Doppelgängers, High Plateaus and Affordability Thresholds

After a week of watching Olympic archery with the sound off (you really don’t need to hear it but its awesome to watch) and don’t get me started on Badminton:

I also learned that there are no Swedish Fish in Sweden but they can be found in Oreo Cookies, as I was ready to sit down and write this note. All the Oreo talk helped me channel my inner Bobby Flay as you’ll see next.

Department of Doppelgängers

Alec Baldwin v. Millard Fillmore

Which reminded me of this 2008 post by Dan Green…
Sure, Jonathan Miller Can Value Your Home, But Can He Cook?


But I digress…

Jobs and Housing

Unlike the housing bubble of the previous cycle, you usually need a job to get a mortgage. So it makes sense to look to employment trends to consider where housing is going. But that’s hard to understand when you read varying headlines on jobs. The context seems to be centered on whether job growth will spur the Fed to raise rates.

  • Jim O’Sullivan is the Michael Phelps of economics – 15-time top forecaster says strong job market will force Fed to raise rates [Marketwatch]
  • The big jobs number is a win for luxury housing [CNBC/Yahoo Finance]
  • Why Jobs Won’t Jolt the Fed [WSJ]

If the Fed does raise rates, it is because the economy is better and job growth is part of that. And net, net, housing will not be adversely impacted. It will crush refinance volume, however. I think higher wage growth is probably more important to offset rising housing prices, goosed unnaturally higher by tight credit causing constraints in supply. The Atlanta Fed has a cool interactive wage growth tracker – and wage growth looks promising.


Manhattan Market Absorption Rate

Each month I take a look at the number of months it would take to sell all listings at the current rate of sales. I’ve been doing that since August 2009. A few months ago I started to compare the current month against the long term absorption rate in each price segment. It’s quite compelling to see how much faster the market moves at the lower end of the market.

Here’s the new version with separate charts for co-ops and condos.


and the version I’ve been creating for the past seven years…


Elliman Report: Manhattan, Brooklyn & Queens Rentals – July 2016

The monthly rental market report I author as part of a market report series for Douglas Elliman was published yesterday. The key points centered around the disparity in performance between the high and low end of the markets. I’ll go into this further down, but here are the results.

First of all, nothing makes my heart beat faster than a good chart using our data, and Bloomberg created a nice one on the growing rental supply in Brooklyn.


There are a lot of press links at the bottom of this note that chronicle the report results.

Elliman Report: Manhattan, Brooklyn & Queens Rentals 7-2016:

MANHATTAN For much of 2016, growth in median rent on a year over year basis flirted with zero and this month was no exception. The median rent of a Manhattan apartment was $3,450, up 0.9% from the same period last year. After factoring the expanded use of landlord concessions, median rent increased 0.5% over the same period. The market share of concessions was 10.8%, more than double the 5.3% share of the same period a year ago…

BROOKLYN The year over year change in median rent declined in July for the first time in 2016. Median rent was $2,826, down 0.8% from the same period a year ago. Average rental price edged up 1.1% to $3,124 over the same period. The use of concessions by landlords nearly doubled to a 9.5% share from the same period last year. As a result, the net effective median rent slipped 1.2% from the same period last year…

QUEENS Rents in Northwest Queens – comprised of the neighborhoods of Long Island City, Astoria, Sunnyside and Woodside – were softer this year than last year as newly developed inventory continued to enter the market. Median rent declined 8.2% to $2,768 from the same month a year ago. Average rental price declined 4.7% to $2,909 over the same period. Median rent moved lower across all unit sizes with bigger declines in the larger sized apartments…

Polarized Rental Markets

I have been referring to the of “high plateau” phenomenon for more than a year now. While the phrase reminds me of a movie and a song, it really refers to the rental market being stuck at a high price point. New supply has been focused on the upper third of the market whereas the lower two thirds is left with inelastic supply. For the past few years, the growth in overall rental prices was the combination of static low/middle supply and a rising amount of higher priced housing stock.


Housing gets distorted when an economy with job and population growth emphasizes housing for the highest wage earners. Housing prices remain expensive in the lower end and flat line or slide in upper end. Low/middle markets won’t see much rent relief in the near term unless we count stabilizing rents as relief. High rents with less or no price gains are still high rents. And unless population growth falls, the region plunges into a recession or land prices collapse and land owners actually sell for much lower prices, I’m not sure how relief is brought to most tenants. This is aside from NYC’s efforts to incentivize development of more affordable housing. It’s fair to say that all housing segments are experiencing high rent levels these days. Hence, many have reached their “affordability threshold” and opted to leave the city, creating record sales volume in the outlying suburban markets. It forces the tenant to consider other options like moving to an area that is less expensive or even out of the city all together, especially when looking to become a homeowner. So while the press coverage on cracks in the rental market is part of the changing narrative, I don’t see tenants facing a near term future with greater affordability, just more of the same.

As much as New Yorkers like to think they are the only ones afflicted by this, take a look at this twitter conversation about the San Francisco rental market I had yesterday (click on the very bottom of graphic to the right of the “Likes” to see the conversation):

Brooklyn Rental Market Charts

Here are a few of the charts I’ve created for the Brooklyn rental market.







Best Housing Headlines

  • Despite $30.75M Sale of Allen Street Hotel, the Abandoned Eyesore Remains a Disgusting Toilet [Bowery Boogie]
  • McMansions are not affordable housing, judge says []
  • Rio Is Building Igloos of Poop to Fix the Sewage Problem [CityLab]

Not housing related, but…

  • Are large male grizzly bears attracted to railway lines for food and sex? ‘It’s not just travel efficiency’ [National Post]


Do you need continuing education to maintain your CRP? Do you want to meet other relocation professionals and earn educational credits? You are invited to attend the Relocation Appraisers and Consultants (RAC) conference that is scheduled for September 15-16th in Frisco, Texas. The educational conference has been approved for 11 hours of continuing education by the Worldwide ERC. We are applying to increase this to 14 hours with an added session. The educational sessions are interesting, diversified and provide solutions to old and new appraisal challenges. Please see below for more information or click here to visit our conference page and register!

I hope to be the incoming president of RAC this year yet my firm does very little relocation work these days and is thriving. RAC was founded by appraisers specializing in relocation, but has morphed into an organization dedicated to promoting the professionalism and knowledge of hard working residential appraisers. Good appraisers are not widgets squeezed into a massive mortgage machine that treats valuation as a commodity and has no respect for market experience and valuation expertise. RAC members are appraisal professionals that provide their clients with valuation benchmarks and insights that enable them to make informed decisions. Our members specialize in providing valuation solutions for complex residential properties. I have been a member for nearly 20 years simply to be connected with the best residential appraisers in the country. Shouldn’t you?

RAC Appraisers – Providing Valuation Solutions for Complex Residential Properties from RAC Appraisers on Vimeo.

A Brilliant Idea

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them. They’ll become your doppelgänger, you’ll get a cheaper luxury rental apartment and I’ll finally find those Swedish Fish.

See you next week.

Jonathan Miller, CRP, CRE
Miller Samuel Inc.
Real Estate Appraisers & Consultants

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Appraisal Related Reads

Extra Curricular Reads