Real estate BS detector

real estate BS detector
Become a real estate BS detector (infographic from visual.ly)

DARPA issued a recent request for information seeking ideas about how to create automated capabilities to assign “Confidence Levels” to scientific studies, claims, hypotheses, conclusions, models, and/or theories.  In other words, the Defense Advanced Research Projects Agency wants to create a BS detector.  First reported by Adam Rogers for WIRED (Darpa Wants to Build a BS Detector for Science; wired.com; July 30, 2017), DARPA doesn’t look at it as rooting out “BS” but rather establishing the what, why, and how scientists know stuff. Imagine how this could be applied as a real estate BS detector!

The Defense Advanced Research Projects Agency’s stated mission on their website is “to make pivotal investments in breakthrough technologies for national security.”  So, chances are that if they are able to devise a real working BS detector, you won’t know about it.

When it comes to real estate, people sometimes bend the truth.  Additionally, real estate agents are known for “puffery” and are generally not trusted because of the salesy techniques they employ.  But having a real estate BS detector would be huge breakthrough!  Imagine being able to weed through the BS and nonsense that many real estate agents spout when they are clearly trying to sell.  Wouldn’t it be wonderful to check your real estate BS detector, when an agent is pontificating about a house or themselves, to know if the agent is wasting your time?  Unfortunately, the real estate BS detector is not a real device.  However, there are strategies to help you detect real estate BS.

“Luke, trust your feelings.”  Ok, there’s no such thing as a Jedi, but empirical research has demonstrated that intuition can be used to weed out lies.  Many say they rely on their gut instincts to protect themselves.  But the truth is that many ignore or don’t trust their intuition because the rational mind takes over and dominates.  Increasing your intuition could help you detect the real estate BS and prepare for (and maybe prevent) regretful situations.  Becoming more aware about your “gut feeling” can increase your intuition.

Being cynical can also help detect real estate BS.  Don’t be rude of course, but questioning what others say helps you clarify and understand them at a higher level.  It can also reveal untruths.  Question all claims and over-the-top statements.  For example, if you’re dealing with a real estate agent, ask for support to any assertion they make about themselves or their services.  Ask to speak to their references.  Also, ask for additional information that support their opinions on the housing market and deciding on a price to sell or buy a home.

Do your due diligence to discover real estate BS.  After asking questions, take what others say or do during the real estate transaction at face value and take it upon yourself to verify it.  It can save you a headache down the road.  It’s easy to verify many aspects of the real estate transaction, because many local jurisdictions have their databases online.  However, making a call or two to a helpful government employee is straightforward and can provide bonus information.  Verify licenses of real estate agents, loan officers, and even home contractors.  Verify permits of home improvements.  Verify the local schools and the home’s zoning.

Finally, don’t feel pressured to do anything.  The BS artist will make it seem as if you have to act immediately.  But if you are not comfortable with the situation or are not yet ready, take a pause.

Copyright© Dan Krell
Google+

If you like this post, do not copy; instead please:
link to the article,
like it at facebook
or re-tweet.

Protected by Copyscape Web Plagiarism Detector
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.

Self-driving cars and home buying

self-driving cars
Self-driving cars (infographic from crowdcompanies.com)

Technology has made homes more efficient and environmentally friendly, while also making them more comfortable.  Technology has made the business of real estate become increasingly easier through electronic communications and electronic signatures.  Technology has also made finding a home much easier too.  It’s obvious that the real estate industry has been greatly impacted by technology, but will the self-driving cars technology impact real estate?

A curious article that appeared in a recent issue of Appraisal Journal suggests that self-driving cars will eventually influence real estate (A Largely Unnoticed Impact on Real Estate-Self-Driven Vehicles; Appraisal Journal; Winter2017, Vol. 85, No.1, p51-59).  The authors, Levine, Segev, and Thode, discuss how self-driving cars will likely become a standard on our roads, as well as likely changing the way we think about where we live.  There is a suggestion that the wide spread adoption of self-driving cars could bring about a suburban renewal.  As self-driving cars become more abundant, some suggest that would influence some home buyers and their decisions on where they choose to live.  The concept of owning a self-driving car could make the choice a little easier to opt for the less expensive suburban home with more land.

