Miller Samuel Fourth Quarter Results

You can throw out all past historical data, charts, trends etc....out and flush down the toliet because this is nothing like anything we ever seen. This is a perfect storm and they is nothing on the horizon like the internet boom of the 90's to pull us out of this tsunami. We don't produce anything anymore but debt and leverage, this nothing but a phony economy we that we let the politicians and Wall Street pull over our eyes. Yep I guess deficit spending is the way to pull us out this coming depression. Stevejhx keep posting and blowing away these amateurs with reality and fact. They know nothing!!!

"apartment, per square foot, per square inch, it doesn't matter: it's a median, which means that is the point that half of apartments sold above, and half sold below."

I think you should look up the defintion of median price per square foot. It is a far better measure than median and stock has a much smaller impact. Where in the article above do they talk about median price per square foot? How would compare that to Case-Shiller?

This idea pushed by some that a cheap glass condo offered by a desperate, less-emotional developer can't drag down resale prices...Come on now. Steve, nice comment way back in the post that the single, high earning finance employee who is gonna pay $1.5mm for a 1 bed condo no longer exists. Neither does the couple paying $2.1 for the 1300 sqft 2 bed in the same development.

Is there any way to figure out the unsold glass condo new dev inventory? When do the offering prices on those units start going down? I still see them offered at $1400-1500/ft plus. Is there any truth to what I have heard about banks refusing to give mortgage to places under 50% sold?

"Where in the article above do they talk about median price per square foot?"

Why would that matter - it's a stupid measure. WHO CARES what the median price per square foot is? You don't see the properties. You show me where anybody but in NY claims that that is a useful measure.

The only valuable measure is what happens to the same apartment over time. That is what I say will happen based on that. It is the Case-Shiller method.

"How would compare that to Case-Shiller?"

How the hell would I know? No one but you and Jonathan Miller use it. The ppsf for a ground-lease building will be different from an non-ground lease building. The ppsf for a condo will be different than for a co-op. The ppsf for a big apartment will be different than for a small apartment. The ppsf for Tudor City will be different than the ppsf for Battery Park City.

It's a stupid measure. What matters is the price trajectory of the same apartment over time. Add them all up (and, perhaps, adjust them seasonally) and you will get an accurate view of what prices are doing.

"This is a perfect storm."

I said that a year ago. They made it worse still by letting Lehman go under.

"this nothing but a phony economy"

Absolutely true. It's a Ponzi scheme. Paul Krugman's essay yesterday was brilliant - supply-side is forever dead. Keynes was right.

Juiceman, median is far better than median? Median does actually suck becaue if you sell enough new development units you drag the median up to better-than-average coop unit. If you exclude the new developments, the median is a much better indication of the average condition coop unit that represents the average piece of housing stock in Manhattan.

I've always been a Keynesian.

"Is there any truth to what I have heard about banks refusing to give mortgage to places under 50% sold?"

75% is the new Fannie threshold. It's not applicable at these prices, but banks will adopt it as standard.

"stock has a much smaller impact."

That is hugely hilarious.

JuiceMan, you are showing your lack of knowledge in greater depth even than when you said JPM was going to retain tons of BSC staff for the integration. They're already gone.

And stock has the same impact on median prices whether you take the median apartment price, median square foot price, median view price. It's the median of the ones that were sold.

OMG.

Rhino86, median price per square ft. Look it up and tell me if that measure sucks as much as median.

"WHO CARES what the median price per square foot is? "

I do.

"The only valuable measure is what happens to the same apartment over time. That is what I say will happen based on that. It is the Case-Shiller method."

Until you have the ability to track it like Jonathan Miller we'll have to use what we have. I don't have a database and a staff so the best measure we have access to is median price per square ft. Why it is a stupid measure? Tell me how stock is impacts this measure? Do you even know?

"And stock has the same impact on median prices whether you take the median apartment price, median square foot price, median view price."

OMG? Here we go. You are going to start getting testy. Tell me the difference (since I have a lack of knowledge) between median and median price per square ft. How are they different? Which one would have less of a mix, stock, etc impact?

