Housing Market Geometry’s Shrinking Dimensions
Friday nights are pizza night at our house. I remember seeing a lottery commercial a few years ago that explored what people would think about in all their spare time if they won the jackpot. One commercial showed a woman walking in a beautiful garden, contemplating the geometry of a pizza box. Admittedly, I thought it was pretty deep. After all, a slice of pizza (triangle) that is part of a pie (circle) that sits in a box (square) is kind of mindblowing…especially when I contemplate the round slices of pepperoni and parallelogram-like chunks of eggplant.
Apple, known for iPhones and MacBook Pros and their new saucer-like (circle) headquarters building…
And in the process, patented a better pizza box , although technically it is no longer a square box (circle). And they are not speaking in public about it, so the plot thickens (but not the crust).
All I can say is that appraisers are constantly measuring different shapes every day. This is a deep and a good segway to the next Housing Note slice (triangle).
New Single Family Home Sizes Are Getting Smaller
I thought this was a pretty interesting point made by NAHB on new home sizes :
Typical new home size falls prior to and during a recession as home buyers tighten budgets, and then sizes rise as high-end homebuyers, who face fewer credit constraints, return to the housing market in relatively greater proportions.
Here’s the trend…
Since Zillow Miscalculated Their Zestimate, You Can Get A Prize
The Zestimate has been around now for more than a decade, filling a voyeuristic real estate need but without consistent accuracy. And their former president once told me at a meeting in my office: “The consumer knows when it is wrong.” That might have flown in the early days when it wasn’t ubiquitous. And because they infer significant precision in their presentation of Zestimates to the nearest dollar, they don’t seem to be aware of how misleading the tool actually can be to consumers.
Zillow was recently sued by a homeowner/lawyer in Chicago , and her phone is ringing off the hook as evidenced by the news coverage. She is now representing an area homebuilder  who looks to make their case go to class-action:
The lawsuit seeks an injunction against Zillow, saying that the Patels and the company have never requested or authorized Zillow to gather data about their properties or to publish it. One of the questions that the lawsuit raises is whether Zillow’s publishing homes with a Zestimate “violates the tort of invasion of seclusion.”
The reason I think this is a diversion tactic to fend off the lawsuit is that the problem isn’t likely about algorithms. Zillow has had more than a decade to build and improve them. The real issue is more about the varying quality of public record and the simplistic singular digit way they present the results to the public. NYC public record is a horror show yet in other markets with more homogenous housing stock the results are more accurate.
More on the Retail Apocolypse: Manhattan Edition
Manhattan retail rents have spiked 50% since 2010 while the overall city retail rents have fallen 21%. No wonder there are empty storefronts all over Manhattan.
While I Have Style, The Celebrity Premium Is A Myth
Humblebrag: My insights and research were mentioned in both Woman’s Wear Daily  and the New York Times Style Section  this week, so I clearly have style. Ok, so they didn’t post pictures of me walking down the street in cool clothes but I thought my insights – at the very least – looked good.
Here’s a shout out to all celebrities that wildly overprice their homes – your buyers aren’t star struck enough to pay a massive premium for anything just because you lived there, particularly at high end of the market. The celebrity premium is largely a myth.
And while we’re at it, “experiences ” can get buyers to new developments, but they don’t cause them to pay a premium. Pricing still needs to reflect actual market conditions.
Robert Shiller On Why Worldwide Economies Are Anemic
In Robert Shiller’s Project Syndicate column he addresses the global economic malaise and how it is fueled by pessimissm . This is one of the reasons I have a hard time believing mortgage rates are going to rise much over the next several years no matter what the FOMC decides to do.
Here’s what Shiller said about growing angst…
My own theory about today’s stagnation focuses on growing angst about rapid advances in technologies that could eventually replace many or most of our jobs, possibly fueling massive economic inequality. People might be increasingly reluctant to spend today because they have vague fears about their long-term employability – fears that may not be uppermost in their minds when they answer consumer confidence surveys. If that is the case, they might increasingly need stimulus in the form of low interest rates to keep them spending.
10-year treasuries have been fairly consistent since 2014.
I Wonder How Wealthy Home Owners Price Their Homes?
There is a beautiful Malibu California listing for $57.5 million . Although the Forbes reporter was able to get the square footage estimate of around 8,000 from the broker, the figure is not presented in the listing (as of this writing). This seems odd since it is a new home and there must be fresh architectural measurements. Perhaps it was done to prevent ppsf comparisons to other sales? Still, I love this place.
I pinch hit for Becky Jones, founder of the New York Coalition of Appraiser Professionals (NY-CAP), in a webinar hosted by Appraiser eLearning ‘s Bryan Reynolds. I am one of the board members of the new NY-CAP effort. While the sound quality was a little choppy , I learned a lot from the other speakers, John Dingeman and Creighton R. Cross, MAI. Great information was shared and I soaked it up as someone new to the grassroots coalition movement.
