Shipping Housing Values Elsewhere
It’s been a stressful week for news, especially after last week’s clown analysis . So rather than delve into those details, I’m going to actually focus on housing related topics and not stoop low to discuss the after effects  of your favorite childhood cereal or this.
I should point out that after 4 years, my wife and I finally agreed on a name for our boat. It will be known as “Sound Decision” – because we are located on Long Island Sound and it clearly isn’t a good decision. Our kids fought hard for “Tough Ship” but my wife and I didn’t want to go low road.
but I digress…
5 Market Reports Have Been Shipped
For those of my non-NYC metro Housing Note readers, the following is regional but might be interesting nevertheless since many of the patterns we are seeing in the NYC metro area are playing out across of U.S. housing markets.
It was week 2 of our 4 week U.S. market report gauntlet. Douglas Elliman  Real Estate published 5 reports  that I authored, covering 8 housing markets. Next week: South Florida, Fairfield County, including Greenwich, CT.
We learned from the report release that Wall Streeters are more interested in the New York City apartment rents than the Fed minutes, slumping stocks and the Wells Fargo CEO resignation.
MANHATTAN Rents Manhattan median rent slipped as new leases surged and landlord concessions expanded. This was the second time in nearly three years median rental price declined year over year. Both of those declines came in 2016 with the prior decline occurring in February. Median rental price slipped 1.2% to $3,396 from the same period a year ago. Average sales price edged up 0.8% to $4,117 from the same month last year. Median rental price declined most at the upper end of the market and was flat in the entry market…
BROOKLYN Rents After two consecutive months of declines, Brooklyn median rental price edged higher, along with a surge in new leases and gain in inventory. Median rental price rose 2.4% to $2,949 from the same period last year. Average rental price increased 2.2% to $3,197 over the same period…
QUEENS Rents Rental price trends for the Northwest Queens market have remained mixed, declining in 7 months over the past year. Median rental price for the area that includes Long Island City, Astoria, Sunnyside and Woodside, declined 5.7% to $2,787 from the same period a year ago…
Elliman Report: Brooklyn Sales 3Q 2016 
The Brooklyn housing market continued to push the envelope both with higher prices, more sales and falling inventory. Median sales price increased 8.7% to $735,000 from the same period last year to a new record. Average sales price showed a similar pattern rising 14.8% to a record $983,511, just shy of the $1 million threshold. Housing prices continued to rise across all property types and all major regions of the borough. The median sales price for condos were up 6.8% to $812,008, co-ops were up 8.4% to $428,000 and 1-3 family houses were up 9.2% to $830,000 respectively over the same period…
Elliman Report: Queens Sales 3Q 2016  The Queens housing market set a number of new price records, as the region benefited from the spillover of demand from Brooklyn. Median sales price set a new record, rising 10.7% to $499,000 from the same period a year ago. Average sales price followed the same pattern, rising 7.6% to a record $561,966. There were 3,750 sales during the quarter, up 3% of the same period last year to the highest third quarter sales total in 9 years. With heavy sales volume, listing inventory continued to slide. There were 4,291 listings on the market at the end of the quarter, 18.3% less than the same period a year ago…
Elliman Report: Westchester Sales 3Q 2016 
There were more residential sales during the third quarter Westchester county housing market than during any other quarter over the past 35 years. The sales were comprised of single-family homes, 2-4 family homes, coop apartments and condominium units. The overall market has shown heavy sales volume for more than a year now fueled by New York City renters and homeowners priced out by the recent housing boom. There were a record 3,193 sales, up 4.9% from the same period a year ago and the prior record… 
Putnam & Dutchess sales
Elliman Report: Putnam & Dutchess Sales 3Q 2016  The Putnam county housing market saw the most sales in 11 years. The number of sales surged 21.5% to 367 from the same period a year ago. Single family home sales accounted for 87.2% of total sales while condos accounted for 12.8% of total sales respectively from the year ago quarter with roughly the same representation by property type. Listing inventory dropped 27.8% to 698, pushing the pace of the market more than 40% faster than the same period a year ago. The absorption rate, the number of months to sell all inventory at the current rate of sales, was 5.7 months compared to 9.6 months in the year ago period, the fastest market pace in thirteen years…
Vancouver is shipping foreign housing demand elsewhere
On August 2nd, the Vancouver government implemented a 15% property-transfer tax on non-Canadian buyers  to prevent further proliferation of building “bank safety deposit boxes” in the sky. The results have been dramatic across the market. Luxury market sales fell 57.5% and overall sales fell 30.2% from the prior month. While these month over month numbers strike me as exaggerated since there was a rush to close in July before the deadline and sales were compared with sales after the deadline, I would think there will be a significant impact to prices. While prices haven’t been hit yet I am confident they will be eventually with less demand. This will impact property values for Canadian buyers int he market going forward. I don’t know what the alternative is but Vancouver seems to be a test case. I hope city officials are expecting a sharp drop in tax revenue going forward.
