NAMED THE NATION’S BEST NEWSLETTER BY NAREE
DECEMBER 2017 VOL 11 ISSUE 12
MY TAKE BY PAM HUGHES CO-FOUNDER, COBUY
BIG DATA SANDBOX
P22
P13
7 HABITS OF HIGHLY EFFECTIVE FLIPPERS
DATA IN ACTION LOCAL HOUSING MARKETS MOST IMPACTED BY THE GOP TAX PROPOSAL P23
SPL ITTING THE ATTOM A PROPERTY DATA REFORMATION
P18
Contents
FEATURED ARTICLE
P1
The decision by Amazon to build a massive second headquarters – the HQ2 – has set off a gold rush of sorts, one where 238 states, provinces, districts, and territories in the U.S. and Canada have each suggested they alone are worthy of Amazon’s $5 billion investment and 50,000 new jobs. The Amazon victor will be the symbol of a newly emerging economic landscape – one where a limited number of winners do very well. P1 AMAZON AND THE BATTLE FOR TOMORROW’S COMMUNITIES Pam Hughes, Co-Founder of online platform CoBuy that helps buyers navigate the process of co-buying a home with other buyers, explains why co-buying is an innovative solution that can help overcome many of the challenges facing homebuyers in today’s highly competitive housing market without introducing the type of risk that infiltrated — and eventually brought down — the market during the last boom. P13 MY TAKE: AN ENTREPRENEUR’S PERSPECTIVE ON RETHINKING HOMEOWNERSHIP Using the Protestant Reformation sparked by Martin Luther 500 years ago as an illuminating parallel, ATTOM Data Solutions product manager Stephen Meeks explains how the democratization of property data that kicked into high gear about a decade ago is now rippling out to disrupt data delivery platforms, allowing small businesses and entrepreneurs to access powerful data mining tools once only available to large corporations with massive data management capabilities. P18 SPLITTING THE ATTOM: A PROPERTY DATA REFORMATION Distilled from transaction-level data for nearly 50,000 single family home and condo flips in the third quarter of 2017, this infographic provides seven best practices for home flippers operating in a highly competitive housing market with a high potential for plump flipping profits but also a small margin for error. P22 BIG DATA SANDBOX: 7 HABITS OF HIGHLY EFFECTIVE FLIPPERS The Republican tax proposal unveiled in late October included at least two changes to the income tax structure that could potentially have significant impacts on homeowners, and by extension the housing market. We’ve created two heat maps to illustrate which local housing markets could have the most homeowners impacted by these changes — the new cap on the mortgage interest deduction, and the new cap on the property tax deduction. P23 DATA IN ACTION: LOCAL HOUSING MARKETS MOST IMPACTED BY THE GOP TAX PROPOSAL
P13
P18
P22
HOUSINGNEWS REPORT
LEAD ARTICLE
Amazon and the Battle for Tomorrow’s Communities
BY PETER MILLER, STAFF WRITER
The decision by Amazon to build a massive second headquarters – the HQ2 – has set off a gold rush of sorts, one where 238 states, provinces, districts, and territories in the U.S. and Canada have each suggested they alone are worthy of Amazon’s $5 billion investment and 50,000 new jobs. The Amazon victor will be the symbol of a newly emerging economic landscape – one where a limited number of winners
do very well while lagging counties and communities are being hollowed out: jobs are few, property values are weak, taxes are insufficient, and the local standard of living is stalled This is not some dire and dystopian prediction for the future, this is a reality today for tens of millions of people, individuals who no longer have the option of living in a hip and happening metro core, the places with arguably the best jobs and the highest standard
of living. At the same time, changes in social values are opening up new opportunities in cities and counties not named New York, San Jose or Seattle. The Affordability Gulch Large numbers of people in high-tech centers are increasingly priced out of traditional real estate options. In some cases people with jobs in high-cost areas — the homeless employed — can only afford to live in their cars.
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MARKETS WITH HIGHEST PRE-MOVER INDEX Q3 2017
INDEX OF 100 IS NATIONAL AVERAGE
305
COLORADO SPRINGS, CO MANCHESTER-NASHUA, NH CHICAGO-NAPERVILLE-ELGIN, IL-IN-WI
243
222
204
WASHINGTON-ARLINGTON-ALEXANDRIA, DC-VA-MD-WV NASHVILLE-DAVIDSON-MURFREESBORO-FRANKLIN, TN RENO, NV
196
189
TAMPA-ST.PETERSBURG-CLEARWATER, FL LAS VEGAS-HENDERSON-PARADISE, NV JACKSONVILLE, FL KINGSPORT-BRISTOL-BRISTOL, TN-VA
188
180
179 178
a need to import teachers and plumbers from distant locales.
“Buyers today will pay a premium to live on the waterfront or near ski trails, and they will also pay more for homes near leading job centers.”
Buyers today will pay a premium to live on the waterfront or near ski trails, and they will also pay more for homes near leading job centers. In Cupertino and Sunnyvale, California, in the heart of the Silicon Valley, the San Jose Mercury News reported this summer that many listings were attracting bids $200,000 over asking prices. No doubt there are good jobs in both Cupertino and Sunnyvale, the home of such corporate giants as Apple, Lockheed Martin, and Broadcom, but the people who live in such locations are not all business executives, heirs, tech pioneers, or hedge fund moguls. According to the Bureau of Labor Statistics, the annual mean wage in the San Jose-Sunnyvale- Santa Clara metropolitan statistical area is $78,990.
