Real Estate News

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President Obama announced his intent to appoint several individuals to serve on the Recovery Independent Advisory Panel. One of them is Edward Tufte who has been my inspiration to look at the housing market with data in different ways. He’s taught me how to see through the BS in charts and tables we are spun with nearly every day – and no – I am not one of his PR people.

He says:

I will be serving on the Recovery Independent Advisory Panel. This Panel advises The Recovery Accountability and Transparency Board, whose job is to track and explain $787 billion in recovery stimulus funds.

Anyone who has been reading this blog since the early days (2005) knows I am a big fan of Edward Tufte, professor Emeritus of Political Science, Statistics, and Computer Science at Yale University. His self-published books are fascinating and cover the way we present information. I’ve attended one of his seminars when he came to New York.

• The Visual Display of Quantitative Information
• Envisioning Information
• Visual Explanations
• Beautiful Evidence

I especially love his essay on Powerpoint, the worst way to present information in the history of mankind (ok, so I get a little emotional about the topic). Here’s a sampling.

Continued here:
[Graphing Stimulus] Edward Tufte Presidential Appointment

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The Obama administration has come up with a radically aggressive plan to reduce foreclosure activity which has remained alarmingly high. The key ingredient is to encourage lenders/services to allow more short sales – selling the home for less than the amount of the mortgage without going after the debtor for the shortfall. Mortgage modification plans have not been successful to date.

The New York Times page 1 story today Program Will Pay Homeowners to Sell at a Loss does a masterful job in presenting the program and summarizing the problems of the issue to date, I just wish the title wasn’t so simplistic.

Perhaps I am missing the point, but I feel like this solution has focused on the wrong side of the mortgage default equation. Are servicers going to forgive $200,000 in principal to get $1,000? Are homeowners going to move forward because they get $1,500 (more than the servicer) in relocation fees?

The flood of short sale requests are already overloading many bank’s ability to handle the administration of this crisis – hard to see them able to manage the process any more efficiently.

However, the only way out of this crisis is a solution with principal foregiveness in the equation or people will simply walk away and perhaps the servicer/lender ends up being hurt more. No easy answer I suppose.

Real estate agents will determine property value

One mechanical aspect of this process which demonstrates the administration’s and government in general’s disconnect in the need for neutral analysis of value. Real estate agents, who are paid to sell property, determine the “reserve” price above which the lender/servicer must adhere to.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Mr. Paul, the Phoenix agent, was skeptical. “In a perfect world, this would work,” he said. “But because estimates of value are inherently subjective, it won’t. The banks don’t want to sell at a discount.”

How about a neutral party in the process? A qualified appraiser? (not the yahoos doing AMC work in high volume). I would assume the agents selecting the number are not allowed to sell the property (huge assumption on my part) but why not have someone who can’t ever sell the property, whose full time job it is to estimate market value, be assigned that task?

The devil is in the details.

See original here:
[New Mortgage Program] Getting Paid To Sell Short

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One of the best social media strategies for real estate agents is to become your network’s trusted advisor. And of course one of the best places to put that strategy into play is, without a doubt, on Facebook. So you create a profile and import your sphere list, now what?!

Well, as a real estate professional you can easily showcase your expertise and knowledge about your market area and industry trends. One of the ways I suggest doing this is by posting status updates that offer relevant info and/or tips your network would find helpful. Now some of you are already REALLY GOOD at sharing this type of info…and you might be so good at it that you decide to create a Fan Page to focus more intently on business.

Fan Pages are becoming more popular among real estate professionals for several reasons. Most importantly, it is more widely accepted (and preferred by Facebook) to utilize a Fan Page for promoting your business and sharing comprehensive listing data. NOTE: There are some people that truly ROCK the essence of Facebook and have mastered the art of the 3 P’s (personality, passion, profession) from their profile and don’t need to maintain the separation of church and state….or personal and professional. However, for many the draw of a Fan Page breaks down to the ability of sharing listing data, as well as relevant market data in a more appropriate fashion…with an opt-in network of interested folks.

Up until now adding real estate specific applications to a Fan Page has been, to say it nicely, less than effective. Many of the listing applications copy Website functionality and seem to have forgotten the nature of this network. Ideally, these applications need to offer more than just listing information but a way to provide interaction….or a rich data set of relevant information.

