Notorious R.O.B.

So… I assume there’s still some sort of a raging blogwar going on about Greg Swann, but when the man is right, he’s right.  His latest is just some good solid advice:

Give your home a blog.

Every home for sale should have its own web site. What makes a weblog useful and practical is that weblogging software is so easy to use. And the price to get started? Nothing.

…

What do you want for content? Photos — and lots of them. Good pictures of clean, well-lit rooms sell houses. Your text should be just-the-facts, nothing overtly promotional. Not only can people see through hype, it turns them off.

With a weblog, you can document your house room by room — or by the benefits to be realized from the home’s features and amenities.

So his advice is not the thing that makes me go Hmmm…

This is: (click to enlarge and view)

I mean, there’s no price listed, but let’s just make some quick calculations.  This Loopnet listing (not the same property) in or near Marlborough, MA quotes a price of $225/SF.  Not that they’re apples to apples comparisons, but we’re just looking for ballpark here.  On that basis, this flyer is advertising a building worth $17,235,000.

The entire description is this:

A two-story first class office building situated in the master planned, 157-acre Marlborough Business Center. The building consists of a structural steel frame with brick facade, tinted glass curtain wall atrium and insulated ribbon windows.

Hmmm….  I did a Google Search for 325 Donald J. Lynch Blvd.  No website.

In contrast, here’s a home for sale for $495,000.  Look at how many large, beautiful photos there are.  Look at the description text.  Oh and yes, that’s a website specific to the property.

Now, I know some folks from the Dark Side of the Force will think this is nonsense, because business people are sober, serious men with no time to be browsing a website to find their next corporate HQ.  They just find the right professional to help them, and that’s that.

Besides, who the hell spends $17 million on the Internet?

Presumably, there’s a beautiful, leather-bound 200-page presentation sitting on the broker’s desk filled with high-resolution professional photography, detailed site analysis plans, financial reports on every aspect of ownership, and sale comps going back two hundred years to the days of Puritans tilling the soil, just waiting for a real buyer with real intent to call.  It’s not meant for the hoi polloi, you understand?

That may all be true.  But what makes me go, Hmmm… is, “Why not?”  I mean, how could it possibly hurt your cause to spend some time putting together a nice website with a lot of photos about some corporation’s possible future home?  Besides, it’s a $17 million transaction.  Even if you’re only getting 3% for the whole thing, so 1.5% for your share, that’s $255K in your pocket.

If residential real estate is struggling with Web 1.5 vs. Web 2.0, commercial real estate is still trying to figure out Web 0.5….  Someone could make a lot of money showing commercial brokers to do some marketing things that residential people take for granted.

Hmmm….

-rsh

(Image from Flickr.com, by MarkyBon)

There must be some sort of a zeitgeist (literally, “time spirit”) going around the RE.net, like some sort of a benign virus, on the topic of “Web 2.0″ — what it is, what it is not. I just posted on Web 2.0, only to see Louis Cammarosano from HomeGain, and then Ardell from RCG post some very interesting thoughts on Web 2.0. That we are all thinking similar types of thoughts must mean some sort of a collective subconscious about Web 2.0 and what it means in the real estate context.

In my previous post, I mentioned the Cluetrain Manifesto, and my belief that Web 2.0 is really nothing more than a vulgate expression of that document and its insights. The authors actually wrote a book based on the ideas of the Manifesto itself, and the 95 theses. Since the entire thing is available online, I can easily recommend that you read it. Or if you like dead tree versions, you can find a copy here.

Now, considering the Manifesto was written in 1999, and eight years on the Internet is basically a new geological epoch, each reader must update it from his or her own viewpoint. And apply the insights to his or her own situation.

This is just my own personal take on the Cluetrain, and what it means for the real estate industry, both residential and commercial. It isn’t the complete take, of course, as that would take many posts, but just one particular aspect of the Cluetrain and what it might mean for the real estate industry.

Read the rest of this entry »

With everyone focusing on the gloomy residential real estate market, I thought it might be interesting to take a look at what’s happening over on the Dark Side of the Force, aka, commercial real estate.

CoStar released their Q4 financial results recently, and boy, are they impressive:

BETHESDA, Md., Feb. 20 /PRNewswire-FirstCall/ — CoStar Group, Inc. (Nasdaq: CSGP – News), the number one provider of information services to the commercial real estate industry, today announced that net income for the year ended December 31, 2007 increased 28.5% to $16.0 million, or $0.82 per diluted share, compared to $12.4 million, or $0.65 per diluted share for 2006. EBITDA (earnings before interest, taxes, deprecation and amortization) for the year ended December 31, 2007 was $34.0 million, an increase of 31.3% compared to EBITDA of $25.9 million in 2006. Revenues for the year ended December 31, 2007 were $192.8 million, an increase of 21.3% over revenues of $158.9 million in 2006.

28.5% increase in profit; 21.3% increase in revenues. Wow. Nice. Congratulations are due to the people at CoStar.

