1.) Educate about the market
2.) More importantly, provide advice on navigating the market.
I want to start with the more important advice first: BE NICE.
As you watch this clip of The Man Himself, (Mr. Laird Hamilton, the dude who keeps Chris Chelios in shape at 46 years old on the Hockeytown Blue Line), Laird's conclusions are the conclusions of a man who has faced the wildest, least controllable, most concussive forces on the planet: Big Waves. They're simple and to the point.
With that, I want to include a response I sent out to a fellow agent last week. As the official Stat Nerd of ERA Shields, I was called out in an ALL COMPANY EMAIL (Addressed: EVERYONE) as to whether or not home values were sliding. All the work, all the graphs, all the information I had presented all kind of indicated this. But I was being questioned over the validity of Zillow's numbers. As one dedicated to Chaos Theory reigning supreme in all economics, especially real estate, this was a classic example of moving one variable and influencing thousands of others. Including myself. My respone: Sigh. Yes I just done wrote another Stat Pack. Jo Ann, you baited me. Okay, please only read this email if you are: 1.) A Nerd yourself (guilty) or a Nerd in training (also guilty) 2.) An insomniac needing something stiffer than a couple shots of Glenlivet 3.) An aspiring blogger who has a shortage of material Or 4.) Wanting to persuade some that the market is “strong”. There are lies, damned lies, and statistics. Technically speaking, Zillow is saying our market is better than the Gazette. So don’t pick on Zillow as the bad guy here. They’re a lot more accurate than The Gazette. They’re even more generous than your own PPAR. PPAR says that the YTD Average sales price is $235,000. This time last year? $253,000. Variance? 7.65%. To do this the Larry Kendall way, “which number is bigger, $253,000 or $235,000? If the values were $253,000 in 2007 and they are $235,000 now, are prices up or down?” I wonder how buyers come up with their conclusions. But is real estate simple, complex, or even abstract? I’d personally say: abstract. Screw complex. In that 75 minutes that put most of you to sleep at Retreat, I tried to use a lot of goofy animation to show that the next home your buyer buys is tied to whether or not an Irish airline can buy resale planes from Airbus. That’s global credit these days, your credit is tied to my credit, the “fairness” of the system has been replaced with severe restrictions and regulations, the modern rules have been replaced with the abacus and every media outlet and even non-media outlets have opinions. You can’t “headline” something that is abstract, complicated and hard to explain, but you can headline something distilled down to simple comparisons. Even if those two are really not “comparisons,” a headliner doesn’t care because a headliner has a single job: sell crap. I would say that comparing 2007 to 2008 comes with a serious grain of salt. We were just plateauing in listing build up at this time last year and subprime had not imploded. So out of market buyers were healthier and credit risks/foreclosure risks could still buy (remember the good ol’ days?). That 15% of the market often times WAS NOT buying cheap stuff. They were buying in Pine Creek, Jackson Creek, Springs Ranch, Stetson Hills.... The people that got into trouble on the front side of the foreclosure wave in 2003 and 2004 were in 80916, 80911 and 80910. These were people who buying a home was their dream. The echo is filled with people who were buying their-dream-home... With their dream-job... And dream-income. Even though they didn’t go to full-tilt foreclosures, a lot of people over-leveraged themselves with screwy liar loans, IO’s, 40-years, minimum payments, you name it. And if someone was using one of those loans, they were not simply providing shelter for their family or a place beside a dignitary at a State of the Union address as an example of the American Dream of expanding homeownership... They were leveraging themselves on their car, their plasma and their frappucino too. Who are some of the healthiest companies in America right now? Visa, Mastercard and AMEX. You need gear to fill a highly leveraged McMansion. This is the drain on the economy brought on by housing: artificial purchases for artificially “affordable” houses. Those big sales of consumer goods aren’t there right now. So rant aside, back to the sample of 2007 to 2008... In the first four months of 2007, 80% of the homes that sold were less than $300,000. So the sample pool can only compare what is in the sample pool... In other words, “values” are totally tied to only properties that sold. In 2008, what has sold has been cheap. There is abundant inventory everywhere in town over $500,000 for instance. Have those home’s depreciated? Maybe. Maybe not. Have they sold? Probably not. But here’s an interesting little tidbit... What are both within 1% of their all-time high right now? Average on the market price for all listings and average new listing price. Apparently... These values are going up. They’re not solds... But they are what is on the market. What Zillow is trying to say is that they are smarter than the market. They’re saying that their complicated little algorithm, that looks first at square footage, does not account for simple sales, but makes these sophisticated value adjustments based on trends, sales rates, all sorts of things. But Zillow at the end of the day still uses tons of information from the public assessors page. That’s why if you Zestimate a home and the square footage is wrong, that screws up the number. Sometimes it counts finished basements, sometimes it doesn’t. Is Zillow right? Is Zillow wrong? Well... Is the MLS right? Or is the MLS wrong? The average price a REALTOR puts on the market is $313,000 right now. But they’re selling $235,000. Does anyone else see a huge disconnect here? They are both measurements. The best thing any of us can do is say “it depends.” Jo Ann, trust me, I’m not calling you out on this, but I have a closing with First Bank in Wagon Trails next month and the buyer is 95% financing their purchase. Fifteen percent MI rate. It did not come up as a declining market with their lender’s private MI company or their appraiser. Why? BEAT’S ME! That’s not to say your buyer’s lender is wrong or my buyer’s lender is right. What it means is: it depends. Their risk variance is their risk variance. I had another agent (and I’m sorry I didn’t get back to you yesterday) ask why an appraiser would use Zillow to gauge values in the Chicago area. Again, beats me. Maybe here Zillow would be a benefit because they show an average sales price that is (gulp) actually higher than our own MLS indicates. Zillow says the market is better than we say it is. How many of you would prefer an appraiser using numbers better than your MLS could come up with? Now, the same question... How solid or risk-loving must that lender be to approve appraisers using Zillow? Or... Does Erin Toll only live in Colorado and we’ve gone from no regulation to hyper-regulation? Back to: It Beats Me. So...Viva Zillow! Buenos Noches,