This is a Sign Manhattan’s Housing Bubble is Ready to Pop!

Those who come in last have the most to lose.

By Harry Dent, Senior Editor, Economy & Markets:

I’ve been doing a lot of traveling lately. Our lease ran up at our home in Tampa many weeks ago, and my wife and I have been staying at several of our favorite spots up and down the east coast. We’re in San Juan now, but last month I got a look at this new “billionaire’s row” that’s popped up on the south side of Central Park in New York.

Billionaire’s row is as ritzy and swanky as you can get. It’s right near the best shopping and restaurants, and you have a view of the entire park to the north from inside these buildings.

The skinny towers that line West 57th Street are altering Manhattan’s skyline. They’re far higher than any of the surrounding buildings, as new technology has allowed for these slender structures with small footprints to reach farther and farther into the sky.

Half a dozen are planned through the end of the decade, with the tallest at Central Park Tower set for 1,550 feet. That’ll make it the tallest residential building in the western hemisphere. I was just flying a small plane over the Caribbean at that altitude, and that’s high.

And forget about Manhattan for a second – this bubble is reaching all over the globe, as Saudi Arabia and China are competing to see whose cloud-piercing tower can earn the title of “world’s tallest.”

A few years ago, the story was about an 8,000 square-foot condo in New York that sold for $88 million – twice what the owner had paid for it two years earlier. Then in 2014, Manhattan first broke the $100 million mark when a condo sold just over that at the new 90-story One57 building, also on billionaire’s row.

But as they say, you ain’t seen nothing yet…

I just saw an article on CBS saying the penthouse at 220 Central Park South – a short walk away from the site for Central Park Tower – is under application to go for $250 million… the highest listing ever. The condo fees will come in at about $520,000 a year, with $675,000 in taxes.

And this isn’t just any old penthouse. Over the past few years an 8,000-10,000 square-foot penthouse might get listed for $100 million.

The one at 220 Central Park South pulled out all the stops. At 23,000 square feet, it’s a virtual castle in the sky. It spans four floors with 16 bedrooms, 17 bathrooms and five balconies. With a $250 million price tag, that’s almost $11,000 a square foot!

In the first bubble that peaked in 2007, a very high-end apartment ran $2,000-plus per square foot. In this second bubble, these new, super upscale condos broke $5,000-plus, easy. Now, they’re heading toward $10,000-plus! A clear and obvious sign that this is a bubble! It’s going to burst. It’s just a question of when and to what extent.

People can say: “So what, let the billionaires play.” But the high-end brings the broader market up with it. It’s gotten so out of hand that a typical, 1,350 square-foot condo in Manhattan now costs $2 million!

Your average one-bedroom there rents for $3,000 a month and has 750 square feet. The typical studio at 550 square feet costs $2,300. That’s insanity!

My wife has a friend that rents an 800 square-foot apartment for $5,000 a month! How many can afford to rent at that level!?

I saw a 1,600 square-foot apartment several blocks to the east side of Central Park that would rent for $12,000 a month if it weren’t for rent controls. That’s $7.5 per square foot per month. And it’s not even a scenic area.

In contrast, I’m leasing an ocean-front condo in San Juan in the hip Condado area for just $1.8 per square foot. It has a glorious view with quick access to all the great restaurants, stores and everything – and is very modern to boot. The same condo in South Beach would cost me four times what I’m paying!

The question is – how much longer can this last?

Not long, as I see it.

I’d say this $250 million listing signals a top much sooner than later. Pretty much the only people buying these super expensive listings are foreigners trying to park large sums of cash outside their home countries.

But many of them are running into problems. Many currencies are falling versus the dollar due to falling oil prices, GDP growth and rising inflation. The Russian ruble has fallen to record lows against the dollar earlier this year. An overpriced New York condo now costs twice as much to them. Ditto for Brazil and most Middle Eastern countries! Brazil’s inflation rate is some 9.3%!

And at some point, the Chinese government is going to clamp down on the most affluent laundering their money out of the country to avert the cash limits of $50,000 a year.

So yes, developers always overbuild.

But just like any Ponzi scheme or bubble, those who come in last have the most to lose. And this high-end, global bubble tops anything we have seen in modern history. Remember: the bigger the bubble, the bigger the burst.

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  18 comments for “This is a Sign Manhattan’s Housing Bubble is Ready to Pop!

  1. Petunia says:


    Your bohemian living arrangements reminded me that I once figured out it is possible to live cheaply on cruise ships, meals and entertainment included. The cost can be as low as $50 a per person per night and the more trips you accumulate the more upgrades and discounts you get.

  2. West says:

    The example of NYC seems more like an effect of money printing and bailouts than a housing bubble.

    If you want to see a housing bubble, you should have stayed in Tampa. Homes there are quickly trending towards 2004-2005 prices, which are almost double the 2011 prices. 99/00 and 11/early 12 were the only times in recent memory when Tampa housing was fairly prices with respect to incomes.

    Or just turn on HGTV and see all the flipping shows. “It’s different this time” – or not.

  3. michael says:

    Ok Harry when are we going to see some real progress in this asset inflation nonsense

  4. quest says:

    “I saw a 1,600 square-foot apartment several blocks to the east side of Central Park that would rent for $12,000 a month if it weren’t for rent controls.”

    And I saw a pigeon that would sell for a million dollars if it weren’t for the fact that no one would pay it! This is sketchy reasoning. The market has not spoken on that unit.

    Also, prices going up is not what characterizes an ‘implosion’, it’s the other way! Your article is not well reasoned. You could have argued we were in a bubble 30% ago.

