NAR Pending Home Sales Had Biggest “February to March” Jump in 4 Years

April 28, 2014 | 4:52 pm | irslogo |

4-28-14PHSI
[click to expand]

After all the housing news drama of the past month, I thought it was interesting to see the negative streak broken. Still, sales are below year ago levels after what I described as a “release of pent-up demand” that was caused by the expiration of the “fiscal cliff” and the looming rise in mortgage rates last year.

Although home sales are expected to trend up over the course of the year and into 2015, this year began on a weak note and total sales are unlikely to match the 2013 level.

All the indices NAR publishes bother me because they include seasonal adjustments and those adjustments can be very severe. The chart above has no seasonal adjustments so you can see how much adjusting has to take place to smooth out the line. I thought I’d take a look at the month-over-month data that wasn’t seasonally adjusted to see if the same pattern occurred.

4-28-14PHSIfebtomarch

Yes, month-over-month pending sales rose the most since 2010 when the market was wildly skewed (higher) as a result of the First-Time Homebuyer Credit (federal first time buyer and homeowner tax credit).

February to March 2014 had the largest increase in contracts than the same period in each year since 2010.

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Is Gentrification a Four Letter Word?

March 5, 2014 | 11:00 am | nytlogo |

dieyuppiescum

Back in mid 1980′s the front door of a new condo conversion at One Tompkins Square Park was spray painted with words “Die Yuppie Scum” and it became the battle cry for protests against gentrification of the East Village. With the eastward push of new residential development in the 1980s from the West and Central Village, residents and local businesses worried about being priced out and losing the intangibles that made the neighborhood unique – and that they would disappear along with it.

I remember appraising apartments to the east of Tompkins Square Park, seeing squatters inhabit derelict buildings, observing a burned out school bus on blocks in front of a newly converted walk-up and the self-described “Anarchists” in the park. All that is gone.

Recent discussions about gentrification have been more visible of late – and so have the discussions of the benefits of gentrification.

Merriam-Webster defines gentrification as:

the process of renewal and rebuilding accompanying the influx of middle-class or affluent people into deteriorating areas that often displaces poorer residents

Philadelphia is one of the first cities to tackle the issue in an attempt to keep the long time residents there and in doing so, helping to minimize the loss of the character of the neighborhood. It is fascinating and encouraging to see city governments be proactive on the issue since it costs money in the short term.

The initiatives, planned or underway in Boston, Philadelphia, Washington, Pittsburgh and other cities, are centered on reducing or freezing property taxes for such homeowners in an effort to promote neighborhood stability, preserve character and provide a dividend of sorts to those who have stayed through years of high crime, population loss and declining property values, officials say.

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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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[No Fiscal Cliff Hangover] 1Q 2013 Hamptons & North Fork Reports

May 13, 2013 | 10:02 am | delogo | Reports |

[click to open reports]

We recently released the market reports we prepare for Douglas Elliman covering the The Hamptons and North Fork.

This is part of an evolving market report series I’ve been writing for Douglas Elliman since 1994.

Key Points

HAMPTONS 1Q 2013

  • Listing inventory continued to fall.
  • Number of sales surged.
  • Number of sales in excess of $5M dropped as many high end buyers rushed to close at the end of 2012.
  • Limited supply beginning to apply upward pressure to stable markets.
  • Credit remains tight, restraining supply from entering market, no urgency to list.
  • Record low mortgage rates and release of pent-up demand keeping demand strong.
  • Less high end sales as tax-incentivized buyers rushed to close at the end of 2012.

NORTH FORK 1Q 2013

  • Housing prices up in all segments except for top quintile due to tax-incentivized rush at end of 2012.
  • Number of sales fell and listings rose.
  • Days on market expanded.


Here’s an excerpt from the 1Q 2013 report:

HAMPTONS…After an unprecedented year end surge in high end closings motivated by tax planning purposes, the first quarter Hamptons housing market saw an unusually low level of high end sales despite a year-over-year increase in total sales. As a result, the price indicators reflected declines, when in fact the housing market was not experiencing falling prices…

NORTH FORK…Sales activity in the first quarter of the North Fork housing market was somewhat weaker than the same period a year ago as the prior quarter “poached” some activity at the close of 2012. Price indicators were generally higher, but sales were lower and inventory was above prior year levels…

You can build your own custom data tables on the market – now updated with 1Q 13. While we haven’t built separate chart galleries for each market yet, you can browse our chart library.




