There are trends in everything from food to fashion to hobbies–even home design. For a while, an in-home office was all the rage. In-law suites and finished basements have had their share of the limelight as well. A recent article I read talked about the features the most home buyers are currently looking for and while some seemed obvious, a few surprised me. The number one “want”? A laundry room. Gotta admit, that one surprised me. Sure, anyone would appreciate one if it were there, but the number one “extra” that people hoped to find? Interesting. Another one that surprised me was exterior lighting. That was the single most desired outdoor feature. Patios were on the list, but that one seemed predictable. Same with hardwood floors. Energy efficient windows and appliances made the list, too. Read more.
Real Estate Trends
There are lots of options available if your parents become unable to live independently: you can hire help to come in, you can move them to an assisted living facility, you can move in with them or move them in to your home. Now there’s a new choice: the MED Cottage. This is a pre-fab structure, about 12 x 24, which is designed to accommodate a wheel chair, necessary medical equipment and act as a generous bedroom space for your parent(s) on your property, yet not in your house. There’s a lot of debate over relegating mom to “the shed” by people who feel that it seems to clearly exclude her from the household she was supposed to be joining. Others, though, including some of those parents cite two advantages over being in the house: not feeling like they are intruding on their children’s families; after all, these domiciles have their own rhythms, patterns and rules and many parents are loathe to disrupt them. Second, they, themselves, are used to living alone; the MED Cottage is their separate, private space. I can see both sides of the argument. What do you think?
Don’t believe everything you read. That directive doesn’t mean you should stop reading, but, rather, that it might be prudent to read critically. What does reading critically entail? Not taking everything a face value. Questioning sources and statistics . Challenging assumptions. Processing conflicting information and deciding what it means. To illustrate what I’m talking about, here’s a good example. I recently read an article that a fellow realtor posted on a community Facebook page. It was titled “Why the Supply of Homes for Sale is the Lowest Since 1999”. So, being a realtor, I was curious, clicked on the link and began reading. Now, I was already skeptical as it is common knowledge that “real estate is local”, so sweeping statements with no specificity had me doubtful about the credulity of the article before I even started reading.
It starts out with a semi-hysterical declaration that there is very little inventory, providing a statistic that a marker called the months’ supply of inventory (normally about six months’ in a balanced market) is around three and a half right now. It even quotes a market “expert” who describes the demand for homes as “titanic”. While I’m certainly hearing my buyers say “there’s no inventory”, the numbers didn’t ring true to me, so I looked up stats for my local area, which is running about six or seven months’ supply of inventory. (so, normal). On a side note, I’d like to remind you that, as the saying goes, statistics lie. Here’s what I mean: when I looked up the MSI for my area, over a two-year period, I can look at the net change over the entire time period. I can look at what it was 24 months ago and then “skip” to what it is now and compare those two figures. The difference in the two numbers? about 30%. Yeah. When you look at the net change, it’s around 9%, but when you look at the one that compares January 2105 to January 2017, due to a particularly high MSA for January 2017 (an anomaly, as you can see from the chart), the math shows a change of 39.9%! So be sure that when you look at statistics, you understand the criteria and methods used to calculate them.
TThe next section explains that, due to a dearth of inventory to buy, “This means fierce competition for homes”. Ok. That makes sense, in markets where there’s low inventory. I can buy that reasoning. However, the author posits that with rising mortgage rates and every-stricter lender guidelines, fewer first-time buyers are able to even consider a purchase and that that specific segment of the buying population has dropped the most (making up less than a third, when it has historically been about 40%). So now the author is telling us that there is at least one buyer group that is not in competition for the few listings there are, because they can’t qualify for mortgages. Hmmmm.
In another paragraph, the author points out that the main reason for the lack of inventory is that the building industry is still rebounding from the recession and not building new construction as fast as it used to and that it is not keeping up with demand. She also says that with rising costs of labor and land, very little of that already depleted new construction is lower cost housing (in a first-time home buyer’s price range, she implies). Well, again, taken in a vacuum, that summary seems logical. And it is. The problem is that while the rising mortgage rates affect everyone nationally (they are federal, not local rates), what is being built and what types of buyers are in the marketplace is incredibly local.
I realized that this article just didn’t pertain to our area for a few different reasons. First, the Main Line is a very old area and we have practically no new construction at all–so a slow down in new building, or an even bigger slow down in lower priced new building was irrelevant. Second, while the first time buyer not being able to find any inventory to buy due to that building slow down was also not applicable as very few lower budget buyers ever look in our region because our values tend to be outside of their price range. So the first time buyer’s obstacles shouldn’t greatly affect the Main Line’s marketplace.
What is in high demand in our area is a specific feature: updatedness. With rates, still fairly low, most buyers can much better afford to finance an extra 100,000 for a house someone has fixed up than come up with that extra cash, to say nothing of the logistics (esp if owners both work and can’t be supervising big const projects) of remodeling. So it’s not that there’s no inventory; it’s that it’s low in the category people want. Also, consider this: not that many people sink $100,000 or more into updating and then sell. So the re-done houses are even that much more rarely available.
When I finished the article, I was so annoyed at just how poorly it explained anything, that I just needed to vent (hence this response). So, the takeaways? Real estate is hyper local and when you read, do it with a critical eye and a large grain of salt at the ready, particularly because statistics can be very slippery in terms of exactly what information they are actually representing.
