Dinosaurs Go Glamping As Suburban Homeowners Heave Sigh of Relief

For those of you who can’t see housing trends change, here’s the slow-mo…

But I digress…

Bloomberg TV 10-7-19: Manhattan Pivots

I had a nice chat with Vonnie Quinn of Bloomberg Television on Monday concerning the state of the Manhattan housing market, following a highly read Bloomberg article on the terminal covering our Elliman Report results for Q3-2019 as well as a followup on Bloomberg Radio here and here.

New Reports: Elliman Reports Q3-2019 Westchester Sales, Putnam & Dutchess Sales

I’ve been the author of an expanding series of market reports for Douglas Elliman Real Estate for 25 years and it has made me feel younger somehow. We have just completed week 2 of the quarterly market report gauntlet and these are the results.

Before we get started, coverage of the Douglas Elliman Q3-2019 Westchester Sales report was the third most read by the 350K subscribers on the Bloomberg Terminal yesterday within about an hour of publication.

And a chart!!!

There are some good links for the market report coverage below.

Here are some of the key points:


Elliman Report: Q3-2019 Westchester Sales

“Sales fell year over year for the first time in five quarters as price trends rose.”

– For the first time in seven quarters, all three price trend indicators rose year over year
– County-wide sales declined annually for the first time in five quarters
– Most of the year over year sales gains occurred from $700K to $900K
– Total and new single-family contracts increased year over year
– All luxury price trend indicators increased annually after falling for three quarters
– Luxury listing inventory declined annually for the second time in three quarters


Elliman Report: Q3-2019 Putnam & Dutchess Sales

“Median sales price rose year over year for ten straight quarters.”

– Median sales price set a new record after rising annually for ten straight quarters
– The number of sales increased for the second time in three quarters
– Listing inventory rose annually for the third consecutive quarter


Elliman Report: Q3-2019 Putnam & Dutchess Sales

“Heavy sales volume continued to exceed the rise of listing inventory.”

– The number of sales surged year over year, rising for the third straight quarter

– Listing inventory increased annually for the fifth consecutive quarter

– The market pace moved much faster year over year in the two most recent quarters

New Reports: Elliman Reports Q3-2019 Brooklyn Sales, Queens Sales, Riverdale Sales (Bronx)

There are some good links for the Elliman report coverage below.

Here are some of the key points:


Elliman Report: Q3-2019 Brooklyn Sales

“As price trends flirted with records, sales continued to slide.”

– Median sales price slipped year over year for the second time in three quarters
– The number of sales fell annually for the seventh straight quarter
– Listing inventory continued to trend higher, rising year over year for the sixth consecutive quarter
– Median sales price for new developments edged higher year over year while resales declined
– Average and median sales price for co-ops set new records after rising annually for three quarters


Elliman Report: Q3-2019 Queens Sales

“Despite expanded inventory, price trend indicators set new records.”

– Median sales price and average sales price reached new records
– Sales have fallen year over year for eight straight quarters
– Listing inventory has expanded year over year for ten consecutive quarters
– Co-op median sales price reached a new record for the seventh time in the past nine quarters
– The number of condo sales fell year over year for the sixth straight quarter
– First increase in year over year new development sales in six quarters

[includes Fieldston, Hudson Hill, North Riverdale and Spuyten Duyvil]

Elliman Report: Q3-2019 Riverdale Sales

“Listing inventory and price trend indicators fell for the first time in more than a year.”

– Median sales price declined annually for the first time in six quarters
– Listing inventory fell year over year for the first time in five quarters
– Number of sales fell annually for the fourth time in five quarters

New Reports: Elliman Report 9-2019 Manhattan Brooklyn & Queens Rentals

The rental markets, especially within Manhattan, seemed to invert this quarter as more price growth was seen at the top. I have joked for months that these renters were “glamping out” instead of “camping” out and finally, my word choice was used in a headline and a story that was the 10th most-read story of the day on the Bloomberg Terminals.

And of course, a multi-colored Bloomberg chart that went with the article.


Elliman Report: 9-2019 Manhattan, Brooklyn & Queens Rentals

“Rising rents and falling concessions still define the rental market.”

– Median net effective median rent rose year over year throughout 2019
– Concession market share declined year over year for the eighth time in nine months
– The vacancy rate has increased year over year for three straight months
– Rents generally rose more quickly at the higher price strata
– Doorman median rent rose faster than non-doorman median rent respectively from the year-ago level
– New development median rent rose more quickly than the existing median rent
– The luxury entry threshold hasn’t seen a year over year decline in 2019


Elliman Report: 9-2019 Manhattan, Brooklyn & Queens Rentals

“Rental price trends continued to rise, and landlord concessions continued to slide.”