Be careful what you wish for.
Shipping a condo’s value 2 inches to the right and 16 inches down
So what’s a condo worth in the 58-story Millennium Tower at 301 Mission St., the most luxurious condo tower in San Francisco, which has sunk 16 inches since its completion in 2008 and began leaning in 2009?
There will be years of litigation ahead but the condo owners have already begun to provide their value opinions.
Before revelations this summer that the tower was sinking and leaning, condos had been valued from $563,084 to $12.6 million, with 141 units valued at over one million, according to the SF Examiner; but now the dynamics have changed: “Some stated figures as low as $0, $1 or $2. Others knocked off a million dollars or reduced the value by half.”
In litigation situations there are always parties who claim there is “zero” value to a property. I find that line of reasoning is quickly dismissed when the opposing attorney offers to overpay for the property and give the plaintiff $1.
This situation seems to be a “catch-22” because the value is predicated on an assumption that there is a functioning market for it. Questions about additional sinking and leaning, safety and a lot of future litigation have likely made the project non-financeable and unsaleable at the moment. But that doesn’t mean forever and those questions will probably be answered eventually. But it means a lot of caveats and hypotheticals to provide some sort of value of those units future.
Shipping demand for city housing to the suburbs
There were a couple articles in Curbed that I stumbled across that talked about the new shift in housing demand (we are already seeing this in NYC with record suburban sales (see Westchester report above). Affordability leads all discussions.
Curbed: Why Millennials May Soon Leave Big Cities  The trends that have brought more young adults to urban areas are about to reverse, says a new study
Curbed: Can building luxury condos fix the affordable housing crisis?  The answer is more complicated than you think
REFA: For Sale and for Rent, Trouble at the Top?
If you happen to be in or near Connecticut on October 25th, I’m moderating what looks to be an interesting panel in Stamford, CT for the Real Estate Finance Association .
Please read and sign this letter
Appraiserblogs posted an open letter by The Virginia Coalition of Appraiser Professionals sent out an open letter to AMCs. Whether you are an appraiser, in the mortgage industry or somehow connected with the valuation process, please take a moment to read it and hopefully sign it. The intent is to create much more awareness about the damage the appraisal management company (AMC) industry is causing to the quality of valuation that is relied on in the mortgage lending process.
You can read and sign the letter at the bottom of the post under the heading “VaCAP AMC Letter” in red – it is simple and quick. I find it encouraging to see the all the grassroots efforts by state coalitions to rise up after appraisers have been long neglected by appraisal industry trade groups who seem only focused on collecting a fee.
Appraisers Narcing On Each Other
One of the things that has annoyed me for my entire career is how many appraisers are so ready and willing to get personal digs in on an appraisal review for a mutual client. It’s as if our industry can’t help ourselves.
Our firm completed an appraisal for an estate and the broker told the estate they thought we were a little low. So the estate hired a local appraiser recommended by the broker – I have run into them over the years (personal dig because I can’t help myself: this appraiser worked for a company that went under after the owners lost their license). The appraiser has always seemed like a nice person and from what little I’ve seen, also seems to provide adequate quality work. The appraiser proceeded to perform a “review” of my appraiser’s report but used an effective date of 8 months later than ours, throwing in jabs at our appraisal – yet the comps he used in his report did not exist 8 months prior. He even referred to things I’ve said on valuation methodology in the media as evidence we were low. Bizarre. Why do some appraisers act so unprofessional sometimes? Are most appraisers that insecure? This unprofessional behavior only makes that reviewer look bad to their client.
In this situation the appraiser didn’t review us on the effective date of our report (so its not technically a review under the guise of being one) and he looked to be too high. So for the rest of my career, we will no longer recommend this person. If the appraiser’s review stuck to the facts and compared apples and apples it would be business as usual. Does the review appraiser really think this places them in a good light with the client? No, it doesn’t. In this particular case, we spoke to the client who inferred as such. We declined to provide a rebuttal to the review but did offer to be engaged to update our report by 8 months.
In the appraiser’s defense and some of the really outlandish review commentary I have seen over the years, some appraisers are just very poor writers outside of their comfort level like providing constructive criticism over providing market analysis in their reports. Don’t go down that path. Stick to the facts and your experience in the market and stay away from reality television behavior. Otherwise you do yourself, your colleagues and the appraisal industry a disservice.
Appraisal Oversight, Illustrated
This was shared with me from a colleague – don’t know the source: “This demonstrates what’s wrong with the appraisal industry.”
