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Phoenix real-estate guru predicts stability

ASU's real-estate guru sees stability, with shadows on the horizon.
After ASU's Orr made a $1 million by accident, he became a real-estate guru.
December 30, 2015

Director of ASU research center focuses on gathering, analyzing data

When Mike Orr accidentally made a million dollars, it set him on a path toward his role as the Valley’s real-estate guru.

That was back in 2002, when Orr sold his Silicon Valley house during the real-estate frenzy.

“My timing was perfect, although it was accidental,” said Orr, who is director of the Center for Real Estate Theory and Practice in the W. P. Carey School of Business at Arizona State University.

After making a seven-figure profit on a house he owned for just six years, Orr moved to Arizona and turned that serendipitous start into a new career. He used his math and computer science background to analyze and forecast real-estate trends in the greater Phoenix area. In the process he became one the first analysts to spot the beginning of the housing bubble, in 2004, and was one of the first to predict the recovery, in 2009.

“Real estate is not like Wall Street, where it’s very unpredictable and people can change their sentiment in the afternoon and back again the next morning,” he said.

“In real estate, it’s a very long wave cycle. If things go bad, they’ll stay bad for a long time.”

Orr produces the Cromford Report, a monthly housing update that’s quoted by media all over the world. He uses cold, hard analytics to spot trends in a field that’s often driven by sentiment.

“You have to be very focused on the numbers and not let emotions get into it,” he said.

'Astonishingly bad'

Orr was born and raised in England, and after earning a degree in math, he worked for IBM and then the Amdahl Corp. in sales. In 1992, he moved his family to California because Amdahl thought that an Englishman would have a better handle on how to sell to Europe.

The work was financially rewarding but intense, with long hours. So in 2002, he took a big plunge, selling his house in San Jose and pondering the rest of his career. The Orrs ended up in the Valley of the Sun, choosing Mesa for its family-friendly atmosphere.

Then he became a real-estate investor — also by accident. Orr and his wife wanted a house with a basement, but the contractor said it would take a year to complete. So in the meantime, they bought a house without a basement.

“When it became time to sell that house, the market had gone a bit quiet,” Orr said.

So they rented it out.

“The experience of buying and selling houses interested me,” he said. “I thought if I made so much money by accident, maybe I could make more by really trying.”

So he started reading books and got his real-estate license.

“I didn’t really want to be a Realtor. But I wanted the information they had. I’ve always been fascinated by data and collecting and analyzing it.”

In 2004, he began downloading data from the Arizona Regional Multiple Listing Service — the giant database of all houses for sale in the greater Phoenix area. He analyzed the numbers, hoping to glean investment insights.

“But then I looked — this is telling me it’s not a good time to invest. The market is getting very frothy,” he said as he watched housing prices climb ever higher.

“I was stumped. I felt I had a lot of information but I wasn’t able to use it.”

Then he had the idea of creating a report for other Realtors. Although there was a lot of data about commercial real estate, Realtors were hungry for accurate information about single-family residential housing.

“People said, ‘Can you tell us when it would end?’ As it turned out, I could.”
— Mike Orr, on the housing crash

Phoenix was the perfect place to do that. For one thing, the amount paid for a house is public information in Arizona, unlike many states that keep prices secret.

“And not only the price, but in Arizona, you’re legally bound to report the type of financing, the down payment, where the buyer is coming from — lots of really useful information,” Orr said.

Also, the Valley is unique in that one multiple-listing service covers all of Maricopa and Pinal counties. Orr said that elsewhere, small areas can have many services, making data-gathering complicated.

Orr’s idea was brilliant because while there was a lot of information, most of it was useless.

“The data is terrible when you first get hold of it because it’s mostly handwritten and nobody double-checks anything,” he said.

“Houses are listed in the incorrect ZIP code or with incorrect square footage. Or they put an extra zero on the end of the price — which happens more than you think,” he said.

He devised a system to detect and fix errors in the data so it would be more reliable. Then he put it all together into the Cromford ReportSo named because he used to live on Cromford Road. "I thought it sounded English, too. I had already discovered that having an English accent in America is a big advantage." and created a website to sell it.

Everything went well until the Arizona Regional Multiple Listing Service sent him a cease-and-desist letter, asking him to stop profiting from its information. Orr negotiated with the organization, which agreed to buy a subscription and send his report to all its agents.

As the market continued its plunge through 2008, Realtors were desperate for good news.

“It was astonishingly bad. People said, ‘Can you tell us when it would end?’ As it turned out, I could.”

Predicting the turnaround

At the end of March 2009, Orr noticed that the price of houses put into escrow started ticking up — before actual sales prices bottomed out. This signaled the start of the turnaround.

“It’s invisible to the public because it’s taken off the market, but it’s powerful information,” he said.

He was so confident in his insight that he bought two investment houses himself that year, and ended up on the front page of the Arizona Republic for his forecast.

“A lot of people said, ‘Rubbish, he’s wrong.’ But that was when prices stopped going down.”

