49 Syllable Haiku

This winter we will capture

only perfect snow flakes.

Using great care,

we will write the Lord’s Prayer

on each one.

We will bottle the snow

in flasks marked GINSENG

and then sell them

as holy water.

Copyright © by Roger Patrick Ewing, all rights reserved.

Mr. Lazo,

Thank you for your well thought out article in the Times this morning, “Home Values Jump In January”.   As a 32 year veteran of the Southern California real estate market and I would like to offer a couple of observations regarding home values in today’s market.  Unfortunately, I believe the real estate market is extremely fragile and the recovery may be long and painful for home owners who have lost so much equity in this economic downturn.

First, as you probably are aware, we currently have a two tiered real estate market.

A conforming loan market where buyers obtain loans less than $729,751 and a jumbo loan market for loans above $729,750.

The jumbo home market price structure is still depreciating and will continue to do so until a secondary mortgage market becomes available to create a resource whereby lenders can sell the jumbo loans to third parties.

None of us see such a resource becoming available in the near future.  As a result the important “move up” real estate market is for all intents and purposes, moribund.

The conforming market continues to show strength and has probably bottomed out in terms of price depreciation for the time being.  However, an increase in interest rates, combined with harsher qualifying guidelines, and a rush of foreclosures could cause this situation to reverse itself as you correctly mention in your article.

Second, the real estate market is not immune to classic financial market behaviors.  The government has been successful in supporting the current situation through a number of incentives that you mentioned.  However, it is important to consider the entire home market as a singular unit.

Ecosystem

Each segment of the market is dependent upon the other in an ecosystem of sorts.  And just like any ecosystem, the failure of any market segment will have negative consequences for the other segments.

In other words, for the low end home market in Southern California to become permanently stable, the upper end market (where buyers depend upon jumbo mortgages) must also become healthy.

I would point out that the real estate market in our country is responsible for over 20%  of the national GDP.  Given the importance of the real estate market in the overall economy, I am surprised at the lack of understanding on the part of our leadership in Washington.

The focus for stimulating housing has and continues to be only on the low end conforming segment.

This continued myopia by leadership will result in extending the delay of a full recovery in housing and will hold back the overall economy as well.

Thanks for reading my email.  I hope to see articles in future that draw attention to the two tiered market and the importance of addressing issues related to each market segment.  After all, those who purchase conforming loan properties tend to be tradespeople and small business owners/workers.

When a real estate transaction is successfully completed, more than 25 individual vendors receive work.  This tends to be an even higher number of vendors when a high end property finally closes escrow.  At the end of the day, full employment is the key to overall financial stability.

LA Times: Home Sales Jump In January

By Roger Ewing

While local home sales activity has improved during the past six months, the market cannot be considered to be in full recovery, at least not yet.

What does this mean to you as a potential buyer or seller?

Following is a summary of the issues you will want to consider when making your real estate investment decisions.

First, The “Not So Good” News.

1.  The US Treasury is scheduled to stop purchasing mortgage backed securities in March of 2010.  This effort on the part of the federal government has been a major contributor to the low interest rates we have enjoyed.  When this program ends, interest rates will rise.  Experts have estimated that home mortgage rates may rise as much as 1/2%-1%.

2.  The government has been offering first time home buyers a tax credit of $8,000 to stimulate buying activity.  This credit will no longer be available after April 30, 2010.  Ending this program may result in a slight increase in the inventory of unsold homes.  More importantly, the end of this popular program may create some negative press which may further depress buyer’s lack of urgency.

3.  The 12.4% unemployment rate in California represents the highest rate in over a quarter century. Some economists believe the true “hidden unemployment” rate may be as high as 18% or 20%.

Naturally, people who are concerned about their job stability are reluctant to buy homes.  Unemployment must be addressed to ensure the fledgling economic recovery is sustainable.

4.  A potential surge of bank owned properties may come to market in 2010, resulting in an increase in the number of homes for sale, thereby depressing the home pricing structure.  “Given what we see in terms of the number of distressed properties that are in the pipeline, we do expect that foreclosures will mount…” said Celia Chen, senior director of Moody’s Economy.com.

