Matrix Blog

Real estate technology has come of age, aided by the housing boom combined the American obsession with real estate ans technology. The ability to find and match properties with consumers, to research and investigate properties are among the most logical extensions of new web technologies.

New web sites such as Trulia and Zillow are launched, have deep pockets, yet remain in beta, probably to difuse criticism of the vast promises they seem to be making to the consumer (and may fullfill those promises within a few years if they can last that long). Zillow provides property values and Trulia provides listings with very easy to follow interfaces.

Real estate blogs have evolved into the goto daily resources with a slew of ever changing real estate related topics. The king of real estate blogs, [Curbed]((http://www.curbed.com) who has been around just about the longest, is going national with localized market coverage areas. Curbed started out in New York, and has expanded to Los Angeles with about a half dozen other major markets coming down the pike. Big Media has begun to join the blog fray but is at a disadvantage since they cannot have the same edge to them that independent bloggers have. The New York Times blog The Walk-Through and Businessweek’s Hot Properties are among the best of them.

Craigslist, with its primitive interface, has proved that you don’t have to be pretty to be effective, has cost classified advertisers millions of dollars and continues to grow.

Earlier forays into online real estate services such as Realtor.com and Realestate.com remain oldschool and seem stuck in cluttered screen cram-down that overwhelms consumers with irrelevant information.

This whole technology movement is exciting and the possibilities are endless, as soon as we get out of Beta.

Tags: Zillow, Realtor.com, NAR, National Association of Realtors

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In Berson’s Weekly Commentary Total home sales for 2005: another record year [Fannie Mae]. 2005 was all about breaking records when looking at the annual numbers.

According to the National Association of Realtors, total existing home sales were up by 4.2 percent to 7.07 million units. Condo and co-op sales were up by 9.3 percent, while single-family sales were up by 3.6 percent. The Census Bureau reported that new home sales were up by 6.6 percent to 1.28 million units.

Fannie Mae Projects:
* Total home sales will decline from last year’s record, falling by around 8.0 percent to 7.71 million units — mostly as investor and second home demand decline.
* December marked the third consecutive monthly decline in total existing home sales, so the trend may already be beginning.

Even with the projected decrease in total home sales, 2006 should still be the third-strongest year ever. You have to remember that Fannie Mae is biased towards a robust housing market like NAR is, but Berson makes a good point.

Pessimists will look to the last quarter of 2005 and say that the market is weakening and use the lower numbers that we may see in 2006, in terms of prices and number of sales compared to 2005 as evidence of a declining market. I agree.

Optimists will look at the annual figures of 2005 as a record and say that any comparison to a record year will show a decline and misrepresents the current market. I agree.

I think its a little of both. The record year in 2005 will skew any meaningful comparisons to the current year as excessively negative. However, recent trends, namely the second half of 2005 showed a downshift in the real estate market and that cannot be ignored.

In other words, its been good, it might be good, but not as good as before.

Tags: Commerce Dept, Census, NAR, National Association of Realtors

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The housing market is now being characterized as a super tanker or large ship.

I was humored by the Lereah changes metaphor – Real estate is now a ship, not a balloon [Northern NJ RE Bubble Blog] post which takes a quote from the NAR Chief Economist [Reuters] who says:

Changes in the overall direction of the housing market are akin to a large ship making course corrections — it takes some time for the driving factors to materialize as a change in the sales level.

This comes after his recent pronouncement that we are in a housing expansion [Matrix]. However, that description did not gain traction, and in fact did more damage to NAR credibility trying to be the lighthouse in the dark and stormy night [Matrix]. [Sorry about that]

Actually I am not sure that the ship analogy is accurate. I don’t think that housing markets always take long periods of time to change as the ship comparison would suggest. However, I think it does take a long time for market participants to accept change, especially when the market has been largely unchanged for several years.

Tags: Pending Home Sale Index, PHSI, NAR, National Association of Realtors

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Residential real estate is all about homes and housing, but the terms house and home are often used interchangeably and they can mean or imply different things.

In the copywriting article The seven irrefutable laws of sizzling sales copy [SiteTube] a number of examples are provided:

“Cost” versus “investment;”
“Beautiful teeth” versus “beautiful smiles;”
“Skinny” versus “slim” or “slender;”
“Products” or “services” versus “solutions;”
“Cost-effective” versus “return on investment;”
And “house” versus “home.”

