The Challenge Of Housing Forecasting Is Cool

December 3, 2021

The outcome of a current trend is not always obvious, but by using a refrigerator, it can be cool.

But I digress…

The Drop In New Signed Contracts Is All About The Bigger Drop In New Inventory

I’ve been the author of the expanding Douglas Elliman market report series since 1994. We are releasing a bunch of new markets in the coming months. Our newest addition – the monthly new signed contract series was born out of the pandemic – continues to be helpful in understanding sudden changes in housing conditions.

One of the biggest disconnects in the current market has been the observation that because newly signed contracts are coming down from the distortion highs of a year ago, demand is cooling. The reality is that within most housing markets we track, the slowdown in contracts is largely attributable to the larger decline in new inventory entering the market.

This is well illustrated by this Bloomberg story Suburban NYC Home Sales Plunge Because There’s Nothing to Buy

Wall Street cares as evidenced by the article being the 9th most read on the 350K Bloomberg Terminals yesterday, just ahead of COVID Omicron Variant coverage!

Perhaps the heavy interest wasn’t just because of the collapse in new listings but the use of a multi-colored chart?

______________________________________________________
New York New Signed Contracts Report

– The New York report attached covers Manhattan, Brooklyn, Long Island, Hamptons, North Fork, Westchester County, Fairfield County, and Greenwich, CT.

Elliman Report: November 2021 New York New Signed Contracts

Other related charts:

Long Island Listing Inventory Is Being Sold Off Faster Than It Can Be Replaced

Newsday did a deep dive on the months of supply for the region with their article: Fast-paced Long Island housing market depletes inventory of homes for sale. Long Island has been and continues to be one of the most consistently active markets in the region over the past decade.

Elliman Report: November 2021 New York New Signed Contracts

These charts really illustrate it:

U.S. Listing Inventory Trends In The Time Of COVID Varied Significantly

The Winter 2022 issue of Elliman Magazine was published this week and it is quite a beautiful publication. I created a chart for the publication which compares monthly new listing inventory trends across a number of the markets we cover for Douglas Elliman.


[click to expand image]

New Signed Contracts Are Being Restrained In Many U.S. Housing Markets As New Inventory Collapses

In addition to the NYC metro area, we provide research for Douglas Elliman Real Estate on newly signed contracts in specific luxury markets in Florida, Colorado, and California.

Elliman Report: November 2021 Florida New Signed Contracts

Elliman Report: November 2021 Colorado New Signed Contracts

Elliman Report: November 2021 California New Signed Contracts

Rental Price Trends Continue Upward

I’ve really been enjoying Calculated Risk’s Substack posts more than the blog itself these days. Using Apartment List data, here is the monthly trend.

Is Housing Seasonality Over? (No)

Seasonality was thrown out with the bathwater in 2020 as the pandemic and mortgage rates disrupted housing patterns.

My friend Mike Simonsen, founder of Altos Research (and a Burning Tree afficionado) talks it through in his regular “How’s The Market?” presentations.

Getting Graphic

My favorite charts of the week made by others

Len Kiefer‘s Chart Handiwork

Appraiserville

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

ALOFT: Getting Funding To Solve A Problem That Isn’t Being Addressed By The Funding

When I read the announcement that Fifth Wall funded a relatively new startup called ALOFT, I and many of my peers were confused on what the value proposition actually is. Backed by a VC, including some of the biggest…

In addition to Fifth Wall, Aloft’s backers include VC firms Andreessen Horowitz and MetaProp, Zillow and Pacaso co-founder Spencer Rascoff, Built CEO Chase Gilbert and Doordash executive Gokul Rajaram.

…means that this funding is very expensive for ALOFT but they are trying to disrupt a very low-margin industry. I thought of the following acronym translation, not aimed at the management team, but befitting of the staffing problem they will face:

ALOFT = “A Lack of F***ing Talent”

“A shortage of home appraisers is bottlenecking the housing market, delaying closings and putting buyers at risk of missing out on low interest rates.”

They are getting funding to hire more appraisers (there is a chronic supply problem of competent appraisers that will work for less than the market rate) and it’s important because we are aging out. Appraisers won’t work for them unless they pay more than what appraisers are making during this boom.

In other words, ALOFT’s reason for being doesn’t solve the stated problem of not enough appraisers. They are sort of inferring they will solve the problem. How? By creating a crappy AVM like everyone else and trying to bypass appraisers? By training younger appraisers for and offering very high wages to pull them in? The main reason the industry is aging out is that the fees are too low and work too sparse for trainees.

I see this as further evidence the tech sector has no idea what the appraisal industry does and that there is way too much capital sloshing around looking for a home. The fintech world has wildly overhyped the valuation space – think Bowery Valuation and BBG in commercial valuation when you look closer and speak with ex-employees.

More Progress In West Virginia After Dean Dawson’s Power Grab Was Thwarted

West Virginia is diligently moving forward to fix the situation caused by the self-dealing legacy of Dean Dawson’s Real Estate Appraisal Board and his predecessor.

This just in from a trusted source:

The governor has appointed four new members to the WVREALCB. The Board is comprised of nine members (four appraisers, two bankers, two members of the public, and one AMC representative) who serve a maximum of three consecutive 3-year terms. The governor recently appointed two appraisers and two members of the public to seats on the board. One of the public seats was empty and the terms of the three who are being replaced had expired.

TAF’s BOT Called A Last Minute Board Meeting Next Week

In an unusual move, The Board of Trustees of the Appraisal Foundation is holding a last-minute meeting. They haven’t posted the agenda but you can register for the Virtual BOT End-of-Year General Session on Wednesday, December 15th from 1 pm to 3 pm ET.

The meeting will be held to discuss the Foundation budget, the Vision 2030 Strategic Plan and other miscellaneous items.

In other words, we can assume this meeting is about their financial independence since that’s essentially the top priority of their Vision 2030 Strategic Plan.

When I was looking for the meeting agenda, I noticed that the last two of Dave Bunton’s monthly newsletters haven’t been posted. The last posted newsletter, from October, was about how excited they were to regurgitate a “new” USPAP course that wasn’t. Perhaps I am being a bit paranoid but this is the same organization led by Dave Bunton who sent that bat-shit crazy letter last year.

OFT (One Final Thought)

Finally, the impact of stupidity is clearly explained.

“Non-stupid people always underestimate the damaging power of stupid individuals. In particular non-stupid people constantly forget that at all times and places and under any circumstances to deal and/or associate with stupid people always turns out to be a costly mistake.”

Brilliant Idea #1

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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 next week’s Housing Note.

See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog
@jonathanmiller

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