real estate Archives - Page 29 of 102 - Real Estate News and Commentary

June 28, 2018November 23, 2021

Housing market bubble hyperbole

Timing, as they say, is “everything.” Predicting the housing market is tricky. Even the best economists can get it wrong. Aptly, however, there is that group of naysayers who always believe the homes are overpriced and we are in a housing market bubble status. And you know what they say about a broken clock, it’s correct twice a day.

There’s no way around it, housing market trends are cyclical. Eventually, the housing market will crash and home prices will recede. But, like the phoenix, will again be reborn to go through it’s life cycle. According to Harvard’s Teo Nicolais (extension.harvard.edu/faculty-directory/teo-nicolais), there are four phases to the housing cycle. The cycles were described in 1876 by economist Henry George and modernized by Glenn R. Mueller to include recovery, expansion, hypersupply, and recession. Nicolais predicts that, aside from the occasional slowdown, there won’t be an honest to goodness housing crash until 2024.

You may be saying, “But Dan, the market feels just like the housing market bubble before the last crash.” And in some respect, you may be correct. At that time, home sale inventory was low, and home prices seemed on a never-ending climb. However, even though we have similar conditions, the current housing market is in a different cycle than where we were thirteen years ago.

Back in 2005 I reported that the active inventory of Montgomery County single family homes for sale for June 2005 increased to 2,004 units. Homes were selling at rapid rate, as the number of contracts increase 2.5 percent during June 2005 compared to 2004. And there was almost a 13 percent price appreciation from the previous year. The 2005 housing market was clearly in a rapid expansion phase. Oversupply began in late 2006 when Montgomery County single family home inventory hovered around 4,000 units for the better part of the summer and fall. And of course, the rest is history.

There is some disagreement about the current phase of the housing market. Some say the market is in the beginning of an expansion cycle, while others (like me) believe we are still in the recovery cycle. Yes, Inventory is tight. But as I reported recently, not all homes are selling. Which is contrary to the expansion of 2005, when it seemed as if all homes sold quickly regardless of condition. Home prices are increasing, but at a more reasonable rate than they did thirteen years ago. Although it may feel that houses sell in less than a week, the average days on market for homes that sell is currently 33 days in Montgomery County (according to MLS stats), and 78 days nationwide according to Zillow.

Another factor that is playing into current housing market conditions is mortgage interest rates. Unlike the housing market bubble of thirteen years ago, interest rates are increasing and is anticipated to help mitigate the home price spikes.

Sure, there are regional markets, such as Seattle and Denver, that lead the country in home price gains (typically double digits). But most everywhere else, real estate prices are improving gradually. Moreover, regional markets each have their own hot neighborhoods that grab the headlines too. Hot neighborhoods tend to be where investors, flippers and first-time home buyers converge.

Is there a housing market bubble? Are we headed to a market crash like we experienced in 2007? No, at least not in the short term. More likely, the market may be affected in the near future by a mild (and overdue) economic slowdown. Unfettered, the housing market will continue its herky-jerky pace.

By Dan Krell
Copyright © 2018.

Original located at https://dankrell.com/blog/2018/06/28/housing-market-bubble-talk/

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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.

June 24, 2018April 30, 2019

Basic home repair

I often preach about regular home maintenance. However, home owners should also have basic home repair skills. Basic repairs are those items that you can do safely, and usually don’t require a professional. Basic home repair skills are sometimes useful as an emergency stopgap before the licensed contractor can make it to your home.

Basic home repair requires a few tools. Keep a toolbox well stocked and know where it is so you can easily find it when necessary. Besides the standard hammer, Philips and flathead screwdriver, your toolbox will need more items depending on your skill level. If you’re in doubt about your ability to make a basic home repair, call a licensed contractor (you can do more damage if you don’t know what you’re doing). As a precaution and in case of emergency, you should know where the emergency shutoffs are in your home for water, electric and gas.

One of the first repair skills that I learned as a home owner is how to “snake a drain.” Bathroom drains, specifically, get clogged with hair and soap. Chemical products are a common solution, however you should always follow the directions and read the “cautions and dangers.” Chemicals don’t always work well, however. If used improperly, chemical drain products can also damage basins and pipes. Following the instructions, you can easily clear most clogs with a drain snake. A small drain snake should be part of your tool box. These are cheap to purchase and readily available at the hardware store.

Have you ever needed to change your door locks quickly? I have, once when a lock failed (the mechanism broke), and another time when someone stole our keys. Although most locks can be changed out easily with a screwdriver, specialized locks require a locksmith. Most locksets are designed as components that easily install. However, you should note that standards change over time, so make sure the lockset you purchase is the same size as the one being replaced.

Patching drywall is one of those repairs that is so basic that you can find “how-to” tutorials everywhere. Basic drywall patching requires a few basic tools, such as a “spackling tool,” utility knife, sand paper and spackle. Spackling tiny pinholes is easy. However, a larger hole may require some time for the repair as well as the clean-up. Damage to large areas of drywall will most likely require sections to be replaced.