For the sake of comparing apples to apples, here’s CoStar’s archnemesis, Loopnet:

Revenue for the fourth quarter of 2007 was $19.6 million, an increase of 41% from $13.8 million in the fourth quarter of 2006. Net income for the fourth quarter of 2007 was $5.7 million or $0.14 per diluted share, compared to $5.3 million or $0.13 per diluted share in the fourth quarter of 2006. The effective tax rate for the fourth quarter of 2007 was 38.1% compared to 25.8% in the fourth quarter of 2006.

LoopNet’s Adjusted EBITDA (earnings before interest, tax, depreciation, amortization and stock-based compensation) for the fourth quarter of 2007 was $9.4 million, an increase of 40% from $6.7 million in the fourth quarter of 2006. The Company has reported Adjusted EBITDA because management uses it to monitor and assess the Company’s performance and believes it is helpful to investors in understanding the Company’s business.

For the full year, total revenue was $70.7 million, an increase of 46% from $48.4 million in 2006. Net income for the full year of 2007 was $21.1 million or $0.52 per diluted share, compared to $15.5 million or $0.40 per diluted share in 2006. Adjusted EBITDA for the full year of 2007 was $34.0 million, an increase of 46% from $23.2 million in 2006.

$5.7M vs. $5.4M — that’s a 7.5% increase — but as LoopNet points out, Uncle Sam and the People’s Republic of California took a much bigger chunk. So LoopNet points to EBITDA: $34M vs. $23.2M, or 46%. Revenues were up 46% as well.

Again, a great year, and congratulations are due to the boys and girls at LoopNet.

What about some of the other stalwarts? Maybe some non-web companies?

Here’s the clear industry leader, CBRE:

CB Richard Ellis Group, Inc. (NYSE:CBG – News) today reported full year 2007 revenue rose 49.7% to $6.0 billion and earnings per share increased 23.0% to $1.66 per diluted share – both record levels for the Company. Fourth quarter 2007 revenue increased 30.4% to $1.8 billion and diluted earnings per share increased slightly to $0.54 compared to the fourth quarter of 2006. Excluding one-time charges, full year diluted earnings per share was $2.11, an increase of 42.6% from 2006 and fourth quarter 2007 diluted earnings per share was $0.63, representing an increase of 10.5% from the fourth quarter of 2006.

Yowza. 23.0% increase in earnings, and 49.7% increase in revenues.

What about the other major player, Jones Lang & Lasalle?:

Jones Lang LaSalle Incorporated (NYSE: JLL – News), the leading integrated global real estate services and money management firm, today reported record net income of $256 million, or $7.64 per diluted share of common stock, for the year ended December 31, 2007. This represents an increase of 46 percent over the prior year’s net income of $175 million, or $5.24 per share. Revenue for the full year 2007 was $2.7 billion, an increase of 32 percent from the prior year, the result of strong performance in all operating segments. Operating income for 2007 was $342 million compared with $244 million for the prior year, an increase of 40 percent, led by Asia Pacific and EMEA. Included in the firm’s 2007 full-year results was a significant advisory transaction fee earned by the Asia Pacific Hotels business. Included in the firm’s 2006 full-year results was an incentive fee from a single client of $113 million, or $1.01 per share, earned by LaSalle Investment Management. The strengthening of foreign currencies against the U.S. dollar in 2007 contributed $0.07 per share in the fourth quarter and $0.23 per share on a full-year basis.

JLL with 46% increase in earnings, and 32% increase in revenues. Woot!

These firms somehow managed to post these numbers and do this kind of business in a world without MLS, and without a NAR-type of organization that spends millions burnishing the Realtor brand (although, yes, there is a commercial specialty at NAR).

Just something to think about. You don’t know the power of the Dark Side.

-rsh

I hate Web 2.0.

I mean I hate the term. People throw it around all the time, and it even comes up in conversation at parties:

“So, what’s your cute friend Sarah doing?”

“Oh she’s doing publicity for this fabulous Web 2.0 company in the dress-swapping community.”

“That’s so cool — can you give me her phone number?”

Etc.

It turns out Web 2.0 is like “freedom of speech” — something that a lot of people think they understand, but do not. I think I understand it better than most, but when you have such honest disagreement about what the term means, it’s difficult to come to consensus.

Now, even as I hate the term, I like most of the websites designated as “Web 2.0″ despite there being no consensus on what that actually means. Digg is a cool little site; I use Pandora.com pretty often to find new music; Wikipedia is indispensable; and many blogs are very educational and some are top-notch entertainment. The reason is that Web 2.0 (in my not so humble opinion) is really a set of principles, like Agile is in software development, that guide business practices. Those business practices in turn drive features and rules for websites for those particular businesses. And I like those business practices, principles, and what they imply for our world.

I happen to believe that the roots of “Web 2.0″ lay in the Cluetrain Manifesto, first published in 1999 — at the height of the first dotcom bubble. If you’re in marketing, and you don’t know what cluetrain is, you seriously owe it to yourself and to your employer and to your customers to go read at least the 95 theses and the first chapter.

In the first chapter, while discussing how the Web as we knew it (in 1999) came to be, the authors of Cluetrain Manifesto explained it as succintly as anyone ever has:

Well, OK, a few things did happen in between. One of those things was that the Internet attracted millions. Many millions. The interesting question to ask is why. In the early 1990s, there was nothing like the Internet we take for granted today. Back then, the Net was primitive, daunting, uninviting. So what did we come for? And the answer is: each other.

