Matrix Blog

The 1Q 2006 Manhattan Market Overview that my appraisal firm, Miller Samuel, prepares for Prudential Douglas Elliman, was released today. I always think its interesting (actually, its fun) to see how the various media outlets (Big and Small Media, Blogs) respond to the exact same set of data and how the real estate brokerage companies who write alternative reports, frame their comments.

This list is in no particular order and excluded all the redundant articles (ie news feeds). I will keep adding to it through the week after the initial post.

Apartment Prices Up Again After a Slump in Manhattan [NYT]
Housing frenzy slows down[NYDN]
Wall Street bonuses lift Manhattan apartment prices [Reuters]
Reports: Luxury Housing Boom May Be Reaching Its Crest [NY Sun]
First Quarter Reports: Thousand Island [NYO The Real Estate]
Housing market still steady [NY Newsday]
City Apts. Defy U.S. Bubble Trouble [New York Post]
Condo boom boosts Manhattan real estate market [Inman News]
Manhattan housing market shows weakness [CNN/Money]
Manhattan Apartment Sales Cool Off [TheStreet.com]
Manhattan Apartment Prices Climb at Slowest Pace in Three Years [Bloomberg] IMMOBILIARE: SALE, SI SGONFIA OPPURE CROLLA [Wall Street Italia]
Manhattan housing market booms in first quarter [The Real Deal]
State o’ the Market Update: Through Thick and Thin, ‘Essentially Flat’ [Curbed]
Brokers say New York real estate market is cooling [Financial Times]
[Wall Street Bonuses Fuel Manhattan Real Estate Surge [DJ]](no link)
A game of telephone [Property Grunt]
Manhattan Market Up, Psychology Down in Q1 [Brownstoner]
Real Estate Rashomon [Walk-Through]

Here are a handful of radio and tv clips as well.

[Bloomberg TV]

[WNBC-TV]

[WPIX WB11]

[WABC-TV]

[WCBS Radio]

Tags: Brownstoner, Wall Street Bonus, New York Observer, Radio

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I happened to glance outside my office window a few weeks ago and noticed a water tank being constructed. There are so many on the skyline, I didn’t notice the previous tank that was replaced. The exterior of my window was dirty from a season of snow and rain (and hard to open) so the quality of the photos are weak, but you get the picture.

Water tanks have always been a favorite of mine as evidenced by our collection of them [Miller Samuel]. They are one of my favorite items in the NYC skyline because of the contrast they provide. They are non-descript and primitive looking, and the design has largely gone unchanged since the mid-1800’s.

They contrast with the sleek new buildings that are being developed and are usually hidden behind the design (but still look like these). They are everywhere but one doesn’t get that impression from street level. You’ve got to be up high to appreciate the quantity of water tanks out there.

Here’s a series of interestng articles on their history:

• Holding Water For Generations [Block Magazine]

• Charlie Zimmerman – WATER TANK BUILDER [NPR]

• Talk Of The Town [New Yorker]

Here’s the 24 hour sequence. I missed a few steps because I didn’t expect progress to go so quickly.

Tags: Radio

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Source: Friends of the Highline

In New York, urban renewal took the form of an elevated 22-block long section of train tracks to be turned into a future park called The Highline and has spurred new residential and commercial development. Thats the result of the efforts of an organization called Friends of the Highline [thehighline.org] and the New York City government.

Source: Friends of the Highline

From Wikipedia, the story goes:

“The West Side Line, also called the West Side Freight Line, is a railroad line on the west side of Manhattan, New York, USA. North of Penn Station, at 34th Street, the line is used by Amtrak passenger service heading north via Albany. South of Penn Station, a roughly 1.5 mile (2.4 km) section of the line, popularly known as the High Line, is elevated and has been abandoned since 1980. The High Line (40°44.9′N 74°0.3′W) is in a state of extreme disrepair, although the elevated structure is basically sound. Grass and trees grow along most of the line, making it a natural oasis in urban Manhattan. There is a movement by community residents to turn the High Line into an elevated park similar to the Promenade Plantée in Paris. In 2004, the New York City government promised to invest $50 million in the proposed park. On June 13, 2005, the U.S. Surface Transportation Board granted a “certificate of interim trail use”, allowing the city to remove the line from the national railway grid.”

