Wednesday, August 18, 2004

Housing: Can We Call It A Bubble Yet?

One of the more irritating things in life is the prevelance of two kinds of intellectual scum-bags. The first is the ever synchopantic yes-man. A yes-person, and recently women have been cashing in on the act as much as men ever did, has as their only purpose as to look or sound or otherwise present themselves as credible and endorse an otherwise irrationally and shamelessly idiotic notion. Pandering to power and money is the usual suspect motive in such a case.

A second type however is the more complicated "plausible denial" crowd. It makes it difficult to spot these individuals since their main form of camouflage is to hang around with otherwise agonstic or innocently uninformed persons, and through character assassination, rhetorical aspersions, or casting doubts to attempt to present a muddled cloud of plausible deniability to the most outrageous misconceptions.

An example of the first is the over-eager to please Tenet and the top-CIA bureaucracy who both under Clinton's and Bush's Administrations were all too eager to please the powers that be by coming up with politicall correct intelligence conclusions, while suppressing the work of analysts and field officers who had grave doubts about the provenance of the WMD claims. After such claims were roundly rebutted by nothing other than facts on the ground, then enter act II of the plausible deniability crew.

By hiding behind claims of reasonable doubt, playing upon the general ignorance of the crowd, and making specious claims they attempt to prevent condemnation. "But surely we don't have enough evidence yet," they chim in "to judge this serious matter." Is it any wonder that people doubt what they're told when both crews are run out consequtively? Especially when people of expert credentials lend themselves to these groups?

My point in discussing this is that the "plausible deniability", is that it's been at work overtime in soothing Americans about the reality of a real estate bubble.

The Boston Globe reports that the price of an average apartment in New York City has just broken the $1 million dollar ceiling.

In New York, the price of an average apartment now tops 1 million

Tatsha Robertson
The Boston Globe
Tuesday, August 17, 2004

NEW YORK - The bachelor pad on the city's Upper West Side may have a terrace overlooking the American Museum of Natural History, but it also has a grumpy doorman, just one bedroom and a price of more than $1 million.

And yet, seven potential buyers within an hour raced to view the apartment one night last week.

On the Upper East Side, a feisty bidding war broke out last week around another apartment - also listed for more than $1 million - with one contender offering $10,000 above the asking price, beating out a would-be buyer waving cash for the 1,100-square-foot, or 102-square-meter, condominium.

Even more shocking is that this now passes for ordinary in Manhattan's real estate market, where, for the first time, the average price for a condo or co-op apartment has surpassed $1 million. The $786 average price per square foot also broke a record in the second quarter this year, according to Miller Samuel, a residential appraiser, and Douglas Elliman, a large New York real estate broker.

And Boston is chasing New York's heels.

In Boston's Midtown section - home to the Ritz towers - the average condo price in the second quarter was $1,018,630, with an average price per square foot of $707, according to Listing Information Network, or LINK. In the Back Bay, the average condo is selling for $800,009, with an average price per square foot of $652.

In Manhattan, an improving economy, low interest rates, Wall Street bonuses and the lack of available apartments drove prices to the new high of $1,047,938 in the second quarter from $998,905 in the first three months of the year, the Miller Samuel report found. The average size was 1,332 square feet.

Jonathan Miller, author of the study, said he looked at a number of indicators, including median sales price and the price per square foot, all of which broke records. "So what it is telling us is that this is not a fluke," he said.

Boston has one of the most expensive markets in the United States, behind New York City and San Francisco, but it is difficult to compare it or any other place to Manhattan's real estate market, which is literally an island unto itself.

"When you buy in New York City you are buying a way of life," said Jacky Teplitzky, the real estate agent for the Upper East Side property. In New Jersey, in comparison, "then you are going to get more space, but some people are willing to pay to be in the heart of things, to be in the heart of the action."

Still, anyone from outside Manhattan visiting open houses may wonder if the prices are really worth it.

Agents tell stories of shocked transplants who realize that the money they paid for their three-bedroom house in cities like Minneapolis or Dallas would barely afford them a one-bedroom apartment in the West Village.

For those not willing to settle for a larger home in the New York City boroughs of Brooklyn or Queens or in northern New Jersey, agents say a $1 million apartment in Manhattan will get them no more than 1,300 square feet in a moderate to good neighborhood. "To some, once you live here, you have arrived," said Pamela Liebman, chief executive of Corcoran Group in Manhattan.

But that's just New York City and Boston. That's not a national real estate bubble, right? Wrong. According to this video from CNN, the number of people attempting to become real estate brokers is exploding.

Broker boom
Nationwide, people are flocking to learn to be real estate brokers, with enrollment soaring 400 percent. CNNfn's Jen Rogers takes a look at the explosive growth in the industry.

That's 400% nationwide. That's not a regional or local phenomena. That's the sound of thousands upon thousands of Americans trying to cash in on the big chunk of change being passed around. Yet the signs of this trend have been evident for some time, and yet I still find economists and commentators whining about how it's technically not a bubble yet because there is some benighted corner of Midnight, Alaska whose property values haven't risen yet.

I think it's the whining that irritates me most. So yes, it is a real estate bubble already.

This is a problem in more than the real estate market. How can we ever solve our problems in our nation when on the right hand we have a chorus of yes-people assenting vigorously to the most inane political proposals and on the left-hand side we have a chorus of nay-sayers providing cover for the most bald faced denials of blatant reality. I'm not sure. But this is something we have to confront, because if we can't even communicate openly about the obvious then we really will remain gridlocked and paralyzed.


At September 9, 2004 at 2:31 PM, Anonymous Anonymous said...

Minneapolis / St. Paul area is also in a housing bubble albeit not as bad as in New York or Boston. There are some areas here where the average sf home is now in the $ 300-400,000 range.

How can anyone be insane to pay such prices to be in the middle of nowhere in this country and in one of the coldest during Winter and more hot and humid mosquito infested in the Summer?

I think if this keeps up in most parts of the country, we are probably going to see a major movement of people from the more expensive areas (New York, Massachusetts, California, Washington, Colorado, Minnesota, Florida...) to the cheaper areas (Tennessee, Alabama, Mississippi, Missouri, Oklahoma, Texas...). Eventually, those who are priced out will realize they have to move to own their home.

Talking about owning one's home, they talk about the median family income in the Minneapolis/St. Paul area being around $62,000. Well, that is probably true for those who ALREADY own homes, are well off and OLDER. I've been reviewing through the local papers to see how much they now pay for full time job and FYI, most jobs here are in the in the mid $20,000 / year! You multiply that by two for a young urban couple and you get $40,000/year. How can one afford a home around here at that salary level?

It seems that the younger you are, the lower your salary level, the more you can't afford to buy a home around here. I won't even get into the higher cost of living, higher cost of community college education ($120/credit vs US average of $55/credit) higher taxes, and the extra expenses associated with living in a very, very cold climate.

Yet it seems everyone is in deal and that life is still as good as it has ever been... Yeah, just keep on wearing those rose colored glasses and you'll find out how bad things are finally if you keep them on too long.

Anyway, just my two cents and personal opinion...

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