I’ve been taking the commuter train from Connecticut into Manhattan since 1990 and much of my daily ride was full of open newspapers before handheld devices became ubiquitous. The morning read of the car tended to be NYT/WSJ/FT and the evening was the NYPost/NYDailyNews as well as a thorough handwashing to remove the black ink:
All this technology is making us antisocial. pic.twitter.com/Go3zRWqvQt
— Life in Moments (@historyinmoment) May 9, 2019
But I digress…
Elliman Report Released: April 2019 – Manhattan, Brooklyn & Queens Rentals
Real estate giant Douglas Elliman released our research today for the April rental market covering Manhattan, Brooklyn and Northwest Queens. This market report is part of the expanding Elliman Report series I have been authoring since 1994.
Elliman Report: Manhattan, Brooklyn & Queens Rentals 4-2019
“Rental price trends in the entry tier pressed higher, overpowering the high-end market.”
– The net effective median rent rose year over year for the fourth consecutive month
– Landlord concession market share fell sharply, the third year over year decline in four months
– The vacancy rate edged higher year over year for the first time in eleven months
– Market share of leases above $10 thousand per month moved higher
– All luxury price trend indicators moved higher than year-ago levels
Bloomberg included two charts (a twofer!) so that needs a shout out. Click on either for the Bloomberg coverage.
Here are some of our Manhattan charts.
“The decline in market share of rentals with concessions continued to accelerate.”
– The year over year change in the market share of concessions continued to decline
– New leases rose year over year for the fourth time in five months
– Net effective median rent increased annually for the fifth straight month
These are some of our Brooklyn charts.
“Landlord concession market share fell sharply from the year-ago record.”
– Market share of landlord concessions fell year over year for the second time in eight months
– Net effective median rent expanded year over year for the fifth time in six months
– Studio and 1-bedroom rental leasing grew as 2-bedroom rental leasing fell
These are some of our Queens charts.
My Views on the Value of Views
There is an epic New York Times real estate cover story out today that will be available in print this weekend that covers my takes on the impact of views on value and the philosophy behind it. These insights were developed during our appraisal firm Miller Samuel‘s 33 years of existence and tens of thousands of appraisals completed by our team. Both the photos and the write-up were terrific and I’m super proud to be a key part of this story. Click on the image to read the story and see more photos.
“Flip” is the New 4-Letter Word
Many young investors haven’t seen a declining market and took excessive risks. With the proliferation of flipping shows (mostly shot in Canada BTW) who can blame them? It was not so long ago that we were all talking about how young people had never seen a rising housing market.
The changes in some markets are quite pronounced making flipping inherently a bad idea.
Some Analog Thoughts About The iBuyer Industry
Ben Casselman pens a great piece in the New York Times: Real Estate’s Latest Bid: Zillow Wants to Buy Your House. If you click on the tweet first (not the link to the article) you get a great thread that breaks it all down.
In a digital world, selling a house remains stubbornly analog. Silicon Valley wants to change that. https://t.co/GQjP2NQhuO
— Ben Casselman (@bencasselman) May 7, 2019
Aspirational Pricing Illustrated
There was an article in the Wall Street Journal: Miami Condo King Brought Back to Earth by Luxury Home Price Correction on setting listing prices in Miami from the perspective of one of the most prolific developers there, George Perez of Related. Here is the history of the penthouse he owns at the development he built known as 1 Collins in Miami:
2016 purchased $4.23M (assuming as the developer, he got a deal)
2016 listed for $20M
2019 dropped the price to $10.95 million
Bloomberg Masters in Business Podcast: Ivy Zelman Discusses Real Estate
This was a twofer – two of my good friends talking about the real estate market and I get a shoutout! Ok, ok, that’s not why I’m sharing this. This was a really enjoyable listen on the topic that drives you to read Housing Notes – you’ll get a sense of how Ivy has been so darn accurate during her career and what she sees now.
Visualizing Monthly Mortgage Payments
Another great “Howmuch.net” visual on mortgage payments. The idea that the average payment in Santa Cruz, CA is $2,940 and in Coffeyville, Kansas is $205 – is mindblowing.
Our favorite charts of the week
One of the hopes of housing market observers is for continued growth in wages after falling behind housing price gains. Wages are clearly rising but the rate of growth is leveling, which is especially disappointing after the large stimulus insertion into the economy by the tax cut in 2018.
NY Fed: The probability of U.S. Recession as predicted by Treasury Spread was 27.5% in April.
Len Kiefer‘s Chart Handiwork
(For earlier appraisal industry commentary, visit my old clunky REIC site.)
Protect Appraisal Report Integrity By Delivering Locked PDFs
Obviously, it is easy to unlock a pdf report, but we lock every report as an effort to maintain report integrity. This should be a regulatory requirement. Periodically we have seen reports we delivered electronically that ended up being modified to the client’s needs.
This almost happened a week ago.
