Home prices began to rise again in recent months while mortgage rates move higher and consumers remain as confused as ever. Because I am a non-linear thinker, I immediately thought of the infectious groove of this Hives song from 2000, mainly for two reasons: My wife and I had just been to Sweden earlier this year, and this Swedish rock band just released their first album in a decade.
Did you miss last Friday’s Housing Notes?
August 11, 2023: The Dog Days Of Housing’s Summer
But I digress…
The Definitive Study: ‘Man Caves’ Versus ‘She Sheds’
…and the power of social media explained:
My friend Ryan Lundquist of Sacramento Appraisal Blog posted a chart of “She Shed” mentions in listings across the Sacramento, California metro area. Yet I didn’t feel fulfilled. I needed more so I requested he look at “man caves” too. Hence he updated this important analysis to include both in the following chart.
Fun Facts About Palm Beach Tunnels
Palm beach money is diff lemme tell you
There’s over 50 homes on palm beach island that have an underground tunnel that connects the main home to the beach home
These tunnels cost millions to construct and they do this so they don’t have to cross the street when going to the 🏝️ pic.twitter.com/kbCinM8gqq
— The Don of Stocks (@Thedonofstocks) August 14, 2023
Understanding Who Reads Your Market Research
This week a media publication reached out to see how I felt about a pointed criticism on “X” (formerly known as Twitter) of our rental market coverage which seemed to be oblivious to the limitations on open market rental coverage in NYC. It’s a free country so I thought it was best to engage with the writer of the post directly rather than go through the media outlet to do it.
I added to Andrew Fine’s original post with five replies comprising a thread (not sure if I did that right). Since I was two days late to the post (party), there was no engagement to my replies, a fact of life in new Twitter (a.k.a “X”).
I am begging reporters not to write whole articles based on these misleading broker reports every month. The average rent in Manhattan is not $5,588, and the median is not $4,440. Elliman relies on data from a tiny # of unrepresentative new leases that they have access to. https://t.co/zFWcFHh6nh
— Andrew Fine (@andrewdfine) August 12, 2023
I DM’d Andrew to reach out and he quickly responded. We had a great conversation and I hope to stay in touch. I make it a point to always contact people directly who throw shade, whether in a speech or social media or an article, just to get to the bottom of it.
He was speaking from another silo that these reports shouldn’t be trusted, making the real estate community out to be the bad guys at first glance. Yet most reporters I connect with understand what these reports represent: open market (no rent stabilized or rent controlled) rentals using new leasing data (no renewals) because that’s all there is. This is a national reality, not just a NYC reality. I contend the readers of our rental report and any other brokerage rental reports covering this market understand what the content represents and recognizes the small number of transactions they are based on relative to the much larger number of rental units in each borough.
Andrew insisted he wasn’t criticizing the accuracy of my rental report itself even though that’s how I read it – so my Twitter replies are probably moot. His said his concern was more about how the media doesn’t qualify what rental market research represents even though we disclose it in a methodology link in every report. He was looking beyond readers of our report to people that just read the coverage headlines. The reality of media coverage is the reporter writing about the story usually doesn’t write the headlines.
I respect his point although I realize I can’t make everyone happy, and I’ll make a greater effort to articulate what the rental market data represents when interviewed and point more people to the long-time methodology link within all of our reports.” In fact I just did two media interviews and added more clarity to what the rental data represents.
With The Increase In Compass Cash Flow, More Unpaid Commissions Despite Revenue Drop
At least that’s what this Harrison Connery article from The Real Deal said: Unpaid commissions key ingredient in Compass’ cash-flow positivity
The Real Deal isn’t saying that real estate brokerage Compass is doing anything wrong in the piece, but they do say that the:
Brokerage owed agents more at end Q2 than a year ago, despite revenue drop
I’ve long been critical about this Softbank unicorn since its founding, as I’ve never understood their business model. I have good friends that are agents there – this criticism has nothing to do with the agents, just the business model. Of course, I’ve never run a real estate brokerage (or a unicorn) but basic logic suggests deeper explanations are needed.
Makes A Good Argument Against Celebrity Premiums
Besides having one of the best titles ever, this article really addressed the negatives of having a property associated with a celebrity. I’ve long been a naysayer of such a claim and this piece drives home the point. Wow.
Makes a good argument against “celebrity premiums!” These days, even mildly famous houses get tons of visitors. “There were people sitting in our yard, taking videos.” @candaceETaylor @wsjrealestate https://t.co/NMlfMqracx pic.twitter.com/5LVyqkS46Q
— Jonathan Miller (@jonathanmiller) August 7, 2023
Accidentally Catching An Ad About Me On Instagram
“Data-whisperer” (source: Brick Underground!)
