I’ve been asked to participate in Thursday’s New York Times Event New York Real Estate: How Low Will Prices Go?”.
Click on the image below to RSVP!
I’ve been asked to participate in Thursday’s New York Times Event New York Real Estate: How Low Will Prices Go?”.
Click on the image below to RSVP!
In this Sunday’s New York Times Real Estate Section (online now), the Calculator column featured some data trends I’ve gathered during two significant prior housing market events: What Can 9/11 and the Great Recession Tell Us About Coronavirus Recovery?
The YIMBY (Yes-In-My-Backyard) movement is fairly new.
In the United States, early leaders of the YIMBY movement include Sonja Trauss in San Francisco and Nikolai Fedak in New York. The first ever Yes In My Backyard conference was held in Boulder, Colorado, in June 2016.
Nikolai has done an amazing job at chronicling the explosion of new development in NYC over the past several years with his must read web site New York YIMBY.
One of the misconceptions with the NIMBY movement which is largely the opposite of YIMBY is the idea/rule of thumb that low-income housing always drags down property values of nearby properties. In an era challenged by the lack of any type of affordable housing, this makes a bad situation worse.
According to this recent research by Trulia (FYI – I was part of their industry advisory board from 2006-2014), and notably in aggregate form, the impact seems to be non-existent in the majority of the markets covered. One can’t conclude there is no impact as a general rule but it does show that should not be the default assumption.
The above infographic is from this Weekend’s New York Times’ real estate section column called ‘Calculator’ – Low-Income Housing: Why Not in My Neighborhood?. The methodology used in the Trulia research was the following:
To measure this, Trulia compared the median price per square foot of nearby homes (within 2,000 feet of low-income housing) with that of homes farther away (2,001 to 4,000 feet) over 20 years, starting 10 years before the low-income housing was built and ending 10 years after.
This morning I noticed a quote I had made in an earlier piece this week was one of two quotes selected for “The Chatter” on page 2 of the NYT SundayBusiness section.
“No supply means frenzy, and it means prices rise.”
Forgive this exercise in narcissism but I learned a few things from the process.
Today’s quote mention gave me pause and since I’m midway through our quarterly market report gauntlet I thought I’d take a quick moment to comment on the thrill I experienced this past Tuesday contributing to Liz Harris’ cover story on housing market inventory (lack thereof). It was titled Words to Start a Stampede: New York Apartment for Sale. Liz writes an excellent weekly column with clearly the best title in all of journalism: The Appraisal.
On Tuesday (7/2) I was initially contacted for the piece, beginning a weeklong period of handwringing. At that time I was told it would run on Saturday’s cover (7/6) which seemed like a long time away. However the topic is evergreen (not time sensitive to the day) so it was likely “on the bubble” (pun sort of intended) if any last minute breaking news appeared.
On Friday afternoon (7/5) I learned that Saturday was pushed to Sunday to make room for the crisis in Egypt.
Late Saturday (7/6) evening I learned that Sunday was pushed to Monday to make room for the plane crash at SFO airport.
Late Sunday (7/7) evening I was told that Monday was pulled because former NY governor Eliot Spitzer announced his candidacy for NYC Comptroller and no word on whether it would appear in Tuesday’s edition.
On Monday (7/8) I was clearly hoping for a slow news day so the piece wouldn’t get bumped a fourth time so every news alert required my attention. By the time Monday afternoon rolled around, the article suddenly appeared online so I became confident it would never make the cover – but no page number was assigned to a print page.
The online article appeared on the NYT “Most Popular” page, reaching 13th place quickly soon after it was posted and rapidly ascended to number 4, finally surpassing the very popular article about stool.
I assume this was a way for the NYT to test via crowd sourcing how relevant this story was to deserve a spot on page one. The online article jumped to 2nd place, then 1st on the most emailed list so I began to feel confident that this was the feedback the editors needed. …and we were still ahead of the stool article.
Late on Monday evening the online article was appended by the following notation at the bottom of the page:
“A version of this article appeared in print on July 9, 2013, on page A1 of the New York edition with the headline: Words to Start a Stampede: New York Apartment for Sale.”
On Tuesday morning (7/9) my parents texted me at 6:08am to say they saw the printed version in their town drug store. The article actually made both the NY Metro edition and the US edition so I could share the fun with my relatives outside the NYC area, where social norms are a lot less obsessive about real estate.
Ok, back to work.
