We’re Not Even Thinking About Thinking About Higher Rates As We Race Downhill To The Other Side Of This Crisis
The following video is an excellent analogy for the current state of housing and the economy – the title of this week’s Housing Notes is a take off on the Fed chair’s comments shared this week in a video further down. The uncertainty illustrated here is quite stressful.
This is beyond cool! pic.twitter.com/rHUUe6KpET— Rob Szczerba (@RJSzczerba) June 10, 2020
But I digress…
Manhattan, Brooklyn & Queens Rentals Continue To See A Plunge In New Leasing Activity As Brokers Are Still Not Allowed To Physically Show Property
I’ve been the 25-year author of an expanding series of market reports for Douglas Elliman Real Estate, now covering more than 35 U.S. Housing Markets. This monthly rental report series covers three of the five boroughs of New York City: Manhattan, Brooklyn, and Queens.
Since the COVID-19 lockdown in NYC, real estate agents/brokers have not been allowed to physically show properties and as a result, new leasing activity has plummeted and most of the price action has occurred on the renewal side of the market which is estimated to be about 2/3 of all transactions and is not shared with the public.
Elliman Report: May 2020 Manhattan, Brooklyn & Queens Rentals
MANHATTAN RENTAL MARKET HIGHLIGHTS
“With the inability of real estate agents to physically show property per state’ shelter in place’ rules, there has been a sharp drop in new lease signings and limited price discovery during the Coronavirus crisis.”
- The lowest total of new leases recorded for the month of May in a decade
- The second-largest year over year decline in new leases in a decade
- The largest year over year increase of listing inventory in forty-five months
- The first year over year decline in median rent for non-doorman apartments in seventeen months
- New development median rental price declined year over year
- Luxury market rents retreated from their year-long price growth
- The starter (bottom 10%) reached a new median rental price record
BROOKLYN RENTAL MARKET HIGHLIGHTS
“The challenge of a near-record decline in new leasing activity and the recent gain in market share of landlord concessions have been amplified due to COVID-19′ shelter in place’ rules for real estate agents.”
- The number of new leases fell annually for the eighth straight month
- Listing inventory expanded for the first time in eleven months
- The market share of landlord concessions rose annually for the first time in seventeen months
QUEENS RENTAL MARKET HIGHLIGHTS
“New leasing activity continued to see significant year over year declines as state “shelter in place” rules during the COVID-19 crisis have limited new rental transactions and price discovery.”
- Median rent fell year over year for the first time in eight months
- The market share of landlord concessions set a new record over four and a half years of tracking
- Nearly two-thirds of 1-bedroom rentals had some form of landlord concession, a new record
Residential rents still falling in Manhattan, which also has its highest vacancy rate since '06, according to @jonathanmiller. Number of new leases signed in Manhattan and Brooklyn also hit record low numbers for the past decade. https://t.co/QF6GKR6QJb— Rebecca Baird-Remba (@thecitywanderer) June 11, 2020
Manhattan rental vacancy is the highest its been in 14 years (!) Story by @EK_Hudson: https://t.co/IfXeJ80Yna @jonathanmiller— Sylvia Varnham (@SylviaVarnham) June 11, 2020
VIDEO State of the City II: Navigating Through COVID-19
Reuveni Real Estate’s President and CEO, Shlomi Reuveni moderated a panel discussion on COVID-19’s effects on market conditions in NYC and Miami. The panel consisted of:
- Hall Willkie, President at Brown Harris Stevens
- David Von Spreckelsen, Group President at Tolls Brothers City Living
- Edgardo Defortuna, President and CEO at Fortune International Group
- Jonathan J. Miller, CRE, CRP, Member of RAC, President and CEO at Miller Samuel Inc.
You can watch it here:
Existing Home Sales Don’t Reflect COVID-19 Yet
It is almost the middle of June so why am I charting the NAR Existing Home Sales Data (EHS) published a few weeks ago (at the end of May)?
Because in a crisis that is changing on a daily basis, the report doesn’t really reflect the COVID-19 crisis yet which technically began in mid-March when it was declared a global pandemic. I wanted to make that point.
The NAR May EHS Report reflects closings from April which generally reflect contracts signed from February and March. Therefore the June Report, which reflects closings in May, which will generally reflect contracts from March and April. Even then, the first half of March was not within the confines of COVID-19. Also, remember, this: While existing home sales currently account for 90% of all home sales, the NAR sample size only reflects 40% of all MLS data.
In creating the following charts, I avoided seasonally adjusted data and only looked at the actual data. I gotta tell you, the housing market has been incredibly consistent for years:
- Seasonality has been maintained
- Listing inventory has fallen
- Prices have risen
And mortgage rate trends have sort of drifted lower…
And it looks like fluctuations in mortgage rates have had no impact on seasonal price trends.
Inflation-adjusted wage growth didn’t start rising until halfway through the 2007-2020 period which correlated with price trends.
It looks to me that wage growth drove prices higher but the lack of inventory intensified the consistency and steepness of price growth. Mortgage rates don’t seem to be the direct driver of price trends.
