Haunted House Trulia 2

We’ve been on the receiving end of boatloads of Halloween-themed press releases, but nothing really sticks with you like a cool video. That’s why I love this hidden-camera gem from Trulia, which rigs a cluttered Victorian with a murder back story with some pulleys and sheets for an old-school fright fest!

Jump for the full video!

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With the advent of photo-heavy online listings visible from anywhere, video tours, and slideshows, many Realtors have already ordered a tombstone for the Open House. But should we start eulogizing a long-held practice that can give sellers much-needed feedback and turn looky-loos into serious buyers?

That’s the argument Brendon Desimone poses in his blog post, saying that serious buyers are developed over time, and just browsing listings online won’t sell them on one particular home.

“Open houses give buyers a no-pressure environment in which to deepen their education about the local market, so they can make a more informed decision,” Desimone says. “A buyer may use an open house as a first showing of the property. But when buyers become serious about a home, an open house provides them another opportunity to spend time in the home, to get to know it better, without the confines of a 15-minute private appointment.”

I agree with some of what Desimone says, but there are so many websites out there that break down important market information, giving buyers an economic outlook on a property long before they’re ready to commit. Trulia does a great job of this with its graphic interface and easily accessible message boards that facilitate discussion about neighborhoods. Let’s use our Friday Four Hundred, 5802 Monticello, for example. To the right you can see agents and potential buyers talking about the neighborhood at length — a wonderful resource for buyer education.

Trulia 5802 Monticello screenshot

 

Of course, what you don’t get from all of this buyer education is a feel for neighborhood traffic. Is this home near a noisy intersection? How close are you to shopping? Are there other families and pedestrians nearby? That’s where an open house really provides an added benefit. Buyers can linger, walk around the neighborhood, get a feel for their surroundings.

Of course, one open house is a lot easier to manage than a gazillion individual showings, says Desimone. Agreed, but it also opens the home to people who aren’t interested in buying at all, including neighbors and thieves, as Rogers Healy recently mentioned on Fox Business News’ The Willis Report. But they do give agents and sellers an opportunity to get some feedback on a listing, Desimone says.

“A good listing agent will want to see as many buyers come through as possible to gauge their reactions to the home,” he offers. “Are people walking in and out quickly? Or are they hanging around? What questions are they asking? What are their biggest hang-ups or concerns? This is the kind of valuable information you can’t get online.”

Agreed. You won’t get a lot of feedback from buyers who shop mostly online, and a seller’s agent won’t likely be at showings, so besides critiques from stagers and other agents, this is likely the only direct feedback sellers can get.

What do you think? Is the Open House a relic, or is it relevant?

With the advent of photo-heavy online listings visible from anywhere, video tours, and slideshows, many Realtors have already ordered a tombstone for the Open House. But should we start eulogizing a long-held practice that can give sellers much-needed feedback and turn looky-loos into serious buyers?

That’s the argument Brendon Desimone poses in his blog post, saying that serious buyers are developed over time, and just browsing listings online won’t sell them on one particular home.

“Open houses give buyers a no-pressure environment in which to deepen their education about the local market, so they can make a more informed decision,” Desimone says. “A buyer may use an open house as a first showing of the property. But when buyers become serious about a home, an open house provides them another opportunity to spend time in the home, to get to know it better, without the confines of a 15-minute private appointment.”

I agree with some of what Desimone says, but there are so many websites out there that break down important market information, giving buyers an economic outlook on a property long before they’re ready to commit. Trulia does a great job of this with its graphic interface and easily accessible message boards that facilitate discussion about neighborhoods. Let’s use our Friday Four Hundred, 5802 Monticello, for example. To the right you can see agents and potential buyers talking about the neighborhood at length — a wonderful resource for buyer education.

Trulia 5802 Monticello screenshot

 

Of course, what you don’t get from all of this buyer education is a feel for neighborhood traffic. Is this home near a noisy intersection? How close are you to shopping? Are there other families and pedestrians nearby? That’s where an open house really provides an added benefit. Buyers can linger, walk around the neighborhood, get a feel for their surroundings.

Of course, one open house is a lot easier to manage than a gazillion individual showings, says Desimone. Agreed, but it also opens the home to people who aren’t interested in buying at all, including neighbors and thieves, as Rogers Healy recently mentioned on Fox Business News’ The Willis Report. But they do give agents and sellers an opportunity to get some feedback on a listing, Desimone says.

