Brooklyn Life


Blogger Transfer calls developer United Homes of New York on its unforgiveable constructions. It comes as no surprise that these homes are getting built by and large in poorer neighborhoods. As Transfer writes, “Substandard design, materials, and expectations… Just what the ghetto needs, right?” A commenter adds: “Piece of shit developers like United Homes are just consigning these neighborhoods to another 25 years of low-value stagnation.” All this begs the question: Does cheap have to mean ugly? We don’t think so, though it certainly requires more effort and creativity than most run-of-the-mill developers have. All the more reason for some kind of aesthetic oversight a la Landmarks in our opinion.
Substandard Architecture [Transfer]


Food for thought from bond market guru Bill Gross’ monthly letter on the role of low real interest rates in pumping up the value of all asset classes, including real estate…

My point is that since the lower and lower real interest rate spiral is basically over, the multiple expansions in stocks, housing, commodities, collectibles and bonds are over as well. Housing prices may go up in the future, but only to the extent that they mirror inflationary and perhaps mild demographic pressures…Since the PIMCO forecast is for real yields to stay low, absent a policy mistake by the Fed, we may well whimper along rather slowly as all asset classes compress to provide 2-3 percent real and 5+ percent nominal returns over long periods of time. We remain mindful, however, of not only potential central bank errors of judgment, but of oil, currency and geopolitical sparks that could produce a calamitous Big Bang in a highly levered, finance-based economy.

Comment: If there is going to be one thing that saves New York real estate from a nasty correction it will be the demographic pressures Gross refers too. As we all know too well, they certainly aren’t mild. Hard to put odds on one of the geopolitical sparks he cites igniting a full-blown fire, but they certainly are not insignificant.
Investment Outlook [PIMCO]


From today’s Wall Street Journal:

With an eye on the weak dollar, American homeowners are increasingly seeking out buyers who come not from around the block or even a nearby town — but from other countries altogether. And foreigners, hoping for a deal, are more eager than ever to buy here. The upshot: The residential real-estate market is getting a small shot of globalization.Given the fact that buying homes — and even quickly reselling them — continues at a fervid pace, it would seem that U.S. homeowners wouldn’t have to go abroad to find buyers. But in places like California’s Orange County and New York, prices have climbed so high that the pool of potential purchasers has actually shrunk — to folks who already own homes in the area and have built up equity, or who have quick access to a lot of cash. Expanding a sales pitch to foreigners, especially those whose native currency has risen against the dollar, can help pick up the slack. Another bonus: Since foreigners find it more difficult to get financing here, they tend to pay all cash.

Comment: While we don’t get the sense that many foreigners are buying in Brooklyn, there clearly is a strong spillover effect of local buyers getting priced out of Manhattan by overseas house hunters whose strong currencies make U.S. assets look cheap.
Sold in Translation [Wall Street Journal – Subscription]