Posted by Jonathan J. Miller -Wednesday, August 31, 2011, 9:32 PM
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Ok, so Irene has left the building but so has most of our electrical power. As of this post, my town in CT is down to 39% remaining without power (includes my house) and 25% of homes in the entire state are without power – that’s 310,661 homes or less than 1/10 the number that watched the Weather Channel during Irene.
We were blessed with at least 2 national market reports this week which I examined over at MRIS Blog:
S&P/Case Shiller Home Price Index: S&P/Case Shiller: Seasons Don’t Exist In Housing Market?
The S&P/Case Shiller Home Price Index was released today reflecting the average of April-May-June closings which likely went to contract as early as January-February-March when the housing market began to wake up after a post-tax credit slumber in the second half of 2010. [read more]
NAR Pending Home Sale Index: NAR pendings released today (RBI release was 19 days ago); Fell 1st time in 3 months
The NAR released its national pending home sales index on re-sales today covering the same period (warning: gloat) we released the RealEstate Business Intelligence‘s RBI Pending Home Sales Index for Washington, D.C. Metro and Baltimore Metro back on August 10th. [read more]
Posted by Jonathan J. Miller -Saturday, August 27, 2011, 11:52 AM
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As I wait to be battered by the impending visit by (Hurricane) Irene and returning from a mini-vacation, but I was struck by the latest results of the latest Mortgage Banker Association seasonally adjusted rate index:
The seasonally adjusted gauge of loan requests for home purchases tumbled 5.7 percent to its lowest level since December 1996, the MBA said. Refinance demand also sagged as interest rates rose, with the refinance index slipping 1.7 percent.
Mortgage rates are at the all-time low, yet mortgage applications are down. Why? Part of the decline is likely because consumers have become jaded with low rates since they have been so low for so long. These are seasonally adjusted numbers so the decline is not due to the typical August slow down.
I feel strongly that the decline in mortgage purchase applications is largely due to the S&P US downgrade of several weeks ago which roiled (my new favorite word) financial markets across the planet. Consumers don’t like the unknown and they are waiting for a sign of better times. It doesn’t mean people aren’t buying homes. What it means is that fewer people are buying homes. If this becomes sustained or rises, lower sales levels will lead to additional price declines.
I think I’ll focus on the weather right now.
Posted by Jonathan J. Miller -Wednesday, August 24, 2011, 8:38 AM
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Now that we are past the earthquake thing, here are a couple of aftershock observations I’ve made (that were released more or less during the 20 second tremor) that I’d like to share:
The first piece is something I wrote for Knight Frank, a property consultant based in London who provides extensive global insight to their clients and has some of the best research I’ve ever seen. My piece sits restlessly on their Global Briefing blog where there is a lot of cool research to look at. I’ll be writing for them periodically.
They dubbed my post:
Letter from America – The state of the US housing market
The second piece is from The Real Deal South Florida. I did a Q & A with their editor on the Miami housing market. My research comes from the report I write for Douglas Elliman Florida. It’s amazing how misunderstood and misrepresented the Miami housing market is. I thought this piece provides a reasonable take on the state of the Miami housing market.
The interview was titled:
Q & A with Jonathan Miller.
Posted by Jonathan J. Miller -Tuesday, August 23, 2011, 6:16 PM
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Image source
Nothing.
UPDATE
Posted by Jonathan J. Miller -Tuesday, August 23, 2011, 3:30 PM
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Over the past decade I’ve had to evacuate my office in Manhattan due to:
- 2001: 9/11
- 2002: A fire and building collapse across the street
- 2003: An electrical fire in our building (previous office)
- 2004: The NYC blackout – no power in the city for 24+ hours
- 2009: Smoking/oil smell in our building
- 2011: 5.8 earthquake
Plus assorted fire drills and false alarms.
Today’s 5.8 earthquake that was about 87 miles south of DC shook our office building in Manhattan.
Sometime around 1:50pm EST, I had finished my lunch and started to feel lightheaded as I was writing on my laptop. Was thinking that my orange spicy chicken takeout was disagreeing with me.
I went to stand up and was wobbling so I sat down. Seemed like a good 30 seconds where it felt like the entire building was swaying quite a bit. Felt like we were on top of blades of tall grass. I stood up again and saw others in my office get up from their desk asking, “did you feel that?” followed by “It’s an earthquake!”
We started to leave the office and heard my sister admonishing our staff to stop appraising and walk down the 16 flights of stairs to the street (hard working loyal appraisers to the end). Could feel other shocks in our decent down the stairwell.
No cell service.
We began asking if it was just our building or if the others on the sidewalk were from other buildings. They were from other buildings. Got word that this had happened all around us and felt better.
Texted my wife and parents to see if they felt it and to let them know we were fine. No tremors at our home in Connecticut, but got notes from friends in the area including Long Island and as far away as Massachusetts and Michigan who had felt the tremors.
One of our appraisers came rushing back from his inspection when he got this message from his wife who also works for us, although she didn’t send it. Hopefully that person is ok.
Waited a little longer and then went back to work. Well, actually, to write this post.
Posted by Jonathan J. Miller -Monday, August 22, 2011, 9:14 AM
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actual AMC (car) factory
AMC Factory For a year and a half, our firm tangled with the bureaucracy of Landsafe, the poster child for the appraisal management company (AMC) industry. While not all AMC’s are bad, their relationship to the mortgage process is fundamentally flawed. The estimation of market value of mortgage collateral to enable lenders to make informed decisions has been commoditized to the point where most mortgage appraisals are generally not worth the paper they are written on. This series is from an appraiser’s perspective, about a profession left to die by the side of the road.
Incidentally, some may view this series as providing cheap shots since it is always easy to pick out unflattering examples of misconduct in a large industry. You bet it is. After what good appraisers have observed over the past several years, the AMC industry deserves nothing more than that.
River Views Less Valuable Because of “Smelly Fish Boats”
Here’s one broker’s experience:
…client in [Manhattan] (urban market) could not buy the 10th Floor river-view apartment he wanted because his bank assigned an appraiser from Suffolk County, Long Island, (suburban market several hours away) who appraised it at less than the recent sale price of a 3rd Floor apartment in the same line, which had no river-view, and the client was short $20,000 cash which he did not have; the appraiser explained that where he comes from residences near enough to the shore to have a water-view, always have lower value perhaps because of the smelly fishboats. The bank would not do another appraisal because of the belief that all appraisers in a state are equally able to appraise any property in that state, no exceptions. So the client had to move into another rental apartment.
My thoughts
Local market knowledge is the primary qualification to hire a specific appraiser for an assignment. Merely having a license in the same state as the subject property to be appraised does not make someone competent.
A continuing refrain among real estate agents is that the appraiser came from another market, often 3-5 hours away. Not something that was the status quo in prior years.
Sigh.
Posted by Jonathan J. Miller -Saturday, August 20, 2011, 11:15 AM
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A primary news service in Brazil, Jornal da Globo, interviewed me on the housing market and I did a quick overview of the 2008 and laid out the US part of the story. If you blink you might miss me but its a balanced story and it seems to me like Brazil is in year 2006 of our cycle.
[click to see video]
The reporter told me that their economists and regulators say they are not in a bubble. However consumers have easy access to credit and there has been double digit multi-year housing growth far outpacing rental prices. That’s a housing bubble, no?
Incidentally, the day before this interview I was interviewed by a Chinese Television station with a similar story but less optimistic about the state of their market – saw it as a bubble.
Here’s a good Financial Times article on the Brazil housing market from last spring: Housing boom raises fears of Brazil bubble [subscription]
Entenda as causas do crescimento nos preços dos imóveis no Brasil [Jornal da Globo]
Understand the causes of growth in property prices in Brazil [English Translation]
Posted by Jonathan J. Miller -Thursday, August 18, 2011, 3:30 PM
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Absorption defined for the purposes of this chart is: Number of months to sell all listing inventory at the annual pace of sales activity. (The definition of absorption in my market report series reflects the quarterly pace – nearly the same)
I started this analysis in August 2009 so I am able to show side-by side year-over-year comparisons. The blue line showing the 10-year quarterly average travels up and down because of the change in scale caused by some of the significant volatility seen at the upper end of the market.
Thoughts
The entry level market continues to weaken but the absorption rate is consistent with the 10-year average. $500 to $2M is moving best but $1.5M to $2M is the fastest. Dowtown is most efficient market overall followed by West Side then East Side.
Side by Side Manhattan regional comparison:
July 2010 v. July 2011
[click images to expand]
Manhattan Absorption Archive 2011 [Miller Samuel]
Manhattan Absorption Archive 2010 [Miller Samuel]
Note: This chart series does not include shadow inventory (properties ready for market but not yet listed for sale) so this anlaysis understates the rate of condo absorption. The Uptown (Northern Manhattan) data set is too thin for a reliable presentation.
Posted by Jonathan J. Miller -Thursday, August 18, 2011, 9:59 AM
1 Comment
actual AMC (car) factory
AMC Factory For a year and a half, our firm tangled with the bureaucracy of Landsafe, the poster child for the appraisal management company (AMC) industry. While not all AMC’s are bad, their relationship to the mortgage process is fundamentally flawed. The estimation of market value of mortgage collateral to enable lenders to make informed decisions has been commoditized to the point where most mortgage appraisals are generally not worth the paper they are written on. This series is from an appraiser’s perspective, about a profession left to die by the side of the road.
Conservative Appraisers Because Their Client “Likes It”
Here’s one broker’s experience:
A client…received an offer from an out of state office of their lender whose 5-year interest-only loan was soon to expire and agreed to allow an appraiser to visit the apartment; the appraiser told the client:
I measured the dimensions and also I can see from the floor plan
done by the architect in 1939 that the apartment is 950 square feet
but I am going to tell the bank that it is 850 square feet because
the bank will like that
The (My) client refused to proceed and ultimately the bank automatically converted the loan to 30-year fixed at a rate of 2 points over LIBOR at the time which turned out to be 3.75%, with no appraisal and no new application and no costs or fees.
My thoughts
Since when are appraisers supposed to take it upon themselves to modify the physical characteristics of the property? We are supposed to be the eyes and ears of lenders, not part of their sales force or underwriting team.
This appraiser’s behavior sickens me.
Posted by Jonathan J. Miller -Wednesday, August 17, 2011, 5:55 PM
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I was reading a good blog post over at Time: Busted Recovery: How Much is Housing to Blame? when I came across an out-of-character quote from Chris Thornberg of Beacon Economics, someone whom I normally find offers sage advice:
Still, Chris Thornberg of Beacon Economics says there is a little hyperbole when people say the economy can’t recover without the housing market. That’s because much of what we normally think of the housing market doesn’t produce a lot of economic value. “Realtors have perpetuated the fraud that selling homes back and forth between people is good for the economy,” says Thornberg. “I’m not convinced that does that much for the economy.”
His use of the word “fraud” set me off.
However I agree with what he is saying about housing and the economy – I do believe there is way too much hyperbole that housing must recover before the economy recovers. I think that the economy will likely recover before housing will and that housing will be a drag on overall economic recover. And we all know that all jobs created by the housing market during the boom quickly evaporated during the bust.
But this part…
“Realtors have perpetuated the fraud that selling homes back and forth between people is good for the economy,” says Thornberg. “I’m not convinced that does that much for the economy.”
Really? Fraud?
While I’ve been very vocal about the misleading comments about the credit crunch and housing observations coming out of NAR since the days of David Lereah and now with Lawrence Yun, it’s ridiculous to call it fraud. It’s called selling and spin. Big difference although they are also distasteful.
It is the job of Realtors to sell homes for sellers and help find homes for buyers. They are in the business of sales. Realtors are represented by The National Association of Realtors who are a trade group and the function of a trade group is to help their members be more successful and represent their interests.
I’ll bet every single trade group has similar pitches specific to their client’s needs. Attend plumbing convention and you’ll be told that PVC pipes enable our country to grow. Attend a snack food convention and there will be no discussion about eating too many candy bars. Attend a dental convention and you’ll hear all the spin about brushing and how bad candy is for teeth (but good for business).
I think the part many miss with the dissemination real estate information, is that a trade group as a source should not be presented in the media as an authoritative source on a topic. Yes they can attest to a condition that helps their members but we should never see them as a neutral go-to resource. Think Mortgage Bankers Association, American Banking Association, National Association of Homebuilders, etc. Massive spin for their members. It’s not fraud.
The blogosphere was particularly good at outing NAR’s former chief economist Lereah and current chief economist Yun’s usually absurd press releases and proclamations.
Up until recently, I don’t think the public realized that there was any difference in credibility in the analysis of the real estate market from NAR. That realization has propped up alternatives like Case Shiller and CoreLogic (although Case Shiller has many of its own serious flaws).
So despite the easy target, let’s raise the bar on the discourse. Realtor-bashing isn’t in style anymore. Realtors are simply doing their jobs and there isn’t some sort of conspiracy – they are too busy driving clients around looking at homes.
In fact, of all people that touched the home buying process, from rating agencies, investment banks, consumers, mortgage brokers, commercial banks and appraisers during the bubble, Realtors had little to do with the run up. They were order-takers in a nation gone insane.
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