A friend of mine over at Blommit.com (a hilarious blog, by the way) made a, ahem, modest proposal to get ahead in real estate. Check out their blog this week for a humorous take on our very subject at hand: Real Estate.
Archive for the 'Progressive Trends' Category
Is the American ideal of the single-family home going the way of trans-fat, plastic bags and the Hummer?
In New England at least, something seems to be driving up the value of condos relative to that of single-family homes. So far this year, the median single-family home price in Massachusetts is about $34,000 more than the median condo price, according to the Warren Group, which specializes in analyzing market data in Massachusetts, Rhode Island and Connecticut. Compare that to 2005 when the median price for a single-family home was $72,000 more than a condo.
The data involves just a few recent years, is highly local and still pretty sketchy, but if this really IS a trend, why is it happening?
Certainly New England is different from other areas of the country, like Florida, where speculative condos flooded the market before everything crashed. In New England things have been more restrained. Speculative building was held in check by the area’s topography, geography and zoning laws. But what else? Here are a few guesses:
- As more first-time buyers enter the market, they buy lower-cost condos first, boosting prices of condos relative to that of single-family homes.
- In the Boston area, foreclosures seem to be concentrated in outlying suburban areas with more single-family homes. Alternatively, dense and fashionable urban areas located close to universities and public transportation —areas usually consisting of condos — have retained value and experienced fewer foreclosures, keeping prices higher.
But does the New England experience suggest anything about the future of condos in general?
Maybe. A growing senior population in the market for a maintenance-free life, may eventually boost condo sales and prices relative to single-family homes across the country. A growing immigrant population used to tighter living quarters, urban life, and multi-family dwellings, may also boost demand for condos. Certainly young professionals may prefer condos in the city if they can avoid a long commute.
What’s happening with condos in your neck of the woods? Could the condominium replace the single-family home as the housing option of choice?
As they say, the more things change, the more they stay the same. Not one year ago, we nervously watched gas prices as they crept skyward each day. Heightened awareness of rising fuel costs and excess waste prompted Americans to run toward the cities, and those nestled in the ‘burbs wondered if these outlying areas would soon become ghost towns, once again blamed again for eco-hostility and more.
However not one year later, the first victims of the mortgage crisis, the ‘burbs, are showing new signs of life as the first to begin the rise from foreclosure devastation. For example, sales of existing homes increased in many regions over the last few months and much of the activity is taking place in the suburbs. The strongest resurgence in suburban sales is occurring in the Sunbelt, including Arizona, Nevada, Florida, and California, where at the beginning of the mortgage crisis some of the greatest increases in prices caused buyers to turn to subprime loans.
Feeding the continued survival of the ‘burbs is the changing geography of the workplace as more and more employers move away from city centers. A newly released Brookings Institute report finds the steady decentralization of jobs; between 1998 and 2006, 95 out of 98 metropolitan areas saw a job shift away from the urban core, though the overall number of jobs increased in all metropolitan areas. In fact, researchers identified a shift away from city center in almost every one of the 18 major industries analyzed and more than half of all major metropolitan areas experienced rapid job sprawl.
However, it’s not only the jobs that are keeping the ‘burbs alive. The bottom line is that time and time again, the ‘burbs get the blame, but in reality suburban living is a preferential lifestyle that will not likely fade. The fact of the matter is that suburbanites like their style of living. Many enjoy a quiet, more relaxed style of living, and study after study has shown that single family homes remain a strong preference to many; Pew Research asked residents to rate overall satisfaction with their current communities and suburbanites were the most satisfied (42%) of any residential group, including those who live in cities (34%), small towns (25%), or rural areas (29%).
So throw your sticks and stones and blame the ‘burbs for what you will but know that the more things change, the more the ‘burbs are here to stay.
When all the dust has settled in the housing market and the last at-risk home has finally fallen to foreclosure, the real estate market as we have known it will have changed.
And one of the biggest changes: renters will finally get a little respect.
