Altos Research Real Estate Insights

Client, friend, and indefatigable blogger Kevin Boer has a really slick map mashup of our AltosCharts housing price charts for the Bay Area, using our price quartile data. Kevin uses Zeesource and the result is prettier than our own map mashup (though ours covers all our markets and has a zoom-in-to-the-zip-codes feature.)

Our AltosCharts service is up for the Most Innovative Technology award at the Inman Connect conference this week. It's partners like Kevin that really illustrate the power of using market analytics to inform. We're proud to count him as a client. I'm not sure how the winners are selected for these awards, but maybe fans of Kevin's work will stuff the ballot box for us.

And while I'm patting myself on the back, here are a couple of other Altos clients that use AltosCharts really well to bring value to their readers, and boost their own marketing return:

The Harper Team in the East Bay

Pat Kapowich in Sunnyvale

SeattleHome.com

(BTW - I don't mean to exclude any other clients and your sites. There are too many to mention. Feel free to add your site to the comments of this blog if you want to show off your AltosCharts work. I'll work up a post highlighting other sites soon.)

This week we're proud to announce that we're joined by Scott Sambucci as the new director of business development for Altos Research.

Scott is a rare breed: an economist and an entrepreneur. That means he's an expert in the technical aspect of our market analytics work and an expert in helping people (like our clients) build their businesses.

For fun, Scott's an adjunct professor of economics at the University of San Francisco and Cal State East Bay (can you just imagine the Altos Research team happy hour? paaartay!). Plus he's off-the-charts smart and has graduate degrees from Duke University and USF. He's a technology veteran with a diverse background in the Silicon Valley software world and international economics consulting. He also speaks Russian fluently, but I haven't yet figured out how to leverage that talent to our advantage. In short, he fits right in with the Altos team and we're super happy to have him on board.

Why the squishy title, "director of business development"? Everyone at our firm contributes to multiple parts of the business. Scott's primary role is leading our sales efforts. He's already interacting every day with our subscribers, site visitors, and prospects. Of course, since so much of our efforts are focused on making our realtor clients look like rock stars, Scott's role also necessarily spreads into customer service. Finally, Scott's technical background fits our product strategy needs nicely. So "director of business development" seems to be an appropriate catch-all.

So friends, please extend a warm welcome to Scott. I'm hoping to get him blogging from time to time in this space. In the meantime, he can be reached at scott [at] altosresearch [dot] com.

Scott will be prowling the halls of the Inman Real Estate Connect conference in San Francisco this week, stop by and say Hi if you're there.

It's no secret I'm an Silicon Valley/entrepreneurship geek...'course I'm a geek in lots of ways, as my half-finished Harry Potter #7 will attest this Saturday morning... Anyway, since this blog is focused on the output of our company rather than the process of building the company itself, I've published a piece over on GigaOm's Found|Read site, a site dedicated to technology startups. In the article I discuss some of the process we used with early potential customers to design and launch our research product line. If you're into that kind of thing too, the article is here.

Las Vegas has long been the most maligned city when the housing bubblers do their maligning. The logic of complaints/fears goes something like this:

1. Housing demand of 2000-2005 was driven in large part by second home buyers
   
2. Off the charts levels of new construction keeps supply high
3. When the bubble bursts, those second home buyers are going to be the first to run.
4. Demand will crater. Prices will surely follow.

While no one is popping the champagne any time soon, a year into the housing market burst...erm...correction... and prices for second homes (mostly condos) in Las Vegas are still hanging tough.

This investigation was triggered over breakfast with Altos client Aaron Wheeler of Oakville Properties who mentioned his Las Vegas team is having a surprisingly strong year. (Oakville is headquartered in California, but does a good business matching people with the right properties in Las Vegas.)

Here's a chart that touches on what Aaron was talking about.

What gives? Why hasn't the Las Vegas housing market tanked yet*?

The answer is that Las Vegas real estate appears to be buoyed by those same second homes that the bubblistas were so afraid of.

When I was a kid, the second home market was a cabin on Lake Somethingorother in Northern Wisconsin. Somewhere in the '90s Las Vegas became the second home city of choice for vacation-bound Chicagoans. And Angelenos. And Hong Kongers.

So it turns out that this housing bubble is deflating in unexpected ways. And the Las Vegas housing market is an exaggerated version of the country's experience. Let's sum it up this way:

The economy is pulling real estate, not the other way around. Las Vegas is a global destination and the world's economy is BOOMING.

