June 18, 2021

Inflating Human Interactions With Housing

Not just dogs…I’m told this is actually how humans interact.

But I digress…

No, We’re Not Going To Become A Nation Of Renters

I remember the “we will become a nation of renters schtick during the great financial crisis. Pundits back then were all over this point. The part that is missing with from this Bloomberg Opinion: America Should Become a Nation of Renters piece is the missing context about financial engineering that enabled the homeownership rise so much from the late 1990s to the mid-2000s. In the recent uptick, there has been a notable absence of financial engineering. Of course, as a homeowner and a real estate appraiser, I clearly am biased towards homeownership.


Global Housing Bubble Signs Stoked By Low-Interest Rates And Remote Workers

The segment concludes that this is likely to end with “cooling” and not a “crash” presumably because of the absence of financial engineering. Without “liar loans” we’ll see a slow down in sales as buyers can’t finance their purchase – remember that lender underwriting is historically tight.


TV: Newsday Live: Hot Tips For a Hot Market: For Sellers

I had a fun conversation with Faith Jessie, journalist and anchor at Newsday, Maura McDermott, the real estate writer at Newsday, and Monica Balsan at Daniel Gale Sotheby’s International Realty. My housing data came from our Elliman Report: Long Island Sales series I author for Douglas Elliman.

The interview was placed on Newsday’s home page, which was pretty cool.

Newsday Live: Hot Tips For a Hot Market: For Sellers

Newsday is the largest news publication for Long Island, New York.

We’ve Been Reading A Lot About Inflation Concerns – Here’s How It Was Handled in 1952

I clipped this inflation propaganda ad from a Dragnet radio show episode from January 1952. Apparently, it was a simpler time. The message, just to work harder and more efficiently.

Remember… “It’s the one enemy that can lick America…”


And now…apparently older people are more worried about inflation….including those that listen to old radio shows…

Residence of Note: Buyers Are Not Swayed By Aspirational Pricing In The Current Market

This apartment remains on my bucket list of penthouse apartments I want to inspect – the dome on the former Manhattan police headquarters building at 240 Centre Street that was converted to a co-op in 1988 is one of them. My firm and I have appraised many apartments in the Police Building, including the former gym and the muster room (the former police radio room which is a circular space that was lined with police radio switchboards.


[Streeteasy]

The penthouse apartment with the “dome” just sold for $10 million ($1,818 psf), which is consistent with the building price structure. It was originally priced for sale at $40 million in 2015, consistent with the “aspirational pricing” frenzy of the time. The monthly maintenance charges (HOA fees including property taxes) is $12,600 per month or $2.29 per square foot.

If you’re an appraiser, here’s a fun apartment to measure. LOL.


And the broker tour from a few years ago. Gotta love that living room…


Selling A ‘Slice of Hell’

There is an interesting interview of a real estate agent trying to sell a severely damaged house that has sat vacant for a year and a half and severely vandalized by a former tenant.

In a housing market absent of much inventory, this is actually quite saleable.

Take the tour:


Don’t Miss the Unveiling of the 2021-22 Top Ten Issues Affecting Real Estate® 6-23


[click image for free registration]

I’m a Counselor of Real Estate (CRE) and wanted to share this….

Join The Counselors of Real Estate on June 23 for the unveiling of the 2021-22 Top Ten Issues Affecting Real Estate®. Now in its 10th year, this signature thought leadership initiative identifies the current and emerging issues expected to have the most significant impact on all sectors of real estate. The Top Ten is developed through broad discussion, polling, and debate among 1,000 Counselors of Real Estate® and is an invaluable resource to clients of Counselors worldwide and to the real estate industry at large.

Don’t miss the countdown on June 23. Register for free here.

Getting Graphic

My favorite charts of the week made by others


Appraiserville

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

To all my Appraiserville readers who may have skipped over the fascinating housing market content above including an announcement by The Counselors of Real Estate (CRE) of which I am a proud member, check out next week’s announcement by clicking on the image.


[click image for free registration]

A Personal Property Appraiser Comments About The Appraisal Foundation Boondoggle

I just received a note from a personal property appraiser that agreed with last week’s post on restructuring TAF. It’s quite telling (bold my emphasis):

Reading your note from Friday, I wanted to let you know that as a personal property appraiser, I couldn’t agree more re: your proposal to restructure TAF. Their advisory opinions are frequently irrelevant for PP appraisers (and most of the USPAP book doesn’t even apply to PP). It is frustrating and it devalues TAF authority because they don’t recognize the differences between each area of specialization. We are in completely different industries and governed by different laws! I also think PP should be regulated, but that’s a different can of worms…

The only reason personal property appraisers are part of the Appraisal Foundation efforts is to generate revenue. There is no logical reason why a different profession can sit on technical committees and determine rules that impact the livelihoods of tens of thousands of real estate appraisers. Remember that real estate appraisers have a bullseye painted on their back in the form of state laws. Personal property appraisers are not exposed to those same laws.

It’s all about generating revenue by a not-for-profit for reasons no one seems to understand.

With 70% of GSE Residential Mortgages Done With AVMs, Recent Policy Changes Make Room For Bifurcated Appraisals

An appraiser shared these modifications with me:

August 5, 2020

June 22, 2021

It now looks like Fannie and Freddie no longer require original comp photos. This appears to be paving the way for greater reliance on bifurcated/hybrid reports which don’t require original comp photos already.

This change makes sense since 70% of refi mortgages used AVMs instead of appraisals. This reduction in resistance will be applied for hybrids despite being more expensive, slower and less reliable but more easily automated.

But since we know retail mortgage lenders, they will demand appraisers take their own photos but accept MLS or no photos in bifurcated “appraisals.”

This is also the same logic we have observed since the financial crisis – GSEs are fine with trainees for appraisal inspections but lenders are not fine with trainees.

Sigh.

Home Appraisal Bias Event – Discussions On Housing Policy With Civil Rights Organizations

Jim Park at the Appraisal Subcommittee (ASC) lays out how the system works. The Appraisal Foundation (TAF) is subject to oversight by ASC as they state on the TAF website but over the past couple of years, TAF has been strongly pushing back against any oversight amassing a large financial war chest. This behavior is best demonstrated by their infamous bat-shit crazy letter.

Jim gets to the point about the current issues that brought about this meeting:

  • Racial Bias In Appraisal
  • Lack of Diversity (dead last out of 400 occupations by BLS).

Part of the confusion within the appraisal profession itself is that these 2 points are being conflated into one topic. By having a lack of diversity in the primary organizations such as the Appraisal Foundation, it is easy for the public to conclude, along with the recent series of media articles on the topic. That’s because TAF has damaged the “public trust.”

And Jim outlined in the video below, the actions the ASC is taking right now include a significant audit of the mortgage appraisal process, options to proactively provide input and leadership and ASC roundtables to better understand “Diversity Equity Inclusion Issues (DE&I) and solutions.

And actually said he finds the allegations “deeply disturbing” as a “human being.” Wow.

Here’s the entire event including Jim Park’s portion. It is clear that that most civil rights organizations that presented don’t quite understand what an appraiser actually does, but I am hopeful that this will be resolved over the next year as the mortgage appraisal process is closely analyzed.


Dave Towne Again Makes The Point About The Role Of Appraisers And Disconnect By That Infamous Brookings Report

While the appraisal industry is devoid of diversity and needs to be fixed at the top, the proof for taking action is based on a research paper that doesn’t demonstrate an understanding of what appraisers actually do. The 2018 paper, Brookings Inst – Devaluation of assets in Black neighborhoods – 2018 Report by A. Perry, et al never empirically connected the dots between low housing prices and appraisers actions.

A number of appraisers continue to belt out position pieces on why the finger-pointing is misdirected. Take Dave Towne’s latest, Independent Fee Appraisers Under Attack the appraiser who has a gift for providing clarity to current industry challenges.

I get the point being made by Dave but the actual focus needs to be on solving the problem effectively which involves resets in the middle-aged white guy leadership and mentality at The Appraisal Foundation and The Appraisal Institute, two organizations that should have seen this coming decades ago. Instead, they remain silent and ineffective, afraid of venturing out to take a leadership role. This has allowed independent fee appraisers to be the focus of blame, and left twisting in the wind.

OFT (One Final Thought)

Riveting and succinct testimony the Sackler/OxyContin situation and a lesson in compelling public speaking.


But because I can’t leave Housing Notes on a negative note, here’s a poem:


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 inflationary;
  • You’ll feel more inflated;
  • And I’ll remain full of hot air.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


June 11, 2021

Annoying The Negative-COVID Pundits, NYC Is Back, Baby

As parents, my wife and I have felt strongly that an important role was to be annoying to our children. After all, our four sons were equally annoying to each other and this clip reminded me of it. Being annoying is a skill that needs to be practiced and honed over a lifetime.


But I digress…

NYC Rental Price Stability Has Emerged As Lease Terms Expand

In addition to our real estate appraisal practice, I’ve been the author of the expanding series of market reports for Douglas Elliman Real Estate for the past 26 years. The monthly rental report covering rental conditions in Manhattan, Brooklyn, and Queens has been of particular interest since the COVID-lockdown that ended last spring because the rental market reacts more quickly to changes in economic conditions.

The 350± Bloomberg Terminal subscribers made the article covering the report results in a top ten read, ranked ahead of the news that the Fed might taper mortgage bonds first.

And a super cool chart that illustrates the pivot to longer leases. There are more of our charts across the three boroughs we cover below.

The New York Times also had an epic piece on the rental market that will be seen in print in the Sunday New York Times this weekend.

Elliman Report: May 2021 Manhattan, Brooklyn, and Queens Rental Report

______________________________________________________
MANHATTAN RENTAL MARKET HIGHLIGHTS

“New leasing activity continues to boom as rental prices show stabilization.”

  • The highest number of new lease signings since tracking began in 2008
  • Net effective median rent rose month over month for the fifth time in six months at the highest rate in a decade
  • The average lease length rose sharply in the past three months as renters sensed that prices were stabilizing
  • The amount of rental concessions given by landlords rose again to their third-highest level since 2008
  • For the fifth straight month, non-doorman rental fell year over year at a higher rate than doorman rentals
  • Listing inventory fell substantially from the record set in January but remains unusually elevated
  • Rental price trends remain weakest in smaller apartments
  • New development leasing market share was the highest in more than a year
  • The luxury market median price was the only price tranche to rise year over year

______________________________________________________
BROOKLYN RENTAL MARKET HIGHLIGHTS

“Continued significant new leasing activity helped stabilize pricing.”

  • The highest number of new leases since 2008 reached in three of the past four months
  • Net effective median rent rose month over month for the second time in three months at the highest rate in more than a decade
  • The amount of rental concessions given by landlords rose again to their third-highest level since 2010

______________________________________________________
QUEENS RENTAL MARKET HIGHLIGHTS

[Northwest Region]
“Heavy new leasing activity helped begin to stabilize pricing.”

  • The second-highest number of new leases since 2011, representing a six-fold annual increase
  • The market share of landlord concessions was more than double the market share of existing rentals
  • Rental price trends remain weakest in smaller apartments


[Bloomberg Surveillance TV] NYC Tenants Are Signing Longer Leases

I did an interview with Bloomberg TV this morning, covering our May research on the NYC rental market for Douglas Elliman.


CHART NYC Rental Lease Terms Are Expanding As Tenants See The Drop In Prices Coming To An End

Our lease length and rental price chart for the Manhattan rental market illustrates this trend quite clearly – Brick Underground parses out the story.

[Yahoo Finance TV Interview] The NYC Rental Market Is Stabilizing

On Thursday I joined Alexis Christofouros at Yahoo to speak about the just-released May 2021 Manhattan, Brooklyn & Queens Rental Report that I author for Douglas Elliman. I’ve always enjoyed my conversations with Alexis.


, [click on image for interview and transcript]


[Relevance Rapport Podcast] with guest Jonathan Miller – Episode 6

Last month I sat down with (virtually) with Suzanne Rosnowski, founder of the public relations firm Relevance International to share insights on NYC’s real estate market value, the importance of credibility, and the practice of providing unbiased information. Suzanne and I have known each other for 20 years? I think. It was a fun conversation.


ABC 20/20 Presentation on The Dakota, The Co-op Building Where John Lennon Lived

A friend shared this ABC special on John Lennon’s time in The Dakota in Manhattan. My appraisal firm, self-included, have appraised many apartments in The Dakota since the mid 1980s, especially fronting Central Park. Always a thrill. And another reason to love NYC.


[Solvecast Interview] Impact of Remote Work on Real Estate with Jonathan Miller

Dana Williams of Sotheby’s interviewed me on the future of remote work – something we are observing right now as it evolves in realtime. This wasn’t specifically a housing market discussion, but with me, it usually ends up there. She did a wonderful job steering the ship.

Click on the image to play the podcast.


[The Compound Podcast] It’s Not a Housing Bubble, It’s a Supply Bust

I enjoyed the housing market discussion by Downtown Josh Brown and Michael Batnick – the clip is cued up the relevant section:


This Week in Aspirational Pricing: From $115M to $30.5M = Narcissistic Insanity

The “aspirational pricing” era in luxury housing began in 2012 and ended in 2018 was pure narcissistic insanity. This beautiful condo was a prime example and there are many other examples. Homes that were priced 3-5 times their market value influenced nearby listings and ultimately none of these ever sold until they were brought down to earth. The irony of this transaction was that it was dropped from $115M to $29.5M and then expererineced a bidding war, driving the price up to $30.5 million. So now the sellers can claim they sold the home above ask!


