Spinning Housing Inventory Counterclockwise
When my 3rd oldest son went on a week long middle school trip to East Africa near the equator, we had an important father-son discussion – as all fathers and sons would have before such an adventure to the other side of the world – to confirm whether the direction toilets flush below the equator is the same as above the equator. This was a decade ago, but he could capture low res video on his phone. When he returned, he indeed confirmed the flush direction as opposite of ours and documented the reverse spin on video. Unfortunately, we could never figure out how to extract it off the phone so you’ll have to trust us.
Scientific American also addressed this issue as any important scientific publication would and apparently it is not true so we are confused. Apparently, the Coriolis force only impacts on a larger scale like tornados on occasion. Still, astrophysicist Neil deGrasse Tyson proved it using a spurious correlation with revolving doors.
But I digress…
2Q Housing Market Report Gauntlet: Week 4
This week was the final of a long month 32+ market report gauntlet I author as part of a growing series for Douglas Elliman Real Estate I began in 1994. This week we published research for the Hamptons, North Fork, and Long Island New York; Aspen, Snowmass Village Colorado; The Westside and Downtown areas of Los Angeles including the sub markets of Venice, Mar Vista, Malibu and Malibu Beach. The links to all these reports are found at the bottom of the newsletter.
Let’s start with the Hamptons. Like Manhattan, Brooklyn, and Greenwich, Wall Streeters love the Hamptons. Coverage of our report reached at least the 8th most read spot on all Bloomberg Terminals world wide – there are about ±350,000 subscribers.
While the single family housing market set a new record of $1,070,000, the number of sales above $5 million surged. The high-end market had been largely dormant in 2016 so the uptick in high-end was somewhat unexpected.
For a lot of housing market charts, visit our chart gallery.
The Steady Upward Grind of Long Island Housing Market
A few days ago I whipped up the following chart for my interview with Newsday on Douglas Elliman’s Long Island report that I authored. I wanted to better illustrate how home prices are rising steadily and not seeing the explosion in price trends that we saw during the housing bubble a decade ago:
This year’s gains are not creating a bubble since strict mortgage lending standards are keeping a lid on the market, Miller said.
Note the slow grind rather than significant volatility before the financial crisis. Unfortunately, my compiled data only goes back to 2003 but I have raw data back to the 1980s.
A quick tour of Los Angeles
Speaking of Los Angeles, have I got a tour for you. If you want to take a [fast] tour of LA, ride with Ken Block and see the city in a different way (if you like burnt rubber). He doesn’t seem to be too concerned about the Coriolis force in his spins. Scientific-American needs to look into this.
Starting Points for Select Luxury Housing Markets
To gain perspective of some of the highest priced housing markets I cover for Douglas Elliman, here is a table of some of their starting points. I define “luxury” for purposes of these reports as the top 10% of all sales in a given period. The numbers represent the starting point or bottom of the top 10% of each market in 2Q 2017. Hamptons high-end used to feel very expensive relative to other markets until you see where it sits.
Charting San Francisco’s Gentrification
Constantine A. Valhouli of Neighborhoodx (I’m on their advisory board) pens a fascinating piece on how to look at and measure gentrification at the neighborhood level in Charting gentrification in San Francisco: Using metrics, not punditry.
He explores the price per foot/rent per foot ratio. Lower ratios mean more favorable for investment properties. Higher ratios mean more owner occupancy.
If fundamentals remain intact, transitional neighborhoods will continue to emerge (and as restaurants, bars, and lifestyle retail options proliferate) and these will begin trading at ratios closer to more established neighborhoods. In other words, while both rents and purchase prices will continue to rise, the purchase prices will likely rise faster than rents.
I have done this analysis in Manhattan for a long time but not by neighborhood…yet.
Comparing Incomes to Home Values
There’s a pretty cool interactive chart on ratios and affordability. But before we get there, here’s a screen shot for NYC.
