January 24, 2020

Giving The Old Housing Narrative An Axe

Last night’s axe-throwing (note the hipster “e” in ax) party at a Brooklyn bar was perhaps the most “hipster-ish thing I’ve ever done in my life. It was a “sharper” version of bowling, but for “edgy” people who have an “axe to grind.” I reached out for advice on Twitter beforehand and it paid off. I won the tournament (but trophy shops don’t have “axe” versions since the sport is so new (click on the tweet for the tips that made it happen!)

But I “sharply” digress…

Hamptons Sellers Gave Largest Discounts In Two Years

I’ve been the author of the expanding Elliman Report market report series for Douglas Elliman Real Estate for 25 years and it feels like 2. How time flies.

My research was published by Douglas Elliman yesterday and Bloomberg included a chart in the piece. As loyal Housing Notes readers understand: charts are what life’s all about (aside from becoming a grandfather this month, obviously).


I don’t have proof this week but the report coverage by Bloomberg read by the 350K± Bloomberg Terminal subscribers made the top 20 most read yesterday. I don’t really need proof now that I already proved I can throw an ax.

Elliman Report: Q4-2019 Hamptons Sales
Elliman Report: Q4-2019 North Fork Sales
Elliman Report: Q4-2019 Long Island Sales

Decade Reports (No commentary)

Elliman Report: 2010-2019 Hamptons and North Fork Decade
Elliman Report: 2010-2019 Long Island Decade

Here are some key points made in these Q4-2019 reports:

________________________________________________
HAMPTONS HIGHLIGHTS

“Rapid listing inventory gains over the past year took a breather this quarter.”

  • Median sales price fell year over year for the third time in four quarters
  • The second-lowest number of fourth-quarter sales in eleven years
  • The number of sales increased annually for the first time in eight quarters
  • Listing inventory fell year over year for the first time in five quarters
  • Condo listing inventory and sales rose year over year for the third straight quarter
  • Single-family sales rose year over year for the first time in eight quarters
  • Luxury listing inventory rose year over year to the highest fourth-quarter tracked in eight years
  • Luxury median sales price fell sharply year over year for the second straight quarter


________________________________________________
NORTH FORK HIGHLIGHTS

“Price trend indicators and sales rose year over year.”

  • Median sales price rose year over year for the second time in three quarters
  • Despite the surge in sales, four-quarter transactions were the second-lowest in seven years
  • Listing inventory stabilized year over year after four straight quarters of gains
  • Marketing time and negotiability expanded from year-ago levels
  • Condo listing inventory declined year over year for the third straight quarter
  • Single-family sales rose year over year for the second time in three quarters
  • Luxury sales over $2 million surged from the nominal sales last year
  • Luxury listing inventory fell to its lowest level in three years


________________________________________________
LONG ISLAND HIGHLIGHTS

“Listing inventory fell to a record low as sales and prices continued to rise.”

  • The median sales price has not seen a year over year decline in twenty-seven quarters
  • After rising annually for three straight quarters, listing inventory fell to a record low
  • Number of sales were up year over year for the fourth time in five quarters
  • Condo median sales price has not seen a year over year decline in twenty-one quarters
  • After rising annually for three straight quarters, condo listing inventory fell to a record low
  • Single-family median sales price rose year over year for twenty consecutive quarters
  • Single-family listing inventory fell year over year for the first time in four quarters
  • Luxury median sales price rose year over year for the third time in four quarters
  • Luxury listing inventory increased year over year for eight straight quarters

The Brick Underground Podcast: 1-23-20 I Talk “Peak Uncertainty”

I joined Emily Myers of Brick Underground for my third interview on their podcast series. The discussion topics are covered here: The Brick Underground Podcast: How does NYC real estate move past ‘peak uncertainty’ in 2020.


After 700 Years Of Falling Interest Rates, Low Rates Today Shouldn’t Surprise

Since the financial crisis, I’ve looked at the phenomenon of low-interest rates as an inherent “hangover” effect of the financial crisis. Central banks around the world are close to 0%.

Mortgage rates have fallen sharply over the past year as the Fed tries to save the economy from the trade war. But perhaps this recent decline is just part of the macro trend over the last 700 years of recorded history?

And remember, Falling rates = rising asset prices. Next up? Negative interest rates.


The Real Estate Celebrity Effect Is In The Eyes Of The Lister

In one of the strongest U.S. luxury real estate markets of 2019 that boasted at least three sales just above and below $100,000,000, there are ten substantial listings around Mar-a-Lago that have been languishing on the market for an unusually long length of time. My contrarian theory in the Bloomberg piece is that homeowners adjacent to a celebrity property assume that it rubs off on them (their property value). I have never been a believer in the celebrity-effect pushing values above market levels. The quotes provided by some of the brokers don’t help that case for the higher value.

My favorite quote for explaining the lack of movement among these ten listings was quite amazing:

“It’s like when people get cancer and then they sue the power company and try to prove it came from the power lines.”

Wow.

More Sales In The Wealthier Areas Of LA, But Prices Aren’t

The Real Deal LA wrote a great summary of the results of our LA analysis (Downtown+WestSide+Malibu) for Douglas Elliman. Mansion Global noted the uptick in Luxury Condo Sales.

Elliman Report: Q4-2019 Los Angeles Westside + Downtown
Elliman Report: Q4-2019 Venice + Mar Vista
Elliman Report: Q4-2019 Malibu + Malibu Beach

And let’s not forget about Ski Country!

Elliman Report: Q4-2019 Aspen + Snowmass Village

GREATER LOS ANGELES INCLUDING WESTSIDE AND DOWNTOWN SALES HIGHLIGHTS

Trends “After six quarters of year over year declines, sales increased in the final quarter of 2019.”

  • All price trend indicators rose year over year for the third straight quarter
  • Listing inventory fell annually for the first time in seven quarters
  • The number of sales increased year over year after six consecutive quarters of declines
  • Single-family listing inventory fell annually for the first times after six quarters of gains
  • Condo sales rose sharply year over year after five consecutive declines
  • Luxury listing inventory for single-families increased while condos declined respectively from the same period last year

Here are some key points made in these Q4-2019 reports:

_____________________________________________________________________________
GREATER LOS ANGELES INCLUDING WESTSIDE AND DOWNTOWN SALES HIGHLIGHTS

“After six quarters of year over year declines, sales increased in the final quarter of 2019.”

  • All price trend indicators rose year over year for the third straight quarter
  • Listing inventory fell annually for the first time in seven quarters
  • The number of sales increased year over year after six consecutive quarters of declines
  • Single-family listing inventory fell annually for the first times after six quarters of gains
  • Condo sales rose sharply year over year after five consecutive declines
  • Luxury listing inventory for single-families increased while condos declined respectively from the same period last year


_____________________________________________________________________________
VENICE/MAR VISTA

“Sales moved higher year over year across all the market segments.”

_____________________________________________________________________________
MALIBU/MALIBU BEACH

“Sales showed stability or pressed higher year over year across all the market segments.”

_____________________________________________________________________________
ASPEN SALES HIGHLIGHTS

“Price per square foot moved higher as listing inventory declined across the region.”

  • The second straight quarter with a year over year increase in average price per square foot
  • Listing inventory fell short of year-ago levels for the third consecutive quarter
  • The first decline in the number of sales after four quarters of annual gains
  • Condo average price per square foot rose year over year for the second time in three quarters
  • Single-family sales increased annually for the third time in four quarters
  • After four quarters of year over year declines, the luxury average price per square foot surged
  • Luxury listing inventory declined annually for the first time after five consecutive quarters of increases

_____________________________________________________________________________
SNOWMASS VILLAGE SALES HIGHLIGHTS

“Year to date overall sales and price trends were up, and listing inventory was down.”

  • The sixth year over year increase in average price per square foot in the last seven quarters
  • Listing inventory declined year over year for the third consecutive quarter
  • The number of sales declined annually for the third time in the last four quarters
  • Condo average price per square foot increased year over year for the fifth straight quarter
  • Single-family listing inventory has declined year over year for three straight quarters
  • Listing inventory fell sharply year over year for the third time in four quarters
  • Average price per square foot declined year over year for the second time in three quarters


Getting Graphic


My favorite chart of the week


Upcoming Speaking Event


Appraiserville

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

Some Cobras Might Want To Look In The Mirror

In 2016 I began to wage a battle with the Appraisal Institute to bring to light how they were working against the residential appraisers’ interests by going to state legislatures (largely, Scott DeBiasio). What triggered my outrage was their attempt to take control over the local finances of each chapter and I’m not even a member. Their lack of residential representation continues today but the difference is, the appraisal industry’s deeper understanding of AI’s past behavior, linkage with AMCs including past senior officers who run them and lack of effectiveness in moving residential forward.

One of my thought processes during the effort was being forced to “choose sides” between The Appraisal Foundation and the Appraisal Institute because AI was doing everything they could to attack TAF. The residential industry was already being crushed by fees, partly due to AI’s alliances with REVAA and the legacy of past AI leadership working at or running AMCs.

Like most appraisers, I am frustrated by the argument that USPAP has to be continually updated and the realization that most of our industry simply can’t keep up with the changes. Setting standards is a good thing and I recognize and appreciate all the hard work that people on TAF do. My issue is the frequency of change and that’s what residential appraisers need to see changed.

And then comes this bombshell new book “Dispatches from the Cosmic Cobra Breeding Farm” that I received this week and wow, the writing style of the author Jeremy Bagott is spectacular. This guy can write. The book cover looks like an Isaac Asimov sci-fi novel but it reads like Stephen King, full of current cultural references. I got it this week and have nearly read the whole thing.

The book’s favorite target is TAF president Dave Bunton who is referenced dozens of times and portrayed as the source of the problem, and references Dave’s $760,000 compensation.


