The coronavirus has wreaked havoc on Americans’ health as well as the health of our economy over the past several months. The real estate industry is certainly no exception. Due to challenges and unpredictability ahead, combined with record unemployment and cost-cutting layoffs, many Americans have put their plans to purchase a home on hold.
At the pandemic’s onset, new home sale listings dropped by as much as 70 percent in some markets but the April numbers suggested some recovery was underway. Web traffic to real estate portals like Zillow plunged by almost 40 percent. Further, nearly 4 million homeowners are in the midst of forbearance plans – delaying payments on their mortgages – making up almost 8 percent of all mortgages.
While challenges presented by the coronavirus introduce uncertainty, a competitive real estate market and an environment that rewards fair competition and promotes collaboration within the industry will help foster a faster recovery.
Today, key industry partnerships and collaborations between mortgage service providers or banks, fintech and realtech developers offer products and services that bridge the gap between the huge swaths of available data and informed consumer decision-making. These innovations empower home buyers or sellers to make more informed decisions, at a time when few can afford to spend more or sell for less than they should based on constantly fluctuating home markets. A prime example is how Amrock, one of the nation’s leading title insurance, property valuations, and settlement services providers, has focused on developing innovative solutions, such as their eClosing platform, to improve the real estate experience for all parties involved. Because of the rapidly evolving and highly dynamic nature of the industry, partnerships have become key to finding innovative ways to use data to provide the best product for consumers.
Regrettably, such ingenuity and the necessary B2B collaboration faces challenges that predate the current pandemic raddled housing markets. The real estate industry and those who rely on it all pay the price for the increasing onslaught of litigation abuses by the hands of legal profiteers seeking to exploit our courts and our industries for financial gain.
Fortunately, on June 3, the Texas 4th Court of Appeals issued a decision offering hope that the trend of increasing abusive litigation, particularly that within the real estate industry, may not be so inevitable.
This ruling marks a milestone for homeowners who pay title insurance, which protects both real estate owners and lenders against loss or damage occurring from liens (mortgage loans, home equity lines of credit, easements), encumbrances, or defects in the title or actual ownership of a property. Critically, title insurance offers buyers and sellers the assurance they need to buy, sell, and reinvest, all critical components of a recovery.
The Texas 4th Court of Appeals follows a March 2018 decision by a Bexar County, TX, jury who awarded HouseCanary, a software developer, nearly three-quarters of a billion dollars after mistakenly believing Amrock allegedly stole their trade secrets. In truth, Amrock had hired HouseCanary on a $5 million contract to develop an automated valuation model (AVM) mobile application for use by appraisers in the field – a key development in streamlining the real estate buying/selling process. AVMs are formulas that are used to appraise real estate property based on key variables like historical price data, tax assessments, sales history and past lending transactions. However, after HouseCanary had failed to deliver a functional application after more than a year and no clear progress, Amrock sued for breach of contract, and built their own AVM for appraiser use.
The facts of that case – and the weakening standard of what makes up a trade secret – painted a distressing picture for the future of American innovation.
In an effort to cover their inability to develop the application they were hired to produce, HouseCanary countersued – alleging Amrock had stolen their trade secrets and used proprietary information in the development of their own AVM. After ignoring key facts and employing several faulty legal arguments and highly questionable calculations, HouseCanary was able to convince the jury that Amrock had misappropriated their trade secrets – and that such information was valued at $235 million dollars – more than 100 times HouseCanary’s total revenues for all product sales during the period in question.
Beside the fact that the ruling was 150 times the value of the initial $5 million contract, there is another piece of fundamental misinformation the entire ruling hinges on: HouseCanary had no trade secrets or any proprietary information – hence their inability to produce the mobile AVM application Amrock contracted them to create.
This was confirmed by four HouseCanary executives-turned-whistleblowers, who, alarmed by the massive damages figure, testified that “there was never a working version of the App,” and that HouseCanary had deceived Amrock by “representing that the App was more functional than it actually was.” In a then-anonymous email to Amrock CEO Jeff Eisenshtadt, former HouseCanary Director of Appraiser Experience Anthony Roveda wrote “housecanary never had any proprietary anything…”
The original 2018 decision, as it stood before June 3, established a dangerous precedent for the future regarding what was classified as protectable “trade secrets,” which deterred innovation and the partnerships needed to provide the best product for consumers.
As the nation emerges from the coronavirus pandemic, the government – from policymakers to judges – have a duty to provide stability, create meaningful policy, uphold our justice system, and provide clarity where needed. The Texas appeals court decision to overturn Amrock v. HouseCanary sent a loud and clear message that this kind of frivolous litigation has no place in our courts – providing a reassuring and much-needed signal to innovators and developers that collaboration remains welcome here in the United States.
