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:

– 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]

– 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:


(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.


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
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

Reads, Listens and Visuals I Enjoyed

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Appraisal Related Reads

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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:

– 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

– 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? []

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):



(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)


  • 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
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!

October 26, 2018

Flying Ahead Of Ourselves In Housing

There’s a fun story (not this other fun story) in Forbes about parking your flying car at your penthouse within a luxury condominium. (But god help you if your toddlers are swimming in the pool with the nanny when you decide to land).

but I digress

Market Report Gauntlet Q3-2018 Week 4: Long Island, Hamptons & North Fork

Well, this was the final week of our 4-week quarterly gauntlet of market reports prepared for Douglas Elliman Real Estate. I’ve been authoring this expanding series of research since 1994.

Sadly the coverage of our Hamptons research didn’t rank at the top of the Bloomberg Terminals this week – I guess there was some other news going on that was more important? But then again, it’s always about the chart:

Media coverage can be found here.

Here are some key observations of our three reports:

Hamptons Sales

  • Price trend indicators rose year over year as sales fell for third consecutive quarter
  • Rate of year over year sales declines expanded in 2018 as rate of inventory declines eased
  • Largest decline in third quarter market activity by price occurred under $1 million
  • Luxury listing inventory surged to the highest level seen in the seven years of tracking
  • Luxury sales at or above $10 million unchanged from year ago level

North Fork Sales

  • Median sales price rose year over year for sixth consecutive quarter to record high
  • Listing inventory slipped for third consecutive quarter as marketing time expanded
  • Number of sales fell sharply year over year for second consecutive quarter
  • Luxury price trend indicators rose sharply as listing inventory fell by half
  • Luxury days on market and negotiability expanded as older supply was cleared

Long Island Sales

  • Median sales price climbed to new record in sixteen years of tracking data
  • Number of sales declined for the second time in three quarters
  • Inventory declined year over year with the fastest marketing time on record
  • Luxury listing inventory rose to the highest third-quarter total in seven years
  • Luxury median sales price slid year over year for the third consecutive quarter

Some of our charts from the chart gallery:

Market Report Gauntlet Q3-2018 Week 4: Aspen/Snowmass Village, Los Angeles, Venice/Mar Vista & Malibu/Malibu Beach

Media coverage can be found here.

Here are some key observations in these reports:

Aspen Sales

  • Price per square foot declined year over year for first time in six quarters as median sales price rose
  • Listing inventory edged higher year over year for two quarters as sales declined for three
  • The non-luxury market showed more strength than luxury with mixed price trends and less inventory
  • Luxury price trend indicators declined despite rise in average sales size
  • After four quarters of year over year declines, luxury listing inventory jumped

Snowmass Village

  • Number of sales surged year over year, extended the trend to ninth quarter
  • Negotiability expanded significantly as marketing time tightened
  • Price trend indicators moved higher as inventory expanded
  • Luxury price trend indicators showed mixed results, partially skewed by surge in average sales size

Greater LA including Westside and Downtown

  • Price trend indicators pressed higher with median sales price reaching a record high
  • Number of sales declined year over year, for the second consecutive quarter
  • The pace of the market remained brisk but eased from the year ago absorption rate
  • Luxury single-family price trend indicators showed mixed results with an uptick in supply
  • Luxury condo price trend indicators moved higher as average sales size expanded

Some of our charts from the chart gallery:

Why The Northeastern U.S. Housing Market Is Being Hit Hardest

There was an amazing Bloomberg View piece on why Northeastern U.S. new homes sales are being hammered. SPOILER ALERT It’s the new federal tax law.

But its really not just about new home sales. Existing sales are declining too but the west coast is being hit harder than the northeast because prices are higher.

Existing home sales have declined even more rapidly in the West than in the Northeast. But that seems to be more about high prices than the loss of the tax deduction. The West has by far the most expensive houses in the country, but California ranks 21st in per-capita property taxes, and the other populous Western states rank even lower. 1 Lots of affluent Californians will still be hit hard by the reduction in the state and local tax deduction, but it will be mostly because of no longer being able to deduct all of their state income taxes, so the impact on the housing market will be less direct.

Here’s A Macro Way To Detect Housing Vulnerability To New Federal Tax Law

There’s an interesting tax analysis by state on the visualization web site “” A Visual Guide to State Taxes that’s worth a look.

Home Buyers Can’t Buy What’s Not For Sale

It’s long been a rule of thumb in the brokerage industry that the average length of time a homeowner stays put was 7 years. But that’s so 2012. It’s more like ten years, according to First American who calls the metric the “Median Homeowner Tenure Rate” and here’s an illustration of the pattern.

The challenge is this:

Homeowners are staying in their homes longer than ever, limiting supply and slowing home sales.

I’m sure rising home prices against tepid wage growth and above historical average credit standards are a key reason for the hibernation.

Manhattan’s Evolving Skyline Visualized

Wow. From Visual Capitalist: A Century of New York City’s Evolving Skyline

But Isn’t Compass A Traditional Brokerage Model?

I’ve been speaking about the New York-based Compass off and on for the past year because their model doesn’t click for me with all that I have read and heard. Usually, I wouldn’t care about a specific firm like this, but the cartoonish nature of their storyline keeps drawing me in. Their leadership has brilliantly snagged $1.2 billion in funding for what seems to be nothing more than a traditional business model with smoother finishes and more bright and shiny lights. I know many people who interviewed there and said it is a traditional firm with a glossier finish. I’ve also listened to all the things that their leadership has said in public, but they never answer the questions like this posed by Pam Liebman of Corcoran Group this week: “What makes you not a traditional brokerage model?” Reffkin has never answered this type of question directly. The audience is always left with some sort of intangible salesy vision thing. An early favorite answer of his came from his interview on CNBC when Andrew Ross Sorkin asked the same question as Liebman. Reffkin gave a series of rhetorical responses such as “Is Amazon Just A Bookseller?” and “Is Tesla just a car company?”

Their 5-10 year vision seems to be merely consolidating services on one platform. It feels much like the efforts of large brokerage firms over the past several decades, offering mortgage, title insurance, management, and other services, but wrapped up in a shinier package somehow. My wild guess is that their own brokers are providing the clicks in their daily business to enable some analysis tool for vertical integration of other services. The upside can’t be in the brokerage business itself.

I do not question that some brokers love working there and perhaps are sold on the promise of a vision that will pay them handsomely in stock options. I do not wish Compass ill will either. I have no skin in the game. But from the outside looking in, I worry about how this all ends. The math as illustrated by their public performance only seems to affirm them as a traditional brokerage and their only difference with most firms is an assumed lack of profit and a pile of cash to draw upon indefinitely. The test for the validity of their “non-traditional” model should be this:

If their vast pool of capital was removed from the equation five or even ten years from now as Reffkin outlined, does this “vision” enable Compass to break even or be profitable? Will current leadership carry this vision (not yet conveyed in any way to the public), allowing the company to survive on its own let alone provide a handsome return on a $1.2 billion provided by Softbank?

Although my concerns make no difference here in any way and I assume the founders will make a lot of money, I do worry for those people outside of leadership that are currently “all in.”

Upcoming Speaking Events

November 1, 2, 3- Appraiserfest in San Antonio!


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

After 4 weeks of 24/7 market report research and releases, I’m going to give my Appraiserville readers a break. I still have unfinished business to cover including the A La Mode preference box issue and the AI California lobbying to destroy the difference between licensed and non-licensed work so their membership can make less money.

Instead, I will leave you with this one important message (aside from my Forbes profile article, LOL):

Appraiserfest is next week!

It is not too late to signup now!

OFT (One Final Thought)

This is a fascinating way to look at the geographic center of the global economy – as illustrated in The Economist.

[The Economist]

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
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

October 19, 2018

In Housing Analysis, You Have To Get Up Early To Be A Talking Head So Save Your Changes

Thankfully yesterday was a super fun 18-hour work day (is that a long-form oxymoron?) which I delve into for these housing notes. When you are in the middle of building market research to share with the public, it is important to test outcomes and save your work – so watch the following closely:

And here’s a shoutout to my former Columbia grad students from my summer “Market Analysis” session who came to hear me speak last night at the Columbia Business School Alumni Club event:

but I digress…

NBC SquawkBox October 18th: Impact of New Federal Tax Law on High-Cost Housing Markets

Robert Frank of CNBC invited me to appear yesterday’s show. I’ve been on the show a half dozen times, especially during the housing bubble when I was always interviewed remotely in a dark room with an automated camera. This appearance was the first time on the actual set. The interview with Robert Frank and Andrew Ross Sorkin was fun. In keeping with their audience, it was all about the “trade” and focus on pricing which reminded me of the stock market-like thinking of housing from a decade ago.

“Should all New Jersey homeowners move to Florida?”

Afterward, I was standing next to Alan Greenspan, former Fed chair, in the makeup room after the interview to take my makeup off. Chatted with Diana Olick as well as I am in now “full name-dropper” mode. Here’s Robert Frank’s intro and then my interview:

Here’s what to watch as real estate drifts into two different markets from CNBC.

Market Report Gauntlet Q3-2018 Week 3: Greenwich & Fairfield County, Connecticut

Yesterday was a long but really fun 18 hour work day. I had to get up at about 4:30 am to get picked up for a TV thing (above) in Manhattan to talk about the release of the Douglas Elliman reports I author covering Connecticut and South Florida and their housing market patterns that suggested an impact from the new federal tax law.

I’ve been the author of the expanding Douglas Elliman report series since 1994. I insert any new report releases in these Friday Housing Notes.

The Elliman Report for the Greenwich sales market showed some compelling changes in market behavior because of the surge in single-family sales, the largest year over year third quarter jump in six years, despite the years-long weakness of the luxury market. Then compare this pattern to the neighboring county of Westchester in New York state with five consecutive quarters of year over year single-family sales declines. Here’s a possible reality show on the topic.

Bloomberg News covered this phenomenon in her story: Greenwich Home Sales Jump as Buyers See Tax Break, Better Prices. It resonated with the ±350k Bloomberg Terminal subscribers as the 3rd most emailed article of the day. The securities industry loves their Greenwich housing news.

And of course, there were great charts using our data. What makes them great are their titles, not my numbers. Take a look.

