Home designs for multigenerational families under one roof

For Sale“Wait long enough and it will come back in style” is a saying that typically applies to clothing styles and fashion. And unlike fashion trends, which typically relies on pop culture, fads, and a designer’s vision; home design trends are more practical and rely on changing life styles, advances in building technologies, and the development and/or use of new construction materials.

Although the idea of extended family living under one roof has not been commonplace for decades, multigenerational life styles have been trending in recent years. And this year, there was a surge in the demand of multigenerational home designs.

Consider a Pew Research Center analysis, as reported by Sally Abrahms in the AARP Bulletin (3 Generations Under One Roof, April 2013; aarp.org), that indicated multigenerational households increased 10.5 percent (which is about 16.7 percent of the U.S. population) between 2007 and 2009. She also cited a 2012 survey by the Pulte Group, that indicated about 32 percent of adult children plan to live with their parents.

Such surveys make sense, if you consider that our population is increasingly aging. And as long term care costs are increasing, there is growing pressure on adult children to take care of their parents during their waning years and declining health (as was once expected decades ago). Consider the cost of long term care as reported by Genworth Financial (genworth.com): the 2014 Maryland median cost of a private one bedroom accommodation in an assisted living facility is $40,800 per year; while the 2014 Maryland median cost for a semi-private room in a nursing home is $98,368 per year.

Besides the rising aging population, Abrahms also pointed out that multigenerational living is also due to the return of young adults to their parents’ homes. Also known as the “boomerang generation,” many pay rent and contribute to housing costs. About 75% of young adults aged 25-34 moved back with parents; as well 61% of young adults aged 25-34 who know of friends or family who moved back with parents due to lack of living arrangements, lack of money, and/or lack of employment.

In the past, the extended families that lived under one roof had little choice but to make the best use of a home typically designed for one family. However, home builders have taken notice of the trend in multigenerational households and have responded. Amy Taxin, of the Associated Press, reported (The family that stays together: Homebuilders are making room for more multigenerational households; Associated Press – The Washington Times, April 16, 2012) that builders are offering single family home designs with “…semi-independent suites with separate entries, bathrooms and kitchenettes. Some suites even include their own laundry areas and outdoor patios for additional privacy, though they maintain a connection to the main house through an inside door.

Taxin pointed out multigenerational housing options, which includes: Lennar Corp, which offered a 3,400 square foot home in the Las Vegas area that contained 700 square foot suites; and Standard Pacific Homes that rolled out the “casitas” idea which is independent living areas attached to the main house.

After many decades of the “break-away” family, a number of socio-economic factors have come together to bring about the reintegration of the extended family under one roof. The idea that multigenerational living is once again popular has created a new niche and trend for home builders and architects.

© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

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Real estate, a dangerous profession

Bethesda Real EstateIf you asked anyone on the street to name the top dangerous professions, “real estate agent” is not usually considered. But the recent murder of Arkansas Realtor® Beverly Carter highlights, once again, the dangers of selling homes. Carter went missing in September after she planned to show a house, and her body was later found in a rural area.

Although the details of the murder is yet to be revealed, it feels reminiscent of the 2010 murders of two Ohio real estate agents killed in separate incidents within the same week. Vivian Martin was found on the floor of burning home, Martin’s death was found to be by strangulation. Andrew VonStein, was found shot in a vacant home (usatoday30.usatoday.com/news/nation/2010-09-22-real-estate-agents-ohio_N.htm).

Dealing with the public on a daily basis puts real estate agents in contact with a wide range of personalities and potentially dangerous situations. And although reports of general crime may not grab our attention until we hear about a life being taken prematurely, other daily dangers that agents may face can include stalking, robbery, assault, and rape.

Here are a just few reports from this year:

Over the summer, a Pennsylvania real estate agent was allegedly carjacked at gunpoint, then allegedly sexually assaulted and forced to stay in back seat. While the alleged assailants drove her SUV, it lost control and ran into pedestrians a fruit stand. Two Philadelphia men were charged with the deaths of three children and their mother, as well as the kidnapping, aggravated assault and sexual assault of the real estate agent (cnn.com/2014/08/08/us/philadelphia-carjacking).

The Charlotte Observer reported May 14th that a man was arrested and charged with rape, attempted rape, felonious restraint and kidnapping, and two counts of sexual assault. Police stated that the alleged assailant arranged to view a number of homes with the real estate agent the day before they met. The two drove together, and while in the first home the agent was choked and was threatened to be killed with a knife lest she comply. The agent was sexually assaulted in the home; the alleged attacker ordered her to take him to the second home, where she was assaulted again (charlotteobserver.com/2014/05/14/4910501/realty-firms-re-emphasize-safety.html).

