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July 3, 2018July 28, 2019

Independence, patriotism and homeownership

Let’s come together to celebrate our freedom and independence. Having innate and inalienable liberties is the foundation of this country. The concept of independence is abstract and usually expressed as intangible actions, such as the freedom from the tyranny of others. However, home ownership has become an icon of freedom that is tangible and obtainable.

Last month I wrote about a few of the benefits of owning a home as part of the recognition of National Homeownership Month. Besides being wealthier, home owners tend to be healthier and happier than their renter counterparts. The history of owning land has been one of wealth and luxury. Renting on the other hand has been associated transition, difficult times, and a hard life. This can be traced back to the middle ages, when serfdom was associated with leasing.

How did owning a home become associated with the American Dream? Richard Mize revealed the truth about the connection in 2013 (Who first dreamed the American dream of homeownership?; Oklahoman,com; June 22, 2013). Mize cites Eric John Abrahamson’s historical biography “Building Home: Howard F. Ahmanson and the Politics of the American Dream” (University of California Press) as the source of the story. Abrahamson attributes the idea of home ownership as the American Dream to the restructuring of local savings and loans after the depression of 1896.

Building and loan institutions during the 1800’s certainly did not have the technology nor the interconnectedness our modern banking system has today. In restructuring the financial system after the 1896 depression, local building and loans were organized to form the U.S. League of Local Building and Loan Associations. The League’s motto was “The American Home: The Safe-Guard of American Liberties.” According to Mize, this was promoted as the American Dream.

Abrahamson attributed the League’s first president, Seymour Dexter, with equating the idea of home ownership to liberty. According to Abrahamson, Dexter felt that owning property was a duty. Dexter believed Thomas Jefferson’s conviction that independent property-owning farmers would “sustain the independence and virtue of the citizenry and the health of the democracy.” Dexter viewed the industrialization of America as a “challenge to democracy.” The industrialized worker was much like the serf of the middle ages who rented a home near their job, and owed allegiance only to their employer (landlord), which was viewed as “politically corrupt.” And to rebuild America of the 1890s, owning a home became portrayed as patriotic and a “civic virtue.”

In 2011, then president of the National Association of Realtors Ronald L. Phipps wrote (Home ownership matters; magazine.realtor; February 1^st, 2011):

“Our commitment to home ownership is not about simple self-interest. Rather it is about a larger purpose. Home ownership has been part of the American experience since the very first breath of the Republic. Today, what we need to do as a nation is connect with our truth and our tradition: Home ownership matters.”

It’s not only Realtors who promote home ownership but government as well. Federal and local government programs exist to encourage home ownership through down payment assistance programs, low interest rate mortgages, and even home renovation programs.

As Seymour Dexter of the U.S. League of Local Building and Loan Associations realized, owning a home is an act of independence and patriotism. It doesn’t only benefit you personally, but it also benefits your community and the economy. The idea of independence transcends all ideology and can be exhibited by owning a home.

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.

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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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 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
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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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