New Year’s Realty Eve 2006

Posted by Jonathan J. Miller -Friday, December 30, 2005, 12:01 AM
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Here’s a blog with a whole lof of great pictures from Times Square during the Millenium 2000 celebration.

Wishing all of you a Happy New Year. We’ll be back on Tuesday, January 3, 2006.

The Western Mass Real Estate Market Is No Tea Party

Posted by Jonathan J. Miller -Thursday, December 29, 2005, 12:01 AM
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In the headline: Western Mass. sees strong housing growth[cbs6Albany.com] a study by the Warren Group out of Boston showed that the sharpest rise in real estate prices in Massachusetts were to be found in the western part of the state.

Real estate experts say the numbers indicate that demand for housing is pushing buyers into western Massachusetts where prices are still relatively affordable.

• Franklin, Hampden and Hampshire Counties recorded the largest median increase in condo prices in 2005.
  
• Franklin County condo prices spiked almost 29 percent.
  
• Hampden County condo prices shot up by almost 20 percent.
• Hampshire County recorded an increase of just over 18 percent for condos.
• Price jumps of at least ten percent for single family homes were also seen in those three counties.

Housing prices in Western Mass are surprisingly affordable compared to Boston and NYC standards. The trend from urban to suburban is a common phenomenon as city prices rose sooner than their rural counterparts.

More Than One Sale Makes A Market

Posted by Jonathan J. Miller -Wednesday, December 28, 2005, 12:05 AM
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A post in the Gothamist today Plaza Condos: Ridiculously Overpriced, was based on a New York Daily News article 4.5M for 1 bedroom: How suite it is at pricey Plaza co-ops [NYDN] (Well, actually the Plaza is going condo, not co-op.)

The days of being surprised about residential pricing are basically over. The 1-bedroom mentioned in the Daily News article was an 1,155 square foot 1-bedroom with direct views of Central Park at $3,900 per square foot. $2M for a 1-bedroom without views. Since there are no true comparables for this project, pricing must have been extremely difficult.

To those new to the Manhattan market, $3,900 is not an overall price per square foot record. However, it probably is a record specifically for a 1-bedroom unit (I haven’t verified).

The Gothamist post’s title is pretty strong language and to many, the price really is ridiculous. However, since there has been a rush to purchase small units at the Plaza, it suggests that there is demand at this price point.

You can scratch your head and be resolute in the fact that one sale like this 1-bedroom is an anomaly, but many sales like this is a market.

Lower Gas Prices Fuel (Sorry) Housing Optimism

Posted by Jonathan J. Miller -Wednesday, December 28, 2005, 12:04 AM
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According to a recent Gallup Poll investor optimism surged in December, reaching highest level since February [Gallup]

Investor optimism surged in December nearly matching its February high for the year. This strong positive reaction to the sharp drop in gas prices at the pump during recent months is all the more impressive given the continued uncertainty among investors concerning the future volatility of energy prices over the next year.

As a result, many investors could be surprised by a potential slowdown. Whats amazing about this poll, is only 86% of all investors surveyed have ever heard of a so-called “housing bubble.”

Of those 86% half give it a few more months, 38% say its about over and 8% say its over now.

77% of investors expect housing prices to remain the same or continue increasing over the next year and 21% expect a modest decline. Only 1% expect a rapid price decline.

Seasonal pattern – “Investor optimism surged 29 points in December and now stands at 79 — its highest level since February when it reached 82. This is the fifth straight year investor optimism has increased between November and December.”

If housing does slow down, “a Merrill Lynch & Co. report in August 2005 asserts that the real estate boom has accounted for about half of the economic growth and jobs created over the past five years. While such estimates are extremely difficult to substantiate, this assertion appears to have considerable face-validity. The traditional ripple effects of a strong housing market have been magnified in recent years as many consumers have liquefied their housing wealth gains by way of home equity loans and lines. This is one reason consumers have been able to maintain their spending throughout periods of economic adversity during the past five years.”

Gallup concludes that investors could be right and the slowdown in the number of units sold may not weaken housing prices but that would be inconsistent with historical trends.

In Search Of Affordable Housing, Many Are Moving Away From The Coasts

Posted by Jonathan J. Miller -Wednesday, December 28, 2005, 12:01 AM
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It is affecting population shifts, congressional representation and housing demand.

_Population Shifts_
In the article People Fleeing Pricey Coastal States for South, West [USAToday] an analysis of the census data halfway through the decade, Americans are shifting away from the coasts toward more affordable locations such as the Southwest, Southeast and the Rocky Mountains.