Earlier this year, ABC-7 WJLA reported that a Maryland agent was robbed in a New Carrolton home.   Police stated that a man followed the agent into the vacant home, when a purse and other items were taken by threat of an alleged weapon (wjla.com/articles/2014/03/real-estate-agent-robbed-in-vacant-maryland-home-101466.html).

A recent story out of Arizona (kpho.com/story/25186878/foot-fetish-predator-targets-valley-real-estate-agents) tells of a buyer texting female real estate agents to see a home. Seemingly innocent, the would-be buyer would initially text the agents about a house listed for sale; however, quickly changing the topic to the agents’ feet and foot wear. As bizarre as this story may sound, one of the affected agents seemed to think that this foot-fetish pervert was harmless; she stated to in this CBS-5 KPHO story, “You very much have to trust your instincts and intuition…If something doesn’t seem right, ask questions…”

Most real estate agents are personable and service oriented, but don’t be surprised if your call to urgently see a home, with an agent whom you have never met, is answered with deliberate caution. The recent murder of Beverly Carter once again puts safety first in the minds of many agents and others in the industry.

© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

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Home equity entitlements, home prices, and talk of external price controls

single family homeA home buyer who visited a recent open house told me that home sellers need to “let go of their perception of entitled equity.”

I will pause here for a moment, as you are no doubt trying to make sense of the last statement.

Was this visitor verbalizing that a seller’s home equity be measured and controlled? And the follow up question might be: “Since when is a home owner’s equity perceived as an entitlement?” Was the buyer saying that there should be outside intervention to determine the equity a home owner may net on their sale (so as to make housing affordable), much like rental controls that exist in some areas around the country?

Who makes the decision as to how much equity a home owner may realize (net)? Sure, one could argue that home equity is an intangible concept that comes from the perceived value of your home; where the value is relative until it is realized (liquidated). You could also say that equity is realized through liquidation of the home by either selling it (or cashing out with a mortgage or equity line of credit); the value being the price a buyer is willing to pay, (or the amount a lender decides so as to make a loan). So it seems that when it comes to home sales, market forces still (mostly) determines the sale price and the amount of equity (if any) the home seller nets from the sale. Simply put – buyers and sellers negotiate home prices; generally, buyer pushback on listing prices can pressure sale prices to decrease, much like high demand can pressures prices to increase.

Let’s give the open house buyer the benefit of the doubt; maybe having outside intervention was not what he meant by saying home sellers need to let go of their perceived entitled equity. Maybe he was using (or misusing) economic jargon to make a point by expressing his opinion that housing is currently overpriced.

As I wrote in August, if you want to know where the housing market is headed, ask a home buyer. And it seems as if this buyer is not alone in his sentiment, as the attitude that home prices are too high is (again) an increasing view among many home buyers.   It could be that the housing market is encountering what was experienced in 2009, when at that time there was a growing disparity between the price home sellers are asking and what home buyers are willing to pay. After all, it was during 2008-2009 when similar attitudes were strongly expressed, a time when rapidly falling home prices did not encourage home sales.

Quentin Fottrell pointed out in his pithy MarketWatch analysis of recent housing data (10 most overvalued (and undervalued) housing markets, marketwatch.com, 10/1/2014) that “Seven of the top 100 metro areas are overvalued by more than 10%, the highest number since the first quarter of 2009.” He also mentions that the last time this occurred was early in the housing bubble; but Fottrell says there should be little concern of current housing bubble because of the current economic environment (jobs and construction).

Conversations with home buyers are extremely valuable to home sellers for many reasons. What you might come away from this conversation is that there is continued push back on listing prices; and unless home sellers are responsive to pricing feedback, they should prepare for a long time on market.

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Don’t leave money on the table

money to close on homeA nagging concern that is often expressed by many home sellers is that they are leaving money on the table; in other words selling for too little. The dilemma often presented to a home seller is that if the home is priced too high, then there is risk eliminating potential home buyers; while at a lower price, there is risk selling at a less than desirable price.

Pricing a home is both a science and art. Skilled agents employ mathematical formulas as a foundation upon which to build a case for a range of sale price (the science); as well as demonstrating their ability of making price adjustments for variations in improvements, updates, as well as intangibles (the art).

