November 2008 Archives

Cape Coral Florida: From Boom to Bust

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The Economist pays a visit:
Tuesday
AS I drive up to the dusty fairgrounds of the German-American Social Club of Cape Coral, Florida, I see an abandoned white house with peeling paint and boarded-up windows across the street. Spray painted in large, black letters across the front of the home is the word "BUST". You won't find many homes that look quite like that in Cape Coral, but these days, "BUST" is hardly a unique condition. It's become so commonplace, in fact, that if every delinquent homeowner had a vandal's flair for the dramatic, defaced houses would be everywhere: one in every 71 houses here currently has a foreclosure filing.

Instead, wiped-out homeowners merely strip their properties for everything they can carry off--air conditioning units, appliances, light fixtures. Homes sit empty with wires dangling out of their stucco exteriors where sconces should be. Banks that own foreclosed properties might try to keep the weeds down, in hopes of attracting buyers. Might. Plenty of empty houses have front yards full of high grass, obscuring realtors' signs that beg passers-by to make an offer. This is ground zero in America's housing crisis.

Developers began building on the swampland of Cape Coral in 1958, erecting homes along a network of canals constructed to accommodate residents' speed boats. "America's Venice", some optimistically called it. Right along the warm waters of the Gulf of Mexico, some people retired there, while others merely bought vacation homes.

Around 2005, home purchases and home building began to spike. Home construction outpaced the city's ability to provide water and sewer services to new neighbourhoods. Speculators--many small-time investors looking to boost their retirement savings--bought up plots of land. Cape Coral was a boom town, rated one of the best performing cities in America. Contractors, financiers and everyday residents could buy big homes, cars and boats on credit.

An End Run Around Realogy's Lenders

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Floyd Norris:

At the end of 2006, Apollo Management, the private equity firm headed by Leon Black, agreed to buy Realogy, a conglomerate with a number of franchised real estate businesses, among them Century 21 and Coldwell Banker, for $7 billion in cash.

That was a few months after house prices peaked. By the next spring, when the deal closed, subprime mortgage lenders were starting to go broke. The great housing bubble was bursting, and that was very bad news for a company whose revenue was based on how many homes it could sell and how high the prices were.

Now a struggle is emerging over how the unfortunate lenders should be treated. Realogy, under the direction of Apollo, is using a classic divide-and-conquer strategy. Bondholders are screaming that the tactics are illegal.

The strategy is simple: Just tell one group of bondholders that they can move up in the capital structure (and thus be more likely to be paid if the company goes broke). But first, they have to agree to forget about collecting most of the money they are owed. They are being asked to trade in old bonds for new loans with much smaller face values.

Overindebted consumers can only look on with envy, wishing they could pull off something similar, perhaps by telling one credit card company that they will pay another card company first unless the first company agrees to forgive most of what it is owed.

No owner of Realogy bonds has to make the exchange, of course. But if a bondholder turns it down, and others do make the exchange, that bondholder may find that he is much farther back in line, with even less probability of being paid anything.

Sand Castles - Half Price Mansions

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Karen Hube:

LUXURY-HOME SHOPPERS HAVE COME DOWN with a bad case of cold feet. From Malibu to Manhattan, would-be buyers of $5 million-and-up properties are pulling out of pending deals and suspending their searches out of concern over jarring drops in the stock market and dire economic news. Among the shoppers who still feel flush, many are simply waiting to see what will happen to prices. "People feel that if they buy for $5 million today, tomorrow it's going to be worth $4 million -- they don't want to commit to a price," says Saddy Delgado, owner of Miami-based Avatar Real Estate Services. The upshot: The market has slowed to a crawl. Properties that once took a few weeks to sell are now taking months and months, even as prices continue to fall. Luxury-home prices are down an estimated 20% since peaking last year, and some savvy pros think they'll drop another 10% to 15% before bottoming in 2010. That would be later than the likely bottoming of the general housing market; Barron's has maintained that a leveling-off of the broader housing market is imminent in many regions ("Bottoms Up," July 14). But the luxe downturn also began much later than the general slump. Until the second half of last year, most of the $5 million-plus market looked to be headed ever skyward.

Not anymore. Now, almost no sellers of luxury homes can escape the indignities of price-cutting -- not the Astors, not the hedge-fund titans.

GPS HomeFinder: iPhone 3G and Blackberry Storm?

