Hard To Track A Scuzzy Housing Market
Are we at “peak scuzzy?” Google Books Ngram viewer certainly infers it.
The following “scuzzy” view of St. Mark’s Place was exactly what attracted me to Manhattan when my wife and I moved here (on a whim, because we could) back in the mid-1980s.
GREAT tracking shot of scuzzy, late 1980s St. Mark’s place in Frank Henenlotter’s BRAIN DAMAGE. pic.twitter.com/8qHeFqjNdh— Patton Oswalt (@pattonoswalt) October 29, 2022
Admittedly these Housing Notes are a bit shorter than normal – this morning, I was on a panel in Miami Beach with its mayor!
But I digress…
New Signed Contracts Are Down, But Not As Much As You Think
I’ve been the author of an expanding series of market reports for Douglas Elliman Real Estate since 1994. We added the New Signed Contract series during the pandemic. It covers markets in the New York City metro area, a big chunk of Florida, a little of Colorado, and Southern California.
Here are the reports and some associated charts. For more charts, please go to our gallery.
Elliman Report: October 2022 New York New Signed Contracts
Elliman Report: October 2022 Florida New Signed Contracts
Elliman Report: October 2022 Colorado New Signed Contracts
Elliman Report: October 2022 California New Signed Contracts
Reliance on Year Over Year Results Provides An Overstated Narrative
I’ve long been a promoter of year-over-year comparisons and am not a fan of seasonal adjustments because housing is seasonal and seasonal adjustments help dilute the original numbers. Year over year tends to be more “apples to apples.” But the pandemic housing era has interjected massive extremes into the housing market results as mortgage rates stayed way too low for more than a year. As I like to say, 2021 was a rocket ship for the housing market, so comparisons against the same period last year, while technically accurate, present a more extreme downturn than actually occurred.
In my chart above, I show a sampling of some of the Florida markets I cover for Douglas Elliman that shows the downturn in sales from a pre-pandemic benchmark, i.e., the last third quarter before the pandemic began. Sales are down around about 15% from a “normal” market. However (and I didn’t have time to chart the year over years for these markets), I’ll use an extreme example to make my point (and all the YOY results are available in the reports on this site.
Miami Beach sales declined 39.5% yearly but were 21.6% higher than pre-pandemic. The larger year-over-year drop occurred because sales surged unusually high in 2021 as mortgage rates remained on the floor. Looking at the listing inventory, you can see evidence of the 2021 sales surge. Overall supply is down 42.9% in aggregate from pre-pandemic because it was obliterated by overcharged demand.
The fact that listing inventory is nearly half as much as pre-pandemic provides a firmer underpinning for prices. Prices will rise at much lower rates than the past few years or see modest declines, but it’s hard to imagine a significant price correction coming out of the pandemic housing boom:
- credit conditions always remained tighter than long-term norms (banks never lost their minds)
- listing inventory is generally far lower than the norm
- potential sellers are reluctant to list with the far lower rates they enjoy
We usually see listing inventory pile up during a market slowdown. Listing inventory across the 40+ markets, I cover for Douglas Elliman is either rising slowly but significantly below pre-pandemic norms or falling.
Conforming Loan Limits NEVER Go Down
FHFA sets the limit each year for the loans that the GSEs – Fannie & Freddie – will take back, etc. That limit is based on the FHFA Quarterly National SA Index. This is a repeat sales index like Case Shiller and is based only on sales with a conforming mortgage. Mortgages above the conforming loan limit (CLL) are considered “Jumbo.”
It’s kind of interesting that this index has never gone downward since 1979. It’s a reminder that the GSEs are here to do business with the advantage of having taxpayers as the inferred backstop (even before they were taken into receivership). The GSEs are not neutral arbiters of risk.
