In Housing Analysis, You Have To Get Up Early To Be A Talking Head So Save Your Changes
Thankfully yesterday was a super fun 18-hour work day (is that a long-form oxymoron?) which I delve into for these housing notes. When you are in the middle of building market research to share with the public, it is important to test outcomes and save your work – so watch the following closely:
Running the tests again without saving your changes pic.twitter.com/ZZkFdRSEOL — Sergio Gil (@porras) October 5, 2018 
And here’s a shoutout to my former Columbia grad students from my summer “Market Analysis” session who came to hear me speak last night at the Columbia Business School Alumni Club  event:
Pie is the only acceptable dessert. Cake is for 6 year olds and communists. #NationalDessertDay — David Burge (@iowahawkblog) October 14, 2018 
but I digress…
NBC SquawkBox October 18th: Impact of New Federal Tax Law on High-Cost Housing Markets
Robert Frank  of CNBC invited me to appear yesterday’s show. I’ve been on the show a half dozen times, especially during the housing bubble when I was always interviewed remotely in a dark room with an automated camera. This appearance was the first time on the actual set. The interview with Robert Frank and Andrew Ross Sorkin  was fun. In keeping with their audience, it was all about the “trade” and focus on pricing which reminded me of the stock market-like thinking of housing from a decade ago.
“Should all New Jersey homeowners move to Florida?”
Afterward, I was standing next to Alan Greenspan, former Fed chair, in the makeup room after the interview to take my makeup off. Chatted with Diana Olick as well as I am in now “full name-dropper” mode. Here’s Robert Frank’s intro  and then my interview:
Market Report Gauntlet Q3-2018 Week 3: Greenwich & Fairfield County, Connecticut
Yesterday was a long but really fun 18 hour work day. I had to get up at about 4:30 am to get picked up for a TV thing (above) in Manhattan to talk about the release of the Douglas Elliman reports  I author covering Connecticut and South Florida and their housing market patterns that suggested an impact from the new federal tax law .
I’ve been the author of the expanding Douglas Elliman report series  since 1994. I insert any new report releases in these Friday Housing Notes.
The Elliman Report for the Greenwich sales market  showed some compelling changes in market behavior because of the surge in single-family sales, the largest year over year third quarter jump in six years, despite the years-long weakness of the luxury market. Then compare this pattern to the neighboring county of Westchester in New York state with five consecutive quarters of year over year single-family sales declines. Here’s a possible reality show  on the topic.
Bloomberg News covered this phenomenon in her story: Greenwich Home Sales Jump as Buyers See Tax Break, Better Prices . It resonated with the ±350k Bloomberg Terminal subscribers as the 3rd most emailed article of the day. The securities industry loves their Greenwich housing news.
And of course, there were great charts using our data. What makes them great are their titles, not my numbers. Take a look.
Market Report Gauntlet Q3-2018 Week 3: South Florida
After a long drought of South Florida sales, especially at the high end, the eight market reports covering even more markets suggested a growing momentum of rising sales and prices along with stabilizing or modest inventory growth. Don’t get the message wrong here. South Florida still has a backlog of new development supply to work off as well, but the market, at least for the first three quarters of 2018, seems to be improving and coincidentally it began with the new tax law that went into effect on January 1st of this year. We all know that the plural of anecdotal is not data, but for now, there has been a lot of anecdotal to enable a conversation about the correlation.
All the Elliman market reports  I authored on the Q3-2018 are available at the bottom of these Housing Notes.
We’ve also got a lot of charts on our website . Here are a few samples: 
Storming Towards Elevated Living
This New York Times piece  on a house left standing from the ravages of Hurricane Michael on the Gulf of Mexico probably represents what waterfront development building codes will look like in the future. Low-cost flood zone insurance in a world with accelerating climate change patterns of rougher more volatile weather will necessitate it.
American Dream Home, Rehabbed
There was a great opinion piece  by Candace Jackson in the New York Times about a new way to view the optimal home. The dream has centered around expanded square footage for years. Now it is not that simple as seen in the following floorplan:
[New York Times]
But the best graphic of this article was the mind-blowing gif that shouldn’t be watched during cocktail hour.
This Week in Aspirational Pricing
Here are two true-false questions as an exclusive for my Housing Notes readers:
Q1. Was the following house ever worth the original asking price in the history of the universe?
