Matrix Blog

Housing Notes

September 6, 2019

Keep Your Housing Chill When Under Pressure

If you find yourself fretting about the future of the housing market with a potential looming recession or the confusion of a jubilant stock market alongside a terrified bond market as illustrated by rates that continue to fall, I wouldn’t recommend remaining oblivious to the world around you — case in point, this gentleman at the bar during a robbery.


And of course, #WhyILoveNYC no matter what the housing market is doing (listen for the bone-crunching street sounds).


But I digress…

Movin’ Out Of New York At Twice The Rate Of Last Year

Since the introduction of the Tax Cut and Jobs Act of 2017, there has been an acceleration of outbound migration according to a Bloomberg article: More People Are Leaving NYC Daily Than Any Other U.S. City.

New York leads all U.S. metro areas as the largest net loser with 277 people moving every day — more than double the exodus of 132 just one year ago. Los Angeles and Chicago were next with triple digit daily losses of 201 and 161 residents, respectively.


In addition to the new federal tax law, the New York State legislature has passed and attempted to pass anti-investment/anti-landlord legislation that reflects a stunning lack of understanding of market forces. The anti-real estate zeitgeist is already reflected in this exodus from New York. I don’t believe the Albany political majority understands the long-term direct consequences of what they have created – the massive tax revenues real estate generates enables extensive social programs they are so focused on.

Why Uncertainty In Real Estate Still Remains, Well, Uncertain

Hint: Trade War With China & Brexit


Wait, Renting Isn’t Throwing Your Money Away?

The classic ‘Rent v. Buy’ argument is thrown upside down in this Bloomberg video “No, Renting Isn’t Throwing Your Money Away.“. The problem with these types of arguments is that it applies the same logic to everyone regardless of their personal situation. The very idea that the ‘homeownership versus renting’ market share is 3:1 in the suburbs but 1:3 in the cities speaks directly to affordability and lifestyle. In current conditions, we are in a housing affordability crisis and a student loan crisis while wage growth has been tepid and mortgage rates flirt with records. I get that the longstanding mantra of “renting is throwing your money away” was never questioned until the financial crisis, but I still find narratives like this too generic (but entertaining).


VOX: Why So Many Suburbs Look The Same


Not So Spurious Housing Correlations: Refrigerator Size v. Household Size

h/t @PlanMaestro @voxmediainc

The Rush To Buy Before July 1 NYS Mansion Tax Deadline Revealed Scorched Earth In July

Last June I warned against the giddiness of the Q219 surge in sales activity, that the excess demand was actualy poached from Q319. Because changes in tax policy change consumer demand patterns, the Q2 uptick was not evidence of a return to better market conditions. Although though I do think the heavy lifting of the decline in activity has already occurred and the continuing drop in mortgage rates may have helped mitigate some of the sales drop and price damage that was expected.

As it turned out I was right as illustrated in these compelling visuals.


Getting Graphic


Our favorite charts of the week of our own making

Len Kiefer‘s Chart Handiwork

Some of My Upcoming Speaking Events

9/12/19 – The Metro New Jersey Chapter of the Appraisal Institute


[click to open application]

9/17/19NYcorp: New York Council of Relocation Professionals

Speaking to NYC Metro Housing Trends.

Appraiserville

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

Sitting In The Witness Chair

I’ve sat in the witness chair as a real estate expert many times over the years. It’s nerve-wracking, but it is also fun and fascinating. My partner in our commercial firm says there is something wrong with me because I enjoy it so much.

Consider that something you wrote in an appraisal report six months ago is being discussed now and what you wrote back then is not subject to edits. You have to live with what you wrote. I think the quality of appraisals in the U.S. would improve substantially if all appraisers had to sit in that chair early in their career and have to answer to all the B.S. they piled into their report.

When you sit in that chair and are sworn in to testify, there is no going back. You are answerable to no one but the truth.

Sadly many of my peers run away from the opportunity of testimony. Or perhaps that fear makes it more lucrative for those that are willing to testify. It can be a worthy alternative to generic bank appraisals and provides absolute clarity on how non-appraisers, especially adversaries, can interpret (twist) your results and how you conveyed them to the report reader. My favorite clients have long been lawyers because of how they think. It is a strategy exercise like playing chess.

Some thoughts:

  • Always get paid for your report before you deliver the result and hopefully at engagement. Always get paid in advance for your court appearance with the understanding that any overage in time will be paid for immediately after the appearance. Don’t block out a bunch of availability dates unless you have been paid so you livlihood is impacted by a false promise or change in their needs.

  • One of the most important things I’ve learned is to simply answer the question. No embellishment. Remember that opposing counsel will ask you incomplete questions, fish when they don’t know what they are looking for and try to trip you up anyway they can if you are a threat to their client. They’re doing their job so you want to prepare and do yours.

  • You are auditioning for more work. One of the greatest complements I can get is when I am hired by opposing counsel for a new matter.

  • Remember that you are the expert and you are not guilty of anything. This sounds trite but that is what runs through the minds of those new to this. Your job is to express your opinion and to do it in a way that is credible and conveys it clearly.

  • If you don’t know the answer, then say “I don’t know” – its ok if you don’t know the answer.

With Fannie and Freddie working hard to automate and the whole world jazzed about evaluations and oblivious to the long term decline in reliability that the now terrified bond market expects, expand your consulting footprint. Legal support services are a great way to start.

OFT (One Final Thought)

What laser focus looks like.


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 hear it through the grapevine;
  • You’ll move to NYC;
  • And I can’t get the sound of crunching chicken bones out of my head.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


August 30, 2019

Housing Is Treading Lightly Around Our Wheelhouse Because We’re Flatly Tired Of Spinning In Circles This Summer

The month of August is in its final moments, and I already know I am going to miss it. I like the steady pace of this time of year (as long as the air conditioning is working) without the periodic panic from clients who forgot to order an appraisal. Our firm has remained busy. Many of our staff have been able to enjoy a little time off. Some exciting opportunities and changes have appeared for both me personally and my firm too – but more on that later. After all this, I’m “tired” of tire analogies

But I digress…

The ‘Back to the City’ Trend Has Reversed

There’s a good read on the evidence of a reversal in the decade trend of moving to the city from the suburbs in the Brookings blog: Big city growth stalls further, as the suburbs make a comeback. Here’s a fascinating chart.

Why Falling Mortgage Rates Are Not A Long Term Housing Benefit

There was a great article and interview on falling rates and housing last week I missed while on vacation. I was in it so how could I have missed it? (That’s clear proof I was checked out.)


According to Freddie Mac, the 30-year fixed mortgage rate is down a full percentage (100 basis points) from last year. This drop has lit a fire under refinance activity as consumer look to save money with lower homeownership costs. In fact, with the sharp rise in housing costs in the northeastern U.S. due to the Tax Cut and Jobs Act of 2017, the significant drop in mortgage rates has likely helped moderate the damage to the market.

Remember that low-interest rates are not a gift. In the long run, low rates raise asset prices. When rates fall, more people come into the market which is essentially the reason why the Fed raises and lowers rates to manage the economy, current politics aside.

Here’s the part that concerns me. After years of low rates, the housing market appears highly dependent on them yet the drop in rates has resulted in a more muted boost in sales. Affordability continues to be challenged with lackluster wage growth in comparison.


The longer the housing market remains addicted to low mortgage rates, the more vulnerable it becomes to an eventual change in direction (higher). While I’m not of the belief there will be a surge in mortgage rates anytime in the near term, the market is clearly more vulnerable to such a condition but low rates are firmly built into current pricing. This is one of the reasons that housing remains most vulnerable in high-cost areas impacted by the new federal tax law and it will take years for asset prices to adjust to higher homeownership costs. In NYC metro, we are in the thick of that adjustment period.


Parking Your Plane In The Garage

Over in Big Bubble Miami, you can see how easy it is to park your plane at your house. Why? Because you can. Recently I referenced houses with RV parking. Same idea. Handling turbulence but with wings.

Location, Location, Drug-Treatment Center?

Our appraisal firm does a lot of expert witness litigation and I continue to be fascinated by the arbitrary rules of thumb presented by experts. There are many home-spun assumptions formed without reliance on empirical evidence. Translation: they pull it out of their @$$.


Case in point. There was a great New York Times “Ask Real Estate” column last week: Should I Buy a Home Next to a Drug-Treatment Center?

I like the way the writer parses out the logic and that appraiser guy Jonathan Miller lays it out there pretty clearly too.

Investors Are Making A Tight Starter Market Much Worse

The Urban Institute has a write up on why the surge of investors in the entry market could be an issue. The piece is remarkably non-committal but does raise the right questions. The reference a seminal New York Times piece on the topic I’ve shared before. My short answers are in “()”:

1) Are investors taking homeownership opportunities away from individuals and families?
(yes)
2) Are investors creating and maintaining quality affordable rental units?
(possibly)
3) Are investors increasing home prices?
(absolutely)

A Great Take On The Homeownership Rate

Jed Kolko, a super-smart economist of whom I had the pleasure of working with when he was at Trulia, penned a great piece in 2014 on the homeownership rate that is worth revisiting: Why the Homeownership Rate Is Misleading.

Shouldn’t we be panicking that the American dream of homeownership is drifting out of reach?

Nope. At this stage of the housing recovery, the falling homeownership rate turns out to be misleading. In fact, for young adults, who were hit especially hard in the recession and housing crisis, the decline in their homeownership rate might paradoxically be a sign of improvement. The rate can mislead in the other direction, too: During the worst of the housing crisis, the falling homeownership rate clearly understated the damage done.

The current rate is nearly the same as the median rate since 1965.

Appraiserville

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

Appraiserville is back next week.

OFT (One Final Thought)

Because we are chilling over the long weekend, I thought you’d find this insight helpful in your morning coffee ritual.


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 be homeowners;
  • You’ll park your plane;
  • And I’ll (continue to) live in the suburbs.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Appraisal Related Reads

Extra Curricular Reads


August 23, 2019

Of Inverted Yield Curves, Negative Interest Rates and Skeeball

Cheryl & I are staying at our usual hotel in Rehoboth Beach, DE right now, where I grew up (some say that is in an inaccurate statement) from 1967- 1982 and then as adults, took our kids there when they were younger and now some of them are even visiting there on their own. It is a not so sleepy resort town, the “Hamptons” of Washington, DC. that grew up too and in a good way. I can assure you that right now we are not thinking of anything but Skeeball, Nic-o-bolis, Kohr Brothers orange sherbet, and vanilla soft serve custard, Grotto Pizza slices on the boardwalk, bookstores, power napping, ocean-swimming and tonight we are crashing a wedding rehearsal dinner.

Next week is another week of recovery and then the following week all hell breaks loose.

But I digress…

In the meantime, there are some great reads below, especially the extra-curricular kind.

See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Appraisal Related Reads

Extra Curricular Reads


August 9, 2019

Rocky Raccoon Houses A Strong Desire For Stuff

Sometimes people want what they want, no matter what the risk is. There is a lot of that same sentiment coming from regulators and policy administrators in the federal government these days. More on that in future editions of these Housing Notes, but until then, we’ll fight for our jackets.

On an unrelated note, here’s a shoutout to my excellent summer semester Columbia grad students in the GSAPP program who took their final exam yesterday. I really enjoyed the class interaction and wish them well in their careers. When turning in their completed exam, one of the students commented that they specifically enjoyed my discussion on pie versus cake

Oh, the satisfaction of teaching can not be put into words!

But I digress…

Rate Talk: Business versus Consumer Sentiment Is Like Apples versus Oranges

As I’ve mentioned before in these housing notes, the bond market seems terrified of current U.S. economic policies while the stock market seems euphoric (even though the stock market is not the economy.

Sam Khater, Freddie Mac’s chief economist, and aficionado of the only band that matters says, “There is a tug of war in the financial markets between weaker business sentiment and consumer sentiment. Business sentiment is declining on negative trade and manufacturing headlines, but consumer sentiment remains buoyed by a strong labor market and low rates that will continue to drive home sales into the fall.”

I loved this observation about sentiment (and The Clash, obviously).


Chart-Nirvana Market Update In Elliman Magazine

As regular readers of my Housing Notes have noticed, I create a full-page spread for Douglas Elliman Real Estate’s quarterly magazine using the results of my U.S. market research. I’m no Len Keifer but still, the visuals are pretty cool.

