Friday March 19, 2021

Watching Housing Market Jargon As Housing Notes Hits The 6 Year Mark

On March 6, 2015, I began writing these weekly Housing Notes and had not missed a week since then. Today’s edition is the 315th installment of Housing Notes. The weekly format took about a year to evolve before it became a routine, and I became more comfortable in my voice. The notes have become a cathartic exercise. I exhale (now, with a mask on) much of the housing information that accumulates in my brain during a week tempered by available time. I will continue to do this whether I have seven rabid readers or 7,000 – I simply need to do it.

While I occasionally (lol) drift into the weeds, it is always a good idea to keep in mind who the audience is when presenting information. Please watch this clip from a decade ago to understand what consumers hear when many housing professionals, including me, speak. Listen to the whole thing, please.

But I digress…

The General Phrase ‘The Market Is Down’ Varies Greatly By Property Type

In the current environment, there appear to be haves and have nots with wildly different takes on market conditions before the COVID lockdown in New York and after the COVID lockdown in New York. Different property types are often conflated into one incorrect narrative. Incidentally, many of us tend to see conditions in a linear way:

When prices are falling, they will fall forever.
When prices are rising, they will rise forever.

Even though market conditions ebb and flow…

Manhattan Residential Sales The plunge in mortgage rates brought on a “late to the party” boom for Manhattan at the end of the year, even with the optics of boarded up street retail and 85% empty office buildings in the Midtown central business district. But discounts from aspirational asking prices do not represent the decline in market conditions. The Market Is Down: lower initial sales, surge in initial inventory, slip in pricing.

Manhattan Residential Leasing The rental market fueled the suburban home sale boom, poaching a huge segment of demand, resulting in a massive drop in rental prices and heavy inventory. The Market Is Down: plunge in new leasing initially pivoting to record activity in the fall and faint signs emerging of price stabilization after initial plunge but with high vacancy and inventory.

Manhattan Condo Development The condo development space is perhaps the most polarized given its multi-year oversupply challenge of the prior five years. We are seeing some developers having financial problems, but it is important not to brush-stroke all developments into the same bucket. The Market Is Down: Based on closing data for co-ops and condos, Q4-2020 new development sales fell 5.8% YOY while resales fell 22.8%. New signed contracts for February for all property types jumped 73% YOY.

Manhattan Commercial Buildings new leases being signed are seeing significant price cuts. The Market Is Down: declining office rents and rising vacancy will crush property values which has ramifications for lenders who used the property as collateral.

Manhattan Bidding Wars Remain Near Record Lows But Saw A Slight YOY Uptick In Q4-2020

The 41.6% market share of first time buyers, a seven year record, reflects the power of the mortgage rate drop in pulling renters into the purchase market.

On Our Matrix Blog: I Discuss The Florida-New York Housing SMACKDOWN On Bloomberg TV’s Surveillance March 12, 2021

Last Friday I had a fun discussion with Lisa Abramowicz on Bloomberg Surveillance. It’s been bedlam in Appraiserville so I’ve been slow to post it. The New York to Florida housing migration story has been a bit one sided with optics that suggest 9 people will be left in Manhattan by the summer time despite that Manhattan contract activity beginning to surge. On the other hand Florida sales activity continues to be frenzied.

I don’t have the short clip so you have to go to the end of the full show at the 2:10:50 minute mark to pick up my interview with Lisa (but I think its worth it):

Affordability by State Only Shows Half The Typical Owner Vs. Renter Relationship has a pretty cool state by state chart showing affordability to purchase a new home. While clearly median new home prices are typically higher than resales, a new contruction since the financial crisis has skewed to higher-end housing due to high land, labor and materials cost, the fact that only one/third of residents can afford one is eye opening, especially when the U.S. homeownership rate is double that. The moral of the story, record low mortgage rates DO NOT improve affordability. Low rates make asset price higher.


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

AI National’s Travel Policies Are A Sham Paid Vacation Entitlement Exercise

At the last board meeting on February 25-26, 2021, it became clear to me that the odds are much higher that Jim Amorin’s contract was renewed for another three years since the BOD did not discuss its expiration. I hope I am wrong about that. If true, it is very unfortunate for the organization, but I am encouraged to see growing pushback from the BOD against both his and his FOJs (friend of Jim Amorin) sham policies to load their pockets, as has been discussed many times here before.

