TIME

Housing Prices Jump Though Top of Market Cools Off

The start to the story is the same as it has been for months: the most recent housing price data came in, and prices jumped.

However, the influence of extremely speculative markets (think: Miami and Vegas) is moderating, causing the national numbers to begin coming in at a slower pace.

For the year, this meant that the 20-City S&P/Case-Shiller Home Price Index, which had clocked a yearly gain of 10.8% in April, slowed to high single digits, posting a yearly gain of 9.3% for the twelve months ending in May.

On a monthly basis, prices were up 0.1% for the index. For the year, every one of the twenty cities showed price increases.

However, gains for the cities at the top of the market slowed, which may presage softer numbers for the index as a whole in the coming months. Call it “hot hot” instead of “hot hot hot.” Las Vegas, which last month showed a yearly gain of 18.8%, decelerated to a yearly gain of 16.9%; Miami slid from 14.7% to 13.2%, and Phoenix slowed from a yearly rate of 9.8% to 8.2%.

The cities with the slightest gains were Cleveland (up 1.2% month-to-month, and 2.4% annually); Charlotte (up 1.4% month-to-month, and 4.7% annually), and New York (up 1.0% from April, and 4.8% annually).

One strong driver behind the market has been historically low interest rates. The rate for thirty-year “jumbo” loans — those with a loan balance of greater than $417,000 — fell this week to 4.21 percent, according to a weekly survey by the Mortgage Bankers Association. The MBA noted in a release that this was “the lowest level since May 2013.”

So continued low rates are supporting high prices. But what about the Federal Reserve? Wasn’t the Fed, which had been following a program of supporting low interest rates by buying debt, supposed to be slowly removing that support by buying less debt? Last year, when then-Fed Chairman Ben Bernanke had announced that the Fed would wean off its latest round of bond purchasing, that so-called “Taper Talk” sent rates jumping.

Yet they’re low again because the economy made one strong realization: that “tapering” can be neutral. Yes, the Fed is buying less debt in an absolute sense — it’s buying a lower dollar volume worth of bonds. But the Federal government is also issuing less debt, since tax revenues are up. So indeed there’s less buying — but there’s less to buy. “It’s not really tightening if the proportion is the same,” noted Doug Duncan, senior vice president and chief economist of the mortgage giant Fannie Mae, in a chat with Time last month.

Going forward, there’s a possibility that rates do spike as the taper ends completely, which is planned for later this year. However, if the history of the past couple of years is any guide, that impact will show in a slowing volume of home sales. Prices, though, seem on track to keep rising — albeit at a slowing pace. Maybe by the end of the year, we’ll be down to just one “hot.”

MONEY home prices

Case-Shiller Index Shows Home Price Growth Slowing

Home prices increased at their slowest pace since February 2013, according to the latest report on the S&P/Case-Shiller Home Price Index.

The index, which compiles a 10- and 20-city composite of home prices, showed the 10-city composite posted price gains of 9.4% year-over-year, while the 20-city group showed gains of 9.3%. Both results were significantly lower than the 10.9% and 10.8% year-over-year increases the respective composites showed last month, and much less than the 9.9% gains analysts expected from the 20-city index.

All 20 cities posted some month-to-month price gains before seasonal adjustment, but 14 of 20 saw prices decline once seasonal factors were taken into account.

This is the second bit of bad news for home-sellers this month. On Monday, the National Association of Realtors reported that pending home sales dropped 1.1% in June, and were down 7.3% since June of 2013. Lawrence Yun, the NAR’s chief economist, blamed tight credit, low inventory, and flat wages for the decline. However, Yun predicted sales would increase slightly in the second half of the year, partially because price appreciation has slowed.

“Housing has been turning in mixed economic numbers in the last few months,” said David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. “Prices and sales of existing homes have shown improvement while construction and sales of new homes continue to lag. At the same time, the broader economy and especially employment are showing larger improvements and substantial gains.”

