Posted by Jonathan J. Miller -Saturday, March 24, 2012, 10:00 AM 1 Comment
REBNY is the trade group for the commercial and residential real estate industry in NYC. Here’s video that remains on their home page that addresses the issue of inconsistent tax liability between the four tax classifications.
I’ve been remiss in not posting this video since it was produced more than a year ago but it was well done, whatever your view on this issue is. My friend, journalist, columnist, former Crain’s editor and blogger Greg David as well as a number of well respected New York real estate types participate.
Posted by Jonathan J. Miller -Friday, February 24, 2012, 12:40 PM Comments Off
The following was shared by an appraiser colleague in the Midwest as told to him by a loan officer:
“You want to talk welcome to America. I am doing a loan for [redact] and they [the borrowers] are not US citizens. He did not work all of last year and she made approx. $21,000. And, their tax refund is $9200!!! ….”
“….How is that even possible? I knew you would enjoy this as much as I did, except I had them in front of me and my head was going only in America!“
A lot has been made about the “class warfare” sniping between presidential hopefuls in the current campaign. It’s unfortunate, but as it relates to housing, the disparity is somewhat alarming.
For this week’s New York Times real estate cover story, For Sellers, High End Is Hot, I was asked to back up my statement:
“There is a greater disconnect between the very top of the market and everything else than I have ever seen in my 25 years in the business,” said Jonathan J. Miller, the president of the appraisal firm Miller Samuel.
I sliced up the Manhattan apartment market in 20 (5%) equal segments for 1991, 2001 and 2011 by median sales price and compared the top 5% with the bottom 5% after adjusting for inflation.
And guess what? The spread between the top 5% and the bottom 5% is getting wider, a lot wider:
10 years (2001-2011) +12.5%
10 years (1991-2011) +66.2%
20 years (1991-2011) +87%
The data shows that the gap expanded more significantly during the Dotcom-related housing boom of the late 1990s and then continued in the aughts (00’s) with the credit boom. In many metro area markets and affluent suburban towns across the US, this same phenomena can be seen.
An advertisement for Powerball “Yeah, That Kind of Rich” on a phone booth (now that’s a weird contradiction) that I photographed (to the right) says it all. At least we can all aspire to own a Porsche Panamera – by itself in left lane – love that car!).
After the collapse of Lehman in 2008 and the collapse of the secondary mortgage market for jumbo (non-conforming) loans, there was great concern over the health of the high end of the market. Less access to financing or more difficult mortgage underwriting for jumbo mortgages became the norm because jumbo lenders had to hold these loans in their own portfolio instead of offloading them to investors representing the Icelandic banking system or Wisconsin school districts.
And there should have been concern. The credit crunch has adversely impacted the high end luxury market.
However I am not talking about the high end or luxury market in this analysis. I am speaking to the market that is above it.
I am really talking about the “super” or “luxe” or “ultra” (or insert your own hyperbole) high end market and the top few percentage points of markets they represent. Trophy properties are in demand right now. The buyers are paying cash and demand is high.
Meanwhile the balance of the housing market is mundane, sliding or stabilizing, grappling with bad lending decisions during a period where everyone lost their rationale mind.
Right now is an exciting time to be “trophy-hunting”, housing-wise.
Posted by Jonathan J. Miller -Monday, January 23, 2012, 8:55 AM Comments Off
Ok, at least it’s it’s Year of the Dragon, not the Year of the Rat but the Chinese New Year does bring to mind some other associations with housing in the post-credit crunch world.
Here are names I have associated with each year since the fall of Lehman and the impact on housing.
2008 (Rat) – Year of the return to reality. Appropriately named, the year notes the final punctuation mark on the credit boom unraveling and the fact that the entire world lost it’s mind.
2009 (Ox) – Year of the first time buyer. The first year after the September 2008 fall of Lehman Brothers that marked the beginning of a new credit environment as well as a new housing market. Mortgage rates fell to the floor and the Federal government introduced the first time homebuyer tax credit – later expanded to existing homeowners. For appraisers it was the “Year of the Appraisal Management Company” as the Cuomo/Fannie Mae agreement effectively prevented the residential appraisal industry from becoming a reliable and impartial benchmark provider.
