Wednesday, September 06, 2006

Post-9/11 Economic Recovery

From the Record:

N.J.'s post-9/11 boom has abated

Five years ago, after the Twin Towers fell, New Jersey seemed the logical landing place for many of the displaced companies.

It happened -- for a short while.

American Express, Merrill Lynch, Morgan Stanley and Lehman Bros. all shifted employees to New Jersey in the scramble for office space after 9/11.

But the flow soon fizzled, and some companies moved back to New York.

State Labor Department statistics show that while the number of New Jersey-based financial services jobs jumped by 15,000 immediately after the attacks, 5,000 of them were gone a year later.

Some companies stayed, among them Garban Intercapital, an electronic stock brokerage now based in Jersey City, and Marsh & McLennan, which moved 1,100 employees to Hoboken.

New Jersey is now seeing a second surge, largely into Jersey City, fueled by New York's economic good times, which have pushed up the cost of office space in the midtown and downtown markets.


N.Y.C. proves pessimists wrong, remains heart of financial world

At the time, observers said the attacks would accelerate the economic downturn already under way and trigger mass layoffs and widespread business closures. They wondered if residents and companies alike would flee New York for the suburbs. They suggested that downtown Manhattan might lose its position as the center of world capitalism.

Though some of those things happened, the worst-case scenarios didn't. To the contrary, the metropolitan region – especially New York -- has returned to health, and remains a global finance center, though lower Manhattan still has a ways to go toward full recovery.

An analysis by The Record shows that 18 of the 32 larger tenants at the World Trade Center based on office space moved to midtown Manhattan.

Another 12 stayed downtown, while other prominent companies that were not tenants in the Twin Towers, such as Goldman Sachs and American Express, also stayed.

More important for New York, only a few WTC tenants fled permanently for the suburbs.
...
Yet employment figures in both New York and New Jersey are now close to the pre-attack levels.

New York City's workforce, at 3.66 million, is about 32,000 lower -- less than 1 percent -- than on 9/11, and New Jersey has 91,000 more jobs than five years ago.

"I think it proves how resilient the economy is," said James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. "You put New York and New Jersey together; you have got close to 8 million jobs. That's a huge, huge enterprise. So it takes a lot to derail it."

24 Comments:

Blogger grim said...

From Financial Times:

IMF warns of ‘severe global slowdown’

The world is set to enjoy a fifth record year of high growth next year, says the International Monetary Fund, but it warns that the risks of a sharp slowdown have significantly increased.

The IMF will say next week that the world economy is on track to grow at 5.1 per cent this year but the risk of a severe global slowdown in 2007 is stronger than at any time since the 2001 terror attacks on the US.

“Risk to the global outlook is clearly tilted to the downside,” the IMF said, adding, “there is a one-in-six chance of growth falling below 3.25 per cent in 2007.”

The warning comes in a report to finance ministers at next week’s meeting of the G7 in Singapore.

The report, seen by Expansión, the Financial Times’ Spanish partner paper, is based on the IMF’s World Economic Outlook, due for publication next week.

The IMF warns slower growth could be triggered by a sharp US housing market slowdown or by surging inflationary expectations that forced central banks to raise interest rates.

9/06/2006 10:34:00 AM  
Blogger RichInNorthNJ said...

Expanding debt

Just cause he’s SO freaking funny!

That and the fact that he talks about Globalization also.

Rich

9/06/2006 10:53:00 AM  
Anonymous Anonymous said...

PRWEB) September 6, 2006 -- The question regarding a national real estate bubble, and or a hard or soft landing according to the President of The National Mortgage Complaint Center/Homeowners Consumer Center "is about to get answered." Mr. Thomas Martin the President of this group has indicated that the "bubble is going to be more like a nuclear detonation with consequences getting progressively worse, with no quick fix." He calls it "the Hurricane Katrina of real estate, because everyone knew it was coming and no one prepared for what it would, or could do."

Lagging home sales and home price reductions are but one indicator, ever increasing foreclosures are the second.The reality is that with real estate valuations coming back to earth many homeowners have no equity left in their homes or actually owe more than their home is worth.
"Lagging home sales and home price reductions are but one indicator, ever increasing foreclosures are the second.The reality is that with real estate valuations coming back to earth many homeowners have no equity left in their homes or actually owe more than their home is worth." So how did this happen? Martin says the answer can be summed up in one word, "Greed."

