Grey is Every Theory, Green is the Tree of Life

On the last Tuesday of every month, I get up at 5:45 a.m., pour myself a bowl of cereal, and begin hitting the refresh button on my browser, waiting for the Case-Shiller data to come out on the housing market. Once the data go live, we crunch the numbers, make some charts and publish a newsletter summarizing everything that moved in the market over the past 30 days. We try to stick to the facts: foreclosures, mortgage interest rates, housing starts, sales volume, price indexes.

And then, because we are sensitive creatures who live for praise, we wait for the responses… When the market was going down, Realtors would complain that the newsletter was fanning the flames of an already catastrophic market while consumers said it was a breath of fresh air. Given Redfin’s history as a consumer advocate, this didn’t bother us. As Franklin Roosevelt would say about industry fat-cats, “They are unanimous in their hate for me, and I welcome their hatred.”

But now that our newsletters have taken note of a market up-tick in some areas, we get all sorts of outraged screeds from bubble-bloggers and market-vultures. Here’s one of the briefer responses to this month’s newsletter:

The NRA  [likely a reference to the National Association of Realtors, not the National Rifle Association] obviously your Master.

p/s i wonder about your resume.

Enjoy your turkey

And here’s one from last month:

Dear Glenn,

How stupid do you think we are? Housing prices aren’t rising anywhere. 10% of houses in America have delinquent mortgages. If we didn’t buy yet, how are rising prices going to get us to pull trigger? Face it- the market has run out of stupid people. You are actually going to have to tell your clients to lower their prices to make a sale, especially when rates go up.

BTW- Spreading rhetoric like this has made me decide to never be a Redfin customer. I thought you might be different than NAR but I guess not.


We’ve seen the same tone on our forums. Yes, by all means, let the fur fly. There’s a very good argument to be made that prices will decline further, and it’s largely hosted on Redfin’s site.

But it’s hard to understand complaints that we’re the ones boosting the market. Most of the screeds cite the huge number of foreclosures as evidence the market will keep dropping  (whereas we tend to think that a big increase in interest rates is the most important swing factor). But every Redfin newsletter already discusses foreclosures at length, using words like “scary” and “bottomless.” Here’s what we said about foreclosures last month:

What has been preventing any type of serious price recovery has been the seemingly bottomless pit of foreclosures. And the problem may be getting worse. Nationwide, foreclosure filings increased 5% in July – September as compared to April – June… Bank re-possessions increased 21% in the third quarter as compared to the second.

And here’s what we had to say about foreclosures in the latest newsletter:

But we don’t think inventory will drop much over the next three to six months and it will probably increase starting next year. As usual, we’re worried about the number of foreclosed homes banks will try to sell this winter and next spring… 14% of all home loans had at least one payment past due in the third quarter; 3.4% are 120 days past due as of October, up from 3.2% the month before. Michelle Meyer, an economist at Barclays Banks, does not expect foreclosures to peak until mid-2010.

For the bubble bloggers, it is not enough for Redfin to recognize that trouble lies ahead. We must also suppress any evidence that that good news has occurred in the past. The primary source of this good news has been the Case-Shiller index, which shows a price increase in most areas over the summer.

Anyone looking for bias in the Case-Shiller index is looking in the wrong place. The Case-Shiller index is the most well-respected, academically rigorous index in the world, created by Robert Shiller, aka “Mr. Bubble,” the only economist credited with predicting both the tech and real estate bubbles. Case-Shiller economists painstakingly cull sales records for months in order to throw out sale prices inflated by kitchen-remodels and the construction of big new houses.

When we report on the Case-Shiller data, we aren’t providing a projection on the future, much less our own opinion, neither of which we tend to offer in our monthly digest of market news. In fact, the only projection we’ve offered on real estate prices was last month, and it was the kind of projection designed to tell anyone buying a house now to wait six months: A research report published by First American CoreLogic — and touted by the Wall Street Journal — predicts that nationwide U.S. housing prices won’t bottom out until March 2010

Meanwhile, there are no indexes or experts we are aware of showing a broad-based decline in real estate prices over the summer. We respond to every complaint of bias by asking what data sources we could include in the next newsletter and have never got a suggestion. And there are no critics who seem to account for the real cost of a home, which is a combination of the price and the interest rate for borrowing money. It’s easy for me to believe that home prices can fall further in many areas; it’s harder to say for sure that it will soon be much less expensive for someone to buy a home.
So now we have become weary of everyone in this market whose identity is tied to a market increase or decrease: the brokers who always say the market is headed up, and the bubble bloggers — what will a blog like Westside Bubble be called when there really is no bubble? — who say the market is headed down.

Like a broken clock that’s right twice a day, either one of those opinions is bound to be right sometimes, and bound to be wrong other times. As even the perpetually depressed philosopher Albert Camus once had to concede, “happiness is inevitable, too.” The truth is more complicated than any one ideology allows, but people need to hear it.

So we’ll put together a panel of enthusiasts and skeptics to talk about where they think the market is headed, and maybe that will provide a more balanced view of a very complicated subject. And we’ll keep assembling all the facts. If you’d like to be on the panel, send us your credentials. If you feel we’re suppressing important facts, let us know what they are and where to corroborate them, and we’ll include them in the next newsletter. And by all means, keep posting, commenting, arguing and writing us emails. We love the debate. We just want to keep it civil & fact-based.


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  • Nils

    A small pedantic note: isn’t the title here drawn from what the Devil himself says to Faust? Theory is all that keeps us away from the devil, though it’s certainly not enough….

  • Jeff Persons

    I was in the stock market as a trader for a number of years and this grasping at metrics and making personal opinions and conjecture can go on endlessly. Its a total waste of time.

    The truth is most most real estate people are going to predict what they want to happen or what they wish would happen so they grab some data that may support a guess about the market direction.

    I’ve had enough of that hubris.

    After the deadline has passed, we will see if we are running low on sellers. Once that happens, the demand is satisfied, the market has a chance to stabilize and move higher. This can take longer than anyone predicts and there is a possibility of the market languishing after the tax credit has expired and we could move lower in prices as well as transactions. This could go on for years and years or conversely, the market prices and number of transactions could go up in 2010.

    I for one have resolved to stop guessing as its all posturing and ego-tripping. In a market anything can happen and usually the thing that makes the largest number of market participants wrong is what happens anyway.

  • Glenn Kelman

    The devil was sort of a sympathetic creature in my reading of Faust Nils… and ideologues drive me nuts! Which is why I tend to agree with folks like Jeff Persons… nice comment Jeff!

  • Andy

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  • Fishers IN Homes

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  • The Indianapolis Homes Dude

    I don't see anything wrong with reporting the facts. I say keep up the real estate reports.