Altos Research Real Estate Insights

I've said frequently I am a huge fan of the predictive power of futures markets. Today the DEMO 2007 conference brings us the latest prediction market innovation in the form of an ambitious startup and new Altos Research partner (more on that below), My-Currency.com

[update] My Currency's DEMO Demo is here.

The concept behind "predictive markets" is that the collective wisdom of enough properly incented people can provide insights beyond the abilities of any individual.

Usually the incentive is your cash. My Currency does a cool twist and incents its market players (Realtors or other service providers for example) by tracking their reputation with points on how well they trade on a market. Later, a consumer can come to the sight poking around for say, South of Market Condo market information and find the experts with the best reputation for knowledge in that part of town. Could be a great marketing channel.

The company has already been positioned as the anti-Zillow. And the concept may have some legs. You know how everyone has an opinion of the Zillow price for your home? Well My-Currency let's you put your reputation where your mouth is.

You can also track the market by neighborhood with their futures market
on price-per-square-foot by zip code. The spot pricing in this market
is provided by Altos Research.

We experimented last year with a futures market at inklingmarkets.com. There we set up the San Jose median home price market (which by the way successfully predicted San Jose home price changes in 2006). My suspicion is that My Currency, by being focused on real estate, has an advantage over the ad hoc markets of Inkling. In any market, liquidity is the key. So My-Currency should have better volume of real estate traders than someone like Inkling.

The user interface for making a trade on the My Currency market is really simple and it's kinda fun too. Give it a shot and let's see how your expertise flies. I'm trading on the indexes. Is that inside information? Maybe. Can you beat me? If you know your neighborhood!

Joel at FoREM, as usual, has a thoughtful and insightful review.

VentureBeat covered My-Currency's launch story yesterday.

Here are some great nuggets from the National Association of Realtor's 2006 Profile of Home Buyers and Sellers, Texas edition:

• In Texas for 2006, first-time homebuyers, with a median age of 33, accounted for 35% of existing homes purchased statewide
• The median income for first-timers was $62,700, about 7 percent
  higher than the national average.
• Almost half of all buyers believe their home purchases are better investments than stocks. [ed: "better" leaves a lot of room for subjectivity.]
• Most 68% of Texas homebuyers were married couples
• Single females purchased a whopping 20 percent compared to single males at 5 percent. [ed: man, there's a lot that can be read into this statistic.]


• About 79 percent purchasing through real estate agents. [ed: that's a lot lower than I'd expect. Is that 21% Redfin bait or are they buying from their brother-in-law?]


• Of those purchasing through an agent, 79 percent reported they were “very satisfied” with the honesty and integrity of their agents.

On the Texas Home Seller:

• The seller’s median age was 46 with an average household income of 89,500.


• Married home sellers accounted for 73 percent of sales, and 49 percent had no children younger than 18 living at home. [ed: sigh... single Texas girl buys home, gets married to transient Texas boy, ages 13 years and increases 50% more income.]


• 86% of Texas home sellers used agents to sell their homes [ed: again, this surprises me. Is the FSBO market really 14%? Anyone have national stats on FSBOs as a percent of total?]


• Average days on market was six weeks, with more than half of sellers receiving their asking prices. [ed: for 2006 overall, those are not bubble burst conditions. If Texas mirrors the rest of the markets we cover, though, the days on market climbed significantly in the October-December quarter of 2006. We'll be covering Texas soon for you.]

via: Texas A&M

Since today we're on the topic of powerful real estate marketings tools I thought I'd point out Alain Pinel realtor Kevin Boer's excellent post using video to show a property on his blog.

Kevin's video is hosted by WellcomeMat.com (Yes, that two LLs). A slick YouTube optimized for real estate. Incidentally Phil from WellcomeMat has a great blog post up today about The Fear that some face in the adoption of new technology whether that's real time market research or real estate video.

Kevin, by the way, knows no fear.

Here's the video of that cool property in Palo Alto.

I agree, btw, on the bamboo - have it in our bathroom. Also the de riguer barcelona chair, natch.

Some of you have noticed this already, but I wanted to point it out in a post, in case you read this blog in a feedreader or via email: We've added a MeeboMe widget to the sidebar. What's MeeboMe? Meebo is a web-based IM client that lets you be logged into several IM services at the same time (AOL and Yahoo, for example). MeeboMe is a widget that sits on your site and lets any site visitor chat with you directly, right now, when they're looking at your stuff.

Why is this important to you, Mr/ Ms Real Estate Marketer?

