The New York Times has an interesting op-ed piece about bringing hope, confidence — and buyers — back to the US real estate market. The author’s premise is pretty simple: To get home buyers back in the real estate market, it’s not enough to focus on lower prices, because a lot of potential home buyers are simply too scared to buy anything right now. And if they’re not scared, then they’re being very clever — that is, they expect prices to keep decreasing, so they’ll just keep on waiting to get the absolutely lowest price. A good deal is no longer good enough. Many buyers want the very best, cheapest option. After all, it is a buyer’s market.

The result is inertia fueled by a hypercautious speculation and fear, which would spell disaster for large sectors of the economy if left unchecked.

The solution therefore requires returning hope and confidence to real estate buyers. We need to convince them to suspend disbelief despite all they’ve been reading about credit crunches, foreclosures, sub-prime bla bla bla . . . The media is selling papers by selling fear, but it’s clear that a moribund real estate market is not in any country’s mid-term interests.

So the big question is: How do you return confidence to home buyers back in the context of carnage and despair that define current real estate market conditions not just in Spain but in many countries throughout the world?

The author suggests that the best measure would be to give potential buyers rebates to incentivize them to buy property - in this case, the author suggests a 5% tax rebate of up to $25,000.

And he argues that it should be done after the real estate market after the market has sufficiently corrected itself, which the author estimates should be between August to December 2008. Under this approach, the rebate would last for 12 months.

I’m not sure a rebate of €25,000 would be sufficient in the US market, but it might work in Spain, if done in conjunction with other measures. In Spain, the problem is two-fold:

• Buyers need to begin to have faith that now is the right time to buy — that they shouldn’t feel stupid for not waiting a little bit longer, and
• Banks need to be willing to lend people the money to buy property at an affordable price.

It’s clear that the first problem won’t be solved until the second one is addressed. In the last few months of my real estate business, one of the most frustrating experiences was finally getting an interested buyer only to have the bank reject the application or request a double guarantee or some other very stringent requirement that sent the buyer running back to live with Mommy and Daddy.

That being said, the sub-prime crisis is sufficiently scary to make me empathize with banks’ unwillingness to extend credit to risky applicants. Banks really shouldn’t be lending money to people whose only asset is the dream of being a property owner. If you don’t have a steady job, assets or any sort of guarantor, maybe you really don’t need to be a home owner.For me, the essence of the current quandary is stemming the circle of fear. Banks have lost confidence in businesses and in home buyers, and home buyers have lost confidence in ever being able to afford a decent home. And it seems that in large part, it’ll be up to normal economic forces and the government to instill confidence in both parties.

What do you think? Should the Spanish government offer similar incentives to home buyers to get them back? At which point should the rebate be offered? Will it make any difference, or are more fundamental changes in the Spanish real estate market required? If so, what might they be? And in light of the current credit crunch, what, if anything, should the Spanish government do to convince banks to support the real estate industry and potential home buyers, without going in the direction of the sub-prime mortgage debacle?

A few months ago, some real estate agencies were still claiming that there is no crisis currently facing the real estate sector in Spain.

But those people are probably either living in The Twilight Zone and/or out of business by now.

Even the New York Times has been running a series of stories about the Spanish real estate market, noting that the Spanish housing market is in even worse danger than the US market! That’s saying quite a bit.

In my last post, I looked at the announcement that Expofinques was seeking bankruptcy protection. Out of curiosity, I searched for headlines related to the other two franchises that I investigated back when I entered real estate in 2005: Don Piso and Tecnocasa.

Here’s what I found:

• La red de venta de pisos Expofincas suspende de pagos: I already examined this story in my last blog post.
• El Grupo Tecnocasa reduce un 39,3% su beneficio en 2007 y cerro 387 oficinas en España: Tecnocasa, another of the major Spanish real estate agencies, earned €8.8 million less in profit than in 2007, which is a 39.3% decrease relative to 2006. The group’s turnover was €51 million in 2007, 10% less than in 2006. In 2007, the group closed one-third of their franchisees (387 of 1052 offices). The franchisees overall earned €215.56 million in 2007, which was 30.9% less than in 2006. Tecnocasa sold 16,760 homes in 2007, which was 27.1% less than in 2006.
• Efectos del frenazo inmobiliario: Don Piso ajusta plantilla y cierra 26 oficinas comerciales: Don Piso, probably the strongest national brand, supported by one of Spain’s most blue-chip companies, Grupo Ferrovial, has 136 internal offices and 227 franchised offices. They note that the franchisees have been the worst hit, given that they have to pay a fixed monthly royalty payment of €1200 to €1500 (in Expofincas, for example, the royalty was variable, dependent on sales). In total, the Company had closed or expected to close 36 offices as of October 2007.

