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Speaker 1: This is Bloomberg Surveillance. Consolidation makes sense in a growing world,

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Speaker 1: but what we have right now is consolidations taking place

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Speaker 1: in a flat world, and that's more concerning. The big

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Speaker 1: issue is the role of government. That's where the differences are.

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Speaker 1: That's where the American public is conflicted. That's the key issue.

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Speaker 1: I think that this election is going to pivot on it.

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Speaker 1: You don't want to be out of bonds because you

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Speaker 1: want to be sure that you've got a less volatile portfolio.

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Speaker 1: So don't be out of fixed income, even though there's

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Speaker 1: rates are low, because fixed income plays a really important

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Speaker 1: role in your portfolio, especially in returning Bloomberg Surveillance your

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Speaker 1: link to the world of economics, finance and investment on

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Speaker 1: Bloomberg Radio. Good morning everyone, Michael McKay and Tom Kane.

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Speaker 1: Still to have you on board with the sunny economics, finance,

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Speaker 1: investment on international relations on the studio apartment. I can't

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Speaker 1: afford a midto, Mannette, and we'll do that here in

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Speaker 1: a bit and talk about real estate nationwide as well.

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Speaker 1: Bloomberg Surveillance. Watch you by Cone Resnick Accounting Tax Advisory

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Speaker 1: to sees opportunities in commercial real estate your business needs

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Speaker 1: market focus guidance from the industry leading experts at Cone Resnick.

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Speaker 1: Find out how at Cone Resnick dot com c O

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Speaker 1: h n R e z n I c K cone

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Speaker 1: Resnec dot com. On the day to front the yen,

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Speaker 1: what a dash to one oh seven this morning, we

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Speaker 1: didn't get there one oh wet eight right now still

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Speaker 1: very strong, uh yen. And I would note Mike also

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Speaker 1: German yields um lower this morning again. Yeah, I mean

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Speaker 1: it's just sort of a moving to the negative space.

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Speaker 1: Copper off as well. Four dollars in Chicago copper two

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Speaker 1: oh nine ninety futures to tier eight negative twelve dot

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Speaker 1: futures negative at ninety one. Why don't you start with

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Speaker 1: John Miller. We sat him over by you because I

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Speaker 1: want to punch him over what the price of real

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Speaker 1: estates doing. It's his flaw. Wow. Well it's good to

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Speaker 1: do this though, Tom. And in John's latest report, you

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Speaker 1: can't buy anything but my be able to rent something right.

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Speaker 1: Rents actually in Manhattan fell in the first quarter, yes

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Speaker 1: on a year on a year of a year basis.

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Speaker 1: The median rent is down for the first time in

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Speaker 1: twenty four after four consecutive months. My entire staff of

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Speaker 1: twenty five year olds is coming in here to take notes.

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Speaker 1: Why do you yet just fell off his chair. It

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Speaker 1: hasn't been it's been a long time since we've been

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Speaker 1: having this discussion. But but I don't know if I

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Speaker 1: would get your hopes up too high in the sense

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Speaker 1: that they're going to continue to fall, simply because the

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Speaker 1: rental market is sitting within a very vibrant local economy

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Speaker 1: in New York City is running on all cylinders right

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Speaker 1: now with record employment growth and uh above population growth.

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Speaker 1: So it's it's a unique time. What what about the

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Speaker 1: rest of the boroughs well so well before that, um,

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Speaker 1: just just as a comment, why they're declining, It really

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Speaker 1: is because the high around the upper half of the

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Speaker 1: market is where all the supply is, and that's softer,

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Speaker 1: but the lower end, sort of the the entry level

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Speaker 1: market is still The rents have been rising, um quite

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Speaker 1: a bit, but we've hit sort of an affordability threshold,

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Speaker 1: I think, and as a result, what we're seeing in

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Speaker 1: the outlying suburbs record sales activity. So those thirty million

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Speaker 1: dollar apartments in a hundred story building across the street,

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Speaker 1: here are our twenty five year olds will get a

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Speaker 1: break on those with things that they would normally live

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Speaker 1: not so much, right, So the stake stay where you are.

