Monday, November 25, 2013

Take Your Time to House Hunt, Love HOAs and Support Immigration Reform.

This article in The Atlantic a few days ago really caught my attention. It's entitled, "What Will Happen to Grandma's House?"

The thesis is that gazillions of aging Baby Boomers will be trying to downsize and sell their homes in the coming years, and a lot of them won't have buyers. As in, about a third of them.

The Captain has alluded to this possibility before in predicting the future of the real estate market. It's one of many factors suggesting that it could be a really, really long time before the housing market takes off again. It's demographics, supply and demand. Oh--and a crappy economy, where security in good-paying jobs is something Boomers tell Millennials *really did happen*.

Driving through suburban neighborhood after neighborhood along the Front Range in Colorado, you'll see that so many of them seem old as tattered books, with a lot of older people living there and few young folks moving in. Architectural styles are kind of dated. Many have deferred maintenance. Proximity to good public transportation is rare to non-existent, and cars are required for the most routine tasks. But the same is true, and worse, in other places across America.

How cool is this?
That's a lot of oak-cabineted kitchens with black refrigerators, sixty-percent furnaces gasping away, settled foundations, failing cast iron sewer lines and more what-not that goes with older homes. Along with, no doubt, homeowners associations with seriously underfunded reserves. And Colorado, along with other cities in the West, Southwest and the coasts, is one of the good places to be with a pretty good outlook.

Buffalo and Schenectady? Hmmm.

We can't do much about demographics, but we can try to tweak supply and demand.

First, support immigration reform. Immigrants buy houses. Lots of them.

Second, love your HOA.

Third, the house you want at the price you want to pay is out there.

For Boomers, someone said to take out a reverse mortgage before it's too late. But the Captain would never go that far.
Out with the old and in with the new!

Friday, November 22, 2013

Real Estate Brokers: What Do You Do to Make Yourself Stand Out?

A few weeks ago, I was talking with one of my sons about how fast business was growing at Native Rank, the startup SEO (search engine optimization) company he works for and is helping develop. He casually mentioned, in passing, how real estate websites are more difficult to manage than most others. "They all have the same content," he said.

It's pretty much true. They all have some sort of property search engine, even though few people out there use broker websites to search for properties. Most have mortgage calculators and similar
features. Most have a narrative on why the broker's service is so much better than anyone else's. Often, the site is equipped with a blog purporting to give "valuable information" and exhort the viewer to leave contact information. Some talk about the broker's "team." Others claim to be "your trusted advisor."

But by and large, broker websites are like American shopping malls: Plunk yourself down in one, and you're hard-pressed to know where in the world you are. As my son said, they all have the same content.

I've been thinking a lot about this, lately, since I'm considering (underline considering) getting my broker's license again. If I were to do that, how might I develop a brand?

By brand, I mean the unique je nais se quoi that sets one out from the other. Nordstrom vs. Sears. Whole Foods vs. Wal Mart. Audi vs. Chevrolet. For that matter, Chevy pickups vs. Ford pickups.

A lot of successful brokers don't spend a lot of time navel-gazing over this issue, probably because they're too busy buying and selling homes. And most of these folks that I know personally pretty much share one trait--a personal authenticity they've developed over time. But that's a personal quality known to their clients and network.

But still. If someone were going to list a home for sale or were thinking about buying one, how would  he or she shop for a broker? How do consumers find the quality level in a broker they want at the price they want to pay? And, more to the point, what do brokers do to address the issue? What can they do?

Or does it all matter anyway? To date, I don't think it has. Outside the recent crash and the savings and loan debacle in the 1990s, the housing market has had a pretty good run. Of course, some brokers are better than others, but by and large, anyone could do the job, and they al get paid the same.

But going forward into kind of stagnant years? I'm less certain. Just as other professional personal service people have developed specialties enabling consumers to choose one over the other, I suspect real estate brokers will have to as well.

Everyone's content can't be the same.

Thursday, November 21, 2013

Don't Rush to Buy a Home. There's Plenty of Time.

A few days ago, I read some mortgage broker's blog post on why people interested in a house needed to move sooner rather than later. The whole post was on the cost of waiting and assumed the buyer would take down a $200,000 mortgage. Rates were low, now, and so were prices, and he was pretty sure both would be going up. Wait too long, the post said, and buyers would be paying a higher price and a higher interest rate.

I heard the same thing when I started at Remax in 2006. And again in 2007, just after the crash. And again in 2008, 2009, 2010, 2011, and 2012. See a pattern, here?