Getting Graphic


My favorite charts of the week made by others



Appraiserville

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

The Wave Of Stories About Appraisers As Racist Is Surging As Industry Leadership Sits On Its Hands In First Class Seating

To all my appraiser colleagues out there, you are being left exposed right now by the organizations who never saw this coming. They still don’t realize that this could be “the thing” that brings our profession down, all because of self-dealing and the absence of any real leadership. The Appraisal Foundation C-suite has focused on petty gripes such as their infamous bat-shit crazy letter to financially “go rogue” without any real oversight. They have probably amassed more than $10M in cash as a not-for-profit, for reasons that are unclear now.

And the hits to our profession keep coming… here are some of this week’s big articles:



[NBC News – click on link]


[Money Magazine – click on link]

Housingwire: Is the appraisal process color-blind? Leaders should seek reasonable and effective solutions to eliminate racial discrimination from the home-buying process

RICS COO Quits Unexpectedly – A Warning To AI’s CEO

This is a wake up call to the Appraisal Institute Board of Directors and all the potential financial self-dealing we’ve covered here in Appraiserville by Jim Amorin and FOJs (Friends of Jim Amorin).

RICS COO Violetta Parylo has handed in her resignation and will leave the organisation today. Parylo’s sudden departure comes as a surprise, given that she has served on the executive team for over a decade.

and

Peter Oldham was appointed a few weeks later February to investigate the events that led to the dismissal of four directors in November 2019 after they raised concerns about the findings of a 2018 BDO financial audit into the historic body.

A board should oversee a CEO and not the other way around. Spouse travel expenses, by the way, have never been covered by RICS. Nor does corporate America.

The intense focus on executive compensation, lack of transparency, and allegations of quashing of open discussion have led to a Queens Counsel investigation of RICS. QC in the UK is like either an AG office or the FBI. Four NEDs that raised issues about financial matters were summarily fired from their board when those issues were raised. The Appraisal Institute is in an equally vulnerable position, especially as Bylaw changes that have been proposed to increase transparency have been watered down in a coordinated manner by board members that are FOJs.

Appraisal Institute Board Members are subject to the CEOs whims and enable by his FOJs. Incidentally, the CEO has demanded that all reports prepared by staff should not be released to the board but are routed right back to him. This is the one person who has a vested interest in keeping staff reports concealed and allows him to operate without accountability.

AI continues to enjoy the benefit of board members who, acting in a rehearsed manner, thwart any efforts to provide insight. Where is the external study on CEO compensation, KPIs? If there is one, it will be buried by the CEO, because now the Board’s machinations have ensured that the report will be just for him.

The CEO of RICS made $359,443 last year and he runs an organization that is 7.4x the Appraisal Institute (whose spouse has to pay her own way on business trips). The CEO of the Appraisal Institute made $451,000 last year (and his spouse flies on their membership’s dime).

Appraisal Institute take heed: you are an organization of 17,000 people, and a voluntary industry group at that, without any regulatory standing. RICS is a true worldwide organization, quasi-governmental and with strong regulatory power comprised of 125,000 people.

If I were re-organizing the Appraisal Institute, I would slash the CEO salary to $250K and separate the board into two separate entities with no overlap: residential and commercial organizations.

Fix The Appraisal Foundation Structure

The Board of Trustees and/or The Technical Boards should be broken out by specialty rather than lumping all appraisal types together.

  • Personal Property
  • Commercial
  • Residential
  • Business
  • Mass

USPAP and TAF are trying to be all things to all in the valuation industry. They have failed in all.

TAF needs to jettison or handle personal property separately because they aren’t regulated and have no place in the ecosystem – this is another revenue play by TAF allowing personal property appraisers to be on technical boards that impact only real property appraisers.

PAREA Has Essentially Been Abandoned By TAF Because Of Their Default Emphasis On Money

One of many solutions to making appraisers more diverse and getting youth into our ranks as we age out every year is PAREA (Practical Applications of Real Estate Appraisal). Back in 2015, the AQB approved a concept paper to get the ball rolling. It wasn’t a complete solution but it would likely help the industry and TAF was taking leadership on it.

Originally, TAF was going to build a model and license it to users. In other words, they were going to lead the industry on the initiative. At some point, leadership got spooked by the cost so TAF hired a consultant that appeared to generate a wildly high cost of around $6 million to $15 million, presumably to give TAF a reason to bow out of leadership on this effort.

This is further evidence that TAF is more focused on money than the profession it serves. Remember that they have millions in the bank and opted not to take any grant money from the ASC.

As a result of TAF’s exit, the private sector is stepping up, and I hear the cost estimates are somewhere between $1M and $2M. At full retail price TAF could now pay for PAREA module 5x over with the money they have socked away in the bank. Why?

TAF has offered $500k for the development of PAREA for up to two entities ($250K each) despite supposedly having $10M+ in the bank as a not-for-profit created to serve the industry. It shows that they are not interested at all in solving the industry’s problems.

And it’s not just about money. PAREA coming from TAF would be a powerful unifying message to the states to incorporate this into their state laws. Instead, we have states like Pennsylvania who would only give 25% credit for PAREA hours which is like giving zero credit because mentoring would still be required. Some states are talking about requiring 10-20 completed appraisals which also defeats the purpose if a reviewer signs off on the report because they shape the final report into something they are comfortable signing and therefore the state doesn’t see a pure representation of the appraiser’s work.

The beauty of PAREA is that appraisers will be exposed to other types of valuation – for example, someone like me who primarily appraises co-ops and condos in Manhattan, doesn’t see how to appraise other forms of real estate and that will only make me a better appraiser. It allows an expansion beyond the mentor’s appraisal territory.

To recap, TAF has largely abandoned PAREA:

  • they didn’t build the model because it was too expensive so they probably got a consultant to go high on costs.
  • they didn’t create a model so implementation at the state level is an uphill battle and anyone that is inspired literally has to interact with the 55 states and territories themselves.

What does TAF actually do for appraisers these days?

OFT (OneTWO Final ThoughtS)

As the weather continues to warm up and more of us get back on our bikes, it is important to remember that helmets have been shown to be a good idea throughout history.


I took up pole vaulting my senior year of high school because I was too slow in the two-mile. I wasn’t very good at my new sport either, but actually scored once in a meet and it was glorious. I sill remember the moment going over the bar and the free fall all the way down to the matt (which was about one-third the distance the guy below experienced). Still, it was a win and a moment I’ll never forget.


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 annoying;
  • You’ll be more annoying;
  • And I’ll be satisfied as a result.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


June 4, 2021

The Roaring Twenties For Housing

I’ve been commuting to my Manhattan office two days a week and it feels like…


But I digress…

Manhattan Contract Volume Remain Heavy As Rental Price Continue To Fall

I’ve been the author of the expanding Elliman Report series since 1994 for real estate firm Douglas Elliman. They published our monthly research this week covering four U.S. regions.

Bloomberg covered the story and, most importantly, provided a chart.

The basic message here is that new inventory is rising because the metric has pivoted to seasonality. The growth in listings has been unable to keep up with the growth in new signed contracts. Check out this chart from Q1-2021 closed sales – look at the crazy 2020 pattern.

Here are some additional charts for the four reports that we plan to update each month:

______________________________________________________
New York New Signed Contracts Report

  • The New York report attached covers Manhattan, Brooklyn, Long Island, Hamptons, North Fork, Westchester County, Fairfield County, and Greenwich, CT.

  • Elliman Report: New York New Signed Contracts 5-2021

Manhattan
New signed contracts for all three property types combined expanded significantly from last year’s same period for the sixth consecutive month. The significant annual jump reflected the lockdown during the same period last year. New inventory rose year over year for the past three months as the market reverts to traditional seasonal patterns.

Brooklyn
New signed contracts for all three property types combined rose from last year’s same period every month since last July. The significant annual jump reflected the lockdown during the same period last year. New inventory rose year over year since last June but could not keep up with new signed contract growth.

Long Island (excluding H/NF)
New signed contracts had not seen an annual decline since June of last year. New inventory has expanded year over year for the third consecutive month. Greater new signed contract growth for single families and condos was generally skewed to higher-price tranches.

Hamptons
New signed contracts pressed higher each month than the prior-year since at least June of last year. New inventory rose annually for the third straight month after two months of declines. Greater new signed contract growth was skewed towards higher price tranches.

North Fork
New signed contracts rose annually for the past four months, while new inventory increased annually for the third straight month after three months of declines. Greater new signed contract growth was skewed towards higher price tranches.

Westchester
New signed contracts rose significantly higher each month than the prior-year since at least July of last year. New inventory declined annually for the fourth time in the past five months. Greater new signed contract growth for both single families and condos was skewed to the higher price tranches.

Fairfield
New inventory fell sharply year over year for the seventh time in eight months. The severe lack of supply allowed new signed contracts to rise only twice annually in the new year. Greater new signed contract growth for both single families and condos was skewed to the higher price tranches.

Greenwich
New signed contracts surged year over year each month since at least last July. New inventory fell annually for the first time in three months.

______________________________________________________
Florida New Signed Contracts Report

Palm Beach County
New signed contracts pressed higher each month than the prior-year since at least March of last year. New inventory rose annually for the second straight month after six months of declines. Greater new signed contract growth for both single families and condos was skewed to the higher price tranches.

Broward County
New signed contracts pressed higher each month than the prior-year since at least March of last year. New inventory rose annually for the second straight month after six months of declines. Greater new signed contract growth for both single families and condos was skewed to the higher price tranches.

Miami-Dade County
New signed contracts slipped annually for the past two months as compared to the prior year. New inventory has declined year over year nearly every month since at least May of last year. Greater new signed contract growth for both single families and condos was skewed to the higher price tranches.

Pinellas County
New signed contracts pressed higher each month as compared to the prior year since the start of 2021. New inventory has fallen year over year for the past seven months. Greater new signed contract growth for both single families and condos was skewed to the higher price tranches.

Hillsborough County
New signed contracts pressed higher each month than the prior-year since at least March of last year. New inventory has fallen year over year since the beginning of the new year. Greater new signed contract growth for both single families and condos was skewed to the higher price tranches.

______________________________________________________
Colorado New Signed Contracts Report

Aspen
New signed contracts nearly doubled year over year and have shown significant gains each month since last summer. New inventory fell year over year for the first time in 2021. Condo new signed contracts showed a larger gain than single families.

Snowmass Village
New signed contracts quadrupled year over year and have been showing significant gains each month since last summer. New inventory fell year over year for the first time in 2021. Condo new signed contracts showed a larger gain than single families.

______________________________________________________
California New Signed Contracts Report

Los Angeles County
New signed contracts more than doubled year over year by the highest rate in at least fourteen months. New inventory has fallen annually by a significant rate in each of the past seven months. Greater new signed contract growth for both single families and condos was skewed to the higher price tranches.

Orange County
New signed contracts rose sharply year over year each month since January. New inventory has fallen year over year each month since the spring of last year. Greater new signed contract growth for both single families and condos was skewed to the higher price tranches.

San Diego County
New signed contracts pressed higher each month as compared to the prior year since the start of 2021. New inventory has fallen year over year each month since last spring. Greater new signed contract growth for both single families and condos was skewed to the higher price tranches.

[Knight Frank Interview] Are we on the cusp of a Roaring Twenties for London and New York’s prime markets?

The short answer: yes. Here’s my fun discussion with Anna Ward and Kate Everett Allen of Knight Frank.


Relevance International Promo for my interview: “If you’re not working in New York, you’re just camping out.”

The full interview will be posted next week, but here’s a brief clip.


Like Parking Lots, Remove Highways That Cut Through Residential City Neighborhoods

When I first moved to Manhattan in 1985, the first book I read was The Power Broker: Robert Moses and the Fall of New York Paperback. Moses ruled in absolute terms. At a community planning meeting to discuss the construction of the Cross Bronx Expressway which arbitrarily cut through neighborhoods said (paraphrased) “To make an omelet, you have to crack a few eggs.” He got bridges and tunnels built and traffic arteries developed like no one else could but he was car-centric in all his planning and destroyed many vibrant neighborhoods in New York City.

Like the legacy of too much parking in urban centers, the argument is being made for the reduction in large highways, often planned through neighborhoods offering the least resistance. This visualization piece by the New York Times is amazing: Can Removing Highways Fix America’s Cities?


[clink on NYT image for story]

[Howmuch.net] Top 10 U.S. Cities by Fastest Growing and Declining Rent Prices

Our reports showed Manhattan net effective median rents were down -21.2% YOY in April but I’ll assume they are lumping all five boroughs together.


[click to open post]

Getting Graphic


My favorite charts of the week of our own making


My favorite charts of the week made by others

Len Kiefer‘s Chart Handiwork

Appraiserville

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

The Appraisal Foundation’s “Unbearable Whiteness of Being” Has Awakened The ASC Tiger

With the near total lack of diversity in the leadership across the Appraisal Foundation, and unprofessional actions in the past year such as the bat-shit crazy letter, the knee-jerk temporary expansion of USPAP for one year without advanced notice to all the stakeholders based on “COVID”, the dishonest effort to mislead Congresswoman Waters to initiate an audit of everyone in the appraisal regulatory process EXCEPT the Appraisal Foundation itself, which is the actual player in the sandbox that needs scrutiny may have been the cause of this:


[click image for web page]

Wow. This is the part that stands out:

The goal of the review is to ensure that USPAP and the AQB Criteria do not encourage or systematize bias, and consistently support or promote fairness, equity, objectivity and diversity in both appraisals and the training and credentialing of appraisers.