Guess which dot represents Manhattan? Yet Brooklyn is less affordable than Manhattan, ratio-wise.
New York City, with its five boroughs, is also interesting to look at. Here they are ranked by price-to-income:
Kings County (Brooklyn): 11.8 (House value: $570,000, Income: $48,000)
New York County (Manhattan): 11.7 (House value: $849,000, Income: $73,000)
Bronx County (The Bronx): 10.6 (House value: $363,000, Income: $34,000)
Queens County (Queens): 7.8 (House value: $450,000, Income: $58,000)
Richmond County (Staten Island): 6.0 (House value: $440,000, Income: $73,000)
Several months ago, Housingwire hosted a controversial webinar that seemed to represent all that was wrong with the perception of appraisers and the patently false “appraiser shortage” narrative that was being pushed out by REVAA and AMCs across all mortgage related publications. Even the Appraisal Institute – long known for the reputation of being dismissive of its residential membership – talks about the shortage after forming their fact finding committee to address how to better represent residential appraisers in the organizations.
The only useful information that came of the previous webinar was the presentation by Matt Simmons, a former Florida state real estate board member and active appraiser and Zach Dawson of Fannie Mae (who I recently had the pleasure of speaking with in person). The rest of it was largely AMC misinformation babble and silliness. I angrily took to social media and email as did many of my friends and colleagues, to express out outrage at Housingwire’s seeming disconnect with appraisers.
To Housingwire‘s credit and specifically their editor in chief offered to have me write a rebuttal and participate in a subsequent webinar which was held this week. Although this won’t end the “appraisal shortage” misinformation by AMCs and related moronic commentary so I urge all appraisers reading Appraiserville to defend your industry with facts. Our industry is devoid of cohesive leadership so we have to do this ourselves. Remember this:
The only shortage of appraisers is the shortage of appraisers willing to work for half the market rate.
Here is a clear way to show this message empirically – thanks to Matt Simmons during this week’s webinar. Download them. Share them.
Lazy journalists and industry trade groups will describe licensing trends as falling in the first chart, but thats because the industry demand fell. In other words, you can’t talk about the appraisal industry without the context of supply and demand.
Listen to the webinar here – it’s all audio so you can listen to it when writing your appraisal reports. 😉
Housingwire wrote about the webinar afterwards – The highly contested state of the appraisal market and where it’s headed
A Brilliant Idea
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. They’ll flush the toilet, you’ll let the Coriolis Force be with you and I’ll not feel guilty about eating avacodo toast.
See you next week.
Jonathan Miller, CRP, CRE
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Reads, Listens and Visuals I Enjoyed
- The Best Way to Increase Housing Supply? Build More [Bloomberg]
- Venice Beach Is a Hot Place to Live, So Why Is Its Housing Supply Shrinking? [WSJ]
- Mapping New York’s biggest, most outrageous megamansions [Curbed NY]
- Newly unsealed documents reveal real reason for Fannie, Freddie profit sweep [Housingwire]
- Vacancy Rate of 22% Passes for Progress in Beleaguered Sao Paulo [Bloomberg]
- Amazon and the Strange Case of the Zillow Stock Selloff [The Motley Fool]
- LOIS WEISS: The Balance Of New York Renting Power Has Shifted [Bisnow]
- Happy Birthday Dodd-Frank: The Big Banks learned nothing [Housingwire]
- DOJ Ignores Citi's Elite Criminals: Wins Whistleblowers' 4th Lemons Award [Huffpo]
