Economics
September 28, 2009
Bed-Stuy, a Harbor in the Tempest?
Just as it did a month ago, The New York Times took a stab at classifying Bedford-Stuyvesant, this time as an exception to the ubiquitous economic tumult. Even though real estate prices are dropping faster in Bed-Stuy than in Park Slope, the article argues, the area is ripe for entrepreneurship: commercial rents are lower, attracting new shops such as Therapy Wine Bar or Creative Blossoms. Some of these new businesses are struggling themselves, but the Times points to some optimistic statistics: a 2008 study showing that locals spend $30 million at bars and restaurants outside of the neighborhood (i.e., there is a demand for local venues) and an NYU professor who claims that since residents of Bed-Stuy aren't as dependent on unstable Wall Street salaries and bonuses as, say, residents of Brooklyn Heights, their spending habits are also more stable. The article does plenty of comparison: Bed-Stuy to Fort Greene, Bed-Stuy to the Upper East Side, Bed-Stuy to Brooklyn Heights. What did you think of it?
Amid a Citywide Slump, a Local Expansion [NY Times]
History, with Hipper Retailing in Bed-Stuy [NY Times]
Photo by Clay Williams
Appraising the Appraisers
Appraisals, for all their importance in getting a mortgage and buying a home, seem to be rather nebulous. This past weekend, The New York Times ran an article pointing out several gray areas in the art of appraising. First of all, a change in the Home Valuation Code of Conduct that took effect back in May gave banks exclusive power over the appraisal process. The plus side, and intent of the change, is that brokers, builders, and buyers cannot influence the appraisal as much; the down side, according to some appraisers in New York, is that banks are using national appraisal firms that assign appraisers who charge lower fees—i.e., less experienced appraisers who are likely unfamiliar with the local market, something which is essential in New York City's market of microscopic subclimates. It is common, of course, in a down market for appraisals to come in low, but the combination of inexperienced appraisers and fewer data points due to lower volume might result in inaccurately low valuations. Buffalo News made a similar report about the appraisal industry upstate, and CNN Money reported that the housing industry met with New York Attorney General Andrew Cuomo last week to protest the current Code of Conduct, and the attorney general's office agreed to consider the matter further. The primary sources for these articles are brokers and local appraisers. We'd like to hear from other players in the game, as well. Any bankers, buyers, or national appraisers out there who want to throw their hat into the ring?
New York Appraisals Get Shortchanged [NY Times]
Tougher Appraisals Make Home Sales Harder [Buffalo News]
Housing Industry to Cuomo: Let's Work Together [CNN Money]
Photo by Richard Wanderman
September 1, 2009
Advocacy Org Finds Ubiquitous Housing Discrimination
The Federal Fair Housing Act was passed 40 years ago, points out the Gotham Gazette, which allows the Department of Justice to prosecute "patterns or practices" of "housing discrimination", and yet housing discrimination persists, according to the Fair Housing Justice Center, a non-profit advocacy organization. There is a significant dearth of affordable housing, for example, and the sales and rental markets are operated by brokers, some of whom use illegal practices and propagate discriminatory concepts such as the idea that it is okay to set a limit on the number of children. The FHJC gave the Gazette several examples of discrimination based on race (NYC is the fourth most segregated metropolitan area in the U.S. for African Americans, and the fifth most for Latinos), disabilities (such as new buildings that flaunt flout design requirements for access to disabled people), or income source. In July 2008, for example, the FHJC found that close to 400 posts from 161 different real estate companies on Craigslist discriminated on income source alone, using phrases like "no government programs." As a solution to these violations of rights, the Center is pushing for better training of realtors and brokers, consistent and flexible enforcement of existing laws, and improved regulations towards marketing practices that will make all available units visible to all demographics.
Housing Bias Persists [Gotham Gazette]
March 6, 2009
Unemployment Rate Hits 25-Year High
Pretty grim. The Times covers it here and its economics blog has this to say: "It’s still too early to call this the worst recession since the Great Depression. But it’s bad, and it’s still getting worse at a rapid rate." On a more positive note, a Siena College survey just found that New Yorkers' consumer confidence rose 3 percentage points last month, while the national rate fell 5 points.
February 20, 2009
Coney Island Lager Doing Well Despite Great Depression
A ray of sunshine in a storm of depressing economic data: According to a press release, Shmaltz Brewing Company, makers of, among other things, HE'BREW Beer and Coney Island Lager, reported that its sale rose 80% in 2008 and predicts it will clear the $2 million sales mark in '09. Although it's a member of the Brooklyn Chamber of Commerce, Shmaltz actually makes its brews in Upstate New York.
