Zillow Plunges After Verdict on Real Estate Brokerage Commissions

 

• Lawsuits have challenged system for paying real estate agents
• Realtors group, brokerage say they will appeal the decision

Zillow Group Inc. and other real estate stocks plunged after a Missouri jury found the National Association of Realtors and other industry players guilty of colluding to maintain high brokerage commissions.

Shares of Zillow were down 6.4% to $35.70 at 3:12 p.m. New York time. They earlier fell as much as 11%, the largest intraday decline since May 2022, after industry publications reported on the verdict. Brokerage shares also sank, with Compass Inc. falling 5.7%. Redfin Corp. dropped 5.4%.

https://www.bloomberg.com/news/articles/2023-10-31/zillow-plunges-as-verdict-on-commissions-batters-real-estate

Bidenomics: Typical US Family Would Pay $9,100 To Comply With 'Dream House' Climate Wish List

 The Biden administration's war on fossil fuels would cost the average American household more than $9,100 per year, according to a consumer watchdog.

The Alliance for Consumers took an infographic from the Biden White House titled "Biden's Dream Home," which proposes new energy standards for various appliances, including air conditioners, stoves, washing machines, while the Department of Energy's so-called Unified List of appliances includes microwave ovens, dehumidifiers and pool pumps.

"Welcome to Biden's Dream House, where the American dream just got significantly more expensive," the group wrote on X.

According to the consumer watchdog, gas furnace efficiency standards which will "significantly reduce greenhouse gas emissions" for residences (according to the DOE), will cost consumers an estimated $494 additional on average, while dishwasher efficiency standards will cost somewhere between $50 and $400 to comply with, because the proposed rules will lead to drainage problems and clogging.

Sears Kenmore washing machines are shown for sale inside a Sears department store in La Jolla, Calif., on March 22, 2017. (Mike Blake/Reuters)

The rules targeting air conditioning units will cost around $1,100 to comply with.

This year, the Department of Energy (DOE), the Environmental Protection Agency (EPA), and the Department of Transportation (DOT) have announced a range of proposed rules that will make household appliances more expensive and, as some experts contend, are designed to force Americans to give up their current appliances.

For example, under the DOE's proposed natural gas stove rule, an estimated 90 percent of gas stoves would have to be redesigned, with reduced performance and raise the upfront cost of stove products by around $32 million per year. -Epoch Times

New rules for water heaters will cost consumers an average of $2,800 more, while everything from ceiling fans, washing machines and light bulbs will also add to that $9,100 total.

"It's just spreading to more and more appliances. It seems that almost everything that plugs in or fires up around the house is either subject to a pending regulation or soon will be,"  Ben Lieberman, a senior fellow at the Competitive Enterprise Institute, told Fox News.

"Consumers aren't going to like any of it. These rules are almost always bad for consumers for the simple reason that they restrict consumer choice."

https://www.zerohedge.com/political/bidenomics-typical-us-family-would-pay-9100-comply-dream-house-climate-wish-list

Biden Throws $45 Billion in Federal Funds to Convert Offices into Homes

Questions abound. Assume you can convert offices into homes, who wants to live in them? Is a tear down cheaper?

To ease the housing crisis, White House Opens $45 Billion in Federal Funds to Convert Offices Into Homes

Taking aim at the nation’s housing crisis, the White House kicked off a multiagency push on Friday to help real-estate developers convert more office buildings emptied by the pandemic into affordable housing.

The initiative aims to harness $35 billion in low-cost loans already available through the Transportation Department to fund housing developments near transit hubs, folding the initiative into the Biden administration’s clean-energy push.

It also opens up additional funding sources and tax incentives and offers a new guide to 20 federal programs that developers can tap and that offers technical assistance in what can be tricky and expensive conversions.

A third part of the program will see the federal government draw up a public list of buildings it owns that could be made available for sale to help bolster development.

