Realtors & Technology

"First Adopters" --
or "First Ruiners?"

Nobody goes there anymore -- it's too crowded.

--Yogi Berra, about a Miami Beach restaurant near the Yankees' Spring training camp.

Are social networks like Facebook becoming like Yogi Berra's restaurant?

In other words, as latecomers and "tourists" fill up the place, is the original, "in" crowd decamping for less noisy environs?

The "Spam Factor"

Perhaps.

If so, Realtors will bear much of the blame (or credit, if you think that social networking is a gigantic time sink).

In technology circles, the joke is that Realtors aren't the "First Adopters" they fancy themselves to be, but instead are "First Ruiners."

That's because, whatever the technology, Realtors invariably seize upon it to do one thing: hawk their listings.

P.S.: Hat tip to Nobu Hata for the "First Ruiners" quote.

Time to Get Off the Stimulus/Incentives Roller Coaster?

"Deja Vu All Over Again?"*

The number of buyers who signed contracts to purchase homes dropped in May to the lowest level on record, a sign the housing recovery can’t survive without government incentives.

The National Association of Realtors said Thursday that its seasonally adjusted index of sales agreements for previously occupied homes tumbled 30 percent in May. The index fell to 77.6 in May from 110.9 in April. May’s reading was the lowest dating back to 2001.

--"U.S. Pending Home Sales Fell to a New Low in May"; The New York Times (7/1/2010)

The above is hardly a shock to any Realtor doing business the last two months; showings, Pending sales, and virtually all other real estate activity are down markedly since the last batch of tax credits expired April 30.

So now what?

Diminishing Returns

Personally, I think it's time to change course.

Instead of another batch of incentives, which create another burst of buying (although less than last time, which in turn was less than the time before), how about doing what should have been done two years ago:

--Reform Wall Street, and specifically dismantle the mega-banks that are too big to fail.
--Charge Wall Street's leadership with the criminal activity it clearly committed, and put a couple dozen people in prison (while we're at it, confiscate their ill-gotten gains, and apply it to the exploding deficit that the bailouts exacerbated).
--Strip corporations of their status as "legal persons," which a supine Supreme Court has (incredibly) conferred upon them, and which allows for -- amongst other things -- unlimited campaign contributions.

That's what previous generations would have done -- and in fact, did -- when confronted with unbridled greed and systemic corruption.

Do all that, and just watch what happens to consumer confidence, people's faith in the system generally, and their sense that someone guarding their interests is really in charge.

Do all that . . . and home sales will take care of themselves . . .

*Courtesy of Yogi Berra

The Bullish Scenario for Housing

Sell (Stocks) High, Buy (Housing) Low . . . Again?

Stock market investors who'd gotten in at much lower levels and were worried that a correction was overdue decided to take profits.

The sector they turned to?

The housing market, where wary Buyers burned by the last downturn were still keeping their distance -- or clamoring to get out at the bottom.

The foregoing pretty much describes what savvy investors were doing . . . in the late '90's.

Back then, of course, the Nasdaq was well on its way to its 5,000-plus moonshot, and stocks like Pets.com were fetching -- temporarily -- billions despite having no sales or earnings.

And the real estate downturn that was still fresh in people's minds?

The early '90's bear market, which was especially severe in places like Manhattan and Southern California.

Then and Now

Fast forward to today.

After rallying some 75% now from the lows set in March, 2009, here's what Gluskin Sheff analyst David Rosenberg says about stocks today:

The April data was just updated and showed the inflation-adjusted normalized P/E, premised on "bird-in-the-hand" (as opposed to consensus earnings forecasts, which is historically more than 20% higher than we get actually get — one reason why Wall Street banks are dubbed "the sell side") 10-year trailing profits, expanded to over 22x from 21x in March.This is not nosebleed territory, but it is expensive; the historical average is 16.4x. So, this implies that the market is currently 34.7% overvalued benchmarked against the historical norm. It would be nice to say that a higher-than-normal P/E is justified by low inflation and low interest rates. But frankly, real bond yields are not that far from their long-run averages; however, equity valuation is, and something is going to give at some point.

--David Rosenberg, Gluskin Sheff (4/21/2010)

Translation for non-economists: 'stocks ain't cheap anymore.'

As Yogi Berra would say, is it "deja vu all over again?"

Downtown Minneapolis Parking -- Or Lack Thereof

8th Time is the Charm?

No, downtown Minneapolis doesn't literally have "Keep Out" signs posted on its perimeter.

But it might as well have.

I just returned from a (thankfully rare) appointment downtown, and spent double the time it took me to get downtown, about 10 minutes, looking for parking once I got there.

Thanks to ongoing road construction, a good chunk of the street level parking meters are out of commission. Even when they're available, you'd better have a pocket full of correct change: a quarter only buys 12 minutes (or is it 8?).

Meanwhile, it took me 7 parking ramps before I finally found one that wasn't full.

Eighth Time is the Charm?

So, given all those full ramps, isn't this just a Yogi Berra-esque case of "nobody goes there anymore, it's too crowded?"

Actually, no.

Judging by the signs in front of all those full ramps, the majority of cars parked there are monthly contract parkers -- that is, people who work downtown.

But the clincher was the sparsity of retail stores -- and the lack of customers in them.

By my unscientific count, the number of retail stores in downtown Minneapolis is down 30% from 5 years ago, and the number of customers in what's left is down . . . . more.

How Clear Are Realtors' Crystal Balls?

"Predictions are Tough -- Especially About the Future"

As I've blogged previously, home Sellers should pick Realtors based on how well they price, market, negotiate, communicate, etc.; Buyers, all those things, plus the Realtor's market knowledge and frankly, willingness to hustle for them.

Predicting future home prices isn't one of the criteria.

For one thing, that's not possible to do -- for anyone.

For another, to the extent that Realtors opine about the direction of prices, they're invariably too optimistic.

The Saga of Stockton, CA

What caught my eye in a long piece on The Huffington Post about Stockton, CA -- dubbed "Foreclosureville, USA" -- was this quote from a Stockton Realtor, Rudy Willey, with 27 years experience selling homes locally:

Having seen his share of boom and bust cycles, Willey knew the times were too good to last. A wave of selling in Elk Grove, a town half an hour away that had been the fastest growing in the country in 2007, became a sign. "When I saw the 'For Sale' signs, I thought: 'Something's happening,'" Willey said. "I thought we were due for a correction – maybe a 15 percent drop.

--Evelyn Nieves, "Stockton is Foreclosureville, USA"; The Huffington Post (1/10/2010)

So, how far have Stockton prices actually fallen?

Try, 60%.

Clearly, Willey had lots of company missing the magnitude of the decline.

And virtually no one anticipated the breadth and scale of the housing downturn, the biggest since The Great Depression (excepting, of course, Goldman Sachs and a few hedge funds, that made tens of billions betting on it).

But that's the point.

As Yogi Berra famously said, "it's tough to make predictions -- especially about the future."

Your Realtor can and should know prevailing prices better than anyone.

But predicting the future is beyond our job description.

P.S.: As my clients know, my stock answer when asked about the direction of home prices is, "if you tell me what interest rates, unemployment, and GDP are going to be . . . I'll give you a reasonably reliable housing forecast."