February 19, 2009
How the Financial Crisis May Not Be So Bad for New York
We just got around to reading the cover story of the current issue of The Atlantic Monthly called How the Crash Will Reshape America. One of the article's central points is that while hubs of intellectual and creative capital like New York will surely suffer in the economic crisis, they will suffer a lot less than second-tier cities, the suburbs or industrial areas and therefore benefit on a relative basis. While there has been much hand-wringing about New York's reliance upon the finance industry, many other smaller cities, it turns out, are much more reliant: Hartford, Des Moines and Charlotte, to name a few. Rather, New York is an incredibly diverse place which should be well-positioned to reinvent itself faster and more efficiently than other places:
New York is much, much more than a financial center...It is home to a diverse and innovative economy built around a broad range of creative industries, from media to design to arts and entertainment. It is home to high-tech companies like Bloomberg, and boasts a thriving Google outpost in its Chelsea neighborhood... New York is more of a mecca for fashion designers, musicians, film directors, artists, and—yes—psychiatrists than for financial professionals...The financial crisis may ultimately help New York by reenergizing its creative economy...Place still matters in the modern economy—and the competitive advantage of the world’s most successful city-regions seems to be growing, not shrinking...Talent-rich ecosystems are not easy to replicate, and to realize their full economic value, talented and ambitious people increasingly need to live within them...Economic crises tend to reinforce and accelerate the underlying, long-term trends within an economy [like the map of per capita patent creation above]... In this case, the economy is shifting away from manufacturing and toward idea-driven creative industries—and that, too, favors America’s talent-rich, fast-metabolizing places.
Sounds good so far, right? Here's how the trends will play out on the American landscape, according to the author Richard Florida:
What will this geography look like? It will likely be sparser in the Midwest and also, ultimately, in those parts of the Southeast that are dependent on manufacturing. Its suburbs will be thinner and its houses, perhaps, smaller. Some of its southwestern cities will grow less quickly. Its great mega-regions will rise farther upward and extend farther outward. It will feature a lower rate of homeownership, and a more mobile population of renters. In short, it will be a more concentrated geography, one that allows more people to mix more freely and interact more efficiently in a discrete number of dense, innovative mega-regions and creative cities. Serendipitously, it will be a landscape suited to a world in which petroleum is no longer cheap by any measure. But most of all, it will be a landscape that can accommodate and accelerate invention, innovation, and creation—the activities in which the U.S. still holds a big competitive advantage.
Sounds like we're sitting pretty, huh?
How the Crash Will Reshape America [The Atlantic]
Obama Details Rescue Plan for Homeowners
With almost one in ten houses either delinquent or in foreclosure, President Obama unveiled a more ambitious plan than expected yesterday that could end up helping as many as nine million Americans. The $75 billion portion of the plan directed at homeowners has two basic goals: 1) To help the roughly five million homeowners who are current on payments but facing high interest rates and unable to refinance because the value of their homes has deteriorated; 2) To incentivize lenders to modify the mortgages of roughly four million homeowners on the verge of losing their homes. In addition, the Obama administration will pump another $200 billion into Fannie Mae and Freddie to increase the general availability of mortgages. The plan also aims to lower consumers' debt-to-equity ratios overall. “This plan will not save every home, but it will give millions of families resigned to financial ruin a chance to rebuild,” Mr. Obama told a crowd here, in one of the communities hardest hit by the housing crisis. “It will prevent the worst consequences of this crisis from wreaking even greater havoc on the economy. And by bringing down the foreclosure rate, it will help to shore up housing prices for everyone.” As The Times reminds us, modifying mortgages doesn't always work.
$275 Billion Plan Seeks to Address Crisis in Housing [NY Times]
O's $75 Billion Housing Bet [NY Post]
President Obama Unveils $75 Billion Plan [NY Daily News]
February 17, 2009
How Bad Could It Get?
"Mr. [John Tepper] Marlin (former Chief Economist for the City Comptroller's Office) expects that there will be more defaults on buildings as condominium and co-op owners fail to pay their common charges, and also more sales of foreclosed properties. Rents will continue to dip. There will be longer lines at the grocery store, because fewer people will eat out. And he worries about unrest, citing hard-hit Iceland as a recent example. “I’m concerned about people being so desperate that they lose the fear of losing their own lives and they become so desperate that they’re willing to endanger other people’s lives,” he said." — NY Times
February 12, 2009
Retail Sales Surprise on the Upside
Feb. 12 (Bloomberg) -- Sales at U.S. retailers unexpectedly halted a record six-month slide in January, reflecting higher gasoline prices and more spending on items such as clothing and food. The 1 percent increase followed a revised 3 percent drop the prior month, the Commerce Department said today in Washington. Purchases excluding automobiles gained 0.9 percent. Consumer spending, about 70 percent of the economy, is likely to resume shrinking as the year progresses, according to a separate monthly Bloomberg News survey, capping the longest slide on record. Lawmakers are aiming to shore up the economy with a $789 billion stimulus package that’s designed to create 3.5 million new jobs.
