January 18, 2019

Fast Food Visualizations On Housing

Sometimes art just jumps out of the picture and drenches you with a message:


But I digress…

Market Report Gauntlet Q4-2018 Downtown Boston

Although I was born in Boston and had traces of an accent until we moved to Delaware when I was 6 years old, and definitely annoyed my mother for adopting the New York Yankees as my favorite baseball team, I’ve always wanted to cover the Boston market in our Elliman Report series. Last year Douglas Elliman acquired a local firm and yesterday published our research on the Downtown Boston market.

Curbed Boston went gonzo with report coverage here, here and here.

The data within the reports cover the condo and townhouse markets in the neighborhoods of Back Bay, Beacon Hil, Charlestown, Fenway, Midtown, North End, South Boston, South End, Seaport, West End & Waterfront. Its basically a luxury market moving at a blistering pace but there was a noticeable drop in condo sales in Q4-2108.

Elliman Report: Downtown Boston Sales 4Q 2018

Here are a few basic observations:

DOWNTOWN BOSTON HIGHLIGHTS

CONDO
– “Price trends and sales for the entire year finished above prior-year levels.”

– Sales for the quarter fell year over year as median sales price edged higher
– The highest fourth-quarter inventory total in five years
– Negotiability tightened from year-ago levels as marketing time expanded

TOWNHOUSE
– “More sales and less inventory kept the pace of the market moving quickly in the final quarter of 2018.”

– Median sales price rose year over year after three straight quarters of declines
– Year to date median sales price was unchanged year over year as annual sales slid
– Listing inventory declined year over year for the first time six quarters

And some charts!






Market Report Gauntlet Q4-2018 Greenwich, Fairfield County

For Greenwich, CT, the news was weakness but I wonder if the crazy volitility in the financial markets were the root cause of the luxury sales slowdown countywide. Since I measure luxury as the top 10%, if those units stopped trading, the top 10% is at a lower echelon rather than an actual decline in property values.


Elliman Report: Greenwich Sales 4Q 2018

Elliman Report: Fairfield County Sales 4Q 2018

FAIRFIELD COUNTY HIGHLIGHTS

“Shift towards smaller sized properties as countywide sales slipped.”

– Median sales price declined for the second time in three quarters
– Number of sales declined year over year for fourth straight quarter
– Listing inventory rose after ten straight year over year quarterly declines
– Luxury price trend indicators skewed lower by a sharp decline in average sales size
– Luxury listing inventory rose year over year for the fourth straight quarter
– Entry threshold to the luxury market fell to its lowest level in four years


GREENWICH SALES HIGHLIGHTS

Overview “Condo sales surged as single-family sales showed modest slip.”

  • Single-family average sales size fell sharply, pulling down price trend indicators
  • Single-family sales slipped as listing inventory saw a modest gain
  • Condo sales surged as listing inventory edged higher
  • Sharp drop in luxury threshold reflected the shift away from the top of the market
  • Luxury listing inventory expanded with a slight tightening of negotiability

And some charts!





Market Report Gauntlet Q4-2018 South Florida

The report links will be available shortly. In addition to the research for the Elliman Reports covering South Florida, I compiled 5-year sales patterns for condo/single-family properties that sold over $1M. Their high-end is seeing sales growth:


Bloomberg TV 1-17-19: The Northeast to South Florida Housing Market Connection Explored

Just before I stepped on the set, I got to look at the file photo Bloomberg took about 15 years ago (I think I’ve aged gracefully) but I was also called out for it.


Here’s the interview along with a cameo by Sam Zell, lol!


The Big Mac index shows how strong the US Dollar is

If you are wondering why foreign investors in U.S. residential real estate are not what they used to be, look no further than the Big Mac you were about to devour. Does anyone at The Economist or really, anywhere, see the irony of the initials for “Big Mac Index” are “BMI” or am I over thinking this?


This Week in Aspirational Pricing

The quip “I’m like a farmer, outstanding in my field” crossed my mind when interviewed for this epic profile piece on prolific New York developer Gary Barnett and his Extell firm.

His success opened the door for other high-end towers across the city, permanently altering the Manhattan skyline. “The frenzy around One57 gave everyone the idea that this was a market that was ripe to be harvested,” said real-estate appraiser Jonathan Miller.

Barnett is currently building the tallest condominium in the world, over 1,500 feet high. This WSJ piece “The Man Behind Billionaires’ Row Battles to Sell the World’s Tallest Condo” supposed to be on the front page of WSJ today but it was bumped off to the real estate section. When I read this piece and their announcement of a new CEO, it made me wonder if investors were getting worried about the timing of this super luxury project in the middle of a market reset. Their nearby project One57 still has a lot of units left to sell and this new project is priced higher (however it is 50% taller with more views) and has twice the number of units. Will this project be the marker for the end of this era through “Billionaire’s Row?”

Aside from those concerns, I’ve always found this form of innovation fascinating and the constant change to the skyline exciting. Just peruse some old Dover-type books to see what I mean.


Foreclosures Are So Not A Part of The Housing Conversation Now

Here’s a press release from Attom (who acquired Realtytrac): U.S. Foreclosure Activity Drops to 13-Year Low in 2018


New in the Real Estate Lexicon: Down

The housing market conversation is using the word “down” quite a bit more than in the prior several years: California Existing Homes in December: Sales Down 12% YoY, Inventory Up 31% [Calculated Risk]

High Student Loan Debt and Low Homeownership Rates

The Federal Reserve released a research piece that includes discussion of the student loan debt crisis in a chapter called: Can Student Loan Debt Explain Low Homeownership Rates for Young Adults?

From 2005 to 2014, homeownership among 24-32 year-olds fell 8.8%.

The part of the “school debt to housing” connection that doesn’t get discussed is just how much the credit side of student loans mirrors what happened during the housing bubble. Schools can keep raising tuition because it is not seen by the students – everything can be covered by the easily-issued debt. Why do you think tuition costs have outpaced inflation?

College marketing commonly touts how more than half of their students graduate in 6 years! (in a 4-year program). My wife and I attended orientation for one of my sons. In the presentation, honor roll students were brought on stage and both the school and students touted how many students were getting a major AND 3-4 minors. None of that makes much economic sense. By now the disconnect between the cost of a college education and the benefit to their careers is being talked about. Fast and loose credit has enabled reckless spending by universities. There are no checks and balances – simply raise the fees and the students will pay for it…for years.

Here was the authors’ previous piece on the topic: A Trillion Dollar Question: What Predicts Student Loan Delinquency Risk?

All told, our finding that student loan balances are only a poor predictor of future student loan delinquencies challenges aspects of the popular narrative that frequently link borrowers with high student loan burdens (and often advanced degrees) to student loan debt repayment difficulties.


[Ritholz: MIB Podcast] Len Kiefer, Freddie Mac Deputy Chief Economist

My friend Barry Ritholtz interviews my zen-god for mortgage-related visualizations, Len Kiefer for his Masters in Business Radioshow/Podcast. Len is an amazing follow on twitter.

Upcoming Speaking Events

These aren’t upcoming but I had a great time speaking on the 84th floor of 1 World Trade Center this week with this view:

Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.)

CoesterVMS is experiencing severe financial problems

If you haven’t been paid, I suspect it is a long shot for appraisers to recover anything from them. The irony here is that many AMCs attempt to verify an appraiser’s financial wherewithal when signing them up yet I suspect the shoe is more often on the other foot, especially when considering the scale of a controversial company like CoesterVMS.

Dave Towne wrote a piece on what to do if you’re still owed money by CoesterVMS.

Here’s an email I received as a certified appraiser in Connecticut. I’ve never done any work for them but it is nice to see that they are being proactive.

OFT (One Final Thought)

Only because this is weird.

Brilliant Idea #1

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:

  • They’ll migrate to Florida;
  • You’ll borrow to add 4 more college minors to you existing major;
  • And I’ll revisit my childhood Boston accent.

Brilliant Idea #2

You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive and it helps me craft the next week’s Housing Note.

See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


January 11, 2019

Sometimes We Don’t See Signs Of Housing Trends Until They Hit Us

Since the New Year began, reporting on the housing market has been consistent in identifying that many markets are undergoing changes after many years of consistent white hot conditions. In many ways the changes that are being openly discussed already began more than a year ago but consensus wasn’t yet formed. Now the chorus is getting louder.


No more signs to share – but I do have some cool charts below.

I clearly have digressed.

Market Report Gauntlet Q4 Week 2: Westchester, Putnam & Dutchess Counties

Since 1994, I’ve been the author of an expanding independent series of market reports for Douglas Elliman, the third largest real estate company in the U.S. After each quarter ends, they publish our research in more than 30 U.S. housing markets in what I call “The Gauntlet.”

Elliman Report: Q4-2018 Westchester Sales
Elliman Report: Q4-2018 Putnam & Dutchess Sales

Bloomberg provided a nice chart on our results for the quarter illustrating the tight co-op market. I’ve got this data back to 1994. The chart shows the compression (faster speed) of the past two years.


