Those Blue Turtles Dreamt About Housing
I’m trying to be a little more careful about what I eat these days. Ok, truth be told, not really, well sort of. It’s hard to concentrate on the important stuff like the housing market when we don’t have the proper utensils to make our sandwiches. There’s a metaphor for housing in here somewhere (See Sting listing further down), but I’m famished.
Here’s a matrix table on sandwich alignment that might help organize your thoughts:
Full disclosure – I classify as a radical sandwich anarchist.
Utensils are key…The Frork (spelled correctly) – I need one of these utensils.
Ok, on to the useful stuff.
The Elliman Market Report Series Gets Mansion Global’s Attention
I’ve been authoring the expanding Elliman Report series across their U.S. market footprint since 1994. Real estate brokerage firms are often afraid to be candid about market conditions with the mantra – it is always a good time to buy – yet that does no one any good. Buyers won’t buy, and sellers are anchored to market conditions that only exist in their mind. MG writes about it in Good Market Reports Are Page Turners For the Savvy Investor
The housing market is heartless and unrelenting like the cyborg in The Terminator as described by the Kyle Reese character:
You still don’t get it, do you?
He’ll find her. That’s what he does. THATS ALL HE DOES. _________________________________________
Here’s a great recap by Jay Parker, CEO of Douglas Elliman in South Florida:
“Our market reports are something that buyers can use to really understand where opportunities are arising, and get a sense of how they need to adjust their expectations to the current market conditions,” said Jay Parker, the CEO of Douglas Elliman’s Florida Brokerage. “While we know that most real estate decisions are driven by emotion, these reports can help buyers make a more sophisticated, data-driven purchase.”
Connecting and Disconnecting With Reality
We continue to see more and more high-end sales proving the point that there is demand, but only at the market price. Sellers are traveling farther to meet the buyers at market levels. While this is an obvious statement, it hasn’t been part of the seller dialogue for several years.
- $85M David Geffen Malibu, CA house just sold for $85M, but asked $100M a year ago.
- $38.5M Celine Dion waterpark-like Jupiter Island, Florida house just went to contract after a 47% price cut from the asking price of four years ago.
- $28M Beekman Place Townhouse Manhattan, NY went on the market for just under $50M in 2014, to $37.5M in 2015 and now $28M in 2017. Hint, the luxury market has not fallen by 44% since 2014. Seller sentiment was wildly over-optimistic in 2014. I appraised this property for different prior owners a few times a long time ago. There are impressive river views for a townhouse.
Oh, one more.
$56M Sting listed 15 CPW condo for double what he paid for it in 2008. That sounds outrageous at the onset, given my ranting about aspirational pricing. However, I took a look at every original sale in the building that had a subsequent sale or 2 or 3 with the last one in the years 2014-2017. Those condo sales sold for an average of 116.9% or a little more than double the original purchase price. Perhaps that was what all those blue turtles were dreaming.
Photo Credit: Thinkstock
In a semi-related topic, when you walk the streets of Manhattan, and most towns in the outlying suburbs I have visited over the past year, there are a lot of vacancy signs to see. The massive shift to online provides – namely Amazon – is crushing the retail market. Secondly, there has been a multi-year run of investment property sales with insanely low cap rates because of the shortage of inventory. Many investors with cash that burned a hole in their pocket are now forced to jack up the retail rents to justify their purchase. The problem is – their asking rents are significantly disconnected from what the market can support. During a recent NYC real estate conference, a sarcastic comment was made as only a New Yorker would say on retail rents:
But Billy Macklowe stole the show with his thoughts on the retail market. Though other landlords have taken the “Fifth is forever” approach, Macklowe offered no such comfort. “I think retail is fucked,” he said. “Plain and simple.”
On Richard Florida’s Citylab site – one of my favorite regular, go to’s – there is a fascinating post on gentrification, and specifically New York City based on research from NYU Furman Center. The study helps explain the significant changes to the city over the past 15 years: Focus on Gentrication.
Look at the percentage change in the number of business from 2000-2015.
While we’re on the topic, here’s a pretty cool video by Public Square NYC on the 2020 Manhattan skyline.
Cash sales are all around us
I can get pretty snooty about Manhattan’s nearly 50% market share of cash sales every quarter with very few distressed investor cash purchases. The implication of cash sales in most housing markets, however, infer distress.
