From bad to oh we are so f**ked

The s**t didn't hit the fan. It was the whole f**king septic tank. As much as I would like to blame Rosie O'Donnell for pissing off the Chinese for the worst day in the stock market since 9/11. I think that would oversimplify the matter.

Barry Ritholtz of the Big Picture argues that it wasn't the Chinese that have led us to this point but this is entirely of our own doing. In a nut shell it is our economy.

He lists these points that have dominated the news:

• Freddie Mac to Tighten Subprime Rules -- (2.27)
See also: Video: Freddie Mac chairman and CEO Richard Syron discusses new subprime mortgage standards, which will be implemented September 2007.

• Orders for Durable Goods Tumble (2.27)A key barometer of business-equipment spending -- orders for nondefense capital goods excluding aircraft -- fell by 6.0%, after increasing 3.6% in December.

• No Worries: Banks Keeping Less Money in Reserve (2.27)Every Dollar Set Aside Can Cut Into Profits

• Subprime Game's Reckoning Day (2.27)Risky Lending Fallout Threatens to Spread;Uncertain ARM Strength• Home Lenders Cut the Flow of Risky Loans (2.26)Default Fears Drain Subprime Pool, Adding To Pressures on Prices

• Mortgage Hot Potatoes (2.15)Banks Try to Return High-Risk Loans To the Originators

• Default Jitters Batter Shares of Home Lenders (2.9)Risky Mortgages Spark Concerns, Uncertainty About Fallout on Bonds

Let's not forget our former Fed Chairman Alan Greenspan who alerted the world yesterday that the USA is at risk for a recession. Great timing as always Alan.


What is probabkly going to get our nuts in a sling are the sub prime loans.


The King of all Appraisers, Jonathan Miller, had this to say about the sub prime minefield.

As I lamented in yesterday’s post Banking On Profits, Not Risks,
the lending industry and investors have had short attention spans when it comes
to understanding risk. As the housing market continues to either cool or
stabilize, depending on what local market is being discussed, a new focal point
is arising…lending.

With the housing bubble as a media topic nearly worn out, or even with
a few kicks left in it, subprime has taken the torch as one of the next hot
(er…sorry) topic. Today alone, the Wall Street Journal had seven stories on
subprime lending. And here is an endless supply of other
sources on the topic as well.

Lou Barnes over at Inman has another bleak perspective on sub prime loans.

The money world has since 2005 watched for a blowing bubble in housing
above all other economic possibilities, but it's been watching the wrong thing.
Close, but wrong. Housing is in a long-term correction, still looking for
bottom, but the correction is orderly. Foreclosure rates are likely to rise
clear through 2008, but there is no evidence of recession-inducing spillover
into the economy as a whole -- dampening growth but not drowning it.
The party most vulnerable to the retreat of housing exuberance is not housing, it's
the mortgage profiteers, at this moment the Wall Street co-dependents even more
so than their Main Street lender-accomplices.

Junk is very, very lucrative. However, as a kindly man explained to me near the end of my brief career as a junk-bond salesman, "Mr. Barnes, there is a difference between junk and trash."
Every financial reporter and news outlet has for a month been all
over the demise of the subprime mortgage, the accent on foreclosures. In the
mortgage market, everybody has been blaming everybody: it's only the 2006
originations, it's only the bad actors ... big guys stuffing faulty paper back
down the throats of little guys until they fold, giant guys taking big losses
(HSBC $10 billion so far), but not giant losses.

As of Friday there are not enough buyers of subprime risk to cover
loans recently closed or in process. In panicky conditions, no buyers at any
price. Subprime loans this week from time to time may be unobtainable until
their rates move high enough and credit standards tighten enough. Trash, like
other things, rolls downhill: Alt-A loans are closer to junk than trash, but
high loan-to-value-ratio Alt-A loans are still trash. By next week there will be
few buyers of Alt-A risk, and that market may lock up just like subprime.

And no. I did not forget about the latest housing report. According to Inman.

This Standard & Poor's/Case-Shiller U.S. Home Price Index declined steeply throughout 2006, falling to near-zero growth after peaking at about 16 percent year-over-year growth in 2005.

It appears the idea that when the real estate market goes up then the stock market goes down and vice versa has been thrown out the window.

Hey, when we crash and burn at least we do it in style.

Face Value: Creaming in their jeans over Queens!

I would like to announce a mission shift of this blog which is an implementation of a new feature called Face Value. The objective of Face Value is to analyze the locations of real estate listings and present as much information about the listing's surroundings. In the near future I plan on adding on a financial analysis portion of this feature but for now this will simply be an analysis of the location and what it offers. I just want to remind people that I am not an appraiser so this analysis is based on my experiences in real estate, from researching other sources and from walking around the neighborhood.

For this particular evolution I will be focusing on Queens. As some of you may know there was an entry in Curbed titled the Curbed Roundtable: The Year of Queens?

Do I think this will be the Year of Queens? Well, they have been talking about Queens being the second coming for the real estate market for sometime and there is potential for this area. So on February 18th, 2007 I hit the streets of Queens to get the rundown.

The Q23 bus ride was quite uneventful and I got the chance to do some sight seeing which included a lot of beautiful homes in this area of Queens. In all honesty, I felt the bus route was out of place in this area since the area felt quite suburban.




Yes. There is a Williamsburg in Queens.




I found the building pictured on Massey Knakal's website. I just want to give a heads up that I do not work for them and I have never even been inside this building. This is their description.

100-07 Metropolitan Avenue, Forest Hills, NY (On Metropolitan Avenue between 70th Avenue and 71st Avenue.) Mixed-Use Investment Buildings,Outer BoroughsThe subject is located on Metropolitan Avenue, between 70th Avenue and 71st Ave. (Continental) in the heart of a charming and lively commercial area abounding with restaurants, shops and a movie theater. The area is greatly benefiting from additional commercial projects in the vicinity (e.g. Shops at Atlas Park and a proposed retail mall at Metropolitan Ave. and Woodhaven Blvd.). The property consists of a retail unit of approximately 1600 SF leased until February, 2010 and two residential units. Perfect for a 1031 or a long term investor, who would benefit from the higher rents he will get at retail lease expiration (current rents are approx. 20-30% below market value).

ASKING PRICE: $1,400,000


Massey Knakal states that the zoning for this building is a R3-2 and C1-2 Overlay.


According to the Zoning Handbook, the R3- 2 code are general residence districts which means it allows an array of housing models which include small multi-famiyl apartment houses and two family residences. C1-2 Overlay are districts that are mapped as commerical overlays with residential districts. They are mapped along the streets that serve the local retail needs and are found in low and medium density areas.

Now the number "2" is important because that code allows more flexibilty in uses which include funeral homes and repair services.


As I was walking around, I did see some Mom and Pop type restaurants and pubs. Like the one pictured above. Pictured below is a high end Italian restaurant that has been around for about 3 years which is something your most likely to see in the Upper West Side of Manhattan.

Now here's where it gets a little interesting.

Yes. A CVS. It appears Duane Reade has yet to get their meathooks into this area. Now remember when I mentioned how the number "2"? plays a signifigant role in the zoning? This is why.

This area is populated with gas stations and businesses associated with auto repair and maintenance. Why? Because this is a high traffice area due to its close proximity to Woodhaven Boulevard and the Long Island Expressway. In fact across the property is a Sunoco station. What I also noticed was the presence of national banks in the area which also sprout up where the traffic is. Another kicker was this.

Yup. That is a Home Depot. Well, at least one in the embryonic stages of being built. Why would a big box want to be around this area? Once again, it is the traffic and accessibility to the LIE. I think what made Home Depot snatch this area was because of the density of homes in the area. Whether it is due to wear and tear or asthetic reasons, homes need to be repair or renovated. But what really threw me for a loop were the following businesses I found where 100-07 Metropolitan Ave is located smack dab between them.

SIZZLER

MCDONALD'S

The presences of these two business are very signifigant since they do not simply setup shop anywhere. They do their market research which probably brought them to the same conclusions as those gas stations and auto shops in the area. Lots of auto traffic. Which makes that flashy singage really handy to attract costumers.

McDonald's is a fast food business that is ideal for cars. People can use the drive through or park their cars to grab a meal to go. Now when I think of Sizzler , I do not think of high end dining. I've been a Sizzler twice in my life, the first with some high school friends and then with my sister who declared that the cusine was like eating a salt lick and forbid me to ever go to one ever again. However there appears to be a demographic in this area that enjoys this type of high sodium, high carbodydrate cookery.

Now as nutty as Jeffrey Chodorow is, I do not see him being crazy enough to open up a restaurant with a Sizzler and McDonald's in the same area since they cater to a certain demographic that purchases their products which are not Jeff's crowd. So these two businesses may serve as a barrier to entry for others future pioneers of nouveau cusine.

Now mind you, I am not writing this listing off. There is a profit to be made on this property, however there are certains aspects one needs to be aware of. What makes the area valuable is the traffic. There are a ton of cars coming throught the area, that is why certain businesses have gravitated toward that area. In a way it is smaller version of Queens Boulevard just without being called the Boulevard of death.

As I have stated before there is a bunch of gas stations and an auto repair shops. These types of businesses, particularly gas stations can be potential brownfields. Underneath those gas stations have enormous tanks below them to store gas. Now if, god forbid, something happens to those tanks you have a potential enviornmental issue. Repair shops and Lube replacement shops are no different. They all accumulate some type of waste and need to dispose of it properly. If they don't, well residents are going to have some problems.

Another issue is transportation. There is no subway line in this area. You need a car or you have to rely on the buses. From there you can get dropped off at 71st Continental Ave and take the subway or LIRR. Depending on outside factors and your timing you could be looking at a very long commute. When I was there I was waiting for about fifteen minutes for the bus. It seemed like ages with the arctic wind blowing in my face.

This area is a huge goldmine but it depends on what type of business you want to attract with that listing. As stated before, anything automotive is a good bet in the area. The landlords that have these types of businesses leasing to them are ensured a good stable cashflow.

Is this building a good deal? I don't know since I haven't done a proforma or seen the comparables for other properties. I do know if you want to develop something you might have issues with your neighbors since the building shares ajoining walls with its neighbors.

With rents shooting up in Brooklyn and Manhattan it is possible that the next migration of young people will come to this area and drive up the value of the area.

What I think would make this more property valuable is creating an assemblage and buying out all the other adjoing buildings on the block. Then either selling the whole shebang or just treating it as an investment property.

As I have stated before, if you live there you need a car or rely on the bus system. Perhaps I am biased since I have always traveled by subway but I find taking the train alot quicker than the bus. And I sure as hell don't want to get a car. Considering how gas prices are starting to kick up, having a car might become a burden. Let's not forget parking.

Could this become the next Williamsburg? It is possible that a convoy of hipsters from Brooklyn could set up their homes here since there is no where else to go? Let's what happens in a year.

Roll Call: The sick edition

I have been fighting an annoying cold that is my chest, throat and sinuses. I am really pissed becasue I take very good care of myself and to make matters worse there is a going away party tonight for some friends of mine. That being said. Here we go.

The first link I would like to address is the Ask Curbed: Is There a 'Frenzy' in the Market? entry.

My Dead Cat Bounce entry has tapped into the anxiety of where this market is going. What I am really happy about is that we are having a discussion over the situation. Even though it has become quite heated and there have been some bumps bruises in the process, even for yours truly.


Below is a press release from Kelly Kreth. I wonder if MANAR and REBNY get along? Who has more pull?

KEVIN BROWN AND PHILIP KIRACOFE OF CENTURY 21 NY METRO
APPOINTED TO THE BOARD OF MANHATTAN ASSOCIATION OF REALTORS


( New York , New York , February 22, 2007) Kevin B. Brown and Philip Kiracofe of Century 21 NY Metro were recently appointed to the Board of Directors of MANAR.

Manhattan Association of Realtors (MANAR) is the local chapter of NAR (National Association of Realtors). NAR has over 1.3 million members, the largest real estate trade organization in the country.

Brown, a 17-year veteran of the Manhattan real estate industry recently merged his firm with Dwelling Quest to form Century 21 NY Metro. His vision, driven by a rapidly evolving NYC marketplace, is to revolutionize conventional real estate practices through state-of-the-art technology, impact marketing, and exceptional customer service.

“Being in the service industry for almost twenty years, I immediately knew I wanted to be a part of MANAR because it greatly benefits both customers and clients,” says Brown.

