July 19, 2019

Knitting and Ironing A New Housing Sweater

Of course, we all know about Extreme Ironing. Now we have…wait for it…Heavy Metal Knitting. Some people desperately need a hobby but I’ll stick to housing market analysis. And don’t get me started about birds.

A quick shoutout to my Columbia University grad students who learned yesterday:

“The housing market doesn’t care what you think.”

But I digress…

Elliman Reports Released: Q2-2019 Greenwich, Fairfield County, Downtown Boston

As my faithful Housing Notes readers know, I’ve been authoring an expanding series of Elliman Reports for Douglas Elliman Real Estate since 1994.

Week 3 of our quarterly gauntlet was completed with the publication of reports in the Northeast and South Florida. Let’s start with the northeast.

Elliman Report: Q2-2019 Greenwich Sales
Elliman Report Q2-2019 Fairfield County
Elliman Report: Q2-2019 Downtown Boston

First, the coverage of the Greenwich market findings was the 9th most-read story of the day worldwide on the Bloomberg Terminals which has ±350,000 subscribers. That makes sense because Greenwich, Connecticut has long been known as the home of many in the securities industry.

And they presented a chart on Greenwich and who doesn’t love charts!

Here are the highlights and charts of each market:


Elliman Report: Q2-2019 Greenwich Sales

“Excess listing inventory at the high is beginning to clear as sellers reconnect with market conditions.”

  • Single-family median sales price rose annually for the sixth time in eight quarters
  • Single-family listing inventory fell annually for the fourth straight quarter as casual sellers withdrew from the market
  • Condo sales declined annually for the first time in three quarters
  • Condo listing inventory fell the most in more than two years
  • Luxury median sales price rose annually for the first time in five quarters


Elliman Report Q2-2019 Fairfield County

“Sales edged higher year over year after five straight quarters of declines.”

  • All price trend indicators slipped along with the average size of a sale
  • The pace of the market moved faster, nearly twice as fast as the decade average
  • Listing inventory edged lower year over year for the first time in three quarters
  • Luxury listing inventory declined for the first time in six months


Elliman Report: Q2-2019 Downtown Boston

“All price trend indicators moved higher with average price per square foot setting a record high.”

  • Median sales price rose year over year for the sixth time in the past seven quarters
  • Average price per square footage showed larger annual gains for bigger units
  • The market pace remained blistering despite five straight quarters of yearly inventory increases

“Rising price trends reached record levels as a blistering sales pace remained.”

  • More than half of all townhouse sales sold within thirty days on the market
  • All three price trend indicators increased year over year with the median rising for the third straight quarter
  • Sales declined, and inventory expanded annually for the first time in three quarters

Elliman Reports Released: Q2-2019 South Florida

Elliman Reports: Q2-2019 South Florida

For charts on each of the South Florida markets we cover, you can go to our chart gallery.


  • Overall listing inventory was essentially unchanged as the number of sales slipped
  • Condo listing inventory declined year over year for the first time in the 22
    consecutive months it was tracked
  • Single-family median sales price increased year over year for the sixth consecutive quarter
  • Luxury condo price trend indicators, as well as average sales size, declined annually
  • A sharp decline in average single-family sales size pulled luxury median and average sales price below year-ago levels


  • Lowest market share of condo and single-family cash buyers in more than five years as mortgage financing continues to grow
  • Condo and single-family median sales price has not seen a year over year decline in at least 22 straight quarters
  • Condo price trend indicators and the number of sales increase over year-ago levels
  • All condo sales categories by size increased above year-ago levels
  • Single-family sales increased annually for the third time in the last four quarters
  • All luxury condo price trend indicators moved higher while listing inventory slipped from year-ago levels
  • All luxury single-family price trend indicators fell short of year-ago levels as average sales size dropped


  • Condo sales and price trend indicators fell short of year-ago levels
  • Single-family sales increased but showed mixed price trends from the same period last year
  • Single-family median sales price declined annually for the thirteenth time in the last twelve quarters
  • Luxury inventory for both condos and single families increased year over year for the last two quarters


  • Single-family and condo sales increased and listing inventory decreased respectively from the year-ago period
  • Condo median sales price hasn’t declined year over year in twelve consecutive quarters
  • Single-family listing inventory declined annually in two of the last three quarters
  • Luxury condo inventory increased as luxury single-family inventory declined respectively from the year-ago quarter


  • Single-family price trend indicators and number of sales rose year over year
  • Condo median sales price hasn’t declined annually in fourteen consecutive quarters
  • Luxury single-family price trend indicators moved higher as listing inventory fell sharply
  • Luxury condo price trend indicators showed mixed results as listing inventory edged higher


  • All condo price trend indicators increased year over year as the number of sales surged
  • Cond listing inventory fell annually for the first time in five quarters
  • All single-family price trend indicators and the number of sales moved higher
  • Single-family listing inventory fell year over year for the second straight quarter
  • Luxury condo and single-family listing inventory fell sharply from year-ago levels


  • Although they missed Q2, there have been four single-family sales to close in the first days of July for over $200 million
  • Condo and single-family pending sales surged from year-ago levels as cash sales accounted for nearly 8 of 10 sales
  • Condo median sales price rose annually for the third time in four quarters
  • Second-quarter single-family sales tied for the lowest total in nine years
  • The modest gain in luxury and single-family price per square foot was not reflective of sharp downward skew in sales size that impacted the other indicators
  • Luxury price threshold fell year over year for the fourth straight quarter as the high-end market pulled back


– Single-family sales rose year over year for the second time in three quarters
– Condo sales rose year over year for the fourth consecutive quarter

– Single-family sales rose as all price indicators continued to move higher
– Condo median price rose annually for the 27th time in 28 quarters

Way Down: NAR’s International Real Estate Survey 2019

NAR released their annual membership survey covering international real estate. Because of Fair Housing laws and “redlining” concerns, hard data that connects country of origin with purchase transactions is essentially non-existent in the U.S., unlike much of the world.

Bottom line: Purchases by international buyers are down 31% and total dollar volume is down 36%.

Based on our resources, we think international buyers in Manhattan are down by half.

ATTOM: U.S. Median Sales Price Hits Record While Second Y-Axis is Lost

Housingwire ran a story using ATTOM’s data that the U.S. median home price hit a new record of $266,000, rising 6.4% year over year. This is consistent with the NAR existing median sales price of $277,000, up 4.8% year over year.

While this is terribly fascinating, why has the second Y-Axis in the ATTOM chart gone rogue?


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

Back in the Day: FDIC Bragged About Negative Amortization (Neg-am) Loans

Regulators today are often removing barriers to responsible behavior with the hope of expanding lending activity since falling mortgage rates aren’t the answer. Banks are pushing back and it is instructive to see the way FDIC thought back in 2006. FDIC and the U.S. Treasury have turned out to be very anti-appraiser and are championing ways to automate as a way to replace us. Think about wildly inaccurate Zestimate-like AVMs on first mortgages. Economist, real estate agent and good follow John Wake shares this:

NCUA BOD Quadruples Threshold For Non-Residential Loans

Dave Towne essentially asks us to mark this moment in time after receiving an email alert from the Appraisal Institute on the cavalier risk position taken by NCUA. Not require appraisals on the vast majority of commercial loans being – what could go wrong?

“The NCUA Board of Directors today (July 18, 2019) quadrupled – from $250,000 to $1 million – the appraisal threshold for nonresidential real estate loans. (NCUA is the National Credit Union Administration.)

The appraisal threshold is the loan amount below which appraisals are not required.

Increasing the threshold would drastically increase the number of nonresidential real estate loans that would not require an appraisal.”

That last sentence is somewhat convoluted. (I didn’t write it!)
More simply stated: The decision will REDUCE the number of appraisals needed for Commercial property loans ….. which originate with Credit Unions.

Secondarily, the other major loan guarantee agencies threshold is half as much….$500,000. So the NCUA Board decision has the potential of significantly impacting all aspects of Commercial appraisals. It presents a possible upheaval in the industry/profession.

This decision also means that any person a CU designates can do a commercial property EVALUATION when the loan amount will be below $1M. It begs the question: who will value the actual property which will be the collateral for the loan?

Since most loans are written for a percentage of the collateral value, it means a significant amount of commercial property value will not be actually appraised by a Commercial appraiser.

Like so many things in life, the NCUA Board decision was predicated primarily on greed. They hope to generate more business for Credit Unions whereby those local organizations can say to community business people … “We’ll give you a boat load of money and you won’t have to pay for a proper appraisal which will be the evidence basis for the pile of moolah.”

This is a lot like the liar loans that infiltrated residential lending not that long ago.

It’s also akin to the ‘savings and loan crisis’ many of us went through in the late 1970’s – early 80’s.

It’s too bad people cannot learn from past history. “Oh, but it’s different now!” Yah, right…..same pile of barnyard stuff, but just wearing a different pair of boots.

OFT (One Final Thought)

This video was made three years ago and I don’t know how I missed it – its amazing. It’s not what you think it is…but it may be NSFW to some.

HOW TO LOSE WEIGHT IN 4 EASY STEPS from Benjamin Berman on Vimeo.

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 do more knitting;
  • You’ll do more ironing;
  • And I’ll do more vacuuming.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Real Estate Blockchain

Appraisal Related Reads

Extra Curricular Reads

July 12, 2019

Bicycles and Rock Lobsters Can Change Your Housing Outlook

I’m nearly a third of the way into my Tour de France watch-a-thon, a 7-hour per day, 23-day guilty pleasure every July. I just let the NBC feed run on my iPhone with the sound off and periodically glance at it to check up on changes. Forget staring at fishtanks for soothing relaxation. The amazing countryside scenery makes it well worth the time.

So with that frame of mind, here is my biking analogy of the week. It only takes two to bring everything down. Watch this in its entirety on a big screen if possible.

But I digress…

A Shout Out To My Columbia Grad Students

It’s that time of year again to teach Market Analysis in the Master of Science in Real Estate Development (MSRED) Program at Columbia University. It’s a strong program if I do say so myself. If the quality of student participation in yesterday’s first class was any indication, this semester is going to be engaging and fun for all of us. Plus the terrific faculty and alumni support make this position a dream for me.

Remember, a down residential housing trend goes like this:

EXTERNAL EVENT> (i.e. new tax law) >
SALES DECLINE > (buyers pause until fully understand)
LISTING INVENTORY RISES > (sellers remain in denial)
1-2 YEARS PASS > (sellers don’t sell unless they get their price)
PRICES ERODE > (sellers capitulate to the market)

Since the real estate brokerage community is transaction-based, I’ve never understood why the industry never spoke about a downturn directly. With greater transparency over the past decade, the smarter, more successful brokerage firms embrace market changes as an opportunity to educate sellers on the market reality that “the housing market doesn’t care what you think.”

Market Report Gauntlet: Elliman Report Q2-2019 Westchester, Putnam & Dutchess Sales

We just completed “week 2” of our four-week quarterly market report gauntlet for Douglas Elliman, part of the expanding Elliman market report series I’ve been authoring for the past 25 years.

Let’s start with Westchester County, New York, an affluent suburban market to the North of New York City.

• Elliman Report: Q2-2019 Westchester Sales
• Elliman Report: Q2-2019 Putnam/Dutchess Sales

Wall Street loves Westchester housing news because many in the securities industry live there. The Bloomberg coverage of our Westchester research was the third most read story on the 350,000± Bloomberg Terminal subscribers worldwide.

Even more fun – a chart, obviously.

Here’s an outline of the northern counties and some charts


“Countywide sales continued to expand as price trend indicators showed mixed results.”

– Countywide sales have increased at a rising annual rate for the fourth straight quarter
– The largest annual sales growth occurred in the $800,000 to $1,000,000 range
– Co-op and condo sales gained market share over single and 2-4 family sales
– Single family sales surged and outpaced the rise in listing inventory
– Single family listing inventory expanded annually over the past five quarters
– Luxury single family price trend indicators fell short of year-ago levels
– Luxury single family listing inventory declined annually for the third time in four quarters

And who wouldn’t like being superimposed on a chart?


“The second fastest paced quarter in fifteen years.”

– Median sales price increased year over year for the ninth straight quarter
– The number of sales rose annually for the third time in four quarters
– Listing inventory fell year over year for the second time in three quarters


“The surge in sales overpowered the growth of listing inventory.”

– Median sales price declined year over year for the first time in nine quarters
– The number of sales rose year over year for the second time in three quarters
– The pace in the market moved sharply faster than the same period last year

Market Report Gauntlet: Elliman Report June-2019 Manhattan, Brooklyn & Queens Rentals

Despite an uptick in the Manhattan sales market, the Manhattan rental market continued to show strengthening trends. Incidentally, the new rental law passed in Albany has not played a role in the open market rental market yet that would show up in the trends.

But I digress.

The city rental market continues to see rising rents and falling market share of concessions. Rents are rising.

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

Because I’m partial to charts, here’s the Bloomberg story featuring our research that ranked 16th most read yesterday worldwide:

Here are some of the key observations and charts for each borough.


“Landlord concession market share continued to decline but remain a significant part of the rental housing market calculus.”

– Landlord concession market share declined year over year for the fifth time in six months
– The net effective median rent has risen annually each month since the beginning of the year
– Rent growth skewed to smaller apartments as market share gains skewed to larger apartments
– New development median rent increased at three times the rate as existing median rent
– Median annual rent gains were most pronounced in the 61% to 90% price strata
– The lowest year over year price growth was seen in the luxury and super luxury markets


“The market continued to pivot away from concessions as rental prices continued to rise.”

– Concession market share declined annually for the sixth straight consecutive month
– All three face rent trend indicators have been rising annually since July 2018
– Net effective median rent rose year over year for the seventh consecutive month


[Northwest Region]
“Rental prices pressed higher as landlord concession market share declined.”

