Google's Christmas Present to NYC? A $2 Billion Building

        One of the virtual world's most prominent companies has finalized a deal today to purchase a Chelsea office building for $1.9B. The company, whose unofficial motto is 'Don't be evil', has sparked some life back into the commercial real estate sector of the city. Their new space at 111 Eighth Avenue is rumored to be the city's fourth-largest office building with 2.9 million square feet, the Times reports. Taxes on the purchase will bring New York State a much needed $7.08 million, and New York City a huge $46,462,500, helping to fill some very empty coffers. 

        Google, which also has offices and land in New Jersey, is expected to expand its city workforce dramatically in the years to come, as it will now have the ability to fill in the additional 2.5 million feet as other large leases at 111 Eighth Ave. expire. Sale of the building should be finalized by the end of the year, which means that, come 2011, anyone using Yahoo in the building will be up for eviction! (jk, jk)

Pres. Obama Signs $858 Billion Tax Cut to Revive Economy, Add Jobs

(Via Bloomberg) President Obama signed into law an $858 billion bill extending Bush-era tax cuts to boost a fragile economy and add jobs. “Putting more money in the pockets of families most likely to spend it, helping businesses to grow, that’s how we’re going to spark demand, spur hiring and strengthen our economy in the new year,” Obama said at a signing ceremony in Washington.

The President had to overcome significant resistance among both Democrats and Republicans who were opposed to the bill. He signed the measure after meeting privately with about a dozen labor leaders, including AFL-CIO President Richard Trumka. Organized labor leaders opposed the tax-cut deal. “Candidly speaking, there are some elements of this legislation that I don’t like,” Obama said. “That’s the nature of compromise.”

I’ve summarized below what you need to know about the bill and how it applies to you:

·         The tax-plan expands aid to the long-term unemployed for 13 months and reduces payroll taxes for workers by two percentage points during 2011

·         Many economists and law-makers warned that failure to pass the bill would “possibly send us back into a double-dip recession”  [Repub. Rep Eric Cantor, VA]

·         Gus Faucher, director of macroeconomics at Moody’s Analytics, predicts that because of the bill unemployment will be lower in 2011, averaging 8.7 percent versus 9.8 percent (its most recent record in November of this year)

·         Under the plan, the estate tax next year would have a top rate of 35 percent to be applied after an exemption of $5 million per person

·         The plan extends all Bush-era tax rates through 2012, guaranteeing a fight over taxes during that year’s presidential campaign.

 --Raj Persaud

WikiLeaks' Julian Assange's Next Target? Corporate America

One of America's most hated and controversial figures, Julian Assange, told Forbes last week that his expose on the Pentagon and the US Government are only the tip of the iceberg. According to Assange, next year a major American bank will confront a crisis as it finds itself with tens of thousands of leaked exposed documents and communications among executives. Forbes reports, "The data dump will lay bare the finance firm’s secrets on the Web for every customer, every competitor, every regulator to examine and pass judgment on." Assange won't let up on anymore details such as where and when, or give any more hints on who the major financial firm in question is. But one thing's for sure-- he's planning to follow through, as he has on every other major project under Wikileaks' wings.

In his interview, Assange declares the work he's accomplished so far as just the beginning of a series of long-overdue exposes or "mega-leaks" as he decidedly calls them. Over the last year, his "information insurgency" has included 76,000 secret Afghan war documents and another trove of 392,000 files from the Iraq war, many of which documented data explosions. Their release created one of the largest classified military security breaches in history and has roused antiwar activists while enraging the Pentagon.

But what is the value of Assange's work? And is it the beginning of a movement we should fear or embrace? Admire him or revile him, Assange has been referred to as "the prophet of a coming age of involuntary transparency". His expose on misconduct in the world's largest and most reputable military has given him significant respect, if not bargaining power. Now, with the same philosophy, he's taking aim at corporate America. He claims to have unpublished, damaging documents on everything ranging from top pharmaceutical companies to Wall Street's biggest financial firms. On energy, he says that he possesses everything from BP to an Albanian oil firm that he says attempted to sabotage its competitors’ wells. 

