Remodeling Impact Report 2019

The National Association of Realtors (NAR) recently released their 2019 Remodeling Impact Report. The report, which examines homeowners’ reasons for completing the projects ranked, also provides the costs and seller recovery values for many of the tasks.

The annual report does provide insights into the home ownership demographic concerning their desired improvements and thus potentially predicting the future market concerning sellers and buyers. It is no secret with housing prices in some markets having risen exponentially since The Great Recession has changed the traditional cycles concerning move-up and move-down buyers. Thus entry-level homes have become scarce yet the upper-end of the luxury market has been challenged for the last few years as move-up buyers are staying in their homes and embarking on structural and cosmetic improvements versus moving.

While not surprising new roofs and kitchens continue to be popular as roofs are a basic and important structural component of the home and updated kitchens provide not only satisfaction while in-residence also is desired by potential buyers and usually provides one of the highest ROI when selling.

Of interest in the report is closets: “This year, we saw the estimated cost of closet renovations increase from 2017; however, we also saw an increase in the cost recovered from this project,” Brandi Snowden, director of Member and Consumer Survey Research at NAR, “Because homeowners are staying longer in their homes, we see them investing more elaborately than in the past.”

Another effect of homeowners staying in their residences longer is they’re choosing to invest their money in projects that they’ll use on a daily basis, and that will improve the functionality and livability of their home.

Aside from kitchen renovations and upgrades and closet renovations, other interior projects hugely popular with both homeowners and REALTORS® this year are HVAC replacements, new wood flooring, bathroom renovations and adding new bathrooms.

As far as exterior projects, the REALTORS® surveyed in the report note that new roofing was most popular among homeowners, and, in their opinion, would add the most value to a home.

Of interest during the last two years I too have updated my kitchen with new cabinets, countertops and backsplash. I too had two bedroom closets updated with Elfa from The Container Store. In my former home I had a phenomenal walk-in closet designed by California Closets and was a joy for 25+ years. My next projects are an updated bathroom and refinishing of the wood floors presently hidden under worn wall-to-wall carpeting. While I know I will be in residence for the immediate future I also know the improvements when designed in a timeless, classical manner, I shall be able to recoup the cost invested and enjoy during my residency.



Size Does Matter in Real Estate Part II

Seller and buyer have come to a resolution.

As advised last week I had a unique situation. While representing a buyer for a condo in Denver I was perplexed concerning the actual size of the unit as follows:

  • The MLS/Listing Broker advised the unit was 1,080 SF*
  • The Assessors Office advised the unit was 994 SF
  • An appraiser I use for measuring advised 975 SF

*The 1,080 SF measurement was off a valuation appraisal completed a few months prior.

The difference between my appraisers measurements and the marketing materials was 106 SF. While the number does not sound large at $515 PSF the value of the difference exceeded $50,000! In addition 100 SF equals a 10’ x 10’ room or potentially a 2nd bedroom.

Some background, seller and buyer agreed to transact at a PSF of $508.78 based on the 1,080 SF per the listing.

The resolution: an independent appraiser was hired, his measurement 1,026 SF.

After some back and forth between seller and buyer (my client) the final amount concerning the sale will be $520 PSF. The negotiation and final sales price was a fair compromise between seller and buyer.

Yes my buyer is paying slightly more on a PSF basis however the price is based on the revised downward size. The seller is divesting of a unit that is actually smaller than they believed however on a PSF basis; securing a price that is in-line with their original ask. Thus I believe will be a win-win for all at the closing table.

The message here is this, the Square Footage Disclosure in Colorado actually advises one to consider getting their own independent measurements. From experience builders plans and actual measurements can vary. Assessors while generally connect can be off by 10% in either direction. Independent appraisers can come up with different numbers even though technically using the same standards for measurement. The following is a screen shot of the text from the Square Footage Disclosure used in Colorado:

Screen Shot 2019-09-30 at 1.42.27 PM

Thus if in doubt laser measuring devices are inexpensive and I would strongly suggest hiring an independent appraiser that both parties can agree on. In a marketplace where $500 PSF can be the norm the reality is every square foot counts. While the phenomenon is new to Denver, in major cities like New York, Los Angeles, San Francisco and others were PSF exceeds four figures on average appraiser measurements are nothing new and are sometimes added as a contingency in the sales contract.

