[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.


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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 Tom 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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Banks Make Regulations Onerous By Over-Interpreting Them

March 8, 2017 | 11:52 am | Investigative |

Some people are their own worst enemy. And that old saying also applies to financial institutions.

With all the talk about revisiting, gutting or eliminating Dodd-Frank, a significant part of the problem with mortgage appraisal related lending actually exists within the bank risk management themselves. Their over-interpretation of what the regulations require gives outsiders the impression that appraiser related regulations or standards are more onerous than they actually are.

Fannie Mae Allows Trainee Inspections Without Their Supervisory Appraiser
One of the biggest issues today is the lack of mentoring by experienced appraisers because it is not financially feasible under current lending practice. Both banks and AMCs – who act as a bank’s agent – generally do not allow trainees to inspect a property without a licensed or certified appraiser alongside. So in an era where AMCs control as much as 90% of mortgage appraisal work, the lenders are requiring AMCs to require something the GSEs (the party buy their mortgage paper) do not require. This risk aversion is residual from housing bubble collapse. Mortgage lenders today, subjected to low rates and a very narrow rate spread, remain irrationally averse to risk.

However, their underwriting risk management is effectively destroying the future quality of appraisals that will be done on their collateral because the new wave of appraisers is essentially only book-smart without real world context (mentoring). Experienced appraisers can not afford to invest the time to inspect the property with the trainee (in addition to their own inspections) for the multi-year experience period before the appraiser is certified after already taking a 30% to 50% overnight pay cut from AMCs.

From the Fannie Mae Seller’s Guide Update – 2017-01 page 2.

Reporting “Material Failures” to State Boards
In reference to appraisal oversight, let’s consider how banks determine whether an appraiser is reported to their state licensing board.

Dodd-Frank says the following in 12 CFR 226.42(g)(1). Whereby a lender has to report an appraiser for…[bold, my emphasis]

(g) Mandatory reporting—(1) Reporting required. Any covered person that reasonably believes an appraiser has not complied with the Uniform Standards of Professional Appraisal Practice or ethical or professional requirements for appraisers under applicable state or federal statutes or regulations shall refer the matter to the appropriate state agency if the failure to comply is material. For purposes of this paragraph (g)(1), a failure to comply is material if it is likely to significantly affect the value assigned to the consumer’s principal dwelling.

When the CFPB was asked what they meant by a “material failure” – the following table shows the difference between material and non-material.  So how much is a material failure? A value off by 2%, 10% or 30%?

And by the way, the third option for reporting a material failure seems absurd although I suppose it has to be said – Who is dumb enough to admit that they accepted the assignment because they knew they would “make the deal” happen. The obvious lack of a definitive paper trail in such a situation makes this very hard to prove.

I’ve always had a problem with setting rigid rules in considering the concept of appraisal oversight. With valuation expertise, how does a state agency apply hard rules to value opinions, comp selection and adjustments, etc.? There needs to be a great deal of latitude for regulators and an “I’ll know it when I see it” approach should be allowed.

Separating gross negligence from negligence

Here is the rule.

“Performing an appraisal in a grossly negligent manner, in violation of a rule under USPAP.”

While subjective, it represents a very severe extreme to which an appraisal would be reported to a state board. The rule goes on to say…

“Accepting an appraisal assignment on the condition that the appraiser will report a value equal to or greater than the purchase price for the consumer’s principal dwelling, is in violation of a rule under USPAP.”

But big national mortgage companies today like Wells Fargo and others are reporting appraisals to state boards where the value is not supported. ie weak comps, unreasonable adjustments, etc. Reports with those issues may, in fact, be negligent but do not fall under the definition of gross negligence. Let’s not wreck an appraisers career because they missed some better comps. Once these reports are referred to the state, the state must investigate. It opens up the appraiser to more risk of unintended consequences. Think of a scenario where a cop pulls over a driver for a missing taillight and learns that the driver doesn’t have his wallet with him.

Gross negligence requires a much higher test than applying it to an appraiser who is just being stupid.

It is defined as:

Gross negligence is a conscious and voluntary disregard of the need to use reasonable care, which is likely to cause foreseeable grave injury or harm to persons, property, or both. It is conduct that is extreme when compared with ordinary Negligence, which is a mere failure to exercise reasonable care.

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Our Manhattan Luxury Housing Price Indices on Bloomberg Terminals

March 4, 2017 | 10:03 pm | Charts |

Bloomberg maintains 6 quarterly charts on their terminals covering the Manhattan luxury sales and rental results we compile.  I periodically throw these charts on this Matrix Blog only because I find myself asking…how cool is that?

Manhattan Luxury Average Sales Price

Manhattan Luxury Average Sales Price Per Sq Ft

Manhattan Luxury Median Sales Price

Manhattan Luxury Average Rental Price

Manhattan Luxury Average Rental Price Per Sq Ft

Manhattan Luxury Median Rental Price

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Mansion Global’s State of the Real Estate Market Event

February 15, 2017 | 1:47 pm | | Public |

Speaking about the state of the real estate market tomorrow morning. Looking forward to it! The cool graphic below is enough of a reason to attend. 😉

The original invite graphic was also pretty cool.

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