Kenmore Undressed

Delusion Comes in Many Forms: Facing Facts Can Be Difficult

I spoke with the Broker of a fairly large real estate brokerage the other day. She is one of those consumate optimists (don’t you just hate those people?), but even she has been shaken by the current real estate market. “The phones aren’t ringing,” she said. “It’s awfully quite out there. I’m worried.” 

The truth is, she should be worried. The deteriorating economy and upcoming election have had a chilling effect on home sales both here and nationwide. It has been rough for sellers and their agents. Buyers are also facing difficult lending challenges. What amazes me is that a lot of people out there have not come to terms with reality. Here are two perfect examples:

NUMBER 1: THE REALTOR WITHOUT A CLUE

I’m a contributor to a Real Estate Blog called Active Rain. Over 100,000 agents write blog posts on this site. Yesterday, I read a particularly interesting blog by an agent who was asking if she should take a listing knowing full-well that the seller was unrealistic about the price (way too high) and the seller didn’t even want a sign on the property. She rationalized that they might get lucky and sell the home (even though the home has been previously listed ), or that her virtual tour would attract the right buyer or this listing might generate residual business for her because “she’ll do a great job!”  The fun part was reading almost 70 comments telling her that it’s ridiculous to take an overpriced listing (no matter what the market conditions are). From her response to the comments, I have a strong sense that she’s going to take the listing knowing full-well that she is not doing her clients any favors. This is why our industry has earned such a bad reputation and why this downturn may very well be a good thing. It’s going to eliminate the non-professionals……but:

2) HOMEOWNERS ARE DELUDING THEMSELVES AS WELL

Zillow, one of the most popular Internet home value sites published some interesting findings regarding home owner expectations in the current market. Zillow indicated in their Homeowner Confidence Survey that there exists a perception-reality gap. Quote: “Despite the turbulent quarter, half of U.S homeowners do not think their home’s value has decreased. In reality, nearly three-quarters of homes lost value in the past 12 months.”

The bottom line is that we all need to step back and take a cold, hard look at reality. I recognize that every home transaction is unique but we all need to be guided by the core values of honesty, fair-play and professionalism in order to protect our clients.

The Central Bank Cuts the Federal Funds Rate: What does this mean?

The Federal Reserve again lowered a key interest rate by .5% to 1%. This interest rate is called the “federal funds rate” which is the interest banks charge each other on overnight loans. From an historical perspective, this rate has not been lower since 1958 and represents an aggressive move by the Fed to restore confidence in the market and stimulate banks to make loans.  

But here’s an important question: What impact does this interest rate cut have on the consumer’s mortgage rates, credit card interest or other loans? Does a reduction in this rate matter? Will home owners in Seattle, Kenmore or New York City be able to get a better rate on their mortgages? Well, the short answer is yes. In the long-term the theory is that lowering this interest rate exerts downward pressure on the whole economic system resulting in lower consumer interest rates.  I have a colleague who has a degree in economics to whom I posed this question. He confirmed that the overall strategy of the Fed lowering the rate is intended to stimulate lending. He said there’s a fancy economics term called the velocity of money that applies here. However, he believes the the Fed is lowering the rates because there is a total lack of confidence and trust between the large lending institutions. ”It’s really about psychology,” he said. My friend also said something I think is critical: “If a consumer has good credit and the right amount of cash, they can still buy a house even in the current economy!”

So what does this all mean? The Federal Reserve has a number of “tools” to help influence banks and stimulate lending. Today they sent a clear message that action is needed and they will be monitoring the results of the interest rate cut. Let’s see what happens.

A special note: I am not an economist.

A Schizophrenic Day: Home Prices Down, Stock Market Up, Confidence Way Down!

It was an amazingly confusing day today in the world of economics and real estate. The Seattle PI reported that Seattle-area house values continue to drop, falling 8.8% since last August. Nationally, the numbers are sobering: a 30.7% decline in Phoenix, 30.6% in Las Vegas, the LA, San Fransisco & San Diego markets down 25% and Miami & Tampa down 28.1 & 18.1% respectively.  

There were numerous reports of a huge decline in consumer confidence. Consumer Confidence is one of those economic indices that analysts watch carefully because the majority of our economy is driven by consumer spending. According to a report by marketwatch.com “the implosion of the housing bubble, the weak job market, the bailout of the banks, and the sell-off in the stock markets have put consumer in a sour mood.” This could a problem as we approach the Christmas shopping season. Already, many retailers are bracing for chilly sales.

Then, just when I was getting depressed, PricewaterhouseCoopers announced that among major metropolitan areas, Seattle’s real estate market is the best in the nation as a prospective investment.

THEN, the Stock Market closed up almost 900 points! Whew……….I am reminded of the old curse: May you live in interesting times!

Picture by MrJuggles

Localism: Is It Just Another Pseudo-Trend or Is It For Real?

Yesterday, the Seattle Times featured an interesting article entitled:  “The New Localism: saving Main Street” in which the author and futurist, Joel Kotkin,  expresses the idea that the current financial chaos facing the United States may, in fact, be a catalyst in strengthening family ties and local communities. Mr. Kotkin points out that localism isn’t really a new phenomena, in fact, there has been a push for more localized markets and businesses for many years.  The difference today is that we have greater access to technologies that can help communities localize in more creative ways.

Since the early 70’s  books such as Future Shock and A Nation of Strangers and more recently Bill McKibben’s Deep Economy and Robert Putnam’s Bowling Alone have pointed out that America is “falling apart at the seams” due to the huge changes taking place in the world.  Kotkin suggests that we are seeing a reversal of this trend:

1) More Americans are staying closer to home. He writes that Americans born today are more likely to reside near their place of birth than in the 19th century. This is driven by an aging population and more limited economic opportunities.

2) Higher fuel prices are forcing Americans to spend less time traveling. It is also fueling a resurgence of local markets and local manufacturing. Simply put, transporting food and other products has become very expensive. Purchasing these things more locally makes sense.

3) Technology has allowed millions of Americans to work from home either as telecommuters or private businesses.

What fascinates me as a realtor is how “localism” has recently become a common notion in the real estate industry as well. A growing number of real estate agents  are writing blogs that focus on hyper-local markets such as their own town, neighborhood or social group.  This blog is a perfect example of a blog that focuses on my hometown.  I believe a local approach will ultimately provide better service to buyers and sellers. I also believe that agents who blog their own communities are more focused on their area of expertise and can rightly call themselves “neighborhood experts.”

To answer the question, is localism relevant, yes. Is it a pseudo-trend, I don’t think so.

Market picture by natalie maynor

Top Tools for Learning: How to Stay Ahead in an Age of Information

How are you dealing with all of the technological changes in your life? Let’s face it, iPods, computers, telecommunication technology and other tools have literally transformed our world. I don’t know about you in your career but as a Realtor (c) it’s incredibly important that I keep up with a MASSIVE amount of information. I must also adapt to new communication technology (phone and computer) and I need to distill all of this “stuff” into a coherent package (or toolkit) that I can use to be effective in my work as a real estate agent. This very blog is the result of a huge number of technologies working together. Trying to keep up is like drinking through a fire hose. It wasn’t so long ago that things were……..different:

I went to high school in the early and mid 1970’s….you know, we had disco and high inflation (or stagflation..I can never remember which), the unpopular Vietnam War was raging on and we had any number of other crises from OPEC’s gas embargo to to Richard Nixon’s plumber’s union. I sure some of you don’t remember that there was even a “Cold War” going on. Basically, humanity was wrestling with some fairly complicated issues. Looking back, it’s hard to believe our troops in Vietnam couldn’t just email family and friends, the President had to call the Soviets on the “red phone” if there was a dispute or missunderstanding. We barely had VCR’s and video games. Computers were rare. In fact, my high school had a couple of small computers that only the most dedicated math geniuses could fathom. When I look back on it, it’s as if we were moving through time in the dark. How anything got done is a miracle……….

On a more personal level, I grew up in a small town in Utah. I went to a medium-sized high school and all my friends and I dreamed about was graduating, going to college and getting a place of our own. We were products of a world in which technology and communications was, by today’s standards, paleolithic. Through it all, we did have a number of visionary thinkers that tried to tell us a new age was coming. One of the most well-know was Alvin Toffler. His seminal work was entitled “Future Shock.” Written in 1970, I remember our history and social science teachers showing us a short film based on his concepts. Basically, Toffler addressed, head-on some of the very issues modern technology has brought our way: the problems of dealing with change, the creation of a throw-away society, the breakdown of borders, advanced technological shifts, the creation of alternative lifestyles (a interesting concept at that time) and a whole lot more. In short, Toffler believed that all of this change was going to ultimately have powerful affects on humans and that the very volume and velocity of change was going to cause political, social and family challenges………………………….OH HOW RIGHT HE WAS. For those of you who haven’t read Future Shock, I think it’s worth your time to revisit this provocative book and think about how you’re dealing with all the change coming at us every day.

