Podcast: Guest hosting ‘Voice of Appraisal’ – Week of August 7, 2017

August 6, 2017 | 8:05 pm | Podcasts |

Phil Crawford of Voice of Appraisal asked me to cover for him while he took a well-earned vacation. While I don’t have his sweet, syrupy smooth radio voice, I can grow on you a little bit if you listen long enough. I talk appraisal war stories and appraisal business philosophy. Fun!

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VIDEO Nightly Business Report: U.S. Luxury Market Trends

August 6, 2017 | 7:54 pm | TV, Videos |

Diana Olick of CNBC interviewed me on the reason behind the luxury market uptick as a companion piece to her story on the luxury report released by Redfin.

The luxury real estate story starts at 20:58 into the broadcast:


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NeighborhoodX: In praise of secondary cities

July 5, 2017 | 4:52 pm | | Articles |

Every so often I include a guest post that I wish I had written on my own. This is one of them. It was written by my friend and colleague at NeighborhoodX. I hope you enjoy it.


In praise of secondary cities

Why the next great Brooklyn neighborhood might not be in Brooklyn.


Detail of Edward Hopper, “From Williamsburg Bridge”

Constantine A. Valhouli   |   Jun 20, 2017 10:45 AM

Not so long ago, the central question of urban planning was how to revive the downtowns and surrounding neighborhoods of major cities. In the last decade or so, those efforts have succeeded to the point where the central question has become, “where do the people go who are being priced out of these cities?”

It’s worth a moment to understand what shifted during that time.

Across the United States, the downtowns in need of revival had been damaged by misguided federal policies like redlining (a racist policy of not making loans in ethnically-diverse neighborhoods) and urban renewal (massive demolition of historic neighborhoods). By contrast, the revival of these neighborhoods was often a fragmented, small-scale effort that largely happened from the ground up. Cheaper rents and large vacant spaces provided fertile ground for creative and entrepreneurial efforts.

Many of these neighborhoods experienced the same arc. From sleepy and decrepit bargains to lively and gritty destinations, and finally to consumerist caricatures of their former liveliness. Some of these neighborhoods were victims of their own success; rents and purchase prices rose out of reach because it was now much more desirable. For other neighborhoods, rezoning created incentives to demolish those large, vacant spaces (or those small, occupied houses) for an apartment complex or condo tower aimed at more affluent residents.

Among affluent families, the shifting preference from suburbs to cities is glibly described as a ‘change in consumer preference.’ But it is more than this. The shifts are not just on the demand side, but on the supply side as well. During that time, the cities changed as well, becoming more like suburbs – and thus more welcoming to wealthy suburbanites. In turn, the demographic of these cities is coming to resemble affluent suburbs: doctors, lawyers, management consultants, and those in financial services.

At the same time, the people who made these cities interesting and dynamic – the writers and artists, musicians and actors, entrepreneurs and talented young people – are being priced out. Today, many young people who move to a major American city to pursue creative or entrepreneurial ventures require the financial support from their parents.

And yet, people are paying these higher prices because they believe that they need to be in the city in order to pursue these kinds of ventures and meet like-minded people. But is this always true? Or could smaller cities and suburbs also could provide these opportunities?

Almost every unsexy suburb within commuting distance of major cities has the basic raw elements to make for a fascinating and livable place.

In addition to low rents and purchase prices, there is often a critical mass of housing within walking distance of a historic (but largely vacant) downtown, one that evokes the opening sequence of Bob’s Burgers. But even the vacancies can be an opportunity rather than a drawback. These were the same conditions that faced the early next-wave residents of almost-suburban city neighborhoods like Williamsburg, South Boston, or Silver Lake. In each case, it was the vision and drive of the creative and entrepreneurial residents that transformed these buildings from space into an actual community.

Today, these suburbs and mill towns are overlooked by major real estate investors. But again, this can be an opportunity rather than a drawback. Even as contrarian investor Sam Zell recently sold Equity Residential’s suburban portfolio to focus on urban markets, this creates an opportunity to be a contrarian to the contrarian, by taking advantage of the lower prices because these areas are out of favor.

But not all secondary cities are created equal.

Some have geographic advantages of significant parks, protected land, or beautiful views and rivers (like Beacon and Garrison, NY). Others have architectural advantages, with intact neighborhoods of elegant historic houses for less than the price of a Manhattan studio apartment.

