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Archive for February, 2014

Why AMC Addendums Are Bane of an Appraiser’s Existence

February 27, 2014 | 5:54 pm |

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One of our appraisers just got an addendum request for an appraisal we recently delivered to an appraisal management company. If you know my history, relax, it’s an AMC that accepts our reasonable fee and turnaround times rather accepting the typical AMC terms dictated to most appraisers (we won’t work for that type of AMC). But as reasonable as this AMC is to deal with, we do receive maddening addenda requests (asking the appraiser for written clarifications on the report originally submitted).

Here’s the latest:

Reporting discrepancies noted regarding subjects site size (pg 1, addendum comments, survey). Appraisers to comment and revise as appropriate, including applicable site adjustments.

Translation: we needed to reconcile the following:

  • Lot size per town records (and used in our report): 0.365 acres or 15,529 square feet.
  • Lot size per survey: 0.3655 acres or 15,530 square feet.

That’s a 1 foot difference in the amount of land under the house or a 0.006439565% difference in the amount of land reported in public record and the survey (aside from the fact that the town drops the 4th digit from the acreage measurement in their public record listing).

As a result of using public record for the acreage information, we got dinged on our “appraiser rating” which impacts our volume flow (appraisal requests from a client)

This is just the tip of the iceberg as to the types of addendum requests we receive. Curiously, we NEVER receive requests questioning the value or how we arrived at it – the questions are always clerical minutia, reflecting the 19 year clerk chewing gum who doesn’t really know what an appraisal is.

Sigh.

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[WSJ] Good Overview on 2014 US Housing Expectations – Jed Kolko, Trulia

February 26, 2014 | 12:32 pm | trulialogo |

Jed Kolko does a nice job summarizing what the general housing market may look like in 2014 after the new home sales report came out today.

My big takeaway was that any housing market improvement will be more affected by local job and income growth rather than the “rebound effect.” This phenomena occurred in markets that were hit hardest by the downturn, yet saw the largest price increases.

I’ve added “rebound effect” to my 2014 phrase list, right after “polar vortex.”

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[Three Cents Worth #260 NY] Looking At Manhattan’s Mortgage History

February 25, 2014 | 3:23 pm | curbed | Charts |

It’s time to share my Three Cents Worth (3CW) on Curbed NY, at the intersection of neighborhood and real estate in the capital of the world…and I’m here to take measurements.

Check out my 3CW column on @CurbedNY:

In this week’s column, I thought I’d look at something near and dear to our economic hearts: tracking rental versus mortgage payments in Manhattan. Above, you’ll find Manhattan’s median sales price for co-ops and condos, as well as median rental prices, plotted against a theoretical monthly mortgage payment. At first I was using this to present the rent-or-buy decision, but the visual became a little more than that.

For the mortgage payment estimation, I used generic defaults of 20 percent down and 30-year fixed Freddie Mac mortgage rates using median sales prices as the anchor—understanding that a 20 percent down payment has not been a constant over the past 20 years. Although I’m only tracking principal and interest on the payment, I’m not factoring in the tax deduction either, so the offset is somewhat reasonable in this simple visual. Here’s what I found:…

3cwNY2-25-14
[click to expand chart]

 


My latest Three Cents Worth column on Curbed: Looking At Manhattan’s Mortgage History [Curbed]

Three Cents Worth Archive Curbed NY
Three Cents Worth Archive Curbed DC
Three Cents Worth Archive Curbed Miami
Three Cents Worth Archive Curbed Hamptons

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Is Housing Recovery Thwarted By The Polar Vortex?

February 25, 2014 | 3:09 pm | bloomberglogo |

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Since we have another cold snap in our midst, I thought I talk about cold weather and housing trends.

Back in early January, the US experienced what has now become a household phrase – “The Polar Vortex” and extreme weather has morphed its way into recent housing reports as plausible explanations for a slow down in some of the results.

Buyer perspective: Imagine a couple looking to buy their first home and decide they will begin looking right after the New Year. The dreaded Polar Vortex hits and it is too uncomfortable to run around looking at houses in freezing temperatures, so they postpone until the weather warms up in a month or 2.

Seller perspective: Imagine a homeowner who decides to put their home on the market and they experience searing pain from the cold by simply going to the grocery store. They can’t imagine a buyer coming to look at their home in the severe weather and don’t want their home to sit, so they postpone until the weather warms up in a month or 2.