And that is why I was very excited to hear about  a new application for agents that launched this week! The Roost Social Real Estate Application is the first app of its kind to offer agents the opportunity to:

• Showcase their expertise from a Fan Page
• Provide valuable market data and information for a particular area (city) to their network
• Easily customize and install on your own Page (in 5 minutes!)
• Avoid the cost of hiring a professional to customize a local resource tab for you (this app naturally integrates local market trend info via Altos Research, active listings via Roost, mapping via Google, school info via Education.com, and neighborhood info via Walkscore).

The Roost Social Real Estate Application is clearly a value-add now…but there are more goodies to come with this app! Derek Overbey and Alex Chang of Roost took some time to share some important details about using this new app, as well as what’s in store in the future! In the coming months, Roost will add the ability to share market data for up to 5 cities! In addition the feature scope will widen to include featured properties, testimonials, and IDX compliant MLS search (inside Facebook)!!!

I have to say it’s very refreshing to witness a company like Roost incorporate Facebook functionality and real estate expertise…and deliver it to agents for FREE! Yep, this app is currently available on Facebook for FREE. You can add it to you Fan Page today, simply search “Roost Social Real Estate” once logged in to Facebook. Several agents have already taken advantage of the opportunity to add the app, check out Brad Coy’s Page,  Heather Elias’ Page, and Engel Real Estate Page for great examples of customization.

To add the Roost Social Real Estate Application to your Fan Page, follow these steps:

(1)    Visit the Roost Social Real Estate Application Page inside Facebook, and click on “Go to Application”.

(2)    You’ll be prompted to customize the app to your selected Fan Page by selecting: “Create Profile”

(3)    Next customize the application with your contact information, logo, and informational verbiage. NOTE- You can update the marketing verbiage periodically to share the latest trends and tips with your local network.

(4)    Finally, you’ll need to add the app to your Page. FYI- Facebook must render some images of the app so if it doesn’t load completely at first, be patient!

Once the tab has loaded onto your Page, you can direct your clients to the info by announcing it via a status update on your Profile, and even on your Fan Page! Also, be sure to share your Facebook Page URL on all your marketing. Write a blog post letting your clients now about this new feature on your Page, or create a postcard to share with your farm.

Related Posts

• AgentPress: The Ideal Theme for Real Estate Bloggers
• Real Estate Bloggers: Increase Your RSS Subscribers with Facebook
• 7 Ways to Syndicate Your Real Estate Listing

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Add To My Page: Roost Social Real Estate App

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It’s time to share my Three Cents Worth on Curbed, at the intersection of neighborhood and real estate.

Three Cents Worth:
Reading the Tea Leaves of Listing Inventory

This week I thought I’d try to compare the listing inventory trend in the first two months of any given year and see if there was a corresponding change in re-sale price per square foot adjusted for inflation. The thinking is that faster inventory growth means more weakness in price—pretty basic.

[Click to expand and read full post on Curbed]

Check out previous Three Cents Worth posts.

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[Three Cents Worth #142] Reading the Tea Leaves of Listing Inventory

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Loan Modifications have taken over the financial news in the last year. This is not at all surprising, with over 11.3 million people, nearly 25 per cent of all homes, with underwater mortgages; this is an issue that has the nation’s attention.

This makes any research into the issue of loan modifications and their effect on foreclosure of great interest to borrowers, banks, and the government.

One professor whose research has received a lot of attention is Sanjiv Ranjan Das, from the University of Santa Clara in California. Last year Das attacked the underwater issue, this refers to borrowers whose mortgage balances are larger than the market value of their homes. The underwater issue is one of the big problems the United States housing market has to deal with.

Professor Sanjiv Ranjan Das had a large and interested audience to his research; one big fan was his namesake Sanjiv Das, a top executive at CitiMortgage, the fourth biggest bank in the US, lender and servicer of over seven hundred billion dollars in mortgages.

Interestingly, these two men, one a professor and the other a banker, share more than just a name. Not least among the things they have in common is an education at the Indian Institute of Management.

Now they are working together on research that seeks to explain the behavior of borrowers that are stuck with underwater homes, unemployment and mortgage payments they cannot afford.

Interestingly the partnership between the two Das, began when the professor started receiving emails meant for the CitiMortgage Das. However, the accidental emails were great for the research of Santa Clara’s professor.

