April 25, 2008
As our resident expert, Kevin Boer noted in his April 1 posting, the housing market officially hit bottom a couple of weeks ago. For those of you who were skeptical of his information given the April 1 posting date, and Kevin’s well known reputation for satire and irony, the California Association of Realtors published some new market data yesterday (April 24) showing how real estate really is local, and that the local real estate market in Silicon Valley is humming along nicely, thank you:
In case you’ve been wondering why high-end real estate markets continue to perform relatively well: One out of every 10,000 American families has an annual income greater than $10.7 million, according to two university professors who study the super-rich. By their tally, there are some 15,000 Americans who fit into that category. These individuals also are getting an increasing share of the economic bounty: In 2006, the super-rich possessed 3.89 percent of total income, up from .87 percent in 1980 and the highest level since 1916.
Strong employment and wage growth are two factors that have helped the San Francisco Bay Area stave off the kind of home sales and price declines experienced in the inland regions of California. For example, Santa Clara County residents earn nearly double the nation’s average weekly wage and surpassed Manhattan as the county whose residents take home the largest paycheck, according to the U.S. Bureau of Labor Statistics. Santa Clarans take home an average of $1,585 per week, slightly more than Manhattanites, who earn an average of $1,544 a week. San Mateo County ranks fifth in the nation at $1,322, while San Francisco is eighth at $1,286. Nationally, the average is $818. San Francisco ranked tenth in new-job generation, adding 18,000 jobs for the twelve months ending Sept. 30, 2007.
Despite the above, some worry that California’s technology sector may be in for another “dot bomb.” But experts say technology and Internet companies are better prepared to weather the storm this time around. Their reasoning? Many Web 2.0 companies learned a lesson from their free-spending predecessors and have discovered ways to operate with fewer employees and at lower costs. That appeals to venture capitalists, who have tightened their criteria but continue to seek companies with strong revenue models.
Lately, I have been describing the market as “upside down”, where I am seeing unusually strong sales activity in the over $3 million market, while under $1 million is about the same as last year, or a little off depending on the neighborhood. What is interesting, is the $1 million to $3 million market, what I call “tweeners”, because these homes are in-between the entry-level and high-end.
Gross simplification warning: Buyers of “tweener” homes have significant amounts of cash or equity to put down, but still need a mortgage, and often a significant one. As banks and other mortgage providers have tightened their lending guidelines from recent years, it has become harder to get a $1.5 - $2 million mortgage, and those have become more expensive. As a result, more people aren’t upgrading, or they are getting priced down from say, $2.5 million to $2 million. Thus reducing demand relative to supply and creating a soft spot in the market.
In my experience, in the $3 million and over market, Buyers have more cash, Euros, Rubles, Yuan, Dinars, stock, gold, trust money, etc. to use to purchase their new “executive home”, so they are less concerned or affected by interest rates and loan qualification hurdles.
Let’s hope that VC money mentioned in the article above keeps flowing so we can keep paying for our million dollar tract homes and $5 a gallon (you know it’s coming!) gas.
I know you will have an opinion or comment, share it here.
Thanks for reading.
Tags: 2008 real estate market, housing market, palo alto economy, palo alto real estate market, palo alto realtor, silicon valley economy, silicon valley real estate
April 14, 2008
Some of you will remember my post on the lawsuit in Southern California where the buyers of a home were suing their agent because they felt they overpaid, and the agent had acted to hide that information from them (Refresher available here).
This case had lawyers salivating, and brokers trembling, as it potentially could provide precedent and open the door to lawsuits by home buyers who purchased homes during the recent run-up in housing prices, and are now seeing their local markets stagnate or fall.
According to the following article released by the California Association of Realtors, the jury on the case found in favor of the real estate agent.
There was no mention of the issues that I flagged in my earlier post, namely that the agent didn’t share the appraisal or list of comparable properties with the client, or that he encouraged them to get their home loan through him and use his appraiser.
I’m sure that there are many real estate agents out there who also are great mortgage brokers. I’m not one of them. Frankly, I’m not smart enough to keep up with all the issues in real estate law and the local market, plus all the ongoing changes in the lending market.
