Posted by nithi.vivatrat on December 4, 2009
Economists and other talking heads were almost giddy today about November’s unexpected dip in the unemployment rate to 10%. It was not unusual to see quotes like these being tossed around:
- WSJ: “…a sign the labor market is finally healing as the economy recovers…”
- Chris Rupkey, chief financial economist at Bank of Tokyo/Mistubishi UFJ in New York, quoted by CNBC: “We’re almost back to normal… The economy is lifting at a much greater rate than expected.”
- Tom Sowanick, chief investment officer at the OmniVest Group in Princeton, New Jersey, also quoted by CNBC: “These numbers are almost too good to be true.”
I think it is. WAIT! There is more to read… read on »
Posted by nithi.vivatrat on November 16, 2009
Been a while since I’ve blogged — sorry about that. Some big changes at SmithAdams coming — more about that later. I did want to make sure that everyone saw Joseph Gyourko’s piece in the Washington Post yesterday taking a critical look at the conventional wisdom about the benefits of homeownership. I am a homeowner, but I think a lot of people become homeowners for the wrong reasons. If you’re going to become a homeowner, it should be with eyes wide open and not because you’re going along with the mythology. Definitely worth reading — happy Monday!
Posted by nithi.vivatrat on August 26, 2009
As has been broadly reported, the S&P/Case-Shiller U.S. national home price index rose nearly 3% in the second quarter compared with the first three months of this year. In the Washington region, prices of previously owned single-family homes rose 2.85% in June over the previous month, the second gain in a row after a 1.3% increase in May.
I wrote previously that we’re still facing further unemployment and foreclosure activity, as well as the end of the first-time buyer tax credit; all of these factors have the potential to take away the gains we are seeing. Specifically to the tax credit issue, Dean Baker, the co-director of the Center for Economic and Policy Research, stated in the LA Times that the tax credit “probably pulled a lot of purchases forward that might not have happened until 2010 or 2011, and that demand’s not going to be there.”
We’ll need to wait until after the tax credit program expires before we can really get a sense of how prices will trend in the “normal state.”
Posted by nithi.vivatrat on August 25, 2009
The paperback edition of Freakonomics went on sale today, and Levitt/Dubner posted on their blog the only new content in this edition, which is a Q&A with the authors derived from the wonderful Freakonomics blog. I thought you would find this excerpt interesting:
Q: Of the examples discussed in the book, which have gained the greatest traction in the popular/political discussion? — Rick Groves
A: There has been a lot of talk about the relationship between legalized abortion and the crime rate. And some governments have cited the low wages of street-level drug dealers as an incentive to young people to go legit. But on a day-to-day level, the part of the book that’s probably spurred the most change is our discussion of real-estate agents. The standard fixed-commission, full-service Realtor model is gradually melting away [emphasis added]. Even the White House weighed in, with the Real Estate Settlement Procedures Act, which is meant to increase transparency between Realtors and their customers.
In my posts, I have never claimed that the commission model will disappear (though it doesn’t hurt when the Freakonomics guys say so). I do, however, believe that the commission-free, fee-for-service model will be a popular option for an increasingly large segment of consumers. To each their own, as the saying goes…
Posted by nithi.vivatrat on
Bloomberg reports that the Federal Reserve, losing a federal lawsuit yesterday, must identify the financial firms that received special emergency loans. You may remember that the Fed refused to disclose any details of these loan programs, arguing that the knowledge that a specific firm received emergency loan would undermine its competitiveness or even spark a run on that bank — so of course, it would be safer to keep that knowledge solely in the Fed’s wise hands. The details withheld by the Fed included the names of the firms, the loan amounts, and the assets put up for collateral.
Fortunately, Manhattan Chief U.S. District Judge Loretta Preska rejected this speculation: “Conjecture, without evidence of imminent harm, simply fails to meet the Board’s burden” of proof.
I agree. As taxpayers, we became — like it or not — lenders to and investors in these firms. We should have the right to see what’s in our portfolio. I for one look forward to seeing these details come out — Judge Preska gave the Fed five days to comply.
Posted by nithi.vivatrat on August 24, 2009
In an opinion piece in yesterday’s Financial Times, NYU economics professor Nouriel Roubini took issue with the mainstream speculation of an imminent economic recovery, arguing that the recovery will be “U-shaped, anaemic and below trend for at least a couple of years, after a couple of quarters of rapid growth driven by the restocking of inventories and a recovery of production from near Depression levels.” He goes on to list seven systemic economic conditions dragging out a recovery.