In fact, I think I've pretty much heard the same cant my entire adult life. And it always comes from people who get paid only if a transaction closes. There's nothing inherently wrong with that, this being America, the last I heard. But if compensation only comes when a transaction closes, the buyer and broker have competing interests.

From a financial point of view, one of the attractions of buying a house is the enormous leverage available to a buyer. With $10,500 plus closing costs, a person can tie up a $300,000 property. Ownership has some tax preferences (overstated, in my view) and offers a way to lock in housing costs. As an investment, though, it's a crappy one, according to Nobel Prize-winning economist Robert Shiller.

Sales of pre-existing homes have been down the last two months, which means little except that monthly data means little. It didn't mean anything when sales were up earlier in the year, either. In my view, the country is in for a stagnant and possibly deflationary period of several years, which means rates and pricing aren't going to move a whole lot. Available inventory and competition from cash buyers will pose the greatest roadblock to normal buyers.

People buy a house because they want to own a home, and that's a good thing, I think, especially if they can stay put for a good number of years. Whenever I meet someone interesting, I always wonder what their house looks like. People put their personal stamps on their homes, make them reflect who they are and what they're all about. I like that.

Which is what you should keep in mind when you set out to buy a house. It will insulate you from others trying to push you.

Wednesday, November 20, 2013

Form an HOA of One--You!

Among our most popular posts are this having to do with Homeowners' Associations (HOA) and their evil twin, Condominium Owner Associations (COA). Okay, not really twin. Both are the necessary evils that owners love to hate.

But individual owners, whether or not they belong to an association, can take a page from the HOA book to handle repairs and maintenance. HOAs save monthly for repairs that have to be made over time.

Owners can do the same thing. Instead of ponying up all at once for, say, a $6,000 paint job, they can put $100 a month into a savings account. At the end of five years, the money's in the bank. And if owners are DIY folk, and if they use the new super-cool 25-year paint, the cost is less.

It works for appliances as well. The average life span of a furnace is 15-18 years, so why not save a little bit per month for the time when it has to be replaced? Same for water heaters, with life spans of 8-12 years. Caveats, of course, abound. For example, the furnace in our home is a 1992 vintage, ands it's running just fine. But our 7-year-old water heater died.

I used to get super annoyed with brokers who'd gleefully advertise a listing as having no HOA fees as a selling point. In fact, HOA fees are a really good savings account.

Why not form and HOA of one--you--and do as they do?

Thursday, November 7, 2013

Demographics Drive Change

I keep saying that the inability to recruit young real estate agents is what will drive major changes in the profession. Forty percent of Realtors are over 60!

Check out this article in Inman News.

I guess old agents could dye their hair, huh?

Saturday, November 2, 2013

How's the Market? Is Now a Good Time to Buy a House?

Depending on whom you ask, it's always either (a) It's a great time to buy a house, or (b) It's never a good time, because a house is a lousy investment.

The problem, here, is that both sides are right. Robert Shiller, Nobel Prize-winning economist at Yale University, takes the latter view and has the strong data to prove it.

While most people say they want to buy a house as an investment, they really don't see it that way. Lots of first-time buyers say something like, "It's better to put that monthly payment into a house than give it all to some landlord."

But an investment is something like, say, pork belly futures, and most people know it. You can't live in a pork belly future. Really, lots of people want to own a house because they just do. They like having something that's theirs.

For those folks, maybe now is a pretty good time to buy.

It's true house prices have gone up, but they're still hovering around 2004 levels. And mortgage interest rates (as, ahem, a previous post predicted) aren't much north of 4%. Even though The Captain believes we're in a low-rate environment for a while, that's still pretty low by historical standards.

But plan on being there a while. The Captain continues to think prices won't be moving up anytime soon. The recent uptick in prices induced more sellers to put their homes on the market. But too many are still underwater, according to Zillow, and that doesn't include owners with flatlined-to-minimal equity. Prices won't be going up until the national economy improves, something which has been right around the corner for several years and will be for several more.

And the recent upsurge in home buying has come from investors paying cash for distressed or low-priced properties and pent-up demand from traditional buyers. Investor purchases are already falling off, as are traditional ones. Pending home sales continue their slide.

The point being, I guess, that the home-as-investment part isn't looking great. The place to live part is, though.

As usually, if you have any questions for The Captain, fire away.

And, agree or disagree, I'd love to hear what you think!