Zillow.com Sued

For the past year or so, many real estate agents, residential buyers and sellers have talked to me about Zillow.com, an online house-pricing service. They have told me that they no longer require a formal Comparative Market Analysis (CMA). They simply look up house prices on Zillow.com and use them.

I have looked at Zillow.com on several occasions but never found the information to be as accurate as the pricing guidelines developed when I completed a formal CMA. I've told many people that I did not trust the Zillow.com information platform, found data to be out of date, and have advised them not to use the service whenever accurate pricing is required. I know of no professional appraisers or mortgage companies who rely on or allow Zillow.com pricing data.

On October 30th, a non-profit group filed a complaint with the United States Federal Trade Commission against Zillow.com. The National Community Reinvestment Coalition (NCRC) says Zillow.com is misleading consumers, lenders and real estate professionals.

NCRC says Zillow.com is accurate less than 30 percent of the time and that this causes "substantial injury to consumers nationwide when they consider selling their home." Zillow.com provides online data on the value of about 68-million American homes.

Moreover, the NCRC feels that Zillow.com is more prone to underestimating the value of homes in low to moderate income areas than in more expensive neighborhoods.

Zillow.com said the complaint is groundless. Zillow said its web-based service is designed merely as a "starting point" for those who want to learn more about house values.

I would point out to the professional real estate agents and brokers who read this blogsite that we are not hired to give data on house values as a "starting point". Our opinions on matters involving real property can be considered the opinions of an expert, and as such the public is allowed to rely and act on our opinions. Since Zillow.com, by their own admission, offers only a starting point in property valuation, I would advise professionals to use the figures with extreme caution and to continue the good practice of preparing in-depth CMA's as a way to accurately advise your clients and protect the interests of the public in general.

For more information on real estate in the Tampa Bay area, visit my website at www.TheStPeteRealEstateSite.com.

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Buyers: Now's The Time To Tour Homes

Fall ushers in that wonderful time of the year with three of my favorite holidays. Holloween, Thanksgiving and Christmas? No ... not those holidays. I'm talking about three really important events ... the Tampa Bay Fall Tour of Homes, the Candlelight Tour and Bungalow Fest.

This year's Tampa Bay Fall Tour of Homes runs October 28th through November 12th. 139 absolutely drop-dead gorgeous homes are included in this year's tour that includes properties in Pinellas, Hillsborough, Pasco and Hernando Counties. Hours of the tour are 10 to 6 PM, Monday through Saturday; Noon to 6 PM on Sundays. The St. Petersburg Times has a large insert that gives you all the home locations, or you can go to the Tour's website at www.tampabayparadeofhomes.com.

The Candlelight Tour of Homes will take place on Sunday, December 10th from 3 to 8 PM. This evening tour takes place in the historic Old Northeast neighborhood in St. Petersburg. You can visit eight homes by foot or by trolley. Tickets are $15 in advance or $20 on tour day and are available from many local retailers starting just after Thanksgiving.

Bungalow Fest in Historic Kenwood gets underway on November 3rd with their moonlight tour from 7 to 10 PM. Tickets are $15. Then on November 4th you should attend the famous Bungalow Fest Home and Garden Tour from 10 AM to 3 PM. Tickets are $10. A two-day combined ticket is only $20. You can get tickets in advance at Craftsman House Gallery, 2955 Central Avenue or get additional info at the website, www.historickenwood.org.

If you're a buyer, or if you're just looking for great decorating ideas, touring these homes is a great way to spend a few hours. I love to go to these events, so maybe I'll see you there!

For more info on real estate in Tampa Bay, visit my website, www.thestpeterealestatesite.com.

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Buy Now: It May Be Later Than You Think

Home buyers are reluctant to buy right now. It's easy to understand why. Pick up any newspaper, tune in the TV news, read any financial magazine and all you hear about is the real estate "correction". Consequently, homebuyers are nervous about committing to the purchase of a new home or investment property. Prices could -- and I stress the word could -- go lower and buyers fear they would have paid too much and be unable to recoup the price difference any time soon.

