Blood Moon, aka, Hunter's Moon
A month ago, I read this depressing story on the Interwebs and it’s stuck with me since. Gary Shilling, the author, runs a research service for which one would pay a presumably hefty premium — I don’t subscribe to it, so I’m going simply on what’s on that website.
His conclusion is that housing prices will drop another 20% from today’s levels:
This huge and growing surplus inventory of houses will probably depress prices considerably from here, perhaps another 20% over the next several years. That would bring the total decline from the first quarter 2006 peak to 42%.
This may sound like a lot, but it would return single-family house prices, corrected for general inflation and also for the tendency of houses to increase in size over time, back to the flat trend that has held since 1890 ( Chart 26).
We are strong believers in reversions to the mean, especially when it has held for over a century and through so many huge changes in the economy in those years—two world wars and the 1930s Depression, the leap in government regulation and involvement in the economy, the economic transformation from an agricultural base to manufacturing and then to services, the post- World War II population shift from cities to suburbs, the western and southern transfer of population and economic strength, the movement from renting to homeownership and the accompanying spreading of mortgage financing, etc.
Seems to me that Gary Shilling runs a market research firm and normally gets paid for his analysis and opinions. They’re worth paying attention to, maybe. And the data, the charts, and the conclusion are pretty devastating and difficult to refute. Go read the whole thing; it might depress you a bit, but there’s some really good information and analysis there.
What I started wondering is, what would be some of the impact to the industry should Shilling’s predictions come to pass?
(Originally posted on the 7DS Blog)
As reported by Inman News, NAR’s Multiple Listing Issues and Policies Committee has approved a new addition to the Internet Data Exchange (“IDX”) policy as follows:
Display of IDX Information by Real Estate Franchise Organizations
Participants may provide IDX information to their real estate franchise organizations (“franchisors”) to be indexed for display on franchisors’ websites. For purposes of this policy, “real estate franchisor” is defined as a company granting real estate brokerage franchises under the franchisor’s trademarks pursuant to a franchise disclosure document meeting applicable Federal Trade Commission rules. Display of IDX information by franchisors is subject to the following requirements and limitations. Failure of a franchisor to comply with the following requirements and limitations can, at the discretion of the MLS, result in suspension or termination of the participant(s)’ authority to provide IDX information to the franchisor:
- Initial search results that provide minimal information (e.g. “thumbnails”) are exempt from MLS-required disclosures (e.g. listing firm, listing agent, source of information, notice that information is deemed reliable but is not guaranteed accurate) provided that a direct link to a detailed (“full view”) display that includes all required disclosures is provided.
- Consumers can link directly to the detailed (“full view”) display that complies with MLS disclosure/display rules of the source MLS.
- IDX information is not used for any unauthorized purpose.
- Inaccurate or incomplete information related to any listing is promptly corrected by the franchisor at the request of the source MLS.
- No advertising may appear on pages displaying IDX information.
- IDX listing information will not be modified, manipulated or permanently retained.
Rationale: This proposed expansion of the IDX policy would authorize real estate franchise organizations, with their franchisees’ consent, to index those franchisees’ IDX displays, with the results being displayed on franchisors’ websites, subject to appropriate qualifications and limitations.
On the surface, this seems like a fairly minor change to the IDX policy. But we’re not content to lick the surface of this watermelon. Let’s dive in a bit with some questions that immediately arise.
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Back in September, when Move, Inc. (which operates Realtor.com, among other units) acquired ListHub, the leading syndicator of listings, there were a number of opinions and speculations on why Move would buy a syndicator of all things. Given that Move gets a direct feed of all MLS listings under the NAR Operating Agreement, it didn’t make much sense to buy a supplier of listings.
I thought then that I knew the real strategic motivation behind Move’s acquisition, and how we’d eventually see it play out. But I didn’t write anything about the acquisition at the time because I felt I was in possession of information I should treat as confidential, given how I acquired it. Well, at NAR yesterday, I got a few minutes to speak with Steve Berkowitz, the new CEO of Move, as well as Errol Samuelson, President of Realtor.com, more “on the record” so to speak. I confirmed most of my hypotheses, and learned a bit more about how Move intends to utilize its latest asset.
