Ranked Second Only to the Patron Saint of Gentrification
Before I get too saintly here, my second oldest son is getting married this weekend (next week’s status of my 4 sons: 50% married, 25% engaged, 25% with a significant other) so I am going to keep this Housing Note brief because there are a lot of free range family floating around.
But nearly as important, I finally figured out what bothered me about the movie Avatar . As with real estate market nuance, the devil is in the details, so to speak.
and speaking of graphic design… Citylab  presented the efforts of a graphic designer in Mexico City who wanted to address the displacement caused by gentrification. And don’t forget the patron saint of home and family, Saint Joseph . Ok, back to the article on gentrificaiton with a little poetry.
While we’re at it with poetry and lyrics, I have been slogging The Lost Bank: The Story of Washington Mutual, the Biggest Bank Failure in American History . It’s a great read but the subject is so well researched that I needed to periodically stop and read something lighter . I came across a variation of American Pie  modified for the housing bubble in the book:
but I digress…
The 3Q 2017 Report Gauntlet Begins: Up First, Manhattan Sales
Douglas Elliman Real Estate  published our research on the Manhattan Sales market for 3Q2017 . This is part of an expanding report series that I’ve authored since 1994. Here are some highlights.
- Median sales price increased but fell short of prior quarter record
- Most overall sales in two years as overall inventory slipped
- Average sales price fell across most markets as legacy appear to decline
- Co-op median sales price set 28-year record high
- Luxury inventory declined as overpriced listings continued to drop out
- Resale inventory fell for second consecutive quarter as new development supply continued to expand
- Market share of bidding wars remain less frequent in larger apartments
The report story  was the second most emailed story on the Bloomberg Terminals worldwide. Wall Street loves their Manhattan real estate stories. The New York Times , CNBC , The Real Deal NY , Mansion Global , Curbed NY , Brick Underground , Crains NY , DNAinfo  Buzzbuzzhome  and others also provided great context of the state of the market.
Here’s a portion of the interview I did yesterday on Bloomberg Television on the Manhattan housing market. It was great to meet Julia and see Scarlet and Joe again:
If you’d like to see the whole segment, my interview starts at the 48:40 mark . I really like the show format and the chemistry of the hosts so you might want to watch the whole show.
CNBC presented the Manhattan report  as an info-video:
Bloomberg presented a cool chart for their online story:
And we have a slew of our own charts  – I selected a few favorites:
Location, Affordability, Location
Wolf’s Sidewalk Warmers
Wolf Jakubowski is a top Manhattan townhouse broker who’ve I’ve known for most of my appraisal career. I’ve subscribed to his newsletter for years. This recent factoid really resonated with me.
Blurring Neighborhood Boundaries
Defining neighborhood boundaries can be a hot button for locals, a marketing opportunity for some and confusion for many. Throw in the idea that they change and evolve over time and you can have pandemonium. I’m involved in a startup called NeighborhoodX run by my friend Constantine Vahouli  who makes it their business to tell fascinating stories through research and analytics.
There was a great read in on this in the The Real Deal Magazine  current issue.
Relating Land Cost to Housing Prices
HowMuch.net created a visualization to compare land and housing prices…
Everyone knows location is the most important part of real estate. You can’t change where your house is (all things being equal). You have to consider school districts, crime rates, commute times—the list goes on and on.
It feels like the “price per square foot” method of comparing slightly different sized condos within the same market subset. Land is vastly more expensive where the colonists first set foot.
ROI on Investor Units, Deconstructed
Using the Bloomberg story “Manhattan Condos Are Barely Yielding More Than Government Treasuries ” – The Real Deal Magazine shared a Streeteasy infographic  to illustrate the declining return for investors who buy condos for their ROI.
Here are a couple of things to contemplate in the Streeteasy analysis that is commonly not understood:
- ROI was not a key driver of the latest new development investment boom – it was more about diversification and asset preservation with a dash of currency play.
- Their analysis doesn’t take into consideration any use of leverage, a key advantage of real estate over stocks. Even if consumers tended to pay more cash for these units, often their cash comes from banks in their home country. I wrote about ROI using mortgage leverage  a few years ago.
