Respecting The Power Of The Housing Demand Wave

July 23, 2021

That sheer mass of water is the perfect analogy for the “wave” (sorry) of housing demand. Playing Pink Floyd’s “Time” makes it timely. The paddling surfboarders represent listing inventory.

But I digress…

Hamptons and North Fork Crushes It

Translation: a lot of records were set this quarter. Heavy sales, rising prices and inventory lows were the result.

I’ve been the author of the expanding Douglas Elliman Report Series since 1994 for real estate firm Douglas Elliman Real Estate. Throughout the past decade of coverage, Long Island and the North Fork have continued to see rising prices and sale trends while the Hamptons tended to parallel conditions in Manhattan – until the pandemic. Hamptons took off last summer and Manhattan didn’t start to recover until the new year (see a later post down the page with my favorite quote).

This week Douglas Elliman published our market research on the Hamptons and North Fork. The Hamptons coverage by Bloomberg ended up being the 13th most read by the 350K Bloomberg Terminal subscribers which is always exciting. The high readership showed how much interest Wall Street has on the Eastern Long Island housing market.

And of course CHARTS!!! A 2-fer this time.

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HAMPTONS HIGHLIGHTS

“Prices set records as sales levels remained high, but not at the intensity seen late last year.”

– Price trend indicators rose to new highs as sales surged year over year
– Listing inventory fell sharply to the third-lowest level in nearly fifteen years
– The market pace fell annually to the fastest moving market in fifteen years
– Bidding wars rose annually to their second-highest market share in five years of tracking
– While sales rose market-wide, sales from $1 million to $5 million range saw the highest market share in a decade
– Luxury listing inventory fell sharply as the market share of sales to close at the asking price reached a new high

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NORTH FORK HIGHLIGHTS

“Median sales price saw significant growth for four straight quarters along with a brisk market pace.”

– The number of sales posted four significant, consecutive year over increases
– Listing inventory fell annually to its third-lowest level in fifteen years of tracking
– The market share of sales that went to bidding wars was the third-highest in five years of tracking
– While sales rose market-wide, sales from $1 million to $2 million range saw the highest market share in nine years

Long Island Housing Market Continued To Boom

Newsday’s epic coverage of the Long Island housing market talked about rocket ships and bidding wars.

The Real Deal also jumped in with regional coverage and this cool graphic.

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LONG ISLAND HIGHLIGHTS

“Sales surged against a sharp drop in supply, sending prices to new highs.”

– Average and median sales price surged to new records, collectively for the fourth consecutive quarter
– Sales surged year over year for the third straight quarter as listing inventory saw a large drop
– The market pace fell annually to the third-fastest moving market in eighteen years
– Single family price trend indicators reached new highs as listing inventory fell to the third lowest on record
– Condo days on market from the original list date was the shortest on record
– Luxury listing inventory fell by its steepest annual rate for the third straight quarter to its third-lowest level on record

The Real Deal Shares My Favorite NYC Quote Of 2021

While I’m currently away on vacation, a friend texted me this photo taken from The Real Deal Magazine.

The Impact Of Climate Change On Housing: Luxury Takes The Lead

This Bloomberg piece: Why Hasn’t Climate Change Put a Dent in Luxury Real Estate? with the subtitle: “Preparedness meets presence meets private plane” shares some of my views on the relationship.

Although I grew up on the beach in Rehoboth Beach, Delaware, I developed most of my views on the relationship between housing climate change with a study I co-authored for the Urban Land Institute as well as first hand observations during Superstorm Sandy back in 2012.

This week I shared my thoughts on the impact of climate change on the housing market. One of the most noticeable changes was the replacement of damaged property on the waterfront with luxury housing.

Palm Beach Continues To Win The Super Luxury Housing Market Race

There was an epic Wall Street Journal piece today: Palm Beach Real Estate Is So Hot, at Least 22 Homes Sold for $40M-Plus Since Covid that is chock full of visuals of recent home sales.

The stories of record Palm Beach real estate purchases continue to fill the news cycle and are also well-chronicled by the Shiny Sheet.

Here’s a sense of the “coming to Palm Beach” narrative from the WSJ story:

Over the past roughly 16 months, buyers have poured billions of dollars into property in Palm Beach, a 16-mile barrier island off Florida’s Atlantic coast with roughly 2,500 homes. Since March 2020, there have been at least 22 sales north of $40 million in Palm Beach County, with two over $100 million and about 35 over $30 million, according to property records and data compiled by the Corcoran Group and Miller Samuel. Notable buyers include casino mogul Steve Wynn, software billionaire Larry Ellison, designer Tommy Hilfiger and finance-sector bigwigs such as hedge-funder David Tepper and investment-services entrepreneur Charles R. Schwab.

