Sep
10
I was perusing other blogs today and came across my friend’s blog about Zillow and the accuracy of it’s Zestimates. More interesting to me though were the reactions and comments that followed it. I hate to say it, but allot of them sounded much the same as comments that I often receive when I speak of the transition that our industry is going through.
Most everyone says that computers can’t replace humans and frankly, I find those comments to be true and false and more importantly, lazy. True because computers can’t replace humans. False because they can replace what we are doing right now, and lazy because many of those comments reflect an unwillingness to change our roles and a gross misunderstanding of our value, as humans, in the transaction process.
First of all, the blog referenced above complained that certain websites that give value ranges of real estate are often way off. Many commentators agreed and said that they are way off because they are not human and cannot process all the information that we can. Bad info in equals bad info out. They miss the point. Zillow and sites like it will learn and grow. Wikipedia, is an amalgamation of many inputs. The site gives a definition of a word and then people from around the world can add to that definition and expand it and make it more accurate. I don’t know the details of how that works but the concept takes full advantage of the internet and proves that information and the processing of it is a process in itself and can be refined.
Zillow will eventually be able to unite the comps by tax records in the area along with people’s comments about a particular home site to arrive at more accurate Zestimates. Again, I don’t know how they will do it. If I did, I would be in the wrong industry. I do know that they will evolve and yes, eventually replace us humans in the valuation process. Let’s face it, even when humans guess at the value of a home, we are not that accurate. True value is in the eyes of the beholder.
This blog, however, is not about home values or internet sites but about the choices we are having to make and how so many don’t want to make them. I see that Zillow is fallable and I also see that it will soon be able to accurately value real estate, so I see that my value as a human Realtor is changing and that I need to tap into the things that I can do. I need to emphasize my humanity and my ability to comfort, guide, reassure and navigate these waters. That is my value in this transaction. It is not just about what I know, but what I know how to get and how I disseminate that info to my clients.
There is so much more to think about and these changes in technology really do require that we begin to rethink our roles in this ever-changing market. It is not enough to just brashly say that computers can’t replace humans and be content that we have job security because we said that.
Sep
2
I just don’t know when. I have spent a great deal of this last Labor Day weekend thinking about it though and, of course, I had to spill my thoughts here. I think that the prevailing wisdom says that we should see another 20% decline in home values before we see a bottom. That same wisdom also says that we probably won’t see the bottom until 2009, possibly 2010. I think a great deal of the numbers and available accurate data support those predictions, HOWEVER!………………… It was not sane numbers or data that got us into this mess and so using George Soros’s theory of Reflexivity I am predicting that the market drops only about 10% more (+/- 1.5%) and that will be the bottom. I further guess that this will happen sooner rather than later, 2009. For the purposes of this argument, it is not important wheather we think this is good or not, in the long term (I think it is not).Reflexivity, if I understand it properly, is Soros’s theory that markets do not always move to equilibrium. They, instead, are influenced by investors and therefore move where investors believe they should. In other words, the markets are not islands. They are influenced by the participants and therefore cannot be described or predicted independently of the market participants. It is a very similar theory to other theories I have read about matter and energy. These other theories suggest that our perceptions of things shape those things. A rock is not just a rock but something that my perception changes. It may have been a rock before I saw it, but after seeing it it is a different rock. A bit like the butterfly effect.Using this theory, I believe that many people are believing that the bottom is near. They want to believe that. When you compare the current prices to the reality we knew a few years ago, it looks like we have fallen a long way.I think that the early part of this decade changed, forever, the way we view real estate and therefore we cannot predict, based on older models, how this downturn will shake out. If the house down the street from me, used to sell for $150,000 four years ago and is now selling for $80,000, I may perceive that as a steep decline and I may believe that it will not go any lower; time to buy. My Realtor may reinforce this attitude. A 46% decline looks like a bottom to the untrained eye. Is it really 46%? The market rose approx. 50% in that timeframe, so 46% is just losing the crazy runnup. The perception is different though. On the flip side, to get back to that $150,000 value, it has to appreciate 87.5%. My point is that the numbers can get confusing and people tend to go to what they know. The equilibrium, in this case is that real estate may start to behave, as much as it can, more like stocks, with more volatility because that is the new paradigm that people believe.Based on the numbers, I would never have guessed that real estate would continue to appreciate past 2004. I was consistently calling the top and I was consistently wrong. I miscalculated the fact that numbers don’t move markets, people do. The numbers may be telling us to be cautious and have patience right now. The numbers may still be very high, but I think that people are waiting on the sidelines, anxious to jump in again. Many of them don’t know any other market but what they saw a few years ago. My guess is that if lenders were willing to lend more right now, you would see the market take off again, even against common sense. So that is my prediction on this 2nd of September, 2008. I predict that we won’t fall as far as we should and as far as we think. I hope I’m wrong
