- Miller Samuel Real Estate Appraisers & Consultants - https://www.millersamuel.com -

April 10, 2020

A Virus-Slowed Housing Market As Seen From A Comfortable Chair

With social-distancing and “shelter in place” rules defining our days, it is good to know that, while La-z-boys [1] can represent a sedate lifestyle, combined with eating frozen meat [2], they can also be an inspiration:

Without the family gathering this Easter, I will get out of that comfy chair and be more creative with the holiday meal:


I am apologizing in advance for the heavy amount of content in this Housing Note – more than any other I have written in their five years of existence. However, I assume, sadly, that many of my readers have more time on their hands for the time being.

But I really digress…

Comparing two prior significant events to glean future impact from the Coronavirus crisis

It’s been a challenging time for all of us. I’ve been seeing and hearing a lot of comparisons of historic catastrophes in the past with the Coronavirus crisis (or as one of my sons calls it, The ‘Rona). I hear things like “It’s worse than the aftermath of 9/11 or the “Lehman Moment” (financial crisis as the housing bubble burst).

My initial observation of this crisis was the absence of a “light at the end of the tunnel” – that many of us are “sheltering in place” and social-distancing but we have no idea when this nightmare will end and the money is running out. Being an appraiser in Manhattan on September 11, 2001, and the “Lehman Moment” on September 15, 2008, I saw them as singular events and the further we moved from them in time, the sooner we would heal. As bad as 9/11 was, there was a 9/12, 9/13, 9/14 and so on. But we don’t have that with the Coronavirus yet. Our nation is still convulsing with the tragedy of more people getting ill and more deaths being reported, knowing that those numbers are likely wildly under-reported.

Looks like I am going to have to update my January 11, 2006 Matrix post: In Good Times and Bad, Negative Milestones Often Define The Real Estate Market [9]

Since there is limited real estate data at the moment (but there will be in April!), I placed 9/11 and Lehman side by side as indices using three different metrics: median sales price, contracts and listing inventory and compare their trends from the event going forward by quarter. For market-wide contract trends, I simply pulled the closing dates one quarter earlier to represent contract dates since no one has market-wide bulk historical data on contracts from back then (we do not have a traditional MLS in Manhattan).

I looked at 9/11 as an abrupt external event that immediately inserted itself into our lives without warning. The Lehman moment was a multi-year journey that some of us could see that it would end badly (I saw it and spoke quite a bit in public about it). This Coronavirus crisis seems to be a combination of both. The threat of the Coronavirus didn’t interfere with every day living for most of the U.S. population (right or wrong) until March 15 when the second Fed rate made it real for everyone.

I’d love my Housing Note Readers to share with me how this will play out over the next two years. Here is what happened post-9/11 and Lehman to the Manhattan housing market:

[10]

[11]

[12]

The decline in new leases for March was significant in New York City

Douglas Elliman [13] just published our monthly research on the Manhattan, Brooklyn and Northwest Queens rental markets [14]. They’ve enveloped their new branding over the reports and did a great job. Same data methodologies and presentation of information with a refreshed look.

Elliman Report: March 2020 Manhattan, Brooklyn & Queens Rentals [15]

But what was even more fun, was the Bloomberg chart [16], which says a lot about the collapse of inventory at the end of March with buyers pausing, concerned about their safety in marketing their home and wondering if there is a market.

[16]

______________________________________________________
MANHATTAN RENTAL MARKET HIGHLIGHTS

“With awareness of COVID-19 breakout by mid-March, leasing activity fell sharply as landlords worked hard to retain existing tenants.”

[17]

[18]

[19]

______________________________________________________
BROOKLYN RENTAL MARKET HIGHLIGHTS

“With the Coronavirus pandemic, new lease signings fell to their lowest level in four and a half years.”

[20]

[21]

______________________________________________________
QUEENS RENTAL MARKET HIGHLIGHTS
[Northwest Region]

“The number of new leases declined each month annually since last summer, with now larger declines due to the Coronavirus.”