For over two years the National Mortgage Complaint Center has been expressing concern/panic over regional or national homebuilders forcing local real estate appraisers to come up with inflated or over-valued real estate valuations. The net result is, as builders inflated the price of their new homes, existing homeowners inflated theirs. This practice goes back to about 1998. It was a game of musical chairs. According to Martin,"at some point the music would stop and someone would get left without a chair. In this instance it will be the homeowners who recently purchased a home and or the pension funds who thought they were buying a real estate portfolio worth 100%. In reality new mortgage backed securities might only be worth 90% or 85%. Ultimately it will be the taxpayer; as this real estate bubble burst will call for another massive federal bail-out just like the Savings & Loan Bail Out of the late 1980s & early 1990s."

The other culprit according to Martin is a "greedy mortgage industry combined with a Fannie Mae, Senate & House Banking Committee all asleep at the switch with respect to ridiculous mortgage products such as adjustable rate mortgages (ARM's) with start rates as low as 1%. The problem is, the borrower did not understand that the rates would increase, or these mortgage products allowed borrowers to qualify for a mortgage they could never other wise afford. At some point the borrower realizes they cannot make the payments or they owe more on the home than it is actually worth, and they walk away from the house or they face foreclosure." According to Martin, "the combination of blackmailing real estate appraisers into inflated valuations combined with insane mortgage products creates the perfect storm for a real estate disaster that could be our nations most costly real estate melt down in history."

The National Mortgage Complaint Center & its partner The Homeowners Consumer Center suggest homeowners do the following to weather the 2006 real estate bubble burst.

1. Don't sell right now if you don't have to. If you do have to sell, do it now, even if you have to reduce your price. The national or some regional markets may ultimately correct to 10%-20% less than current market valuations, especially in formerly hot markets like California, Arizona, Nevada, Washington DC Metro, New York, Florida and the Carolina's. It may take 5 to 7 years for these markets to recover to 2005 price levels.

2. If you are in a mortgage that has features that call for payment increases or adjustments within the next two years, see if your current lender will allow you to convert to a fixed rate product. If not call the National Mortgage Complaint Center Http://NationalMortgageComplaintCenter.Com to see what your options might be. The Complaint Centers toll free number is 866-714-6466.

3. Consumers should not fall for some advertising gimmick from a mortgage firm/bank or homebuilder offering a 1% start rate on a mortgage or 100% financing. Why would anyone want 100% financing in a nationwide real estate market that could see values decline 10% to 15%+ in the next two years? Put another way "why purchase something that at least in the short run may not retain its value"?

4. If you are a potential real estate buyer the Homeowners Consumer Center ( Http://HomeownersConsumerCenter.Com ) & the National Mortgage Complaint Center strongly suggest you wait to see how far real estate values go down in your area before you purchase a home or investment property.

5. While real estate market prices may decline, the rental market should stay intact. Homeowners unable to sell their existing property should consider renting their property until the real estate market begins to recover. This may be the best option for many homeowners to actually hold onto their property.

For Mortgage Lenders, Mortgage Bankers & Homebuilders the National Mortgage Complaint Center Suggests; Clean Up Your Act.

The mortgage process should be simple and transparent with consumer friendly approaches to fees; par interest rates, yield spreads and pre-payment penalties, etc. Martin envisions a future, with flat fee- A-type mortgages, and flat fee title insurance. In other words the same thing that happened to the stock market with respect to flat fee stock trades is about to happen to the mortgage and title industry. "Its no longer a question of if, at this point, it's just a question of who figures it out first and takes over the mortgage/title industries".

The echo generation is now in high school or college (the largest generation of possible homeowners in our nations history). Within four to six years they will become potential home buyers or renters. By this time, we believe the market will have corrected and appreciation will begin again. By then it is the hope of the Homeowners Consumer Center that there will be much more conservative approaches to real estate valuations and deceptive mortgage products/fees will have been outlawed.

9/06/2006 10:54:00 AM  
Blogger RichInNorthNJ said...

From Jonathan Miller over at the Matrix:

Looking On The Bright Side, If You Don’t Time It

I’m curious to hear others thoughts, especially those of Chicago’s on the idea that “Market-timing doesn’t work in real estate”.

I personally agree with a lot that Mr. Miller has to say but I disagree with his assumption that most are waiting for the very or “final” bottom. I know I’m not, but I’m also looking to stay in any home I purchase for a minimum of 10 years baring any unforeseen “problems” (I.E. job loss, etc).

Hmmm, maybe I should be commenting over there…

9/06/2006 11:22:00 AM  
Anonymous Anonymous said...

Things are booming. You see it when looking at rents & retail sales.

Both are robust & booming higher.

Consumer spending is running at the fastest rate since 1999 & may exceed 1999 to grow at the fastest rate since 1983 when the economy was recovering from the deep 1981-1982 recession.