Market Report Gauntlet Q3-2018 Week 3: South Florida

After a long drought of South Florida sales, especially at the high end, the eight market reports covering even more markets suggested a growing momentum of rising sales and prices along with stabilizing or modest inventory growth. Don’t get the message wrong here. South Florida still has a backlog of new development supply to work off as well, but the market, at least for the first three quarters of 2018, seems to be improving and coincidentally it began with the new tax law that went into effect on January 1st of this year. We all know that the plural of anecdotal is not data, but for now, there has been a lot of anecdotal to enable a conversation about the correlation.

All the Elliman market reports I authored on the Q3-2018 are available at the bottom of these Housing Notes.

We’ve also got a lot of charts on our website. Here are a few samples:”>

Storming Towards Elevated Living

This New York Times piece on a house left standing from the ravages of Hurricane Michael on the Gulf of Mexico probably represents what waterfront development building codes will look like in the future. Low-cost flood zone insurance in a world with accelerating climate change patterns of rougher more volatile weather will necessitate it.


American Dream Home, Rehabbed

There was a great opinion piece by Candace Jackson in the New York Times about a new way to view the optimal home. The dream has centered around expanded square footage for years. Now it is not that simple as seen in the following floorplan:

[New York Times]

But the best graphic of this article was the mind-blowing gif that shouldn’t be watched during cocktail hour.

[New York Times]

This Week in Aspirational Pricing

Here are two true-false questions as an exclusive for my Housing Notes readers:

Q1. Was the following house ever worth the original asking price in the history of the universe?

Hamptons Mansion Sees 50% Price Cut [Mansion Global]

Q2. Was the following house ever worth the original asking price in the history of the universe?

Warren Buffett Finally Sells Beach House After Big Price Cut [Wall Street Journal]

Thought: property sellers, even titans of industry, can be way off on their asking prices for high-end properties.

While we’re on the topic, keep an eye on this new development project in Manhattan.


Getting Graphic

Favorite charts of the week from our gallery.


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

Appraisersblogs Pushes Out Our Content For An Industry Under Siege

The appraisal blog aggregator “Appraisersblogs” regularly takes content from my Appraiserville section of Housing Notes without asking but always links back. Normally I get annoyed with that, but in this case, I am very grateful because it pushes out my thoughts to an ever wider appraisal-related audience as they do for my appraiser colleagues who also write. Since we have been abandoned by The Appraisal Institute and are in the way of “progress” by financial institutions (who only seem concerned about raising lending volumes because they will always have the federal backstop), the more insights shared in public outside of our industry is for the better. Thanks, Appraisersblogs.

Response (Part I): AI National Damaging Appraisers Livelihoods

Over the past month, I have been writing about SB-70, a California Law that allows appraisers to get a pass and do evaluations on the cheap and not have to verify anything in their appraisals. After all, what MAI or SRA doesn’t want to do an appraisal on the cheap so they can compete with dog-walkers, pool-cleaners, and TV-repairmen? It is what every residential appraiser wants to do because obviously, they can do it better than a septic tank-cleaner or ditch-digger who does evaluations on the side. Appraisersblog posted my thoughts on this from an earlier Appraisersville post I wrote and, the comments began to fly.

Passions ran high on the blog after Charles Baker, SRA, AI-RRS, and SCCAI Chapter President 2018 criticized me for essentially being uninformed about the law. Here’s a snippet of the “compliment followed by an insult” observation on his part:

Jonathan – While I applaud your passion on this and many other issues affecting our profession, your breathless excitations merely affirm your personal animus towards the Appraisal Institute. A dispassionate reasoned reader can easily see through these headline grabbing histrionics.

One of the problems with a small select group of these individuals is that they don’t seem to understand that they represent residential appraisers and commercial real estate appraisers. As a trade group they have never shared (at least during Grubbe’s reign as CEO through today) any insights about what drives their policies). Their leadership and those who are on the path to leadership have work within a corporate cult. You need to comply, or you will never be on the inside. And people like Charles, who I am sure is a nice person and good appraiser (he also said so), get so far embedded into the corrosive culture that they believe what they are saying. The rest of us have no idea what they are thinking, and membership has long enjoyed zero input. The problem with this type of management is that it teaches those in the inner circle a certain amount of disdain by the organization to its members – that they morons who don’t get it and who can be bypassed so all those first class flights with their spouses to far away boondoggles can be continued.

I have a broader theory on the impetus for pushing so irrationally hard for evaluations that causes their leadership to misstate and mislead out of context, and it has nothing to do with residential appraising. It has everything to do with commercial appraising. After this bizarre law in California and the repeated efforts to bypass appraiser boards in many other states like Florida, Montana, Virginia, North Carolina, Texas, North Dakota, Wisconsin and I’m sure many others, this is about generating income for leadership’s appraisal practices. For example in financial reporting, commercial appraisers are losing out to accountants and others in reporting for various reasons for large corporations. I assume that USPAP stops them from doing what they see as lucrative reports. With leadership in a bubble, they have no idea how the masses feel and clearly don’t care. They want that business for themselves.

The logic Charles (in this post), Scott Dibiasio, Bill Garber and others bring to the table has never been agreed to by the masses. Why? Because they really aren’t telling us why. In a one on one conversation, none of these characters have ever been able to convey credible rationale for their efforts, because they aren’t defensible but they scratch their heads and wonder why most appraisers outside their bubble are so damn pissed.

But I digress.

Here are some key points of this SB-70 tragedy that the Appraisal Institute heaped on hard-working appraisers:

AI Leadership in CA hides what they are doing: Charles does a lot of fogging in his responses. Remember that presidents of the California chapters send people to Sacramento to lobby for SB-70 without informing their own membership on what they are lobbying for, so I’ve been told by insiders. Why? That reflects a culture that views membership opinions with disdain. In his response you can see he comes from the perspective of “Well I’m from the Appraisal Institute, that’s why” which is not a reason. The greatest illustration of this, which Charles couldn’t step back and see when he says:

Members of the Appraisal Institute CA GRC sent out invitations to every other appraisal organization in California to meet with us in the fall of 2017 in Irvine at a very lovely hotel. We even offered to pay for lunch. The aim was to solicit feedback from other stakeholders. We called and emailed weeks in advance and not a single person showed up.

The reason no one showed up, aside from too much salt in the beef stew special, was that the Appraisal Institute is no longer a leader in our industry. They have built a reputation of arrogance in their behavior. I was at TAFAC when we voted to throw them out after wasting everyone’s time with a constant parade of temper tantrums and in the end, they would not agree to the goal of the organization.

What is a level playing field?

As you well know, there are thousands of unlicensed valuation professionals performing valuation-related work today . . . to a different standard, or perhaps to no standard whatsoever. State licensed appraisers in California are unable to compete on a level playing field given, among other things, the requirement to produce restricted-use reports for one intended user only. No one could possibly argue that the public in California is better protected by ceding this work to unlicensed practitioners in New York or India.

This is an absolute abomination of logic and I am aghast at how dumb this is. Why do you want a level playing field? The public trust is served by a licensing mechanism. Just give up your license and do the work you so badly want at all costs and not destroy the public trust for what an appraiser actually is.

As a licensed practicing appraiser, you are likely better at valuation than a TV repairman doing an evaluation. But when you demand to remove your license restraints to do this work, OF COURSE, you will do a better job but it destroys the impression of your worth when you are doing a real valuation. Ironically, the value of an appraiser is already damaged by this because Charles and his colleagues can’t do the branding math.

Here is an example in reverse. In the North Dakota request for a statewide waiver of appraisers because they are too hard to find in rural areas. But so are doctors! How about waiving medical licenses for medical practitioners to serve the public!

There is no enforcement when you do evaluations. So dumbing down appraiser licensing does NOT protect the public trust.

That’s all I have time for today, but my goodness, there is a lot more to talk about with SB-70 in next week’s Housing Notes. Lots.

OFT (One Final Thought)

From my college days until I moved to Manhattan in the mid-80s, the band, Talking Heads was my core music listen. I didn’t know that the owner of Sire, the record company that signed them, came up with name “new wave” as the genre to differentiate them from “punk” which had a negative connotation.

and the trailer for True Stories:

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 modify their American Dream;
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  • And I’ll play ‘Psycho Killer‘ in my car.

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
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

Reads, Listens and Visuals I Enjoyed

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Recently Published Elliman Market Reports

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October 12, 2018

The Housing Market is as “Solid as Sears”

When I was a kid in the late 1960s, we lived in (not on) LSD (Lower Slower Delaware), namely Rehoboth Beach, branded “the nation’s summer capital.” Washingtonians made the 2.5-hour drive there every weekend from Memorial Day to Labor Day. The population went from 5,000 in the offseason to 75,000 in the summer. Dirt roads and farmland were I rode my bicycle was slowly displaced by heavy development into what is now a booming resort destination on the beach. My father was a developer back then and owner of a small real estate brokerage firm. The real estate market was a “wild west” kind of place.

One of the challenges of year ’round living was the lack of retail outlets (excluding t-shirt, pizza, salt water taffy and ice cream stores on the boardwalk). The nearest mall was an hour away and it has just opened – the first enclosed mall in Delaware.

But for convenience, my mother ordered all of our clothes from the Sears catalog. It was the Amazon of the day and it was both dependable and the variety was amazing. They sold houses and gave mortgages in the 1920s after all.

When someone was a good upstanding person, they were “solid as Sears” – their advertising phrase that began in the early seventies that means nothing to most people today after decades of retail irrelevance.

Their impending doom was self-earned, but it saddens me to see the demise.

And by the way, be careful when walking through glass doors:

But I digress…

Market Report Gauntlet Q3-2018 Week 2: Westchester Sales; Putnam & Dutchess Sales

Douglas Elliman Real Estate published our research on a slew of markets this week. We’ve been authoring the expanding Elliman Report series since 1994 and it keeps getting bigger and better ;).

Elliman Report: Westchester Sales 3Q 2018

Elliman Report: Putnam & Dutchess Sales 3Q 2018

The Bloomberg story that covered the Westchester County housing market was the 4th most read on the Bloomberg Terminals worldwide (±350k subscribers). Interest in Westchester even beat the 5th place story on POTUS calling the Fed Chair “Loco”! The story centered around the large increase in multifamily sales and the fact that single-family sales slid for the 5th consecutive quarter.

