Ranked Second Only to the Patron Saint of Gentrification

Before I get too saintly here, my second oldest son is getting married this weekend (next week’s status of my 4 sons: 50% married, 25% engaged, 25% with a significant other) so I am going to keep this Housing Note brief because there are a lot of free range family floating around.

But nearly as important, I finally figured out what bothered me about the movie Avatar. As with real estate market nuance, the devil is in the details, so to speak.

and speaking of graphic designCitylab presented the efforts of a graphic designer in Mexico City who wanted to address the displacement caused by gentrification. And don’t forget the patron saint of home and family, Saint Joseph. Ok, back to the article on gentrificaiton with a little poetry.

While we’re at it with poetry and lyrics, I have been slogging The Lost Bank: The Story of Washington Mutual, the Biggest Bank Failure in American History. It’s a great read but the subject is so well researched that I needed to periodically stop and read something lighter. I came across a variation of American Pie modified for the housing bubble in the book:

but I digress…

The 3Q 2017 Report Gauntlet Begins: Up First, Manhattan Sales

Douglas Elliman Real Estate published our research on the Manhattan Sales market for 3Q2017. This is part of an expanding report series that I’ve authored since 1994. Here are some highlights.

  • Median sales price increased but fell short of prior quarter record
  • Most overall sales in two years as overall inventory slipped
  • Average sales price fell across most markets as legacy appear to decline
  • Co-op median sales price set 28-year record high
  • Luxury inventory declined as overpriced listings continued to drop out
  • Resale inventory fell for second consecutive quarter as new development supply continued to expand
  • Market share of bidding wars remain less frequent in larger apartments

The report story was the second most emailed story on the Bloomberg Terminals worldwide. Wall Street loves their Manhattan real estate stories. The New York Times, CNBC, The Real Deal NY, Mansion Global, Curbed NY, Brick Underground, Crains NY, DNAinfo Buzzbuzzhome and others also provided great context of the state of the market.

Here’s a portion of the interview I did yesterday on Bloomberg Television on the Manhattan housing market. It was great to meet Julia and see Scarlet and Joe again:

If you’d like to see the whole segment, my interview starts at the 48:40 mark. I really like the show format and the chemistry of the hosts so you might want to watch the whole show.

CNBC presented the Manhattan report as an info-video:

Manhattan apartment sales highest in two years from CNBC.

Bloomberg presented a cool chart for their online story:

And we have a slew of our own charts – I selected a few favorites:

Location, Affordability, Location

A cartoon by Bruce Eric Kaplan, from this week's issue. Follow @newyorkercartoons for more #TNYcartoons.

A post shared by The New Yorker (@newyorkermag) on

Wolf’s Sidewalk Warmers

Wolf Jakubowski is a top Manhattan townhouse broker who’ve I’ve known for most of my appraisal career. I’ve subscribed to his newsletter for years. This recent factoid really resonated with me.

Blurring Neighborhood Boundaries

Defining neighborhood boundaries can be a hot button for locals, a marketing opportunity for some and confusion for many. Throw in the idea that they change and evolve over time and you can have pandemonium. I’m involved in a startup called NeighborhoodX run by my friend Constantine Vahouli who makes it their business to tell fascinating stories through research and analytics.

There was a great read in on this in the The Real Deal Magazine current issue.

Relating Land Cost to Housing Prices

HowMuch.net created a visualization to compare land and housing prices…

Everyone knows location is the most important part of real estate. You can’t change where your house is (all things being equal). You have to consider school districts, crime rates, commute times—the list goes on and on.

It feels like the “price per square foot” method of comparing slightly different sized condos within the same market subset. Land is vastly more expensive where the colonists first set foot.

ROI on Investor Units, Deconstructed

Using the Bloomberg story “Manhattan Condos Are Barely Yielding More Than Government Treasuries” – The Real Deal Magazine shared a Streeteasy infographic to illustrate the declining return for investors who buy condos for their ROI.

Here are a couple of things to contemplate in the Streeteasy analysis that is commonly not understood:

  • ROI was not a key driver of the latest new development investment boom – it was more about diversification and asset preservation with a dash of currency play.
  • Their analysis doesn’t take into consideration any use of leverage, a key advantage of real estate over stocks. Even if consumers tended to pay more cash for these units, often their cash comes from banks in their home country. I wrote about ROI using mortgage leverage a few years ago.