The federal government owns about 1,500 office buildings nationally and had leases on almost 200 million square feet of additional space as of April, according to Barclays analysts, who said in a recent report that much of that office space was underused.

 

Questions Abound

Also consider San Francisco’s push to turn office buildings into homes hinges on this simple idea

“Hope is not a strategy,” said Nick Romito, co-founder and CEO of VTS, a leasing and asset-management data company. “The hope that if you convert it, they will come —well, a lot depends on where that building is.”

While New York City’s downtown financial district is home to a number of successful office-to-residential conversions, it also takes a vibrant neighborhood, with bustling cafés, grocery stores and more.

“That is not the same for San Francisco,” Romito said. “The infrastructure and the cost of converting a building — that’s part of it,” he said. “But I’d be more concerned about, even if you can convert it, who wants to live there?”

“What’s cheaper?” Romito said. “Is it cheaper to add amenities in maybe a zombie building, add a floor or two, to create a better experience? Or is it cheaper to knock the entire building down, rebuild something else, and pray to God you lease it?”

Warren Wachsberger, CEO of Aecom Capital, a subsidiary of Aecom ACM, said revamping old office buildings isn’t that simple. “Less than 1% of all apartment units underway, being built nationally, are office-to-residential conversions, despite everybody’s love affair with them,” Wachsberger said, speaking from Los Angeles.

“Many buildings probably won’t work,” Wachsberger said, observing that thick, concrete office floorplates often need to be drilled through and plumbing and heating systems overhauled, with local building codes adding to the headache.

“It’s a lot easier and cheaper to demolish it and start over from scratch,” he said. “That means buying buildings essentially at the cost of land.”

Wachsberger said hopes for an expansion of an office-to-residential conversion effort in Los Angeles in the 2000s likely hinge on incentives for developers and the buildings being in places where people wanted to work, eat, live and shop. “Until that’s able to come back, it’s difficult to create the vibrancy that was there prepandemic,” he said.

Simple Idea

I had to read that article twice to find the simple idea mentioned in the headline. The article never really explained. But I believe It’s in that last paragraph above: Incentives and free money from governments.

With enough subsidies, developers will try nearly anything. Then when the projects fail, the developers ask for more money.

Clean Energy Question

What the heck does this have to do with clean energy?

The answer is clearly nothing. Nonetheless, $45 billion is siphoned from the Biden administration’s clean-energy push.

The government has 1,500 office buildings nationally and leases on almost 200 million square feet of additional space that it does not need. Instead of canceling leases and selling the real estate, it’s going to convert them into clean energy spaces.

Biden’s Green Energy Inflation Reduction Act Needs a Big Bailout Already

Please note Biden’s Green Energy Inflation Reduction Act Needs a Big Bailout Already

Surprise, surprise. Subsidies were not enough to make Biden’s energy projects profitable.

The Inflation Reduction Act (IRA) includes hundreds of billions of dollars in subsidies for green energy, yet now renewable developers want utility rate-payers in New York and other states to bail them out.

According to a report late last month by the New York State Energy Research and Development Authority (Nyserda), large offshore wind developers are asking for an average 48% price adjustment in their contracts to cover rising costs. The Alliance for Clean Energy NY is also requesting an average 64% price increase on 86 solar and wind projects.

What Will This Office to Apartment Conversion Ultimately Cost?

Supposedly, this office conversion idea will only cost $45 billion.

I assume it will eventually cost $450 billion minimum by the time Biden finishes. He is guaranteed to add subsidized low income, clean energy, free electric heat, and free child care into the mix.

https://mishtalk.com/economics/biden-throws-45-billion-in-federal-funds-to-convert-offices-into-homes/

NYC developers rip judge in Trump case — and some predict ex-prez will win on appeal

 New York real estate developers slammed the judge who stripped Donald Trump of his business empire for allegedly inflating the prices of his properties — with some predicting the decision will be overturned on appeal. 