Former mill towns have a particular advantage – if it is used thoughtfully.

The vacant or underused factory buildings offer a potential density that might only be found in larger cities. For example, the buildings in the canal district of Lowell, Mass., would not look out of place in Tribeca in New York City. Furthermore, the redevelopment of these spaces generally doesn’t displace anyone (except for pigeons) and, if done thoughtfully, can add mixed-use liveliness that can benefit the entire neighborhood or town. The vast size of the buildings and the relative affordability of the raw space allows developers to devote square footage to, say, independent movie theaters and stages, to provide a lifestyle within walking distance for which residents previously needed to travel out of town.

While these entertainment spaces are critical to the livability of a secondary city, they do not need to be gratuitously large or fancy. In fact, they will likely be better, and more affordable, if they are not.

For example, community groups who try to raise money for a nonprofit movie theater get caught in an endless cycle of grant writing to raise much more money than they actually need to launch. People forget that at its heart, a movie theater is a black box room with a projector. Maybe with beanbag chairs. Rather than trying to compete with commercial chain theaters on technology or fancy seating, their competitive advantage can be intangible – better film programming, or video talks with the director or writer, or events or events (like Rocky Horror Picture Show) that cannot be found elsewhere.

Even buildings that are not historically significant can be re-purposed rather than demolished. Smaller towns that grew by absorbing more contemporary suburbs have examples for how to reuse functional buildings like auto body shops and chain restaurants.

In outlying neighborhoods of Austin and Sedona, some former Pizza Hut franchises have been transformed into independent restaurants. In Greenwich, Connecticut, a former Howard Johnsons was renovated into the sleek, midcentury J-House Hotel. In a rural part of North Andover, Mass., the local music venue was the Red Barn, which was exactly what is sounds like. And in suburban parts of Anchorage, Alaska, pop-up shops take the form of happily-painted garden sheds on trailer hitches, set up in parking lots or roadside which serve as mobile coffee shops or as specialty jerky shacks.

Truly, more Brooklyn than Brooklyn.

In 2006, at the final show of CBGB’s – a moment that for many marked the end of a countercultural era for the East Village – when most people were waxing nostalgic about the revelry, the community, and the closing of an institution, Patti Smith offered an unsentimental coda: “CBGB is a state of mind. Young kids all over the world are going to have their own f—ing clubs. They won’t care about CBGB because they’re going to have the new places, and the new places are always the most important.”

This sort of punk rock/DIY ethos that drove the city’s revival from the 1970s to the 1990s, and this pragmatic, grassroots approach is precisely why the next hot Brooklyn neighborhood might not be in Brooklyn.

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[Forbes] Penthouse Juxtaposition – What Developer Wants v. What Market Supports

June 15, 2017 | 5:14 pm | TV, Videos |

No one will argue that a $70 million penthouse can be special. But when a penthouse has many open houses and sits on the market for more than a year, it seems reasonable to wonder about pricing.

Samantha Sharf at Forbes presented a great video that juxtaposes the amenities of the apartment with my perspective on the state of the super luxury market and the next possible housing cycle in front of us. When they filmed this in Bryant Park, there were many people standing and watching off camera which was kinda fun despite my serious slouching.


[click on image for video]

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[Housingwire] Hey 50-percenters, there is no “appraiser shortage” so knock it off

June 15, 2017 | 4:32 pm | Articles |

As a longtime reader of Housingwire, I always saw them as a great resource on the goings on in the mortgage industry. But lately, I grew concerned about the one-sided coverage as it related to my industry – residential appraisal.

HousingWire recently published an “appraiser shortage” blog screed that was tone-deaf to the problems facing appraisers. To their credit, Jacob Gaffney, the editor-in-chief, reached out to me for a rebuttal after reading all the negative appraiser feedback in the comments section. Rather than address specific failings of this piece, I opted to focus on current appraiser reality.

To start, the residential appraisal industry has a perception problem.

Read my full post on HousingWire.

Here is another thought on this appraisal shortage silliness. Not too long ago there was a webinar hosted by Housingwire that included some Powerpoint slides by one of the panelists, Matt Simmons. He is a Florida appraiser and former state regulator. He shared it with me and one of his slides is quite amazing. He matched mortgage origination volume with the federal registry of appraisers.

The finding?