“The southernmost part of the High Line has since been demolished; as of mid-2005, the rest of the High Line is owned by CSX, which acquired it after the 1998 breakup of Conrail.”

There’s a really good podcast that can be downloaded from Smart City, a great resource for innovative thinking on urban development: Smart City: New Uses For Old Railroads

Highline under construction in 1930s

Roughly the same spot today

Additional photos
Friends of the Highline Photo Gallery
Forgotten Subways & Trains
[LTV Squad: Urban Exploration](http://ltvsquad.com/Locations/urbanexploration.php?ID=86 http://www.oldnyc.com/highline/contents/highline.html)
MOMA Exhibit

Additional background
Future of the Highline (Design Trust 2001) [pdf]
Reclaiming the Highline (Design Trust 2001) [pdf]

Tags: Radio

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In George Chamberlin’s column By George: Words for Investors [North County Times] in San Diego provides some plain language to the discussion of the current state of the real estate market. He is a TV and radio commentator.

• After the Fed release its quarterly household wealth report, CNBC ran alerts that Americans were deeper in debt than ever before but the report said that net worth rose to a record level.

• Foreclosures are lower today than a year ago

• As far as a slowdown in sales, the California Association of Realtors said it took 34 days to sell a house in October. A year ago it took 33 days.

• The NAR report that pending home sales dropped 3.3% in November and that was reported as a sign of collapse yet in California, they rose 0.8% indicating that real estate is local.

• The UCLA Anderson Forecast calls for a crash of Southern CA real estate prices over the next few years yet excludes San Diego county from their stats.

• Wall Street has a vested interest in seeing housing slide to prompt more people to return to the financial markets.

Although this commentary is California-orientated and I am not an advocate for the real estate industry, the lesson here is for the media to fairly interpret the information released.

Tags: CNBC, Pending Home Sale Index, PHSI, Radio, NAR, National Association of Realtors

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The New York Times approached our firm to provide some “war stories” about unusual property inspections. No names, just experiences. We had a bunch of fun jogging our memories. However, the writer decided to present the story from the perspective of real estate brokers [NYT] which was a fun read so I thought I would make my own fun and share a few stories from my staff and myself with you:

Michael J. Grassi

1. It was mid February and I was doing an inspection of a home. It was a very frigid day and I asked the owner if I could see in the garage. He was not all that happy about my request. I told him it was part of doing a complete inspection and he reluctantly opened the door. I came to find that there were two people living in the garage with no running water or heat. They were staying warm by using a Weber kettle grill and charcoal. They had cut a hole in the roof for a vent. Not ideal living conditions even by New York standards.

2. While doing an inspection in Jamaica, Queens I asked the owner if I could go down to the basement and if I would disturb anyone. No was the reply by the owner. I went down into the dark basement with only minimal light from a window. When, I reached the bottom step, I heard a growl and saw a massive head with two large orange eyes. As I slowly backed up the stairs heart pounding, sweat dripping, I got to the top step and asked what that was down in the basement. Oh!! the owner said casually, you mean our watch dog. This dog was a 180+ lb. Rottweiler, who looked very under fed. Thanks for the warning I said.

3. During an inspection of a multi-family dwelling I came across a most unusual sound. As I moved into the basement I noticed a foul smell which was pungent but not overwhelming. While in the basement I heard what sounded like a distant toilet flush from above. As I stood listening, I heard what amounted to the sound of a waterfall getting closer with a splash at the end. Apparently, there was a large hole in the sewer pipe and the waste water was dumping right into the basement, not ideal. The landlord who was with me was mortified. I needed a shower and shoe cleaning after that inspection.

