Housing Concerns About Bank Runs

But I digress…

NYC’s Flat Iron Building Was Just Sold, And We’re Wondering What’s Next?

The Flat Iron Building, a famous historic triangular building at 175 Fifth Avenue, was sold at live auction on the courthouse steps in $500,000 increments for $190 million – it was purchased by someone outside the usual NYC development circles. Here’s a tour of the interior.

I did a quick interview on what may happen for Newsday, who captured the drama as it happened. I was camped out in a temporary space until our office renovation is completed so apologies for the bland background. Ha.

Here’s the Wikipedia page for the building. Lots of history.


The Real Deal Deconstruct Podcast Explainer on SVB

Looking At Mortgage Banking As A Potential Systemic Failure Or An Overhype

I see a ton of humor on the “Collapse of the Banking System” topic. After a significant event, we often hear, “Too Soon?” after a joke on the topic. Yet the humor appeared almost instantly, unlike the Lehman collapse in 2008. Or maybe we’re just too distracted with AI and the GPTchatbot? Or maybe this a sign that it’s not as bad as the headlines scream? Like in the words of The Simpsons — “turn a potential Chernobyl into a mere Three Mile Island.”

The LA Mansion Tax Resets High-end Market Prices

On April 1st, Los Angeles is instituting a transfer tax on sales of homes that are $5 million or higher. There are two tranches:

The New York Times does a nice summary of Measure ULA in “For Sale: Mansions in Los Angeles at Bargain Prices”.

I suspect that the cost will come out of the seller’s proceeds by roughly the amount of the tax, and then on the next sale of the property, it will already be baked in.

I talk a lot about the market impact of the tax in this CNBC piece: This LA mansion is staring down an April 1 deadline before the seller loses millions on a specific property that includes a mind-blowing video.

.

Frontline: Age of Easy Money (The Title Seems Misleading)

…from the context of residential mortgage lending.

As I discussed earlier, there seems to be a disconnect between the narrative of the banking system post-SVB collapse and how mortgage lenders behaved during the biggest housing boom of the modern era. The fact is that credit was tighter than what would be considered “normal” during the pandemic housing boom. In other words, banks never lost their minds during this recent boom, unlike the housing bubble fifteen years ago.

The two banks that were taken over, SVB and Signature, were already known for questionable practices by regulators. Signature lost their shirts from the crypto collapse while SVB was guilty of having uninsured leverage, something only 1% of all banks have. In fact, when New York Community Bank swept in to buy up Signature Bank’s assets, they excluded the mortgages for the rent stabilized buildings portfolio. Signature Bank was one of the only games in town for financing of these buildings since the Housing Stability and Tenant Protection Act of 2019 that effectively eliminated any upside for the buildings and is likely to create a failing asset class over the next decade.

The SVB and Signature collapse was projected onto the entire industry from my untrained banking perspective. Banks like First Republic may only seem guilty by association for being in a similar size classification. Which is explained by the massive outpouring of financial support by other banks. The bank run depleted cash positions as they worried about a run on their own institutions if they didn’t shore things up.

The broader commentary on the topic seems to be full of phrases like “bank runs” and “bank collapses” everywhere yet, so far, it’s only been SVB, Signature and Credit Suisse, the latter of which has been in trouble for more than a decade. I had a crazy Credit Suisse first-hand experience during the housing bubble to share in that book I need to finish.

Maintaining consumer trust in banks is a powerful thing. So is guilt by association. Fingers-crossed.

Getting Graphic


My favorite charts of the week of our own making

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

Paul Kedrosky‘s chart collections

My favorite random charts of the week made by others

Appraiserville

Fannie Mae’s Continuing Push To Get Rid Of Appraisers

Bryan Reynolds and his backers acquired the assets of Valuation Expo and Appraisal Buzz (at what looks to be the peak of the market) and seems very focused on upgrading their interaction with the big players. It’s always good to have more transparency in our industry.

My takeaways from Bryan’s conversation with Lyle Radke and Hemp Thomas:

  • I love Hemp’s tie.
  • Hemp was not given equal air time.
  • Lyle explains how appraisers’ days are numbered, and it’s time for appraisers to pivot to info-gatherers at $85 a pop.

It’s a long slow death for the banking appraisal industry (but not for appraisers in other disciplines). Fannie is pushing us to be data collectors so their AVMs can do the work without the drama of human intervention. They firmly believe that their AVMs are as accurate as appraisers are. In my view – if that assumption were accurate, we’d be gone tomorrow.


Appraisal Board Chief Dean Dawson Of West Virginia Can’t Help Being Conflicted

If my Housing Notes readers of Appraiserville will recall the writings here of two years ago, The West Virginia Board of Real Estate Appraisers‘s chairman was under pressure for keeping competitors out of his market. Some changes were made, and he was termed out. But as often happens in government, he stayed in the office anyway but has seen his power reduced by individuals named to the board who were not his sycophants.

There is now a lawsuit by one of Dean’s peers, Edward Estep, who was his colleague at Mountain State Justice (MSJ), in the context that they performed appraisals for them. This is an entity that makes a living out of suing appraisers. Edward is suing the board and Dean Dawson directly for going after Edward’s license. I’m guessing Dean thought enough time had passed and he could start reducing his competition again. Edward and Dean may have performed appraisals for the same firm, but Edward is also a competitor.

This is what I’ve heard over the years on how it works.

  1. Appraiser1 would appraise a residential property in litigation, taking, etc.

  2. Appraiser2 would come in for MSJ and lowball or highball it.

  3. A complaint would be filed with the WV board on Appraiser1 using Appraiser2’s appraisal as evidence that Appraiser1 was wrong, and Dean’s board would work to remove Appraiser1’s license. Dean also works for MSJ as an independent appraiser. Can you see the severe conflict of interest here?

Edward is suing Dean personally and the board he chairs, fighting to keep his license. I’m not picking sides here, but an incredible conflict of interest exists. How can the Governor of West Virginia continue to allow this to happen? It’s impeding commerce in the state.

The court filing is a fascinating read:

J. Edward Estep, L.R.A No. 0606 v West Virginia Real Estate Licensing and Certification Board, and Dean E Dawson, Individually and as Chair of the West Virginia Real Estate Licensing and Certification Board. Download PDF

Private feedback on this matter would be appreciated.

OFT (One Final Thought)

This provides a whole new perspective on something I love. It saps some of the joy out of loving the product while better understanding how the sausage (Dove Bars) are made:

How ice cream is manufactured for m cutting to coating is oddly satisfying
by u/yassora1977 in oddlysatisfying


Brilliant Idea #1

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Brilliant Idea #2

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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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