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Speaker 1: But as far as the outer borrows go for we're

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Speaker 1: still seeing rent growth in Brooklyn. Brooklyn is still the

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Speaker 1: outlier of the boroughs, both in the sales market and

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Speaker 1: the rental market seems to be leading the way. Um,

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Speaker 1: and we're seeing softness and queens. So I think the

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Speaker 1: region itself is seeing weaker rents on average, but it

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Speaker 1: really is. Uh you have to look under the hood

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Speaker 1: to see where it's actually changing. Is it uh pause? Uh,

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Speaker 1: you know when when we've over build or is it

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Speaker 1: going to start coming back again as the weather gets warmer? Uh? No,

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Speaker 1: I mean, you know, we're we're taking into consideration a

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Speaker 1: seasonal It really what it is. And it's whether you're

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Speaker 1: talking about the sales market or the rental market in

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Speaker 1: the New York metro area, whether whatever we're talking burrows

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Speaker 1: or suburbs. The way to characterize the market in general

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Speaker 1: is soft at the top and firmer in the middle

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Speaker 1: and lower sections segments of the market. And that has

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Speaker 1: been the developing phenomenon over the last year. I saw

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Speaker 1: you quoted in a story. You're talking about those hundred

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Speaker 1: story um safe deposit boxes on billion what they call

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Speaker 1: billion billionaires, Like one of them has been now postponed

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Speaker 1: or something like that. Yeah, one eleven West fifty seven,

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Speaker 1: which was has a very small footprint. It's it's one

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Speaker 1: of those supertalls, as the British like to call them. Uh,

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Speaker 1: they're gonna delay hardcore sales effort for at least a

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Speaker 1: year just to get a sense, just to see if

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Speaker 1: the you know, the market starts to sort of restart

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Speaker 1: from there. The Jonathan Miller with this, folks, you're the

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Speaker 1: expert on this. I get this nationwide all the time,

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Speaker 1: particularly in New York and Boston and in Washington. On

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Speaker 1: the properties that we see in the New York Times magazine.

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Speaker 1: What are the taxes on those properties or is it

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Speaker 1: such a scam that they're paying a lot less then

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Speaker 1: we think they should. Well, it really depends on the property.

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Speaker 1: So if you're talking about a uh modest twenty million

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Speaker 1: dollar town house, you might be talking about real estate

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Speaker 1: taxes of seventy five hundred thousand a year. Uh So,

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Speaker 1: I guess are they paying their fair share twenty million

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Speaker 1: or even the the starter that Mike McKee is looking

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Speaker 1: at a four million forget that up, Thomas leading a

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Speaker 1: protest effort here. I get this all. No, I mean

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Speaker 1: I think on the so when you when you think

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Speaker 1: about the way the real estate taxes are calculated, certainly

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Speaker 1: on the condo market, uh proportionally versus single family that

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Speaker 1: there's less taxes paid on a condo. Yes, okay, fine,

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Speaker 1: But are the fat cats paying their fair share? Is

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Speaker 1: they park their non investment analysis CA jillions in our property? Well,

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Speaker 1: first of all, I want to I want to disclaim

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Speaker 1: that I don't know any fat cats. So come on,

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Speaker 1: they're lined up ten deep in four zip codes. They

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Speaker 1: don't care what the prices, they just put the money there.

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Speaker 1: Are they paying their fair share of taxes? It's the

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Speaker 1: number three questions I get. Well, I don't know about

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Speaker 1: fair share, but if you compare it by property type,

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Speaker 1: there's definitely disparities within the taxes and for residential real

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Speaker 1: estate in New York and it's been that way for

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Speaker 1: a long time. Um, it becomes more exaggerated when you're

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Speaker 1: talking about price points that are, you know, at levels

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Speaker 1: that we've never seen before. Uh million dollars, Mike, I'm

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Speaker 1: looking at a chart from metro Cosm, and this is

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Speaker 1: the kind of stuff that's out in the media, and

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Speaker 1: it shows fifteen Central Park West, which is I know

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Speaker 1: that's a starter place for you. You're such a hitter, Jonathan.

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Speaker 1: But in the seven forty Park Avenue, the Ris Carlton

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Speaker 1: blah blah blah blah blah, and they're paying way less.

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Speaker 1: Somebody with a three bedroom in Queens trying to figure

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Speaker 1: out if the number seven works today, Right, there's clearly

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Speaker 1: a disparity in the tax system between I didn't I

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Speaker 1: didn't write it, I didn't negotiate it. I don't know.

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Speaker 1: It's just that's the way it's always been, and it's

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Speaker 1: been that way, and there's clear disparity between single family

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Speaker 1: tax classifications and multifamily. Just that's the way it's set up.

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Speaker 1: And I don't mind the condo might help me here.