Of the 20 cities measured by the Case-Shiller index, Charlotte was the only area to see its annual growth rate improve. Las Vegas experienced some slowdown in price appreciation, but remained the city with the fastest price growth (16.9% YOY), followed by San Francisco (15.4% YOY). Washington had the lowest year-over-year growth at 5.8%.

MONEY buying a home

What a Zillow/Trulia Merger Might Mean For Consumers

House with SOLD sign
Martin Barraud—Getty Images

UPDATED—4:21 P.M.

It’s official. Zillow and Trulia, the two largest sites in the home listings game, are merging. Together they account for about 48% (not including local websites) of listings web traffic.

The deal, worth $3.5 billion in Zillow stock, has already been good for investors. Both companies’ stock is through the roof as Wall Street rewards Zillow for effectively eliminating its major competitor. Zillow’s press release states that both brands will be maintained, but Trulia CEO Pete Flint will begin reporting to Zillow’s chief executive, Spencer Rascoff. For all intents and purposes, Zillow-Trulia is now the only game in town, with a combined traffic that’s more than 3.5 times that of its nearest competitor, Realtor.com, according to comScore.

What does Zillow’s new, even-more-dominant market position mean for the consumer? Probably not a whole lot—at least initially.

The major concern consumers have long held with both Zillow and Trulia is the accuracy of the services’ listing information. The notorious(ly questionable) ‘Zestimate’ aside, the big two have been dinged for having out-of-date listings information. Because neither company has access to the large sample of multiple listing service (MLS) data that members of the National Association of Realtors are privy to, each relies on a hodgepodge of MLS listings, third-party services, and individual brokerages for their listing information.

The results can be hit or miss. It’s not uncommon to find a home on either site that’s already off the market. Realtor.com, run by the National Association of Realtors (NAR), has made its large MLS network—the site has access to virtually all of the country’s listing services—and more accurate listing information the cornerstone of recent marketing efforts.

A Zillow/Trulia merger isn’t likely to make their listing information any more reliable, and Zillow doesn’t mention increased accuracy as one of the “expected benefits” of the deal. Sissy Lappin, a Texas Realtor and founder of ListingDoor.com, thinks the Zillow/Trulia merger is a pure-and-simple market share grab, not a quest for more or better data. “They’re buying out the competition,” Lappin says.

That shouldn’t come as much of a surprise, both because each company has likely already made deals with all of the data providers willing to do business, and because the data only needs to be accurate enough to attract customers, not necessarily to sell them a particular home. Zillow makes most of its money by providing real estate agents with early leads, and even its own CEO has gone so far as to endorse the notion that “a lead on a stale listing is still a good lead.”

At the end of the day, consumers might find themselves the losers in the merger. 24/7 Wall Street points out that less competition for agents’ business could lead Zillow to charge them higher advertising fees, and those agents may pass on the costs to the buyers they represent. That said, how much agents actually pay for ad space on Trulia/Zillow is a hotly debated topic, and it’s still unclear whether agents—who, after all, provide Zillow with listings—or the company itself has the upper hand in the relationship.

Ultimately, the big question is whether the merger will bring long-simmering tensions between brokerage firms and Trulia/Zullow to a boil. Brokers like the advertising and leads online listings sites provide, but they also don’t like that agents can circumvent real estate franchises and go to the customer directly. There’s always the potential that Zillow becomes so large it can muscle out the middle man, and if enough of the industry fears this is coming true, they could pull their listings entirely.

Zillow denies they have any aspirations beyond creating a mutually beneficial partnership. “We’ve never wanted to become a real estate brokerage,” stated one company spokesman. The question is whether brokers believe that partnership is more beneficial than threatening. If they don’t, and decide to pull their listings—the so called “nuclear option”—it would have a huge impact on the market, for both consumers and everyone involved in the real estate business.

CORRECTION: A previous version of this post stated that Trulia and Zillow shared 90% of online listings traffic. According to Zillow, that number is 48%.

MONEY Housing Market

WATCH: What Zillow Buying Trulia Means for Real Estate

Zillow is set to acquire Trulia for $3.5 billion, but some people in the industry are nervous about the deal.

