Measuring the Median of Housing, Halloween & Hamptons

Official Statement on Halloween: Because I am fairly uptight, I do not wear costumes on Halloween, nor will I attend costume parties. Ironically my favorite color is orange. In a midlife crisis about 5 years ago my official favorite color morphed from blue to orange. Yes I am a complex individual. Oh, and I love candy.


One more thing. Let’s crowdsource to solve this riddle. It’s an advertisement on my commuter train and it’s driving me nuts. Then I can clearly focus on housing.

No really, how did she solve the riddle and get the classic 6?

A photo posted by Jonathan Miller (@jonathanmiller) on

Here goes…

Last of 3Q 2016 Elliman market report gauntlet is released

I am currently authoring 18 housing market research pieces for Douglas Elliman Real Estate, the 4th largest residential real estate company in the U.S. I’ve been writing these reports as an independent analyst for 22 years. They are used by the Federal Reserve, HUD, FHA, IRS, OMB NY and other agencies. The market coverage areas continue to expand and I’ve got more in development. One of the most satisfying things in this effort is to see real estate appraisers in many of these markets source them in their reports. This is week 4 of the 3Q16 gauntlet:

  • Hamptons, North Fork and Long Island, NY
  • Aspen/Snowmass Village, CO
  • Los Angeles, CA

Elliman Report: Hamptons Sales 3Q 2016

There were more sales in Hamptons housing market this quarter but price trends were mixed. There were 517 sales during the quarter, up 2% from the year ago quarter and the first such increase in more than a year. Listing inventory declined on a year-over-year basis for the fifth consecutive quarter. There were 1,533 listings, down 10.4% from the same period a year ago. As a result of rising sales and declining inventory, the pace of the market was faster than the year ago period…

Reading about the Hamptons housing market is a big pastime with Wall Streeters so I was hoping we could score a #1 read on the Bloomberg Terminals for the 4th week in a row, but alas, the Bloomberg article on that topic was only the 8th most read article worldwide. 8th place worldwide is hardly worth rolling out of bed for but I’ll take it. I suspect its because the Hamptons headline lacked words like “glut”, “plunging” or “pickier” (inside joke) – or even “Lazy, Fat, Stupid” as the #1 article used.


And of course a chart is always super cool to see.


There were some other great reads on housing markets published in the links at the bottom of this Housing Note. Here are some of the highlights for each market:

Elliman Report: North Fork Sales 3Q 2016

The number of sales in the North Fork housing market jumped as the price trend indicators slipped. There were 199 sales, up 19.9% from the prior year quarter and the most third quarter sales in over a decade. The increase in sales overpowered supply. Listing inventory fell 23.4% to 472 over the same period. As a result the pace of the market accelerated. The absorption period, the number of months to sell all inventory at the current rate of sales, declined to 7.1 months from 11.1 months in the year ago quarter, the second fastest quarter since 2008…

Elliman Report: Long Island Sales 3Q 2016

Long Island sales activity rose to a 14-year record, consistent with the heavy volume seen in other New York City suburban markets. There were 8,362 sales, up 9.2% from the year ago quarter and up 32.2% from the prior quarter. The latter was consistent with the 28.8% jump in pending sales in the prior quarter. Listing inventory fell 22.3% to 12,473 and a 13-year low. As a result of unusually high sales and low inventory, the pace of the market was the fastest since 2003. The absorption rate, the number of months to sell all inventory at the current rate of sales, fell 28.6% to 4.5 months, the fastest paced quarter in 13 years…

Newsday presented a great article on the aftermath of Superstorm Sandy that hit Long Island hard almost exactly 4 years ago. The housing market of the South Shore of Nassau County was hit the hardest by the storm surge as the storm pushed water inland with no place to escape. What’s most interesting about this housing market is that prices are up, even outperforming overall Long Island mainly because the homes that were rebuilt the soonest tended to be skewed towards larger more expensive properties. The selling of those homes skewed prices higher.