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Speaker 1: I don't mind the condo single family home thing. I

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Speaker 1: get that. But what I don't get is the perception

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Speaker 1: I hear from viewers. Thank you and listeners, thank you

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Speaker 1: so much for enjoying Bloomberg surveillance. That the guy you

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Speaker 1: named the name the borough, who's there. Let's say they're

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Speaker 1: making two fifty two forty all and three people working

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Speaker 1: whatever they got a tax bill? Great? And the fat

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Speaker 1: cats and I don't mean one fifty seven they all

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Speaker 1: pick on that monstrosity. I mean some fancy pants condo

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Speaker 1: in downtown. Are they paying the same in that seven

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Speaker 1: story condo downtown? Uh? You know, the valuation is set

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Speaker 1: up based on the assessment. It's the rate that is different.

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Speaker 1: So there are sus differently as the issue. Uh there,

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Speaker 1: Now it's it's the it's the tax rate for each

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Speaker 1: classification is different. So the tax classification of what what

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Speaker 1: a condo would fall in is at a lower rate

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Speaker 1: than that single family. I know that, but I this

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Speaker 1: I guess it is it is proportional to value. So

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Speaker 1: if you look at a condo in you know that's

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Speaker 1: selling for ten million and a condo that's selling for

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Speaker 1: two million, proportionally, they're fairly consistent, assuming there's no tax abatement.

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Speaker 1: Uh is it's Is it the same kind of complicated

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Speaker 1: story in a place like San Francisco. I mean we're

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Speaker 1: we're looking at the Good York real state is terrible.

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Speaker 1: San Francisco prices are terrible. They have the same issues.

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Speaker 1: Oh absolutely, Uh, one of the disadvantages they have over

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Speaker 1: us is that they can't expand outward and they can't

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Speaker 1: go higher because of earthquake country. Uh. Here we seem

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Speaker 1: to have figured out a way to go higher. And

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Speaker 1: in in Atlanta, you you spread outward like your departments

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Speaker 1: here seven forty Park, Avenue, number twelve and number thirteen.

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Speaker 1: You combine those, didn't you write? They say this article

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Speaker 1: says their actual valuations should be fifty they should fift

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Speaker 1: a million, and the value of the property taxes like

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Speaker 1: under four. Well, actually, in the case of seven forty Park,

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Speaker 1: which is a co op. Uh and actually there was

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Speaker 1: a fire in that building yesterday. Uh that the um

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Speaker 1: the taxes for co ops by the city are actually

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Speaker 1: calculated as if it were a rental, which is which

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Speaker 1: is a matter. I'm just telling you that I get more.

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Speaker 1: I get almost as many questions on this as I do.

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Speaker 1: There's no inflation drives our listeners nuts when economists say

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Speaker 1: there's no inflation, right right. I don't mean to beat

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Speaker 1: you to death. We want you to come back, but

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Speaker 1: this is a huge issue for people. As long as

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Speaker 1: I'm happy to come back, as long as they don't

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Speaker 1: think that I hang out with Okay, we gotta come back.

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Speaker 1: Jonathan Miller with Miller Samuel futures at negative eleven. Down

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Speaker 1: future is a negative eight. All right, let's check it

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Speaker 1: with like a bar. Now I'll get the latest nationals

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Speaker 1: national headlines. Mike Ton, thank you very much. The head

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Speaker 1: of a UN counter terrorism task WORSE has opened a

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Speaker 1: first of its kind conference in Geneva by declaring that

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Speaker 1: there is no quick fix, There is no magic wand

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Speaker 1: with which to confront violent extremism. The two day conference

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Speaker 1: includes government envoys, civil society advocates, social media gurus, and

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Speaker 1: UN officials. It's part of UN Secretary General Banki Moon's

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Speaker 1: efforts to address the root causes of terrorism. A local

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Speaker 1: officials says dozens of insurgents are dead after a pre

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Speaker 1: dawn attack on a Pakistani security post along the Afghan

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Speaker 1: border that's sparked an hours long gun battle. Firefighters are

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Speaker 1: setting backfires to try to corral a wildfire that jumped

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Speaker 1: the Colorado River from Arizona into California. Global News twenty

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Speaker 1: four hours a day, powered by our two hundred journalists

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Speaker 1: and more than a hundred fifty news bureaus from around

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Speaker 1: the world. I like Michael bar thanks so much coming back.

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Speaker 1: I promise I'll be civil to Jonathan Miller. Viller Samuel

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Speaker 1: will have a civil conversation on the uncivil business known

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Speaker 1: as your next property Bloomberg Surveillance. The news update brought

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Speaker 1: to you by a Flushing Bank. Open a complete business

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Speaker 1: checking account with fifteen thousand dollars a more and get

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Speaker 1: a free sixteen gig WiFi tablets a Flushing Bank dot com.