The Internet became a place where people could talk to other people without constraint. Without filters or censorship or official sanction — and perhaps most significantly, without advertising. Another, noncommercial culture began forming across this out-of-the-way collection of computer networks. Long before graphical user interfaces made the scene, the scene was populated by plain old boring ASCII: green phosphor text scrolling up screens at the glacial pace afforded by early modems. So where was the attraction in that?

The attraction was in speech, however mediated. In people talking, however slowly. And mostly, the attraction lay in the kinds of things they were saying. Never in history had so many had the chance to know what so many others were thinking on such a wide range of subjects. Slowly at first, a new kind of conversation was beginning to emerge, but it would achieve global reach with astonishing speed.

So if you read the 95 theses, then you know that cluetrain believes markets are conversations. From the above you read that the basis of the Internet, from back in the green phosphor UNIX days of yore, is the ability for people to talk to each other.

Look at most of the top so-called Web 2.0 companies today. What they do, essentially, is provide a space for conversation — then they more or less get out of the way. Facebook is actually empty, if you think about it — Facebook itself produces nothing but the infrastructure. They’re like the hotelier who builds a hotel and waits for conventions and tradeshows to come make it interesting. It’s the members who produce all of the things that make Facebook interesting. Same thing with Wikipedia, Digg, Techmeme, Flickr, del.icio.us, and even supposedly “Old Web” companies like Ebay and Amazon (in its reviews).

So, with the above agreed on (for the sake of discussion if nothing else), where does the Blog fit into this?

I think it’s fairly obvious that the Blog is just a voice in the conversation. That’s it. Nothing more, nothing less. Thing is, what we do isn’t “web 2.0″ — it isn’t even particularly innovative in any way. Since Gutenberg’s time, people have been “blogging” — except they were using dead trees and ink to do it. Newspapers and magazines have been putting forth a voice in the conversation for hundreds of years. They still do, no matter the rise of the digiterati.

Some bloggers, when they get big enough and attract enough of an audience, make a lot of money from advertising. Some folks have called such blogs “web magazines” clarifying that in fact what we do is really no different than some poor schmuck at Pinch’s operation in Times Square does day in and day out.

Well, that is… what we do is no different from a technique standpoint (stringing words together). It is, however, dramatically different if we adopt the cluetrain mindset.

This is just an enormously long winded way of talking about competition in the real estate blogosphere. The Real Estate Tomato recently published a post called “7 Reasons Why Your Local Real Estate Blogging Peers Are Not Your Competition“. It’s interesting and worth checking out in full.

I just noticed one section that really got me thinking about competition in the blogosphere, and by extension, in the Web 2.0 world. The Tomato wrote:

2. Build Win-Win Relationships

Show an interest in your neighbors real estate blog, and they and their audience will show an interest in yours.

This is such a foreign concept for many agents that have been fighting for client loyalty for so many years. But the truth of the matter is that it is precisely this reciprocating effort that will be the difference between a good blogger and a great blogger.

Initiating conversations in emails and in the comments of your peers’ blogs will both establish the recognition of your name and your blog as well as help you earn their trust and their visit.

Bringing local Realtors and their audience to your site to contribute to the discussions on your platform is the reward. But, you’ll need to make the first (or many) effort(s) by playing nice on theirs.

This is certainly another instance of:
Keep your friends close, and your enemies competition even closer.

Now… keep in mind that I’m operating in very much of a cluetrain mindset when I do blogging at all. I’ve got enough positioning and marketing and such to do in my day job that I will not do it on my personal space. I don’t use Notorious R.O.B. to market something, or promote my services, or whatever. So there’s probably a pretty big disconnect between me and those agents who are blogging to generate leads or promote themselves to the local market. Lots and lots of caveats today.

Having said that, doesn’t the above advice strike you as being a little bit… like unto a sleazebag?

I mean, imagine if you went to a party and struck up a conversation with some attractive young woman/man. You’re having a great time talking about Rob Reiner movies or whatever. Then you find out that the only reason why s/he was talking to you was to get a job in your company or sell you something.

Ewwww.

Maybe that’s why I tend to dislike trade shows and industry networking events. They feel like those huge tanks they have in aquariums where sharks circle endlessly, while the chum dart hither and thither to avoid catching their notice.

Why would it be any different simply because you’re doing it online instead of in person?

I comment on other people’s blog; I often use my own blog to comment on stuff I read elsewhere. I don’t do it to earn their trust and their visit. I appreciate it when people do notice, when people do visit, but that isn’t why I wrote the damn post. I have a blogroll, like everyone else, and I add sites I like to it. But I have never asked for a reciprocal link back. Because it isn’t about that. If someone finds my blog worthy of linking to, then he’ll link to it. If he doesn’t, then he won’t. Either way, if I think his blog is saying interesting things, then I’ll link to it. Because what he says is interesting, period.  If it’s not interesting, then I won’t link to it no matter how many emails he sends me, or comments he puts on my site.

Markets are conversations.  The Internet is the last remaining frontier of authentic communication (and confrontation as well) where people aren’t censored, aren’t told what you can and can’t say by some PC thought police.  If you’re anonymous, no one cares what you look like, or where you went to school, or how much money you’ve got: you are judged purely on the substance and style of what you contribute to the conversation.

What Tomato is suggesting is tantamount to turning conversations into markets.  I know that may be what salespeople do, and real estate agents do amongst their friends and family, but honestly, guys, that’s a little bit of a turnoff.

So I have a different suggestion than Tomato’s:

Build actual relationships, not Win-Win relationships.

Stop giving a shit about “who’s winning” and “who’s losing” (in the real world, that is, not in the rhetorics of cyberspace) and give a crap about how the conversation is going.  Just write, just blog, just comment, just email, without expecting a thing in return, and trust that as the conversation spreads, as your contribution is noted, people will notice.  And somewhere down the line, that may result in a fee or two for you.  But please do not go into it like some networking fiend working a party at Inman or something, wanting to schmooze this guy or kiss ass to that blogger or whatever.

Reciprocation is not the hallmark of a great blogger (vs. a good blogger).  Writing is.  If you can write with wit, style, and knowledge about any particular topic, then guess what?  You’re a great blogger on that topic.

Reciprocation is just the hallmark of a nice guy, and while that can be helpful, how many blogs have you seen that is basically just a link farm with totally asinine press-releases-as-articles?  Likely, such a “blog” was astroturfed by some big company’s interactive marketing agency just to raise organic SEO profiles or some crap.

So… let me conclude this… rant?  advice?  thoughts? with this:

Get on the cluetrain.  Recognize that Web 2.0 means authentic conversations.  Then ask, what is the meaning of “competition” in that world of real, genuine, authentic engagement?

-rsh

This is completely unrelated to anything serious at all, but… Greg, Mr. Swann… WTF?

Is it because I find insults abhorrent? Obviously not. For all of me, well-crafted satire is the essence of Western art — the primordial expression of independence by the nascent Greeks toward the hegemonic Persians. To be oriental, in the Greek and Roman sense, is to be of the East — docile, obedient, subservient — a domesticated animal in the guise of a homo sapiens. (They’re not talking about particular people, they’re talking about categories of behavior.) To be occidental — of the West — is to be wild and free, a truly human being. To deliver a scathing insult to the powerful is to defy the idea power over others. This idea I absolutely love.

To be docile, obedient, subservient, is to be of the East?

You mean, maybe like this guy?

And I didn’t realize my 10,000 year old cultural tradition — you know, the one where my ancestors were inventing the printing press some 900 years before Gutenberg — was merely the act of “animals in the guise of homo sapiens”.

I know, it’s just a flowery analogy, and Greg’s just trying to be — you know — literary and philosophical.  That’s cool.

Just might want to think about the words you’re using there, lest it distract the reader from your point.  And you know, maybe have the reader focus on such casual racist assumptions (the parenthetical sub-rosa defense notwithstanding) instead of your argument.

Just sayin’.

-rsh

PS: By the way, if you can point to where the Greek and Roman philosophy of the oriental and the occidental is not talking about a particular people, but categories of human behavior, I’d enjoy perusing those pages.  Which of Plato’s writings would that be?  Or is it Aristotelian ethics?  The inquiring mind wants to know.

I don’t normally write much on financial matters connected to real estate, because I recognize it as an area where frankly, I have no real expertise. I know generally how mortgages, CDO’s, subprime and so forth work, but beyond the basics, I get lost. Tanta, over at Calculated Risk, however, does not get lost. In fact, you might say he illuminate the path. I think this site is a must-read for serious real estate industristas.

His latest post discusses a story in the New York Times reporting an effort by various gargantuan banks to get the feds to bail them out of their current financial woes. Tanta’s analysis of the proposals by the banks to create “a Federal Homeowner Preservation Corporation that would buy up billions of dollars in troubled mortgages at a deep discount, forgive debt above the current market value of the homes and use federal loan guarantees to refinance the borrowers at lower rates.”

According to this proposal, with Bank of America’s name on it, there are some $739 billion (that’s Billons, not their low-rent cousins on the wrong side of the tracks, the Millions) worth of mortgages that are at moderate to high risk of default. So the thought is that the Federales should step in and bail out these banks and borrowers to avoid foreclosures and so forth.

The New York Times itself argues against such a bailout:

In practice, taxpayers would almost certainly view such a move as a bailout. If lawmakers and the Bush administration agreed to this step, it could be on a scale similar to the government’s $200 billion bailout of the savings and loan industry in the 1990s. The arguments against a bailout are powerful. It would mostly benefit banks and Wall Street firms that earned huge fees by packaging trillions of dollars in risky mortgages, often without documenting the incomes of borrowers and often turning a blind eye to clear fraud by borrowers or mortgage brokers.

A rescue would also create a “moral hazard,” many experts contend, by encouraging banks and home buyers to take outsize risks in the future, in the expectation of another government bailout if things go wrong again.

If the government pays too much for the mortgages or the market declines even more than it has already, Washington — read, taxpayers — could be stuck with hundreds of billions of dollars in defaulted loans.

