Black Friday Housing Tryptophan Wake Up Call

November 27, 2020

It’s a short Housing Note this week but please remember that the right kind of training is always important.

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I wanted to give my shoutout to my excellent Columbia Grad students who participated in this last week’s Zoom lecture on the nuances of market analysis. Here’s that same tip: you don’t need to concern yourself with the “Appraiserville” section down below where I bring transparency to the appraisal industry, especially with the larger institutions that influence it. But by all means, feel free to read at your leisure.

But I digress…

Newsday: Long Island Bidding Wars Are Through The Roof

I’ve been analyzing the Long Island housing market for Douglas Elliman for years via the Elliman Report: Long Island Sales series.

Recently, I did an analysis for Newsday, looking at the spread between the last ask and closing price in Long Island during Q3-2020. They wanted to identify the sales that sold at $50,000 or more above the last asking price and I found 135.

Once socially distanced open houses were permitted again, prospective buyers were actually eager to wait hours on long lines for walk-throughs of homes in Patchogue, Brentwood, Uniondale and other communities, agents said. In many cases, sellers have been pleasantly shocked to see bids up to $100,000 over asking prices, agents said.

It is important to note that in my Long Island analysis, I excluded the Hamptons and the North Fork, so clearly, this is not a data set of wildly high-priced properties to start with. The median sales price for the data set of closed sales prices was $665,000 with a $200,000 minimum price and a $3,250,000 maximum price. The median sales price was 11% above the $599,000 median listing price.


[click view article and see data]

Conforming Loan Limits Are WAAAAY Up

In the history of conforming loan limits, only 1990 saw a $150 drop, otherwise, it’s always up. During the housing crisis, from price peak to trough and then some, i.e. 2006 to 2016, the limit remained unchanged at $417,000 despite the +30% drop in prices nationwide. NYC’s conforming loan limit for 2021 was just raised to $822,375 while the national limit was raised to $548,250.

Here’s their trend from the beginning (since 1970)

– A conforming loan is a mortgage whose underlying terms and conditions meet the funding criteria of Fannie Mae and Freddie Mac—mainly, a dollar limit on the size of the loan.
– The baseline conforming loan limit is adjusted annually. It is $548,250 in 2021 for most parts of the U.S.
– Lenders prefer to deal with conforming loans, as these are the only type that Fannie Mae and Freddie Mac will guarantee and buy in the secondary mortgage market.
– Conforming loans often offer more advantageous rates for borrowers.


[click on image to see interactive county map]

Lots of Changes In The Mix When Manhattan Rents Plummet

While I wrote about the growing inbound migration related to the sharp drop in rents, here’s another quality of life improvement: less dependency on roommates.

Bloomberg: NYC Rent Plunge Lets Budget-Minded Roommates Finally Live Alone

‘Brooklyn Ranks 48th Most Popular Baby Name In 21st Century

When a booming housing market inspires baby names, you know the market is a force to be reckoned with. While ‘Brooklyn’ is #48, I’m still rooting for ‘Staten Island’ as a baby name.

Getting Graphic

Our favorite charts of the week

Len Kiefer‘s Chart Handiwork

Appraiserville

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

TAF FOIAS ASC And Unintentionally Makes Public The Overwhelming Industry Sentiment Against Two Year Renewals

The first order of business – last week I neglected to insert the famous bat-shit crazy letter link sent from TAF to ASC and cut short my weekly streak but was told by the “officiating committee of blog streaks” that my mention of it two times (and bleeped) in the adjoining Phil Crawford, Voice of Appraisal interview of me thankfully kept the streak alive.

On October 26, 2020, The Appraisal Foundation sent a FOIA (Freedom of Information Act) requesting to ASC for all public comments made concerning the two-year USPAP publishing cycle (that I believe most of the industry has been pushing back on for years).

This is yet another bureaucratic misstep by TAF, not unlike Dave Bunton’s GAO audit request of ASC to Congresswoman Maxine Waters that conveniently forgot to include The Appraisal Foundation, a key source of controversy and problems in the appraisal industry.

