April Brings Market Report Madness
My college roommate and best man at my wedding organized a March Madness bracket after we graduated college 35 years ago (damn!) and it gradually expanded to include our children. For the first 20 years, I won the pool every 4± years, having invested hours of time watching college hoops on television. But in the latter half, I’ve been woefully bad, ending up about halfway (or worse) down the rankings. Three of my kids took over the winning so if you count that a family win, I’m doing fine – except for the part where my sons shame me for losing to them as they are ultra-competitive like me. If the time spent raising our boys was a reason for my lower bracket results, I think it’s been well worth it since they all turned out to be amazing young men.
For the past couple of weeks, I’ve been traveling a lot and I found myself returning to my hotel room late on Thursday evening knowing I had early meetings in the morning – and simply couldn’t write a Housing Note in the morning. So this oversized Housing Note is a combination of catch-up and new stuff. Some of this you may have seen in my twitter feed as a way to get it the information out there reasonably on time. Buckle up.
Manhattan Parking Spaces Average $55 Million per Acre
I hate to brag, but our data appeared in a recent issue of FarmLife magazine. Since the cost of land is a key factor in the housing market, they tell me it’s a big deal in farming. They converted the 2016 average sales price of a parking space of $265,000 to acreage or $55.47 million.
100 Years of New York Real Estate Is A Series of Tubes
A little over 5 years ago I wrote a blog post looking at Manhattan real estate values by decade for the century. It was a fun piece but I had no idea this one post would average about 1,000 views for more than 5 years. It continues to peak interest to this day – as a launch point for a recent WSJ article and another article by a French publication to come out next week. I still don’t really understand the internet beyond the series of tubes part. I do know that Manhattan real estate is a spectator sport like no other market.
Elliman Report: Sellers Travel Further to Meet the Buyers
Real estate company Douglas Elliman published our research in the Elliman Report: Manhattan Sales 1Q17, part of a report series I have authored for 23 years. We also wrote a submarket report on Northern Manhattan.
One of the topics of discussion has been the surge in the stock market since the election. We also see this point being made in the housing market. Real estate agent feedback speaks to pent-up demand accumulated before the election that was released after the election. We observed the same market pattern after the 2012 election so it doesn’t seem to be a factor of party or candidate. Manhattan resales jumped 7.7% year over year which was the highest increase in two years. We also continued to see the frequency of bidding wars drop to 12.6%, well below the 31% record set in 3Q15. Bloomberg charted our numbers.
There was a lot of interest in this particular report.
While the story on the report garnered a lackluster (sarcasm) 16th most read and emailed story worldwide on the Bloomberg terminals – the chart made it to the very prominent “chart of the hour” on the Bloomberg Terminals.
There were a lot of great articles on our market report shared in the links below. But wait, there’s a CNBC videoand more Bloomberg-iness to share…
I did a Bloomberg Radio segment on the report after its release with Denise Pelligrini – always a pleasure.
Also did a fun Bloomberg Radio segment (at 37:45) just before the report release (not specific to the report) with David Gura and Tom Keene in the Pierre Hotel among the eggs and sausage of the diners sitting immediately adjacent to us. And speaking of food, there was an interesting article that considered housing price trends and the downfall of Le Cirque, once a five-star restaurant. I’ve eaten there and in their 2 prior locations retaining great memories of the experiences.
And we have a bunch of updated charts on our site – here a few.
Swearing About Your Home Listing on TV
I’ve addressed the topic of swearing in a prior Housing Note. However when you learn why he did it, it’s kind of touching.
Speaking of Swearing, Why is StreetEasy/Zillow Being So Awful To Brokers?
This month’s Real Deal magazine in New York has some epic and fascinating reads on Streeteasy’s bad behavior by Kathy Clarke and E.B. Solomont. In a nutshell, Streeteasy thought it would be ethical to post a real estate agents listings but cover them with paid listings by “premier” agents who have nothing to do with the property but then hide the actual listing broker. Let me translate. The provider of the listing (content) to StreetEasy, doesn’t need to be associated with the listing unless they pay a fee. That’s arrogant and non-neutral to the transaction. I know they need a revenue stream but misleading their users of the identity of the listing agent is not the way to do it. The listing agent needs to be identified. One of the reasons StreetEasy has been so popular within the agent community is that the listings also provide an important stream of referrals. I’m being told across the agent community that these leads have become non-existent now.
