Important Housing Moments Without Nudity or Penguins

While I understand the concept “No Shoes, No Shirt, No Service” and I get the “no nudity” thing, admittedly I’ll have to spend some time researching penguins this weekend.

But I digress…

Have We Reached Peak Housing?

Love them or hate them, Blackstone is one of those companies that seems to be a lot more right than it is wrong. After the housing bubble burst a decade ago, they snatched up thousands of single-family suburban homes during the foreclosure crisis, gambling the demand for rentals would rise as credit conditions would remain tight.

Now they are selling their holdings which must mean we are at or close to “Peak Housing.” Admittedly I’ve been talking about slowing U.S. sales for all of the last year.

The private-equity firm late Tuesday sold more than $1 billion of shares of Invitation Homes INVH +0.28% Inc., the giant single-family home landlord it launched following the financial crisis in a wager that many Americans would be willing to rent the suburban lifestyle they could no longer afford to own.

The share offering is Blackstone’s second since March and comes as Invitation’s shares are trading at a record, reflecting rising rents and strong demand for the 80,000-odd homes it owns in 17 markets around the country.

Yahoo Finance TV – State of Housing

Its always fun to join Alexis Christoforous at Yahoo Finance TV – and I met her colleague Brian Sozzi. They’ve got a cool new broadcasting facility and I contend, the best green room in the TV business. If you’re curious where the term “green room” came from…no, it’s not that obvious.

We spent most of the time discussing all the changes occurring in the NYC market this year. Fun.

Why Free Cars Don’t Sell Overpriced Mega Listings

I got to speak with James Barron of the New York Times (the distinctive voice of some NYT podcasts engrained in my head so it was fun and a bit disorientating) about this crazy Manhattan condo listing: Perk for the Ultrarich: Buy an $85 Million Apartment, Get a Trip to Space

With such an abundance of opulence how do you attract buyers?

Promise a trip to space.

Yes, two seats on a future spaceflight.

But there is more.

The apartment in question comes with a house in the Hamptons for one summer; three cars — two Rolls-Royces and a Lamborghini; a yacht with docking fees for five years; season tickets to Nets home games; dinner once a week at the two-Michelin-star restaurant Daniel; a private chef for a year; a butler; and a $2 million construction allowance for renovations.

This listing was covered by the New York Post last year: This $85M apartment comes with Rolls-Royces and a trip to space.

I shared this note with a slew of my appraiser colleagues of RAC who are located all over the U.S.

Here’s a hypothetical for RACers…I was interviewed for this story and am asking all of you this very difficult question:

If you price a Manhattan condo and it sits on the market for more than 6 years and each year the seller throws in additional “free stuff” – why doesn’t it sell?

I got nothing back but a heavy dose of sarcasm in return given to the absurd situation. I doesn’t take a market expert to understand that when something doesn’t sell for 6 years, it is overpriced. Throwing “free” gifts into the offering aren’t free gifts. The buyer will be paying for them by overpaying for the property.

There has to be an alternative reason for the annual marketing push of this property since the high-end market is declining – is it simply free marketing for units in the building to elevate its market stature? I have no idea. However if anything, I think this annual activity risks the branding reputation of the building. Buyers aren’t dumb.

Here’s a retread of my blog post from 2014:

Matrix Blog________________________
…and the Home Seller will give you a Free Tesla!


Back when I was in college, a good friend of mine owned a large Michigan sod farm with his father – acres and acres of putting green quality sod. They wanted to upgrade their big tractor so I joined him on his visit to the local tractor dealership – International Harvester (my parents tell me I am a distant – really distant – relative of John Deere).


[Source: Hemmings]

The tractor they were looking at included air conditioning and a surround sound stereo system. It was impressive. The salesman said that if they bought the tractor that month the dealership would throw in an International Harvester truck.

My friend’s comment to me under his breath was something along the lines of “looks like we are actually buying the truck too.”

There was a New York Magazine piece on the guy who throws in a Tesla if you buy his condo talks about this marketing technique.  Using a Tesla is buzz worthy as a well thought of brand – after all marketing is about getting eyeballs on the listing – but is it effective?  Does this technique actual sell properties?

In my view throwing in such a large concession is a red flag signifying the property is overpriced enough to cover the seller’s cost of the “gift.”

Econ 101:  There is no such thing as a free lunch.

We’ve seen this marketing gimmick attempted with other cars such as a Prius, a Porsche, a Cadillac and Ferrari.

The funny thing is, you never read a follow-up article that shows how this marketing technique/gimmick was successful.


A buyer for the condo would have the financial wherewithal to buy their own Tesla and likely isn’t thinking about buying a car during their visit to the property.

We don’t see these extreme marketing gimmicks tried with low margin properties. “If I buy this $75,000 condo I get a free Tesla!” Of course not – the condo seller in this “Tesla” story is telegraphing to a potential buyer the listing is overpriced.

Yes, in a typical suburban transaction, a seller may throw in a used lawnmower to close the sale, but this is not something that is usually promoted during the actual marketing of the property.

NEWSFLASH Buyers are a lot smarter than this seller is giving them given credit for.

Moving To A New Home Leaves You Flat

(British translation: “Moving To A New Flat Leaves You…Well…Flat”)

FAR SIDE always speaks to me.

