[click to open article]

AnnaMaria Andriotis at SmartMoney asked me to look at the state of maintenance charges for Manhattan co-ops on an annualized basis.

It’s generally easier to look at maintenance charges for co-ops on a per square foot basis per month (ie a 1,000 sq ft apartment with a $1,500 monthly maintenance is $1.50/sqft/month). It more readily enables side-by-side comparisons.

I pulled out the research I did in 2005 since it went back 20 years (on a 5 year basis). I updated it annually from that point. As a result the chart is split by 5 and 1 year breakdowns with 2005 as the divider. I should point out that 2010 reflected year to date.

Maintenance increased 19% this year after seeing nominal changes since 2006. While charges have clearly increased this year, it is not clear whether this is the beginning of a trend or simply an anomaly. In a tentative housing market, it is a concern. We last saw a double digit jump from 2005 to 2006 with an 11% increase. Specific issues like energy costs aside, I would speculate that the era of low mortgage rates has enabled less restraint on maintenance growth over the past two decades.

Crain’s New York just released their City-Facts edition which is chock full of data (including ours). Here are a few key charts in the residential section.

And charts based on our firm’s data.

And some other interesting stuff that’s been accumulating in my RSS reader…

• [West Side Spirit] Manhattan Borough President Scott Stringer rejects Extell’s Riverside plans
• [Think BIG] Bearish Sentiment Rises to Highest Level Since March 2009
• [MyTownCryer] Rational Apathy or Good Common Sense?
• [Mass RE News] Realtors Should Not Let Short Sale Investors Negotiate With Lenders
• [For What Its Worth] Attention, Masters of the Universe
• [John Keith Real Estate] W Hotel & Residences giving away million dollar condo
• [Brownstoner/Philly] Rowhouse Cornice Chronology, Philly Style
• [White House Blog] President Obama’s Address on the End of the Combat Mission in Iraq
• [WSJ/Law Blog] Big Banks, The Whipping Boys of the Financial Crisis, Go After MBIA
• [NYT] Foreclosures Pose Potential Trouble on Election Day
• [The Purple Lounge] Noisy neighbors: Turning up the volume against the uproar next door
• [Daily Intel] Richard Fuld’s Day in Denial
• [The Awl] Order Your Drink In A Short Glass
• [The Simple Dollar] Yard Sale Ethics: Is the Sticker Price the End of the Story?

A few months ago I met Mark Stark, CEO of Prudential Americana Group in Las Vegas, NV so I thought I’d ask him to have a conversation about the challenges of his market. Mark is very candid about his market and we had a compelling conversation.

Check out the podcast.

The Housing Helix Podcast Interview List

You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.

To show you how bad things got, Fannie Mae is now in the process upgrading their appraisal regulations to reflect more prudent risk management. Part of this upgrade was to begin to insist that appraisers have local market knowledge and to now actually take pictures of the interior of a property being inspected and appraised.

They relied on AVMs, computer-aided valuation tools that are wildly inaccurate. Why not just require an appraiser to click a picture?

In the past, Fannie Mae did not provide requirements concerning lenders making changes to the opinion of market value reflected in the appraisal report. During Fannie Mae’s post-purchase reviews, cases were identified where the lender had reduced the opinion of market value in the appraisal report based upon underwriter judgment, automated valuation models, or other methodology. Therefore, Fannie Mae has updated its appraisal policies to address the practice of lenders changing the appraiser’s opinion of market value and also to provide specific guidance when an appraisal is considered deficient.

It begs the question, what kind of appraiser would NOT take photos inside the property? Would a good appraiser not take hand written notes either? The whole logic here is crazy (nothing like setting yourself up to be sued down the road for correctly saying the home was a wreck when the borrower claims it was renovated).

I got a generic email from a lender yesterday that made this announcement seem like a huge deal. How much does a digital photo cost, remembering the reports are rarely printed these days, being delivered as a pdf or electronically.

Dear Sir or Madam: On Wednesday, September 1st 2010 [NAME REDACTED] will require interior photos that meet new Fannie Mae guidelines. (Fannie Mae Announcement SEL-2010-09).

This will effect any appraisal with an effective date of 9/1/10 or later. The guideline is listed below and also each engagement letter you will receive from SLS.

Interior photographs, which must, at a minimum, include:
– the kitchen;
– all bathrooms;
– main living area;
– examples of physical deterioration, if present; and
– examples of recent updates, such as restoration, remodeling, and renovation, if present

Thank you,

Vendor Relations Team

In Fannie Mae’s Announcement SEL-2010-09 Selling Guide Updates and Additional Guidance on Appraisal-Related Policies they want the appraiser to provide interior photos.

Good grief.

We have been providing interior photos since we were founded in 1986. It’s not like we should have received extra credit for doing that.

Based on my experiences in the 1980s, initial reason for not requiring them was the cost to the appraiser for film, photo processing, etc. in ordert to keep costs down. However my firm went digital in 1998 (12 years ago) and I felt the “no photo required” regulation later came to mean that many lenders and the GSEs didn’t want to know what the interior of the property looked like (aka don’t tell, I won’t ask).

