Monthly Archive for March, 2009

Realtor-Buyer Disconnect and How to Avoid It

Published
by
preynolds
on March 31, 2009
in Home Buying and Home Selling
. 131 Comments

Have you ever worked with a realtor, who just doesn’t “get” you?

If you don’t know what I mean, picture dating someone who doesn’t fit into the kind of life you envision for yourself.  Perhaps you’re a homebody who likes to cook and snuggle on the couch. But the guy you’re dating isn’t the nesting type and gets restless at home. Or perhaps you consider yourself an urban sophisticate in love with sidewalk cafes, independent boutiques and neighborhood ethnic restaurants. Well, the woman you’re dating likes suburbia, big box stores and Applebee’s.

In my case, I’m an urban soul, content to walk everywhere. I gave up owning a car a few years back in favor of Zipcar. But my realtor kept pushing me to condos that came with parking spaces, even though they were often $40-$50,000 more than condos without parking. Why? Resale value, he said. Even if I don’t own a car and intend to stay in my condo for years if not decades, he thought I should find a nice condo with parking. Kind of like mom who wants you to find a nice guy with a stable job, even though the unstable artist makes you feel more alive.

Sometimes, mismatched realtors don’t understand your lifestyle because they have a predictable life pattern stuck in their head: Buy a starter home. Move to a larger home. Start a family. Raise a family in a home with good school districts, etc. Or maybe they have lived this kind of life, and so it’s hard to relate to anyone who hasn’t.

So what’s the best way to fix the realtor-buyer disconnect?

For realtors, my advice is to focus less on resale and more on what your clients want, no matter how insane it may seem. If you can’t fathom why a client would want a huge McMansion stuck in the middle of nowhere, perhaps it’s better to be honest and point your clients to some realtor who can.

For buyers, my advice is to go with a realtor who reflects your demographic. Someone who’s about your age with a lifestyle similar to your own will inherently understand why you want to live on a ground floor when most people want an upper floor, or why you want an older building with character rather than a modern complex. If you’re an artist, find a realtor who specializes in finding homes for artists. If you’re an urban pioneer, find a realtor who is an urban pioneer himself. You won’t have to convince your realtor that your lifestyle needs trump resale value. And just like your best chance of meeting a nice companion often lie with friends who have similar interests and lifestyles, so does your best chance of finding the right realtor. Get recommendations from like-minded friends.

Finding the right realtor isn’t easy, but you shouldn’t have to live through months of frustration and disappointment hoping that one day, your realtor will finally understand you.

Chinese Bargain-Hunting in America

Published
by
Editor
on March 30, 2009
in Market Conditions and Uncategorized
. 2 Comments

I’ve heard plenty of stories about foreclosure bargain hunting around the country, but this article shows just how many people are holding off for the elusive “Rock Bottom.” An investor tour group, SouFun, has been bussing 40 Chinese investors at a time through foreclosure-heavy cities around the U.S., where they can find better deals than in the major cities of the rapid-growing East.

Here, you can trade in your Beijing studio for a three-bedroom house in Chicago, so your child can get a good, American education! Who WOULDN’T want to try a little window shopping? It’s SouFun!

But for serious — the important point of this article might be the best news I’ve heard yet. Not one of the last 40 visitors invested in any property, showing that they either weren’t so serious, or the deals aren’t as good as they thought. Many of the Chinese investors believe our market hasn’t hit bottom (wise), and others aren’t trusting the sales pitches directed toward them (wiser).

While it’s inevitable that foreign money is going to pour into slumpy U.S. real estate, it may not happen as quickly or as robustly as I first imagined when foreign bus tours were heading through Detroit. Let’s face it — if everybody is holding their cash in their hands, watching the race on seven television screens, waiting in real-time for the ultimate Rock Bottom Moment, it will pass us by. There are just too many people in this global economy, watching for anything dramatic to happen.

Maybe the disappointed Chinese tour bus is proof that our Rock Bottom Moment isn’t as spectacular as we hoped. And while foreign investment (like the Willis Tower) in the U.S. is inevitable — at least it isn’t happening at a bus-tour-per-month pace.

How will foreign investment shape the U.S. market in the next ten years? Time will tell.

Spring Offers Hope But Will it Last?

Published
by
kmunsell
on March 26, 2009
in Home Buying, Home Selling and Market Conditions
. 104 Comments

The official start of spring pounced on the scene just days ago. From the winter trodden areas of the country, bulbs peer out from under ground, cherry trees poise to burst, and tiny, new leaves prepare to invade winter beaten branches.

Spring, the traditional start of prime real estate season, is here. This year, however, is an extraordinary year.  Will the traditional spring real estate jolt happen this year? If you sell, will they come?

