Notorious R.O.B.

The loss looks ugly, but Realogy is getting healthy, y'all...

Last year, I wrote that Realogy’s numbers looked pretty good to me, despite the fact that Realogy had lost $237m in Q1 of 2011. I figured I might as well dip back into that water since I’m interested in my old corporate home (I started my real estate career at Coldwell Banker Commercial), and well… I guess I’m kinda strange in enjoying looking at financial statements.

So Realogy lost $192m in Q1 of 2012. Sounds bad, right? Well, I know a lot of folks like to point to the big loss number and claim that Realogy is screwed, but… after these results, saying such a thing just exposes you as someone who doesn’t actually read financial reports.

Let’s take a look at a few signs of health that I find very interesting. I did read through the 10-Q, but I think this presentation for the investor call contains enough detail.

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Not the answer to all our problems, sadly...

Jeff Corbett, my good friend and former partner at 7DS Associates, recently penned a fantastic call to arms at the RETSO blog in which he got into some depth about the concept of an Open Source MLS:

As a self described ‘Agent of Change’ around the real estate and mortgage space, I’ve sat in the shadows lurking, observing the discussions regarding ‘Raising The Bar’, IDX listing exchange equity, why it’s a bad idea to send listings to the aggregators and the such. All conversations that, IMHO, root back to the 900 some odd MLSs across the nation.

So, what I would like to talk about is the concept of an Open Source Multiple Listing Service.

He goes on to lay out a fairly convincing set of arguments for an Open Source MLS (“OSMLS” hereafter).

As it happens, I personally worked on precisely this concept of the Open Source MLS last year for quite some time. It was a serious effort, that went as far as setting up a company, looking for people, and was on the verge of raising money to fund it. So I do think I have some insights to be shared here. I don’t know that I believe in the OSMLS anymore, but in case someone else wants to take up Jeff’s battle standard, I would advise them to consider some things.

Part of this will be a debate with Jeff, since some of the problems he seeks to solve cannot be and will not be solved with an Open Source MLS. But the larger part of this will be looking at a couple of issues that I found I could not solve with an Open Source MLS

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"We are a nation with a government, not the other way around."

A few weeks back, Bill Lublin and I engaged in a spirited debate about the future of the Association, stemming from this post of mine from March. Bill’s initial response is here.

Well, my post then became the basis for my presentation at RETSO, which gave me impetus to expand on the topic.

During that debate, I suggested that Bill was simply defending the status quo to the hilt since his first post was nothing but a robust defense of all things NAR. Since he said that he has many ideas for change at NAR, that he wasn’t happy with everything at NAR, I asked him to lay out some reforms he’d like to see.

Bill has now posted the reforms he’d like to institute at NAR in Part 2 of his Ask What You Can Do for NAR post. I, of course, argue with Bill after the jump, partially because I learn things through debate, but really, because this topic is a critical one for the industry. We may as well have it in public.

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Oh my...

Back in November of 2010, I wrote about Move’s acquisition of ListHub and what it might mean for “Syndication Quality”. I thought then that the reason why Move acquired ListHub was strategic — to control the source of listing data, in order to impose on its main competitors the same restrictions that Move had on operating REALTOR.com:

There was little doubt in my mind when the acquisition was announced that what Move was doing was a strategic maneuver to neutralize some of the advantages that its big competitors had — freedom to do whatever they wanted with the data, given the widespread ignorance of brokers and agents on intellectual property issues.  Having spoken to Messrs. Berkowitz and Samuelson, as well as other players in the drama, I have confirmed that this is indeed the mutual vision of the Move and ListHub teams.

“Let’s see how Trulia and Zillow compete if they have to live up to our standards of data protection and data integrity” might be something Move executives never actually said, but I rather think they are thinking it.

Well, it only took a year and a half, but I believe we’re starting to see the strategy be implemented:

ListHub, the largest syndicator of real estate listings and website analytics, today announced the launch of the ListHub Preferred Publisher Program. Real estate brokers syndicating listings through ListHub’s Preferred Publisher Program can now quickly identify preferred publishers and publisher rules, rate publisher websites and access reports through the control panel. The new features bring greater transparency, control and protection to real estate brokers as they syndicate listings to multiple publishers. ListHub is operated by Move, Inc., (Nasdaq: MOVE), the leader in online real estate.

Earlier this week, prior to the press release, I had the rare opportunity to get a demo from Luke Glass, General Manager, and Mark Wise, VP Operations and Technology, of ListHub of these new features, and to ask them some questions about what they were doing. Well, what they’re doing is a small step, but it is one fraught with real significance for real estate data policy.

There are two things in the new ListHub that work together to create the significance. Let’s dive in, shall we?

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I’ve been traveling pretty much nonstop since attending the best event on the real estate conference calendar: RETechSouth (or RETSO for short). As always, Brad Nix, Mike Pennington, and Ben Carter (with an amazing team of people) put on a fantastic event. I did a little debate on syndication with Jay Thompson, leveraging my expensive legal education to argue positions I don’t believe in. And then I gave a little ten minute speech on the future of the REALTOR Association:

I am grateful to my friend Sue Adler for taping the speech, and to the RETSO team for giving me permission to publish video footage of their conference. The audio isn’t the greatest, but considering that Sue filmed this on her iPhone, I think she did a fantastic job. And technology is pretty damn amazing.

What I recommended, essentially, is an echo of this post, entitled, “Ask Not What Your NAR Can Do For You“:

Second, having rediscovered your core mission, start purging. As it is today, only about half of the nation’s real estate brokers and agents belong to the Association and can call themselves REALTORS. And that percentage may be less, since NAR dipped below the 1 million mark recently. Smaller and dedicated beats larger and apathetic every time.

