Author Archives: Galen

Walkable neighborhood: Capitol Hill

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I’m going to vote for 15th Avenue, home of the Victrola, Seattle’s best bagels (at the creatively named Bagel Deli), mediocre or dive bars, and Seattle’s crummiest QFC as one of Seattle’s most walkable neighborhoods. Trader Joe’s and 2 organic food stores are within 8 blocks, Safeway is right across from Swedish Medical Center and, most importantly for a walkable neighborhood, one can walk right out into the street without fear because there are so many pedestrians that they almost mingle with the slow moving bikes, cars, and buses – an accidental implementation of an unconventional “traffic calming” idea that I love. Dustin can definitely tell you more about this if you’re curious.

As the Seattle Times once pointed out, Seattle could definitely do a better job embracing car alternatives I propose street living rooms. And maybe more mass transit.

I also like the art at the Victrola right now:
Art at the Victrola in January 2006.

Throw your walkable neighborhood review in the comments and we’ll see what we can do to get a list of the best and the worst neighborhoods for walking.

-Galen
ShackPrices.com

Real Estate Search Article

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Search Engine Watch has a real estate search tool write up. It’s mostly links, but some of them haven’t been mentioned here. I like to think that our write ups are a little more coherent.

Not mentioned is the much improved (aesthetically) Redfin (even in the last week or two – take a look!) and the still nascent ShackPrices.

-Galen
ShackPrices.com

Bubble-bursting round-up

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I doubt it’s here so soon (but I don’t claim to know a thing about market-timing). Here are the stories:

Marketplace
New York Times
Investors Insight – goodness that’s dense! (and a couple of weeks old)

I expect Ardell to further suss out where the bubble is popping and where it is not popping as she expertly did for Kirkland. I will go out on a limb and say everywhere, over the next 10 years (daring!). To those who say “they aren’t making more land,” which admirably hasn’t yet been stated on Rain City Guide, I would like to point you to Tokyo’s experience in the late 80s and throughout the 90s.

I like how Marketplace makes realtors sound like wild animals – “the realtor population has grown immensely over the last 5 years.”

There are a couple significant differences between this “bubble” and the internet one:

1. The magnitude. Internet stocks went significantly more than 50% to high. However, most people weren’t leveraged on internet stocks.
2. The naysayers. There are a lot more naysayers this time around (or am I just reading more negative publications?). Perhaps that means the market will continue to rise until the pessimists are suckered into second homes too.

I was told today that cranes are still on backorder in the Seattle area. If sales go soft as prices go soft, we might have a ton of extra units ready to open in 2007 and maybe even in 2008. If they’re half done now, they’re half price to finish.

-Galen
ShackPrices.com

Speechless on eminent domain

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I’m not familiar with the laws on eminent domain in Washington State, but an article in the New York Times about new laws to limit eminent domain struck me as interesting. Eminent domain law means a lot to folks involved in real estate as it is often used to dramatically overhaul neighborhoods. It is almost unquestionable that it is a necessary evil, but the specific rules and regulations around it can get into sticky issues like declaring an area “blighted” and condemning low income housing.

The outcry has given heart to property-rights advocates. “We lost the Supreme Court case, but we’re ultimately going to win in changing the way that eminent domain is going to be used in this country,” said Dana Berliner, a senior attorney for the Institute for Justice, the most prominent advocacy group.

Eminent domain is important, though:

But around the country, developers and city officials say weakening or destroying the power to condemn property will seriously undermine efforts to rehabilitate decaying cities and might even hinder the rebuilding of New Orleans. Without eminent domain, the Inner Harbor, which played an essential role in Baltimore’s success in building its tourist industry, could not have been redeveloped, said Ralph S. Tyler, the city solicitor.

If Washington doesn’t act to justify or tweak the eminent domain process, I’d put decent odds on a Tim Eyman-backed initiative to restrict eminent domain law. Ohio is ahead of the game:

In a more cautious vein, Ohio has effectively denied state funding for one year to private projects in nonblighted areas that involve condemnation. The state also created a bipartisan task force to study the issue. “Ohio is saying, ‘We need some breathing space,’ ” Mr. Morandi, of the National Conference of State Legislatures, said.

It’s really too bad that most state governments don’t follow this cautious approach instead of reacting once a situation goes bad.

