Foxtons US in the shitter

According to NJ Newsday:

WEST LONG BRANCH, N.J. - Foxtons is closing because of the slumping housing market.
The West Long Branch-based real estate company says it's contemplating bankruptcy protection for an orderly shutdown.
It will lay off 350 of its 380 workers and intends to keep 4,400 listings on the market.
Senior vice president John Blomquist tells The Asbury Park Press the company no longer has the liquidity to operate as a going concern.

John Hunt sold Foxtons UK for to a private equity firm for nearly £400 million in May of this year, but apparently retained ownership of Foxtons US. Even though the report claims Foxtons is closing because of the US housing slump, the company has never actually made any money in the US market, since it entered the NY tristate market in 1999.

Extate seem poised for success

It's been about 18 months since Byte Play Ltd, the company that owns Extate.co.uk was founded by Douglas De Jagger and Artemi Krymski, two post grad computer students from Imperial College.
Late last month, Byte Play announced that Extate had now received their first major round of funding from The Accelarator Group (TAG), the venture capital conglomerate who had previously backed Lastminute.com, Last.fm and Agent Provocateur. This past weekend Artemi and I had a chance to catch up over coffee and as expected, we ended up discussing some issues surrounding the funding plus and future plans for Extate, now that they have some heavyweight players backing them up.
TAG chose to back Extate over the other property vertical search engines - Artemi claims - because of a crucial difference in their business model over other vertical property search engines. Many bloggers assume Extate is basically the same as other vertical search mash-ups; throw a crawler out, grab some data, mash it up, get a funky logo and and voila, deal done !
But pay closer attention,and you will notice differences, some subtle, some not so subtle, perhaps the biggest being that Extate only produces search results directly from estate agents website and not via third party 'property portals' such as Findaproperty.com, Propertfinder.com, or Rightmove.
Nestoria, Oodle.co.uk and the popular OnoneMap.com offer a significant portion of their search results from portals, but Artemi feels that this deteriorates the quality of their search results. He mentioned the popular 'flyboarding' strategy that many agents use, when advertising via portals and believes that close to 30% of all listings on portals are actually 'flyboards':

"What that does, is when a customer calls in about a property he's seen advertised, the agent says that the property has been sold and then offers them another one, or takes their details for their database."

Artemi feels that the information on the agents website is always fresher and more up to date than what's on the portals and that by crawling agents websites for data, the Extate engine is much more beneficial for consumers. What is also quite unique about Extate, and what probably makes them technically superior to their rivals is the 'artificial intelligence' (AI) technology which they employ in gathering data from websites.
The Extate AI analysis tool, not only crawls the web for property data, but is also able to extract useful information out of the sites it crawls, enhancing user experience with the ability to specify price and property location on a particular site. So for example , if a user is looking for a '2 bed house over 300 sq ft' the Extate engine simply does not just use simple text-matching to match user queries to webpages. Instead the patented AI technology permits the Extate engine to extract information such as square footage details and other information from within the estate agent's website. No two estate agency websites are designed the same and the search parameters vary from website to website.
The AI analysis ultimately answers the users query in a 'natural language format', something that no other property search engine in the world is currently doing, a process that Art describes as 'technically challenging', but clearly worth the effort if it translates to a greater user experience and increased consumer traffic.
A search on Extate takes the user straight to the source of the original listing, extracting data using artificial intelligence, and like pretty much all vertical property engines, they do it all for free; neither the agent nor the consumer pays for the service. So of course the challenge is to make money and the problem is that right now they're not making much. At the moment people tend to look at Extate and other vertical search engines with a lot of curiosity, deciding the best of the bunch is probably the one that's most "fun" but does anyone really take them seriously?
Rightmove, of course has a bunch of traffic and record profits as over 13,000 agents pay a minimum of £250/month to list properties on the portal. But can this model last with the new players like Extate offering such a viable alternative? In today's downward spiraling property market 'free' is a very tempting word for an agent, but the problem of course is that Extate hardly has any traffic and for the moment, don't seem much of a problem for the likes of Rightmove or Findaproperty, but:

"the portals realize we're a better model for agents, they're extremely happy we don't have traffic but they realize thier approach probably will not last much longer. if not us, then maybe Google, who knows, but the information will be free".