What is the driving force behind his work? Being a visionary of free-speech. He prefers to think of himself as an "entrepreneur". "Leaks merely lubricate the free market," he says. Markets rely on pure information. He cites the example of the Chinese Sanlu Group, whose milk powder contained toxic melamine in 2008. While poisoning its customers, Sanlu also gained an advantage over competitors and might have forced more of them to taint their products, too, or go bankrupt—if Sanlu hadn’t been exposed in the Chinese press. “In the struggle between open and honest companies and dishonest and closed companies, we’re creating a tremendous reputational tax on the unethical companies,” he says.

But, of course, Assange isn't being entirely fair.  He alone decides which targets to choose, what documents to leak, and the theatrical fashion of their penality—all with zero personal accountability.

Powerful? Just? Frightening? The world can only wait and watch.

--Raj Persaud
[Forbes, Andy Greenberg]

The transformation is complete

A.C. Lawrence has finally taken over Century 21 NY Metro, and closed its office at 60 Madison Avenue and move to 228 East 45^th Street (where Century 21 NY Metro moved to in March).  Former Century 21 managers will continue on the A.C. Lawrence team except for Marc Windheuser, who has returned to Prudential Douglas Elliman. Furthermore, other Century 21 agents are "free to decide" whether they want to join A.C. Lawrence, which has around 35 agents, but A.C. Lawrence is launching an "aggressive recruitment campaign," however.

Charlotte Kullen said, “A.C. Lawrence did not technically absorb Century 21 NY Metro; rather, Century 21 NY Metro, the entity, was closed, leaving AC Lawrence free to take over its space and taking on many of its personnel.”

Real estate is still scary

Courtesy of Google Images

Even though the United States economy is starting to come out of the recession, the people are still filled with a fear of buying a home in the current market.  Some of the people are afraid about how they are going to making the payments from their salary, while others are waiting to see if the prices will fall even more.  “It's perfectly natural that they should feel that way in the wake of the housing bust,” said Lawrence Yun, the chief economist for the National Association of Realtors. "It's like when the stock market is crashing," he said. "People are waiting to see if deals will get better." Moreover, home sales are down about 25% since last year. 

If fear continues to plague the people of the United States, it will create a self-fulfilling downward spiral in the housing market.  If people continue to sit on the sidelines, and wait for the prices to fall even more the supply of houses will continue to increase and the prices will continue to drop.  Investment in real estate will certainly help the United States out of the recession.  

New plans with Fannie and Freddie

Courtesy of Google Images

According to the Wall Street Journal, the United States government is working with Fannie Mae and Freddie Mac to reduce the mortgage balances for the borrowers whose homes are worth less than they borrowed.  However, Fannie Mae and Freddie Mac are highly reluctant to go through with this plan especially with the borrowers who are still making mortgage payments.  Furthermore, the government also wants both companies to join another program run by the Federal Housing Administration (FHA) to further assist struggling borrowers

During the housing bubble, property values were sharply increasing, and so the owners were able to borrow additional money against their homes.  But, after the bubble burst, the borrowers found themselves in debt, and living in a home that was worth a lot less than the money they owed.  This is why the government would like to restructure the debts, and assist the homeowners who already have not lost their homes to foreclosure. 

America's 5 Slowest Real-Estate Markets OR Where NOT to Invest in the Next Few Years

There's no doubt that the great real estate bust of 2008 has left a dent on the way America does business. Today, however, the housing market is not entirely in shambles. Economists across the country have reported steady increases in market activity. Here at Manhattist, where we specialize in foreign investment in real estate, we've been working with scores of new international clients, most of whom have taken interest in New York property after the market seemed to have bottomed out. On the heels of my last blog-post about compelling reasons why you should invest in real-estate, I'll present to you today a few regions across the nation you should watch out for. It's important to keep updated on market trends and the rise and fall of prices. According to Moody's Analytics, these areas are the slowest appreciating markets in the nation. The projections are based on the relative growth in income, employment and population over the next decade.