Hamptons Mansion Sees 50% Price Cut [Mansion Global ]
Q2. Was the following house ever worth the original asking price in the history of the universe?
Warren Buffett Finally Sells Beach House After Big Price Cut [Wall Street Journal ]
Thought: property sellers, even titans of industry, can be way off on their asking prices for high-end properties.
While we’re on the topic, keep an eye on this new development project in Manhattan .
Favorite charts of the week from our gallery .
(For earlier appraisal industry commentary, visit my old clunky REIC  site).
Appraisersblogs Pushes Out Our Content For An Industry Under Siege
The appraisal blog aggregator “Appraisersblogs ” regularly takes content from my Appraiserville section of Housing Notes without asking but always links back. Normally I get annoyed with that, but in this case, I am very grateful because it pushes out my thoughts to an ever wider appraisal-related audience as they do for my appraiser colleagues who also write. Since we have been abandoned by The Appraisal Institute and are in the way of “progress” by financial institutions (who only seem concerned about raising lending volumes because they will always have the federal backstop), the more insights shared in public outside of our industry is for the better. Thanks, Appraisersblogs.
Response (Part I): AI National Damaging Appraisers Livelihoods
Over the past month, I have been writing about SB-70, a California Law that allows appraisers to get a pass and do evaluations on the cheap and not have to verify anything in their appraisals. After all, what MAI or SRA doesn’t want to do an appraisal on the cheap so they can compete with dog-walkers, pool-cleaners, and TV-repairmen? It is what every residential appraiser wants to do because obviously, they can do it better than a septic tank-cleaner or ditch-digger who does evaluations on the side. Appraisersblog posted my thoughts on this from an earlier Appraisersville post I wrote  and, the comments began to fly.
Passions ran high on the blog after Charles Baker, SRA, AI-RRS, and SCCAI Chapter President 2018 criticized me for essentially being uninformed about the law. Here’s a snippet of the “compliment followed by an insult” observation on his part:
Jonathan – While I applaud your passion on this and many other issues affecting our profession, your breathless excitations merely affirm your personal animus towards the Appraisal Institute. A dispassionate reasoned reader can easily see through these headline grabbing histrionics.
One of the problems with a small select group of these individuals is that they don’t seem to understand that they represent both residential appraisers and commercial real estate appraisers. As a trade group they have never shared (at least during Grubbe’s reign as CEO through today) any insights about what drives their policies). Their leadership and those who are on the path to leadership have to work within a corporate cult. They need to comply, or they will never be on the inside. And people like Charles, who I am sure is a nice person and good appraiser (he also said so), get so far embedded into the corrosive culture that they begin to believe what they are saying. The rest of us have no idea what is behind their thinking, and membership has long enjoyed zero input. The problem with this type of management is that it teaches those within the inner circle to have a certain amount of disdain towards their dues-paying members – i.e. that membership is comprised of a bunch morons who don’t get it and who can be bypassed so the “inners” can keep taking all those first class flights with their spouses to far away boondoggles.
I have a broader theory on the impetus for pushing so irrationally hard for evaluations that causes their leadership to misstate and mislead out of context, and it has nothing to do with residential appraising. It has everything to do with commercial appraising. After this bizarre law in California and the repeated efforts to bypass appraiser boards in many other states like Florida, Montana, Virginia, North Carolina, Texas, North Dakota, Wisconsin and I’m sure many others, this is about generating income for leadership’s appraisal practices. For example in financial reporting, commercial appraisers are losing out to accountants and others in reporting for various reasons for large corporations. I assume that USPAP stops them from doing what they see as lucrative reports. With leadership in a bubble, they have no idea how the masses feel and clearly don’t care. They want that business for themselves.
The logic Charles (in this post), Scott Dibiasio, Bill Garber and others bring to the table has never been agreed to by the masses. Why? Because they really aren’t telling us why. In a one on one conversation, none of these characters have ever been able to convey credible rationale for their efforts, because they aren’t defensible but they scratch their heads and wonder why most appraisers outside their bubble are so damn pissed.
But I digress.