A study this summer by ATTOM Data Solutions found that “since bottoming out nationwide in Q1 2012, median home prices nationwide have increased 69 percent while average weekly wages have increased 9 percent during the same time period.” Lawrence Yun, Chief Economist with the National Association of Realtors (NAR), explained in April that “home prices have risen by 41 percent and rents have climbed 17 percent over the past five years at a time when the typical worker wage has grown by only 11 percent.” Freddie Mac sees it this way: “house price growth has outpaced income growth by a cumulative 42 percent over the last 17 years.”
The affordability gap looks at general numbers nationwide but in high-cost areas the affordability gap is far more severe. According to the McKinsey Global Institute, the cumulative housing shortfall in California “has expanded to two million units. With home prices and rents hitting all- time highs, nearly half of the state’s households struggle to afford housing in their local market.” McKinsey estimates that “the housing shortage causes the state to lose $140 billion in annual output, or 6 percent of state GDP.” One by-product of steep housing costs is that these areas have become real estate rich but in some ways impoverished with
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The Squeeze Is On High-cost metro centers produce an array of winners and losers. If you’re in, you’re in. If you bought a home in San Jose or Seattle 20 years ago you’ve won the brass ring. The tremendous run-up in home prices has created real equity and genuine wealth. But owing a million-dollar home is not free. Your good friends in the local government will want to share your success as values rise. To get equity out you’ll have to refinance or sell. The former will raise your monthly costs while the latter will create a whole new world of expenses and taxes. If you want to stay and remodel you’ll need building permits, paperwork likely to set off higher property taxes. “Those who have profited in hot markets may well be best served by moving out while those who live in areas with less real estate appreciation may not have the financial ability to move in. Renters in the most vibrant markets may not be able to save enough to ever catch up with local home prices. The natural result of such trends is that people move out.” The only thing worse than owning in a fast-appreciating community is not
owning. If you now rent what’s “buyable” becomes smaller and smaller with every price hike. Renters in hot communities are hard-pressed to save enough for a down payment and — if they do — they still may not be able to afford the mortgage. Apple is headquartered in Cupertino and there the median house sold for $1.91 million in the third quarter of 2017, up 18.8 percent in a year, according to ATTOM. That’s a one-year price increase of $302,000 — an average increase of more than $25,000 a month. A borrower buying with 5 percent down would need to save (or earn) an extra $1,258 a month for a year just to keep up with the price increase. Those who have profited in hot markets may be best served by moving out while those who live in areas with less real estate appreciation may not
have the financial ability to move in. Renters in the most vibrant markets may not be able to save enough to ever catch up with local home prices. The natural result of such trends is that people move out. Migrations “California’s generally unaffordable housing markets have suffered substantial net domestic migration losses,” says the 2016 Demographia International Housing Affordability Survey. “This is despite their reputations for strong consumer demand. Overall, the state has lost nearly a net 1,900,000 domestic migrants since 2000.” “While tech worker interest in Silicon Valley is strong, it’s hardly the only place tech workers see opportunity — not by a long shot,” says a 2016 report by Indeed.com.
WHERE HOMEBUYERS ARE MOVING Q3 2017 PRE-MOVER INDEX (100 IS NATIONAL AVERAGE) 32 304
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“In fact, over two-thirds of tech workers think it is either ‘not that important’ or ‘not at all important’ to live and work in Silicon Valley while pursuing a career in technology – compared to 31.8 percent of tech workers who do.”
commutes, lower housing costs, and less pollution. It’s not that metro cores are unattractive, rather it’s that values other than compensation also count. Want the best place to raise a family? According to Niche.com you might want to look at the Philadelphia suburb of
not another. While money and career advancement are surely important, other reasons stand out as well. For many people big cities and huge metro cores are less and less alluring. People want the benefits of modern living with what they see as a better lifestyle, one they associate with shorter
There are a lot of reasons why people choose to locate in one place and
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Q3 2017 HOME AFFORDABI L ITY HEAT MAP Q3 2017AFFORDABILITY INDEX* (UNDER 100 IS LESS AFFORDABLE THAN HISTORIC AVERAGE)
“ ... it’s hard to imagine that a forward-thinking company like Amazon hasn’t already selected its preferred location. And, if that’s the case, then this public process is, intentionally or not, creating a bidding war amongst states and cities.”
-24
224
RON NIRENBERG MAYOR OF SAN ANTONIO
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Devon and the suburbs of Claredon Hills and Hinsdale outside Chicago.
