The Housing Market is as “Solid as Sears”
When I was a kid in the late 1960s, we lived in (not on) LSD (Lower Slower Delaware), namely Rehoboth Beach, branded “the nation’s summer capital.” Washingtonians made the 2.5-hour drive there every weekend from Memorial Day to Labor Day. The population went from 5,000 in the offseason to 75,000 in the summer. Dirt roads and farmland were I rode my bicycle was slowly displaced by heavy development into what is now a booming resort destination on the beach. My father was a developer back then and owner of a small real estate brokerage firm. The real estate market was a “wild west” kind of place.
One of the challenges of year ’round living was the lack of retail outlets (excluding t-shirt, pizza, salt water taffy and ice cream stores on the boardwalk). The nearest mall was an hour away and it has just opened – the first enclosed mall in Delaware .
But for convenience, my mother ordered all of our clothes from the Sears catalog. It was the Amazon of the day and it was both dependable and the variety was amazing. They sold houses and gave mortgages  in the 1920s after all.
When someone was a good upstanding person, they were “solid as Sears ” – their advertising phrase that began in the early seventies that means nothing to most people today  after decades of retail irrelevance.
Their impending doom  was self-earned, but it saddens me to see the demise.
And by the way, be careful when walking through glass doors:
Invisible doors pic.twitter.com/TYTeRIWfHV — viral viral (@xxlfunny1) October 9, 2018 
But I digress…
Market Report Gauntlet Q3-2018 Week 2: Westchester Sales; Putnam & Dutchess Sales
Douglas Elliman Real Estate  published our research  on a slew of markets this week. We’ve been authoring the expanding Elliman Report series  since 1994 and it keeps getting bigger and better ;).
Elliman Report: Westchester Sales 3Q 2018 
Elliman Report: Putnam & Dutchess Sales 3Q 2018 
The Bloomberg story that covered the Westchester County housing market was the 4th most read on the Bloomberg Terminals worldwide (±350k subscribers). Interest in Westchester even beat the 5th place story on POTUS calling the Fed Chair “Loco”! The story centered around the large increase in multifamily sales and the fact that single-family sales slid for the 5th consecutive quarter.
Countywide sales did not fall for the fifth time year over year like single-family sales because of the uptick in multi-family sales skewing the overall sales numbers higher. Last quarter a county brokerage firm actually called me irresponsible for discussing the impact of the new federal tax law on housing even though consumers are talking about it nonstop with the brokerage community. This thinking was a remnant of the old brokerage firm gatekeeper mentality  of controlling the narrative. Take a look at the headlines in the links below and tell me the U.S. housing market is not shifting towards weakness. Transparency in this marketing period is critical and consumers are as informed as brokers are.
And a chart! With an Archie Bunker-like “deep pull” headline.
Westchester County Sales:
– Countywide median sales price slid year over year for the first time in the past six quarters
– Fifth straight quarter with a year over year decline in the number of single-family sales
– Single-family median sales price declined year over year after six consecutive gains
– Listing inventory single-family homes expanded annually for the third time in four quarters
Putnam County Sales:
– Median sales price expanded annually for the sixth consecutive quarter
– The number of sales increased annually for the second time in the past three quarters
– Inventory expanded year over year for the first time in more than three years
Dutchess County Sales:
– The number of sales declined annually for the third straight quarter
– All price trend indicators rose year over year as inventory edged nominally higher
– The pace of the market was unchanged from the year-ago quarter
Market Report Gauntlet Q3-2018 Week 2: Manhattan, Brooklyn & Queens Rentals
Elliman Report: Manhattan, Brooklyn & Queens Rentals 9-2018 
From the Bloomberg story …
Here’s a great quote from the rental director at Elliman:
This time next year, Gavzie expects the share of leases with concessions will be close to where it is now, and that they’ll still be tied to high inventory.
“It’s really tough, to be honest,” he said. “There’s so much that has hit the market that I don’t know if 12 months is enough to absorb this all.”
