Monthly Archives: June 2008

Everyone’s an Expert in Real Estate — So Who to Believe?

Shill

Doing my best Seinfeld query: “What’s the deal with the Case-Shiller Index? Is it a case study in how to be a shill for the sensationalistic media?”

 What I’m referring to, is this article “Getting Case-Shillered”, which recently appeared in one of the industry pubs I regularly read.  Here are the cogent highlights:

The S&P/Case-Shiller Home Price Index is the benchmark the financial press uses to tell us how terrible the housing market is.

One must wonder why.

The index’s findings are notoriously softer than the indexes used by the Office of the Federal Housing Enterprise Oversight, NAR, and even Realogy.

In 2007, home prices went down for the first time in decades, but by how much? OFHEO said by 0.3 percent, NAR 1.4 percent, and Realogy 1 percent. Case-Shiller? 8.9 percent.

Yale economist Robert Shiller, cofounder of the index, is scaring home buyers with proclamations that home prices “will fall further than the 30 percent drop in the historic depression of the 1930s,” as he told the Associated Press in April.

Prognostications like that are a problem because financial journalists … as well as securities investors and analysts, call his index “the best gauge” of real estate values. Since when do reporters .. REPORTERS for criminy sake!! (my interjected comment) feel the need to fluff a source, and why are analysts so enthralled with the index?

One reason might be its Wall Street seal of approval: It was launched to provide information for hedge funds. Created by Shiller and Karl Case, an economics professor at Wellesley, the index is licensed exclusively to Macromarkets LLC for “developing, structuring and trading financial instruments,” says the Macromarkets Web site. Among Macromarkets’ products is the Housing Futures and Options index, which forms the basis for “directly investing in and hedging U.S.housing” on the Chicago Mercantile Exchange, where futures and options on the index are traded. Every time a CME hedge is made, revenue flows to Macromarkets.  

 

And guess what? Shiller is a founder and chief economist of Macromarkets.

 

I guess one could hypothesize that Mr. Shiller has a financial incentive to “scare” the market.

Hmm – can you spell CONFLICT OF INTEREST?

 

And what’s the deal with Robert Shiller? I mean, who is this guy?

 

Robert Shiller scored instant media celebrity when his 2000 book, ‘Irrational Exuberance,’ predicted the tech bubble’s explosion just weeks before the fact. Four years later, when he tried to apply the same principles to the real estate boom, he found out that all investments don’t behave alike. Shiller contended that rising home prices weren’t based in the fundamentals of population growth and supply and demand; they were bubbles, destined to pop. To the contrary, NAR economists predicted that market slowdowns would largely be gradual — a trend that’s playing out today. Shiller’s failed bubble scenario demonstrates that sometimes even smart guys get it wrong

 

So who, then, to believe? What about all those readers who post comments for every single real estate article out there? Surely they must have intelligent answers? Here was one I recently found:

“I’m confident the prices will keep dropping and foreclosures and defaults will outpace the ability to fix the issue.. Generally, the higher up the price ladder you go the more in denial a person is about the market.”

 

Ah yes, Nostradamus – that would explain how 3660 Tripp Rd. in Woodside, which was list priced at $4.495M, sold in 7 days and closed escrow at $4.71M.   You are truly amazing, Kreskin!

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New Mt. Carmel Listings – Week of 6/16

So yes, it’s been awhile sincee we’ve had so many new listings pop up here in Mt. Carmel. A lot of them are, how shall I phrase this tactfully, “good opportunities”.  But, lots of good stuff to pick from — here, in no particular order:

  • 5 Elwood St. – $749,999 – 3br,2ba – 1230 sf on a 7020 sf lot – Just came on the market, on the corner of Whipple. Also a short sale
  • 202 Harrison Ave. – $1,089,000 – 4br/3.5ba – 2380 sf on a 5550 sf lot.  Beautiful architecture.
  • 554 Jeter St. -$799,000 – 4br/2ba – 1750 sf on a 6500 sf lot.  Not the most “traditional” of floor plans (the garage is converted to a bedroom), but for the price, not so bad.
  • 346 Grand (new price) – $874,950 – 4br/2ba – 2010 sf on a 6500sf lot.   Originally $999K, this one’s come down a couple times at least.  If you like 60s/70s era wood paneling, this house is for you!
  • 194 Inner Circle – $1,058,000 – 3br/1ba – 1700sf on a 12,600 sf lot.  This one sold 1 year ago for $1,001,000.  Seems to have been cleaned up a little since it was last on the market.  A fantastic sized lot.
  • 155 Fulton St. – $799,000 – 3br/1ba – 1170sf on a 7150 sf lot.  A classic old Craftsman, on a nice sized lot
  • 279 Hudson St. (new price) – $1,275,000 – 4br/2ba – 2140 sf on a 6500 sf lot.  A gorgeously updated home (but I think I did call it, when this first came on the market for $1.349M, that its list price might have been a stretch, given the sometimes busy-ness of Hudson)
  • 188 Inner Circle – $849,999 – 2br/1ba – 920 sf on a 6580 sf lot.  A great little cottage, on a nice street. But, considering that about $800K gets you a 3/1 in this area, time will tell if the price is right.
  • 244 Fulton St. – $895,000 – 3br/1ba – 1440 sf on a 6500 sf lot.  Some pictures would be nice, considering its been on the market for 13 days already (pet peeve of mine…but I digress)
  • 195 Opal Ave. – $1,070,00 – 3br/1.5ba – 1490 sf on 8151 sf lot.  A really nice home, on a nice quiet street.  This one gets my vote for the “fav of the week” 
  • 553 Topaz St. – $829,000 – 3br/2ba – 1300 sf on a 5250 sf lot.  Great price for a 3/2 in this area.

 

 

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New Listings – and Recent Sales – in Mt. Carmel

Just one new one on the market this week so far.  On a fantastic block, the “00” block (that between Whipple and Hopkins), is:

61 Myrtle: $998,800 — 2br/2ba, 1640 sq. ft. on a large 9,100 sq. ft. lot.  Great location, and lots of potential.

Recently sold in the Mt. Carmel area:

  • 518 Grand St: List price $850,888. Sale price: $850,888. 5 days on market (although, this one originally tried to come on the market back in June ’07 for $1,060,888 — was subsequently withdrawn after a couple price reductions).
  • 2469 Brewster: List price: $1,250,000. Sale price: $1,200,000. 33 days on market.
  • 190 Opal Ave: List price: $850,000. Sale price: $850,000.  11 days on market.  Lots of great potential in this one, and on a nice street in the Mt. Carmel neighborhood.
  • 436 Sapphire St: List price: $738,888. Sale price: $785,000. 7 days on market. This one sold with 10 offers!!!

So I know the word “recession” is not in the vocabulary of super-hot markets like Palo Alto — but, it appears that the housing situation in the Mt. Carmel area is still not doing too bad!

 

 

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