Tonight, a handful of real estate innovators will gather with Mass. Legal Hackers team at Code of America / Code for Boston. They could be formidable new allies who help unleash the potential of blockchain / smart contract to build real estate apps that are #FiduciaryFirst.
What’s at stake: $110B, including $30B annually in real estate?
Want to get involved in efforts to reform the real estate industry and deliver billions in consumer savings? Visit http://RE2020.Loomio.org and request access if you’d like to collaborate; or simply listen to the audio post above, and share your thoughts. We’re particularly interested in humorous ideas to help the consumer protection / public awareness campaign we do annually between the Ides of March and April Fool’s Day to go viral. Be sure to use #REFooled if you post anything you’d like others to see (if you’ve been househunting in Greater Boston, Cambridge and surrounding communities, you know why.
Fooled again? Let’s use tech to reform real estate / BLIND bidding wars
As 2016 comes to a close, there is an uptick of activity on BostonBubble, a forum for homebuyers in Greater Boston that dates back to 2005. A self-described “lowly renter” is asking advice about homebuying in the New Year because of pressure he’s getting from relatives. Know anyone in a similar situation, or having similar conversations with your own peers about housing in a DysTrumpian era?
One renter adamantly wrote, “that parabolic up moves in prices in any market ALWAYS are an the tell of a coming crash.” We generally agree but submit that it’s more complicated than that; otherwise the “totally artificial housing market” (Robert Shiller’s characterization) would have turned down by now. See why we thought that way during 4Q2013 via the empathy map above.
Housing Resolutions for the New Year
New Year’s is a time to look into the future, and there are numerous ways to do that. If you’re a “lowly renter” getting pressure to buy consider the following:
Short-term perspective: Rather than dismissing well-intended relatives, maybe you can ask for their empathy. Copy this Empathy Map on Google Drive, complete it and ask your relative, parent, spouse, whomever to do the same. Compare your perceptions of whether it’s a good time to buy, and maybe even share your responses here or offline in person:
Wonder if mortgage lenders will begin rejecting or risk pricing loans based on the prospect that one’s livelihood will disappear before the end of their loan? Regardless, what impact will that have on housing expenditures (not just housing prices)?
Some say disruptive demographics will take housing down again before jobs begin to disappear. Greater Boston and New England already have a disproportionate percent of people over 60. Would you buy or sell a home in 2017 knowing that the next housing downturn will become more obvious by 2020? What are you doing to future proof your decisions?
As written in our previous blog post, there are already signs that the housing market is slumping. Anyone else fear that we could see another lost decade in housing? How does that influence your home buying strategy?
Regardless of whether you plan on buying in 2017 or hear warning bells, want to meet off-line to complete / compare housing Empathy Maps including our own from 4Q2013? For those hoping to buy, want to learn more about “Defensive Homebuying”?
Contact us by calling 617-661-4046 or this form for more information. We hope to host offline events, we call “Bubble Hours” over beer in 2017. Follow #REonTap on @RealEstateCafe
The Consumer Federation of America, an organization that includes 300 groups, just finished their annual Financial Services Conference and the event begged the question, what is the future of consumer advocacy in a DysTrumpian era? This hard-hitting opinion in the Washington Posts asks if a Trump economy will teach kids to be “con men.” Here’s what’s at stake:
“…big companies and moneyed interests [are] eager to fleece unsophisticated or shallow-pocketed borrowers, investors, consumers, workers and small-potatoes entrepreneurs.
To the untrained ear, Trump’s campaign rhetoric suggested he might be on board with Obama’s mission.
Trump spoke frequently of how the system was “rigged” against the little guy, and how — because no one knows the system better than Trump — he alone could un-rig it. But now that he’s heading into office, Trump has flanked himself with a fleet of anti-regulation, anti-consumer subordinates who appear hellbent on dismantling the Obama administration’s hard-won pro-little-guy protections.”
Who will protect consumers from the oncoming assault? Leading consumer advocates from non-profit and government agencies around the country gathered at their annual two-day event, and their concerns are reflected tweets using the hashtag #CFAFS2016.
One keynote and a break out panel addressed the need to protect investors, particularly those saving for retirement, by preserving the hard-won “Fiduciary Duty” rule president-elect Trump is likely to repeal. Hoping to link a recent court decision protecting homebuyers from conflicts of interest, Real Estate Cafe asked what’s the best way to extend fiduciary reform into real estate in a series of tweets.
#RE2020: Protect consumers, deliver billions in savings
To my knowledge, no real estate consumer advocates participated in the gathering but another panel addressed privacy and the abuse of personal data collected online. That is one of the emerging issues in real estate, and creepy real estate apps get our nomination for “Stealth Story of 2016.” Consumer advocates and tech innovators need to collaborate with conscientious Realtor groups, like the @CRTLabs, to extend #FiduciaryFirst principles to include the role of #InformationFiduciary. As Doc Searls told that group, “Shelter is Privacy 101;” and his Castle Doctrine explains why managing personal data from smart homes and real estate transactions is a consumer’s right in an era of surveillance capitalism.