– Face rent price trend indicators moved from the shift in the mix to higher quality rentals
– Overall rents skewed higher as new development prices rose much faster than existing rentals
– The rental market appears ready to benefit from the slowdown in the sales market
– Market share of concessions rose year over year for the 40th consecutive month
– The vacancy rate fell to the lowest level for a September in nine years
– Studio and 1-bedroom rentals were only size category to see a gain in year over year median rent
– Net effective median rent slipped for the ninth time in the past ten months
– Market share of concessions rose year over year for the 32nd consecutive month
– Median face rent has not shown a year over year decline in six months
– Face rent price trend indicators moved from a shift in the mix to higher quality rentals
– Overall rents skewed higher as new development prices rose much faster than existing rentals
NW Queens Rentals:
– Median face rent has not shown a year over year decline in three months as new development skews prices higher
– Year over year growth in concessions returned after the two prior months showed declines
– The number of news leases surged for the third consecutive month
Market Report Gauntlet Q3-2018 Week 2: Brooklyn Sales, Queens Sales & Riverdale Sales
Elliman Report: Brooklyn Sales 3Q 2018 
Elliman Report: Queens Sales 3Q 2018 
Elliman Report: Riverdale Sales 3Q 2018 
– Median and average sales price broke the $800,000 and $1 million thresholds respectively
– Sales slipped year over year for the third consecutive quarter
– Listing inventory expanded year over year for the second consecutive quarter
– Co-op and 1-3 family prices set records as condo sales slipped for the fourth consecutive quarter
– Record median and average sales price reached
– Number of sales declined as listing inventory expanded
– Sixth consecutive quarter with average sales price record
– Co-op and 1-3 family prices set records as condo sales slipped for the fourth consecutive quarter
Riverdale (Bronx) Sales:
– Price trend indicators and number of sales moved sharply higher
– Listing inventory edged higher but overpowered by a surge in sales
– Co-ops showed the largest gain in median sales price
– Surge in overall average sales size caused by more higher-end activity
Rules of Thumb Can’t Be Placed In Arms of Non-Professionals
Actually, professionals need to be careful of over-relying on “rules of thumb” they have developed during their careers because they are subject to change at any time. A very good real estate broker sent me this quote from a client who misused a “rule of thumb I developed years ago that is still largely valid today and widely used:
Always enjoy reading your notes. Is this item housing notes worthy? If not, would appreciate your insight: How would you answer this seller:
“It doesn’t make sense to have a more than 50% difference between 2nd floor and 52nd floor in … building…applies here too…” This was in response to saying that appraisers might price the 15th floor vs the 27th flr at 1 percent more per floor for a higher floor, or 1 percent less per floor for a lower floor such as 15. The views are similarly open. Should they be priced 1 percent more per higher floor? Or value both the same? Same condition…Continued success. Thank you!
My answer – while the 1% rule applies to the difference in floor level assuming no variation in views, it was never intended to measure between the extremes of the 2nd and 52nd floor without modification. In other words, there is a large adjustment in the view from the 2nd to the 3rd floor because the second floor can be blocked by scaffolding when external facade repairs are made. In addition, I can’t imagine a scenario were the 2nd and 52 views are the same. In most cases there is a view break once the lowrise or mid rise buildings are cleared across the street. I have shared this before in these notes but here are two different methodologies I used to show this phenomenon over at my Matrix Blog:
[ChartFloor] Manhattan Price Per Floor Breakdown  – 2010
Repost: Measuring Manhattan Values By Floor Level  – 2012
New in the Real Estate Lexicon: Strolerification
The analysis was based on birth rates.
Upcoming Speaking Events
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The Housing Narrative Has Officially Changed
I refer you back to my “Theory of Negative Milestones ” 2008 blog post that referenced my original 2006 post for context:
With rising mortgage rates, the new federal tax law, a volatile stock market, and economic uncertainty, the conversation about the housing market had been altered.
Here’s a terrific infographic from FT’s real estate cover story on the change: Is Manhattan on the edge of a prime housing precipice? 
The Stock Market Corrected, What Does It Mean For Housing?