Thanks for reading . . .
REALTOR® WINS HIGH PROFILE JURY TRIAL
After only two hours of deliberation yesterday, the jury unanimously vindicated a buyer’s agent accused by his clients of failing to disclose that two other homes in the neighborhood sold for less than what they paid. As a trial court case, this decision in Ummel v. Little is binding on the parties to the case, but has no binding authority for other cases. Moreover, the buyers may file an appeal.
This case involved a couple who bought a home in a coastal Carlsbad community in 2005 for $1.2 million. They regretted their purchase when they discovered that two other homes sold for about $150,000 less than theirs. They sued their real estate agent for negligent misrepresentation and breach of fiduciary duty. Their lawsuit grabbed national attention, given the recent downturn in the real estate market.
At the trial, the agent’s attorney argued that there were valid reasons these two other properties sold for less. One home, for example, had a lap pool which was unappealing to many buyers, and the sellers wanted to rent back the home for two years.
Tags: agent sued over negligence, carlsbad realtor lawsuit, realtor lawsuit
April 8, 2008
With surprisingly little fanfare, Redfin, that pesky little Seattle brokerage the real estate industry loves to hate, announced yesterday their “Redfin Select” program, which looks suspiciously more and more like … a traditional brokerage offering.
Redfin’s initial business model, which made great sense in the VC’s conference rooms, was to outsource a big chunk of the buying process to its clients in exchange for a big chunk of the buy-side commissions. For better or for worse, however, that model has continued to run dab-smack into the middle of the reality of real estate: the listing agent, though representing the seller, is not usually responsible for showing the property to every interested buyer. That service is usually provided by the agent representing the buyer. The problem? In order to make offers on a property, Redfin’s clients have to actually, well, see it. If they don’t manage to hustle there during an open house, then they’re SOL — unless a Realtor-magic-key-toting Redfin agent comes by to open it. And just like that, poof! goes half the business model.
Fast forward to today. If you’re a Redfin client and you want a regular set of property showings, just give up a portion of the commission that was coming due to you and have Redfin show you around, just like a traditional broker would do. Instead of getting 66% of the commission back, you get 50% back.
Possible explanations come from two different fronts:
First is my “Innovator’s Dilemma” proposition: Redfin as a classic disruptive company, will first figure out how to be profitable serving the lower end of the market, the price-conscious clients that traditional brokers don’t mind losing. Then it will move upmarket, charge more, and offer more service — ie. become more like a traditional brokerage, but with fatter margins.
At first glance, Redfin’s move seems to fit this pattern. However. by Redfin’s own admission, they’re not growing as quickly as they would like, their business model is not as scalable as they had hoped, and they certainly are too young of a company to have taken significant market share yet.
So perhaps the better explanation comes from Mike Simonsen over at Altos Research. Mike suggests it’s a simple pragmatic response to the harsh realities of the market place and their VC backers: they need to become a $100M company as quickly as possible, and doing it at $10000 rather than $5000 per transaction will bring that about more quickly.
- The Bloodhound notes that the rules around home showing seem strict and, well, a bit school-marm-ish.
- Greg Tracy suggests Redfin is becoming what they hate: a traditional brokerage.
- Jon Washburn notes the progression leading to this model and wonders if Redfin may end up becoming simply a lean-and-mean traditional brokerage.
Tags: Business models, Consumer, Glenn Kelman, Industry, Redfin, The Innovator's Dilemma
April 8, 2008
I have to honest. I have been reading Kevin’s posts on social media and blogging, I am itching to write one on the topic myself since internet & blogging has done tremendous for my business. So here it is! (We will continue the regular programming on staging for next post I promise.)
I have been toying with Facebook a lot lately because I am intrigued of how this thing can work for my business (since I am spending a ridiculous amount of time on it) and how fun it actually can be even for work. Facebook has exploded on the business sphere lately largely because of its user-friendliness, much more professional look than myspace, and easy to network quickly with a string of people in a more relaxed atmosphere (they now even added a People You May Know section, which is frankly scary how they know I know these people).
