A rare video of the SVB bank run pic.twitter.com/vfNlJs3cbZ
— Matt Turck (@mattturck) March 20, 2023
But I digress…
NYC’s Flat Iron Building Was Just Sold, And We’re Wondering What’s Next?
The Flat Iron Building, a famous historic triangular building at 175 Fifth Avenue, was sold at live auction on the courthouse steps in $500,000 increments for $190 million – it was purchased by someone outside the usual NYC development circles. Here’s a tour of the interior.
I did a quick interview on what may happen for Newsday, who captured the drama as it happened. I was camped out in a temporary space until our office renovation is completed so apologies for the bland background. Ha.
Here’s the Wikipedia page for the building. Lots of history.
The Real Deal Deconstruct Podcast Explainer on SVB
Looking At Mortgage Banking As A Potential Systemic Failure Or An Overhype
I see a ton of humor on the “Collapse of the Banking System” topic. After a significant event, we often hear, “Too Soon?” after a joke on the topic. Yet the humor appeared almost instantly, unlike the Lehman collapse in 2008. Or maybe we’re just too distracted with AI and the GPTchatbot? Or maybe this a sign that it’s not as bad as the headlines scream? Like in the words of The Simpsons — “turn a potential Chernobyl into a mere Three Mile Island.”
I just went to my bank to get all my money out and they are totally closed.
The place is boarded up.
This is bad. pic.twitter.com/q6R1JpRLNq
— Chris Bakke (@ChrisJBakke) March 19, 2023
Love this letter to the @FinancialTimes
The correct name for a group of black swans is a bank pic.twitter.com/z4v4k5udO5
— John Thornhill (@johnthornhillft) March 18, 2023
The LA Mansion Tax Resets High-end Market Prices
On April 1st, Los Angeles is instituting a transfer tax on sales of homes that are $5 million or higher. There are two tranches:
The New York Times does a nice summary of Measure ULA in “For Sale: Mansions in Los Angeles at Bargain Prices”.
I suspect that the cost will come out of the seller’s proceeds by roughly the amount of the tax, and then on the next sale of the property, it will already be baked in.
I talk a lot about the market impact of the tax in this CNBC piece: This LA mansion is staring down an April 1 deadline before the seller loses millions on a specific property that includes a mind-blowing video.
Frontline: Age of Easy Money (The Title Seems Misleading)
…from the context of residential mortgage lending.
As I discussed earlier, there seems to be a disconnect between the narrative of the banking system post-SVB collapse and how mortgage lenders behaved during the biggest housing boom of the modern era. The fact is that credit was tighter than what would be considered “normal” during the pandemic housing boom. In other words, banks never lost their minds during this recent boom, unlike the housing bubble fifteen years ago.
The two banks that were taken over, SVB and Signature, were already known for questionable practices by regulators. Signature lost their shirts from the crypto collapse while SVB was guilty of having uninsured leverage, something only 1% of all banks have. In fact, when New York Community Bank swept in to buy up Signature Bank’s assets, they excluded the mortgages for the rent stabilized buildings portfolio. Signature Bank was one of the only games in town for financing of these buildings since the Housing Stability and Tenant Protection Act of 2019 that effectively eliminated any upside for the buildings and is likely to create a failing asset class over the next decade.
The SVB and Signature collapse was projected onto the entire industry from my untrained banking perspective. Banks like First Republic may only seem guilty by association for being in a similar size classification. Which is explained by the massive outpouring of financial support by other banks. The bank run depleted cash positions as they worried about a run on their own institutions if they didn’t shore things up.
The broader commentary on the topic seems to be full of phrases like “bank runs” and “bank collapses” everywhere yet, so far, it’s only been SVB, Signature and Credit Suisse, the latter of which has been in trouble for more than a decade. I had a crazy Credit Suisse first-hand experience during the housing bubble to share in that book I need to finish.
Maintaining consumer trust in banks is a powerful thing. So is guilt by association. Fingers-crossed.
