or, what low interest rates do. I found this article at Curbed New York about the large number of unsold new condos in New York very interesting:
According to the StreetEasy report, there have been some 16,242 new condos constructed in the city in the past six years. Of those, more than 25 percent are still sitting on the market—including around 40 percent of the condos for sale on Billionaires’ Row, according to an analysis of data conducted for the New York Times by data guru Jonathan Miller.
Miller’s analysis makes StreetEasy’s look downright conservative: “By Mr. Miller’s count, which includes buildings that are still under construction, there are over 9,000 unsold new units in Manhattan,” according to the Times.
And the condos that have sold are not necessarily being used by their buyers. Around 30 percent of luxury condos that have closed have since re-appeared on that site as rentals, according to StreetEasy.
These are sobering, if not totally unsurprising, statistics, putting real estate insiders—a bevy of whom spoke with the Times—on edge. “People don’t realize this is already as bad as it was after Lehman, purely from a supply standpoint,” Mark Chin, the CEO of Keller Williams, told the Times.
I think that this is what happens when interest rates are extremely low. People speculate on building condos for the rich or ultra-rich because, as Willie Sutton said, that’s where the money is.
But there is a tremendous temptation to lose track of an economic fact. As prices for anything rise, the market for it shrinks until, ultimately, you’ve outraced the actual market for whatever it is. That may be what has happened in New York. The top .1% of income earners is something like 140,000 people and all of them don’t live in New York or want to, something New Yorkers may find inconceivable. They should remember that for some people in California there is no life east of Sepulveda.