Have faith. The lookers are already beginning to emerge from their quiet, hiding places, waiting to blossom into healthy, thriving buyers. So far:

  • New home starts jumped 22% in February, compared to one month prior. Though this number is still significantly below where it was one year ago, it does offer some hope.
  • Sales of existing homes rose 5.1% from January figures, again still lower than same time last year, but a move in the right direction, nonetheless. 
  • New home buyers can obtain up to $8,000 in tax credit from a qualified purchase.
  • Fixed rate mortgages are as low as 4 3/4% for qualified buyers.

This year, spring is needed more than any year before, but we don’t know how long this new burst of life will last. Is the market now poised for a turnaround or is it just a spot of sunshine that will shrink in the dark clouds ahead. Nobody knows what lies ahead, but if a move in on your mind, there may be no better time. 

Sellers clean up, price well, and play nice to make a sale, and lookers, buy now or prepare to stick it out for the long haul. Right now, the time is right for both sides of the deal. Let’s just hope this lasts.

Readers, share your thoughts below. Do you believe we’ve reached the bottom and clearer skies lie ahead, or do you believe this is a short term, transient burst of energy?

Musings on Touching Bottom

Published
by
preynolds
on March 24, 2009
in Home Buying and Market Conditions
. 25 Comments

Last week, the New York Times ran an article entitled “Has the Economy Hit Bottom Yet?”

One of the economists cited in the article said that as far as housing prices go, you can say we’ve hit bottom when a young couple earning two modest incomes can afford to buy  a two- or three-bedroom starter home in a middle-income neighborhood in their city. 

An interesting measure, but is it realistic?

In many midwestern cities in the United States, a couple of modest incomes is truly all it takes. But in my experience on the East and West Coasts in the last 30 years, this is no longer a realistic baseline measure in our changed economy.  Yes, my parents were able to afford a three-bedroom Los Angeles starter home on two modest salaries back in the mid-60s, but that was about the last time a couple of “modest” salaries could get you anywhere near a house in L.A.  That’s not just because home prices have gone up, but because real income has stayed absolutely flat since about 1973 while education and healthcare costs have skyrocketed. Most families have tried to keep up by adding a second wage earner and by borrowing more heavily to get into a home. A lot of homebuyers have compensated by buying smaller condos as their “starter homes.” But the cold hard reality is that raging income inequality  has a few of us making a whole lot more (read the executives over at AIG) and many more of us making a whole lot less. And that has forever changed the homeownership model of a nice three-bedroom starter home bought and paid for on two modest incomes. (Incidentally, back in the 1960s, this was doable on ONE modest income.)

Don’t forget, after all, that a young couple making $25,000 each will likely have hefty student loans to repay, as well as steep healthcare premiums to foot each month. Years ago, their parents buying their first home wouldn’t have had these costs. In order to compensate for increased daycare, healthcare and education costs at a stagnant salary, a home’s price would practically have to drop to what it might have been in 1973, and that’s just not going to happen.

Will the median household income of about $50,000 a year ever buy the American Dream again? It’s my guess that in many large American cities, even after we hit bottom, those days may be over — unless something remarkable happens to make the rest of life affordable for families.

A Brief Rant on Social Networking

Published
by
Editor
on March 23, 2009
in Market Conditions and Online Resources
. 3 Comments

People have been saying it, and I’m starting to believe it. The catch-all social networking site is becoming increasingly difficult to sustain. If Facebook’s new face and sad Twitter stories are any indicator, it’s that there are few messages we really want to send to 800 people at a time.

I use the term ‘censorship’ loosely in this case, since we censor our personal lives in broader networks and censor our ‘marketable’ selves to our close networks. As the lines between personal and public lives are being blurred by Twitter-esque bits of what I ate for lunch, where I’m going for drinks tonight or how I have a case of the Mondays, I realize that there is a wealth of strangers I do want knowing what I saw on the train today, and a slew of stranger’s I don’t want knowing how many Swiss almond cookies I ate on Friday afternoon.

Niche networking makes it easier for me to send the right message to the right people. Only because you don’t care that it’s very cold today and I’m not wearing a hat, or that I watched a game of bike polo in Chinatown yesterday afternoon. I want cycling friends to hear one message, and my mother to hear the other. I want my real estate buddies to know about the luxury condos going up in Bushwick, and I want my friends in theater to know that Hedda Gabler was terrible.

Now that you’ve all learned a little too much about me, you understand why niche social networking is important for us all.

Multigenerational Shacking Up on the Rise

Published
by
kmunsell
on March 19, 2009
in Market Conditions and Progressive Trends
. 140 Comments

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

SOS to Artists: Save Our Abandoned Neighborhoods!

Published
by
preynolds
on March 17, 2009
in Market Conditions and Progressive Trends
. 76 Comments

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.