- Taibbi: Government Misled Public on Fannie/Freddie Takeover [Rolling Stone]
- Charting gentrification in San Francisco [NeighborhoodX]
- Funny Real Estate Quote from 10 Years Ago [Calculated Risk]
- South Fork swells in the summer, so does the number of free magazines [27east]
- As Waltham fire smolders, building method questioned [Boston Globe]
- Matthew Perry drops $20 million on full-floor penthouse in Century City [LA Times]
- Interactive: The Least Affordable Housing in the U.S. [Visual Capitalist]
My New Content, Research and Mentions
- Elliman Report: Aspen Sales 2Q 2017 [Miller Samuel]
- Elliman Report: Los Angeles Sales 2Q 2017 [Miller Samuel]
- Elliman Report: Malibu + Malibu Beach Sales 2Q 2017 [Miller Samuel]
- Elliman Report: Venice + Mar Vista Sales 2Q 2017 [Miller Samuel]
- Elliman Report: Hamptons Sales 2Q 2017 [Miller Samuel]
- Elliman Report: North Fork Sales 2Q 2017 [Miller Samuel]
- Elliman Report: Long Island Sales 2Q 2017 [Miller Samuel]
- NYC's Northern Suburbs Get Urban Makeover With Apartment Towers [Bloomberg]
- Smaller Housing Markets Lure Individual Investors [NY Times]
- Rezoning, new developments headed to East New York. Is now the time to buy? [Brick Underground]
- How Venice Beach Became a Neighborhood for the Wealthy [The Atlantic]
- Hamptons Real Estate Finishes Second Quarter with Solid Gains [Mansion Global]
- Luxury Homes in Los Angeles Vanishing From Market [Mansion Global]
- Beach homes in the Hamptons hit a new price record [CNBC]
- Hamptons Home Prices Soar to Record $1.07 Million [Bloomberg]
- A Wave of Luxury Sales Buoys Hamptons Property Market [Fox Business]
- Aspen, Colorado, Has the Highest Entry Price in the U.S. for Luxury Homes [Mansion Global]
- Hamptons Real Estate Prices Are On The Rise [Hamptons.com]
- East End home sales, prices on the rise [Long Island Business News]
- Tight supply drives up home prices across LI [Newsday]
- Hamptons’ resi sales jump to highest level in two years [The Real Deal NY]
- Trump’s Favorite Vacation Spot Sees Real Estate Soar [Mansion Global]
- Putnam Real Estate Market Continues to Grow [Tapinto.net]
- Hamptons estate has celebrity pedigree [The Mercury]
- Property Rounds: Connecticut home sales forge recovery [Stamford Advocate]
- Star-Studded Tribeca Building Defies Trend by Raising Prices [Mansion Global]
- Hudson Yards Developers to Lure Night Traffic With Power Dining Room [Bloomberg]
- Mansions are evaporating in Greenwich [Luxury Listings NYC]
- Manhattan Luxury Market Slows—But Is It Seasonal? [Mansion Global]
- Comparing Manhattan and Brooklyn 1BR rents across different neighborhoods [Curbed NY]
Appraisal Related Reads
- The highly contested state of the appraisal market and where it’s headed [Housingwire]
- Another answer to the appraiser shortage? Eliminate 4-year degree requirement [Housingwire]
- Webinar: Your Appraisal Questions, Answered [Housingwire]
- What first time home buyers should know about the appraisal process [Birmingham Appraisal Blog]
- This house had 22 offers. Here’s why they didn’t take the highest [Diana Olick]
- What is your home worth? Realtors and appraiser dispel 6 myths [Duluth News Tribune]
Extra Curricular Reads
- Fact or Fiction?: South of the Equator Toilets Flush and Tornadoes Spin in the Opposite Direction [Scientific American]
- The deal Jeff Bezos got on Basecamp [Signal v. Noise]
- You Can Finally Afford Both a House and Avocado Toast [Bloomberg]
- The Stupidest Thing You Can Do With Your Money [Freakonomics]
- Keynote Session: Dr. Edward Tufte – The Future of Data Analysis [Microsoft]
- When Did the Arctic Monkeys Start Trying to Be Cool? [Medium]
- Delivering on the 300-Hour Rule [Krueger & Catalano]
- You Have a Bad Commute? Try Four Hours and Three Trains [NY Times]