TAF responded with a note to correct the misstatement.

Since it seems to be well-known that Jim Amorin, CEO of AI makes around $400K as a base salary, I would think the other ancillary benefits bring the number a lot higher. Jim’s predecessor made about $350K as a base salary, plus benefits.


To which Jeremy responded:

CRYPTIC MEMO CLAIMS FOUNDATION DEALT BUNTON INTERNAL RETIREE PAYOUT PLUS CEO PAY IN 2017

An unsigned, undated memo on Appraisal Foundation letterhead was posted to the blog site “Valuation Nation” on January 22. The memo, citing “inaccurate” reporting in an unnamed recently published book, sought to further explain the 2017 annual pay of David S. Bunton, president of the Appraisal Foundation. The $760,000 pay package for the head of the 14-employee nonprofit, categorized as “compensation” in the Foundation’s Form 990, was reported to have included both an annual CEO pay component alongside an internal retirement-related payout.

“There are many open questions about the internal retirement component of Bunton’s pay if this memo is accurate,” said Jeremy Bagott, author of Dispatches from the Cosmic Breeding Farm, a book dealing with waste and abuse in appraiser oversight. “For example, have any additional sequenced internal retirement accounts been set up by his compensation committee or anyone else? One thing is clear: Bunton was no retiree in 2017. Nor was he one in 2018 or 2019. Even a onetime internal payout could have the effect of underreporting his pay over the coming years. Part of this haul was once our money, public money,” said the author.

Bagott contacted David Greer, Director of Communications for the nonprofit, seeking further comment. As of this writing, an email to Greer was unreturned.


Honestly, I found the author’s reasoning: “Bunton was no retiree in 2017. Nor was he one in 2018 or 2019. Even a onetime internal payout could have the effect of underreporting his pay over the coming years” was oddly weak and panicky, inconsistent with his strong writing style in the book.

I appreciate the distinction between AI and TAF but look at the performance of AI on behalf of their residential membership – it’s been zero.

The key point made in Jeremy’s book was the phrase “incorporation by reference” which focuses on the

“…public’s inability to access privately copyrighted standards once they’ve been incorporated by reference into public regulations. By “access,” read “purchase.”

This is reported to be a growing problem in law where copyrighted material becomes law, yet access to it is restricted. This insight is something for us to focus on going forward.

One flaw in Jeremy’s presentation, besides misstating Dave Bunton’s salary is that while Jeremy holds an “MAI” designation, the “MAI” designation of the Appraisal Institute is embedded into many state laws a la “incorporation by reference” because those laws require the use of an “MAI” in commercial appraisals in order for the appraiser to get the work. Selecting an MAI over an equally qualified commercial appraiser is now illegal under FIRREA. However, AI has continued to push for things like branded AI classes. One other thing, I thought the characterization of the ASC director was misrepresentative of what actually happened and seemed to be more of a cheap shot, again for effect. I know him and from direct experience, that guy is brutally ethical.

So to summarize the Cobra book:

  • It is superbly well written and articulates the problems facing residential appraisers, in particular, today
  • The “incorporation by reference” is a smart way to look at the appraiser regulatory situation
  • The “nail in the coffin” point made throughout the book about Dave Bunton’s salary and the ASC director was, unfortunately, inaccurate replacing the author’s interpretation as the “fact” and detracts from the broader message.
  • I’m a bit surprised that the author, as an MAI, didn’t speak to AI’s “incorporation by reference” practice itself since there has been a “Cosmic” battle between AI and TAF for years as AI has fought hard to replace TAF.

Still, I’d read the book for its articulation on where residential appraisers sit today in the mortgage finance ecosystem. It’s brilliant.

OFT (One Final Thought)


Brilliant Idea #1

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

  • They’ll be more cosmic;
  • You’ll be more like a cobra;
  • And I’ll keep throwing that ax.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


January 17, 2020

Some Housing Styles Really Stand Out In Any Location

I’ve often wondered what kind of school graduates students of architecture like this? Locating it near train tracks becomes a positive amenity.

But I digress…

Greenwich and Fairfield County Connecticut Continue To Show Choppy Improvement

I’ve been writing the expanding Douglas Elliman market report series for 25 years and nothing is more fun than fueling reader interest at a large scale.

The Greenwich market report I wrote for Douglas Elliman which they published yesterday, was included in a Bloomberg News story. And despite the heavy news volume, the piece was the #2 most-read article at one point in the day by 350K± Bloomberg Terminal subscribers worldwide.


…and if that wasn’t cool enough, the story included a twofer! (2 charts).



________________________________________________
GREENWICH SALES HIGHLIGHTS

Elliman Report: Q4-2019 Greenwich Sales

“Negotiability expanded to the highest level in two years as more sellers became in sync with market conditions.”

  • Single-family median sales price jumped year over year as listing inventory declined
  • Single-family listing discount showed the most negotiability in two years
  • Condo price trend indicators and the number of sales declined from year-ago levels
  • Luxury listing inventory fell year over year for the third consecutive quarter
  • Luxury price trend indicators and the average sales size decreased at a similar rate




________________________________________________
FAIRFIELD COUNTY SALES HIGHLIGHTS

Elliman Report: Q4-2019 Fairfield County Sales

“Sales expanded and listing inventory compressed annually for the third straight quarter.”

  • Median sales price rose year over year after four straight quarterly declines
  • The number of sales increased annually for the third consecutive quarter
  • Listing inventory declined year over year for three straight quarters
  • Luxury median sales price declined year over year for the eighth straight quarter
  • Luxury listing inventory declined annually for three straight quarters at an expanding rate




Downtown Boston Keeps Moving Quickly Even After Cherry-Picking

Let me explain. The price growth of this affluent submarket are influenced by the proliferation of new development activity that continues to be absorbed. And it is clearly being influenced by the rapid absorption of high-end projects like One Dalton.

Someone suggested to me the market was rising because of this one new development so I ran the numbers without its 40+ Q4 closings and the marketwide numbers still showed robust conditions:


______________________________________________________
DOWNTOWN BOSTON SALES HIGHLIGHTS

Elliman Report: Q4-2019 Downtown Boston Sales

“Numerous price trend indicators set new records as the market pace remained brisk.”

CONDO
– The overall price trend indicators reached new records with significant year over year increases
– Despite the annual surge in sales this quarter, year to date sales fell short of last year
– Listing inventory fell year over year for the first time in seven quarters

TOWNHOUSE
– Price trend indicators increased year over year as median price rose for the fifth straight quarter
– Listing inventory remained unchanged after rising annually for the prior two quarters
– The decline in sales was due to the chronic shortage of listing inventory




SALT: Inventory is dropping in Florida

Douglas Elliman just published 13 market research pieces I wrote on the Florida markets they service. The newest addition was the South Tampa/Greater Downton Tampa report which rolled out this quarter.

The one commonality across most of these Florida markets this quarter was the growing pattern of declining inventory. Even the Miami Beach market, which still has excessive luxury condo supply, is seeing inventory fall.

Since there the volume of research is too large to not monopolize these housing notes, you can go to these resources:

Florida Elliman Reports

Chart Gallery (includes Florida markets)

[Podcast] The World of Real Estate with Frances Katzen – Jonathan Miller

I had a great chat with my friend and Douglas Elliman power broker Frances Katzen.


NY1 Delves Into The Cause of the Manhattan Supertall Skyscraper Boom


[click to see article and play clip]

Enjoyed speaking with Michael Herzenberg of NY1 on the Super Tall story in Manhattan. This is a great summary of the phenomenon.

Bloomberg Markets 1-6-20: Manhattan High-End Hurt By New Tax Laws


I joined Vonnie Quinn on Bloomberg Markets to talk about the results of my recent research for Douglas Elliman’s Elliman Report: Manhattan Sales Report Q4-2019. Always enjoy the conversation.

Upcoming Speaking Events


Appraiserville

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

The Better Mortgage Business Philosophy Doesn’t Include The Appraiser

A good friend and appraiser colleague of mine in the midwest sent me this appraisal order request from Better Mortgage in New York [redacted]:


My friend and I and most of my peers marvel at order requests like this. They are paying half the market rate to the actual person analyzing the asset to be used as collateral for the mortgage, but most importantly that seems to enable them to provide free lunches and snacks to their employees who process the loans. See the review in Glassdoor.


Companies like this can often find a few appraisers willing to work for this fee because those individuals’ services aren’t in demand (they aren’t competent to earn the market rate), or they’ve fallen on hard times. Its not a sustainable fee structure (half the market rate) to preserve valuation quality. And new millennial-targeting companies like this seem to be focused on anything but the value of the collateral. The millennials ordering Buffalo Wild Wings on Uber Eats or a mortgage don’t understand what’s behind that click. But they should because they will inherit the reckless mortgage process today as Baby Boomers did after the housing bubble crash. Those clicks aren’t cheap.

This disconnect is a pervasive problem that our industry has been unable to effectively change the message because we don’t have lots of venture capital or large legacy financial institutions backing us as the AMC industry does.

Do you want to take a first step? Think about that order. Stare at it. You should be insulted if that’s all you think you’re worth. If you’re not insulted, then you need to move on and get a job that pays at least minimum wage.

OFT (One Final Thought)


Brilliant Idea #1

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

  • They’ll make a chart;
  • You’ll talk to a McMansion architect and ask “why?”;
  • And I’ll crack more eggs than Robert Moses.

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

Real Estate Blockchain

Appraisal Related Reads

Extra Curricular Reads


January 10, 2020

Housing Fell On Its Head But The Market Moved On Like Nothing Happened

This week’s edition is highly NYC Metro Area centric so to my Non-NYC Housing Notes loyal readers, please hang in there or read it.

