Watching the Housing Detectives
It’s been an exciting 10 days, to say the least so bear with me while I spin my yarn.
It started with a trip to the epic Appraiserfest 2018 in San Antonio, Texas, hence my “placeholder” Housing Notes last week. The event was a rousing success for the underrepresented residential appraisers across the U.S and was the talk of D.C. regulators (in a good way) as I found out later. I got to meet all my “fake” appraiser friends (my wife classifies online friends as “fake” until you meet them in person.)
I keynoted on Thursday and got to hear my peers present amazingly pragmatic insights to promote appraisers’ professional practice and their businesses. During the convention – which was more like attending a rock concert wearing a bubble suit – several of my colleagues and I were interviewed for an upcoming epic documentary on the financial crisis that finishes with our industry (you know, the one that warned everyone what was coming but the history books have already laid blame at our feet).
From the conference, my wife and I flew to D.C. on Sunday for Monday’s Appraisal Subcommittee Roundtable (ASC) at the OCC (with LMNOPQRSTUVWXYZ) on Monday where I met more of my appraiser colleagues and senior officials from federal agencies and chief appraisers of global financial institutions to look at the path ahead for valuation services. For the first time, appraisers were representing themselves rather than relying solely on trade groups, one of which does not have our best interests in mind.
On Tuesday, my wife and I took the train back to Connecticut to vote. Oh, and I had an emergency root canal and had to replace my brand new “iBrick” with an iPhone XS Max that actually worked. Then I published the Douglas Elliman rental report that was the top ten most read story on the 350K± Bloomberg Terminals and was interviewed many times on the Amazon HQ2 decision to locate 25K high wage earners in Long Island City, Queens.
Tonight we’re headed to see Elvis Costello with friends and I can’t clear my mind of the song “Watching the Detectives”…
I’m exhausted but highly satisfied with the past ten days. Now I need to downshift a bit. Some people watch fish tanks to relax and clear their mind. I do this:
I'm not normally one for politically charged social commentary but here's some ducklings on a water slide. pic.twitter.com/YV68lrfJ3P— Paul Bronks (@BoringEnormous) November 7, 2018
But I digress…
Elliman Report: Manhattan, Brooklyn & Queens Rentals October 2018
I’ve been the author of the expanding series of market reports for Douglas Elliman since 1994. Most of the research is pushed out quarterly but we also release a monthly rental report covering Manhattan, Brooklyn and the northwest region of Queens. The news leak that Amazon had selected Long Island City Queens as a split site for HQ2 along with Crystal City, Virginia was a simultaneous bombshell news event that I’ll discuss later in these notes.
I was pretty confident that after this week’s mid-term elections and the Amazon HQ2 announcement, no one would care about the status of NYC rental market. As my sons often tell me, “you’re wrong, Dad” and the story coverage ranked the “tenth most read” on the 350K± Bloomberg Terminals and we got a chart!
Here are some bullet points on the release:
– Market share of concessions rose year over year for the 41st consecutive month
– Vacancy rate fell to lowest level for an October in nine years
– Median face rent skewed higher with heavy influx of higher quality rentals
– 2 and 3+ bedroom median rent were only size categories to see declining rents and market share
– New development median rent declined while existing median rent increased respectively year over year
– Median rent for the Mid Tier segment ($2,700 – $3,800) continued to outperform all others
– Market share of concessions rose year over year for the 33rd consecutive month
– Second highest concession market share in more than eight years
– New development prices rose much faster than existing rentals, skewing overall prices higher
– Several years of new development activity is skewing price trends higher
– New development rents accounted for nearly 43% of all activity
– Face rent indicators continued to rise as new development skewed prices
– Fourth consecutive month with large year over year gain in new leases
Some of my favorite rental charts from our gallery:
We’re All Amazon Now: HQ2 Lands in LIC, Queens NYC
For years, we’ve observed the massive overbuilding of rental and condo multi-family development in Long Island City, Queens. After all, it is only one subway stop from Manhattan and has more in common with Midtown than the borough of Queens itself based on pricing. Despite the thousands of units coming online there over the next few years, the streetscape retail there is largely barren. It has long felt less like a neighborhood and more like a collection of new buildings.
