Annoying The Negative-COVID Pundits, NYC Is Back, Baby
As parents, my wife and I have felt strongly that an important role was to be annoying to our children. After all, our four sons were equally annoying to each other and this clip reminded me of it. Being annoying is a skill that needs to be practiced and honed over a lifetime.
And they say us guys don’t grow up, we just get older. 😂 pic.twitter.com/PAKeem49F9— Fergie Jenkins (@fergieajenkins) June 6, 2021
But I digress…
NYC Rental Price Stability Has Emerged As Lease Terms Expand
In addition to our real estate appraisal practice, I’ve been the author of the expanding series of market reports for Douglas Elliman Real Estate for the past 26 years. The monthly rental report covering rental conditions in Manhattan, Brooklyn, and Queens has been of particular interest since the COVID-lockdown that ended last spring because the rental market reacts more quickly to changes in economic conditions.
The 350± Bloomberg Terminal subscribers made the article covering the report results in a top ten read, ranked ahead of the news that the Fed might taper mortgage bonds first.
And a super cool chart that illustrates the pivot to longer leases. There are more of our charts across the three boroughs we cover below.
The New York Times also had an epic piece on the rental market that will be seen in print in the Sunday New York Times this weekend.
Elliman Report: May 2021 Manhattan, Brooklyn, and Queens Rental Report
MANHATTAN RENTAL MARKET HIGHLIGHTS
“New leasing activity continues to boom as rental prices show stabilization.”
- The highest number of new lease signings since tracking began in 2008
- Net effective median rent rose month over month for the fifth time in six months at the highest rate in a decade
- The average lease length rose sharply in the past three months as renters sensed that prices were stabilizing
- The amount of rental concessions given by landlords rose again to their third-highest level since 2008
- For the fifth straight month, non-doorman rental fell year over year at a higher rate than doorman rentals
- Listing inventory fell substantially from the record set in January but remains unusually elevated
- Rental price trends remain weakest in smaller apartments
- New development leasing market share was the highest in more than a year
- The luxury market median price was the only price tranche to rise year over year
BROOKLYN RENTAL MARKET HIGHLIGHTS
“Continued significant new leasing activity helped stabilize pricing.”
- The highest number of new leases since 2008 reached in three of the past four months
- Net effective median rent rose month over month for the second time in three months at the highest rate in more than a decade
- The amount of rental concessions given by landlords rose again to their third-highest level since 2010
QUEENS RENTAL MARKET HIGHLIGHTS
“Heavy new leasing activity helped begin to stabilize pricing.”
- The second-highest number of new leases since 2011, representing a six-fold annual increase
- The market share of landlord concessions was more than double the market share of existing rentals
- Rental price trends remain weakest in smaller apartments
[Bloomberg Surveillance TV] NYC Tenants Are Signing Longer Leases
I did an interview with Bloomberg TV this morning, covering our May research on the NYC rental market for Douglas Elliman.
CHART NYC Rental Lease Terms Are Expanding As Tenants See The Drop In Prices Coming To An End
Our lease length and rental price chart for the Manhattan rental market illustrates this trend quite clearly – Brick Underground parses out the story.
[Yahoo Finance TV Interview] The NYC Rental Market Is Stabilizing
On Thursday I joined Alexis Christofouros at Yahoo to speak about the just-released May 2021 Manhattan, Brooklyn & Queens Rental Report that I author for Douglas Elliman. I’ve always enjoyed my conversations with Alexis.
“We’ve seen record new lease signing activity” in New York City, Miller Samuel Inc President & CEO @jonathanmiller says. “Rents are still off of pre-COVID levels. … Younger people that were priced out are now coming into the city.” Full interview: pic.twitter.com/svD0Y7EqJc— Yahoo Finance (@YahooFinance) June 10, 2021
[Relevance Rapport Podcast] with guest Jonathan Miller – Episode 6
Last month I sat down with (virtually) with Suzanne Rosnowski, founder of the public relations firm Relevance International to share insights on NYC’s real estate market value, the importance of credibility, and the practice of providing unbiased information. Suzanne and I have known each other for 20 years? I think. It was a fun conversation.
ABC 20/20 Presentation on The Dakota, The Co-op Building Where John Lennon Lived
A friend shared this ABC special on John Lennon’s time in The Dakota in Manhattan. My appraisal firm, self-included, have appraised many apartments in The Dakota since the mid 1980s, especially fronting Central Park. Always a thrill. And another reason to love NYC.
[Solvecast Interview] Impact of Remote Work on Real Estate with Jonathan Miller
Dana Williams of Sotheby’s interviewed me on the future of remote work – something we are observing right now as it evolves in realtime. This wasn’t specifically a housing market discussion, but with me, it usually ends up there. She did a wonderful job steering the ship.
Click on the image to play the podcast.
[The Compound Podcast] It’s Not a Housing Bubble, It’s a Supply Bust
I enjoyed the housing market discussion by Downtown Josh Brown and Michael Batnick – the clip is cued up the relevant section:
This Week in Aspirational Pricing: From $115M to $30.5M = Narcissistic Insanity
The “aspirational pricing” era in luxury housing began in 2012 and ended in 2018 was pure narcissistic insanity. This beautiful condo was a prime example and there are many other examples. Homes that were priced 3-5 times their market value influenced nearby listings and ultimately none of these ever sold until they were brought down to earth. The irony of this transaction was that it was dropped from $115M to $29.5M and then expererineced a bidding war, driving the price up to $30.5 million. So now the sellers can claim they sold the home above ask!
Initially, and wildly overpriced in 2013 at $115M, it represented the early days of "aspirational pricing". I remember thinking then it was 4X actual value. Steve Cohen’s NYC Condo Sells Above Asking Price After Big Cut @per @OshratCarmiel @business https://t.co/f7T3izuSii pic.twitter.com/MlpnuQkTbJ— Jonathan Miller (@jonathanmiller) June 10, 2021
My favorite charts of the week made by others
UBS: “.. we expect inflation pressures to moderate towards the end of the year as supply conditions ease and pent-up demand ebbs.” The market appears to agree, “as seen by the sharp inversion of the US inflation swap curve with the 1y at 3.7% and the 10y at 2.6%.” pic.twitter.com/132wqo7pPu— Carl Quintanilla (@carlquintanilla) June 9, 2021
(For earlier appraisal industry commentary, visit my old clunky REIC site.)
The Wave Of Stories About Appraisers As Racist Is Surging As Industry Leadership Sits On Its Hands In First Class Seating
To all my appraiser colleagues out there, you are being left exposed right now by the organizations who never saw this coming. They still don’t realize that this could be “the thing” that brings our profession down, all because of self-dealing and the absence of any real leadership. The Appraisal Foundation C-suite has focused on petty gripes such as their infamous bat-shit crazy letter to financially “go rogue” without any real oversight. They have probably amassed more than $10M in cash as a not-for-profit, for reasons that are unclear now.
And the hits to our profession keep coming… here are some of this week’s big articles:
RICS COO Quits Unexpectedly – A Warning To AI’s CEO
This is a wake up call to the Appraisal Institute Board of Directors and all the potential financial self-dealing we’ve covered here in Appraiserville by Jim Amorin and FOJs (Friends of Jim Amorin).
RICS COO Violetta Parylo has handed in her resignation and will leave the organisation today. Parylo’s sudden departure comes as a surprise, given that she has served on the executive team for over a decade.
Peter Oldham was appointed a few weeks later February to investigate the events that led to the dismissal of four directors in November 2019 after they raised concerns about the findings of a 2018 BDO financial audit into the historic body.
A board should oversee a CEO and not the other way around. Spouse travel expenses, by the way, have never been covered by RICS. Nor does corporate America.
The intense focus on executive compensation, lack of transparency, and allegations of quashing of open discussion have led to a Queens Counsel investigation of RICS. QC in the UK is like either an AG office or the FBI. Four NEDs that raised issues about financial matters were summarily fired from their board when those issues were raised. The Appraisal Institute is in an equally vulnerable position, especially as Bylaw changes that have been proposed to increase transparency have been watered down in a coordinated manner by board members that are FOJs.
Appraisal Institute Board Members are subject to the CEOs whims and enable by his FOJs. Incidentally, the CEO has demanded that all reports prepared by staff should not be released to the board but are routed right back to him. This is the one person who has a vested interest in keeping staff reports concealed and allows him to operate without accountability.
AI continues to enjoy the benefit of board members who, acting in a rehearsed manner, thwart any efforts to provide insight. Where is the external study on CEO compensation, KPIs? If there is one, it will be buried by the CEO, because now the Board’s machinations have ensured that the report will be just for him.
The CEO of RICS made $359,443 last year and he runs an organization that is 7.4x the Appraisal Institute (whose spouse has to pay her own way on business trips). The CEO of the Appraisal Institute made $451,000 last year (and his spouse flies on their membership’s dime).