First: the stock market is not the economy.
Second: I’ve never been able to credibly correlate housing prices and the Dow Jones Industrial Average with housing prices.
Third: for a brief period I was able to show some vague distant correlation in Manhattan sales and the index, but it hasn’t come close in a while.
Fourth: Focus on jobs and compensation and types of compensation (i.e. cash v. deferred).
All you need to know is that it is an important economic engine for the NYC economy, providing 23% of total wages with 5% of the jobs. And each securities industry job supports 2.5 NYC private sector jobs.
Anything more than that is beyond my comprehension. One thing I should note is that the economy itself appears much more detached from the housing economy in this cycle. This makes the observation of good economic news more confusing than ever – i.e. very low unemployment.
I am somewhat obsessed by the new tariff policies and how much damage they will bring to the economy – think of it as a tax on the consumer who has to pay more for goods produced by domestic firms because there is less competition. That ultimately competes for the amount left over for a mortgage payment as rates are rising.
But hey, I’m no economist. Here’s a screenshot from my phone as I write this today as the market seems to be stabilizing (so far).
As Jane Wells of CNBC tweeted yesterday:
Sit tight. Grab a beer. Watch. Relax. The Dow hasn’t been this low in…two months. https://t.co/YeWUNrmOlJ — janewells (@janewells) October 11, 2018 
(For earlier appraisal industry commentary, visit my old clunky REIC  site.)
CoreLogic’s A La Mode is Pulling A Facebook Privacy Play
One of the tactics of Facebook has long been to “cross the line and apologize” rather than “ask permission.” Now that “A la mode has been acquired, by CoreLogic” the company with a 50% market share of the industry seems to be employing this tactic.
We have been A La Mode users for a decade. Heck, I even appeared on their homepage and in their marketing materials  to attest to our firm’s belief in the product. But that was before Dave Biggers sold the company and our belief in the product was replaced with suspicion.
Rightly so. In a routine update to our software, we saw that A La Mode inserted a checkbox in our preferences without advanced notice – the software allows you to see other appraisers’ data attached to a specific comp record. You populate the address and all the information is inserted using other appraiser’s data. And guess what, the other appraisers can see yours!
And it gets better. You can subscribe for a fee and get all your competitors data (assuming they subscribe) and you sign away all your rights to it.
This seems to acknowledge that we own our information because we have to sign away our rights, something appraisers have believed since forever but lenders and AMCs haven’t been on board and simply take it and use it (think FNC).
Here is the best of the random appraiser feedback I read on this new development (made anonymous).
NO, NOT SMART AT ALL! Appraisers cannot make a decision on behalf of ALL clients they’ve done work for. They are asking for big, really big problems if a client clearly didn’t want the analysis or any portion of the analysis given to anyone. This is another attempt from Corelogic to obtain data they have no rights to. Although, in multiple appraiser shops many of the owners and or managers have already accepted this agreement on behalf of all the appraisers utilizing the software which now puts the associates performing the appraisal(s) in jeopardy. No matter how big a shop you work with or for, you (the individual appraiser) are legally responsible for what you produce and safeguard. Corelogic cannot take the data you analyzed and produced a product for your client and create a derivative product to pass around to other appraisers or potential third parties.
Here is one other issue with this “Smart Exchange” product. At a minimum (without consideration of Corelogics roll in the process) this is what happens. “Joe appraiser is doing an appraisal and Smart Exchange indicates that a “Peer” appraiser has utilized a comparable or even may have appraised a comparable which Joe appraiser wishes to use in his report. “Peer” appraiser rates this property at a C-3, but Joe appraiser thinks its thinks it’s a solid C-4. But because the fear of UCDP compliance issues and fear of having to answer a rebuttal request, Joe changes his rating to match that of the “Peer” appraiser. This in no way passes the USPAP smell test for confidentiality or impartiality. Plus Joe appraiser utilized the “Peer” appraisers photo which could have been the wrong property anyway.