Already the signs of a renting revolution are in the air. Last year, a survey by The National Apartment Association found that 67 percent of renters had no immediate plans to buy a home. In fact, according to the NAA, occupancy rates in rental housing last year saw the largest annual increase since 1965. There are now more rental housing units across the country then ever — about 34.7 million units sheltering about 83 million people.
“We’re seeing more dramatic growth in renters and a decline in the number of owners,” William C. Apgar, of the Joint Center for Housing Studies at Harvard University told the Post Chronicle. “People are beginning to understand that homeownership can be a very risky venture.”
According to census data, about 67.8 percent of Americans owned their own homes in 2008, compared to a record high of 69.1 percent two years ago. Economists and housing experts predict that once we’ve pulled out of troubled economic times, only about 50 percent of us will own our own homes. In support of this prediction, census data showed that 32.3 percent of Americans were renting homes last year, up from 30.9 in 2005.
As more of us happily turn to lifetime renting, the experience of renting is likely to change dramatically.
Right now, according to Eric Belsky, the executive director of Harvard’s Joint Center for Housing Studies, America’s rental properties are in a sad state — increasingly unaffordable, rundown, and concentrated in blighted neighborhoods. But as more Americans rent for longer and longer periods of time, they will no longer settle for second-rate product. Tomorrow’s renters will demand high-quality properties with the amenities and updates that they would expect of an owned home. Forget cheap carpets and formica countertops. More renters will rent in upscale neighborhoods, and more will expect the sorts of updates that are more common in owned homes — hardwood floors and granite countertops, for instance. More landlords may permit renovation and changes to their property, including painting walls colors and hanging pictures. Some renters may even seek longer-term Euro-style leases of three-to-five years, with the ability to bring their own modular kitchen along to their new digs. Expect new lease options and a much wider assortment of housing choices. Look for landlords to put a new priority on maintaining their properties in an effort to compete for better tenants who will be looking for better product.
In the very near future, renting may be a far more empowering and attractive experience than it is today.
Paul Krugman’s recent op-ed piece suggests how wonderful life would be if banking became boring again. It is a brilliantly simple take on patterns in the past century of banking, and articulates something I’ve questioned for years: what do financial services do for me? What is the value of this service to anyone other than the bankers themselves?
Krugman writes, “During this first era of high finance, bankers were, on average, paid much more than their counterparts in other industries. But finance lost its glamour when the banking system collapsed during the Great Depression.”
Of course, there is great value in what people can do with capital, but should we seek capital for the sake of capital? No. We should seek capital for the sake of adding real value in the world.
Currency is a tool. Capital is a tool. We often get into trouble when we obsess more about the tool than the actual value the tool provides.
Here is my real estate take on this: mortgages should be boring. But the actual use of the mortgage, the home, the house, the life, should not. How will this change the way we see home ownership?
Give me a nice, simple, boring 30-year fixed with 5% down, and I’m a happy housing consumer and value-adder!
What will our communities look like 20, 30, 40 years from now?
According to author and journalist James Howard Kunstler, a whole lot different than they do today.
Home Depot and Target? Gone. Strip malls and suburban parking lots? Abandoned. Gated communities of gleaming McMansions? Uh… just empty weed-strewn lots — or slums.
Instead of our current suburban sprawl, most Americans will live in a real city or in a small town where they can farm in their front yards, buy from local artisans and cottage industries, hoof it to work. In short, according to Kunstler, author of “The Long Emergency,” we’ll be returning to the pre-industrial age. We’ll have no choice. We will be running out of oil.
Oil, of course, powers not only our cars and heats and electrifies our homes, but also creates most of the technology, including computer technology, that dominates our lives. Without oil, large factory farms dependent on heavy machinery, petroleum-based fertilizers and pesticides disappear. Without oil, manufacturing disappears, along with the huge global distribution networks that allowed Walmart and Costco to sweep the country. Even alternative energy sources, like solar power, is rendered impotent, since it actually takes petroleum-based technologies to manufacture things like solar panels and windmill parts. Once world oil production peaks (and many experts think it did so in 2005) life is going to take on a whole new homespun cast. Unless someone discovers a miracle energy source. And fast.