Again, words are not messages in themselves. They have different meanings to each of us and can be interpreted differently. While many words can be used to communicate a single message, the words you choose can dramatically alter its emotional impact. In copywriting, it is not so much the message that’s important but the meaning behind it that is.

I used a definition of each to illustrate the subtle difference between them. Their use is not mutually exclusive but its important to be aware of their differences.

• Home – A place where one lives; a residence. (Interpretation: There is more of an emotional component to this word and it is more often used when incorporated into selling a property.)

• House – A structure serving as a dwelling for one or more persons, especially for a family. (Interpretation: This is a more clinical description of a physical unit that provides shelter.)

Ever wonder why the NAR uses the word “home” in all their stats like Existing Home Sales and the Census Bureau uses “house” in their stats like the New Residential Sales Index (pdf) does?

Tags: Commerce Dept, Census, NAR, National Association of Realtors

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I think one of the biggest challenges NAR has faced in recent years has been its credibility with the statistics that they disseminate to the public, (which is perhaps even more critical as the market goes through whatever change you wish to label this). The NAR is one of the few organizations able to provide national housing statistics on a regular basis to the public. Over the years we have relied on this near monopoly of information to gain insight as to the direction of the real estate market. Of course we recognize that this is a trade group and its purpose is to look out for its membership. However, its not the statistics that are creating the gap, its the hard sell that goes along with it. Although one Realtor group has stopped sharing data, possibly due to the negative results it may show [Housing Bubble 2].

After seemingly being on cruise control for the past several years, the real estate market has showed signs of change. A credibility gap that has formed from the rising frequency of spin used by NAR in order to keep the public from a media-induced panic over housing. No one complained when the market was going up and records were broken nearly ever month and the NAR just piled on the euphoria. Now that the market has weakened, there is polarization between what the NAR says and what the public believes, despite their in-house experts. The proliferation of “bubble blogs” is a glaring sign of the cynicism of information that has been released to the public.

I pointed out the new word NAR was using to describe the housing market, “post-boom,” yet “anti-bubble” termed housing expansion in Fill In The Blank With The Latest Catchphrase: Housing “Expansion” [Matrix]. Did anyone at NAR actually look up the word expansion? The housing market is clearly not expanding.

Now last week’s existing home sales report predicts [pdf] that prices will increase 5% in 2006. Anyone care to take bets on that? We have a sputtering economy as evidenced by the latest GDP figures [Macroblog] prompting the Fed to telegraph it may ease its measured growth policy of raising short term rates, we have mortgage rates at higher levels (albeit not much) than they were a year ago, loan origination is projected to drop, we have speculators leaving the market and we have the highest increase in inventory in 20 years.

The Walkthrough blog just did a really cool analysis on the accuracy of NAR housing market predictions [Walkthrough]. The accuracy of the predictions of the number of existing home sales compared reality was basically 100%…wrong. Not just wrong. 4% to 14% each year plus 9% in the wrong direction. Throwing darts could probably be more accurate.

The NAR reached a new low last week using phrases like “Once again, the Chicken Littles came out of the henhouse shouting the “sky is falling” in their latest research update. [NAR]. How does that headline enhance their credibility as the authority on real estate with the public, besides their membership?

I would suggest that NAR continues to pump out their monthly housing stats with full disclosure on how they arrived at the figures (I think their info is generally pretty good) but back away from the need to hard sell that things are good. The facts will speak from themselves, good or bad, but taunting pessimists creates more distrust by the public.

Lose the hard sell.

Tags: NAR, National Association of Realtors

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The Commerce Department released their new home sale data on Friday and it showed an unexpected increase of 2.9% [TheStreet.com]. This was unexpected because December existing home sales information released by the NAR the day before had shown a 5.7% decline over the prior month.

However, existing home sales data is 45-60 days behind the market since it is based on closed sales data and new home data is based on units currently under contract. The December existing market data was influenced by rising mortgage rates, the effects of the two hurricanes, rising gasoline prices among other negative economic conditions back in October, and is not necessarily reflective of the current market.

It seems like every month these two statistical releases contradict each other, but perhaps that largley because they are based on different points in time and the market is in transition.

NAR Existing Home Sales [pdf]
Commerce Department New Home Sales [pdf]

Tags: Hurricane, Commerce Dept, Census, NAR, National Association of Realtors

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On the light and subjective side, here’s the real estate portion of Business 2.0’s 101 dumbest moments in business: Real estate. The year in shenanigans, skulduggery, and just plain stupidity in the world of housing [CNN/Money].

Of these real estate items, I think the most notable are:

Most Ironic
* Vail Board of Realtors can’t afford to be located in Vail: Unable to buy office space in a community where the average home price recently headed north of $4 million, the Aspen Board of Realtors heads north too — to Basalt, Colo., a town of 3,000 residents 20 miles away.

No Reason To Be On The List
* In November, New York developers William and Arthur Zeckendorf agree to pay $37 million for the air rights above a church and an 88-year-old private club. The Zeckendorfs’ purchase, part of a plan to build a 35-story apartment building that would tower over its neighbors on East 60th Street, comes out to a whopping $430 per square foot — two to four times the going rate for the skies above Manhattan. This seemed to shock only people outside of New York.

Most Amazing
* In May an Experian-Gallup national survey finds that 65 percent of Americans haven’t heard anything about a possible “housing bubble.” Another 12 percent have heard “only a little.” Indeed, 70 percent expect home prices to keep rising, while only 5 percent think they’ll slip. However, when the facets of a housing bubble are described to them, about 40 percent go on to say that the scenario is likely to occur in their area in the next three years.

Q: Why won’t we see a “List Of Smartest Moments In Real Estate?”

A: Because NO ONE is interested in seeing someone else succeed (aka boring) OR we simply enjoy seeing people screw up.

Tags: NAR, National Association of Realtors

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In one of the coolest applications of Google Maps that should make realtors and landlords stop and consider: product placement on roof tops [MIT Advertising Lab]. Retailer Target already gets the concept.

On the opposite end of the specrum and all across the globe, governments are already concerned that sensitive sites are now visible to the public, such as the Kremlin, CIA Headquarters, etc.

Tags: NAR, National Association of Realtors

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Like many others, I am guilty of using phrases like “the market is returning to more normal levels, to historic norms, etc. After reading this press release from the NAR, I promise to cut back on the use of “normal.”

Apparently the NAR and many others use the same language as I did. The recent press release for NAR Housing Market to “Normalize” in 2006 provides some standard market descriptions.

WASHINGTON (January 10, 2006) – The key word for the housing market in 2006 is balance, with a return to a more normal rate of price growth, according to the National Association of Realtors®.

David Lereah, NAR’s chief economist, said current trends in the housing sector are healthy. “We don’t need to break a record every year for the housing market to be good – in fact, cooling sales are necessary for the long-term health of this vital sector,” Lereah said. “A modest slowdown in home sales, coupled with improvements in housing inventory, means the market is in the process of normalization. That will help to bring balance between home buyers and sellers, yet sales will remain historically strong.”

But lately I have been thinking…what is normal, let alone historically strong?

I am now of the opinion that “normal” does not exist. Its obsolete, kaput. Lately normal seems more like double digit appreciation.

We are leaving normal right now.

Here are some typical uses of “normalized” [Google]:

Hovnanian Sees ‘Normalized’ Market [The Street]
Housing outlook remains healthy: Analysts say market to normalize in 2006 [IB Las Vegas]
Economic Growth To Slow in Region [Washington Post]

I think what the users of the term really mean is to reassure buyers that the market is still favorable to get into. Its hard to articulate this into one one sentence so the connotation of normal implies balance, less volatility and less risk than seen in a prior period.

Tags: David Lereah, NAR, National Association of Realtors

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In the laws of supply and demand, assuming demand as a constant, restriction in housing supply causes housing prices to rise.

This is nothing new but the irony is not lost on some. Municipalities grapple with providing affordable housing yet unintentially create a restrictive development environment preventing anything but luxury housing from being cost-effective to build. This pattern tends to be more exagerated in high density metropolitan areas.

A “two-year study, released last week by the Pioneer Institute for Public Policy Research and the Rappaport Institute [Lowell Sun], collected zoning data on 187 communities within 50 miles of Boston. The data does not include Boston or Cape Cod.

