Housing Principal Payments Have Less Room In The Pie

October 14, 2022

A piece (actually many pieces) of evidence shows why pie was better than cake back in 1965.

But I digress…

NYC Rents Peaked But Luxury Hasn’t

I’ve been covering the New York rental market for a long time as part of our expanding market report series for Douglas Elliman Real Estate. I began writing the series back in 1994, focusing on Manhattan initially.

The monthly rental reports and rental data have been especially useful during the pandemic era, given the significant volatility that has emerged.

Bloomberg had a good piece on the report release and, of course, a nifty chart.

Elliman Report: September 2022 Manhattan, Brooklyn & Queens Rentals

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MANHATTAN RENTAL MARKET HIGHLIGHTS

“Market median rent continued to level off at a near-record as high-end rentals pressed higher.”

– Net effective median rent fell for the second straight month, slipping to the third highest on record
– The market share of rentals with landlord concessions fell to its lowest level in more than six years
– The market share of bidding wars fell below prior-year levels
– Doorman net effective average rent increased to a new high for the third time in four months
– The net effective median rent for existing rentals slipped to the second-highest level for the first time in eight months
– Luxury net effective median rent increased to a new high for the third time in four months
– Luxury average and median rents rose to new highs
– The entry threshold for the luxury market expanded annually for the fifteenth consecutive month

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BROOKLYN RENTAL MARKET HIGHLIGHTS

“Rental prices appeared to peak in August, moving sideways in September.”

– Net effective median rent slipped month over month for the first time in eleven months
– The market share of bidding wars continued to account for one out of five new leases
– Listing inventory expanded annually for the first time in eleven months

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QUEENS RENTAL MARKET HIGHLIGHTS

[Northwest Region] “Median rent increased to new highs as concessions have fallen for more than a year.”

– Median and median net effective rose to new highs
– The number of new lease signings fell for the sixth consecutive month
– Landlord concession market share declined annually for the fourteen straight month

[Podcast] Slate Money: Felix Learns What A Condo Is – Jonathan Miller joins to talk all things real estate.

I’m a regular listener to the Slate Money podcast so I was thrilled to be invited to participate.

This week, Felix Salmon, Emily Peck, and Elizabeth Spiers are joined by housing market analyst and real estate appraiser Jonathan Miller to answer all their burning real estate questions including what’s going on with mortgage rates, how do new luxury buildings affect prices, and why is rent so damn high?

Listing Inventory Falling In The Outer Boroughs of NYC

Douglas Elliman published our research this week on several NYC outer borough markets:

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BROOKLYN SALES MARKET HIGHLIGHTS

Elliman Report: Q3-2022 Brooklyn Sales

“Median sales price declined quarterly for the first time in eight quarters.”

– Median sales price fell to only the second-highest level on record after nearly two years of new records
– Bidding war market share rose to a new high, reaching nearly one-third of all closings
– Listing inventory declined for the second quarter after rising annually for five quarters

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QUEENS SALES MARKET HIGHLIGHTS

Elliman Report: Q3-2022 Queens Sales

“Median sales price rose annually for the eighth consecutive quarter.”

– Median sales price expanded but fell short of reaching a new high as it has five times in the past seven quarters
– Bidding war market share rose to a new high, reaching nearly one-quarter of all closings
– Listing inventory declined annually for the fifth straight quarter remaining below pre-pandemic levels

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RIVERDALE SALES MARKET HIGHLIGHTS
[includes Fieldston, Hudson Hill, North Riverdale, and Spuyten Duyvil]

Elliman Report: Q3-2022 Riverdale (Bronx) Sales

“Median sales price rose to a new high as sales slipped for the first time in nearly two years.”

– Median sales price rose annually for the past eight quarters
– Bidding war market share increased to the third highest on record, nearly one in five sales
– Listing inventory declined annually for the third time in four quarters

[NY1 News] What’s It Like To Buy in NYC Right Now?

Here’s an interesting NY1 story on an individual trying to buy a home in Brooklyn – I get to weigh in.

Westchester, Putnam, and Dutchess Counties Continue to See Low Listing Inventory

Douglas Elliman published our research covering the Hudson Valley north of NYC:

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WESTCHESTER SALES MARKET HIGHLIGHTS

Elliman Report: Q3-2022 Westchester County Sales

“Sales slowed annually for the third consecutive quarter as several price trend indicators reached new highs.”

