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There’s always something to howl about.

Author: Sean Purcell (page 7 of 11)

Real Estate Renaissance Man

December 11, 2008

If Mortgage Rates Are Not Going Below 5%, Where Are They Going?

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Real Estate Renaissance Man

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There was an interesting post yesterday asking Why Won’t Mortgage Rates Drop Below 5%?.  Brian Brady answered the question with a supply and demand analysis and as usual, I cannot disagree with that reliable old tool (the supply and demand analysis… not Brian 🙂 ).  But I wonder, is there more at work here than supply and demand?  Reading his post reminded me of something I have been telling my clients lately and meaning to share with everyone else:  Belief runs the show.  I suggest that Belief & Fear have supplanted Supply & Demand as our modus operandi.

The markets of late are moving as much on belief as they are on fundamentals.  Don’t get me wrong; I’m not complaining.  At least fundamentals is a player again.  For the last couple of years the markets based their valuations on leverage, blind optimism and a smug sense of higher intellect – all the while recording profits in the sand.  It is kind of nice to see some fundamental analysis come back into vogue.  But we do not relinquish old habits easily.  If I believe that ABC Company will (or should) profit ten cents per share, I will pay a price based on that belief – almost as if the profits were already announced.  This, of course, is what leads us into the strange world of Wall Street where a company’s shares can get whacked even after they announce record earnings IF their earnings turn out to be less than I thought they should be.

What does all this have to do with mortgage rates?  The fed has hinted at buying down mortgage rates using various tools at their disposal.  The market has now partially priced this belief into the mortgage backs.  Rates are down, at least to some degree, because the market believes they will drop even lower.  Once again, we equate assumptions with knowledge.  I don’t mind it up to a point; and here’s the point: lately I have had more than one client elect to wait on their purchase (or at least their purchase mortgage) because they want a piece of that Read more

November 24, 2008

Citi’s So Nice I Bought It Twice (a Tin Foil Hat production)

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Real Estate Renaissance Man

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Alright, let’s see if I got this straight:

  • Less than 4 weeks ago Citi was purchasing Wachovia in a deal brokered by the FDIC.
  • Less than 3 weeks ago the Fed injected $25 billion into Citi
  • Less than 1 week ago Citi’s shares tumbled
  • Yesterday the Fed injected ANOTHER $20 billion into Citi

Am I forgetting anything?  Oh yeah:

  • Based on share price, Citi is now worth $20 billion… which means we (the taxpayers) have bought her twice!

When Citi was buying Wachovia waaaaaaay back in October, it was apparently strong enough to handle the $42 billion in losses it agreed to take on in exchange for the Fed covering the other $270 billion that Wachovia was going to generate in bad loans.  But now we discover that they actually needed us to purchase them… TWICE, and we’re still unsure if they’ll survive.

(For a clearer picture of which lenders had these bad loans and would fail, read The Mortgage Dance from July of 2008 and click on the “accounting debacle” link which was originally delivered in a speech in August of 2007!  Or you can read about Countrywide beginning its fall back in May of 2007.  My point is that much of this seems obvious now and was actually visible on the horizon quite a while ago.  But the Fed keeps up its Animal House impression, telling us to “remain calm… all is well.”  The possibility of a conspiracy grows so large that now i don’t even leave the house without my Tin Foil Hat.)

I have to wonder if there was more going on in that initial Wachovia deal.  Was Citi getting a cash infusion of some type?  One of the influential directors at Citi is Robert Rubin – the former secretary of the Treasury.  I’m not sure I understand how he didn’t see that Citi was only three weeks away from failing.  Although I can certainly understand how he might have an inside ear at the Treasury.  Was the Wachovia deal a way to support Citi without making a public scene?  That would explain the ensuing public scene (the technical term in economics is hissy-fit) that Citi Read more

November 19, 2008

Unchained Notes: SMM is a Process, Not a Fetish

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Real Estate Renaissance Man

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This is the third in an ongoing series of posts sharing some of the gold I found at the Unchained Orlando Conference on Social Media Marketing for Real Estate.  The first post was on theme, the second was philosophy and now it’s time to talk nuts and bolts.