5.  Lenders are tightening qualifying guidelines.  The conforming lenders such as Fannie Mae, Freddie Mac and FHA are all making it more difficult for buyers to obtain financing.  The resulting lack of qualified buyers will potentially result in weaker buyer demand.

Jumbo mortgages, home loans above the conforming $729,750 loan limit, are difficult to obtain because a secondary mortgage market has failed to replace the mortgage backed securities market that existed prior to the economic meltdown.

But Wait, Now The “Good” News.

1.  Home sales are improving while the median sales price is rising.   This is true even though the rate of appreciation is slow and labored.  It will take an extended amount of time for prices to rebound to their previous highs.  According to statistics produced by Case Schiller, in the last recession it took nearly ten years for prices to fully recover to previous highs.

2.  First-time Buyer Housing Affordability Index, measures the percentage of households that can afford to purchase an entry-level home in California. The index stood at 64%  in the third quarter of 2009 compared with 55% in 2008. Recent decreases in home prices and mortgage rates have brought affordability into better alignment with income levels of typical California households.

3.  The Obama administration’s $75-billion program to help troubled borrowers hold on to their homes appears to be keeping more California families out of foreclosure, but the relief may be temporary. At the end of September, 2009, about 1 in 4 homeowners with mortgages was underwater.

4.  The residential real estate market is responsible for over 20% of the annual Gross Domestic Product.  Without a solid recovery in housing, our economy will not be able to sustain a lasting recovery.  Housing is a key ingredient to financial stability and the federal government must support housing to ensure the recovery continues.

Summary

Potential home buyers and sellers are navigating treacherous water. Real estate is extremely dependent upon low interest rates and high employment.  These two important forces are competing with one another.

As the year progresses, we can expect home mortgage rates to rise. Given the depth of the economic recession we should not be optimistic about employment making a strong comeback this calendar year.

BUYERS, Consider acting now to lock in the lowest interest rate possible before the end of the first quarter of 2010.  A 1% increase in interest on a $700,000 mortgage will result in approximately $70,000 in additional interest over ten years. The question a buyer should ask themselves is this.  “Should I risk paying a higher interest rate on my future mortgage, while I wait for prices to decrease further”?

SELLERS, Consider the real possibility that prices may erode further as a result of higher inventories of homes for sale and the availability of fewer qualified buyers.  Increasing interest rates may affect the ability of buyers to qualify for larger mortgages, resulting in downward pressure on prices.

As always, prior to making your home buying and selling decisions, consult with your tax advisor to ensure your decisions are knowledgeable and well planned.  Then consult with a qualified Realtor to assist you in executing your home investment strategy.

“The dramatic drop in foreclouse activity may have been a Christmas gift to homeowners”, says Sean O’toole, CEO of Foreclosure Radar.co

By Roger Ewing

For the first time, since the loan crisis began over two years ago, banks are canceling more foreclosures then they sell.  For a complete analysis of the foreclosure situation read the full report from Foreclosure Radar here. Foreclosure Radar

Life on Moonstone Beach

is more precious at midnight-

mysterious mist.

Copyright © by Roger Patrick Ewing, all rights reserved.

Snow is a coffin

of flowing Angel hair in

the dead of winter.

Copyright © by Roger Patrick Ewing, all rights reserved.

James Cameron’s Avatar is a blockbuster movie , due largely to the technology of augmented reality.

By Roger Ewing

Imagine this for a moment.  You point your mobile phone camera at a busy city street and instantly you see an overlay image on your phone of information about sales, promotions, events, food, coffee and other interesting stuff.  All in real time.

No need to actually walk down the street and check out the menus, or look in the display windows.  If you don’t like what you see, you simply point the phone camera in the opposite direction and check out the action there.  Tonchidot, a Japanese company created an iPhone application called Sekai Camera that channels augmented reality technology into this exciting application.

