Here is my Wednesday post for Curbed, the mother, father & sister of all real estate web logs.
An archive of previous posts can be found here.
Here’s a couple of press hits that covered Matrix recently that crushed us with traffic. I appreciate everyone’s interest in checking in with Matrix, especially all the people I nag incessantly (you’re not off the hook).
[The Stamford Review] makes the well-documented conclusion that New York City may face a total build-out crisis in seven to 10 years, reported in its most recent issue, all the more alarming.
This press release provides an overview of the current issue [Stamford Review]. Stamford Review editor Larry Sicular states:
The city depends on housing construction to help support its economy, but by the time a child born here today reaches the fourth grade there may not be any vacant land left for development,” said Larry Sicular, publisher/editor of The Stamford Review. “Focused on following the strengthening or weakening real estate market, few people have stopped long enough to look forward to the very difficult planning decisions facing us.
I have known Larry for more than 20 years and I jumped at the opportunity to contribute two articles to the current issue:
Here are the portions of the press release that pertain to the Gentrification article:
As Manhattan has gentrified, pricing differentials among neighborhoods like Tribeca and the Upper West side have dramatically slimmed down, by 35% since 1989. (Miller, Miller Samuel Inc.)
High land prices are forcing developers to create bigger, more profitable units, but demand has shifted to mid-sized units. A growing supply of unsold, large, pricey units is the result. (Miller)
New developments in emerging New York City neighborhoods now cost almost as much for homebuyers as those in established markets. (Miller)
Here are the portions of the press release that pertain to the Media article:
In 2005, the media were so determined to find bad news about a housing bubble that they oversimplified and drew misleading conclusions about market statistics. (Miller)
Now, after two consecutive quarters of quiet markets, the media has adjusted its terminology from a “bubble ready to burst” to a “soft landing” or a more “normalized” market. (Miller)
According to Bubblemeter, David Lereah, the Chief Economist for the National Association of Realtors (NAR) is changing the title of his real estate book (as seen on Amazon) from:
Notice how the word BOOM is the same size and the graphics are identical? The Walk-through’s Old Fish In A New Wrapper says the content is the same – Damon Darlin’s post provided a pretty good chuckle.
I had the chance to meet David Lereah in the green room before the taping of CNBC’s Town Hall: Real Estate Boom last year. It was me, Suze Orman, Robert Shiller and David Lereah. Surreal to say the least. All very nice I might add. I only had a small appearance – these people were the main characters in this production.
Mr. Lereah has provided a tremendous amount of fodder for the blogosphere, myself included. Up until now, its been the use of language which would seem to be misleading. Now its book titles. This sort of stuff might have worked 5 years ago but not today. People have access to information almost immediately.
The Stamford Review, Spring/Summer 2006 is the third issue and was just released. It can be downloaded for free on their web site after a simple registration or hard copies can be purchased for a nominal fee. The intention of the publication was to bring together a diverse group of writers who are passionate about their topics to write about issues that affect New York City real estate, land use, architecture, and urban affairs.
See the author list below.
Shameless plug: I wrote two articles for this publication The Gentrification of Manhattan and Manhattan’s Housing Market and the Media
I hope you enjoy them.
Larry Sicular is the editor and has been a professional colleague of mine for 20 years. The journal, which is a labor of love for him, takes a monumental effort to coordinate, edit and publish and I truly appreciated the opportunity to be in it.
In the introduction of the publication, Larry describes the current issue as being:
…about the reconfiguration of New York City, a physical transformation that has been fueled by a mixture of population growth, increased affluence, and an unusually strong housing market. What is happening here is mirrored to varying degrees in successful cities elsewhere in this nation and across the globe.
Here, nine experts praise and critique city government’s efforts to guide this transformation, to meet and balance growing demands for market housing, affordable housing, open space, industrial space, and historic preservation. Even as the housing market softens, these policies will have long-term effects and will continue to be debated.
In recent years it has been easy to forget Jonathan Miller’s reminder that twenty years ago Manhattan’s housing market relied on government tax policy to stimulate demand. Julia Vitullo-Martin applauds the results of public and institutional investment in the Bronx, but she notes that destructive government policies helped depress the borough in the first place.
Much of our attention is drawn to the city’s extensive rezoning of former industrial areas on the Brooklyn waterfront and the west side of Manhattan. Frank Braconi questions whether these initiatives are sufficient to meet the needs of our growing population, while Kimberly Miller and Mark Alexander address what will be required to make the rezonings a success. Peter Beck shows us that limited public resources, directed to these areas for affordable housing, could perhaps be more effectively spent, while Lisa Kersavage shows us how rezoning need not have cost us valuable historic resources. Pamela Hannigan praises the city policy that is creating new industrial business zones in order to preserve and stimulate the valuable manufacturing resources that remain.
And then there is Governors Island. Is there a greater possibility for adding a jewel in our crown than the history and open spaces that this island offers and represents? Our third issue is dedicated to the possibilities of Governors Island.
Every month, I provide data and analysis for a chart that appears once a month in Crain’s New York Magazine. Here is this month’s chart appearing in this week’s issue of Crain’s New York Business for what seemed relevant in the real estate housing market at that time. I really enjoy dealing with this publication.
Please go here for an archive of all Crains’s New York Economic Spotlight charts that have I done. They are organized by year.
Tags: Crains New York Business
In Howard Gold’s Fighting The Tape column Is It Crunch Time for Housing? [Barron’s], he suggests that this spring determines how the residential housing market, which is one of the key contributors to the economic recovery, will behave over the next several years.
The points he makes are:
Inventory is up [WSJ]
Toll Brothers reports a 29% drop in orders
Mark Zandi of Economy.com writes: I don’t think nationwide you’ll see a bust,” says Mark Zandi, chief economist of Moody’s Economy.com. But we might in certain markets, he adds — the usual suspects like Miami, Las Vegas and Phoenix.
(and we can’t omit moi)
This is a watershed moment,” says Jonathan Miller, president and chief executive officer of Miller Samuel, a large New York real-estate appraisal firm. “If we’re going to see trouble, it’s going to be over the next 12 to 18 months.
What I mean by this is the following: Bernanke indicated today that the economy is very strong and so is housing. It has been speculated that he has at least two more rate increases in store for us until he takes a breather. That will further weaken the housing market as things continue to get more expensive for the ARM mortgage customers who largely financed the housing boom.
It’s a three- to five-year cycle on the downside,” says Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley. Rosen calls himself a real-estate bear who endorses the doom-and-gloom scenario of Yale University professor Robert Shiller.
We’ve already passed stage one, characterized by “a falloff in new sales and orders,” says Rosen, and are just entering stage two, in which unsold inventories build up.
Inventory and mortgage rates are the key concerns.
In Nicholas Yulico’s article Housing Starts Explode [TheStreet.com], January new housing starts increased 12.8% above December. Initial reactions from optomists said that this was evidence that the housing market was back. Actually, the surge was due to unusually warm weather for December which enabled builders to build. This will compound inventory problems since inventory was already rising without help from new construction.
(In the Barron’s piece, I close out with moi)
“The boom is over,” declares Jonathan Miller. That perception no doubt has begun to trickle down to prospective buyers and sellers
Its a bit dramatic but its taken about 6 months for many in the real estate market to come to terms with this.
Here’s couple of media spots I did recently. The first is part of a series of podcasts that The Real Deal does with various leaders within New York real estate industry. They are the first to use this medium in New York and its a great way to distribute information. The other is an interview I had with PBS on understanding value in housing. This one is more national in relevance.
[I know, I know, I am just an appraiser and this is shameless self-promotion.]
Here’s the 2nd and latest podcast with The Real Deal. Its a different format, more of a casual recap of the quarter instead of an interview. I hope to provide these every quarter if there is enough interest in them.
The fourth quarter Manhattan housing market report from appraisal firm Miller Samuel showed a drop-off in sales activity of 21.2 percent and a slight rise in the average number of days properties are staying on the market. At the same time, both the average and the median sales prices for a Manhattan apartment increased – and the borough’s average sales price per square foot set a record.
So, what exactly is going on in the housing market? Miller Samuel CEO and president Jonathan Miller, in a special podcast for The Real Deal, breaks down his firm’s heavily watched report.
The conversation with Miller is part of The Real Deal’s regular podcast series. To listen to the entire interview, click one of the links below.
Here’s the segment I did for American Media/ PBS on what to consider when buying a house. You need windows media player to watch it.
United Van Lines has been publishing a report on traffic patterns of the moves [United Van Lines] that are ordered within the moving company each year. This report has been published annually since 1977.
Methodology: “For 2005, the accounting is based on the 226,353 interstate household moves handled by United among the 48 contiguous states, as well as Washington, D.C. In its study, United classifies each state in one of three categories — “high inbound” (55% or more of moves going into a state); “high outbound” (55% or more of moves coming out of a state); or “balanced.” Although the majority of states were in the “balanced” category last year, several showed more substantial population shifts.”
I thought it would be neat to try to correlate inbound and outbound traffic to housing demand. The idea that a state with high outbound traffic would have lower appreciation rates than states with higher inbound traffic. However, the census data does not fully correlate with this report. I can only assume that its a factor of the client demographic the moving company works with, or this is a flawed methodology.
Nevertheless, United Van Lines map concept is very cool.
US Census Division Map: Change in House Prices By Region
In this article by Steve Kerch, real estate editor for MarketWatch about Adjustable-rate mortgages he says:
Adjustable-rate mortgages have been maligned in recent years as some critics have contended that, in an era when fixed-rate loans were at historic lows, ARMs were only being used by marginal buyers who could not otherwise afford to buy houses. The implication was these were all risky loans that would eventually come back to haunt lenders and the housing market.
“The reality is quite a bit different. Yes, ARMs do account for a significant portion of the mortgage market — 32 % in 2005, Freddie Mac says, down only slightly from a 10-year high of 33% in 2004. But the most popular ARMs aren’t the risky ones everybody assumes.
Instead, the reason the ARM share of the market has remained so high while 30-year fixed rates have remained so low is that buyers have been flocking to hybrid ARMs, adjustable loans that don’t adjust right away but have a fixed-rate period for a number of years. The biggest among those hybrids is the 5/1 loan, which means the borrower has a fixed rate for five years before the mortgage begins to adjust every year. In fact, 5/1 ARMs accounted for 40% of all adjustable-loan applications in 2005, Freddie Mac said.”
“This idea of better matching your housing plans to the financing you put on the housing is a relatively new one, since these hybrid ARMs — you can find three-year, seven-year and 10-year versions as well — have only been around a few years. (Freddie Mac only began tracking the 5/1 hybrid rate in 2005.) But the practice makes perfect sense: Homes turn over in the U.S. every seven years on average and first-time buyers especially often plan a short stay in their “starter” home before moving up. “
See 5/1 ARM A Good Idea? [Urban Digs] for a rational discussion on the strategy of obtaining a hybrid mortgage.
These have become very popular as buyers have been forced to rethink traditional financing (aka 30-year fixed mortgages). The logic has become: if a homeowner plans to move in 5 years, why pay a premium for a 30-year fixed when the hybrid has a steady payment for the same period of time? Some say that you should select a hybrid that has a fixed term of 2 years longer than you plan on staying in the house.
Tags: Urban Digs
A few years ago, I decided to be more outspoken about the predicament that appraisers are in. We really don’t have a collective voice over the issue of the flawed structure that currently exists in our profession. It is essentially this:
Bob Moon of the Marketplace show on American Public Media radio showed great interest in the story. He researched and put together a broadcast aired on National Public Radio on June 23, 2005.
At about 6 minutes, it was one of the longest stories they had done in the past year. That meant either I was a fascinating interviewee or the story was compelling. (I assume the latter but was secretly hoping it was the former).
American Public Media “Market Place” Radio Broadcast Appraising the appraisers
The Marketplace audio file link is broken so I don’t hope they mind me placing the audio file of the June 23, 2005 segment on my blog. This was the moment I came out on the situation appraisers were facing in public. If you’ve been following our industry or are part of it, the solutions set by Dodd-Frank have made the reliability of an appraisal done for a bank even worse.