Justice Arthur Engoron issued a summary judgment last month calling for a receiver and the canceling of the Trump Organization’s business certificates after state Attorney General Letitia James filed a $250 million civil fraud lawsuit against the former president.

His ruling was temporarily paused by an appeals court at the start of trial, which continued this week.

“I don’t think Trump will lose his properties or his business licenses because of one eccentric judge making a decision on his own. I think [the decision] will be reversed on appeal, but I could be wrong,” one major real estate player said. 

Top developers interviewed by The Post — including those who love Trump and those who loathe him — admit there has always been a bit of embellishment when dealing with banks about their properties.

“The Real Estate Board of New York’s annual party — the equivalent of Vanity Fair’s Oscar party — is even dubbed ‘The Liar’s Ball,'” one developer noted.

However, the ramifications of possibly losing their properties is no joking matter, and Engoron’s decision — whether it is an overreach or not — has sent a chill through the industry. 

“Canceling business certificates is carte blanche to go after anyone for anything,” one concerned developer said. “I’m not defending Trump. But now they have another tool in their toolbox. Where does it end? It’s a little scary.”

Trump’s former lawyer and longtime fixer Michael Cohen spent two days on the stand this week testifying that he “reverse engineered” Trump Organization asset values based on whatever number Trump chose.

The former president’s defense has been, essentially, that every developer lies and that there was no victim because the bank loans were paid back and that everyone made money. 

The onus falls on banks to do their due diligence before issuing any loans, one legal expert told The Post.

“No one lost money. No one got hurt. Everyone got paid in full — even overpaid since the assets were inflated,” real estate lawyer Adam Leitman Bailey said. 

The argument carried weight with many developers, including one who has clashed with Trump in the past.

“So Trump is a fraud. We all know it. He always has been. He’s the world’s best con man. The question is, if everybody knows you are a fraud, who are you defrauding?” the developer said.

But another legal expert dismissed the notion that Trump committed a victimless crime. 

Business litigation attorney David Slarskey said the Trump Organization’s extreme lies and falsifications go way beyond developers’ standard “fudge factor” — what developers themselves call “puffery” and “aggressive interpretation” of truth. 

“The victims of the fraud are not the banks but the integrity of the system itself,” Slarskey said. 

“It is not a question of whether a bank makes a profit but what role does this organization play in the ecosystem and does that need to be addressed.”

He added that the Trump Organization’s outright lies and falsifications of square footage at Trump’s Fifth Avenue penthouse, for example, are so “grossly out of line with anything anyone could imagine that it becomes a regulatory issue, that this is the kind of organization that shouldn’t be allowed to operate in New York.”  

Trump is known to have embellished almost everything about Trump Tower.

He said it was 68 stories tall when it was really 58 stories.

He said his penthouse triplex was 30,000 square feet instead of 10,000.

He hired undocumented Polish works, promised to pay them and then didn’t — until they sued.

He promised to save Art Deco pillars that were on site, part of the former Bonwit Teller building, but he didn’t. 

“I remember being in his penthouse decades ago,” one developer said. “Donald was looking for an appraisal and told someone in the room it was 30,000 square feet. Then he looked at me and winked.”

https://nypost.com/2023/10/27/business/nyc-developers-rip-trump-judge-predict-he-will-win-on-appeal/

Rent control laws could be contributing to shortage of affordable housing

 As the cost of housing in the U.S. has surged in recent years, movements have cropped up across the country seeking rent control measures in an effort to stabilize prices. However, such laws could be making the problem even worse.

Despite warnings from economists, rent control is becoming more and more popular in progressive strongholds. Oregon led the charge in 2019 when the state imposed a cap on older units, and California followed suit in 2020. Since then, municipalities in Illinois, Colorado, Massachusetts and elsewhere are considering similar moves.

Many states had various forms of rent control in the 1970s, another time of high inflation. However, several banned rent control after that, when there was a consensus that price controls were destructive policies. Now, the trend has re-emerged.

