I’m a regular listener to the Slate Money podcast so I was thrilled to be invited to participate.
This week, Felix Salmon, Emily Peck, and Elizabeth Spiers are joined by housing market analyst and real estate appraiser Jonathan Miller to answer all their burning real estate questions including what’s going on with mortgage rates, how do new luxury buildings affect prices, and why is rent so damn high?
Tags: Felix Salmon, Emily Peck, Elizabeth Spiers, Slate+, Slate Money
This topic was explored in last Friday’s Housing Notes.
In order to understand what is happening now, we need to ween ourselves off of what happened before this crisis and focus on finding data exclusive to the post-COVID-19 era. In Manhattan, that data set is not yet apparent because we are in nearly a total market shut down but it is evident elsewhere to a limited degree. From my perspective, the demarcation line for the onset of the crisis is where market participants would have to be living in a cave on a desert island to be unaware of the sharp pivot in market sentiment.
March 15, 2020
I believe that date is March 15th which is the date of the Federal Reserve federal funds rate cut to zero and was their second cut in less than two weeks.
March 11, 2020
My friend and California appraiser Ryan Lundquist proclaimed March 11th which was the date Tom Hanks announced he and his wife had contracted COVID-19. Phil Crawford of Voice of Appraisal said the demarcation line was March 5, 2020 dubbing it “data point zero” and I had originally said the demarcation line was March 3, 2020, on the day of the 0.5% rate cut in March.
I was talking about this difference in these dates with a friend, Chicagoan, and RAC appraiser Michael Hobbs who brilliantly dubbed this four-day window from March 11 to March 15 as: “From Hanks To Banks.”
And if you do the math, the median and average date of March 11 and March 15 is literally Friday the 13th so what more confirmation of a demarcation line do you need?
Whatever your specific local demarcation line is, use it to keep the data for these two market periods separate.
Tags: COVID-19, Coronavirus, Demarcation Line, Hanks to Banks
Cheddar TV reached out to me on March 11th as I was 4 days into my self-quarantine and my voice sounded quite scary. Aside from bad lighting and a red face, the discussion was long-form in nature covering low mortgage rates, which is why I so appreciate Cheddar’s format.
March 11 was soooo long ago!
Using Skype (which has been improved since Microsoft acquired it to be less of a horror show) I am able to blur out the background so you don’t get distracted by my prized autographed drum head from Lynyrd Skynrd, my 2002 March Madness pool victory plaque and my certificate for passing a 1978 Italian Cooking class in my Dad’s former cooking school in the DMV.
Tags: Cheddar, mortgage rates
Coming to a theatre near you in December…
Aside from playing my favorite Led Zeppelin song “When the Levee Breaks” and being based on one of my favorite books about the housing bust/financial crisis “The Big Short” that was written by one of my favorite authors Michael Lewis (Blind Side, Flash Boys, Moneyball, Liar’s Poker, The New New Thing, etc.) that includes pretty much all my favorite actors – it’s a freakin’ incredible story.
Tags: Michael Lewis, Too Big To Fail, housing bubble, The Big Short, Led Zeppelin
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Radio
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I was set to speak in studio with Tom Keene and Pimm Fox but had a commuting snafu and had to call in. It was a great opportunity to show a picture of me as a 15 year old. Love these guys. The best. The Bloomberg Television/Radio are clearly pros and handled the last minute change with ease.
We talked about lots of housing markets and the distortion being created by credit conditions.
Tags: Tom Keene, Pimm Fox, Bloomberg TV, Bloomberg Surveillance, Bloomberg Radio, fundamentals, healthy
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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
A few months ago I was approached by film students Clàudia Prat & Eric French to speak to the housing market as part of a larger project called “What is Home?” series.
I’m a big fan of documentaries and this is worth watching.
Their effort was called: NYC Home Shuffle (5:51 minutes):
Part of a global trend, New York City’s homes become a commodity: an investment instead of a right. Yet a global movement responds.
By Clàudia Prat & Eric French
whatishome.nyc // May 2015
NYC Home Shuffle from Studio 20 on Vimeo.
Tags: documentary, Clàudia Prat & Eric French
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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.
Wlliam Black, a former bank regulator, made a TED Talk last fall that I wish I had made (but I couldn’t be as eloquent although I have a cooler tie). It should be required viewing by anyone who is connected with the housing industry.
Black’s presentation lays out the financial crisis in the proper context. He provides the recipe for disaster for all to see and it is NOT complicated to understand. Change the perverse incentives and a lot of this goes away. So many opportunities to avoid this crisis were missed.
And this is the first time I’ve heard someone talk about the unrelenting pressure that banks (and mortgage brokers) placed on appraisers, essentially forcing our industry to either make the number of get out of town. By 2007, 90% of appraisers said they were coerced by banks to make the number. That seems low to me. It had to be 100% or else those 10% of appraisers were living in a cave.