WESTCHESTER SALES MARKET HIGHLIGHTS
Countywide
– Overall price trend indicators slid year over year by a shift in the mix toward apartment sales
– Single-family and 2-4 family sales and their market share declined year over year
– Total contracts fell year over year for the fourth consecutive quarter

Single Family
– Sales declined annually for the sixth consecutive quarter
– Total contracts fell annually for the ninth straight quarter
– Listing inventory expanded annually for the third consecutive quarter


PUTNAM SALES MARKET HIGHLIGHTS
– In contrast with the region, sales rose year over year for the third time in the past four quarters
– Inventory, marketing time and negotiability tightened year over year
– Median sales price increased year over year for the seventh consecutive quarter


DUTCHESS SALES MARKET HIGHLIGHTS
– Listing inventory rose year over year for the second straight quarter after falling for the previous nine
– The number of sales decreased year over year for the fourth consecutive quarter
– All price trend indicators rose year over year for the second consecutive quarter


Market Report Gauntlet Q4 Week 2: Brooklyn, Queens & Riverdale Sales

Elliman Report: Q4-2018 Brooklyn Sales
Elliman Report: Q4-2018 Northwest Queens Sales
Elliman Report: Q4-2018 Queens Sales
Elliman Report: Q4-2018 Riverdale Sales

BROOKLYN SALES MARKET HIGHLIGHTS
– The market continued to be characterized by steadily rising prices, and a fast-moving pace.
– The number of sales declined year over year for the fourth consecutive quarter
– After reaching a record low in the prior year quarter, listing inventory rose sharply
– Median and average sales price increased year over year for the second consecutive quarter


QUEENS SALES MARKET HIGHLIGHTS
– Consistency in setting new price records, sliding sales, and rising inventory trends
– Seventh consecutive quarter with average sales price record
– Fifth consecutive quarter of year over year declining sales
– Listing inventory rose year over year for the seventh consecutive quarter


RIVERDALE SALES MARKET HIGHLIGHTS
[includes Fieldston, Hudson Hill, North Riverdale and Spuyten Duyvil]
– Price trends moved higher despite rising inventory
– All price trend indicators move higher as sales fell sharply
– Listing inventory edged higher, but marketing time dropped
– Negotiability eased nominally as the market pace slowed


Market Report Gauntlet December 2018: Manhattan, Brooklyn & Queens Rental Markets

Elliman Report: 12-2018 Manhattan, Brooklyn & Queens Rentals

MANHATTAN RENTAL MARKET HIGHLIGHTS
– The Manhattan rental market saw fewer new leases, more concessions, and aggregate prices skewed upward by higher quality rental housing stock.
– Median net effective rent slid year over year for the second consecutive month
– Vacancy rate continued to fall year over year, down for the seventh consecutive month
– Market share of concessions rose year over year for the forty-third consecutive month
– Mid-tier, entry tier and starter median rent moved higher year over year
– Luxury median rent fell year over year for the fifth time in the past six months


BROOKLYN RENTAL MARKET HIGHLIGHTS
– The Brooklyn rental market continued its trend of rising rents skewed higher by the influx of higher quality new development rentals.
– Market share of 2-bedroom and 3-bedroom rentals rose 1.8%, skewing overall price trends higher
– Median net effective rent rose year over year for the second time in five months
– Market share of concessions increased year over year for the 35th consecutive month


QUEENS RENTAL MARKET HIGHLIGHTS [Northwest Region]
– The Amazon “HQ2” announcement has led to speculation that the market will tighten soon if not already. It hasn’t.
– Rental price trend indicators skewed higher by an influx of new development product
– Market share of concessions increased year over year for the 4th consecutive month
– Only 2-bedrooms saw a year over year rise in rental market share


Shifting Fortunes of International Real Estate

Knight Frank, a global real estate firm affiliated with Douglas Elliman has issued forecasts for 2019 for a number of global cities. Europe (and Miami) are poised to be standouts.


Home Sales Are Slowing

Here’s a Bloomberg video featuring our Elliman Report research on slowing sales. Admittedly I prefer rock music in the background.

New in the Real Estate Lexicon: Shutdown

Please be advised that surveys are one step worse than bad data but NAR is taking an aggressive stance on the impact of the shutdown to the spring housing market.

Among those that reported problems, 9 percent said clients who were federal employees had held back from buying, while 25 percent said buyers pulled out simply because of “economic uncertainty,” according to the report. Of those, about half had closings delayed or canceled because customers’ mortgages were backed by the Federal Housing Administration, U.S. Department of Veterans Affairs or the U.S. Department of Agriculture.

Uncertainty Still Remains Popular in The Housing Lexicon to the point where homebuilders can’t forecast their outlook for the year. Now THATS uncertainty.

The “R” word

According to JP Morgan, the odds of a recession in two years are 70%

The issue isn’t whether we will go into one – we always do eventually. The issue is how bad it will be. Rates are already low so the Fed has less wiggle room to work with since the tax cut was made a time when the economy was booming – generally the opposite moment when a tax cut should be issued. The Indicator Podcast by Planet Money does a great job explaining.

This Week in Aspirational Pricing

Yawn, another $125 Million Los Angeles listing.

Here’s proof that titans of Wall Street don’t get housing. The $70 million price cut from a $115 million price set five years ago isn’t a price cut. The cut really shows how wildly over the market the listing was priced around the time of “Peak Luxury.”

According to our data, the top 1% of the market had an average sales price of $28,447,888 in 4Q18, a 97% increase since 4Q13. Basically double. This listing cut its price by 61% over the same period. Wow.

Punchbowl Economics: Metro Home Supply-Demand Imbalance

This AEI study (h/t Ritholtz) is measuring recent market changes across 100 metros.

I love how AEI constantly refers to the “punch bowl” in a serious research piece:

Minimal access to the leverage punch bowl makes difficult for buyers in high price tier (almost exclusively repeat buyers) to offset higher home prices and interest rates. As noted earlier, these buyers have been using quality trade-offs to offset rising constant quality home prices. As a result, 40 of 100 metros are buyer’s markets, while many others are just moderate seller’s markets.

Raking The Living Room Carpet

One of my friends during college had a mom that was a bit enthusiastic about there living room. It was a shrine. The carpet was “raked” so she could see if the kids ventured into the room where all the couches and chairs with covered in clear plastic.

I found this Curbed article by must read McMansion Hell author fascinating: “Our homes don’t need formal spaces

One of the simplest reasons so many clamor for formal spaces is because they are a signifier of wealth and prestige, a sign of having “made it.”

Working With Appraisers

Here’s a good video for agents to better understand how to work with appraisers – wait for the end of the clip.


h/t Maureen Sweeney

Upcoming Speaking Events


Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.)

12-24 Hour Valuations: How Are We Worth So Little?

An appraiser sent me the following email. It has become clear to me that the valuation industry that engages appraisers now places more value on the physical inspection than it does the actual valuation itself.

Why?

They can’t replicate the interior inspection so the valuation portion is where the fee shaving occurs and believe they can come up with the value themselves or find people that will work for wages that won’t attract people who are competent, but rather, people that are desperate.

[Bold for emphasis]


Hello,

You are receiving this email because you have expressed interest in completing desktop products for Computershare. If you are not interested in completing these products and wish to no longer be contacted, please let me know and I will remove you from our list.

We have recently completed a recording of our AppraisalX (Desktop Hybrid Appraisal) and ARA (Appraisal Review) training session and made it available for everyone on our BrickFTP site. This training runs for approximately an hour and covers both products as well as general system navigation within our Acuity platform. This is a requirement to complete, along with a short test, in order to be eligible to receive these assignments.

On the BrickFTP site you will find our video labeled “AppraisalX _ ARA Training Recording 2018-09-18” which is in .mp4, .mov, .wmv, or .avi format. These are all the same video, just different formats that your computer or portable device might be able to read. Also included within the BrickFTP site are our training documents: (Three for each product) A completion guide, instructions and an example. This documentation should be downloaded and reviewed in conjunction with the video and testing.

Within the video there will be instructions on how to contact us to have the tests sent to you. These tests will be sent through SurveyMonkey, which is a third party site. You are required to get a 90% or better on each test to be eligible. If you fail the test the first time a wait period of a week is enforced before a new test will be sent to you. If you fail the test twice, you will not be eligible to complete that particular product. We do allow you to review the documentation while taking the test, so these are essentially open book tests to ensure you pass.

Each of these products pays $50. The typical turn time for the AppraisalX is 24 hours from assignment. The ARA has two different turn times based on the clients’ needs. One is 24 hours, and the other is 12 hours (or basically the next morning).

Below you’ll find the link to our BrickFTP site as well as the login information you will need to access the video and training documentation. When you login to the site, click the upper left icon that says “All Files”. This will take you to the videos and documentation. You do not need to download any additional software to view these files. The website does have an option, but we don’t recommend this.


URL: https://computershare.brickftp.com/v3/login

Username: HybridAppraisalTraining
Password: training@1234!

If you have any additional questions regarding this, feel free to reach out to me directly.

Thank you again and we look forward to working with you!

Sean Buford
Computershare
Sr Valuation Analyst > Loan Services > Property Solutions
T +1 303 895 2858
8742 Lucent Boulevard, Highlands Ranch, CO 80129
www.clsps.us

Because firms like this and their clients believe they can reliably value property through automation despite clear evidence they can’t. Their clients don’t seem to care about valuation reliability because of the need to drive more lending as profits have waned as well as the moral hazard created by the federal backstop used in 2008. The taxpayers will bail these institutions out.

Our industry has a weak voice, largely from a combination of self-loathing, ineffective trade group leadership and the shear nature of the largess of the financial institutions that lobby against us. We are the last resort for the consumer and taxpayer, but ultimately regulatory authorities have yet to prove they care.

OFT (One Final Thought)

And you thought Millennials were hard to understand:


Brilliant Idea #1

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:

  • They’ll overprice their listing;
  • You’ll rake the carpet;
  • And I’ll dig out my rotary dial telephone.

Brilliant Idea #2

You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive and it helps me craft the next week’s Housing Note.

See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


January 4, 2019

‘This Is A Moment’ For Housing: Serenading Cows With A Trombone Edition

A little over a year ago our market research across the U.S. began to show that housing trends were weakening, largely based on sales, not price trends. But very few in the real estate seemed to be talking openly about it. But over time the chorus got louder and by the end of 2018, it became very clear to many that market conditions were weaker now than the prior year, but to varying degrees.