[22]

[23]

MNN:The Forbearance Crisis

Ivy Zelman of Zelman & Associates and David H Stevens formerly of the Mortgage Bankers Association and an FHA commissioner talks about the state of the mortgage market through the Coronavirisis. It is quite a good discussion.

Incidentally, here’s what a mortgage forbearance [24] is.


CNBC: Mortgage industry on the brink of collapse

Diana Olick reports on the flood of borrowers applying for forbearance and servicers have to make up for it so the bondholders get paid. Mark Calabria of the FHFA is not offering a backstop yet which makes us wonder if this is intentional, to drive some servicers, especially non-bank lenders, out of business. Chris Whalen of The Institutional Analyst writes that FHFA Director Mark Calabria, has “never actually worked in finance much less in the housing industry. [25]

At this point, I’m not quite sure what to think – whether FHFA has a strategy to let non-bank entities go under or they have a blind spot. Either way, it is going to get brutally messy and from my vantage point as an appraiser, we are seeing mortgage volume drop sharply over the past week.


From my Matrix Blog: Do We Hope This Listing Goes Viral?…No We Don’t.

I am reading a lot more about everything right now, including real estate. Yesterday’s Bloomberg article caught my eye: Greenwich Homeowner Bets on Virus Getaway Pitch to Win a Sale [26]. Desperation to sell can take many forms. Please read on.

The article featured a listing in Greenwich, CT [27] that came on 68 days ago that wasn’t moving (I assume this based on what was done later). Here is the text for the original listing displayed at the bottom the screenshot:

Like new light-filled house with a modern design by Donald Breismeister including 9 ft ceilings on the first floor. High-tech amenities throughout with e-thermostat, lighting and security cameras all hardwifred CAT-5 wiring throughout. Bathrooms are beautiful and modern with separate steamshower and large whirlpool tub. Nice front yard and backyard has large entertainment deck. All these amenities are just two blocks from the Post Road on a quiet road within walking distance to GreenwichHS, Greenwich Country Day and Central MS.

[28]
[click to expand]

With the sales market slowing down despite entering peak selling season, many homeowners are reluctant to add their homes to the rental market. The owner in the article said:

“I rented property in the past. It’s too much hassle. My trust level is pretty low with renters.”

About ten days ago the listing was modified by raising the price to $100,000 and throwing in a 2011 Subaru, linens, televisions, etc. and rebranding the sales effort as a Coronavirus Special (bold emphasis mine).

CORONAVIRUS SPECIAL – Some houses are move-in ready. This house is live-in ready. It comes with all furniture, kitchen appliances, washer & dryer, dishes, silverware, TVs, pool table, beds, linens, lawn equipment and even a car. Everything you need to enjoy living in your own house in Greenwich. The house was designed by an award winning architect with lots of custom features. The first floor has high ceilings and two fireplaces. You have a Costco closet just off the 2-car garages and 5 BRs upstairs.You have town water, gas and sewer and are close to both public and private schools. Tomney is a quiet side street, but near downtown, the train and I-95.If you don’t want the time and hassle of arranging movers and buying lots of new items, this house is ready for you now.

While I very much appreciate how hard it is right now to market a home for sale during a global pandemic, the marketing of a home as a CORONAVIRUS SPECIAL is a bit tone-deaf especially when raising the price to include a bunch of the seller’s personal stuff. “Throwing in” used furniture, appliances, linens and an old car by raising the listing price by $100,000 is not, by definition, “throwing it in.”

When I first saw the listing in the Bloomberg piece I thought about all the snarky headlines during other pandemics/tragedies and using brutal sarcasm I found myself chuckling from the absurdity of all of it. Now, as I was writing this post a day later, the initial LMAO title ideas felt icky and were not worth repeating.

Q: Can you imagine associating the word “SPECIAL” with these?

A: I didn’t think so.

Times like this call for creative marketing and perhaps the Bloomberg story and even this blog post may bring new eyeballs to the listing to help it sell. I suspect that won’t happen because the appearance of the home and what comes with it for the price isn’t the problem. The agent is definitely not the problem. The seller is definitely not the problem. The problem is the sudden change in the world we live in and the understanding that it will take time to adapt. Our initial impulses to take action, such as this situation, are often wrong.


