Is the tip-top of the high-end market vulnerable, or is it protected because there will always be enough billionaires who want to grab up the small amount of trophy properties?
The point of the [Christopher] Mayer and [Todd] Sinai “Superstar Cities” paper is that income inequality is worsening in the U.S. and it’s worsening around the world. And their point about superstar cities is that they are increasingly populated by the super-rich, not just New York … Where will it go from here? The “Superstar Cities” people seem to think that it’s just a law of nature and will continue, but I wonder … The idea that Manhattan is going to be this super-rich city in the midst of a country where more and more people are having trouble, where these low-income wages are not going up? I don’t know! I just wouldn’t bet on it. I’m not talking about this election, but eventually something has a chance of happening that�
�s going to stop this.
A hedge-fund guy is paying $46 million, a New York record, for a co-op apartment this month. As long as there’s a single buyer willing to pay $46 million for a co-op, can we say the apartment is fundamentally worth $46 million? Or is the price inflated?
I would say the question is whether this is temporary or not. What I mean by inflated is that I don’t think it’s going to stay—it’s not going to hold. It happens all the time that some rich person pays way too much for something, and so he’ll discover that when he tries to sell it.
In 2003, New York magazine asked, ‘Is This the Year the BUBBLE BURSTS?’ and ‘crash’ cover stories have followed annually. At what point is a bubble no longer a bubble, just the normal state of affairs?
It can’t keep going like this! What’s it been going up, like 10 percent a year? That compounds. Eventually it compounds into something astronomical. It can’t be … You’ve got to really remember that this has been an unusual period, very unusual period, for Manhattan and for the country.
You’ve said that ‘a fundamental weakness of our free-market system is that, especially during boom periods, there tends to be a decline in ethical standards.’
I can’t speak specifically to New York, but there has been a decline in ethics in the real estate industry nationwide. A lot of mortgages were issued to people who shouldn’t have bought them, and they weren’t warned about interest rate resets and things like that.
Which was more dangerous, the dotcom bubble or the real estate bubble?
Interesting question—I think the real estate boom is more dangerous to our economy, because real estate is held more widely, and the effects on confidence are likely to be more severe, because it’s our homes now that are going down.
Two years ago, the chief executive of huge homebuilder Toll Brothers said: ‘Shiller is predicting the mountain goes into the sea. He’s selling himself.’ Toll just had their first quarterly loss in 21 years.
Their stock, I’m trying to remember, soared just like the NASDAQ stocks in the 90’s. I guess they didn’t appreciate anyone criticizing their optimism, investors were really believing in them, and they were doing extremely well because of the boom. Of course, they’re not going to want to hear it’s temporary.
Have you invested in property in New York City?