Tag Archives: real estate

TerribleRealEstateAgentPhotos.com

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I’ve discussed bad real estate photos before (here and here) but here is a full website devoted to the topic. Some of the pictures are indeed bad photos: poorly chosen emphasis, bad angle, catching the photographer in the picture. However, a number of have more to do with the home or the homeowner themselves; why do so many people have so much clutter when having these photos taken?? Of course, it could be argued that the agent/seller shouldn’t take such a picture in the first place but agents may have little control over what the owner has and having no photos of a house or major room (kitchen, primary bathroom, etc.) is not a good option.

The moral of the website? You want photographs that emphasize the better traits of the home without letting the bad photography skills or odd stuff the homeowner has get in the way.

And there are ways to prevent this from happening: make professional videos and photoshop furniture into the scenes.

The perils of analyzing big real estate data

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Two leaders of Zillow recently wrote Zillow Talk: The New Rules of Real Estate which is a sort of Freakanomics look at all the real estate data they have. While it is an interesting book, it also illustrates the difficulties of analyzing big data:

1. The key to the book is all the data Zillow has harnessed to track real estate prices and make predictions on current and future prices. They don’t say much about their models. This could be for two good reasons: this is aimed at a mass market and the models are their trade secrets. Yet, I wanted to hear more about all the fascinating data – at least in an appendix?

2. Problems of aggregation: the data is analyzed usually at a metro area or national level. There are hints at smaller markets – a chapter on NYC for example and another looking at some unusual markets like Las Vegas – but there are not different chapters on cheaper/starter homes or luxury homes. An unanswered questino: is real estate within or across markets more similar? Put another way, are the features of the Chicago market so unique and patterned or are cheaper homes in the Chicago region more like similar homes in Atlanta or Los Angeles compared to more expensive homes across markets?

3. Most provocative argument: in Chapter 24, the authors suggest that pushing homeownership for lower-income Americans is a bad idea as it can often trap them in properties that don’t appreciate. This was a big problem in the 2000s: Presidents Clinton and Bush pushed homeownership but after housing values dropped in the late 2000s, poorer neighborhoods were hit hard, leaving many homeowners to default or seriously underwater. Unfortunately, unless demand picks up in these neighborhoods (and gentrification is pretty rare), these homes are not good investments.

4. The individual chapters often discuss small effects that may be significant but don’t have large substantive effects. For example, there is a section on male vs. female real estate agents. The effects for each gender are small: at most, a few percentage points difference in selling price as well as slight variations in speed of sale. (Women are better in both categories: higher prices, faster sales.)

5. The authors are pretty good at repeatedly pointing out that correlation does not mean causation. Yet, they don’t catch all of these moments and at other times present patterns in such a way that distort the axes. For example, here is a chart from page 202:

ZillowTalkp202

These two things may be correlated (as one goes up so does the other and vice versa) but why fix the axes so you are comparing half percentages to five percentage increments?

6. Continuing #4, I supposed a buyer and seller would want to use all the tricks they can but the tips here mean that those in the real estate market are supposed to string along all of these small effects to maximize what they get. On the final page, they write: “These are small actions that add up to a big difference.” Maybe. With margins of error on the effects, some buyers and sellers aren’t going to get the effects outlined here: some will benefit more but some will benefit less.

7. The moral of the whole story? Use data to your advantage even as it is not a guarantee:

In the new realm of real estate, everyone faces a rather stark choice. The operative question now is: Do you wield the power of data to your advantage? Or do you ignore the data, to your peril?

The same is true of the housing market writ large. Certainly, many macro-level dynamics are out of any one person’s control. And yet, we’re better equipped than ever before to choose wisely in the present – to make the kinds of measured judgments that can prevent another coast-to-coast bubble and calamitous burst. (p.252)

In the end, this book is aimed at the mass market where a buyer or seller could hope to string together a number of these small advantages. Yet, there are no guarantees and the effects are often small. Having more data may be good for markets and may make participants feel more knowledgeable (or perhaps more overwhelmed) but not everyone can take advantage of this information.