Here are some key points of this SB-70  tragedy that the Appraisal Institute heaped on hard-working appraisers:
AI Leadership in CA hides what they are doing: Charles does a lot of fogging in his responses. Remember that presidents of the California chapters send people to Sacramento to lobby for SB-70 without informing their own membership on what they are lobbying for, so I’ve been told by insiders. Why? That reflects a culture that views membership opinions with disdain. In his response you can see he comes from the perspective of “Well I’m from the Appraisal Institute, that’s why” which is not a reason. The greatest illustration of this, which Charles couldn’t step back and see when he says:
Members of the Appraisal Institute CA GRC sent out invitations to every other appraisal organization in California to meet with us in the fall of 2017 in Irvine at a very lovely hotel. We even offered to pay for lunch. The aim was to solicit feedback from other stakeholders. We called and emailed weeks in advance and not a single person showed up.
The reason no one showed up, aside from too much salt in the beef stew special, was that the Appraisal Institute is no longer a leader in our industry. They have built a reputation of arrogance in their behavior. I was at TAFAC when we voted to throw them out after wasting everyone’s time with a constant parade of temper tantrums and in the end, they would not agree to the goal of the organization.
What is a level playing field?
As you well know, there are thousands of unlicensed valuation professionals performing valuation-related work today . . . to a different standard, or perhaps to no standard whatsoever. State licensed appraisers in California are unable to compete on a level playing field given, among other things, the requirement to produce restricted-use reports for one intended user only. No one could possibly argue that the public in California is better protected by ceding this work to unlicensed practitioners in New York or India.
This is an absolute abomination of logic and I am aghast at how dumb this is. Why do you want a level playing field? The public trust is served by a licensing mechanism. Just give up your license and do the work you so badly want at all costs and not destroy the public trust for what an appraiser actually is.
As a licensed practicing appraiser, you are likely better at valuation than a TV repairman doing an evaluation. But when you demand to remove your license restraints to do this work, OF COURSE, you will do a better job but it destroys the impression of your worth when you are doing a real valuation. Ironically, the value of an appraiser is already damaged by this because Charles and his colleagues can’t do the branding math.
Here is an example in reverse. In the North Dakota request for a statewide waiver of appraisers because they are too hard to find in rural areas. But so are doctors! How about waiving medical licenses for medical practitioners to serve the public!
There is no enforcement when you do evaluations. So dumbing down appraiser licensing does NOT protect the public trust.
That’s all I have time for today, but my goodness, there is a lot more to talk about with SB-70 in next week’s Housing Notes. Lots.
OFT (One Final Thought)
From my college days until I moved to Manhattan in the mid-80s, the band, Talking Heads was my core music listen. I didn’t know that the owner of Sire, the record company that signed them, came up with name “new wave” as the genre to differentiate them from “punk” which had a negative connotation.
and the trailer for True Stories:
Brilliant Idea #1
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 because:
- They’ll modify their American Dream;
- You’ll be watching more reality shows;
- And I’ll play ‘Psycho Killer ‘ in my car.
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.
Reads, Listens and Visuals I Enjoyed
- Warren Buffett Finally Sells Beach House After Big Price Cut [Wall Street Journal] 
- NYC's Related Cos. Sees Future in $3 Billion of Senior Housing [Bloomberg] 
- Boston Wants to Build Inclusion into Its Construction Boom [Next City] 
- Big Builders Jump Into ‘Financing Gap’ to Fuel NYC Construction Boom [Bloomberg] 
- The Bullies of Real Estate [Wall Street Journal] 
- Hollywood Scion Asks $125 Million for L.A. Mansion [Wall Street Journal] 
- U.S. Recession Chances in Next Two Years Top 60%, JPMorgan Says [Bloomberg] 