MONEY buying a home

Dear Zillow, Please Don’t Kill Trulia’s Best Feature

Trulia's heat maps are a huge competitive advantage. Courtesy of Trulia

Zillow is said to be interested in buying its competitor, Trulia.com. If so, let's hope they don't ruin what makes Trulia so great.

UPDATED—July 28, 4:25 P.M.

In case you haven’t heard, rumors are swirling that real estate giant Zillow.com plans to purchase real estate slightly-less-giant Trulia.com. Both companies’ stock have shot up on the news, and if the deal succeeds in going through, the new company (Trillow? Zulia?) will have almost 50% of the online listings market.

That’s good for shareholders. What about for consumers? When two businesses decide to tie the knot, you never know what aspects of your favorite company will make it through to the other side. And in the case of Trulia, it would be a tragedy if a ZillowTrulia mashup killed its best feature: Trulia’s amazing visualization of local data.

Sure, Zillow has local data too. And it’s not bad. There’s the average and median sales price, stats on specific neighborhoods (demographics, education, home prices over time), and even a nice little map showing the quality of schools in your chosen area. But Trulia takes all this to another level. Here’s a Zillow data visualization on schools:

ZillowExample
Courtesy of Zillow

Trulia has pretty much the same thing. But it also has these.

Heat maps of crime rates:

TruliaExample
Courtesy of Trulia

Commute times:

TruliaCommute
Courtesy of Trulia

Local listing price heat maps:

TriliaPrice
Courtesy of Trulia

There’s even a national home price heat map:

TruliaNational
Courtesy of Trulia

And that’s not even all of the data maps Trulia offers (I just assumed you might be tired of scrolling). The site also has similar visualizations for hazards (like flood zones), demographics, and amenities.

It’s hard to overstate how useful all of this is. When you’re looking for a house in a large area, getting the big picture is absolutely essential in making the right decision. How far am I from work if I live here? How much cheaper are home prices if I move a few blocks that way? Which areas are safe enough to live in, and what kind of stuff is there do in this neighborhood? These are all questions every buyer asks, and Trulia makes it very, very, easy to get the answers. Its amazing maps have long been cited as a competitive advantage.

So Zillow, if you do end up buying Trulia, you’re getting a pretty amazing product. Just please don’t screw it up.

CORRECTION: A previous version of this article stated that together Zillow and Trulia received 90% of online listings web traffic. According to Zillow, that number is actually 48% (not including local sites).

MONEY real estate

NYC Apartment Building Will Have Separate Door for Lower Rent Tenants. What’s Up With That?

Rich door and poor door
New Yorkers are calling it the "poor door." Sarina Finkelstein—Marcus Lindström/Bronxgebiet/Getty Images

A new luxury high-rise on the Upper West Side of Manhattan will include a separate entrance for tenants in "affordable" housing units.

New York City has approved plans for a new luxury high-rise on the Upper West Side of Manhattan that will include a separate entrance for tenants in “affordable” housing, reports the New York Post. Even the conservative Post manages to see the class angle, calling this a plan for a “poor door.” (The quotation marks are the Post‘s.)

This controversy has been roiling in New York for a while. The Daily Mail unearths a 2013 quotation in a real-estate trade paper from the developer of another project (not the one on the West Side) defending separate entrances. It’s one for the ages:

‘No one ever said that the goal was full integration of these populations,’ said David Von Spreckelsen, senior vice president at Toll Brothers. ‘So now you have politicians talking about that, saying how horrible those back doors are. I think it’s unfair to expect very high-income homeowners who paid a fortune to live in their building to have to be in the same boat as low-income renters, who are very fortunate to live in a new building in a great neighborhood.’

Let’s keep the rich and not-so-rich in separate boats. Nice. You can make arguments for what the developers are doing here—here’s one—but, wow, that’s not it.

If you don’t live in New York and you aren’t familiar with the crazy real estate market here, this story might need a little translation. Your questions answered:

If the developers don’t want to mix different tenants, why include “affordable” units at all?

