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New York Times

State Legislatures to Supreme Court: Don’t Tread on Me

February 22, 2006 | 12:01 am | |

The front page, above the fold, article States Curbing Right to Seize Private Homes [NYT] talks about the national backlash to the Supreme Court findings in KELO et al. v. CITY OF NEW LONDON et al..

In a rare display of unanimity that cuts across partisan and geographic lines, lawmakers in virtually every statehouse across the country are advancing bills and constitutional amendments to limit use of the government’s power of eminent domain to seize private property for economic development purposes.

Rarely has a Supreme Court ruling created such a universal reaction that was not made up along party lines. The idea that the loss of private property to private development seems to have struck a cord with state and local legislatures and they are passing laws that would disallow many situations that would involve emminent domain. In fact, one of the justices seemed to apologize after the 4-3 decision and said that “We emphasize that nothing in our opinion precludes any state from placing further restrictions on its exercise of the takings power.”

“It’s open season on eminent domain,” said Larry Morandi, a land-use specialist at the National Conference of State Legislatures. “Bills are being pushed by Democrats and Republicans, liberals and conservatives, and they’re passing by huge margins.” Americans see property ownership, and the rights associated with them, as a right of citizenship. This ruling seemed to bypass American sentiment.

Like everything to do with real estate, Americans tend to go from one extreme to the other. More neutral observers expressed concern that state officials, in their zeal to protect homeowners and small businesses, would handcuff local governments that are trying to revitalize dying cities and fill in blighted areas with projects that produce tax revenues and jobs. Many emminent domain situations need to be judged on a case-by-case basis.

USA Today provided a list of strategies that legislatures are taking:

  • Explicit bans. Some bills would ban the use of eminent domain for economic development. Others would do so indirectly by stating when it can be used and leaving commercial development off the list.

  • Narrower rules. Many states are considering making it harder for cities to declare a neighborhood “blighted” just for economic development.

  • Economic penalties. New York and Indiana are among states considering making eminent domain more expensive. The government would have to pay 25% or 50% above market value when it confiscates a property for commercial development.

_Here’s a sample of the action that is taking place to limit takings:_
Eminent-domain bills given a hearing [Baltimore Sun]
Limiting eminent domain [Journal-Advocate – CO]
Rethinking eminent domain: Lawmakers want to curtail the power of local governments [Bradenton Herald – FL]

_Prior Posts In Matrix_
The Kelo Backlash: Now Many Are Rethinking Eminent Domain [Matrix]
Wrecking Ball: Taking Eminent Domain Private [Matrix]

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No Ifs, Ands Or Butts – Smoking Is Not Allowed In This Co-op

February 15, 2006 | 12:22 am | |

In Jhoanna Robledo’s No Pets, No Parties—No Smoking? A co-op votes to declare itself smoke-free, and potential buyers fume [NY Mag] the topic of a smoke-free environment enters the housing discourse.

Planes, trains, taxis and commercial buildings ban smoking, why can’t a co-op?

Dennis Hevesi covered this topic for the New York Times in 2002 in the article Co-op Board Bans Smoking in Apartments for New Owners. The rule was eventually withdrawn because of the backlash which was interesting since existing tenants were grandfathered in. That rule would only affect new buyers. This current co-op rule affects 100% of the occupants but this building is much smaller than the Lincoln Towers co-op that tried it 4 years ago.

_“It’s absolutely enforceable,” confirms co-op attorney Adam Leitman Bailey. “By signing on to a co-op, you’re giving up some of your personal rights, and in this case, that would be smoking.” Co-ops, after all, have long dictated “house rules,” requiring owners to carpet floors, turn off music late at night, and forgo pets. _

Apparently smoking is a privilege and not a right.

Does it impact value?

Its not clear whether this restriction would have an impact of values within the building or not, but I suspect it doesn’t, or if it does, its either nominal or virtually impossible to correlate with empirical evidence. Anytime you add a restriction to the marketability, you risk limiting the buyer pool that would be interested in a purchase. However, because of the health issues are involved, the same argument could be made in the opposite direction because you may actually atract new buyers looking to avoid such an environment which provides an offset to those buyers you may have lost.

