Michael Nierenberg in Real Estate After Bear Stearns

True or False, Part 1: Residential Real Estate in New York City

 

 

This is the first article in a series featuring true or false statements to illustrate consumer and investor challenges in the residential mortgage sector. The initial installment begins with questions about residential property in New York City (NYC).

 

 

True or False? — T/F: Residential Mortgages and Property in the New York City Area

 

Here is a collection of six questions reviewing knowledge about homes in the New York metropolitan area (answers and explanations are provided after all of the true or false questions are listed):

 

  • 1 — The November 2019 median price for homes listed for sale in NYC is $1 million. — T or F
  • 2 — Home prices in Manhattan’s most expensive neighborhoods declined by 14-28 percent during the past 12 months. — T or F
  • 3 — The highest priced home sold in Queens, Brooklyn and Manhattan during the third quarter of 2019 was $48 million. — T or F
  • 4 — The New York-Newark-Jersey City Metropolitan Statistical Area (MSA) is the second largest in the country. — T or F
  • 5 — One-third of all Fortune 500 companies are headquartered in six cities that include the NYC area. — T or F
  • 6 — New York City is the only American city in the top 10 most expensive cities in the world for 2019. — T or F

 

 

Answers and Explanations: New York City — Residential Real Estate

 

1 — False. Recent NYC listing prices have a median of $775,000.

 

2 — True. The Tribeca area recorded the largest decrease (28 percent) while Greenwich Village, Chelsea, the Upper West Side and Soho declined by about 14-15 percent. Recent median prices in Tribeca were $2.25 million. One factor impacting higher-end properties is a new “mansion tax” that went into effect July 1, 2019. The previous tax of 1 percent for sales above $1 million was increased to a new staggered rate as high as 3.9 percent above $25 million.

 

3 — False. During the period July-September 2019, the biggest sales transaction was $66 million for a property with 5,800 square feet. The purchase was made by Sting (Gordon M. Sumner) and his wife Trudie Styler for a penthouse located at 220 Central Park South. The couple recently (late 2017) sold their 2-floor penthouse with 5,400 square feet at 15 Central Park for $50 million — purchased for $26 million in 2008. The 220 Central Park South building includes a residence previously sold for $238 million to asset manager Ken Griffin in January 2019, making it the nation’s most expensive residential property.

 

4 — False. The New York metro area is by far the largest in the United States with more than 20 million residents — almost 7 million more than second-place Los Angeles. The MSA includes five counties in northeastern Pennsylvania, three counties in western Connecticut, central and north New Jersey, the mid and lower Hudson Valley, Long Island and the boroughs of NYC — Staten Island, Queens, Manhattan, Brooklyn and the Bronx. The population of NYC is about 8.6 million, or about twice as many residents as Los Angeles (4 million).

 

5 — True. The New York metro area has the most with 65, followed by Chicago (33), Dallas (22), Houston (21), and both San Francisco and Minneapolis-St. Paul with 18. While New York City is often referred to as the financial capital of the world, Fortune 500 companies based in the area include diverse industries such as television, pharmaceuticals, telecom services and airlines.

 

6 — False. NYC ranks 7th and Los Angeles is 10th — Paris, Hong Kong and Singapore are tied for first place. In two related studies, New York was named as the world’s most exciting city and the place that most people wanted to visit in the upcoming year.

 

 

A reminder — The True or False series will continue with “Part 2: Residential Real Estate in Vermont.”

True or False, Part 2: Residential Real Estate in Vermont

 

 

This is the second installment in a series emphasizing a true-or-false format to examine mortgage business scenarios. The first article reviewed real estate in New York City, and this segment will analyze residential property in Vermont.

 

True or False? — T/F: Residential Mortgages and Property in Vermont

 

Here are 10 T-F examples that examine knowledge about residential property in Vermont (answers and explanations are provided after all of the true or false questions are listed):

 

  • 1 — Utah, Colorado and Nevada are the only non-coastal states with more expensive housing prices than Vermont. — T or F
  • 2 — In a 2019 list of best places to live in the United States, Vermont had two cities in the top 50. — T or F
  • 3 — Vermont is the least populated state in the nation. — T or F
  • 4 — Based on land area, Vermont is one of the four smallest states. — T or F
  • 5 — Among all 50 states, Vermont ranks 26th based on median listing price of homes in 2019. — T or F
  • 6 — Montpelier, Vermont is the least populous state capital in the United States. — T or F
  • 7 — Winooski, Vermont is the most densely populated city in northern New England (including Vermont, New Hampshire and Maine). — T or F
  • 8 — Burlington, Vermont is the least populous city in the nation to be the most populous city in the state. — T or F
  • 9 — In a review of the most expensive zip codes in each state, Woodstock is number one in Vermont. — T or F
  • 10 — Stowe and Colchester were both included in a recent ranking of the five best markets for real estate investment in Vermont. — T or F

 

 

Answers and Explanations: Vermont — Residential Real Estate

 

1 — True. Most states that have higher housing prices in comparison to Vermont are on the west and east coast — Nevada, Colorado and Utah are the only three exceptions based on recent data. Expressed in different terms, Vermont’s housing costs are less than almost all of the non-coastal states in the country.

 

2 — False. Vermont did not have any cities in the top 125.

 

3 — False. Wyoming has the fewest residents with about 579,000 while Vermont ranks second with 624,000 and North Dakota is next with 755,000.

 

4 — False. The five smallest (in order) are Rhode Island, Delaware, Connecticut, New Jersey and New Hampshire. Vermont is the sixth smallest state.