A Potential Spike In Refi’s, Illustrated

Here’s a good look at the refinance situation via The Basis Point, always a good read. The one point not made here is that falling rates raise prices which is not good for housing in the long term when matched against tepid wage growth. The drop in rates is a short term win for consumers, not a long term win.

Vox: Where Manhattan’s Street Grids Came From

It wasn’t by accident.

Spurious Housing Correlations: Grocery Stores

Here’s one from ATTOM.

  1. Take a ton of housing data and geotag it for its proximity to a grocery store like Whole Foods (a.k.a. Whole Paycheck) or Trader Joes.
  2. Then measure the value of a neighborhood against those farther away or before and after the store was built.
  3. Base the analysis on zip codes even thought zip codes don’t represent neighborhoods or like housing stock.
  4. And you get…voila…junkstats.

There are so many other factors to be considered that this type of analysis is way too simplistic to be credible. An example of spurious correlations in my housing market of Manhattan would be to compare the average or median sales price of an apartment with or without a fireplace. Homes with fireplaces tend to be “pre-war” (built prior to WWII) or penthouses which sell for a premium above the remainder of the housing stock. My own fireplace amenity analysis was not some sort of boolean logic exercise found in the ATTOM analysis.

Bloomberg Terminals: Miller Samuel Luxury Housing Index

We power 6 different price indices for Manhattan luxury housing on the Bloomberg Terminals. This luxury median sales price chart shows how the market has slid from recent highs and how much prices have surged after the financial crisis.


Downtown Alliance: Q2-2019 Lower Manhattan Market Overview

For many years I’ve been crunching residential housing data for the Downtown Alliance for use in their quarterly reports. Here are the residential pages of their latest report:



Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.) As I said last week, I’m taking a bit of a summer hiatus from appraisal policy discussions, but there is always time for this:

Appraising Unique Properties Like Attached RV Garages

I’ve been at this appraisal thing for 33 years and I’ve never seen or heard of this amenity or the targeted demo it appeals to. My friend and appraiser colleague Ryan Lundquist is the undisputed leader of wacky amenity observations.

OFT (One Final Thought)

Aside from his dirty hands, this would be a typical experience in my kitchen. The skills demonstrated here are strangely satisfying and are required viewing.

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 replay the Beatle’s ‘White Album” for that ‘Rocky Raccoon’ song;
  • You’ll learn to love my charts;
  • And I’ll go to the grocery store.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Appraisal Related Reads

Extra Curricular Reads


August 2, 2019

Buckle Up: Rates Are Falling and Housing Market Is Confused

As a kid, I gave little thought of seatbelts. They were decorative metal things that singed your legs in the summer. Little did I appreciate the deathtraps we were riding in circa the early 1970’s – you know, the Ford Country Squire with blue vinyl seats with fake wood panel stickers and those cool sideways back seats surrounded by metal?

How little we think of safety when we’re sitting in a cool seat.


!!!!Here’s a shoutout to my Columbia GSAPP students who learned yesterday that while pie charts are generally bad, pie is absolutely good.

But I digress…

The Myth of Missing Skyscrapers Between Downtown and Midtown

In addition to some serious “Caisson” talk, Jason Barr, Professor of Economics at Rutgers, wrote a bedrock takedown of the bedrock myth of Manhattan skyscraper building locations – it is worth a full read.

The Bedrock Myth and the Rise of Midtown Manhattan (Part I) – Building the Skyline Blog

I get claustrophobic just thinking about what sandhogs do:

Workers inside the cube (“sandhogs”) would dig up the soil and pass it up through shoots to the surface. The box would slowly sink. Once it hit the quicksand, compressed air was pumped in to keep the soil out. Eventually, the box would reach the bedrock. It was then filled with cement, and piers were built atop it up to the basement level to hold up the structure.


[from Building the Skyline Blog]

Why Is That Neighborhood So Expensive?

Check out the moving bus action above from the article! LOL.

I enjoyed this short piece from a rare source for me: House Beautiful. My friend Constantine Vahouli and founder of NeighborhoodX contributed insight.

While the article is not a deep dive, it is remarkably clear.

Why We Move

Love this from Flowing Data: Why People Move using the Current Population Survey.

I was surprised how small the category “retired” was and conversely, how high “wanted new or better home.”

I’ve Always Wanted A Graffiti-Covered Home

I haven’t seen the film yet but my friend and appraiser colleague Maureen from Chicago is always worried I don’t get out enough so she keeps sending me good things to check out. The documentary “Jay Myself” is one of those.

A while back I appraised a nearly identical building occupied by one of the founders of Blue Man Group and a few others as well. This represented a time when you could buy a modest building for very little in the context of today.


Sellers: Price Your Home Correctly The First Time!

This article by Grant Long, Data Scientist at Streeteasy was one of the best things I read this week:

Price Cuts on NYC Homes Don’t Usually Work. Here’s Why

The article provides empirical evidence and sound logic why MOST PRICE CUTS OFFERED BY SELLERS ARE MERELY CHASING THE MARKET and make little difference to buyers. Price it correctly from the get-go or make a drastic cut as soon as you realize you are wrong.

Long Island’s Nitty Gritty Details by Town

Newsday published an article on the Long Island housing market and shared an epic data table that we provided using our analytics in addition to the Elliman Report: Long Island Sales Q2-2019 we released last week. The table doesn’t appear on mobile devices and won’t be included in the Sunday print edition.

I orangified the table provided in the online article to sort by town name and presented it below – click on graphic to open entire table:


[click on table to open it in full]

Charting Economic Policy Uncertainty

The word “uncertainty” has dominated housing market conversations in the Northeast and because of ongoing policy changes like the day to day China tariff situation, wondering what happens with Brexit and unemployment at 50-year lows but we see the Fed dropping rates.

The bond market has been uncomfortable with U.S. economic policy since last October as evidenced by the sharp drop in mortgage rates…

…yet the stock market has been trending higher…

…and global uncertainty on policy is rising…

…as is China…

…and the US…

Why should we care? While housing market doesn’t care what you think it has always been very clear that it doesn’t like uncertainty. This is why the sharp drop in mortgage rates have had less than the typical impact on the housing market.

Getting Graphic

Our favorite charts of the week

From Greg Daco, Chief U.S. Economist of Oxford Analytics, who I’ve had the pleasure of sharing a green room with and serve on the NYC mayor’s economic advisory panel with. He cuts through the clutter.

All three charts here are worth a look…wage growth is peaking.


We need wage growth to boost the housing market. Low unemployment is never enough.

Appraiserville

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

Appraiser Discovers New State of the Art Home Security Feature in Texas

Forget Simplisafe. This time tested security feature was shared by my good friend and appraiser Ron Box in Dallas who was given this by a local colleague. It was observed in a new home during an appraisal inspection. Ron is always on the lookout for new home amenities.

OFT (One Final Thought)


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 buckleup;
  • You’ll buy an old station wagon;
  • And I’ll be more uncertain.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Appraisal Related Reads

Extra Curricular Reads


July 12, 2019

Bicycles and Rock Lobsters Can Change Your Housing Outlook

I’m nearly a third of the way into my Tour de France watch-a-thon, a 7-hour per day, 23-day guilty pleasure every July. I just let the NBC feed run on my iPhone with the sound off and periodically glance at it to check up on changes. Forget staring at fishtanks for soothing relaxation. The amazing countryside scenery makes it well worth the time.


So with that frame of mind, here is my biking analogy of the week. It only takes two to bring everything down. Watch this in its entirety on a big screen if possible.


But I digress…

A Shout Out To My Columbia Grad Students

It’s that time of year again to teach Market Analysis in the Master of Science in Real Estate Development (MSRED) Program at Columbia University. It’s a strong program if I do say so myself. If the quality of student participation in yesterday’s first class was any indication, this semester is going to be engaging and fun for all of us. Plus the terrific faculty and alumni support make this position a dream for me.

Remember, a down residential housing trend goes like this:

EXTERNAL EVENT> (i.e. new tax law) >
SALES DECLINE > (buyers pause until fully understand)
LISTING INVENTORY RISES > (sellers remain in denial)
1-2 YEARS PASS > (sellers don’t sell unless they get their price)
PRICES ERODE > (sellers capitulate to the market)
SALES RISE…

Since the real estate brokerage community is transaction-based, I’ve never understood why the industry never spoke about a downturn directly. With greater transparency over the past decade, the smarter, more successful brokerage firms embrace market changes as an opportunity to educate sellers on the market reality that “the housing market doesn’t care what you think.”


Market Report Gauntlet: Elliman Report Q2-2019 Westchester, Putnam & Dutchess Sales

We just completed “week 2” of our four-week quarterly market report gauntlet for Douglas Elliman, part of the expanding Elliman market report series I’ve been authoring for the past 25 years.

Let’s start with Westchester County, New York, an affluent suburban market to the North of New York City.

• Elliman Report: Q2-2019 Westchester Sales
• Elliman Report: Q2-2019 Putnam/Dutchess Sales

Wall Street loves Westchester housing news because many in the securities industry live there. The Bloomberg coverage of our Westchester research was the third most read story on the 350,000± Bloomberg Terminal subscribers worldwide.

Even more fun – a chart, obviously.


Here’s an outline of the northern counties and some charts

______________________________________________________
WESTCHESTER SALES MARKET HIGHLIGHTS

“Countywide sales continued to expand as price trend indicators showed mixed results.”

– Countywide sales have increased at a rising annual rate for the fourth straight quarter
– The largest annual sales growth occurred in the $800,000 to $1,000,000 range
– Co-op and condo sales gained market share over single and 2-4 family sales
– Single family sales surged and outpaced the rise in listing inventory
– Single family listing inventory expanded annually over the past five quarters
– Luxury single family price trend indicators fell short of year-ago levels
– Luxury single family listing inventory declined annually for the third time in four quarters

And who wouldn’t like being superimposed on a chart?



_____________________________________________________
PUTNAM SALES MARKET HIGHLIGHTS

“The second fastest paced quarter in fifteen years.”

– Median sales price increased year over year for the ninth straight quarter
– The number of sales rose annually for the third time in four quarters
– Listing inventory fell year over year for the second time in three quarters


______________________________________________________
DUTCHESS SALES MARKET HIGHLIGHTS

“The surge in sales overpowered the growth of listing inventory.”

– Median sales price declined year over year for the first time in nine quarters
– The number of sales rose year over year for the second time in three quarters
– The pace in the market moved sharply faster than the same period last year


Market Report Gauntlet: Elliman Report June-2019 Manhattan, Brooklyn & Queens Rentals

Despite an uptick in the Manhattan sales market, the Manhattan rental market continued to show strengthening trends. Incidentally, the new rental law passed in Albany has not played a role in the open market rental market yet that would show up in the trends.

But I digress.

The city rental market continues to see rising rents and falling market share of concessions. Rents are rising.

Elliman Report: June-2019 Manhattan, Brooklyn & Queens Rentals

Because I’m partial to charts, here’s the Bloomberg story featuring our research that ranked 16th most read yesterday worldwide:

Here are some of the key observations and charts for each borough.

______________________________________________________
MANHATTAN RENTAL MARKET HIGHLIGHTS

“Landlord concession market share continued to decline but remain a significant part of the rental housing market calculus.”

– Landlord concession market share declined year over year for the fifth time in six months
– The net effective median rent has risen annually each month since the beginning of the year
– Rent growth skewed to smaller apartments as market share gains skewed to larger apartments
– New development median rent increased at three times the rate as existing median rent
– Median annual rent gains were most pronounced in the 61% to 90% price strata
– The lowest year over year price growth was seen in the luxury and super luxury markets



______________________________________________________
BROOKLYN RENTAL MARKET HIGHLIGHTS

“The market continued to pivot away from concessions as rental prices continued to rise.”

– Concession market share declined annually for the sixth straight consecutive month
– All three face rent trend indicators have been rising annually since July 2018
– Net effective median rent rose year over year for the seventh consecutive month


______________________________________________________
QUEENS RENTAL MARKET HIGHLIGHTS

[Northwest Region]
“Rental prices pressed higher as landlord concession market share declined.”