Rents are rising quickly as well. Many people I know are getting rent increases running 10% -30% in the NYC area or NJ.

They are happily paying the increase because they are making in the six figures and know that
the job market is booming.

This generation of 20 & 30 somethings have just seen great economic times in NYC. There has not been a significant economic slowdown since 1990-1992.

9/06/2006 12:38:00 PM  
Anonymous Anonymous said...

Don't forget about the suburbs of NYC especially Long Island and most of NJ.

Rents are still quickly rising as a spillover from manhattan.

You cannot find a one bedroom for less than $2,000 a month within a 2 hour commute each way from Midtown Manhattan. Plus realtor fees have increased to 15% of annual rent in most areas as well.

9/06/2006 12:41:00 PM  
Anonymous Anonymous said...

{{{{New York City's workforce, at 3.66 million, is about 32,000 lower -- less than 1 percent -- than on 9/11, and New Jersey has 91,000 more jobs than five years ago.

"I think it proves how resilient the economy is," said James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. "You put New York and New Jersey together; you have got close to 8 million jobs. That's a huge, huge enterprise. So it takes a lot to derail it."}}}}

And most of these jobs pay in the six figures. Strong job growth was the primary driver in housing prices.

Most people still put down 20% when buying a home and banks require higher credit scores of at least 700 plus much more extensive documentation when applying for a mortgage than in the rest of the country.

9/06/2006 12:49:00 PM  
Anonymous UnRealtor said...

"You cannot find a one bedroom for less than $2,000 a month within a 2 hour commute each way from Midtown Manhattan."


Is this the same person posting this nonsense over and over every few days? (The $300 jeans person?)


Summit 3BR $1,750
http://newjersey.craigslist.org/apa/198271232.html

Summit 2BR @ $1,450
http://newjersey.craigslist.org/apa/195451024.html

Summit 1BR $1,100
http://newjersey.craigslist.org/apa/196495546.html


All with a 40-minute single train ride to Penn Station.

My rent has increased only about $15 a month for many years. Rents are not that big a deal, it's housing prices that are the issue. If rents are too high, move.

9/06/2006 12:50:00 PM  
Blogger grim said...

The impossibility of market timing is a concept that is inextricably linked to the Efficient Market Hypothesis.

From Wikipedia:

efficient market hypothesis (EMH) asserts that financial markets are "efficient", or that prices on traded assets, e.g. stocks, bonds, or property, already reflect all known information and therefore are unbiased in the sense that they reflect the collective beliefs of all investors about future prospects.

The efficient market hypothesis implies that it is not possible to consistently outperform the market — appropriately adjusted for risk — by using any information that the market already knows, except through luck or obtaining and trading on inside information. Information or news in the EMH is defined as anything that may affect stock prices that is unknowable in the present and thus appears randomly in the future. This random information will be the cause of future stock price changes.


We first need to realize that market timing is possible when the market is imperfect. Insider trading, while not legal, is a perfect example of market timing that works. It works because an individual is exploiting an information asymmetry with the rest of the market. This single individual has information that will impact the valuation of an asset and acts on it before the rest of the market does.

I'm not trying to say it's possible to time the real estate market, but I am saying that this seems to be a gross misapplication of the concept.

However, the real estate market is hardly efficient and hardly a perfect market. Aside from that, psychology plays an incredible role in the valuation, again, not a factor of an efficient market.

Can you time the real estate market? Probably not. However can you determine whether or not it is over or undervalued? Sure.

Remember, if the real estate market was efficient, there would be no need for appraisers or valuation experts. Why? Because the market price would always be correct.

grim

9/06/2006 12:55:00 PM  
Blogger skep-tic said...

this will not be over by 2007. people right now are praying that rate cuts will revive the market next spring. there are still a lot of people in denial. it will take years for this to unravel, just as it has in every past real estate bust

9/06/2006 12:56:00 PM  
Anonymous Anonymous said...

Go to Suffern, NY - one hour door to door to Penn Station (via Secaucus Junction) - plenty of one bedrooms for $1100 and 2 bedrooms for $1500 to $1700 - within a 2 minute walk to the train station. Great restaurants - it's definitely an up and coming town. The NY Post wrote an article about Suffern in its real estate section 4 months ago.

9/06/2006 12:58:00 PM  
Blogger thatbigwindow said...

Is this the same person posting this nonsense over and over every few days? (The $300 jeans person?)

Yes, Anonymous is living in what I call "realtor reality"

9/06/2006 12:59:00 PM  
Blogger delford said...