At first I only used Facebook for contacting old college classmates & long lost friends,
secretly comparing looking where they are working now how much weight they had gained, but lately I am finding a lot more business applications being developed and used, as well as an increased number of contacts in both staging and realtor fields. (Finally, no more of those invites of “Are You a Vampire?” but “Have my online business card.”)
I also read Guy Kawasaki’s 10 Things You Don’t Know About Facebook: “the fastest growing demographic on Facebook is those ages twenty-five and older. [per Facebook's own stats] Facebook is quickly becoming not just place for friends to meet friends, but for business users, baby-boomers…”
Which prompted me to establish a “store front” (in Facebook lingo: Page) for my staging business. I listed my mission statement, basic info, even added blog syndications and apps such as charity that I personally support.
It’s an interesting experiment so far. According to Facebook’s stats, (or “Insights” per Facebook lingo) I have received 88 hits so far in the last 2 days. Although it is unclear where these traffic are coming from…. While my page is not like a major consumer product’s page, such as Dr. Pepper or Guiness where they have legion of fans who have the kind of viral power that can multiply consumer bases quickly and sell more products through their Facebook pages, I am interested to see how small businesses or professionals can use this to help them increase exposure.
Moreover, more and more people every day are joining for the sole purposes of prospecting and expanding networks. Similarly to LinkedIn, you can seek introductions via Facebook by simply “poking” someone to view their profiles, nudging them to respond and even visually displayed how many friends you have in common.
Similarly to twitter, you can update your status quickly via your mobiles or on the internet to let your sphere of influence, as well as millions of other users to know what you are doing.
I also have to say, the SEO on the Facebook page is SCARY. I only made it couple days ago, it already popped up on my google alert. I am experimenting and I plugged in “Burlingame” just now, to test and see if it will pop up on future searches.
What do you think? Any success stories so far? What do you use Facebook for? Be part of my social experiment by becoming a fan of my page at http://tinyurl.com/3jryvf. Or simply add me as your facebook friend
Tags: Blogging, Facebook, fan, guy kawasaki, linkedin, page, social media, social networking, twitter
April 6, 2008
There is a cost to this:
Two weeks ago in North Lauderdale, Fla., funeral services were held for Russell Shaw, a prolific blogger on technology subjects who died at 60 of a heart attack. In December, another tech blogger, Marc Orchant, died at 50 of a massive coronary. A third, Om Malik, 41, survived a heart attack in December.
The article admits, of course, that “the premature demise of two people obviously does not qualify as an epidemic.”
My thoughts? There’s more than enough stress in my life already, thank you very much, so I try to make sure blogging doesn’t add to this. I’ve gone several weeks without posting when things just get too busy. I find blogging in modest doses — say, 30 minutes per day — to be therapeutic. I like writing, I like reading, I like the camaraderies and interaction.
So here then is my modest blogger manifesto, part serious, part humorous. Tell me what you think! Any more we should add to the list?
- From Saturday at 6pm until Monday morning, no blogging. [Present post excluded.] There’s really nothing so important that it can’t wait till then. [Again, excepting this article.]
- No vendor pre-briefs less than 48 hours before the news embargo lifts. I need time to digest the information and come up with a cogent response.
- Once a month, I will prune my feed reader. If I haven’t read a blog in a month, off it goes.
- Many of us in real estate tend to be perfectionists, and our motto traditionally is, “Only perfect is good enough.” Let’s turn that on its head and say: “Good enough is perfect.”
- If it’s starting to be a drag, then it’s time for a break. A one week moratorium.
- I will not take it personally when somebody in real estate says they’ve never read my blog, or they don’t know what a blog is.
- I will not nickname any of my kids “Zillow” or “Trulia” or “Redfin.”
- I will not obsessively update Wordpress to the latest platform. Two upgrades per year are enough.
- I will not tatoo my subscriber stats on my forehead.
- Above all, I promise not to take myself, my blogging, or my blog more seriously that I need to.