“A good listing agent will want to see as many buyers come through as possible to gauge their reactions to the home,” he offers. “Are people walking in and out quickly? Or are they hanging around? What questions are they asking? What are their biggest hang-ups or concerns? This is the kind of valuable information you can’t get online.”

Agreed. You won’t get a lot of feedback from buyers who shop mostly online, and a seller’s agent won’t likely be at showings, so besides critiques from stagers and other agents, this is likely the only direct feedback sellers can get.

What do you think? Is the Open House a relic, or is it relevant?

New Home Construction

I know “housing shortage” should sound very ominous, but really, we should be celebrating! Thanks to a growing job market, Texas is adding more workers faster than it can build housing for them. According to this story in Bloomberg News, there are bidding wars all over Texas, with some sellers turning down cash offers that would have seemed ample just a few years ago.

While the Bloomberg story is a bit general and doesn’t show that in some neighborhoods homes sit on the market for 90 days or more depending on location and price, it sheds an interesting perspective on why Texas wasn’t hit so hard when the housing bubble burst and why home builders are slow to meet brisk demand:

Values also didn’t inflate as much because builders could move quickly to meet demand given the state’s abundance of land and relatively easy zoning requirements. Texas home prices fell about 2.5 percent from a peak in 2007 to a trough in 2011, according to the Federal Housing Finance Agency.

The state’s homebuilding industry, which fell into hibernation during the recession, awoke to a rebound that it was unprepared for. Developers, constrained by banks reluctant to make construction loans, had few lots in its backlog, and many homebuilders closed or downsized. Trade workers left for jobs in the energy industry as oil prices surged.

You have to read some of the anecdotes in the story, too, which we’ve heard some version of from Realtors in the Dallas area. In the story, CoreLogic economist Sam Khater says that Texas’ surge in prices “begins to defy fundamentals,” noting that the swing from moderately brisk to frenzied isn’t driven by normal market forces. Instead, Khater wages, it is driven by investors.

Which brings up another point: Are investors driving up prices too much? According to Trulia’s “Bubble Watch,”  Dallas, Austin, San Antonio, and Houston residential real estate markets are becoming “overvalued.”

Trulia Bubble Watch Table

 

 

(Table: Trulia)

Interesting to see these cities among locations such as Orange County, Calif., Los Angeles, San Jose, San Francisco, and Portland, Oregon. And while Dallas is experiencing a surge in both demand and prices, it’s heartening to know that we came in last.

Still, these numbers and observations seem a little too general for me, as residential real estate is best gauged looking from home to home within a neighborhood, rather than comparing areas as disparate as Portland to Dallas.

So, what do you think? Are these Texas cities poised for another bubble? Or will low inventory and high demand maintain the market for the foreseeable future?

for sale signI have never met a real estate agent who likes Trulia or Zillow’s market home valuation estimates. Excuse me, “Zestimates”.

I have never met a real estate consumer who didn’t like searching for real estate online and being able to get values instantly. We live in a real time society, which means, we want information when we want it, usually RIGHT NOW!

Consumers think Realtors don’t like the Zillows and Trulia’s because they take over the “agents’ job”. But most home buyers I know start on these sites, then after they’ve noodled around with neighborhoods and homes styles and school reports, call an agent. Thus the home valuation estimates become tools in the preliminary search process for a new home.

But now an expert is proposing something unique: could these home valuation estimates be distorting home values? And the market?

Clifford Rossi, a business professor at the Robert H. Smith School of Business at the University of Maryland, wonders if “arming consumers with such tools without providing them with disclaimers on the limitations of these models can magnify price volatility in housing markets and hurt house sales.”

In an over-simplified nutshell, he is saying that no statistical model can know the market conditions and intricate attributes of a single property. Even in a subdivision where homes are basically Levittown-like replicas of each other, differences exist.

Rossi says “lying behind online home value estimators are a host of complicated statistical models that attempt to predict a home’s price based on comparisons with similar properties (comparable sales) using county property record data on a variety of attributes such as house square footage, number of bedrooms and bathrooms, among a number of features unique to that property. ”

Yes, aggregated data has come light years but is not a perfect science and significant information lags exist. And when we rely on “modelled outcomes” like, say, we did prior to the real estate bust, well things don’t always work out like the models say they should. In fact, it leads to a misunderstanding of risk.