In both scenarios, I would venture to guess that no one would say:

WOW, this weather is severe. I’ve rethought my (buying or selling) decision and will cancel the idea for a few years because the weather is too cold right now.

or

WOW, this weather is severe. Staying warm in my home right now made me realize that I rushed to make my decision and will no longer (buy or sell) for a long time.

Consumers can better relate to the weather than macro economic theory so throw it into the title of a news article:

NBC News: Spring Thaw May Not Heat up This Housing Market
Bloomberg News: Cooling U.S. Home Sales Only Partly Due to Weather: Economy
Fox Business: Housing Freeze: It’s Not Just The Weather

If we isolate the housing market to new construction (which represent about 15% of sales historically) then it gets a lot more plausible – ie permits, starts etc. can be more affected by the weather on a pragmatic basis.

But that has little or no impact to the vast majority of housing consumers.

Here’s one way to visualize the potential impact of weather to retail sales activity (translation: slow down, spring back) in Business Insider.

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Context, people, context.

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Bloomberg View’s Super Cool Visual: Bubble to Bust to Recovery

February 25, 2014 | 2:09 pm | bloomberglogo |

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[Click to view presentation]

Matthew C. Klein does an amazing presentation on the housing cycle (h/t Barry Ritholtz) – think of it as a Kahn Academy presentation on visual steroids.

Bloomberg View’s “Bubble to Bust to Recovery.”

Required viewing.

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Best Real Estate Lawsuit Prose EVER

February 24, 2014 | 1:20 pm |

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Here’s an excerpt from a recent lawsuit for a NYC property that struck me as high art (modified to keep parties private).

…During the same timeframe in which the Sponsor insisted it was unable to restore service to the Condominium, it was somehow possible to locate and rescue 33 trapped miners in a remote region of Chile.

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Housing Starts Drop: Whether the Weather or New Trend?

February 20, 2014 | 12:21 pm | Videos |

Yesterday I did a quick interview for CNBC at 30 Rock (right next to the new Tonight Show/Jimmy Fallon set which was all abuzz). We were talking about housing starts before they were released. While predicting this stuff is a fool’s errand, I think the bigger question was whether the recent weakening of housing metrics was a new trend or a pause caused by the harsh weather creating havoc across the US.

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The NAHB homebuilder sentiment index (1 family) posted its largest one month drop in history – severe weather, cost of labor, materials and land with given as reasons but those really aren’t new issues other than the severe weather.

While weather played a role and probably amounts to more of a short term blip, I think the larger concern is the outlook over the next 6 months with reduced affordability (higher rates but still historically low) and the bottoming of existing home inventory in 2013 providing additional listing competition in some markets.

December housing starts
• 999k annualized and seasonally adjusted rate in December, declining 9.8% but exceeding forecasts. More weakness in multi-family starts than 1-family • +18.3% 2013 over 2012

Why I thought January Housing Starts would fall (luckily I was right with the announcement of a record 16% drop) • Same factors in place as last month: Weather, Labor and Material Costs and Land Costs. • Record m-o-m drop in NAFB confidence – looking out over the coming months – suggests a larger impact by weather. • Mortgage rates slipped from last month but still nearly a point higher than a year ago, expectation of flat or edging higher in 2014. • Implementation of Dodd-Frank Qualified Mortgage (QM) may also drag viewing traffic. • Permits already fell over last 2 months which suggests lower starts (contracts versus closed sales analogy).

Actual January housing starts release after my interview
880K annualized rate in January, dropping 16% from December 2013. • January 2014 y-o-y dropped 2%. • Permits fell for 3rd consecutive month, down 5.4% from prior month (seasonally adjusted).

STILL – the question REALLY is whether the recent construction slowdown is the beginning of a trend or a temporary set back that will clear over the next few months as the weather improves and the economy shows some improvement. Right now it feels more like the market is losing momentum and the weather is only making it worse.

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[Three Cents Worth #259 NY] Snowy Weather Keeps The Listings Away

February 18, 2014 | 3:31 pm | curbed | Charts |

It’s time to share my Three Cents Worth (3CW) on Curbed NY, at the intersection of neighborhood and real estate in the capital of the world…and I’m here to take measurements.