So in light of all this, where will YOU be leaving a couple of decades down the road? Well, forget surburbia. And forget major metropolitan areas like New York or Chicago or Los Angeles. Without oil, they’re just too expensive to run. (Think of all the electricity it takes to run those elevators in 40-story buildings.) Small towns with relatively dense and walkable town squares surrounded by productive agricultural countryside will be the most sensible place to call home. After all, you’re going to need to be able to walk (or maybe ride your horse) to do your business. And you’ll be growing your own food, too. Those living in cities will live in much smaller ones featuring dense multi-family housing of less than four or five stories. Forget globalization, localization is where the future lies.
Will Kunstler’s predictions come true or are these just the wacky rants of another doomsday sayer? I’d be a little more skeptical if Kunstler hadn’t accurately predicted today’s economic meltdown a few years back. And even without Kunstler, most housing experts agree that America’s housing stock is going to have to start looking more like the rest of the world’s. And that’s not a bad thing.
It started in the auto industry, snaked its way through cruises, men’s clothing, and now it’s hitting the real estate industry. Will this new trend in layoff protection boost consumer confidence?
In January of this year, Hyundai Motor of America implemented a broad, new strategy, aimed directly at the ailing economy and loss of jobs. Under their new Assurance program, Hyundai said that U.S. customers who buy new cars and lose their jobs within a year of purchase can return their vehicle–as easy as that! Next to follow, JetBlue began promising full-fare refunds to customers who are laid off before their planned trip. And next came BookSafe Travel from Norwegian Cruise Lines, The Risk-Free Suit from men’s clothing retailer, Jos. A. Bank, and more auto payment protection for Florida car purchases.
So, it’s only natural that these programs designed to alleviate consumer job worries would extend to real estate. In the rental market, Western National Property Management and Goldberg Companies offer layoff protection plans, giving some assistance to laid off tenants in Florida, Ohio, Texas, and North Carolina. And most recently, condominium complex Thornton Place in Seattle jumped on the bandwagon with their Safety Net Program. Under this program, if you buy a condo and lose your job, they will pay your mortgage for six months. The company believes this is the first program of its kind in the country, though others have offered up smaller incentives such as homeowners’ association dues. To start, Thornton Place is offering 27 condos, starting at $299,950 for a one-bedroom 595 sq. foot unit.
The details of each program vary of course, so buyer beware. However, layoff protection is catching the eye of worried consumers and addressing pink slip phobia head on. Is it working? It’s still too soon to tell, but initial signs are good. Hyundai’s sales were reportedly up by 14% for the first two months of the year, compared to last year, however the jury’s just starting deliberations on those condos.
Lost jobs, home foreclosures, tight pocketbooks, and aging are forcing more and more people to shack up with in-laws, parents, and grandparents, this trend a clear result of an economy in the dumps. Multigenerational housing, where extended families live together under one roof is on the rise, as more adults are returning home to live with their parents, even after a period out on their own.
According to the results of a new study by the AARP, 33% of respondents age 18-49 currently live with their parents or in laws, with 11% of those between the ages of 35 and 44 living in this arrangement. Furthermore, the AARP predicts this number is likely to grow. When asked about the likelihood of living with other family members in the future, 15% of respondents thought it would be likely, with 61% of these people citing the need to economic reasons such as job loss or foreclosure.
However, even before economic tough times hit, multigenerational housing was making its way back to the American household. Census estimates in the year 2000 showed that nearly 3.9 million households consisted of three or more generations living together, this number representing an increase of 60% from the number of 3+ generation households in 1990. Though job loss and home foreclosures didn’t play as significant of a role during this period, economics still had its hand in the matter. Dual income families benefited from having grandparents present to participate in child care, while aging grandparents also benefited from having the company and support of an extended family.