California; 8) Boston, Massachusetts; 9) Minneapolis-St. Paul, Minnesota; and 10) Indianapolis, Indiana. The three metros with the largest year- over-year increases in the Growth Entrepreneurship Index rankings this year were Atlanta, Georgia; Portland, Oregon; and Indianapolis, Indiana.” Costs and Conflicts As much as billions in local spending would be a boon for any community, and as much as 50,000 well-paying jobs would be a windfall, the truth is that not everyone is interested because attracting Amazon raises questions of cost and conflicts. The community which lands the Amazon contract won’t get it for free. Amazon — a company which had sales of nearly $136 billion in 2016 — will undoubtedly get incentives worth billions of dollars from the HQ2 winner. New Jersey, as
one example, has offered roughly $7 billion in tax incentives if HQ2 is located near Newark. If Amazon expects to spend $5 billion on its new digs and can get $7 billion in incentives, then it effectively will obtain both a free new headquarters plus $2 billion.
How about the best beer scene? Hey, it has to be somewhere. USA Today says you should check-out Grand Rapids, Asheville, Fort Collins, Chicago, and Cleveland. Where can you find the next best place to be a start-up entrepreneur? How about Columbus, Ohio or Nashville? According to the Kauffman Index of Growth Entrepreneurship, “the geography of growth was very diverse, touching cities on both coasts, the South, and Midwest. The top ten metros with the highest growth entrepreneurship activity were: 1) Washington, D.C.; 2) Austin, Texas; 3) Columbus, Ohio; 4) Nashville, Tennessee; 5) Atlanta, Georgia; 6) San Jose, California; 7) San Francisco,
Meanwhile, San Antonio is not offering a dime.
“We’ve long been impressed by Amazon and its bold view of the future,” wrote Ron Nirenberg, the Mayor of San Antonio and Bexar County Judge Nelson W. Wolff in an October letter to Amazon. “Given this, it’s hard to imagine that a forward-thinking company like Amazon hasn’t already selected its preferred location. And, if that’s the case, then this public process is, intentionally or not, creating a bidding war amongst states and cities.
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“Sure,” they continued, “we have a competitive toolkit of incentives, but blindly giving away the farm isn’t our style.” Who Has Leverage? Politicians, community leaders, and economic development offices all know that the future of every town and county is directly tied to jobs, preferably non-polluting jobs with solid wages and strong benefits. Seattle has done well with its relationship to Amazon, and the company is not shy about the benefits it’s created. In its HQ2 request for proposals (RFP) Amazon “estimates its investments in Seattle from 2010 through 2016 resulted in an additional $38 billion to the city’s economy — every dollar invested by Amazon in Seattle generated an additional $1.4 for the city’s economy overall.”
DC area, $50,800 in Houston, and $55,150 nationwide.
Amazon says the company “ranks #1 on Fast Company’s Most Innovative Companies, #2 on Fortune’s World’s Most Admired Companies, #1 on The Harris Poll’s Corporate Reputation survey, and #2 on LinkedIn’s U.S. most desirable companies list. Amazon was also included in the Military Times’ Best for Vets list of companies committed to providing opportunities for military veterans.” While the presence of Amazon has boosted Seattle, it has not created a gilded and gated community. According to the National Association of Realtors, you need a qualifying income of almost $253,000 to buy a typical home in the San Jose area. The figure is roughly $129,200 in Los Angeles, $165,000 in Honolulu, $90,800 in Denver, $73,800 in Miami, $88,700 in the Washington,
And in Seattle? The typical qualifying income is $104,000. High — but nowhere near other leading tech centers. Alternatively, for communities that lose their job base the result can be stagnation and contraction, stalled home values, and reduced tax collections. Detroit was the fourth- largest city in America in 1950 but with the decline of the auto industry the city filed for bankruptcy in 2013. Detroit today ranks 18th by population. “There are two Americas,” AOL founder Steve Case told The New York Times. “One with an abundance of capital and opportunity -- in Silicon Valley and
HOME PRICE WINNER: CUPERTINO, CA
MEDIAN HOME SALES PRICE
ANNUAL HOME PRICE APPRECIATION
$2,500,000
40%
30%
$2,000,000
20%
$1,500,000
10%
0%
$1,000,000
-10%
$500,000
-20%
$0
-30%
Q1 2000
Q1 2002
Q1 2004
Q1 2006
Q1 2008
Q1 2010
Q1 2012
Q1 2014
Q1 2016
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“There are two Americas. One with an abundance of capital and opportunity -- in Silicon Valley and pockets around the nation. But not in the other America, and that other America is most of the country.”
