Dead Cat Bounce?

David Goldsmith

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I don't have a string of examples but seem to remember The Plaza having a celebrity boom and bust as well. Seem to remember Tommy Hilfiger's unit going (asking wise at least) from $25M to $80M back to $30M?
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
I think it's more that the two buildings share something:
Being known as the "it building" of a moment in time. Out of the box a good number of high profile buyers came on board. Most notably Sting in both buildings. We saw what happened when that wore off at Limestone Jesus. Will the same thing happen at the "curated" Chateau de Roth after he doesn't get to hand pick the buyers on resale? Only the future will tell.
My experience confirms that this is a thing --> "Being known as the "it building" of a moment in time."
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
What do you mean, wasn’t it new dev in 2008 (contract in 2006), with the subsequent sale in 2011?
knocking my brain out looking for this, I was at citi hab at the time, so dont have those emails. Killing me to find out what prewar bldg on that street was the 3A we saw
 

David Goldsmith

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I can see 432 Park from my window (the top half at least). The exact same sets of lights are on/off >95% of the time.
 

inonada

Well-known member

inonada

Well-known member
Expanding from the other thread, here's an abbreviated view of this dead cat bouncing in nominal (and 2021 inflation-adjusted) dollars:

1986: Sold $876K ($2134K)
2001: Sold $1200K ($1820K)
2006: Sold $2300K ($3052K)
2013: Ask $4300K ($4967K)
2015: Ask $4000K ($4551K)
2017: Ask $4250K ($4696K)
2018: Ask $2990K ($3182K)
2019: Ask $2600K ($2721K)
2020: Ask $2350K ($2429K)
2021: Ask $2000K ($2016K)
2021: Sold $1800K ($1800K)


To be sure, there's some element of Trump-turd discount here, something as high as $500K perhaps. But nevertheless, it does show the dead cat bouncing after the (unmarked here) 2010 "lows".
 

inonada

Well-known member
One common narrative that I saw posted on StreetEasy circa early 2010's is how higher prices are justified with lower interest rates. It's illustrative to see the above inflation-adjusted price series from an era where 10.75% mortgages were called "low" (by Halstead) to 2.x% mortgages. Even removing the Trump-turd discount, inflation-adjusted prices are flat.

Reflecting on that, and the mentality of the ridiculous asks we sometimes saw (see), one often heard (hears):

The sellers don't need to sell.

But rarely the corollary:

The buyers don't need to buy.

Or (the most important piece long-term):

The developers DO need to develop.

While buyers/sellers can wait it out for a variety of reasons, developers cannot. It is their source of income, and if you stop for any significant period of time, you atrophy as a business and lose the franchise value of being a player in the market, having the workforce, etc.

The Fed's purpose behind lower interest rates was (and has always been) pretty transparent: economic stimulation. That means developers building more, not inflation (prices going up). But there were (and are) a lot of dopey misconceptions, IMO, about how lower interest rates means prices should go up and/or you should pay more. It's as if people couldn't imagine the Fed accounting for that effect in lowering interest rates.

 

David Goldsmith

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There was an interview by The Real Deal a few months back where Gary Barnett of Extell both admitted half his current projects were going to lose money and claimed something like "no one is going to build anything for 3 years."

On a different note I rarely see discussion of how the ultra low interest rates have led to waste/inefficiency in markets. On eBay I see people selling suits which have been on the market for 2 years rather than reducing prices and moving inventory because cost to carry is so low. I think we are seeing some of the same in Real Estate - "The sellers don't need to sell" and it's not only sad, but I feel societally "wrong" (perhaps a bad word choice) to have tens of thousands of units being carried vacant on purpose because it's so cheap to do so while so many are either extremely rent burdened or outright homeless.

