I joined Dennis Scully again on The Business of Home podcast: The Thursday Show: A real estate check-in with Jonathan Miller, why Gen Z loves dupes and more. A lot has happened since our previous conversation back in July 2022. Other than having quality issues with my microphone, I really enjoyed the conversation. It starts at the 25:22 mark.
[click on the image to play]
Tags: Podcast, Business of Home Podcast, Dennis Scully, Design, Interior Decorator
[NPR]
Well, it has been an odd couple of weeks brought to you by the global pandemic known as COVID-19 or the Coronavirus. We’ve been self-quarantined in our house for 1.5 weeks with many more weeks to go. I might have to refer to this pandemic as “Cabin Fever” although there are many people that don’t have the benefit of working at home, including one of my sons, who is a police officer.
With falling mortgage rates of the past year or so, many in the real estate community thought:
“oh my goodness, refi’s and housing sales are going to boom with these low rates, and any Fed rate cuts will offset the damage of a plunging stock market and the economic damage of a pandemic.”
But please remember this:
Falling mortgage rates are not a gift.
Rates are cut to stimulate the economy, to offset something terrible that has happened.
Rates have been falling for the past year as the Federal Reserve likely increased rates in the recent past to be able to have something to cut when the inevitable recession arrives. Because of the damage to the U.S. economy from the trade war, the Fed has been forced to act earlier to keep the economy from dropping into a recession.
Since March began, the Federal Reserve brought the federal funds rate down to zero in the first half of March with two massive cuts. With the first cut of 0.5% on March 3, consumers became fully aware that something significant was wrong, and it was associated with the Coronavirus (and oil prices). And surprising to many, national 30-year mortgage rates rose.
Mortgage lenders continue to enjoy the large spread instead of lowering mortgage rates substantially because of layoff decisions made over the past year as refi volume cooled. Most banks cannot take full advantage of the rate cut opportunity because they do not have the capacity.
Since the 2020 DJIA peak of February 12, 2020, of 29,551.42, the market has fallen 28.13% to 21,237.88 as of the late afternoon, an insanely large decline.
However, all of these housing-related workers such as appraisers and agents, are starting to see that market conditions do not include the gift that it will be “business as usual.” They and their colleagues are becoming fearful of their own personal safety and the safety of their families.
In light of this slowdown, some real estate agents have suggested that market times be modified to cast a better light on listings that will languish due to the virus. This type of action is precisely what should not be done. In a global pandemic or worldwide catastrophic event, housing market stats will be internally adjusted by consumers to factor the event into the equation. Cherry-picking stat solutions will breed distrust between agents and consumers.
Open houses as a marketing tool fell 38% in Manhattan which is quite astounding but shows how quickly “personal safety” is becoming front and center with both agents and market participants. The outbreak is clearly expanding.
But now, those real estate agents are seeing home sellers and home buyers change their minds about letting strangers walk through their homes all day, and the “nexus between fear and greed” has shifted to fear.
Therefore the spring market will likely be underwhelming in NYC if downright bad and pushed forward into the future with a possible release of pent-up demand at some unknown future date. Perhaps the same will apply to many regions across the U.S. this spring.
Now wash your hands.
Tags: flattening the curve, pandemic, COVID-19, Coronavirus
I’m moderating a great panel in Stamford, CT for the Fairfield/Westchester Chapter of the Real Estate Finance Association (REFA) on October 25, 2016 titled:
Residential Real Estate has been one of the bright spots in the local economy in recent years. The single family market continues to post record sales volumes and the growth of the multi-family market in Fairfield County has been dramatic. However, there is mount- ing concern about perceived over-building at the top end of the luxury single family and multi-family markets. Where is the demand coming from? Will it continue? What prod- uct do people want? Where are we headed? We look forward to a lively and informative program.
The response so far has been heavy – click here for more information or to sign up.
