Matrix Blog

Appraising

When We Say “Gut Rehab” We Mean It

December 11, 2012 | 9:11 pm | |

Here is a front and back view of a gut renovation on the Upper East Side of Manhattan observed by one of our appraisers. Offhand I don’t know what the building was or will be but other than the street facade, nothing else remains. It’s like new construction only completely different (the facade keeps it authentic as perceived by the local market).

Street View

Rear View

Not much left inside.

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Serious Jibber-Jabber: Lessons from Nate Silver to Filter Out Housing Noise

December 10, 2012 | 7:00 am | | TV, Videos |

I really enjoyed this “Charlie Rose”-like interview by late night TV host Conan O’Brien and statistician Nate Silver on his “Serious Jibber-Jabber” series. I recently bought Nate’s book “The Signal and the Noise: Why Most Predictions Fail but Some Don’t” and it’s next on my reading list (actually I bought 2 copies because I forgot I had pre-ordered on Amazon for Kindle and ordered again from Apple iBooks, Doh!).

What I found intriguing about the discussion is how much effort it takes to filter out the noise and get the to meat of the issue as well as getting outside of your self-made insulated bubble to be able to make an informed decision – aka neutrality.

Real estate, like politics, is a spin laden industry whose health is very difficult to gauge if you rely on people and institutions who have a vested interest in the outcome. i.e. Wall Street, rating agencies, government, banks, real estate agents etc.

Some interesting points made:

  • During the bubble, for every $1 in mortgages, Wall Street was making $50 in side bets.
  • Many people during the housing boom saw it was a bubble but didn’t want to miss out. They would see the green arrows pointing up on CNBC screen and it became very hard to be contrarian and be left behind.

The current “happy housing news” that is all the rage seems to draw a parallel with the pundits who got the election outcome all wrong yet all were experienced in politics. The housing herd is disconnecting from what the data is showing.

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A La Mode Software Tells Our Appraisal Story

December 5, 2012 | 9:00 am | | Favorites |


[click to open flyer]

This post is really meant for my appraiser readers because they’ll appreciate this:

A La Mode software has well over a 50% market share of residential appraisal software used today and I was flattered when they approached me, as a user of their product, to associate our brand with theirs. They sent this flyer out to appraisers across the US this week. Very cool.

Branding and marketing…Yes they are important to an appraiser’s success (in addition to being great at analysis!)

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Valuing the Light in Your Condo or Co-op

December 3, 2012 | 11:05 am | | Favorites |

Jhoanna Robledo over at New York Magazine squeezes light from my proverbial turnip and the result is a very cool graphic on one way to value light in an apartment in her piece “What’s the Price of Light?” The topic of view have been recently explored and floor level.

Light is perhaps the most subjective of the view-floor level-light trio but this is the logic our firm has used for years (based on the “paired sales” theory that isn’t very practical in an appraiser’s daily life) but I feel it’s a good starting point, and of course it depends on the nuances of each situation.

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Divorce Valuations: Appraiserville Meets Splitsville

December 1, 2012 | 7:00 am | | Public |

In this week’s WSJ Mansion section there was a nice write up by Alyssa Abkowitz about the appraisal process during a divorce: Appraisers in Splitsville. Our firm does a lot of this type of consulting and we find working with attorneys much easier than dealing with retail banks.

I also find that it’s a small world – I know nearly all the appraisers in my market personally (only a handful are active in this segment). Most are professional and knowledgable but like any profession, there are a few hacks.

The challenge in the divorce appraisal business is the challenge of proper communication between the parties – the slightest miscue can snowball into a huge complicated mess billable by the hour. The key to valuation in this process is to filter out the personal element of it and just do the appraisal. When working for one party, the appraiser never gets the whole story and magically “you’re not always on the ‘right’ side so don’t concern yourself with the details beyond the valuation.” Professionals are the ones that do their job devoid of personal bias.

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Get Down With It: Falling Mortgage Rates Are Not Creating Housing Sales

November 27, 2012 | 11:16 am | | Charts |

Inspired by my analysis of yesterday’s WSJ article, I thought I’d explore the effectiveness of low mortgage rates in getting the housing market going. I matched year-to-date sales volume where a mortgage was used and mortgage rates broken out by conforming and jumbo mortgage volume.

Mortgage volume has been falling (off an artificial high I might add) since 2005, while rates have continued to fall to new record lows, yet transaction volume has not recovered. I contend that low rates can now do no more to help housing than they already have.

Even the NAR has run out of reasons and is now focusing on bad appraisals as holding the market back (I agree appraisal quality post Dodd-Frank is terrible and is impacting the market to a limited extent – and I secretly wish appraiser held that much sway over the market).

I’m no bear, but the uptick Case Shiller’s report today (remembering that Case Shiller reflects the housing market 5-7 months ago) still shows slowing momentum and all 2012 year-over-year comparisons in the various national reports are skewed higher from an anemic 2011.

Five years of falling mortgage rates have only served to provide stability in volume. The monetary and fiscal conversation ought to be on ways to incentivize banks to ease credit – falling rates only makes them more risk averse.

Of course a significant drop in unemployment would likely solve the tight credit problem fairly quickly.

