« July 2006 | | September 2006 »

Mortgage & Loan: Crashdown

The consumer confidence reports are out today, and everyone is feeling the pain:

The report may signal trouble ahead for consumer spending—and perhaps for the overall economy. Early reports of August retail sales show that shoppers of all stripes are already cutting back, from the lower-income shoppers at Dollar General (DG) to the more affluent who buy their linens and dishes at Williams-Sonoma (WSM).

Since August is generally viewed as a bellwether for shopping trends during the holiday season, these are worrying signs, especially because the holiday sales season is extremely important to retailers. For most retailers, it can account for up to 40% of annual sales and up to 75% of annual profit.

I'm not sure what the Conference Board expected, really. The sense of unease and rising acknowledgement of our lack of upward mobility is affecting everyone from the policy wonks to Joe Sixpack. We're in the middle of two wars, our housing market is in the tank, gas is very much OUT of the tank, and prices for almost every form of consumable item are rising. Angry Bear does a great job of pointing out how the rich get richer, while the rest of us, well, don't.

Wasn't home ownership supposed to be the gateway to riches for 85 percent of Americans? Couldn't we borrow off our equity and spend far beyond our means? Well, we did...in huge numbers, in fact, and as Dean Baker points out, we're reaping the rewards:

The one thing we can say is that the recovery from a housing crash induced recession will not be as easy as a normal recovery. Youl can't just lower interest rates and expect a boom in home construction and car buying. As I've note before, the Fed used the housing bubble to boost the economy out of the recession that resulted from the collapse of stock bubble. It's not clear that it has another potential bubble out there.

What do we do when we run out of assets to inflate, eh? Looks like the economy is going to continue taking flying lessons from Comair for a good long while...

Posted at 03:21 PM | TrackBack

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Architecture & Design: Rebuilding The Gulf Coast

Of the many stories you will be hearing, seeing, and reading this week regarding Katrina and her destructive aftermath, one of the most heartbreaking--and yet hopeful--involves the shape of the rebuilding effort. I think it's fair to say that we haven't seen a need for this level of reconstruction in my lifetime. The scope of the project is almost too mindboggling to comprehend, and the stories being told are at times positive and depressing, and sometimes both.

For example, in the focused media coverage on New Orleans, the damage to Mississippi has been glossed over or altogether forgotten, and as the Detroit Free Press reminds us, the Ole Miss is still suffering greatly under the yoke of bureaucracy, frustration, and despair. The state's economy is becoming almost wholly reliant on big-ticket casinos to bring in revenue, but at what price to its character, culture, and tradition?

The expertise of architects and designers can be found all over the place in the rebuilding effort, as in the case of Thom Mayne and his maverick designs. Mayne's argument is a good one--play to the strengths of the city and rebuild its potential as an environmental and social landmark, rather than becoming yet another glitzy City-Walk style tourist trap for rich folks.

But the devastation remains terrible, and the conspiracy of silence that falls over the rebuilding effort must be broken, particularly if that silence is due to a bored and ADD-addled media.

The rebuilding will continue. The Gulf Coast will rise again. But it will take far longer, cost far more, and force many to endure heartbreak and frustration for years to come. There is no quick fix. We need to accept that, and not let this American tragedy slip from our minds.

Our fellow Americans who suffered Katrina's wrath deserve no less.

Posted at 02:21 PM | TrackBack

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Hurricane Housing: The Flood Gates

There's a new poll out that claims Americans are not at all sure we can handle another disaster. Of course, one of the major reasons the gov't response has been and continues to be so ineffectual is because FEMA got shrank from a full Cabinet agency and put in the hands of a man who thought horse grooming was key preparation for disaster management.

Katrina tore away any preconceptions people have about the nature of race and class in this country. I still shudder to think of some of the horrific things I saw heard, said, and done. But that horror pales alongside the everyday dramas and trials people who survived the catastrophe have to deal with. It's important that we read the stories of people like the Forrest family, or the residents of Plaquemines Parish.

Read these words, know these are Americans just like you and I, and do what you can to help. For these people, Katrina is not over, and will not be over for a long time to come.