Tags: REFA, Fairfield/Westchester Chapter of REFA, Amy Kane, William Raveis Real Estate, Gregory Belew, Alliance Residential Company, Jeff Dunne, CBRE, Real Estate Finance Association
A few days ago I was interviewed by Christopher Eshleman at the Port Authority of New York & New Jersey. He works for Alexander Heil who is the chief economist and publishes a lot of great regional economic insights. Although this is a new effort, this was their first podcast conducted outside of the institution so I am deeply appreciative of the opportunity to share my views.
Christopher is a sharp guy and kept the conversation interesting (I even inserted a Jerry Seinfeld joke). It’s about a half an hour.
Check it out.
Tags: Podcast, Christopher Eshleman, Alexander Heil, transportation, Port Authority of New York & New Jersey
|
Crain’s 2015 annual analysis of a wide range of NYC data is worth a look. Get to know the biggest city in the U.S.
Top 10 Manhattan Residential Tallest Towers
Affordable Housing Units Built
DeBlasio administrations meets it’s annual goal of building 8,000 annual affordable housing units – the highest total ever tracked (began in 2008).
Tags: Super Talls, Hudson Yards
|
The New York Fed just put out an economic recap of the U.S. economy that is chock full of charts and data.
NYC employment growth is strong…
But nationally, unemployment is falling but those being counted on the roles are falling…
Housing starts have ramped up but most is multi-family – driven by freakin’ high rents.
New single family home sales are lagging existing home sales (see chart above)…
And we wonder why the economy doesn’t feels so good…anemic wage growth…
Tags: Existing Home Sales, New Home Sales, Housing Starts, Employment, fundamentals, Unemployment, Average Hourly Earnings
Cracks in the “sharing economy” are forming.
As reported on Airbnb — and real estate big shots — where it hurts” Inman News…
The ad says that nearly half of the revenue from the site goes to “real estate moguls,” a figure taken from the New York State Office of the Attorney General’s “Airbnb in the City” report from October 2014.
Tags: video, Airbnb, sharing economy, New York State Office of the Attorney General
|
Charts
|
Read my latest Bloomberg View column Costly City Housing Is an Economic Drag.
Here’s an excerpt…
It’s tough living in a big city — the people, the traffic, the noise. Oh, and did we mention the cost of housing? Contrary to conventional wisdom, high and rising housing costs in the U.S.’s biggest cities are not ideal for an economic recovery. Just the opposite: When housing costs take a big bite out of incomes, it diverts money that could be spent on local goods and services or invested in new businesses that stimulate growth…
My Bloomberg View Column Directory
My Bloomberg View RSS feed.
Tags: Harvard JCHS, U.S. Census, economic recovery, S&P/Case-Shiller 20-City index, tight credit, National Association of Realtors
|
Here’s one way to look at it.
Tags: video, wealth, rich, inequality
|
According the Federal Reserve Bank of New York, the NYC economy is crushing it, growing far faster than the states of New York and New Jersey.
They are using an Index of Coincident Economic Indicators:
A coincident index is a single summary statistic that tracks the current state of the economy. The index is computed from a number of data series that move systematically with overall economic conditions.
|
[Source: WSJ]
I really like the way this chart illustrates the 20 year decline in the homeownership rate. A few thoughts on what it shows:
Under 35 – Lowest in 20 years – record student debt and tepid economy plays a significant role in falling rate.
35-44 – most volatile, has overcorrected – large gain during credit boom and fell well below 1994 levels.
45-54 – fell below 1994 levels but didn’t rise as much during credit housing boom.
55-60 – higher than 45-54 group but followed a similar arc – fell below 1994 levels but didn’t rise as much during credit housing boom.
65 and above – only category to finish higher than 1994 levels – not heavily influenced by credit bubble.
Overall – is currently higher than 1994 levels. Coming down from artificial credit bubble high – probably won’t stop declining until credit begins to normalize.
Tags: homeownership, Josh Mitchell
|
[click to open report]
I like to say that we never had a housing bubble in the US. It was a credit bubble with a housing as a symptom. The same credit bubble logic applies to college costs which have run unchecked well past the housing bubble “pop” in 2006 and the great recession. Lately there has been discussion on the student debt crisis by economists and financial journalists that the phenomenon is overhyped – which prompted this post as a college tuition paying parent.