You hear a lot about Social Media Marketing. It is variously described as the future of prospecting, a revolutionary version of networking for a 2.0 world, the miracle of permission based marketing and – if I remember correctly – a cure for the common cold.  But more often than not you’re hearing from someone who talks about it as opposed to someone out here in the trenches doing it.  You can always tell because the person just talking about it doesn’t give a whole lot of information on how it works. You hear all the sizzle but what’s needed is for someone to actually throw a big, juicy steak on your plate.  Well, I hope you’re hungry because Brian Brady worked the grill for hours at the Unchained Conference in Orlando and he did not disappoint.  Not only did he serve up the meat of the matter, he cut it into bite size pieces and made it easy to digest.

Why
As with all teaching opportunities, Brian started with the “Why.”  Why do we market and why, specifically, is Social Media Marketing important.  The answer to the first question was easy.  Farming for new customers creates new customers and they are the life-blood of our practice.  It was the answer to the latter question that hit me right between the eyes.  The Internet allows us to automate our Unique Selling Proposition.  Think about the power in that last statement.  Automating your USP and reaching an exponentially larger audience with no extra effort or cost is a magical formula.

Brian identified the five pillars of Social Media Marketing:

  1. Declaration of Identity
  2. Identity by Association
  3. Consumer Generated Conversation
  4. Provider Generated Conversation
  5. Off-Line Conversation

He went on to show us how to “set traps” using these five pillars.  What did he mean by “setting traps?”  Being in the right place at the right time by design Read more

November 17, 2008

Unchained Notes: It’s a Greek Thing

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Real Estate Renaissance Man

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This is the second in an ongoing series of posts sharing some of the gold I found at the Unchained Orlando Conference on Social Media Marketing for Real Estate.  In the first post: An Outsider’s View from Inside the Hound Pound,  I talked a little about the theme that emerged through all the speakers.  In this, the second post, the theme reveals its philosophy.

Imagine someone handing you a list with ten actions you could use right now to improve your marketing.  Now imagine not only being given the list, but an understanding of the “why” behind the actions on the list.  You would go from an agent that is hungry, to an agent eating a fish, to an agent who knows how to fish in rapid order.  That is what Greg Swann, our first speaker, accomplished when he shared his Unchained Epiphany.

Greg pointed out that most civilizations will do just what is needed to survive and no more.  When faced with a new problem they will do just enough to overcome it but again, no more.  He did not come right out and say it, but I couldn’t help myself thinking of us as a civilization.  All of us involved in the real estate business.  We have our own language, our own goals, our own methods for determining hierarchy and possibly most important, we have our own culture.  We also suffer from the same problems Greg was describing: often doing just what is needed to get by; just enough to solve a problem, pay the bills and move on to the next thing.  Not all cultures operate this way.

The Greeks, as Mr. Swann pointed out, were the first culture to come along and reach for more than just surviving; to become, as Greg said: “a doer for the sake of having done, a thinker for the sake of having thought, a poet for poetry’s own sake.”  We, each and every one of us, has that opportunity.  We are free to succeed and we are free to fail.  We are free to control our business and we are free to believe others Read more

November 12, 2008

The Paulson Clarification (a Tin Foil Hat production)

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Real Estate Renaissance Man

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Henry Paulson figured out that buying troubled assets does not help the cause.  If you want to own the financial industry you don’t get there by purchasing their problems, you get there by purchasing them.  (Or at least watching over them with Tin Foil Hat firmly in place.)   Read the full article here.

On the other hand, King Henry is watching the Democratic machine rev up in support of auto maker bail-outs and keeping his distance.  Either he recognizes this as a straight donation to the unions or he understands how little an ownership stake in the backward facing auto industry contributes to the nationalization of our economy.  In my opinion both are correct.  For an insightful read on the auto industries’ brazen beggary go here.

November 10, 2008

Unchained Notes: An Outsider’s View From Inside the Hound Pound

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Real Estate Renaissance Man

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Random Thoughts
A day and a half since I left Unchained Orlando, but my head is still spinning.  Maybe it was Orlando – the home of Disneyworld – that added to the surreal nature of the experience.  If you haven’t been there, Orlando is beautiful in a Disney kind of way: everything is clean and bright and just a little plasticized.  Maybe the buildings all use the same 7/8 scale that Disney uses, or maybe Unchained was just oversized… hard to say.

Over the next few days I am going to share a few of the gold nuggets I panned from the rapid flood of information that was one long, intense, ecstatic day at Unchained.  But not today.  Today I am still sifting and understanding.  Today I have only themes and simple data – points of interest that do not connect into a greater whole.  For new information to infiltrate and impact our daily activities it must be processed and that is where I find myself: clarifying the headers, organizing the outline and slowly expanding the void with pages and pages of ideas handed to me while I was there.  Bloodhound Unchained in 36 hours.  A blur of activity, a multitude of speakers – each sharing freely and every last one of them speaking much too quickly for my longhand chicken scratch – and laughing.  Laughing so much at times my sides hurt.

Dark Theme Emerges
The one theme I find over and over again is most assuredly not on Greg or Brian’s agenda, but the results speak for themselves.  Allow me a few words on most of the speakers and tell me if you see a thematic element:

  • we opened with Greg discussing the Greeks and the disciplined violence that was the Spartans
  • you had Brian sharing the dark secrets of being a Ninja in social media marketing
  • Teri warned of a fatal addiction to the Tweet drug
  • there was Kelly exhibiting the cool, detached efficiency of a hit man targeting Google
  • Mitch covered 100mph and proved that speed does kill the competition
  • we were exposed to John’s killer app
  • and finally, Eric explained how to make the organically grown poison Read more
November 5, 2008

Tin Foil Hats Optional

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Real Estate Renaissance Man

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In an earlier post I laid out how my distrust of conspiracy theories is being severely challenged by our government and what appears to be a naked power grab.  I am loath to continue in this vein for fear of being labeled the nut job who writes about Area 51 and Men in Black.  But my tin foil hat fits well and the strange shenanigans continue unabated at the government level.

WASHINGTON – The former chief risk officer at investment bank Bear Stearns Cos., which nearly collapsed in March, is now a senior official of the Federal Reserve division that supervises U.S. banks.

Michael Alix, who worked at Bear Stearns for 12 years and was its senior risk manager since 2006, was named a senior vice president in the bank supervision group of the Federal Reserve Bank of New York, the Fed announced. (emphasis mine)

Read full story here.

So, just to make sure I am getting this straight: the senior man in charge of assessing risk for a company that… failed miserably in its risk assessments (costing billions) will now “help oversee the financial safety and soundness of banks.”

What?

We (the taxpayers) pledged $29 billion to backstop the sale of Bear Stearns to JP Morgan and the government hires the individual originally tasked with preventing such meltdowns and puts him in charge of evaluating bank risks?

Each time I find myself with tin foil hat in hand, I think it only prudent to end the post the same way I did that first one: I am no longer confused…  I am scared.  Are you?  Are you paying attention?

October 31, 2008

Do You Like a Good Scary Story? Read This One Anyway…

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Real Estate Renaissance Man

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I am not, by any stretch, a conspiracy person.  I think the probability of a conspiracy succeeding is inversely tied to the number of people involved.  That makes me especially dubious of government conspiracies.  The bottom line for me is this: people are smart, groups are dumb.  If you want to understand something just follow the money.

But I am getting a little scared.

You may have heard about the various bailouts and financial manipulations the government is engaged in lately.  It has been in the news.  There was a $750 billion bailout, followed by another $500+ billion bailout.  A number of investment banking firms were bailed out (and, curiously, some were not) while AIG continues to be handed money.  Banks are being force fed money and there are more stimulus packages on the way.  All done, we are told, to save us from a world economic collapse.

But is it true?  This week the Fed lowered the fed funds rate… again.  Lowering the rate didn’t do a damn thing a month ago, so why are they trying again?  Here’s a better question: Why are they lowering the rate at all?  Lowering the fed funds rate effectively lowers the “cost” of money.  When do you lower the cost of something?  When their is a demand problem.  From everything you have read, do we have a demand problem or a supply problem?  We are being told that everyone needs money and no one will lend it.  So why in the world would you lower the price of money?

