Monthly Archives: August 2008

Dorm Life vs. Ownership

At the risk of revealing the true depths of my ignorance — seeing as how my son is some 15 years away from having to worry about college — I couldn’t help but think about this post on Zillow’s blog:

While the potential gains are tantalizing, there are some major red flags and risks involved with financing your child’s private study environment/animal house. To further tap into this concept, I read up on the Zillow blog about buying a house for college and raised this question on Zillow Discussions yesterday. “Mom & Dad: Should I live in the dorms or will you buy me a house?” Four hours and 45 comments later, I had my answer—-or at least a lot of new opinions.

Do go check out the comments.  Most of them tend to emphasize the idea that 18-year olds are simply not responsible enough to be homeowners.

The author concludes, therefore, that dorm life is the answer:

My advice: Parents, make your kids live in the dorms. Dorm life builds character, strengthens your immune system, and is the heart of undergraduate college experience. Parents, college is your time to relax and enjoy an empty nest. Don’t stress yourself out by micromanaging your child’s college experience.

There are two questions that come to mind.

1.  Is there some magical responsibility transformation that happens between the age of 18 and 22?

Because the exact same analysis — whether to buy a house for your college student child or to have them live in a dorm — applies to whether you should help your new college graduate buy a place or to have them live in an apartment.

My family was not in a financial position where this was ever an issue, but if it were, I’m not sure that I was somehow far more mature at 22 than I was at 18.

In fact, in retrospect, I think in many ways I was more mature as a sophomore in college than I was my first year on Wall Street: I had less money, fewer distractions, and more homework.

Meanwhile, my wife owned her own little studio condo within 18 months of graduating from college, and her parents helped her with the downpayment.  As a 22 year old assistant buyer, making roughly $19K a year, she managed to make mortgage payments every month, determined not to ask Mom and Dad for money for her house.  She told me stories about eating nothing but bologna sandwiches for seven months straight, just so she could make the house payments and repay her folks for their down payment loan.  Knowing her as I do, I’m not convinced that she couldn’t have done the same as an 18 year old.

I suppose every parent knows their own child, and can make the decision whether he/she is mature enough to handle the responsibility of homeownership.  But that leads to…

2.  If your child is not mature enough to handle homeownership by 18, is she truly ready to be leaving your roof in the first place?

This may take the discussion a bit away from what I usually talk about on this blog.  But it is a real question.  College isn’t kindergarten; it isn’t sleepaway camp.  One gets exposed to all sorts of things that require judgment and responsibility to handle — alcohol, sex, drugs, even violence, not to mention the actual course of study, and so on.

It seems odd to me to claim that a student isn’t mature enough to make payments, maintain the property, and so on, but is mature enough to make decisions about sexual partners, choice of career, and whether and how much to drink.

Are we, as a society, holding our young people to too low a standard?

-rsh

More Numbers That Make Me Go Hmmm…

I dont understand these numbers!

I don't understand these numbers!

I need help. Someone explain these numbers (PDF) to me, like I’m six years old.

I mean, I think I have a pretty good education. I think I have a pretty solid record in business operations, marketing, and overall management. I think I know how to read 10-K’s and spreadsheets and so on. But these numbers have me scratching my head.

Rental vacancy rate Homeowner vacancy rate
Year Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007 10.1 - - - 2.8 - - -
2006 9.5 9.6 9.9 9.8 2.1 2.2 2.5 2.7
2005 10.1 9.8 9.9 9.6 1.8 1.8 1.9 2.0
2004 10.4 10.2 10.1 10 1.7 1.7 1.7 1.8
2003 9.4 9.6 9.9 10.2 1.7 1.7 1.9 1.8

The Census Bureau did a study in April of 2007 on residential vacancy rates.  The real estate bubble supposedly burst in 2005.  According to this GAO study, from Q2 of 2005 to Q2 of 2007, foreclosure inventory “rose sharply” by 55%.

So… uh… where are all these people living then?

Look at from Homeowner vacancy rates from Q2 of 2005 in the chart above.  It goes from 2.2% to 2.8%. That 0.6% vacancy rate presumably means that some 1.2 million Americans lost their homes (300m population, 68.4% homeownership rate, then 0.6% of that number in additional foreclosures).

Meanwhile, the rental vacancy rate goes from 9.6% to 10.1%?  And it went up every single quarter since Q2 of 2005?

Three possible explanations:

1.  Foreclosures were happening for the most part on investment properties.  Those people who owned foreclosed homes have primary residences; they just walked away from their “quick flip” properties, having lost a bundle of money.  But they are not homeless and do not need an apartment.

If true, then the whole “homeowner rescue” legislation is a crock of steaming dung.  “Speculator rescue” is more like it.

2.  Developers built so many rental units from 2005 to 2007 that despite the increased demand, vacancy rates went up.

One would think one might have heard a thing or two about this.

3.  There are now legions of homeless people on the streets of America.

One would think one might have heard about an additional million homeless people.

So which is it?  Or is this the magical mystery vacancy rate number?