The ratio of appraisers to mortgage volume has been higher since the housing bust than during the housing boom. While the chart only goes to 2015, both total origination and appraisers have changed little since then, so the ratio would remain stable, consistent with the post-financial crisis pattern. In other words, there are more appraisers now than there were during the Housing Bubble based on mortgage volume.


UPDATE Full Housingwire Blog Post with Comments [PDF]

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Homes with Blue Bathrooms Sell for More?

June 1, 2017 | 9:40 am |


[Geithner Bathroom, Westchester MLS]

Remember former Treasury Secretary Tim Geithner’s blue bathroom that didn’t help him get his price back in 2009?

Today I received a press release from Zillow that shared the results of their research with the headline: Homes with Blue Bathrooms Sell for $5,400 More than Expected.

Like the Zestimate’s results that are presented to the nearest dollar, this type of presentation infers a market precision that does not exist. Labeled as “disrupters,” I think Zillow’s concept of “aggressively marketing an accuracy that is non-existent” is one of the biggest challenges facing real estate appraisers and brokers and in turn, the consumers. Numbers can be magic, especially when presented in an econ-sounding way. The consumer absorbs the results as gospel without challenge.

I’m sure the numbers are accurate with the data they have but Zillow’s application of the results are misleading. Yes their data says blue bathrooms sell for $5,400 more but that doesn’t mean your blue bathroom will get you $5,400 more than your neighbor with the exact same house across the street that doesn’t have a blue bathroom.

As that commercial on tv says: if it’s on the internet, then it must be true.

 

 

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Moderating REBNY Panel: New York, New York On The Global Stage

May 28, 2017 | 1:13 pm | Public |

I’m looking forward to moderating a great REBNY panel for the Residential Brokerage Division Owners and Managers Breakfast on June 13th. Owners/Principals of Residential Brokerage Firms and Residential Managers can signup here.

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Pocket Listings: Appreciating Los Angeles Sales We Didn’t Know About

April 27, 2017 | 1:00 pm | |

We took a look at the pocket listing phenomenon in Los Angeles.

I’ve been authoring an LA housing market report for Douglas Elliman as part of their expanding Elliman Report series I’ve been authoring for 23 years. The report covers their firm’s LA footprint, namely the Westside, Downtown and other areas including Malibu.

Aside from Brooklyn, this housing market is one of the most robust we covered in 1Q17. Price growth, elevated sales and sliding inventory remained the theme.

We matched public record closings with properties listed on the MLS. Those sales missing from the MLS were either FSBOs or “pocket listings.” I don’t have a great way to separate the two at this point but I’m inclined to believe the higher the price, the more likely the sale was a pocket listing.

The chart shows that about 19% of all sales are not shared through the MLS. But even more interesting is the pattern shown by price. Approximately one-third of all sales over $5 million are missing from the MLS.

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Westchester to Manhattan Commute Time by Housing Cost

April 7, 2017 | 10:34 am | | Infographics |

Because I’m a little behind, the awesome infographic below by Michael Kolomatsky appeared in the New York Times real estate section a few weeks ago: How Much Is Your House Worth Per Minute?.

My original version covering Fairfield County was so popular they wanted me to do recurring versions. This one was much harder since there wasn’t an obvious “sweet spot” but the concept was the same. And best of all, it’s pretty darn cool.

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Agricultural Land versus Manhattan Parking Per Acre

March 26, 2017 | 8:19 pm | Infographics |

Well here’s a first for me.

Our Manhattan parking stats were compared with the average value per acre of agricultural land in FarmLife magazine.

In 25 years, the cost of an acre of agriculture farmland rose 309% while a Manhattan parking space rose 855% over the same period. Cost? $7,700 per acre for California agricultural land versus $55.5 million per acre for a Manhattan parking spot.

Gotta love this comparison.



UPDATE A colleague pointed out that we don’t know how large the average farmland was or whether it had reasonable access to water and electricity. I pointed out that Manhattan parking spaces don’t have electric and water service and seem to be about 100 feet from the elevator. LOL.

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Doubling Down On Appraisers as ‘Lone Wolves’ – Valuation Review

March 23, 2017 | 7:29 am | Articles |

Note: I have been a subscriber of Valuation Review and it’s predecessor for years. It provides a wide perspective on the appraisal industry and I’ve always got something out of it. Over the past few years, I’ve noticed that the voices in the magazine seemed to be skewing more and more towards national level AMC executives. I suspect the PR departments of these firms make their top executives readily accessible washing out the voices of individual appraisers. So I sent the editor a note offering another perspective with links to my content. He was immediately interested in getting another voice so he interviewed me.