STEVE CASE FOUNDER OF AOL
subsidies according to Good Jobs First, “a non-profit, non-partisan resource center promoting accountability in economic development.” The reality is that subsidies are hard to measure. If Smithville gives a $5 million tax abatement to a company was the cost really $5 million? Had the company not moved into town there would have been no tax revenues to abate. If a city gives the Jones company $10 million to build a factory, the money is being spent locally; it’s employing local people which means more money is being spent in town, property taxes are going up, and unemployment costs are going down. Changing Times Maybe there’s no need to pay subsidies at all. We now have virtually full
pockets around the nation. But not in the other America, and that other America is most of the country.” To create more balance in smaller markets, Case has now raised more than $1 billion to finance Midwest start-ups. If you’re in a community where the job base is contracting — where abandoned factories and closed shopping malls dot the landscape, where home prices are falling and people are leaving — then courting Amazon is a compelling idea. If you’re a politician the good news is that the public overwhelmingly supports an Amazon investment in your community. Morning Consult — a polling organization — found in a recent survey “that 72 percent of a national
sample of 2,201 adults support the retail and technology giant setting up its headquarters in their hometown or nearest large city, with half saying they strongly support it. Notably, majorities of every subgroup surveyed are in favor of Amazon’s presence in their area — including 72 percent each of suburbanites and urbanites and 70 percent of rural dwellers. “The tech giant,” it continued, “also enjoys a 76 percent net favorability per Morning Consult Brand Intelligence, one of the highest rankings for any brand polled.” What About Cost? Amazon – like most corporations — seeks the lowest possible expenses when it elects to locate a facility. To date Amazon has extracted some $600 million in economic development
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employment — the unemployment rate in October was just 4.1 percent. If one company won’t locate in town surely there’s another. At least that’s the theory. In practice low unemployment figures mask the reality that many communities are being left behind. Between 2000 to 2014 the share of adults living in middle-income households fell in 203 of 229 U.S. metropolitan areas, according to the Pew Research Center. “The widespread erosion of the middle class took place against the backdrop of a decrease in household incomes in most U.S. metropolitan areas,” says Pew. “Nationwide, the median income of U.S. households in 2014 stood at 8 percent
less than in 1999, a reminder that the economy has yet to fully recover from the effects of the Great Recession of 2007-09. The decline was pervasive, with median incomes falling in 190 of 229 metropolitan areas examined.” Translation: In 39 of 229 metro areas median incomes are rising. For the rest the recovery has a long way to go. National unemployment figures miss a deeply personal point for many workers. If your community loses 100 jobs and another community 500 miles away gains 150 jobs then national employment levels have increased but you don’t care. The bottom-line point is that your community lost 100 jobs. Property tax collections in your town are not going up, your town can no longer fund certain public services, and without
replacement jobs local home values will stall as demand declines.
Productivity Versus Wages Automation used to be seen as a challenge for factory workers, but now white-collar workers are also beginning to feel the pinch. Fortune says automation is becoming more common in such fields as law, medicine, and even sports reporting. PWC, the international consulting firm, says that automation could cut traditional U.S. jobs by as much as 38 percent by the 2030s. A study from Oxford goes further and estimates that “around 47 percent of total U.S. employment is in the high risk category” because of automation. Not only has automation eroded the job base, the financial benefits of technology have largely eluded the working class. According to the Economic Policy Institute (EPI), “from 1973 to 2013, hourly compensation of a typical (production/nonsupervisory) worker rose just 9 percent while productivity increased 74 percent.” The result is that U.S. manufacturing is increasing but manufacturing jobs and incomes are not. We are sending more and more work to machines and software, a situation which will become increasingly common in the future. The Boston Consulting Group explains that “a human welder today earns around $25 per hour (including benefits), while the equivalent operating
HOME SELLER PROFITS BY METRO Q2 2017 AVERAGE HOME SELLER PCT RETURN SINCE PURCHASE
-10.3%
74.5%
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METRO JOB LOSERS
MEDIAN HOME PRICE 2017
NET JOB GAIN/LOSS IN 2016
SAN JOSE
LOS ANGELES
WASHINGTON, DC
NEW YORK
CHICAGO
$950,000
-2,406
-2,484
-3,245
-3,380
$590,000
$375,000
$366,000
-7,659
$217,000
SOURCES: ADP, ATTOM DATA SOLUTIONS
cost per hour for a robot is around $8 when installation, maintenance, and the operating costs of all hardware, software, and peripherals are amortized over a five-year depreciation period. In 15 years, that gap will widen even more dramatically. The operating cost per hour for a robot doing similar welding tasks could plunge to as little as $2 when improvements in its performance are factored in.” (Parenthesis theirs.) In such an environment a development offer from Amazon or any other company is tough to ignore. Amazon, in particular, is not just bringing in 50,000 new jobs with the HQ2 project, it’s bringing in jobs with “an average annual total compensation
exceeding one hundred thousand dollars ($100,000) over the next ten to fifteen years.” Like a major government facility, it’s also bringing in contractors and manufacturers who want to do business with the giant tech company. Armies of new people with money to spend need shopping, entertainment, medical care, auto repair shops, and all the other services one expects in a booming local economy.
Retailers before World War I were able to sell goods with huge mark-ups. There were few discount shops, automation as we know it today was in the future, and most Americans did not live in big cities. “In 1890,” says the U.S. Postal Service, “nearly 41 million people — 65 percent of the American population — lived in rural areas. Although many city dwellers had enjoyed free home delivery since 1863, rural citizens had to pick up their mail at the Post Office, leading one farmer to ask: ‘Why should the cities have fancy mail service and the old colonial system still prevail in the country districts?’”
Sears Roebuck And The Case For Amazon
Long ago the retail marketplace was very different. As Noam Chomsky explains, “the shift from sailing ships to telegraph was far more radical than that from telephone to email!”