As a reminder about TAF – it is a non-profit organization that has been strenuously pushing back against any oversight by ASC, illustrated in the previously mentioned bat-shit crazy letter. This is the same organization that will not let their regulator talk or be seen in ongoing Zoom calls, has amassed $8 million as a non-profit, has opted to refuse about $1.4M in ASC grant money in 2020-2021 (translation: all ASC grant funds) despite this being the funding mechanism Congress intended. And then to go all conspiracy theory here, TAF brought Zillow into the IAC, despite the fact they are not an appraisal organization nor a provider of appraisal services. The Zestimate product (consumer-facing AVM) is only accurate within 5% of the actual price, 50% of the time (per Zillow), and has been the valuation nemesis of appraisers and real estate agents nation-wide since 2005.

But I digress.

General Counsel for ASC, Alice Ritter responded to the FOIA request on November 24th with a 92-page pdf.


[click to open the full FOIA response]

There are many organizations and individuals that are clearly pushing back on the two-year USPAP cycle that has saddled appraisers with bureaucracy and unnecessary costs for decades. Most notable is the Appraisal Institute, the industry’s largest trade group. In fact, a TAF executive, Kelly Davids, recently said on a public call that TAF and AI were going to “make beautiful music together.” This was in contrast to the more than a decade of irrational adversarial behavior.

It will be interesting to hear what that beautiful music sounds like after reading this statement by the Appraisal Institute on the topic of USPAP two year cycles”

“While it’s impossible to predict what will
happen in Washington, the Appraisal Institute
is optimistic that Congress will address
regulatory modernization this year,” Murrett
told us. “Perhaps now more than ever, we
see the need for an overhaul of the current
U.S. appraisal regulatory structure as
appraisers are crushed by a stack of growing,
outdated rules and regulations. Regulatory
modernization is an opportunity to fix a
broken system.”

And an Appraisal Institute article on the topic.

There is a growing need for a better regulatory system for the appraisal industry
By James L. Murrett, president, Appraisal Institute

Indicative of the challenges facing the appraisal industry, a 2017 study conducted by the National Association of
Realtors found that excessive regulation is one of the most common reasons for appraisers wanting to leave the
profession — among appraisers who say they are likely to leave the industry within five years. Standards and
associated required coursework for the profession change every two years, for example, causing appraisers to
devote additional fees and significant time for minute, inconsequential updates.
Because most appraisers operate as small businesses, these regulatory requirements become a significant
burden. To put it simply, appraisers are inundated with unnecessary, tedious requirements that change often and
may not be recognized outside of the state where they practice.
This aging regulatory structure, which has been in place for nearly 30 years, has layers of federal rules and
regulations that are duplicative and unnecessary while adding time and costs without additional lender and
borrower benefit. This structure is unlike any in the federal system and has no comparable model — not for land
surveyors, insurance agents, real estate brokers or mortgage originators.
In fact, the two most prominent parties that meet with homebuyers — real estate agents and mortgage
originators — do not have direct federal oversight of their licensing functions. Instead, what mortgage originators
do have is an efficient multi-state licensing program that can serve as a model for appraisal-regulatory
modernization.

And AMC trade group REVAA weighs in: REVAA Appraiser Modernization Key Concepts – 05.17.2018

o USPAP shall be published/modified on a stabilized basis, not to exceed every four years unless a
change is requested by the ASC. Stakeholder organizations shall have the opportunity to appeal
to the ASC to request changes.
o A functional electronic version of USPAP shall be made available for free to the public and
allowed to be used for appraisal coursework. Hard copy versions and derivative works shall
remain available for sale.
o Grant funding for ASB and AQB ASC shall conduct a review of USPAP (every two years) to ensure it is relevant, understandable and applicable to current market conditions.

And so many more…if you’d like to see all the responses provided the ASC FOIA response, you can go here.

The main point of all this is to reiterate the disconnect TAF has from the real world of appraisal industry participants by creating an insulated structure run by FODs (friends of Dave Bunton) and this is not good for appraisers or maintaining the public trust. We’ve seen this in the three decades without African-American representation on the AQB. It’s really that simple.

OFT (One Final Thought)

Sometimes it’s better to strip away all the distractions and get down to the groove.

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 conforming;
– You’ll be more likely to live alone;
– And I’ll keep looking at FOIA requests.

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
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog
@jonathanmiller

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