Housing Inventory Was Eclipsed By Sales
This week’s solar eclipse offered a brief respite from the intense political news out of D.C. that seemingly hits us every day. We sang about it. We mapped it. We got back to arts and crafts. We got excited about it. Yes we did.
NAR Existing Home Sales Choked Off by Limited Supply And Record Price Level
NAR released its existing home sale report for July. Inventory has fallen for 26 consecutive months on a year over year basis and the price set a new record. The lack of supply pressed prices upward and higher prices are reducing affordability. The 6.2% jump in median sales price was insane.
US Treasury Indicated 30% of High-End Sales Were Suspicious
UPDATE – It looks like CNBC made a mistake and interpreted the FinCEN 30% figure as a share of all sales – which confirms my original hunch below was right. According to the Miami Herald, the 30% figure related to the 240 sales they examined for a total of 73 suspicious transactions from 2/29/16 to 3/9/17. It is clear that FinCEN is trying to throw doubt into the arena because, even though they have discovered a very small amount of money-laundering cases, with the wire transfer loophole closed, they have a more effective way to catch these transactions than ever before.
FinCEN (UST) began cracking down on money-laundering and kleptocracy in 2015 just after the super lux new development cooled. I feel their 30% figure high as if there is something more to the derivation of that percentage that we have not been made aware of. It suggests to me that this announcement was a warning or reminder to market participants that this behavior is being watched. Good.
I have a lot to say on the appraiser-less mortgages being touted by Fannie Mae, but it will have to wait until next week. We are getting our youngest off to college and taking the weekend off and heading for the beach, pizza on the boardwalk and some serious skeeball. In the meantime, here is what I do have for you. The chart on the AI National exodus is kind of amazing. But that’s what happens when an organization ignores and even works against its membership. If AI National was a company, it’s leadership would have been fired at least 5 years ago.
Appraisal Institute Membership Down 50% Since Housing Bubble
In the latest mid year numbers for Appraisal Institute membership, 15,000 members have paid their dues as of May 31, 2017. That’s 3,000 less than this year’s projected 18,000 total on their web site. AI National forecasted a 700 member drop in membership for 2017.
In all fairness, AI National could see additional sign-ups but this will be tempered by the now spirited debates surrounding their governance proposal. The key issue in front of the organization now is the “taking” policy where they announced their plans to take chapter funds last fall. This was largely done without advanced warning or membership input and their recent governance committee came up with a similar recommendation.
I assume the faster decline in membership occurred because of all the unknowns with AI National’s future or actual survival in the short term.
In the following chart, I matched up the current ASC registry totals with AI membership through the middle of the year (May for AI National and July for ASC).
The rate of AI membership decline has accelerated to triple what it has fallen since the financial crisis began, yet ASC Registry numbers are stabilizing.
An URGENT request to my readers: I have only been able to verify AI membership totals back to 2007 and a 25,000 total for 1995. If you have any annual membership totals by year prior to 2007, it would be greatly appreciated. I would keep the source anonymous. I am interested in comparing the AI membership trend since 1992 when the ASC registry data begins.
North Carolina Real Estate Appraiser Association (NCREAA) Responds to FTC Letter of June 30, 2017
NCREAA felt there needed to be a response rather than leaving the FTC letter to stand unchallenged. Here is the Cannon response letter.
Questions for the Governance Structure Project Team Regarding their July 2017 Recommendations
These are questions that will be asked at an upcoming chapter meeting with AI National in attendance. The one burning question I have always had and it has never been addressed in an open and credible way to the membership: “Why does AI National need to take each chapter’s money when that has not been an issue to all but a handful of the smallest chapters? since AI National was founded?”
- If the survey of Chapter and Region leaders suggested that the minimum number of Chapter members should be 125, why did the Project Team recommend 300?
- One Chapter in states with large numbers of members and significant distances to major cities, such as Texas, California and Florida, will make it difficult for many members to be involved and attend meetings/education programs. Conversely, the grouping of states to form Chapters of 300 members each will have similar challenges. This structure will likely result in worse communications between National and the Chapters/members than currently exists. In addition, the structure would make it very difficult to meet the needs of members in geographically widespread areas.
- The Texas Chapters/members provide funding to support FACT. How will that funding be provided under the recommended structure?
- The recommendations state that, “Existing or future chapter conferences will be reviewed as part of a cost/benefit analysis and managed as part of the budget process.” Many Chapters offer conferences and symposiums that provide significant revenue to Chapters and are very effective public relations tools. Why would the future of these successful programs be subject to National review?
- If Chapters’ only involvement in AE, QE, USPAP and some CE education is to be available, if contacted, to provide local input and feedback on delivery locations, what is the process to ensure that Chapter members’ needs are met?
- Networking is a benefit to members and their businesses, and it occurs, primarily, at programs that provide education credit. If Chapters have no control of education programs, then there won’t be any networking for the members.