Recently Esquire published it’s first augmented reality magazine.  Readers must download software from the internet.  Once enabled, the reader then holds the magazine page that includes the marker up to the webcam on their computer and instantly a video of Robert Downey Jr. springs to life on the computer screen.

There are additional augmented reality pages included inside the magazine that are quite amazing.  You can see a demonstration of the application here. Esquire Magazine Augmented Reality Issue

Research into augmented reality involves the assimilation of computer-generated imagery into live-video streams.  This technology expands the way we view the real world.

The Coca Cola Zero | Avatar promotion is probably the most amazing demonstration of this new technology.  It provides a glimpse into the marketing opportunities available through augmented reality.

James Cameron’s Avatar Toys augmented reality demonstration is another example of the commercialization of this technology.  Action figures are now 3D controllable images.  Press a button, and the figure takes flight; press another, and the guns begin to fire.  Add another figure, and they can interact.  The possibilities are endless.  Check out the video below.

It’s not difficult to envision a brochure or direct mail announcing a home for sale that possesses a marker, like Esquire Magazine, that when held in front of a computer webcam will trigger a virtual tour of the home to begin playing on the screen.  This is the power of augmented reality.

In the virtual world of augmented reality, our understanding of entertainment and marketing has changed forever.

Avatar, The Movie

Copyright © by Roger Patrick Ewing, all rights reserved.

Child Of My Dreams

For my son, Tyler

You are the child of my dreams

whispering to me softly

from the quiet darkness

behind your eyes.

You came into the world shimmering.

Rigged for silent running.

Braced hard against the helm.

Standing tall before the wind.

Physics will determine the course

of life’s many rain drops

crashing in clever cat paw patterns.

Leaving traces of accelerated particles

in your wake.

There is no science

no logical conclusion

no antibiotic for the infections

that wander after you and me.

Feel your sails rush

full bloom into the night?

Those maudlin clouds

no longer cling

to your precious feet.

Brave child of my dreams

take no prisoners in life’s grand game.

Quietly inscribe your enchanted heart

like a simple tattoo

on the shoulder of God.

Copyright © by Roger Patrick Ewing, all rights reserved.

By Roger Ewing

In his book Leviathan, English political philosopher Thomas Hobbes said, science is reason, and “Reason is nothing but Reckoning..”.  Hobbes was describing either a computer and/or the human brain when he wrote those words in 1651.

Thomas Hobbes

Reckoning is computation and isn’t that what brains and computers do?  And isn’t thinking just another term for computing?  Artificial Intelligence has been described as the quality of a machine to have a mind, consciousness and a mental state.  How to make a machine exhibit these qualities is the question on the minds of Google engineers as they steer the starship Google into the next decade.  The magic of the search and the man-machine interface has become the new frontier of computer science.

John Battelle, in  his book The Search, writes of the “Database of Intentions”.  Batelle says search is the force driving the web forward and the ability of machines to understand what people are looking for is critical.

The capability of a computer to intuitively interpret our intentions is the Holy Grail of search.  Search is becoming less about finding something, and more about understanding something.

The Turing Test

Simply stated, the Turing Test is the ability of a machine to demonstrate intelligence.  Alan Turing in his 1950 paper Computing Machinery and Intelligence, contemplates the question “can machines think?”  The test goes like this. A human interrogator engages in a conversation with another human and a machine, each of which tries to appear human. All participants are separated from one another in different locations. If the interrogator cannot reliably tell the machine from the human, the machine is said to have passed the test and is therefore deemed intelligent.

The Loebner Prize

Hugh Loebner of the Cambridge Center for Behavioral Studies sponsors a contest each year in which he offers a cash prize of $100,000 to the first computer that can pass the Turing Test.  Thus far, the Gold (audio and visual) and the Silver (text only) have never been won.

However, Loebner has awarded the bronze medal every year for the computer that demonstrates the “most human” conversation among that year’s entries.  Artificial Linguistic Internet Computer Entity (A.L.I.C.E.) won the bronze award three times (2000, 2001, 2004) and AI Jabberwacky won in 2005 and 2006.

