- Miller Samuel Real Estate Appraisers & Consultants - https://www.millersamuel.com -

March 5, 2021

Housing Construction Port-A-Potties Have Reached Their Max Headroom

Not all data is presented as numbers. For years, I have collected names of construction port-a-potties and this week, I tripped over a new one, while waiting in line for my first COVID vaccine.

Here is the go list:

Royal Flush
Johnny on the Spot
Jiffy John
Scottie’s Potties – we’re no 1 in the no 2 business
Gotta Go
Call a Head
Mr. John
Don’s Johns
GI John’s: it’s go time

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[1]

A post shared by Jonathan Miller (@jonathanmiller) [1]


But I digress…

New Signed Contract Activity Shows Rabid Demand Across All Markets Covered; Manhattan Finally Arrived, But Was Late To The Party

Douglas Elliman [2] just published our new signed contract research for the month of February, and it was blistering in the New York [3], Florida [4], Colorado [5] and California [6] markets we cover.

CNBC reported using our data [7] that the Manhattan housing market was the standout.Here’s a screenshot from my internal spreadsheet – it represents the YOY% trend of all three property types combined. In journalism, we know that three data points make a trend…

[3]


California [6]
Los Angeles County
The new year has seen two straight months with year over year gains in the combination of single family and condo new signed contracts. The month of February saw the largest annual increase in new signed contracts since this report series began last April. New inventory has fallen year over year by half over the last four months, keeping the pressure up on the market.

Orange County
New inventory for single family and condos combined fell year over year by the largest amount since April when tracking began. The new year has seen two straight months with year over year gains in the combination of single family and condo new signed contracts. The month of February saw the second-largest annual increase in new signed contracts since this report series began last April, with January seeing a slightly larger gain.

San Diego County
The new year has seen two straight months with year over year gains in the combination of single family and condo new signed contracts. New inventory for single family and condos combined fell year over year by the largest amount since May when tracking began, keeping the pressure up on the market.


Colorado [5]
Aspen
February was the eighth straight month with significant year over year gains in the combination of single family and condo new signed contracts. The month of February saw the largest annual increase in new signed contracts since this report series began last April. The continuation of heavy sales levels has begun to pull new inventory into the market, as evidenced by the second straight month of year over year gains after two months of annual declines.

Snowmass Village
The combination of single family and condo new signed contracts rose sharply year over year for the sixth time in seven months. High sales volume has pulled in significant new inventory for both months in the new year.


Florida [4]
Palm Beach County
Single family and condo new signed contracts combined have risen significantly year over year for the twelfth consecutive month. New inventory has seen modest annual declines for the third time in four months, unable to keep up with the robust sales activity.

Broward County
The combination of single family and condo new signed contracts rose sharply year over year for the twelfth consecutive month. New inventory has seen expanding declines since October, unable to keep up with sales.

Miami-Dade County
New signed contracts for condos surged year over year by the highest amount since tracking began in May. New condo listing inventory fell significantly year over year since June. Single family new signed contracts surged annually at their highest rate since July as supply fell annually for the fourth time in five months.

Pinellas County Since July, the combination of single family and condo new signed contracts rose sharply year over year at its highest rate. New inventory has declined year over year for four consecutive months, unable to keep up with sales.

Hillsborough County
Single family and condo new signed contracts combined have risen significantly year over year for the twelfth straight month. New inventory has seen modest annual declines for the third time in four months, unable to keep up with the heavy sales levels.


New York [3]
Manhattan
For the third straight month, new signed contracts for co-ops, condos, and 1-3 families combined have risen annually. Manhattan has lagged the region in activity since the summer but appears to be catching up in the new year. The new listings coming to market have declined year over year for five consecutive months, overpowered by rising sales levels.

Brooklyn
New signed contracts for co-ops, condos, and 1-3 families combined have risen significantly year over year for eight consecutive months. Despite the heavy new signed contract gains since July, new listing inventory has increased annually since June as robust conditions have encouraged more property owners to list.

Long Island (excluding H/NF)
For the first time since June, new signed contracts for condos and single families combined did not rise year over year. The sharp annual drop in listing inventory over the past two months has restrained new signed contract levels.

Hamptons
New signed contracts for condos and single families combined had risen significantly year over year since May when tracking began. The sustained year over year sales surge since the spring finally began to overpower new listing inventory in the new year, which fell sharply.

North Fork
New signed contracts for condos and single families combined saw a modest year over year gain after slipping in January. New listing inventory has fallen sharply year over year for three straight months.

Westchester
New signed contracts for condos and single families combined have risen significantly year over year since July. The extended sales surge finally began to overpower new listing inventory in the new year, which fell sharply in January and February.

Fairfield
New inventory for condos and single families combined has shown significant year over year declines since October, restraining new signed contract activity in January and February of this year.