But that may change.
Memo to the genius leaking info about Crystal City, VA as #HQ2 selection. You’re not doing Crystal City, VA any favors. And stop treating the NDA you signed like a used napkin. https://t.co/wqrZLqr8MQ— Mike Grella (@MikeGrella) November 3, 2018
Oh, and Google is doubling down on New York City. Good for the economy but so much for housing affordability.
Here are some of the stories on the HQ2 move:
50 Million Chinese Homes Are Empty?
While visiting China in 2015 and 2016, namely Shanghai and Beijing, I was obsessed with the question of housing resale activity. I observed that there was basically either an ancient, dilapidated housing stock or newly constructed towers. I was skeptical about my theory that new development did not have a resale market. I was told that multi-generational efforts by families to pool their funds to buy a new unit drove all sales, and of course, all land is owned by the government. Consumers are wary of the stock market there (rightly so given government manipulation) and they seemed enamored with the housing boom. As much as I asked, I never got a satisfactory answer or saw evidence of an active resale housing market (resale is called by the derogatory term “used” in China). If you can show me the error of my thinking, please do!
Bloomberg now reports that 20% of all homes are vacant:
This Week in Aspirational Pricing
- It’s hard to read this headline out loud without using sarcasm:
- A riveting deep dive:
- A home I appraised years ago just sold. Years afterward I learned that Michael Jackson rented it for $75,000 per month on a month to month basis.
- $200M+ listings are officially a dime a dozen:
According to the New York Post…
- Here’s proof that you can still by a home when you get fired from your job:
Travis Kalanick, co-founder of ride-hailing giant Uber who was pushed out as chief executive by investors last year, has inked a deal to buy a glamorous New York City penthouse for about $36.4 million, according to people familiar with the deal.
Yay! Millennials Look Away From Their Screens Long Enough To Buy A House
The share of households who own their home and are headed by someone under 35 years old rose to 36.8% in the third quarter from 36.5% in the second quarter, and was up 1.2 percentage points from a year earlier.
That was significantly more than the overall increase in the homeownership rate. The share of American households that own a home inched up to 64.4% in the third quarter, up from 64.3% in the second quarter and up half a percentage point from a year earlier, according to data released Tuesday by the U.S. Census Bureau.
No Time For Sex When Housing Prices Are Rising
I’m a sucker for junk stat correlations when they’re fun. Here’s the latest from Zillow: Birth Rates Dropped Most in Counties Where Home Values Grew Most. Here’s the Tableau work table to play with (if you have time):
(For earlier appraisal industry commentary, visit my old clunky REIC site.)
Appraiserfest Has Your Back (And Your Teeth)
After an amazing Appraiserfest conference in San Antonio, I had to have an emergency root canal. So for protection, I wore my Appraiserfest t-shirt and all went well. Proof positive that the Appraiserfest movement has your back (and teeth).
What The Appraiserfest 2018 Conference Happening Meant
I can’t speak for each attendee at the San Antonio happening but I can say what it meant to me:
- A big thanks to Phil Crawford, Mark Skapinetz and Lori Noble for making the dream happen!