From the Wednesday, March 22, 2017, Valuation Review Article:  CEO suggests appraisal industry comprised of ‘lone wolves’.

CEO suggests appraisal industry comprised of ‘lone wolves’

Reasonable compensation, lender and AMC issues are constantly on the mind of the appraiser. When things aren’t falling into place, the process of assigning blame kicks into high gear with appraisers continuing to look for guidance.

“That’s the problem in that there really isn’t any leadership for appraisers to follow. The false narrative of an appraisal shortage continues to be pushed by AMCs, unfairly tarnishing the image of individual appraisers,” Miller Samuel Inc. President and CEO Jonathan Miller told Valuation Review. “When an industry takes a 50 percent pay cut overnight, good people leave or struggle to hang on and weaker players are attracted-which equals problems. But is it the fault of the remaining individual appraisers?

“AMCs are at a seminal moment,” Miller added. “In what other industry does the company managing the talent get about the same compensation as the talent them? An agent representing a Hollywood actor isn’t going to get $1 million if their client is receiving that same amount for a movie role. It is a broken model.”

Like many in the appraisal profession, Miller strongly believes that there is not a shortage of appraisers. In fact, he more than challenges one reason for such a shortage is that too many burdensome regulations are being placed upon appraisers.

“There is a shortage of appraisers willing to work for 50 cents on the dollar,” Miller said. “The AMC model has hit a wall. AMCs have run out of new people willing to work for 50 cents on the dollar. Sadly, consumers think appraisers are getting the appraisal fee stated in their mortgage documents. They aren’t and typically the appraiser receives as little as 50 percent of it.

“The Appraisal Institute says there is a shortage of appraisers and seem to be championing the AMC concept but appraisers don’t understand why,” Miller added. “I’m not against AMCs; rather, I’m against the execution of business by the AMCs. They treat appraisers as a commodity rather than a professional service.”

For the rest of the story, visit here.

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[NeighborhoodX] With Data As A Commodity, Interpretation Becomes The Differentiator

March 19, 2017 | 2:48 pm | | Columns |

My friend and colleague Constantine Valhouli, founder of NeighborhoodX pens an excellent piece on how the analytics that can be derived from raw data separates seemingly similar real estate resources. And he loves price per square foot. I serve as an advisor to his firm as well as a co-consumer of caffeine whenever possible. He may periodically drop in here on Matrix with some insights derived from his neighborhood analytics.

-Jonathan J. Miller


With Data As A Commodity, Interpretation Becomes The Differentiator

by Constantine Valhouli

When data becomes a commodity, context, and analysis for that data become a critical point of differentiation. This is particularly true for real estate data.

The major real estate portals active in New York City – Realtor, StreetEasy, Trulia, and Zillow – are all relying on the same underlying data: listings from real estate brokerage firms, multiple listing systems and public record. As a result, what differentiates one portal from another is the user experience. This UX is a combination of the (hopefully) intuitive site navigation and the contextual information that helps users make more informed decisions about the various listings.

Those three factors – listings, navigation, and contextual information – come together in the search functions on a real estate portal.

Why? Even as the web has streamlined the housing search, it remains cumbersome. We’ve previously analyzed how the same search on different portals will yield different number of listings for the same neighborhood (Austin, Boston, NYC) – which means that buyers will have to duplicate their search across several portals to be sure they are finding all the relevant properties. Other times, the listings aren’t actually in the neighborhood they claim to be. All of this puts the burden of analysis onto the site user.

The real estate search recently became even more cumbersome and opaque. The major real estate portals which are active in New York City no longer have an option to sort properties by price per square foot.

On these portals, users can search by most or least expensive, by largest or smallest, or by newest – but these metrics are not as useful as looking at price per square foot. Sometimes a large property that appears expensive can be a bargain on a per-square-foot basis. Other times, some of the least expensive properties in a neighborhood are asking the highest prices per square foot for that neighborhood. The ability to sort listings by price per square foot is a minor feature, and relatively easy to implement. But the omission speaks volumes. Without this option, it is no longer possible for consumers to quickly sort properties to get a better sense the price/sq.ft. range in a neighborhood. Or to know whether a particular property is asking too much (or is a relative bargain) compared to the neighborhood. This also means that it is harder for sellers to value their property accurately.

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