My firm received this request from Servicelink on a BoA request. In accordance with the new AMC law in New York State, we are including the invoice with our reports. This was the first report to this particular BOA group since the new law was activated so it is reasonable to assume that the BOA clerk handling the appraisal didn’t know what to do about the invoice and Servicelink was passing along the request. The law itself says the invoice must be delivered with the report which infers but doesn’t specifically state that the invoice should be within the report pdf. I would imagine there will be a lot of attempts by lenders to get rid of invoices out of habit but after a while, once appraisers start seeing invoices missing from the applicant copy when an applicant calls the appraiser, the appraiser needs to complain to the CFPB. I remain skeptical that lenders will be able to sustain a systemic fraud or ignorance to the spirit of the NY AMC law by hiding the invoices from the applicant and risk doing future business in one of the largest mortgage markets in the U.S.
Our client, Bank of America, has accepted both appraisal reports. Unfortunately, they are having issues uploading the documents into their system due to them being locked and password protected. Are you able to modify the permissions to allow printing and unlock the document? Please let me know as soon as possible so we can deliver to the client.
Red flag: How could they have accepted the report but never uploaded it?
I personally tested the pdf they sent back to us as well as our original copy. They both printed as usual so we told them they must have a software issue on their end. We have never had to deliver unlocked reports to this client and as practice. It is ALWAYS inappropriate for an AMC to request an unlocked report. There is only a nefarious reason behind it, even if the requestor themselves have no idea.
Causation, not correlation: The first time we get a request to unlock = first time we attached an invoice.
Here is how we respond to these things:
Thank you so much for the business. We greatly appreciate it!
Miller Samuel does not unlock pdf’s or remove passwords. So we just can’t help in this situation. This is done to protect the integrity of our report as a matter of policy with every client.
Thanks again and we look forward to working with you in the future!
Here’s what Servicelink told us after we said “no.”
We were just looking for a partnership here to try and meet the needs of what is a very important client to ServiceLink.
Until the new New York State AMC Law is fully adopted by the AMC industry, expect to get these requests. Part of the issue is software updates or internal procedural changes and part of it – like this example – is nefarious.
Solidifi Wants Insight Into Your Vacation Time
If AMCs weren’t invasive enough already on appraisers personal lives with overly-frequent status calls and other well-documented and demeaning requests, how about vacation time? In addition to the 37-page boilerplate order request the appraiser is required to read, appraisers now have to fill out another form.
The fact that Solidifi and their competitors are in business to fee out to the lowest bidder makes this request silly because appraisers don’t have that kind of relationship with AMCs. It goes like this. They send out an appraisal request to 10+ appraisers and one of them is on vacation and therefore doesn’t respond. Who cares? In my view, a business that treats its vendors like cattle, can’t call it a professional relationship. In fact, there IS NO RELATIONSHIP. The appraiser as the local market expert is really only a widget to them. AMCs can’t expect to have it both ways. If appraisers weren’t bombarded with paperwork and dogged by phone calls from a 19-year-old chewing gum already then this would not be an issue.
XOME Seems Concerned New York Borrowers Will Find Out How Little The Appraiser Gets?
An appraiser/reader sends me this text from an XOME appraisal request:
“Good Morning, The state of NY requires the appraiser to include their invoice in the report. AMC fee does not need disclosed. Please include an invoice in your report when uploading. Thank you”
This is technically accurate. Here is an excerpt from the NYS AMC Law:
38 (e) Knowingly fail to separately state the fees paid to an appraiser
39 for appraisal services and the fees charged by the appraisal management
40 company for services associated with the management of the appraisal
41 process to the client, borrower and any other payer.
Why would XOME go out of its way to tell their appraisers not to disclose the AMC portion of the fee the applicant paid? This is not a regulatory requirement that I am aware of. My firm includes our invoice at the top of the pdf and the pdf is locked (we don’t work with the XOME platform).
OFT (One Final Thought)
I hate Facebook. This pretty much sums it up.
Why is Facebook co-founder Chris Hughes saying it’s time to break up the company? He explains in this video op-ed. pic.twitter.com/mrAuP3QXzE
— New York Times Opinion (@nytopinion) May 9, 2019
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 be more analog;
– You’ll be more aspirational;
– And I’ll be more antisocial.
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.
