Matrix Blog

Archive for January, 2009

[Trulia Voices] Mortgage refinancing, it’s not just about low rates

January 31, 2009 | 10:27 pm | |

Trulia’s got a broker alternative to blogging called Trulia Voices. It a merger of the power of social media an specific housing locations.

A recent request for mortgage refinancing tips, tricks and advice was posted.

So much has been made of historic low mortgage rates as an incentive to refinance or purchase a home, yet its not just about low mortgage rates.

What’s What, Where’s Where, Who’s Who in America

January 31, 2009 | 1:21 am | Public |

Ok, here’s kind of a fun interview that was posted today on Who’s Who In America. Are you kidding? It’s about me. I read my interview to confirm if it was actually about me. It was. So read it.

Here’s the synopsis as I presented it:

  • I lost my faith in humanity caused by a morally flexible business environment
  • Then I saw it coming
  • But I warned everyone
  • Yet no one listened
  • So I decided to keep toiling
  • Because I believed in my appraisal expertise
  • Made easy because I love what I am doing
  • And finally the sky fell
  • Suddenly people were looking for honesty in a sea of doom and gloom
  • My faith in humanity was restored

The typical rags to riches (in theory) ethical appraiser story you read about every day.


’nuff said.

[Financial Trust Index] Apparently Trust is both an Asset and a 4-Letter Word

January 29, 2009 | 1:30 am | |

The missing ingredient today in the housing market, the economy and the financial system is trust.

  • Banks won’t lend to each other because each thinks the other is going under.
  • Bank won’t lend to conumers because they don’t think they can pay the loan back.
  • Consumers don’t trust the government because just 6 months ago they pronounced that the economy has strong fundamentals.
  • Buyers don’t trust the local housing market because they think it is going to collapse.
  • No one trusts anyone.

Like consumer confidence, trust is a key factor in all that is wrong with the economy.

While trust is fundamental to all trade and investment, it is particularly important in financial markets, where people depart with their money in exchange for promises. Promises that aren’t worth the paper they’re written on if there is no trust.

Kellogg School of Management at Northwestern University and The University of Chicago Booth School of Business have developed the Chicago Booth Kellogg School Financial Trust Index.

A Trust Crisis Paola Sapienza and Luigi Zingales1

If a modern Rip Van Winkle had fallen asleep two years ago and woken up now, he would wonder what had happened to the U.S. economy. Two years ago, we were in the middle of an economic boom. Banks were eager to lend even at the cost of forgoing important covenants, and corporate America (and the entire world) was producing at full steam, so much so that commodities prices were rising in anticipation of a future scarcity. Today we are quickly sliding into a deep recession. Banks are not lending and commodity prices are plummeting in expectation of a dramatic slowdown of production throughout the world.

Neoclassical economic models cannot explain this dramatic change. There was no apparent shock to productivity nor a clear slowdown in innovation. The government has kept taxes low. The Federal Reserve has kept interest rates low and cut them even further. What happened?

Everyone agrees that this crisis originated in the financial system. When Lehman Brothers defaulted and AIG had to be rescued by the government in September, the economy was still doing all right. The rate of growth during the second quarter was still a comfortable +2.8 percent. How could the default of an investment bank, with very limited lending to the real economy, have had such a disastrous effect?


[Mark-up] 2009 U.S. Real Estate Investment Outlook

January 29, 2009 | 12:24 am |

A matrix reader passed along a mark-up of 2-2008 report by RREEF ResearchRREEF Alternative Investments is the global alternative investment management business of Deutsche Bank’s Asset Management division.

The mark-ups are quite compelling in contrast to the original document.


Other points of interest:




and of course:


Here’s the full “mark-up” document on their site. If the link breaks, try this one.

[In The Media] Fox Business 1-26-09

January 28, 2009 | 1:19 am | Public |

Here’s something I did yesterday on Fox Business covering the weaker market conditions in Manhattan.