– The annual change in concession market share fell sharply for four consecutive months
– Net effective median rent rose annually for the seventh time in eight months
– New development concessions have experienced a more pronounced decline than concessions for existing rentals

Market Report Gauntlet: Elliman Report Q2-2019 Brooklyn, Queens & Riverdale (Bronx) Sales

Here are some key observations on these three NYC sales markets.


Elliman Report: Q2-2019 Brooklyn Sales

“Although median sales price reached a new record, sales slipped annually for the sixth straight quarter.”

– Median sales price set a new record this quarter for the seventh time in three years
– The number of sales declined year over year for the sixth straight quarter
– Listing inventory expanded annually for the fourth consecutive quarter
– Sales from $1-2 million and $4 -10 million were the only price strata to see an increase
– Luxury listing inventory increased year over year for the fifth consecutive quarter
– New development sales surged as price trends showed mixed results


Elliman Report: Q2-2019 Queens Sales
“Price trend indicators flirted with records as sales continued to slip.”

– Median sales price rose annually to the second highest on record and thirteenth quarter without a decline
– The seventh consecutive quarter with a year over year decline in sales
– Listing inventory increased annually for a ninth straight quarter
– Co-op median sales price reached its second-highest mark after setting records in six of the seven previous quarters
– All 1-3 family price trend indicators rose year over year for the thirteenth straight quarter

[includes Fieldston, Hudson Hill, North Riverdale and Spuyten Duyvil]

Elliman Report: Q2-2019 Riverdale Sales
“Price trends pressed higher as sales fell short of year-ago levels.”

– Median sales price rose year over year for the fifth straight quarter
– Number of sales fell annually for the fourth time in five quarters
– Listing inventory moved higher year over year for the fourth consecutive quarter

Albany Legislators Need To Consider Economics For Future Tax Revenue

Since last fall, the Albany legislature has turned New York’s real estate environment upside down. Best intentions I’m sure, but no evidence of understanding of how a real estate economy works, which is needed to generate the revenue needed to fund an expanding budget. Worst of all we’ve seen this movie before (1960s, 1970s and 1980s).

Failed Amazon Deal in Long Island CityThe outcry against it was based on a false common lack of understanding that the city was going to outlay billions to a rich company, when in fact the tax break was coming out of the additional revenue Amazon would provide.

Proposed/Failed “Pied-a-terre tax” – I was reading The Real Deal online this morning and a video with me speaking popped up! It was from March and I had forgotten about the interview – my short term memory is pretty weak. The overturned proposal would have decimated real estate development and investment.

The updated mansion tax and transfer tax – placed a wet blanket on an already struggling new development market. Because the high-end market was so weak, sellers and developers will be forced to cover the cost. The real damage to the market is the global image NYC is creating as a hostile place for investment.

The new rent law – the changes will ultimately decimate the multifamily sales market and effectively end all building improvements. We are already hearing about layoffs of construction workers by landlords who upgraded apartments as they became vacant. State legislators removed all financial incentives to renovate a multifamily property in New York State, likely crushing the multifamily sales market going forward. We are hearing that landlords are stopping renovations – look for the quality of affordable housing stock to deteriorate over the coming years. A repeat of the In Rem housing crisis of the NYC metro area of the 1970s and 1980s is here.

Econ Insight Episode 41 — Real Estate Boom or Bust?

My friend Alex Heil, Chief Economist, Planning & Regional Development of The Port Authority of New York and New Jersey asked me to do another podcast but this time it was culled from my multi-agency presentation at the Port Authority – they step you through my presentation and inserted some of my audio. My first podcast for PANYNJ was back in September 2015 right after the market peaked: Housing and the Metro New York Economy

If you’re not signed up to “Econ Insight” by the Port Authority, it is a good idea to subscribe to their newsletters and podcasts for great monthly snapshots and other insights on the NYC metro area regional economy.

[click anywhere on the image to play podcast]

Here is the first page of June PANYNJ Monthly Economic Indicators newsletter which provides some of the information from my presentation. Great info on these pages every month.

Realogy Sues Compass, Realogy Gets Sued By Investors

There was a big Wall Street Journal story this week: Compass Engaged in Illegal Activity, Realogy Lawsuit Alleges

Here’s the formal complaint

This is a good read for all of you non-lawyers out there. Realogy names names and is incredibly direct against the practices of Compass. It really is a good read.

Of course, if you’re a Realogy fan, no good deed goes unpunished. Realogy was just hit with a class action lawsuit.

From the Real Deal today: On heels of Compass legal battle and dwindling stock, Realogy hit with securities fraud suit

Getting Graphic

Len Kiefer‘s Chart Handiwork


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

Taking a break this week

Even though there was a lot of important things to discuss here like the one year North Dakota waiver, I simply ran out of time this week if you haven’t noticed the early content in these Housing Notes.

OFT (One Final Thought)

Speaking as wanna be lobster fisherman, I’ve always loved this song. Who knew that this band would get so popular? Always loved their playful vibe. I was a sophomore in college when this came out and wore out the album. So different than the hairband stuff that dominated the airwaves back then.

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 rent;
  • You’ll rock lobster;
  • And I’ll talk a lot.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads

July 5, 2019

The Emperor’s New Clothes In Housing Tech

Be careful who you listen to when it comes to the future of the housing market. It’s not the size of the company/organization or capital raise that matters as real estate undergoes disruption (or pseudo disruption), it’s the depth of their understanding of the consumer and anticipating what the consumer doesn’t yet know what they want. Does the emperor actually wear clothes in all the real estate tech stories you’ve been reading about?

Steve Jobs

“Some people say, “Give the customers what they want.” But that’s not my approach. Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, “If I’d asked customers what they wanted, they would have told me, ‘A faster horse!'” People don’t know what they want until you show it to them. That’s why I never rely on market research. Our task is to read things that are not yet on the page.”

And then there’s the following video – I remember seeing this in real time. I burst out laughing at the time, marveling at how misguided titans of industry can be.

But I digress…

Market Report Gauntlet: Q2-2019 Elliman Report: Manhattan & Northern Manhattan Sales

My readers of Housing Notes know that I’ve been writing an expanding series of market reports for Douglas Elliman since 1994 and it’s a full-on obsession as are charts and data. So here we go.


Elliman Report Q2-2019 Manhattan Sales

Co-ops & Condos

“First annual rise in sales in seven quarters with buyers motivated to avoid exposure to new tax law.”

– Sales increased year over year for the first time after six quarters of declines
– The most significant rate of annual sales growth occurred from $2 million to $5 million
– Listing inventory rose annually for the seventh consecutive quarter
– Overall price trend indicators moved higher as median sales price set a new record
– Listing inventory for re-sales expanded year over year for the seventh consecutive quarter
– Highest co-op listing inventory total in six years and it exceeded the ten-year quarterly average
– After six straight quarters of annual declines, condo sales rose the most in three years
– The number of luxury sales at or above $10 million rose sharply from year-ago levels
– The first year over year increase in the number of new development sales in nearly two years

Our report results featured on the Bloomberg Terminals home page in “Chart of the Hour”


Elliman Report Q2-2019 Northern Manhattan Sales

“Apartment sales increased while townhouse sales declined.”

Co-ops & Condos

  • Median sales price rose year over year for the third time in four quarters
  • Listing inventory expanded annually for the fifth straight quarter
  • The pace of the market, as measured by months of supply, was faster than the markets to the south
  • Studio and 2-bedroom sales gained the most market share from the prior year


  • Listing inventory remained unchanged as sales declined
  • Price trend indicators showed mixed results
  • Shorter marketing time with more negotiability

On The Floor of The NYSE, Not Talking About Stocks

After the publication of the Elliman Report for Q2-2019 Manhattan Sales, I was asked to join Cheddar anchors Kristen Scholer and Tim Stenovec on the floor of the exchange. They were terrific to speak with and I appreciated the invite. I was last there in 2007, interviewed by Erin Burnett when she was at CNBC. Back then I got to sit near the president of the Russian natural gas conglomerate Gazprom and his dozen very large bodyguards. This time was a bit different, thankfully.

Update: I forgot to mention the following little moment in this post when I shared my Erin Burnett/CNBC story today – the security guard at NYSE asked me “when was the last time you visited the NYSE?” and I said, “about 10-12 years ago.” He looked it up to confirm and deadpanned, “I’ll bet you remember that I was the guy that took your picture in 2007, right?!?! He and his colleague and I all had a good hard chuckle over that. Moments like this are what I love so much about my job.

Purplebricks Huffed And Puffed But No Match For Big Bad Wolf

Discount real estate broker “Purplebrickshas withdrawn from the U.S. after losses nearly doubled this year and their stock price fell 75%. They entered the U.S. housing market in 2017.

The Purplebricks web site claims they save their customers an average of 40%. If that claim is actually true and they failed in the U.S. market, then there is clearly something else to this firm’s U.S. collapse.

This story reminds me of Foxtons YHD back in 2007. Technology firms proliferate in boom markets and many become challenged in their first down market.

Here is what I had to say back then (shout out to @johnwake for reminding me!):

From my Matrix Blog in 2007 as the housing market was beginning to stall – Foxtons: Cutting Commissions = Watching MTV

National Housing Stats Still Look Good

From Black Knight (worst corporate name ever) via Basis Point

Pipelines & Weathervanes: New Development Deliveries Define Market Outlooks

Mansion Global does a good job showing the future incoming new development supply for Manhattan (using our data) and Miami.

The Manor: This Week in Aspirational Pricing

Let’s recap:

$85 million – cash purchase in 2011 – was in good condition but was upgraded for $20M subsequent to sale towards more a contemporary style.

$200 million – Original list price
$160 million – Last list price (20% price cut)

$119.75 million – Sales Price (price cut: 40% from original, 25.2% from last list)

With $105 million invested (cash purchase + renos), the seller made 1.76% per year on the sale. For the excessive risk, this seems like a terrible financial strategy all around.

Cheddar: How Property Taxes Are Calculated On Billionaire’s Row

Since Cheddar came up earlier here, I thought I’d share this clip:

Getting Graphic

Our favorite charts of the week of our own making

Notice our chart redesign? We finally packed up our Crayolas…


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

Location Update: ASC Special Meeting – North Dakota Temporary Waiver Request Thursday, June 13, 2019

UPDATE I just learned of this meeting update after sending out my Housing Notes:

The ASC will hold a Special Meeting on Tuesday, July 9th at 10:00 a.m. to consider the Temporary Waiver Request submitted by North Dakota. The Meeting will be held at 1100 New York Ave NW, Suite 200 East, Room: 2 A/B (Partnership for Public Service). If you plan to attend this Meeting, please send a request to Meetings@asc.gov.

If any of you can attend this meeting, please do! It is critical that the appraisal industry shows its strength in numbers – this proposal by North Dakota is a travesty for its damage to the public trust, the attack against the consumer, and fraudulent premise.

AVMs Are Not Understood By A Large Swath of Non-Appraisers

Here is a NAR deck on AVMs (automated valuation models).

Here are some recent survey results that show more than half of the respondents indicated, it is either NEVER appropriate or NOT SURE if it is appropriate for a non-appraiser to perform a valuation on a home.

So the jury is still out for a third of respondents but a third are absolutely sure it is inappropriate. One can infer that appraisers have an opportunity to convey what AVMs really are to the public.

OFT (One Final Thought)

All three videos are fake, but which one scares the heck out of you?



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 bowl with robots;
  • You’ll learn to love pipelines;
  • And I’ll chat on the trading floor without bodyguards.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads

June 28, 2019

The Basis Point Analogy of Swings in the Housing Market

I was out the office this week from Tuesday through Thursday and gearing up for the “Q2-2019 Market Report Gauntlet” that begins early next week, so some of my tweets did the heavy lifting.

NAR’s non-seasonally adjusted existing home sales rose year over year for the first time after eight months of annual declines. The ±75 basis point drop since this time last year had a lot to do with the growing momentum in the swing towards more demand. As more basis drops onto the market rope, participants jump into the market from their safe platforms as enthusiasm grows. The lack of inventory weighs down the participants with more price risk until everyone gets soaked. Hopefully, no one gets hurt but our valuation model ended unexpectedly so we aren’t sure how this plays out.


But I digress…

New York State Rent Law Will Be Challenged as a ‘Taking’

Because of the new rent law’s perceived overstep by multi-family building owners, we expect to see a lot of litigation in the future. I can’t emphasize how catastrophic this will be to the New York City housing stock as the law is written. This was a good-faith effort to preserve affordable housing but it will likely create several outcomes detrimental to the original intent. I’ve written on this before but have had more time to process the ramifications:

  • Jump in cap rates which would crush multi-family building values because all incentives for rental price upside by making capital improvements have been eliminated, sending NYC back to the “In Rem” housing crisis of the 70s and 80s, where the landlords, especially small building owners, walked away from their buildings. Constrained by caps on rent increases as expenses rose faster removed all incentives for ownership and maintenance. This is a repeat scenario
  • Sales of multi-family buildings will essentially stop as the incentive for ownership has been removed
  • Construction of new rental buildings will fall sharply given the loss of incentives and the harsh anti-landlord political zeitgeist
  • With the removal of ownership incentive, the number of rent-regulated apartments will decline as rental to co-op conversions jump. Perhaps not as frenzied as the 1980s boom but there should be more of this. Current public commentary on this issue is being made by developers who have no experience in this new world
  • Rental conversion to co-op will expand despite the 51% from 15% new requirement for insider votes. The reason? Back in the 1980s I recall that a large portion of conversions during that boom era saw greater than 51% conversions despite the 15% threshold because Fannie Mae financing required it
  • Rental housing stock will decline as conversion activity rises. However, the unintended consequence of the conversion activity will bring more affordable “for sale” housing stock to the market, something sorely lacking before the law change. The 51% ensures that insider discounts will be closer to 50% than nominal discounts from the outsider price. Also, the insider pricing of those fortunate 51 percenters will enjoy instant equity to fuel additional housing sales
  • The city is highly dependent on real estate transfers so the drop in multi-family sales volume could reduce real estate tax revenue to a city that is expanding spending at a record break pace to resolve issues like transportation infrastructure. Spending will need to be cut back or borrowing will need to increase.
  • The City of New York’s reputation worldwide has already taken it on the chin by creating an anti-development, anti-investment reputation from the failed Amazon deal, proposed but withdrawn “pied-a-terre” tax, the new transfer and mansion tax and now the new rent law, all within the last 9 months. That’s tough to undo and is brand damaging to the City.

