In the United States, early leaders of the YIMBY movement include Sonja Trauss in San Francisco and Nikolai Fedak in New York. The first ever Yes In My Backyard conference was held in Boulder, Colorado, in June 2016.

Nikolai has done an amazing job at chronicling the explosion of new development in NYC over the past several years with his must read web site New York YIMBY.

One of the misconceptions with the NIMBY movement which is largely the opposite of YIMBY is the idea/rule of thumb that low-income housing always drags down property values of nearby properties. In an era challenged by the lack of any type of affordable housing, this makes a bad situation worse.

According to this recent research by Trulia (FYI – I was part of their industry advisory board from 2006-2014), and notably in aggregate form, the impact seems to be non-existent in the majority of the markets covered. One can’t conclude there is no impact as a general rule but it does show that should not be the default assumption.

The above infographic is from this Weekend’s New York Times’ real estate section column called ‘Calculator’ – Low-Income Housing: Why Not in My Neighborhood?. The methodology used in the Trulia research was the following:

To measure this, Trulia compared the median price per square foot of nearby homes (within 2,000 feet of low-income housing) with that of homes farther away (2,001 to 4,000 feet) over 20 years, starting 10 years before the low-income housing was built and ending 10 years after.

On Tuesday (7/2) I was initially contacted for the piece, beginning a weeklong period of handwringing. At that time I was told it would run on Saturday’s cover (7/6) which seemed like a long time away. However the topic is evergreen (not time sensitive to the day) so it was likely “on the bubble” (pun sort of intended) if any last minute breaking news appeared.

On Friday afternoon (7/5) I learned that Saturday was pushed to Sunday to make room for the crisis in Egypt.

On Monday (7/8) I was clearly hoping for a slow news day so the piece wouldn’t get bumped a fourth time so every news alert required my attention. By the time Monday afternoon rolled around, the article suddenly appeared online so I became confident it would never make the cover – but no page number was assigned to a print page.

I assume this was a way for the NYT to test via crowd sourcing how relevant this story was to deserve a spot on page one. The online article jumped to 2nd place, then 1st on the most emailed list so I began to feel confident that this was the feedback the editors needed. …and we were still ahead of the stool article.

Late on Monday evening the online article was appended by the following notation at the bottom of the page:

“A version of this article appeared in print on July 9, 2013, on page A1 of the New York edition with the headline: Words to Start a Stampede: New York Apartment for Sale.”

My company and I were both officially sourced (as well as Douglas Elliman for whom I write my report series) on A1 for the 12th time since 2000 (about .9/year).

On Tuesday morning (7/9) my parents texted me at 6:08am to say they saw the printed version in their town drug store. The article actually made both the NY Metro edition and the US edition so I could share the fun with my relatives outside the NYC area, where social norms are a lot less obsessive about real estate.

Comments Off on Appearing on New York Times’ Page One NEVER Gets Old…But It’s A Process

I’ve been talking a lot about the causes of falling inventory lately and some mortgage industry types seem to resistant to the idea that credit is keeping supply off the market, versus some sort of uniform national paralysis or sales surge (sales arent’ rising nearly as fast as inventory is falling).

But seriously, you’ve got to love the chart (at top) in the article – we provided ten year’s worth of monthly inventory trends to show the visual of just how low inventory has fallen. What’s amazing is the drop is happening in virtually every housing market I can think of.

There was a really good appraisal story in the Sunday Real Estate Section this weekend by Lisa Prevost focusing on appraising high end properties whose theme is well-captured in the opening sentence:

As home sales pick up in the million-dollar-plus market, deals are being complicated by unexpectedly low appraisal values.

The higher the price strata of the market, the smaller the data set is to work with so the conventional wisdom seems to be that less data = more unreliable appraisals. However I believe the real problem is lack of market knowledge by more appraisers today as a result of May 2009’s Home Valuation Code of Conduct (HVCC) – the lack of data at the top of the market merely exposes a pervasive problem throughout the housing market.

To the New York Times’ credit, they are the only national media outlet that has been consistently covering the appraisal topic since the credit crunch began and I appreciate it since so few really understand our challenges as well as our our roles and relationship to the parties in the home buying and selling process. Appraising gets limited coverage in the national media aside from NAR’s constantly blaming of the appraisers as preventing a housing recovery (in their clumsy way of articulating the problem, they are more right than wrong).

The general theme and style of coverage comes about when Realtors start seeing an increase in deals blowing up that involve the appraisal. The Prevost article indicates that higher end sales are more at risk because the market at the top (think pyramid, not as in ponzi) is smaller and therefore the data set is smaller.

This may be true but I don’t think that is the cause of the problem but rather it exposes the problem for what it really is. I contend that the problem starts with the appraisal management company (AMC) industry and how it has driven the best appraisers out of business or pushed them into different valuation emphasis besides bank appraisals by splitting the appraisal fee with the appraiser (the mortgage applicant doesn’t realize that half their appraisal fee is going to a bureaucracy).

My firm does a much smaller share of bank appraisals than our historical norm these days but it is NIRVANA and we’re not likeley to return to our old model anytime soon.

Since the bank-hired AMC relies on appraisers who will work for half the market rate and therefore need to cut corners and do little analysis to survive, they generally don’t have local market knowledge often driving from 2 to 3 hours away.

Throw very little data into the equation as well as a very non-homogonous housing stock at the luxury end of the market and voila! there is an increased frequency of blown appraisal assignments.

There is always less data at the top of the market – the general lack of expertise in bank appraisals today via the AMC process is simply exposed for its lack of reliability. Unfortunately the appraisal disfunction affects many people’s financial lives unnecessarily such as buyers, sellers and real estate agents (and good appraisers not able to work for half the market rate and cut corners on quality).

The appraisal simply is not a commodity as it is treated by the banking industry. The appraisal is a professional service so by dumbing it down through the AMC process, they have succeeded in nearly destroying the ability to create a reliable valuation benchmark on the collateral for each mortgage in order to be able to make informed decisions on their risk exposure.

The New York Times Real Estate goes gonzo this weekend with a nice write-up AND a large color artwork on perhaps the least understood part of the home buying process.

No not the radon test…

The appraisal. Can’t live with them, can’t live without them.

Here’s my stream of consciousness on the topics brought up in the article:

“Sale and “Comparable” are not interchangeable terms. Really.

There is no ratings category for (like totally) “super excellent.” The checkboxes provide good average fair poor with “good” at top end (but fear not, “super excellent” is marked “good” and like total adjusted for).

Not all amenity nuances that are important to you as a seller (ie chrome plated doorknobs), are important to the buyer.

Not all amenity nuances that are important to you as a seller, are measurable in the market given the limited precision that may exist.

Not all appraisers have actually been anywhere near your market before they were asked to appraise your home, so technically they shouldn’t be called appraisers. Since their clients don’t seem too concerned about this, something like “form-filler” seems more appropriate.

When an appraiser makes a time-adjustment for a rising market, understanding whether a bank will accept that adjustment or not is (should be) completely irrelevant and quite ridiculous (unless they are “form-fillers” and not actual appraisers). I have always believed that the appraiser’s role is to provide an opinion of the value and that occurs in either flat, rising or falling markets.

HVCC was a created with best intentions by former NY AG Cuomo by attempting to protect the appraiser from lender pressure, but it has literally destroyed the credibility of the appraisal profession by enabling the AMC Industry.

The 12% deal kill average of an AMC an arm’s length sale properly exposed to the market is absolutely an unacceptably high amount and a major red flag for appraiser cluelessness about local markets.

I’ve never heard of a major bank since the credit crunch began who would throw out the original appraisal found to have glaring errors that would severely impact the result. My quote on this nailed that sentiment with brutal precision, if I do say so:

“You have a better chance of winning Powerball than getting a lender to abandon the first appraisal.”

Back from a short self-imposed overwhelmed-with-year-end-deadline-work-blogging-hiatus. Hope everyone had a nice holiday.

So I’m a bit late but the donuts are still fresh…

Michelle Higgins at the New York Times wrote a great piece weekend before last on the current stratification of the housing market that I call a “donut.” Strong on bottom, strong on top and weak in the middle. Mortgage rates are pulling in first time buyers at entry-level and high end is being driven high net worth and international buyers, leaving a weaker middle. The NYT editors weren’t very excited about my “donut” analogy even when I suggested a more New York City-ish bagel or bialy. However the piece correctly focused on the challenges the “trading-up” market in today’s houisng market.

I had lunch with my friend Barry Ritholtz last week and he didn’t like my donut analogy saying it should have been a “barbell” – but seriously, can you put icing or frosting on a barbell? I thought so.

“When people refer to their real estate as art, they’re really trying to say it’s unique, that it can’t be replicated.”

He said he’s seen the phenomenon not just in New York, but also Miami, London, Los Angeles and other markets where investors “are looking for safety in a world of turmoil and uncertainty.”

But, he said, “they’re confusing price with art. You’d think that titans of industry would be very individualistic about their acquisitions, but at the very top, there’s a herd mentality. You get one or two very large transactions that grab headlines and then it’s like a light switch goes off. In New York, this happened in the second half of 2010, and since then it’s been very intense. The size of what’s happening is unprecedented. How long can this go on? You see this kind of behavior and you have to wonder.”

This weekend I was quoted in the New York Times article “Shooting for the Moon” by Alexei Barrioneuvo which explored some of the crazy prices being asked at the top of the market. Appraisers come across list prices every day that have no rhyme or reason to them.

Within the appraisal industry there is a term for listings based on loose associations to reality, he said: “P.F.A.,” or “Pulled From Air.” As Mr. Miller explains it, “Take the highest sale you can find and apply some methodology in a very subjective way to talk yourself up to this bigger number.”

At the high end of the market, sometimes this approach is successful, but in reality, it is more often successful in new development than re-sales because of the concentrated marketing effort in place and that it is “new” with no benchmark bias already established.

Another name for it (and I just made this up) could be “unprecedented pricing” or UP. Buildings like 15 CPW and One57 in Manhattan and One Hyde Park in London had no real comparable benchmarks and became their own market.

Comments Off on Why “Pull From Air” (P.F.A.) Is An Appraisal Term, Pig v. Sheep Explained

Last week’s Manhattan housing market certainly ended on a high note – literally. You know that old saying about things happening in threes? My word of the week is “trifecta” – it’s always been a favorite, along with “neat, blowhard and Muttontown.

My favorite phrase is “The Trend is Your Friend” and one needs at least 3 data points to make a trend. Sometimes I append “…until it ends.”

It’s all quite breathtaking when you look at this sale in context of the entire market. However what sets the last 3 sales of $52.5M, $70M and $90M+ apart is they all exceed 10k square feet. The recent $88M sale was a nominal 6,744 square feet.

This record sale won’t close until the building construction is completed next year or so and I am not so sure it will still be a record at that point.

Comments Off on Manhattan’s 10k+ Square Foot “Trifecta” of Sales

The New York Times Real Estate section has been upgrading and tweaking the stats they provide on their listing database. The chart above shows the trend line for the number of listings seeing price reductions and increases. Increases remain nominal and constant while the number of listings with price decreases nearly doubles since the beginning of the year.

One thought I had is that more sellers thought prices were going to rise throughout the spring with the volume surge and set prices too high (a phenomenon I discussed in my 1Q 2010 report). When that strategy met resistance from buyers, a rising number of sellers capitulated and dropped their pricesresulting in a leveling off of sales activity in April.

In the New York City metro area, prices were generally stable – the story this spring was really all about transactions. In today’s New York Times, Vivian Toy’s piece: Spring Real Estate Market Roars In but Tiptoes Out Early describes the robust sales activity that occurred in the first three months of the year but peaked by mid-April, two months early. Sales continued to remain elevated through May and June, however. Does this mean that the market is poised to slip?

Who knows?

This article portrays what we observed in our practice and it was corroborated by StreetEasy‘s contract data. This could be explained by the federal tax credit expiration in much of the US housing market, but probably less so in Manhattan due to the high price point:

Housing sales activity rose across the country in March and April, in anticipation of the April 30 deadline for the $8,000 first-time buyers’ tax credit. But economists and brokers say the tax credit was probably a less powerful incentive in Manhattan, where the average sales price for an apartment is $1.4 million.

And price metrics are rising.

Seeing another sign that the market is on the mend, Pamela Liebman, the president of the Corcoran Group, said that the average price on signed contracts at Corcoran had climbed to $1.5 million in May, from $1.31 million in February.

However, it is important not to confuse this increase with rising prices. The high end market simply “woke up” in the beginning of the year and is skewing the overall numbers. We saw this happen to our 1Q 2010 market stats. Plus its a seasonal phenomenon to see the aggregate numbers rise in the spring.

Comments Off on [Spring Market] In Like a Lion, Out Like a Lamb

Follow Jonathan

Newsletter Signup:

If you haven't already, sign up for
'Housing Notes' to receive weekly insights and research.

First Name

Last Name

Email Address

About Jonathan Miller

Jonathan Miller is President and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm he co-founded in 1986. He is a state-certified real estate appraiser in New York and Connecticut, performing court testimony as an expert witness in various local, state and federal courts. He holds the Counselors of Real Estate (CRE) and Certified Relocation Professional (CRP) designations. He is an Appraiser “A” Member of the Real Estate Board of New York and a member of Relocation Appraisers and Consultants, Inc.Learn More...

Subscription Service Coming Soon

You'll be able to choose from an array of robust housing metrics compiled using research developed during the preparation of our market report series. Expanded significantly from prior offerings, use this resource to build charts and custom data tables or leverage your own information for more powerful research and presentations.

In the meantime, here is a small sample of the aggregated data we will provide.

“Jonathan Miller: One of the top 25 most influential U.S. real estate bloggers.”–Inman News

“Jonathan Miller...one of the nation’s most prominent appraisers.”–Money Magazine

Matrix Blog

Phil Crawford of Voice of Appraisal asked me to cover for him while he took a well-earned vacation. While I don’t have his sweet, syrupy smooth radio voice, I can grow on you a little bit if you listen long… Read More