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June 17, 2016December 6, 2019

Home owner savvy

The playwright Oscar Wilde must have been fond of the idiom “nowadays people know the price of everything and the value of nothing,” because he used it in back to back works; first in The Picture of Dorian Gray, and then a variation in Lady Windermere’s Fan. Today, corrupted forms of Wilde’s phrase are wrongly attributed or misquoted – but the point is well made. More psychologist then poet, Wilde seemed to characterize a core consumer behavioral trait of seeking short term gain vs long term value – which applies to home owner savvy!

Consumers in the 19^th century were much like consumers today, such that they sought out to get a bargain; often times overlooking the costs from which it comes by. And what may have been in Wilde’s time a conflation of price and value, is still common today – especially for home owners. While many home owners pride themselves on their frugality in home maintenance, they don’t realize the consequences of their poor choices when it comes time to sell their home. Home owner savvy is also knowing about value.

Today’s home owner’s frugality comes honestly as a result of the great recession. A McKinsey Global Institute consumer sentiment survey from a year and half ago sums it up in the title: America the frugal: US Consumer Sentiment Survey (Martinez, Motiwala, and Sher; mckinsey.com; December 2014). Martinez, Motiwala, and Sher wrote in their economic analysis that “…Multiple years of austerity have left consumers with altered views about spending. Almost 40 percent say they will probably never go back to their prerecession approach to buying…”

While looking to spend less on maintenance and home repairs, home owners often ignore the effects of their thriftiness on the long term maintenance costs of their home. Trying to spend less often means becoming reactive to maintenance issues, instead of proactive. Reactive maintenance typically means that the plumbing, electrical, or roof issue the owner is repairing, may have been an ongoing problem that may have also affected other systems of the home. However, proactive home maintenance is an ongoing process that can prevent minor problems from becoming costly major issues and is home owner savvy.

John Riha invoked Ben Franklin’s “An ounce of prevention is worth a pound of cure” when writing about home maintenance and house values (How Much Value Does Regular Maintenance Add to Your Home?; houselogic.com). He repeats a common theme that regular preventative maintenance doesn’t only save you money down the line, but can add to a home’s sale price. Riha quotes University of Connecticut and Syracuse University studies that implies the value of a regularly maintained home may increase by 1% a year!

Riha recommends a “proactive maintenance strategy” to help stay on top of necessary repairs and system replacements. He suggests saving 1% to 3% of a home’s cost for regular maintenance. To help keep it “interesting,” he suggests repairing and updating one room per year. If you are unsure where to begin, a home inspection may help identify areas of immediate concern; as well as develop a regular maintenance schedule. Also, keeping records of ongoing repairs and upgrades will cement in a home buyer’s mind the amount of care you had for your home.

Home owner savvy is not necessarily about being frugal with home maintenance, which is also not about knowing the price of everything; but in reality, diminish the value of their home. Regular home maintenance can not only keep you comfortable and safe through the year, it may help you sell your home faster and for more!

Original published at https://dankrell.com/blog/2016/06/17/home-owner-savvy/

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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 10, 2016

Vacation home preparation

Summer vacation home preparation is much like preparing it for the winter or severe weather. Much of the plan is conventional wisdom and incorporates penny pinching advice intended to prevent a potential hazard. The goal is to anticipate and minimize problems while your away by safeguarding the home’s systems and implementing a security plan.

Many electrical items we use are considered to be “zombie” appliances; meaning they use electricity even when not in use. Unplugging such items as the toaster, Keurig, and other small appliances that won’t be in use while you’re away will conserve energy (and may save you a few pennies). More so, shut down (and unplug) your computers and printers to not just conserve energy, but to also thwart hackers while your away.

Some people play with their home’s thermostat to save some money. The thought is that by setting the thermostat temperature much higher than usual, the air conditioner will not run as much (or at all). However, if you have a basement or cellar, you might consider setting the thermostat temperature to a more reasonable temperature to prevent mold from growing in your dark and humid basement.

Some shut off the water to the house to prevent a water hazard. However, shutting off valves at faucets, fixtures, or appliances may be a better plan if your home has a sprinkler system. And to prevent someone taking advantage of your absence and wash a car or two in your driveway, you might also consider shutting off the valves to the exterior hose bibs.

Besides protecting your home’s systems, think about home security too! First, refrain from posting your plans on social media. Although you may want to inform your Facebook friends and Twitter followers of your itinerary, broadcasting vacation plans in such a way could also get the attention of a would be criminal looking for their next break-in.

Although storing your valuables in a safe place could minimize loss, consider implementing crime deterrents as well. Installing motion activated lights on the home’s exterior may deter activity around the home at night; while electronic devices, such as the camera-doorbell, can notify you if there is any activity around the house during the day.