Consequently, homes that are flexible enough to suit a wide-range of needs are gaining more attention. These include homes that are either specifically “universally designed” to accommodate aging in place, or homes that simply offer certain amenities or functionality for elderly or multiple families such as:
- Dual master bedrooms
- Main floor bedroom(s)
- Level entries
- Wide hallways
- “Privacy wing” floor plans
- Bathroom support bars
- Multiple entrances
As someone who has more than just a passing interest in the arts, I was heartened to read about artists doing what they have done for ages — rescuing dilapidated neighborhoods. Recently in the New York Times, author Toby Barlow recounted how a lot of outsiders (including Barlow himself) are moving into Detroit, buying up cheap, sometimes abandoned or foreclosed homes. These outsiders are artists priced out of more expensive artist enclaves in cities like New York, Los Angeles or San Francisco. They’re in search of a little room to spread out — a home that has space for maybe a painting or writing studio — and costs low enough to allow a low-income artist to survive, create, and perhaps even thrive.
Does this phenomenon suggest a path out of the current housing crisis? Maybe so. Just look at Paducah, Kentucky. This tiny little town of 27,000 bordering Illinois and Kentucky, started an artist relocation program back in 2001 when it became apparent that the town was in crisis. Crime was up, especially drug-dealing. People were moving out. Houses were being abandoned. Whole sections of town were rapidly falling into disrepair. The town put together a whole package of financial incentives to market to artists just scrapping by in other high-cost locales, including 100 percent financing, low-interest lows, and even architectural services. The town bought advertisements in art magazines and newspapers across the country, and pretty soon, the artists started showing up. They were able to snap up Victorian homes for less than $20,000 and whip them into shape at a low-cost. More than 70 artists have moved to Paducah to date.
Considering that many towns now have precisely the low-cost-housing artists need, why not take advantage of it by instituting a well-focused recruiting program specifically targeted at the creative class? Artists (including writers, filmmakers, designers, architects and others) have flexibility in where they live. Many can do their jobs just as well in Detroit or Cleveland as they can in New York or Los Angeles. As more choose to move into troubled regions, they can work the transformative magic they’ve worked in Paducah. Paducah now has a cultural district, art walks, regular arts events, and continued infrastructure investment that have made the tiny little town a regional tourist destination.
Abandoned neighborhoods are a huge opportunity to infuse more towns and cities with a vibrant cultural life. Let’s take advantage and remake our neighborhoods while we can.
Got a McMansion whose mortgage you can’t quite afford?
Here’s an idea that will help you meet your mortgage payment and put all that extra space to use, too. It’s called Homstie.com and markets itself as a “community marketplace for storage space.” In other words, instead of paying a storage facility $100 a month or more to rent storage, you just pay your neighbor to use his basement. You may help him keep his home and you get a place to stash your stuff.
It works like this: you go online and create a profile of yourself and then sift through listings looking for someone in your neighborhood or town whose got some space to rent out. You “apply” for their space, giving the “landlord” two days to accept or decline your application. If you’re the person with extra room in the basement, the unused guestroom, bedroom or attic space, you list it on Homstie and wait for the right person to come along. Listing for and searching for a space is free, although the site offers a customized lease agreement for $19.
Hmm…. interesting concept. And certainly, we can say that it brings two needy types together. (That is, homeowners in need of extra cash and people who own lots and lots of stuff with no place to put it.) But you might say that this whole idea is a symptom of one big American illness: owning too many things to begin with. If you’ve got so much unused space in your house that you need to rent it out, then you’ve probably got more house than you need. And certainly, if you’re searching for storage, you probably own more objects than you need.
What’s the real cure? How about not buying so much stuff? Swap sites of all kinds are all over the net, allowing you to swap toys, books, music, DVDs, clothes, furniture, and just about anythine else you can think of.
Buy less stuff. Buy less house. Now that’s a great way to solve both sides of the problem.
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