At the end of the day both parties are satisfied. My buyers looked at many properties and this unit met all their checkboxes. The seller while selling a slightly smaller condo is actually receiving more on a PSF basis than his original asking price. Thus a win-win for all.

Next week why negative interest rates are detrimental to real estate.



Size Does Matter in Real Rstate

I am presently representing a client concerning the purchase of a condo. In the interest of privacy I will not disclose the address or actual pricing except on a PSF basis.

The residence is listed for sale and the Square Footage Disclosure(SFD) advises 1,080 SF. As I have visited the unit multiple times with my client and the inspector I truly questioned the 1,080 SF, as eyeballing it, seemed smaller. Related the SFD concerning the listing is executed incorrectly thus adding to my suspicions.

I went to the local Assessors office for where the condo is located. The Assessors office advised on their official measurement used for taxation purposes the unit is 994 SF. Perplexed I called an appraiser I know; he measured and came up with 960 SF or 975 SF depending on how one takes into account an interior support beam. Finally a 3rd party brokerage marketing support firm RealList the size of the unit 1,008 SF. Thus the average is 994 SF and the median is 993 SF.

Basically we have a 10% discrepancy. While this may not sound like much; at $500+ PSF we are looking at a potential $50,000 change in value.

When the listing broker was asked about the source of measurements they first advised the measurement was taken off building plans. In general not the best source as plans (embellished) and reality (what was actually built) can differ. Yet a valuation appraisal completed a few months prior shows a 1,080 SF space (see picture above, my appraiser in black, valuation appraisal in red). Thus a quandary, which is correct?

At present three(3) sources advise the measurement is closest to the Assessors Office of 994 SF and two sources placing at 1,080 SF. While 10% may seem miniscule; concerning a condo we are literally missing a 10’ x 10’ room and at $500+ PSF, $50K of value.

Today the unit is being measured by a 3rd party appraiser hired by the listing agent. Will advise either by adding to this blog post or next week’s submission.

On a personal note I have found from experience the County Appraiser number is usually accurate concerning attached homes i.e. condos, townhomes and so forth. Yet in one instance on a listing I found the local assessor to be off by almost 10%. The Assessor had a measurement of 805 SF for a one bedroom condo when it was actually 900 SF (at $415 PSF selling price a substantial difference).

The mistake, the line of condos was in-fact 805 SF throughout the building HOWEVER on floors 2-3 the same condo line was larger by 95 SF due to the base of the building having a larger footprint that narrowed beginning on the 4th floor and thus the line of condos shrunk to 805 SF between floors 4 to the roof.

Thus if in doubt, consider hiring your own appraiser to measure. Can you measure yourself? Of course however if you hire a licensed appraiser and there is a challenge your evidence is strengthened by the use of a licensed appraiser and their standard of measurement taking and analysis.



When New York City Real Estate Sneezes does the rest of the Country Catch a Cold

The deluxe and luxury housing market is a unique indicator concerning the housing market and overall economy. The first indication of green shoots during The Great Recession was the activity in luxury housing as affluent, equity-comfortable buyers were able to purchase luxury housing for at the time bargain-prices.

Since The Great Recession deluxe and luxury housing has buoyed the market in part due to desired profit margins, return on investment and demand due to historically low mortgage rates (even for jumbo loans) and until recently expansive tax advantages.

However it seems the deluxe and luxury housing market is suddenly feeling a chill.

While each market is unique New York City may be a good bell-weather. Demand always outstrips supply i.e. housing vacancy rarely exceeds 1%. While not the country’s most expensive housing market; it is a market with the most diverse housing opportunities across its 5-boroughs.

