About Dan Krell

February 23, 2010October 5, 2019

Will an expected housing shortage cause another bubble market?

Last week’s statements by Brian Wesbury may have startled the real estate industry. The chief economist for First Trust Advisers stated in an interview with Steve Forbes that the United States is headed for a housing shortage in 2011 (“Housing Shortage Coming In 2011” by Alexandra Zendrian, Forbes.com; 2/15/2010).

Mr. Wesbury’s dire prediction is predicated on housing statistics that indicate that the United States needs to add an annual average of 1.5 million homes to stay on par with population growth. The fact that housing starts and completions in the last two years have only been a fraction of the 1.5 million home target may be an indicator of a housing shortage. Even though the foreclosure crisis has added many homes to the market, the number of homes being built is significantly deficient in maintaining a reasonable pace with the population growth, according to Wesbury.

The last time people spoke of a housing shortage was in 2004, when monthly peek single family inventory for Montgomery County never exceeded 2,000 units and absorption rates of single family homes approached 80% during winter months (as reported in the 2005 Year in Review by the Greater Capital Association of Realtors). The following year, winter inventory soared and housing absorption rates did not exceed 40%. The result was a bubbling real estate market that exhibited an appreciation of 18% of single family home prices in Montgomery County from November 2004 to November 2005, even though inventory increased from 1,692 to 3,100 units for the same time period.

Cole Kendall, of Understanding Markets LLC (understandingthemarket.com), explains that the annual addition of 1.5 million homes is a benchmark that is widely used by economists to predict housing trends. The benchmark is based on a decade of demographic and economic data.

The problem is that since 2008, the Country’s economy and demography may have changed significantly, such that predictions based on historical data may be flawed. In fact, in 2008 Mr. Kendall was emphatic that over building occurred during the housing bubble. He stated that housing starts must remain low just to catch up with diminished demand, “It is impossible to know how many houses there should be in the U.S. at any time, but we can say that the gap between demographic demand and the supply of homes has been getting smaller.”

The national and local economy is vastly different today than it was earlier this decade; so even if the demand for housing once again equaled the levels that existed in 2004, any resulting market gains may be expressed differently. Currently, unemployment and stricter lending policies are only a couple of changed factors that have significantly impacted the housing market in recent years. Compared to a time when many home buyers did not even need to prove they had a job (much less an income) to qualify for a mortgage, today’s lending environment is such that a home buyer not only needs to provide evidence of employment and income, they need a higher down payment as well as evidence of financial reserves to make their case for a mortgage.

There is no doubt that the housing supply is being reduced because of decreased demand. The result may not be a housing shortage, but more likely it is the manifestation of economic forces seeking equilibrium.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of February 22, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell

February 16, 2010October 5, 2019

Hyper-Local Real Estate: understanding your home’s value

The good news is that homes are selling. However, many wonder how sales data will be expressed within their neighborhoods. Unfortunately many are finding out that, much like weight-loss infomercials, individual results may vary. As the economy shifts, homeowners are looking to their own neighborhoods for viable and meaningful data; an awareness of hyper-local real estate has emerged.

The National Association of Realtors (Realtor.org) reported on February 11th that home sales increased from the third quarter in most states; the caveat is that thirty-two percent of the sales were for distressed properties (i.e., foreclosures and short sales). Preliminary figures for 2009 indicate that about a third of the metropolitan areas experienced an increase in median sale prices from the fourth quarter of 2008.

Regional data for Maryland and Washington, DC indicate a “warming” trend. Quarterly data indicate that home sales progressively increased through the second, third and fourth quarters of 2009. The NAR calculated an annual increase of home sales of 47.9% for Maryland, and 56.3% for the District. Area home prices have seemed to appreciate as well; the NAR calculated an annual increase of 3.8% in median home prices for the Washington, DC metropolitan area (including suburban Maryland).