That’s going to be very awkward for TAF to explain how:

  • there is nearly zero diversity on their technical boards for the past thirty years
  • they cultivated the appraisal profession to be dead last in the diversity of 400 occupations tracked by BLS with 96.5% of appraisers being white
  • the head of the diversity committee is a middle-aged white guy
  • the Ethics Rule is poorly written, seemingly giving appraisers leeway to use race data to make adjustments
  • AO16 was written
The Appraisal Foundation’s Diversity Survey Isn’t Credible But Is Laughable

TAF’s Diversity Survey touts its high participation rate of 4,714 (7.4%) of the 64,000 email survey who actually completed the survey. As someone who works with data for a living (I’m an appraiser, after all), look at the following chart. Does something in it jump out at you?


Step back and absorb this logic:

According to the survey, 77.6% of appraisers who answered the question: “With which racial and ethnic groups do you identify?” identified as white.

So an institution that, according to federal government, has the least diversity of the 400 occupations they track, sends an opinion survey to appraisers who are predominantly white to ask them questions about diversity?

This is not a credible approach for research. Anyone with any experience with data knows that survey data is incredibly unreliable and the lowest form of information.

My goodness.

Appraisers Who Think They Are Fighting The Good Fight Have Missed The Point

To my appraiser friends and colleagues who have written heart-felt screeds about how appraisers are observers of the market and not creators of value as well as the stunning lack of understanding of what our appraisal profession actually does in that Brookings Institute study of a few years ago, you are absolutely missing the broader point here and it’s serious – as serious as it gets.

Our industry has no diversity. That’s a fact and leadership in our profession such as TAF had no clue until the past year when many of us took them to task for it. They still don’t get it based on their recent actions.

When you say things like, there is no proof that appraisers are racist, you don’t have a leg to stand on because organizations like TAF exist, organizations that are willfully blind to reality, no matter how much you believe what you are saying. Take a break from talking about it from the appraisers’ on-the-ground perspective and think of it from the perspective of the public and users of our services.

Our role involves public trust. Over 30 years of systemic, identifiable, and un-addressed bias and racism sweeps us from the realm of public trust. The public has no trust in us and it’s only now that the massive institutions that hold our future in their hands are waking up to it. We are on the wrong side of history, and our unchallenged leadership has placed and kept us there.

For the past 30+ years, the institution responsible for our standards and entrance into the profession has been dominated by middle-aged white guys (like me).

From the public trust perspective, the very basis of our profession, this is classic systemic racism defined. It’s not a statement about you individually, it’s about the system we came through. That’s what needs to be corrected.

And those news stories about discrimination in valuation won’t stop coming because they are like shooting fish in a barrel. That’s because as an industry, we can’t defend what is nearly a whites-only – and dominantly male – environment. We need to fix TAF now unless you want to be reading “appraisers are racists” stories forever and see our profession marginalized further, even eliminated.

OFT (One Final Thought)

I love the playful joy being shared here in both of these clips (the bottom one is NSFW).


Brilliant Idea #1

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  • They’ll be roaring;
  • You’ll be screaming;
  • And I’ll be howling.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


May 28, 2021

Housing Is Almost Augmented, Goat-Like and Full of Cicadas

As the long weekend approaches, my work attitude is terrible so I need to share a bunch of clips this week:

his short film Sight imagines a world wearing contacts that augment reality. We’re almost there and I’m wondering if it is something to look forward to.


And if that’s too heavy for you as we head into the holiday weekend (NSFO):

@ivyandsophiesmith

There's a fucking goat outside ##viral ##goat ##kidsswearing ##2yearold ##funny

♬ original sound – ivyandsophiesmith


And consider this addition to your Memorial Day Cookout via Brood X:


But I digress…

We’re finally arriving at Memorial Day weekend. Let’s make sure we honor the men and women who died while serving in the U.S. military.

But I digress again…

House Price To Rent Ratio At Highest Level Since At Least 1975

Using the income approach to valuation, housing prices as they relate to rent are at their highest level ever tracked and 1% above the housing bubble peak per the St. Louis Fed.

One key difference from the housing bubble era: homeowners today have greater home equity and less mortgage debt, on average.


I’ve tracked this ratio in Manhattan since 1991 and the 1Q21 rose to a new ratio record:


The income approach looks at the asset by how the economics are driving the value. The disparity between income and sales approaches to value might indicate that there is a greater value placed on occupancy than revenue potential and now, coming out of the COVID-lockdown the potential increase in that disparity could further be expanded.

Remember When Mortgages Rates Weren’t Unbelievably Low?

In 1981, a 30-yera fixed rate was nearly 17%. I’d love to get 14% rate on a CD in today’s economy. 😉

Real Estate Professionals Tend To Marry Real Estate Professionals

Here’s a super cool look at who we marry. Flowing Data provided a look at Jobs that Marry Together the Most.

Real estate brokers tend to marry real estate brokers:

Getting Graphic

My favorite charts of the week made by others

Appraiserville

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

Real Estate Appraisers Tend To Marry Real Estate Appraisers (And Teachers)

I spoke about this post: Jobs that Marry Together the Most earlier, but given my career as a real estate appraiser, I’m guilty as charged.

OFT (One Final Thought)

In light of Father’s Day arriving soon, this fantastic short film by Fahnon Bennett is absolutely worth your time. I’ve had the pleasure of working with him via Douglas Elliman for many years.


And one more final thought because, well, I need to:


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 eat more cicada tacos;
  • You’ll be more augmented;
  • And I’ll look for that f**king goat.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


May 21, 2021

Contorted Housing Numbers Can Sound Impressive

Say this address number three times very quickly…


But I digress…

Making The Front Page of the WSJ Today: “There’s No Crying In Real Estate?”

My company and I finally made it onto the front page of the Wall Street Journal today in Candace Taylor’s Real-Estate Frenzy Overwhelms Small-Town America: ‘I Came Home Crying’ My reports had been mentioned on the front page once a long time ago but only with reference to Douglas Elliman – so this was a nice weekend send-off!

The collapse of inventory is playing havoc with housing markets around the U.S.


I channeled my inner Tom Hanks from the movie “A League Of Their Own” after seeing the article title.


From My Matrix Blog: No Diversity: 96.5% Of U.S. Appraisers Are White

Here’s a post from my Matrix Blog:

Over the past year, beginning with this NY Times piece: Black Homeowners Face Discrimination in Appraisals that initiated a rising progression of news stories covering discrimination in the appraisal of houses. And most recently, this CNN piece: When a Black homeowner concealed her race, her home’s appraisal value doubled.

So I looked at U.S. labor force data from the U.S. Bureau of Labor Statistics [BLS], which ranked the top 400 occupations by sex, race, and Hispanic or Latino ethnicity. I’ve been an appraiser for 35 years and it’s been very clear that there is nominal diversity in my profession. For users of the industry’s services who have constantly complained about “appraisal shortages” (translated: a shortage of appraisers willing to work for 50% to 75% below the market rate) – here is your opportunity for action to expand our ranks.

The appraisal industry is aging out because it is hard to bring in youth. It is one of the only professions that require new entrants to have a mentor for their first two years and often without making a living, financially. One of the key reasons for this is because most financial institutions won’t accept a “trainee” until they are licensed or certified with two years of experience. A “trainee” is a derogatory term applied to an appraiser that is not licensed yet. While the GSEs like Fannie and Freddie are fine with “trainees” signing reports prior to their two-year experience threshold, most banks are not. Existing appraisers are all for the difficult entry because supply and demand are in their favor. Few other professions have this two-year mentorship period before an entrant can make a living.

Accountants don’t require a two year mentorship program before they can make a living. Free market conditions should let those with more experience make more money, but not zero.

As a result, entry into the appraiser profession via a mentor system essentially requires appraisers to have relatives that will hire and train them. Given the beginnings of the housing industry as explained next, you can see the problem with this approach.

The housing industry we know today was built on a foundation of racism by the federal government

…and racial covenants. No wonder why there is essentially no diversity in the appraisal profession.


[CNN: click on image]

These BLS numbers for 400 occupations show an incredible lack of diversity within the appraisal profession. In fact, U.S. appraisers were ranked dead last for diversity in the list of 400 occupations tracked by BLS with white appraisers comprising 96.5% of the industry. Here are some appraiser ratios from BLS.

And here are the 20 least diverse occupations. The appraisal industry is even less diverse than farmers & ranchers.


While The Appraisal Foundation [TAF] was created and enabled by Congress to maintain appraisal standards (ASB) and minimum qualifications (AQB) for entry into the appraisal profession, it was also created to protect the public trust. The Appraisal Foundation’s attempt to address diversity has largely been in the form of “checking a box” to be able to say they are working on it. Yet the only actions they have taken were the result of recent public pressure by people like myself and others to call them out. The most glaring tone-deaf situations at TAF demonstrate how inappropriate it would be to allow TAF to lead any diversity efforts in the profession:

  • An African-American had never held a board seat on the Appraiser Qualifications Board (AQB) until 2021. In other words, for more than thirty years, the organization has existed in a racial bubble.
  • There have only been three women who have served on the AQB in the past 30 years.
  • The head of the just-formed “diversity commission” is white and male.

Since TAF has not been able to see the problem for more than three decades until outsiders pointed it out and they have continued to make decisions that demonstrate their disconnect, TAF leadership is essentially the starting point to resolve the lack of industry diversity problem. Top-down is how this gets fixed if the stakeholders in the industry actually want it fixed. We have no leadership on this issue within the industry and solving this problem has to be top-down or it won’t ever be resolved.

And the news is getting worse for the appraisal industry as more and more stories like this are published yet TAF remains rudderless on diversity.

It’s time for Congress to step in.

[WNBC TV] The Manhattan Sales Market Saw Much Less Damage Than The Manhattan Rental Market

Here’s a post from my Matrix Blog:

Adam Kuperstein at WNBC reached out to do a story on the state of the Manhattan housing market for Douglas Elliman. He got all the nuances right and featured the results of our market research. It was my first tv interview back in my Manhattan office and afterwards I realized I need to warm up my background after using my home office for the past 14 months!


NPR: Bidding Wars Are Seemingly Everywhere

During a period with chronic shortages of listing inventory, the predominat marketing technique seems to be the eBay Auction Technique. List the rare product for sale and watch the price surge as bidders, many shot out in numerous prior attempts, go all in. Market value is now derived by bidding wars seemingly everywhere.


NYT Calculator Column: NYC Mayoral Cheat Sheet On Brooklyn Housing Prices

Last week I spoke at length about the NYC mayoral race and the bad guess by one of the candidates on the median sales price for a Brooklyn residential property. The NYT, Bloomberg and The Daily Mail had referenced our research in the Elliman Report: Q1 2021 Brooklyn Sales that provided a median sales price for the borough of $900,000. Bloomberg showed how I extrapolated mayoral candidate Donovan’s $100K estimate back to the early 1980s. In this Sunday’s NYT Real Estate Section, the Calculator Column topic was the median sales price trend for Brooklyn. I have compiled the data back to 2003, which is as far back as the NYC public record, known as ACRIS, goes. This is part of my monthly (or more often) contribution to the weekly Calculator Column.

Here are more Brooklyn price charts my team creates:

Appraiserville

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

AARO Conference: PAREA And It’s Role In Resolving The Lack Of Industry Diversity

Here is the powerpoint (pdf) at theAARO Spring Conference 4-30-2021.

It’s a compelling presentation. Specifically Pete and Craig’s remarks.


No Diversity: 96.5% Of U.S. Appraisers Are White

See the full post earlier in these Housing Notes above.

Incidentally, all the appraisers out there that are making the argument on podcasts and blog posts that we are victims of this systemic racism narrative need to rethink this strategy because it is tone-deaf to the public optics. Real estate appraisers are 96.5% white – even less diverse than farmers and ranchers! Blowhardy speeches like I keep seeing only make us look worse by coming across as insulated from the real world and makes us more vulnerable to criticism and to elimination. For goodness sakes, the GSEs backed 70% of refinance mortgages with AVMs in 2020 – you’re just giving the mortgage industry and regulators a reason to eliminate us. I cringe every time I come across a podcast interview and blog post saying these press stories about white appraisers and African-American homeowners don’t represent reality. Remember that 96.5% of us are white. That is a fact.

As far as these denials made on podcasts and blog posts go, remember what Warren Buffet once said: “Never ask a barber if you need a haircut.” By espousing your insulated views, “you are only preaching to the choir.” It doesn’t create more awareness nor does it solve the problem.

The growing frequency of events chronicled in the media with growing frequency is because our profession (myself included) has been complacent about our industry leadership for decades. This is a “top-down” problem and speaking out this without addressing the systemic problem only makes it worse for all of us. We have long been sitting and waiting for the fax to arrive, the phone to ring or the email to arrive. It is time to think bigger and push for a change in leadership at organizations like The Appraisal Foundation.

And that should be right now, dammit.

Appraisal Buzz/Clear Capital Webinar: Does Your Appraisal Data Include Racial Bias?

I got a lot out of this webinar. Click on the image to replay it.

OFT (One Final Thought)

If you want to see pissed-off high school girls rant like the Ramones over injustice with cringy lyrics, then this band is for you. They just rock. Otherwise, move on.