- How will Chapters be funded?
- The recommendations about Chapter finances are more restrictive to Chapters than the Chapter Finance Management and Administration Policy. Why is it necessary for Chapters to cede all control of their money to National under the current recommendations, when it was acceptable to the Audit Committee that Chapters only cede control of the accounting functions to National?
- One of the key takeaways was that, “Overall, roughly 1/2 to 1/3 of the membership has a strong relationship with Chapters.” This is a very strong number, considering the fact that many members are not interested in being involved.
- Because of the inadequacies of some Chapters, all Chapters will be subject to the recommendations. The underperforming Chapters should be subject to the recommendations, and the high performing Chapters should not be subject to the recommendations so they could continue doing what they do the best – servicing the members.
- Please explain the recommendation, “Chapter support to be provided locally, utilizing uniform job descriptions; supervised locally, directed nationally“.
- Are the Chapter support staff paid by National?
- If so, who at National do they report to?
- The strengths of Regions could be maintained by, possibly, removing some of the burdens of Chapters.
- With approximately 80 Chapters in the US, how many staff will need to be hired at the National office to perform the functions of these Chapters?
National Board of Directors
- As of 12/31/16, there were 309 international members and 18,508 US members. The recommendations provide for a decrease in the Board size from 21 Directors and 5 Officers to 11 Directors and 5 Officers.
- Why is there such a disproportionate representation between international members (1/309) and US members (1/1,850)?
- Why weren’t the number of Officers decreased? Perhaps the Immediate Past President and CEO positions should be eliminated, and the number of Directors be increased.
- With so few positions available to members, why would up to 2 of the 11 Directors be non-members? This is a member-driven non-profit association and only members should serve on the Board of Directors.
- Since candidates for the Board of Directors are selected by the National Nominating Committee, the general membership loses the ability to determine their representation on the Board of Directors. How does this benefit the members?
- There is a possibility that the Director positions could be filled by members from private national appraisal groups, thus leaving a loophole wherein other members from these groups could be promoted to fill national leadership positions. This scenario could compromise the independence of the AI. What safeguards are in place to prevent this from occurring?
- Why would members of the Board of Directors be paid for their service on the Board?
- Why couldn’t the National Board of Directors members be elected by the membership at large?
National Nominating Committee
- Members of the National Nominating Committee should not be permitted to serve on other National Committees as this limits the opportunities for other members to serve.
- The recommendations allow that a petition of alternate nominees for the Vice President position must come from 40% of sitting Directors.
- Why was the charge to recommend a structure from scratch rather than utilizing the strengths of the current structure, which have been built over the past 85 years?
- If there is a projection that implementing the recommendations might result in increased membership, please explain how that could occur.
- One of the conclusions was that, “The existing three-tier structure is unwieldy and is expensive to operate. Moreover, the structure is not providing maximum value to all members.”
- What are some of the maximum values to all members that will result from the new structure?
- How will the recommendations provide more efficient delivery of services?
- How will streamlining the organization facilitate communications?
- There is a strong possibility that one of the consequences of implementing the recommendations will be a decrease in membership. Did the Project Team consider the possible loss of membership in their deliberations?
- The AI has been a grassroots structure for 85 years.
- Why are the recommendations centering more power with the Executive Committee and less with the members?
- Centralized power is dangerous to the AI’s future. A loss of local control will diminish opportunities and benefits that members have now.
- Has a financial analysis been performed to determine if the recommendations have a positive impact to the organization?
- What are the organizations the GSPT reviewed that have undergone a similar governance restructure?
- Why weren’t all levels of the organization reviewed, including National? There are potential savings and efficiencies that could be realized at that level.
- What was the source of the research that was provided the Project Team?
- When the AI surveyed members, did the surveys also include questions about their involvement in the AI?
- A more reasonable approach to recommendations of this magnitude would be to apply changes in moderate, phased-in periods. This would allow for adjustments, as needed, and would prevent changes that could be catastrophic to the Appraisal Institute.
- The recommendations could, potentially, provide fewer opportunities for members to be involved and give them less input/voice into issues. This will result in members not being invested in the AI and ultimately harm the Appraisal Institute. Isn’t this a disservice to members to develop a structure
- The recommendations could, potentially, provide fewer opportunities for members to be involved and give them less input/voice into issues. This will result in members not being invested in the AI and ultimately harm the Appraisal Institute. Isn’t this a disservice to members to develop a structure where members could not be connected or involved?
- Many members feel that their identity and value of membership has been a result of affiliation with their Chapter, not National. How will this structure change or improve members’ membership value and identity?
- Why can’t the members see comments that are submitted on the AI website?