– The annual change in concession market share fell sharply for four consecutive months
– Net effective median rent rose annually for the seventh time in eight months
– New development concessions have experienced a more pronounced decline than concessions for existing rentals


Market Report Gauntlet: Elliman Report Q2-2019 Brooklyn, Queens & Riverdale (Bronx) Sales

Here are some key observations on these three NYC sales markets.

______________________________________________________
BROOKLYN SALES MARKET HIGHLIGHTS

Elliman Report: Q2-2019 Brooklyn Sales

“Although median sales price reached a new record, sales slipped annually for the sixth straight quarter.”

– Median sales price set a new record this quarter for the seventh time in three years
– The number of sales declined year over year for the sixth straight quarter
– Listing inventory expanded annually for the fourth consecutive quarter
– Sales from $1-2 million and $4 -10 million were the only price strata to see an increase
– Luxury listing inventory increased year over year for the fifth consecutive quarter
– New development sales surged as price trends showed mixed results

______________________________________________________
QUEENS SALES MARKET HIGHLIGHTS

Elliman Report: Q2-2019 Queens Sales
“Price trend indicators flirted with records as sales continued to slip.”

– Median sales price rose annually to the second highest on record and thirteenth quarter without a decline
– The seventh consecutive quarter with a year over year decline in sales
– Listing inventory increased annually for a ninth straight quarter
– Co-op median sales price reached its second-highest mark after setting records in six of the seven previous quarters
– All 1-3 family price trend indicators rose year over year for the thirteenth straight quarter


______________________________________________________
RIVERDALE SALES MARKET HIGHLIGHTS
[includes Fieldston, Hudson Hill, North Riverdale and Spuyten Duyvil]

Elliman Report: Q2-2019 Riverdale Sales
“Price trends pressed higher as sales fell short of year-ago levels.”

– Median sales price rose year over year for the fifth straight quarter
– Number of sales fell annually for the fourth time in five quarters
– Listing inventory moved higher year over year for the fourth consecutive quarter

Albany Legislators Need To Consider Economics For Future Tax Revenue

Since last fall, the Albany legislature has turned New York’s real estate environment upside down. Best intentions I’m sure, but no evidence of understanding of how a real estate economy works, which is needed to generate the revenue needed to fund an expanding budget. Worst of all we’ve seen this movie before (1960s, 1970s and 1980s).

Failed Amazon Deal in Long Island CityThe outcry against it was based on a false common lack of understanding that the city was going to outlay billions to a rich company, when in fact the tax break was coming out of the additional revenue Amazon would provide.

Proposed/Failed “Pied-a-terre tax” – I was reading The Real Deal online this morning and a video with me speaking popped up! It was from March and I had forgotten about the interview – my short term memory is pretty weak. The overturned proposal would have decimated real estate development and investment.


The updated mansion tax and transfer tax – placed a wet blanket on an already struggling new development market. Because the high-end market was so weak, sellers and developers will be forced to cover the cost. The real damage to the market is the global image NYC is creating as a hostile place for investment.

The new rent law – the changes will ultimately decimate the multifamily sales market and effectively end all building improvements. We are already hearing about layoffs of construction workers by landlords who upgraded apartments as they became vacant. State legislators removed all financial incentives to renovate a multifamily property in New York State, likely crushing the multifamily sales market going forward. We are hearing that landlords are stopping renovations – look for the quality of affordable housing stock to deteriorate over the coming years. A repeat of the In Rem housing crisis of the NYC metro area of the 1970s and 1980s is here.

Econ Insight Episode 41 — Real Estate Boom or Bust?

My friend Alex Heil, Chief Economist, Planning & Regional Development of The Port Authority of New York and New Jersey asked me to do another podcast but this time it was culled from my multi-agency presentation at the Port Authority – they step you through my presentation and inserted some of my audio. My first podcast for PANYNJ was back in September 2015 right after the market peaked: Housing and the Metro New York Economy

If you’re not signed up to “Econ Insight” by the Port Authority, it is a good idea to subscribe to their newsletters and podcasts for great monthly snapshots and other insights on the NYC metro area regional economy.


[click anywhere on the image to play podcast]

Here is the first page of June PANYNJ Monthly Economic Indicators newsletter which provides some of the information from my presentation. Great info on these pages every month.


Realogy Sues Compass, Realogy Gets Sued By Investors

There was a big Wall Street Journal story this week: Compass Engaged in Illegal Activity, Realogy Lawsuit Alleges

Here’s the formal complaint

This is a good read for all of you non-lawyers out there. Realogy names names and is incredibly direct against the practices of Compass. It really is a good read.

Of course, if you’re a Realogy fan, no good deed goes unpunished. Realogy was just hit with a class action lawsuit.

From the Real Deal today: On heels of Compass legal battle and dwindling stock, Realogy hit with securities fraud suit

Getting Graphic


Len Kiefer‘s Chart Handiwork

Appraiserville

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

Taking a break this week

Even though there was a lot of important things to discuss here like the one year North Dakota waiver, I simply ran out of time this week if you haven’t noticed the early content in these Housing Notes.

OFT (One Final Thought)

Speaking as wanna be lobster fisherman, I’ve always loved this song. Who knew that this band would get so popular? Always loved their playful vibe. I was a sophomore in college when this came out and wore out the album. So different than the hairband stuff that dominated the airwaves back then.

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 rent;
  • You’ll rock lobster;
  • And I’ll talk a lot.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


June 28, 2019

The Basis Point Analogy of Swings in the Housing Market

I was out the office this week from Tuesday through Thursday and gearing up for the “Q2-2019 Market Report Gauntlet” that begins early next week, so some of my tweets did the heavy lifting.

NAR’s non-seasonally adjusted existing home sales rose year over year for the first time after eight months of annual declines. The ±75 basis point drop since this time last year had a lot to do with the growing momentum in the swing towards more demand. As more basis drops onto the market rope, participants jump into the market from their safe platforms as enthusiasm grows. The lack of inventory weighs down the participants with more price risk until everyone gets soaked. Hopefully, no one gets hurt but our valuation model ended unexpectedly so we aren’t sure how this plays out.

Illustrated…

But I digress…

New York State Rent Law Will Be Challenged as a ‘Taking’

Because of the new rent law’s perceived overstep by multi-family building owners, we expect to see a lot of litigation in the future. I can’t emphasize how catastrophic this will be to the New York City housing stock as the law is written. This was a good-faith effort to preserve affordable housing but it will likely create several outcomes detrimental to the original intent. I’ve written on this before but have had more time to process the ramifications:

  • Jump in cap rates which would crush multi-family building values because all incentives for rental price upside by making capital improvements have been eliminated, sending NYC back to the “In Rem” housing crisis of the 70s and 80s, where the landlords, especially small building owners, walked away from their buildings. Constrained by caps on rent increases as expenses rose faster removed all incentives for ownership and maintenance. This is a repeat scenario
  • Sales of multi-family buildings will essentially stop as the incentive for ownership has been removed
  • Construction of new rental buildings will fall sharply given the loss of incentives and the harsh anti-landlord political zeitgeist
  • With the removal of ownership incentive, the number of rent-regulated apartments will decline as rental to co-op conversions jump. Perhaps not as frenzied as the 1980s boom but there should be more of this. Current public commentary on this issue is being made by developers who have no experience in this new world
  • Rental conversion to co-op will expand despite the 51% from 15% new requirement for insider votes. The reason? Back in the 1980s I recall that a large portion of conversions during that boom era saw greater than 51% conversions despite the 15% threshold because Fannie Mae financing required it
  • Rental housing stock will decline as conversion activity rises. However, the unintended consequence of the conversion activity will bring more affordable “for sale” housing stock to the market, something sorely lacking before the law change. The 51% ensures that insider discounts will be closer to 50% than nominal discounts from the outsider price. Also, the insider pricing of those fortunate 51 percenters will enjoy instant equity to fuel additional housing sales
  • The city is highly dependent on real estate transfers so the drop in multi-family sales volume could reduce real estate tax revenue to a city that is expanding spending at a record break pace to resolve issues like transportation infrastructure. Spending will need to be cut back or borrowing will need to increase.
  • The City of New York’s reputation worldwide has already taken it on the chin by creating an anti-development, anti-investment reputation from the failed Amazon deal, proposed but withdrawn “pied-a-terre” tax, the new transfer and mansion tax and now the new rent law, all within the last 9 months. That’s tough to undo and is brand damaging to the City.

The first sign of an industry push back will be a lawsuit to be filed in mid-July where it takes the form of government property “taking”.

It’s unclear whether Cuomo will be named as a defendant, but the case will argue that his new rent law violates owners’ constitutional right against the “unlawful taking of property,” sources said.


It’s Not Like Nothing Is Selling

This Bloomberg story illustrated how important context is when measuring value, even when the comparison is a little out of context. A new development on the Upper West Side configured as a rental building with smaller units in the configuration, is in close proximity to Billionaires Row. The marketing narrative is to show how much less expensive this new condo project is than ‘Billionaires Row’ pricing even though it is in close proximity. However, it doesn’t have the same expansive views or the height than most of the Billionaires Row units have. But it does introduce additional smaller condo units to the market and that is a refreshing change from the steadfast overemphasis on super luxury units far into this market cycle.

Are People Still Flipping?

Yes, they are but in places you wouldn’t expect. When I read this U.K. WSJ article on condo flipping activity: British Contract Flippers Stymied by Faltering London Market, I was taken aback at the volume scale of property flippers in the Brexit UK. I wanted to say “Doh!” to the title but was amazed at the scale of the flipping activity.

But my tweet paid homage to the structure that was being converted. Think “Pigs on the Wing.” The lyrics kinda provide a visual for the end of a flipping era.

Getting Graphic


Len Kiefer‘s Chart Handiwork

Not the word “exemption” in 2019 i.e. $10k cap on SALT.

Appraiserville

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

THE COMMENT PERIOD ON NORTH DAKOTA’S REQUEST FOR A 5-YEAR WAIVER IS EXPIRING SOON!!

All appraisers need to provide their opine on this request. It is obvious why its a disaster and you need to share why right NOW to show our industry is concerned!!! At last count, there were only 24 comments!!!

Click here.

Incomplete Data Provides Incomplete Assumptions

In meetings with the National Association of Realtors and The Appraisal Foundation this week, there was a lot of time spent listening to AVM owners espousing their importance and more sober observations of the pitfalls. One of the presenters seemed to be bragging that 90% of the time, a good Automated Valuation Model (AVM) can be within plus/minus 10% of the actual value. Remember that Zillow’s Zestimate is within 5% of the actual value only 50% of the time. Both numbers are very dreadful and very random inconsistency across the marketplace.

But still, there is a place for their use in conjunction with appraisers, just not to the intensity being touted now, especially as their data gets polluted going forward by the impact of waivers.

Here’s a simple scenario on how data pollution works and in large scale has the potential to cause bubbles in the future – a sales transaction is given a waiver by a GSE and the sale happened to sell for 5% above current market conditions. That sale closes and is used by AVMs AND BY APPRAISERS as a valid comp. Multiply that by tens of thousands of transactions and we are creating unnecessary market volatility.

There was an excellent guest speaker from Columbia University, Josh Panknin who made the following observations about “big data” and the current wiz-bang “overhype” that seems to be threatening the future of appraisers.

  • Computers can’t fill in the blanks
  • Computers can’t do qualitative (my interpretation- i.e. views and condition despite UAD).
  • Incomplete data give us incomplete answers (so throwing more data at big data does not resolve that problem).

He also used a “turkey sandwich” metaphor for AVMs.

The quality of this sandwich of bread, cheese, turkey, and mayo get better by improving the quality and components, not by moving around the items.

In other words, we don’t improve quality by simply swapping out technologies.

Sidebar: AVMs Have Trouble Considering Natural Light

Josh Panknin also provided a paired sales discussion about differences in natural light.