Lea Freund

I was appraising a museum and the summer intern took me around the place. I think it was in the fall and I decided to leave my jacket, bag and cell phone in her office. Just as we stepped out onto the roof, the door closed behind us and locked. . . We did find a set of stairs that led down to an enclosed alley, and the doors on each floor were locked. Finally, we got to the ground level and we started banging on the door quite loudly. It took a while, but security opened the door and said they were completely frightened by the noise.

Dina Miller

I went to an inspection, the maid let me in. The husband had made the appointment. Both husband and wife were at work. The apartment was spotless and in beautiful condition. The wife calls the housekeeper by phone and asks to speak with me. Her first words are “Get the HELL out of my apartment. The maid hasn’t finished cleaning and its a mess”. I explained to her the apartment really looked fine and her husband had made the appointment. She said we’ll see about that…Then I had to conference call with the husband and the wife who continued to rant that I need to get out, her apartment wasn’t clean. When I hung up the maid said “You know she has a daughter. The daughter is just like her. You want some wine?”

Andrew L. Rogers

I went into an apt in Harlem. there were cages for large dogs, but no dogs and cats all over the place. the maid was there and said she didn’t know where the kittens were. we went down to the basement and in one room that was littered with debris there were flies buzzing all about, we assumed that the kittens were dead underneath the rubble.

Jonathan J. Miller

1. I met a couple on a very large property inspection that stayed with me (very much in my personal space) for the entire inspection, yet both screamed strong insults and innuendos at each other for the hour I was there while I kept saying “perhaps I should come back at a later time” or “please, I am having a hard time concentrating” hoping they would leave or stop, but they would both say “oh no take your time” seemingly oblivious of what they were doing to each other (and me). I called my wife after the inspection and told her I loved her.

2. I was given the keys to an apartment. When I opened the door, the apartment was completely dark. I thought I saw someone sitting on the couch so I called out “Hello”, but no answer. I finally found the light switch and saw a nude woman out of the corner of my eye in the mirror looking at me. I was startled but then realized it was a female mannequin propped up on the couch. I continued with the inspection, and was startled by yet another mannequin standing behind a door in a dark bedroom. I was definitely creeped out. When I called the homeowner later for info, I mentioned this to him and he laughed and told me their names as if they were real people.

3. At the end of the day, I had to inspect an apartment for an estate. The property seemed to be lived in with dishes in the sink, magazines strewn about. The apartment was very large and didn’t have a lot of natural light. It was getting dark and as I worked my way toward the rear of the apartment, I began to hear two men speaking very softly from the back of the apartment. I called out and the talking stopped for a few seconds. Then it continued. I became very uncomfortable and felt a chill down my spine. I called out again with the same result. I finally arrived at the rear of the apartment and found a small radio playing on the floor of a closed closet door. I finished up and got the heck out of there.

4. As a broker was taking me in to inspect a condo unit in a relatively nice building in Chinatown, he mentioned to me in passing “this apartment needs a little work.” He opened the door and the cigarette smoke was so thick, I could not see across the room. I literally had to duck down to see where I was going. It was a studio (one room) apartment and 6 chain smoking brothers were living there after their mother had died (it had been her apartment). There were about a half dozen cages with live chickens and all the walls were smeared with their mother’s feces as she had suffered from some psychological problems before she had died. Needless to say I didn’t touch anything and got outside as soon as I could.

Got any of your own stories? Share ’em!

Tags: Soapbox Blog, Appraisal Process, Home Inspection, Radio

2 Comments

After the release of our 3rd quarter Prudential Douglas Elliman Manhattan Market Overview last Tuesday to the media and the frenzy of coverage during the week as a result, the New York Times ran an excellent overview of the market story this weekend called A Mixed Message [NYT].

