Tag: wsj

• What will be the new New York City?

  Peggy Noonan argues, in this recent WSJ article, that the world has changed forever. A human habit was broken during this pandemic and city life, including office life, will never be the same in New York City. She qualifies this by saying that some people will return to offices, potentially in significant numbers. (People like being around other people.) But that things will never be what they once were. We’ve learned that we can decentralize and still get work done.

  As many of you know, I am bullish on cities and I am bullish on offices. So I found myself disagreeing with many of her arguments. But Peggy does raise some valid concerns: How are cities going to pay for what just happened over the last 12 months? According to the Partnership for New York City, the city lost about 500,000 private-sector jobs since March 2020. About 300,000 residents from high-income neighborhoods also filed for a “change of the address” during this time period.

  Given that the top 5% in New York represent about 62% of the state’s income tax base, the movement of people to low-tax states (and warmer places) is something to watch. It’s also a trend that existed well before this pandemic.

  At the same time, I’m not necessarily convinced that (at least some of) these fleeing rich people aren’t coming back. I was speaking with a real estate agent over the weekend who is based in a popular US resort/recreation market and while he told me that, yes, he’s seeing a massive influx of people from expensive coastal markets, these people are largely choosing to rent. They want to take the lifestyle for a test drive and they are also waiting to see what happens with the world once city life returns.

  There will be real financial challenges coming out of this. But as I’ve said time and time before, cities are remarkably resilient. And as Jack Shafer argued in this recent article about “memorializing the pandemic,” humans tend to have short memories, especially when it comes to bad things. The Spanish Flu has been regarded by many as a forgotten pandemic. We moved on and the same will happen this time around.

  2021.02.27

• Wuhan as tourist destination

  Seeing people out at bars and at amusements parks in this WSJ video about Wuhan, China is a little odd given that in this part of the world we are decisively in our second wave. But that is what is happening. In fact, the title of the video is, “Wuhan, Former Pandemic Center, Emerges as Tourist Hot Spot.”

  Over a recent public holiday, the city saw nearly 19 million tourists — the most of any Chinese city. And while tourist revenues are still thought to be down by some 30%, Chinese people are seemingly feeling confident enough to get back out and do things.

  Based on what the WSJ is reporting, this seems to be supported by a few things. International travel isn’t happening, so it’s becoming a boon for local tourism, which is not that dissimilar from what’s happening in other countries. (Domestic air travel is rebounding faster than international travel when you look at flight volumes across major airlines.)

  At the same time, Wuhan implemented what sounds like some pretty extensive testing, which is in turn supported by a national healthcare platform that presumably makes contact tracing easier. These things seem to have given people the confidence to go out again. And I don’t doubt that the same will eventually happen in the rest of the world.

  2020.10.17

• The state of the restaurant industry

  People are starting to eat at restaurants again. Here is a recent chart from the WSJ showing seated diners at restaurants on the OpenTable network:

  

  OpenTable has been publishing this data since the beginning of the pandemic in something they call “the state of the restaurant industry.” All of their datasets from around the world can be downloaded here.

  Back in March, it was interesting to see this data, but most people basically just stopped eating out around the middle of the month. After that, in-person dining mostly flatlined. (This data wouldn’t capture takeout, delivery, and other activities not flowing through the OpenTable network.)

  At this point, we are now seeing geographies reopen in different ways. Germany, for example, is ahead of many other countries (at least on the OpenTable network). Note the spike (i.e. lower year-over-year decline) on May 21st. It was a national holiday.

  

  You can also drill down into individual cities:

  

  I think this is a pretty good indicator for how people are feeling, and so it could be useful to follow this data. Governments can reopen things, but people need to feel confident to go out and spend money. It looks like a number of people already feel that way.

  2020.05.26

• Cashing out home equity

  Below is an interesting chart from the WSJ showing total home equity cashed out in the United States by quarter. What is clear is that the US is nowhere near its pre-2008 peak in terms of total dollars. However, if you look at the percentage of homeowners who refinanced their home in 2018 and took out cash at a higher interest rate, it was nearly 60% of all refis. This is up in the pre-2008 territory and it’s about 3x more than the average from 2009 to 2017.

