Housing Is Treading Lightly Around Our Wheelhouse Because We’re Flatly Tired Of Spinning In Circles This Summer
The month of August is in its final moments, and I already know I am going to miss it. I like the steady pace of this time of year (as long as the air conditioning is working) without the periodic panic from clients who forgot to order an appraisal. Our firm has remained busy. Many of our staff have been able to enjoy a little time off. Some exciting opportunities and changes have appeared for both me personally and my firm too – but more on that later. After all this, I’m “tired” of tire analogies
August 23, 2019 
But I digress…
The ‘Back to the City’ Trend Has Reversed
There’s a good read on the evidence of a reversal in the decade trend of moving to the city from the suburbs in the Brookings blog: Big city growth stalls further, as the suburbs make a comeback . Here’s a fascinating chart.
Why Falling Mortgage Rates Are Not A Long Term Housing Benefit
There was a great article and interview  on falling rates and housing last week I missed while on vacation. I was in it so how could I have missed it? (That’s clear proof I was checked out.)
According to Freddie Mac, the 30-year fixed mortgage rate is down a full percentage (100 basis points) from last year. This drop has lit a fire under refinance activity as consumer look to save money with lower homeownership costs. In fact, with the sharp rise in housing costs in the northeastern U.S. due to the Tax Cut and Jobs Act of 2017, the significant drop in mortgage rates has likely helped moderate the damage to the market.
Remember that low-interest rates are not a gift. In the long run, low rates raise asset prices . When rates fall, more people come into the market which is essentially the reason why the Fed raises and lowers rates to manage the economy, current politics aside.
Here’s the part that concerns me. After years of low rates, the housing market appears highly dependent on them yet the drop in rates has resulted in a more muted boost in sales . Affordability continues to be challenged with lackluster wage growth in comparison.
The longer the housing market remains addicted to low mortgage rates, the more vulnerable it becomes to an eventual change in direction (higher). While I’m not of the belief there will be a surge in mortgage rates anytime in the near term, the market is clearly more vulnerable to such a condition but low rates are firmly built into current pricing. This is one of the reasons that housing remains most vulnerable in high-cost areas impacted by the new federal tax law and it will take years for asset prices to adjust to higher homeownership costs. In NYC metro, we are in the thick of that adjustment period.
Parking Your Plane In The Garage
Over in Big Bubble Miami , you can see how easy it is to park your plane at your house . Why? Because you can. Recently I referenced houses with RV parking . Same idea. Handling turbulence but with wings.
Location, Location, Drug-Treatment Center?
Our appraisal firm does a lot of expert witness litigation and I continue to be fascinated by the arbitrary rules of thumb presented by experts. There are many home-spun assumptions formed without reliance on empirical evidence. Translation: they pull it out of their @$$.
Case in point. There was a great New York Times “Ask Real Estate” column last week: Should I Buy a Home Next to a Drug-Treatment Center? 
I like the way the writer parses out the logic and that appraiser guy Jonathan Miller lays it out there pretty clearly too.
Investors Are Making A Tight Starter Market Much Worse
The Urban Institute has a write up  on why the surge of investors in the entry market could be an issue. The piece is remarkably non-committal but does raise the right questions. The reference a seminal New York Times piece  on the topic I’ve shared before. My short answers are in “()”:
1) Are investors taking homeownership opportunities away from individuals and families?
2) Are investors creating and maintaining quality affordable rental units?
3) Are investors increasing home prices?
A Great Take On The Homeownership Rate
Jed Kolko, a super-smart economist of whom I had the pleasure of working with when he was at Trulia, penned a great piece in 2014 on the homeownership rate that is worth revisiting: Why the Homeownership Rate Is Misleading .
Shouldn’t we be panicking that the American dream of homeownership is drifting out of reach?
Nope. At this stage of the housing recovery, the falling homeownership rate turns out to be misleading. In fact, for young adults, who were hit especially hard in the recession and housing crisis, the decline in their homeownership rate might paradoxically be a sign of improvement. The rate can mislead in the other direction, too: During the worst of the housing crisis, the falling homeownership rate clearly understated the damage done.
The current rate is nearly the same as the median rate since 1965.
(For earlier appraisal industry commentary, visit my old clunky REIC  site.)
Appraiserville is back next week.
OFT (One Final Thought)
Because we are chilling over the long weekend, I thought you’d find this insight helpful in your morning coffee ritual.
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 homeowners;
- You’ll park your plane;
- And I’ll (continue to) live in the suburbs.
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.
Reads, Listens and Visuals I Enjoyed
- Big city growth stalls further, as the suburbs make a comeback [Brookings] 
- The Surge of Investors in Single-Family Homes Raises Three Concerns [Urban] 
- On Martha’s Vineyard, All Eyes on Obamas’ Real Estate [Wall Street Journal] 
- Blackstone “warehousing” rent-stabilized apartments at Stuy Town [The Real Deal] 
- Expert panel endorses plan to stabilize SF’s leaning Millennium Tower [SF Chronicle] 
- Better Homes and Gardens Real Estate Gary Greene acquires Heritage Texas Properties [Housing Chronicle] 
- Jumbolair, the Fly-In Community in Central Florida, is For Sale [The Big Bubble Miami] 
- Appraisals may soon not be required on certain home sales of $400,000 and under [Housingwire] 
- A Primer on the Future of Fannie, Freddie [Wall Street Journal] 
- Home prices in some Virginia suburbs have shot up $100,000. Thank Amazon [CBS News] 
- How Amazon Could Transform the Tiny House Movement [Citylab] 
- Why the Homeownership Rate Is Misleading [NY Times] 
- Rent control critics warn about eventual destruction of New York City [NY Post] 
My New Content, Research and Mentions
- Long Island Home Flippers Sell to Each Other in Red-Hot Market [Bloomberg] 
- Should I Buy a Home Next to a Drug-Treatment Center? [NY Times] 
- After Years Of Brooklyn Apartment Oversupply, Construction Is Down And Rents Are Up [Bisnow] 
- ‘Iron Man’-Inspired ‘Razor House’ Sells for $20.8 Million [Mansion Global] 
- Airbnb Muscling Aside Brokers for Hamptons Summer Business [Wall Street Journal] 
- LI’s Gold Coast loses its luster [The Real Deal] 
- Unsold luxury homes are piling up in the Hamptons [Chicago Tribune] 
- Low interest rates are giving the housing market a boost [Yahoo Finance] 
Appraisal Related Reads
- What Does The Recent Change In The Appraisal Threshold Mean For Home Buyers? [Birmingham Appraisal Blog] 
- How Do Appraisers Qualify Comps? [Birmingham Appraisal Blog] 
- Dude, people want smaller homes (sort of) [Sacramento Appraisal Blog] 
- Your Next Home Might be Appraised by a Robot [Wall Street Journal] 
Extra Curricular Reads
- A visual guide to 20 seasons of Daniel Snyder’s Redskins ownership [Washington Post] 
- Richard Booth, Self-Crowned King of Used Books, Dies at 80 [NY Times] 
- Uber And Lyft Take A Lot More From Drivers Than They Say [Jalopnik] 
- Papa John’s: Now With Less Papa John [Dealbreaker] 
- A Q&A With the Man Who Called Bret Stephens a Bedbug [Slate] 
- Perspective | Andrew Luck made a brave decision, and he might inspire other NFL players to do the same [Washington Post] 
- Cop Diary [The Sun Magazine] 
- In Andrew Luck’s Retirement, Football’s Consequences Weigh Heavily [NY Times] 
- Scarface: The Shame of a Nation [Aurorasginjoint.com]