The Catholic saint has long been believed to help with home-related matters. And according to lore now spreading on the Internet and among desperate home-sellers, burying St. Joseph in the yard of a home for sale promises a prompt bid. After Ms. Luna and her husband held five open houses, even baking cookies for one of them, she ordered a St. Joseph "real estate kit" online and buried the three-inch white statue in her yard.
"I wasn't sure if it would be disrespectful for me, a Jewish Buddhist, to co-opt this saint for my real-estate purposes," says Ms. Luna, a writer. She figured, "Well, could it hurt?"
With the worst housing market in recent years, St. Joseph is enjoying a flurry of attention. Some vendors of religious supplies say St. Joseph statues are flying off the shelves as an increasing number of skeptics and non-Catholics look for some saintly intervention to help them sell their houses.
October 2007 Archives
Data through August 2007, released today by Standard & Poor’s for its S&P/Case-Shiller® Home Price Indices, the leading measure of U.S. home prices, show further declines in the prices of existing single family homes across the United States, marking the 8th consecutive month of negative annual returns and the 21st consecutive month of decelerating returns.
Most industries innovate from both ends:
The mediocre record companies, mediocre A&R guys and the mediocre acts are struggling to stay in place. They're nervous that it all might fall apart. So they wait. They wait for 'proof' that this new idea is going to work, or at least won't prove fatal. (It's the impulse to wait that made them mediocre in the first place, of course).
- The outsiders go first because they have nothing to lose.
- The winners go next because they can afford to and they want to stay winners.
- It's the mediocre middle that sits and waits and watches.
So, in every industry, the middle waits. And watches. And then, once they realize they can survive the switch (or once they're persuaded that their current model is truly fading away), they jump in.
The irony, of course, is that by jumping in last, they're condemning themselves to more mediocrity.
One of the things I have consistently pointed out was that the so-called Housing Bubble was in reality two bubbles: Credit and Interest Rate.
We can define a bubble as a “trade in high volumes at prices that are considerably at variance from intrinsic values." By that definition, I'm not so sure Housing was a true bubble -- the run up in prices, a doubling over the course of about 7 years, was actually a rational market response to interest rates being dropped to generational (46 year) lows. Trading volumes moved up, but proportionately so. Compare that with the Nasdaq, which doubled from October 1999 to March 2000 on a dynamic of a new paradigm. Trading volumes skyrocketed. When it was over, the Nazz had plummeted 78%.
Mary Meeker @ Morgan Stanley [1.9MB PDF]:
- Tech stock performance strong reflecting future expectations -for now
- Consumer demand for Internet-enabled services / products is strong
- Innovation in wireless products is accelerating
- Storage needs continue to ramp
- Data center growth is robust
- Emerging markets pacing next wave of technology adoption
- Enterprises may be coming out of relative purchasing funk
- Recession(s) = very serious potential challenge
You can only learn so much about frontline employees as a customer, or even as a reporter. I knew that to find out how the best companies train and indoctrinate employees, I'd have to become one myself. In what wound up as a two-year undercover project, I took a series of entry-level retail jobs, becoming that critical employee who represents the company's face. I did it to better understand the world of commerce and the corporate cultures that drive it. In the process, I learned that Apple Stores, with their aura of cool, were in fact living up to their mission to "reinvent retail" and setting a high bar for other companies in the retail world.Book: Punching In The Unauthorized Adventures of a Front-Line Employee
I knew I'd have competition when I applied at the Apple Store, but I also knew store managers hire from the ranks of the brand's fans. Apple is surely a rare bird--few companies have such a broad and committed following, let alone frontline employees who revere its CEO. (When I worked at Gap, then-CEO Paul Pressler showed up in the store and coworkers knew he was a bigwig but didn't realize he was the boss.)
But even companies that have devotees don't always look as hard for passion as they should. On its hiring application, Starbucks asked briefly about my interest in coffee ("What do you like about coffee?") but left it at that.
In my journey, only the Container Store did as good a job as Apple Stores at finding people passionate about what they're selling. When I went in for my Container Store group interview, I choked during a show-and-tell exercise that's an impromptu sales demonstration-slash-passion display that rapidly separates wannabes (like me) from the real deal. Learning from that experience, in my Apple Store interview, I talked about all the Apple products in my life: from iPods to iMacs, AppleCare to Safari.