Greenwich
New signed contracts for condos and single families combined had risen significantly year over year since July when tracking began. The sustained year over year sales surge since the summer finally began to overpower new listing inventory by this month.

The Suburban Plunge In Listing Inventory Continues While Expanded Vaccine Distribution May Help Resolve The Shortage

The New York Times [8] and Bloomberg News [9] looked at the collapse of listing inventory in the suburban markets that surround New York City.

The plunge in mortgage rates have stimulated sales demand nationwide to the extent that listing inventory has collapsed. This is the current plight of suburban housing markets.

[9]

The Manhattan Decade Report Results Included A Global Financial Crisis And A Global Pandemic

Elliman Report: 2011-2020 Manhattan Decade [10]

I haven’t given the The Elliman Report: 2011-2020 Decade Manhattan Report [10] a proper shout out since Douglas Elliman published it last month. The report is nearly 60 pages of co-op and condo market results by region, neighborhood, property type and other views during a ten year moving window. The first iteration for Douglas Elliman [11] was way back in 1996 when it covered the market from 1989-1996, not quite a decade but hey, it was a start.

[10]

[10]

Manhattan Townhouse Buyers Got More For Their Money, But Weren’t The COVID-Safe Haven That Was Anticipated

This month in my monthly data contribution to the New York Times Real Estate Section’s Calculator Columm, it’s all about townhouses: Townhouse Buyers Are Getting More for Their Money [12].

The Elliman Report: 2011-2020 Decade Manhattan Townhouse Report [13]

But while the shift to buying bigger has been part of the pandemic story — particularly suburban buyers seeking single-family homes for working, schooling and everything else — in Manhattan, it was a dearth of sales that helped drive up the median price.

There was an initial narrative that with Covid there’s going to be this flight to townhouses, from multifamily, from condos, when actually the number of sales for townhouses was the lowest in 24 years

Here’s the table illustrating average square footage trends…

Greenwich Connecticut, The Luxury Suburb, Continues To Boom

Bloomberg did a story [19] relying on our new signed contract research for the Greenwich housing market – sales conditions continue to out perform the regional housing market.

The large estate portion known as “Backcountry” has switched back on, after being dormant since 2007.

Those with a taste for the ultra-luxury have turned their attention to Greenwich’s older estates outside the town center, which had fallen out of favor in recent years. Two homes listed at $20 million or more found buyers last month, compared with none in February 2020.

[19]

[19]

[Podcast] Barron’s Live – Feb. 26: Understanding Home Values in a Shifting Market

[20]

I joined Barron’s Live [21] again for a fun discussion with Beckie Strum on appraising and how the housing market recovery is taking shape in the new year. This event was supposed to be a video chat but my new gigabit fiber optic internet service dropped about 5 minutes in (I think the culprit was my VPN) and I had to scramble and call in to do the interview on a backup number. That disaster has been edited out and the audio interview is available in their podcast feed:

Understanding Home Values in a Shifting Marke‪t‬ [Barron’s Live [22]]

[VIDEO] The Pandemic Renter Wish List Is Likely Short Term

I did a quick interview [23] for Fox5 NY this week. The laundry list of amenities tenants ask for in return for moving out of the city seems temporary to me. As the vaccine distribution expands and the infection rate drops, those amenities on the wish list will be much less important. Remember, those items are an offset for being cooped up in the city. I believe much of the amenity hype dissolves when companies call their employees back and the city is more widely perceived as safe.


The Compass IPO Chronicles: They Might SPAC

Why do I continue to write about the brokerage firm Compass [24]? Partly because it is the business model grift gift that keeps on giving.

There has been so much to write about because so much they have said seems disconnected with an understanding of real estate or is representative of the prior bubble era. To be clear, I have good friends that are agents that moved there, like it there, and I wish them well. They’ll be fine in whatever the company’s outcome and their intentions are not in question. The “emperor wears no clothes” sense I get after reading what Compass constantly puts out truly galls my “right versus wrong” sensibilities as they appear to be nothing more than a “disruptor by capital [25].” I’ve been watching this firm since they were known as Urban Compass, and I seem to recall a press release or quote after their first year in business that indicated they were returning to a “traditional business model” because their initial efforts only attracted a few dozen rental agents. Unfortunately, that press release or quote appears to have been scrubbed from the internet, or I am showing my age.

With the massive implosion of WeWork a while back (and the recent $500 billion reward to the founder for blowing it up), Compass stopped touting them as a believer in their approach [26] since it was clear that little due diligence was applied to Softbank’s WeWork investment. Compass had to delay their IPO plans and worked hard to dissociate with Softbank, including sending emails out to their agents explaining how to say it.