Reads, Listens and Visuals I Enjoyed
- Miami Condo King Brought Back to Earth by Luxury Home Price Correction [Wall Street Journal]
- Wealthy Bay Area suburbs could have a whole new look under California housing bill [SF Chronicle]
- A couple uprooted a 180-year-old oak. A judge ordered them to pay nearly $600,000. [Washington Post]
- Rezonings transform NYC neighborhoods—but the city doesn’t meaningfully study their impacts [Curbed]
- Young Real Estate Flippers Get Their First Taste of Losing [Bloomberg]
- Revisiting 1916 (Part I): The History of New York City’s First Zoning Resolution [Skynomics Blog]
- Revisiting 1916 (Part II): The Economics of Population Density [Skynomics Blog]
- Revisiting 1916 (Part III): New York's First Zoning Resolution and the Roots of NIMBYism [Skynomics Blog]
- This start-up buys your home, rents it back to you and lets you profit if the value grows [CNBC]
- Real Estate’s Latest Bid: Zillow Wants to Buy Your House [New York Times]
- Fifth Avenue Losing Luster as Vacancies Climb, Rents Fall [Wall Street Journal]
- Purplebricks boss moves out as expansion scaled back [Sky News]
- “My expectations were way too high”: Related CEO Jorge Pérez slashes price on his condo [The Real Deal]
- 10 things real-estate agents wish they could tell you — but won't [Business Insider]
- Developers Are Trying To Make Sense Of New York City’s Climate Policies [Bisnow]
- New Taxes and Higher Density Aren't Fixing Vancouver's Housing Problem [Citylab]
- Untouched Paris Apartment Discovered after 70 years. Includes Painting worth $3.4M [The Mind Circle]
- NYC’s supertall skyscraper boom, mapped [Curbed]
- Criminals and kleptocrats will find it harder to launder money in U.S. if bill passes [Washington Post]
- Proposed project from Vornado and Rudin calls for 1,450-foot tower in Midtown East [6sqft]
- ULI Real Estate Economic Forecast Sees More Runway Ahead for Current Growth Cycle [Urban Land Magazine]
- Private elevators, heated floors, valets: How Boomers are transforming the Toronto condo market [National Post]
- At New York’s Hudson Yards, Everyone Feels Colder [Wall Street Journal]
- Palm Beach real estate season: Pace picks up after sluggish start [Palm Beach Daily]
- Visualizing Monthly Mortgage Payments in the United States [Howmuch.net]
- NYC’s Population — And its Impact on the Rental Market [NY Multifamily]
- Podcast: Ivy Lynne Zelman Discusses Real Estate [Bloomberg Masters in Business]
- Why Wages Are Finally Rising, 10 Years After the Recession [NY Times]
My New Content, Research and Mentions
- Trophy homes: how the super-wealthy struggle to value their properties [Financial Times]
- Douglas Elliman Releases April 2019 Rental Market Report for Manhattan, Brooklyn and Queens [Citybizlist]
- Rooms With a View (and How Much You’ll Pay for Them) [New York Times]
- Where have all the billionaires gone? [The Real Deal]
- Manhattan’s Market for Posh Rentals Is Booming [Bloomberg]
- Brooklyn and Queens rents rise as incentives decline: Elliman [The Real Deal]
- Report: NYC landlords get stingier with new lease freebies [Brick Underground]
- Manhattan Landlords Offer Fewer Deals as Rental Market Tightens [Mansion Global]
- Cautious buyers are pushing up Manhattan rents [The Real Deal]
- It's deal frenzy before the taxman cometh [The Real Deal]
- New York City Sellers to Shoulder New Mansion Tax Burden [Barrons]
- Luxury home sales see biggest slump in nearly a decade [Daily Trust]
- New York City Sellers to Shoulder New Mansion Tax Burden [Mansion Global]
Recently Published Elliman Market Reports
Real Estate Blockchain
- The Tweets of April: Courthouse becomes new battlefield for Bitcoin Cash | Modern Consensus | Cryptocurrency and blockchain news and opinions [Modern Consensus]
- Louis Vuitton Owner LVMH Is Launching a Blockchain to Track Luxury Goods [Yahoo News]
Appraisal Related Reads
- How To Minimize Diminishing Profits in Real Estate [Cleveland Real Estate Blog]
- The Relocation Appraisal: Defining The Differences [WERC]
- NCUA’s appraisal plan ignores lessons of last crisis [American Banker]
- When the best comps are four years old [Sacramento Appaisal Blog]
- How Knowing Days On Market Can Help Buyers and Sellers Be More Successful [Birmingham Appraisal Blog]
- Two things to understand about Zillow’s accuracy rate [Sacramento Appraisal Blog]
- Austin Board of Realtors issues cease and desist order in data dispute [Statesman]
- Unintended Users Phony Low Value Claims Against Innocent Appraisers [Mike Ford/Appraisers Blogs]
- How much is that new roof & AC unit worth? [Sacramento Appraisal Blog]
- Science & Art Reflect our Search for the Truth – Is There an Art in Science? [George Dell/Appraisers Blogs]
- Appraisers question process NYC used to value properties before shelling out $173 million to shady landlords [NY Daily News]
- Appraisal Management Companies Create More Problems Than They Solve [American Banker]
Extra Curricular Reads
- Party City says it is closing 45 stores amid a global helium shortage [USA Today]
- This tech ad parody is so spot-on, we almost refuse to believe it’s not real [Fast Company]
- My 1,100sqft: Pizza pundit Scott Wiener's Midwood home holds the world's largest pizza box collection [6sqft]
- How Much of the Internet Is Fake? [NY Mag]
- Law & Order’s New York was never real [Curbed NY]
- Starbucks got an estimated $2.3 billion in free advertising from 'Game of Thrones' gaffe, and it wasn't even its coffee cup [CNBC]
- The price of plenty: how beef changed America [The Guardian]
- Giuliano Bugialli, Champion of Italian Cuisine, Dies at 88 [NY Times]
- How Mapping Shots In The NBA Changed It Forever [FiveThirtyEight]