Inequality and NYC real estate

Felix Salmon argues that Manhattan property values have nowhere to go but up! (Last I checked, desirable apartments were over $1k per square foot, or > $1M for a 1000 square foot pad.)

His argument is simple: thanks to growing inequality (nonlinear returns to big winners in fields like finance, entertainment, technology), and the unique desirability of living in Manhattan (he details these ad nauseum in his post -- as a professional blogger, I suppose he has a lot of free time :-), there will always be high demand for the limited number of units in the Big Apple. I think he's right, at least based on current trends.

In the first quarter of this year, the New York City housing market boomed even as the rest of the country saw some nasty falls in house prices. And I suspect that the same trend might continue for quite a while. Partly, that's because precious few Manhattan homeowners have subprime mortgages. But on a much larger scale, it's because New York is one of a handful of global cities which are the winners in the location stakes. The set of things you buy when you buy an apartment here can't be measured in square feet.

At 11:18am this morning, I got an email which told me that the Committee on Global Thought at Columbia University was having a discussion about the economics of climate change. The discussants? Jeff Sachs, Joe Stiglitz, and Nick Stern. Said discussion was happening at 4pm, and was free and open to the public. Of course, I went. I was even fortunate enough to be able to put to Stern directly my single biggest question/problem on the subject of climate change. He gave a great answer – and then Sachs answered the question too, and then Stiglitz gave his answer, and then Stern came back and added to his answer. (I'll blog it in a minute.) It was a wonderful moment, and I thank New York City for it.

...The climate change event took place one week to the day after I went out for lunch with Nassim Nicholas Taleb, and had a fascinating and wide-ranging conversation with him.

...And because New York is a global town, demand for property here is global as well. Every time the dollar falls, New York property becomes that much more appealing to millions of Europeans and Asians who have visited and dreamed of living here: it's not even expensive, by London or Hong Kong standards.

I wouldn't be at all surprised were someone to tell me that Sachs, Stiglitz and Stern were all having dinner tonight with Bill Clinton, maybe at the house of Mike Bloomberg or George Soros. It's the kind of thing which happens in New York – and in precious few other places. Davos, maybe, once a year. As such people move to New York, other such people follow them here, in a self-perpetuating virtuous cycle.

Taleb says, in his latest book, that there's no particular reason why New York rose and Baltimore fell. But now it has happened, it can't be stopped. Baltimore will never again be a leading global city. And – I feel comfortable in saying – New York will never again (not in the next few decades, anyway) be a crime-addled drug den like it was in the 1980s. The road from there to here was not foreseeable. But the road ahead is clear: New York City is pulling away from the pack, and the bigger a lead it takes, the faster it goes.

Of course, Felix's perspective might change after he has kids :-)