The COVID-19 experience helps us decide what is essential and what isn’t
One effect of the lockdown is that we find ourselves with frequent decisions as to what is essential to our survival and happiness and what isn’t. Life gets stripped down to essentials, with all the extras becoming secondary, if that. Here are some ideas along these lines.
The first essential is food. The availability of food for us to buy entails a massive industry. First, there is the source which is the farmers and ranchers who provide our meat, fruit and vegetables. Their activities require thousands of acres of land and huge amounts of water for crops and livestock, which in turn depend on favorable weather. Bad weather can bring both floods and droughts.
Then there is also a vast capital expense required for equipment and labor to plant, cultivate and harvest the crops which feed both people and animals.
Ahead is the immense supply chain which involves the transportation, processing and ultimately delivery to the thousands of stores and restaurants which will make our food supply available to all of us. It is important to remember that this entire industry and all its parts must continue to operate at all times in order for us to survive. Any significant disruption could have disastrous consequences.
Closely related to food is water. Humans can survive longer without food than without water. The availability of water involves another massive industry as well as favorable weather. When we turn on a faucet and water appears, it is well to remember what has gone into that daily miracle.
The moral of these reflections is that 1) we are all radically dependent on the proper functioning of extremely complicated and expensive sources and supply chains for the very fundamentals of our existence, and 2) that the survival of the human race depends on factors which are mostly beyond our control.
Among other things, these essentials remind us that they depend entirely on people working, pandemic or no pandemic.
The subject of “work” brings up another consideration: buildings may not be as universally essential as we thought. Specifically, our housing is essential. If we never thought about that before the “shelter in place” mandate appeared, staying home for three or four months certainly showed us the importance of our house.
For many, however, the experience also demonstrated that “office” is not essential to work. We have been forced to discover that, thanks to all the modern communication technology, much of the work we do can be as easily preformed at home as in an office. So, offices are not really on some lists as essential.
But work really is essential. We have discovered what we always knew – that our work is what keeps us going, defines our place in this society, which, if we are not satisfied with the way things are, provides alternatives for us to test and follow. Work is also critical for society as a whole because it constitutes the means by which all those complex supply chains are sustained. Combined, they are the “economy” which is followed so thoroughly by the news – and Wall Street.
Another essential which has been forced to the front of our attention span by the pandemic is our family. In many cases, parents who work hard in often stressful circumstances have re-discovered the importance and the joys of marriage and parenthood by staying home for extended periods. They have become re-acquainted with their spouse and children, and spouses and children have in turn made their own discoveries.
Fathers especially sometimes become almost mythical figures to children who see them only for short periods, often in a disciplinary circumstance. The rest of the time their father is talked about but not there. Getting to know each other better is beneficial to all.
Hygiene is another subject which has drawn more attention in the last few months than in the last few years. We have been told ad nauseum how to wash our hands and sterilize every surface in sight. Like it or not, cleanliness – of person and environment – has become a new essential.
Shopping, restaurants, sports events and sports teams have fallen to lower placed priorities. All are missed – acutely by some – but there are other ways to get exercise and to prepare and consume food and drinks, other ways which involve much less risk of contracting disease.
Among the essentials most missed, however, are social events and interactions with other people. Some have discovered that the absence of crowds and gatherings is so important that being deprived has led to depression or worse. Others – often a significant number – have decided to seek communal activities, whether parties or protest marches, in spite of advice and even prohibitions to the contrary. To them, a full social life is essential, damn the consequences!
Just some contemplative thoughts (while working at home!).
GAO finds Medicaid and housing assistance may cause lower labor force participation
by Ali Meyer • Washington Free Beacon
Government entitlement programs such as Medicaid and housing assistance may make their beneficiaries less likely to work, according to a Government Accountability Office (GAO) report.
According to the GAO, an increase in income could result in a loss of Medicaid benefits for an individual and thus cause them to be less likely to pursue employment.
The GAO found the same result when looking at the housing assistance program, especially in Chicago. GAO found that the Section 8 program had a negative effect on labor force participation and earnings. Continue reading
by Cullen Roche • Business Insider
Someone sent me an email Wednesday evening with some details on the Paul Krugman response to James Montier, which I discussed here. I had previously stated that the Krugman response was lacking meat. But it’s actually worse than that. It’s actually highly misleading and appears intentionally so.
In the post, Dr. Krugman tries to show how much interest rates matter by comparing the Fed Funds Rate with Housing Starts. He shows a chart and declares that there appears to be a strong correlation. Except, as this emailer notes, he appears to have shifted the chart to make it appear as though there is a correlation where there isn’t one.
Here’s the Krugman chart: