Property Grunt

Wednesday, November 30, 2005

Stump the Grunt

I recently got the following email from an Ivy Leaguer.

Dear Property Grunt,

I have some general questions for you. I've been reading your blog for a while and I was hoping that you could either address this in a post or point me to a place in your archives where I could find the info. Basically, here's the question: I'm about to move to New York. How do I find a rental apartment?

I'm looking for an apartment in Manhattan or Brooklyn, close to the AC trains, 2 bedrooms (or 1 and a half bedrooms), 1000 square feet plus. Is this the holy grail of NYC apartments? Should I adjust my expectations?

Second, how do I find a broker that is knowledgeable?

Third, I want to move in in May (pref. May 15, but flexible). When should I start contacting brokers and looking for a place?

Basically, I just need advice for NYC beginners. Any suggestions you have would be so helpful. Thanks!

So what does everyone suggest? Is there a particular set of tactics that anyone can recommend? I've already responded to this reader's questions however I am curious to see what everyone else recommends.

Tuesday, November 29, 2005

What the hell is going on?

If there's one thing this last week has taught me, it's better to have a gun and not need it than to need a gun and not have it.

Clarence Worley

True Romance

When I heard about the new housing sales jump on CNBC I was a bit perplexed. Then Jonathan Miller cleared up the confusion

New Home Sales
“The Census Bureau collects new home sales based upon the following definition: “A sale of the new house occurs with the signing of a sales contract or the acceptance of a deposit.” The house can be in any stage of construction: not yet started, under construction, or already completed. Typically about 25% of the houses are sold at the time of completion. The remaining 75% are evenly split between those not yet started and those under construction. “

But before you all start celebrating for a dodging a bullet and lining up to throw chairs at the Grunt for being the wet blanket on the housing market I would like share this interesting passage from the New York Times.

The latest reading on home sales, released yesterday, contradicts most recent measures of housing activity, which generally indicate a slowdown. And, yes, manufacturers' fortunes are on the mend, but few besides airplane makers are celebrating.

It all means the economy is likely to end the year with a splash. But before you splurge on a new car, consider this: Many economists do not expect the party to continue, especially if the Federal Reserve continues taking the punchbowl away and raises interest rates. That could further slow the housing market, damp consumer spending and crimp corporate profits.

Indeed, the Organization for Economic Cooperation and Development said yesterday that 2005 growth would most likely settle at 3.6 percent, down from 4.2 percent in 2004. The organization also forecast 2006 growth at 3.5 percent, but other economists think that may be too optimistic.

"The two major concerns are the extent of slowdown in housing and how it can feed into growth and consumer spending," said Joshua Shapiro, chief United States economist at Maria Fiorini Ramirez Inc., a research firm in New York.

Many analysts, including Mr. Shapiro, say a housing slowdown is already under way. Along with rising interest rates and anemic job growth, any such drop-off could sap the economy next year - by just how much is still subject to debate.

Let's not forget jobs.

Analysts are eagerly awaiting the Labor Department's next jobs report, out Friday, and hoping the recent weakness will prove temporary. But they worry that job creation may turn out to be disappointing because of deep-rooted concerns about thinning profit margins, caused by, among other things, high energy costs.

"This is only a fear that has sprung up recently," said Mr. Shapiro of Maria Fiorini Ramirez.

Now regarding my quote from True Romance. I am not advocating people to stock up on 9mm Berretas. What I am just saying we should all exercise a strong sense of caution. None of us has any idea what is around the corner. All indications show it can be very good or downright nasty. I say we all err on the side of caution.

So get rid of your credit card debt and cut your expenses. Keep up your health insurance payments and start setting up a reserve fund. DO NOT TREAT CREDIT CARDS AS A RESERVE FUND! THEY ARE A LAST RESORT!

Perhaps this will pass with no more than a hush. Perhaps we will all laugh at the trouble this bubble talk has caused and wonder what we will do with the surplus of cash in our hands. But we won't know until it goes down and it will be too late to do anything about it.

Open House Update and other developments

Dead as before but I have heard reports on the wire that there was some BLack Friday spillage at other openhouses. Perhaps those price reductions are stirring up the blood of buyers.

The New York Times recently reported that Existing Home Sales Fell in October . Big surprise. What is really annoying me is that some of the NAR cheerleaders are saying this is an evidence of a soft landing or a normalization of the market. The Motley Fool isn't so sure.

If NAR is so confident that we are in for a soft landing then I challenge their homecoming committee to forfeit their jobs if they are wrong. Despite their bravado I doubt they would take this challenge.

Why? Because none of us knows, including myself, what the outcome of this correction will be. It could be a soft landing or this market could plummet deeper than anyone could imagine. But for NAR to make these assurances that a soft landing is in sight is a poor choice of actions on their part. NAR's softlanding stance reminds me of that analyst during the tech meltdown who kept pushing viewers to buy even though it was dropping at that rate of 1000 feet per second while he was flapping his gums.

The Fool makes these two points of interest:

As usual, the NAR's press release touts housing as a "good investment," but buyers would do well to beware. Recent earnings calls from homebuilders like Centex (NYSE: CTX - News), Toll Brothers (NYSE: TOL - News), D.R. Horton (NYSE: DHI - News), and Beazer Homes all seem to indicate a slip in growth.

Well, the housing market is getting a bit squishier, but whether that indicates a soft landing is anyone's guess. And of course, your own landing will depend on what you paid for your place.

I strongly agree, the outcome of this correction is quite subjective. But all indications point that we are entering a very rough phase. My recommendation to everyone is to exercise caution in your purchases. Remember. Real estate is illiquid. Which means you will have a very hard time ditching it if the market goes south.

New York Magazine recently published an article about the bumper crop of bonuses that have come to frutition at Goldman Sachs which is just futher evidence of the enormous bounty that Wall Street will enjoy. Whether they will share it with the rest of the real estate market is the remaining question. In a recent entry, I stated that it is highly unlikely that will happen but there are other authorities who think otherwise. I think at this point it will all be about the wait and see.

Saturday, November 26, 2005

Triple Threat with the Times

Black Friday has shocked us out of our Tryptophan induced comas which was brought about from massive does of turkey and other Thanksgiving goodies. Right now many of you are probably filled with war stories of dealing angry crowds and fighting over the Xbox 360. The Grunt has decided to engage in these activities at a later date after the crowds have died down a bit.

The New York Times has had a hot bed of articles that I feel foreshadow certain developments in the industry

In So Few Properties, So Many Brokers, the lovely Nadine Brozan writes about how new brokers are having a hard time gathering listings and buyers. This is due in part that more established brokers have already set up a pipeline of referrals and there are just too many agents in the field.

One of the frustrating things that agents experiences is that it requires a tremendous amount of patience and effort in creating a referral base. But it is all worth it since all it takes is one listing for an agent to setup their own pipeline. When that closes the agent proudly shows the spoils of their hunt and that attracts the attention of other sellers. There are other ways for brokers to get listings but this most well known and reliable.

Ms. Brozan states the following:

The listing broker is the gatekeeper for the property, able to control viewings and, more important, get a cut of the commission even if another broker brings in the buyer. A listing has marketing and promotional benefits too. The name of the listing broker goes in the ad or on the Web site with the property, meaning potential buyers will start phoning and clicking, making contact with that broker.

Ms. Brozan is completely on the money. As I have stated on my craigislist entry, craigslist ads also serve as a way to generate leads. Since it is highly unlikely for buyers to purchase the apartment they contact an agent about it gives the agent the opportunity to find them something else. Also having a high amount of listings featured on an agent’s site gives the impression that they are well qualified to take care of your housing needs. That’s why some agents are slow to remove old listings from their sites.