Locally, data reported by the Greater Capital Area Association of Realtors (GCAAR.com) indicated increases of sales (settlements) and ratified contracts of single family homes in Montgomery County during December 2009. Compared to the same time period in 2008, the number of sales increased 12.5%; while the number of ratified contracts increased 15.4%. Additionally, the year-to-date data indicate increases for sales (up 20.7% from 2008) and for ratified contracts (up 26.4% from 2008).

Differences in regional markets are due to a wide range of factors impacting each area. For example, differences between the real estate markets in the Washington, DC metropolitan area and the greater Los Angeles area can be explained by differences in economic influences (which include but are not limited to employment, commercial, and industrial influences).

Although, the adage that real estate is regional still holds water; however, some have cast a skeptical eye towards the expression of the data to their neighborhoods. It seems that neighborhood data within a region can vary significantly. Comparing specific zip codes within a region can demonstrate that regional gains or losses may not be the trend for all neighborhoods. Take for example the comparison of several Silver Spring zip codes for December 2009 (as compiled and reported by the Metropolitan Regional Information Systems, Inc.):

The number of units sold during December 2009 increased compared the same time in 2008 for the zip codes: 20910, 20902, and 20903; the number of units sold decreased during the same time period for the zip codes: 20901 and 20906. The average sold price decreased in December 2009 compared to the same time in 2008 in the zip codes 20901, 20902, 20903, and 20910; while the average sold price increased in the zip code 20906.

Specific subdivision data could further demonstrate such variances; some of the data possibly revealing extreme deviations (positive or negative) to zip code and regional data. Hyper-local real estate is not only useful to home owners, but increasingly used by home buyers as well. Hyper-local real estate is not a fad, but essential for understanding your home’s value in a meaningful way.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of February 15, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell

February 10, 2010October 5, 2019

Regular Maintenance can Possibly Keep you Comfortable during Severe Weather

Talking to a neighbor about how lucky I felt to have power during the blizzard over the weekend, he lamented that he did not have heat. Listening to him talk about how he tried to fix his furnace, it became increasingly clear that he had no idea what type of heating system was in his home. Putting aside my neighbor’s assessments of his situation, I reluctantly asked when he last serviced his furnace; his response did not provide confidence that the furnace was serviced any time recently.

My neighbor’s recent experience demonstrates that poorly maintained home systems can cause problems when we rely on them the most. Enduring severe weather events remind us of past due maintenance that unfortunately we soon forget as we get on with our busy lives.

Having a heating professional conduct a furnace check every fall can ensure that your furnace is clean and operating safely and efficiently – especially when we depend on the system to operate properly. To many, the furnace may seem like a magic box that keeps the house warm during cold months. However, like many mechanical objects, the furnace is prone to breakdowns unless regularly serviced.

To ensure optimal operation of your furnace, a licensed HVAC professional is should conduct annual maintenance that examines such items as (depending on your heating system): the burner and pilot; the heat exchanger; the thermocouple; the filter; the vents; the gas piping; the electronic ignition; the fan; the burner; the limit switch; the manifold pressure; the temperature rise; the heat anticipator; the belt; and the draft diverter.

Although your HVAC professional probably checks for carbon monoxide (if your furnace is a combustible fuel system), carbon monoxide can build up any time. Severe weather can cause heavy amounts of snow and other debris to possibly block exhaust vents and chimneys. Installing and ensuring its peak operation, a carbon monoxide detector can save your life.

Another cause for concern during extreme weather is water penetration into your home. Regular maintenance of your roof system and sump pump can minimize damage caused by severe weather. First, ice dams occurring from melting and freezing snow can lift shingles and separate siding allowing water to make its way into your home. Water from ice dams can damage ceilings, walls and window casings. Left unrepaired, mold and possibly structural problems may develop.

Second, blocked downspouts can cause water penetration into your basement by forcing melting snow from your roof to drain and drip down directly to your home’s foundation. Remembering to dig out your downspouts when shoveling the walks and driveway may prevent this type of penetration by providing a route for melting water to drain away from your home’s foundation.