The Elliman Report: 1Q 2013 Hamptons Sales [Miller Samuel]
The Elliman Report: 1Q 2013 North Fork Sales [Miller Samuel]
The Elliman Report: 1Q 2013 Hamptons Sales [Douglas Elliman]
The Elliman Report: 1Q 2013 North Fork Sales [Douglas Elliman]
Market Chart Library [Miller Samuel]
Aggregated Custom Market Data Tables [Miller Samuel]


[Defined by Low Supply] 1Q 2013 Long Island Sales Report

May 13, 2013 | 9:34 am | delogo | Reports |

We published our report on the Long Island sales market for 1Q 2013.

This is part of an evolving market report series I’ve been writing for Douglas Elliman since 1994.

Key Points

1Q 2013

  • Lowest first quarter listing total in a decade.
  • Signed contract volume jumped from year ago levels.
  • Housing prices remained generally stable, indicators mixed.
  • Limited supply beginning to apply upward pressure to stable markets.
  • Credit remains tight, restraining supply from entering market, no urgency to list.
  • Record low mortgage rates and release of pent-up demand keeping demand strong.
  • Less high end sales as tax-incentivized buyers rushed to close at the end of 2012.


Here’s an excerpt from the 1Q 2013 report:

…The lack of supply and rise of contract activity continued to define the Long Island housing market. Listing inventory fell to the lowest first quarter level seen in a decade as pending sales continued to rise. Despite the tightening of the market, overall price indicators remained mixed. The number of listings in inventory at the end of the first quarter fell 24.8% to 15,303 as compared to the same period last year, a ten year first quarter low…

You can build your own custom data tables on the market – now updated with 1Q 13 data. Check out the charts by browsing in our chart library.




The Elliman Report: 1Q 2013 Long Island Sales [Miller Samuel]
The Elliman Report: 1Q 2013 Long Island Sales [Douglas Elliman]
Market Chart Library [Miller Samuel]
Aggregated Custom Market Data Tables [Miller Samuel]


[Inventory Collapse] 1Q 2013 Manhattan Sales Report

April 2, 2013 | 8:00 am | delogo | Reports |

We published our report on Manhattan market sales for 1Q 2013 today.   I’ve been writing this series for Douglas Elliman since 1994.

My Take

-Inventory remained near historic lows, seeing the largest year-over-year decline in the 12+ years we’ve tracked it.
-Sales increased despite drop in inventory – low mortgage rates and pent-up demand as key drivers.
-All price indicators increased from year ago levels – largely due to inventory near historic lows.
-Largest price increases since credit crunch began with exception of 2010′s federal homeowner tax credit era.
-Days on market and listing discounts dropped as inventory declined.
-Luxury market had slower rate of decline in inventory (about half) than the overall market.

Here’s an excerpt from the report:

…The first quarter Manhattan housing market was defined by the acute shortage of inventory. As with many US housing markets, inventory in Manhattan has been falling for several years; this quarter, listing inventory posted its steepest year-over-year drop in the 12 years we’ve been recording it, declining 34.4% from the prior year quarter to 4,960. This was the ninth consecutive month and the 14th of the last 15 months that has shown a year-over-year decline in inventory. Despite the drop, number of sales increased 6.3% to 2,457 as consumers fought tight credit conditions to take advantage of low mortgage rates, and more still were incentivized by the rise in rental prices over the past two years…


The charts and data tables are updated to include the first quarter of 2013.

Here is some of the press coverage for the report today.


The Elliman Report: 1Q 2013 Manhattan Sales [Miller Samuel]
The Elliman Report: 1Q 2013 Manhattan Sales [Douglas Elliman]


[Turning Corner?] 4Q 2012 + 2003-2012 Long Island Decade Reports

January 25, 2013 | 11:48 am | delogo | Reports |


[click to open reports]

We published our report on the Long Island sales market for 4Q 2012. Since this was the final quarter of 2012, we also released our Long Island Decade report, a ten year moving window data compendium of the Long Island market from 2003-2012

This is part of an evolving market report series I’ve been writing for Douglas Elliman since 1994.

Key Points

4Q 2012

  • Lowest fourth quarter inventory level in 8 years, down 21% from a year ago.
  • Year end rising momentum in sales as pending sales outpaced closed sales.
  • Price indicators were up across-the-board from a year ago.
  • Credit remains tight as economy slowly improves.
  • Inventory falling – low to negative equity, no urgency to list.
  • Sales rising as record low mortgage rates create demand.
  • A release in pent-up demand from election year and “fiscal cliff” concerns over rising taxes.

2003-2012

  • Sales increased for first time since 2006.
  • Median sales price up 3.2% over decade.
  • Market peak in price was 2006, same as the US housing market.
  • Housing prices have shown stability for 3 years.


