Matrix Blog

Archive for May, 2006

[Curbed] Three Cents Worth: Co-ops Move and Shake With Rates

May 31, 2006 | 8:46 pm | | Charts |

Its Wednesday, so its that time of the week to provide my Three Cents Worth, as a post for Curbed, a real step-mother of a real estate web log.

Curbed: Three Cents Worth: Co-ops Move and Shake With Rates

Previous posts can be found here.

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Its A Good Time To Be A Famous Architect, Even If You Are Not That Famous

May 31, 2006 | 12:05 am | |

Source: NYT

I must admit, I have really enjoyed the burst of creativity in new architectural design as it relates to residential housing. It became all the rave during the later years of the recent housing boom. Some architects were name-brands before this trend but others have been marketed so heavily by developers that they become famous by their recent works.

I was reading the article Miami Is All About Its Celebrity Architects [NYT] this weekend and it occured to me:

  • Isn’t this the same Miami while gushing about its architecture that has a massive oversupply of new condos coming online over the next year?

  • Isn’t this simply a game of oneupmanship? Increased competition has raised the stakes for differentiation rather than some clever awareness of changing lifestyles?

With all the Starchitect developments in the major metro markets (and its all virtually the same players in the major markets), honestly, how many have been runaway hits in the past 3 years? …Sold out quickly or at least faster than the norm?

Have developers simply been caught up in the hype? Can we mark the beginning of the end of the boom when their use became popularized (say mid-2004)?

I wonder.

Here’s a few of Starchitect articles of interest:
Celebrity Architects: Behind the Curtain Wall [The Real Deal]
Should colleges hire star architects? [Chronicle]
Condo Couture [NY Mag]
Playing the Fame Game [LA Dwtn]

Outstanding On Our Soapbox This Week: Appraisers Make Mistakes

May 31, 2006 | 12:03 am |

In this week’s Sounding Bored post on our other blog, Soapbox, Appraisers Make Mistakes, I tackle the delicate subject of what to do if the appraiser makes a mistake. After all, most of us are human.


[Sounding Bored] Appraisers Make Mistakes

May 31, 2006 | 12:01 am | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. I explore how to get an appraiser to re-consider the error of his or her ways.

Appraisers are human, well most of the time. One of the rights of passage for a real estate broker is to deal with the fact that on occasion, the appraiser is going to disagree with the sales price of the transaction.

A wise appraiser once told me: Everyone in the sales transaction is smarter than the appraiser because they already know the number. The real estate listing broker and selling broker, the mortgage broker, the lender and of course the buyer and seller all know the number. The appraiser is the last one to the party.

But sometimes it happens and when its does, life can be difficult for the appraiser. The buyer and seller threaten to sue, the mortgage broker may never use the appraiser again, same goes for the lender. The real estate brokers may never refer the appraiser their clients again.

So why would an appraiser want to go through this? Because its their responsibility, their job as an appraiser to estimate the value of the collateral (in a mortgage appraisal assignment).

Appraisers aren’t perfect, but they have everything to gain by being thorough, accurate, and honest. Encouraging an appraiser to engage in illegal activity in this era of widespread mortgage fraud could lead to a sanction against you and even to criminal prosecution for you and the appraiser. No transaction is worth that.

But what if the appraiser meant well, but either made an error or just didn’t understand the market?

The NAR in the latest issue of REALTOR Magazine provides the best way for a real estate broker to handle the situation and understand the appraiser’s position. Actually, the method they present is respectful to the appraiser and the process should only be engaged if the broker truly believes a mistake was made.

You never want to demand or coerce an appraiser to revise the appraisal. There must be a reason for the appraiser to reconsider an opinion of value other than “This is what we need to get the deal through.”

I have to say that I was impressed by their tact.

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Real Estate Blog Rankings May Rankle A Bit

May 31, 2006 | 12:01 am | Public |

Blogging Systems released their real estate blog ranking site called PubSub a few weeks ago. A hat tip to RealCentralVA for clueing me in.

This methodology focuses on in and out links, volume of posts and feed depth. Of course the sheer traffic of some of the sites leave them woefully undercounted and gives the wrong impression of the site’s weight in the Blogosphere. I think consideration to traffic needs to be an important component to a ranking while at the same time looking at the number of links and the weight of the links.

Actually, I don’t want to overshadow the very cool subscription feature.

