Starwood REIT CEO: "The Manhattan High-End Condo Market Is A Catastrophe"

Tyler Durden's picture

Not all is well in the luxury segment of the US housing market, manifested best through Manhattan's luxury condo segment, where as reported here over the last few months, there has been a sharp deterioration. A quick sampling of recent stories on the topic reveals that the situation is indeed bad, and getting worse:

Yet while all these external observations are troubling, nothing compares to the perspective of a real insider. Overnight we got just that, courtesy of Barry Sternlich, CEO of the Starwood Property Trust. As a reminder, Starwood Property Trust isn't a traditional mortgage REIT plowing its capital into mortgage-backed securities, but instead, its primary business is the direct financing of real estate projects, and as such it is far more familiar with the nuances of a given real-estate market than those who transact in bulk.

It is what Sternlicht said during yesterday's STWD conference call that caught our attention, and which confirms that while the market may be at all time highs, that optimism is now very far removed from the one sector that has traditionally benefited the most from a soaring S&P500: Manhattan luxury real estate. This is what he said about the state of the retnal market:

New York City rental market is going to be weak. It is weak. It is going to continue to be weak. You saw that in our earnings statement. Similarly, parts of South Florida, particularly only really our focus on Miami has a similar situation with a lot of condos coming online with a much different structure than any market we have seen before, because in most cases the individuals have up to half of the cost of the apartment paid for as a deposit.

And then the Manhattan high-end condo market:

... there is one market in the country which is quite weak, but where the weakest market is where there is almost no loans at all. So we are looking at places like Manhattan. The condo market at the high-end, you know, is a catastrophe and will get worse. The hotel market is weak, not terrible, still profitable, but you are not seeing RevPAR increases year-over-year, in part because of the dollar and also because of supply.

Needless to say, if the economy - and especially the upper segment, the one that benefits the most from a record stock market - was running smoothly, none of what Sternlicht said would be applicable, which begs the question: what is the source of this "catastrophic" disconnect.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
American Psycho's picture

Weakening of the luxury market is good for another few percentage points higher in the S&P. 

BullyBearish's picture

Where many swamp things dwell...

NoDebt's picture

My real estate agent has no nose.

How does he smell?

Terrible!

 

Raymond K Hessel's picture

I know the rate in the number of residential units is not as high as the population rate, so it can't be a supply problem in residential real estate. It is clearly coming from demand.

question though is what is the root of the demand problem.

Is it semi affluent people leaving NYC for the suburbs or farther afield?

Or is it that this group is suffering from layoffs, no bonus, etc...

eatthebanksters's picture

Oversupply...there are only so many gazillionaires...developers wanted in on the action and a bunch of new super high end luxury towers got built and there aren't enough people with the large net worth needed to buy all of them.

y3maxx's picture

-Toronto and Vancouver housing markets are slowly being bought up by East and West Coast Americans.

Long memory man's picture

Hardly a surprise, it is a HUGE money launder exercise, same in Canada.

 

 

Stan522's picture

Only fitting... so is Lib NY!

small axe's picture

a warm cardboard box on the sidewalk is plenty good enough for these people

buzzsaw99's picture

high prices cause over building leading to a glut. it can't be a bubble though. /s

Raymond K Hessel's picture

i wish there was overbuilding here but NIMBY prevents that. This is something else. The supply in hotel is a nod to Airbnb and HomeAway. There is absolutely very litte in the way of building here in NYC to keep up with the population growth rate. That's why it's so fucking expensive.

kgw's picture

Where would you build? On the water? When I lived in the Berkshires, right on the NY/MA line, I was working for a NYC architect whose second home was in Stockbridge, MA. His office remodeled (interior design) whole floors of the skyscrapers, there was no building unless you were a corporate architect: tearing down the 'scrapers, and rebuilding another on the same dirt...

foodstampbarry's picture

Must print more money. Get to work Mr. Yellin

buzzsaw99's picture

loose lending cause over building leading to a glut. it can't be a bubble though. /s

pound the vix's picture

Simple answer.....China stopping capital from leaving the country.

SmilinJoeFizzion's picture

1MM for a broom closet in NYC- fuck that!

For that price I can get a 4 Bedroom house near the lake in Lincoln Park in Chicago with better restaurants, sports teams, and airports and the natives are killing each other at record rates. This place will be crime free in a few years. And.... And if you have any game the chicks bang at hello...

JustPastPeacefield's picture

"And if you have any game the chicks bang at hello..."

Funny. Great line.

adr's picture

As more wealth is concentrated in fewer hands, the supply of buyers for this type of product shrinks. There are only so many people who can pay $20million+ for a condo. Most of them already have ten or fifteen. 

I was offered a timeshare that had a book value of $100k for $15k. If I pushed I could have got it for $10k. How desperate is the King Jew that owns the complex if he is willing to take a 90% hit just to get a deed sold? I didn't buy, but I negotiated a $500 7 day vacation at a better property including 4 day Disney tickets for next year on the consideration of maybe buying there. ALWAYS TAKE THE DESPERATE JEW TO THE CLEANERS, because they will for sure do the same to you. 