Posted at 12:19 PM | TrackBack

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Bonus Fed Watch: Stop Talking, Ben, Or We'll Shoot

"What I meant to say was 'the world is flat,' and we're all 'glocalized'...put the gun down!!!!"

Ben Bernanke spoke before the Federal Reserve Bank of Kansas City today, and it sounded for all the world like he grabbed his talking points from Thomas Friedman:

"The natural reaction of those so affected is to resist change, for example, by seeking the passage of protectionist measures," Bernanke said. "The challenge for policymakers is to ensure that the benefits of global economic integration are sufficiently widely shared — for example, by helping displaced workers get the necessary training to take advantage of new opportunities," he said.

Right, because all of those corporations put so much money into retraining and education programs for employees once they fire them. :) I wonder if my inability to understand this crap is due to insufficient transmission of the Moustache of Understanding, or maybe because it's really just crap.

Then again, if I were Ben Bernanke, I'd much rather dazzle the masses with obscure historical trivia than speak plainly about the fact that we could be looking at a major recession at worst, and tepid growth at best.

Posted at 01:56 PM | TrackBack

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Buying And Selling: The Good, The Bad, and The Ugly

Someday, if I'm still one of the mighty bubble blogerati, I'll be writing a post that starts with "Today's NAR report showed steady, stable appreciation in home prices in a solid market..."

Today, unfortunately, is not that day:

The National Association of Realtors reported Wednesday that sales of existing homes and condominiums dropped by 4.1 percent in July from June to a seasonally adjusted annual rate of 6.33 million. That was the lowest level since January 2004.

The latest snapshot of housing activity was weaker than analysts anticipated. Economists were forecasting the pace of sales to fall to 6.55 million.

The only thing more fragile than market data right now is David Lereah's reputation. How does this guy continue to get quoted without any sort of challenge or authentication of his opinions as fact? I do credit Jeannine Aversa with a little more snark in the article, at least.

The Mortgage Bankers' Association reported another slight easing in mortgage rates, though as Calculated Risk noted, the stats look anemic in light of last year's performance. Still, rates are still tremendously low, and this might encourage shaky buyers to give it a whirl.

Then again, if yesterday's portents of doom and gloom from the Fed are any indication, things may be getting much worse before they get much better:

A Federal Reserve official's warning about a possible resumption of interest rate hikes rattled Wall Street on Tuesday, wiping out most of an early advance.

The comments by Chicago Fed President Michael Moskow unnerved investors looking to revive last week's rally after having collected some profits Monday. Retailers and other sectors dependent on consumer spending were weak after Moskow said, "Some additional firming of policy may yet be necessary to bring inflation back into the comfort zone within a reasonable period of time."

.....Do ya feel lucky? Well, do ya, punk?

Posted at 02:44 PM | TrackBack

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Buying And Selling: Bad News Travels

"But...but...real estate prices always go up! David Lereah said so!"

There's a lot of interesting information you can get from the news of Toll Brothers' third-quarter profit drop:

"The housing market is getting weaker much faster than anybody expected," said Alex Barron, senior housing analyst with JMP Securities in San Francisco. "What's hurting Toll is just the fact that they build luxury homes. Luxury homes are very discretionary. People who want to live on the golf course, they can do so today or they can wait a year. There's no hurry."

That doesn't seem to make sense, does it? If luxury homeowners have no difficulty waiting for a home, then why is Toll Bros' having so much trouble meeting expectations? Particularly if they only build homes when there are orders in the queue? Seems more like the people who Toll Bros. caters to are getting much more bearish and not as willing to commit to big-ticket purchases...or maybe Toll was relying far more on flippers to move product than they are willing to admit.

Then you have the news that Lowe's is advertising bad tidings for the remainder of the year:

But orders for new homes have slowed in recent periods and sales of existing houses are slowing from record levels, putting pressure on sales at Lowe's and larger rival, The Home Depot Inc. Increased gas prices have also affected business, Chief Executive Robert Niblock said.

"Near-term pressures on the U.S. consumer have led to a more cautious outlook for the balance of the year," Niblock said in a prepared statement.

With less discretionary spending due to maxed-out levels of consumer debt, stagnant wages, and a cooling housing market, the ripple effect is spreading beyond the realtors to the home improvement industry now. Then the contractors, then the builders, and on and on and on...

