New York City Developers Are Relying On A Shrinking Pool Of Buyers

Most of New York City’s largest developers are probably optimistic about the near future now that one of their own is occupying the most powerful office in the world. Bu, this very specific group of taxpayers stands to benefit immensely from several of the provisions that have appeared in the Senate or House plans: Repealing the AMT and estate taxes would allow them (and their heirs) to shave a pile of percentage points off their tax bills. And those are just two examples.

To be sure, the tax plan’s passage isn’t assured – now that Alabama Democrat Doug Jones has defeated Republican Roy Moore. With Jones expected to be seated some time after New Year’s, the time pressure facing Republicans has intensified. Because at the start of the next Congress, their already precarious two-vote majority will shrink to one. Beyond this, Republicans haven’t agreed on a final version of the bill yet, and existing differences between moderates, deficit hawks and conservatives within the party could prove insurmountable.

But regardless of what happens with the tax plan, there’s a much more pressing problem facing developers in the Big Apple: A glut of “luxury” apartments priced in the low-seven or high-six figure range is coinciding with a precipitous drop in sales volume, according to Reuters.

While prices have been steady in recent years, sales volume for condos in Manhattan are still 30% below their pre-crisis peak.

In other words, the market’s dependence on a small, well-heeled pool of buyers – a pool that is shrinking as prices rise to unsustainable levels and wealth in the US becomes increasingly concentrated in the hands of the wealthiest – could be a major vulnerability in the coming years.

In the past five years, however, Manhattan has seen a different kind of development boom. Prices for these units are higher than they ever were before but the number of units built and sold is way off levels achieved a decade ago, Warshawer said.

 

“As prices have risen, less of the market share is comprised of cheaper units,” she said.

 

In 2013, 7,787 units were sold for under $1 million for a total $4.7 billion in sales. This year is projected to end with 5,040 units sold at under $1 million for $3.4 billion in sales.

Indeed, apartments priced in the seven-figures are increasingly going unsold – while affordable housing becomes increasingly harder to

The median sales price of high-end apartments edged higher in 2017, but the closely watched average square-foot price slid a bit for condos as prices leveled off after years of heady growth, the report said.

 

While the average and median sales price for all residential units has jumped since 2007 by 61 percent to $2.2 million and 44 percent to $1.2 million, respectively, transaction volume is off 30 percent from peak activity a decade ago, CityRealty said.

 

CityRealty examined sales registrations from the city’s Department of Finance. Much of Harlem and nearby areas were excluded because its market size.

Units sold at 432 Park Avenue, a 96-story tower marketed by developers as the tallest residential building in the Americas, garnered the most number of sales in a listing of the 25 highest-priced condos, CityRealty said. But elsewhere, the ultra-high-end market is suffering as nearly a third of the apartments in Manhattan’s recently developed “Billionaire’s Row” have gone unsold.

As we highlighted back in August during Starwood Property Trust’s Q2 earnings call, CEO Barry Sternlicht warned of a doomsday waiting at the end of New York"s "Billionaire"s Row", predicting an imminent "debacle." He mentioned the out-of-balance mezzanine loan at JDS Development and Property Markets Group’s 111 West 57th Street project and predicted more distress in the luxury residential market, including at 53 W 53, a supertall condo being developed next to the Museum of Modern Art by Hines, Pontiac Land Group and Goldman Sachs.

“We are beginning to see the cracks of the high-end residential market in Manhattan,” Sternlich warned.

Indeed, and while developers stand to benefit personally from the Republican plan, proposals to eliminate or reduce the mortgage deduction or deductions on state and local taxes could further damage their sales figures by favoring renters over buyers.

DeSoto To DeLorean - 14 Defunct Car Brands (& How They Failed)

Automobile enthusiasts around the world know brands like Studebaker, Plymouth and Packard, but you’d be hard-pressed to find any of these on the roads today. Former powerhouses in the American auto market, as Visual Capitalists"s Chris Matei notes, they have since become beloved by collectors, but lost to the general public.

Today’s infographic comes from TitleMax and it looks at 14 now-defunct car brands and the circumstances that took them from highways to bygones.

These are only a selection of a much longer list of car brands that have not survived to see the present day. What accounts for the churn rate of these brands?

BOLD EXPERIMENTS, BOONDOGGLES, AND BURNOUTS

Some car brands, like Tucker and Saturn, introduced new ideas that the market simply didn’t care for, didn’t perform as well as the competition, or were too ambitious for the industry climate.