Here’s an excerpt from the 4Q 2012 report:

…Long Island, like much of the greater New York region, is experiencing a chronic short of listing inventory. Steadily declining over the past several years, Long Island listing inventory reached an 8-year low in the fourth quarter. The large year-over-year drop in supply was met with an increased level of sales activity, both in terms of signed contracts and closed sales…

You can build your own custom data tables on the market – now updated with 4Q 12 and annual 2003-2012 data. I’ll post the updated charts soon. In the meantime you can browse our chart library.




The Elliman Report: 4Q 2012 Long Island Sales [Miller Samuel]
The Elliman Report: 2003-2012 Long Island Decade [Miller Samuel]
The Elliman Report: 4Q 2012 Long Island Sales [Douglas Elliman]
The Elliman Report: 2003-2012 Long Island Decade [Douglas Elliman]
Market Chart Library [Miller Samuel]
Aggregated Custom Market Data Tables [Miller Samuel]


‘Defensibility’ of Property Values [Part II of Trilogy]

June 7, 2012 | 3:02 pm | irslogo |

A good friend of mine, Mark Stockton of Valuations Unlimited, LLC, has developed a powerful research tool to aid in valuation. Mark is a sharp unassuming guy who has sold technology to Wall Street before. Here is a simple overview. It addresses the significant elements of the technology. It’s not an AVM and better yet…it actually works! His technology develops the replacement cost, market analysis, land residual analysis, assessment analysis, sale price index and rental analysis and allows the user to weight the applicability of each approach.

Here’s the second installment of his property valuation trilogy. The first installment covered ‘Sustainability‘. This version is about “defensibility”. It was perfect timing since I just testified in court this morning as an expert witness to defend my appraisal report.


In Defense of Defensibility
By Mark L. Stockton
June 7, 2012

Can you imagine walking into an IRS audit without the slightest ability to defend the deductions you have taken to reduce your tax liability? Not on your life! If your tax return was to become the subject of an audit, you would walk into the meeting with the IRS auditor equipped with all of the support documentation required to substantiate every entry on the tax form. To do less would be to risk a ruling disallowing specific deductions and perhaps requiring you to pay some amount of tax plus penalty and interest.

The concept of defensibility is not new to any of us, nor is it confined to our tax filings. The theory has universal application for any service or product that relies to some degree on the appropriate selection of factual information, and the analytical abilities and/or opinions of one or more individuals. As this relates to the mortgage industry, a title policy must be defensible, or it is of no value. A credit report or an income statement must also be defensible in order to have any worth. It stands to reason that a real estate appraisal should be able to withstand the same scrutiny – but it generally will not.

Residential real estate appraisals are seldom defensible. Traditionally, lenders have audited appraisals for completeness (are all the boxes checked?) without giving any consideration to the reasonableness of the value conclusion. That changed – or was supposed to change – with the adoption of the Interagency Appraisal and Evaluation Guidelines in December of 2010.

Consider the following excerpt from the Guidelines:

XV. Reviewing Appraisals and Evaluations
This review also should ensure that an appraisal or evaluation contains sufficient information and analysis to support the decision to engage in the transaction. Through the review process, the institution should be able to assess the reasonableness of the appraisal or evaluation, including whether the valuation methods, assumptions, and data sources are appropriate and well-supported.

Interpret this anyway you wish; it is impossible for a lender to assess the reasonableness of the appraisal or evaluation without considering whether or not the value conclusion is reasonable. In order to accomplish that task, all of the items set forth in the provision above must be readily available and/or readily apparent to the lender.

  • There must be sufficient information to support a decision making process.
  • There must be sufficient analytics to support the value conclusion
  • The valuation methods used must be adequate and applied properly
  • Assumptions must be documented
  • Data sources must be adequate

Given the lack of support documentation that accompanies a residential appraisal report, it is impossible to determine whether any of these criteria have been adequately addressed. Under these circumstances, how can anyone be expected to make a determination about the reasonableness of a value conclusion as the Guidelines require, and as common sense and prudent business practice dictate?

The appraisal process today is an abbreviated version of that which was once mandated. Generally, a single approach to value is considered – the market comparison approach. This method depends on the successful execution of two procedures:

  1. The identification properties that have recently sold, that are reasonably similar to the Subject property in terms of location and property characteristics, and that best represent local market conditions (“comparable properties”)
  2. The determination of reasonable dollar adjustments to account for the locational and characteristic differences between each comparable property and the Subject.