Here’s my raw semi-hidden list of sales I’ve collected for years that shows the scale of the recent $50M+ sales has surged.

Getting Graphic

My favorite charts of the week made by others

Appraiserville

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

The “Stupidest and Most Absurd Stipulation” In An Appraiser’s Career

An appraiser colleague and friend of mine attaches an aerial photo to all his reports and still has to provide this statement after a QC review said:

Appraiser must comment on if oil, gas and mineral leases or mining is noted in proximity to the subject. If none is noted, please state “No drilling or mining present in proximity to the subject.” Please add these comments to the report.

Appraiser’s comment to the reviewer

This is the most ridiculous stipulation I have ever experienced. This home is in the middle of [city] on a small high density residential lot. The reason we supply an aerial map is so the reader can clearly understand the surroundings of the subject property. But I will play so as not to harm or delay the borrowers loan application: “No drilling or mining is present in proximity to the subject”

The death of common sense is upon us.

MAIs Are Desired But Not Required

That kind of rhymes.

As the long time Appraisal Institute FOJs continue fight for personal gain at membership expense, we will continue to see the erosion in the brand value of their designations. The value of SRAs are clearly much lower now and we are seeing evidence of MAI branding deteriorate as well. This erosion is patently unfair to those designated individuals who have worked hard and spent both time and money maintaining these designations. I have been told by a number of MAIs that if the current FOJ sham petition process effort succeeds, they will drop their membership and rely on their other designations. This was an unthinkable move only a decade ago.

Just a random query shows how MAIs are relegated to a nice thing to have – these are higher level jobs (links will likely break soon):

Wells Fargo Commercial Reviewer / Appraiser


_____________________________

Wells Fargo Valuation Consultant 3

_____________________________

Citi Residential Real Estate Property Review Appraiser

_____________________________

And AI is always touting their international prowess as justification for all those first-class plane flights around the world with their spouses, here is a high-level position in Australia:

Citi (Australia) Property Valuations Officer

Obviously, this is an anecdotal sampling but I can assure you it was widespread and is cause for concern.

Rooting For Their Own Teams As AI Plans To Eat TAF For Lunch

The photo shows the C-Suite of both TAF and AI having a fun time gathering for a baseball game in Chicago. The irony should not be lost on anyone with some history of the anti-AI mantra that has been part of TAF’s DNA since at least 2007. TAF espoused that AI was the devil and of course, AI did and still wants to take control of USPAP (remember that USPAP is based on AI’s own code of conduct) and wet their beak with some of that USPAP associated revenue.

But this fun photo represents a different time for TAF. They are no longer in control of their future and needed to team up with their long-time nemesis to survive the near-term storm they created after sending that bat-shit crazy letter to the ASC.

I have met some of these individuals and they are nice people but there are many who don’t see the bubble they live in or have any interest in changing that view because they benefit personally.

Yet the media and the consumer do see the lack of diversity now and both of these organizations are extremely vulnerable and ripe for eventual extinction, but all these individuals will have retired by then.

I believe the vast majority of appraisers want the industry to survive but many industry leaders are focused on their own needs. The appraisal population is lacking leadership strong enough to address the changing world around us and that won’t change unless more appraisers speak their minds and express their discontent. There are a few vocal sycophants (aka crackpots) that are outside this bubble and desperately want in to the exclusive club. The majority of industry leaders remain loyal to the status quo of the past 30+ years. They continue to marinate in their own stew by constantly embarrassing themselves on appraisal forums and blogs in the hopes that they catch the eye of one of these leaders. These people do not represent the majority of our industry but they are vocal and quite damaging to our future.

The handful of appraisers that have gone after me here over the past few years suffer from The Dunning-Kruger effect.

The Dunning-Kruger effect is a type of cognitive bias in which people believe that they are smarter and more capable than they really are. Essentially, low ability people do not possess the skills needed to recognize their own incompetence.

Remember that the Appraisal Institute would like nothing better than to eat TAF for lunch, during any ballgame.