Since I just became a first-time grandfather, this clip resonated with me (…wait for it):


But I digress…

Westchester County Sellers Got Real And Then Their Houses Sold

I’ve been writing the expanding series of Elliman Reports for Douglas Elliman Real Estate independently since 1994.

The Bloomberg article on Westchester real estate trends that used the Elliman Report: Q4-2020 Westchester Sales was yesterday’s number 3 most emailed article on the Bloomberg Terminals with 350K± subscribers. However, more people were interested in the 100K jobs offered by Taco Bell.


And a chart!

Here are the regional reports released yesterday:

Elliman Report: Q4-2020 Westchester Sales

Elliman Report: Q4-2020 Putnam & Dutchess Sales

Here are some key points for the two reports:

______________________________________________________
WESTCHESTER SALES MARKET HIGHLIGHTS

“Single-family median sales price pressed higher as the luxury single-family market remained stable.”

  • The number of sales increased annually in two of the last three quarters
  • All three price trend indicators rose year over year for the second straight quarter
  • Single-family listing inventory declined annually for the second straight quarter
  • Single-family median sales price hasn’t seen an annual decline in three consecutive quarters
  • The hot spot for the most improved year over year sales activity was from $800K to $899K
  • Luxury median sales price was unchanged from the year-ago level
  • Luxury listing inventory fell year over year for the third straight quarter

______________________________________________________
PUTNAM SALES MARKET HIGHLIGHTS

“Median sales price reset from the record set in the prior quarter.”

  • Median sales price declined year over year for the first time in eleven quarters
  • Listing inventory increased year over year for the fourth straight quarter but remains low
  • The number of sales slipped annually after two straight increases

Brooklyn And Queens Sales Market Reversed The Trend With More Sales, Less Supply

Sales increased YOY and inventory declined YOY, reversing the two-year trend. Oh, prices continued to set or flirt with record levels.

Here are the regional reports released yesterday:

Elliman Report: Q4-2020 Brooklyn Sales

Elliman Report: Q4-2020 Queens Sales

Elliman Report: Q4-2020 NW Queens Sales

Elliman Report: Q4-2020 Riverdale Sales

______________________________________________________
BROOKLYN SALES MARKET HIGHLIGHTS

“Sales moved higher after nearly two years of declines.”

  • Median sales price slipped year over year for the second time in three quarters
  • The market hot spot that showed the largest year over year increase in sales was the $2M to $3M price range
  • Approximately 1 in 5 sales sold above last asking price
  • Overall listing inventory declined after seven straight quarters of year over year growth
  • Luxury listing inventory jumped as the price trend indicators declined
  • New development listing inventory rose sharply for the fifth straight quarter

______________________________________________________
QUEENS SALES MARKET HIGHLIGHTS

“While setting new price records isn’t new, sales rose annually for the first time in more than two years.”

  • Sales rose year over year for the first time in nine quarters
  • Median sales price and average sales price continued to set records
  • Approximately 1 in 6 sales sold above last asking price
  • Listing inventory has expanded year over year for nearly three years
  • Condo, co-op and 1-3 family median sales price and average sales price set records
  • Condo and 1-3 family sales rose year over year for the first time in seven quarters
  • All condo new development price trend indicators set new records

______________________________________________________
RIVERDALE SALES MARKET HIGHLIGHTS
[includes Fieldston, Hudson Hill, North Riverdale and Spuyten Duyvil]

“All price trend indicators rose above year-ago levels as sales continued to slide.”

  • Median sales price increased year over year for the sixth time in seven quarters
  • Listing inventory fell year over year for the second consecutive quarter
  • Number of sales decreased year over year for the fifth straight quarter

Manhattan, Brooklyn, and Queens Rents Continued To Rise, Especially At The Top

The rental market continued to benefit from the weakness at the top of the sales markets in their respective locations.

Elliman Report: 12-2019 Manhattan, Brooklyn & Queens Rental Market

______________________________________________________
MANHATTAN RENTAL MARKET HIGHLIGHTS

“All price trend indicators rose as the market share of landlord concessions declined but remained elevated.”

  • The twelfth year over year quarterly increase in net effective rent
  • The vacancy rate has edged higher year over year since July
  • The ninth straight quarter with an annual decline in concession market share
  • Median net effective rate increased across all bedroom types but large gains with larger sized apartments
  • Concession market share remained high and consistent among apartment size categories
  • Year over year median rent growth was higher in non-doorman than doorman buildings
  • Super luxury rent representing the top 5% of the market, continued to show the highest median rent gain

______________________________________________________
BROOKLYN RENTAL MARKET HIGHLIGHTS

“Significant annual increases across all price trend indicators.”

  • Most year over rise in median face rent in nearly six years
  • Year over year gains in median face rental price across all apartment sizes
  • Twelfth straight year over year decline in landlord concessions
  • Third straight annual decline in new leases as landlords were more successful retaining tenants at renewal

______________________________________________________
QUEENS RENTAL MARKET HIGHLIGHTS

[Northwest Region]
“In a reversal from last month, median rent gains were more significant in the entry-markets.”

  • Net effective median rent slipped year over year for the first time in four months
  • First-year over year increase in landlord concession market share in five months
  • The fifth straight decline in new leases as landlords were more successful retaining tenants at renewal

How They Build Skyscrapers

Here’s a basic infographic on skyscraper construction. Over the past decade, materials and engineering have advanced to create towers twice as tall on much smaller footprints.


Broker Listing Language Has Come A Long Way From “Triple Mint”

There was a fun New York Times Real Estate graphic on listing language but what was even more interesting was how it was parsed by price range:

Real Estate Stories You Need To Read Right Now

These stories really grabbed my attention this morning but were a tad late to get the attention in these Housing Notes they fully deserve so I’ll discuss more next week:

______________________________________________
She Was a Star of New York Real Estate, but Her Life Story Was a Lie [NY Times]

I interacted with Faith for years – while this New York Times story was quite shocking, it rang true from my own personal experiences. The author, Julie Satow, author of The Plaza, wrote a compelling piece. One word: WOW.


______________________________________________
The Decade Dominated by the Ultraluxury Condo [New York Times]

This is a must-read piece that explains the changing skyline and what it meant. I am going to expand and explore this topic next week. This is how I addressed the last decade of super-luxury development in the piece:

We think of this decade as this boom of new product never seen before, but that’s a distant memory,” said Jonathan J. Miller, the president of Miller Samuel Real Estate Appraisers & Consultants. “The second half was a reckoning with reality.



[New York Times]

Appraiserville

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

Endeavoring To Share Appraisal Insights To Consumers and Appraisers Is Easier Said Than Done

It’s no secret that I love reading and sharing posts from appraiser bloggers. Tom Horn of Birmingham Appraisal Blog who just hit the ten year mark, Ryan Lundquist of the Sacramento Appraisal Blog who has been blogging since 2009, and most recently Jamie Owens of Cleveland Appraisal Blog who has been pushing out video and podcasts, to name a few. I’ve met all of them in person and consider them my friends as well as go to authorities on the craft of appraisal. And I can’t forget industry legend Ann O’Rourke and her blog Appraisal Today (I’ve never her but have read her stuff for at least 25 years). There are other mediums like Podcasting where my friend Phil Crawford of Voice of Appraisal nearly owns the space.

Are there other great reads out there written by appraisers? I’ve found that many of us who ambition to write and share knowledge through blogging aren’t able to keep it going week in and week out (for years!) Only a few have kept at it. I’ve been writing about appraising since 2005 and merged my original Soapbox Blog into my Matrix Blog and these Housing Notes. As the above-mentioned appraisers will tell you. It is hard work but very gratifying (and great for branding and marketing).

Articles Were Written About Our Industry This Week And I’d Appreciate Some Feedback

I’m going to try something new this week – Reply to your Housing Note email with your thoughts on any or all three of these articles and tell me whether to keep anonymous or not. I’ll share them next week.

OFT (One Final Thought)

Talking Heads was my default band beginning in college. I’ve appraised a certain member of the band’s home and continue to include the band’s music in my playlist. I’m going to see David Byrne on Broadway soon and simply can’t wait. I also subscribe to his newsletter, “reasons to be cheerful.” Here’s a clip from the CBS interview:


Brilliant Idea #1

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

  • They’ll be more like Talking Heads;
  • You’ll make more charts;
  • And I’ll scrape the sky.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


January 3, 2019

In 2020, We Hope To Sled Down The Housing Market

Admittedly, I haven’t fully exited holiday mode and am more focused on stuff like this (except that mega Manhattan market report release thing later down the page).

But I digress…

Manhattan’s Real Estate Success Is Highly Leveraged On The High End

I’ve been the author of the expanding Elliman Report series for Douglas Elliman Real Estate over the past 25 years.

I’ve long said that the optics of the market tend to be through a $100 million new condo. The results presented this quarter should help reorient Housing Note readers to the proper context.

Let’s start with a breakdown of Manhattan 4Q19 sales:

It should be noted that only 4.4% of all sales in 4Q19 were sold at/above $5 million and therefore sales below $5 million accounted for 95.6% of the Manhattan market. Sales above the $5 million threshold fell 37.6% YOY and sales below $5 million rose 1.6%. Two completely different patterns are very apparent.

I’m not laying on some flowery prose about the market here but 95.6% of the market saw a 1.6% increase in sales and 4.4% of the market saw a 37.6% drop in sales. How would you describe it?

The real issue to the real estate industry is that the super-luxury prices of the top 4.4% represent a significant dollar volume in the market. Total market volume was $4.4 billion this quarter and the top 4.4% of sales accounted for 30% of those total dollars. So yes, based on dollar volume, the drop in high-end sales activity is a big deal.

Elliman Report: Sales: Q4-2019 Manhattan Sales – Prices Flat to Sliding

The Bloomberg story using our 4Q19 Elliman Report results was ranked 9th most read worldwide (350K Bloomberg Terminal subscribers) before 9 am so with all the other big headlines today, I’d say interest in real estate hasn’t waned.