Things change quickly in the world of 2.0 internet, and things are changing quickly in today's property market. Extate seems poised to take advantage of this atmosphere in that their technology is unique, and their business model transferable and expandable at relatively short notice.

Anatomy Of A British Bank Run

The 1860's were a very turbulent time for Britain. The country had just lost the American Civil War and the abolition of the African slave trade was no doubt having effects on the overall economy. In this environment, Overend, Gurney and Company, the so called "bankers' bank", spectacularly collapsed in May 1866, owing about 11 million pounds (probably about £6 billion in todays money). At the time Overend, Gurney & Co, had a turnover double that of all its competitors and was the second wealthiest bank in the country. Only the Bank of England had more money.

What caused the collapse?

In 1862, 500 new limited companies were registered in Britain. By 1865, nearly 1,000 companies were registered because of changes in liability law, making it easier for individuals to register companies and not face liability in case they went bankrupt. Many of these new companies were promoted fraudulently, but the bank paid little attention to the finer details, making credit easily available.
Ironically a key source of this credit were new types of 'finance companies' which would accept poorer securities from 'farmers, tradesmen, domestic servants, peers, and peasants’ a market that traditional money lenders did not do business with. These new finance companies were able to charge much higher interest rates and as the bankers bank, Overend Gurney provided the liquidity to these new finance companies. Unsurprisingly, defaults quickly rose as many of the new companies went bust. Overend Gurney began to feel the pressure and in 1865, in an effort to offset losses and increase liquidity, management at 'the bankers bank' decided to take the company public. Subsequently Overend Gurney was converted into a joint stock company under the new regulations but the banks management did not disclose the full extent of their liabilities to the public and regulators.
Laden with bad securities and unable to make calls to nervous shareholders, Overend Gurney began collapsing in the early months of 1866. In May 1866, the 'bankers bank' went into liquidation owing £11 million to shareholders and the public. As a result of the Overend Gurney collapse, nearly 300 companies including other banks also failed, causing one of the worst financial disasters in British history, forcing Parliament to suspend the Bank Charter Act. The directors at Overend Gurney were tried for fraud, but miraculously escaped prison. In fact the Gurney family, being one of the most respected banking dynasties in England survived the scandal sufficiently unscathed to become founding partners in Barclays Bank 30 years after the 1866 crash.
The Overend Guerney crash of 1866 was the last recorded bank run in the UK, before Northern Rock PLC lost over £2 billion, starting 14th September 2007. The similarities are scary.

Further Reading

Overend Guerney
1911 Encyclopedia
Spectator
Taylor
Northern Rock
Peston
Renthusiast

Extate is feeling wealthy

Never mind the credit crunch, with the money they just got Extate can now afford to feel a little wealthy. Check out their homepage to see what I'm talking about

Properazzi launches aggregated news service

Properazzi News is similar to Real Estate Voices, launched last year by Niki Scevak, of New York's Homethinking.com and the UK's Housereview service.
In essence, Properazzi news picks up leading property related stories from around the world, with a European consumer focus.
The news will initially be offered in four categories: Markets, Architecture & design, Eco-living, and Curious. Readers can comment on news stories, favorite them and forward to friends. In a little while, people will also be able to submit content themselves, a sort of global real estate social news platform. The news is presented on a multi-language platform, although most of the content is still in English.

Good news , bad news from NAEA

OK, time for some good not so bad news on UK housing.

The Good Not So Bad news

According to the National Association of Estate Agents (NAEA), the number of people looking to purchase a home increased slightly in August with agents reporting a rise of 3.8% with an average of 326 buyers registered on their books in comparison to the 314 recorded in July.