“We’re very pleased with the addition of Century 21 NY Metro to MANAR, and to have Kevin Brown and Philip Kiracofe on our Board. I’m quite confident that their knowledge and real estate experience will take MANAR to the next level,” states Robert DeLeonardis, president, MANAR

Kiracofe, a former top producer within the Prudential system has been appointed to MANAR Leadership Committees focusing on Technology integration/adoption and the growing use of the MLS in NYC. Both positions will tap into his background in technology, sales and finance.

“In general, my entire focus is increasing transparency for buyers/sellers, and I will actively promote MANAR’s leadership position in NYC,” explain Kiracofe, executive vice president of sales, Century 21 NY Metro.

When asked about the importance of MANAR and having two representatives on the Board of Directors, Mike Simon, president, Century 21 NY Metro commented, “As the largest national brand and a growing presence in NYC, we felt it important for our firm to enhance our relationship with NAR by developing a deeper relationship with the national realtor’s association governing body in NYC.”





About CENTURY 21 NY Metro
CENTURY 21 NY Metro (www.C21nyc.com) is a full-service New York City real estate firm offering luxury apartments (condominium, condo, cooperatives, coops, condops) and townhouses for sale and for rent. CENTURY 21 NY Metro is professional real estate, serving all of Manhattan/NYC, Brooklyn, Queens, and the Bronx .

About MANAR
Manhattan Association of Realtors (MANAR) is the local chapter of NAR (National Association of Realtors). NAR has over 1.3 million members, the largest real estate trade organization in the country.


Also the Architects held their own version of the Oscars.

AMERICAN INSTITUTE OF ARCHITECTS NEW YORK CHAPTER
ANNOUNCED 2007 DESIGN AWARDS

31 Winners Selected from Over 400 Submissions

Works Show Vitality of Design and Architecture in NYC -- and by NYC-Based Firms Working Around the Globe


( New York , NY ) – February 14, 2007 – The New York Chapter of the American Institute of Architects announced the 2007 Design Award winners during its annual evening symposium on February 12th.

The coveted award recognizes excellence in architectural design by New York City architects and by architectural work in New York City .

From over 400 submissions 31 awards were given in three categories: buildings, interiors, and projects. Architects from all fifty states and twelve foreign countries submitted.

The jurors for this year’s competition, now in its 26th year, were:
David Adjaye; Jeanne Gang; Dan Hanganu; Debra Lehman-Smith; Benjamin Gianni; Matthias Sauerbruch; Piero Sartogo; Massimiliano Fuksas; and Peter Waldman


Architecture Honor Award winners:

1. Weiss / Manfredi
Olympic Sculpture Park

2. Diller Scofidio + Renfro
The Institute of Contemporary Art

3. Steven Holl Architects
Higgins Hall Center Section / Pratt Institute

4. Steven Holl Architects
New Residence at the Swiss Embassy

5. Steven Harris Architects LLP
92 Jane Street

6. Foster + Partners
Hearst Tower

Architecture Merit Award Winners:

7 Peter L. Gluck and Partners
Affordable Housing

8. Steven Holl Architects
School of Art and Art History, University of Iowa
9. noroof architects
Slot House

10. Skidmore, Owings & Merrill
United States Census Bureau Headquarters

Interior Architecture Honor Award Winners:

11. Dean / Wolf Architects
Operable Boundary Townhouse Garden

12. Della Valle Bernheimer
23 Beekman Place


Interior Architecture Merit Award Winners:

13. STUDIOS Architecture
Bloomberg LP Expansion Floors 17-20

14. Christoff:Finio Architecture
The Heckscher Foundation for Children

15. Asymptote: Hani Rashid and Lise Anne Couture
Alessi Flagship Store New York


Interior Architecture Of Interest to the Public Realm Award Winners:

16. Sage and Coombe Architects
New York Public Library Fort Washington Branch Children's Room
17. Skidmore, Owings & Merrill
United States Census Bureau Headquarters


Project Honor Award Winners:

18. Thomas Phifer and Partners
North Carolina Museum of Art
19. nARCHITECTS
Windshape


Project Merit Award Winners:

20. Cooper Robertson & Partners
Zuccotti Park

21. Thomas Phifer and Partners, Office for Visual Interaction, Werner Sobek Ingenieure
City Lights

22. Caples Jefferson Architects
Weeksville Heritage Center

23. Robert Siegel Architects
United States Land Port of Entry, Calais , Maine
24. Smith-Miller + Hawkinson Architects
405 West 53rd Street

25. Ogawa / Depardon Architects
Red Hook Workspace

26. CR Studio
Pier 62 Carousel Shed

27. Lyn Rice Architects
Sheila C. Johnson Design Center

28. Kohn Pedersen Fox Associates
Park Fifth

29. Rogers Marvel Architects
55 Water Street Plaza, The Elevated Acre

30. Rogers Marvel Architects
Battery Park City Streetscapes

31. Frederic Schwartz, Architects
New Orleans ShotgunLOFT Affordable Housing

I am heading back to bed and hopefully be able to beat this cold in time for the party. I also want to alert my readers that there will be a mission shift in this blog. More details later.

The Dead Cat Bounce Part 2: The Punisher

The Punisher is an avenging angel who goes after criminals and the scum of society that are beyond the reach of rules of law. With an uzi in his hand and a white skull on his chest, he doles out justice in a simpl straight forward manner er. If your guilty, your dead.

A man of violence, just like his origin. Frank Castle was going to Central Park with his family to have a picnic when they accidentally stumbled upon a mob hit. And as you can guess, the participants had no desire to leave witnesses and opened fire on Frank Castle and his family leaving Frank the sole survivor of the massacre.

After recovering from his wounds he discovered that the law would be of no help in bringing him justice. So he decided to take it upon himself exact punishment. Of course, being a decorated Vietnam Vet with special forces experience didn't hurt either. Enter the Punisher.

He is considred a favorite comic book character among fans because he is more relatable than Spider-Man and Batman. He is just an ordinary man who has an unquenchable desire to bring the hammer down on those who bring nothing but pain and suffering to the innocent. When you are a kid who got bullied alot, reading a Punisher comic was great way to kill the demons.

He was the everyman, the guy who just said enough and decided to do something permanent and violent against the scum of society.

I still read the Punisher and I still get a kick out of his adventures as he takes on all comers of the criminal and the super villian underworld. However, I am aware that the character is pretty much a psycho and somone that could only exist for this long in the comic book world. As for dealing with bullies. I am a big believer that success not firearms is the best revenge.

The reason why I am bringing up the Punisher is due to the article in the New York Times which has become the most emailed article of the New York Times. I am sure that many a broker have been mandated to email these it to all their buyers who have been sitting on the fence and their sellers who have been tearing into their cuticles.

I am not surprised about this development in the market. As I have stated before in previous entries, I could see Manhattn being able to weather the bubble burst. But it is also probably unlikely that Manhattan will walk unscathed. Even the experts are a little wary.

Real estate experts say they see no reason for the trend to not continue, with economists predicting stable mortgage rates and a continuing city budget surplus. However, other factors may alter New Yorkers’ renewed interest in buying real estate, including an expansion of the Iraq war, a changing employment picture or another terrorist attack.
Yet, there is “cautious exuberance,” according to Steven L. James, director of Manhattan sales for Prudential Douglas Elliman.
A week ago, one open house attracted 100 people to an Upper West Side one-bedroom; a $2.475 million house in the Park Slope neighborhood of Brooklyn sold in a day.
Across the board, the prices of Manhattan apartments are rising. Jonathan Miller, the president of Miller Samuel, an appraisal firm, said the number of contracts signed this January was 19.4 percent higher than in January 2006. Prices were up 14.4 percent in the same time period. Inventory, which was mounting last summer, is shrinking fast.
Now, according to Mr. Miller, statistics showed that sales of studio and one-bedroom units, stagnant over the past year, were up 13.7 percent in January. “It’s not like a lot of huge sales at the high end skewed the average up.”

It is noticebale but it is not huge. Which is the reason why the shamans of the industry are not whooping it up.

Mr. Miller said New Yorkers had been reluctant to buy because of the feeling of an impending crash. “Last summer, a lot of information was being dumped on the consumer: stories about the glut of condos in Miami, Washington, D.C., and Las Vegas, exacerbated by the constant debate on the blogosphere about housing bubbles, mixed together with a barrage of negative predictions,” he said in a telephone interview.

I have to concur that the past several months the consumer has been bombarded with alot of information about the end of the market. WheneverI told people my background they would ask what the market was like and if they should buy. It seems consumers were looking for that big bang. The crescendo, that said "You're f**ked." That crescendo did come but it arrived for the rest of the nation.

Although no one can pinpoint the moment when New Yorkers started feverishly buying again, Kirk Henckels, the director of the private brokerage division of Stribling & Associates, said he thought the luxury market picked up after Labor Day.

He and others said the resurgence was partly fueled by the fall’s record-setting (and well-publicized) sales of a few multimillion-dollar apartments and town houses, like the Stanford White limestone palazzo at 25 East 78th Street bought by Mayor Michael R. Bloomberg for $45 million and the Harkness mansion at 4 East 75th Street sold in October for $53 million.
Then came this year’s stratospheric Wall Street bonuses, and the market exploded, real estate executives said.
“The plunger that freed up all the hesitation at all price levels was those bonuses,” said Diane Ramirez, the president of Halstead Property. “It cleaned the pipes and gave confidence to even small apartment buyers.”

Those damn bonuses. Every broker should give up their first born for the hype that Wall Street gave them. Along with some high profile sales, it looks as if happy days are here again.

Which brings me to the Punisher. Besides using it as an excuse to showcase some sweet Tim Bradstreet art, I think there is a Punisher awaiting this market.

Punisher is only one man but he has earned a reputation of taking down the biggest, baddest motherf**kers. One of the key reasons he is able to take on such bad motherf**kers is these villians thought they were the baddest motherf**kers on the planet. They thought they were untouchable, that not even God bring them to tears. Of course the Punisher proved them quite wrong. Also the Punisher is a tactical genius. I remember the first issue of the Garth Ennis MAX series of the Punisher where he led an army of wiseguys that were armed to the teeth into an ambush consisting of a mine field and an M-60. And all he had to do was get them really mad.

Now, I am not saying that there is a costumed vigilante with a pair of uzis who is going to wreck this market. What I am saying is that we should not be lulled into a false sense of security like those bad motherf**kers. There is a Punisher out there or a series of Punishers that will bring turbulence to this market. Whether it is inflation, interest rates, the economy and the expanding theatre in the Middle East, something is out there.

Of course, there will be others who think I should shut the f**k up and stick to playing with my comic books. Which is fine. But those of you who are listening, if your a seller, now is the time to liquidate. Run with this cycle of exuberance because it looks it might be the last call before closing time.

The Dead Cat Bounce

The Dead Cat Bounce defined by Wikipedia.


A dead cat bounce is a term used in market economics to describe a pattern wherein a moderate rise in the price of a stock follows a spectacular fall, with the connotation that the rise does not indicate improving circumstances. It is derived from the notion that "even a dead cat will bounce if it falls from a great height".
The phrase has been used on the trading floors for many years. However the earliest recorded use of the phrase dates from 1985 when the Singaporean and Malaysian stock markets bounced back after a hard fall during the recession of that year. The Financial Times reported a stock broker as saying the market rise was a 'dead cat bounce'.
The reasons for such a bounce can be technical - investors may have standing orders to buy shorted stocks if they fall below a certain level, to cover certain option positions, or for speculation. Since bounces often occur, investors buy into what they hope is the bottom of the market, expecting a bounce and thus make a quick profit. The very act of anticipating a bounce can create and magnify it.
A market rise after a sharp fall can only really be seen to be a "dead cat bounce" with the benefit of hindsight. If the stocks starts to fall again in the following days and weeks, then the bounce was for technical or speculative reasons. If the stock remains steady, then the bounce is merely a correction to over-selling.

I bring up the dead cat bounce because I think Manhattan is probably experiencing it right now. In a previous entry I wrote about the Lazurus scenario that was occuring in the Manhattan market.

Mind you, I am not back pedaling on what I have written, but I am just bringing up another possibility that this just another aspect of the market entering its normalization phase. What got my wheels turning was the drastic drop in home prices on the national front.

This part probably got a lot of people choking on their breakfast.