The first sign of an industry push back will be a lawsuit to be filed in mid-July where it takes the form of government property “taking”.

It’s unclear whether Cuomo will be named as a defendant, but the case will argue that his new rent law violates owners’ constitutional right against the “unlawful taking of property,” sources said.

It’s Not Like Nothing Is Selling

This Bloomberg story illustrated how important context is when measuring value, even when the comparison is a little out of context. A new development on the Upper West Side configured as a rental building with smaller units in the configuration, is in close proximity to Billionaires Row. The marketing narrative is to show how much less expensive this new condo project is than ‘Billionaires Row’ pricing even though it is in close proximity. However, it doesn’t have the same expansive views or the height than most of the Billionaires Row units have. But it does introduce additional smaller condo units to the market and that is a refreshing change from the steadfast overemphasis on super luxury units far into this market cycle.

Are People Still Flipping?

Yes, they are but in places you wouldn’t expect. When I read this U.K. WSJ article on condo flipping activity: British Contract Flippers Stymied by Faltering London Market, I was taken aback at the volume scale of property flippers in the Brexit UK. I wanted to say “Doh!” to the title but was amazed at the scale of the flipping activity.

But my tweet paid homage to the structure that was being converted. Think “Pigs on the Wing.” The lyrics kinda provide a visual for the end of a flipping era.

Getting Graphic

Len Kiefer‘s Chart Handiwork

Not the word “exemption” in 2019 i.e. $10k cap on SALT.


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


All appraisers need to provide their opine on this request. It is obvious why its a disaster and you need to share why right NOW to show our industry is concerned!!! At last count, there were only 24 comments!!!

Click here.

Incomplete Data Provides Incomplete Assumptions

In meetings with the National Association of Realtors and The Appraisal Foundation this week, there was a lot of time spent listening to AVM owners espousing their importance and more sober observations of the pitfalls. One of the presenters seemed to be bragging that 90% of the time, a good Automated Valuation Model (AVM) can be within plus/minus 10% of the actual value. Remember that Zillow’s Zestimate is within 5% of the actual value only 50% of the time. Both numbers are very dreadful and very random inconsistency across the marketplace.

But still, there is a place for their use in conjunction with appraisers, just not to the intensity being touted now, especially as their data gets polluted going forward by the impact of waivers.

Here’s a simple scenario on how data pollution works and in large scale has the potential to cause bubbles in the future – a sales transaction is given a waiver by a GSE and the sale happened to sell for 5% above current market conditions. That sale closes and is used by AVMs AND BY APPRAISERS as a valid comp. Multiply that by tens of thousands of transactions and we are creating unnecessary market volatility.

There was an excellent guest speaker from Columbia University, Josh Panknin who made the following observations about “big data” and the current wiz-bang “overhype” that seems to be threatening the future of appraisers.

  • Computers can’t fill in the blanks
  • Computers can’t do qualitative (my interpretation- i.e. views and condition despite UAD).
  • Incomplete data give us incomplete answers (so throwing more data at big data does not resolve that problem).

He also used a “turkey sandwich” metaphor for AVMs.

The quality of this sandwich of bread, cheese, turkey, and mayo get better by improving the quality and components, not by moving around the items.

In other words, we don’t improve quality by simply swapping out technologies.

Sidebar: AVMs Have Trouble Considering Natural Light

Josh Panknin also provided a paired sales discussion about differences in natural light.

Maureen Undoes The Misrepresentation of Appraisals At The House Panel

Chicago appraiser and friend (even though she calls me “fancy pants”) writes a stellar explanation of what an appraiser actual does – and what one of the panel experts got completely wrong because he didn’t understand our role in the mortgage process:

Greetings Congresswoman Waters, Chairman Clay, Ranking Member Duffy, Ranking Member Gooden, and the Members of the Housing Subcommittee:

My name is Maureen Sweeney, and I am a real estate appraiser. I grew up in a real estate family and lived through the savings and loan crisis of the 1980’s, which had a profound impact on my life. I witnessed first-hand illegal and unethical behavior in the real estate and mortgage industry towards homeowners. Through that experience, my greatest concern was, “who is protecting the public?”. In 1989, Congress enacted Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA). With this decision by Congress, I decided I wanted to be an appraiser. The appraisal profession was and still is the profession in the mortgage industry that promotes and maintains the public trust in housing finance. We are the first profession in the mortgage industry that was licensed, and we are the only profession that is regulated by Congress.

Because of FIRREA, all appraisers who develop opinions of value for federally related transactions must follow the Uniform Standards of Professional Appraisal Practices (USPAP). What was originally intended as assignment conditions for federally related transactions is now partially or fully embedded in all states’ appraisal laws.

USPAP states in the Ethics Rule, “An appraiser must not use or rely on unsupported conclusions relating to characteristics such as race, color, religion, national origin, gender, marital status, familial status, age, receipt of public assistance income, handicap, or an unsupported conclusion that the homogeneity of such characteristics is necessary to maximize value.” (Lines 200 – 202, USPAP 2018-2019 Edition © The Appraisal Foundation). The Fair Housing Act of 1968 prohibits discrimination concerning the sale, rental, and financing of housing based on race, religion, national origin, or sex. All states have laws that prevent discrimination. If an appraisal professional basis their assignment results on race, they can lose their license and may go to jail.

Appraisers develop the Valuation Process in each of their assignments. Each step in the Valuation Process builds on the previous step, so at the end of the report, there is a logical conclusion so those who rely in the report can understand how the assignment results came to be. This 8-step process includes:
1) Identifying the Problem; this includes determining who is the client, who are those who can rely on the assignment results, why is the report needed and how will it be used, what is the effective date of the assignment, what are the characteristics of the property such as the address or legal description, and what are the assignment conditions.
2) Determine the Scope of Work: this is the type and extent of research and analysis in an assignment.
3) Data Collection and Property Description: this is the step where appraisers collect data on the market, data on the subject property, and all data on comparable sales and listings that will be used in the report.
4) Data Analysis: this step includes determining the Highest and Best Use of the property as well as analyzing the market of the subject property. In this step supply and demand are analyzed, inventory levels and marketing times are determined. The data is verified. When appraising for federally related transactions, the closed sales data must be verified through two independent sources, such as the local multiple listing service, the recorder of deeds, or local newspapers.
5) Site Value Opinion: In this step, the appraiser determines the cost of the land where the property is located.
6) The Applications of the Approaches to Value:
a. Cost Approach: this step derives value by estimating the current cost to construct a reproduction or replacement of the existing structure, including entrepreneurial incentives, deducting depreciation from the total cost, and adding the estimated land value. How much does it cost to build the same or similar property? The Cost Approach addresses this question.
b. Sales Comparison Approach: this is the process of deriving a value indication for the subject property by comparing market information for similar properties with the property that is being appraised. The sales comparison approach is based on the [principle] of substitution, which states that a buyer will not pay more for one property when several similar properties are available; the property with the lowest price will attract the greatest demand. What’s my house worth when compared to my neighbors? The Sales Comparison Approach addresses this question. c. Income Capitalization Approach: this step converts income to value. How much money can I make from this property? The Income Capitalization Approach address this question.
7) Reconciliation of Value Indications and Final Opinion of Value: in this step the appraiser analyzes the information reported previously in the valuation process and selects a final opinion of value, which may be a value range or a specific number. If the market is oversupplied and prices are declining, the final opinion of value may be on the lower end of the value range. If the market is undersupplied and prices are rising, the final opinion of value may be on the high end of the value range.
8) Report of Defined Value: this is the last phase of the valuation process. The defined value is stated as of the effective date that was identified in Step 1.

All appraisals have a signed certification. The certification states that the appraiser has personally conducted the appraisal in an unbiased, objective manner in accordance with USPAP. The certification states what the appraiser did or did not do. A signed certification is important because it clearly states the role of the appraiser, thereby clarifying that the appraisal was done by an individual who is impartial, objective, and unbiased. The certification must be signed by the appraiser. Once signed, the appraiser is legally bound to the appraisal.

On June 20, 2019 at the U.S. House of Representatives Committee on Financial Services, Subcommittee on Housing, Community Development, and Insurance at their meeting: “What’s Your Home Worth? A Review of the Appraisal Industry.” Mr Andre M. Perry was one of the five witnesses to testify. Mr. Perry is not a licensed appraiser, yet Mr. Perry concluded that “owner-occupied homes in black neighborhoods are undervalued by $48,000 per home on average, amounting to $156 billion in cumulative losses.” As an appraiser who deals with data, I was very interested in his claim, as well as the basis for his conclusions.

In Mr. Perry’s written testimony, page 2, Figure 1, titled “Neighborhood median home value by black population share”, Mr. Perry data sources were property listings from Zillow and the value estimates provided to the Census Bureau. Mr. Perry did not provide values determined by licensed appraisers or any apparent recognized valuation method or technique. Zillow was sued in Illinois in 2017 (Vipul P. Patel., et al., v. Zillow, Inc and Zillow Group, Inc., Case No. 17 C 4008) and appealed in 2018 (United States Court of Appeals for the Seventh Circuit No. 18-2130). Zillow explicitly points out that Zestimate does not constitute an appraisal and is what it sounds like, an estimate. An estimate is not an appraisal, nor does it resemble any method or technique recognized by Congress or regulators. An appraisal is, “(noun) the act or process of developing an opinion of value; an opinion of value. (adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.” (Lines 59 – 60, USPAP 2018-2019 Edition © The Appraisal Foundation).

In his written testimony to your committee, Mr Perry notes on page 2, Figure 1 that the 2016 median list price was provided by Zillow. List price is what a seller is offering their property for sale. List price is not sale price. Sale price is a fact; list price is a suggestion. Rarely do properties in a balanced or declining market sell for above their list price. List price to sale price ratios were not profiled or discussed in Mr. Perry’s study, nor was any final sale price data referenced or profiled. In Figure 1 of his written testimony, Mr. Perry used “Census Bureau” for Median Value, rather than sale price data or appraiser’s conclusions. The Census Bureau is not a valuation agency and obtains their data via a survey. Per the U. S. Census Bureau, the market value is, “the respondent’s estimate of how much the property (house and lot) would sell for if it were for sale.” (https://www.census.gov/quickfacts/fact/note/US/HSG495217 ). An estimate is not an appraisal. [Homeowners] may or may not know the true value of their properties, because they are not valuation professionals, and they have a personal interest in their property. With only Zillow’s list price data and the Census Bureau’s homeowner estimates of their property’s worth, the study lacks any reliable value indicators. None of this data supports discontinuing the use of individual appraisers in preference for using Automated Valuation Models, as Mr. Perry suggested in his opening statement and throughout the hearing.

Is there a problem with poor and underserved communities in the United States? Yes. Is it the appraisal profession’s fault? No. The systematic practice of redlining (licensed broker issue), loan rejection (lending issue), and property taxes (assessor and county taxing agency issue) have nothing to do with the appraising of real property for federally related transactions. Entire neighborhoods fell victim to predatory lending, subprime mortgages, and mortgage fraud, with most of the mortgage loans generated with loan amounts below the de minimis of $250,000, which made them qualify for appraiser-alternative products, including AVMs. There were a whole lot of non-appraisal related issues presented in Mr. Perry’s data. It’s sad that the label of racism got pinned on the only profession in the mortgage process who is charged with protecting the public trust.

It’s like blaming the canary for the bad air in the coal mine or blaming the mirror for your bad hair day. Appraisers reflect the market; we do not create it. We observe, we verify through credible sources and analyze our data, and we report our findings in a manner that is meaningful and not misleading.

It comes down to data and how the data is collected and analyzed. In his opening statement, final statements, and throughout the hearing, Mr. Perry championed the use of AVMs. None of the data presented by Mr. Perry in his written testimony to this committee supports the discontinued use of individual appraisers over AVMs. This presents a question: since Mr. Perry relied on data from AVMs and Zillow, is race baked into these systems and their data? Algorithms and machine learning are built on historical data, which is primarily human driven. Machines may and have been shown to amplify bias in data. If racism has been perpetuated for decades in real estate, then it’s baked into the system and the data, therefore what kind of data will we get from the machines? Some hope that Big Data will save us from the mistakes made by humans. The humans who provide valuation services are licensed by their individual states and regulated by Congress. The licensed humans can lose their licenses, get heavily fined, or go to jail for unethical or incompetent appraisal practices. Who’s regulating Big Data when Big Data makes mistakes?

Today we know that 85% to 90 % of all mortgage transactions backed by the federal government and U.S. taxpayers are currently not subject to the protections Congress enacted through Title XI. Big Data companies that provide AVMs are not regulated. Their valuation process and sources of information are not verified, regulated, or publicly available. How does relying on an unregulated private industry running aggregation models protect the public trust? I don’t believe it does.

The appraiser is central to the checks and balances in the home lending system. The appraiser is hired by the lender to ensure that there is value in the property being used as collateral by the lender to provide funds to the borrower. The licensed broker/Realtor negotiates the price of the property, but they are not qualified or licensed to determine the value. Providing valuation services is the appraisal professional’s job. The appraisal professional provides checks and balances in the housing system, as the appraiser is entirely unrelated to the transaction and is not paid based on the amount of the valuation nor contingent on the closing of any loan.

Public trust is key in promoting the stability in the housing market. The continued reliance of unregulated aggregators and bifurcated products continues to erode the public trust at the expense of discarding the profession specifically intended to promote the public trust. How does this protect the public? The appraisal profession is at risk with this policy change. More important: the public is at risk with this policy change and the continued lack of reliance of the appraisal profession.

