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February 2011

Making sense of the market

 

When I turned on my radio this morning, I heard this report (audio player above if you are reading this on our blog.) highlighting the latest Case Shiller numbers.

To the housing market now where things are getting worse. A closely-watched index out this morning says home prices in 11 major U.S. cities have fallen to their lowest levels since the housing bubble popped...

The catch of course is that it is easy to forget that they aren't talking about today.  They aren't talking about yesterday either.  The story is current but they are talking about historical figures from December of last year (yes, there's that much lag built into the Case Shiller Index)!  

That might be fine if you an an economist at the Fed setting policy, but if you're a real estate investor or simply a buyer or seller wanting to understand today's market and make a good desicion, all this hype two-months-after-the-fact doesn't really help you make your decision today.   History is nice, but you want to know what's happening today and what's likely to happen tomorrow.  You need good forward looking information.

The best forward looking counterpart to Case Shiller that I know of is the Altos 20 City Composite.  It covers the same markets as Case Shiller, but with real-time listing data, not historical sales data.  This means it is forward looking and leads Case Shiller.  Here's what Altos shows in a blog post today:

Altos-20-Price-q4-2010-q1-2011
You can see the December dip (and you could see it back in December), and you can also see a leveling out and what looks to be a rebound in prices since December (the orange black line is a 7-day moving average, the black orange line is a smoother 90 moving average).   As Altos puts it, "Weekly home prices are starting a seasonal bounce..."  

The bottom line?  Reading the headlines isn't enough.  Truly making sense of the market requires an understanding of the right data, combined with local market expertise.   The benefits of this insight is one of the most valuable things a competent luxury agent can provide.


Is it really about the shoes?

NYT
There is a good article (To Sell an Apartment, No Detail Is Too Small) in the Times today  that highlights the importance of staging and enhancing how a property shows.  

Of course you know the importance of this already, but the article is novel because they attempt to put a dollar value on simple staging and repairs with examples from NYC agents and their listings.  For example:

  • Clutter: Subtract 5 to 15 percent.
  • Fresh towels and throw pillows: add $25,000. 
  • Dirty rugs: subtract $5,000. 
  • Regrouting tile: add $100,000 (to a $3 million apartment, that is). 
  • New fixtures and appliances: add $250 in rent. 
  • New lights: add $32,500. 
  • Replacing cabinets: add $107,000. 

Of course in your market, mileage may vary!  They nailed it at the end though with an insight about the fact that buyers aren't buying a home, they are buying a LIFESTYLE:

An expensive shoe closet: worth every dollar. Michele Kleier of Gumley Haft Kleier has found that when buyers walk into a closet filled with Christian Louboutins, they are likely to pay more of a premium than what the seller spent on her shoe collection. She advises sellers, “You can buy 25 pairs of designer shoes, put them in your closet, and they’re going to get more than you spent on them.” That’s because, Ms. Kleier said, “people want to step into your life.”

If the shoe fits...


In a nutshell

This morning the private banking and wealth management group at HSBC released the results of a study on international markets and the attitudes of wealthy investors.  The subheadline of the press release really jumped out at me:

"75% say ability to make the right investments comes from local market expertise"

HSBC Press Release 

Let me shout it: LOCAL MARKET EXPERTISE!  

This is it in a nutshell.  This is what it's all about.   

Your job is to:

  • Be capable of delivering it. (competence)
  • Let folks know you can deliver it in spades. (positioning) (ahem, can you say "market report"?)
  • Deliver it well. (service)

Do this consistently and well and you will be successful in luxury real estate.