Lee Morof's Real Estate Blog

The average size of an American home has been increasing since the 1970s. The American Enterprise Institute (AEI) reports that, in 1973, the median size for a new home in the United States was 1,660 square feet.

Over the past 45 years or so, this increased by more than 1,000 square feet. The median size of a new home is now 2,687 square feet.

The Problem With Big Houses

At first, a big house is appealing until one tries to clean it or pay the utility bills. Many baby boomers, who are now nearing retirement age, are downsizing, especially if their children have all moved away.

Moreover, Millennials are the first generation of Americans to experience a reduced standard of living when compared to their parents.

Many millennials see big houses as wasteful, environmentally destructive, and not sustainable. Also, with the challenge of paying off massive student debt, these young adults are delaying buying a home or may remain renters for their rest of their lives, foregoing the chance to have their own home.

One solution for the problems with big houses is to make homes smaller.

The Tiny House Movement

There are strong motivators for the social trend called “The Tiny House Movement.” Many want a smaller space to live in, which they can more easily maintain and afford. Tiny houses are no more than 400 square feet. That is like living in a compact studio apartment.

TheTinyLife says that tiny houses are being built all over the country. They come in almost any style imaginable. The median price for a quality tiny house is about $40,000, although do-it-yourself types can build one for a lot less.

Some are built on a trailer bed that makes them portable. Others are built to function properly in off-grid locations using solar power. There are even tiny houses that have been printed using 3-D printing technology.

Tiny houses can be luxurious, or they can be built to provide inexpensive solutions for housing that helps the homeless.

The Denver Tiny House Community

Denver is trying an experiment with a group of tiny houses called The Beloved Community Village. This is a group of private one-room units that share a communal kitchen and bathrooms. They started with 11 units and plan to expand to 20.

The challenges they experienced were not necessarily construction related. They needed to change the zoning and occupant density rules to allow the development.

Summary

People make a conscious choice to simplify their lifestyle for the freedom that a minimalistic philosophy brings. It is quite possible to live well while also living with less. Tiny houses may even be part of the solution for the approximately half a million homeless people living on the streets in America as the successful tiny house community village in Denver is now demonstrating.

If you are interested in a new home or in listing your current property, be sure to contact your trusted real estate professional.

What can be done with a house that is just perfect but it is in a bad neighborhood or a dangerous spot? Think about homes that are in decent condition; yet, too close to the water. America is experiencing flooding now that is not supposed to happen in 500 years.

That cute little beach bungalow could easily get wiped out in the next hurricane. It might be time to think about moving those homes to a safer area or higher ground.

The International Association of Structural Movers says that around 8,000 homes are moved each year in America. Relocation may be due to hazards, such as the erosion of an oceanfront or cliffside lot. Others relocate for their historical value.

What It Takes To Move A Home

There are five main considerations for moving a home, which are:

1. Legal Issues: Moving the home and transporting it must be allowed by law.
2. Strength: A home must be strong enough to stay together when disconnected from its foundation.
3. Lift and Transport: It must be possible to lift the home and transport it to the new location.
4. Access: Access to the home’s new location must be unimpaired on the route to get there and on the site when the home arrives.
5. Cost: The cost to move a home may be shockingly prohibitive.

Legal Issues

The legal issues can be very challenging. Do not give up easily, if the idea of moving a home is blocked at first because it may be possible to get a one-time waiver from the regulations.

Strength

Some homes are not strong enough to move. However, it is surprising what is possible if the home and/or lot is very valuable.

There are home-moving projects that lifted Victorian-style homes built over one hundred years ago in the most valuable parts of San Francisco. These homes only moved upwards. They stayed on their lots. The moving project raised them 15-feet higher to allow a garage to be built underneath. These well-built wooden homes survived the 1906 earthquake. They were carefully raised without damaging them.

Lift And Transport

Experts use many techniques to lift a home and prepare it for transport. Homes may be transported by strong flat-bed trucks, by industrial, heavy-lifting helicopters, and on barges in the river or ocean. Homes can be disassembled partially to make moving them easier.

Access

When moving a home, even if separated in pieces, the pieces may be very large. The entire transport route needs to be carefully checked by an engineer for proper clearance heights, enough turning radius when needed, and sufficient width for passage.

Cost

While many homes are movable, the cost may be too high to make it worthwhile. However, the cost to move a multi-million dollar mansion falling off a cliff may be far less than the home’s value, which might otherwise be lost.

Summary

If there is a beautiful heritage home sitting on a cliff’s edge overlooking the ocean and teetering on the edge of collapse, there is a new way to think about it. It may make perfect sense to move it to a lot that is down the street and further away from the edge.