College costs for a 4 year degree are growing at a rate of about 5%, well above inflation. Access to credit has remained easy for students and parents to obtain so there are no real checks and balances (no pun intended) on college costs. Demand is high as students and their parents often fight to gain admission and can worry about paying off the debt later.
It’s been widely discussed that anemic household formation is holding back the housing market and the economy from fully recovering, that student debt has been the key culprit in holding back young people from striking out on their own, resigned to live at home until their finances get better. Speaking as a parent who just finished sending a son through college with more on the way, it’s a hard reality for parents too.
I was standing on the platform the other day waiting for a delayed commuter train (hey, it’s Metro North, who else) and struck up a conversation with a woman who was lamenting about all the debt she and her husband incurred sending their 4 kids to Ivy League schools – only for them to be unable to find a job in their chosen profession or find one that pays a living wage – these factors are often mutually exclusive.
Parents that borrow heavily to finance their children’s education is the sort of thing that is missed in economic data because that debt is in some other form of a home equity loan or other debt.
“Parents are facing an economic crisis because they are borrowing too much for college,” says Rick Darvis, executive director of the National Institute of Certified College Planners. “They’re sacrificing their current lifestyle and robbing their future retirement.” The rising levels of parental debt could ripple through the rest of the economy. By the time parents are in their 50s and 60s, they should be saving for retirement instead of taking on new liabilities, says Joseph S. Messinger, a certified college planner and president of Capstone Wealth Partners in Columbus, Ohio.
We are seeing financial coping strategies emerge like going to a community college for 2 years to save money and transferring to a better school for the remainder – or questioning the value of college all together. The cost/benefit of a college degree is being called into question because of the combination of spiraling costs and tepid job opportunities for many in the current economy.
The baby boomers have taken on significant debt to finance their children’s education. Sure the average student debt is $25k to $29K, the cost of a new or used car, but I contend a large portion of college debt is in the shadows born by the parents.
The average cost for a 4-year degree is about $23K (blended cost of private and public) which suggests that the debt would only cover about 80% of the cost of first year. This would imply that more than 3/4 of the cost of a 4-year degree was paid in cash through savings and working during the four year period. That doesn’t seem plausible to me – actually it seems ludicrous. Parents have to be paying cash or taking on an inordinate amount of debt to pay for the other 75% of the cost that doesn’t show up in the school related debt numbers. How common is it to see parents in our helicopter nanny state shoulder little to no financial burden for their children’s college educations? No matter the demographics, I contend it’s quite rare.
And how does this impact the US housing market recovery?
The tepid economy has exposed the problem – and the heavy debt loads could provide a drag on housing for an extended period of time.
Tags: college tuition, student debt, household formation
If you haven't already, sign up for
'Housing Notes' to receive weekly insights and research.
Jonathan Miller is President and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm he co-founded in 1986. He is a state-certified real estate appraiser in New York and Connecticut, performing court testimony as an expert witness in various local, state, and federal courts. He holds the Counselors of Real Estate (CRE) designation, is an Appraiser “A” Member of the Real Estate Board of New York, and is a member of RAC.
Learn More...
You'll be able to choose from an array of robust housing metrics compiled using research developed during the preparation of our market report series. Expanded significantly from prior offerings, use this resource to build charts and custom data tables or leverage your own information for more powerful research and presentations.
In the meantime, here is a small sample of the aggregated data we will provide.
Forbes ('20-)
Appraisersblogs ('17-)
'Three Cents Worth' column 3CW ('05-'16)
When Curbed was acquired by Vox, my eleven years of 3CW chart art and column links were broken on Curbed NY, Curbed DC, Curbed Miami, Curbed Hamptons, Curbed LA, and Curbed Ski.
Many of my 3CW charts can be found here:
Curbed 3CW Full Chart Archive
Op-ed column ('14-'15)
'Economic Spotlight column ('03-'09)
New York Times experiment ('08-09')
Huffington Post (09')
Favorite "How to Value" Posts
Recent Comments on Matrix