Ms. Brozan’s article touches upon an issue that I have beaten the war drums over which is the impact of the Internet.

The Internet has made it easier for buyers to connect directly with sellers or their brokers, keeping brokers without listings from potential clients. "The Web has changed our business for people coming in," said Paula Busch, a managing director at the Corcoran Group (where 46.7 percent of agents lacked listings). "Buyers in the below $1 million market go there first and then directly to open houses, and they say they don't need brokers."

I realize that Ms. Busch is making a reference to buyers brokers however I feel what she says also applies to listing brokers. As Ms. Brozan has stated in her article there is a select group of agents that have the privilege to gorge themselves in the exclusive listings trough. However I feel that their days are numbered. Craigslist and Google Base have already established there are other alternatives for sellers and buyers without the use of brokers. And they are not alone. As I write this Zillow is one of the many e-commerce real estate services that are gearing up for their D-day onto the shores of the real estate industry. It is only a matter of time before the e-commerce community carves up these listing hogs.

Marketing an apartment for sale is not brain surgery. And when sellers realize they can get the same type of service and traffic by going FSBO or using an alternative that does not charge the full commission, there will be a significant migration to those e-commerce solutions. There will be a need for brokers but they will be forced to work harder to justify their commissions. Those who will are unable to perform will be left behind.

Another article that has caught the Grunt’s eye was Jennifer A. Kingson’s Wireless Moves the Cash Register Where You Are.

According to Ms. Kingson

Plumbers, limousine drivers, flea market proprietors and merchants of all sizes and stripes are beginning to take credit and debit cards in odd places, often using nothing more than an ordinary cellphone and a card swipe attachment, or a handheld device with a built-in swipe slot. Now that wireless networks span the nation and devices that tap into them are cheap and reliable, expectations for the technology are running high outside these niches.

I foresee this as the next evolution into the paperless real estate transaction once it is applied into the real estate industry. For instance landlords will eventually be able to process a rental application on a Blackberry and instead of having tenants running their asses to the bank for certified checks they can simply deposit the money with their credit or debit cards by swiping it on the Blackberry.

Buyers will be able to put a down payment through their wireless devices, which could also setup escrow accounts. A wireless system would also lower closing costs since a title search could be done online. Not only would these advances lower closing costs be lower since it would all be automated but also it would make the sales transactions conclude in a quick efficient pace.

All aspects of the real estate sales transactions will eventually go paperless since the overhead is lower with wireless and the profit potential is much higher.

Cellphones are slower and cheaper than more sophisticated wireless systems that rely on Internet or satellite technology, but some merchants find bigger investments worthwhile. "If you run a sandwich shop in downtown New York and you have a two-hour period during the day where all your business happens, it matters to you if it takes 30 seconds for a dial-up credit card transaction, and it's important to you that wireless can do it in 2 seconds," Mr. Rasori said.

Some retailers are already experimenting with hand-helds as a way to do what they call line-busting: making sure that people waiting in long lines for a cashier do not give up and abandon their merchandise. Apple Computer, for instance, started using them just this month in some of its retail stores to help reduce some of the holiday crush at cash registers.
"If you're buying a couple of dresses, a retail store wants the ability to walk up to you at that time, read the tags on the clothing items and create a sale right there," said O. B. Rawls IV, president of the North America region for Hypercom, a company based in Phoenix that sells payment card terminals and technology. "In a wireless mode, you can take advantage of impulse buying and line-busting, and I think that's pretty slick."

As Ms. Kingson has shown the capital outlays for wireless commerce is more than reasonable considering the amount of revenue it will provide. And much to the chagrin of those who work in real estate it will allow consumers to outsource aspects of the transactions including title searches and contracts.
For instance when a board package is completed it needs to be physically delivered to the parties involved that requires a messenger, which costs money. It also requires time for the messenger to be called upon to pick up and deliver the package.
With the wireless transaction the use of the messenger is eliminated and the board package can be delivered via wireless without the usual encumbrances that are attached to the physical document itself. What I have touched upon is only the beginning of what will happen to the real estate world.

In my previous entry Don’t be a grasshopper , I expressed my dismay at people in the real estate industry who were only setting themselves up for a fall by relying on the good times of the market. Daniel Gross most recent article As the McMansions Go, So Goes Job Growth presents some grim yet unsurprising news.

THERE'S a growing consensus that the housing market is cooling off. This month, Toll Brothers, the luxury home builder, warned that sales of McMansions were falling, and its highflying stock fell to earth. Last Thursday, the Commerce Department reported that housing starts, a reliable gauge of present activity, fell 5.6 percent in October from year-ago levels, while building permits, a reliable gauge of future activity, fell 6.7 percent. These data points are potentially worrisome, and not only for the legions of real estate brokers and Sheetrock layers toiling in offices and job sites across the country. In recent years, economists from Alan Greenspan on down have been discussing the way rising home prices and the growth of home-equity borrowing have fueled consumer spending, the piston that drives the country's economic engine. But in recent years, housing, real estate and the related industries have become a huge factor in another crucial economic area: employment growth.

It is the dot com bust all over again. People who ran out to get their real estate licenses or pooled money to buy lots to go into development we’ll be in the same boat as those who people who went out to get Microsoft and web design certifications during the tech boom of the late 90’s.

If the frothy regional markets go flat or if prices simply stop rising at the rates of recent years, there will surely be wide-ranging economic effects on consumer spending and on jobs. "Housing and the job markets are joined at the hip," Mr. Zandi said. "And if housing cools, so too will hiring and the job market more broadly, particularly in the more juiced-up housing markets."

Greeeaaat! Is Starbucks hiring?

If housing prices are flat in 2006 and residential investment falls 5 percent, there could be a direct loss of a few hundred thousand jobs related to real estate, Mr. Hatzius said. And the indirect effects will certainly be larger, Mr. Zandi said: "Housing is going to go from being a key contributor to the job engine to being a significant drag on job growth."

When the stock market popped back in the late 90’s, it was like a huge ball and chain wrapped around the neck of the economy dragging everything down. It appears it will be real estate’s turn.

But there's some good news.

Ms. Bangalore notes that while housing's contribution to job growth has declined in recent months, "other sectors are picking up the slack."

Well at least that is some comfort. We will all have a place to go. Perhaps it will be hedgefunds.

Good people, it looks like the s**t is going to hit the fan on this one. We have two choices. We can give up or we can figure out what to do next. I am going for the latter.

Wednesday, November 23, 2005

FEEL THE LOVE!: GM and the Real Estate connection

As you all may have noticed the response to my last entry was not exactly gentle. Readers seem obligated to line up and smack me with chairs and I expected no less from my people. I would like to share some of the comments, which were greatly appreciated, and of course my responses




I have to say I disagree. While it will contribute to the general discomfort of those already stretched, other discretionary things will suffer first - like luxury goods, Starbucks coffees, movie tickets, mega cable packages, etc. The cost of heat will have a long term effect, if any, but not a short term one.

Brokered. I love you like I love taffy. And I am a man who loves his taffy. Things like Starbucks coffees, movie tickets, mega cable packages, etc. are not luxuries. They are perceived as needs. Try to stop a New Yorker from getting their daily dose of starbucks and they will rip your nipples off.

I do concur that mortgages will play a key role in the correction of the housing market. But oil will be right behind it. There will be people out there who will completely freak when they get their heating bills.