Let’s leave that alone for a minute and move on to the credit crunch.  As I mentioned previously, the world economic collapse is precipitously close and liquidity is the problem.  “No one is lending money.”  “Commercial paper has dried up.”  “Our financial system is grinding to a halt because cash is being hoarded.”  I have not taken the time to actually go out and find these headlines and link to them.  I trust this is now such common wisdom you will take it on face value.  But take a look at the following graph:

Interbank Loans

That represents the loans, in Read more

October 30, 2008

Credit Default Swaps Are Not The Bad Guys

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Real Estate Renaissance Man

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David Shafer is a frequent commenter here on BHB and his insights often make me think.  We do not always agree, but I always listen to what he has to say.  He recently posted an interesting and (typically) well written article entitled Credit Default Swaps; The real financial WMD.  You can imagine from the title his take on these instruments.  Part of the article quotes from a recent 60 Minutes segment on credit default swaps  called The Bet That Blew Up Wall Street which is a hatchet job… I mean fair and balanced investigation for which this particular news show has gained such renown.

I commented on this article to the point that it was obvious I was writing a post, which brings us up to date.  I do not agree with the popular sentiment regarding CDS’s and I definitely do not agree with the simplistic view put out by sources such as 60 Minutes that imply derivatives are nothing more than gambling.  The problem is not with the tool but rather the hand that wields the tool (and no doubt, some of the hands at the helm of the credit default swaps market belonged to real tools, if you know what I mean).

Read this very carefully: Credit Default Swaps serve a very legitimate and important purpose.  Derivatives are a must in the market place and here’s why: they provide a hedge on risk.  The ability to hedge risk is an extremely important aspect of our markets.  Without it equities would be lower, rates would be higher and capital would move more slowly.  Derivatives are NOT some bastardized form of gambling.  The suggestion by 60 Minutes and others that they should be outlawed only reflects their rudimentary understanding of how markets work.

I’ll give you an example using a derivative called options, which were my area of specialty as a floor trader.

ABC company insures the debt of XYZ company, allowing XYZ company to borrow desperately needed funds for expansion, research and other job creating endeavors from a large pension fund that would not otherwise have bought XYZ’s bonds (lent them the money).  Read more

October 28, 2008

God Save Me From Another Real Estate Flyer

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Real Estate Renaissance Man

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Over the past couple weeks I have been reading every real estate flyer I could find.  I am sure many of you are asking why I would submit myself to such torture… and you would be right to ask.  If I had to guess, eight out of every ten flyers I read were sheer torture.  How familiar does this sound:

Just look at all the room in this lovely 3 bedroom, 2 bathroom ranch style single family residence with attached garage.  Enjoy 1742 square feet of flowing space with enough room for parties or quiet solitude overlooking your own private backyard.  Hurry, this one won’t last long!

Did you just call that home a “single family residence?”  Why are you repeating the bedrooms and baths?  Is that information not available somewhere more appropriate?   Who are you talking to when you look up over your slide rule and say 1742 square feet?  Appraisers?  Contractors?  How many people do you think know the difference between 1742 square feet and 1648?  Or even 1700?  “Honey, stop the car!  This house has that extra 42 square feet we have been dreaming about.”  Please STOP… or you won’t last long.

Most of the real estate marketing I see starts like this and goes downhill from there.  The reason is simple: this is not real estate marketing.  Unfortunately, most agents do not know the difference.  I attribute some of this to the poor copy writing we are inundated with via the television and a lot of it to the fact that marketing is just not taught, or at least not taught well.

THE BIG FIVE
Over the next few posts I am going to discuss real estate marketing.  The list of potentially innovative ways to market a home are never-ending.  Many new ideas are shared right here on BloodhoundBlog.  I do not hold any illusions of being so creative myself.  But I do understand the basics of marketing and I am quite adept at borrowing great ideas from other people.  With that being said, in the next couple of posts I am going to discuss the five basics everyone should be doing:

  1. MLS Read more
October 26, 2008

A Disturbing New Dynamic

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Real Estate Renaissance Man

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Although this post discusses the election in general, it is not meant to instigate a general discussion of the election.  It is… a non-political post on politics.

In talking to various people about the upcoming presidential election and their preferences, I was stuck by an odd response I kept hearing – in various forms – over and over again.  I decided to do an extensive, double blind study – exhausting all resources in order to generate a valid conclusion.  Following this study, I now believe we are witnessing a new election dynamic (or at the very least a dynamic not previously seen in our life time).

Editor’s Note: By “extensive” I mean I asked anyone who walked into, out of or near my office doorway.  I did not actually go the whole distance and get up off my seat.  Also, by “double blind” I mean to say neither I nor the person I interviewed had a clue what we were talking about.  I imagine my idea of “exhaustive” needs no further explanation…

In all seriousness, when I meet someone voting for either candidate I ask them a straightforward question: “Why are you voting for that candidate?”  Even though I spoke with a full spectrum of ideologies, I heard a similarity in all their responses.  If the person was an Obama supporter they would provide answers such as “four more years of Bush… disastrous deregulation by the current administration… conservative duplicity with Wall Street” and so on.  If the person was a McCain supporter they would provide answers such as “tax and spend Democrats… redistribution of wealth… lack of liberal strength in the face of terrorism” and so on.  I rarely got an affirmative answer with regard to their candidate of choice.  In other words: they were not voting for someone so much as voting against someone else.

That people cast their vote for someone they are not particularly excited about is not new.  Nor is casting a vote solely in opposition to the other candidate.  What is groundbreaking (and, so far as I know, not being reported) is that this year, for the first time Read more

October 24, 2008

Tiger the Caddie?

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Real Estate Renaissance Man

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Last Monday Tiger Woods returned to Torrey Pines in beautiful San Diego, but not to golf.  Instead he caddied for John Abel, winner of the “Tee Off With Tiger” online sweepstakes sponsored by Buick.  This is such a great picture that I can’t help but fill in some dialogue.  Mine is below.  What do you hear them saying?

AP Photo/Lenny Ignelzi

Abel: “This looks like a tough one Tiger.  What would you do here?”

Tiger: “Well, I would push this putt along a path eleven inches left of the true line, with just enough touch to clear the fringe but still allow the natural slope of the green to pull the ball back and down, dropping into the hole dead center… I have no idea what you are going to do.”

AP Photo/Lenny Ignelzi

October 23, 2008

The Last Vestige of Respect… Gone

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Real Estate Renaissance Man

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With a little over a week to go in this election, we can finally all come together in agreement on one issue.  Whether you are voting for McCain: the logical vote, or voting for Obama: the emotional vote, or voting third party: the non-viable vote (unfortunately) – one thing has become clear.  The mainstream press has given up all pretense of being unbiased in their coverage.  They are blatantly shilling.  Whether we like the candidate they are whoring for or not, any respect we could have is gone.  The fourth estate has lost all legitimacy.

This final nail in the coffin was delivered by CNN earlier this week.  By all accounts, CNN has been as neutral as possible during the election.  They appear a little left of center by most accounts, yet they have been relatively even in their coverage.  What respect they deserved is now gone too.  On Tuesday night, Drew Griffin interviewed Governor Sarah Palin.  Watch the video at about 1:25 in and listen to the question Mr. Griffin asks of Governor Palin.  She is visibly shaken by it:

Now please read the actual paragraph that Mr. Griffin is quoting from the National Review.  It was written by Byron York (not a difficult fact to find out Mr. Griffin) :

Watching press coverage of the Republican candidate for vice president, it’s sometimes hard to decide whether Sarah Palin is incompetent, stupid, unqualified, corrupt, backward, or — or, well, all of the above. Palin, the governor of Alaska, has faced more criticism than any vice-presidential candidate since 1988… (full article here)

The first and last lines change the meaning a little don’t you think?  To say Mr. Griffin quoted Mr. York to Governor Palin out of context would be an understatement. The National Review article now has an Editor’s Note that reads in part:

Editor’s note: Byron York’s recent article in National Review on Sarah Palin’s time as governor of Alaska became a campaign issue Tuesday when CNN’s Drew Griffin distorted its meaning in a high-profile interview with Palin.