Ryan Bourne, chair for the public understanding of economics at the Cato Institute's Center for Economic Studies, said economists overwhelmingly agree that imposing rent control tends to reduce the amount and quality of affordable housing and explained why in an interview with FOX Business.

Bourne said that at a time when cost of living concerns are such a pressing issue, rent tends to be families' single greatest expense. So, it is natural for politicians to look at ways to make people's cost of living more affordable. However, when considering the underlying economics of rent control, it becomes much less simple than that.

"Capping rents at a time when you know demand for property is growing strongly creates a situation where you have a shortage of rental accommodation relative to demand, so it creates shortages," Bourne said. "And to the extent they create shortages, that can actually kind of raise the underlying market rents because if you kept rents below market rates, a lot of landlords will decide to convert their properties to condos or sell them for owner occupation."

"So quite often," he added, "it makes the kind of underlying market rate of property actually more expensive, rather than less expensive."

The more coverage from rent control, the more damage, and the policies are more worrisome in places where the laws are applied across the board, according to Bourne.

He gave the example of how New Jersey has had rent control in place for a long time, but it does not really have much of an impact because it only applies to certain properties and tends to have a fairly high cap. 

However, when Minneapolis tried rent control in 2021, the coverage was broad and set a very tight cap that had "pretty disastrous consequences," he explained.

Bourne said after Minneapolis imposed its rent control, the city saw a significant decline in construction permits for new apartments, so the city had to change the law quickly after officials realized it covered new construction and was going to have awful consequences on the availability of property.

A nationwide inventory shortage is causing elevated rent prices across the country, especially in major metros. Still, many large cities have rent control measures in place while others are considering them, despite the fact that the policies could further hurt housing supplies and drive up prices across the board.

One example is New York City, which has had rent control laws in place for decades, and is now defending them before the Supreme Court. According to a recent report from Moody's, New York City has the highest rent-to-income ratio in the U.S. at 64.9%. 

https://www.foxbusiness.com/economy/rent-control-laws-contributing-shortage-affordable-housing

New Home Sales Exploded In September, As Homebuilders Eat Soaring Mortgage Costs

 Some background color before the big number - The Mortgage Bankers Association's index of home-purchase applications tumbled 2.2% WoW to 127 - the lowest level since 1995 - as mortgage rates hit 8% for the first time in 23 years.

Source: Bloomberg

With all that in mind, it was a surprise that new home sales were expected to rise 0.7% MoM (although sales did puke 8.7% MoM in August). Instead - because you just can't make this shit up - new home sales soared 12.3% MoM in September (and August was revised up from -8.7% to -8.2%). That is the biggest MoM rise since August 2022. and smashed YoY sales up 33.9%...

Source: Bloomberg

That is the highest new home sales SAAR since Feb 2022, as existing home sales hit double-decade lows...

Source: Bloomberg

As rates soar, so homebuilders are eating all that cost!!!

Source: Bloomberg

Mortgage loans have been increasing in size linearly but the last 3 years have seen home-prices rising exponentially... until now...

They should, given that homebuilders can't be filling this gap - between the current 30Y mortgage rate and the effective rates that borrowers are currently paying on their home loans - (i.e. subsidizing new home sales) forever...

Source: Bloomberg

Supply is tumbling (from 7.7mths to 6.9mths - the lowest since Feb 2022...

With a lack of home-building (as builders' incentives are crushed), we don't think Powell will be getting his 'affordability crisis' under control (especially if he cuts rates drastically... because imagine what that does to prices).

https://www.zerohedge.com/markets/new-home-sales

Landlord’s Guide to Using Artificial Intelligence for Rental Processes

 Among all the ways landlords use technology to make operating within the rental housing industry easier, artificial intelligence (AI) is a more sophisticated tool than rent collection software or communication by text message. AI can potentially be very useful to landlords, but there are plenty of things to be aware of before you consider automating a process that typically benefits from the human touch.

