hedge fund professional. “I am going to the movies with my bonus. By myself."

If this indictative of the current mindset in Wall Street then all this talk about bonuses might just be all hype.

Honestly, I am sick and tired of brokers putting their eggs in one basket as they start screaming and raving how bonus season is going to pull a mighty mouse and save the day. How all the buyers who are sitting on the sidelines better jump in or else they will be crushed by bonus. Because bonus is the viagra of the residential market and there is no way to tell how long it will maintain it's potency and continue to thrust itself into rising prices.

But then again does it really matter?

Tom Acitelli of the NY Observer made these observations.

Otherwise, the Manhattan housing market over the year that’s about to end has remained fairly strong indeed, though the pessimistic storyline sounds loudly still.

Blame the media, brokers tell The Lab. Others cite an entire category of real-estate blogs devoted to the bubble theory, relying heavily—even gleefully—on the pessimism from 2005 going into 2006.

Ironically, many of these so-called bubble-burst blogs went bust as the wider storyline of a total national housing-market collapse lost steam.

And perhaps that’s just it: The Manhattan housing market is … normal. Boringly, stoically normal.
Any ups and downs that might plague other metropolises simply don’t penetrate Manhattan housing, where $400,000 for a decent studio (four walls, a floor and a ceiling) is considered, without irony, a steal.

The last major dip in the Manhattan housing market, in the late 1980’s, was spurred more by changes in the tax codes than by anything else. Even the recession of the early 1990’s—even the terrorist attacks of 2001—couldn’t truly wallop this market. In 2002, the number of Manhattan apartment sales hit a now-six-year high of more than 9,500.

Steady. Even. Normal. These are adjectives, too, for the Manhattan housing market. They’re just not that cool.

I have seen the same numbers that Jonathan Miller has presented and it does look like the market in New York is holding its mud while the rest of the country is crashing and burning. In fact Tom recently pointed out that Manhattan doesn't seem to give a damn what is happening on the national front. Therefore, I would my perspetive is in align with Tom's.

Please hold the collective gasps after I finish, I will make it clear that I still believe that we were in a bubble which has popped. I still maintain the stance that all of us need to be more cautious for a variety of reasons.

Democrats are in control of the House and Senate and we have a President who is struggling to revoke his lame duck status by making some decision that are highly questionable.

Saddam Hussein has recently been executed and even though he hasn't been in power for awhile it will definitely serve as a catalyst for more violence in the region. Even though Bush was given a get out of free jail card by his father he has decided to opt for a course of action that most likely does not bode well for young men who have reached their 18 year old birthdays.


With the current state of the real estate market, flipping is out of touch as speculators have either left by force or by their own free will. Distressed properties will become the real estate product of choice as investors swoop to bag as many of those bankrupt developments as they can.

The Euro is putting foot to ass to the Dollar which is brings another flight to quality on the horizon as Europeans and other foreign investors look for places to put their money in America. Considering the returns that are coming out of the stock market, it may lay the smackdown on real estate.

Here's my final assessment folks.

Those of you need to buy, make sure you can afford the payments and stay the hell away from interest only or exotic mortgages. Stick to the tried and true fixed rate. Those of you who wish to invest, remember to do your due diligence and if the deal doesn't make sense. Walk away. The cashflow has to make sense or you are going to royally screw yourself over.

If you are a seller, exercise common sense and consider reducing your prices if you are not generating interest.

Happy New Year!

Kelly Kreth on TV

I got this link from Kelly Kreth. She has this new gig on GMTV which is the British counterpart of GMA and discusses topics about NEw YOrk City.

It is about the Man Map starts off like a Ithaca College production of Sex and the City and somehow does a 180 onto plane crashes. Don't ask. Just watch.

Kelly is very well poised and professional as always. I keep telling her she should become talent and gather up a reel but she is not down with the idea. I guess she makes more money doing PR with half the aggravation of being a television personality.

