Housing's Two For One (COVID + Migration)

Housing’s Two For One (COVID + Migration)

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I wanted to give my shoutout to my excellent Columbia Grad students who participated in this week’s Zoom lecture on the nuances of market analysis. Here’s that same tip: you don’t need to concern yourself with the “Appraiserville” section down below where I bring transparency to the appraisal industry, especially with the larger institutions that influence it. But by all means, feel free to read at your leisure.

But I digress…

New Signed Contracts Are Up YOY in NYC Metro, Florida, SoCal and Aspen

This week Douglas Elliman Real Estate published our monthly research for our new Signed Contract Reports. I’ve been the author of a growing Elliman Report series since 1994.

Not only are new signed contracts up year over year across the U.S., but we are also seeing noticeable gains in Manhattan, the long time laggard. In many of the markets, condos are starting to see the growth that single families have enjoyed since lockdown conditions ended across these regions. The initial pattern following the lockdown has been towards safety at the expense of condo activity. However, that emphasis on single families is beginning to wane nationwide

But before we get to that, the story that covered the New York New Signed contracts report results was the 10th most emailed by the 350K Bloomberg Terminal subscribers nationwide, edging out the election results. Wall Streeters love their real estate!

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New York New Signed Contracts Report

Elliman Report: New York October 2020 New Signed Contracts

– The New York report attached covers Manhattan, Brooklyn, Long Island, Hamptons, North Fork, Westchester County, Fairfield County, and Greenwich, CT.

Manhattan
New signed contracts for the combination of all property types continued to narrow the gap from the same month a year-ago. Single-family new signed contracts led the way, exceeding prior-year levels, while co-ops saw a slight year over year decline. Condo new signed contracts continued to lag the other property types.

Brooklyn
New signed contracts for the combination of all property types continued to narrow the gap from the same month a year-ago. Single-family new signed contracts led the way, exceeding prior-year levels, while co-ops saw a slight year over year decline. Condo new signed contracts continued to lag the other property types.

Long Island (excluding H/NF)
New signed contract activity for both property types remained above year-ago levels, as did most of the individual price tranches. New inventory also edged above year-ago levels, but new signed contracts continued to outpace the supply gains significantly.

Hamptons
Single family new signed contracts were more than double year-ago levels, but activity has plateaued on a month over month basis since September. Single family new inventory remained at more than double the prior year level but saw a large month over month drop in October.

North Fork
Single family and condo new signed contracts more than doubled year-ago levels. Single family activity has plateaued at a high level since July. New inventory for both property types remained well above year-ago levels.

Westchester
Single family and condo new signed contracts continued to remain well-above year-ago levels while new listings were consistent over the same period.

Fairfield
Single family new signed contracts continued to remain above year-ago levels while condos fell behind over the same period. Single family new inventory fell sharply below the prior year total, yet condos remained significantly higher over the same period.

Greenwich
Single family new signed contracts tripled from the same month last year with no evidence of plateauing. Condo new signed contracts were also up sharply over the same period. New listings for both property types roughly doubled from the same period last year.

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Florida New Signed Contracts Report

Elliman Report: Florida October 2020 New Signed Contracts

There was a separate Bloomberg story on the surging high end of Palm Beach County: Million-Dollar Condo Contracts Jump 300% in Palm Beach County and it included a chart!!!

– The Florida report includes the counties of Miami-Dade, Broward, Palm Beach, Pinellas, and Hillsborough

Palm Beach County
New signed contract activity for single families nearly doubled and for condos more than doubled from the same time last year with significant gains across all price tranches. Single family and condo new listings continued to fall sharply below year-ago levels.

Broward County
New signed contract activity for both property types was up sharply from the same time last year with significant gains across most price tranches. Single family and condo new listings fell just short of year-ago levels.

Miami-Dade County
New signed contract activity for both property types edged higher from the same time last year, with gains starting above the $300,000 threshold. Condo new listings fell significantly from year-ago levels.

Pinellas County
New signed contract gains for single family and condos showed modest increases above prior-year levels. The number of new listings for single families edged above levels in the same month last year, and new listings for condos slipped below the total for the year-ago period.

Hillsborough County
New signed contract gains for single family and condos showed increases above prior-year levels. The number of new listings for single families edged above levels in the same month last year, and new listings for condos jumped above the total for the year-ago period.

