Monday Links
A: Got a very busy first half today so I will try to get my regular post up by the end of day and do some live chat time later as well. For now, here are some great articles/posts from the blogosphere and business sites that you should definitely read if you have the time.
Office Condos Set To Boom (Millionaire Now) - Larry Nusbaum's article for PREIM (Personal Real Estate Investor Magazine) that discusses the opportunity of the office condo market. Some key phrases from the article include
"But, we are only in the 3rd inning of a nine inning game for office condos. The two major reasons for this are because smart money has come out of residential and has found its way into the office market and because business owners no longer wish to rent but rather see that paying rent to one’s self and making a good investment is an easy way to participate in the real estate boom."Bernanke's View on Rate Cuts (Matrix) - Jonathan Miller's take on Ben Bernanke's luncheon includes excerpts from Big Ben's speech and discusses how "weaker housing market conditions [WaPo] are not enough on their own to push the economy into a recession." Another interesting quote...
"Much of his speech was used to gently dampen two of the major fears about the outlook - that the housing market would push the economy into a full-fledged recession, or that inflation pressures were like a smoldering campfire, seemingly controlled but ready to burst up in the next strong wind."The Housing Optimists (Calculated Risk) - Great article discussing the recent optimism that housing may be nearing a bottom. This post goes into good detail specifically about the so-called false starts-to-sales # that is somewhat of a misread number. The article talks about this and why, and then goes on to discuss why you should anaylze Single Family Starts, Built For Sale as the # to deduce any signals of nearing a bottom in the housing market. Conclusions include..."
As I noted yesterday, inventories of existing homes are at about 5% as a percent of total owner occupied units. This is an all time record, and is well above the median inventory levels of 3% of owner occupied units.Are New Build Prices Negotiable (BloodhoundBlog) - Good article discussing the concept of negotiating with new builders. Some points of interest in the post include...This high level of existing home inventory should depress new home sales and put pressure on prices.
And we also need to look at new home inventories. Currently the Census Bureau is reporting inventory of 558,000 units. Inventory numbers from the Census Bureau do not include cancellations - and cancellations are at record levels. Actual New Home inventories are much higher - some estimates about 20% higher.
All and all, I don't find any of the optimists' arguments the least bit convincing."
"New home sales is a retail business. The builder has to move current inventory to finance the future inventory, just as Sears has to clear out all the Fall and Winter goods to make way - and pay - for the Spring line.Sometimes builders have more business than they need - and in consequence nothing is negotiable.
Sometimes - like now - builders need to move inventory, and they are willing to Make Deals, as they say down at the new car lot...In consequence, many builders are essentially giving away upgrade packages for free: You pay for the base price of the home and whatever upgrades the former buyers had ordered are thrown in gratis."
Add to Newsvine
Comments (3)
Noah:
Pls keep up with the macro-economic analyses -- very helpful in thinking about planning and making real estate choices, even in NYC.
Also, if Bernake lowers rates, what do you think the short term effect (ie, within 60 days after doing so), would be in the NYC market?
Posted by A Weissman | December 4, 2006 3:06 PM
Andrew - You got it!
If the fed were to cut interest rates it would probably have a quick effect on mortgage rates as they tick lower but not so much difference in the housing market. Remember the cut's true effect on economy is a lag and takes about 8-12 months to funnel through economic system.
And if the fed is cutting rates, its because the economy is CURRENTLY getting weaker which means a possibility of a recession. If this anaylsis is true we would have to work through job losses, and lower salary's/bonuses which might negatively affect housing or at least the size of the buyer pool that could afford housing for the short term; say a year or so.
One cut will not do much. Numerous cuts should help form a floor to the NYC housing market for down the road, but how low that floor is the unknown. Afterall, if there are numerous rate cuts, then the economy is in bad shape and what do you think will happen to housing if the economy is in bad shape?
Posted by Noah | December 4, 2006 3:29 PM
"As I noted yesterday, inventories of existing homes are at about 5% as a percent of total owner occupied units. This is an all time record, and is well above the median inventory levels of 3% of owner occupied units.
Not exactly sure what this means...
Posted by Larry Nusbaum | December 4, 2006 7:41 PM