Counter Intelligence: The Real Estate Cafe Weblog

Misleading medians understate savings opportunities for homebuyers

Posted in response to blog post entitled "Boston Housing Prices" on Boston.com's new real estate blog, Boston Real Estate Now:

As some of your readers know, focusing on median sales prices can understate the magnitude of saving opportunities in the housing market.  Like the image above, a closer look at sales behind the housing bubble reveals some surprising findings!  If, for example, you focus on sales of single family homes in the 28 most expensive suburban communities in Greater Boston last month (Sept. 2007), these findings emerge from the MLS:

1.  Sales were down nearly one third from last year:  216 sales in 9/07 versus 300 sales in 9/06;

2.  The percent of homes selling below their assessed value, once unthinkable in Greater Boston, rose slightly from 37% in 9/06 to 40% in 9/07;

3.  Those who argue that prices are holding up in Greater Boston can point to these stats: 

3.1  Twelve listings sold for over  their original asking price or 1 in 20 listings;

3.2  Another 13 listings sold for their original asking price or 1 in 20 again;

4.  In contrast, those who argue that median statistics are misleading would point to these stats:

4.1  One in four listings, or 53 of 216 single family homes in the most expensive suburban communities, sold for at least $99,000 less than the original asking price -- a trend we mapped last year;

5.  Looking just at the 86 homes which sold below their assessed value, 1 in 3 sold for at least $99,000 off;

6.  Switching from dollars saved to percent saved last month:

6.  One in three listings sold for at least 10% less than their original asking price; and worse

7.  One in ten sold for at least 17% below than their original asking price!

So, if you are a buyer, don't be too quick to base your assessment of market value, and hence your offer, on median sales prices or market indexes which are showing modest declines.  Historically, one in five homes which go under agreement between Thanksgiving and New Years, sell for at least 10% below the original asking price.  As the statistics above reveal, price reductions are likely to be deeper and more wide spread this year.  We'll map them on our award-winning real estate bubble map. It's an open, interactive map so Real Estate Cafe clients can earn rebate bonuses by adding properties, too.

Call for Real Estate Consumer Bill of Rights expanding?

Glad to read that fellow real estate innovators are blogging about a real estate consumer bill of rights and that a CNN reporter may be working on a story.  Given that, maybe it would be worthwhile for readers to collaborate on a short history of efforts to create a Real Estate Consumer Bill of Rights.  Since everyone in Boston is talking about the "Rolling Rally" today for the World Champion Red Sox, hope you don't mind if I use a baseball metaphor to categorize time:

1st Inning:  To my knowledge, Erle Rawlins, a buyer agent / consumer advocate in Dallas, Texas wrote the first draft of a real estate consumer bill of rights in 1999.  A working draft is currently online on The Real Estate Cafe's wiki.  Our goal is to invite the public to comment and coauthor on the wiki.

2nd Inning:  Two years later, in May 2001, a coalition of leading real estate consumer advocates nationwide -- including buyer agents, fee-for-service consultants, and for sale by owner publishers -- cosigned a petition calling for a Real Estate Consumer Bill of Rights which Consumer Union, publishers of Consumer Reports, echoed in their testimony in Congressional hearings on banks as brokers:

"We also call on Congress to hold hearings on the real estate marketplace. ...Are consumers being treated fairly by real estate brokers? Are commissions priced fairly?" asked Consumers Union legislative counsel Frank Torres during testimony May 2nd before the U.S. House of Representative's Committee on Financial Services Subcommittee on Financial Institutions and Consumer Credit.

"Perhaps what we should be talking about is a Real estate Consumer Bill of Rights."

3rd Inning:  Note sure of the dates, by my recollection is that some government agencies began discussing a borrower's bill of rights.  Here's a link to one version by the Mortgage Bankers Association published on their website, StopMortgageFraud.com, copyright 2002.  (Your comments and links to other borrower's bill of rights are most welcome.) 

4th Inning:  In May 2006, The Real Estate Cafe reminded fellow real estate consumer advocates that it had been five years since the call for Real Estate Consumer Bill of Rights had been heard in Congressional testimony.  That was six months after we initially blogged about the topic.

5th Inning:  To my knowledge, Redfin released their version of a real estate consumer bill of rights about seven months ago, on or around April 2, 2007.  Personally, I was pleased to see Redfin expand talk about creating a real estate consumer bill of rights and encourage others to separate the need for consumer protection from their critique of Redfin. 

6th inning:  The call for a real estate consumer was greeted enthusiastically in informal conversations at a workshop on mortgages and lending hosted by the Congressman Barney Frank (D-MA), Chairman of the House Committee on Financial Services at the Federal Reserve Bank in Boston on Friday, October 26, 2007.

Where will those private conversations with legal and consumer advocacy groups lead?  I hope there will be a growing recognition that a Real Estate Consumer Bill of Rights is long overdue and more timely than ever.  Whether you are a homebuyer, seller, or professional, we'd love to know what you would like to see included in a Real Estate Consumer Bill of Rights.  As written in the past, I'd love to see real estate commissions separated.  This short video / slide show, created nearly two years ago, bullet points 10 mega-trends leading towards that tipping point.

Time for a "Real Estate unConference"? Let's start planning

Nearly a year and a half after participating in my first "unConference," I remain interested in (1) meeting monthly with other real estate innovators in Boston, and (2) developing a "Real Estate unConference" model that can be replicated by fellow change agents around the country.  If you are not familiar with the unconferences, visit our earlier blog post entitled, "Brainstorming with real estate innovators in Boston & beyond" or join us this weekend at PodCamp Boston2:

Would like to brainstorm with real estate innovators (or any podcasters, bloggers, and social networking gurus) about the possibility of hosting a "Real Estate unConference" for home buyers, sellers, and "alternative" money-saving business models (for sale by owner, fee-for-service, etc). Some idea starters are online at: http://realestatecafe.pbwiki.com/Unconference

Bono in Boston to challenge real estate industry to join (Product)RED?

Where is real estate's Steve Jobs? a leading real estate industry guru wrote yesterday, asking who real estate consumers can trust.

IMHO, a single visionary is unlikely to emerge and less likely to transform the trillion dollar real estate industry than the collective actions of like-minded innovators. In the absence of a formal coalition, maybe an outside influence, perhaps a world-class celebrity, can help push the industry past a tipping point. At least that's my hope with Bono's keynote speech tomorrow at the mortgage bankers' conference in Boston.

A Reuters headline says he's simply there to lure mortgage brokers to the event, but it's more likely he's there to challenge the real estate industry to get involved in (product)RED or create their own AIDS related fund raising campaigns. That was the subject of this blog post seven months ago:

Creating a real estate version of (product)RED

Regardless of what Bono says tomorrow, any change agents -- or home buyers and sellers -- who are interested in building a voluntary, industry-wide coalition to help real estate consumers save money AND SAVE LIVES are invited to use these resources as idea starters for their own cause marketing and fund raising ideas:

• ASAP Slideshow
• Social networking site for "change agents"
• Wiki for annual fund-raising events
• Draft pledge campaign for cities or alumni groups