Here are some stats about Manhattan real estate (from the paper) that you all might find interesting:
- In 1930, Manhattan housed 1.5% of the US population, but had approximately 4% of all US real estate wealth.
- To construct their price indices the authors randomly collected 30 real estate transactions per month in Manhattan between 1920 and 1939. The mean price per square foot in 1929 was $6.91 (year of Black Tuesday). And the mean price per square foot in 1939 – 10 years later – was $2.29.
- Buildings containing a store at grade tended to sell at higher prices. The authors speculate that this could be because a zoning change in 1916 made it difficult to open stores in “residential” areas.
- Buildings with three, four and five storeys tended to sell at a discount. Six storeys or higher and the buildings generally had an elevator, which resulted in higher pricing.
Here are some stats about Manhattan real estate (from the paper) that you all might find interesting:
- In 1930, Manhattan housed 1.5% of the US population, but had approximately 4% of all US real estate wealth.
- To construct their price indices the authors randomly collected 30 real estate transactions per month in Manhattan between 1920 and 1939. The mean price per square foot in 1929 was $6.91 (year of Black Tuesday). And the mean price per square foot in 1939 – 10 years later – was $2.29.
- Buildings containing a store at grade tended to sell at higher prices. The authors speculate that this could be because a zoning change in 1916 made it difficult to open stores in “residential” areas.
- Buildings with three, four and five storeys tended to sell at a discount. Six storeys or higher and the buildings generally had an elevator, which resulted in higher pricing.
- Manhattan real estate prices reached their highest level in Q3-1929 before falling 67% by 1932. Prices remained more or less flat during the Great Depression.
- If you bought a “typical property” in 1920, it would have retained only 56% of its value (in nominal dollars) by 1939. In fact, it took until 1960 for assessed property values in Manhattan to exceed their pre-Depression pricing.
- An investment in the stock market index during this same time period, 1920-1939, would have outperformed real estate by a factor of 5.2x.
Much of this probably seems hard to believe given the market today. Imagine waiting 40 years for the value of your property to come back.
What happens when wages and real estate prices become too high in a city? Companies start growing in lower cost locations. We’ve all seen this before.
Fred Wilson recently blogged about this “spillover effect”, citing a New York Times article talking about the growth of tech offices in Phoenix. As someone who sits on the board of many technology companies, he was noticing a thematic trend:
“A big theme of board meetings I’ve been in over the past year is the crazy high cost of talent in the big tech centers (SF, NYC, LA, Boston, Seattle) and the need to grow headcount in lower cost locations.”
We talk a lot about housing prices on this blog, and so I think it’s useful to see how this, along with high wages, also impacts companies. The two are interrelated.
Below is a chart from the NY Times article showing the US cities with the highest number of technology jobs and the most growth from 2010 to 2015.
- Manhattan real estate prices reached their highest level in Q3-1929 before falling 67% by 1932. Prices remained more or less flat during the Great Depression.
- If you bought a “typical property” in 1920, it would have retained only 56% of its value (in nominal dollars) by 1939. In fact, it took until 1960 for assessed property values in Manhattan to exceed their pre-Depression pricing.
- An investment in the stock market index during this same time period, 1920-1939, would have outperformed real estate by a factor of 5.2x.
Much of this probably seems hard to believe given the market today. Imagine waiting 40 years for the value of your property to come back.
What happens when wages and real estate prices become too high in a city? Companies start growing in lower cost locations. We’ve all seen this before.
Fred Wilson recently blogged about this “spillover effect”, citing a New York Times article talking about the growth of tech offices in Phoenix. As someone who sits on the board of many technology companies, he was noticing a thematic trend:
“A big theme of board meetings I’ve been in over the past year is the crazy high cost of talent in the big tech centers (SF, NYC, LA, Boston, Seattle) and the need to grow headcount in lower cost locations.”
We talk a lot about housing prices on this blog, and so I think it’s useful to see how this, along with high wages, also impacts companies. The two are interrelated.
Below is a chart from the NY Times article showing the US cities with the highest number of technology jobs and the most growth from 2010 to 2015.
They also have this set of interactive graphs that allows you to chart prices according to a number of different measures. The two metrics that The Economist focuses on (above) are house prices against rents and house prices against incomes.
The argument they make is that as (foreign) capital begins to think of property as merely a bolthole, it can start to detach itself from fundamentals such as rents and incomes. New Zealand, Canada, and Australia are specifically called out.
This isn’t necessarily news. And one chart can only tell you so much. But I like staying on top of the various indices.
San Francisco is in a league of its own. But overall, the growth is in tech and many cities are adding lots of technology jobs. Look at Detroit and Boston right beside each other (Detroit obviously has a smaller starting base). And look at how Miami is nowhere to be found.
Of course, one interesting question is whether these new outposts – such as Phoenix – can truly come into their own and carve out a niche:
“We don’t want to be San Francisco’s back office — we need more creators here,” said Scott Salkin, a founder and the chief executive of Allbound, which is based in Phoenix, makes sales software and has offices down the hall from Gainsight’s.
Even with the high cost of living, it’s hard to supplant the coastal hegemony. That’s where people go to chase riches. As comedian Daniel Tosh likes to say, “the middle of the country is for people who gave up on their dreams.”
Though for some, living in a place like Denver or Salt Lake City and snowboarding every weekend is a better outcome than living in a studio apartment and commuting an hour to work.
They also have this set of interactive graphs that allows you to chart prices according to a number of different measures. The two metrics that The Economist focuses on (above) are house prices against rents and house prices against incomes.
The argument they make is that as (foreign) capital begins to think of property as merely a bolthole, it can start to detach itself from fundamentals such as rents and incomes. New Zealand, Canada, and Australia are specifically called out.
This isn’t necessarily news. And one chart can only tell you so much. But I like staying on top of the various indices.
San Francisco is in a league of its own. But overall, the growth is in tech and many cities are adding lots of technology jobs. Look at Detroit and Boston right beside each other (Detroit obviously has a smaller starting base). And look at how Miami is nowhere to be found.
Of course, one interesting question is whether these new outposts – such as Phoenix – can truly come into their own and carve out a niche:
“We don’t want to be San Francisco’s back office — we need more creators here,” said Scott Salkin, a founder and the chief executive of Allbound, which is based in Phoenix, makes sales software and has offices down the hall from Gainsight’s.
Even with the high cost of living, it’s hard to supplant the coastal hegemony. That’s where people go to chase riches. As comedian Daniel Tosh likes to say, “the middle of the country is for people who gave up on their dreams.”
Though for some, living in a place like Denver or Salt Lake City and snowboarding every weekend is a better outcome than living in a studio apartment and commuting an hour to work.
