What else is new? The NAR is asking the government for handouts.

As I’ve mentioned before, the last thing we need is for the government to prop up inflated home prices. Nevertheless, the NAR came up with their four point housing stimulus plan a while ago, in an attempt to do just that. Last week they emailed realtors with a Call To Action to get them, and their clients, to email their representatives in Washington in support of the handouts. Chicago Association of Realtors President David Hanna is quoted: “Your action has never been so important, now is the time for you to stand up for your industry and demand the changes we need. Every Realtor must participate in this Call to Action, please contact your representatives and urge your peers and clients to as well.”

Here, in a nutshell, is what they are asking for:

1. Make the $7500 tax credit available to all buyers and eliminate the repayment requirement.
2. Make the 2008 FHA, Fannie Mae and Freddie Mac loan limits permanent.
3. Target more funds to mortgage relief and create a federal mortgage interest buy-down program to make below-market rates available.
4. Permanently bar banks from engaging in real estate brokerage and management.

Here, in a nutshell, are the problems with each of the four points:

1. Why should people who make $200K per year get a tax credit from the government? For that matter, why should anyone? The government should not be subsidizing home purchases. Not to mention that this would cost at least $38B per year.
2. As if Fannie and Freddie weren’t already spread too thin.
3. The very existence of Fannie and Freddie is a buy-down program. They effectively lower mortgage rates. In fact, the entire economic bailout program is helping to lower mortgage rates and low mortgage rates is what got us here to begin with.
4. And this will help the economy how? By keeping real estate commissions high? The NAR is positioning this proposal as necessary to keep the banks focused on fixing all their problems. But come on! Could anything be more blatantly anti-competitive?

It’s stuff like this that gives Realtors a bad name.

As I’ve written in the past, the real estate industry is full of really weird rules - or maybe they’re not that weird in light of the fact that the intention is often to undermine competition.

One such set of rules pertains to the arcane world of IDX and VOW - two different ways for MLS listings to be distributed across the Internet. The rules regarding these two different protocols are so convoluted that I always need to refer back to my notes to remember what the deal is.

IDX stands for Internet Data Exchange and is also known as Broker Reciprocity. Brokers who participate in this program agree to allow each other to display their listings on each other’s Web sites. When a listing is distributed via IDX it can be shown on any Web site without the user needing to register. However, the local MLS may restrict the display of some data fields and the Web site must display the name of the listing broker. OK…with the exception of the data restriction and the fact that brokers can choose not to reciprocate (why in the world wouldn’t everyone reciprocate?), this seems to be the way things should work. So why is there any other way to do business? Because this is real estate and nothing is simple. Hence, there is VOW.

VOW stands for Virtual Office Web site. The idea of VOW is that the Web site is a virtual office of the real estate broker and therefore the broker has established a client relationship with the visitor - provided the visitor has registered. Once the visitor registers, the broker is allowed to interact with that client just like they would if the client walked in the door of their office. They can show them all the information on any listing, whether or not the listing agent is participating in the reciprocity program. Seems to me to be a trivial distinction in order to show consumers something they should have access to without restriction.

When I first started researching the real estate industry the Multiple Listing Service of Northern Illinois (MLSNI) told me that only 60% of the listings were available through IDX in the Chicago area. Therefore, a Web site operator really needed to get users to register in order to show them all the listings. However, since then MLSNI merged with the other local MLS system (MAP) and in the process IDX became the default process. As far as I know this had nothing to do with the recent settlement between the NAR and the DOJ. Today around 97% of the listings are available through IDX. In other words, registration is really not necessary.

So then why do many broker sites still require registration, often with messages like the following when searching on their Web site?

It looks like Remax is only showing their own listings without registration but requiring registration to see anyone else’s listings, under the guise of MLS rules. Just to be clear, it is a flat out lie that the MLS requires registration - a great way to engender trust.

So why is registration required? Because they want your contact information so that they can follow up with you. We would love to follow up with you also but we don’t want registration to stand in the way of you getting what you want right now. We figure that if you would like us to follow up with you you will contact us.

Barack Obama’s house at 5046 S. Greenwood in the historic Kenwood district of Chicago can be found on the MLS system. Built in 1910 and sitting on a 70 x 150 foot lot on the west side of the street, this 3 story Georgian home has 14 total rooms, 6 bedrooms, and 5 1/2 baths spread over 6500 square feet and a 4 car garage. Here are a few other key stats on the Obama house:

• Master bedroom is 19 x 14
• His office is 22 x 15
• Kitchen is 20 x 20
• Family room is 38 x 36
• Property taxes appear to be about $22,000 per year best I can tell

I wonder if the size of Barack’s office relative to his bedroom is any indication of his priorities.

I found the following photo of the Obama house on Flickr:

The empty lot on the left of the house is owned by Tony Rezko and has been the subject of much speculation regarding the relationship between Tony and Barack. The two properties were purchased from the same seller and closed on the same day, June 15, 2005. Subsequently, the Obamas purchased a strip of the empty lot from the Rezkos in order to expand their yard.

The Obamas got their home for $1.65 MM compared to a listing price of $1.95 MM. From the public release of the Obama’s tax return for 2007 we know that they deducted $58K of mortgage interest. So I assume they put a fair amount down on the purchase. The CCRD site has no record of this transaction. Perhaps it wasn’t recorded or some legal maneuver was used to avoid the public record. I do know that the transaction was done through a trust to maintain Obama’s privacy. So much for that idea.

I found a very interesting article from someone who lived in the Obama house many years ago. He provides an in depth description of the history of the house and what it looks like on the inside.

The picture above was obviously taken well before Obama won the nomination. The secret service and the Chicago police had not yet taken over the neighborhood. I drove past this area a few weeks ago and noted a couple of interesting things. First, there are signs on 50th St. about a mile away from the intersection with Greenwood requesting all trucks to divert. That seems reasonable except that I didn’t see any capability to enforce that displayed. Once you get to the intersection they have concrete barricades set up on Greenwood to prevent any vehicle from approaching the house and there were numerous Chicago police cars and officers manning the entrances. I didn’t see any donut eating.

If the Obamas decide to sell the place - it’s going to be vacant for the next 4 years - I would be happy to cut them a great deal on the commissions. I suggest that as part of the realtor vetting process the secret service should administer a lie detector test to any prospective realtors.

For those not familiar with Chicago here is a map showing where the house is:

Special Thanks

Special thanks to David Dalka, who runs an Internet Marketing strategy blog, for suggesting this post.

I think Mick Jagger might actually know a bit more about the housing market than our politicians. In case you can’t already see where this is going let me spell it out for you: “You can’t always get what you want but if you try sometimes you just might find you get what you need.” In this case what we need is for the housing market to clear and, unfortunately, that is not consistent with stabilized home prices, which is what everyone wants. And in this highly charged political season politicians want to give people what they want, not what they need. So we hear endless lamentation about how we are not going to solve our economic problems until we stop the decline of home prices and everyone is floating ideas about how to prop up the housing market.

No surprise that the NAR is also getting in on the action with their 4 point plan for government handouts to the real estate industry. More on that another day.

Unfortunately, all this is a bit like trying to build a city below sea level in the path of numerous hurricanes. Wait a second…don’t we do that also? The fact of the matter is that sooner or later nature has to take its course. Home prices have to seek their natural level. They expanded at above-trend rates and now they need to return to the trend line, which is a bit below where they are now. Driving this was an unnatural growth in home ownership levels above the norm of the last 40 years as demonstrated in the chart below from the Federal Reserve Bank of St. Louis.

It should be no surprise that during this period the affordability of homes declined.

Now, as the real estate market attempts to cope with these imbalances, we find buyers and sellers at a stalemate and transaction volume has dried up. Politicians can pull all the rabbits out of the hat that they want: tax credits for homebuyers, Fannie and Freddie support for the mortgage market, government purchases of mortgages, etc… However, they can’t stop the ocean from seeking the lowest level. Nothing will return to normal until prices return to normal. And normal prices will be a good thing. For instance, homes can once again be affordable for people with good paying jobs.

During the last 10 years or so the country made poor financial decisions to put too many people in their own homes and to build bigger homes than people really needed. Instead of investing in our infrastructure we invested in granite countertops and marble showers. So today we find ourselves with vacant homes, collapsing bridges, and roads full of potholes. If the government wants to stimulate our economy they would be better off investing in our infrastructure than in more homes.

Speaking Of Potholes

While perusing David Dalka’s Internet Marketing Blog the other day I noticed several links to sites for reporting potholes and even filing a claim for vehicle damage from potholes. Sounds like a great idea. However, I attempted to file a claim about 6 months ago using the process outlined on one of those sites after my car was nearly swallowed by a giant sinkhole. OK, maybe I’m exaggerating a little bit but I did blow a tire. After dutifully taking my pictures, attaching a receipt, filling out the form, and sending it in I’m still waiting. However, I wouldn’t let that discourage you. Maybe if they get enough forms in the mail they’ll have to do something about it.