Housing Is Like Dogs Jumping From Trees
It’s a surreal housing market out there but someone always figures out how to get that ball.
Barkour! pic.twitter.com/HrUW4GQ1mY— Zack Bornstein (@ZackBornstein) February 9, 2020
But I digress…
Manhattan, Brooklyn and Northwest Queens Rents Rose Sharply
I’ve been the author of the expanding Douglas Elliman market report series for twenty-five years and the Manhattan, Brooklyn & Northwest Queens rental report is the only monthly report we produce. The bulk of our report series is released on a quarterly basis.
Elliman Report: 1-2020 Manhattan, Brooklyn and Queens Rentals
Mansion Global produced a clear summary table that shows that 96% of the market is seeing sharp gains in the median rental price. Robust rental conditions are being created by a weak sales market.
A Douglas Elliman infographic for the report:
It is too soon to see the impact from last week’s New York Department of State guidance on the Statewide Security and Tenant Protection Act of 2019 and a subsequent temporary restraining order issued after real estate industry trade groups and firms filed a lawsuit to stop its execution.
MANHATTAN RENTAL MARKET HIGHLIGHTS
“New leases continued to fall as landlords continued to be more successful at the time of lease renewal.”
- The market share of landlord concessions slipped for the twelfth time in thirteen months
- The number of new leases fell year over year for the sixth straight month
- The net effective median rent rose annually for the thirteenth consecutive month
- New development median rental price rose year over year for the ninth straight month
- Median rent for new development increased more year over year than existing rents in ten of the last twelve months
- Luxury median rent hasn’t seen a year over year decline since last March
BROOKLYN RENTAL MARKET HIGHLIGHTS
“The market share of landlord concessions fell year over year for the thirteenth straight months.”
- The net effective median rent rose annually for the fourteenth straight month
- Thirteen consecutive declines in the market share of landlord concessions
- The fifth time in six months the number of new leases declined as landlords were better able to retain tenants at renewal
QUEENS RENTAL MARKET HIGHLIGHTS
“Six straight months of year over year declines in new lease signings.”
- The market share of new development reached its lowest level since the summer of 2018
- Net effective median rent increased annually for the third time in four months
- Concession market remained above the fifty percent market share threshold for the third straight month
We Just Added Another $100M+ U.S. Sale to the List
With the proliferation of $100 million+ home sales, I’m starting to feel like a red carpet paparazzi. Jeff Bezos of Amazon just purchased an LA home for $165 million home, not including a nearby $90 million plot of land.
This home sale isn’t remotely connected to the local housing market in any way despite this broker quote:
“The Geffen sale will really help the high-end,” Hyland said.
If we are talking about this super-luxury market, perhaps but it has nothing to do with the “normal” high-end market.
The first known $100 million+ sale occurred in 2011 and by 2014, the market segment was formed. The 2019 market was the high water mark with contributors from LA, New York, and Palm Beach.
Manhattan’s Upper East Side Condo Market Performance Is Quite Bifurcated
I was speaking to a crowded room of real estate professionals on the Upper East Side – here’s a snippet.
Mortgage delinquencies correlate with unemployment and therefore remain low
MBA released its latest National Delinquency Survey – for the fourth quarter of 2019 – earlier this week. Mortgage delinquencies track closely to the U.S. unemployment rate, and with unemployment at historic lows, it’s no surprise to see so many households paying their mortgage on time.
The Mallpocolypse Is Real
When I was in DC this week, I listened to a presenter from the Atlanta Fed talk about retail real estate risks and malls were front and center. A few years ago this topic was seen as sensationalist as was the phrase “retail apocalypse,” but no longer. The scale of the problem is apparent in the following table, where the vast majority of mall properties are rated “B” or lower.
Here are several good reads on the topic. h/t @ritholtz
Never Mind the Internet. Here’s What’s Killing Malls. [NYT]
In short, the broad forces hitting retail are more a lesson in economics than in the power of disruptive technology. It’s a lesson all retailers will have to learn someday — even the mighty Amazon.
Retail Apocalypse Hits High End Malls, Leading to Landlord Deal [Bloomberg]
The fallout from the retail apocalypse is putting pressure even on high-end malls.
As bankruptcies and store closures pile up among brick-and-mortar retailers, investors are increasingly concerned about mall operators. For the most part, those worries have centered on the landlords who operate dying malls.
How chain stores are rightsizing New York City retail [Retail Dive]
An analysis of stores in New York City last year revealed that the number of national chain stores operating in the retail destination had dropped a notable amount. That the entire retail industry is in flux is not a secret, but the drop in one of the countries top retail destinations sparks a larger question: Is the decline of national retail brands in New York City a regional problem, or endemic of a larger retail shift?
Our favorite charts of the week
With today's benchmark revision, there was still a modest increase in payroll growth in 2018 over 2017. The 2019 average was essentially unchanged. Job growth has been remarkably steady for the past four years. pic.twitter.com/I44FdiLTVp— Jed Kolko (@JedKolko) February 7, 2020
Len Kiefer‘s Chart Handiwork
thanks— 📈 𝙻𝚎𝚗 𝙺𝚒𝚎𝚏𝚎𝚛 📊 (@lenkiefer) February 13, 2020
flip flop pic.twitter.com/Q1LmUh9K0X
US 30-year mortgage rates running at the lowest monthly average since September 2016 pic.twitter.com/NZ9JLXPxg1— 📈 𝙻𝚎𝚗 𝙺𝚒𝚎𝚏𝚎𝚛 📊 (@lenkiefer) February 13, 2020
(For earlier appraisal industry commentary, visit my old clunky REIC site.)
GAO to Study The Dilution of Intent of Title XI
In December, The Appraisal Foundation requested the House Financial Services Committee take a look at the dilution of the intent of Title XI. This week the Financial Services Committee directed the Government Accounting Office (GAO) to provide a study on the dilution of the 1989 intent of Title XI.
From the House Financial Services Committee:
“The Appraisal Subcommittee (ASC), the entity created and charged under Title XI to monitor the appraisal related actions of the Federal financial institutions regulatory agencies (Agencies), estimated in its 2018 report to Congress that ‘at least 90 percent of residential mortgage loan originations are not subject to the Title XI appraisal regulations,’” the lawmakers wrote. “Over the past few decades, however, the federal agencies charged with implementing Title XI of FIRREA have taken steps to limit the number of transactions for which an appraisal is required….We request that you conduct a review of the impact of these changes, including the potential risks that they pose to homeowners and the safety and soundness of our financial system.”
As a reminder, the original de minimus in Title XI was $15,000. It is now $400,000. That is a $2,567% increase over 30 years (1989-2020). Using the FHFA Home Price Index, home prices have grown 182% from 1991-2019, a similar period.
In other words, the de minimus has risen 14 times higher than housing prices. I’d say Congress’ original intent has not been followed.
Phil Crawford Interviews The Cosmic Cobra Guy
The author of “Dispatches From The Cosmic Cobra Breeding Farm” lays out his case against The Appraisal Foundation on Phil Crawford’s Voice of Appraisal. It is quite compelling reasoning and a good read. I got a lot out of it.
However, I am troubled by the author’s bias in rationale. Where he falls short is trying to explain why he doesn’t hold AI, IRWA, and ASFMRA to the same standard as TAF. The logic Jeremy uses is that he can quit those trade groups and he can’t quit the foundation and still be an appraiser. That’s quite a disingenuous argument.
In the real world, if I didn’t have an MAI as a partner in our commercial practice (I’m a CRE), we wouldn’t get commercial work from most, if not all financial institutions no matter what the regulations are. That’s a fact. The MAI designation is embedded in many state laws and CMBS regulations. That’s a fact. I’ve written about how AI scared designation holders who might speak out against them because their designation is a building block of the designation holder’s livelihood. That’s a fact. Although for my latter point, admittedly I’m getting a better feeling about AI with some of their new leadership and board members. Fingers crossed.
We All Use A Periodic Table of Data Elements
Earlier this week I represented RAC (Relocation Appraisers & Consultants) at the Appraisal Subcommittee (ASC) Roundtable held at the OCC. The ASC is the financial link between congress and The Appraisal Foundation. Over 50 agency representatives that connect to the mortgage process were there to discuss data.
Lee Kennedy of AVMetrics, a firm that tests AVMs moderated a panel on the topic of data. Lee’s presentation included a terrific slide that was shared with the attendees.
Setting The Standard For Telling The Story Of The Market
As the mortgage industry pushes to wigdetize appraisers, the cream of the crop are straying from mortgage work and not looking back. Many of us (appraisers) possess an invaluable level of knowledge that agents and consumers are hungry for but are unable, unwilling or afraid to share it.
My friend and appraiser colleague Ryan Lundquist in Sacramento shows all of us how to give a presentation (that he was generous enough to share). Please watch and take notes.
OFT (One Final Thought)
I’m begging you to watch the whole clip. You just never know when it will be your last conversation with someone.
Brilliant Idea #1
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Brilliant Idea #2
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Reads, Listens and Visuals I Enjoyed
- It’s Time to Get Rid of NYC’s Rental Broker Fees for Good [New York Magazine]
- Never Mind the Internet. Here’s What’s Killing Malls. [NY Times]
- Retail Apocalypse Hits High End Malls, Leading to Landlord Deal [Bloomberg]
- How chain stores are rightsizing New York City retail [Retail Dive]
- Looking for a New Place to Live? This Is What $165 Million Buys [Wall Street Journal]
- Save our city: Stop making it so damn hard to build [NY Post]
- Jeff Bezos Sets Record With $165 Million Beverly Hills Home Purchase [Bloomberg]
- Jeff Bezos buys David Geffen's Beverly Hills estate for record $165M [The Real Deal]
- WSJ News Exclusive | Jeff Bezos Buys David Geffen’s Los Angeles Mansion for a Record $165 Million [Wall Street Journal]
- The 10 best cities in the U.S. to move to right now [Curbed]
- Billionaires' Row property taxes would dramatically increase under proposed system overhaul [6sqft]
- ‘Full House’ home gets a price cut in San Francisco [LA Times]
- More people are taking cash out of their homes [Marketplace]
- U.S. Household Size, at a Record Low, May Finally Be Bottoming Out [Bloomberg]
- Falling Rates Could Boost Mortgages Ahead of Spring Selling Season [Wall Street Journal]
- New York’s Broker Fee Ban Rattles Real Estate Industry [The Real Deal]
- NYC Brokerages Struggle Over Rental Commission Rule [The Real Deal]
My New Content, Research and Mentions
- Gallery: A is for art for agents, B is brokers go back to school [Real Estate Weekly]
- Douglas Elliman Releases January 2020 Rental Market Report for Manhattan, Brooklyn and Queens [Citybizlist]
- NYC rents 'up sharply' across all apartment sizes in January [Brick Underground]
- New York’s ridiculously high rents still a thing in 2020 [Curbed NY]
- Tiny home in Boston’s South End asks just under $430,000 [Curbed Boston]
- Manhattan Luxury Rentals Saw a Price Hike in January [Mansion Global]
- Jeff Bezos reportedly dropped $165 million on a mansion that broke the LA real-estate record. Here are the 17 most expensive homes sold in the US over the past decade. [Business Insider]
- Jeff Bezos reportedly just bought the most expensive home ever sold in California — after spending nearly a year touring mega-mansions [MSN]
- NYC Billionaires’ Row Could See Property Taxes Quintuple Under Proposed System [Mansion Global]
- A Massive Full-Floor Penthouse in Fort Lauderdale Lists for $35 Million [Mansion Global]
- Con base en otros periodos, expertos pronostican un declive inmobiliario causada por elecciones presidenciales [El Diario NY]
- Duncing About Architecture [New Republic]
Recently Published Elliman Market Reports
- Elliman Report: Manhattan, Brooklyn & Queens Rentals 1-2020 [Miller Samuel]
- Elliman Report: Manhattan Decade 2010-2019 [Miller Samuel]
- Elliman Report: Manhattan Townhouse 2010-2019 [Miller Samuel]
- Elliman Report: Venice + Mar Vista Sales 4Q 2019 [Miller Samuel]
- Elliman Report: Malibu + Malibu Beach Sales 4Q 2019 [Miller Samuel]
- Elliman Report: Los Angeles Sales 4Q 2019 [Miller Samuel]
- Elliman Report: Aspen + Snowmass Village Sales 4Q 2019 [Miller Samuel]
- Elliman Report: North Fork Sales 4Q 2019 [Miller Samuel]
- Elliman Report: Hamptons Sales 4Q 2019 [Miller Samuel]
- Elliman Report: Long Island Sales 4Q 2019 [Miller Samuel]
Real Estate Blockchain
- Loopy Libra [econ70]
- “A Blockchain solution for the technology war between China and the US “ [Econbrowser]
Appraisal Related Reads
- 2-7-20 Newz: Obsolete Appraisers – Apartment AVMs – Outlier Sales [Appraisal Today]
- Continued inventory shortage [Ann Arbor Appraisal]
- How do I find a good home appraiser? [Consumer Home Value]
- Legacy Appraisal vs Data Science Approach? [George Dell]
- Is Achieving Home Ownership in Danger? [Ask An Appraiser]
- Dealing with Price Shoppers [Working RE]
- 6 Ways Floor Plan Sketches Can Help Birmingham Rental Companies [Birmingham Appraisal Blog]
- Crack in the Foundation? Deep Dive Into the Appraisal Regulatory System [Phil Crawford]
- Think It's Okay to Do Bifurcated Hybrids? Georgia Fines Hybrid Appraiser! [Mike Ford/Appraisers Blogs]
Extra Curricular Reads
- Every employee’s worst nightmare, getting outed on Glassdoor, could become a reality [Fast Company]
- How to Fake a Traffic Jam on Google Maps [VICE]
- Banksy Is a Control Freak. But He Can’t Control His Legacy. [NY Times]
- Yield-Curve Inversion Is Sending a Message [Bloomberg]
- Are WeWorks in Revolt Now That the Company Is Taking Away Free Beer? A WeWork Tenant Explains. [Slate]
- Jane Smiley, The Art of Fiction No. 229 [The Paris Review]
- Here is why you should swear at work, according to science [Fast Company]
- Google Wants to Pour Money Into San Jose. The City Has a Few Demands. [Wall Street Journal]