So what can we learn from the current crisis?

• It’s the banks’ (and Alan Greenspan’s) fault: Whether fairly or not, everyone blames the banks, which aren’t being very flexible in terms of lending money either to potential buyers or to agencies in need of refinancing their debts. Everyone’s been burned by the US sub-prime mortgage crisis and the resulting world-wide credit crunch (which some people are blaming on Alan Greenspan), and banks are no longer willing to take risks.
• A buyer’s market: If you are a relatively “risk-free” home buyer (meaning that you have your finances more or less in order — that you’re the kind of low-risk client that banks now like), then now is the time to begin your search. If not now, then in the near future, as both real estate agents and sellers are desperate to sell — in some cases, their very survival might depend on their capacity to get a few sales done. Agents and sellers no longer have the luxury of being chulo (arrogant), as pretty much everyone was a couple of years ago when buyers were fungible. Now the buyer is the queen!
• Internet is the cheapest option for sellers, and the most convenient option for buyers: Despite the crisis, people are still searching for properties, and when they do search, more are searching online. So even if the overall number of real estate purchases decrease, the percentage that is searching online is increasing. In addition, agencies are now more willing to try new, cheaper options that might allow them to reach interested buyers. For that reason, the newspapers will lose big as more agencies go under, because fewer agencies will be able to pay the exorbitant price of placing their ads in even 1 major newspaper. By contrast, Idealista is a lot cheaper, and nuroa.es, our Spanish property search engine, is free for agencies.

There’s an expression in English that “when the going gets tough, the tough get going”, which means basically that the only way to overcome a difficult situation is to work harder and better. The real estate crisis will no doubt shake up the Spanish real estate market, and there will be a few winners and lots of losers. But that’s life, and instead of looking at the glass as half-empty, I prefer to think that current market conditions provide a unique opportunity for disruptive Internet products that can help a troubled real estate sector buy a little bit more time in order to survive the current downturn. And it’s clear, of course, that I think that nuroa is such a product.

With all of the commotion about Expofinques’s seeking bankruptcy protection and continuing signs of a real estate crisis, I almost forgot to mention that nuroa has reached an agreement with Spain’s leading real estate group, Metrovacesa, to open up a new homes section to our property search engine.

I have to say that I really admire Metrovacesa’s approach. We first got in touch with them, when they invited Victor (the author of our Spanish blog “Sin Techo“) to a meeting to talk about their aggressive new Internet strategy. A lot of real estate groups are just starting to bet aggressively on advertising online, but Metrovacesa is already one step ahead; they’re not just trying to advertise properties, they want to complete the transaction online.

They’ve got cojones, and we admire that. And since we like to think that we also have cojones, we figured they’d make ideal partners.

I’d like to think that this is just the first of many such deals. After all, Metrovacesa is Spain’s leading real estate group, so convincing them was a pretty big test for us. Metrovacesa is one of the only listed Spanish real estate companies whose share price continues to increase, even as all of the other real estate groups struggle to withstand very brutal attacks on their share prices, or simply struggle to stay out of bankruptcy court.

They obviously have a clue as to what they’re doing. And it’s always exciting to know that market-leading companies have confidence in our project.

By the way, thanks to all of the journalists, bloggers and press services that wrote about the story, including:

• Javier Martín from Loogic
• Carmen López from OjoInternet
• Cinco Dias
• Yahoo Finanzas
• El Economista
• Finanzas.com,
• Carlos Mantero,
• Victor Aloi (Sin Techo), and
• Europa Press.

I love Barcelona. As the people here say a lot, it has the perfect combination of “mar” (sea) and montaña (mountain). Beaches. Skiing. Great restaurants. Great food. Good-looking people. Great night life. What’s not to love? Carpe diem!

But lately I’ve begun to think that bohemian chic has its limitations. Let me explain. One of the things that I love most about Spain is that people here enjoy life. Too many people in the US have a 5-year plan they work like crazy to realize. On my very first visit to Barcelona, however, I realized that things here were different. I was 25 at the time, fresh out of law school. And I noticed that everyone here seemed so relaxed. Not a care in the world. They were all on the streets and partying. They embodied the Rent ethic that seemed so attractive after 7 years at Yale, busting my ass trying to be Maverick, trying to be the Top Gun. In this context, “La vie boheme! No day but today!” sounded especially appealing. You only have 525, 600 minutes in a year. How do you want to spend them? Forget all the bullshit and enjoy every day. Carpe diem!

