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Charts
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[click to expand]
This infographic was part of an epic must-read Andrew Rice piece for New York Magazine called: The Red Hot Rubble of East New York which explores the gentrification frontier where investors and New York City’s efforts to create affordable housing are running headlong into each other.
As much as 10% of the property sales are flips and prices are up 150% over the past 2 years.
Tags: New York Magazine, Affordability, Gentrification, East New York, Bushwhack, flip, speculation
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Back when I was in college, a good friend of mine owned a large Michigan sod farm with his father – acres and acres of putting green quality sod. They wanted to upgrade their big tractor so I joined him on his visit to the local tractor dealership – International Harvester (my parents tell me I am a distant – really distant – relative of John Deere).
[Source: Hemmings]
The tractor they were looking at included air conditioning and a surround sound stereo system. It was impressive. The salesman said that if they bought the tractor that month the dealership would throw in an International Harvester truck.
My friend’s comment to me under his breath was something along the lines of “looks like we are actually buying the truck too.”
Jhoanna Robeledo’s New York Magazine piece on the guy who throws in a Tesla if you buy his condo talks about this marketing technique. Using a Tesla is buzz worthy as a well thought of brand – after all marketing is about getting eyeballs on the listing – but is it effective? Does this technique actual sell properties?
In my view throwing in such a large concession is a red flag signifying the property is over priced enough to cover the seller’s cost of the “gift.”
Econ 101: There is no such thing as a free lunch.
We’ve seen this marketing gimmick attempted with other cars such as a Prius, a Porsche, a Cadillac and Ferrari.
The funny thing is, you never read a follow-up article that shows how this marketing technique/gimmick was successful.
A buyer for the condo in Jhoanna’s article would have the financial wherewithal to buy their own Tesla and likely isn’t thinking about buying a car during their visit to the property.
We don’t see these extreme marketing gimmicks tried with low margin properties. “If I buy this $75,000 condo I get a free Tesla!” Of course not – the condo seller in this “Tesla” story is telegraphing to a potential buyer the listing is over priced.
Yes, in a typical suburban transaction, a seller may throw in a used lawnmower to close the sale, but this is not something that is usually promoted during the actual marketing of the property.
NEWSFLASH Buyers are a lot smarter than this Tesla-giving away seller is giving them given credit for.
Tags: Jhoanna Robledo, John Deere, farming, tractor, Tesla, Porsche, Ferrari, Prius, Cadillac
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Favorites
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In the spring of 2012 my floor level valuation methodology was illustrated in a great piece in New York Magazine by Jhoanna Robledo called “What Price Height and Light?. The graphic and accompanying descriptions provide incredible clarity to a fairly convoluted subject.
In the flurry of transitioning content to our new site over the past few months, I remember the actual moment when I deleted the original post for this topic by mistake and thought, “wow this is annoying but I can always go the Wayback Machine.” However, today someone asked me about the graphic and I couldn’t find my prior post on the Wayback Machine (but I found a bunch of cool stuff) so I am reposting this piece. I really LOVE the graphic that New York Magazine came up with.
The graphic is fairly self-explanatory.
Tags: New York Magazine, Jhoanna Robledo, Floor Level, 301 West 57th Street, view
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Public
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[click to open story]
For Jhoanna Robledo’s story: “Splitting the Rent, Fair and Square: Appraiser Jonathan Miller calculates how to divvy up the bill based on a typical two-bedroom, $3,200-a-month apartment.” in this week’s real estate feature piece in New York Magazine The Art of Roommating, I attempt to give some logic on how to fairly allocate the rent to 2 people sharing a 2-bedroom, 2-bath Brooklyn apartment.
Gotta love the first comment made on the web site:
…or if you’re friends you could split it evenly. just saying.
Splitting the Rent, Fair and Square [New York Magazine]
Tags: New York Magazine, Jhoanna Robledo, Floor Plan
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A few weeks ago I provided some logic to Jhoanna Robledo at New York Magazine about valuing a fireplace. She’s just as interested in quantifying amenities as I am and has written some fun pieces on valuing various amenities using my logic. Floor level. Outdoor space. Light and Views.