Spousal Travel Lap Dog / Emotional Support Spouse

One of the board members, Matt Myers, who works abroad and would be the most impacted, proposed that the travel policy excludes spousal travel because it is not in the best interest of its members. You can bet the FOJs will fight to keep him from serving on the board another term so the good guys need to work hard to protect the backbone he is showing. Very impressive.

One of the most idiotic comments in favor of this policy was made by Trevor Hubbard, who said the board needed to consider all officers’ emotional care. Translation I: My spouse is my emotional support animal, and I need to have them by my side at all times since I am too afraid to travel alone.
Translation II: How can I enjoy my all expense paid trip to Europe blindly covered by the membership without my spouse? It just won’t be as fun and it’s just not fair (to me).

Corporate America DOES NOT PAY SPOUSAL EXPENSES. Good grief.

Previous AI President Jeff Sherman said this was a huge “firecracker” because of the severe business sacrifice he has made. The thing is, as Joe Magz said during the meeting, serving the membership is a “privilege.” Plus, as I’ve shared before in the 990 analysis, Jeff got a chunk of money for his time as president. That should factor in whether a candidate aspires to serve the membership.

And remind me again why AI officers fly to Europe and Asia all the time? What is the proof of benefit to the organization and members? How is this benefit relayed to the members? Answer: There is no tangible benefit that matters, given membership has fallen by about 30% in a little over a decade.

And if the flight is five hours or more, they can fly Business Class! With their spouse!

AI spends $250K per year on travel!!!

The problem with the FOJs is they forgot long ago that they were serving the organization and were not there to serve themselves. Once they got a taste of the insider track, it became addictive in the form of feeling entitled.

Nine people voted against this motion, but 14 people were in favor of it. The “against” largely represents FOJs: Sherman, Hubbard, Konikoff, Molinari, Schulze, AuFrance, Placer, Powers, Ramirez.

Amorin Control-Freaking Discussed

Jody Bishop brought up that the board wanted Jim Amorin to stop interfering with the information that BOD asks of staffers. There needs to be an established process. Jim Amorin freaked out at this, stating he has never (except once) denied BOD information. Amorin essentially expressed that “members might think” he was doing something he wasn’t. LOL.


Also, I appreciate Rodman’s shoutout to “our blogger” – it certainly beats being called ‘that Joe Miller’ – AI’s new president is on the right side of history and board members that are showing backbone against the FOJ mob is appreciated by myself and the membership.

Ichthyologist Alert: The Cosmic Cobra Guy Explains The Subprime Crisis


Here’s Jeremy Bagott’s latest effort (Ichthyology): The Ichthyologist’s Guide to the Subprime Meltdown. Giving his easy to understand writing style provided in his Dispatches from the Cosmic Cobra Breeding Farm tome I read in early January 2020, I bought his latest effort. I am recommending the book before I read it based on the prior book and his press release which sounds really interesting:


(LOS ANGELES, MARCH 12, 2021) – From Seattle’s CHOP zone to the Rajneesh compound in rural Oregon to the so-called Republic of West Florida, self-styled autonomous zones have never prospered in America. Too often, they’ve descended into lawlessness, orgiastic behavior and chaos, requiring costly taxpayer-funded clean-ups. Such was the case in 2008 with the ungovernable mash-ups Fannie Mae and Freddie Mac.

A first of its kind, “The Ichthyologist’s Guide to the Subprime Meltdown” is a concise almanac that distills the cataclysmic financial crisis of 2007-2008 to its essence. This pithy guide to the upheaval includes essays, chronologies, roundups and key lists, weaving together the stories of the politics-infused Freddie and Fannie; the doomed Wall Street investment banks Lehman and Bear Stearns; the dereliction of duty by the Big Three credit-rating services; the mayhem caused by the shadowy nonbank lenders; and the massive government bailouts. It provides a rapid-fire succession of “ah-hah” moments as it lays out the meltdown, convulsion by convulsion.