"hugely hilarious"

Yup, you are.

"WHO CARES what the median price per square foot is?" "I do."

Okay, name me the second person. You're doing what LICC = tech_guy = oldbuyer does: making up your own metric. Just like in the olden days realtors in NY measured property prices by how many rooms they had.

"Until you have the ability to track it like Jonathan Miller we'll have to use what we have."

Admittedly real estate in NYC has been an opaque business. But now we have ACRIS which includes co-ops. In the future it will be measurable.

"Why it is a stupid measure?"

It's a stupid measure because you don't know what units are included in it.

"Tell me how stock is impacts this measure?"

Do I really have to?

Oh, okay, I'll humor you (said in a Sarah Palin accent):

"median: denoting or relating to a value or quantity lying at the mid point of a frequency distribution of observed values or quantities."

"Observed values or quantities." That would be the specific units sold in a specific period. They're not always the same ones, and hence are not controlled.

"You are going to start getting testy."

I'm not getting testy. I'm just amazed that you can make these unsubstantiated claims and expect people to believe them.

"Tell me the difference (since I have a lack of knowledge) between median and median price per square ft."

Okay. One is the median price of apartments, the other is the median price of apartments divided by the number of square feet in each apartment.

"Which one would have less of a mix, stock, etc impact?"

They would have the same mix, stock, etc. impact, as they are the same apartments, in one case the raw price, in the second the raw price divided by the number of square feet.

In fact, you could add up all the square feet sold and divide the total price of all apartments sold, and you'd get the same answer.

Rhino86, median price per square ft. Look it up and tell me if that measure sucks as much as median.

You said median and median...WTF are you talking about? Yes when mix is as big a factor as it is in this sample, then yes, median sucks.

> Wow. Down 3.6% in a Q4. I am so scared. Yawn.

Number was 10%.

Keep yawning...

And those were mostly Q3 numbers

Keep yawning...

To take a break from the obvious disaster that is the purchase market, how about rentals? What is going to happen when all these developers flood the market with rental units? 2002 was nothing compared to this, and rents went down 20%-25% depending on neighborhood.

No comment from JuiceMan on who else considers median price per square foot to be meaningful, outside of New York, where realtors used to use price per room as a metric?

Median price per square foot is sort of like the median price of vegetables - interesting, but absurd and ultimately meaningless.

btw, bjw, I went and foudn this for you... the difference between a miller samuel report and even a co-branded one, versus a brokerage report that uses the miller samuel data.

Things like this:

"In the last few weeks, intelligent buyers have taken the opportunity to snap up fantastic real estate at a comfortable savings. Speculative activity is certainly on the wane and the beneficiaries of the resulting drop in activity are undoubtedly regular New Yorkers who need to relocate. They are getting the best deals to be had in many years."

Pamela Liebman
Q4 Corcoran Report

After something doubles in five years, then goes down 15-20% in a quarter it becomes a bargain to some... That is why it can't fall as fast as the stock market. If people could check their house value like a stock, more people would already be panic selling down 20% to avoid the next 30%... Thats why the anecdote is actually telling. Hell, my father has said his house didn't go down in value in the 1990s, it just didn't go up... For some people its just not real, and maybe its for the best for them.

"No comment from JuiceMan on who else considers median price per square foot to be meaningful, outside of New York, where realtors used to use price per room as a metric?"

I do. A ton of other people find it useful too. It has its flaws, but so does every metric, and this one is pretty damn good as far as flawed metrics go.

nyc10022, take off your "I hate all brokers" cap for a second and re-read what's written there. There's nothing inherently false about it. Does it try to put things in a more positive light? Yes, but if you expect a brokerage firm to cry the same doom and gloom song you have on repeat in your head, you're mistaken. There is concrete evidence (in at least one thread on this board) that some recent closings are at prices not seen in many years. But really, the point (again) is that the Miller Samuel report IS THE EXACT SAME THING as the Elliman report. You said you liked the MS report but thought the Elliman one was "ass." Capisci?

Does anyone publish a median that excludes new developments? That might be more useful.

