Matrix Blog

Archive for November, 2009

[A Different Home Laundering] Brokers May Be Forced To File Suspicious Activity Reports

November 30, 2009 | 11:52 pm |

There’s a pretty interesting story on how money laundering might be making its way to the housing market on MarketWatch: Something to hide: The warning signs a money launderer wants to buy your home.

The story caught my eye after my son tried to sell something on CraigsList this week for $500. The interested party said they would send him a check for $2,600 because she “trusted” him and he could keep an extra $100 for his trouble and send the balance back. He didn’t sell the item to her.

Apparently there is a loophole where large amounts of cash deposited in checking accounts from abroad aren’t scrutinized like a check from a parent would be. The irony here is the lender associates the large cash downpayment with lower risk. Once the cash is deposit and then used for purchase, the money is clean.

Federal Bureau of Investigation, among other agencies, suspects that money laundering is becoming more common. So much so that the Financial Crimes Enforcement Network, or FinCen, is considering a rule requiring real estate brokers, among other entities which don’t have a direct financial interest in property sales, to file the same suspicious activity reports that lenders are compelled to file when they smell something fishy.

Here’s a 3-2009 summary of Suspicious Activity Reports.

An aside, wiring money to Nigeria has its own chapter for those of you who get a lot of those emails.

[The Housing Helix Podcast] Neal Elkin, President, Real Estate Analytics LLC, REAL

November 30, 2009 | 2:23 pm | Podcasts |

I get to have a conversation with Neal Elkin, President of Real Estate Analytics, LLC whose Moody’s/REAL CPPI Reports tracks the commercial real estate space. I’ve followed Neal’s efforts with Moody’s Investor Service since its inception.

On a side note, I find the correlation of their metrics with the residential market fascinating.

Check out the podcast

The Housing Helix Podcast Interview List

You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.

[Interview] Neal Elkin, President, Real Estate Analytics LLC, REAL

November 30, 2009 | 12:38 pm | Podcasts |

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[The Housing Helix Podcast] Ardell DellaLoggia, Associate Broker, Blogger, Seattle Real Estate

November 24, 2009 | 12:45 am | Podcasts |

I had been looking forward to my conversation with Ardell for a while. She is an associate broker with Sound Realty in Seattle Washington and blogs at Rain City Guide and on her eponymous site ARDELL’s Seattle Real Estate Blog.

She and I have known each other for years, having attended and participated in various real estate forums and connected online. She is always a thoughtful, candid and deliberate speaker.

One of the masters of social media, Ardell has created brand awareness well outside the Seattle Housing market.

For this conversation we Skype, and thanks to the Internet (a series of tubes), the sound level varies a bit – but stick with it because she has great insight on buyer agency, calling a bottom, social media and Redfin.

Note: If you’d rather not, Ardell has created a transcript of the conversation.

Check out the podcast

The Housing Helix Podcast Interview List

You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.


[Interview] Ardell DellaLoggia, Associate Broker, Blogger, Seattle Real Estate

November 23, 2009 | 11:09 pm | Podcasts |

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[Tax Credit] Existing Home Sales Up 10.1% M-O-M, 23.5% Y-O-Y

November 23, 2009 | 4:01 pm | |

The National Association of Realtors released their October 2009 Existing Home Sale Report and the news was positive and kind of weird.

Driven by the first-time buyer tax credit, existing-home sales showed another big gain in October with a strong uptrend established over the past seven months, while inventories continue to decline.

It looks like the uptick in sales last month has been eliminated with the downward revision this month.

Existing-home sales

Existing-home sales – including single-family, townhomes, condominiums and co-ops – surged 10.1 percent to a seasonally adjusted annual rate1 of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, and are 23.5 percent above the 4.94 million-unit level in October 2008. Sales activity is at the highest pace since February 2007 when it hit 6.55 million.

The number of sales was up 23.5% over the same period last year and up 10.1% from August. Both saw unusually sharp increases, caused by the expiration of the tax credit (and then renewal and expansion), falling mortgage rates, rising foreclosures (falling prices) and improved affordability.

If you remove the seasonality adjustment, the number of sales was up 20.8% over the same period last year and up 6.6% from August, still significant.

“It’s an impressive increase and shows a lot of pent-up demand for housing,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “Buyers have enough confidence to take the plunge. The housing market recovery will be a durable one.

I’m not clear how the recovery is durable since it is solely dependent on artificially depressed mortgage rates, federal agency bailouts and tax credits.

Median existing home price

Prices continued to fall as there remained a large market share of foreclosures and lower priced properties and condos receive the most interest from buyers.

The national median existing-home price for all housing types was $173,100 in October, down 7.1 percent from October 2008. Distressed properties, which accounted for 30 percent of sales in October, continue to downwardly distort the median price because they usually sell at a discount relative to traditional homes in the same area.

Listing inventory continues to decline.

Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, which represents a 7.0-month supply2 at the current sales pace, down from an 8.0-month supply in September. Unsold inventory totals are 14.9 percent below a year ago.

Whats kind of weird about all of this good news, is that prices are falling,low end sales activity surged, market share of foreclosure sales remains high and high end housing market segments are the weak.

The NAR press release seems to couch readers in their anticipated sharp decline in sales over the winter.

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[The Housing Helix Podcast] Robert Knakal, Chairman, Founding Partner, Massey Knakal Realty Services

November 20, 2009 | 4:26 pm | Podcasts |

I sit down with Bob Knakal, the founding partner and Chairman of Massey Knakal Realty Services, who sell more commercial properties in New York City than any other firm. In 2009, Real Estate Forum magazine named Mr. Knakal one of the top 10 investment sales brokers in the United States.