Let’s leave aside for the moment how amusing it is (in a deeply unfunny way) how “news” articles in the Gray Lady have a tendency to make arguments. As if the New York Times were a partisan in the matter. Which, I guess, it is — if you’re honest with yourself, at least. Because in this case, Keller’s boys and girls have a point.

And Tanta expands on the undesirability of such a bailout by pointing out the institutional barriers to executing such a grand plan:

Nobody is going to create a functioning new agency with the relevant expertise and staffing and funding and clear mandate out of thin air fast enough to do what this wants to do, if what we want to do is stave off recession. FHA probably has the expertise to credibly attempt the loan-level workouts, but not enough hands to get saddled with $739 billion worth that has to be dealt with before everybody’s lawns go brown. Ginnie Mae is, in my view, one of the most efficient and quietly professional government agencies ever: they run a highly successful program with a tiny staff. I can’t imagine Ginnie Mae is ready to manage reporting and remittances on a brand-new government-owned pool o’ junk of this size with existing resources.

Tanta’s conclusion is that the Feds ought to find some smart private company or two and outsource the administration of the whole thing to them. I think that’s very smart.

However, I have a different question on the issue.

What’s in it for US?

And I use the word US in two senses — “US” as in the United States, and “us” as in the taxpayers who are funding these bailouts.

In theory, I suppose the benefit is that using taxpayer dollars to provide welfare to Bank of America, Goldman Sachs, and other ginormous financial institutions would increase stability in our financial markets, soften a recession, etc. etc. Seems kinda remote. And a terrible investment.

So I have a better idea.  Well, probably a better idea.

If we’re going to do a bailout of any kind involving $739 billion, I suggest we do it as an equity investment in these large and wealthy banks and hedge funds and insurance companies. The Feds ought to go to Warren Buffet and tell him, “Okay, we’d like you to identify the banks, Wall Street firms, and insurance companies who have large exposure to subprime debt — then buy them on behalf of the people of the United States. Here’s $750 billion to work with, Warren. Get us some good deals.”

Rather than buying BofA’s crappy debt, let’s just buy BofA.  Bank of America’s market cap is only $189B or so, and their stock price hit a 52-week low on Feb 22.  Seems like it’s a bargain, maybe, for the taxpayers to snap up.  That way, the Federales are backing BofA’s debt as well, and the taxpayers could be stuck with hundreds of billions of nonperforming loans. But at a minimum, once the loan losses are written off, the good loans rescued, and the market turns around, and BofA starts to throw off billions in profits, the gubmint will share in that turnaround as well. And the gubmint can use that money to (a) issue a profit-share to each taxpayer on a pro-rata basis, or (b) reduce taxes (which amounts to the same thing).

As it stands, BofA had profits of $14.9 billion in 2007, and $21.1 billion in 2006.  And the bank executives are crying in their beers.  Okay, so let’s buy ‘em out, and see if profits in 2008 go back to $21 billion, and go up from there.

Add in JP Morgan, Citigroup, Morgan Stanley, and any other financial institution who wants some of the government handout, and we’re looking at what may possibly be a pretty good investment for the American people.  Yes, this does mean dilution for existing shareholders — their choice is to accept the dilution, or watch the stock price float to zero as the bank gets overwhelmed by bad mortgage debt and CDO instruments.

Seems to me that the troubled banks can get over this hump with an injection of capital to the tune of $739 billion from the Feds. In return, the Feds get huge chunks of these very valuable, very profitable financial institutions. In all honesty, the employees of said financial institutions might find their annual bonuses curtailed a wee bit to pay the new owners their fair share of the pie. But that’s better than looking for a job after one or more of these banks go under, no?

Since none of us want a nationalization of our money center banks, the investment can have very specific mandatory out-clauses. At a certain price level in the stocks of these companies, or at a certain profit multiple, the Feds will start to liquidate the holdings in banks by selling shares to the private market.  That has the added benefit of capturing any appreciation in the stocks of these banks, which then can be used to pay down the government’s debt (probably incurred in the course of trying to bail out these banks in the first place).

So, the Rob Hahn plan for bailing out our mortgage banks.

1.  Go hire Warren Buffet.

2.  Invest $750 billion in 2008 into these banks who want government welfare, as equity — and only as equity, not as loans or loan guarantees.  Yes, this probably means dilution for all of the current equity holders.  Too bad, so sad, guys — you knew what you were doing when you invested in financials.
3.  $750B buys you, in today’s valuation, the following financials:

• Bank of America ($189B)
• JPMorgan Chase ($148B)
• Countrywide Financial ($4B)
• Citigroup ($125B)
• Wachovia ($67B)
• U.S. Bancorp ($57B)
• Wells Fargo ($103B)
• American Express ($52B)

4. Make money, use the money to lower taxes (which has the benefit of stimulating the economy, thereby making recovery faster), then sell the stocks once certain triggering conditions are met.

I’m sure someone more versed in the arcana of the financial markets will point out various flaws in this plan.  But as you do so, please then answer the question: What’s in it for US in any bailout plan?