High oil prices probably will not cause many immediate sales or foreclosures. They would aggravate an overall poor financial situation for some people, but I don't even think it would cause a trend of sales and foreclosures. I agree with the first commenter, people would change their behavior before they allowed something like that to happen... including minimizing their usage of oil heat.

Also, most utility companies give residents a good deal of latitude when prices go up during a period of high demand. When I once received a particularly high oil bill, the utility company actually took it upon themselves to amortize the higher cost through the summer months.

Of course they amoritize. It’s the summer. Your not going to use the heat unless of course you live in Alaska. See if they will amoritize next winter winter. Not. Besides I have never heard a utility company doing that for their customers.

Yeah. You're going to minimize your use of heating oil. At the risk of having your kids freeze to death? I don’t think so. Heat is a need during winter and I highly doubt anyone will cut down on that.

Two choices will be presented to owners of real estate which will be pay the heating bill or the mortgage. At that point in the game they may decided to dump their properites since it is causing them to bleed cash. Keep an eye out for this.

I doubt it as well.

Oil is only one way of heating, in a lot of European countries (as in Sweden were I live) the cost of oil is far above the US price and here you see a move towards electricity heating, mostly with some extra kicker, ie. Ground source heat pumps / Geothermal heat pumps, Exhaust air heat pumps or something like that.

So I figure that the major chunk of housingcost is still the loan even in US.

Well my fine Swedish friend, when it comes to alternative fuels the US care less. There are movements that are picking up steam to use alternative fuels but refined petroleum will always have a seat at the head of the table.

Let me go out on a limb and guess that you weren't captain of your high school debate team, Grunt. Your connection between GM and the real estate market is a weak one. Oil prices have their effect on many industries, and undoubtedly, it has an effect on real estate industry as well. But the price of oil is simply a contributing factor (one of many) in the layoffs at GM. It also, as stated by other commentors, probably doesn't have a huge effect on real estate (foreclosures!? are you kidding me!?). If you want to draw the connection between increased crude oil prices and how it will affect homeowners in the coming months, why not just state that the price of crude oil per barrel has increased by X% over the past X months? Using the GM layoffs and plant closings as evidence of increased oil prices is too much of a leap because there are many other contributing factors to the closing (as you even quoted in your entry). There are even other contributing factors as to why SUV sales are down, not solely higher oil prices.

A week ago I would take that limb and swing it at you. But I’m not going to do that since you do raise some interesting points. My argument may seem weak however I feel it will get strong over time. You are correct that right now it appears that oil will not play a role in the downfall of the market. But appearances can be deceiving. SUVs are gas guzzlers and when customers realized they were going to pimp slapped with that bill their interest began to wane. If profits were raining down on GM do you think they would even think of touching their pension program? Their revenue streams are started to dry up which is selling SUVs. That is why they had t take such drastic actions to stabilize the company.

You have to understand that a key component of real estate is the nickel and dime. Little things always add up and can creep up on you without warning. Oil plays a role in that. From what I have heard on the wire, in New York City operating costs have shot up 40% for managing residential properties alone since last year. It doesn’t seem apparent now but just watch and wait, GM’s current situation is a sign of things to come.

I realize I kicked the hornets next on this entry and I have no doubt that the response will be the same to this entry. But before you all start lining up with your hockey sticks I would like you all of you to read these two rather alarming articles.

The first article presents a very unusually meeting between Congressman William D. Delahunt with the President of Venezuela

That meeting -- unusual for a sitting member of Congress and a head of state so critical of the White House -- sparked negotiations that led to the official announcement scheduled for today: A US subsidiary of a Venezuelan-owned company will provide 12 million gallons of discounted home heating oil to Massachusetts consumers and organizations serving the poor.

Those of you who have been living under a rock, Chavez has drawn the ire of George W. Bush and of course Pat Robertson because among other things he is a huge critic of the Bush administration and bestest buddies with Fidel Castro and if you don’t know the significance then you are wasting valuable oxygen. What is really puckering up the administration’s butt holes is that Chavez’s country is sitting on a huge surplus of oil that America needs.

Politics aside, I think Congressman Delahunt is doing what he can for his constituents and I applaud him for that. But if a man of his stature has to go to South America to broker a deal with someone that is so despised by the Bush administration to get heating oil for his people you have to admit there is something really wrong with our oil situation.

The other article deals with natural gas and the long term damage that Katrina has caused. Those of us who use natural gas will also be feeling the pain in our pocket books.

The Energy Department's Energy Information Administration recently predicted that households heating primarily with natural gas can expect to spend about 50 percent more this winter.
Kelliher said the final figure depends on further recovery for offshore facilities, the weather and conservation efforts. He said a winter 10 percent warmer than the last would more than offset gas production losses, but if the winter is 10 percent colder it could double the price effect of the gas loss.

Even on natural gas we are all going to be taking a beating. Energy costs are going to go up and unfortunately little can be done. Utilities will emerge as key factor in the demise of this market.

With addition of overpaying for properties with atrocious mortgages, these oil prices will be a huge burden on homeowners. I know of some people who had to take out a home equity loan to pay for their heating oil. And I am sure they are not alone. If you have to go that far to heat your home then you know you are entering dire straits.

However, what we need here is viagra-induced facts. Are there any investment bankers or Wall Street people who could put in their two cents on this topic? And of course all comments are welcome.

Before I depart I want to wish all of you a Happy Thanksgiving. The Grunt plans on spending it with family. Be safe and be well.

Monday, November 21, 2005

A connection to GM and real estate?

GM decided to give their employees and early Christmas present by annoucing they were going to slash 30,000 jobs, close 9 plants and eat their young. Actually I made up eat their young part.

According to this article Rick Wagoner, GM's chairman and CEO stated the following:

"The decisions we are announcing today were very difficult to reach because of their impact on our employees and the communities where we live and work," Wagoner told employees. "But these actions are necessary for GM to get its costs in line with our major global competitors. In short, they are an essential part of our plan to return our North American operations to profitability as soon as possible."

It also stated the factors of the closings.

GM has been crippled by high labor, pension, health care and materials costs as well as by sagging demand for sport utility vehicles, its longtime cash cows, and by bloated plant capacity. Its market share has been eroded by competition from Asian automakers led by Toyota Motor Corp. GM lost nearly $4 billion in the first nine months of the year.

So what does this have to do with real estate? The part that caught my eye was the line sagging demand for sport utility vehicles. Why has demand lagged for SUVs? Because they cost too much money to gas up. What is causing high gas prices? Oil.

So here's my theory good people, GM's actions is another indication that the real estate market will get its ass kicked in because majority of homes use oil or a form of fossil fuel to heat their homes. It is the Grunt's opinion that the high oil prices will force alot of owners to either sell immediately or foreclose since they will be beaten senseless by the high cost of heating oil.

What do you think folks? All opinions are welcome.

Sunday, November 20, 2005


Explosive open house traffic was like the Great Pumpkin. It never came. I had two parties come in with brokers. No direct buyers. I felt like Linus in need of his secruity blanket.

There has also been some other developments that the Grunt will address on a later date but all I have to say is that this market is freaking sellers out.

Buyers. That apartment you want awaits you. A good tactic is to figure out what is the motivation of sellers. If they have set up a domino deal where they need to take money out of their property to apply to another purchase. If they already committed to another property then the seller will most likely be strapped for cash. What that means for the buyer is LEVEARAGE!

Yes. I am not a happy camper but there is nothing wrong if somone benefits from this popping market. So buyers if there is something you like, start grilling the selling broker and see where the seller is going.

Then you figure what you are willing to pay for the property. And then put in your offer.