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Speaker 1: For details member ft I, see Equal Housing, Lenar Global

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Speaker 1: Business News twenty four hours a day at Bloomberg dot com,

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Speaker 1: the Radio plus Mobile Act and on your radio. This

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Speaker 1: is a Bloomberg Business Flash and I'm Karen Moscow US

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Speaker 1: dot indise. Future is moving lower this morning. Let's go

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Speaker 1: to the first Word Breaking news desk for today's morning call.

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Speaker 1: And here's Vince Signarella. Good morning, Vince, Good morning, Karen.

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Speaker 1: As you say, US futures are lower. Down is down eight, one,

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Speaker 1: SMP down eleven, NASA dick down twenty. The tenure yield

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Speaker 1: is slightly lower at one point seven three. Dollar is

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Speaker 1: mostly higher, with the one glaring exception of dollar yen,

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Speaker 1: which is off. It's one o eight oh two lows

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Speaker 1: training at one of thirty five on the US economic front.

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Speaker 1: At e thirty we have initial jobless claims. Ten thirty

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Speaker 1: e I A natural guests storage change. At three pm

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Speaker 1: Consumer Credit After the bell, FED share Janet Yelling takes

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Speaker 1: part in a discussion with former FED chiefs Ben Bernankey,

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Speaker 1: Allan Greenspan, and Paul Voker. In some of today's top news.

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Speaker 1: JP Morgan shareholders proposing that Jamie Diamond no longer hold

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Speaker 1: dual role as chairman and CEO. Mon Santos says it's

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Speaker 1: no longer sees large scale M and A as a strategy.

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Speaker 1: The US bracing for first quarter company earnings expected to

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Speaker 1: show the deepest, the steepest drop in six and a

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Speaker 1: half years, led by the energy sector. Live from the

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Speaker 1: First Word Breaking News desk. I'm Vincent Signarella, Karen very

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Speaker 1: thanks Vincent to hear live breaking news of your Bloomberg tape.

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Speaker 1: Squawk to go on your terminal. Let's ask you a

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Speaker 1: w K go. That's a Bloomberg business flash, Tom and Mike.

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Speaker 1: Karen thinks so much great, We appreciate that. Good morning everybody.

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Speaker 1: Bloomberg surveillance this morning. And as Karen mentioned, negative ten

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Speaker 1: and it's mentioned negative seventies seven on the dough is well.

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Speaker 1: Lots to talk about with John Miller first though Bloomberg

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Speaker 1: Surveillance brought you by Investco. Factor based strategies can help

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Speaker 1: investors focus on high quality, low volatility and more. Learn

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Speaker 1: more at investco dot com Slash High Conviction. Investco dot

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Speaker 1: com slash High Conviction. Jonathan Miller with US with Miller Samuel.

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Speaker 1: For all of our listeners Nation where we get a

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Speaker 1: huge response when you're on it's sick, how much down

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Speaker 1: payment do I need? Well, for the most part, it's

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Speaker 1: unless you go through f h A and then you

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Speaker 1: can get three and a half. It's like twelve people

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Speaker 1: right in the country. It is one of the reasons

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Speaker 1: why bank lenders credit conditions remain fairly tight on that

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Speaker 1: side of the lending circle. And um, that's one of

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Speaker 1: the reasons why we're seeing, you know, rising prices across

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Speaker 1: the U S. It's sort of choking off inventory still

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Speaker 1: to this day, and this has been going on for

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Speaker 1: so The rising prices on a microeconomic basis is because

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Speaker 1: there's nothing out there for sale. Correct, It's it's not

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Speaker 1: about wage growth, uh, you know recently, Um, and uh,

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Speaker 1: it really that's been the driver In fact, if you

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Speaker 1: look at n a RS existing homesale numbers, just over

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Speaker 1: the last two years, the year over year patterns for

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Speaker 1: inventory have either been negative or flat. Uh. And that

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Speaker 1: is correlated with rising home prices. Well, you know, as

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Speaker 1: an economist, you'd say, then markets will clear, they will

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Speaker 1: build more houses. But why why are they not meeting

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Speaker 1: the demand? Well, part there's a there's a lot of

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Speaker 1: moving parts. One of them is the emphasis on building

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Speaker 1: over the last uh few years has been skewed towards

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Speaker 1: the higher end of the market. And part of that

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Speaker 1: is because land sales uh have been remained stubbornly high.