MiB Podcast: Jonathan Litt on Real Estate Investments – How To Create Value In Real Estate
My friend Barry Ritholtz is a prolific provider of high-quality, all over the place content and his Bloomberg ‘Masters in Business‘ podcast stream is no exception.
This week he speaks with Jonathan Litt, who is the founder and chief investment officer of Land & Buildings. I highly recommend listening to this interview if you are in the business of real estate.
VIDEO Interest Rates Don’t Seem To Be Going Anywhere
This week the Federal Reserve provided some insights on how they see the world for the next two years in this WSJ piece: Fed Officials Project No Rate Increases Through 2022:
Watch this clip.
My favorite chart of the week of my own making
Len Kiefer‘s Chart Handiwork
Upcoming Speaking Events
June 16, 2020 – Curbed/Streeteasy ‘The Neighborhood’ Virtual Panel “Don’t Call It a Comeback: Patterns in NY Housing Market Recovery“
Since the pandemic necessitates a virtual event, notice the menu item for breakfast on the upper right corner of the event landing page. It looks like we self-serve, self-bake in this virtual world.
June 18, 2020 – Urban Land Institute (ULI) New York Webinar Series: Assessing NYC’s Residential Real Estate Market
(For earlier appraisal industry commentary, visit my old clunky REIC site.)
Inspection Stories: Vertical Air Conditioning
How do you present this in your appraisal report?
Had to share this. We appraisers see it all! (I did not take this photo) pic.twitter.com/S6WQkS3yuU— Philip????️???? (@AirdalePhil) June 9, 2020
OFT (One Final Thought)
The AppleWatch can’t do all that.
An advert I did with @accuristwatches that ran in the 70s. Upon my death they shall reveal what is most important of all. pic.twitter.com/ltCS9cAxxZ— John Cleese (@JohnCleese) June 7, 2020
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 virus-free;
- You’ll buy an old watch;
- And I’ll think about thinking about skateboarding again.
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 next week’s Housing Note.
See you next week.
Jonathan J. Miller, CRP, CRE, Member of RAC
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog @jonathanmiller
Reads, Listens and Visuals I Enjoyed
- Nearly a Third of U.S. Renters Worried About Their Next Payment [Bloomberg]
- Sean Connery’s Former Home in the South of France Lists for €30 Million [Mansion Global]
- Fed Debates How to Set Policy for the Post-Pandemic Economy [Wall Street Journal]
- WSJ News Exclusive | Two Major Deals Offer Hope For Manhattan’s Stalled Luxury Condo Market [Wall Street Journal]
- COVID swallows up $160M in NYC tax revenue [Real Estate Weekly]
- Inside Nextdoor’s "Karen problem" [The Verge]
- Couple Sue Sprint Over Cell Tower, Fake Bricks on Building [The Real Deal]
- Home Prices Are Rising, Along With Post-Lockdown Demand [NY Times]
- WSJ News Exclusive | Pent-Up Demand Lifts May New Home Sales 21%, Survey Finds [Wall Street Journal]
- U.S. Existing-Home Sales Dropped to a Nearly 10-Year Low in April [Mansion Global]
- Podcast: Jonathan Litt Discusses Real Estate Investments [Bloomberg Masters in Business]
My New Content, Research and Mentions
- NYC Rental Market Continues to Decline Amid Pandemic [Commercial Observer]
- Manhattan's empty apartments: New leases plunge 62% in May [CNBC]
- Manhattan lease signings fell to 10-year low in May because of the shutdown [Brick Underground]
- New Yorkers Flee The City for the Suburbs and Vacation Towns [The Real Deal]
- New York City’s Rental Vacancy Rate Rises in May 2020 [The Real Deal]
- Manhattan Luxury Rentals Softened Amid Coronavirus Crisis [Mansion Global]
- Massive Apartment on Billionaires’ Row Sells for $28 Million [Bloomberg]
Recently Published Elliman Market Reports
Appraisal Related Reads
- Fast Connections AMC Fined $2.8 Million – Don't Mess With Texas [VACAP/Appraisers Blogs]
- Inspecting During a Pandemic [Working RE]
- So What's Happening With Birmingham Home Prices? [Birmingham Appraisal Blog]
- Appraisal Terms That Are Out of This World [Cleveland Appraisal Blog]
- Interview with VA's Chief Appraiser [Working RE]
- Appraiser Directory… Another Suspicious Outfit [Dave Towne/Appraisers Blogs]
- Are Investor Flips Good Appraisal Comps? [Tom Horn/Birmingham Appraisal Blog]
Extra Curricular Reads
- Pepsi’s $32 Billion Typo Caused Deadly Riots [Medium]
- Opinion | Why Isn’t the Stock Market Reading the Room? [NY Times]
- 'Cops' Canceled at Paramount Network [Hollywood Reporter]
- When 511 Epidemiologists Expect to Fly, Hug and Do 18 Other Everyday Activities Again [NY Times]