Add your suggestions below…
Tags: Blogging, Industry
April 4, 2008
Yes, the market is bad in many parts of the country — even many parts of the Bay Area. But real estate, as the adage goes, is local, local, local — and in many of the good school district parts of the Bay, prices continue to go up and multiple offers are back in vogue. Case in point — in the last week, there were at least two properties that sold with multiple offers — with “multiple” in this case meaning “more than 10.”
So, if you’re a buyer competing with other buyers, what should you do? Our advice: Pull out all the stops. Here are some time-tested suggestions*:
- Bring a large manila envelope stuffed with 100 dollar bills to the offer presentation. Discreetly slip it to the listing agent.
- Rename your first born after the owner of the property. Bring said child to offer presentation, clearly labeled “I named him/her after you!”
- Offer a 15-year free rent-back to the sellers.
- Bring along your dream therapist. Have him/her describe your last session in which you clearly saw yourself buying, owning, and living in the home.
- Lobby congress to make it illegal to not accept your offer.
- Stalk the seller for a few days ahead of the offer presentation. Hold up signs saying, “Sell me your home! Please!”
- Add an extra zero to the price you’re offering.
- Do a “presumptive close.” The day of the offer presentation, show up with moving trucks, decorators, painters, and other assorted workmen. Tell the current home owners you’re about to move in — didn’t they get the memo?
- Bring along your burly cousin to the offering. Have him sit menacingly in the corner, swinging a baseball bat. Make oblique comments about “keeping him happy” and “how disappointed he’ll be if I don’t win the house.”
- Put up a sign outside the offer presentation office saying, “The home has already sold! Nah nah nah nah nah nah!”
* These suggestions are intended to be humorous. Pleasure consult with your attorney and/or Realtor before following them.
Tags: Humor, Multiple offers
Is Social Media A Waste Of Time? Texas Realtor Magazine: Yes. Sherry Chris, Better Homes And Gardens: No.
April 3, 2008
Michael Parker of Blackwater Consulting Group, writing in the Texas Realtor Magazine, says “Yes”:
I respectfully call social networking and Web 2.0 great hype with great future promise. I just don’t think they help sell houses today in any proportion to the emphasis they are receiving.
[Sidenote: What's Michael doing writing an article about social media in a Realtor magazine? Shouldn't he be protecting diplomats in Iraq? Oh, wait a minute -- that's the other Blackwater.]
Michael raises some very interesting points, definitely worth addressing in a future post.
Friend and business colleague Pat “Transparent Real Estate” Kitano and I had the privilege of meeting Sherry and Camilla — BHG’s new head of marketing — over breakfast recently. Sherry’s team has the exciting task of building a brand new nationwide real estate franchise from scratch, but with the incredible advantage of using a name with incredible brand equity. They’re pulling out all the stops in their pre-launch efforts, including some very interesting online social media initiatives, with participation from the whole executive team.
Taking a page from Rudy and Joe, Sherry always has a video camera with her, and she made the mistake of interviewing Pat and me. Whether it was the content or the participants that caused this, I’m not sure — but the hotel did give her grief about filming without permission.
* Better Homes and Gardens Real Estate is a client of Domus Consulting, a sister company of 3 Oceans Real Estate.
Tags: Better Homes and Gardens Real Estate, Domus Consulting, Industry, Sherry Chris
April 2, 2008
Zillow, the perennial surprise-maker of online real estate, has just launched its long-anticipated foray into the mortgage world with a “Mortgage Marketplace.” The company’s original online real estate product — the controversial “Zestimate” — is a computer algorithm estimating the value of homes. The logical mechanism behind a “Mortgage Marketplace” would thus also be a computer algorithm — say, a mortgage pricing engine that spits out rates from lenders based on the borrower’s situation.
In a delicious twist of irony, however, the mechanical Turk behind this new product is … a person. As in, homo sapien. Specifically, a mortgage professional.
In a pre-launch briefing with “What would David Gibbons do” David Gibbons, he described the all-too-typical grief that a potential borrower goes through with many lenders, whether online or offline: bait-and-switch salesmanship, hidden fees, inflated rates, and perhaps most egregiously, a complete lack of anonymity.