My favorite housing market/economic charts of the week made by others
Apollo’s Torsten Slok‘s amazingly clear charts.
IF U.S. incomes spiked 69%, we'd return to pre-pandemic housing affordability levels.
IF U.S. home prices fell 41%, we'd return to pre-pandemic affordability.
IF mortgage rates fell 4.3 percentage points (from 7.26% to 2.96%), we'd return to pre-pandemic affordability. pic.twitter.com/P7t6XZlGPJ
— Lance Lambert (@NewsLambert) August 16, 2023
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).
Len Kiefer‘s chart handiwork
My favorite random charts of the week made by others
AI Gets Restarted In The Right Direction As The FOJ Carcass Is Left To Rot In A Ditch
Whoa, that post title sounds a bit extreme, but the FOJ (Friends of Jim) phenomenon diverted the focus of the organization back in 2010 away from membership. The prior year’s president from 2009 was Jim Amorin who helped form the FOJ culture to rampant self-dealing without accountability. In 2010, Leslie P. Sellers was elected president by backroom self-dealing enabled by the creation of the sham petition process. I would love to confirm who authored this abomination of AI bylaws so they get proper public credit for setting back the organization from its true industry leadership rule for more than a dozen years. I’m fairly sure I know who it is, but I would love more confirmation. I sat at a dinner next to this guy at a conference.
For the uninitiated, the “sham petition process” was designed to overpower the choice coming out of the national nominating committee, which was based on those sent up by membership. FOJs often left the nominee hanging out to dry, by publicly announcing them as the winner, and then invoking the sham petition process. I saw this first hand when current President Craig Steinley, MAI, SRA, AI-GRS, AI-RRS was forced into this insanely disrespectful sham a few years ago. But with a groundswell of support, he overcame the sham to become vice president, eventually becoming president, leading to the exit of CEO Jim Amorin.
It was quite an experience to learn how people I once thought were solid citizens, sold their souls to get cherished teaching and other positions as JA doled them out like candy to maintain his power. But it looks like there is a new day dawning with the announcement of Cindy Chance as the new CEO who starts September 5th!
The new CEO is from the Urban Land Institute, and no history with the Appraisal Institute. The search committee used Korn/Ferry, an elite employee search firm. Acting CEO Beata Swacha really wanted the job but as an FOJ, the power base via JA was gone. In fact the board of directors is no longer controlled by FOJs and remaining FOJ leadership of Sandra K. Adomatis, SRA (President-Elect) and Paula K. Konikoff, JD, MAI, AI-GRS (Vice President) who succeed Craig are going to learn the hard rule that both they and the CEO report to the Board of Directors, not the other way around.
AI is proud to announce the hiring of Cindy Chance as the organization’s next CEO, effective Sept. 5. Cindy comes to us from the Urban Land Institute, where she most recently served as executive vice president. Welcome Cindy! Learn more: https://t.co/9aQKMwp6jx pic.twitter.com/47yTaO94vw
— Appraisal Institute (@AI_National) August 16, 2023
The sham petition process was used by JA to thwart the membership choices via the NNC to get both Sandy and Paula into their current positions. The FOJs specifically kept from membership that Claire M. Aufrance, MAI, SRA had won the AI 2024 Vice Presidency (I wrote about how she had nothing to say so spent her candidacy quoting other people). Then the non-FOJ faction implemented the sham petition process that FOJ’s had long championed. In politics, you have to fight fire with fire and this battle got the Appraisal Institute its identity back.
Oh, The Irony Of The Sham
What broke the FOJ leadership’s lock on AI was exactly the same thing that kept those FOJs in power for the past several years, the sham petition process. Some connected to the ordeal told me that the people that used the sham petition process to manipulate their way into extending their power, are crying and wailing that AI has to get rid of the sham petition process.
I agree. The petition process was an FOJ tool invented to maintain power back in 2010 to assuage Leslie Sellers whining about not getting the NNC nod. It was fitting that it was used for good, hopefully for the last time. It should be removed from the bylaws to once and for all focus all efforts on the membership.
And finally, it is important to note that credit for the overthrow of the FOJ era can be placed on the shoulders of current AI president Craig Steinley who gave others the courage to stand up to the metastasized corruption and get AI back on track, working hard for the benefit of the membership, including bringing residential back into the fold. The guy has worked tirelessly over the past year. On another note, I was excited to learn that the incoming third directors from the ten regions are mostly non-FOJ and represent significant diversity. Change it seems, is here.