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California New Signed Contracts Report

Elliman Report: California October 2020 New Signed Contracts

– The California report contains the counties of Los Angeles, Orange, and San Diego

Los Angeles County
Overall single family new signed contract activity slipped before year-ago levels for the first time since June, while condo new signed contracts remained well above the same month last year. Single family new listings fell sharply below year-ago levels.

Orange County
Overall single family new signed contract activity edged higher than year-ago levels, concentrated above the $800,000 threshold. Single family and condo new listings continued to fall sharply below year-ago levels.

San Diego County
Overall single family new signed contract activity edged higher than year-ago levels, concentrated above the $600,000 threshold. Single family and condo new listings continued to fall sharply below year-ago levels.

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Colorado New Signed Contracts Report

Elliman Report: Colorado October 2020 New Signed Contracts

– The Colorado report covers Aspen and Snowmass Village.

Aspen
New signed contract gains of both property types were roughly triple those of the same period last year. New listing inventory continued to remain above prior-year levels but was significantly outpaced by the growth in new signed contracts.

Snowmass Village
New signed contract gains of both property types combined were nearly triple those of the same period last year. New listing inventory for single families remained short of prior-year levels, while new listing inventory for condos more than doubled over the same period.

JPMorgan Will Now Only Finance 70% Jumbo LTVs in Manhattan

Here’s the announcement from Bloomberg: Manhattan Apartment Weakness Spurs Tighter JPMorgan Jumbo Loans

This headline is not great news for the Manhattan sales market where the median sales price was $1.2M in Q3 2020 and GSE conforming loan limits for Manhattan (New York County) are $765,600. As a result, mortgage activity is heavily weighted to jumbo which is anything but conforming. I have been impressed that financial institutions have been pretty good at managing their risk during this uncertain economic period. It doesn’t look like we are poised for a banking crisis as the economy slows down with the third wave of COVID making its way across the U.S. But my fingers remain crossed just in case.

“Every single lender is ratcheting up their risk requirements,” said Orest Tomaselli, chief executive officer of National Condo Advisors, which helps developers of new apartments comply with lender rules. “Right now, if you look out 24 months, can you say what the value of a new construction condo unit would be in Manhattan?

Don’t Buildings Walk Every Day?

It’s hard to process the extensive effort this took versus the quality of the seemingly mediocre building that was saved.

REBNY Webinar: Don’t Get Spooked by the Market: Top Brokers Share Their Tricks

I participated in a recent REBNY webinar – I really enjoyed the broker feedback shared in this discussion. Pragmatic and insightful. To be clear, I didn’t “trick” anyone for Halloween – I just brought data candy…

Here’s Proof That People Nationwide Are Viewing Listings In Person

The U.S. firm “Showing Time” got a shout-out in the NYT Real Estate Section this weekend with the results of home showings before, during and after the COVID lockdown. I gave the keynote address for ShowingTime in Chicago for their first national event. I’ve been fascinated with their data as a forward-looking indicator and here we are four years later and they seem ubiquitous, showing up on seemingly every MLS system I have access to nationwide.

So yes, people are viewing properties like mad, with showings particularly heavy beginning in May when some lockdowns began to end.

Miam and Manhattan Condos Remained Challenged Post-Lockdown Conditions

We are seeing condo sales improve year over year in our new signed contract reports series discussed earlier, but Manhattan condos still lag the prior year and South Florida condo contractors are rising. The Real Deal presented an interesting piece using our results from our quarterly and monthly Elliman Reports.

Speaking of Miami…and its “Wild West” Nature

Appraiserville

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

I Can See It Now: “Standards I – Sponsored By Zillow”

Yesterday I received this feedback from TAF/IAC:

The voting process was completed for Zillow Group and they were approved as an IAC member with the required affirmative votes (two-thirds of the IAC members). Thank you for taking the time to vote.

My appraisal firm is a member of the Industry Advisory Council (IAC) of the Appraisal Foundation (TAF). I’ve presented to IAC in Washington and the people I’ve met at IAC are great. Before I get to Zillow, here are my thoughts about the structure of the TAF councils:

IAC = Pay to Play In order to see how the sausage is made, members pay $2,500 per year to buy access to TAF executives, board chairs, and various staff. Members pay their way to the IAC meetings across the county, probably spending $10k to $15K annually. I only attended the meetings when they were in DC but each of those trips cost me about $1,500 round trip. I am not making the argument here that these companies shouldn’t have access to TAF, but it shouldn’t be on a pay to play basis. It is corporate elitism at its worst.