Check out my 3CW column on @CurbedNY:

I get the feeling that many businesses (and the local economy) have been on some sort of “pause” during the past month, perhaps partially brought about by the weather. (Full disclosure: I’m the first to admit – I LOVE snow. I’ve even got a snowmaker at home.) Since the market is experiencing the tightest inventory levels in 14 years, I thought I’d compare seasonal inventory trends to seasonal snowfall trends…

3cwNY2-18-14 [click to expand chart]

 


My latest Three Cents Worth column on Curbed: Snowy Weather Keeps The Listings Away [Curbed]

Three Cents Worth Archive Curbed NY
Three Cents Worth Archive Curbed DC
Three Cents Worth Archive Curbed Miami
Three Cents Worth Archive Curbed Hamptons

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Manhattan Luxury Housing Buyers: ‘Eager but not Desperate’

February 15, 2014 | 7:37 pm | bloomberglogo | Public |

There was a terrific Bloomberg News story by Oshrat Carmiel: Manhattan Trophy Home Sellers Test Buyer Limits on Price that delved into the disconnect between reality and perception of the luxury housing market in Manhattan. I talk about this phenomenon on Bloomberg Radio’s ‘Taking Stock’ with Pimm Fox and Carol Masser.

It all began with Sandy Weill’s $88M sale of 15 Central Park West PH20 to a Russian Oligarch back in late 2011 that closed in early 2012. He was reportedly purchasing the unit for his 20-something daughter to crash when she wasn’t at her home in Monaco but it was more likely a divorce strategy. The home sold for $13k per square foot, 30% more than the recent $10k ppsf record previously set within the building (ie definition of an outlier).

Combine this outlier with the dearth of high end new development until recently and this 13k ppsf threshold became a new pricing tool for hopeful sellers and real estate brokers of large properties. The $100M resale penthouse listing at CitySpire was the new symbol of “outlier pricing” phenomenon. Other examples of aggressive pricing are cited in the Bloomberg story.

Despite the fact that this nearly $100M subset represents a tiny sliver - a handful of listings and sales – in the overall Manhattan market, consumer (buyers and sellers) have been subjected to a buzz saw of news reports about trophy properties giving the impression that properties like this comprise most of the housing market.

In reality there have only been a handful of contracts signed near the $100M threshold at buildings like One57 and 432 Park Avenue (the near $100M townhouse contract doesn’t count because it’s roughly 1/2 the ppsf of those apt sales)..and otherwise the overall Manhattan market seeing very modest price growth.

Yet none of the trophy apartment resales are selling at this new price point. Sellers have been testing the waters to see if someone across the globe will be willing to pay for something here, that in relative dollars to their home market is a good deal or they hope they will get lucky and these buyers will over pay.

Apparently these trophy sellers haven’t used the Internet.

UPDATE
Just got this feedback emailed from a real estate agent: In every neighborhood and property class “testing the waters” is an age-old technique that has enough utility to go on forever. As an agent, I prefer the price that results in a quick sell but I never turned down a client who insists on an absurd Ask. In most such cases, I have picked up a few customers and sold them something else they could afford before the “outlier” ran out of inquiries and the seller dropped its price or took it off the market. I like it when journalists report activity at the extremes of price and value because it helps me to identify the evolving dimensions of the market.

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Bloomberg Radio’s ‘Taking Stock’ with Pimm Fox and Carol Masser
Bloomberg News: Manhattan Trophy Home Sellers Test Buyer Limits on Price

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On Bloomberg TV’s ‘Bottom Line’ 2-12-14 Talking US Housing Slowdown

February 14, 2014 | 5:24 pm | bloomberglogo | Videos |

Had a great discussion with Mark Crumpton on his show “Bottom Line” about the slowing US housing market. You can see this in the quarterly results:

The median existing single-family home price increased in 73 percent of measured markets, with 119 out of 164 metropolitan statistical areas (MSAs) showing gains based on closings in the fourth quarter compared with the fourth quarter of 2012. Forty-two areas, 26 percent, had double-digit increases, two were unchanged and 43 recorded lower median prices.

The storyline of the last 2 years has been “Housing is Back!” yet prices were rising based on fed policy, not due to fundamentals like income, employment and access to credit. I have been labeled as a bit bearish on the “recovery” but I’m really not. I look at this slow down as a good thing for the long view on housing. We need to have sustainable housing growth (ie sales and prices) and 13.7% YoY price gains are in start contrast to economic fundamentals.

During our interview we were interrupted by the signing ceremony with President Obama for the new minimum wage act, so Bloomberg TV spliced the two parts together quite nicely. This is the second or third time one of my interviews has been interrupted by the President of the United States. Yes, I’m ok with that. ;)

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