However, you should consider that owning a self-driving car might not make your suburban commute more convenient.  For many home buyers, a reason to move closer to an urban area is to reduce the commute time to their jobs.  For some, the thought of increasing their commute time even by ten to fifteen minutes (by virtue of an extra metro stop) is unacceptable.  Sitting in your self-driving car is not much different than sitting in a metro car or bus.  So the notion that owning a self-driving car could spawn suburban growth may not hold water.

Owning a self-driving car won’t make the suburban commute less expensive.  Many home buyers decide to live closer to their jobs to save money and energy.  The self-driving car is like any other car, such that there are operating costs.  Regardless whether your self-driving car is electric, gas or hybrid, there are fuel costs.  There will be maintenance costs too.  And of course, you need to a place to park it like any other car.

Even the value of commercial real estate may not necessarily be affected by self-driving cars.  These vehicles won’t reduce travel time to the store, nor would they make any business more convenient than another.

Let’s face it, self-driving cars isn’t the internet.  These vehicles are a convenient way to travel for sure, but they won’t change how we communicate.  Nor will they change the basic requirements we seek from our homes.

However, a government policy shift, much like the policies favoring designated car-pool vehicles and mass transit, could tip the scales in making the self-driving car the vehicle (no pun intended) to changing the real estate landscape.  Creating special lanes for self-driving vehicles could reduce commute times, thus reducing fuel costs.  Requiring dedicated parking for self-driving vehicles could also influence commercial real estate.  However, like the impact of designated car-pool vehicles, a major impact to our lifestyle is unlikely from self-driving cars.

Choosing where you live is a personal decision that is impacted by many external factors, including quality of life.  Of course the self-driving car is a technological advance that is surely to affect how you travel.  However, it is doubtful that owning a self-driving car will largely impact your quality of life and how you decide where to live.  In fact, the authors of the above mentioned article point to a 2016 Kelly Blue Book survey that indicates that a majority of Americans prefer “cars that are not fully autonomous and retain some ability for individual control.”

Copyright© Dan Krell
Google+

If you like this post, do not copy; instead please:
link to the article,
like it at facebook
or re-tweet.

Protected by Copyscape Web Plagiarism Detector
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.

Healthy home trend trumps green initiative

healthy home
Effects of Living in a Healthy Home (infographic from haywardhealthyhome.com)

Green building practices have been the trend for new homes over a decade.  Housing experts have touted the benefits of green building as environmentally friendly and money saving.  Health experts have also proclaimed the benefits of green home designs.  However, a revealing exposé in Remodeling Magazine discusses the health dangers of living in a green design and/or energy efficient home.  There is a healthy home trend that is trumping the green initiative.

The need for a healthy home

To describe how a green home’s air can become dangerous over time, Marisa Martinez uses the analogy of opening up the air-tight sealed bag of clothes from last summer and getting a whiff of the stale, plastic air (Breathing Easy: An Introduction to Healthy Homes; remodeling.hw.com; June 22, 2017).  Martinez discussed how builders and home owners have focused on reducing environmental impacts of their home and neglected the health effects from the new building directives.

Green building and efficient home designs focus on reducing system operating costs by increasing the structure efficiency, thus reducing the impact to the environment.  One of the outcomes of such a building design is having an air tight home.  The air-tight feature is to ensure that there is minimal energy loss from escaping air.  Owners and occupants of green homes are becoming ill because homes are air-tight.  The lack of proper ventilation and the decreased breathability of a home can make the inside air become stale.  And, over time, the buildup of interior pollutants can make the home toxic.

Increasing the awareness of green and efficient homes was a reason for the mandatory utility disclosures when selling a home in Montgomery County. This requirement was enacted in 2008 as a compromise from a proposed mandatory energy audit.