He’s also a prolific commentator on the commercial real estate economy. Check out his blog StreetWise which is an initiative of his firm and as well as his weekly commentary in the New York Observer’s Commercial Observer. His recent State Shouldn’t Make a Whole New Ball Game of Mitchell-Lama is mandatory reading (no, not because of the Yankees World Series analogy).

I have long admired his market insights and his hair. We have a great conversation.

Check out the podcast

The Housing Helix Podcast Interview List

You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.

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[Interview] Robert Knakal, Chairman, Founding Partner, Massey Knakal Realty Services

November 20, 2009 | 12:01 pm | Podcasts |

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[Boston Fed] Its Not How Much You Can Consume, Its How Much You Borrow To Consume

November 18, 2009 | 11:06 am | |

A quick shout out to Sam Chandan at Real Estate Econometrics for his invite to me to speak to his MBA real estate class at Wharton last Monday. A lot of fun and no tomatoes thrown. Added bonus, they have Au Bon Pain as snack shop.

[click to expand]

The widely held belief that houses were used as ATM’s during the credit boom is a valid assumption given the massive withdrawal of home equity. Of course that parallels mortgage lending and as a result, housing activity boomed over the same period.

With the post-Lehman credit crunch, millions of homeowners can’t refinance their mortgages or obtain a mortgage for a purchase. The contraction in credit has choked off the high pace of sales activity our economy has grown accustomed too. Yet sales and prices appear to be leveling off after a steady decline.

Q: Who’s buying these homes?
A: People that can actually afford and qualify for a mortgage.

According to a recent public policy discussion paper from the Federal Reserve Bank of Boston by Daniel Cooper Impending U.S. Spending Bust? The Role of Housing Wealth as Borrowing Collateral

house values affect consumption by serving as collateral for households to borrow against to smooth their spending….house values, however, have little effect on the expenditures of households who do not need to borrow to finance their consumption.

In other words, the segment of the consumer market that needs to borrow to spend, aren’t spending now. That doesn’t mean “no one is spending” – this is the cause for significant confusion in interpreting the health of our current economy.

For those who borrow to spend

The results show that the consumption of households who need to borrow against their home equity increases by roughly 11 cents per $1.00 increase in their housing wealth.

During the housing boom, the excess demand was simply fueled by those who had to excessively borrow to spend. It doesn’t mean that everyone had the same thinking.

Back to basics.


[Manhattan Absorption] Price Threshold For Balanced Absorption Is Rising

November 17, 2009 | 6:38 pm | Charts |

Absorption defined for the purposes of this chart as: Number of months to sell all listing inventory at the annualized pace of sales activity.

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It comes as no surprise by now that the lower price strata of the market is doing better than the upper end, primarily because of the divergence between jumbo and conforming mortgage underwriting requirements. Absorption has been better in the sub-million price strata than above $1M over the past year.

In other words, the surge in sales over the summer has increased the pace of absorption. The pace of sales increased relative to the amount of listings offered.

It appears that the trend is moving higher up in the price strata since absorption between $1M and $2M has improved in recent months. However, west side absorption for condo units has deteriorated on the west side with more new product entering the market than can be absorbed (especially sub-$500k).

I’ll update these charts monthly and have already created an archive. This chart does not include shadow inventory (properties ready for market but not yet listed for sale) so it understates condo absorption.


[Over Coffee] Quote: Our man Jonathan Miller drops the truth bomb

November 15, 2009 | 11:25 pm | |

In reference to my New York Times quote this weekend by Vivian Toy – Bidding Wars Resume:

Jonathan J. Miller, the president of the appraisal firm Miller Samuel, estimated that two-thirds of the roughly 4,000 [8,389] apartments for sale in Manhattan are priced too high for the current market.

“So,” Mr. Miller said, “you have this weird situation right now where you have above-average inventory, but people are fighting over the ones that are priced correctly.”

(I’m not sure where the 4,000 number came from because Manhattan 3Q 09 showed 8,389 but the specific amount is irrelevant.)

The difference between a bidding war of two years ago and the current market is the irrational nature of bidding wars back then – it was all about “winning.” The market today is about obtaining value – with prices having fallen an average of 25% since pre-Lehman.

Also, there is a larger disconnect between buyers and sellers than a few years ago as measured by the lower pace of sales. There was a reprieve this summer when sales surged, but listing inventory is still above average levels and a higher level of listings are priced above market level leaving purchasers fighting over a smaller selection.

Although this is anecdotal, I do believe that there are fewer bidding wars that occur above list price than we saw a few years ago.

When my friend and bigger than macro Big Picture blogger Barry Ritholtz refers to me as “Our man Jonathan Miller drops the truth bomb” I am confident I nailed the current state of bidding wars.

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[The Housing Helix Podcast] Jonathan Butler, Publisher, Brownstoner Media LLC,, BrooklynFlea

November 13, 2009 | 1:05 am | Podcasts |

Jonathan Butler is the publisher of the essential which is a blog et al about Brooklyn. He started out as an anonymous blogger looking to write about his Brooklyn brownstone in Clinton Hill – then removed his mask – and his blog morphed into Brownstoner Media LLC. Some of his efforts include Brooklyn Flea, his Brooklyn flea market in both Fort Greene and under the Brooklyn Bridge, a services directory, a renovation guide, renovation blogs, and recently, a URL shortener/twitter aggregator.

The interview is done via cell phone in the middle of a construction site, which is, I suppose, the story of Jonathan’s entrepreneurial business life.

Check out the podcast

The Housing Helix Podcast Interview List

You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.