Bidding wars in the suburbs (Part 2)

The point is, too crowded?

I just got back from picking up some computer equipment at the Best Buy in one of the mega-malls within a 15 min door-to-door drive from my current location and marveled at the abundance of food choices and parking. Applebees? TGIF? Chile’s? Everything is so easy here, so the question is, what is wrong with me that I wanted to shoot myself as I surveyed the abundance and ease of it all? I do really like the little enclave we have found in the Short North, but the rest will be an adjustment. Our reason for being here is purely family, and I feel good about that. In addition to family, the locale has myriad redeeming traits; just not the first choice were family members more mobile.

Nada, Great story. I always view people much richer than me relieving tax burden of others especially with NYC income tax. Cuomo mentioned the other day that 1 percent were paying 50 percent of taxes.

>> The point is, too crowded?

No, she would have preferred it if all the rich people lived in one neighborhood while the mass affluent lived in another, so the former wouldn’t have to see the latter and get jealous. Like the way it is in the different towns in the suburbs. At least, that’s how I interpreted it.

George, your misinterpretation of the data keeps coming back to the same point.

On the maintenance increase, it's all weighted by sales. Coops have had a more consistent stock sold, and you can see maintenance increases track inflation at ~2% per year. If you bothered to look at the same condos in 2005 vs. 2020, it's the same story.

The condo I rent has monthlies that are $4 per square foot. That's because for every 2 apartments in the building, there is 1 staff employed under the theory of full service even when the building is full. But only a fraction of the building is actually every occupied simultaneously. So mostly, they hang around in the lobby chatting. They are nice people & I enjoy yapping with them, but trust me, you'd be just as happy without it.

The median sale price of a Manhattan condo is $1.7m. so when looking at the median monthly fee of a condo being sold, we are looking precisely at the mass affluent segment. The point holds.

Congratulations on keeping your building's monthlies low. Maybe you had a good reserve fund going in, or maybe they were high to begin with. Maybe it was a new building then and it's aging now. One observation does not refute the overall point that the median condo's monthlies per square foot have risen dramatically faster than inflation. That is a problem for sellers.

It's not my building, it's just somewhere I lived in 2005.

Yes, median condo monthlies (on a per-sold basis) have grown alongside median condo prices (on a per-sold basis) at above-inflation rates because 8000 new dev condos are sold each year whose quality is vastly higher. If you look at coop monthlies and prices, they track inflation. And if you look at every single same-apt resale 2005-2020 (which is what the Streeteasy Price Index does), you'll see an 18% increase, part of which is explained by improving renovations and part of which is explained by the lack of Covid in the measurement at this point.

I'm not sure what you're gaining by sticking your head in the sand on this point, referencing a broker seeking foreign investors based on Manhattan's ever-increasing condo ppsf.

Using your own data, median condo ppsf doubled 2005 to 2020 as did median condo monthlies.

Note how over the last decade, new dev marched to $3K ppsf while representing 10% of all sales (coop & condos):

https://www.millersamuel.com/charts/manhattan-co-opcondo-new-development-ppsf-market-share/

I haven't even bothered to look for data to back this up, but I highly suspect 2 reasons for increasing condo common Common Charges are:
A) There has been a trend to smaller and smaller buildings having full-time doormen, and
B) Even after they are built, all those square feet of amenity spaces still have to be heated, cooled, cleaned, repaired, and otherwise maintained.

Indeed, "boutique" buildings will have higher charges than a 700 unit building like Bill Zeckendorf used to build, even if the amenities are the same. But even then you could cite all manner of costs that are rising for everyone. Insurance, union contracts, employee health care, power, gas, water and sewer, repair and maintenance costs, service contracts, other administrative costs. Name one that is rising at less than 2% inflation per year.

Steven Ross from Related captured it well today -- even though he is part of the problem.

"The problem with New York is that the cost of doing business here is so much higher than anywhere else in the country. We have to get the cost factors out.

"In the city, we overbuilt like crazy and we had bad leadership. We were growing to the point where nobody could really afford to live here."

https://www.nytimes.com/2020/08/27/business/stephen-ross-related-corner-office-trump.html

"If you look at coop monthlies and prices, they track inflation" -- Inonada, that's not correct. Property taxes have grown at a 4-6% CAGR for the past 15 years, as have regulated utility costs and labor costs.

What makes you say that? 5% CAGR over 15 years is more than a doubling (108% increase to be exact). You can see from the chart that George dug up, coop monthlies on sold inventory went $1.46 per square ft to $1.74 between 2008 and 2020. That’s 19%, or 1.5% CAGR.

https://www.millersamuel.com/charts/manhattan-hoa-monthly-cost-per-sq-ft-based-on-sales-during-each-quarter/

This line in my old building from 2005 went up 23% over 11 years from 2009 to 2020 (1.9% CAGR):

https://streeteasy.com/sale/392880

https://streeteasy.com/sale/1412478

George / ToRenoOrNotToReno / 300 / 30yrs / anyone else, from your perspectives, what do you think has been the percentage increase rate for monthlies & rent over the past 15 years? I'm curious to see how broad a spectrum we have on this question.

I started reading the Stephen Ross article last night, was interested in hearing what he had to say.
Seemed off-the-cuff, so I liked that, but based on some cringe-worthy statements (uh yeah, at age 75 in 2015 you probably became the first white person to ever think of this):

"Five years ago, I set up RISE. It’s probably the only group to deal with racism ever formed by a white person..."

