More On NYC Comptroller's Forecast

A reader forwards this from your heroes at Zero Hedge on the subject of NYC's dilemma - in contrast with the rest of the nation. The "lagging" property performance locally would seem obvious, after all! Wait for the revisions on how long the Hoboken RE crash will continue. Where are all those brokers and flippers hiding?


New York City's Pain
Posted by Tyler Durden at 10:39 AM

One feels the pain of New York City Comptroller Bill Thompson, Jr. Not only does he have to deal with the continuing lunacy over in Albany and the still ongoing power struggle in the wake of Spitzer's abrupt implosion, but he has to scramble to contain the fall out in the world's most financially dependent city. His only wildcard: hope, whether it be preached by 1,000 billboards across America, or Obama appearing on TV every 15 minutes to remind Americans that the only way out of a credit crisis is to max out their credit cards, or by watching comedy channels disguised as financial reporting.

In the meantime, underneath the still glitzy veneer, is a hollow core that is starting to shrivel at such an alarming pace that the $16 billion in projected budgetary shortfalls will likely double within 12 months at the current rate of deterioration.

A good indication of the real state of micro economy is a cursory read of the most recent edition of NYC's "Economic Notes", the Comptroller's inside view periodic report on the real pain in New York City.

Here are the bullet points for the attention impaired:

* Real Gross City Product fell at an estimated 4.1 percent annual rate in 1Q09, after a 6.1 percent decline in 4Q08.
* NYC payroll jobs have fallen by 108,000 since their cyclical peak in August, 2008.
* NYC’s unemployment rate rose to 9.0 percent in May, compared to 5.1 percent in May, 2008, representing its highest level on a seasonally-adjusted basis since 1997.
* For the first half of 2009, the city’s payroll tax withholding, a good indicator of worker incomes, was down 14 percent from the equivalent period of 2008.
* General city sales tax collections declined 7.8 percent for the first five months of 2009, compared to the same period in 2008.
* The Manhattan office vacancy rate rose to 9.6 percent in 1Q09, the highest since 3Q05.
* The number of Manhattan apartments sold rose 28 percent in 2Q09 over 1Q09, but were down 50 percent from 2Q08, according to a report by Prudential Douglas Elliman.
* Ridership on NYC Transit, an indicator of the City’s overall economic activity, fell 2.2 percent during the first four months of 2009.

And here is Bill's condensed message:

After enjoying a period of historically low unemployment, the city is experiencing a surge in joblessness. The recession’s impacts have fallen most heavily on men, on African Americans, on prime-age workers, and on the relatively well-educated. Income losses from unemployment are likely to be cushioned somewhat due to the preponderance of multi-earner families and an increase in self-employment, but thousands of families will see their incomes plunge.

Here is one for the PR specialists:

The severity of the current recession raises fears that the city’s job losses will match or exceed those of previous downturns. Except in 1980-82, the city always lost proportionately more jobs than did the nation, and national job losses have been mounting at an alarming rate for the past six months. If the city had merely suffered a proportional rate of job loss as has the nation since the beginning of 2008, it would have already lost about 165,000 jobs.

A point on unemployment:

Unemployment is usually measured at the individual level but its impacts are often felt by entire households. Nearly 70 percent of the city’s workers are heads-of-household, or are the householder’s spouse or partner. The rest are the child of a household head, the sibling, the unrelated housemate, or one of a variety of other relations. All told, the average New York City worker lives in a household with 2.2 other people, so each instance of unemployment typically affects the economic circumstances of at least three individuals.

And this:

During 2006 and 2007, new initial claims for unemployment compensation in the city averaged about 7,000 per week. During the first half of 2008 they rose to about 8,000 per week, and during the second half of 2008 they exceeded 9,000 per week. During the first half of 2009 they were averaging over 12,700 weekly. By February, 2009, the total number of beneficiaries in the city had risen to almost 119,000, an increase of 57,000, or 93 percent, over the previous February.

The conclusion: Strip club valuations are going down... way down.