With the traditional IPO route now in question for them post-WeWork, their recently filed S-1 [27] raises a lot of questions. Both Housingwire [28] and The Real Deal [29] have been all over this filing.

In the Housingwire [30] piece I said…

“They showed a $270 million loss in an insanely booming housing market,” noted Jonathan Miller, a real estate appraiser at Miller Samuel. The S-1’s main sales points, especially an introductory section where Compass walks through its agent-friendly technology, “seems to show how little they understand the brokerage space or are just ignoring it,” Miller said.

And this is the key point made by many over the past several years:

“I do not see any identifiable technology advantages from Compass over other brokerage firms,” said Ken Johnson, a real estate economist at Florida Atlantic University. “Compass appears to be another real estate franchise with a bit more integrated use of technology and aggressive marketing.”

In other words, how does reducing agent clerical efforts slightly, result in billions in valuation premium?

Mike DePrete [31] is offering a webinar on it today. Here’s his chart-heavy analysis [32] from 2019. Here’s a couple of examples:

[33]

[34]

SPAC talk, of course

There have been rumors of Compass using a SPAC [35] as a workaround vehicle instead of a traditional IPO.

For those of you not familiar with SPACS, and the fact that celebrities are often associated with them, gave me pause – especially when former NY Yankee A-Rod [36] had one. There is a good New York Times piece on SPACS that explains them and my friend Barry Ritholtz has some spectacular quotes:

Anyone Who’s Anyone Has a SPAC Right Now [NY Times [37]]

What is a SPAC (special purpose acquisition company)?

SPACs are shell corporations that list on a stock exchange, with the goal of buying a private business and taking it public. In essence, a SPAC is a way to do an I.P.O. without all the time, expense and regulatory oversight traditionally required. The sponsors of a SPAC typically have two years to identify acquisitions or must return their investors’ money.


And Barry Ritholtz [38]‘s Quotes:

‘Hey, listen, there’s this hot new financial offering. Let’s put your name and celebrity on it,’” Mr. Ritholtz said. “‘You’re going to bring some fairy dust to a SPAC and the potential upside is tens if not hundreds of millions of dollars.’”

“but if it works out, it’s $100 million,” Mr. Ritholtz said. “Humans love asymmetrical risk-reward situations.”

“I can’t believe we haven’t seen a Kim Kardashian SPAC yet.”

Barry also cited Sturgeon’s Law [39]

[40]
[click on chart for Barry’s post]

Seems about right.

Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC [41] site.)

Risk Management Association’s Chief Appraisers Virtual Round Table

This week I spoke to a group of chief appraisers that run the valuation groups for many of largest banks in the world. It’s an invitation only event run by the Risk Management Association – I was very appreciative of opportunity to present and extremely appreciative of the valuation knowledge of the audience. I spoke about the forms the COVID housing recovery is taking, focusing on the urban/suburban housing tension.

NAR’s EXCELLENT Response To FHFA’s ‘Request for Information on Appraisal-Related Policies, Practices, and Processes’

I can only assume that this NAR Letter to FHFA [45] was crafted by the NAR Appraisal Section of appraisal industry leaders that has been behind other recent excellent thought pieces. This was a spectacular starting point summary on the appraisal industry’s situation today and the overpromise of technology:

Discriminatory bias could be factor with whomever is conducting the inspection of a home, whether it is an appraiser or a third-party inspector. There is evidence that algorithm-based decision-making tools can be designed in ways that create discriminatory outcomes. 4 Likewise, switching out one form of valuation for another sidesteps the necessary work of actively dismantling biased and discriminatory behavior. NAR urges FHFA to work with partner organizations, such as NAR and the Appraisal Foundation, to develop education and materials on bias, discrimination, and other fair housing related issues that speaks directly to the experience of the appraiser to truly address the issue with discrimination in the appraisal process.


Two quick observations on “partner organizations” mentioned in the piece:

Lack of leadership is one of the biggest issues facing the industry today – none of the big appraisal organizations are recognized by the real estate appraisal masses as leaders since they are mired in their problems or are focused on everything but appraisers themselves. I thought it was interesting that NAR didn’t mention the Appraisal Institute. And I found it even more interesting that The Appraisal Foundation was cited. Yet, TAF is the poster child for little to no representation of minorities and women through their three-decade existence. In fact, the TAF head of their diversity initiative is not a minority. The ASA seems like it would have been more worthy of a mention, not to take anything away from this excellent NAR thought piece.

OFT (One Final Thought)

I almost forgot about the Max Headroom [46] phenomenon on the mid-80s. It hasn’t aged well but it was a thing.


Brilliant Idea #1

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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.

Jonathan J. Miller, CRP, CRE, Member of RAC [48]
President/CEO
Miller Samuel Inc. [49]
Real Estate Appraisers & Consultants
Matrix Blog [50] @jonathanmiller [51]

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