Countywide sales did not fall for the fifth time year over year like single-family sales because of the uptick in multi-family sales skewing the overall sales numbers higher. Last quarter a county brokerage firm actually called me irresponsible for discussing the impact of the new federal tax law on housing even though consumers are talking about it nonstop with the brokerage community. This thinking was a remnant of the old brokerage firm gatekeeper mentality of controlling the narrative. Take a look at the headlines in the links below and tell me the U.S. housing market is not shifting towards weakness. Transparency in this marketing period is critical and consumers are as informed as brokers are.

And a chart! With an Archie Bunker-like “deep pull” headline.

Key points

Westchester County Sales:
– Countywide median sales price slid year over year for the first time in the past six quarters
– Fifth straight quarter with a year over year decline in the number of single-family sales
– Single-family median sales price declined year over year after six consecutive gains
– Listing inventory single-family homes expanded annually for the third time in four quarters

Putnam County Sales:
– Median sales price expanded annually for the sixth consecutive quarter
– The number of sales increased annually for the second time in the past three quarters
– Inventory expanded year over year for the first time in more than three years

Dutchess County Sales:
– The number of sales declined annually for the third straight quarter
– All price trend indicators rose year over year as inventory edged nominally higher
– The pace of the market was unchanged from the year-ago quarter

Market Report Gauntlet Q3-2018 Week 2: Manhattan, Brooklyn & Queens Rentals

Elliman Report: Manhattan, Brooklyn & Queens Rentals 9-2018

From the Bloomberg story

Here’s a great quote from the rental director at Elliman:

This time next year, Gavzie expects the share of leases with concessions will be close to where it is now, and that they’ll still be tied to high inventory.

“It’s really tough, to be honest,” he said. “There’s so much that has hit the market that I don’t know if 12 months is enough to absorb this all.”

Key points

Manhattan Rentals:
– Face rent price trend indicators moved from the shift in the mix to higher quality rentals
– Overall rents skewed higher as new development prices rose much faster than existing rentals
– The rental market appears ready to benefit from the slowdown in the sales market
– Market share of concessions rose year over year for the 40th consecutive month
– The vacancy rate fell to the lowest level for a September in nine years
– Studio and 1-bedroom rentals were only size category to see a gain in year over year median rent

Brooklyn Rentals:
– Net effective median rent slipped for the ninth time in the past ten months
– Market share of concessions rose year over year for the 32nd consecutive month
– Median face rent has not shown a year over year decline in six months
– Face rent price trend indicators moved from a shift in the mix to higher quality rentals
– Overall rents skewed higher as new development prices rose much faster than existing rentals

NW Queens Rentals:
– Median face rent has not shown a year over year decline in three months as new development skews prices higher
– Year over year growth in concessions returned after the two prior months showed declines
– The number of news leases surged for the third consecutive month

Market Report Gauntlet Q3-2018 Week 2: Brooklyn Sales, Queens Sales & Riverdale Sales

Elliman Report: Brooklyn Sales 3Q 2018

Elliman Report: Queens Sales 3Q 2018

Elliman Report: Riverdale Sales 3Q 2018

Key points

Brooklyn Sales:
– Median and average sales price broke the $800,000 and $1 million thresholds respectively
– Sales slipped year over year for the third consecutive quarter
– Listing inventory expanded year over year for the second consecutive quarter
– Co-op and 1-3 family prices set records as condo sales slipped for the fourth consecutive quarter

Queens Sales:
– Record median and average sales price reached
– Number of sales declined as listing inventory expanded
– Sixth consecutive quarter with average sales price record
– Co-op and 1-3 family prices set records as condo sales slipped for the fourth consecutive quarter

Riverdale (Bronx) Sales:
– Price trend indicators and number of sales moved sharply higher
– Listing inventory edged higher but overpowered by a surge in sales
– Co-ops showed the largest gain in median sales price
– Surge in overall average sales size caused by more higher-end activity

Rules of Thumb Can’t Be Placed In Arms of Non-Professionals

Actually, professionals need to be careful of over-relying on “rules of thumb” they have developed during their careers because they are subject to change at any time. A very good real estate broker sent me this quote from a client who misused a “rule of thumb I developed years ago that is still largely valid today and widely used:

Always enjoy reading your notes. Is this item housing notes worthy? If not, would appreciate your insight: How would you answer this seller:

“It doesn’t make sense to have a more than 50% difference between 2nd floor and 52nd floor in … building…applies here too…” This was in response to saying that appraisers might price the 15th floor vs the 27th flr at 1 percent more per floor for a higher floor, or 1 percent less per floor for a lower floor such as 15. The views are similarly open. Should they be priced 1 percent more per higher floor? Or value both the same? Same condition…Continued success. Thank you!

My answer – while the 1% rule applies to the difference in floor level assuming no variation in views, it was never intended to measure between the extremes of the 2nd and 52nd floor without modification. In other words, there is a large adjustment in the view from the 2nd to the 3rd floor because the second floor can be blocked by scaffolding when external facade repairs are made. In addition, I can’t imagine a scenario were the 2nd and 52 views are the same. In most cases there is a view break once the lowrise or mid rise buildings are cleared across the street. I have shared this before in these notes but here are two different methodologies I used to show this phenomenon over at my Matrix Blog:

[ChartFloor] Manhattan Price Per Floor Breakdown – 2010

Repost: Measuring Manhattan Values By Floor Level – 2012

New in the Real Estate Lexicon: Strolerification

Strolerification” – It’s a take on gentrification where couples with small children move into a neighborhood and rapidly make it pricey.

The analysis was based on birth rates.

[Click to go to NYT story]

Upcoming Speaking Events

Click on the graphic for the event landing page:

The Housing Narrative Has Officially Changed

I refer you back to my “Theory of Negative Milestones” 2008 blog post that referenced my original 2006 post for context:

With rising mortgage rates, the new federal tax law, a volatile stock market, and economic uncertainty, the conversation about the housing market had been altered.

Here’s a terrific infographic from FT’s real estate cover story on the change: Is Manhattan on the edge of a prime housing precipice?

[click to expand]

The Stock Market Corrected, What Does It Mean For Housing?

First: the stock market is not the economy.
Second: I’ve never been able to credibly correlate housing prices and the Dow Jones Industrial Average with housing prices.
Third: for a brief period I was able to show some vague distant correlation in Manhattan sales and the index, but it hasn’t come close in a while.
Fourth: Focus on jobs and compensation and types of compensation (i.e. cash v. deferred).

All you need to know is that it is an important economic engine for the NYC economy, providing 23% of total wages with 5% of the jobs. And each securities industry job supports 2.5 NYC private sector jobs.

Anything more than that is beyond my comprehension. One thing I should note is that the economy itself appears much more detached from the housing economy in this cycle. This makes the observation of good economic news more confusing than ever – i.e. very low unemployment.

I am somewhat obsessed by the new tariff policies and how much damage they will bring to the economy – think of it as a tax on the consumer who has to pay more for goods produced by domestic firms because there is less competition. That ultimately competes for the amount left over for a mortgage payment as rates are rising.

But hey, I’m no economist. Here’s a screenshot from my phone as I write this today as the market seems to be stabilizing (so far).

As Jane Wells of CNBC tweeted yesterday:


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

CoreLogic’s A La Mode is Pulling A Facebook Privacy Play

One of the tactics of Facebook has long been to “cross the line and apologize” rather than “ask permission.” Now that “A la mode has been acquired, by CoreLogic” the company with a 50% market share of the industry seems to be employing this tactic.

We have been A La Mode users for a decade. Heck, I even appeared on their homepage and in their marketing materials to attest to our firm’s belief in the product. But that was before Dave Biggers sold the company and our belief in the product was replaced with suspicion.

Rightly so. In a routine update to our software, we saw that A La Mode inserted a checkbox in our preferences without advanced notice – the software allows you to see other appraisers’ data attached to a specific comp record. You populate the address and all the information is inserted using other appraiser’s data. And guess what, the other appraisers can see yours!

And it gets better. You can subscribe for a fee and get all your competitors data (assuming they subscribe) and you sign away all your rights to it.

This seems to acknowledge that we own our information because we have to sign away our rights, something appraisers have believed since forever but lenders and AMCs haven’t been on board and simply take it and use it (think FNC).

Industry feedback

Here is the best of the random appraiser feedback I read on this new development (made anonymous).

NO, NOT SMART AT ALL! Appraisers cannot make a decision on behalf of ALL clients they’ve done work for. They are asking for big, really big problems if a client clearly didn’t want the analysis or any portion of the analysis given to anyone. This is another attempt from Corelogic to obtain data they have no rights to. Although, in multiple appraiser shops many of the owners and or managers have already accepted this agreement on behalf of all the appraisers utilizing the software which now puts the associates performing the appraisal(s) in jeopardy. No matter how big a shop you work with or for, you (the individual appraiser) are legally responsible for what you produce and safeguard. Corelogic cannot take the data you analyzed and produced a product for your client and create a derivative product to pass around to other appraisers or potential third parties.

Here is one other issue with this “Smart Exchange” product. At a minimum (without consideration of Corelogics roll in the process) this is what happens. “Joe appraiser is doing an appraisal and Smart Exchange indicates that a “Peer” appraiser has utilized a comparable or even may have appraised a comparable which Joe appraiser wishes to use in his report. “Peer” appraiser rates this property at a C-3, but Joe appraiser thinks its thinks it’s a solid C-4. But because the fear of UCDP compliance issues and fear of having to answer a rebuttal request, Joe changes his rating to match that of the “Peer” appraiser. This in no way passes the USPAP smell test for confidentiality or impartiality. Plus Joe appraiser utilized the “Peer” appraisers photo which could have been the wrong property anyway.

How stupid do you have to be anyway. You pay through the nose for software, subscriptions, appraisal portal fees, insurance, gas, paper, computers, phones and whatever else you need to provide a great product, and in the end you would give it all away so that some big data grabbing company (which you bought the appraisal software from) can sell as “Confirmed” data to eventually put you out of business or at a minimum reduce the appraisal assignment pool to you and many up and coming appraiser. Why would you want to take that chance, makes no sense to me. Maybe not this year or even five years down the road. But eventually appraisers and the public will suffer greatly when all loans will be standardized to one valuation product. Okay, a few of you are going to argue that the physical appraisal assignment will never go away completely. Your right, custom homes or unique construction we will always have arround. But take a look in your market area and tell me how many new Tract home subdivisions (this is even those custom home tracts) are popping up all over. Simply put; Corelogic DID NOT WORK for that data, they are not providing it to you as a compliment to their software or they would have offered to sell it to you. They are TAKING IT from you…..They have no legal rights to it, so don’t give it away.