According to ATTOM as reported in REALTOR Magazine:
Cash sales made up about 30 percent of all single-family and condo sales in the first quarter of this year, according to ATTOM Data Solutions’ First Quarter 2017 U.S. Home Sales Report. That is well below their peak of 44.7 percent in the first quarter of 2011 but higher than the prerecession average of 20.4 percent from 2000 to 2007.
Streeteasy (Zillow)’s Premier Agent Program Gets Tweaked
One of the tragedies of the real estate brokerage industry is that they held on to their Gatekeeper status for too long and it ended up creating opportunities for others. Streeteasy evolved into the defacto Manhattan MLS, but since its acquisition by Zillow a few years ago, it is slowly being Zillowized, by eliminating cool features and inserting annoying features. Recently there was an uproar about their installation of the Premier Agent service which was done in such a way that it did not show the consumer who the listing agent was. This prompted a great read by The Real Deal New York that laid it all out. However, Streeteasy succumbed to broker outrage and changed the linkage issue that gives the consumer a link to the listing agent, so it looks like this crisis has been resolved for now.
The Architect of Hollywood
I’m a regular listener of 99 Percent Invisible, and this podcast about Paul R. Williams was fascinating [Click on the graphic].
My advice to all appraisers…This week I testified in DC as an expert in litigation based on the New York housing market – no appraisal was done for this assignment and no details of the case can be shared, but I crushed it. I think every appraiser needs to testify at least once in their career – hopefully early on. You see the appraisal process much differently when a lawyer is asking you to explain yourself. There is a clarity that washes over after the first time. Throw yourself into it. Through repetition, you deaden your nerve endings, and you get immersed in a lucrative appraisal discipline. Personally, I love it. The other thing you need to do is read about the profession all the time. Our industry has been beaten down for years, but I think a lot of that has to do with not being aware of the upcoming regulatory changes and the activities of industry institutions since those such as AI National and AMCs count on your complacency.
One of the best ways to hone your appraisal craft is to read about problem-solving from your peers. Not about byzantine rules, but how to problem solve each unique valuation situation you face. Nearly every week I link out to Ryan (take a knee) Lundquist’s blog and Tom (blogging for your noggin) Horn’s blog posts for excellent insights. I tend to be a little macro in Appraiserville, but wow, these guys drill down on front line appraisal stuff like nobody’s business. Sign up for their weekly emails in the links at the bottom of these Housing Notes. I learn a lot from them and you will too.
AI National’s Web site log-in for members was down this week
The log-in for members on the AI website was down from Wednesday until a few minutes ago (Friday morning). Everyone has technology issues. However, remember that this is the same organization that is going to “take” chapter funds to solve a problem that doesn’t exist. I sure hope their site doesn’t go down when a chapter needs some of their funds to pay bills.
Lawyer: Zillow ‘Zestimate’ illegal appraisal hampering home’s sale; Zillow: Only estimate, not appraisal
I met one of the founders of Zillow at a party the day before they launched more than a decade ago. The Zillow name came from “Rhymes with Pillow” i.e. your home. I’ve always had a huge issue with the “Zestimate” because it infers an accuracy it doesn’t have. The voyeurism can be fun, but when the results are zeroed down to the dollar, it can become an accepted source of value by the consumer masses. Now someone has taken issue with that and are suing Zillow.
Phil Crawford has an interview with the plaintiff on the upcoming free Wednesday edition of Voice of Appraisal. Fascinating topic. A while back, the WSJ interviewed me because of my Zestimate (I have a 200-year-old historic home), was 5x what it was optimistically worth. If I was uninformed about my market, I suspect it would take me years to resolve my anchoring to the inflated number. It’s hard enough to de-anchor a high value when the Zestimate is 10% too high let alone five times too high.
January 7th is National Real Estate Appraisers Day
Every appraiser needs to subscribe to Dave Towne’s musings on our industry. Send him an email (firstname.lastname@example.org), and he’ll add you to the list.
If the date selected for the appraiser day becomes ubiquitous, it’ll help me remember to get a birthday card for my wife (kidding!). Dave writes:
Texas appraiser Mark Paulson has submitted an application to the National Day Calendar™ web site to get Jan 7th on their calendar as an official day to recognize appraisers. I found his posting about this on The National Appraisal Coalition Facebook page.
Let’s get behind this effort! Re-send and re-post this message to your appraiser buddies and other bloggers, web sites, trade journals, etc.