Saturday, November 19, 2005

Broker Etiquette

Recently somone asked about Broker Etiquette on Curbed which I find quite amusing because usually etiquette is the last thing people think about is etiquette when it comes to brokers. If you have read my previous entry you will know where I stand but the questions that were asked were too delicious to ignore.

Can I work with as many brokers as I like regardless of overlap in properties, agencies, neighborhoods?

You can work with as many agents as you want. Here's the catch. If you sign a fee form agreement, which you will be required to do, look at an apartment, then look at the same apartment with another agent from another company then rent that apartment through that other agent then you might have a problem. If the prior agent hears that then they have legal grounds to demand a fee since they showed it to you first. I have never heard being in enforced but if you look at the fee agreement it is set up that way.

· Breaking up with my broker. After a couple of months, I'm not impressed with his efforts to date. I met another broker within his/her agency that I'd prefer to work with. Can I switch brokers without starting WWIII?

Yes you can. And yes you will start WWIII whether you like it or not. Here's a fun story about this agent who spent a couple of weeks showing a bunch of apartments. He was completely professional throughout the whole process and they eventually landed on one apartment but the couple was still unsure of the apartment and wanted to think about it. One day while that agent was out that same couple came in to put an application in the apartment. A hungry agent fresh from training immediately pounced on the couple. Clutching them in her jaws she carried to the apartment then carried them back to the office to do the deal.

The original agent went ballastic and demanded that the fee go to him. For several weeks the office was as hostile as the House vote on the pullout of troops. The manager of the office acceded to the original agent's demands. He promised the other agent he would make it up to her with a better client. She began to cry and the manager, who has soft for the ladies, couldn't go through with it decided to just put in a 50/50 split. The original broker was as livid as Martin Sheen at a GOP barbecue. He appealed the decision but it remained unchanged.

I can guaruntee that soon to be ex-broker will want to beat your new broker with a chair and will demand a piece of the action.

· I've been looking downtown with a large agency broker based in the area. We have an understanding that he's the broker I'm officially "working with." However, I'm now expanding my search to Inwood and Jackson Heights. Other brokers, both inside and outside his agency, are more knowledgable about those areas. I'd prefer to work directly with them as opposed to having him filter the listings. How to handle?

As I have stated before you can do whatever you want. But if you choose to use another agent in that same office you are going to be encountering the same trauma that I have previously described. It would be best to use an agencies out side the one you are using now. And do not inform anyone of your intentions.

· Brooklyn. My impression is that the larger agencies co-broke but some of the smaller neighborhood specialists do not. True? Is this also the case in other boroughs, neighborhhods?

Each area is different. In Queens they charge one month. Manhattan it is 15%. As for co-broking in Brooklyn I am assuming it depends on the agency.

Friday, November 18, 2005

Embrace The Base

Yesterday as the Grunt was walking to work, he had an epiphany. I was pondering the aftermath of Google Base and my previous entry. I was wondering how the newspaper world could survive. Then it came to me. Newspapers would simply embrace the Base. Since Google Base has an option where users can simply insert a url that goes straight to their website all newspapers need to do is to insert their content into google base ads.

For example, New York Times sets up a squad of interns to sit in a room with a bunch of desktops. Their goal is to insert 100 ads a piece onto Google Base or whatever new ads come onto that day. This would insure another point of traffic for the New York Times. The beauty of this model is that the overhead is nearly nonexistent. I am unsure how the New York Times internships work but internships are usually unpaid and even if they are probably at pay 10 bucks an hour at the most. More importantly Google Base is free.

Would an intern be willing to put in those hours to simply sit in front of computer putting in ads? Let me put it this way. When I was an intern I once risked life and limb during one of the biggest snowstorms to deliver a manuscript to Barbara Walters.

College kids need experience particularly if they want to work in the media field. But that experience does not come cheap. It involves a tremendous amount of sweat equity doing mind numbing tasks like ordering lunch and stuffing envelopes. The payoff for a job well done is not the grade but the contacts you make and the job you eventually get.

As long as the intern is willing to play office monkey for free, then New York Times will be free to embrace the base.

Thursday, November 17, 2005

Google Base. It's Here

Recently I did an entry on Google Base and now Inman has announced that Google Base is now open for business.

According to Inman:

The product works somewhat similarly to craigslist, making it possible to quickly and easily create a free post that will appear online and can be located by searching specific terms, such as "real estate for sale."

"Google Base is a place where you can easily submit all types of online and offline content that we'll host and make searchable online," the company said on its Web site.

I have been examing the GUI and it is quite similar Craigslist. In fact it is alot easier to use than Craigslist in terms of listing products or services. Users are not required to submit an email address to list onto Google Base. However without that failsafe it seems Google Base is vulnerable to spammers and bait and switch artists.

However all the ads have an option for users to report spammers and other types of internet hooliganism.

You have the option of placing your own url or creating an ad and the ad can be of your own creation. Comparing to craigslist which is far more regimented. Google Base sets up basic parameters but users are pretty much free to do what they want.

Here is a rundown on Google Base.

Quick Facts about Google Base
Cost: Free
Item types accepted: All types of online and offline information and images
Languages: Google Base is currently available only in English.
Reach: Items you submit to Google Base can be found on Google Base and, depending on their relevance, may also appear on Google properties like Google, Froogle and Google Local.
How it's different: Google Base enables you to add attributes that better describe your content so that users can easily find it. The more popular specific attributes become, the more often we'll suggest them when others post the same items. Similarly, items that become more popular will show up as suggested item types in the Choose an existing item type drop down menu.

I suspect that that is the point. Google's objective is to create a community that are control of what direction they take with the ads.

I still maintain the position that when Google Base begins to gain popularity, it will be the bane for newspapers and brokers alike. The Google brand has far been a juggernaut and it doesn't look like it will be stopped anytime soon.

Wednesday, November 16, 2005

Arianne has a sound plan

Alot of you have probably have heard me rant about noise in my building. Well I have decided to stop ranting to take action. With the help of Arianne Cohen I am on my way to create a silent friendly environment.

Arriane has displayed a series of options that I am quite excited about. And if that doesn't work I'm calling the cops.

Monday, November 14, 2005

Damon is a Darlin

Damon you are a darling. Finally the New York Times gets the balls to call Rich Dad and those other gurus out. If you read my previous entry on Rich Dad you will know my feelings on the subject so I won't rant any further. However I urge all of you to read Damon's most triumphantarticle.

According to the article.

You'll get the same advice reading this newspaper or any number of financial advice columnists at no additional cost, though you may not get the urge to aspire.

Apparently the book industry loves aspiration.

"People do respond to it," said Rick Wolf, vice president and executive editor of Warner Books, the publisher of the series. The old rules no longer apply in a world of outsourcing and pension plan collapses, he said.
"People are definitely looking for some alternative pathways to financial freedom," Mr. Wolf said. "The staying power speaks for itself."

In other words people are so scared of what is going to happen to their jobs and futures that they are willing fork over their hard earned money to a man who is taking advantage of their fears by claiming to have the map to financial freedom. When the evidence he made his fortune not from real estate or investing but from selling his rich dad books.

Why the need for inspiration? "When the stock market bubble collapsed in 2000, ordinary Americans - who had watched their stock portfolios effortlessly rise in value during the late 1990's - quickly realized that the notion that they could outsmart the market was an illusion," said Mr. Drake, who will publish Mr. Bach's follow-up in March, "The Automatic Millionaire Homeowner."

I think your own life should be a constant source of inspiration. For instance if you are married and are expecting a child, that should inspire you to look at your finances and figure out a way to create another revenue stream.