Your trusted real estate agent is ready to help youfind the perfect home. Give them a call today!

It’s often harder to make friends as an adult than it is when you’re a child. It’s even more challenging to make adult friends when you move into a new neighborhood. You may feel like people already have their own group of friends and aren’t looking to include newcomers. Of course, that’s just an illusion.

Here are some easy ways to implement tips for making friends in your new neighborhood.

Put Out The Welcome Mat

Make your front door inviting to the neighbors. Place some cheery flower pots near the porch and buy a nice welcome mat for the front door. Be sure to put fresh light bulbs in the porch lanterns, too. These small touches will show neighbors you’re setting a friendly tone.

Have Coffee And Lunch Out

Make a point of having your coffee breaks and lunch at the nearby cafes as often as possible. Mention to the servers or owner that you’re new in town and this is your first time trying out their menu. They’ll likely take an interest in you and ask what house you bought, and so on. As you continue returning, you’ll be on a first-name basis, which will probably lead to some casual introductions to other locals who are stopping in for coffee.

Host A Housewarming Party

Housewarming parties are a fantastic way to welcome old friends and meet new ones. They are also a great excuse to knock on your neighbors’ doors and personally let them know they’re invited. If you feel uncomfortable having strangers in your new home, make it a backyard BBQ housewarming. In no time at all, you’ll have a new collection of local friends and acquaintances.

Join The Local Clubs

Membership clubs offer a natural way to meet new people without appearing overtly friendly. Look for some local clubs you’re interested in, such as gardening, exercise and book clubs. When you start attending on a routine basis, friendships will organically begin to develop.

Volunteer

If you have an extra hour or two in the week, consider volunteering as a way to help the community and to make new friends. Places that typically need volunteers include theaters, schools and athletic programs.

Making friends in your new neighborhood will enable you and your family to feel more at home sooner. One or more of the above-mentioned tips is likely to work for your personality and preferences.  And don’t forget your real estate and mortgage professionals! They’d be happy to help get you connected as well!

Many baby boomers are reaching retirement age. If they set up their financial planning well, while younger, they should have accumulated enough wealth to have some discretionary money available for making investments.

Others, who may be just starting out, have some investment capital but not necessarily enough to buy a piece of commercial real estate on their own. These investors might enjoy a real estate investment pool, also called an investors’ club.

Pooling Resources

One way to get some investment participation in real estate is to pool investment funds needed to have enough for the down payment on a piece of real estate.

For example, if the down payment for acquiring a single-family rental home is $40,000 and four investors chip in, this means the contribution by each one will be $10,000. Each investor will own 25% of the deal. Many can come up with $10,000 for investment but it may not be as easy to find a spare $40,000.

Real Estate Investment Clubs

An investment club is where people get together to review the summary of a real estate deal to discuss its merits as a group investment.

To find a local group there is a nice system called Meetup online, which is a good resource. If there is no real estate investment club in a particular local area, consider forming a new one through that system.

Legal Structure

For real estate purchased by an investors’ pool, the best legal structure is to acquire the property by a newly-formed limited liability company (LLC). An LLC is very easy to create online. The LLC structure limits the liability of its owners (members) to the amount they each invest in the LLC.

It is best to set up a new LLC for each closing of a real estate acquisition. In this way, the owners can be different and to separate the deal from the successes or losses in other deals. Investors in an LLC buy units of the LLC, not shares.

When an LLC starts, it is authorized to issue a certain number of units. Each investment gets a proportional percentage ownership share of the LLC. The investor gets the number of units that represents the percentage value of the investment compared to the total investment.

Work with a real estate agent to help find deals. Use competent legal counsel and a professional accounting firm to set up and manage the LLC properly.

Summary

Investment clubs can be very fun. There may be considerable discussion and disagreement about each potential deal. This is a welcome thing. It is excellent practice to learn how to conduct proper due diligence.

Investors who are just learning about what to look for in a real estate deal gain insights from more experienced investors. Experienced investors stay active and get a chance to pass on their knowledge to the less-experienced ones. Everyone enjoys socializing together and that is a nice extra reward.

Last week’s economic releases included readings on consumer credit, job openings and weekly reports on mortgage rates and first-time jobless claims.

Consumer Credit Use, Job Openings Slow in June

Consumer credit use slowed in June as credit card use lost ground. Non-revolving credit, which typically includes education and auto loans, grew at its slowest pace in three months. Mortgage loans are not included in the Federal Reserve’s report on consumer credit. Consumer credit use grew by $14.6 billion year-over-year in June as compared to May’s year-over-year reading of $16.0 billion.