Even if the city’s jobs base stabilizes, however, unemployment is likely to continue to increase, and by mid-2010, some 400,000 New Yorkers may be unemployed. That suggests that over one million residents will be living in households whose incomes are severely diminished by unemployment and underemployment.

So yes, while it is easy to wave the magic wand of generalization and hope at the overall broad and nebulous economy which is "stabilizing" simply due to a short squeeze in the markets, a drill down in regional areas exposes a lot more of the same truth that brought the market to its March lows. Alas, hope as a policy can and will only persist as there is one more marginal shorter whose forced buy in can lead the market that much higher. The question is what after.

Hoboken Mayor In NJ Corruption Sweep

July 24, 2009 6:39 a.m. EDT

THE WALL STREET JOURNAL

Jersey Mayors Stung In Graft Probe By AMIR EFRATI, SUZANNE SATALINE AND DIONNE SEARCEY From THE WALL STREET JOURNAL New Jersey has never been short of corruption scandals, but the one that unfolded yesterday was surprising even by the standards of the state that inspired "The Sopranos." Federal agents swept across New Jersey and New York on Thursday, charging 44 people -- including mayors, rabbis and even one alleged trafficker in human kidneys -- in a decadelong investigation into public corruption and international money laundering. The key to the investigation: a real-estate developer who became an informant after being arrested on bank-fraud charges in 2006, according to a person familiar with the case. The developer, Solomon Dwek, wore a wire for the Federal Bureau of Investigation while offering to bribe New Jersey mayors and other public officials, that person said. A lawyer for Mr. Dwek didn't respond to requests for comment. While the state has a long history of dirty politics -- in Newark alone, three ex-mayors have been convicted of crimes unrelated to the latest sweep -- the scale of the allegations shocked veterans of New Jersey's political crises. "This is not only a black eye, but this fans more cynicism," said Gene Grabowski, a crisis manager who has represented New Jersey clients in graft probes. "It validates this idea that New Jersey is a setting for "The Sopranos.'" Court documents read like a pulp crime novel. At one point, Mr. Dwek (described as a "cooperating witness' in criminal complaints) is quoted saying to an alleged money-launderer: "I have at least $100,000 a month coming from money I "schnookied" from banks for bad loans." Another time, Mr. Dwek gave one of the alleged co-conspirators a box of Apple Jacks cereal stuffed with $97,000 cash, the documents say. The arrests in the public-corruption portion of the probe included the Democratic mayors of Hoboken and Secaucus, Peter Cammarano III and Dennis Elwell; Republican state Assemblyman Daniel Van Pelt; and Democrat Leona Beldini, the deputy mayor of Jersey City. A woman who picked up the phone at Mr. Van Pelt's office said, "Mr. Van Pelt was arrested today and is out of the office." His lawyer declined to comment. Mr. Cammarano's lawyer said he "intends to plead innocent because he is innocent." After her court appearance, Ms. Beldini said she didn't violate taxpayers' trust and declined to comment further while leaving the courthouse. Mr. Elwell and his lawyer declined to comment. Arrests on the investigation's money-laundering side include several rabbis in New York and New Jersey, said Ralph Marra Jr., acting U.S. attorney for New Jersey. The arrestees appeared in federal court in New Jersey Thursday afternoon. Corruption among the politicians was "a way of life," Mr. Marra said. "They existed in an ethics-free zone." The probe includes a bizarre sideshow: the alleged trafficking of human kidneys, a lucrative, illegal industry and not one that's typically showcased alongside political shenanigans. In the course of the investigation last year, Mr. Dwek came into contact with an alleged organ trafficker, Levy Izhak Rosenbaum, and told him Mr. Dwek's uncle needed a new kidney, according to court papers. The two men discussed how Mr. Dwek would pay a $160,000 fee to buy a kidney from a donor in Israel, documents show. According to the complaint, Mr. Rosenbaum described himself as a "matchmaker." Mr. Rosenbaum couldn't be reached for comment. A person who answered the phone at his residence declined to comment. This federal investigation grew out of two previous cases and dates back to 1999, according to the FBI. It culminated at 6 a.m. Thursday with more than 200 FBI and Internal Revenue Service agents making arrests and executing search warrants throughout the state, said Weysan Dun, special agent in charge of the FBI's Newark office. In all, 29 people were caught up in the public-corruption part of the probe. Fifteen were implicated