Figuring Out The Housing Market Begins With Profane Thoughts
The following clip is my motto (NSFW). This is literally what I do all day…
this is my favorite clip on the internet pic.twitter.com/r7qBEYDzkC— anna melissa 🏀✨ (@annamelissa) September 28, 2022
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:
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
AUDIO 🔊: Rising mortgage rates have made the American dream of being a home owner unattainable for some, but @jonathanmiller tells me it could reset the hot pandemic housing market and result in more inventory, which would lower prices. @wcbs880 https://t.co/GashxxHtmA— Neil A. Carousso (@NeilACarousso) September 25, 2022
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.
Great tidbit on the origins of the 5-day work week, just about the tipping point: 1926 article from Jewish Daily Bulletin, on the bitter irony (given Henry Ford’s antisemitism) that F was 2nd major employer to close his factories on Saturday The AFL was *less* enthusiastic… https://t.co/UZbf97Lqgg pic.twitter.com/zutpXdePc9— thefirstweek (@thefirstweek) September 25, 2022
Len Kiefer‘s Chart Handiwork
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.
Our field crews were able to survey the damage near Sanibel Island by helicopter earlier today. You can see the damage and Chinook helicopters assisting with search and rescue operations in the area. The road to recovery will be an extremely long one #Flwx pic.twitter.com/XBPAqyv7vw— WeatherNation (@WeatherNation) September 29, 2022
(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.
Fantastic ‘Old Hollywood’ Bloopers pic.twitter.com/PZBD361mVB— Michael Warburton (@MichaelWarbur17) September 24, 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
- Wonking Out: How the Remote Work Craze Made Housing Affordability Worse [NY Times]
- Return to Office Survey Results [Partnership for New York City]
- The Boomtown That Shouldn’t Exist [Politico]
- Taller Towers, Fewer Homes [NY Times]
- New Home Sales Increased in August; Completed Inventory Increased [Calculated Risk]
- Whales Buy The Dip in Compass Stock [The Real Deal]
- Compass’ Houston Impact Day Upbeat About Market, Company [The Real Deal]
- How to Break Barriers to Build More Housing in New York? Experts Point to Changes [Gotham Gazette]
- London-Based Businessman Pays $50 Million Cash for Gilded Age Mansion in New York [Wall Street Journal]
- Opinion | FOMO Helped Drive Up Housing Prices in the Pandemic. What Can We Expect Next? [NY Times]
- In New York, NIMBYism Finally Outstays Its Welcome [NY Times]
- Brodsky Brings Challenge to NYC’s Airbnb Law [The Real Deal]
- New York’s Empty-Office Problem Is Coming to Big Cities Everywhere [Bloomberg]
- Lumber Prices Fall Back to Around Their Pre-Covid Levels [Wall Street Journal]
- Home-Price Growth Slowed in July [Wall Street Journal]
- Home purchase cancellations are above 15% for the second straight month. It's important to know the financial repercussions [CNBC]
- Light Fades from Sun Belt Cities as More Contracts Are Canceled [Mansion Global]
- 'The little guys win': West Village residents rejoice after defeating decades-old sidewalk scaffolding [Gothamist]
- Seattle Housing: A Case Study in Crisis Creation [Counselors of Real Estate]
- Njord, a Carbon-Neutral Luxury Yacht, Launches First 10 Residences [Mansion Global]
- Office Markets Are the Real Estate Crash We Need to Worry About [Bloomberg]
- Why Measures of Existing Home Inventory appear Different [Calculated Risk]
- John Paulson on Frothy US Housing Market: This Time Is Different [Bloomberg]
- The U.S. Is Running Short of Land for Housing [Wall Street Journal]
- Rents Drop for First Time in Two Years After Climbing to Records [Wall Street Journal]
- How's New York City Doing? [The City]
- Whatever Happened to the Starter Home? [NY Times]
My New Content, Research and Mentions
- 'I lose money every time I leave the house': Inflation complicates back-to-office push [Financial Post]
- $100 million is the new frontier for South Florida luxury homes, says agent Dina Goldentayer, who sold $750 million in real estate last year via chauffeured car, helicopter, and golf cart [Business Insider]
- Broadway Director Sells Weston Home for $6.5 Million [The Real Deal]
- How brutal is NYC’s rental market? Just ask this producer. [Marketplace]
- NYC Rents Plateau in August, Still Near Record Highs [The Jewish Voice]
- Back-to-office push hits US workers with inflation shock [Financial Times]
- Analysis | Why Is a New York Apartment Still So Hard to Find? [Washington Post]
- Real Estate Industry Leaders Forecast Gloomy 2023 [The Epoch Times]
- Why Is a New York Apartment Still So Hard to Find? [Bloomberg]
- Inside the $250 million penthouse on 'Billionaires' Row' [CNBC]
- Rising Mortgage Rates Can Be A Good Thing For Homebuyers [Audacy]
- Inside £220million New York penthouse that's most expensive US property [Daily Star]
Recently Published Elliman Market Reports
- Elliman Report: Manhattan, Brooklyn & Queens Rentals 8-2022 [Miller Samuel]
- Elliman Report: Colorado New Signed Contracts 8-2022 [Miller Samuel]
- Elliman Report: California New Signed Contracts 8-2022 [Miller Samuel]
- Elliman Report: Normandy Isles/Normandy Shores New Signed Contracts 8-2022 [Miller Samuel]
- Elliman Report: Florida New Signed Contracts 8-2022 [Miller Samuel]
- Elliman Report: New York New Signed Contracts 8-2022 [Miller Samuel]
- Elliman Report: Colorado New Signed Contracts 7-2022 [Miller Samuel]
- Elliman Report: Manhattan, Brooklyn & Queens Rentals 7-2022 [Miller Samuel]
- Elliman Report: California New Signed Contracts 7-2022 [Miller Samuel]
- Elliman Report: Normandy Isles/Normandy Shores New Signed Contracts 7-2022 [Miller Samuel]
Appraisal Related Reads
- Appraisal Reports Are Like Flipbooks [Cleveland Appraisal Blog]
- Biden administration launches Chief Diversity Officers Executive Council [Axios]
- New York Alleges Trump Procured Inflated Appraisals for Conservation Easements [National Law Review]
- 5 Things To Consider When Getting A Hybrid Appraisal [Birmingham Appraisal Blog]
- Chuck Norris eats 7% mortgage rates for breakfast [Sacramento Appraisal Blog]
Extra Curricular Reads
- Roxy Music At The Forum with Spotify Playlist [Lefsetz Letter]
- Ten handy phrases for bluffing your way through the new financial crisis [The Spectator]
- Why do you like the music you like? Science weighs in. [Washington Post]
- Making a Desk with 10,000 Recycled Chopsticks [Reasons to be Cheerful]
- 17 Seconds With a Spotted Lanternfly [Curbed]
- Meta Faces Mounting Questions from Congress on Health Data Privacy As Hospitals Remove Facebook Tracker [The Markup]
- How Big Should an Umbrella Be? [Curbed]
- 50 years ago, Roxy Music invented rock's future. Now they're taking a well-deserved bow [LA Times]
- Yes, DC Misspelled “Virginia Avenue” [Washingtonian]