Computer geeks

A friend of mine sent me this article about virtual real estate gone wrong.

Second Life Land Deal Goes Sour
By Kathleen Craig| Also by this reporter
02:00 AM May, 18, 2006

In what might be a first-of-its-kind lawsuit, a Pennsylvania lawyer is suing the publisher of the rapidly growing online world Second Life, alleging the company unfairly confiscated tens of thousands of dollars worth of his virtual land and other property.

The attorney, Marc Bragg of West Chester, Pennsylvania, says game developer Linden Lab unilaterally shut down his Second Life account, cutting off his access to a substantial portfolio of real estate and currency in the virtual world. He's demanding $8,000 in restitution.

Bragg claims Linden Lab froze his account after a land deal went bad. The attorney said he found a legitimate way to purchase land at prices far below market rates, using an online auction on the Second Life website.

In all honesty when I first read this article, I was thinking this guy. But then again there are people who out there who are blowing money on everquest characters.

I know. None of this s**t is real. It is all bits of memory on a server somewhere. However the money is very, very real since real people are placing real value on these virtual properties. Really.

Naste Girl

Greetings good people! Yes! I am still blogging and I am quite alive. I appreciate everyone in checking in on me.

I just want give a shout out to Sara Clemence who is no longer with Forbes. No she did not get downsized. She got upgraded and is joining Conde Naste in launching Portfolio next year.

Just in time for those Wall Street bonuses, Portfolio is going to be covering the rich and super rich. More details later, once I figure what she is doing.

Drinking for the Holidays

I never realized how alcohol was so important at Christmas/Hannukah parties until I got my license. A couple I am very good friends invited me to their annual holiday shindig which included copious amounts of alcohol and a viewing of the Star Wars Holiday Special. I was told that it was actually 4 hours long. And I can't figure why the hell Jefferson Starship appeared on the show.

One of the reasons why I hate holiday parties is that as soon as I tell people what I do, I get carpet bombed by questions about how the market is. Or what is a good deal? Then I have to go into my spiel about that I have no idea and that maybe if you opened a New York Times and read once in your life you would be able to figure it out. But I say it in a nice way. When you have do that song and dance every 10 mintues, well it get really f**king old.

What is also annoying is the suspicious glances of peopel thinking I am trying to pick up buyers and listings. In reality, I just want to get loaded and hopefully hook up with a girl who is lonely and desperate from the holidays but is not interested in committnet which of course has never happened because all the girls I meet at these parties are either married, have boyfriends or girlfriends.

Perhaps my most memorable conversation occured yesterday when I was speaking to a young lady. She was transplant from Tennesse and from the way she dressed I could see why she never wanted to go back. She was decked out in red white candy cane stockings and a black top. The necklace she wore around her neck was a simpy cord with various geometric shapes in red. Her hair was quite unusual because it was a mutatation of a bob and bed head. It was very 80's. The way she talked was definitely not southern. In fact she sounded like she was from Greenwich, Connecticut. What was really annoying was the fact that I wasn't sure if she was joking or being saracstic from her tone of voice.

She briefed ,e that she coordinated photo shoots but she was an artist on the side. I told her I was in real estate.

Me
"On weekends I usually show apartments and do openhouses."

Her
"That sounds horrible."

Without missing a beat.

Me
"Yeah. It is."

Pass the stoli.

Women: Saviors of the market?

Women Unafraid of Condo Commitment is another expose on how real estate is just like rock rock and roll since it consists of 4 things. Chicks, chicks, chicks and dough!

Seriously, NYT tries to make sense of why the rest of America is getting clobbered while New York holds its own. The NYT thinks the answer lies with the fairer sex. Below are some points I find interesting.

In the last five months, single women spent more than $30 million out of the $100 million or so in sales in the 299-unit condominium. In fact, single women bought 72 of the first 165 apartments sold. Spending by these women far surpassed that of single men, who accounted for $19 million. Married couples accounted for about $45 million in sales, and investors $5 million.