in the investigation into money laundering, including Mr. Rosenbaum, who was charged with conspiring to broker the sale of a kidney. Court documents quote a number of incriminating wiretap recordings involving New Jersey politicians -- some prominent names, others known only in their small communities. For example, according to court documents, on April 27, FBI agents caught an incoming call from former Jersey City council candidate Guy Catrillo to a consultant's cellphone. The consultant asked Mr. Catrillo: "Did you get the money from [Mr. Dwek] when we saw him the other day?" Mr. Catrillo replied: "Yeah, I took care of that. Yeah." Mr. Catrillo's office didn't answer the phone Thursday. Mr. Dwek, a 36-year-old religious-school head and philanthropist from Monmouth County, N.J., was at the heart of the investigation. He began his career as a small-time real-estate developer whose investors included friends and relatives in the Syrian Jewish community. Three years ago he was charged with defrauding PNC Bank of $25 million and remained free on a $10 million bond. In 2007, Mr. Dwek began working for the FBI, wearing a wire and being trailed by FBI agents who videotaped his encounters with targets of their probe, according to someone familiar with the matter and information in the complaints. Prosecutors said the alleged bribe-taking was often tied to election fund-raising efforts. Other recipients took cash for direct personal use, prosecutors allege. In the case involving Mr. Cammarano, who became Hoboken mayor on July 1, he was charged with accepting $25,000 in cash bribes from Mr. Dwek in return for promising support for zoning changes for a high-rise Mr. Dwek said he wanted to build. Mr. Cammarano is so new to the mayor's job that an events poster outside his office still lists the name of the previous mayor, David Roberts, on it. The alleged bribes occurred during the 32-year-old Mr. Cammarano's mayoral campaign earlier this year, according to the FBI's complaint. According to the compliant, Mr. Cammarano assured Mr. Dwek, that "[y]ou can put your faith in me" and that "I promise you ... you're gonna be, you're gonna be treated like a friend." Supporters of the mayor expressed dismay at the charges. "This was a charismatic guy who we thought could get us past all this stuff," said Jay Rose, a 27-year resident of Hoboken who voted for Mr. Cammarano. "It looks like we're back to square one." In the FBI money-laundering probe, Mr. Dwek represented himself as someone who engaged in various illegal businesses, including bank fraud and counterfeiting of women's handbags. "Business is very good. Prada, Gucci, boom, boom, boom," Mr. Dwek boasted at one point, according to court papers. The alleged money-laundering operations -- most of them run by rabbis as religious charity organizations -- laundered about $3 million for Mr. Dwek in his capacity as a cooperating witness since June 2007, according to the court documents and a person familiar with the matter. Mr. Dwek likely will receive credit from federal prosecutors for his cooperation. The prosecutors allege that the rabbis used nonprofit organizations connected to their synagogues to launder money they understood came from criminal activity. In 2007 Eliahu Ben Haim, principal rabbi of Congregation Ohel Yaacob, a synagogue located in the New Jersey shore community of Deal, accepted a $50,000 check from Mr. Dwek, which was drawn from an account held by a phony company set up by the FBI for Mr. Dwek to help facilitate the investigation, according to the complaint. The check was made payable to one of Mr. Ben Haim's charitable organizations with the expectation that the proceeds would eventually be returned to Mr. Dwek, documents indicate; Mr. Ben Haim, who was charged with money laundering on Thursday, was to take a 10% fee. A woman who answered the phone at Ohel Yaacob Congregation in Deal said, "I don't have anything to say." Michael O'Donnell, Mr. Ben Haim's lawyer, declined to comment. The arrests place an added burden on Gov. Jon Corzine, a Democrat in his first term who is running for re-election this year. Mr. Corzine ran four years ago promising to quash corruption. "The scale of corruption we're seeing as this unfolds is simply outrageous and cannot be tolerated," he said in a statement. In Hoboken, a city of just less than 40,000, city-clerk employees at the municipal building huddled around a small television to watch the news conference announcing the charges. Some residents there said they weren't so surprised. "It happens everywhere in New Jersey," said James Goggin, a Hoboken resident. "I'll tell you one thing -- it never gets boring here. But sometimes I wish it would." --- Chad Bray, Robert Copeland, Chris Herring, Lucette Lagnado, Barbara Martinez and Steven Russolillo contributed to this report.