How stupid do you have to be anyway. You pay through the nose for software, subscriptions, appraisal portal fees, insurance, gas, paper, computers, phones and whatever else you need to provide a great product, and in the end you would give it all away so that some big data grabbing company (which you bought the appraisal software from) can sell as “Confirmed” data to eventually put you out of business or at a minimum reduce the appraisal assignment pool to you and many up and coming appraiser. Why would you want to take that chance, makes no sense to me. Maybe not this year or even five years down the road. But eventually appraisers and the public will suffer greatly when all loans will be standardized to one valuation product. Okay, a few of you are going to argue that the physical appraisal assignment will never go away completely. Your right, custom homes or unique construction we will always have arround. But take a look in your market area and tell me how many new Tract home subdivisions (this is even those custom home tracts) are popping up all over. Simply put; Corelogic DID NOT WORK for that data, they are not providing it to you as a compliment to their software or they would have offered to sell it to you. They are TAKING IT from you…..They have no legal rights to it, so don’t give it away.
Appraisers need to THINK (hate to say most are not) about this. If the Lender/Clients data along with the product we produced was not to be closely guarded. Then there would be no laws or regulations about how we handle this information and Corelogic wouldn’t be asking in such a extremely exclusive statement which they want you to agree to on behalf of your clients. Others may say, Yeah but what about those other third parties which we subscribe to that give us information about properties which were appraised by others within that subscription service. Well that pretty simple also. The information provided by those other third party subscriptions are not providing information that can’t be obtained from public records. It all about your data you analyzed to produce a product. Primarily at this time, your quality and condition ratings or any ratings and analysis which may show up and can’t be obtained from public records.
Not so sure what’s so hard to understand about our responsibility.
See below and pay particular attention to “Assignment Results”. Assignment results include how you evaluated and produced your comparable data to come up with the appraised value.
USPAP Confidentiality excerpt:
CONFIDENTIALITY: An appraiser must protect the confidential nature of the appraiser-client relationship. 12 An appraiser must act in good faith with regard to the legitimate interests of the client in the use of confidential information and in the communication of assignment results.
An appraiser must be aware of, and comply with, all confidentiality and privacy laws and regulations applicable in an assignment.
An appraiser must not disclose: (1) confidential information; or (2) assignment results to anyone other than: • the client; • parties specifically authorized by the client; • state appraiser regulatory agencies; • third parties as may be authorized by due process of law; or • a duly authorized professional peer review committee except when such disclosure to a committee would violate applicable law or regulation.
An appraiser must take reasonable steps to safeguard access to confidential information and assignment results by unauthorized individuals, whether such information or results are in physical or electronic form.
An appraiser must ensure that employees, co-workers, sub-contractors, or others who may have access to confidential information or assignment results, are aware of the prohibitions on disclosure of such information or results.
A member of a duly authorized professional peer review committee must not disclose confidential information presented to the committee.
Comment: When all confidential elements of confidential information and assignment results are removed through redaction or the process of aggregation, client authorization is not required for the disclosure of the remaining information, as modified
Coester Chronicles Continued: Skap Counters Big Time (David v. Goliath Edition)
Mandatory reading for appraisers.