“According to Montgomery County Bill 31-07, enacted into Montgomery County Code Real Property 40-13b earlier this year, a home seller must provide potential home buyers the last twelve months of utility bills and information approved by the Montgomery County Department of Environmental Protection (DEP) about home efficiency improvements including the “benefit of conducting a home energy audit” before entering into a sales contract.”

Additional potential hazards can be encountered when renovating a green designed home because the air-tight feature can cause air pollutants to accumulate inside the home.  Materials in new carpets, flooring (finished wood or vinyl), and paints can produce toxic off-gases that are not ventilated out of the home.  Dust from drywall and other building materials pose a health hazard as well.

Martinez’s exposé flies in the face of research hyping the health benefits of green homes.  One of the flaws of the these studies is that the health outcome comparisons of occupants of conventional built homes and green designated homes typically focused on new homes.  The air quality issue that Martinez points out should be studied in older green and efficient homes, where the indoor air has had time to “mature.”

The green home movement was supposed to give us environmentally friendly, efficient homes that were also supposed keep us healthy.  But the trend from green and efficient building is now transforming to a focus more on healthy home environments with an emphasis on good indoor air quality.  Martinez stated that the good indoor air quality can be achieved by continuously exchanging the indoor air with conditioned outdoor air.  There are physical and environmental benefits of a healthy home, which include increased emotional well being and reduced respiratory distress.

Leading the effort to educate the housing industry and consumers on healthy home environments is Bill Hayward.  In an interview in Builder Magazine (Advocating for Fresh Air in Homes; builderonline.com; September 29, 2016) he discussed his journey in creating Hayward Healthy Homes after realizing his home was making his family ill.  Hayward stated “Thirty percent of the population has allergies and is physically affected by the indoor air quality. The worst air that Americans breath right now is the air within their house.” More information and a free guide on creating a healthy home can be obtained from Hayward Healthy Home (haywardhealthyhome.com).

Copyright© Dan Krell
Google+

If you like this post, do not copy; instead please:
link to the article,
like it at facebook
or re-tweet.

Protected by Copyscape Web Plagiarism Detector
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.

Homeownership crisis?

homeownership crisis
Homeownership Crisis? (infographic from keepingcurrentmatters.com)

The housing market made significant strides last year with regard to home sales and home prices.  However, even with housing’s good news, the homeownership rate continues to be at generational lows.  Economists and real estate professionals are stumped. Is there a homeownership crisis?

The homeownership rate for the first quarter of 2017, reported by the U.S. Census Bureau (census.gov), was 63.6 percent.  This is a slight improvement from homeownership rate recorded in 2016.  However, in their analysis, the Census Bureau stated that when the rate is adjusted for “seasonal variation,” there was no statistical difference from the 63.5 percent rate recorded in the last quarter of 2016.

homeownership
Homeownership Rate (historical data from census.gov)

The homeownership rate peaked at 69.2 percent in 2005, but has steadily declined since the Great Recession. Industry experts have been flummoxed as to why there have not been more home buyers taking advantage of historically low interest rates in an upward economy. (Freddie Mac reported last week that the national average interest rate for a 30 year fixed rate mortgage was 3.94 percent; freddiemac.com). Even mortgage lending has become looser, as some mortgage companies have rolled out low and no-down payment programs in recent months.

A homeownership crisis in the making, why is there lack of interest in homeownership?  A recent study co-sponsored by the Fisher Center for Real Estate and Urban Economics, UC Berkley and the Rosen consulting Group (Hurdles to Homeownership: Understanding the Barriers; June 2017) asserted to have the answer to this question.  According to a NAR press release (realtor.org), the study was announced this month in honor of National Homeownership Month, and presented at the National Association of Realtors Sustainable Homeownership Conference.

The authors discussed regulatory issues that has hindered housing and mortgage lending.  They also identified issues affecting would-be home buyers, which include: student debt; availability of mortgages; housing affordability; low home sale inventory; and “post-foreclosure stress disorder.”

You may already have heard much about regulatory issues, consumer debt, mortgages, affordability, and low housing inventory.  But, what is “post-foreclosure stress disorder?”  The Rosen Consulting Group coined the phrase to give a name to the concept of perceived home buying risks derived from a financial crisis.