Appraisers need to THINK (hate to say most are not) about this. If the Lender/Clients data along with the product we produced was not to be closely guarded. Then there would be no laws or regulations about how we handle this information and Corelogic wouldn’t be asking in such a extremely exclusive statement which they want you to agree to on behalf of your clients. Others may say, Yeah but what about those other third parties which we subscribe to that give us information about properties which were appraised by others within that subscription service. Well that pretty simple also. The information provided by those other third party subscriptions are not providing information that can’t be obtained from public records. It all about your data you analyzed to produce a product. Primarily at this time, your quality and condition ratings or any ratings and analysis which may show up and can’t be obtained from public records.

Not so sure what’s so hard to understand about our responsibility.

See below and pay particular attention to “Assignment Results”. Assignment results include how you evaluated and produced your comparable data to come up with the appraised value.

USPAP Confidentiality excerpt:

CONFIDENTIALITY: An appraiser must protect the confidential nature of the appraiser-client relationship. 12 An appraiser must act in good faith with regard to the legitimate interests of the client in the use of confidential information and in the communication of assignment results.

An appraiser must be aware of, and comply with, all confidentiality and privacy laws and regulations applicable in an assignment.

An appraiser must not disclose: (1) confidential information; or (2) assignment results to anyone other than: • the client; • parties specifically authorized by the client; • state appraiser regulatory agencies; • third parties as may be authorized by due process of law; or • a duly authorized professional peer review committee except when such disclosure to a committee would violate applicable law or regulation.

An appraiser must take reasonable steps to safeguard access to confidential information and assignment results by unauthorized individuals, whether such information or results are in physical or electronic form.

An appraiser must ensure that employees, co-workers, sub-contractors, or others who may have access to confidential information or assignment results, are aware of the prohibitions on disclosure of such information or results.

A member of a duly authorized professional peer review committee must not disclose confidential information presented to the committee.

Comment: When all confidential elements of confidential information and assignment results are removed through redaction or the process of aggregation, client authorization is not required for the disclosure of the remaining information, as modified

Coester Chronicles Continued: Skap Counters Big Time (David v. Goliath Edition)

Mandatory reading for appraisers.

More Skap v. Coester

Appraiserfest is almost here!

Signup now!

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 Dow Jonesy;
  • You’ll be less “loco”;
  • And I’ll make a chart.

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
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

October 5, 2018

When Compelling Stories About Housing’s Future Are Dated

When I read this NAR factoid that 77% of Americans think now is a good time to sell, at first glance, it sounded like good news. But if a record number of Americans want to sell, logic follows that they don’t think their homes would be worth more next year.

Here’s another way to illustrate it. There was a great viral video making the rounds recently that made me feel good after I watched it. Except it was fake.

My takeaway is that digging deeper into the stories we read and hear every day about our profession (and, well, everything) should somehow be our new full-time job.

but I digress

Market Report Gauntlet Q3-2018 Week 1: Manhattan/Northern Manhattan

After a long quiet summer, Douglas Elliman published our research covering the Manhattan housing market. I’ve been authoring the expanding series of Elliman Reports since 1994. Most importantly, the Bloomberg piece covering our report was the number 1 read and shared article by the ±350K Bloomberg Terminal subscribers worldwide. Most importantly, our research has never been included in an article with “Clogged” in the title.

Elliman Report: Q3-2018 Manhattan Sales
Elliman Report: Q3-2018 Northern Manhattan Sales

And charts!

Our charts!

Here are some of the key points:

  • Number of sales declined year over year for the fourth consecutive quarter
  • Resale listing inventory increased annually for four straight quarters
  • Most inventory gains were seen in the studio and 1-bedroom markets
  • Co-op median sales price has not experienced a year over year decline in more than two years–
  • The year over year rate of new development sales decline was double that of resales
  • Market share of bidding wars stabilized for three consecutive quarters
  • Negotiability between buyers and sellers has not changed significantly over the past year
  • The bidding war luxury market share was less than half of non-luxury market share
  • Luxury market shifting lower with top ten percent at the lowest level in three years

8 Out of 10 New Apartment Buildings Built Were High-End in 2017

Now this is something I’ve been saying about NYC Metro over the past 5 years. New development has been clearly skewed towards the high end.

This is a key reason why housing affordability has moved to the forefront of the housing conversation – development emphasis has been on higher end across rental, condo and single family development = shortage of affordable and surplus of luxury.

Auction Marketing As Alternative To, Well, Marketing

The auctioning off of real estate is fraught with perception risk and good old stereo-typing. Auctions are assumed by many to be only for distressed sales. There have been many attempts to mainstream the concept into the mainstream.

I look at the auction process for real estate as the selling a number of units faster than the typical market area can absorb. In other words, the seller is compressing marketing time – almost like a present value application – to move the property. This doesn’t always require a discount from value which people often confuse for a discount from listing price. The skill behind auctioning is to create a sense of urgency. There are firms out there that cater to the high end. Since pricing is harder in higher end properties because the product is generally less homogenous, the inefficiencies present opportunities to other types of marketing. It’s still not a mainstream marketing process but as the market softens from the top down, I suspect we will be seeing more of this concept going forward.

[Paramount Realty USA]

Never Underestimate Human Beings Ability To Behave Fraudulently

I always marvel at those who steadfastly believe that gutting all regulations is better for all and the free market will prevail. The problem is that human beings are really good at screwing things up, and aggressively engaging in self-dealing, over time. We have short memories and love to have an edge over our neighbors. The spectrum of risk versus reward never stops moving back and forth as memories fade until are reminded again through another crisis. Since the last cycle did not have any “perp walk” videos, I believe we are more vulnerable to bad behavior. While I do believe “less is more” in the context of regulations, it is more about “smart over generic,” blah, blah, blah, I’m not a fan of gutting a large number of existing regulations.

Here it comes…

This is a reminder, even with historically tight credit conditions.

Mortgage fraud putting lenders in a tough spot from CNBC.

New Ideas on How To Measure Softening Housing Markets

We already have some good ways to see housing slowdowns through:

  • sales declines
  • inventory expansion
  • more auctions marketing companies

…notice how I left out “price trends”? By then it is already too late.

But what about…

Compass: Let’s Do The Math?

This week’s announcement that Compass raised another $400 million, bringing their total to $1.2 billion. At this point, most of the money raised seems to be from two entities: The Softbank Vision Fund and Qatar Investment Authority.

The company expects growth in 2018 to double to almost $1 billion in revenue, according to the person, who asked not to be identified because the information is confidential.

This sentence inspired me to write about this news event. I’ll try to be specific solely on my limited understanding of the brokerage industry:

The average U.S. brokerage commission generally ranges from 4% to 6% but each transaction has two sides. We could even assume that 75% of Compass deals are splits with other companies and 25% have them on both sides of the transaction. To keep it simple, let’s assume there is an average of 5% commission on every deal and I am only considering this revenue as from the brokerage business and not other lines of business they may start soon or have just started. When including the weighting of sides, the commission average works out to 3.12% so let’s call it a 3% commission per deal.

What will be their 2018 U.S. market share of total sales as a residential brokerage company? What’s also interesting is that they tend to be doing business in high split markets

UPDATED – It was pointed out to me by a number of readers that the splits that go to the agents are not included in their revenue projections. So the following was revised to reflect that.

$1,000,000,000 gross revenue (provided by anonymouse source in this story) / 3% blended sales commission = $33,333,333,333 property values sold in 2018 when the year is completed.

From this napkin measurement, I get a $33,333,333,333 U.S. property volume result for Compass brokerage.

Now lets pair this up with the U.S. housing market results. According to FRED, the average sales price of all U.S. homes (new+existing) in the U.S. was $375,200 in 2Q18. The seasonally adjusted annual existing home sale number for August 2018 was 5,340,000 units. According to Census, there were 629,000 annual new home sales, seasonally adjusted using August results. By my math, that means there will be a total of 5,969,000 U.S. new and existing home sales when the 2018 dust settles.

5,969,000 U.S. annual home sales x $375,200 = $2,239,568,800,000.

Compass 2018 market share calculation is

$33,333,333,333 (Compass property sold share) / $2,239,568,800,000 (U.S property sold share) = 1.5%

This suggests that Compass will sell 1.5% of all homes nationwide by the end of 2018.

So with $1 billion in revenue (if true), Compass was given a valuation of $4.4 billion resulting in a multiple of 4.4x in a service (non-tech) industry. Based on past conversations with accountants and others in the brokerage industry, I would have assumed a ratio was more like 1/3 of 4.4, but then again I am at the disadvantage in not knowing the inside details and whatever “secret sauce” they have that hasn’t appeared in any of their press releases to date.

Cities Where It Is Still Cheaper To Own

The cost of homeownership has been rising this year but it didn’t mean that it was better to rent.

What Is A Bedroom?

The Real Estate Board of New York (REBNY) has some very useful explanations for defining what a room, and other living areas are.

Upcoming Speaking Events



Featuring Guest Speaker Jonathan Miller

Presented by Columbia Business School Alumni Club / NY in association with Greenberg Traurig and the New York Metro CCIM Chapter

The published ticket rate for this event is $45/ea. As a member of the NY Metro CCIM Chapter we are pleased to offer tickets at only $20/ea. Seating is extremely limited. To reserve your space please click HERE and use promo code “NYMEMBER” to unlock the member rate.


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

Appraiserfest 2018 is almost here!

November 1, 2, 3 in San Antonio.

Sign-up here with the last coupon offered for the event.

When you’re apparently the “Go To” appraiser for the wrong reasons

I’m not being political here by using this massive New York Times investigative piece on POTUS tax history, but there were some pretty specific points made towards a commercial appraiser in NYC that I wanted to bring up.

The references to this person reminded me of the housing bubble era when certain firms who mastered the art of working with mortgage brokers, were known as ‘deal enablers.’ All of the appraisers of that era that I knew either saw their companies collapse or lost their credentials.