Short version: Move, with ListHub, will be creating and enforcing syndication standards across the industry that will both increase data protection for brokers and agents, and provide Move with a competitive advantage (or at least remove the competitive disadvantage) vis a vis other publishers, such as Trulia and Zillow.
Your future tax dollars at work?
In my earlier post on the New Normal in real estate, a commenter took issue with my predictions about the future of the 30-year fixed rate mortgage (among other claims). I thought I would expand on that aspect a bit.
The specific mechanism that I think will be put in place is a change in the mission of Fannie Mae and Freddie Mac (possibly other housing-related agencies, such as FHA, VA, and the state/local housing authorities). I expect that Fannie/Freddie will actually become fully government-chartered entities (as NAR suggests) rather than this weird government-sponsored private companies that provide private rewards at public risk. As a GCE, rather than a GSE, F&F will no longer have profit as its raison d’etre, but the promotion of public policy.
In this case, that public policy is to encourage the development of affordable rental properties across the low and middle-income spectrum, thereby reserving homeownership for the (relatively) wealthy who pose far less credit risk to lenders.
That, to me, spells the end of the 30-year fixed rate mortgage.
Allow me to step you through the argument for why this is likely to happen. (Which is not to say I want this to happen, of course.)
In part 1, I laid out some hints of what the Obama Administration has in mind for a new federal housing policy that would “reset the rules of the market” and engage in a “fundamental rethink” not just of the mechanics of housing finance, but of the objectives of housing policy themselves. The Treasury now has all of the comments that it requested from the public and we can expect to see a proposal from the Administration sometime this fall or early next year.
In this post, I’d like to engage in the purest conjectures about what such a policy might look like. I know that assumptions are dangerous, and any conjecture at this early stage is more likely to be wrong than right, but… hey, this is fun. (If you’re a real estate and politics geek like me anyhow.) So here we go.
1906 San Francisco earthquake
There was, apparently, an earthquake in Washington DC not too long ago. Thankfully, no one was hurt, and no serious property damage occurred as the 3.6 magnitude tremor rolled through. Mere days later, however, I learned that another tremor — this one not registered on any geological survey — centered around Washington DC occurred. From the Washington Post:
Responding to the collapse in home prices and the huge number of foreclosures, the Obama administration is pursuing an overhaul of government policy that could diverge from the emphasis on homeownership embraced by former administrations.
“In previous eras, we haven’t seen people question whether homeownership was the right decision. It was just assumed that’s where you want to go,” said Raphael Bostic, a senior official in the Department of Housing and Urban Development. “You’re not going to hear us say that.”
While this particular tremor hasn’t developed yet into anything earth-shattering just yet, and there are absolutely no details available just yet, for anyone even remotely connected to the real estate industry, these statements amount to a tectonic shift of realignment.
What rough beast, its hour come around at last, slouches towards DC to be born?
Conjectures follow.
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A while back, I wrote on Inman (subscription required) that the single greatest asset of realtors was political power, and got mixed comments about that position. Well, the time to find out is upon us:
The popular tax break for mortgage interest, once considered untouchable, is falling under the scrutiny of policymakers and economic experts seeking ways to close huge deficits.
Although Congress last year rejected the White House’s proposed cut to the amount wealthier taxpayers can deduct for home mortgage interest payments, the administration included it again in its 2010 budget — saying it could save $208 billion over the next decade.
When NAR lauched HouseLogic.com last year, one of the examples it used to talk about how important HouseLogic.com would be was defending the home mortgage interest deduction. With the Obama Administration putting the elimination of the mortgage interest deduction back on the agenda for 2010, it’s time to find out just how powerful NAR is, and whether NAR does in fact add value to the Realtor or not.
Plus, given that the “recovery” of 2009 and spring of 2010 (I have my doubts on how much of the recent market is a recovery vs. simply pulling deals forward in time, but nevertheless…) was widely seen as having been fueled by a $8,000 first time homebuyer tax credit, the elimination of the mortgage interest should have interesting — if devastating — consequences for the market.
