So I wanted to do a blog about modern style trends in housing, and before I started I wanted to direct you all to this page of the “World’s Wildest Houses”. Some of these houses you won’t believe…but I digress.
FSBOs, since you are taking on the project of selling your house to potential first-time homebuyers, you want to be on the cutting edge of style so your house shows well. In all of my research, I haven’t really landed on a “defining” style that everyone is currently going for. Some people want a fixer upper and that might mean no style at all. Others might be looking for modern-chic. The bottom line is that you can’t predict what your buyer is going to like or dislike.
(One thing to note: You as the seller are selling the structure of the house, not the stuff inside of it. That’s why it might be a good idea to remove any excess furniture or décor to show off as much of the shell as you can. A smart buyer isn’t going to buy from you because your nice leather sectional looked good in the den next to the fireplace—they’re going to buy it because their twin suede love seats will look great next to the fireplace.)
But what I can say, through all my research, I always somehow ended up arriving at the same point: Green. Once thought as a trend, now a way of life, and soon becoming the only way to live, greening is perhaps the best enhancement you can make on your house. People will be much more tempted by energy-efficient windows and water-conserving dishwashers than anything else. Plus, a green home can get buyers government sponsored incentives, which makes a nice selling point on any property. Simply by upgrading your heating and air-conditioning system to an Energy Star rated system, you qualify for a 30% tax credit for the upgrade, which helps you (see details here at paystolivegreen.com.) There are countless other ways to green and you read more about them at paystolivegreen.com.
So instead of using style to sell your house, entice buyers with life style, and a green one at that.
Archive for February, 2010
A Guide to (Life)Style
Friday, February 26th, 2010The Secret to Home Pricing
Thursday, February 25th, 2010It’s an unfortunate fact to acknowledge, FSBOs, but it’s the darn truth: Homes aren’t selling quite like they used to. And if you’re having trouble getting offers on your home, the problem could be your asking price.
As a homeowner, you feel attached to your home. It’s not just a shell where you put all of your things, its where you lived your life, where you raised a family, and where you came to get peace of mind after a long day. That’s why getting a proper asking price for your home is tough for even the most objective of sellers.
But if you’re home is languishing on the market chopping block, you might want to reconsider what homes are really worth today. Although the price index is up (see my recent blog on December’s numbers,) the overall index is down 30%.
You will have to price lower than you want to sell your home quickly.
But it’s not all bad. In an article recently published by the NYTimes.com, home sellers lowered prices to inspire interest, and a bidding war took them $10k over their original asking price. You never know. The important thing is to get buyers, and if that means going lower than you ever anticipated, then you have to do what you have to do.
Market Update: Prices Rise, Market Stabilizes
Tuesday, February 23rd, 2010
The December numbers are in from the Standard and Poor’s/Case-Shiller 20 city price index and the news is good. Home prices are up 0.3%. Now that’s not a huge jump but it is evidence of some great things. First, the market is slowly starting to stabilize and find some foundation. Overall the index has increased 3 percent from its bottom in May, but still down around 30% from its peak in 2006.
So we’re making a slow but steady comeback.
The second indication, as released in the article on Yahoo! Business News, is that home prices are going up in the states hardest hit by the housing bubble. Pricing gains are happening in California, Nevada, and Arizona, but Florida is still staggering.
As prices go up, consumers feel more confident and tend to spend more money, so this is good for the economic outlook. The only thing still keeping us in a trough is—you guessed it—unemployment.
But for the time being, the market is starting to reach that stable low point. We’ve found the floor, and the only way to go now is up.
Making the Most Out of That Space!
Thursday, February 18th, 2010If you live in Colorado (I did for some time,) then you’d notice that nearly every house has a basement, and many don’t have a garage. Here, in Texas, basements are rare—garages are more commonplace.
When my friend was building his Texas home, a portion of the attic was turned into what he called a “bonus room”, which is basically extra living space the builders put in the house at no extra cost. That room, although it isn’t insulated, will add value to the house if he were ever to sell. For FSBOs, you want to make your deal as enticing as possible, so it might be time to start thinking about a bonus room—most likely your garage or your basement. Many of you park your cars in your garages and use your basements as work spaces, but if you’re willing to forego luxuries like covered parking, you can turn your extra space in to a real asset.