In addition to weaker sales and declining prices, the number of homes on the market has been climbing. That suggests, economists say, that prices may have to fall further for sales to pick up and the overall housing market to recover. In the fourth quarter, the vacancy rate for owner-occupied homes was 2.7 percent, up from 2 percent a year before and the highest it has been since the Census Bureau started compiling the data in 1956.
“That means we have got a while before this thing fully adjusts,” said Edward Leamer, an economist at the University of California, Los Angeles. Mr. Leamer noted that individual sellers often preferred to wait rather than cut the price to a level that would be agreeable to most buyers. That gap between seller and buyer is reflected in the decline in sales and the buildup in the number of homes sitting vacant.

With the rest of the nation crashing and burning, is Manhattan simply the last candle to burn out? Are we the dead cat bounce of America?

Racism

WARNING: This entry will be offensive. Unfortunately it is necessary to present a point or two. If you are easyily offended then go to Gothamist for a less offensive entry.

Recently a group of musicians pulled a Rosie O’Donnell by naming themselves The Ch**g Ch**g Song. Now those of you who are dense, “Ch**g C**ng” is a derogatory term aim spefically towards the Chinese language but it is a slur that can be applied to Asians in general.

So these poseur hipsters were forced to cancel a concert at Bryn Mawr College and in response, the lead singer wrote a unremarkable and incoherent letter defending their name stating that Ch**g Ch**g” was German slang and that the people who forced the cancellation of the concert were ignorant. She also insinuated that being a child of a gay parent and of Italian descent allowed her to act this way.

I am not going to go any further about the letter because I think I lost a couple of IQ points reading it. You can tell this girl was rejected by a couple of community colleges with the way she formualtes her senteces and arguments.

Of course Bryn Mawr responded in kind with a barrage of letters which include the editor, a student and the Office of Intercultural Affairs which I thought hit it on the nail.

Ms. LaMendola maintains that the band’s name is “(non)offensive,” despite ASA’s efforts to educate her on the derogatory nature of the term, “Ching Chong.” Her explanation that a variation of the band’s name, Ching Chang Chong, is the name of a game in Germany, is irrelevant. Our community is not in Germany. “Ching Chong Song” is offensive to the Asian students, faculty and staff at Bryn Mawr College, where the band was initially asked to play. Ms. LaMendola proposes, with no foundation, that homophobia is the basis for opposing her band’s appearance at Bryn Mawr. Matters of sexual orientation are perfectly immaterial to the band being asked not to appear here. Further, we do not believe that Ms. LaMendola’s sexuality or views on sexuality entitle or permit her in any way to insult another community. It is the group’s name, which is the offending issue—nothing more. Our community is insulted and offended (not “scared,” by the way) by the group’s name, and that is the reason for the cancellation.

And of course NYU, known for being sensitive to the needs of gays, lesbians and minorities decided to invite these douchebags to play a concert even though they already knew about the controversy. Unsuprisingly, the Asian Student body responded with a peaceful protest which resulted in the band apologizing and changing their name. Of course the apology was an insincere one

NYU senior Lily Yuan expressed concern about the sincerity of the band’s apology. "But, even though the band changed their name, they announced it with sarcasm and pride and few words that meant nothing and left us standing in humiliation and shock." Yuan was brought to tears during the band public apology when band member LaMendola said, "The college banned me from performing and then I wrote them a letter calling them retarded t**ts [the audience laughed]...Yea I thought it was pretty funny too..."

If you are going to argue that this is just an example of overreaction by the rice eaters and that people missed the point because as artists they were being ironic or making fun of racism, well you can go f**k yourself. That dog didn’t hunt for SS and it’s not going to work for this poseur trash. I don’t care how good their music is or what their intentions were. These people f**ked up royally.

However, I am not here to debate about racism or lecture people about respecting people’s cultures. I would like to take this opportunity to talk about something very important which is our economic surivial. I know that racism and survival sound like a bit of a stretch, but please bear with me.

All those plasma tvs, sneakers, blue jeans that you can get for rock bottom prices are due to the cheap Chinese labor that can be bought off with a pack of cigarettes and some congee. Walmart has practically stocked its shelves with made in China products. Which is ironic because 25 years ago they maintained a strong policy of only purchasing items that were made in America.

China has also become a popular destination to not only adopt yourself a kid or two but to get your rocks off. Afterall, if perverted Japanese businessmen are running in droves to swap spit and other bodliy fluids with the indeginious female population, then you know it has to be a sexual paradise.

One of the key reasons why the US has enjoyed such a great housing market is that China has been been gobbling up our debt like Rosie O’Donnell at an Nathan’s Hot Dog eating contest. Which is the reason why China will play a pivotal role on whether we are able to ride the housing storm.

So, those of you in real estate who like to make racist remarks towards Asians I have two pieces of advice for you.

Shut your mouth and know your role.

Not because it is wrong or immoral but it is a really bad idea to f**k with these people and this is why.

According to the AP
China's recent signal that it may diversify its foreign investments in 2006 has mortgage industry watchers concerned that if China buys fewer U.S. Treasury securities this year, it may drive interest rates higher and pour more cold water on the real estate market.

Are we getting the picture now? Piss off the Chinese and all of us could be working at Starbucks for health insurance. If you still don't get it. Well, I found this video that will clear everything up.

Don't get me wrong. I am a big believer in the right to free speech. I wouldn't be here with out it. Those idiot poseurs can call their band whatever they want, but they need to be aware if they say something that is deemed offensive, they will be called out on it. That's how free speech works. It works for everybody. Even me.

Please don't take this entry as a love letter for all things Chinese. There are times when I get annoyed by Chinese culture. Last weekend I picked up Hong Kong Style vegetable lo mein from Big Wing Wong in Chinatown. It turned out to be some vegetables and instant remen noodles. But I was already in the midtown area and it was too late to do anything about it. So I just treated it as another lesson about Chinese food which includes never to order what the waiter recommends and don't get the butterfly shrimp.

Remember. Don't piss off the Chinese. They are the ones with the money.

The Wild West

Today the NYT did an article on on how consumers now want hard data on real estate listings ranging from valuation and market conditions. It is pretty much stuff that all of us bloggers have been covering for quite awhile, however there were two things that caught my attention.

The first was this Zillow complaint.


Within a few months of its opening, however, Zillow attracted some unwelcome attention. In October, the National Community Reinvestment Coalition, a nonprofit consumer group in Washington, filed a complaint with the Federal Trade Commission that contended that inaccurate valuations on the site, both high and low, were damaging the interests of all consumers and particularly the interests of working families.
The complaint has yet to be resolved, but a spokeswoman for Zillow was careful to point out the site’s disclaimers.
“We’re a starting point,” said the spokeswoman, Amanda Hoffman. “We’re not a
crystal ball. It’s the Internet. You sort of have to take everything you read on the Internet with a grain of salt.”