What is your reaction to the following headline: “A quarter of the new condos built since 2013 in New York City have not yet found buyers, according to a new analysis of closed sales.” Yes folk’s that is 25% or 1 out of 4 and that statistic is actually optimistic.

Among the more than 16,200 condo units across 682 new buildings completed in New York City since 2013, one in four remain unsold, or roughly 4,100 apartments — most of them in luxury buildings, according to a new analysis by the listing website StreetEasy.

While the situation is not as dire as 2008 when projects stalled post-Lehman and new buildings are still on the rise evidenced by active cranes in all 5 boroughs, but there are signs that some developers are nearing an inflection point. Prices at several new towers have been reduced, either directly or through concessions like waived common charges (HOA for the rest of the country) and transfer taxes, and some may soon be forced to cut deeper. Tactics from past down cycles could also be making a comeback: bulk sales of unsold units to investors, condos converting to rentals en masse, and multimillion-dollar “rent-to-own” options.

A secret many of my peers in the brokerage community know a growing share of condos sold in recent years have been quietly re-listed as rentals by investors who bought them and are reluctant to put them back on the market. Of the 12,133 new condos sold between January 2013 and August 2019, 38 percent have appeared on StreetEasy as rentals.

Again New York City is a unique market however on my morning drive through Cherry Creek to Downtown along Speer Boulevard or 8thAvenue I see multiple cranes on the horizon. I am also seeing rental complexes advising a free month’s rent. More telling is what I consider the post 8PM test, looking at buildings that are dark or have lights on, however not a stick of furniture within view.

While I cannot predict the future I believe within the next 3-5 years we shall all bear witness that sellers of rental buildings between 2015-2018 transacted at the top of the cycle as buyers may have over-paid while chasing returns to exceed those available in a low interest-rate environment. Added concern for my readers: Real Estate Investments Are Never ‘Recession-Proof,’ but Some Are Safer Than Others.

Unfortunately statistics lag behind present and actual market conditions. Personally my listings are sitting on the market longer, showing activity is less robust and offers are coming in below asking; quite the reversal of our recent hyper-active multi-offer marketplace. Again I am suggesting a Yellow Light for caution moving into the Fall and Winter.


Older Homeowners Continue to Invest and Stay in Place

As brokers we are always advising homeowners (both sellers and buyers) of the list of home improvements that will improve resale values. I too did this when I sold my primary residence a few years back to 1) achieve the highest price and 2) increase my cost basis to lessen capital gains tax liability.

However our market continues to be challenged partially due to older homeowners not selling to downsize. Instead this segment of the market is investing in their residences for continued occupancy. Yet their investment and improvements may not be visible to the naked eye.

Spending on home improvement has grown more than 50 percent in the U.S. since 2010, when it hit a low during The Great Recession. And homeowners who are 55 and over are the major force behind that spending, according to a recent report from the Harvard Joint Center for Housing Studies, based on data from the United States Department of Housing and Urban Development, and other sources.

Aging homeowners, in fact, were responsible for half of the home improvement spending in 2017: 25% by those between 55 and 64 / 25% by those 65 and older:

  • Type of Improvement / # of Homeowners / Average Expenditure
  • Carpets, floors, paneling, ceiling tiles / 5.2 million  | $3,283
  • Plumbing / 4.1 million | $1,360
  • Built-in dishwashers and garbage disposals / 3.7 million | $570
  • Windows and doors / 3.7 million | $3,442
  • Water heaters / 3.6 million | $976
  • Roofing / 3.4 million | $7,674
  • Bathroom / 2.9 million | $6,362
  • Landscaping – Sprinkler System / 2.8 million | $2,497
  • Central Air Conditioning / 2.7 million | $5,113
  • Electrical Wiring – Fuse – Breaker Box / 2.2 million | $1,473

While some have argued that long-term older homeowners staying in place may be stressing the housing market i.e. constraining supply I see the positive; infrastructure of those homes being improved including energy efficiency coupled with a retention and increase of value of the residence. We may be moving towards the European model of improve versus raze and replace.

Happy House Hunting.