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But in 1896 things changed. Rural free delivery (RFD) was offered to homes and farms very much off the grid. One result was that retailing pioneers such as Montgomery Ward and Sears, Roebuck began offering goods through mail-order catalogs. Now able to generate massive sales, the catalogers reduced prices and radically changed the retail marketplace. “In 1897 bicycles ran anywhere from $75 to $100 in retail stores,” writes Thomas V. DiBacco in his book, Made in the U.S.A. The History of American Business. “When Sears first sold them, the price was affordable. According to an 1898 magazine, Sears sends a
‘bicycle Catalogue free to anyone who asks for it, and, we are told, shipping several hundred bicycles every day to every state, direct to the riders at $5 to $19.75, on free trial before paying. If Sears, Roebuck & Co. continue to wage their bicycle war throughout the season it will be a boon to all those who want bicycles, but a sad blow to bicycle dealers and manufacturers.’” Sears, of course, eventually expanded from virtual marketing by mail to brick-and-mortar stores. For decades it was the most-dominant retailer in the United States, a company that at one time or another sold cars, entire kit houses, shirts, tools, and appliances.
The parallels are obvious. The internet is the new technology instead of mail. Like Sears itself Amazon is beginning to have a bricks-and-mortar future; just consider its recent $13.7 billion purchase of Whole Foods. The established retailers in town are feeling the squeeze: America is “overstored.” Green Street Advisors estimates that “the top 300-400 malls by quality should fare well for the next several years, but it is reasonable to assume that several hundred lower quality malls will either close or become irrelevant retail destinations over the next ten years.”
METRO JOB WINNERS
MEDIAN HOME PRICE 2017
NET JOB GAIN/LOSS IN 2016
$410,000
1,699
$360,000
1,591
$287,577
1,167
1,121
1,066
$200,000
$190,100
SEATTLE
DENVER
AUSTIN
CHARLOTTE
ATLANTA
SOURCES: ADP, ATTOM DATA SOLUTIONS
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After The Amazon Decision In the coming year Amazon will announce the HQ2 winner and one result is that 237 economic development offices will need to rethink their options. How can their communities grow and prosper in an environment where wages and jobs are being downsized, rightsized, outsourced, and off-shored? Will large numbers of American towns and counties go the way of the shopping mall, the retail kingdoms that once symbolized the national economy?
Flint — the Michigan city decimated by the fall of the domestic auto industry and then thrust into the national spotlight with a massive water crisis — has just announced that GM will spend $79 million to improve its Flint Assembly Center. The Lear Corporation is building a new seat manufacturing facility that will employ 600 people. Tellingly, the plant — the first to be constructed in the city in 30 years — will be located on the former site of the historic Buick City complex. C3 Venture, a manufacturer of plastic vehicle parts, has added almost 400 jobs in the past year. Ten philanthropies, led by the C.S. Mott Foundation, have pledged $125 million to help the city.
Despite low unemployment, rising wages, huge corporate profits, and massive run-ups on Wall Street prosperity is not universal. The National Association of Realtors reports that in the third quarter annual home prices gains were seen in 162 out of 177 metropolitan statistical areas. The same report showed that 15 areas had price declines. Like ghost towns in the old west, populations in such places will decline, young people will move away, home prices will drop, tax revenues will fall, and buildings will decay. Destinations no longer, such empty places will emerge as dingy monuments to an economy which once was.
Looking ahead we are likely to see three paths going forward.
First, and unfortunately, there will be a number of communities which fall behind.
Second, many communities will fight to remain relevant.
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We don’t know what the future will bring but Flint, at least, is trying to be part of it.
Third, there are always new competitors coming into the marketplace.
There’s no rule which says new communities can’t be created from scratch; it might actually be advantageous to do so. In the past we have seen any number of new communities such as Reston, Virginia, Columbia, Maryland, Greenbelt, Maryland, and Florida’s Royal Palm Beach, a property which originally included almost 65,000 acres. In a sense, Washington, D.C. was itself a “new” community, built in the woods next to Georgetown on the Potomac River. The attraction of a new town is that you can start fresh. There are no legacy pension costs to pay or century-old pipes to fix. The latest new town is Belmont in Arizona’s Maricopa County, about 45 minutes from Phoenix. Announced in early November, Belmont will include 24,800 acres and is designed to include 80,000 residential units as well as 3,800 acres of industrial, office, and commercial space. In addition, 3,400 acres will be set aside as open space. “Belmont,” says Belmont Partners, the developer, “will create a forward-thinking community with a communication and infrastructure spine that embraces cutting-edge technology, designed
“Belmont is an incredible opportunity for the state of Arizona. Envisioning future infrastructure from scratch is far easier and more cost efficient than retrofitting an existing urban fabric.”
GRADY GRAMMAGE, JR. BELMONT PARTNERS
“Belmont is an incredible opportunity for the state of Arizona,” explains Belmont’s Grady Gammage, Jr. “Envisioning future infrastructure from scratch is far easier and more cost efficient than retrofitting an existing urban fabric.” Alternatively, if you’re in a community with a lot of “existing urban fabric,” still- another competitor for jobs and people is not likely to brighten your day.
around high-speed digital networks, data centers, new manufacturing technologies and distribution models, autonomous vehicles and autonomous logistics hubs.” If Belmont seems like a city of the future developed by a high-tech innovator you’re on to something. According to The Arizona Republic, the project is backed with an $80 million investment from a group controlled by Microsoft founder Bill Gates.