Too Many Mega Mansions But A Lot of Parties

On the same theme as the earlier “free trip to space if you buy my condo,” section earlier, these are salad days for party planners. Developers of super lux properties pull out all the stops to get attention given all the competition. There is a fascinating Wall Street Journal story on what developers are doing to sell in this market: L.A. Developers Have a Big Problem: Too Many New Megamansions, also shared in Mansion Global.

While this home is cool…

This type of marketing is way over my head (literally).


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

Appraiser Maureen Sweeney Makes It Clear

Maureen Sweeney, my friend and appraiser colleague from Chicago (who knew where the name “Chicago” originated from that I learned when I used to live there), wrote an opus about appraiser liability being created and the race to the bottom. It’s a great read.

Spoiler alert: Apps don’t have any judgment, nor does their maker.


There are moments in my life when I am glad to have given 12 years of my life to service to the Illinois appraisal community, and being part of the team that was in place when the Illinois AMC laws and rules were written years ago.

Each state is different with how they discipline their AMCs and how they discipline their appraisers. In Illinois the AMCs have nothing to do with the appraisal board. They are a business, and as such, they have no say in the disciplining of appraisers. They have to follow the laws that govern them as a business, which includes hiring licensed appraisers for all of their work.

This brings up 4 points:

1. The AMC is responsible for hiring licensed inspectors, which includes appraisers to do these hybrid reports.
2. The appraiser must be knowledgeable of their state laws, including the laws that govern AMCs
3. If the appraiser receives an assignment that is ordered by an AMC in which the inspection is not done by a licensed appraiser or a licensed building inspector, then the appraiser should not accept the assignment and contact the state, informing them that the AMC is breaking the law.
4. If the appraiser accepts the assignment that is ordered by an AMC in which the inspection is not done by a licensed appraiser or a licensed building inspector, then they are engaging in illegal activity.

Can mom and pop appraisal shops in Illinois do these hybrid reports when ordered by anyone other than an AMC? They sure can. And like every assignment, the appraiser is 100% responsible for their product. They sign it, they buy it.

When I served on the Illinois appraisal board from 2005 – 2017, the attitude then, and currently is: our job is not to tell you how to run your business. If there are appraisers out there who wish to do 1025s for $175 and take full responsibility for such a business decision, that’s their business decision. If somebody wants to sign off and take full responsibility for doing hybrids, that’s great too. It’s their business decision. They sign it, they buy it. Yet, this comes with a whole lot of Valuation Process problems. Let’s look at the following paragraph from the Morningstar press release:

“Clear Capital’s Modern Appraisal Program uses ClearInspect™ — Clear Capital’s new, intuitive mobile app — to guide appraisers, agents, brokers, and other data collectors step-by-step through a property data collection process to ensure quality and efficiency. The results can easily be delivered to customers, government sponsored enterprises (GSEs), and appraisers who may perform a desktop valuation based upon the collected property data.”

Who’s driving the Scope of Work? Who’s driving the data collection? It sounds like the intuitive mobile app is. Now I ask the question: who is driving the decision making process with this app? Is it the appraiser? It doesn’t sound like it. It sounds more like it’s Clear Capital’s new, intuitive mobile app!

And with that, my head just exploded.

When the hybrid and bifurcated reports were first introduced, I spoke with an attorney who does a whole lot of work defending appraisers. Right now, there aren’t that many cases against appraisers in Illinois and nationwide, yet the E&O companies and law firms that are hired by the E&O companies to defend appraisers, as well as the law firms who defend lenders who suffered a loss due to the hybrid appraisers are waiting. As one who specializes in forensic appraising of real property, along with a bunch of other “stuff”, I too will wait. There are a whole lot of licensed appraisers who are racing to the bottom to get some quick and easy money, and all of us know that this business practice typically results in stupid mistakes that have real consequences. For those of us who do expert testimony, we are going to be hammered with work due to the business decisions of others.

And I wish I didn’t have this gut feeling that a year from now, I will be receiving calls to litigation support regarding hybrid and bifurcated appraisal reports, but I do.

[see updated meeting info below] For those who will be in the Arlington, VA area next Friday, June 7th, hopefully you can make the joint TAFAC and IAC meeting . Peter Christensen will be there:

All of us have been in this business way too long, and all of us have lived through the public making uninformed decisions. All of us have screamed for consumers to inform themselves. And all of us have witnessed time after time consumers ignoring the cries of those who witnessed the decisions made by others before them. We can’t save the consumer from themselves, and we can’t save the appraiser from themselves. And yet, like Sisyphus, we will continue to try.

[From The Appraisal Foundation:
Next Friday, June 7, we will be in Park City for the Spring Board of Trustees meeting.

Our 2019 Joint TAFAC/IAC Meeting is Thursday, June 27:

It’s the 30th anniversary of FIRREA and this year’s speakers include Peter Barash and Bill Black giving a historical perspective of the S&L Crisis and Congressional responses and the agencies’ activities since that have diluted it, and also a look forward with Josh Panknin from Columbia Univ & NYU, author of The Property Valuation Reckoning is Imminent, How Technology is Highlighting Underwriting’s Shortcomings. And more.]


OFT (One Final Thought)

My goal since from childhood – to have one of those cool driveways (still a goal):

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 peak;
– You’ll get a free car;
– And I’ll be more considerate of penguins.

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.

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

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