According to Das’ research the perfect or optimal loan modification includes an element of forgiving some of the balance in the loan. This is not easy for bankers to accept. Reducing the balance of the loan increases the speed at which the bank must accept losses and there is the added fear that it will create a counterproductive culture among borrowers.

However research has shown that re-defaulting on mortgages is much higher among borrowers that do not receive a reduction of their mortgage balance. This is because having an underwater home, a house with negative equity, makes many homeowners feel there is no financial sense in keeping their homes. However, when a principal reduction is carried out, even if only a modest one, re-defaulting on mortgages is sharply reduced.

Nevertheless lenders still shy away from this radical loan modification method and prefer using interest rate reductions and term extensions to reduce the monthly payments of troubled homeowners.

The good news is that the research carried out is getting the attention of the right people. The more is studied about the effects of income shock, or wealth shock, on troubled borrowers the more effective loan modifications and debt management as whole will be.

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Appraisal Journal Study Cites Flaws In Zillow AVM

Mar 3

Real Estate

[click to open report]

Zillow has been one of the most visible and talked about AVMs (Automated Valuation Models) in the US and enjoyed considerable press during the housing boom. Of course they have always been at the mercy of the quality of public record data despite their technology prowess.

Perhaps they were more guilty of overhyping the reliability of their “Zestimates” in the early days by presenting value estimates precisely down to the dollar. But hey, it was cool to see how much your neighbor’s house was worth.

There was an interesting article in Valuation Review (subscription) and HousingWire.

The study concludes that:

Zestimates on Zillow.com are no more accurate than homeowner’s estimates.

When it comes to using the Zillow.com automated valuation model (AVM) to get a free listing price on a house, users may be getting what they paid for, according to a report published by the Appraisal Institute that finds the Web site overestimates the values on homes almost as often as the actual homeowners.

Zillow has become the real estate punching bag to the real estate community. And once again, they are on the defensive in the media coverage of this report.

Here’s the issue:

The key issue regarding Zillow’s Zestimates is whether they reflect transaction prices. Zillow has been described both as “a useful site” and as “categorically wrong.” There have been many instances of praise and many instances of complaints by homeowners using the Web site to estimate the value of their homes. Realtors in general have also been critical of the values produced by Zillow.

Agents had issues with over valuation because they tended to set seller’s expectations too high. Of course, appraisers have an ax to grind with a service that was perceived to trivialize their expertise in valuation.

The report, “Zillow’s Estimates of Single-Family Housing Values,” was authored by Daniel Hollas, Ronald Rutherford and Thomas Thomson, doctors in economics, real estate and business, respectively. The report was published in the quarterly technical and academic publication of the Appraisal Institute, the nation’s largest association of real estate appraisers.

View the report.

Excerpt from:
Appraisal Journal Study Cites Flaws In Zillow AVM

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Why Banks Aren’t Going To Ease Mortgage Underwriting Anytime Soon

Mar 3

Real Estate

Source: NY Times [click to expand]

Floyd Norris’ Off The Charts column “Banks Out of the Woods? Maybe Not” had some sobering news from the FDIC.

• $1 of $8 in outstanding 1-family mortgage loans is to a troubled borrower.
• 40% of 1-family residential construction loans delinquent or uncollectible.
• Number of outstanding loans falling, even after adjusting for write offs.
• 2.9% of loans written off in 2009, highest rate in FDIC history.

Some good news?

• Fewer loans are going bad – 30-89 day loan arrears falling

However this good news may be misleading – a regulatory change allows banks to only write down the exposure.

Source:
Why Banks Aren’t Going To Ease Mortgage Underwriting Anytime Soon

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The Obama Loan Modification Plan, An Overview