- There was LOVE everywhere – I can’t tell you how many people I spoke to teared up when they talked about the event
- This was the first “non-trade group” appraiser-centric event in history
- About 80% of attendees (my rough poll) had NEVER attended an appraisal conference before
- A documentary crew interviewed a number of appraisers about their experiences during the financial crisis
- It was “appraisers-only” so everyone was relaxed and open for discussion
- It was not a “complain-fest” and was orientated towards the future
- The event was entertaining and upbeat at all times – like a rock concert
- There was almost no “whining” (and we’re good at that) since the purpose of this event was to inspire appraisers to look at other business opportunities right in front of them
- Appraisers who were military veterans were honored in a moving ceremony
- Attendees were inspired to share their successes such as operational tips and new sources of business
- Appraisers were lauded for their valuable skills instead of being “beat down” by the entire mortgage world as a cog in the mortgage machine
- AMCs were not regularly dissed during the sessions despite their damage to the quality of valuations, partly because lenders are just as much at fault and we can’t solve the AMC problem ourselves
- Most appraisers said they continued to be pressured to “hit” numbers by lenders and AMCs
- The appraisers that attended were taking responsibility for the future of their careers
- The mortgage valuation arena is going to lose more of the brain trust of residential valuation if they don’t rethink waivers and hybrids
- It was widely discussed that hybrid products increased turnaround times and reduced valuation quality so there was general confusion as to why AMCs were aggressively pushing them (it is just another source of business revenue, otherwise no advantage)
- Our largest industry trade group focuses on fear and “how not to get sued” – none of that at Appraiserfest
- Many attendees won’t be able to get the image of Mark and Phil in bubble suits out of their mind (they’re not sorry about that)
- I always had Frank Black’s song “Czar” as my fantasy intro music and gave my song request to Phil before he even finished asking the question
- I finally got my own “G5”
Cheaper = Less Reliable
I saw this on Mark Skapinetz’s 100% RE Appraisers Facebook private group and I hope he doesn’t mind. This image says it all.
Remember that many financial institutions embrace this misinformed think because of the federal backstop.
Banking Propaganda About Appraisal Services Ignores Keeping The Public Trust
This is a super dumb interview, seriously.
OFT (One Final Thought)
If this chart contained “Manhattan” instead of the five boroughs of “NYC” it would be well over 50%:
% of homes worth for over $1 million, by metro area— Mike Rosenberg (@ByRosenberg) November 8, 2018
San Francisco: 81% (not a typo)
San Jose: 70% (ditto)
San Diego: 14%
Portland: 2.5%https://t.co/tXaTL3uaCw pic.twitter.com/7JwxzhcEtp
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 live in a house made of pee;
- You’ll wear bubble wrap more often;
- And I’ll fly in my own G5.
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.
Reads, Listens and Visuals I Enjoyed
- Google Plans Large New York City Expansion [The Wall Street Journal]
- A Fifth of China's Housing Is Empty. That's 50 Million Homes [Bloomberg]
- What’s 8 Feet Wide and Has an Elevator? Manhattan’s Tiniest Fancy Townhouses [Realtor.com]
- Amazon could turn LIC into a company town [The Real Deal]
- Birth Rates Dropped Most in Counties Where Home Values Grew Most [Zillow]
- Uber Co-Founder Travis Kalanick Buys Manhattan Penthouse for $36 Million [The Wall Street Journal]
- U.S. Midterm Economic Analysis [Northern Trust]
- Zillow stock tanks [Housingwire]
- Amazon ‘HQ2’ will boost house prices in chosen cities, but not like Seattle [MarketWatch]
- What HQ2 could mean for the Washington region’s housing market, in 7 charts [Urban Institute]
- What Is the Real Vacancy Rate for Manhattan Storefronts? [Commercial Observer]
- Brokers Need to Shift Strategy Immediately [WAV Group Consulting]
- Amazon's Potential NYC Home Bolstered by Trump's Tax Breaks [Bloomberg]