Do We Hope This Listing Goes Viral?…No We Don’t. [Matrix [29]]

NYC Listing Inventory Drops Despite Entering ‘Spring Market’

Douglas Elliman [30] released three of our sales market research pieces today covering submarkets of New York City, namely Brooklyn, Queens and Riverdale (Bronx):

Elliman Report: Q1 2020 Brooklyn Sales [31]
Elliman Report: Q1 2020 Queens Sales [32]
Elliman Report: Q1 2020 Queens Northwest Sales [33]
Elliman Report: Q1 2020 Riverdale Sales [34]

______________________________________________________
BROOKLYN SALES MARKET HIGHLIGHTS

“Falling spring inventory and rising prices characterized the market until the final two weeks of March.”

Final two weeks of March 2020
– Awareness of the global pandemic known as COVID-19 cooled conditions after two significant rate cuts by the Federal Reserve and the statewide shutdown of non-essential businesses
– Current sales contract activity does not account for the market impact of the coronavirus yet since it lags the meeting of the minds by 2-3 weeks
– Listing inventory growth went negative this quarter in contrast to the average increase seen over the past five years
– If the outbreak is not prolonged, there is still potential for a release of pent-up demand, but this depends on the extent of damage done to the economy

New Year 2020 through mid-March 2020
– All overall price trend indicators increased from year-ago levels
– Average sales price rose above the $1 million threshold for only the third time
– The number of sales jumped above year-ago levels

[35]

[36]

[37]

______________________________________________________
QUEENS SALES MARKET HIGHLIGHTS

“Sales and price trends rose throughout the quarter until the mid-March slowdown.”

Final two weeks of March 2020
– Awareness of the global pandemic known as COVID-19 cooled conditions after two significant rate cuts by the Federal Reserve and the statewide shutdown of non-essential businesses
– Current sales contract activity does not account for the market impact of the coronavirus yet since it lags the meeting of the minds by 2-3 weeks
– Listing inventory growth for the spring market went negative this quarter in contrast to stability over the past five years
– If the outbreak is not prolonged, there is still potential for a release of pent-up demand, but this depends on the extent of damage done to the economy

New Year 2020 through mid-March 2020
– The number of sales rose annually for the second straight quarter
– Median sales price has not seen a year over year decline in sixteen quarters
– Listing inventory declined year over year for the first time in twelve quarters

[38]

[39]

[40]

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

“Sales surged annually for the first time in six quarters showing strength going into the mid-March slowdown.”

Final two weeks of March 2020
– Awareness of the global pandemic known as COVID-19 cooled conditions after two significant rate cuts by the Federal Reserve and the statewide shutdown of non-essential businesses
– Current sales contract activity does not account for the market impact of the coronavirus yet since it lags the meeting of the minds by 2-3 weeks
– Listing inventory growth for the spring market grew at one half the rate of the prior decade
– If the outbreak is not prolonged, there is still potential for a release of pent-up demand, but this depends on the extent of damage done to the economy

New Year 2020 through mid-March 2020
– The overall price trends showed mixed results as compared to the same period last year
– The number of sales surged year over year following five quarters of declines
– Price trend gains were largest in the entry-level market

[41]

[42]

Westchester, Putnam & Dutchess Inventory Drops In Final Two Weeks of March

Douglas Elliman [30] released two of our sales market research pieces this week covering three counties north of New York City, including Westchester and Putnam/Dutchess.

Elliman Report: Q1 2020 Westchester Sales [43]
Elliman Report: Q1 2020 Putnam/Dutchess Sales [44]

______________________________________________________
WESTCHESTER SALES MARKET HIGHLIGHTS

“Despite generally robust results, the coronavirus outbreak brought down inventory at the end of the quarter.”

