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Monopoly MLS Post-Mortem: What Comes Next?


By HARM   Follow   Tue, 7 Feb 2006, 8:55am PST   4,469 views   150 comments
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Many here have argued that the 6% Realt-Whore commission is doomed, like travel agency commissions of yore. The NAR is already under investigation by the Feds for anti-competitive practices, such as restricting access to the many regional MLSs, refusing to work with reduced-commission and/or flat-fee brokers (Help-U-Sell, ZipRealty, etc.). A bursting bubble will no doubt help grease the road to MLS reform and reform-minded legislation, as the myth of RE's invincibility begins to fade. As dreams of early-retirement-through-flipping evaporates, public sentiment will no doubt begin to turn against the NAR.

If we assume that the MLS monopoly will be broken at some point in favor of a free (or inexpensive) internet-based open MLS, what will the new status quo look like? Will we see dramatically lowered commissions (1-2%) as in Europe, or a transition to a fee-for service based structure? Which type of payment structure would you prefer to see and why?

Do you see any chance of political/structural reform on other critical fronts, such as:
--Insulating appraisers from "hit-the-mark-or-you-don't-work" lenders?
--Requiring mortgage lenders (originators) to actually book/assume the risk for some of the toxic loans they dump on investors as MBSs and CMOs?
--Imposing some minimum uniform borrowing standards, such as minimum 20% down, full documentation and proof of legal residence?

Discuss, enjoy...
HARM

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surfer-x   Thu, 9 Feb 2006, 6:23am PST   Share   Quote   Permalink   Like   Dislike     Comment 111

May I assume you suggest that aging people purchase a Dodge Magnum because it can double as their hearse when they die?

Your keen insight infers an encyclopedic knowledge of boomerdom.

surfer-x   Thu, 9 Feb 2006, 6:23am PST   Share   Quote   Permalink   Like   Dislike     Comment 112

May I assume you suggest that aging people purchase a Dodge Magnum because it can double as their hearse when they die?

Your keen insight infers an encyclopedic knowledge of boomerdom. Whoops, nope, sorry, I was mistaken, couldn't double as a Hearse, as the boomers are never going to die.

jeffolie   Thu, 9 Feb 2006, 6:28am PST   Share   Quote   Permalink   Like   Dislike     Comment 113

Boomers are the last generation to get pensions. The big corporations are freezing the gen-x and gen-y out in the cold.

inquiring mind   Thu, 9 Feb 2006, 6:35am PST   Share   Quote   Permalink   Like   Dislike     Comment 114

"Some people make it happen with RE investment…"

It's WAY too late in the game for Joe Schmo investor to start purchasing negative cash flow properties. There are now so many cooks in the kitchen they will (are?) trip(ping) over each other to get the hell out.

Peter P   Thu, 9 Feb 2006, 6:36am PST   Share   Quote   Permalink   Like   Dislike     Comment 115

Mutual Assured Destruction

I love MAD. It means peace. Only through the peaceful threat of annihilation can we achieve peace.

AIDS

Can anyone here guess the probability of infection though a single known sexual exposure to HIV.

Peter P   Thu, 9 Feb 2006, 6:38am PST   Share   Quote   Permalink   Like   Dislike     Comment 116

Russian-American M.A.D. No, we don’t have that anymore, but nuclear proliferation has actually gotten worse since the Cold War in the sense that even small, unstable countries are more likely to have them. This makes the odds of a terrorist obtaining one –and using it– that much more likely.

Exactly. The chance of a nuclear even has gone up since the end of the Cold War.

Peter P   Thu, 9 Feb 2006, 6:57am PST   Share   Quote   Permalink   Like   Dislike     Comment 117

It is still possible to make money in RE.

It is still possible to win a lottery.

Peter P   Thu, 9 Feb 2006, 6:58am PST   Share   Quote   Permalink   Like   Dislike     Comment 118

You can’t really estimate the risk of HIV infection from a single exposure because of the number of variables. Amount of and pathogenicity of virus the infected person is shedding, exact method of exposure, intactness of exposed epithelial tissue, other infectious (particularly ulcerous) diseases, being circumsized or not, even such things as epithelial exposure to detergents before the exposure to the virus can increase the risk of exposure.

Good answer. :)

Are you a medical professional?

Peter P   Thu, 9 Feb 2006, 7:00am PST   Share   Quote   Permalink   Like   Dislike     Comment 119

Also, with MAD or not, the world has not become safer. How many people were killed by MAD ever? How many people were killed by drunk drivers last month?

