Fishing For Housing Inventory

January 13, 2023

Yikes!

But I digress…

NYC Rents Continue To Drift Lower, Not Fall

I’ve been authoring the Douglas Elliman report expanding series since 1994. This monthly rental series was a helpful navigation tool through the pandemic era because the rental market is a much faster-moving and reactive asset class than sales. The roller coaster ride was much more severe as a result.

Douglas Elliman published our research on NYC’s December rental market this week. The market moved sideways or, to put it another way, drifted slightly downward since peaking in price last July.

Here’s a cool chart on the Manhattan results by The Real Deal.

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MANHATTAN RENTAL MARKET HIGHLIGHTS

“Median rent continued to slip monthly after peaking in July.”

– Highest net effective median rent on record for a December
– Median rent slipped month over month for the fourth time in five months since reaching July record
– The vacancy rate rose for the eighth straight month
– Doorman net effective median rent rose month over month as non-doorman rent slipped
– New development new leases increased annually, while new leases for existing leases declined
– Luxury median and average rent rose to the third highest on record
– Luxury listing inventory expanded annually but remained sharply below pre-pandemic levels
– Luxury entry threshold expanded annually for the fifteenth consecutive month

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BROOKLYN RENTAL MARKET HIGHLIGHTS

“Median rent was unchanged month over month but remained below the August peak.”

– Median rent showed stability month over month after peaking in August but remained above pre-pandemic levels
– New lease signings declined annually for the third consecutive month
– The amount of landlord concessions paid was at its highest level in fourteen months

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QUEENS RENTAL MARKET HIGHLIGHTS

[Northwest Region] “Median rent fell below the $3,000 threshold for the first time since May.”

– Median rent rose year over year for the sixteenth consecutive month
– New lease signings declined annually for the ninth consecutive month
– The market share of landlord concession rose to its highest level since May

U.S. Rents Are Still Higher Than Before The Pandemic

Zillow’s rent index is a repeat methodology much like Case Shiller’s, so it lags, doesn’t consider the shift in the mix, and excludes new construction (because there is no prior rental, hence another lag). Here’s a good FiveThirtyEight piece: Rents Are Still Higher Than Before The Pandemic — And Assistance Programs Are Drying Up

Still, there is a significant decline in U.S. rents using this index, something NYC doesn’t seem to be experiencing. And there’s more to consider: Rental Housing Is Suddenly Headed Toward a Hard Landing

But as Bill McBride of Calculated Risk has pointed out, millennials are now at the age where they are more likely to want to buy homes than rent them. The country’s demographics in the 2020s are tilted toward ownership, not renting. So as the housing market recovers from this soft patch, we should expect the for-sale market to recover more strongly than the rental market.

Brooklyn, Queens And Riverdale Generally Remain Above Pre-Pandemic Levels

The outer boroughs of New York City have generally performed like a hybrid of the suburbs and Manhattan with Manhattan being the weakest performer. Douglas Elliman published our research this week.

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BROOKLYN SALES MARKET HIGHLIGHTS

The Elliman Report: Q4-2022 Brooklyn Sales

“Median sales price declined quarterly for the first time in eight quarters.”

– Median sales price fell to only the second-highest level on record after nearly two years of new records
– Bidding war market share rose to a new high, reaching nearly one-third of all closings
– Listing inventory declined for the second quarter after rising annually for five quarters

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QUEENS SALES MARKET HIGHLIGHTS

The Elliman Report: Q4-2022 Queens Sales

“Median sales price rose annually for the eighth consecutive quarter.”

– Median sales price expanded but fell short of reaching a new high as it had five times in the past seven quarters
– Bidding war market share rose to a new high, reaching nearly one-quarter of all closings
– Listing inventory declined annually for the fifth straight quarter remaining below pre-pandemic levels

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RIVERDALE SALES MARKET HIGHLIGHTS
[includes Fieldston, Hudson Hill, North Riverdale, and Spuyten Duyvil]

The Elliman Report: Q4-2022 Riverdale Sale

“Median sales price rose to a new high as sales slipped for the first time in nearly two years.”

