Posted by Jonathan J. Miller -Tuesday, January 31, 2006, 12:05 AM
Daniel Gross wrote a brilliant article (as usual) in this month’s issue of Wired In Praise of Bubbles: Boom and bust cycles have always driven the US economy fostering innovation.
The premise of the article is that people associate them with sob stories, criminal activity and irrational investment behavior.
[Bubbles] tend to follow a painful cycle of boom, bust,
hand-wringing, and abject humiliation. But there’s often
another step at the end: innovation. Over the past 150
years, many bursting bubbles have paved the way for
economic and cultural progress.
methodless enthusiasm was reborn as
The result of creating too much capacity gives way to other innovations that would have not been possible. One of the exciting aspects of the recent real estate boom has been the redevelopment of urban areas (ie San Diego, New York City, Chicago, Boston. etc.) that would not have been possible during a flat housing period.
Daniel Gross concludes:
“The result has been a real, delayed boom. Put cheap data transmission and storage together with an exploding population of consumers willing to use the Net and you get eBay, Google, and Yahoo! Now come widespread laments that another bursting bubble is anon: real estate, genomics, China stocks, wireless Internet, you name it. Maybe so. But sometimes, a little methodless enthusiasm is precisely what an economy needs.”
Posted by Jonathan J. Miller -Monday, January 30, 2006, 9:07 PM
Mash-ups have become exceedingly popular these days especially after Google placed its API (application programming interface) or “hooks” in the public domain to let innovative companies combine different sources of data to a create new effect. One of the best uses of the mash-up concept in real estate to date has been created by Trulia.com. Trulia was created by Pete Flint and Sami Inkinen in the summer of 2004 while they were graduate students at Stanford University. Note: the Google founders also went to graduate school at Stanford. I had the pleasure of speaking with Sami at length at Brad Inman’s Real Estate Connect in New York this month.
Here’s some more information about the service and their philosophies.
Trulia is essentially a vertical application of a Google search.
I heard about Trulia last fall through word of mouth and have followed their popularity in California. I added a post about Trulia [Matrix] a few months ago. The concept was straightforward and the site seemed to place tremendous emphasis on simplicity. Their data feeds are from public web sites, not MLS systems since that information is proprietary.
New York seemed to be ripe for this type of service as a compliment to what already exists in the public domain because it culls together a variety of information into one web page. When Trulia decided to launch in New York, they came to my firm Miller Samuel as well as Property Shark to provide additional content for users. The result of this mash-up is a lot of data useful to potential homebuyers interspersed within the listing information being searched.
Trulia is not a real estate broker and in fact, has sought out cooperation with the brokerage community. They have positioned themselves as a way for brokers to leverage the exposure of the listings already placed out on the web, and not as competition. They make their money from online advertising.
Among my favorite features are being able to create an RSS feed so the user can see new listings that meet their search criteria as the become available. I also like being able to save custom searches and their listing stats are particularly useful. Rarely do new web service sites come along that I get excited about.
Posted by Jonathan J. Miller -Monday, January 30, 2006, 12:04 AM
Lets not be serious for a moment…
Well, its that time of year again, and all this talk about bubbles has got me yearning for a good piece of bubble-wrap to pop. After all, today is Bubble WrapÂ® Appreciation Day.
Posted by Jonathan J. Miller -Monday, January 30, 2006, 12:02 AM
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 â€œExpansionâ€ [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 â€œsky is fallingâ€ 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.
Posted by Jonathan J. Miller -Monday, January 30, 2006, 12:02 AM
In Kenneth R. Harney’s article A Good-Faith Effort To Clean Up Estimates [Washington Post] finally there is some good news on some costs associated with housing.
“It’s a distressingly familiar scenario for home buyers and refinancers, and it was one of the major mortgage-related consumer complaints to federal agencies in 2005: “good-faith estimates” of settlement costs that turn out to be hundreds, even thousands, of dollars off the mark.”
Federal housing officials are working on possible
remedies, but here’s some unexpected good
news: Mortgage lenders are, too. Growing
numbers of them have gotten the message from
their customers — we demand certainty about
fees — and they are debuting new ways to turn
their estimates into binding promises.
Harney mentions a few lenders that are seeing the importance of fixing the closing costs. Its sounds like a good idea. Lets hope its contagious.
Posted by Jonathan J. Miller -Monday, January 30, 2006, 12:01 AM
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]
Posted by Jonathan J. Miller -Monday, January 30, 2006, 12:01 AM
[Back From San Diego, Where The Weather Is Absolutely Perfect.]
Do you ever get the feeling that everything you read about the housing market is either optimistic or pessimistic?
In other words, if you find yourself devouring articles about the current real estate market, do you find yourself confused by alot of their conclusions?
I certainly do. One of the problems is the evolving language of real estate. No, not old-fashioned brokerspeak, but the language of real estate economics, which has been morphing into the cliche feel-good phrases many despise.
In Stephanie Rosenbloom’s fun article The Power of Words [NYT] she explores the erosion of real estate language (with a little help from me – especially since I am guilty of having used the word “pause” on occasion but never, ever “grand.”)
“[Buzzwords] are especially prevalent in New York, where residents routinely say that real estate is a topic second only to sex. And where there is extreme interest, there tends to be extreme language.”
Posted by Jonathan J. Miller -Thursday, January 26, 2006, 6:56 PM
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:
* 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.
* 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.
Posted by Jonathan J. Miller -Thursday, January 26, 2006, 4:20 AM
I am away at a conference this week so my posts are sporadic and limited. Next week I’ll be up to full speed again. But hey, good weather tends to do that to me. Here’s a screenshot from my laptop weather application:
Posted by Jonathan J. Miller -Wednesday, January 25, 2006, 12:16 AM
In the AP article Trump sues writer, publisher for allegedly understating wealth.
Donald Trump has filed a multibillion dollar lawsuit
against the author and publisher of “TrumpNation:
The Art of Being The Donald,” claiming the book
knowingly understated the celebrity businessman’s
“The thrust of the book is that Trump is an unskilled and dissembling businessman,” the complaint states. At an event promoting his book at a Manhattan store in November, the lawsuit says O’Brien called Trump a “train wreck” of a businessman and “the walking embodiment of financial pornography.”
The book claims his net worth is between $150 million and $250 million. Trump’s suit suggests his fortune is closer to $2.7 billion. The lawsuit is for $5 billion or nearly twice his net worth today [The Indepenedent].
This is all smells of a PR ploy of which he is the master. How can Trump prove the writer wrong unless he fully discloses his financial statements? Isn’t this a classic “my word/his word”? We can only hope he runs for President to get to the bottom of this.
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