Realtors argue their guild needs more professionalization

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Real estate is an important part of the American economy but a recent report from the National Association of Realtors suggests realtors need more training:

In an unusual move for a major American trade association, the million-member National Association of Realtors has commissioned and released a frank and sometimes searing assessment of top challenges facing its industry for the next several years. The critiques hit everything from the professionalism and training of agents to the commissions charged consumers, and even the association’s ?leadership.

-“The real estate industry is saddled with a large number of part-time, untrained, unethical and/or incompetent agents. This knowledge gap threatens the credibility of the industry.” Ouch!

-Low entry requirements for agents are a key problem. While other professionals often must undergo extensive education and training for thousands of hours or multiple years, realty agents need only complete 70 hours on average to qualify for licenses to sell homes, with the lowest state requirement for licensing at just 13 hours. Cosmetologists, by contrast, average 372 hours of training, according to the report.

-Professional, hard-working agents across the country “increasingly understand that the ‘not-so-good’ agents are bringing the entire industry down.” Yet there “are no meaningful educational initiatives on the table to raise the national bar …”

 

This is a good example of maintaining professional standards, a key activity of many business associations. (For an award-winning sociological read on trade associations and a book for which I did a small amount of research work, see Solidarity in Strategy: Making Business Meaningful in American Trade Associations.) Keeping track of the actions of thousands of members is a difficult task. The NAR has the ability to bestow the name REALTOR®. Upping the standards with harder tests and stricter requirements has been done by lots of groups in order to improve their status.

But, this might also have some negative consequences:

1. Might it encourage more people to bypass realtors all together? This is easier than ever with the Internet.

2. If I remember correctly, the average age of realtors has increased in recent years. Might this simply increase that?

3. Might this issue be solved in other ways like if realtors worked within agencies that stressed standards or through mentoring programs that offer benefits for both parties?

4. Do realtors want more regulatory oversight like other groups – such as cosmetologists? This may help up their status but could lead to more hoops to jump through.

Trends in the slowly improving housing market in the Chicago suburbs

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The Daily Herald reports on the slow growth in real estate transactions and construction in the Chicago suburbs:

Sales of existing homes were on the upswing in February, climbing 1.2 percent from January and 4.7 percent from a year ago, according to the National Association of Realtors.

The tactics of builders and developers have changed:

The result is that buyers are seeing new houses of smaller square footage loaded with amenities such as wood floors, high-end appliances, specialty cabinets, spa-quality bathrooms, upscale windows and trims, and the latest wireless communication and entertainment technology.

Two groups of buyers are driving this trend: older millennials tired of paying rising rents and ready to raise a family, and baby boomers at or near retirement and looking to downsize…

Like other developers, Pulte is focusing on building in closer-in suburbs rather than massive subdivisions on the fringes…

Toll Brothers also has a limit on how far out it will develop, said Keith Anderson, Midwest group president.

“Elgin is as far as we will go. We’d rather pay more for the land and build closer,” Anderson said.

Or, put differently, there are not enough buyers and sellers putting pressure on builders and developers to construct homes further in the hinterlands in the Chicago region. In contrast, those buying homes have different expectations as well as the means to purchase more in-fill properties. This provides more evidence – from the higher economic end of suburban homeowners – that the bifurcated housing market continues.

“5 Reasons That Hispanic Homeownership Will Define Housing’s Future”

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Where will the housing market turn in the near future? A new report suggests a move toward Latinos:

1. Hispanic Homeownership – Since 2000, the number of Hispanic owner households has increased from 4.242 million to 6.810 million, a rise of 60.54 percent; in just the last four years, in fact, Hispanic owner households have risen 614,000.

2. Hispanic Households – When we extend our parameters to overall households, the numbers are even more stunning. In 2014, the number of Hispanic households grew by 320,000, or 40 percent of total U.S. household growth.