My favorite charts of the week of our own making
My favorite housing market/economic charts of the week made by others
Paul Kedrosky‘s chart collections
My favorite random charts of the week made by others
NCAA tournament wins in the last 25 years pic.twitter.com/sObqt0bDvS
— Jay Cuda (@JayCuda) March 21, 2023
Fannie Mae’s Continuing Push To Get Rid Of Appraisers
Bryan Reynolds and his backers acquired the assets of Valuation Expo and Appraisal Buzz (at what looks to be the peak of the market) and seems very focused on upgrading their interaction with the big players. It’s always good to have more transparency in our industry.
My takeaways from Bryan’s conversation with Lyle Radke and Hemp Thomas:
– I love Hemp’s tie.
– Hemp was not given equal air time.
– Lyle explains how appraisers’ days are numbered, and it’s time for appraisers to pivot to info-gatherers at $85 a pop.
It’s a long slow death for the banking appraisal industry (but not for appraisers in other disciplines). Fannie is pushing us to be data collectors so their AVMs can do the work without the drama of human intervention. They firmly believe that their AVMs are as accurate as appraisers are. In my view – if that assumption were accurate, we’d be gone tomorrow.
Appraisal Board Chief Dean Dawson Of West Virginia Can’t Help Being Conflicted
If my Housing Notes readers of Appraiserville will recall the writings here of two years ago, The West Virginia Board of Real Estate Appraisers‘s chairman was under pressure for keeping competitors out of his market. Some changes were made, and he was termed out. But as often happens in government, he stayed in the office anyway but has seen his power reduced by individuals named to the board who were not his sycophants.
There is now a lawsuit by one of Dean’s peers, Edward Estep, who was his colleague at Mountain State Justice (MSJ), in the context that they performed appraisals for them. This is an entity that makes a living out of suing appraisers. Edward is suing the board and Dean Dawson directly for going after Edward’s license. I’m guessing Dean thought enough time had passed and he could start reducing his competition again. Edward and Dean may have performed appraisals for the same firm, but Edward is also a competitor.
This is what I’ve heard over the years on how it works.
1. Appraiser1 would appraise a residential property in litigation, taking, etc.
2. Appraiser2 would come in for MSJ and lowball or highball it.
3. A complaint would be filed with the WV board on Appraiser1 using Appraiser2’s appraisal as evidence that Appraiser1 was wrong, and Dean’s board would work to remove Appraiser1’s license. Dean also works for MSJ as an independent appraiser. Can you see the severe conflict of interest here?
Edward is suing Dean personally and the board he chairs, fighting to keep his license. I’m not picking sides here, but an incredible conflict of interest exists. How can the Governor of West Virginia continue to allow this to happen? It’s impeding commerce in the state.
The court filing is a fascinating read:
J. Edward Estep, L.R.A No. 0606 v West Virginia Real Estate Licensing and Certification Board, and Dean E Dawson, Individually and as Chair of the West Virginia Real Estate Licensing and Certification Board. Download PDF
Private feedback on this matter would be appreciated.
OFT (One Final Thought)
This provides a whole new perspective on something I love. It saps some of the joy out of loving the product while better understanding how the sausage (Dove Bars) are made:
Brilliant Idea #1
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– They’ll panic;
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Brilliant Idea #2
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See you next week.