Year-over-year credit use fell one percent in June to 4.30 as compared to May’s year-over-year reading of 5.30 percent. Credit card use fell by 0.10 percent in June, which suggested that consumers held off on large purchases. Fed Chair Jerome Powell said ,”households are in pretty good shape overall.” in reference to current economic conditions.

Job openings fell in June, but maintained a 15-month streak of seven million or more job openings. There were 7.35 million jobs open in June as compared to May’s reading of 7.38 million jobs open. Job openings rose in retail and real estate, but were lower in construction, leisure and hospitality categories.

Analysts said that shortages of skilled labor and fears over the effects of trade wars caused fewer hires. The trade war with China has not broken the longest period of economic growth in U.S. history, but escalation of trade disputes could further slow economic growth if trade wars aren’t resolved.

Mortgage Rates, Weekly Jobless Claims Fall

Mortgage rates dropped last week according to Freddie Mac. Rates for 30-year fixed rate mortgages averaged 3.60 percent and were 15 basis points lower. Rates for 15-year fixed rate mortgages averaged 3.05 percent and were 15 basis points lower.

The average rate for 5/1 adjustable rate mortgages dropped ten basis points to 3.36 percent. Discount points averaged 0.60 percent, 0.50 percent and 0.30 percent respectively.

Initial jobless claims fell last week to 209,000 new claims filed as compared to the prior week’s reading of 217,000  first-time claims filed. Analysts expected a reading of 215,000 new jobless claims filed for last week.

What‘s Ahead

This week’s scheduled economic news includes readings on housing market conditions, housing starts and building permits issued. Weekly readings on mortgage rates and initial jobless claims will also be released.

A hot market in real estate is identified by a few things, which include higher prices, lower amounts of unsold inventory, and desirable neighborhoods. Neighborhoods can increase in value because of having an excellent location, high-paying jobs, quality schools, and a variety of attractive amenities.

Hot Markets Are After The Fact

Properties in a hot market may sell faster, for higher prices, and without needing to be in perfect condition or staged for sale. Real estate investors do not necessarily benefit from learning about a hot market unless they already own property in that market area.

It is nice to be an owner with a property for sale in a hot market. However, more success may come from identifying a market as potentially valuable before it becomes a hot market.

Hot Market Trends Before The Fact

Gentrification is a pattern that may start out slowly and then build until a market goes from cold to hot. With gentrification, renovation of rundown neighborhoods attracts new, wealthier residents. Many cities encourage the gentrification of deteriorating urban areas.

Streets with abandoned storefronts may convert into pedestrian-only shopping promenades. Old wharf warehouses may turn into a riverfront boardwalk. Artist types may move into a bad neighborhood because of the low rent and then turn it into an eclectic, hip area with art galleries, coffee shops, boutiques, and street murals.

One way to benefit from gentrification possibilities is to follow the long-term development plans of a community and be an early investor in those plans. Invest in property just on the outskirts of a planned gentrification zone.

Be careful to note any physical barricades, such as a wide street, which may stop gentrification from progressing further. A wide street may prevent gentrification from moving across it to the rundown area on the other side.

A similar pattern shows up when investing in real estate that is on the outskirts of a growing area or adjacent to a desirable neighborhood. Over time, if the growth continues, these outlying areas may become a nicely profitable investment for those who are patient.

Getting Out Of A Hot Market At The Right Time

It is important to know when to sell properties in a hot market and move on to find a different one. Continuing to re-invest in a hot market may ultimately disappoint when there is a market correction to the downside. Try to avoid this if possible.

Market indicators to watch include:

• Year-over-year increases in listing prices compared to historical figures for the same area.
• The percentage of listings showing a price reduction.
• The average time a property is listed before being sold.
• A comparison between the listing price and the sales price for sold properties.

Conclusion

Studying market growth and guessing the direction of growth helps identify a potentially strong market before it gets hot.

It is time to sell and move on, if the listing prices are not increasing each year or if price reductions are increasing. Other strong indicators that a market is cooling down are when the average listing time is increasing and the average difference between the listing price and sale price is widening.

If you’re in the market for a new home or interested in listing your current property, be sure to set up a consult with your trusted real estate professional.

There are a few things to consider, when selling a home, that will help you maximize your potential for a better sales price. Seasoned real estate professionals are one of your best resources for these tips.

The Buyer’s First Impression Is Emotional

The first goal is to improve the buyer’s first impression when they see photos or a video of the home, do a drive-by, or make an appointment to view the home. Work with a real estate agent on staging the home and pay particular attention to curb appeal.

Staging means that a home has no clutter. Remove any personal items (family photos, toys, pets, etc.). Make closets less than one-third full. Make sure the home is immaculately clean. Use nice decor and minimal furniture. 

Logical Backup For The Buyer’s Emotions

Once a buyer has a positive emotional reaction to the home, then to cement the deal at a good price, offer logical backup to support the emotional reaction. Create a handout that lists the amenities and positive attributes of living in the neighborhood, such as good schools. If possible, sell the neighborhood and the community along with the home.

Answer a buyer’s, often unspoken, question of “Why should I live in this area?”

Like-New Condition

Homes that are in perfect condition usually sell for a premium price and may attract multiple purchase offers. Make any repairs that are necessary to ensure all the systems in the home are in working order.

Another confidence builder for a buyer is when the seller reimburses the fees for the inspections needed, from the escrow closing. Let the buyer choose the inspection companies from a pre-approved list that is acceptable for the seller.

Kitchen and master bathroom upgrades usually have a positive impact on the sales price. New appliances can be included in the sale and covered by a home warranty.

Go Green

Homes that are energy efficient and have an alternative energy system, such as solar, are usually more desirable. This is especially true in parts of the country where the monthly utility bills are very high. Add information about the savings on the monthly utility bills, when compared to other homes that are not green, to the home’s selling brochure.

Summary

Top-selling real estate agents know that homes with these characteristics usually command the best prices, receive more offers, and spend less time for sale on the market. Another benefit is that agents get excited about listing high quality homes. They typically feature them prominently in their listings from the agency, on their website, and in all other marketing efforts.

There is a joke about gated communities that says the walls are not just there to keep the people out but to keep the residents in. Living in a gated community that is subject to the rules of a homeowners’ association (HOA) can be a pleasant or a severely irritating experience, depending on the perspective a homeowner has about lifestyles.

The Good, Bad, And Ugly About CC&Rs

Gated and master-planned communities may have an HOA and also may have covenants, conditions, and restrictions (CC&Rs) that are part of the property rights (or lack thereof) that a home buyer accepts when they buy a property in those neighborhoods.

The developer records a registered copy of the CC&Rs with the county where the development is. Every homeowner is subject to the rules found in the official CC&Rs. A copy of the CC&Rs may look like an old-style telephone book with hundreds of pages.

Prospective home buyers should force themselves to take the time to read the entire CC&Rs extremely carefully. This may take many nights to read because reading the CC&Rs may put a person to sleep. However, failure to read them can cause serious problems in the future and extremely stressful levels of frustration.

What Can Be In The CC&Rs?

It is not surprising to see in the CC&Rs rules that prohibit a homeowner from filling the front yard with broken-down cars or having a pig farm on the property. In a nice, gated, community nobody wants to see a neighbor’s property in that condition. The benefit of having reasonable CC&Rs is that homes, which are eyesores, because the people do not maintain them properly, are prohibited.

So far, so good. However, what about when the CC&Rs state the maximum measurement of grass before cutting it is 1.25 inches. That is an odd number to use as a measurement standard but don’t be surprised to see stuff like this in the CC&Rs. In such a neighborhood, you can be cited for a grass height violation. It may seem funny to see the enforcers in the front yard measuring the grass with a ruler until a homeowner gets a fine for a violation. This is just a simple example of the many rules potentially found in the CC&Rs that are very easy to violate.

Want to put up lighted holiday decorations? Check the CC&Rs because it may not even be allowed to put a wreath on the front door.

Think it would be a nice idea to repaint the exterior of the house? Check the CC&Rs first because there are usually severe color restrictions. If the paint is one shade lighter or darker than an approved color, this may cause the need to redo the entire paint job.

Conclusion

Personal taste differs significantly between people. When buying a home subject to CC&Rs, be sure to read them carefully and be able to live with all the details. Otherwise, a homeowner may find it really frustrating to live in a neighborhood with so many controls over personal freedom and choice.

If you have any questions or concerns about a prospective HOA, be sure to discuss it with your trusted real estate professional before making an offer on a new home.

The Federal Open Market Committee of the Federal Reserve announced the first rate cut to its key interest rate range since the Great Recession ushered in a series of rate cuts described as “quantitative easing.” The Fed committee confirmed a quarter-point cut to 2.00 to 2.25 percent.

Fed Chair Jerome Powell described the rate cut as a “mid-cycle adjustment” intended as a one-time boost for the economy. Mr. Powell said he did not view the cut as the first in a series of quantitative easing moves, but analysts said single rate cuts are not common.