It's true, in the short run your real estate investment might become de-valued. But unless you are planning to sell the property quickly -- flipping is the common term -- you should look at your real estate purchase as a long-term financial investment. If you look at it that way, the short term ups-n-downs of the marketplace are virtually meaningless.

Let's take a brief look at some key factors that might have a bearing on your purchase decision. These factors may change your mind about putting off your purchase and will give you some good ideas as to why now may be a good time to buy.

1. Low Mortgage Rates. Mortgage interest rates seem to be holding in the neighborhood of 6.5% for a fixed rate 30-year mortgage. Historically, that is cheap money! Sure, it is not the 3.5% rates we saw a year to two ago, but if you're holding your breath for those rates to return you are likely going to suffocate. Take advantage of these historically low rates right now before they go away forever.

2. You're Already In A Buyer's Market. There is no doubt that it's a buyer's market today. At the end of September, 2006 in Pinellas County, Florida, the local Multiple Listing Service had a total of 16,202 single family homes, townhomes and condominiums listed for sale but only 1,028 properties were sold that month. As a buyer, you now have a huge selection of property and very little competition since so many buyers are sitting on the sidelines waiting for prices to suddenly drop. If you wait for newspaper writers to pen stories saying the real estate market has bottomed-out, all those people who have put off buying will suddenly jump back into the market. This will increase competition. Increased competition will reduce your selection and, more importantly, drive prices higher. It will become a miniature version of what we had in 2002-2004 with rising prices. Act now while the selection is at its best and while nervous sellers will negotiate lower than expected selling prices, discounts and other consessions.

3. Sellers Are Getting Impatient. Some homes have been on the market for many, many months. Some sellers are desparate. Some are in financial trouble and must sell to avoid foreclosure. Now's the time to float them an offer that's on the low side of acceptable but not insulting. You might be pleasantly surprised at what happens. After all, money talks.

4. The Market May Have Already Bottomed. Asking prices may be as low as they are going to get. How low do you expect sellers to go? Frankly, my crystal ball is a little cloudy on that answer. Even in markets where heavy speculation drove prices way, way up, the experts say prices will likely only adjust a few points. Do you think prices are going to fall back to where they were in 1999 or 2000? Not likely. Take Naples, Florida, which is one of the most over-priced real estate markets in America; prices are expected to drop by only 18% there. In Tampa Bay where there were plenty of speculators driving up values, prices may drop by only 7% to 10% on average from where they peaked last year. In fact, asking prices may already have come down as far as they are going to go. If you keep waiting, you may actually miss out on the bargains. Now is the time to start making offers.

5. Get Adjusted To The "New Normal". We all need to come to grips with the fact that the real estate market we see today is pretty much the real estate market we'll see for many years to come. We need to get used to it. Home ownership has become expensive and is likely going to stay that way. It's the "new normal" -- high prices, high taxes, high insurance rates, and fluctuating mortgage rates. We all need to learn to live with it, and to learn to live within our means in spite of it.

Waiting for prices to come down reminds me of a cartoon I saw some years ago. It was of an old, old, old man looking at a house with a "for sale" sign in the yard. The caption said something to the effect that this is what happens to young men who wait for real estate prices to come down. Think about that one for a moment.

If you're a buyer, here's the deal today ... mortgage rates are low, but may go up anytime ... selection is fantastic because inventories are high ... you control the negotiation because you have money and sellers are getting nervous ... competition is low ... sellers are looking for offers. It does not take a genius to see that this is the time to buy.

If you wait, here's the danger ... mortgage rates may creep upward ... competition from other buyers may drive prices upward ... your selection will be gradually reduced ... sellers may see market improvement and not be willing to negotiate even lower prices.

Nobody wants to lose money on real estate. The odd thing is that if you're waiting for prices to come down, you may end up paying more. Buying now may be the smart move.

If you want more information about real estate in Tampa Bay, please visit my website at www.thestpeterealestatesite.com.

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September's Sales Report Creates An Important Question

Well folks, Sepember's sales reports from the Pinellas Realtor Organization (PRO) are now in. After reviewing them it leads me to ask this question ... "When does a market correction start to become a market crash?"