On a lighter note, a good friend of my sent me a link to an interesting and helpful website: Centre for Learning & Performance Technologies. The site includes a free list of the Top 100 Tools for Learning. It’s truly amazing to me that a mere 30 years ago none of these “tools” existed. Think about it: we didn’t have the Internet, high speed communication lines, “on-line social networks,” email, (no voice mail either), home computers, document scanning, cell phones, iPods,…..etc. I hope you check out the list as you may come across a few tools that can make life just a little bit easier.  Just click on the picture below to begin your journey. Have fun.

Technology pic by Lost in Scotland    

Can I Be a Economist Groupie? I Love Paul Krugman - Nobel Prize Dude!

Paul Krugman has done more to help ordinary people understand the complexities of our modern financial systems than any current economist. He has been the spokesman for liberal ideas regarding economics and his unabashed dislike of the conservative, supply-side economic theory is legend. I’ve been following his writings for years and it came as a pleasant surprise that he was awarded the Noble Prize for Economics yesterday. I love his column in the NY Times and one of my favorite non-fiction books written in 2002 is entitled “The Great Unraveling” in which he reprises many of his earlier newspaper columns. It’s almost a prophetic work with regard to the fallacy of trickle-down economics, Wall Street ponzi schemes and our current financial crisis.

From a real estateperspective, Krugman was always skeptical about the mortgage backed securities and the incredibly complex “products” being created by Wall Street financial gurus. One of my real estate brethren in Denver, CO had this to say about Krugman’s predictions back in August when he wrote about liquidity problems in the banking system:

“ And then this morning, sure enough, Paul Krugman posted a piece in the NYT saying exactly what I had been thinking.  And the title of the article is “Very Scary Things” (unfortunately if you’re not a member of Times Select you won’t be able to read the article). Krugman says the really scary part is that there’s nothing policy-makers can do to rectify the situation.  He talks about a similar meltdown in 1998, when a senior Federal Reserve official advised Krugman that the best strategy would be prayer.  Prayer?? ” Judith Clausen, Buyer’s Advantage Realty of Metro Denver, CO

I think it’s very important for us, as investors, home owners, workers and citizensto better inform ourselves about our economic system. I spent many years talking with high school students about the problems inherent in trying to get rich too quickly; purchasing everything on credit and being financially illiterate. Mine was a message of financial frugality. I can even admit to a healthy mistrust of the Stock Market. We need smart people such as Paul Krugman to sound the alarm in a clean, rational so as to avoid the “irrational exuberance” that has led us down this difficult path. I hope the next administration, no matter what party, taps Paul Krugman on the shoulder for some advice and wisdom to help us out of our current situation.

Mr. Freeze, The Financial Curmedgeon - Pointing His Big Fat Finger at the Wolves

Mr. Freeze and his minions have never believed that letting wolves tend the hen house was a good idea. Unfortunately, our financial system has been controlled by individuals who are only concerned with profit. There are a lot of  capitalists who have been preaching the virtues of the “unfettered” free market for decades. Here is the constant refrain: “If we would just get out of the way and let the free market operate without the intervention of regulation, then business will prosper and everyone benefits.” This is an expression of the Ronald Reagan “trickle down” baloney that so many Americans believe in. Mr. Freeze knows that in America if something is said over and over again, often enough, then it becomes true. Well, today Mr. Freeze takes great pleasure in pointing his big fat figure at all of the libertarian/conservative think tanks, investment “experts,” day traders, financial publications and CEO’s who have manufactured this get rich easy propaganda. It is a sort of money-idolatry of biblical proportions. The tragic thing is that this MYTH is now causing domestic and international markets to self-destruct. As a public service, Mr. Freeze has provided you, dear reader, with two important media clips: a video from 60 Minutes broadcast last night, and one audio article from National Public Radio. I hope you have a few moments to reflect on what these pieces reveal. Click on the picture below to watch the 60 Minutes piece:

Please click on the NPR piece below to hear one of the most articulate observers of the current market break-down, John C. Bogle, Founder of the Vanguard Mutual Funds.

The pieces above confirm one of Mr. Freeze’s economic formulas: capitalism + greed - governmental regulation = disaster. There must be a well-considered balance between government and business. One cannot exist successfully without the other. Mr. Freeze is tired of hearing about the virtues of the free market system. Mr. Freeze lives in the REAL WORLD where people go bankrupt, where families fall apart, where jobs and careers are outsourced,  and where ruinous things happen to people because a wealthy, elite financial class has been allowed to “make a profit” no matter the cost.  Mr. Freeze hopes you’re all doing OK. Really.