I am not sure if this complaint is meritorius in anyway. It seems to me that that "Coalition" doesn't want this type of information so readily available to the public because it allows people to figure what areas are higher and lower in value. If you live in a town that has low values, people are going to wonder why and if they ask the right questions they will be able to figure it out. The result is they may not move there.

I feel this complaint has no merit for a variety of reasons. The main reason all real estate is not an exact science. Everything is determined by the market and how the market reacts changes on a day to day basis. Besides, even before Zillow and the internet, a person could always figure out why an area had such low home values by simply walking around the neighborhood and talking to people.

I plan on looking into this further because there is something about this complaint that bothers me.

Another quote that I thought was quite hilarious was from Mr. Dalton.

As an extension of pure data about communities, Realtor.com is planning to add some consumer opinion, a feature that follows somewhat in the style of online retailers like Amazon.com.
Mr. Dalton said the company was developing a feature that would allow people who live in a community to comment on the site about schools, restaurants and other amenities.
He conceded, of course, that public opinion could be tricky to manage in a high-stakes sales environment. He said that site administrators planned to allow residents to make recommendations — but that the site would employ editors to keep watch.
“It won’t be the wild, wild West,” he said

You have to be kidding me. It already is the wild west out there. Curbed and Inman news can't be stopped. The real estate online presence is like Hulkamania. It's running wild. Even if they do employ "editors", they are going to be in for quite a ride.

These people are playing catchup. What they should be doing is figuring out a way to adapt to being outsourced.

Mortgage Broker Gone Wild!

Barry sent this to me. It is quite amusing and perhaps telling of how desperate things are getting in the mortgage broker industry.

LMAO, I don't normally surf the 'girls for guys' section, but I ran across
the best and funniest CL post EVER... ----- Its from a gal (definitely a HOTTIE)
who does mortgages and plays with her clients! I thought to myself since I am a
broker Id throw my own post up just to see what happens! ----- Now, understand
Im not gonna sit here and say I'll f*$k anyone etc etc...but I have posted my
pic below (yes, its really me) ----- Definitely get back to me if you need help
with a refinance- if you need to lower your mortgage payments, cash out some
equity, or consolidate some higher interest debt, leave me a name and contact
number and we'll take it from there. Well, that’s about it, don’t know how this
will go over ‘out there’ but I guess we’ll see. ----- Sincerely, Kryss Ivey

Here's the ad itself.

No. I am not going to contact her. I already enough problems.

Starrett and Zillow: Double Shot!

Well this isn't a big surprise. Starrett City has just been sold. According to the New York Times an offer of 1.3 billion was accepted by the sellers.

It didn't even go as far as a second bid.

According to real estate executives, more than a half-dozen
bidders submitted
offers for Starrett City on Monday afternoon, ranging from
$600 million to more
than $1 billion.
The owners, led by Disque Dean, had
told bidders that a
select group would be asked to make a final and best
offer in the second round
of bidding. They had imposed a strict gag order,
which barred prospective buyers
from speaking to tenants or government
officials. The Dean family had promised
them that the second-round bidders
would be permitted to speak with affected
parties.
Executives who have
been briefed on the sale said that Berkshire
LLC, a partnership of David
Bistricer and Sam Levinson, wanted to short-circuit
the second round by
offering a premium bid of nearly $1.3 billion.

Already there has been alot of chatter that the affordability of those apartments will be in jeopardy. From Curbed to Gothamist all eyes are watching this deal and for good reason.

Government has a great deal of leverage over a new owner. The state holds a
$234.4 million, interest-free mortgage on the property. State and federal
officials could approve or reject a new owner. City officials would have to
approve any plans for large-scale development.

So basically Berkshire has their very own co-op board to contend with. And the fund doesn't end there.

Shaun Donovan, the city’s housing commissioner, said there was little
development potential at the complex without a lengthy public review.
“Because of limited market potential in the area,” he said, “we would expect
any new development to require unusually large government subsidies to be
economically feasible and that is unlikely to happen.”
Bertha Lewis,
executive director of New York Acorn, a community organizing group that has been
working with the local tenants’ association, said, “There is simply no way that
Berkshire can afford to pay $1.3 billion for Starrett City and still keep the
complex affordable.”
She added, “By offering to pay a quarter of a million
dollars per apartment, these developers are virtually guaranteeing that they
will raise rents, cut services and build market-rate housing in order to squeeze
a profit out of their wildly inflated offer.”

I still stand by my original entry on this matter which is that the buyers have no interest in doing any type of development, at least not at this moment. The power comes from the cash flow of the complex because it is guaranteed by the government. These sellers are not idiots and probably have a team of a special forces caliber to run the numbers and to figure out the best strategy for the Starret Housing while dealing with the barriers of entry of this property.

What I could see them doing is pulling a Met Life in the future when that area of Brooklyn completely gentrifies and then liquidate at next market cycle. Meanwhile they just collect their checks from the government. What could also happen is that the residences of Starret have no need for the subsidized housing and leave on their own accord. Which is pretty unlikely.

ZILLOW KNOWS ALL!

Amanda from Zillow gave me the rundown on some

new Zillow developments.

The first is a national overview of home values which they have broken down into various markets which they call Zindexes. First Zestimates now this. Their marketing department is starting to coast a bit. But then again, you don't alot options when you have to put Z's

What makes this quarterly report really hardcore is that have included a detailed blow by blow of 75 metropolitan areas. BADASS! I would love to hear from Jonathan Miller to see his take on these reports.

If you don't have the attention span to look over these reports, Zillow has a press release which lays out the facts. What I found quite amusing was that New York was neither the highest or least appreciating metropolitan area.

I think what is telling about Zillow's direction is this quote from their blog.

We get a lot of demand for the underlying data itself and the real estate
blogosphere is rabid in consuming
new data and producing incredible insights from it. So, we thought
we’d unleash the data and take advantage of the fact that there are a lot more
analysts out there than there are here at Zillow. As Marshall
McLuhan foretold, how we’re providing the data is at least as important as
the data itself. So have some fun with the data, combine your local
knowledge and insights and share with the community.