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 have less bias;
  • You’ll be more number-savy;
  • And I’ll scream like a high school student.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


May 14, 2021

Predicting The End Of NYC & Its Housing Market Was A Cheap Stunt

The crap New Yorkers read early in the pandemic got lots of SEO points but was a disservice to the public. There is nothing wrong with being critical, but proclamations about a dire dystopian hellscape future became its own misleading narrative. This CNBC tweet comparison uses our data from the recent rental report discussed later on in these notes.

But I digress…

The NYC Rental Market Saw Record New Lease Signings And Significant Price Declines

This week Douglas Elliman published our April rental market research for Manhattan, Brooklyn, and Queens. This is part of a growing Elliman Report series I’ve been authoring since 1994.

Over the four months, prior to April, it was beginning to look like rental prices were beginning to stabilize. After all, net effective median rental price did not see a decline for four straight months and the rate of annual declines, while still huge, at 16%, were down significantly from 20%+ in the fall.

But despite record lease signings, rental prices are still falling hard. Or should I say, because rental prices are still falling hard, new lease signings are rising sharply.

Elliman Report: April 2021 Manhattan, Brooklyn and Queens Rentals

______________________________________________________
MANHATTAN RENTAL MARKET HIGHLIGHTS

“The highest number of new lease signings on record spurred on by continued price declines.”

  • The highest number total number of new lease signings and the highest annual rate of growth since monthly tracking began in 2008
  • Month over month net effective median rent declined annually for the first time in five months and at the highest rate in a decade
  • The second-largest year over year decline in median net effective rent in more than a decade
  • Landlord concessions rose to their second-highest level, falling just short of the record set back in January
  • Both doorman and non-doorman rentals saw their largest year over year declines in nearly a decade of tracking
  • Existing rentals saw their largest annual decline in six and a half years and were twice the rate of new development rentals
  • The market share of luxury market concessions continued to be less than the remainder of the market

______________________________________________________
BROOKLYN RENTAL MARKET HIGHLIGHTS

“The market was characterized by record new lease signings combined with a record decline in net effective median rent.”

  • The highest number total number of new lease signings and since monthly tracking began in 2009
  • Landlord concessions rose to their second-highest level, falling just short of the record set back in January
  • While median rent for all apartment sizes fell year over year, 1-bedrooms and 2-bedrooms fell at record rates

______________________________________________________
QUEENS RENTAL MARKET HIGHLIGHTS

[Northwest Region]
“The numbers of leases surged to a new record as net effective median rent fell month over month for the twelfth time.”

  • Landlord concessions jumped to their second-highest level, falling short of the record set back in January
  • The highest number total number of new lease signings and since monthly tracking began in 2011
  • Highest market share of new development listings in eighteen months


The Hamptons and Greenwich Boomed Post-Lock Down Because Housing Has Turned Upsidedown

My NY Times Sunday Real Estate Calculator Column monthly feature came a little early this month: How Real Estate Blew Up in the Hamptons and Greenwich.

I thought it would be interesting to understand see how these markets were showing very robust conditions yet represented two different types of markets – Greenwich, CT as a primary market and the Hamptons as a “coprimary” aka luxury second home market.

With the U.S. and regional economic damage focused on lower-wage earners, higher-end homes, and specifically luxury submarkets have thrived since last summer after languishing for the past several years.

The recalibration of these markets continues.

The NYC Mayoral Candidates Whiff On Our Brooklyn Housing Market Obsession

If you live in and around NYC, you know have a sense of what housing prices are. You should. Everybody talks about it all the time and we are flooded with information about it. It’s a regional obsession.

Earlier this week, my phone, text, and Twitter feed lit up after NYC mayoral candidate Shaun Donovan was asked what the median price of a Brooklyn home was. He guessed $100,000. For those that don’t know, Shaun is a policy wonk with a lot of affordable housing policy proposals. After all, he was the U.S. Secretary of Housing and Urban Development (HUD) from 2009 to 2014, and the Commissioner of the New York City Department of Housing Preservation and Development (HPD) from 2004 to 2009.

The problem with his answer was that he was $800,000 off and Brooklyn housing prices haven’t been that low in 40 years. That was troubling to many who are looking to the next mayor to provide policy solutions to create more affordable housing. It’s one of the key issues facing the city. Donovan punted and claimed he thought the question was about “assessed value” which is not a believable pivot.

My favorite Twitter question was this and be sure to read the thread:


And this thread…


The New York Times shared his error in their piece Shaun Donovan Mayoral Endorsement Interview and started the firestorm also linked out to my firm as the source of the $900,000 Brooklyn median sales price, a reference to our Elliman Report: Q1-2021 Brooklyn Sales.

Bloomberg wrote about it NYC Mayoral Candidates Whiff on Brooklyn Home Question and made a cool chart…


And a Slate piece New York’s Mayoral Candidates Fail the “Price of Housing” Question contained the best quote of the day:

In relative terms, then, Donovan’s appraisal of the Brooklyn housing market is wrong in the same way it would be wrong to guess that a Big Mac meal costs $1, a can of Coke costs 12 cents, or a gallon of gas costs 40 cents.


Getting Graphic


My favorite charts of the week of our own making

My favorite charts of the week made by others


Appraiserville

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

Who Knew? Solar Energy Is More Important To Appraisers Than USPAP Politics?

Based on the view count at Appraisal Buzzcast, it sure looks like appraisers want to know more about solar energy than any other recent topic.


[click to expand]

Cosmic Cobra Guy says USPAP may now not be enforceable in Texas

I think Jeremy’s concern is even more serious for Texas because of the recent TAF decision to extend the current edition of USPAP for another year due to COVID without any advanced notice to the 55 states and territories. It is clear that TAF is feeling public pressure to expand beyond the two-year cycle and using COVID as an excuse was simply a way to save face.

May 11, 2021 Release From Appraiser Jeremy Bagott

SCOFFLAW ACTIVITY AT TEXAS APPRAISER BOARD SPREADS TO CENTRAL APPRAISAL DISTRICTS

– In his column last year in the Austin American-Statesman, appraiser Jeremy Bagott warned that the Texas Appraiser Licensing & Certification Board was in open violation of Texas state law.

In a column this month in the Lubbock Avalanche-Journal, Bagott warns that the horse has bolted – all 254 central appraisal districts, which function as county assessors in the Lone Star State, have repeated the defect in their biennial reappraisal plans. The state’s Department of Banking, Department of Housing and Community Affairs, Credit Union Department and Public Utility Commission are similarly in violation of Texas administrative law.

After his column ran in the Statesman, a number of appraisers asked Bagott for suggested wording that cautions clients and intended users that the “2020-2021 Uniform Standards of Professional Appraisal Practice” have not been adopted into Texas law. He suggested the following:

The client and any intended users should be aware that the Texas Appraiser Licensing & Certification Board Commissioner has not submitted the “2020-2021 Uniform Standards of Professional Appraisal Practice” to a required notice-and-comment rulemaking pursuant to the procedures and standards set forth in the Texas Administrative Procedure Act (Texas Government Code § 2001.021). In addition, Title 1 of the Texas Administrative Code § 91.40 requires any state agency adopting by reference (ABR) a document into law to “note the revision date of the ABR information” and to “amend the rule to adopt a newer version of the ABR information.” This requirement has not been met either. Absent a required rulemaking, the “2020-2021 Uniform Standards of Professional Appraisal Practice” is not recognized by the State of Texas and would not likely be enforceable if challenged.

The scofflaw activity is linked to the two-year change cycle of the standards. Some states cannot reliably complete a required rulemaking in a two-year period, so they bluff.

“I think it’s been an article of faith among the state’s mortgagors, underwriters, investors and bank depositors that USPAP is enforceable in Texas,” said Bagott. “Sadly, it’s likely not the case, because of the deficient rulemaking.”

Appraisers may now need to disclose this in their reports, so as not to risk inadvertently misleading their clients.

“I think people would be very surprised to learn of this,” said Bagott. “It’s regrettable.”

#

Hoisting the flag of waste and abuse, Jeremy Bagott, a licensed appraiser and former newspaperman, issues a clarion call in his 2019 book “Dispatches from the Cosmic Cobra Breeding Farm.” He takes the reader deep inside a tiny Washington, D.C., foundation that has managed to have its copyrighted code of conduct enshrined in federal and state law. All 50 states, even the U.S. territories of Guam and the Northern Mariana Islands, now enforce it. The 14-employee nonprofit, known as the Appraisal Foundation, has parlayed the arrangement into a lucrative publishing cartel with top officers and favored trustees jet-setting to Europe and Asia. In the process, the author uncovers a troubling trend deep in the plumbing of government.

OFT (One Final Thought)

Oddly satisfying.


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 know the median sales price in Brooklyn now;
  • You’ll know the Brooklyn median sales price a year ago;
  • And I’ll know the Brooklyn median sales price in 1981.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


May 7, 2021

Housing Migration As An Unaffordable Sport

Sometimes we run out of runway:

But I digress…

New Signed Contracts Are Up…A Lot YOY Because That’s When The Lockdowns Started

Its been a year since we launched our newest monthly addition to the expanding Elliman Report series for Douglas Elliman. I’ve been the author since 1994 and never did such a rapid change in market conditions bring the need for an additional way to look at the market.

What was most surprising about the April results was the continued surge in activity across the board.




The New York Suburban Versus Urban Housing Market Relationship Is Not A Zero-Sum Game

Here is my third monthly contribution to the New York Times Calculator column in their real estate section: Did the Suburbs Kill the City Real Estate Market? Maybe Not.

The “fleeing the city” narrative was established as the pandemic lockdown began last March. It gave rise to the expectation that the return of sales activity to the city would come at the suburb’s expense. That didn’t happen when looking at home sales activity. Using the results of the Elliman Report: Westchester Sales Q1 2021 and Elliman Report: Manhattan Sales Q1 2021 it is clear they are both up but the timing is different.


And the same pattern is shown by comparing additional suburbs.

The Real Deal Shows My Market Reports Are Median In A Myriad

The Real Deal Magazine, the stalwart of the real estate industry coverage, does a comparison of all the market reports out there that cover the Manhattan housing market.

Barbara Corcoran launched the industry genre first in Manhattan in the 1980s, an arguably primitive real estate market compared to most suburban markets I can think of because coops, representing about 85% of the market back then, weren’t in public record. I began writing an expanding series of reports for Douglas Elliman in 1994 with one rule: no interference or editorial input. To their credit, Elliman has never gone back on their promise despite four shifts in leadership since then. My independence and neutrality fit in well with their entrepreneurial culture. I’m the bad guy when things are bad. When our report series took off in popularity, there were lots of new entries in the space produced by marketing departments and then stored away after the report was released.

This point was brought up in the Real Deal analysis and I want to understand why:

and each quarter there are unexplained gaps in those figures, painting a sometimes murky picture of the housing market.

Why is it important that the report results have to be the same across all companies? This always comes up with the topic of market reports. To have uniformity, it would require that each effort does the exact same thing. The problem with this thinking is:

  • each firm has different strengths and weaknesses
  • a robot can regurgitate public record
  • public record is very dirty
  • public record is very inconsistent in timing
  • Manhattan doesn’t have a traditional MLS
  • each firm defines things differently (i.e. luxury)

So it comes down to sameness, and there is room for all efforts. The consumer, like in most everything, decides.

One big issue for me to keep my neutrality on market outlook when I speak to market conditions: I don’t read the other reports very often. This is not meant to be a slight to anyone in any way. Knowing how the other brokerages think about the market is not part of my report preparation process – that’s part of the effort to remain neutral.

Here is how our Elliman Report matches up with others per The Real Deal.


The Journal Podcast: Why Housing Is On Fire (Location means less than it used to)

This was a fascinating, and a bit depressing, story on how location means less than it used to – how Boise home buyers are being rattled by the influx of Californians.

Rising Seas Are No Deterrent To Lending


This was a fascinating article because there will be a noticeable impact by climate change within the term of typical thirty-year mortgages.

Podcast: Going To Church For The Real Estate

With church membership sliding lower for decades, defunct churches provide a real estate opportunity and presumably new tax revenue for municipalities as their tax-exempt status changes.

Here’s an interesting Marketplace podcast on the topic: When the spirit moves: Church real estate is heating up:

Migration Patterns Are Making Housing Prices Higher

I’m starting to get a little confused about the surge of migration narratives for two reasons:

  • The story remains in process because vaccinations are still being distributed. For example, NYC has a narrative but corporations haven’t called back their employees and 80% of office buildings are empty. So how do we proclaim a conclusion now?

  • There are a massive number of really interesting stories on the topic but it’s getting a bit overwhelming. One consistent point is being made – consumers are searching for affordability and it’s making it more expensive in many locations.

• How Covid Has Reshaped Real Estate From New York to Singapore [Bloomberg]

We get a shout-out!

• MapLab: How to Track American Migration [Bloomberg]

• The Dynamics Behind the Ugly Amount of Empty Office Space [Wolf Street]

• The home sales boom means you might end up renting [Vox]

The Pandemic Changed Where Americans Live [WSJ]


There are more stories in the links at the bottom.

Byron Allen Gets Mega Financing To Build A Mega Home And Its No Joke

This Real Deal piece interviewed me about this huge spec development by the comedian…

Allen took out an 18-year, $37.8 million mortgage from Bank of America and landed a $45 million line of credit for the project, set to mature in 2024, according to records. Allen signed the loan documents.

…but I stayed for his punchline. That joke got to me, LOL.

His joke about the value of money on national television…

“I love old people but never ask them for money,’’ he said on the Tonight Show when he was 18. “They start reminiscing. ‘Grandaddy, could I get a quarter for a popsicle?’ And he’s like, ‘A quarter? For a popsicle? I once bought a 20-room house with a quarter.’”