We keep reading that the market is slowing and that this is simply a correction; that the market is cooling after several years of unsustainable growth and price expansion. We keep hearing about an "orderly adjustment" and we all keep looking for "positive influences within the economic framework".

Sounds like bureaucrat-speak to me.

Here's what's happening.

As usual, let's look at the absorption rate for single family homes and condos for September. The absorption rate is the inventory turn. It is calculated by dividing the number of units sold in the month by the total number of listings in the MLS.

The absorption rate for single family homes in Pinellas County for September was 7.0%. That is the worst absorption rate since PRO started reporting them in January of 2003. By comparison, the absorption rate for September of 2005 was 35.7%.

The absorption rate for condos last month was 5.3%. By comparison, in September 2005 the absorption rate for condos was 26.1%.

Single family home listings totaled 10,127 units in September 2006. Last September there were only 3,388 single family homes on the market.

Single family home sales last month totaled 706. In September 2005, 1,210 single family homes were sold.

Pretty sad. Tough time to be a seller. Good time to be a buyer.

Condo listings declined last month from the previous month. Last month there were 6,075 condos on the MLS list, but in August the MLS showed 6,130 units for sale. A year ago in September 2005 there were only 2,217 condos listed for sale.

Condo sales dropped. Last month only 322 condos were sold. In August of 2005 there were 593 condo sales. So, the reduction in condo listings can not be attributed to an increase in condo sales. It must be expired listings or withdrawal from the marketplace that is causing the reduction in condo listings.

Perhaps condo activity will pick up as we move more toward the traditional condo buying season. Let's keep our fingers crossed!

The single family home median price was $217,000 in September, and it has been steadily trending downward for months now. The median price for condos in September was $157,000. It's also been trending downward for months.

Year to date, overall sales are off 31.1% from last year.

Those are the facts, folks. What I'm looking for is a definition of a market correction. Perhaps one of you economist-types out there can supply it to me.

For more info on real estate in Pinellas County, visit my website at www.thestpeterealestatesite.com.

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Why Americans Are Becoming House Poor

As a nation, we are becoming house poor.

In every state but one, homeowners are spending a larger percentage of their annual incomes on housing costs. In 1999, housing costs averaged 19-percent of annual income. Last year, the percentage rose to 21-percent. Only in Alaska did the percentage remain the same over those years.

It's a very simple set of data released by the U. S. Census Bureau. It shows that home prices have increased greatly in many states since the start of the decade. In that same period, household incomes have dropped an average of 2.8-percent.

Commenting on this data, Mark Zandi, chief economist at Moody's Economy.com said "Until incomes catch up, the housing market is going to remain flat."

According to the government, housing costs are excessive if they top 30-percent of household income. Nationally, 34.5-percent of homeowners with mortgages paid over 30-percent of their annual income for housing costs in 2005. That's an increase of 7.8-percent of homeowners since 1999. Housing costs are defined as payments for mortgage, taxes, insurance and utilities.

Here in Florida, the cost of homeownership rose at about twice the national rate in the last five years. In the Census Bureau's ranking of states comparing the portion of household income spent on housing expenses, Florida ranked #10. In the last five years, Floridians had a higher rate of growth for housing expenses, rising from #26 to #20 on the ranking of median costs for housing expenses.

Rising home prices. Declining personal income. No wonder Americans are becoming house poor. Doesn't sound too encouraging to me.

For more information about real estate in the Tampa Bay area, visit my website at www.thestpeterealestatesite.com.

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Floirida On Both "Top 5" Lists

Florida is the only state to be included as one of the top-5 places to live for both U.S. residents and foreigners.

A public opinion survey asked people from both the U.S. and internationally where they wanted to live. Americans selected Florida as their third favorite place while the international answers placed Florida second.

The survey was conducted amont 9,000 U.S. residents and over 12,000 foreigners by the Anholt State Brands Index, www.statebrandsindex.com. Here is the order ...

U.S. Responses:
1. North Carolina
2. Virginia
3. Florida
4. Colorado
5. Oregon

Foreign Responses:
1. California
2. Florida
3. Hawaii
4. New York
5. Washington

Florida is the only state showing up on both lists. At least we now know one thing ... Florida has a great brand image among both domestic and foreign audiences.