In these series of charts using our research, the yield is higher because it includes co-ops and condos and the overall rental market is configured with smaller units than the condo market. Still, the trend is slipping.
Stand me up at the gates of hell but I won’t back down
Tom Petty has been one of my favorite musicians and it was sad that he passed away  unexpectedly. He was a frequent “go to” listen in college with “Damn the Torpedos” his second album after he extracted himself out of a bad contract on his first one. His style was simple melodic rock and roll and solid lyrics. His song: I Won’t Back Down  should be the theme song for the appraiser grassroots movement of the past few years with the lyric:
FTC Grants a Settlement Conference In the Matter of Louisiana Real Estate Appraisers Board
Here is the motion . There is no clear messaging being conveyed yet as to whether this motion is favorable or unfavorable to the Louisiana board since they requested the conference. h/t Michael Small
The Federal Trade Commission filed an administrative complaint against the Louisiana Real Estate Appraisers Board, alleging that the group is unreasonably restraining price competition for appraisal services in Louisiana, contrary to federal antitrust law. The complaint alleges that the appraisal board’s regulations exceeded the scope of the mandate outlined in the Dodd-Frank Act that required appraisal management companies to pay “a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.” Specifically, the board required appraisal fees to equal or exceed the median fees identified in survey reports commissioned and published by the board. The board then investigated and sanctioned companies that paid fees below the specified levels.
AI National’s Executive Leadership Regularly Flys To International Events With Their Spouses At Membership Expense As Rome Burns
I understand that the current and upcoming president and their wives are traveling to Munich for EXPO REAL  which also coincides with Oktoberfest. According to a German banker, AI has sent 2 representatives and their wives to attend most European valuation events for years.
Here’s the proper context for this behavior:
- AI membership doesn’t know about this activity.
- AI Membership numbers are hemorrhaging.
- AI National intends to take nearly all chapter funds on January 1st to “help” relieve the chapter’s administrative burden (aka The “Taking”) when it is really looking like a money-grab to fund existing jet-setting lifestyles. All the outrage membership expressed in late 2016 and 2017 to date doesn’t seem to have quelled their thirst for travel.
We’ve documented this behavior or heard membership share knowledge of many other destinations besides Germany, including China, Romania, and Serbia.
Now ask yourself these questions:
- How does this ongoing expense benefit the members of AI or solve the organizations chronically falling membership?
- What is the AI National policy on paying for a spouse to travel on these junkets? Is this stated in a policy manual anywhere?
- Do members have access to this or some other form of this benefit?
- Did former CEO Fred Grubbe and his wife get these free trips over his decade of leadership?
- Is there organizational documentation of where and when Grubbe and the executive committee have been traveling the globe, who accompanied them and how much of the costs were fully or partially reimbursed? i.e. spouses, friends, other couples, etc.
In my view, this stealth international travel pattern is highly unethical and simply immoral, possibly criminal. The organization needs to be reimbursed by all who exploited the hard working membership for these boondoggles. There can be a parallel drawn to recent travel scandals in the federal government.
The next time you see someone from AI National executive leadership, please ask them about their upcoming travel plans.
AI Leadership hasn’t “missed a MIPIM in a decade”
A high-up industry leader asks:
“They haven’t missed a MIPIM  in a decade – always in twos, always with the wives, always first class. Why? The US organization is failing so why are they spending all this money to go outside of the US instead of tending to their core constituency.”
“Essentially, they want to go wide on International and are changing the bylaws to allow tiny and lots of chapters in non-US. While they take our money to support the failing US chapters.”
Upcoming Speaking Events
- October 12, 2017: Fall Meeting of the Industry Advisory Council (IAC), Washington, DC
- October 24, 2017: O’Connor Davies Symposium, New York, NY
- October 25, 2017: Asian American Real Estate Association of America (AREAA), New York, NY
- November 2, 2017: Manufactured Housing Institute, Chicago, IL
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 buy some American Pie, you’ll that being number 2 isn’t all bad and I won’t back down in front of the gates of hell.
See you next week.
Jonathan Miller, CRP, CRE
Miller Samuel Inc. 