The Bad news Truth

The figures are the lowest reported since 2003, as increasing interest rates and reduced price inflation suggest caution among consumers. According to NAEA president, Stewart Lilly, “the recent introduction of the second phase of HIPs is likely to cause more disruption and in particular prompt a ‘wait and see’ strategy from individuals who are unsure about the full impact of the legislation.”
OK, guess we all have to continue to 'wait and see'

Has Merv lost the plot?

Word on the street is that BoE Governor Mervyn King may be 'loosing the plot'.
In a stunning and uncharacteristic reversal on his word, King agreed with the FSA and other government regulatory bodies to do almost exactly what he said he wouldn't do and that is to use BoE resources and bail out 'unwise lenders'.
Surely 'unwise' is relatively tame to describe what the Rock has done - actually increasing the amount of loans on their books for the first half of this year, when all indications were that the market was going south, coupled with steadily rising interest rates, high inflation, the summer floods and decreased consumer spending:

In the first six months of 2007, its net lending rose 47 per cent to just under £11bn. And at June 30, it had a further £6.2bn pipeline of loans that had been agreed with customers but not yet delivered ... [w]hat’s perhaps even more embarrassing for Northern is that in its interim statement made earlier this summer, it was explicit that it continued to lend even as the interest rate environment turned against it.
[Peston]

Clearly that decision was unwise, but is Merv's decision any unwiser? Is he now under political duress to bail out banks?
Check the Northern Rock statement released today concerning the bailout:

...Northern Rock has agreed with the Bank of England that it can raise such amounts of liquidity as may be necessary by either borrowing on a secured basis from the Bank of England or entering into repurchase facilities with the Bank of England. Such repurchase facilities would include securities that have prime residential mortgage assets as underlying collateral. The collateral that can be used under this 'Repo' facility is similar in nature to the collateral currently utilised by many Eurozone banks with the ECB. This additional source of funding will enable Northern Rock to adapt its business model in line with the developing market conditions.

OK so get this, what Merv has actually done is collateralize the bailout using - guess what- "prime [read sub-prime - 'cause that's NR's main business] residential mortgage assets."
So the BoE - yes the Central Bank of England, Wales and Scotland - has now become a prime/sub-prime mortgage lender. But that's not the worse of it; now NR decides to adapt a business model in line with 'developing market conditions'; and King supports this?
To give yourself an idea of just what those conditions are, read what Rightmove had to say this afternoon about developing market conditions, then decide for yourself whether or not King is indeed - losing the plot.

Rightmove lifts embargo

After today's unauthorized breach of the Rightmove September Index [pdf], the company has now decided to release the full report, in order to avoid "potentially misleading and selective reporting of the full September 2007 report."

HIGHLIGHTS:

Rightmove claim that average asking prices have fallen by 2.5%, but blame the fall on the HIP kerfuffle as opposed to overall market conditions.

Greater London average asking prices’ dropped by 2.5% in September to £384,439
from £394,268 in August. The last time we saw such a negative figure was in August 2004, when prices dropped 4.3 % in a month. However, the lower number of ‘higher priced’ 4+ bedroom properties coming onto the market after the August 1st implementation of HIPs does exacerbate the average price drop, though the London market has fewer large properties than the rest of the country. Distortion of normal market forces will continue into next year due to HIPs implementation and phasing according to bedroom numbers.

[Full PDF]

"NO NEED TO PANIC !" as Northern Rock effectively goes bust

The writing's on the wall for UK sub-prime industry as Northern Rock arguably the biggest sub-prime mortgage bank in the UK effectively goes bust, were it not for another Bank of England bailout; yet some politicians feel that there is 'no need to panic'.
However, there certainly is need for concern in Northern Rock's situation because the cash crunch problem affecting UK lending institutions, is being caused mainly by irresponsible lending in US housing, particularly the sub-prime market.
Northern Rock, solely a UK lender, brings the problem close to home.
The actions by the UK central bank appear in some way to contradict the policy Mervin King outlined a few weeks ago, when he stated that the Bank of England would not support 'unwise lenders', although his comments were with regards to interest rate policy. However, today's bailout indicates he may be having a problem sticking to his words