1. Virginia Beach, VA:  With its low crime rate, strong school system and famous shoreline, it's no wonder U.S. News in 2009 named Virginia Beach one of the best places to grow up. The area may be a less enticing place for investors or new home-owners, however. According to Moody's Analytics, real estate values in Virginia Beach will increase an average of 1.1 percent a year from 2010 to 2020, significantly below the national average. Why? Blame the wonders of economics. Though home prices in the area were popular during the housing boom, the market didn't actually experience a subsequent crash.Since prices didn't plummet, the market won't get the rebound that harder-hit areas will experience in about 10 years.

2. Miami, FL: During the housing boom, sunny Florida became a destination for the masses. Easy credit and competing investor demands led to housing prices doubling between 2002 to 2006. But Miami, where the majority of activity occurred, took one of the biggest blows of the crisis, causing homes to drop to even about 48% of their peak values. The problem? The market there shows no sign of bottoming out until about 2012, so recovery must wait until after then. Even if the area does rebound, economists project a  slow 1.1 percent growth in appreciation values from 2010 to 2020, again, well below the national average.

3. Nashville, TN: During the housing boom in the earlier part of the decade, Nashville's rate of appreciation was comparatively slower than its peer cities. While this means that it's decline won't be terribly deep or dramatic, it also means that its rebound won't be either. Its 10 year annualized growth rate is projected to be 1.2 percent according to Moody Analytics.

4. Austin, TX: Austin suffers from the same fate as Nashville. Because its home-prices didn't surge during the boom, it will ride the bust but will be unable to appreciate strongly. Real estate values are expected to increase about 1.3 percent per year.

5. San Antonio, TX: Like the other southern cities on this list, San Antonio did not suffer too great of a price increase or price bust, which means that there's not much momentum for a rebound. It is expected to appreciate about 1.4 percent per year.

The projected national average growth is expected to be 3.1 percent annually.

--Raj Persaud

[Moody's Analytics, Chicago Tribune]

Bad news for slumlords

New York City Council member James Vacca sponsored the Bad Actors Bill to crack down on slumlords.  This new piece of legislation will require developers and landowners to have their permits reexamined to make sure they do not owe more than $25,000 in fines, taxes, or fees to the city.  The slumlords must pay these fines or at least establish a payment plan with the city before they can start building again.  The New York City Building Congress is against the bill because they believe it will destroy job opportunities in the midst of the economic recovery.  Moreover, the NYBC believes there are other ways to accomplish these tasks that will have less of an impact on the economy.

Courtesy of Google Images

This is definitely a critical time for the economy, and it important of understand how the developers will react before moving forward with the bill.  It is not worth risking the recovery to crack down the slumlords who have not paid their taxes on time.  

Federal grant for clean energy

Commercial property owners are racing to install solar panels on warehouses, and even excess land because there is a strong monetary incentive for going green.  The installers will receive a 30 percent tax credit check within thirty days of the project’s completion.  The Treasury grant program initiated in February 2009 as part the American Recovery and Reinvestment Act is due to expire on December 31, 2010. According to the New York Times, “An owner installing a typical 500-kilowatt photovoltaic system on a 100,000-square-foot rooftop at a cost of about $2.2 million would receive $660,000. Depending on how the building is used, that 500-kilowatt system could generate all the building’s power or, for high-demand uses like data centers or refrigeration, as little as 2 percent.”

Courtesy of Google Images

The purchase of the solar panels is no small expense, but the local, state, and federal incentives are causing a drastic increase in the amount of installations.  The benefits are not only saving the planet from the negative externalities, but are helping stimulate economy by increasing investment in the solar power industry.  Finally, the owners of the solar panels estimate a 100 percent return with four to five years of the installations.