Bidding Wars Seem to Have Given Way to Détente

While I have been suggesting the real estate market has been softening over the past year, maybe longer I have had peers advise I am off base and to be honest anecdotal information has been challenging to come by. Yes we have more inventory on the market (check). Prices have stabilized and in some markets have come down from peak levels (check) with the caveat more inventory naturally leads to price stability (true). Interest rates at 3-yr lows do not seem to be impacting the buying market (check) yet refinancing is strong.

I believe the most compelling data to support my views concerns Bidding Wars of lack thereof. In the not too distant past bidding wars were commonplace. Listed properties would literally receive multiple competing offers. Brokers would advise in their comments “Please submit highest and best offer with cash or pre-approval letter ”. Some prospective buyers would actually waive contingencies including but not limited to inspections and appraisals, foolhardy in my professional opinion. I even heard of situations of offers placed site-unseen; the rationale, if it does not work out I can always place back of market and sell for a higher price.

Of note I always advised clients both seller and buyers to avoid bidding wars as in the end no one is happy. The buyers who were outbid feel rejected. The seller has to review multiple offers, many similar to each other and make a decision based on tangible and intangible data. I am not even going to mention the Love Letters; as a broker I will not read them and I advise my sellers not to either and buyers not to compose and send. Here is a link concerning The Colorado Real Estate Commission Advisory concerning Love Letters sent to the Brokerage Community:

According to the real estate brokerage Redfin, of note the following concerns their brokers; they advised only 11% of the properties for which their agents submitted offers in July 2019 had multiple bids, down from 46% in July 2018. Of note Redfin the 11% number is the lowest share since 2011 (and for those with short memories in 2011 nationally we started to climb out of The Great Recession).

Concerning Denver we went from 49% to 14% (see chat below). I can attest as I have multiple listings that are sitting on the market, all priced mark to market, yet still awaiting a buyer.

The following chart from Redfin (based on their activity concerning offers for their clients shows that change in percentage of offers involving multiple bids or more commonly known as a bidding war:

Location:                 July 2018       July 2019

National:                    46%               11%

San Francisco            72%                35%

San Diego                   62%                21%

Boston                        64%                16%

Los Angeles                65%                16%

Philadelphia              37%                14%

Denver                       49%               14%

Phoenix                      48%                14%

San Jose (CA)             80%                13%

Sacramento               39%                9%

Washington               40%                9%

Raleigh NC                 29%                9%

Portland OR               37%                9%

Chicago                       31%                8%

Seattle                         41%                8%

Atlanta                       35%                8%

Austin TX                   39%                8%

Las Vegas                   31%                7%

Dallas                         43%                7%

New York                   41%                6%

Houston                      38%                5%

Miami                         30%                1%

Will bidding wars more commonly known as multiple offers continue? Of course. If a property is listed below market and/or has demand i.e. design, neighborhood and so forth a multiple offer situation can happen. I know brokers who purposely list properties below market as a strategy (with their clients permission) to generate interest and buzz. The downside, offers may not come in and it is always more challenging to adjust a price upward versus downward.

As a broker my suggestion to clients is to price mark to market as noted above with my listings. If priced correctly based on comparable sales, condition and so forth the laws of supply and demand shall prevail. Let us hope the chart above advises the return to a more rationale less speculative marketplace. Coupled with historically low mortgage interest rates some excellent opportunities may arise.

What Usurps Low Mortgage Rates Concerning Housing Activity? Confidence

While I truly understand as a broker the continued optimistic view of housing espoused by my peers; hey its our bread and butter. Yet even with last week’s downdraft concerning mortgage interest rates the housing market did not suddenly spring back to the activity levels of last year and asking prices did not all of sudden increase. There is a fundamental reason why activity did not spike; it’s called confidence or lack thereof.  Let me explain:

  • First: Mortgage rates have been falling sharply over the last three months, which should be incredibly positive for the housing market, but so far reaction has been muted in both home sales and new home construction. Granted part of the drop was due to the inverted yield curve and discussion concerning a Recession on the horizon but the point is…..The average rate on the 30-year fixed is now well below 4%; it was above 5% in November 2018. The drop in rates has not produced a home-buying spree for either new or existing homes.