Since then, I have received many inquiries about the state of the market over the week from real estate brokers, wall street firms and lenders to interpret the statistics in the report that were played over and over in the media firestorm. Whats been fascinating about this whole experience is how much coverage was given to the average sales price statistic, which could not stand on its own without explanation. Hopefully I don’t sound too cynical but this stat was likely used because it showed the most negative result.

Here’s a quick list of the highlights of the current market that are most useful:

• The average price per square foot set an all-time record reaching $984 per square foot and rising 1.4% from the prior quarter. This is the telling statistic. The overall market increased this quarter, but not at the same torrid pace as before. The rate of appreciation has eased. In fact, since larger apartments generally sell for more on a per square foot basis than smaller apartments, one could make the argument that the shift in unit mix also tempered this indicator as well.
• There was a significant shift in the mix of apartments that were sold. The average sales price dropped 12.7% because the market share of entry-level apartments (studio and 1-bedrooms) spiked 5% and activity at the upper end dropped off.
  
• Entry-level sales surged because of concerns over modest increases in mortgage rates are expected. Of course, this has been the speculation since mid 2003 but this time, with rising fuel prices, comments from the Federal Reserve about housing, mortgage rates may actually rise.
  
• High end sales activity eased rather than prices dropped. The luxury market average sales price dropped 26% from last quarter because fewer sales at the upper end occurred. There were 17 sales at or above $10M in the 2nd quarter and only 4 sales at or above $10M tracked in the 3rd quarter. In fact, a high end broker contacted me to say there were 5 such sales this quarter, but didn’t realize that one of them closed in the prior quarter. Nevertheless, whether 4 or 5, the sales activity was well below 17 sales. This doesn’t indicate that prices collapsed, but that a shift in the mix of apartments that sold in the upper 10% of the market.
• Inventory did increase this quarter and was more heavily weighted with condos than co-ops. Since inventory came on at generally the same pace as the number of sales eased, inventory built up. This was attributable to seasonal considerations (thats a stretch) and bad economic news, rising gasoline prices, over saturation of bubble speak for the past 6 months and negative economic news relating to the 2 hurricanes.
  
• There are expectations of record Wall Street bonuses at yearend due to the solid year seen by investment bankers and a number of other sectors in the financial district. Historically, Wall Street bonus income has flowed through the real estate economy after the New Year.
  

Here are a handful of all the interviews I did which basically re-iterate most of these points.

[Focus on Business (Canada)]

[Bloomberg Television]

[WCBS Channel 2]

[WNYC Radio (Brian Leher Show)]

[WNYC Radio]

[Bloomberg Radio]

[WCBS Radio]

Tags: Hurricane, Wall Street Bonus, Canadian Housing Market, Radio

3 Comments

A few years ago, I decided to be more outspoken about the predicament that appraisers are in. We really don’t have a collective voice over the issue of the flawed structure that currently exists in our profession. It is essentially this:

Those who are paid on commission in the origination of a mortgage, determine which appraiser(s) to use. The system of checks and balances no longer exist.

Bob Moon of the Marketplace show on American Public Media radio showed great interest in the story. He researched and put together a broadcast aired on National Public Radio on June 23, 2005.

At about 6 minutes, it was one of the longest stories they had done in the past year. That meant either I was a fascinating interviewee or the story was compelling. (I assume the latter but was secretly hoping it was the former).

American Public Media “Market Place” Radio Broadcast Appraising the appraisers

UPDATE This was my first post on Matrix. The earlier posts were part of my original Soapbox Blog that I began in early July 18, 2005 and eventually merged into Matrix.

The Marketplace audio file link is broken so I don’t hope they mind me placing the audio file of the June 23, 2005 segment on my blog. This was the moment I came out on the situation appraisers were facing in public. If you’ve been following our industry or are part of it, the solutions set by Dodd-Frank have made the reliability of an appraisal done for a bank even worse.

Tags: NPR, Bob Moon, American Public Media, Radio

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