I’ll be returning to this video periodically for the foreseeable future as a reminder.
Tags: Alan Greenspan, Ben Bernanke, OCC, TED, OTS, William Black, Regulators
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Ian Shepherdson, chief economist at Pantheon Macroeconomics as a guest on Bloomberg Television points out some key issues relating to housing and the economy. It’s a great quick overview on how housing fits into the economic recovery equation. So much for a “soft handoff,” the idea of the housing moving from dependency on low mortgage rate to thriving on a stronger economy. The ideas being projected here are that the economy may improve without housing’s help.
“It is not quite as important as the fed seems to think.” “I sometimes say the fed is almost as obsessed with housing as the labor market.”
“I’m not convinced it is absolutely essential that housing keeps charging upwards in order for the rest of the economy to grow.”
“It’s a relatively small share of gdp now in terms of housing construction and even when you add in the retail stuff related to housing.”
“It is important to sentiment.”
“They were ready to dismiss it as something temporary and clearly the worries are more deeper.”
“Mortgage rates, if they rise further as the economy picks up, housing will be under further pressure.”
“It is a paradox that the stronger the rest of the economy gets and the more worried the market gets about the fed raising rates, the higher 10 year yields will go and mortgage rates and potentially the housing market will get weaker.”
“This is a three or four year process to get back to normal.”
“Housing unfortunately will be a necessary casualty.”
“My guess is that that’s the way the fed’s thinking evolves great if we see the economy strengthening brother that housing is weakening, i think they will have to live with that and stand up and say it’s a price we have to pay in order to get the rest of the economy moving.”
Tags: Tom Keene, Bloomberg TV, Scarlet Fu, Bloomberg Surveillance, Adam Johnson, Ian Shepherdson
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NAR released their pending home sale index today and the news was not unexpected. US home sales volume has slowed since last spring’s taper miscue by the fed which caused mortgage rates to jump. If you look at the May surge in pending sales, sales volume, seasonally speaking (comparing year over year) has fallen 10.2% (unadjusted).
The introduction of QM earlier in the year probably doesn’t help volume levels, but I’m not really convinced that the housing recovery is actually stalling. It seems more like sales levels are settling to more sustainable levels. And as sales go, so goes the insane price gains seen in the national reports.
Tags: Pending Home Sale Index, QM, Dodd-Frank, PHSI, NAR, National Association of Realtors
The OCC and an alphabet soup of 5 additional regulators: FDIC, CFPB, FHFA, NCUA and the Federal Reserve issued a joint press release that if adopted, takes a small step forward in the regulation of appraisal management companies, who are largely responsible for the collapse of valuation quality since the credit crunch began.
To many, this action is long overdue. Appraisal management companies control the vast majority all mortgage appraisals in the US, having been legitimized by HVCC back in May 2009. I’ve burned a lot of calories over the past several years pointing out the problems with the AMC industry so admittedly it is nice to see them getting attention. The fact that these institutions are not licensed to do business at a statewide level but the appraisers who provide the valuation expertise they manage is inconsistent at best.
Still, the recognition of this regulatory glitch probably won’t have a significant impact on appraisal quality provided by AMCs. As my friend Joe Palumbo maintains, is like fool’s gold.
I think proposal is at least a starting point.
A couple of highlights – regulators would:
Housingwire has a good recap of the proposed regulations and so does the Wall Street Journal provides a nice overview (I gave them background for the piece).
The proposal by the Office of the Comptroller of the Currency, Federal Reserve and other regulators mandates that appraisal-management companies hired by federally regulated banks use only state-licensed appraisers with “the requisite education, expertise, and experience necessary” to complete appraisals competently.
Moral hazard There is no significant financial incentive for lenders to stop accepting the generally poor quality appraisals the AMC industry presents them daily. The hope is that the additional regulatory largess the AMCs have to confront will force the issue with lenders simply because the AMCs will have to raise their fees. Without a real “value-add” to the banks other than cost control and fast turn times, the lack of quality for a large swath of AMCs may no longer be overlooked by banks. Yes I can dream.
Residential appraisers, mostly 1-2 person shops, have largely been left without a voice and the bigger financial institutions have lobbied financial reform overtop of us without the regulators truly understanding what our role should to be to protect the taxpayer from excessive risk.
Anumber of smart appraisers I know have created a petition whose sole purpose is the get the attention of the CSFB to address the issue of “customary and reasonable” fees. Our industry has no other way to reach the regulators or the ability to lobby our views in Washington. I hope they are listening.
Tags: FHFA, Appraisal Management Companies, FDIC, AMC, Petition, OCC, CFPB, NCUA, Press Release
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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.
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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