Is it really fair to blame one man for destroying the US economy?
Probably not. But Alan Greenspan is still tops on our list. After all, Greenspan "presided over the greatest expansion of speculative finance in history, including a trillion-dollar hedge fund industry, bloated Wall Street-firm balance sheets approaching $2 trillion, and a global derivatives market with notional values surpassing an unfathomable $220 trillion." (Henry Liu, "Why the Subprime Bust will Spread" Asia Times) Greenspan is also responsible for slashing the real Fed Funds Rate so that it was negative for 31 months from 2002 to 2005. That decision flooded the housing market with trillions of dollars in low interest credit creating the largest equity bubble in history. Now that that bubble is crashing; Greenspan has hit the road. He now spends his time leap-frogging from city to city hawking his revisionist memoirs of how he steered the ship of state through troubled waters while fending off protectionist liberals. Look for it in the Fiction section of your local bookstore.
Still, can we really blame "Maestro" for what appears to have been a spontaneous flurry of "free market" speculation in real estate?
To a large extent, yes. Apart from Greenspan's tacit endorsement of all the dubious loans (subprime, ARMs etc) which flourished during his reign; and despite his brusque rejection of the Fed's role as regulator; the Federal Reserve's own documents ("House Prices and Monetary Policy: A Cross-Country Study") indicate that housing was "specifically targeted" acknowledging that it would serve as "a key channel of monetary policy transmission". This is not even particularly controversial any more. In fact, we can see that this same scam has been used in England, Spain and Ireland---all now suffering the ill-effects of massive real estate inflation. Low interest rates continue to be the most efficient way of stealthily shifting wealth from one class to another while decimating the foundations of a healthy economy.
When disaster strikes, the need for short-term housing is immediate and urgent. The Department of Homeland Security estimates that more than 800,000 people were displaced after Hurricane Katrina in 2005, and UNICEF reported 130,000 residents were made homeless by the 2006 earthquake in central Java, Indonesia.
State-provided housing is expensive, too temporary and can be potentially harmful to residents. A growing number of architects and designers is exploring humanitarian design for people displaced by a natural disaster or other emergency. This gallery shows some of the most promising quick-fix shelters, from inflatable concrete tents to houses made from recycled wood pallets.
In his office high above the Chicago River, Sam Zell, the real estate virtuoso and master investor, is talking about motorcycles. "I have had accidents over the years," he says, "but most of them while standing still. I'm actually a very, very good driver." In case I look skeptical, he adds a sweetener, his wife's verdict: "Helen rides in the back with me and this is not Miss Bravery or something," he says. "But you know, she won't let me drive a car. I get distracted."
He's hoping I'll catch the broader point, which is about managing risk--the subject we're actually here to talk about. In his three-plus decades in the business, Mr. Zell has built a fortune doing deals in industries and business cycles where few were keen to tread. He's come out with levels of success that left others wondering how they failed to see the opportunities that were there, plain as day.
The most recent of these high-wire acts was his sale in February of Equity Office Properties, the real estate investment trust he had built over decades, to Blackstone for $39 billion in cash. At the time, business publications were unconvinced. "Is he cashing out too early?" one headline asked.
When individual borrowers began to suffer, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson didn't seem overly concerned. The market would clear out the problem through the foreclosure process. Loans would get written off; properties would change hands and be resold. When upstart subprime mortgage lenders ran into trouble, Bernanke and Paulson shrugged again. The market would clear out the problem through the bankruptcy process. Subprime companies like New Century Financial filed for Chapter 11, others liquidated or restructured, and loans made to the lenders were written down. Meanwhile, Paulson and Bernanke assured us that the subprime mess was contained.