Their books, as well as "Secrets of the Millionaire Mind" by T. Harv Eker, another regular on the motivational seminar circuit, recycle a lot of the language and advice of those hotel ballroom talkathons; namely, you have been conditioned to think like a poor person, but you can remake yourself to think rich. Mr. Eker suggests a daily affirmation in which you put hand over heart and say: "I am an excellent receiver. I am open and willing to receive massive amounts of money into my life." You then touch your head and say, "I have a millionaire mind!".

Reading these books will definitely stop you from thinking like a poor person. Instad it will condition you into thinking that you need to buy more books on becoming rich, therefore making the authors rich and you lot poorer.

But they are light on practical advice. And sometimes what they advocate seems counterproductive. Mr. Eker, for instance, recommends creating a fund just for frivolous purchases because you need to fill your inner spirit.

What is this inner spirit called? Credit card debt? If you want to fill your inner spirit go to church, temple, become a Buddhist or join the Peace Corps. Money has no place there. By substituting consumption for spiritual well being you will be creating a black hole that will never be filled.

Mr. Kiyosaki admits in his book that buying real estate at foreclosures or tax sales and investing in thinly traded start-up companies is risky. But he writes that salting money away each month "blinds the person from what is really going on."

"They miss major opportunities for much more significant growth of their money," he writes.

Ok. Obvioulsy Mr. Kyosaki has never heard of the concept of multitasking. You can save your money and look for other opportunities to invest. It is not hard to do. In the real world it is called not being an idiot.

Tax sales, foreclosures and companies that are balancing on the start up edge of oblivion are not the safest investments in the world. So if Bobby knows this why the hell is he pushing these investments onto first timer investors? Because he doesn’t know what the f**k he’s talking about.

This is advice for people who like to live on the edge. Mr. Kiyosaki counters that the risk of failing is a motivation to make more money.

This is advice for people who are too lazy to roll up their sleeves and embrace the concept of hard work.

The core motivation of money is to make a profit. Risk of failing should be treated as a risk. That's it. Kiyosaki keeps confusing the two. Unfortunately failure is a constant specter in the world of investment. You can do everything in your power to make an investment but you can’t completely eradicate it. I am not saying you should be afraid of it or yield to it but you need to be aware that failure is there. However simply focusing on avoiding failure will distract you from making the right decisions.

The bottom line is: save your money by not buying these books. At about $25 a book, buying one every year probably will not decimate your retirement fund. But if you don't, you'll have at least $2,370 more in 40 years.

Amen my brother.

You want to know how to get rich? This is what I learned about rich people.

1.They are good at math. I’m not talking calculus. I am taking old fashion add,
subtract, multiply and divide.
2.They are consistent at whatever they do. Whether it is Donald Trump or Bill Gates,
rich people focus on a specialty and master it.
3.They don’t do anything stupid with their money.
4.They educate themselves.
5.They save.
6.They don’t buy stupid books filled with boilerplate information.

Yes. It's that simple. Now if you still think the grass is greener then by all means satiate your curiousity. But just go to the library.

Indiana, Open Houses and the New York Times

Yeah this is a real bargain.
1 Square Inch of Land for Sale at $1,500

Dear Indiana,

No one cares.
As long as "Hoosiers" is in reruns and high school drama clubs keep doing productions of the Music Man your state will not fade into landlocked obscurity. So please stop with the media whore act. Your story is two years too late to get yourselves on the morning show circuit. It's not amusing. Just pitiful.

I've had another set of craptacular open houses. Even with the brand new spanking price reductions traffic was still on the critical path. Since the market has begun to experience erticle dysfunction sellers are starting to get more tense. I can't wait when oil prices start hitting the roof and co-ops begin to experience the assessment gang bang. I am really glad I am not a property manager because they are looking over their books to figure out how to squeeze as much money from their budgets as possible to cover costs.

On a lighter note there was a bumper crop of articles this weekend from the New York Times that really got my adrenaline pumping.

Teri Karush Rogers article on awkward broker moments brought back a lot of memories. As all of you know, I employ a technique of announcing myself when entering an apartment. The motivation of this technique came from certain experiences of mine. Below is one of them.

I was once with a mother who was looking for an apartment for her son and we were in a building looking for one particular apartment but the only information I was given was the floor and that the door of the apartment would be unlocked.

So we began to check the doors and I found one that was unlocked. Obviously this was the apartment, so I opened it up only to see a young woman in bed watching tv with the covers over her chest.

For a second our eyes locked. I realized this was the wrong place and began to apologize when she sat up, holding the covers and began to scream. I responded by quickly slamming the door. Of course this all happened in front of the mother.

One thing that still bothers me to this day what possessed that woman to leave her door unlocked?

Still, it's the close encounters of the dishabille kind that seem to leave the strongest impressions. Veronica Raehse, an executive vice president at Bellmarc Realty, recalled the alarmed, alarming and mostly bare houseguest who charged out of the shower swinging a toilet plunger over his head. ("No! I'm a real estate agent!" Ms. Raehse shouted.)

This reminds me of my shower story where I did everything right but was a hair away from a very embarassing situation. I was showing an apartment to a broker and her clients and followed standard operational procedure, which was to have the doorman alert the tenant who did not answer. I even rang the doorbell and announced myself. But as far as I could tell it was empty. It was only after entering the apartment for several minutes that we all heard the sound of rushing water. That was when we realized there was someone in the shower. I quickly ushered the broker and clients out without incident.

"Bad kitchens, bad bathrooms, horrible pictures of ugly families - all of that doesn't matter as long as the price is right. But what it can do is affect how many people want an apartment, whereas the perfectly staged apartment can make someone on the cusp really want it."

This is so true. It doesn’t take much of a rocket scientist to properly stage a home. Unless you want to pay a husky housewife to do it.

Do you all remember the Grunt’s entry about the two to three bedrooms market?

It appears I was onto something. According to Patrick Healy’s latest article More Buyers Are Thinking Small, there is an influx of buyers who are looking at studios and one bedrooms. If this trend continues that means that the apartments that are two bedrooms are more will be hanging out on the market far longer which is great news for those of you who are priced out of the two bedroom or more market. If the winter is brutal and oil prices beat owners senseless, I wouldn’t be surprised if you find more inventory in your price range in the aftermath.

Because they are cheaper to buy and maintain, small apartments also make natural second homes or pieds-à-terre for commuters or suburbanites tiptoeing into the city, according to Jonathan J. Miller, president of the appraisal firm Miller Samuel. And they are often easier to rent, and draw high rents relative to an owner's mortgage burden, making them more profitable investments for buyers looking for rental income.

The buyers buoying this wedge of the market are largely students and young professionals planting a foot in Manhattan, rather than families of four squeezing into a too-small home, brokers say. On the low end of the scale, they are singles looking for the cheapest studio available.

As long as young people want to come to Manhattan, are willing to deal with cramped space and people just need a place to crash, the studio apartment will always be popular. SO WHAT ARE YOU WAITING FOR PEOPLE? START MAKING OFFERS NOW!

Saturday, November 12, 2005

Help, It's Broken. Not after Arianne has spoken!

For those of you who are familiar with the delightful work of Arianne Cohen, you will be happy to hear about her a new book "Help, It's Broken!: A Fix-It Bible for the Repair-Impaired".
I have had the pleasure of reading this book which is by far one of the most practical books on apartment repairs ever published. Not only is the book chock full of home repair juiciness but the book is set up so the reader has the first option of taking a self diagnostic on their knowledge of home repairs. The book covers huge array of topics from how to pick the right paint to how to do faucet repairs and dealing with home safety.