The pressure is building at the low end of the market. Mortgages are getting tougher and more expensive. But investment is strong, people are working. And the top-end globally is rolling. The whole country benefits from global economic strength. Vegas real estate maybe more so. Who knew?

*Not that this is a puff-piece article. There are indeed plenty of signs of fragility. Prices for single family homes in Las Vegas haven't held up nearly as well. Days On Market averages are climbing into discomfort zone. There are plenty of options for buyers. Caveat Emptor.

link: Las Vegas Real Estate Market free research and subscription

Jessica at Inman this morning reports that, in a fit of fear of a bursting bubble, the SoCal MLS has stopped publishing it's Days on Market stats.

Even if you give them the benefit of the doubt that a Days On Market stat can be misleading as a standalone indicator of housing market conditions, the move is just plain silly. Bite the bullet guys, sweeping bad news under the rug doesn't make the bad news go away. It just makes it harder to manage intelligently for home buyers and sellers.

So since you can no longer get a view from the SoCal MLS, you'll have to get it from us. And we, of course, don't present DoM as a standalone indicator.

Among lots of other market data, when we survey a market, we calculate an mean Days on Market vs. a median Days on Market. (The mean, remember, is the average. It'll skew higher if just a few porperties are on the market for super long times. The median is the measure of half the market. So half the homes are on less than X days.) It's fascinating to watch in a changing market, for example, the median drop while the average stays high. That illustrates the freshest properties--and the ones priced right--are turning over quickly while the stale, overpriced, unappealing properties are lingering.

Because I know you're interested, here's a chart illustrating the median Days on Market for some key Southern California real state markets. You can see we're past the seasonal Spring Fling of new properties coming on and the Dog Days are approaching. Though higher than it's been for years, 2+ months is actually not that crazy painful (easy for me to say). This is the median, remember so there are lots of properties hanging around for several (many) months.

[update] Here's average DoM too, note the effect of stale properties staying on the market and skewing the average higher than the median:

Further Research Details available here:

Los Angeles Real Estate Market

Irvine Real Estate Market

Pasadena Real Estate Market

Thousand Oaks Real Estate Market

We're quoted in a fun article by Noam Cohen in today's New York Times.

The topic is the emerging predictive power of internet information. Triggered by the recent murders by a pro-wrestler, and its seemingly prescient reporting in Wikipedia, Noam draws the comparison to the oracles on the Ides of March.

My friend Bill Tancer of Hitwise is also cited. Bill and I gave a talk on this very topic at FOO Camp a couple weeks ago. Bill likes to predict American Idol winners based on search data they capture at Hitwise (and he's good at it, though not infallible.) He's also demonstrated some potentially actionable leading data on housing, unemployment, and the spread of pandemic fears. Bill calls it searchonomics. Here's the point I like to make:

This information serves a Wall Street function as “closer to real time” data for investors, said Michael Simonsen, Altos’s president and chief executive.

“We are really early in the predictive power of the Internet; financial markets are getting a hang of it,” he says. “We have miles to go in all the nuances in capturing information.”

And that's the key, really. Predictive power is a trade-off between advance time and uncertainty. So the more the information is reported in real time, the more it is measured in real time and the more efficient markets get. Funny how in this view, the Bloomberg terminal looks like steam power.

Altos Research happens to be in the business of measuring really, really quickly. In markets where it takes a long time to get the data to people, the internet blows the roof off previously held conventions. Robin Hanson nails it:

Robin Hanson of George Mason University, an expert on using future markets to track public sentiment, said an e-mail exchange that these examples are hardly evidence of predicting the future. Rather, he suggested, it was “a bit newspaper-centric to say that news has not broke ‘publicly’ if it is being discussed online in rumors but has not appeared in a newspaper.” He added that “with more and more kinds of media, there are more and more intermediate levels of info availability.”

This is the crucial dividing line: between reporting on events in as close to real time as possible — which can prove jarring to society, and journalists in particular, but hardly supernatural — and predicting things around the bend.

Cool stuff. Nicely captured by Cohen.

Drew Meyers from Zillow called up last week and interviewed me about last week's Carnival of Real Estate. If for some reason you don't get enough of my pontificating in written form in this blog, you can hear Drew and I chatter on about Altos Research, the contributors and articles in last week's Carnival of Real Estate, blogging in general, and the state of the real estate market.