This “cows enjoying trombone music” provides the perfect analogy, without getting into other quotes like “the grass is always greener…” or and “I gotta have more cowbell.


Market Report Gauntlet Q4-2018 Week 1: Manhattan (and Northern Manhattan)

To start the new year, Douglas Elliman, the 3rd largest real estate brokerage firm in the U.S., published my research on the Manhattan sales market. I’ve been the author of the expanding Elliman Report series since 1994 (and we are adding two more reports this month! – more on that later).

The Reports
Elliman Report: Manhattan Sales
Elliman Report: Northern Manhattan Sales

Video Interviews About Our Report

My interview on Yahoo Finance TV was fun!


Others bantering about our report results on Bloomberg TV based on this article:


And here is a great interview with New York City Douglas Elliman CEO Steven James on CBS Channel 2’s new streaming service:


Bloomberg created a nice chart on the $999,000 median sales price falling below the $1 million threshold.

And of course, a sample of our Manhattan charts More here.





Going Back In Time, Block By Block

There is a fun visualization story by the New York Times if you have time to kill: Every Building on Every Block: A Time Capsule of 1930s New York

In the late 1930s and early 1940s, New York City sent photographers to every building in every borough in an attempt to make property tax assessments fairer and more accurate.

Riding Elevators All Day, Sometimes With Gruesome Results

As appraisers in Manhattan, our staff collectively rides elevators every day. According to this alarming investigative piece by The Real Deal: Elevated risk, there are 63,000 elevators in New York City enabling an estimated 1 billion rides, annually and people die more often than you think.

Since 2010, at least 22 people have been killed in passenger elevators or shafts in the city, and there have been nearly 500 incidents, 48 of which led to serious injuries, according to the DOB.

The piece has a collection of gruesome stories, many not for the faint of heart.

They built a nifty tool to verify what outstanding issues remained in each building. Thankful, the office building where our company is based is well-managed and has no issues.


TROUBLE: Things To Look For In Fraud (Video)

Back in 2008, when the Madoff case broke, it was clear that a declining market prevented his Ponzi scheme from continuing. With evidence of a national housing slowdown becoming more and more tangible, it makes me wonder if we will see such schemes related to housing begin to appear. Our firm was hired for some of the cleanup. This Institutional Investor video is a compelling narrative of an investor who didn’t fall for the Madoff fraud. Seems like good common sense advice is being dispensed. Click image to play video.

h/t to Barry Ritholtz.


[Institutional Investor – click image to play]

When Government Raises Taxes On Residential Properties, This Happens

Vancouver, Canada has been the poster child for trying to tamp down foreign buyer appetites for their new development condos. Foreign buyers, especially from Asia, flooded the market shortly after the financial crisis to diversify risk. In response, the government instituted taxes to discourage foreign investment and values began to decline. The emphasis was focused on the upper end of their market. It also interesting that the national housing stats in Canada have shown declines but Vancouver was the first to fall. With only 5 major markets nationwide, they played a large role in the national decline in housing trends.

Newsflash!!!! Higher housing costs suppress housing prices.


Upcoming Speaking Events


Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.)

To all my friends and colleagues, I ran out of time this week to do any deep thinking (if you call my thinking “deep”). IRONY ALERT: A slew of appraisal business and research absorbed my time allotted for Appraiserville.

Next Week!

OFT (One Final Thought)


Brilliant Idea #1

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:

  • They’ll be more like old photos;
  • You’ll want more cow bell;
  • And I’ll be on TV even more in 2019.

Brilliant Idea #2

You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive and it helps me craft the next week’s Housing Note.

See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


December 28, 2018

Housing Is Skating On Thin Ice And A Private Resolution

This year I tried to come up with a New Year’s resolution that would stick. Since I see resolutions as a private thought – like those wishes we keep secret when blowing out the candles on a birthday cake – I’ll spare you the details and get down to business. But first…

…on the day after Christmas, I began ramping up for the market report gauntlet in January. Real estate firm Douglas Elliman releases over 30 of the research reports I author. But I couldn’t focus on that until I…

…figured out how to:

  • turn on/off my home office desk lights with my new Amazon Echo Spot instead of simply flipping the light switch.
  • master the 8 billion nuances of my new Apple watch with the magenta wristband.
  • revive an important college skill with my new Balai sand-filled juggling balls,
  • catch up on water skiing with snow ski videos…


But I digress…

Year End Listicle Fever

Every year at this time we are exposed to a lot of real estate lists to close out the year. We like to look back to see where we came from and look ahead to where we might be headed. In the real estate world, this has to include super high-end sales with “pie in the sky” prices. (note to my Columbia grad students of last spring who learned that pie was better than cake so it follows, as a New York Times journalist once shared a deep thought, “pie in the sky is better than cake on the ground.”) Who knew baking was so philosophical?

But I digress again…

Manhattan

While I contributed to the article and was quoted several times including in the title, I have a confession to make: I’ve never been on the autobahn (but aspire to).


There was even a fun discussion about the article by reporters at Bloomberg.


It was even cooler that Bloomberg news used my chart online where I listed the highest Manhattan residential sale for each of the three primary property type going back to the 1980s. You can see three distinct periods of luxury prices: 1980s/1990s, Nasdaq to Lehman, Post Financial crisis. So what will the next boom look like? My chart helps contextualize how detached these high end sales are from housing for mere mortals.


[click to expand]

Palm Beach

Palm Beach seemed to represent the case that despite the economic turbulence and jittery stock market, the high end seemed unphased.

“I think there’s no doubt that 2018 has proven to be a record-breaking year, in terms of the number of transactions, the dollar value of those transactions and the market in general,” said newly installed Palm Beach Board of Realtors President Jim McCann, an agent at Premier Estate Properties. “And contracts are being written, which is encouraging. Despite the recent stock market gyrations and rising interest rates, there are still a lot of reasons for people to buy in Palm Beach.”
Los Angeles

It’s kind of amazing when the lowest priced house on a top 20 list is $28.5 million. It is also very amazing how the must-read luxury real estate blog Yolanda’s Little Black Book has burst into public awareness.

Economic Indicator of the Year: Housing

“The Indicator” is one of my favorite “explainer” podcasts. Each episode is short and to the point. Although this one is basically a Redfin PR pitched story, it is still worth a listen.

The key question on everyone’s mind is: Why is housing so detached from the economy?”


Defining Middle Class

One of the biggest soft spots in our economy is the middle class. Lack of housing affordability is crushing them. How is it defined?



[Howmuch.net]

A “Certificate of Sanity” Tells You All You Need to Know about Russian Real Estate

If you are a real estate agent, broker, buyer or seller in the U.S., please read this article in its entirety and then be thankful.


Back in 2006, I was sourced for a New York Times article on Moscow real estate – how it was advisable to have the buyer and seller certify that they were not drunk at the closing.

I’m not sure if the “Certificate of Sanity” covers the doctor’s note proving sobriety at the closing. And how do you digitize this process? Exhale into a breathalyzer at the title company?

Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.)

A shout out to all my appraiser friends and colleagues during this holiday week. Nothing specific this week to rail against, largely because my brain is fried from learning how to use all the gadgets I got for Christmas.

For those that have shared news or bad practices with me, look for discussions on these and other issues appraisers are facing in the coming weeks of the new year.

The Last Line of Defense

As I wrote recently, we learned a lot about both our industry and ourselves in 2018. We do provide an invaluable service to the lending community even though most of the mortgage industrial complex doesn’t appreciate or want it, largely because of the moral hazard generated by the taxpayer bailouts of 2008. Our expertise will be shifting to the consumer in the near term with some snapback to mortgage work after this all ends badly in the not so distant future. We just can’t sit around and wait for it. As was said in the movie “The Shawshank Redemption” we need to:

Get busy living or get busy dying.

I prefer the former, after all, we appraisers are the last line of defense for fraud.

In the current edition of mortgage fraud 2019, the regulators are leading the charge for removal of underwriting guardrails rather than the banks themselves. This is being done in the name of generating more mortgage volume to enjoy more fees. Falling mortgage rates over the decade resulted in falling loan volume because low mortgage rates were not the solution. Banks don’t trust the economy and the government any more than appraisers do.

This reckless behavior being pursued by regulators is all out in front of us to see and we as an industry need to point it out.

Appraisers are essential to help maintain the public trust, especially in the banking system, even as the regulators move away from safe practices. Exposure to consumers/taxpayers is expanding.

I am looking towards 2019 as a period of real opportunity from consumers for appraisers who seek it out, despite the repetitive mantra from large comprised institutions.

OFT (One Final Thought)

When you run out of things to do this week, try thinking of the purpose of chimes.


Brilliant Idea #1

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:

  • They’ll be more middle class;
  • You’ll be more of a mere mortal;
  • And I’ll play some chimes.

Brilliant Idea #2

You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive and it helps me craft the next week’s Housing Note.

See you next week. Oh, and HAPPY NEW YEAR!

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Appraisal Related Reads

Extra Curricular Reads


December 21, 2018

The Housing Market As A Donut Hole, Holiday Mall Edition

About six years ago I tried to convince others that the Manhattan housing market was a “donut” – vibrant in the starter market and relatively strong on top, but soft in the middle. A few people suggested that a barbell analogy was more accurate, but hey, I like donuts. But now with rising mortgage rates, we are seeing early signs of a sales slowdown in the starter market. But donut hole sales continue to hold their own. Even HUD mentioned a “donut hole” analogy

Whatever this all means, I suspect with all the holiday decorations it will be tough to focus on any form of intensive donut analysis.