That’s cool while you’re young and immortal. But as you get older, and you realize that you have fewer “todays” awaiting you, a long-term vision becomes unavoidable.

So what I loved about Barcelona when I first got here 7 years ago — the bohemian chic — looks more problematic as age gives me a little bit of perspective.

A few examples:

• Shitty service: One of my biggest pet peeves. The customer is the enemy, or at best irrelevant, in many Spanish businesses. If you want to come back, great. If not, who cares? Are you a loyal customer? That’s your problem! Just pay for your meal, and go — and I’m going to try as exploit you as much as possible while you’re here. Carpe Diem! For example, I eat at the same restaurant almost every day. For dessert, I usually get the arroz con leche, but one day I asked for the yogurt with honey. The waitress told me that they had honey, but I’d be charged extra for it. For a few drops of honey! Since then, I’ve been a little more reluctant to eat there. I don’t feel valued as a customer, so I’m trying to find my “Cheers” place — where everyone knows my name. And I’m not the only entrepreneur who laments this entrepreneurial short-sightedness in Spanish businesses. Yannick recounts a similar experience where a waitress charged for electricity when he plugged in his laptop! The title of the post says it all: A Catalan Starbucks, Impossible!

• Bye-bye 3GSM: A major international conference held in Catalunya? Impossible! Not quite, but given the oft short-sighted approach to business here, not far from the truth. A lot of blogs this week are lamenting that the organizers of the 3GSM conference want to leave Barcelona. The conference brings a lot of international prestige to Barcelona, but who cares? Let’s gouge the tourists! The petty thieves will rob them on the streets, the local businesspeople will rob them everywhere else, and the local government will remain largely silent because they’ll keep coming back, right? And all the taxi drivers that spend all day complaining in their smelly cabs about how tough life is will chat on their phones and drink coffee instead of attending to the surge of new clients, some of whom might even give tips. But who cares? Carpe diem!

Maybe it’s just a matter of getting old — from hippie to yuppie — or maybe bohemian chic really is an unsustainable way of life. Maybe as all of those long-haired, free love do-gooders of the 60s realized long ago, at some point we all have to grow up or suffer retarded development, both economically and personally.

This is the second episode of nuroaTV, our video channel for real estate. To record it, we went to the March for a Vivienda Digna, which took place on 1 March. We marched from Plaza Catalunya to Via via Laeitana to the beat of Brazilian drums. It seems like I can’t escape Carnaval! I was sambaing during the march — maybe I kind of missed the point?

More seriously, I should probably be more discrete, but that’s not my style. The real story is that we approached the organizers to see if there were some way that we could help out, since we too believe that everyone deserves dignified housing. As I will write in another blog post, I came to Barcelona in chase of quality of life. It’s still here, but life is now a life more expensive than it was just five years ago, and housing is only once indice of the problem.

In any case, the organizers kindly but quickly ushered us out of their offices, noting that they don’t work with “companies”, which I got the impression was a kind of dirty word. I respect that, even though I think that it’s important to include ALL voices in discussions that affect all members of a given society. I might not share the methods of squatters and more revolutionary anti-capitalists, but I do understand their frustration. And the only way to solve the underlying problems is to have a constructive dialogue in which we look for solutions together.

But I’ll save my kumbaya speech for another moment. For now, it’s enough that you enjoy the video, and let me know: What does the right to dignified housing mean to you? Does it mean anything? And if it so, what should society do to ensure this right?

I was watching the Indian Wells semifinals today between Novak Djokovic (the number 3 male tennis player in the world, all of 20 years old) and the veteran, Rafa Nadal (the number 2 male tennis player in world, all of 21 years old). And the commentators were talking about how to deal with the pressure of being in the semifinals of a major tournament.

On the one hand, the sports psychologists always say that you should “play your game”. In other words, don’t worry so much about your opponent. Whether you win or lose is all in your hands. Under this approach, you should “go for your shots”, meaning that you shouldn’t be afraid to take calculated risks. If you play it safe, you’re always going to be in the defensive position, and you have to wait for your opponent to lose rather that playing to win. Be the master of your own destiny!

On the other hand, players like the Williams sisters always get criticized for playing too aggressively. They’re always going for their shots. So sometimes, when the stars are all aligned, they play absolutely brilliant tennis and no one can beat them. The opponent becomes irrelevant as they hit winner after winner after winner. But if their games are a little bit off, or if their competitors are a little bit better prepared to deal with their go-for-broke approach, then they commit a lot of errors, frustrated that their winners are largely ineffective. In other words, their attempts to be the masters of their own destiny become largely ineffectual, whether because of the circumstances or because of their opponents.