Third, a non functioning sump pump is a sure way for rising water to penetrate your home. The sump pump drains water that collects in the sump pit away from your home. As large amounts of snow melts, the grounds around your home become saturated, and the sump pit may fill quickly. If your sump pump is not operating properly (or the pump drain is blocked), the water can penetrate your home until properly drained.

If you’re one of the “lucky” ones whose home endured the recent severe weather, don’t take your home for granted. Regular maintenance can ensure years of enjoyment – and comfort in severe weather events.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of February 8, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell

February 8, 2010October 5, 2019

"Snowmageddon" is over, now waiting for "Snowzilla" to arrive

by Dan Krell © 2010

The good news is that the historic blizzard of 2010 (A.K.A. “Snowmageddon”) is now officially over. The unfortunate news is that the weather service issued additional snow amounts of 12″ to 24″ due to begin tomorrow evening. Forget the recession, this years snow has probably affected more home buyers than anything else. Since open houses and home showings are postponed for better weather, enjoy these photos from a blizzard of many names.
Snowing…
Early morning about 6am, another eight to ten hours to go!

Still snowing…
Here comes “Mr. Plow”… but still snowingSnow eventially stops leaving this…

February 2, 2010December 13, 2022

Your future home

The “Jetson’s” lived in a futuristic home that combined science fiction with a hedonistic vision of immediate gratification. Even futuristic home exhibits featured at past World’s Fairs seemed like sci-fi movie sets. Although some interesting devices were featured in those futuristic homes (such as the Jetson’s Rosie the robot or their Food-a-Rac-a-Cycle), some have actually made their way into our homes; wall mounted wide screen televisions and microwave cooking are but a couple of the conveniences that evolved from “futuristic” technological advances.

Although futuristic devices are always welcome to make life easier and more fun, the evolution of the home will not occur because of the conveniences that are contained within. Rather, the future home will evolve from changes in living space and lifestyle; location, home size and interior space will be the focus of future home architecture and development.

Location has always been a main consideration when buying a home. The recent real estate market decline confirmed the higher demand for homes located in or in close proximity to major population and employment centers than homes located in “suburbia.” One of the many reasons you may buy a home closer to your job is to decrease your commute. The National Association of Realtors 2009 Profile of Home Buyers and Sellers (Realtor.org) indicated that commuting costs are a factor when choosing a neighborhood. Since the cost of commuting is becoming more expensive (in terms of money and time), home buyers as well as home builders will look to the convenience of living “close in,” or at least close to the conveyances (such as metro) that will take you to work.

Your next home may be smaller than you think. The NAR 2009 Profile of Home Buyers and Sellers indicated that size matters when it comes to a home; the average size of a home purchased in 2009 was about 1,800 sf. Although the average home size has almost doubled since 1950 (to about 2,300 sf), the trend towards increasing home size has most likely plateaued due to factors that balance the home’s cost, affordability, and the desire to be in a “close in” neighborhood.

Your lifestyle has most likely changed in the last twenty years, just as the average American’s lifestyle has changed – and will continue to change. Changing lifestyles have altered many things in our lives, including how we use our homes. One example is how we entertain; long gone are the “formal” tea parties in the sitting or living room, present-day home owners plan informal gatherings instead (usually ending in the kitchen). Homes that will offer open “flexible” spaces, which are multi-purpose and can be modified by our personal lifestyles, will provide a feeling of being in a much larger home. Additionally, kitchen spaces will blend in with these multipurpose spaces adding to the flexibility and creating the feel of having a large kitchen space. The rooms can be used for entertainment and work centers, while allowing for informal dining and impromptu entertaining.

Your home of tomorrow may not be the futuristic vision that you dreamed about watching Saturday morning cartoons. However, much like current home owners who are transforming their older, “close-in” homes into contemporary “open” spaces, it will be a blend of utilitarianism and style that will be convenient to your office.

By Dan Krell
Copyright © 2010

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.