But I digress…

Getting Malled On Video

I hate going to our local mall, especially around the holidays. I’ve written about this before, but malls were an important part of my childhood. When we lived in Delaware in the late 1960s, the big brand new Blue Hen mall in Dover, an hour away, was the only place to buy most of our clothes and basic staples. That mall has now gone under and is being re-used as something else. Later when we moved to the Maryland suburbs of D.C. the big new Montgomery Mall was the regular place to go. In fact, when I was home for the holiday break during my college freshman year, I walked through the mall looking for work and landed a 3-week busboy gig at a Greek restaurant.

Later on in my life, I used to go to the Stamford Town Center mall all the time to run errands. Then big box stores entered our local market, Amazon gained critical mass and now I visit it only a few times a year, mainly to the Apple Store. I always find the mall visit depressing so I avoid it all costs.

Nationally malls are failing much faster than being created. A report by Credit Suisse estimated that 20% to 25% of malls would shutter over the next five years, largely because of store closures. Currently, there are about 1,100 malls nationwide.

However, there are some that yearn for the old days. I’m not one of them but I can see how impactful growing up with them can be to some.

The first video was made in 2007 and covers the folks who created DeadMalls.com. Periodically, I check into the DeadMall YouTube feed for a quick update. It is mindboggling how much space goes unused. The second is a 2009 documentary on the shift in retail patterns away from malls. It is super depressing.



Combined Apartments Can Be The Single Best Thing

For my entire 32-year appraisal career, our firm has been valuing combined apartments. I came up with the saying “1+1=2.5” to reflect the value premium enjoyed by purchasing two adjacent apartments, whether or not they were combined. The premium varies widely based on the size and configurations of the apartments. This premium doesn’t apply to all combos but since there is a Manhattan premium for larger contiguous space. I’ve found that once the total size approaches 7,000 square feet, there is no premium, and in fact, the impact on a price per square foot basis often falls.

This weekend’s New York Times Real Estate Section cover story “Hey Neighbor, Can I Buy Your Apartment?

In my own experience, these are the issues and observations with combos:

  • As I said earlier, there is generally a premium enjoyed by acquiring the neighbor’s apartment, even before they ae combined.
  • Usually, the larger apartment owner is acquiring the smaller apartment (say a 3-bedroom owner’s purchase of a studio) and therefore it is likely they will need to significantly overpay for the studio. But the premium enjoyed afterward can make that a no-brainer.
  • Co-ops tend to leave the building Certificate of Occupancy alone with the idea that if the market softens or the owner falls on bad times, they can easily sell off the smaller apartment.
  • We often perform three valuation opinions to lenders: “as is” appraisal of each apartment and a “subject to combination and renovation” of both apartments” value. In the early 90s we ran across a few fraud scenarios where one bank held the mortgage of each of the individual apartments and a second bank held the combined mortgage for both apartments. I never understood how that could have happened in a co-op.
  • Often in a combo scenario, additional common hallway area is purchased from the co-op to make the layout better.
  • I believe the goal of the combined layout is to provide something that doesn’t “feel” like a combination of two or more apartments. That’s hard to do.


The following two posts were shared earlier this week on my Matrix Blog.

Bloomberg Markets TV: December 18, 2018, Amazon HQ2

As always, I had a wonderful conversion with Vonnie Quinn, anchor of Bloomberg TV’s Markets this week. It was a lengthy interview where we discussed national and NYC metric trends. The following portion covered the Amazon HQ2 story in Long Island City, NY.


Elliman Magazine Winter 2019 – Market Update

The Winter 2019 Issue of Elliman Magazine was just released. I provided a two-page spread showing various market tidbits on random U.S. markets where Douglas Elliman has a footprint. The magazine is well done and a good aspirational read.



[click to expand]

Here’s the full online version of the magazine:


Getting Graphic

Favorite charts of the week. Time to look at the aggregate of the 5 boroughs:


Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.)

An Extraordinary Year For Appraisers

Some thoughts about what we learned from 2018 to apply to 2019:

  • We have always been our own worst enemy as evidenced by the behavior of AI National who kept thinking up initiatives for its members without asking for membership feedback – remember this when their “taking” initiative is attempted in 2019.
  • Through Appraiserfest and a vibrant appraisal coalition network, we are learning to fend for ourselves and find we all actually like each other.
  • State level political action was the battleground as AI National’s Scott DeBiasio continued to work hard for AI National to further devalue our profession with evaluations.
  • Regulators and the GSEs pushed hard to normalize appraisal waivers or push wildly inaccurate and inefficient appraisal replacements like AVMs and hybrid reports, viewing us as about the same as obsolete television repairmen. Their irrational logic that ignores quality damage completely, making me wonder if this is being done at the behest of the Corelogic and other data monopolies who have a big lobbying presence.

Remember that appraisers are here as the last line of defense to the consumer and to the taxpayer, yet we have a limited voice. Our progress for more transparency in 2017 & 2018 showed us we could have more of a voice. In 2019, we will continue to more effectively press the quality concerns that are being driven into the ground by most existing insitutions after moral hazard was established in all the 2008 bailouts.

Dave Towne on De Minimus

Appraisers…..

Yesterday, I sent out a message about a Fee/TT quote conversation I had with an AMC clerk.

I’ve received a number of responses from appraisers across this fruited plain who said often they will receive Fee/TT quote requests for the SAME property from MULTIPLE AMC’s. That corroborates stories I hear from appraisers I talk with at conferences.

The entire AMC situation is a giant time-wasting game that really doesn’t benefit the borrower at all, and least of all, appraisers. Lenders are the coaches in this game.

Another message I got today caused the tiny little light bulb in my gray matter to explode in brilliance. The last paragraph is key to the raising de minimus shenanigans being promoted lately, backed by….you guessed it…..lenders:

“What you may not see is that there are Lenders that also agree with your statements. However because of all the noise, miscommunication and regulatory interference everyone is starting to just give up and/or default to a legacy AMC model and then micromanage the process. Those same lenders will be the ones that jump on the De Minimis increase and eventually be insolvent at the next market crash.

The De Minimis level was raised to solve a regulator burden created by Regulation, they can’t roll it back so they just make the filter larger.

Prudent Lenders will still get appraisals, the real question is what kind of appraisal? One that complies with USPAP or one that Doesn’t, and who is going to prepare it. Evaluations still require a level of competency under that Regulatory requirement.

Keep in mind USPAP is a road map to a repurchase lawsuit, a non USPAP appraisal isn’t. Lenders are tired of paying legal expenses for USPAP experts to line up in a courtroom and argue if a report and the appraisers workfile complies or not.”

In other words, USPAP is an impediment to the financial bottom line for lenders. To avoid spending thousands to millions of dollars going after licensed appraisers over allegedly faulty appraisals, they are attempting to get the de minimus raised so that EVALUATIONS used to value properties won’t face the same investigative and legal issues.

~ EVALUATIONS do not have the same regulatory burden as appraiser’s USPAP compliant appraisals.
~ People who perform EVALUATIONS are not licensed by the states.
~ “Competency” is mentioned in the Agency regulations, but who monitors that?
~ EVALUATIONS may not cost as much as a regular appraisal.
~ People who do EVALUATIONS may not have the high level of property analysis training as appraisers have.
~ When faulty EVALUATIONS are produced, it will be up to the borrower to bring charges against the lender – which probably will happen less frequently than lenders going after appraisers. So the lender will save money on legal defense.

The other issue here, that just dawned on me, is what do lenders call property valuation costs when a borrower applies for a mortgage loan? All lenders have a line item on loan requests for “appraisal cost.” Appraisal is a legal term that has a specific meaning. By regulation, the ‘appraisal cost’ must be identified to the borrower up front, after the time of application.

But if the lender is NOT actually going to use an APPRAISAL for property valuation (due to prospective value below the maximum de minimus amount), the fee should not be termed ‘appraisal cost.’

Secondly, due to differing production costs, will the fee charged the borrower be equally the same for both types of valuation reports, even though the EVALUATION probably costs less than an appraisal?? Is the lender pocketing the difference? (Pocketing any portion of the borrower paid fee for ‘appraisal’ didn’t use to be allowed; I’m not sure how that currently applies since D-F was signed into law.)

USPAP was mandated by Congress to preserve public trust in the real property valuation process. EVALUATIONS subvert that obligation. (Yes, USPAP also applies to personal property.)

OFT (One Final Thought)

It’s all about the angle you work:


Brilliant Idea #1

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:

  • They’ll be sweeter;
  • You’ll be more donut-like;
  • And I’ll go on a diet.

Brilliant Idea #2

You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive and it helps me craft the next week’s Housing Note.

HAPPY HOLIDAYS!!!! & See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Appraisal Related Reads

Extra Curricular Reads


December 14, 2018

Housing Goes To The Emergency Room

Yesterday I spent most of the day in the emergency room, so today I am one-handed, typing painfully slowly so let’s keep this short.

November 2018 Elliman Report: Manhattan, Brooklyn & Queens Rentals

Real estate firm Douglas Elliman published our research this week on the Manhattan, Brooklyn & Queens rental market for November. I’ve been the author of their expanding Elliman market report series since 1994.

Here are my summary points:

MANHATTAN RENTAL MARKET HIGHLIGHTS
– The Manhattan rental market continued to be characterized by rising concessions, falling vacancy rates and price trends skewed higher by the influx of new development rentals

  • Would-be buyers are beginning to “camp out” in the rental market until some of the uncertainty facing the sales market eases.
  • Median net effective rent slid year over year for the fourth time in six months
  • The vacancy rate fell year over year for the sixth consecutive month as concessions keep buildings full
  • Market share of concessions rose year over year for the 42nd consecutive month
  • 3+ bedroom net effective median rent fell annually for the fifth consecutive month
  • Luxury rent threshold moved to the highest level in 2018 as new development continued to skew overall prices higher

BROOKLYN RENTAL MARKET HIGHLIGHTS
– Landlord concessions continued to dominate the Brooklyn rental market as incoming new development skewed face rents higher, despite weakening conditions.