From the NYT investigative piece…

A crucial step was finding a property appraiser attuned to their needs. As anyone who has ever bought or sold a home knows, appraisers can arrive at sharply different valuations depending on their methods and assumptions. And like stock analysts, property appraisers have been known to massage those methods and assumptions in ways that coincide with their clients’ interests. The Trumps used Robert Von Ancken, a favorite of New York City’s big real estate families. Over a 45-year career, Mr. Von Ancken has appraised many of the city’s landmarks, including Rockefeller Center, the World Trade Center, the Chrysler Building and the Empire State Building. Donald Trump recruited him after Fred Trump Jr. died and the family needed friendly appraisals to help shield the estate from taxes. Mr. Von Ancken appraised the 25 apartment complexes and other properties in the Trumps’ GRATs and concluded that their total value was $93.9 million, tax records show. To assess the accuracy of those valuations, The Times examined the prices paid for comparable apartment buildings that sold within a year of Mr. Von Ancken’s appraisals. A pattern quickly emerged. Again and again, buildings in the same neighborhood as Trump buildings sold for two to four times as much per square foot as Mr. Von Ancken’s appraisals, even when the buildings were decades older, had fewer amenities and smaller apartments, and were deemed less valuable by city property tax appraisers.
The Appraisal Institute Succeeded Pushing SB-70 Into CA Law Without Informing Their Own Membership

Their long-term goal for all their anonymous lobbying to dismantle all appraisal licensing is to revert to a previous time before FIRREA when membership in trade groups mattered a lot more. Unfortunately, they are heavily damaging the livelihoods of appraisers in the process. Be sure to shake hands with Scott DiBiasio, Bill Garber, Jim Amorin and the rest of AI executive leadership at your next AI meeting.

The background on this insanely damaging law to appraisers can be found in the August 3, 2018 issue of Appraiserville.

I’ve been keeping tabs on SB70 and saw that it was signed into to law this week.

Here is what I wrote back in August about SB70:

Here’s the biggie:

(C) States that there may be assumptions that the appraiser has not verified that may significantly impact the appraised value of the subject of the report. The whole purpose of USPAP is to provide credibility in reporting to protect the public trust. With the wording of this bill, any appraiser could take any point of view and not back it up with verifiable data. For example, an appraiser could take a seller’s word on potential uses of their property and the appraiser can simply restate them and not provide any support to verify the claims.


This bill allows the creation of a worthless document that demeans the value of an actual diligent appraisal.

This will open up fraud and overvaluation on a scale not yet seen before. It renders our profession equal to a fortune teller (no offense to fortune tellers). This bill shows a blatant disregard for the public trust from the real estate’s largest trade group.

But there is more:

This bill, if it becomes law on January 1, 2019, is only good until January 1, 2020!!! It is only valid for one year which clearly shows how desperately AI National needs to claim a win after years of losses in fighting for evaluations against their own membership’s wishes. They are throwing ethics aside! All bets are off now! Just get a win!

This bill destroys the validity of what an appraisal actually is because good appraisers can now perform like bad appraisers without concern. There is no accountability and no verification required if this bill is passed.

Plus, this bill changes the use of the report from the single client concept to a universal use as long as all the names are listed. How does this square up with their own code of ethics?

There is one glaring oversight by the AI lackeys in Sacramento that signed-off on this bill in secret that shows their own greediness to advance up the AI National hierarchy: There are about 10,000 credentialed appraisers in California. I don’t know how many AI designated members are in California, but I’m assuming it is substantially less than that. If this bill becomes law, can anyone imagine the explosion of fraud by people desperate to take shortcuts, ESPECIALLY AS THE MARKET STARTS TO COOL? Remember, AI leadership in California signed off on a bill that makes verification unnecessary. I’m sure a majority of AI membership in California are decent and competent appraisers. But now they have to compete with the bad eggs or those that will quickly become bad because they can say and do anything without verification. Not only AI members get to do these simple reports, but anyone with a license and a pulse does as well.

And you can bet that AI National will press for renewal or permanence in 2019 without telling their CA membership. I was told from a very credible source that the strategy all along was to not tell the membership what was going on and sneak in the bill in the second year of a 2-year review process. Congrats AI National, you got a win and hope you can sleep at night. Oh, and shame on all of your leadership.

Texas Appraiser Licensing & Certification Board Withdraws Proposed Rule To Allow Appraisers To Drop Licensing Requirements to Perform Evaluations

AI National’s Scott DiBiasio has been pushing the idea of allowing appraisers to drop their credential requirements to perform evaluations on commercial assignments in a number of states. We have witnessed these deceptive efforts in Florida. The Texas Board has been pressured as well but they voted against it:

MOVED, that staff is authorized, on behalf of this Board, to withdraw new rule 22 TAC §155.3, Work Relating to Commercial Real Estate Transactions, as published in the Texas Register.
Here is some anonymous feedback from an appraiser in Texas:

In an interesting related story just received. An informed source indicated that independent appraisers would never get the mark to market work since it will all go to the nationals with deep pockets since the users are looking for the assurance that there will be somebody to sue if the deal goes south.

Coincidentally, xxx saw an RFP the other day that specified – national firms only.

This story likely will/may relate to evaluations too. All the business will go to the nationals who set up divisions to produce these types of reports while independents sit on the sidelines waiting for the call with trepidation and reluctance since we all know the job needs to be done thoroughly. But, we’ll never get the call anyway since users will hire nationals they can sue.

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 willing to go to a food mart at night;
  • You’ll measure your bedroom;
  • And I’ll review some charts.

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
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Real Estate Blockchain Reads

Appraisal Related Reads

Extra Curricular Reads

September 28, 2018

A Third Wedding, A Birthday, An Anniversary and a House

It’s the week before what I have dubbed the third quarter market report gauntlet when real estate firm Douglas Elliman publishes our 30+ housing market research. This coming Tuesday the first report to go live covers the Manhattan sales market. It promises to be a good read. But before I make it to Tuesday, I have to celebrate a few things:

1) My third oldest son’s wedding (as you are reading this note)
2) My birthday
3) Our company’s 32nd anniversary
4) And most importantly, our company’s fiscal year-end

Incidentally, the son (3rd oldest of 4) who is getting married on Friday could solve the Rubik’s Cube in a little over a minute, but I am completely clueless how to do that myself. But I have jumped out of a perfectly good airplane in my youth and thankfully lived to advise you not to do that…let alone solve Rubik’s Cube while free-falling…

I’m hinting here..these Housing Notes are going to be a little light this week.

but I digress…

Annual Income Required To Buy A Home by City

If only I could live in OK but be paid a New York wage. Sigh. Incidentally, the $103,235 required for New York City would be about $20,000 short if you instead wanted to rent a 1-bedroom apartment in a newly developed Manhattan building. Housing costs in the other four boroughs bring the average down.

[click to expand]

NAR: 2018 Profile of International Transactions in U.S. Residential Real Estate

Since linking country of origin to real estate transactions is a no-no in U.S. real estate due to fair housing and redlining laws, unlike much of the world, the best resource we have, unfortunately, is an NAR survey: Profile of International Activity in U.S. Residential Real Estate

[click to expand]


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

38% Increase Into The Profession in Three Years

The following stats from The Appraisal Foundation shows a rising number of people entering the appraisal profession. The projected number for 2018 represents a 38% increase over 2015.

The propaganda being fed to regulators and the users of appraisal services is misrepresenting the state of the profession. To my loyal Appraiserville readers, please let me know when you hear a speaker convey the declining trend story in a public forum so we can inform them.

Indirect Appraiser Pressure of The Daily Kind

An appraiser shared this email from a mortgage underwriter:

“I saw you called a few days ago and I apologize as I have been very busy. If you can just email back notes as to why your not changing value or you can input notes into the appraisal. This can give the borrower a better understanding why the appraisal is low. If your updating value; that is find too.”

My response to the appraiser:

“Good grief. The Appraisal already explains why the value is the value in the report to your client – the bank. The lender is the one to explain to the borrower if they choose to. It’s not on you. Consider charging a consulting fee to make that explanation.

This is what I call the-clueless-19-year-old-chewing-gum-on-the-phone-syndrome.”

The appraiser who sent this to me saw the deeper meaning referring to all the typos and lack of response:

“We are a society and culture in adult age with no more education and teaching than a text messaging two year old.

Now dear Appraiserville readers…imagine being delivered this crap multiple times a day. How can appraisers not be jaded and serve up a lot of righteous indignation when having these conversations? Who stands up for appraisers who go through this?

Fannie Mae plans appraisal waivers for high-needs rural loans

Here’s the logic. To avoid requiring the borrower from making costly repairs, but still reduce the risk of loan performance, Fannie plans to waive the appraisal but order a home inspection.

Translation: Defining the cost of repairs is more important than understanding the value of the loan collateral.

Good grief. This makes no risk management sense unless the taxpayer was willing to pay for this in the future if something goes wrong. Fannie is so worried about a few extra days (or weeks) with a rural appraisal in the loan process in the context of a 30-year loan period that it overpowers the need to assure the value is supported.

Fannie Mae plans appraisal waivers for high-needs rural loans [NMN]

Appraiserfest in San Antonio is a Happening AND its happening on November 1,2,3!

Can’t wait!!!

OFT (One Final Thought)

Like Warren Miller’s classic ski movie “Steep and Deep” – ok not really, but who doesn’t love a good 70s/80s Warren Miller ski movie? Nobel economic laureate Paul Krugman wrote “Steeper Versus Deeper (Wonkish):Did finance cause the Great Recession, redux.

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 wedded to their ideas;
  • You’ll be more wedded to things;
  • And I’ll continued to remain wedded.

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
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

September 21, 2018

Even Rats Are Safety Orientated In Condo Housing

In high school, the big stupid prank was pulling the fire alarm. At one point, the school administration covered the alarms with a chemical that would turn the prankster’s fingers pink. Upon inspection by teachers and administrators, the perpetrator was outed. Of course, this was the seventies and gloves weren’t invented yet.