Let’s use the Boston Realty Party, our annual gathering(s) of real estate innovators and consumer advocates on (or near) the anniversary of the Boston Tea Party, to reconnect and update perspectives on what real estate might look like by 2020, the end of Donald Trump’s presidency. Scary thought, but the real estate ecosystem is already changing, the question is who will reshape the future? Want to use these links to try?
To extend California’s landmark victory against dual agency, consumer advocates need to be involved in efforts by real estate insiders to update the agency disclosure form in Massachusetts. Anyone else alarmed that this meeting is being held at the Mass. Association of Realtors? Classic example of the fox guarding the chicken coop?
December 11 will mark the 9th anniversary of joining http://BostonBubble.com, a forum for homebuyers to crowdsource insights during the real estate recession. Over that period, Real Estate Cafe contributed over 100 posts, and two offer context for the current housing market. Obviously, they were written pre-Trump, and one cannot underestimate the potential impact his presidency (if it is not overturned by the Electoral College) will have on the housing market. Despite his celebrity status as a “real estate mogul,” he has NEVER developed a housing policy and his choice lead HUD, Dr. Ben Carson, has no housing experience.
Six months after warning homebuyers on BostonBubble of a changing housing market, October stats and recent headlines reveal that real estate sales and prices are falling in Massachusetts
As interest rates rise, will 1Q2017 see a repeat of 1Q2016? Time to exercise “Defensive Homebuying” strategies so you can save money, be proactive or simply sit out because there is too much uncertainty? If you’re inclined to buy, here’s the case for bargain hunting this time of year:
Anyone want to meet at Cambridge Common near Harvard Square or Joshua Tree in Davis Square to talk about the implications of these emerging trends, and whether it’s possible or wise to “time the market.”
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Know anyone who’s suffering from buyer’s remorse, wondering if they were manipulated into overpaying in the past two years? Will we see a “Bidding War Backlash” in the next 18 months and a repeat of regrets like those in 2008?
Rather than taking legal action two years from now, what’s the best way to be preemptive — calm bidding wars during the next 100 days?
My hypothesis: By mid-August, the pre-election pause will cool currently overheated areas expanding the count of communities with falling housing prices.
What’s your prediction?
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As the image above shows, comments on BostonBubble have dropped to a trickle and there haven’t been any updates on the news feed in four months. So Real Estate Cafe is setting up a place to monitor REBubble 2.0 online and we’re eager to begin hosting informal “Bubble Hours” as part of our ongoing series of conversations over beer, aka #REonTap. Our goal is to inform homebuyer clients by crowdsourcing insights from other buyers, and selected real estate professionals particularly other buyer agents. Similar crowdsourcing efforts a decade ago helped some clients save more than $100,000 off original asking prices.
Here’s what our Real Estate Bubble Map / wiki looked like a decade ago (unfortunately Platial.com went out of business so you’ll see repeated gaps), want to help us explore ways to track REBubble 2.0 this time? Here’s what’s at stake:
MUST READ list of why Bubble 2.0 more dangerous than Bubble 1.0
Without a question about housing or any mention of investigations and lawsuits related to Trump University, references to real estate were revealing in last night’s debate between presidential candidates Hillary Clinton and Donald Trump.
When a reporter asked afterwards if there were any defining moments, a Clinton strategist didn’t need to spin. Donald Trump’s lack of empathy for millions of Americans who were devastated by the real estate recession was revealing.
“Accused of practicing racial discrimination in his businesses, he says being sued by the federal government is ‘one of those things’ and even though he paid up, there was ‘no admission of guilt.’”
He repeated “no admission of guilt” twice as if that would absolve him from the truth.
The truth is that Donald Trump saw foreclosures as an opportunity to exploit people. “That’s called business,” was his dismissive response when Hillary Clinton exposed Trump’s greed. So if he lashes out at Fed Chief Janet Yellen for creating another “big fat ugly bubble,” he needs to be held accountable. If elected President, which version of Donald Trump would develop policies to protect millions of homeowners if they go upside down again on their mortgages again?
Is that a far fetched scenario? Not according to some housing market observers. Real estate is cyclical and storm clouds are already forming according to the co-founder of Keller-Williams. The next president will need an enlightened housing policy to address numerous problems:
5. We have only one affordable housing unit for every three seniors who need it.
Housing is taking a larger and larger share of household budgets, so some prominent people argue that affordable housing should have been more prominent throughout the primary and presidential campaigns. Rather than waiting for debate moderators to ask, maybe ordinary home buyers and sellers should crowd source our own questions.