Should You Invest In Real Estate Now?

6 Reasons Why You Should Invest in Real Estate Now

      The media has been buzzing over the past few months with stories about the fledgling economy. Given its current state of slow growth, many investors and businessmen are asking the same question: Where Should I invest and Why? Look no further, keeping faithful to our mission of providing you with the best investment resources, we’ve assembled a list of 6 Compelling Reasons why you should take advantage of the current real estate market and invest now before it’s too late.

1.    Capital Appreciation—As most news sources may have told you, real estate values have dropped significantly since 2008. In fact, indicators show that because of the recession, most markets have bottomed out.  What does this mean for you? Within the next few investors, investors can expect to see returns and appreciation on their property investment.  Real estate is different from other investments because you don't have to purchase it outright—you can finance just a portion of the cost to acquire it.  The capital appreciation of a property is not based on the home-owner’s equity. This means that regardless of whether a property is owned free and clear or there is a loan covering 60% or more of the value, the property will appreciate exactly the same.   Take advantage of this now: buy low and you’ll be able to sell high.

2.    Easier Cash Flow –One of the strongest reasons for investing in real estate is its easy access to cash flow. Like the stock market, real estate investment comes with a risk--the value of your asset can go up or down.   However, in the stock market, when the value of your stock portfolio drops, you need to invest to gain back the value lost or hope that the stock recovers its previous value. If you are retired, a loss of stock portfolio could mean having to figure out how to live on less.   Although real estate values go up and down, with investment property you still have the cash flow because your renters are still paying the rent regardless of the current value of the property.    With real estate investments, money is flowing into your accounts every month.  With enough of these types of investments, you can live comfortably on the cash flow that comes from real estate.

3.    Diversifies Your Financial Portfolio – Like the old saying, “Don’t put all your eggs in one basket,” every good investor knows that it’s important to diversify your portfolio. Real Estate investments made in the form of a 401K or Self-Directed IRA, for example, can be made in different markets across the US.  Because the real estate market only sometimes follows the stock market, real estate investments can be a good asset to fall back on if you are in financial trouble or if your other investments are providing negative returns.

4.    Affordable Pricing – Congruent to reasons #1 and #3 , investing in real estate today is far more affordable than it was in previous years. Because real estate values have dropped significantly since 2008, it is now a much more affordable and feasible investment option than ever before.

5.    Use Leveraging to Afford Costs – One of the great benefits of real estate is its ability to easily finance itself, especially in the form of leveraging. Like most other assets, if you want to purchase a $100,000 stock investment today, you will be required to produce $100,000 to purchase it.  With real estate, however, the cost of the investment can be leveraged with a real estate loan.   For example, if you have $200,000 to invest, you could buy one rental property for $200,000.  If the investment doubles in value, you will have made $200,000 (which covers the price you paid to purchase the place).  If, however, you purchase two investment properties with $100,000 down each and the properties double in value, you now have $400,000 worth in assets (an additional $200,000).   If you’re renting these places, this can help greatly with your cash flow because you will now have 2 rents being collected each month instead of one.

6.      Invest with Partners – Unlike the stock market, if you do not have the funds to purchase an asset or property today, you can team up with friends or partners.  You could pool Self Directed IRA or Self Directed 401(K) funds to make your purchase.   This is very different from the stock market where you purchase everything on your own. The ability to team  up means that even investors who don’t have hundreds of thousands of dollars can purchase and own real estate AND profit from it. Indeed, the time to take advantage of these opportunities is now before the market picks up again and before the pricing of properties climbs.

--Raj Persaud, Business Development Manager, Manhattist Inc. 