I’ve been talking a lot about the causes of falling inventory lately and some mortgage industry types seem to resistant to the idea that credit is keeping supply off the market, versus some sort of uniform national paralysis or sales surge (sales arent’ rising nearly as fast as inventory is falling).
Michelle Higgins at New York Times does a nice feature piece: Dear Owner: Please Sell: Faced With Apartment Shortage, Brokers Get Creative on how this shortage of inventory is changing the way brokers work to get inventory to sell.
But seriously, you’ve got to love the chart (at top) in the article – we provided ten year’s worth of monthly inventory trends to show the visual of just how low inventory has fallen. What’s amazing is the drop is happening in virtually every housing market I can think of.
Since credit is a national market and housing is local, I view this phenomenon as a byproduct of tight credit.
There was a really good appraisal story in the Sunday Real Estate Section this weekend by Lisa Prevost focusing on appraising high end properties whose theme is well-captured in the opening sentence:
As home sales pick up in the million-dollar-plus market, deals are being complicated by unexpectedly low appraisal values.
The higher the price strata of the market, the smaller the data set is to work with so the conventional wisdom seems to be that less data = more unreliable appraisals. However I believe the real problem is lack of market knowledge by more appraisers today as a result of May 2009’s Home Valuation Code of Conduct (HVCC) – the lack of data at the top of the market merely exposes a pervasive problem throughout the housing market.
To the New York Times’ credit, they are the only national media outlet that has been consistently covering the appraisal topic since the credit crunch began and I appreciate it since so few really understand our challenges as well as our our roles and relationship to the parties in the home buying and selling process. Appraising gets limited coverage in the national media aside from NAR’s constantly blaming of the appraisers as preventing a housing recovery (in their clumsy way of articulating the problem, they are more right than wrong).
Here’s the recent NYT coverage:
January 27, 2013 Appraising High-End Homes
January 11, 2013 Understanding the Home Appraisal Process
October 12, 2012 Scrutiny for Home Appraisers as the Market Struggles
June 14, 2012 When the Appraisal Sinks the Deal
May 8, 2012 Accuracy of Appraisals Is Spotty, Study Says
September 16, 2011 Decoding the Wide Variations in House Appraisals
The general theme and style of coverage comes about when Realtors start seeing an increase in deals blowing up that involve the appraisal. The Prevost article indicates that higher end sales are more at risk because the market at the top (think pyramid, not as in ponzi) is smaller and therefore the data set is smaller.
This may be true but I don’t think that is the cause of the problem but rather it exposes the problem for what it really is. I contend that the problem starts with the appraisal management company (AMC) industry and how it has driven the best appraisers out of business or pushed them into different valuation emphasis besides bank appraisals by splitting the appraisal fee with the appraiser (the mortgage applicant doesn’t realize that half their appraisal fee is going to a bureaucracy).
My firm does a much smaller share of bank appraisals than our historical norm these days but it is NIRVANA and we’re not likeley to return to our old model anytime soon.
Since the bank-hired AMC relies on appraisers who will work for half the market rate and therefore need to cut corners and do little analysis to survive, they generally don’t have local market knowledge often driving from 2 to 3 hours away.
Throw very little data into the equation as well as a very non-homogonous housing stock at the luxury end of the market and voila! there is an increased frequency of blown appraisal assignments.
There is always less data at the top of the market – the general lack of expertise in bank appraisals today via the AMC process is simply exposed for its lack of reliability. Unfortunately the appraisal disfunction affects many people’s financial lives unnecessarily such as buyers, sellers and real estate agents (and good appraisers not able to work for half the market rate and cut corners on quality).
The appraisal simply is not a commodity as it is treated by the banking industry. The appraisal is a professional service so by dumbing it down through the AMC process, they have succeeded in nearly destroying the ability to create a reliable valuation benchmark on the collateral for each mortgage in order to be able to make informed decisions on their risk exposure.
The New York Times Real Estate goes gonzo this weekend with a nice write-up AND a large color artwork on perhaps the least understood part of the home buying process.
No not the radon test…
The appraisal. Can’t live with them, can’t live without them.
Here’s my stream of consciousness on the topics brought up in the article:
“You have a better chance of winning Powerball than getting a lender to abandon the first appraisal.”
Understanding the Home Appraisal Process [NY Times]
Back from a short self-imposed overwhelmed-with-year-end-deadline-work-blogging-hiatus. Hope everyone had a nice holiday.