  • Median net effective rent slipped year over year for the third time in four months
  • Eight out of ten new development rentals had a landlord concession
  • Market share of concessions increased year over year for the 34th consecutive month

QUEENS RENTAL MARKET HIGHLIGHTS
[Northwest Region]
– The recent decision by Amazon to locate their “HQ2” in Long Island City has not had any apparent impact on the local rental market yet

  • Heavy new development market share continued to skew face rents higher
  • Fifth consecutive month with large year over year gain in new leases
  • Rising leasing levels prodded by rising concession market share

And A Chart!


Our Own Rental Chart Favorites









NYC Metro Housing Slump Proclamation Has Been Made

As I’ve been saying for more than the past year, the NYC metro area has seen a continued deterioration in sales volume as it struggles to recalibrate home values while grappling with the new federal tax law, higher mortgage rates, and lower affordability. Depending on the specific location, sales levels have been falling year over year for 3-5 quarters. Falling sales leads to rising inventory which eventually leads to lower price levels.

Here’s a chart based on our data that really tells the story, plus, they throw in a chart!

Notice where the highest property taxes by county are located in the U.S.? These counties are most vulnerable to the new federal tax law that severely limits property tax and SALT deductions.


[Bloomberg]

Macklowe Divorce Case Decision Comes In After A Year

Last year at about this time, I testified as an expert in the Macklowe divorce. The couple is known for their real estate development and exceptional art collection activities, and of course a long history of gossip column content. There were reporters in the courtroom during the trial so the public was given a near daily dose of drama. The details of the resolution are here.

While the new development market has slowed considerably, I never get tired of floating through new development renderings. Here is a current Macklowe offering:


Building Supplies Versus Falling Demand

There is some clear evidence by NAHB of cooling housing market conditions as the prices for lumber and drywall ebb from recent highs.


Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.)

Since I’m writing these notes with one hand this week, I’m going to keep this short. As a result, I wanted to focus on the single most important thing you can do as an appraiser – provide commentary on the proposed regulatory rules.

Call To Action

If you don’t speak for yourself, few others will. It’s the first thing I plan to do once I have two hands to type.

VACAP lays it all for you here.

Join RESO and Vote!!!

One more thing – consider joining RESO and vote for my friend and colleague Craig Gilbert, SRA, CRP, SCREA. This is how we have a voice in all aspects of our industry! Like setting Standards! Lots of RAC members have joined – Its only $50 per year!

I hope to be back to normal by next week – you know, the ranting and raving you are accustomed to – so be sure to check in next week.

OFT (One Final Thought)

Although George Carlin was clear in his claim that there was no blue food and I wholeheartedly agreed, my four sons have toiled for years to prove me wrong:


Here is a deep dive that one of them shared with me on a related “blue” topic – and I’ll spare you a repeat telling of my midlife crisis about switching my favorite color from blue to orange:


Brilliant Idea #1

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:

  • They’ll be bluer;
  • You’ll be more rental market-oriented;
  • And I’ll try not to go to the ER anymore this year.

Brilliant Idea #2

You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive and it helps me craft the next week’s Housing Note.

See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


December 7, 2018

Surfing the Yield Curve of Housing

Conventional wisdom says that a flattening yield curve infers a recession is imminent.

While I don’t surf, ever since I read Barbarian Days: A Surfing Life, I relate to surfing analogies. Here’s the way I see it (hint: I can’t see it):


Yahoo Finance TV 12-4-2018 – Toll Brothers & Banking Conditions in Real Estate


I was invited by Julie Hyman at Yahoo Finance TV for a discussion on the weakening luxury housing market and some other topics of interest. I’ve known her for years, after a long run at Bloomberg TV, and am excited about her new opportunity at Yahoo.

When I arrived at the studio, the stock market was being battered (down by over 400 points at the time of this broadcast) by the conflicting interpretations of the recent US/China tariff talks and the results Toll Brothers analyst call. It was exciting to be there during the perfect storm. The conversation shifted from what I was invited to cover, to the developing news story.

Yahoo is ramping up live coverage in early 2019 via 100% internet. Judging by their super cool/huge studio and throngs of people working there, Verizon seems very serious about their investment.

New in the Real Estate Lexicon: Hotness

Realtor.com, not to be confused with the National Association of Realtors as an interesting resource called the “Market Hotness Index” that tells you how “hot” your housing market is.

This naming decision feels like me telling one of my “dad jokes.” I think I am on point but my wife and kids just roll their eyes to which I use “got woke” in a sentence and only make it worse. Other than that, it’s a fun tool to play around with.

            <br>

Every Housing Notes Subscriber Should Sign Our Petition

The valuation business sits on a three-legged stool which stand for quality, cost and speed. Since the financial crisis the regulatory world has been obsessed with speed and cost of appraisals, and championing the deeply flawed execution of vehicles such as appraisal management companies (AMCs), misrepresentations about hybrid appraisals and automated valuation models (AVMs). At no time is the topic of quality broached. For the regulatory entities such as the Federal Reserve, US Treasury, FHFA and OCC, the objective seems to be to goose more mortgage volume out of the system since falling mortgage rates didn’t seem to bring more volume (hey, that’s a sign. Many agencies depend on fees from the banks and with the moral hazard established by bailouts of a decade ago, the taxpayer is always a backstop when things go wrong. Hence the illogical pursuit of eliminating appraisals, who account for ±.02% of a transaction but are the only non-biased resource in the entire mortgage process.

If this is too much acronym gobblygook for you to understand what I just said, just understand this: the economy is drifting towards recession. Whether it does tip into a recession is not guaranteed but the housing economy is clearly cooling as evidenced by slowing sales and rising inventory. How did turning a bling eye to quality work out a decade ago? We are still in the financial crisis hangover as evidenced by unusually low rates. The regulators are trying to pull more mortgage volume through the pipeline by cutting all costs and speed that no consumers are screaming for.

While I have no expectations that signing a petition will stop what has been predetermined, I do hope it catches the attentions of lawmakers. I hope we won’t have to look back a few years from now and wonder why we didn’t do anything about this before it was too late.

This is only a first step and its important. Please sign now to make your voice heard:

Remember liar loans of a decade ago? Those same people want to do away with appraisers. [Change.org]

Here is the FDIC announcement on real estate appraisals.

And my take on the matter in REALTOR Magazine. All real estate agents are exposed to significant risk if this rule change is adopted. The same people in power during the era of liar loans are pushing for this rule change.

Getting Graphic

Some of my favorite charts of the week.

The problem with the messaging here is that within urban markets, there was a massive amount of development, yet the narrative about lack of building pertains to single family homes. The problem for both suburbia and urban markets is that that the product built was heavily skewed to luxury, which exacerbated the shortage and why we have a national affordable housing crisis.

LIC Survey


Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.)

I’m visiting family in Colorado at the moment, going to see my nephew play Division 1 NCAA college basketball so I’m holding off on Appraiserville commentary this week. Although take a look at the additional commentary surrounding the petition early in Housing Notes – all of you really should sign the petition if you haven’t already.

OFT (One Final Thought)

Sometimes…things change in a second.


Brilliant Idea #1

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:

  • They’ll petition;
  • You’ll show Hotness;
  • And I’ll watch people surf.

Brilliant Idea #2

You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive and it helps me craft the next week’s Housing Note.

See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Real Estate Blockchain Reads

Appraisal Related Reads

Extra Curricular Reads


November 30, 2018

The Liar Loan Mentality Was Never Purged From The Home Mortgage System

First, there are supertalls and then there are supertalls with or without cats.

This marketing rendering of 111 West 57th Street looking north over Central Park gives you context as to how much it stands out and how expansive the views are. The project to the left (west) known as One57 was the first supertall on West 57th Street. The two buildings directly behind (south/below) One57 were considered among the tallest new developments when I moved to Manhattan in the mid-1980s. Open this rendering to appreciate the height of West 111 West 57th Street.


[Source: http://111w57.com/]

The next rendering looks south from Central Park. The first rendering is labeled “4” in the image below. While building number 2 has been canceled/suspended, you can see how much the skyline has changed over the past decade.


[Source 6sqft]

Speaking of highrise living, my friend Nathan Pyle is spot on once again and I’m not a big cat fan (I inherited two from my kids).


Mad Money Trounces Quicken Loans

I’m not in the demo that watches Jim Cramer’s MAD Money on CNBC very regularly but cracks in the mortgage market are beginning to show. Think of the crazy Rocket Mortgage advertising blitz that pines for the old days (2005) of the housing bubble. So Jim Cramer’s clip (and revisiting this) is worth a listen.

Non-bank lenders like Quicken Loans are ‘the biggest risk to the system’ right now, Jim Cramer warns from CNBC.

Every Housing Notes Subscriber Should Sign Our Petition NOW

Remember liar loans of a decade ago? Those same people want to do away with appraisers. [Change.org]

Here is the FDIC announcement on real estate appraisals.

And my take on the matter in REALTOR Magazine. All real estate agents are exposed to significant risk if this rule change is adopted. The same people in power during the era of liar loans are pushing for this rule change.

Real Estate is NYC

I was looking in the Real Estate Board of New York (REBNY)’s 2017 annual report and came across a table of the industry’s contribution to annual city revenue. The scale is unreal. And I’m not even talking about my pictures in the publication!

New in the Real Estate Lexicon: PIW

PIW is the acronym for “property inspection waivers” which in practice means “appraisal inspection waivers.” Some appraisers say it stands for “Pissing in Wind” because the waiver of an appraisal means that no one independent of the transaction looked at what the GSEs are using for collateral. Right now waivers account for 12% of Fannie and Freddie loans and are likely to expand.