From what I understand this past year country wide there were record numbers of houses purchased where the buyers didn't put their current homes on the market because it was so cheap to carry 2 houses. This at least in part led to the artificial shortage of inventory we have seen nationwide for the past year. Yes prices boomed but I don't necessarily believe that is/was a good thing and I'm not sure it will end well.
 

inonada

Well-known member
It may be that Extell is not going to build anything for the next 3 years, but others will step in — Extell seems way overextended capital-wise in projects that haven’t sold, but capital exists elsewhere.

Case in point, you might think 20% vacancy in office space, which is 100 million sq ft, might curb construction. Because perhaps the pandemic might have changed long-term demand for office space. But maybe not, let’s plow ahead with 14 million sq ft under construction:


And it’s not even already-started projects like One Vanderbilt, but new ones started 6 months ago:

 

inonada

Well-known member
I understand your point about the wastefulness of empty homes. For better or for worse, people will always waste. What one person considers “waste” is another person’s “usage”.

Low interest rates promote new development, which is what ultimately resolves the issue. It also promotes more waste, but hopefully the new stuff outpaces the waste.

J Lo can afford to waste her empty apt indefinitely. There is probably some element of “It’s not like the cash could be earning much elsewhere” that discourages pricing at market, which would bruise her ego (bought high). But what you see is that eventually, people want to move on with life. It might take 5 year, but it happens.

Meanwhile, for every 1 J Lo apt that sits empty, a half-dozen others were built and used on the back of cheap money. As was J Lo’s unit, which will see (say) 50 years of usage against 10 years of wastage over its lifetime.
 

David Goldsmith

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I'm not 100% sure about the very last part - usage vs wastage. I see buildings like 432 Park Ave and it seems like actual usage (as in days units are actually occupied) could be as low as 10%.
 

David Goldsmith

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It may be that Extell is not going to build anything for the next 3 years, but others will step in — Extell seems way overextended capital-wise in projects that haven’t sold, but capital exists elsewhere.

Case in point, you might think 20% vacancy in office space, which is 100 million sq ft, might curb construction. Because perhaps the pandemic might have changed long-term demand for office space. But maybe not, let’s plow ahead with 14 million sq ft under construction:


And it’s not even already-started projects like One Vanderbilt, but new ones started 6 months ago:

One of the reasons I think there may be a rocky road ahead for the Manhattan office market is just how much office space is under construction or planned. Although it definitely rubs me the wrong way that we are told by Governor Cuomo, Mayor DeBlasio, Pat Foye, etc how we need "congestion pricing" because of how overcrowded Midtown is, but at the same time Midtown East was upzoned for millions more square feet of office space, the State of New York wants to condemn a string of properties to build a huge project around Penn Station, and the MTA is supporting a zoning variance to double the square footage on the project replacing their former headquarters on Madison Avenue to line their own pockets. And why does the "congestion zone" include Avenue D but not 61st Street? Is there any issue which one is more congested?

AFAIK we are still seeing less than 25% of office workers returned. An increasing amount of tension associated with that. When it comes to permanent WFH it looks like we have gone through denial and are somewhere between anger and bargaining. The quicker we move through depression to acceptance the better. I've read several articles claiming an increasing number of employees are quitting rather than returning to 100% in office jobs. I think the employers who have indicated they will be "disappointed' if everyone isn't back after Labor Day may be in for a rude awakening when other sailors steal their wind (i.e. workforce).
 

David Goldsmith

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Only went condo in 2014 so just the down side - half off original pricing:
04/20/2021Listing entered contract$9,950,000
11/30/2020Listed by Modlin Group$9,950,000
10/05/2020Off market temporarily$12,650,000
04/15/2019Previously Listed by Compass$12,650,000
10/16/2017Douglas Elliman Listing is no longer available on StreetEasy Last priced at $12,995,000$12,995,000
05/08/2017Previously Listed by Douglas Elliman$14,995,000
01/28/2017Douglas Elliman Listing is no longer available on StreetEasy Last priced at $14,995,000$14,995,000
12/02/2014Previously Listed by Douglas Elliman$17,750,000
 
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