– Median and average sales prices reached new records and remain well-above pre-pandemic levels
– The number of sales declined at an expanding annual rate but was the third-highest sales total on record
– Listing inventory fell to the lowest level for a third quarter on record
– Single family sales that went to a bidding war accounted for six out of ten closings in the quarter
– Condo sales saw a record market share of bidding wars in the quarter
– All luxury price trend indicators reached their respective second-highest level on record
– Luxury listing inventory annually for the fourteenth straight quarter to the second-lowest on record

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PUTNAM SALES MARKET HIGHLIGHTS

Elliman Report: Q3-2022 Putnam & Dutchess County Sales

“All price trend indicators rose annually and expanded substantially above pre-pandemic levels.”

– Median sales price reached a new high in five of the last six quarters
– The number of sales fell year over year for the last four quarters but remained above pre-pandemic levels
– Listing inventory declined year over year for the tenth consecutive quarter

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DUTCHESS SALES MARKET HIGHLIGHTS

Elliman Report: Q3-2022 Putnam & Dutchess County Sales

“All price trend indicators rose annually and expanded substantially above pre-pandemic levels.”

– Median sales price reached a new high in four of the last six quarters
– The number of sales fell year over year for the last three quarters but remained above pre-pandemic levels
– Listing inventory expanded year over year for the past two quarters after falling for the previous ten quarters

NYC Comptroller: The City Economy Continues To Rebound From The Pandemic

I highly recommend my readers subscribe to the NYC comptroller’s monthly newsletter. Lots of insights shared on the national and local economy.

Here are a few interesting charts:

NBER: WFH & The Office Real Estate Apocolypse

My policy: Always read a white paper that has a title that could be used for a rock band.

Work From Home and the Office Real Estate Apocalypse by Arpit Gupta, Vrinda Mittal & Stijn Van Nieuwerburgh

From the abstract (bold my emphasis):

We show that the pandemic
has had large effects on both current and expected future cash flows for office buildings. Remote
work also changes the risk premium on office real estate. We revalue the stock of New York City
commercial office buildings taking into account pandemic-induced cash flow and discount rate
effects. We find a 45% decline in office values in 2020 and 39% in the longer-run, the latter
representing a $453 billion value destruction. Higher quality office buildings were somewhat
buffered against these trends due to a flight to quality, while lower quality office buildings see
much more dramatic swings. These valuation changes have repercussions for local public
finances and financial sector stability.

Mortgage Lenders Never Lost Their Minds During The Pandemic-era Housing Boom

From Calculated Risk…

This chart shows how mortgage lenders never lost their minds during the pandemic-era housing boom.The housing bubble was a credit bubble with housing as a symptom.

NYT Podcast: The Rise of the Single Family House

Twenty years ago, I got involved in local politics and ran for and held public office in my hometown after a big REIT came in to build a multi-family complex in our town. The site was the last green space available that many in the town wanted as a park. I got to see how the sausage was made. My objection to the proposal was the massive underestimation of children that would live in the development and depend on the school system. This development would place an additional tax burden on the community. The town already had a shortage of classrooms, relying on a few pods (exterior classrooms in mobile home-type structures) and the likely increase in local property taxes. I even met with the mayor because I disagreed with the town’s appraisal assumptions. But the REIT used strong-armed tactics such as taping all public hearings and suing many individuals who spoke out. It was hardball – in fact the REIT specialized in building multi-family in single-family dominated towns. They won. Since the site was a former landfill, tests were being made on the property, and many test sites were mysteriously vandalized. Supposedly it was the first residential housing built on a landfill in the state.

After my anger subsided and the years passed, this event stuck with me and got me thinking of the domination of single-family homes within the zoning regulations of the suburbs and I began to question whether it was sustainable path for the long-term.

NYT Reporter Conor Dougherty talks about the housing affordability crisis through the optics of a home in San Diego. I’m a big fan of his work, especially his book: “Golden Gates: Fighting for Housing in America.”

Getting Graphic

My favorite charts of the week made by others

Appraiserville

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

Nothing to share this week, too much time spent studying inflation impacts and market research.

OFT (One Final Thought)

Austerity budgeting in 1943: One coat every six years…oof.

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 pie;
– You’ll throw some pie;
– And I’ll have more pie.

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 following week’s Housing Note.

See you next week.

Jonathan J. Miller, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog
@jonathanmiller

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