Mr. Walentas has done so well that he has been able to raise his prices twice. He also sees more married women writing the $60,000-to-$100,000 deposit checks. “It’s the women’s checks,” he said. “It’s not like a dual account — Joe and Suzy. It’s Suzy. I’m amazed.”

All I have to say is this. Happy wife, happy life. However the part where wives are putting their money where their mouths are is quite telling. It could be indicative of husbands who are more than willing to take a risk as long as their signifgant others are the ones footing the bill.

Brokers say that women are betting that even if they buy in a declining market, the values won’t drop as much as they would have spent on rent. They’re more comfortable buying in the same neighborhoods and buildings as their friends do. By purchasing condominiums that they could eventually rent out if they needed to move, they’re also hoping that they can hold on to these properties until the market improves.

So, in other words there seems to be a herd mentality that is displayed by women who are invading Brooklyn. So if one woman screasm "Brooklyn!" They all rush in like the running of the bulls. As long as it is in a enviornment that is attracts their own social circle, they will be more than happy to take the plunge.

"A woman will say, ‘I’m still saving money in the long term.’ ” said JoAnn Schwimmer, an associate real estate broker at DJK Residential. “They’re able to see the bigger picture, while a guy says, ‘I have to get the best deal.’ ” She said that her female clients who bought four years ago have male friends still waiting for prices to drop.

Perhaps. But how long is the long run? How long do they want to stay for to recoup their ivnestment? If the market takes a severe enough beating it may take awhile for you get a return on your investment.

As for women being able to "see the bigger picture" while men just want "to get the best deal,". I have to disagree with that. Getting the best deal is part of the bigger picture. How much you pay plays a critical role in the long term benefits of your home.

Erica Besikof is one of the women who decided that now was the time to buy at 110 Livingston. Ms. Besikof and her husband, Dan Besikof, who currently live in Manhattan in the financial district, put down a 10 percent deposit on a $600,000 apartment. As self-professed Food Network addicts and aspiring chefs, they were sold on the unit’s Viking range and Sub-Zero refrigerator.

Ms. Besikof was so enthusiastic about the purchase that she tried to persuade a half-dozen female friends and their husbands or partners to buy in the same building. Her candidates included a college friend, a high school friend, her husband’s former co-worker, a current co-worker and the co-worker’s former roommate.

So far, only Melissa Sussberg and her husband, Matthew Sussberg, have followed her advice and bought an apartment, a $765,000 two-bedroom. But there’s still time for the Besikofs to turn more acquaintances into neighbors: they don’t move until spring.

The impact of female buyers may be most pronounced in the Brooklyn condominium market, because properties are less expensive than they would be in Manhattan and the deposits are as low as 10 percent of the purchase price. That means that more women who are first-time home buyers can break into the market more easily and that women who own apartments in Manhattan can sell and buy larger apartments in Brooklyn.

Women’s interest is good news for Brooklyn developers, who are beginning to see the same troubling market conditions that are hitting Manhattan and the rest of the country. Brooklyn has 5,888 condominiums under construction and another 11,634 units planned, according to data gathered by Halstead Property.

I am sure anthropolgists would have a field day with this trend since there is so much you can discern from this. At one point some of these women will get married and have children. Brooklyn presents itself as a unique area where they can acclimate themselves and move to other areas of Brooklyn that have better school systems. And the worst case scenario is that they send their kids ot private school which Brooklyn has plenty of excellent ones.

For those, for a lack of a better word, that are part of the spinster set. Brooklyn is a great place where they can lay their burdens down while not having to deal with the refugees from Sex and the City.

New York City real estate brokers say that many of these sales originate from friends talking to friends. “Word of mouth kind of seals the deal for them,” said Sarah Burke, the vice president for sales and marketing at the Developers Group, a Brooklyn real estate company.