[thanks to Charity Shehtanian 

Cal Coast Financial Corp]

Changes for borrowers

New rules went in effect today for loans insured by the Federal Housing Administration to adjust the types of mortgage insurance paid by homeowners.  The annual insurance premium, paid monthly by borrower, increased to from 0.85 to 0.9 percent from 0.5 to 0.55 percent, while the upfront insurance premium fell to 1 percent from 2.25 percent.  However, the decrease in the onetime upfront payment will barely offset the increase in the monthly premium.  For example, “The changes, under an example provided by the F.H.A., mean that a borrower who puts 3.5 percent down on a $154,000 house with a 30-year fixed-rate mortgage at 5 percent (such a consumer typically earns a gross annual income of $54,000, according to the agency) and who finances the upfront premium into the loan will see monthly mortgage payments, including taxes, interest and the two insurance premiums, rise to $1,238 from $1,205. The example is based on median data, including property taxes put at about 2.5 percent of home value. That increase includes the drop in the upfront mortgage insurance, to $1,486 from $3,344 — but also includes the rise in the monthly insurance premium, to $111 from $68.”  It is clear that the borrower saves $1,858 upfront, but pays an additional $15,480 over the period of 30 years.

Future of real estate

According to CB Richard Ellis Econometric Advisors, the amount of retail real estate available in the United States is expected to drop to 12.7 percent.  Furthermore, CBRE-EA predict that the demand for retail real estate will be positive for the first time since the burst of the housing bubble in 2007, but the increase is said to be modest. 

This information combined with the increase in mortgage applications are strong signs that the economy is starting to recover.  However, because the unemployment rate is still quite high, it is quite clear that the economic recovery is going to be slow and that it will take some time to restore all of the consumer confidence lost due to the recession. 

Changes for Century 21 NY Metro

Century 21 NY Metro, an independently owned franchise of the Century 21 brand, is suffering cash flow problems and is looking for additional investors.  It is said that A.C. Lawrence is going to absorb the troubled firm, but it is unclear what the new firm is going to be called.  A.C. Lawrence co-founders Anthony DeGrotta and Larry Friedman, both of who declined to comment on the merger, are now listed as agents on the Century 21 NY Metro website. 

Antonio del Rosario, the former president of the sales division at A.C. Lawrence said that the firms are a good match and have similar backgrounds in rentals.  The future looks bright for the two companies, and perhaps the struggles from the recession will make the companies stronger than ever.

Differences in identical houses

It is quite difficult to sell a house in the current jumpy market; it can seem so much more difficult when neighbors are selling houses at competitive prices.  In these situations, one house will seem better than the others, and then it will come down to which house has the better appliances or which house has the better bathroom fixtures.  And, sometimes the harsh competition can even create a race to the bottom with the prices. 

But, there can be a bright side to this strict competition.  The neighbor listings draw extra traffic to the open houses and the increasing amount of people help sell the houses even faster.  There are both positives and negatives to this competition, it is just important to figure out whether the positive outweigh the negatives or vice-versa in each individual case.

A six-month high for mortgage applications

According to the Mortgage Bankers Association, mortgage purchase applications increased by 14 percent at the end of last week to their highest level since May.  Michael Fratantoni, vice president of research and economics for the Mortgage Bankers Association, said "the increase in purchase applications last week aligns with other incoming data suggesting that consumers are feeling somewhat more confident with their financial situation."  Furthermore, the interest rate on the30-year fixed-rate mortgage rose to 4.5 percent, the highest since September.

Restoring consumer confidence is a key aspect in the economic recovery, and if trends such as this continue, it would be very encouraging for the people and further increase the consumer confidence in the market.

Abusive Manhattan landlord

A 65 year old housekeeper, Irma Diaz, is suing her employer Abe Haruvi, a landlord who owns forty buildings in Manhattan.  And according to the New York Post, Haruvi tried to evict rent-stabilized tenants by wrongly claiming he needed their homes for his personal use.  Diaz claims that she was forced to work around 130 hours every week, share her living quarters with a dog, and eat leftovers from the trash.  However, another one of Haruvi’s employers claims that she never heard of Diaz or the allegations in the lawsuit. 

Are these allegations true or just another way to scam a wealth landlord out of money?  It is difficult to decide who is telling the truth in this situation, and there seems to a great deal uncertainty in terms of the evidence.