– Net effective median rent rose year over year for the tenth straight month
– Concession market share has continued to decline annually throughout 2019
– Median rent by bedroom rose annually for each size category


Elliman Report: 9-2019 Manhattan, Brooklyn & Queens Rentals

[Northwest Region] “Despite the decline in market share of landlord concessions, overall price trend indicators drifted lower.”

– All price trend indicators and new leases fell year over year
– Net effective median rent has stabilized after falling year over year in the prior two months
– The market share of landlord concessions fell year over year for the sixth time in seven months

Prices in Free Fall? Huge Spike in Foreclosures? Beware Real Estate Filter Bubbles.

Free Fall?
After the slew of market reports that were released over the past few weeks (in addition to ours), there were some pretty outrageous headlines that had little to do with the market and everything to do with SEO. The use of the phrase ‘prices in free fall‘ made it to the headlines of a handful of stories but then carried across the real estate community, including buyers.

Fred Peters, one of the Manhattan patriarchs of the real estate community who happens to be an excellent writer, took issue with the term ‘free fall’ and penned an article for Forbes: Why New York City’s Real Estate Market Isn’t In ‘Free Fall’. Fred and I don’t always agree on market conditions, but I never question his authority on the subject.

We all look through different optics. Within most media outlets, the journalist doesn’t control the way the headlines are written. The editor usually does, and an important part of their job is to generate clicks, readership, etc.

The definition of the phrase ‘free fall‘ in this situation means ‘a rapid and continuing drop or decline’ yet such a choice paints the market as a “black hole” or an “abyss” or that we are “standing at the edge of a precipice” or, well, you get the idea.

Related to this, it is important that we develop more respect for the quality of sources and how the information actually gets to you. If you only read one source, then you’ll eventually rest comfortably in a filter bubble.

Huge Spike?
Here’s another attempt to get SEO in a headline. Property Shark is a great resource for data but can be weak on the editorial side. There is a glaring example of this in their latest blog post: Manhattan Foreclosures Increase 118% Y-o-Y – Q3 2019 Report

Other references to the headline within the piece included “Manhattan cases up a staggering 118% year-over-year” and “Manhattan Foreclosures See Huge Spike: Up 118%.”

Then look at the following chart and read the fine print in the same article “Foreclosures in Manhattan increased drastically year-over-year when it comes to percentages. However, the absolute numbers aren’t nearly as spectacular. Percentage-wise, the borough saw a 118% surge, from 22 cases from Q3 2018 to 48 cases this quarter. 25 out of the 48 foreclosures were mortgage foreclosures.”

In other words, the headlines were referring to a YOY rise from 22 to 48 in a city with more than 800,000 housing units.

There is a terrific TED talk from 2011 that essentially predicted what would happen. I urge you to watch this presentation. After you see it, you won’t ever look at Internet searches in the same way.

Housing Splits Inflation Difference Between Education and Apparel

Another compelling Len Kiefer visualization.

Dinosaurs Have A Longer Marketing Time Than Spec Homes

I remember when the housing bubble was nearing the end a decade ago, and we started to see fancy sports cars being thrown in with a sale, and I wrote about that quite a bit here and in my Matrix blog.

This time its Dinosaur skeletons.

Compass Has Been Reassuring Its Agents They’re Not WeWork

A Compass broker, concerned about last week’s Housing Note post on WeWork and Compass (NYU’s Scott Galloway Takedown of Softbank’s Unicorns), and how they share the same key financing source (along with $350M for a dog-walking app maker), sent me a note from the Compass CFO, presumably to all their agents. The note was clearly intended to allay agent concerns by separating Compass from WeWork. The agent gave the letter to me in a Word document, not formatted or signed. It was shared with me to prove Compass was not in the same boat as WeWork (I never said they were), so I’m going to assume this is a valid document that hasn’t been altered.

Here’s a partial excerpt of my reply given to the agent who contacted me:

When I wrote the piece, the issue for me WAS the shared funding source because, after WeWork, it suggests how little due diligence Softbank must have done yet Compass marketed the Softbank investment as a vote of confidence. And it’s not just WeWork. I still can’t get over how Softbank invested $350M in a dog-walking app maker.