Other discussions on the topic and all relate to condos


Real Estate’s Technology Boom Goes Beta

February 13, 2006 | 12:02 am | |

Real estate technology has come of age, aided by the housing boom combined the American obsession with real estate ans technology. The ability to find and match properties with consumers, to research and investigate properties are among the most logical extensions of new web technologies.

New web sites such as Trulia and Zillow are launched, have deep pockets, yet remain in beta, probably to difuse criticism of the vast promises they seem to be making to the consumer (and may fullfill those promises within a few years if they can last that long). Zillow provides property values and Trulia provides listings with very easy to follow interfaces.

Real estate blogs have evolved into the goto daily resources with a slew of ever changing real estate related topics. The king of real estate blogs, [Curbed](( who has been around just about the longest, is going national with localized market coverage areas. Curbed started out in New York, and has expanded to Los Angeles with about a half dozen other major markets coming down the pike. Big Media has begun to join the blog fray but is at a disadvantage since they cannot have the same edge to them that independent bloggers have. The New York Times blog The Walk-Through and Businessweek’s Hot Properties are among the best of them.

Craigslist, with its primitive interface, has proved that you don’t have to be pretty to be effective, has cost classified advertisers millions of dollars and continues to grow.

Earlier forays into online real estate services such as and remain oldschool and seem stuck in cluttered screen cram-down that overwhelms consumers with irrelevant information.

This whole technology movement is exciting and the possibilities are endless, as soon as we get out of Beta.

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Shvo As A New Verb In Real Estate Marketing

February 13, 2006 | 12:01 am | |
Source: ABC

On Friday night, Michael Shvo was profiled in The Real Estate Assassin of New York City [ABC News Nightline] with the tag line Michael Shvo Became the Most Successful Broker in the Big Apple – and Generated a Flood of Controversy Along the Way

Lets Shvo

Shvo’s marketing slogan, has become a verb associated with real estate but cannot be said without sarcasm by many in the real estate community.

In a high density housing market like Manhattan, the competition is fierce and quite often, contrarian marketers will float to the top. This is no guarantee that they will be successful in the long run. Here were or are some of the best:

  • Barabara Corcoran — One of the pioneers of real estate marketing who did go the distance was Barbara Corcoran. She formed the Corcoran Group real estate brokerage firm in the early 1980’s and brought new marketing concepts to a pretty boring marketing environment. She was seen as a marketer first and a real estate expert second. She had a reputation for saying anything to get attention for her firm and drove many crazy with the things that she said. She has since sold her firm to NRT and moved on to television but her influence remains.
  • Louise Sunshine — who (has literally one of the best last names in marketing) sold her firm to NRT as well, has been one of the most creative marketing minds in the real estate marketing business. She was able to understand the intricacies between the development process and the marketing process of luxury residences in many different markets. She is not without controversy as noted in this recent article [NYT]. I remember once being on a real estate panel with her, hosted by New York University and the New York Times and she arrived about 5 minutes late and left 5 minutes before the panel ended because she was working on several deals. She walks to the beat of her own drum and maybe that’s the point.
  • Donald Trump — There is no one like him and no one in New York real estate that is an international household name. He has created a brand that attracts international buyers of New York real estate and has expanded his brand into many other venues. His style is brash and comes from the school that if you say something positive often enough, people will believe it. He has developed a following unmatched by anyone in the business as evidenced the success of his television reality series The Apprentice and his recent appearance and deal with the Learning Annex.

There have been and are many other successful real estate marketers in Manhattan and now there is Michael Shvo. He has made many enemies with his brashness. With three blackberries and two cell phones, love or hate him, the man can sell.

Our first-hand impression_
However, my appraisal firm was assigned to appraise a unit in one of the projects he is currently marketing. The sales representative was unbelievably rude and abrasive…over – the – top. The Shvo agent was not busy yet seemed to thrive on this type of behavior and would _not show my appraiser the unit
even though we had made an appointment well in advance. During this interaction, a potential buyer came in who was trying to get information and the sales staff would not help him. The potential buyer eventually gave up. My appraiser finally had to find a construction foreman who provided access to the unit.

To be fair, this was the first and only time that we have inspected this particular project, although I suspect we will be returning soon as the units that are sold get set to close. Hopefully this incident could be the fault of a few poorly trained agents, but thats the rub. The brashness of Shvo doesn’t allow him to be given slack by the real estate community. And to his own admission, he could care less about what anyone thinks. Perhaps thats the key to his success as a salesman.

In a market with limited supply, rapid marketing times and eager buyers, this type of behavior probably doesn’t really matter. Many brokers were order takers until recently. As we enter a market where there is more balance between supply and demand and new developments are the primary source of new supply, I have my doubts about the long-term staying power of in your face selling.

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Hindsight Is Not Always 19/87

February 13, 2006 | 12:01 am | |

James Bednar performed exhaustive research using the New York Times online archives in his article Home Prices Do Fall – he is also the webmaster of the Northern New Jersey Real Estate Bubble blog.

His premise is that housing prices can fall despite the mantra of NAR and others. The spread in the chart he created between median income and NJ housing prices seem to show that the market is approaching the same point at present that it was in the late 1980’s.

However, the argument can also be made that this is a one-dimensional viewpoint. Not that there isn’t a shift occuring in the housing market, clearly there is, but rather the extreme fate that has been suggested could be overstated.

I was an active appraiser during the late 1980’s and this is what I remember as big issues of the day post-October 1987 stock market crash:

  • Mortgage rates – the 30 year fixed was about 11.5% and rising.

  • Recession – the economy going into one of the worst recessions in recent history.

  • Foreclosures – were at far higher levels than we see today (although this is somewhat unfair since the lenders are more resistant to doing foreclosures today, preferring workouts and other alternatives which skews the historical data for comparison).

  • Employment levels were falling and inflation was higher than today.

  • Inventory – due to the 1986 tax laws, there was a flood of investor properties on the market that were no longer economically feasible to purchase and took about 7 years to absorb.

  • Specifically in Manhattan, the coop conversion boom and condo 421a tax abatements created an oversupply that was about 5x the inventory levels we see today.

It might be interesting to see the chart presented with the median income and sales price adjusted for inflation. This is great stuff and it will be interesting to see how this plays out.

Rhymes With Pillow: Takes A Breather

February 9, 2006 | 12:30 am | |

At a party recently, I had the chance to meet Richard Barton, the founder of Zillow and he mentioned he was starting up a real estate site. He was a nice, very low key guy who happen to be one of the founders of, which turned the travel industry on its ear. His new site, Zillow got everyone’s attention and no one knew what it was – until yesterday. Inman spent a lot of effort peaking our curiousity and I got a lot of calls from people in the industry asking what the heck it does.

Wednesday was launch day. I read four articles this morning about the site and got excited to check it out for myself when I got into work. The NY Observer article was especially good. In fact I read it on my Treo as I commuted in to work.

As far as the media coverage goes, I find it interesting that technical tools like this are often painted as spelling the end of full service brokerage services. I find this point hard to accept. I think that tools like Zillow and others are a natural evolution of technology and special services like this offer something that full service brokers cannot provide and really aren’t in business to provide. I think its kind of like the iPod. Apple builds them but third parties build all the add-on accessories.

The result of these tools is a more efficient market because of the additional flow of information. Its also raises the bar for full service brokers to have staff that are more fully informed about the market. There is opportunity to interpret information. Over this next year or so, the number of transactions is likely to drop and many brokers who have relied on being order takers will now have to actually market. Those that always marketed in boom times, should have nothing to worry about.

Since the Zillow involves valuation, and I am an appraiser, I was especially curious because its such a daunting effort to automate valuation on such a large scale. In fact, for the most part, the lending industry has been trying to do this for the past 5 years with limited success (If you base success on accuracy rather than simply pushing paper for the files to keep the regulators happy). A few months ago, a national lender told me that out of the 10 major automated valuation services (AVM’s), 8 were totally unreliable, 1 was marginal and 1 was pretty good. This lays the groundwork for my initial skepticism about Zillow, but I am open minded. I think it will evolve and will have more strength in certain markets than others depending on the data they are fed.

Well, apparently, the public relations juggernaut the emerged over the past few weeks with the build up, overwhelmed the site early in the day and as of 11:51pm tonight they are still of the air. I found their ZillowBlog which explained the problem and put a human spin on it. They should definitely link the blog to their home page to keep a dialog of their technical progress.

For those who were lucky enough to get access, the reviews were pretty good but basically mixed (after all this is a beta and there is a lot more data for them to tap into.) Of course the “red light theory” seems to apply here. Users will likely only remember the valuations that were not accurate and not those that were.