TAFAC = free The other council is for private organizations, trade groups, individuals, and government agencies. There is no fee for these members, just travel costs. More importantly, TAFAC has wasted more than a decade with the bitter feud between Dave Bunton and the Appraisal Institute. But now, as Kelly Davids has said, AI and TAF are going to make beautiful music together?

I have mixed feelings about the set up of these two councils. How can a publicly accountable organization like TAF, require a fee from the private sector? Is ‘pay to play’ really appropriate for a non-profit that has government oversight?

In addition, the IAC is comprised of many AMCs, National mortgage companies because they can afford the costs. My firm’s membership appears to be an outlier in that regard.

Let’s Look At Zillow as a new IAC member

As an IAC member, I voted against Zillow becoming a member. Full disclosure: I was a member (and the sole appraiser) of the Trulia Industry Advisory Council before the Trulia website went live and left after Zillow purchased Trulia – The Trulia co-founders told me I was the only member that remained from the startup to buyout process.

Zillow got its start with its Zestimate tool, a consumer-based AVM, known for its wild inaccuracies. They claim a 5% median accuracy rate. To the informed, this means that the Zestimate is accurate within 5% of the actual value 50% of the time, but 50% of the time it is not. In other words, a Zillow association with TAF significantly dilutes the public trust in the appraisal industry – violating their public mandate.

There were no listings on Zillow when it started. I remembered the constant drumbeat of Zillow trying to have great relationships with the brokerage firms so they could get their listing feeds. Now Zillow is going into brokerage, betraying their years of denial as a potential competitor.

I remember the evening before Zillow launched, I was introduced to co-founder Rich Barton at a NYC party sponsored by Inman/Curbed by the founder of Curbed, Lockhart Steele. I asked Rich, who was very nice, “so what’ya do?” To which he told me he was the co-founder of Expedia (and had I heard of it) and was launching a real estate platform called “Zillow” the next day. He said the name “rhymes with pillow.”

From the start, Zillow made appraisers and brokers’ lives miserable as it was very inaccurate but grabbed the consumers’ attention to become a juggernaut. Accuracy improved over the years but it’s still at the mercy of the quality of the public record.

Zillow Valuation Inaccuracy

My friend and colleague Ryan Lundquist wrote a great post a few years ago on what a number of myself and my peers have also discovered. The Zillow algorithms now seem incredibly weighted to the list price.

I remember getting a visit from then Zillow President Lloyd Frink years ago at my office, also a very nice guy. I was very candid about Zestimates and walked through of the problems with the Zestimates. One problem in particular was my biggest pet peeve. Zestimates are rendered to the nearest dollar, which infers a precision that doesn’t exist. Again, protecting the public trust doesn’t seem to be a concern of theirs.

Here are some additional thoughts on Zillow’s IAC membership:

– Zillow seems to be using TAF to build credibility as a valuation source when its valuation reputation is poor. TAF just wants the money.
– Zillow seems to be the only IAC member that is NOT an appraiser or appraisal provider. TAF just wants the money.

And the most important consideration for IAC’s mistake in judgment is that because Dave Bunton is steering TAF away from accepting ASC grant money as Congress intended, they will become much more dependent on funds from other sources such as IAC members and Corporate sponsorships, continuing to shift away from their mission.

The Zillow decision and TAF’s actions are completely inappropriate for an organization that is supposed to protect the public trust.

As Promised, TAF Makes Standards 1-4 Available (But Hard To Find) In The Public Domain

As Dave Bunton, President of TAF promised to make USPAP standards 1-4 available to the public in an easy to use format. He did this after being told by their legal team, their position wasn’t defendable since public money was behind the establishment of those standards. Interestingly, TAF isn’t accepting ASC grant money now because they no longer want to be subject to oversight as presented in TAF’s “bat-shit crazy” letter to ASC. This sure seems like a non-profit created by Congress is not acting appropriately (going in the right direction).


[click image to go to USPAP landing page]

OFT (One Final Thought)

Your moment of chart zen:

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
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog
@jonathanmiller

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