To all you real estate brokers that read these Housing Notes: you’re getting a fresh bulls-eye painted on your back right now. You might want to contact your local association or board and get more info. And you can sign my petition to send a message to regulators.

Houses That Grow With Us, Not Our Stuff

There was a great read on Curbed by well known “McMansion Hell” tweeter Kate Wagner on rethinking how we design our homes.


[Source: Curbed]

Adventures in Real Estate Marketing

Perhaps sex sells, but let’s give the buyers credit for understanding when a home is overpriced. Looks like HAR.com was the adult in the kitchen.


Reckless Behavior Returns To Housing Market At Precisely The Wrong Time

There has been a deluge of coverage of the U.S. national housing slowdown and the introduction of requirements that remove appraisers from most mortgage valuations.

OK, Computer: How Much Is My House Worth? [WSJ]

Home-Price Gains Continue to Slow in September [WSJ]

First American: Home prices point to trouble ahead [Housingwire]

The U.S. Housing Boom Is Coming to an End, Starting in Dallas [WSJ]

Free Vacations, $100,000 Discounts: Homebuilders Get Desperate [Bloomberg]

Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.)

Remember liar loans of a decade ago? Those same people want to do away with appraisers.

My friend and appraisal colleague Ryan Lundquist and I authored a petition on change.org to point out the growing wreckless behavior that is enveloping the mortgage process.

There’s a proposal from the FDIC, Federal Reserve, and Treasury Department not to require appraisals for some mortgages under $400,000.

As we say in the petition, this change can impact several groups in particular: consumers, the taxpayers, the housing market and appraisers.

One group not explicitly mentioned in the petition but impacted down the road are real estate agents and brokers. Currently, 12% of mortgages that flow through the GSE (Fannie Mae and Freddie Mac account for 78% of residential mortgages right now) will have their appraisals waived. Those are “PiW” loans or have a “Property Inspection Waiver.” My good friend and appraiser colleague Phil Crawford says on his radio show “Voice of Appraisal” says the acronym stands for “Pissing In Wind” which is more accurate. If the buyer realizes they overpaid for the property, the agents are now the professionals with the bullseye on their back. Liability insurers are already talking about a new target when things go south.

Years ago and again this morning, I heard a real estate agent say – what do we need you (appraisers) for? “The seller and the buyer determined the market value by agreeing on the price.” The problem with this logic is the buyer may not be fully informed (i.e., from an out of market area) and will also mortgage fraud supercharged. Ever heard of straw buyers? Agents must remember that they perceived as biased even with the best intentions and the best ethics because they are paid only if the deal closes. When something goes wrong, they are completely exposed.

The direction that was taken by regulators relies heavily on AVMs (Think Zillow’s Zestimate which is not within 4.3% of the actual value 50% of the time) and “hybrid appraisers” (which removes the appraiser from the actual inspection of properties) to develop a value opinion. The inspection of the property, when done, will rely on non-licensed individuals to fill out a checklist and give an appraiser at a desk the information without any standardization, direct contact or assurance the inspector knows what they are doing. I’ve heard of fees as low as $8 to do the inspection and $78 for the appraiser. As far as I can tell, a full appraisal (inspection and analysis) cost can represent as little as a hundredth of a percent of a purchase transaction.

This petition is for everyone to sign, not just appraisers. Please sign and help bring attention to a pattern we just lived through in the financial crisis. It’s happening again.

Please make your voice known, read about and hopefully sign the petition below:

PETITION: Remember liar loans of a decade ago? Those same people want to do away with appraisers.

There are lots of issues facing appraisers right now, so let’s focus on the big rocks first and sign the petition!

The FHA Attack On Appraisers Was Timed To Make Way For Getting Rid of Them

Inflated Home Appraisals Drain Billions From Government Insurance Fund [WSJ]

Federal Housing Administration says it expects to lose $14.4 billion in coming years, potentially raising premiums on mortgages insured by the FHA

FHA seems to be rewriting history. When the GSEs were bailed out in 2008, FHA became a “last resort” program for many home buyers that couldn’s afford a 20% downpayment and lending was rampant and reckless. Now that they are having problems, they seem to be singling out the appraiser’s role a few days before major appraisal rule changes are being proposed.

In my opinion, there are no coincidences when it comes to proposed regulations. See OFT below.

Voice of Appraiser: Person of the Year!!! Brian Coester?


OFT (One Final Thought)


Brilliant Idea #1

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:

  • They’ll be more clueless;
  • You’ll be more concerned;
  • And I’ll reaffirm that I don’t watch cat videos.

Brilliant Idea #2

You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive and it helps me craft the next week’s Housing Note.

See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Real Estate Blockchain Reads

Appraisal Related Reads

Extra Curricular Reads


November 23, 2018

After the Black Friday Freight Train, It’s All Housing Tryptophan

Eventually, you just get used to it…


But I digress…

Retail Apocolypse, Fact or Fiction

I’ve touched on this topic quite a bit over the past year. When I’ve walked around a number of different cities and towns this year, it is clear to me there are a lot more vacant storefronts.

Here is the old bodega version of that narrative that was told on APM Marketplace across public radio stations in the U.S. My voice sounded weird to me.

And here is a misinformed piece in New York Magazine that goes counter to the visceral reality. The debunking a bogus 20% number attributed to a retail broker was the basis of saying the retail apocalypse wasn’t real. Ugh.

Yet there is so much more to the story.

By Now We Should Be Sick of All Amazon’s HQ2 Coverage

But here’s more:


WATCH: Everything you always wanted to know about Opportunity Zones


Amazon HQ2 poised to propel housing market in Long Island City – for now [AM New York]

Attract businesses like Amazon with lean government, not pork [Crains New York]

Insider Home Trading?

Amazon employees snapped up NYC real estate before headquarters announcement [WSJ/Boing Boing]

Amazon Employees Join the Rush to Buy Long Island City Condos [Wall Street Journal]

Favorite Chart

Here’s a chart I whipped up to show how the fourth quarter Hamptons market sees more than its fair share of big sales in what is typically the weakest quarter of most housing markets. The reason? Tax planning.


Goosing for More Appraisal Talk

Dear Readers: I hope everyone enjoyed their Thanksgiving festivities. Housing market activity typically takes a break this week so the vast majority of these Housing Notes covers what’s going on in Appraiserville:

Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.)

Rumormill: AI National Is Going To Try And Take All Chapter Funds AGAIN

It’s been two years since senior executives at The Appraisal Institute headquarters in Chicago, referred to as AI National, attempted to seize local chapter funds. I was just told by a trusted source that AI National will move forward on the “taking” plan.

From AI National’s perspective, another attempt to steal chapter funds makes perfect sense because:

  • They only “suspended” the first attempt and subsequently referred to chapter funds as “their” money in discourse with chapter leaders.
  • They have not publicly addressed membership outrage of this attempt (no plausible reason has ever been given).
  • They have done NOTHING with their residential appraisal panel – it was just a PR stunt.
  • They have continued to drift into irrelevancy in Washington, DC regulatory circles.
  • They named a 2x president their new CEO who was a key part of their decade-long drift into irrelevancy after sitting exactly a year on a sham election process but to be paid $400K. They bumped up his pay from the toxic former CEO who left in the middle of the night.

It’s why I entered the conversation in 2016, providing regular takedowns of this fraud.

Coester Chronicles: I Hope CoesterVMS Doesn’t Owe You Any Money!

There has been a lot of discussions circulating this week after VACAP broke the news that the Coester VMS has run out of funds to pay for the appraisals they ordered. A law firm acting on the behalf of FVCBank, a CoesterVMS client, has sent a letter by email to appraisers providing the point of contact for those looking to collect their fees. I would assume that this bank seized their assets. I don’t know whether they represent any other banks in this situation.

From AppraisersForum, Andy Arledge of Freedom Appraise, one of a number of new A La Mode competitors, commented:


Here in Appraiserville’s ‘Coester Chronicles’, Appraisalblogs, Appraisersforum, and other sites have been warning appraisers for more than a year that this day may come. The word around the industry back then was that Coester owed millions in appraisal fees. If true, I can only assume appraisers are owed millions more now.


Hopefully, this will all come out in the wash but sadly, appraisers shouldn’t count on obtaining their long-owed Coester fees.

The intense lessons to be learned are:

1) AMC’s often demand proof of an appraisal firm’s business viability to receive work, yet it is clear that this demand should cut both ways. Recent news about Coester and Clarocity make that clear.

2) Unlike in the past, residential appraisers now have resources including on the ground blogs, Facebook groups and individual appraisers providing transparency and advocacy that are both readily available and free. Start reading all these sources regularly – get involved – these resources are motivated by a sense of right and wrong (because there isn’t any income to be found in their efforts).


AMC Clarocity Cash Flow Shortages Funded by iLOOKABOUT

As the headline says, Clarocity (CLY) Reaches New 1-Year Low at $0.01 on November 19th. Trading was haulted by Canadian regulators on November 15th.

And this press release:

iLOOKABOUT Enters Into Non-Binding Term Sheet for the Purchase of Assets of Clarocity Corporation

Here’s one take.

Appraisers should be very concerned about getting paid for their services until more is understood about this financial jiu-jitsu.



16%: Hybrid Fees Show Perceived Value of Valuation Expertise By Mortgage Lenders and AMCs

Here’s the math:

An appraiser shared an email survey concerning hybrid appraisals. The survey reveals the fees they are thinking of charging. These fees aren’t that different from what I’ve heard elsewhere.


It’s actually quite telling on how the AMC/Mortgage Lending industry sees the appraiser’s role in providing a reasonable benchmark on their collateral to make more informed lending decisions.

