What’s going on with Manhattan residential real estate?
The article above says that prices in Manhattan are going up? What happened to the narrative that people are LEAVING Manhattan because they can work from home?
Well I don’t know for sure, but I have some theories.
Theory #1: Prices for real estate are going up everywhere and not just in Manhattan. There’s just a massive wave of asset inflation happening because of super-loose monetary policy from the Fed and massive inflationary government spending.
Theory #2: There are people who can now work from home, yet they don’t want to move out of Manhattan. Instead, they want to move into a larger co-op/condo/apartment in Manhattan. This pressure for more space is causing an increase in the price per square foot for all sizes of residential until.
Theory #3: Yes, NYC is in a death spiral, but hardly anyone has fully grokked it yet. Right now could very well be the peak of Manhattan residential real estate prices, and it will only go down from this point forward.
Lion of the Blogosphere 
Out of state transplants who always wanted to savor Manhattan have been driving up the real estate prices during the height of the pandemic when they were at their lowest. Yet, the office industry isn’t on par with this trajectory.
So I’d agree that number 3 is the most likely phenomenon!
Ok, what, who's this again?
July 29, 2021 at 12:32 PM
Great to see you back to blogging!
If you can live anywhere and work virtually, I suppose people will tend to either live where it’s cheapest, or live where it’s the best. A lot of people must still think Manhattan is the best.
Ledford
July 29, 2021 at 3:38 PM
Theory #4 – Hedge funds are buying up real estate. They are gambling on huge inflation and a recovery.
If you borrow to buy real estate, and there’s 100% inflation, you make a huge profit even if prices go down on an inflation-adjusted basis.
FSK
July 29, 2021 at 4:17 PM
Ambitious people will always want to spend lots of time in the office.
Judge Absalom
July 29, 2021 at 4:18 PM
What would be the point if almost no one else is there. Think about how easier meetings are when one does not have to find a time when everyone is in the office. Just do a zoom call instead. I have noticed how think tanks and political organizations are having more public events because schedule speakers is easier when the speaker can just zoom in from their office.
The problems for the future are managers who have to manage without seeing people in person and speakers learning how to be better speakers on a video call rather than either sounding like a reporter on NPR or reading their slide while looking sideways.
PS. Lion, please post more on your blog instead of you twitter account.
superdestroyer
July 30, 2021 at 1:02 PM
Popville, a local news blog for Washington, DC, does a real estate ad review daily for apartments/townhouses for rent. They reviewed an efficiency apartment at $1445 a month and then joked that that was cheaper than the same apartment that they reviewed ten years ago.
https://www.popville.com/2021/07/todays-rental-was-chosen-for-the-curved-room-and-the-fact-this-was-a-rental-picked-ten-years-ago-and-the-rent-is-actually-5-cheaper/#more-252876
Maybe purchases prices are going up because people are trying to get out of rental.
superdestroyer
July 29, 2021 at 5:19 PM
I don’t know about New York City being in a death spiral, but this blog…
MoreSigmasThanYou
July 29, 2021 at 6:06 PM
Hey Lion- Do you ever watch Louis Rossmann‘s YouTube channel? He has several good rants about Manhattan real estate, bureaucracy, tech products, and other topics that you might relate to. Recommended!
Steverino@steverino.com
July 30, 2021 at 12:32 AM
I generally prefer to READ news.
Lion of the Blogosphere
July 30, 2021 at 11:15 AM
Reading is a denser communication medium.
Jokah Macpherson
July 30, 2021 at 12:57 PM
I only found out about his channel a few weeks ago and it’s already become one of my favorites. Especially because of Clinton the cat.
One of his best rants: Macbook Pros not uncommonly conk out because a $25 (or thereabouts) charging chip fails. When that happens, the only authorized way to fix the computer is to replace the motherboard at the cost of over $1,000. Apple uses its contracts with the chip manufacturers to prohibit them from selling the inexpensive chips to consumers or third-party repair shops.
Fortunately, there’s a loophole. Apple sells a charging device for about $150 that uses the same chip. Sacrificing that device to recover the chip, and installing it into the nonworking Macbook Pro, is much cheaper than a new motherboard.
Another of Louis Rossmann’s useful rants explains why commercial landlords with high vacancy rates don’t just reduce their rents to attract more tenants. In most cases it’s because they can’t. Lowering rents usually constitutes an action that impairs the collateral for the property’s mortgage even if the value is likely to rise due to fewer vacancies. This generally will have to consequences: the landlord will have to get the lender’s consent, which may be a multitude of investors if the original lender collateralized the loan, and the landlord will have to post additional collateral.
While keeping rents at their original level with high vacanies also will reduce the proerty’s value and impair the collateral, because this isn’t an affirmative step on the landlord’s part there is no need for lender consent and it will not trigger an additional collateral call.
Peter
ironrailsironweights
July 30, 2021 at 12:54 PM
Mostly #2 I’d say, with a small portion of #1.
On a different note, have you been following the Carmageddon? Due mostly though not entirely to the chip shortage, car prices are insanely hyperinflated. With the supply of new cars greatly curtailed, dealers are taking advantage of their legal monopoly to add enormous markups to the normal prices, tens of thousands of dollars in some cases. This in turn has led to massive inflation in used car prices.
Of course the smart strategy is to hold off buying cars until inventories aren’t so depleted, unfortunately some people don’t have the option to wait and need to get cars right now and are getting lustily corn holed.. No one at any level of government is willing to do anything about this crisis.
Peter
ironrailsironweights
July 30, 2021 at 1:15 AM
How far would a death spiral go? It’s hard to imagine all those buildings just being left vacant. Presumably, real estate owners and their lenders will lose a lot of money, and NY might become a poorer city overall, but it doesn’t have to go full Detroit.
Bert
July 30, 2021 at 9:03 AM
Did you write this article?
https://hoboken411.com/archives/139463
Brett Sylvester
July 30, 2021 at 6:50 PM
Yes, I did write that article. Republished without my permission.
Lion of the Blogosphere
August 2, 2021 at 3:54 PM
It looks like a 411 directory for Hoboken with a post mentioning NAMs.
What does that mean? This is what an average reader from the city would say when they spot the word and who wishes the NYC skyline was really in their neck of the woods.
Ok, what, who's this again?
August 2, 2021 at 10:01 PM
Theory #2: There are people who can now work from home, yet they don’t want to move out of Manhattan. Instead, they want to move into a larger co-op/condo/apartment in Manhattan. This pressure for more space is causing an increase in the price per square foot for all sizes of residential until.
That and because people who can afford to want to live in Manhattan for the nightlife. Telecommuting (by itself) will not change the attractiveness of New York’s after-work scenery. That makes crime, not Zoom, the biggest longterm threat to Manhattan real estate.
The Undiscovered Jew
July 30, 2021 at 10:20 PM
I’d go with theory 2.
There are also a few reasons to keep betting on Manhattan.
– De Blasio is out of office Dec 31, his replacement is likely to be more law & order.
– Finance can never really leave. Do to the way insider trading laws are written big investors will only be safe if they can discuss certain things in person with no electronic monitoring.
– There’s going to be big fallout from the end of the CDC eviction moratorium. A lot of people didn’t pay rent for the last 12 months and will suddenly owe it all back. It’s not clear what’s going to happen, but it’s certainly possible that wealthy people will notice fewer undesirables in the city.
Thagomizer
August 1, 2021 at 6:21 PM