the Property Monger Real Estate Blog

Hold onto your hats people. The Carnival of Real Estate has finally made it around to little old me.  I have to say I am completely honered to be hosting the Carnival on it’s 21st birthday. So submit your best entries by Sunday the third. And hopefully we can celebrate the big #21 with style, as opposed to the other way around…

Apparently I’ve been under a rock, I swear I wasn’t playing Mansion Impossible.  Regardless, Boston’s skyline might be getting a facelift.  Only one developer, Steve Belkin, actually bid on the project.  He might have had a slight advantage, seeing as he owns an adjoining property.  

As seen above, the new building designed by Renzo Piano, will be 75 stories, 15 stories higher than the current New England record holder, the John Hancock Tower.  It will feature 1.3 million square feet of commercial space, and 40,000 square feet of retail and restaurant space. It will also have an additional 55,000 square feet of public space including a one acre town green on the ground floor with public art, as well as a wind protected, richly landscaped, public observatory area on the top of the building.

The location will be bound by Franklin St. to the North, Summer St. to the South, Devonshire St. to the West, and Federal St. to the East.

CNN reported on home prices across the country.  Hold onto your hats people, the bubble has popped, the sky is falling, housing prices fell a whopping …… 1.2% this quarter compared to a year ago. What does that mean?  Not too much because real estate is local. Fortunately, the article is kind enough to break it down by city, and by single family homes and condos.  These numbers were based on the median price of homes.

Cheers go to:

- Salem, Oregon where single family homes (median price $228k) saw a 24.7% increase from the third quarter last year.
- Knoxville, Tennessee where condos (median price $155.7k) saw a 29% increase over last year.
- other notable cheers go out to Seattle/Tacoma/Bellview WA (single family) and Honolulu HI (condos) that had both high median prices and good percentage increases over the last year.

And the Jeers:

- Detroit MI area single family homes ($154.1k median) lost 10.5% of their value  from last year.
- and Sarasota FL area condos ($275.6k median) lost 11% (ouch) of their value.

So where does that put Boston? Unfortunately we’re in the red.  For single family homes Boston / Cambridge / Quincy ($412.3k median) lost 4.3% from last year.  Strangely enough, Boston / Cambridge / Quincy condos  (median $300.8k) are doing a little better, having lost only 1.9% of their value over last year.

I was just reading about the CFA ragging on the Real Estate Industry. One of their claims was that NAR and Real Estate boards (led mostly by Agents and Brokers) have been trying to keep barriers to entry low. The low barriers to entry causes there to be too many licensed agents, which leads to an inefficient marketplace, where commission rates are kept high. Essentially they are saying that NAR and the Real Estate industry has complete control over commission rates.

Apparently the CFA claimed that there were 2.5 million licensees, and only about 7 million sales annually. Therefore, by most brokers completing only a handfull of sales each year it helped “support a system that keeps comission rates high.” And they claim that this is from an economists point of view.

I studied economics, and this couldn’t sound more wrong to me. Competition creates efficiency, and the most efficient market, is one that has perfect competition. In general, conditions for perfect competition require:

- A large number of buyers and sellers (check)
- goods or services offered are functionally identical (pseudo-check….nothing’s perfect)
- and freedom of entry and exit

The fact of the matter is, the more players that there are in a market, the more competative and efficient it becomes. One factor that could possibly effect comissions in an area, would be a market with a few large players that had a large majority of market share.

I think the better question comes if we take it to the extreme, and assume that the CFA is right, and the real estate industry and NAR do have a magical grasp of (negotiable by law) commission rates. What exactly would be their plan to deal with some of the new discount brokerages popping up, that are giving a percentage of the commission back to the buyers?

The easiest way to deal with that would be to snuff them out. These new discount business models are based on the going commission rates. Use the strength of numbers and the grasp of the market share and make the going comission rate lower. Lower the standard, and their model won’t survive.

However we don’t see that happening because the real estate industry and NAR cannot change commissions with the flick of a switch. The market sets the rates.

I recently wrote an entry about zillows recent focus on Boston Real Estate, and how their zindex was flawed. Drew from Zillow followed up with me and asked if I thought that price per square foot would be more accurate.  I answered with:

 “To be honest, I think a really cool heatmap would be one that show’s off increases and decreases in activity/volume.  Like a heatmap based off of average months supply of an area (units for sale divided by units sold in the last month) compared to the national or local average. To really show a “HOT” area.  Or a heatmap that used an algorithm that would account for months supply and price per square foot… Different colors, and different shades of the colors (pink being a high volume high price, deep red being low volume same high prices)….”

And I haven’t heard back from him since.  Oh well.  Well one cool thing that came out of that post was a comment from a mysterious stranger asking for “advice” who I never heard from again.  But he happened to show me a link to Trulia’s Boston Heatmap.

Now THAT’S a heatmap.  Now, I don’t think that the Trulia Popularity is dead on accurate still.  I think any time that new luxury construction units are offered in an area, it will skew the numbers.  But the beautiful thing here is the options that they give you.  Sort by whatever you want. Instead of forcing a number down your throat, they are giving the consumer options.