Ms. Besikof said that her husband would have been happy to postpone buying an apartment. But she convinced him that they could stop paying a lot in rent and live closer to their favorite beer bar, the Downtown Bar and Grill, and their favorite Thai restaurant, Joya.

“He’s more nervous about the market and if we’re going to make a profit,” she said. If the couple hadn’t found an apartment at 110 Livingston, “he would have been fine renting,” she added.

Of course he's nervous. At a certain point he's going to have kids. And kids cost alot of money. He wants to save up as much money as possible because the reality is that he might become the only breadwinner in the household. Of course one can argue that all he is doing is throwing money down the drain by not buying a place. However there is a certain amount of flexibility in renting. And when things really cool off, he would be allowed to pick and choose what he wants.

While Ms. Besikof encouraged her friends to check out the building, she said she never pressed them to buy. “Everyone, I guess, has to make up their mind to take their own risk,” she said.

Ms. Besikof and Ms. Sussberg were in the same sorority at the University of Wisconsin but graduated in different years. It was a mutual friend who encouraged them both to move closer to her in Brooklyn. Ms. Sussberg, a 28-year-old Chanel sales executive, said that she and her husband, Matthew, a 30-year-old advertising sales executive for the Huffington Post, a political Web site, wanted more space than they currently have in their Upper East Side apartment.

Now that the Besikofs will live on the third floor and the Sussbergs on the fourth, both couples look forward to hanging out together. “It will be fun to have a social life in the building,” Ms. Sussberg said.

This the perfect blend of social networks and a touch of irrational exuberance. It seems in this segment of the market women are leading the charge to stake out their own territory where they can be comfortable and populate it with their brethren. This is no different with the migration patterns of senior citizens to Florida and Chinese people showing up in certain areas of Boston.

Some women said that they felt their friends were better market indicators than any statistics that point to a downturn.

Roberta Brenner, 62, a former recruiter for consumer marketing executives, had accompanied her friend Jill Montaigne, 48, a media and entertainment consultant, to give her advice on buying an apartment at 70 Washington Street in Dumbo, a two-bedroom that cost more than $1 million.

The women had been friends since Ms. Brenner tried to recruit Ms. Montaigne for a job many years before. After 19 years on the Upper West Side, Ms. Montaigne wanted more anonymity and more space for her 8-year-old son, Schuyler.

While Ms. Brenner encouraged Ms. Montaigne to buy, Ms. Brenner had some reservations about the neighborhood. In the spring, Ms. Montaigne went to dinner at Ms. Brenner’s and encouraged the Brenners to move to Dumbo. The next weekend, the couple checked out the building for themselves.

While women have purchased a smaller percentage of apartments in this building, they still have made an impact. Single women bought about 40 of 200 of the units, including the two penthouses, accounting for about $35 million in sales, according to the executive sales director, Toby Klein. The project is a conversion by Mr. Walentas’s company, Two Trees Management.

“There’s a certain amount of evangelism that goes on,” Ms. Montaigne said. “There are so many people who moved in because they knew someone else who bought in the building.”

This is one of the reasons why real estate is not an exact science. Sometimes it is not the numbers that tell the story. Sometimes it is people on the ground who are in the trenches that will give you a better perspective of what is going on. Reporters call this "Shoe Leather."

People can argue all day on why men are so committment phobic. Perhaps it is due to our genetic code of being hunter gatherers who have a constant need to wander. Or perhaps men are not prone to impluse buying? Are women able to percive another angle in real estate? Do they have the intuition to understand more than the numbers? I have no idea.

I am curious to see how these women fare in the next couple of years.

"What were you doing in Manhattan?"

My first apartment was a one bedroom in Gramercy Park. Whenever I was commuting by subway I would often pass by the Washington Irving High School. On some days the streets would be crowded with kids, but I usually just walked across the street to avoid the crowds.

