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Monday, 07 February 2011 13:34

Why Is NYC The Only Major Condo Market Increasing In Price?

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If you recall from my earlier rants on the Case Shiller index, one of its most glaring flaws is that it doesn't capture condo prices, which are a material component of housing stock in NYC and many major urban centers - see The Real Trend in US Housing Prices… It appears as if someone over there was listening, S&P now publishes a condo specific index, although that index too has many of the flaws of the CS single family index - see "Those Who Blindly Follow Housing Prices Without Taking Other Metrics Into Consideration Are Missing the Housing Depression of the New Millennium" and “Why the Case Shiller Index, Although Showing Another Downturn Coming, is Overly Optimistic and Quite Misleading!

Well, NYC, according to the S&P Case Shiller Condo index, is the only major US condo market that not only has firming prices but is actually increasing in price. Chatter and anecdotal evidence from the ground confirms this as developers and speculators are once again bidding up development land, lots and potential conversion properties.

The interactive version - drag the time line at the bottom of the graph to alter the perspective...

[iframe https://spreadsheets.google.com/pub?key=0Ai5WJsM3KjltdHh0SEFLdUR0ak5IWmFhcWFEUkxudWc&hl=en&output=html&widget=true 640 480]

The question du jour is, "Why?" Well, NYC has been the indirect recipient of over a trillion dollars of federal and central banking aid. As the de facto capital of the FIRE sectors (finance, insurance and real estate), it has seen an unprecedented amount of liquidity, loosened regulation and aid pumped through its borders. Will the price uptick last? Well, one should be asking themselves "Will the government bubble blowing last?". I feel the answers are highly correlated. With that being said, the basic economic laws of supply and demand and the associated market dynamics that go along with it are still quite apropos, as I attempted to demonstrate a couple of years ago in the post - “Who are ya gonna believe, the pundits or your lying eyes?”. Here is that same area about a year later...

[youtube WsTdV86nAGw]

We shall dive into this further in the next post on Shadow Inventory - the updated metrics.

Interested readers can follow me on twitter, peruse my Residential Real Estate postings and/or my Commercial Real Estate opinion and research. I will be lecturing on this “realistic” viewpoint of real asset valuation and the outlook for 2011 as the keynote speaker in both New Amsterdam (Harlem, NY) and Amsterdam (the Netherlands).