Talking
Numbers - CNBC | Yahoo Finance
What ritzy Manhattan real
estate says about stocks
The already scorching-hot
New York City real estate market surpassed its latest milestone this week, when
news emerged that an apartment in Manhattan’s posh Upper East Side neighborhood
would go on sale for $130 million. That makes the triplex penthouse apartment,
in a building yet to be built, the most expensive New York apartment listing
ever.
For some, these
types of milestones reflect the stimulative policies of the Federal
Reserve. The Federal Reserve’s easing measures have decreased interest rates
and increased asset prices, which provides an even bigger boon to the
wealthy and make borrowing money less onerous.
“Global QE [or “quantitative
easing”] and the debasement of global currencies increases the demand for hard
assets, and NYC real estate is an easy way to park a lot of money in a hard
asset,” Peter Boockvar of The Lindsey Group wrote to CNBC.
For longtime bears like Marc
Faber, Manhattan real estate prices play into a case that stocks will crash.
Faber frequently makes the
point that Manhattan real estate, alongside art and collectibles, has become
much more expensive recently. For Faber, this isn’t a consequence of the rise
in stock and bond prices--it is a parallel move, driven by the Fed’s easy-money
policies. Manhattan real estate prices, then, indicate that stocks haven’t
risen thanks to improving economic fundamentals, but rather due to the policies
of the U.S. central bank. As the Fed pulls back on these measures, stock prices
are likely to collapse, Faber says (a view partially shared by Boockvar, if not
in such overtly frightening terms).
But for
Wei Min Tan, a buyer’s broker at Charles Rutenberg, the view on the ground
indicates something substantially different. He says home prices, including
prices for Manhattan apartments, are actually not outlandish given levels of
income.
“In
the U.S., the average house costs about three times annual income. And I think
that’s very healthy. Because I think a bubble market would be something like
Hong Kong, where the property prices are about 25 times the annual income,” Tan
said.
Additionally,
he says we aren’t seeing the irresponsible lending that was rampant in the
recent housing bubble.
“Banks
are not lending recklessly like they used to. So right now the buyers who are
actually getting loans are those who can really afford to get the loans. So
that’s representative of good demand.”
However, when it
comes to Boockvar’s point, he agrees “the global buyers are seeing Manhattan as
a safe haven for their assets,” which is creating “very strong demand.”
Interestingly,
while those buying real estate as an investment (which Tan estimates makes up
about 30 percent of Manhattan buyers) are clearly having an impact on New York
real estate, the broader housing trade has been a tough one. The SPDR S&P
Homebuilders ETF (ticker symbol: XHB), which comprises stocks levered to
homebuilding, is down some 10 percent this year.
]If there is a bubble in
equities, then, housing stocks certainly aren’t showing it. And if
multimillion-dollar apartments become a bit less expensive--well, we can take
comfort in knowing that their owners can probably afford the slip in prices.
Wei Min Tan is a Manhattan condominium specialist focusing on investment condos and foreign buyers. He can be reached at tan@castle-avenue.com
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