Call it Mike's Internet Lead Law: The success rate for converting an internet-generated inquiry (ie. a lead) into actual business decreases at a rate of 1 / (time to respond).

Any realtor who has handled internet-generated leads knows this from experience. It's why you have the Treo or Blackberry. If you can reply inside of 15 minutes-catch them while they're still at the computer and remember who the hell you are-your success rate is vastly higher than if you wait even a few hours.

IM, of course, stands for Instant Message, so you get the picture.

I prefer to think of MeeboMe as Instant Customer Service.

The widget is currently on our blog page, but we'll be integrating it into the Altos Research site in general. If you're in the process of subscribing to some of our research and just want one question answered before you complete the purchase, why shouldn't we be right there for you?! Now we are.

Here's a cool bonus feature. You get to see how many people are actually looking at your site, right now. If they've input their nickname, you can see them by name. In this screen shot below, you can see there are four people reading the blog right now (Fritz runs the HousingDerivatives.com blog) plus a few folks.

Our MeeboMe Instant Customer Service is already getting rave reviews. If you're at all interested in converting your web visitors into actual clients, I highly recommend it.

Side note: Dustin and team at Rain City Guide use a Skype contact, which I've always found innovative and intriguing. At Altos, we use Skype too. But with Meebo, no one is required to install any software. It just works. That's a huge advantage.

Another side note: I frequently work out of the RedRock coffee shop in downtown Mountain View. The Meebo HQ is right around the corner and they hang out there too. I love Silicon Valley.

We've been covering Southern California for a while now, but I don't comment on the markets down there nearly enough. So here's some info on the current Pasadena housing market. (Note the charts on our free housing market research page use 90-day rolling averages, so their trendlines will differ somewhat from this week's numbers I cite below.)

Median home price in Pasadena has held flat around $800,000 since last summer. While days on market is climbing like everywhere else in the country (almost 11 weeks!), there's still some amount of action, especially at the low end of the market.

Where are the trends pointing? Well available inventory is about to begin is seasonal climb. And while I find that days-on-market statistic a bit troublesome, this is always the time of year when the old stuff sits around.

The high-end of the Pasadena market, nice (though a bit aged) $2 million homes on big lots, are getting a bit stale at 12 weeks on the market. This condition is probably making some sellers nervous. If you're a buyer and not worried about a bubble burst in the next six months, you can probably find some people willing to deal!

The trends are amplified in the Central part of town where the 91106 zip code generally has the ritziest properties. Average time on market for the great spreads in the $5 million range is pushing half a year. If you need 8 beds and 8 baths just north of LA, have I got a deal for you!

Here's a cool trend: We've been noticing a consistent local pricing up-tick across the Bay Area as we've entered 2007.

I grabbed these charts for a client the other day and was surprised how similar they all look. Though the phenomenon is primarily a function of seasonal inventory changes, at least it is evidence that a big cyclical downturn (read: bubble burst) hasn't overwhelmed the market.

Down from the peak, to be sure, but positive signs nonetheless.

If you're paying close attention, you'll notice the San Jose chart in the right hand column of this blog has not yet turned the corner and is still aiming down. If you're paying really close attention, you'll notice the weekly price number under the San Jose chart has actually been flat-and-climbing in the last few weeks. (That stat feature uses our AltosStats API, pretty cool huh?) What gives with the discrepency? The chart is illustrating a 90-day rolling average. The number is this week's sample. So while we're still below the rolling average, the flattening trends are taking shape in San Jose too.

Tom Kelly has an interesting article over at Inman News today. Citing a Wall Street Journal study of the top 200 realtors in the county and NAR data, Tom comes up with some insightful stats.

• The "typical" Realtor is a 52-year-old female who lives in a household with three people, in the business for 9 years.
• This salesperson has a gross personal income of $62,300, works 46 hours a week, and does about 12 transactions. [ed: this makes sense if the average gross commission cut per agent is a little over 2%, then the average price of these deals is about the average US home price.]
• This professional is affiliated with an independently owned, nonfranchised firm that has just one office. [ed: This factoid surprises me given that NAR has 1.3 million members and the top 10 franchise firms must have half that number - starting with RE/MAX with 90,000 US agents. I would have guessed that the Altos Research client sample had larger than average representation with the independents - about 30% of Altos Research clients run their own independent firms.]
• The top individual agent did...get ready for this... $245 million in sales last year (NYC). The top "team" did $540 million over 24 individual agents (San Diego). [ed: These two stats surprise me less. About 10% of Altos Research clients did over $50 million last year. I expect more of our clients to join those ranks this year.]