You may also consider implementing some common tactics to make it seem as if you never went on vacation. Having a few lights on a timer will appear as if someone is turning lights on and off. Besides having a neighbor pick up the mail and newspaper (many stop their paper and mail while they’re away), have them park in your driveway to make it seem as if someone is coming and going to and from the home. Additionally, have a neighbor or friend check in on the home regularly to ensure it is secure. Depending on the length of your vacation, they may drop in a few times, picking up any packages left at the door and adjusting the thermostat as necessary.

A summer vacation home preparation idea if your home is on the market – consider restricting showings to be by appointment only to ensure the house remains secure. Talk to your agent about how to contact you in case of an emergency, your agent may check in on the home regularly too. Don’t worry about missing out on a great offer on your home – if you will have email access, your agent can send you any offers and have you sign them electronically.

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June 3, 2016November 23, 2021

Housing bubble countdown

The March S&P/Case-Shiller U.S. National Home Price Index (spindices.com) was announced May 31^st to reveal a 5.2% increase in home prices. Although down from last March’s 5.3% increase, home prices seem to be appreciating at a regular pace, with the metro areas of Portland, Seattle, and Denver leading the way with double digit gains (year-over-year price increases of 12.3%, 10.8%, 10.0% respectively). As home prices climb, so too are the claims that we are experiencing a housing bubble.

Those concerned about the next bubble have been ringing the alarm bells since last fall, when the combination of limited inventory, multiple offers, and rising prices created an environment in some regions that was reminiscent of the go-go market just prior to the last market bust. And like the broken watch that is correct twice a day, those naysayers may eventually be correct – but it may not be for another eight years.

How to predict a housing bubble

According to Ted Nicolais, the real estate cycle has been steady since 1800 (How to Use Real Estate Trends to Predict the Next Housing Bubble; dce.harvard.edu; February 20, 2014). Writing for the Harvard University’s Department of Continuing Education’s The Language of Business blog, Nicolais maps out Homer Hoyt’s cycles and found a regular 18-year cycle to the bubble and bust housing market (albeit two exceptions).

The 18-year cycle, as it turns out can be observed by analyzing trends. An applying Henry George’s four phases of the real estate cycle (as modernized by Glenn R. Mueller), Nicolais can determine how and when the next housing bubble will occur. (Henry George was a nineteenth century economist who studied the boom-bust cycle of the economy).

The first phase is the “recovery.” Home prices are at the bottom, and demand increases. Real estate vacancies decrease as economic activity increases, which fuels the economy.

The second phase is the “expansion.” Housing inventories dwindle, there is little is available to buy, and finding a rental becomes difficult. Nicolais explains that an issue with real estate is that once demand increases, filling inventory takes a long time. New development can take two to five years. Until new inventory is added, price growth accelerates; and rather than valued at market conditions, real estate becomes priced to future gains. During a real estate boom, people buy into the prospect of “future growth” and believe the escalating prices are reasonable.

Phase three is “hyper supply.” When the completion of new development begins to satisfy demand, inventories fist stabilizes and then swells. Price growth begins to slow. Nicolais stated that the amount of continued development will determine the severity of the impending recession; while demand is satiated, new inventory comes to market and vacancies increase. He asserted that “wise” developers stop building during this phase.

Phase four is the “recession.” New development is stopped, while projects coming to completion add to a growing inventory. Occupancy rates and prices fall; property values and profits dwindle. Developments in mid-construction may not be completed because they are no longer financially feasible.

Following the four phases and the 18-year cycle; Nicolais stated that the great recession was not caused by external forces, but rather occurred on schedule! He figures that the current housing market is transitioning from recovery to an expansion phase. And with the exception of the occasional slow down, he predicts that the next housing bubble will be in 2024.

Original published at https://dankrell.com/blog/2016/06/03/housing-bubble-countdown/

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May 27, 2016December 13, 2022

Get top dollar for your home

The guarantee of “Getting top dollar for your home” is a theme in many real estate ads, as well as being promised by many agents. Of course the goal of every home owner is to get top dollar is the goal for every home seller! But why is this meme still prominent, and is it still meaningful?

What does “get top dollar” mean anyway? Getting top dollar on your sale may be relative to other home sales during the same period. Market conditions and timing are variables that may dictate your sales price; home sale prices are lower when home buyer demand wanes, as well as sales that occur during winter months. However, other influences on sale price include your home’s physical location and condition. For example, homes that sit on (or are in close proximity) to a main thoroughfare typically sell for less; as well as houses with deferred maintenance and a lack of updates.

