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Posts Tagged ‘NAR’

A La Mode: Whats So Mean About Median Sales Price?

March 27, 2006 | 12:01 am |

The National Association of Realtors Uses It. Big Media tends to prefer median sales price over average sales price. [What exactly is the ‘median’ price? [OCR]]( Although it is the primary numeric representation of the residential housing market, it is surprisingly misunderstood. Other statistics such as [Average or Mean](, or to a much lesser degree (statistical Siberia), [Mode](, don’t get the same prominence in national statistics.

[Median defined: ]( Relating to, located in, or extending toward the middle.

The idea that the middle number is used puts many at ease because the outliers, in other words, the extreme data points like very high and very low sales prices, get excluded. Half of the numbers are above the median and half are below.

When its used in the context of real estate, however, the biggest concern is the mix of sales that make up the data set and how it is used. In the OCR article, the northern and southern portions of the county have a different median sales price largely to the differing mix of condos, smaller and older housing within the mix of sales.

In other words,

a lower median sales price in one neighborhood doesn’t always mean (no pun intended) that the value of a specific house is worth less than the value of a similar house in another neighborhood.

I often see median sales price defined (such as the OCR article) within the context of the article yet average sales price seldom is. It seems a bit ironic that in light of the outpouring of statistics on the housing market and the fact that median sales price dominates statistics in the housing sector, many still don’t understand it. Maybe its not a great indicator after all.

For the next housing boom, since many of us are confused, lets use the statistic: [mode]( Some people are able to [find their perfect number [Seth Godin]](, so finding a perfect statistic is not too much to ask.

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What Do Cheddar Cheese, Nonfat Dry Milk and Housing Have In Common?

March 24, 2006 | 12:05 am | |

Besides the hot futures and options vehicles nearly every American trades such as [cheddar cheese]( and [nonfat dry milk]( (just kidding), starting March 31st, investors can now trade [housing index futures]( as well.

The indexes will be called the [S&P Case-Shiller Metro Area Home Price Indices]( and use calculation techniques developed by economics professors Karl Chase and Robert Shiller, author of the influential book “Irrational Exuberance.”

The press release provides a good overview: [S&P Set to Launch Metro Area Home Price Indices](

There will be a composite index weight by market size and one for each of the following ten cities: Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York Commuter Index, San Diego, San Francisco and Washington D.C. I would venture a guess that the NY Commuter Index includes New York City, the outlying suburbs of Westchester and Fairfield Counties, Long Island and Northern New Jersey.

This index won’t render the [OFHEO Housing Price Index]( or the various [NAR indexes]( obsolete because this covers 10 metro markets rather than entire country.

However, it looks like the methodologies employed in this index are far better, with less bias than the NAR and OFHEO numbers. Here’s a [series of white papers]( on the Chicago Merc’s site that sums it up nicely as follows:

_National Association of Realtor (NAR) Indexes_
– NAR indexes quoted as median home values and do not use repeat sales methodology
– Median values do not address homeowner returns and may readily be skewed if composition of housing stock changes, e.g., new luxury subdivisions are introduced to area

_Office of Federal Housing Enterprise Oversight (OFHEO)_
– Uses repeat sales methodology
– BUT … sample confined to Fannie & Freddie conforming mortgages and, therefore, skewed to low end of housing market
– Only perhaps 1/6th of California housing sold with conforming mortgages
– Uses appraisal data to supplement sample … appraisals tend to be upwardly biased?

What does a housing index that can be traded do for us?

  • [The contracts will allow investors to go long or short on a specific housing market — that is, bet on it rising or falling in value [WSJ]](

  • Provide a reliable source of housing data for consumers and investors.

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February Existing Housing Under High Pressure (And Partly Sunny)

March 24, 2006 | 12:01 am | |

Source: NOAA 2-18-2006

The existing housing sales data was [released by the NAR today [pdf]]($FILE/EHS.pdf) and the news was better than expected. In general economists projected a decline in existing home sale volume. What they got instead was a 5.2% increase over January and a 0.3% decline over February 2005. This marks the first month over month increase after 5 months of declines.

