3D Printing Home Building

3D printing home building
Healthy Home (infographic from hud.gov)

When you think of modern home construction, you typically think about (wood) sticks and bricks.  And it’s been that way for decades.  But since its introduction in 1983, tech visionaries thought about using the 3D printing to build houses.  What was once a futuristic dream of 3D printing home building is now a reality.

In his 2017 commentary, Sean Mashian lays out how 3D printing will change the landscape of home building and real estate (The impact of 3D printing on real estate; Cornell Real Estate Review; 2017. 15, p64-65.).   He discussed how the technology was used and the potential for the housing industry.  His assessment was that large scale commercial 3D printing technology was rudimentary and expensive.  Instead, the industry mostly used the tech for smaller projects, such as scale models for new home developments.  However, like any new technology, he expected large scale commercial 3D printers to become more commonplace as the tech emerges.  He predicted the potential of 3D printing growth, just as internet tech and e-commerce grew in the early 2000’s.

In order to grow the technology of 3D printing home building , pioneers like Apis Cor (apis-cor.com) are needed.  Apis Cor claimed to be the first company to develop and deploy a mobile construction 3D printer capable of printing a complete house on site.  About five years ago, Apis Cor made headlines when they “printed” a house in 24 hours.  Although. the one level 400sf home was rudimentary, it demonstrated the flexibility of the 3D printing technology.  The home was 3D printed completely on site and in mid-winter. 

The 3D tech is already being used in some manner in the housing industry. A 2013 article in Kitchen & Bath Design News (Design and the 3D Printing Revolution) reported on design companies that were using 3D printing to manufacture personalized home fixtures.  And in 2019, the National Association of Homebuilders reported that 3D printing tech is already being used by a small number of builders to produce architectural details for homes.

A January 11th National Association of Home Builders release discusses how 3D printing can change the industry (How 3D-Printed Structures Could Disrupt Housing; nahb.org).  Although the NAHB states the tech is still developing, there is a belief that it will address several concerns about housing:

First, it will make homes more affordable.  Currently, 3D printed homes are relatively small, which reduces materials and time to build the home.  Automation significantly reduces labor costs.  Additionally, some 3D printed homes can be built without a foundation, which also reduces time, materials, and costs. 

Second, home building will be more sustainable.  The technology inherently has little waste.  Each house is “printed” with the necessary material.  Besides incorporating green technologies, the structure is printed in such a way that it improves energy efficiency. 

Third, 3D printing home building designs are easily changed in an automated system.  The design flexibility can make numerous shapes that can address fast paced changes to the housing market.

And last, building delays are almost eliminated.  Whether the houses are printed on site, (such as Apis Cor’s technology) or built in a facility, the rapid building time reduces weather impact.  Depending on the home size and printer capability, a home can be built in as little as 24 hours or up to several weeks.  This type of productivity greatly reduces time and delay costs due to labor and materials.

By Dan Krell
Copyright © 2021

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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.

Short Sale Home Selling

short sale home selling
Housing Market Expectations 2021

As you probably know, it’s been a sellers’ market with many listings getting multiple offers.  With such a strong housing market, it would seem unthinkable that some home owners would be underwater on their mortgages when selling their homes.  But the fact remains that there are many home owners who have to go through the short sale home selling process to sell their homes.

On the face of it, the January 14th press release from ATTOM Data Solutions (attomdata.com) seems to add credence to the housing market’s strength, touting that foreclosure activity is the lowest in sixteen years.  The report stated that default notices, auctions, and repossessions decreased 57 percent from the previous year, and decreased 93 percent from 2010’s peak would seem to be terrific news.  But the low foreclosure activity stats are actually a manifestation of a government moratoria on foreclosure activities that was imposed due to the pandemic emergency. 

Rick Sharga, Executive Vice President of RealtyTrac, an ATTOM Data Solutions company, stated “The government’s moratoria have effectively stopped foreclosure activity on everything but vacant and abandoned properties. There is a backlog of foreclosures building up – loans that were in foreclosure prior to the moratoria; loans that would have defaulted under normal circumstances; and loans whose borrowers are in financial distress due to the pandemic.”  Further commenting on the foreclosure backlog, Sharga believes that the foreclosure wave won’t be as bad as what occurred prior and during the Great Recession.  But he cautioned that we won’t know how large the foreclosure wave will be until the moratoria expires. 

So, in the face of a strong housing market, there are many home owners who need to sell (due to job loss, job relocation, divorce, etc.) but can’t because the proposed sale price is short of the amount needed to cover the costs of selling (which typically includes mortgage, closing costs, realtor & title fees, etc.).  This is where a short sale can be considered.