 

5 — True. Vermont ranks almost exactly in the middle of all states — the recent statewide median listing price was $274,000. This is cheaper than many nearby states such as Massachusetts ($480,000), New York ($425,000), Connecticut ($328,000), Rhode Island ($325,000) and New Hampshire ($310,000)

 

6 — True. Montpelier has about 7,600 residents. The next five smallest capitals are Pierre (South Dakota), Augusta (Maine), Frankfort (Kentucky), Juneau (Alaska) and Helena (Montana).

 

7 — True. Winooski’s population is about 7,200 — the city is the smallest in land area of the nine incorporated cities in Vermont.

 

8 — True. With slightly more than 42,400 residents, Burlington is the most populous of all Vermont municipalities. The next biggest are South Burlington (18,700), Rutland (15,700), Essex Junction (10,000), Bennington (8,800) and Barre (8,700).

 

9 — False. Zip code 05445 is in the town of Charlotte, located 30 minutes south of Burlington. Median home values are about $540,000. This area includes waterfront homes on Lake Champlain.

 

10 — True. Other cities included Burlington, Jericho and Charlotte. For example, the median rent is slightly under $2,000 in Colchester and $1,700 in Charlotte. In a separate analysis, Charlotte, Jericho, Burlington and Colchester were also ranked in a list of Vermont towns that exhibited price increases that exceeded national averages for both the most recent 5 and 10-year periods. During the last 10 years, all four experienced total appreciation ranging from 33-36 percent.

 

 

A reminder — The True or False series will continue with “Part 3: Mortgage Technology and Innovation.”

True or False, Part 3: Mortgage Technology and Innovation

 

 

This is the third part in a series that uses true or false questions (and answers) to assess trends in the mortgage industry. The first two articles covered residential real estate in Vermont and New York City. This installment will focus on innovation in the mortgage business.

 

 

True or False? — T/F: Technology Issues in the Residential Mortgage Sector

 

Here is a series of seven questions focusing on innovation and new technology involving residential mortgages (explanations are shown in the next section):

 

  • 1 — Traditional residential mortgage lenders often use legacy business practices that are obsolete by many modern standards. — T or F
  • 2 — Covius Holdings is a leading supplier of technology-related services to the mortgage and financial services industries. — T or F
  • 3 — The common tendency for mortgage providers is to embrace change. — T or F
  • 4 — The benefits of financial technology (often shortened to fintech) include an improved experience for borrowers, shorter processing times, reduced costs and competitive advantages. — T or F
  • 5 — Embracing mortgage servicing rights (MSRs) and non-Agency residential mortgage-backed securities (RMBS) as assets is a standard investment practice for contemporary asset managers. — T or F
  • 6 — Mike Nierenberg is a leading proponent of innovation in the mortgage industry. — T or F
  • 7 — The recent growth of non-traditional lenders such as NewRez has been helped by the creation of new mortgage types that permit more borrowers to qualify for home loans from alternative lenders than with traditional mortgages provided by banks. — T or F

 

Answers and Explanations: The Mortgage Technology Challenge

 

1 — True. Although most business executives appear to agree that successful change and innovation are mandatory for success in a digital world, traditional lenders in the mortgage sector have typically made very little forward progress. As observed by Andy Higginbotham, “Innovation, disruption, change — these words are not generally associated with the mortgage industry.” Meanwhile, New Residential Investment Corp. is a non-traditional company that has succeeded primarily due to transforming the way that the residential mortgage business operates.

 

2 — True. During 2019, New Residential announced a strategic investment in Covius Holdings.

 

3 — False. The prevailing practice of resisting change is a recurring challenge within many companies, especially in the mortgage business. The residential mortgage sector was dominated by banking institutions for several decades, and these traditional mortgage providers are at least partially locked-in to outdated infrastructure and technology. This “failure to innovate” has resulted in a dramatic loss of market share for residential mortgages originated by banks — from about 90 percent a decade ago to 45-55 percent recently.

 

4 — True. These benefits are magnified when companies like New Residential pursue a “whole pie strategy” that includes multiple mortgage-related operations — originating, servicing, investing and ancillary services such as real-estate owned (REO) management and title insurance.

 

5 — False. MSRs and non-Agency RMBS are complex assets that require active management by portfolio managers — an approach often shunned by many contemporary portfolio managers. New Residential pioneered the use of mortgage-related assets like these and helped to create a national trading market for mortgage servicing rights.

 

6 — True. Mike Nierenberg was an early leader in assessing the competitive significance of dramatic changes in the mortgage origination and servicing industries. He has been an innovator in the residential mortgage market for more than two decades. Mike is currently NRZ’s CEO, President and Board Chairman.

 

7 — True. New Residential Investment Corp. (NRZ on the New York Stock Exchange) is an innovative mortgage real estate investment trust (mREIT) with a primary mission of offering non-traditional and non-bank mortgage-related services to investors and residential borrowers. To make new types of mortgage loans available to more borrowers, NRZ acquired NewRez in 2018 — NewRez currently operates in 49 states and the District of Columbia.

 

 

NRZ and Michael (Mike) Nierenberg: NYSE Market Value $6.5 Billion (12-6-2019)

 

The 2018 dividend of $2 per common share (paid quarterly) by New Residential Investment Corp. represents a yield of 12.7 percent based on the December 6, 2019 intraday price of $15.75. Mike Nierenberg has served as Board Chairman of NRZ since 2016 and as President and Chief Executive Officer since the company was founded in 2013 — he has been described as “among the most highly skilled and knowledgeable people in the mortgage business” during his distinguished career.

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