The FOMC post-meeting statement said the decision to cut rates was based on global and domestic economic developments prompted by recent trade wars and resulting uncertainties. The Fed also cited inflation concerns connected with its dual mandate of maintaining maximum employment and stable pricing, but did not indicate urgency in its decision to reduce its benchmark rate range.

No Commitment to Future Rate Cuts

The FOMC statement did not commit to future rate cuts, but said that committee members would “continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion with a strong labor market and inflation near its symmetric two percent objective.” Mr. Powell said, “If you look overall, financial stability vulnerabilities are moderate.” Eight of ten FOMC members voted in favor of the rate cut.

Projections for future cuts varied, as the Fed gave no guarantees of further rate cuts and economists predicted one more rate cut in 2019. Bond market analysts expected three rate cuts this year, which was factored into bond pricing.

The Fed also announced it was ending is efforts to shrink its balance sheet and that it was important for the Fed to buy Treasury bonds in the open market as mortgage assets move out of the Fed’s balance sheet. This move was expected to stabilize the market.

The FOMC statement concluded with the Committee’s consistent commitment to  assess real and expected economic developments and to review global and domestic developments along with readings on economic and financial trends as part of its decision-making process. The FOMC outlook is flexible and subject to change as events warrant.

Last week’s economic news included readings from Case-Shiller on home prices, pending home sales, construction spending and a post-meeting statement from the Federal Open Market Committee of the Federal Reserve.

Consumer sentiment was released along with Commerce Department reports on public and private sector job growth and the national unemployment rate. Weekly readings on mortgage rates and new jobless claims.

Home Price Growth Slows in May

The Case-Shiller National Home price Index showed slower home price growth in May; this was the 14^th consecutive month of slower growth in national home prices and the lowest reading for home price growth since the Great Recession.

Home prices grew by 3.40 percent on a seasonally-adjusted annual basis as compared to a 3.50 percent reading in April. While easing home price growth is a plus for would-be home buyers, slower growth in home prices could be a sign of overall economic slowing.

Construction spending was lower in June and fell by 1.20 percent. Analysts expected spending to slow at 0.10 percent based on May’s reading of -0.80 percent. Les spending suggests fewer homes will be built and demand for homes could increase based on the combined effects of slower price gains, low mortgage rates and fewer available homes.

Pending home sales jumped 2.80 percent in June and 1.60 percent year-over-year according to the National Association of Realtors®. The year-over-year gain was the first in 17 months. Analysts said that slower growth in home prices coupled with lower mortgage rates would prompt more buyers to enter the housing market.

The Federal Reserve’s Open Market Committee lowered the Fed’s benchmark interest rate range on Wednesday. Committee members voted to lower the key fed rate range from 2.25-2.50 percent to 2.00-2.25 percent. Fed Chair Jerome Powell said that this rate reduction was not  first in a series of rate cuts, but one-off rate cuts by the Fed are not common.

Job Growth Mixed, Unemployment Rate Unchanged

Labor-sector readings for July showed mixed results for public and private-sector job growth, ADP reported 156,000 private sector jobs were added in July as compared to 112,000 jobs added in July.

The Commerce Department reported 164,000  private and public-sector jobs added in July as compared to June’s reading of 193,000 public-and private-sector jobs added. July’s lower reading was not unexpected as analysts projected 163,000 public and private-sector jobs added in July.

The national unemployment rate held steady at 3.70 percent; this was higher than in recent months, but  remained relatively low, which suggested few layoffs and strong job markets.

Freddie Mac reported little change to average mortgage rates. 30-year fixed rate mortgages averaged 3.75 percent and were one basis point higher than for the prior week. Rates for 15-year fixed rate mortgages were two basis points higher and averaged 3.20 percent. Rates for 5/1 adjustable rate mortgages averaged 3.46 percent and were one basis point lower.

Discount points averaged 0.60 percent for 30-year fixed rate mortgages, 0.50 percent for 15-year fixed rate mortgages. Discount points for 5/1 adjustable rate mortgages averaged 0.40 percent.

First-time jobless claims rose to 215,000 claims filed and surpassed expectations of 210,000 new claims filed, which was based on the prior week’s reading of 208,000 first-time claims filed.

Last week’s economic reports wrapped up with the University of Michigan’s Consumer Sentiment Index reading for July, which was two points higher than June’s index reading of 98.2. Consumers surveyed reported paying off debt and increasing savings as a hedge against slower economic growth.

What‘s Ahead

This week’s economic readings include weekly reports on mortgage rates and first-time jobless claims.