I have been following most parts of the financial/economic crisis because of my job (at an economic consulting firm), and I have to say that you are crazy if you think prices will EVER (accounting for inflation) go back to where they were at the peak. The RE bubble was a perfect storm even more than the current POP is.

Real estate prices are notoriously sticky and opaque, which makes it difficult to say exactly how much prices have fallen by at this point in time, but prices very clearly are falling and will continue to do so. The opacity of RE prices has made the fall slower than I expected but no less inevitable. I would look at price levels in 2002 or pre-tech bubble to form an opinion of where they will land, but the massive wealth destruction and deleveraging that is occurring makes predictions extremely difficult.

That said, this is very difficult news for many people as Americans in general put a lot of financial/emotional stock in their real estate (hence the bubble). The tone of this discussion would probably improve if bearish posters kept this in mind.

> You said you liked the MS report but thought the Elliman one was "ass."

Dude, that was a joke.

Relax. Its all good.

;-)

btw, that was the corcoran report. not the same thing.

I don't think owners were any less insensitive on the way up.... Everyone hates a bear. Even the government hates a bear market. Where is the sensitivity for everyone who doesn't work in finance who haven't been able to afford to buy since the 1990s? And I say this as a finance person. The government protects the holders of assets. Why shouldn't the market be able to fall and create investment opportunities for the prudent akin to the ones that existed in the early 90s and early 80s. The whole thing is a joke.

"I have to say that you are crazy if you think prices will EVER (accounting for inflation) go back to where they were at the peak."

They will, eventually. I won't be alive to see it, but they will.

2003 prices.

"Does anyone publish a median that excludes new developments? That might be more useful."

Yes, the miller samuel data breaks out new condo median and resale median. Basically confirms that new condo sales from 12-18 months ago are propping up overall averages.

Steve is right on the whole median thing. Case schiller like for like is the only true measure. But since it doesn't exist for nyc condo/coop, I suppose mean/median will have to do. But if you are going to use that as the measure, you need to eliminate as much of the noise as possible. i.e., median price/sq foot or median by bedroom size or type of building, etc over time. at the least, it will help eliminate some of the noise from large vs. small apt mix shift affecting marketwide numbers.

MS has just posted the actual Fourth Quarter Report on their web site. Always an interesting read.

http://www.millersamuel.com/reports/pdf-reports/MMO4Q08.pdf

A little market intel for you guys. Just got my offer accepted on a Classic 8. 23% below the asking price and 45% below the peak comp in the same line. That apartment was on a lower floor so I actually see it as 50% less.

Not going to post any more information until after the contract is signed and I won't reveal the address until we close. So don't ask.

Enjoy

Let the crash begin.

a_o - no need to post the same thing on every thread. Only I'm allowed to do that.

Congrats - sounds really exciting!

"Does anyone publish a median that excludes new developments? That might be more useful."

Agreed Rhino, but would that include resale’s of new devs or could we draw the line on buildings less than 5 years old? Parsing gets a little hairy.

"No comment from JuiceMan”

First of all steve, I have a job where I can’t post on streeteasy 24/7. Second, my comments are worth waiting for since I'm taking the time to educate you. You have to have patience.

“on who else considers median price per square foot to be meaningful"

Funny thing is steve, streeteasy seems to think it is meaningful enough to include on every query. Does streeteasy have credibility?

"A ton of other people find it useful too. It has its flaws, but so does every metric, and this one is pretty damn good as far as flawed metrics go."

Tech_guy, I think we can add median psft to steve's growing list of blind spots (marginal rates, tax deductions, 12x ratio's, etc)

Is that accepted_offer really true? Come on... So you priced 20% down and needed to accept 45% down? And the condition is really comparable? I guess those fortunate enough to afford classic 8s these days already own one. If true, it must be that the pool of buyers of $2.5mm-3.0mm+ apts is tiny as hizzel.

"my comments are worth waiting for since I'm taking the time to educate you."

Yes, you have been for a year when you've been saying that the real estate market was doing just fine.

"streeteasy seems to think it is meaningful enough to include on every query. Does streeteasy have credibility?"