David Bunton from The Appraisal Foundation said it best to this committee: “The last thirty years were witness to federal agencies doing their best to circumvent using these trained professionals. Likewise, the government sponsored enterprises are taking on riskier practices that leave appraisal protections on the sidelines. Through exemptions, appraisal waivers, promoting evaluations in lieu of appraisals, and encouraging lenders to use unlicensed individuals, the federal financial institutions regulatory agencies estimate that a mere 10 to 15 percent of all mortgage transactions backed by the federal government and U.S. taxpayers are currently subject to the protections Congress enacted through Title XI. ”

I ask again: How does relying on an unregulated private industry running aggregation models protect the public trust? It doesn’t. The reliance on Big Data, the acceptance of hybrid and bifurcated appraisal reports, the potential rising of the de minimis from $250,000 to $400,000, and the lack of hiring the profession that is charged by Congress to promote and maintain the public trust in the housing industry, is a bad direction for our industry and our country. Please do all in your power to protect the citizens of the United States and prevent the next housing crisis.

Thank you for your time, your service, and your continued interest in protecting the public trust.
Maureen Sweeney

OFT (One Final Thought)

This photo shows how serious and good library humor can be (I’ve got all the 1960s Batman TV shows on my iPhone). Just ask my wife about libraries and humor. Our first date was at the university library and she thought I was kidding – but I had a paper due on Monday.

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 want more Natural Light;
  • You’ll want a better turkey sandwich;
  • And I’ll go to the library.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

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June 21, 2019

From Pink To Purple: Get Ready For The Housing Ride of Your Life

While I love rollercoasters, I am not of fan of anything that spins, plunges or inverts (translation: anything besides fast old school wood rollercoasters). I turn green very easily when sitting in a car anywhere but the driver’s seat or even answering/texting on my iPhone when I am a passenger.

I am already beginning to turn green: The Fed may cut rates by a half percent over the summer, economic and foreign policies including “tariff talk” out of Washington seem to get more random every day and the GSEs are looking to “modernize” the mortgage process by transitioning to Zestimate-like valuations.

But I digress…

Disclosing Non-Disclosure States

[WSJ/Mike Lemanski]

There are a dozen non-disclosure states in the U.S. with differing levels of restrictions. The idea behind the disclosure of real estate transactions is to promote a fair and open market in order to protect the consumer. I assume that the non-disclosure states were the result of a combination of concerns about the privacy of data and a powerful real estate lobby back when real estate brokers were the gatekeepers of housing data. Whatever the reason, today’s housing market demands more transparency whether the data is disclosed legally or not.

We are seeing a bunch of what looks like illegal disclosure activity in states where the MLS data is pumped out into the public domain by data aggregators (who will be doomed in the future anyway by the advent of blockchain). Institutional users of this aggregated data are often unaware of the illegality of it. A widely publicized case of this was when the Austin MLS accused CoreLogic of selling of illegally obtained data to tax appraisers. While I get the Realtor’s concerns with the basis of the illegality of the data it’s hard to wrap my mind around the higher valuations claim since there should be randomness in the data released.

The board is concerned that as a result, appraisals could rise significantly since Travis Central Appraisal District had access to the fresh sales data from the MLS.

This seems like an odd reason (aside from the illegality) to fight for i.e. “We Want Old Data for Tax Purposes!”

Yield To The Curve!

We’ve been discussing the flattening/inverted yield curve for months now so perhaps we can declare a downturn, possibly a recession, is imminent. With consensus building for drastic rate cuts this summer, it’s worth taking a look at the topic more closely.

My friend Hugh Kelly of Hugh F. Kelly Real Estate Economics who taught at NYU/Schack for more than three decades and now is the director of graduate programs & chair of the executive advisory council curriculum committee at the Fordham University Real Estate Institute among other things, wrote a compelling column in the latest issue of Commercial Property Executive: Economic View: Why You Should Watch the Yield Curve:

A couple of key insights

“If the unemployment rate is back to where it was in 1969, we should remember that this was the beginning of the Baby Boomers’ entry into the job market, and that we are now in the early years of the Boomers’ exit.”

“That interest rate wave—with many consumer credit rates and mortgages pegged to short-term benchmarks—is still an economic indicator worth attending to. As history tells us, inverted yield curves presage liquidity squeezes, and that’s why inversion is considered an advance indicator of recessions.”

“As of this writing, approximately 20 percent of the bonds being traded around the globe bear negative interest rates, according to World Bank data.”

Little Pink Houses: Downtown Single-Family Housing Is No Longer Sustainable

The common sense rationale here spoke to me and it’s gaining momentum. This was a fascinating listen (and read).

The New York Times presents a compelling visualization on the topic as well: Cities Start to Question an American Ideal: A House With a Yard on Every Lot

Single-family zoning is practically gospel in America, embraced by homeowners and local governments to protect neighborhoods of tidy houses from denser development nearby.

But a number of officials across the country are starting to make seemingly heretical moves. The Oregon legislature this month will consider a law that would end zoning exclusively for single-family homes in most of the state. California lawmakers have drafted a bill that would effectively do the same. In December, the Minneapolis City Council voted to end single-family zoning citywide.



Forget Pink Houses: Purple Rain Leads To A Purple Driveway

Think Minneapolis, the hometown of Prince and Purple Rain. Now, take a look at the driveway at his Turks & Caicos estate. In fact, the whole layout of the property is simply amazing.



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

OCAP Shows The Nation What An Appraiser Coalition Can Do

This week I flew to Ohio to speak at the Ohio Coalition of Appraiser Professionals (OCAP)‘ Conference that was smack in the middle of the Ohio State campus in Columbus Ohio. I interact with a lot of state coalitions and OCAP is one of the best. I was asked back despite last year’s proud mention of my Michigan State University pedigree amongst a sea of red and white clothing. I squeezed in a few Spartan mentions this time and aside from the boos and hisses, the attendees were true professionals. I really enjoyed interacting with everyone there and the organization is one of the strongest coalitions I’ve seen. I got to speak one on one quite a bit with industry legend Larry Disney, connected with Anne M. Petit, Superintendent Ohio Division of Real Estate & Professional, whose good work is heard all the way back in New York, my friend Phil Crawford of Voice of Appraisal who literally brought tinker toys to a whole new level via blockchain and my friend and fellow Relocation Appraisers & Consultants (RAC) member Ernie Durbin, the Chief Valuation Officer at Clarocity who walked attendees through regulatory, technology and scope changes. I got to spend some time with my friend Jamie Owen of the Clevland Appraisal Blog as well. The “sausage party” photo with Ernie and Phil was an inside joke from last fall’s Appraiserfest conference led by Phil that took place in San Antonio.

Kudos to the OCAP leadership for coordinating such an invaluable event.

Code For Appraisal Modernization: Changing Smart Lightbulbs

This video provides the perfect analogy for the misrepresentation of what appraisal “modernization” actually means. The image conveyed is a smooth simple process that involves a few buttons. Whenever the modernization topic is discussed, residential appraisers are not asked to the table yet they are the only valuation experts that have “on the ground” expertise.

I challenge you to listen to the entire 3-minute video without losing your mind.

NEW NORTH DAKOTA WAIVER REQUEST The Most Important Issue Facing The Appraisal Industry RIGHT NOW

If you thought the answer was the House “modernization” panel discussion that occurred in front of the House Financial Services Committee this week you were wrong.

The state of North Dakota is attempting to obtain another waiver request, not the laughably written request of last summer. Now North Dakota is requesting a waiver for five years!

From the Federal Register

The request seeks a waiver of appraiser credentialing requirements for appraisals for federally related transactions under $500,000 for 1-to-4 family residential real estate transactions and under $1,000,000 for agricultural and commercial real estate transactions throughout the State of North Dakota for a period of not less than five years.


Lenders don’t want to pay market rate fees so why not have bank employees make the numbers up. What could go wrong? Here is the anti-appraiser propaganda web site CSBS that somehow ignores this point. Perhaps next time the North Dakota governor will sign off waiving licenses for doctors because there aren’t enough? This is an economic issue plain and simple.

This request was filed on May 30th with a 30-day notice for comment. Time is running out! ASA has a landing page for appraisers (and anyone else) to provide comments. There is a public hearing on July 9th (I wish I could attend but I am providing expert witness testimony that day) so please try to attend. It will make a difference when the regulators see our industry’s concern.

ASC Notice for Comment – North Dakota Temporary Waiver Request

This places the taxpayers on the hook for the aftermath and is an insanely irresponsible request to make given the global financial crisis we just went through. History is repeating itself. Appraisers need to get the word out!

Hearing: What’s Your Home Worth? A Review of the Appraisal Industry

Last week I mentioned that I didn’t make the cut to represent independent boots-on-the-ground appraisers but was appreciative of being acknowledged by the committee for reasons I’ll discuss at a later date.

The feedback from the appraisal industry after the session was how large the misunderstanding of what appraisers actually do. Perhaps that’s why the current conditions and perceptions exist – on-the-ground residential appraisers are never invited to the table to clarify what’s really happening. I hope the committee now feels the same way after viewing the remaining self-serving testimony. While it was good to have a discussion, the idea that appraisers make the market is simply detached. As I’ve said many times: The Market Doesn’t Care What You Think.

Here’s a breakdown of the five invited panel members,

Dave Bunton, The President of The Appraisal Foundation spoke about the importance of independent valuation and the reasons why professional appraisers protect the public trust and the consumer. The Appraisal Foundation is a non-profit organization with congressional authority (Title XI of the Financial Institutions Reform, Recovery and Enforcement Act, of 1989) (Title XI) to establish minimum qualifications for licensed and certified appraisers and promulgate the Uniform Standards of Professional Appraisal Practice (USPAP).

Stephen S. Wagner, Commercial Appraiser, on behalf of The Appraisal Institute. Sadly, he represented an organization that doesn’t care about residential appraisers or consumers as noted by their faster rate of membership decline than credentialed appraisers. The Appraisal Institute is a private trade organization which grants the MAI designation. AI has no legal authority at any level except over its membership. As an example of their anti-consumer stance, AI was instrumental in aggressive lobbying to pass California SB-70 which states: (C) States that there may be assumptions that the appraiser has not verified that may significantly impact the appraised value of the subject of the report. NOTE: With the wording of this bill, any appraiser could take any point of view and not back it up with verifiable data. For example, an appraiser could take a seller’s word on potential uses of their property and the appraiser can simply restate them and not provide any support to verify the claims. Stephen was on the residential committee that was thrown together by current director Jim Amorin in hopes assuaging the masses after I spoke early and often for their members who were outraged at the national organization’s efforts to seize local chapter funds. Two years later, they didn’t do anything for their residential members showing what an effort of misdirection it truly was. In fact, the appraiser outrage of the past 2.5 years directed towards the Appraisal Institute was triggered by the prior version of this committee in the fall of 2016 when the GOP controlled the house. Appraisal Institute is very much in favor of appraisal management companies and has former top executives installed in AMC companies.

Jeff Dickstein, Chief Compliance Office, Pro Teck Valuation Services, on behalf of The Real Estate Valuation Advocacy Association (REVAA). He represents the organization of appraisal management companies (AMCs) that is literally the reason why we have problems with the appraisal system today. REVAA is the advocacy group for the Appraisal Management Company (“AMC”) industry. They fight transparency and advocate for dropping licensing and certification requirements They represent a system that has decimated appraisers by leaching off their fees, created scope creep to justify their existence and pushed the completely false “appraiser shortage.” They represent problem number 1 to the valuation industry.

Andre Perry, David M. Rubenstein Fellow, Metropolitan Policy Program, The Brookings Institute whose work I am not familiar with but his research comprised half of the panel testimony time.

Joan N. Trice, Founder, Collateral Risk Network. Joan was a last minute addition as a previous panelist had a scheduling conflict. Joan attempts to speak for appraisers but makes her living by holding conferences for appraisal management companies so she is not neutral. She can’t have it both ways. She was the only panelist not to read her statement which was pro-appraiser and instead talked about other things almost as a time-killer. It was weird to have a panelist not read their statement. Any thoughts on why? Someone pointed out to me that she referred to the three approaches to value as “income, cost and market” then later called that last one the “sales price approach.”

Thoughts on future panel hearings:

The best source of any of this information is the various state coalitions, which rose out of the leadership void in the appraisal field. Given that the Appraisal Subcommittee and the Appraisal Foundation cannot lobby, State Coalitions are the best and most grass-roots organizations out there.

OFT (One Final Thought)

Please remember this when taking at face value the long term predictions of prognosticators.

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 wrong about the future;
  • You’ll sell your pink house;
  • And I’ll purple my driveway.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Appraisal Related Reads

Extra Curricular Reads

June 14, 2019

While Housing Is Right In Front Of Us, It Doesn’t Mean We Understand It

When our boys were young, we used to go to Canada to ski during the winter break. The first time we made the trip, we rented a chalet and the snow around it was measured in feet, not inches. After a day on the slopes and romping around in the snow, we’d make dinner and sit in the living room and melt into the furniture. But most importantly we’d watch curling on television all week. It seemed to be on all the channels and I was told by locals that it got higher ratings than hockey. I have a curling app on my iPhone and continue to marvel at the sport yet at the same time, fail to grasp how it works (like being quoted in People Magazine). But I do know that for every action, there is an equal and opposite reaction, much like Cycleball, obviously.

But I digress…

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

Ironically, the release of the May 2019 Elliman Report: Manhattan, Brooklyn & Queens Rentals occurred during the crescendo of newly proposed rent control laws coming out of Albany that will provide a sea-change to the housing market (more on that later).

As my Housing Note readers know, I’ve been authoring the expanding series of market reports for Douglas Elliman Real Estate since 1994. The goal is to provide a neutral housing benchmark for its readers.