February 6, 2009
It's Tough Out There for a Middle-Class New Yorker
“Income levels that would enable a very comfortable lifestyle in other locales barely suffice to provide the basics in New York City,” says the the Center for an Urban Future in a new report that merely provides data to back up what all city residents already new. The group estimates that the same quality of life that costs $50,000 a year in Houston will run you $123,322 in the Big Apple; San Francisco is a distant second at $95,489 with LA at $80,583 and Philadelphia at $69,196. In addition, many New Yorkers put up with commutes that double the national average of 25 minutes. One Brooklyn Bridge Park even gets an unnamed reference: "If it wasn't already clear that the cost of living in New York City is greatly out-of-whack with the rest of the country, it certainly became apparent in early 2008 when a new condo development in Brooklyn Heights began selling individual parking spaces—not apartments, parking spaces—for as much as $280,000." So it's no surprise that the report finds that many people have been giving up on New York. In fact, twice as many people with bachelor's degrees left New York in 2005-2006 than in the prior two-year period. So what's to do: Among other recommendations, the report suggests diversifying the economy, focus on basic infrastructure and quality of life issues rather than building flashy new projects and increase housing stock that is affordable to the middle class.
January 30, 2009
Fourth Quarter Saw Biggest GDP Decline in 26 Years
December 17, 2008
Credit Crunch Hits Gehry's Office
After Ratner told Gehry to put his pencils (or balls of crumpled paper) down, he laid off two dozen workers, reports the WSJ. No comment from offices Gehry or Ratner, but FCR did reaffirm its commitment to the project: "it has cut off its new development pipeline, except for Atlantic Yards."
Photo by Atlantic Yards web cam.
November 6, 2008
End of the $400 Property Tax Rebate
Since 2004, $400 rebate checks have been sent out to homeowners courtesy of the Bloomberg administration. Well, no more. The mayor is immediately axing the program, reports the NY Times, to help shore up the expected $4 billion budget deficit. Other quick fixes: raising personal income tax by as much as 15 percent; hiking the city's portion of the state sales tax by as much as three percent; and charging a nickel for every plastic bag a consumer picks up at a store. "The mayor also detailed $1.5 billion in proposed budget cuts that would affect virtually every agency in city government," they write. "The measures include closing libraries for a half day, eliminating dental programs and closing a clinic in East Harlem." Should Wall Street rally and the economy heal, the mayor said, checks will go out again.
Mayor Cancels Rebates for Homeowners [NY Times]
Photo by tienmao.
September 23, 2008
Brooklyn's Financial Class and the Condo Boom
That's the subject of a NY Observer piece, which asks what effect Wall Street's downturn will have on the portion of our population that works in the financial industry, and thus our high-end housing boom; those are the folks responsible for snatching up a lot of the inventory, apparently. "Brooklyn may not be where the top executives or VPs live," worries one financial industry worker, "but a ton of back office employees live in the borough and will be out of jobs." Still, the article assumes a relatively optimistic tone. Brooklyn is still a bigger bargain than Manhattan; contractors still maintain a backlog of work; big projects have a long enough time line that the economy could pop back up by the time they get to the offering phase. And apparently we've learned our lessons from the city's last serious downward spiral. As one fellow put it, "I can't see New York going into this huge kind of 1970s-city-going-to-shit type of thing."
Wall Street Views From Another Bank [NY Observer]
Keap/Ainslie. Photo by kenyee.
September 15, 2008
6,000 Jobs May Disappear from Brooklyn
That's the grim news from the Brooklyn Chamber of Commerce, as reported in the New York Times. The BCC commissioned a report from the Fiscal Policy Institute, who concluded that Brooklyn will be a little better insulated from the looming recession than other boroughs, but it will be far from immune. Some 6,000 jobs could disappear by the first half of next year, which "would amount to about one of every 70 jobs in the borough and less than one-tenth of the 80,000 jobs expected to be lost across the entire city," they write. The reason we're expected to fare better: we're less dependent on Wall Street, with Kings County's big ticket employers being health care, retail and social services. We also fared better than the city as a whole during the last recession, from 2001 to 2003. Carl Hum, president of the chamber, suggested this possible solution: "Try to persuade city officials and banks to support the continued diversification of Brooklyn’s economy, especially by fostering the expansion of food makers and other specialty manufacturing."
Brooklyn Could Lose 6,000 Jobs, Report Says [NY Times]
Now Hiring. Photo by modernmonk.