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MY TAKE
Rethinking Homeownership: An Entrepreneur’s Perspective
BY PAM HUGHES CO-FOUNDER, COBUY
U.S. EXISTING SINGLE-FAMI LY HOME INVENTORY YEAR OVER YEAR CHANGES
Great challenge often breeds creative solutions, even simple ones. A decade after the start of the Great Recession, the residential real estate market is climbing out of the depths of disaster -- but a different sort of crisis has emerged. The problem is that of housing affordability, especially in many of the country’s largest metropolitan areas.
America’s housing bust left the supply side of the market lagging woefully
SOURCE: CENSUS BUREAU
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MY TAKE
HOME PRICE INDEX TABLE
City
Sept 2017 Growth Vs. Last Month Growth Vs. 6 Mo Ago Growth Vs. 1 Year Ago Aug 2017 Mar 2017 Sept 2016
AZ-Pheonix
6.06% 6.18% 8.17% 7.16% 3.12% 4.97% 7.25% 5.43% 3.90% 7.23% 6.94% 5.43% 6.23% 9.01% 5.15% 5.44% 7.31% 7.15% 5.70% 6.19% 6.15% 12.90%
Better Better Better Better Worse Better Better Better Better Better Better Worse Worse Better Better Better Better Better Better Worse Better Better Better
Better Better Better Better Worse Worse Worse Better Worse Worse Worse Worse Worse Worse Better Better Better Worse Worse Better Better Better Better
Better Better Better Better Worse Better Worse Worse Better Better Better Better Better Better Better Better Better Worse Worse Better Better Better Better
5.74% 5.52% 5.26% 6.00% 5.31% 5.80% 7.78% 6.36% 5.33% 6.08% 5.05% 5.69% 7.25% 8.31% 8.73% 3.12% 3.73% 1.74% 4.85% 5.91% 6.62% 6.83% 6.71% 7.51% 5.39% 5.60% 5.23% 3.62% 4.64% 2.97% 6.90% 7.65% 4.20% 7.25% 7.24% 6.26% 5.67% 6.89% 5.26% 6.13% 6.48% 5.94% 8.54% 6.42% 5.60% 4.14% 4.38% 2.19% 4.44% 4.62% 2.84% 7.21% 9.15% 10.85% 7.11% 8.62% 8.04% 13.21% 12.29% 11.01% 5.21% 5.20% 4.17% 5.82% 5.91% 5.00% 5.95% 5.69% 5.15%
CA-Los Angeles CA-San Diego
CA-San Francisco 7.04%
CO-Denver
DC-Washington
FL-Miami FL-Tampa GA-Atlanta IL-Chicago MA-Boston MI-Detroit
MN-Minneapolis NC-Charlotte NV-Las Vegas NY-New York OH-Cleveland OR-Portland
TX-Dallas WA-Seattle
Composite-10 Composite-20 National-US
% BETTER
83%
52%
78%
SOURCE: S&P, DOW JONES
behind the hockey stick growth curve in demand. Necessarily, growth took a hiatus during the downturn. Housing supply was scooped up at bargain basement prices putting anyone who didn’t need to sell in a holding pattern. Supply quickly evaporated as prize- takers descended on the fire sale that was housing. Ever since, the rate of replenishing supply has suffered from a sluggish and heavy burdened re-start while demand has built momentum at a sprinter’s pace. Today, supply of existing homes is near a 30-year low, according to the Census Bureau and is declining at a rate of
about 10 percent per year. In many major metropolitan areas, demand is strong and growing. The divergent forces of supply and demand have created unsustainable home price appreciation. Today, home values in many metros across the nation are experiencing year-over-year price appreciation that is still accelerating and is projected to continue into 2018. The table above shows the 20 largest regions in a home price report and highlights those regions with accelerating year-over-year appreciation rates in addition to a
“In many major metropolitan areas, demand is strong and growing. The divergent forces of supply and demand have created unsustainable home price appreciation. Today, home values in many metros across the nation are experiencing year-over-year price appreciation that is still accelerating and is projected to continue into 2018.”
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MY TAKE
CO-BORROWER HEAT MAP Q2 2017 Q2 2017 PRECENT OF SINGLE FAMILY PURCHASE LOANS WITH CO-BORROWERS*
ability to amass their down payments and outpace the rise in incomes, causing these prospective buyers to fall further behind on the treadmill leading to homeownership. Crisis spawns opportunity. The present housing affordability crisis is no exception and many an entrepreneur, myself included, has gone to work to solve the problem for would-be homeowners. Many are working on the supply side, some are working on the policy side to reduce costs of building and increase density and still others are attacking the affordability challenge through other means. One approach that is not new, but is gaining popularity is the notion of buying with others. Some call it shared equity, some call it co-ownership, co- living, co-housing or co-buying. In fact, Peter Miller wrote an article that first appeared in the August 2017 Housing News Report and is excerpted here that highlighted some equity sharing options putting homes within reach for new homeowners. We are learning from watching and listening to the market. Recent data reported by Attom Data Solutions shows more than 16 percent of all single-family purchases in Q1 2017 were to “co-buyers” — multiple, non- married buyers listed on the sales deed — up from 15 percent in Q1 2016. Similarly, year-over-year growth in the share of co-borrowers – multiple, non-married borrowers listed on the
10.3%
61.0%
CLICK HERE TO VIEW INTERACTIVE VISUAL
“Crisis spawns opportunity. The present housing affordability crisis is no exception and many an entrepreneur, myself included, has gone to work to solve the problem for would-be homeowners.”
