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If You Pay A Premium, Be Prepared To Hold Onto It For A Long Time

A report from the New York Post. “Don’t believe the brochures. A Billionaire’s Row apartment can be a terrible investment. Roughly 16,000 apartments were bought and resold in New York from 2014 through 2018. Of those, 1,295 homes — 7.7 percent — sold at an outright loss. But a whopping 39 percent of the 66 luxury condos that were bought and resold in Midtown during this time lost money, according to StreetEasy. In fact, across all neighborhoods, the city’s priciest properties saw losses.”

“‘One of the things that I struggle to wrap my head around is why people continue to park money in high-end New York real estate when it’s not a very lucrative asset class,’ said Grant Long, senior economist at StreetEasy. ‘You just have to assume someone like Ken Griffin [who recently dropped a record-breaking $250 million on an apartment at 220 Central Park South] isn’t very interested in seeing his money back. An apartment like that isn’t liquid.'”

“The current correction in the market is ‘driven by sentiment rather than data or some kind of event,’ added Leonard Steinberg of Compass, a residential brokerage. ‘We had market razzmatazz between the years of 2011 and 2016. There was an extraordinary escalation of asset prices and in some cases it was justified and in a lot of cases it wasn’t.'”

“‘Everything about real estate losses or gains is about timing,’ Steinberg said. ‘People say, ‘I thought real estate in Manhattan was a secure, 100 percent bet.’ But if you pay a premium for anything, you better be prepared to hold onto it for a long time.'”

“In March of 2018, an entity controlled by one Mohammed al Saud sold two adjacent units on the 63rd floor of One57 for a total of $44.5 million — after having paid nearly $59.7 million for the apartments in 2014. Paul Adams, the CEO of Monroe Capital, picked up an 1888 town house for $13.7 million in 2017. But he ­unloaded it for just $9.5 million in November.”

“Although Adams did not respond to request for comment regarding the sale, it’s safe to say that he lost by flipping the home in less than a year. Moreover, the luxury town-house market in Manahttan is particularly weak as of late. The median sales price fell 9 percent from 2017 to 2018, according to Douglas Elliman.”

From Mansion Global. “A renovated 42nd-floor apartment on the Upper West Side of Manhattan, has been listed for $21.5 million, down from $30 million when it was first listed in September 2017. The current owners bought the corner unit at Trump International Hotel and Tower in 2013 for $16.25 million and spent $2,500 per square foot—just shy of $12 million—on a three-year renovation, according to the listing agents.”

“The lowered price is a response to the changing marketplace. ‘The market ‘ has adjusted over the last 18 months,’ said listing agent Noble Black of Douglas Elliman. ‘Two years ago it was definitely a stronger market.'”

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This Post Has 37 Comments

    1. “Pent-up demand” was the greatest lie ever told.”

      Tawana Brawley, Chief Lying Dog, Jussie Smollett and Wolfgang Halbig would disagree.

  4. Is the size of the Fed’s balance sheet purely discretionary? If they decide to blow it up again, will extant bubbles get even bigger?

    1. The Financial Times
      Federal Reserve
      Federal Reserve nears decisions on its asset portfolio
      Some officials think balance sheet reduction programme will end this year
      Federal Reserve governor Jay Powell © FT montage; Bloomberg
      Sam Fleming in Washington and Joe Rennison in New York 12 hours ago

      Federal Reserve officials are getting closer to identifying when they will end their market-sensitive balance sheet reduction programme, with some signalling it could be completed this year as they opt to keep a hefty quantity of reserves in the financial system.

      Recent comments from policymakers, including Fed governor Lael Brainard and Philadelphia Fed president Pat Harker, point in the direction of well over $1tn of commercial bank reserves being maintained, said analysts.

      Even if the Fed decides when to halt the programme, however, it still leaves open major questions over the future composition of the Fed asset holdings — an issue that could have important market ramifications of its own.

      “The picture coming together is one of a central bank that wants to give the market as much of a concrete timetable in March as it can,” said Lou Crandall, chief economist at Wrightson Icap. “We don’t know the precise level of specificity they will achieve.”

      The Fed swelled its balance sheet to $4.5tn as it battled the financial crisis and economic downturn, purchasing treasuries and mortgage-backed securities in a bid to buoy markets and the economy. Former Fed chair Janet Yellen put the process into reverse in 2017, gradually allowing the asset holdings to shrink as the central bank withdraws its monetary support for the economy.