I have it from a pretty good source that Sears/Kmart will be gone within six months. My source? A very wealthy NY property Jew who was out scouting mall locations he could pick up for pennies on the dollar when they go out. His plan is to build hospitals in mall locations since they are usually centrally located and  virgin property in those areas is sky high. Cities will beg for the property to be used and will grant concessions like mad. 

 

LawsofPhysics's picture

Define "wealth"....

 

"Full faith and credit"

TheytookERjobs's picture

Good morning my fellow debt slaves.

I am Jobe's picture

Americans love to be slaves chating Freedom.  

 

 

LawsofPhysics's picture

If I had that view every morning it wouldn't be so bad...

I am Jobe's picture

Austin , Dallas is unreal  when it comes to home prices . WTF

honest injun's picture

In Manhattan, an apartment that sells for one million dollars or less is considered the low end of the market.  Are the people of NYC so much mor productive that they can earn enough money to pay that kind of money plus high tax rates and high prices generally?  I'm missing something.

saveUSsavers's picture

WE FEEL SORRY FOR YOU COCKROACHES!

Sword of Troy's picture

I live in NYC. And the good news there's a lot more of high end units and buildings coming on the market. They are running out of billionaires to buy these units. And when you have Hedge Fudgers losing $600 million in a derivate bet against Trump and the rising stock market that pool is dwindling.

DirtySanchez's picture

Let's do the math.....

 

Some Ahole gets greedy and lists his Manhattan co-op for 50 million. He comes to his senses and drops ask price by half. The fucking jew still sells for 25 million, when in fact he bought it 30 years ago for 3 million from another fucking jew.

This is only a problem when the poor dumb jew victim buys at the top, tries to flip for a profit, and loses 80% of his "investment".

This is not a news story. This is fake news.

Sonny Brakes's picture

Let's say for example that you spent $3000/month to rent a place and you rented that place for 90 years, in that time you will have spent $3.24 million. If you paid $30000/month for a place 10x as grand you will have spent $32.4 million. My question is why is real estate being bid up that way it is? All that bidding has to be paid for and unless you are involved with dealing drugs coming up with that kind of money month after month isn't going to be easy.

barysenter's picture

Well go solicit Taiwanese cash investors, you fucking moron.

dizzyfingers's picture
Starwood REIT CEO:

Dear sir: Get a sharp stick. Insert it into your left eye, then insert it into your right eye. That ought to get out whatever is keeping you from seeing the truth of your situation, that you and only you made it happen.

Have a nice day.

MASTER OF UNIVERSE's picture

Catastrophic Thermodynamic Economic Collapse/Implosion in the case of High End Real Estate in New York shitty, and elsewhere, is indicative of a system wide disconnect of understanding. In brief, the fucktards in the Central Banking System, and High Finance, around the entire world/globe, are absolutely effin' fucking RETARDED when it comes to understanding that the entire edifice of Central Banking & High Finance in the Western Empire is based on a fucking Ponzi Scheme. And in terms of understanding basic fucking mathematics they have FAILED with an F Grade.

 

Note: If Ivory Tower so-called 'Economists' cannot understand that they have financed their careers off of fraud en masse, they must be understood to be incapable of grasping the basics of mathematics progression, and of understanding basic laws of Thermodynamics from a perspective of Engineering, Architecture, and Cybernetics, as well as Information Theory. Clearly, they need to employ people like myself to rebuild & reset the entire edifice of 'High Finance' so that the real leaders in this world occupy the highest echelons of power & control of Global Finance. Bottom line is that the entire world is on the precipice of the most destructive financial crash in world history, and only people like myself have the slightest notion of how to fix the systemic fraud. Lastly, Trump cannot fix the system whatsoever, and if people like myself are not brought in immediately the entire Global Banking Architecture will crash within days & weeks from now.

 

I'm not kidding whatsoever.

SurfinUSA's picture

Agreed that the "walls will come tumblin' down."  The question is, if you have the answer that has eluded so many, why isn't your ass knocking on the door at the White House with the prescription?  It's not a job interview, its to save frickin' humanity!

Vlad the Inhaler's picture

Meh, the rich bastards all are moving to the West Coast instead.

Colonel Klink's picture

Amazing how that same male pattern baldness follows (((them))) around. You can see it from a mile away when there's a picture for the articles.

quax's picture

It's amazing how even the most innocuous article on ZH draws >>>them<<< out. You know antisemitic wannabee Nazis like >>>you<<<. 

Sledge-hammer's picture
Sledge-hammer (not verified) Feb 25, 2017 12:35 AM

What f*cking goober wants to pay through the nose to live in a third-world city full of non-Caucasian peasants?  You succeed only in making jew land-lords wealthy.

//
SurfinUSA's picture

Hard to buy a luxury apartment when your wallet is empty.  It's hard to buy at Macy's or Nordstrom's when your wallet is empty.  

It's the result of "income redistribution" thanks to the fucking communist Black Muslim that "led" the nation and still basks in the glory from useful idiots.  

The parasites have nearly sucked all the life out of the host.  Now they will riot when they don't get their sugar because there is no daddy left.