In NYC we had the Pizza Rat and now…

but I digress…

The Financial Crisis In Retrospect

We’ve had a decade to reflect on what happened. I’m finding out that there is a limited consensus on the specific cause or the moment of truth. Marketplace put out a piece with a video of Dodd and Frank that is way too long. Frankly, I ran the video as background noise when I was working. Frank famously missed the development of the crisis years earlier and Dodd was outed for being a “Friend of Angelo” so it is weird to see them placed as the elder statesman of the fixing of the crisis. Dodd-Frank was overreaching and tried to prevent the past crisis from happening again. Yet each future crisis will be based on something emerging from the distortion of the past. This is a national platform yet it got fewer views (765) than my friend Phil Crawford gets on his Voice of Appraisal podcasts.

However, there was an epic New York Times Business section infographic that I implore you to look at. Click on the graphic to explore.

Here’s a Bloomberg News series of interviews a la “Where were you?”

Must-reads reflections on the financial crisis

Barry Ritholtz on Misunderstanding the Financial Crisis [Bloomberg Opinion]

The Day the Economy (Almost) Died [New Yorker]

What caused the financial crisis? The Big Lie goes viral [WaPo]

10 Things People Still Get Wrong About the Financial Crisis [Bloomberg]

“Unprecedented amount of fraud”: Decade after Great Recession, Denver attorney still cleaning up Lehman mortgage mess. [Denver Post]

The Shaky Ground Edition [Slate Money Podcast]

The Causes and Costs of the Worst Crisis Since the Great Depression [The Balance]

Visit the Appraiserville section below – “Reflecting On The Financial Crisis a Decade Later” – a snippet of my own take on the front lines as an appraiser.

Good Enough For Government Work

NYC OMB report on Current Economic Conditons

This NYC OMB economic report is more numbers-centric than the Fed’s Beige Book, but just as digestible. It chronicles the same slow down in sales that I reported on earlier this year. Also, Brooklyn saw the most permits while Manhattan had the second-lowest of the 5 boroughs.

Here’s page 8 that covers the residential market:

NYS Office of Comptroller Report On The Securities Industry

Wall Street (The Securities Industry) has been a core economic engine for decades. The Office of the New York State Comptroller just released their report on the state of the securities industry.

Since the financial crisis, their NYC tax revenue share has remained stable…

as has its ratio of salaries to the private sector…

and employment growth has been anemic…

and although bonuses remain high, the bonus as a percentage of total compensation is not what it was before the financial crisis (>50%)…

Bonuses made up 40 percent of securities industry wages in 2017, a much larger share than in any other industry.

And with deferred comp growing, gone are the days when the bonus announcements would cause an Oklahoma Sooners-style rush to buy real estate. Still, the performance of the securities industry is critical to the housing market and the NYC regional economy, so there’s that. Hopefully news outlets will completely stop doing stories on Wall Streeters rushing to buy the latest edition Maybachs during bonus season.

Upcoming Speaking Events

September 26, 2018 – Asian American Real Estate Association of America (AREAA) – East Meets West Real Estate Connect Conference. “This year’s four keynote speakers, highly regarded professionals in their respective fields, are John Catsimatidis, Chairman and CEO of Red Apple Group; Streeteasy’s General Manager Susan Daimler; Adam Spies, Chairman and CEO of Cushman and Wakefield, and Jonathan Miller, President and CEO of Miller Samuel.”

You can register here.


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

Reflecting On The Financial Crisis a Decade Later

Over the past several weeks, there has been a slew of thought-provoking pieces on the financial crisis of ten years ago. There are so many varying views on what happened and what caused it. It was such a systemic event that ten years later, there are strong opinions on the cause and the lessons learned and not learned. I’ve always looked at it from a valuation/mortgage/credit standpoint since that has been my business orientation. I saw the events roll out from my perspective, but I only saw a sliver of what the crisis represented.

Mortgage brokers I knew that thrived back then, are either gone or generic loan reps at large institutions, never to be heard from again. Appraisers I knew who succeeded on the massive volume thrown to them by star mortgage brokers collapsed and lost their licenses or their businesses. Those appraisers never lost their self-respect because they didn’t have any, to begin with.

I was a confusing and stressful time as I wondered what math class I missed in high school and what ethics class I missed in college as our business suffered and my competitors made deals with mortgage brokers from the back of limos. In 2005, I was sure I would be out of business by 2008. Fortunately, it worked out in the long run but the period from 2005 to 2008 felt like an eternity.

Late in the crisis, I provided numerous consultations to the office of NYC Attorney (then Andrew Cuomo) to understand the problems appraisers faced from enormous economic pressure by mortgage brokers to hit the “number” but being disappointed when Cuomo opened the AMC pandora’s box with HVCC. A deputy told me they pushed the envelope as far as their authority reached, but it enabled AMCs, the institutional middleman that has mostly served to destroy quality valuation practices in the U.S. Cuomo’s office wanted names of the perpetrators and I basically said it was systemic and there were no names to give because it would be almost all the names in the mortgage broker industry. After all, why did a mortgage broker get to pick the appraiser they used when the mortgage broker only got paid if the deal closed. At one point I was literally on the phone with Cuomo’s office and at the same time got an email from a mortgage broker in Florida who was looking for an appraisal to be completed in New York that needed to be at least $1,200,000 so the borrower could draw down money to buy a boat. At that moment I could have forwarded that email to the AG, but because nearly all mortgage brokers spoke like that, it confirmed to me that it was systemic and not a few rotten eggs. If only that mortgage broker knew how close she came to losing her license.

Although the Lehman moment didn’t cause the financial crisis, it was a symbol of the beginning of true consumer awareness of the problem. Sales contracts collapsed 75% in my market from September to December. However, I saw the rumblings begin in the prior summer when the two Bear Stearns mortgage hedge funds and American Home Mortgage collapsed. I experienced this first hand when the head of those funds join a company that was going to acquire our company. I disconnected from the relationship shortly after that.

My wife and sister, who are my business partners, sat down and reinvented our business, jettisoning appraisal management companies and most retail mortgage work, inverting our practice away from mortgage rate dependent work. In many ways, the experience was a gift, because our firm became more profitable and we focused on good clients. We avoided clients represented by a 19-year-old chewing gum demanding to know where our report was ordered 24 hours ago.

RAC Member Ernie Durbin Goes Mano a Mano With Phil Crawford

My good friends Ernie and Phil show us a Cincy-style discussion on appraiser issues of the day at the 2018 RAC conference last week in Plano Texas.

Calling Zestimates into Question and Identifying Their User Addicts

The New York Times did a great piece on Zestimates and the addicts that check them daily. I chime in about your horoscope – BTW I’m a Libra so I’m clearly “well balanced.” Then Ryan Lundquist shows how much the Zestimate weights the current average sales price with an actual example. It’s amazing.

John Brenan of The Appraisal Foundation Pens A Thoughtful Piece on “Why Appraisers Matter”

Read the piece in Realtor Magazine.

the number one caveat for consumers is that these estimates are not a substitute for formal appraisals
Appraisal Institute is Working Hard to Fog The Rural Appraisal Narrative

The following CSBS article essentially written by the Appraisal Institute which is being distributed by lenders – continues to misrepresent the idea that the number of appraisers is falling and no new appraisers are coming into the profession.

Notice how CSBS tracks the number of appraisers from the peak of the housing bubble? If this organization’s or the Appraisal Institute’s intentions were honest, they would show the trend before the housing bubble as well. In this piece, they show that credentialed appraisers have fallen 21% in 10 years which is far less than Appraisal Institute membership. There are actually more appraisers now per mortgage origination than back then. Why? Because despite record low rates, mortgage origination volume has fallen since 2008.

That my friends is the missing context here. In other words, the CSBS/AI research piece is at best propaganda and at worst, a lie.

Here is the Appraisal Institute’s (I mean CSBS’s) summary of observations (with my comments appended):

  • Some rural and underserved areas do not have enough appraisers. That’s been the case for one hundred years and only became problematic when AMCs became dominant and typically pay less than half the market rate.
  • The National Registry of Real Estate Appraisers does not accurately reflect local shortages of appraisers. And it doesn’t show surpluses, nor does it reflect non-free market business practices of the AMC industry that AI National so dearly loves.
  • The Title XI waiver process is unclear, lengthy, and underutilized. This is a bizarrely desperate and a made up reason that sounds impressive but says nothing.
  • Congress acknowledged with the passage of the “Economic Growth, Regulatory Relief, and Consumer Protection Act” that obtaining appraisals for certain rural transactions are an issue and that an avenue for relief is needed.This a wildly misleading statement of what this act actually is. According to ABA: to qualify lenders must show that three appraisers were not available within 5 days beyond a reasonable time frame (determined by the bank) for an appraisal. Appraiser licensing and credentialing processes create barriers to entry.Name one! We’d have a lot more doctors if we didn’t require an education and experience.

Can these reasons be any more self-serving and dumb?

Appraisers Taking Exams Jumps 14% YTD 2017 to 2018

This is fresh from the Appraisal Foundation:

Over the same period last year, there has been an increase of 9% people taking the Licensed Residential exam; an increase of 41% taking the Certified Residential exam; and a decrease of 10% people taking the Certified General exam. The overall total equals a 14% increase in the number of people taking an exam in 2018 vs. 2017.

Here is a chart that tracks the age range of test takers from 2013 to 2017. The 26-35 subset (purple) is the highest for each year showing that youth is indeed entering the profession.

More Examples of FIRREA-Breaking Laws That Require an MAI-Designation

A few weeks ago I posted several legacy laws in California that were pre-FIRREA and are still on the books. I share these because these laws and others like it allow AI National to be run like a dictatorship without accountability to its membership. If a member criticizes the organization, then that member can be suspended or kicked out, having a severe impact on their livelihood. Therefore I am on a mission to share these laws. Here are three more to investigate:

  1. City of Santa Fe, New Mexico

Purchase of City-Owned Property

Requests to purchase parcels or portions of City-owned property are first reviewed by all relevant City departments to determine whether the property is planned for future uses by the City. If the City verifies that the property can be sold, the request is forwarded to the City Council for conceptual approval of the sale. If the sale is approved in concept, the applicant must provide a current survey of the property along with an appraisal prepared by an MAI-certified appraiser. Upon receipt of these items, the purchase request is forwarded to the City Council for final approval. Purchases are often subject to reservations for existing utilities or easements.