Posted at 03:24 PM | TrackBack

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Buying And Selling: Upside Down Down Under

And now for the flipside of unusual spikes in trends, we have a distinct decline in Australian housing prices:

A THREE-BEDROOM brick-veneer house in St Clair sold for just $260,000 at the weekend - down about 42 per cent from its last sale at $450,000 in 2003 in a further sign of the depressed state of the Sydney property market.
Only one person bid on the house in the city's west. The mortgagee sale was forced after the owners could not meet the interest payments on the $405,000 they borrowed to buy the house at the peak of the market.

A sharp-eyed fellow housing blogger tells me this is a bellwether for what will happen to American housing prices, and I can't disagree. All the fundamentals are in place--overextended families with too much consumption and too little savings, fluctuations in home prices caused by too much inventory, and the looming spectre of bankruptcy, foreclosure, and default due to the resetting of ARMs homedebtors can't afford. If nothing else, this is a grim-but-good reminder that things aren't necessarily better in other countries.

More about this from Ben Jones and Housing Panic.

Posted at 02:28 PM | TrackBack

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Moving & Relocation: Crime & The Cities

An interesting article from Reuters on increasing trends in violent crime in unexpected places:

From Kansas City, Missouri, to Indianapolis, Indiana, places that rarely attract notice on annual FBI crime surveys are seeing significant increases in murder. Boston, once a model city in America's battle against gun violence, is poised to eclipse last year's homicide tally, which was the worst in a decade.

One thing that doesn't get mentioned is how the areas with dramatic increases in crime tally up with increased housing prices and shifts in demographic movement. This is a total bulls$*t theory, but I wonder if crime is on the rise in areas with higher income demographics from home purchases. If people are moving to smaller cities to find affordable homes, and other cities are attracting wealthier folks who can afford to live downtown, this might explain the spike in crime. Criminals go where the money is, after all.

It doesn't explain the increase in violent crime fully, but that could definitely be attributable to lack of resources to combat domestic crime, weakened gun laws, income disparity, etc.

I don't think the spike in crime is attributable to any one thing, but a combination of many things, and income gaps created by patterns of home purchasing may be one of them.

Posted at 02:05 PM | TrackBack

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Housing Market: Condomania

This morning I was bitching to a friend who lives in my building about the massive new "condo hotel" conversion going on behind us, keeping us awake at all hours, destroying our trees and sidewalks, and generally serving no purpose.

Why, we wondered, were condo developers continuing to put down stakes on massive new high rises and conversions in such a bearish market as this? Who did they think would buy those units?

Vinnie Tong from the AP sheds some light on this particular condo conundrum:

Hotel-condo projects can be found in different stages of development in cities such as Berkeley, Calif.; Provo, Utah; Pittsburgh and Little Rock, Ark. And they've been proposed for towns as varied as Yankeetown, Fla.; Asheville, N.C.; and West Wendover, Nev.

I think the key to the heavy investment spate lies more in the whole "spreading risk around" angle than it does anything relating to New Urbanism. Condo developers can be true shysters--get in, get the deposits, and break out again. The idea of passing on the risk and making a profit enables these folks to lure in citydwellers like the proverbial moths to the flame.

I'd probably buy a condo before a home in the burbs, but I'd rent before buying a condo. It seems like it combines all the worst aspects of renting (lack of space, intrusive landlords, nosy neighbors) with owning (property taxes, assessments, hidden fees, HOAs, etc.). Your mileage, of course, may vary.

Speaking of New Urbanism, I found a hysterical quote from a discussion at Planetizen that goes even further to explain the condomania:

The New Urbanist allegory works because it connects to the complex concerns of middle- and upper-income Americans. They want to be near other people and to have new and different experiences, as long as the other people aren't scary and the experiences seem safe. That's why people who would never ride a bus or walk around on a crowded New York City street are willing to take a tram from the parking lot at Walt Disney World and spend their days in congested and car-free surroundings.