A short sale is basically when your sales net isn’t enough to pay the mortgage(s) on the property.  In many cases, short selling home owners don’t have the funds to make up the shortage needed at settlement.  Instead, they seek lender approval to allow a lower mortgage payoff in order for the transaction to close.  Because short sales have become a common form of transaction in the real estate landscape, the process has become more standardized since the Great Recession.  Although the typical time to complete a short sale can take three to six months, short sales can take as little as forty-five days.  However, it’s important to note short sale approval can also take more than six months. 

Although the core process is the same, lenders have different requirements when collecting information and conducting their due diligence.  Having a professional negotiator helps facilitate your short sale.  Seasoned short sale listing agents typically work with experienced attorneys to negotiate and handle the process. 

If you are thinking of short sale home selling, interview several experienced and local short sale agents.  Ask about their track record for successful short sales and how they work on your behalf to get the job done.  Also talk to their negotiator, and ask about their track record in successfully negotiating short sales.   

When considering a short sale, consider all your other options as well and get professional advice from an attorney and CPA to determine your best solution. 

By Dan Krell
Copyright © 2021

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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.

Negative Interest Rates Redux

negative interest rates
Average mortgage rates by decade

Negative interest rates used to be a controversial topic.  However, countries such as Japan and those in the European Union entered into the uncharted waters to stimulate their economies in the years following the Great Recession.  Back in 2015 there was speculation that the US was headed into negative interest rates too.  But those thoughts quickly vanished as the economy rapidly expanded after 2016.  But with the prospect of more economic distress down the road with on-and-off again lockdowns and business restrictions, are negative interest rates on the table again?

What are “negative interest rates?”  A very rudimentary explanation is it’s when interest rates go below zero.  Meaning that instead of borrowers paying interest on loans, the lender pays the borrower.  It may sound backward to what we are used to, but it is a “tool” that central bankers may employ in times of severe financial crisis. 

Although many economists contend that negative interest rates are a viable short-term option to respond to a severe financial crisis, it is uncertain the policy works as intended.  Negative interest rates expose a vulnerable economy to future financial downturns.  Additionally, some are concerned about long-term deflationary effects, while others fear it results in hyperinflation.  Some experts point to the potential of a paradoxical effect of freeze community lending.  This can occur if investors hold onto their cash, instead of depositing it with banks for zero interest (or even having to pay the bank to hold their money).  This lack of investment has the potential will reduce banks’ available capital to lend. 

The possibility of negative interest rates in the US is once again a hot topic.  A 2020 NAR report discusses this option (Expectations & Market Realities in Real Estate 2020-Forging Ahead; nar.realtor):

There is nothing stopping the U.S. from moving into negative interest rates, but several issues would arise should the U.S. decide to take that plunge. One of the biggest fears is that the FOMC [Fed Open Market Committee] would not have any tools left to employ when the next downturn occurs.  Global investors might lose faith in the safety of U.S. government bonds as negative interest rates and other forms of quantitative easing may be perceived as a sign of weaknesses in the economy. In addition, the portfolios of millions of U.S. investors would likely be hurt. According to the Office of Management and Budget, $16.8 trillion of the government’s $22.7 trillion debt is held by the public of the U.S.  A large portion of the holders of U.S. debt are retired or soon-to-be retirees who have their portfolios in risk-free U.S. Treasurys. Many federal programs, including Social Security, Medicare and Medicaid, are also heavily invested in Treasurys, meaning these public programs would most likely lose money on the aggregate due to negative interest rates.”

(Expectations & Market Realities in Real Estate 2020-Forging Ahead; nar.realtor)

Could we see negative interest rates in the US?

In their recent statement of the FOMC (federalreserve.gov), the Federal Reserve believes that although economic activity and employment are recovering, the health emergency has caused a tremendous human and economic hardship in the US (and globally as well).  If extraneous events are unchanged, “Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.”  However…“The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”

Original published at https://dankrell.com/blog/2021/01/04/negative-interest-rates-redux

By Dan Krell
Copyright © 2021

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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.

Home Sale Predictions 2021

home sale predictions
Home equity 2020

Given the performance of the housing market this year, can we make home sale predictions for next year? The housing market had quite a year!  It’s amazing how resilient the market is, which demonstrates the appeal of homeownership.  Even after a significant spring slowdown, home sales rebounded to record levels in the fall.  NAR’s Existing Home Sales and Pending Home Sale Indices for October 2020 increased year-over-year 26.6 and 20 percent respectively (nar.realtor).  Even as we headed toward the holidays, NAR’s November Existing Home Sales increased 25.8 percent year-over-year.  And year-over-year median home prices increased 14.6 percent. 

While some experts expect the recent housing market activity to continue, others question if this intense home buying is sustainable.  Making home sale predictions for the new year has always been predicated on recent trends.  However, 2020 was different.  Unexpected and unusual events occurred throughout the year affecting the housing market.  First taking a pause because of an economic shock, home sales made up ground later in the year. 