Why the surprise? Apparently Mother Nature got her broker’s license in February because the weather co-operated and we had an unseasonably warm period, which favors the real estate market as people become anxious to end the winter blues and it is easier to view properties.

The irony here is that the only region to see a decline in activity was in the south, arguably the warmest.

Existing-home sales rose 19.2% in the Northeast and 11.1% in the Midwest — areas where weather was unseasonably warm. Sales were up 5.1% in the West and [declined 2.5% in the South [WSJ]](

However, in the true spirit of a zero-sum game there are concerns that this will take away sales over the coming month, much like the extensive summer auto rebates did to the fall sales levels.

“Spring selling season started a little earlier because of the warm weather,” Mr. Lereah said, [“but I expect the numbers to come down a bit in the next few months.” [NYT]](

[Most other publications]( bought into Lereah’s reasoning which was:

Warm weather in January prompting sales: these sales closed in February.

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Shameless Self-Promotion: Top 25 Real Estate (Related) Blogs

March 24, 2006 | 12:01 am | | Public |

[In an unscientific poll](, Realty Blogging: A Network of Blogging Evangelists Writing On Effective Real Estate Blogging ranked [Matrix]( and [Soapbox]( in the top 25 of all real estate related blogs. Matrix also won Most Interesting Real Estate Blog.

This does not really represent any real in depth surveys or analysis but its fun nonetheless.

Hey, I am the only one to have 2 blogs on the list! 😉

  • [MATRIX: Interpreting the Real Estate Economy](

  • [Soapbox: appraisal ethics, ideas and industry issues](

The winners are the main sites I read daily with a few new sites in the mix ([get the links here](

Affordable Housing Institute
Behind The Mortgage
Central VA real estate news, trends and opinions
Center for Realtor Technology
Hot Property
Housing Panic
My East Bay Agent
Northern Virgina Real Estate
Property Grunt
Rain City Guide
Real Estate Marketing Blog
Tampa Bay’s Inside Real Estate Journal
The Mortgage Reports
The Real Deal
The Real Estate Blog
Toronto at Home
Urban Digs
The Walk-Through

Ok, back to work…

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Economic Dependence On Housing: Getting It Wrong vs. Saying It Wrong

March 21, 2006 | 12:04 am | |

Its getting harder and harder to see the road

[Boston Federal Reserve President Cathy Minehan [MW]]( [said that if housing prices fall [FR]](, the impact could be more serious on the economy than generally believed.

Since this speech was held in from the of New England Realtors Conference Monday, I thought it was especially interesting that MarketWatch omitted the presence and comments of David Lereah, the Chief Economist for NAR. [His comments were, as expected, far more optimistic []](

“The solid fundamentals in our economy will keep the real estate expansion alive,” Lereah told about 250 real estate agents at the New England Realtors Conference.

Real estate expansion?

Perhaps thats why MarketWatch ommitted him from the article when covering this event. He has maintained this expansion argument since early fall. It strikes me as very self-serving. See [Fill In The Blank With The Latest Catchphrase: Housing “Expansion” [Matrix]](

With all that being said, its going to get interesting in the second half of 2006. [Consumer confidence is waning [Conference Board]](

The decline, which follows four months of gains, suggested to some analysts that [the nation’s economic growth will slow in the year’s second half [Times-Dispatch]](!business&s=1045855934855). The Conference Board said its Index of Leading Economic Indicators fell 0.2 percent in February, after a revised 0.5 percent rise in January. The January increase had initially been reported at 1.1 percent.

The irony here, is that if the economy weakens (bit not too much) in the second half of 2006 or first half of 2007, mortgage rates could trend downward and actually provide a boost to the housing market.

What name do we give that?

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Broker Ethics Will Be Tested As Market Lies

March 20, 2006 | 12:01 am |

I was watching the NCAA basketball tournament this weekend and noticed a lot of NAR commercials.

[The National Association of Realtors is rolling out an ad campaign [NAR]]( that is dedicated to their Code of Ethics, which may be tested in the coming change in market conditions. There is also a segment aimed at FSBO sellers claiming a 16% premium for homes sold by a real estate professional. I’d love to review that study but I can’t seem to locate it.