While this might seem somewhat tongue in cheek, this calendar is used by media folks across the US to help publicize a variety of ‘days’ each year. Being on the calendar is a good way for the average Joe & Jane Public to get a better understanding of what we appraisers do in their communities, because some media outlets may want to talk to appraisers in advance for inclusion in stories about our work.
Here’s a link to the calendar: https://www.nationaldaycalendar.com/january/
If Mark sees this message, please keep us informed about the process to get accepted. I don’t see a way to support the effort until the Calendar web site posts a message there to ‘vote’ on inclusion.
Coester Chronicles: Appraisers Get LESS THAN HALF The Apraisal Fee
This week, an appraiser received an order from CoesterVMS, the AMC run by Brian Coester who is being sued by Mark Skapinetz in Georgia for allegedly hacking Mark’s email. I’ve redacted it for privacy but to illustrate the way the fee is being handled.
Here’s how the appraisal fee gets parsed out.
- Appraisal Fee: $790 – Amount paid by borrower
- AMC Fee: $445 – Coester VMS gets 56% of appraisal fee paid by the borrower for maintaining a web site that tracks appraisal status and reviews the report when delivered.
- Appraiser Fee: $345 – The valuation expert gets paid 44% of the appraisal fee paid by the borrower to apply their local market knowledge to the collateral the lender is using for the mortgage that will likely be sold to a GSE and guaranteed by the taxpayer in the form of a federal backstop.
In other words, banks and mortgage company hire this AMC because they place more value in administration, rather than the expert taking the risk and coming up with a professional opinion of value to make a lending decision. This incorrect emphasis is somehow acceptable to the banking system.
I remember when HVCC went into effect on May 1, 2009 (eventually sunsetted into Dodd-Frank) and the justification mantra for banks and AMCs was a combination of cost-savings and a firewall. But it looks like
- the consumer is being screwed because they are overcharging for unnecessary bureaucracy ($445).
- the appraiser is being screwed because they aren’t being paid the prevailing market rate ($790), i.e., what the consumer is willing to pay.
- the taxpayer is being screwed by being forced to pay for a future cost during the next banking crisis as competent appraisers exit the profession. Good appraisers are moving on to other things. The quality of AMC work is poor and getting weaker as watered down expertise enters the business.
Here’s the heavily redacted order form:
Translation of above investor comments in red: If you are blacklisted (excluded) by any investor, it is ok to work on this assignment if you aren’t on the list of this particular investor. Of course you could be blacklisted as an appraiser because you are honest and didn’t hit the number for a previous assignment…or you can be blacklisted because you are a horrible appraiser. Either way, Coester doesn’t care given the presentation on this order form. Coester is simply saying: just tell us whether you are blacklisted or not with this investor in so we know what jobs to assign you. I find this makes the review process of this AMC highly suspect.
Here’s the fee breakdown on the form.
The fact that this fee arrangement is typical is absolutely surreal and unacceptable. Regulators and banks don;t really appreciate how bad the appraisal management process really is.
Updates from the Real Estate Industrial Complex
Here are some posts over at my forum known as the Real Estate Industrial Complex where I have been chronicling the unfortunate anti-membership activities of AI National.
AI Immediate Past President Scott Robinson, MAI, SRA, AI-GRS, spoke in Belgrade, Serbia, on “Valuer Licensing in the U.S. and Lessons to be Learned by Serbia.”
Appraisal Institute President’s Message March 31, 2017 Regarding The Residential Appraiser Project Team
Back on April 10, I wrote a post here that essentially pronounced the residential committee that Jim Amorin proposed was DOA since it had been months since there was any feedback shared. I received a few emails today that shared the month old email announcing the committee. Here is the original header and the specific section of the letter that covers the committee.
Sadly, I believe that this effort is a waste of time. I hope I am wrong. It is a noble attempt by AI members to repair the diluted SRA designation brand that so many worked so hard to obtain.
Now step back and imagine the leadership of a trade group or professional organization asking itself why they forgot about a large contingency of its members for a decade – coincidentally they began to question this past bias against residential appraisers while under siege for the “taking” policy? And then expecting those same leaders to embrace any recommendations from such a committee? Let us remember that the idea to form this committee was by leadership that ignored residential membership during this critical decade.
AI National leadership already knows what to do about the residential membership neglect and the dilution of the SRA brand. The top leadership is not a bunch of children, and there is no magic or complex research needed to solve the residential appraiser void at AI National. It would take AI President Jim Amorin and his handful of executive peers 5 minutes (or less) to include residential within the organizational culture and start moving forward in a meaningful way.
