This is my first Housing Note of 2018. Yay me! There is something uplifting and optimistic and about starting off a new year, although the impact of the new tax law of December 22, 2017, challenges my ongoing naivete. While the new law has the potential to put the housing market in a jam as the federal government pulls its century-old endorsement through deductions, this is how you get out of one:
Clearly it is more fun to avoid getting into a jam by turning around.
So let’s look at empirical data on how the Manhattan market reacted to the uncertainty that permeated the housing zeitgeist in the fall of 2017 as both houses of Congress worked on the new tax law.
Market Report Gauntlet Q4 2017 Week 1: Manhattan Sales
Since it is the beginning of 2018, we need to close out the 2017 housing market. In the coming weeks, I’ll recap the results of the 4Q 2017 for the entire Elliman Report Series that I have been authoring for Douglas Elliman since 1994.
Here is some empirical evidence that Wall Street is very curious about the implications of the new tax law. The coverage of our Elliman market report for Manhattan Sales Q4 2017 was the number 1 most read article first thing in the morning and maintained #1 “most read” and number 1 “most emailed” status for the entire trading day (350,000 subscribers worldwide). I’m even going to go into discussions of my alma mater’s #1 men’s college hoop rating this week.
And some chart love (it strayed from the purple or gold color theme but given the article’s #1 status for a full day, black and white are clearly ok).
Here were some of my takeaways for the Q4 2017 Elliman Report: Manhattan Sales:
– First time in 7 quarters the average sales price fell below $2 million as the legacy contract pipeline clears
– Median sales price edged higher for third consecutive quarter, driven by re-sales
– Sales activity for the Manhattan housing market was at the lowest fourth quarter total in six years
– Pace of the fall market cooled as market participants awaited the housing-related terms of the new federal tax law
– Buyers continued to hold firm, forcing sellers to meet them on price
– Smaller apartments continued to see more bidding wars than larger apartments
– 90% of sales at or above $5 million were “all cash”
I have provided a sampling of Manhattan-centric charts below that can also be found in our online Manhattan chart gallery.
Tax Law Insight On Twitter
Click on my retweet of Nick’s tweet for a fascinating thread.
To be fair, a number of people have gone out on a limb on this one, and they're going to have to answer for calls of "10% declines in home prices" if those don't materialize.
— Nick Timiraos (@NickTimiraos) January 4, 2018
Brick Underground Podcast January 2, 2018 – Jonathan Miller
Just before the holidays, I got to join Alanna Schubach and Nathan Tomey on their Brick Underground podcast to talk about 2018.
This podcast will always have a special meaning to me as our late friend Jhoanna Robledo‘s passion project.
The Brick Underground Podcast: Talking 2018 with NYC real estate appraiser Jonathan Miller.
Click on the graphic below to listen to 30 minutes of Brick talk.
2017: The Year The 2015 Manhattan Market Shift Became Conventional Wisdom
This was my favorite blog post title in years.
After controlling the Manhattan housing market for quite a while, sellers and landlords exchanged roles with buyers and tenants circa 2015.
After peaking in 3Q 2015, the market share of bidding wars fell by two thirds. Bidding wars remain more common at lower price points. After bottoming in the 3Q 2015, the market share of rentals with landlord concessions has expanded sharply due to high-end rental development over-building. But like the sales market, the oversupply remains at the upper end.
Sunday, December 31, 2017, was a trifecta of my New York Times Real Estate market insight goodness before the year ended:
Landlords and Sellers Adjust [New York Times: Calculator column]
Manhattan Prices Stable in 2017, Even as Luxury Takes a Breather [New York Times: Big Ticket column]
Ditching the Tub [New York Times]
New Manhattan Condos Got Really Big Over The Past Three Years
Average sales size patterns for these two size sales categories split sharply three years ago.
Upcoming Speaking Events
Happy New Year to readers of Appraiserville – wishing you a prosperous 2018. The 2017 appraisal year was a sea-change of events that gave many appraisers hope that sanity would return to our world. It was the first year of upside in probably a decade so we’ll gladly take it. I’ve just gone through the busiest year end of my career (it’s not over!) so I have a backlog of writings to share soon on Real Estate Industrial Complex. I just renewed the domain so this industry repository won’t be sitting dormant for long.