I suggest consulting David Pogue’s How to Be a Curmudgeon on the Internet for suggestions on how to comment on posts. The comments at Rain City Guide have been far too civil and substantial.

-Galen
ShackPrices.com

Zillow fans, meet your new blog

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Blog of Spencer Rascoff, employee of Zillow. Today’s post gives out (already available) information about Zillow. They’ve raised $32 million. It sounds like they’re settling in on a business model: Zillow’s 75 employees (mostly engineers) will manage to get the beta version out within the next 6 months. The comparison of Zillow to Hotwire is also very informative.

-Galen
ShackPrices.com

Is it bad if everyone else does it too? What if you're one of the best?

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Realtors are the subject of another balanced-but-critical New York Times article today. This time it’s for a whole host of lobbying-related fair market-blocking activities.

Frankly, I don’t have a lot of sympathy for banks, but the strong-arm tactics of the National Association of Realtors described in the article make banks look like victims of injustice. The story meanders away from bank-blocking tactics to easier to explain subjects, like the federal suit brought against the National Association of Realtors for locking low-cost realtors out of many listings. It appears the government (a very pro-business administration, at that) wants to create a level playing field:

When the suit was filed, J. Bruce McDonald, a deputy assistant attorney general, said, “Our job is to ensure that one group of competitors doesn’t tell some of its members they can’t compete in a certain way and undercut the level playing field.”

The defense:

Ms. Janik warns that major changes to the multiple listing services could cause large nationwide brokerages to pull out of the system and establish their own private listings. That, she said, would be a far greater threat to small firms.

So what’s the story? As I understand it, the progressive (egads!) North West MLS does not allow brokers to selectively block listings from competitors sites, which is what the realtors say they have a right to do. And, as far as I can tell, Windermere and the other monsters still list their houses with the NWMLS. Why? Because listing on the MLS allows way more potential buyers to see their houses and, sorry FSBO lovers and separate MLS creators, having more potential buyers increases the speed and price at which your home sells. Also, it would be extraordinarily two-faced if they first said “don’t do For Sale By Owner (FSBO) because you won’t get the exposure that you would get with a full-service brokerage” and then said “list with us even though only we’re going to intentionally reduce the visibility of your property to only buyers who talk to our agents.”

If anything, the Justice Department’s suit should keep realtors in business longer. If the system is open just enough that innovators and alternative pricing models will use it, they keep people in the fold and maintain some pricing power. If the system is locked down, innovators will tend to create MLS replacements systems until one of them succeeds.

Realtors: a PR campaign is in order. Your organization is blocking open markets left and right in order to enforce a 5-6% commission structure. The reputation of the National Association of Realtors is headed toward car salesman and lobbyist territory and when other folks find themselves having monopoly-like pricing power, they spend some of that money on goodwill (see: Microsoft). When other organizations find themselves in this making lots of money, not very popular pickle (for good reasons or bad), they also advertise on NPR (see: ADM, Exxon, Walmart).

On a side note, why haven’t I heard of the sell-your-home-get-a-Toyota model?

“Because the industry functions as a cartel, it is able to overcharge consumers tens of billions of dollars a year,” said Stephen Brobeck, the federation’s executive director. “Consumers are increasingly wondering why they are often charged more to sell a home than to purchase a new car.”

-Galen
ShackPrices.com

John Cook Interviews Redfin CEO: Redfin is "crazy-good"

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Dustin pointed out that John Cook over at the Seattle PI just published an interesting interview of Redfin’s CEO, Glenn Kelman (Direct link to the mp3).

Before I jump in, I should point out that I run ShackPrices.com, a site that is faintly a Redfin competitor. That said, that both Redfin and ShackPrices are much more worried about our customers and competitors with lots of money than we are about each other. I’ll try my best to stay unbiased.

Up to this point, Dustin has been under the impression that Redfin is very insular (He’s even gone so far as to say “arrogant”). I get the impression that Redfin has some interesting technologies, but they are still looking for their path; Glenn is doing a big marketing push on a site that has only had cosmetic changes (to real estate buyers) in the last year. Throughout the interview he raves about his site. I think he says exciting ten times and “crazy-happy” or “crazy-love” at least three times. If you check Redfin.com, their news bar clearly shows that they’re on a marketing push (it also shows they still don’t have an interface person who can tell them to use that valuable space more effectively).