Maureen Undoes The Misrepresentation of Appraisals At The House Panel

Chicago appraiser and friend (even though she calls me “fancy pants”) writes a stellar explanation of what an appraiser actual does – and what one of the panel experts got completely wrong because he didn’t understand our role in the mortgage process:


Greetings Congresswoman Waters, Chairman Clay, Ranking Member Duffy, Ranking Member Gooden, and the Members of the Housing Subcommittee:

My name is Maureen Sweeney, and I am a real estate appraiser. I grew up in a real estate family and lived through the savings and loan crisis of the 1980’s, which had a profound impact on my life. I witnessed first-hand illegal and unethical behavior in the real estate and mortgage industry towards homeowners. Through that experience, my greatest concern was, “who is protecting the public?”. In 1989, Congress enacted Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA). With this decision by Congress, I decided I wanted to be an appraiser. The appraisal profession was and still is the profession in the mortgage industry that promotes and maintains the public trust in housing finance. We are the first profession in the mortgage industry that was licensed, and we are the only profession that is regulated by Congress.

Because of FIRREA, all appraisers who develop opinions of value for federally related transactions must follow the Uniform Standards of Professional Appraisal Practices (USPAP). What was originally intended as assignment conditions for federally related transactions is now partially or fully embedded in all states’ appraisal laws.

USPAP states in the Ethics Rule, “An appraiser must not use or rely on unsupported conclusions relating to characteristics such as race, color, religion, national origin, gender, marital status, familial status, age, receipt of public assistance income, handicap, or an unsupported conclusion that the homogeneity of such characteristics is necessary to maximize value.” (Lines 200 – 202, USPAP 2018-2019 Edition © The Appraisal Foundation). The Fair Housing Act of 1968 prohibits discrimination concerning the sale, rental, and financing of housing based on race, religion, national origin, or sex. All states have laws that prevent discrimination. If an appraisal professional basis their assignment results on race, they can lose their license and may go to jail.

Appraisers develop the Valuation Process in each of their assignments. Each step in the Valuation Process builds on the previous step, so at the end of the report, there is a logical conclusion so those who rely in the report can understand how the assignment results came to be. This 8-step process includes:
1) Identifying the Problem; this includes determining who is the client, who are those who can rely on the assignment results, why is the report needed and how will it be used, what is the effective date of the assignment, what are the characteristics of the property such as the address or legal description, and what are the assignment conditions.
2) Determine the Scope of Work: this is the type and extent of research and analysis in an assignment.
3) Data Collection and Property Description: this is the step where appraisers collect data on the market, data on the subject property, and all data on comparable sales and listings that will be used in the report.
4) Data Analysis: this step includes determining the Highest and Best Use of the property as well as analyzing the market of the subject property. In this step supply and demand are analyzed, inventory levels and marketing times are determined. The data is verified. When appraising for federally related transactions, the closed sales data must be verified through two independent sources, such as the local multiple listing service, the recorder of deeds, or local newspapers.
5) Site Value Opinion: In this step, the appraiser determines the cost of the land where the property is located.
6) The Applications of the Approaches to Value:
a. Cost Approach: this step derives value by estimating the current cost to construct a reproduction or replacement of the existing structure, including entrepreneurial incentives, deducting depreciation from the total cost, and adding the estimated land value. How much does it cost to build the same or similar property? The Cost Approach addresses this question.
b. Sales Comparison Approach: this is the process of deriving a value indication for the subject property by comparing market information for similar properties with the property that is being appraised. The sales comparison approach is based on the [principle] of substitution, which states that a buyer will not pay more for one property when several similar properties are available; the property with the lowest price will attract the greatest demand. What’s my house worth when compared to my neighbors? The Sales Comparison Approach addresses this question. c. Income Capitalization Approach: this step converts income to value. How much money can I make from this property? The Income Capitalization Approach address this question.
7) Reconciliation of Value Indications and Final Opinion of Value: in this step the appraiser analyzes the information reported previously in the valuation process and selects a final opinion of value, which may be a value range or a specific number. If the market is oversupplied and prices are declining, the final opinion of value may be on the lower end of the value range. If the market is undersupplied and prices are rising, the final opinion of value may be on the high end of the value range.
8) Report of Defined Value: this is the last phase of the valuation process. The defined value is stated as of the effective date that was identified in Step 1.

All appraisals have a signed certification. The certification states that the appraiser has personally conducted the appraisal in an unbiased, objective manner in accordance with USPAP. The certification states what the appraiser did or did not do. A signed certification is important because it clearly states the role of the appraiser, thereby clarifying that the appraisal was done by an individual who is impartial, objective, and unbiased. The certification must be signed by the appraiser. Once signed, the appraiser is legally bound to the appraisal.

On June 20, 2019 at the U.S. House of Representatives Committee on Financial Services, Subcommittee on Housing, Community Development, and Insurance at their meeting: “What’s Your Home Worth? A Review of the Appraisal Industry.” Mr Andre M. Perry was one of the five witnesses to testify. Mr. Perry is not a licensed appraiser, yet Mr. Perry concluded that “owner-occupied homes in black neighborhoods are undervalued by $48,000 per home on average, amounting to $156 billion in cumulative losses.” As an appraiser who deals with data, I was very interested in his claim, as well as the basis for his conclusions.

In Mr. Perry’s written testimony, page 2, Figure 1, titled “Neighborhood median home value by black population share”, Mr. Perry data sources were property listings from Zillow and the value estimates provided to the Census Bureau. Mr. Perry did not provide values determined by licensed appraisers or any apparent recognized valuation method or technique. Zillow was sued in Illinois in 2017 (Vipul P. Patel., et al., v. Zillow, Inc and Zillow Group, Inc., Case No. 17 C 4008) and appealed in 2018 (United States Court of Appeals for the Seventh Circuit No. 18-2130). Zillow explicitly points out that Zestimate does not constitute an appraisal and is what it sounds like, an estimate. An estimate is not an appraisal, nor does it resemble any method or technique recognized by Congress or regulators. An appraisal is, “(noun) the act or process of developing an opinion of value; an opinion of value. (adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.” (Lines 59 – 60, USPAP 2018-2019 Edition © The Appraisal Foundation).

In his written testimony to your committee, Mr Perry notes on page 2, Figure 1 that the 2016 median list price was provided by Zillow. List price is what a seller is offering their property for sale. List price is not sale price. Sale price is a fact; list price is a suggestion. Rarely do properties in a balanced or declining market sell for above their list price. List price to sale price ratios were not profiled or discussed in Mr. Perry’s study, nor was any final sale price data referenced or profiled. In Figure 1 of his written testimony, Mr. Perry used “Census Bureau” for Median Value, rather than sale price data or appraiser’s conclusions. The Census Bureau is not a valuation agency and obtains their data via a survey. Per the U. S. Census Bureau, the market value is, “the respondent’s estimate of how much the property (house and lot) would sell for if it were for sale.” (https://www.census.gov/quickfacts/fact/note/US/HSG495217 ). An estimate is not an appraisal. [Homeowners] may or may not know the true value of their properties, because they are not valuation professionals, and they have a personal interest in their property. With only Zillow’s list price data and the Census Bureau’s homeowner estimates of their property’s worth, the study lacks any reliable value indicators. None of this data supports discontinuing the use of individual appraisers in preference for using Automated Valuation Models, as Mr. Perry suggested in his opening statement and throughout the hearing.

Is there a problem with poor and underserved communities in the United States? Yes. Is it the appraisal profession’s fault? No. The systematic practice of redlining (licensed broker issue), loan rejection (lending issue), and property taxes (assessor and county taxing agency issue) have nothing to do with the appraising of real property for federally related transactions. Entire neighborhoods fell victim to predatory lending, subprime mortgages, and mortgage fraud, with most of the mortgage loans generated with loan amounts below the de minimis of $250,000, which made them qualify for appraiser-alternative products, including AVMs. There were a whole lot of non-appraisal related issues presented in Mr. Perry’s data. It’s sad that the label of racism got pinned on the only profession in the mortgage process who is charged with protecting the public trust.

It’s like blaming the canary for the bad air in the coal mine or blaming the mirror for your bad hair day. Appraisers reflect the market; we do not create it. We observe, we verify through credible sources and analyze our data, and we report our findings in a manner that is meaningful and not misleading.

It comes down to data and how the data is collected and analyzed. In his opening statement, final statements, and throughout the hearing, Mr. Perry championed the use of AVMs. None of the data presented by Mr. Perry in his written testimony to this committee supports the discontinued use of individual appraisers over AVMs. This presents a question: since Mr. Perry relied on data from AVMs and Zillow, is race baked into these systems and their data? Algorithms and machine learning are built on historical data, which is primarily human driven. Machines may and have been shown to amplify bias in data. If racism has been perpetuated for decades in real estate, then it’s baked into the system and the data, therefore what kind of data will we get from the machines? Some hope that Big Data will save us from the mistakes made by humans. The humans who provide valuation services are licensed by their individual states and regulated by Congress. The licensed humans can lose their licenses, get heavily fined, or go to jail for unethical or incompetent appraisal practices. Who’s regulating Big Data when Big Data makes mistakes?

Today we know that 85% to 90 % of all mortgage transactions backed by the federal government and U.S. taxpayers are currently not subject to the protections Congress enacted through Title XI. Big Data companies that provide AVMs are not regulated. Their valuation process and sources of information are not verified, regulated, or publicly available. How does relying on an unregulated private industry running aggregation models protect the public trust? I don’t believe it does.

The appraiser is central to the checks and balances in the home lending system. The appraiser is hired by the lender to ensure that there is value in the property being used as collateral by the lender to provide funds to the borrower. The licensed broker/Realtor negotiates the price of the property, but they are not qualified or licensed to determine the value. Providing valuation services is the appraisal professional’s job. The appraisal professional provides checks and balances in the housing system, as the appraiser is entirely unrelated to the transaction and is not paid based on the amount of the valuation nor contingent on the closing of any loan.

Public trust is key in promoting the stability in the housing market. The continued reliance of unregulated aggregators and bifurcated products continues to erode the public trust at the expense of discarding the profession specifically intended to promote the public trust. How does this protect the public? The appraisal profession is at risk with this policy change. More important: the public is at risk with this policy change and the continued lack of reliance of the appraisal profession.

David Bunton from The Appraisal Foundation said it best to this committee: “The last thirty years were witness to federal agencies doing their best to circumvent using these trained professionals. Likewise, the government sponsored enterprises are taking on riskier practices that leave appraisal protections on the sidelines. Through exemptions, appraisal waivers, promoting evaluations in lieu of appraisals, and encouraging lenders to use unlicensed individuals, the federal financial institutions regulatory agencies estimate that a mere 10 to 15 percent of all mortgage transactions backed by the federal government and U.S. taxpayers are currently subject to the protections Congress enacted through Title XI. ”

I ask again: How does relying on an unregulated private industry running aggregation models protect the public trust? It doesn’t. The reliance on Big Data, the acceptance of hybrid and bifurcated appraisal reports, the potential rising of the de minimis from $250,000 to $400,000, and the lack of hiring the profession that is charged by Congress to promote and maintain the public trust in the housing industry, is a bad direction for our industry and our country. Please do all in your power to protect the citizens of the United States and prevent the next housing crisis.

Thank you for your time, your service, and your continued interest in protecting the public trust.
Maureen Sweeney

OFT (One Final Thought)

This photo shows how serious and good library humor can be (I’ve got all the 1960s Batman TV shows on my iPhone). Just ask my wife about libraries and humor. Our first date was at the university library and she thought I was kidding – but I had a paper due on Monday.


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 want more Natural Light;
  • You’ll want a better turkey sandwich;
  • And I’ll go to the library.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Appraisal Related Reads

Extra Curricular Reads


June 14, 2019

While Housing Is Right In Front Of Us, It Doesn’t Mean We Understand It

When our boys were young, we used to go to Canada to ski during the winter break. The first time we made the trip, we rented a chalet and the snow around it was measured in feet, not inches. After a day on the slopes and romping around in the snow, we’d make dinner and sit in the living room and melt into the furniture. But most importantly we’d watch curling on television all week. It seemed to be on all the channels and I was told by locals that it got higher ratings than hockey. I have a curling app on my iPhone and continue to marvel at the sport yet at the same time, fail to grasp how it works (like being quoted in People Magazine). But I do know that for every action, there is an equal and opposite reaction, much like Cycleball, obviously.


But I digress…

Elliman Report Released: May 2019 – Manhattan, Brooklyn & Queens Rentals

Ironically, the release of the May 2019 Elliman Report: Manhattan, Brooklyn & Queens Rentals occurred during the crescendo of newly proposed rent control laws coming out of Albany that will provide a sea-change to the housing market (more on that later).