Sometimes as CEO of nuroa, our property search engine, I wonder which approach is better. Probably a combination of the two. But as in tennis, you only know if the approach was the correct one after the fact, once you see the instant replay. If the ball goes in, your brilliant! If the ball goes out too many times, even by a few millimeters, you’re a reckless loser. And this applies not only to overall strategy, but to employee decisions, to partnership proposals, to deciding which investors to take in your company.

But isn’t part of being in a start-up the joy of being in a high-risk, high-reward venture? What do calculated risks mean in such a context? Can a start-up really afford to play it safe? That being said, can it afford to be too aggressive?

Is there a happy medium, or is it just a matter of the post-mortem evaluation of your start-up after it’s hit the dead pool, or the IPO prospectus as you prepare for your IPO?

What do YOU think?

She’s back! Out of rehab . . . Without her kids . . . K-Fed (her ex-husband) has gained about 15 pounds since the divorce and now has custody of their two kids . . . But Britney Spears is back . . . as an actress on a popular U.S. sitcom . . . and we can only assume, that eventually, she’ll back back a dancer/singer.

Baby steps . . .

All the best, Brit!

Why do smart people do dumb things?

Why do we all take risks that we know are not worth it? The list is interminable: smoking, drinking, super-sizing your order at McDonalds, going to McDonalds, unprotected sex, promiscuity, cheating on your partner, drugs, not going to the gym, ignoring your mother’s phone calls, speeding around Barcelona on a motorbike, going at 160 km per hour on the highway when the speed limit is 110 . . . .

Why is it so good to be so bad?

Bill Clinton had his Monica Lewinsky. Sarkozy has his Carla Bruni. And now Eliot Spitzer, the Governor of New York, has his Emperor’s Club V.I.P. People are calling for his resignation after it was made public that he was “Client-9″ at a high-class prostitution ring with a taste for petite American brunettes. According to prosecutors, the Emperor’s Club operated in London, Paris, Miami and other cities, and charged between $1,000 and $5,500 an hour.

Spitzer, better than anyone else, should have known better. As attorney general, he made his career by angrily and enthusiastically hunting anyone and everyone that committed a crime, including members of prostitution rings, which he denounced as rife with human trafficking, drug trafficking and money laundering.

Now it seems that the sheriff was also an outlaw.

I’m trying not to judge him. As Britney Spears famously explained, “I’m not that innocent.” I’ve made my share of mistakes. I have my “bad boy” streak. Part of getting older is coming to grips with one’s own imperfections . . . realizing that youthful idealism is refreshing, but at the end of the day, we’re all very flawed human beings full of contradictions and hypocrisies that cause pain to ourselves and to our loved ones.

Good people do bad things.

But that doesn’t mean that it doesn’t suck.

(By the way, the reference to “the spirit is willing . . .” is from the New Testament (Matthew 26:41), where Jesus tells his disciples on the night before he was crucified: “Watch and pray, that ye enter not into temptation: the spirit indeed is willing, but the flesh is weak.” The point is that Jesus himself was struggling with temptation, but he overcame it, unlike the weaker disciples.)

I know that I should stay out of politics, but I don’t usually do what I should.

I have to say that I’m very happy that Zapatero won. Or almost more to the point, I’m very happy that Rajoy lost. One xenophobic homophobic leader (ahem, Bush) is enough for me.

This morning as I sat in a cafe listening to my iPhone and reading the paper, I was a bit surprised by La Vanguardia’s (the Catalan newspaper’s) headline: “Zapatero Gana Por El Apoyo de Catalunya (Zapatero Wins Because of Catalunya’s Support)“. Probably true, but somehow I didn’t think that was the most important element of the story. It’s like if Obama wins and then the headline were “Obama wins because Blacks Voted for Him.” It would be undoubtedly true and marginally newsworthy, but for me there is so much more at stake than regional pride.

Anyway, when I got to the office, I thought it’d be interesting to look at how international newspapers covered the story. The Wall Street Journal’s headline was: “Socialists Win in Spain, Get Clear Mandate“. The WSJ defines the mandate as “engineering a soft landing for a country that has fueled European economic growth for a decade” — which, for me, is the most important thing, ahead of which region played what role in the electoral process.