2010 (Tiger) – Year of the short sale. Preceding the incoming flood of foreclosures, the banking industry understood that it was a lot cheaper to effect a short sale rather than go to foreclosure. Unfortunately they had no idea how to manage the process and many fell into foreclosure. Here’s some free advice to banks looking to cut losses on foreclosure activity: actually pick up the phone.
2011 (Rabbit) – Year of the foreign buyer/trophy property sale. The DC politically charged debt ceiling debate leading to the S&P downgrade of US debt and economic debt problems in Europe drove many foreign buyers to the US housing market as a safe haven. A byproduct of this trend was a surge in the sale of unique high end properties in the US. Think Candy Spelling and Sanford Weill. I had originally dubbed 2011 as “Year of the foreclosure” but the “robo-signing” scandal in late 2010 tempered servicer/lender plans of releasing foreclosures into the market until they were more confident they could prove ownership and the right to actually foreclosure (what a time we’re living in).
2012 (Dragon) – Year of the foreclosure/election year do-nothingness. Servicers/lenders will begin to ramp up the foreclosure process again as more time has passed for them to get their ducks in a row. I am doubtful there was enough time to do much of anything considering the millions of potential transactions but it’s likely to start this year and heavier than usual volume should last for at least 3 years. This is a good thing because we need to clear the market before claiming a housing recovery. We will likely see a surge in election year political promises as an attempt to help troubled homeowners such as a more streamlined shortsale process, an improved loan modification process and an expanded refinance policy, but judging from all feeble attempts so far and the stalemate in DC on economic policy and their stunning lack of understanding about what ail’s housing, we’ll probably get the status quo instead.
The next Chinese New Year will be named Year of the Snake. Uh, I’ve never liked snakes.
Posted by Jonathan J. Miller -Tuesday, October 25, 2011, 6:30 AM Comments Off
Former economic adviser to President Obama Dr. Larry Summers pens an opinion piece in the Washington Post: “How to stabilize the housing market“.
I can’t decide why this was submitted to Wapo since it offers no solutions to stabilize the housing market. Should be renamed “here are some of the problems with the housing market.”
Some feel he’s made our credit problems worse by derailing Obama’s economic strategy. Here and here is a two part podcast with Barry Ritholtz that contains some very choice words for Dr. Summers.
When I first read Summer’s piece I was reminded of Steve Martin’s line on SNL (way back in 1978) where he offers some sage advice on “how to have a million dollars and never pay taxes”:
“First, get a million dollars, then…”
The observations he makes are not new and not insightful beyond basic conventional wisdom. I continue to be amazed at how disconnected the very smart DC econoliteri are from what ails housing.
“First, banks need to lend, then…”
He says:
First, and perhaps most fundamentally, credit standards for those seeking to buy homes are too high and too rigorous.
Second, as President Obama stressed in rolling out his jobs plan, there is no reason that those who are current on their GSE-guaranteed mortgages should not be able to take advantage of lower rates.
Third, stabilizing the housing market will require doing something about the large and growing inventory of foreclosed properties.
Fourth, there is the issue of preventing foreclosures, the initial focus of housing policy efforts. The right way forward is far from clear.
Here are my observations to these 4 points:
First – Banks have to be incentivized to lend and ease underwriting standards. The problem with Washington establishment is they have been begging and pleading for banks to lend since the crunch began. THIS WILL NOT WORK. Banks don’t want to, primarily because of the low rate policy held by the Fed. No real spread and tough to equalize the risk between borrowing from the Fed for free and a higher risk proposition with Joe and Mary Homebuyer.
Second – Yep. Low rates don’t do anyone any good if you can’t get a mortgage. That’s what is happening now. It’s all credit access, baby.
Third – Five years of elevated REO activity coming. Its not going away and housing won’t recover until it clears the market. Our government resources can’t stop this. They aren’t large enough.
Fourth – Uh, yes its a complex problem.
NOTICE TO THE WASHINGTON ECONOMIC POLICY ELITE
Create economic incentives to lenders and problems slowly go away. Housing won’t recover without credit repair. Incentivize lenders to lend. Asking doesn’t work. Focus on the banks and they will in turn help the consumer. Don’t bypass the banks and go directly to the consumer since that’s not a sustainable fix.
Late into the Depression, 10% down lending returned to the market with government incentives and helped housing recover more quickly. You don’t starve a recession and feed a boom. Washington’s still got it exactly backwards.
Posted by Jonathan J. Miller -Wednesday, August 10, 2011, 9:20 AM Comments Off
Sorry, but being stuck for hours on an airport tarmac yesterday with the pilot telling us every 20 minutes he was trying to get a departure time as soon as the storm passed at our destination did wonders for my outlook in the economy and the housing market. No irony that the airline was AA or Double A (American Airlines).
My non-political observation about President Obama’s speech covering the S&P downgrade is best described in Dan Gross’ Yahoo Finance Column “We Need Policy, Not More Posturing — And Now“
Never mind that this is the sort of thing a coach tells Little Leaguers as they’re about to get mercy-ruled. By heaping scorn on Standard & Poor’s, President Obama, and the rest of official Washington, Monday violated Gross’s Second Rule of Punditry: Don’t Pick Down, Pick Up. When you engage in verbal fisticuffs with people below you on the pecking order, it only brings you down and raises them up to your level. Besides, this isn’t an episode of Crossfire.
My political observation is that we seem to have reached the end of the road, err, politically. How do politicians cut costs when they are elected by their constituents who want them to bring home the bacon or deliver tax breaks? I cringe each time I hear phrases like “we need to cut costs” and “we need to eliminate tax loopholes.” After all the brinksmanship and positioning, we end up with some sort of bland compromise and the totality (sp?) of decades of this sort of thing has left us with a massive deficit and reactive fiscal policy with regulatory oversight on things that already happened.
One is that the U.S. political system at some point has to adjust to the reality that we are just one more country trying to make it in a big, bad global economy and probably ought to stop shooting ourselves in the foot on a regular basis. The debt ceiling debate was one example of this; the seeming inability to get a handle on increasing health care costs (or to talk rationally about it in the political arena) has been another. This was the most convincing justification the S&P gave for its downgrade, and while I’m enough of a Pollyanna to believe we’ll eventually get our act together, I don’t see any short-term fix.
The Fed announcement yesterday struck me as further political posturing until after the next election cycle. Good grief.
But as the debate rages on in Washington about whether to enact austerity measures, something interesting is taking place, Dan notes: Cutbacks are already taking hold at the state and local level where school districts are cutting teacher jobs and public transportation rates are rising.
Austerity vs. stimulus is a “convenient political issue for politicians to hammer each other about,” he says. “But the reality is, it is the state governments, it is the counties, it is the local townships that are doing all the slashing.”
I’m thinking the next bailout will be state and local governments.
The U.S. Department of Housing and Urban Development (HUD) and the
U.S. Department of the Treasury today introduced a monthly scorecard on the nation’s housing
market. Each month, the scorecard will incorporate key housing market indicators and highlight
the impact of the Administration’s unprecedented housing recovery efforts, including assistance
to homeowners through the Federal Housing Administration (FHA) and the Home Affordable
Modification Program (HAMP).
“Scorecard”? They got game of transparency, no? Ok that’s harsh – nevertheless it captures a lot of great housing data captured in one location to show the “Obama Administration’s efforts to stabilize the housing market and help American Homeowners.”
On Tuesday January 26th 2010, Trulia’s CEO Pete Flint will be hosting an industry call discussing how President Obama did in his first year in regards to turning around the housing crisis. Pete will be joined by real estate experts and pundits Jonathan Miller, President and CEO of Miller Samuel and Howard Glaser, Principal of The Glaser Group…
Had a fun interview with Tom and Sara this morning on the always MUST watch/listen Bloomberg Surveillance. We talked housing, rentals, vacancy and inventory. An added bonus was the addition of Adam Davidson – co-founder and co-host of Planet Money... Read More