But it may not necessarily be your home’s list price that can set you up to leave money on the table. Examining how your home is marketed, as well as your motivations and reasons for selling may reveal a weakness in your negotiation position as a result of convenience.

Selling a home can be disruptive to your daily life; and the prospect of having people, whom you’ve never met, traipse through your home can be unsettling. The typically limited and highly targeted private placement or pre-listing marketing may offer the convenience of limiting buyer traffic to your home, but its appeal is sometimes promoted to increase the potential of the agent receiving both sides of the commission. (continued below)

Before you agree to a marketing plan that promises exclusive home buyer targeting; consider that many experts make the argument that you can leave money on the table when limiting your home’s exposure to potential buyers. In a world where everything and everyone seems electronically connected, you can increase the buyer pool by taking advantage of every reasonable marketing opportunity (including the internet and local listservs, and electronic bulletin boards, and other acceptable marketing tactics).

The process of selling a home can also be emotional and time consuming; more so if you’re divorcing and selling marital property, or selling your parents’ or grandparents’ home (sometimes because of a move to an assisted living facility or to settle an estate). The convenience of a quick sale can be very tempting; but can also set you up for selling for too little. And if the home is in need of repairs, updating, and renovations, the pricing can be unclear and inaccurate adding to the pressure for a quick sale.

You might even be considering responding to an ad promising a fast home sale without real estate commissions, repairs or home inspections – which is alluring to be sure. However, consider that many of these operations are seeking to purchase homes at a fraction of retail value minus repair costs.

Unfortunately, there is no “real time” measure to determine if you’re selling your home for too little; and some home sellers often lament in hindsight selling at a lower price out of convenience. However, a little homework and investigation can at least better your negotiating position. Ask questions and understand the purpose, benefits and limitations of a private placement or pre-listing marketing. Additionally, you can get pricing guidance from a market analysis, obtained from at least two (three is better) neighborhood real estate agents. And finally, weigh the pros and cons of selling out of convenience to the process of selling on the open market (listing the home in the MLS).

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

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Retro-future of real estate – buyers like representation

For SaleWhen I wrote about the future of real estate brokerage seven years ago, I predicted that consumers would become increasingly reliant on the internet; while the process of selling homes would remain interpersonal. Once thought to free home buyers and sellers from real estate brokers, the internet has become ancillary to the home buying and selling process.

Some real estate experts point to home buyers’ perception of buyer agency as a reason for the integration of the internet into the buying process. The internet has become a prolific source of information that funnels buyers directly to listing agents. With information in hand, many buyers are seemingly ditching their agents when viewing homes; some thinking they can negotiate a sweat deal directly with the listing agent.

Consider this 2012 anonymous post from a popular real estate web site. The poster proclaimed to have fired their agent and on their own negotiated a $490,000 price, when a previous buyer backed out from a $515,000 contract. The poster stated that “it makes financial sense,” the rationale being that there is always a 6% commission built into the price. The post stated that the seller makes more money if there is no buyer agent to pay, even if the offer is lower; while also getting the listing agent to accept a lower commission.

The post’s rationale may seem ostensibly compelling; and if the tactic works, it most likely has nothing to do with commissions per se. The strategy of negotiating a better price based on commission falls flat when you understand how broker commissions are negotiated. Generally, commissions are negotiated between the listing broker and the seller before the home is listed; the negotiated commission is expressly stated in the listing contract. The commission belongs to the listing broker, not the agents. The listing contract is also specific to the amount of the commission to be split if the buyer is represented by a buyer broker. Trends in commissions vary; including variable commissions, which is an agreement to a reduced listing commission if the buyer is not represented.
(Continued below)

Of course this do-it-yourself (DIY) home buyer post (and many others like it) has garnered a lot of attention and unconfirmed corroboration. However, there is no additional information about this specific transaction; and two thoughts immediately come to mind, either: the home did not appraise at the higher price (this was 2012); or the buyer walked on the home inspection.

The truth is that many still value buyer broker representation, which goes beyond just finding a home and negotiating a sales price; and may include (among other responsibilities) identifying and guiding you through any obstacles that can arise during the transaction. Of course, not all agents are the same. If your agent is a strong negotiator, the probability on settling on a better price is higher; as well as other occasions during the transaction where negotiation is paramount – notably during the home inspection process.