Getting Graphic


My favorite charts of the week of our own making

This Is The East Village/Lower East Side I Remember In The 1980s

This video was shared with me – I looked all over to buy it but all the former links to purchase it are broken.

When I moved to Manhattan in the mid-1980s, this video captures how I remember the Lower East Side and East Village at that time. It was scary to an outsider who was raised in the suburbs. It was an intoxicating eclectic mix of people and culture representing a world I never knew existed. I was drawn to it but crossed my fingers every time I was asked to appraise something there. I ran into someone I went to high school within the D.C. metro area who told me that he and his friends ended up as squatters in one of the abandoned buildings (think IN REM foreclosure crisis of the 70s/80s when NYC landlords abandoned thousands of buildings because rent restrictions kept rents rising less than inflation) and when the gentrification movement swept in, they sold it and now he never needs to work again. The area has completely gentrified. I kind of miss that old burned-out school bus on blocks in the middle of the street somewhere off of Avenue B. What a crazy world.

Since 1979 Clayton Patterson has dedicated his life to documenting the
final era of raw creativity and lawlessness in New York City's Lower
East Side, a neighborhood famed for art, music and revolutionary
minds. Traversing the outside edge he's recorded a dark and colorful
society, from drag to hardcore, heroin, homelessness, political chaos
and ultimately gentrification. His odyssey from voyeur to provocateur
reveals that it can take losing everything you love to find your own
significance.

Directed by Daniel B. Levin and Ben Solomon

Appraiserville

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

Sadly, I’ve got nothing to share this week but more insights are coming soon. Think “diversity.”

OFT (One Final Thought)

Seeing parenting through the lens of sports:


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 faster;
  • You’ll be saying nothing to the media;
  • And I’ll be on the bench.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


April 30, 2021

In Life And Death And Housing, There Is Always Music

This video showcasing the amazing talent of Prince playing my favorite Beatles song, has over 100 million views (unreal!). I imagine most Housing Notes readers have seen this clip before, but it’s worth watching again if you want to feel really good, especially the second half. This is an analogy for the euphoria most of us in housing market businesses are feeling right now.


But I digress…

Masters in Business on Bloomberg Radio: Jonathan Miller on the state of real estate (it’s fun)

This is my fourth appearance with my friend Barry Ritholtz, a prolific columnist/blogger, radio show host/podcaster, and wealth management firm head on his Masters In Business show for Bloomberg Radio. He previously interviewed me in 2014, 2016 and 2020.

Barry also posted the interview on his essential Big Picture blog: MiB: Jonathan Miller, Appraiser Extraordinaire in addition to the Bloomberg Masters In Business landing page.

To say we talk a lot about housing and valuation in a crazy market wouldn’t do this fun conversation any justice. I am always thrilled to be in the company of his never-ending incredible lineup of guests.

To listen to the entire one hour and 49 minute show (sorry about that), you can go here:


The Journal Podcast: The Strange Economics of the Lumber Market (retail prices skyrocket while raw prices fall)

When we think about a “long-term” asset like growing trees, the broken economy of lumber is not what you think. This is a fascinating look behind the scenes on a key resource for housing.

Housing Is A Winner Coming Out Of The Pandemic

Residential investment is up 14.4% YOY. Wow. There’s a great UpShot/NYT Piece on who wins and loses.

The People That Left Cities Generally Didn’t Move Very Far

New York City is seeing a reduction in outbound and the inbound is just getting started as vaccine adoption really ramps up. This is from a really great Bloomberg piece: More Americans Are Leaving Cities, But Don’t Call It an Urban Exodus.

When You Look At All The Housing Records Being Set, Affordability, Not ‘Bubble’ Strangely Applies

There was a terrific Bloomberg piece last week: The Most Important Number of the Week Is $329,100The median price of an existing home in the U.S. rose to a record in March, but don’t call the housing market a bubble.

Many are confused about why sales have continued to surge long after last year’s lockdowns ended. Affordability is driving this seemingly unsustainable demand…

…despite all the records being set…

[Elliman Webinar] A Deep Dive Into The Structural Shift In Hamptons Housing In Two Parts

Douglas Elliman Real Estate held two sessions on the state of the Hamptons housing market. It was a discussion about how this booming market started out of the pandemic, what the state of the market is now, and addressed the question of sustainability of conditions in the future. Excellent and different insights were shared by both panels. I enjoyed moderating both panels equally!

The links to watch each session have been made available by Douglas Elliman.

Panel 1: April 29th 9:30 am

Panel 2: April 29th 11:00 am


If You Love Disney World, Have I Got A Place For You To Live

Apparently, the construction mortgage underwriters were big fans of Disney theme parks.

Kitchens are a key component to a homes value, but Microwaves are the neediest of all appliances

Here’s the proof.

Getting Graphic


My favorite charts of the week of our own making

My favorite charts of the week made by others


Appraiserville

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

The USPAP Ethics Rule States That It Is OK To Discriminate As Long As You Have Good Data

One of the more amazing aspects of the recklessness of The Appraisal Foundation’s management of USPAP is their lack of legal review of the revisions they churn out every two years. As I’ve written about their misinformed modification of the word “misleading” that has placed every appraiser in jeopardy, the hits keep coming. With an estimated $8M to $10M in reserve, you would think a not-for-profit with such a small staff would invest in a legal review of the very appraisal standards they are responsible to maintain, yet they don’t. USPAP is embedded into state laws and yet, a bunch of volunteers who are responding to the organizational culture of finding something wrong every two years so the organization can sell books and classes is not protecting either the public trust or looking out for the appraiser. This is the same organization that writes bat-shit crazy letters demanding they deserve no oversight.

Let’s look at the Ethics Rule, something that has been embedded in USPAP for years. It’s not an Advisory Opinion (AO). It has literally been part of USPAP for years. (Page 7 in USPAP – page 18 of the app)

An appraiser (highlight my emphasis):

must not perform an assignment with bias;
must not advocate the cause or interest of any party or issue;
must not accept an assignment that includes the reporting of predetermined opinions and conclusions;
must not misrepresent his or her role when providing valuation services that are outside of appraisal practice;
must not communicate assignment results with the intent to mislead or to defraud;
must not use or communicate a report or assignment results known by the appraiser to be misleading or fraudulent;
must not knowingly permit an employee or other person to communicate a report or assignment results that are misleading or fraudulent;
must not use or rely on unsupported conclusions relating to characteristics such as race, color, religion, national origin, gender, marital status, familial status, age, receipt of public assistance income, handicap, or an unsupported conclusion that homogeneity of such characteristics is necessary to maximize value;
must not engage in criminal conduct;
must not willfully or knowingly violate the requirements of the RECORD KEEPING RULE; and
must not perform an assignment in a grossly negligent manner.

Now re-read the part I have made bold. If you look at the point being made closely, it is saying an appraiser can’t use unsupported racist data. In other words, the text is conveying that you CAN use supported racist data for “conclusions relating to characteristics such as race, color,…”

If these ridiculous lapses in judgment were reviewed by a lawyer, this kind of thing wouldn’t happen over and over again. It’s not that the writers of the Ethics Rule were racist, it’s that they are in their own bubble and typically not lawyers.

This is the same organization that has formed a “diversity” task force that is not led by a person of color and went without an African American on their Appraisal Qualifications Board for more than three decades. Only because of external pressure by people like myself and others did they address this particular lapse of board composition.

This is inexcusable and should be edited immediately for its tone-deaf look at systemic racism. The industry is in the early days of a rigorous external examination and all of us will be mischaracterized. It is already happening. No amount of complaining about how unfair this is in posts in Appraisers Blogs and other outlets will stop the shifting momentum against us if our industry leaders are oblivious to it.

Just like the “misleading” fiasco, the problem with our profession does generally not lie with the appraisers themselves, but our ineffective and insulated leadership.

I still can’t get over how dumb the error in the ethics rule is.

Good grief!

[Buzzcast Podcast] Jonathan Miller: The State of the Appraisal Industry

I had a fun and productive conversation with Joan Trice on her podcast about the appraisal industry.


Appraisal Industry Versus Appraisal Profession

Ann O’Rourke, the appraiser pioneer of mass communication, publishes an essential publication, Appraiser Today (I’m a subscriber). She was enthusiastically promoting my above interview on Appraiser Buzz and made the observation:

I don’t like the term “appraisal industry” and prefer “appraisal profession.” I’m an “old-timer” of 45 years and have always thought of myself as being in a profession.

When I reflected on Ann’s comment I thought I’d provide an explanation of why I agree with the title of the podcast. I get where Ann is coming from but let me play devil’s advocate. I too like to think of myself as an appraisal professional, one that works within the appraisal industry. I am proud to be an appraiser and proud of the skills I have amassed over my career. The appraisal industry is comprised of entities and individuals that intersect or overlap with an appraisal professional: software companies, big data, AVMs, AMCs, regulators, banks, loan officers, mortgage underwriters, mortgage brokers, etc.

I’ve had a number of Appraisal Institute members tell me they are NOT part of a trade group but representatives of a profession. It makes sense that a member of an organization would upsell what they represent. After all, that’s the very definition of a trade group. On the other hand, the objection to using “trade” and “industry” suggests it is a comedown from the “profession” image that is projected on the public.

In danger of going down a rabbit hole, words like “trade” and “industry” infer physical labor combined with technical skill like a plumber, an electrician, or an arc-welder on a deep-sea oil drilling platform yet the act of appraising (the type of appraisals I am referring to) really is half physical (walking the property, town hall, driving around to view comps) and half analytical (the “grid”, adjustments, comp selection, historical references, etc.)

As a good friend and long-time Oklahoma appraiser Tom Allen once told me, “appraising isn’t rocket science.” Using that logic, it’s a skill and therefore a trade, and trades are part of an industry. That’s a key problem with the bureaucratic largess of the Appraisal Foundation – it has set up a byzantine set of rules and procedures that don’t match the profession and actually hold it back. Carpenters (at least the carpenters I’ve met), don’t describe themselves as carpentry professionals.

And yes, as I climb 6 flights of stairs in a Manhattan walkup co-op apartment building on the hottest day of the year, to enter a filthy foreclosed apartment with all the windows shut, I consider switching to that arc-welding gig on an oil platform in the Gulf of Mexico.

OFT (One Final Thought)

As we come out of the pandemic, I am much more appreciative of the little things in life. When I think back to 9/11, being in Manhattan at the time, I assume I’ve heard it all by now. Yet I just stumbled across this must-watch clip: “A lesser-known rescue effort is the historic maritime evacuation that took place that day – one that was greater even than Dunkirk. In this episode of “I Was There” VICE meets civilian mariner Pete Johansen who assisted with the world’s largest boat lift that rescued half a million people stranded on the seawalls of Lower Manhattan.”

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 professional;
  • You’ll see housing as more affordable despite all the records being set;
  • And I’ll be an arc-welding gig on an oil platform in the Gulf of Mexico.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


April 23, 2021

Whole Lotta Housing?

The next time you have the opportunity to give a speech, consider the potential uses of a microphone. Since Led Zeppelin is trending on Twitter right now for unknown reasons…


and I want Housing Notes to be in tune with our current cultural zeitgeist, I shared a clip again that I’ve watched a bunch and I can’t stop. Microphones are clearly underutilized. Please remember this clip the next time you give a speech using a mic and don’t short yourself.


But I digress…

The Hamptons And Other Luxury Market Destinations Are Having A Hard Time Keeping Up With Demand

I’ve been the author of the expanding Douglas Elliman market report series since 1994 and this week Douglas Elliman published our research on The Hamptons, North Fork, Long Island, Los Angeles, Venice Beach, Mar Vista, Malibu and Malibu Beach.

One of the pivots in the housing market post-COVID lockdown has been the inversion of market strength. Instead of housing markets reflecting a “soft at the top” characteristic, it has inverted with the lower end seeing less strength than higher-priced segments (not weakness, just less strength than higher price tranches). In the Hamptons and North Fork, overall listing inventory is way down as covered in The Real Deal Buyers hunt Hamptons, North Fork homes — often in vain. Sellers are owning the Hamptons market right now as reported in Mansion Global Hamptons Sellers Bask in a Luxury Buying Spree.

For the most part, in a relative sense, upper-end markets we cover across the U.S., those below the very top seem to be showing a disproportionate amount of activity. This is discussed in this Bloomberg story on the Hamptons, comparing it to other markets we cover such as Palm Beach and Greenwich: Frenzied Demand Is Luring Hamptons Sellers in Boom-Time Market And its not just sales as CNBC reported: A house just rented in the Hamptons for $2 million for the summer. Forbes also reported on the boom that our research shows: Hamptons Home Sales Hit Records

Here’s an illustration for the Hamptons showing the middle tranche of $1 million to $5 million (I affectionally call with tongue in cheek, the “Hamptons Middle”) shows a massive YOY surge. Granted the markets above and below are booming with sales activity too.

“It’s a generational change,” says Michaela Keszler, a broker at Douglas Elliman. “They’ve had their houses for a long time, and they want to downsize or move somewhere else.”

In Newsday Looking for a home in the Hamptons? Get ready to shell out $1.3 million.

There was a “massive surge” in sales activity in the $1 million to $5 million range, where the number of sales jumped by almost 83% compared with a year earlier…

In fact as a result, overall average sales was skewed negative because of the significant YOY shift in what is selling. Here’s a screenshot of my always colorful internal worksheet.