I was interviewed by Dagen McDowell who was very pleasant to speak with before and after the interview. This was a 4 minute spot, which is pretty long in TV-time.

Here’s the clip. Let me know if there are issues with pc users in playing the clip. Works fine on my mac – thanks!

Afterwords, I got to meet Cody Willard briefly in the green room, host of “Happy Hour” who has a pretty interesting thing or two to say on his blog, The Cody Word.

Update: Here was my security pass – good for my self-esteem.


Existing Home Sales Rebound…Phew, Its Over!

January 27, 2009 | 12:24 am | |

When I heard the latest NAR existing home sale stats released today, I fought back the urge to ignore them because of the past spin of David Lereah and the fact there is no national housing market, blah, blah, blah.

Here’s the NAR position:

Lawrence Yun, NAR chief economist, said home prices continue to fall significantly. “It appears some buyers are taking advantage of much lower home prices,” he said. “The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions. Buyers will continue to have an edge over sellers for the foreseeable future.”

Here’s type of coverage on the news release today, which was consistent:

The number of existing homes sold in December rose 6.5% from the previous month, according to a report released Monday, as bargain hunters took advantage of plummeting prices.

The National Association of Realtors said that home sales increased to a seasonally-adjusted, annualized rate of 4.74 million units. That’s up from a revised pace of 4.45 million units sold in November and more than the rate of 4.4 million units projected by a consensus of industry analysts as reported by

Tim Iacono, a regular contributor to Seeking Alpha, made a great chart trending number of sales and inventory (above). When you read the news coverage and press releases, you don’t get the perspective this chart provides:

  • The number of sales are less than half of those in 2005 (blue line).
  • The credit crunch that began in the summer of 2007 initiated a new low level of activity, has been remarkably level.
  • The positive news of the 6.5% monthly uptick in the number of sales, in the context of post-summer 2007 credit crunch, suggests we may be moving into a lower level of activity.
  • Without the surge in west coast foreclosure sales, the levels would likely be far lower.

In other words, this is so not over.

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[Trulia Voices] What does Obama need to do to fix housing?

January 26, 2009 | 11:30 pm | |

Trulia’s got a broker alternative to blogging called Trulia Voices. It a merger of the power of social media an specific housing locations.

Last week, a question was posted:

If President Barack Obama could change or fix anything about housing what would it be?

My answer has been the highest rated response so far. C’mon, don’t you feel the need to vote for my answer, or even fake it and vote for mine anyway?

Actually, there is a wide variety of interesting suggestions worthy of reading.

City Of Architecture: 2008 Market Report For Charleston, SC

January 26, 2009 | 1:10 am |

The research for this monthly market report is provided by Brad Rundbaken, of Diversified Resource Group, LLC, a real estate appraiser, consultant and investor with a stock brokerage background. He analyzes the Charleston real estate market using the Charleston-Trident MLS and inserts a lot of extra analysis on the national housing market. In fact, he crams it in there and he’s not afraid to share his opinions. Check out his web site:

I got to speak with him after he was terminated by his former employer (an appraisal firm) after he started publishing his market stats in 2006. However, honesty pays and he tells me his consulting business is doing well.

…Jonathan Miller

View the 2008 report. There many pages of chart rant in the intro – the stats themselves are found midway if the tables below are too small too read.

Here are some of his observations pertaining to the overall Charleston market.

The two main trends for 2008 were that the average and median price declined for both the attached and detached homes. I discussed this quite a bit in 2007 and the overall price decline trend showed up in 08. This is a natural occurrence of the downturn in any economic cycle, especially a deflationary one like we are in right now. Price declines are not bad because this helps clean up the excess inventory in the market so it can return to a more affordable and equilibrium state. The fact that new housing starts and new building permits decline is healthy for any market with excess supply. We do not want inventory to continuously grow or we run the risk of future price declines and foreclosures. Even though months inventory for both attached and detached homes has increased in 2008 due to sales slowing from a brutal September and October stock market and the seasonality of the real estate market the current inventory has been declining in both housing segments since reaching highs during the summer months. Yes, there are a bunch of homes still sitting on the market but I hope the low interest rates and price declines will help. I will monitor this trend closely over the next few months.