You can, of course, Google all of this and you can read Read more

October 17, 2008

A Song and A Smile

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Real Estate Renaissance Man

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A week or so ago I was out for an early morning run through Balboa Park.  This is one of San Diego’s gems and part of what makes living here worth the cost.  It was daybreak and quiet; mostly the sound of my own footsteps echoing across the Spanish style buildings that house the many museums and exhibits.  Occasionally I would see another runner or a young couple up early for a walk (or maybe they were still out, ending their evening with a walk).  Mostly though, it was a wonderful run of solitude.  As I came up on the little art village I turned in to its plaza.  Here, in a few hours time, there would be artists selling paintings and sculptures and all forms of creativity.  I still don’t know why I veered in, the plaza does not go anywhere.  It is just a cul-de-sac of stone pavers lined by small, decoratively painted arts and crafts buildings used during the regular business hours of the park.

There was one other person on the street that early, unloading paintings from his van and arranging them just so.  He looked to be in his late fifties and he looked to be happy, but more than that he looked interesting.  I found myself slowing down as I made the turn to go back by him; I guess I wanted to connect somehow… there was something about this guy.  So I stopped and said hi.  We talked a bit about his paintings and we talked a bit about my run and pretty soon we were just talking.  The kind of talk that is comfortable, like you already know each other.  His name was Steve and he was almost 74 years old, yet we had a lot in common.  He had been a shot-putter and football player just as I had.  We knew the same names, although he knew them as the guys that came along after him and I knew them as the guys I tried to emulate while growing up.  Our philosophies were similar and our backgrounds too.  It was a rewarding conversation Read more

October 16, 2008

Point / Counter-Point

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Real Estate Renaissance Man

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Michael Cook wrote a thought provoking post earlier entitled What Happens to the Early Worm.  So thought provoking that I found my comments drifting to post length.  So how about a little point/counter-point?

Michael, a very detailed and thoughtful post. I would not disagree with you that cautiousness is a safe strategy (although not always a profitable one) and I certainly do not disagree with your assessment of the people here on BHB.  But I do have some other questions:

The income / price equation did not get out of whack overnight, so buyers and sellers should not expect it to correct itself overnight either.

All real estate is local and that is never more true than now. In some areas we have seen real estate go through the support level of fundamental value (that value which would allow an investor to purchase a property and cash flow). This is no different than the Dow last week. It was oversold and many companies could be purchased below their fundamental value. So are you suggesting that rents are going to decrease in these areas?  Otherwise, the correction has already occurred in some areas.

You are looking at some of the best real estate agents in the business here. So when they write that their business has not dropped off, it might lead the casual reader to believe that the real estate market is not in a tailspin or even that real estate is close to a bottom. Do not be lulled into a false sense of optimism. This group is adaptable, smart and most of all well above average.

Michael, to whom are are you writing this post?  If it is agents then I suggest the new market has caused an industry-wide house cleaning.  Those that do not belong have seen business disappear and those that do have been rewarded; but this does not necessarily reflect a worsening real estate market.  If, on the other hand, you are writing to consumers then I suggest they read you closely when you say that the top agents have found “their business has not dropped off.”  It has not dropped Read more

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Inventing Real Estate 2.0

Welcome to BloodhoundBlog, the national real estate industry marketing and technology weblog written by, for and about real estate professionals. Better yet, welcome to the wired world of real estate. We are busily inventing Real Estate 2.0 – technology, marketing, service and salesmanship. Like all Bloodhounds, we are smart, frisky and fiercely independent. We've built a spot on the earth – beloved over all – where each one of us can be who we are, no matter who that might be. We are committed to an idea of excellence that will flush the bums, the con-men and the crybabies out of the real estate industry. If you yearn to have your failures excused, your moral lapses absolved or your boo-boos kissed, seek elsewhere. But if you are sick to death of mediocrity – welcome home. Read all about us, subscribe to our feed and steel yourself for the hunt. We work hard, we play hard, we learn everything we can – and we bow to no one.

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