Appraisal Institute take heed: you are an organization of 17,000 people, and a voluntary industry group at that, without any regulatory standing. RICS is a true worldwide organization, quasi-governmental and with strong regulatory power comprised of 125,000 people.
If I were re-organizing the Appraisal Institute, I would slash the CEO salary to $250K and separate the board into two separate entities with no overlap: residential and commercial organizations.
Fix The Appraisal Foundation Structure
The Board of Trustees and/or The Technical Boards should be broken out by specialty rather than lumping all appraisal types together.
- Personal Property
USPAP and TAF are trying to be all things to all in the valuation industry. They have failed in all.
TAF needs to jettison or handle personal property separately because they aren’t regulated and have no place in the ecosystem – this is another revenue play by TAF allowing personal property appraisers to be on technical boards that impact only real property appraisers.
PAREA Has Essentially Been Abandoned By TAF Because Of Their Default Emphasis On Money
One of many solutions to making appraisers more diverse and getting youth into our ranks as we age out every year is PAREA (Practical Applications of Real Estate Appraisal). Back in 2015, the AQB approved a concept paper to get the ball rolling. It wasn’t a complete solution but it would likely help the industry and TAF was taking leadership on it.
Originally, TAF was going to build a model and license it to users. In other words, they were going to lead the industry on the initiative. At some point, leadership got spooked by the cost so TAF hired a consultant that appeared to generate a wildly high cost of around $6 million to $15 million, presumably to give TAF a reason to bow out of leadership on this effort.
This is further evidence that TAF is more focused on money than the profession it serves. Remember that they have millions in the bank and opted not to take any grant money from the ASC.
As a result of TAF’s exit, the private sector is stepping up, and I hear the cost estimates are somewhere between $1M and $2M. At full retail price TAF could now pay for PAREA module 5x over with the money they have socked away in the bank. Why?
TAF has offered $500k for the development of PAREA for up to two entities ($250K each) despite supposedly having $10M+ in the bank as a not-for-profit created to serve the industry. It shows that they are not interested at all in solving the industry’s problems.
And it’s not just about money. PAREA coming from TAF would be a powerful unifying message to the states to incorporate this into their state laws. Instead, we have states like Pennsylvania who would only give 25% credit for PAREA hours which is like giving zero credit because mentoring would still be required. Some states are talking about requiring 10-20 completed appraisals which also defeats the purpose if a reviewer signs off on the report because they shape the final report into something they are comfortable signing and therefore the state doesn’t see a pure representation of the appraiser’s work.
The beauty of PAREA is that appraisers will be exposed to other types of valuation – for example, someone like me who primarily appraises co-ops and condos in Manhattan, doesn’t see how to appraise other forms of real estate and that will only make me a better appraiser. It allows an expansion beyond the mentor’s appraisal territory.
To recap, TAF has largely abandoned PAREA:
- they didn’t build the model because it was too expensive so they probably got a consultant to go high on costs.
- they didn’t create a model so implementation at the state level is an uphill battle and anyone that is inspired literally has to interact with the 55 states and territories themselves.
What does TAF actually do for appraisers these days?
OneTWO Final ThoughtS)
As the weather continues to warm up and more of us get back on our bikes, it is important to remember that helmets have been shown to be a good idea throughout history.
I took up pole vaulting my senior year of high school because I was too slow in the two-mile. I wasn’t very good at my new sport either, but actually scored once in a meet and it was glorious. I sill remember the moment going over the bar and the free fall all the way down to the matt (which was about one-third the distance the guy below experienced). Still, it was a win and a moment I’ll never forget.
Brilliant Idea #1
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Brilliant Idea #2
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See you next week.
