The Housing Market Is Snoring Right Now

November 25, 2022

(Snoring, Not Soaring)
I hope all my Housing Note readers had a wonderful Thanksgiving holiday with family and friends. I know I did, so I had this thought…Snoring seems more relevant after a big Thanksgiving meal and a day of consuming leftovers. And to take it a step further, snoring as a housing indicator has the potential to convey relevant future visuals, as illustrated here.

But I digress…

Parking Spaces For $300K Seems Inexpensive Compared to Fifteen Years Ago

CNBC had a fun piece on automated parking spaces in NYC: The future of parking is in New York — and it costs at least $300,000 per space The topic reminded me of my research on the NYT’s front page back in 2007 (15 years ago! gulp) where I estimated that the average cost was about $225,000: For Parking Space, the Price Is Right at $225,000

Scarcity figures big in the escalating prices. Mr. Miller estimated that less than 1 percent of all co-op and condominium buildings in the city have private garages. The city also limits how much parking new buildings below 60th Street can offer, requiring that no more than 20 percent of the units have spaces.

“It’s a fairly rare amenity,” Mr. Miller said. “And in the world of pet spas and on-site sommeliers, it’s actually a pretty functional amenity.”

Here is the cool video that CNBC created – I always wondered what the inside looked like!

[NPR Interview] The housing market is looking less and less appealing to consumers

I’m not intentionally being contrarian here, and there is no argument that sales have cooled very quickly as illustrated in the following Apollo chart, but I suspect the negativity is being overstated against a 2021 “rocketship.”

Here’s the short interview on Marketplace.

Forecasting The Fannie Mae Forecast: Housing Sales Forecasted to Hit Trough in Q2 2023 Before Beginning to Rebound

Doug Duncan is one of my favorite U.S. macroeconomists, who I met a decade ago when I was moderating a panel on the main stage at Inman Connect in San Francisco. At that time, Apple had more cash than the federal government. Ha.

In his most recent newsletter Doug says:

“The economy continues to slide toward a modest recession, which we anticipate will begin in the new year, with housing leading the slowdown,” said Doug Duncan, Senior Vice President and Chief Economist, Fannie Mae. “Higher interest rates have ignited the typical reduction in residential fixed investment, which historically has led into either an economic slowdown or recession. From our perspective, the good news is that demographics remain favorable for housing, so the sector appears well-positioned to help lead the economy out of what we expect will be a brief recession.”

Apollo’s chart on recession probability is amazing…

So what happens if we slip into a recession? Unemployment rises, and mortgage rates should come down a bit, so it’s not necessarily something to hope for if you work in housing market-related industries.

Mortgage Rates Are Resisting More Gains

Despite recent Fed moves, mortgage rates are resisting a similar rise as signs that the economy is weakening continue to appear.

The past year…

Since 1971 for context…

Existing Home Sales Are Down Any Way You Slice It

The problem with this NAR chart is it doesn’t show the context of the collapse in listing inventory. There are 3.3 months versus six months as their stated norm. In other words, even with the rise in supply from 2.4 months to 3.3 months over the past year, listing inventory remains at half of the normal levels.

This pattern was the polar opposite during the housing bubble. When the music stopped during the bubble, the listing inventory was substantially higher than it is now. Look at the build-up in 2007 (the farthest back data I have). Click on all the imagines to reveal much larger versions…

Therefore the severe impact on housing prices we saw during the GFC doesn’t seem to be supported to the same degree.

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.)

Industry Leaders Are Getting A Whiff Of The TAF Stench

KC Conway, MAI, CRE, CCIM of Red Shoe Economics, wrote a post in LinkedIn about the appalling lack of due process. We saw this in TAF’s clear effort to not discuss “barriers to entry” as former AQB Chairman John Ryan found out when he placed “Barriers to Entry” on the agenda and was immediately removed from his Chairmanship. KC is a pillar of the appraisal industry as one of its most respected individuals. I was pleased to serve with him on a committee at the Counselors of Real Estate.

As a reminder, The Appraisal Foundation is the same organization that wrote the bat-shit crazy letter and 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)

I suspect there are more people like KC who were unaware of the dysfunction of TAF, so we need to get the word out even more than we have so far. These leaders often find out after they get into their position, so it’s no surprise he opted to resign when this issue arose. As a reminder, all board conversations are scripted, and the organization has no oversight. The financing of TAF is entirely through sponsors, IAC membership, and appraisers being forced to take USPAP classes and buy USPAP materials even when USPAP isn’t materially updated. ASC has offered to make USPAP free to appraisers, but TAF doesn’t want that to happen because there would be “strings attached” (translation: oversight). TAF wants no oversight, but it is, after all, a Dave Bunton monarchy that does not want to fix the barriers to entry in the profession, even though 98% of appraisers are white and dominated by men (stale, pale, and male). The entry path is a mentorship arrangement that TAF has structurally championed for over three decades.