-rsh

Joel Burslem at FOREM (mildly) puts the hammer down on Seth Godin’s SquidZipper:

I think he (and Squidoo) may just be a little late to the party on this one.

I’m just not sure Agents really need yet another place to blog hyperlocally. And Squidoo, for all its promise as a destination for user generated content, has never really taken off.

Dustin Luther follows up (again, in a really nice way):

Anyway, I only remembered this story after reading Joel’s post about Seth Godin’s new product: SquidZipper.

Even two years after my call with Dan, the market for providing a free, quality, and local marketing platform for agents is still largely undeveloped… and while one of the real estate focused verticals like Trulia or Zillow could theoretically fill this niche, it still seems like such a no brainer for one of the big guys like Google, Microsoft or Yahoo to take a page from Seth’s playbook and create a niche-specific platform for their various tools!

Seth’s platform is a great idea… but it is still missing the one thing that could really make a platform like this work: an abundance of consumers!

Funny how that one little thing makes a lot of otherwise crappy platforms work (see, e.g., LoopNet).

But this isn’t a post about SquidZipper necessarily.  Nor is it a post really about Trulia.

Instead, it’s a post about HomeDepot.

A while back, the wife and I noticed a pretty significant draft coming through our windows.  Considering the house had been built in 1940′s, and hadn’t really had a renovation since then, we thought it wise to invest in some new windows.  So we went to HomeDepot like millions of Americans, and looked into getting windows installed.

Everything pretty much went according to plan.  We bought the windows, talked to the nice people at HomeDepot, and on the appointed day, a contractor showed up at our house and started work.

I noticed, however, that the contractor’s van didn’t look like a HomeDepot van; it didn’t have any colors.  It had some guy’s name on the side (like Joe Romano & Sons or something like that) with no hint of the ubiquitous HomeDepot orange.  Turns out the HomeDepot installation technician who was in my house wasn’t, strictly speaking, a HomeDepot employee.  He actually had his own company that installed windows, and did assorted contractor work specializing in decks and patios.  He was just one of the numerous independent contractors who had agreed to have HomeDepot send them work, presumably in exchange for some fixed rate, and for agreeing to certain HomeDepot rules and standards.

We had a nice chat, this contractor and I.  He installed our windows, and left.  I can’t remember his name, and I couldn’t pick him out of a lineup.  I don’t remember the name of his company.

What I do remember is that HomeDepot installed my windows.

What the )(@#*$ does any of this have to do with real estate, Trulia, SquidZipper, and so forth?

Well, since I asked what an agent needed a brand for, it seems more and more to me that various companies out there are targeting at disintermediating not the agent, but the brands.

Let’s suppose for a moment that SquidZipper or Trulia or Zillow or any of these guys do manage to launch some sort of a platform to help a real estate agent do local marketing extremely well.  All of the tools are there: maps, listings, content, data, etc.  Let’s further suppose that one of these platforms manage to acquire an abundance of consumers such that the agent can see leads coming in day in and day out.

Said consumer then has a relationship (or at least an experience) with Trulia or whoever; it’s how they found the house, and found the real estate agent.  Presumably said consumer would have a relationship/experience with the agent himself, since they worked closely with the agent in the whole acquisition/disposition process.

But the brokerage?  Or the brand?  Just like I couldn’t remember the name of the contractor that did my windows, would any consumer remember RE/Max or Coldwell Banker or whatever?

Would said consumer, upon resurfacing seven years later (on average), remember the agent who took such good care of him the first time around?  Or would he remember the really useful website where he found a house and someone to “install” the house for him?

Where exactly is the brand, or the brokerage company, in all of this?

-rsh

One of the more interesting articles I’ve read recently from a mainstream publication comes from The Atlantic.  Christopher Leinberger, a scholar and a real-estate developer (not sure I’ve ever seen those two terms together like that, but he is a professor of urban planning at UMich and a real-estate developer), writes about the possibility that the suburbs will become the next slums, as affluent people move out of the burbs into urban centers, while the displaced poor move out to the formerly swank enclaves of McMansions and treelined streets. (HT: Instapundit)  Most of the article is a look into the distant future (2025 to be precise) but you owe it to yourself to read the whole thing.

Prof. Leinberger’s hypothesis is built upon analysis of a number of trends, research conducted by the Metropolitan Institute at Virginia Tech:

Arthur C. Nelson, director of the Metropolitan Institute at Virginia Tech, has looked carefully at trends in American demographics, construction, house prices, and consumer preferences. In 2006, using recent consumer research, housing supply data, and population growth rates, he modeled future demand for various types of housing. The results were bracing: Nelson forecasts a likely surplus of 22 million large-lot homes (houses built on a sixth of an acre or more) by 2025—that’s roughly 40 percent of the large-lot homes in existence today.

For 60 years, Americans have pushed steadily into the suburbs, transforming the landscape and (until recently) leaving cities behind. But today the pendulum is swinging back toward urban living, and there are many reasons to believe this swing will continue. As it does, many low-density suburbs and McMansion subdivisions, including some that are lovely and affluent today, may become what inner cities became in the 1960s and ’70s—slums characterized by poverty, crime, and decay.