The Industry’s Leadership Void Remained During AI’s Absence
The Appraisal Institute had lost its way since 2009 though 2022 – quite a legacy for Amorin and Sellers as the organization wrestled with internal political tumult. All the while the appraisal industry has gone through nonstop upheaval without real representation to fight the proliferation of AMCs, the GSEs smashing of independent fee appraisers, the petty/silly battle with the FODs at TAF, the continued collapse of entrants into the profession and the tragic loss of its once-sterling educational offerings, now relegated to McKissock. I quit being an associate member in 2010 after I heard the BS video speech from then president Sellers saying he was excited about the future of AI. And then it lost a third of its members in the years after he pulled AI from TAF.
I always thought another organization like ASA might have stepped up during AI’s absence to take charge but no one did. This suggest that AI can quickly resume its leadership role. There is much work to do.
American Banker Covers The 2018 Brookings Report That Started It All
In debate over appraisal bias, rival researchers clash over key data [American Banker] (behind paywall but was accessible through free registration yesterday)
In the piece, I pointed out that the 2018 Brookings study showed a remarkable lack of understanding of what appraisers actually do. They looked at value differences between locations using Zillow data and proclaimed something along the lines of markets like an industrial Gary, Indiana were undervalued compared to markets like predominately white Greenwich Connecticut because appraisers suppress values in Gary. It inferred that in claiming appraisers are lowballing, they must be racist.
The current administration sees the problem through “bricks and sticks” meaning that a house built in Gary Indiana should cost the same as a house in Greenwich Connecticut. Those who see this challenge through the prism of “bricks and sticks” don’t understand that land value is the difference. Another way to think about it is that “land appreciates” and improvements depreciate. Value differences by locations are seen though land.
Yes we all have unconscious bias and I’m sure some appraisers are racist, but I would argue most professions have the same challenges. For example, if a neighborhood is located next to a highway and is largely minority owned, the appraiser is reflecting sales activity at that time, not the potentially racist decision 70 years ago to build the highway next to that neighborhood instead of a primarily white neighborhood a few miles away. The appraiser is there to value collateral in the case of a mortgage appraisal.
And those dozen or so stories about “whitening a home” to get a higher value are used to prove the Brookings narrative, are tragic if all true. A few appraisers that were singled as coming in low on the value “because they were racist” are now countersuing those claims. One of the things I said back in May at the Subcommittee hearing on racial bias was “why is the second higher value always right?” It’s definitely not always right. There has not been a close look taken in the quality of the two reports (low versus high) in these widely covered examples. It’s been my experience that the second appraisal value in mortgage lending is nearly always higher because the process is skewed towards getting a higher result for whatever reason.
Admittedly I remain a little frustrated with many of my peers that insist on standing on their soapbox and proclaiming they are not “racists.” The people of color who go through a lowball experience need answers – they felt what they felt. Appraisers shouldn’t go down that path when our industry fluctuates from 93% to 98% white year to year according to BLS. It sounds disengenuous. How can those appraisers spend so much effort on this claim and not focus on fixing the Appraisal Foundation, the maintainers of the two year mentorship requirement, the primary obstruction for diversity in the industry?
CRE: Where Are Rents Going?
I shared a snippet of this Globe Street piece: Experts Forecast Where Apartment Rents are Headed because it was nice to get a plug in about the Counselors of Real Estate, a professional organization that I’ve been a member of for more than a dozen years and love the organizational culture. The organization is there to help you grow as a professional.
Jonathan Miller, a member of The Counselors of Real Estate and President and CEO of Miller Samuel in New York City, tells GlobeSt.com that even as mortgage rate growth slows, the upward pressure on rental prices remains as “very low unemployment and high wages are the perfect cocktail for higher rents.
“However, there are some signs that rental price growth may be nearing peak levels. In Manhattan, one of the highest-cost rental markets in the nation, leasing volume has begun to slide as consumers have likely entered an affordability threshold and can’t continue paying higher rents.”