The National Association of REALTORS® Public Awareness Campaign includes a wide range of communication tools. In 2006, two new spots highlight key issues on the importance of choosing a REALTOR® when buying or selling a home. For the first time ever, a new commercial will be airing that is strictly dedicated to the REALTOR® Code of Ethics. “Someone You Can Trust” will enlighten consumers about the promise and commitment REALTORS® make, and the honesty and integrity they bring to the process. There is also a new execution aimed at unrepresented sellers. “Don’t Try This At Home” targets FSBOs with a hard-hitting message: Homes sold by a real estate professional sell on average for up to 16% more.

This comes at a critical time as NAR faces a [ligitation over representation disclosure [WP].]( Columnist Ken Harney writes a compelling article about this phenomenon and the things you need to be aware of.

According to new research by the National Association of Realtors, just 30 percent of all buyers in 2005 received disclosures about representation from their agents at their first meeting. Nearly half of all first-time buyers either received no disclosures during the sales transaction or were unaware of whether they did or did not.

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Advertise This: The Seller – Buyer Disconnect

March 17, 2006 | 1:29 am |

Ron Nixon writes about how [real estate classified advertising is moving to the web from traditional media [The Walk-Through]]( creating more problems in a situation that can already be characterized as a slow bleed. He cites how a traditional realtor is doing just that in Minnesota.

[Real estate advertising will become more critical [NYP]]( as selling times expand and sellers are forced to do more marketing. Developers and real estate brokers will likely be spending more in order to move product.

I think that it is essential for sellers of properties continue to look for effective mediums. Some work, some don’t. Traditional media can be very effective but its going to be a continual struggle to be cost efficient with more and more pressure expected on marketing budgets in the coming year. This environment will favor larger real estate brokers and developers with deeper pockets. But what about the consumer?

I constantly get feedback from real estate brokers that traditional print ads are only placed in the quantities they are placed because the sellers expect it. I can speak honestly and say I did the same thing when I sold my last house a year and a half ago. The broker ran the ads only so I felt I got something for the 5% I was paying. I knew that the market was so hot that it wasn’t necessary, but I wanted it anyway.

Perhaps, with so much on the line, it was an added comfort? With all the alternatives, what causes sellers like me to demand traditional advertising? Because its proven and effective? Or because its safe?

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From The Garden State: The January 2006 Otteau Report

March 8, 2006 | 1:03 pm |

[This monthly market report is provided by Jeffrey Otteau of the [Otteau Appraisal Group]( who also authors a series of widely followed [quarterly reports]( on the New Jersey real estate market. This information is collected from various sources including Boards of Realtors and Multiple Listing Systems in New Jersey.] I have known Jeff for many years and consider him one of the leaders of the real estate appraisal profession. He has taught me a lot about quantitative real estate market analysis over the years. -Jonathan Miller

Waiting For The Spring Market

If you’re looking for a positive sign in the New Jersey housing market you can take some comfort in knowing that increase in contract-sales activity from December to January was slightly greater than the month-to-month increase of 1 year ago. Despite relative improvement however, sales activity in January ran 12% less than January 2005 indicating that the weakness in the residential market which began in October has carried over into 2006. Further evidence that the market has softened comes from the continuing increase of unsold inventory which grew by more than 2,000 homes in January and now stands 46% higher than 1 year ago. Home buyers will clearly have much more to say in determining the selling price of a home in 2006 than was the case last year.

Despite these signs, the Spring Market will arrive, although later than we’ve grown accustomed to in recent years. Look for the Spring rally to start in late March once home buyers realize that the long predicted collapse in housing prices won’t occur and as climbing mortgage interest rates bring some urgency back into the home buying equation.

With all the increased competition on the market this year, the appearance of a home will play a greater role in determining marketing success. Items such as condition, décor, and curb appeal will take on greater significance as home buyers have a wider selection of competing homes from which to choose.

Here are the 2005 annual stats as well.