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Speaker 1: And so as a result, um, when you have higher

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Speaker 1: going in costs, you have to create housing that's skewed

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Speaker 1: to the high end. So the supply at they'll say

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Speaker 1: the lower half of the lower third of the market

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Speaker 1: doesn't get additional product and that keeps it tight. And

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Speaker 1: that's why there's this pattern of sort of you know,

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Speaker 1: weak at the top. I'd like to say it's like

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Speaker 1: an ice cream cone, sort of soft at the top

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Speaker 1: and firm everywhere else, but that's probably a bad analogy. Um.

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Speaker 1: And and this is pervasive, uh, not just in urban markets.

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Speaker 1: But in suburban markets, outlying suburbs, the high end markets

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Speaker 1: tend to be the softest. Maybe it's a timing issue

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Speaker 1: where the high end markets sort of peaked first and

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Speaker 1: now we're looking at the rest of it. Is there,

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Speaker 1: what's the what's the hottest market in America? Oh? Yeah,

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Speaker 1: within two blocks on the Upper west Side. Well, you

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Speaker 1: know the way, Uh, First of all, I don't use

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Speaker 1: the word hot because then I'd be like it would

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Speaker 1: would be uncomfortable saying hot. But but but the way

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Speaker 1: I look at it is, uh, you know, we have

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Speaker 1: just in the New York metro area, we have pretty

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Speaker 1: brisk activity. Um, the outlying suburbs. Brisk, folks, can I

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Speaker 1: transfer Jonathan Miller talk, brisk means you can't afford it? Uh.

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Speaker 1: The the the brisk translation means that the pace of absorption,

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Speaker 1: meaning the number of months it would take to sell

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Speaker 1: all the inventory at the current rate of sales in

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Speaker 1: the outlying suburban markets and in some of the boroughs

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Speaker 1: like Brooklyn, are extremely low, four or five months, whereas

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Speaker 1: you know, something more balanced might be six, seven, eight months. Um.

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Speaker 1: So it's very fast, and it's very fast because you

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Speaker 1: have elevated sales activity, despite the problems with credit, in

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Speaker 1: addition to chronically low inventory except at the very high end,

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Speaker 1: right the super the super tall sort of phenomena we've

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Speaker 1: had in New York. That's that's where the activity has

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Speaker 1: one thousand, like one thousand, five hundred dollars per square foot,

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Speaker 1: two bedrooms to bath. It's a tiny place, it's got

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Speaker 1: zero charm. It's on the upper east Side, a great address.

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Speaker 1: Two point four million dollars. What's the taxes on that? Puppy?

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Speaker 1: Is there any hot neighborhood in New York? Now? So?

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Speaker 1: So right now, is that a co op? I don't know, Yeah, condo,

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Speaker 1: it's a condo. It's been it's been listed for six days,

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Speaker 1: so it's probably already gone. Yeah, you know. The way

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Speaker 1: to think of it right now, sort of, the average

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Speaker 1: monthly monthly counter charges, real estate taxes and common charges

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Speaker 1: together is is about a buck between a buck eighty

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Speaker 1: and two dollars a foot per month. So if you

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Speaker 1: have fifteen hundred feet the averages somewhere, that's right. Everybody

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Speaker 1: drove off the road outside a hundred mile radios New

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Speaker 1: York and last three thousand a month, and that that's

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Speaker 1: just the monthly carry. Yeah, that's that's but part of

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Speaker 1: that seductible if you're real estate taxes. But but but

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Speaker 1: that's the number of killing me, helping Mike. I can't.

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Speaker 1: Once again, I'm speechless, so combative, John. They're on line,

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Speaker 1: I kid you not. They're lying up outside my building

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Speaker 1: looking at proper Tom. Nobody speaks English, and they're all

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Speaker 1: carrying very expensive briefcase. In the first quarter of two

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Speaker 1: thousand and sixteen, our research showed that of the transactions

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Speaker 1: that closed in Manhattan sold at or above list price,

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Speaker 1: and so obviously above list prices a bidding war and

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Speaker 1: uh at list prices, probably half of that is a

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Speaker 1: bidding war. So that ends up getting you, like the Tans.

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Speaker 1: Don't be a stranger, come buy more off Jonathan Miller

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Speaker 1: with our briefing on real estate. It's Bloomberg surveillance. I

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Speaker 1: need I need medication. Covering up there. With all due respect,

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