Market Firming up - Indicators

300, I'm not doom and gloom. But I do think the same sort of fee compression will happen in the PE space although it is just beginning. 2 and 20 on multi-billion $ funds? That is unsustainable. And there's certainly going to be compression on the 20 as there is way too much cash on the sidelines. Perhaps I'm digressing. I am glad to see that tech is moving in and there's perhaps a growing diversity in our 'industrial' base.

A majority of the tech workforce in NYC cannot afford to own. Comp is not as high as you think. Low base salaries, limited cash bonuses and majority of total comp are RSUs vesting over 4 years. Private equity comp not as great as it used to be either as very little carry offered and more deferred stock being offered. Total comp across the board for “high earners” has been and continuing to compress

Re passive investing
https://www.marketwatch.com/story/bubble-in-passive-investing-offers-small-cap-opportunity-big-short-investor-says-2019-08-28?mod=mw_theo_homepage&__s=kup1asgyc5r1hupsyqkp&utm_source=drip&utm_medium=email&utm_campaign=%F0%9F%92%A5+Refinance+Boom+Goes+Bust&utm_content=%F0%9F%92%A5Refinance+Boom+Goes+Busy but

BPC, Tech indeed has lower comp than revenue generation Wall Street functions but has more money that people think. Senior managers and sales people get paid pretty well in $400k to $750k cash comp range plus options. In fact, Wall Street has had to increase the tech comp while cutting elsewhere. There are also small 10-20 people tech companies in $10-$50mm range being sold to Googles of the world and the founders may want to live in New York or have a home in NY. Add to that increasing double income young under 35 couples with lower income of the two making $250k plus.

So Resales Market Pulse down to 0.45 on 09/14/2019 due to high number of new listings after day some of which are listings which went off market in the last year.

Market Pulse YOY is up 4.7% which is just neutral relative to last year. Let us see if this percentage improves.

Pending sales are up 16.4% which is pretty healthy but sales increases are barely keeping up with increase supply which is up 11.8% YOY.

If you take into account the analysis done by Miller it would appear the actual inventory could be double what's being counted by UrbanDigs.

That is why I am looking at Resales which is pure data and sales volume reflect pressure from unsold new condo inventory and off-market inventory getting relisted. Price points and locations (1 Manhattan Square and Hudson Yards as an example) are very different for Resales and New Condos.

Miller is including forward pipeline of condos.

Regardless of who makes what money, the big picture is scary for NYC. The macro-cycle of fund managers returning to the City from Greenwich and beyond (after abandoning NYC when CT had better tax rates) appears to be reversing, this time sending them to Florida. Carl Icahn is the latest on Friday. Forget dumb foreign buyers. A few firms can move, and their people flip from being buyers to sellers. In the thin end of the market where they buy (say, $3 to 10m), things start looking really ugly when that happens. Add the oversupply from late-to-the-party developers, and the next several years look difficult indeed. I'm also hearing that it was easier than ever to get kids into the top kindergartens this year.

https://www.foxbusiness.com/economy/financial-firms-tax-billionaire-florida

Pre school or K? I would be very surprised if the K admissions to the top 5-10 schools (Trinity, Dalton, Horace Mann, Collegiate, Brearley etc) got any easier.

Is any of this information new? I thought it had been pretty widely discussed that supply was skyrocketing (both new and shadow resale), particularly for luxury properties. Has something changed such that it is worse than anticipated?

I check the Olshan report each Monday morning. It has shown a weak run for $4mm+ properties. We will see tomorrow morning whether anything has changed in that respect, but I doubt it.

Unless there's a massive change in the tax laws, I don't see what macro force would change the trend to create the demand needed to solve this issue. That's why I think the problem will get worse and those who drop their prices first to make deals will be the winners.

Someone's been say this for a while now.

I think people are attempting to look beyond the headwinds (over supply) for a catalyst that could help reverse this current trend. Foreign buyers? Nope, dollar is too strong. Free-spending suburban rich people? Nope, tax laws. New breed of hedge fund manager? Nope, Florida.

Here is the Olshan report for this week: https://olshan.com/marketreport.php

It says that Manhattan $4m+ is having the worst 3rd quarter volumes since 2012. It does not say how the full year-to-date is shaping up yet, but my sense is that it is quite poor.

In the 70's, people fled to suburban is mainly a racial/class segregation thing, today, they have no where to go

But looks like they are preparing to print money crazily again. That explains why sellers are so stubborn and this summer outperforms most summers in the history

Is the supply problem at the level of post-Lehman, as it states in this article? That seems extreme.

https://www.nytimes.com/2019/09/13/realestate/new-development-new-york.html

Seems like things are still good Downtown, but I'm not the expert that others are on this data.

Prime downtown is pretty good but that is not where most of downtown supply is : Fidi, Lower East Side / Two Bridges, Gramercy East.

The impression I get for downtown is that that prime markets are doing ok, but the edge markets are down by quite a lot. There were some examples I posted for FiDi a while back which showed massive drops several months ago for comps, and nothing I've seen since says the situation has gotten better. It may even have gotten worse.

In general you don't get a lot of new construction in prime areas because the affluent who live there get them downzoned to prevent it. So large projects tend to occur on the fringes. Look at Billionaire's Row - before these megatowers got built you had gorgeous buildings like The Osborn and Alwyn Court that sold dirt cheap because no one wanted to live there.

In Downtown Brooklyn you've got Brooklyn Point which is barely 1/3 sold (or maybe not) and 11 Hoyt at ?1/4? And both coming upon completion. Fortunately most of the big DT Brooklyn construction is rental. Same for LIC: most of it is rental, but after rumors of Amazon deal condo plans increased. But what's going to happen now?
The game of musical chairs has flipped and now there are tons of empty chairs and not enough butts to fill them. In general that indicates for each deal that gets done the scale tips a little farther away from the those left.