What some experts proclaim to be evidence of a trend of home buyers purchasing sans a buyer agent, may actually be just a shift in buyer behavior. Sure, there will always be the “DYI” buyer trying to justify a price by reducing commissions. But the reality may be that, rather than ditching the buyer agent altogether, the internet has allowed many home buyers to put off signing a buyer agency agreement until they are ready to make an offer.

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

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Getting home buyers into your listing – sellers and agents take note

Bethesda Real EstateSome economists have discussed how consumers are increasingly “shopping” rather than buying. And this is evident in the housing market, where home buyers have become overly discerning about their purchases. After what seemed to be a brief seller’s market, we find ourselves slipping back into a buyer’s market; and an old dilemma is reemerging: how are you going to get more buyer traffic and more offers on your home?

If your home has been on the market for while, check with your agent to review feedback from those who visited your home. Typical responses focus on price, home condition, and how the home shows. If you’re about to list your home, have some neighbors and friends tour the home (as if they were home buyers) to provide an alternate perspective of your home’s selling points and shortcomings.

Pricing your home correctly is critical to selling in a reasonable time frame. Your agent should keep you up to date with neighborhood sales activity, so you can remain competitive with other relevant listings. Recent neighborhood sales trends (1-3-6 months) can indicate where your price range should fall, as well as understanding the types of homes that are selling.

One of the main objections you may have heard from home buyers, is that your home “needs work,” which has a number of meanings. Of course, it may mean your home does need updating and/or repairing; in which case you should discuss with your agent about the possibility of making updates/repairs, and/or adjusting the price to reflect any needed updates/repairs. Before you decide to go all out on a renovation, consider making updates that are equivalent to your neighborhood and price range; over spending may not significantly increase your home value. If your home is updated and shows well, another meaning of “needing work” comes from the buyer wanting a turn-key home; and your updates/renovations do match their tastes and preferences.


Another issue to consider is that although your home may be updated and clean, you just may have too much stuff! Lots of furniture, wall hangings, and other stuff can make large rooms feel cramped and small, as well as give a busy and unsettling vibe. If this sounds like your home, consider removing items that can distract and detract from your home’s true elegance and style.

If your home is not getting many showings, another factor to address (independent of price, condition and clutter) is how your home is marketed. If you haven’t done so, look at your MLS listing; are you satisfied with the pictures, and remarks? Keep in mind that about 96% of home buyers search online and make decisions based on what they see and read. Home sellers, like you, are savvy and know that solely hanging a sign and posting a MLS listing is no longer acceptable to market a home. Ask your agent to update you on active marketing efforts, as well as other resources that may be used to market your home, including: local and global networks of agents and buyers; as well as using the internet and SEO (search engine optimization) to get buyers interested in your home.

If you’re home has been on the market for a while, you might consider addressing any of these issues to boost home buyer activity. If you’re considering a sale in the near future; have a plan of action before you list, so your sale does not languish.

© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

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Resurgence of solar power

House Solar Once considered too costly, solar is getting hot (pun intended). Many factors are making it easier for consumers to choose solar; including lower installation costs and tax credits. Solar energy has also become a selling point for some home builders in sunny states such as California; where builders have offered the option of solar panel installation during construction.

Solar technology has come a long way. Manufacturing advances have not only made the technology more affordable, it has paved the way to new applications as well. Besides the panels with which we have become accustomed, photovoltaic (PV) technology is now available as roof shingles and windows; and some companies that can even apply the PV to other exterior home surfaces.

Is the investment worth it? A recent Washington Post piece (March 26, 2014; Real Estate Matters: Are solar panels worth the investment?) explores the value of installing solar panels – and concludes that it depends on your individual costs and savings. Authors Glink and Tamkin take into account the installation costs, tax credits and a monthly power bill of $120. Assuming that their system would supply all of their electricity needs, they applied the $120/month savings to repay the loan taken to cover the solar panel installation; and based on their calculations – there would be no savings for the first ten years.

However, your actual utility savings can vary on a number of factors, including (but not limited to): the amount of solar power produced; system size and placement; and available sun energy. Additionally, the cost of maintaining your solar panel system can vary; regular maintenance is required to ensure your system is producing power efficiently. Maintaining your system typically entails cleaning the panels (debris, dust, bird droppings can collect on surfaces) and testing other components. Furthermore, because the average life expectancy of a solar panel is about 30 years (depending in manufacturer), you should consider the time you intend to live in your home and resale. Home buyer attitudes on existing systems and possible replacement costs is not entirely clear.

