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April 30, 2018May 6, 2019

Maintenance free homes

I talk about home maintenance quite a bit. And there is a reason. Maintaining your home is important, not just to keep you comfortable but to also preserve your investment. But many people loath the idea of spending their weekend checking their home’s systems, replacing air filters, mowing the yard, washing the siding, cleaning appliances, ad nauseum. They are called chores for a reason. But maybe sometime in the near future we will eliminate the chores and live in maintenance free homes.

Rapid technological advances are certainly making our lives easier. We can do many things in our homes, even when we’re not home! Our homes can even do things while we’re not home. So how about increasing the quality of our lives by reducing the time spent maintaining our homes?

Maintenance free homes

Home design and materials tech are leading us to a home where maintenance is minimal or non-existent. Tech innovations has brought us new materials to enhance our homes’ appearance and decrease maintenance. Many of the new materials not only look good, but they are also green which makes our homes more efficient. Many material improvements have been primarily for your home’s exterior. For example, new no-maintenance or minimal maintenance materials for siding, decking and roofs are aesthetically pleasing and can last decades. However, low or no maintenance materials for your home’s interior are increasing in popularity too. Examples include quartz for counters, and prefinished wood for flooring.

The desire for maintenance free homes is not a new phenomenon and can be directly observed by housing choices. New home buyers like the idea that there will be minimal maintenance for the first year. They like feeling confident that everything in the home will work as expected without spending money on service calls, or expensive emergency repairs. Condo buyers like the idea of not having to deal with exterior home maintenance, especially lawn care. Additionally, active adult communities are designed with low maintenance in mind to make living easy and increase quality of life.

Unfortunately, because of their design, some mechanical systems still require care. For example, experts recommend that HVAC systems be serviced twice a year. The service not only checks and tunes the system to operate efficiently, it can identify potential hazards as well. However, to help keep maintenance at a minimum, many homeowners decide to sign up for a service contract. The service contract may also schedule the maintenance for you, which can also help you with time management. Not all service contracts are the same, and due diligence is recommended before you sign any agreement.

I am not dissing those homeowners who love to work on and around their homes. Don’t get me wrong, there is a satisfaction from doing chores and repairs. But there are many who don’t care for it. And not to mention that there are many homeowners who don’t maintain their homes, because of cost and/or inability. A major benefit to living in maintenance free homes is reducing the value-reducing effects of deferred maintenance.

Tech advances in home design and building materials have eliminated a great deal of the maintenance requirements that was necessary in the past. And although some systems in the home require regular care, newer systems increase in reliability. It’s fascinating that because of maintenance free exteriors many homeowners today don’t know what it’s like to paint the exterior of the house every two to three years. Likewise, maybe sometime in the near future, we won’t remember what it’s like changing air filters.

By Dan Krell
Copyright © 2018

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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.

February 15, 2018July 15, 2019

Stock market and home buying

It’s easy to understand why the recent stock market volatility triggered some into proclaiming that the sky is falling. The potential for losing money can evoke some strong emotional responses. Interestingly, some experts have speculated how the recent stock market activity would spill over to consumer spending, including the housing market. Reporting such as Jacob Passy’s recent article titled “Could Stock Market Volatility Cause House Prices to Fall?” (Marketwatch.com; February 8, 2018) makes for good click-bait. However, the details of the article would suggest otherwise. The consensus is that the recent Wall Street activity is not likely to impact the housing market.

Passy is trying to make an argument that the housing market will suffer from the recent stock correction, and subsequent interest rate increases. But Daren Blomquist, senior vice president of communications at Attom Data Solutions [formerly RealtyTrac], was quoted in Passy’s article saying “The strength of the housing market and economy in general is what’s spooking the stock market.” However, the volatility may make some home buyers wary of making an investment in housing.

The stock correction and increased Wall Street volatility is not a new phenomenon. The last market correction with lasting volatility occurred in June and August of 2015,through the fall. The current stock market volatility is part of the cycle of a healthy economy. Unlike the crash of 2008, current economic fundamentals are positive.