The World’s Most Expensive Office Markets

Courtesy of Google Images

According to CB Richard Ellis Group, the Midtown neighborhood in New York City leads the North American market in office occupancy costs at $66.59 per square foot.  However, the midtown market falls down to rank 26 in the worldwide market.  The North American market still hasn’t recovered from the recession, and is still declining.  The major emerging economies are dominating the lists, and all four of the BRIC countries are on the list. 

The Top 10 Countries:

1.       London West End, United Kingdom         $193.69

2.       Hong Kong (Central CBD)                       $184.21

3.       Tokyo, (Inner Central), Japan                   $158.08

4.       Mumbai, India                                        $130.41

5.       Moscow, Russian Federation                   $128.33

6.       Tokyo (Outer Central), Japan                   $127.31

7.       London City, United Kingdom                  $124.59

8.       Paris, France                                         $115.72

9.       Sao Paulo, Brazil                                   $109.03

10.   Rio de Janeiro, Brazil                              $104.40

Donald Trump for President

Courtesy of Google Images

Real estate mogul, and reality TV star Donald Trump (who is registered under the Grand Old Party) might be running for the office of the president against incumbent Barack Obama in 2012.  His supporters say that the people of the United States are tired of politicians who make empty promises, and the country needs a strong, business minded leader who will get the people through these tough times. 

Of course, anyone who runs in an election against President Obama will have a difficult journey.  Moreover, can a moderate like Donald Trump get the nomination from the Republican Party?  However, the real question is that how a strong minded business man will “run” the United States different from a lifelong politician?

Is the Foreclosure Crisis Overblown?

The recent foreclose crisis occurred because of notary fraud and certain other illegal activities committed by the large banks/mortgage providers, but are the people of the United States overreacting to the problems?  Foreclosures around the country have been suspended till it is clear who has the right to the mortgages.  But, in the meantime the owners of the delinquent mortgages have been given a break and an extended stay in their house. 

Courtesy of Google Images

However, this crisis has created groups with two different sets of opinions.  One side believes that the banks deserve to lose the rights to the mortgages and the houses for the irresponsible/illegal activity.  And, that the owners of the delinquent mortgages should be allow to stay in their houses for the time being because the large amount of foreclosures will further slow down economic activity.  The other side believes that the owners of the houses should be foreclosed upon by the rightful owners, and that the people should not be allowed to live in a house that they did not pay for just because the banks engaged in illegal activities.  

Hotels show signs of recovery

Courtesy of Google Images

The national hotel market is showing significant signs of recovery as the average price of a room increased almost 90% to $107,988, and the number of transactions increased about 15% to 466 compared to September 2009. 

Not only does the data, provided by Lodging Econometrics, give evidence towards the increasing strength of the nationwide hotel market, but it also provides evidence of increasing consumer confidence.  The hotel market seems to improving because consumer demand grows as the number of vacations, business trips, and celebrations increase. 


~Karan

What does $600 billion mean for you?

Courtesy of Google Images

The Federal Reserve recently purchased $600 billion in treasury securities, and the stock markets rallied the next day.  But, what impact will this have on the average consumer?  The Fed purchased these additional securities to drive down long term interest to increase the amount of home refinancing, fight of the fears of deflation, and spur consumer spending.  However, it is still not clear whether the purchase will have as strong of an effect as was intended because of the continuously high unemployment rate and the large amount of existing consumer debt.

Timing was also important in last week’s large purchase.  The strong turnaround in the House and weakening of the Obama administration after last week’s election will most likely slow down the fiscal stimulus for the next two years. Therefore, this large economic stimulus came at an appropriate time. 

~Karan

Unions Continue to Grow Weaker

Courtesy of Google Images

Union workers extremely upset about the non-union construction on the new building on 500 West 23^rd Street.  And not only are the union workers upset, but they are also disturbing the people of the neighborhood by the early morning noise from the protests. 

