Confirmation bias is a known behavioral tendency – the desire to only look for information that supports an established point of view. This can be especially dangerous in finance, where there is the need to be objective. If anything, I believe it is important to constantly challenge my existing points of view and assess whether such beliefs still make sense as time passes and new information emerges.
Many economic data points and anecdotal stories lead me to have a very cautious outlook on the economy. Therefore, I try to be watchful for optimistic data. A story in the NY Times yesterday, while anecdotal, suggests strength in the economy. The article highlights a demand for high-end New York apartments.
The article describes several properties that are under construction. Despite being early in the building phase, properties are selling at the asking price. As one example, the article writes:
“Last month sales opened for 200 East 79th Street, a Skyline Developers project. The building is still going up, but already contracts have been signed for 25 of the 39 units.”
“We were inundated,” said Kenneth S. Horn, Alchemy’s president. “There is such a dearth of new properties that if you deliver a nice product with nice finishes in a good area, they’re going to sell.”
Perhaps this is due to limited supply. The article discusses this as follows:
“In all, by the end of 2012, 1,249 new apartments are expected in the Manhattan market. That’s up from just 277 new units last year, which had the second-lowest number of new units over the past decade (in 2009, more apartments were taken off the market than were listed). But it’s still far from a peak of 8,052 in 2007.”
As I think about this critically, even with limited new supply, I would expect there to be some normal turnover to provide supply of housing, so this story strikes me as positive and bullish. It is further impressive in light of a stream of announcement of layoffs at investment banks, which I tend to think of as the employers of the high earners who would typically buy high-end Manhattan apartments.
Manhattan and its real estate is a microcosm not necessarily reflective of the US. However, housing appears to have emerged as a bright spot in the economy, with increases in new homes being built, albeit from depressed levels. New homes means jobs for builders and also purchases of furniture, decor, and appliances, all of which also requires human labor (jobs).
I thought to mention this merely as interesting and positive. I will file this away mentally as one of the many pieces of information I process as I think about the future.
source: NY Times: The Take-It-on-Faith Condo