Here is the exact text of KC’s post if you don’t have access to LinkedIn:

Appraisal Bias and the Appraisal Foundation’s Silence on the topic and new data are unacceptable.
This 35-year veteran of the Appraisal industry with a milti-generation background of MAIs knows 90%+ of appraisers are not biased, but there are always bad apples in every industry. The lenders imposing Bias Appraisal standards need to be examined too. When the lenders hore, the appraisers, review the appraisals, impose policies that dont allow appraisers to use higher comps just a block away, and control the lending, the appraisers are more of a pawn and the lenders the con or bias against minorities..

The Appraisal Institute and its President are speaking up on this issue, unlike the Appraisal Foundation (AF) which tries to censor those that speak up from within the AF. That’s what happened to me this past weekend as a Trustee of the Appraisal Foundation. When I spoke up in a recent article for the CCIM Institute titled “Appraisal Change” and dared to use the “P” word (PAREA and PAVE), the AF leadership threatened me with a written admonishment and a censorship mandate on anything Appraisal related despite using a disclaimer in the article insulating the AF and them receiving an advance copy of the article – and offering no comments.
I refused to accept the admonishment without any due process – and censorship – something the AF is NOT imposing on AF Sponsors like the Appraisal Instiute or other Trustees, and resigned my Trustee role.

Congress, the Appraisal Subcommitte and broader Appraisal industry need to look under the cover of the AF. Why doesn’t the AF comment on this data? Why do they selectively censor those from within that add a voice and perspective to this most important issue today? Why, at their own DEI training this past Friday, was the AF unable to define what “Diversity” means within the AF?

I atleast tip my hat to the Appraisal Institute – an AF Sponsor – for commenting and NOT being bulleyed into censorship by the AF Leadership. Note the following and AF silence from this article and let your voice be heard:
“The Appraisal Foundation, which sets national standards for real estate valuation, did not respond to a request for a comment. But Jody Bishop, president of the Appraisal Institute, an international association of registered appraisers, said he was distressed by the findings.

“When we see even one story of a consumer who feels they were treated differently because of their race, it’s gut-wrenching because that goes against everything appraisers stand for. Appraisal is one piece of a larger ecosystem to look at when it comes to housing issues. Ensuring unconscious bias doesn’t play a role in appraisals and seeking broader solutions to diversity, equity and inclusion in housing is a priority,” he said in an email.”

#cre #ccim #sior #Realtors #appraisalinstitute #diversity #uli #trepp #naiop #commercialrealestate #redshoeeconomics

Basking In The Glow Of An FOJ-Less AI

Admittedly I remain giddy about the resignation of CEO Jim Amorin as it signifies the end of the lost era of the organization. It has been a long time since Leslie Sellers was AI president and his awful explanation on video as to why AI was no longer a sponsoring organization of TAF. It so ridiculous, it caused me to leave AI. Sellers (and others) set the stage for the gradual JA “organizational taking” and they were kept in power during that taking. Here are some observations and suggestions for a post-FOJ world.

– Embrace diversity by reestablishing the committee that JA reduced to a panel without a budget and a voice – be a leader in this space like Rodman Schley attempted to be but was saddled with a Jim Amorin organizational dominance
– Focus on rebuilding AI education so appraisers within and outside AI aren’t all doomed to take McKissock classes because there is limited competition. Most importantly, modify the rules to allow new blood to teach the classes and remove the handful of FOJs that enjoyed exclusive rights to the teaching gravy train. If someone develops a course for AI, they should have the right to teach it, unlike during the JA era where he gave them to others in his flock
– Remove the sham petition process immediately from the bylaws so that the membership picks leadership again. The idea that this is in the bylaws is a stain on AI governance
– Remove all rules that discourage a voice for the membership, whether through the NNC or other organizational functions – the CEO works for the BOD, and the BOD works for the membership
– Be publically transparent about positive and negative organizational events that periodically occur
– Rethink public relations to get the organization out front in the public space instead of the boring repeat materials that have been used for years
– Enforce conflict of interest violations, such as seen with three c-suite officers joining the board of the past president’s startup
– Streamline the ability to quickly remove someone from membership who has damaged the organization’s reputation, using a newly created transparent due process
– Term out all FOJs in positions of power who put their self-interests ahead of the organization, so AI does not go down this toxic path ever again
– Prevent all individuals in the organization that were used as goons by JA to threaten members who criticized AI in any way – from holding any leadership or teaching positions
– Make an open commitment to the residential membership that the organization will no longer ignore them and will double down its efforts to serve those members and to create a reason for others to join
– Bring transparency to the organization and get away from a walled-off leadership structure
– Review the lavish perks bestowed on FOJs and begin to act like an organization that has lost one-third of its membership over the past decade
– Commit to expanding the size of the organization by offering value in its new efforts to new members
– Commit to rebuilding the brands of existing designations that have been ignored for more than a decade

The void in the industry that an absence of a credible Appraisal Institute created will have to be earned back. Still, I am optimistic that with proactive efforts to change the organization, I suspect it won’t take very long.

OFT (One Final Thought)

Brilliant Idea #1

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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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