OFT (One Final Thought)
Brilliant Idea #1
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Reads, Listens and Visuals I Enjoyed
- Houses Are Still Big. Prices Are Much Bigger. [NY Times]
- New York City Offers Plan to Convert Offices to Residences But With No Tax Breaks [The Messenger]
- NYC Kicks Off Plan to Rezone Midtown, Turn Offices to Houses [Bloomberg]
- Too Many Vacant Lots, Not Enough Housing: The U.S. Real-Estate Puzzle [Wall Street Journal]
- Douglas Elliman|Knight Frank Report: Art Again Tops 2023 Luxury Investment Index in Q2 [Elliman Insider]
- Unpaid Commissions Helped Compass Get Cash-Flow Positive [The Real Deal]
- WSJ News Exclusive | A Condo on New York’s Billionaires’ Row Sells for Around $80 Million [Wall Street Journal]
- A Tiny Cabin, a Little Island and a Big Change: ‘Am I Crazy?’ [NY Times]
- Miami Has a Lot in Common With San Francisco [Bloomberg]
- Return-To-Office Mandates Now Cover Nearly 2 Million Workers. Occupancy Has Barely Budged [Bisnow]
- UK house prices rise by least since 2020 and fall in London – ONS [Reuters]
- ‘Coliving’ Landlords Turned $800 Rent-Stabilized Apartments into $7,000 Suites. Now Tenants Are Pushing Back. [The City]
- One Nassau County Has a Housing Crisis, the Other Nassau County Has a Solution [Bloomberg]
- Home Inventory in the U.S. Falls 18%, the Largest Drop Since Early 2022 [Mansion Global]
- Lots of US Homeowners Want to Move. They Just Have Nowhere to Go [Bloomberg]
- The Dose [1000 Watt]
- In New York City, Some Real-Estate Battles Come Down to Inches [Wall Street Journal]
- You Made a Nice Profit Selling Your House? Beware What Happens Next [Wall Street Journal]
- Goldman Pencils In First Fed Rate Cut for Second Quarter of 2024 [Bloomberg]
- Why rent control in NYC could become the new abortion [NY Post]
- This institutional homebuyer has completely stopped buying—why the 2023 housing market has Wall Street types timid [Fortune]
- Home Prices Are About to Get Even Higher Than During the Pandemic [The Messenger]
- You Can Now Buy a Lighthouse of Your Very Own in Michigan [Smithsonian Magazine]
- Chinese homebuyers make comeback in the U.S. [Axios]
- Jeff Bezos Buys $68 Million Home on Florida’s Exclusive Indian Creek Island [Bloomberg]
- 🤔 Thinking cumulatively [Axios]
My New Content, Research and Mentions
- Billionaires Row villa sells for $80M in biggest sale of the year so far [Crain's New York]
- In the LA Mansion Market, Steep Discounts Are the New Normal [Bloomberg]
- NYC Rents Keep Topping Records as New Leases Sag [GlobeSt]
- Manhattan Rents Continue to Soar to Record Highs, While New Lease Signings Fall [Chelsea News]
- I Moved From Ohio to New York City. Was That Financially Crazy? [Wall Street Journal]
- Experts Forecast Where Apartment Rents are Headed [GlobeSt]
- The Mad Dash to South Florida by Manhattan Real Estate Players [The Messenger]
Recently Published Elliman Market Reports
- Elliman Report: Manhattan, Brooklyn & Queens Rentals 7-2023 [Miller Samuel]
- Elliman Report: California New Signed Contracts 7-2023 [Miller Samuel]
- Elliman Report: Florida New Signed Contracts 7-2023 [Miller Samuel]
- Elliman Report: New York New Signed Contracts 7-2023 [Miller Samuel]
- Elliman Report: San Diego County Sales 2Q 2023 [Miller Samuel]
- Elliman Report: Orange County Sales 2Q 2023 [Miller Samuel]
- Elliman Report: Malibu + Malibu Beach Sales 2Q 2023 [Miller Samuel]
- Elliman Report: Los Angeles Sales 2Q 2023 [Miller Samuel]
- Elliman Report: North Fork Sales 2Q 2023 [Miller Samuel]
- Elliman Report: Hamptons Sales 2Q 2023 [Miller Samuel]
Appraisal Related Reads
- In debate over appraisal bias, rival researchers clash over key data [American Banker]
- A Weird Housing Market: High Prices & Depressed Volume [Sacramento Appraisal Blog]
- Finding of Bias in Home Valuations Fails by Own Measure [Appraisers Blogs]
Extra Curricular Reads
- The Future of Recycling Is Sorty McSortFace [The Atlantic]
- The evolution of Steve Albini: ‘If the dumbest person is on your side, you’re on the wrong side’ [The Guardian]
- How the Hives made Hate to Say I Told You So: ‘The riff was like striking gold’ [The Guardian]
- A Woman Screaming Blood of Christ and 5 a.m. Construction [Curbed]
- Why Is the Tour de France Getting Faster? [Bicycling]
- 10 Surprising Facts About Rogue Waves [Mental Floss]
- Collyer brothers [Wikipedia]
- CNET is deleting old articles to try to improve its Google Search ranking [The Verge]