Realtors Property Resource (RPR) – courtesy their Facebook

Realcomp, a Farmington Hills company with some eleven thousand plus members in Detroit, will now now feed RPR listings in exchange for advanced analytics for Realcomp subscibers. Realcomp II Ltd. CEO Karen S. Kage offered comment on the announcement:

“Realcomp II Ltd. is very pleased to make Realcomp MLS data available through the RPR product in order to ensure that our REALTOR® subscribers have full use of all of the technology tools and features that the product offers. Our Board of Governors approved moving forward with RPR for the benefit of its MLS Subscribers, and in line with the company’s mission to deliver first-rate data services, support, and instruction to the real estate industry.”

A subsidiary of the National Association of Realtors, RPR has MLS and commercial info exchanges reflective of NAR’s over one million members. So basically Realcomp II Ltd. has just plugged into a much more powerful network of listing and sales potential, when all is said and done. Despite criticisms RPR has not produced for the NAR revenue wise so far, it seems clear that the uptake of tech for Realtors is a slow go anyhow. Most agencies cannot even figure out Twitter let alone study advanced analytics, while it’s also clear the RPR people are tuned to SM looking at their Facebook.

Having only recently launched to support some one million Realtors nationwide, RPR is targeting monetization via their analytics. Rather than go into the specifics of RPR offerings, the video below from them explains in some detail how their historical data can fast forward agent effectiveness.

Many so-called 'experts' are even more confused about housing than the average Joe on the street © Aljulew - Fotolia.com

The market data is simply not all that clear when you look at general national averages, because it’s like being in an airplane at 30,000 feet. You can make out the shape of things on the ground below, but it’s very difficult if not impossible to see any details. But when you get down on the street level, you can see all of the details in one particular spot, so your view is much clearer, but much more focused on one specific area as well.

This is why David Lereah, former Chief Economist at the National Association of Realtors, the Fed, Treasury, Fannie, Freddie, big banks and big investors all failed to recognize the coming market crash that was very apparent in many neighborhoods as early as 2006. The so-called “experts” were up in the “airplane”, flying at 30,000 feet, trying to figure out what was happening on the ground. But in reality, while they could see something down there that did not appear to be normal, their data contained a distant view, so at their “altitude” they simply could not see what was really happening on the ground.

The primary reason market reporting appears to be conflicted and confusing when viewing the general housing data  is because real estate markets are very much a local phenomenon. While the media tend to latch on to these monthly reports posted by the National Association of Realtors, or other agencies responsible for general housing sales analysis, the simple fact is you can’t get a detailed picture of local fundamentals.

The reality is, some markets are doing pretty well, some are doing very badly, and some are in between. It all depends on your local market fundamentals. After years of analyzing thousands of properties in a wide variety of cities and neighborhoods, I can tell you that fundamentals such as location, supply – demand ratios, employment sectors, and housing prices are highly localized. They are best viewed clearly by collecting data on the fundamentals for your specific area. In large cities, this data can vary markedly in just a 5 mile radius. National averages are simply not that helpful.

I worked with a coaching client in early 2011, who was in Wyoming. Due to high paying employment caused by an energy boom, and demand for housing that was pressing on the supply of homes, his city, Casper, had seen little of the foreclosure wave, and housing prices there were stable to rising, even as other cities were making headlines for falling prices and record foreclosures. Because of the fundamentals in his market, his investment options were totally different from those of investors in other markets.

Las Vegas on the other hand, is among the highest foreclosure rates in the nation, heavily over-built and then subjected to a downturn in tourism driven employment, because of the recession.  The result was the home buyers who bought in 2006 got slammed, paying peak market prices, and then watching those homes lose as much as 50% of their value in less than three years. Yet the media reports in 2006 had the Las Vegas housing market flying high, with no indication that it was about to slam into a mountain that was not on the radar.

Las Vegas homeowners were well and truly slammed © John Takai - Fotolia.com

Investors and owner occupant buyers can clear up most of this confusion by simply focusing on what is happening in your local market. And I mean really local. What is happening within 10 miles of the area where you want to live or invest? And further, what is about to happen? Is there a new medical facility under construction? Is that military base that’s been there for 60 years about to be closed to accommodate a cut in the defense budget? This stuff has major local impact, yet does not show up on monthly housing reports.

In any large metro area, there are some neighborhoods that experience high demand, and low or no loss of value, while other areas experience high foreclosure rates, slow sales, and loss of value as high as 50%. The key fundamentals driving this are the proximity to high paying employment and the convenience factor. (i.e. location)

Neighborhoods that are located near a wide variety of essential activities like medical facilities, educational institutions and shopping, are seeing more demand. Neighborhoods farther out in the burbs tend to be less convenient, have longer drive times, and can be impacted significantly by rising gas prices. They tend to have higher foreclosure rates, lower demand in a recession, and this usually results in a greater loss of value.

Miami, Florida has had it’s problems with over development, but hey, it’s at the beach! and it’s warm year round. People want to go there, and will if they have the means to do so. Coastal areas suffer much shorter downturns than areas located “out in the boonies” where it’s less convenient. Even with hurricanes, the memory of such bad events fades quickly in the face of such highly desirable location or good paying jobs.