Given that market conditions aren’t their best, homeowners are less likely to take on more debt due to major home renovations, so they are working with what they have. Instead of making an addition, you can just renovate. It’s relatively easy and inexpensive to convert garage into livable space. Given the typical location of garages to houses, they make a great space for guest housing, an office, or an art studio. All it takes is a little insulation, perhaps some hardwood flooring, a bay window here and there and you’ve got yourself something great.
See the picture below
For instance, the owner of the house I currently rent gutted his garage and turned it into a professional recording studio for bands. He put up reinforced walls, put in heating and a/c, laid down wood floors, converted what would be a laundry room into a control room. Considering that I live in Austin, music capital of the world, and there is an abundance of home recording studios, the fact that he has installed a studio turns the property into a real musician’s asset. If he ever wanted to sell, he could market that aspect to potential buyers and increase the asking price from what he bought it for.
I’m not saying that you have to go that crazy on the space. A studio isn’t for everyone, but perhaps a guest room or an office can make great use of the available space while at the same time increasing the value of your home.
Generation Y
Tuesday, February 16th, 2010
Considering that this blogger is a staunch member of Generation Y, I feel I can offer some great insight into the psyche of the demographic in regards to the future of the housing market. First off, we grew up with technology. Some of us even remember what it was like to use 3 ½ floppy disk and DOS. I remember dial-up and when 56k was fast. I remember a time when Apple was a second rate computer company and not a lifestyle. Now it’s all changed so much that it’s hard to really remember how things were done before the Information Age took full effect.
Since we (I) grew up in such a time of flux, it has shaped the way that we see the world, culture, economics, real estate, etc. McIlwain does a pretty good job of describing our general mind set:
“This is the generation of the on-line social network, and “herding,” the ability to meet up on a moment’s notice at a social gather place (think Starbuck’s and other “third places”). They value community highly and ideas, information (not always correct but often corrected by the widespread on-line network) and opinions flash among them with speeds that leave older generations unable to keep up. Reputations are made and lost in weeks, and good reports can lead to a sudden upsurge in business just as fast as a bad report can kill a once promising business. They move and think quickly and easily multi-task, and are also committed to a healthy work/life balance; they will work hard, but not at the expense of time with family and friends.
Many are active and socially responsible and volunteer in large numbers, looking for ways, especially on-line, to improve the world. They are acutely aware that they will live through unprecedented changes in the climate and will be impacted in unpredictable ways. They also know they are the last generation to grow up with endless supplies of cheap carbon-based fuels. They can expect to live well into their nineties and they will see a dramatically different world at the end of this century than the one they were born into. They are the “greenest” generation yet.”
Given that, it’s not wonder why Generation Y will have a pronounced affect upon the world of real estate. The model has been the same for years: buy a house, move up, retire. But now, with Baby Boomers and their “under water” mortgages, and the financial collapse at the feet of the housing market, this new generation is a bit wary—if not wiser—of the way things have been run in the past.
It makes little financial sense to jump into home ownership. In a study conducted by the U.S. Census, income levels have fallen slightly in the last decade and are expected to do so in the coming decade through the Great Recession.
Generation Y also has to deal with rising cost of attaining an education and no jobs available to pay off those loans. I think McIlwain puts it best when he says “income constrained”. Thus, Generation Y will be “renters by necessity” as they no longer view “homeownership [as] a way to develop wealth.”
And since we won’t be buying houses for sometime, the surplus of homes in suburban communities will only continue to grow until unemployment rates drop back down and Gen Y has a financial foundation to stand on.
Simply put, we got the short end of the stick. With less income to work with and a total disillusionment with the housing market it’s no wonder Gen Y is going to rent and live in urban areas. Convenience is the word—a way to whether the storm.
Watch Out for the Boomers!
Sunday, February 14th, 2010
Get ready folks—were moving back to the city!
Well, not now, but given the demographic projections, the housing market is due for a change. Outlined in McIlwain’s essay (one which I have been discussing at length all week,) the ages and lifestyles of current and future homeowners are going to have a great impact on the changing of the housing industry.
First, we must consider the first demographic of homeowners: the Older Baby Boomers. It used to be that people would age, retire around the age of 65—earlier if possible—and then move to communities in the Sun Belt for older folks or face the prospect of being placed under the care of a nursing home. But things have changed. The older baby boomers, feeling trapped by “under water” mortgages and damaged retirement funds, are more reluctant to retire and move.
McIlwain writes, “…a 2009 RCLCO survey found that 75% of retiring Boomers said that they want to live in mixed age and mixed-use communities, i.e. in urban settings. Not all will want to move to the central city, and walkable, urbanized suburban town centers will see an influx of aging Boomers.”