  1. City of Salt Lake City, Utah

Offsets to Impact Fees (18.98.070)

E. The value of land dedicated or donated shall be based on the appraised land value of the parent parcel on the date of transfer of ownership to the city, as determined by an MAI certified appraiser who was selected from a list of city approved appraisers provided by the director and paid for by the applicant, who used generally accepted appraisal techniques.

  1. City of Indianapolis, Indiana (h) (Note: Updated May 9, 2016, but contains very outdated references for designations!)

Consolidated Zoning/Subdivision Ordinance

Market Value: For purposes of flood control regulation, the market value of the structure itself, not including the associated land, landscaping or detached accessory structures. The market value must be determined by a method approved by FEMA and the Bureau of License and Permit Services. If an appraisal is used, the appraiser must have at least one of the following designations: 1. Member of the American Institute of Real Estate Appraisers (MAI); 2. Residential member of the American Institute of Real Estate Appraisers (RM); 3. Senior real estate analyst of the Society of Real Estate Appraisers (SREA); 4. Senior residential appraiser of the Society of Real Estate Appraisers (SREA); 5. Senior real property appraiser of the Society of Real Estate Appraisers (SRPA); 6. Senior member of the American Society of Appraisers (ASA); 7. Accredited rural appraiser of the American Society of Farm Managers and Rural Appraisers (ARA); or 8. Accredited appraiser of the Manufactured Housing Appraiser Society.

More to come.

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 reflective;
  • You’ll learn how to debate cincy-style;
  • And I’ll say OK.

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
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

September 14, 2018

The Pie v. Cake Debate As The Ultimate Housing Market Analogy

I’m attending a RAC appraisal conference in Dallas at the moment so these are admittedly brief Housing Notes. These are the final days of my two-year term as RAC president and it has been one of my prouder accomplishments listed on my resume (my CV for expert witness testimony is 18 pages so I’m not just saying this).

But I digress…

I know what you’re thinking, “pie versus cake” as a housing analogy doesn’t make sense. And the fact that the cake v. pie choice won the poll even though it didn’t have the most votes shows the power of pie over cake. It’s just the way it is.

But I digress…again…

Elliman Report: August 2018 Manhattan, Brooklyn & Queens Rentals released.

This week Douglas Elliman Real Estate published my research on the August 2018 Manhattan, Brooklyn and Northwest Queens rental market. I’ve been the author of this expanding Elliman Report series since 1994.

Elliman Report: 8-2018 Manhattan, Brooklyn & Queens Rentals

– The number of new leases increased year over year in three of the past four months
– The gain in year over year median face rent was only observed in the studio market
– Market share of concessions expanded year over year for the 39th consecutive month
– Existing median rent declined year over year for eight of the past nine months
– Non-doorman median rent, which covers half the market, has not seen an increase in twelve months
– The largest decline in rent was seen in the luxury segment or top ten percent of the market

– Net effective median rent slipped annually for the eighth time in nine months
– Market share of concessions expanded year over year for the 31st consecutive month
– New development market share rose year over year for seventh consecutive month skewing prices higher

QUEENS Overview
[Northwest Region]
– After sixteen consecutive months of annual rising concessions, market share fell for the second month
– Average square foot of a rental rose annually for the fifth time in six months
– A large surge in 1-bedroom new leases as all price trend indicators posted large gains

Here are a collection of charts from our gallery.



Queens (NW)


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

I’m hiatus this week

Lots of things to discuss next week when I return back to 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 more rental-like;
  • You’ll be more committed to pie;
  • And I’ll chart my course.

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
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

My curated reads/links will be back next week.

September 7, 2018

Can Housing Lightening Strike Twice?

But I digress…

Fall 2018 Elliman Magazine – Market Update

The Fall 2018 Issue of Elliman Magazine was just released and as usual, I provided a two-page spread showing interesting (my definition, lol) of what is going on in some of the markets under their national footprint. The magazine is well done and a fun aspirational read.

[click to expand]

Here’s the full online version of the magazine:

Ritholtz: Anatomy of a Crash

Since it has now been a decade since the financial crisis and the Lehman collapse, there has been a lot of retrospectives of that era – to which I contend we are still in the “hangover” phase, with unusually low-interest rates and distorted credit conditions. I call it the “Lehman Moment” not because Lehman caused the financial crisis, but because it marked the moment where the full scope of the crisis finally became very visceral to the consumer.

How so, you might ask? From that moment through the end of 2008, Manhattan sales contracts fell about 75%, that’s how.

When I saw my friend Barry’s insanely direct quip about this period in history…

$LEH was merely the first trailer in the trailer park to be destroyed by the tornado

…so I thought I’d share one of my favorite graphics from his must-read “The Big Picture Blog” in 2009: 7 Factors That Led to Crisis

Leaning Tower of San Francisco and that New (Cracked) Addition

It has been a while since I wrote about this unfortunate situation in San Francisco (h/t @sacappraiser) @SacAppraiser).

New crack found at San Francisco’s sinking Millennium Tower

This 58-story building built in 2009 has settled 16 inches over the past two years and continues to tilt! And residents heard a loud creaking and popping noises on Tuesday as a crack appeared on the 36th floor. Unsettling and it sounds like it is going to be in litigation for years.

[San Francisco Magazine]

Here is the problem with price estimators like Redfin, Zillow, Trulia, and, is they are blind to things like whether a building has sunk 16 inches in the past year.

For example, Redfin says that unit 502 at 301 Mission Street (Millennium Tower) closed May 14, 2012, for $1,875,000. It came on the market in 2016 and then was removed after a few price changes.

But it is worth $907,000 more today than in 2012 (or whenever the contract was signed since 2009) even though the building has sunk 16 inches?

Something to consider if you misuse, and these companies misrepresent their accuracy of these valuation tools. At best case, they are macro looks but the consumer has no idea whether they are accurate or not.

Millennials Less Positive About Homeownership Than Gen Z But Both Have No Money

Baby Boomers>Gen X>Millenials>Gen Z…

Data research firm PropertyShark performed a survey which I thought provided some insightful results considering my wife and I raised 3 millennials and 1 Gen Z. They covered the biggest obstacles…

to the deciding factors beyond price…

Enjoy It While You Can: Chickenwire Embedded Glass Means You Can Lose Your View At Any Time

The New York Times had a great piece on lot line windows and the photo couldnt have been better:

In the city, it is the norm to have buildings constructed directly on the lot line, unlike a typical suburban single family home. If the adjacent lot is vacant on consists of a lowrise building, underutilizing the zoning envelope, lot line windows are often installed. These windows can be seen in walkups, lowrise, and highrise buildings.

As the saying goes, “in New York City, no views are guaranteed.” If a condo unit has lot line windows and view is enabled over a vacant lot and zoning allows the same height as your unit, then I’d say you’re “window” of enjoyment is very limited. If you look over a landmarked historic structure, then you may reap the benefits during your time of occupancy. But be careful, there is no guarantee.

Lot-Line Window? Keep Your Fingers Crossed [NY Times]

Dying To Get Into The Market, Grave (versus) Housing Price Trends

I’ve always been fascinated by the economics of cemeteries.

This quirky Bloomberg story: Think Chinese Home Prices Are High? Try Buying a Grave provides the spurious correlation.

“Supply is very limited,” said Hao Hong, a chief strategist at Bocom International Holdings Co. “We’ve heard about some people who bought flats in Shanghai to store cremains instead of expensive graves.”

So many puns…

Cash Dominates The Detroit Housing Market

In lower priced housing markets such as Detroit, cash often dominates as a mechanism for purchase. The Motor City saw 87% of its purchases come in the form of cash with a median sales price of $32,428 per ATTOM (U.S. median is $234,000).

In booming markets with a distressed real estate history, cash still rules. Our research for the Elliman Report in Miami Beach and the mainland showed a 42.6% cash share, down from 53.6% three years ago. Investors prefer cash and lenders are still burnt from the housing bubble era a decade ago, despite the market’s transformation to luxury.

In high priced markets like Manhattan, our research shows a 54% cash share in 2Q18 and about a 90% cash share for purchases above $5 million (top 8% of the market).


As the industry changes, it is more important than ever for appraisers to have a longer term plan…from my friend Nathan Pyle.

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

Prophet, Not Profit

Ryan Lundquist at the must-read Sacramento Appraisal Blog served up this ditty. Be sure to read the post comments.

To conclude, there are no actual prophets. Only shills that claim to be.

A New MAI Acronym Making the Rounds For Good Reason

When I was taking an appraisal class in NYC by the Appraisal Institute back in the day, the 2 MAIs teaching the class sort of bragged that the “MAI” designation stood for:

“More Annual Income” but someone in the audience quipped: “Made as Instructed”

Those two definitions still remain in the appraiser-verse.

With the pre-determined anointment of 2x president Jim Amorin after 12 months of a bogus replacement search by the senior executive team to get their guy in to fill the vacated CEO position of the MAI (gasp), a new definition has appeared:

“More Amorin Influence”

Sadly, this move probably symbolizes the point of no return for the Appraisal Institute and there is at least anecdotal evidence that many members are looking to renew one more year and then think about leaving the organization.

Confusion about acronyms

As quoted by an MAI in Florida

MAI is not an acronym (i.e. it is not Member of Appraisal Institute). The MAI designation represents the designee is affiliated with the Appraisal Institute. The Appraisal Institute is a global organization for real estate appraisers.

I suspect most of the membership is unaware of this differentiation.

During my career, I have been told on several occasions that after the merger between American Institute of Real Estate Appraisers (AIREA) and the Society of Real Estate Appraisers (Society) in 1991, the newly formed Appraisal Institute somehow lost the ability to define “MAI” as “Member, Appraisal Institute.” I haven’t been able to cite this but I do find it strange that most older members seem to think that’s what it stands for when the Appraisal Institute web site makes no mention of it.

UPDATE Friday 9/7/18

This AI National position was just shared with me from a regular reader of Appraiserville:

The acronyms no longer worked after the merger between the American Institute and the Society back in 1991. Previously MAI meant “Member Appraisal Institute” and the SRA meant “Senior Residential Appraiser.” The board at that time decided that in the new organization those words were no longer relevant. However, they did not want to change the letters as the letters are widely recognized around the world.

The designations therefore are collective service marks, similar to IBM. (IBM faced a similar problem when the words behind the letters lost relevancy but the company did not want to give up the widely recognized IBM name.)