Here’s the scenario – take the $78 national desktop report fee and divide it by the $500 average appraisal fee as quoted by Realtor Magazine. Now think in terms of the inspection versus valuation.

$78 Valuation / $500 full appraisal = 16%. Don’t get me wrong. Appraisers are willing to work for $78 on desktop valuations but many have little choice in the submarkets they cover. It also shows how the valuation expertise is viewed as a commodity and not a skill that takes years to obtain.

The fact the mortgage industry thinks a $78 expense is a reliable expenditure for a reliable valuation suggests we will be looking at a significant mortgage bubble in the future.

To all you 16-percenters out there – start taking stock of what you are really worth.

Regulators Are Pushing Hard for Requiring No Appraisals For Most U.S. Mortgages Part I

Next week I dive deeper into the anti-quality valuation sentiment outlined in the Treasury outline.

The federal government is pushing to eliminate the need for appraisals under $400,000. I threw together a quick analysis of how they are effectively saying that no appraisal is needed for nearly all mortgage applications nationwide. It’s kind of amazing. I’ll devote more time to this issue next week after the tryptophan wears off (ok, ok that’s a myth).


A deeper dive is coming next week.

OFT (One Final Thought)

I hope you cooked your Thanksgiving turkey the old-fashioned way…


Brilliant Idea #1

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:

  • They’ll be more drowsy;
  • You’ll be more drowsy;
  • And I’ll take multiple naps.

Brilliant Idea #2

You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive and it helps me craft the next week’s Housing Note.

See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Appraisal Related Reads

Extra Curricular Reads


November 16, 2018

HQ2 Housing Edition: Doubling Down Doesn’t Mean You Get What You Pay For

There has been a surprising amount of pushback to the Amazon HQ2 decision to select NYC as one of the locations. Municipalities have had a long tortured experience with public financing of sports stadiums. However I do believe there is a net positive for NYC here, but it’s not a straightforward assessment and the announcement was not well-received given the affordable housing crisis and aging transportation infrastructure.

Wells Fargo Wants 25% Down For Jumbo Loans In Fairfield County, CT

One of the biggest mortgage lenders in the NYC metro area began requiring 25% down for loans above $601,450 which accounts for a large share of homes across the county.

I live there and my firm appraises there in addition to NYC.

One thing that was odd about this decision is that Fairfield County has outperformed the adjacent Westchester County in New York State and is less exposed to the new federal tax law that caps property tax and SALT decisions at $10,000 combined. They haven’t applied this underwriting restriction to Westchester.

And in fact, there is evidence that sales of high-end Fairfield properties such as Greenwich are seeing some gains – we noted this in Greenwich, CT at the end of the third quarter.


After all the bad lending decisions made in the run-up to the financial crisis, the harsh clampdown on underwriting standards when the housing bubble burst actually damaged the value of the collateral as a result. Fannie unnecessarily crushed the condo market when they tightened underwriting overnight. By restricting lending, downward price pressure expands.

On the other hand, here is an example of a lender being proactive (but not consistent). If warranted, they should have made this move back in 2011-12 and not waited so long. In our data and experience, the market metrics have improved over the past five years. What do they know that we don’t and they won’t share?

The Housing Market Is Disconnected From The Economy

This phenomenon is confusing consumers since the housing market often moves with or even in front of the economy. Not in this cycle. Housing sales, a far more important barometer of market health than prices, are falling despite a strong economy.

Before you post pictures on Instagram today, you should read this article: Why the Housing Market Is Slumping Despite a Booming Economy.

Sales of new single-family homes were down 22 percent in September from their recent high in November 2017, and existing home sales in September were down 10 percent.

We are seeing listing inventory rise nationwide but there isn’t a glut – it is still tough to find an accurately priced home. For many markets, affordability has been shrinking with years of price gains fueled by limited supply and now made worse with rising mortgage rates.


Sign, Sign, Everywhere a Sign

When we lived in Manhattan circa 1990 and were thinking of moving, we rented a car and drove into Connecticut to explore the possibility of living there. We passed through New Canaan and noticed that all the real estate signs has no corporate logos. But I recall the design of the signs matched their company branding which seemed ridiculous. It was as if the town was trying to pretend that displaying brands was in poor taste. During the 1990-91 recession, there were a lot of homes for sale just like now.

Fast forward to this summer,

The New Canaan Board of Realtors had publicly announced the six-month trial ban in early June, citing the dramatic shift toward online house-hunting and a desire among its members to improve the look of the pricey town…“When you have as much inventory as we have, the signs make it look like there’s something wrong,” said Doug Milne, an agent with Houlihan Lawrence who specializes in the towns of New Canaan and Darien, explaining part of the thinking behind the proposed sign ban.

With sales down 25% for the first half of the year to the same period a year ago, this agent suggests that consumers will be more willing to buy and pay more in a town without signs. I would guess that most agents in this market would not agree with Doug or the Board of Realtors leadership. And in fact, their national association told them they couldn’t restrict advertising.

This sign removal effort was an old residual “gatekeeper” mentality that is still lingering from 1990, yet times are different, and most consumers obsess over online listings.

The number of listings has swelled because the market changed and sellers are very much lagging the market. Removing these sales signs was premised on the assumption that buyers won’t look at their Zillow or other broker apps to get a sense of the market.

I’d advise The New Canaan Board of Realtors to come back to the future.

Amazon HQ2 Wet Blanket Talk

I’ll bet you can order wet blankets on Amazon, no?

I’ll venture a guess and say in the long run there is a net positive in the selection of Long Island City as a winner in the 14 month Amazon HQ2 Sweepstakes. But the deal has a lot of hair on it:

Negatives
– A study shows that these contests “have no discernible impact on firm expansion, measured by job creation.”
– Will likely raise housing costs by melting rental concessions in the immediate and adjacent areas
– Will overtax public infrastructure which has long been neglected
– PRESS Amazon’s HQ2 Spectacle Isn’t Just Shameful—It Should Be Illegal [The Atlantic]
– PRESS The backlash to Amazon HQ2, explained [Vox]

Positives
– Might prompt the state to finally fund an improvement for the 7 train which is at capacity
– Will probably enable more development in the surrounding area
– Well paying private sector jobs fund more private sector jobs
– Raises employment and potentially, wages
– Bails out all the developers who extensively overbuilt rentals
– Will finally bring critical mass to LIC and broaden street retail services
– PRESS Why New York and Virginia were right to gamble on Amazon [The Week]
– PRESS Here’s what Amazon HQ2 employees will face in Long Island City when it comes to transportation, housing and … sewage [Recode]


And New York Has Already Established Itself As Tech Hub

Amazon was icing on the cake and was not an enabler. The importance of having a tech hub is that its higher wages offset the lack of hiring in the securities industry. The city needs them as part of the tax base and we already have the tech talent pool to offer them.

This chart blows me away.


Getting Graphic

You can poke around our chart gallery here:

Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.)

Appraiserfest Recap

Just one more look back at a stunning success…Appraiserfest.


Take Non-Appraisal Seminars

Up your game – differentiate yourself from your competition.

We all attend appraisal seminars or take online courses to fulfill our CE requirements, but I implore you to consider other types of seminars if it provides value to your practice. Fifteen years ago I took an all-day class for fun to gain insights on presenting data. It was taught by Edward Tufte and if he is ever in your vicinity, I highly, no, enthusiastically recommend the course. The topic was relevant at the time and is relevant today. It was a spectacular class and the materials are the best out there. I applied what I learned to my market reports which came along later. Well, Friday I’m going to Brooklyn to take it again. I can’t wait.


PRESENTING DATA AND INFORMATION:A ONE-DAY COURSE TAUGHT BY EDWARD TUFTE

OFT (One Final Thought)

Actually, I have two final thoughts about one subject – Writing. Many Housing Notes readers wonder how they got into a job that required so much, you know, writing. The following suggestions are amazing.

1) This writing sample is beyond brilliant and something I’ve never considered before:

2) I am going to do this immediately:

Brilliant Idea #1

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:

  • They’ll increase their font size;
  • You’ll look for bigger cookies;
  • And I’ll figure out something new.

Brilliant Idea #2

You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive and it helps me craft the next week’s Housing Note.

See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Appraisal Related Reads

Extra Curricular Reads


November 9, 2018

Watching the Housing Detectives

It’s been an exciting 10 days, to say the least so bear with me while I spin my yarn.

It started with a trip to the epic Appraiserfest 2018 in San Antonio, Texas, hence my “placeholder” Housing Notes last week. The event was a rousing success for the underrepresented residential appraisers across the U.S and was the talk of D.C. regulators (in a good way) as I found out later. I got to meet all my “fake” appraiser friends (my wife classifies online friends as “fake” until you meet them in person.)

I keynoted on Thursday and got to hear my peers present amazingly pragmatic insights to promote appraisers’ professional practice and their businesses. During the convention – which was more like attending a rock concert wearing a bubble suit – several of my colleagues and I were interviewed for an upcoming epic documentary on the financial crisis that finishes with our industry (you know, the one that warned everyone what was coming but the history books have already laid blame at our feet).

From the conference, my wife and I flew to D.C. on Sunday for Monday’s Appraisal Subcommittee Roundtable (ASC) at the OCC (with LMNOPQRSTUVWXYZ) on Monday where I met more of my appraiser colleagues and senior officials from federal agencies and chief appraisers of global financial institutions to look at the path ahead for valuation services. For the first time, appraisers were representing themselves rather than relying solely on trade groups, one of which does not have our best interests in mind.