Hamptons listing inventory saw sharp gains after the federal SALT tax went into effect in January 2018 but the growth dissipated before the pandemic as late 2019 and early 2020 started to look better for sellers. However the past year has burned off a tremendous amount of inventory with record sales volume:

________________________________________________
HAMPTONS HIGHLIGHTS

“The market pace remained brisk, with heavy sales volume and limited inventory.”

  • Listing inventory fell at its fastest rate in more than thirteen years of tracking
  • Sales surged year over year for the third straight quarter to the largest first-quarter total in six years
  • Median sales price rose sharply year over year for the fifth consecutive quarter
  • While sales surged market-wide, activity on the $1 million to $5 million range nearly doubled, skewing average sales price lower
  • Listing inventory for the luxury market rose in sharp contrast to the remainder of the market, which declined

________________________________________________
NORTH FORK HIGHLIGHTS

“Robust market conditions remained with high sales activity, prices and limited supply.”

  • The number of sales jumped annually for the third straight quarter
  • Listing inventory fell to the lowest level in fifteen years of tracking
  • More than a third of all closings occurred above the last asking price
  • The number of sales above the $2 million threshold more than tripled


LONG ISLAND HIGHLIGHTS

“A record-laden quarterly result with rising prices, strong demand, and limited supply.”

  • Average and median sales price rose sharply to new records, collectively for the third straight quarter
  • The number of sales surged year over year at the highest rate in eleven years
  • Listing inventory fell sharply to the lowest level in nearly eighteen years of tracking
  • Single family median sales price set a new record for the fourth consecutive quarter
  • Condo month of supply showed the second fastest-paced market in twelve years
  • Luxury listing inventory fell by its steepest annual rate in eleven years to its second-lowest level on record

Knight Frank NY Focus Report: New York Prices To Stabilize in 2021

Knight Frank, a global real estate firm and is affiliated with Douglas Elliman produces a slew of global housing market reports. I’ was connected with them and other global firms like Savills before Elliman developed their relationship. Knight Frank has been covering various U.S. housing markets since they became affiliated with Douglas Elliman, incorporating our research and analysis into their presentations. They produce some beautiful reports. The latest is a subset of U.S. reports that key off of their seminal annual Wealth Report. Here’s a snippet Incidentally, “UHNWI” means “Ultra High Net Worth Individuals.”


New York Focus 2021 [Knight Frank]

An Epic NYT Piece On The Current State of Real Estate: Optimistic But Still Unsettling

Please read this New York Times piece: U.S. Home Sales Are Surging. When Does the Music Stop?

It really resonated with me (probably because I can’t play an instrument).

U.S. Real Estate Analogy Using A Big Apple

This video went viral and made the rounds with all my appraiser colleagues across the U.S. The shortage of U.S. listing inventory is causing a lot of irrational behavior but mortgage lending is still historically tight. Watch it.


Where Did People Actually Move Since The Pandemic Began?

This pandemic/housing discussion that began mid-March of 2020 has been visualized in an excellent way by The Upshot at the New York Times: How the Pandemic Did, and Didn’t, Change Where Americans Move

There was tremendous growth in lower-density outward regions, especially the Hudson Valley, upstate Connecticut, and the eastern end of Long Island.

In short, as disruptive as the pandemic has been in nearly every aspect of life, it doesn’t appear to have altered the underlying forces shaping which places are thriving or struggling.


and this…

All together, this evidence shows neither a broad pandemic urban exodus, nor a California-specific exodus, nor a remote-work boon for declining communities hoping the past year might usher in their revival.


There are lots of visualizations in the piece – this one captured NYC metro and its quite informative:


For Users Of The Zestimate, Please Realize It Is Only Reasonably Accurate 50% Of The Time

I’ve long been annoyed about the consumer infatuation with the Zestimate which was the marketing genius of the founders of Zillow. It was incredibly sticky to the consumer – after all, who doesn’t want to know what their relatives’ homes are worth? Full disclosure: I was on the Trulia industry advisory board from prior to their website launch until being acquired by Zillow.


The problem is, the results are still crap because in the phrase “median accuracy rate” the “median” part gets glossed over. I’ve written about this hundreds of times and I continue to be amazed at how most consumers don’t understand this. A median accuracy rate of 1.9% literally means that 50% of the time the Zestimate is within 1.9% of the price and 50% of the time it is not. It could be 99% off the right price half the time! Perhaps this is the actual reason why Zillow is not using their Zestimate in their iBuyer business – when it’s their money, they don’t trust it.

When I read this CNN piece about accuracy and sent a suggestion to the author to provide additional clarity and she did but its really not enough.

When you look at how these firms pitch their accuracy within the piece and then remember what “median” means, it gives you quite a different take.

One of the worst kept secrets of the past several years is how much the listing price impacts the Zestimate. It’s almost as if the accuracy is so bad, they need the listing price for a reality check. In my mind, this is actually proof positive that Zillow knows Zestimate is terrible because it is overly reliant on the original listing price of the property. In a random test, I selected an area in Bethesda Maryland where I grew up and looked at the Zestimate trend for the first ten listings I saw. In every case, those listings caused the Zestimate to surge to meet the asking price. Incredible!

Lifting Homes To Lift Prices

I’m showing this CNBC clip that shows how homes are raised to protect against rising water levels because I was taken aback by how cheap it was to do it. Small homes can be lifted for $10,000! With the furniture remaining inside!!!


ShowingTime: 2020 Property Showings Remained Above Trend From May Through December

One of the standard features on many MLS systems these days is a ShowingTime button. They have a free analytics section related to statewide showings to show the impact of COVID. It’s fascinating to watch.


Agent 1 Coaching Video: Talking Appraisals And Market Conditions

Here’s a fun discussion I had about everything with some real estate agents about appraisers with my friend Laura Scott. Click on image to listen.


Getting Graphic


My favorite charts of the week made by others

Appraiserville

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

TODAY IS THE LAST DAY To Submit Comments On The First Exposure Draft of a Proposed Change to the Real Property Appraiser Qualification Criteria

Here is the AQB exposure draft up for review. The comment link is on the second page at the “Survey Monkey” link.


This change is being pushed by large institutions that have the ear of The Appraisal Foundation because they either pay for it through being on IAC, sponsorships or they sit on AQB and don’t recuse themselves for their conflict of interest. Most of my colleagues take this view from a friend and colleague of mine (raw forwarded – many times – notes):


My understanding is that AQB is proposing striking the following…..which –if I comprehend the occasionally uncomprehendable, this removes the necessity of any direct hands-on training/field experience and allows individuals to be licensed/certified without such field experience… or possibly be under an instructor who will be remotely responsible for the actions of the infield trainee and likely numerous others.

Interpretation— the largest stakeholders–AVM’s– instructional providers– etc. will be the ones promoting this and providing training for multiple new appraisers.. And as one state regulatory agency insider commented we don’t have enough money or attorneys to go up against these entities or their appraisers.

Result—-Not good for the public, citizens, or the industry. This would seem self-serving for those that would benefit from lower standards, from creating a huge supply of appraisers and/or from providing training. Lower standards and minimally trained individuals is not what is needed nor is it good for anyone.

Having been involved/responsible for training 1-5 appraisers per year by my firm over the last 40+ years… I strongly believe in field- direct supervision by an experienced appraiser is a necessity. Further classroom hours/ coursesare most effective/useful after field training. You will not learn it without doing it in real life. One individual overseeing numerous others will not suffice for direct training.

The following change is being made deleting the experience is valuable statement……

(Will Be Deleted in Bold my emphasis) There is an underlying assumption that experience is valuable because clients and instructors tend to demand competency. Because experience in a classroom setting calls this assumption into question, credentialing authorities should carefully assess the quality and adequacy of appraisals made under such circumstances. They should also give consideration to restricting the percentage of this type ofexperience.Therefore, while practicum course appraisals are eligible to qualify for experience credit, the credentialing authority should audit a significant sample of appraisals made in such instances for quality and conformance with USPAP.

I can’t help but wonder which interest would put this forward. I am having difficulty with the argument that this is housekeeping bringing this in line with other statements. Perhaps it’s the other statementsthat should be reconsidered.

How many experts would you hire that didn’t have experience overseen by an involved at risk professional? Doctor? Radiologist, Dentist, Accountant?


++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Note from Jonathan: “The line numbers in the above “bold” section were removed to provide more clarity within the smorgasbord of informal stream of consciousness text. The original numbered text of the proposed deletion within the first exposure draft, as originally found the source document, is presented below. Click on the image to take you to the original text.”


While I agree with this there does need to be some sort of nuanced middle ground or appraisers will be fully replaced over time. Why else are Fannie and Freddie now applying AVMs to well more than half of all mortgages being issued? It is literally happening right now.

I think the key problem here is that most banks won’t accept trainees so the “mentor” mentality means the appraisers are largely useless for two years and places the financial burden on mentors – plus economically AMCs have removed a chunk of profits from appraisers making that two year period untenable for many mentors.

No other profession makes an arbitrary requirement like two years of mentorship. I have some young trainees with 6-9 months experience, that are better appraisers than some long-time veterans.

The Fall RAC Conference 2021 Is On!!! September 16-17

RAC will be holding this live, in-person event, in Plano, Texas.

“Mastering Disasters – conquering housing market disruptors”

More information to follow soon!

Incidentally, we were inspired by RAC member Frank Gregoire’s desktop for the marketing photo!

Your Zestimate is 50% Off + That Viral Housing Videa

If you skipped over it, look for these appraisal-related topics above in Housing Notes!

OFT (One Final Thought)

Why? Because He Can.


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 rock a whole lot;
  • You’ll lather in reverb;
  • And I’ll tune my old guitar.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


April 16, 2021

Housing Fish Tanks And The Perfect Wave

Watching surfing videos (my pandemic-inspired hobby even though I don’t do it myself yet grew up on the ocean) are especially soothing to watch (and apparently safer than watching a fish tank):


And even more to see here from Surfline.

But I digress…

Greenwich and Fairfield County Connecticut Boom

The Greenwich market has continued to standout as a robust housing market after 1=fifteen years of tepid market patterns. Our research for Greenwich and Fairfield County, Connecticut are part of our expanding Elliman Report series for Douglas Elliman that I began in 1994.

±350K Bloomberg Terminal subscribers made the story the sixth most read article of the day.

The listing inventory chart was concerning, as is the same situation across much of the U.S. housing market.

Elliman Report: Q1-2021 Greenwich
Elliman Report: Q1-2021 Fairfield County

________________________________________________
GREENWICH SALES HIGHLIGHTS

“Now three quarters past the spring lockdown, heavy sales volume continues to characterize the market.”

  • Single family sales volume remained heavy, nearly doubling year over year by the second-highest rate in a decade
  • Single family listing inventory continued to plunge, falling annually at the highest rate in more than six years
  • Condo sales more than doubled from the prior-year quarter, at the highest rate in nine years
  • Average luxury sales size skewed sharply higher year over year for the fourth straight quarter
  • Luxury listing inventory fell annually for the eighth consecutive quarter

________________________________________________
FAIRFIELD COUNTY SALES HIGHLIGHTS

“Most first-quarter sales in sixteen years and lowest inventory total in twenty-five years.”

  • The county saw the highest number of sales for a first quarter in more than sixteen years
  • Average and median sales price rose to their third-highest level on record
  • Listing inventory fell annually by its fastest rate to its lowest level in more than twenty-five years
  • More than one-third of all single family sales closed above the last list price
  • The number of condo sales surged year over year at a rising rate for the past three quarters
  • Luxury listing inventory fell to its lowest level tracked in our research for the third straight quarter
  • Luxury price trend indicators all rose to new records

Podcast: Urban Digs’ Talking Manhattan – Tracking Recovery

I joined my good friends over at Urban Digs, Noah Rosenblatt and John Walkup to talk about the lay of the land in the Manhattan housing market on their Talking Manhattan podcast. Their take on measuring market conditions is always fascinating.

They’ve shared an audio and video version here:



Downtown Boston Is Seeing Heavy Sales Volume

Douglas Elliman published our research for the Downtown Boston market this week and Bisnow Boston does an excellent recap on the state of the market as evidenced by our research.

Elliman Report: Q1-2021 Downtown Boston

______________________________________________________
DOWNTOWN BOSTON SALES HIGHLIGHTS

CONDO

“Sales jumped to their highest first-quarter total in sixteen years.”

  • The highest number of first quarter sales in thirteen years
  • The average sales sized skewed smaller year over year for the fourth straight quarter
  • All price trend indicators declined from the prior-year record, skewed low by the shift to smaller sales

TOWNHOUSE

“The number of sales surged above year-ago levels, rising for the first time in five quarters.”

  • The average sales sized skewed smaller year over year for the fourth straight quarter
  • All price trend indicators declined from the prior-year record, skewed lower by the shift to smaller sales
  • Listing inventory declined sharply quarter over quarter for the second time coming out of the year-ago market pause

A U.S. Housing Chart Frenzy In The Spring/Summer Issue of Elliman Magazine

I had some fun with the data from a bunch of housing markets we track for Douglas Elliman featured in the latest issue of Elliman Magazine.

Bisnow ‘Make Yourself At Home’ Podcast: How Does A Rental Market Recovery Play Out?

I had a fun discussion with Miriam Hall at Bisnow on the rental market and its future.