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[From The 92Y] Making Sense of Manhattan Real Estate

January 26, 2009 | 12:46 am | Public |

This will be either the fifth or sixth year (I’ve lost track) that Paul Purcell and Kathy Braddock of Braddock and Purcell have organized a panel discussion (that includes me) on the state of the Manhattan residential market at the 92nd Street Y in Manhattan.

The event has sold out each time, so get your tickets early. I participate in this event because its fun – Paul is a great moderator. Also, the 92Y is a fantastic resource to explore with a wide array of programs. Their 92Y Blog is very well done and worth checking out. Its been on my Matrix blogroll for quite a while.

They have also invited Pamela Liebman, president and CEO of the Corcoran Group as well as Alan Rosenbaum, president of Guard Hill Financial, a mortgage broker. I’ve known Pam for much of my career – beginning when she was an agent and I was just starting out as an appraiser. My firm has been hired periodically by Alan’s firm but I don’t know him that well so I am looking forward to his insights mortgages and underwriting.

The event will be held on Thu, Mar 5, 2009, 8:15pm-9:30pm at the East 92nd St/Lexington Avenue location.

Click here for tickets.


[Crack in the Bell] Philly Real Estate Declines, But Less Than Other Metro Areas

January 26, 2009 | 12:12 am |

This quarterly market report is provided by Dr. Kevin Gillen, an economist at the Real Estate Department of the Wharton School and Fellow of the University of Pennsylvania. He analyzes the Philadelphia real estate market using the city’s real estate database through Hallwatch, a watchdog group. The results are published in a research paper called Philadelphia House Price Indices each quarter as a public service to the Philadelphia real estate community. Here’s his methodology [pdf].

Kevin does a great job parsing out the market and its a pleasure to share his results on Matrix —Jonathan Miller

Download the full report [pdf].

Read the Hallwatch article on the market: Decline in Home Values Accelerates: But city still continues to outperform most other large U.S. metro markets.

But while the Philadelphia’ market has declined less than many other U.S. cities, the news here is still sobering:

  • The number of homes that actually sold under arms-length conditions in Q4 stood at just over 3,400; which was a dramatic 25% drop from Q3 and the lowest level of home sales since 2002 Q4.
  • Inventories (homes listed for sale) still stand at all-time high levels. As of December 2008, there were nearly 10,000 houses listed for sale in Philadelphia, which is still well above their pre- bubble average.
  • The continued high number of homes for sale combined with a continuously shrinking pool of buyers means homes continue to linger on the market. The average time it took to sell a home in Philadelphia in Q4 rose to 74 days, which is well above the 30-40 days it typically takes in a balanced market.

More discussion concerning the report []. Hallwatch is a private and independently maintained watchdog website that does a lot of in-depth, independent and investigative pieces on city politics, as well as real estate.

[Of Mice and RE Bloggers] The New York Times covers 6 of us

January 25, 2009 | 10:30 am | Columns |

Also posted on our Matrix blog.

It was fun to open the New York Times this morning and see Samantha Storey’s well written real estate cover story And the Blog Goes On on 6 real estate bloggers – with the added bonus of an above the fold photo. Even better that I was one of the bloggers profiled.

Aside from moi, others covered include Lockhart Steele of Curbed, Jonathan Butler of Brownstoner, Doug Heddings of TrueGotham, Noah Rosenblatt of UrbanDigs and Property Grunt of PropertyGrunt are all long time bloggers who have been on my blog roll nearly since day1 and continue to provide their unique take on all things real estate and whatever else is on their mind. All of us have different approaches, purposes, styles and audiences… thats what makes the blogosphere so cool.

On a personal note, I’ve never been superimposed on a mouse, especially as a long time trackpad user. I wonder if the “upside down” position of my photo could have some sort of hidden meaning? Like… “turning real estate on its head”, “being upside down on a mortgage”, “looking at things in a different way”?

