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Weekly News (October 4, 2017)

1. Amazon 2nd HQ → Possibly Queens Sunnyside Yard in NY, Edison in NJ 

  • Direct investment of $5 Billion will create 50,000 jobs with earning more than $100,000 salary
  • Any candidate must submit the proposal by 10/19/2017
  • Total more than 50 cities are in the race
  • NY (Queens Sunnyside Yard): 180 Ac/ 5 miles form LaGuardia Airport and 15 miles from JFK Airport / LIRR / Metro North Train connects to Manhattan Grand Central station / 12 subway stations concentrated nearby/ Bicycle roads connect to Manhattan easily
    Issues: 1.MTA, Amtrak are co-owner and NYC owns air right → Multiple owners
    2.EDC estimated $19 Billion the cost of redevelopment of Sunnyside Yard. Amazon will direct-invest only $5 Billion
  • NJ : (Edison former ‘Ferren Mall’ on Albany Street): Middlesex County, New Brunswick City and Rutgers University initiated joint efforts to attract Amazon 2nd HQ.
    Former ‘Ferren Mall’: Total 1,007,000 SF, Easy access to University, Newark Air port and NYC. Other cities are under consideration: Jersey City, Atlantic City, Camden. Governor Christie asks two Governor candidates to put unified efforts to attract. Amazon to NJ ( Estimated $9 Billion Economy impact )

2. NYC is #1 for highest rent in the world among 30 big cities

  • With $1,500, rentable space is 277 SF in NYC. → London: 301 SF,  Zurich: 314 SF, San francisco: 316 SF, Hong Kong: 321 SF, Paris: 321 SF, Geneva: 341 SF,  Boston:359 SF.
  • LA: 530 SF (11th), Washington DC: 543 SF (14th), Chicago: 600 SF (15th)
  • Cheapest city among 30 → Istanbul: 1899 Sf, Shanghai: 1705 SF
  • Seoul, KOREA : 1389 SF (26th)

3. Long Island, Underwater house decreased 

  • According to Core Logic, Underwater house in Long Island: 6.9% last year → 5% this year
  • First time it went to under 6% since 2009 3rd QT (In 2013, it was 10%)
  • April ~ June in 2017: Median Price → $404,000 ($339,000 in 2011)

4. What is driving our fall real estate market? (quote from Terrie O’ Conner)

  • Multiple years of uninterrupted job gains → Strong consumer confidence
  • The share of households believing the economy is improving was up 48% in the first part of 2017 CMT last year same time.
  • 69% of home owners think it is good time to sell → 13% Up from a year ago
  • Mortgage standards are more relaxed
  • Student loan debt is getting alleviated
  • In Northern NJ Area, low inventory, lack of open land, and higher constructions costs 

5. In US, 33% of income is used for Housing cost

  • Housing cost → Highest expense item
  • Average income $74,664 → 33% ($18,186) for Housing cost, 15% ($9,049) for Transportation, 12.6%($7,203) for Grocery, 12% for Pension/Insurance, 8% for medical expense, 7% for Education / Self Development, 5.1% ($2,900) for Entertainment, 3.6%($2,081) for donation
  • Some say this statistics has a flaw: Debt service is not considered → house-hold’s card debt is $8,377 ($500 Up form a year ago)
  • 2016 Average income increased by 7.6%, but Consuming expenses increased by only 2.6%

6. Leverage Loan level is about right before the financial crises

  • Leverage loan in US → Loan to global company, who has debt, for their assets as collateral. Usually for funding M&A case for consideration of asset of company to be bought out
  • 53% increase this year → Very close to $534 Billion which was loan amount right before 2007 financial crises
  • In Europe, similar situation: This year up to now, 7.6 Billion Euro → highest in7 years. 70% is covenant-lite bond → High risk bond
  • 2008 during financial crises, US lost 30% of leverage loan investment
  • Toys ‘R’ us Bankruptcy is good example of risky Leverage loan and high yield bond

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Stephen Lee

He has been in Real Estate industry in about 20 years and has been Broker of Record for 9 years. His experience includes residential, commercial, and property management. Prior to involving with Real Estate business, he has been involved in the digital communication equipment industry utilizing his engineering background and education, including running own company. He has established C Land Realty in 2011 which has grown to staffing over 100 Real Estate agents and the annual transaction amount of over $110,000,000 today.

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