Zillow’s solution? Let consumers ask for mortgage quotes without revealing their name. Let mortgage brokers respond to these requests. Let consumers sift through the responses and choose the broker they want to work with; then and only then does the buyer have to reveal his or her name.
What about the whole bait-and-switch thing? Zillow deals with that in a very Web 2.0 way — consumer reviews of mortgage broker performance. Plus, the participating mortgage brokers are vetted — at least minimally — to confirm that they are, in fact, licensed mortgage brokers.
And here’s something sure to make at least some mortgage brokers sweat a bit: the competing mortgage offers are visible not just to the consumer who requested them…but also to the other mortgage brokers who submitted offers!
The cost to mortgage brokers? Zero. In David’s words, Zillow remains committed to being an advertising platform. The data they can now gather about consumers — what their home is worth, other homes they’re interested in, and now their income and credit score — makes it possible to target-advertise with nearly pinpoint precision. David assures us this is not being done in a “Big Brother” kind of way, but if I understand him correctly it may soon be possible, for instance, for Mercedes to target ads that will appear only in front of prospective buyers with an income of at least $100K and a credit score of at least 720.
- Todd Carpenter likes it.
- Tribute Media reviews the product.
- Further explanation from Rich Barton, Zillow CEO.
- Drew Meyers weighs in.
- Greg Swann notes that this product reduces the information asymmetry in the mortgage lending business, and sheds further light on how Zillow manages the wealth of personal information they’re able to gather about consumers.
- Joel Burslem has some questions, but is submitting a loan request as we speak.
Tags: Consumer, Industry, Mortgage, Zillow
Market Bottom Officially Reached At 2:34pm This Afternoon; Impasse Between Buyers And Sellers Finally Resolved
April 1, 2008
The news that all fence-sitters have been waiting for finally happened: at 2:34pm this afternoon, the bottom of the real estate market was officially reached when 356 Avocado Lane in Stockton finally sold — with multiple offers — after 30 months on the market.
Said listing agent Trevor Blackstone of Stockton Realty: “Phew! I’m glad that’s over. I’m the fifth Realtor for these folks! They went on the market at $750,000 and after 25 price reductions they finally reduced it $275,000 and it sold! In fact, we got two offers, both just above the list price.”
CAR chief economist Leslie Appleton-Young broke out the champaign at CAR headquarters in Los Angeles. “We’ve been keeping our eyes on that property for a long time. We knew that when it sold, the housing recession would officially be over.”
Mike Simonsen over at Altos Research had this to say: “Our charts predicted this a few months ago already. The 7-day rolling average of the ratio of the median days on market for the upper quartile in the worst area of Stockton has been steadily moving upwards. That’s the sign that’s accurately predicted the bottom of every single market since 1900!”
TJ Shanahan of Realty World in Sacramento was also not surprised. “Seven of my top 10 ways of predicting the market bottom came true literally in the last week!”
Astoundingly, every single market bottom has also happened on April 1st, and at the exact same time. Here’s the Altos Chart to prove it:
Bubblistas are already salivating over the next real estate recession, scheduled to start in late 2024. The domains IToldYouSo.blog and WorstHousingRecessionEverWillStartIn2024.com have already been reserved. “In the meantime,” said a prominent bubblista, “I’m gonna stay renting.”
Tags: Consumer, Humor, Industry
April 1, 2008
Just a few months after we got the shocking news that Odysseus was not invited to be the keynote speaker at either Inman’s or NAR’s convention, comes the doubly shocking news that our very own Teresa Boardman was not invited to be the keynote speaker at the Republican National Convention, to be held in Minneapolis/St. Paul in September.
Reached for comment, Teresa said, “What am I, waxed fruit?”
The string of poor corporate decision-making continues with other little-known recent non-invites from within the re.net world:
- Brian Brady, though often consulted by Uncle Ben, was not invited to speak at the Fed’s recent “Bail Out Bear Stearns” party.
- Athol Kay, despite his photography prowess, was not invited to speak at this year’s Kodak convention.
- Kris Berg was not invited to the annual “Scripps Ranch Market Is Tanking” convention put on by the bubblistas.
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