There are a bunch of great articles on the state of the market in the links at the bottom of the page. Be sure to check them out.

And then there is the chart:

Notice the Mansion Tax flip flop in Q2 qnd Q3 of 2019. Just noise.


Q4-2019 Elliman Report: Manhattan Sales [Elliman]

Q4-2019 Elliman Report: Northern Manhattan Sales [Elliman]

Here are some key points:

______________________________________________________
MANHATTAN SALES MARKET HIGHLIGHTS

Co-ops & Condos
“Overall sales below the $5 million threshold edged higher while sales at or above the threshold fell sharply.”

  • The number of sales fell annually for the eighth time in nine quarters
  • Median sales price unchanged year over year as average sales price continued to decline
  • The lowest overall share of quarterly cash buyers in five years of recording
  • The hardest-hit segment in terms of sales has from $7 million to $10 million
  • Four out of ten luxury sales were new development versus six out of ten three years ago
  • The sharp gain in luxury listing inventory continued with resales contributing the most significant portion
  • Smallest new development average square footage of a sale in seven years
  • The third straight annual increase in new development sales market share but remained below decade quarterly average

______________________________________________________
NORTHERN MANHATTAN SALES MARKET HIGHLIGHTS

Overview “Price trend indicators by property type continued to slide.”

Co-ops & Condos
– Median sales price declined year over year for the third time in four quarters
– The number of sales expanded annually for the second time in three quarters

Townhouses
– Price trend indicators and the number of sales declined from the year-ago quarter
– Listing inventory hasn’t shown a year over year decline in seven quarters

Getting Graphic


Appraiserville

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

It’s still the holidays in Appraiserville.

More Miles Than An Uber Driver


You’ll note that in the comments of the tweet, as a Manhattan appraiser, I’ve never driven my car to any of my 8,000 appraisals during my career.

OFT (One Final Thought)

Marketing on steroids…

I learned to drive a stick in my friend’s yellow VW Beetle in a hilly neighborhood in the late 1970s. We both survived and I have largely preferred driving a stick ever since. I loved that moment but never wanted to actually own a Bug. Nostalgia aside, it felt like a death trap, but I still retained fond memories of the car.

I highly recommend a documentary on the VW Beetle called: The Bug.

VW marked the discontinuation of their Beetle in this video on New Year’s Eve.


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 drive a stick;
  • You’ll like to sled;
  • And deal with the oversupply at the top.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


December 27, 2019

The Housing Market We Read About Is Hard To Translate To Our Reality (Like Punk Music)

When I was a kid growing up in Delaware and The DMV, the Baltimore Orioles were a colorful team to follow, to say the least. So before we get to punk rock housing analogies in the final Housing Note of 2019, we need to scream and yell like Bad Brains Earl Weaver (WARNING: NSFW).


Oh, and I’ve always been a list keeper – my Evernote app is full of them…the cars I’ve owned, co-op hallway space sales, $50M+ home sales, toilet company names on construction sites, like…

Royal Flush
Johnny on the Spot
Jiffy John
Scottie’s Potties – we’re no 1 in the no 2 business
Gotta Go
Call a Head
Mr. John
Don’s Johns

Now for the $50M+ home sales…

But I digress…

Not For Mere Mortals: A Collection Of Year-End Housing Lists

Making a list…of successful aspirationally priced sales…

Back in 2014, I started to observe a U.S. housing market pattern of wildly overpriced luxury housing listings that rarely sold. I dubbed it “aspirational pricing.”

But when some of these aspiration listings did sell, a super-luxury group think seemed to ignite more of these listings and more super-luxury sales – a true herd mentality. When I began to track closings of $50,000,000 or higher sales in the U.S. five years ago and then worldwide, it was clear that these outliers were more than a passing fad.

Tracking these sales is more work than it sounds as it requires constant updating of information, but hey, its a hobby. In my reality, I’ve found it akin to a treasure hunt. There have been a number of stories presented this week using my list and they’re all fun reads.

  • The Decade of the Uber-Decadent House: How an influx of global wealth gave rise to supertall condo buildings, megamansions and $100 million home sales [Wall Street Journal/Mansion Global]


Making a list…of large price cuts to aspirationally priced listings…

  • In 2019 a $65 Million Price Cut on a Mansion Wasn’t a Big Deal [Bloomberg]

  • The biggest losers in New York real estate of 2019 [NY Post]

  • One of New York’s Widest Townhouses Narrows Its Aim to $50 Million [NY Times]

Bloomberg Terminals: Luxury Housing Price Trends – Sales Prices Falling, Rental Prices Rising

For more than a decade, the luxury results from our Elliman Report series are used to power three luxury sales and three luxury rental price indices. While Manhattan luxury rental price trends have risen sharply in recent months, they’ve been climbing for quite a while.

Manhattan Luxury Sales

Manhattan Luxury Rentals

Getting Graphic

My chart below was the basis for the awesome Wall Street Journal chart shown above. I still think “magenta” is a cooler color than “blue.” In an era of weakening luxury housing, 2019 seems to prove that super-luxury transactions have little to do with the overall housing market. The strong showing in 2019 also suggests that they will persist no matter what happens in the housing market for mere mortals.

Appraiserville

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

Happy New Year to all my readers of Appraiserville. I appreciate each and every one of you and wish all of you a successful 2020. I have a strong feeling that 2020 is going to be our industry’s best year in ages! And check out my friends at Find My Appraiser to renew your focus on private work and get someone to help market your services. C’mon, you need help.

Sign of GSE Compression Into One Entity

Here’s one little thought before you sip that New Year’s champagne…

Because we appraisers sweat the details to provide credible valuations, we might miss the macro right in front of us.

A few months ago I suggested that the current pilot programs for wide-scale bifurcation assignments were “dead man walking” per suggestions and insider tips related to actions by the new head of FHFA. He has consistently mentioned his aversion to the additional risk taken on by the GSEs in public speaking. Yes there is already bifurcation out there, but nothing near the scale should bifurcation go mainstream (under false pretenses I might add.)

The GSEs remain in receivership yet specifically Fannie Mae still behaves more like a Wall Street Institution than a government-sponsored entity or an entity in receivership under the federal government that they are. Remember that Fannie has a cost advantage over other financial institutions because they have the implicit backing of The Taxpayer if the mortgage market goes south. Perhaps this is why they are more willing to take risks. The GSEs made that implied guarantee a fact in their 2008 bailout and they continue to push the risk envelope with their pilot projects.

Appraisers have felt that impact first hand with our continued, irresponsible, marginalization by the banking industry who is closely and necessarily aligned with the GSEs.

As a refresher, Fannie got into trouble because they chose to serve only one of their two masters (Freddie just follows the actions of Fannie) during the bubble: “The Shareholder,” and they forgot about “The Taxpayer” – that’s what got them into trouble in 2004-2006 and eventually, by 2008 they were bailed out by us, “The Taxpayer.” And then this.

And then there is this announcement made last week from Reuters: Freddie Mac offers early retirement to 25% of workforce

Why is a GSE trying to reduce its workforce by as much as 25%? Here are two potential reasons:

  1. Mortgage volume will collapse in 2020 and they are overstaffed – unlikely – rates aren’t going up in 2020.
  2. The FHFA is planning the merger of Fannie & Freddie, a goal; of the current administration.

If option 2 is the more likely, then it makes sense that any bifurcation pilot program – which is more expensive, less accurate and slower than traditional appraisals – is not a needed expansion of their risk profile before such a GSE merger is undertaken. A botched merger could bring down the entire economy so why would FHFA take that chance?

Ok, now sip your champagne!

Happy New Year!

OFT (One Final Thought)

From my favorite music web site, Consequence of Sound, here’s a short and sweet video explaining the disconnect: Punks on Film: The Difficulty of Portraying Punk On Screen


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 punk rock;
  • You’ll be more list-orientated;
  • And I’ll put an aspirational downpayment on my next super-luxury home.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


December 20, 2019

Placing A Roomba In The Middle Of A Rich Creamy Housing Market

Because we all love rich, creamy pudding, I used it for a luxury market analogy this week. Oh, and Happy Holidays to all – see you next week!

Wait for it…


But I digress…

Cash Is No Longer King For Luxury Buyers

The plunge in cash buyers above $5 million (top 8% of the Manhattan market) might be attributable to the wealthy taking advantage of the plunge in mortgage rates over the past year. However, I believe it is much more indicative of the exodus of investors from the market after the passage of the new rent law in New York state that punishes aspiring landlords.

The exodus of investors has a significant impact on the current absorption as well as the future of new development activity since at least 25% of new condominium sales were made by investors and there is nearly a decade of stock to sell-off. Investors typically become landlords on the day they close.

Creating “Combos” May Be One Way Around New York’s New Rent Law

There is a good Wall Street Journal article using empirical data to show the change to apartment renovations since the frenzy of new New York State housing-related laws first half of 2019.

While it is a small data set, combining units are catching on, taking advantage of the market premium for larger contiguous space.


In Manhattan Townhouse Sales, Width Matters

The widest house I’ve ever appraised was a 50-footer on the Upper East Side in the park block between Madison and Fifth Avenues once owned by the son of the IBM founder Thomas Watson and had remained a gutted shell since the late 1980s before the previous sale in 2006.

The second widest sales I am aware of was the 48-footer created by the Milbank family in 1920 by combining two houses at 14-16 East 67th Street. My firm and I have appraised that house a number of times over the years, before and after its complete gut renovation.

Clearly a wider house enables more square footage but there is another reason why width is a valuable amenity on its own. Because townhouses are normally built right up to the lot line, townhouse width can’t be expanded unless the adjacent property is acquired. In a high-density market like Manhattan, width is a key valuation metric.