– Median sales price rose annually for the past eight quarters
– Bidding war market share increased to the third highest on record, nearly one in five sales
– Listing inventory declined annually for the third time in four quarters

The Hawkish Fed Loop Makes It Much Harder For Would-be Buyers To Adapt

Over my thirty-six years of valuation experience, I’ve come up with a rough and extremely anecdotal opinion that consumers looking to purchase a home take one to two months to adapt to a recent rise in mortgage rates. The problem with the current environment for home purchasers – pushing aside all other variables like affordability and other global events, is that a hawkish fed has been consistently raising rates every 1.5 months. So, another one comes just as the consumer adapts to the higher rate. And this regular frequency has been occurring for nearly a year. And yes, mortgage rates have slid, and economists think they will stay in the low to mid-6 range during 2023.

Housing has disproportionally been punished by this pattern and primarily the middle class. I think we should be focused on what happens when rate increases are over, and consumers start to wonder how long it will be before there are cuts, and that depends on whether we go into a recession which equals job loss.

But it helps that consumers are now expecting lower inflation, per Bloomberg.

Westchester, Putnam and Dutchess Counties Remain Devoid Of Listing Inventory

It is amazing how little listing inventory is coming into the market despite the drop-off in sales as pricing remains relatively firm.

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WESTCHESTER SALES MARKET HIGHLIGHTS

Elliman Report: Q4-2022 Westchester County Sales

“Price gains slowed despite the drop in listing inventory.”

– Median sales price has increased annually for the fifth consecutive quarter
– Bidding wars accounted for one-third of all closings in the quarter
– Listing inventory fell year over year for the fourteenth straight quarter
– Luxury median sales price fell annually for the first time in eleven quarters
– Luxury listing inventory rose year over year for the first time in fifteen quarters
– The luxury entry threshold expanded for the fourth consecutive quarter

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PUTNAM SALES MARKET HIGHLIGHTS

Elliman Report: Q4-2022 Putnam/Dutchess County Sales

“Price gains slowed despite the low listing inventory levels.”

– Median sales price rose annually for the tenth consecutive quarter at a diminishing rate
– Bidding wars accounted for more than one-third of all closings in the quarter
– Listing inventory edged higher year over year for the first time in twelve quarters

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DUTCHESS SALES MARKET HIGHLIGHTS

“Median sales price stabilized as listing inventory expanded.”

– Median sales price has not declined annually over the past fourteen quarters
– Bidding wars accounted for one-third of all closings in the quarter
– Listing inventory fell year over year for the eighth straight quarter

Getting Graphic

My favorite housing market/economic charts of the week made by others

My favorite random charts of the week made by others

Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.)

Cosmic Cobra Guy Notes Appraisal Institute Using Same Lobbyist As Institutions Who Want Us Gone

I don’t fault AI for what the Cosmic Cobra calls out because it’s hard to find a lobbying consultant in DC that doesn’t work for the commercial banking, mortgage or investment banking industry. That’s where the money is. Just refer back to Fannie Mae’s pre-financial crisis lobbying strategy. Every lobbying firm in DC had them as a client. But it does illustrate how outnumbered our industry is. He asked me to share my comments in his release below, and of course, I needed to include a necessary reference to The Appraisal Foundation since TAF is the organization that wrote the bat-shit crazy letter, the chickenshit letter and is the subject of an active investigation by HUD on whether USPAP promotes a lack of diversity in the appraisal profession (BLS: 97.7% of appraisers are white).

Since this is a screenshot, you can sign up to his mailing list here and probably reach out to him direclty for the links!

Is This Real? Dart’s Email To Its Appraisal Panel

This was shared with me. We don’t work for Dart, but it is sad to see. If The Appraisal Foundation was truly focused on conscious and unconscious bias for the past three decades instead of describing it as a recent problem, this kind of awkward large-scale corporate mandate wouldn’t have been sent. Wow.

OFT (One Final Thought)

Sadly, Jeff Beck passed away this week. I’ve spent a big chunk of time over my life listening to his musical genius. Here’s a good one.

And I love this remake of the 1965 Impressions song – People Get Ready.

Brilliant Idea #1

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 because:

– They’ll be more aware of the power of Pirhannas;
– You’ll get that rental;
– And I’ll get ready.

Brilliant Idea #2

You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive, and it helps me craft the following week’s Housing Note.

See you next week.

Jonathan J. Miller, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog
@jonathanmiller

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