It doesn’t correlate with what I’ve been told, but at least AI National seems to have an official position. They might want to weave this into their website somewhere so their own membership knows this.

Here Is Why The MAI Designation Keeps Members From Criticizing The Executive Leadership

In a direct violation of FIRREA, there are local laws that require the MAI designation. With the advent of appraiser licensing, private organizations do not outweigh a licensed appraiser if all qualifications are equal. Membership has been reluctant to criticize the Appraisal Institute’s behavior because they can suspend or cancel your designation. If that economic leverage over membership did not exist, the organization would collapse. And that is a shame when it could be a leader in these uncertain valuation-related times.

Here are two examples in California:

  • The City and County of San Francisco []

“Qualified Appraiser” shall mean a person who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective, holds a certified general license issued by the California Bureau of Real Estate Appraisers and the designation of MAI from the Appraisal Institute, and has five or more years of recent experience appraising real estate of the same type and in the same city, county, or wider area, as applicable, as the subject Real Property.

  • Port of Los Angeles (RFP for Appraisals dated 12/29/16) []

Proposed Appraiser must have a current MAI or SRPA designation from the Appraisal Institute or ASA designation from the American Society of Appraisers.

Biting The Hand That Fed You

I think many appraisers aspire to sell their firm to a larger company if they don’t have a family succession plan. But beware. The appraiser will find themselves forced to adjust the new rules and culture and some may do things they shouldn’t. The following litigation reveals the inside of a deal what looks to have some mind-blowing numbers in the valuation industry and some questionable behavior.

A well-known commercial appraiser in NYC metro, Joel Leitner, that ran a “high volume” shop, was acquired by BBG, a national firm in 2014.

This is the 2018 lawsuit.

The high dollars and actions are compelling. I can only assume that this firm needed NYC coverage very badly to legitimize their growth strategy, and based on the lawsuit result, it didn’t seem like enough for the appraiser after the fact.

If you want the short story, the judge found in favor of BBG so Leitner has to pay them $187,577.50 in claims and honor the 2 year non-compete from his April 2018 termination date. Wow.

Supreme Court of the State of New York, New York County

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 in a magazine;
  • You’ll lean and tilt more;
  • And I’ll try not to take a grave position.

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
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

Reads, Listens and Visuals I Enjoyed

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Appraisal Related Reads

Extra Curricular Reads

August 31, 2018

Reflecting On Housing History a.k.a. What’s in the Fridge?

My wife and I just returned from vacation (reverse-vacation-commuting so to speak) and were well-rested, happy and rejuvenated until this…nothing good was to be found in the fridge. It made me want to…

But I digress…

How The Luxury Market “Feels” Across NYC Metro

This weekend’s New York Times Calculator column in the real estate section uses our absorption (months to sell) data across the region to illustrate the pace of the luxury market in each of the areas (their respective top 10% of sales). It brings to mind that tired old phrase, “every market is different.” Notice the wide range of starting luxury thresholds for each of the markets covered.

As Markets Change, Real Estate Language Changes

I’ve always marveled at the art of re-orientating perspective to sell the same asset. Used cars are “pre-owned.” In China “pre-owned” houses are actually called “used.” In the U.S. pre-owned homes are called “existing” or “re-sales.”

In the marketing of Manhattan properties, the sales language is changing as the market cools.

I divide the language of selling into three categories: re-orientation, yelling, free stuff


In the realm of changing orientation, my favorite phrase is “price improvement” as a replacement for “price reduction.” The switch in phrases coincides with the switch from seller’s market to a buyer’s market. The change in terminology reflects who has the upper hand in the market. A buyer gets a price improvement and a seller gets a price reduction so in a buyer’s market (I do hate that description but stay with me on this), the new price is more favorable to the buyer since it has been lowered so that is what is featured.

That’s my theory anyway.


Yelling suggests urgency and there is a lot more of that. ALL CAPS and exclamation points are on the rise as supply increases. The need to stand out becomes more critical.


Free Stuff

Free stuff, like cupcakes or even free cars, raises traffic but in reality, I am skeptical if they raise the quality of their leads. However, they bring attention to the listing and more traffic which helps the agent convey to the seller that they are doing something to enable a future sale in the slow market. More supply = more cupcakes. And then I wonder – in a cupcake surplus, will that tighten the housing market? I wonder.

Sometimes even discounts need extra sweetening. Magnolia Bakery cupcakes were part of the deal for the first 12 visitors to an open house for a West Village townhome that in May got a cut to just below $10 million.

Think of the logic for a second. The person willing to spend $10 million on a home will be drawn to the opportunity to eat one of twelve cupcakes that cost $56. It seems ludicrous, but showing “action” to sellers in the current market is the agent currency of the day.

Scratching & Denting The Housing Bubble

Curbed has a great long-form read with epic illustrations and my only criticism is the SEO-centric title: 10 years after the financial crisis, is the housing market still at risk?

The topic of the story is actually the subtitle: “Why the housing bubble caused a crisis—and what’s different now

I learned a new phrase in this piece – “Scratch & Dent RMBS” that wasn’t explained in the article so I looked it up at a Fitch Ratings from a 2009 press release:

The Scratch and Dent transactions reviewed were comprised at the time of issuance of some combination of performing, re-performing, sub-performing, or non-performing collateral. Many of these transactions contain collateral that was seasoned and/or seriously delinquent at the time of the transaction’s issuance. The reviewed transactions were issued in 1997 to 2007.

Because the GSEs only buy qualified mortgages, the remaining crap is issued by private institutions. It only accounts for 5% of mortgage bonds today and the other 95% is issued by the GSEs. During the bubble, non-GSE issuance was far higher.

The low bond share since 2008 represents why mortgage underwriting standards remain so tight, as institutions hold a lot of mortgages in their own portfolios.

And there is an epic infographic in the Curbed piece. Click for massive image.

New Tax Law Coverage Illustrates A Lack of Understanding of Housing Behavior

I came across a New York Times piece that looked at price trends as indicative that there has been no real impact from the new federal tax law on the housing market. The Trump Tax Cuts Were Supposed to Depress Housing Prices. They Haven’t.

It was a rehash of a Ken Harney piece in the Washington Post on June 13th: The new tax law was supposed to cause a slump in housing values. It hasn’t materialized — yet.

Relying on price trends is the same flawed logic used during the housing bubble. Pick any market back then. Housing sales fell sharply eventually leading to a sharp drop in prices. Peak prices nationwide were seen in 2006 while peak sales were achieved a year earlier. I continue to be amazed at how this continues to be missed in economic circles.

Think of a seller anchored to a ridiculously high list price. It takes them 1-2 years to de-anchor and not feel like they haven’t left money on the table. What happens when a housing market is exposed to a federal new tax law overnight? The sellers continue to demand their price and a rising number of buyers opt not to pay it. In other words, sales decline first. This is exactly what is happening in high tax, high-cost states right now.

And it is true, the new federal tax law likely won’t have any real impact in 80% of U.S. markets because of their much lower housing prices, mortgage amounts. property taxes and SALT. The doubling of standard deductions made it irrelevant. But let’s not proclaim the same goes for the entire U.S. when without too much effort you can see the slowdown in real-time in high-cost markets. This article treated the national housing market as, well, a single market. The new federal tax law, as far as housing goes, was designed to have the most impact on high-cost housing markets such as those found on the west coast and the northeast and the reform aspect centered on reducing the amount of itemization.

We are seeing slowing sales in the northeast and west coast right now, 9 months after the law became effective. Price trends are not a reliable basis for the premise being suggested in this piece. Here’s how it goes:

  • external impact (tax law)

  • sales decline (yes)

  • inventory rises (happening now in the U.S. including NE and West)

  • prices slip (next)

In other words, 9 months is way too early to be calling for no impact. We can see it happening in NYC right now.

A Traditional Broker Branded As Tech Continues To Confuse

Compass continues to confuse.

  • They recently rescinded their plan to license their technology to competitors after hailing it as the next step of expansion. Days later that plan was met with their own agent’s outrage and was immediately rescinded. It makes me wonder if they really have a strategy. On one hand having all that VC money is a compelling growth story, but on the other hand they have to develop a sustainable model to be able to IPO or otherwise cash out. No sign of that yet.

  • Compass just announced they are starting up a commercial brokerage firm. All along I thought their high tech valuation was predicated on them being a “tech” firm. Have they somehow created a commercial equivalent of their residential software?

  • California-based Pacific Union is one of the real estate brokerage firms I’ve long admired. They just launched a new marketing campaign and their CEO has always come across as fiercely independent. Then without warning, came the announcement Pacific Union was being acquired by Compass and the company agents were instantly in shock.

One of the theories making the rounds is that this was a “hostile takeover” which if true would be the first in the industry. The theory goes that the majority partner of Pacific Union is an investor at Compass and forced the sale. This theory does seem to explain the bizarre-out-of-the-blue announcement.

Shortly after, The Real Deal scooped that:

At a meeting on Thursday in San Francisco, Compass CEO Robert Reffkin told a group of agents that McLaughlin, Pacific Union’s CEO, “will only oversee Pacific Union agents.” Compass agent Lisa Sockolov, a former Pacific Union broker who attended the meeting, provided The Real Deal with that account.

That is really bizarre as well. I suspect one of the early warning signs that this deal would be a problem may have been that many agents were considering fleeing the company almost immediately if Mark wasn’t at the helm somehow.

One one hand, who cares?

On the other hand, this behavior damages the industry because it is not a real disruption of innovation, but rather a disruption simply powered by a large amount of money without a sustainable business model. I’m not saying that Compass can’t be great, but that doesn’t seem to be the holy grail. Their loyal agents praise their marketing prowess. But throwing high fee splits at an agent for one year doesn’t ensure retention nor does it ensure agent adoption of their technology.


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

I’m giving appraisers a break this week so you can use the time saved reading and sign up for the RAC conference coming up on September 13-14th in Plano, TX (Dallas). It has always been a productive and fun conference for appraisers and best of all it’s not expensive nor do you need to be a member of RAC (but we’d love you to join our growing ranks!)

C’mon! Click on the graphic for more info about the conference.

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 get a better compass;
  • You’ll be more sales orientated;
  • And I’ll fill up the fridge.

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 Miller, CRP, CRE
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