Can’t find the leak from your sink or tub? There’s a good chance it’s coming from water that is seeping through old caulking. Caulk is used as a sealant in plumbing applications. It seals the fixtures and perimeter of sinks, tubs and shower stalls, which prevents water from trickling through. As it ages, caulk shrinks and can become brittle, which allows water penetration and leaking. A tube of caulk should be in your toolbox in case you need it for an emergency repair. You don’t need a large caulking gun, as caulk is available in many forms, such as squeezable tubes and even tape.

Plastic sheathing and duct tape are both good to have in your toolbox in case of an emergency. Duct tape, specifically, has many uses and is widely used as an adhesive and sealant. These two items are useful as a short-term repair for broken windows and doors. Plastic sheathing and duct tape can easily cover the affected areas until they are replaced, as well as help maintain cooling or heating in the interim.

By Dan Krell
Copyright © 2018.

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June 18, 2018January 7, 2020

Modern homeownership

June is National Homeownership Month. In recognition of modern homeownership, National Association of Realtors President Elizabeth Mendenhall stated in a June 1^st press release that “National Homeownership Month is a time to celebrate and promote the modern American Dream of owning a home. Homeownership changes lives and enhances futures, and many Americans see it as one of their greatest hopes. These individuals are counting on the nation’s 1.3 million Realtors to champion and protect homeownership and help make it more affordable, attainable and sustainable (nar.realtor).”

The NAR provides a history of celebrating modern homeownership which goes back almost a century (nar.realtor). The roots of celebrating homeownership go back to the 1920’s when local associations would bring together consumers and brokers during “Real Estate Day” events. In 1955, the National Association of Realtors created a national “Realtor Week” to promote the value of Realtors when buying a home. The celebration of modern homeownership began in 1976 when “Realtor Week” was changed to “Private Property Week.” Then in 1986, the celebration was changed to “American Home Week” to promote owning a home as part of the American Dream. June became National Homeownership Month through a proclamation by President Bush in 2002, which expanded the American Home Week to include HUD initiatives. Although 2008 was the last official proclamation of National Homeownership Month, it has been observed annually. However, last year, President Trump revived the annual proclamation recognizing the significance of homeownership.

Although the idea of homeownership hasn’t changed since the 1920’s, many things have. For example, buying a home is much easier and affordable today than it was then. You can now search homes from your couch, rather than driving to individual broker offices. Additionally, low down payments and thirty-year fixed rate mortgages have made modern homeownership a realty for many.

Of course, some things haven’t changed in a century. A home is still an asset that maintains relative market value. Given regular cycles of up and down markets, real estate can appreciate over time. There are also some tax advantages to owning a home (consult your tax preparer). Furthermore, owning a home stabilizes communities and encourages civic pride, which positively affect home values.

Additionally, there are many social benefits to homeownership. Studies demonstrate that home owners tend to be more charitable, have an increased connection to their neighborhood, have an increased general positive life outlook, express an increased self-esteem and higher life satisfaction, and be healthier. Other studies indicate that children living in owner-occupied homes have higher test scores, higher graduation rates, decreased delinquencies, and an increased participation in organized activities.

homeownership rate — Homeownership Rate (census.gov)

The comparisons of the costs of renting vs. the costs of owning a home hasn’t changed over time. Of course, the debate takes on a different tone depending on the state of the economy. During the Great Recession, many believed that owning a home was folly. Even after the recession, many continued to believe that real estate wasn’t a viable investment, while discounting the other benefits of homeownership. The homeownership rate bottomed to a modern low of 62.9 percent during the second quarter of 2016 (census.gov). However, homeownership is back in vogue. Even with increased home prices and mortgage rates, buying a home today can still be less expensive than renting.

Modern homeownership – your home is a silent witness to your life.

You have a relationship with your home. When you own a home, your relationship with it is intimate and symbiotic, which contributes to an intangible and intrinsic sense of wholeness.

Original published at https://dankrell.com/blog/2018/06/18/modern-homeownership/

By Dan Krell
Copyright © 2018.

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June 14, 2018April 30, 2019

Specialty rooms for all interests

Prior to the Great Recession, home owner spending for remodeling and renovations was very strong. Besides remodeling the kitchen and bathrooms, many home owners also created specialty rooms (also known as special function rooms) in their homes. Specialty rooms such as home theaters and media rooms were not just trendy because they were cool to have in the house, but they also added resale value. According to Kermit Baker writing for Harvard’s Joint Center for Housing Studies, post-recession home remodeling spending dropped off by as much as 28 percent between 2007 and 2011. That spending decrease meant that while home owners focused on saving and paying their mortgages, specialty rooms were no longer a necessity.

The return of the specialty room can be measured by the increased home remodeling spending over the past few years. Specialty rooms are increasingly in demand. The recent LIRA press release projects that home remodeling will remain strong at least through 2019. Chris Herbert, Managing Director of the Joint Center for Housing Studies stated:

“Strengthening employment conditions and rising home values are encouraging homeowners to make greater investments in their homes…Upward trends in retail sales of building materials and the growing number of remodeling permits indicate that homeowners are doing more—and larger—improvement projects.”