I always try to look (actually, be completely blinded) by the bright side when it comes to my blog stats. As of May 30th, both of my sites were ranked in the top 20. Matrix was ranked 9th overall and Soapbox was 16th but may change day to day.

I prefer not to understand any more than that, for fear of lowering or questioning my rankings. I need to save energy for my other posts.

Housing Cycles Everywhere You Look

May 30, 2006 | 12:01 am |

In Kenneth R. Harney’s always insightful column, The Nation’s Housing, he discusses the types of housing markets in Market Action Slips Away From Coasts [WaPo].

First American Real Estate Solutions [note: I have had terrible experiences with their customer service, but their research is pretty good.] has completed an extensive analysis of 100 major metro areas to understand more about housing price cycles. There are 3 major categories:

  • Linear markets where booms and busts almost never occur.[Columbus, Ohio; Indianapolis; Houston; San Antonio; Memphis; Atlanta; Cincinnati; Des Moines; and Louisville.]

  • Cyclic markets are the shooting stars of housing booms. Generally they are along the East and West coasts, where household incomes are higher and land for new construction is in short supply. [California south of the San Francisco Bay, Florida, Washington DC, Baltimore, New York and much of New England.]

  • Hybrid markets have linear, slow-growth characteristics for periods, followed by periods of moderate cyclic-style appreciation. [Chicago, Seattle, Minneapolis-St. Paul, Detroit and Phoenix.]

By understanding the type of housing market a property owner is currently in, they may be able to make better choices when it comes to housing. For market-timer wannabes, it sure seems like you don’t want to be in the midwest because there are no cycles, however, thats where there has been much discussion about the location of the next housing boom as the coasts cool off.

However, housing is a lagging indicator, not a leading indicator, and rising mortgage rates have eliminated much of the flexibility for real estate investment. If the midwest is currently attractive to investors who want to make returns on housing, then lets be clear what type of investors we are speaking about: institutional investors with deep pockets, not individual investors, who days are numbered.

Post-Memorial Day Weekend, Things I Didn’t Have Time To Grill List-o-Links

May 30, 2006 | 12:01 am | |

Source: NYT from “Pimp My Grill”

I’m so exhausted from all the eating and activities afforded me this weekend that I need to go to work to rest up. Here’s a smattering of links I didn’t do anything with. Enjoy:

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[Sounding Bored] Using The Pool Cleaner To Get To The Right Price For Your Property

May 30, 2006 | 12:01 am | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. We will have additional columnists soon (and frankly, as the webmaster, I got jealous of all the cool graphics my colleagues get to use with their posts). This week I discuss whether appraisers are the right choice to help sellers price properties for sale.

Well, not really. Without a real estate broker or real estate appraiser doing the analysis, who else is available to the seller for help pricing their property?

In Doug Heddings recent post, Pricing: Why Not Just Hire an Appraiser? [True Gotham] he argues against using an appraiser for pricing a property. He says:

In theory, that’s a great idea. But over the last seven years, as the market has been rising, appraisals have often fallen short of conditions on the ground–meaning that you’re leaving money on the table if you leave the pricing to an appraiser.

He suggests sticking with a good real estate broker. But what defines a good broker if you are new to the market? While I would recommend Doug as one of the top brokers out there, what if you didn’t know that?

His post was inspired by a recommendation he read in Marshall Loeb’s Marketwatch column Price Your Home Right To Help Speed a Sale.

Doug makes the argument that, since so many appraisers in New York rely on brokers for listing information, why not go to the broker first? Listings are an important component for pricing, especially now with marketing times expanding. However, some appraisers have access to the same listing information (ie, me).

I actually, agree with his argument against using typical appraisers, espcially those that came out of the wordwork during the recent housing boom, but its based on the same argument that could be made against relying on a real estate broker for pricing which, like his anti-appraiser argument, is based on dated stereotypes.

Even Marshall Loebs comments are dated. The idea that we look at 3 or 4 “comps” in the area in the past 6 months is just silly. We look at sales, contracts and listings in the immediate area – properties that would have or will compete with the subject property. Often we have access to more accurate information than the broker does.