I anxiously await my turn. I am sure this is going to be fun. More to come.

_As seen from their web site_

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Methodless Enthusiasm From Innovative Bubbles

January 31, 2006 | 12:05 am | |

Daniel Gross wrote a brilliant article (as usual) in this month’s issue of Wired In Praise of Bubbles: Boom and bust cycles have always driven the US economy fostering innovation.

The premise of the article is that people associate them with sob stories, criminal activity and irrational investment behavior.

[Bubbles] tend to follow a painful cycle of boom, bust, hand-wringing, and abject humiliation. But there’s often another step at the end: innovation. Over the past 150 years, many bursting bubbles have paved the way for economic and cultural progress.

methodless enthusiasm was reborn as irrational exuberance

The result of creating too much capacity gives way to other innovations that would have not been possible. One of the exciting aspects of the recent real estate boom has been the redevelopment of urban areas (ie San Diego, New York City, Chicago, Boston. etc.) that would not have been possible during a flat housing period.

Daniel Gross concludes:

“The result has been a real, delayed boom. Put cheap data transmission and storage together with an exploding population of consumers willing to use the Net and you get eBay, Google, and Yahoo! Now come widespread laments that another bursting bubble is anon: real estate, genomics, China stocks, wireless Internet, you name it. Maybe so. But sometimes, a little methodless enthusiasm is precisely what an economy needs.”

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Real Estate: Extreme Interest Fosters Extreme Language

January 30, 2006 | 12:01 am | |

[Back From San Diego, Where The Weather Is Absolutely Perfect.]

Do you ever get the feeling that everything you read about the housing market is either optimistic or pessimistic?

In other words, if you find yourself devouring articles about the current real estate market, do you find yourself confused by alot of their conclusions?

I certainly do. One of the problems is the evolving language of real estate. No, not old-fashioned brokerspeak, but the language of real estate economics, which has been morphing into the cliche feel-good phrases many despise.

In Stephanie Rosenbloom’s fun article The Power of Words [NYT] she explores the erosion of real estate language (with a little help from me – especially since I am guilty of having used the word “pause” on occasion but never, ever “grand.”)

“[Buzzwords] are especially prevalent in New York, where residents routinely say that real estate is a topic second only to sex. And where there is extreme interest, there tends to be extreme language.”

Mud Spelled Backwards: Business 2.0’s List Of Dumbest Moments In Real Estate

January 26, 2006 | 6:56 pm | |

On the light and subjective side, here’s the real estate portion of Business 2.0’s 101 dumbest moments in business: Real estate. The year in shenanigans, skulduggery, and just plain stupidity in the world of housing [CNN/Money].

Of these real estate items, I think the most notable are:

Most Ironic
* Vail Board of Realtors can’t afford to be located in Vail: Unable to buy office space in a community where the average home price recently headed north of $4 million, the Aspen Board of Realtors heads north too — to Basalt, Colo., a town of 3,000 residents 20 miles away.

No Reason To Be On The List
* In November, New York developers William and Arthur Zeckendorf agree to pay $37 million for the air rights above a church and an 88-year-old private club. The Zeckendorfs’ purchase, part of a plan to build a 35-story apartment building that would tower over its neighbors on East 60th Street, comes out to a whopping $430 per square foot — two to four times the going rate for the skies above Manhattan. This seemed to shock only people outside of New York.

Most Amazing
* In May an Experian-Gallup national survey finds that 65 percent of Americans haven’t heard anything about a possible “housing bubble.” Another 12 percent have heard “only a little.” Indeed, 70 percent expect home prices to keep rising, while only 5 percent think they’ll slip. However, when the facets of a housing bubble are described to them, about 40 percent go on to say that the scenario is likely to occur in their area in the next three years.

Q: Why won’t we see a “List Of Smartest Moments In Real Estate?”

A: Because NO ONE is interested in seeing someone else succeed (aka boring) OR we simply enjoy seeing people screw up.

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The US and Mexico Cement Agreement On Imports

January 23, 2006 | 12:01 am | |

The U.S., Mexico End Dispute Over Cement [LA Times].

“Under the pact, Washington would slash punitive tariffs on Mexican cement while Mexico would grant U.S. firms access to its market, now dominated by a few companies that charge consumers here some of the highest prices in the world.”