Mostly New York City Visuals
A magnificent Kodachrome of New York in 1964 by Evelyn Hofer. Like a scene from Fritz Lang’s Metropolis. pic.twitter.com/mbFisgV9jm— Davenant 📸 (@MarcDavenant) October 28, 2022
Yes, please. pic.twitter.com/dbYGnAusSE— Wendy O'Rourke (@wendyOrourke) October 29, 2022
My favorite charts of the week of our own making
My favorite charts of the week made by others
Len Kiefer‘s Chart Handiwork
(For earlier appraisal industry commentary, visit my old clunky REIC site.)
Perhaps Its Dawning On TAF To Try To Protect The Public Trust
I used to get the TAF monthly emails that provided nuggets of hypocricy that Dave lacked self-awareness thereof. But, alas, he seems to have removed me from distribution so colleagues send them to me. Censorship in TAF. What will they think of next? Remember that this 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: 98% of appraisers are white)
But I digress…
It’s refreshing to see that TAF has flat-out admitted they’ve failed at their mission. In their November monthly email newsletter (that he had me removed from), Dave states:
“There are serious pressing issues of public trust facing the appraisal profession…”
And from the home page on their website:
“It is our mission to advance the valuation profession by setting standards of excellence, promoting education and upholding the public trust.” (Bold added for emphasis)
I’m sure this wasn’t intentional on Dave’s part, so it’s incredibly ironic that this is the most transparent TAF has been in many years. Perhaps all the external pressure is finally getting to them – that business as usual in the monarchy isn’t right.
USPAP Supplement Isn’t Ready For USPAP Courses That Begin In One Week
Kind of odd that the USPAP update supplement course that is coming out in a week isn’t ready yet USPAP hasn’t been updated in three years. I suspect TAF is working with their law firm, and it’s taking a while. The positive here is that for what I believe is the first time, they are using legal counsel to review any of their courses. That’s an encouraging baby step.
Appraisal Institute Shows A Canadian “Racial Bias” Sting Video And The Audience Almost Came To Blows
The following video was aired in Canada by CBC in March 2021 and has nearly a half a million views.
At a recent meeting, the Appraisal Institute showed this video and anger ensued. The audience was deeply divided, and the conversations almost came to blows. My guess from past actions of AI CEO to remove the diversity committee would assume the FOJs want to continue to hope that this issue goes away and will continue to do little as an organization. And without Rodman’s leadership on his personal passion point and Super Duper’s deer in headlights compassionate pleas on how awful this is but does nothing because it’s completely up to Jim even though technically it absolutely isn’t (gasp for air), these stories and situations expand to daylight without the industry trying to solve it. At this point, it’s probably better they do nothing and suffer their fate. The issue is not going away.
So the New York Times story: Widespread Racial Bias Found in Home Appraisals, Bloomberg: New Federal Data Shows the Home Appraisal Gap Is Getting Worse, Inman: Those claims of appraisal bias? Another study backs them up, NPR: How home appraisal methods can end up perpetuating racial inequality and The Real Deal: Appraisal gap worsened as racial disparity persists shows that is too late to provide credible input. The cowardice of Appraisal Institute and Appraisal Foundation leadership on this topic is forever etched in stone. Congratulations. Were all those first-class airplane tickets to boondoggles really worth it?
OFT (One Final Thought)
Please take notes…
Wow. Didn’t know Bo Burnham was a real one. Couldn’t be more relevant pic.twitter.com/DOBEcUEVJQ— Read Jackson Rising by @CooperationJXN (@JoshuaPHilll) November 2, 2022
Brilliant Idea #1
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Brilliant Idea #2
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See you next week.