For more information about this survey, go to the Anholt State Brands Index website at the link provided (above). For info about real estate in the Tampa Bay area, visit my website at this link ... www.thestpeterealestatesite.com.

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Insurance Risk-Takers Stand To Make Gazillions

Two of the many things that impact the real estate market are property taxes and property insurance premiums. Since this is a real estate-related blog, I feel it is okay for me to pass comments once in ahwile about both these subjects, but make no mistake, this is not going to become a political blog even though some of my comments may border on politics.

So, here are some things about insurance that you need to know that I found out only recently.

A select group of risk-taking investors stand to make huge -- and brother, I mean huge -- gains if the weather holds in the southeastern United States. Problem is, the money that represents the profit to these investors comes from the outrageously high premiums you and I pay to insure our properties.

Here's the story, and I'm piecing this together from info from the Associated Press that I've read during the past few weeks ...

First, you need to understand what a reinsurance company is, then I'll tell you about something called a sidecar. Essentially, reinsurance is another form of insurance that is purchased by insurance companies. Think of it as insurance for the insurance company. If there is a huge disaster and the insurance company is faced with big losses, the reinsurance company steps in to help pay large claims from policyholders. This helps to spread out the risk in cases involving disasters and keeps the insurance company solvent.

During the last year, a handful of reinsurance companies placed a bet. They bet that this year would be light on hurricanes along the Gulf and Atlantic coastlines of the United States. In the process of accepting the reinsurance business from insurance companies, the reinsurance companies wrote policies with exceptionally large premiums. In other words, they charged the insurance comapnies out the proverbial wazoo for reinsurance. This was simply a way of hedging on their bet that the weather would hold good for an entire year despite what the hurricane predictors were saying.

What does this mean? It means that for each calm day in the Atlantic and Gulf of Mexico, these reinsurance companies get one day closer to securing hundreds of millions of your dollars that they did not have to pay out as reinsurance claims to insurance companies.

Your dollars? You bet. Here's why. The costs for that reinsurance, plus a little extra margin of profit I'm sure, has been passed along to you in the form of significantly higher insurance premiums. That's how your insurance company gets the money to pay for it's reinsurance policy. So, all the hurricane-free weather that we've enjoyed this season has served only to line the pockets of the billionaires who control reinsurance companies.

Who are these people? And how much money are we talking about?

Does the name Warren Buffett sound familiar to you? Yes, we're talking about the same Warren Buffett who just gave away billions to charity. According to the AP, two divisions of Buffett's Berkshire Hathaway company stand to make gazillions if the weather continues to hold. Then there's a little outfit called RenaissanceRe Holdings Ltd. This company is headquartered in Bermuda and they specialize in going into areas that have just had a disaster because that is where their pricing and terms are most attractive. This company is doing so well that its stock, which is traded on the New York Stock Exchange, was selling for $55 per share on Monday, the 2nd of October. That stock price is up almost 50-percent from where it was a year earlier.

At this point you need to get to know a new term in the world of investments and insurance. That term is sidecar. A sidecar is a group of investors who provide investment capital to cover risk for a specified period of time, say a year to two years. So, you may have a sidecar that provides reinsurance capital funding for wind damage in Florida for a year or two. The sidecar investors leave the management of the insurance programs to the insurance experts, but they generally share in both the premiums and profits, and -- if things go badly -- the losses. So, there is an element of risk in sidecars.

But sidecars are proving to be highly profitable right now because there have not been any major hurricanes this year. The AP reports that Rob Bredahl, president of reinsurance brokerage firm Benfield, Inc. of New York, is predicting returns of 20 to 30 percent or more for many sidecar investors this year. By comparison, the Dow Jones Induatrial Average is up only 9 percent and most people feel it has been a pretty darn good year in the stock market. So, this give you an idea as to why people are willing to take a risk with sidecar investments.