This stock market correction is not unusual, however it is extraordinary.

Seeking Alpha noted that the percentage drop for the two largest Dow losses this year are not even in the top 100 (10 Figures On Historic Dow Correction; seekingalpha.com; February 6, 2018). And this correction is distinct, according to ZeroHedge, because most individual stocks were left intact (If This Correction Is Over, It Will Be Unique in Leaving Most Individual Stocks Unscathed; zerohedge.com; February 13, 2018). Many individual stocks actually made gains while the Dow and the S&P stocks “took it on the chin.” This phenomenon is unique and is said to demonstrate that the economic fundamentals are working.

As for rising interest rates, they are needed to moderate home prices. If home prices aren’t controlled by market forces, such as interest rates, then homes will become unaffordable for many home buyers. Mortgage interest are still historically low, even with recent increases.

Homeownership is out of reach for many home buyers because of increasing home prices. David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, declared in the January 30^th S&P CoreLogic Case-Shiller Home Price Index release:

“Home prices continue to rise three times faster than the rate of inflation. The S&P CoreLogic Case-Shiller National Index year-over-year increases have been 5% or more for 16 months; the 20-City index has climbed at this pace for 28 months.”

Blitzer pointed out that these increases are not based on home buyer demand, stating, “Given slow population and income growth since the financial crisis, demand is not the primary factor in rising home prices.” Instead, sharp home price increases are due to the lack of homes for sale and new construction. And until housing inventory increases, “home prices may continue to substantially outpace inflation.”

Lawrence Yun, chief economist for the National Association of Realtors, remarked that the recent stock market volatility should not impact the housing market. He stated, “Underlying economic fundamentals remain strong.” However, he cautioned that if the stock market retreats further, it could affect home buyers who plan to use funds from their 401k’s and other investment vehicles as down payment sources.

By Dan Krell
Copyright © 2018.

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January 26, 2018March 4, 2020

Prime housing move by Amazon

Amazon is about to make a decision on their “HQ2.” The highly anticipate decision can be a prime housing move not just for the chosen city, but the region. As you now know, Montgomery County is on the short list. Some even have it pegged to be in the top five. Although many local residents are excited at the prospect of increasing home values, many others are anxious how a Montgomery County Amazon HQ2 will affect their quality of life.

If Amazon chooses Montgomery County, the county will likely see a similar impact that Seattle experienced. However, rather than be purely speculative, let’s look how Amazon has shaped Seattle. Stephen Cohen offers interesting statistics looking at how Seattle has changed after Amazon (How Seattle Changed After Amazon Came to Town; seattlepi.com; September 22, 2017). Cohen points out that Amazon has been based in Seattle since the mid 1990’s, and that the major impact on the town happened when the company moved to the South Lake Union campus (SLU) in 2010. Since the move, Amazon’s stock price skyrocketed and its market cap exceeded (and has since doubled) that of Walmart.

Cohen’s data goes beyond the pros and cons of having the business giant in the community and compares statistics that span from 2010 to 2017. During that time, Seattle’s population grew 17.3 percent. However, it remained as the 18^th most populous US city. Although Seattle followed the national trend of becoming more diverse, its African American population slightly decreased (which was counter the national trend). Cohen describes Seattle’s population as “skews male,” probably because Amazon’s “workforce is 63 percent male.”

But the home values…Seattle has had one of the hottest and prime housing markets in the country. Seattle’s average home price increases are almost double the national average. Finding housing in Seattle is very difficult, as the town’s vacancy rate significantly decreased to about half that of the national average. The city’s median gross rent is 47.6 percent higher than the national average.

Other interesting facts from Cohen’s data…one-person households decreased from about 15 percent to slightly more than 10 percent. There was a 25.2 percent increase in commuters. And, the city’s mean household income increased 41.3 percent, which is more than double the national average.

Prime housing is not for everyone. Cohen cites the sharply increased cost of housing and high cost of living for negatively affected the poor, as well as the middle class. And although Seattle is the 18^th largest US city, it has the third largest homeless population (according to a December 7, 2017 Seattle Times expose “King County homeless population third-largest in U.S.”).

But, Lisa Stiffler reported that Amazon’s philanthropic corporate culture has noticeably changed (What gives? Tech giant Amazon finally boosts its philanthropic rep in its hometown; geekwire.com; December 14, 2016). She notes that it is evident that employees are volunteering and getting involved with such activities as the Amazon “Non-Profit Expo.”

Seattle’s SLU is described by Stephen Cohen as an “Innovation District,” which is a Brookings Institute term for a “geographic areas where leading-edge anchor institutions and companies cluster and connect with start-ups, business incubators, and accelerators.” SLU is similar to Montgomery County’s Technology Corridor. An Amazon move to MoCo’s Tech Corridor would likely dovetail with a $100 million plan to improve I-270 (the infrastructure plan was reported by the Washington Post last April). Such infrastructure improvements would open up Maryland’s western real estate market, which would ease some of the upward pressure to MoCo’s already tight prime housing market and already increasing home prices.

By Dan Krell
Copyright© 2018

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March 23, 2017December 13, 2022

Violent crime effects home values

Last week’s alleged horrific and violent crime has propelled our Montgomery County MD community, specifically Rockville, into the national spotlight. And like other communities that have experienced violent crimes, residents will be asking questions long after the spotlight dims. Unfortunately, the aftermath of violent crimes not only leaves a psychological scar on the community, it also affects home values.

Of course, it’s intuitive to think that home values are affected by violent crime. You might ask, how can such a violent act that occurred last week not be in the minds of prospective home buyers? And as you will see in the research below, violent crime will also compel some home owners to move.

A 2009 study by John Hipp, George Tita and Robert Greenbaum sought to determine the interrelationship between crime and “residential mobility” (Drive-Bys and Trade-Ups: Examining the Directionality of the Crime and Residential Instability Relationship; Social Forces; 2009, Vol. 87, No. 4, pp.1777-1812). The findings revealed that although there is no evidence that a year with a high number of home sales increases violent crimes, they found direct evidence that a year with a high number of violent crimes will increase home sales during the ensuing year. The same holds true for property crimes, where a high number of home sales do not lead to increased property crimes, however a high number of property crimes will increase the number of home sales the following year. They also found evidence of a downward trend in home values following a year of high violent crime. The authors of the study concluded that households basically respond to crime by moving. Additionally, many home buyers not only take crime stats into account, but likely consider recent high profile crimes when deciding on a home.

They also found evidence of a downward trend in home values following a year of high violent crime.

There are decades of research on the effects of violent crime on property values. For example, an influential article by Sheila Little published in 1988 discussed an appraiser’s duty to consider violent crime when determining property value (Effects of Violent Crimes on Residential Property Values; Appraisal Journal; 1988, Vol. 56,No. 3, p341-343). She stated; “It is part of appraisers’ responsibilities to make an effort to ascertain the effects of violent crimes on market value of properties.”

Fortunately, communities heal. However, it’s not easy and certainly not immediate; as evidenced by the research of George Galster, Jackie Cutsingerm and Up Lim. They studied how five US cities responded to “exogenous shock,” such as violent crime (Are Neighbourhoods Self-stabilising? Exploring Endogenous Dynamics; Urban Studies; 2007, Vol 44, No.1, pp. 167-185). They concluded that communities have a “self-regulating adjustment” mechanism that help them adjust and stabilize after various external shocks. Although an increase in violent and property crime will elicit a community’s self-regulation mechanism; stabilization takes “considerably longer” than other external shocks, especially when the shock to the community is substantial.

Galster, Cutsingerm, and Lim rhetorically ask how the self-correcting mechanism functions; how does it adjust and stabilize a community? They propose that there are social, economic, and/or political reactions to shocks such as violent crime. They surmise these reactions are manifested as a “powerful momentum” within communities.