CEPR - Dean Baker

Homeownership: the Fast Path to Poverty

Price declines have been sharpest at the bottom end of the market.

---

The collapse of the housing bubble has put downward pressure on house prices in all segments of the housing market, but the more moderate end has been by far the hardest hit. In former bubble markets, houses in the bottom third of the market are selling for less than half of their peak prices, in some cases wiping out more than a decade of nominal appreciation. Furthermore, house prices are continuing to decline at a double-digit annual rate, indicating that further declines of 10 percent or more are likely.

In Los Angeles, prices for homes in the bottom tier have fallen by 54.2 percent from their peak in February 2007. They have been falling at a 27.5 percent annual rate over the last quarter. In San Francisco, prices in the bottom tier are down 61.4 percent from their peak in May of 2006 and have fallen at a rate of 33.5 percent over the last quarter. In Phoenix, prices are down by an incredible 70.7 percent from their peak in January 2007. They have fallen at a 66.2 percent annual rate over the last quarter.

Prices for homes in the bottom tier are down sharply, even in markets that were less bubble-driven. In Minneapolis, they are down 47.0 percent from their peak. In New York, they are down by 24.2 percent. And in Washington, D.C. they are down by 44.2 percent.

It is not just people who bought at the peaks who are suffering. The plunge has fully reversed most of the appreciation in the current decade. In Washington, D.C. nominal prices are back at their August 2003 level, implying a real price decline of close to 15 percent. Prices for bottom tier homes in San Francisco are down to their March 2000 level. In Chicago, nominal prices have fallen to the same level as November of 2001. And in Phoenix, they are at the same level as in February of 1995.

It is also important to remember that in all of these markets - as well as most other markets around the country - house prices are still falling very rapidly, especially for homes in the bottom tier. An additional price decline of 10-20 percent is likely to push real house prices in most of the former bubble markets to levels that are well below their mid-90s levels. Even if the overall market just returns to its trend level, the market for homes in the bottom tier is virtually certain to overshoot. Of course, if the overall market overshoots its trend levels, then the overshooting in the bottom tier is likely to be even more pronounced.

It is tragic that so many moderate-income families were pushed into homeownership as a matter of policy (this was even before the proliferation of questionable subprime loans). Homeownership can be an effective way to accumulate wealth, but this is certainly not always the case for every family or in every situation. Households with uncertain family or employment situations are likely to lose money from homeownership, since they will likely have to sell a home in a relatively short period of time. The transactions costs associated with buying and selling a home can easily be equal to two years of rent of a comparable unit.

Of course, encouraging moderate-income families to buy homes in the middle of a housing bubble that should have been easy to recognize was incredibly irresponsible. Unfortunately, few policy professionals will suffer as a result of their incredibly bad judgment.

In the wake of the collapse of the housing bubble, it would be good if there were some serious rethinking of national housing policy. While efforts to support homeownership should not be abandoned, there must be a recognition that for many families renting is a better option. Housing policy must be designed to ensure that renters are not treated as second-class citizens. While landlord-tenant law is set at the state and local level, federal policy can provide an important push towards adopting laws that ensure tenants rights. A more balanced housing policy may be an important outcome of this disaster.

-- July 15, 2009

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CEPR's Housing Market Monitor is published weekly and provides an incisive breakdown of the latest indicators and developments in the housing sector.

As NYC Employment Shrinks, So Do RE Prices!