Even though a number of consumer surveys continue to indicate a strong positive sentiment towards homeownership, the authors point to post-foreclosure stress disorder as a major influence on home buying decisions.  They believe that many individuals have been directly and indirectly affected by the Great Recession, and therefore have changed their behaviors based on perceived financial risks.  And the greater the financial risk, the greater the caution exercised.  They claim this is confirmed by a Federal Reserve survey where 80 percent of respondents indicated they would like to own a home someday, but only one in six who were financially able to purchase a home felt that renting was the best choice for now.  The authors stated that although the trauma of the Great Recession will fade over time, they assert the need to rebuild confidence in homeownership benefits.

Post-foreclosure stress disorder may account for a decline in the homeownership rate, but this is not a homeownership crisis.  It is shift in values and a major shift in lifestyles. Surveys have indicated that millennials are expected to be the largest group of homebuyers, but many millennials don’t want to be anchored by owning a home. They want to be able to take advantage of global opportunities without the burden of having to sell a home.  There is a shift away from the old standard of being house-centric to mobility.

Copyright© Dan Krell
Google+

If you like this post, do not copy; instead please:
link to the article,
like it at facebook
or re-tweet.

Protected by Copyscape Web Plagiarism Detector
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.

Homeownership evolving

homeownership and American Dream
Homeownership and the American Dream (from SolomonMcCown.com and bulldogreporter.com)

Homeownership wasn’t always part of the American Dream.  The American Dream originated as a concept about increasing one’s quality of life, which was well established before the Country’s independence from Britain.  John Kenneth White and Sandra L. Hanson discussed the history of the American Dream in the introduction to their edited collection “The American Dream in the 21st Century” (2011; Temple University Press).  They describe the American Dream as being fundamental to the Declaration of Independence.  But the, the idiom “American Dream” was not in our lexicon until the twentieth century.  Although James Truslow Adams has been credited for the phrase “American Dream;” White and Hanson attribute its first use to Walter Lippmann, who used it in his 1914 book “Drift and Mastery.”  Adams’ 1931 work “The Epic of America” was the first widely accepted promotion of the phrase “American Dream.”

Homeownership most likely became a part of the American Dream as the middle class developed and rose in economic prominence.  However, it probably wasn’t until the 1930’s when homeownership and American Dream were associated; when the Federal Housing Authority was established to make owning a home affordable.  Before the FHA, buying a home meant signing up for a short term mortgage with a high down payment; which made renting the only option for most.

Homeownership can also be gauged by the health of the middle class.  As the Amercican middle class fares, so does homeownership.  This is evident from the effects of a recession; when the middle class takes the brunt of an economic downturn, homeowner rates typically suffer as a result.

Homeownership Rates
Homeownership Rates (from census.gov)

Homeownership rates have steadily decreased from a peak approaching 70 percent just before the housing crash, to the current rate of 63.5 percent (census.gov). From the Census October 27th press release:

“National vacancy rates in the third quarter 2016 were 6.8 percent for rental housing and 1.8 percent for homeowner housing. The rental vacancy rate of 6.8 percent was 0.5 percentage points (+/-0.4 percentage points) lower than the rate in the third quarter 2015 and not statistically different from the rate in the second quarter 2016. The homeowner vacancy rate of 1.8 percent was not statistically different from the third quarter 2015 or second quarter 2016 rates.

The homeownership rate of 63.5 percent was not statistically different from the rate in the third quarter 2015 (63.7 percent) and 0.6 percentage points (+/-0.4 percentage points) higher than the rate in the second quarter 2016.”

The decline has been attributed to shrinking middle class, changing demographics, and the residual economic malaise of the Great Recession.  Although the declining homeownership rate seems as if it is a recent phenomenon, it’s actually cyclical.  Anthony DePalma reported for the New York Times about the declining homeownership rate in the post-recession climate of the 1980’s (IN THE NATION; Why Owning a Home Is the American Dream; nytimes.com; September 11, 1988).