Probably not.

Ok, back to work.

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[Fee Simplistic] Thinking Outside The Tranche: Is It Time to Reinvent Appraisals For Income Properties?

January 25, 2009 | 10:25 am |

Fee Simplistic is a regular post by Martin Tessler, CRE whom after 30 years of commercial fee appraiser-related experience, gets to the bottom of real issues by seeing the both the trees and the forest. Marty has never been accused of being a man of few words and his commentary can’t be inspired on a specific day of the week.

…Jonathan Miller

From illiquidity to insolvency, to default, to unemployment, to declining demand for space and consumer spending, to falling rents, growing vacancies and overall economic gloom coupled with looming mortgage refinancing in the face of a continued credit market freeze-up. Is it time to realize that this might well be the perfect storm? What lessons have we learned? It does not take Advanced Appraisal 501 to have foreseen that the frenzied market produced by low interest rates, CMBS securitization that off-loaded risk, easy credit and lax underwriting standards, if not their complete absence as in the residential sector, was a disaster waiting to happen (archival Soapbox postings would confirm).

The appraisal world however, true to its role in reporting what the market was experiencing as of the valuation date, could only report back market metrics of sales prices/square foot, going-in cap rates, cash-on-cash yields, expected investor yields, rental growth, and vacancy trends. And if the appraisal lived up to its fundamental requirements, it would include a section on supply and demand metrics for the particular use of the subject property. Anecdotally, I can count on the fingers of one hand the number of appraisal reports reviewed in my previous financial institution days that truly measured supply and demand factors in apartment sale and rental scenarios, shopping center appraisals where share of the market sales ratios were calculated, office space supply and absorption vs. employment growth. This is not to say that these metrics were not presented in the appraisal report but the manner of presentation was generally “boilerplate” filler to convey the feeling that these factors were being addressed.

We have gone from a capital driven market back to what will be prevailing supply and demand metrics in the specific geographic market of the subject property. In essence we will be forced to return to market analysis as the basis of valuation rather than rely on the frenzied deals of the past created by easy credit. Nowhere is this more evident than in an overview of the capital markets where in 2007 commercial property sales generated $500 billion in financing that declined to $150 billion in 2008. For 2009, loans projected for maturation refinancing total between $80-90 billion. The present closure of the securitization market will mean that valuations are going to have to be dead-on in their opinion of value and absent bonafide market analysis measuring supply and demand the appraisal will likely not be worth the paper it is written on.

This brings to mind the question of estimating value in a market that is virtually shut down and is stuttering along to find itself in volatile economic circumstances. Should the FIRREA/USPAP protocols be amended to mandate that every appraisal look at a downside risk scenario? Thus not only would the appraisal report the opinion of value as of the date of value but it would also include the lower end of value if economic and market assumptions did not pan out. If investors and lenders are exposed to the downside would it enable a thawing of the credibility and credit freeze prevailing today? My opinion is-yes it would at least help.

The Wall Street Journal, in a recent article reporting on the mezzanine debt that financed the acquisition of the John Hancock Tower, quoted a lawyer specializing in real estate that “tranche warfare” is starting in the battles over who will sustain losses or retain equity from overleveraged debt and how these are going to be battles never previously encountered. The article went on to point out how mezzanine debt was sliced and diced among different investors similar to the tranching of CMBS debt. Compounding the problem is the fact that if there was a default an appraisal was to be undertaken to determine which investors retained equity and who were wiped out. Needless to say, arguments over the appraised value have started. A major factor contributing to the cash flow shortfall was that in the two year period from the time of the purchase vacancy in the building went fro 0 to 15%. Whether this was on the radar screen of the appraisers or attributable to the market would have been something that turned up in a definitive market analysis. This will be a very interesting period for lawyers if not appraisers who may well discover that the slicing and dicing may well have produced values (or prices) greater than the sum of the tranched parts.

All hands on deck man your battle stations

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