Because they are getting subsidies—pretty valuable ones—to build them.

There is not enough of any kind of housing in NYC, but housing for people with low-to-middle incomes is especially scarce. The long-term answer to that is to build lots more housing, and there’s a case to be made that building in NYC should just be a lot easier than it is. The fear on the other side is that new construction will mostly go to the luxury end of the market.

One stop-gap has been to encourage developers to encourage builders to include various kinds of affordable units in their projects. There may be tax benefits passed on to buyers of condos in buildings with affordable units, for example. The Upper West Side project, developed by a group called Extell, got zoning rights to build more units, says the blog West Side Rag, and Extell can sell those rights to other nearby developers.

West Side Rag also says the developer argues that, since the affordable units are in a separate part of the building, it legally must have its own entrance. That could have been avoided had the affordable units been mixed throughout the building. But this particular high-rise offers coveted views, including of the Hudson River. Spreading the units around would presumably have meant giving up some prime spots to affordable units, cutting profits for the developer.

What’s “affordable”?

To qualify for these units, a tenant would need to earn less than 60% of the area’s median income, adjusted for family size, says West Side Rag. For a family of four, that’s about $52,ooo a year. That’s twice the Federal poverty line and above the median U.S. household income, though making ends meet in NYC on that much, with a couple of kids, isn’t easy. That family could rent a two bedroom under this program for about $1,100 a month. So yeah, New York’s version of affordable is different than in other places.

TIME Economy

Motor City Revival: Detroit’s Stunning Evolution in 19 GIFs

One year ago today Detroit became the largest city in US history to file for bankruptcy. See what changes took place in the city in the years leading up to the momentous declaration.

The Motor City, the former automotive capital of the nation, has seen a steady and precipitous decline in population and economic growth over the last half-century. The automotive industry’s move out of Detroit, poor political decision-making, and the collapse of the housing industry can all be viewed as causes for the city’s decline, among other reasons. On July 18, 2013, unable to pay its looming debts, Detroit became the largest city in U.S. history to enter bankruptcy.

However, this momentous step did not happen overnight. Detroit was hit with a housing crisis in 2008, a sign of economic trouble that foreshadowed the city’s bankruptcy. A major outcome of that crisis is the city’s ongoing blight epidemic. Vast stretches of abandoned residential property lay on the outskirts of the once sprawling 139-square-mile city.

As Steven Gray wrote in 2009, “If there’s any city that symbolizes the most extreme effects of the nation’s economic crisis and, in particular, America’s housing crisis, it is Detroit.”

While many of the buildings and houses within the city have disappeared, evidence of a former era can be found in the more than 80,000 blighted houses remaining combined with an estimated 5,000 incidents of arson each year, according to the New York Times Magazine.

Despite all this, the Motor City could have a bright road ahead. There has been a recent surge in growth, spurred by a sense of opportunity in the ever-evolving city. New businesses are popping up and property is being rebuilt and re-purposed for urban farming, startups and public art.

Google Street view images, compiled here into GIFs, offer a unique look at how Detroit’s landscape has changed over the past four to six years leading up to the city’s bankruptcy a year ago.

MONEY

What Six Californias Would Really Look Like

Under a tech mogul's proposed breakup plan, some "states" are more equal than others.

Tim Draper, the Silicon Valley venture capitalist behind companies like Tesla and Skype, has a crazy idea. In order to make California more responsive to the needs of local communities, it should be broken up into six separate states: South California; Central California; North California; West California; Silicon Valley; and Jefferson.

This concept might seem more fit for a speculative novel than reality, but Draper’s dream may actually get its moment in the sun. On Tuesday, he informed USA Today that his Six Calfornias campaign had received 1.3 million signatures—far more than the roughly 808,000 required for the initiative to appear on the 2016 ballot.

Draper’s proposal still has virtually zero chance of ever happening. Even if the ballot initiative is approved (a December Field Poll showed only a quarter of residents support it), a California breakup would require the approval of Congress. And it is all but impossible to imagine a GOP-dominated House ever approving a plan that could potentially create 10 new Democratic senators.