Peter P   Thu, 9 Feb 2006, 7:10am PST   Share   Quote   Permalink   Like   Dislike     Comment 120

This is a false analogy. Lottery is pure luck with a very remote chance of success. RE is a business. There’s an element of luck in business (like in everything else), but it’s only one of many factors (and typically not the dominant one).

Successful business people like yourself with always over-emphasize on their own merit.

When you are winning, it is because of you. When you are losing, it must be bad luck!

It is all about expected value. We maintain that buying negative-cashflow properties at this point of the cycle will bring a negative expected return.

The lottery analogy is not inappropriate.

Moreover, only a statement can be true or false. My analogy as a statement is true. :)

HARM   Thu, 9 Feb 2006, 7:12am PST   Share   Quote   Permalink   Like   Dislike     Comment 121

On the boomer vs X gen issue: I’ve seen some pretty egregious behavior all around. I’ve ammended my philosophy to SAS “selfish asshats suck”.

I'll buy that for a dollar!

Peter P   Thu, 9 Feb 2006, 7:12am PST   Share   Quote   Permalink   Like   Dislike     Comment 122

Well, people like to think that they have much control over their own lives. I know, it is just a comforting thought.

jeffolie   Thu, 9 Feb 2006, 7:15am PST   Share   Quote   Permalink   Like   Dislike     Comment 123

FACE

SOMETHING WICKED THIS WAY COMES...

Fed Focus
Paul McCulley
Managing Director PIMCO
February 7, 2006
mcculley@pimco.com

“…When the cyclical turn comes, it will be a wicked turn, our guts say, as conventional policy gives way to unconventional property market weakness….”

Peter P   Thu, 9 Feb 2006, 7:18am PST   Share   Quote   Permalink   Like   Dislike     Comment 124

Paul also mentioned something about reflexivity.

Perhaps this life lesson in reflexivity is a freebie that comes with my purchase of The Alchemy of Finance. :)

Peter P   Thu, 9 Feb 2006, 7:20am PST   Share   Quote   Permalink   Like   Dislike     Comment 125

As far as the Dodge Magnum goes…nah.

Why would anyone possibly want a Dodge Magnum?

Peter P   Thu, 9 Feb 2006, 7:26am PST   Share   Quote   Permalink   Like   Dislike     Comment 126

What if I buy a negative-cashflow property in an up-and-coming area, invest in major improvements (such as tear down and rebuild), and sell?

The market discounts more information than you think. Up-and-coming areas are especially overvalued already.

I know many people who have been doing this successfully for years - long before this bubble and even during downturns.

The keywords are "long before this bubble". Hindsight is always 20/15.

Peter P   Thu, 9 Feb 2006, 7:38am PST   Share   Quote   Permalink   Like   Dislike     Comment 127

Let’s take the example which I described before of the church in SF that was turned into a 14-unit condo development during 2003-2005.

How much would that church be going for if the developer is buying it today? I bet the market would already have discounted a large portion of the expected profits.

Land prices are very highly geared. The smart thing to do is to buy land when the market is not discounting high expected appreciation and the competition for land is not feverish.

Peter P   Thu, 9 Feb 2006, 7:40am PST   Share   Quote   Permalink   Like   Dislike     Comment 128

I was a molecular biologist doing tropical medicine stuff. I know nothing about real estate other than that it is soooo overpriced in San Francisco at the moment.

No wonder. :)

Peter P   Thu, 9 Feb 2006, 7:42am PST   Share   Quote   Permalink   Like   Dislike     Comment 129

That’s why “major improvement of the property” is a key element of the strategy.

You still have to make more profit than what the market has already discounted.

Peter P   Thu, 9 Feb 2006, 7:52am PST   Share   Quote   Permalink   Like   Dislike     Comment 130

True enough, but there are such opportunities out there, even now.

I do not disagree. But I think the risk/reward is not favorable.

HARM   Thu, 9 Feb 2006, 8:13am PST   Share   Quote   Permalink   Like   Dislike     Comment 131

Where is Prime anyways?

Technically, the Troll-Whose-Name-We-Dare-Not-Speak has been banished, but has reappeared under different names from time to time to heckle us.

Peter P   Thu, 9 Feb 2006, 8:32am PST   Share   Quote   Permalink   Like   Dislike     Comment 132

Technically, the Troll-Whose-Name-We-Dare-Not-Speak has been banished, but has reappeared under different names from time to time to heckle us.

It is legal to depict the troll in a cartoon?

inquiring mind   Thu, 9 Feb 2006, 8:48am PST   Share   Quote   Permalink   Like   Dislike     Comment 133

This just in:

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/02/09/BUG0QH5NHD5.DTL

Oracle layoff double what was initially expected.

inquiring mind   Thu, 9 Feb 2006, 8:59am PST   Share   Quote   Permalink   Like   Dislike     Comment 134

Well, I keep hearing about how wonderful things are again for tech, but the recovery seems to be, shall I say, uneven?

Peter P   Thu, 9 Feb 2006, 9:09am PST   Share   Quote   Permalink   Like   Dislike     Comment 135

Oracle layoff double what was initially expected.

When I was still working at Oracle there was a layoff. I was so excited because parking would become easier. Indeed, I was able to park (on average) 0.5 floor closer to street level.

Peter P   Thu, 9 Feb 2006, 9:12am PST   Share   Quote   Permalink   Like   Dislike     Comment 136

I think most affected employees live in the Bay Area. They should probably look for jobs soon or they will have to compete with unemployed realtors.

Peter P   Thu, 9 Feb 2006, 9:21am PST   Share   Quote   Permalink   Like   Dislike     Comment 137

Oracle hires a lot of fresh grads. Younger people tend to have bought houses later. As a result, an Oracle layoff probably has more effect on the housing market than, say, an HP layoff.

HARM   Thu, 9 Feb 2006, 9:38am PST   Share   Quote   Permalink   Like   Dislike     Comment 138

New thread: MBS/CMO data & links, please

Peter P   Thu, 9 Feb 2006, 10:10am PST   Share   Quote   Permalink   Like   Dislike     Comment 139

There is a reason why the standard commission is 6%. Real estate companies could not survive on less. Some seller lists a home with a Realtor. The Realtor markets the house, advertises it, shows it. That costs money. But if the house doesn’t sell, does the Realtor get paid? No.

That is fine than. If they worth 6%, free market will give it 6%, no less.

Open MLS, banzai!

Peter P   Thu, 9 Feb 2006, 10:41am PST   Share   Quote   Permalink   Like   Dislike     Comment 140

Since ScottC is so defensive I have to wonder if things aren’t exactly as rosy as he claims.

He claims that RE companies cannot survive with commission below 6%. Yet he says that he made 3% commission this month (as if there is no costs).

So perhaps the profit margin of RE companies can be compressed?

Or he made less than 3% _net_ last month?

If we count only revenue, weird things happens. Remember that right before its bankruptcy Enron was top 5 or 7 among Fortune 500 companies?

Peter P   Thu, 9 Feb 2006, 11:05am PST   Share   Quote   Permalink   Like   Dislike     Comment 141

I never could figure out why anyone in RE who has no reason to worry about a bubble would bother searching for a ‘housing bubble’ website.

Perhaps they googled "Bay Area Real Estate". We are the first link. :)

Petrick.net, banzai!

empty houses   Thu, 9 Feb 2006, 4:26pm PST   Share   Quote   Permalink   Like   Dislike     Comment 142

For the record, I'm 43 and I suppose that's the tail end of the boomer Gen. I dont take it too personally but I think the generalizations are incorrect. The people that are causing the problems are not so much the boomers as they are the super wealthy. Boomers had the same complaint about the "establishment". It's a pretty weak . Certain people in society gain wealth and others dont. If wealth was suddenly distributed evenly it would be back in the hands of the wealthy in a short period of time. It's a personality trait that has little to do with how old you are.
If you doubt this, just look at the gen X real estate agents.

I seem to see a bunch of young poor stupid people driving SUV's. They have a low resale value and the 20 boppers love em with those 20 inch rims. And what the hell is up with those spinners. I think idiot everytime I see those.

I say lay off the boomers. You will be that age someday too if you are lucky. Show some respect for your elders. You might learn something from them.

HARM   Thu, 9 Feb 2006, 4:56pm PST   Share   Quote   Permalink   Like   Dislike     Comment 143

When you are clearly so good at your job, you should not let a non-competitive system hide such talent. I say you blaze a path, throw down the gauntlet and challenge other realtors to compete with your service and price. That will show them who is who and what is what.

In humble awe of your sheer tumescence

PS,

You, sir, are a true gentleman and visionary! How could ScottC not help but be inspired by such eloquence and good spirit? I expect a favorable reply from him forthwith.

HARM   Thu, 9 Feb 2006, 5:22pm PST   Share   Quote   Permalink   Like   Dislike     Comment 144

@iceman,

Well, I thought we had pretty much settled the stereotyping "Us vs. Them" thing with Bay Area Homeowner above. But, since you're bringing it up again, I certainly don't hold being age XX against anyone and I'm sure you're a decent guy. I guess "Boomerdom" is really more of a symbol for greed and corruption than an age range to me.

Suffice it to say that Surfer-X and I would agree with this: "The people that are causing the problems are not so much the boomers as they are the super wealthy."