The trend is undeniable around my part of the country.  I can think of two close friends, both very successful attorneys, who have chosen to (over)pay for relatively small coops in Manhattan instead of the enormous stately homes they could have bought for the same price.  The multifamiliy development going on both in Manhattan and in the east bank of the Hudson River in Jersey City, Hoboken, and elsewhere is positively frantic.

I do think that Prof. Leinberger’s article, while very compelling, doesn’t necessarily examine all angles, however.  (That isn’t really a criticism, since he isn’t writing a scholarly dissertation but a magazine article.)  For example, I think he may be cherrypicking certain examples in support of his hypothesis:

Pent-up demand for urban living is evident in housing prices. Twenty years ago, urban housing was a bargain in most central cities. Today, it carries an enormous price premium. Per square foot, urban residential neighborhood space goes for 40 percent to 200 percent more than traditional suburban space in areas as diverse as New York City; Portland, Oregon; Seattle; and Washington, D.C.

Well, yes, I’m sure he’s correct as it pertains to New York City, Portland, Seattle and Washington DC.  But what about Detroit?  Minneapolis?  Newark, NJ?  Bridgeport, CT?  If you pick cities that most GenX and Millenials — just now coming into the peak of their earning power — think are cool hip places to live, then I suppose that tends to support the thesis.  But there are still many urban centers that no affluent consumer in his or her right mind would want to step into.  It seems like the phenomenon may be more local than Prof. Leinberger portrays, at least in the magazine article.

Plus, in looking at New York City, is he taking into account the immense variation between the island of Manhattan and the boroughs of Brooklyn, Queens, Bronx, and Staten Island?  The average condo in Manhattan goes for $1.43M on average; in Brooklyn, that figure is $428K.  (Source: REBNY - PDF) 

Furthermore, he posits that the cultural shift behind this trend is… well, walking.  Throughout the article, he points out that the benefit people want from living in urban centers is walking distance to stores and restaurant, a walkable downtown, and so forth.  For example:

In one study, for instance, Levine and his colleagues asked more than 1,600 mostly suburban residents of the Atlanta and Boston metro areas to hypothetically trade off typical suburban amenities (such as large living spaces) against typical urban ones (like living within walking distance of retail districts). All in all, they found that only about a third of the people surveyed solidly preferred traditional suburban lifestyles, featuring large houses and lots of driving. Another third, roughly, had mixed feelings. The final third wanted to live in mixed-use, walkable urban areas—but most had no way to do so at an affordable price.

Certainly there’s something to his insight.  Young people like to walk around.  Being within walking distance to the corner bistro is certainly attractive — you don’t worry about drinking and driving, and a stroll on a cool summer evening is a wonderful thing.

At the same time, I wonder a bit if Prof. Leinberger didn’t dig deep enough.  For example, he does mention in the article that there is significant demographic change going on in the United States that led to this shift:

Demographic changes in the United States also are working against conventional suburban growth, and are likely to further weaken preferences for car-based suburban living. When the Baby Boomers were young, families with children made up more than half of all households; by 2000, they were only a third of households; and by 2025, they will be closer to a quarter. Young people are starting families later than earlier generations did, and having fewer children. The Boomers themselves are becoming empty-nesters, and many have voiced a preference for urban living. By 2025, the U.S. will contain about as many single-person households as families with children.

My own experience parallels this somewhat.  As a young single, I lived in Manhattan, where walking distance to clubs, restaurants, parks, and bars was extremely important to my lifestyle.  As a young childless couple, we lived in Hoboken where we had a similar lifestyle.  With one child, we still maintained quite a bit of that lifestyle — taking trains to Manhattan and walking around Soho with our stroller, etc.

With two kids, all that stopped.  It simply is no fun to take two kids “out for a stroll”.  Restaurants within walking distance?  That’s nice, but who can really afford a night out with two small kids at home?  Such outings are enough of a rarity that should we actually get the opportunity (e.g., grandma comes for a visit!), we’ll happily drive somewhere to try a restaurant we’ve heard about but haven’t had a chance to try.  For daily living, the minivan (or if you’re hip and cool, the SUV) is almost a necessity with two or more kids.

Now, I don’t know that we’re a typical GenX couple with kids.  So research on driving culture vs. walking culture probably should take urban centers like Salt Lake City and Provo into account.  Utah has the highest birthrate in the country, thanks to the high Mormon population.  If there’s an actual cultural shift towards walking, towards smaller, more intimate “town centers” in America as a whole, examining Salt Lake City might prove interesting.

If, on the other hand, the causation is more like: Americans are having fewer (read as one or none) kids –> therefore they can walk around, stroll, and continue to do those DINK things –> therefore, these GenX families want to live in urban centers… that may lead to different thoughts as well.

If most of the households in urban areas are having one or no kids (and the birthrate for NYC is plunging), that has consequences for things like neighborhood formation, tax base, and employment.  Add in the cost of raising children, and it may be that the “typical” American family of four (the current rate for the U.S. as a whole is still 2.1 births per woman) might find such urban centers not all that appealing.  Being surrounded by single yuppies and DISK (Double Income Single Kid) families with all of their disposable income, facing restaurants that are kid-unfriendly, and all of the things that young singles find exciting and families find disturbing (nightclubs anyone?) might not be the ideal living situation for many families.