“Thursday’s deal appears to resolve a trade spat that dates to 1990, when a group of 31 U.S.-based cement makers brought a successful anti-dumping case against Mexican producers that sold their product at prices far below those paid in Mexico.”

In an article by the New York Times, U.S. Cuts Duty on Cement From Mexico which is aimed at easing cement shortages caused by a building boom in Asia and rising demand for cement to rebuild after Hurricane Katrina.

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Its No Secret, But Now Its Official: Wall Street Bonus Money Sets Record

January 13, 2006 | 9:34 am | |

Many markets have a primary industry that influences their respective housing industry. In Redmond, its Microsoft; in Detroit, its the Big 3 [Detroit News] and in Manhattan, its financial services and their associated bonus income [NYT]. Wall Street accounts for roughly 6% of the city’s jobs and 20% of its personal income. Bonuses typically account for more than 50% of personal income in much of the sector. Its always played a significant roll in the real estate economy, good or bad.

When the New York State Comptroller announces the bonuses paid every year, its already old news. Most people know, or have a sense of knowing by the second or third week of December how much their bonus will be.

There has been a lot of discussion about whether this year would be different, that Wall Streeters would not invest, despite the record bonus money that would be paid out.

  • Would Wall Streeters use it to buy real estate?
  • Does the fact that the bonus money was more concentrated at the upper echelons mean that only upper end properties would be sold?

Early indicators point away from the naysayers, but the jury is still out. Most of the CEO’s of the Manhattan based real estate brokerage firms I have spoken with indicated that they saw a surge in sales activity starting immediately after Thanksgiving, a few weeks before the bonus amounts would be known. Our firm saw a significant up tick in the number of sales that we appraised in October and a surprising number of $20M+ purchases were made.

My first reaction was that this was simply pent-up demand from two consecutive quarters of fewer transactions than we saw in the first half of the year. I expected the the number of sales to drop off after the first of the year.


We are seeing an elevated level of sales activity across the board, not just at the high end. Its not clear if this is a short term blip or not. Long term mortgage rates have been trending down since mid-November [Bankrate], possibly setting the stage for a more favorable real estate mindset in the first few quarters of 2006.

However, don’t expect an official announcement about that.

[Webmaster’s note: I’ve been a little light on the number of posts I have presented over the past few days. Its all Inman’s fault. I have been attending the Inman conference this week and its really been refreshing. I enjoyed being there for no specific reason other than a lot of new ideas and products, great information and a whole lot of smart people (self excluded). I’ll be back on track Tuesday, after all, its a long weekend. jm]

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In Good Times and Bad, Negative Milestones Often Define The Real Estate Market

January 11, 2006 | 9:48 am | | Favorites |

Theory of Negative Milestones


I was writing another post about the housing situation in New Orleans and I kept coming across the phrase “post-Katrina” as in “post-Katrina policy landscape” [NYT] and it struck me how much negative economic or natural disasters help define a new period for the real estate market.

It gives people the ability to sweep away everything that occurred prior to the event and see things in the current market with a little more clarity. At that moment, history plays a lesser roll in defining how the current market is behaving.

It can also be a stressful period because, like most markets, buyers don’t like the unknown. When economic parameters change or are likely to change because of an event, it takes a while for participants to get used to the new rules. Its a delicate moment in time when buyer/seller psychology is at its weakest or most raw and the potential for misinformation is most high.

I find this whole concept this akin not to asking when it comes to real estate, “what were you doing when Neil Armstrong stepped on the moon?” but rather “where were you when the plane hit the north tower on 9/11?”

The irony is that the whole idea of real estate exudes optimism, hope, success, growth, shelter, safety and opportunity, but the events that define it are most often negative.

Here’s a list that helps define my interpretation of the real estate market after 20 years in the business. Some are more specific to New York City because that is where I work and there are certainly other milestones to consider. It also seems to me that the milestones are getting closer together, but that might just be only because they are fresher in my thinking.

Negative Milestones

  • October 19, 1987 stock market crash
  • 1990-1991 recession
  • August 1998 stock market correction
  • February – March 2000 NASDAQ correction
  • June 2001 entering the recession
  • 9/11
  • March 2003 – start of the Iraq War
  • June 2004 – Fed starts raising federal funds rate
  • August – September 2005 – Hurricane Katrina and Rita

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