These models have been around for a number of years and during the boom years were used extensively behind the scenes by banks (including those I worked for) as well as Fannie Mae and Freddie Mac as a way of reducing processing costs. During these years, regulatory agencies identified a number of significant limitations surrounding the use of these models. They tend to work better on homes of similar type and quality but break down quickly on custom homes, homes in rural areas, small neighborhoods and nonstandard property features. Further, no statistical model can understand the market and condition issues of a particular property. For example, these models cannot factor in property upkeep or whether the property sits directly across the street from a gas station, which could reduce its value.

Yes, we know that. Real estate is a hyperlocal story. But how can these ‘Zestimates” hurt a flea? I mean, most of us know they are off but it’s fun sometimes to see the numbers they come up with. But what if someone uses them to formulate an offer on a property?

Of some concern for regulators is the tradeoff between the percentage of homes where an automated valuation model could be used (known as AVM coverage) and the accuracy of the estimated value. The greater the use of the model across property types, the higher the valuation errors, typically. Those tradeoffs remain, and as we have learned from the crisis, anytime we become overly reliant on modeled outcomes it leads to a misunderstanding of risk: so saith Rossi.

In the specific application of online valuation engines, buyer offers can be highly influenced by the estimates generated from these models. In forming an offer, a buyer needs to obtain a reasonable view of what a home is worth. LOCAL appraisers are a good place to start. The values displayed by online real estate sites provide an easy way for a buyer to develop an offer. Let’s say they don’t know that the numbers they are looking at are at least 6 months old and many plusses about the house were not even recorded. Many homeowners fail to report property improvements, thinking they are saving on property taxes.

So what you get, says Rossi, is a lower offer based on flawed information. Flawed, old, stale information.

…Such outcomes create an artificial drag on house values during recovery periods and amplify price appreciation trends during boom periods given potential data lags in market pricing. In addition, the use of such valuations in forming bids can lengthen or prevent real estate transactions from being consummated given large potential gaps between sale and offer prices using these estimates.

I have to admit, I never thought of it that way. Did you?

Trulia Heatmap Tornadoes Dallas

 

(Graphic: Trulia Heatmap From NOAA tornado data)

love what Trulia manages to do with a little data. This company is consistently making the best tools that break down statistical information, helping homebuyers decide which areas best suit their needs. 

Their newest tool, the Natural Hazards heatmaps, are perfect for seismophobics, potamophobics, brontophobics, and pretty much any other weather-related phobia you can think of. With data from the USGS, FEMA, NOAA, and the Forest Service, Trulia has created color-coded models showing which areas pose the greatest risk for these natural disasters.

Of course, if you plan buy wherever you want — data be damned — I’m sure these maps will help you negotiate your homeowner’s insurance policy. Take a minute to click around on their Trulia Local page for Dallas. It’s interesting stuff.

On the flipside, if you want to avoid natural disasters altogether, Trulia Economist Jed Kolko has compiled a list of the top-10 U.S. cities least likely to be hit with an act of God. Topping that list is Syracuse, N.Y., with Cleaveland and Akron, Ohio, in second and third, respectively. Fourth is Buffalo, N.Y., and fifth is Bethesda-Rockville-Frederick, Md.

 

Pain in the butt ad...First of, apologies for this visual, but can you believe this was an actual billboard for an agent? I shudder. I came across a most interesting article over the weekend from a site called Property Portal Watch: Why Redfin, Zillow, and Trulia Haven’t Killed off Real Estate Brokers. The article initially ran in Businessweek. Interesting, albeit long story, but I strongly suggest you read it. You know that 90% of all consumers now begin their real estate search for homes, condos or apartments on line now, right, this from the NAR. Still, brokers are handling more sales than ever and real estate commissions, in fact, have gone up, not down! The average real estate commission paid in 2011 was 5.4%, up from 5% in 2008. And U.S. real estate commissions are higher than the median commission rates abroad, with the exception of islands and resort properties.

 “Ten years ago almost no one started their home search online. And yet none of that value has come back to the consumer,” says Glenn Kelman, Redfin’s chief executive officer.

There was a time, back in 2001/2002 when I clearly recall agents getting worried they would go the way of travel agents. In fact, the co-founder of Zillow is none other than Rich Barton, the guy who put travel agents out to pasture by creating Expedia.com.