The recent research of the future of homeownership by Spader, McCue, and Herbert projected three scenarios (Homeowner Households and the U.S. Homeownership Rate: Tenure Projections for 2015-2035; Joint Center for Housing Studies of Harvard; working paper, 2016).  The low scenario is that homeownership rates continue to decline to a rate of 60.6 percent through the year 2020.  The high scenario is that homeownership rates will once again increase through the year 2025 and peak around 65 percent.  However, they also provide for a scenario where homeownership rates stabilize and maintain at current levels:

The base scenario, which holds homeownership rates constant at their 2015 levels, shows that projected changes in the demographic composition of U.S. households by age, race/ethnicity, and family type will largely offset one another, affecting the homeownership rate only minimally through 2035. Under this scenario, projected household growth will add 8.9 million homeowner households and 4.7 million renter households by 2025, and 15.7 million homeowner households and 9.4 million renter households by 2035. Alternatively, the low and high scenarios produce a range for the national homeownership rate of 60.7 percent to 64.8 percent by 2035, resulting in different levels of growth in homeowner and renter households.”

They concede that the trajectory of homeownership is complex, stating:

“… the homeownership rate’s actual trajectory will depend on how quickly the foreclosure backlog clears, how many foreclosed households reenter homeownership, and whether young households’ slowed rates of homeownership entry persist in future years. Additionally, any major changes in the broader economy, housing finance system, or households’ attitudes toward homeownership may also influence future homeownership rates to the extent that they alter households’ demand or access to homeownership…”

Home owners are more inclined to maintain their homes and neighborhoods, as well as being invested in protecting their home and community; which may account for lower incidences of reported crime. Besides stabilizing communities, many of these benefits may also account for positively affecting home values.

The benefits of homeownership have been well documented and discussed by Research Economist Selma Hepp for the National Association of Realtors®:

“In addition to tangible financial benefits, research has shown that homeownership brings substantial social benefits for families, communities, and the country as a whole. Because of these societal benefits, policy makers have promoted homeownership through a number of channels. Homeownership has been an essential element of the American Dream for decades and continues to be so even today. Some of the documented social benefits include:

  • Increased charitable activity
  • Civic participation in both local community and national issues (including voting)
  • Greater awareness of the political process
  • Higher incidence of membership in voluntary organizations and church attendance
  • Greater social capital generated
  • Greater attachment to the neighborhood and neighbors
  • Lower teen pregnancy by children’s living in owned homes
  • Higher student test scores by children’s living in owned homes
  • Higher rate of high school graduation thereby higher earnings
  • Children more likely to participate in organized activities and have less television screen time
  • Homeowners take on a greater responsibility such as home maintenance and acquiring the financial skills to handle mortgage payments and those skills transfer to their children
  • Lower teenage delinquencies
  • General increase in positive outlook to life
  • Homeowners reported higher life satisfaction, higher self-esteem, happiness, and higher perceived control over their lives
  • Better health outcomes, better physical and psychological health
  • Tremendous wealth gains for homeowners under normal housing market conditions (outside of the terrible bubble/bust housing years)
  • Homeowners not only experience a significant increase in housing satisfaction, but also obtain a higher satisfaction even in the same home in which they resided as renters
  • Family financial situation and housing tenure during childhood and adulthood, impacted one’s self-rated health (in particular, the socioeconomic disadvantaged indicated by not being able to save any money or not owning or purchasing a home are less likely to self-rate their health as excellent or very good).
  • Less likely to become crime victims
  • Homeowners better maintain their homes, and high quality structures also raise mental health -renter-occupied housing appreciates less than owner-occupied housing
  • Housing prices are higher in high-ownership neighborhoods
  • Maintenance behavior of individual homeowners is influenced by those of their neighbors”

As the American Dream continues to evolve, so does the goal for homeownership.  Although many have not been recently swayed by benefits, the cycle may once again reveal the true value of homeownership.

Copyright © Dan Krell
Google+

If you like this post, do not copy; instead please:
reference the article,
like it at facebook
or re-tweet.

Protected by Copyscape Web Plagiarism Detector
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.