I teach real estate appraisal classes to brokers in a variety of venues and I am always struck by the impression our industry makes on real estate brokers. To most brokers, their only interaction with an appraiser is made during a sales transaction, when the bank sends the appraiser, often from outside market areas because they are cheaper, can crank out the report fast, etc. In otherwords, most of the appraisers that brokers interact with are simply form-fillers [Soapbox], and not true appraisers. I sound a bit harsh on this type of appraisers, but this has been a sore-spot of mine for the past decade.

So the bottom line is that all comes down the the individual real estate professional to provide pricing advice. Here are the arguments:

  • Use a broker for pricing – they have an inherent bias toward selling the property built into their relationship with it as a commissioned agent. They are paid only if the property sells. Sellers are often uncomfortable with this fact, whether unfounded or not, for the particular broker to be able to provide unbiased advice. Plus, they may not specialize in a particular market area that they are asked to sell. _Therefore it all comes down to the skills of the individual broker for pricing._
  • Use an appraiser for pricing – many are simply not competent in the particular market they are asked to perform an assignment for. They may not know the individual market as well as a particular broker who specializes in it. When our firm performs appraisals for relocation assignments, in the past we have been rated and +/- 3% of the final sales price even though our results are affected by competancy of the brokers that are asked to sell the property. _Therefore it all comes down the the individual appraiser._

Go with who you think is the most competent and who you feel comfortable with. Both Doug and I are not being self-serving here, because there is no right answer.

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Outstanding On Our Soapbox This Week: Using The Pool Cleaner To Get To The Right Price For Your Property

May 30, 2006 | 12:01 am |

In this week’s inaugural Sounding Bored by Jonathan Miller on our other blog, Soapbox, Using The Pool Cleaner To Get To The Right Price For Your Property, I solve the real estate broker, real estate appraiser as expert in pricing dilemma for sellers

…well, not really.


To The The Economist, The Housing Outlook Bears All

May 30, 2006 | 12:01 am |

The Economist magazine has been bearish on housing since at least 2002. The current issue is no exception.

[My apologies in advance to those who do not have a subscription, but its well worth getting one. -ed]

The current cover story features the image a bear: Despite the rattled markets, the world economy is still relatively strong. Just don’t bet your house on it [The Economist].

They seem to be less concerned with the equities markets and more concerned about the housing market in the US and its global implications.

By borrowing against the surging prices of their homes, American consumers have been able to keep on spending. The housing market is already coming off the boil. If prices merely flatten, the economy could slow sharply as consumer spending and construction are squeezed. If house prices fall as a result of higher bond yields, the American economy could even dip into recession. Less spending and more saving is just what America needs to reduce its current-account deficit, but for American households used to years of plenty it will hurt.

My beef with the Economist, is their love affair with the rental market and its relationship to owner occupied housing. The rental equivalent of owner occupancy, because it is less than the cost of housing, portends certain doom from their view point. This has always struck me as overly simplistic. For many reasons, an investment property is rarely of the same quality or caliber as an owner occupied property and reflects different motivations and buyers. This is the same flawed rationale that includes the rental equivalent of housing in our CPI stats rather than using actual sales stats to represent the housing market. Rental markets have not behaved like the owner occupied markets have during this recent housing boom.

I think its more directly related to affordability. Low mortgage rates have been the key driver of this boom and any other factors are minor in comparison.

In fact their focus on this point has gotten to be the source of some rather dark humor in economics circles. However, the tone of this article seems to back-pedal this 5 year argument a bit, providing both a hard and soft landing scenario.

Here’s a sample of articles for each of the past several years that repeatedly show their view point that the American housing market is headed for a hard landing.

The current bear article seems to be calling for the Fed to continue rate increases because for the world, it is best that America slows today. Later, imbalances will loom even larger. The Economist seems to be saying that inaction by the Fed now would raise the odds significantly that we could see a recession in 2007 as a result.

I contend that the slowing housing market has not been fully represented in the current array of economic stats, and when it does, a recession is already possible without anymore increases by the Fed.

Lets hope that Bernanke doesn’t read The Economist.

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Memorial Day Weekend 2006

May 26, 2006 | 7:22 pm |

Wishing all of you a great Memorial Day weekend. We’ll be back on Tuesday, May 30, 2006. Interview 5-26-06: The Housing Landscape

May 26, 2006 | 1:22 pm | | Public |

Nick Yulico of discusses the lay of the land with Jonathan Miller, CEO of Miller Samuel, and Brad Inman, publisher of Inman News on this StreetWatch Video.

View the clip
Interview: The Housing Landscape