Reads, Listens and Visuals I Enjoyed
- Senator Presses Landlord Over Report It Evicts Black Renters At Higher Rates [NPR]
- Many Americans moved to less pricey housing markets in 2020 [AP News]
- Nantucket’s Short-Term Rental War Is Pitting ‘Neighbor Against Neighbor’ [Wall Street Journal]
- Mortgage rates slip back down to 2.96% [HousingWire]
- Mortgage lenders loosened credit standards in May [HousingWire]
- Future Apartments to Get “One Home Office Larger” RENTCafé rental blog [Rent Cafe]
- Where to Appreciate the Joys of Naked Gardening [NY Times]
- Renting Is Cheaper Than Buying, Almost Everywhere [NY Times]
- A Slice of the Sky [Curbed]
- First quarter 2021 sales disappoint, but future is looking up… [Bob Knakal]
- In Ohio, Homeowners Keep Underground Railroad Houses From Becoming Forgotten History [Wall Street Journal]
- How the NYC Mayoral Candidates’ Housing Platforms Stack Up [City Limits]
- Battle Brews Over Banning Natural Gas to Homes [Wall Street Journal]
- Housing and Demographics: The Next Big Shift [Calculated Risk Blog]
- WSJ News Exclusive | Mystery Buyer Pays $157.5 Million for Two Condos on New York’s Billionaires’ Row [Wall Street Journal]
- Employees Are Quitting Instead of Giving Up Working From Home [Bloomberg]
- Investors Fret as Biden Takes Aim at a 100-Year-Old Tax Loophole [NY Times]
- PHOTOS: The Most Expensive Homes Sold in Washington in May [Washingtonian (DC)]
- Why Interest Rates Have to Stay Low For a Very Long Time [A Wealth of Common Sense]
- It's Not a Housing Bubble, It's a Supply Bust [The Reformed Broker]
- Is there a housing bubble? [VOX]
- It's easy to sell a home these days. The catch is you have to find another one to buy [CNN]
- Amid Red-Hot Real Estate Market, a Snazzy Beverly Hills Mansion Trades at $10 Million Loss [Dirt]
- Battle Over Rent Hikes Turns to Who’s Suffered More: Tenants or Landlords? [The City]
- Buildings With Sections That Seem to Hover in Midair [NY Times]
My New Content, Research and Mentions
- Why Manhattan Renters Are Rushing to Sign Longer Leases [Bloomberg TV]
- Renters Signing Longer Leases to Score Deals in Recovering Market [The Real Deal]
- Finally Making It to Manhattan [NY Times]
- Manhattan asking rents are creeping back up, but they haven’t reached pre-pandemic levels [Crain's New York]
- Rental market heats up in New York City [Yahoo Finance]
- Manhattan Renters Seeking Discounts Rush to Sign Longer Leases [Bloomberg Quint]
- How New York's Hit New Park Was Designed, Built And Timed To Perfection [Bisnow]
- Wild Hamptons prices are pushing renters into these summer hotspots [NY Post]
- Rental market heats up in New York [MSN]
- Steve Cohen’s NYC Condo Sells Above Asking Price After Big Cut [Bloomberg]
- With rents hitting bottom, apartment hunters are locking in longer leases [Brick Underground]
- Manhattan’s Luxury Rental Market Had a Stellar May [Mansion Global]
- Manhattan Renters Seeking Discounts Rush to Sign Longer Leases [Bloomberg]
- New Buildings Lure Tenants With Free Rent [NY Times]
- Brooklyn Townhouse is Borough’s Priciest Rental at $30K [The Real Deal]
- Billionaires’ Row Condos Defy the Odds With Profitable Resales [Bloomberg]
- Senate votes to postpone rent stabilization housing survey [Crain's New York]
Recently Published Elliman Market Reports
- Elliman Report: Manhattan, Brooklyn & Queens Rentals 5-2021 [Miller Samuel]
- Elliman Report: Colorado New Signed Contracts 5-2021 [Miller Samuel]
- Elliman Report: California New Signed Contracts 5-2021 [Miller Samuel]
- Elliman Report: Florida New Signed Contracts 5-2021 [Miller Samuel]
- Elliman Report: New York New Signed Contracts 5-2021 [Miller Samuel]
Appraisal Related Reads
- 7 Tips To Avoid Appraisal Problems In Today's Crazy Real Estate Market [Tom Horn/Birmingham Appraisal Blog]
- Black Homeowners Are Being Left out of the Mortgage Refinance Boom [Money]
- Is the appraisal process color-blind? [HousingWire]
- Racial gap in appraisals devalues homes owned by people of color [Marketplace]
- Is the housing market starting to slow? [Ryan Lundquist/Sacramento Appraisal Blog]
- RICS COO quits unexpectedly [Property Industry Eye]
- Black appraisers call out industry's racial bias and need for systemic change [NBC News]
- FACT SHEET: Biden-Harris Administration Announces New Actions to Build Black Wealth and Narrow the Racial Wealth Gap [The White House]
- View Whats New [Appraisal Subcommittee]
Extra Curricular Reads
- The Month New York Woke Up [NY Times]
- New York Is Back. Now It Has a Second Chance. [NY Times]
- The Oracle’s Daughter [The Cut]
- Overcoming history: Entrepreneurs of color forced to confront constraints from the past [Boston Fed]
- Inside The New Halls Of Gems & Minerals At The AMNH [Gothamist]
- As Vaccination Rates Rise, More Companies Consider "Soft Reopenings" Over Summer [Gothamist]