An update from Thompson's Economic Notes today... NYC Comptroller Thompson Sour On Jobless Rate

Number of unemployed New Yorkers will reach 400,000 by next year, the largest number in more than 15 years, City Comptroller William C. Thompson, Jr. said in his latest edition of Economic Notes. He said the Big Apple's unemployment rate probably will reach 9.5% by early 2010.

Hello Reality! Call Another Bottom...

Manhattan Apartment Prices Drop as Lehman Hits Home

By Oshrat Carmiel

July 2 (Bloomberg) -- Manhattan apartment prices dropped for the first time since 2002 in the second quarter as the collapse of Lehman Brothers Holdings Inc. and Bear Stearns Cos. caught up to property owners in the nation’s most expensive urban market.

The median price fell 18.5 percent from a year earlier to $835,700, New York appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said today. The number of sales plunged by half, the most since Miller Samuel began keeping data in 1989.

“The standstill that existed after Lehman Brothers has been broken, and it was the sellers that cried uncle,” Pamela Liebman, chief executive officer of New York-based property broker the Corcoran Group, said in an interview.

Values are falling broadly in Manhattan for the first time in the almost four-year U.S. housing recession, with declines now seen in co-operatives and condominiums of every size and price. Private-sector employment in the city dropped by 91,200 jobs, or 2.8 percent, in the 12 months through May as Wall Street losses and asset writedowns topped $1.4 trillion.

The price of studio apartments declined 16 percent from a year ago to a median of $405,000, according to Miller Samuel. One-bedrooms dropped 17 percent to $650,000 and two-bedrooms fell 23 percent to $1.27 million. Three-bedroom units fell 37 percent to $2.35 million and four-bedrooms plummeted 47 percent to a median of $3.92 million.

The Miller Samuel-Prudential data reflect for the first time what sellers have known for at least six months: The way to lure a buyer in the current market is to cut your price.

Price Cuts

About 32 percent of second-quarter listings included discounts from the original asking price, according to StreetEasy.com, a Web site that gathers Manhattan property listings from brokers. The deepest concessions were on Central Park South and in the Financial District, where list prices were pared by an average of 10 percent.

“The sellers who want to sell are reducing their prices,” Liebman said. “The ones that aren’t, are either sitting on them overpriced or waiting for another day.”

James Rosenthal didn’t want to wait.

Rosenthal and his Upper West Side neighbor on Riverside Drive near 77th Street put their adjacent apartments up for sale in February 2008 for $6 million, hoping to lure a buyer that wanted to maximize the 3,800-square feet of combined space.

Bear Stearns Effect

Then Bear Stearns collapsed and the neighbors cut their price to $5.75 million, then to $4.96 million. The properties sold for $3.6 million, a 40 percent discount from the original asking price, on April 20, said Rosenthal, who is a senior vice president at New York real estate brokerage Brown Harris Stevens as well as a recent seller.

“As the seller you don’t control the market,” Rosenthal said. “The buyers control the market.”

On the Upper East Side, the median price of existing co-ops fell 20 percent to $758,000, while condominiums in that neighborhood declined 4 percent to $1.22 million, according to Corcoran. On the Upper West Side, co-op re-sales slid 8.5 percent to a median of $700,000 and condos were down 22 percent to $893,000.

South of 34th Street median prices for condos and co-ops combined dropped 16 percent to a median price of $880,000, according to StreetEasy.

Julian Schnabel

The two most-discounted apartments in the second quarter were penthouses at Palazzo Chupi, a rose-colored five-unit condominium building of balconies and terraces developed by film director Julian Schnabel on 11th Street in the West Village. Listings for the triplex and duplex penthouses were discounted by 32 percent to $14.95 million and $12.95 million respectively, according to StreetEasy.

A two-bedroom co-op at 417 Park Ave., was also discounted by 32 percent in the second quarter, to $1.13 million on April 30. It went into contract six weeks later, according to StreetEasy.

While home prices have been falling nationwide since 2007, Manhattan held up in part because of luxury developments that sprouted up and were planned during the housing boom.

