Altos Research Real Estate Insights

Here's a fascinating development for anyone interested in the housing futures markets. Radar Logic has acquired Miller Samuel-- the eponymous home of Jonathan Miller, blogger of Matrix fame and all around good guy.

Radar Logic, in case you haven't been paying attention, has developed the second tradable index for futures and options in residential real estate. Their product, the RPX, differs from the incumbent Case Shiller Index in a few key ways. The CSI updates monthly, where the RPX is a daily update. Case Shiller tracks median price, RPX tracks price-per-square-foot. This difference is ostensibly to better align with the relative value of a property and to avoid entanglement with the changing nature of the properties themselves.

More important in this story however, is not the difference in the trading indexes (each has its own advantages) but the differences in the companies that support these indexes.

With this move, Radar Logic buys itself all kinds of benefits: revenue, diversification, and talent. Miller is arguably the most influential voice in residential property valuation markets today. He's certainly got more readers than Shiller, plus the regular CNBC gig. Radar Logic is building itself into a significant Wall Street player.

Shiller's firm MacroMarkets, on the other hand, remains a couple of introvert finance professors in Cambridge with a reputation as enormously difficult to do business with.

So place your bets. Expect the RPX to over take the CSI in trading volume very quickly. (Both are still thinly traded to date.) Radar Logic may just be making itself into the firm that can fulfill the promise of a real, liquid market in housing futures.

[Disclosures: At Altos Research, we sell data that leads the Case Shiller Index by 3 months. We have trader clients on Wall Street. We have no relationship with MacroMarkets, but wish they'd turn up the heat a bit. RPX stuff coming soon.]

I have huge respect for Jonathan. Great move by Radar Logic. Congrats to both. This is what the market needs.

The bubble is bursting all around us and the National Association of Realtors comes out with a report that San Francisco Bay Area median home prices increased by 13% in the second quarter. Nooooo, can it be? If you can't trust NAR, who can you trust?

Stephen Bedikian of RealIQ has a nice piece today over at Inman News sorting through the confusion. He cites some Altos numbers to help make sense of the turmoil. Stephen concludes:

So what actually happened? Sales transactions increased with a greater proportion on the high end versus the previous quarter. There appears to have been little actual appreciation as evidenced by the Case Shiller and OFHEO numbers, while inventory increased and prices of many listed properties were reduced. So next time you read that median house prices have increased in your area, don't celebrate prematurely. Conduct more research before you reach a conclusion about market conditions in your area.

In addition to Stephen's suggestion of diversifying your stats, I'll add that if you're not looking local, you're not looking anywhere. The Bay Area market? Are you kidding? This spring, you could indeed watch a few key markets, like Palo Alto and up the Peninsula stay strong. But look even a few miles inland, say Antioch, and the carnage was everywhere.

To be fair to NAR, we reported the same trends for some of those parts of the Bay Area in February, March, and April. We also noted that by May, the Spring price growth had already begun to recede. (Notably correlated, by the way, with the widening spreads on jumbo mortgages that started at that time. Surprise! The high-end starts to fade when fat mortgages get more expensive.) So here we are five months later and NAR is telling you that San Francisco had a strong spring. Thanks guys.

[ps. sorry about the long hiatus from the blogosphere. Hope you've been enjoying Scott's posts on real estate e-marketing tactics. Our plan is to intersperse both topics together. Thanks to Stephen for getting me off my ass and posting. I like his work, we'll have to do more together in the future.]