Most buyers are putiing down 20%? That is too funny, I have family in the legal aspects of real estate (closings), and they cannot remmber the last time soembody put down 20%, at best it is 5%.


The jobs ar all 6 figure jobs, another myth by cluless NJ people. Most of the Jersery city Wall St jobs are back ogffice, not front office big buck jobs.

The Goldman tower in JC is almost empty, the firm originally planned to move most of its operations there, but the rainmakers at the firm (the really big bucks guys) said no.

As far as the market taking years to unravel, I do not hink so, its unraveling pretty quickly right now.

9/06/2006 01:35:00 PM  
Blogger Richard said...

>>You cannot find a one bedroom for less than $2,000 a month within a 2 hour commute each way from Midtown Manhattan.

i can find you 3 bedroom, 2 bath townhouses for $2k that get you into NYC on a direct train line in 1 hour.

you're either uninformed or a liar. i'm beginning to think you're a realtor troll.

9/06/2006 01:36:00 PM  
Blogger NJGal said...

Unrealtor and Richard, that's definitely $300 jeans guy...you know him - he lives in Queens, makes 75K a year, claims to be poor and tells us that at least ten times a week!

Frankly, he bores me. Time to go to Saks, spend to my limit on $300 jeans, borrow a couple hundred K from dad for a downpayment (while I continue to rent my 5K a month one bedroom), maybe charge a Hummer or two while I'm at it and ruminate on my massive 6 figure salary - didn't you know? Everyone in NYC makes 6 figures!

Sorry for the extreme snarking but I really wish someone would get this guy some therapy!

9/06/2006 02:21:00 PM  
Blogger RichInNorthNJ said...

Grim,

Thanks for not only a great reply but for your analysis as well!

I have to admit, initially it took me a bit to follow what you where saying. But after re-reading your comments here and at the Matrix I finally got it!

Thanks again, Rich

9/06/2006 02:23:00 PM  
Blogger delford said...

Even if the Fed decides to cut rates, which is highly unlikely in 07, that will not save the real estate market.

The Fed will be there to clen up after the mess;it's is what they do.

Anyone who believes they will reinflate the real estate market by cutting rates is in denial. That is why they started raising them in the first place.

9/06/2006 02:34:00 PM  
Anonymous Anonymous said...

The mascot of Suffern High School is the "Succotash."

True Story**.

Also: Sorry, Anon. 1:49, but most of the eight million jobs in the NY/NJ area do NOT pay six figures. To claim otherwise would be ludicrous.

-Jamey

**No, not true.

9/06/2006 02:35:00 PM  
Blogger RichInNorthNJ said...

From Reuters via Yahoo:

Fed says economy still growing

"The U.S. economy grew overall from mid-July to late August, the Federal Reserve said on Wednesday, but five of the 12 Fed districts reported slowing growth as residential construction slackened and energy costs rose.

The Fed, in its Beige Book summary of economic conditions, said the Boston, New York, Philadelphia, Kansas City and Dallas districts reported declines in the rate of growth, but the remaining seven districts reported little change in their pace of activity since the last report, released on July 26.

......

It said flat or declining home prices were noted in the New York, Richmond and Kansas City districts, while price gains were decelerating in the Philadelphia and San Francisco districts. Most districts indicated substantial increases in the inventory of unsold homes. Kansas City attributed some of this increase to "sizable numbers of foreclosures in some areas.

.......

Consumer spending increased modestly in most of the Fed districts, but some districts reported flat to declining retail sales. "A number of districts also indicate that persistently high energy prices are perceived to have crimped consumer demand in general," the Fed said."

.....

Bold emphasis added,
Rich

9/06/2006 02:36:00 PM  
Anonymous Anonymous said...

im going to ditech.

61/8 no points.

oh boy, let me refi.

im going to scoop up
one of these grubbers on
the cheap.

9/06/2006 02:46:00 PM  
Blogger chicagofinance said...

RichInNorthNJ:
re Market Timing in RE

the grim-olator nailed it

ranks up there with some of his best original analysis

he even had Miller genuflecting

9/06/2006 03:21:00 PM  
Blogger lisoosh said...

NJgal -
Don't forget, HE pays $1000 a month but that is only because it is rent controlled.

9/06/2006 08:58:00 PM  
Anonymous Anonymous said...

Yee Grim,

That was a classic post. One of the best.

SAS

9/06/2006 10:37:00 PM  
Anonymous Anonymous said...

One other note Grim...

True, you can't time the markets with perfection.

BUT, you can cheat the hell out of the tax man. Makes up for not being able to master timing of markets.

he he.....yes...

;)
SAS

9/06/2006 10:41:00 PM  

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