I disagree with the guy's thesis, but that IS some funny shit. :) And doesn't that picture actually look like your typical sh%tbox development? I didn't choose the title of this entry for no reason, after all. :)

Posted at 05:20 PM | TrackBack

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The Bursting of the Housing Bubble

Reader Julie passed this link on to me from Truthout.org. An interesting editorial on the rapidly slowing Housing market:

This was posted today: The Bursting of the Housing Bubble and the Coming Recession

Posted at 04:53 PM | TrackBack

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Buying And Selling: False Profits

And so it came to pass that the Lereah looked upon the land of the housing market and claimed it was good:

WASHINGTON - The slowdown in the once-sizzling housing market is spreading, with 28 states and the District of Columbia reporting spring sales declines, led by big drops in former boom areas of Arizona, Florida and California....The Realtors report depicted a tale of two housing markets, with former boom areas experiencing declines and other areas of moderate sales gains during the boom years experiencing strong growth.

Of course, those who've been reading Housing for a while know that this is the latest phase of the great leap inward, where exhausted families and exurbanites flee the cities for cheaper homes deep inland, thus pushing those prices up and giving homebuilders a reason to move all that excess inventory. Meanwhile, the cities attract the super-rich, childless, and anyone else with lots of disposable income.

Naturally, true housing bubble blogerati do not tolerate the lies of false idols like the Lereah, and so they have crafted some truly wicked punishments for his perfidy:

Make him purchase a new-construction condo in South Florida, or a far exurban new Southern California cookie cutter new home for full price, using an an option mortgage with significant pre-pay penalties. And, the condo or house must have a hefty HOA. The punishment fits the crime.

Verily, their verdict is vengeance.

Posted at 12:03 AM | TrackBack

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What Your Real Estate Broker Won't Tell You

A friend recently directed me to an interesting piece of information he found browsing Yahoo Finance. This serves as an excellent 'heads up' for those considering a home sale or purchase and intend to use a real estate broker. On either side of the transaction, the bottom line is beware of what you say and who you say it to. And, as always, do your own homework and learn to ask the right questions:

From Yahoo, here are the first two of "10 Things Your Broker Won't Tell You":

1. "Your open house is really a party for me."
Hire a real estate broker to sell your home and one of the first things he'll likely suggest is hosting an open house, so potential buyers can casually check out your property on a weekend afternoon. While open houses are promoted as a great way of finding a buyer, a National Association of Realtors study found that their success rate is a mere 2%.

No matter. Having an open house serves another important purpose - for the broker. "It gives him a database of clients," says Sean McNeill, an independent real estate broker based in New York City who says that he doesn't like open houses, preferring to match clients with appropriate buyers. "At open houses, you get all kinds of people walking in. Some are [trying] to see how much they should sell their own places for; others just want to get a look at what's out there." All are perfect pickings for a broker looking to increase his roster of buyers and sellers. "Think about it," McNeill says. "The broker is devoting a couple hours of a weekend. He won't do that unless it helps him in a big way."

2. "My fees are negotiable."
Brokers like to make it sound as if their fees are engraved in stone, but that's rarely the case - especially in a brisk market, when brokers fiercely compete for properties they can unload fast. This past summer one broker in the Midwest says he lowered his fee by a full percentage point because there was so much demand for good properties that he needed leverage. Indeed, says the broker, who asked not to be named, sellers should shop around for broker's fees. He suggests these negotiating tactics: "If somebody's willing to commit to me for selling one place and buying another, I give a discount. If you're in a particularly desirable neighborhood with a house that will bring a lot of traffic" - say, at an open house - "that can be used, because the broker will use the flow of people to get potential customers. And with some [smaller] brokers, all you need to do is ask and they'll lower the commission."

From Yahoo, read the entire piece: "10 Things Your Broker Won't Tell You"

Posted at 03:57 PM | TrackBack

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Hurricane Housing: FEMA's Stupidity Vortex

Just when I thought FEMA had reached their event horizon of ignorance--the point where they could not possibly get any dumber or more incompetent--they go and surprise me again:

WASHINGTON - FEMA will replace locks on as many as 118,000 trailers used by Gulf Coast hurricane victims after discovering that the same key could open multiple mobile homes, the agency said Monday.

Some keys could open as many as 50 different locks — causing a security risk in heavily populated trailer parks in Louisiana and Mississippi.