I’d like to expand on this notion a bit.

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Home Prices, 1970-2011 in Gold

I’m on the road so don’t have a ton of time to be doing a long post, but a reader emailed me a post by Barry Ritholtz of the Big Picture Blog that was an Op/Ed in the Washington Post. It’s worth reading in full, so go check it out here.

I thought I’d try to add one tiny little piece of data to a specific point that Ritholtz raises:

Regardless of the asset class — stocks, bonds, commodities, houses, etc. — assets do not merely stabilize. We have never seen a stock market run up into bubble territory and then revert to fair value. Instead, we careen wildly past that level, to deeply undersold and exceedingly cheap.

That is the marvelous mechanism of markets. It is how assets are repriced, distressed holdings liquidated, capital markets stabilized, fools revealed, speculators punished — and money returned to its rightful owner, the prudent investor.

For a lasting recovery, we need to see houses cheap enough that they fall into “good hands” — long-term owners who can afford their mortgage payments.

First of all, I happen to agree with Ritholtz 100% on this point. No asset bubble inflates and then simply reverts to the mean. It goes deep into negative territory, and then bounces back to the mean (i.e., “fair value”).

But I do wonder if we haven’t hit that point of housing being deeply undersold and exceedingly cheap. I suppose the definition of cheap depends on the buyer’s perspective, but the graph above is one from a post I wrote a while back looking at the price of housing in terms of gold — that ultimate holder of value, the non-fiat money in this world of fiat currency.

According to that chart, housing prices in 2011 were down to 1980 levels at least in terms of gold. 1980 was the absolute depths of the Jimmy Carter Malaise, when annual inflation was 13.5% and mortgage interest rates were around 18%. (Reagan didn’t take office until January of 1981, and you can see home prices recovering by 1982.)

The question is whether 1980 price levels are “deeply undersold and exceedingly cheap”, especially when rates are at historic lows thanks to the printing presses of the Fed going full speed. If you have the cash or the gilt-edged credit to get a mortgage in today’s environment, it may just be that prices have tumbled to “exceedingly cheap” levels thanks to unreported devaluation of the dollar.

I’ll have more speculating to do later on Ritholtz’s fantastic series on housing, but I did want to add this little tidbit for now.

-rsh

One of the most eye-opening books I’ve read in the past few years is Coming Apart: State of White America 1960-2010 by Charles Murray, a sometimes controversial scholar at the American Enterprise Institute. This is not a full book review, as there have been dozens of them already done, and there will be hundreds of discussions started throughout the country because of this book.

But there were a couple of items that really piqued my interest as it relates directly to the real estate industry. Since I know that real estate economists from NAR, Zillow, Trulia, and others sometimes read this blog, I’d like to pose the questions and ask them for some answers after crunching their data.

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Poets for the People! Share!

Over on the Raise the Bar Facebook Group, I posted a question to the thousand-plus members:

Question for this group, because it has so many ultra-engaged and informed people in it.

If your MLS proposed to change fees from a flat-fee subscription to a percentage of closed transaction (NB: FMLS in Atlanta area does this), would you support such a change or oppose it?

Please explain your reason, if you can.

The answers were fascinating, mostly for the reason that they were pretty much uniformly against the idea because it would subsidize the unproductive. A few examples:

The responses are not surprising, since the entire Raise The Bar movement has as a theme the idea that there are too many bad real estate agents out there who are giving a bad name to the good agents. Furthermore, the existence of too many of these “accidental salespeople” in the words of David Charron, CEO of MRIS, hurts the business opportunities of better agents.

But the question of subsidies is a bit more complex than that.

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Maybe they're checking Redfin's mobile app...

I think this might be a bleg (that would be a blog/beg) for help in making sense of some recent buyer data. Some of this just makes so little sense to me that I’m asking the Notorious community for assistance.

The buyer data comes from Redfin. I’m focusing on it because I know Redfin’s corporate culture is data-driven, and because the folks there are really good at data. They constantly survey their customers, they take pride in their NPS-derived customer satisfaction surveys, and pretty much have been data junkies from day one.

Given that we’re only looking at buyer survey data from one brokerage, and a fairly unique one at that, it isn’t clear how much weight we could/should put on the data. But it’s something. If you’re aware of any other brokerages (NAR’s survey is a bit too broad/diffuse, and I’d like to look at broker-level surveys) who have this kind of buyer data, I’d be interested in knowing about them.

So let’s get into it.

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Courtesy of NAR Research — one of the more valuable things on Facebook — comes this CNBC article on how investors are flooding the residential real estate market:

The number of homes sold to investors more than doubled last year, as rising rents and low-priced distressed properties fueled demand. Investors, half of them using no mortgage, bought 1.23 million homes in 2011, a 65 percent jump from 2010, according to the National Association of Realtors. Half of the homes purchased were distressed properties, that is, foreclosures or short sales (when the bank allows the home to be sold for less than the value of the mortgage). [Emphasis added]

The video above references this explosion in investor interest as well, but goes well beyond that.

This new information from NAR, which the CNBC story references, answers a couple of questions for me on the hot housing market of the past couple of months. As a result, I’m not ready to call the bottom on housing, nor do I think that Renter Nation will pass us by.

Quite a few of my friends in real estate have already called the bottom, and are embarking on a round of marketing to consumers that this is a once-in-a-lifetime opportunity to buy real estate. I would urge them to tap the brakes just a little bit, since credibility is the coin of the trustworthiness realm.

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