- Slower Growth Anticipated in Home Remodeling [Joint Center for Housing Studies of Harvard University] 
- How Manhattan Became a Rich Ghost Town [The Atlantic] 
- 10 offbeat spots that reveal New York City's haunted history [6sqft] 
- Here Is the Most Expensive Home for Sale in Each State + The District of Columbia [PropertyShark] 
- With IPO ahead, Compass lures agents with stock options [The Real Deal] 
- U.K. Home Prices Grow at Slowest Pace in 5 Years as Brexit Looms [Bloomberg] 
- Housing Market Is Raising Serious Red Flags [Bloomberg] 
- Among the Ruins of Mexico Beach Stands One House, Built ‘for the Big One’ [NY Times] 
- The Guild, specialist in home-like hotels, gets funding for expansion [Travel Weekly] 
- Tariffs may lead to costly headaches for home builders and remodelers [Washington Post] 
- The New American Dream Home Is One You Never Have to Leave [New York Times] 
- The Interview: Michael Lau on the State of Mortgage Finance [The Institutional Risk Analyst] 
- Interior Design, Front and Center [The New York Times] 
- Hamptons Mansion Sees 50% Price Cut [Mansion Global] 
My New Content, Research and Mentions
- South Florida’s resi markets rally: report [The Real Deal] 
- Luxury House Prices Double in Miami Beach [Mansion Global] 
- Greenwich Home Sales Jump as Buyers See Tax Break, Better Prices [Bloomberg] 
- Se estabiliza mercado de propiedades de Miami Beach [Negocia En Miami] 
- 美国都市的偏远郊区比市区更贵！都不是省油灯… [The China Press] 
- Greenwich, Connecticut, Sales Robust Despite Declining Luxury Prices [Mansion Global] 
- The Suburban Burden: Living In The City Is Less Expensive In These Areas [Forbes] 
- VIDEO: Here's what to watch as real estate drifts into two different markets [CNBC] 
- VIDEO: Real estate sales fall in high-tax states, surges in low-tax [CNBC] 
- Facing headwinds, Billionaires Row tower launches sales [Crain's New York] 
- Is The NYC Luxury Real-Estate Market On The Verge Of A Full-Blown Collapse? [ZeroHedge] 
- Long Island City Condos Catch Eye of Investors Cooling on Manhattan [The Wall Street Journal] 
- Quay Tower $20M Penthouse Contract Could Set Brooklyn Record [CityRealty] 
- SPY FINANZA/ Da Sears a Verizon, l'amara verità sull'economia Usa [Il Sussidiario] 
- Propietarios de Manhattan seducen a inquilinos con incentivos [Gestión] 
- Multifamily properties in Westchester are selling "like hotcakes" [The Real Deal] 
- For the first time, average Brooklyn home prices break the $1M threshold [6sqft] 
Recently Published Elliman Market Reports
- Elliman Report: Fairfield County Sales 3Q 2018 [Miller Samuel] 
- Elliman Report: Palm Beach Sales 3Q 2018 [Miller Samuel] 
- Elliman Report: Wellington Sales 3Q 2018 [Miller Samuel] 
- Elliman Report: Jupiter + Palm Beach Gardens Sales 3Q 2018 [Miller Samuel] 
- Elliman Report: Delray Beach Sales 3Q 2018 [Miller Samuel] 
- Elliman Report: Boca Raton 3Q 2018 [Miller Samuel] 
- Elliman Report: Fort Lauderdale Sales 3Q 2018 [Miller Samuel] 
- Elliman Report: Miami Beach + Barrier Islands Sales 3Q 2018 [Miller Samuel] 
- Elliman Report: Miami Coastal Mainland Sales 3Q 2018 [Miller Samuel] 
- Elliman Report: Greenwich Sales 3Q 2018 [Miller Samuel] 
Appraisal Related Reads
- Various price trend indicators [Ann Arbor Appraisal Blog] 
- Appraisers advised to spend more time with buyers [NEREJ] 
- Get by with a little help from our friends [Ann Arbor Appraisal Blog] 
- Would you be ready if the market did change? [Sacramento Appraisal Blog] 
- AI Damaging Appraisers' Livelihood – Shame on All AI National Leadership [Jonathan Miller/Appraisersblogs] 
- Valuing Properties in 5 to 15 minutes Using Photos…Lightspeed Appraisals [VaCAP/Appraisersblogs] 
Extra Curricular Reads
- What I Learned from Watching My iPad’s Slow Death [New York Times] 
- True Stories, A Film by David Byrne: The Complete Soundtrack (Trailer) [YouTube] 
- You Need to Make More Than $713,706 to Be in New York City’s 1% 
- A $21,634 bill? How a homeless woman fought her way out of tow-company hell 
- Apple Has Finally Fixed Its Bagel Emoji 
- Cheap Is Great, But Free Will Cost You 
- America Is Drowning in Milk Nobody Wants [Bloomberg] 
- 8 Lottery Winners Who Went Broke 
- Microsoft co-founder Paul Allen dies at 65; creative programmer was 'the idea man' – Los Angeles Times 
- Where We Live [The New York Times] 
- Twin Towers engineer blamed himself after 9/11 
- Opinion | Holding On to the Farm 
- The Joy Formidable: AAARTH Album Review [Pitchfork]