Investing in Empty Boxes

Published
by
Editor
on March 16, 2009
in Market Conditions
. 9 Comments

I was meditating over a small part of a very talked-about blog in the Times earlier this year, concerning the fate of the empty boxes that were once Wal-Marts, K Marts and a series of other Marts. Apparently for a commercial developer, it is cheaper to get up and walk away from those behemoths rather than remodel for expansion. It is cheaper to throw it away than to fix it.

The inevitable strip mall ghost town could bear similarities to its urban equivalent 30 years ago. We’ve already seen squatters, looters and the occasional tumbleweed rolling by, but is there some value to be found in these large, empty, energy-sucking, green-space-destroying strip malls?

I was driving through Toledo, Ohio (less than two hours from Cleveland, where 1 in 13 homes is vacant) and stopped in a strip mall off of Route 90. A dated strip mall that looks like it once housed a deadly Mart in the 80’s has seen some new inhabitants; a church (why not) and an “antique barn.” The Burger King structure in the parking lot was re-inhabited by a breakfast diner, so churchgoers had everything they needed in one place.

Is this a glimpse into the post-suburban future? Maybe. My guess is that the next generation of 20-somethings will make the Big Box their new artist lofts. I’ll be buying them by the box.

Real Estate by the Generation

Published
by
kmunsell
on March 11, 2009
in Home Buying, Sustainable Living and Technology
. 148 Comments

The generational divide applies to music, television, philosophy and life in general, so it comes as no surprise that there are generational differences when it comes to real estate as well. The biggest population segments shaping the market today are the Baby Boomers (1946-1964), Generation X (1965-1980), and Generation Y (1981-1999). Each group has its own unique set of characteristics and needs, and nowhere is this more visible than in real estate and choosing a home.

Baby Boomers: This group currently makes up about 26% of the population and falls between the ages of 45 - 63. They are quickly becoming “empty-nesters” and though retirement is in their field of vision, they are happy, healthy, and on the move. Consequently, smaller homes centered around an active community and lifestyle are becoming popular with this crowd, giving rise to a new class of retirement communities for active adults.

Generation X: About one out of every five people falls into this age range of 29-44 years old. According to the National Association of Home Builders, the average age of the move-up home buyer was about 45, squarely falling on the line between Gen X and the Baby Boomers. The priorities of this busy group are different from others. Consisting of many double income couples now in the midst of raising children, technology, efficiency, and casual are in, while unnecessary is out. The unnecessary, to this group, includes extra space (like formal dining rooms and wine cellars) and even extends to unnecessary labor as well–low maintenance is a boon to Gen X.

Generation Y: Young and upcoming represents the core of this group. Currently aging in range from 10-28 years old and comprising a whopping 28% of the population, Generation Y has yet to make its full impression on society. However, what we have heard of this group so far, shows that they are keen on location (they want to live, work, and play all in one) and are interested in creative design and efficient living spaces with less emphasis on kitchens and formal areas. High tech and constant connectivity also seem to be high priorities with this group, while green tends to be a crowd pleaser. This group is aware of the environment and will likely continue to fuel advances in the green building industry.

Do You Need a Realtor?

Published
by
preynolds
on March 10, 2009
in Home Buying and Home Selling
. 108 Comments

I have friends who are in the market for a home. After years of incessant talk about buying, they can finally take the plunge, thanks to an inheritance just large enough to allow them to buy a dilapidated fixer upper on the outskirts of Boston. So they’ve been looking in the suburbs north of that city, visiting open houses and combing the internet listings. Recently they’ve stumbled onto a worn 100-year-old Victorian with lots of potential, but in need of tremendous amounts of work. They plan to offer what they have — the amount of their cash inheritance — but not a penny more as they don’t have a penny more. The seller can either take it or leave it.

But now the big debate: do they need a realtor?

One half of the couple says yes: “It won’t cost us a dime. A realtor could help walk us through the process. A realtor could tell us if we’re offering too much, and what to look out for since we’re buying a house that needs work.”

The other half of the couple says no: “Look, we have what we have to spend. We’re not going to be negotiating. We’re taking the house “as is.” Realtors, whether they are buyer or seller agents, have one common goal — making a sell. Buyers agents are in business for themselves, and thus they push prices higher. We are absolutely NOT going to use a buyer’s agent.”

I listened to my friends argue and realized I could see both their points. In fact, when I’ve been a seller, I’ve always come away feeling a bit cheated. Last time I sold, my agent advised me to take a low offer when it turned out I was able to get better just by holding out a bit. On the other hand, when I’ve been a buyer, I’ve often come away feeling as if I’ve been a bit of a sucker, paying more than I really should have.

Now here’s my question for you: Is this doubt about realtors just human nature, or does it have something real to say about the profession?

I’d love to hear your opinions.