Williams & Williams CEO: Real Estate Auctions Offer Clearer Home Values than HPIs

Dean Williams is chairman and CEO of Williams & Williams Worldwide Real Estate Auction. He co-founded Williams & Williams in 1986, along with his father, auctioneer Tommy Williams. After spending more than a decade as managing partner and general counsel, Dean became the sole shareholder in 2004. In May, the firm released an auction index that tracks actual house pricing results from the company’s monthly data. For this edition of In This Corner, Williams explains why such a volatile market needs data as up to date as possible. How is this index developed? What you’ll see is a graph that’s an ongoing snapshot of market prices. It’s a leading edge view that’s a combination of our pricing predictives and our tracking of actual results from our monthly performance data. It’s released monthly, and internally kept weekly. Our auction index was developed using sales data we collect every month from individual single family residence auction sales we conduct in all 50 states.  Leveraging this proprietary data, we get a nearly real time view of how the real estate market is trending month to month. How is it different from other indices such as S&P/Case-Shiller and other HPIs? Well, it’s different really on two fronts. First, because we sell a pool of properties every 30 days, we have a clear view of market performance the last day of the month for each month. The leading indices in the market rely on third party data which results in a reporting lag of 60-90 days. Second, those are different because they’re limited to gross sales price based primarily on negotiated terms and conditions. Our data points are based on prices generated on publicly standard terms and conditions. Here’s a view of it compared to the S&P/Case-Shiller: So, who’s using it so far? Private equity and capital markets companies who are our partners. Companies that are currently acquiring collateral risk and use auction as a disposition method for real estate collateral. As the market is pulling out of this recession and in the time ahead, how important is having data that is as up to date as possible? It’s fundamental and critical. The value of current data is tremendous. We didn’t always have that, and it belies mistakes that lead the way to the financial crisis. The risk management for owning real estate has never gotten better. With each cycle, we remain over exposed. But when you have a liquid exchange like auctions, you don’t have to rely on an estimated value. You can understand what the real values of homes are, and this is essential for vacant properties. Instead of modeling and predicting, you now have access to that value continually.