As my Housing Note readers know, I’ve been authoring the expanding series of market reports for Douglas Elliman Real Estate since 1994. The goal is to provide a neutral housing benchmark for its readers.

After several years of modest decline, the rental market has returned to its rising ways since last fall, but largely on the back of the weakening sales market. The sales market has been impacted by the Tax Cut and Jobs act of 2017 that went into effect on January 1, 2018, and dished out a slew of market uncertainty in NYC metro, a high tax, high-cost U.S. housing market. Would-be buyers began to camp out in the rental market last fall. As a result, rents began to rise and concessions began to fall. Here’s a cool chart about it from the sharp Bloomberg story.

Here are some key points for each of the three markets:

MANHATTAN

“While landlord concession market share has been falling since the beginning of the year, they still impact about one-third of apartment rentals.”

  • The vacancy rate has declined year over year for the eleventh time in twelve months
  • Landlord concession market share has continued to trend lower since the beginning of the year
  • The net effective median rent rose year over year for the fifth consecutive month
  • The median rent for studio and 1-bedroom apartments continued to increase year over year while larger sized units declined
  • The luxury entry-threshold hasn’t seen a year over year decline since December
  • Luxury median rent was flat with the most significant annual gain occurring in the Upper Tier

BROOKLYN

“Rental price trend indicators continued to rise as use of concessions declined.”

  • Net effective median rent rose over year for the sixth straight month
  • Concessions market share declined year over year for the fifth consecutive month
  • Median rent for all apartment sizes rose year over year

NW QUEENS

“Landlord concession market share fell by nearly half from April 2018 record.”

  • The annual change in concession market share fell sharply for three consecutive months
  • Net effective median rent rose annually for the third straight month
  • New leases rose year over year for the tenth time in eleven months

The Nelson Report Podcast: What’s the deal with the residential market in New York City?

I was recently interviewed by James Nelson, one of New York commercial real estate’s star brokers at Avison Young whom I’ve known since his Massey Knakal days. I’ve been on his podcast several times over the years and always enjoy the conversation. This time he did the interview at CUNY studios in Manhattan. In addition, he brought in Vince Rocco, a residential real estate agent at Halstead who has a broker-centric podcast known as “Good Morning New York Real Estate with Vince Rocco.” I had never met Vince before so it was nice to get his perspective on the market.

The Waldorf (Not The Salad) Is In Vogue Again

While it’s been widely documented that the new development market has been cooling since its peak in 2014, new development projects continue to be introduced due to their long lead times, although 2020 seems to be the last year of new apartment introductions. The high-end of the new development market has been characterized by “supertalls” since 2012 the likes of which comprise the Billionaire’s Row market in Midtown Manhattan. The demand for the product remains steady if it is priced for 2019 and not for 2014. When Chinese insurance conglomerate Anbang acquired the historic Waldorf Astoria Hotel in 2014, it confirmed my prior thoughts that 2014 represented the peak of the real estate acquisition boom.

The Wall Street Journal and others covered the announcement of the Waldorf condo sales effort this week. I was surprised and a bit relieved that 350 hotel units will remain.

The Waldorf Hotel is a historic treasure to the Manhattan real estate market but the challenge in the conversion to condos will be to differentiate it from the other high-end offerings. The owners have a lot to work with given the hotel’s rich history, but as they say, timing is everything. I’ve presented there, met people for drinks, lunches, and dinners, and even walk through occasionally just for the sake of being in a special place in the city during my workday.

Law of Unintended Consequences: Proposed NYC Rental Regulations Have Significant Repercussions

Here is the Housing Stability and Tenant Protection Act of 2019 that is expected to be signed by New York Governor Cuomo. This version shows the edits recently made. The NYS Assembly (8281) version mirrors the NYS Senate version (6458).

The U.S. housing market has been plagued by a shortage of affordable housing since the financial crisis. The economics of post-crisis housing has encouraged a luxury housing orientation. As a result, entry-level housing has been woefully neglected, placing many hardworking New Yorkers in an affordability crisis. Since the fall elections, both houses in the Albany legislature and the governor are all aligned politically and have pushed out housing legislation initiatives that are counter to business as usual, first with the poorly thought out “pied-a-terre” tax that failed but quickly was replaced with the “Mansion Tax” that passed. This was the beginning of a new anti-landlord, an anti-developer mindset. Perhaps with the best intentions of creating more affordable housing, the opposite will occur in the long run.

Here’s a NY Post infographic on the proposed legislation that Governor Cuomo promised to sign.

Real estate industry leaders did not expect this law would happen.


The proposed, permanent New York State Rent Laws are effectively going to eliminate all financial incentives for building upgrades and crush multi-family sales activity and the tax revenue they generate.

Up until now, rents under stabilization laws were determined by the rent board and expenses were determined by the forces of a free market. So if an allowable rent increase was two percent, but a spike in expenses like insurance, real estate taxes or say, fuel caused overall expenses to rise more than 2%, the landlord has to absorb the difference. That logic may be sustainable in the short term but in the long term, it is not. Other items like vacancy decontrol, preferential rent and incentives for major capital improvements have been removed from the new law, so there are no economic incentives to an owner to perform any maintenance or upgrades to a building. I suspect small landlords are the most vulnerable because they don’t have the staying power or economic efficiency that large landlords do.

In the short term, renters will see only modest rent increases even without the preferential rent loophole. In the long term, the housing stock will deteriorate and landlords, now blindsided with an asset that has no upside, will begin to look at ways to shed the exposure. After all, who wants to own an asset that through better management can’t improve its quality?

I suspect that we will see a return to the days of co-op conversions a largely distant memory. Perhaps condo conversions are part of the mix as well but with co-ops, the upside for landlords can be the underlying mortgage instead of the sales prices achieved in a weakening housing market. However, this method of extracting upside to property owner’s investment will probably not be at the scale of the 1980s conversion frenzy because the legislators considered this. They upped the requirement of insider approval for a non-evict plan from 15% to 51% to ensure that the “insider” prices offered to rent-stabilized tenants would remain at a sharp discount to market prices.

The short term result?

An uptick in conversions will cause a reduction in rent-stabilized apartments over time and an increase in affordable “for sale” properties.

When Cuomo signs this legislation into law, I suspect cap rates for multi-family housing in New York State will spike as multi-family property values plummet and sales of multi-family buildings essentially stop.

Possible long term result?

It looks like we might return to the In Rem housing crisis of the 1970s-1980s as landlords, especially small building landlords, abandon their properties and tenants are displaced. The cause for the In Rem crisis echoes similar patterns of restricting rent increases while operating costs rise according to the market with no other upside allowed.

The state and city governments don’t have the resources to fund affordable housing initiatives without the aid of market forces. In this new effort, there will be no incentives to create more housing.

From the New York Times in 1986:

The figures suggest that the city has still not found a way to recycle expeditiously all the property it takes in tax-foreclosure proceedings, which now begin after only a year of delinquency. In fact, the city had more tax-foreclosed properties at the end of fiscal 1986 (9,716 buildings) than it did at the end of fiscal 1983 (9,194 buildings), even though the real-estate market has improved substantially over three years.


Given the shift in the Albany political zeitgeist against multi-family owners and developers, the outside investor community will no longer contemplate building multi-family open market housing in New York State due to the political uncertainty and bias against all landlords.

In the desire to create affordable housing, the long term impact of these laws will likely result in fewer apartments within rent stabilizations but may provide additional affordable “for sale” properties.

New York State Tax Collectors Are Getting Aggressive

To stem the outflow of tax revenue with the new wave of wealthy migration to Florida from New York as a result of the new federal tax law that promotes it, New York State is getting hyper-aggressive. The CNBC video shows how it works:

New federal tax laws limiting the deduction of state and local income taxes have created incentives for wealthy New Yorkers to move to Florida or other lower-tax states. New York Gov. Andrew Cuomo last month blamed wealth flight for the state’s $2.3 billion revenue shortfall in December and January.

“Tax the rich, tax the rich, tax the rich,” he said. “We did. Now, God forbid, the rich leave.”

Getting Graphic

Our favorite charts of the week of our own making

FYI – I brought in a graphics consultant for all our charts to extract my Crayola Crayons from our tool kit.

Len Kiefer‘s Chart Handiwork

Appraiserville

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

With the rent stabilization law pending of epic proportions and a week of full-on expert witness consulting and testimony in three different ongoing matters, I’m sure appraisers can appreciate that I am just coming up for air. More to follow as I am keynoting at OCAP next week and speaking in DC for NAR on June 26th. Since I was informed that I wasn’t speaking on the House panel covering appraisal modernization on June 20th, I opted to use that day to get some root canal work. No irony there.

OFT (One Final Thought)

The following video informed me about the Rescued Film Project and why I’ll think differently about 31 Rolls of Undeveloped Film from a Soldier in WWII Discovered and Processed.

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 go low rent;
  • You’ll play cycleball;
  • And I’ll develop some film.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


May 10, 2019

iBuyers Are Here, But We Still House Antisocial Feelings

I’ve been taking the commuter train from Connecticut into Manhattan since 1990 and much of my daily ride was full of open newspapers before handheld devices became ubiquitous. The morning read of the car tended to be NYT/WSJ/FT and the evening was the NYPost/NYDailyNews as well as a thorough handwashing to remove the black ink:


But I digress…

Elliman Report Released: April 2019 – Manhattan, Brooklyn & Queens Rentals

Real estate giant Douglas Elliman released our research today for the April rental market covering Manhattan, Brooklyn and Northwest Queens. This market report is part of the expanding Elliman Report series I have been authoring since 1994.

Elliman Report: Manhattan, Brooklyn & Queens Rentals 4-2019

MANHATTAN
“Rental price trends in the entry tier pressed higher, overpowering the high-end market.”

  • The net effective median rent rose year over year for the fourth consecutive month
  • Landlord concession market share fell sharply, the third year over year decline in four months
  • The vacancy rate edged higher year over year for the first time in eleven months
  • Market share of leases above $10 thousand per month moved higher
  • All luxury price trend indicators moved higher than year-ago levels

Bloomberg included two charts (a twofer!) so that needs a shout out. Click on either for the Bloomberg coverage.


Here are some of our Manhattan charts.

BROOKLYN
“The decline in market share of rentals with concessions continued to accelerate.”

  • The year over year change in the market share of concessions continued to decline
  • New leases rose year over year for the fourth time in five months
  • Net effective median rent increased annually for the fifth straight month

These are some of our Brooklyn charts.

NW QUEENS
“Landlord concession market share fell sharply from the year-ago record.”

  • Market share of landlord concessions fell year over year for the second time in eight months
  • Net effective median rent expanded year over year for the fifth time in six months
  • Studio and 1-bedroom rental leasing grew as 2-bedroom rental leasing fell

These are some of our Queens charts.

My Views on the Value of Views

There is an epic New York Times real estate cover story out today that will be available in print this weekend that covers my takes on the impact of views on value and the philosophy behind it. These insights were developed during our appraisal firm Miller Samuel‘s 33 years of existence and tens of thousands of appraisals completed by our team. Both the photos and the write-up were terrific and I’m super proud to be a key part of this story. Click on the image to read the story and see more photos.


“Flip” is the New 4-Letter Word

Many young investors haven’t seen a declining market and took excessive risks. With the proliferation of flipping shows (mostly shot in Canada BTW) who can blame them? It was not so long ago that we were all talking about how young people had never seen a rising housing market.

The changes in some markets are quite pronounced making flipping inherently a bad idea.

Some Analog Thoughts About The iBuyer Industry

Ben Casselman pens a great piece in the New York Times: Real Estate’s Latest Bid: Zillow Wants to Buy Your House. If you click on the tweet first (not the link to the article) you get a great thread that breaks it all down.