Michelle Higgins at the New York Times wrote a great piece weekend before last on the current stratification of the housing market that I call a “donut.” Strong on bottom, strong on top and weak in the middle. Mortgage rates are pulling in first time buyers at entry-level and high end is being driven high net worth and international buyers, leaving a weaker middle. The NYT editors weren’t very excited about my “donut” analogy even when I suggested a more New York City-ish bagel or bialy. However the piece correctly focused on the challenges the “trading-up” market in today’s houisng market.
I had lunch with my friend Barry Ritholtz last week and he didn’t like my donut analogy saying it should have been a “barbell” – but seriously, can you put icing or frosting on a barbell? I thought so.
I enjoyed the interview of James B. Stewart and Alexei Barrionuevo by Louise Story (best last name a reporter could ever have), on the topic of luxury real estate in the New York Times Business Day Live video series. Mr. Stewart (author of Den of Thieves – one of my favorite books of all time) penned “The Market for Real Estate Masterpieces” exploring the idea of high end real estate as art based on Alexei’s high end housing market coverage of the past year, including the $100M listing (including the upset interior designer), the $88M sale and the >$90M contract among others.
Here was my take on the “Art as Real Estate” angle in Mr. Stewart’s column:
“When people refer to their real estate as art, they’re really trying to say it’s unique, that it can’t be replicated.”
He said he’s seen the phenomenon not just in New York, but also Miami, London, Los Angeles and other markets where investors “are looking for safety in a world of turmoil and uncertainty.”
But, he said, “they’re confusing price with art. You’d think that titans of industry would be very individualistic about their acquisitions, but at the very top, there’s a herd mentality. You get one or two very large transactions that grab headlines and then it’s like a light switch goes off. In New York, this happened in the second half of 2010, and since then it’s been very intense. The size of what’s happening is unprecedented. How long can this go on? You see this kind of behavior and you have to wonder.”
New York Times Business Day Live August 31,2012 [New York Times]
Common Sense: The Market for Real Estate Masterpieces [New York Times]
Reaching for $100M [New York Times]
Other Luxury Real Estate articles by Alexei Barrionuevo [New York Times]
A real estate article by Michelle Higgins on the Woolworth Building Condo Conversion: Luxury Living in Old Temple of the 5 and Dime made the cover of the New York Times today.
Not to wear out the use of irony here but the very idea that multi-million dollar homes will be located in the crowned jewel of nickel and dime retail sales is a bit mind boggling in retrospect.
Our company got a nice mention for the Manhattan zip code data we have been been tracking for the NYT for years. They’ve got a nice interface to slice and dice the data.
This is our 10th mention on A1 (I’m a numbers guy so I count everything) and I can assure you it never gets old.
This weekend I was quoted in the New York Times article “Shooting for the Moon” by Alexei Barrioneuvo which explored some of the crazy prices being asked at the top of the market. Appraisers come across list prices every day that have no rhyme or reason to them.
In providing this quote, I sort of felt like I was in the movie “Babe” which I saw with my kids years ago (admittedly, I liked that movie) sharing that “secret word” that Babe used to get the sheep to talk to him.
I explained the PFA phenomenon as follows:
Within the appraisal industry there is a term for listings based on loose associations to reality, he said: “P.F.A.,” or “Pulled From Air.” As Mr. Miller explains it, “Take the highest sale you can find and apply some methodology in a very subjective way to talk yourself up to this bigger number.”
At the high end of the market, sometimes this approach is successful, but in reality, it is more often successful in new development than re-sales because of the concentrated marketing effort in place and that it is “new” with no benchmark bias already established.
Another name for it (and I just made this up) could be “unprecedented pricing” or UP. Buildings like 15 CPW and One57 in Manhattan and One Hyde Park in London had no real comparable benchmarks and became their own market.
Last week’s Manhattan housing market certainly ended on a high note – literally. You know that old saying about things happening in threes? My word of the week is “trifecta” – it’s always been a favorite, along with “neat, blowhard and Muttontown.
My favorite phrase is “The Trend is Your Friend” and one needs at least 3 data points to make a trend. Sometimes I append “…until it ends.”
I spoke about The $70M Condo versus $52M Co-op Smackdown, Manhattan Style last week but there is another big sale to make headlines was scooped by Alexei Barrionuevo at the New York Times. Alexei corrected me on my Twitter feed that the price was “over” 90M.
It’s all quite breathtaking when you look at this sale in context of the entire market. However what sets the last 3 sales of $52.5M, $70M and $90M+ apart is they all exceed 10k square feet. The recent $88M sale was a nominal 6,744 square feet.
This record sale won’t close until the building construction is completed next year or so and I am not so sure it will still be a record at that point.