More Skap v. Coester 
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Reads, Listens and Visuals I Enjoyed
- More Trees, Happier People [NY Times] 
- Housing Pain Gauge: Nearly 1 in 6 Owners 'Under Water' [WSJ] 
- The Stock-Market Meltdown That Everyone Saw Coming [Bloomberg View] 
- The ‘pain threshold’ approaches for the housing market, analyst warns [Marketwatch] 
- Public anger in China spreading as property prices drop [South China Morning Post] 
- Housing market correction or 'a whole lot of nothing'? Uncertainty as new mortgage rules come into effect [CBC] 
- Mortgage Rates Fast Approaching 5%, a Fresh Blow to Housing Market [WSJ] 
- Miami ‘Townhouse in the Sky’ Asks $48 Million [WSJ] 
- We Forget That the Financial Crisis Had a Trial Run [Bloomberg] 
- Ban on sea walls faces increasing protests from homeowners [Boston Globe] 
- Lennar Is in Advanced Talks to Sell Its Real-Estate Lending Unit, Rialto Capital [WSJ] 
- How The FBI Foiled a Wire Transfer Scam [WAV Group Consulting] 
- Balance of power shifting in metro Denver’s housing market [Denver Post] 
- New Condo Sales Plummet [WSJ] 
- Is the speed of skyscraper construction declining? [Marginal REVOLUTION] 
- What does 'net effective maintenance' mean and why am I suddenly seeing this phrase in sales listings? [Brick Underground] 
- Florida Home Once Among America’s Priciest Heads to Auction [WSJ] 
- How Often Can You Buy the Dip in Housing? [A Wealth of Common Sense] 
- A red flashing light in the housing market could spell trouble for the economy [CNBC] 
- Amid legal turmoil, Billy Rose stepped down as broker of record for Agency [The Real Deal] 
My New Content, Research and Mentions
- Citi Habitats and Michael Stern's JDS break up at American Copper Buildings [The Real Deal] 
- Manhattan real estate deals on a downard slope [The Standard] 
- Brooklyn, Queens, Riverdale all saw record high median sales prices in Q3 [The Real Deal] 
- Manhattan Rents Decline, Says Douglas Elliman, Miller Samuel Report [National Real Estate Investor] 
- Manhattan’s rental market is stuck in a "slow grind" [The Real Deal] 
- Home prices in Brooklyn and Queens reach record highs [Crain's New York] 
- Demand for Manhattan Rentals Plummeted in September [Mansion Global] 
- Manhattan Landlords Are Offering Tenants More Sweeteners [Bloomberg] 
- Sales in 'white-hot' Brooklyn and Queens markets set to cool off in coming months [Brick Underground] 
- Average Home Price in Brooklyn Breaks $1M Threshold for the First Time [Mansion Global] 
- Brooklyn Heights penthouse set for borough sales record [AmNewYork] 
- Westchester Homebuyers Find a Way to Get Around New Tax Burdens [Bloomberg] 
- Acquisti di case in forte calo a Manhattan: i venditori si rifiutano di fare prezzi ‘realistici’ [Business Insider Italia] 
- Columbia Business School Alumni Club of New York [Columbia Business School] 
- Is Manhattan on the edge of a prime housing precipice? [Financial Times] 
- Corcoran is a new development heavyweight. Here's why it's now chasing small projects [The Real Deal] 
- Will rising interest rates knock buyers off the fence or steer them toward rentals? [Brick Underground] 
Recently Published Elliman Market Reports
- Elliman Report: Putnam & Dutchess Sales 3Q 2018 [Miller Samuel] 
- Elliman Report: Westchester Sales 3Q 2018 [Miller Samuel] 
- Elliman Report: Riverdale Sales 3Q 2018 [Miller Samuel] 
- Elliman Report: Queens Sales 3Q 2018 [Miller Samuel] 
- Elliman Report: Brooklyn Sales 3Q 2018 [Miller Samuel] 
- Elliman Report: Manhattan, Brooklyn & Queens Rentals 9-2018 [Miller Samuel] 
Appraisal Related Reads
- Slumping volume & rising inventory [Sacramento Appraisal Blog] 
- AI Damaging Appraisers' Livelihood – Shame on All AI National Leadership [Appraisersblogs/Miller] 
- National data, does not local data make [Ann Arbor Appraisal Blog] 
- Loud tile, fake trends, & staying grounded [Sacramento Appraisal Blog] 
- Appraiser competency for relocation assignments [RAC] 
Extra Curricular Reads
- Sears, Roebuck & Co. [Ad Age] 
- Happy Belated Birthday Pop [The Retired Cop] 
- Can Typos Give Insight Into Your Mental Health? [WSJ] 
- For Sale: Black Flag’s Logo, the Most Iconic Symbol of Hardcore Punk [WSJ] 
- The Stick Shift Index: Where Do People Still Drive Stick Shift in America? [Priceonomics]