I never had any problems with those kids until one day coming back from a sh***y interview. It was a rainy day and I was coming up the escalator that was near the Food Emporium entrance on the Southside of Irving Plaza. As I was getting out I saw this crowd of high school kids were taking shelter from the rain. They were quite loud and boisterous and I kept walking until one of them jumped in front of me with a hard look on his face. He couldn’t have been more than 13 years old but he tried to come off as a gangsta. Maybe he was. I could care less. I had just f**ked up the interview and was in no mood to play Hanging Tough with this douchebag.

As I was walking past him, I saw out of my perhirperal vision one of his cohorts suddenly slap me in my shoulder. It wasn’t a hard slap but it was enough to piss me off. I turned to him and he ran off into a crowd of his friends. I was about go further but intuition stopped me and pointed out that if this was to get violent I would be completely f**ked because these a**holes outmanned me 20 to one. So I left while they heckled me.

I have to be honest. I really wanted to physically extract a bicuspid or two from that piece of garbage but in retrospect it wasn’t worth it. And I wrote it off as one of those ananomolies that happen when a lot of bored young people are hanging out in a group.

Now we got this bull**t that happened in the Farmer’s market in Union Square. In all honestly when hearing the reports of violence the last thing I thought of a rumble between two high schools.

I feel a tremendous amount of sadness for the boy who lost his life. It sounded like this kid has promise and was going to make something of himself. As for those other meatheads, I hope Kelly goes out and lays the smackdown on these punks.

It suprising how uneducated today's wannabe punks are about large scale campaigns of hand to hand combat. Any douchebag who has watched West Side Story knows that if you engage in a melee of this level you stage it in an area that will allow a certain amount of isolation. A park, alley, somone’s house party are a perfect place to go toe to toe. You do not have a throwdown in Union Square of all place because is not designed for urban warfare. There are too many innocent bystanders that could get hurt and there is also a ton of traffic, which increases your chances in getting hit by a car. Also massive riots really harm property values.

Just like there certain areas you don't go to because somone could crakc your skull there are certain areas you do not have a fight in because you are asking for trouble.

No. I am not a former member of the Warriors but I make an effort to be aware of my surroundings so I don’t get jumped.

You have a beef with someone, fine, go settle it in a secluded area where I won’t be a witness to whatever violent buffoonery you engage in. Because I could care less that this guy dissed you because of the way he looked at your sneakers.

Those of you who fear a return to the era of when street crime was prevalent to the point that crack heads would snatch babies out of carriages and demand money from parents and every night on the subway was an adventure in not getting mugged, do not fret. This is Bloomberg’s New York.

The man has put too much time and money in developing New York City into a viable asset. And even though he is approaching the finishing line, he will let nothing besmirch his legacy. Also bear in mind there is a ton of businesses who treat Union Square as their own personal gold mine. They are not going to simply stand there and let there gold mine be raided.

If another incident of this magnitude occurs and some innocent bystanders get hurt, Bloomberg will lockdown the city and sweep it clean with Herucles teams. He will not let a bunch of young dumb stupid punk kids run rampant and ruin what he has built. If you think Giuliani was crazy, then see what happens when you f**k with a self made billionaire.

Update

Gretings folks, as you may have noticed my entries have been a bit erratic. I have a perfectly good explanation. The Grunt has been quite busy for the last couple of weeks due to some recent developments. Nothing major. I just have some loose ends to tie before the New Year. But I will try to do at least one entry a week. Don't worry people. I am not going anywhere.

Good Hunting!

Dog Walk Tension in Park Slope

This weekend I was at a shindig in Brooklyn when I was talking to a couple from Park Slope when the subject of dogs came up.

Apparently there is a war at a small park in the area where they walk their dog. So far it has entered the passive aggressive stage where the gates of the park have been chained open by an unknown party. Of course a counter offensive is being planned to release the gates. Now the park is open to the public but apparently certain parties take offense to the gates.