She distilled down the ±90 minutes of discussion on the hot topic…and remember when it comes to valuation logic, one size doesn’t fit all. My approach came from 26 years of valuing thousands of co-ops, condos and townhouses in NYC but the same logic could very well apply to other markets.
In a study of Manhattan sales that appraiser Jonathan Miller made with researchers from NYU’s Furman Center for Real Estate and Urban Policy, apartments with fireplaces cost an average of about 10 percent more than those without. (The difference was 11.4 percent in condos, 9.7 in co-ops.) But the fireplace is “part of a suite of amenities” not easily parsed from other prewar features like high ceilings. Miller estimates that the fireplace itself adds 2 to 5 percent to the price. That’s a fairly wide range, depending majorly on placement: A mantel in the center of the living room is worth a lot more than if it’s in a back bedroom. And if the fireplace doesn’t work, or the flue needs more than a cosmetic touch-up? That cuts the value by half.
Think yule log.
Tags: New York Magazine, Jhoanna Robledo
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Favorites
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Jhoanna Robledo over at New York Magazine squeezes light from my proverbial turnip and the result is a very cool graphic on one way to value light in an apartment in her piece “What’s the Price of Light?” The topic of view have been recently explored and floor level.
Light is perhaps the most subjective of the view-floor level-light trio but this is the logic our firm has used for years (based on the “paired sales” theory that isn’t very practical in an appraiser’s daily life) but I feel it’s a good starting point, and of course it depends on the nuances of each situation.
Tags: New York Magazine, Light, Jhoanna Robledo
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Reports
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Knight Frank released their new report exploring the floor level premium in London’s high-rise residential developments with the coolest report name ever: Knight Frank Tall Towers Report 2012
While NYC has a taller residential housing stock than London but the premium per floor is similar. London shows a 1.5% increase in value per floor. My rule of thumb for Manhattan has been 1% to 1.5%, but closer to 1%. However we treat floor level as a different amenity than view and that’s probably the reason for the slightly larger adjustment in London. What’s particularly of interest is how much more the per floor cost of development is for higher floors:
Net to gross area ratios in tower schemes are lower, since the percentage of space taken up by the cores and service provision areas are comparatively high. This means that the effective revenue-generating 43% Uplift in construction costs per sq ft between the 10th and 50th floor.
I’ve explored the subject myself in New York Magazine and The Real Deal Magazine.
Tall Towers Report 2012 [Knight Frank]
Manhattan Values By Floor Level [Matrix/New York Magazine]
The cost of a view [The Real Deal]
Tags: The Real Deal, New York Magazine, London
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Since my company is located in neighborhood formerly known as “SoPo” (South of Power) I thought I’d post the amazing New York Magazine cover.
Tags: Hurricane, New York Magazine, Superstorm Sandy, SoPo
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Infographics
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In this week’s issue of New York Magazine, Jhoanna Robledo goes all out on the topic of outdoor space in city residences in “1/100th of an Acre of Heaven“. She asked me how our appraisal firm approaches the valuation of outdoor space.
The outcome of our conversation was this cool tape measure-like graphic:
[click to expand to – huge – widen your browser window.]
Page layout:
[click to expand]
And it brings to mind one of the most read posts on Matrix: Understanding The Value of Manhattan Apartment Outdoor Space where I break down the background and logic for the valuation of outdoor space. I point real estate agents to this post nearly every day.
Hypothetical examples of our valuation logic is displayed in these 2 crude sketches [pdf] with hypothetical scenarios I submitted for this NY Mag piece that weren’t used (hey, I never took art in school, EVER). It’s part of my attempt to compartmentalize amenities of properties to derive a reasonable value relationship with the basic property.
First hypothetical scenario sketch – i.e. a Brownstone garden apartment.
Second hypothetical scenario sketch – i.e. a studio apartment with an oversized yard.
1/100th of an Acre of Heaven [New York Magazine]
Terra Logic: Understanding The Value of Manhattan Apartment Outdoor Space [Matrix]
Tags: New York Magazine, Jhoanna Robledo
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Source: Google Earth
Back in 2005, I did a fun exercise for New York Magazine – I was asked to value Central Park (just for fun) in about 3 minutes. It was within an article that ranked the reasons to love New York and was item number 3.