USPAP And AQB Under Review As Potential Leading Cause Of Industry Stunning Lack Of Diversity

The Appraisal Subcommittee published a press release today: “Review of Appraisal Standards and Appraiser Criteria; Focus on Fairness, Equity, Objectivity and Diversity”
Here’s a tidbit: a key mission of the TAF mission has been “to advance the valuation profession by setting standards of excellence, promoting education and upholding the public trust.” The “upholding the public trust” part, after all we’ve seen in TAF’s actions is being called into question. How can anyone reasonably say TAF has been successful at “upholding the public trust” based on the current low level of trust directed towards the profession, most notably after TAF sent the bat-shit crazy letter to ASC. Appraisers around the country a being attacked or at a minimum, inferred as racists in news articles – TAF optics are so vulnerable and their response so generically bureaucratic and lame that appraisers are left twisting in the wind.

The key ASC effort here is:

These Standards, found in the Uniform Standards of Professional Appraisal Practice (USPAP),
and Criteria, found in the Real Property Appraiser Qualification Criteria, are being reviewed to
determine whether they, as currently established, ensure and promote fairness, equity,
objectivity, and diversity, in both appraisals and in the training and credentialing of appraisers.

This is a welcomed and groundbreaking effort, an important first step to address the lack of diversity of our profession. The Appraisal Foundation is the key creator of the problem itself through the monarchy of leadership and bureaucratic quagmire that equates appraising with rocket science-like requirements for more than three decades.

After all, an industry that has the least diversity of all according to BLS was enabled through the TAF bureaucracy that has consistently expanded over more than three decades, and now, with the evolution in social mores and sudden awareness of the lack of diversity, have made appraisers very vulnerable to extinction.

Many appraisers in response have toiled writing blog posts that emphasized making the argument that there is no systemic racism in the industry and attacking the false narrative that all appraisers are racist. They are pushing back on the lack of connecting the dots that the infamous and non-vetted Brookings Study makes. Yet they continue to miss the point of how to solve the problem. A bunch of middle-aged white bloggers saying they are not racists is essentially preaching to the choir, not the public, regulators, or the affected minorities. While it is good to add information to the dialogue, it won’t solve the actual problem of the lack of diversity. The real problem is that the optics created by TAF have been one step below horrible because they are trapped within their own bubble.

The public face of the profession is The Appraisal Foundation and The Appraisal Institute. They have shown a consistent lack of diversity throughout their history and have demonstrated resistance in changing that. And now when it matters most, when appraisers are depending on them to push back against being marginalized, the industry has no credibility and isn’t addressing the lack of diversity in fundamental ways.

It has come to light that current Appraisal Institute CEO Jim Amorin shut down the diversity committee in 2015 because it became a threat to his power. Current AI president Rodman Schley has been out front trying to lead the organization ahead on this topic but a sham petition process enabled by Jim Amorin is trying to stop him. The Appraisal Foundation President Dave Bunton finally allowed an African-American to join the Appraisal Qualifications Board after being in total power for more than 30 years – all board choices are informally vetted as to whether they are FODs (Friends of Dave Bunton).

The closing of the ASC press release says it all:

This review is a high priority for the ASC and is being undertaken as part of an administration wide evaluation of the appraisal profession to ensure that the federal government is doing
everything in its power to discourage bias and consistently support fairness, equity, objectivity,
and diversity in appraisal practices nationwide.

From My Matrix Blog: MORE AMORIN INFLUENCE (MAI): The AI National Nominating Committee Design Is Being Attacked By FOJs

Here is a letter (below) that I also posted over at Matrix Blog earlier this week. If you haven’t read it, please do.

To all members of the Appraisal Institute:

Before I start, I wanted to share what the Appraisal Institute’s MAI designation is referred to by many of its members. I learned these two from an MAI instructor years ago (pre-merger) who told our class (as if to motivate us?) that MAI stands for:

MORE ANNUAL INCOME
MADE AS INSTRUCTED

And now…

MORE AMORIN INFLUENCE

Over the last five years, I have frequently been writing about the corruption and self-dealing of the largest appraisal trade group in the U.S., whose membership has fallen by a third over the past decade. Since 1997, the leadership has been largely comprised of the same people moving in and out of leadership positions, enjoying lucrative teaching contracts, enjoying compensation as much as double the market rate, expense reimbursements not consistent with corporate and competing organizations, lots of first-class plane flights to Europe, Asia, and other locations with their spouses, all paid for by the hard-working membership who is not clear about what is happening in Chicago headquarters because they are not told.