Source: Newsday Data: Miller Samuel/Douglas Elliman

Elliman Report: Aspen Sales 3Q 2016

ASPEN The Aspen housing market continued to shift towards smaller properties as the pace of the market slowed. The average size of a sale declined 27.6% to 2,414 from the prior year quarter pulling average and median sales price trend indicators lower. Price per square foot declined 2% to $1,352 from the year ago period, but was up year to date by 2.8%. The overall number of condo and single-family sales fell 23.2% to 63 sales with all of the decline attributable to the single family market…

SNOWMASS VILLAGE The pace of Snowmass Village marked moved faster with more sales and less inventory. There were 35 sales in the third quarter, up 9.4% from the same period a year ago. By property type, the number of sales rose 10.5% for condo sales and 7.7% for single-family sales. Listing inventory declined 3.8% to 230 from the year ago quarter. As a result the absorption rate, the number of months to sell all inventory at the current rate of sales, was 19.7 months and 12.1% faster than the year ago quarter…

Elliman Report: Los Angeles 3Q 2016

The Westside and Downtown Los Angeles housing market continued to see rising prices, higher sales and more inventory. Median sales price increased 5.3% to $1,000,000 from the year ago quarter. This was the third consecutive quarter this metric was at or above the $1 million threshold and it’s 17th consecutive quarter with a year over year increase. Average sales price increased 7.1% to $1,506,388 and price per square foot showed a similar rising trend from the prior year period…

The LA report shows the high end of Los Angeles (Downtown + Westside, etc.) to be one of the fastest moving housing markets I cover. The absorption rate, which is the number of months to sell all inventory at the current rate of sales, was a white hot 3.1 months with both prices and sales volume continuing to rise. If there were to be a weak line, it is the high end which is seeing a slight slow down in pace. Curbed LA and The Real Deal LA provide a nice summary of the report.

Median Sales Price: A safe but occasionally misleading metric

In the aftermath of the Hamptons report results that showed a 13.2% drop in median sales price I thought I’d break it down. I will explain why we saw a large drop in median sales price even though housing prices aren’t declining by exploring how we got there. I delve into why median as a price trend metric is one of the better tools we have but is not without its problems. Here’s a screenshot of a snippet of my spreadsheet on the Hamptons market. Yes, I like bright colors.

In the bottom 3 rows in the aqua blue section, the $1M-$5M section dropped 24% but the north of $5M and south of $1M sales volume jumped 29% and 21.9% respectively. Because the market share of sales below $1M was nearly 60% of all sales and therefore negated the tiny sliver of the market north of $5M that jumped, the middle of the market was pulled much lower.


Housing prices aren’t falling in the Hamptons, rather the mix shifted lower. This is very consistent with the region that continues to see housing market soft at the top.

Median sales price is viewed as safe because it removes the outliers, high and low, from the market, peeling back layers equally from the bottom and the top until the center is reached. It’s the official metric of real estate specifically for that reason i.e. NAR Existing Home Sales. For that reason it is better than relying on average sales price but as I have said before, there is no magic number or metric to define a housing market trend or its health. Whether you are an appraiser, real estate agent or consumer, the use of housing metrics should be done in total, that is, using as many as you can and understand how they relate to each other.

That’s why this TRD NY headline about our Hamptons report makes perfect sense after you dig in:

As Manhattan’s luxury market cools, Hamptons high-end properties rise in Q3 [TRD NY]

I wrote about median sales price a decade ago and it still holds true. A couple of years ago I whipped up a table that shows how median sales price can perform in changing housing markets. Median is subject to skew by consumer behavior rather than math. Click on that graphic below to expand.


Valuing penthouses with apples and apples

Brick Underground wrote a post on The pros and cons of buying a penthouse apartment which seemed timely because there is a lot of misunderstanding about the penthouse premium. I wrote about this more than a decade ago for a very much missed local real magazine called New York Living.

Between the Brick Underground article and my old article there is plenty to work with. To cut to the chase, most penthouses have outdoor space yet the price per square foot metric only considers the interior space. That means the the ppsf is skewed higher by default since the denominator of the equation is insufficient. In other to remove the skew, you need to convert the terrace area into its equivalent interior square footage. i.e. if a terrace is worth 50% of interior space, then a 1,000 square foot terrace is the equivalent of 500 square feet of interior space and that is added to the denominator of the price per square foot formula. That way you can compare penthouses with and without terraces in a more reasonable way. It doesn’t factor in the premium but it does more readily equalize the sales. I believe this is the number one reason many market participants overvalue the penthouse premium. I illustrate this more extensively over on my Matrix Blog: [Terra Logic] Understanding The Value of Manhattan Apartment Outdoor Space.