Recent trends suggest that home buying will continue at a healthy rate, as long as the economy remains relatively similar.  However, being an election year there is anticipation for change.  Even many economists, who are typically ready to offer their opinion, are ambivalent about the economy.  This may suggest that the economic outlook for the near future is uncertain.

A main factor to watch in 2021, is employment.  It’s a known fact that unemployment directly effects home sales.  In periods of increasing unemployment, home sales decline.  A 2010 Florida Realtors (floridayrealtors.org) survey demonstrated a correlation between unemployment and foreclosures.  There is no coincidence that home sales strongly rebounded along with employment and the economy.  If employment remains stable into 2021, home sales will continue to over-perform. 

Other factors that will drive the housing market in 2021 include mortgage interest rates, home sale inventory, and home buyer demand. 

Mortgage rates have been relatively low since 2008.  At that time, rates hovered in the low 4’s, and were though to be “historically low.”  Also, consider that mortgage rates were in the 18 percent range during the early 1980’s.  Even during the go-go market of 2005-2006, rates hovered in the 6 percent range.  But the most recent mortgage interest rate average of 2.66 percent for a 30-year-fixed rate is described as “another record low” by Freddie Mac’s December 24th 2020 Primary Mortgage Market Survey (freddiemac.com).  If mortgage rates remain low, home buyers will be incentivized to buy homes.

Another after-effect of the Great Recession, which continues today, is low home sale inventory.  The Great Recession changed how consumers thought of housing.  Since 2008, home owners have remained in their homes much longer.  Many growing families make due with smaller spaces, rather than moving-up to a larger home.  Many older home owners are deciding to “age in place,” in lieu of down-sizing.  And telecommuting is outpacing job relocation.  Home sale inventory of non-distressed properties will continue to remain low through 2021.

There is always “home buyer demand.”  Meaning there are always active home buyers.  However, the strength of the demand varies.  Home buyer demand is typically gauged in hindsight through home sales and pending home sales.  When you combine housing stats with other factors, such as employment, economy, and mortgage rates you can estimate the strength of future home buyer demand.  If economic factors remain stable, home buyer demand will continue to be strong in 2021. 

Original published at https://dankrell.com/blog/2020/12/27/home-sale-predictions-2021/

By Dan Krell
Copyright © 2020

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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.

Price is Everything

Price is everything
Home owner equity

Home sellers want to get top dollar, and home buyers want value.  This is a hard to truth to acknowledge, but regardless of your home’s condition, location, etc. it all comes down to the home sale price.  Don’t just take my word on it. There’s plenty of peer reviewed research on the topic.  For example, Han and Strange’s study that demonstrates how home price effects home buyers’ response and motivation to visit and/or make an offer on your home (What is the Role of the Asking Price for a House?; Journal of Urban Economics; Volume 93, May 2016, P115-130).  The conclusion indicated that list prices that are consistent with neighborhood values (not overpriced) maximize home buyer engagement.  Price is everything .

The “price is everything” concept applies to any housing market.  It applies when the market is slow, and even when the market is doing well.  Take for example this year, when it seemed as if any home that come on the market sold quickly. However, there’s a caveat: homes that were priced correctly sold quickly.  Homes that were overpriced took much longer to sell.  For those overpriced homes that sold, they sold for less than original list price. 

As home prices continue to appreciate, home sellers are eager to push the envelope when setting their list price.  But home buyers are savvy and won’t overpay for a home, so creating a realistic pricing strategy is key to your home sale success.  Things to consider include your home’s condition, your local market, and your competition.

The main tool to help you decide on a list price is the CMA (comparative market analysis), which you can get from your agent.  The CMA is not an appraisal, but it is a snapshot of market activity for similar homes in your market area.  The CMA can show how homes like yours (that are similar in size, style, age and condition) sell by price and days on market.  Typically, the CMA is broken down into 3-month, 6-month, and 12-month segments to show how home sales are trending.  Compare active homes to homes that sold as well as those that didn’t sell for sale price and days-on-market).  Also be aware of any seller concession, which can affect your net sale.  Finally keep track of neighborhood active listings, this is your competition that can also help you modulate your price if needed.

To help sellers understand how their homes compare to the competition, I used to advise clients to visit neighborhood open houses.  This was helpful in understanding how to prepare their homes by comparing the homes’ condition and features.  Although visiting open houses may not be practical for you these days, technology makes it easy to see the interior of home via HD pictures, virtual tours and floor plans. 

Another pricing strategy that many home sellers use to get more buyer traffic is “just-below” pricing.  Just-below pricing is reducing your decided list price below the rounded number.  For example, if your list price is $450,000, the just-below price might be $449,900. This strategy was demonstrated through research by Beracha and Seiler (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).  Just-below pricing works best the list price is rounded down to the nearest hundred or thousand.

Original published at https://dankrell.com/blog/2020/12/20/price-is-everything/

By Dan Krell
Copyright © 2020

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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.