The Dog Days Of Housing's Summer

The Dog Days Of Housing’s Summer

Some related thoughts about AI in the future…


Did you miss last Friday’s Housing Notes?

August 4, 2023: Housing’s Convenient Bad Zoom Connections

But I digress…

NYC Rents Set Records, But With Signs The Market Is Topping Out

I’ve been the author of an expanding series of market reports for Douglas Elliman Real Estate since 1994. The rental report series has attracted a disproportionate amount of attention during the pandemic-era housing boom with a steady stream of new highs, despite the significant amount of unused office space that was created by the work from home movement. July 2023 rents set records in the three boroughs but new leasing levels declined in what is supposed to be peak leasing season.

By the way, there is a spectacular article in The City on why rents are so high. Yes, it’s a little complicated.

Bloomberg created a terrific chart on the ascent of rents in the three boroughs we cover for the report.

Elliman Report: July 2023 Manhattan, Brooklyn & Queens Rentals


“All three overall rental price trend indicators reached new highs.”

– Median and net effective median rent reached all-time highs for the third time in four months
– New lease signings slipped from the prior month as the market approaches the seasonal summer peak
– Vacancy rate slipped from the prior month and remained below the decade average for July
– Non-doorman and doorman median rental prices rose to new records for the second straight month
– Average price per square foot for new development rentals remained above the $100 threshold for the third consecutive month
– Luxury median sales price was the second-highest on record for the second time
– Luxury listing inventory slipped annually for the second time in three months
– Luxury landlord concessions remained tied at their lowest level in nearly six years


“Average and median rental prices set new records.”

– Net effective median rent and median rent set new records for the fourth straight month
– New lease signings fell year over year for the third time in four months
– Bidding war market share remained at about one in five new lease signings


[Northwest Region] “Average and median rental prices set new records.”

– Net effective median rent and median rent set new records for the third time in four months
– New lease signings fell year over year for the fourth straight month
– The listing discount did not reflect a premium for the first time in nearly two years

Zumper: Rental Rate Increases Are Slowing

The rate of rent growth is cooling nationwide. One thing that can be confusing in these reports, is that many who read “NYC” assume they are talking about Manhattan when they are really blending in the other four boroughs. In addition, there is a national narrative that residential rents are falling when I think its more about the rate of growth is falling.

The New York Times breaks down the 1-bedroom markets in the Zumper report.

You can see within our July 2023 rental report that Manhattan 1-bedroom rents are much higher than “NYC (5 boro) rents.

‘Highest and Best’ Real Estate Newsletter Launches

Long time well-respected Bloomberg real estate reporter Oshrat Carmiel packed up and moved from Manhattan to Florida during the pandemic and just began a newsletter called Highest and Best. I suspect there will be a lot of analysis of the relationship between New York and Florida chock full of information. (I have long called New Yorkers in Florida, the “new foreign buyers.”)

The best nerdy part of her effort is the newsletter title which is taken from an appraisal phrase “Highest and Best Use.” She unwittingly became a hero to appraisers everywhere.

Manhattan’s Condo Kings are Migrating South [Highest and Best]

The Celebrity Premium That Isn’t: It’s Hell I Tell You!

As a Manhattan appraiser, one of the most common things I am asked is whether a celebrity sale generates a premium. Not really. I’ve always contended that on average, the best case scenario is a reduced marketing time from greater exposure. Yes there are plenty of examples of homes selling for more and a celebrity was the seller. But every time I see one of those sales, there are plenty more that show no premium. In other words, a sale that got a premium price also occurs when a celebrity is not involved. Hence the difference between correlation and causation breaks out a discussion. Look at it another way: often the most successful agents are those that get celebrity listings, or those that specialize in luxury properties are more likely to get a celebrity listing because celebrities are more likely to have higher end listings. The arguments about a premium seem endless and I fall on the side that believes they are exaggerated as a market phenomenon.

So when I saw this terrific Wall Street Journal article, and finally saw tangible examples of the downside to a celebrity sale (with its awesome title), I was excited: The Hell of Living in a Home With Any Celebrity Connection

[100th Episode] Boroughs and ‘Burbs: Greedflation, Spurious Correlations, and Contradictory Signals

I joined John Engel and Roberto Cabrera on the 100th episode of their podcast Boroughs and ‘Burbs. It’s my third visit on the show and Ithe conversation quite engaging.

The news is full of contradictions. We hear talk of an inflationary bubble and runaway housing costs are met with Fed tightening and the end of the stimulus. A record number of Millennials are starting families, experiencing record low unemployment and rising wages. And yet those wages aren’t keeping pace with record inflation. Add to this supply chain problems, a lack of affordable housing, bank tightening and rising commodity prices seem to add a level of uncertainty not seen in our lifetime. This week we want to talk economics. We are trying to separate the signal from the noise. Our guest is a man who has been studying housing prices since founding his firm in 1986. We’ll ask Jonathan which of those headlines matter most to the real estate market, and which we can safely ignore.

From $110 Million To $30 Million: It Was Never Worth Anywhere Close To $110 Million

The top of the Woolworth Building In Manhattan was once the tallest building in the world. In 2014 it was partly converted to residential condo units at the top. The five story penthouse was often talked about during this period when I observed that the era of “aspirational pricing” began and I started to track closed U.S. residential sales at or above the $50 million threshold. At that time, such a sale wouldn’t have fit on this chart which was capped by the then record of $88 million (the current record is nearly $240 million!)