I decided it was best for him to just follow his own advice:

"But you know what? The best thing is to keep your mouth shut. You go about your business because that’s what matters."

300, I thought I'd corrected this before, but: the 1% pay 50% of all INCOME taxes.

There are lots of other taxes out there (Property, payroll, sales, and gas tax spring to mind) where the 99% are carrying the load.

@Ali - Those who like simplistic tropes tend to ignore facts. Whenever I hear someone parroting one, rather than correct them, I ask them to provide the foundation for their statement and see if they can handle kicking the tires. Their reaction is always telling: some engage in good faith dialogue, some ignore completely, and some get really defensive and resort to ad hominem attacks.

@Inonada - Agree on cringeworthy statement; indicative of the mindset of the culture in which I was raised.

Do you think he is actually that clueless, or was it an off-the-cuff half-joke offered as proof of his antiracist bona fides in response to the Trump fundraiser fiasco? I have the impression it was the latter.

I know quite a few individuals of his profile and age who are so clueless as to say they have done more to combat destructive racism than anyone they know while continuing to support Trump. They get angry and belligerent when confronted with the contradiction if the initial attempt at deflection doesn’t work. The fact is they don’t care about ending systemic institutionalized racism at their personal expense, and if you kick the tires hard enough, some pretty scary white sumpremacist tropes come out at the end of the day. I have quite a bit of personal experience in these discussions.

PS - And I am well aware that I am profiling, but knowingly so based on the subject’s statements, rather than immutable traits. I also know successful white men of that generation who don’t think alone those lines at all.

Ali, I am just quoting Cuomo in 50 percent of taxes being paid by 1 percent in NY. The true number would be what you put in terms of taxes (Income, payroll, sales, property tax etc) and what you take out (schooling, public housing, medicaid, Welfare programs, use of public goods such as roads, benefit from national military spending, partially earned benefits - social security, medicare etc). I have not seen a middle of road fair study on that. They are plenty of studies on the left and on the right. Would love a link to what you believe is middle of the road.

inonada,
I think those numbers are all over the map. I can think of buildings where Common Charges are up by 1/3, Real Estate Taxes are triple, and real rents (adjusted for fees) are even.

On the earlier question of how much "same stores" monthly fees have risen, I don't think anyone has the numbers. And what is even same-stores? Is it the same apartment today vs in 2005, when today it is much older and depreciated? Or is it a 10 year old apt today vs a 10 year old apt in 2005? Or just the median sale?

I only look at condos for several reasons. One, I have no desire ever to deal with a co-op Board, as I've discussed previously. Two, coops tend to be old, which has advantages and disadvantages. They are stable and predictable in terms of cost but often also own their own garage, retail space, etc., which obscures the true cost of running the building. As has been discussed, the retail apocalypse may result in a surge in fees at some of these buildings. Third, coop maintenance includes RET, which is better analyzed on its own and is often half of the monthly fee.

Bottom line, my view is that condo monthlies have doubled psf considering similar 10 year old condos in 2005 and 2020.

The increase in Maintenance in Coops and Real Estate Taxes in Condos is complicated. Not only have RET gone up tremendously on the whole, but also the tax rates between classes have diverged. In addition the vacancy destabilization of Rent Stabilised units led to a huge increase in the value of pre-1971 buildings which then in turn led to huge increases in the Assessed Value of comparable Coop and Condo buildings.

And generally in terms of being ad valorem, the system used to be heavily subsidized by Manhattan office space but there has been a shift towards Manhattan residential buildings subsidizing the outer boroughs apartment buildings and houses as well as non-gentrified areas single family subsidizing gentrified.

Thanks, 30yrs & George.

George, I certainly agree that the typical 10-year-old building in 2005 had half the monthlies of the typical 10-year-old building in 2020. But that’s just a reflection of hamburger economics. To you, break-even inflation seems to be getting double the quality at the same price simply because that’s what the market produced in response to demand. That’s not how inflation works. The buyers got richer, but they didn’t want more sq ft at the same quality. There’s only so much hamburger a person can eat. Your complaints about prices/monthlies/rents going up in NYC seem to be more about how your purchasing power has changed in relation to others, not in an absolute sense.

On deterioration, it’s a fair point. However, that’s more about an increment on price than anything about monthlies. I’m pretty sure you can buy that 800 sq ft in 200 RSB for the 2005 price of $750K, restore it to its full former glory for $100K, and pay the same monthlies.

George, another question for you. Let's take the 812 sq ft low-floor B-line at 200 Riverside Blvd. These traded at ~$400K in 1999 (with variation around pre-construction vs. not, presumably), ~$750K in 2005 (with $1350 in monthlies), ~$700K in 2009 (with still ~$1350 in monthlies), and what would probably be $700K-$750K in 2020 (with ~$1650 in monthlies).

At what price would you have been a buyer in 2005 and today? Personally, I'd say perhaps $500K back then and maybe $600K now. I'm curious about your view on both 2005 & 2020. Here is a link for reference:

https://streeteasy.com/sale/1412478

I've never looked at those buildings on the far west. Most of my life is on the east. And right now I'm not a buyer of anything in the city. These buildings do show that new buildings far from WTC were really overbought in the early '00s compared to many other neighborhoods. There weren't so many at the time, but there sure are now. Personally I'd feel like a fool if I lost relative to inflation after buying in 2002.

Let's continue the discussion on a fresh thread.

https://streeteasy.com/talk/discussion/45948-bidding-wars-in-the-suburbs-part-5