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Our ReData® GPS HomeFinder for the iPhone 3G allows real estate agents, managers, buyers and sellers to quickly view properties for sale or rent near their current location via a smart map (video demo).

RIM's (Research in Motion) recently announced Blackberry Storm is their first touch screen smartphone. The Storm includes GPS. We are evaluating the Storm and hope to support GPS HomeFinder soon.

Read these reviews of the Blackberry Storm:

  • Joshua Topolsky:
    It's clear from the device itself and the massive promotional push that both RIM and Verizon are giving the Storm that they view this as a proper threat to the iPhone's dominance in the smartphone market. Over the last few weeks we've been bombarded with commercials, leaks, press releases, and special events all celebrating the arrival of the Storm, both here and abroad. So it seems fairly obvious that yes, the companies believe they have a real contender on their hands -- and in many ways they do. The selling points are easy: the phone is gorgeous to look at and hold, it's designed and backed by RIM (now almost a household name thanks to their prevalence in the business and entertainment markets), and it's packed with features that, at first glance, make it seem not only as good as the iPhone, but better. The only hitch in this plan is a major one: it's not as easy, enjoyable, or consistent to use as the iPhone, and the one place where everyone is sure they have an upper hand -- that wow-inducing clickable screen -- just isn't all that great. For casual users, the learning curve and complexity of this phone will feel like an instant turn off, and for power users, the lack of a decent typing option and considerable lagginess in software will give them pause. RIM tried to strike some middle ground between form and function, and unfortunately came up short on both.
  • Walt Mossberg @ Wall Street Journal:
    verall, the Storm is a very capable handheld computer that will appeal to BlackBerry users who have been pining for a touch-controlled device with a larger screen. And it offers yet another good option for anyone who is looking to buy one of the new, more powerful, pocket computers.
  • Matt Buchanan:
    The Storm is a strong effort from RIM, but it's not quite the killer phone that they or Verizon need it to be. It's good--RIM clearly put a lot of thought into the design. But I think it fall short of what they were aiming for, and ultimately what all the hype is driving people to expect. Some of this is fixable: The damn thing needs to crash less often. But SurePress is not the end-all, be-all of touchscreen technologies--it's not really an evolutionary step forward, even. The experience may be fairly refined, but more polish is still needed. Had this Storm been left to brew a bit longer, it would've been much more powerful.
Related: AdMob Mobile Metrics [200K PDF Report]:
Here are a few interesting findings from the most recent report:
  • The iPhone is now the #1 device worldwide in the AdMob Network with 4.1% share of requests in October. Since AdMob launched its ad units for iPhone sites and applications, iPhone requests have increased from 28 million in July to 236 million in October. This month, we break out iPhone requests by country and region.
  • 62.8% of iPhone requests were from the US, where the iPhone is the #2 device behind the RAZR. 5.0% of iPhone requests came from the UK, where the iPhone is the #3 device behind the Nokia N95 and Sony Ericsson K800i. Other top markets include Canada, France, Japan, Australia, and Germany.
  • As part of our commitment to providing detailed insight into different regions, this month we provide traffic, manufacturer, and device data for Latin America & the Caribbean. Traffic from the region increased 138% in the last 12 months to 109 million requests in October 2008.
  • Motorola, Nokia, and Sony Ericsson all have greater than 20% market share in Latin America and are each leaders in different markets. The Motorola RAZR is the top device in the region with 10.3% share and is a Top 20 Handset in each of the top Latin American markets.
  • Worldwide requests grew 13.8% month over month to 5.8 billion. US requests grew 7.9% to 2.2 billion and UK requests grew 16.0% to 229 million in October 2008.
Finally, our ReData® maps are updated quarterly, support extensive customization and, most importantly are available on a fixed price basis for unlimited use. Other mapping services allow competitors to advertise on your site and/or charge a per click fee, which means that you cannot control your mapping costs or quality of service.

Emmy Moody & Caroline Salas:

Leon Black's Apollo Management LP is leaning on investors to exchange more than $3 billion of bonds in Harrah's Entertainment Inc. and Realogy Corp. for new debt as it tries to avoid default.

Harrah's, the Las Vegas-based casino company acquired by Apollo and TPG Inc. in January, is offering holders of unsecured notes maturing from 2010 to 2018 as much as $2.1 billion of 10 percent second-priority senior secured notes due 2015 and 2018, according to a Nov. 14 statement.