Bernie Sanders fans want to start here?
Mr. Trump, you made your fortune through real estate but your father developed thousands of units for ordinary people. What’s your vision for housing a generation of millennials who are watching investors and foreign buyers remove starter homes and affordable condos from the housing market?
What about real estate professionals? Why aren’t leaders in the industry stepping forward to confront the candidates on housing as they did at the bottom of the housing recession?
Across the river in Cambridge, concerns about soaring housing prices were mirrored by 80 neighbor-to-neighbor comments after one member of NextDoor, a neighbor-only site, expressed concerns about “how many members of the “public [hearing on affordable housing]” were developers, and how few were residents and advocates.”
Despite shared concern about rising costs, the gap between the two threads revealed a hidden problem: how little is known about the role foreign buyers are playing in the current speculative cycle and their short and long-term impact on affordability. What we do know is that:
Millennium Tower opened their sales center in China before the Boston,
“…going back to 2013, recall that the People’s Bank of China allowed Chinese companies to lend money in renminbi to their offshore branches without any limit and without any requirement for them to first notify regulators.
That essentially meant that companies could transfer money out of China without having to worry about capital controls. Home prices started increasing strongly around the world since around that year.”
How can we raise awareness about #SpeculatorsWithoutBorders? Here are two idea starters:
IDEA STARTER 2: Use humor to raise awareness about #SpeculatorsWithoutBorders
We’ve shared this idea with a number of insiders, and invite feedback on using LAUGHTivism to expose #SpeculatorsWithoutBorders. Should we play with the idea sometime over beer at one of our #REonTap sessions?
Bidding wars are blind, so unless someone spills the beans, first-time homebuyers may not know that they’ve been outbid by a foreign buyer. However, if the same buyer or investor pool turns that purchase into an AirBnb unit, it may be easier to spot and:
If short-rentals violate your condo by-laws or threaten to undermine financing options and resales, report to your condo association.
Finally, if you’d simply like to sound off about the problem, record a one minute sound bite using this link via lap/desktop or your smartphone. We’ll share it with Senator Elizabeth Warren’s staff, as Congress is investigating whether “short-term rentals may be exacerbating housing shortages and driving up the cost of housing in our communities.”
A controversial protest organized by Black Lives Matter Cambridge resulted in extensive media coverage and an open letter last week in the Cambridge Chronicle entitled, Fight for affordable housing in Cambridge is fight for black liberation. Unfortunately, the same publication rejected my comment so posting here and eager to share with City Councilors, various affordable housing committees, and Envision Cambridge — the $3.3M citywide planning process.
Encourage affordable housing advocates to look at the impact “external demand” and bidding wars are having on a daily basis in Cambridge; and as reflected in the bullet points in the attached above, the long-term implications of the globalization of real estate. As you can see from this announcement posted on a Cambridge real estate agent’s Facebook page, it’s no secret that Cambridge real estate agents are courting international buyers and investor pools:
My sense, unverified at this point and potentially unverifiable unless policy changes are made, is that foreign buyers and investor pools are removing affordable housing (which they define as $500K starter condos) faster then they can be added to the housing inventory.
What can we learn from other cities about how to respond? Vancouver has imposed a new 15% real estate transfer tax on foreign buyers. Significantly, the tax does not come out of the sellers pocket or the developer’s proforma. As such, it essentially taps into Cambridge’s international appeal to raise funds to increase affordable housing.
Look into the future, and see the consequences if we continue to let #SpeculatorsWithoutBorders drive up prices and extract affordable housing opportunities:
BOTTOMLINE: Add a 5th and potentially 6th bullet point to the list in the Cambridge Chronicle’s Guest Opinion?
5. Impose a buyer tax on foreign buyers, similar to Vancouver where international investors pay 15% on top of the sales price; or Singapore’s model: any investor / non-owner occupant pays a tiered buyer tax.
There’s been a flurry of more than 30 comments on @NextDoor following a recent Cambridge City Council meeting on affordable housing. Mine is shown below. Want to share yours offline tonight at #REonTap? Let’s meet at the Podcast Garage where we’re learning to expand our voice and invite yours as well. If you can’t attend, you can still reply to the conversation starter below:
Robert, I like your question: What would you like (data) to prove? My hypothesis is that the globalization of real estate = supply of affordable units going in reverse in Cambridge. Consider these bullet points:
1. Price is not the sole measure of affordability, ask anyone who’s been told they need to pay $100K/+ over asking price to win a bidding war in Cambridge (ironic for a city with its own Peace Commission);
2. While Cambridge has added nearly 1,000 affordable units; how many others have been extracted from the existing housing stock by investors — foreign or domestic; short-term rental (like @AirBnB) or crowdfunded pools looking to maximize long-term rents? Marc McGovern & Robert Winters, my guess is that the number FAR exceeds the 200 affordable ownership units added since 1998.