Looking back at the appraisal industry in 2017:
– Appraisers became significantly more outspoken and legislatively active.
– Longstanding chronic problems with the Appraisal Institute leadership and their disdain for residential appraisers was finally discussed openly.
– A massive industry pushback of Appraisal Institute’s planned “taking” of most chapter funds was delayed (originally January 1, 2018).
– The state coalitions expanded and continued to be more effective in their influence of policy.
– Our industry learned that state level policy influence is effective thanks to the coalitions getting the word out.
– A great sense of community working for a common cause (survival) has blossomed.
– The AMC grip on our industry formed cracks after the misleading “appraisal shortage” narrative was crushed by our providing enlightened economic facts.
Just say NO
On a personal note, multiple Wall Street and other large financial institutions have approached my firm this year after they neutered their AMC vendors, requiring that they use our firm for high-end work. We are to be paid our fee and allowed to provide our reasonable turn times. I was told many horror stories by those institutions who came to realize we are not robots, nor are we widgets. By taking this step, they invested in risk management.
However, their initial stream of new business was met with 3-4 addendum requests per assignment that had nothing to do with any requirements, repeated prior requests or had no relationship to the credibility of the value. We nicely complained to the AMC and their institutional clients as to why this was a problem for us, indicating the relationship won’t work unless this is fixed – the idea that we are not to be treated as if we have no experience in our market. To their credit, they escalated the issues and responded with the utmost professionalism. Suddenly all those requests for clarifications stopped coming, but the new assignments didn’t stop. Win-win. We have one last new Wall Street client who is resolving their internal issues now and I am hopeful that they will make the necessary corrections. If they don’t, we’ll simply drop them.
I do understand the default thinking behind superfluous addenda requests – Typically, AMCs are forced to rely on appraisers with no local market knowledge because most of the better local talent has other clients paying full fees and demanding reasonable turn times. As a result, AMCs often lose their muscle memory to engage critical thinking in their reviews. The idea that my high-end Manhattan property appraisal can be reviewed by an appraiser in Kansas who has never been here, for a California bank and the AMC engages in scary big worded USPAP talk that isn’t accurate is completely inappropriate. I’m not saying pushback always works but AMCs seem to be recognizing that their time is up for business as usual and are bringing outsiders with actual valuation experience to fix what’s broken – at least in my small window of AMC interactions.
Life is too short. Don’t put up with what isn’t right. That’s how the appraisal industry killed the “appraisal shortage” lie in 2017. Do the best appraisal you can, operate with professionalism and integrity and know when to say “no.” After what happened in 2017, I think the few AMC clients we are engaged with are seeing a little bit of this light.
Dave Towne: Revision to GSE forms coming?
Most of my reports are narrative these days (unless you know of a form to appraise a “dumb-waiter airshaft.”)
But here’s something from Dave Towne (send him a note and get on his essential mailing list).
Brilliant Idea #1
If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:
– They’ll get out of that parking space without hitting your bumper;
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– And I’ll buy a new snow plow.
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.
One more thing – Me in 40 years:
No country for old men pic.twitter.com/gnDMVWS1tG
— Flashbak.com (@aflashbak) December 24, 2017
See you next week.
Reads, Listens and Visuals I Enjoyed
- Terrible real estate agent photographs – This year, why not take some time to consider the…
- Low-Cost Rental Housing Increasingly Difficult to Find [Harvard Joint Center for Housing Studies]
- How ‘Not in My Backyard’ Became ‘Not in My Neighborhood’ [New York Times]
- You Got Priced Out of … Philadelphia? The Spread of Hot Housing Markets [Wall Street Journal]
- PHH reaches nationwide settlement over crisis-era mortgage servicing [Housingwire]
- Want to become a franchise brokerage for a national brand? Here's what it costs [The Real Deal NY]
- When is the best month to put my NYC apartment up for sale? [Brickunderground]
- Land Is Underrated as a Source of Wealth [Bloomberg View]
- Seattle and Brooklyn Saw Soaring Luxury Prices in 2017 [Mansion Global]
- First, this town lost its Macy’s. Then Sears. Now, all eyes were on J.C. Penney. [Washington Post]
- California's real estate gold rush is even boosting Stockton, but at what price? [LA Times]
- Mystery buyer of Asia’s priciest flats on The Peak named [South China Morning Post]
- Democrats in High-Tax States Plot to Blunt Impact of New Tax Law [New York Times]
- Vintage Photos: The Evolution of Times Square from 1898 to Today [Untapped Cities]
- How the tax bill impacts homeowners, buyers and sellers [Washington Post]
My New Content, Research and Mentions
- Chart: Manhattan Closed Sales Records by Year [Miller Samuel]
- Toll Brothers and the Rise of "Affordable Luxury" [Builder Online]
- Co-ops And Condos: The Pros And Cons Of Each [Bankrate.com]
- Douglas Elliman Releases Its Latest Quarterly Manhattan Sales Findings – Manhattan Condo Sales Prices Dipped in 4Q 2017: Report [Cooperator]
- Trump's tax overhaul has slowed Manhattan's real estate market even before going into full effect [Business Insider]
- Renters Love the Gym—but Only in Theory [Wall Street Journal]
- New York’s sales market ends 2017 with tax bill uncertainty, lower prices [Curbed NY}
- Manhattan Apartment Prices Hit New Low Amid Tax Worries: Report [Patch NYC]
- The Tax Law Hits Manhattan Real Estate Sales [Bloomberg]
- Manhattan Market Blinks Ahead of Tax Overhaul [New York Times]
- Manhattan home resales tumble as US tax overhaul sidelines buyers [Business Times]
- Manhattan’s Real Estate Market Had Lackluster End of 2017 [Mansion Global]
- New York real estate has its worst quarter in 6 years — and there could be more pain ahead [CNBC]
- Manhattan real estate prices and sales fell ahead оf tax changes [USA News Guide]
- Douglas Elliman Releases Q4 2017 Manhattan Sales Market Report [PR Newswire]
- How Will Your Specific Housing Market Change Under the New Tax Law? [Pro Builder]
- Blue Zees targets $59M condo sellout in East Williamsburg [The Real Deal NY]
- The Brick Underground Podcast: Talking 2018 with NYC real estate appraiser Jonathan Miller [Brick Underground]
- Here’s the data on how your city’s housing market will change after tax reform [Curbed NY]
- Brick Underground's 2018 Market Forecast: Tax uncertainty, ultra-luxury prices perk up, mortgage rates remain low [Brick Underground]
- Game of Thrones: What's next for Douglas Elliman's C-suite? [The Real Deal NY]
- 2018: Global Luxury Real Estate to Feel Tax Impact [Mansion Global]
- Manhattan Prices Stable in 2017, Even as Luxury Takes a Breather [New York Times]
- What to expect from the housing market in 2018 [Yahoo Finance]
Appraisal Related Reads
- Is the Appraisal Profession Dying? [George Dell, MAI, SRA, ASA]
- How Do I Know If My Home is Priced Accurately? [Birmingham Appraisal Blog]
- Real estate trends to watch in 2018 [Sacramento Appraisal Blog]
- Best Appraisal Blog Posts of 2017 [DW Slater Co.]
- Judge tosses $25M lawsuit against property appraiser [Gainesville Sun]
Extra Curricular Reads
- The Most Expensive Mile of Subway Track on Earth [New York Times]
- You only need to do three things to make a great presentation [Quartz]
- ‘Jeopardy!’ Tells Contestant: A ‘Gangster’ Is Not a ‘Gangsta’ [New York Times]
- Perspective | Why the debate over the budget deficit is so confusing and frustrating [Washington Post]
- I Can’t Believe This Beloved Neighborhood Café That I Never Went to is Shutting Down [McSweeneys]
- 2018 No Pants Subway Ride Is Taking Place This Weekend in NYC [Untapped Cities]
- 2017: A Year in Graphics [Bloomberg]
- Woman battling cancer gets married hours before passing away [WFSB]
- 18 things New Yorkers can look forward to in 2018 [Curbed NY]
- The Year in News 2017, According to 2.8 Billion Tweets [Visual Capitalist]
- What Apple’s New Office Chairs Reveal About Work In 2018 [Fastco Design]
- Diary of an African Cryptocurrency Miner [Bloomberg]
- American Carnage [First Things]