In these series of charts using our research, the yield is higher because it includes co-ops and condos and the overall rental market is configured with smaller units than the condo market. Still, the trend is slipping.


Stand me up at the gates of hell but I won’t back down

Tom Petty has been one of my favorite musicians and it was sad that he passed away unexpectedly. He was a frequent “go to” listen in college with “Damn the Torpedos” his second album after he extracted himself out of a bad contract on his first one. His style was simple melodic rock and roll and solid lyrics. His song: I Won’t Back Down should be the theme song for the appraiser grassroots movement of the past few years with the lyric:

FTC Grants a Settlement Conference In the Matter of Louisiana Real Estate Appraisers Board

Here is the motion. There is no clear messaging being conveyed yet as to whether this motion is favorable or unfavorable to the Louisiana board since they requested the conference. h/t Michael Small

FCC Timeline of the Case

The Federal Trade Commission filed an administrative complaint against the Louisiana Real Estate Appraisers Board, alleging that the group is unreasonably restraining price competition for appraisal services in Louisiana, contrary to federal antitrust law. The complaint alleges that the appraisal board’s regulations exceeded the scope of the mandate outlined in the Dodd-Frank Act that required appraisal management companies to pay “a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.” Specifically, the board required appraisal fees to equal or exceed the median fees identified in survey reports commissioned and published by the board. The board then investigated and sanctioned companies that paid fees below the specified levels.

AI National’s Executive Leadership Regularly Flys To International Events With Their Spouses At Membership Expense As Rome Burns

I understand that the current and upcoming president and their wives are traveling to Munich for EXPO REAL which also coincides with Oktoberfest. According to a German banker, AI has sent 2 representatives and their wives to attend most European valuation events for years.

Here’s the proper context for this behavior:

  • AI membership doesn’t know about this activity.
  • AI Membership numbers are hemorrhaging.
  • AI National intends to take nearly all chapter funds on January 1st to “help” relieve the chapter’s administrative burden (aka The “Taking”) when it is really looking like a money-grab to fund existing jet-setting lifestyles. All the outrage membership expressed in late 2016 and 2017 to date doesn’t seem to have quelled their thirst for travel.

We’ve documented this behavior or heard membership share knowledge of many other destinations besides Germany, including China, Romania, and Serbia.

Now ask yourself these questions:

  • How does this ongoing expense benefit the members of AI or solve the organizations chronically falling membership?
  • What is the AI National policy on paying for a spouse to travel on these junkets? Is this stated in a policy manual anywhere?
  • Do members have access to this or some other form of this benefit?
  • Did former CEO Fred Grubbe and his wife get these free trips over his decade of leadership?
  • Is there organizational documentation of where and when Grubbe and the executive committee have been traveling the globe, who accompanied them and how much of the costs were fully or partially reimbursed? i.e. spouses, friends, other couples, etc.

In my view, this stealth international travel pattern is highly unethical and simply immoral, possibly criminal. The organization needs to be reimbursed by all who exploited the hard working membership for these boondoggles. There can be a parallel drawn to recent travel scandals in the federal government.

The next time you see someone from AI National executive leadership, please ask them about their upcoming travel plans.

Good grief.

AI Leadership hasn’t “missed a MIPIM in a decade”

A high-up industry leader asks:

“They haven’t missed a MIPIM in a decade – always in twos, always with the wives, always first class. Why? The US organization is failing so why are they spending all this money to go outside of the US instead of tending to their core constituency.”

“Essentially, they want to go wide on International and are changing the bylaws to allow tiny and lots of chapters in non-US. While they take our money to support the failing US chapters.”

Upcoming Speaking Events

  • October 12, 2017: Fall Meeting of the Industry Advisory Council (IAC), Washington, DC
  • October 24, 2017: O’Connor Davies Symposium, New York, NY
  • October 25, 2017: Asian American Real Estate Association of America (AREAA), New York, NY
  • November 2, 2017: Manufactured Housing Institute, Chicago, IL

A Brilliant Idea

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. They’ll buy some American Pie, you’ll that being number 2 isn’t all bad and I won’t back down in front of the gates of hell.

See you next week.

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

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