      Late last year investors developed an acute aversion to the Fed’s programme of reducing its asset holdings, arguing it was damaging equity markets. While Fed officials were sceptical about the complaints, Fed chairman Jay Powell sought to quell some of Wall Street’s angst last month by insisting the central bank was willing to change tack if financial or economic conditions required it.

      The flipside of the Fed’s asset holdings are liabilities including currency in circulation and commercial bank reserves held on deposit with the Fed. The central bank has decided it wants to keep these deposits in more ample supply than before the crisis, but gauging the exact levels of reserves it needs to limit volatility in money markets is difficult.

      Reserves are now about $1.6tn, down 40 per cent from their peak levels but far above pre-crisis norms.
      …

      1. Just what’s really going on here? The stawk market is pretty much at all time highs, and continuing its upward trajectory, yet the Fed is going to stop unwinding in the face of that? There’s something we’re not being told.

    2. The Financial Times
      Market Questions
      Markets
      How worried should we be about a US economic slowdown?
      The key concerns for the week ahead
      © FT montage; Bloomberg
      FT reporters yesterday

      How worried should we be about a US economic slowdown?

      Disappointing retail earnings released last week dented the US stock market recovery, and fanned concerns that the economic slowdown that panicked investors last year might not be a blip.

      December’s 1.4 per cent month-on-month decline in retail sales (excluding cars and petrol) was the largest slump since the depths of the financial crisis in March 2009. Goldman Sachs noted that the dip in “core” sales was the steepest since January 2000.

      On the other hand, the latest jobs figures smashed expectations, ratcheting up the focus on next week’s batch of economic data. Thursday sees the release of initial jobless claims, Markit’s purchasing manager indices and home sales — data that will either underpin recently resurgent stocks or trigger more fears about the health of the US economy.

      Will the currencies market ever wake up?

      This is starting to become an increasingly pressing question. Broadly, the market is in a deep sleep.
      …

  7. Just saw this.
    h/t Chris Whalen
    https://twitter.com/rcwhalen/status/1097618612494450688
    Christopher Whalen | @rcwhalen
    “Send your thank you notes to Ben and Janet c/o @federalreserve”

    https://www.housingwire.com/articles/48210-it-costs-more-to-own-a-home-than-to-rent-one-in-every-us-state

    It costs more to own a home than to rent one in every U.S. state
    Here’s a breakdown of the price difference by state
    February 18, 2019
    Jessica Guerin

        1. Plus it’s a sure thing to make you rich eventually if you just HODL long enough. You don’t even have to maintain it.

          1. Don’t forget to drive until you qualify. Don’t worry, driving an hour to work in a gas guzzling SUV doesn’t cost any money either.

            There also isn’t a glut of brand new luxury apartment buildings (sometimes fully furnished) with amazing amenities that are offering up to 2 months free rent and free internet.

            Nope, i want to “own” a shack so I can drive to work and spend all weekend at home depot and cutting my lawn.

      2. They are counting (hoping) on 4-5% gains a yr. In some cases the school system matters and with kids and no plans to move… Timing is everything. I do miss my 3 car garage.

        1. Shiller’s long-term housing price analysis shows recent gains north of 4%-5% a year are a historic aberration. But that hasn’t stopped the proles from concluding that such rates of appreciation are here to stay from now on. And the Fed has encouraged this view by exercising the Bernanke housing market put beginning circa 2012.

        2. Exactly. The market is priced with the expectation that houses will appreciate at annualized 4%-5% rate for the next 10-15 years. By renting, I’m betting that this will not happen, and in some cases (Seattle, Colorado, California, cough-cough) prices might actually be lower in that time period.

    2. This is like comparing apples to oranges. Major assumption of this study is that housing stock being rented is similar to housing stock being bought. Vast majority of rentals are apartments, it’s not the same on the buying side.

    1. Hell yes they are. Nothing is moving. Tons of $1million+ listings. Just saw an $890k come back on the market. Womp woooommmmmp.

    1. Nice tune. I’ve had the pleasure to perform it a few times over the years. The most memorable time was at a large, formal Lutheran church funeral.

  11. Jan. 29, 2019, 6:13 PM EST
    By Brooke Sopelsa

    “This was an attempted modern-day lynching,” tweeted Harris, who last week announced her 2020 presidential bid. “No one should have to fear for their life because of their sexuality or color of their skin. We must confront this hate.”

  13. According to an blurb I just read(no link) , over 50% of U.S farm households lost money farming. In 2018 the median farm income was -$1,548.

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