Aspirational Pricing Illustrated

There was an article in the Wall Street Journal: Miami Condo King Brought Back to Earth by Luxury Home Price Correction on setting listing prices in Miami from the perspective of one of the most prolific developers there, George Perez of Related. Here is the history of the penthouse he owns at the development he built known as 1 Collins in Miami:

2016 purchased $4.23M (assuming as the developer, he got a deal)
2016 listed for $20M
2019 dropped the price to $10.95 million

Bloomberg Masters in Business Podcast: Ivy Zelman Discusses Real Estate

This was a twofer – two of my good friends talking about the real estate market and I get a shoutout! Ok, ok, that’s not why I’m sharing this. This was a really enjoyable listen on the topic that drives you to read Housing Notes – you’ll get a sense of how Ivy has been so darn accurate during her career and what she sees now.


[click to open podcast]

Visualizing Monthly Mortgage Payments

Another great “Howmuch.net” visual on mortgage payments. The idea that the average payment in Santa Cruz, CA is $2,940 and in Coffeyville, Kansas is $205 – is mindblowing.


[click to read their post]

Getting Graphic

Our favorite charts of the week

One of the hopes of housing market observers is for continued growth in wages after falling behind housing price gains. Wages are clearly rising but the rate of growth is leveling, which is especially disappointing after the large stimulus insertion into the economy by the tax cut in 2018.


[Wall Street Journal]

NY Fed: The probability of U.S. Recession as predicted by Treasury Spread was 27.5% in April.

Len Kiefer‘s Chart Handiwork

Appraiserville

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

Protect Appraisal Report Integrity By Delivering Locked PDFs

Obviously, it is easy to unlock a pdf report, but we lock every report as an effort to maintain report integrity. This should be a regulatory requirement. Periodically we have seen reports we delivered electronically that ended up being modified to the client’s needs.

This almost happened a week ago.

My firm received this request from Servicelink on a BoA request. In accordance with the new AMC law in New York State, we are including the invoice with our reports. This was the first report to this particular BOA group since the new law was activated so it is reasonable to assume that the BOA clerk handling the appraisal didn’t know what to do about the invoice and Servicelink was passing along the request. The law itself says the invoice must be delivered with the report which infers but doesn’t specifically state that the invoice should be within the report pdf. I would imagine there will be a lot of attempts by lenders to get rid of invoices out of habit but after a while, once appraisers start seeing invoices missing from the applicant copy when an applicant calls the appraiser, the appraiser needs to complain to the CFPB. I remain skeptical that lenders will be able to sustain a systemic fraud or ignorance to the spirit of the NY AMC law by hiding the invoices from the applicant and risk doing future business in one of the largest mortgage markets in the U.S.

Our client, Bank of America, has accepted both appraisal reports. Unfortunately, they are having issues uploading the documents into their system due to them being locked and password protected. Are you able to modify the permissions to allow printing and unlock the document? Please let me know as soon as possible so we can deliver to the client.

Red flag: How could they have accepted the report but never uploaded it?

I personally tested the pdf they sent back to us as well as our original copy. They both printed as usual so we told them they must have a software issue on their end. We have never had to deliver unlocked reports to this client and as practice. It is ALWAYS inappropriate for an AMC to request an unlocked report. There is only a nefarious reason behind it, even if the requestor themselves have no idea.

Causation, not correlation: The first time we get a request to unlock = first time we attached an invoice.

Here is how we respond to these things:

Thank you so much for the business. We greatly appreciate it!

Miller Samuel does not unlock pdf’s or remove passwords. So we just can’t help in this situation. This is done to protect the integrity of our report as a matter of policy with every client.

Thanks again and we look forward to working with you in the future!


Here’s what Servicelink told us after we said “no.”

We were just looking for a partnership here to try and meet the needs of what is a very important client to ServiceLink.

Until the new New York State AMC Law is fully adopted by the AMC industry, expect to get these requests. Part of the issue is software updates or internal procedural changes and part of it – like this example – is nefarious.

Solidifi Wants Insight Into Your Vacation Time

If AMCs weren’t invasive enough already on appraisers personal lives with overly-frequent status calls and other well-documented and demeaning requests, how about vacation time? In addition to the 37-page boilerplate order request the appraiser is required to read, appraisers now have to fill out another form.

The fact that Solidifi and their competitors are in business to fee out to the lowest bidder makes this request silly because appraisers don’t have that kind of relationship with AMCs. It goes like this. They send out an appraisal request to 10+ appraisers and one of them is on vacation and therefore doesn’t respond. Who cares? In my view, a business that treats its vendors like cattle, can’t call it a professional relationship. In fact, there IS NO RELATIONSHIP. The appraiser as the local market expert is really only a widget to them. AMCs can’t expect to have it both ways. If appraisers weren’t bombarded with paperwork and dogged by phone calls from a 19-year-old chewing gum already then this would not be an issue.

XOME Seems Concerned New York Borrowers Will Find Out How Little The Appraiser Gets?

An appraiser/reader sends me this text from an XOME appraisal request:

“Good Morning, The state of NY requires the appraiser to include their invoice in the report. AMC fee does not need disclosed. Please include an invoice in your report when uploading. Thank you”

This is technically accurate. Here is an excerpt from the NYS AMC Law:

38 (e) Knowingly fail to separately state the fees paid to an appraiser
39 for appraisal services and the fees charged by the appraisal management
40 company for services associated with the management of the appraisal
41 process to the client, borrower and any other payer.

Why would XOME go out of its way to tell their appraisers not to disclose the AMC portion of the fee the applicant paid? This is not a regulatory requirement that I am aware of. My firm includes our invoice at the top of the pdf and the pdf is locked (we don’t work with the XOME platform).

OFT (One Final Thought)

I hate Facebook. This pretty much sums it up.


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 be more analog;
  • You’ll be more aspirational;
  • And I’ll be more antisocial.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Real Estate Blockchain

Appraisal Related Reads

Extra Curricular Reads


April 26, 2019

The Housing Bunny Shows Us He’s Ready To Rumble

The moral of the story, don’t judge a bunny by its cute, cuddly exterior. Inside there may be a stronger person that is ready to fight.

But I digress…

Elliman Reports Released: Q1-2019 Hamptons, North Fork and Long Island

This was the final week of our four week quarterly report gauntlet. Phew. More markets are being added next quarter to our expanding Elliman Report series I’ve been authoring since 1994.

Of utmost importance was a Bloomberg chart (2 versions) on the spike in listing inventory…


Here are some key observations of these markets:

THE HAMPTONS

Elliman Report: Hamptons Sales 1Q 2019

“The sub-million dollar market had its second highest sales share in five years.”

  • Second highest market share of sales below $1 million in five years
  • The number of sales has declined annually for the fifth straight quarter as the market resets
  • Lowest first quarter number of sales in seven years
  • Listings inventory rose sharply for the last two quarters
  • Tied for the lowest number of sales at or above $10 million in six years
  • Luxury listing inventory expanded sharply for six straight quarters


NORTH FORK

Elliman Report: North Fork Sales 1Q 2019

“Stable pricing with easing sales growth.”

  • Median sales price has not shown a year over year decline in eight straight quarters
  • Listing inventory edged higher year over year for two straight quarters
  • The number of sales declined year over year for the third time in four quarters
  • The market share of sales under and over $1 million was unchanged
  • Tied for the second lowest number of sales above $2 million in six years

LONG ISLAND

Elliman Report: Long Island Sales 1Q 2019

“Sales slowed as prices continued to rise.”

  • There has not been a year over year decline in median sales price for twenty-four consecutive quarters
  • The number of sales slipped year over year for the second time in three quarters
  • Listing inventory expanded annually for the first time in four quarters
  • Shortest first quarter marketing time for single-families in at least twelve years
  • The number of condo sales has declined year over year for five consecutive quarters
  • Luxury listing inventory rose year over year for five straight quarters

Elliman Reports Released: Aspen/Snowmass Village, Los Angeles, Venice/Mar Vista, Malibu/Malibu Beach

ASPEN

Elliman Report: Aspen + Snowmass Village Sales 1Q 2019

“Market-wide sales continued to see annual gains for the second straight quarter.”

  • The number of sales expanded year over year for the second straight quarter
  • Average sales sized increased annually for the second time in three quarters
  • Listing inventory annually edged higher for four straight quarters
  • Luxury average price per square foot declined and listing inventory expanded annually for three straight quarters
  • The entry-threshold drifted lower year over year for three consecutive quarters

SNOWMASS VILLAGE

Elliman Report: Aspen + Snowmass Village Sales 1Q 2019

“Larger sales size skewed price trends higher as sales slowed.”

  • The average sales size surged, skewing all price trend indicators sharply higher
  • The number of sales declined faster than listing inventory, slowing the market pace
  • The number of sales declined annually for the first time in eleven quarters
  • Luxury average price per square foot rose year over year for the second straight quarter
  • The average size of a luxury sale jumped from the year-ago level

LOS ANGELES

Elliman Report: Los Angeles Sales 1Q 2019

“Overall market share of pocked/whisper listings declined as listing inventory expanded.”

  • Number of sales declined year over year for the fourth straight quarter, consistent with the decade quarterly average
  • Price trend indicators showed mixed results, with median sales price falling from the year-ago record
  • Listing inventory expanded year over year for the fourth consecutive quarter
  • Market share of pocket/whisper listings fell across most price categories
  • Sales market share of larger single-family sales declined
  • Luxury price trend indicators for condo and single-family sales generally moved higher

MALIBU/MALIBU BEACH

Elliman Report: Malibu + Malibu Beach Sales 1Q 2019

  • Malibu single-family and condo sales year over year remained well below year-ago levels as sales size shifted to smaller homes
  • Malibu Beach single-family and condo inventory fell as average sales size skewed lower

VENICE/MAR VISTA

Elliman Report: Venice + Mar Vista Sales 1Q 2019

  • Venice single family and condo price trend indicators ranged from flat to rising year over year as sales remained well below year-ago levels
  • Mar Vista single-family and condo price trend indicators rose sharply as inventory expanded sharply but remained inadequate for the demand

Elliman Reports on Greenwich and Fairfield County, Connecticut Featured on CNBC

Diana Olick at CNBC reached out to me this week to talk about the Q1-2019 Elliman Report on the Greenwich, CT housing market and the impact of the federal tax law on high-end suburban markets in NYC metro. We spoke on Greenwich Avenue in Greenwich at 8:30 am and had to keep doing segments over because of the random roars of delivery and garbage trucks. The irony was not lost on me – a busy downtown with not a lot of empty parking spaces so early in the morning – combined with a slow housing market. Anecdotal but this is what we are seeing at the macro level – a robust regional economy with soft housing conditions.

We were set up in front of a Vineyard Vines store while I was wearing a bright Ted Baker tie (Hey, I can be a social media style influencer too). The irony in this product placement “ties” this story altogether (in my own mind). I received more feedback about my tie than I did on my content. Oh well. And for the record, Diana made very clear to me that she commented on my tie first.


Here’s the segment that also includes my friend Jennifer Leahy of Douglas Elliman, their number one agent in Connecticut who just sold the massively oversized home of 50 Cent.

New tax laws take a toll on home sales in Connecticut from CNBC.


Streeteasy’s Out East Site Has Brokerage Community Where They Want Them

The brokerage community is complaining that the new Streeteasy site for the Hamptons and North Fork – Outeast – is preventing them from serving the consumers.

Let me start from the beginning.

It has been almost six years since Zillow acquired Streeteasy, the defacto MLS system for Manhattan. Streeteasy, as conceived, was an elixir that the brokerage community (and me) became addicted to. There had been no listing search engine that understood vertical housing markets since most platforms are “flat file” like in functionality. Zillow today and others remain like that. Condo unit 3A is viewed on its own merits and not with condo unit 47A in the same building at the same time. I had incorrectly assumed that Zillow would use Streeteasy to power the vertical housing markets they cover, but instead, they opted to use the acquisition to buy into the NYC market and have spent the time removing the bells and whistles that made Streeteasy so cool since there has been no real competition. Sure REBNY tried with their RLS system, but they don’t have the money to compete in the same league as Zillow and Zillow has won the consumer with hundreds of millions in marketing. Now that they won the consumer, they rolled out their Premier Agent program at $333 per month per listing because they enjoy the monopoly that MLS systems around the country have long been accused of. Except that this is not a consortium of companies, it is simply a single tech platform.

I understand the New York Department of State is wrestling with this situation right now and the MLS world is watching for their final decision. I wouldn’t hold your breath.