But as the summer turned to fall, and the next several shoes dropped, their attitude changed. And that is because the next group of unfortunates to fall victim to subprime woes were massive banks. In recent years, banks in New York, London, and other financial capitals set up off-balance-sheet funding vehicles called SIVs, or conduits. The entities borrow money at low interest rates for short periods, say 30 to 90 days, and use the funds to buy longer-term debt that pays higher interest rates. To stay in business, the conduits must continually roll over the short-term debt. But as they searched for higher yields, some conduits stuffed themselves with subprime-mortgage-backed securities. And when lenders became alarmed at the declining value of those holdings, they were reluctant to roll over the debt. Banks thus faced a choice. They could either raise cash by dumping the already-depressed subprime junk onto the market, or bring the conduits onto their balance sheets and assure short-term lenders they'd get paid back.
During the boom years, books about striking it rich in real estate, as well as designing and decorating our abodes, were stacked up in bookstores like bricks. Now that the party is long over, more sober assessments on our national obsession with shelter are hitting the shelves.
"Craving Community: The New American Dream" by Todd W. Mansfield, Ross P. Yockey and L. Beth Yockey (Abecedary Press, 2007). Suburbia has been satirized as sterile almost as long as it has existed, but now it has a new label: Community Deprivation Syndrome. Drawing from sociological studies and adding anecdotes from themselves and others, the authors replow well-worn ground: that people were not meant to live in isolation -- and that car-driven suburban land planning, along with the Internet, keep us in isolated cocoons, watching videos in our home theaters rather than going to the movies and having wine in our cellars rather than bars, locked away from our neighbors, rather than fostering healthy relationships in more nurturing village settings.
Though the housing and real estate industries oppose the plan, a key House committee leader's proposed "carbon tax" cutbacks on mortgage interest deductions are attracting strong support from environmental and scientific groups.
Rep. John Dingell, D-Mich., chairman of the House Energy and Commerce Committee, wants to phase out mortgage interest write-offs for houses larger than 3,000 square feet, using a graduated scale that ends at no deductions for properties with 4,200 square feet or more.
Although he says he recognizes that newly constructed houses may be more energy efficient than older ones, their "sheer size, sprawl and commutes lead to dramatically more energy use - or to put it more simply, a larger carbon footprint."
In his latest draft of the plan, Dingell provides more detail about the housing-related tax elements than he did in earlier versions. The new draft also offers some limited exemptions from the phase-out, including those for historic homes built before 1900, farm houses, certified energy-efficient homes, and houses whose owners "purchase carbon offsets to make the (property) carbon-neutral."
Apollo Real Estate Advisors, an affiliate of private equity firm Apollo Management, has hired a leading real estate attorney as it looks for opportunities in the distressed mortgage sector.
Cindy Wenig, who headed the real estate practice at Chadbourne & Parke, joined Apollo as general counsel. At Chadbourne, Wenig advised real clients involved in the redevelopment of 125th Street in New York City’s Harlem and The World Trade Center site, and advised private equity funds on domestic and international real estate investments.
Real estate is an attractive area for funds, especially those looking for bargains. As the sub-prime mortgage meltdown hit with full force this summer, firms began to look for attractive investments in the sector including residential and commercial real estate, as well as the kinds of debt instruments that were at the center of the credit storm.
Buying or selling a home is the largest financial transaction most Americans will ever undertake. The median priced home cost $225,334 in 2006, and the median commission paid to real estate brokers came to $11,672. Overall, Americans paid more than $93 billion for brokerage services.
I have been saying ad nauseam that the US economy has become increasingly "asset-ized" and "financial-ized". A quick way to judge if an asset class is becoming overvalued against the economy's ability to produce goods and services is to examine the total value that assets represent vs. GDP, so without further ado here are a few charts.
First, the total value of stocks and Real estate vs. GDP for the US.
ON the way to Annona, a stylish restaurant on the second floor of the Manhattan Motorcars Hamptons dealership here, George and Mary Ann Mathys of Quogue spotted a 2001 Rolls-Royce Corniche the color of merlot in the showroom.
“It really caught our eye,” said Mr. Mathys, 70, who works in real estate management. Over a dinner of braised short ribs and sea bass, the car was a topic of conversation among the Mathyses and another couple.
“I ended up buying it,” said Mr. Mathys, a car connoisseur who also owns a 1957 Chevy convertible, a 1936 Auburn and a 1953 Buick.
The two-year-old dealership is one of a number of high-end showrooms offering customers more than wheels.
For decades, I've watched newspaper industry thinktanks - the too few that exist - try to invent the next medium for news. This usually takes the mythical form of e-paper, thin as a sheet and just as portable, able to display newspapers like newspapers, very Harry Potter. I have also seen too many newspapers and magazines attempting to use painful PDF technology to display their publications on screens exactly as they appear on paper. Why? Ego, I think, and comfort and fear of change. The New York Times recently did a deal with Microsoft to use its new reader, which looks as attractive, if grey, as the Times itself and enables familiar activities like turning pages, but which loses some of the rich linking and interactivity of the web.
I think that's all driving the wrong way: backwards. These are attempts to mould technology to old media. What we should be doing instead, of course, is moulding media to new technology. We should be asking what new we can do on this new iPhone.
Jonathan Marks makes his living as a real-estate agent. Lately, he's been babysitting rats.
With the housing market in a dive and homes lingering unsold for months, the relationship between real-estate agents and their clients is beginning to change. Both buyers and sellers are demanding more from their brokers, and getting it.
Jim Perry, an agent in St. Helena, Calif., spent most of an afternoon vacuuming up thousands of flies from one client's guest house. Mary Hartley, in Albany, Ore., organized a garage sale for one seller, spent 10 hours painting the side of the house for another and recently enlisted her grandchildren to help clean out the debris in a crawl space for a third. And to help Sandra Le Buhn sell her $1.2 million, four-bedroom home in Mill Valley, Calif., Mr. Marks agreed to board her nine-year-old daughter's cherished brown-and-white rats, Zack and Cody, who had been living in a cage in the bathtub.
But some agents are drawing the line. Kirsten Lindquist, a Sonoma, Calif., agent, says she made a marketing pitch to a seller a few weeks ago. Two days later, he called her from the hospital and asked if she would drive him home from his colonoscopy appointment. She declined, even though it cost her the listing. "I'm licensed to practice real estate, not medicine," she says.
There is a growing call for a redress of the imbalance between what John Bogle terms managerial capitalism and owners' capitalism. Bogle describes owners' capitalism in his book, The Battle for the Soul of Capitalism, as "an enormous transfer of wealth from public investors to the hands of business leaders, corporate insiders, and financial intermediaries."
Headlines remind us of very large payouts to CEOs, regardless of their performance. (In fact, it could be argued that in many cases, payouts are inverse to success, since many have been occasioned by the firing of the recipients.) Some critics contend that managers have received a disproportionate share of the fruits of corporate success, leaving too little for workers or owners. Even hedge funds have been derided as better management compensation devices than investment vehicles.
What's the reason for these phenomena? According to one report, Michael Jensen and Kevin Murphy, in a book to be published in the next several months, C.E.O. Pay and What to Do About It, lay much of the blame at the feet of boards of directors. They claim that CEOs in public companies should be answerable to directors for poor performance but in fact are not. Directors, representing an indirect form of governance, are poor representatives of owners. They are far too lax in influencing employment contracts and management incentives. The options they grant are too generous and fail to take into account the cost of capital employed during the term of the option. The severance payment arrangements to which they agree are too lavish, regardless of the reasons for severance.
Nationwide, home prices are falling, sales are sluggish and the number of foreclosures is mounting. Ask any economist and you'll hear that things are bad, and likely to get worse.Les Christie:
Unless you live in Seattle, where the market is slowing but fundamentals remain strong.
The Emerald City has experienced strong price appreciation over the last six quarters, and that's expected to continue in the new year, though at a slower pace. In addition to a very low housing inventory and a strong sales rate, there are few non-conforming and high-risk loans on the books than in other cities, which means the area will likely see fewer defaults in the coming months than the rest of the country's markets.
Also primed for a stable year are Pittsburgh, Columbus, Ohio, and Dallas. They follow Seattle in our ranking of the country's 10 most stable markets. All are projected to have median home sale price increases next year, thanks to a combination of factors including lower-than-average inventory levels, little price volatility and high job growth.
Over the next few years, more than three-quarters of the nation's housing markets will suffer some decline in home prices. Many will experience double-digit hits in a forecast that has worsened considerably in recent months.