The Milbank family also created a 55-footer in Greenwich Village years ago and it is now on the market with a new price cut to $50,000,000.

What’s so interesting about this house is that the exterior is maintained (I believe it is landmarked) as original yet the interior is modern.


[Click image to see NYT slideshow]

Since the financial crisis, there have been at least 10 sales at or above $25,000,000 downtown. The metrics for downtown townhouses contain the largest average width of any region in Manhattan. According to our Elliman townhouse report in 2018, the average width was 24.9′ while Manhattan averages 21 feet.

Here’s a hypothetical about townhouse width: two homes equal in square footage are side by side in identical condition. One is 50′ wide and one is 35′ wide. The 50-footer enjoys a significant premium in the market.

In A Weakening Market, More Manhattan Co-op Boards Are Killing Sales That Are ‘Too Low’

I’ll be writing about this phenomenon a lot in 2020 but I’ve been told that a growing number of boards are killing sales they deem too “low” even though the sale was vetted by the market – properly exposed, fully qualified buyer, etc.

A leading real estate broker, Donna Olshan, that I’ve known for most of my career, shared a letter written to a board that described the efforts to sell the apartment to offset certain board members who felt the price was too low. I’ve redacted everything that would reveal the parties but you get the point. The letter conveyed the reality of selling co-op apartments in today’s market.

Here’s my message to all co-op boards who do this – THE MARKET DOESNT CARE WHAT YOU THINK. By killing sales you think are too low, you are violating your fiduciary responsibility to the shareholders by acting this way. Co-ops that do this are damaging shareholder equity as brokers steer would-be buyers away from boards that are violating their fiduciary responsibilities.

The letter:


October 28, 2019

Board of Directors
[redacted]
c/o [redacted]
New York, N.Y. 10128
Re: Apartment [redacted]

Dear Board of Directors,

I am writing to provide context for the sales price of $[redacted] million of apartment #[redacted] located at [redacted].

Before being listed for sale, the apartment was professionally staged and refreshed at great expense to [redacted]. Additionally, a professional photographer was hired to insure the portfolio of listing photos were just right. (Please See attached photos):
https:[redacted]

On May 22, 2018, the unit was listed in the multiple listing service run by the Real Estate Board of New York (REBNY-RLS) and disseminated electronically to its approximately 12,000+ residential members. The original listing price was [redacted]. The apartment was shown numerous times however the owners received no offers and by the end of December 2018, the unit was withdrawn from the market so the listing did not appear as stale.

On March 13, 2019, it was relisted at a reduced price of [redacted] million in the hopes that listing earlier in the Spring at a lower level would draw buyers. It did not.

On May 6, 2019, the price was lowered to [redacted].

By August 2019, a contract was signed at [redacted] million.
This was the ONLY offer that the seller received during the entire marketing period.

The current market has been on a consistent downward swing since Congress changed the tax law at the end of December 2017 when the deduction for state and local taxes (including real estate) was capped at $10,000. The mortgage interest deduction was also reduced to a maximum of $750,000. Since 2018, the pool of buyers has shrunk and there has been an increase in inventory. Unit [redacted] was caught in a downward cycle and by any metric available, the market continues to head south. Below is a 3rd quarter report written by the appraiser Jonathan Miller for Douglas Elliman. Jonathan is considered the dean of appraising in the industry and is frequently cited in mass media and is consulted by various institutions:

https://www.elliman.com/pdf/cd301cd94c6c2fee6e9317e7fc8e5ca0b2d9c658

I have been a professional in the real estate business since 1980 and my career spans many markets, properties and clients. I am very experienced in the market and conditions and can confidently state that the price achieved is fair market value and the unit has been thoroughly market-tested.

Very truly yours,
Donna Olshan
President



Getting Graphic


Len Kiefer‘s Chart Handiwork


Appraiserville

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

Happy Holidays From Appraiserville

May your holiday gifts include the perfect comps…

OFT (One Final Thought)

I once read that the Washington Square Park Arch was made of wood. Apparently not.

UPDATE A loyal Housing Notes reader tells me today:

Hey jonathan:
You confused washington square arch with the victory arch.
See link below.

You almost had a perfect year!

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 clean their carpet;
  • You’ll be more into pudding;
  • And I’ll write a letter about the market.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


December 13, 2019

In The Housing Maze, The Shortest Distance Between Two Points Wins

When I think of the complexity of the real estate industry, sometimes breaking conventional rules can get you there faster.


But I digress…

Elliman Report Released: November 2019 – Manhattan, Brooklyn & Queens Rentals

High-end rental market strengthened by weakening high-end sales market

I’ve been the author of the expanding Elliman Report series for Douglas Elliman Real Estate since 1994. To they released our research for the rental market in three boroughs of New York City.

First of all, there is nothing better than a good chart provided by Bloomberg from their coverage of our research:

And a video, making it a two-fer!


Here are some borough specific key trends and charts:

______________________________________________________
MANHATTAN RENTAL MARKET HIGHLIGHTS

“Median rental price rose to its second-highest level recorded.”

  • Net effective median rent hasn’t seen a year over year decline in 2019
  • Median rent reached its highest level in more than a decade
  • New leases fell as landlords were more successful retaining tenants at renewal
  • Landlord concession market share fell annually for the eighth straight month
  • Non-doorman median rent surged at highest rate in more than seven years of tracking
  • Highest median rent for 1-bedrooms reached in nearly twelve years of recording
  • Median rental price moved higher at all price strata presented and by all bedroom sizes
  • Share of new leases at or above $10,000 reached its highest level in more than eight years of tracking
  • Super luxury rent representing the top 5% of the market, showed the highest annual gain


______________________________________________________
BROOKLYN RENTAL MARKET HIGHLIGHTS

“High-end of the market saw the largest price growth.”

  • Year over year median rental price trends rose more in higher-end markets
  • Net effective median rent rose year over year for twelve consecutive months
  • New leases fell as landlords were more successful retaining tenants at renewal
  • Land concession market share fell year over year during every month of 2019


______________________________________________________
QUEENS RENTAL MARKET HIGHLIGHTS

[Northwest Region]
“The largest areas of price growth occurred at the high-end.”

  • Landlord concession market share was significantly lower for larger apartments
  • Net effective median rent hasn’t declined year over year in three months
  • Concession market share for new development was nearly double that of existing rentals
  • New leases fell as landlords were more successful retaining tenants at renewal


This Week in Aspirational Pricing: The Beverly Hillbillies’ Place


I spent a lot of time in my youth watching that show after school – what are the odds that Lachlan Murdoch of News Corp., the buyer and Ruppert’s son, has ever seen an episode?

The Wall Street Journal got the scoop on another 9-digit US sale: $150 million for the mansion used as background in the Beverly Hillbillies 1960s TV show. Asking $350 million since 2017, the estate was able to let it go for a 57% discount. The price cut shows how far off the asking price was in 2017, not some sort of firesale discount.

According to my records, it is the second-highest residential home sale in U.S. history. I began tracking this market as a hobby since 2014.

This Week in Aspirational Pricing: 3rd $100+ Million Manhattan Sale

The closings at 220 Central Park South are starting to accelerate with 7 sales to close above/above $50 million.

The year 2019 is starting to approach sales levels seen in 2014. Please remember, this is a rarify market niche and the Manhattan luxury market remains unusually weak.

Bloomberg Podcast: Manhattan Luxury Market Is Challenged


[click on image to play]

NPR Planet Money’s The Indicator “New York City’s Luxury Condo Hangover”

As a matter of fact, I’ve long declared that our economy and the housing market remains in the hangover phase of the financial crisis. Credit hasn’t normalized and falling mortgage rates haven’t had the expected impact on the housing market.

Hint #1: Low mortgage rates make housing prices higher
Hint #2: Global investors chasing higher returns over-invested in luxury condo development

NPR interviewed Grant Long, a sharp data scientist I know at Streeteasy.

New in the Real Estate Lexicon: Peak Uncertainty

I officially dub this housing era “Peak Uncertainty” for the large numbers of variables that consumer face in high cost, high tax markets like New York:

  • 2019 NYS Mansion tax
  • 2018 Federal SALT deduction cap
  • 2019 Rent Law
  • Retreat of foreign buyer and investors
  • Affordability challenge

The Real Deal Magazine shows a great reason why recent closing in a building often doesn’t represent the current market. The new building 220 Central Park South has 2 sales above the $100 million threshold and the units actually went to contract several years ago.


Curbed: Will The Role Of Realtors Change Even More

There was an especially great read in Curbed: The 2010s changed how you shop for homes. Will the 2020s change the way you buy them?

There has been an incredible volume of venture capital entering the real estate space with the singular mission of simplifying the home buying process.

Wagging The Dog With Questonable Due Diligence

I’ve been giving national real estate brokerage Compass a lot of grief in recent months after the meltdown of WeWork – which exposed Softbank’s lack of due diligence when they were awarded significant funding. The specific reason I bring this topic up here was that Compass pushed their Softbank fundraising quite hard as a confirmation of their business model. After one of the Compass reported raises, I remember reading an article shortly after about Softbank’s $300 million dog-walking app-maker called Wag. Two years later Softbank appears to have given up on their investment.

$300 million for a dog-walking app maker? Really?

There was a lot made about Softbank’s unicorns as being disrupters by capital but it sure looks like many of them have no clear path to revenue. Expect more problems in the unicorn space to come. Disrupters by capital might be turning out to be unsustainable as a concept and have already experienced their moment in the sun.

Appraiserville

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

Pizza Deliverance

My friend and leading Chicago appraiser has stepped up his game to pizza and is now my hero: Chip Wagner has won $100 of pizza every month for 5 years.