After several years of modest decline, the rental market has returned to its rising ways since last fall, but largely on the back of the weakening sales market. The sales market has been impacted by the Tax Cut and Jobs act of 2017 that went into effect on January 1, 2018, and dished out a slew of market uncertainty in NYC metro, a high tax, high-cost U.S. housing market. Would-be buyers began to camp out in the rental market last fall. As a result, rents began to rise and concessions began to fall. Here’s a cool chart about it from the sharp Bloomberg story.

Here are some key points for each of the three markets:


“While landlord concession market share has been falling since the beginning of the year, they still impact about one-third of apartment rentals.”

  • The vacancy rate has declined year over year for the eleventh time in twelve months
  • Landlord concession market share has continued to trend lower since the beginning of the year
  • The net effective median rent rose year over year for the fifth consecutive month
  • The median rent for studio and 1-bedroom apartments continued to increase year over year while larger sized units declined
  • The luxury entry-threshold hasn’t seen a year over year decline since December
  • Luxury median rent was flat with the most significant annual gain occurring in the Upper Tier


“Rental price trend indicators continued to rise as use of concessions declined.”

  • Net effective median rent rose over year for the sixth straight month
  • Concessions market share declined year over year for the fifth consecutive month
  • Median rent for all apartment sizes rose year over year


“Landlord concession market share fell by nearly half from April 2018 record.”

  • The annual change in concession market share fell sharply for three consecutive months
  • Net effective median rent rose annually for the third straight month
  • New leases rose year over year for the tenth time in eleven months

The Nelson Report Podcast: What’s the deal with the residential market in New York City?

I was recently interviewed by James Nelson, one of New York commercial real estate’s star brokers at Avison Young whom I’ve known since his Massey Knakal days. I’ve been on his podcast several times over the years and always enjoy the conversation. This time he did the interview at CUNY studios in Manhattan. In addition, he brought in Vince Rocco, a residential real estate agent at Halstead who has a broker-centric podcast known as “Good Morning New York Real Estate with Vince Rocco.” I had never met Vince before so it was nice to get his perspective on the market.

The Waldorf (Not The Salad) Is In Vogue Again

While it’s been widely documented that the new development market has been cooling since its peak in 2014, new development projects continue to be introduced due to their long lead times, although 2020 seems to be the last year of new apartment introductions. The high-end of the new development market has been characterized by “supertalls” since 2012 the likes of which comprise the Billionaire’s Row market in Midtown Manhattan. The demand for the product remains steady if it is priced for 2019 and not for 2014. When Chinese insurance conglomerate Anbang acquired the historic Waldorf Astoria Hotel in 2014, it confirmed my prior thoughts that 2014 represented the peak of the real estate acquisition boom.

The Wall Street Journal and others covered the announcement of the Waldorf condo sales effort this week. I was surprised and a bit relieved that 350 hotel units will remain.

The Waldorf Hotel is a historic treasure to the Manhattan real estate market but the challenge in the conversion to condos will be to differentiate it from the other high-end offerings. The owners have a lot to work with given the hotel’s rich history, but as they say, timing is everything. I’ve presented there, met people for drinks, lunches, and dinners, and even walk through occasionally just for the sake of being in a special place in the city during my workday.

Law of Unintended Consequences: Proposed NYC Rental Regulations Have Significant Repercussions

Here is the Housing Stability and Tenant Protection Act of 2019 that is expected to be signed by New York Governor Cuomo. This version shows the edits recently made. The NYS Assembly (8281) version mirrors the NYS Senate version (6458).

The U.S. housing market has been plagued by a shortage of affordable housing since the financial crisis. The economics of post-crisis housing has encouraged a luxury housing orientation. As a result, entry-level housing has been woefully neglected, placing many hardworking New Yorkers in an affordability crisis. Since the fall elections, both houses in the Albany legislature and the governor are all aligned politically and have pushed out housing legislation initiatives that are counter to business as usual, first with the poorly thought out “pied-a-terre” tax that failed but quickly was replaced with the “Mansion Tax” that passed. This was the beginning of a new anti-landlord, an anti-developer mindset. Perhaps with the best intentions of creating more affordable housing, the opposite will occur in the long run.

Here’s a NY Post infographic on the proposed legislation that Governor Cuomo promised to sign.

Real estate industry leaders did not expect this law would happen.

The proposed, permanent New York State Rent Laws are effectively going to eliminate all financial incentives for building upgrades and crush multi-family sales activity and the tax revenue they generate.

Up until now, rents under stabilization laws were determined by the rent board and expenses were determined by the forces of a free market. So if an allowable rent increase was two percent, but a spike in expenses like insurance, real estate taxes or say, fuel caused overall expenses to rise more than 2%, the landlord has to absorb the difference. That logic may be sustainable in the short term but in the long term, it is not. Other items like vacancy decontrol, preferential rent and incentives for major capital improvements have been removed from the new law, so there are no economic incentives to an owner to perform any maintenance or upgrades to a building. I suspect small landlords are the most vulnerable because they don’t have the staying power or economic efficiency that large landlords do.

In the short term, renters will see only modest rent increases even without the preferential rent loophole. In the long term, the housing stock will deteriorate and landlords, now blindsided with an asset that has no upside, will begin to look at ways to shed the exposure. After all, who wants to own an asset that through better management can’t improve its quality?

I suspect that we will see a return to the days of co-op conversions a largely distant memory. Perhaps condo conversions are part of the mix as well but with co-ops, the upside for landlords can be the underlying mortgage instead of the sales prices achieved in a weakening housing market. However, this method of extracting upside to property owner’s investment will probably not be at the scale of the 1980s conversion frenzy because the legislators considered this. They upped the requirement of insider approval for a non-evict plan from 15% to 51% to ensure that the “insider” prices offered to rent-stabilized tenants would remain at a sharp discount to market prices.

The short term result?

An uptick in conversions will cause a reduction in rent-stabilized apartments over time and an increase in affordable “for sale” properties.

When Cuomo signs this legislation into law, I suspect cap rates for multi-family housing in New York State will spike as multi-family property values plummet and sales of multi-family buildings essentially stop.

Possible long term result?

It looks like we might return to the In Rem housing crisis of the 1970s-1980s as landlords, especially small building landlords, abandon their properties and tenants are displaced. The cause for the In Rem crisis echoes similar patterns of restricting rent increases while operating costs rise according to the market with no other upside allowed.

The state and city governments don’t have the resources to fund affordable housing initiatives without the aid of market forces. In this new effort, there will be no incentives to create more housing.

From the New York Times in 1986:

The figures suggest that the city has still not found a way to recycle expeditiously all the property it takes in tax-foreclosure proceedings, which now begin after only a year of delinquency. In fact, the city had more tax-foreclosed properties at the end of fiscal 1986 (9,716 buildings) than it did at the end of fiscal 1983 (9,194 buildings), even though the real-estate market has improved substantially over three years.

Given the shift in the Albany political zeitgeist against multi-family owners and developers, the outside investor community will no longer contemplate building multi-family open market housing in New York State due to the political uncertainty and bias against all landlords.

In the desire to create affordable housing, the long term impact of these laws will likely result in fewer apartments within rent stabilizations but may provide additional affordable “for sale” properties.

New York State Tax Collectors Are Getting Aggressive

To stem the outflow of tax revenue with the new wave of wealthy migration to Florida from New York as a result of the new federal tax law that promotes it, New York State is getting hyper-aggressive. The CNBC video shows how it works:

New federal tax laws limiting the deduction of state and local income taxes have created incentives for wealthy New Yorkers to move to Florida or other lower-tax states. New York Gov. Andrew Cuomo last month blamed wealth flight for the state’s $2.3 billion revenue shortfall in December and January.

“Tax the rich, tax the rich, tax the rich,” he said. “We did. Now, God forbid, the rich leave.”

Getting Graphic

Our favorite charts of the week of our own making

FYI – I brought in a graphics consultant for all our charts to extract my Crayola Crayons from our tool kit.

Len Kiefer‘s Chart Handiwork


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

With the rent stabilization law pending of epic proportions and a week of full-on expert witness consulting and testimony in three different ongoing matters, I’m sure appraisers can appreciate that I am just coming up for air. More to follow as I am keynoting at OCAP next week and speaking in DC for NAR on June 26th. Since I was informed that I wasn’t speaking on the House panel covering appraisal modernization on June 20th, I opted to use that day to get some root canal work. No irony there.

OFT (One Final Thought)

The following video informed me about the Rescued Film Project and why I’ll think differently about 31 Rolls of Undeveloped Film from a Soldier in WWII Discovered and Processed.

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 go low rent;
  • You’ll play cycleball;
  • And I’ll develop some film.

Brilliant Idea #2

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

See you next week.

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

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Recently Published Elliman Market Reports

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June 7, 2019

Rats And Housing Markets Don’t Care What You Think

Just when the pizza rat skips town, another takes the subway and got off at 42nd Street. This is why I love New York! Every day is an adventure!


But I digress…

Brick Underground Podcast Interview: The Market Doesn’t Care What You Think

That was the theme but my interview episode was called “the state of the market.

The indispensable NYC web site Brick Underground has been doubling down on its podcast as of late and I was fortunate enough to be invited to speak about the state of the market.

It was fun and hopefully, I conveyed some helpful insights to their listeners. You can subscribe to the Brick Underground Podcast feed here.

And specifically my interview here.

Aspirational Pricing: A Record Number of Manhattan Records in 2019

Kind of.

Wall Street Journal Mansion Section reporter Kathy Clarke broke all three of these record price stories.

$238 million, $80 million, $80 million

Here’s how it played out.

January 2019: Highest purchase price in North America (220 Central Park West $238 million) but went to contract in 2015 so it was not a recent “meeting of the minds” and sparked the ill-conceived “pied-a-tax” proposal which was killed in Albany and replaced by the new Mansion Tax. June 2019: Highest priced townhouse in New York City History (14-16 East 67th Street $80 million (est)). It was a pocket listing. The seller said the square footage was expanded to 30,000 up from its 13,300 square feet from the prior sale. I inspected this property a few times before Falcone acquired it and based on the new photos, this property was gut renovated through and through. June 2019: Jeff Bezos reappeared after rumors swirled about Amazon expanding their footprint in NYC despite the blow-up of their deal with NYC in Long Island City. He purchased a 3 unit condo in a new conversion (212 Fifth Avenue $80,000,000±). The penthouse itself hasn’t been recorded so the exact total price hasn’t been confirmed.

What does this mean? Is this a comeback for the super luxury market?

Nah. But it does somewhat suggest that buyers for high-end Manhattan property are circling the wagons waiting until the seller gets real.

All these building photos came from the WSJ articles announcing the records.

  • The Griffin purchase reflects the market of four years ago when it went to contract [Source: Wall Street Journal]
  • The Falcone sale wasn’t openly marketed and therefore vetted since it was a whisper listing [Source: Wall Street Journal]
  • The Bezos purchase reflected a 21% drop from the original ask but that’s only to the last asking price. The definitive contract price is not recorded yet but it represents at least a 21% discount from the original ask. [Source: Wall Street Journal]

As far as high-end real estate goes, it looks like the highest levels of the Manhattan luxury market are comprised of sellers willing to accept offers at market value. As I mentioned in the Brick Underground Podcast above:

The Market Doesn’t Care What You Think


“The Plaza” by Julie Satow is a Great Read!

“Trust” is Hard To Win Back

Trust is a wildly important asset to have in the banking industry. They violated the public trust during the housing bubble and have worked hard but still haven’t reach pre-bubble trust levels. Let this be a lesson to Appraisal Management Companies, Mortgage Lenders, GSEs and Regulators who are currently working hard to undermine consumer trust again through the mortgage valuation process in order to generate more volume.

Here’s yet another amazing infographic from Visual Capitalist infographic:

Getting Graphic

Our favorite charts of the week of our own making

Len Kiefer‘s Chart Handiwork


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

House Panel: What’s Your Home Worth? A Review of the Appraisal Industry

Phil Crawford of Voice of Appraisal sent a “call to action” email to his followers early this week to recommend I provide testimony on this upcoming June 20th panel. As a result, there were hundreds of recommendations sent to the House Financial Services Committee providing why I would be a good candidate to speak on the panel. I was blown away by the support and the professionalism of the emails. I thank you all.

The committee told me yesterday that I would not be on the panel but offered other ways to share our views and I was very appreciative of the opportunities offered to me. Today I was told by someone outside of the committee that these were the names of the panelists. Four were chosen by Democrats and one was chosen by a Republican.

Jennifer Wagner (Mt State Justice) Jeff Dickstein (REVVA) Andre Perry (Brookings Institute) Stephen Wagner (AI) Dave Bunton (TAF)

My only concern with the information to be discussed is that the appraisal industry sees the re-introduction of checks and balances to the appraisal process, that the consumer and public trust is protected and a stabilized housing market is promoted.

I have the gravest of concerns for the inclusion of The Appraisal Institute who haven’t been relevant in the residential mortgage appraisal community for at least a decade. My other grave concern is the inclusion of REVAA which is the trade group of appraisal management companies that control 80% of residential mortgage appraisals and are the single reason for higher consumer appraisal costs and reduced quality.

Still, I will keep an open mind and believe me, appraisers across the country will be watching this hearing very closely.

The November 2016 House hearing on this same topic was largely a misrepresentation by the Appraisal Institute on the state of the industry.

However, I have full confidence that Chairperson and Congresswoman Maxine Waters and her legislative colleagues and staff will see the challenges very clearly.

Let’s Focus on the Public Trust

If you missed it – take a look at a banking industry trust visual I presented earlier in these Housing Notes:

“Trust” is Hard To Win Back

Banking still hasn’t recovered from the financial crisis using this metric. History is repeating itself right now with the “modernization” movement – code word for “automated valuation” using abysmally unreliable technology.

OFT (One Final Thought)

Ladybugs are on our radar.

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 not care what the market thinks;
  • You’ll not care what they think;
  • And I’ll care what the market thinks.