On Tuesday, my wife and I took the train back to Connecticut to vote. Oh, and I had an emergency root canal and had to replace my brand new “iBrick” with an iPhone XS Max that actually worked. Then I published the Douglas Elliman rental report that was the top ten most read story on the 350K± Bloomberg Terminals and was interviewed many times on the Amazon HQ2 decision to locate 25K high wage earners in Long Island City, Queens.

Tonight we’re headed to see Elvis Costello with friends and I can’t clear my mind of the song “Watching the Detectives”…


I’m exhausted but highly satisfied with the past ten days. Now I need to downshift a bit. Some people watch fish tanks to relax and clear their mind. I do this:


But I digress…

Elliman Report: Manhattan, Brooklyn & Queens Rentals October 2018

I’ve been the author of the expanding series of market reports for Douglas Elliman since 1994. Most of the research is pushed out quarterly but we also release a monthly rental report covering Manhattan, Brooklyn and the northwest region of Queens. The news leak that Amazon had selected Long Island City Queens as a split site for HQ2 along with Crystal City, Virginia was a simultaneous bombshell news event that I’ll discuss later in these notes.

I was pretty confident that after this week’s mid-term elections and the Amazon HQ2 announcement, no one would care about the status of NYC rental market. As my sons often tell me, “you’re wrong, Dad” and the story coverage ranked the “tenth most read” on the 350K± Bloomberg Terminals and we got a chart!



Here are some bullet points on the release:

Manhattan
– Market share of concessions rose year over year for the 41st consecutive month
– Vacancy rate fell to lowest level for an October in nine years
– Median face rent skewed higher with heavy influx of higher quality rentals
– 2 and 3+ bedroom median rent were only size categories to see declining rents and market share
– New development median rent declined while existing median rent increased respectively year over year
– Median rent for the Mid Tier segment ($2,700 – $3,800) continued to outperform all others

Brooklyn
– Market share of concessions rose year over year for the 33rd consecutive month
– Second highest concession market share in more than eight years
– New development prices rose much faster than existing rentals, skewing overall prices higher
– Several years of new development activity is skewing price trends higher

Queens (Northwest)
– New development rents accounted for nearly 43% of all activity
– Face rent indicators continued to rise as new development skewed prices
– Fourth consecutive month with large year over year gain in new leases

Some of my favorite rental charts from our gallery:

We’re All Amazon Now: HQ2 Lands in LIC, Queens NYC

For years, we’ve observed the massive overbuilding of rental and condo multi-family development in Long Island City, Queens. After all, it is only one subway stop from Manhattan and has more in common with Midtown than the borough of Queens itself based on pricing. Despite the thousands of units coming online there over the next few years, the streetscape retail there is largely barren. It has long felt less like a neighborhood and more like a collection of new buildings.

But that may change.

Word was leaked to the New York Times and the Wall Street Journal about their intentions, to which Amazon said:

Oh, and Google is doubling down on New York City. Good for the economy but so much for housing affordability.

Here are some of the stories on the HQ2 move:

Selling a Penthouse to Amazon’s Jeff Bezos Is a Queens Broker’s Dream [Bloomberg]


Amazon’s New Headquarters May Be a Prime Deal for Two Cities, but Where Will Workers Live? [Realtor.com]

HQ2 In Long Island City: If You Build It, Amazon Will Come [Forbes]

Influx of Amazon, Google hires could hike Long Island housing costs [Newsday]

News Long Island City Might Get 25,000 Amazon HQ2 Jobs. Here’s Who Would Benefit. [Bisnow]

50 Million Chinese Homes Are Empty?

While visiting China in 2015 and 2016, namely Shanghai and Beijing, I was obsessed with the question of housing resale activity. I observed that there was basically either an ancient, dilapidated housing stock or newly constructed towers. I was skeptical about my theory that new development did not have a resale market. I was told that multi-generational efforts by families to pool their funds to buy a new unit drove all sales, and of course, all land is owned by the government. Consumers are wary of the stock market there (rightly so given government manipulation) and they seemed enamored with the housing boom. As much as I asked, I never got a satisfactory answer or saw evidence of an active resale housing market (resale is called by the derogatory term “used” in China). If you can show me the error of my thinking, please do!

Bloomberg now reports that 20% of all homes are vacant:

This Week in Aspirational Pricing

  • It’s hard to read this headline out loud without using sarcasm:

A Manhattan Penthouse Faces Reality, Cuts Price to $62 Million [Bloomberg]

  • A riveting deep dive:

The odyssey of the Mountain: Inside the struggle to sell 157 acres atop Beverly Hills [The Real Deal]

  • A home I appraised years ago just sold. Years afterward I learned that Michael Jackson rented it for $75,000 per month on a month to month basis.

Former Home to Michael Jackson and Marc Chagall Sells for $32 Million [New York Times]

  • $200M+ listings are officially a dime a dozen:

According to the New York Post

  • Here’s proof that you can still by a home when you get fired from your job:
Travis Kalanick, co-founder of ride-hailing giant Uber who was pushed out as chief executive by investors last year, has inked a deal to buy a glamorous New York City penthouse for about $36.4 million, according to people familiar with the deal.

Yay! Millennials Look Away From Their Screens Long Enough To Buy A House

According to the Wall Street Journal’s analysis of the just-released U.S. Census data:

The share of households who own their home and are headed by someone under 35 years old rose to 36.8% in the third quarter from 36.5% in the second quarter, and was up 1.2 percentage points from a year earlier.

That was significantly more than the overall increase in the homeownership rate. The share of American households that own a home inched up to 64.4% in the third quarter, up from 64.3% in the second quarter and up half a percentage point from a year earlier, according to data released Tuesday by the U.S. Census Bureau.

No Time For Sex When Housing Prices Are Rising

I’m a sucker for junk stat correlations when they’re fun. Here’s the latest from Zillow: Birth Rates Dropped Most in Counties Where Home Values Grew Most. Here’s the Tableau work table to play with (if you have time):

            

Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.)

Appraiserfest Has Your Back (And Your Teeth)

After an amazing Appraiserfest conference in San Antonio, I had to have an emergency root canal. So for protection, I wore my Appraiserfest t-shirt and all went well. Proof positive that the Appraiserfest movement has your back (and teeth).

What The Appraiserfest 2018 Conference Happening Meant

I can’t speak for each attendee at the San Antonio happening but I can say what it meant to me:

  • A big thanks to Phil Crawford, Mark Skapinetz and Lori Noble for making the dream happen!
  • There was LOVE everywhere – I can’t tell you how many people I spoke to teared up when they talked about the event
  • This was the first “non-trade group” appraiser-centric event in history
  • About 80% of attendees (my rough poll) had NEVER attended an appraisal conference before
  • A documentary crew interviewed a number of appraisers about their experiences during the financial crisis

  • It was “appraisers-only” so everyone was relaxed and open for discussion
  • It was not a “complain-fest” and was orientated towards the future
  • The event was entertaining and upbeat at all times – like a rock concert
  • There was almost no “whining” (and we’re good at that) since the purpose of this event was to inspire appraisers to look at other business opportunities right in front of them
  • Appraisers who were military veterans were honored in a moving ceremony

  • Attendees were inspired to share their successes such as operational tips and new sources of business
  • Appraisers were lauded for their valuable skills instead of being “beat down” by the entire mortgage world as a cog in the mortgage machine
  • AMCs were not regularly dissed during the sessions despite their damage to the quality of valuations, partly because lenders are just as much at fault and we can’t solve the AMC problem ourselves
  • Most appraisers said they continued to be pressured to “hit” numbers by lenders and AMCs
  • The appraisers that attended were taking responsibility for the future of their careers
  • The mortgage valuation arena is going to lose more of the brain trust of residential valuation if they don’t rethink waivers and hybrids
  • It was widely discussed that hybrid products increased turnaround times and reduced valuation quality so there was general confusion as to why AMCs were aggressively pushing them (it is just another source of business revenue, otherwise no advantage)

Also,

  • Our largest industry trade group focuses on fear and “how not to get sued” – none of that at Appraiserfest
  • Many attendees won’t be able to get the image of Mark and Phil in bubble suits out of their mind (they’re not sorry about that)
  • I always had Frank Black’s song “Czar” as my fantasy intro music and gave my song request to Phil before he even finished asking the question

  • I finally got my own “G5”
Cheaper = Less Reliable

I saw this on Mark Skapinetz’s 100% RE Appraisers Facebook private group and I hope he doesn’t mind. This image says it all.

Remember that many financial institutions embrace this misinformed think because of the federal backstop.

Banking Propaganda About Appraisal Services Ignores Keeping The Public Trust

This is a super dumb interview, seriously.


OFT (One Final Thought)

If this chart contained “Manhattan” instead of the five boroughs of “NYC” it would be well over 50%:


Brilliant Idea #1

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:

Brilliant Idea #2

You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive and it helps me craft the next week’s Housing Note.

See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


November 2, 2018

Housing Costumes Manhattanites’ Obsession

Dear readers of these Housing Notes. Halloween just passed us by and so did all the ghost, goblin and super luxury condominium tower costumes that New Yorker’s wear for the holiday. I haven’t dressed up in a costume since 1972 but the following would be one I’d consider if I ever changed my mind.


In the meantime, my wife and I are on a 7-day travel odyssey that begins with #AppraiserFest, a one of a kind conference for appraisers. I’m speaking here in San Antonio today and have successfully converted almost all my appraiser “fake friends” into “real” friends (you have to actually meet your online friends in person to earn a “real” status). Appraiserfest has been awesome by the way. Enthusiasm, excitement, and insights on building a professional career is contagious and that’s what it’s all about. Move forward to new opportunities. They are always out there.


So for this week, I gave you a reprieve as I haven’t had any quiet time to write my notes or share links. I was also concerned you would be able to focus with the sugar high you still have after “inspecting” your children’s candy haul.

See you next week!