OFT (One Final Thought)

This is unreal. The Ramones could never have imagined this. Check out the other songs in that link.

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 sedated;
  • You’ll be more like the Beverly Hillbillies;
  • And I’ll pay more for a rental.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


December 6, 2019

How Smooth Is the Housing Market? Popcorn Ceiling Smooth.

I’m out of town at the moment with a scrambled schedule running at 50% capacity in this issue. I suspect some of my Housing Note readers will be thankful. But I’m never short of time when it comes to the topic of popcorn ceilings.

Back 33 years ago when Miller Samuel was launched, we used “wheel on a stick” measuring devices to calculate square footage of co-ops and condos. Since the measuring stick (no telescoping handles back then) stuck out of my appraisal bag (we don’t use cars to do property inspections in Manhattan), many assumed I was headed out to play squash?

There were no lasers or infrared devices available yet to measure apartments and co-ops have no square footages available in public record. Yet this latest and greatest “wheel on a stick” gadget was a significant improvement from the “tape measure.” I remember fondly hearing from the owner of a large appraisal firm in my market during the 1980s telling me confidently “the tape doesn’t lie.” But in the same breath, he asked me how often I had to return to an apartment to remeasure at the client’s request. And my answer was “like, never” so apparently his “tape measure” lied a lot.

But there was a potential problem for this new fangled measuring device. There were many apartments that still had thick shag carpeting as a decorating legacy of the 1970s. That modern “wheel on a stick” we used to roll across the floor could be off by as much 1-inch per foot.

To counter this inaccuracy “I hear” this wheel on a stick “may” have been rolled on the ceiling to measure these “shaggy” apartments with popcorn ceilings and that wheel “may” have left a few tire tracks in its wake. That’s what I heard, anyway.

So there’s this.


But I digress…

Bloomberg TV 12-3-19: Super Luxury Oversupply

I got to speak with Lisa Abramowicz on her Bloomberg TV show “Money Undercover” yesterday. She is a great follow on Twitter. Best of all, I sat in a comfy chair.

Lisa mentioned the topic of “inventory loans” that developers are relying heavily on to limp to the next upcycle with lots of unsold inventory. Hedge funds have dived headfirst into this space, even developers who are in good financial state are lending money on unsold condo inventory. These loans are another way that financial engineering prevents the market from healing in the long run. This loan product reminds me of the actions of the Fed and FDIC a decade ago whose policy changes allowed banks to avoid “mark to market” so they wouldn’t be insolvent on their balance sheet. The goal is to sit and pretend everything is alright until enough time passes when everything becomes okay again.

While the interview was occurring, a real estate agent I know was walking down the street and saw me being interviewed via television sitting in a bank window. He emailed me a picture of it with a chuckle. The agent said he couldn’t hear what I had to say but hoped the news was good. Well, it is good news for South Florida property sellers.

Deutsche: Homebuyers Are A Lot Older Today Than In The 1980s and Other Observations…

Some unbelievable analytics from Deutsche Bank…

The median age of US homebuyers in 1981 was 31. Today it is 47, see chart below and here. The rise since the financial crisis is particularly noteworthy. This is driven by an aging population, affordability, higher student debt levels, and tighter mortgage lending standards for young people and individuals with lower credit scores. All these forces have also contributed to lower levels of residential mobility.


The chart below shows that roughly 10% of the population, or 30 million people, move to a new home every year, down from 20% a few decades ago. In other words, the US population is less and less mobile. This development started in the 1980s, and the financial crisis has not had any particular impact on the slope of the trend…


There is an elevated level of uncertainty in markets, but it has come down from a few months ago…

Appraiserville

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

Shag Carpeting > Wheel On A Stick

For those of you that missed the introduction to these Housing Notes up above.

Appraisal Industry Big Data Can’t Validate Their Reason For Being

To those who say, “just throw more data at it to get it right,” certified appraiser Paul Chandler eloquently tells us in so many words that big data never will.

I encourage you to read his terrific article: A Perspective on AVMs

Following the presentation, I asked the following question: “Given that you are contending big data and artificial intelligence are much better today and you use FSD as a test to validate models, has your research shown that FSDs are improving over the years?”
The presenter’s initial response was, “good question,” followed by five minutes explaining how cool big data is and the importance of speed of execution. Of course, I had a follow up question, “I take from your response you have no evidence that FSDs are getting better, is that correct?” His response was, “yes, you are correct.”

OFT (One Final Thought)

This is insane. Note the comment about SF’s infamous Millennium Tower in the tweet comments…

Brilliant Idea #1

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  • They’ll be super oversupplied;
  • You’ll be more earthquake-proof;
  • And smooth over those damn ceilings.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


November 29, 2019

That First One Was The “Greatest House Of All Time” (G.H.O.A.T.)

One of my sons and his wife have an accepted offer on their first house. It is the greatest house of all time in their eyes. I remember looking back at our first rental apartment, our first rental house and our first home purchase and how exciting it was. Today, I can’t imagine living in our first after having traded up over the years, but the memories are still warm. Do you remember that sense of irrational exuberance? It is an awesome feeling. Just perservere to get one as illustrated here:


But I digress…

Build A Home As Solid As Sears

Check out the Sears Archives:

From the 1908 catalog


[click to expand]

Interest Rates Are Near 670 Year Lows

When looking over back the last 670 years as I’m sure many of us do, it is clear that current interest rates are unusually low. That doesn’t make home purchases more affordable by the way. It ensures housing gets more expensive in the future. Think about the dutch and the tulip bubble in the 1400s and 1500s while you’re at it.


Housing Prices Have Risen More Than Turkey Prices In Past Three Years

Because its the day after Thanksgiving, I wanted to understand how poultry price trends relate to housing costs, because, well, just because.


[Source: MBA]

Fed Beige Book for New York Shows Little To No Economic Growth In Region

Periodically, I mention to my Housing Note readers how helpful I find the Federal Reserve’s Beige Book (“Summary of Commentary on Current Economic Conditions.”) It’s a qualitative description of the economy, both nationally and within the footprint of its twelve member banks. I’ve been used as a resource for it for more than a decade and also refer to it regularly.

Formerly called the “Red Book” when it was an internal document, it became known as the “Beige Book” when it was made public in 1970 because of its…wait for it…tan cover.

National housing snippet:

Home sales were mostly flat to up, and residential construction experienced more widespread growth compared to the prior report. Construction and leasing activity of nonresidential real estate continued to increase at a modest pace.

New York Real Estate and Construction snippet:

Housing markets across the District have been mixed but, on balance, weaker in the latest reporting period. Prices of New York City condos and co-ops have continued to trend lower and are now running moderately below comparable 2018 levels, with steeper declines at the high end of the market and in Manhattan. A local real estate expert noted a precipitous drop in the share of cash purchases at the higher end of the market, which is seen as a signal that investors have largely left the market. The inventory of existing homes has continued to climb to a fairly high level in Manhattan but less so in the outer boroughs. Housing markets in the suburban areas around New York have been more stable, with prices still rising moderately in most areas and inventories generally stable. Similarly, in upstate New York, the sales market has remained strong, with inventories steady at very low levels, prices still rising, and bidding wars still fairly commonplace in the more sought-after areas.

The residential rental market has strengthened further. While Manhattan rents have leveled off, rents across much of the city and metro area have continued to rise at a moderate pace—and at a somewhat faster pace at the high end of the market, reflecting a shift in demand away from owning. Rental vacancy rates have edged up but remain quite low across New York City.

Commercial real estate markets across the District have generally weakened in the latest reporting period. Office rents have been mostly flat, while availability rates have climbed modestly in most areas, with leasing activity steady to slower. Industrial markets have been mixed: rents have continued to trend up, though the pace has slowed, and availability rates have been flat to up slightly. The market for retail space has weakened further, even as the holiday shopping season draws near, with rents flat and vacancy rates at multi-year highs.

New multi-family construction starts have held steady across the District, while the volume of ongoing multi-family construction has remained fairly brisk. New office and industrial construction has continued to weaken modestly.


OK, Boomer There’s Not Enough Gen Xers But Plenty of Millennials

There was an epic Wall Street Journal article of the coming down cycle of housing demand as Boomers die off and there aren’t enough Gen Xers to buy them. It looks like big homes in the suburbs built before 1970 are going to be a hard sell for a generation. My home was built in 1825 (gulp).


Source: WSJ, click to expand]


Source: WSJ, click to expand]


Recommendation: My sons constantly say “Ok, Boomer” when I pontificate too much (which is always too much) so the best retort I found is “Ok, Millennial” which locks up their brains.

Getting Graphic


Our favorite charts of the week of our own making

I share this chart often because it amazes me. The Greenwich, CT housing market showed us that the housing bubble pre-2008 was also a home renovation bubble!

Appraiserville

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

Consider getting out of the bank appraiser rat race, and focus on clients who respect your services

Since I co-founded Miller Samuel in 1986, our mission was to work for clients who needed our services, not clients who were forced to use us through mortgage regulations. Over the years appraisers became our own worst enemies and didn’t work together to protect a profession designed to protect the public trust. Because we and our trade groups have been asleep and adversarial, we became marginalized, often disrespected and wholly blamed for anything that went wrong in a deal, even if it had nothing to do with us. Yet appraisers are the last stop in the mortgage process to protect the consumer and the taxpayer.

Our firm works for only those institutions that treat us professionally, pay us a market wage and enable us to complete assignments in the time needed to perform a credible analysis. You can only demand that by providing the best or one of the best appraisals in your market (reliability, not fast and cheap).

In 2005, near the peak of the housing bubble, we rejiggered our business from 75% bank/25% lawyer-consumer -> 25% bank/75% lawyer-consumer because it became apparent that most retail banks thought of us as “deal enablers” rather than independent arbiters of value to provide a neutral benchmark for informed lending decisions. After all, they could offload the risk to unsuspecting secondary market investors.