January 7, 2008
Stuck in the Middle
An article in this week’s Crain’s looks at how real estate prices and taxes are making the city increasingly unaffordable for the middle class. The rising cost of housing, in particular, has meant that families making between $80,000 and $150,000 a year are finding it more difficult than ever to make ends meet. Higher real estate costs in Brooklyn, for example, have put the borough out of reach for many middle-income earners. A person profiled in the article who makes $60,000 a year “looked all over Brooklyn” before deciding to rent in Astoria. "Five years ago, [landlords] in Park Slope would have come to you," he says. Interestingly, the story also notes that the city’s recent prosperity has contributed to a widespread sense of entitlement, thus making people believe that their incomes should stretch farther. "People used to squeeze kids into one bedroom; now everybody thinks every kid should get his own bedroom," says Nicole Gelinas, a fellow at the Manhattan Institute.
Unaffordable NY: Tough Choices at $150,000 [Crain's]
Photo by ultraclay!
July 25, 2006
Residential RE Squeezes Industrial Nabes
A lot of concern has been raised about the survival of the industrial sector in the city, and much of the worries stem from the encroachment of residential property on land used primarily for industrial uses, whether it be through zoning variances, or illegal conversions. The residential real estate market has put enormous pressure on the industrial sector. In response, Bloomberg - in cooperation with advocacy groups and business leaders - has created a centralized agency to coordinate the effort to help the sector, initiated protective boundaries around the city called Industrial Business Zones, and has increased penalties and patrolling for illegal residential conversions.
A more complete look at the issue after the jump...
Commentator Balks at Mayor's Housing Plan
Arguing that Bloomberg's affordable housing plan will in effect increase housing costs for middle-income New Yorkers, Nicole Gelinas, of the Manhattan Institute, outlines the theory that regulating prices acuses supply to become restricted. The result? Housing becomes more valuable and prices rise for living space still on the free market. She also makes the generalized argument that rent stabilization leads to the deteriorization of housing conditions by depriving landlords of revenue needed for upkeep, forcing them to cut corners. Granted, some single mothers may not be able to afford their apartments without government regulations, she says, but that's "a problem of the dysfunctional underclass."
Bloomberg's Housing Horror [NY Post]
July 21, 2006
Brooklyn's Labor Market
Brooklyn is not fulfilling its potential in the retail market, and construction jobs are not keeping pace with the number of construction projects in the borough, says a recent report on the labor market in Brooklyn, published by the Brooklyn Chamber of Commerce. While the number of jobs in Brooklyn grew 1% in 2005 - the highest percentage occuring in culture and recreation - the 6.2% unemployment rate still lags behind the citywide average of 5.5%. Commanding the labor market is still the public sector, at 41% of all jobs in the borough. Wages have kept pace with inflation, but also remain below city average. The overall number of residential building permits issued almost doubled between 2001 and 2005. In 2005, 1,600 were issued, at a total of 9,000 units - coming in just over Manhattan, which totaled 8,500.
Brooklyn Labor Market Review [Brooklyn Chamber of Commerce]
Chamber's 'Target': Shopping [Brooklyn Papers]
Photo by Rob Innes.
November 17, 2005
NYT: Limiting Mortgage Deduction Wise, Unlikely
Hal Varian, a professor of business, economics and information management at the University of California, Berkeley, weighs in on Bush's proposal to limit the mortgage interest deduction in an editorial in the New York Times:
An excessive subsidy on one asset means that less will be invested in other assets. The money put into building those huge villas on the hillside could have been put into factories, office buildings and schools. Investment in physical capital and human capital makes the economy as a whole more productive, unlike investment in housing.
Given the huge subsidies to housing, it is likely that we as a country have overinvested in this area. Cutting back some of those subsidies would be good economic policy. That being said, I hasten to add that this is unlikely to happen anytime soon. People have put substantial amounts of their wealth into housing in large part because it has been so highly subsidized. The housing tax subsidy has been built into housing prices, to some degree, and cutting back could lead to painful capital losses on home values.
If you give a lollipop to a baby, it may make him smile, but you will pay dearly for that smile if you try to take the candy away. The best thing to do is to distract the baby with other sweets, while you gradually extricate the lollipop from that sticky hand.
An Opportunity to Consider [NY Times]
Latest Restaurant Additions
-
Le Barricou
added November 20, 2009 12:00 PM in Williamsburg -
Der Schwarze Kölner
added November 19, 2009 12:00 PM in Fort Greene -
Oak Wine Bar & Café
added November 18, 2009 12:00 PM in Williamsburg -
Mr. Wonton
added November 17, 2009 12:00 PM in Park Slope -
Casa Rosa
added November 16, 2009 12:00 PM in Carroll Gardens -
Cousin John's Café & Bakery
added November 13, 2009 12:00 PM in Park Slope -
Elote
added November 12, 2009 12:00 PM in Williamsburg -
Miracle Grill
added November 11, 2009 12:00 PM in Park Slope -
Phoebe's Cafe
added November 10, 2009 12:00 PM in Williamsburg -
Ruthie's
added November 9, 2009 12:00 PM in Clinton Hill, Downtown Brooklyn