Zillow is quite aware of their brand and the impact it has on the market. They realize that the fact that this data coming from them will put it into somewhat different. I do admire that because they are not trying to pull the old "we are above any type of bias." trick. I am curious to see how Propertyshark's bubble map fares.

Btw. Excuse the format. I am still experimenting with these new blogging features that were forced upon me.

Another wrench in the works.

There are many variables that are affecting this market from mortgages and the mindsets of buyers and sellers. But there has been one development that I have been watching very closely and have been concerned about for quite awhile. That factor is are the Baby Boomers.

I got this from another blogger who hits it dead solid about why the baby boomers are a development that should not be taken lightly.

Baby boomers - the X factor that may get things even worse

I haven't seen any research on how this huge population segment may affect the real estate, but considering that almost all of boomers have kids out of high schools, and in colleges by now, they are likely to sell for several reasons:
- to finance their kids college education
- to move into warmer or colder climate
- to indulge themselves in the golden years
- to simply downsize
Finally to stop paying insanely high real estate taxes they don't need anymore, since their children don't need the best high school money can buy. Considering that there are about 35 millions of baby boomers, and only 1%, which is 350,000, of them will have to sell quick, the impact on sale prices can be quite severe.

What makes this a TARFU is the fact that is the year 2007. This is when the Baby Boomers start turning 60 and retire en masse. That is if they have the resources to do so.

There will be a growing trend of boomers of withdrawing from their former routines and embarking on the next stage of their lives. Unfortunately this requires cash and alot of that cash is locked up in their homes. And with a tanking market, their timing couldn't be worse. These boomers will have to make some hard decisions which means taking a loss and drop prices, pull the old reverse mortgage trick or simply lock themselves down. Each of these choices are not very attractive.



Even Federal Reserve Chairman Ben Bernanke is freaked out by the Boomer situation.

This huge wave of retirees will hit the U.S. budget as well as the economy, Bernanke said.

"The longer we wait, the more severe, the more Draconian, the more difficult the objective -- the adjustments are going to be. I think the right time to start is about 10 years ago," he told lawmakers when questioned about the urgency of the situation.

However, as cruel as this may sound, there is a way for buyers to put this to their advantage. A seller who is blocked from entering their golden years maybe more flexible in lowering their price.

This is going to suck.

A Better Tomorrow? New Buyers raise their due diligence game but will it be enough?

The New York Times demonstrates their journalistic prowess with their article about this new generation of buyers who are taking it to the streets with their new fangled excel spread sheets and background checks of developers in order to find an apartment. In other words they are acting as their own brokers. Here’s my analysis of the story.

February 4, 2007
Young Buyers, Prepared and Fearless
By CHRISTINE HAUGHNEY
DANIEL AND LUCIANA HYMAN are quick to admit that they are insufferably sentimental about how they fell in love. Seated on the half-finished floor of their Midtown co-op, they relate every detail about how they met at a nightclub in Rio de Janiero, how he asked her to move to Manhattan in the sculpture garden at the Metropolitan Museum of Art and how he proposed on a trip to Paris at the Eiffel Tower — well before Tom Cruise and Katie Holmes became engaged at the same spot.
But Mr. Hyman, a 27-year-old trader at Credit Suisse First Boston, and Mrs. Hyman, a 24-year-old elementary science teacher at the Grace Church School, lose all of their sentimentality when they talk about real estate.
After online research into the financial state of more than 100 apartment buildings, tours of 30 condos and co-ops and analysis of minutiae like projected future maintenance payments, they recently closed on an $875,000 two-bedroom co-op in Midtown. As owners in a building with relatively lenient policies, like 10 percent down payments and flexible sublets, the Hymans talk about their apartment as a strategic investment that they someday plan to turn into cash.
“We’re more comfortable with taking on debt and paying tomorrow,” Mr. Hyman said. “If the cards topple, you can rent your place out and go somewhere cheaper.”

Mr. Hyman is correct that if the house of cards falls, he has the option to rent their apartment out. Currently rental vacancies are almost non-existent. The one barrier to entry is the rent. Will the rent Mr. Hyman is charging cover the mortgage payment? Depending on the market it may or may. If doesn’t, Mr. Hyman will have to dig into his kid’s college fund to cover the mortgage. And what if the only place cheaper to live is out of state. Do they really want to commute from the Poconos?

There is little talk about the apartment as a romantic nest for newlyweds, and in that they are not unusual. Brokers say that younger buyers, especially those under 30, often approach their first home with cold calculation and an appetite for risk more often associated with real estate moguls.
While this approach to buying may be typical of Wall Street analysts and bankers who are used to approaching deals with extensive research, younger buyers with jobs far from financial fields — wedding photographers and advertising executives, for example — are not relying only on the advice of their brokers. In addition, they are coolly investigating the backgrounds of their developers and their buildings’ histories. They treat these purchases first as portfolio diversifiers and only second as homes. With that in mind, they are keeping their money in the bank and borrowing as much as possible

“You have a new kind of buyer today,” said Dottie Herman, the chief executive of Prudential Douglas Elliman Real Estate. “Twenty years ago, it was ‘Pay everything off in cash and have no debt.’ Ten years ago, it was ‘Have some debt.’ If they want something now, they figure out a creative way to finance it.”

I know what these “new buyers “ are trying to do. And they are no different from any of the other buyers who keep refinancing

What these new buyers want to do is play the OPM game, where they place the burden of financing onto the lender. Meanwhile, the cash that isn’t locked up in their homes is readily available to invest elsewhere. It is a great idea in theory but when you are dealing with the uncertainty of our economy, you are looking at a complete clusterf**k.

The mind-set of younger buyers may dominate the patterns of buying in New York City for years to come. Their liberated attitude toward borrowing is helping to keep prices stable. While buyers of the past may have coveted co-ops, younger buyers find condominiums more appealing because they allow for flexible financing and their sales don’t require board approval.
At the same time, younger buyers are exposing themselves to more risk because they are taking on so much debt that if prices fell, they could be caught with no equity in their homes.
“The whole attitude is different today,” said Barbara Fox, the president of the Fox Residential Group in Manhattan, who started her real estate career before these under-30 buyers were born. “These buyers have never lived through bad times.”
.

These “New Buyers” are scarfing up debt like Rosie O’Donnell at an all you can eat Chinese Buffet, so there will be significant number of them living through the bad times once things start to get rough.

