Slate Money – Felix Learns What A Condo Is
Date: October 8, 2022
Host: Felix Salmon (Axios)
Co-Hosts: Elizabeth Spiers, Emily Peck (Axios)
Guest: Jonathan Miller (Appraiser & Market Analyst, New York)
Overview
In this episode, the Slate Money team dedicates the entire discussion to the housing market, joined by Jonathan Miller, a veteran New York appraiser and market analyst. The conversation explores the dynamics between mortgage rates and home prices, the stickiness of housing markets, the peculiarities of American homeownership, luxury real estate, supply and demand conflicts (YIMBY vs. NIMBY), racial and structural biases in real estate appraisal, and some eye-opening numbers from the world's most expensive homes.
Key Discussion Points & Insights
1. Mortgage Rates and Housing Prices
[01:00–05:56]
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Sticky Prices:
Miller dismantles the common belief that rising mortgage rates instantly lower home prices.“Prices are sticky on the downside because if the seller doesn’t have to sell and they don’t get their price, they don’t sell.” — Jonathan Miller [02:15]
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Volume Drops Before Prices:
With mortgage rates high, most homeowners “sit tight," leading to reduced transaction volume rather than immediate price decreases.“For the next 12 to 24 months, we’re just going to see much less volume, much less turnover in the residential real estate market.” — Felix Salmon [05:16]
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Golden Handcuffs:
Most U.S. homeowners have very low fixed-rate mortgages, discouraging them from selling and trading up/down.“No one wants to sell and walk away from really low, a really low mortgage rate and then have to face one that's like twice as much.” — Emily Peck [03:15]
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Personal Anecdote:
Miller shares his own recent buying experience: “We beat 30 other parties... I only paid 36% above asking price.” [07:01]
2. Luxury Real Estate & the Pandemic Boom
[08:10–10:46]
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The ‘Weenie Waving’ Effect:
The drive for bigger, flashier homes among the ultra-rich is often about “parking money," not daily living.“People had the world's most expensive bank safety deposit boxes.” — Jonathan Miller [09:18]
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Pandemic Patterns:
The luxury sector (e.g. Billionaires’ Row) saw a rapid sell-off during the pandemic even after a prior glut.“There was a tremendous surge in luxury sales activity during the pandemic era, which was an inversion… because lower wage earners were much more economically punished by the lockdown.” — Miller [10:18]
3. Renovations, Divorce, and Market Timing
[10:46–13:17]
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Renovations as a Relationship Test:
Miller notes an odd trend: 90% of divorce-related appraisals his firm does involve recently renovated apartments.“People think they can make themselves happy by renovating their apartment, but it turns out it’s actually their marriage.” — Felix Salmon [11:28]
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Value of Renovation Varies:
Renovation payback depends on timing; hot markets reward sprucing-up, slow ones don’t.
4. Urban and Suburban Market Dynamics
[13:34–16:23]
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Year-over-Year Data Distortions:
Post-pandemic numbers look bad compared to 2021's “insane supercharged market", but less dire measured against pre-pandemic.“It looks like contracts are down 30%. If you compare them against pre pandemic... contracts are down about 12%.” — Miller [14:07]
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Supply, Demand, & Gentrification Debates:
Felix poses the classic “Does building more luxury housing make neighborhoods more or less expensive?”“If you build a bunch of luxury apartments in a neighborhood, is that going to gentrify that neighborhood and make everything... more expensive, or will it reduce prices via supply?” — Felix Salmon [16:23]
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Expert’s Take:
Miller: Impact is real but nuanced; luxury builds have some upward influence but don’t automatically cause across-the-board price spikes.
5. YIMBYs vs NIMBYs: Who’s Right?
[17:11–23:35]
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Cities vs. Suburbs:
In urban areas, increasing supply means luxury supply; it doesn’t necessarily lower prices for everyone.
In suburbs with more land, NIMBYs fear property value drops from multi-family housing, but Miller’s experience shows little to no effect.“I think the NIMBYs are generally wrong.” — Jonathan Miller [22:08]
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Other Concerns:
Financial impacts are often overblown; greater worries are about taxes and school infrastructure.
6. Factors That Might Actually Lower Prices
[24:13–27:40]
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High Rates:
Longer periods of high mortgage rates might stagnate or put pressure on prices, but rarely cause outright drops except in periods of sustained economic distress. -
Boomer Die-Off and Land Value:
Boomer housing stock is often dated; true value increase is mainly in the land, not the structures.
7. Rental Market and “Apartments” vs “Condos”
[27:40–32:34]
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Rents Peak:
Rents have soared, especially in New York, but bid-ask records may be plateauing.“Manhattan rents... did not set a new high. They are only the second highest in history.” — Miller [27:49]
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Class Distinction:
The U.S. uniquely labels identical properties differently by tenure; “apartment” if renting, “condo” if owned. -
Urban vs. Suburb Rentership:
Most city dwellers rent; suburbs are homeownership bastions, leading to marked differences in school funding and social stigma.
8. Historical Context: Race and Housing
[32:34–36:44]
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Structural Racism:
Redlining, deed restrictions, and federal policies created white-dominated, property-owning suburbs.“The suburbs... were created as sort of like a white haven. Black families couldn’t get mortgages there.” — Emily Peck [32:47]
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Urban Decline and Recovery:
New York neighborhoods once had “negative value”. Swanky apartments on Lex could be had for less than the annual maintenance.
9. Racism in Real Estate Appraisal
[36:17–44:14]
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Appraisal Industry Lacks Diversity:
The field is “98% white… dead last in diversity of 400 industries" [36:54].
The traditional mentor-and-family-entry system creates barriers, especially for people of color. -
Bias and Discrimination:
Miller admits:“...if an appraiser goes in and there’s signifiers that the occupants are people of color... the appraised value is lower.” [36:17]
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Barriers to Entry:
It’s hard to break into appraisal work without family connections; financial arrangements and regulatory structures perpetuate this.
10. Wild Real Estate Numbers & Trends
[44:44–50:48]
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Historical Mortgage Insight:
“The average rate on the 30-year mortgage in 1981 was 16.63%.” — Emily Peck [44:57]
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Space & Costs in New York:
“The average size of the condo unit in New York City is less than 1,600 square feet." — Elizabeth Spiers [45:20]
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Stratospheric Prices:
- Marc Andreessen’s $177 million Malibu house ($15,000/sq ft) [45:35–46:25]
- A Billionaires’ Row condo: $14,285 per sq ft, asking $250M, likely to be discounted by at least 25%. [47:14]
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Ultra-Luxury Market is a Global Microcosm:
Such eye-watering prices are atypical; “these sales end up being a circus sideshow... They’re not intricately connected to the local market.” — Miller [48:17]
Notable Quotes & Memorable Moments
-
On why sellers don’t cut prices immediately:
“Prices are sticky on the downside because if the seller doesn’t have to sell… they don’t sell.” — Jonathan Miller [02:15]
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On the true value in housing:
“When properties appreciate, most of that appreciation is the land value, not the house... The land is truly appreciating.” — Jonathan Miller [26:55]
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On the “stigmatization” of renting:
“There was absolutely... stigma. People would say, ‘Oh, you don’t own?’... I thought that was sad.” — Jonathan Miller [31:35]
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On the racial legacy in real estate:
“The suburbs were created as sort of like a white haven... Black families couldn’t get mortgages there.” — Emily Peck [32:47]
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On luxury units as status objects:
“People had the world’s most expensive bank safety deposit boxes.” — Jonathan Miller [09:18]
Timestamps for Important Segments
- Mortgage rates and sales stickiness: 01:00–05:56
- Luxury market behavior & pandemic trends: 08:10–10:46
- Renovations & divorce rates: 11:09–13:17
- NYC and national market volume/price shifts: 13:34–16:23
- YIMBY vs. NIMBY dynamics: 17:11–23:35
- What brings prices down (if anything): 24:13–27:40
- Rent trends & “apartment” vs “condo” talk: 27:40–32:34
- Race, redlining, urban/suburban histories: 32:34–36:44
- Structural racism in appraisal industry: 36:17–44:14
- Numbers round (mortgage rates, giant houses): 44:44–50:44
Tone & Style
The episode is witty, analytical, and accessible, mixing data and personal anecdotes with references to market trends, policy history, and even old detective radio shows, all while engaging Jonathan Miller’s expert insights and the hosts' curiosity.
Summary prepared for listeners who want a comprehensive, nuanced view of the U.S. housing market—and the social, financial, and historical forces shaping it.