There is currently another sham petition process underway to prevent Steven Stiloski, the thoroughly vetted choice of the NNC (the second year in a row this sham petition process was utilized), from becoming Vice President. Steven is representing the choice of the membership. Sandra Adomatis, who by entering the election, no matter what her intentions were, can not be blind to the political poison of this sham petition process and becomes an FOJ by default, no matter how qualified she or her backers say she is.

Remember that the sham petition process places the thoroughly vetted NNC candidate on EQUAL FOOTING with someone Jim Amorin puts into the sham petition process or even someone that self-nominates. Incredible.

Smartly, CEO Jim Amorin chose to limit the exposure to the membership by placing it at the end of the membership newsletter in June (I wrote about this several weeks ago in an earlier version of Appraiserville). And I’ve been told it also appeared in a membership email from the president on June 25th.

So I thought I’d explain one of the things that FOJs (Friends of Jim Amorin) are trying to dismantle because of their eagerness to serve at the pleasure of the current CEO, Jim Amorin.

Let me define what an FOJ (Friends of Jim Amorin) on the Board of Directors is in case the membership is not familiar with this term I coined:

– FOJs are resume builders only, actively running the once-proud organization into the ground for their own personal enrichment.
– The current FOJs on BOD have not filed a single motion – in other words, they do nothing but the bidding of the CEO Jim Amorin.
– They don’t represent diversity, especially the actions of all the women who signed the sham petition process to push for Sandy because it will result in less diversity – remember that the CEO scuttled the diversity committee run by Bob Stevens in 2015 because it was a threat to his hold on power.
– FOJs don’t bring any new ideas to the board or to leadership – they are only on the board to vote “no,” so they will get their committees and puff up their resumes.

Remember that Jim Amorin makes over $500k, and using comps of CEOs at reasonably similar organizations, his salary is nearly double the market rate – and membership is forced to pay that. And consider his FOJ enablers like past president Jeff Sherman, who whined in a board meeting against suggestions that the organization begins to stop paying travel expenses of spouses (which is NOT done by corporate America, incidentally). Finally, remember that FOJs need the CEO to remain in power to get their perks and, basically, to hell with the membership.

Jody (Super-Duper) Bishop gets to select the incoming open positions (about 50) and invite the membership to look at those he selects. Because if Jim Amorin wins this sham petition process and Jody selects all FOJs, then the Appraisal Institute will have zero diversity in the future, and both Bishop’s and Schley’s legacies will be tarnished for the remainder of their professional careers.

Significant diversity initiatives are coming from the new presidential administration, and social mores are shifting too. Current president Rodman Schley has been driving the AI’s presence in the discussion, which keeps AI relevant. All that is for nothing if the sham petition process succeeds in keeping the NNC vetted selection from being duly placed in leadership.

The NNC (National Nominating Committee) is comprised of one member from each of the ten regions. The chairman of the NNC is the immediate past president but has a non-voting role. If there is a tie, the executive committee gets to be the tiebreaker with three votes (Super-Duper Bishop, Craig Steinley, and selection after the sham election process is decided).

The NNC is one of the good governance things that happens in Chicago. This committee is Kryptonite to CEO Jim Amorin, and he has worked hard to weaken it but has failed so far. In the past, he has made the following attempts to weaken the NNC:

– Narrow the number of leaders
– Narrow the number of regions
– Propose focus on other sources of future leaders

The beauty of the NNC structure is that members of the Board of Directors have to wait six years after they roll off the board before they can serve on the NNC. This has been problematic for Jim Amorin because he can’t get his FOJs onto the NNC easily (it takes too much time) to do what they do now on BOD and live a dishonest professional life of quid pro quo. Of course, in turn, for doing Jim’s bidding, they get lots of perks.

The practice of Jim doling out choice positions in return for an FOJ’s ethical soul – they’re not much different than a sociopath in my book – because FOJs have no moral compass and think that outsiders can’t see what they are doing. By definition, FOJs do not care about membership or the direction of the institution. It’s all about getting what they want because they are aligned with the person who does things to keep themselves in power at the membership’s expense. The CEO is very skilled at that.

And to the handful of FOJs that have reached out privately and given me crap about calling out this malpractice of the organization, don’t worry, I will always honor my agreement to keep your name out of this conversation as promised. I am a man of my word. But remember, every one of you is only doing it to preserve the benefits you get from keeping Jim Amorin in power. You have no moral ground beneath you in this debacle. FOJs have placed their self-interest above the membership and the future of the organization. And with that, many FOJs don’t seem to understand how the sausage is made, so they are even more vulnerable to manipulation by the CEO.