Mortgage rates have been unbelievably low since the recession. Finally, though, they are starting to creep up over 4%. Still very low, to be sure, but higher. So what do higher rates mean? Well, it sort of depends on whom you ask. Some people think that they will drive down the price of homes; if the monthly payment for a loan of the same amount is now more than it used to be, buyers will not be able to afford to buy unless the price of homes falls. Ok, that is a reasonable argument. On the other hand, some real estate experts predict that since rates are still so low, the increase will simply knock out the buyers at the very bottom of the group, not significantly affecting home prices, just marginally reducing the competition. Their view is that prices will remain stable, but volume may drop a little. Still others believe that the job market is improving enough to spur a small improvement in the economy, perhaps enough to offset the higher costs of home loans. As always, economists make various predictions and the rest of us wait and see what actually happens.
Unless space is in very high demand, you’d be hard pressed to find a kitchen being designed today that is not of the “eat-in” variety. For many families, the kitchen is the heart of the home and the stigma of eating in the kitchen as being too informal is long-gone. Of course, lots of people have a table and chairs in their kitchens, and plenty of people have some kind of counter that allows for stools , but there are some really creative, attractive ideas for eat-in kitchens that are a sort of crossbreed or hybrid of those two styles. See the gallery for some great inspiration…
It’s not news that jobs are hard to come by, particularly for people without a college degree. It’s also not news that the cost of college has skyrocketed in the last decade. The combination of those factors translates to more people than ever going to college, but more people than ever needing student loans in order to attend. Currently, student debt in this country exceeds $1.2 trillion. This debt plays an important role in a mortgage company’s decision to lend money for a home purchase. First of all, if someone with a student loan has missed any monthly payments, it will negatively affect his or her credit score, which influences the rate the lender will offer. Second, if that student loan payment reduces the amount of money available for a down payment to less than 20% of the purchase price, there will be mortgage insurance on the mortgage loan, which means an even higher monthly payment.
While there are some loans available specifically to physicians how have lots of debt but are expected to start earning high incomes to offset that debt (these loans do NOT carry the mortgage insurance and have different guidelines), they are specific to doctors. While we may start to see other programs in the future that give more leeway to people in other, usually high-earning fields, right now, people with significant student debt may find themselves unable to qualify for a loan that enables them to buy a home in the price range they’ve identified. What is the result? We are seeing a lot more people continue to rent well into their thirties, as opposed to buying their first homes in their late twenties. How this trend will change the housing landscape remains to be seen, but the reality demands some kind of response in terms of how and where people live. Will more people rent out their homes instead of selling them? Will we see more apartments built? We have already seen more graduates returning to live with their extended families (parents, grandparents, siblings, etc.). I also wonder if there might be more of the small, pre-fab “pod”-type or “tiny” houses manufactured to meet the growing demand of more affordable housing.
While real estate values on the Main Line have not gone back up to their peak (2005-2006), the luxury market has suffered most. Homes in the $1.5 million and above range tend to sit on the market for a long time and often sell at a bigger loss than their less expensive neighbors. Why? There are several factors driving this luxury market slump:
- Many of these properties are gracious, older homes (not many McMansions in this area). So, while the appeal of the style of these stately houses remains, as this segment of housing inventory ages, the efforts and expense of updating them increases. Buyers are often presented with costs and time requirements (as well as inconvenience) that make these houses more of a project than they want to take on.
- Since the recession, people are being more careful with all spending, but particularly on real estate because, as they’ve seen, it may NOT always appreciate in value, so buying an extravagant property may be less enticing to some.
- A growing trend toward owning second homes may also bear some responsibility for a dwindling buyer pool. Some people would prefer to own a more modest house (especially one without the cost of grounds to maintain, which can be an enormous expense) and have the money to have another home elsewhere.
- In considering the target market for these homes (and who is most likely to be able to afford them), it is important to recognize a recent surge in new communities serving the 55+ buyer with luxurious as well as practical features which are providing some of the competition with these estate properties. First floor masters, fewer stairs, hallways and bathrooms designed to accommodate wheelchairs are some of the features they offer.
- Finally, Philadelphia has been enjoying an urban Renaissance with both new luxury condos as well as some major refurbishing of elegant older buildings. For certain buyers, the appeal of living in a beautifully appointed building with set condo fees and no maintenance while in walking distance to restaurants and music, theater and art venues cannot be overstated, so again, an already limited buyer pool may be further diluted by this competing kind of housing.
For a more through discussion, please click here.
In 1828, the first indoor mall in the country was built in Providence, RI. The Westminster Arcade, as it was called, was declared a national landmark in 1976. Perhaps partly because it had no elevator, the businesses on the top two floors did poorly and the mall went bankrupt and closed in 2008. Private investors bought the building and, after a $10 million renovation, turned the individual spaces on the top two floors into fully furnished micro-apartments (the smallest ones taking up only 225 sq. ft.). They have no ovens (but they do have refrigerators, dishwashers and microwaves), flat screen tvs, table and chairs, bed and dresser, private baths, a bedroom and a small living room space with some built-in seating. The glass ceiling above the central atrium brings terrific natural light into the building, so the interior windows allow for sunny, bright apartments.
Laundry and storage facilities are located in a central space in the building and there is a common area with tv and arcade games, creating a community space. Similarly, the atrium houses restaurants and shops and acts as a kind of “main street” for the residents. While there are cheaper (and larger) places for rent in the Providence area, the newly minted Arcade Providence is in such demand that there are 400 people on the waiting list. The micro-apartment trend is taking off, especially there has been an increase of single people renting living space. People looking to do more with less, conserve space and energy and repurpose existing resources (abandoned buildings) are driving the demand. Many cities are relaxing some of their zoning and preservation rules to allow for similar projects, particularly where fairly low cost housing is especially difficult to find. I wonder if we, in the Philadelphia area, will start to see a similar phenomenon.