Tuesday, 13 October 2009 20:00

Reggie Middleton's Real Estate Rehash - 10/14/09 Featured

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I read the Real Deal magazine, a NYC real estate rag. Although they have never quoted me or even bothered to feature my rather dashing picture in their publication, a reporter or two does keep in touch to get my opinion on things valuation related. This is some of their latest stuff:

Manhattan residential market reports bring good news, experts cautiously optimistic
Third-quarter Manhattan market reports released by the city's residential brokerages this week paint a grim picture compared to the same period last year, but show a marked improvement from earlier this year. "For New York, the worst is over," said Dottie Herman, president and CEO of the city's largest residential brokerage, Prudential Douglas Elliman. Still, experts caution that while the pace of decline is slowing, recovery is not yet imminent. "I'm very pleased with what we saw this summer and it’s a step in the right direction, but I still think we have a ways to go," said real estate appraiser Jonathan Miller, the CEO of Miller Samuel, who prepared Elliman's report.   

Well, I wouldn't stake my future on those prices skyrocketing any time soon. To begin with, there is a market difference between prices improving verses prices getting worse at a slower pace. Words, after all, do have meanings, don't they? Below is the Case Shiller seasonally adjusted index for Condos, to put things into perspective.



 As you can see, it does not appear that the index believes NYC prices are going anywhere significant. The macro scene of unsustainable and government suppressed mortgage rate levels, rampant unemployment expected to increase for at least another year, and the potential end to government housing subsidies really don't seem to bode well for prices either. Oh well, what the hell do I know?



When I stroll around NYC (with unemployment pushing 10% and not looking much better anytime soon), I see the recipe for lower prices. For those who are not regulars to my site and particularly those who do not know the NYC real estate market well, I strongly recommend you read the following two posts thoroughly in order to get a visual account of what is actually going on and why I am sure these banks are still hiding TREMENDOUS losses: "Who are ya gonna believe, the pundits or your lying eyes?" (for pictures) and "Who are you going to believe, the pundits or your lying eyes, part 2" (for numbers and a very shaky video), in order, of course. Hey, why believe your own eyes. I started getting bearish on NYC real estate in 2004, and liquidated my own inventory in 2005. The market collapse in 2006 (actually, it started getting difficult to sell in 2005 but brokers will never admit that. I started placing short positions against the homebuilders in the summer of 2007, see:

  1. Voodoo, Zombies, Lennar’s Off Balance Sheet Accounting and Other Things of Mystery & Myth 
  2. Lennar Insolvent: Enron redux??? 
  3. Lennar, Voodoo & the Year of the Living Dead! 
  4. Now, a "Realistic" View of Lennar's Solvency 
  5. Bubble, Banks and Builders 
  6. Even as the corporate management, the treasury secretary, the Fed Chairman and the sell side called a bottom in 2007, 2008, and even now in 2009 (sound familiar) - see Bubbles, Bank, & Builders - Pt IV: I can't believe this guy and Again, I say, Credibility is the key, Mr. Hovnanian.
BTW, I was quite serious about Paulson, Bernanke and their bottom(s), see:
    1. I've always said that the Bernanke and Paulson lack credibility, accuracy, and quite possibly veraci
    2. Is Paulson to be trusted, or is this Bush Administration Shock and Awe, 2.0?
    3. Reggie Middleton says, "Don't believe Paulson": S&L 2.0 - bank failure redux

I also sounded the alarm on commercial real estate in 2007 went short the sector in November of that same year. One REIT in particular, GGP, was quite feisty in trying to besmirch me in their conference calls and in press releases sent out at 9 pm on a Saturday evening. They called my analysis trash. Well, sticks and stones may break my bones, but leveraged caused them to file bankruptcy. As it appears, I was right: see GGP and the type of investigative analysis you will not get from your brokerage house.

Don't get me wrong. I am far from a permabear. As a matter of fact, I rode the real estate market up on a highly leveraged basis from 2000 to 2005, but enough is enough and math is still math. That's how I knew how to get out. The way I saw things, 2 + 2 does not equal 49!!! Now, I am being told that there are new rules to the game and the old fundamentals don't apply, so we should all just ride the momentum wave. Right, like they didn't apply in 2000, or 2006, 2007? 2008? Here we are in 2009, and nearly all of the problems extant in 2008 are here with us in 2009, except for a stock market that has rocketed 60% or so. Oh well, back to the Real Deal...

Case-Shiller: NY home prices improving
New York metropolitan area home prices have improved, but still haven't seen the solid increases of some other markets around the country, according to S&P/Case-Shiller Home Price Index July data released this week. Home sale prices within a 50-mile radius of New York City declined at a slower pace than previous months, according to the index, which gauges values in 20 major U.S. cities. New York-area prices fell 10.3 percent in July from the same month last year, compared to a year-over-year drop of 11.9 percent in June, and 12.2 percent in May. Since the data does not include condo or co-op units, the report primarily reflects home prices in the outer boroughs, Connecticut, New Jersey and Westchester County. New York was one of 13 metropolitan areas showing at least three straight months of price gains, the data shows. New York-area prices inched up 0.8 percent between June and July, and 0.7 percent between May and June after having increased slightly between April and May. Before that, prices had been falling, including a record decline of 2.5 percent between February and March. 

Again, let's go back to the tape for a blow by blow...



Read 4849 times Last modified on Wednesday, 14 October 2009 10:38
Reggie Middleton

Resident Contrarian Badass at BoomBustBlog (you can call me Editor-in-Chief)...

Disruptor-in-Chief at Veritaseum.com, where we're ushering the P2P Economy.


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