  

  Now, you could argue that this is a fairly rationale outcome after a long period of economic expansion and home price appreciation. And interest rates were, on average, even lower in the 2012 to 2016 period. But, the WSJ posits that this could be a signal that people simply need the cash — which is why the majority are willing to accept a higher interest rate. Here is another chart from a different WSJ article:

  

  Housing debt (mortgage balances) has come way down since 2008, but non-housing debt has come way up and now exceeds that of the former. Non-housing consumer debt rose by about $1 trillion in real dollars from 2013 to 2019, principally driven by student loans and car loans. Noteworthy is the fact that student loans are rising fairly linearly (along with dramatically), whereas car loans and credit card debt seem to follow the overall economy.

  When people are feeling richer (and confident about their economic prospects) they go out and buy things, like cars.

  Charts: WSJ

  2019.12.28

• Brutalism is fashionable again, kind of

  

  I think it’s time to make it official: Brutalism is fashionable again. Okay, kind of. According to this WSJ article, the appreciation for this style of architecture remains nowhere near universal, but the renaissance is certainly continuing. Some Brutalist structures are and have been torn down; while others are being repurposed.

  One recent example is the Balfron Tower in East London (pictured above). Designed by the Hungarian-born architect Ernő Goldfinger and completed in the 1960s as social housing, the tower is currently undergoing a £40 million renovation that will convert it to market-rate housing. Apartments start at £365,000 (USD 472,054) for a 450 square foot one bedroom.

  One notable feature are the “streets in the sky” that separate the building’s circulation (elevator core) from the actual suites. It’s a peculiar way to build and most never consider it today, but it’s very much a hallmark of the Brutalist movement. The idea was to express the building’s various functions — vertical circulation being one of them.

  I guess we just don’t build them like we used to.

  Photo: Walter Homann via the WSJ

  2019.12.25

• Every major hurricane in the North Atlantic and Eastern North Pacific

  I came across this map while reading up on Hurricane Dorian:

  

  It is a map showing the tracks of every known hurricane in the North Atlantic (1851-2013) and in the Eastern North Pacific (1949-2013). Major hurricanes (category 3 or higher) are shown in yellow and tropical cyclones (intensity less than category 3) are shown in red.

  The map is from the National Hurricane Center. Some of their other maps include the points of origin for tropical cyclones (here is August 21-31 from 1851-2015) and the total number of hurricane strikes by U.S. county (here is Florida from 1900-2010).

  What has happened is a catastrophe. UBS is already estimating the insured damages in the Bahamas to be between $500 million and $1 billion. But as is usually the case, the total economic losses will likely exceed the insured losses.

  2019.09.03

• Boom babies (of China)

  A few years ago I wrote a post talking about “depression babies.” In it, I cited a research paper that looked at the impact of macroeconomic shocks on people’s willingness to take on financial risk in the future. The term “depression babies” stems from the Great Depression and how it is believed to have impacted risk taking, savings rates, and probably many other things.

  I was reminded of this when I read this recent article in the WSJ talking about how the Chinese have started spending — and taking on the debt — like Americans, particularly among Chinese under 30. It is the inverse of the depression baby phenomenon. In this case, it is arguably years of economic expansion leading to greater comfort around financial risk.

  Here are a couple of figures from the article:

  

  JPMorgan estimates China’s ratio of household debt to gross domestic product will climb to 61% by 2020. That’s up from 26% in 2010 and higher than current levels in Italy and Greece.

  The level in the U.S. is about 76%, after falling from 98% in 2006, according to the International Monetary Fund.

  By another measure—the ratio of household debt to disposable income—China appears to have already surpassed the U.S. Its ratio reached 117.2% in 2018, up from 42.7% in 2008, according to calculations by Lei Ning, a researcher at the Institute for Advanced Research at Shanghai University of Finance and Economics. The U.S. peaked at 135% in 2007 and dropped to 101% in 2018.