This has been an ongoing struggle since World War II, when union membership started to decline dramatically.  One of the reasons that union membership started to decline was because of the ever growing international economy, and the decline of protectionism.  

Europe’s Influence on the United States

Courtesy of Google Images

Covered Bonds, a financial tool extremely popular in Europe, is gaining popularity and is attracting more and more investors in the United States.  A covered bond is different than a mortgage backed security because even after the issuer bundles it up and sells it, it is still kept on the issuer’s balance sheet.  This extra security feature leads to the bonds usually having a triple-A rating.  Furthermore, it prevents the issuers from underwriting risky loans. 

If the United States government adopts these bonds, it will be another move to strengthen the economy and lower uncertainty after the recession.  But, this is not the first thing the United States has picked up from Europe; the Corridor System was adopted not too long ago by the Federal Reserve to put a lower bound on the interest rates.  

Bad News for Freddie

Freddie Mac lost $4.1 billion in the third quarter after losing $6 billion in the second quarter.  The losses included dividend payment on the senior preferred stock owned by the United States Treasury Department.  Charles Haldeman, the CEO of Freddie Mac, stated that the continuing loss is because the housing market is still relatively fragile.  Other factors that may have been behind the losses include the high unemployment rate, slow economic growth, and foreclosure uncertainties. 

Courtesy of Google Images

Freddie Mac, the second largest provider of residential mortgage funding, is just an example of how the entire economy could suffer if the real estate market continues to be sluggish.  The consumers of the United States need incentives, discounts, and reassurance to help stimulate the housing market and the economy.  And, that is why the Federal Reserve has agreed to buy an additional $600 billion in treasury securities.  

Surprising Drop

Courtesy of Google Images

Usually, September is a great time for the real estate market.  But, surprisingly that is not the case this year.  According to data provided by StreetEasy.com on the properties gone into contract in September and October, the numbers are notably flimsy compared to the data from 2009. 

The cause of this unusually weak market is unknown, and one cannot figure out the real reasons till the data for the next few weeks is known.  This could be because of the high unemployment rate, the slow growth of the economy, and foreclosure uncertainties.  

Activity Stabilizes

Courtesy of Google Images

Although, the Manhattan office leasing market has improved drastically since the downturn in 2008, it is starting to plateau.  According to the most recent reports, office leasing volume rose by 60,000 square feet to 1.6 million square feet.  And, even though the rents have dropped about 25 percent since before the recession, they are now rising (although very slowly) and giving landlords the upper hand. 

Brokers say that there are still incentives to motivate clients to sign leases, but they are quickly disappearing.  However, the market is flat because according to the Federal Reserve, the economy growth is “disappointingly slow” and the unemployment rate is still quite high.  Therefore, the economy and the clients need more incentives to get the leasing market growing at a steady rate.  

Google’s New Home

Google is close to purchasing 111 8th Avenue, one of the largest buildings in Manhattan, for close $2 billion.  However, Google has competition.  Many entities from around the world are interested in purchasing the 2.9 million square feet from Taconic Partners. 

Courtesy of Google Images

The purchase of this building by Google, Inc. will help stimulate the economy because of the amount of third-parties in the transaction, and the tax dollars that will flow through New York City.  

Surprising Slide for Home Prices

Courtesy of Google Images

According to CoreLogic’s Home Price Index, national priced fell 1.5 percent in August 2010 compared to August 2009, even though the prices increased by 0.6 percent in July 2010 compared to July 2009.  Although, New York was one of the states with the highest appreciation, more three-fourths of the metropolitan areas around the country experienced declines. 

With mortgage rates and housing prices falling, it is an excellent time for the consumers to invest and try to stimulate the economy.  