New condominiums in buildings including 15 Central Park West and the Plaza went into contract at record prices between 2006 and the beginning of 2008. Closings on those sales continued to appear in public records and in broker statistics through the beginning of this year, which kept median prices high, said Jonathan Miller, president of Miller Samuel.

Upper West Side

The average price per square foot of condos on the Upper West Side fell 29 percent in the second quarter to $1,145 because only one apartment closed at 15 Central Park West compared with 57 closings in that building a year ago, said Gregory Heym, chief economist for Terra Holdings LLC, which owns brokers Brown Harris and Halstead Property LLC.

New developments comprised 27 percent of all sales in the second quarter, down from 35 percent a year ago, Miller said.

Property brokers and Web sites issued five separate market reports today. All showed price declines. The groups base their findings on closings culled from city records and their own data.

Brown Harris, Halstead and StreetEasy said in separate reports that median prices dropped 19 percent from a year earlier. The Corcoran Group, which conducts its survey with the property research Web site PropertyShark.com, put the decline at 13 percent.

Fewer $1 Million Sales

The fall stems in part from a shift to more sales for less than $1 million. Of 1,532 deals closed in the second quarter, 61 percent were for less than $1 million versus 49 percent a year ago, Miller said.

Buyers in higher price brackets are struggling to obtain mortgages for more than $729,750, the limit on home loans that federally controlled mortgage buyers Fannie Mae and Freddie Mac can purchase or guarantee.

So-called “jumbo” lending, which includes refinancing as well as home purchases, dropped to $98 billion last year from $348 billion in 2007, according to the Bethesda, Maryland-based newsletter Inside Mortgage Finance. Jumbo loans fell to $11 billion in the fourth quarter, or 4 percent of the mortgage market, the lowest quarterly amount since Inside Mortgage Finance started tracking that data in 1990.

“People can’t borrow as much,” said Prudential Douglas Elliman Chief Executive Officer Dottie Herman. “So they can’t spend as much.”

To contact the reporter on this story: Oshrat Carmiel in New York at ocarmiel1@bloomberg.net.

Last Updated: July 2, 2009 11:34 EDT

Is Hudson County Data Using Same Gameplan?

Tuesday, June 30, 2009

May San Diego Home Sales Increase Revised From 89% to 6.5%

Posted by Tyler Durden at 4:57 PM

More and more economic data manipulation is coming to the fore, none of which as blatantly obvious as the California housing market. Some of it is palatable, but when home sales in San Diego get revised from 89% to 6.5% due to a "data glitch", it is no wonder that increasingly more Americans realize every single day they are being blatantly lied to by an Administration whose sole purpose in life is to give out 10 pair of rose-colored glasses to every possible voter in the next election. For the most recent take on this the WSJ chimes in:

The California Association of Realtors expects to make sharp downward revisions in its recent monthly reports of soaring home sales in the San Diego area, Robert Kleinhenz, deputy chief economist of the trade group, said in an interview. Those revisions will mean modest downward revisions in statewide sales, he added.

The revisions are likely to be announced in late July, when the Realtor group reports home sales for June. The problem resulted from a glitch in data from a multiple-listing service in San Diego, Mr. Kleinhenz said. He said a change in computer systems used there resulted in incorrect data being sent to the Realtor association over the past year or so.

Thomas Lawler, an independent economist in Leesburg, Va., who tracks home sales nationwide, raised questions about the San Diego data in a report last week. Mr. Lawler noted that the numbers reported by the Realtors vastly exceeded those from MDA DataQuick, a research firm in La Jolla, Calif., and other sources.

The California Realtors have reported that San Diego sales in April were up about 63% from a year earlier. Mr. Kleinhenz said that is expected to be revised downward to a gain of about 20%. For May, the group reported an 89% increase in sales in San Diego; that will be slashed to about 6.5%, the economist said.

As a result, he said, the state-wide sales gain for May -- reported last week as 35% -- also will be revised down, though it probably will remain above 30%, Mr. Kleinhenz said.

Of course, the problem with this is that as more and more instances of blatant data fudging become obvious, only the most naive citizens will believe anything that is released as "certifiable" economic data.