Think about of that for a moment: does anyone use a travel agent anymore to make plane reservations? I buy all my tickets on my iphone or online. My millennial kids don’t even know what a travel agent IS.

feature_redfin11_buyerschart__605The thinking back in 2004 was that perhaps real estate purchasing could be done much like buying an airline ticket, or booking a hotel. As you learn in this fascinating story, it was David Eraker, the original founder of Redfin, who first put real estate search on line for consumers. Eraker was a Seattle-based geek (who had dropped out of med school) who was frustrated he could not find a condo on line and thought the irrationality of broker commissions that remained fixed… regardless of housing supplies or competition among agents well, sucked. So in 2002, working with a Yalie partner who had a degree in electrical engineering,  the dynamic duo went live with a site that displayed homes for sale on a digital map in Seattle.

Redfin’s initial philosophy was a bit different from the Redfin of today — I have a story on the Dallas Redfin group coming up, impressive group of agents. Redfin hoped to eliminate the agent or minimize his/her role in the home purchase, much like the Expedia model. That is not the Redfin of today. The idea was to save consumers money — whittle down that real estate commission.

Over at Zillow, the founders were thinking along those money-saving lines, too. At first they thought they could hold online auctions for homes as a way to disrupt the status quo of selling homes. Rich Barton soon saw that real estate agents were not anything like travel agents:

 “It was obvious to us, regardless of how relatively frustrated consumers were with the whole process, how important the agent relationship was to customers. No robots were going to eliminate the agent,” Barton says.

No, no robots and no online platforms. Quicken and Quickbooks sure didn’t eliminate our CPA, just helped me organize financial information. When it comers to  complicated, expensive, emotional, life-changing purchases, people still want someone with experience to guide them through.

feat_redfin11_agentschart__605According to this article, economic theory suggests that the relationship between an agent and a buyer is not optimal because of the diverging, almost conflicting, interests of the Principal (the customer) and he Agent representing him or her. Agents make their commission by selling the home. They also bear the brunt of marketing costs, though increasingly I am hearing of agents who ask the Sellers to cover the cost — the parties, the ads, the gas! Do some agents pressure sellers into selling quickly and accepting lower offers just to make a quick buck — we have discussed Pocket Sales here at length? The theory is that if the home sells for the maximum amount the market will bear, it’s a win/win for the agent broker and the seller. The conflict may be even worse for buying agents — do they pressure clients to pay too much to fatten their commission?

In 2008, Stanford University economics professors B. Douglas Bernheim and Jonathan Meer published the results of their study of nearly 30 years of house and condo sales on the university campus. They found that an owner’s use of a broker to sell their property reduced the eventual selling price by 5.9 percent to 7.7 percent, compared with homes sold by the owner directly.

Do you know what I think when I see a FSBO? I make it a mental game to see which agent will pick up the listing in 3 months. There are exceptions in hot neighborhoods and hot markets, but fewer than ever homeowners are selling their own homes without an agent:

Yet only 9 percent of homes were sold directly by owners in 2012, down from 13 percent in 2008, according to the National Association of Realtors. As one might expect, members of the housing industry argue that people simply value the expertise and service that agents can provide and are nervous about venturing out on their own or trusting an online discounter for the most complicated transaction of their lives.

What do you think about all this? Will the current model ever change? I think it may at some point, at some lower price levels, where the marketing costs and time input may not be worth the commission. Mid to high end homes will always, always have an agent.

Last October, at a Seattle technology conference, an audience member asked Spencer Rascoff, Zillow’s CEO, if sales commissions were ever going to decline. “There are other startups that are trying to break down those agent commissions, and I think most of them will fail,” he said. Rascoff said later in an interview that “consumers don’t really care about commissions. They say they care, and they talk a big game in the off-season. But when push comes to shove and it comes time to sell their home, the transaction is so infrequent and so highly emotional and expensive—and consumers are so prone to error—that they turn to a professional.”

 

 

Trulia Heatmap

What a cool feature! I love that Trulia is coming up with cool ways to make their cache of data more accessible. If you’re a buyer and want to know if it’s more prudent to rent or to buy a home in your city, check out this cool color-coded heat map.

My favorite feature is that you can adjust the data points you want to see, like rent/buy ratio and rent prices, without having to do all the rigamarole that usually comes with finding the data you need. Hopefully Trulia will come out with a similar map feature for first-time homebuyer data. Now that would be enlightening.

Of course, some of the results will stun absolutely no one. Of course it makes more financial sense to rent in NYC, San Francisco, and Seattle. The shocker for me is that corresponding rent prices vs. rent/buy ratios were high in Kansas City, Mo.,  and Memphis, Tenn.

Anyway, go fiddle with the interactive map and post your personal insights below!

Trulia RentvBuy Graph