Real Estate Appraisers & Consultants
Reads, Listens and Visuals I Enjoyed
- Why millennials are choosing to live at home 
- Murdoch ‘moves’ on Zillow 
- Another residential loan wave swells in NYC 
- NYC Developer Races Against Rules That Would Cut Tower in Half 
- Millennials’s New Weapon in Bidding Wars: A Parent’s Home Equity 
- The Future of Hugh Hefner’s Former Home and Playground [Mansion Global] 
- Solow’s last stand? [The Real Deal] 
- Manhattan Condos Are Barely Yielding More Than Government Treasuries [Bloomberg] 
- Penthouse at Schrager’s 160 Leroy in contract after bidding war: report [The Real Deal NY] 
- After 75 years, NAHB rethinks strong stance on the mortgage interest tax deduction [Housingwire] 
- Airbnb backlash in Paris [VINGT Paris] 
- Statement of Melvin L. Watt, Director, FHFA, Before the U.S. House of Representatives Committee on Financial Services – 10/3/2017 [FHFA] 
- The Most (and Least) Valuable States in America [Howmuch.net] 
- Condo buyers beware: Renting out swank units isn’t a major moneymaker [The Real Deal NY] 
- Ranking the top resi firms in SoFla [The Real Deal So. Florida] 
- Victims of Gentrification, Meet Your Patron Saint [Citylab] 
My New Content, Research and Mentions
- New York’s sweet apartment deals are no longer wooing renters [Nation Mortage News] 
- Amid a building boom, Brooklyn properties fly off the market at rising prices [Curbed NY] 
- A Boom in Brooklyn’s New Condo Market [Mansion Global] 
- Home Prices Rise in Brooklyn and Queens While Rents Drop, Figures Show [DNA Info] 
- Are landlord incentives enough to keep Manhattan rents from falling? [BuzzBuzz Home] 
- Brooklyn has lost a little steam but continues chugging along [Crains] 
- Brooklyn home inventory hasn’t been this low in a decade [TRD] 
- New York’s Sweet Apartment Deals Are No Longer Wooing Renters [Bloomberg] 
- Fence goes up around home used in ‘Breaking Bad’ [KOB] 
- Wealthy (allegedly tax avoidant) lifestyle laid bare in $2bn divorce [Daily Mail] 
- Suburban Offices Are Cool Again [Bloomberg] 
- Homes for Sale in Toronto – The New York Times [NYT] 
- The Million-Dollar Manhattan Apartment – [LuxuryStndrd] 
- How Tiffany & Co. Is Adapting to a Shifting Luxury Market [One News] 
- The Fastest Ride in Virtual Reality [WSJ] 
- Montreal Real Estate Gets Fancy [WSJ] 
- Longtime Johnny Carson Estate in Malibu Asks $81.5 Million [WSJ] 
- Walker Tower Penthouse Allegedly Linked to 1MDB Scandal Asks $45 Million [WSJ] 
- The Rise of the Rich Renter [City Lab] 
- Video: On Bloomberg TV: What’d You Miss? 10-5-2017 [Matrix] 
- Manhattan’s Luxury Market Retreats [NY Times] 
- Stamford, Greenwich battle it out for urban-suburban supremacy [NY Post] 
- Roosevelt Island: Part of Manhattan, but Apart from It [NY Times] 
Appraisal Related Reads
- Birmingham’s Top 10 Luxury Home Neighborhoods [Birmingham Appraisal Blog] 
- Is it okay to use comps from a different city? [Sacramento Appraisal Blog] 
- University of Hawaii gets donation that could equal $7B [SF Chronicle] 
- The Changing Landscape of Residential Appraising – [Appraisal Buzz] 
Extra Curricular Reads
- Here’s Why Stop Signs Are Red [Jalopnik] 
- 10 Ways To Stay Ridiculously Focused On Your Goals 
- The Economist Who Realized How Crazy We Are [Bloomberg View] 
- Watch Aerial Drone Footage of the Old Kosciuszko Bridge as it Comes Down in a Demolition [Untapped Cities] 
- Avatar’s Heinous Papyrus Logo Haunts Ryan Gosling On SNL [Co.Design]