I’m going to try to do a bit of a stream-of-consciousness “live-blog” here at Houston Association of REALTORS Real Estate Investment Symposium. I put that in quotes because (a) I’m distracted often, and (b) the bandwidth isn’t the best off my little MiFi device.
I’ve already missed a couple of the early presentations from Zillow, Google, and Move, but a couple of interesting things from this morning.
Sam Sebastian from Google suggests that the future of real estate broker is as an ‘information broker’; I asked if he could elaborate on that, since the experience of the past ten or so years is the opposite: information that used to be held by realtors is now all over the public via the Internet. Isn’t the trend more and more towards realtors becoming customer service people rather than information brokers?
The answer — and it’s a good one — basically seems to be (at least interpreting Sam) that by “information broker” he meant something more like an analyst. That the future of the realtor is as an interpreter of all of the information and data that’s all over the place on the Internet.
Interestingly, Google’s search on real estate terms is up 20% year over year, despite the terrible market. Incidentally, I think that’s contradictory to the experience of the other big real estate websites (or at least used to be a few years back), but I haven’t seen recent stats.
[EDIT: This is getting very long, so it continues after the fold. And forgive me for the ugliness of the post; it's the nature of a "live-blog".]
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I've uncovered a terrible secret... a conspiracy...
So earlier today, I get an interesting email from our form on 7DSAssociates.com:
First Name: NAR
Last Name: Scandal
Email Address:
Company: NARscandal.com
Title:
Phone:
Comments: Breaking News! New Scandal at the NAR
Exclusive from NARscandal.com
A new scandal is brewing over at the National Association of Realtors and we at (www.NARscandal.com) have the “exclusive story” along with quality in-depth reporting you can find no where else.
This scandal is a true living tale of real estate, the internet, technology, money, power & greed.
A must read for every member of the National Association of Realtors (NAR) as well as every citizen and homeowner within the United States and modernized world, as this one actually has the power to affect our future as well as future generations to follow, in so many ways.
Click here to read all of the latest details at ( http://www.NARscandal.com ).
Sincerely,
The Researchers & Writers
www.NARscandal.com
http://twitter.com/narscandal.com
“The Next Generation of Real Estate Media”
Naturally, I am intrigued by the “Next Generation of Real Estate Media” that is talking about scandals and intrigues, power and greed, a shadowy powerful conspiracy with the power to affect future generations for years to come! I’m sure there’s some sort of a DaVinci Code type of puzzle or three involved. Tom Hanks and sexy French lady can’t be far behind!
See that green pattern on the bark! That's 3.2(b)(iii) of the License!
Once again, I find myself in the curious position of praising the good folks at RPR while at the same time ending up on a negative note. On the one hand, RPR’s posting their Content License Agreement (complete with redlined corrections) is by far the most transparent thing that I’ve seen a company do in real estate industry thus far. Kudos not just to Reggie Nicolay, the Social Media director of RPR, but also to Marty Frame and to Dale Ross, the executives in charge of RPR. These guys talk the talk, and walk the walk of being open and transparent. Thank you guys, and I really mean that.
If you’d like to look at the entire Agreement, including the Terms of Use for the RPR Website, go to the Google Doc here.
Some of the critiques already on the web may be entirely valid, but I think they largely miss the point. For example, Mike Wurzer’s post suggesting that the new License Agreement allows RPR to sell listing-level data to various customers may be accurate (or may not be, as Marty Frame points out in the comments), but… this falls into the category of missing the forest because you’re too busy looking at whether the tree is a douglas fir or a pine tree.
There are three major, fundamental issues that the License Agreement does not address — primarily because those issues stem from RPR’s business model and its basic value proposition. If the goal is to nitpick the language of the Agreement in the hopes of finding a provision on which one can base a future lawsuit, I suppose the detailed analysis being done now is interesting. If the goal, however, is to understand the fundamental challenge of RPR, then we need to raise our eyes up a bit.
