Taxing Our Housing Patience When Pigs Fly
Because I am always confident that human beings are capable of screwing things up…eventually, I believe we should always try to right our wrongs…even if it involved blowing things up. I saw at least one Detroit Lions game there when I was in college so I was trying to imagine what the ride in the seat would be like after the second explosion:
But we can’t overlook things we don’t screw up. I spent a lot of time looking at this album in college when I wasn’t in stadiums that were going to be blown up in the future. The Battersea Powerstation where the iconic pig flew overhead has been converted into a cultural center.
This Pink Floyd album confirmed to me long ago that pigs can fly. “When pigs fly” is one of those phrases that applied to the mortgage interest deduction as part of the “American Dream” analogy. In other words, it is sacred and will never be touched. Wrong. I’ll discuss later. Now that it the “pigs” phrase is no longer an accurate inference in our literary lexicon, here’s another: “When trains do stunts” is the new “When pigs fly.”
Taxes, taxes, taxes, blah, blah, blah
I’ll be posting my views on the tax bill over on my Matrix Blog this weekend. Lots of moving parts made me rethink some of my views I established earlier this week. I’ll include in next week’s Housing Notes and if you are on my email list, you get it this weekend. Doing 2 TV appearances on Tuesday on the topic as well. Fun!
What’s 3 times $40 million at 432 Park?
While the Manhattan super lux market remains soft, we continue to see random sales occur after the price has been adjusted to current conditions to show there is still life in it. We’ve seen this in Greenwich Connecticut this fall. Now Mansion Global reports three half floor units on the 92nd and 93rd floors (96 is the top floor) that went to contract seemingly at the same time asking a combined $120,750,000. The actual contract prices are not available, nor is confirmation whether these three sales were made with a single buyer. This project was one of the first high profile developments to work with buyers as the market cooled in 2014. Like I have been saying for 3 years, the buyers remain in the market but the price needs to reflect 2017.
My appraisal firm, self-included, has inspected a number of high floor units in this building and the views are incredible.
What is it about the 1970s that shaped New York City?
A few years ago I wrote a piece for Elliman Magazine that was covered in Curbed that tracked 100 years of New York real estate. This was more of an anecdotal effort since I searched the New York Times archives for real estate stories for each decade to extract what rental and sales prices were going for.
Here was the 2011 article I wrote:
You can see a massive course correction in the 1970s.
I think it had a lot to do with land use policy. A reader chimed in, sharing his thoughts on an article he wrote a few years ago about LA and a recommendation of this book, which I just bought: Zoning Rules!: The Economics of Land Use Regulation. My reader writes: Fischel argues that high inflation and weak growth (stagflation) cause property owners to work harder to increase property values through zoning limits..
This topic has been widely covered by noted researchers like Ed Glaeser who coauthored this paper in 2003 and included some of my data: Why is Manhattan So Expensive? Regulation and the Rise in House Prices.
When I think of New York City in the 1970s, I was growing up in Washington, D.C. thinking all of New York was like the movie Fort Apache, the Bronx. It makes one appreciate how far (and how much more expensive) New York City has come.
Exploring the Malaise at the Upper End of the Manhattan Housing Market
My friend and appraiser colleague Larry Sicular, MAI, RM of Sicular & Associates, who is also a broker at BHS, wrote an article on the softness at the Manhattan high end: Exploring the Malaise at the Upper End of the Manhattan Housing Market. He uses our data to tell the story – here are just a couple of his conclusions:
-On average, recent price performance, for many of the most expensive apartments, has been
uneven, and it has also been unimpressive during this past real estate cycle.
-The condominium market now overshadows the cooperative market in both price and sale volume.
Flattening Yield Curve Makes Mortgage Risk Aversion Worse
It makes it tougher for lenders to lend when the rate they borrow approaches the rate they lend at. Regulators are working hard to encourage banks to lend more but big banks remain fairly resolute not to lose their shirt again.
The Appraisal Industry Needs Better PR
- No one knows what we do.
- No one appreciates what we do.
- We don’t have the resources to tell people what we do
- AMCs survive by taking the majority of our fee to “manage us” with 19-year-olds chewing gum
- Taxpayers don’t realize that many federal agencies and institutions, as well as trade groups, work hard to undermine us
- Loan volume remains down despite low mortgage rates and apparently, it is all our fault.
- We are a bunch of incompetent old people set in our ways and can’t grasp technology.
Mortgage volume keeps falling, placing the blame on us?
This all goes away if taxpayers and mortgage applicants understand what service we actually provide: neutral market insight so that others can make informed business decisions. The 100% Appraiser Movement is the first step in getting the word out – no more letting others speak for us.
My friend Nathan does a better job explaining this than I can.
More on Tristar Bank in TN (you know, the one that shouldn’t be in the mortgage business)
There has been a lot of outrage about the letter they wrote to the ASC so get a waiver on appraisals to save their customers time and money. It was a tone-deaf letter that was so embarrassing I’m surprised that FDIC or other banking regulators aren’t concerned about their risk management. I addressed this letter in last week’s Appraiserville in my Housing Notes called: The Appraisal Waiver “Slippery Slope” Becomes A “Cliff”.