We know from studies performed periodically by Fannie Mae and others that a significant percentage of the time – perhaps 40% – properties identified as comparables on appraisal reports are in fact not comparable. A valuation process that begins with such a flawed premise can seldom arrive at a reasonable, defensible value conclusion. We don’t know what properties comprised the set from which eventual comps were selected, nor do we know the precise criteria used to define “comparability”. Likewise, we do not know the analytical basis for the computation of the dollar adjustments.

What do we know?

  • There is insufficient information to support a decision making process
  • A single approach to value is insufficient to support a value conclusion
  • The valuation methods used are inadequate, even if applied properly
  • Assumptions are seldom documented
  • Data sources may not be adequate

The sum of our knowledge leads us to the following determination: The information supplied is inadequate to form an opinion about the reasonableness of a value conclusion, which cannot, therefore, be used in a prudent decision making process.

Unless and until the appraisal product becomes defensible, as defined in the Interagency Guidelines, lenders will be unable to comply, and appraisals will not be useful tools for lending or investing decisions.



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Change is Constant: 100 Years of New York Real Estate

February 7, 2012 | 11:28 am | delogo | Articles |


[click to expand]

Last fall Prudential Douglas Elliman turned 100 years old and they asked me to write an article for their Elliman magazine. If you’ve been living in a cave, I’ve been writing their housing market report series since 1994.

What started as a simple project morphed into a fun, albeit gigantic, research project. I learned a lot about the evolution of the Manhattan housing market, largely through the amazing incredible New York Times archives. This was right about the time of my web site revision and semi-necessary hiatus so I am cleaning out my desk of posts I have been itching to write so please indulge me.

The article I wrote for Douglas Elliman was beautifully presented by their marketing department and prominently inserted in their Elliman magazine (and iPad app!).

Diane Cardwell of the New York Times in her “The Appraisal” (an incredible column name BTW) penned a great piece: In an Earlier Time of Boom and Bust, Rentals Also Gained Favor that originated from my article and zeroed in on the 1920s and 1930s to draw a comparison to the current market.

I have the feeling my project is going to morph into something bigger – it’s just too interesting (to me). A few things I learned about the Manhattan market over this period:

  • Douglas Elliman published the first market study in 1927 [heh, heh] not counting other marketing materials written before WWI)
  • Real estate media coverage in the first half of the century was social scene fodder (same as today) but with extensive and excessive personal details presented on tenants, buyers and sellers yet housing prices and rents were rarely presented in public.
  • Manhattan made a rapid transition from single family to luxury apartment rentals and eventually co-ops.
  • Housing prices and rents by mid century weren’t that much different than the beginning of the century.
  • Manhattan’s population peaked at 2.3M around WWI.
  • Wall Street in the 1920′s was seen as the driver of the real estate market.
  • Federal and state credit fixes in the late 1930′s help bail out the housing market.



• Change Is The Constant In A Century of New York City Real Estate – pdf [Miller Samuel]
• My Theory of Negative Milestones [Matrix]

Read More

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[FHFA] U.S. Monthly House Price Index Up 0.8% M-O-M, Down 12.8% From Peak

June 23, 2010 | 9:54 am | irslogo |

[click to expand

FHFA, the oversight agency for Fannie Mae and Freddie Mac, released their monthly US Housing Price Index for April. The index shows some stabilization since January however, April is the last month of the federal tax credit for first time buyers and existing homeowners so it would be reasonable to expect declines over the next 2-3 months.

U.S. house prices rose 0.8 percent on a seasonally adjusted basis from March to April, according to the Federal Housing Finance Agency’s monthly House Price Index. The previously reported 0.3 percent increase in March was revised to a 0.1 percent increase. For the 12 months ending in April, U.S. prices fell 1.5 percent. The U.S. index is 12.8 percent below its April 2007 peak.

Index Background
The index lags NAR’s Existing Home Sale by one month but it is a repeat sales index rather than an aggregate report. The index tracks Fannie and Freddie purchases mortgages where they acquire the paper or provide a guaranty, which dominates the mortgage business and provides the standardization that the secondary mortgage market relies on. This promotes liquidity of the US mortgage market but is limited to conforming mortgages of $417,000 in most of the country and $729,750 in designated high priced housing markets like the NYC metro area.

As a result of its data source, this repeat sales index is NOT a proxy for the US Housing market because it is skewed toward the sub-million housing market, roughly 80% of the US housing stock but is performing much better than the remainder because of the standardization provided by the former GSEs (Fannie and Freddie) and the backing of the federal government. Still, it represents the majority of the US housing market and warrants observation.

Since I am wary of seasonal adjustments my chart tracks the non-seasonally adjusted index, even though the press release relies on seasonal adjustments – the trend is the same but the month over months vary somewhat.


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