June 2007 Archives

Stephen Frater and Michael Pollick:

The Naples Area Board of Realtors has long wanted to report that city's results undiluted by lower-priced and worse-performing neighbors.

In fact, for the past few months, the board has refused to submit its sales and price numbers to the Florida Association of Realtors for its comprehensive monthly reports.

Marla Martin, an FAR spokeswoman, said the Naples board -- representing the wealthiest median home sales prices in Florida -- had raised issues with the state association relating to the presentation of the board's sales and price data.

Martin said there have been recent meetings about the matter, and she expected some resolution soon.

Observers say that Naples' strong, expensive but medium-small market does not want to be lumped into any other database because it could drag down the statistics.

Austan Goolsbee:

They wanted to know if there was any evidence that the American genius with information technology transfers to locations outside the United States. If American companies turn computers into productivity better than anyone else, can businesses in Britain do the same when they are taken over by Americans?

And in the huge service sectors — financial services, retail trade, wholesale trade — they found compelling evidence of exactly that. American takeovers caused a tremendous productivity advantage over a non-American alternative.

When Americans take over a business in Britain, the business becomes significantly better at translating technology spending into productivity than a comparable business taken over by someone else. It is as if the invisible hand of the American marketplace were somehow passing along a secret handshake to these firms.

Companies like Wal-Mart seem to be more adept at translating technology into productivity than anyone else. The Asda supermarket chain in Britain, for example was a middling fourth in its home market before it was taken over by Wal-Mart in 1999. Asda proceeded to grow, sharply, and has taken the No. 2 spot.

Download the paper: 728K PDF

Virtual Goods: the next big business model

Susan Wu:

People spend over $1.5 billion on virtual items every year. Pets, coins, avatars, and bling: these virtual objects are nothing more than a series of digital 1s and 0s stored on a remote database somewhere in the ether. What could possibly possess people to spend real, hard earned cash on ‘objects’ that have no tangible substance?

The virtual worlds space has received tremendous press attention in the last year, fueled in no small part by Wild West stories of fortune and anarchy in worlds like Second Life and the plight of the Chinese gold farmer in World of Warcraft. But people aren’t paying attention to the bigger story. While people preoccupy themselves with mocking the absurdities of some of these virtual worlds, the reality is that there are many businesses out there making meaningful amounts of money in virtual goods:

Most Over and UnderValued US Housing Markets

Global Insight 468K PDF:

One hundred fifty-seven of 317 metro areas suffered price declines during the last quarter. Cumulatively, these 157 metro areas accounted for 38 percent of all single-family units and half of all single-family real estate assets in the nation. Declines were widely dispersed, though most highly concentrated in California, Florida, New York, New England, and the industrial Midwest.

Nationally, however, house prices advanced during the first quarter at an annualized rate of just 2.2%. This latest gain falls between the third quarter pace of 2.0 percent and the fourth quarter pace of 2.5%. On a year-over-year basis, prices are up 3.0 percent, the weakest gain in a decade.

Fifty-four metro areas were judged to be overvalued during the quarter, representing a decline from 62 metro areas (as revised) during the third quarter More important were declines in the share of all housing units, and real estate assets, judged to be overvalued. In terms of housing units, the percent deemed to be overvalued declined from 17 to 14 percent (as revised). In terms of single-family asset value, the percent deemed to be overvalued declined from 33 to 25 percent (as revised). Clearly, we interpret the evidence as reflective of prices reverting to their historic norms, though further adjustment is likely.

Martin Wolf:

Much of the institutional scenery of two decades ago – distinct national business elites, stable managerial control over companies and long-term relationships with financial institutions – is disappearing into economic history. We have, instead the triumph of the global over the local, of the speculator over the manager and of the financier over the producer. We are witnessing the transformation of mid-20th century managerial capitalism into global financial capitalism.

Above all, the financial sector, which was placed in chains after the Depression of the 1930s, is once again unbound. Many of the new developments emanated from the US. But they are ever more global. With them come not just new economic activities and new wealth but also a new social and political landscape.

First, finance has exploded. According to the McKinsey Global Institute, the ratio of global financial assets to annual world output has soared from 109 per cent in 1980 to 316 per cent in 2005. In 2005, the global stock of core financial assets had reached $140,000bn (£70,660bn, €104,490bn: see chart).

This increase in financial depth has been particularly marked in the eurozone: the ratio of financial assets to gross domestic product there jumped from 180 per cent in 1995 to 303 per cent in 2005. Over the same period it grew from 278 per cent to 359 per cent in the UK and from 303 per cent to 405 per cent in the US.