[click to open article]

In the aftermath of federal tax credit for first time buyers and existing homeowners as part of the stimulus program, I newly appreciated one key thing: buyers and sellers modify their behavior to work a tax to their best advantage. The other takeaway is how naive governments tend to be when imposing such a tax – something about not understanding basic economics.

This was reinforced when Sarabeth Sanders of The Real Deal Magazine asked me to look at the impact of the “mansion tax” on housing market behavior.

In my research I found a disproportionate cluster of activity between $975,000 and $999,000.

To arrive at this I parsed all Manhattan residential sales (co-ops, condos, 1-3 family properties) over the past five years into $25,000 segments from $900,000 to $1,100,000 to see if there was a pattern. Of course I have long experienced this first hand in our appraisal company but never showed it empirically. Granted this is a correlation analysis, not causation analysis since it could be some other factor I am not aware of. However I am confident that the tax motivates this price behavior. The seller or buyer often work out some other consideration to keep the price just under $1M.

Six-figure discount Skirting the mansion tax in a buyer’s market [The Real Deal]

[Irvine Housing Blog via The Big Picture]

And some other interesting stuff that’s been accumulating in my RSS reader…

• [RE Journal] No wonder people hate mortgage lenders
• [Housingwire] Freddie Mac HomeSteps VP: REO management key to stabilizing housing
• [Developments/WSJ] The Nation’s Best Bathroom? You Decide
• [BBC] California golfer’s errant swing ’sparks 12-acre blaze’
• [Reuters] Hurricane Earl could sideswipe East Coast
• [Notorious ROB] Welcome to the New *#&@%@ Normal!
• [DS News] American Home Mortgage Charged with Violating Debt Collection Laws
• [The Real Deal] Homebuyer tax credit: part II?

It’s time to share my Three Cents Worth on Curbed, at the intersection of neighborhood and real estate.

I thought I’d take a look at each of the five boroughs to review the market ordeal we went through before the third-quarter numbers come in and we hit the fall market. I presented sales and price trends for all five boroughs by year over year quarterly percent change…

Three Cents Worth: Charting the Seven-Year Sales and Price Itch

[Click to expand and read full post on Curbed]

[Click to expand and read full post on Curbed]

Check out previous Three Cents Worth posts.

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The reports are de-emphasizing seasonally adjusted results since the last 2 years have wreaked havoc on that metric. I for one am glad as I have always distrusted seasonal adjustments. Let the reader do the math rather than have anything in a black box.

From the press release:

“The monthly Composites cover June and the national index covers the second quarter, when the government’s program for first time home-buyers was winding down. While the numbers are upbeat, other more recent data on home sales and mortgages point to fewer gains ahead,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Even with concerns about near term developments, we recognize that the housing market is in better shape than this time last year. Further, California’s cities have moved from some of the hardest hit to three of the four leading cities based on year-over-year gains. Among the other hard hit cities, the news is also a bit encouraging – Las Vegas, however, remains among the weaker cities.

The S&P/Case Shiller Index showed:

• 17 of the 20 MSAs and both Composites saw home prices increase in June over May
• 10-City and 20-City Composite were up 1.0% in June over May.
• 15 of the 20 MSAs and both Composites have positive annual growth rates
• No market is registering a doubledigit decline.

4-5 Month Lag In Meeting of Minds
One of the issues with the S&P/Case Shiller and this index class is the significant lag in depicting current market conditions. If the consumer wants to do the math on typically monthly results, the majority of the data in the June report probably saw a “meeting of the minds”/contract last March/April, then closed in June, reported at the end of August. Today’s market is in a far different place than it was pre-tax credit (April 30th). That is likely why this release warns us about anticipated future declines to be caused by the tax credit expiration.

“The monthly Composites cover June and the national index covers the second quarter, when the government’s program for first time home-buyers was winding down. While the numbers are upbeat, other more recent data on home sales and mortgages point to fewer gains ahead,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s.

Indexes like these develop a sense of the direction a few months in advance as they the data falls in their bucket.

In other words, S&P/CSI is generally more of a confirmation of we already know about the housing market rather than a provider of new insights. And in the New York metro area, co-ops, condos, new development and foreclosures are not included so it becomes even less telling.

Still, the original concept behind the S&P/Case Shiller Index was to provide a trading tool to hedge housing markets for which Professors Shiller, and later Case, are true pioneers, yet market indexes like this have not seen heavy derivative trading volume and therefore seem to have been relegated to consumer use. With financial reform, it will be harder, not easier to obtain the necessary critical mass for widespread Wall Street adoption.

[Flowing Data] A house that knows when you’re happy and sad

And some other interesting stuff that’s been accumulating in my RSS reader…

• [New York Times] New York Rebounds From Slump, but Unevenly
• [Credit Slips] HAMP fizzles
• [Mandel] Why We Struggle: Too Much Housing, Too Little Information Technology
• [Infectious Greed] Vacant Homes in U.S. = Canada Housing Stock x2
• [Curious Capitalist] Housing Market: What’s Ahead?
• [WSJ/RT Economics] Housing Bust Makes Paying for College Harder