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December 28, 2018

Housing Is Skating On Thin Ice And A Private Resolution

This year I tried to come up with a New Year’s resolution that would stick. Since I see resolutions as a private thought – like those wishes we keep secret when blowing out the candles on a birthday cake – I’ll spare you the details and get down to business. But first…

…on the day after Christmas, I began ramping up for the market report gauntlet in January. Real estate firm Douglas Elliman releases over 30 of the research reports I author. But I couldn’t focus on that until I…

…figured out how to:


But I digress…

Year End Listicle Fever

Every year at this time we are exposed to a lot of real estate lists to close out the year. We like to look back to see where we came from and look ahead to where we might be headed. In the real estate world, this has to include super high-end sales with “pie in the sky” prices. (note to my Columbia grad students of last spring who learned that pie was better than cake so it follows, as a New York Times journalist once shared a deep thought, “pie in the sky is better than cake on the ground.”) Who knew baking was so philosophical?

But I digress again…

Manhattan

While I contributed to the article and was quoted several times including in the title, I have a confession to make: I’ve never been on the autobahn [6] (but aspire to).

[5]

[7]

There was even a fun discussion about the article by reporters at Bloomberg.


It was even cooler that Bloomberg news used my chart online where I listed the highest Manhattan residential sale for each of the three primary property type going back to the 1980s. You can see three distinct periods of luxury prices: 1980s/1990s, Nasdaq to Lehman, Post Financial crisis. So what will the next boom look like? My chart helps contextualize how detached these high end sales are from housing for mere mortals.

[8]
[click to expand]

Palm Beach

Palm Beach seemed to represent the case that despite the economic turbulence and jittery stock market, the high end seemed unphased.

“I think there’s no doubt that 2018 has proven to be a record-breaking year, in terms of the number of transactions, the dollar value of those transactions and the market in general,” said newly installed Palm Beach Board of Realtors President Jim McCann, an agent at Premier Estate Properties. “And contracts are being written, which is encouraging. Despite the recent stock market gyrations and rising interest rates, there are still a lot of reasons for people to buy in Palm Beach.”
Los Angeles

It’s kind of amazing when the lowest priced house on a top 20 list is $28.5 million. It is also very amazing how the must-read luxury real estate blog Yolanda’s Little Black Book [11] has burst into public awareness.

Economic Indicator of the Year: Housing

“The Indicator” is one of my favorite “explainer” podcasts. Each episode is short and to the point. Although this one is basically a Redfin PR pitched story, it is still worth a listen.

The key question on everyone’s mind is: Why is housing so detached from the economy?”


Defining Middle Class

One of the biggest soft spots in our economy is the middle class. Lack of housing affordability is crushing them. How is it defined [12]?

[13]

[Howmuch.net]

A “Certificate of Sanity” Tells You All You Need to Know about Russian Real Estate

If you are a real estate agent, broker, buyer or seller in the U.S., please read this article in its entirety [14] and then be thankful.

[14]

Back in 2006 [15], I was sourced for a New York Times article on Moscow real estate [16] – how it was advisable to have the buyer and seller certify that they were not drunk at the closing.

I’m not sure if the “Certificate of Sanity” covers the doctor’s note proving sobriety at the closing. And how do you digitize this process? Exhale into a breathalyzer at the title company?

Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC [17] site.)

A shout out to all my appraiser friends and colleagues during this holiday week. Nothing specific this week to rail against, largely because my brain is fried from learning how to use all the gadgets I got for Christmas.

For those that have shared news or bad practices with me, look for discussions on these and other issues appraisers are facing in the coming weeks of the new year.

The Last Line of Defense

As I wrote recently, we learned a lot about both our industry and ourselves in 2018. We do provide an invaluable service to the lending community even though most of the mortgage industrial complex doesn’t appreciate or want it, largely because of the moral hazard generated by the taxpayer bailouts of 2008. Our expertise will be shifting to the consumer in the near term with some snapback to mortgage work after this all ends badly in the not so distant future. We just can’t sit around and wait for it. As was said in the movie “The Shawshank Redemption” we need to:

Get busy living or get busy dying.

I prefer the former, after all, we appraisers are the last line of defense for fraud.

In the current edition of mortgage fraud 2019, the regulators are leading the charge for removal of underwriting guardrails rather than the banks themselves. This is being done in the name of generating more mortgage volume to enjoy more fees. Falling mortgage rates over the decade resulted in falling loan volume because low mortgage rates were not the solution. Banks don’t trust the economy and the government any more than appraisers do.

This reckless behavior being pursued by regulators is all out in front of us to see and we as an industry need to point it out.

Appraisers are essential to help maintain the public trust, especially in the banking system, even as the regulators move away from safe practices. Exposure to consumers/taxpayers is expanding.

I am looking towards 2019 as a period of real opportunity from consumers for appraisers who seek it out, despite the repetitive mantra from large comprised institutions.

OFT (One Final Thought)

When you run out of things to do this week, try thinking of the purpose of chimes.

[18]

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 [19]. 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. Oh, and HAPPY NEW YEAR!

Jonathan J. Miller, CRP, CRE, Member of RAC [20]
President/CEO
Miller Samuel Inc. [21]
Real Estate Appraisers & Consultants
Matrix Blog [22] @jonathanmiller [23]

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