One thing to consider. If you are resolved to work with AMCs for the rest of your career, consider that most of them will be gone within a few years. Their time has passed and banks are on to what they really are.

So to those of you who are thankful to have enjoyed a lengthy career or those who want to have one, there are plenty of clients out there that are not banks or AMCs. One of the ways to build a thriving appraisal practice if you are a talented appraiser is to market and brand your services. As an industry we are woefully inadequate and have been trained to “wait for the the fax to ring.” LOL. I’m involved in one of efforts that addresses this smart business focus: FindMyAppraiser.com

If I’ve learned anything about the appraisal profession since 1986 is that residential mortgage appraisers are seen as “pain-points” by most lending institutions, appraisal management companies, as well as most banking regulators. Why waste your years of hard-earned expertise working for clients that don’t appreciate it or want to pay for it? Spend your productive time focusing on appraisal assignments that rely on your professional expertise. Consumers are being ill-served in the current regulatory environment. Why not work for them directly and have someone help you market to them?

I’ve spent my appraisal career looking for clients outside of the banking industry and FindMyAppraiser.com aligns with that mission. Disclaimer: I am part of Find My Appraiser because its mission aligns with mine.

Check out FindMyAppraiser.com

OFT TFT (One TWO Final Thought(s))

Innovation…


Leadership…


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 shop at Target;
  • You’ll be the greatest of all time;
  • And I’ll watch more goat videos.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


November 22, 2019

Our Tall Housing Future Is Still Defined By Its Past

The following conversation is amazingly quaint.

Ironically, Bill Gates’ Microsoft figured out the internet too late to dominate it as they did for their Office Suite (that included Word & Excel). It’s hard to imagine Letterman and a large swath of America was so incredibly wrong either. As email was entering mainstream real estate practice in the late 1990s, a top real estate agent I know, who is still around, made the case to their tech people in her firm: “Why do I need email when I can just pick up the phone?”


But I digress…

How Do You Know Your Future Neighbor is A Nightmare?

My wife and I were home-shopping in 2004 when the market was tight, and we placed a bid on a house that was a stretch for us, so we didn’t offer full ask. We were outbid and lost the house. We found out later that the sellers were moving because of a nightmare neighbor. We consider ourselves very fortunate.

One of my sons and his wife are under contract for their first home right now and I think back to our experience, and worry a little bit. Most people are good, and the odds are against such a situation like the following


Can Residential Buildings Be Too Tall For Consumers? Apparently, The Answer Could Be Yes

James Tarmy of Bloomberg moderates an interesting conversation with developer Arthur Zeckendorf and starchitect Robert A.M. Stern. Having spoken with James for a number of his articles, I have always found his take on eclectic real estate topics a great read.


[click on image to play video]

Too Much SALT Wasn’t Good For the Market, But Adjustment Is Well Underway

Nearly two years ago, I was criticized by a Westchester real estate brokerage firm that competes with Douglas Elliman after stating in our Elliman Report: Westchester Sales that the drastic change in federal deductions from SALT would adversely impact the housing market. The Westchester sentiment then was that because of the AMT (alternative minimum tax), the SALT tax would have a nominal impact on the assumption that most homeowners there don’t take deductions for SALT and property taxes. Yet Westchester sales fell year over year for six straight quarters, and that firm modified its messaging. Pushing that silliness aside, The Real Deal presents a solid take on the state of the market since SALT..

Scott Elwell, Elliman’s regional vice president of sales for Westchester and New England, said that “we’re seeing a lot of older inventory pass through now.”

“At all price points, including the higher end, sellers are coming to better terms of what a house is worth, and buyers are getting a better grasp on what they are willing to spend,” he said.

Brokers said buyers started stepping up shortly after they found out what the damage was from their 2018 tax bills.

“When buyers met with their accountants, it was almost like a faucet went on,” said Deborah Doern, regional vice president for Houlihan Lawrence in Westchester.

Because of the trade war and the resulting flight to safety by investors, the Federal Reserve has been aggressively lowering rates and as a result, mortgage rates have fallen sharply over the past year, mitigating some of the damage of SALT. One important consideration of SALT that gets missed. I believe that many in the market see SALT as a “forever” weight on the market when, in reality, once prices slide to equilibrium, it won’t be a market obsession anymore because it will already be baked into the price structure of the market.

Every drop in pricing brings the market closer to that equilibrium.

Taller Building Trends Are Rapidly Bringing More Shadows

And no, I’m not speaking about shadow listing inventory. Rentcafe shared a study on the significant shift towards taller buildings. Here’s a 30 city building type breakout for the past decade with the interactive version below:

The Chicago Condo Deconversion Trend Is Growing

While I lived in Chicago for three years following college and kept loose tabs on the market, I had no idea that condo deconversion back to rental was such a thing. In fact, the condo to rental phenomenon is such a big deal that the City Council just passed a “Condo Deconversion Ordinance” to slow the frequency of these occurrences:

the number of “yes” votes needed from condo unit owners to sell the building to an investor, from 75 percent to 85 percent.

Based on the principle of “highest and best use” it makes sense to convert a condo to a rental just like it makes sense to convert a rental to a condo, I just thought that 100% of the unit owners need to vote for it as we have in NYC.

China Trade War and Capital Restrictions Driving LA Condo Sales Downward

With roughly 50% of buyers in LA’s downtown condo market coming from China, the two-year-old trade war and capital restrictions are crushing sales in the submarket.

The Soft Luxury Sales Market Is Driving Luxury Rents Higher

Using our research from the Elliman Report released for the New York City rental market, there have been a number of articles that delve into the topic. The slowing luxury sales market has motivated would-be buyers to rent out luxury property temporarily, and at the same time, would-be sellers are listing properties for rent to stem the bleeding.

Elliman Report: 10-2019 Manhattan, Brooklyn & Queens Rentals

  • Manhattan’s Rental ‘Glampers’ Send Luxury Lease Prices Soaring [Bloomberg]
  • The luxury rental market is booming. Here’s what a $100,000-a-month penthouse looks like [CNBC]
  • Luxury Leases That Reach Six Figures [Wall Street Journal]

Incidentally, the number of new Manhattan leases at or above $10,000 per month has jumped 21.1% over the past three years. Before that growth began, this market segment was languishing from oversupply.

Here’s CNBC taking you into a $100K per month Manhattan rental:

Getting Graphic


Our favorite charts of the week of our own making

Len Kiefer‘s Chart Handiwork

Appraiserville

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

All I Do As An Appraiser
Reflecting: NAR Real Property Valuation Committee Issues Position On Bifurcation

I reread last week’s post in Appraiserville: “NAR Real Property Valuation Committee Issues Position On Bifurcation” and felt I left the reader hanging with this incomplete thought: But I don’t want our industry to think: “There, we’ve addressed and resolved the threat to appraisers and more importantly, the public trust.”

After marinating in this topic, I believe the more accurate way to think of this new NAR policy position is this:

One of the largest residential real estate trade groups (NAR) developed an appraisal policy on a controversial appraisal topic: bifurcations. Appraisers have been battling the implementation of bifurcation for several years, largely on the misrepresentation of future providers of such services such as AMCs and future users of this service, such as banks. Bifurcations may have some very limited uses, but I object to portraying it as an industry-wide replacement for full appraisals. Bifurcations are much less accurate, more expensive, and slower to complete. But other than that, they’re awesome.

Regulators like FHFA reach out to groups like NAR to get feedback on controversial proposals for policies like this. Now one of the largest residential real estate trade groups with about 400 lawyers will be pushing this policy through all their channels, and that is a good thing for the appraisal industry. Groupthink has been steered to the appraiser’s way of seeing the world, the last protector left in the mortgage process to protect the public trust.

The VA Provides A Sane View on Hybrids With AAPP

The Veterans Administration has provided a position on controversial hybrid appraisals (aka bifurcations):

which states “[t]he Secretary shall permit an appraiser on a list developed and maintained under subsection (a)(3) to make an appraisal for the purposes of this chapter based solely on information gathered by a person with whom the appraiser has entered into an agreement for such services.”

In other words, the appraiser has to form an agreement with the inspector since the inspection is critical to the reliability of the appraisal. In my view, this policy is the equivalent of a “no, we don’t want hybrids.” Impressive.

This appears to resolve an important aspect of the bifurcation insanity, where it has been presented that the actual appraiser has to rely on the inspector but can’t interact with them or have any understanding of their competency. This depiction was making appraisal industry E&O carriers salivate with excitement over the fresh income sources for an entirely new category of litigation.

The VA seems to have addressed this gaping hole in logic with AAPP. More on this topic here.

How to Become a Luxury Real Estate Appraiser (Being Wildly Dependent on a Designation)

Back in the late 1970s, when comedian Steve Martin was at his standup peak, he appeared on Saturday Night Live in a routine whose theme was “How to have A Million Dollars And Never Pay Taxes.”

Steve got right to the heart of the matter:

“First, get a million dollars…”

Appraisalbuzz provided a press release type piece on luxury real estate appraising, and I did a double-take wondering whether this was a parody. McKissock, a well respected online education company, now offers a designation for luxury real estate appraising, which I find quite silly. Here are the steps they shared to get into this niche so appraisers can make more money and work fewer hours per this piece:

1) Become a certified residential or certified general appraiser (licensed appraisers are a tiny segment already)
2) Make sure you’re well-suited to specialize in luxury appraisal (don’t wear the same shirt you used to change the oil in your car)
3) Familiarize yourself with the luxury home market(develop local market knowledge which takes years)
4) Earn a professional designation (get the CLHA designation today!)
5) Get started as a luxury real estate appraiser (find wealthy attorneys to give you business)

In other words, this new designation conveys the appraiser’s luxury expertise to the world. But it can’t!