Put another way, my lawyer friends with their $3M Manhattan lofts may decide to have another kid.  Suddenly, they may find their formerly hip Tribeca loft to be… a bit small… and the amenities that they loved so much suddenly a bit unfriendly to a couple with two strollers.

Extending things out to 2025, I don’t know that predicting the death of the surburbs might not be premature.  Singles get married; DINKs have a child; DISKs have more kids.  All of a sudden, that house in the burbs with the minivan and a backyard doesn’t look so bad after all.  We may just be in a short-term phenomenon related to where the GenXers and Millenials are in their lifecycle, rather than a permanent, decades-long shift back towards cities.

Nonetheless, I think the article makes for very interesting reading.  It certainly provokes thought on what the real estate industry looks like twenty years out, based on demographic trends.

-rsh

A cautionary tale from the real estate world:

The Fifth Amendment ends saying, “…nor shall private property be taken for public use without just compensation.” In the end, this is private, not public property. The same person that wants to dictate what can and cannot happen on private property, does not want anyone to tell them what they can and cannot do to their own house. I understand development more than the average person. Because an ex-employee wanted to get back at me, he asked for one of my projects to be considered a landmark for no other reason than it was old enough to fit the criteria. So I have been through the Landmark process and have spent a large amount of money all to have the Landmark board unanimously vote NO.

Going through this process made me question my political rights. Political freedom is being free from tyranny and free to own what you want to own as long as it does not harm anyone else, or abuse their rights. This is the point where opposition becomes confused. Opposition may use the argument that development of the Ballard Dennys would harm or abuse their rights, but on what grounds? I am sure John McCullough (attorney hired by Benaroya) will appeal this decision on the simple ground that this is private property and will not harm or abuse other’s rights.

We are all giving these personal freedoms and Ken Alhadeff, the owner of Majestic Bay Theatres said it perfectly. “If you choose to designate, you must be part of the solution. And then what? What’s the next step? Who will restore it? What will it be?”

Sadly, Jon, the answer is that Ken Alhadeff is wrong.  You don’t have to be part of the solution; you can just make the private landowner pay.  You don’t have to show harm or abuse or any such thing — you just have to have the power to compel private property owners to buckle under to the will of the majority.

At a time when large numbers of Americans accept rent control laws, believing that all those laws do is “stick it to the rich”, why anyone would continue to believe that appeals to conscience would preserve personal freedoms such as private property rights is beyond me.  Freedom isn’t free.  It must be defended, and vigorously, not just from foreign enemies, but from the far more dangerous domestic enemies.

In the aftermath of Kelo, the number of Americans who are clueless about where various local candidates stand on the issue of private property rights is astonishing.

People deserve the leaders that they get.  I would suggest Jon consider running for office, or supporting someone for office who cares about private property rights and personal freedom.

-rsh

It appears that Zillow has broken the 100,000 real estate agent milestone:

Sometime last Friday, real estate agent number 100,000 (yes, one hundred thousand!) registered on Zillow and posted a listing for sale in Niceville, Florida. I’d like to say; “Welcome to Zillow!” to Jamee Graff (pictured at left.) Jamee is a Realtor with The Real Estate Market Inc in Destin, FL.

This is a huge milestone for Zillow but the first 100K agents to register are just the tip of the iceberg. There are in fact another 135K agents who are ‘beneath the surface’ – if you will let me drag out the iceberg metaphor. So, who are these secret agents? They’re agents whose listings are advertised on Zillow but who haven’t registered as a user. Their listings were posted via a data feed supplied by their brokerage, MLS or website.

The good people at Zillow go on to invite these 135,000 subterranean agents to surface by registering at Zillow, and briefly mention some benefits of unmasking onself:

When you do, buyers will not only be able to find your listings on Zillow, they’ll also find you (or at least your profile page) and because your profile is linked to all of your listings, they will easily find your other listings as well. Your profile on Zillow tells a buyer more about you and it can link prospective clients to your website or blog.

Interesting.  Cool even.  I think it’s very smart of Zillow to offer this, and to encourage it.

Having said that… my question: If your listings are all on Zillow, and buyers can find you via your profiles to all your listings, and your profile tells buyer more about you and can link to your website or blog…

What do you need your brand (or broker or MLS) for again?

Okay, I know most states require a full broker’s license — so maybe you just need to park your real estate license at some brokerage and pay them their split.  But… does it then matter whether you’re at a Century 21 or a Keller Williams or a Re/Max?  I’ve had one top producing residential agent tell me at an industry conference that the only reason why she’s with Re/Max is because of liability insurance.  Is that the future of these mega-brands in real estate?  Becoming essentially professional liability insurance cooperatives?

For that matter, if your business is coming from Zillow… how long before you begin to wonder what you need the MLS for?

I’m not a real estate agent, so I don’t know the answers.  But seems to me that Zillow is befriending the agent, but commoditizing the heck out of the big brands and the MLS.  I’m frankly surprised that the big brands, website companies, and MLS’es aren’t going apeshit over this post.

But then, maybe they know something I don’t.

-rsh