Her earlier piece led the way to the discussion: NYC Apartment Owners Seize On Burst Of Activity As Market Stabilizes

Palm Beach Real Estate is ‘Agog’

The absolute best series of words written about the housing market were given to us by Darrell Hofheinz of the Shiny Sheet this week covering the Q1 2021 market report releases. He is tasked articulating the wild Palm Beach housing market. The epic prose is, well, epic…

Words such as “active,” “busy” and even “bustling” just don’t seem to catch the spirit of the barreling price escalation and on-steroids sales activity that has even seasoned real estate observers, well, agog.

Just this week he post two other transactions articles that illuminates the frenzy:

EXCLUSIVE: Palm Beach house flipped for $17.75M, just 6 months after it last sold: MLS

Record setter: First of 4 townhomes brings $26M on old Charley’s Crab site in Palm Beach

Here are a sampling of Palm Beach charts from our market report research. Due to time constraints, I’ll be covering the Florida reports next week here in Housing Notes.

The Battle For Florida Housing Market’s Substantiation Of A Structure Shift Is Becoming More Evident

Like we are seeing in Palm Beach, the balance of the Florida housing market is continuing to see an influx of securities industry titans plant a stake in the high end Florida housing market.

I was quoted in a couple of places about the creation of the largest sized condo penthouse in recent history (22,547 square feet) – Bloomberg and the Miami Herald and Forbes broke the story and the piece chronicles the recent spate of this activity.

Here’s some raw data on the sales above 10,000 square feet (click to epxand).

Last week, the billionaire Larry Ellison acquired an $80 million megamansion in North Palm Beach (though he reportedly plans to tear it down). In February, a partner at Tiger Global Management set a record for Palm Beach, shelling out over $120 million for a beachfront estate. Shutterstock founder Jon Oringer, Keith Rabois of Founders Fund and Playboy mansion owner Daren Metropoulos have also struck deals of late. Not to mention Jared Kushner and Ivanka Trump, who bought a $32.2 million lot on the “Billionaire’s Bunker,” Indian Creek, in December.

The rate of expansion in activity continues to surprise and seems to substantiate the argument that Florida’s housing boom is not a fluke and might very well be a rest to a higher level. I’m not suggesting the current high level of activity is sustainable, but its gone on longer than anyone could have imagined. I said the following in the Miami Herald piece (it’s really LOL to quote myself in a newsletter):

“Zoom is here for the rest of our lives,” Miller said. “So there are going to be residual benefits to cities now. It seems there’s a real effort to diversify Miami’s economy beyond tourism and tax breaks, and the pandemic seems to be the grease that got that wheel going.”

The Real Estate Lexicon: Repositioned

When a listing price is cut, alternative versions of the action of changing the price to a lower price seems to be evolving:

Changed> Cut > Reduced > Improved > Repositioned

The last one in this progression is new to me. The language of real estate marketing evolves.

Appraising Madoff, And Thankfully No Tears Are Shed For Him

It was a bit surprising how little attention was paid to the announcement of Madoff’s death in prison. Good.

His returns were amazingly linear and there were a number of people that kept calling out the ponzi but he was close with regulators.

Because my firm is located in NYC, we’ve ended up doing appraisals in matters related to the post-Madoff tragedy/cleanup. All those people who trusted in him that had their finances destroyed – still hard to process.

In the aftermath, we appraised the properties of his wife, brother, both of his sons (the apartment where one sons committed suicide, and the other who died of cancer). I remember that infamous perp walk and talking to our appraisers about the news. One of our staff mentioned that he had been in the son’s apartment (the one who eventually died of cancer) and the soon to be ex-wife with kids in a luxury apartment telling him to the effect that her husband was an idiot because he was already engaged to his next wife and wasn’t divorced yet.

Every time I saw the Bernie Madoff perp walk after that I thought about that woman and how shocking it must have been to suddenly realize her path in life was instantly changed forever that she could have never forseen. I met Madoff’s brother while inspecting his apartment the day before he went to prison. He was literally saying goodbye to his family on the phone as I walked the apartment. The next day I saw his perp walk in television. It was a surreal experience.

I never appraised one of Bernie’s properties but was brought into the CNN studio to talk about his Manhattan coop and Montauk homes.

The CNN video (which I can’t find online anymore), was surreal too. The U.S. Marshal’s office was selling the property and did a video walk through the Montauk estate (incidentally the Zestimate at that time inflated its value by about double what the home actually sold for). Imagine a U.S. Marshal, wearing a blue raincoat with yellow block letters “U.S. Marshal” on the back, and his gun bulging under the jacket on his right hand side, making sweeping arm movements and using the phrase “understated elegance” twice as he pointed to the living room, and later the antique dresser, in the master bedroom.

When I was about to do a Bloomberg TV interview with Deirdre Bolton (the clip is gone now) on the Bernie Madoff properties in 2009 – the Manhattan market seemed to be a black hole (you get sense of it in my then column for Huffington Post after the September 2008 “Lehman Moment.” I happened to bump into anchor Tom Keene who tweeted:


Getting Graphic


My favorite charts of the week of our own making


My favorite charts of the week made by others


Len Kiefer‘s Chart Handiwork



Appraiserville

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

Appraising Madoff, And Thankfully No Tears Are Shed For Him

If you missed it earlier in these Housing Notes, check out my appraiser’s perspective of the tragedy above. We appraised several of the Madoff family’s residential properties in NYC metro.

Cosmic Cobra Guy: ALLEGATIONS OF SELF-DEALING AT NRA RING FAMILIAR TO LONG-SUFFERING APPRAISERS

From Jeremy Bagott, MAI, AI-GRS:

In his new book “The Ichthyologist’s Guide to the Subprime Meltdown,” appraiser and former newspaper editor Jeremy Bagott walks the reader through the smoldering wreckage of a crisis that took the global financial system to the edge of the abyss. He delivers a concise almanac to the debacle that includes essays, chronologies, roundups and key lists.

“Every great cause begins as a movement, becomes a business, and eventually degenerates into a racket” said the late philosopher Eric Hoffer. Testimony suggests one more nonprofit has become just another personal playpen for a long-tenured chief executive. This time, it’s the National Rifle Association, but Hoffer could have easily been describing the Appraisal Foundation.

Second Amendment advocates have watched in horror over the past few weeks as NRA board members testify at a bankruptcy hearing in Dallas.

“It essentially operates as a kingdom rather than a corporation,” Phillip Journey, a family court judge in Wichita and member of the NRA’s board, described the nonprofit. He called it “Wayne’s Kingdom.”

He was referring to Wayne LaPierre, whose 30-year tenure atop the association is under attack. According to testimony, the 501(c)(4) nonprofit has been used to bankroll a garden of earthly delights for the CEO.

LaPierre himself has already testified for two days about his alleged receipt of gifts that regulators claim represent undisclosed conflicts of interest. LaPierre justified his decision to voyage on Hollywood producer Stanton McKenzie’s 108-foot yacht. He acknowledged taking regular trips to the Bahamas on the vessel for years. He offered rationale for flying exclusively by private charter jet, and he defended his expensing of nearly $300,000 in Italian suits from a Beverly Hills shop.

The nation’s bank appraisers will see parallels with the Appraisal Foundation, an obscure, congressionally authorized Washington, D.C., 501(c)(3) nonprofit that has learned to maximize its publishing proceeds by continually changing its national appraisal standards, its copyrighted Uniform Standards of Professional Appraisal Practice. The tiny Beltway organization controls a niche publishing monopoly. It is wet-nursed by guaranteed annual federal grants. It has harvested other government funding and even applied for and received PPP relief during the pandemic.

It partners with corporations; representatives of lobbying groups sit on this nonprofit’s board. Its chief executive and favored trustees travel the globe on junkets to places like Paris, London, Rome, Rio and Singapore. In the world’s grand salons and skyline lounges, these global denizens trade jabs and jousts with notables like the former British Chancellor of the Exchequer Alistair Darling. It’s too weird for fiction.

The 13-employee organization has paid its CEO, a long-tenured, high-profile figure named David Bunton, more than the chairman of the Federal Reserve and U.S. Treasury Secretary combined. Over a recent eight-year period, the tiny nonprofit received $6.5 million in federal grants and parlayed that into $27.6 million in publishing revenue.

According to its 2018 IRS Form 990, the publicly subsidized nonprofit has slowly amassed more than $6 million in cash, savings and publicly traded securities while receiving guaranteed taxpayer grants year after year.

What’s going on with this tiny nonprofit is a four-alarm fire. A profession that helps safeguard trillions in mortgage loans is ultimately at the mercy of a handful of world citizens flush with U.S. government patronage and a license to mint money. Unchallenged power over decades has resulted in hubris and abuse.

Last year, details surfaced that Bunton received internal retirement pay in 2017 on top of his regular CEO pay, effectively more than doubling his reportable compensation to more than $760,000. It would be no one’s business if his nonprofit were not receiving guaranteed federal grants each year and not exercising a monopoly at the expense of a class of citizens.


Breaking: FTC Is Considering A Proposed Consent Agreement

On Wednesday, there was an FTC action that could be a sign this case is coming to a close. For those readers more informed than me, please feel free to share your thoughts.

ORDER WITHDRAWING MATTER FROM ADJUDICATION FOR THE PURPOSE OF CONSIDERING A PROPOSED CONSENT AGREEMENT

Background

The Federal Trade Commission filed an administrative complaint against the Louisiana Real Estate Appraisers Board, alleging that the group is unreasonably restraining price competition for appraisal services in Louisiana, contrary to federal antitrust law. The complaint alleges that the appraisal board’s regulations exceeded the scope of the mandate outlined in the Dodd-Frank Act that required appraisal management companies to pay “a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.” Specifically, the board required appraisal fees to equal or exceed the median fees identified in survey reports commissioned and published by the board. The board then investigated and sanctioned companies that paid fees below the specified levels.


I’m working on a few things for Appraiserville. Stay tuned – I’m in the middle of market report release season and our appraisal volume is off the charts – hopefully the same for you. In the meantime, you can re-read about the stay and that AEI paper on the wildly elevated state of appraisal waivers. Make sure you think deeply our massively bloated industry bureaucracy that treats our industry like its rocket science and the and rampant self-dealing by leadership that neglected to keep their eye on the ball for more than a decade.

OFT (One Final Thought)

Some things in life are underutilized.


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 fish tank averse;
  • You’ll be soothed;
  • And I’ll get those pots & pans out of the cupboard.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

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Extra Curricular Reads


April 9, 2021

The Housing Market Needs More Cowbell

It’s hard to believe that the classic “More Cowbell” SNL skit aired 21 years ago this week. I played a lot of Blue Oyster Cult in high school and college but since I saw this 2000 skit live when it aired, I’m all in (on cowbells). To this day I have a cowbell from my son’s old drum kit on my workbench and I have a cowbell app on my iphone that plays Christopher Walken saying “I’ve gotta have more cowbell” when you touch the cowbell image. This is the type of technology we really need. Will Ferrell said later on when he bumped into Walken (who played Bruce Dickinson) said: ‘You know, you’ve ruined my life…People during curtain call bring cowbells and ring them. The other day, I went for Italian food lunch, and the waiter asked if I wanted more cowbell with my pasta bolognese.’

But I digress…

Heavy Manhattan Rental Market Leasing Activity Is Aiding In Price Stabilization

This week Douglas Elliman published our research on the Manhattan, Brooklyn and Queens rental markets for March 2021. This is part of our expanding Elliman Report series I’ve been authoring for 26 (gulp) years. while the rental market is still seeing significant year over year price drops, they are slowly abating after peaking last fall. Net effective median rent (face rent including concessions) has not seen a month over month decline in four months. Of course rents tend to rise after the new year but the higher gain from February to March suggests that stability is coming.

I’m not sure if this has happened before but the reporting on two of our Douglas Elliman market reports became the 11th (Manhattan rents) and 18th (Westchester sales) of the day by the ±350K Bloomberg Terminal subscribers. A two-fer!

One of the interesting patterns that has evolved in Manhattan rentals is that marketing time has spiked, not because rentals are taking more time to rent (afterall, new lease signings for March had the highest March total since we began tracking in 2008) but rather that, older inventory is being cleared from the market and being rented. I would think this will be a short term data quirk as inventory continues to decline. Here are two versions of the same chart.

Here is our chart using our research data from the Elliman report that shows month over month changes in net effective median rent. Journalists are taught that 3 data points make a trend and here are four.


______________________________________________________
MANHATTAN RENTAL MARKET HIGHLIGHTS

“Net effective median rent has begun to show month to month stability in the new year.”

  • The highest number of March new lease signings since tracking began in 2008
  • Net effective median rent rose month over month for four straight months at highest rate in a decade
  • The dollar amount of rental concessions rose to the third highest level since 2008
  • Doorman new lease signings continued to rise by about twice the rate as non-doorman lease signings
  • Existing new lease signings increased by more than twice the rate as new development lease signings
  • Landlord concessions market share for the luxury market was nearly half that of the non-luxury market
  • Lower price tranches continued to see a larger percentage decline in median rent than higher tranches

______________________________________________________
BROOKLYN RENTAL MARKET HIGHLIGHTS

“New lease signings have continued to rise sharply since the fall.”

  • New leases rose sharply year over year for the seventh consecutive month
  • The net effective median rent fell year over year for the ninth straight month
  • Lower price tranches continued to see a larger percentage decline in median rent than higher tranches

______________________________________________________
QUEENS RENTAL MARKET HIGHLIGHTS

[Northwest Region]
“Despite the steady decline in rental price trends, new lease signings have not trended higher.”