  • Second: The drop in interest rates did have impacts specifically concerning refinancing activity.  This is a mixed message as refinancing may suggest prospective sellers may actually be staying in a home versus selling and moving up or down from their existing residence HOWEVER most who refinance will conduct a cost-benefit analysis i.e. months to recoup the investment and then subsequent savings. Thus due to refinancing one would assume housing availability would be further constrained. However……


  • Third: The further drop in mortgage rates did nothing to encourage people to buy, as there was no change in intentions to buy a home, and instead there was a 9 point jump in those that said it’s a good time to sell a house—the most since 1992 when this question was first asked. Of note I am in the same boat as I have literally stopped looking for now and am not enticed by the attractive interest rates.

Consumer confidence fell sharply in August, according to a just-released report from the University of Michigan. The report said consumers felt they needed to be cautious about spending in anticipation of a potential recession. That bled into housing. Again coupled with the gyrations in the equities market, continued volatility concerning tariffs and asking prices that has remained at 2018 levels the Fall season may be worth watching (I suggest from the sidelines) as recession fears and become a self-fulfilling prophecy.

A quote I have used this week with clients both looking to purchase and those looking to sell has been the same: “Sellers believe it is 2018, Buyers believe it is 2020 and at some point the two shall meet in the middle”.

When the For Sale By Owner Does Not Work Out

As some of the readers of my blog know I live in Cherry Creek North since 1989 (wow that is a long-time). Thus I have been through and boom and bust cycles of the neighborhood. I still remember in the beginning days of The Great Recession when a Craftsman Style Mansion was constructed on the southwest corner of 4thAvenue and Garfield Street (373 Garfield St) as I knew the owner of the duplexes (on the 100’ x 125’ lot which were sold and razed for the 8,000+ SF residence to be completed in 2008.

Fast forward to 2016/17, the mansion makes the news twice.

First in 2016 the owner of 373 Garfield Street filed a lawsuit against his neighbor across the alley concerning impeded access to his garage. Here is the story from CBS Channel 4: Feuding Neighbors Head to Court Over Alley Parking Spot. 

Then in June 2017 the owner of the house enjoyed an extensive article in the respected online BusinessDen periodical in which the owner was planning to place his house on the market as a For Sale By Owner or FSBO. The article titled: Cherry Creek Mansion FSBO: ‘I’m not going to pay 6 percent on a $5 million home’

My favorite quote from the article is as follows: “I’m not going to pay 6 percent on a $5 million home. I’m just not going to do it. I don’t need to,” Neubeiser said. “The home is going to sell itself … If you dangle $156,000 (the 3 percent commission) in front of me, believe me, I’ll jump.”

Well, fast forward two years to July 2019, the home is for sale and guess what it is listed by a real estate broker; here is the listing: 373 Garfield Street listed by Camber Realty.

Of note the co-op commission offered by Camber Realty is 2.8%, thus even if the brokerage listing the home is paid zero ($0.00) at asking of $4,995,000 the seller will still be on the hook for the commission to the co-op broker also known as the Selling Broker, the broker/berkerage who brought the buyer to the table. The amount assuming receives the full asking price: $140,000

Trust me as a homeowner and a real estate broker I understand the desire of FSBO’s; i.e. sellers assuming they will sell their own homes, ascertain a value, facilitate all the negotiations including contesting a potential appraisal shortfall, execute all the paperwork and so forth to save anywhere from 2.5%-6%. Of note many FSBO’s are now paying co-op commissions of between 2.5% and 3% thus savings are even less.

I get it; within hot/in-demand markets why pay a commission when you can sell it yourself. From experience I have witnessed FSBO’s languish on the market and after losing months of time to save a listing commission the house is them listed with a full-service or discount brokerage. Yet in the interim the seller has been paying on the mortgage, lost valuable time in marketing and prospective showings being a FSBO.

