We could use more inventory, for several reasons – to slow price increases, to provide more opportunities for first-timers and newcomers, and to keep realtors busy!
But people don’t want to move, and that’s unlikely to change. We’re probably in the best climate in America, and enjoy a relatively-perfect lifestyle – why would you give that up?
Most aren’t going anywhere, and that’s fine.
But for those who might consider taking the money and running, where can you go? As time goes on, the options are getting more creative.
I’ve long thought that we will see communal living and tent cities as suitable options for some baby boomers. Others sell their house and buy the big RV and cruise the country.
Did you catch the idea mentioned in the nytimes.com article called roam.co?
You pay $500 per week and live in psuedo-communal living at different locations around the world. They are just getting started, so the locations are few, but the idea could catch on:
Mitch noted that Lush is back together. I’ve never heard of them – from wiki:
In September 2015, the music press suggested a reunion might be planned after Anderson posted a cryptic “7 day.” message on social media and the official website was revamped. On 28 September 2015, Lush announced their reunion on their Facebook page. The reunited band consists of Anderson, Berenyi and King with the addition of Justin Welch on drums, an old friend of deceased drummer Acland.
We’ve been away for ages and ages, but we’re really excited to announce that we’re finally ready to reform as Lush. For all the fans who have been pestering us to do this: thanks so much for your patience and support! We wish it could have been sooner but, for many years, it was just too painful to contemplate without Chris, and then all kinds of life-changing commitments made it impossible. Now, at last, the three of us are in the right place at the right time to play music together again.
We’re coming off tax season – how was your mortgage-interest deduction? It only benefits those in high-cost areas. Should we initiate a real tax-reform package, and start with eliminating the MID when it’s impact is low?
Chronically low interest rates may have accomplished something that the housing lobby has spent millions of campaign contributions and decades of political pressure to prevent.
Did the mortgage interest deduction, long the holy grail of homeownership, become worthless eight years ago when low rates and falling prices so reduced the value of the interest that owners can deduct that the MID has minimal impact?
Even when the MID is combined with the dedication owners receive for property taxes, would many middle class homeowners do just as well tax-wise by renting?
“We believe we have found one of the primary reasons why entry-level home buying has not recovered—and why homeownership has been plunging,” wrote real estate consultant John Burns in an eye-opening blog post circulated April 13, two days before income tax deadline day.
The standard marital deduction has risen from $1,300 in 1972 to $12,600 today, meaning that the first $12,600 of itemized deductions has no benefit to consumers. Today, a typical first-time home buyer financing 95% or less of a median-priced US home pays less than $12,000 in mortgage interest and property taxes, which is not enough to warrant itemizing. Even with other deductions that bring the taxpayer over the $12,600 limit, the tax savings are minimal, argues Burns.
“In the graph, we show the change over time for a typical homeowner couple with an 80% loan-to-value mortgage and a 1.5% property tax rate on the median-priced US home. That owner paid mortgage interest and property taxes in excess of the standard deduction every year from 1972 to 2008. Today, that homeowner’s deductions fall nearly $2,500 short of the standard deduction,” Burns wrote.
We’re well into the spring selling season (May 1st is twelve days away), and soon the talking heads will be touting fewer sales this year, compared to 2015.
It is short-sighted though, because 2015 was a great year, statistically. When you consider that prices are still strong, and any softness in the market is at the high-end where hopefully sellers can endure, it’s hard to complain!
NSDCC Detached-Home Sales between March 1 – April 15
Year
# of Sales
Median SP
Avg. $/sf
2012
345
$813,500
$367/sf
2013
438
$873,250
$406/sf
2014
351
$1,030,000
$494/sf
2015
419
$1,100,000
$496/sf
2016
365
$1,142,331
$525/sf
Whether the demand is getting more picky or just taking a breather, to still have 365 sales after a 40% price hike in four years is phenomenal.
Millienials – or anyone feeling priced out – really should support permissive housing policy to help keep a throttle on prices. Here’s evidence showing that faster-growing cities have more-modest price increases, although this chart is older (prices over last 5 years have been straight up). Thanks Ollie!
Across the country, a divide is emerging between cities that are growing outward and remaining affordable and ones that are hemmed in by geography and onerous zoning codes and are becoming more and more expensive.
As a whole, U.S. cities are expanding as rapidly as they have throughout the last half-century. From the 1950s until the 2000s they have added about 10,000 square miles per decade, or an area roughly the size of Massachusetts, according to research by Issi Romem, chief economist at real-estate site BuildZoom, to be released Monday. But beneath the surface a divide is deepening.
On the one side are cities such as San Francisco, Boston, New York and Miami that have slowed their pace of expansion dramatically since the 1970s, in part as they have added layer upon layer of building regulations. On the other side are cities concentrated in the southeast and Texas, which have grown outward and seen much slower price growth.
The developed residential area in Atlanta, for example, grew by 208% from 1980 to 2010 and real home values grew by 14%. In contrast, in the San Francisco-San Jose area, developed residential land grew by just 30%, while homes values grew by 188%.
The developed residential area in Raleigh, N.C., grew by 219% in the same period, while home values grew by 27%. In Seattle, the developed area grew by 69%, while home values grew by 119%.
Mr. Romem draws the distinction succinctly: expansive cities versus expensive cities.
“If you don’t let the city grow, you’re going to get prices going upward…and see the middle class being pushed out,” Mr. Romem said.
NIMBY-ism has served baby boomers and the one-percenters quite well. But eventually the baby boomers will give way, and younger people will take over – will they demand more housing be built, or just pay the prices we leave them?
Zillow and other internet tools are helping to generate maximum urgency early in the listing period (the Stratford buyer saw it on Zillow).
But sellers can be surprised to see an offer in the first day or two on the market, and may not be prepared mentally, physically, or emotionally to sell their house. There is temptation to wait for the two in the bush – and it almost always goes that route, even when a full-price offer is presented.
There is an old adage that the first offer is the best offer. But that sounds like sales talk, and is easy to shrug off.
Let’s change it to the first BUYER is the best BUYER.
Sellers should recognize that anyone who makes an offer in the first day or two must be on high alert, and is ready to buy. They have probably made offers on others, and lost out or couldn’t come to terms. Frustration is creeping in, and they want to get it done – these are the folks who pay top dollar.
Most importantly, all buyers are looking the same comps – and will usually come to the same conclusion on price. Yes, you may get other offers, but will they be any better, later?
Are you going to turn down a full-price offer on a $2,000,000+ property in hopes that two in the bush might pay an extra what? $25,000? $50,000?
Part of what got you here is putting the right price on it from the beginning. Motivated buyers will pay the right price, but balk at the wrong price.
Could you be giving it away?
Maybe – but you have to live with that thought no matter what price you take. There’s no way to tell, because you can’t predict the future.
Until we go to an auction format, sellers will be faced with these prickly decisions. Be prepared for the early action, and don’t be surprised if someone wants to buy your house right away!