He sold one house for 75 percent profit and still rents out the other one.

“I didn’t buy any more because I didn’t want to borrow money,” he said. “Also, the actual job of being a landlord sucks.”

Orr called the housing crash a “once-in-a-lifetime event.”

“The collapse came from inside the housing market because we were feeding too much money into it because of lenders who would lend to anybody,” he said — a situation that no longer exists.

In 2012, ASU reached out to Orr, asking him to lead the university's real-estate research center. He now produces a monthly subscription housing report for ASU that includes interactive charts.

“I think it’s some of the best stuff available from a university anywhere,” said Orr, whose Cromford Report is available at his own website. He has since ended his partnership with the Arizona Regional MLS.

Orr said that housing prices in the area are neutral now, with higher demand for dwellings in the $200,000 range in the central Phoenix area and less demand for more luxurious homes on the fringes of the Valley. Condo prices have also increased more than single-family dwellings over the past year.

Orr said that the Phoenix housing market is stable, but he worries that the global plummeting price of oil, iron ore and commodities such as beef could create job losses, which might affect Arizona. If that happens, and it disturbs housing prices, he’ll see it.

"I’ve discovered that people want accurate information no matter the state of the housing market.”

Photo by Charlie Leight/ASU Now

Mary Beth Faller

reporter , ASU Now

480-727-4503

 
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Brain freeze: Frozen temps hinder sports performance

Playing a sport in the cold? Don't let your brain freeze you out.
Yes, it's true, the cold can affect your athletic performance.
January 4, 2016

ASU engineering professor looks at cold's effects on athlete's motor functions

“Nothing burns like the cold,” wrote “Game of Thrones” author George R.R. Martin. Just ask any football team that has had to take on the Green Bay Packers during a winter game at their home, Lambeau Field, nicknamed “The Frozen Tundra.”

The stadium earned its moniker during the Ice Bowl between the Packers and the Dallas Cowboys in December 1967, when the temperature was minus 15 degrees Fahrenheit and windy. The northern Wisconsin winter is the Packers’ friend. From the time Lambeau Field opened in 1957 the Packers never lost a postseason game there until until January 2003, when they fell 27-7 to the Atlanta Falcons. Even now their home postseason record is a tidy 15-5.

Cold has a huge effect on the perceptual motor abilities of athletes.

“Your body can handle it in a lot of ways, but your mind has other effects,” said Rob Gray, an associate professor of human systems engineering in Arizona State University's Ira A. Fulton Schools of Engineering. Gray studies the dynamics of perception, cognition and action in skilled performance like driving and sports.

He asked the question of cold’s effect on sports in a recent edition of his podcast Perception & Action. Gray features his research and studies from others in his field to illustrate lectures.

Cold can pack a psychological wallop to an athlete, Gray said.

When he was 15, the Canadian native’s hockey team toured Sweden in late December. Before each game, teams exchanged gifts. Before a game played in a barn with no insulation or heating, one team gave Gray’s team thermometers that went down to minus 30 Celsius. Gray thought the thermometer didn’t work.

“The temperature wasn’t high enough to register on it,” he said.  “What a great psych-out!”

“People seem to give up a bit easier when they’re losing in the cold. It’s not comfortable."
— Rob Gray, ASU associate professor of human systems engineering

Gray cited a 1987 study that investigated the effects of cold on a variety of cognitive and perceptual tasks. Performance was compared at two temperatures: 21 Celsius and 5 Celsius (roughly 70 and 40 degrees Fahrenheit, respectively). The study found large negative effects on manual dexterity and response times.

There was an 11 percent reduction of performance in perceptual and motor tasks at the lower temperature. Temps below 50 Fahrenheit can produce large effects on performance.

“People’s reaction times get slow, and they have trouble making decisions,” Gray said. “The effects can be quite large.”

In football a quarterback might be slower in making a decision, but the defense charging him is slower to react, too.

The threshold for cold to have an effect was higher than expected, and it can reduce grip force by half. It’s also harder to keep focused when you’re losing in the cold, Gray said.

“People seem to give up a bit easier when they’re losing in the cold,” he said. “It’s not comfortable. It’s distracting in a way.”

However, like the Green Bay Packers or Himalayan mountaineers, players used to being in the cold perform better than those who aren’t. NFL teams that play in a dome win 35 percent fewer games when they have to play a team in a cold stadium. Teams with cold stadiums like the Packers or the New York Giants have an 8 percent home-field advantage.

“In any sport we’re finding out you have to train for the conditions you’re going to be playing, whether it’s high altitude or cold,” Gray said, news that the San Diego Chargers will be less than pleased to learn. “You have to get used to it and prepare yourself for it. It’s going to affect everybody. Go out there and don’t let it distract you.”

And his game in Sweden?

“It was the best game I played on the tour,” he said. “It’s not as bad as you think.”

Scott Seckel

Reporter , ASU Now

480-727-4502