- A Manhattan Penthouse Faces Reality, Cuts Price to $62 Million [Bloomberg]
- The odyssey of the Mountain: Inside the struggle to sell 157 acres atop Beverly Hills [The Real Deal]
- Former Home to Michael Jackson and Marc Chagall Sells for $32 Million [The New York Times]
- Yes, In Your Backyard [The New York Times]
- Why This Startup Is Betting $30M Stock Trading's Business Model Could Turn Real Estate On Its Head [Forbes]
- Millennial Buyers Drive Uptick In Homeownership [The Wall Street Journal]
- Quarterly Residential Vacancies and Homeownership 3Q18 [Census.gov]
- Investors Are Readying for a Home Price Spike in the Amazon HQ2 City [Citylab]
- Opinion | The Economy Is Great, Really, for Now [The New York Times]
- Rowland Atkinson – London’s extraordinary surplus of empty luxury apartments revealed [Brave New Europe]
- All cities should have our problems [Crain's New York]
- Harlem Penthouse Sale Sets Uptown Record at More Than $9 Million [The Wall Street Journal]
- Soon you may be able to live in a house made out of pee [Fast Company]
- America’s most expensive home just listed for $245M [New York Post]
- Why Homeowners Staying in their Homes Dampens the Housing Market [First American]
My New Content, Research and Mentions
- Influx of Amazon, Google hires could hike Long Island housing costs [Newsday]
- Selling a Penthouse to Amazon's Jeff Bezos Is a Queens Broker's Dream [Bloomberg]
- More than half of Brooklyn rentals had concessions in October [The Real Deal]
- Manhattan Rents Are Climbing Again. Blame the Weak Sales Market [Bloomberg]
- HQ2 and Housing Affordability [Professional Builder]
- Looking for a deal on a new development rental in NYC? Head to the outer boroughs [Brick Underground]
- Amazon's New Headquarters May Be a Prime Deal for Two Cities, but Where Will Workers Live? [Realtor.com]
- What happens to apartment prices and rents if Amazon's HQ2 lands in Long Island City? [Brick Underground]
- Manhattan rental market in holding pattern [The Real Deal]
- Fewer Concessions for High-End Manhattan Renters [Mansion Global]
- Is Long Island City ready for Amazon’s HQ2? [Curbed]
- 想不到，美国都市的偏远郊区比市区更贵！都不是省油灯… – 雪花新闻 [Xuehua.us]
- Dissecting the Queens condo craze [The Real Deal]
- The housing market is cooling off — and uncertainty isn't helping [Business Insider]
- The housing market is cooling off — and uncertainty isn't helping [Insider]
- Aspen’s Luxury Real Estate Market Cold Going Into Winter [Mansion Global]
- Numbers Don’t Lie: Third Quarter’s A Dud [The Independent]
- Hamptons Cheat Sheet: South Fork home sales drop for third consecutive quarter … & more [The Real Deal]
- Is Long Island's Housing Market Strong Enough to Withstand a Downturn? [The Foggiest Idea]
- Average sales prices down in Fairfield County housing market [Westfair Online]
- Number Of South Fork Real Estate Sales Down For Third Consecutive Quarter [27east.com]
Recently Published Elliman Market Reports
Appraisal Related Reads
- A hair stylist says we’re not in a bubble… [Sacramento Appraisal Blog]
- Dissolution appraisal reports [Ann Arbor Appraisal Blog]
- What Would Happen if There Were No Appraisers? [Birmingham Appraisal Blog]
- Why do appraisers take pictures of my home? [Shannon Slater/APPRAISALUSA]
- Don’t Be Afraid Of Talking To The Appraiser! [Cleveland Appraisal Blog]
- Get Ready For Lower Quality Appraisals [Birmingham Appraisal Blog]
- Amrock ordered to pay $740 million to HouseCanary for trade secret theft [HousingWire]
- Who’s best at home valuations – owners or websites? [Florida Realtors]
- Human Real Estate Appraisers Unnecessary? [Appraisers Blogs]
- Pre-listing appraisals [Ann Arbor Appraisal Blog]
- Are you or a computer better at figuring out what your home is worth? [The Washington Post]
Extra Curricular Reads
- The Waffle House Index [Household Name Podcast]
- 720,000 Newly Digitized Historic Photos Show Where New Yorkers Lived In The 1940s [Gothamist]
- Coffee Shops Are Better Than Open-Plan Offices, According to Science [Inc.]
- When It Comes to Sleep, One Size Fits All [The Wall Street Journal]
- The Myth of ‘Dumbing Down’ [The Atlantic]
- Colgate key sales measure falls for first time since recession [Crain's New York]
- The Alarming Homogeneity of Instagram Travel Photos [Hyperallergic]