But back to Freddie and Fannie: The trajectory of the two can be best understood through their almost comically incoherent timeline during the crisis – It reads like a rap sheet. They assured investors in early 2007 they had little exposure to toxic subprime loans. Reports would later surface that by 2008 the two had backed or purchased as many as 70 percent of the nation’s junk mortgages. In September of that year, the undercapitalized mortgage guarantors – amped up on sugar water and with no real accountability – simply collapsed. Their lack of an adequate capital cushion all but preordained it.


February 27, 2007 – Fannie Mae and Freddie Mac tell investors they have little exposure to the subprime mortgage market.

March 6, 2007 – Fed Chairman Ben Bernanke, quoting Alan Greenspan, warns that Fannie and Freddie are a continual source of “systemic risk.” He suggests legislation to rein them in.

April 18, 2007 – Freddie Mac is fined $3.8 million by the Federal Election Commission for making illegal campaign contributions to members of the U.S. House Committee on Financial Services, which is tasked with monitoring the mortgage giant.

December 4, 2007 – Fannie Mae issues a cash call, seeking $7 billion to cover losses linked to the housing market. Investors get a haircut when the dividend is trimmed by 30 percent.

January 1, 2008 – More than 70 percent of the nation’s 27 million weak mortgages are on the books of a government-related entity, primarily Fannie and Freddie, it is later reported. These include radioactive products such as so-called option ARMs, 2/28 ARMs, negatively amortizing mortgages and “no doc” mortgages.

April 2008 – Former Fannie Mae CEO Frank Raines, who left office in the midst of an accounting scandal, settles with the U.S. government. His total compensation from 1998 through 2004 is reported at $91.1 million, including some $52.6 million in bonuses. He ushered in an era in which Fannie was making big bets on subprime mortgage securities. A federal lawsuit accused him and two other Fannie Mae executives of manipulating earnings over 6 years.

July 14, 2008 – U.S. Representative Barney Frank of Massachusetts characterizes Fannie Mae and Freddie Mac as financially sound. Later, the Boston Globe will report that Frank received tens of thousands of dollars in donations from Fannie and Freddie between 2000 and 2008.

September 7, 2008 – Regulators seize Fannie Mae and Freddie Mac, pumping about $200 billion of U.S. taxpayer money into the two. Riddled with bad mortgages, they are placed into conservatorship. At the time, Fannie and Freddie were the most highly leveraged financial institutions on the planet, wrote Jason Thomas in National Affairs in a fall 2013 retrospective.

September 23, 2008 – The FBI reveals it has been investigating Fannie and Freddie, along with their executives, as part of a far-reaching probe into potential mortgage fraud.

November 25, 2008 – Fannie and Freddie offload as much as $500 billion in toxic mortgage-backed securities and $100 billion in bad housing agency debt to the U.S. Federal Reserve.

July 21, 2010 – A former Countrywide Financial loan officer tells the Wall Street Journal that Senator Chris Dodd knowingly saved tens of thousands of dollars on the refinancing of his two personal properties in 2003 as part of a special VIP program Countrywide Financial had for anyone with the ability to influence Fannie and Freddie.

When the two amalgams were finally seized by federal regulators and placed into conservatorship, they were neither government agencies nor private enterprises. They defy description to this day. Their business model is simple: Collectivize the risks and privatize the profits. But even this plum arrangement was not enough. The two have always been about boundary-pushing and excess, with the implicit – now demonstrated – guarantee that the U.S. taxpayer would be there to clean up any mess.

Like sasquatches, they lurk in the thickets, unreformed, unrepentant. They remain a source of future taxpayer liability, ready to one day unleash a new crisis on a new generation.

The book’s author, a real property appraiser and former newspaper editor, guides the reader through the smoldering wreckage of a crisis that took the global financial system to the edge of the abyss in the first decade of a new millennium.

# # #


Exec At The Appraisal Foundation ‘Likes’ The Appraisal Institute

Even after the excellent and solid thrashing AI National gave TAF in their comments discussed last week in Appraiserville regarding USPAP, causing TAF to extend USPAP for another year without notifying or doing any research for the stakeholders, yet lamely and falsely blaming COVID, TAF exec still “likes’ them. What a leadership void we are seeing in The Appraisal Foundation at this critical moment in history.

OFT (One Final Thought)

Appraiser Dave Towne shares this Big Bear Bald Eagle Cam and we never knew we needed to see it.

Brilliant Idea #1

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Brilliant Idea #2

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See you next week.

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