Prior to the Great Recession, specialty rooms were a must for home owners. However, many of these specialty rooms were primarily added for display and resale. Home owners have since moved away from the large gaudy specialty room and are opting for more practical spaces focused on enjoyment and function.

Several years ago, panic rooms were in demand for protection. It wasn’t just to protect from a home invasion, as portrayed in the movie “Panic Room,” but also to offer shelter from severe weather. FEMA even provides information on creating a safe room in your home.

Yes, specialty rooms are becoming popular again, but not in the way they were prior to the recession. According to the 2017 AIA Home Design Trends Survey (aia.org), creating an outdoor living area is the currently the most popular specialty room today. The outdoor living area is a way to extend indoor space and amenities (such as kitchen and home entertainment) to your back yard or roof top deck.

But home owners are opting for other specialty rooms too. Building a fabulous mudroom comes in second in the AIA Home Design Trends Survey. No longer that meager alcove separating the garage and kitchen, the mudroom has become a multi-purpose functional suite. Obvious coat hooks, benches, and shoe cubicles are standard. But mudrooms have become larger to accommodate storage units and desks, typically with high-end flooring and moldings.

Other specialty rooms mentioned in AIA’s survey include the home office and in-law suite. However, other types of specialty rooms that are popular include fitness rooms and wine cellars.

As the economy improves, home owners have more money to spend on their passions. Currently, there is a trend to build specialty rooms to help home owners pursue hobbies and talents. Hobbyists are creating spaces for their collections and interests. Many home owners are designing dedicated rooms as art studios. Music lovers and musicians are finding that technology has made the music listening room and recording studio easy and affordable to create in their homes.

Over time, the home has evolved from a Spartan shelter to a space where we relax and express our personalities. It is likely that specialty rooms will continue to evolve based the home owner’s lifestyle, finances, as well as technology. Specialty rooms will also vary based on societal norms (consider formal dining and living rooms) and economic conditions.

By Dan Krell
Copyright © 2018.

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June 5, 2018November 23, 2021

Home pricing psychology

Pricing your home correctly is the foundation of a successful sale. I have often talked about the science and art of pricing a home in various market conditions, but did you know home pricing psychology also plays a role?

With vast amounts of public data available on the internet, you may be tempted to price your home on your own. However, keep in mind that unverified internet data can be inaccurate or outdated. Moreover, the most recent sales data may not yet be available on your favorite real estate sites. Asking a Realtor to help you analyze relevant comparables from the MLS can help you decide on a sales price that is in line with home buying trends.

The science of pricing a home is a straight forward method of analyzing the sale prices of similar neighborhood homes. The analysis will provide you with a potential sales price range. When selecting comparable homes, make sure that the homes are similar in style (colonial, split level, rambler, etc.). Select comparable homes that are similar in size (usually within 15 to 20 percent of your home’s living area). Also, try to find comparable sales that sold within the last six months to be relevant to current market trends.

The “art” of pricing your home is a process of fine tuning the sale price range derived from comparable homes. Looking at various factors for each home, you can make adjustments on your calculated sale price range. Interior differences, such as number of bedrooms, bathrooms, or having a finished basement, can change a sale price significantly. Likewise, exterior features, such as a deck or fence, can also affect the price.

Let’s talk about your home’s condition. Whether you like it or not, your home’s condition should be a major factor in determining a sale price. You should be honest and objective when it comes to your home’s condition. Have others offer their opinions about necessary updates and repairs. Are there any comparables that are in similar condition? You may have to make adjustments to correspond to deferred maintenance and lack of updates.

Home Pricing Psychology

To attract home buyers while trying to get top dollar, you may also have to apply home pricing psychology. Of course, many of these home pricing psychology strategies are not sound or based on facts. An example of this is the use of a “totem” price. A totem price is when the second half of the number is a mirror of the first (e.g., 543,345). This was a strategy that was highly touted during the “go-go” market of 2005-2006.

Until recently, there hasn’t been much research into the psychological effects of real estate pricing strategies. An empirical study by Eli Beracha and Michael J. Seiler revealed how sellers can ask for a higher price without turning off buyers (The Effect of Pricing Strategy on Home Selection and Transaction Prices: An Investigation of the Left-Most Digit Effect; Journal of Housing Research; 2015; Vol. 24, No. 2, pp.147-161). Their study revealed that “just-below” pricing can help you sell your home faster and get a higher price. Just-below pricing is a strategy that lowers the price by reducing the left most digit by “1.” However, they suggest that when using the just-below strategy in real estate, it should be rounded to the nearest hundred or thousand. For example, if you decide on a list price of $450,000, then the rounded-just-below price will be $449,900.

Original published at https://dankrell.com/blog/2018/06/05/home-pricing-psychology/

By Dan Krell
Copyright © 2018.

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