I believe it is simply too late and the residential profession has already passed them by. I can foresee the acknowledgment process by senior leadership morph into a procedural labyrinth, unlike the “taking” policy that was done without effective notice – evidenced by the widespread outrage at the end of last year.
After/If the January 1 “taking” occurs, this effort will be moot – I can’t believe AI National leadership will care about residential once they have control of chapter funds – or the organization collapses as a result of the chapter outrage that will ensue.
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 dream of blue turtles, you’ll dream of them dreaming about blue turtles, and I’ll finally accept the fact that blue turtles don’t Sting.
See you next week.
Jonathan Miller, CRP, CRE
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Reads, Listens and Visuals I Enjoyed
- Sting Lists Condo at NYC’s 15 Central Park West for $56 Million [Bloomberg]
- Experts on an Earlier Version of the World [A Wealth of Common Sense]
- Podcast: The Architect of Hollywood [99% Invisible]
- StreetEasy’s “Premier Agent” is putting junior agents in direct competition with the big players [The Real Deal NY]
- How price discounts are driving condo sales in Miami [Miami Herald]
- House hunter hurdle: Homeowners in California staying 2 extra years [OC Register]
- ‘Mansionization’ and home remodeling are obliterating urban greenscapes by reducing trees, study says [San Gabriel Valley Tribune]
- Cities With the Most Cash Sales [Realtor Mag]
- The Surprising Challenges of Living in a Cul-de-Sac [Realtor.com]
- Federal Reserve meets as economic picture darkens [Axios]
- The true story of the city’s unfair property taxes [Crains New York]
- Tracking the Incredible Gentrification of New York City [Citylab]
- Paydirt Column: Luxe home truths [The Real Deal NY]
- David Geffen reportedly selling Malibu spread for whopping $85M [Curbed LA]
- Cities May Sue Banks Over Foreclosure, Industry Reacts [The M Report]
- London’s Property Market Blows Hot and Cold [Bloomberg]
- Markdowns in Manhattan, While Costs Grow in Brooklyn [Bloomberg]
- These Fed Officials Give the Best Policy Signal [Bloomberg]
- Smart cities are a security nightmare [Axios]
- Creative Marketing for Luxury Condos [NY Times]
- Palatial Beekman Place townhouse seeks $21M less than original asking price [Curbed NY]
- At Long Last, Celine Dion Finds Buyer for Jupiter Island Estate [Mansion Global]
My New Content, Research and Mentions
- 5 things you need to know about elevators before moving into an elevator building [Brick Underground]
- Condo prices in DTLA are up to nearly $600K, report says [Curbed LA]
- Good Market Reports Are Page Turners For the Savvy Investor [Mansion Global]
- Sellers get real. To a limit. [The Real Deal NY]
- Will my apartment lose value if I replace my tub with a walk-in shower? [Brick Underground]
- Tight inventory heats up Westchester housing market [LoHud]
- What’s a “classic 5” apartment, and where can I find one? [Brick Underground]
- Hamptons Mid-range luxury kills it in Q1 [The Real Deal NY]
- Central Park West: one of New York’s most sought-after addresses [FT]
- With fewer properties for sale, homebuyers have less leverage in Brooklyn than Manhattan [Quartz]
Appraisal Related Reads
- Cherry-picking comps & being connected to the neighborhood [Sacramento Appraisal Blog]
- Lawyer: Zillow ‘Zestimate’ illegal appraisal hampering home’s sale; Zillow: Only estimate, not appraisal [Cook County Record]
- 6 Home Appraisal Myths You Need to Stop Believing Immediately [Realtor.com]
- 7 Reasons sales contracts come in higher than appraisals [Birmingham Appraisal Blog]
Extra Curricular Reads
- How Much Does a Politician Cost? A Groundbreaking Study Reveals the Influence of Money in Politics. [The Intercept]
- New, Lame 332 Area Code To Separate Cool Manhattanites From Lame Ones Next Month [Gothamist]
- The Eagles Sue an Actual Hotel California [WSJ]
- New Apple Park drone footage shows headquarter’s final touches [Curbed SF]
- What It’s Like to Be the NFL Draft’s Last Pick [GQ]
- Thomas Forkner, Waffle House Co-Founder, Dies at 98 [NY Times]