Reads, Listens and Visuals I Enjoyed
- AG Urges New York Officials to Make ‘Deed Theft’ an Explicit Crime
- The Housing Market Has Gone From Bad to Worse [The Atlantic]
- The Daily Dirt [The Real Deal]
- Get Used to Startups Trying to Reinvent Housing — WIRED [Apple Stocks]
- Older, White and Wealthy Home Buyers Are Pushing Others Out of the Market [NY Times]
- The Housing Market Is Worse Than You Think [NY Times]
- Opendoor Writes Down Housing Inventory by $573 Million in Slump [Bloomberg]
- US Homeowners Have a Fat Equity Cushion for Real-Estate Downturn [Bloomberg]
- Opendoor Slashes 18% of Staff [The Real Deal]
- Joel Scheiber, WeWork's First Investor, Under Fire [The Real Deal]
- Eliot Spitzer Plans High-End Condo Building on Fifth Ave [The Real Deal]
- Are landlords using an algorithm to hike rents in NYC? [Brick Underground]
- Pandemic led to sharp spike in Black, Asian and Latino homeownership [Washington Post]
- NY Attorney General Dings Compass for Voucher Discrimination [The Real Deal]
- How Much will the Fannie & Freddie Conforming Loan Limit Increase for 2023? [Calculated Risk]
- GFP, MetroLoft Eye Conversion of 25 Water Street to Apartments [The Real Deal]
- More Than a Third of US Small Businesses Couldn’t Pay All Their Rent in October [Bloomberg]
My New Content, Research and Mentions
- NYC Condo and Co-op Sales Post Sharp Year-Over-Year Drops [Connect CRE]
- Billionaires' Row penthouse goes for a hefty $72M [Inman]
- WSJ News Exclusive | Penthouse on Billionaires’ Row in New York City Sells for $72 Million [Wall Street Journal]
- Penthouse on Billionaires’ Row in New York City Sells for $72 Million [Mansion Global]
- LA home sales continue slide: Douglas Elliman report [The Real Deal]
- Hoping To Supersize—or Downsize? These Cities Have the Largest and Smallest Homes for Sale [MYSA]
- Hoping To Supersize—or Downsize? These Cities Have the Largest and Smallest Homes for Sale [SF Gate]
- Newly Signed Housing Contracts Plummet In Palm Beach County [Boca News Now]
- Manhattan, Brooklyn Home Markets Keep Cooling from Hot 2021 [The Real Deal]
- Why the Fall Housing Market Won't Be Great for Buyers — or Sellers
Recently Published Elliman Market Reports
- Elliman Report: Colorado New Signed Contracts 10-2022 [Miller Samuel]
- Elliman Report: California New Signed Contracts 10-2022 [Miller Samuel]
- Elliman Report: Normandy Isles/Normandy Shores New Signed Contracts 10-2022 [Miller Samuel]
- Elliman Report: Florida New Signed Contracts 10-2022 [Miller Samuel]
- Elliman Report: New York New Signed Contracts 10-2022 [Miller Samuel]
- Elliman Report: San Diego County Sales 3Q 2022 [Miller Samuel]
- Elliman Report: Orange County Sales 3Q 2022 [Miller Samuel]
- Elliman Report: Malibu + Malibu Beach Sales 3Q 2022 [Miller Samuel]
- Elliman Report: Los Angeles Sales 3Q 2022 [Miller Samuel]
- Elliman Report: North Fork Sales 3Q 2022 [Miller Samuel]
Super Storm Sandy’s Decade Anniversary
- ‘We’re not ready’: NY, NJ still building for extreme weather 10 years after Hurricane Sandy [Politico]
- Hurricane Sandy Devastated Coney Island 10 Years Ago. So Why Has NYC Added Almost 2,000 Homes to the Area Since? [The City]
Appraisal Related Reads
- Discrimination against Black homeowners in the appraisal process: How to recognize it and what to do about it [Business Insider]
- Those claims of appraisal bias? Another study backs them up [Inman]
- Appraisal Gap Worsened During Pandemic [The Real Deal]
- How home appraisal methods can end up perpetuating racial inequality [Marketplace]
- New Federal Data Shows the Home Appraisal Gap Is Getting Worse [Bloomberg]
- Widespread Racial Bias Found in Home Appraisals [NY Times]
Extra Curricular Reads
- How to kick your habit of assuming the worst [Fast Company]
- The War of the Worlds : Orson Welles-Mr. Bruns : Free Download, Borrow, and Streaming [Internet Archive]
- How the Hawaiian Steel Guitar Changed American Music [Smithsonian Magazine]
- How candy corn became the villain in our modern Halloween lore [Salon]