I’ll bet this “terra logic” applies to most highrise condos and co-ops housing markets outside of New York.

More big sales

Although the era of press releases announcing 9-digit listings across the U.S. ended more than a year ago that never sell, that doesn’t mean that we won’t see occasion sales at or above the $100 million threshold.

Here is the the second $100 million sale in LA this year:


To all LA appraisers out there – now you have a couple of comps! LOL.

Manhattan only has one 9-digit closed sale in this price range so far, so here is a partial list of “more affordable” sales in Manhattan from high to low:

Here are the 10 most expensive apartment deals in N.Y.C. history — so far

007: High End Branding in Housing

For the past two years, inventory has been getting a lot more crowded at the very high end of the market (i.e. “soft at the top”). I am beginning to wonder whether new super luxury projects will need some sort of global branding to stand out against the competition. Err, to make sales move faster…

In Miami we’ve already seen the Porsche Tower whose branding played a role in moving units. As a former long time Porsche owner and now recent Dodge Challenger SRT 392 Coupe owner, I am having trouble imagining a “Dodge Tower” super luxury condo development anywhere.

Astin-Martin, the maker of James Bond 007’s preferred car, is now in the condo branding business.



Of course I’m not in that demo because, this is all I need.



The appraiser industry disconnect with real estate sales industry

The Real Deal Magazine, a must read monthly industry magazine, features columnist Ken Harney, who is a reader of these Housing Notes and writes regularly on appraisal issues. The magazine pushes out its content over social media up until the next issue is published. Ken’s column that came out a month ago about the appraisal scarcity controversy (i.e. the misinformation that AMCs are pushing out about the shortage of appraisers that doesn’t exist) was in my feed again and I felt compelled to share it here, largely after the following video was sent to me.

Before you watch this, consider the fact that NAR, the largest trade group for real estate agents and brokers in the U.S., has a membership with a staggeringly low level of understanding about what appraisers actually do, even though they interact with appraisers very frequently. I’m not giving NAR a hard time here, but it is time they made a concerted effort to educate their members about the appraiser’s role in the transaction.

Of course there is an inherent conflict between the two industries, real estate sales and real estate appraisal:

  • a listing agent’s job is to get the highest price for their seller
  • an appraiser’s job is to provide a reasonable market value opinion.

This video shared with me will make your blood boil, at least it did for me.

Do you want the value or not?

Not Everyone Is Ready For An Appraisal Of Reality – here is something I wrote about the industry just as the housing market was peaking in 2006. Sales were already slowing (U.S. sales volume peaked in 2005, a year before the U.S. price peak in the summer of 2006. At that point I felt very alone in New York. Every one in real estate seemed to know that the market always rises. Right.

Appraisers aren’t forecasters

One more old timey appraisal post for you – My good friend and appraiser colleague John Mason used to write a column on my blog during the housing bubble along with a half dozen other appraisers. Since his post has a Halloween themed title and touches on the idea that current lenders are starting to look to appraisers to “forecast” – I thought you’d enjoy it.

Price per square foot and land

Tom Horn at Birmingham Appraisal Blog wrote a great post on price per square foot. If you read through my article on penthouses above, and swap out land for terrace, you can see how price per square foot skews things. But get used to it. City residents being priced out and moving to the suburbs, think in terms of price per square foot much more than suburbanites do.

Voice of the Appraiser Survey

October Research just published their annual survey on the state of our profession. There is a lot of stuff to pour over but what stood out to me was the question: Have you seen an increase in your appraisal fees since “customary and reasonable”? The share of “yes” answers have been rising – from 29.9% in 2012 to 39.7% in 2016. It’s still basically a low result but the increase is consistent with the “shortage of appraisers” talking point that AMCs continue to push. I believe this trend really reflects the exodus of appraisers shopping their skills to greener pastures (non-lending work) for clients that are willing to pay the market rate.


A Brilliant Idea

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them. They’ll dress up in a Halloween costume, you’ll market your mixtape and I’ll finally find the candy my kids hid from me a few years ago.

See you next week.

Jonathan Miller, CRP, CRE
Miller Samuel Inc.
Real Estate Appraisers & Consultants

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