It’s not personal either and I get nothing out of this other than trying to get answers to things that don’t make sense. I’ve been following Compass since it was Urban Compass as well as Softbank’s investment history, trying to understand what makes Compass a disrupter. I can’t process the use of the word disruption in the traditional sense, and perhaps that’s my fault. The only disruption myself or anyone I know outside of the company (or former employees) has observed is that there is plenty of capital to buy agents or brokerage firms. They’ve achieved a well-polished marketing image, and I’m assuming it is well-run, but if there’s no apparent secret sauce beyond spending capital, then it can’t be valued as a tech company. The references check approvals above $1,000 require the CFO signature? That seems like someone grasping at straws to find talking points and also doesn’t give me confidence that a CFO has to micromanage a multi-million dollar company that way.

Give any smart person hundreds of millions of dollars, and they can be a disruptor too…

….How does this shift in investor and media sentiment impact the brokers Compass has hired? It probably doesn’t, at least for now, assuming the status quo.


Here is the Compass CFO letter the Compass agent shared with me to make a case for the greatness of the company:

Compass Family,

Over the past few weeks we have seen comparisons being drawn between Compass and WeWork simply because we share a single investor. To be clear, our businesses are quite different — in terms of our business model, capital structure, customers, culture and investments. I hope the 8 facts below help make this contrast crystal clear and answer the questions that some people outside of Compass have raised.

• Compass has no debt: Compass has raised zero dollars of debt while WeWork has over $5B of debt obligations that they have to pay back. Every dollar we have raised is in equity. With debt, companies have to pay back lenders with company money. With equity, companies don’t pay investors, but rather, the investors aim to realize their returns in the public market.

• Compass’ valuation is in line with peers & leaves room for future equity growth: Compass’ last round (Series G) valued the company at $6.4bn, which implies a revenue multiple in line with those of other publicly-traded real estate tech companies at 2-3x 2019E revenue, a fraction of WeWork’s multiple reported by the financial press (20x).

• Compass has a diverse and sophisticated investor base who collectively set the valuation for each round: Every one of our fundraising rounds has included multiple well-respected investors who have endorsed the valuation. Some of our investors include Wellington, IVP, QIA, Softbank, Fidelity, Dragoneer and others. WeWork’s recent rounds were exclusively with one investor.

• Compass’ expansion strategy is focused on depth vs. breadth: We have executed a consistent strategy throughout 2019 to drive deeper into our top 20 markets in the U.S. with a focus on profitable growth versus opening hundreds of locations across 29 countries as WeWork did. We intend to be a global company but our near term focus is one of the reasons we feel great about our path to profitability.

• Compass has a growing % of its employees focused on tech: We have over 425 members of our tech team who make up 19% of our total employee base (not 5%, as some outlets have erroneously reported), creating proprietary technology in partnership with our agents that they use to run their business and that differentiates us in the market.

• Compass’ acquisition strategy has been focused on assets that strengthen the core business: Every business Compass has acquired has either efficiently grown our agent base or accelerated our technology roadmap (e.g., Contactually), which is very different than investing capital to acquire companies that are not relevant to the core business.

• Compass has a culture of frugality: Our leadership team books coach tickets and does not fly on private jets and, as you know all too well, I review all company expenses above $1,000. This culture is critical to ensure we responsibly invest our money into building a better future for agents and their clients.

• Compass’ industry and business model are completely different: It may seem obvious, but it’s worth stating that it is hard to draw any parallels between our businesses given that we have different customers (agents, not enterprises), are in different industries (residential real estate vs. commercial leasing), and have very different business models (an end-to-end tech platform on which to operate vs. an office space solution).

Lastly, you may have heard some concerns about tech IPOs underperforming in recent months, so I’m adding a simple chart at the end of this email put together by a major investment bank to provide additional perspective. It shows the last private market valuation compared to the current public market valuation for tech companies that have gone public since 2018. What you see, with few exceptions, is significant value created for the employees and investors (median increase of 68% in 2019 increasing to 85% when you include 2018). While the headlines might indicate these companies are performing poorly, the numbers show a sizable increase from their last private valuation to current trading levels.

I hope this helps provide you all some clarity and talking points for your clients and colleagues. I am amazed by the Compass team and incredibly proud of what we have all accomplished so far this year. I’ve spent 17 years in tech investing, working both at Carlyle and Goldman Sachs, and I couldn’t be more excited about the future at Compass. Thank you for your continued hard work and your commitment to our mission. We are grateful to you and your dedication to our customers. Stay focused and let’s make the flywheel spin!

All the best,

Like I said earlier, their Softbank association issue probably doesn’t impact agents but rather it speaks to the fading unicorn narrative that has always seemed too good to be true. Let’s see how it plays out in a down market.


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

North Dakota Was Told Getting A Waiver Was A Snap

This post is a continuation of “The Banking Industry Is Driving The Waiver Movement” story in Appraiserville, within last week’s Housing Note.