I’ve got more appraisal news and issues to discuss, but it’s the Friday before Memorial Day weekend – who am I kidding? All appraisers I know are getting their shopping list together right now for some serious B-B-Qing this weekend. I’ll get back on my horse next week.
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 grind meat  for the BBQ, you won’t wear this hat  and I’ll look at the physic’s of Roger Moore’s greatest iconic Bond stunt .
Have a terrific Memorial Day Weekend. See you next week.
Jonathan Miller, CRP, CRE
Miller Samuel Inc. 
Real Estate Appraisers & Consultants
Reads, Listens and Visuals I Enjoyed
- Luxury Homes in Manhattan Are Finally Getting Cheaper [Bloomberg] 
- Why are rich Russians so obsessed with buying up London property? [Guardian] 
- Zillow offers $1M prize to improve "Zestimate" algorithm [The Real Deal NY] 
- The great London property squeeze [Guardian] 
- New Single-Family Home Size Continues to Trend Down [Eye on Housing] 
- Seattle Climbs but Austin Sprawls: The Myth of the Return to Cities 
- Angry Over Zillow’s Home Prices? A Prize Is Offered for Improving Them [NY Times] 
- Zillow in Court Again Over Zestimate Accuracy and Consumer Interpretation [CandysDirt.com] 
- StreetEasy.com Broker Listings Under Scrutiny [WSJ] 
- Retail rents in Manhattan grew 50% since 2010 [The Real Deal NY] 
- Announcing Zillow Prize [Zillow Research] 
- California Million-Dollar Home Sales Climb to a Q1 Peak as Stocks Soar [Corelogic] 
- A definitive breakdown of the gloomy state on Wall Street [Business Insider] 
- Chinese buyer shells out $50M for Bob Diamond’s 15 CPW penthouse [The Real Deal NY] 
- Suburban builders seek class action to stop Zillow estimates [Chicago Tribune] 
- The economy is stagnant because people fear for the future – Robert Shiller [Guardian] 
- Do Zillow Zestimates mislead home buyers Illinois lawsuit claims yes [MarketWatch] 
- A Tiny Park Fights for Sunlight Among New York City Skyscrapers [NY Times] 
- Federal Hill rowhome accidentally knocked down [Baltimore Sun] 
- Return of the S.R.O., With a Twist [NY Times] 
- Manhattan Tallies Vacant Storefronts [WSJ] 
- 11 hidden attractions in New York City that even locals might not know exist [Business Insider] 
- Hale ‘Ae Kai | Most Expensive Home Hawaii [The Real Deal NY] 
- "An Empty Lot, An Idle Backhoe And Pieces of Rubble": NYC Real-Estate Market Is Imploding [Zero Hedge] 
- Miami, New York Log Highest Rates of Suspicious Luxury Real Estate Buys [Mansion Global] 
- Retired artist had no idea he was 'mysterious' tenant in viral SC property listing [WIS TV] 
My New Content, Research and Mentions
- The micro apartments are coming to Miami. Are you ready for tiny living? [Miami Herald] 
- View From The Top: Step Inside Malibu's $57.5 Million, East Coast-Inspired Mansion [Forbes] 
- Developers Migrate to Areas Near the G, J, M and Z Trains [NY Times] 
- Hamptons summer rental season off to slow start [Newsday] 
- How to Rent a $20,000-a-Month Apartment [Mansion Global] 
- They Could Buy, but Why? Meet the High-Renters [NY Times] 
- New York City Landlords Are Offering Deals [NY Times] 
- Why Have These Famous Fashionistas’ Homes Languished on the Market? [WWD] 
- Home prices rise as inventory continues to fall in Nassau [The Island Now] 
- Joint venture shooting for $30M sellout with luxury condos in Williamsburg [The Real Deal NY] 
- ‘Experiences’ are the new must-have amenity in NYC’s crowded real estate market [Curbed NY] 
- Summer in the Hamptons: Eleven Madison Park and Uber (Finally!) Are Coming to the East End [NY Times] 
Appraisal Related Reads
- I Messed Up (Really!) [Working RE] 
- VIDEO: The role of State and National Appraisal Groups [Appraiser eLearning] 
- AVMs to Finally Replace Appraisers? [Working RE] 
- Does paying off Mello Roos early increase value? [Sacramento Appraisal Blog] 
- Zillow Gone Wild: Class-Action Suit Against Zillow's Zestimates [Appraisersblogs] 
- Is it the appraiser's job to support value? [Birmingham Appraisal Blog] 
- Florida Makes Significant Changes to Appraiser Licensing Law [Appraisal Institute] 
- What's an Algorithm, and How Do Quants Use Them? [Marketwatch] 
- Human Brain, AMC app & Appraisers – Bend Over & Ask for More [Appraisersblogs]