Was no one paying attention when these trailers were manufactured or rolled out? Didn't anyone think to check for this sort of thing?

Mind you, the sad part is that if you're holed up in FEMAville for the duration, you probably don't have anything worth stealing, but that's not the point.

I guess I'm not being entirely fair to FEMA, for as Frank James points out, they probably just assumed they would work, as we all would, but "assuming" is not an acceptable course of action when you're put in the business of protecting people's lives.

Posted at 10:21 PM | TrackBack

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Fed Watch: The Not-So-Great Communicator

An AP news story today discusses the difficulties Ben Bernanke has had in explaining his monetary policies to Wall Street, Main Street, and so on:

A former economics professors, Bernanke came to the Fed with a reputation for plain speaking dating to his days as an economics professor. His communications since coming to the Fed have been anything but. The result: skittish investors have sent stocks on a roller-coaster ride. Experts say it will take time for investors to get used to Bernanke and for Bernanke to sharpen his signaling system.

That's what happens when you base the well-being of an entire country's economic market on how well someone can interpret the modern equivalent of Morse code or smoke signals. I completely agree that the Fed should be more transparent, and the note of the dissension of Jeffrey Lacker is a good start. Much like home buyers' battles with the opaque Realtor/MLS axis :), transparency and accountability are key. ;)

I've beat on poor Ben quite a bit since he took over, and to be fair, the guy really has a crap situation ahead of him. Witness Business Week's take on the decision not to hike rates for the moment:

The central bank's views on inflation risks were refined somewhat compared to the June statement, though it still acknowledged firm core-inflation readings. It also stated that "the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures" -- though these are likely to "moderate over time." This last reference to "moderate over time" replaced "limit inflation pressures over time" from June and therefore proved slightly more dovish as well.

.....

Yeah, me too.

This kind of guessing-game silliness is what makes modern economics so hard for people to parse, and consequently far too easy for predatory lenders, scammers, mouthpieces like David Lereah, etc. to take advantage of. Just express your opinion, say what you think needs to be done, and let the markets make their moves.

Dean Baker has been doing a phenomenal job of tearing the ass out of bad economic reporting, and I'd love to see his thoughts on whether or not the Fed itself should stop veiling its moves in cloaks of fifty-cent words and obfuscatory, commitment-free verbiage.

Posted at 03:33 PM | TrackBack

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Friday Housing News: Katrina, One Year Later

It's coming up on one year since I've been putting fingers to keyboard on behalf of the mighty Housing.Com. While this would normally be a cause for celebration and recognition of achievement, but it's much more somber for me, personally.

Not long after I started blogging here, what seemed to be an ordinary hurricane soon blossomed into the worst natural disaster in American history. I know people would like to forget about it, but it's not that easy.

The survivors are still struggling with the remains of their broken lives.

The opportunities to rebuild are few and far between.

The scumbags who couldn't get the evacuation and emergency services right the first time are profiting from their incompetence.

And the resources people desperately need are being buried under mountains of red tape and stupidity.

I could go on, but it is truly said that pictures are worth a thousand words:

(Some images used courtesy of National Geographic. No challenge to copyright intended.)

Posted at 06:10 PM | TrackBack

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Housing News: Clipping Sterling's Wings

Someone sent me an Internet the other day about how L.A. Clippers' owner Donald Sterling is showing more bias then Len on a cocaine binge:

The Justice Department on Monday filed a discrimination suit against Los Angeles Clippers owner and real estate mogul Donald Sterling, accusing him of favoring Korean tenants while seeking to exclude African Americans and families with children from his apartment buildings in Los Angeles County....Here in Los Angeles, where housing is already at a premium, it is imperative that no one be denied housing simply because of their skin color, ethnic background or because they have children," said Debra Wong Yang, U.S. attorney in Los Angeles. (Emphasis added.)

Racism is idiotic in every sense of the word, and not only that, but it makes bad business sense to turn away good potential renters (who may want to be owners) simply because they don't look like you. The SoCal housing bubble is one of the most thoroughly dissected and covered in the nation, and everyone from Marinite to the vacationing David can tell you that it's hardly the days of cheap land and available credit out on the left coast.