In this article, we’ll examine some pros and cons of using AI programs to assist you as a housing provider. But first, we’ll provide a very basic explanation of how AI and neural networks work to generate and evaluate content.

Artificial intelligence, neural networks and AI image generation have been hot topics of discussion recently, and it seems like more and more systems are being AI-automated every day. Virtual assistants such as Alexa and Siri are forms of artificial intelligence. So are customer service chat bots, content generators and facial recognition programs. Many of these programs learn and become “more intelligent” by using a neural network.

A neural network is a form of artificial intelligence that teaches computers to process information in a method that is similar to how the human brain operates. A human brain processes information by filtering it through many layers of nodes (called “neurons”) that are interconnected. When a neuron receives an “input” electrical signal, there’s a chance the neuron will do nothing, but there’s also a chance it will turn on and begin emitting its own signal. Each layer takes the information at hand and evaluates it in a way that informs what the next layer does, until finally, you are at an end state where the neurons have come together to produce an action or behavior (or, potentially, no action). 

An artificial intelligence network represents neurons as numbers. When the network returns a wrong answer (one that does not match what you have requested), it can go back through its layers and tweak its own neuron numbers until it “learns” how to provide the correct information.

You can use various AI platforms to generate different types of results. Some AI is trained to create entirely new content (essays, forms, images). Others may be able to evaluate or edit existing content that you feed it. It sounds futuristic, but although AI is here to stay, it has a long way to go before it can replace people entirely.

So, What’s Wrong with AI Generated Content?

Neural networks and AI-generated content have some good applications. For instance, AI technology can help improve internet accessibility by quickly creating alt-image descriptions for people with low or no vision who use screen readers to access content.

AI can also make it easier to generate text from spoken words. For people with hearing difficulties, AI technology can easily transcribe audio into text. Additionally, current speech-to-text generation has problems with recognizing the difference between homonyms (your and you’re, for example), and being able to filter out non-speech sounds. AI technology can help eliminate those accessibility barriers.

There are ways that AI technology may be able to help you with your landlording practices, and we’ll cover those. But there are many ways in which AI-generated content falls short of excellence, or even reaching the threshold of “good,” and you should be aware that it can be used against you.

Pro: AI Can Scan Lease and Other Forms for Errors

Starting with something good: Artificial intelligence could keep you out of court. If you are not sure whether your forms and notices for your rental practice comply with housing law,s artificial intelligence could be a good resource.

Of course, our first recommendation is to always use AOA forms, which are written by actual people without the aid of artificial intelligence. These forms will keep you compliant with our complicated housing laws. But if you have older rental agreements, or have opted to draft certain things on your own, without an attorney’s guidance (we don’t recommend you do this), a program like ChatGPT might be able to assist. In theory, ChatGPT could read through your rental agreement or other form and, with the right prompt, point out anything in it that runs afoul of the law. Will it always be accurate? We can’t guarantee that. ChatGPT, like most of the AI generation we’ve seen, is not infallible. But it could alert you to verbiage or clauses that merit your attention to ensure they’re lawful.

Pro: Chat Bots Could Help You with Tenant Inquiries

When you list an available rental unit on Zillow or similar sites, you are most likely inundated with inquiries. It’s a tight housing market, yes, but there are also scammers and bots that simply ping you with no interest in your specific property.

If you have just one rental unit, then you may be able to manage the inquiries you’ll receive on your own. If you only get a couple hundred messages, you can probably weed through the junk. But if you have multiple properties available at a time, you can see how that could quickly get out of hand. Chat bots have been used with some degree of success for large property management firms. You may be able to use a similar program to help you sift through messages, and direct people to answers for the most common property questions. (Just don’t become non-responsive and assume a chat bot can handle everything your prospective renters need.)

Con: AI Reflects Bias, Should Not be Used for Tenant Screening

You’ve probably seen an example or two of some great AI-generated artwork. Just give the program a prompt (“an abstract painting of the ocean with lots of blue and green swirls”) and let the results amaze you. The more detailed you make your request, the closer your image will be (is supposed to be) to what you’re imagining.

