The Housing Market Drops the Mic

I’m about to shut down my laptop and head out for some skiing in Vermont with some good friends. Sadly it’s my first time on the slopes this year, and I’m not quite sure why. And the winter housing market continues to confuse, and the standards of discourse are changing – especially apparent this week. I’m not talking about what you think I am talking about. I’m talking about not using audience microphones for Q&A during presentations.

On Wednesday I keynoted an Appraisal Insitute chapter dinner in Long Island, New York. Yesterday I joined Fredrik Ekland (MDL NY), John Gomes (his business partner) and Bruce Eichner, the developer on the 52nd floor of the newly built Madison Square Park Tower condominium. Both events were packed, and in both events, there was no audience mic.

Why am I bringing up an arcane nuanced point like using an audience microphone? In the current world of public speaking around the housing market, audience engagement seems a lot more personal and a lot closer in proximity than it used to be. It’s not some stuffy economist rambling off abstract macro numbers. So the use of an audience microphone can scare off great questions and make the whole process more detached and formal. Of course, during much larger events at much higher decibels of background noise, audience microphones are usually essential. It seems to me that the audience size thresholds to use those mics are rising. Like it or not, we are creeping into each other’s personal spaces. Now look at that view.

Admittedly that intro was a bit heavy.

The Optics of High-End Sales and Getting the Story Backwards

Quite recently, we have been reading about some big home sales that seemed counter to the narrative of a “soft at the top” housing market people like me have been pushing. For example there was a $24.4 million sale in Aspen Colorado. This single family selling price was slightly above last year’s highest sale and infers that the market is recovering. Perhaps. But I think it says something more than the power of higher pricing. This transaction came on the market in August of 2015 for $36 million. Sixteen months and a 32.2% price cut later, a contract was born in December 2016 with a closing this month. Nearly every time we read about a high priced sale, there is usually a big discount associated with it. Again, this is not to suggest that a particular market is weak and the sellers gave away the property at a huge discount. Rather it means that the property was significantly overpriced, to begin with, and after a lengthy marketing time, the seller came down and joined current market conditions. That is a good thing for the market.

The conventional wisdom in many luxury markets is that demand has waned. I think the more accurate take on the market is that the era of “aspirational” pricing is over (man, I love saying that). I have said this many times here in these Housing Notes. The asking price for that Aspen listing was likely never justified. The developer wanted a number that was detached from what buyers were willing to pay.

This came up in yesterday’s event I mentioned earlier. One of the speakers said they are seeing a lot more high-end sales occurring, so the high end is coming back. I agree that we indeed are seeing more high-end sales, but only after their asking prices have been cut sharply to current conditions. The blame falls more on the seller who probably didn’t listen to their broker’s advice in 2015 and saw lots of other sellers listing at similar levels. In the current market, the demand remains significant but only after asking prices are close to reality.

The same thing happened in Miami. The highest priced single family sale in two years just closed for $22.5 million. It was originally listed for $34 million. After a 33.8% price reduction, the home sold.

I’m all anecdotal here but could it be said that super luxury list prices, in general, could be overpriced by a third? It’s not unreasonable when a listing sits on the market for 1-2 years without any offers. It suggests the degree of impact the aspiration pricing can be holding back sales activity.

Paying Your Mansion Taxes Takes Its Toll

Diana Olick at CNBC covered the discounting move announced by Toll Brothers and I get a nice shoutout. Diana explains the concessions:

The banner is right on the website: “Sponsor pays mansion and transfer taxes at select communities.” Those taxes amount to 2.5 percent of the purchase price, and the condos at these two developments are listed for $2 million to $13 million. That means the discount can amount to more than $250,000.

In an oversupplied market, it makes sense to be proactive and adjust housing costs to the market levels. I know the developers don’t like to talk about that publicly but it is a smart move.

Seriously, what is a penthouse?

In some cases it is a matter of I know it when I see it. Or I’ll know when it is not a legitimate penthouse.

There was a great Mansion Global article this week trying to answer this question with: As Definition of Penthouse Evolves, it Generally Means ‘Best-in-Building’

The article hashes out all the ways we try to understand a property type that by definition is unique to the building where it is located. My description of penthouse qualifications is more like a checklist where most of the boxes, but not all, must be checked. We appraise many penthouses in our appraisal firm and quit often we call the “why me” appraisals, because that’s what you say when you walk out on the terrace overlooking the city and you realize there are no comps. Here is the checklist:

  • Unique layout compared to other building units
  • Only unit on top floor or one of a few
  • Expansive views
  • Highest unit in the building
  • Multi-level
  • Floor to ceiling windows
  • Has fireplace when no one else does
  • Plenty of outdoor space, often the only unit in building with it

Often times the “premium” for penthouses is confused with their higher price per square foot. A big reason that penthouses have a higher per square foot is that usually include large terraces and price per square foot is based on the interior square footage.

Nearly 11 years ago I wrote a magazine article on penthouses for now defunct New York Living magazine where I opined on what they were.

A few years ago I wrote about Manhattan penthouses in my Matrix post: Manhattan’s Electric Kool-Aid Penthouse Test. Over the year and a half before I wrote the post, penthouse sales comprised 2.3% of Manhattan sales, but my attempt to trend them showed me nothing.

I found 329 penthouse sales out of a pool of 14,612 sales over the past 14 months. I tagged any sale with a “PH or some abbreviation of the word “penthouse” in the label. Yes, there are penthouses that aren’t necessarily tagged as such, but that occurrence would be random and not likely a factor. That’s a 2.3% market share for penthouse sales which seems to correlate to the housing stock i.e. 100 unit building with 2 penthouses.