San Francisco, California has had some of worst earthquakes in history, but prices there are still high relative to most other cities. The proximity to high paying jobs and beautiful scenery adds fundamental value and higher demand to an area, even if it is threatened by something as ominous as a major earthquake.

Detroit, Michigan on the other hand, has had the worst of both worlds. A crumbling job market in the once dominant auto industry, combined with harsh winters in their northern location. They are having to tear down houses in Detroit, as some of them were priced as low as $1 and still did not sell. It’s hard to justify buying a home to live in, or a property for investment, when there are few jobs and thousands of vacant homes with no takers.

It’s a well worn saying that the three most important things in real estate are “location, location, location”. This is a hugely important fundamental. And it’s one that is difficult to incorporate into those general monthly reports that cover the entire nation.

Jobs are the other big local driver. Areas with employment in medical and educational sectors have been stronger during the recession, and over all, have been relatively stable compared to neighboods where a significant number of the residents were employed in construction, trades or manufacturing industries that were supported primarily by home building.

The average real estate investor or home buyer does not need a 30,000 foot view of the national real estate picture. When it comes to making smart investing decisions or choosing a home to live in that will hold or increase it’s value, it’s much more important to know what is going on right down the street.
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Donna S. Robinson is a 16 year veteran of the real estate industry and a staff writer for RealtyBizNews.com. She is an active real estate investor who also provides coaching and consulting services. Contact her at donnaconsults@reihelp.com or call her office at 888-915-9968 to inquire about coaching or consulting, or to request a free copy of her latest book.

Housing can't pick itself up by itself © Air0ne - Fotolia.com

While the politicians argue over whether we should reduce loan balances for those homeowners who are “most deserving”, or refinance existing mortgages from 5% down to 4%, or “let the free market work”, these are all merely addressing the symptoms of the problem not the root cause. It’s sort of like treating a cold and flu epidemic by having the government provide everyone with free aspirin and tissues, while ignoring the reasons why colds spread in the first place.

The fact is, the data is pretty clear in showing that the root cause of this epidemic had it’s beginnings many years ago. To establish the case for this, lets look at some basic data provided by a variety of analytical sources.

Household Incomes Continue To Fall:

•  2007 to 2009 average household incomes fell an average of 3.2%
• 2009 – 2011 incomes fell an additional 6.7%
• People who lost their jobs during the recession, then found new ones are working for about 17.5% less in their new jobs.
• Those with Associates degrees are earning 14% less over the past 4 years.
• Those with Bachelor degrees or higher are earning about 6.8% less.
• Those who did not finish high school are earning about 7.9% less. (and this group has much more trouble finding work in general)

Household Incomes Have Not Kept Pace With Housing Prices

Combine the above data with the U.S. Census Bureau Analysis of Real Median Household Income, which shows that real median income increased only $9,345 from 1967 to 2010! 

On the other hand, there are a number of sources with housing data, that show that housing prices have increased about 6.3% PER YEAR, since the 1960′s. Over the years there were long periods of relatively stable prices, with small increases. The really big increases began in the 1990′s and by the early 2000′s, they had gotten into double digits, largely due to easy access to mortgage financing.

I believe the big picture here also tends to strongly suggest that government policies and finance programs tend to drive housing prices higher, even as other government policies have had a negative impact on income and employment. Home prices are simply searching for an affordable balance between ownership costs and real income.

By the time you take taxes into account, and look at the impact that current monetary policy is having on the value of the dollar, it’s no wonder that housing prices have fallen and they can’t get up. As long as real income is not increasing, there is no reason to assume that home prices will either.

Housing prospects unlikely to improve any time soon. Image courtesy of Pagedooley

While 27% of markets showed a very small increase in average selling prices, overall the data still indicates that housing will continue to struggle because of high unemployment and tight credit.

Considering that interest rates remain at or near all time lows, the lack of any significant improvement in this data points to a confluence of other factors that continue to dog the housing market.

High unemployment continues to be a major issue, as it leads directly to fewer qualified home buyers. In past  recessions, activity in the housing sector tended to add jobs to the economy. But not this time. The cycle of the housing bust  leading to higher unemployment has turned into one in which higher unemployment is continuing to drag down the housing market.

Unemployment continues to dog housing markets. Image courtesy of Combined Media

All-cash purchases of distressed properties are now about 30% of all home sales, up from 25% in the 2nd quarter of  2010. First time buyer purchases are down 11% from the same period in 2010. For the first time in the modern history of the housing market, investor buyers may actually begin to out number first time buyers.  If this trend were to continue, it would carry major implications for the residential investment property  market, and could actually lead to lower rent rates, which could continue to encourage renting, keeping more first time buyers out of the housing market.

Traditionally first time buyers have accounted for the bulk of home purchases, but this segment of the market is more likely to be affected by the unemployment problem.  If certain changes in mortgage financing, such as the Qualified Residential Mortgage Rule take effect, and new mortgages are mandated to require 20% down payments, the first time buyer market could be drastically reduced.

I’d like to wrap this article up with a nice positive statement about a housing recovery, but between unemployment and pending government regulations on mortgages, the outlook for housing continues to be negative. One thing is for sure, if housing is to recover any time soon, we’re going to have to see a drastic improvement in the employment situation.