Now we are seeing the same thing playing out in the eastern end of Long Island over the past two weeks – the brokerage community in the Hamptons seems to be besieged by tech issues now that they are forced to use the Streeteasy site Outeast now that they turned off editing of the Realnet site they acquired. The site is being forced on the community and it is not ready for daily use. Monopolies arent motivated in the same way as when competition exists.

Here are some of the incoming broker responses who are using a system that is not ready for prime time:

Their averaging stat misrepresents seasonal rents:

customers can not figure out what the rental prices are I always have to ask them first what period they are interested in and I think since averages are so high it keeps full season rentals from calling.

It’s been 2 weeks it is a crisis mode now for our business!
It took me two weeks to enter a rental condo , all my rentals Are average year round prices-shows up and most are only summer – you cannot average a Hamptons summer by the year .

Listing entry process is flawed

Who is your supervisor, you have no phone support you have a system that clearly doesn’t work and I have listings that can’t be entered. Where IS the old sale that was entered for the same address. I thought I could just use that. What is going on over there? How can you release a system that doesn’t work. Where is the open house info? Where is the day sheet. How do you operate a system that doesn’t work.

YOU GAVE ME A BICYCLE WITH NO TIRES AND ASKED ME TO PEDAL


There is more. I’ll expand on this topic this weekend over on my Matrix Blog.

In Canada, Losing A Purchase Deposit Can Be Gangsta

A one-time potential purchaser of a luxury home in Vancouver was not entitled to their $220,000 deposit back:

But property investor Shao Feng Yun wanted nothing to do with the mansion after finding out that notorious triad boss Raymond Huang Hong Chao was shot dead outside the front gate in 2007, in an unsolved gangland hit.

I’d be curious whether the property subsequently sold and there was any stigma attached to the sale.


Vertigo-Inducing Photos of Second Tallest NYC Building By Height

YIMBY has a photo spread of 111 West 57th Street that is worth visiting. The technical challenges of this kind of construction have to be unreal but the views must be spectacular as visits to other supertalls have shown me.

My goal in life is to visit a top floor unit during a Hurricane without taking Dramamine. Here are a few of the photos taken by Michael Young for YIMBY. The third one was the most vertigo-inducing. Clicking on each takes you to the source article.


HowMuch.net: Salary Needed to Buy A House In The Largest U.S. Metros

Chart eye candy.


[Click to expand]

Tip: Remove All Your Toilets to Save Money on Property Taxes

Over the last few weeks, I have been particularly sensitive to the notion that consumers modify their behavior, especially the wealthy when it comes to avoiding paying taxes. The idea that they have so much money that they don’t modify their behavior is lazy armchair economics.

Here is an amazing example of tax avoidance in Chicago if the charges are true.

One of the mayoral candidates in Chicago is accused of removing all the toilets in one of his extra homes to save $330,000 in property taxes.

The appraisal noted that “there were no functioning bathrooms in the house since all the toilets were removed,” adding that there were appliances in the “cooks’ kitchen” in the basement. It also noted that one stairway banister was braced and another one “sloped noticeably to the right side.”


No photos to be found online taken of the house or the lack of toilets…

Getting Graphic


Len Kiefer‘s Chart Handiwork
[click to expand]

His forecasting model for EHS is mindblowing. The change in forward-looking views has been incredibly volatile.

Appraiserville

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

Look for more discussion about the seminal NYS AMC Law this weekend over on my Matrix Blog.

Your Reports Can Turn Up Anywhere
  • Toilet Removals Noted In Chicago Mansion By Appraiser In Tax Appeal. This was discussed in these Housing Notes higher up on the page but note how there is opposing evidence of a bathroom in the house after all. If true, this is an example of an appraiser as a “deal enabler” rather than a trusted neutral observer. I’ll bet they never thought this would be an issue discussed in the Chicago Tribune. Ugh.

  • The appraiser I wrote about in Appraiserville back on September 7, 2018 is in the spotlight again and the optics are not flattering. Fascinating read.

OFT (One Final Thought)

I actually bought one of these last summer. It didn’t work (burn off carbs, that is).

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 cut pizza with a bicycle;
  • You’ll get vertigo;
  • And I’ll get a new tie.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads


April 19, 2019

An Unredacted Hack: Housing Spam Edition

Yesterday, my business email was hacked and it was more disruptive than I could have imagined. I received hundreds of emails from recipients who I know as well as texts and phone calls. And it isn’t over. I am still getting calls, texts and emails from recipients. As this propagates, I’ll bet thousands of people were spammed by my account in the 5 minutes it was active. More on that below.

The following message confused all of my contacts and has spread to other recipients I don’t even know. The following screenshot is what was sent – it looks like an attempt to harvest even more emails.

About five minutes after I was hit, a tech friend of mine called me after receiving the email to let me know and told me to change my password immediately. I did so and while talking with our tech people, I could see 5 emails a minute leave my outbox, each with about 80 names up until the moment my password changed and we added additional authentication and virus protection software.

Here is the most disturbing part – one of my contacts named “Valerie” replied to me with “Jonathan, is this real?” and my email account – the hacker – responded on its own, “Yes, Valerie, it is.” OMG. Here is a snapshot after I redacted her info:

Nearly 20-years ago I was playing a fresh copy of DOOM (possibly DOOM3?)

at home, marveling that I was playing online with others all across the world and not focused on the game itself. I had a slow dial-up connection and my total lack of eye-hand coordination made me no match for anyone. I never forgot this particular moment: At one point I was shot and was laying down watching others run around me. As I was about to come back to life, a player stood over to me and pumped a dozen rounds into me. Chills went down my spine much like yesterday when my account responded to Valerie on its own as I watched.

Afterthoughts on being hacked:

  • Hundreds of people have called, emailed and texted me to let me know what happened and I can cheerfully conclude that most people in this world are nice and good – we too willingly focus our lives on the bad outliers.
  • I never apologized to anyone that called me – it didn’t feel like something I did wrong and everyone will or has been hacked at some point in their lives. But I thanked everyone for letting me know.
  • Never, ever, ever reply to an email you think is spam or click on something from a person you know when you don’t understand what it is or why you received it. Call or text them.
  • Any social media or email account you control should be guarded with two-way authentication. Nifty passwords don’t cut it.

But I digress…

Elliman Reports Released: Q1-2019 Downtown Boston, Fairfield County CT and Greenwich CT

Douglas Elliman Real Estate, the second largest independent residential real estate brokerage in the United States by sales volume, published our research on these markets this week and the news on the housing conditions in the region was decidedly mixed. I’ve been the author if this expanding report series since 1994.

Here’s the breakdown by report:

Elliman Report: Downtown Boston Sales 1Q 2019

The report is broken down by condo and townhouse sales. This is our second quarter with a report release but while townhouse market conditions were robust, I noticed the year over year condo results was sharply negative. This result was caused by an unusual spike in closings in the prior year quarter, and the lion’s share was in a handful of buildings at the top of the market with mostly legacy contracts. We call these legacy contracts because the meeting of the minds between buyer and seller (developer) occurred years before the building was finished and closings occurred. While I won’t cherry-pick the data that goes into a report, I ran the numbers without sales in 3 buildings and got these results, side by side will full results that include the legacy sales:

The actual report results were unedited but overstate the decline in sales and prices form records set last year. Here are the modified results. I have done this in Manhattan before i.e. with and without the $238 million condo sale in Q1-2019, a decade ago with and without the mass closings at The Plaza and 15 Central Park West condos and before that with the $43 million penthouse sale at then-named AOL Time Warner.

“Price and sales trends showed stability after considering the year-ago surge legacy contract closings.*

*A year-ago, record prices and heavy sales volume were caused by a significant surge in high-end new development legacy closings, i.e., contracts signed 2-4 years earlier that distorted current trends. Q1-2018 closings were the highest first quarter number of sales in 13 years; Average and median sales price were skewed to records; average price per square foot was second highest on record. By the removal of three buildings with either a high volume of legacy contract closings or record pricing: 50 Liberty (49), Pierce Boston (58) and 10 Farnsworth (6) resulted in a more representative trend in comparison to the first quarter of 2019 that did not see the same surge in legacy closings. The published report does include legacy closings.

Each time I have done this in other markets, there may be some brokers out there who see reports like mine as damaging the market, especially new underwriting for more developments. That’s actually a false old-school assumption and a residual of the gatekeeper mentality. In the underwriting process, legacy contracts are outed in appraisals by requiring their contract dates – this is the standard operating procedure. The same goes for individual appraisals on mortgages.

Transparency is always the best way to approach market report or there is zero credibility in future research.

Here are a few charts with the legacy data from our chart gallery:


Elliman Report: Fairfield County Sales 1Q 2019

“The market continues to indicate a shift in the overall sales mix to smaller properties.”

  • The average sales size has declined year over year for seven straight quarters
  • Number of sales decreased year over year for the fifth consecutive quarter
  • Listing inventory expanded year over year for the second straight quarter


Elliman Report: Greenwich Sales 1Q 2019

First of all, some Bloomberg charts!!! Click on either of them for the article.

“Condo sales continued to surge as single-family sales reflected a pronounced decrease.”

  • Single-family sales fell to the lowest first-quarter total in eight years
  • Single-family average sales size fell for the third consecutive quarter, pulling down price trends
  • Condo sales surged in three of the past four quarters
  • The sharp drop in the luxury threshold reflected the shift away from the high-end of the market
  • Luxury listing inventory reflected large gains in supply for three straight quarters

Market Report Gauntlet: Q1-2019 South Florida

We released a slew of market reports and the news wasn’t as robust as the prior quarter. We are in a choppy period of the new tax law. Miami Beach and Boca appeared to be the standouts.

Elliman Report: Miami Beach + Barrier Islands Sales 1Q 2019

Elliman Report: Miami Coastal Mainland Sales 1Q 2019

Elliman Report: Fort Lauderdale Sales 1Q 2019

Elliman Report: Boca Raton 1Q 2019

Elliman Report: Royal Palm/Boca Raton 1Q 2019

Elliman Report: Wellington Sales 1Q 2019

Elliman Report: Delray Beach Sales 1Q 2019

Elliman Report: Palm Beach Sales 1Q 2019

Elliman Report: Jupiter + Palm Beach Gardens Sales 1Q 2019

…from one of the Douglas Elliman releases I contributed to:

An overall assessment of the South Florida markets shows price trends edged higher but sales slipped and inventory edged a little higher this quarter.

Overall price trend indicators in Miami Beach moved higher than year-ago levels as the number of sales slipped. Marketing time jumped as older inventory was sold off and listing inventory slipped. In Miami Coastal Mainland, median sales price rose year over year for the eighteenth consecutive quarter, and sales declined annually for the first time in three quarters.

In Fort Lauderdale, condo price trend indicators slid year over year with a decline in average sales size. Luxury condo pending sales signed in the quarter surged over the same period last year. Single-family luxury median and average sales price moved higher as marketing time stabilized.

In Boca Raton, condo and single-family price trend indicators rose year over year as sales slipped for the first time in three quarters. Luxury condo price trends surged year over year partially due to the jump in average sales size.

Single-family sales in Delray Beach slipped for the first time in six quarters as listing inventory expanded for four quarters. Condo price trend indicators haven’t declined in thirteen straight quarters.

In Wellington, condo median sales price increased annually for the tenth straight quarter. Single-family price trend indicators all rose year over year for the fourth consecutive quarter.

In Palm Beach, condo sales rose annually for the fifth consecutive quarter to the second highest market share recorded. Single-family price trends showed mixed results as sales fell to their lowest first-quarter total in seven years.

Single-family median sales price moved higher for the second straight month. Condo sales rose year over year for the third consecutive quarter in Jupiter. In Palm Beach Gardens, single-family sales slipped for the third time in four quarters as all price indicators rose. Condo median price slipped year over year for the first time in 27 quarters.

New Federal Tax Law Slowed The Housing Market

The New York Fed published a study on the housing slowdown and how the 2017 federal tax cut played role in it. Here was part of my take. Spoiler alert: Mortgage rates fell and the market still slowed.

Here’s a good explainer by Marketplace.

And now for the counterpoint by White House Council of Economic Advisers Chairman Kevin Hassett who used “Zestimates” to do his research. If you know how the Zestimates work (they track prices and are only within 5% of actual value 50% of the time) and how housing markets work (sales fall 1-2 years ahead of prices), then this observation is stunningly uninformed. Good grief.