Sterling needs to get his head right and his ass out of the renting business if he's going to practice such bad behavior, or he's going to get....nah, I've already said it, but it's still true. :)

Posted at 02:44 PM | TrackBack

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Housing Market: Temporary Relief

And just like that, everyone breathes a huge sigh as the Fed stops the long interest rate march. Here's the full statement from the Fed.

It is indeed interesting to note that this is the first governors' decision under Bernanke's reign that was not unanimous. What the hell was Jeffery Lacker thinking? Here's an example of his viewpoint from April that may shed some light:

“In the wake of the destruction caused by two hurricanes, energy prices had surged. From the end of 2004 to the peak last fall, crude oil prices rose 56 percent, wholesale natural gas prices rose 129 percent, and retail gasoline prices rose 70 percent. To some, it seemed obvious that the high energy prices would lead to a significant and persistent reduction in consumer spending, which would bring overall economic activity to the edge of recession. That didn’t happen.”

Clearly, Mr. Lacker hails from the Instantaneous Transport Economic School, where economic change is negligible if people aren't on the dole the next day. Who was his professor, I wonder, because it sure wasn't Kreskin or Karnak:

WASHINGTON - The efficiency of American workers slowed sharply in the spring while a key gauge of labor costs rose at the fastest rate since late 2004.

The Labor Department reported that productivity — the amount of output per hour of work — slowed to an annual rate of increase of 1.1 percent in the April-June quarter, down from a 4.3 percent rate of increase in the first three months of the year.

So workers are having the temerity to demand more wage gains, eh? Can't have that. Here's to opening the betting pool for how many of the Fed governors will take Lacker's side come the next meeting.

Posted at 04:29 PM | TrackBack

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Sunday Housing News: The Lottery

Buying a home is a roll of the dice in even the flattest seller's market. There are so many variables that can turn the locked deal into a nightmare in less than an instant. And in today's market, with extreme prices at one end and declining consumer power at the other, there's more of a need for assistance and building mixed markets than ever before.

The New York metro area is taking a number of novel approaches to the "workforce housing" conundrum--building units affordable enough for middle-income families to live in, but not branded with the stigma of "subsidized welfare" projects that have plagued the issue in the past. The struggle that Long Island is going through is a welcome illustration of how hard a project like this can be--you have to negotiate everything from water rights to NIMBY exurbanites. This requires a lot of horse-trading and delicate negotiation:

Mr. Elkowitz of the housing partnership said making affordable housing profitable for a builder requires creative financing using public funds, often garnered by the housing partnership, and the cooperation of several forces: town zoning boards, mortgage banks and county spending on infrastructure.

Mixed housing isn't just great from a cultural and infrastructural process, but it's good for business as well. Getting the rich and poor to live together can build new markets, new communities, and hopefully more business. Naive, I know, but it's not beyond the realm of the possible. After all, no one thought that Chicago's Cabrini Green could be rehabbed:

He and Peterson are convinced – along with many scholars of the culture of poverty – that people learn by example. Living among people who go to work every day and seek to improve their families' lives rubs off on welfare mothers.

Let's hope that NYC mayor Michael Bloomberg's big affordable housing gamble reaps equally positive returns and doesn't come up snake eyes. :)

Posted at 03:21 PM | TrackBack

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Fed Watch: All Eyes On Ben

The latest paltry job and growth numbers are leaving the chattering class more and more convinced that Bernanke will guide the Federal Reserve to...well...they're not sure:

You now have a feel for the Fed's new conundrum. The economy is slowing, enough that the Fed could hold off raising rates, but inflation just won't cooperate. Does the Fed gamble that inflation is indeed lagging the economy and hold off raising rates on Aug. 8?

Or do they stay the course, putting into effect one final rate hike for good measure before sitting back and taking in the economic and inflation scenery?

It really comes down to what the Fed deems is the most important issue facing the economy--high prices or little growth. As I've said before, an increase in wages would help cushion the multiple body blows of rising energy costs, consumer debt, and so on. Unfortunately, this analysis from Peter Cohan paints a much gloomier picture of where Ben's head is at:

If Bernanke cared about consumer price increases, he would keep raising interest rates. However he cares about wage inflation. Thanks to bankruptcies in the airline and auto parts industries, layoffs in the auto industry, a rise in outsourcing, and competition from China and India, employers have been able to keep wage increases to a minimum.