Glenn then talks about how addictive (crazy-addictive?) he finds the Redfin site. Personally, I get much more excited by the technologies behind PropSmart and Trulia. Those sites seem to have added to cool aerial photos with some real focus on the user interface. Redfin gives you great information about individual houses and even shows you the lot line, but it doesn’t give you any medium- to big-picture information. Neighborhood and city pricing information is worth much more than a single house’s historical sales (and this is coming from the dude who has only historical sales on his site).

I think it is interesting how an interview can really bring out the best and worst in somebody by just letting them talk. More articulately than anyone else I’ve heard from Redfin, Glenn describes the company’s lack of focus. For instance, he talks about how every state is different and national websites can’t accommodate that. Next, he talks about how he’s going to expand down the West Coast and all over the country. He talks about how cool the site is and how technology is changing, but gives digital photos of houses as an example of this trend (that was cool 5 years ago!). Even in vegan-city Seattle, I want to know where’s the meat to go with this fluff? When asked what’s driving traffic to Redfin, Glenn says “because it’s an awesome site.” I think I would have gone with “aerial imagery, property outlines and past sales data.” And if they don’t add to that list, they risk becoming just-another-mapping-site.

A while back, Anna wrote this article that showed how Redfin wants it both ways with real estate agents… and it is interesting that while Glenn is new to the staff (he started in September), he inarticulately describes this same conundrum that Redfin faces.

He says,

we’re not trying to serve the real estate agents… sell people out to real estate agents… what we’re trying to do instead is serve the consumer directly…

But when pressed by John about how Redfin makes money, he says

How do we make money now? People sign up for a real estate agent… The real estate agent and Redfin share the fruits of that.

Which essentially means “by selling customer names to agents.” I’ll give him credit – I hate the housevalues model and find it to be really sleazy and maybe there really is something to be said for waiting until someone requests an agent. However, they are not, as he says, “trying to do something totally different.” Redfin is just leaving more money on the table and, possibly generating higher-quality leads. I’m going to read into this, though, and say that they don’t plan on working with agents for long – note his question to himself “How do we make money now?”

Dustin says “it is not hard to read between the lines that he’d really like to squeeze those agents out of the business if only it wasn’t for those “great” relationships he’s built up with a few of them.” I agree. Late in the interview he emphasizes how he wants to balance the business model:

… balancing our business model. We’ve got real estate agents that are partners, that we still value enormously, but we want to make sure we keep the focus on the home buyer and seller who is the customer.”

Word to agents: now that we have funding, you are not a priority.

This is my favorite part:

If you walked into Redfin, all you would see are engineers and a customer support person.

-Galen
ShackPrices.com

Insurance for house price change

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Last November, Slate magazine posted a piece on the housing market futures and options. The gist: you can hedge a drop in your house’s property values by buying derivatives that pay if the region’s property values drop a specific amount over a specific time period or even if predicted growth doesn’t materialize:

Next spring, however, investors might finally have a better hedging product. Just in time for the apparent top of the housing market, the Chicago Mercantile Exchange is introducing futures and options on housing prices in 10 cities for the second quarter of 2006.

It’s pitched to big institutions, but it would probably benefit individual investors immensely. That is, if they used it. Unfortunately, the individual home owners it would benefit the most didn’t have enough cash on hand to put money down on their house and are currently just paying interest, so they probably don’t have extra money to invest in hedges.

Also, as Ardell eloquently pointed out a while back, different sectors of the market can “pop” at different times and at different rates. Unfortunately, this could only protect against region-wide shifts:

These options will cover large markets—it will be tough to hedge the value of your own house, which depends so much on your particular neighborhood.

I liken it to buying an index fund (or mutual fund) instead of a single stock, although maybe insurance against extreme price swings is a better analogy; the effect is to reduce the upside and the downside of your investment. It doesn’t seem very exciting in the least so I’m putting this one in the “popular after the crash” basket, as it’s hard to plan for hard times when the good times have lasted so long.

So who’s buying on opening day? And can the market correctly predict housing prices over the next few years, or are investors so oriented toward a bubble popping that they can’t see the inherent strength of the market (or vice versa)?

Galen
ShackPrices.com