No switch blades or zipguns have been used but if this escalates expect a rumble to break out.

Going with the flow

This just broke on the New York Times.

November 30, 2006
46-Tower Brooklyn Apartment Complex to Be Sold
By CHARLES V. BAGLI
Starrett City, a 140-acre apartment complex built 30 years ago on Jamaica Bay in Brooklyn as an enclave for working class New Yorkers, is on the auction block, the owners confirmed today.

The complex, whose owners changed its name in recent years to the more chic-sounding Spring Creek Towers, is the largest federally funded rental complex in the country. Its approximately 14,000 residents live in 46 towers on a peninsula with its own schools, churches, synagogues, shopping center, post office and power plant.

The sale by Starrett City Associates, a group of investors, is the latest indication that even bland brick buildings are a sought-after commodity in a booming real estate market that has driven prices skyward for everything from condominiums to tenements. The Starrett City auction follows by two weeks the $5.4 billion sale of Peter Cooper Village and Stuyvesant Town. Tenants there fear the loss over time of an increasingly rare middle class redoubt in Manhattan.

Starrett City is far from flashy Manhattan, but real estate executives still expect the bids for the complex, which has 5,881 apartments, to exceed $1 billion.

It was unclear how much would change under a new owner at Starrett City, which was built by a limited-profit housing corporation under the state’s Mitchell-Lama program as subsidized housing for moderate income workers. About 60 percent of the tenants get direct federal rent subsidies, and another 30 percent benefit from other kinds of government assistance.

According to real estate executives familiar with the property, a new owner could choose to drop out of the Mitchell-Lama program and develop some of the vacant land with new apartment towers.

Charles Barron, the councilman whose district includes Starrett City, said yesterday that he would keep a close eye on the sale. He said he had spoken to the sellers, who assured him that even if a new owner pulled out of Mitchell-Lama, the vast majority of the tenants would be able to remain.

“I’m not going to sit back and let them assure us that everything is fine,” Mr. Barron said. “I’ll be meeting with residents and the new owners to make sure it stays affordable and in the same condition. We don’t want to get duped or gentrified

.”

Charles Barron and his constitutents have nothing to worry about. Starrett City won't be going condo for awhile. The market is waaaay too saturated and the cost of construction is still quite high. Any gentrification that does occur won't happen during Barron's politcal career, in fact it might not even happen in his lifetime.

So why would any investor plunk down $1 billion if they aren't able to develop it and kick the occupants out? Because what makes Starrett City so valuable is the occupants. As it was pointed out, 90% of the units are subsidized by the government. In other words Federal Government is the acting tenant. In other words this complex is laying golden eggs and any investor worth their salt will do anything that could not to kill the goose.

So why is Starrett City Associates walking away from this complex? I suspect it is because they have squeezed every penny they could out that complex through refinancing and tax break. Their people probably did their projections and realized this is far as they could go and this is probably the best time they can cash out until the next cycle. Another incentive is the fact that our commander in chief looks down on federally funded housing and is doing what he can to get rid of it.

So why would anyone want to buy Starrett City? As I mentioned, the guaranteed cashflow of government subsidies is a huge incentive for any investor. For investment properties, it is always about the rent. I know one landlord who loves Section 8 housing because he gets 95% of his rent for his Section 8 building every month on time.

Considering how the stock market is acting and how weak the dollar is, certain types of real estate investments are probably the best options to park large quanties of cash. Not to mention the tax benefits. Federally funded housing is probably as stable as you can get because it looks bad for the Federal government if you have to drag them into housing court for failure to pay rent.

As for subsidized housing getting killed, its highly unlikely that will happen now that the Democrats in control.

Please do not mistake this as a sign that the boom is still on. In fact this is more evidence that this is all over. Professionals like Starrett City Associates are always the last to leave the party because they want to eat and drink as much as they can before they leave. But their exit is timed just right so that someone else is stuck with the bill.