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

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May 31, 2019

Important Housing Moments Without Nudity or Penguins

While I understand the concept “No Shoes, No Shirt, No Service” and I get the “no nudity” thing, admittedly I’ll have to spend some time researching penguins this weekend.

But I digress…

Have We Reached Peak Housing?

Love them or hate them, Blackstone is one of those companies that seems to be a lot more right than it is wrong. After the housing bubble burst a decade ago, they snatched up thousands of single-family suburban homes during the foreclosure crisis, gambling the demand for rentals would rise as credit conditions would remain tight.

Now they are selling their holdings which must mean we are at or close to “Peak Housing.” Admittedly I’ve been talking about slowing U.S. sales for all of the last year.

The private-equity firm late Tuesday sold more than $1 billion of shares of Invitation Homes INVH +0.28% Inc., the giant single-family home landlord it launched following the financial crisis in a wager that many Americans would be willing to rent the suburban lifestyle they could no longer afford to own.

The share offering is Blackstone’s second since March and comes as Invitation’s shares are trading at a record, reflecting rising rents and strong demand for the 80,000-odd homes it owns in 17 markets around the country.

Yahoo Finance TV – State of Housing

Its always fun to join Alexis Christoforous at Yahoo Finance TV – and I met her colleague Brian Sozzi. They’ve got a cool new broadcasting facility and I contend, the best green room in the TV business. If you’re curious where the term “green room” came from…no, it’s not that obvious.

We spent most of the time discussing all the changes occurring in the NYC market this year. Fun.

Why Free Cars Don’t Sell Overpriced Mega Listings

I got to speak with James Barron of the New York Times (the distinctive voice of some NYT podcasts engrained in my head so it was fun and a bit disorientating) about this crazy Manhattan condo listing: Perk for the Ultrarich: Buy an $85 Million Apartment, Get a Trip to Space

With such an abundance of opulence how do you attract buyers?

Promise a trip to space.

Yes, two seats on a future spaceflight.

But there is more.

The apartment in question comes with a house in the Hamptons for one summer; three cars — two Rolls-Royces and a Lamborghini; a yacht with docking fees for five years; season tickets to Nets home games; dinner once a week at the two-Michelin-star restaurant Daniel; a private chef for a year; a butler; and a $2 million construction allowance for renovations.

This listing was covered by the New York Post last year: This $85M apartment comes with Rolls-Royces and a trip to space.

I shared this note with a slew of my appraiser colleagues of RAC who are located all over the U.S.

Here’s a hypothetical for RACers…I was interviewed for this story and am asking all of you this very difficult question:

If you price a Manhattan condo and it sits on the market for more than 6 years and each year the seller throws in additional “free stuff” – why doesn’t it sell?

I got nothing back but a heavy dose of sarcasm in return given to the absurd situation. I doesn’t take a market expert to understand that when something doesn’t sell for 6 years, it is overpriced. Throwing “free” gifts into the offering aren’t free gifts. The buyer will be paying for them by overpaying for the property.

There has to be an alternative reason for the annual marketing push of this property since the high-end market is declining – is it simply free marketing for units in the building to elevate its market stature? I have no idea. However if anything, I think this annual activity risks the branding reputation of the building. Buyers aren’t dumb.

Here’s a retread of my blog post from 2014:

Matrix Blog________________________ …and the Home Seller will give you a Free Tesla!


Back when I was in college, a good friend of mine owned a large Michigan sod farm with his father – acres and acres of putting green quality sod. They wanted to upgrade their big tractor so I joined him on his visit to the local tractor dealership – International Harvester (my parents tell me I am a distant – really distant – relative of John Deere).


[Source: Hemmings]

The tractor they were looking at included air conditioning and a surround sound stereo system. It was impressive. The salesman said that if they bought the tractor that month the dealership would throw in an International Harvester truck.

My friend’s comment to me under his breath was something along the lines of “looks like we are actually buying the truck too.”

There was a New York Magazine piece on the guy who throws in a Tesla if you buy his condo talks about this marketing technique.  Using a Tesla is buzz worthy as a well thought of brand – after all marketing is about getting eyeballs on the listing – but is it effective?  Does this technique actual sell properties?

In my view throwing in such a large concession is a red flag signifying the property is overpriced enough to cover the seller’s cost of the “gift.”

Econ 101:  There is no such thing as a free lunch.

We’ve seen this marketing gimmick attempted with other cars such as a Prius, a Porsche, a Cadillac and Ferrari.

The funny thing is, you never read a follow-up article that shows how this marketing technique/gimmick was successful.


A buyer for the condo would have the financial wherewithal to buy their own Tesla and likely isn’t thinking about buying a car during their visit to the property.

We don’t see these extreme marketing gimmicks tried with low margin properties. “If I buy this $75,000 condo I get a free Tesla!” Of course not – the condo seller in this “Tesla” story is telegraphing to a potential buyer the listing is overpriced.

Yes, in a typical suburban transaction, a seller may throw in a used lawnmower to close the sale, but this is not something that is usually promoted during the actual marketing of the property.

NEWSFLASH Buyers are a lot smarter than this seller is giving them given credit for.

Moving To A New Home Leaves You Flat

(British translation: “Moving To A New Flat Leaves You…Well…Flat”)

FAR SIDE always speaks to me.

Too Many Mega Mansions But A Lot of Parties

On the same theme as the earlier “free trip to space if you buy my condo,” section earlier, these are salad days for party planners. Developers of super lux properties pull out all the stops to get attention given all the competition. There is a fascinating Wall Street Journal story on what developers are doing to sell in this market: L.A. Developers Have a Big Problem: Too Many New Megamansions, also shared in Mansion Global.

While this home is cool…

This type of marketing is way over my head (literally).


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

Appraiser Maureen Sweeney Makes It Clear

Maureen Sweeney, my friend and appraiser colleague from Chicago (who knew where the name “Chicago” originated from that I learned when I used to live there), wrote an opus about appraiser liability being created and the race to the bottom. It’s a great read.

Spoiler alert: Apps don’t have any judgment, nor does their maker.

There are moments in my life when I am glad to have given 12 years of my life to service to the Illinois appraisal community, and being part of the team that was in place when the Illinois AMC laws and rules were written years ago.

Each state is different with how they discipline their AMCs and how they discipline their appraisers. In Illinois the AMCs have nothing to do with the appraisal board. They are a business, and as such, they have no say in the disciplining of appraisers. They have to follow the laws that govern them as a business, which includes hiring licensed appraisers for all of their work.

This brings up 4 points:

1. The AMC is responsible for hiring licensed inspectors, which includes appraisers to do these hybrid reports.
2. The appraiser must be knowledgeable of their state laws, including the laws that govern AMCs
3. If the appraiser receives an assignment that is ordered by an AMC in which the inspection is not done by a licensed appraiser or a licensed building inspector, then the appraiser should not accept the assignment and contact the state, informing them that the AMC is breaking the law.
4. If the appraiser accepts the assignment that is ordered by an AMC in which the inspection is not done by a licensed appraiser or a licensed building inspector, then they are engaging in illegal activity.

Can mom and pop appraisal shops in Illinois do these hybrid reports when ordered by anyone other than an AMC? They sure can. And like every assignment, the appraiser is 100% responsible for their product. They sign it, they buy it.

When I served on the Illinois appraisal board from 2005 – 2017, the attitude then, and currently is: our job is not to tell you how to run your business. If there are appraisers out there who wish to do 1025s for $175 and take full responsibility for such a business decision, that’s their business decision. If somebody wants to sign off and take full responsibility for doing hybrids, that’s great too. It’s their business decision. They sign it, they buy it. Yet, this comes with a whole lot of Valuation Process problems. Let’s look at the following paragraph from the Morningstar press release:

“Clear Capital’s Modern Appraisal Program uses ClearInspect™ — Clear Capital’s new, intuitive mobile app — to guide appraisers, agents, brokers, and other data collectors step-by-step through a property data collection process to ensure quality and efficiency. The results can easily be delivered to customers, government sponsored enterprises (GSEs), and appraisers who may perform a desktop valuation based upon the collected property data.”

Who’s driving the Scope of Work? Who’s driving the data collection? It sounds like the intuitive mobile app is. Now I ask the question: who is driving the decision making process with this app? Is it the appraiser? It doesn’t sound like it. It sounds more like it’s Clear Capital’s new, intuitive mobile app!

And with that, my head just exploded.

When the hybrid and bifurcated reports were first introduced, I spoke with an attorney who does a whole lot of work defending appraisers. Right now, there aren’t that many cases against appraisers in Illinois and nationwide, yet the E&O companies and law firms that are hired by the E&O companies to defend appraisers, as well as the law firms who defend lenders who suffered a loss due to the hybrid appraisers are waiting. As one who specializes in forensic appraising of real property, along with a bunch of other “stuff”, I too will wait. There are a whole lot of licensed appraisers who are racing to the bottom to get some quick and easy money, and all of us know that this business practice typically results in stupid mistakes that have real consequences. For those of us who do expert testimony, we are going to be hammered with work due to the business decisions of others.

And I wish I didn’t have this gut feeling that a year from now, I will be receiving calls to litigation support regarding hybrid and bifurcated appraisal reports, but I do.

[see updated meeting info below] For those who will be in the Arlington, VA area next Friday, June 7th, hopefully you can make the joint TAFAC and IAC meeting https://www.appraisalfoundation.org/TAFCore/Events/Event_Display.aspx?EventKey=AFAC201806 . Peter Christensen will be there: http://appraisersblogs.com/hybrid-appraisals-liability-risks

All of us have been in this business way too long, and all of us have lived through the public making uninformed decisions. All of us have screamed for consumers to inform themselves. And all of us have witnessed time after time consumers ignoring the cries of those who witnessed the decisions made by others before them. We can’t save the consumer from themselves, and we can’t save the appraiser from themselves. And yet, like Sisyphus, we will continue to try.

[From The Appraisal Foundation:
Next Friday, June 7, we will be in Park City for the Spring Board of Trustees meeting.

Our 2019 Joint TAFAC/IAC Meeting is Thursday, June 27:

It’s the 30th anniversary of FIRREA and this year’s speakers include Peter Barash and Bill Black giving a historical perspective of the S&L Crisis and Congressional responses and the agencies’ activities since that have diluted it, and also a look forward with Josh Panknin from Columbia Univ & NYU, author of The Property Valuation Reckoning is Imminent, How Technology is Highlighting Underwriting’s Shortcomings. And more.

OFT (One Final Thought)

My goal since from childhood – to have one of those cool driveways (still a goal):

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 peak;
  • You’ll get a free car;
  • And I’ll be more considerate of penguins.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Appraisal Related Reads

Extra Curricular Reads

May 24, 2019

REO Speedwagon Crushes an OREO Any Day

Don’t worry. I’m not delving into politics with the following. But rest assured there are good times ahead for housing when our Secretary of Housing and Urban Development isn’t familiar with the acronym REO. He thought it was the famous OREO cookie. With full disclosure to Secretary Carlson, I would have guessed REO Speedwagon, the Detroit 70s/80s hair band and a guilty pleasure.

In the aftermath of the housing bubble a decade ago, resulting in the worst foreclosure crisis of the modern era, this mistake can’t be brushed off as just another D.C. acronym someone didn’t know. He shows a stunning lack of knowledge on the topic of housing, a U.S. economic lynchpin. As an aside, I prefer Nutter Butters over OREOS any day (but either way, Nabisco wins).

One of my sons is graduating from college today so instead, I wrote this last night with a limited amount of time, but hey, it’s a commitment.

But I digress…

A Building Emerges From The Dead

My wife and I moved to the Upper West Side in early 1986 three blocks north of 400 West 57th Street. At that time the building was covered with scaffolding and looked nearly abandoned – a real eyesore. While the world moved on around it, this building seemed trapped in time. In a market with some of the most expensive real estate in the world, how could a building site with scaffolding for at least three and a half decades?

This is how I saw the building for the four years I lived nearby and how it remained every time I walked by it over the next three decades.

[Source: Ephemeral New York]

Ephemeral New York has a fun write up on it. So does the former DNA.info site.

The Windermere was built 1881 as an apartment building for women artists and writers. In the 1970’s some of the larger apartments were subdivided into single room units.

The former landlord let the building sink into disrepair in the 1980’s and had a record of tenant harassment, according to a letter the community board sent to the Landmarks Preservation Commission.

A former building manager Jerome Garland eventually spent time in prison threatening to kill tenants who didn’t vacate their apartments, the Times reported.

It looks like this building is on the road to recovery. YIMBY has a nice write-up on it.

[New York Yimby]

Antitrust And Corelogic

It’s not been a good couple of weeks for CoreLogic, the massive data aggregator of real estate information. It’s been no secret that Corelogic has been steadily amassing all the major real estate data sources and the top MLS platform vendor. In my industry, they purchased the market leader of appraisal software, and many of my peers became wary of some of the software changes that were initiated.

CoreLogic (NYSE: CLGX) is one of the largest real-estate data companies in the nation with 4.5 billion records spanning more than 50 years. It operates in North America, Western Europe and Asia Pacific.

Here are a few recent stories.

  • Austin MLS accuses CoreLogic of selling its data to appraisers group [The Real Deal]

  • DOJ demands CoreLogic hand over MLS data amid antitrust concerns [The Real Deal]

  • Reserve Bank ditches CoreLogic, but analyst defends home price data [Australia ABC]

NYC Tax Medallion Bubble Burst Six Years After Housing Did

There was a spectacular yet very sad investigative piece in the New York Times on the disastrous situation in the taxi industry. I’ve always been fascinated with the valuation of taxi medallions that enable owners of yellow cabs to prowl the streets of New York looking for a fare. I made the assumption, as did most, I suppose, that the collapse of the taxicab medallion value was due to the massive influx of rideshare services like Uber and Lyft. But as we learned from the housing boom and bust, it was a credit bubble with housing as a symptom that enabled the collapse. For the taxi industry, it was yet another case of predatory lending and a house of cards – the rideshare phenomenon simply accelerated the collapse. And like the Uber and Lyft IPOs have shown us, the drivers are left behind.