In reality, many appraisers don’t understand that the organization creating the designation has to spend a lot of money market the designation’s brand, or the consumer will place no value in it. And appraisal organizations have never demonstrated adeptness at doing so, largely because it is too freaking expensive. Early on, appraisal designations did mean something, but with the advent of appraiser licensing/certification and the proliferation of new designations as largely revenue opportunities, their effectiveness for generating new business is severely limited, except perhaps within the old guard of the profession itself.

OFT (One Final Thought)

Totally.


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 stick the landing;
  • You’ll venture onto the internet;
  • And I’ll market a new appraisal designation.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


November 15, 2019

Housing Weakness Is More Rental Than Sentimental

Despite having a reputation as being a difficult person to work with, Apple co-founder Steve Jobs’ marketing legacy is incredible. Being a devoted Mac nut, having built both our appraisal companies using Macs, he made a lasting impression on me. The craft of story-telling he employs is unmatched as far as I’m concerned.


But I digress…

Manhattan, Brooklyn & Queens Rental Markets Show Cooling Price Trends Except for Luxury

I’ve been the author of the expanding Elliman Report series for Douglas Elliman Real Estate for a quarter of a century (yikes!). What has made this affiliation work so well over the years is that Elliman has respected my independence, a deal killer for me otherwise. With their entrepreneurial business culture, they want their clients to understand actual market conditions to enable them to navigate better. I consider myself fortunate to be affiliated with a firm that has never had an issue with me conveying honesty in my market messaging.

One of our research pieces is the monthly rental report that covers Manhattan, Brooklyn and Northwest Queens in New York City. Although few realize this, 2/3 of the NYC housing stock is rental.

Elliman Report: 10-2019 Manhattan, Brooklyn & Queens Rentals

With the massive surplus of news this week, coverage of the rental market reached 18th place yesterday on the ±350,000 Bloomberg Terminal subscribers.

And of course, a chart!


______________________________________________________
MANHATTAN RENTAL MARKET HIGHLIGHTS

“Rental price trends pressed higher across all apartment sizes.”

  • The vacancy rate has increased year over year for three straight months
  • Median net effective median rent year over year growth appeared to have peaked in July
  • The seventh consecutive month with year over year declines in concession market share
  • New development median rent continued to rise faster than the existing median rent
  • Share of new leases at or above $10,000 expanded for the fourth straight month
  • The luxury entry threshold hasn’t seen a year over year decline in 2019
  • The median rental price moved higher year over year at all price strata


______________________________________________________
BROOKLYN RENTAL MARKET HIGHLIGHTS

“Rising demand resulted in the largest year over year drop in concessions for 2019.”

  • Net effective median rent increased annually for eleven consecutive months
  • Most significant year over year decline in concession market share for 2019
  • The average size of a rental apartment rose across all bedroom categories


______________________________________________________
QUEENS RENTAL MARKET HIGHLIGHTS

“Net effective median rent rose annually for the first time in four months.”

  • The market share of landlord concessions fell year over year for the third straight month
  • Net effective median rent rose year over year for the first time in four months
  • The most significant decline of concession market share in six months


SoftBank Unicorns Got No Apparent Due Diligence

One of the tragedies for investors and current and former employees of WeWork has been the stunning lack of due diligence by SoftBank. I mean, $300 million for a dog-walking app maker and no one blinks?

The sting of WeWork’s collapse is spilling over into other SoftBank unicorns like Compass, the traditional real estate brokerage firm that markets itself as a tech firm, presumably to get a higher valuation. In response to the bad WeWork headlines of late, Compass has sweetened the pot for its agents, probably because of the perception that anything associated with SoftBank is now tainted – that all unicorns received the same lack of due diligence that WeWork did.

The theme of these unicorns seems to be to go big to dominate their vertical, and then presumably after they kill off or buy most of the competition, they can charge higher commissions. They are disrupting through capital, not any apparent innovation. The problem with this strategy, ethically, is that the consumer will end up paying more in the end. With the toxic nature of unicorns these days, that vision is getting blurry. Uber continues to lose billions and was just fined $649 million. Peloton too.

Large signing bonuses create short term loyalty, say, just enough until an IPO when the founders can cash out and leave everyone else with a disruptor that has a lot of capital but hasn’t provided new ideas beyond the traditional brokerage model. I just heard from a broker friend who told me of a top producing team that signed with Compass to get a very large signing bonus to take some of the stress off of maintaining their top performance.

Cooling Rental Markets May Be Holding Back Inflation

Because national rents of primary residences, including the rental equivalent of a home, account for 40% of core inflation calculations, the direction of the rental market has a significant influence on core inflation.

The declines in New York and Boston weighed on the national measure for rent of primary residence, which rose 0.1% on a monthly basis, the least since April 2011.


Click on the chart to read more about this trend.


NAR Attempts To Solve Inventory Shortage By Fighting Whisper-Listings

The fight between Bright MLS and Compass over whisper/Pocket listings fight has been in the news. The grand strategy by Compass looks like they are trying to become the center of the listing universe to capture both sides of the commission in an organized way. This practice cuts off inventory access to the broader public unless they go through Compass and place pressure on housing market affordability already plagued by chronically low levels of supply.

This week NAR approved its “Clear Cooperation Policy” meant to standardize how long a broker can hold the listing until they share it with their members on the MLS. The associations have until the spring to adopt it.

If members don’t adhere to the new policy, they can always leave the MLS, I suppose. Look to see how hard Compass fights this policy nationwide. I believe this disrupts their key strategy of destroying the MLS system to become the center of the listing ecosystem.

Recession Probability Is Losing Steam

I typically speak a few times a week to the real estate brokerage industry and have found the word “Recession” undoubtedly comes up. Often referenced as the “R” word, it stokes fear in the hearts of many a real estate broker. We are in late innings of the proverbial baseball analogy cycle, and yet I think the reason for the elevated concern about such a probability is based on what people associate with a recession. The last one involved a global thermonuclear meltdown of global credit, and those conditions are associated with how a recession might feel today. Yes, we are still in an over-corrected hangover phase of the financial crisis, but fear of the “R” word has become the “boogieman” of the real estate economy. And who can blame the real estate industry’s concerns? We have seen a significant mortgage rate decline over the past year, and that usually occurs when the economy is weak rather than like now when unemployment has remained crazy-low, below 4%.


One of the reasons that rates are falling is because the Fed is trying to offset the economic damage created by the ongoing trade war and its uncertainty. This confluence of events has impacted real estate in the high-cost markets I analyze in my research by slowing sales despite falling mortgage rates. Here’s a variation of a checklist I’ve shared before.

-Uncertainty
-Sales slow
-Inventory rises
-Sales continue to slow
-Price discovery for 1-2 years
-Market stabilizes

The following is a diagram of the trade war that is driving economic uncertainty and explains why lower mortgage rates aren’t as much impact as one would expect. Click the tweet to expand the infographic:


The best description using a baseball analogy I’ve heard (can’t recall the source – likely on Twitter or heard in a podcast). Here’s how the conversation goes:

Prognosticator:
“We are in the third inning…”
Listener:
“Wait; what? How can that be? We are much further in the cycle than that!”
Prognosticator:
“We are in the third inning of the second game of the double-header.”
Listener:
“Oh, I get it.”

Getting Graphic


Len Kiefer‘s Chart Handiwork



Appraiserville

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

NAR Real Property Valuation Committee Issues Position On Bifurcation

The Real Estate Valuation Committee within NAR, which includes a slew of some of the best practicing appraiser minds in the industry, came out with a position on bifurcation. The release speaks to NAR’s support of independent valuation by state-credentialed appraisers, which is great. And it states that the appraiser must be able to interact directly with a third-party property data collector (inspector), which is also great.

Presumably, the inspector could be a Realtor since NAR is a trade group for Realtors, not for appraisers. Thankfully NAR recognizes that the detachment of appraisers from the process may damage their members’ livelihood as well as hurt home buyers and sellers. It’s great to have NAR in the mix, and they have long supported the importance of our role.

As much as I appreciate the symbolism of this policy position and the hard work by this committee, it is not clear to me how it makes much of a difference in the ultimate use of bifurcation assignments by mortgage lenders. Presumably, if views change with the future of the pilot programs at the GSEs, the use of bifurcation appraisals won’t be stopped. Still, I see their efforts as very important.

But I don’t want our industry to think: “There, we’ve addressed and resolved the threat to appraisers and more importantly, the public trust.”


Home Value Stories Podcast: If the Appraised Value Is Lower Than You Anticipated If the Appraised Value Is Lower Than You Anticipated

My friend Jamie Owen of the Cleveland Appraisal Blog has a new podcast that you can add to your feed. It gets into the nuts and bolts of our profession yet keeps it interesting and has high-quality production values. Here is the latest episode:

OFT (One Final Thought)


Brilliant Idea #1

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

  • They’ll upgrade their Mac;
  • You’ll rent;
  • And I’ll grab that fish.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


November 8, 2019

People Are Staying In Their Homes Long While I Am Staying On Vacation Longer

My wife and I are in San Francisco this week enjoying a little R&R (despite doing some work on occasion) so my readers get some time off too. However, there are some great reads in the links at the bottom of the page!

I remember when 7 years was the default assumption of the length of stay in a home. Now it is 13: People Are Staying in Their Homes Longer—a Big Reason for Slower Sales: Homeowners nationwide are staying put an average of five years longer than they did in 2010, a new analysis shows [WSJ].

Click on the photo below if you can handle vertigo.

But I digress…

Appraiserville

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

Out looking for that perfect comp while on vacation.

OFT (One Final Thought)

Not suitable for office use (strong language).


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 stay longer;
  • You’ll stay longer;
  • And I’ll go on vacation.

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

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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