....

Realogy's $1.7 billion of 10.5 percent notes due 2014 fell 6.5 cents to 26.5 cents on the dollar on Nov. 14 to yield 52 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Starting Up in a Sour Market

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Marcelle Fischler:

TUMBLING real estate market somehow signals the best of times for Lawrence Citarelli Jr., a custom builder and developer, who started a real estate company, Crystal Properties, in September, and bought out the 30-year-old Re/Max First Hampton agency on Nov. 5. Armed with these businesses, Mr. Citarelli, who describes himself as a contrarian, says he is positioning himself for the future.

"When life serves you lemons, you make lemonade" was how Mr. Citarelli put it. "This is an unprecedented time; it's an unprecedented opportunity."

Along with its initial 160 listings, his new real estate agency, First Hampton International Realty, on Main Street in Westhampton Beach, has 16 brokers and sales associates, and plans its own in-house art and media department, a design/build division with draftsmen and architects, in-house financing, title and mortgage services and "down-home personalized service."

"Timing is everything," said Mr. Citarelli, who through Crystal Properties is also building five "green" homes. "It's the willingness to step in when other people are running away."

The End of Wall Street's Boom - A Must Read

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Michael Lewis:

To this day, the willingness of a Wall Street investment bank to pay me hundreds of thousands of dollars to dispense investment advice to grownups remains a mystery to me. I was 24 years old, with no experience of, or particular interest in, guessing which stocks and bonds would rise and which would fall. The essential function of Wall Street is to allocate capital--to decide who should get it and who should not. Believe me when I tell you that I hadn't the first clue.
I'd never taken an accounting course, never run a business, never even had savings of my own to manage. I stumbled into a job at Salomon Brothers in 1985 and stumbled out much richer three years later, and even though I wrote a book about the experience, the whole thing still strikes me as preposterous--which is one of the reasons the money was so easy to walk away from. I figured the situation was unsustainable. Sooner rather than later, someone was going to identify me, along with a lot of people more or less like me, as a fraud. Sooner rather than later, there would come a Great Reckoning when Wall Street would wake up and hundreds if not thousands of young people like me, who had no business making huge bets with other people's money, would be expelled from finance.

When I sat down to write my account of the experience in 1989--Liar's Poker, it was called--it was in the spirit of a young man who thought he was getting out while the getting was good. I was merely scribbling down a message on my way out and stuffing it into a bottle for those who would pass through these parts in the far distant future.

.......

Eisman wasn't, in short, an analyst with a sunny disposition who expected the best of his fellow financial man and the companies he created. "You have to understand," Eisman says in his defense, "I did subprime first. I lived with the worst first. These guys lied to infinity. What I learned from that experience was that Wall Street didn't give a ____ what it sold."

.......

Instead of money, he attracted people whose worldviews were as shaded as his own--Vincent Daniel, for instance, who became a partner and an analyst in charge of the mortgage sector. Now 36, Daniel grew up a lower-middle-class kid in Queens. One of his first jobs, as a junior accountant at Arthur Andersen, was to audit Salomon Brothers' books. "It was shocking," he says. "No one could explain to me what they were doing." He left accounting in the middle of the internet boom to become a research analyst, looking at companies that made subprime loans. "I was the only guy I knew covering companies that were all going to go bust," he says. "I saw how the sausage was made in the economy, and it was really freaky."

Brokerages are spending more time and in some cases money on their websites. What features and factors are critical to your brand and value equation to agents, sellers and buyers?

Pew recently published an interesting look at the 50 US State election websites. This report raises a number of interesting issues, including:

  • Website usability (don't cobble things together from disparate systems),

  • The enormous potential cost savings when information is accurate, timely and easily discovered,

  • 2 minutes: "On average, people spend two minutes on a website before they abandon the search for information". Consider this fact as you evaluate your home page, agent tools and the engine behind them,

  • and, seven criteria for evaluating the usability of state elections websites:

    1. Web Presence:
      How easily can users find the official state elections Web site when conducting standard Web searches for key phrases related to voting? Can they find the elections Web site from the state's main Web site?
    2. Navigation Information Architecture:
      Is it easy to navigate to key topics? Can users easily tell where they are Information within the site if accessing a deep link from a search engine? Are links Architecture named intuitively? Is the site organized in a user-centered manner?
    3. Content:
      Is the content understandable to users? Is it easy to scan and find the right information? Is information made available in HTML versus PDFs?
    4. Homepage:
      Is the homepage organized such that users can tell which information is intended for them? Are important links placed and presented so they will be noticed? Is the homepage easy to scan?
    5. Accessibility:
      Can users with disabilities (severe or mild) utilize the site effectively?
    6. Search:
      Is there an open search field available on each page of the site? Do search results
      seem appropriate? Are result titles/content understandable?
    7. Site Tools:
      Are tools for looking up registration, finding a poll location, etc. intuitive and efficient?
These are useful questions to consider for any website initiative.

Take a quick survey of US Broker websites using our sortable list (click the column description to resort by Name, City, State, Zip Code or Website).

Pew Trusts:

Americans are increasingly incorporating the Internet into their daily lives. Today, it's an easy way to look for directions, purchase gifts or household necessities, get a movie or book review or search for information about a presidential candidate. For many companies like Marriott, Progressive, Best Buy or Toyota, a first-class Web site is part of their core strategy and the site's usability sometimes makes the difference between success and failure. Businesses realize that their customers rely on Web sites to help them not only purchase goods, but also to gather information--comparing products and prices--that can help consumers make better decisions.

In this report, Make Voting Work (MVW) examined the state elections Web sites in all 50 states and the District of Columbia to determine whether citizens can find the official election information they need to register to vote, check their registration status and locate their polling places. More importantly, MVW measured if potential voters can use the information on state elections Web sites and if it helps them. We found that every state has room for improvement. However, states can still take steps to help voters; as the election approaches, many states have updated their Web sites and developed tools to help voters this November.

A key point: However, usability research suggests that additions and improvements should be incorporated within a unified Web site rather than spread across different URLs or separate windows. As state elections Web sites update their information and tools, they should aim for consistency in the navigation and information architecture of their sites.

Most broker websites include a variety of systems and interfaces, counterintuitive to good usability.

Realogy Reports Results for Third Quarter 2008

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Press Release:

ealogy Corporation, a global provider of real estate and relocation services, today reported results for the third quarter of 2008. Specifically, the Company had third quarter 2008 net revenue of $1.3 billion, earnings before interest, income taxes, depreciation and amortization (EBITDA) of $129 million, and a net loss of $50 million.

Realogy's EBITDA for the period was negatively affected by $45 million of non-cash equity losses and impairment charges from its 49.9% investment in PHH Home Loans LLC, its loan origination joint venture with PHH Corporation, as well as $15 million of restructuring charges. The net loss is after $152 million of interest expense and $54 million of depreciation and amortization expense.

"The current economic conditions of this country are weighing heavily on consumer confidence and thus on the housing industry," said Richard A. Smith, Realogy's president and CEO. "We are not immune from the macroeconomic shocks to the credit and financial markets. In spite of these extraordinarily difficult circumstances, we have remained focused on reducing our operating costs and investing in the growth of our business. In the past two years alone, our management team has improved Realogy's profitability profile by more than $350 million through brokerage office consolidations, business optimization activities and other cost-saving measures."

Second Home Real Estate Blogs

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Lisa Keys:

Mr. Baily's father had recently bought a place in the Catskills, and visiting his home the couple realized how much they liked it there. Soon enough, Ms. Phillips and Mr. Baily thought about buying a getaway of their own.

"It's tough to go into a sort of rural area, where everyone's been there forever," said Mr. Baily, the director of publicity at Shore Fire Media, a Brooklyn-based public relations and online marketing firm. "There's a real barrier for entry. You stay at a B & B and think, oh, wouldn't it be nice to have a place here? To go from thinking about buying a place to looking at places -- seriously, it's a big jump. It's a little scary. You just don't know what a good deal is; you don't know the landscape. You can't go buy a manual. You need to find someone you can trust."

A Web search led Mr. Baily to blog.catskill4sale.com, a blog about the real estate scene in Sullivan County, N.Y., written by David Knudsen, a broker at Catskills Buyer Agency. On his widely read site, Mr. Knudsen ruminates upon everything from current market conditions to energy drilling and new restaurant openings. Mr. Baily said he read "pages and pages" of the blog, and not only was he convinced he'd found his real-estate agent, he said, but he also gained confidence in his decision to buy a home in the area.

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