I have confidence that the number is correct, just not that it's worthwhile. Some habits hard to break.

"I think we can add median psft to steve's growing list of blind spots (marginal rates, tax deductions, 12x ratio's, etc)"

I stand by my comments on marginal rates.

I stand by my comments on tax deductions.

I stand by my comments on 12x ratios without an apostrophe.

I've showed you where my information comes from - respected academicians and corroborated data. Still waiting for you guys to post where you get your theories or numbers from, apart from, "That's the way, uh hu, I like it, uh hu."

I don't understand your question. I made an offer, they countered, I countered, they accepted. Where we ended up was 23% below the final asking price. The condition of the apartment is good but not mint same as the comp.

A year ago I was definitely not in the category of someone who could afford a Classic 8 in a great building. Fortunately my industry is recession proof and things changed a lot in the market. Amazing how much things can change in a year. For what it's worth I probably could have gotten a similar apartment for less if I held out another six months but I'm going for it.

I misread. I thought you were the seller. I can't believe something traded for 50% of peak. What was the per square foot price accepted/per square foot peak, if that doesn't reveal too much? You are making a case for going out and bidding 1/2 peak.

accepted: you said you have settled 23% below their final asking price. can you calculate what % below their INITIAL asking price they have accepted your offer? Thanks very much. Not asking for incidental reasons, we are considering bidding on a similar apartment, and this information would be helpful to us,

The Miller Samuel listing discount stat is 7.3% for 4Q, which is a huge and dramatic expansion from 2.6% for 3Q, but that's a far cry from 23%. That's an interesting data point, which is meaningful if we start seeing it replicated -- time will tell.

ali r.
{downtown broker]

Do we really need time to tell us that the market is down 15-20%? As people who watch the market closely, don't we already know it?

"I've showed you where my information comes from - respected academicians and corroborated data"

Yes and we poked gigantic holes in each one of them. I guess that would be another blind spot?

Yawn, I'm bored with this. Next topic!

"we poked gigantic holes in each one of them"

Yes. Poked giant holes in all of economic theory. I understand. Seen it done. Sort of like the median price of vegetables at the grocery store.

You've yet to show anything to substantiate anything you say.

Boring!

"Do we really need time to tell us that the market is down 15-20%? As people who watch the market closely, don't we already know it?"

I don't think anyone here really needs the information in the sense of "they don't know". I do think some need it to break down the denial wall a bit...

> Real people who bought real co-ops to live in seem to be doing just fine. :)

When did 20% down and sinking become the new "fine"?

Are we getting to a new reality?

nyc10022, its not a new reality. why is it accepted that in stocks you will wax and wane..that you essentially forget about a large portion of your portfolio? it's the same with real estate. i cannot tell you have many times i have lost (on paper) value in my homes. but overall i ahve always made a lot of money - with one exception. i have an old home in the south of france that has not appreciated a cent and seems to need a repair every other day. but we love it.

Difference being that the long term return on stocks has been shown to be worth the effort of the ups and downs...

while the long term returns on RE have not...

I hope this does not trigger a slew of financial models but I cannot see how owning is a "bad" financial decision. for a lot of people it is certainly woreth the ups and downs

If folks are buying as a stable place to live, sure.

If folks are buying as their investment strategy (which seems to be most of the country 2005-2007) then its a whole different story. The historical returns show its pretty lacking as "investments" go...

If folks are buying as their investment strategy (which seems to be most of the country 2005-2007) then its a whole different story. in this, i completely agree, if you're referring to their primary residence or if they're a one off investor. as a slow, steady strategy i have found that having a portfolio of real estate that cash flows is an excellent way to invest a portion of your net worth. A PORTION.

I disagree with you on this, nyc10022.

The real estate return numbers that typically get bandied about are "price only" return numbers. They don't include the "imputed rent" that you didn't have to pay. When that number is included, residential (and commercial) real estate has been a solid and competitive asset class with a competitive "Sharpe" ratio (risk-adjusted return). It's lower risk than stocks and lower return - but that risk can also be leveraged up to a risk level similar to equities.