    There is supply and demand. We live in a world where there are vast amounts of water and money. No one says we’re in a ‘water bubble’. There is no restoring force for monetary policey so long as the supply of money continues to increase.

    As we know there will always be more and more and more money; the crash in stocks and real estate will not come.

    Society may collapse, but prices will soar!

  5. Phil says:

    Sure, Wolf, prices are coming down. Keep saying it and someday it will be true.

    I think you are laughing at us. Every time you write an article saying how the “bubble is bursting,” it is full of numbers that show how huge profits have been made up to now, and that the market is accommodating the demand by actually building things. That is called a thriving housing market, not a bursting bubble.

    • Wolf Richter says:

      Housing is local. You’ve got to check the local numbers. I turned bearish on the San Francisco housing market late last year. Before then I just wrote about how prices were soaring to insane levels. I called it a bubble (all bubbles eventually burst but that wasn’t the theme of those articles).

      Now we have a condo glut in SF. Rents at the high end are already coming down and move-in incentives have now appeared.

      In SF, you need to distinguish between condos and houses. The huge supply that has come on the market and is coming on the market is all condos. There are no houses being built in SF.

      You should read my articles (the ones I have written; others on WS have also written about housing but we don’t always agree on everything) to get a feel. They will tell you when the SF condo glut started impacting the market and when I switched to a bearish position on SF.

      Miami and Manhattan are now seeing similar things (condo glut and price pressures).

      The national averages, however, still look strong.

      The Case Shiller is useless for San Francisco itself. It covers a 5-county area, including SF, and you’ll never know what’s going on in SF by just looking at the Case-Shiller.

      So it’s a little more complicated on WS.

  6. John Doyle says:

    Tim Morgan describes the description of housing as a ladder, but seldom as a snake. Well, we are about to see lots of snakes!

  7. Dan Romig says:

    In Minneapolis, there’s also a lot of condo/apartment construction in the hip neighborhood called the Loop. This was once the called the warehouse district, and its between the river and downtown – near the Twins ballpark.

    Demand is still there, and construction/renovation has been going on for 15 years or so, but the price per square foot for housing is much higher than in nearby areas around downtown. Many people who work in the city want to (and do) live in the Loop, and its got trendy restaurants and such.

    In Minneapolis, we haven’t seen sky high prices like Manhattan or San Fran., but there’s a premium to be paid to live in the Loop. Will MPLS see a bubble ready to burst? Probably not, but a leveling off I’d predict.

  8. paul Whalen says:

    Bonds secured by the Billionaire Tower, One57, issued and trading in Tel Aviv are at 47 cents on the dollar. The collapse in prices at the top end will ripple through the entire market. Irrespective of the plaintive assertions of the Real Estate guru’s, “It’s different this time”. It Ain’t.
    Hell, Barnett can’t even rent the units at One57.

    • Petunia says:

      I think the outrageous pricing at the top end in real estate reflects an insecurity in wealth management in general. The rich and their managers are really unsure as to whether, in the end, it is financial assets or hard assets that survive a downturn. The question is whether $250M will be better preserved in a NYC penthouse or a basket of companies. The “buyer” is placing their bet. It has nothing to do with the real value of the real estate.

  9. Phil says:

    Thanks for your long response to my comment, Wolf.

    I have been reading you for years. I’m a professional real estate investor, as is everyone in my family.

    I can count the cranes in Miami as well as the next guy.

    What I find non-contributory is the hysterical language of your posts. The market rises; it falls. It is not always a bubble or a crash or an implosion; the apocalypse has not “already begun”; the end is not near, as the sandwich board man likes to say to get attention. There is nothing new or unusual or even dramatic about what is happening. San Francisco desperately needs a condo glut to return to some level of affordability. A few people will lose money–real estate speculators, for the most part–and others will do just fine, thank you very much.

    If your blog were a hard drive, it would be described as “thrashing.” It was entertaining for a while, but seriously, now it just reveals a lack of effort. You are obscuring information at this point, not revealing it.

    I come here more rarely now. Because I always use Adblock anyway, I am a parasite, and you will not miss my absence. It’s just sorry to see, that’s all. ZH and Testosterone Pit had some glory days. Now I would be embarrassed to link to ZH, and here, well–it’s just like and mp3 on repeat.

    • Petunia says:


      As someone looking from the bottom up, I see things you don’t see or don’t want to see. Money is the divider in America today. Anyone with money to speculate in the real estate market, especially from the misery of working families, is insulated from the vast majority of the people.
      You said you come from a family of real estate speculators. Any financial failure you experience can be mitigated with the help of family and family money. Most people don’t have that cushion.

      What is happening in politics today is the first crack in the system. People are trying to get some relief through political channels, as that fails, your real estate investment possibilities may increase, but will you even want to be in America any more. Ponder that question and the implications that go along with it.

    • Wolf Richter says:

      Are you starting to block out contrary data because you’re worried about losing money on your RE investments? That would be all too human! But it’s a very risky strategy.

      • frederick says:

        Wolf İ think they call that “denial” and yes most people are great at it look at the 911 attacks for a prime example

    • Fierson says:

      Your tone says it all. Miami has been over priced for months and in fact its worse now since my last 2 holidays there from Germany where I live. Your money sources are drying up, ie, Brazil, Europe- Russia and China. None of us here in Germany now consider that market as stable. In fact we are in the observation mode. The downside is larger. Fact. Its the truth no matter how Wolf labels the articles posted here.

      Your statement of markets rise, then fall says it all. So your post was redundant Phil

Comments are closed.