The New York Observer recently asked me to update this calculation using the same methodology (in 3 minutes and just for fun) and I came up with $363,538,692,000 which is a far cry from $528,783,552,000. The same disclaimers apply as the original effort, seriously.
To put this in perspective, about 9,000 Detroit properties were auctioned (hat tip WalletPop) with opening bids of $500. Only 20% received bids. The total land area of these properties was equivalent to Central Park. If all 9,000 properties received a bid of $500 (which is probably not far off if you assume the 20% that received bids were over $500 and the rest $0), that represents a total value of $4,500,000.
Thats’s not much of a value and these properties also pull down values around them – plus they are off the tax roll placing more financial burden on existing properties.
Not a good sign
Most of the bidders were investors and vacant land in Detroit equals the entire footprint of Boston.
As much as I love my time spent in Michigan and my relatives there, I believe this is called an economic failure spiral.
Tags: Central Park, Detroit, New York Observer
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Public
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Well this weekend was pretty decent:
Not much accomplished if measured in productivity, yet it was still a good weekend (even though my kids didn’t like the chocolate pudding).
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There is an absolutely spot-on article in the New York Magazine called Triple-A Failure: The Ratings Game
I highly recommend that everyone read the article from start to finish.
In 1996, Thomas Friedman, the New York Times columnist, remarked on “The NewsHour With Jim Lehrer” that there were two superpowers in the world — the United States and Moody’s bond-rating service
Essentially in their quest for profits, the agencies’ relationship with Wall Street changed from a mysterious and powerful ratings entity to a firm working closely with their clients.
Rating agencies (Moody’s, S&P, Fitch are the biggies) sought fees from investment banks to rate securities. If the ratings were too conservative, the bank could simply go to one of the other agencies to get the rating they wanted to. The agencies were essentially behind the curve in understanding the sophisticated new products being introduced at a rapid rate.
A few years ago, as I was getting more and more frustrated at the lack of neutrality in the mortgage lending process and the shaft given to good appraisers in the form of pressure, even an outsider like me could see that something was wrong with the relationship. The system can’t allow a ratings agency to be at the mercy of fee driven investment banks. The proverbial hand in the cookie jar.
Rating agencies were the enabler of securitization much like appraisers were the enabler of shady lending practices. Search hard enough and long enough and anyone can find someone to make the deal work.
By providing the mortgage industry with an entree to Wall Street, the agencies also transformed what had been among the sleepiest corners of finance. No longer did mortgage banks have to wait 10 or 20 or 30 years to get their money back from homeowners. Now they sold their loans into securitized pools and — their capital thus replenished — wrote new loans at a much quicker pace.
Mortgage volume surged; in 2006, it topped $2.5 trillion. Also, many more mortgages were issued to risky subprime borrowers. Almost all of those subprime loans ended up in securitized pools; indeed, the reason banks were willing to issue so many risky loans is that they could fob them off on Wall Street.
The search for new profits and their close relationship with Wall Street placed them in a non-neutral position yet investors were relying on the ratings.
Thus the agencies became the de facto watchdog over the mortgage industry. In a practical sense, it was Moody’s and Standard & Poor’s that set the credit standards that determined which loans Wall Street could repackage and, ultimately, which borrowers would qualify. Effectively, they did the job that was expected of banks and government regulators. And today, they are a central culprit in the mortgage bust, in which the total loss has been projected at $250 billion and possibly much more.
The agencies have a very big credibility problem right now with investors. It’s all about the lack of activity in the credit markets right now.
It’s certainly telling that the three ratings agencies and four major mortgage related associations took the position with Congress that the current administration’s suggestions for fixing the problem were flawed. The Real Estate Roundtable, Mortgage Bankers Association, Commercial Mortgage Securities Association and the National Association of Realtors basically took the position not to do anything but teach investors how to, well…invest.
Are they kidding?
The credit markets are currently frozen because of the lack of neutrality in the rating and mortgage process, not because investors are ignorant. Next thing we will start hearing is that the agencies and associations will simply self-police.
Fear of change, living in denial.
Over rated.
Here’s something that’s not overrated: Joe’s Gizzard City, my favorite college hangout (note the Michigan State jersey).
Tags: Sub-Prime, NAR, National Association of Realtors
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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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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