This disaster isn’t just about the agents. If I was a buyer calling about a listing in Manhattan, I wouldn’t want to be connected with an agent in Ohio who paid to be on that page and is who I think represents the listing.
Get back to being ethical and respectful to your source of content, Streeteasy.
I’m surprised the brokerage firms haven’t done anything about this. REBNY did go to Albany and protest but I doubt if that will effect change. I’ve written about Streeteasy’s “Zillowification” in prior Housing Notes for their removal of popular and not so popular features under the “our analytics show there wasn’t much demand for this feature” excuse and used to make their service so cool.
Cost of Commuting in Westchester County, NY
High End Sales Prices Show Seller Capitulation
One of the key takeaways in this week’s Manhattan report was the idea that sellers were coming down to meet buyers at the market price. And with the extension of days on market, buyers were perfectly willing to wait. Another key concept for 2017, especially at the high end of the market, is that it isn’t 2014 anymore.
Here’s an example.
A Manhattan townhouse just sold for $79,500,000, the highest price for a townhouse ever recorded. I’ve been in the house before and it was just under 19,000 square feet so this sale price was about $4,200 per square foot.
However back in 2014, this sale was previously under contract for $90,000,000 by a foreign government and the sale fell through – not because of the price, but because of the publicity surrounding the sale. The current price represents an 11.7% drop from the prior agreed upon price. In other words, here is a record transaction that took a nearly 12% price cut from a prior contract price and the sale was still a record.
That shows you how much 2014 represented a high-end price boom not grounded in rational thinking. And now 3 years later, sellers are finally rethinking their understanding of value.
Oh, and that house we’ve been chronicling cut their asking price by $66 million.
Here’s a picture I took of the house a few years ago. It’s impressive.
Upcoming Speaking Events
I have a couple, but they are all client events. In the meantime…
April 6, 2017 This wasn’t upcoming – it was yesterday. I moderated the main panel for the Miami Herald’s RE:Engage The New Miami: Beyond the Beaches at the Sotheby’s Gallery in Manhattan. I had a terrific conversation with Howard Lorber (Chairman of Douglas Elliman Real Estate – 4th largest U.S. RE firm), Neisen Kasdin (Former Miami mayor, Managing Principal, Akerman Miami office) and Michael Stern (Chairman, JDS, New York and Miami developer).
There’s a test or more of the game I like to play that I’ve mentioned in the past. It’s called stupid or liar. It’s useful when supposedly smart people try to hard sell you on an issue with an out of context message that simply doesn’t make sense. This is exactly the game that the Appraisal Institute has been playing with their membership, I’m guessing because there is some sort of end game that promises revenue to them later on (I’m only guessing at this point). I’ll be expanding on this at REIC over the weekend but I need to make this point now.
An email has been making the rounds sent to Jim Amorin seeking answers to the way AI National has expended incredible energy and resources they don’t have to make sure appraisers have the right to do $25 evaluations. Frankly, it’s bizarre and I am embarassed for their top executives.