Further, Roubini contends that, in fact, we could be facing a W-shaped, double-dip recession, caused by the Catch-22 of ending government bailout/stimulus programs (undermine recovery if they end, drive inflation risk and then interest rates if they don’t) as well as speculation on commodities.
Well-articulated, sobering analysis — must read for anyone seriously interested in planning for what’s ahead.
Posted by nithi.vivatrat on August 21, 2009
Bloomberg reported this morning that July sales of existing homes exceeded the forecast to reach the highest level it has been in almost two years.
The Bloomberg News survey of 64 economists had a July median forecast of a 5 million annual rate. The actual sales in July, according to the National Association of Realtors, exceeded this forecast with a 5.24 million annual rate.
Of course, the number of transactions tends to increase as prices fall: the median price of existing homes fell 15%, from $210,100 in July 2008 to $178,400 in July 2009. There is no new concrete evidence of price stabilization, as the supply of previously-owned unsold homes, measured in months, remained unchanged from June at 9.4 months. To this point, I wrote in previous posts about the possible existence of “shadow inventory,” homes whose owners are waiting for signs of economic improvement before putting on the market, which would continue to keep inventory high (and prices depressed).
Other factors to keep in mind: the elevated level of foreclosure activity will likely persist for some time, which will continue to depress prices. In addition, the $8000 first-time homebuyer federal tax credit will not be available for transactions occurring after December 1; first-time homebuyers accounted for 30% of July sales, so the end of the program could also have a negative impact on home sale activity.
Some good news today, but I’m taking it with a grain of salt, given these other long-term factors.
Posted by nithi.vivatrat on August 20, 2009
Among the various types of consumers with whom I speak about SmithAdams, one segment immediately and intuitively gets it: professionals. By professionals, I mean specialized service providers such as lawyers, accountants, consultants, and doctors.
None of these professional groups charge a commission for their services. Accountants don’t charge their clients a percentage of their taxable income to do their taxes. M&A lawyers don’t calculate their fees as a percentage of the deal size. Consultants don’t charge their clients a percentage of profits. Yet the commission model is the traditional way we pay for real estate brokerage services.
Looking at my customer base, I can see that professionals — specifically lawyers — are among the early adopters of the SmithAdams model. More than one told me, “I’ve been waiting for something like this to come along!”
What is it about SmithAdams that appeals to professionals? Is it that they can pick and choose what services to use and pay for? Or is it that the potential for conflicts of interest inherent in the commission model is avoided? Or is it our focus on establishing a culture of service and client advocacy, versus a culture of sales and transactions? Probably a little bit of all of the above.
To me, this is key validation of our approach. If the SmithAdams fee-for-service model was the WRONG choice for a consumer, who would know better than professionals who use the same model in their work life? Fortunately for us, lawyers, consultants, and other professionals are opting to choose the SmithAdams model over the commission alternative. Great news for SmithAdams!
Posted by nithi.vivatrat on August 6, 2009
Amidst the signs being cited as proof of a recovering economy, other data still shows a rough road ahead. Yesterday, CalculatedRisk highlighted two such reports from Deutsche Bank (reported by Bloomberg) and the Wall Street Journal. The Bloomberg report indicates that:
The percentage of properties “underwater” is forecast to rise to 48 percent, or 25 million homes, as property prices drop through the first quarter of 2011, according to [Deutsche Bank] analysts Karen Weaver and Ying Shen.
According to Bloomberg, Deutsche Bank also believes that a large segment of the newly underwater homeowners will be prime borrowers (conforming and jumbo), not subprime or option ARM borrowers as has been the general case thus far.
WSJ reports an increase in the number of homeowners upside-down on their mortgages:
Some 24% of owner-occupied homes had mortgage debt that exceeded the values of those homes at the end of June, according to data from Equifax and Moody’s Economy.com. That number rises to 32% when looking at the share of homeowners with mortgages that don’t have equity left in their homes.
Overall, 16 million homeowners are “upside-down” on their mortgages, up from 10 million, or 15% of owner-occupied homes, one year ago.
Rough times ahead for a lot of homeowners, despite any improvement in the economy.
Posted by nithi.vivatrat on July 31, 2009
My apologies for a long hiatus from blogging. I needed to check out from the online social media world for a little while to handle an intense spike of new client activity in the physical world. I was also out since Saturday on vacation. But I’m back!
While I was out, The Daily Show had this hilarious take (embedded below) on Treasury Secretary Timothy Geithner’s problems selling his own home as proof that Secretary Geithner’s was unqualified for the job — hope you enjoy!