  Not surprisingly, the article goes on to talk about how this dramatic increase in household debt might be something to worry about. Maybe. I’m not an economist. But I do think this is designed to boost the Chinese growth machine and I do think it makes them less reliant on other countries — such as, maybe, the United States.

  2019.08.29

• Is Toronto’s tech ecosystem too US-centric?

  The Wall Street Journal’s recent piece about “Silicon Valley invading Toronto” is, in my view, describing a generally positive outcome.

  We are one of the largest cities in North America (the exact ranking depends on where you draw the urban boundaries).

  We have more enlightened views around foreign and high-skilled workers (I was given a short window in which to leave the US after I finished my first graduate degree there).

  And we have a large and highly educated pool of tech talent (the salary differential discussed in the article looks to be, at least partially, a result of the weaker Canadian dollar).

  

  US companies are gobbling up office space in Toronto. And presumably, this is one of the reasons why 139 new flights were added between Toronto and Francisco over the last two years. (Source: WSJ)

  However, I do agree with the remarks from people like Jim Balsillie (Blackberry) and Harley Finkelstein (Shopify) that a better outcome would be the creation of more massively successful Canadian tech companies.

  As Finkelstein points out, there’s a big difference between 100,000 square feet of space for the HQ of a new and growing Canadian tech company and 100,000 square feet for a new branch or satellite office.

  The stats we read in the papers about the number of tech jobs being created in Toronto generally don’t speak to composition. Where in the value chain do these people sit? Where is the value accruing?

  The intellectual capital is here. And we should be doing everything we can to foster and finance new homegrown ideas and businesses.

  Image: WSJ

  2019.08.18

• Why Phoenix is ground zero for algorithmic home buying

  I have been writing about algorithmic home buying on the blog since Opendoor launched back in 2014.

  I don’t have anything new to report on that today, but this recent article from the WSJ is interesting in that it talks about why Phoenix, in particular, has become ground zero for algorithmic home buying, as well as for institutional investors looking to buy cheap rentals.

  Across Opendoor, Offerpad, and Zillow, nearly 500 homes are now being purchased — largely by software — in Phoenix each month:

  

  One of the reasons why Phoenix is well suited to these platforms is that the housing stock is cheap and fairly homogenous. (The WSJ calls it “stucco sprawl.”) This makes it easier for the algorithms to put a value on the homes.

  A big chunk of the housing stock is also relatively new. Just over 36% of it was built in 2000 or later. And it tends to trade fairly often. Below is the percentage of homes in 2018 that were resold within a year of purchase.

  

  It’s also worth noting that Arizona is a non-recourse state, meaning you’re typically not personally liable if you default on your home mortgage. You simply hand back the keys. So it’s viewed as a fairly risk tolerant state, which may be one of the reasons why Phoenix’s median home price chart looks like this:

  

  I’ll end with this quote from the article: “It’s the dawn of e-commerce for real estate,” said Zillow Chief Executive Rich Barton. “Phoenix is ground zero.”

  Charts: WSJ

  2019.06.21

• Aman New York’s $180 million penthouse

  

  This morning I was reading about Aman’s new condo and hotel project in New York, which is planned for the 100-year-old Crown Building at 730 Fifth Avenue. It will have 83 hotel rooms and just 22 homes, and be the first urban condominium for the resort company.

  Owned by OKO Group, the hospitality company is mostly known for their “sleek, minimalist hotels in secluded, far-flung destinations,” according to the WSJ. Rooms go for upwards of USD 2,500 per night and they, supposedly, have a rabid customer base known as “Amanjunkies.”

  What’s interesting about this project is that (among other things) it’s a bet the Aman brand will translate to an urban context and drive above-market pricing. And it will do it at a time when the ultra high-net-worth segment of the market in NYC has been cooling because of a new “mansion tax” and probably other factors.

  The five-storey penthouse, which will be built into the building’s “crown,” is asking USD 180 million. If/when it sells, it will break the record for the most expensive home ever sold in the city on a square foot basis at $14,358 psf.

  If you subscribe to the WSJ, you can read the full story here. I find it valuable to see how projects position themselves.

  Rendering: Aman

  2019.06.16