The Price of a Free Lunch

Courtesy of Google Images

“Zero-cost” or “no cost” mortgages, which were popular during the housing boom, and were very poorly regulated.  However, today it is a lot more difficult to acquire a “no cost” loan due to stricter disclosure requirements.  But, what does one actually end up paying for these appealing agreements? In exchange for taking care of all the third-party fees, the lender increases the interest by a half to five-eights of a percent.  In a 30-year-fixed “no cost” mortgage of $300,000, the borrower would save $6,000, get an interest rate of about 5 percent, and pay a monthly sum of $1,610.  Whereas, a borrower who chooses a traditional mortgage would pay $6,000 upfront, get an interest rate of about 4.5 percent, and pay a monthly sum of $1,520 saving him about $32,000 over the thirty year period. 

The “Zero-cost” mortgages actually have a very high variable cost over the period of the mortgage.  A borrower must calculate all of the options before deciding on the type of loan, especially if the borrower does not have a broker.  The amount of transparency exponentially decreases when there is no broker involved, because the lenders are not required to disclose how much profit they are making on the particular loan. 

Mortgages Get a Boost

Courtesy of Google Images

Mortgage applications increased as record low interest rates fell even more.  The 30-year-fixed mortgage fell to 4.25 percent and the 15-year mortgage followed by hitting almost a record low of 3.67 percent.  According to the Mortgage Bankers Association, refinance and purchase applications rose 3.0 percent and 3.9 percent, respectively.

Although, rates were already low enough to attract an increasing amount of investors, the lack of job security is what is continuously causing the lack of investment in real estate even though the interest rates are close record lows.

Top 10 Worst Cities

The government and private companies are offering many incentives to invest in the real estate market because they are trying to stimulate the economy.  But, one must be careful to invest; there are cities where property values will continue to fall for some time.  Forbes has come out with a top 10 list -- the worst cities nationwide for investing in residential real estate. 

1.  Lakeland-Winter Haven, FL (MSA)

Courtesy of Google Images

2.  Reno-Sparks, NV (MSA)

3.  Orlando-Kissimmee, FL (MSA)

4.  Deltona-Daytona Beach-Ormond Beach, FL (MSA)

5.  Port St. Lucie, FL (MSA)

6.  Las Vegas-Paradise, NV (MSA)

7.  Boise City-Nampa, ID (MSA)

8.  Cape Coral-Fort Myers, FL (MSA)

9.  Phoenix-Mesa-Scottsdale, AZ (MSA)

10.  Warren-Troy-Farmington Hills, MI Metropolitan Division

The list primarily contains cities in Florida, Nevada, and Arizona because these cities were the most susceptible to speculative investing.  A majority of the sectors in today’s economy have already faced the worst of the recession and are on their way back up.  But, there are areas, like the ones on the Forbes top 10 list that have yet to bottom out and will take longer to recover from the downturn.  

Technological Advances for Landlords

Gene Fata, 80, owns eleven properties, and not too long ago, he was annoyed by the amount of backed up toilets and the high costs of heating in the winter.  But, that was before DiMi.  Gene’s son, Robert Fata, created a system called DiMi, which uses instant messaging to warn the landlord when a particular toilet is backed up or when the boiler in a particular building is turned up too high.  DiMi has made Gene’s life a lot easier, and has brought down his heating costs down by 60 percent. 

Courtesy of Google Images

Technological Innovations are often praised for increasing productivity and lowering costs.  But, they also have another positive externality.  Inventions like DiMi are also helping the environment.  When DiMi warns Robert about the backed up toilet, it saves the amount of water that is wasted and at the same times lowers the water bill.  

Transformation in Tribeca

Courtesy of  ny.curbed.com

The Sheraton Tribeca is finally opened for business on October 14, 2010.  The twenty-two story Starwood Hotel is equipped with 369 guest bedrooms, a terrace with outstanding views, and communal lounge with a fully stocked bar.  Moreover, the hotel is offering special deals for neighborhood residents who are looking to accommodate visitors and guests. 

The Sheraton, like many other businesses, is trying to stimulate the economy by offering special incentives to customers.  Such discounts not only pump more money in the economy, but they also start to restore consumer confidence in the market.