Now as the overall real estate market begins to cool and inventory increases I predict FSBO’s will be less common. Yes I know many marketing channels exist for FSBO’s and there is the false belief that brokers are taking commissions just to place a listing on the MLS and sit back. If that were the situation I would be composing this blog from The Maldives and not my office.



Are Auto Sales Flashing a Potential Warning Sign for Residential Real Estate

It is assumed for most people the largest purchases are their homes and cars; known as the ultimate in durable goods in economic parlance.

Thus some recent news from the automobile market started to get me wonder are trends in the two markets similar?  The catalyst for my question? The luxury German automakers all reported a slow-down in sales.

Granted the article I lined to above also mentions macro forces i.e. tariff/trade-war, Brexit and other issues however the bottom line is the same; luxury auto sales are slowing.

The same can be said about luxury housing on both coasts and in Denver, which is witnessing price adjustments to the downside concerning luxury residences.

Manhattan’s high-end apartment prices suffer as NYC real estate cools.

Luxury home sales see biggest slump in nearly a decade.

Now I am the first to admit luxury car sales and luxury home sales are probably not the best leading indicators of an economy’s health. Then how about run of the mill cars?

Between 2009 and 2016 sales of new cars and trucks rose steadily the longest growth streak since at least before the Great Depression. Millions of Americans traded up to bigger and more sophisticated vehicles decked out in leather and outfitted with gee-whiz electronics and safety features.

The same trend happened in housing with the housing growth streak beginning in 2010 as green-shoots started to peak out of the carnage of The Great Recession. The growth in housing sales and prices seemed to run unabated until approximately 2017.

Back to cars, concerning automobiles sales to individual buyers are now falling. Even once popular sport utility vehicles and pickup trucks are sitting on dealer lots for longer stretches. I know; do not feel sorry for car dealers as they have a 7-year boom cycle. Yet how about the effect on our overall economy?

Let’s consider auto sales: Consumer purchases, which are known as retail sales, fell 3.5 percent in the first half of the year to their lowest six-month total since the first half of 2013, according to J.D. Power and Associates. Such sales are considered a more accurate measure of demand than total sales, which include purchases by fleet operators like car rental companies. Related, AlixPartners, a consulting firm with a large automotive practice, estimates that sales will drop more than 2 percent in 2019, to 16.9 million vehicles. The firm expects the industry to sell 16.3 million vehicles next year and 15.1 million in 2021.

While not delving into too much detail concerning economics one should note a slowdown in auto sales as noted above could weigh on the United States economy. The auto industry is the largest manufacturing sector and makes up about three (3%) percent of our gross domestic product. Automakers, parts manufacturers and dealers directly employ more than two million people. Car companies spend billions of dollars every year on research and development.

On a more micro level consider the following concerning AutoNation with more than 325 franchises, AutoNation is considered an industry bellwether and other dealers often follow its lead. AutoNation has been paring inventory for the last three months, and now has 64,000 new vehicles in stock, 9,000 fewer than a year ago. The company has been limiting orders to top-selling models and cutting back on vehicles that tend to languish for weeks or months and often need to be heavily discounted or sold at a loss.

Personally I see similarities concerning the housing market including price adjustments, longer days of market and homes that are not in prime high-demand neighborhoods or located on busy streets languishing on the market.

One additional parallel concerning housing and cars; the average price of new vehicles has risen to around $35,000, while interest rates on auto loans have edged higher. That means people have to be willing and able to spend more to buy a new car than they were just a few years ago.

Sound familiar? While housing prices are adjusting downward in most markets prices are still at or close to record highs, demand for entry-level housing is not being met and even though interest rates on a conventional mortgage can still be had for under 3.75% the housing market seems to be directionless.

Now I do not know how the Federal Reserves monetary action of last week i.e. cutting Fed Funds rates by 25 basis points AKA .25% will have in igniting the housing and auto markets, two markets tied to loan products I believe the following quote sums up my feeling from a family run 6-showroom dealership in the heartland “After such a long period of growth in a cyclical industry, we know we’re headed for a recession.”