If you’re considering a PV system, Energy.gov offers these tips: measure the amount of sun available; calculate the size of the system to meet your needs; predetermine the best location for the system, as well as making sure it will fit; decide if the system is a standalone or connected to the power grid; and how will the safety needs be met (energy.gov/energysaver/articles/planning-home-solar-electric-system).

Before choosing a contractor, energy.gov recommends due diligence. Ask about the company’s time in business and experience installing the type of system you have chosen (technical differences can exist). Check the contractor/company for complaints, judgments or liens. And, of course, make sure the contractor has appropriate valid licenses; according to the Maryland Department of Labor Licensing and Regulation website, “a home improvement contractor or subcontractor license is required to install solar panels for a homeowner, regardless of whether the panels will be installed on the home or an outbuilding adjacent to a residence, or will be attached to the land next to the residence. A licensed master electrician is required to hook the panels to the electric system.”

Finally, energy.gov also recommends getting multiple installation quotes because panel efficiency can vary depending on the manufacturer. The estimates should include the total cost of getting the PV system up and running, including hardware, installation, connection to the grid, permitting, sales tax, and warranty.

© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

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When landlord-tenant relations go wrong

HousingAlthough renting your basement out may seem like a great way to generate extra income to help pay the bills, it can also become a point of conflict that could spiral out of control if not handled correctly. The recent report of the arrest of local landlord highlights the issues of being a landlord, as well as being a tenant.

The arrest seems to be the outcome of events that climaxed when the landlord allegedly forced the tenants out of the apartment earlier this month because the tenants were allegedly late paying their rent. According to an August 21st Montgomery County Police press release (mymcpnews.com), the police responded to calls of woman screaming for help and banging on a neighbor’s window. The woman reported to police that five individuals were in an interior room and prevented her from closing her bedroom door. The woman and her son were allegedly grabbed and were told that the “landlord said they had to, ‘go and pack their stuff.’” It was reported that the individuals yelled at the woman to take her belongings and get out of the apartment; and the suspects “pushed” the woman and her son out of the home.

Another tenant, who spoke to investigating officers, stated that the landlord allegedly told them that they should stay in their room because he was going to pay people to force the tenants out. Another tenant stated that the landlord told them to not come out of their residence because there would be people “yelling and screaming.”

One of the five suspects who was subsequently arrested, was allegedly paid $1,000 to “scare and force” the tenants out of the apartment. The landlord reportedly turned himself in to police and was “charged with conspiracy to commit first-degree burglary, conspiracy to commit robbery, and conspiracy to commit second-degree assault.”

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Another outcome of this incident is that the property was condemned by the Montgomery County Department of Housing and Community Affairs (DHCA) and all occupants were ordered to vacate the property. An investigation of the home by the 4th District Community Service Officer and DHCA Housing Code Enforcement Inspectors determined that the landlord was “running a rooming/boarding home”; which “included four, illegal accessory apartments and five separate kitchens” and was “occupied by 15 people at the time of the incident.”

The unfortunate actions, events, and outcome of this incident are atypical. However, the plight of the landlord and tenant highlights the frustrations that can occur on both sides of the rental relationship, and may serve as a reminder to consult with an attorney before taking matters into your own hands.

Before you decide to become a landlord, consider familiarizing yourself with federal, state and local laws, rules and ordinances governing landlord-tenant affairs; as well as making sure your rental(s) conforms to licensing and zoning laws. Locally, the Montgomery County Office of Landlord – Tenant Affairs (housed within the Department of Housing and Community Affairs) is a resource for landlords and tenants on licensing, security deposits, evictions, leases, and rent increases. Besides publishing a Landlord – Tenant Handbook (a guide on informing of general rights and responsibilities of landlords and tenants), it also offers a free and quick avenue for tenants to seek amicable dispute resolution.

(dankrell.com)
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Will home prices depreciate second half of 2014?

house for saleIt’s no secret that the pace of home sales has slowed during 2014. So what’s ahead for real estate and the housing market? If you really want to know, Irwin Kellner, Chief Economist for MarketWatch, has some advice. In his August 19th MarketWatch.com piece (Opinion: Don’t count on U.S. consumer to save economy) he eloquently and succinctly stated, “If you are trying to discern where the economy is heading, look at the consumer.” And this applies directly to real estate too.