Most of AI membership and the appraisal industry remain dumbfounded by AI National’s efforts to enable appraisers to do $25 evaluations, but as Jim Amorin replied in the email when asked if the email could be shared – making sure he copied the inner circle that is responsible for the current state of AI National:
His response was:
…I assumed it would be shared. Nothing to hide
Cc: Jim Murrett email@example.com; Stephen Wagner firstname.lastname@example.org; SRobinson@appraisalinstitute.org email@example.com; Fred Grubbe firstname.lastname@example.org; Bill Godden email@example.com
Here is AI National’s boilerplate rationale that Jim Amorin sent to justify damaging the livelihoods of residential appraisers by confusing the marketplace and violating the public trust with $25 evaluation fees:
Under federal law, many mortgage loan transactions can be originated using evaluations instead of appraisals. Over the last several years a number of new services and processes have been introduced to the marketplace to attempt to provide clients with alternatives to traditional appraisals where their use is allowed. While these “alternative” valuation products are marketed under various names, the two primary types of products provided by real estate sales professionals are broker price opinions (BPOs) and comparative market analyses (CMAs). However, due to state appraiser licensing & certification laws the ability of a real estate broker or salesperson to render a BPO or a CMA is limited in many states to the real estate listing and sales process. Several states have enacted new laws to expand the ability for brokers and salespersons to render BPOs and CMAs. A few states (GA, IN and TN) have amended their state appraiser licensing laws to allow appraisers to perform evaluations without having to comply with USPAP. We are not making moves to get eval products more widely accepted. What we are doing is trying to level the playing filed so that appraisers can compete on the same footing as brokers and other non-appraisers if they chose to develop this line of work. Of course we are always suggesting that an appraisal is a better, more fully developed product performed by someone with years of experience and credentials. That said, evals and BPOs are being done everyday by unlicensed people and of course we do not think that is a good thing for the public trust.
To a passer-by, this explanation sounds very official and Jim is certainly brimming with confidence. Scott DiBiaso, the pit bull on this issue at the state level, in a separate email chain had the same confidence:
Yep. Just as Jim Amorin said. Evaluations are a fact of life that are allowed under federal law and used in the marketplace every day. Currently appraisers are precluded from providing evaluations in most states because of the requirements to comply with USPAP.
We have legislation pending in a number of states that would allow state-licensed and state-certified appraisers to perform a non-USPAP compliant evaluation when a USPAP-compliant product is not required by federal law.
We are not trying to expand the use of evaluations. Rather, we are trying to allow appraisers to be able to perform those services if they so choose.
Incidentally, pool cleaning and dog grooming are also allowed by licensed individuals.
Their responses are poorly reasoned and stunningly damaging to appraisers and the appraisal industry – particularly residential appraisers because it assumes that the public is just as informed as the appraisers and the AI National Board. As Scott indicated, AI National merely wants to give appraisers more choices for business opportunities, and if they want to do evaluations, they will have the right to do them rather than have non-appraisers do them.
But to do that, they directly violate the public trust because the public doesn’t understand the difference.
Let’s be clear. When an appraiser comes up with a value, it is an appraisal. It is not a box. It is not a fox. It is not a dog. It is not a log. It’s not even green eggs and ha. It is an appraisal. That is what an appraisal is to the consumer. This applies to real estate, art, personal property, etc. The fact that AI National advocates a “flip the switch” solution to turn USPAP on or off is simply wrong and frankly, stupid.
Here’s another way of looking at it:
Appraisal value = $500,000
or (assuming it was done accurately)
Evaluation value = $500,000
Appraisal value = $500,000
or (assuming it was wrong)
Evaluation value = $700,000 – borrower and lender are exposed to risk.
Appraisal value = $500,000
or (assuming it was wrong)
Evaluation value = $300,000 – borrower didn’t get the loan they needed and the lender lost a business opportunity.
The consumer HAS NO IDEA how either value in each scenario was estimated but one thing they do know – the number is a number and the person giving the number is an appraiser. This situation is a direct violation of the public trust. AI National is making the case that the consumer understands the nuance.
When I took my state license exam back in 1991, I was in the room with pool cleaners, dog groomers and barbers to take various licensing exams. Now let’s say that a brain surgeon can flip on and off their credentials when doing surgery. They are standing in the green surgical gown speaking to the patient beforehand. The patient has financial troubles, and the surgeon had previously offered to do the procedure cheaper – so the surgeon flips the switch and is no longer a doctor. He botches the surgery, and the patient sues the doctor because as far as they are concerned, they went through with the surgery because they knew that the doctor went to medical school and knew how to do the surgery. It wasn’t a plumber (no offense) that walked off the street to do the procedure at a cheaper rate than a surgeon. It was the same person. The public cannot distinguish between the two. AI National is stunningly wrong here yet they represent appraisers. Appraisers have a lot more training about valuation than someone walking in off the street doing evaluations.