Subway Tunnel Reconstruction

This is an amazingly informative video on the damage to the NYC subway tunnels due to Supersotrm Sandy. It has a lot of implications for housing markets as transportation gets a little more complicated.

Upcoming Presentations

March 9, 2017 – Real Estate Board of New York: 19th Annual Residential Management Leadership Breakfast to honor outstanding leaders in residential property management: Jonathan J. Miller, CRE, CRP, of Miller Samuel Inc., will give the keynote address at the event to be held at the New York Hilton Midtown (2nd Floor, Sutton Ballroom, 1335 Avenue of the Americas). Tickets are available for purchase on


Recently I had the pleasure of connecting with Peter J Fontana, the Vice Chairman of the Montana Board of Real Estate Appraisers. He watched theNovember 16, 2016, titled “Modernizing Appraisals: A Regulatory Review and the Future of the Industry and felt it was important to correct the false narrative promoted by the Appraisal Institute at that hearing. Their disconnect with the residential appraiser’s reality was evident in Bill Garber’s testimony. I’ve presented it here before, and most of my appraiser-readers have seen it, but it is a good reference point to the letter that Pete crafted in response to the testimony.

The purpose of his email to state licensing boards was to let them know about the false narrative AI National pushes despite the detrimental impact to their residential members and non-members alike. I ma posting a lot more correspondence and audio on this next week over on

Here is their email and letter:

Sent: Tuesday, February 14, 2017 8:44 AM
Subject: Letter to all State Boards and Commissions

State Regulatory Boards and Commissions:

As most are aware there was a congressional hearing on November 16, 2016, titled “Modernizing Appraisals: A Regulatory Review and the Future of the Industry”! Many jurisdictions were not made aware of this hearing and some of the content and testimony was alarming and damning to our job as regulators and industry members. The Montana Board held a special board meeting on 01/26/2017 to discuss this hearing and our Boards submission of this topic to the ARRO committee that develops agenda items. A similar panel discussion will take place at the spring AARO conference in Tampa so all jurisdictions can have the opportunity to ask questions and better understand this topic.

The Montana Board unanimously passed a motion to send a response to the Congressional Subcommittee on Housing and Insurance in response to some of the misleading testimony that was provided at this hearing. The Appraisal Institute, in an attempt to silence the voice of our independent citizen board, sent a letter to our board objecting to us even having this on our agenda for discussion. The AI was allowed to speak during the public portion of the meeting and expressed their objection on the record. We proceeded with the meeting as noticed and discussed the two agenda items and eventually passed a unanimous motion to approve the chair draft a letter to Congress stating our thoughts and position about the current state of the regulatory process. Several days later the AI took a bold step and drafted a letter to the Governor of the State of Montana objecting to our motion and attempting to influence and obstruct our boards right to comment on issues that would directly affect our licensees and more importantly issues that would affect the public trust in our board. The letter from the AI attempts to tell the Governor what his responsibilities are in allowing our Board to send such a letter to Congress. The Governor’s Office reviewed the letter (attached) and approved its distribution to Congress and the 55 jurisdictions under the oversight of the ASC.

We are providing you folks with the information relating to this topic. We encourage your board to read the Montana Boards letter to Congress and consider sending a similar message to the Congressional Subcommittee as well as your state or district members of the United States House and Senate.

As we point out in the letter, we may not always like the results of the audits from the ASC, they serve a purpose to ensure everyone is following and applying state and federal statutes and rules accordingly. Furthermore, we cannot digress from the guidance of the Appraisal Foundation when it comes to a consistent approach to licensure so all jurisdictions can be confident that each candidate for licensure has met the same criteria with respect to education, experience hours and a standardized test. Or, the consistent adoption of one set of standards and rules so ALL appraisers and regulators know what the minimum expectations are in the development and reporting of assignment results in an independent and fair manner. The AI testified that our industry is “being choked by rules and regulations in nearly every facet of their business. From how an appraiser reports an appraisal, to supervising trainees, to uneven licensing requirements, to licensing and registration fees passed down by clients, to mandates from federal agencies – appraisers’ professional lives have become extremely complicated, more expensive and less productive due to dated and archaic regulatory structure. As a result, consumers suffer from increased turnaround time, delays in loans, and potential higher costs” We find no credible evidence, nor did the AI produce any credible evidence, to support these statements. Furthermore, we find little or no support that the work of TAF or the ASC interferes, restricts or limits how an appraiser reports an appraisal, the supervision of trainees, uneven licensing requirements, mandates from federal agencies, etc. We find these to be statements without specific facts.

Therefore we are making ourselves available to each board or commission to attend your next board meeting to further discuss this topic. The Montana Board is very interested to hear from all 55 Boards and Commissions on this topic. Our delegation will be holding an afterhours information gathering session at the spring AARO conference. This will be an informal get together to chat about this most important topic. We will provide additional information prior to the conference in Tampa. If your Board or Commission would like us to attend your next Board meeting please contact Thomas G. Stevens, MAI, SRA, Board Chair ( or Peter J. Fontana, Board Vice Chair (

We have attached the link to the live stream of the congressional hearing.

Respectfully Submitted

Thomas G Stevens, MAI, SRA

Peter J Fontana
Vice Chairman

A Brilliant Idea

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See you next week.

Jonathan Miller, CRP, CRE
Miller Samuel Inc.
Real Estate Appraisers & Consultants

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