Reads, Listens and Visuals I Enjoyed
- For Sale: Mansions in Los Angeles at Bargain Prices [NY Times]
- Potential U.S. Sellers Are Pulling Back Amid High Mortgage Rates [Mansion Global]
- Job cut jitters spur NYC buyers to ask for employment contingencies [Brick Underground]
- Historic Flatiron Building sells for $190 million at auction [NY1]
- The Real Estate Bust America’s Suburbs Need [Bloomberg]
- WSJ News Exclusive | Bernie Madoff’s Former Hamptons Home Sells for $14 Million [Wall Street Journal]
- SL Green’s One Vanderbilt Evacuated After “Huge Shake” [The Real Deal]
- NAR: Existing-Home Sales Increased to 4.58 million SAAR in February; Median Prices Declined YoY [Calculated Risk]
- New York Community Bank Snubs Signature Bank’s CRE Loans [The Real Deal]
- Tenant Sues to Stop 55 Broad Office-to-Resi Conversion [The Real Deal]
- Dubai Villa With Double-Decker Pool Lists for AED 349 million [Mansion Global]
- A Question About Your Money: Has Anything Truly Changed This Week? [NY Times]
- Why Developers Are Delaying New Projects in South Florida [The Real Deal]
- Retreat in Rodanthe [Washington Post]
- Here’s How to Solve a 25-Story Rubik’s Cube [NY Times]
- In New York’s Fight to Legalize Basement Apartments, What About Cellars? [City Limits]
My New Content, Research and Mentions
- This LA mansion is staring down an April 1 deadline before the seller loses millions [CNBC]
- New owners could mean new future for historic Flatiron Building [NY1]
- Looking for a Deal? Too Bad. Rents Are Rising the Fastest in the Cheapest Real Estate Markets [Realtor]
- Heath Ledger’s Former Soho Rental Sold for $14M [The Real Deal]
- Mets’ Max Scherzer Buying Waterfront $18M Jupiter Home [The Real Deal]
- BentallGreenOak, Slate Land $248M for The Biltmore [The Real Deal]
- Lenox Hill Townhouse Tops Manhattan Luxury Market [The Real Deal]
Recently Published Elliman Market Reports
- Elliman Report: Manhattan, Brooklyn & Queens Rentals 2-2023 [Miller Samuel]
- Elliman Report: Colorado New Signed Contracts 2-2023 [Miller Samuel]
- Elliman Report: California New Signed Contracts 2-2023 [Miller Samuel]
- Elliman Report: Normandy Isles/Normandy Shores New Signed Contracts 2-2023 [Miller Samuel]
- Elliman Report: Florida New Signed Contracts 2-2023 [Miller Samuel]
- Elliman Report: New York New Signed Contracts 2-2023 [Miller Samuel]
- Elliman Report: Manhattan, Brooklyn & Queens Rentals 1-2023 [Miller Samuel]
- Elliman Report: Hamptons/North Fork Decade 2013-2022 [Miller Samuel]
- Elliman Report: Long Island Decade 2013-2022 [Miller Samuel]
- Elliman Report: Manhattan Townhouse 2013-2022 [Miller Samuel]
That One Big Thing
- Opinion | I Was an S.V.B. Client. I Blame the Venture Capitalists. [NY Times]
- Credit Suisse, the Risk-Taking Swiss Banking Giant, Succumbs to Crisis [Wall Street Journal]
- After Signature Bank Deal, FDIC Is Left With $11 Billion in ‘Toxic Waste’ Loans [Bloomberg]
- US Banks on Bumpy Path as First Republic’s Troubles Persist [Bloomberg]
- First Republic Stock Fights Back as Jamie Dimon Leads Rescue Talks [Barron's]
- Anxiety Strikes $8 Trillion Mortgage-Debt Market After SVB Collapse [Wall Street Journal]
- Signature’s Collapse Puts Rent-Stabilized Buildings at Risk [The Real Deal]
- Signature Bank Threw a Fundraiser for the Congressman Now Probing How It Failed [Bloomberg]
- Why People Are Worried About Banks [NY Times]
- Silicon Valley Bank was warned by BlackRock that risk controls were weak [Financial Times]
Appraisal Related Reads
- Debriefing Fannie Mae's Selling Guide Announcement [The Appraisal Report Webinar]
- FACT SHEET: Biden-Harris Administration Tackles Racial and Ethnic Bias in Home Valuations [The White House]
- Remote Appraisals of Homes Could Reduce Racial Bias (Published 2022) [NY Times]
- The effort to diversify the field of home appraisal [NPR]
- What is the Role of Market Trends in a Real Estate Appraisal? [Birmingham Appraisal Blog]
- Appraisers [Fannie Mae]
- The housing market is a mixed bag [Sacramento Appraisal Blog]
- Slew of Negative Reviews for Appraiser Miller [Appraisers Blogs]
- ACTS [Appraisers Conference]
- A Landlord Got a Low Appraisal. He Is Black, and So Are His Tenants. [NY Times]