I heard that Tennessee appraisers have flooded the bank with calls and in-person visits to try to get on the list. This has been the rep of the bank – they rely on their AMC which they touted as performing “evaluations” and then have their senior officer evaluate it. Although I heard AI is working hard to get the word out on this, their hard push to legitimize evaluations as an alternative to appraisals is a direct consequence of their anti-residential appraiser efforts by Scott DiBiasio at the state legislature level.
I thought I would look at what kind of bank Tristar is:
- Founded in 2000
- Five offices, plus ATM locations inside Kroger, J-Mart, Horizon Medical Center
- Doesn’t make Advisory HQ’s top 20 “Top Banks in Tennessee” List in 2017 or 2016.
It’s a small bank located in and around the booming Nashville market and they are the first in the country to submit a request to ASC for an appraisal waiver. Joan Trice of AppraisalBuzz wrote a good breakdown of this on her blog with information on how to get on the approved appraiser list.
The Next Appraisal Bombshell: Economic Growth Regulatory Reduction and Consumer Protection Act
This is something that slipped under our radar. This bill reflects the basic problem with DC economic policy right now as it relates to mortgages. The regulators and the federal government are working hard to get mortgage volume to rise – they don’t understand how that is possible since mortgage rates are so low. Appraisers, without real representation, have no voice so we are getting run over because by doing our jobs, we don’t always agree with the value of the collateral and by cutting by 50% to 70% they have created a shortage of appraisers willing to work for substandard fees. I’d be scared about the bond market in a few years.
Section 103 is most relevant to mortgage appraisers.
Section 103. Access to Affordable Mortgages.
This section provides a tailored exemption from appraisal requirements under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 for certain mortgage loans with a balance of less than $400,000 if the originator is unable to find a State certified or State licensed appraiser to perform an appraisal after a good faith effort to do so.
My question is this: How is good faith effort measured? Didn’t everyone assume that in 2002-2008? Those are just words.
Over time, the banks can easily game the system: Drop apprasial fees by 99% and then say there is an appraisal shortage. That’s effectively what is happening now.
Voice of Appraisal with Phil Crawford ‘New World Appraisal Order’
I join Phil on his always must-listen podcast. We talk hybrid appraisals and our screwed up appraisal world. Listen here.
Always fun to join Phil and Kevin on the show (I think this was my 4th time).
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 get you on that appraiser list, you’ll do train tricks and I’ll get more PR.
See you next week.
Jonathan Miller, CRP, CRE
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Reads, Listens and Visuals I Enjoyed
- Map of Southern California fires [Axios]
- Photos show the surreal devastation from Southern California's wildfires [Mashable]
- Buyer nabs three 432 Park penthouses asking $120M [TRD]
- 432 Park Sells Three $40 Million Penthouses [Mansion Global]
- Manhattan Townhouse Built On Site of Gas Explosion Asks $32.5 Million [WSJ]
- Access and Affordability: Interactive map and research on 3 barriers to homeownership [Urban]
- 12 reasons why that amazing NYC apartment is so cheap [Brick Underground]
- Gottheimer and Lance make last-ditch effort to save SALT deduction [Politico]
- What the GOP Tax Bill Means For Commuters, Renters, and Retirees [CityLab]
- Rise of the Creative Class Worked a Little Too Well [Bloomberg]
- The Never-Ending Foreclosure [The Atlantic]
- Winners And Losers Of The Senate Tax Bill [Forbes]
- Party-Pooping in the Financial Markets [Bloomberg]
- Home Builder Accused of Default Swap Scheme With Blackstone Unit [WSJ]
- The 7 Myths of the GOP Tax Bill [The Atlantic]
- The Great American Single-Family Home Problem [NYT]
My New Content, Research and Mentions
- Prewar, With a Twist [NYT]
- Inventory Is Growing Scarcer in the Luxury Real Estate Market -[Cottages/Gardens]
- Art Basel Miami: Art Won’t Be Only Luxury Changing Hands at Festival – [Welcome To Miami]
- Analysts: GOP tax plan could reduce Manhattan home prices by nearly 10 percent [Brick Underground]
- How New Yorkers Would Lose Under the Republican Tax Bill [NY Times]
- Tracking New York Rents and Asking Prices Over a Century [Curbed NY]
- Real estate's party poopers [TRD]
- How Art Won’t Be the Only Luxury Changing Hands at This Year’s Art Basel [WWD]
- As one-time deals stop filling apartments, some landlords are actually lowering rents [Brick Underground]
- Art in the Home: How to Choose, Maintain and Display Treasured Pieces [Mansion Global]
- 3 ways to make, not break your NYC apartment appraisal [Brick Underground]
Appraisal Related Reads
- 6 Factors That Influence Your Home's Value • [Birmingham Appraisal Blog]
- An open letter to buyers worried about a housing bubble [Sacramento Appraisal Blog]
- That place where fame & real estate meet [Sacramento Appraisal Blog]
Extra Curricular Reads
- Uber versus taxi: A driver’s eye view | [VOX]
- Pantone’s Color Of The Year Is Here, And It’s As Nebulous As 2018 Looks [Fast Code Design]
- Eighty Years of New York City, Then and Now | [Youtube]
- AIM will be discontinued on December 15, 2017
- Investing Lessons from the Dude. “Or, uh, His Dudeness, or uh, Duder, or El Duderino if you’re not into the whole brevity thing.” [25iq]