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Knight Frank Tall Towers Report Shows London With Similar Manhattan Height Premium

November 6, 2012 | 10:00 am | | Reports |

Knight Frank released their new report exploring the floor level premium in London’s high-rise residential developments with the coolest report name ever: Knight Frank Tall Towers Report 2012

While NYC has a taller residential housing stock than London but the premium per floor is similar. London shows a 1.5% increase in value per floor. My rule of thumb for Manhattan has been 1% to 1.5%, but closer to 1%. However we treat floor level as a different amenity than view and that’s probably the reason for the slightly larger adjustment in London. What’s particularly of interest is how much more the per floor cost of development is for higher floors:

Net to gross area ratios in tower schemes are lower, since the percentage of space taken up by the cores and service provision areas are comparatively high. This means that the effective revenue-generating 43% Uplift in construction costs per sq ft between the 10th and 50th floor.

I’ve explored the subject myself in New York Magazine and The Real Deal Magazine.



Tall Towers Report 2012 [Knight Frank]
Manhattan Values By Floor Level [Matrix/New York Magazine]
The cost of a view [The Real Deal]

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[666 Park Avenue] Appraising Fictitious TV Celebrity Apartments

September 28, 2012 | 9:46 pm | | Articles |


[click to expand]

In lieu of the new TV show 666 Park Avenue (the devil passed the board interview apparently), the Commercial Observer asked me for some thoughts on the value of some fictitious apartments and properties in some notable TV shows using what limited information was available back in the day and some strained logic (with a slew of hypotheticals and disclaimers) all in the name of fun.

Although the graphic incorrectly uses the building square footage total for no. 3, the graphics people at CO did an absolutely brilliant job with this – love it.

Here’s a cool web site I came across with theoretical floor plans for popular tv shows.



Lifestyles of the Rich and Fictitious [Commercial Observer]
Celebrity Floorplans [Deviant Art]
666 Park Avenue [Wikipedia]

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[Breaking News] CNN Gives Housing Followers Heart Attack, Case Shiller Up 1.2% YOY

September 25, 2012 | 12:01 pm | |


[click to open report]

I like this index chart from the report (2nd chart presented in their report) better than the more commonly used % based chart (1st chart presented in their report) because it provides better context. The recent trend is clearly a small see-saw but still sliding in general. I’m not a fan of the CS index for its 5-7 month lag but since it’s some sort of gold standard for housing, it’s important to point out that this clearly shows housing remains tepid at best.

But more importantly…






Shortly after the S&P/Case Shiller report was released this morning at 9:00am, I got the following CNN Breaking News email at 9:15am:

Home prices in 20 major U.S. cities rise to highest level in nine years, according to a new report.

I just about had a heart attack, wondering how I could be so far off in my assessment of the housing market. However I opened the report and the numbers didn’t show that kind of gain.

At 10:21am I received a followup email from CNN Breaking News:

Correction: Home prices rose in July to their 2003 level, but remain lower than the peak in 2006. CNN’s previous alert erroneously stated that home prices had risen to the highest level in nine years.

Not to single CNN out since this has happened at ABC, Breitbart and Fox.

Speed comes at a price: Accuracy.

Similar phenomenon in the appraisal business. The absurd speed demanded by retail banks and AMCs of their appraisers even after the “lessons learned” in this credit crunch, attracts the wrong kind of appraiser. Speed still trumps accuracy.



Home Prices Increase Again in July 2012 [S&P/Case Shiller]

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Literally The Narrowest Housing Insight Ever Provided (Hint: Valuing Outdoor Space)

September 6, 2012 | 2:15 pm | | Infographics |

In this week’s issue of New York Magazine, Jhoanna Robledo goes all out on the topic of outdoor space in city residences in “1/100th of an Acre of Heaven“. She asked me how our appraisal firm approaches the valuation of outdoor space.

The outcome of our conversation was this cool tape measure-like graphic:


[click to expand to – huge – widen your browser window.]

Page layout:

[click to expand]

And it brings to mind one of the most read posts on Matrix: Understanding The Value of Manhattan Apartment Outdoor Space where I break down the background and logic for the valuation of outdoor space. I point real estate agents to this post nearly every day.

Hypothetical examples of our valuation logic is displayed in these 2 crude sketches [pdf] with hypothetical scenarios I submitted for this NY Mag piece that weren’t used (hey, I never took art in school, EVER). It’s part of my attempt to compartmentalize amenities of properties to derive a reasonable value relationship with the basic property.

First hypothetical scenario sketch – i.e. a Brownstone garden apartment.

Second hypothetical scenario sketch – i.e. a studio apartment with an oversized yard.



1/100th of an Acre of Heaven [New York Magazine]
Terra Logic: Understanding The Value of Manhattan Apartment Outdoor Space [Matrix]

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[a la mode] Here’s My Testimonial For Their Appraisal Software

September 3, 2012 | 8:53 pm | |

Earlier this summer I found myself on the home page of a la mode software, the largest appraisal software company out there with over 100k users. Our firm Miller Samuel uses their software and well, here’s my testimonial on the a la mode web site and a version that was recently sent out to about 80,000 appraiser subscribers of Working RE, an essential publication for real estate appraisers.

Hey this is better than being on the cover of Time.

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[Appraising The Decade] Miller Cicero’s 10-Year Anniversary

August 30, 2012 | 10:32 am | | Milestones |

It’s officially been a decade since we launched our commercial valuation affiliate Miller Cicero, LLC and it’s been a great run so far. In appraiser years, it actually feels longer than a decade.

Our partner and co-founder in this commercial venture, John Cicero, MAI, CRE, FRICS with nearly 3 decades of valuation experience, runs the firm. Besides being a good friend and especially because he thinks I have a good sense of humor, is still one of the smartest guys I know in commercial valuation. He’s got a great executive team and staff providing commercial valuation expertise throughout the NYC metro area.

The commercial real estate world is a mess right now and Miller Cicero provides reliable neutral valuation insight to it’s clients. Give John a call.

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