A $700,000,000,000 Bailout, Golden Parachutes and The Invisible Hand

It’s hard to wrap my mind around $700 BILLION dollars. Look at all those zeros! What’s even more difficult is to ponder all the unintended consequences of using almost $1 Trillion tax-payer dollars to help Wall Street out of it’s troubles. One interesting byproduct of the bailout is the “shocking” revelation regarding executive golden parachutes. Since the 1980’s, executive compensation has been increasing at ridiculous rates. I think most Americans were convinced by the “investment class” that they actually deserved the exorbitant severance packages they received for running large corporations. My, oh my, Americans should have been paying closer attention. Allow me to illustrate my point with the following story:

I had a conversation with a good friend last week. He’s been a Realtor for close to twenty (20) years. He told me that he had to file for bankruptcy recently. He said his home had gone into foreclosure and that his “back was against the wall.” As is the case with so many real estate agents today, business has withered to almost nothing. The affects of the mortgage crisis have come down hard on our industry. And you know, my friend isn’t one of those speculator-type agents who purchased a number of homes as “investments” in the hope of becoming rich quick. He’s a hard-working professional with lots of experience and expertise. Right now he’s having a hard time finding a new job. His story is emblematic of the current state of our economy and it would seem almost cliche were it not for the news that came out a couple of days later: Washington Mutual Bank was seized by Federal Regulators. It was the largest bank failure in American History.

It’s bad enough that WAMU failed. It’s downright absurd that Alan H. Fishman was the new chief executive officer of the company for a total of 17 days when he bailed-out with a golden parachute worth close to $20 million dollars. Looked at another way, Mr. Fishman was paid $50,000 per hour (assuming he worked 24 hours a day whilst on the job). He didn’t even have to get results. It seems he just had to show up. Let’s be honest, we all have a picture in our heads about this type of person:

This morning Congress announced a Draft Proposal on the Financial Rescue Legislation which contains language regarding the limitation of CEO compensation:

• Limits on excessive compensation for CEOs and executives

– New restrictions on CEO and executive compensation for participating companies:

– No multi-million dollar golden parachutes

– Limits CEO compensation that encourages unnecessary risk-taking

– Recovers bonuses paid based on promised gains that later turn out to be false or inaccurate

One can only hope that this portion of the legislation survives the legislative process. Already I can hear the corporate apologists whining and complaining that running a company is a tough job. Pardon me for being so blunt, but I’m sick and tired of hearing how tough it is on the wealthy and privileged . I’m particularly tired of the notion that it takes some sort of Ubermensch to run a corporation.

My friend, who has worked hard for many years, is not part of any bailout. He represents millions of other Americans who have worked hard and played by the rules only to discover that Adam Smith’s “invisible hand” (the wonders of an unfettered market place)  is propaganda. It’s a philosophy that has been repeated over often enough that we actually believed it. I can only hope that this bailout will actually help the current market situation. Perhaps we will be better off in several years, but for now let’s all make a promise to ourselves: let’s be more vigilant with those in Wall Street who would have us believe they really care about us.

Pictures: capitalist  pig, http://flickr.com/photos/urbanblitz/, Washington Mutual Tower,  http://flickr.com/photos/cloganese/, Bailout http://flickr.com/photos/emdot/2880848408/

Rescue Me From My Computer! The Solution: Boyd Hatch of the ROCS Alliance

I have a computer that’s almost seven-years-old. Overall, it’s been a wonderful box. It has needed a couple of “operations” over the years, yet, it has always come back to life. Recently, our relationship was on-the-rocks. I was beginning to mistrust my old friend. You know how it goes: you try to log on to the internet and it takes forever; you find yourself wondering if the darn thing has lost files; you’re in the middle of a project and you’re logged-off mysteriously. Obviously, I was living in denial for a long time. Then a wonderful thing happened:

I called Boyd Hatch, Director of Technical Services for the ROCS Alliance. He had my computer humming along in less than an hour. Boyd saved our relationship. I love Boyd! Another thing to know is that Boyd is one of my colleagues at ROCS.

Boyd is one of the most talented computer technicians around. He has served literally thousands of customers (lots of real estate agents) who have slow computers, trouble with mail merge, an email problem, hardware issues…..you name it, Boyd can fix it. Anyone with a computer needs help eventually. Here’s the good part: Boyd can resolve a lot of problems via a remote access to your computer, so there’s no need to bring your computer anywhere or pay for an expensive visit. Just look at how hard he’s working:

Truly, the man is obsessed with making computers work. And here’s something you’re going to like: Boyd charges $80 per hour for basic technical services. If you would like to have a long-term relationship with Boyd, you can subscribe to his services for $30 per month. This is particularly economical for those of you who have a business that demands a lot of your computer system.

You can reach Boyd at 206.861.2250 or email him at boyd@gorocs.com.

Computer picture by ClintJCL on Flickr.com