RELATED : HAS MERV LOST THE PLOT

Ed F speaks to Nubricks

Nestoria's Ed Frefogle is this weeks podcast interviewee on Nubricks.
Haven't listened yet, but the numbers suggest that Nestoria is miles ahead of their European competitors, in terms of visitor traffic, although Properazzi seems recently to be giving them a worthwhile run for their money with regards to visitor engagement

Central banks pause, but Libor keeps on rising

Bank of England at 5.75%, ECB at 4%
but the Libor keeps on rising

Zoomf 2.0 seminar tonight

Taking place at the British Computer Society, with seminar presentations Mike Carter from Zoomf, Mark Hopwood from agency.com, Andy Etches from Brightsale.com and Ben Brandt from theratandmouse.co.uk. Not sure if there are any tickets left, but email Poppy (poppy at zoomf.com) if you're interested, or if you've booked your reservation, but haven't received your ticket.

The Bush initiative may actually save US housing

Seattle based Jillayne Schlicke, winner of this weeks 'Odysseus Medal'; highlights in her post what she believes to be the hypocrisy in President Bush's Homeownership Financing initiative, which is supposedly a 'common-sense, risk-based pricing structure' scheduled to begin January 1st 2008.
The main aim of the initiative appears to be a modernization program aimed at the Washington based Federal Housing Administration (FHA), a government agency that provides mortgage insurance to borrowers through a network of private sector lenders.

"In the coming days, the FHA will launch a new program called FHA-Secure. This program will allow American homeowners who have got good credit history but cannot afford their current payments to refinance into FHA-insured mortgages. This means that many families who are struggling now will be able to refinance their loans, meet their monthly payments and keep their homes. In other words, we're going to start reaching out and making sure people know that this option is available to them so they can stay in their homes" according to the president.

The problem with the above statement is that homeowners with good credit history aren't usually the ones with sub-prime loans and are therefore less likely to be the ones feeling the effects of the current crises. Furthermore current indications in the prime mortgage market appear stable; but that may change as the credit crunch continues to bite.
Schlicke's argument also suggests that it takes an enormous amount of effort for a mortgage broker to become FHA-approved, and that it's really not worth it because of the 'small details'; including net worth requirements, audited financial statements, quality control and compliance issues, plus a rigorous employee payment requirement.
According to Ms Schlicke, for some small to medium sized broker firms, it was:

"a business decision: make more money selling subprime and leave the hassle of originating FHA loans to the banks. “See ya, wouldn’t want to be ya” was the motto when bank [loan officers] left to work for a brokerage firm where all the women and men were hotties, yield spread rapes were encouraged and celebrated and the underwriters gave unconditional loan approvals because the underwriters reported to the sales manager or were threatened with baseball bats."

Bush also claimed in his statement that if a mortgage broker was 'cheating somebody', his administration would 'find you and hold you to account', reminiscent of the 'with us or against us' war on terror rhetoric, which - if history is our best teacher, well, need I say more?
Needless to say, any Bush initiative at this stage of his presidency will most likely be dismissed as hogwash by most people as its become way too easy to dismiss the man as a buffoon.
Truthfully, at the moment his words appear to be shallow political rhetoric, but if the credit crunch hits the prime mortgage industry, they may prove to be a little deeper than first imagined. And if the US economy recedes because of housing, his words may actually resonate further than we would all like to hear. If it gets to that stage, the program may not appear to be so useless after all.

The Odysseus Medal

Greg Swann and the Bloodhound blog's innovative 'Odysseus Medal' blog carnival is currently showcasing their shortlisted entries for this weeks carnival.
Swann's innovative approach to "blog carnivalism" is that the voting is open to the public after the Bloodhound bloggers meticulously prepare a shortlist of the best posts ... sweet, as most blog carnivals are getting played out.
The Odysseus approach is fun and unique 'cause it's interactive and in the spirit of 2.0. Check out the shortlist, pick your favorite then vote. I voted for People Don’t Buy Homes Online by Greg Tracy of BlueRoof blog. I also submitted my Liam Bailey post from last week, but unfortunately it didn't get shortlisted.
BTW, happy labour day to everybody in America