For the most part, the Journal has a favourable write-up of Zapatero noting that “[t]he Socialists’ re-election is a clear vote of confidence in the charismatic Mr. Zapatero, who became prime minister four years ago at the age of 43. Mr. Zapatero’s tenure has focused on social issues, including introducing gay marriage and tougher penalties on domestic violence against women.” The Journal also seems reassured that Zapatero “can count on the well-respected former European Union Economic Affairs Commissioner and two-time Spanish Finance Minister Pedro Solbes, who is likely to be finance minister in the new government.” In short, Zapatero is seen as a charismatic leader with a clear mandate and an effective team. Not bad, considering that the Journal is a more conservative newspaper.

The New York Times, which has more of a liberal slant, also noted that the election gave Zapatero a clear, new mandate. The headline was “Socialists Re-elected in Spain, After Bitter Campaign“, and the article noted that “[d]espite a bitterly fought campaign, the outcome seemed to endorse some of Mr. Zapatero’s boldest decisions, including the withdrawal of Spain’s troops from Iraq, the granting of more autonomy to Spain’s rebellious regions, simplified divorce and the legalization of homosexual marriage.” Again, the focus is on the fact that Zapatero is a bold leader with a clear mandate to move Spain toward modernity (in line with the direction that the NYT has called for the US goverment to move in).

Interestingly, the NYT ran a story on Saturday in which the author noted that Rajoy seemed just the opposite of modern. The reporter explained: “Mr. Rajoy, a 52-year-old former interior and education minister, has not been helped by his personal style. He has a graying beard, apparently to cover scars from a car accident years ago, that makes him look old-fashioned and older than his years. He laces his speeches with 19th-century expressions and suffers from unfortunate nervous habits, sticking out his tongue and bulging his eyes when he is angry.”

I agree with the Times and the Journal. Rajoy was an unwanted blast-from-the past that used fear of difference (gays and immigrants, among others) to win votes. Zapatero’s message was more inclusive and optimisic. So I prefer Zapatero. I think that he’s moving Spain in the right direction. The economic downturn is scary, but thanks to the Bush family, I’ve already lived through a few recessions, so what’s one more? It’s part of the cycle of life. What goes up, must come down . . .

My only hope is that either Obama or Hillary will win, because 8 years of Bush is almost more than I can bear. The US needs someone to take us back in the right direction.

Axe!

I still have Brazil on my mind.

Carnaval was hot! Both literally and figuratively.

Hanging out in Bahia

We flew from Barcelona to Salvador de Bahia by way of Madrid. Victor (our product manager and star blogger) picked us up at the airport and then drove us to his home, where his parents and his brother had waited up so that they could join us for dinner. The Aloi family was really, really cool and really, really generous. They have a nice duplex penthouse apartment with a swimming pool on the roof and a full-time housekeeper. They made our stay pure joy. I felt like David Beckham! They got hold of a friend’s yacht, and took us island hopping in All Saints Bay (the biggest bay in Brazil). They got us free passes to go to various Carnaval events like the camarote (like a VIP area where you can see Carnaval from a balcony area with open bar and kitchen, but where you don’t have to mix with the rowdy crowd). It definitely was not a backpackers’ trip.

Actually, the rowdy crowd was my favorite part of the Carnaval experience. The camarote was fun, but being in the Carnaval crowd feels like being in a cult, or like being an Obama supporter, like you’re a part of an exciting movement where the communal experience is the most important part. And, of course, everyone is drunk, so it makes socializing a lot easier. Maybe too easy. We entered a kissing challenge, where each night the goal was to kiss as many people as possible. It was something that everyone in Bahia does during Carnaval, apparently. Being from the US (i.e., anti-PDAs — public displays of affection), I couldn’t really get into the game. So Victor’s aunts ridiculed me and called me “Pretty Woman”, in reference to Julia Robert’s statement in the movie that kissing is more intimate than sex. I was like a little old lady in that crowd.

(By the way, Zum Zum Zum Zum Zum Baba — the title of this post — is the chorus to one of the most popular songs that we listened to during Carnaval.)

On the second night in Rio, we went to a samba school, where we saw all of the samba girls practicing their moves. It was an amazing experience. The dancers know how to shake their junk in the trunk. We even got to dance with some of them.

The only bad thing about Rio was that it was overcast most of the time we were there. But it’s still Rio — amazingly beautiful.

Off to the beach

On the last couple of days of Carnaval (it lasts 6 days and some Brazilian entertainers are pushing to make it 9 days!), we went to a really cool island called Morro de Sao Paulo. We watched futvoley (which is volleyball but played like soccer, so you can only use your body, your head and your feet — but not your hands) and drank caipirihnas made of mango, kiwi, coconut and other tropical fruits.

I’m already planning for Carnaval 2009!