This damages the appraisal profession’s image. It is clear that AI National leadership has little understanding of the residential appraisal industry and is wholly focused on the commercial world.
So back to the game “stupid or liar” that I mentioned earlier. Is AI National this stupid or are they lying (aka falsehood) because some other deal lays in waiting with REVAA, FNC or elsewhere. I just can’t accept that these guys, coupled with all their other offenses commit towards appraisers, are this disconnected?
Appraisal Add-on Fees Don’t All Go To The Appraiser
As I scramble to catch up after a few weeks off, I want to make sure to include this terrific article by columnist Kenneth R. Harney, a syndicated columnist who is one of the feew national journalists to take interest in the appraisal profession. It was prompted by appraiser Ryan Lundquist who when he isn’t “taking a knee” he writes great industry insights for the appraiser on the ground.
Voice of Appraisal with Phil Crawford has an App!
Phil’s new Voice of Appraiser app has a great interface, it’s easy to use and is a must have for every appraiser. Subscribe to premium access and support someone who is bringing transparency to our industry and is a practicing appraiser. Here is the latest episode.
Note the episode comment on YouTube: This nightmare is only as good as Trump travel ban. When it hits the courts everyone will be beaten like Rodney King at a police holiday party and cherry’s will be across the board of the E&O, Lenders, AMC’s slot machine; they will all look as dumb founded as Wolf Blitzer on Jeopardy, and have to go back to having professionals in the field. How stupid would you have to be to only talk to interns and never the doctor. Hey doc I came in for a tonsillectomy and you removed my kidney. Yeah, I am John Smith but I live on 123 Main not 123 First. I’m getting my lawyer and he has a lot of vowels in his name.
Updates from the Real Estate Industrial Complex
Here are some posts over at my forum known as the Real Estate Industrial Complex where I have been chronicling the unfortunate anti-membership activities of AI National.
Beware the Meaning of AI National’s 900 Million Media Hits (it is easier to relate to 19,000 searches)
On AI National’s website, there is a link from January that touts their ability to get media attention for their members as the largest U.S. trade organization for appraisers: VIDEO: Appraisal Institute Media Coverage Seen by Nearly 900 Million Between July and December. That’s a big number to the casual reader. My concern over the credibility of stats like this are the following issues. Consider these:
For mortgage work, the SRA brand is no longer a significant differentiator, and it is far less of a differentiator than it was a decade ago for non-mortgage work. This is a common refrain from members I interact with. As I have mentioned before, a number of MAIs I have spoken with say their designation is next, likely fading away in less than a decade. If banks continue to ease their reliance on it (I believe the bank practice violates FIRREA, doesn’t it?) overnight, AI National would collapse within a year. That blame falls squarely on AI National for failing to adequately brand the SRA and MAI designations. It also does and did a disservice to all current and newly former members who dutifully paid dues for years and worked hard to earn their designations.
But readers here largely understand that.
So I thought about the 900 million mega number and the trust issue that AI membership has with AI National leadership. They have completely abandoned transparency and their obligation to disclose important organizational plans such as how much they are spending on lobbying ($100k in 2016), the terms of the FNC deal (disclosed recently after a dozen years of denials), why Jim Amorin was allowed a second term when there are many other candidates, why the BOD and executive leaders have to swear allegiance to themselves rather than the membership, how many millions did AI National invest in their failed international recruitment effort, why they are flying Scott DiBiasio around the country to push for alternative standards with misleading information in state legislatures as well as desperately push $25 evaluations when it goes against the needs of their residential membership, to share what is AI National’s apparently close relationship with REVAA (the AMC trade association) and so on.
And readers here have read about many of these points here already.
but I digress…
So I performed a simple test using a ubiquitous Internet search engine….
349,000 Google Hits for Largest U.S. Appraisal Trade Group
I queried “Appraisal Institute” in quotes in the “All” category. This wasn’t intended to be compared to their 900 million results since that number is likely representative of lots of other media outlets. But again, there is a deep distrust issue with membership and AI National.
330,000 Google Hits for Appraisal Company I did the same search for my residential appraisal firm “Miller Samuel” which is not the largest U.S. appraisal trade group in the appraisal industry.
