Counter Intelligence: The Real Estate Cafe Weblog

Fee-for-service real estate, not fee-for-research (yet)

We're a bit embarrassed about asking our clients and others to ChipIn to pay for our attendance at a real estate technology conference, but as one of nation's first and leading fee-for-service real estate consulting firms the slow housing market has reduced cash flow at The Real Estate Cafe. We haven't charged for access to cutting edge market research in the past, but we may be forced to experiment with "fee-for-research" in the future.

To date, we've done the opposite -- we've paid clients to add content to our Real Estate Bubble Map!  Their collective efforts helped us earn Platial.com's "Best Real Estate Map" Award for 2006, and the map was featured in an international conference on the future of journalism. 

Visit our map of homes selling for below assessed value in Greater Boston to learn more about our "Tipping policy."

TRAVEL ALERT:  Our plane to San Francisco leaves in three hours, so we're offering new and existing clients a variety of financial incentives -- like signing bonuses and reduced hourly rates from our normal menu of fees & rebates -- to help pay for travel expenses.  Call 617-661-4046 for more details.

Will social networking make "negative cycle" more vicious?

Economy.com's Mark Zandi is no zealot, so if he is using terms like this "negative cycle" homebuyers ought to take note:

"There is a substantial risk that the mortgage market will devolve into a self-reinforcing negative cycle," Zandi said in a release this morning. "Mounting credit problems could beget more restrictive underwriting standards, which would weigh heavily on the fragile housing market as potential borrowers become unable to obtain credit, and existing borrowers facing large payment resets are unable to refinance. Foreclosures would mount, leading to weaker house prices, falling homeowners' equity and even more substantial credit problems. The cycle repeats with more intensity and the mortgage market corrections unravel into a crash."

Thanks to the Boston.com's new real estate blog for posting the quote above.  We discussed the same worse-case scenario yesterday with NECN, but used the word -- "vicious cycle" -- an economic term some might substitute for the "negative cycle" above. 

My question is whether social networking and unfiltered consumer access to real estate data make the downcycle more vicious?"  Not through lack of civility, but data transparency that allows home buyers to make more informed decisions, putting further downward pressure on prices.  To see what I mean, visit our new MLS access which allows users to easily compare asking prices to price trends and more on Zillow.com.

Here's what we wrote two years ago about the coming negative cycle before Economy.com issued it's warning today:  From froth to foreclosures:  You ain't seen nothing yet!"

When the market really cools, things will get worse, potentially much worse.  A recent New York Times article called the magnitude of interest-only and adjustable rate mortgages "The Trillion-Dollar Bet" because "$1 trillion of the nation's mortgage debt - or about 12 percent of it - [will] switch to adjustable payments in 2007."  Will foreclosures spike then?

An upcoming article in the July / August 2005 issue of The Atlantic Monthly, entitled "Countdown to a Meltdown, speculates that the situation could become so bad that "repossession riots" will occur in some areas.  Do you think that fictitious forecast is irresponsible fear mongering, or foreshadowing a falling market that will make current home buyers look foolish; or worse, candidates for foreclosure in the future?

Cross-posted in the forum of The Real Estate Cafe's social networking site.  Please join the discussion with other home buyers and sellers there.

Market correction in 2009? Watch NECN video & use this new tool

Responding quickly to today's front page story in the New York Times (Home Lender's Woes Fuel Market's Decline) and over 200 similar stories on Google News, New England Cable News quickly invited The Real Estate Cafe to present the local home buyers' perspective on national headlines which reveal the lowest home sales in five years.  The three minute video clip is worth watching, even if there is a lot more to say about why Countrywide's CEO told reporters that home prices were falling “almost like never before, with the exception of the Great Depression" and that "the housing sector would continue to suffer until sometime in 2008 and not begin recovering until 2009."

As we told NECN, and as documented on our Real Estate Bubble Map, people don't realize how long it takes for housing markets to correct. It's not four months, it's not fourteen months, it can be four years as was the case in the last down cycle in Greater Boston:

Past housing price corrections:
Price decline: 13%
Duration: 3.5 years (14 quarters)
Period: 1989Q1-1993Q1
Overvaluation prior to price correction: 37%
Valuation peak: 1987Q1

If you are one of the many home buyers across Massachusetts watching housing prices fall and plotting your home buying strategies for the second half of 2007 or beyond, The Real Estate Cafe invites you to test our new map-based MLS search.  Each MLS listing is linked to Zillow so you can identify price trends, compare the asking price to recent sales, and identify other possible home buying opportunities nearby, even if they are NOT listed in the MLS.  If you are trying to time the market, you can even sort listings by how long they have been on the market to help identify "motivated sellers."

Cross-posted on The Real Estate Cafe's social networking site.  Please join the discussion with other home buyers and sellers there.