Not quite sure where you're going with the rest of it, though. Sure, unequal distribution of wealth to some extent is a given in any society, given people's varying talents, business acumen, advantages of birth, etc. I don't recall ever denying that or advocating a communist dystopia. Would be nice to have a more level playing field, regardless of one's age, though. I always thought the American ideal was supposed to be meritocracy, not generational wealth transfer through a de facto nobility.

As far as having "respect for my elders" goes, I most certainly do. My father is one of the greatest men I ever knew. He grew up during the Great Depression, fought the Japanese in WWII, and managed to raise a family on a civil servant's salary. I try my best to practice the lessons and good habits he taught me to this day.

Now, as to respecting some smug, greedy, narcissistic ex-hippie for having achieved the amazing feat of of growing old without O.D.ing...

Well, let's just say we've already covered that ground ;-).

Michael Holliday   Thu, 9 Feb 2006, 10:50pm PST   Share   Quote   Permalink   Like   Dislike     Comment 145

iceman Says:

"I say lay off the boomers. You will be that age someday too if you are lucky. Show some respect for your elders. You might learn something from them."

You've got to be fvcking kidding.

Oh my god. I can't believe I'm reading this shit.

The entire Boomer career was made off supposedly giving the finger to the establishment. Socially, economically, politically...in other words EVERTYTHING...about where we are at today is the product of the Boomer excesses.

This is THE hippy ass generation that tuned in, turned on and dopped out.
Theny they became the 70s "Me" generation. Then they morphed into yuppies.

They showed no respect to those that came before them.

When it's all over, we are going to have to practically have start over
from year zero from what they've bequeathed us.

Gen. X/Y are pretty much screwed. It will be up to Gen. Z to recapture th American Dream.

The worst part of the Boomer psychosis is the denial. The denial of their responsibility is their hallmark of the authentic Boomer.

At least most Gen. X'ers admit it when they've done wrong: "Sure, OK I did it. So sue me. I don't have shit!"

But look who their role models were.

It's the friggen' hypocrisy of the Boomers that kills me. The friggen' arrogance!

empty houses   Fri, 10 Feb 2006, 1:26am PST   Share   Quote   Permalink   Like   Dislike     Comment 146

Hey come on, how about all the cool stuff boomers created during their productive years.
Give credit where credit is due. How about all the social programs initiated. Did you use any financial aid when you went to college? Some group of boomers made that available. That's right kids. The boomers created all the cool stuff that you enjoy everyday and how do you thank them.............with venomous rants. Sure they smoked pot. They smoked pot and kept good jobs. And yes they had sex. And it was good too. It was a sexual free for all, jism shmigma everywhere. In the morning they hauled there ass off to Lockheed or some other corporate gig. So I say lay off the boomers. Give em a nod when you pass them. Tell em thanks for the cool stuff as you give them a wide berth on their sidewalk.

Now let's get back on topic here and put this to rest.

HARM   Fri, 10 Feb 2006, 3:18am PST   Share   Quote   Permalink   Like   Dislike     Comment 147

Give credit where credit is due. How about all the social programs initiated. Did you use any financial aid when you went to college? Some group of boomers made that available. That’s right kids.

Boy, this argument just refuses to die. Well, let's take a look at some of those great college social programs supposedly started by Boomers:

1944 GI Bill (Servicemen's Readjustment Act) created by WWII generation for returning vets.

1965 Pell Grant (as the Educational Opportunity Grant Program) started by WWII generation TO BENEFIT Boomers. Pretty good program actually, but --oops--- that program got slashed to the bone right when my generation reached college age --bummer.

1965 Guaranteed Student Loan (GSL) Program, precursor to Stafford Loan Program started by WWII generation TO BENEFIT Boomers. Good news: this one's still going strong. Bad news: it's a market-rate loan, not a grant.

http://www.finaid.org/educators/history.phtml

HARM   Fri, 10 Feb 2006, 3:41am PST   Share   Quote   Permalink   Like   Dislike     Comment 148

@SFWoman,

Huh?

HARM   Fri, 10 Feb 2006, 6:49am PST   Share   Quote   Permalink   Like   Dislike     Comment 149

SFWoman,

Ok, I get you now --you were REPLYING to ScottC, not agreeing with him. My bad.

HARM   Fri, 10 Feb 2006, 7:57am PST   Share   Quote   Permalink   Like   Dislike     Comment 150

If I remember correctly ScottC works for his mother’s company. It would explain a lot of his success, as well as the ability to keep a job despite an incredible attitude. Plus, the weath he refers to is probably his mother’s.

This could segue nicely into *yet another* anti-Boomer rant, but in the interest of blog harmony, I won't go there (today). :mrgreen:

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