Ivy Zelman Talks About the U.S. Spring Housing Market

My friend and legendary Wall Street housing analyst Ivy Zelman of Zelman & Associates discussed the outlook of homebuilders in the U.S. single-family market. The chart shows the expanding use of concessions. Click on the image to watch the video.

Appraiserville

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

The New York State AMC Law Goes Into Effect

The NY State Coalition of Appraisers wants you to to know that there is a new AMC law coming into effect at the end of the month and REVAA doesn’t like it.

Last December New York State Governor Andrew Cuomo signed Senate Bill S9080 into law, effective at the end of this month.

REVAA‘s biggest concern is that it requires all valuations to be performed by appraisers AND invoices must be attached to the report so the consumer knows what the appraiser was paid.

This is groundbreaking for our industry. Let’s hope that the word spreads and the consumer is finally protected!

There are lots of goodies here – just a couple of samples:

  1. Act without just cause to withhold or threaten to withhold timely payment for an appraisal report or for other valuation services rendered with such appraisal report or services provided in accordance with the contract between parties;

(c) Requiring an appraiser to prepare an appraisal report or valuation service under a time frame that such appraiser believes, in their professional judgment, does not afford such appraiser the ability to meet all the relevant legal and professional obligations including USPAP requirements. Notwithstanding the foregoing provisions of this paragraph, all appraisal reports should be completed within a reasonable timeframe and appraisers may not unnecessarily delay completing appraisal assignments;

(d) Prohibiting or inhibiting communication between the appraiser and the lender, a real estate licensee, or any other person from whom such appraiser, in their professional judgment is relevant;

(e) Requiring the appraiser to do anything that does not comply with USPAP…

AMCs Need To Turn To Consumers To Survive

After reaching the point where there was no more room to gouge appraisers to drive profits higher, more and more AMCs are in trouble or have become “former” AMCs. Last year when appraisers fought back with logic to counter the false “appraisal shortage” narrative, it worked. Appraisers have already given up 50% to 70% of the mortgage applicant’s appraisal fee and there is no more left for appraisers to give up. There never was an appraisal shortage, there was merely a shortage of appraisers willing to work for 50 cents on the dollar. Our industry hit our limit.

The opportunity that consumers provide is the future of appraising.

I’m involved in Phil Crawford’s “Get My True Value” effort which is an organic marketing machine for appraisers who don’t know how or don’t have time to market to consumers. It’s exciting to see it take off.

And you can see this consumer angle taking off in other efforts which are repurposing the AMC concept to something else – I just got this email and know nothing about them – they are going after lender work, not consumers, but notice their anti-AMC pitch.

We are in the wild west right now and the AMC legacy is no longer relevant to those who want to make a living and love being an appraiser.

OFT (One Final Thought)

Sometimes getting more eyeballs on a property doesn’t help sell it, or does it? We’ll find out in May when this property goes to auction.

Brilliant Idea #1

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Brilliant Idea #2

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See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

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Extra Curricular Reads


April 12, 2019

Housing Junkstats Are Today’s Surf and Turf

I’ve always marveled at how many “eye candy” style national maps are pumped out to show us how housing market performance varies across the country. The sheer volume is amazing and we tend to gobble it up. I love the transparency, but I also love pizza AND seafood equally…so where should I live? A key observation of this map suggests that “…seafood is popular along the coast!” LOL.

And why does consumption of BBQ collapse north of the 36th/37th parallel?…


I just don’t know…

But I digress…

Elliman Report Released: March 2019 – Manhattan, Brooklyn & Queens Rentals

I’ve been authoring the expanding Elliman Report series since 1994 for Douglas Elliman Real Estate. This rental report is the one monthly series we prepare, everything else is quarterly or annual. In the past 6 months, the relationship between rentals is more linked as softening sales are driving rental demand higher. The market remains addicted to concessions so it will probably be a slow grind to their demise just like their incorporation into the market on the way up.

Elliman Report: March – 2019 Manhattan, Brooklyn and Queens Rentals

And a chart!!!


______________________________________________________
MANHATTAN RENTAL MARKET HIGHLIGHTS

Overview
“Rental price trends continued to press higher as concessions stabilized and vacancy slipped”

– Net effective median rent rose for the third consecutive month
– Studio and 1-bedroom median rents expanded as larger-sized apartment median rents declined
– The vacancy rate fell year over year for the eleventh straight month
– New leases surged after falling annually for four consecutive months
– Landlord concession market share edged up nominally year over year after falling for two consecutive months




______________________________________________________
BROOKLYN RENTAL MARKET HIGHLIGHTS

Overview
“Rental price trends continued to rise as new leasing activity surged.”

– Net effective median rent rose year over year for the fourth straight month
– Almost three-fourths of new development rentals had a concession while one-third of existing rentals had a concession
– New leases surged year over year at the highest rate in fifteen months across all market sizes




______________________________________________________
QUEENS RENTAL MARKET HIGHLIGHTS

Overview
[Northwest Region]
“New leasing activity jumped across all apartment sizes as landlords pushed for higher rents at lease renewal.”

– Market share of landlord concessions fell year over year for the first time in seven months
– Net effective median rent expanded year over year for the fourth time in five months
– The average size of a rental apartment increased largely from the size gains of 2-bedrooms and 3-bedrooms
– Median rent for existing apartments increased as new development rental prices slipped



Market Report Gauntlet: Q1-2019 Brooklyn, Queens, Riverdale, Westchester, Putnam and Dutchess Sales

A report gauntlet wouldn’t be a gauntlet without a lot of market research on the NYC metro regional sales market coming at out once. Here are the talking points for the region. The full reports can be found in the “Recently Published Elliman Market Reports” links at the bottom of the page.

______________________________________________________
BROOKLYN SALES MARKET HIGHLIGHTS

Overview
“The market pace remains fast, but sales and price trends have started to slip.”

– The number of sales declined year over year for the fifth consecutive quarter
– Listing inventory rose annually for the fourth straight quarter
– Price trends set record highs last fall, which appears to represent a market peak
– Sales priced between $3 million and $4 million were the only price strata with an increase
– Condo sales represented the lowest market share of total sales in more than twelve years


______________________________________________________
QUEENS SALES MARKET HIGHLIGHTS
Overview
“This was the first quarter without a record average sales price in two years.”

– The number of sales declined year over year for the fifth consecutive quarter
– Listing inventory rose year over year for the eighth consecutive quarter
– The first quarter without a record average sales price in two years
– The largest decline in sales was seen in the condo market
– While the pace of the market was brisk, it was the slowest pace in nearly four years


______________________________________________________
RIVERDALE SALES MARKET HIGHLIGHTS
[includes Fieldston, Hudson Hill, North Riverdale and Spuyten Duyvil]

Overview
“Rising price trends continued despite additional inventory coming to the market.”

– Sales declined for the fourth consecutive quarter at a rising rate
– Listing inventory expanded year over year for the third straight quarter
– All overall price trend indicators increased annually for the third consecutive quarter


______________________________________________________
WESTCHESTER SALES MARKET HIGHLIGHTS

Overview
“Single-family sales rose year over year after six consecutive quarters of declines.”

– The number of countywide sales has expanded year over year for three consecutive quarters
– Listing inventory has edged higher year over year for three straight quarters
– Median sales price expanded for the first time in three quarters
– Contracts signed in the first quarter increased from year-ago levels
– All four property types showed more sales than in the prior year quarter
– Luxury single family price trends continue to weaken as luxury inventory expanded


______________________________________________________
PUTNAM SALES MARKET HIGHLIGHTS

Overview
“Median sales price increased year over year for the eighth straight quarter.”

– Listing inventory rose for the second time in three quarters
– Sales and the market pace slowed year over year for the first time in three quarters
– Shorter marketing time on average but with more negotiability


______________________________________________________
DUTCHESS SALES MARKET HIGHLIGHTS

Overview
“Like Putnam, Dutchess median sales price rose annually for the eighth consecutive quarter.”

– Listing inventory increased annually in the three most recent quarters
– The months of supply has been expanding over the past year
– There was a surge in new contracts signed year over year


Shhh, Whisper Listings Are a Thing

This listing type, also known as “pocket” listings, became enormously popular when the luxury U.S. housing market was booming and high-end property owners didn’t need to shotgun blast all the intimate details of their home through large photo galleries. For example, the high-end LA market I cover for Douglas Elliman has more than 20% of the listings above $5 million as pocket listings (outside the MLS). We extracted this metric by matching public record closings with closings in the multiple listing systems. One of the challenges of tracking this phenomenon in the Manhattan market is we don’t have a very accurate market-wide listing system. But most importantly, this article has a chart.


At first glance, this concept seems to short change the seller who will have less exposure to the market by keeping the listing private.

A secret listing probably isn’t the best strategy for most New York homeowners, who would benefit from casting a wide net to attract offers, according to Jason Haber, an agent at Warburg Realty.

However, in the upper price echelons, it still tends to be more by word of mouth anyway.

On a quick side note, Teri Rogers, founder & CEO of Brick Underground, dubbed me “The Data Whisperer” so there’s that. She will be celebrating her 10th year of operation next month. Time flies. Shhh.

Canadian Housing Market Has Been Cooling For A While, Eh?

According to Teranet – National Bank House Price Index, a widely followed housing market composite index, clearly illustrates the weakening national trend. I like to keep tabs on the Canadian housing market, sort of as a hobby (and not because my mother was born in Montreal). The press release included this observation:

Moreover, in 20 years of history, this is the first time that the Composite HPI drops in a month of March outside a recession.


Over the past few years, it looks like Canada has been catching up with the rest of the housing world. This is an important development since the Canadian national economy is highly dependent on the housing market.


Several years ago I was approached to author a recurring national housing market report for Canada by a large financial institution but they ultimately decided not to go ahead with the project. Bummer.

Digging Yourself A Hole

No, I’m not speaking to housing affordability, but rather the opposite in this New York Times piece: That Noise? The Rich Neighbors Digging a Basement Pool in Their $100 Million Brownstone “The extremely loud and incredibly expensive renovations that have shattered a formerly quiet residential block in Manhattan.”

The article is a great read and I found these pictures to be amazing – notice how the house is really just a facade with a deep hole behind it? They must really like to swim. Welcome to Manhattan real estate.


[Source: Benjamin Norman for The New York Times]


[Source: Benjamin Norman for The New York Times]

This Week in (Deeply, Awfully, Twisted) Aspirational Pricing

The former home of the Las Vegas mass murderer who killed 58 people and injured 851 on October 1, 2017, was recently sold to a real estate agent for $305,000 and the funds will go to the victims.

Even in Reno’s largely unaffordable housing market, O’Neill’s bid on Thursday fell far below the home’s most recently appraised value of $367,000. But as a Washoe County appraiser cautioned in paperwork, that estimate was based on “the extraordinary assumption that the value of the property will not be affected by any negative stigma due to the infamous actions of the owner.”

Since the home sold for $305,000, the stigma represented a 17% discount for a mass murderer’s home in an extremely tight housing market. That seems like a very low discount given the scale of the tragedy. In the case of the mass school shooting of 26 children and staff in Newtown, CT, the nearby home of the shooter was leveled and the land left as open space.

In the Las Vegas scenario, the victims received compensation (along with his other holdings) while the stigma on the Newtown property was deemed it worthless (in the context of real estate, not emotion). I’d have to say that even though there would be fewer funds for the victims, I am not a fan of someone trying to flip the house of a serial killer. I’m just guessing here because I don’t cover either market but it sure looks like the discount the broker achieved on sale, was wildly low or it was indicative of the shift in stigma value depending on the tightness of supply. Ugh. Of course, the market will determine that issue down the road when they try to sell.


[Source: Las Vegas Review-Journal]

Appraiserville

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

Valuing Stigma in the Era of Mass Shootings

Take a look at my attempted stigma analysis of the Las Vegas mass shooter’s home above in “This Week in (Deeply, Awfully, Twisted) Aspirational Pricing”

OFT (One Final Thought)

You don’t have to be a basketball fan to watch this. I teared up.


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 eat more seafood;
  • You’ll consume BBQ above the 37th parallel;
  • And I’ll write another market report.

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

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads

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