So, there's a 20 to 30 percent upside for the sidecar boys. To understand the profits being made, you have to understand the magnitude of the investments made in sidecars. Highfields Capital Management oversees $8-billion in sidecars; Third Avenue Management invested $2.3-billion. Now, if you make a 20 percent profit on $8-billion in one year, you've made a couple of bucks.

Problem is, folks, it's YOUR money paid in as increased insurance premiums. And it is one of the reasons why your premiums have jumped so high so fast.

Now, we have to be fair about this. When a disaster comes, these investments aren't worth the paper they are printed on and losses can be huge. When Katrina and Rita hit last year, Berkshire Hathaway's reinsurance divisions had losses totalling $2.02-billion. I would not have wanted to be holding a sidecar investment then. But so far this year there have been no major storms. So, those same divisions are doing stunningly well with your money. In fact, the Berkshire Hathaway divisions involved with reinsurance will show third quarter gains of about $400-million. Folks, that's $400,000,000 in 90 days! RenaissanceRe will post after-tax operating income of $612-million this year. That's $612,000,000 in 12 months! Where did the money come from? I think you know by now.

"It's just going to be mind-blowing how well they do", said Glenn Tongue in an AP story. Tongue is associated with hedge-fund T2Partners which owns Berkshire stock. Mind-blowing is right. How long will it take them to make up the losses from 2005? And when they do, will they reduce their premiums? Sure.

In the meantime, I guess all you and I can do is complain. Simple fact is that the insurance system is broken. I don't know how to fix it because, as I've written before, it's a combination of big business greed and government incompetence that has gotten us to this point. Oh, and to a certain extent we've done this to ourselves through our love for coastal development combined with city, county and state governments who see coastal expansion as a way to increase property tax rolls. Witness the condo growth along the Pinellas County (Florida) beaches during the past five years. Ah, but that's fodder for another story.

Anyway, I urge you to join the various protests going on now about insurance premiums. I don't really know if it will help because the companies involved are so large they can pretty much ignore consumers, government bureaucrats are ineffective in overseeing premium growth, and politicians don't have an answer to the problem but will certainly accept campaign contributions from the same companies that they are supposed to regulate.

So, that's what I found out recently about the insurance problems in Florida. If you want to stay in touch, keep reading this blogsite and go to my website, www.thestpeterealestatesite.com.

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Maybe My Dad Was Right

When I got out of college back in the stone age, my father advised me to go to law school and move to San Diego, California. He thought the practice of law was a nobel calling, and he believed that California was simply the place to be.

I didn't much care about law school, and had no great desire to move to California.

Perhaps I should have listened more closely to what pop had to say.

If I had, I might have made a fortune in real estate even without the law degree. Let's say, for the sake of argument, that I had moved to California back in the early 1970's and bought a house. I don't know what the median price for a house was in California back then; suffice it to say that it was a whole lot less than it is today. Maybe it was $50,000. Maybe $100,000. I really don't know.

Well, the median price for a home in California now stands at $477,700. That ranks California as having the highest median price for housing in the United States. Clearly, I would have enjoyed quite a tidy profit had I bought something there 35 years ago.

But California is not the only place where real estate prices have jumped. The Census Bureau is going to release information today (October 3, 2006) that shows the following ...

• New Jersey residents have the highest average housing costs per month: $1,938;
• West Virginia residents have the lowest average housing costs per month: $797;
• The most expensive state in which to rent is Hawaii with an average of $995;
• North Dakota is the least expensive state to rent with an average of $479;
• Mississippi has the least expensive median home value: $82,700;
• Among America's 15 largest cities, San Francisco has the most expensive homes with a median home value of $726,700.
• Among America's 15 largest cities, Detroit has the least expensive median home value at $88,300.
• This is the factoid my dad would have loved: from 2000 to 2005, San Diego had the biggest increase in median home value, going from $249,000 to $567,000. Yup, that would have been a good investment if you could find a buyer for it today.

Now, this is not to say that real estate prices have stood still in Florida. They haven't, as we all know. It's just that in California the gross numbers are much bigger. Sometimes I wish I had paid more attention to my dad.

If you want to stay up to date on what's happening in real estate, continue to read this blogsite and also go to my website, www.thestpeterealestatesite.com.

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