3. Other cities including Vancouver are responding with innovative solutions:
3.1 Regulating the BLIND bidding process used by real estate agents to increase transparency, and
3.2 Taxing foreign buyers 15% on top of their purchase price. That’s calmed demand from #SpeculatorsWithoutBorders and put downward pressure on prices.
With blogs on Forbes & Financial Times hyping Cambridge real estate as a great investment:
… time we also explore emergency regulations to protect the “Common Good” from multiple perspectives: existing residents who’d like to downsize but can’t find anything affordable, businesses who’d like to attract employees put off by housing costs, and our adult children who’ve been priced out of Cambridge?
My assumption is that many buyer agents who take fiduciary duties seriously have worked with buyers willing to pay over asking price because they believe rising prices will offset their leap of faith. In 1988, Nobel prize winning economist Robert Shiller and Karl Case said those kind of calculations turned homebuyers unknowingly into the drivers of a speculative boom / bust cycle as 6 to 10% of homes sold over asking price. In some locations like Cambridge, Massachusetts that pace is now up TENFOLD, as bidding wars are at a dangerous unprecedented pace.
Recognizing that, this stunning finding asks what role are buyer agents playing. By one quantitative measure of ROI or ROA – Return On Agency, buyer agents generated savings beyond their paycheck in just 17 or 217 transactions in Cambridge. That’s a paltry 8%:
When buyer agents pioneers launched their practices two to three decades ago, they routinely quoted excerpts like this:
HOUSE HUNTING? SAVE BY HIRING YOUR OWN BROKER
“If you ever doubted the value of real estate agents who work solely for home buyers (as opposed to traditional agents who report to sellers, consider this: A recent study by U.S. Sprint found that 232 relocating Sprint employees who hired buyer’s brokers paid an average of 91% of a home’s list price. People who use traditional agents typically pay about 96%. On a house originally priced at$150,000, that’s a difference of $7,500.”
“…Buyers average a 5% savings when represented by a buyer’s agent rather than a seller’s agent.”
What happened, and what will happen when the market changes? Will we see a repeat of 2008 when clients began suing counterfeit buyer agents?
With Keller William’s founder warning about a shift in the housing market — http://bit.ly/BewaREShift, is it time we develop a meaningful if not quantifiable measure of buyer agents effectiveness that exposes fake buyer agents? Maybe something as simple as:
Put the savings back into buyer agency?
Some say the next major housing crisis will be generated by “disruptive demographics,” and in retrospect, it may be clear were’s headed for another lost decade in housing. What’s your take?
Back of the Napkin sketch from Global Legal Technology Lab, by Brenden C. Maher.
Back of the Napkin sketch from Global Legal Technology Lab, by Brenden C. Maher.
Since the early 1990’s, Real Estate Cafe has scouted innovations at the intersection of real estate + technology + consumer advocacy, but we’ve never attended a streak of events like the past month. As new technologies and players come into the emerging real estate ecosystem (#RE2020), we’ve expanded our radar screen to include innovations in RETech, FinTech, LegalTech, Smart Cities, Smart Homes, Internet of Things / Internet of Me, and Blockchain.
Significantly, two events this week (2Q2016 / WK 20) will address Blockchain in Real Estate. Would anyone in Boston / Cambridge like to meet offline for some or all of today’s event via Twitter or any Livestream, Blab or Periscope that event organizers might share?
Matt McKibben from Ubitquity.io will be in town to participate in this MIT event. Should we invite him to demo their blockchain solution for title? If so, are there people we should invite from the #RE2020 ecosystem to expedite adoption / expand awareness?
Our the past four weeks, we’ve scouted #RE2020 trends and innovations at nine events — seven in person and two virtually:
04/25-28/16: VRM Day / Internet Identity Workshop (IIW)
05/02-03/16: Concensus 2016 (Blockchain conference in NYC)
04/16/16: MIT FinTech Conference
04/22/16: MIT Future of Cities Conference
04/17/16: Real Disruption
05/6-7/16: Global Legal Technology Lab
05/11-12/16: National Association of Realtors Mid-Year conference
05/12-13/16: RE.Work Connected Home Summit
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What events should we watching or attending in coming weeks to continue to monitor changes in the #RE2020 ecosystem?
WEEK 21: 05/22-28/16
WEEK 22: 05/29-06/04/16
For the past two decades, the Real Estate Cafe has hosted technology debriefings after major technology events. We’re currently updating our ongoing list of Best of Breed money-savings apps and the reVRM-Minifesto we first drafted in 2010. With that in mind, we’re pleased to learn that Doc Searls, of ProjectVRM or Customer Commons, is drafting on The Castle Doctrine that will address the use of personal data in Smart Homes.