-rsh

Three Thoughts On Local Blogging

I wrote a longer piece on the OnBlog recently about this topic, but in light of this and this, I thought it worth revisiting the issue in plainer language and shorter sentences. :)

1.  If your “local blog” is of little interest to people who actually live in your “locale”, then guess what?  It ain’t a local blog.  All the twittering and facebooking and so on will not change this essential fact.  A “local blog” is defined by who reads it.

2.  If your “local blog” exists simply to drive leads to your brokerage business, then it ain’t a local blog.  It’s a brochure.  That isn’t a bad thing in and of itself, but treat it as a brochure.

3.  If you are a true local blogger, then your blog will not be about real estate.  It will be about your town.

That is all.

-rsh

Sex Sells: An Amusing Idea, With a Point

This post by Joe Ferrara made me laugh out loud.  Seriously, I don’t know where Joe finds such interesting nuggets.  You want to check it out.  Don’t believe me?  Okay, here’s a peek:

Like I said, you want to check out the post.

Like I said, you want to check out the post.

For some reason, this reminded me of the rather interesting conversation that Joe, Jessie Beaudoin, and I think Jeff Corbett and Henry Davidson had at the ActiveRain party at Inman San Francisco.  If I’m forgetting anyone, it’s because of our mutual friend Jack‘s lingering influence.

Nakedlistings.com

Yes, the URL is parked courtesy of GoDaddy.com.  I wonder who bought that…  (Jessie?  Was it you? :) You did threaten to do just that at the party, hehe.)

The concept is simple.  It will be a direct analogue to nakednews.com (NOT SAFE FOR WORK).  Each listing is a ~60 second video in which an attractive woman talks about the property, while taking her clothes off.  I know that every single reader is going, “Are you insane?

The key to nakedlistings.com working is that it only deals with commercial real estate listings.

As much as I like and respect commercial real estate and the top-notch professionals who work in it… let’s face facts, shall we?  I don’t know that I’ve seen a more macho, more male-dominated industry outside of Wall Street trading floors in the early 90′s (and restaurant kitchens, incidentally).  Things that would shock the average corporate person happens all the time in the rough and tumble world of commercial real estate.

Therefore, nakedlistings.com would absolutely work in commercial real estate.  Consumers generally don’t look for commercial properties; only professionals do.  The vast majority of those professionals (CREW – Commercial Real Estate Women – says 23% of commercial brokers are women, but I think that’s a significant overestimation) are men, and men of a certain type, who would sit through a 60 second listings presentation simply because the presenter is stripping as she talks about column spacing and loading dock heights.

So you heard the idea here first. :)  You are hereby free to take advantage of it, as I have no desire to explain to my United Methodist Church pastor parents what I do for a living were I operating nakedlistings.com. :)

Now, there is a serious point here.  Allow me to dig it up.

In marketing, especially in real estate marketing, there is a very serious tendency to focus on the product and the service provider (i.e., the agent).  But few real estate marketers think very hard about the audience.  Listings flyers are produced that betrays a real lack of thinking about whom said flyers are targeting.  One page rinky-dink flyers for a $15m alpine mansion is just one example.  Agents and brokers have websites that were obviously constructed from some off-the-shelf template from a cut-rate agency, yet they work and operate in high-end neighborhoods where the median family income is over $150,000 a year.

If nakedlistings.com can work, it’s only because it starts with identifying a specific audience segment that would be receptive to what is otherwise crass and offensive.  The Lush campaign that Joe Ferrara discussed might work because it did similar audience segmentation and identified a group that would respond to the sex-based marketing.

Think about the audience.  It is likely to be important.

-rsh

Imagining the Future, Part 4: Specialization for Domination

Ill cover condos -- you take multifamily! GO GO GO!

I'll cover condos -- you take multifamily! GO GO GO!

“One man cannot practice many arts with success.” – Plato

Welcome to Part 4 of this series of too-many-words. Here are the links to previous parts: 1, 2, 3.

Let us review the situation. Upon deciding that the law firm (although not lawyers themselves perhaps) is a fine model for real estate, you have banded with other rainmakers and formed an institutional real estate practice. You have gone forth and installed a set of uniform, customer-centric relationship management processes, together with the computerized tools (CRM) to help them along. You have recruited people to be salaried employee associates, and have provided the best technical and marketing support. Through your institutional strengths, you have successfully changed the very ground of competition.

The last strategic step to consider is specialization.

In any reasonably complex industry, specialists are bound to arise. The competitive advantage of specialization is fairly large, as customers often want to make sure that they are getting the best qualified, most expert service provider. You are more likely to win business, and to be able to charge a premium for your services because the supply of specialists is lower than that of the run-of-the-mill generalist. On the other hand, the disadvantage of specialization is that your market is smaller than that of the generalist, and the demand for your services is lower as a result.

[I must point out before continuing that I mean true specialization, where someone actually has knowledge and skills that the average practitioner does not have. Simply saying one is a specialist in XYZ is mere marketing, and consumers usually can see past that pablum.] Continue reading