They beat my NYC appraisal firm by 5.79% or 19,000 hits.
About those hits…it’s ironic that AI is down to about 19,000 members per their website.
AI National Pushing Hard for Appraiser’s Right to Do $25 Evaluations With AI Standards, But Forgot What They Said in 2010
So why does AI National have Scott DiBiasio running around the country misleading legislators in states like Kansas, Florida and North Carolina on the membership’s dime? What is AI National’s end game? Based on past and recent actions, it seems highly unlikely that membership will ever be told.
On the AppraisalInstitute.org Website…
Guide Note 13 (2010): Performing Evaluations of Real Property Collateral for Lenders
A Brilliant Idea
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. They’ll keep your beverages cool while watching TV, you’ll wonder if snakes on a plane happen more than you realize and I’ll finally enjoy another version of Pink Floyd’s “Shine on You Crazy Diamond.”
See you next week.
Jonathan Miller, CRP, CRE
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Reads, Listens and Visuals I Enjoyed
- Jamie Dimon says there’s something shameful going on with the mortgage market [Business Insider]
- 2017 shaping up to be fastest housing market on record [CNBC]
- A Plague of Ice Cream Trucks [NY Times]
- As equity rises, many homeowners use refinancings to free up cash [Washington Post]
- NYC luxury condo owners want to play farmer [The Real Deal NY]
- Vornado’s Roth Sees Chance to ‘Feed on the Carnage’ in Retail [Bloomberg]
- ROSENBERG ON THE JOBS REPORT: ‘There is no possible way to put lipstick on this pig’ [Business Insider]
- What Impact Do Changing Interest Rates Have on Mortgage Demand? [Harvard JCHS]
- Geo-Graphics » RMB Globalization, Once “Unstoppable,” Heads Into Reverse [CFR]
- Fed Is Expected to Pare Investment Holdings, Officials Signal [NY Times]
- See how a 225-square-foot West Village attic became a stylish, functional micro apartment [Curbed NY]
- Century-Old Belnord Tests NYC Price Limits as New Towers Stumble [Bloomberg]
- Lord Taylors flagship in Manhattan may serve as platform for new highrise [MarketWatch]
- Restricting Airbnb won’t solve Washington DC’s affordable housing problem [Washington Examiner]
- South Florida condo developers chopping prices, shifting strategies to close deals [The Real Deal Miami]
- Top hedge funder says retail slump is a “forever trend” [The Real Deal NY]
- More And More People Have Been Leaving New York, Census Says [Gothamist]
- Cursing Man Becomes Viral Sensation After Posting Video Trying To Sell Home [CBS TV Philadelphia]
- Buying a Home Will Be Harder Than Ever This Spring [WSJ]
- Want That Apartment? You May Have to Bid for It [WSJ]
- How Gentrification Powers New York City’s Tourism Industry [Skift]
- Zoning Arrived 100 Years Ago. It Changed New York City Forever. [NY Times]
- Within Hours, Plans for a Quiet Corner of China Send Home Prices Soaring [NY Times]
- How Much Do Amenities Impact Your Rent? [Pricenomics]
- Land deal for North Vancouver development property binding, judge rules [NS News]
- A Real Estate Boom, Powered by Pot [NY Times]
- End Of An Era Or Simply a Moment In Time? [Lexology]
- $15.5 million condo sale in Palm Beach sets square-foot record [Shiny Sheet]
- Billionaire Slashes Asking Price For Beverly Hills Mega- Mansion By A Third, Or $66 Million [Zero Hedge]
- Colin Robertson: The Fed May Let Inflation Run Hot [Northern Trust]
- Financial Regulation in the Era of Donald Trump by Richard Christopher Whalen [SSRN]
- Good Banks, Bad Banks… [irablog]
My New Content, Research and Mentions
- New York’s Chelsea: bold new architecture adds to the picture [FT]