Between 2002 and 2014, the price of a medallion rose to more than $1 million from $200,000, even though city records showed that driver incomes barely changed.

Unbelievably tragic.

[click to open article]

Podcast of the Week

Since I listen to podcasts for most of my waking hours at the expense of watching very little TV anymore, I thought I’d share some chestnuts I come across – either the podcast or a specific episode.

Crosstown with Pat Kiernan

This is a new weekly podcast that drills down on key stories. It’s a fun listen and Pat is a local broadcasting treasure. I’ve been a guest on his TV show once and have done a couple of call-ins. The man has a knack for filtering out what’s important. The episode: “It’s Hard to Live Here” caught my attention.

This Week in Aspirational Pricing: “White Elephants of LA”

CNBC’s Robert Frank does a piece on a 34,000 square foot $180,000,000 LA spec home that supposedly cost $70,000,000 to develop. That seems to be quite a markup and if accurate, there is a lot of room to negotiate. The fact that the property has sat on the market for 4 years suggests that the price may have not been worth it four years ago. An immense ego seems to be what is keeping the property from being priced to market conditions. He’s now considering a $60 million price cut. I’ve never been able to stomach that kind of risk. The photo gallery in the piece is unreal.

UpcomingRecent Speaking Event

I really enjoyed moderating the tax migration panel in Boca Raton this week. There was a big turnout – is there anything that can slip by the The Real Deal magazine!?!?!? I learned a lot from the panelists who are all on the receiving end of this new tax migration phenomenon from the Northeast and other high-cost housing markets. Some of the topics covered included what’s involved in declaring a domicile and the various tax implications.

[The Real Deal – click to open article]


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

Appraisal Industry Loses A Friend

VaCAP recently shared the bad news from the family of Ken Harney, syndicated real estate columnist for the Washington Post was ill.

Now we know that Ken just died on Thursday at his home in Chevy Chase Maryland.

I can’t believe I traded emails with Ken on April 29th.

“Thanks Jonathan. I appreciate your perspective on this.”


Always the professional.

My favorite moment interacting with Ken was when I gave him a shout out in my Friday Housing Notes two years ago as if I was talking to him directly from the page. He got a kick out of it. I still smile when I think about it.

OFT (One Final Thought)

Mobile Homes: Last Week Tonight with John Oliver (HBO)

Two years ago I keynoted the Manufactured Housing Institute‘s annual conference in Chicago and found this housing world absolutely fascinating. At more than 6,000,000 views, many found John Oliver’s take on some of the bad actors in the industry fascinating too.

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 aware of White Elephants;
  • You’ll remove the scaffolding;
  • And I’ll listen to another podcast.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Appraisal Related Reads

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May 17, 2019

Squirreling Away Our Housing Data

This happens every…single…day.

But I digress…

Hamptons Sellers Are Starting To Get The Message

Michael Kolomatsky of the Calculator column in the New York Times real estate section crafted a cool infographic for this weekend using data from the Douglas Elliman‘s Hamptons Sales report that I author. The gist of it is that sellers are slowly pricing closer to market causing days on market and the listing discount to compress somewhat. This faster moving pattern is in sharp contrast to sliding price trends, declining sales, and rising inventory. The narrative in this market clearly reflects a slowdown, but with a vibrant regional economy, the buyers are here, but unwilling to pay at price levels of a few years ago.

And there’s more to the high-end Hamptons story – here are a few others from this week:

In the High-Flying Hamptons, Real Estate Is in a Rut [New York Times

Chinese-Inspired Hamptons Home Resurfaces for $20 Million Less [Wall Street Journal]

From the beginning of Kathy Clarke’s WSJ story:

Amid a slow market, a Hamptons home with lots of China-inspired features is returning to market for $7.9 million—less than a third of the $28 million it briefly sought six years ago.

To the end of this WSJ story (sorry for inserting one of my quotes):

“This is a classic aspirational pricing story,” said appraiser Jonathan Miller. “Certainly we’re seeing some softness in pricing, but no where near what that price cut represents. It shows you how wildly overpriced many properties were during that period of peak luxury.”

Inside Edition TV: The Fifth Avenue Retail Apocolypse?

Real estate brokerage firm Cushman & Wakefield wrote a research piece on the prime Fifth Avenue retail corridor from 49th Street to 60th Street that was covered in a widely read Wall Street Journal article called Fifth Avenue Losing Luster as Vacancies Climb, Rents Fall. The following chart was in the WSJ article. Luxury real estate here peaked at about the same time.

Inside Edition reached out and asked me to take a stroll with reporter Les Trent on Fifth Avenue to talk about the state of luxury retail. Les was great to speak with and like a true pro, he had access to sidewalk chalk (see video). I think I am in a lot of tourist pictures as they were snapping my picture as we strolled up and down Fifth Avenue.

If you’ll notice in the video and article, all the vacancies were related to the fashion/clothing industries. The 1 out of 4 storefront vacancies – essentially 1 empty storefront on every block – is not reflective of NYC retail employment patterns, but simply the pullback of clothing/fashion industries from high-end retail locations as they place more resources toward their online presence.

[click to play]

Lower Priced Ground Floor Apartments Come At A Cost

The always must-read “Ask Real Estate” New York Times column by Ronda Kaysen had a great Q&A about a ground floor apartment.

The 123 comments so far on the column say it all, especially this one:

What’s more important to the both of you? Your safety or ventilation? Get a security gate and he should pay for it or a new boyfriend who cares more about you.

In my experience confirmed using empirical evidence, ground floor Manhattan apartments usually go for 10% to 15% less than the identical apartment a few floors higher. Why?

UBS Bubble Index: New York and Boston Slightly Overpriced, Hong Kong Wildly Overpriced

I know this info is a tad dated, coming from an October 8, 2018 post on Visual Capitalist, but the UBS Global Real Estate Bubble Index still relevant and fascinating:

Wolf Bites: Rent Regulation and the Value of Townhouses

I’ve known and followed the writings of Manhattan real estate broker Wolf Jakubowski for years. There is a big movement in Albany towards additional rent regulations and this will have an impact on the Manhattan townhouse market. Here is his view from his “Wolf Bites” newsletter.

U.S. Economic Stats Seem Strong, But Why Doesn’t It Feel That Way?

My friend, author, appraiser-colleague and author-appraiser-colleague-friend Maureen Sweeney shared this thread:

Open and be sure to read this entire thread. Anecdotal takeaway: U.S. Companies, despite strong earnings and lots of cash, are unusally nervous.

Getting Graphic

Len Kiefer‘s Chart Handiwork and here.

Upcoming Speaking Events


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

Maureen Sweeney Wrote A Book!

My friend and Chicagoland appraiser Maureen Sweeney, SRA, AI-RRS, IFA, CDEI wrote an essential book on valuation, outside of the single family realm. The Valuation of Condominiums, Cooperatives, and PUDs is available at the Appraisal Institute web site.

I purchased the PDF version so I can refer to it on my iPhone while inspecting a co-op or condo which comprises 98% of my residential market (Manhattan). Just kidding. Yes, I purchased it but I won’t refer to it during the interior inspection. I’ll read it while I’m walking to and from my inspections.

New York RICS Conference – Session on Big Data

My friend and Head of Valuation for Natixis CIB, Cate Agnew, CRE, FRICS, CCIM, MAI, spoke on a panel of U.S. valuation leaders on the topic of big data at the recent RICS conference in New York. It was a fascinating discussion about “Big Data” with a mixture of “gee whiz” and “wait a second.”

It became quite apparent that big data aggregators there were arguing that even if they don’t have access to private data essential for valuing income property reliably, they would simply get more data and would be able to achieve an accurate result. I find this line of thinking completely misleading and self-serving. More raw data is not always better. Remember that aggregators like Zillow, Costar and others have no economic incentive to be accurate. They solve any problem with simply providing more data. Think about what is happening now in the real estate space. The aggregators are enjoying higher valuations while the actual providers of the raw data are losing value. Wait until blockchain becomes a force. All the aggregators will become irrelevant.

Appraisers are also providers of raw data and aggregators like CoreLogic or AMCs like Servicelink will be irrelevant down the road when blockchain gains critical mass. Otherwise, the service providers will eventually go bankrupt and these aggregators won’t have a data source. The current big data model, by definition, is not sustainable.

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 begin on the ground floor;
  • You’ll go to the Hamptons;
  • And I’ll text in the right lane.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Appraisal Related Reads

Extra Curricular Reads

May 10, 2019

iBuyers Are Here, But We Still House Antisocial Feelings

I’ve been taking the commuter train from Connecticut into Manhattan since 1990 and much of my daily ride was full of open newspapers before handheld devices became ubiquitous. The morning read of the car tended to be NYT/WSJ/FT and the evening was the NYPost/NYDailyNews as well as a thorough handwashing to remove the black ink:

But I digress…

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

Real estate giant Douglas Elliman released our research today for the April rental market covering Manhattan, Brooklyn and Northwest Queens. This market report is part of the expanding Elliman Report series I have been authoring since 1994.

Elliman Report: Manhattan, Brooklyn & Queens Rentals 4-2019

“Rental price trends in the entry tier pressed higher, overpowering the high-end market.”

  • The net effective median rent rose year over year for the fourth consecutive month
  • Landlord concession market share fell sharply, the third year over year decline in four months
  • The vacancy rate edged higher year over year for the first time in eleven months
  • Market share of leases above $10 thousand per month moved higher
  • All luxury price trend indicators moved higher than year-ago levels

Bloomberg included two charts (a twofer!) so that needs a shout out. Click on either for the Bloomberg coverage.

Here are some of our Manhattan charts.

“The decline in market share of rentals with concessions continued to accelerate.”

  • The year over year change in the market share of concessions continued to decline
  • New leases rose year over year for the fourth time in five months
  • Net effective median rent increased annually for the fifth straight month

These are some of our Brooklyn charts.

“Landlord concession market share fell sharply from the year-ago record.”

  • Market share of landlord concessions fell year over year for the second time in eight months
  • Net effective median rent expanded year over year for the fifth time in six months
  • Studio and 1-bedroom rental leasing grew as 2-bedroom rental leasing fell

These are some of our Queens charts.

My Views on the Value of Views

There is an epic New York Times real estate cover story out today that will be available in print this weekend that covers my takes on the impact of views on value and the philosophy behind it. These insights were developed during our appraisal firm Miller Samuel‘s 33 years of existence and tens of thousands of appraisals completed by our team. Both the photos and the write-up were terrific and I’m super proud to be a key part of this story. Click on the image to read the story and see more photos.

“Flip” is the New 4-Letter Word

Many young investors haven’t seen a declining market and took excessive risks. With the proliferation of flipping shows (mostly shot in Canada BTW) who can blame them? It was not so long ago that we were all talking about how young people had never seen a rising housing market.

The changes in some markets are quite pronounced making flipping inherently a bad idea.

Some Analog Thoughts About The iBuyer Industry

Ben Casselman pens a great piece in the New York Times: Real Estate’s Latest Bid: Zillow Wants to Buy Your House. If you click on the tweet first (not the link to the article) you get a great thread that breaks it all down.

Aspirational Pricing Illustrated

There was an article in the Wall Street Journal: Miami Condo King Brought Back to Earth by Luxury Home Price Correction on setting listing prices in Miami from the perspective of one of the most prolific developers there, George Perez of Related. Here is the history of the penthouse he owns at the development he built known as 1 Collins in Miami:

2016 purchased $4.23M (assuming as the developer, he got a deal)
2016 listed for $20M
2019 dropped the price to $10.95 million

Bloomberg Masters in Business Podcast: Ivy Zelman Discusses Real Estate

This was a twofer – two of my good friends talking about the real estate market and I get a shoutout! Ok, ok, that’s not why I’m sharing this. This was a really enjoyable listen on the topic that drives you to read Housing Notes – you’ll get a sense of how Ivy has been so darn accurate during her career and what she sees now.

[click to open podcast]

Visualizing Monthly Mortgage Payments

Another great “Howmuch.net” visual on mortgage payments. The idea that the average payment in Santa Cruz, CA is $2,940 and in Coffeyville, Kansas is $205 – is mindblowing.

[click to read their post]

Getting Graphic

Our favorite charts of the week

One of the hopes of housing market observers is for continued growth in wages after falling behind housing price gains. Wages are clearly rising but the rate of growth is leveling, which is especially disappointing after the large stimulus insertion into the economy by the tax cut in 2018.

[Wall Street Journal]

NY Fed: The probability of U.S. Recession as predicted by Treasury Spread was 27.5% in April.

Len Kiefer‘s Chart Handiwork


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

Protect Appraisal Report Integrity By Delivering Locked PDFs

Obviously, it is easy to unlock a pdf report, but we lock every report as an effort to maintain report integrity. This should be a regulatory requirement. Periodically we have seen reports we delivered electronically that ended up being modified to the client’s needs.

This almost happened a week ago.

My firm received this request from Servicelink on a BoA request. In accordance with the new AMC law in New York State, we are including the invoice with our reports. This was the first report to this particular BOA group since the new law was activated so it is reasonable to assume that the BOA clerk handling the appraisal didn’t know what to do about the invoice and Servicelink was passing along the request. The law itself says the invoice must be delivered with the report which infers but doesn’t specifically state that the invoice should be within the report pdf. I would imagine there will be a lot of attempts by lenders to get rid of invoices out of habit but after a while, once appraisers start seeing invoices missing from the applicant copy when an applicant calls the appraiser, the appraiser needs to complain to the CFPB. I remain skeptical that lenders will be able to sustain a systemic fraud or ignorance to the spirit of the NY AMC law by hiding the invoices from the applicant and risk doing future business in one of the largest mortgage markets in the U.S.