Is “getting top dollar” just about listing at a high price? The key to a successful sale is pricing your home correctly. Proper pricing includes analyzing your local market, and comparing your home to the most recent neighborhood sales that are most similar to your home in style, size, age, and condition. Also, looking at market trends in three and six month segments will determine a seasonal effect.

How can you tell if your home sold for top dollar? Certainly if your house sells for more than others in the neighborhood, you might think you got “top dollar.” But if your neighbor sells immediately after you and sells for more; your claim to getting top dollar is now in jeopardy. There is also the home sale price conundrum: If your house sells fast with multiple offers, you might think that the list price was too low; However, if you price your home too high, you risk over pricing such that the house might languish on the market and miss the window of opportunity.

Maybe the promise of “getting top dollar” is just a marketing ploy by real estate agents to get your listing. A top complaint by home sellers is that their agent misled them; often citing the promise of a high sales price, only to be coerced into reducing and/or accepting a lower price at a later time. Regrettably, there are real estate agents who resort to questionable sales tactics to get business; and unfortunately, they learn these tactics from real estate trainers, and/or develop them on their own and share with other agents.

Maybe “getting top dollar” for your house is a metaphor for being satisfied. Although you might think you could be satisfied with just selling for a high price; customer satisfaction includes other factors too, including level of service. It has been determined that many consumers are less interested in hiring agents whose focus is about being “#1;” rather, consumers want to be treated as if they are “#1.”

Maybe “getting top dollar” is about your bottom line. Consider that many home buyers in today’s market are seeking “turnkey” homes, where they won’t have to worry about immediate maintenance issues – and some are willing to pay “top dollar” for such a home. Be honest about your home’s location, condition and features. Making some modifications can increase the sales price, however at a cost. A cost-benefit analysis of pre-listing repairs and updates may help you decide on the projects that will add to your sales net.

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May 20, 2016July 12, 2019

Presidential election and home sales

Elections have vastly changed in mood and intensity. It used to be that the candidates debated about substantive issues looking for win-win solutions, including housing. Maybe some of you remember how both the Clinton and Dole campaigns showcased their ideas of expanding the capital gains exemption during the 1996 election. Housing and home sales doesn’t seem to be a platform issue anymore. Elections have become divisive and nasty, even among the electorate; and for many Americans, the trending (real estate) election issue is – whom is moving to Canada!

That’s right, moving to Canada. Maybe you’ve heard someone at work or at the store proclaim they are moving to Canada if “the other candidate” wins the election. The theme of moving to Canada after the election has become a mantra so much so that it’s become part of pop culture. The idea has even been satirized by the likes of South Park. And of course there is the growing number of celebrities who vow to move to Canada if the election outcome isn’t to their liking.

Of course the threat of moving to Canada is tongue in cheek (for most), or is it? Nevertheless, leave it to astute real estate agents who realized that people considering such a move is now a target market. Agent ads and blog posts popped up in recent weeks reaching out to those disaffected home owners asking for their business. Reporting for Buzfeed, Craig Silverman reported on two agents who posted such an ad on their Facebook pages (Leaving Because Of Trump? These Texas Realtors Want To Sell Your House; buzfeed.com; May13, 2016). Although both agents received a lot of attention for their seemingly whimsical posts, there was a mixed response; some did not get the humor. It was reported that one of the two agents interviewed was asked to remove her post; and of course neither reported any new business from the posts.

Every four years, people wonder if presidential elections effect the real estate market. During the 2012 election cycle, the real estate portal Movoto took it upon itself to find an answer (David Cross; Election Years Are Bad for Home Prices; movoto.com; May 12, 2012). They analyzed historical data from the California Association of Realtors® and found that there is indeed a direct effect of a presidential election on home prices (at least in California). They determined that the average home sale price during an election year is lower than that of the years preceding and following an election.

Movoto’s hypothesis was: “Presidential election years are stressful for the American people and in times of uncertainty people are less likely to take chances—this includes making large purchases such as a new house.” While the National Association of Realtors® comment on Movoto’s findings was, “We’ve observed no correlation between levels of home sales and an election year. The market responds to a wide range of economic factors, including jobs, interest rates and consumer confidence.”

Although there maybe anecdotal evidence that presidential election years affect home prices; there is no doubt that the outcome of a presidential election effects policy, which as a result affects the economy and the housing market (see Experts: Housing to Grow Steadily, But Maybe Less So if Trump, Cruz or Sanders is Elected President; Zillow.com; May 17, 2016). But no one has yet suggested that US elections would have an effect on Canada’s real estate market.

By Dan Krell
Copyright © 2016

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