That said, the venture capital mogul has apparently captured the imagination of many Californians who yearn for a more representative and responsive government than the one in Sacramento. In that light, it’s worth examining what six new Californias would really look like.

The major flaw in Draper’s plan is that the six new states he has outlined are not economically equal. In fact, they’re so unequal that many have wondered if the whole concept isn’t just a techno-libertarian plot to free Silicon Valley from having to share its wealth.

Under the breakup plan, some new “states” would be getting a pretty good deal. Others, well, not so much. Here’s a breakdown of each region and how it compares on various economic metrics. (All state comparisons are relative to the current United States.)

The common theme: Things look pretty darn good for Silicon Valley and West California (which includes Los Angeles), at the expense of making Jefferson and Central California two of the poorest states in the union.

Major Cities

Silicon Valley: San Francisco, Oakland, San Jose

North California: Sacramento, Santa Rosa

West California: Los Angeles, Santa Barbara

South California: San Diego, Anaheim

Central California: Fresno, Bakersfield

Jefferson: Redding, Chico

Population

West California: 11.5 million (8th in the U.S., similar to Ohio)

South California: 10.8 million (8th in the U.S., similar to Georgia)

Silicon Valley: 6.8 million (14th in the U.S., similar to Massachusetts)

Central California: 4.2 million (27th in the U.S., similar to Kentucky)

North California: 3.8 million (29th in the U.S., similar to Oklahoma)

Jefferson: 949,000 (45th in U.S., similar to Montana)

Personal Income Per Capita

Silicon Valley: $63,288 (1st in U.S., similar to Connecticut)

North California: $48,048 (7th in U.S., similar to Wyoming)

West California: $44,900 (15th in the U.S., similar to Illinois)

South California: $42,980 (21th in the U.S., similar to Vermont)

Jefferson: $36,147 (40th in the U.S., similar to Arizona)

Central California: $33,510 (50th in the US, similar to Idaho)

Percentage Living in Poverty

Silicon Valley: 12.8% (35th highest U.S., similar to Colorado)

North California: 13.7% (28th highest in U.S., similar to Illinois)

West California: 15.2% (21st highest in U.S., similar to California)

South California: 17.8% (7th highest in U.S., similar to West Virginia)

Central California: 19.9% (2nd highest in U.S, similar to New Mexico)

Jefferson: 20.8% (2nd highest in U.S., similar to New Mexico)

Median Home Price in Largest City

Silicon Valley (San Jose): $708,500

West California (Los Angeles): $520,500

South California (San Diego): $494,500

North California (Sacramento): $247,400

Jefferson (Redding): $207,600

Central California (Fresno): $165,000

Number of State Universities

West California: 9

Silicon Valley: 7

South California: 7

North California: 4

Central California: 4

Jefferson: 2

Sources: Zillow.com, U.S. Department of Commerce, United States Census Bureau, Huffington Post, California Legislative Analyst’s Office, 2008-2012 American Community Survey 5-Year Estimates.

MONEY Sports

WATCH: U.S. Men’s Soccer Star Alejandro Bedoya on His Biggest Money Mistake

Alejandro Bedoya, midfielder for the U.S. World Cup team, talks about blowing a paycheck, investment strategies, and an important money lesson from his father.

+ READ ARTICLE

Bedoya on his biggest money mistake:

My first paycheck, I remember, I put in the bank. And the second one…you know, in Europe everybody is always…they want to look good…and it’s probably buying one of those brand name designer things that, I remember, for that month it was like probably my whole paycheck. Buying things like that. I mean, those things are cool to have, but it’s not really important.”

Bedoya on what he’s learned from his father about money:

He’s always taught me that it’s not what you’re worth, it’s what you negotiate. That holds true in every aspect. It’s really how you handle things and how you go about what you think you deserve. I feel like that has helped me out a lot with the opportunities I’ve gotten with money and investments.”

 

 

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