look at price appreciation for the month of September compared to August 2017. Clearly, if housing affordability is an issue today, we are on a trajectory that cannot be supported with current thinking about homeownership. For the past several years, as millennials have been coming of age to buy their first homes, there have been several reasons given why we weren’t seeing typical first time buying activity. There was the fact that living wage jobs were not available to these newly anointed
adults and that student debt was keeping them from amassing a down payment. There was also the theory that this generation was not interested in homeownership. There was a belief that millennials did not want to be tied down by real estate ownership. Alas, these impediments have largely been overcome or refuted. For first time homebuyers especially, supply has become more severely diminished relative to demand during each passing year. The resulting home price increases delay first time homebuyers’
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MY TAKE
purchase mortgage or deed of trust — accounted for 22 percent of all single family purchase loan originations in Q1 2017. This is up from 20 percent in Q1 2016. By banding together, co-buyers can afford more home than they could alone. At the same time, they may be able to reduce their risk exposure as they may no longer need to stretch to afford a home they would enjoy. Imagine the individual who alone may qualify for a $500,000 home and with a friend or loved one can purchase an $800,000 home with just $400,000 exposure in their 50 percent ownership. An added benefit can be the social aspects of living with friends or family of your choosing. At CoBuy, we have been surprised to discover just how many different cohorts of people are finding benefits in co- buying. Three of the earliest adopters who we’ve been working with are: The beauty of co-buying is that it is quick and does not require policy change. Co-buying creates supply from existing inventory by expanding the target properties within reach for new buyers. Sharing a home also decreases demand as you may have multiple “heads of household” occupying one dwelling instead of two or three. Just as eating a healthy diet was happening long before the term “vegetarian” or “vegan” became • Unmarried • Intergenerational households • Friends
mainstream, co-buying has been around for all time. Like eating healthy, there is a body of information and there are a host of advisors who can provide structure, guidance and protection to enable a positive co- buying, co-living and co-ownership experience. It’s an exciting time to be an entrepreneur, especially in the financial and real estate space. It’s especially invigorating to see new forms of ownership evolve and become a part of the mainstream conversation. Just
in the last couple months, we’ve seen IKEA launch an experimental project called One Shared House 2030 challenging us to imagine the way we’ll live in the future. Others, like WeWork are also tackling the opportunities of co-living with their nascent WeLive project. As we enter the new frontier of collaborative working and living, as business leaders we will certainly be called upon to help answer and explore some of the toughest questions that arise around real estate, finances and the social, ecological and economic impacts of the coming changes.
PAMELA HUGHES Pamela Hughes is Co-Founder of CoBuy, Inc. Prior to founding CoBuy, Inc. she was a successful broker in the state of Washington for nearly 15 years with Coldwell Banker Bain and Keller Williams. Pam is an advocate for a financial planning approach to helping people build and protect wealth with real estate.
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SECTION TITLE
P r Public Records T a Tax Assessor D e Deed F c Foreclosure P m Plat Maps D g Demographics
L s Landslide E q Earthquake F i Fire N h
ATTOM Table of Data Elements
M I Mortgage Loan
P b Parcel Boundaries F I Flood S p Spills H h Health Hazards
P f Pre-foreclosure
O w Ownership S c Schools
E r Environmental Risks N c Neighborhood Characteristics P c Property Characteristics
S f Superfund Sites D I Former Drug Labs H c Home Condition
B f Brownfields A q Air Quality
R p Registered Polluters U v UV Index
U t Underground Storage Tanks R d Radon
Natural Hazards
F t FCC Towers
S h Sinkholes
C r Crime
C o Criminal Offenders
B p Building Permits
H v Home Values
A v Assessed Values
U S Utility Score
P v Pre-mover
MLS Analytics M s
Quantum AVM Q a
Coming Soon
Coming Soon
Coming Soon
Public Records Environmental Risks
Property Characteristics Neighborhood Characteristics
Natural Hazards Health Hazards
www.attomdata.com 1-800-462-5125
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A Property Data Reformation SPLITTING THE ATTOM
BY STEPHEN MEEKS PRODUCT MANAGER, ATTOM DATA SOLUTIONS
When Martin Luther wrote his 95 theses 500 years ago, it sparked a reformation that profoundly changed how Christians interacted with their ultimate source of truth: the Bible.
Rather than accessing that truth through the intermediary of the existing church hierarchy – which often added its own layer of explanation on top of the Scriptures -- believers were ultimately able to read the scriptures in
their own language and interpret it on their own thanks to the ripple effects of the reformation. But it wasn’t just theological innovation that helped quickly spread the Protestant Reformation. The technological innovation of the printing press about 75 years prior to the 1517 posting of the 95 theses enabled the bible to be printed in new languages
“Believe it or not, there are parallels to the Protestant Reformation in the world of property data.”
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more quickly and cost-effectively. Believe it or not, there are parallels to the Protestant Reformation in the world of property data.