Mar 2

Real Estate

This Thursday the Obama Loan Modification Plan, HAMP, will be a year old. It was on the 4^th of March, 2009 that the Obama administration started the largest and most ambitious homeowner’s aid package since the 1930s. The goal was to stop the wave of foreclosures that was destroying the housing market. The Government’s reply was huge. The aim was to help four million homeowners avoid foreclosure and they were willing to spend $75 billion to do so. How are things looking as we approach HAMP’s first birthday. By December 2009 there were nearly 760,000 loans in the trial stage of the program. This three month trial stage is designed to test if the homeowner will pay his modified loan for three months before the modification is final. However, only 31,000 homeowners had actually received a permanent loan modification by the end of 2009. Of these many had seen only the slightest of changes to their monthly payments. The Obama administration realized they needed to do more, and quickly. This triggered a list of amendments and countermeasures designed to speed up the process and open the doors to more homeowners. Soon it became obvious that the issue was not the interest rates of bad loans that were hurting homeowners but the increasing rates of unemployment that was reducing the income of homeowners that could not afford to pay for their mortgage. In fact, the fastest growing demographic in the foreclosure market consisted of homeowners with prime loans that had lost their jobs. From the beginning of the program, the Treasury Department made it very clear that the program would not cater for families that no longer had an income because of losing their job. The aid was focused on families whose income had shrunk but could still afford the payments of a modified loan. Another issue was the complexity of the loan modification process. Homeowners complained that mortgage servicers were not consistent, lost important documents regularly and did not provide accurate information. Mortgage servicers on the other hand explained that homeowners often did not provide the right documentation and were less than honest when filling forms. Treasury reacted by simplifying the system and providing greater concessions to lenders and mortgage servicers. Industry leaders often made the valid point that the HAMP plan incentives did not cover the costs and it was better for them to continue charging fees from delinquent homeowners and foreclosure proceedings than approve loan modifications. The reaction was to increase the incentives and the arm twisting of lenders that would not comply with the program’s expectations. The incentives did become rather generous for both servicers and borrowers. Every loan a servicer modified came with a $1,000 upfront payment, with an extra thousand dollars every year the homeowners was current on payments. This means the Treasury will pay $1,000 every year the borrower is not delinquent, to reduce the loan balance. However the biggest subsidy was offered to reduce the actual monthly payments of mortgages. If the lender could reduce the monthly payments to 38% of the borrower’s income the government would pay for the cost of reducing the payments to 31% of the family’s income. The problem is that these measures have not been sufficient to stem the increase in foreclosures and new guidelines are being worked on to look for a solution. Unfortunately the prospects do not look good for the second year of the Obama Loan Modification Plan.

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Wall Street Bonus Money Flows Like Molasses

Mar 2

Real Estate

Note to readers – Matrix was hacked and we moved to a new host. Lost some of the graphics as a result – will get back on track shortly.

[click to expand]

The Wall Street bonus pool rose 17% and average bonus per person rose 25%.

Wall Street bonuses paid to New York City securities industry employees rose by 17 percent to $20.3 billion in 2009, according to an estimate released today by State Comptroller Thomas P. DiNapoli. Total compensation at the largest securities firms grew even faster and industry profits could exceed an unprecedented $55 billion in 2009, nearly three times greater than the previous all-time record. In 2008, the industry lost a record $42.6 billion.

On the surface this sounds like there will be a big jolt to the NYC regional economy. The sector is an important economic engine, providing 25% of the income from 5% of the jobs. Every job lost on Wall Street causes the loss of 2.5 private sector jobs.

The higher growth in bonuses are bittersweet – while the average per person bonus was up because there was job loss in the sector. Arguably few jobs lost than forecast but it tempers the bonus impact on the real estate economy.

But bonuses are controversial especially when so many are struggling outside of Wall Street. President Obama fell prey to populist sentiment with his “Fat Cats on Wall Street” comments but now doesn’t “begrudge“ them (I’ve never been able to use begrudge in a sentence before).

Bonus income accounts for as much as 50% of total compensation for an individual.

But as John Mack, Morgan Stanley Chairman, has said

“I still don’t think the industry gets it,” Bloomberg reported the veteran banker as saying yesterday during an appearance in Charlotte, North Carolina (hat tip Huffington Post). “The issue is not structure, it is amount.”

My anecdotal feedback is that compensation seems to be about 70% restricted stock and 30% cash. And institutions like UBS are reportedly paying out half of the cash compensation now and half in 6 months.

That knocks the wind out of the “sales” (sorry) for a spring frenzy in the NYC housing market that has grown accustomed to a frenzy over the past decade. Still, it will help but I am skeptical about it helping above seasonal expectations, but who really knows.

[click to expand]

Source: New York State State Comptroller

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Wall Street Bonus Money Flows Like Molasses

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