The newsletter FOUND, illustrates this quite clearly: ‘I’m shocked they got $30 million for it’

The Slip: One Of The Most Important Locations For NYC Art You’ve Never Heard Of

I was on vacation in Rehoboth Beach, Delaware last week and was browsing (more like ‘loading up’) at a popular local book store with my wife when I stumbled into the new book called The Slip. While I had heard of Coenties Slip, I knew nothing about its history and so I bought it. It is on my nightstand in position to be my next read.

So this isn’t a book review since I haven’t read the book, but it is intensely fascinating to be made aware of something about Manhattan I’ve never heard before – ever. I’ve appraised all over Soho and Tribeca, made popular by artists. I’ve been in Andy Warhol’s “The Factory” on East 47th Street, but never heard the story behind “The Slip” which is named after Coenties Slip on the East River in Manhattan.

Luckily, Brick Underground just published a great piece on the new book which confirms I didn’t make a bad purchase.

The Risk Of Multi-Family Overbuilding Should Not Be Overshadowed By The Office Market Problem

In this terrific WSJ read, A Real-Estate Haven Turns Perilous With Roughly $1 Trillion Coming Due the argument is made that the multi-family market is also quite vulnerable. I’ve thought this because of higher rates and rampant overbuilding encouraged by the REIT phenomenon – Zelman & Associates first exposed me to this risk. If apartment rents continue to weaken, the challenge to multi-family apartment owners will be much more significant.

“Everyone is focused on office,” Sotoloff said. The risk of apartment defaults, he added, “is a really big issue that is not getting the attention it deserves.”

Here’s a terrific WSJ clip on converting office buildings into multi-family housing that appeared within the piece – I encourage you to watch it:

Some challenges:
– Most projects don’t pencil out without tax breaks or subsidies
– Zoning changes require often with community approval
– Debt service challenge – new financing need because collateral changed and interest rates are much higher

Peter Lynch: I’d Love To Know When Interest Rates Are Going To…

I find myself being asked about the future of mortgage rates, reasonable expectations, etc. all the time by the real estate community. After I do all the caveats (helpful dad joke: my crystal ball is held together with duct tape”) I present my thoughts which are based on logic and not data, much like a conversation at a cocktail party. I can’t help myself but I remain deliberately vague, because I don’t “know.” Still, I also don’t believe in going around saying “I have no thoughts on the topic.”

By the way, here is an amazing paper by the SF Fed: Where Is Shelter Inflation Headed?

Here’s the most watch Peter Lynch clip.

We Prefer Bigger And Farther Apart

I found this Pew Research study really interesting, especially as someone who became an empty nester and downsized by half (but with more land).

Visual Capitalist Ranks Cities With Most Office Vacancies

Ranked: The U.S. Cities with the Most Vacant Offices

I love how three Manhattan neighborhoods rank in the top ten of the most vacant cities.

Getting Graphic

My favorite housing market/economic charts of the week made by others

Apollo’s Torsten Slok‘s amazingly clear charts.

Kastle card swipe data charts

Remember that Kastle charts are overstating occupancy* because their pre-pandemic occupancy benchmark was 100% which is simply incorrect (*measures card swipe activity as a proxy for occupancy).

My favorite random charts of the week made by others


Oversightless TAF Shows Dave Made $495,470 In 2021

Nice Work If You Can Get It Without Any Oversight.

For the uninitiated, TAF is the organization that wrote the bat-shit crazy letter, the chickenshit letter and is the subject of an active investigation by HUD on whether USPAP promotes a lack of diversity in the appraisal profession (400th out of 400 occupations according to BLS in 2021).

According to the 990 presented by ProPublica, TAF’s President Dave Bunton made a base salary in 2021 of $367,537, and because he did such a great job at making the industry diverse, taking the topic very seriously and didn’t wait until he was pressured and didn’t sit and do nothing tangible other than make lists of new committees and allowed massive conflicts of interest like the one between the Chair of the ASB and Leader at McKissock (they’re married) and exposed hard-working appraisers to distorted national criticism was also given a a bonus of $127,933 (It’s not clear whether that bonus includes global first class travel and lodging to valuation events worldwide that have nothing to do with TAF’s mission to protect the public trust).

This is a tiny organization that lives on top of the backs of hard-working appraisers – how is this much money for bureaucratic positions in an organization over an industry that doesn’t change that much? The top for employees clear well over $1 million annually.

Its now 2023 – what are the odds those salaries and bonuses are a lot higher?

Here’s a clip from the 990.

Rapattoni Is Under A Ransomware Attack Nationwide

Rapattoni System Interruption

As you are aware, there has been a significant interruption at the Rapattoni data center that has affected all Rapattoni customers nation wide due to a cyber-attack.

At times I can yearn for a good old pencil, paper, and old-timey MLS books….

OFT (One Final Thought)

Sound on…

Brilliant Idea #1

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See you next week!

Jonathan J. Miller, CRE, Member of RAC
Miller Samuel Inc.
Real Estate Appraisers & Consultants
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