Unmasking real estate’s next culprit

History can only be understood at a great distance, the historian David Halberstam once said. It may take years to clearly understand what’s going on in the world around us at any given moment — so complex are the social forces and so enmeshed are we in their day-to-day reality, where it’s hard to maintain perspective.

I’m reminded of that observation all the time when reporting on the New York City real estate market.

Last month, I sat around a table with about a dozen senior commercial brokers in Midtown, as we reporters and editors often do, to talk about market trends.

There was rapid-fire discussion about recent deals where record prices had been paid by buyers, and where sellers — who had purchased the properties only a few years earlier — had seen outrageous profits.

But when talk turned to the next possible bust, and what warning signs The Real Deal should watch for, the room fell noticeably silent.

Interestingly, I don’t think that silence stemmed from the fact that brokers are often boosterish. In my view, it was more the inability to explain what might be the equivalent of subprime loans or CDOs (remember those?) in this economic cycle.

While nobody in that room identified one, there will undoubtedly be a new culprit this time around, and the key question is: What’s it’s going to be?

Of course, banks have remained conservative, so the lending spigot isn’t wide open right now. But the federal government is pumping money into the economy (by buying bonds to keep interest rates low). And foreign buyers are out there in force. But is either a potential smoking gun?

Foreign buyers, for one, were around during the last cycle and still are only responsible for 20 percent to a third of all Manhattan sales, according to estimates.

One hopes, as always, that today’s growth is happening on solid footing. There may be more foreign money than meets the eye (it’s hard to see the “real” money behind an LLC), the result of emerging economies around the world that are producing more newly wealthy buyers, who are parking their money in safe investments in New York. And hopefully the money isn’t “funny” and is actually here to stay — for the long haul.

And hopefully it won’t be too rocky a road for real estate when the government tapers its massive bond-buying program and lets the free market operate unfettered when it comes to interest rates.

Even as the Dow has continued to shatter records — despite last month’s government shutdown — it’s worth reminding ourselves that both economic booms and busts are inevitable. Indeed, Yale economist Robert Shiller won a Nobel Prize last month for tracking those booms and busts in the stock and real estate markets.

Meanwhile, journalism has been described as the first draft of history — and that’s what we bring you in this issue, as we look at the strong market.

From townhouse prices to office rents, we examine the records shattered in Brooklyn recently, as the borough continues to see unprecedented growth (see “Brooklyn’s heights”).

One reason those records are being broken, of course, is the limited supply of new projects coming on the market, including rental buildings. As developers and lenders increasingly gravitate toward building condos, the shortage of new rentals will grow even greater. We take a comprehensive look at new rental development in Brooklyn and Manhattan in “Where are the rentals?”

Our main cover story also looks at both Manhattan and Brooklyn, and it uncovers which residential brokerages dominate in which neighborhoods — a first-ever ranking of its kind. You can’t go five feet in Park Slope without hitting a Corcoran listing, for example. Reporter Kathy Clarke breaks down our findings in “Who has the tightest grip on NYC?”

Finally, check out our profile of controversial super-broker Dolly Lenz, who recently (and abruptly) left mega-brokerage Douglas Elliman to start her own firm. We look behind the scenes at her departure and the prognosis for her new company, which has so far raked in nearly $400 million in listings (see “Dolly’s next act”).

Enjoy the issue. And enjoy the good times — while they last.