Catching The Housing Market Is Really A Lifecycle

February 10, 2023

Wait for it…

But I digress…

NYC Rents Aren’t Falling Or Cooperating With U.S. Trends

I’ve been the author of an expanding series of reports covering the market footprint of Douglas Elliman Real Estate‘s U.S. operations. During the pandemic era, our rental report series has been widely covered because rental leasing trends are generally much faster to respond to changes in economic conditions than sales trends.

Here’s a CNBC clip on our research for the Douglas Elliman report:

Elliman Report: January 2023 Manhattan, Brooklyn & Queens Rentals

______________________________________________________
MANHATTAN RENTAL MARKET HIGHLIGHTS

“Median rent rose to the third-highest on record as the vacancy rate slipped for the first time in nine months.”

– The median rent was the highest on record for the month of January and the third-highest overall
– The number of new leases expanded annually for the first time in three months
– The vacancy rate slipped monthly for the first time in nine months
– Non-doorman price trend indicators expanded annually at a higher rate than doorman price trend indicators
– New development new leases rose year over year at five times the rate of non-doorman rents
– Luxury median rent remained at the third highest on record
– Luxury bidding wars accounted for nearly one in five rentals
– Luxury listing inventory is expanding but remains below pre-pandemic levels

______________________________________________________
BROOKLYN RENTAL MARKET HIGHLIGHTS

“Average rent soared above the August peak as median rent rose to the second-highest on record.”

– Average rent and average rent per square foot rose to a new high as the median rent was the second highest in history
– New lease signings rose month over month for the first time in four months
– Concessions paid by the landlord were at their highest level since the fall of 2021

______________________________________________________
QUEENS RENTAL MARKET HIGHLIGHTS

[Northwest Region] “Average and median rents surged over the summer highs to set new records.”

– Net effective average and median rents rose to the highest on record
– New lease signings slipped annually but were sharply higher than pre-pandemic levels
– Market share of two-year leases was at its highest level in two years

The January Sales Lift

We saw a month over month uptick in home sales activity across many of our markets, and the housing narrative began to pivot from wildly negative to a bit more realistic, perhaps because there was less emphasis on YOY comparisons against a 2021 rocket ship and more analysis comparing against pre-pandemic market conditions.

Junk Housing Stats: Here’s An Example

Several people shared this Washington Post piece with me: See how many all-cash buyers snagged houses in your neighborhood

In the drive to get PR awareness, the rush to push out this stuff can mislead. This research overlapped markets I covered and saw similar numbers but I knew why there were many more cash buyers. The answer wasn’t simply because mortgage rates are much higher, so people opted to pay cash. That’s not real world.

I saw this phenomenon in the 20+ markets I covered in Florida for Q4 and developed this understanding:

Cash as a market share is higher because sales are way down, and purchase mortgages are way down because of high mortgage rates. And because cash transactions aren’t as volatile, the results of this study show that cash buyers are much higher as a share of the market, but that’s because there are fewer purchase mortgage sales, not that there are more cash sales.

From WeWork To Flow: Crypto To Unclog The Toilet

Adam Neumann of WeWork fame is back, well-funded, and he is in the housing space this time. This is an amazing example of what venture capital thinks about failure. Failure is merely proof of being in the game.

HGAR – Be Your Best: Crunching the Numbers: Buy, Hold, or Sell? 2/9/2023

I’ve been on these panels with HGAR for these events a number of times, and I’ve always found the chemistry of the panels to be good – their leadership genuinely wants to get useful information out to their members to navigate the current market better. This one: HGAR – Be Your Best: Crunching the Numbers: Buy, Hold, or Sell? 2/9/2023

The Curbed v. The Real Deal State of New York City Migration SMACKDOWN

A viral Curbed story framed the idea that: New Yorkers Never Came ‘Flooding Back.’ Why Did Rents Go Up So Much?. News executives from several media outlets were so jazzed about the story idea that they wanted more stories of this type, except that the article, which was well written, was based on nothing. I love the Curbed platform, and they’ve been killing it on the real estate market front, but this one. Oof.