It also includes easy to follow illustrations and instructions which add to its no nonsense appeal. This is the ideal book for anyone who lives in an apartment in New York City and makes a great housewarming gift for anyone you know who is moving into a new place.

Just from reading this book I just found out the reason my apartment is so cold is due to the the heat that is wasted warming the wall the radiator is attached to. What's the solution? Buy the book.

If you are too cheap to buy the book and desire a more interactive experience I recommend going to her blog Ask Arianne.
Feel free to ask her any apartment repair related questions and she will be more than happy to answer them.

Yes. She will personally reply to your emails. Why? Because she is a sweetheart.

Thursday, November 10, 2005

The Wall Street Cavalry

Back in July, the Grunt did an entry title Getting the hell out of Dodge regarding corporate world's reaction to the market.

I bring this up now because of an entry I saw on the Matrix and the recent discussion on Curbed regarding a graph that which presented Jonathan Miller's projections if sellers ignore the fact that price appreciation is no longer in their favor.

One of the comments I have been noticing in that Curbed entry and from news on the wire is that there is an expectation that when bonus time comes, the Wall Street Cavalry will come to save the day.

It is understandable why brokers and sellers are so eager for this moment. According to the New York Times there is a strong expectation that there will be a bumper crop of bonuses on Wall Street.

According to a new compensation survey to be released today, the biggest percentage winners for 2005 are expected to be investment bankers who focus on mergers and acquisitions; prime brokers, the professionals who manage a bank's relationship with hedge funds; and proprietary traders, the traders who use their firm's money to bet on the direction of certain market trends.

"It's been a solid year, especially in light of rising interest rates and energy prices, the impact of the hurricanes and geopolitical events like the London subway bombings," said Alan Roost, a vice president at Johnson Associates, the New York compensation consulting firm that conducted the survey.

Brokers have historically relied on the bonuses to pull them through their darkest hours. However I am expecting that the Wall Street Cavalry will not be coming to our rescue.

As I have stated in my previous entry Getting the hell out of Dodge the Wall Street Cavalary are actaully liquidating their real estate investments. Those that are jumping in to buy huge portfolios have the resources to sustain a huge hit from a bust.

The Wall Street Cavalry are in the financial trenches and get to see first hand what will happen to the economy. Mind you, these people aren't always on point with their predictions or actions but they have a ton of experience and resources at their disposal.

Real estate obviously plays a key role in the markets and especially in these times the Wall Street Cavalry has been keeping a very close eye on the market. They are very well educated and have the scars to prove it.

Yes. The Cavalry is going to be awash in bonuses. But they are most likely going to shove that money in the best investments they can find. And it doesn't look like real estate will make the cut.


Yes. Everyone needs a place to live. But if someone does not have a pressing need to find a new home, then they will stay where they are until the market makes sense.

My recommendation is that we should tighten our belts, ration our food and expect to a longer stay in our foxholes.

Wednesday, November 09, 2005

Election night

Forrestor has conceded and Ferrer has followed suit. Corzine is the new governor of New Jersey and Bloomberg has retained his crown. In my opinion Bloomberg's relection will give a much needed boost to the real estate market. If Ferrer was elected I feel that the initial uncertainity of a new adminstration would have definitely sent the real estate market into quicker a tailspin.

Please do not mistake my words as an endorsement but just an observation. Bloomberg played a key role in elevating the profile of New York City. Many critics would grumble that his high real estate taxes hurt the residents however it did not prevent Manhattan from experiencong one of the biggest bull markets in real estate. The city has adapted to Bloomberg's policies and so far is willing to maintain the status quo.

Of course this euphoria will be short lived. According to Curbed , the land bingeing Toll Brothers, who were recently profiled in the New York Times magazine, announced that they were cutting their sales forecast. This is just another indication of how completely boned we all are.

On CNBC this morning a panel of experts were talking about the weakening market and one of them stated how now the market was going return to normal. Hey, newsflash. We don't know what the outcome will be. For all we know real estate will experience the same cold shoulder that stocks received when that market popped. But what really got on my nerves was that they had this graphic on the bottom of the screen stating HOUSING BUBBLE? What's with the question mark? This is a bubble and it has begun to pop.

Sunday, November 06, 2005

Comeback called off

I am trying to maintain a positive attitude but this market is making my job as fun as a being the new head of FEMA. ZING!

Traffic was like a thin bowl of soup on a cold day. Greatly appreciated but very, very unsatisfying. Perhaps it was the marathon that took away the traffic. At one open house the majority of visitors were people who lived in the building. Most brokers love that because it is an opportunity for them to press the flesh and make an impression on new customers. It seemed like one resident brought in their own extended family. From that crowd I knew it was a mixed bag. They were either interested in upgrading or they were just exercising their right to be nosy.

I talked shop with a bunch of other brokers. One of them made a comment that if the market maintained this course then bonuses were highly unlikely. As far as I am concerned if this market continues its descent I think bonuses will the least of our worries.

Saturday, November 05, 2005

Eve of a comeback

It is Saturday night and I am awaiting another duty of open houses. I think it is going to be a good day. The weather is good and the marathon is on tomorrow. I am hoping for a good turnout.

Curbed has posted their Price Chopper which has displayed the massive price reductions that occured in the Manhattan market. Hopefully that will give the buyers an incentive to come out full force.

One thing I have noticed are repeat customers from previous open houses who are stopping by. We exchange plesantries but the hard look still resides on their faces. They want this market to pop and it is taking too damn long for their taste.

The war of attrition is on. It tastes just like chicken.

Wednesday, November 02, 2005

The following was an interview with Tim Hartford who is a columnist for the Financial Times. He is promoting his book about the hidden economic ideas in day to day life.

What I think will catch everyone's attention is the last part of the interview. For those of you who don't feel like reading the whole article here it is. However I recommend you read the whole article.

Finally, what about American real estate?
Sell, unless you have other good reasons to keep hold of the property -- such as, you live in it and you love it. My reasoning is pretty simple: Bob Shiller, the economist who called the Internet bubble early, used a very simple argument that I describe in my book. He just looked at the relationship between stock prices and corporate earnings for more than a hundred years, and it was as clear as day that the market was totally out of proportion to anything that had come before, even the bubble of the late 1920s. Now, Shiller has constructed a long-term index for house prices, and guess what -- it looks frighteningly similar.

You hear that folks? Another voice to add to the greek chorus that says we're screwed. This may not be the best time to play investor. Treat it like a night at Score's. Look but don't touch. Those of you who are looking for your primary home. It is out there. You are going to find it. Just keep looking, have a budget and be willing to make some compromises. I have no idea what the future will bring us all it a slow descent or it could be a complete FUBAR.

I do know this is not the time to play fast loose with insane mortgage products and act like Donald Trump. We'll definitely clearer and perhaps more grim picture of the market after the winter.

Undercover Investment Tips
By Tim Harford and John Reeves (TMF Bane)
November 1, 2005

Tim Harford writes the "Dear Economist" column for The Financial Times, in which he answers readers' personal dilemmas, tongue-in-cheek, with the latest economic theory. His new book, The Undercover Economist, reveals the hidden economic ideas in day-to-day life. It includes chapters on how to think about the stock market, the connection between scarcity and profits -- and how to buy a cheaper cappuccino.

Tim, what's so Foolish about economics?
Economics has long been the preserve of the Wise -- spouting inscrutable statistics about inflation and unemployment. I thought that this was strange, because economics is all around us: When we buy a cup of coffee, roam around a supermarket, or get stuck in traffic on the way home, these are situations governed by economic ideas that the Foolish can understand. So I wrote a book about economics in everyday life -- and that includes, for the Fools among us, the stock market. I try to explain how the stock market works and how economics can help you demystify it.