A Brilliant Idea
If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, sign up here for these weekly Housing Notes . And be sure to share with a friend or colleague if you enjoy them. They’ll get on a ship, you’ll live in a shipping container and I’ll finally ship my pants.
See you next week.
Jonathan Miller, CRP, CRE
Miller Samuel Inc. 
Real Estate Appraisers & Consultants
Reads, Listens and Visuals I Enjoyed
- Why Millennials May Soon Leave Big Cities [Curbed] 
- Inside the New York Public Library’s Last, Secret Apartments [Atlas Obscura] 
- Can building luxury condos fix the affordable housing crisis? [Curbed] 
- Madison Capital in contract to buy ground lease at 71 Fifth Ave. [The Real Deal] 
- Can Condo Boards Ensure Secret Ballots? [New York Times] 
- Vancouver’s Foreign-Buyer Tax Bruises Luxury Home Sales [WSJ] 
- In LA’s Holmby Hills, A Real Estate Arms Race Continues [Forbes] 
- Urban Revival? Not For Most Americans [Jed Kolko] 
- Some owners in “The Leaning Tower of San Francisco” say their condos are worthless [The Real Deal LA] 
- The Cleanup of Detroit Has Erased Graffiti History [VICE] 
- In Bridgeport, Property Values Plummet, but Taxes Soar for Some [New York Times] 
- Think Wells Fargo scandal is bad? RBS did something so much worse [Housingwire] 
- Job surge shows Brooklyn’s creative class is in session [Crains New York Business] 
- New Jersey’s second most expensive home hits the market asking $45M [LLNYC] 
- Nighttime Windows [New York Times] 
- A lottery isn’t the answer to our housing problems [City Observatory] 
- It’s in the Numbers: Luck and Superstition Sell Luxury Real Estate [Mansion Global] 
My New Content, Research and Mentions
- Matrix Blog: NYT Real Estate Calculator: NYC Rents Go Graphic [Miller Samuel] 
- Matrix Blog: [Speaking] The Fairfield/Westchester Chapter of REFA 10-25-16 [Miller Samuel] 
- A Park Avenue Penthouse in the Clouds [NY Times] 
- Brooklyn, Queens keep getting more expensive [Metro.US] 
- Brooklyn, Queens are more expensive than they’ve ever been; Manhattan rents are down [6sqft] 
- Yes, It’s True — Brooklyn Homes Are Now More Expensive Than Ever [Brownstoner] 
- In the third quarter, the Brooklyn and Queens sales markets got white-hot [Brick Underground] 
- Brooklyn and Queens have never been this expensive [Curbed NY] 
- As demand outstrips supply, BK prices continue to rise in Q3 [The Real Deal NY] 
- Brooklyn and Queens home prices reach record highs [Crains New York] 
- Luxury Developments Spark Price and Sales Spike in Brooklyn [Mansion Global] 
- Manhattan Apartment Rents Decline Amid a 35% Surge in Listings [Yahoo Finance] 
- Manhattan median rental price declined for the second time in 2016 in September [BuzzBuzzHome] 
- Renters in Manhattan are pushing back against exorbitant prices [Business Insider] 
- What you need to know about Manhattan’s housing market heading into 4Q [New York Business Journal] 
- Glamour on the Gowanus: Nets Really Call Brooklyn Home [New York Times] 
- Report: Rent prices fall in Manhattan’s luxury market [AM New York] 
- “Queens is the New Brooklyn. The Bronx is the New Queens.” [Habitat Magazine] 
- Podcast: Westchester Home Sales Surge, Especially at Low End (Podcast) [Bloomberg Radio] 
- Manhattan Apartment Rents Decline Amid a 35% Surge in Listings [Bloomberg] 
- Red Hook, Brooklyn, on the Rebound [New York Times] 
- Rents Rise in Northwest Queens [New York Times] 
- Keeping It Local [New York Times] 
- East Harlem: Bodegas, Botanicas and New Buildings [New York Times] 
Appraisal Related Reads
- Picky buyers, the housing crash, and a Sacramento market update [Sacramento Appraisal Blog] 
- Appraiser shortage causing closing delays [Valuation Review] 
- Sign The Open Letter to AMCs [Appraisersblogs] 
- List of State Coalitions [Voice of Appraisal with Phil Crawford] 
Extra Curricular Reads
- Robin Williams’s Kaleidoscope of Bicycles [WSJ] 
- Saddam Hussein had a secret torture chamber in NYC [NY Post] 
- How Carl Sagan’s Legacy and Romance With Space Lives on [Observer] 
- GoPro Hot Wheels Stunts Are Surprisingly Thrilling [Digg] 
- Lobster roll demand drives prices to 11-year high [FT] 
- Man lounges in the middle the of ocean during hurricane [CNN]