Second, finance has become far more transactions-oriented. In 1980, bank deposits made up 42 per cent of all financial securities. By 2005, this had fallen to 27 per cent. The capital markets increasingly perform the intermediation functions of the banking system. The latter, in turn, has shifted from commercial banking, with its long-term lending to clients and durable relations with customers, towards investment banking.

Jon Brodkin:

The most popular Web search engines rarely deliver the same results when identical queries are performed on each site, and the disparity has increased over the past two years, new research has found.

In a study of 19,332 queries, Google, Yahoo, Windows Live and Ask delivered the same top result only 3.6% of the time. The four engines never delivered the same top three results, even when the order of the results was ignored. Fewer than 1% of first-page results were shared by all four sites.

The search engines agreed more often in a study two years ago, in which the top result matched all four engines on 7% of queries.

“These differences contradict any notion that all search engines are the same and that searching one engine will yield the absolute best results of the Web,” the paper states.

Dogpile.com, a metasearch engine that combines results from the top search sites, conducted the study with researchers from Queensland University of Technology and Pennsylvania State University. The research paper claims the study highlights the value of sites that deliver results from multiple search engines.

Majority of all first-page results across top search engines are unique: on average…
  • 69.6% of Google’s were unique to Google.
  • 79.4% of Yahoo’s were unique to Yahoo.
  • 80.1% of Liv’s were unique to Live.
  • 75.0% Ask’s were unique to Ask.

John Cook:

But even without those features, Fox thinks people will use BuySide because of the savings they get.

BuySide also will not have agents based here, with the company servicing the region from its office in southern California.

Fox doesn't think that is a detriment, saying that those people who want a full service real estate agent should find someone locally.

"Very few people can provide a 75 percent rebate and still make some money on the transaction. And that's because of how we do business," he said.

Fox said that his 40-person company is approaching the market differently than Redfin, who he believes has stoked flames with a confrontational style that "gets headlines."

A look at FSBO home sales in Madison, WI

Jeff Bailey:

It sounds like the setup for a dull economist’s joke. Who gets the better deal: the cautious economist who sells his house through a real estate agent, or his risk-taking colleague who finds a buyer on his own?

But the question — debated by two Northwestern University economists who chose different methods to sell their homes — and the research it helped prompt are serious. And the answer will be of interest to anyone who has paused to consider whether paying a real estate agent’s commission, typically 5 to 6 percent of the sale price, is worth it.

The conclusion, in a study to be released today based on home-sales data from 1998 to 2004 in Madison, Wis., is that people in that city who sold their homes through real estate agents typically did not get a higher sale price than people who sold their homes themselves. When the agent’s commission is factored in, the for-sale-by-owner people came out ahead financially.

156K PDF Paper:
A real estate agent may make up some of the commission he or she is paid by helping the seller get a more favorable outcome. We match several data sets to compare the outcomes obtained by sellers who listed their home on a For-Sale-By-Owner (FSBO) web site versus those who used an agent and the Multiple Listing Service (MLS). We do not find that listing on the MLS helps sellers obtain a significantly higher sale price. Listing on the MLS does shorten the time it takes to sell a house.

Appraisers sue over digitized substitute

Kenneth Harney:

A federal class-action suit is focusing fresh attention on an issue that's important to homeowners nationwide: Who -- or what -- tells you how much your property is worth? Is it a live human being? A digitized substitute? Does it really matter?

A group of professional appraisers is suing a major mortgage technology firm, charging that it systematically takes their appraisal report information, warehouses it, and then markets it to lenders and developers of electronic substitutes for traditional appraisals.

The suit was filed last month by appraisers in Maryland, Virginia and Oklahoma against FNC Inc. of Oxford, Miss. FNC markets a high-tech system that converts traditional appraisals into electronic formats, then sends them to mortgage lender customers. FNC processes approximately 400,000 appraisals a month, according to the company, and deals primarily with the 45 to 50 largest mortgage lenders in the country.

Ann Brenoff:

A picture may be worth a mere 1,000 words in other circles, but in real estate, it enters the realm of deal or no deal.

With an estimated 80% of home buyers starting their search on the Internet, photos are to home sales today what curb appeal used to be: the place where first impressions are made.

According to a National Assn. of Realtors survey of the Web features that buyers found "very useful," 83% mentioned photos, 81% liked detailed property information and 60% named virtual tours.

Every day, decisions about which homes to see — and which to skip — are made based on what a buyer sees online.

"If you can't get them in the door," said Coldwell Banker agent Kenny Bellini of Santa Monica, "you can't sell the house."

Bellini and his wife, Izumi Tanaka, generally shoot their listing photos themselves, as do many other realty agents. And, as he is quick to admit, photography skills aren't part of an agent's training — even though posting quality photos on the Web has now become one of the services an agent must offer clients to stay competitive.

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