3. The Hispanic Population – Since 1970, the Hispanic population has increased by 592 percent. No, that is not a typo! Even more, the Hispanic population is expected to reach 120 million by 2050, more than double what it is today.

4. Hispanics in the Labor Force – Thus far in the new millennium, Hispanics have accounted for 65 percent of the growth in the U.S. labor force, and every year, one million U.S.-born Latinos enter adulthood; with numbers like that, it’s no surprise that Hispanic purchasing power is $1.5 trillion, and is projected to grow to $2.0 trillion by 2020 (that’s an increase of $500 billion!).

5. Hispanics in Housing – Sixty-five percent of top agents NAHREP surveyed expected 2015 to be a “breakout year” for Hispanic homeownership, but NAHREP’s report pulled no punches on the considerable barriers that remain for homebuyers, among them a lack of affordable housing, competition from cash investors and tight lending standards – problems will have to be overcome before homeownership can truly take off.

Reasons #2-4 involve demographics: an increasing population leading to more households and workers. Reasons #1 and 5 address more Hispanics getting involved in the housing market: an increasing number of owners, optimism from realtors, and factors limiting even more Hispanics from owning homes.

The demographics are suggestive but the evidence in reasons #1 and 5 is limited. Census figures from the last quarter of 2014 suggest there is still a long ways to go: the homeownership rate for non-Hispanic white alones was 72.3% but only 44.5% for Hispanic (of any race) and 42.1% for Black alone. A growing population and jobs alone are not enough; homeownership often involves consistently good jobs and wealth as well as access to capital and housing at cheaper levels of the housing market where homeowners can get a start.

What is the goal of Naperville’s first housing expo?

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Naperville will host its first housing expo this Saturday:

The new event is an effort to provide answers for people with all types of housing needs, said city spokeswoman Linda LaCloche. Help for buyers, renters and seniors usually is spread out among several agencies…

The DuPage Homeownership Center, BMO Harris Bank, Naperville Bank & Trust and the Main Street Organization of Realtors are the city’s main partners in the event, which will present resources from 19 agencies or businesses including banks, real estate agents, lawyers, home remodelers, title companies and insurance agents…

The 9:15 a.m. session will cover the money side of buying a house including topics such as financing, credit, grants, incentives, homebuyer assistance, budgeting and avoiding foreclosure…

A panel at 10:15 a.m. will cover home maintenance and tips for seniors to stay in their homes. How to choose a contractor, how to avoid scams, how to use programs that help pay maintenance costs and which types of repairs require city permits all will be discussed.

A final session at 11:15 a.m. will discuss the rental responsibilities of landlords and tenants. Members of the city’s housing commission, who helped plan the new event, will lead the session and share information about Naperville’s crime-free housing program. The city council could extend the voluntary program or make it mandatory.

It is not immediately clear the purposes of this event. The city suggests this is about providing information regarding housing needs. But, only certain groups are targeted – those who want to buy homes, seniors, renters and landlords – as I don’t see much information about affordable housing or dealing with teardowns or having good interactions with neighbors (as possible examples). If I had to guess, this sounds like more of an event promoting homeownership. This makes sense in a community like Naperville that is relatively wealthy but it doesn’t exactly promote a full range of housing issues.

Creating a quirky and warm Twitter personality for your on-the-market housing unit

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Here may be a new housing trend: personifying your for-sale home in a Twitter account.

Bob the House — a three-bedroom, one-and-a-half-bath ranch in the Chicago suburb of Mount Prospect — has been tweeting about his journey on the market since October. You’ll find Bob to be a rather inspirational house, tweeting messages of positivity and hope on a regular basis, along with fanfare for the Chicago Cubs and humorous updates about his search for the right family. (“Six showings today! You like me, you really like me!”)