The quest for affordable housing and jobs is driving Americans from expensive coastal states to more moderately priced parts of the country.

• At its current rate of growth, Florida will exceed the population of New York in 5 years.

• Upstate New York population losses more than offset the boom in New York City.

• California’s gains were more attributable to births than to new residents.

• Virginia gained more population than 9 northeastern states combined due to employment growth.

_Affordability_
A growing number of people are simply Too Poor for Hot Housing Market, Too Affluent for Buyer Assistance [Washington Post]

Government officials “are scrambling to provide “workforce housing” — price-controlled homes for families with high five- and even six-figure incomes.”

While urban areas like New York have long provided housing assistance for low and middle income residents, areas like Washington, D.C. have focused on low income. As a result, there are a lot of residents simply priced out of the current boom.

The National Association of Realtors released its affordability index Housing Affordability Hits 14-Year Low Higher Prices, Rising Rates Hurt Buyers as Creative Loans Lose Some of Their Punch [WSJ]

“There are signs that the growing costs of homeownership are also beginning to take a toll on the housing market. “There’s a systematic erosion of affordability,” says David Seiders, chief economist of the National Association of Home Builders. That decline is “the main reason … the market is starting to cool.”"

The Term “Bubble” In Real Estate Blog Titles Says A Lot

Posted by Jonathan J. Miller -Wednesday, December 28, 2005, 12:01 AM
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The real estate blogs that are springing up daily have provided the delivery of content in real time, causing many in big media to consider launching their own blogs to keep pace. One of the first Big Media real estate specific blogs was the recent launch of The Walk-through by the New York Times.

The perception by many is that small blogs are independent and a more pure source of news while Big Media is subject to influence from advertising.

Have you looked at the titles of some of real estate blogs lately?

It seems like more than half use the word “bubble” in their title. That seems akin to using “crash” that describes one side of the housing picture. Wait a sec, here is one that uses both of these words. Southern California Real Estate Bubble Crash. Conversely, there are virtually no blogs with titles that say something like “There is no bubble” or “Anti-bubble.” This certainly suggests widespread questions about the real estate market.

The word “bubble” seems to strike an emotional cord with many. Its a very effective way to steer traffic to a blog since the word bubble grabs a lot of eyeballs from Google searches. With all the talent that goes into many of these blogs, I just wonder if this stratgy isn’t too short sighted.

Imagine for a minute that the real estate market does not see the effects of a bubble over the next few years. Such a title will seem strangely out of place. If the market does see the effects of a housing bubble over the next few years, it would still seem like a relatively obsolete title after the bursting of such a bubble.

I don’t mean to get hung up on this point, and it is a relevantly minor point, but since there are so many real estate blogs named “bubble” there must be more to this issue. Here are some of my favorite real estate blogs that have “bubble” in their title.

The Housing Bubble 2
The Boy In The Housing Bubble
Bubble Meter
bubbleinfo.com
SacramentoHousingBubble
Bubble Tracking
Housing Panic – There Goes the Neighborhood (The Bubble Bursts)
Inside The DC Bubble
Northern NJ Real Estate Bubble
The Bursting Bubble
Seattle Bubble

Well, you get the picture

Update: Added Trackback to The Stalwart who is a must read for me.

Real Estate Rocky Mountain High Remains Up In The Air

Posted by Jonathan J. Miller -Wednesday, December 28, 2005, 12:01 AM
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In a contrarian’s position to many economists and academics, a real estate professor at the University of Colorado (the only one) says that the Colorado housing market is insulated against big price drops because there is no speculative bubble. [Denver Post]

Inflation, not speculation, can explain most of the gains in Colorado home prices the past decade, Thibodeau says.

“Colorado last enjoyed double-digit gains in sale prices of existing homes in 2000 and 2001. Since then, the state has lagged the rest of the country when it comes to real estate appreciation.”

Prices are rising because of rising construction costs and investors are putting more of their net worth into real estate, including 2nd homes and investment properties. More single people are buying homes and job creation is forecast to increase next year.

_However…_
The postion here seems contradictory to facts simply because the argument of an increase in 2nd home and investment properties contains an element of speculation. In addition, Colorado home purchasers are heavy users of interest only mortgages, foreclosures are rising and payrolls are lower than they were in 2001.

In other words, this professor has not provided any arguments to refute existing issues other than the forecast for job creation. This is the typical momentum argument we see quite often, light on facts, heavy on confidence.

In otherwords, the forecast for Colorado remains up in the air.

Gifts and Eggnog Outpace Housing Bubble

Posted by Jonathan J. Miller -Tuesday, December 27, 2005, 12:03 AM
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Warning: Use of sarcasm may go undetected if this post is not read carefully.

The use of the the words gifts eggnog reached parity with housing bubble in blog posts in early December seeing significant gains over the past three days. This unique insight into the relationship between the housing market and the holidays was made possible by BlogPulse.

The Price A Buyer Is Willing To Pay Is Not Always Market Value

Posted by Jonathan J. Miller -Tuesday, December 27, 2005, 12:01 AM
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Source: Source: St. Petersburg Times

I have always found it interesting that many real estate professionals define market value as the price someone is willing to pay for a property. However this assumption can often be far from reality and is why real estate brokers and real estate appraisers can be at odds on some transactions.

The real estate broker’s job is to get the highest price for the listing they represent, while the real estate appraiser (abridged version) has the responsibility of estimating the reasonable value that a fully informed buyer and a fully informed seller would likely agree on.

What happens when the seller is located on a parcel of land that is of key importance to a larger adjacent development? Thats where reality leaves the picture.

Take this example, which occured recently in St. Petersburg Florida [St. Pertersburg Times]. A modest house was purchased for $76,000 in 1992 and underwent little improvements. The property just recently sold for $1M after being appraised for $141,200. Its a small house on 1/10 of an acre.

The property was a key parcel in a larger development plan and the seller was willing to pay significantly more for the property. A typical mortgage lender would never provide financing on this house for this value because the price paid reflects the investment value to the buyer, not market value to the typical buyer.

Housing Boom Brings Obscure But Distinctive Architects To Public Attention

Posted by Jonathan J. Miller -Tuesday, December 27, 2005, 12:01 AM
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In Amir Efrati’s article Wright, Neutra and … Al Beadle? Unknown ’50s, ’60s Architects Get Big Push From Brokers; Rising Prices, Leaky Roofs [WSJ] he discusses how “the real-estate boom hasn’t just been good to homeowners fortunate enough to cash in on it. It’s also helped the reputations of a crop of architects and developers who until now were pretty obscure.

• Paul Rudolph – Sarasota, Fla. – Covered porches, flat roofs. Check out his Manhattan 4-level apartment built in the 1970’s. He called and hired me to appraise it when he was terminally ill.
  
  Architect: Rudolph

• Robert Rummer – California to Oregon in the 1960s and ’70s, known for flat roofs, is big in Portland.
  
  Architect: Rummer

• H.B. Wolff – a 1950s developer in Denver.
  

• Abrom and Benjamin Dombar – houses built with mahogany and cyprus, who were apprentices of Frank Lloyd Wright.
  

• Howard Meyer – Dallas – Brightly painted front doors, window shades.
  
  Architect: Meyer

• Al Beadle – Phoenix – Steel frames, foundations on stilts.
  
  Architect: Beadle

• Homer Delawie – San Diego – Hillside homes on posts, floor-to-ceiling glass-walls.
  
  Architect: Delawie

• Paul Hayden Kirk – Seattle – Japanese-influenced design like Shoji screens, courtyards.
  ”
  Architect: Kirk

Most of these characters never became as famous as their contemporaries, Richard Neutra and John Lautner, who were known for free-flowing spaces and avant-garde theatrics (the living room of one Lautner house was built to rotate on a turntable and become a patio).

“That’s mostly because “midcentury modern,” or MCM, was cutting-edge in the 1950s and ’60s but dated quickly and lost its popular appeal as buyers returned to more traditional features.”

“Moreover, its sleek, futuristic look was widely copied and over time became associated with cheap cartoonish knockoffs. Then, a new wave of architects came along who considered modernism “bland and boring,” says Thomas Hines, a professor of history and architecture at the University of California, Los Angeles. “They wanted to make allusions to the past.”

“Now, real-estate brokers and preservationists are resuscitating the reputations and homes of some lesser-known mid-century figures.”

And why not? With a heightened interest in real estate, it follows that many would seek to understand houses for their architecture as much as their function as shelter. The brokers recognize this as a marketing opportunity, a hook to sell these properties for their clients.

My dealings in New York with Paul Rudolph and a few other unusual properties has made me realize that, although the general consumer may not be interested in them, there is definitely a market segment that is completely wild about them. It was my experience that the limited marketability of these residential properties were made up by the premium their enthusiastic fan base would pay, usually resulting in a pricing offset.