July housing figures from the National Association of Realtors® are due to be released this week (July housing press release August 21st); and although good news may be suggested, the numbers may be revealing of where the market is heading – and it may not be good. The NAR July 22nd (realtor.org) press release indicated that June’s existing home sales increased (compared to May 2014), however it stated that existing home sales were down 2.3% compared to the same time last year. In the area where I list and sell homes, Montgomery County single family home closings (sales), reported by the Greater Capital Area Association of Realtor® (gcaar.com) also dropped off in June (decreased 1.5%); and particularly telling is July’s decrease of 16.2% compared to the same time last year, as well as the 7.4% decrease year to date (compared to last year)!

The silver lining is that NAR reported that median home prices have increased in 71% of the “measured markets.” However, 27% of the measured markets showed a decline in median home prices from last year. Montgomery County median home sale prices are moderating (according to GCAAR stats): increases were about 3% during June and about 2% during July compared to the same periods last year.

Taking Irwin Kellner’s suggestion of “looking to the consumer,” let’s look at home buyer behavior trends; which may be understood through home absorption rate (the number of homes sold compared to the number of available listings during a given time period). It should be no surprise that the home absorption rate decreases compared to recent years due to the steady growth of home inventories and the reduced number of closings. Surprising is the rate of decrease in the absorption rate (calculated from MLS data) during June and July compared to the same periods last year (a decrease of 15% and 39% respectively).

Like the average consumer, it seems that home buyers may have become a bit skittish. Kellner points out that contrary to economist’s expectations, the August report of the Thomson Reuters/University of Michigan survey of consumer sentiment has dropped to a 10 month low. Additionally, he reported that although there has been some good news about employment, he argues that wages are not keeping up with inflation due to the nature of many newly created jobs, which are temp or part-time. Furthermore, he states that consumer savings are either low or “depleted.” Rounded out by the usual concern about job security, geopolitics, and the general economy: Kellner gives us a glimpse of today’s consumer.

As for real estate, the statistics suggest that the housing market may be at another crossroads. Homes sales have already dropped off during the busiest time of year, and it may be reasonable to expect that sales for the remaining year may also be subdued. The mediating factor will be home prices; which may eventually decline as home sellers try to be competitive with other listings, as well as entice home buyers to buy their homes.

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Making sense of real estate market indicators

home sales statsIt used to be easy to figure out the strength of the real estate market, all you had to do was look at reported housing indices and it all made sense. Statistics were often verified and corresponded to other indices as well. However, since the financial crisis, there seems to be a disconnect between national and local housing indicators; gauging the market has become confusing – understanding what the indices measure and imply is often tricky.

Obviously, the best gauge to the health of the housing market is measuring existing home sales. Existing home sales is reported nationally and locally. The figure is important because it is a direct measure of the number (volume) of home sales during a given time period (usually monthly). National sales figures are often samples of MLS data, while local data are actual (raw) numbers. The statistic is used to chart annual sales trends; as well as a relative comparison to the same period during previous years.

Some have talked about the strength of luxury home sales as an indicator of the housing market. However, during a weak economy is weak, mid and low tier home sales tend to decrease; while upper bracket and luxury sales remain relatively strong. This bifurcation, where two distinct markets are derived from one, has emerged twice since the financial crisis; most recently earlier this year.

The National Association of Realtors® reports the Pending Home Sale Index, which is basically the number of homes that go under contract (pending sale) during a specific period. Pending sales are sometimes called a “forward looking” statistic because it is used to estimate how many homes will have sold for the year. Local pending sales are reported as a raw number of homes under contract. The statistic can be misleading because contracts fall apart for a number of reasons and may be one explanation as to why pending sales and existing sales may not correspond. Although the figure is not always indicative of actual sales, the figure is important because it reveals home buyer activity.

Another statistic relied on by many to determine the strength of the housing market are the home price indices (yes there is more than one). There are a number of national home price indices, and each has their own discrete methodology of measuring home sale prices. Some indices collect MLS data samples, while others use reported mortgage data. Average home sale prices help determine affordability, which can be an indication of buyers’ potential ability to purchase a home.

Some analysts talk about mortgage interest rates for much of the same reason one might follow home sale prices – to project home buyer affordability. The rationale is that the lower the interest the more affordable homes are and increase buyer activity.

Analysts also use new homes statistics to describe the strength of the real estate market. Included in this subset of housing data are new home sales and new home starts. New home starts is typically derived from the number of permits filed to build homes. Besides being a forward looking projection of new homes sales, economists follow new home starts figures closely because it can project construction employment as well.

Housing indices can be inconsistent. And while positive statistics may be reported nationally, it doesn’t necessarily correspond to the local market. Your real estate agent can provide insight to local sales trends and expected projections.

© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

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