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The Housing Market Is Like the Onion…

March 6, 2006 | 12:01 am |

Its coverage and debate can bring tears to your eyes… 😉

In reference to the housing bubble (of course): [Immune-Deficient Realtor Forced To Spend Entire Life In Housing Bubble [the Onion]](

Although I routinely check out print and online articles in [the Onion]( to find hard-hitting news items. It never dawned on me to use it to research the housing market until I was reading a post in [Brokered]( and came across this this hilarious article: [As Real-Estate Agent, Area Man’s Appearance Crucial [the Onion]](

And in a rare example of a conversion in the opposite direction: [Loft Apartments Converted To Mayonnaise Factory [the Onion]](

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Real Estate Lingo, Jargon and Acronyms Are A PITA

March 3, 2006 | 12:01 am |

I believe that over time, classified advertising has caused the evolution of real estate speak. Why? If you fill up an ad with words like new kitchen, park view there is not enough space for words like [sun-drenched, fabulous and triplemint]( I think the use of acronyms is on the decline but still has a long way to go.

The brokerage community needs to communicate better with their potential clients, especially now that the market has eased and marketing and connecting with the consumer takes on more importance.

[Click to see the video clip [Matrix]](

Here’s a few points of view on real estate acronyms, lingo and jargon.

  • TCICBTTOAL – The consumer is confused by this type of abbreviated language. Its denotes a clubby, elitist and/or old-school service.

  • REAAU – Real estate acronyms are unprofessional

In other words, just spell it out.

I collected several master lists of acronyms and jargon and I find it amazing that they are even necessary to reference:

  • [A Short Guide to Real Estate Lingo and Acronyms [NAR]](

  • [Real Estate Acronyms: For Realtors, Mortgage Brokers, and Other Real Estate Professionals [Acronym-Guide]](

  • [Real Estate Acronyms and Abbreviations []](

  • [How to read a home listing [Lending Tree]](

Here R some fab favs 4 U:

Some basics
1. frplc, fplc, FP = fireplace
2. gar = garage
3. HDW, HWF, Hdwd = hardwood floors
4. hi ceils = high ceilings
5. MLS = Multiple Listing Service
6. vw, vu, vws, vus = view(s)
7. FDR = formal dining room
8. HVAC = Heating, Ventilation, and Air Conditioning

Is it really worth abbreviating?
1. expansion pot’l = expansion potential
2. grmet kit = gourmet kitchen
3. assum. fin. = assumable financing
4. nr bst schls = near the best schools
5. fab pentrm = fabulous pentroom
6. q pos= quick possession

1. Wow! = better check this one out.
2. lo dues = low dues
3. FROG = finished room over garage
4. OWC = owner will compromise

1. close to or convenient to = a lot closer than you would want
2. compact = tiny
3. mature garden = needs an industrial weeder
4. intimate = claustrophobics
5. TLC = wreck
6. interesting or unique = shag carpeting and a floor plan designed by Dr. Seuss

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Two Hands In The Cookie Jar: Banks Are Getting Closer To Entry Into The Real Estate Business

February 28, 2006 | 10:45 am | |

I wonder if the NAR, in some respects is regretting the housing boom. With all the income the industry has generated, it has also generated attention that probably isn’t beneficial to the trade group in the long run. Commissions, multiple listing service data, statistical methodology, believability as a resource, etc.

In the article [NAR: Pittsburgh Condo Deal Puts Banks into Residential Real Estate [RISMedia]]( the National Association of Realtors contends that banks are getting into real estate despite regulations that prohibit this activity.

In a letter delivered last week to the chief counsel of the Office of the Comptroller of the Currency, the president of the National Association of Realtors responded to the recent defense by the OCC of its approvals permitting national banks to engage in new real estate and commercial activities.

[They are also fighting Wal-Mart Bank’s application Because It Mixes Banking and Commerce [NAR].]( [They] will actively oppose the application for federal deposit insurance by Wal-Mart Bank, a proposed Industrial Loan Company (ILC) headquartered in Salt Lake City, and requested the opportunity to testify at upcoming hearings. The Federal Deposit Insurance Corp. has scheduled public hearings in April in the Washington, D.C., area, and the Kansas City, Mo., metro area on Wal-Mart Bank’s application.