Essentially, we’re dealing with a whole new breed of Boomers. This generation, soon to be in their 60s, lead more active, more community driven lives, and once it’s financially feasible, they are going to move in order to be closer to their family as opposed to moderate climate.
Then there’s the younger generation of Baby Boomers, ages 46-54. They’re kind of sandwiched between an older Baby Boomer generation less willing to move and the more concise and more urban Generation X. This group of Boomers lives in suburban areas and they too are facing “under water” mortgages and loss of equity.
This generation “moved up” into homes that were previously occupied by the Older Baby Boomers and now are coming to the age where they are considering a second home. Given market and current credit conditions, this group will not be able to purchase those second homes easily, greatly opening up the surplus in supply of suburban homes. Experts predict that the relatively low cost and large size of these suburban homes will appeal to immigrant and minority communities in the coming decade. Second home and suburban markets will be weak because of the limited mobility of the Younger Baby Boomers.
There are two other demographics that McIlwain, and countless other sources, outline as affecting the housing market in the near future: Generation Y (which yours truly happens to be a member of) and the influx of Immigrant populations.
But for now, I leave you to ponder your role as either an Older or Younger Baby Boomer in the housing market.
The Future of the Housing Market—According to John McIlwain: Part II
Thursday, February 11th, 2010
You’re probably feeling a little despondent after Monday’s post about the first section of McIlwain’s essay. (For those of you who are just joining us, you can read the essay here, and read the blog post here.) I understand. After reading that foreboding first part to the essay I was not quite feeling myself. Luckily, there is an anecdote to this sort of housing market misanthropy. I’ll continue outlining McIlwain’s treatise in the second installment: How We Can Fix the Housing Market.
Basically, after the collapse of mortgage capital giants Fannie Mae and Freddie Mac, virtually all of the funding for residential markets became a matter of the federal government. Private investors, which once drove the housing market into the trillion dollar industry it was, left the building. Few remain and only at the behest of federal guarantees. According to McIlwain, “Bringing private investment back is essential to restoring a healthy housing finance system.” But how do you bring all those investors back into the game considering the markets recent history? The answer: Reform.
McIlwain calls for reform to regain a robust and vibrant housing market. Mortgage giants Fannie Mae and Freddie Mac “need to be reformed or replaced.” Being the largest mortgage backing banks in the nation, what choice did the government have but to put them on conservatorship during 2008’s collapse? Nearly 9 in 10 mortgages are backed by the two banks, and if they were to collapse the fallout would have been much more catastrophic than it was. In order to prevent something like this from happening again, experts are talking about either completely privatizing the companies or completely turning them over to the government (which wouldn’t be that much different from how things are run now). However, privatizing would eliminate the fed’s ability to step in and regulate credit flow through a crisis, and completely turning them over would only add to the nation’s debt. It appears that neither are adequate solutions, so you can expect some sort of a middle ground to be drawn (To read McIlwain’s jargon-laden potential options, click here.)
Previously and currently, Fannie Mae and Freddie Mac were privately owned companies that were under financial protection of the government, also known as Government Sponsored Enterprises (GSE). In the reform that McIlwain calls for, the two companies will essentially still be privately owned and federally protected, though they will operate through different avenues. One such option, as put forth by McIlwain, is a series of government-run firms that have the ability to finance different kinds of loans as deemed by federal regulators. Called Chartered MBS Issuers (CMI), these issuers would have limited profitability and would be centered on providing affordable rental housing with limited amounts of securities and mortgages. Of course, this model comes with it’s own slew of national debt related issues.
Fannie Mae and Freddie Mac weren’t the only problem that got us into this crunch. Lousy mortgage practices, such as sub-prime lending, also helped. McIlwain’s plan to reform mortgage: Risk. In order to re-establish a successful private mortgage market, we would need lenders to take on some of the risk of making questionable loans—or as it is commonly referred to “keeping skin in the game.” Such reforms have come before legislation before but were turned down. (To read an in-depth description of such scenarios, click here.)
So it’s a very complicated and timely two-fold process, partially over our heads and convoluted—but it seems to be the only way. Really, the conclusion to make such reforms is an obvious step. Years before the financial crisis, we were seeing the housing market bubble up and deflate, as the problematic issues were quasi-apparent. Unfortunately, we were too late and the housing market imploded on top of a weak foundation.