And this toxic hypocrisy has seeped into RNC (regional nominating committee) process too. Take Region V, for example. There was a bitterly close election on July 9th. The region selected an FOJ back in April to be in line to be considered for the NNC eventually. And then Jean Gannon, a non-FOJ, threw her hat in to compete with the FOJ candidate, much like the sham petition process I talked about. But this time, the shoe is on the opposite foot for FOJs. Because the Non-FOJ candidate was a threat to the FOJ candidate, two of the “Hateful 8” FOJs, Region V Chair Claire M. Aufrance, and Region V Vice Chair Heather Placer Mull, fought against the regional petition process because they said they believed in (paraphrased) “the sanctity of regional integrity.” LOL.

In other words, these two leaders of Region V believed in the “integrity” of the regional nominating process but could care less about the national nominating process. Why? Because it was convenient (and essential) to their role as FOJs. Their hypocrisy should not be lost on you as it is clearly lost on them. They readily can push aside a non-FOJ candidate but then sign the sham petition process at the national level. These are two of the FOJs who play the game well – they do as they are told by the CEO and appear to be there purely as FOJs and not as leaders to move the organization forward.

The hypocrisy that Aufrance and Mull have shown begs the question: Is this the type of people that should be anywhere near a Board of Directors position or regional leadership?

Oh, and it gets worse.

Board of Directors member Trevor Hubbard has been working the room to get the Appraisal Institute to get rid of its residential members. No one I know has any idea why. I find his efforts consistent with the disrespect and lack of attention that residential membership has experienced since the Jim Amorin era began in 2007. After all, we’re still waiting for any feedback from the sham residential appraiser committee that Jim Amorin formed to help diffuse the anger of their 2016 money-grab to take all chapter funds.

Ironically, I’m told Trevor pushed Sandy, a residential appraiser candidate (even if she self-nominated) to offset the NNC vetted commercial appraiser candidate because her credentials checked the boxes that might not get the same pushback as a male commercial appraiser candidate. The hypocrisy here is that this Uber FOJ was so desperate to prevent the NNC vetted selection from being finalized that he had to use a residential appraiser to do it, despite his disdain for them – to get rid of them from the organization. This is Hubbard’s second time on the sham petition process rodeo. His actions show his extreme desperation to remain relevant in the Appraisal Institute. He was willing to be a hypocrite in the sham petition process to keep himself relevant and get rid of residential appraisers.

Trevor’s public anti-residential appraiser stance showed that he would happily do the bidding of Jim Amorin even if it meant using a residential appraiser to do it. There is a lot at stake here. Losing this sham petition process to Steve would jeopardize the position of all FOJs, including Trevor, whatever his beliefs about the residential versus the commercial future of the Appraisal Institute happen to be.

You can see why Trevor’s idea could have legs given the big fall-off in residential membership during the Amorin era and how much SRAs have been ignored and looked down on as second-class citizens. As of now, there are only about 3,000 SRAs out of the roughly 17,000 total members. Pathetic.

Bottom Line: The FOJ gravy train stops if Sandra (FOJ backed candidate) loses and Steve (NNC vetted choice) is confirmed – to FOJs, their actions indicate they care nothing about the dues-paying hard-working membership. The CEO gravy train is all FOJs care about.

Membership has to stop the FOJ gravy train by loudly speaking out against this sham petition process right now – loud and proud. Remember that Jim Amorin scrubbed the regional contact page of all phone numbers and emails for this very reason. He knows the scrubbing was done because he and the board reads every one of my posts about The Appraisal Institute. The AI tech people report to him directly and he has chosen not to return the contact information to the website, thus demonstrating the ethics of the operations leadership of AI is basically zero.

Remember that the complacency of AI membership in the past allowed FOJs to remain in power and get quite financially comfortable. Strong action by the membership today gets FOJs out of power and the organization on the road to recovery and back to relevancy.

The Appraisal Institute is in the hands of membership now – they need to choose the right path for the future of this once great organization. Please make this moment count – it’s your last chance to make yourself heard.

OFT (One Final Thought)

Notice the modest size of the cars parked around this humble abode.

Brilliant Idea #1

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See you next week.

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

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