Real estate returns are not rocket science.  Because they’re such a huge portion of the consumer balance sheet they tend to be tied very closely to wage growth.  Wage growth, by definition, is very closely tied to the rate of inflation.  That explains why the long-term historical return of real estate is roughly in-line with the rate of inflation.  But this survey from Zillow shows that real estate “investors” are probably still too optimistic.

I can see why these assumptions are attractive, but they are not quite what drops out of macroeconomic analysis.

Fundamental Upward Pressure of Prices

Wage growth, per se, shouldn’t drive housing prices. What we might expect is that wage growth drives rents and rents drive housing prices.

The wage-rent relationship, however, is not an iron law.

Matt Yglesias and Ryan Avent are famous for pointing out that rents – and hence housing prices – could be much lower in coastal cities if residents would abandon restrictive zoning laws. For example, Dallas and Philadelphia have roughly the same median household income, but home prices in Philly are much higher than in Dallas.

In general, if a fundamental driver – regulation, technology, preference – causes rents to eat up a higher portion of folks pay checks then rents and home prices will be higher.

To some extent the national rise in home prices is due to both technology and preferences driving more people to want to live in high rent areas like the Northeast Corridor.

Those same forces are leading some people to want to live in Houston, Austin and Raleigh-Durham, but because of looser regulation that simply translates into booming housing supply and a booming population rather than higher prices.

In addition, the relationship between rent and housing prices depends on interest rates – both the real portion and expected inflation. A house is like a utility company. Instead of providing power services, it provides shelter services and keeps you from having to pay rent.

Many finance folks are familiar with the rule-of-thumb that utilities tend to trade like bonds. Higher interest rates lead to lower bond and utility stock prices. Lower interest rates lead to higher bond and utility stock prices.

This is because – like a house – you are receiving a fixed stream of services over a long period of time.

Though this framing is kinda technical, most of these factors can be summed up in a really straightforward comparison: monthly rent vs. monthly mortgage payment for similar homes.

When the market is balanced the monthly mortgage payment should be slightly higher than the rental payment because 1) Mortgages get a tax break and 2) Traditional rate mortgages offer you the stability of a fixed payment.

Adjustable rate mortgages  (ARM) need to produce a payment close to or even below rent to be a good buy. That’s because you lose the security of a fixed payment and depending on the terms of the ARM you may actually be facing more payment volatility than with renting.

Trulia crunches the numbers and it looks like under their baseline assumptions its cheaper to buy than to rent in every one of the top 100 metropolitan areas in the United States.

In traditional hotspots like the San Francisco Bay area, New York City and Orange County, CA, the discount is low. Still this is a recipe for fundamentals house price appreciation.

Bubble Territory

If housing prices merely stabilized into a sustainable equilibrium with rents then the future probably wouldn’t be too dramatic. We would see a rapid shoot-up in home prices now, followed by a long period of little to no price growth as the Fed raised interest rates.

Rents would still be going up and monthly mortgage payments would rise with them to maintain equilbrium. However, mortgages payments would be rising because interest rates were rising, not because home prices were rising.

Eventually, the Fed would stop raising rates and home prices would start to drift higher and eventually home price growth would converge to rent growth.

Article source: http://www.forbes.com/sites/modeledbehavior/2013/03/25/the-housing-bubble-is-back/

Moreover, the very “openness” of an open house means anyone can walk through the door, putting real estate agents at risk every day. There are instances when an open house may not be the safest option, and that’s one reason why Robertson launched OpenHouseKey.com, a website dedicated to transforming open house management.

“We always wished somebody had put together the right set of real estate tools to make our lives easier, more productive and safer,” says Robertson, who also owns the real estate brokerage firm YourSeattleHomeTeam.com. “Nobody did — so we decided to do it ourselves. By harnessing the power of current technologies and the Internet’s popularity as a real estate marketing and research tool, we’ve created a solutions-oriented site that makes open houses more convenient, meaningful and safe, while providing its users with a number of marketing, sales and consumer tools that support industry-wide success.”

OpenHouseKey.com is a one-stop portal for posting “for sale” and “for rent” properties, open house times, auto-generated QR codes for each listing, and auto-fill pdf flyers with photos + QR code. Perhaps even more important, OpenHouseKey.com features SecureShow®, a cutting-edge ID verification process that identifies buyers and tenants, and verifies they are who they say they are before agents, sellers and landlords meet them at properties. SecureShow eliminates speculation regarding who will attend an open house, while reducing the odds of “looky loos” or, worse, unscrupulous imposters popping in for a “showing.”

OpenHouseKey.com is currently in beta-testing, yet Robertson has already been named a finalist for the Washington Association of Mortgage Professionals’ “Best of the Best” award. The honor recognizes outstanding innovators, advocates and community leaders within its industry.

“I believe that part of why I was chosen as an award finalist is because this website is such a welcome reprieve for the industry,” she says. “The issues and challenges related to open houses are very well known, yet there have been no solutions for addressing them effectively until now. With OpenHouseKey.com, we’re doing what we can to make the entire open house experience safer and more effective for all.”

For more information, visit http://openhousekey.com.

About OpenHouseKey.com

OpenHouseKey.com provides security awareness and screening, along with current, user-friendly marketing tools, to sellers, real estate professionals and landlords. All this is delivered through a single-source platform website that also supplies accurate and timely information to prospective buyers and tenants.

Contact:

Lynn RobertsonPresident, OpenHouseKey.comMedia@OpenHouseKey.com 206-225-6941

This press release was issued through eReleases(R).  For more information, visit eReleases Press Release Distribution at http://www.ereleases.com.

SOURCE OpenHouseKey.com

Article source: http://www.sacbee.com/2011/12/12/4116753/openhousekeycom-transforms-open.html