Here’s the open secret: It’s not really Bob who’s doing the tweeting. It’s his “handler,” Rich Burghgraef, an account executive with sales consulting firm Randolph Sterling, Inc. Burghgraef writes in a blog post that he created Bob, whose name comes from the street the house lives on, Robert Drive, as a way to get away from typical advertising tactics. It seems Bob was a hit, with showings of the home going from one or two a weekend to six and eight after the Twitter account debuted. It may have even been responsible (or at least contributory) to the ultimate happy ending, as Bob tweeted on March 1: “My new family moved in on Friday. Thank you all for taking an interest.”…

Burghgraef says that he used Bob to make a personal connection with buyers, not just to throw marketing messages of “buy me!” at them. Bob would tweet about the school that taught him to tweet (so there’s a good school in the neighborhood!); his friend, the stop sign (safety first!); and his stepson, the swing set (don’t you see your family here?). The home’s Twitter account gave buyers a new way to “fall in love with him even before stepping in for a showing,” Burghgraef says.

A clever way to use social media. The several accounts I read of this phenomena did not provide much evidence regarding the effectiveness of this tactic. Of course, social media attention is one of the currencies of today’s social realm so why not leverage it to help sell your home?We can’t be too far away from someone automating this process so that every new housing unit on the market could take advantage of Internet available information about the neighborhood and surrounding area to develop a winning personality.

I think Burghgraef is right in suggesting that this could be particularly effective with real estate since there is a high level of emotional investment. While we could imagine all sorts of consumer goods having their own online personalities, not all of those goods might have the same emotional connections to their owners.

Just how much is the Willis Tower worth?

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News is that the Willis Tower in Chicago is up for sale and one insider suggests it could go for $1.5 billion:

The owners of the Willis Tower have hired Eastdil Secured to seek a sale, according to an offering book already given to potential buyers. The property’s owners are being advised in the deal by Chicago-based Stephen Livaditis and New York-based Douglas Harmon, senior managing directors at Eastdil, according to the materials…

Chicago is coming off the strongest year of office building sales downtown in seven years. Boosted by low interest rates, a strong real estate appetite for U.S. real estate by domestic and international investors and comparatively higher pricing in coastal cities such as New York and San Francisco, Chicago in 2014 experienced some of its biggest office deals…

Industry newsletter Real Estate Alert, which first reported Willis Tower was being shopped, estimated it could sell for about $1.5 billion. That would be almost $400 for each of the tower’s nearly 3.8 million square feet of office space.

But because of its huge size and unusually broad sources of revenue, experts say Willis Tower’s value is more difficult to pinpoint than a traditional office property.

Sounds like a thriving market right now. Building occupancy is up in recent years and several other large office buildings have sold for high prices in the last year or so.

It would be fascinating to see what happens if the name changes again. How would Chicagoans react? The Willis Tower switchover never completely happened – hard to believe that was over 10 years ago now – so would a new name work? We are not there yet but could be headed toward a world where major buildings consistently change names as they change owners or even develop sponsorship deals to have particular names?

The reasons behind and consequences of the possible extinction of the starter home

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Why are fewer builders constructing smaller starter homes that first came to prominence after World War II?

It’s several things. Land is too expensive to put the more modest house on it. Municipalities’ fees are another reason. And then there’s this phenomenon: Entry-level buyers just don’t want a starter home — they want something fancier…

From the time that high-production builders gained traction in the ’40s and ’50s and into the last part of the last decade, they were able to access inexpensive land and get labor and materials in ways that allowed them to produce an accessible and affordable entry-level home. But the Great Recession didn’t cause land to decline in value the way that houses did, and the lots aren’t widely available. When they are available, there are multiple bidders for them, which pushes the price up. Builders also downsized during the recession, and they don’t have the same capacity to build in volume that they once had. Today, if you’re building a $300,000 or $400,000 house, you’re going to make more money than if you were building two or three $150,000 houses.