And, of course, it has been a great diversifier. Look how it performed in the 2000-2002 bear market. That said, it is not always a great diversifier either as we saw last year.

Everything goes down in a deleveraging.... And to forget the fact you don't have to pay rent is so retarded that its sad people even present the numbers that way. In the end, the point is buying when rent is equivalent is buying nothing at all...which is what the buyers of 2005-2007 are finding out the hard way.

"The real estate return numbers that typically get bandied about are "price only" return numbers. They don't include the "imputed rent" that you didn't have to pay."

They also don't include the cost of taxes and maintenance...

"When that number is included, residential (and commercial) real estate has been a solid and competitive asset class with a competitive "Sharpe" ratio (risk-adjusted return)."

Only if you include the last few years of bubble. Check the stats after the pop finishes and get back to me. We are talking about being in the middle of historical declines.

> And, of course, it has been a great diversifier. Look how it performed in the 2000-2002 bear market.
> That said, it is not always a great diversifier either as we saw last year.

I covered this on another thread... yes, if you buy REITS or homebuilders.

No if you own one apartment in one neighborhood in one city with market exposure greater than your total net worth. That is not diversification, that is quite the opposite.

In fact, its even worse when you factor in the life diversification (that are you a stock or are you a bond concept that has recently been written about with economists).

If you worked on Wall Street, buying a Manhattan apartment was about the worst non-diversification move you could make...

thank you, rhino. that is the point. buying real estate is a way to avoid paying rent--period. that is the financial incentive to buy. if you have to pay more to avoid rent than you would have to pay in rent otherwise...what is that old saying about the cure being worse than the illness?

I call it "paying for the right to appreciation"...and its the kiss of death... it is typically paired with "my downpayment would be in cash anyway so I won't calculation opportunity cost".

Gotta go back from lunch break to real work. Bottom line: I expect we will simply agree to disagree.

For me the FTSE NAREIT Apartment REIT index is an OK proxy for home buying. I have stats from 12/31/93 to 11/30/08.

Annualized Return: 8.60%
Annualized Risk: 17.45%
Sharpe Ratio: 0.25

S&P 500:

Annualized Return: 6.42%
Annualized Risk: 15.03%
Sharpe Ratio: 0.25

I'd be the first to acknowledge that returns are time period dependent and this isn't a tremendously long period. But I do think it's indicative.

BTW, rhino, I did order the book you recommended. Look forward to an interesting read.

> I have stats from 12/31/93 to 11/30/08.

Thats your problem. You're taking the period where more than half is the biggest RE bubble of all time, and using that to describe an asset class. Rookie mistake... Hell, why not use data 2001-2008?

Your analysis could have proven tech stocks a great buy in 2000...

"if you have to pay more to avoid rent than you would have to pay in rent otherwise...what is that old saying about the cure being worse than the illness?"

Reminds me of the people who in the hunt to avoid taxes, would rather actually make less... (not just on paper)

"I call it "paying for the right to appreciation"...and its the kiss of death... it is typically paired with "my downpayment would be in cash anyway so I won't calculation opportunity cost"."

I'm going to buy the $10 mil mansion with the screening room so I can save money on movies.

"I'm going to buy the $10 mil mansion with the screening room so I can save money on movies."

That is just such a great line.

Timing is everything in life and there are plenty of people who have been renting to save their money and jump in when the prices drop and they have lost a significant piece of their money in the stock market over the past 6 months. Risk is everywhere.

I love it when late buyers claim renters were all jammed into the stock market in size to make themselves feel better. There must be a psychological term for that too. Transference?

As an fyi, my period also includes one of the biggest sell-offs in history. Apartment REITs had a -26.84% return in the first 11 months of 2008.

I'd also point of that the FTSE NAREIT Equity REIT index goes back to 1972.

REITS: 10.86% pa
S&P 500: 9.21% pa

A lot of smart people have made a lot of money in real estate. It would seem a bit presumptous to suggest real estate is a lousy strategic investment.

Tactics may be another story.

Rhino - My point was that there are many people who have lost money in RE and there are also plenty of people who had their money in the stock market thinking it was a better investment for them and that is not the case across the board.