Of note as this blog was composed the day prior of the Fed Rate Decision the following article crossed my desk post composition courtesy of The New York Times:  Lower Rates Already Hit Housing. They’re Not Helping Much.


Alexa Help Me Purchase a House

Full disclosure my wife has an Amazon Prime membership. Of note I do not have an Alexa and use Amazon rarely. With the above disclosed I am intrigued……….

When I heard the announcement I did not know how to react. Yet as I pondered the partnership between Amazon and Realogy Holdings I realized in its most basic terms Amazon is taking their disruptive (I use disruptive concerning traditional retail) retailing model and applying it to traditional real estate practices.

Let me explain.  First I would have assumed Amazon would have partnered with Zillow, Redfin or other post millennial i.e. Year 2000 real estate entities that desire to be disruptors. Then I realized Amazon is not truly a disruptor, instead it is another unique channel concerning retail distribution and is now venturing into real estate. For Realogy Holdings some of their traditional brokerage brands include but are not limited to Coldwell Banker, Sothebys Realty, Century 21, Better Homes and Gardens and others the partnership may reverse their decline in value i.e. falling from a $7B market capitalization in 2013 to around $600M in mid-2019 which is disheartening as the real estate market nationwide was on a tear during that period. Of note, year to date Realogy Holdings stock is down 80%.

The new Amazon entity titled TurnKey will initially integrate 3,000+ brokers and will launch in 15 markets, including Phoenix, Los Angeles, San Francisco, Denver and Washington, D.C. Of note New York (where Corcoran, a Realogy Holdings franchise is active) where I also have a license is not included in the initial launch.

For prospective buyers using the TurnKey referral service their value of benefits Amazon will provide will range from $1K to $5K, depending on the sale price of the home. To qualify for the maximum benefit, a home would need to cost at least $700,000, while homes sold for $399,000 or less will qualify for the minimum $1,000 benefit. The benefits Amazon will offer range from smart home products like its Echo devices and Ring doorbells to move-in and home maintenance assistance through Amazon Home Services.  I already see the Board of Nest wondering who they can partner with.

The incentives offered by Amazon are meant to address the trend of home shoppers looking for properties themselves, which has been among the biggest drag on profits for brokerage houses i.e. one can see the inverse valuation charts concerning Zillow and Redfin when compared to Realogy Holdings.

While some agents now list properties themselves on sites like Zillow for interested buyers and thus cutting their parent companies out of potential commissions the majority of brokers on Zillow and similar sites are affiliated with traditional brokerage entities and are using Zillow as a marketing channel.

It is too early to know if this partnership model will be a success. For Realogy Holdings the news of the partnership pushed the stock up 25% when the announcement crossed the tape thus some would argue immediate success.

However as many of my readers know I have been in the real estate market for longer than I care to admit. Before the recent disruptors it was the limited service brokerages, which were going to turn the traditional brokerage on its head and in turn decimate the industry.

More recently it is the Zillow’s, Rex and others using algorithms and distributions channels to change the landscape of the marketplace. And Redfin, using traditional brokerage practices yet offering rebates and discounts to entice clients.

What will be interesting to witness; the slowdown in real estate, which is happening now, how will it affect earnings moving forward. The slowdown is evident with the glut of luxury properties on the market. Even with interest rates below 4% housing sales are stagnant in much of the country yet the overall economy should be buoying the housing market i.e. low unemployment, high consumer confidence and a strong US Dollar.  Yes affordability is an issue yet most bubbles build their foundation when affordability is challenged and irrational exuberance takes hold.

While algorithms and so forth may provide some guidance real estate is NOT a blender or a pair of pants. Each residence is truly unique and each transaction is singular. I honestly do not now if the partnership will be a success or a boondoggle. Concerning the real estate disruptors Wall Street is betting they will be successful yet have any of them experienced a down market and recession? I know a few limited service real estate firm brands that are hanging out with the sock puppet at the unemployment office.