- Brooklyn Real Estate: First Quarter Shows a Strong Housing Market [Brownstoner]
- Moins obnubilée par l’avenir, New York se passionne pour son passé [AFP]
- 纽约布鲁克林和 皇后区房屋销售数量及价格均创记录-时政-美国中文网 [Sinovision]
- Manhattan landlord incentives hit second highest level on record in March: Elliman [BuzzBuzzHome]
- Η Ν. Υόρκη αφήνει την εμμονή με το μέλλον και παθιάζεται με το παρελθόν [Economy 365]
- Nueva York encara el futuro con pasión por el pasado [Terra]
- Vânzările de locuințe din Manhattan cresc din nou, după ce proprietarii au început să reducă prețurile [Profit.ro]
- These Luxury Hubs Offer Tempting, Asset-Beating Price Growth… At Least Short Term [Mansion Global]
- Manhattan’s Housing Market Benefited From Pent-Up Demand in Election Run-Up [Mansion Global]
- New York harnesses future with passion for the past [Yahoo.com]
- Vacation home sales plunged in 2016, as prices hit highest level in a decade [CNBC]
- Why Related pulled the plug on a new 298-unit luxury condo [Miami Herald]
- Fears mount over US construction boom [FT]
- Suburban New York Housing Market Turns Red Hot [WSJ]
- House Prices in Brooklyn Hit a Record High [Mansion Global]
- Landlord Sweeteners Remain Key in Manhattan’s Rental Market [Mansion Global]
- Brooklyn Home Sales Jump Most Since ’10 With Listings Near a Low [Bloomberg]
- Brooklyn and Queens home sales set records [Crains]
- Home sale prices in BK, Queens continue to soar in Q1 [The Real Deal NY]
- NYC resi rents remain flat in March: report [The Real Deal NY]
- NYC rentals face steep competition, but offer more perks [Curbed NY]
- L.A.’s housing costs make it harder for companies to keep workers here, survey finds [LA Times]
- Westchester to Manhattan Commute Time by Housing Cost [Matrix Blog]
- Inside the battle for StreetEasy’s soul [The Real Deal NY]
- Change is Constant: 100 Years of New York Real Estate [Matrix Blog]
- New Yorkers, Don’t Cry Over the One (Bedroom) That Got Away [WSJ]
- How an MLS slipped through NYC’s cracks [The Real Deal NY]
Appraisal Related Reads
- Is it okay to share a previous appraisal with the appraiser? [Sacramento Appraisal Blog]
- Appraiser Independence Critical to Veterans’ Home Loans, Appraisal Institute Tells Congress [Appraisal Institute]
- Attention NYS Appraisers: The NY Coalition of Appraiser Professionals (NY-Cap) is here. [Appraiser News]
- CoreLogic vs Appraisers: My Day as an Appraiser [Appraiserblogs]
- Appraisal Institute Urges Caution on Appraisal Thresholds [Appraisal Institute]
- EGRPRA Report to Congress [NAR]
- Are you paying unseen add-on fees for your appraisal? [Chicago Tribune]
- Performing Evaluations of Real Property Collateral for Lenders [Appraisal Institute]
- ALERT! – Florida Appraisal Bills – Amendments [Appraiser Active]
- CEO suggests appraisal industry comprised of ‘lone wolves’ [Valuation Review]
- 5 things to remember about the value of landscaping [Sacramento Appraisal Blog]
- How old can an appraisal comp be? [Birmingham Appraisal Blog]
- Legislation to Regulate AMC’s & Protect Consumers Opposed by REVAA [Appraiserblogs]
Extra Curricular Reads
- Median of medians [Wikipedia]
- With Uber Limping Around Wounded, Lyft Makes A Deal With Wall Street’s Angel Of Death [Dealbreaker]
- Meet the 840-Horsepower Dodge Challenger SRT Demon [Bloomberg]
- Ride-hailing apps may help to curb drunk driving [The Economist]
- Video Games Aren’t Addictive [NY Times]
- A Long-Sought Proof, Found and Almost Lost [Quanta Magazine]
- Jerks and the Start-Ups They Ruin [NY Times]
- How Uber Uses Psychological Tricks to Push Its Drivers’ Buttons [NY Times]
- Your Brain Wasn’t Built to Handle Reality [Bloomberg View]
- The New York Times vs. the ‘Great Firewall’ of China [NY Times]