According to an analysis conducted by Moody's Economy.com, declines will exceed 10 percent in 86 of the 379 largest housing markets. And 290 of the cities will experience price drops of 1 percent or more.
It’s been fun and edifying watching Google’s PR engine at work. Eric Schmidt, Google’s CEO, has been evangelizing the need for “international privacy standards.”
Google’s most powerful PR tool to-date is the comforting and accessible video series featuring Maile Ohye, a personable young woman who is a senior support engineer, giving a chalk talk about what information Google captures when you search, how it uses that information and how you can control it. The two videos in the series to-date are designed to be very comforting.
The Monster Employment Index is "a broad and comprehensive monthly analysis of of U.S. online job demand". It is calculated and released by Monster Worldwide, Inc. the large online employment company and it includes data from approx. 1,500 different employment sites. Why should you care? Because the Help Wanted Index of newspaper ads - the older, traditional gauge of current demand for employees - is no longer valid. The rapid spread and acceptance of Internet technology has completely changed the way employers advertise for open positions. Charts of both indexes are provided below.
My buddy at Redfin, Glenn Kelman, decided he wanted to bare his financial soul so that other entrepreneurs could get greater insight into the witchcraft called financial modeling. In this two-part posting, he reveals his numbers and his lessons. They are eye-opening for most entrepreneurs.
Part I: Numbers
Startups face one primary challenge: To never run out of cash. So when projecting costs, we heeded Guy’s advice that “the three most powerful words you can utter at a board meeting are, ‘We beat projections.’” This convinced us to develop the worst possible financial model that could still be used to raise money.
We’re glad we did. True underachievers, we’ve performed at or just a bit better than this worst-possible plan almost every month, raising revenue projections only when forced to in December 2006. We’ve been able to stick to our plan mostly because absurd assumptions in opposite directions cancelled one another out. As the real estate market tanks, we may not be so lucky in the future.
When first putting together our financial model, we looked online to calibrate spending assumptions. So many people have blown venture capital, we thought, there must be a manual somewhere on how to do it, at what rate, avoiding which follies. We couldn’t find anything. So we took some wild guesses and figured we’d see how they turned out. And now two years later to the day that we built our first model, here are the projections and actual results. Hopefully, you can learn from our experiences.
Rent, Per Employee, Per Month
Redfin Model: $250. Actual Redfin Cost (Last Month): $336
Our actual costs are high because we just moved last month into an office with room to grow, which seems to happen every eighteen months. When people were sitting in hallways at the old space, we were paying about $200 per employee, per month. Class B space on well-traveled mass transit lines is roughly $20 per square foot per year in Seattle, $30 in the Bay Area. You need 165-200 square feet per person or more.
At the extremes, Adobe supposedly allocates 435 square feet per person while Yahoo! allocates 220 square feet per person. The startup cult of cramming people into small spaces is counter-productive: people are what’s really expensive, not space. The cost Redfin really didn’t anticipate was for tenant improvements which you mostly have to fund yourself when signing sub-three-year leases. In September, we spent more than $100,000 to add private offices for our engineers on the hope that our current office will last us longer. It was probably too much money.
If it were not for Rand McNally, I wouldn’t know I was in Europe, separated by an ocean from my family and friends. As far as I’m concerned, the urban culture of Berlin is closer to the culture of New York City than it is to, say, the German hinterland, to say nothing of the American hinterland. It is only through a certain way of looking at the world — from the privileged view of the orbiting satellite, in this case — that it appears the way it does. Our traditional maps, from the rough sketches of the Middle Ages to the latest map/satellite hybrids of Google, place geographic proximity above all other considerations in terms of importance.
But what about cultural proximity? Lifestyle proximity? “Energetic” proximity? What about the fact that I can take a direct flight (more or less) to any world capital, but to get to a mid-sized city in the States, I have to take two or three? It costs more money and takes more time to get from Denver to Upstate New York than it does from Denver to Amsterdam, Paris, or Milan — wouldn’t that make Denver CLOSER to the European capitals than it is to small cities in its own nation? That is my contention.