Matrix Blog


[Media Chain-Links, Fenced In] 3Q 2006 Manhattan Market Overview

October 4, 2006 | 11:13 am | | Public |

The 3Q 2006 Manhattan Market Overview that my appraisal firm, Miller Samuel, authors for Prudential Douglas Elliman, was released for publication today. The raw numbers were released and a summary of their interpretation were provided to the media. The pretty report will be available for download later this week or early next week. I wait until the end of the quarter before I start working on it so there is not enough time to get it together before publication of the results. This quarter ended last Saturday so it made for a long weekend.

The actual data and charts will be available soon. The actual report pdf will be available next week.

For perspective, every quarter I place links to articles about the report for a few days after publication to make it easy to compare how each media outlet (big and small media, blogs) presents the exact same set of data.

This article list is presented in no particular order, basically when I found them. I include some duplicate news feeds because I like to see what regions are interested in the story.

Manhattan real estate finally starts to cool [CNN/Money]
Buying in Manhattan? Apartment Prices Steady [New York Times]
Manhattan apartment prices slip in latest quarter [New York Daily News]
Manhattan apartments selling slower [Newsday]
Manhattan apartment market seen in soft landing [Reuters]
Manhattan Co-Op Apartment Prices Dip 16% as Buyers Favor Condos [Bloomberg (no link yet)]
Manhattan Housing Stays Stable []
Manhattan apartment prices leap despite sales drop [Reuters]
Jonathan Miller On Summer ’06: New York Realty Isn’t So Bad [NYO The Real Estate]
Prices down, sales up in Manhattan housing market; co-op prices slump [The Real Deal]
As Dow Hits Record High, Homes Falter [NY Sun]
Manhattan real estate market slows down [Inman]
DownMarket Reports: Choose Your Own Adventure! [Curbed]
Sector Snap: Manhattan Apartment REITs [AP] Highlights from the Prudential Douglas Elliman Third Quarter Overview [True Gotham]
Manhattan residential real estate market cools [Valuation Review]

Here are a handful of tv spots as well.


[Bloomberg TV]




[Matrix Zeppelin Series] Sticky, Herd Mentality, Media Not Distorting, Acceptance of Risk, Smell Like Cabbage, Fear of Music, Price is Key and 75 Laminated Signs

September 29, 2006 | 7:38 am |

Despite Talk Like A Pirate Day and the Carnival of Real Estate Matrix readers actually thought about other things and said their piece.

Throwing caution to carny barkers walking the plank, here’s a few notable comments from the Matrix Zeppelin:

  • I find it interesting that people expect housing prices to “crash,” yet they are unwilling to see the value of their own home as dropping. Real estate prices are sticky-downward, because we price our homes based on our expectations and desires, not newspaper reports.

  • media coverage, if its not accurate, can help exagerate the highs and the lows of a market. I am not blaming the media at all, its just that I think there is a tremendous herd mentality out there right now.

  • the “herd” is finally waking up to the reality that housing prices must revert to the mean…the media is not distorting the issue; they are merely taking a hard look (for the first time in many years) at the fundamentals of real estate. and the fundamentals are overwhelmingly negative.

  • Sort of along the lines of what you are saying, I know my own perception has changed, over the past several years. Three years ago, when I bought my first condo, I wanted as much home as possible, so I got an adjustable rate 1st loan and interest only 2nd loan. This time around, in May, I was steadfast against getting an ARM, for either. The rates were just a bit higher for the 1st, and a lot higher for the second, but I didn’t want to take any chances. Bottom line? My acceptance of risk had been reduced, because of the uncertain housing market. Others, especially those who can’t afford to take out a fixed-rate mortgage loan at 8% instead of 5% (our 2nd loan rate) will have no choice but wait it out.

  • I find the best blogs at “carnivals” also tend to find carnies. Small hands. Smell like cabbage.

  • I am in Hoboken and it’s a sea of “For Sale” signs, whether on the street or attached to buildings. But I grew up in a town that banned them. I guess it is supposed to provide owners with a sense of security, but frankly, if you really want to sell, I think it’s pretty decent advertising.

  • Here’s another one from Coldwell Banker that claims it will help me “Find myself a city to live in.” (If you’ve also got Fear of Music and ‘77 in your collection, you’re all set as far as I’m concerned.)

  • I have come to a similar conclusion concerning refinancings, but do you think that it will really have an effect on homebuyer mentality? I think that even if rates drop a little, sales will still be down and inventory up, because at this point price is key, and until that comes down, nothing will move. After all, interest rates have been low and falling all summer and it hasn’t helped at all. But that was just my own thought.

  • I know this comment is a little late, but did you hear what Barbara Corcoran had to say today on Good Morning America? She is trying to demonstrate how to sell your home in 7 days and amongst some good ideas she stated: 1) Blanket your area with “For Sale” signs. Corcoran made 75 laminated signs at Kinko’s for a total cost of $324. Make your signs bright and clear. Bright yellow is the most memorable color. Use clear, big, black lettering so people can read it easily. 2) Corcoran also made up car magnets and a giant billboard in front of the house. 3) The Freunds’ [the sellers] friend owns a ski shop on the major interstate in town, so Corcoran hung a nine-foot banner across the front of the shop. Seventy-five signs, one billboard and a nine-foot banner. Yikes!!! No doubt that Town Board will have a very lively meeting the next time they get together.

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[Matrix Zeppelin Series] Coastal, Gentrifying, Negative Light, Overload, Raw Numbers, Get Ugly, Lereah Is MIA, Bonuses, Slowdown Coming, Going Into Foreclosure

September 15, 2006 | 6:46 am | |

This week, there was no hot air in the Zeppelin commentary. In fact it was so heavy, I don’t think it got off the ground. Here’s a sample:

  • It’s interesting reading everyone talk about the inpact of interest rates on the slowing real estate market. “Rates when up .24356, that’s why real estate is slowing” etc. That is nothing! I live in Florida. I paid $3500 for my home owners policy last year. I thought that was too high. I just got my renewal notice. My new premium is $12,500! That’s an increase of $700 per month! Florida and the coastal areas of the US are in a free fall in property values as it is. This new wave of insurance hikes will be a disaster for coastal property values!

  • Are you allowed to say “in a gentrifying area”?

  • I have come to belive all news is presented in the most negative light possible, especially news about the economy. I have also come to believe that most people who post comments to blogs or news stories want the sky to be falling (I don’t know why – but it appears to be the case). I expect that you will be bashed for trying to “keep it in perspective”. [as I suspected, Matrix readers didn’t do that – Jonathan]

  • We can strip away all the information overload and focus in to what real estate pricing is all about which is simply supply and demand.

  • You definitely pinpointed the limited usefulness of the RealtyTrac report in that the comparison should be to the national housing stock that has mortgages. That’s exactly what the Mortgage Bankers Association did in a survey out today, which puts the foreclosure rate for the second quarter at .99 percent — up 1 basis point from last quarter, but down 1 basis point from the same quarter last year. If you have a lot more people taking out loans, as they did in the boom years, the (raw) number of foreclosures is naturally going to go up, even if people are just continuing to default at the same old rate. The real question is what’s the number of homes in foreclosure as a percentage of all loans. The MBA survey did show a pretty good bump in the number of delinquencies on subprime and FHA loans, however (and even prime ARMs), but chief economist Doug Duncan said he doesn’t expect “order of magnitude” increase in delinquencies next year. Companies like RealtyTrac are in the business of selling info about foreclosed properties to investors, and maybe the raw numbers mean something to that crowd — like more opportunities to cash in on others’ misfortunes. Which doesn’t mean their numbers aren’t true. They just, as you say, lack perspective.

  • Here in Southern California, foreclosures (Notice of Defaults, actually) are sky-rocketing. In the first year of this housing market down cycle, the monthly number of NODs is already nearing the worst monthly levels of the 1990’s housing market down cycle. Yes, this is perspective. This is going to get very ugly before the sun starts to rise again.

  • Now that you mention it, Lereah has been MIA for the NAR — hadn’t noticed that. Stevens tenure is about to end, so we soon won’t have him to kick around any more. But let’s give it one more shot. The Washington Post carried a piece last Saturday about (essentially) NAR President Stevens getting caught in the market … um … correction. “his old house in Great Falls has now been on the market for a year at the price of $1.45 million.”What I should have done,” confessed the senior vice president of NRT Inc., parent of Coldwell Banker Residential Brokerage, “was listened to my agent and cut the price by $50,000 to $100,000 early on, and the property would have sold last October.” Or, even better, he said, “I should have listed it a month earlier,” when the market was only just beginning to lose air.” And on, and on he goes. I don’t know what average days on the market is in the DC area, but I bet it is less than 365. And Stevens hasn’t sold yet…

  • I was under the impression that prior to the impending bonuses of 2006, 2005 was also a record year. However, it didn’t seem to do all that much for housing – maybe in the luxury/ultra luxury area, but not overall. We still had a lousy spring. So I can’t see why that would change this year, with inventory so much higher. Besides, don’t all those rich guys own by now?

  • New York’s economy is strong, and people are pouring in. In the short run, therefore, any price decrease would be the result of prices being too high relative to income to being with, and nothing else. I think that may happen. Next year, however, it may also be that weakness in the housing market elsewhere causes weakness in the economy elsewhere and weakness in the stock market, working its way back to NYC. Bonuses will be at record levels this year, but Crains reported on Monday Wall Street’s three-year bull-run is losing steam. “After a terrific first half, earnings are expected to fall 40% in the second half…The slowdown is hitting virtually every trade plied on Wall Street. Stock and bond underwriting volume plunged nearly 50% in the summer quarter compared with a year earlier. The hugely lucrative businesses of advising on corporate mergers and taking companies public are also slumping.” Perhaps, with a slowdown coming, those high flying finanical geniuses won’t blow their bonuses this time around. Naaaah.

  • But you DON’T have perspective until you can answer the question, “What is the impact of NODs (or foreclosures) on the market?” Are they affecting inventory? By how much? What other pressures are there on inventory? The RealtyTrac survey reports 12,506 California homes entered into foreclosure in August — up 25 percent from July and 160 percent from the year before. That sounds pretty serious, right? Well, maybe not if foreclosures were at historic lows. Maybe not if some 500,000 homes change hands in the state every year. Which is not to say that the market’s not soft, especially in particular areas. Inventory in the state is up — CAR puts it at 7.5 months in July, versus 2.9 months same time last year. But what is causing inventory to rise? Is it because more homes are going into foreclosure, or because houses are just sitting on the market because they are overpriced? The bottom line is that the raw number of foreclosures, by itself, doesn’t tell you that much about supply and demand.

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[Matrix Zeppelin Series: Readers Write] Perception, Substitution Principles, Apples To Apples, Timing, Sidelines, Dis-intermediate Or Impractical

September 8, 2006 | 5:35 am |

We are now in post-Labor School Is In Session Mode and Matrix readers are showing it. This week we had many well thought out points of view on a whole range if issues. There were a few readers that stayed after school to finish them:

  • Falling prices do not spur sales—stabilized and rising prices do. Most people did not buy stock when the market was falling? If they did it was only because their “perception” was that the fall was temporary. Slowing of housing sales tells me that the current “perception” is that prices will continue to fall.

  • There is a definite distortion in Shiller’s graphic, but I think the error is in the gov’t inflation numbers. Ever since Greenspan instituted the “substitution principle” in the inflation gauge we have had a false reading of true inflation. I think inflation since 2001 has been so under-reported, that by using the official numbers, we are seeing this skew in Shiller’s graphic. Looking at real world examples where I live (central Florida), housing is up 110% since 2001, milk has gone from $2.20 to $3.40/gallon, and we all know what gas prices have done in the last 5 years. Even Disneyworld tickets have gone from $40 to $67. About the only places I have not seen major price increases would be automobiles and consumer electronics/computers, but those are from production efficiencies. I imagine most of the HELOC growth has been because people are needing the extra income to keep the same lifestyle they had in the ’90s because incomes have been flat while inflation has been much higher than reported.

  • If you want to know what the long term average annual price change was over the last few years as a whole then the OFHEO data is good. If you want to know what the average price change was during the most recent 12 months only you will not find that in the OFHEO data. This is becuase OFHEO uses same house data for determining their index – using the recent transaction compared to its prior transaction years ago. Apples to apples but measuring long term averages – not recent movement. A home bought five years ago and sold recently will show a positive average annual gain – even though it has declined during the latest period. The OFHEO HPI is essentially a rolling average of many years of price movement.

  • Market timing is inextricably linked to the efficient market hypothesis. The EMH states, quite simply, that it is impossible to outperform the market. Why? Because the market is all-knowing, an asset is always perfectly priced based on all known information. All market participants share the same information and no single player has any advantage. Market timing is a perfectly valid concept in an imperfect market, especially in those markets where information isn’t equally shared among all players (an information asymmetry exists). A single participant who receives advanced notice of information will most certainly have an advantage over the other market participants. Information assymetry in the real estate market is just one of the reasons that it is an imperfect market. Keep in mind that real estate is a radically different asset than stock. While the stock market is far from being perfectly efficient, it is most certainly more efficient than the real estate market. Don’t forget that insider trading is a form of market timing. Does it work? Yes, albeit not legal. While I don’t believe it possible to “time the market” in a traditional sense, I do believe that the price of an asset will revert to it’s fundamental-driven mean when both overpriced and underpriced.

  • While I agree that many are on the sidelines, I disagree as to why. I don’t feel people are not purchasing because they fear prices MAY fall, people are not purchasing because prices have NOT fallen. I am one of those buyers on the “sideline” and I’m not trying to time for the bottom. But I am looking for price reductions as I feel prices are overly inflated. (That being said I do plan to stay in any home I purchase for a minimum of 10 years.) So I feel that this doesn’t mean I’m trying to time the market. I’m just waiting for the inevitable and I think others are as well.

  • I sell real estate now, but I was in the business of design and Web development for years. There is a old saying and a glib truth in selling and buying design services: “you can have it good, cheap and fast; but you can only get any two of those at a time.” I think that applies across many industries including real estate services. There is certainly evidence that technology can change things. The ability for it to dis-intermediate an industry, as the expedia/zillow guys did to travel agencies, is possible, but also quite rare. I’d ask you if the customer has actually benefited from it? Are air fares significantly cheaper because of it? I haven’t noticed; and it now costs my time to find the best fare and route. Discount on-line stock brokers did not put the full service ones out of business. The smart ones that offer real knowledge and guidance are still around. Amazon did not kill Wallmart, Ebay has not replaced Christies, and Yahoo did not see Google coming. There is room in the market place for multiple business models. The perception of value is what’s important. The big lie in all of this is that people are led to believe that they are getting the same services for less. What’s missing from the Redfin service proposition is any claim that they will work to get a seller the highest price possible. That’s what brokers actually do. Their model is based around doing it cheaper not better; and you generally get what you pay for. The caricature of the overpaid, lazy real estate broker is spin that serves Redfin and others who would like us to believe it. Like the title of your post implies Jonathan, as an industry, full service practitioners and the NAR could probably do a better job at communicating.

  • I might be able to market-time the cost of housing, but I can’t market-time things such as losing my job, getting a new job, having a baby, terrorist attacks, parents dying, getting divorced, having a mental breakdown, or inheriting wealth. It may not be impossible to market-time housing prices, but simply impractical.

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Carnival Of Real Estate [Week of September 5, 2006]

September 5, 2006 | 10:06 am | Public |

[Matrix is hosting the Carnival of Real Estate the week of September 25, 2006. Its a great way to read some great posts on real estate topics of the day and not get sick on cotton candy.]

What is a carnival?

Here’s a great carnival Q & A. Its basically a a bunch of blogs that take turns displaying the favorite posts of the group each week. Carnivals can vary by topics and of course and the most relevant to Matrix readers is the Carnival of Real Estate.

This week’s host: NuBricks is able to bark out the best posts submitted by carnival members all the way from Europe.

Next week’s host: Real Estate Tomato who will determine once and for all whether tomatoes are to be considered a fruit or a vegetable as well as select the best posts for the carnival.

Carnival of Real Estate

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[Matrix Zeppelin Series: Readers Write] House & Home, Hurricanes, Naivete Of Buyers And Junk Bond Analogies

September 1, 2006 | 6:10 am |

Real estate commentary seemed to dwell on language this week: what they say and what they read into what others say. Matrix readers attempt to clarify the hurricane of terminology and still not get wet.

Trying to bridge the buyer-seller gap, here’s a few notable comments from the Matrix Zeppelin:

  • I use the term house when talking to a seller, and the term home when talking to a buyer…

  • I agree that there is a difference between “house” and “home” in terms of the underlying meaning they imply. I think “house” (or “apartment” in NYC) refers more to the property, while “home” is a warmer and much more emotional term to describe the place you live. The difference is most obvious when you compare a family looking to buy primary residence with an investor looking for property to flip or rent out. As a real estate broker, I would use the word “home” for the first, and “house” (or “apartment”) for the latter (not due to marketing concerns, but because I believe purchasing primary residence is the most personal and emotional transaction of one’s lifetime, and should be addressed appropriately).

  • Aren’t there some stats that do only track single-family residences, i.e. “houses”, which if you’re getting into median or average prices, makes a BIG difference in NYC, where only the highest-end real estate falls into that category, as most “homes” are much smaller, cheaper apartments?

  • I use the term house when talking to a seller, and the term home when talking to a buyer…

  • The only thing that could turn the media coverage right now would be if hurricane JonBennet were to devastate Miami.

  • The spike in media coverage reflects an overall anxed about the economy – and housing is an easy way to contextualize things. Housing experienced an amazing growth that nobody can really explain, and is expected to experience a significant reduction that nobody can really size. The economy is in a similar state. All indicators say that we’ve got harder times coming, but nobody really knows how much harder and for how long. In many markets, there’s currently such a wide gap between buyers and seller that there really is NO housing market to speak of; and that standstill is seen as a bellweather for the rest of the economy. It’s like watching a showdown: where housing goes (trend wise) the economy will follow.

  • If they are still on the sidelines, they either have the nerves of successful poker players or the naiveté of buyers who tell their seller’s agents how much they can afford to spend.

  • Unfortunately (for sellers, and for real estate agents on commission), I don’t see this improvement as bringing in many more buyers. Which is both obvious and strange. As prices go down, potential buyers will be afraid that prices will drop more, and that 1) they are paying too much and 2) they won’t be able to sell their home, further down the line. Therefore, they’ll continue to wait on the sidelines until … well, until I don’t know when.

  • But I don’t buy the junk bond analogy, at least as applied to Manhattan coop or condo purchases. Seems to me that the junk bond abuse was about issuing high rate debt to finance the purchase of an entity whose operating cash could not support the debt service, so (formerly healthy) entity cratered.


Carnival Of Real Estate [Week of August 28, 2006]

August 29, 2006 | 6:12 am | Public |

[Matrix is hosting the Carnival of Real Estate the week of September 25, 2006. Its a great way to read some great posts on real estate topics of the day and not get sick on cotton candy.]

What is a carnival?

Here’s a great carnival Q & A. Its basically a a bunch of blogs that take turns displaying the favorite posts of the group each week. Carnivals can vary by topics and of course and the most relevant to Matrix readers is the Carnival of Real Estate.

This week’s host: The Landlord Blog throws the darts at the best posts submitted to them by carnival members.

Next week’s host: NuBricks who will squeeze the carnival in between new property development news & off plan launches.

Carnival of Real Estate


[Matrix Zeppelin Series: Readers Write] Working Both Sides, Mortgage Resets, Higher Law, Housing Anxiety and Class-Polarity

August 25, 2006 | 1:11 pm |

Even with the loss of Pluto as a planet, Matrix readers have been cleaning the lenses on their telescopes while accepting the risk of placing the remaining planets out of alignment. Here’s a few of this weeks comments from the Matrix Zeppelin:

  • I have been told numerous time that if I am representing both sides of a deal, then I am really only loyal to the deal… not the clients. This is one reason I choose not to be the main representative for both sides of a transaction. If an unrepresented seller is handed our state contract for sale, possibly with addendums, that seller will want to seek out his or her own representation from another representative in most cases. I believe it is worth the money spent to have a representative working for client interests, rather than the transactions interests. Afterall, if you are going to court you wouldn’t want the same attorney working both sides of the case, right??

  • Yes, brokers and agents clearly want to close the deal, but so do the parties, so the interests align. The broker’s fiduciary duty to the client should cover advising of those instances when closing a particular deal is not in the client’s best interest. There is every reason to get advice from as many sources as you need or want, the experienced agent being one. Ditto negotiating skills.

  • The problem arises when consumers do not fully understand the products they are signing up for when rates are higher when their mortgage resets. Of course, lenders see no problem with these programs because they say they inform the consumers and it helps get buyers into their new houses and do not want to discourage consumers from applyhing for mortgages. Lenders are already facing lower loan volume as rates creep upward. There is a saying I’m sure you’ve heard before… ‘Buyers are Liars’. It’s just as true for mortgage brokers as it is for real estate agents

  • There are overpriced properties that are purchased and under-priced properties that are sold, and Bazerman’s point is that its not in the brokers interest to inform the buyer/seller of these inequalities.

  • It is the same as my first point, or I wanted it to be, which is, that there is a “higher law” at work in any real estate transaction involving a broker and a client. An agent must act in the best interests of their principal. Consequently, the self interest of the broker must play second fiddle to the client’s interests. And my experience has shown that brokers are looking out for their clients.

  • Real estate, like any market, can get ahead of itself. If you suppose, for a moment, that the long term average price appreciation of housing is 5% (probably on a “real” basis, but I suppose that is subject to debate), then periods of above 5% appreciation will eventually average out with periods of sub-5% appreciation. I think we all know which period we are in now. The problem is when the market is in “10%+ p.a. appreciation land”, it looks like it will go on forever. When it is correcting, it looks like the sky is falling. For a good example of “the sky is falling” see. Some speculators in markets that are illiquid (and housing certainly is) will get burned and forced out — which is a healthy thing in the long term. I like to think that there are fewer speculators in general in NYC than there are, say, in Las Vegas or South Florida, but I don’t know for sure. What matters is how many speculators can’t stand the heat. The strong rental market leans against the falling prices. Rental apartments in NYC are up 15% since the start of the summer. But the cash flow still isn’t good enough to buy & rent out and make some return on your cash. You will need capital gains to bail you out. When the market squeezes out those capital gains expectations (which it is doing a good job of now, but they are not all gone), that is when you know it is time to buy. Will it ever get there? It did in the mid-1990s correction. It could again. The whole “bubble” thing is probably a misnomer. Bubbles burst and are gone. Housing is a basic good and, unlike tulips, have underlying demand. Remember that in 2000, when people got burned in the internet stocks, money started to flow into housing as an alternative place for your cash. This was exacerbated after 9/11. If the cash isn’t going into housing now, where will it go? Probably financial assets….

  • I feel, at this point any move by the Fed will have no effect on housing. As you mentioned, “Market psychology/mob mentality is a fragile thing.” I think everyone is a little “touched” and now has Housing Anxiety. The Fed should stick to it’s no one role (or is it mandate) and deal with inflation. The sooner we take the medicine, the sooner we’ll get better. And I agree that low mortgage rates fueled the housing boom. And then that old market psychology/mob mentality took over!

  • The main reason why middle class incomed people are being priced out of the cities is tri-fold: (1) The primary problem is the irrational belief in the goodness of centrally planned zoning; that which dictates the density, dimensional proportion, usage type, etc. allowed. Of course planners are only human, so they cannot fully forsee all the long-ranging effects of their economic devestation and class-polarity housing policies. (2) the white collar workers are the direct victims of the price war, as they cannot bid away the same quality housing as the rich, and they must live in inferior housing, less choice neighborhoods, etc. (3) white collar workers are the ones subsidizing the lower classes, who thru the mechanizations of the city and state, end up bidding away the housing with the middle classes’ money!

Carnival Of Real Estate [Week of August 21, 2006]

August 23, 2006 | 7:11 am | Public |

[Matrix is hosting the Carnival of Real Estate the week of September 25, 2006. Its a great way to read some great posts on real estate topics of the day and not get sick on cotton candy.]

What is a carnival?

Here’s a great carnival Q & A. Its basically a a bunch of blogs that take turns displaying the favorite posts of the group each week. Carnivals can vary by topics and of course and the most relevant to Matrix readers is the Carnival of Real Estate.

This week’s host: Pine Needle Lawn pops the balloon by providing best posts submitted to them by carnival members.

Next week’s host: The Landlord Blog who will not sit passively and generate income after selecting the best posts.


Carnival Of Real Estate [Week of August 14, 2006]

August 14, 2006 | 12:01 am | Public |

[Matrix is hosting the Carnival of Real Estate the week of September 25, 2006. Its a great way to read some great posts on real estate topics of the day and not get sick on cotton candy.]

What is a carnival?

Here’s a great carnival Q & A. Its basically a a bunch of blogs that take turns displaying the favorite posts of the group each week. Carnivals can vary by topics and of course and the most relevant to Matrix readers is the Carnival of Real Estate.

This week’s host: Brownstoner is getting his turn on the carousel this week by presenting what he feels are the best posts submitted to him by carnival members.

Next week’s host: Pineneedle Lawn who will use their Land-o-lakes perspective to select the best posts of the week.

Carnival of Real Estate

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[Matrix Reader Writes] Teardowns Are No Phenomenon

August 10, 2006 | 12:58 pm |

Brian S. Hickey, President of Xchange Properties wrote to us, refuting the premise of a previous post of mine about his company called Let’s Be Honest, Teardown Your Home where I conclude: seems to be yet another niche service created by the housing boom that might now be torn down.

Mr. Hickey provides support for his argument that there is long-term demand for his services:

The teardown phenomenon is not new. Houses have been demolished and replaced for as long as they have been built – just take a look at historic pictures of your community, chances are you will see the current “teardown” is a replacement for something even older.

We agree that new business models pop up to take advantage of current trends, but we will argue that offering a service to help facilitate the rebuilding of outdated and in some cases obsolete housing stock within established communities is shallow or temporary.

Please take a look at the attached article from The Lincoln Institute (July 2006) by Daniel P. McMillen. The Lincoln Institute is a non profit educational institution established in 1974 to study and teach land policy and taxation; you just may change your opinion on the longevity of this teardown “phenomenon”.

The paper makes some great points and I am not anti-teardown in most cases (except historic properties). I appreciate Mr. Hickey’s feedback and respect his eagerness to defend his business.

However, the point of my post was simply that there have been a seemingly endless array of niche brokerage services that arrived on the scene during the housing boom. With the market softened by rising inventory, it seems unlikely that teardowns will continue at the torrid pace of the past few years leaving even less room for a specialty business. Yet I do wish success.

Teardowns: Costs, Benefits, and Public Policy [Lincoln Institute]
Lets Be Honest, Tear Down Your Home [Matrix]

[Matrix Zeppelin Series: Readers Write] Thoughts About Trolling For Crazy Prices, Phantom Listings And Causation

August 9, 2006 | 10:11 am | |

August should be a slow month for real estate commentary as people take time off to relax, assuming they are not melting as the sun seems to be crashing to earth. Matrix readers however, have been cranking up their air condtioners and reflecting on housing related economic changes.

Throwing caution to the electric power grid, here’s a few notable comments from the Matrix Zeppelin:

  • When housing prices were going through the roof, the FED kept interest rates low, based on the fact that “inflation,” which uses rents as the basis of housing costs, was low. Greenspan and then Bernanke made the case that the FED should focus on inflation, not asset prices (like the price of owner-occupied housing). How that housing prices are softening, but rents are rising, it appears the measure of inflation is shifting to the former. Bottom line: policy is inflationary. Governments, households, and (if you include pension liabilities) businesses are deep in more debt than they can service. Those debts cannot be paid in today’s dollars. The options are a reduction in the value of the dollar, which is to say inflation, or mass default. The hope appears to be that inflation will bring nominal income up to the level required to support today’s housing prices and credit card debts. The problem: lots of the debt is variable rate. But someone seems willing to lend for 30 years for no more than the return on cash. Amazing.

  • …allowing for inflation and a weakening dollar just to rescue those who got into real estate over their heads. I’m not certain why anyone should feel responsible for their behavior anymore, if the government is just going to come in and clean up their messes for them.

  • I wonder if any meaningful proportion of the residential listings currently on the market are sellers who are not serious and/or are “trolling” for a crazy price. I know several people personally who have their apartments listed but whose selling is strictly optional (meaning, they don’t have to relocate, don’t need a larger space for more kids, etc.), and their pricing reflects their flexibility. They offer what they consider to be a “score” price, meaning if they sold it at that they’d be very happy with their returns. That might be one of several contributing explanations to the reduction in sales volume without a related reduction in prices, a phenomenon you’ve mentioned several times and this article [CNN/Money] reminded me of again.

  • One could hypothesize that there is currently a greater proportion of such listings in the total, due to the widespread perception over the past year that the “bubble” was peaking. That might account for a bit of “phantom” inventory in comparison to previous eras. One could then extrapolate that the inventory growth or level was somewhat exaggerated.

  • The WSJ journal incorrectly states that the boom began in 1991. However, prices in many places were in decline for several years after that. Their chart shows that the decline in sales activity stopped getting worse in 1991, but remained below the long term trend until 1998. I would pick that point as the start of the “boom.” Until then it was merely a weak recovery.

  • Your use of the term “stagflation”, two days in a row make me want to go out and find a used AMC Pacer to buy.

  • I believe between 2002-2004 we were all playing in a market that never really existed. With the correction of compliance over appraisals we are now starting to see who we can start pointing fingers at.

  • Low rates and exotic loans allowed people who could not purchase in the past the chance to buy a home. But eventually, prices (in certain areas) ran much higher than median incomes could afford. And now we have the market slow down and eventual correction. How the correction will play out… I really don’t know. I think many like to point to RISING mortgage rates (and will do so more and more) as the cause of the housing slow down, but I think it was the low rates (and exotic loans) that ACTUALLY caused it.

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