  • Net effective median rent fell year over year for the eleventh straight month
  • New lease signings fell year over year for the second time in three months
  • The market share of landlord concessions has fallen by nearly half since peaking in November

The Manhattan Count Is Edged Out By Beijing Billionaires (But Our Air Is Cleaner)

The battle for high net worth individuals pivot from Manhattan to Beijing (by 1? Give me a break).


TLDR “The Answer Is No” – Are Californians to Blame for Salt Lake’s Rising Housing and Rental Rates?

It sounds to me like many in Utah are blaming California on their high cost housing woes, yet this is happening everywhere. California was recently blamed for Idaho’s drop in housing affordability in this excellent piece. Record low mortgage rates and lack of new supply will do that. The proliferation of inbound and outbound migration narratives has been endless. This one by the non-profit think tank The Utah Foundations blends data from Atlas and United Van Lines as well as the Tax Foundation, USPS and NAR.

At this point, the only thing I am sure of is that everyone needs to blame someone for something rather than solving the problem.


[Utah Foundation]


[Utah Foundation]


[Utah Foundation]

The New York Post looked at another migration study by CBRE this week and I chimed in.

COVID Impacted Long Island Towns Differently: Some Boomed and Some Bammed

There was a recent Newsday piece: 6 boomtowns: What’s driving rising home prices in communities across LI [subscription] that looked at the change in prices by town using data we compiled from the LI MLS and the results were quite different across the market.

On a macro level, this reminds us not to brushstroke housing markets as being consistent. This is not a new idea to ponder. If you have a subscription, it’s quite interesting to see the variance in performance. The variation in prices don’t infer individual property appreciation but these markets in aggregate are influenced by shift in product mix that sells and post-lockdown, that’s been in favor of higher end. By using median sales price, these numbers are not skewed by a few gigantic transactions.

No Zero-Sum Game Apparent: The Westchester Housing Market Continues to Rock (More Sales and Rising Prices)

Some anticipated that the recent rebound in Manhattan sales and early signs of rental price stabilization there would come at the expense of the suburban markets that surround NYC. Yet Westchester County showed us that the market remains very tight and robust, not a bastion of affordability. If we zoom out of NYC metro, the NYC suburbs are behaving just like the rest of the U.S. (rising prices and sales, falling inventory)

Prices are rising because the market is in need of more listing inventory. This is a national condition and I see this challenge as a crisis – affordable housing will be an economic challenge to the U.S. for decades. And you can thank record low mortgage rates for that. Low rates drive asset prices higher and this has been going on for decades now.

Bloomberg covered the report and produced a scary chart (black and white versions).

New York City Investment Sales Don’t Seem To Be Rebounding Yet

The year end jump in NYC investment sales activity seemed to be more about tax avoidance planning for 2021 rather than a true uptick in demand. Deals in 4Q20 were down 14% from the average of the three prior quarter.

Here’s what 2021 would like like after annualizing 1Q-21. Not pretty.


Palm Beach Continues To Defy Gravity With Another Mega Sale

Before we dive into the mega sale pool, new signed contract activity from our Florida research for the Douglas Elliman report shows growing interest in this region. Bloomberg’s chart and article makes it quite obvious:


These mega sales are no longer an anomaly. As broken by the Wall Street Journal, Oracle founder Larry Ellison just paid $80 million for a home in Palm Beach and the fourth sale above $50 million in 2021. For those that are curious, these four sales ranged from $3,100 to $5700 per square foot on 1-3 acres (I don’t know Ellison acreage yet.)

And here’s my chart to illustrate the consistency of this phenomenon in recent years. I maintain that this is a new market subset that appears here to stay but has little bearing on housing for mere mortals.

Appraiserville

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

Appraiser Waivers Shifted From An Exception To The Rule

For all the talk about how important appraisers are to risk management by the GSEs, we really aren’t. There is a compelling blog post using AEI data by Ryan Lundquist over at Sacramento Appraiser Blog.


Appraisal Buzz Interviews Dave Bunton, TAF President, on Buzzcast

Joan Trice’s podcast started out with a diversity question – asking Dave what TAF is doing about the lack of it in the profession. The lobbing of softballs was probably necessary to have Dave on the call. Dave is a very good bureaucrat and a nice guy who has a knack for saying things in a proactive sounding way. Yet Dave has been at the helm of this gatekeeper organization for more than three decades and until this year never had an African-American on the AQB. For those of you not familiar with the Appraiser Qualifications Board (AQB), they set technical policy which determines entry into the profession. Dave clearly acknowledges that the profession doesn’t reflect our U.S. population demographics (which he is essentially the gatekeeper). His answers sound like this issue is some sort of deep mysterious challenge. He went on to address the steps TAF is taking including the recent formation of diversity committee which, incredibly, is not headed by an African-American (nor are any members of the committee). This is how systemic racism evolves. This organization didn’t start taking action until outside critics began to point out the problem and public pressure influenced the need for action. But if the organization never dealt with diversity and didn’t practice it and either didn’t see it or pretend it wasn’t an issue, then how can they be tasked with fixing the problem? Good grief. Take the two year mentoring process for example – unlicensed appraisers trying to get their two years experience is virtually impossible.

To be honest with my listeners, I could only listen to the first ten minutes (halfway) and then I had to turn it off. Perhaps my listeners can let me know how it ends. Based on the lack of credible actions so far to fix the problem, the pressure is only going to get worse. Why not be proactive now? Wait, I know the answer: “It’s nearly impossible to fix a problem your actions showed you were oblivious of for three decades.”


OFT (One Final Thought)

As I’ve told my (adult) kids for years: Old people can rock.


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 play more cowbell;
  • You’ll play more cowbell too;
  • And I’ll rock.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


April 2, 2021

Pixie Dust Was Applied To The Manhattan Housing Market

The drummer from my favorite band, the Pixies, has a magic trick. Wait for it…

But I digress…

Manhattan Sales Have Clawed Back From The Housing Abyss

I’ve been the author of the expanding Elliman Market Report Series since 1994 and it has been a journey that never fails to disappoint. Douglas Elliman is only interested in conveying what market conditions are, rather than what some want them to be in order to help consumers navigate changing conditions with a neutral benchmark. Our first and most followed market report covers the Manhattan sales market and it was released today.

After many wrote off the future of cities as doomed, leaving markets like Manhattan with only a handful of residents, consumers opted to return in short order, with the first step measured in sales exceeding year-ago levels for the first time in four quarters. Sales were up year over year as consumers were pulled in by lower prices and lower mortgage rates in addition to growing evidence of a safer city as the implementation of COVID-19 vaccinations has accelerated faster than expected. It is more accurate to describe the market as “recovering” rather than “recovered” and 2021 is expected to illustrate this continuing improvement in housing conditions.

Even with the markets closed today, news of a recovering Manhattan housing market was the fourth most read story of the day by the ±350K Bloomberg Terminal subscribers

The Bloomberg piece has a cool chart using our bidding war data which shows the market is not as frenzied as being depicted by many but the overall optics are conveying improvement.

.

The New York Times presented my favorite, best nuanced, title for what our market report conveyed: Manhattan Sales Market Is Poised for a Revival, Just a Year After It Collapsed.

The Wall Street Journal and Mansion Global provided clear takes on the results as did Fox Business. My conversation with Brick Underground prompted the M5 post below. I know there is a more coverage coming as real estate reignites to dominate residents’ backyard (or illegally on the balcony) BBQ conversations.

Elliman Report: Manhattan Sales Q1-2021
Elliman Report: Northern Manhattan Sales Q1-2021

______________________________________________________
MANHATTAN SALES MARKET HIGHLIGHTS

Co-ops & Condos

Manhattan sales exceed year-ago levels for the first time in four quarters.

  • The number of sales exceeded the year-ago total for the first time in four quarters
  • The market share of bidding wars fell to its second lowest level in nearly thirteen years of tracking
  • Listing inventory continued to see annual increases skewed towards smaller apartments
  • Median sales price for co-ops and condos individually declined year over year
  • Co-op sales more than doubled since the end of the spring lockdown
  • Highest market share of financed condo sales in seven years of tracking
  • All luxury price trend indicators fell short of year-ago levels, seeing larger declines than non-luxury
  • Luxury listing inventory expanded year over year for the first time in five quarters
  • New development sales below the $3 million threshold surged year over year

______________________________________________________
NORTHERN MANHATTAN SALES MARKET HIGHLIGHTS

Apartment listing inventory has trended lower since the lockdown ended as townhouse sales pressed higher.

Co-ops & Condos
Listing inventory has trended lower quarter over quarter for the second straight quarter but remains well above year-ago levels. All price trend indicators fell short of year levels but rose from the prior quarter.

Townhouses
Price trend indicators showed mixed year over year results while sales expanded. Listing inventory jumped as marketing time expanded from the prior-year quarter.


[M5] Miller Median Market Makeover Mandate or “How Median Subsets Don’t Bracket The Total”

In today’s Elliman Report: Q1-2021 Manhattan Sales release, the YOY change in median sales price for the overall apartment market (co-op+condo) was +1.4%…


…yet the sum of the parts didn’t seem to correlate since co-op median sales price declined 3.8%…


…and condo median sales price declined 4.7%.


Over the past decade this has happened about a half dozen times including resales versus new development. I would get questions from reporters and real estate agents about it so I ended up writing a blog post in 2017 called: Explainer: Overall Median Sales Price Submarket Changes May Not Fall In Range.

The bottom line here is that unlike using “average” is that median is the “middle” number of the data being analyzed while “average” is proportional and most people correlate numbers in a proportional way.

So in this week’s market report, it was important to convey that both co-op and condo markets declined 4-5% year over year. This is a flaw in median sales price but it is still the preferred metric to analyze the real estate market because it removes the outliers.

If you’re still with me, here’s a color-coded chart I whipped for that 2017 blog post to try to explain all this (click on the chart to expand):


The Spread Between Manhattan and Brooklyn Rents Is Shrinking

In my more or less monthly data contribution to the New York Times Calculator Column, in each Sunday’s real estate section, we explored the narrowing gap between Manhattan and Brooklyn rents. Ironically, the pandemic brought Manhattan and Brooklyn rents closer together.

.

New Signed Contract Volume Remains Hot And Heavy

Across the four regions we produce new signed contract reports for Douglas Elliman, activity levels remain quite high although I suspect we will see some of the edge come off the results next month as mortgage rates continue to rise a bit.

Elliman Report: March 2021 New York New Signed Contracts
Elliman Report: March 2021 Florida New Signed Contracts
Elliman Report: March 2021 Colorado New Signed Contracts
Elliman Report: March 2021 California New Signed Contracts

More Bubble Talk-Downs: Monthly Payment Is Way More Important Than Housing Price

Barry Ritholtz presents a clear discussion why we are not in a bubble in Not a Housing Bubble, also adding some of his colleague Ben Carlson’s analytic handiwork.

Please read the post: Not a Housing Bubble.


My favorite part of this post:

Ben adds “the wave of millennials buying means demographics is going to be a huge force in driving the next 5-7 years at least.” In other words, future housing demand is structural, not this speculative.

Getting Graphic


Our favorite charts of the week of our own making

Appraiserville

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

Appraisal Institute Education Continues To Lose Its Relevance As Nepotism Impeded Future Planning

If you are like me and many other appraisers, I take a lot of my courses online through McKissock. Throughout most of my career until the past decade, taking classes through the Appraisal Institute was the gold standard and it was an important revenue stream for the trade group. Early on in my career an AI instructor joked that “MAI” stood for “More Annual Income” but in my residential litigation work, a number of lawyers told me residential appraisals done by an “MAI” stood for “Made As Instructed.” For commercial work, I hold most “MAIs” I know in very high regard.

Over the past decade, as technology for remote learning ramped up, and AI cronyism evolved nee´ 2007 which has been well-chronicled here, the Appraisal Institute dropped the ball on their education initiative and has been crushed by McKissock which continues, like AMCs to drive prices lower. The pandemic lockdown has been an exclamation point on the future dominance of remote CE credits. We can argue that once the pandemic ends or becomes more manageable, on-site CE classes will be back. However I would posit that they will not return anywhere near the levels achieved pre-COVID and were already declining.

How did this happen?

Through financial gerrymandering, the FOJ crowd essentially owned the ability to teach the lucrative AI courses in person and it was nearly impossible for new talented instructors to become part of the approved teaching corp. FOJs were “milking the cash cow” so there was no awareness or input entertained about the future of the sector. This is the same phenomenon that impacted the BoD and executives over this period.

Like the way FOJs looked down on the residential members, aspiring to go full-on commercial, they also shunned online education, instead electing to view education as a way to go “premium” and abandon the bulk of the CE appraisal market. How can they be seen as a valuable investment by new entrants into the profession when they are being ignored?

AI should be dominating CE education instead of raising membership fees to keep the shrinking ship from sinking. The lack of vision caused by the echo chamber of current leadership will be the organizations eventual downfall at memberhip’s expense unless there is dramatic change.

This is a reminder that the time for complacency of membership is over and change is needed immediately. That old saying “grow or die” seems appropriate for this moment in time.

OFT (One Final Thought)

We lost John Prine in 2020 to COVID-19 but we’ll always have his songs.


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 pixie dust;
  • You’ll be more magical;
  • And I’ll chart it.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

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Housing Notes by Jonathan Miller

Receive Jonathan Miller's 'Housing Notes' and get regular market insights, the market report series for Douglas Elliman Real Estate as well as interviews, columns, blog posts and other content.

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#Housing analyst, #realestate, #appraiser, podcaster/blogger, non-economist, Miller Samuel CEO, family man, maker of snow and lobster fisherman (order varies)
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Joined October 2007