Bernanke's obssession with the last war is why Bush chose him--his policies are all about ensuring companies stay solvent and have hoards of capital to amass, while consumers continue to take the shock to the 'nads.

Given that, this video from the Columbia Business School folks about the guy who got passed over for the nod as Fed head in favor of Bernanke is not only even more prescient, but funny as all hell:

Posted at 12:45 PM | TrackBack

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Buying And Selling: Realtors ph3r teh Internetz!!!111

CNet's Declan McCullagh has an amusing take on the brewing battle between online listing services and the real estate establishment. It hits all the good points--fear of disintermediation, the Justice Department lawsuit, the consumer demand for more information, and where agents' priorities really lie:

At this week's conference in San Francisco, discussion veered between how to use the Internet to attract more customers and fear that more Americans would switch to flat-rate Internet brokerages.

A typical audience question: "Can you tell us the future of commissions?"

Switching to a flat-fee system with bonuses would remove the psychological pressure realtors exist under which forces them to push the sale at all costs (pun intended). If the majority of the free world can live within a salaried, non-commission paradigm, then the people associated with such a huge financial transaction can do the same.

The comments are even more interesting, in fact. Check this out:

Consumers are unfortunately getting a load of bad info from internet sites when doing their information gathering. Places like Zillow do not give accurate information on home values...

Now, jump a few comments ahead:

It's true that freely available information on the Internet concerning real estate, the few that there are, isn't totally accurate. But this is because of the stranglehold on the information by the realtor associations. If these types of accurate information that the realtors have are more widely available, then consumers can do some of the work themselves and the lucrative commissions that realtors currently enjoy will no longer be justifiable.

There will always be a need for agents on both sides of the transaction, just as the work that goes into collecting and publishing these listings should be rewarded. But by unlocking the information troves of the MLS and enabling real-time accuracy of "guesstimate" sites like Zillow, it will force all of the players involved to bring their best game to the table. Agents will make more money by doing better work, buyers will spend less money to get the deal closed, and sellers will save money that currently goes into brokers' pockets.

It's not a panacea, but it's a start. Information really DOES want to be free. :)

Posted at 04:59 PM | TrackBack

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Housing Market: Repetitive Motion Injury

Some say that the definition of insanity is doing the same thing over and over again and expecting a different result. If that is the case, then the recent statements by new Treasury Secretary Hank Paulson are a prime example:

Paulson made no changes in U.S. policy, saying that a strong dollar is in the national interest, and calling on China to embark on structural reforms that would create more flexibility in its currency and allow for greater domestic consumption. He said the fiscal deficit is improving, but its long-term stability depends on reforms in entitlement spending. Asked if the economy faces a recession in the near term, Paulson declared, "Absolutely not."

Not only is Paulson apparently on the same well-trod path that John Snow took before his unceremonious exit, right down to the "Get China into debt" philosophy, but he's seriously drunk the Kool-Aid and thinks that reforming Social Security is our most pressing problem:

He offered no new ideas on how Social Security could be reformed to meet the financing needs of 78 million baby boomers, but he said a solution must be found soon.

"The longer we wait to fix this problem, the more limited will be the options available to us, the greater the cost and the more severe the economic impact on our nation," he said.

And in other news, the "no recession" economy continues to demonstrate its resilience to shock...or not:

"By now, it is evident that consumer spending is showing the strains of elevated gasoline prices and a slowing housing market, while for debt-laden consumers higher interest rates have increased the burden of monthly debt service payments," said Stu Hoffman, chief economist for PNC. "With little relief from any of these factors likely in the near term, consumers are becoming increasingly reliant on wage growth to support spending."

As long as prices outstrip wages, and interest rates continue to rise, consumers will pull inward and spend less. Debt keeps consumers from spending, and the more they are pushed into debt, the less they have to leverage. This is rapidly becoming a zero-sum game, and (hopeless that I am at the prospect) Paulson needs to stop playing politics and face the facts.

(Image courtesy of Transcription Gear.)

Posted at 03:14 PM | TrackBack

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