But for all their acclaim, AI neural networks seem to miss the mark a lot. We asked one platform to generate “a landlord and tenant in an apartment” and got a single person sitting on a couch against a wall with a single random painting in the background. We got more specific, and requested “a landlord and tenant together in an apartment,” hoping that the word “together” would further imply the presence of two people, possibly signing a lease or taking a tour. Instead, we got two people snuggling on a sofa, beaming directly into the camera. We hope it goes without saying that this would not be appropriate landlord–tenant behavior. Often, if we got photorealistic results, the people had strange warping to their faces, extra fingers or hands, or other unsettling features.

Also, AI networks must have examples to learn from. Too often, those examples are from art that is not public domain or available for commercial use. As AI learns from stolen material, its results continue to contain elements of that unethically obtained content. Hollywood has even suggested using AI programs to continue to use artists’ likenesses in films well after their paid contracts are up, a talking point that made the news after SAG-AFTRA went on strike this summer. Six years ago, AI was used to digitally “resurrect” actor Peter Cushing for a Star Wars movie.

Finally, and most concerning, AI images reflect bias because they are learning from the images they already have, and those images may not accurately represent reality. AI networks have access to the images that are posted to the internet, and the internet is not known for being a well-balanced place. For instance, when we asked for an image of a “landlord,” we got a lot of men, unless we specifically requested a “female landlord.” While more landlords are male, it’s not by a terribly large margin (one statistic shows that in the United States, 55.7% of landlords are men, and 44.3% are women, hardly a staggering lead). And it gets worse. One MIT student uploaded a relatively casual picture of herself to an AI platform with the prompt to make the headshot look more professional. Instead of swapping her sweatshirt for a button-down or changing the background, the platform made her Asian features look much more Caucasian.

This problem is widely recognized, and there are ways to combat AI bias (being aware it exists at all is the first step). But there’s still a long way to go.

So, how does this relate to landlording? Maybe you aren’t running your prospective tenants’ identification through an AI image database, but if AI-generated images can reflect unintentional bias, AI tenant screening tools can, too.

There are many websites that advertise AI-automated tenant screening services. Maybe that sounds great to you. Properly screening tenants can be a time-consuming process, especially in Massachusetts, where anti-discrimination laws are strict. However, with AI, the neural network you’re using may not be able to place certain data in the proper context, which could lead to renters being rejected for bogus reasons.

For example, one prospective renter in California was rejected from a senior living community because an AI screening tool labeled him “high risk.” The red flag? A prior conviction, except the conviction was for littering, and didn’t even belong to him. The program had connected his name with the profile of someone with the same name, but younger, and living in an entirely different state. Imagine losing your shot at housing because a stranger thousands of miles away didn’t properly dispose of their garbage.

We suggested earlier that a chat bot could help very busy landlords with initial property inquiries, but would not recommend going more in-depth with AI for tenant screening at this time, especially not for anything relating to images. Think of how many otherwise great candidates you might be missing out on because an AI program filtered them out for incorrect, or incorrectly interpreted, data.

Conclusion

Some people rush to be early adopters of the latest technology. Others prefer to stand back and let the kinks get worked out before they take a dive into something new. We’ve seen how artificial intelligence can help evaluate information, but also know it can create problems when the network isn’t quite human enough to properly analyze the data before it.

The other issue is that AI is cheap to use. AI can “learn itself” on less coding than other programs, so the market is rushing to adopt it as a cost-saving measure. But “cheap” doesn’t always mean “good.”

We recommend you always use rental forms that have been written and reviewed by human beings. If you do use AI for some aspect of your rental business, make sure you carefully evaluate the information it gives you. If you’re unsure about something you’re doing as a landlord, contact your lawyer, not a chat bot.

https://www.american-apartment-owners-association.org/property-management/a-landlords-guide-to-using-artificial-intelligence-for-rental-processes/