And then we get the powerful retort from The Real Deal: No, really, New Yorkers came back: Unraveling Curbed’s rent conspiracy: Article theorized landlords faked demand to inflate rents. This was a well-thought-out rebuttal that everyone should focus on (except for correcting the spelling of the Curbed author’s name. Oof.)

I reached out to a bunch of colleagues in economics over the past few weeks, and a few of the key takeaways I learned is that migration trends mined from USPS change of address requests are problematic. Only some people file them, and it doesn’t measure household formation, which was a big part of the post-lockdown boom narrative, i.e., two people split and moved to separate residences, for example. And Census data is also relatively unreliable for migration analysis, especially for its massive lag.

We all see a lot of junk stat references like the North American Van Lines Study and others, which are ripe for the blogosphere but are based on the client base of a particular company.

Hey, I’m a Bekins guy.

The bottom line here? As much as we really want to measure it, migration data sucks. Perhaps a few years ago, when we don’t really care, we’ll have better insights.

Best Hallway Paint Job Ever

27 Speaks Podcast: Making Sense of Hamptons Real Estate Data

Had a fun discussion with the team at 27east.

What Is New York?

From making do with space constraints to…

Super pragmatic insights…

Getting Graphic

My favorite housing market charts of the week made by us

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

Len Kiefer‘s Chart Handiwork

My favorite random charts of the week made by others

Appraiserville

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

Brutal Rejection Letter From Civil Rights And Consumer Advocacy Groups Shows TAF Doesn’t Really CARE

A while back, I was critical of The Appraisal Foundation‘s creation of the Council to Advance Residential Equity (CARE). For those of you that need a TAF primer, 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 (BLS: 97.7% of appraisers are white). I wonder if EY is aware that one of its partners is the current Chairman of TAF’s Board of Trustees?

CARE is another TAF effort that shows how much they’ve strayed from their mission to protect the public trust by dabbling in things that were more of an effort to say, “hey everyone, we’re doing something about diversity!” Good grief. When I saw Dave’s announcement, I saw it as a line item for his growing list of bureaucratic efforts to show they are super focused on diversity despite having only one person of color on their technical boards. And that occurred only after widespread external pressure, which came about three years ago after a three-decade absence of POC. Again, more evidence of the do-thing culture of TAF leadership.

Set up a council. Check off the list. Claim TAF is proactive. Seek out a new item for the list. Rinse. Lather. Repeat.

So it wasn’t a surprise to see TAF invite a group of civil rights and consumer advocacy organizations to join CARE rejected. Notice the list of organizations that rejected this blatant chess move by TAF in the letter:

Having these organizations publicly share their rejection letter to TAF’s invite showed just how ridiculous the invite was and that such a letter would only see the light of day if the group shared it.

Why? Because they recognize TAF’s CARE as bureaucratic, a do-nothing effort to claim it on a checklist as a proactive move in one of Dave’s appearances. This group of leading organizations in the fight for racial equality knew it was counter-productive to allow an organization wildly out of touch with the actual problem to spin CARE membership as a proactive foot forward when, in fact, it’s just an obvious bureaucratic political maneuver. The rejection letter, my friends, is a textbook response to a bureaucratic stunt in Washington, DC.

TAF hasn’t shown any tangible solutions to the industry’s 98% (dead last per BLS) white appraiser and lack of diversity issues. They need to be made aware that it is a real problem in the context of public trust. Dave has called it a “nothing burger” internally. TAF only attempts bureaucratic publicity stunts because they reside within a bubble. It was soundly rejected by serious organizations trying to resolve these issues because they recognized how disconnected and ungenuine the offer was.

If TAF truly wanted to develop solutions, they would make an all-out effort to be involved in all these groups rather than sit on the same couch for 30 years and invite everyone over for tea. Please take a look at all of their initiatives…nothing is ever done after the announcement or entry onto Dave’s presentation list at conferences.

C’mon HUD!

OFT (OneTwo Final Thought(s))

And this…

Take a second and think about something today that is mainstream thinking but was a controversial idea decades ago.

Brilliant Idea #1

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Brilliant Idea #2

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See you next week.

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

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