In a continuation of the Altos Research media tour-de-force, I was, incidentally, a guest on Tom's nationally syndicated Real Estate Today radio show this weekend. podcast of the hour long show is here.

Last year at this time I cited a chart from ECRI to indicate that 2006 was unlikely to see recession and that the robust economic performance was evidence for remaining sanguine in spite of the likelihood of burst in our little real estate bubble in 2006. As we escaped the year with only a little Q4 slowdown, it looks like they hit it on the head.

This year, I'll revisit the same index. It turns out the chart shape is similar, as is the conclusion. We have indeed seen the signs of trouble in some parts of the housing market. New home construction has just started what is probably a multi-year decline, the mortgage business is sending many entrepreneurial souls off to their next venture. With the auto business tanking, these must be the canaries in the coal mine (to quote Barry Ritholtz), right?

For now, the dynamic US economy is holding on strong. While indeed in cyclical downturns, the economy is not just housing and autos.

You might think that if manufacturing slows more than the markets expected, it would raise recession risks -- especially with the weakness in housing. Luckily that isn't so.

This is now a two-speed economy. With industrial growth still slowing [it peaked months ago] but non-industrial growth is perking up. And that's the message from the ECRI leading services index.

But does that make sense? Can falling home prices, slowing industrial growth, and accelerating services growth add up an expanding economy?

Yep. According to ECRI it does. Their Weekly Leading Index is heading up, with growth rate at a 47 week high.

I like this index because 1) It is a weekly, real-time sample. It is therefore very aware of what is happening right now. Further, it is less subject to big revisions when new data comes in. 2) It is consistently right about predicting recession, and 3) maybe more tellingly, it has never cried wolf - their index has never predicted a recession that didn't come. The folks at ECRI say that the index must be persistently and pervasively below zero on the graph above before a recession is in the near-term cards. ECRI smugly puts it this way:

Not in 1995 when pessimists decided that recession was bound to follow Fed rate hiks. Not in 1998 after the LTCM crisis, when President Clinton spoke of the worst financial ciris in 50 years. Not in 2002, when stocks were plunging and the markets were rife with talk of doudle-dip recession. Not after Katrina and yes, not now, even with the yield curve clearly inverted.

So despite obvious weakness, the housing market escaped major carnage in 2006. Much of that relative success can be attributed to the strong economy, at least in the markets that Altos Research monitors. So in many ways, the housing market - at least the existing home resale part of it - is as much a passenger in this economy as a driver.

One caveat: Both the bulls and bears could still be right - with the difference being time horizon. Nouriel Roubini, for example, has indicated 70% chance of recession in 2007. While the ECRI index is powerful, it only looks about 9 months forward. Maybe 4Q 2007 is where we feel the pain.

Another caveat: the existing home sales market was spared in 2006 by persistently low mortgage rates. Our much-maligned, persistently high trade deficit is somewhat to credit for this. Cash flows out of the country for consumer goods, it returns in investment - demand for bonds - which keeps rates low. But in the last few months the trade deficit has been declining, signaling a possible rise in rates in '07.

We were covered in The Seattle Post Intelligencer this weekend. Aubrey Cohen published a local real estate article on Saturday and included some stats and quotes from us. Here's a sample:

Melvey's [Widnermere] own analysis of the number of sales versus the number of homes listed shows that Seattle is still a seller's market.

"Definitely inventory dropped a lot during the holidays, but the activity level didn't drop off as much as I expected it to," he said.
"It certainly seems to me that the market is still really healthy."

Altos Research numbers show the average house is now spending 69 days on the market.

"Ten weeks is pretty long, compared to the levels of the last few years," Simonsen said. He said 36 percent of properties currently on the market have had their prices reduced -- relatively high, but lower than reductions of more than 40 percent seen in many San Francisco Bay Area markets.

Simonsen predicted that Seattle would start seeing slight year-over-year price declines this spring or summer, although he said the city had a strong economy, and its housing market would fare better than outlying areas.

"While we see some positive things to keep the bottom falling out, we don't see any big catalyst that will let prices jump upwards," he said.

Full article available at the Seattle PI.

The fine folks at HousingWire.com have set up the 2007 Real Estate Blogging Awards.

The Altos Research blog has been nominated in the "Best Kept Secret" category, which kinda feels akin to the most improved little league player. Thanks! (I think.)

Anyway, we're honored to be included. And HousingWire is actually putting their money where their links are. They're actually offering a $25 gift certificate to the winners. If we win, we'll have double the Altos Research holiday bonus pool!

So head over to HousingWire and vote early, vote often!