Our community’s self-regulating mechanism has already been deployed, as demonstrated by the intense parent and community involvement in Rockville, asking questions and seeking change. And you can expect a “powerful momentum,” as described above, for change. The resulting social, economic, and/or political change will limit the effects of such violent crimes on home values, and demonstrates why Montgomery County MD continues to be the residence of choice for many home buyers.

By Dan Krell
Copyright © 2017

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January 6, 2017November 23, 2021

Greedy home seller tips

Don't be a greedy home seller — Pricing Strategy for a Home Sale (infographic from forsalebyowner.com)

When there is a buzz about home sellers being greedy, you know home sales are doing well. So, not surprisingly, along with last year’s record home sales came the reports of greedy home sellers. Are you a greedy home seller? Or are you adjusting to a market where home prices are increasing?

Greed has developed a bad rap. Surely there is an evolutionary basis for greed. Many believe that early hominids promoted personal and group survival by being “greedy” (although disputed by some). Those who hoarded food, so as to have more than enough, lived through difficult winters and droughts. During times of financial prosperity, greed is looked upon favorably. However, in the aftermath of a recession, greed is thought of as the basis for fiscal calamity. Immortalized in Gordon Geckko’s famous “greed is good” speech in the 1987 movie Wall Street, “greed” is a cinematic vehicle to show the fine line between a healthy desire to prosper and a corrupt drive to have more than enough.

Avoid being viewed as a greedy home seller by creating a realistic pricing strategy. Creating a pricing strategy is an art and a science. When selling a home, you have to determine the list price. There are many factors to consider besides recent neighborhood sales, such as condition of your home, sales trends, mortgage interest rates, economic trends, etc. Like other home sellers, you fall into a conundrum. If you price your home too high, then it will limit potential home buyers who visit. However, if you price your home too low to increase home buyer interest, you may not get the price you want.

Contrary to some assertions that a home’s list price doesn’t play a role in the sale, there is evidence to suggest that it really does matter. Lu Han and William C. Strange determined that a lower list price does increase home buyer visits – but only to a point (What is the Role of the Asking Price for a House? University of Toronto, Rotman School of Management; 2012). They concluded that there is a point at which the home price is perceived to attract too much buyer competition, which may turn off other home buyers. Furthermore, their data shows that there is a negative relationship between a list price and the number of home buyers: meaning that the higher the list price relative to the neighborhood, the lower number of home buyer visits, and vice-versa.

If you fear being a greedy home seller by asking for a high price for your home, there is research to suggest that you’ll let go of the greed in order to make a deal. A 2013 study by Nuno T. Magessi and Luis Antunes looked at how the emotions of fear and greed compete internally (Agent’s fear monitors the spread of greed in a social network; Proceedings of the 11th European Workshop on Multi‐Agent Systems EUMAS, 12-13). They concluded that greed is mitigated by the fear of loss within the confines of a social network. When applied to a home sale, the fear of not selling a home competes with the impulse to hold out for the high price. Deducing further, there is a need to fit within one’s social network by trying to sell a home for the most money, and yet avoid the stigma of a failed home sale.

Don’t be a greedy home seller. RealtorMag described three common home seller mistakes in a 2015 post (3 Mistakes Sellers Often Make; realtormag.realtor.org; April 12, 2015). Included were “Not being honest with the home’s history,” “Not making a better home presentation,” and “Being unrealistic about the home’s value.” About unrealistic home value, it was said:

“…Despite tight inventories of homes for-sale in many markets, sellers still need to be careful not to get too greedy with their list price, say real estate professionals…Home owners tend to get a much lower price when they overprice a home at the onset and then drop the price several times. The longer the home lingers on a market, the more likely it will receive a deeper discount…”

If your home doesn’t sell, you must examine your pricing strategy. Was the price realistic, or were you too greedy?

Original published at https://dankrell.com/blog/2017/01/06/greedy-home-seller/

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