Some of the sticker shock for buyers of entry-level homes comes from the local entitlement and permit fees that effectively ward off entry-level neighborhoods from established communities. These fees get baked into the cost and may add 20 to 25 percent to the cost of the home, for schools, infrastructure and support services. Municipalities seem to be doing everything they can to prevent lower-cost housing from being developed. They want property values and, in turn, property taxes, to be higher…

The startup of household formations is lagging the generation earlier by a few years. They’re becoming couples later and having children later. In some seismic way, we’re seeing that age group that we call the millennials buying their first homes at age 35, 36, 37. Because that generation grew up in what are really the nicest homes that ever existed in any society, they’re not going to want to go back to a very modest first home that will set them back, in terms of what they’re used to. They have a whole different mindset about that than we did. Certainly, some percentage of this group is going to want (the simple starter), but most will want what they’ve become used to — even in student housing, it’s like major apartment amenities. “Modest” is not what they have in mind.

It sounds like there are issues on both the supply and demand sides:

1. Consumers now expect more from their first homes. With demographic shifts (later marriage and kids) plus higher standards of living over time, homebuyers want more. This is something that also works against downsizing arguments: once people have a standard (and in this case, it comes from their earlier years and not even from something they have owned yet), it is hard to step back from those features.

2. Builders just can’t make as much money off of starter homes. Land is more valuable – think of all those suburbs that have expanded in recent decades – and fees have gone up so they need to construct more expensive homes to make up the difference. How many established communities, particularly wealthier ones, want cheaper starter homes constructed which might lower their own housing values as well as contribute more children to the school system and possibly require more funding?

A few side effects that might emerge:

1. Those who do want starter homes will likely have to go to less wealthy and older communities with older housing stocks.

2. This might limit particular groups, such as lower-income workers, from buying a home as they will have a harder time making the leap to a more expensive new home.

3. This could keep rental prices higher if people have to save larger amounts for more expensive first homes.

4. Those same communities that want to protect their housing values may find they have precious few places for people they might want in the community – such as recent college graduates or downsizing older adults – to own homes.

Interpreting dreams about New York City real estate

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At the center of the world, what do dreams about real estate mean? One dream specialist looks into real estate dreams of New Yorkers:

“I dreamt that I found a door in my apartment that lead to this massive extra room no one knew about and suddenly our 300ish-square-foot one bedroom was big! And we didn’t have to move to have kids! Just don’t tell the landlord! I woke up and searched for that door. It did not exist. Dammit, Narnia!”Anne Cutler: The dream image of finding a hidden door that opens into a room one didn’t know was there could be a metaphor for discovering a new aspect of oneself that you didn’t realize existed. In this dream, the expansion of the apartment with the new room could be both literal: room to start a family, and metaphorical: a psychological readiness to have children and expand the family…

“After our first meeting with our broker—which, by the way, was very positive—I had a dream that he was like, “Rebecca, I’m sorry, but we’re going to have to look on Staten Island.” (My parents are assisting with the buying; that’s why I said “we.”) I was very depressed when I woke up. I’m sure the dream interpreter will say I have financial anxiety about buying an apartment but who knows what else this means.”

AC: This dream was most likely triggered by something in her initial meeting with the broker. Possibly the dreamer was trying to manage her expectations about what they could afford. The dreamer is most likely engaged in an internal weighing of her own fantasies about her dream apartment/house versus her fears about how far her finances will go. The dream does have an anxiety component. Given her depressed mood when she woke up, I’ll assume the dreamer doesn’t want to live in Staten Island. But the specifics of why not can only be gleaned from further discussion with the dreamer. The specific images we choose in dreams all have significance. So, in this case, why Staten Island instead of Queens or the Bronx or Brooklyn?

The neuroses of New York City life – perhaps this should have been the focus of a Woody Allen film?

I can’t help but want more data on such a topic:

1. Do New Yorkers dream about real estate more than people in other cities, particularly those in cities with less expensive housing markets?

2. Compared to others, do New Yorkers always want to move up (bigger place, better location, etc.) in their dreams? Given the consumerist nature of American life and what we think real estate signifies about us, is this limited to New Yorkers?

3. Do people have positive dreams about where they live? The examples presented here are more about anxieties dealing with home. Yet, psychologists and others have argued that certain dwellings can be designed to provide a better fit with the resident’s personality.