As we have said in this Blog, on the radio talk shows and interviews we do.....

DO NOT (in most cases) buy residential real estate (homes, condos) as an investment in this environment. Buy a place because you need somewhere to live. Buy with the assumption that real estate prices drop 15% in most areas, and assume taxes and insurance rates rise every year. Can you still afford to make the buy? Whether it is 3 years or 5, there is going to be a lot of depressed (in value) condo's out there for the picking. Soft landing during this Bush administration, probably, but not forever. This new class of 2nd home buyers and residential investors are fueling 1/3 to 2/3 of this boom and are going to get some whoop-ass. Just like in the mid/late-80's.


On a related note, below are 3 news stories summarized (bottom of this post) by Steve Murray's folks at RealTrends.

>Department of Justice still suing the National association of Realtors (NAR)

>A GAO report finds realty commissions are artificially high

>Fed Chairman comes to the conclusion that using your home equity to go on vacation is probably a dumb idea.

[Not that we post so often, but if you have been reading our posts from early 2004, Smarter Agent has been telling our readers that the above items will come to a head.]

OH Boy, do all those stories make me bullish on the technology opportunities in real estate .

Here are some reasons the current environment is great for Smarter Agent:

>The new Internet policy by NAR is much better than the last 2 versions NAR has come up with over the past 4 years. It's called ILD (Internet listing display, and replaces IDX and VOW).

For example, it lets you advertise next to listings.

It also prohibits a broker from singling 1 firm out to withhold its listing from off the bat..But it still lets Realtors bullshit sellers by making up some non-factual statement to get them to opt-out of other brokers web site displays. I haven't read the revised DOJ complaint yet but it should be a good read.

Coming from where the industry started in 1999, this new policy is a huge, huge, huge improvement.

Of course it took an anti-trust complaint, but what the heck.

I feel bad for the VC's who lost millions trying to re-invent the system before the rules were ready. Actually, don't ask them. They are still shellshocked that a group of 55 year old woman (the average Realtor make-up according to NAR) that is fed a bunch of crap by a few men who run the brokerage firms and NAR could take them down.

At Smarter Agent we reinvent - within the rules and the system - with our eyes wide open. In our view, this new ILD plan -while not perfect- gives us the wind at our back and we are full steam ahead with our plans - with a lot less bad regulations flying around. We do hope the Justice department wins, as the new ILD policy can still hold back progress in empowering consumers.

>The GAO report is a little weak. And I wonder why no one ever mentions although the industry has more than 3 major franchisee players and lots of independently owned firms - so it is very fragmented in one sense --- that control at the top is actually consolidating. Did you know the Cendant brands (C21, ERA, Coldwell Banker, Sothebys) sell or represent buyers in 25% of all home transactions in the USA! And they have an exclusive agreement with the PHH mortgage division they just spun off (but own 40+ %) off to pitch mortgages to all these Buyers.

Corporate Cendant has a lot of franchise control over what goes on evidenced how they and ReMax totally came out and got the NAR bureaucracy to rollover with the last IDX/VOW policy. When you add Remax, GMAC and Prudential to Cendant, I would not be surprised if 60%+ of all transaction are done by a half dozen brands with that number going way higher over the next several years.

The great news is the new ILD policy will help the savvy take business from the pack and make consumers happier to boot.

Also the Smarter Agent bank product is a winner in this environment. If GAO sheds light on letting Banks into real estate, we have a 100M opportunity here.

Not to mention our pending real estate listing configuator patent (first time mentioned) that really will change commission 'ciphering' over time by making the process more efficent without the need to discount.

>Finally, Alan Greenspan. He just gets more and more pessimistic with each piece of info he throws out there.
Here are the article blurbs so you can see what I am talking about.


===DOJ amends antitrust lawsuit against NAR===
The Department of Justice today amended the complaint in its antitrust lawsuit against the National Association of Realtors (NAR), charging that the group's modified policy continues to prevent Internet-based real estate brokers from offering better services and lower costs to consumers. The lawsuit challenges NAR rules that limit competition from brokers who use Internet tools to serve their customers. The new complaint addresses how NAR's changes to its rules still obstruct competition, threaten to lock in outmoded business models and inflate prices in the industry."Last-minute changes by NAR did not fix the anticompetitive problems of its policy," said J. Bruce McDonald, Deputy Assistant Attorney General in the Department's Antitrust Division. "When buying and selling a home, consumers should receive the full benefits of competition - better services and lower costs. NAR's modified policy continues to prevent consumers from realizing these benefits."

===GAO report on competition in the real estate industry===
The Government Accountability Office (GAO) has released a report on competition in the real estate industry that found that its competition appears to be based more on nonprice variables, such as quality, reputation or level of service, than on brokerage fees. One potential cause of the industry's apparent lack of price variation is the use of MLSs, which facilitates cooperation among brokers in a way that can benefit consumers but may also discourage participating brokers from deviating from conventional commission rates. Further, while the Internet offers time and cost savings to the process of searching for homes, Internet-oriented brokerage firms account for only a small share of the brokerage market and many consumers are therefore unaware of those options. The study also found that although about 30 states potentially authorize state-chartered banks or their operating subsidiaries to engage in some form of residential real estate brokerage, few banks in these states appear to have done so, and usually only because their markets are so small that few real brokerages exist.

===Fed Chairman warns of reliance on housing loans===
Federal Reserve Chairman Alan Greenspan, drawing on new research he has personally supervised, said American consumers have become enormously dependent on borrowing against their homes to fuel their spending, and that a rise in mortgage rates could trigger a spending pullback. Mr. Greenspan's new data from his study, "Estimates of Home Mortgage Origination, Repayments and Debt on One-to-Four Family Residences," show that borrowing against home values added a stunning $600 billion to consumers' spending power last year, equivalent to seven percent of personal disposable income, compared with three percent in 2000 and one percent in 1994.The Fed chief attributed that increase to declining mortgage interest rates, an increase in the turnover of homes, the popularity of cash-out mortgage refinance and home-equity loans. Should mortgage rates rise, he told the American Bankers Association, turnover and borrowing would decline, consumer spending would slow and saving would rise. Greenspan suggested that such a reversal need not be "disruptive," but instead would bring about a welcome rise in U.S. savings and a narrower trade deficit. But he also sounded new warnings about speculation in the housing market.