- In the private sector, companies think of customers. In associations, you think of your members, and you’re trying to reach a service goal. Ask: (a) Is this good for the member; (b) Do they want it; and (c) Will they truly value it? The CFA Institute, a large global association of investment professionals, has 142,000 members in 159 countries and territories, including 136,000 members who hold its certification and 147-member societies. The CFA Institute found that the traditional business approach, or the top-down method, doesn’t work anymore. What is winning the members over is a new model focused on working locally with societies and supporting them under a new, global framework. The CFA Institute has changed the way it works as collaborative partners with its societies by working to serve the societies first, especially when it comes to membership resources and funding. (8/9/17 Associations Now Daily News)
A Brilliant Idea
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See you next week.
Jonathan Miller, CRP, CRE President/CEO Miller Samuel Inc. Real Estate Appraisers & Consultants
Reads, Listens and Visuals I Enjoyed
- US existing home sales unexpectedly fall in July [CNBC]
- NeighborhoodX: How racist and misguided planning put America in its housing crunch [NeighborhoodX]
- Manhattan’s average price per square foot surpasses that of other major U.S. cities [Curbed NY]
- US home sales fell to a 2017 low in July [The Real Deal NY]
- The race to reinvent retail across Westchester & Fairfield [The Real Deal NY]
- Mortgage Rates Back to 2017 Lows [MND]
- What you need to know about LA neighborhood prices, in one chart [The Real Deal LA]
- Historically black beach enclaves are fighting to save their history and identity [Boston Globe]
- The Plaza Is for Sale, but a Part-Owner Has Other Ideas [NY Times]
- Treasury Department finally adds teeth to LLC disclosure rule [The Real Deal NY]
- Why Do Cities Become Unaffordable? [Social Europe]
- Six reasons why most Americans aren’t getting big pay raises [Marketwatch]
- Manhattan Gets $20,000-a-Month Homes for New Breed of Seniors [Bloomberg]
- When Bragging About Your Home Is Also Your Job [NY Times]
- The Most Expensive Property In The Hamptons? The List Keeps Growing [Forbes]
- A $105M Colorado ranch just sold to a "true conservationist" [LLNYC]
- A Land-Lease Can Kill a Co-op [Habitat Magazine]
My New Content, Research and Mentions
- Appraisal Institute Membership Down 50% Since Housing Bubble [Matrix Blog]
- Historic Chetrit development has Bronx housing reaching crescendo [Real Estate Weekly]
- A third of luxe real estate deals involve 'suspicious activity' [CNBC]
- Summer’s end is the best time to score a Hamptons bargain [NY Post]
- Live in Zaha Hadid's Undulating High Line Building for $22,500 a Month [Bloomberg]
- Converted Office Parks Try to Lure Millennials With Cheaper Rents [Realtor.com]
- The Millennial's Guide to Moving to NYC [DNAinfo]
- Inside Jay Z and Beyonce’s mansion-hunting journey [CNBC]
- Map: Look at how insane the home prices are in Manhattan [The Real Deal NY]
- West side storey: Manhattan’s $25bn Hudson Yards project [FT]
- Some Manhattan Home Listings Inflate Square Footage [WSJ]
- Former Ford Family Estate Hitting Market For $175M, Becoming N.Y.'s Most Expensive (Official) Listing [Forbes]
Appraisal Related Reads
- Everything you need to know about Fannie, Freddie appraisal-free purchase mortgages [Housingwire]
- Illinois homeowners lose bid to sue Zillow over 'Zestimates' [Chicago Business Journal]
- How to Prepare for an Appraisal and Showcase Your Home at Its Best [Realtor.com]
- The rage of modern homes in real estate [Sacramento Appraisal Blog]
- Freddie moves ahead with appraisal alternative for purchases [NMN]
- Why Automation Is Killing the Property Appraisal Business [Knowledge@Wharton]
- The Future of Appraisal: It’s Not Simple [Economists Outlook]
- Independent Settlement Services and HouseCanary Join Forces to Offer New Valuation Product [PR Newswire]
- Freddie Mac – Freddie Mac Introduces Innovative Appraisal Alternative for Home Purchases and Refinances [Freddie Mac]
Extra Curricular Reads
- Generations of Village Voice Writers Reflect on the Paper Leaving the Honor Boxes [Esquire]
- The Girl Scouts Have Accused The Boy Scouts Of Trying To Recruit Girls To Appeal To Millennial Parents [Buzzfeed]
- Opposing Coaches And Players Console Little League Pitcher After Walk-Off [Deadspin]
- When There is Blood in the Streets [Of Dollars And Data]
- The Jimi Hendrix of the Bass: Watch a Busker Shred the Bass on the Streets of Newcastle [Open Culture]
- Eclipse2017 | Total Solar Eclipse 2017 [NASA]
- Pink Floyd Fails Neil deGrasse Tyson's Science Class: ‘There Is No Dark Side of the Moon' [Ultimate Classic Rock]
- Have Smartphones Destroyed a Generation? [The Atlantic]