From Data Dictatorship to Data Democracy
The last decade has seen a technology driven philosophical shift on the use and availability of property data. Once only accessible to select gatekeepers such as multiple listing services, brokers, real estate agents, and title companies, data disrupters such as Zillow, Trulia, Redfin and RealtyTrac have been willing and able to democratize all sorts of property data to anybody with an internet connection. ATTOM Data Solutions is proud to claim this philosophy of property data disruption as part of its heritage. The forerunner to ATTOM was RealtyTrac, a company that first started posting foreclosure notices such as notices of default, notices of trustee’s sale, and bank repossessions (REO) in Southern California on the internet as early as 1996. Prior to RealtyTrac, only a select group of industry insiders had access to these foreclosure notices – which were typically mailed out on a weekly basis by title companies. Ten years later this open property data philosophy exponentially expanded to the broader market with the launch of Zillow, Trulia and Redfin in 2006. Rather than rely solely on real estate agents to provide them with listings of homes for sale, consumers could now easily access nationwide listing information in one central location. Those same websites –
“Rather than just one language only available to a few, public record property data is effectively multiple languages available to many. A multitude of county-specific languages makes it hard to merge, contrast and compare the data across different U.S. geographies.”
along with RealtyTrac and others – also eventually began including public record property data from county tax assessors and recorders, even for off-market properties not on the MLS. Harmonizing Discordant Data It’s important to note, however, that the philosophical shift toward making property data available to the masses continues to be a work in progress. On the listing side, the myriad MLSs across the country still wield significant power over the data, and in the realm of public record property data – under which foreclosure data falls – the lack of clear national data standards means
the data is messy, often delivered in thousands of format variations corresponding to the thousands of county offices sourcing the data. This problem of messy public record property data is, in a sense, the exact opposite of the problem of the Bible only being available in one language – Latin – that Luther addressed as part of his 95 theses. Rather than just one language only available to a few, public record property data is effectively multiple languages available to many. A multitude of county-specific languages makes it hard to merge, contrast and
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compare the data across different U.S. geographies.
“Just like the Protestant Reformation needed both theological and technological innovation, a true property data reformation requires more than just philosophical innovation; it also requires innovation in the platforms used to deliver the data.” for many businesses consuming property data, it is not a good fit for a substantial set of use cases. Primarily these use cases revolve around using the data to create targeted lists of homeowners for marketing products and services that those homeowners are likely to need in the near future. Enterprise customers who have the financial and database management wherewithal to ingest the massive nationwide or even regional bulk tax, deed and mortgage files can then leverage that asset to create targeted marketing lists (in addition to other applications they create to leverage the data). But that misses a large swath of small businesses and entrepreneurial customers who may not have the capacity to ingest the full bulk file.
it also requires innovation in the platforms used to deliver the data.
ATTOM Data has been managing the reality of messy public record property data since RealtyTrac first began posting foreclosure notices over 20 years ago. The challenges ratcheted to a whole new level about five years ago when we began collecting and licensing the broader tax, deed and mortgage file. Since then we’ve been working hard to harmonize the discordant data from the multitude of sources in a process we call “fusion”. This fused data represents the cleanest and most digestible public record property data available in the marketplace. Data Delivery Innovation Just like the Protestant Reformation needed both theological and technological innovation, a true property data reformation requires more than just philosophical innovation;
For the last three decades, it would have been more accurate to use the word platform rather than platforms – at least when it comes to bulk consumption of the data. Any enterprise customer (i.e. a Zillow or Trulia, Redfin or RealtyTrac) wanting to provide the data to individual consumers was forced to ingest the data via a massive, flat database file delivered via FTP. In more recent years, some API delivery of the public record property data has become available, and ATTOM is leading the charge in that respect (see “Streaming Your Own Property Data List” in the June issue of the Housing News Report).
While the API delivery platform is a welcome and long-overdue innovation
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able to mine the data in an expanded set of counties, they’ll also get more accurate and complete data in those expanded counties. We realize that the data delivered through this platform is not an end in itself but rather a means to an end for the small businesses and entrepreneurs using it. For the first time they will have the ability to feed digestible, large-scale property data into their decisioning stream to help them make better and more profitable business decisions. The better the data, the better the decisions those customers will be able to make. We believe making a do-it-yourself data mining tool for the millions of small businesses and entrepreneurs across the nation will spark a true and lasting property data reformation, bringing the data “word” to the masses.
“With a planned launch date of Q1 2018, the new platform – which we’re dubbing ATTOM List – will include our comprehensive fused data and an expanded geographic data footprint – both of which were previously available only to bulk data customers.”
Think of real estate investors or contractors or pool cleaning services, just to mention a few. DIY Data Mining It’s for these middle-market enterprise customers that RealtyTrac created its Marketing List Platform several years ago. And while we have devoted customers who have built and grown their businesses with this platform, we recognize that it is ripe for innovation that will exponentially improve the user
experience and put this platform head and shoulders above any other similar marketing platforms now available in the marketplace. With a planned launch date of Q1 2018, the new platform – which we’re dubbing ATTOM List – will include our comprehensive fused data and an expanded geographic data footprint – both of which were previously available only to bulk data customers. What that means is not only will customers be
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