Figuring Out The Housing Market Begins With Profane Thoughts

The following clip is my motto (NSFW). This is literally what I do all day…


If you need to understand the origins and structure of new profanity, go here.

But I digress…

Next week begins our 3rd quarter market report gauntlet so get ready for a lot of reports and charts on more than forty U.S. housing markets we cover for Douglas Elliman Real Estate.

Q: Why Is It So Hard To Find An Apartment? A: Build More Housing

Justin Fox, an op-ed writer for Bloomberg, has a unique ability to bring clarity to complicated questions. I interviewed him on my podcast years ago when he published “The Myth of the Rational Market.” In his recent effort, he tries to talk us through the problem of finding an affordable apartment:

Why Is a New York Apartment Still So Hard to Find? The pandemic exodus from the city hasn’t led to an era of cheaper rents. [Bloomberg Opinion]

Why Is a New York Apartment Still So Hard to Find? [Washington Post]

Its opening paragraph sets the stage:

New York City’s population fell by an estimated 336,677, nearly 4%, between April 2020 and July 2021, according to the US Census Bureau. Timelier data from US Postal Service address changes, the Federal Reserve Bank of New York/Equifax Consumer Credit Panel and other sources indicate that more people are probably still leaving the city than moving in. Payroll employment (which includes those who commute into the city) has been rising but remains 161,500 lower than in February 2020.

Here are a handful of charts that helps tell the story.

The NYC Rental Market Is Brutal Per Marketplace

Just saw this piece and my mind started racing about how the market is showing pre-pandemic patterns like a tight starter market and softening high-end market.

Here’s an anecdotal thought shared by two Lyft drivers I spoke to in Dallas a few weeks ago. Both said that they were transferred to Dallas from the NYC metro area, and both said it was a lot cheaper to live in Dallas. Yet both said it was boring there (sorry to my friends and readers from Dallas) and wanted to return to New York. As my grandfather used to tell me as a kid growing up in the DMV, “If you’re not living in New York, then you’re just camping out.” NYC is awesome and there is a reason many people are willing to put up with high rents. Its a trade off.

How brutal is NYC’s rental market? Just ask this producer.[Marketplace]

In case you haven’t heard, New York City’s rental market is … bonkers. A report by real estate company Douglas Elliman found that average net effective rents in Manhattan were north of $5,000 in August. Over in Brooklyn, where this poor soul recently apartment hunted, the net effective median rent jumped more than 27% yearly to $3,464 — the highest on record.

[CNBC VIDEO] A Look At A $250M New Manhattan Condo

The luxury market is under pressure as fed policy begins to cause havoc in the U.S. real estate market. The asking price of this 17K square foot condo is just under $15K per square foot. What’s odd about the pricing here is that the rest of the building is getting a ~ 25% discount off the top, suggesting this asking price is aspirational since competitors got $10K per square foot. However, in a competing building a few blocks away that fronts the park, there have been sales in the $13K to $19K per square foot, and penthouses tend to be a disconnected submarket of the building they sit upon.

My son just moved into a 6th-floor rental walk-up downtown, and I’m sure he feels the same way at the top of his respective building but is breathless for another reason. Ha.

The San Francisco Fed Quantifies The Impact Of Remote Work On Pandemic Home Price Gains: Half

This month the SF Fed released a white paper that quantifies the impact of remote work on home prices. Translation: its not all about mortgage rates.

We find that the shift to remote work accounts for more than half of overall house price growth over the pandemic. Our results suggest that rising house prices over the pandemic reflected a change in fundamentals rather than a speculative bubble. This implies that the evolution of remote work may be an important determinant of future housing costs and inflation.

This research is quite timely and is the first I am aware of that attempts to quantify the impact of the pivot to remote on housing price trends. However, I am skeptical that remote can be so confidentially parsed out of all the economic signals. Still, this effort starts the conversation in understanding the future direction of the sector.

Twitter Spaces Conversation About Raising Rates

RATES GONE WILD! w/Grants Interest Rate Observer – I tripped into this audio conversation on Twitter. I still don’t quite have a handle on this feature, but I have listened to some great conversations. The discussion doesn’t get going until about 8 minutes, and it’s super wonky (even for me), but lots of clarity was shared:

Incidentally, Twitter Spaces doesn’t yet work on Macs (so annoying) so those cool people might have to open the audio on their mobile device.

In 2019 we had:
Cheap Labor
Cheap Goods
Cheap Energy

Normalizing isn’t going back to 2019. This is 2022. It’s a new era. For example, there is no return to office 5 days a week as some on Wall Street press. To move forward, we have to embrace the new realities. A comparison was made to the end of WWII when there were 30 months of persistent inflation. The fed didn’t raise interest rates at that time. A fascinating collection of random thoughts if you’ve got some patience.

NAR New York Metro Market Takes

I participated in an HGAR webinar emphasizing the NYC metro area a few weeks ago, and these were some of the slides shared by Nadia Evangelu, an economist with NAR.

WCBS Radio Interview – Back To Basics

Where Did The 5-Day Workweek Come From?

Since the Partnership for New York City September survey results that said only 9% of office works are there 5 days a week, it got me thinking about how the 5-day work week came to be. Here’s a small piece of the puzzle.

Getting Graphic

My favorite charts of the week made by others

Len Kiefer‘s Chart Handiwork


[click to play]

Let’s Have A Talk About Below Market FEMA Flood Insurance Rates

The tragedy of Hurricane Ian unfolds to show its widespread damage. So awful.

Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.)

It’s my birthday today, so I thought I would give the appraisal industry and myself a break.

OFT (One Final Thought)

I started following Michael Warburton on Twitter when he had a few thousand followers. His follower count has mushroomed very quickly because of spectacular content like this.

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 mess around;
  • You’ll screw around;
  • And I’ll figure it out.

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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