I will continue to reference the document in the link below during the following discussion:


When North Dakota re-applied for a state-wide waiver, the appraisal industry was nearly unanimous in outrage at the audacity of the state to apply for one in the first place because its entire premise was false. Some of the facts brought up by the appraisal industry in opposition that were ignored were:

– There were more appraisers in the state than there were a decade ago
– There are plenty of appraisers in the cities
– Rural appraisers have always been hard to find because the economics make nominally feasible to cover those markets
– The economics of AMC-gouging of appraiser fees had forced more appraisers to specialize
– The difficulty and limited amount of data in rural areas places even more pressure on the economics

The appraisal industry, known for its infighting to its own detriment, actually got together on this matter and various organizations, coalitions, and individuals wrote in to make the argument against such a waiver. And it was obvious to nearly all of us that the decision was pre-determined.

FDIC was one of the most anti-appraiser pro-waiver agencies on the ASC and was “hell-bent” on issuing a waiver. Both the FDIC and OCC even sent senior staff to North Dakota (and other rural states) to promote this push for waivers.

I pointed out last week that the waivers were being pushed by the banking members of ASC or worse, leading those in the banking industry down the waiver path. This bias was illustrated by the comments made by Marilyn Foss of the North Dakota Bankers Association (NDBA) who said that the North Dakota Appraisal Board has known about the rural appraiser challenge but hasn’t come up with a solution and NDBA wanted a solution. (The solution is economics but that’s not a topic the banking industry is willing to look into.) She basically said that FDIC encouraged them to apply for the waiver in 2017 because it will be a piece of cake per FIL-19-2017.

She stated that in May 2017, the FDIC published FIL-19-2017, which inspired the State to act on the issues of scarcity and delay.

So North Dakota applied.

And there is this (emphasis mine):

R. Clayburgh, the President of the NDBA, said that not all in-State appraisers are available to all lenders as some appraisers limit their work to specific lenders or appraisal types. He said legislative leadership brought lenders and appraisers together to address education requirements and that there is a potential for State educational institutions to set up a program to assist those who want to enter the appraisal profession. He added that lending has slowed due to the difficulty in finding comparables which delay lenders from receiving completed appraisal reports.

In other words, the view of the NDBA is that in periods when there are no comps, they need a waiver to make loans. Step back and think about that.

There were concerns raised by the banking industry on slow turn times, yet Corey Kost of the North Dakota Appraisal Board indicated that “turnaround times in North Dakota have improved over the past few years.”

The commissioner of the North Dakota DFI was basically told to apply for the waiver, and this would be an easy process. I don’t think they realized the outrage they would create in making that waiver request. North Dakota got their waiver thanks to the banking regulators but were quite beat up in the process, which may discourage other states from applying.

Bold emphasis mine on the following.

L. Kruse of the North Dakota Department of Financial Institutions (DFI) stated DFI’s mission and the reasons for the Request. She emphasized that a scarcity of appraisers in the State was leading to a delay in turnaround times on appraisal reports which was affecting the closing of loans. She said population is not the only indicator of scarcity and that in North Dakota there is scarcity by reason of geography. She said the high cost of appraisals is paid by the customer which causes harm. DFI does not feel the waiver would cause safety and soundness issues. She commented on the Interagency Advisory on the Availability of Appraisers issued in May of 2017 and stated that in a meeting with Federal agency representatives, she was told that waivers could be used to address scarcity. She said the request was submitted and provided evidence in good faith to provide relief to consumers.

After all, the premise behind the waiver is that banking regulators in their zeal to control the mortgage process, have sought to destroy independent valuation for no other purpose than that. Control. The justification for waivers has nothing to do with appraiser shortages (because there “appraisal shortages” was a false narrative cooked up by the AMC industry a few years ago during the refinance boom yet the reality was in the decline in appraisers willing to work for less than 50 cents on the dollar).

It’s 2019 people, and this ND waiver is preposterous.

– Will result in only uninformed people performing USPAP compliant appraisals without training or experience
– Imagine their personal liability?
– Consumers and lenders won’t be able to file complaints
– Non-licensed appraisers will be challenged to locate the hard to find data in rural areas that experienced appraisers can find, so… they will simply use whatever they can, which will decimate the quality of reports submitted.

When a regulatory action like the North Dakota waiver occurs, and it is completely illogical on all accounts, there are deeper underlying issues at play coming from above that have NOTHING to do with protecting the public trust.

OFT (One Final Thought)

Sometimes, you need to spin that turntable enough to cook dinner.

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 into fossils;
– You’ll be more into glamping;
– And I’ll never waiver (or issue one).

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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