A lot of economists seem to believe in efficient markets. Do you?
The market is smart, not perfect. You can beat the market, but it won't happen by accident or because you trust the stock tips in the papers.

The stock market is a bit like a row of lines at the supermarket checkout. Picking a great value stock is like picking the shortest line: It's possible, but never obvious. If it had been obvious which was the shortest line, then people would have joined it, and it wouldn't be the shortest anymore. The same with a good stock pick: If it were a sure thing, the price would already have risen. That doesn't mean there are no good picks, just that you need to work to find them.

The truth is, unless you've made a study of supermarket lines, you may as well just pick one at random and not worry about it. In the same way, if you have no time or inclination to research the stock market, then you should just buy an index fund. I would only advise someone to start picking their own stocks if they enjoy it and are willing to do the homework.

You wouldn't advise people to trust a fund manager?
No. We all know the basic statistics that index funds beat most fund managers, and we also know that even if a fund manager is doing well today, he may not do well tomorrow. For me, there's a reason for these statistics: Fund managers are much better informed than ordinary investors, but they aren't necessarily rewarded for making the right calls. The Undercover Economist tells the story of Tony Dye, a British fund manager widely known as "Doctor Doom" for his repeated predictions that the bubble was ... well, a bubble. He made absolutely the right call over a five-year time horizon, but he was ridiculed by the newspapers, abandoned by his clients, and took early retirement just before the bubble burst, with many observers concluding that he had been forced out. But what's a fund manager for, if not to make the right calls over five to 10 years? Tony Dye's experience suggests that fund managers are not being rewarded for maximizing returns to their investors, but for running with the herd.

What do you look for in a stock?
Think very carefully about whether the company you're investing in has some scarce resource, something that competitors can't easily duplicate. In my book, I talk a lot about the value of scarcity, and I think that we would never have had an Internet bubble if investors had thought more sensibly about this. Any company that can operate out of someone's bedroom is not going to make sustainable profits, because sooner or later it will have lots of competitors.

Of all of the Internet stocks, the only one that has really established a position that's hard to imitate is eBay (Nasdaq: EBAY). To copy eBay, you'd need to lure the buyers and the sellers away simultaneously, and that's not easy. Yahoo! (Nasdaq: YHOO) got there first in Japan, so in Japan, it's Yahoo! with the unassailable position: eBay had to pull out. But the others, even Amazon (Nasdaq: AMZN) and Google (Nasdaq: GOOG), are doing something that other companies can imitate. They're doing well at the moment, but we'll see whether they keep their privileged competitive position.

This all sounds quite Foolish. Do you disagree with The Motley Fool on much?
I'm a huge fan of the Foolish approach, but I do have a slightly different perspective. I think that Fools tend to focus too much on the stock market and not enough on other investments. There's a good reason for that: Historically, the stock market has been dominated by the Wise, and it's been intimidating for the average person. I think that in the future we're going to see more Fools, and that will mean wider participation in the stock market -- great news for the newcomers, but it will mean that stocks will be more expensive and won't deliver quite such exciting returns as in the past.

Most people understand that a diversified portfolio is an easy way to reduce risk, but forget that real diversification means looking beyond the stock market: bonds, cash, property, and more. An education is an investment -- it ties up cash now and delivers rewards later. When I took unpaid leave to write my book, that was an investment, too. I am sure most Fools wouldn't disagree, so this is a difference of emphasis.

What about your own portfolio?
That's a great question for an economist, because economists always argue that you should judge people by their actions, not their words.

My major investments are The Undercover Economist book, a house in London (although I live in Washington, D.C.), a modest pension in a British index fund, and high-interest savings in pounds and dollars. I expect to retire to England one day, and so too much foreign investment exposes me to a lot of unwelcome currency risk. I keep a fair amount of my investments in quick-access bank accounts because I am about to change jobs from being an economist to being a writer. That change has some costs and some uncertainties, so it's worth giving up some investment returns to have the flexibility to respond.

The house and the pension have done very well. I invested fairly heavily in British stocks just before the invasion of Iraq, when everyone was very gloomy. They've climbed about 60% since then. The highest-risk investment, though, has to be the book. In a few months, I'll have a much better idea as to whether it's paid off, but I can promise that writing it was even more fun than picking stocks.

Let's close by playing Motley Fool co-founder David Gardner's game, which is called "Buy, Sell, or Hold." So what's your view on GM? Buy, sell, or hold?
Hold. The company's market capitalization is about $16 billion, and I've seen estimates of the unfunded liabilities of $70 billion. They're losing money at a rate of over $5 billion a year. Their bonds are now "junk" status. If we lived in a free-market world, I'd say the shares were next to worthless, but politics matters, too. I think General Motors (NYSE: GM) may still have the political clout to dump some of their liabilities onto their workers, pensioners, and the taxpayers. Surely that must be what the current shareholders are holding out for.

How about Apple?
Sell. The price-to-earnings ratio is around 35, and Apple (Nasdaq: AAPL) can't justify that ratio without dramatic further growth. Profits have already quadrupled over the previous year, but is it reasonable to expect the phenomenon to continue forever? Can you imagine Apple having a decade of success that leaves 2005 in the shade? That's what is necessary to justify the current prices. As far as I can see, everyone in the world already has an iPod, and the competitors will catch on. Sony (NYSE: SNE) invented the Walkman, but it didn't have a monopoly forever.

Finally, what about American real estate?
Sell, unless you have other good reasons to keep hold of the property -- such as, you live in it and you love it. My reasoning is pretty simple: Bob Shiller, the economist who called the Internet bubble early, used a very simple argument that I describe in my book. He just looked at the relationship between stock prices and corporate earnings for more than a hundred years, and it was as clear as day that the market was totally out of proportion to anything that had come before, even the bubble of the late 1920s. Now, Shiller has constructed a long-term index for house prices, and guess what -- it looks frighteningly similar.

Who isn't looking for great stocks at great prices? But it takes time and effort to identify the contenders. Let Motley Fool co-founders Tom and David Gardner help you zero in on the hottest picks with a free trial subscription to Motley Fool Stock Advisor.

Tim Harford's book, The Undercover Economist, was published today, Nov. 1, 2005, by Oxford University Press.

Neither Tim nor John owns any shares in any of the companies mentioned in this article.

When brokers attack

Below is a letter written by Steven Spinola, the president of REBNY, in a response to the October 23, 2005 New York Times article titled “Slippery Devil, That Real Estate Bubble”

October 31, 2005

Attn: Thomas Feyer
The New York Times
229 West 43rd Street
New York, NY 10036

To the Editor:

I read with interest the recent article “Slippery Devil, That Real Estate Bubble” (Oct. 23).

Though the article states that apartment prices in Manhattan dropped 13% from July through September, I’d like to set the record straight.

The Miller Samuel report, the same one cited in the article, also shows that average prices per square foot were at the highest levels ever in the third quarter, increasing nearly 25% compared to last year. Average sales prices, though dipping from the second quarter, are up 10% since last year.

Furthermore, market reports compiled by REBNY found that median prices for apartments are 9% higher than last year, with condominium median prices increasing 22%. Cooperative sales activity also increased 21% in the third quarter.

What is troubling is that this is the second story written by this reporter utilizing the same statistic, which doesn’t take into account other valuable market indicators. It leads me to believe that the reporter is arguing an opinion not backed up by the facts. One statistic doesn’t encapsulate the residential market in Manhattan. In fact, the statistics clearly state the market remains strong.