Final two weeks of March 2020
– Awareness of the global pandemic known as COVID-19 cooled conditions after two significant rate cuts by the Federal Reserve and the statewide shutdown of non-essential businesses
– Current sales contract activity does not account for the market impact of the coronavirus yet since it lags the meeting of the minds by 2-3 weeks
– Listing inventory growth for the spring market was only at one-third the rate of the prior decade
– If the outbreak is not prolonged, there is still potential for a release of pent-up demand, but this depends on the extent of damage done to the economy

New Year 2020 through mid-March 2020
– Single-family sales rose sharply but were offset by the decline in multifamily housing activity
– Price trend indicators county-wide and by individual property type moved higher
– Pending sales rose year over year for the second straight quarter

[45]

[46]

______________________________________________________
PUTNAM SALES MARKET HIGHLIGHTS

“Sales rose sharply year over year before the impact of COVID-19 slowed activity at the end of the quarter.”

Final two weeks of March 2020
– Awareness of the global pandemic known as COVID-19 cooled conditions after two significant rate cuts by the Federal Reserve and the statewide shutdown of non-essential businesses
– Current sales contract activity does not account for the market impact of the coronavirus yet since it lags the meeting of the minds by 2-3 weeks
– Listing inventory growth for the spring market was negative, in contrast to the decade average of growth
– If the outbreak is not prolonged, there is still potential for a release of pent-up demand, but this depends on the extent of damage done to the economy

New Year 2020 through mid-March 2020
– Median sales price rose year over year for the eleventh time in twelve quarters
– The number of sales increased annually for the third time in four quarters
– Listing inventory rose year over year until the final weeks of March

[47]

[48]

______________________________________________________
DUTCHESS SALES MARKET HIGHLIGHTS

“More sales and rising price trends occurred during the quarter until the Coronavirus cooled the market temporarily.”

Final two weeks of March 2020
– Awareness of the global pandemic known as COVID-19 cooled conditions after two significant rate cuts by the Federal Reserve and the statewide shutdown of non-essential businesses
– Current sales contract activity does not account for the market impact of the coronavirus yet since it lags the meeting of the minds by 2-3 weeks
– Listing inventory growth for the spring market was roughly half the rate of the previous five-year average
– If the outbreak is not prolonged, there is still potential for a release of pent-up demand, but this depends on the extent of damage done to the economy

New Year 2020 through mid-March 2020
– Median sales price rose year over year for the second time in the past three quarters
– The number of sales rose sharply from the same period last year for five straight quarters
– Listing inventory slipped year over year

[49]

[50]

Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC [51] site.)

NREP Video: Appraisers Getting Shut Down

Here is more information on the forbearance crisis (I talked about this several times in this Housing Note above) and an interesting seminar for lenders and bankers on April 15th.


Why Did AMC Veros Forecast The Coronavirus Aftermath With Incredible Precision?

As real estate appraisers, we are the best source of market insights to the consumer because we aren’t paid on commission. One of the things that appraisers should not do, is pretend to know what will happen in the aftermath of the Coronavirus. No one knows at this point because the Coronavirus itself hasn’t reached its Apex so there is no light at the end of the tunnel. Sure we can speculate about the future, but there are no specific numbers to back that up.

That’s why a recently shared report [52] by the AMC known as Veros is so irresponsible. I can’t figure out what these precision results are based on, and even if I did, I still wouldn’t see it as believable given the nature of the crisis. Don’t let pretty infographics infer topic expertise.

I can only assume this publicity stunt was to showcase “big data capabilities” but all it did was to showcase their lack of understanding of this crisis.

As Joan Trice, CEO/Founder of Clearbox, told me yesterday:

This will prove to be the dumbest statement of this crisis. Is this based on data or the magic eight ball on the corner of his desk?
Dave Towne’s FNMA FAQ’s update Re: Covid-19 Modified Reports

Where would appraisers be without Dave Towne looking out for us to clarify the nuts and bolts?


Appraisers/others…….

On Wed, April 8, 2020, FNMA issued a new FAQ bulletin [53] regarding mortgage lending and appraisals during the Covid-19 “modification” period.