Since 2000, Realtors have opposed a pending regulation by the Federal Reserve and Treasury that would allow national banks to broker real estate and perform property management. Since 2002, Congress has blocked the regulation. It seems to be a matter of time before banks will have this option since every year this debate comes before Congress.

The NAR contends that by banks entering the real estate business, the safety and soundness of the banking system is at risk since it is a speculative investment. The idea posed is the the concentration of assets would be higher making the failure of one bank more critical to the financial system. [NAR contends that the top 5 banks hold 45% of industry assets [Mortgage News Daily]]( and has a series of arguements why banks are a higher risk.

_Number of firms:_
Real estate – 98,000 to over 200,000 (depending on who is counting)
Banks – 8,000 to 10,000.

_Barriers to Entry:_
Real estate – usually less than $1,000 and a few weeks of studying time to obtain a license and enter the field;
Banking – large capital requirement.

_Taxpayer Risk and Historic Experience of Government Bailout:_
Real estate – none;
Banking – yes (historic evidence, S&L failures and RTC bailout.)

_Influence of Foreign Governments:_
Real estate – no;
Banking – large multinational corporations are subject to foreign government regulation.

_Consumer Data on Buying Habits and Possibility of Price Discrimination:_
Real estate – none;
Banking, -vast, often based on data mining of credit card purchase information.

_Cooperation with Competitors in the Sale of Products:_
Real Estate – yes, through MLS;
Banking – no.

_Degree of Regulation:_
Real Estate – minimal;
Banking – heavy.

_Social Promotion of Entrepreneurship, Women and Minorities, and Small Business:_
Real Estate – yes in every category;
Banking – yes in every category bus assessment is limited to owners of community banks.

Here’s a blog post on this issue from a banking perspective: [ALERT: NAR’s New Threat from Mega-Banks – There they go again? There who goes again? [Inman]]( All I read into this most recent industry warning by the NAR is the voice of a threatened professional association that insists upon denying the consumer the choice of any other ownership structure for real estate brokerage other than the status quo – Realtor-centric. Drill down and you will find a true fear that if banks were to be in the real estate brokerage business about the last professional association they would insist their operators belong to would be the NAR.

This is all very interesting and well-laid out on both sides except:

==> ==> ==> ==> ==> ==> ==> ==> ==> ==> ==> ==>
NAR says that banks are not a good idea because they place a higher risk on the banking system by being more speculative.

< == <== <== <== <== <== <== <== <== <== <== <==
Banks (more than just the included post on Inman) say that NAR has a monopoly on home sales and keeping banks out of the process only extends broker control further.

Confused? Be glad you are not a regulator. Its tough to see through the spin. At the end of all this, I think the banking lobby will win out over the broker lobby. They seem to have the OCC and momentum on their side.

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Judging A Book By Its Cover: David Lereah Changes Titles

February 23, 2006 | 12:06 am | Public |

According to [Bubblemeter](, David Lereah, the Chief Economist for the National Association of Realtors (NAR) is changing the title of his real estate book (as seen on Amazon) from:

[Are You Missing the Real Estate Boom?]( to _[Why the Real Estate Boom Will Not Bust.](

Notice how the word BOOM is the same size and the graphics are identical? The Walk-through’s [Old Fish In A New Wrapper]( says the content is the same – Damon Darlin’s post provided a pretty good chuckle.

I had the chance to meet David Lereah in the green room before the taping of [CNBC’s Town Hall: Real Estate Boom]( last year. It was me, Suze Orman, Robert Shiller and David Lereah. Surreal to say the least. All very nice I might add. I only had a small appearance – these people were the main characters in this production.

Mr. Lereah has provided a tremendous amount of fodder for the blogosphere, myself included. Up until now, its been the use of language which would seem to be misleading. Now its book titles. This sort of stuff might have worked 5 years ago but not today. People have access to information almost immediately.

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