Younger buyers have such different approaches to real estate that they are prompting developers to change the way they sell apartments. Some are hyping condominiums with the promise that buyers can eventually rent them out. Others are making sure that their prices are as close as possible to similar projects because they know younger buyers have researched every comparable condominium in the neighborhood before they walk through the door.
Real estate developers and brokers are also using this information to shape how they negotiate deals and approach future projects.
Louise Phillips Forbes, a Halstead broker who represents the converters of 296 East Second Street, sent the developer the feedback she got from a potential buyer about the building’s penthouse, which was lingering on the market. The bidder, a Goldman Sachs investment banker and first-time home buyer, put together a one-and-a-half-page analysis justifying her bid, which was 11 percent lower than the asking price.

Yeah. That developer put that analysis to good use. As toilet paper!

She based her case on data from PropertyShark.com, an online real estate company, and interviews with brokers about how long it had taken to sell apartments in five nearby buildings. The bidder argued that she should pay less because it would be harder to resell a luxury apartment on the Lower East Side. The argument was valid enough that Ms. Forbes thought the developer might want to negotiate.

When the developer got the analysis, he or she probably wanted to wring the broker’s neck for wasting their time. I know I would. Negotiation is really not an option for this developer because an arm and a leg was presented in exchange for this property and that developer is going to demand top dollar for the units.

Since then, Ms. Forbes has received three higher offers, and last week, the developer accepted one for the full asking price.

I wouldn’t be surprise if the developer was pissed off that the offer was submitted by an INVESTMENT BANKER FROM GOLDMAN SACHS. Don’t you think developer’s read the newspapers? If I were the developer I would have the Ms. Forbes call that buyer and give her a big f**k you by letting her know about those offers.

Ms. Forbes said the experience had made her take younger buyers — and their Wall Street bonuses — far more seriously and had made the developer realize how closely younger buyers were examining prices. “He might just need to negotiate on the product,” she said. “It’s a very valid argument.”

Valid Argument nothing. The LowerEeastside has been gentrifying at a rapid pace. Those restaurant supply stores on the Bowery are taking the hint and taking a hike whether they want to or not. The developer knows what this property is worth and knows what he or she can get for it.

Nora Ariffin, the Halstead broker who helped Ms. LaHaie find her apartment, said younger buyers were often more willing to search for listings, instead of relying on her to do that. Still, she often encouraged Ms. LaHaie to let her follow up to weed out apartments with problems. Ms. Ariffin said she had not run into this situation with older buyers.
“The younger buyers like Naomi will do their own research,” Ms. Ariffin said. “They’re more adventurous. Older buyers haven’t e-mailed me listings outside of what their parameters are. In general, they don’t do their research as much as Naomi was.” ‘

Yeah. Those old people have no idea what the f**k a computer is. If you ask if they have a mouse to their computer, they will scream of an exterminator. They used chalk and slate, instead of excel and they chose an apartment by throwing darts at a wall full of photos. This is such a gross generalization. In my experience I have a dealt with people who are older and they are well aware of the concept of email and looking for listings online. The only difference is that that the older generation is hell of a lot wiser and unwilling to do anything stupid.

While many buyers under 30 are getting financial help from their families, they are also turning to aggressive financing. Data collected by the National Association of Realtors show that nearly 65 percent of first-time home buyers finance more than 95 percent of the cost. A first-time buyer is also far more likely to have a mortgage that begins with an attractive interest rate and adjusts periodically.
Oh, this going to end so badly.
Because co-ops in New York often require deposits of 20 percent, younger buyers tend to look at condominiums that require only about 10 percent and allow for creative types of mortgages.
In the most extreme cases, Joseph Gallagher, a Corcoran Group broker in Brooklyn, has had clients with high credit scores finance everything, even their closing costs. He finds that some developers are willing to take down payments as low as 5 percent to fill their apartments.
In the wake of the recent record Wall Street bonus season, brokers say that buyers who have made enough money to put down 20 percent are choosing to keep their money in their pockets.
“Younger buyers want to retain their cash,” Mr. Gallagher said. “They don’t want to empty their bank accounts for a deposit. They want to finance 100 percent if possible.”

This is a new generation where having credit cards and amassing enormous amounts of debt is cool as long as you can pay for it tomorrow. What these younger buyers are doing is throwing this cash into the stock market where they can get higher returns. The risk of course is if the stock market takes a massive hit ala dot com meltdown or interest rates kick up and the monthly payments begin to spiral out of control. And whatever they earn from their jobs and investments can barely cover those payments.

But no one really cares. As the article indicates, developers are bending over backgrounds allowing for aggressive financing and bowing down to the demands of the buyer to have the option of renting out their units. And brokers could care less what their buyers do as long as the check clears.

One of his clients, Charlotte Lewis, a Brooklyn-based photographer, was more conservative than most about financing her condo. She spent six months looking at nearly two dozen apartments in Brooklyn. With her savings and help from her parents, she put down 20 percent for a $340,000 one-bedroom on the outer edges of Williamsburg that she thought was distinctive enough to retain its value, even in an area with many new buildings.
She sought help from a mortgage broker in her rental building to negotiate the best interest rate, and now pays about $1,630 a month. But even with all this thoughtful research, she rattled her family when she told them about the kind of mortgage she had chosen for what she considers a five-year investment.
“My parents freaked out when I said I was doing a seven-year, interest-only ARM,” she said. “They’ve always bought properties that they’ve owned for life.”
In the end, they agreed with her that it was smarter to own than to rent — they even paid for the crown moldings. Since she moved in December, Ms. Lewis has painted her walls a creamy Edgecomb gray and has framed watercolors she painted as a child. She’s feeling more comfortable with her decision every day.
“I really think that real estate will not go down,” she said. “At the very least, it will stay the same. In the meantime, I need a place to live. So the worst-case scenario still isn’t that bad.”

We don’t know what tomorrow will bring. Right now we are dealing with an out of control war, a dying dollar, oil prices, terrorism and a slowing economy. Even if those people are just buying a primary home they are playing a juggling act by taking aggressive and creative forms of financing. Sooner or later they will have too many balls to in the air to control.

I know there are a lot of you would wish I would shut the hell up and I would be more than happy to table this discussion, however it appears that a lot of people out there are not listening. So I am going to keep doing my Paul Revere act.