Our client, Bank of America, has accepted both appraisal reports. Unfortunately, they are having issues uploading the documents into their system due to them being locked and password protected. Are you able to modify the permissions to allow printing and unlock the document? Please let me know as soon as possible so we can deliver to the client.

Red flag: How could they have accepted the report but never uploaded it?

I personally tested the pdf they sent back to us as well as our original copy. They both printed as usual so we told them they must have a software issue on their end. We have never had to deliver unlocked reports to this client and as practice. It is ALWAYS inappropriate for an AMC to request an unlocked report. There is only a nefarious reason behind it, even if the requestor themselves have no idea.

Causation, not correlation: The first time we get a request to unlock = first time we attached an invoice.

Here is how we respond to these things:

Thank you so much for the business. We greatly appreciate it!

Miller Samuel does not unlock pdf’s or remove passwords. So we just can’t help in this situation. This is done to protect the integrity of our report as a matter of policy with every client.

Thanks again and we look forward to working with you in the future!

Here’s what Servicelink told us after we said “no.”

We were just looking for a partnership here to try and meet the needs of what is a very important client to ServiceLink.

Until the new New York State AMC Law is fully adopted by the AMC industry, expect to get these requests. Part of the issue is software updates or internal procedural changes and part of it – like this example – is nefarious.

Solidifi Wants Insight Into Your Vacation Time

If AMCs weren’t invasive enough already on appraisers personal lives with overly-frequent status calls and other well-documented and demeaning requests, how about vacation time? In addition to the 37-page boilerplate order request the appraiser is required to read, appraisers now have to fill out another form.

The fact that Solidifi and their competitors are in business to fee out to the lowest bidder makes this request silly because appraisers don’t have that kind of relationship with AMCs. It goes like this. They send out an appraisal request to 10+ appraisers and one of them is on vacation and therefore doesn’t respond. Who cares? In my view, a business that treats its vendors like cattle, can’t call it a professional relationship. In fact, there IS NO RELATIONSHIP. The appraiser as the local market expert is really only a widget to them. AMCs can’t expect to have it both ways. If appraisers weren’t bombarded with paperwork and dogged by phone calls from a 19-year-old chewing gum already then this would not be an issue.

XOME Seems Concerned New York Borrowers Will Find Out How Little The Appraiser Gets?

An appraiser/reader sends me this text from an XOME appraisal request:

“Good Morning, The state of NY requires the appraiser to include their invoice in the report. AMC fee does not need disclosed. Please include an invoice in your report when uploading. Thank you”

This is technically accurate. Here is an excerpt from the NYS AMC Law:

38 (e) Knowingly fail to separately state the fees paid to an appraiser
39 for appraisal services and the fees charged by the appraisal management
40 company for services associated with the management of the appraisal
41 process to the client, borrower and any other payer.

Why would XOME go out of its way to tell their appraisers not to disclose the AMC portion of the fee the applicant paid? This is not a regulatory requirement that I am aware of. My firm includes our invoice at the top of the pdf and the pdf is locked (we don’t work with the XOME platform).

OFT (One Final Thought)

I hate Facebook. This pretty much sums it up.

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 analog;
  • You’ll be more aspirational;
  • And I’ll be more antisocial.

Brilliant Idea #2

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

See you next week.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Real Estate Blockchain

Appraisal Related Reads

Extra Curricular Reads

May 3, 2019

Plastic Covers Don’t Hide The Housing Market

I saw this picture on Twitter (NSFW) this week and it brought back many memories. No, not from visiting my relatives’ homes in my youth, but from my six-month stint as a real estate agent in Chicagoland before I became an appraiser in New York City. I was driving to see a listing on the weekly broker tour day, listening to Dire Straits’ “Money for Nothing” on the FM radio, thinking how glad I was to be out of the hospital administration world, just having quit my job. I walked into the home to see all the yellow furniture covered in plastic. The picture also reminded me of a college friend’s home with blue plastic-covered furniture in the “shrine” called the “living room” that was carefully carpet-raked to expose any invasions by their children.

I suppose this photo is a deep metaphor for real estate transparency in some way but I leave that to you. I’m a bit under the weather today and am not at my creative best.

But I digress…

The Manhattan Market Dollars Skewed to Top of the Market

There is a cool graphic from the New York Times Calculator column by Michael Kolomatsky in this Sunday’s print edition of the Real Estate section that illustrates Manhattan’s dependence on high-end real estate. Using the data from a chart I began right after 9/11 and we continue to update, he illustrates this point:

Almost half the money spent by New York City home buyers in the first quarter of 2019 went toward the most expensive properties. That wasn’t always the case.

Billionaires Row Continues to be Challenged

It’s been no secret that super luxury Manhattan sales have been the hardest hit segment of the market since 2014. The slowdown is related to the oversupply of new development created from the vast amounts of capital looking for a home since the financial crisis. Perhaps the most famous representation of the super-luxury market has been “Billionaires Row” centered on 57th Street in the heart of Manhattan’s central business district in Midtown Manhattan. The introduction of supertalls to the skyline has provided never before expansive views to the buyers.

I was asked by the New York Post to provide a snapshot of this submarket. Since contract data is not public record and is easily manipulated, I estimated the state of the key buildings as best I could, using ACRIS for closed sales, Streeteasy contract tags, and feedback from market experts in and around the brokerage community. The result was really no surprise to anyone in the real estate business but because it was concentrated in one place, the story went viral.

Now its time for me to confess. I read the online NY Post article just as I leaving for the airport to speak at an event in Florida. After I arrived at the gate, there was a newsstand with a fresh copy of the NY Post so I bought it to read it on the plane. But I bought it because of the cover story and never gave a thought to the “Billionaires Row” story. After I read the Anthony Weiner story I spotted the ‘Billionaires Row’ Story and saw that it included a table not in the online version. Took a picture of the table and included it above.

NPR Interviews Author of Moneyland

Last year I was interviewed for (and might be included!) in the new book “Moneyland” by author Oliver Bullough. My copy is coming next Tuesday but the topic of kleptocracy fascinates me and I have learned over the past five years that it is far more widespread than people realize.

Oliver was recently interviewed by Terry Gross on NPR.

Journalist Oliver Bullough runs kleptocracy tours in London, in which he points out mansions bought by corrupt foreign leaders and oligarchs. Moneyland describes their secretive transnational world.

Getting Graphic

Len Kiefer‘s Chart Handiwork


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

Analogy: AMCs Are Like Starbucks

There was a great podcast last month from Planet Money and the story sounded familiar.

AMCs are adding more and more services that are NOT appraisals. Automated valuation models, loads of hybrid products and yet, the cost of this service is higher than a traditional appraisal. The NPR show on Starbucks seemed like the perfect analogy.

The cost of coffee beans is going down. So why is a cup of coffee becoming more expensive? We break down what it costs to serve you a cup of coffee in the morning.

BREAKING The New York State AMC Law Is Now In Effect

I wrote this blog post on Saturday, so in case you missed it…

Back on April 19th, I wrote about the New York AMC law in my Housing Notes newsletter. After years of AMCs chipping away at the public trust, the New York AMC law was designed to protect the consumer.

The bill summary was:

Relates to the registration of real estate appraisal management companies or an individual or business entity that provides appraisal management services to creditors or to secondary mortgage market participants including affiliates by the department of state.

Yesterday Appraisersblogs ran it as a standalone post and I got a lot of feedback. To be clear, the bill was signed into law by Governor Andrew Cuomo at the end of last year and became effective 120 days later which is today.

Here is the NYS “AMC Law” as a PDF or in plain text on the landing page of the law.

The NY State Coalition of Appraisers (NYCAP), led by my friend and appraiser Becky Jones who along with other unnamed heroes worked hard to help make this possible, wants you to know that this law was not a last-second, fly by night effort as being characterized by The Real Estate Valuation Advocacy Association (REVAA) – the trade group that represents the bulk of the AMC industry in the U.S. – inferring this law was flimsy and easily overturnable.

No, it isn’t. Its been a long road and achieved unanimous consensus during the process.

When the draft of the bill was approved by the NYS Board of Real Estate Appraisal, Carol DiSanto who is the Vice Chair, walked it across the street to The New York State Association of REALTORS (NYSAR). In effect, REALTORS of New York State were made fully aware as the “draft” became part of NYSAR record at their next business meeting. Becky Jones sat on the Legislative steering committee at NYSAR and informed them about the bill. They had no objections to the bill before submission to the state legislature.

A similar proposal was introduced by the New York Department of State in 2015. Senate Bill S9080 was introduced two years ago during the 2017-2018 legislative session, signed into law on December 27, 2018 and became effective today. The voting was unanimous in favor by the rules committee of both houses and the body of both houses.

Here are the vote tallies (the same in both the NYS Senate and Assembly):

And here was the timeline:

A couple of AMCs we work with for some private banking groups sent emails to us yesterday:

Some thoughts

  • If you’re not an appraiser, then you want to read this. It is a 2011 take that still holds up on the AMC industry from American Banker’s Bankthink column (I’ve written a column there before on another subject): Appraisal Management Companies Create More Problems Than They Solve

  • When the realization sunk in that this was a new law, not a proposed bill, attendees began to text me from the joint committee meeting of The Appraisal Foundation. I got the play by play when the news was shared. It sent shockwaves through the AMC-types because, in my view, it effectively destroyed their ability to hide how much they are gouging the consumer and how little the appraiser gets from the actual “appraisal fee” (typically less than half). Seriously, the value-add provided by AMCs to the appraisal process in the delivery of actual appraisals might be 5%, but no chance in hell it is 75%. This is why we need consumer protection in the mortgage business.

  • I’ve been told by several colleagues that they’ve heard one of the main AMC concerns is whether New York interpreted the original law correctly to arrive at this form of law regarding AMCs. From my perspective, it’s like not buying a house because one of the gutters is missing a few screws to hold it in place. The criticism seems like a weird attempt at fogging since this law is protective of USPAP and the public trust, something that has been forgotten in the attempt to “modernize” the appraisal industry. But I’m no lawyer so I’ll look for clarification on their logic. But consider this:

  • REVAA’s biggest concern about the law was specifically the disclosure to the consumer as to what part of the fee goes to the appraiser. Not only does the appraiser get to state the fee, but the AMC fee must also be disclosed. This was upsetting to REVAA director Mark Shiffman presumably because the consumer would finally see that most appraisers get half or less than half of the appraisal fee the consumer thinks they are paying for the appraiser. REVAA has fought hard to hide this from the consumer, pushing back on prior attempts to disclose the breakdown, and finally, New York State has effectively brought to light this predatory practice. Transparency is good for the consumer and for the appraiser. Should a consumer be aware that the check they wrote at the time of mortgage application specifically for an “Appraisal Fee” be used to pay the appraiser less than half of it with the remainder to a wildly inefficient third-party institutional middleman they know nothing about?

  • The NYC AMC law will likely damage the evaluation platform that the Appraisal Institute has been advocating so intensely in state legislatures without disclosure to their own members yet diminishes the meaning of an appraisal certification to the consumer. It is interesting to see that AI National hasn’t taken a position on this new groundbreaking law, like yesterday. They’ve been progressive in their quick denouncement of other important issues, like appraisal waivers, so the lack of denouncement against AMCs is curious.

  • This new law only applies to appraisals ordered through AMCs (which control an estimated 80% of U.S. mortgage appraisal volume) for properties in New York State. (note: this why the law is described as “AN ACT to amend the executive law, in relation to registration of real estate appraisal management companies by the department of state”) New York is one of the few “voluntary” licensing states. There is no mandatory licensing so agents and brokers can perform appraisals and BPOs all day long. This was a key point that REVAA was trying to convey to NYSAR (I hold the CRE designation and all CREs in New York are automatically members of NYSAR) a few weeks ago when REVAA was on a mission to stop the law going into effect. REVAA reached out to NYSAR to claim how bad the law was for their agents and brokers but NYSAR wasn’t buying it because they could still perform BPOs and evaluations for local banks – just not for AMCs. Becky Jones shared a story about this situation from one of the CE classes she teaches: I had an agent work the whole thing in her head out loud during the class and at the end…the agent deduced on her own that she will contact local banks for the BPO work and she was especially thrilled because she realized that she will probably get the listing and therefore an opportunity to make more income. She was so thrilled she “high-fived me during class.”

  • A concern shared with me by a friend and appraiser colleague in Virginia was that most of the large AMC platforms, such as CoreLogic, Appraisal Port and Xome, use a portal that strips the report and the appraiser’s invoice is one of the forms that does not get uploaded (because they don’t want the consumer (i.e. mortgage applicant) to see how much the actual cost goes to the person providing a value opinion of their home. If AMCs continue this practice in New York State and are caught, they will lose their ability to do business in the state. They can risk it, but the stakes are high. There is always a concern that oversight of this will be lost in the shuffle so it is imperative that appraisers keep the pressure on.

  • Another appraiser colleague and friend I know in Illinois said: “So if you are curious what is happening in Illinois, here’s how we must report our fees. When discussing this issue 10 years ago, we were of the opinion that the invoice could get lost, but pages in the appraisal report don’t get lost. That’s why it must be in the body of the report.” Here’s the Illinois AMC law.

And finally…

It is ironic that the New York Governor, who was the creator of HVCC when he was NYS Attorney General and was a board member of a former Ohio-based AMC owned by a friend that eventually collapsed, leaving many appraisers unpaid for their work, was the signer of this law. Despite the irony, his concern for the consumer is incredibly appreciated by the appraisal community who have been beaten up by the AMC industry since 2009 under the false narrative that they are embedded in the process to protect the system. In reality, AMCs gave the mortgage system an empty promise that left the consumer and the taxpayer exposed to excessive costs, bureaucracy and a systematic deletion of quality. Even worse, they stole the economic livelihood of the actual market valuation experts and replaced them with form-fillers.

It is nice to see a state pay more than lip service to consumers within the mortgage business.

OFT (One Final Thought)

Great piece on what happens when a factory closes down and was the dominant source of employment. Click on image for the story.

[NYT Magazine]

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

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