Please see the attached PDF [53]. I have extracted the FAQ questions relating directly to appraisals/appraisers. I suggest you print these 6 pages.

Q54 – Q60 have ‘new’ info appraisers should review.

NOTE: While this FAQ is written by FNMA, it also applies to reports which will be sold to FreddieMac – because both GSE’s are working cooperatively in terms of how appraisal reports are to be completed.

NOTE 2: If you are doing an assignment for FHA, USDA or VA, you need to follow THEIR instructions because they have different guidelines for report completion.

WERC is offering free CRP CE credits to members

This is good news for appraisers who hold the CRP designation – here is the email I received:


Please read below for full details…(it is a lot of info., but worth the read!)

Webinars are FREE to you to register for and attend. Credit is added to your record automatically within about a week of the live program, provided you register and attend the full event.

After webinars air, they are placed into the Learning Portal [54]. For one month, non-members can access for free; members can continue to access the session for an additional month (two months total), and then after that you would need a Premium subscription [55] to continue to access them. Credit is automatically added to your record after completion of each session.

Below shows how you can earn 11-17 credits FOR FREE (with MORE coming!) by taking the sessions noted below – and all by early June. (Duplicate credits will not count.)


MORE classes will be coming! Please be sure to continue to check online here frequently for updates [56]

A very recent exchange of what some AMCs think about placing appraisers in harm’s way

A reminder to appraisers that you do have a say in the mortgage process. Here is how the email exchange went:

Appraiser: Tomorrow but the owner will not allow us in the home because he has a 90 year old physically compromised individual! Therefore we will conduct an exterior field review, measure home, observe MPRs and the homeowner will provide detailed interior photos! This will be in compliance with the new FHA COVID19 requirements.

AMC: Hello, Please place this order on hold due to the fact that you are not authorized to make the decision regarding the exterior only.

Appraiser: I beg to differ as the new rules were put in place to protect the appraisers and the homeowner. We do have the ability to make decisions about which homes we will enter or not. It’s about our health and safety as well. If their loan program does not allow for an exterior that is one issue but it is also our prerogative to determine our safety as well. If this requires an interior inspection then you will likely have to cancel the order as the borrower has told us we are not allowed in the home due to the care of his elderly father who is 90.

AMC Supervisor: My apologies on the poor choice of wording. What my colleague intended to say is, only the lender is authorized to approve a product change including an exterior inspection only. The AMC, borrower, contact, appraiser, etc do not get to choose which product is actually ordered. However, as you mentioned you do reserve the right to accept any assignment. Since this is issue due to the borrower denying access, we have placed the order on hold pending the client advise on how to proceed with the appraisal. Please do not complete any additional work until we advise on how to proceed.

OFT (One Final Thought)


We lost [59] singer/songwriter John Prine [60] to the Coronavirus this week. I first heard him sing his first album when I was in high school on a skiing outing at Deep Creek Lake in Western Maryland. My (still) best friend Bart Simpson invited me to his family’s snow-covered mobile home near Wisp Ski Resort (yes, his name is Bart Simpson and he is an appraiser like me in another part of the country and we still remain best of friends all these years later). The lyrics hung on to me and never let go. While I tend to favor harder, quirkier music in general, John Prine had me hooked. He had this incredible knack of selecting a few words to describe ordinary lives and make it all sound so compelling. My wife and I were lucky enough to see him live at Manhattan’s Beacon Theatre a few years ago. I have his entire catalog [61] and semi-regularly binge listen to all of it. On the day John died, my friend, Bart texted me the news. I had just heard about it moments before, but my memories of the first time I heard his music more than 40+ years later came flooding back.

Here are a couple of clips to appreciate the wordsmithing John Prine was so gifted at. I select a recent and an early on version. I also have a bunch of great reads about John Prine in the extra-curricular links below.



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 [62]. And be sure to share with a friend or colleague if you enjoy them because:

Brilliant Idea #2

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

See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC [63]
President/CEO
Miller Samuel Inc. [64]
Real Estate Appraisers & Consultants
Matrix Blog [65] @jonathanmiller [66]

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads