Jul 18, 2019 | Real Estate
Have you ever played the classic board game called Monopoly? The object of the game is to collect all the properties until one winner bankrupts all the other players. The other part of the game is that accumulating properties adjacent to each other increases the value of the individual properties. When a player acquires all the properties of the same color (two or three), then the rents go up and property development can begin.
The Monopoly Game In Real Life
The same basic principles sometimes work in real life. Owning a property and then buying the one next door creates a value-added possibility of the combined properties being worth more than the individual pieces.
To start this strategy, tell the neighbors of having an interest in buying their home in the future if they want to sell. This is a way to get the first option to buy a home before it lists on the market.
Control Of The Neighbors Adds Value
In many neighborhoods, there is one home that creates severe negative pressure on property values. These homes may be neglected and badly needing a paint job and landscaping. The home may be a source of neighborhood noise problems or heavy traffic.
When considering buying into this neighborhood, make a plan to buy the derelict house. Then, before bringing it back into a marketable condition, there may be a chance to buy the ones next door for a steep discount from the market value.
If possible, buy all the properties at once and close them around the same time. This helps avoid triggering a profit demand from those who are opportunistic and learn about the interest of a buyer in more than one property.
Cashing Out
If possible, buy three houses, one of each side of the derelict house, then renovate all three properties. Make them into rental units or to sell them as a “flipped” property after the renovation for a big profit.
If there is the possibility of controlling a full block on both sides in a rundown neighborhood, it is possible to start with one block of home improvements at a time. Entire neighborhoods may improve one block at a time.
Redevelopment
In some neighborhoods, there is a chance of re-zoning and redevelopment. For example, it may be possible to build a larger structure by combining two properties. There is profit possible in assembling the land for redevelopment purposes, even for those who do not do the construction for the redevelopment.
Summary
Playing Monopoly in real life can make investing in real estate fun. It is possible to start with a few low-cost rental homes. For rental properties, it makes it much easier to manage them if they are next to each other. Values may increase in the neighborhood by the renovation of a derelict house.
If you are intested in listing your current property or in the market for a new home, be sure to contact your trusted real estate professional!
Jul 17, 2019 | Market Outlook
Home Builder sentiment rose one point in July according to the National Association of Home Builders Housing Market Index. 2019 builder confidence in housing market condition continued to fall short of 2018 levels. July’s Housing Market Index reading of 65 was one point higher than June’s reading.
Component readings also rose one point each. Builder confidence in current housing market conditions rose to 72; the reading for builder confidence in market conditions for the next six months rose to 71. Builder confidence in buyer traffic in new housing developments rose to an index reading of 48; buyer traffic readings seldom exceed the neutral reading of reading of 50.
2019 Builder Confidence Is Lagging Behind 2018 Readings
Year to date, builder confidence index readings averaged 63 as compared to a reading of 67 in 2018 and 68 in 2017. Ongoing headwinds affecting builders were familiar concerns over materials prices and shortages of buildable lots and labor. Analysts said that builders remain leery of building to many homes after having large inventories of unsold homes after the Great Recession.
Builders also noted that increasing regulation and local building codes are impacting some areas. Builders are under pressure to produce affordable homes, but are log-jammed by “not in my backyard” zoning restrictions when they apply to build mixed developments of single and multi-family homes.
There may be good news on the horizon. Oregon passed state legislation banning exclusively single-family zoning. Depending on population, local jurisdictions will be allowed to build duplexes and larger multi-family units. If other states and communities follow Oregon’s lead, builders may find new options for building multiple units on lots formerly zoned for single family homes. Building affordable homes would help to ease housing shortages and ease demand for homes.
If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted home mortgage and real estate professionals.
Jul 16, 2019 | Real Estate
The most expensive home sold in America, so far, was a New York penthouse that sold for $238 million in January 2019. It is on the top of a building that overlooks Central Park. The 26-story luxury condo building designed by Robert A. M Stern is nearly all sold out.
Who Has That Kind Of Money?
The proud buyer of the penthouse is Ken Griffin. His net worth is estimated to be $9.6 billion. He is the founder of the Citadel hedge fund. Griffin is 50 years old. A few days before buying the NYC penthouse, he closed on a home in London that overlooks St. James Park near Buckingham Palace. For that 200-year-old home, he paid just a paltry $122 million.
Griffin’s New York penthouse is 22,000 square feet of ultra-luxury living. It sold for more than twice the amount of the second palace record-holder in America. That is a penthouse on the One57 building, which sold for $100.5 million in 2014.
Boom Or Bust?
One might think that a penthouse sale setting a new almost unfathomable record would indicate a vibrant bullish market in New York residential real estate. Well, not exactly. It did raise the median sales price of a residential sale in New York City to over $1 million from being below this amount at the end of 2018. Prior to this sale, the median price was trending lower.
Forbes reports that the current economic trends are not normal. Usually, the NYC real estate market goes up when the stock market is up. However, the NYC residential real estate is down in spite of the robust economy.
Properties selling for top-dollar at prices that are hard to imagine could be a sign of a real estate market collapse. In general, the NYC residential market has been in a steady decline over the past year. The lowest number of closings in a decade happened during the first quarter of 2019.
Investor Uncertainty
There is a general sense of uncertainty for residential buyers in NYC, where the average one-bedroom condominium sells for over $1 million. Uncertainty makes potential buyers take longer to decide on making a home purchase in the Big Apple.
Add to this uncertainty, there is the new “mansion tax” that was approved by New York City as part of its budget in April 2019. The mansion tax is now 1% on residential sales of $1 million or more that goes up to a maximum of 4.15% on homes sales of $25 million and up.
Did you just do the math? Griffin would have paid $9.87 million for the new mansion tax if he waited until April 2019 to buy his penthouse. So maybe he feels like he got a bargain by saving nearly $10 million on the purchase?
Summary
In spite of the record price for the penthouse sale in NYC, the residential market continues to soften. The new mansion tax is not going to help sales either. Unless you have money to burn, as Griffin does, it may not be the best time to invest in residential properties in NYC if you hope to make a return on your investment when selling them.
Your trusted real estate agent is well-informed about the market trends in your area. Be sure to set up an appointment if you are in the market for a new property.
Jul 15, 2019 | Financial Reports
Last week’s economic releases included reports on inflation, core inflation and minutes from the Federal Open Market Committee Meeting held June 18 and 19. Weekly readings on mortgage rates and first-time jobless claims were also released.
Inflation Rate Rises, but Grows at Lowest Pace in Four Months
June’s Consumer Price Index reported the lowest rate of inflation in four months with a year-over-year rate of 1.60 percent growth as compared to May’s year-over-year inflation rate of 1.80 percent. Fuel prices were lower, which helped balance rising costs of rent, clothing and autos. Analysts said that falling inflation rates would be a primary reason why the Fed is likely to cut its key interest rate range later this month.
Core inflation, which excludes volatile food and energy sectors, rose 0.30 percent in June and surpassed expectations of 0.20 percent growth and May’s 0.10 percent growth rate.
Federal Reserve policymakers base their decisions on the Fed’s dual mandate of maintaining maximum employment and economic growth, which is benchmarked at 2.00 percent annual inflation. FOMC members repeatedly state their commitment to reviewing domestic and global economic news and willingness to adjust Fed policy according to changing economic conditions and current events.
Mortgage Rates, New Jobless Claims
Freddie Mac reported little change in average mortgage rates last week; Rates for 30-year fixed rate mortgages were unchanged at 3.75 percent; rates for 15-year fixed rate mortgages rose four basis points on average to 3.22 percent. The average rate for 5/1 adjustable mortgages rose one basis point to 3.40 percent. Discount points averaged 0.50 percent for fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.
Initial jobless claims fell by 13,000 claims to 209,000 claims filed and was lower than the expected reading of 221,000 new claims filed. The July 4 holiday likely impacted the number of initial claims filed.
What‘s Next
This week’s scheduled economic news includes the National Association of Home Builders Housing Market Index, Commerce Department readings on housing starts and building permits issued and a report on consumer sentiment. Weekly readings on mortgage rates and new jobless claims will also be released.
Jul 12, 2019 | Real Estate
For market value and the comfort of a home’s occupants, home security is just as important as energy-efficiency. Innovation in smart home technology focuses on both of these areas.
Here are some tips about things a homeowner can do to make a home more secure and a few pitfalls to look out for, which may not be obvious.
Smart View Doorbell
No matter how reinforced the front door of a home is, it is not secure if it is opened by someone inside without first knowing who is there. Additionally, smart doorbells allow the homeowner to view the front of their home using a smartphone application, even when they are not home.
These systems use motion sensors and video cameras. When someone approaches the front door, the motion sensors trigger and the camera captures the images of what is happening. The smartphone application notifies the homeowner that there is physical activity at the front door.
It may be a neighbor’s cat passing by or a burglar trying to steal a package or attempt a break in. The homeowner can trigger a response through some systems to send a security guard to the premises or has the option to call law enforcement.
Biometric Door Locks
Biometric door locks use fingerprints, iris (eye) scans, and/or facial recognition along with passwords to control who is authorized to enter a home. These systems improve door security and eliminate any problems caused by lost keys or unauthorized duplication of keys.
Improved Remote Garage Door Opener
These are convenient systems, especially when driving up to a home in bad weather and not wanting to get out to open the garage door. They do expose the home to vulnerabilities because the wireless signal that triggers their operations is hackable.
The newest systems use a password-protected system with a two-part security authorization that includes entering a password and responding to a text message sent to the homeowner’s smartphone. The wireless communications of the most innovative systems are encrypted, which makes them impenetrable to hacking.
Automatic Lighting
Smart home lighting can turn on and off automatically. This is useful to save energy and turn things off when a room is not in use. It is also useful to give the appearance that the home is in use even when the occupants are away. Lights and television sets can be turned off and on in the home, based on a pre-determined schedule as if done by occupants, which discourages burglars.
Remote Home Monitoring
Many systems exist that allow a homeowner to remotely monitor a home. “Nanny” cams allow parents to use a smartphone application to view their baby at home when in the care of a babysitter. Other systems allow viewing the entire home.
Be cautious when implementing wireless systems. It is very important to use point-to-point encryption technology to protect the wireless transmission from hacking. It is critical to understand that having a wireless view of the interior of the home creates a security risk if hacked by unauthorized users. As an alternative, the home can be hard-wired (not use a wireless signal) and encryption used to send data to the homeowner’s smartphone.
Summary
Improved home security is a value-added thing to have for a property to protect the occupants and may also improve the home’s resale value. Just be careful not to create new security vulnerabilities by using systems with unprotected wireless communications.
If you are looking for a new home or interested in selling your current property, be sure to contact your trusted real estate professional.