Space Odyssey

Lets cut to the chase.  Can a machine have emotions, self awareness, creativity, benevolence, or hostility?  Can a machine have a soul?  Do we need to be concerned that some day a computer like Hal, from Kubrick’s 2001: A Space Odyssey, will take control and attempt to extinguish our life force?  No, the answer is much more benign.

Battelle believes search will become intelligent as a result of clever algorithms that leverage the multi-millions of daily transactions, behaviors and links that compose the foundation of the web, The Database of Intentions.

What does the world want?

Google is determined to find out.

Copyright © by Roger Patrick Ewing, all rights reserved.

By Roger Ewing

Case in point.   A sales associate in my office, lets call him John, understands the value of referral marketing.  John enters into an agreement with a custom house painter who works on new speculative homes, as well as high-end remodels, in the toniest of neighborhoods.  Pierre is the painter homeowners love to have on their project and then brag to their friends about the talented craftsman working on their home.

John is an enterprising and very successful real estate broker.  He understands the value of referrals and decides to create a mutually beneficial relationship with Pierre the painter.  John will refer Pierre’s custom painting business to his clients who are purchasing or selling homes.  In return, Pierre will refer any potential buyer’s and seller’s to John that he meets on his painting projects.  This symbiotic relationship should result in lots of referral opportunities for both.

John refers several custom painting jobs to Pierre over the course of the next few months.  Pierre is delighted, but John has not yet received any referral leads, even though Pierre claims to have handed out every business card John gave him.  What’s the problem?

It’s not enough for Pierre to simply hand John’s real estate business card to potential clients who happen to inquire about the home he is painting. That action alone does not qualify as a referral.  A successful business referral requires more effort.

I recommended to John that he meet with Pierre the painter and “train” him in the way he should handle his referrals.  Here are four helpful ideas to assist you in creating better referral opportunities.

1.  Ask permission.  Always create an environment where your friends or business partners acknowledge the referral process.  “My business is predominantly the result of personal referrals. Would you be willing to help me by passing on potential buyers and sellers to me?”  Assuming they say yes, you’re next step is to train them on how to refer you properly.

2.  Set the stage. Some individuals will balk at referring a client to you because they worry it may cause problems in their friendship with you.  Confirm that you keep your business and personal relationships well separated.  Assure your referral source that regardless of the quality or outcome of any referrals they give you, the referral will have no negative impact on your personal or business relationship.

3.  Don’t qualify the referral. Your referring source does not need to validate the quality of the referral.  I suggest saying something like this. “Please do not evaluate or attempt to determine the quality of a referral you give me.  Allow me to do that, it’s my job.  Send any lead my way, good, bad, or indifferent.”  People may actually not want to give you a referral because they don’t want to disappoint you.  Do not allow your referring source to do that.

4.  Control the referral process. You must initiate the call to the client, not the other way around.  Instruct your referring source to obtain the clients contact information and tell the client you will be calling.  This is critical.  Taking control of the referral process from the beginning will ensure client contact for you.  Leaving this to chance, by waiting for the client to call you, may result in a lost opportunity.

Lastly, the issue of providing an incentive to the referral source is something to consider.  When a friend or business associate recommends you, they are taking a leap of faith.  Their goal is to do a good deed for the client by giving them the opportunity to work with you.

Personally, I don’t believe in paying cash for a referral that results in a closed transaction weeks later.  I want to reward my referral source to initiate referrals, not to close sales.

Therefore, I recommend you provide some small gift to the person who has referred you.  This should be done as soon as you receive the referral.  That is the behavior you want to reinforce.  A coffee house or a restaurant gift card is all that is required.  If a referring source wants to make a business of providing referrals to you, then they are referring you for the wrong reason and the quality of the referrals will reflect it.

WOM, word of mouth, is a new internet catch word, that describes a very old concept.  People do business with people they know.  The best way to expand your business is to train your friends, past clients and business relationships to refer you.  The result will be many successful business transactions.

Copyright © by Roger Patrick Ewing, all rights reserved.