Pro-development groups including Homebuilders Association of Massachusetts, the Massachusetts Association of Realtors and the Massachusetts Lumber Retailers Association paid for the survey, but the groups did not pay Glaeser for his analysis or report.”

Download the report [Pioneer Institute]

Edward Glaeser, lead author of the study, said over-regulation by cities and towns are driving up the cost of housing in Massachusetts, driving away residents and putting pressure on businesses to keep highly-skilled workers.

_Glaeser is a Harvard academic who has written other well-read housing papers such as:_

Why is Manhattan So Expensive? Regulation and the Rise in Housing Prices [pdf]
Why Have Housing Prices Gone Up? [pdf]
Urban Growth and Housing Supply [pdf]

Tags: NAR, National Association of Realtors

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The article Owners’ Web Site Gives Realtors Run for Money [NYT] talks about for sale by owner or FSBO web sites [Google] but specifically FsboMadison.com.

This quirky site has been surprisingly successful, but don’t be misled. Apparently they are not doing it for the money…they get about $150 per listing. Their site sees more web traffic than the local MLS and have earned about $300,000 since the beginning. If they collected a full commission, they would have amassed $17.3M.

Madison is home to the University of Wisconsin and a city where the percentage of residents who graduated from college is twice the national level. It is also a hotbed of antibusiness sentiment, which turns out to be the perfect place for a free- market real estate revolution. Bucking the system is a civic pastime here.

Interactive Map of Sold Homes by FsboMadison.com, created by the Center for Real Estate, University of Wisconsin-Madison.

And Now…Discount Real Estate Brokers
I’d say that discount real estate brokers, like discount stock brokers, are here to stay and serve a niche. I am doubtful that full service brokers have much to worry about because they service a different market altogether. As we enter a more challenging real estate environment, I suspect that order takers, like Foxtons will see their growth cool more sharply than full service companies.

In fact, brokers that will do well in the changing environment will be those that actively market and sell the properties that they represent. There won’t be a lot of room left for order takers. Foxton (formerly YHD) changed their commission structure from 2% to 3%. Perhaps the services demanded from clients could not be provided at 2%.

UPDATE: Another variation on the discount brokerage theme is the flat fee commission with a la carte service. Once such company is (can we come up with a better name?) Help-U-Sell [North County Times].

Webmaster’s note: I remember visiting the Madison campus (from a rival school), to go to college football games, dining on Bucky Badger Dip at Jocko’s Rocketship before kickoff…but I digress.

Tags: NAR, National Association of Realtors

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For all the talk about a housing bubble this past summer, blog chatter continues to decline to the point it is approaching a soft landing.

Big Media’s use of “bubble speak” appears to be declining even faster and is switching to the use of “soft landing”, especially as the Fed has signalled it may be nearing its measured pace of federal funds increases. Wondering if we will see “soft landing” named blogs in response to this new change similar to the proliferation of “bubble blogs” last year.

Waiting for a Soft Landing [Washington Post]
…All this good news is, of course, bad for the news business. The sunny predictions suggest two familiar economic catchphrases: “soft landing” and “Goldilocks economy.” The Federal Reserve stops raising interest rates before it causes a recession; that’s the soft landing. Economic growth is then fast enough to keep unemployment low and not so fast as to trigger higher inflation; that’s the Goldilocks economy, not too hot or too cold….

A Soft Landing in the New Year [Barron’s]
… the economy was entering the early stage of a necessary adjustment process. Housing market indicators have shifted from being uniformly strong to showing a more mixed picture. This confirms that the housing sector has passed its peak, but leaves open the question of how much of a slowdown is likely and how it will impact consumer spending….

2006 economy looks solid [USA Today]
… it would take several major shocks, not just one, to send the global economy into a recession. For his part, he sees a soft landing for the housing market, rather than a plunge in home prices…

Real estate market is like a ‘balloon,’ says economist [Inman]
…The forecast, “Housing Market: A Slowdown, Not a Meltdown,” which is based on data from the California Association of Realtors trade group and the Office of Federal Housing Enterprise Oversight, concludes that “the housing market is headed for a soft landing.”…

Home sales’ fall seen as sign of soft landing [AP]
…either way, analysts read two economic reports yesterday as indicating a soft landing for the housing sector, which has been flying high in some parts of the country, and a smoother ride for the labor market…

Tags: NAR, National Association of Realtors

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