Steven Spinola
Real Estate Board of New York

I am not surprised REBNY has jumped into the fray. There has been some rumblings in the brokerage community reagarding the New York Times coverage of the real estate market. I even heard a little banter about boycotting of New York Times by brokers since a huge chunk of the classified ads comes from brokers. But nothing ever came of it.

Brokers are very sensitive now with way this market is turning. Even if the numbers indicate that the market is still going strong the mindset of consumers has changed drastically since the fall. This leaves brokers between a rock and a hard place and the New York Times coverage doesn’t help our plight.

Mind you I am not saying that the New York Times should back off. They should publish where ever the story leads them. It’s their job. But please bear in mind that if the brokerage community feels it has been slighted in anyway they will make their displeasure known.

Tuesday, November 01, 2005

Get Ready For Google Base

Recently I heard rumblings about Google’s new ad initiatives from Inman news, which was clarified by a NYT article about their new venture.

I think brokers should be concerned about these initiatives particularly Google Base which is a free advertising system. First of all Google has proven to not only to be bullet proof since the dot com meltdown but has actually thrived during the recession. Since going IPO Google stock has been a consistent winner along with their new advertising model which has also proven quite successful.

Google soared in popularity in its first years but had no meaningful revenue until the founders reluctantly fell on that safety net and started selling ads. Even then, they approached advertising with the mind-set of engineers: Ads would look more like fortune cookies than anything Madison Avenue would come up with

As it turned out, the safety net was a trampoline. Those little ads - 12 word snippets of text, linked to topics that users are actually interested in - have turned Google into one of the biggest advertising vehicles the world has ever seen. This year, Google will sell $6.1 billion in ads, nearly double what it sold last year, according to Anthony Noto, an analyst at Goldman Sachs. That is more advertising than is sold by any newspaper chain, magazine publisher or television network. By next year, Mr. Noto said, he expects Google to have advertising revenue of $9.5 billion. That would place it fourth among American media companies in total ad sales after Viacom, the News Corporation and the Walt Disney Company, but ahead of giants including NBC Universal and Time Warner.

Because of this strong brand identity, Google has become a force to be reckoned in the advertising community.

Not content to just suck advertising dollars from Web search, Google is using its windfall to pay for an eclectic range of ambitious projects that have the potential to radically disrupt other industries. Among other things, it is offering to build a free wireless Internet network in San Francisco, plans to scan nearly every book published and is testing a free classified advertising system it calls Google Base.

"The smartest thing that Google did was getting smaller advertisers to buy in," said Ellen Siminoff, the chief executive of Efficient Frontier, an agency that helps advertisers manage their campaigns on search engines. She estimates that Google has two to three times as many advertisers as Yahoo does, largely because Yahoo has a 10-cent minimum bid. This lets Google earn money on more obscure search terms for which rivals have no ads.

The Google model is ideal for residential sales because selling an apartment is a small business venture in itself. Unlike large scale developers who can afford to market their own properties, the small sellers has very few resources in terms marketing the apartment. The Google advertising model addresses the needs of the seller of that one apartment because it is free and Google has brand name recognition.

So why do I feel that brokers should be dropping a load in their pants? Well you need to understand the role marketing plays in residential sales. One of the reasons why sellers enlist the aid of certain brokers is because of their brand identity. Customers recognize these brands, which draw them into looking at the websites and newspaper ads. Barbara Corcoran is a perfect example of branding since she was the first one to prove that the use of media could strengthen a broker’s bottomline.

Another brand is the New York Times which is considered to be the bible of real estate since it is usually the first place customers peruse for apartments.
Brokers routinely carpet bomb with the New York Times with ads.

None of these marketing services are free. Brokers have to pay out of pocket for New York Times ads and running their website. Brokers are wiling to absorb these costs since they are gambling that that the sale of the apartment will make up for the the marketing costs.

With Google Base there is very little justification for sellers to use a broker because they can do a FSBO, market their own homes and get the same amount traffic through Google because of its strong brand presence. And sellers don't have to pay a dime. Another scenario is that a seller could negotiate a lower commission by demanding that brokers only market through Google base because the broker would not need to expend any money for New York Times ads neither would they need to list it on their own website because of the traffic that the Google brand attracts and that the service is free. By simply using Google Base, brokers would be prevented from expending their own resources therefore they would hardpressed to demand a full commission due to lack of capital outlays.

One could argue that Google Base would not be a viable option since it could be afflicted with the same problems as craigslist which include bait and switch artist. I am sure that the Google crew has created an algorithm to neutralize that problem.

I also forsee brokers arguing that real estate ads are a completely different animal comparing to other advertisements requirin a certain touch and feel that only a experienced broker can provide. Google begs to differ.

Eric E. Schmidt, Google's chief executive, explains the company's astounding success in advertising - and reconciles it with the founders' distrust of hucksterism - by suggesting that advertising should be interesting, relevant and useful to users. "Improving ad quality improves Google's revenue," he said in an interview at the company's headquarters, known as the Googleplex. "If we target the right ad to the right person at the right time and they click it, we win."

This won't happen overnight but it is in my opinion that in the near future many a broker will be cursing these engineers.

This one won't go answered.

Yoohoo. I'll make you famous!

Young Guns II

I normally do not engage in these types of fisticuffs because but a very bad week has left me with a reserve of bad intentions that is just burning inside and I need to get rid of it. And when someone presents an invitation to come kick their ass who am I to refuse?

Below is a comment that was placed in my last entry.

Dear Buyers: Please ignore the real estate agent. He's a nobody. He's not even the decision maker in this deal and you know never to waste time on the guy who can't say yes or no. Make an offer or not, but you have nothing to explain to an agent. You do not need to justify your offer. If you don't want to make an offer, fiine. An agent needs to stand around for a couple hours on Sunday -- if this is a hardship for him he should have gotten out of the business a long time ago.

Dear f**ktard,

I maybe nobody but I am the first and last line of defense for a sale. If a buyer wants to put in an offer they have to go through me. It’s not the broker you have to justify your offer to but the seller. I could care less what the buyer’s reasons are but the seller is going to want to know why the offer is low. You are right. I am not the decision maker. It is entirely in the seller’s hands but I am the one who facilitates it.

Dear Sellers: Why not ask your broker to do some actual marketing and drum up some bids. He works for you. Make him do a little work

Wow. You really are stupid. It’s ok. Obviously you have been convinced that brokers are in control of the market. But we are not. We just adapt to it the best way we can.
I can’t simply drum up bids. It doesn’t work like that. I wish it did it would make everything easier.

Every weekend New York times ads are being put out and exclusives are listed 24/7 on our websites. But even if brokers bought out all the ads in the New York Times it still wouldn’t make a difference. First of all the apartments need to be priced properly. And since the market has begun to go soft it seems that everyone is waiting for it to hit bottom so it is a lot more difficult to figure out what is the best price. Throw in high oil prices and rising interest rates and you got yourself a little clusterf**k in the making.

Please do not mistake my words as an attack against this commentor. By being made an example of there is a certain sense of recognition one gets which is tantamount to eating a bucket of buffalo wings in one setting.

The commentor is one of those individuals who most likely passes the time by slamming the phones voting for their favorite Americna idol, engaging in flame wars over that Kirk was a better captain than Picard or having sex with their own feces.

Obviously American Idol is on hiatus, interest in star trek has waned since Enterprise was cancelled and this commentor is most likely constipated. Thus leaving this commentor nothing else better to do than to antagonize me.