Others, like Edsel and DeLorean, met swift ends as they hemorrhaged money far faster than their owners anticipated. Even more brands were simply folded into the ever-expanding portfolios of either Ford or General Motors, the two biggest auto conglomerates ever to rule the roads.

BAD TIMING, OR WORSE ECONOMY?

Car sales rise and fall with broader economic trends because they are tied into so many different variables: raw materials, production costs, labor costs, oil prices, and interest rates among others.

We can look at two time periods in which the combination of these conditions caused many of the brands on this list to fail.

Post-war Doldrums (1950-1958)

Based on the timeline above, we can see that 1950s were a terrible time for the smaller players in the auto industry. The explanation as to why so many brands declined over this decade has to do with the highly competitive, oligopolistic business practices of market leaders Ford and General Motors. Both of these market titans were locked in a battle to lower prices by taking advantage of economies of scale, while wooing customers who were feeling the economic pressures of a postwar recession.

Smaller volume manufacturers like Packard and Studebaker could not keep up, even when they attempted to merge. As a result, these and many other smaller brands were forced out, or absorbed into the portfolios of one of the “big two.”

Same Car, Different Name (1998-2008)

A similar stretch of declining sales plagued the late 1990s and early 2000s, as the trend of “badge engineering” caught up with manufacturers.

Rather than designing new models at high cost, conglomerates like GM simply engineered new brand “badges” and marketed the same basic models under a variety of names like Pontiac, Plymouth, Mercury, or Oldsmobile. The same tactic was later used to take mid-market designs, such as the Ford Fusion, and style them for a luxury audience as a new model – in this case, the Lincoln Mk. Z.

Badge engineering curbed the appeal of a number of American brands under the GM and Ford portfolios. The nail in many of their coffins was the major auto industry downturn in 2008. That year, GM restructured as it underwent Chapter 11 bankruptcy.

As a result, GM removed the majority of its badge engineered brands, including many of those listed above, from dealerships in the following years.

How Volkswagen Quietly Stashed Half A Million Rigged Cars Around The Country

Volkswagen bought back hundreds of thousands of emissions-cheating cars. We just discovered what it has done with them all...

As Bloomberg reports, the German automaker agreed last year to buy back about 500,000 diesels that it rigged to pass U.S. emissions tests if it can"t figure out a way to fix them. Except for a handful of 2015 models, VW dealers can"t sell the cars until - and unless - the company comes up with repairs to satisfy regulators. The question they face then is - what to do with the hundreds of thousands of diesel cars it is being forced to buy back?

Well, now we know... the company is hauling them to storage lots across America...

VW spokeswoman Jeannine Ginivan said "the program is unprecedented in terms of its size and scope and we have devoted significant resources and personnel to help ensure that it is carried out as seamlessly as possible."

As Jalopnik"s David Tracy reports, after a bit of hunting on forums, and a couple of tips from readers and friends, I seem to have found three such “regional facilities”: one in Pontiac, Michigan; one in San Bernardino, California; and one in Baltimore, Maryland.

The Pontiac Silverdome is a bit of a shitshow in southeast Michigan. It used to be the proud home of the Detroit Lions and the Pistons, and it was even the venue for Super Bowl XVI, multiple NCAA tournament games and some FIFA World Cup matches. But now the huge building lies dormant, with its interior decaying and its parking lots cracking after years of neglect. This makes it the perfect place for VW to stash their bought-back TDIs.

See here for more images...

On a remote part of Norton Air Force Base (in San Bernardino, California), which has been decommissioned for over 20 years now, as is now part of the San Bernardino International Airport, lie thousands of California-plated Volkswagens and Audis awaiting their fate...

Google Street View even has the images..

See here for more images...

The Port of Baltimore is stuffed full of Volkswagens waiting to die. As one Jalopnik readers noted "a total of five storage lots with what had to be thousands of cars, ranging from older Mk5 Jetta models to high line Audi A3s, Passats and MQB Mk7 Golfs and a huge quantity of Jetta Sportwagens... Several of the lots stretched much farther than I could see."

See here for more images...

The images above bring to mind the apocalyptic scenes from "where cars go to die" during the last crisis in America, but for VW, this seemed to sum it all up nicely...

"The public doesn’t realize the monumental undertaking that they’ve pulled off to do this in a year and a half," said Matthew Welch, general manager of Auburn Volkswagen near Seattle.

"Nothing like this has ever been done."

And while VW has only itself (and government regulations) to blame for this scene, we wonder how long before we see the same images for GM vehicles... after all, with inventories at 10-year highs as sales start to collapse, we are feeling a terrible sense of deja vu all over again...